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Tesla: Zooming Beyond EVs into the AI Realm, Investors Buckle Up for the Ride

There’s a new surge of investor interest in Tesla, and it’s not just because of its impressive electric vehicle (EV) portfolio. Retail investors are now gravitating towards Tesla as a promising bet in the artificial intelligence (AI) sector.

Vanda Research reports that bullish sentiments among retail investors towards Tesla have grown significantly this year. The 10-day moving average of retail investments in Tesla towers above the flows into other EV and AI stocks, indicating Tesla’s unique allure.

Investments in EV stocks, excluding Tesla, currently amount to a meager 6% of the average daily Tesla purchases. This figure is even more modest when compared to the investment surge seen in Q4 2020 and Q1 2021.

But the narrative doesn’t end with Tesla’s dominance in the EV arena. Vanda suggests that part of the Tesla stock rally in 2023 is attributable to the growing hype around AI technology, a trend propelling several tech giants higher.

Vanda’s recent note highlighted, “This hardly looks like a resurgence of the EV theme from a retail perspective.” Instead, it appears retail investors are starting to perceive Tesla more as an AI proxy rather than a mere EV contender.

Institutional investors have been mirroring this sentiment by increasing their stakes in Tesla, indicating that Tesla stock is likely to continue its upwards trajectory.

Elon Musk, Tesla’s CEO, has been known for his cautionary stance on AI. However, he has recently hinted at incorporating AI into Tesla’s business model, especially amidst the excitement surrounding ChatGPT. In April, Musk discreetly established an AI startup in Nevada, X.ai, teasing the possibility of launching an AI product – TruthGPT, a competitor to ChatGPT.

Even though Tesla enjoyed a solid performance in 2023, it continues to confront economic challenges, with high inflation and elevated interest rates casting shadows over the broader market. The company has been lowering prices for its car models to fend off competition, but this strategy is taking a toll on its profit margins – a concern that has caught the attention of Wall Street analysts and investors.

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