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Tesla Bears Had a Great November Until Monday's AI Chip Announcement Crushed the Rally

MarketDash Editorial Team
13 days ago
The bearish TSLQ ETF climbed over 30% in November as Tesla stumbled, but a single day of AI chip news from Elon Musk wiped out more than half those gains in one brutal session.

If you were betting against Tesla Inc. (TSLA) this November, you had a good run. Right up until you didn't.

The Tradr 2X Short TSLA Daily ETF (TSLQ), which makes money when Tesla goes down, was riding high heading into the final week of November. The bearish ETF had climbed double digits as Tesla wilted under pressure from weak China sales, valuation skepticism, and general nervousness. By Friday, TSLQ was up more than 30% for the month, and short sellers were feeling pretty good about themselves.

Then Monday happened.

TSLQ plunged nearly 15% in morning trading after Tesla rocketed more than 7% higher. The catalyst? CEO Elon Musk dropped a bombshell over the weekend about Tesla's in-house AI chip strategy, complete with timelines, volume targets, and recruiting plans. Just like that, TSLQ's month-to-date gains shrank from over 30% to about 12%.

Why TSLQ Was Having Such a Nice Month

For most of November, everything seemed to be going TSLQ's way. Tesla's stock was under pressure from multiple angles, creating exactly the kind of environment where an inverse ETF thrives. Here's what was working in the bears' favor:

Tesla Couldn't Hold Its Policy-Driven Rally

Earlier in the month, Tesla shares jumped on optimism around EV incentives in what's being called the "Big, Beautiful Bill." The legislation allows up to $10,000 in annual interest deductions on U.S.-assembled EVs, which should be great news for Tesla. But the stock couldn't sustain the momentum and started sliding. That pullback was perfect for TSLQ, which is designed to profit when Tesla falls.

AI Headlines Weren't Moving the Needle

Musk's xAI venture, backed by Saudi capital, announced deals for a massive AI data center powered by Nvidia Corp (NVDA) chips. Impressive on paper, but Tesla's stock was acting less like a high-flying AI play and more like a company facing serious headwinds. The disconnect between Musk's various ventures and Tesla's stock performance was becoming hard to ignore.

China Sales Dropped While Competition Heated Up

Tesla's China deliveries fell 36% year-over-year in October. Meanwhile, Xiaomi's EV division posted its first profitable quarter and delivered over 100,000 vehicles in Q3. When one of the world's largest smartphone makers starts making money selling electric cars, that's not a minor competitive threat.

Valuation Critics Were Getting Louder

NYU professor Aswath Damodaran didn't mince words, calling Tesla one of the most "irrationally valued" companies and questioning whether the company even knows what it wants to be. Is it an EV manufacturer, an AI company, or a robotics firm? That kind of existential doubt is exactly what inverse ETF traders want to hear.

Musk has countered that Tesla will see a "major valuation change" when it achieves unsupervised self-driving at scale, and an even bigger shift when volume production of its Optimus humanoid robot kicks in. But those remain promises, not products generating revenue today.

Wall Street Was Divided

Analyst sentiment on Tesla remained mostly positive, but cracks were showing. Stifel reiterated a Buy rating with a $508 price target, implying more than 20% upside. Wedbush, one of Tesla's biggest bulls, maintained a $600 target among the most aggressive on the Street.

But the consensus among over 30 analysts sat around $378, according to market data. That gap between the uber-bulls and the broader analyst community suggested growing disagreement about Tesla's trajectory. For a leveraged inverse ETF, that kind of uncertainty is fertile ground. As Tesla kept falling, TSLQ amplified the decline and attracted short-term traders looking to ride the bearish wave.

Then Came Musk's AI Chip Announcement

The narrative flipped completely on Monday after Musk revealed that Tesla has spent years building an internal AI chip and board engineering division that's already designed and deployed "several million" chips in its vehicles and data centers.

The key details from his disclosure:

  • Tesla is currently shipping AI4, its fourth-generation chip
  • AI5 is nearing completion, with AI6 in early development stages
  • Musk wants to roll out a new chip generation every 12 months
  • Tesla expects to eventually produce more AI chips than all competitors combined
  • An aggressive recruiting push is underway for top semiconductor and AI hardware engineers

Even though Musk acknowledged delays—AI5 volume production has slipped to mid-2027—the scale and ambition of the chip roadmap reignited market enthusiasm about Tesla's long-term AI positioning. Bulls saw validation of Tesla as more than just a car company. And that was enough to send the stock surging.

Why This Hit TSLQ So Hard

TSLQ is designed to deliver negative 2x the daily performance of Tesla. When Tesla drops 5%, TSLQ should theoretically rise about 10%. The ETF achieves this through derivatives, mostly contracts for difference on Tesla stock, while holding substantial cash reserves. That structure creates inverse exposure but also introduces tracking risk.

Here's the catch: leveraged ETFs reset daily. Over time, especially in volatile markets, that daily reset can erode returns in ways that surprise investors who aren't paying close attention. You need to be tactical if you're holding TSLQ for more than a day or two.

Monday's move is a textbook example of that risk playing out in real time. Tesla's 7% pop instantly erased the clean, bearish November trend that TSLQ had been riding. The leveraged structure meant TSLQ's drawdown was twice as severe, overwhelming its earlier gains and cutting the month-to-date return by more than half in a single session.

What This Means Going Forward

November is no longer the straightforward downside trade it appeared to be just days ago. One burst of AI optimism from Musk changed everything in a matter of hours. For TSLQ traders and Tesla bears, the lesson is clear: betting against Elon Musk's companies can work until it spectacularly doesn't.

The question now is whether Tesla can sustain this momentum or whether the stock will give back these gains as investors digest the reality that AI5 volume production is still more than two years away. TSLQ holders—the ones who didn't bail out Monday morning—are watching closely to see if Tesla's latest rally has legs or if it's just another head fake in a volatile stock that never stops surprising the market.

Back to News

Tesla Bears Had a Great November Until Monday's AI Chip Announcement Crushed the Rally

MarketDash Editorial Team
13 days ago
The bearish TSLQ ETF climbed over 30% in November as Tesla stumbled, but a single day of AI chip news from Elon Musk wiped out more than half those gains in one brutal session.

If you were betting against Tesla Inc. (TSLA) this November, you had a good run. Right up until you didn't.

The Tradr 2X Short TSLA Daily ETF (TSLQ), which makes money when Tesla goes down, was riding high heading into the final week of November. The bearish ETF had climbed double digits as Tesla wilted under pressure from weak China sales, valuation skepticism, and general nervousness. By Friday, TSLQ was up more than 30% for the month, and short sellers were feeling pretty good about themselves.

Then Monday happened.

TSLQ plunged nearly 15% in morning trading after Tesla rocketed more than 7% higher. The catalyst? CEO Elon Musk dropped a bombshell over the weekend about Tesla's in-house AI chip strategy, complete with timelines, volume targets, and recruiting plans. Just like that, TSLQ's month-to-date gains shrank from over 30% to about 12%.

Why TSLQ Was Having Such a Nice Month

For most of November, everything seemed to be going TSLQ's way. Tesla's stock was under pressure from multiple angles, creating exactly the kind of environment where an inverse ETF thrives. Here's what was working in the bears' favor:

Tesla Couldn't Hold Its Policy-Driven Rally

Earlier in the month, Tesla shares jumped on optimism around EV incentives in what's being called the "Big, Beautiful Bill." The legislation allows up to $10,000 in annual interest deductions on U.S.-assembled EVs, which should be great news for Tesla. But the stock couldn't sustain the momentum and started sliding. That pullback was perfect for TSLQ, which is designed to profit when Tesla falls.

AI Headlines Weren't Moving the Needle

Musk's xAI venture, backed by Saudi capital, announced deals for a massive AI data center powered by Nvidia Corp (NVDA) chips. Impressive on paper, but Tesla's stock was acting less like a high-flying AI play and more like a company facing serious headwinds. The disconnect between Musk's various ventures and Tesla's stock performance was becoming hard to ignore.

China Sales Dropped While Competition Heated Up

Tesla's China deliveries fell 36% year-over-year in October. Meanwhile, Xiaomi's EV division posted its first profitable quarter and delivered over 100,000 vehicles in Q3. When one of the world's largest smartphone makers starts making money selling electric cars, that's not a minor competitive threat.

Valuation Critics Were Getting Louder

NYU professor Aswath Damodaran didn't mince words, calling Tesla one of the most "irrationally valued" companies and questioning whether the company even knows what it wants to be. Is it an EV manufacturer, an AI company, or a robotics firm? That kind of existential doubt is exactly what inverse ETF traders want to hear.

Musk has countered that Tesla will see a "major valuation change" when it achieves unsupervised self-driving at scale, and an even bigger shift when volume production of its Optimus humanoid robot kicks in. But those remain promises, not products generating revenue today.

Wall Street Was Divided

Analyst sentiment on Tesla remained mostly positive, but cracks were showing. Stifel reiterated a Buy rating with a $508 price target, implying more than 20% upside. Wedbush, one of Tesla's biggest bulls, maintained a $600 target among the most aggressive on the Street.

But the consensus among over 30 analysts sat around $378, according to market data. That gap between the uber-bulls and the broader analyst community suggested growing disagreement about Tesla's trajectory. For a leveraged inverse ETF, that kind of uncertainty is fertile ground. As Tesla kept falling, TSLQ amplified the decline and attracted short-term traders looking to ride the bearish wave.

Then Came Musk's AI Chip Announcement

The narrative flipped completely on Monday after Musk revealed that Tesla has spent years building an internal AI chip and board engineering division that's already designed and deployed "several million" chips in its vehicles and data centers.

The key details from his disclosure:

  • Tesla is currently shipping AI4, its fourth-generation chip
  • AI5 is nearing completion, with AI6 in early development stages
  • Musk wants to roll out a new chip generation every 12 months
  • Tesla expects to eventually produce more AI chips than all competitors combined
  • An aggressive recruiting push is underway for top semiconductor and AI hardware engineers

Even though Musk acknowledged delays—AI5 volume production has slipped to mid-2027—the scale and ambition of the chip roadmap reignited market enthusiasm about Tesla's long-term AI positioning. Bulls saw validation of Tesla as more than just a car company. And that was enough to send the stock surging.

Why This Hit TSLQ So Hard

TSLQ is designed to deliver negative 2x the daily performance of Tesla. When Tesla drops 5%, TSLQ should theoretically rise about 10%. The ETF achieves this through derivatives, mostly contracts for difference on Tesla stock, while holding substantial cash reserves. That structure creates inverse exposure but also introduces tracking risk.

Here's the catch: leveraged ETFs reset daily. Over time, especially in volatile markets, that daily reset can erode returns in ways that surprise investors who aren't paying close attention. You need to be tactical if you're holding TSLQ for more than a day or two.

Monday's move is a textbook example of that risk playing out in real time. Tesla's 7% pop instantly erased the clean, bearish November trend that TSLQ had been riding. The leveraged structure meant TSLQ's drawdown was twice as severe, overwhelming its earlier gains and cutting the month-to-date return by more than half in a single session.

What This Means Going Forward

November is no longer the straightforward downside trade it appeared to be just days ago. One burst of AI optimism from Musk changed everything in a matter of hours. For TSLQ traders and Tesla bears, the lesson is clear: betting against Elon Musk's companies can work until it spectacularly doesn't.

The question now is whether Tesla can sustain this momentum or whether the stock will give back these gains as investors digest the reality that AI5 volume production is still more than two years away. TSLQ holders—the ones who didn't bail out Monday morning—are watching closely to see if Tesla's latest rally has legs or if it's just another head fake in a volatile stock that never stops surprising the market.