We recently published a list of 10 Buzzing AI Stocks on Latest Analyst Ratings and News. In this article, we are going to take a look at where Tesla Inc (NASDAQ:TSLA) stands against other buzzing AI stocks on latest analyst ratings and news.
CJ Muse, Cantor Fitzgerald analyst, explained in a latest program on CNBC that the AI investment cycle is different from the ones we have seen in the past. Muse believes major technology companies investing billions in AI are generating “meaningful” free cash flows.
“This cycle is unlike any other. I think most investors look back to the advent of the internet and how long the internet infrastructure investment cycle played out. But this one’s very different. The companies making the investments, predominantly the hyperscalers, are generating meaningful free cash flow despite spending hundreds of billions of dollars building out AI. Let’s be clear: this is existential for these companies as they all try to get to AGI. I think this is a multi-year investment cycle.”
The analyst talked about the latest AI model released by OpenAI and said the race is now to reach artificial general intelligence (AGI) and companies would require more and more computing power to improve the reasoning capabilities of AI systems.
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For this article, we picked 10 AI stocks currently making headlines on the back of latest analyst ratings and important news. With each stock, we have mentioned its hedge fund sentiment. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
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Tesla Inc (NASDAQ:TSLA)
Number of Hedge Fund Investors: 99
Danny Moses, Moses Ventures founder, explained in a latest program on CNBC why he is no longer short on Tesla Inc (NASDAQ:TSLA). However, the analyst also said it’s hard to go long on the stock because it’s based on “all promises.”
“The first quarter this year, it had just started to trade on fundamentals for the first time in a long time. It was hanging around $140 to $150, right? So you felt like, okay, the quarter was bad, right? What happened? The promise of Autonomous Day in August, which ended up getting pushed out to October. He flies to China to get some regulatory relief on certain things, and lo and behold, attaches himself to Trump to make all the other stuff go away.
When the story moves from non-fundamental to technical and those kinds of things, that’s when I leave a story. We talk about it on the podcast a lot, giving updates there. But to people that are listening now, it’s very difficult, certainly, to short a name that’s not trading on fundamentals. It’s also hard to go long a name when it’s all on promises.”
Looking beyond the recent spike in Tesla shares amid Donald Trump’s victory, Tesla’s fundamentals are challenged. How? Tesla Inc’s (NASDAQ:TSLA) key robotaxi event was short on details. Notably absent was the discussion of a “more affordable” model that Musk had previously mentioned to boost confidence in Tesla’s vehicle sales growth outlook.
What about the $30,000 price tag claim?
Musk has indicated that the Cybercab will have a production cost of approximately $30,000. Operating within the robotaxi fleet is projected to cost around $0.20 per mile. With a production cost of $30,000, the retail price of the Cybercab is likely to exceed this figure. For instance, if the Cybercab is priced at $30,000 per unit, that translates to $15,000 per seat. In contrast, the average price per passenger seat in Tesla Inc (NASDAQ:TSLA)’s most affordable long-range RWD Model 3—factoring in full self-driving (FSD) licensing—is under $10,000 ($29,990 post-incentive vehicle price plus $8,000 for the FSD license, divided by four passenger seats). Regarding operational costs, while the Cybercab is expected to cost $0.20 per mile, charging the Model 3 is estimated at under $0.10 per mile, leaving a significant margin to cover maintenance and downtime.
There is a lot of hype around Tesla Inc (NASDAQ:TSLA) robo taxis but many believe they will not be enough to fix the company’s long-term challenges.
What are these challenges?
Tesla Inc’s (NASDAQ:TSLA) product lineup is showing signs of stagnation, with over 95% of sales still coming from the Model 3 and Model Y. Meanwhile, competitors are rolling out more advanced models. Even Rivian’s CEO suggested Tesla Inc (NASDAQ:TSLA) could be nearing market saturation for these models. According to Reuters, Tesla’s market share in Europe is slipping as legacy automakers like BMW post stronger sales. Chinese competitor BYD is also gaining ground in Europe, despite talk of tariffs.
Polen Focus Growth Strategy stated the following regarding Tesla, Inc. (NASDAQ:TSLA) in its Q3 2024 investor letter:
“The largest relative detractors during the quarter were Apple, Airbnb, and Tesla (not owned). We’ve spoken at length about our rationale for not owning Tesla, Inc. (NASDAQ:TSLA). In short, the market seems to be pricing in a lot of positive optionality for this company in the near-to-intermediate term (and particularly a fully autonomous fleet of electric vehicles in the medium term). What exists today is an automobile manufacturer limited to the higher-income segment that is increasingly challenged to sell vehicles when interest rates are not zero. We continue to question the company’s long-term growth profile and governance.”
Overall, TSLA ranks 6th on our list of buzzing AI stocks on latest analyst ratings and news. While we acknowledge the potential of TSLA, our conviction lies in the belief that under the radar AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than TSLA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.