Artificial intelligence is driving more than just cars and robots for Tesla stock.
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The automaker’s advances in the space are fueling optimism for Tesla (TSLA) investors who believe its next level of growth will be built on AI.
Charles Harris, portfolio manager at O’Neil Global Advisors, tells Investor’s Business Daily’s “IBD Live” show that he remains bullish on Tesla stock. He attributes the potential upside to what he sees as significant advances Tesla is making in artificial intelligence — and how it’s being used. He points to a self-driving test broadcast by CEO Elon Musk on X in August. In the demonstration, the vehicle was able to use its training to determine what was on the road and react accordingly.
“(Elon Musk) is saying no one told the car what a speed bump is, it just learned from video training: This is what a speed bump looks like, and the proper thing to do is to slow down,” said Harris.
Harris sees upside in Tesla stock using the same technology to build smarter robots. He points to recent demonstrations where a Tesla robot reportedly used a version of artificial intelligence to sort Lego toy bricks by color. “If you can train a car to drive, then you can train a robot to vacuum your home, wash your dishes, make pancakes, do whatever,” he said.
“I’m a swing trader,” said Harris. “But using Apple (AAPL) as a precedent, I never imagined Apple would turn into what it turned into; I think there’s the same potential for Tesla stock.”
AI Not Profitable For Tesla Stock … Yet
But investors looking for immediate profits driven by artificial intelligence may not find it in Tesla yet. Harris notes that competing technologies from automakers like Mercedes-Benz (MBGAF) are also unprofitable and have guardrails and limitations that, while making the technology safer, also make it less practical to consumers and therefore less of a selling point.
Harris also notes that companies investing in “robotaxi” autonomous technologies like Uber (UBER) are not yet profitable. “I don’t think they’re making money,” said Harris.
Instead, Harris says he is banking on the promise that companies like Tesla and Uber bring, and expects their values to rise over time.
Tesla stock currently ranks fourth in IBD’s Auto Manufacturers Group, behind its peers Ferrari (RACE), Stellantis (STLA) and Li Auto (LI). Tesla holds an IBD Composite Rating of 95 and a Relative Strength Rating of 91, according to IBD Stock Checkup.
Tesla Shakes Off August Gloom
Still, Harris says holding Tesla stock with conviction hasn’t been easy. “My margin account was pretty decimated in 2022,” he said. “And I think the takeaway on that is if you’re going to try to hold a stock for a long-term secular move, don’t do it on margin because you just never know what’s going to happen.”
But while stocks saw a rough August overall, Harris remains optimistic on Tesla stock. Shares of the automaker are setting up a bullish pattern, recently forming a cup-with-handle base that began forming in mid-July.
Tesla stock is currently trading about 10% below the 278.98 entry as it hovers right around the 50-day line.
For now, Harris says he’s not yet making any moves on Tesla stock. “I still maintain a large position in Tesla, which I’m not trading,” Harris said. “I’m just holding.”
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