Tesla in trouble? How BYD could dethrone Elon Musk the same way DeepSeek surpassed OpenAI

Tesla’s stock has been on a downward trend, marking its sixth consecutive day of decline early Tuesday. This drop is part of a broader market selloff, with Tesla feeling the ripple effects of an AI-driven slump that hit the tech sector on Monday. Although Tesla wasn’t as hard-hit as some other companies, its shares still fell by 2.2%, trading at $388.38. Over the past two days, the stock has lost 2.3% of its value.

One of the key factors behind Tesla’s decline is the sudden rise of DeepSeek, a Chinese AI app that skyrocketed to the top of Apple’s download charts over the weekend. DeepSeek is being compared to OpenAI’s ChatGPT in terms of performance but is reportedly much cheaper to develop. This has sparked concerns in the market, particularly for companies like Tesla, which are heavily invested in AI technology.

Tesla’s AI ambitions are closely tied to its work on autonomous driving and humanoid robots. The company has poured billions into training its AI systems to power these innovations. However, the emergence of cost-effective AI solutions like DeepSeek suggests that smaller, more efficient alternatives could challenge Tesla’s dominance in the AI space.

byd dethrone elon musk tesla
BYD is one of China’s first electric vehicle companies and it’s beating Tesla on its home turf, but can it replicate this success in foreign markets?

Deutsche Bank analyst Adrian Cox highlighted this trend in a recent report, noting that DeepSeek’s success signals a shift in the AI industry. “Bigger is no longer better,” Cox said, suggesting that companies like Tesla, which rely on expensive, large-scale AI models, could face challenges as smaller, cheaper systems prove equally capable.

Tesla has been a major beneficiary of the AI boom, investing heavily in Nvidia GPUs to power its AI projects. For instance, Elon Musk’s AI venture, xAI, made headlines last year for building the Colossus supercomputer in just four months using over 100,000 Nvidia H100 GPUs, each costing around $30,000. Despite these investments, Cox warns that as AI becomes more widespread, these models could become commoditized, eroding Tesla’s competitive edge.

Cox drew an analogy to the automotive market: “You don’t need a Tesla Model X to drive around the corner to pick up a pint of milk. A Chinese BYD may do the job just as well.” His point is that as lower-cost AI models become more effective, Tesla could face tougher competition from rivals like BYD, a Chinese automaker, in the self-driving car market.

This shift underscores a broader change in how AI is being used across industries, including automotive. Cheaper AI models could enable more companies to offer competitive self-driving technology at lower prices, potentially threatening Tesla’s premium position.

That said, it’s worth noting that AI chatbots like DeepSeek are far less complex than the AI systems Tesla is developing for its vehicles. Tesla’s self-driving AI must navigate real-world traffic, pedestrians, and other hazards—challenges that DeepSeek doesn’t face. Still, the rise of cost-effective AI solutions highlights the need for Tesla to adapt to a rapidly evolving landscape.

Despite these risks, Tesla remains committed to its aggressive AI strategy. However, investors should keep a close eye on developments like DeepSeek, as they represent a new wave of competition that could disrupt Tesla’s growth in unexpected ways.

Cox’s analysis points to a broader shift in the AI market, where scale and size may no longer guarantee an advantage. For Tesla, this means reevaluating its AI investments to stay ahead of a growing pool of competitors.

While Deutsche Bank analyst Edison Yu maintains a more optimistic view of Tesla, rating it a Buy with a price target of $420, even he may need to adjust his forecasts as the competitive landscape evolves.

For now, Tesla investors should tread carefully, monitoring the shifting dynamics in the AI market. As DeepSeek’s rise demonstrates, the rules of the game are changing—and these changes could challenge Tesla’s dominance in both AI and automotive innovation.

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