For the last few weeks, the stock market has shown signs of strength as new trade deals come together in response to President Donald Trump's tariff policies.
In May, the S&P 500 and Nasdaq Composite rose 5% and 8%, respectively. Among some of the biggest gainers were artificial intelligence (AI) stocks, particularly those in the "Magnificent Seven." Within the Magnificent Seven, Tesla's (TSLA +0.69%) 23% surge last month set it apart from its peers.
Let's dig into Tesla's recent surge and assess whether these gains are sustainable. Is now the time to get in on the action?
NASDAQ: TSLA
Key Data Points
Tesla's price action is being driven by two things right now
Generally speaking, a company's share price should be driven by the performance of the underlying business. However, Tesla's business is not in the best shape right now. Its electric vehicle (EV) segment -- its core source of revenue and profits -- is decelerating, and rising competition from domestic manufacturers such as Rivian and overseas rivals like BYD are adding a new layer of complexity on the customer acquisition front.
But Tesla's stock price throughout 2025 has not been closely related to how the actual business is performing. Rather, investors have been both punishing and rewarding Tesla stock based on actions taken by the company's controversial CEO, Elon Musk.
For much of 2025, Elon Musk has had his focus diverted away from Tesla due to his role as a special government employee for the Trump administration, specifically in the Department of Government Efficiency (DOGE).
Musk's time in Washington has been polarizing, and his role with DOGE has contributed to Tesla's mounting challenges with consumer demand. As recently as mid-April, the stock was down over 50% from its all-time high.
It is against this backdrop that Musk recently announced he is stepping away from DOGE and turning his focus back to Tesla.
The timing of Musk's announcement appears quite strategic. One of the biggest potential growth catalysts for Tesla's future is the introduction of its autonomous driving fleet, dubbed Robotaxi. The service is scheduled to launch on June 12 in Austin, Texas.
With Musk's attention back on Tesla and the highly anticipated Robotaxi launch just days away, investors are pouring back into the stock.
Image source: Getty Images.
Is now a good time to buy Tesla stock?
In tandem with Musk stepping away from DOGE, longtime Tesla bulls Cathie Wood of Ark Invest and Dan Ives of Wedbush Securities have been making the rounds on financial news outlets to hype the narrative that Tesla could be on the brink of a new wave of growth.
Wood doubled down on her $2,600 price target, while Ives raised his own forecast to a cool $500 per share. They agree that significant upside could be in store for Tesla shareholders.
While investing in momentum stocks can be tempting, investors must zoom out and think about the bigger picture. As a reminder, Musk himself explicitly told investors the initial Robotaxi launch this month will be modest. Moreover, he alluded to Robotaxi not being a major financial contributor to Tesla's business for another year or so.
Data by YCharts.
Tesla is currently trading at a forward-price-to-earnings (P/E) multiple of 181. That is high for any growth stock, let alone one that saw its revenue decline in the first quarter.
Investors have already priced the stock according to a heavily bullish narrative surrounding Musk's return to Tesla and the Robotaxi launch, but too much uncertainty remains. I wouldn't recommend chasing Tesla stock at this lofty valuation.
