On Tuesday, Tesla closed down 2.7% at $157.11, with a total market value of $500.4 billion. Since the end of April last year, the company's closing market value has never been lower than $500 billion. If Tesla doesn't release any positive news, the closing below this level is likely to happen soon.

Since the beginning of this year, Tesla has fallen by 37% and its market value has evaporated by approximately $290 billion. This company is the second largest decline in the S&P 500 index this year.

Bad news one after another

If we look at the duration a bit longer, we can see that Tesla's stock price has been under pressure since October last year. At that time, Tesla issued its first warning that demand for electric vehicles was starting to slow down.

Especially in the first quarter of this year, Tesla's car sales declined for the first time in four years and were significantly lower than analyst expectations. It was also at this time that the market deeply realized the meaning of Tesla's earlier warning of a slowdown in demand.

The weak data has raised concerns among investors about Tesla's growth trajectory. Because Tesla has not disclosed much information about its development of a low-cost new car (known as the "Model 2" by the public). Previously, there were reports that Tesla had abandoned the project, but it was denied by Musk.

The recent major layoffs have further intensified market concerns, indicating that Tesla still faces demand risks. In addition, the announcement of two executives leaving the company on the same day further suppressed market sentiment.

Morgan Stanley analyst Ryan Brinkman said, "The tightening of employment and production capacity has had a profound impact on the high growth narrative that still exists in Tesla's stock price, indicating significant downside risks."

Although the slowdown in demand for electric vehicles is troubling global electric vehicle manufacturers, it is a more frightening situation for Tesla stocks than for car companies. Although Tesla's market value has shrunk significantly, the company still far exceeds the market value of other listed electric vehicle manufacturers worldwide.

The reason why Tesla has a huge valuation premium is partly because investors see its potential to dominate the future electric vehicle industry. Now, this potential is weakening.

In this context, Musk's mention of the August release of Robotaxi only briefly boosted market sentiment. Musk once said that unless the problem of autonomous vehicle can be solved, the value of the company will be basically zero. Therefore, Tesla has been pushing towards autonomous driving.

However, many analysts believe that while manufacturing fully autonomous vehicle is crucial to Tesla's prospects, manufacturing low-cost electric vehicles is also important to drive growth. Especially in the view of most experts, it may take decades for autonomous vehicle to be widely adopted.

David Wagner, portfolio manager at Aptus Capital Advisors, said, "Tesla's recent bullish reason is that investors are waiting to launch a low-cost platform that will greatly revive growth. But the market is realizing that this may not be possible because this $25000 car already exists, manufactured by BYD in China."

Tesla will announce its first quarter results on April 23rd. Investors are waiting for Tesla executives to give them more bullish reasons.

Cathie Wood bucked the trend to buy Tesla

On Tuesday, as Tesla continued its decline, Cathie Wood was not intimidated and continued to buy Tesla stocks.It is reported that Ark Investment Management, a subsidiary of "Wood Sister," purchased 20,683 Tesla stocks worth $3.25 million through multiple funds under its umbrella on Tuesday.

Tesla has always been a favorite of Cathie Wood. Currently, Tesla is the largest holdings of Ark Investment Management's flagship fund ARKK, accounting for 9.83% of its investment portfolio based on stock value. ARKK currently holds 4,028,071 Tesla shares worth $650 million.

It is worth mentioning that, like Tesla, ARKK has also suffered a disastrous decline this year.

On Tuesday, ARKK fell 2.8%. The decline of ARKK was mainly dragged down by its heavy holdings. ARKK not only holds a heavy stake in Tesla, but also holds a significant amount of Coinbase. Coinbase's stock price fell by 8% on Tuesday after falling 9% on the previous trading day. ARKK's other major holdings, Roku and UiPath, also fell on Tuesday.

Recently, investors in ARKK have been withdrawing their funds one after another. ARKK is likely to experience a fourth consecutive month of outflow of funds. Since the beginning of this year, investors have withdrawn $1.4 billion in funds. As a comparison, during the pandemic, the fund attracted up to $3 billion in funding in just one month.