Most of the stock market’s gains this year have been driven by artificial intelligence. Therefore, it’s a surprise to see Tesla (NASDAQ:TSLA) stock being one of the biggest gainers, jumping over 100%. That said, one of Tesla’s AI-driven projects could boost its share price beyond its all-time high.
RoboTaxis on the way?
Despite not being a ‘traditional’ AI company, Tesla is one of the most-hyped AI stocks this year. This is because it has been investing heavily in self-driving cars, especially RoboTaxis. These are essentially self-driving cars without human drivers in ulrimate control.
The concept has the potential to revolutionise society by giving riders hours of their days back in commuting time. Tesla already has self-driving technology in its cars. Even so, the potential of machine learning and AI is where the hidden potential is, and could drive the long-term gains in Tesla stock.
Pessimists will no doubt have their reservations. Nonetheless, it’s worth noting that Tesla already has access to a massive amount of driving data from the millions of cars it has on the road. This data can be used to train the machine-learning models for its RoboTaxis.
The taxis are expected to debut as soon as 2024. And if the EV manufacturer successfully launches its fleet, it could have a huge impact on transport.
Charging those gains
Nevertheless, the stock’s monumental rise this year has come from the excitement surrounding its recent deals with other EV companies. Elon Musk has struck an agreement with several EV makers such as GM and Ford, giving them access to Tesla’s fast-charging network across the US.
Other carmakers have attempted — and so far failed — to build a reliable charging network across the US. Therefore, it’s no surprise to see them turn to the world’s biggest EV company for help. The deals now make Tesla’s chargers an industry standard, as the top three EV producers (70%) now use them.
But what’s most enticing for shareholders is the amount of money these deals could generate and drive further gains in Tesla stock. The partnerships are expected to generate approximately $5.4bn of annual revenue by 2032, according to Piper Sandler.
What’s more, Tesla is now eligible for government subsidies, incentivising it to build more charging stations that include CCS adapters for other EVs to use. Plus, the firm is also rumoured to ship more Cybertrucks than previously anticipated, which would be great for the Nasdaq constituent’s top line.
Should I buy?
On that basis, the stock should be a no-brainer buy. Having said that, it’s worth determining whether the shares are overvalued, especially after their run-up this year. Detractors will quickly point to Tesla’s extraordinarily high forward P/E ratio of 75 and label the shares overvalued.
Either way, one must also consider the fact that Tesla is a fast-growing company. The firm has seen its profits grow from $368m to $11.79bn in under three years.
Despite that, growth is expected to taper off. Analysts are expecting EPS to rise to $4.77 in FY24, which is still impressive. But given that its two-year forward P/E sits at 55 with an average price target of $210, I wouldn’t be so keen to buy the stock. However, I may be tempted if the shares drop back down again.
