1 Reason Tesla Stock Is Called a

Why Tesla Stock Is Considered Undervalued in AI

One veteran analyst considers Tesla the "most undervalued AI name." Although Tesla (TSLA 3.28%) shares are hitting new all-time highs this year, the stock’s future growth may be driven less by car manufacturing and more by the enormous potential of artificial intelligence (AI).

Tesla’s Market Valuation Compared to EV Peers

While Tesla is traditionally seen as an electric vehicle (EV) company, its valuation reveals a different story. Tesla trades at nearly 17 times sales, whereas EV competitors like Rivian Automotive and Lucid Group trade between 3 and 7 times sales. This significant valuation gap is explained by two main factors.

Established Leadership and Financial Strength

Firstly, Tesla is a proven EV manufacturer recognized worldwide, with unmatched access to capital thanks to its $1.4 trillion market capitalization. This financial security stands out in an industry where many new entrants struggle to survive.

Challenges Facing EV Startups

Over the past decade, more than 30 EV startups have failed. Launching a new EV requires 10 to 20 years to move from design to production, especially without existing manufacturing infrastructure. Building an EV business with just one model demands billions of dollars and consistent financial backing.

"It can take 10 to 20 years to bring a new vehicle from design to production, especially if the start-up in question has no existing manufacturing infrastructure."

The Bigger Picture: Tesla’s AI Growth Potential

Tesla's future growth potential is likely tied to AI, which could become the biggest growth opportunity in history, overshadowing its car manufacturing roots.

Summary

Tesla's strong market position and financial stability set it apart in the EV industry, but its real value could come from pioneering AI innovations.

Author’s summary: Tesla’s stock reflects not only its leadership in electric vehicles but also its unique potential to capitalize on transformative AI growth.

The Motley Fool — 2025-11-04