As Tesla Tapes Out the AI5 Chip, Should You Buy, Sell, or Hold TSLA Stock?
Electric vehicle (EV) stocks often move on delivery trends, margins, and the pace of demand. Tesla (TSLA), however, has long been more than just an automaker. It is also an AI and autonomy story, with investors watching every step the company takes toward self-driving technology and in-house chip design. That is why Tesla’s latest milestone…
Electric vehicle (EV) stocks often move on delivery trends, margins, and the pace of demand. Tesla (TSLA), however, has long been more than just an automaker. It is also an AI and autonomy story, with investors watching every step the company takes toward self-driving technology and in-house chip design.
That is why Tesla’s latest milestone matters. CEO Elon Musk recently said the company has taped out its AI5 chip, a key step before manufacturing begins. The move adds another layer to Tesla’s long-term case, especially as the company pushes toward Full Self-Driving (FSD), robotaxis, and other AI-driven products. For investors trying to decide whether TSLA stock is a buy, sell, or hold, the new chip development adds fresh fuel to an already important debate.
TSLA stock has been on a bumpy ride lately. Shares jumped sharply in mid-2025 on election-related optimism, but this year has been uneven. Shares of Tesla fell about 10% in January as Chinese EV competition intensified, then rebounded in March on hopes for better FSD progress. Tesla is down roughly 13% year-to-date (YTD) despite an 11% gain over the past five days on the tape-out news. Technically, TSLA is trading near its 50-day moving average, while the 200-day average is still above the current price, indicating the stock hasn’t broken out of its downtrend.
Despite the volatile movement, one thing about Tesla has remained unchanged: its rich valuation. For example, the forward price-to-earnings (P/E) ratio is 280 times, vastly above the sector median, suggesting overpricing compared to peers. By contrast, legacy automakers trade at P/E mulitples in the low double digits or EV/EBITDA in the teens. Tesla’s EV/EBITDA is above 100 times, well above its 10-year median.
In short, TSLA stock isn’t cheap as it prices in big wins from AI, autonomy, and new products. Bulls argue that Tesla’s future growth justifies a premium, but on typical metrics it’s rich relative to peers.
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On April 15, Musk said that Tesla had taped out its AI5 chip. In chipmaking, a tape-out means the design is finished and sent to the factory. It is an important step, but it is not the same as shipping finished products.
Tesla is working with Taiwan Semiconductor Manufacturing (TSM) on AI5. A future AI6 chip is planned for Samsung’s 2-nanometer line, although that program has already seen delays. Musk believes AI5 could enter high-volume production in 2027, and Tesla has also said it will need hundreds of thousands of chips before switching production to the new hardware.
That means the AI5 chip is a strategic win, but not a short-term earnings driver.
Tesla heads into its April 22 earnings report with Wall Street looking for more than a simple bottom-line beat. Current Wall Street estimates sit around $0.21 per share on revenue of about $22.7 billion, while Tesla’s own recent delivery report showed its weakest quarterly deliveries in a year as U.S. incentives faded and competition stayed intense.
The bigger focus for investors will be on margins, inventory, capital spending, and the company’s comments on FSD, robotaxis, and Optimus. Tesla’s latest delivery report showed more vehicles produced than delivered, and several analysts say investors want clearer signs that the AI and autonomy story is turning into actual operating progress.
Options traders are bracing for a meaningful move. Options data show an implied swing of about 6% into earnings, while another market readout points to roughly 7%. That suggests the market expects a sharp reaction even if results are only slightly different from forecasts.
For investors, the key question is whether Tesla can show that the fourth-quarter strength in margins and cash flow was more than a one-quarter lift.
Tesla’s leadership believes the future is not just cars. CEO Elon Musk called 2025 a key year as the company widened its focus to include AI and robotics. Musk pointed to Optimus, Cybercab, and FSD as central parts of the plan.
That strategy also means higher spending. CFO Vaibhav Taneja said that Tesla expects more than $20 billion in capital expenditures in 2026 as it ramps up factories and chip work. The company has not offered formal full-year guidance, but analysts expect near-term pressure from these investments.
Tesla’s moves so far this year clearly show that shift. In March, the company and SpaceX unveiled plans for a $25 billion chip factory in Austin, Texas. Tesla also said that its Shanghai facility will be important for Optimus production, while Fremont is being retooled to make room for robots. In China, stronger competition from local EV makers has also added pressure.
Analysts remain divided on TSLA stock. The consensus rating is a “Hold,” with the average 12-month target at $400.58. That suggests minimal potential upside, with the stock currently trading near $391.
Some bullish analysts stress Tesla’s long-term vision. For instance, Morgan Stanley has an “Equal Weight” rating and a $415 target, noting Tesla’s expanding advantage in autonomy. Analysts argue that progress on unsupervised FSD is key to justifying the price. Similarly, Deutsche Bank analyst Edison Yu maintained a “Buy” rating and a $465 target, impressed by Tesla’s robotaxi and autonomy tech, though he flagged work needed on routing efficiency.
An all-time bull, Wedbush analyst Dan Ives recently reaffirmed his “Outperform” rating on Tesla, maintaining a $600 price target after the delivery miss, citing long-term upside from AI, robotaxi, and robotics expansion. Ives views Tesla’s chip development, including AI5 and the upcoming AI6, as central to its autonomy strategy.
On the other hand, skeptics warn of risks. UBS analyst Joseph Spak has turned “Neutral” on TSLA stock with a $352 target, citing soft EV demand and heavy capex.
www.barchart.com
On the date of publication, Nauman Khan did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. This article was originally published on Barchart.com
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