Stocks of Tesla Rise on Awaited Update to the Full Self-driving Software

Tesla Inc. shares began December on a positive note as investors celebrated the much-anticipated update to the company's Full Self-Driving (FSD) software. This advancement, which leverages artificial intelligence (AI), has reinforced Chief Executive Elon Musk's ambitious vision of a Robotaxi network.

‍

Stifel analyst Stephen Gengaro emphasized the transformative potential of Tesla’s AI-powered FSD system in his latest research note. Gengaro raised his price target for Tesla's stock to $411, marking the highest target among Wall Street analysts. This optimism is rooted in Tesla's progress in autonomous driving technology, which serves as a cornerstone for Musk’s "Cybercab" Robotaxi concept.

‍

Tesla’s approach to self-driving relies exclusively on cameras and neural networks, differentiating it from other automakers. "Tesla’s pure AI-based self-driving is integral to the Cybercab business," Gengaro wrote. He also suggested that Musk’s close ties with President-elect Donald Trump could expedite regulatory approvals for FSD, further accelerating Tesla’s plans.

‍

Tesla’s stock advanced 2% in premarket trading, approaching its 2.5-year high of $252.56 achieved on November 22. The stock had already experienced a 38.2% surge in November, its best monthly performance since January 2023, when it rallied 40.6%.

‍

The latest FSD update, Version 13, began rolling out over the weekend. Ashok Elluswamy, Tesla's vice president of Autopilot/AI Software, announced on X (formerly Twitter) that the update enhances all aspects of Tesla’s end-to-end driving network. This development was initially teased by Musk during Tesla's October earnings call, where he expressed enthusiasm about the forthcoming version.

‍

Gengaro highlighted Tesla’s evolution beyond traditional automaking, noting that its market capitalization has surpassed the combined value of the world’s top 10 automakers. "While we are confident in Tesla’s auto business, the immense value creation potential from its AI-driven FSD capabilities and Cybercab initiative supports our positive outlook," he wrote.

‍

Gengaro reiterated his "buy" rating on Tesla’s stock, increasing his price target by 43% from $287 to $411. This new target represents a 19% potential upside from Tesla’s last closing price of $345.16. Among the 57 analysts covering Tesla, Gengaro’s target is the most bullish, followed closely by Wedbush analyst Dan Ives, who has a $400 target. Ives recently projected that Tesla’s opportunities in AI and autonomous driving could add $1 trillion in market capitalization over time.

‍

As of last Friday, Tesla ranked as the seventh most valuable U.S. company, boasting a market capitalization of $1.11 trillion. For comparison, traditional automakers General Motors and Ford held market caps of $61.13 billion and $44.23 billion, respectively.

‍

Tesla’s stock has risen 38.9% year-to-date, outperforming the broader market and sector-specific benchmarks. In contrast, the Global X Autonomous and Electric Vehicles ETF has declined 4.1%, while the S&P 500 index has gained 26.5% over the same period.

‍

Tesla’s advancements in self-driving technology and AI have reinforced its position as a leader in the EV and autonomous driving industries. The rollout of FSD Version 13 marks a significant step forward, as the system's capabilities are expected to enhance Tesla’s competitive edge in the rapidly evolving mobility landscape.

‍

Musk’s proactive engagement with the political landscape, particularly his alignment with President-elect Trump, has added a new dimension to Tesla’s regulatory strategy. With Musk potentially playing an influential role in the administration, analysts like Gengaro see a pathway to faster regulatory approvals, which could bolster Tesla’s ambitions.

‍

Tesla’s focus on AI and autonomous driving not only differentiates it from traditional automakers but also positions it as a technology powerhouse. The company's market cap reflects this broader perception, with Tesla valued far above its peers in the automotive industry.

‍

As Tesla continues to innovate and expand its FSD capabilities, its stock remains a favorite among growth-focused investors. However, the high valuation and ambitious targets underscore the importance of execution. Any delays in achieving regulatory approvals or technical milestones could impact investor sentiment.

‍

Conclusion

Tesla’s progress with FSD Version 13 and its strong stock performance highlight the company's transformation into more than just an automaker. With its market-leading AI capabilities, ambitious Robotaxi vision, and Musk’s influential political connections, Tesla is poised to shape the future of autonomous driving and mobility. While the road ahead may have its challenges, analysts like Gengaro see significant upside, reinforcing Tesla’s status as a leader in the technology-driven automotive revolution.

‍