Why Tesla Stock Is Called the Most Undervalued AI Name
One experienced analyst considers Tesla the "most undervalued AI name." Shares of Tesla (TSLA) have surged to new all-time highs this year, with even greater potential expected in 2026. This growth outlook extends far beyond car manufacturing.
Instead, it centers on what might become the largest growth opportunity in history: artificial intelligence (AI).
Tesla’s Valuation Compared to Competitors
While Tesla is commonly seen as an electric vehicle (EV) stock, its valuation reveals a notable difference. Tesla currently trades at nearly 17 times sales, whereas EV competitors like Rivian Automotive and Lucid Group trade between 3 and 7 times sales.
Reasons Behind Tesla's Premium Valuation
- Proven Track Record: Tesla is a well-established EV manufacturer with global brand recognition.
- Strong Financial Position: With a market capitalization of $1.4 trillion, Tesla has unmatched access to capital, a crucial advantage in an industry marked by many financial failures.
- Barriers for New Entrants: Over the past decade, at least 30 EV startups have failed, largely due to the immense time and financial investment required.
- High Capital and Time Demands: Bringing a new EV from design to production can take 10 to 20 years and billions of dollars, especially for startups without existing manufacturing infrastructure.
To start an EV business with a single model in production takes billions of dollars. But more importantly, it takes a lot of time, requiring these businesses to continually tap financial markets for more funding.
These factors create a significant moat for Tesla, supporting its premium valuation beyond just vehicle sales.
Author's summary: Tesla's stock is highly valued not just for its EV business but as a leading AI player, backed by its unmatched brand strength and capital access in a tough market.