Why Pony AI (PONY) Plunged 7.4% on Tuesday Amid Safety Concerns and Overvaluation

Investors in Pony AI (NASDAQ: PONY) woke up to a harsh reality on Tuesday, May 13, as shares plunged 7.4% following a catastrophic autonomous driving accident and escalating regulatory scrutiny. This isn’t just a blip—it’s a warning sign that the hype around Pony’s autonomous tech is colliding with cold, hard risks. With a P/S ratio of 80x (vs. an industry average of 2.5x) and a Q1 earnings report looming on May 20, now is the time to lock in profits before the reckoning.

The Arizona Crash: A Safety Nightmare

On May 10, one of Pony’s Level 4 autonomous test vehicles slammed into a stopped emergency vehicle in Tempe, Arizona. The crash, which caused minor injuries, triggered an immediate investigation by the National Highway Traffic Safety Administration (NHTSA). Regulators are probing potential defects in Pony’s LiDAR sensors and decision algorithms, which allegedly failed under low-light conditions.

The fallout is severe: Pony faces a potential recall of 1,200 vehicles linked to its tech, fines up to $200 million, and suspension of testing permits in California. Worse, a European automaker partner reportedly paused its collaboration, while NHTSA accused Pony of delaying data sharing by 72 hours—a red flag for compliance. This isn’t just a setback; it’s a systemic credibility crisis.

Overvaluation: A 80x P/S Ratio Is a Death Sentence

Pony’s valuation is a house of cards. The company trades at 80x trailing sales—a staggering multiple in a sector where even aggressive plays like Tesla (TSLA) trade at just 7x sales. This premium is based on promises of autonomous robotaxi dominance, but reality paints a bleaker picture:

• Revenue collapsed 29.8% YoY in Q4 2024 to $35.5 million, with Robotaxi revenue plummeting 61.9% to $2.6 million.
• Net losses hit $181.1 million in Q4, with no clear path to profitability.
• Legal threats loom, as law firms like Rosen and Pomerantz investigate whether Pony misled investors during its IPO.

Ask yourself: Can Pony justify this valuation when its core business is shrinking, and regulators are closing in? The answer is no.

Q1 Earnings: The Final Straw for Speculators

The May 20 earnings report is a ticking time bomb. Analysts expect more of the same: declining revenue, widening losses, and no progress on cost-cutting. Remember, Pony claims its seventh-gen system will slash costs by 70%—but until those savings materialize, investors are left holding a speculative bet.

Meanwhile, competitors like Waymo and WeRide are advancing faster, leaving Pony in a death race it can’t win. Add in geopolitical risks—U.S.-China trade tensions threaten Pony’s supply chain—and the case for selling becomes undeniable.

Leadership and Lock-Ups: A Desperate Hail Mary

Even Pony’s leadership is panicking. Co-founders Jun Peng and Tiancheng Lou just announced a 540-day lock-up extension on their shares, covering 22.9% of the company. While this is meant to signal confidence, it’s a classic sign of desperation. When insiders can’t sell without triggering panic, it’s time for retail investors to flee.

Bottom Line: Sell Now Before the Floor Drops

Pony AI’s 7.4% drop is just the beginning. The combination of safety failures, regulatory overreach, and a P/S ratio that defies logic makes this stock a short candidate. Even if you believe in autonomous driving’s future, Pony isn’t the company to bet on.

Action: Sell your shares before May 20’s earnings. Let the bears take over—this is no time to be greedy.

The writing is on the wall. Risks now outweigh the hype, and Pony’s valuation is a mirage. Don’t wait for the reckoning—get out now.