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Tesla (NASDAQ:TSLA | TSLA Price Prediction) isn’t the only Mag Seven stock to think about buying after a brief plunge into bear market territory. With the AI trade coming back online over hopes that the war in Iran will be over in two or three weeks’ time, perhaps the discounts across the board might not be sticking around for much longer, now that some of the hardest-hit names in March are showing signs of getting off the canvas.
At the time of this writing, shares of Tesla are still in a bear market, down just over 22% from its all-time highs. And while the name arguably remains the priciest of the Mag Seven based on its triple-digit price-to-earnings (P/E) multiple, it also might be the “cheapest” compared to the growth opportunity that lies ahead.
Undoubtedly, it all comes down to how you view the firm and its visionary leader, Elon Musk, as he looks to shift gears to ready for the age of robotics. If you see Tesla as just an electric vehicle (EV) company with sagging sales and a few uncertain physical AI moonshots, the current price sticker price looks quite obscene.
Even if you’re a believer in Musk and the rise of the physical AI opportunity, the 353 times trailing P/E multiple may still seem too steep, especially when you consider uncertainties regarding when robotics will really take off. Like it or not, though, Musk is making bold moves to prove to the world that robots, rather than just EVs, are the future of Tesla, and that the technology is ready to disrupt new markets in the physical realm.
Tesla’s swinging for the fences with robots and AI. It has to.
Any way you look at it, doubling down on Optimus, warehouse automation, and self-driving might be the only move to avoid a painful valuation reset, one that may see Tesla be repriced as an auto company, rather than a high-tech innovator at the bleeding-edge of AI.
Could it be that the magnitude of multiple compressions at the hands of Optimus, Cybercab, full-self-driving (FSD) subscriptions, autonomous factories and other AI-related wild cards has the potential to allow Tesla to grow into its high-flying multiple? That’s the big question. And over the years, the shorts have had a hard time betting against the company.
In any case, it seems like the sky is the limit for the Tesla narrative. But with growth stories falling out of favor, questions linger as to whether Tesla stock can sustainably turn a corner if Optimus doesn’t end up hitting the ground running at the end of next year. Indeed, Tesla investors seem to be among the most patient out there.
And with the mass production of Optimus going ahead this coming summer (it’s not just a pipe-dream; it’s actually happening), I think we’re reaching a point where Tesla is no longer an AI and robotics “story” stock, but it’s a frontier physical AI innovator that’s jumping right into the deep end. The robots are about to enter mass production, and we’re probably going to start seeing them pop up in a lot of places in the workplace and perhaps beyond. The biggest opportunity, I think, lies in the warehouse, behind the scenes, and, of course, in the home.
The physical AI era has arguably already kicked off
Given Elon Musk’s influence in the tech world, it’s perhaps not too far-fetched to think the man could single-handedly propel us all into the age of robotics in the next two to three years.
Musk is already rolling up his sleeves to bring a sci-fi future to the present, with plans for orbital data centers and the ambitious target to build 1 million Optimus robots by 2027. In short, if you think that’s an achievable production milestone and that each robot will be utilized effectively, I think the case of Tesla being cheap isn’t all that far-fetched. There are certainly a ton of places where Optimus could get hard at work right after they step off the production line.
Of course, a lot needs to go right in a very concise timeframe. And given that highly-capable, useful humanoid robots are uncharted territory, it’s really hard to tell if new Optimus units are going to fly off shelves come 2027 and 2028.
Could highly-capable robots, like Optimus, become the new GPU and memory chip as we step foot into the physical AI era? That’s the $5 trillion question, in my view. If it is, perhaps Tesla stock isn’t as expensive as it seems. Either way, Tesla stock doesn’t just come with extreme downside risk, but also upside risk.