What Happened?
Shares of electric vehicle pioneer Tesla (NASDAQ: TSLA) jumped 6.9% in the afternoon session after CEO Elon Musk posted on his social media platform, X, that the company plans to build its own AI chips in higher volumes than all other AI chip makers combined.
Musk’s post gave investors fresh insight into Tesla's fast-moving internal AI chip development and highlighted the company's aggressive ambitions in the semiconductor industry. This news supported the long-term view held by some investors that Tesla's future is based on artificial intelligence and robotics, beyond its core electric vehicle business. Musk also shared that the company was iterating quickly on its chip designs, with the AI4 chip already in its cars, the AI5 version nearly ready, and an AI6 chip in early development.
Separately, Melius Research reaffirmed its Buy rating of the stock, noting that "TSLA remains a step ahead of peers." The firm added "after a very long and gradual period of improvement, autonomy is coming very soon, and it will change everything about the driving ecosystem.".
Is now the time to buy Tesla? Access our full analysis report here.
What Is The Market Telling Us
Tesla’s shares are extremely volatile and have had 44 moves greater than 5% over the last year. In that context, today’s move indicates the market considers this news meaningful but not something that would fundamentally change its perception of the business.
The previous big move we wrote about was 4 days ago when the stock gained 4.2% on the news that strong results from chipmaker Nvidia eased lingering concerns about a potential bubble, especially in the tech sector. The tech giant delivered another blockbuster earnings report, with sales, profits, and guidance exceeding Wall Street expectations. CEO Jensen Huang let the data do the talking as he acknowledged the growing sentiment about an AI bubble, while affirming that sales for Nvidia's current-generation GPU, called Blackwell (mostly used for AI applications), are "off the charts." A stronger-than-expected September jobs report from the Bureau of Labor Statistics reinforced this bullish sentiment. Nonfarm payrolls rose by 119,000, easily surpassing the consensus estimates of 50,000. While the unemployment rate ticked up to 4.4% and wage growth slowed slightly, the data suggest the U.S. economy remains on a firm footing. While this resilience made some investors unsure of the Fed's December rate decision, the market welcomed the news, rallying on the strength of a solid economy and a booming tech sector.
Tesla is up 10.7% since the beginning of the year, but at $420.01 per share, it is still trading 12.5% below its 52-week high of $479.86 from December 2024. Investors who bought $1,000 worth of Tesla’s shares 5 years ago would now be looking at an investment worth $2,269.
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