Tesla provides things people outside of the auto industry want to buy. You might quibble about details (FSD in particular) but there is no shortage of people wanting to buy Tesla’s cars to use, not resell.
Cryptocurrencies have failed to do the equivalent – that’s why the pitch is “buy in now or you’ll wish you had later” rather than talking about things you could actually do that you can’t do as well now.
Tesla's value is approaching a trillion USD, approximately six times the value of the whole Volkswagen group. You can believe in Tesla or not, but that valuation is clearly hoping for a future where Tesla dominates multiple industries. I don't see much difference to people investing in any insanely valued coin because they think it's the future of payment.
Tesla's stock is definitely soaring but here's what they have underneath:
1. A very popular electric vehicle business (#1 & 2 best-selling EVs, top 10 across all vehicles)
2. A popular home sold and battery provider (3rd in the U.S.)
3. A large and popular EV charging network
4. A large collection of patents, software, manufacturing capabilities, and contracts for the previous three points
Shareholders are still seeing a lot of growth potential but if the market takes a downturn the floor of that value is still quite substantial, especially since the world is turning hard to EVs. Even the bad hypothetical scenarios are something like Toyota buys them at a lower price than shareholders want, not utter disasters.
In contrast, here's the sole value behind almost all cryptocurrencies:
1. How much the community thinks someone else will pay for a token
The floor is $0.00 because cryptocurrencies are the most distilled form of fiat currency with a very weak backing. Nobody is required to use it and almost everyone has alternatives which are at least as easy and affordable so it's possible to end up in the case where simply nobody is interested buying in your particular set of random hashes at any price, or where the cost of operating the network exceeds that value.
Yes, it's definitely possible for a stock to be overvalued. If you note my comment explicitly acknowledged this with the possibility that bad news could force a sale at well under the current price: the point was that there are very few possibilities where that value wouldn't still be a very large amount of money because there's a real business backing it and it's unlikely that the situation is going to change in a way which would cause all of their customers to disappear.
car making, EV charging and selling of home batteries are all terrible businesses: Highly competitive and capital intense, unit economics are disheartening (feel free to look into the financial statements of public pure-play companies in these sectors) - for cars you have a century of empirical data.
Are Tesla's manufacturing capabilities really superior to Toyota? The latter is making 20x as many cars (2020), makes money while doing so and is worth about a third of Tesla.
Again, I'm not saying they're perfect — only that there's a real business unlike a cryptocurrency. It might not be printing money like Google/Facebook ads but it's highly unlikely that the business could not turn a profit, albeit a tighter one due to competition.
Contrast with a cryptocurrency: there's no value other than marketing and nobody needs to use it at all, much less any particular cryptocurrency over an alternative. That puts your floor value at zero: unlike cars, nobody needs random hashes and certainly nobody needs to buy your hashes over equivalent hashes available somewhere else.
Yes, not trying to defend crypto here. Have been watching the space for 6 years and never used a product or service that was built on a blockchain. Cumulative value is hundreds of billions of dollars. I wonder whether I'll wake up in a few years thinking how could I be so blind to all this awesome innovation or whether the hype dies down.
Quick note on Tesla: I'm not saying they cannot make money, just that the current trillion dollar market cap is absolutely astronomical given the business performance.
Tesla sells government credits. Cars and solar panels are ancillary to that. The problem is that government issued credits like those can be sold. The Reagan administration cursed us with Elon Musk, and that simple fix (making government issued tax credits non-transferrable) prevents future Musks.
Again, I'm not saying that I agree that Tesla's current valuation is prudent — only that they have a real business making things which a lot of people like. Even if you think that competition will prevent the massive upsides some investors are hoping for, the floor value from that is a lot greater than the zero for a cryptocurrency.
TSLA has not much to do with Tesla the company, it’s just a token that is speculated upon, like in crypto. Traders and investors, especially retail, don’t care about what a stock is intrinsically (except maybe old school and large ones like Warren Buffet). They care only if they will be able to unload to someone else in the future. As long as people believe in a narrative the reality of what the company does is irrelevant. 10 years of Bitcoin have made that clear.
Words have meaning. TSLA is a share of a real entity with substantial assets and legal rights. While there is a portion of that value which is speculative, it’s grounded in a real business with measurable performance.
Contrast with cryptocurrencies which have no intrinsic demand or business outside of being speculated on. As Bitcoin has shown, this can get you a lot of speculative money but that doesn’t mean there’s any lasting benefit. Normal people would have their lives affected if Tesla folded but if Bitcoin shut down tomorrow nobody outside of speculators would be impacted.
Cryptocurrencies have failed to do the equivalent – that’s why the pitch is “buy in now or you’ll wish you had later” rather than talking about things you could actually do that you can’t do as well now.