Here's Why Tesla Stock Soared in May

Shares in Tesla (TSLA 2.48%) soared by 22.8% in May, according to data provided by S&P Global Market Intelligence. The move is driven by a combination of factors, some of which could propel the stock to even greater heights through 2025 and beyond. Trade tariff de-escalations Three key factors were driving the stock in May. First, the overall market rose sharply, with the S&P 500 up more than 6%. In such an environment, the market often moves toward risk-seeking, so stocks like Tesla tend to outperform. Second, a key event, and part of the reason for the market's rise in May, is the de-escalation of the trade tariff dispute between the U.S. and China. In mid-May, the U.S. and China agreed to walk back tariffs imposed on each other's goods for 90 days. It was good news for the market on the whole and particularly for Tesla. The company sources battery cells from China for some models sold in the U.S., and it also sources components from China. Indeed, CEO Elon Musk is no fan of tariffs, having argued on a recent earnings call that "I've been on the record many times saying that I believe lower tariffs are generally a good idea for prosperity." Robotaxis The third reason for the rise, and arguably the most important, is the growing optimism around the launch of Tesla's robotaxi service in Austin in June. In fact, in late May, Musk said that Tesla was looking at a launch date of June 12. Why the robotaxi launch matters Tesla's robotaxi concept (which involves Tesla vehicles configured for use as robotaxis and a dedicated Cybercab vehicle to be produced starting in 2026) is the key to its future and its valuation. It's easy to point at Tesla's astronomical price-to-earnings multiple and use it as a stick to beat the stock with, but the reality is that Tesla is much more than a car company. Image source: Getty Images. The robotaxi concept is a huge opportunity to leverage its position as the leading electric vehicle company and the maker of the best-selling car in the world. This could enable Tesla to generate huge recurring revenues from offering mobility-as-a-service offerings such as ride-per-mile revenue share and subscription revenue from Full Self-Driving (FSD) software. A successful launch of the robotaxi concept in Austin would bring that exciting future a step closer.