>So long as the valuation goes up enough to compensate for the dilution, the per share stock price will be the same or higher

But per stock price is the "valuation".

My comment re: being detached stems from the fact that on Day X, you can buy Tesla for price $Y. Then Tesla sells more shares (dilution). So now each individual share represents a smaller proportion of company ownership...yet the next day people are willing to pay more for that smaller ownership.

Obviously there are far more dynamics at play; but generally, dilution should cause the price to drop.