Tesla Stock Poised for ChatGPT Moment

Tesla Stock Poised for ChatGPT Moment camreo

Tesla Stock: Potential Price Cut for FSD Software Could Ignite Excitement, States Analyst. Not all reductions in prices carry the same weight. Some instill investor concerns about declining demand, rising competition, and shrinking profit margins. However, there are price cuts that have the power to invigorate investors.

According to Canaccord analyst George Gianarikas, Tesla (TSLA) has the opportunity to execute a price cut that would undoubtedly fall into the category of generating excitement.

While the notion of a price reduction causing positive buzz might seem far-fetched, Tesla stock experienced a 10% decline when the company unveiled first-quarter results revealing larger-than-expected year-over-year profit margin decreases due to global price reductions implemented by the electric vehicle manufacturer to spur demand.

Get Real Estate Advice Here

However, Gianarikas is not referring to reducing car prices. In a recent report, he emphasized, “We strongly advocate for a price adjustment to increase FSD adoption and incentivize more Tesla owners to experience the current FSD Beta.” His recommendation revolves around reducing the price of Tesla’s advanced full self-driving software, the company’s top-tier driver-assistance system.

The potential benefit of a price cut becomes apparent when considering the cost of FSD, which amounts to $15,000 for buyers. Alternatively, it can be obtained through a subscription model priced at $199 per month or $99 upfront with a $6,000 payment for a driver-assistance upgrade. Lowering the price could entice a greater number of individuals to adopt the technology at an earlier stage.

Gianarikas expressed, “Once the masses truly appreciate what FSD specifically and autonomy generally are truly capable of, Tesla may see its ChatGPT moment.” He drew a comparison to the immensely popular AI-powered chatbot, ChatGPT, launched by OpenAI in November.

Achieving a ChatGPT moment is the goal of every business, where investors recognize the potential benefits derived from the rise of AI. Nvidia experienced this when its stock rose by approximately 25% in a single day after forecasting second-quarter sales that exceeded Wall Street expectations by 50%, fueled by the strength of its AI business.

Get WSJ Renewal Print Edition and Digital Edition for 1 or Two Years

While it is widely acknowledged that Nvidia stands to gain from AI, Gianarikas argues that the AI opportunity at Tesla is undervalued. The automaker employs internally developed AI to enhance, refine, and operate its FSD software.

Tesla’s CEO, Elon Musk, firmly believes that the FSD product will eventually achieve level 4 autonomous driving capability, wherein vehicles equipped with the technology will handle the majority of driving tasks without requiring constant attention from human drivers. While FSD has not reached level 4 yet, its attainment would be a game-changer for Tesla and the industry as a whole.

Even without a price reduction for FSD, potential Tesla buyers have received another discount courtesy of the government. All Tesla Model 3 vehicles now qualify for a federal tax credit of $7,500, up from $3,750. This change likely reflects shifts in Tesla’s battery sourcing and materials procurement. Tesla has yet to comment on this alteration.

Gianarikas rates Tesla shares as Buy, setting a price target of $257. Among analysts covering the stock, approximately half have a Buy rating, while the average Buy-rating ratio for stocks in the S&P 500 is around 53%. The average analyst price target for Tesla is approximately $190 per share.

In early Monday trading, Tesla stock exhibited a 1.6% increase, whereas futures for the S&P 500 remained unchanged. Nasdaq Composite futures recorded a 0.2% decrease. Tesla may benefit from higher oil prices following OPEC’s commitment to output restrictions over the weekend. As Tesla vehicles do not rely on gasoline, increased oil prices make them more appealing.