[exged]

The market is efficient in the sense that it aggregates all knowledge between market participants. Nevertheless, no one actually has a crystal ball to predict events far in the future. Tesla's valuation and volatility can both be explained by some market participants expecting huge growth over a long period of time, with a correspondingly huge uncertainty over the actual outcome.

Just to put some simple numbers on things, a commonly held expectation is that Tesla will grow revenue at ~50% a year until 2030 while maintaining high margins. At that point Tesla's revenue would be approximately 1T with perhaps 100B in net income. A fair valuation would then be around 3T, assuming there is still some future growth left.

This largely explains today's 500B valuation - if there is a 30% chance of this scenario playing out (and Tesla goes bankrupt in the other 70%) then this is a reasonable bet compared to buying other stocks.

As for the volatility, imagine if the average market participant changes their mind and believes that Tesla is only likely to achieve a 40% growth rate over the next decade. This would drop 2030 revenue and profits by more than 40% compared to the previous scenario, and today's stock price would fall significantly as well.