Analyst Bullish on Tesla (TSLA) 'If You Take Musk Out of the Equation'

We recently published a list of Top 10 Stocks to Watch as AI Trade Dynamics Change. In this article, we are going to take a look at where Tesla, Inc. (NASDAQ:TSLA) stands against other top stocks to watch as AI trade dynamics change.

Aswath Damodaran from NYU Stern School of Business said in a recent program on CNBC that AI “buzzwords” are not boosting the market anymore as investors grow more concerned about capital spending.

“I’ve said about data centers we’ve gotten way ahead of the game. I mean, the AI product and service business, which ultimately is what has to pay for all of this, has not taken off in any substantial way. I’m hard-pressed to think about any company making significant money from the AI product and service business.”

Damodaran said that the “sobering” of the AI trade started in September last year and the DeepSeek breakthrough in China also had an impact on the industry.

“It’s part of, I think, what you see almost every buzzword in history in the last four decades. I call these the ‘bar mitzvah moment,’ where people wake up and say, ‘Okay, there’s a lot of promise here, but show me something that I can hang my hat on.'”

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Tesla Inc (NASDAQ:TSLA)

Number of Hedge Fund Investors: 99

Keith Fitz-Gerald, Fitz-Gerald Group CIO, said in a latest program on CNBC that while he’s frustrated with the latest selloff around Tesla Inc (NASDAQ:TSLA), he continues to believe in the company for the long term.

“You know, I think if we look at FSD, we look at autonomy, we look at all the things that Tesla is involved in, if you take Musk himself out of the equation for a few minutes, you can’t deny that that company continues to change the planet. So, this is one of those moments where I’m going to hold my nose, I’m going to continue to wait anyway, and I hope that I have enough shares at the end of the day.”

Analysts are looking beyond Elon Musk’s big claims and digesting the harsh reality facing the company. Tesla’s sales are falling all over the world despite the broader industry growth. For example, in California, the largest U.S. market for electric vehicle adoption and sales, Tesla sales fell about 12% year over year in 2024, causing its market share to drop from 60.1% in 2023 to 52.5% in 2024. Was it because Californians are buying fewer EVs? No. Californians purchased more than 2 million electric cars during the year, almost double when compared to the past two years.

Things aren’t looking good for Tesla in Europe, too. For example, in Germany, Tesla delivered just 1,429 new cars in February, down 76% from the same month last year. In contrast, battery-electric vehicle (BEV) registrations surged 30.8% during the month.

Tesla Inc’s (NASDAQ:TSLA) product lineup is showing signs of stagnation, with over 95% of sales still coming from the Model 3 and Model Y. Meanwhile, competitors are rolling out more advanced models. According to Reuters, Tesla’s market share in Europe is slipping as legacy automakers like BMW post stronger sales. Chinese competitor BYD is also gaining ground in Europe, despite talk of tariffs.

Polen Focus Growth Strategy stated the following regarding Tesla, Inc. (NASDAQ:TSLA) in its Q4 2024 investor letter:

“The largest relative detractors in the quarter were Tesla, Inc. (NASDAQ:TSLA) (not owned), Thermo Fisher Scientific, and Broadcom (not owned). We’ve spoken at length about our rationale for not owning Tesla. The stock enjoyed a 54% return during the quarter, with effectively all of the share price performance strength coming in the post-election period, as the market expressed a positive view on Elon Musk’s prominent role in the incoming Trump administration and its potential implications for Tesla. While we agree this development should be a net positive for Tesla and recognize the company’s interesting future prospects for autonomous driving and humanoid robots, its current valuation demands that shareholders pay primarily for potential innovations that have yet to materialize, with uncertain risks and timelines, presenting a different type of risk profile than we are comfortable with. Today, Tesla is an automobile manufacturer limited to the higher-income segment and is increasingly challenged to sell vehicles when interest rates are not zero. As such, we continue to question the company’s long-term growth profile, its ability to scale a large robotaxi service (which seems to be the source of euphoria in Tesla shares), and its corporate governance.”

Overall, TSLA ranks 7th on our list of top stocks to watch as AI trade dynamics change. While we acknowledge the potential of TSLA, our conviction lies in the belief that under the radar AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than TSLA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

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Disclosure: None. This article is originally published at Insider Monkey.