Tesla is making notable strides in its AI chip development, with CEO Elon Musk announcing that the company is nearing the completion of its AI5 chip design. Furthermore, initial plans for the AI6 chip are already underway, signaling Tesla’s ambition to roll out one new chip design each year.
This update, shared by Musk on X, highlights Tesla’s commitment to innovate within the sphere of artificial intelligence. Currently, its AI4 chips are already integrated into vehicles and power its data centers, establishing a strong foundation for future advancements.
Musk emphasized the capabilities of Tesla’s engineering teams, which have been dedicated to designing and deploying millions of AI chips, thus positioning Tesla as a leader in real-world AI applications. “Most people don’t know that Tesla has had an advanced AI chip and board engineering team for many years,” Musk noted, underlining the tech giant’s investment in chip technology.
As the design phase for AI5 approaches tape-out, which is the final step before manufacturing begins, the groundwork for AI6 is being actively laid out. In July, Samsung Electronics secured a substantial $16.5 billion contract to manufacture these chips at a newly established facility in Texas, further consolidating Tesla’s chip supply chain.
Stock Performance and Trading Activity
In terms of financial performance, Tesla’s stock, traded under the ticker TSLA, experienced a decline of 1.05% on Friday, closing at $391.09. This marks a drop of over 3% for the year, which has raised eyebrows among investors.
Recent trading activity has showcased the volatility that Tesla investors have become accustomed to. Last week, shares surged about 4%, peaking at $428.94 before ultimately dropping back down, closing at $395.04—a roughly 2% decrease.
Despite the ups and downs, retail traders have been actively purchasing shares during each dip throughout the year. According to JPMorgan analysts, these fluctuations have led to increased volatility, with Tesla remaining one of the most frequently traded stocks among retail investors.
Compared to other major tech giants like Amazon, Microsoft, and Meta Platforms—companies that have shown consistent growth fueled by substantial AI investments—Tesla’s modest stock performance suggests a mixed sentiment surrounding the timelines for its chip developments and their eventual impact on earnings.
Valuation and Analyst Perspectives
The current valuation of Tesla stock stands at an impressive 180 times its projected earnings for 2026, indicating high expectations from investors regarding advancements in AI and self-driving technologies. However, the timeline for realizing these anticipated gains remains uncertain, introducing a layer of risk.
Some analysts express caution, noting that an increase in chip production could potentially outstrip demand in the coming years, which might exert pressure on profit margins if supply exceeds market requirements.
Tesla is actively seeking to bolster its engineering team by directly hiring AI silicon engineers, requesting candidates to demonstrate remarkable ability in advanced AI techniques applicable to chip design. This move underscores Tesla’s strategic focus on enhancing its proprietary silicon capabilities, seeking to compete in a market increasingly dominated by GPU-focused architectures from companies like Nvidia.
As it stands, analysts’ opinions on Tesla are divided. Among 34 ratings, 14 recommend buying the stock, 10 suggest holding it, and the remaining 10 advise selling. The average price target remains at $383.37, slightly below current trading levels, reflecting a cautious outlook.
This ongoing evolution within Tesla, both in terms of technology and stock performance, continues to garner attention, highlighting the intricate interplay between innovation and market sentiment in the fast-evolving tech landscape.
