Tesla stock has experienced a significant correction in early 2025, falling approximately 18% from its all-time closing high of $479.86 reached on December 17, 2024. Trading around $395.30 per share as of Tuesday, the electric vehicle maker’s shares took a hit after missing annual delivery targets for the first time in company history. Tesla delivered around 495,600 vehicles in the fourth quarter, slightly below analyst estimates of 504,800.
Despite this stumble, several Wall Street analysts remain bullish on Tesla’s prospects, citing artificial intelligence and autonomous driving technology as key growth drivers. Wedbush Securities analyst Dan Ives maintains that Tesla represents “the most undervalued AI play in the market today,” predicting the company could accelerate delivery growth by 20%-30% in 2025. Ives has forecasted that companies will invest $2 trillion in AI over the next three years, describing it as “the biggest tech transformation in over 40 years.”
Full Self-Driving (FSD) technology emerges as a central theme in analyst optimism. Bank of America estimates Tesla’s FSD technology could be worth approximately $480 billion, while the robotaxi business could reach valuations of $420 billion domestically and over $800 billion globally. BofA analysts predict that 23 million vehicles could have FSD software by the end of the decade, generating billions in annual earnings with significantly higher margins than Tesla’s core automotive business.
Stifel analyst Stephen Gengaro emphasized that Tesla’s value extends far beyond electric vehicle sales, highlighting FSD initiatives and the upcoming Cybercab business as “huge value drivers” for medium- to long-term growth. Gengaro also noted that Elon Musk’s relationship with president-elect Trump could prove advantageous, potentially influencing FSD regulation and benefiting from proposed tariffs that would reduce competition from foreign rivals.
Morgan Stanley pointed to Tesla’s energy storage business as another bright spot, with deployments exceeding expectations by 15% in Q4 2024 and annual growth of 113%. The firm also highlighted the anticipated launch of a lower-priced vehicle model, codenamed “Juniper,” expected in early-to-mid 2025.
Analyst price targets range from $400 to $515 per share, implying potential upside of 25-31% from current levels. Additional 2025 catalysts include the potential robotaxi launch and increased production of Optimus, Tesla’s humanoid robot.
Key Quotes
Over the last few years we have discussed the AI Revolution non-stop as in our opinion it represents the biggest tech transformation in over 40 years. Now the time has come for the broader software space to get in on the AI Party as we believe the use cases are exploding.
Wedbush Securities analyst Dan Ives made this statement while explaining his bullish outlook on Tesla, emphasizing the transformative nature of AI and predicting $2 trillion in AI investment over three years. This quote underscores why analysts view Tesla primarily as an AI investment opportunity.
We believe Tesla remains the most undervalued AI play in the market today.
Wedbush analysts stated this while maintaining their $515 price target and ‘outperform’ rating, despite Tesla’s delivery miss. This reflects the firm’s conviction that Tesla’s AI capabilities, particularly in autonomous driving, are not fully reflected in its current stock price.
If you’re buying the stock simply because they’re selling EVs, the stock is overvalued. When you start thinking about the full self-driving initiatives, start thinking about how that plays into the Cybercab business over time, that’s really a huge value driver for the stock in the medium- to long-term.
Stifel analyst Stephen Gengaro explained this perspective to Yahoo! Finance, distinguishing between Tesla’s automotive business and its AI-driven autonomous technology. This quote captures the fundamental shift in how analysts are valuing Tesla as an AI company rather than a traditional automaker.
We experienced FSD during our field trip to Tesla’s gigafactory in Austin, TX in December, and came away impressed by its capabilities. FSD should have meaningfully higher margins than TSLA’s core auto business and could generate billions in EBIT annually.
Bank of America analysts shared this firsthand assessment after testing Tesla’s Full Self-Driving technology, supporting their estimate that FSD could be worth $480 billion. This quote highlights how AI-powered software could become Tesla’s most profitable business segment.
Our Take
The market’s treatment of Tesla as an AI stock rather than an automotive company represents a fundamental paradigm shift in how technology companies are valued. While the delivery miss would typically be devastating for a traditional carmaker, analysts are looking past near-term production metrics to focus on AI-driven future revenue streams.
This reflects a broader trend where AI capabilities are becoming the primary valuation driver across industries. Tesla’s positioning at the intersection of AI, autonomous vehicles, robotics, and energy storage creates multiple pathways for AI monetization. However, the high valuations assigned to unproven technologies like robotaxis and humanoid robots carry significant execution risk.
The $480 billion valuation for FSD technology seems optimistic given regulatory hurdles and technical challenges that remain. Yet if Tesla successfully deploys autonomous technology at scale, the software-driven margins could indeed transform the company’s profitability profile, validating the AI-centric investment thesis that’s currently supporting the stock despite operational headwinds.
Why This Matters
This story highlights the growing convergence between automotive technology and artificial intelligence, positioning Tesla as a major AI player rather than simply an electric vehicle manufacturer. The analyst consensus that Tesla is fundamentally an AI company underscores how autonomous driving and machine learning are reshaping traditional industries.
The $2 trillion AI investment forecast signals massive capital flowing into AI infrastructure and applications across sectors. Tesla’s FSD technology, valued at nearly half a trillion dollars by Bank of America, demonstrates how AI applications can create enormous economic value beyond core business operations.
For investors and businesses, this represents a critical inflection point where AI capabilities become primary valuation drivers, potentially more important than traditional metrics like vehicle deliveries. The story also illustrates how regulatory relationships and policy decisions around AI and autonomous technology will significantly impact company valuations and competitive positioning. As AI transforms transportation, energy, and robotics, Tesla’s multi-faceted AI strategy could serve as a blueprint for how traditional companies evolve into AI-driven enterprises.
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