Why Tesla Stock Is Called the Most Undervalued AI Name
One veteran analyst considers Tesla to be the "most undervalued AI name." While Tesla's shares (TSLA 2.45%) have surged to record highs this year, even greater growth could lie ahead in 2026. This growth potential is less about manufacturing cars and more about Tesla's role in artificial intelligence (AI), which could become the largest growth opportunity ever.
Tesla is commonly seen as an electric vehicle (EV) stock, but its valuation stands out. Currently, Tesla trades at almost 17 times its sales, whereas EV rivals like Rivian Automotive and Lucid Group trade between 3 and 7 times sales.
Reasons for Tesla’s High Valuation
- Established EV Manufacturer: Tesla has proven itself with global brand recognition and unmatched capital access, supported by its $1.4 trillion market cap.
- Industry Context: The EV sector is filled with financial failures; more than 30 start-ups have collapsed in the last decade alone.
- Challenges in EV Business: Developing a new vehicle from concept to production takes 10 to 20 years and billions of dollars, especially without existing manufacturing infrastructure.
- Financial Demands: New EV companies must continually raise capital to survive.
"It can take 10 to 20 years to bring a new vehicle from design to production, especially if the start-up in question has no existing manufacturing infrastructure."
Despite its label as an EV stock, Tesla's unique position and AI strategy could redefine its growth trajectory.
Author's Summary
Tesla's high valuation reflects not just its EV success but its unrivaled potential in AI, positioning it for significant future growth beyond the automotive industry.