Technology stocks have faced a challenging start to 2025. The Nasdaq Composite has declined by 8% year-to-date. Among the biggest losers are the “Magnificent Seven” stocks, with six of them experiencing losses, and Meta Platforms being the exception with a modest 3.8% gain. Within this group, Tesla (TSLA -3.33%) stands out, with its shares plunging 44% in 2025 as of Tuesday’s market close.
Tesla is grappling with several issues, including damage to its brand reputation, escalating competition in the EV market, and slowing operational results. However, Wedbush Securities analyst Dan Ives suggests that the current sell-off in Tesla stock presents a “generational opportunity.”
Tesla’s Current State and Future Prospects
Tesla’s performance in the automotive segment during 2024 was uninspiring. Revenue from this segment reached $77 billion, representing a 6% year-over-year decrease. Moreover, the gross profit margin for the EV business fell to 18.4% for the full year, down from 19.4% in 2023. Though the company’s core EV business is facing challenges, certain Wall Street analysts believe that Tesla’s investments in artificial intelligence (AI) could be a game-changer.
AI Initiatives: A Potential Turnaround
Tesla is focusing on AI development for two key areas:
- Autonomous Driving: Tesla aims to generate revenue through its full self-driving (FSD) software. This includes subscription sales to existing Tesla owners. The company’s vision of building a fleet of autonomous robotaxis presents a potentially highly lucrative opportunity. This could disrupt ride-hailing, delivery, logistics, and car rental markets. Subscriptions for the software could generate billions in profit from high-margin sales.
- Optimus Humanoid Robot: Tesla plans to integrate Optimus robots in its factories, augmenting human workers on the assembly line. As Optimus scales and becomes more integrated into the manufacturing process, Tesla may be able to generate efficiencies from reduced labor costs thereby improving unit economics on each vehicle produced.
Is Tesla Stock a Buy Right Now?
While Tesla’s core EV business currently faces tough operational challenges, the financial results could have been much worse. The economic environment of 2024 was difficult, with consumers and businesses facing lingering inflation impacts.
The long-term bullish outlook for Tesla hinges on the success of its AI initiatives, including commercially available autonomous vehicle fleets and a robotics-enhanced labor force. These AI ambitions could not only reignite sales, but also widen Tesla’s profit margins considerably, giving it a competitive edge. Dan Ives’s view, that now is a good time to invest in Tesla stock, is worth noting. However, investors should expect continued near-term volatility. Tesla is always a volatile stock, but it has historically been a profitable long-term investment. AI is the next chapter in Tesla’s history, and long-term investors should consider taking advantage of the current sell-off.
