Tesla sales fall while its stock rallies – what this tells us about perceptions of Elon Musk

Electric vehicle maker Tesla recently shared the news of disappointing first-quarter results when its earnings report was weaker^[1] than most Wall Street analysts had expected. Tesla’s revenue had tumbled^[2] 9% and its profit was down 71%.

Typically, this would result in a sharp decline in investor confidence and share prices. Tesla’s share prices have indeed dropped over 40% this year. But after the earnings report, Tesla’s stock rallied^[3] when CEO Elon Musk vowed to scale back his involvement with the US Department of Government Efficiency (Doge) and focus on Tesla instead.

He said that he would spend a day or two a week^[4] on government matters at president Donald Trump’s request. In any case, Musk is a “special government employee”, which means he can work in that role for 130 days^[5] in a year. Assuming his role started on January 20 – Trump’s inauguration day – it would need to be terminated by the end of May had he continued to work five days a week.

Tesla maintains that the slump^[6] in its earnings can be attributed to many factors, including concerns about supply chains and tariffs, as well as energy prices.

But Musk’s unpopularity has probably affected sales, with his approval among consumers souring^[7]. There will be a multitude of factors at play that can explain Tesla’s decline. What is less ambiguous is the response of the market to Musk – just the fact that he said that he would devote time to Tesla rallied the investors.

Apparently, the boss’s attention is highly valuable. To some extent, this is not surprising – what a CEO (or leader) chooses to focus on and what they ignore sets the tone^[8] within a firm.

That said, it hardly seems to be the case that this is about setting a tone. Rather, the market (or the investors) seems to trust Musk. This is no mean feat for a CEO prone to engage in bluster. This investor trust contrasts with consumer trust and goodwill, which seem to be eroding at the same time.

Musk has been called an absent CEO^[9] and analysts have noted that the demands on his time imply that he cannot be very active in running Tesla. Perhaps that is true.

Or perhaps Musk thinks that Tesla is too big to fail^[10] and will be protected by the US government. Short-term bumps are less relevant for a firm that is pivoting away from its core business, as Tesla now appears to be doing.

Musk has stated^[11] that Tesla is increasingly an AI and robotics company, saying this is where the firm believes the “future lies”.

Setting aside energy, data^[12] is one of the most important resources powering AI. It is the key input for training large language models (LLMs) and machine algorithms.

The quality of an AI algorithm is directly correlated with the data it trains on. The larger and more diverse the data set, the better (and more lucrative) the AI agent is likely to be. There seems to be substaintial overlap^[13] in the data that AI has been trained on, although details are closely guarded.

In addition, there is a possibility of training data running out^[14], which makes it an even more precious resource.

Companies from OpenAI to Meta seem to be scraping the internet for the same publicly available information (while apparently ignoring^[15] copyright issues). Now Musk seems to have access to an unprecedented amount of data that is not available to his competitors.

His department at Doge has reportedly pushed for access to sensitive social security information^[16], for example, that includes dates of birth, citizenship status, income, addresses, other tax-related information.