Tesla Stock Pops as Musk Talks Up Its AI Chips Business

The hand of a Tesla AI-trained Optimus robot. Coming into Monday trading, Tesla stock was down more than 14% so far in November, pushing shares down about 3% year to date. (AFP via Getty Images)

Key Points

• Tesla designs and deploys AI chips in its vehicles and data centers, a fact highlighted by CEO Elon Musk.
• Tesla’s stock rose 4.1% in early trading to $407.16, following Musk’s tweet and a broad market rebound.
• Investors value Tesla at approximately $1.3 trillion, trading at 177 times estimated 2026 earnings, largely due to its AI aspirations.

Tesla stock bulls see the company as a kind of tech conglomerate, making self-driving cars and energy storage systems, operating a large network of fast chargers in the U.S., and a small network of robo-taxis.

Tesla has another business, too: Artificial intelligence chip design.

“Most people don’t know that Tesla has had an advanced AI chip and board engineering team for many years,” tweeted Tesla CEO Elon Musk on Sunday. “That team has already designed and deployed several million AI chips in our cars and data centers. These chips are what enable Tesla to be the leader in real-world AI.”

Musk’s tweet helped Tesla shares on Monday. The stock rose 6.8%, closing at $417.78, while the S&P 500 and Dow Jones Industrial Average rose 1.6% and 0.4%, respectively.

Melius Research analyst Rob Wertheimer probably lent a hand, too. He said Tesla’s gains in self-driving technology are accelerating and suggested investors take a drive in a Tesla robo-taxi or Tesla running the latest version of the company’s Full-Self Driving to understand how good it is. Wertheimer rates shares Buy and has a $525 price target.

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Designing chips can be valuable. Nvidia has turned its AI chip prowess into a $4.4 trillion market value. D.A. Davidson analyst Gil Luria has estimated that Alphabet’s internally designed chips, which can work with Nvidia chips on different workflows in an AI data center, are worth hundreds of billions.

Tesla’s chips are used in vehicles and data centers that train the cars to drive themselves. What Tesla’s chip business is worth to Tesla isn’t easy to say. Ultimately, Musk plans to monetize Tesla’s chip expertise via self-driving cars and humanoid robots.

Tesla is close to finishing its AI5 chip, has started work on its AI6 chip, and is aiming to bring a new chip design to volume production every 12 months, Musk added.

“These chips will profoundly change the world in positive ways, saving millions of lives due to safer driving and providing advanced medical care to all people via Optimus,” added Musk, while putting in a plug to recruit more AI talent to his company. “Send an email with three bullet points describing evidence of your exceptional ability to AI_Chips@Tesla.com.”

Seeing Tesla as an aspiring AI winner isn’t a surprise to investors. AI is why Tesla is worth about $1.3 trillion and trades for 177 times estimated 2026 earnings, according to FactSet data.

It hasn’t been good to be an AI stock lately. Coming into Monday trading, Tesla stock was down about 3% year to date and up about 11% over the past 12 months. Shares have had a difficult November, falling more than 14%. Nvidia shares were down about 12% so far this month.

Write to Al Root at allen.root@dowjones.com