Tesla stock drops double digits in worst day in years

Tesla shares plunged more than 12% on Thursday, marking the company's worst single-day performance in years and wiping out roughly $214.5 billion in market capitalization by the close of trading. The dramatic selloff came after the electric vehicle maker reported fourth-quarter earnings that disappointed investors, with profits falling short of expectations despite record vehicle deliveries.

The steep decline affected Tesla's shareholders, including institutional investors and retail traders, as the stock lost over a tenth of its value in a single session. The drop erased gains the stock had made since the U.S. presidential election in November, when optimism about CEO Elon Musk's ties to the incoming administration had boosted shares.

The selloff matters because Tesla remains one of the most valuable automakers in the world, and its stock performance influences broader market sentiment toward electric vehicle companies. The $214.5 billion loss in market cap is the largest one-day dollar decline on record for any U.S. company, surpassing previous records held by other tech giants.

According to the company's earnings report released Wednesday, Tesla's fourth-quarter revenue rose 2% to $25.7 billion, but net income fell 71% to $2.3 billion compared with the same period a year earlier. The company's automotive gross margin, excluding regulatory credits, dropped to 16.6%, its lowest level in over five years. Tesla delivered a record 495,570 vehicles in the quarter, but the higher sales came at the expense of profitability.

Musk told analysts on the earnings call that the company plans to spend "as fast as we can" on new vehicle production lines and artificial intelligence infrastructure, including a massive expansion of its Dojo supercomputer and the development of a cheaper model expected in 2025. The spending commitments raised concerns about near-term cash flow and profitability.

Looking ahead, Tesla faces continued pressure from rising competition in China and Europe, as well as uncertainty over the timing of its promised robotaxi service and fully autonomous driving technology. Analysts expect the stock to remain volatile as investors weigh the company's long-term growth prospects against its current margin compression and heavy capital expenditure plans.