Excitement surrounding breakthroughs in artificial intelligence (AI) have led to major gains in the stock market over the last year. The tech-heavy Nasdaq Composite surged 43% in 2023, and is up 8% already so far this year.
Much of these gains, however, can be attributed to a small cohort of stocks collectively known as the “Magnificent Seven” — a catchy moniker that includes Microsoft, Apple, Alphabet, Amazon, Nvidia, Meta Platforms, and Tesla (NASDAQ: TSLA).
The Road Less Traveled: Tesla’s Divergence
Interestingly, Tesla is the only member of the Magnificent Seven that has had a negative return over the last year, down nearly 11% as of market close on April 5. As its megacap peers continue to push the AI narrative forward, Tesla’s progress in artificial intelligence is going overlooked as demand for electric vehicles (EV) begins to cool. Let’s break down why now is a lucrative opportunity to consider scooping up shares of Tesla and preparing to hold long-term.
Beyond Wheels: Tesla’s Multi-Faceted Business
The main knock against Tesla is that the company is nothing more than a car business. While producing a battery-powered vehicle differentiates Tesla from many legacy automakers, bearish investors will also contend that it’s a costly endeavor.
Nevertheless, Tesla’s financial and operating results prove that there is a big market for EVs. In 2023, Tesla generated $96.8 billion in revenue, up 19% year over year. Roughly 85% of the company’s sales stemmed from the car business, with the remainder coming from Tesla’s energy storage and services operations.
Considering that unusually high inflation and rising interest rates weighed on the economy throughout 2023, I see these results as quite impressive. More importantly, Tesla managed to consistently operate at a profitable level last year, despite a tough macro environment.
Robot Revolution: Tesla’s foray into AI Robotics
One of the more notable artificial intelligence (AI) projects Tesla is working on is in robotics. The company is developing a humanoid robot called Optimus, which it hopes to implement into factories in the long run.
The primary selling point is that factories operated by Optimus bots can achieve a new level of automation productivity. But a bigger goal concerns the labor industry. Should Tesla begin commercializing Optimus, humanoid robotics have an opportunity to upend manufacturing, logistics, retail, and more.
While a world integrated with humanoid robots may feel akin to science fiction, it’s worth noting that many other AI enterprises are also investing in the technology.
Driving Towards Autonomy: Tesla’s Self-Driving Ambitions
Another opportunity where AI can play a role for Tesla is autonomous driving. There are a lot of companies investing in self-driving capabilities, but not many have made measurable progress.
Over the last several months, a subsidiary of General Motors called Cruise faced significant hurdles in its autonomous driving roadmap. By contrast, Alphabet’s self-driving car business Waymo has attracted the likes of Uber for potential partnerships down the road.
But with more than 1 billion miles of data collected, Tesla has an edge over the competition. The company is the undisputed leader in self-driving data collection, which it uses to hone and train its autonomous driving software models.
An In-Depth Look at Tesla’s Investment Potential Amidst Market Turbulence
Amidst a tumultuous 2024, Tesla stands out with a price-to-sales (P/S) ratio of just 5.9, marking the second lowest among the famed Magnificent Seven. Despite a 34% decrease in share value, the company’s financials have piqued investor interest, hinting at hidden treasures waiting to be unearthed.
The AI Revolution Beyond Automobile Sales
Long-term investors observing Tesla’s trajectory should not overlook the pioneering Artificial Intelligence (AI) vision the company is crafting beyond its automotive feats. While the spotlight remains fixed on car sales figures, astute investors are recognizing Tesla’s significant stakes in the AI revolution. The current climate presents a golden opportunity to acquire Tesla shares and capitalize on the optimistic outlook for the company.
Exploring Alternative Investment Avenues
Despite the market’s volatility, the outlook on Tesla appears promising. With the stock earning a spot on the list of the “10 best stocks for investors to buy right now,” as highlighted by renowned financial analysts with a remarkably successful track record. Tesla’s inclusion among these top picks signals a potential surge in value, catapulting savvy investors towards new heights of success. Keeping Tesla on the radar alongside other undervalued assets could pave the way for substantial returns in the unpredictable market terrain.
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*Stock Advisor returns as of April 8, 2024