Tesla stock (TSLA) rose early Thursday, and investors can directly thank Nvidia (NVDA). Shares of the electric-vehicle maker were up 1.7% in premarket trading. This jump confirms Tesla’s close link to the AI boom, as Nvidia’s success eases fears that the entire AI sector is a bubble. The whole market seemed to take a deep breath after Nvidia’s Fiscal third-quarter earnings report came out Wednesday night.
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The AI chip maker reported impressive sales of $57 billion, which was ahead of Wall Street’s $55 billion estimate. Even better, revenue for the current fourth quarter is expected to be about $65 billion, beating earlier analyst projections of around $62 billion.
Nvidia Earnings Alleviate Fears of a Spreading AI Bubble
The report was a major relief for investors. Wedbush analyst Dan Ives noted that fears of an AI bubble had been spreading across Wall Street. Ives called Nvidia’s earnings a “pop the champagne moment,” adding, “This is another validation point for the AI Revolution, and in our view, we are in the Top of the 3rd inning of this AI game.”
Nvidia’s stock jumped 4.9% in premarket trading following the news. The reason these earnings move the entire market, including Tesla, is evident: AI and the largest tech companies, known as the Magnificent Seven, now control about 35% of the S&P 500’s (SPX) total market value.
AI-Driven Robots and Cars Now Fuel Tesla’s Valuation
Tesla, for its part, has fully transformed into an AI stock. Investors now believe that AI-trained self-driving cars and humanoid robots will drive explosive growth in the coming years. This belief supports Tesla’s current $1.3 trillion valuation, which depends heavily on its AI capabilities rather than just car sales.
Tesla CEO Elon Musk and Nvidia CEO Jensen Huang recently appeared together at an investment conference. While the discussion was high-level and lacked details on specific products, both leaders laid out an optimistic vision of how AI would change the world. Musk believes work will be “optional” one day, and Huang believes people will be more productive.
Key Takeaway
Nvidia’s strong financial results alleviated widespread fears of an AI market bubble, thereby validating the immense valuation of Tesla, which the market now prices as an AI technology leader dependent on the continued success and growth of the chip-making sector.
Is Tesla Stock a Buy, Hold, or Sell?
Wall Street holds a much more cautious view on Tesla (TSLA). Based on 34 analyst ratings over the past three months, Tesla holds a neutral Hold consensus, based on 14 Buys, 10 Holds, and 10 Sell recommendations. Furthermore, the average 12-month TSLA price target is $384.14, which surprisingly implies a 4.91 percent downside from the most recent share price.
