Tesla's (TSLA) stock dipped as much as 7% during Monday's session but gained back much of its daily losses.
Shares of the electric-vehicle (EV) giant closed 1.47% lower at $930 each after the major averages reversed their course to end the session higher. Investors have been selling high-growth names this year amid the likelihood of tighter Federal Reserve monetary policy.
Momentum stocks have been getting hit particularly hard as investors take into account the prospects of higher interest rates eroding the value of future cash flows.
Strategists point to the high valuations on tech names going into the recent sell-off.
"You were looking at PE ratios that were just ridiculous," Bill Blancato of Ladenburg Thalmann Asset Management told Yahoo Finance Live on Monday. "Look, I know everybody loves Tesla, but the numbers just didn't add up anymore."
The strategist highlighted incoming stiff competition from automakers entering the electric vehicle space.
Tesla earnings on deck
Tesla will report earnings this Wednesday. The company recently reported record deliveries for the fourth quarter of last year, smashing analyst expectations.
Tesla shares had faired better than some of the other big cap names declining in recent weeks. However the stock is now down more than 15% year-to-date, setting it up for its worst January performance since 2016.
The company recently countersued JPMorgan after the bank filed a suit for $162 million against the electric vehicle maker related to sock warrant transactions.
Other EV players have declined heavily over the last month and in December. The low revenue or no-profit-yet companies have taken most of the hit.
EV startup Rivian Automotive (RVIN) is down 45% year-to-date, trading well below its $78/share IPO price. The company went public in November of last year, with a valuation north of $80 billion right out of the gate.
Ines is a markets reporter covering stocks from the floor of the New York Stock Exchange. Follow her on Twitter at @ines_ferre