Tesla's (TSLA.US) stock price has fallen to a three-month low, as Wall Street refuses to buy into Musk's "pie in the sky" promises.

Tesla (TSLA.US) shares have fallen to a three-month low, down more than 30% from its record high, as Wall Street loses faith in the company's AI narrative and self-driving future.

Investor focus has shifted to the investment case for Tesla as a physical AI company, but Oppenheimer warns on the company's valuation. Oppenheimer maintains a "market perform" rating on Tesla.

Oppenheimer analyst Colin Rusch and his team believe Elon Musk's bid for AI company Open AI is only a temporary distraction from other challenges. Rusch notes that Musk's offer for OpenAI is 38% lower than the company's funding level in October last year.

The analyst says: "We expect no meaningful discussion. However, as competition in electric vehicles and autonomous vehicles intensifies, we believe Wall Street's valuation of Tesla is at increasing risk. We also believe that CEO Musk's political activities are well received in some circles, and his public life may alienate consumers and employees as the Trump administration tests the limits of its power."

Tesla's recent demand for electric vehicles in California and Europe has been trending negative. Rusch also says evidence this week further indicates that autonomous vehicle technology is maturing across the industry.

Tesla shares fell 6.34% on Tuesday to close at $328.5, a fresh three-month low and the biggest single-day fall since December 18, 2024. The stock has fallen more than 30% since hitting a record high in mid-December 2024. Earlier this week, BYD announced that most of its models come equipped with advanced driving assistance features without extra cost, shocking the EV industry.

Analysts had warned about Tesla's stock price as early as last month. The company's fourth-quarter results were almost universally below analyst expectations, even its sales growth outlook for 2025 was downgraded. However, Tesla's stock rallied strongly after the results, with investors optimistic about its robotaxi business, humanoid robots, and AI. Ryan Brinkman of Morgan Stanley warned at the time that Tesla's stock "has completely decoupled from fundamentals."