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Elon Musk’s AI startup xAI and social media platform X filed a federal lawsuit Monday against Apple (Nasdaq: AAPL) and OpenAI – accusing them of colluding to suppress competition in the generative AI and smartphone markets.

The lawsuit alleges Apple’s App Store rankings unfairly favour ChatGPT while deprioritising rivals like Grok, which the billionaire claims is an “unequivocal antitrust violation”.

Tesla Inc (Nasdaq: TSLA) is pushing to the upside at writing, even though experts have already warned that Musk’s legal battle with the tech titans could prove a meaningful headwind for the EV stock.

Including today’s gains, Tesla stock is up well over 100% versus its year-to-date low in early April.

Why Musk’s lawsuit is a negative for Tesla stock

While the lawsuit targets Apple and OpenAI, analysts believe the ripple effects could reach TSLA.

Musk’s increasingly combative posture toward tech giants may pose a threat to Tesla shares as it could alienate potential partners and regulators.

The electric vehicle brand, once synonymous with innovation, now risks being overshadowed by Musk’s personal disputes.

Simply put, legal entanglements raise concerns about executive focus.

Elon Musk is already juggling leadership roles at Tesla, SpaceX, xAI, and X.

Adding a high-profile antitrust battle could dilute attention from TSLA’s operational priorities, including ramping up robotaxi services.  

Investors may worry that Musk’s courtroom ambitions are diverting energy from the EV firm’s growth roadmap.

All in all, the development stands to trigger reputational risks, which may exert pressure on TSLA stock moving forward.

Wedbush expects legal battle to weigh on TSLA shares

According to Wedbush’s senior analyst Dan Ives, billionaire Elon Musk’s lawsuit against AAPL and OpenAI could “spiral and take on a life of its own.”

Speaking recently with CNBC, the widely followed expert said Musk’s legal stance against the AI companies could backfire, adding, “Last thing you want right now is Elon putting his force behind this legally.”

Ives believes the lawsuit reiterates “Musk is a wartime CEO focused on xAI and Grok,” which investors may read as Tesla stock is losing its spot on the billionaire’s priority list.

That perception could weigh on investor confidence, especially amid rising competition in the EV space.

Should you buy Tesla shares at current levels?

Musk’s legal battle with Apple and OpenAI warrants pulling out of Tesla shares, especially given that the multinational is already struggling with a sales slowdown amid intense rivalry from Chinese EV makers.

It’s a distraction from TSLA’s strategic initiatives, which could trigger a significant pullback in the EV stock in the near term.

What’s also worth mentioning is that even without the lawsuit, Wall Street had a consensus “hold” rating on TSLA stock, with the mean target of $313 indicating potential “downside” of about 9.0% from current levels.

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