Face the moment of truth at the event introducing Tesla's Robotaxi 'Dream Premium' to world news

Thursday's event, during which Tesla is expected to unveil the so-called Robotaxi, and perhaps another new car, will be a deciding factor for the stock, said Mike O'Rourke, chief market strategist at ZoneTrading. Warner Bros. near Los Angeles. The demo begins at 7 p.m. California time at the Discovery Inc. studios. Shares fell 1.5% after falling as much as 3.6% at 10:22 a.m. in New York on Thursday.

Dave Mazza, CEO of Roundhill Financial Inc., agrees. “It's not just about demonstrating new technology, it's about proving their AI capabilities,” he said. This “may be important in justifying their high valuations in the face of inevitable financial challenges due to the dream premium.”

After some big talks from Musk and the event being delayed by two months, Tesla has a lot to prove. AI assumes that Tesla's car sales are no longer growing at an embarrassing rate and that intense competition from electric vehicles is hurting margins. If Tesla can't prove it's an industry leader in autonomous vehicle technology, its claim to a high share premium will start to look very uncertain.

Tesla shares trade at 83 times forward earnings compared with mid-single-digit multiples of century-old automakers General Motors and Ford. Chipmaker Nvidia Corp., an established artificial intelligence champion, trades at 36 times earnings.

Regardless of whether Kasturi pulls the proverbial rabbit out of the hat once again and manages to impress or not, one thing is certain: investors will have a head start.

Bernstein analyst Tony Sacconaghi and CFRA's Garrett Nelson expect a “sell the news” reaction after such great success at the event.

“We believe it is unlikely that Tesla will actually deliver on the promises that will drive share prices higher,” Sacconaghi said, while Nelson pointed to “sky-high” expectations amid a disappointing scenario.

And even if Tesla unveils an attractive model, bringing a fully autonomous car to market could take years, if not decades, due to regulatory hurdles that must be cleared before such cars can begin testing on real roads.

“Achieving full autonomy remains a challenge, and Tesla still seems a long way off,” Wolf Research's Emanuel Rosner wrote in a note.

However, data from the options market suggest that the mood before this event is somewhat positive. The one-month swing – which measures how much more expensive put options protect against the downside than bullish call options – remains roughly flat after being more bearish for most of the past two years.

The combination of optimism and high risk creates a combination that could protect traders if Tesla fails to deliver. Technical strategists who look at trading patterns to try to predict which way stocks will go recommend keeping an eye on the $220-240 level.

“A break below $240 would take the price below the August intraday low and the trend line from last week's low,” Miller Tobacco + Co said. Tesla shares closed at $241.05 on Wednesday, said Matt Malley, chief market strategist

On the other hand, if Musk convinces the market that Tesla is on the right track, the stock could eventually rise.

Maley said the $260-$263 range was difficult for the stock to break. “If this announcement helps Tesla break this level in any meaningful way, it will be very strong from a technical perspective.”