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Tesla's Identity Crisis: Car Company or AI Innovator?

The battle over Tesla's (TSLA) true identity rages on, with implications stretching far beyond the realm of electric vehicles (EVs). 

Analysts are divided, with some seeing Tesla solely as an auto manufacturer while others envision a future dominated by its artificial intelligence (AI) and robotics ventures.

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Morgan Stanley's Adam Jonas captured the essence of this debate in a recent report, highlighting Tesla's struggle amid mounting earnings pressure and a shifting business landscape. Once the darling of Wall Street, Tesla's earnings per share have dwindled from a high of $6.40 to a projected $2.70 in 2024. Increased competition, rising interest rates, and an aging product lineup have compounded the challenges, making Tesla's path forward increasingly uncertain.

Analysts like Toni Sacconaghi of Bernstein take a cautious stance, emphasizing Tesla's roots in the fiercely competitive auto industry. Sacconaghi argues that Tesla's perceived advantages in robotics and self-driving technology could be eroded by AI breakthroughs, casting doubt on its ability to transcend its carmaker status. With a Sell rating and a price target of $120, Sacconaghi remains bearish on Tesla's prospects.

In contrast, Adam Jonas offers a more optimistic outlook, valuing Tesla's various businesses separately to arrive at a staggering $1 trillion valuation. Jonas sees Tesla not just as a car company but as a multifaceted AI powerhouse. He assigns significant value to Tesla's AI-driven endeavors, particularly in the realm of self-driving technology, where Tesla has amassed a monumental dataset through its full self-driving service.The potential for Tesla's AI lead to endure is a central theme in Jonas's analysis. With Tesla recently achieving one billion miles traveled for its full self-driving service, Jonas envisions a future where Teslas clock one billion miles daily by 2030. This vast dataset, coupled with Tesla's in-house computing capabilities, presents an unparalleled advantage in machine learning and neural net training.

However, Tesla's AI ambitions could hinge on its collaboration with semiconductor giant Nvidia (NVDA). With Nvidia's cutting-edge AI chips and Tesla's groundbreaking AI applications, the two companies could redefine the future of autonomous driving. Analysts speculate that Tesla could emerge as Nvidia's largest customer for AI chips, further solidifying its position as a leader in the AI-driven automotive space.

As Tesla prepares to unveil its much-anticipated robotaxi on August 8th, the spotlight intensifies on its AI capabilities and regulatory readiness. With first-quarter earnings looming and regulatory hurdles yet to be overcome, Tesla's identity crisis shows no signs of abating. Whether Tesla emerges as a dominant force in the AI landscape or remains tethered to its automotive roots remains to be seen. However, one thing is certain: the battle for Tesla's identity is far from over.

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