In the eyes of Tesla shareholders, Elon Musk hardly needed another distraction. OpenAI could turn out to be a costly one.
The EV maker’s multitasking chief executive is leading a consortium bidding $97.4 billion for the nonprofit entity that controls the OpenAI business. The bid is being backed by Musk’s own artificial-intelligence company called xAI and includes backers from around the venture-capital world, The Wall Street Journal reported late Monday.
The price for OpenAI is more than double what Musk paid for Twitter in 2022. And it is a long shot at best, especially given the personal friction between Musk and OpenAI Chief Executive Sam Altman. Altman responded to Musk’s offer on Monday by offering to buy Twitter for $9.7 billion—an allusion to the scorching decline in market value that the social-media platform now called X has experienced under Musk’s ownership.
Tesla’s share price fell 6.3% on Tuesday. The EV maker just closed out a tough year, when total automotive revenue fell for the first time ever on an annual basis, according to data from FactSet. And that is notably different from 2022, when the company’s sales were still growing at high double-digit rates. In a report Tuesday, Colin Rusch of Oppenheimer called the OpenAI move “a distraction from Tesla’s challenges.”
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Distractions have proven costly to Tesla’s shareholders before. The company’s market cap plunged by more than two-thirds in 2022 after Musk first revealed an ownership stake in Twitter in early April. Investors worried about Musk’s focus on the platform and his divisive presence on it.
Tesla’s stock didn’t even fully recover those losses until after the U.S. election three months ago, which effectively put Musk in the White House with a key position in the Trump administration. But the shares have also cooled notably, falling nearly 18% between the inauguration and Monday’s close. Musk has been closely involved with some of the administration’s more controversial moves, including running the newly created Department of Government Efficiency, or DOGE.
CEOs have long dabbled in politics. But few have had as big a public profile as Musk, and few public companies are more closely tied to the image of their chief than Tesla. In a report last week, Stifel analysts said Tesla’s trailing four-week net favorability rating is “nearing all-time lows,” according to their survey. “We believe the negative downturn in consumers’ perception of Elon Musk is captured in our proprietary survey data out of our Stifel Think Tank Group and potentially results in a headwind to sales,” the report read. Rusch of Oppenheimer also called Musk’s political activity “a potential overhang” on Tesla’s sales in his report.
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Even with the stock’s recent weakness, Tesla’s market cap still exceeds that of the world’s next 20 largest automakers combined, according to data from S&P Global Market Intelligence. And shareholders can’t say they weren’t warned. “Although Mr. Musk spends significant time with Tesla and is highly active in our management, he does not devote his full time and attention to Tesla,” Tesla’s annual 10-K filings have warned since the company went public in 2010.
But those boilerplate passages have typically referred only to Musk’s leadership of SpaceX. In its latest annual filing made last month, Tesla added X, xAI, Neuralink, the Boring Company and the DOGE agency as competing demands on the boss’s time. And he is unlikely to get canned for excessive moonlighting. “We are highly dependent on the services of Elon Musk, Technoking of Tesla and our Chief Executive Officer,” the filing read. At more than 114 times this year’s projected earnings, Tesla’s stock is still a big bet that even kings don’t get stretched too thin.
Write to Dan Gallagher at dan.gallagher@wsj.com