One Wall Street analyst believes Tesla CEO Elon Musk’s gambit for OpenAI is a distraction for the company at a very important time.
OpenAI CEO Sam Altman shot down an unsolicited offer by a group of investors led by Elon Musk on Monday to purchase the nonprofit that heads OpenAI for $97.4 billion. In a post on X, the social media platform formerly known as Twitter that Musk purchased for $44 billion back in 2022, Altman wrote, “no thank you, but we will buy Twitter for $9.74 billion if you want.” Musk responded minutes later, calling Altman a “swindler.”
“While TSLA has shifted focus to being a Physical AI play, we view Elon Musk’s bid for Open AI as a distraction from TSLA’s challenges. The bid comes at a 38% discount to Open AI’s October 2024 capital raise,” Oppenheimer analyst Colin Rusch wrote in a note to investors.
Tesla stock was down 6% on Tuesday.
As Rusch noted, the Musk offer, first reported by the Wall Street Journal, would significantly reduce OpenAI’s valuation. According to CNBC, SoftBank plans to invest $40 billion in OpenAI at a valuation of $260 billion.
Regardless of Musk’s ploys to buy Open AI or try to “mess” with it (as Altman said), Musk’s behavior and lack of attention at Tesla could be a problem.
“We don’t expect any meaningful discussions to develop,” Rusch said, adding, “We see increasing risks to Street estimates for TSLA as EV and AV competition intensifies.”
Autonomous competition and technology breakthroughs could limit Tesla’s profitability in the space, Rusch said. Look no further than Google’s Waymo self-driving service expanding in the US, for one example, or Chinese rival BYD’s embrace of DeepSeek for its AI efforts involving autonomous driving.
Speaking of BYD, competition heating up in China is also a big problem for Tesla. Rusch noted that BYD dropped the price of its entry-level model to below $10,000. Meanwhile, China’s XPeng began offering 0% and free charging, putting more pressure on the Chinese domestic market.
Then there is Musk himself and his very vocal political stances, as well as his growing position in the Trump administration as the leader of the Department of Government Efficiency, or DOGE.
“We view Mr. Musk’s political activity and increased regionalization as a potential overhang on TSLA sell-through. We see the biggest risk in CA and the broader EU, where TSLA has seen ongoing declines since the start of 2023,” Rusch wrote, also highlighting softening January sales in China and the EU as a concern.
In particular, Europe has been a sore spot for Tesla recently. Germany reported only 1,277 new Tesla vehicles registered in January, down nearly 60% from the same month in 2024 on the heels of Musk’s courting of the far-right AfD party. January sales also fell 63% in France, 38% in Norway, and 12% in the UK.