Remember that feeling when someone calls the top of a market everyone else loves? It’s equal parts intriguing and nerve-wracking. I’ve always found those moments fascinating because they force you to question the consensus. Right now, one of the most famous contrarian investors is doing exactly that with one of the market’s darling stocks.
The investor behind the legendary big short trade during the housing crisis has turned his attention back to the electric vehicle giant. And he’s not mincing words. In a recent commentary, he described the company as significantly overpriced and highlighted some structural issues that could weigh on shareholders for years to come.
Why This Bearish Call Matters
Contrarian voices like this one carry weight because of past successes. When someone has proven they can spot bubbles before they burst, people listen—even if they disagree. In this case, the criticism centers on valuation, compensation practices, and shifting business narratives. Let’s break it down piece by piece.
The Dilution Dilemma
One of the sharpest points raised is about shareholder dilution through stock-based compensation. Tech companies often use equity to pay employees and executives, which makes sense for cash preservation. But when done excessively without offsets, it can erode existing shareholders’ ownership over time.
Estimates suggest this particular company dilutes shares by around 3-4% annually through these grants. Unlike many mature tech giants that run large buyback programs to counteract this effect, there’s little to no repurchase activity here. That means every year, existing investors own a slightly smaller slice of the pie.
Think about it this way: if you owned 100 shares ten years ago, you’d own far fewer proportionally today after all the grants. It’s a slow grind that compounds over time. And with recent massive compensation packages approved, this issue isn’t going away anytime soon.
The math on stock-based compensation in tech can be tragic for long-term holders when there’s no counterbalance.
That’s the core of the argument. It’s not about denying talent needs rewarding—it’s about balance and protecting those who’ve stuck with the company through thick and thin.
Shifting Stories: From EVs to Robots
Another observation that’s hard to ignore is how the company’s main growth driver seems to change every few years. First, it was all about dominating electric vehicles. Then the spotlight moved to full autonomy and robotaxis. Now, humanoid robots are getting heavy promotion.
There’s a pattern here that’s worth noting. Each time a new narrative takes center stage, the previous one quietly recedes as competition intensifies. Electric vehicle margins have come under pressure as traditional automakers ramp up their own offerings. Autonomy timelines have stretched longer than initially promised. And now robots are the next big promise.
I’m not saying these initiatives lack potential—they’re ambitious and could be transformative. But investors are essentially betting on a moving target. The valuation today prices in success across multiple futuristic bets simultaneously, which raises the risk if even one falls short.
- Electric vehicles: Facing increasing competition and margin compression
- Full self-driving: Regulatory and technical hurdles persist
- Robotaxis: Deployment timelines remain uncertain
- Humanoid robots: Still in very early development stages
Each of these could be worth billions if successful. But valuing them all at perfection while core auto business faces headwinds—that’s where skepticism creeps in.
History Doesn’t Always Repeat, But It Rhymes
Perhaps the most interesting aspect is the timing. This isn’t the first time this investor has taken a bearish stance on the stock. Back in 2021, a sizable put position was disclosed right before the shares continued their upward climb, nearly doubling from the disclosure point before eventually peaking and pulling back sharply.
It was a painful ride for the short side initially. The stock had already run up massively, yet kept going higher on momentum and hype. Only later did gravity assert itself with a significant drawdown from all-time highs.
Is something similar setting up today? Current valuations remain stretched by traditional metrics. Enthusiasm around autonomy and robotics is sky-high among bulls. Meanwhile, core vehicle delivery growth has moderated, and competition is fiercer than ever.
Of course, markets can stay irrational longer than shorts can stay solvent—as the saying goes. Being early is often indistinguishable from being wrong in the short term.
Wall Street’s Contrasting View
Not everyone shares the bearish outlook. Several analysts have recently become more positive, citing progress in autonomous technology and in-house chip development. Some have called the stock a must-own for growth portfolios focused on disruptive innovation.
Price targets have been raised, buy ratings reaffirmed. The optimism centers on the potential for software-like margins once full autonomy is achieved. Robotaxi networks could generate enormous recurring revenue with minimal variable costs.
In my experience, these competing narratives are what make markets so fascinating. Bulls see a once-in-a-generation opportunity to own the future of transportation and robotics. Bears see an overextrapolation of growth with execution risks and valuation disconnect.
Innovation stocks often trade on vision until they must trade on execution.
We’re arguably in that transition phase now—where promises start needing proof.
Broader Implications for Tech Investing
This specific situation highlights bigger questions facing many high-growth tech names. Stock-based compensation has become ubiquitous in the sector, especially among companies that prioritize growth over profitability.
When interest rates were near zero, this practice was easier to overlook. Capital was cheap, growth was king, and buybacks weren’t necessary because shares kept rising anyway. But in a higher rate environment, cash preservation and return of capital matter more.
Companies without meaningful buyback programs while issuing large equity grants face ongoing dilution pressure. Over a decade, this can significantly impact total returns for shareholders, even if the underlying business grows impressively.
It’s one of those subtle but important factors that value-oriented investors watch closely. Growth at any price has limits.
What Recent Moves Tell Us
Beyond this company, the investor has made other notable bearish bets recently. Large put positions in semiconductor leaders and data software firms suggest a broader skepticism toward parts of the tech sector trading at premium valuations.
These moves align with concerns about vendor financing practices and sustainability of certain growth rates. It’s a consistent theme: questioning whether current prices adequately reflect risks.
After stepping away from traditional fund management, commentary now comes through personal channels. The message remains the same—caution toward richly valued growth stories.
Risks for Both Sides of the Trade
Shorting high-momentum growth stocks is notoriously difficult. Even when fundamentals appear stretched, sentiment and narrative can drive prices higher for extended periods. We’ve seen this play out multiple times in recent market cycles.
On the flip side, owning expensive stocks that fail to meet lofty expectations can lead to sharp reversals. When growth decelerates or promised breakthroughs take longer than expected, multiples compress quickly.
- Momentum can overpower fundamentals temporarily
- Execution risks are real for ambitious technology bets
- Valuation matters eventually—even for great companies
- Compensation structure impacts long-term shareholder returns
Both perspectives have merit depending on your time horizon and risk tolerance.
Looking Ahead: What to Watch
Several upcoming milestones could sway sentiment either way. Progress on autonomy regulatory approval, robotaxi deployment updates, delivery numbers, margin trends—all will be scrutinized.
If execution accelerates and new revenue streams emerge, bulls will feel vindicated. If delays persist and competition intensifies without offsetting positives, bears may gain traction.
Either way, this debate highlights why active investing remains challenging and rewarding. Consensus views rarely offer the best risk/reward. It’s often in the divergence of opinion where opportunities lie.
In the end, markets will sort out who’s right. But listening to thoughtful contrarians—even when you disagree—usually makes you a better investor. It forces examination of your own assumptions and blind spots.
That’s what I’ve always appreciated about voices like this one. They challenge the prevailing narrative and make us think harder about what we’re really paying for when we buy growth.
Whatever your view on the stock, the broader lessons about dilution, narrative shifts, and valuation discipline apply across many names in today’s market. Worth keeping in mind as we navigate what comes next.
