Tesla shares fell sharply on Tuesday, tracking a broad market selloff that hit large technology stocks as investors fled riskier assets amid escalating trade tensions.
The electric-vehicle maker’s stock was down around 3% in midday trading, moving in lockstep with the wider retreat from mega-cap technology names.
The declines followed renewed tariff threats from President Donald Trump, who has ramped up pressure on several European countries as part of his push for US ownership of Greenland.
The selloff was widespread across the so-called “Magnificent Seven” technology stocks.
Amazon fell about 2.5% on Tuesday, while Nvidia slid more than 3%.
Alphabet, Meta Platforms, Microsoft, and Apple were all lower as investors reassessed exposure to high-valuation growth stocks.
If the losses hold through the close, it would mark the sixth time in the past three months that all seven of the largest US technology companies have declined in a single session, highlighting how sensitive the group has become to shifts in macroeconomic and geopolitical sentiment.
Tech valuations amplify downside risk
Technology stocks have been particularly vulnerable during periods of market stress due to their elevated valuations and outsized weighting in major indexes.
Investors often rotate into perceived safe havens when geopolitical risks rise, putting pressure on growth-oriented names.
Concerns are also mounting that a prolonged trade conflict between the United States and the European Union could slow economic growth, dampen corporate investment and weigh on earnings expectations.
Such an environment tends to be especially challenging for companies priced on long-term growth assumptions, including Tesla.
Canada tariff shift offers potential relief
Away from the day’s market turbulence, Tesla stands to benefit from a significant policy change in Canada that could reshape the competitive landscape for electric vehicles.
Under an agreement announced last Friday, Canada will remove its 100% tariffs on Chinese-made EVs and allow up to 49,000 vehicles per year to be imported at a 6.1% most-favoured nation tariff rate.
Canadian Prime Minister Mark Carney said the quota could rise to as many as 70,000 vehicles within five years.
Industry experts say Tesla is well-positioned to benefit from the shift due to its early efforts to export vehicles from its Shanghai factory and its established sales network in Canada.
In 2023, Tesla equipped its Shanghai plant—its largest and most cost-efficient factory—to build a Canada-specific version of the Model Y and began shipping the vehicle to the country.
Those shipments helped drive a 460% year-over-year surge in Canadian automobile imports from China to Vancouver in 2023, reaching 44,356 vehicles.
Tesla was later forced to halt the practice in 2024 after Ottawa imposed 100% tariffs, citing concerns over China’s state-directed industrial overcapacity.
While the new agreement reopens the door, one clause could limit Tesla’s immediate upside.
Half of the import quota is reserved for vehicles priced below 35,000 Canadian dollars, a threshold below Tesla’s current model lineup.
Even so, Tesla’s manufacturing flexibility and scale may still give it an advantage as the market adjusts.
AI ambitions remain central to Tesla’s narrative
Tesla’s longer-term investment case continues to hinge on artificial intelligence rather than near-term vehicle sales.
CEO Elon Musk said over the weekend that Tesla is set to become the world’s largest producer of AI chips, as the company accelerates development of its in-house silicon.
“Our AI5 chip design is almost done, and AI6 is in early stages, but there will be AI7, AI8, AI9,” Musk wrote in a post on X.
“Aiming for a 9-month design cycle. Join us to work on what I predict will be the highest volume AI chips in the world by far!”
Musk also said Tesla will restart work on its Dojo3 supercomputer now that the AI5 chip design is nearing completion.
Dojo is used to train AI models that underpin Tesla’s Full Self-Driving software and robotics efforts.
Tesla had previously scaled back its Dojo team to focus on chip development and rely more heavily on external suppliers such as Nvidia and Advanced Micro Devices.
The renewed push underscores how central AI remains to Tesla’s strategy, even as short-term market moves are dominated by geopolitics rather than company fundamentals.
For now, however, Tesla’s stock is being driven less by its long-term ambitions and more by the broader risk-off mood gripping global markets.
The post Why Tesla stock is crashing around 3% on Tuesday appeared first on Invezz
