Every once in a while, a new trend takes Wall Street by storm, and for the past few years there’s no doubt AI has been all the rage. Investors have been piling in, betting that AI will reshape industries as profoundly as the internet once did; from automating routine tasks to accelerating drug discovery and transforming customer service, AI is expected to boost efficiency, cut costs, and create significant improvements and opportunities across a wide range of industries.
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It’s no wonder, then, that the Street’s most venerated investors have been keen to get a piece of the action too. The opportunity hasn’t gone by unnoticed by computer scientist David E. Shaw’s firm, the eponymously titled D. E. Shaw & Co., a quantitative hedge fund that Shaw launched in 1988. The firm gained recognition for its reliance on advanced mathematical models and algorithms, and although the billionaire later shifted his focus to research and stepped back from daily operations, the fund still holds a powerful presence on Wall Street, managing around $65 billion in assets.
D. E. Shaw’s portfolio is peppered with AI luminaries such as Tesla (NASDAQ:TSLA) and Micron (NASDAQ:MU), but recent times have seen the firm offload a chunk of one of these names while leaning strongly into the other.
So, which name has earned D. E. Shaw’s favor, which one has lost ground, and how does the rest of the Street size them up? Let’s break it down.
Tesla
Maybe Tesla is not the first name that springs to mind when we think of AI, but it has become one of the more polarizing plays at the intersection of technology and transportation. The debate on Wall Street has long centered on whether Tesla is simply a pioneering EV manufacturer, or whether it deserves to be valued more like a tech company with transformative potential. While most of its revenue still comes from vehicle sales, Elon Musk has repeatedly argued that cars are just the starting point for something much larger.
That broader vision hinges on Tesla’s full self-driving (FSD) technology. Built on a foundation of vast real-world driving data, Tesla’s neural networks constantly refine and improve their decision-making, setting the company apart from rivals who rely on pre-mapped environments or outsourced systems. In effect, Tesla has built an end-to-end AI ecosystem, designing its own chips, scaling a massive data infrastructure, and deploying a fleet of vehicles that double as data-collecting sensors on the road.
At the same time, Tesla’s ambitions in AI extend beyond cars and into robotics through its humanoid project, Optimus. Musk has argued that the same vision and decision-making systems guiding autonomous driving can be repurposed for bipedal robots capable of performing a wide range of tasks, from factory work to household assistance.
Yet, for all the futuristic promise, the reality today looks far more down-to-earth – and far more challenging. Despite the buzz around AI-driven projects, none have meaningfully boosted the bottom line so far, leaving Tesla’s financial health still squarely dependent on its EV business. That reliance has turned into a vulnerability as deliveries have stumbled, revenue growth has slowed, and profitability has been squeezed, with pressures further magnified by geopolitical factors, regulatory changes, and even Musk’s controversial political entanglements, which have dented consumer sentiment.
Perhaps with this in mind, D.E. Shaw has felt it’s time to take a step back here. During Q2, the firm sold 763,685 shares, representing 43% of its TSLA stake.
That cautious approach is echoed by Barclays analyst Dan Levy, who sees the AI opportunity as very real but warns that the company’s struggles cannot be ignored as Tesla faces mounting headwinds.
“While the AI narrative remains intact for Tesla… fundamentals remain choppy, and are likely to deteriorate in the coming quarters,” Levy said. “With the expiration of the US EV tax credit at the end of 3Q, Elon Musk noted there could be a few ‘rough quarters.’ Moreover, Tesla also talked to reduced regulatory credit sales related to modified emissions standards. The impact of tariffs will magnify. And lastly, while the new low-cost model was effectively pushed to 4Q, we still see likelihood that it is a decontented Model Y…begging the question of how much incremental demand it will spur…”
For now, the focus remains on the Robotaxi ramp, with the November AGM offering a key opportunity for Tesla to tie its future more firmly to the AI story.
“It is the long-term narrative which has kept the stock elevated,” Levy summed up. “Yet for the very near term, the airpocket in fundamentals may be a reminder that fundamentals don’t matter…until they matter.”
That tension between the lofty AI vision and the shaky near-term picture explains Levy’s Equal Weight (i.e., Neutral) rating on Tesla shares, backed by a $275 price target. At current levels, that implies downside of ~20%. (To watch Levy’s track record, click here)
Likewise, the general Wall Street view is a cautious one; TSLA stock claims a Hold consensus rating based on a mix of 15 Holds, 13 Buys, and 8 Sells. Meanwhile, the $305.37 average price target factors in a one-year slide of ~12%. (See TSLA stock forecast)
Micron
If Tesla is one of Wall Street’s most controversial names, the same cannot be said of Micron. The memory giant has long been viewed as a cyclical player in semiconductors, riding the ups and downs of demand for PCs, smartphones, and data centers. Yet, in recent years, Micron has undergone a quiet transformation, sharpening its focus on higher-value products and benefiting from industry consolidation that has left just a handful of global DRAM and NAND suppliers.
What has really given a boost to Micron’s story, however, is the surging demand for high-bandwidth memory (HBM), a critical component for training and running large AI models. HBM3E is now in full production, and Micron has begun shipping HBM4 samples to key customers. These chips are essential for AI workloads, as they deliver the massive data throughput needed to feed advanced GPUs and custom accelerators. It also helps that they are used by Nvidia, which dominates large-scale AI training and inference, making Micron a key enabler of the global AI infrastructure
And in sharp contrast to Tesla’s bumpy ride, Micron’s recent quarterly updates have been investor-pleasing affairs. In its fiscal third quarter (May Quarter), revenue rose by 36.6% year-over-year to reach $9.3 billion, while beating Street estimates by $450 million. At the bottom line, adj. EPS of $1.91 outpaced analyst expectations by $0.30. More recently, the company raised its FQ4 outlook, now anticipating revenue of $11.2 billion, give or take $100 million, compared with its earlier forecast of $10.7 billion ± $300 million. Adj. EPS is also expected to rise to $2.85 ± $0.07, up from the previous estimate of $2.50 ± $0.15.
It’s clear Shaw’s firm sees massive opportunity here, scooping up no less than 7,193,284 MU shares in Q2 – a haul currently worth ~$878 million.
Micron stock also has a fan in CLSA analyst Sanjeev Rana, who highlights the company’s positioning in the HBM segment as key.
“The HBM market has seen explosive growth the last two years driven by demand from AI datacentres as AI chips need memory with higher data speeds and low latency. Driven by AI demand, we expect the global HBM industry revenue to double to US$36bn in 2025,” Rana said. “Micron’s faster-than-expected ramp-up of HBM3E 12-Hi in 2025 and its supply to four major customers underscores its robust technological prowess and flawless execution. HBM4 is currently undergoing qualification, with mass production in mid-to-late 2Q26. We anticipate the contribution of HBM to its DRAM revenue to rise to 31%/39% in FY26/27CL versus 21% in FY25, thereby driving up its margin.”
Conveying his confidence, Rana rates MU shares as Outperform (i.e., Buy), while his $155 price target offers one-year upside of 27%. (To watch Rana’s track record, click here)
All in all, Micron gets a Strong Buy consensus rating from the Street’s analysts based on a mix of 24 Buys vs. 4 Holds. Going by the $152.08 average price target, a year from now, the stock will be changing hands for a ~25% premium. (See Micron stock forecast)
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Disclaimer: The opinions expressed in this article are solely those of the featured analysts. The content is intended to be used for informational purposes only. It is very important to do your own analysis before making any investment.