Tesla (NASDAQ:TSLA) Stocks Are Getting Foamy Again as AI Hype Spreads – TipRanks.com

Tesla (NASDAQ:TSLA) Stocks Are Getting Foamy Again as AI Hype Spreads - TipRanks.com

Tesla shares (NASDAQ:TSLA) have been red-hot lately, up more than 137% year-to-date. Undoubtedly, as the wave of AI sweeps across Tesla, the stakes (and investor expectations) are climbing higher again. For years, many optimistic investors have viewed Tesla as more of a high-tech innovator than just an ordinary car company.

CEO Elon Musk is a brilliant pioneer and a visionary, and if he says robotaxis are coming, investors have every reason to believe the man. After all, those who doubted him sat on the sidelines as the EV giant saw its market cap increase in size.

While I believe Tesla stock is worthy of a technology multiple, I’m not so sure the recent burst of enthusiasm for AI is warranted. Tesla’s self-driving ambitions are really nothing new. The rise of ChatGPT and other AI innovators may have made money go after anything that remotely touches AI, and if those long-awaited autonomous Tesla robotaxis aren’t dominating the streets in time enough, Tesla stock may be able to back off its recent gains.

Elon Musk himself has said that Tesla’s market capitalization is tied to range. For years, self-driving cars have been one of the holy grails of AI technology. So far, it has proved quite difficult to shift gears towards full autonomy. While Tesla has the advantage of data and the competent tech flair to get the job done, the robotaxi’s timeline, I believe, remains as hazy as ever. Personally, I wouldn’t chase Tesla stock after a hot run on old news that seems to be getting new life. For this reason, I am taking a neutral stance on Tesla stock.

Tesla Stock: Enthusiasm for AI may get out of hand

Tesla could have a lot to gain in the AI ​​race if it can get self-driving technology where it needs to be. Just ask Cathie Wood, who touted Tesla as “one of the biggest AI opportunities out there.” Tesla certainly deserves an “AI premium” on its stock price, but how much remains the billion-dollar question.

Tesla isn’t the only competitor in the space. AI kingpin and ad tech giant Alphabet (NASDAQ: GOOGL) has Waymo, which may or may not be able to get ahead of Tesla and the rest of the pack.

The real question is whether an AI-powered software company can compete with an auto company with unmatched technology proficiency. Not sure which company is ahead at this juncture. However, I find GOOGL’s stock valuation (27.4x price-to-earnings ratio) much more attractive.

At the time of writing, TSLA shares are trading at 77.8 times lower than its price-earnings ratio. That’s steep for an auto company or a technology company. At $256-and-over, there’s a pretty high bar ahead of Tesla stock. With a high bar there is a high risk of going short.

Tesla looks like a great company that could fix self-driving

Even if Tesla is one of the first to solve the self-driving problem, the rivals may not be too far behind. Furthermore, the race for fully autonomous driving may not be over once we have self-driving cars dominating the streets. While I don’t doubt Tesla’s self-driving technology, it’s hard to say whether the robotaxi service will take off in a few years or if it will take a little longer.

Without more clarity on the timing of range, I find it difficult to value Tesla stock. RBC analyst Tom Narayan believes 70% of Tesla’s valuation is centered on autonomous technology. In fact, there could be a lot to gain if Tesla is able to keep up with such optimistic analysts.

After such an impressive run, even Cathie Wood, one of Tesla’s biggest supporters, seems more than willing to cut her stake. Just last week, news broke that ARK Invest sold approximately 393,000 Tesla shares.

Is TSLA Stock a Buy, According to Analysts?

Turning to Wall Street, TSLA stock is presenting itself as a moderate buy. Out of 31 analyst ratings, there are 14 buys, 12 lays and five sells. The average Tesla stock price target is $216.46, which implies a 15.6% downside potential. Analyst price targets range from a low of $85.00 per share to a high of $335.00 per share.

The bottom line on TSLA stock

It’s not just the enthusiasm for artificial intelligence that has sent Tesla’s stock soaring as of late. Undoubtedly, enthusiasm for the company’s charging network and bullish notes from analysts were also fuel for the rally. For the most part, however, I believe any further gains from here could be a result of AI FOMO (fear of missing out).

Disclosure

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