Tesla drops 5% as tech selloff erases Monday's rebound gains

Tesla shares fell about 5% on Tuesday, reversing the prior session's rebound as a broad selloff in technology and semiconductor stocks swept across markets.

Tesla Inc. shares fell about 5% on Tuesday, erasing the prior session's gains as a broad selloff in technology and semiconductor stocks swept across markets. The decline pulled the electric-vehicle maker back toward levels hit during last week's tech rout.

"I would be careful about taking one bad day in semiconductors and extrapolating the start of a new trend," Hank Smith, director and head of investment strategy at Haverford Trust, said Monday as chip stocks rebounded. "We continue to think this is a healthy correction within a bull market, not the beginning of a broader downturn."

Tuesday's move reversed a 4.6% gain from Monday, when Tesla and other megacap tech stocks recovered some of the prior week's losses. The iShares Semiconductor ETF surged nearly 6% on Monday, led by Intel Corp. and Micron Technology Inc., which jumped 11% and 10%, respectively. Last week, the Philadelphia Stock Exchange Semiconductor Index posted its worst session since 2020, with the Nasdaq Composite falling 4.2% on Friday after the May jobs report showed 172,000 jobs added — more than double the 80,000 consensus estimate.

The reversal shows how quickly positioning can shift in a market where Treasury yields are rising and the conflict in the Middle East keeps oil prices elevated. The 10-year yield held above 4.55% after the jobs report dashed hopes for rate cuts, while West Texas Intermediate crude traded near $91 a barrel and Brent near $94. For Tesla, the stock remains under pressure even after Monday's bounce, with investors weighing the company's valuation against execution risks in autonomous driving and robotics.

The selloff extended beyond Tesla. Last week's tech rout hit the Magnificent Seven broadly, with Nvidia Corp. and Tesla each falling more than 6% on Friday. The S&P 500 Information Technology sector, which led Monday's advance with a 1.5% gain, reversed course as traders locked in profits ahead of the Consumer Price Index report due Wednesday. The S&P 500 snapped a nine-week winning streak last week, falling 2.6% over the five sessions.

The selloff also reflected broader macro headwinds. The U.S. dollar index stood at 100.04 on Friday, up 0.6% on the day, as the strong jobs data boosted expectations that the Federal Reserve could raise rates at its October meeting. The CME FedWatch tool showed a roughly 50% probability of a rate hike by late October, up from about 34% the prior day.

For Tesla, the decline comes as Wall Street re-evaluates how to value the company. JPMorgan Chase & Co. last week upgraded the stock from underweight to neutral and raised its price target to $475 from $145, shifting from an automaker framework to a physical AI thesis. The new target implies about 13% upside from current levels, though the neutral rating signals the bank is not yet confident enough to recommend buying.

This article is for informational purposes only and does not constitute investment advice.