Key Points
Tesla‘s (NASDAQ: TSLA) market cap is currently hovering around $1.2 trillion. Over the last three years, shares have soared by more than 50%.
What many investors may not realize, however, is that Tesla’s auto sales are actually declining. Last year, Tesla’s auto sales fell by 8%. In 2024, auto sales were down by around 1%.
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Tesla’s core auto manufacturing business is by no means cratering. But it does raise the question: Why are shares doing so well despite declining sales in its biggest business segment?
The answer to this question is undoubtedly artificial intelligence. Autonomous driving is increasingly made possible by rapid advancements in AI. This is allowing Tesla to target new growth opportunities with higher growth rates and superior margins than conventional auto sales. Some experts believe that the robotaxi market, for example, will grow into a $10 trillion industry worldwide over the long term.
“We think $8 trillion to $10 trillion for the entire autonomous taxi opportunity throughout the world, from almost nothing,” predicts Cathie Wood, the CEO of Ark Invest, a major Tesla shareholder. “That’s how quickly AI is going to cause these things to happen.”
Tesla’s pivot from carmaker to AI company has already been rewarded heavily by the market. But one EV stock isn’t getting the same premium despite its new focus on AI. Growth investors could be getting a bargain.
Image source: Rivian.
This Tesla competitor looks way too cheap
Rivian‘s (NASDAQ: RIVN) $19 billion market cap pales in comparison to Tesla’s $1.2 trillion valuation. But in many ways, the companies are pursuing the same growth path.
Both Tesla and Rivian are, of course, manufacturers of electric vehicles. And following the launch of Rivian’s R2 model, both companies now produce at least one vehicle with a starting price tag under $50,000.
Both companies are also going all-in on AI.
“We believe [Tesla] will aggressively bring capacity online to enable AI-driven learning cycles on product design, manufacturing processes, and software integration into products,” explains Colin Rusch, an analyst at Oppenheimer. So it’s not just self-driving robotaxis that AI will make possible for Tesla.