Updated version 1 - Tesla stock price drops, capital expenditure cuts raise investor doubts about Musk's AI robot plan

Rewrote the first paragraph; added analyst commentary and background information in paragraphs 4-6 and 9.

Reuters, October 22 - Tesla (TSLA.O) shares fell 2% on Thursday after the electric vehicle maker lowered its capital expenditure forecast, raising concerns among investors hoping for heavy investment to fulfill Elon Musk’s vision for artificial intelligence and robotics.

(link) On Wednesday, the company cut its 2026 capital expenditure forecast from more than $25 billion to about $20 billion, after third-quarter spending on AI and robotics fell far short of expectations, unexpectedly turning free cash flow positive.

As CEO Musk explores a merger (link) between Tesla and the much more capital-intensive SpaceX SPCX.O, this strong financial position could prove especially valuable.

Josh Gilbert, Chief Analyst at eToro, said that in the current market environment, capital spending requires a delicate balance. He added that investors would welcome a larger budget if they can see returns, but budget cuts suggest slowing growth.

“For a stock whose price is mainly based on the ‘Cybercab’ and ‘Optimus’ concepts, (the capital expenditure forecast downgrade) explains why the share price has stagnated even though most metrics beat expectations.”

Tesla did not specify which areas would see reduced spending, with company management stating on Wednesday that the adjustment was to efficiently manage capital allocation.

https://www.reuters.com/graphics/AUTOMATED-20261021/W-TESLA-SPACEX-PCT-CHG-SINCE-IPO/bypranqydve/chart.png

So far this year, Tesla shares have fallen by about 14%, while the Nasdaq index .IXIC has risen about 15%. The stock remains about 23% below the intraday record high of $498.83 set last December.

However, its valuation remains far above its peers: Tesla's price-to-earnings ratio (based on forward earnings forecasts) is 188.24x, compared to Ford’s 6.58x F.N and General Motors’ 5.16x GM.N.

On Tuesday, Musk said that Tesla and SpaceX SPCX.O have formed a special committee (link) to discuss a potential mega-merger. Such a move could create a giant worth roughly $3.5 trillion, with businesses spanning AI, cars, satellites, and rockets.

“The risk is that, as investors wait for news on a possible Tesla-SpaceX merger, Tesla could enter a period of limbo—which ... could face significant regulatory hurdles,” said Russ Mould, investment director at AJ Bell.

(To make its reporting more accessible to non-native English speakers, Reuters provides automated translation of its reports into several other languages. Automated translation may contain errors or lack necessary context, so Reuters does not guarantee the accuracy of the automated translation, which is provided for reader convenience only. Reuters accepts no liability for any harm or loss arising from the use of the automated translation function.)