Cathie Wood Bought $53.5 Million of Tesla Stock Right After Elon Musk's Post-Earnings Sell-Off. Is a Rebound Coming?

Written by Prosper Junior Bakiny for The Motley Fool->

Ark Investment Management is buying the dip on Tesla stock following a mixed second-quarter update.

The electric vehicle maker could see its shares rebound if it can scale its robotaxi business.

Investors should be cautious about management's projections.

Tesla's (NASDAQ: TSLA) second-quarter update failed to impress the market. The company's core electric vehicle (EV) business performed well, with deliveries growing by a strong 25% year over year to 480,126, well ahead of the consensus analyst estimate. This helped power healthy top-line growth. The company's revenue climbed by 26% year over year to $28.2 billion. However, Tesla didn't perform nearly as well on the bottom line, with its adjusted earnings per share declining 18% year over year to $0.33.

Tesla's stock fell sharply following its earnings release, but some famous names on Wall Street, including Cathie Wood, saw the dip as a buying opportunity. Wood's firm, Ark Investment Management, bought Tesla stock on more than one occasion after the earnings-related drop, purchasing about $53.5 million in shares as of writing. If there is a rebound on the horizon, that's a great move. Let's see whether that's the case.

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Tesla's work on its robotaxi project will likely have the biggest impact on its stock performance in the near term (and perhaps in the long term as well). The company is making progress. Since launching robotaxis in Austin last year, the service is now available across six U.S. cities. According to management, Tesla's unsupervised miles driven per week have grown at double-digit rates since 2026 started, and it expects to maintain that pace through the end of the year. Further, as the company points out, it hasn't had a single notable incident, despite its fleet of unsupervised vehicles driving more than 380,000 miles.

Needless to say, if Tesla can keep that safety record while growing at the pace management expects through the end of the year, the market could reward the stock. Of note, Tesla's EPS declined because of significant capex, partly to support its robotaxi project. If this business scales quickly, that will justify its investments and attract at least some of these otherwise skeptical investors. Elsewhere, Tesla also said it would begin production of its latest Optimus humanoid robot soon.

That is another project that could jolt the stock. If Tesla reveals the Optimus 3 by year-end, and it is nearly as impressive as the company said it would be, the stock could jump significantly.

That said, Tesla is famous for making grand promises and underdelivering. That doesn't mean the company will do the same this time around, but it's a huge risk to take management's word for it. Buying Tesla stock right now, expecting a rebound over the next six months (or so), likely isn't a wise move. But what if we focus on the long term? Tesla's ambitions could certainly unlock a large opportunity.

Its robotaxi business could become a significant source of revenue and higher margin profits than the sale of electric vehicles. But it's worth noting that Waymo, which Alphabet (NASDAQ: GOOG) (NASDAQ: GOOGL) owns, currently has a far larger fleet than Tesla.

Also, as management's recent comments highlight, the company's robotaxi business faces risks. Elon Musk rightly pointed out that a single accident would attract significant attention, including from regulators, and make it harder for Tesla to secure the approvals necessary to operate its robotaxi fleet. Accidents haven't happened to the company yet, but investors should keep the possibility in mind. With all that said, Tesla is a risky stock, even though it has significant upside potential. Invest accordingly.

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Prosper Junior Bakiny has positions in Alphabet. The Motley Fool has positions in and recommends Alphabet and Tesla. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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