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A Tesla Model Y. (Jair F. Coll/Bloomberg)

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Tesla Inc. shares extended a rally climbing as much as 4.9% Dec. 15 and are on pace to close at an all-time high for the first time since December 2024, defying growing concerns about the company’s soaring valuation. 

It’s been a rocky comeback for the electric-vehicle maker, whose shares have more than doubled since they hit a low in early April amid a wider market meltdown sparked by President Donald Trump’s tariff offensive. The stock was trading as high as $481.37 in early trading in New York. If the gains hold through the end of regular session, the stock will close at a new all-time high. Its last closing record was $479.86 on Dec. 17 last year.

“Investors would do well to remember that while having a robust underlying business still has a role to play, that’s not the main driving force,” said Matt Britzman, senior equity analyst at Hargreaves Lansdown. “Tesla shares are trading as much on sentiment as they are on fundamentals, and the core business is playing second fiddle to the AI story that underpins the trillion-dollar valuation.”

Tesla’s third-quarter results, released in October, disappointed investors as rising costs undermined a record quarter for vehicle sales. That surge in sales was driven by consumers rushing in to buy electric cars before the $7,500 federal EV tax credit expired at the end of September. 

Those record sales masked a more challenging outlook for the EV maker. Tesla’s fundamentals have weakened rapidly this year, with sales struggling globally, profit estimates sinking and regulatory scrutiny rising.

Analysts now expect sales to slow significantly in subsequent periods. Industry leaders have echoed this prediction: Ford CEO Jim Farley said that EVs will plunge from about 10% to about 5% of the U.S. market as Trump’s policies favor gas-powered cars. Famed investor Michael Burry, meanwhile, criticized the stock for being “overvalued” in a Substack post earlier this month.

Elon Musk’s political antics earlier this year had sparked fears that his interest in running the carmaker may be waning, and the company’s attempt to stoke sales by offering cheaper models of its popular vehicles were met with skepticism. Such concerns, paired with Trump’s tariffs and Musk’s public break from the president, weighed on the stock, which by April was down as much as 50% from the December high. 

Since then, Tesla shares have staged a spectacular turnaround, marking yet another example of Musk’s ability to drive investor sentiment. In a move some view as visionary and others consider a distraction from the core business, Musk aspires to reorient his electric-vehicle maker as a robotics and AI powerhouse. 

The pivot came just as AI fervor took over the market, pushing stocks spanning old-hat tech giant Alphabet Inc. and dark horse Oracle Corp. to new highs. Those who believe in Musk’s promises to change the world will have another opportunity to bet on his genius as SpaceX intends to go public next year. 

For now, traders are buying what Musk is selling and growing bullish on Tesla’s AI efforts. In November, Tesla investors signaled their faith in Musk’s vision, wishing for him to remain in the driving seat when they approved a trillion-dollar pay package for the CEO.

The company has also received several upgrades and price target boosts based on its potential to dominate the automation space. Tesla’s street high price target sits at $600, after Wedbush’s Dan Ives increased it from $500 on Sept. 26, saying the company may be a “game changer” in AI.

“Tesla remains a retail investors’ darling and, in my view, an example of irrational exuberance in an already overheated equity market,” said Irene Tunkel, chief US equity strategist at BCA Research. “To my mind, Tesla is in bubble territory.”