Tesla (TSLA) reminds me of Nvidia (NVDA) a few years ago.

Tesla pioneered affordable, high-powered electric vehicles (EVs). It sold over $80 billion worth of battery-powered cars last year and achieved incredible growth:

Tesla sells more EVs than any other automaker. In fact, its Model Y was the best-selling car in the world last year, period.

A few years ago, it was so rare to see a Tesla here in Ireland that teenage boys made a game out of it. You’d punch your friend in the arm and say “Tesla” when you spotted one. Now, there’s one on almost every street.

And the EV megatrend is only getting started...

Over coffee in Washington, DC the chief economist at the Abundance Institute Eli Dourado told me, “EVs are obviously going to win. They’re rapidly getting cheaper and the batteries more powerful.”

A decade ago, the farthest a Tesla could drive on a single charge was 260 miles. It can drive over 400 miles today, and I bet in a few years we’ll see an EV hit the 1,000-mile mark.

Meanwhile, the average price of a Tesla has dropped 50% from just a few years ago:

Less than one in five cars sold today is battery powered. My research suggests EVs will make up 75%+ of the auto market a decade from now.

But you likely know Tesla’s stock has been a disappointment overall in 2024. It was the worst-performing S&P 500 stock in the first three months of the year, and is currently down 10% year to date.

Tesla’s EV sales slumped along with other automakers’, and investors rightly punished its stock.

But investors who are writing Tesla off as a struggling automaker are missing the big picture. Tesla is the next great artificial intelligence (AI) stock.

There’s a lot of bad reporting out there about Tesla, mostly because it’s run by Elon Musk. The media doesn’t like Elon because he has the “wrong” political views.

What matters is that Elon is the greatest businessman alive

He sells more EVs than any other automaker (Tesla)… sends skyscraper-sized rockets into space (SpaceX)… did more than anyone to roll back censorship (Twitter/X)… and is helping paralyzed people work again (Neuralink).

I value the opinions of Tesla owners more than journalists. And everyone I chat with raves about how cool the cars are. An Uber driver told me in Washington, DC, recently, “I can fill it up for $5 and unlock it with my phone. I’d never own another car again.”

Personally, I love riding in Teslas. They change your idea of what a car should be. And they’re only going to get better… faster… and cheaper.

Nvidia started out selling video game chips. Then, it became an AI company. Tesla started out selling cars, and it’ll soon morph into an AI company...

Tesla is more than a “mere automaker”

Elon Musk is a pioneer in AI.

He co-founded ChatGPT creator OpenAI in 2015. And Tesla has been working on self-driving technology—AI that drives your car—since 2014.

Nearly 1 million Tesla owners in the US and Canda currently pay for its “full self-driving” (FSD) mode. It costs $8,000 up front, or you can pay a subscription price of $99/month.

These folks are now driving roughly 15 million miles on FSD per day. Take your hands off the wheel, and the car drives itself.

Is this feature perfect? No. It has plenty of flaws. But the important thing is it continues to improve rapidly.

A friend who owns a Tesla told me the latest self-driving upgrade (V12) is a game-changer. “I used the last version every now and then. With this upgrade, I use it every time I drive and don’t want another family car without it.”

This will become a multibillion-dollar business for Tesla. The tech is going to get so good, other automakers will tear the hinges off the door to license it.

A big catalyst for Tesla could be when it reveals its robotaxi platform, now scheduled for October.

Imagine turning all the Teslas in America into a fleet of self-driving Ubers. You could earn money “renting” out your car when working or on vacation. It’ll pick up and drop off passengers all day and arrive back at the office just in time to drive you home.

This is the future Elon is trying to create with the robotaxi platform. Owning a Tesla is about to get a whole lot more exciting (and cheaper).

FSD and robotaxis are powered by Dojo: Tesla’s $300 million AI supercomputer.

Dojo is building the world’s most experienced driver. It ingests every single mile each Tesla drives and learns from it. This is similar to how ChatGPT works. The more examples it sees, the smarter it gets.

Each Tesla then “downloads” these updates, just like you download a new version of Zoom. Tesla will make a ton of cash “renting” out Dojo’s expertise to other AI companies.

Tesla is also a major player in robotics.

Step inside a Tesla factory, and you’ll see robots whizzing around, bolting tires onto cars and spray-painting doors. Here’s a glimpse:

Selling cars is a notoriously low-margin business. Ford (F) and General Motors (GM) make little profit on each car sold.

But Tesla cut the cost to make each of its cars in half by automating various steps with robotics. This allowed it to triple profits between 2021 and 2023.

When most people hear “AI,” they think of software like ChatGPT...

But the big opportunity is when AI gets “physical.” In other words, AI-powered self-driving cars and robots that can reinvent American factories. This is where Tesla shines.

Today, investors have their heads stuck in spreadsheets, calculating how much money Tesla makes on its cars. They’re missing the big opportunity: AI.

Self-driving cars, robotics, and its Dojo supercomputer are what matter for Tesla.

If it nails AI, it can become a $10 trillion company. If you understand this, congratulations—you’re better informed than most Wall Street analysts.

I write about AI and other disruptive technologies and how to invest in them in my M/W/F investing letter—The Jolt. If you’re interested, you can subscribe for free here.

Stephen McBride

Chief Analyst, RiskHedge