Turning a ‘trainwreck’ into a tech titan once again appears to sit at the top of Elon Musk’s to-do list, so could Tesla once again become a stock that demands attention on Wall Street?
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Opinions over the future of Tesla (NASDAQ:TSLA) have been heavily divided between Wall Street’s thought leaders of late. Wedbush’s Dan Ives labeled the company a “trainwreck” recently, while Ark Invest CEO Cathie Wood claimed that Tesla is the ‘biggest AI play in the world’ before suggesting that the stock could rally 777% over the coming three to four years.
While Tesla is currently best known for its leading artificial intelligence pedigree in the realm of autonomous vehicles, the company’s outspoken CEO appears to be constantly immersing himself deeper into the world of generative AI, and Musk’s intensifying rivalry with OpenAI may directly influence the performance of TSLA on Wall Street.
Inside the Generative AI Space Race
Although generative AI became an extremely lucrative buzzword on Wall Street in 2023, this year has seen a greater degree of uncertainty drift throughout the industry as the hype cycle has begun to see greater levels of demand for implementation at an enterprise level.
2024 has also seen Musk intensify the bad blood between himself and ChatGPT creators, OpenAI. Earlier this year, Musk sued OpenAI, the startup that he co-founded, for a perceived breach of their not-for-profit core values.
Despite concerns over a hype bubble emerging around the generative AI landscape, there appears to be little doubt of the industry’s potential, and the battle to become market leaders is paving the way for an artificial intelligence space race.
“The artificial intelligence market size was $428 billion in 2022 and is projected to grow from $515.31 billion in 2023 to $2 trillion by 2030, exhibiting a compound annual growth rate of 21.6%, and this is an extremely solid growth rate,” explained Maxim Manturov, head of investment research at Freedom Finance Europe.
“Concerns about GenAI failing to meet expectations in 2024 should be seen in the context of the natural cycle of hype and maturity of new technologies,” Manturov added. “Companies heavily invested in GenAI are under pressure to prove profitability, and industry reports indicate a shift to more strategic AI initiatives in the coming years.”
It’s this pressure that’s seen Musk accuse OpenAI of attempting to steal Tesla’s most talented engineers, including machine learning scientist, Ethan Knight. As a result, Musk recruited Knight to his own AI startup and OpenAI rival, xAI.
“Ethan was going to join OpenAI, so it was either xAI or them,” said Musk. “They have been aggressively recruiting Tesla engineers with massive compensation offers and have unfortunately been successful in a few cases.”
Musk confirmed that the battle to keep hold of his leading staff has meant that Tesla has needed to raise compensation for its AI engineering team before claiming that the “talent war for AI is the craziest talent war I’ve ever seen.”
Interestingly, Musk’s launch of xAI last year appears to have come as the result of uncertainty over a lack of control at Tesla. The company’s CEO claimed to be uncomfortable about growing generative AI technologies within the company itself without having a strong enough stake in the decision-making process.
“I am uncomfortable growing Tesla to be a leader in AI & robotics without having ~25% voting control,” explained Musk in a recent post on X.
At present, Musk’s share in Tesla stands at around 13%, which, according to Musk, is “enough to be influential, but not so much that I can’t be overturned.”
Tesla’s Impact on the Battle for Generative AI
So, where does Tesla fit into what’s seemingly shaping up to be a battle between OpenAI and Elon Musk’s startup, xAI? Well, it appears that the Nasdaq-listed stock is set to play a deeper role in the generative AI space race than it first appears.
According to Bloomberg, the source for data utilized by xAI will be X and Tesla. This immerses TSLA in the generative AI battlegrounds as a key player, and one that’s already grown a strong presence on Wall Street.
Although we can see that Tesla has struggled to find any kind of momentum following the widespread tech stock sell-offs of 2022, and Musk’s tumultuous leadership of the company has generally thrown up a greater volume of controversies in recent years, the stock can still be considered a key AI player.
At present, much of Tesla’s work in AI has been focused on self-driving cars, but the firm also has the Optimus humanoid robot that’s been in development since 2021.
However, one of the firm’s biggest AI developments can be found in the Dojo supercomputer, which cost some $500 million to create using 10,000 Nvidia H100 computer chips.
Dojo has been designed to self-train its understanding of autonomous driving, and Tesla is betting big that the supercomputer’s machine-learning capabilities will pave the way for generative AI decisions in reacting to different scenarios on roads as the technology is eventually rolled out.
As for the $500 million cost of developing Dojo, “Tesla will spend more than that on Nvidia hardware this year.” claimed Musk in a post on X. “The table stakes for being competitive in AI are at least several billion dollars per year at this point.”
Assessing TSLA’s AI Prospects
Although Tesla’s stock has been struggling of late, expectations for the pioneering AI firm remain high, and the company’s involvement in the field of generative AI is set to push the stock higher.
The company’s emphasis on machine learning, robotics, autonomous driving, and various other AI-focused capabilities are expected to generate between $300 billion and $400 billion in revenue by 2035, making the stock, at its current $550 billion market capitalization a wise long-term hold for investors who believe in its potential.
According to RBC Capital Markets analyst Tom Narayan, current low expectations for the stock could help to push it higher as innovations emerge. With this in mind, Narayan placed a $298 target price on TSLA pointing to a prospective 79% upside for the stock.
Under the somewhat chaotic leadership of Elon Musk, price predictions for Tesla stock can be tricky to craft. However, the CEO has proved time and again that he has the acumen to take emerging technologies to new heights. Should Musk become a generative AI innovator in the coming months, we can expect Tesla to reap the rewards.