Legendary American investor Ron Baron is confident in Tesla's future, predicting that its market value will rise to $4 trillion in the next decade!

According to the Zhongtong Finance APP, although Tesla's (TSLA.US) third-quarter performance was disappointing, legendary investor and billionaire Ron Baron still believes that Tesla's market value could reach $4 trillion in the next decade. According to Refinitiv data, as of Thursday's close, Tesla's market value was close to $700 billion, which means it would need to grow nearly six times to reach $4 trillion. He also said that Tesla, SpaceX, and X's owner, Musk, is a "smart guy."

It is worth mentioning that Ron Baron has been investing in Tesla since 2014 and has made billions of dollars on this stock, firmly believing in Tesla's future. Ron Baron said, "Tesla is not just a car company in the future, nor just a battery company. Tesla's system and computing power will be like Intel's chips inside computers, and will also become the built-in system of other cars. All cars will use Tesla's autonomous driving, and no one else can compete."

Musk agreed with Ron Baron's views on social media and said, "We do need a few successes to achieve this market value, but I think we can do it."

So far this year, Tesla's stock price has risen over 77%. Driven by the AI boom, investors have been buying large tech stocks, including Tesla, among the "Big Seven." However, Tesla's stock price fell nearly 20% in October, mainly due to concerns about its prospects following the company's latest earnings report.

This year, Tesla has been lowering the prices of its electric vehicles to boost demand, but it has gradually found that price cuts have lost their ability to drive sales and have also hurt Tesla's profit margins, a key profitability metric closely watched by the market. Data shows that Tesla's Q3 gross margin was 17.9%, a decrease of 719 basis points from the same period last year, lower than the market's expected 18% and Q2's 18.2%; operating margin was 7.6%, a decrease of 964 basis points from the same period last year, lower than Q2's 9.6%, the lowest level since the first quarter of 2021. The automotive gross margin, excluding regulatory credits, was 16.3%, lower than the market's expected 17.7%.

Tesla CEO Musk explained during the earnings conference call why he issued a demand warning when slowing down plans to build a factory in Mexico. He said, "I'm concerned about the high-interest-rate environment we're in." "What I want to emphasize is that the vast majority of people buy cars on a monthly payment basis. If interest rates stay high for a long time, or even higher, demand will certainly weaken."

As a highly valued electric vehicle manufacturer, Tesla faces high risks. Although Tesla's expensive stock price partly reflects its potential in developing autonomous driving cars, it still largely depends on the company's ability to maintain its current industry-leading position and its profit margin performance. With the weakening demand for electric vehicles and Tesla's aggressive price reduction measures losing their ability to further boost demand, investors are starting to feel uneasy, which is reflected in the recent sharp decline in the company's stock price.