Excitement surrounding breakthroughs in artificial intelligence (AI) led to a huge rally in the stock market last year.High-tech oriented Nasdaq Composite It's up 43% in 2023 and is already up 8% so far this year.
But much of this rally can be attributed to a small group of stocks known collectively as the “Magnificent Seven” (a catchy nickname that includes: microsoft, apple, alphabet, Amazon, Nvidia, meta platformand tesla (NASDAQ:TSLA).
Interestingly, Tesla only It is a member of the Magnificent Seven, with negative returns over the past year and down nearly 11% as of market close on April 5th.
As mega-cap peers continue to advance the AI ​​story, Tesla's advances in artificial intelligence are being overlooked as demand for electric vehicles (EVs) begins to cool. Let's take a closer look at why now is a great time to consider picking up Tesla stock and preparing to own it for the long term.
More than just a car business
The main drawback to Tesla is that it's just a car business. Producing battery-powered cars is what differentiates Tesla from many traditional automakers, but bearish investors will also argue that it's an expensive endeavor.
Nevertheless, Tesla's financial and operating results prove that there is a large market for EVs. In 2023, Tesla generated revenue of $96.8 billion, an increase of 19% over the previous year. Approximately 85% of the company's revenue comes from its automotive business, with the remainder coming from Tesla's energy storage and services business.
I think these results are very impressive given that unusually high inflation and rising interest rates weighed on the economy throughout 2023. More importantly, Tesla was able to operate at a consistently profitable level last year despite a challenging macro environment.
Tesla reported a 19% increase in net income last year to $15 billion on a generally accepted accounting principles (GAAP) basis. And while the company's $4.4 billion in free cash flow represented a 42% year-over-year decline, the more important point is that Tesla still remains green overall. .
With over $29 billion in cash on its balance sheet, let's explore some of the ways Tesla is building outside of EVs.
rise of robots
One of the most notable artificial intelligence (AI) projects Tesla is working on is robotics. The company is developing a humanoid robot called Optimus, and hopes to introduce it into factories in the long term.
The main selling point is that factories run by Optimus bots can achieve new levels of automated productivity. But the larger goal concerns the labor industry. If Tesla begins commercializing Optimus, humanoid robots have a chance to revolutionize manufacturing, logistics, retail, and more.
While a world integrated with humanoid robots may seem like science fiction, it's worth noting that many other AI companies are also investing in this technology. For example, Nvidia joins Jeff Bezos; intel Earlier this year, it raised a $675 million funding round for a startup called Figure AI, which competes with Tesla's Optimus. Additionally, the ChatGPT developer's OpenAI has invested in both Figure AI and Android startup 1X.
goldman sachs predicts that the humanoid robot market will reach $38 billion by 2035. Given Tesla's early entry into this space, I'm not going to pass up this opportunity. Additionally, with a $42 trillion labor market, Tesla has a greenfield opportunity to leverage robotics by strengthening its core automotive business. and Expanding beyond EV production.
1 billion miles of data and growing
Another opportunity for Tesla where AI plays a role is autonomous driving. Many companies are investing in self-driving capabilities, but not many are making measurable progress.
Over the past few months, the following subsidiaries have general motors A company called Cruise faced a major hurdle in its self-driving roadmap. By contrast, Alphabet's self-driving car business Waymo has attracted companies such as: Uber Regarding possible future partnerships.
But with over 1 billion miles of data collected, Tesla has an advantage over its competitors. The company is the undisputed leader in self-driving data collection and uses that data to refine and train self-driving software models.
Currently, Tesla stock has a price-to-sales (P/S) multiple of just 5.9x, the second-lowest of the Magnificent Seven. The stock is down 34% so far in 2024, and it's hard to imagine things getting any worse.
Long-term investors shouldn't discount the AI ​​vision Tesla is creating beyond selling cars. The company is in the midst of his AI revolution, but investors are overlooking Tesla's long-term opportunity by focusing on car sales. I think now is the perfect time to stock up on stocks and buy Tesla shares.
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Alphabet executive Suzanne Frye is a member of The Motley Fool's board of directors. John Mackey, former CEO of Amazon subsidiary Whole Foods Market, is a member of the Motley Fool's board of directors. Randi Zuckerberg is a former head of market development and spokesperson at Facebook, sister of Meta Platforms CEO Mark Zuckerberg, and a member of the Motley Fool's board of directors. Adam Spatacco has held positions at Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia, and Tesla. The Motley Fool has positions in and recommends Alphabet, Amazon, Apple, Meta Platforms, Microsoft, Nvidia, Tesla, and Uber Technologies. The Motley Fool recommends General Motors and Intel and recommends the following options: long January 2023 calls at $57.50 on Intel, long January 2025 calls at $25 on General Motors, and long 2025 calls on Intel at $57.50. long January 2026 calls at $45 on Microsoft, long January 2026 calls on Microsoft at $395, short January 2026 calls on Microsoft at $405, and short May 2024 calls on Intel at $47. The Motley Fool has a disclosure policy.
Once-in-a-generation investment opportunity: 1 Artificial Intelligence (AI) Stock to Buy Now and Hold Forever was originally published by The Motley Fool.