The party is over.
"I'd argue there's a 30-40% downside in Tesla's stock," O'Leary said in an interview with TheStreet.
Tesla shares are up 51% since the start of the year, crushing the broad S&P 500's 6.6% gain.
"There are going to be self-driving cars manufactured by many companies," O'Leary said, "Tesla is the first and perhaps the best brand known, but if I were putting money to work today into this space, it probably wouldn't be in Tesla because it doesn't fit any of the criteria that I look at in terms of derisking my portfolio."
O'Leary said investors who believe in Tesla think it's going to be the only winner in the car space, a contention he's skeptical of.
Last month, Apple (AAPL) - Get Report disclosed that it had received a permit to test self-driving technology on public roads. Apple is the largest holding of O'Leary's U.S. focused ETF, the O'Shares FTSE US Quality Dividend ETF (OUSA) - Get Report .
O'Leary also doesn't like that Tesla doesn't pay a dividend.
"It's a cult stock," O'Leary said, adding that he does not own the stock. "If I'm looking at the automotive sector, why would I pay this valuation for basically a car company?"
O'Leary said Tesla investors think Tesla is a technology company, instead of a car company.
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