Tesla stock has dramatically outperformed the Magnificent Seven tech giants in the fourth quarter of 2024, surging 68% since its October “Robotaxi” event and approaching all-time highs. This remarkable rally has left competitors like Amazon (up 21%) and Alphabet (up 14%) far behind, while handily beating the Nasdaq 100’s 6% gain during the same period.
The electric vehicle maker’s resurgence stems from multiple converging factors, with CEO Elon Musk’s deepening relationship with President-elect Donald Trump playing a central role. Musk’s substantial political donations and campaign support earned him appointment as co-head of the newly formed Department of Government Efficiency, with frequent appearances at Mar-a-Lago alongside Trump. This proximity to power has investors betting on favorable regulatory changes, particularly for autonomous driving technology and self-driving vehicles.
Reports suggest Trump’s administration may ease self-driving car regulations, potentially allowing vehicles without steering wheels or pedals—exactly what Tesla’s robotaxi concept envisions. Wedbush analyst Dan Ives called Trump’s win “a game changer” for Tesla’s autonomous driving ambitions, upgrading his price target accordingly.
Tesla’s AI-powered Full Self-Driving (FSD) technology sits at the heart of the company’s premium $1.3 trillion valuation. DeepWater Management’s Gene Munster believes Tesla is “arguably the most innovative” among mega-cap companies and sees substantial room for market cap growth toward the $2 trillion threshold occupied by Apple, Microsoft, and others.
The company projects a strong rebound with 30% vehicle sales growth in 2025, potentially reaching 2.3 million deliveries after a flat 2024. Trump’s proposed tariffs on Chinese EVs could further benefit Tesla’s US manufacturing base, making foreign competitors more expensive for American buyers.
A major competitive development came when General Motors announced it would abandon its Cruise robotaxi ambitions, previously projected to generate $50 billion by 2030. Munster characterized this as evidence that “the robotaxi market will be winner take most,” with Tesla and Waymo emerging as likely victors. Goldman Sachs noted the stock could maintain higher multiples reflecting “long-term opportunity tied to FSD/robotics given broader market interest in potential AI beneficiaries.”
Key Quotes
There are 5 companies with a market cap over $2T - Apple, Amazon, Google, Microsoft, and Nvidia - and I believe Tesla, with a $1.3T market cap, is arguably the most innovative company of them all. In other words, I believe Tesla’s market cap has plenty of room to grow
DeepWater Management’s Gene Munster made this statement on X (formerly Twitter), positioning Tesla as more innovative than established tech giants and suggesting significant upside potential based on its AI and robotics capabilities.
This is further evidence that the robotaxi market will be winner take most. The likely winners are Tesla and Waymo
Gene Munster commented on GM’s decision to exit the robotaxi business, highlighting how the autonomous vehicle market powered by AI is consolidating around companies with the deepest technical capabilities and resources.
We also believe the stock could remain at a higher multiple to reflect the long-term opportunity tied to FSD/robotics given broader market interest in potential AI beneficiaries
Goldman Sachs analysts explained Tesla’s premium valuation in a Tuesday note, directly linking the company’s stock performance to its AI-powered Full Self-Driving technology and positioning as an artificial intelligence beneficiary.
Much of the recent exuberance stems from Elon Musk’s bromance with President Trump
Yardeni Research characterized the political dimension driving Tesla’s stock surge, noting how Musk’s relationship with the incoming administration could translate into regulatory advantages for AI-powered autonomous vehicles.
Our Take
Tesla’s remarkable rally underscores a critical inflection point where AI technology meets regulatory reality. While the company’s Full Self-Driving system remains controversial and not fully autonomous, the market is pricing in a future where Tesla dominates AI-powered transportation. GM’s retreat validates concerns that autonomous driving requires not just capital, but the kind of vertically integrated AI expertise Tesla has cultivated. However, investors should note the risks: Tesla’s valuation assumes flawless execution on unproven robotaxi economics, favorable regulations, and technological breakthroughs that have eluded the industry for years. The political dimension adds uncertainty—regulatory favors could evaporate with administration changes. Still, with competitors withdrawing and only Waymo presenting serious competition, Tesla’s AI ambitions face a clearer path forward than ever before, justifying some premium even if the full robotaxi vision takes longer to materialize than bulls expect.
Why This Matters
This story represents a pivotal moment in the AI-powered autonomous vehicle race, with Tesla emerging as a dominant force as competitors retreat. GM’s exit from robotaxis validates the “winner-take-most” thesis that only companies with massive AI infrastructure investments can succeed in autonomous driving.
The intersection of AI technology and political influence demonstrates how regulatory frameworks will shape AI deployment in critical sectors like transportation. Tesla’s potential access to favorable self-driving regulations could accelerate the timeline for autonomous vehicle adoption, fundamentally transforming transportation and urban planning.
For the broader AI industry, Tesla’s valuation surge signals investor appetite for companies with tangible AI applications beyond chatbots and software. The market is rewarding Tesla’s Full Self-Driving technology and robotaxi vision with a premium multiple, suggesting AI-enabled hardware and robotics represent the next frontier for AI monetization. This could redirect capital flows toward companies building physical AI systems rather than purely digital solutions, reshaping the competitive landscape for AI investment and development.
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