Tesla is beginning to climb back after a difficult August, with shares jumping more than 7% this week. Despite the recent rally, Guggenheim remains bearish on the stock. “U.S. inventory trends suggest supply is running ahead of demand,” analyst Ronald Jewsikow said in a Wednesday note. “While summer production shutdowns may limit the near-term need for pricing cuts (magnitude of downtime remains unclear), we believe QTD US inventory is a clear sign that at current run rate supply, US demand is trailing production output.” Based on inventory data, Tesla’s U.S. inventory has grown by around 50% since the start of the quarter, with Model Y accounting for the largest increase. Guggenheim has a sell rating on Tesla shares and a price target of $125, implying a 51.4% decline from Tuesday’s close. According to the analyst, price cuts or lower deliveries may be necessary in September to help stimulate demand. However, these actions would also make current gross margins estimates for the third quarter look “overly optimistic.” The stock is also disconnecting from the AI trade despite its week-to-date rally, Jewsikow added. “Following TSLA 2Q23 earnings results, we have seen the correlation TSLA has with other AI stocks decline to insignificant levels,” he said. “We would note that some of the stocks in our AI basket are already seeing positive revisions to numbers resulting from AI, something we do not believe is realistic for TSLA in the near-term.” To be sure, Tesla shares are still trading more than 108% higher year to date. The stock inched down 0.7% Wednesday during premarket trading. TSLA YTD mountain Tesla in 2023 —CNBC’s Michael Bloom contributed to this report.