Tesla Inc. Shares Plunge 3.39% as Morgan Stanley Cuts Rating Over AI Hype, Slowing EV Adoption

Tesla Inc. shares fell 3.39% in pre-market trading on Dec. 9, 2025, following a downgrade from Morgan Stanley analyst Andrew Percoco, who shifted the bank’s rating to Equal-weight from Overweight. Despite raising the price target to $425 from $410, the move signaled a more cautious stance on near-term prospects.

Percoco cited “high expectations” surrounding Tesla’s AI and robotics initiatives as a key factor in the stock’s current valuation. However, he noted that the market may have already priced in much of the potential upside from non-auto businesses like Full Self Driving (FSD), robotaxis, and the Optimus humanoid robot program. The analyst also expressed concerns over slowing EV adoption in the U.S. and intensifying global competition, which led to reduced volume forecasts for 2026 and beyond.

The downgrade marks a shift from Morgan Stanley’s previous bullish stance under former analyst Adam Jonas. Percoco acknowledged Tesla’s leadership in EVs and AI but emphasized that the stock’s premium valuation now reflects a more balanced risk-reward profile. He outlined a wide range of outcomes, from a $145 bear-case to an $860 bull-case, hinging on execution risks in autonomous driving and robotics scaling.

Investors reacted swiftly, with the stock’s decline reflecting skepticism over short-term challenges despite long-term optimism about Tesla’s technology. The move underscores growing scrutiny of the company’s ambitious but unproven ventures amid a competitive and regulatory landscape that remains uncertain.