South Korean retail investors question Tesla's "bull market narrative" and flock to Bitcoin and Ethereum

According to the Zhitong Finance APP, South Korean retail investors, known globally for their aggressive stock investment strategies such as high-leverage options or "gambling-style" full-position bets on individual stocks, are now re-betting in the cryptocurrency sector. There is a significant crack in their long-held belief in the "long-term bull market narrative of Tesla's stock price" — that is, their bullish logic on Tesla may gradually collapse.

As disappointment among South Korean retail investors towards this American electric vehicle manufacturer and leader in autonomous driving and humanoid robotics intensifies, their bullish buying interest in cryptocurrencies like Bitcoin and Ethereum has skyrocketed. Last month, they rarely increased their selling pressure on Tesla stocks and related call options.

South Korean retail investors are known worldwide and can cause severe fluctuations in any stock internationally in a very short time mainly because they focus on the YOLO investment strategy. YOLO — which stands for "You Only Live Once" — is an aggressive investment group that is keen on betting on individual stocks by going all-in or buying high-leverage options in a "gambling-style." This year, "YOLOs" have been particularly obsessed with betting heavily on the hottest AI computing industry chain companies like Nvidia, Broadcom, and TSMC, as well as high-volatility tech stocks with high retail participation like Tesla. Their latest bets have shifted towards high-volatility cryptocurrency-related assets.

Tesla's popularity among South Korean retail investors has sharply declined

According to Bloomberg's calculations based on custody data, South Korean retail investors net sold Tesla stocks worth approximately $657 million in August, marking the largest net outflow of funds since the beginning of 2023. In contrast, South Korean retail investors have shown a strong preference for more volatile U.S. stock market investment targets, such as Bitmine Immersion Technologies Inc (BMNR.US), which is seen as a proxy for Ethereum, with net purchases amounting to $253 million. ETFs tracking Ethereum and Bitcoin also saw net buying from South Korean retail investors.

This latest wave of capital outflow from South Korean retail investors indicates that one of Tesla's most loyal global retail investor groups is significantly retreating from their "bull market narrative belief." Their previous buying frenzy at lows and large-scale buying of call options once amplified the stock's upward momentum to record levels.

The selling of Tesla by South Korean retail investors and their shift to cryptocurrencies like Ethereum and AI leaders like Nvidia highlight that these investors, who were previously attracted to high-profile U.S. tech companies (like Tesla) with high retail participation, are now directing their funds elsewhere.

"Telsa has provided a lot of inspiring long-term bull market narratives in the past, but this year, it has failed to win over more speculative forces, instead continuously frustrating the bulls," said 33-year-old South Korean retail investor Han Chongxiu in an interview He first bought Tesla stock in 2019, but fully liquidated his position earlier this year, turning his attention to stocks he believes have greater upside potential, such as Nvidia, TSMC, and Broadcom, leaders in the AI computing industry. "It (Tesla) failed to lead the market's bullish logic with its own AI narrative."

Nevertheless, data shows that Tesla remains a core overseas stock held by retail investors in South Korea, with an overall value of approximately $21.9 billion in shares of the company. In contrast, AI chip giant Nvidia (NVDA.US) and AI application leader Palantir Technologies Inc (PLTR.US) rank as the second and third most preferred stocks among South Korean retail investors, but there is a significant gap in stock value compared to Tesla.

According to custodial data tracking the flow of retail investor funds in South Korea, the exchange-traded fund (ETF code: TSLL) that provides double leverage exposure to Tesla has also been sold off by this group, experiencing the largest monthly outflow since early 2024 in August, with data showing that the withdrawal value by South Korean retail investors reached as high as $554 million.

Tesla's Performance and Valuation Continues to Face Pressure

Since the beginning of this year, Tesla's fundamental performance and valuation have faced significant pressure, particularly due to global investor concerns stemming from Musk's political involvement, the breakdown of Musk's relationship with former President Trump, a substantial decline in Tesla's sales in multiple regions worldwide, and the slower-than-expected progress of the Full Self-Driving (FSD) subscription and Robotaxi promotion. Tesla's stock price has experienced significant volatility this year, with a cumulative decline of over 17%, placing it at the bottom among the "seven major tech giants" in the U.S. stock market. However, during a major rebound from April to May, the stock surged by as much as 50%, before entering a downward trajectory with a decline of 20% in June and July.

The scale of automobile sales continues to decline, especially as Tesla-branded electric vehicles have faced a "halving of sales" in the European market, significantly impacting Tesla's overall performance this year. Tesla's market share in Europe has seen a "dramatic decline" for seven consecutive months, with new car sales in July plummeting by over 40%. In contrast, new car sales in Europe saw a year-on-year increase of 5.9% in July.

Tesla's market share in Europe has been severely compressed from 1.4% a year ago to 0.8%. Similarly, one of Tesla's biggest competitors in the electric vehicle space, BYD, saw its overall monthly sales in Europe surge by 225.3%, reaching a market share of 1.2%.

Senior analyst Gytis Zizys from SeekingAlpha recently released a research report stating that even if Musk hypes Tesla's Dojo AI supercomputer system, fully autonomous driving, and Robotaxi and humanoid robot applications with market potential, Tesla is essentially still an electric vehicle manufacturer, with car sales contributing up to 75% of its revenue, and the performance contribution from AI supercomputer-driven FSD, Robotaxi, and other "future-oriented businesses" is minimal with extremely unclear revenue prospects The analyst emphasized in the research that the value created by Tesla's automotive business will provide immense financial support for future projects driven by Tesla's incredibly powerful AI supercomputing system, such as FSD, Tesla Robotaxi, and new large-scale energy storage. Based on the AI spending of leading cloud computing companies in the U.S., the funding required for a powerful AI supercomputing system is enormous, which also means that if the automotive business continues to be weak, the "future faith value discount" of Tesla investors, primarily composed of "Tesla believers," regarding Tesla's future and Elon Musk himself will be significantly reduced.

Analyst expectations compiled by Bloomberg Intelligence show that Wall Street analysts generally expect the four tech giants—Google, Microsoft, Meta (the parent company of Facebook), and Amazon—to collectively spend over $350 billion this year on the expansion or construction of data centers centered around AI computing infrastructure, indicating a nearly 50% year-on-year growth based on strong growth anticipated in 2024, with expectations to exceed $450 billion by 2026