The world renowned tech company, Tesla, owned by billionaire Elon Musk, is beginning to heavily invest in the artificial intelligence market and Ark Invest CEO Cathie Wood believes now is the time to get on board by purchasing stock in the company due to this fact, before the price shoots through the roof.
According to the Motley Fool, Wood has a well known reputation for taking some rather large positions when it comes to businesses making a name for themselves in the technology space when she and her team think they have a big upside potential. This, of course, causes Wood to be the target for a whole lot of backlash and skepticism.
I’ll concede that some of Wood’s high-conviction opportunities look far-fetched to me. But to be fair, one thing that Wood does that many of her peers do not is that she publicly releases her research. So while you may not agree with her, at least she backs up her forecasts by making them public.
Wood’s largest position across all of her exchange-traded funds(ETFs) is Tesla(TSLA 0.76%). With the stock at $170 per share as of market close on April 25, Wood believes it could reach $2,000 by 2027 — implying roughly 1,068% upside from current trading levels.
Let’s dive into Wood’s report and assess Tesla’s long-run roadmap. While $2,000 per share may appear a stretch, I’d encourage investors to keep an open mind. There’s a lot to unpack, and buying Tesla stock now could end up being an incredibly lucrative move.
There’s a big conversation still happening about whether or not Tesla is just simply an automobile company or if it goes far beyond being a one-trick pony, becoming a serious developer in other tech-related industries. When you look at it on paper, it certainly is more than a car company due to the fact it also offers a wide variety of energy storage products that are not connected to the core electric vehicle operation they have.
Bulls for Tesla would say differently, noting that the company is far more advanced than other manufacturers in the automotive space.
Namely, the long-term optimism surrounding Tesla is that the company is disrupting artificial intelligence (AI) in many different ways. This is what Cathie Wood sees, and Tesla’s CEO Elon Musk is backing her up. During the company’s first-quarter earnings call, Musk stated, “But I think Cathie Wood said it best. Like really, we should be thought of as an AI or robotics company.” Let’s explore what that means.
There are two big ways that Tesla is investing in AI. First, the company is well-positioned in autonomous driving technology. While General Motors and Alphabet are both competing in the self-driving car space, Tesla is considered to be the leader. This is because Tesla has collected more driver data than any other competing autonomous car platform.
To break it down a little more, not only does Tesla make a killing from increased car sales, but the software used to make vehicles self-driving also presents a source of recurring revenue. Software carries some fairly high margins, but they could potentially unlock new phases of revenue and profit growth.
Additionally, if Tesla is the first car company to commercialize autonomous driving at scale, there is a good possibility that competing automakers will look to license Tesla’s tech. In fact, during first-quarter earnings, Musk hinted that Tesla is “in conversations with one major automaker regarding licensing [full self-driving] FSD.”
While the full adoption of these kind of vehicles is still a long time away, don’t discount Telsa’s position in this space.
Another one of Tesla’s projects in the sector of AI is humanoid robots, which, if I’m being honest, freak me out a little bit. Maybe I’ve just watched Terminator 2 a time too many, but regardless, the company has poured a ton of money into developing their own human-like robot called Optimus. These kind of robots learn how to perform a number of tasks over time in order to provide people with assistance. For Tesla, there’s a case to be made for integrating the Optimus robots into their own factories to assist workers in the manufacturing process more efficiently.
Again, while this might seem like a nominal feat, the compounding gains from more efficient warehouse operations could lead to massive cost savings and higher revenue over time as more cars are produced. Similar to Tesla’s autonomous driving software, it could give Tesla the opportunity to sell Optimus to other businesses that rely heavily on human labor.
Optimus is the product Musk is most bullish on. In fact, he told investors, “I think Optimus will be more valuable than everything else combined.” And while it may seem like humanoid robots are a lofty goal that’s far away, Musk hinted that Optimus could be in Tesla factories in some capacity before the end of the year.
Okay, so the final question is whether or not you should invest in Tesla. Will this company’s stock hit $2,000 a share within three years? Well, there’s no way to know for sure. The thing to keep in mind, to focus your attention on, is that Tesla is slowly transforming from just an EV focused company to one that is interest in AI services. Robotaxi and Optimus could potentially bring Tesla into a completely different category beyond EVs.
While the AI revolution is still in its infancy, it’s a good idea to keep a watchful eye on Tesla. Since the shares right now are down 30 percent in 2024, investors have a prime opportunity to get in on things now and take advantage of where the company could be in the AI space a few years down the road.