Elon Musk Drops $1 Billion on Tesla Stock—Should You Jump In Too?

Elon Musk just made a billion-dollar bet on his own company—sparking fresh debate about whether Tesla stock deserves a spot in your portfolio.

Breaking Down the Move

The Tesla CEO scooped up nearly $1 billion worth of shares, sending a classic insider signal to the market. Musk has never been shy about putting his money where his mouth is, but this purchase raises eyebrows even by his standards.

Why It Matters

Insider buying often hints at confidence—or at least that’s what finance textbooks say. In reality, it’s rarely that simple. Musk moves markets with a tweet; a billion-dollar stock buy is practically a seismic event.

The Investor Dilemma

Do you follow the man who revolutionized electric vehicles—and occasionally meme stocks—or do you question the timing? After all, if a CEO buys, it might mean he believes. Then again, it might also mean he needs the stock to stop sliding.

One thing’s clear: When Musk moves, people watch. Whether you should mirror his trade? That’s the billion-dollar question—literally.

Image source: Tesla.

What's driving the stock higher?

On June 22, Tesla officially announced the long-awaited debut of its robotaxi service. The event, held in Austin, Texas, offered test rides to select members of the Tesla faithful and a number of social media influencers from X (formerly Twitter) -- some of whom livestreamed their rides for good measure.

The pilot program is ongoing, with an estimated 10 to 20 Model Ys ferrying riders to their destinations, hailed using theapp. Musk has previously stated that he expects "open access" to the service to begin sometime in September.

While a host of automakers entered the self-driving car race over the years, Tesla and's Waymo are the only two that have launched robotaxi services. Cathie Wood, founder and CEO of Ark Invest, estimates that by 2030, there will be roughly 50 million robotaxis operating globally, with Tesla controlling 50% of the market.

Even if that estimate turns out to be ambitious, it's easy to see why investors are excited.

By the numbers

Earlier this month, Tesla's Board of Directors took the extraordinary step of asking shareholders to approve a new $900 billion incentive package for Musk. The deal is contingent on Musk achieving "extraordinary financial returns." These include raising Tesla's market cap, first to $2 trillion (up from $1.3 trillion today) and eventually to $8.5 trillion. He WOULD also have to boost Tesla's earnings before interest, taxes, depreciation, and amortization (EBITDA), resulting in operating profits of $400 billion, up from $17 billion in 2024.

In a regulatory filing with the Securities and Exchange Commission (SEC) that dropped on Friday, Musk signaled his enthusiasm for the plan. The enigmatic chief executive bought more than 2.5 million shares of Tesla stock, priced in a range of $371.38 and $396.54, spending just short of $1 billion in all on the purchase. Added to the 410 million shares Musk already owned, and using the stock's closing price on Friday, Musk's stake in Tesla has risen to more than $163 billion.

Should investors follow suit?

There's a well-known axiom on Wall Street, popularized by legendary investor Peter Lynch: "Insiders might sell their shares for any number of reasons, but they buy them for only one: they think the price will rise."

Given Musk's huge vote of confidence in Tesla's future potential, it might seem like a no-brainer to follow suit. More broadly, however, the answer will depend on the individual investor, as there's simply no one-size-fits-all answer.

There's no doubt Tesla is facing challenges in the electric vehicle market. In the second quarter, auto sales revenue of $16.7 billion fell 16%, marking the third consecutive quarter of year-over-year sales declines. Since this is Tesla's bread and butter, total revenue of $22.5 billion slumped 12%. As a result, adjusted earnings per share (EPS) of $0.40 fell 23%.

An unfortunate side-effect of the decline in Tesla's profits has been a commensurate rise in its already pricey valuation. The stock is currently selling for 237 times earnings and 169 times next year's expected earnings, so it isn't for the faint of heart.

As a general rule, I don't make investing decisions based on whether the company's management is buying or selling. That said, if Tesla can pull off a coup in the robotaxi market (and that's a big if), it could become one of the most successful companies in a generation.

To me, that's worth sticking around to find out.