Technology stocks have gotten off to a rough start so far in 2025. As of this writing, the Nasdaq Composite is down 8% on the year.
Among the Nasdaq's biggest laggards are the "Magnificent Seven" stocks, six of which are down on the year (Meta Platforms being the lone exception with just a 3.8% gain on the year).
Within the Magnificent Seven, one stock stands out among the pack: electric vehicle (EV) manufacturer Tesla (TSLA -4.79%). With shares down 38% on the year, Tesla is fighting a host of issues -- from damages to the brand's reputation, rising competition in the EV space, and decelerating operating results.
Nevertheless, Wedbush Securities research analyst Dan Ives recently touted that taking advantage of the sell-off in Tesla stock right now could be a "generational opportunity."
Let's explore the current state of affairs at Tesla and then dive into the ideas that have some on Wall Street calling epic catalysts for Tesla's future.
NASDAQ: TSLA
Key Data Points
Tesla's electric vehicle business is uninspiring right now, but...
Tesla reports its financial figures across three major categories: automotive, energy generation and storage, and services. For the most part, Tesla investors tend to hone in on the automotive segment.
While I'm an investor in Tesla and remain bullish on the company's future, I must admit that the company's performance in 2024 was uninspiring. The company generated $77 billion in revenue from the automotive segment, which represented a decline of 6% year over year. On top of that, gross profit margin for the EV business dropped to 18.4% for the full year from 19.4% in 2023.
Despite this sluggish growth profile, some on Wall Street seem to think the EV business is poised for a turnaround thanks to Tesla's aggressive investments in artificial intelligence (AI).
Image source: Getty Images.
... these two AI initiatives could turn things around
Tesla is exploring AI for two core features.
The first involves autonomous driving. Tesla is aiming to generate sales from autonomous driving software across a couple of applications. The first is that existing Tesla owners can purchase a subscription to the company's autonomous driving software, full self-driving (FSD).
However, the more lucrative opportunity revolves around the company's vision to build a fleet of autonomous vehicles. This project, known as robotaxi, could potentially disrupt several end markets including ride hailing, delivery and logistic services, as well as the car rental business. Considering FSD will be a subscription service, Tesla has an opportunity to generate billions in profit from high-margin recurring sales.
The second major AI opportunity for Tesla is its humanoid robot, Optimus. Tesla's vision is the integrate Optimus in factories, augmenting human workers along the assembly line. In theory, Tesla has an opportunity to significantly increase its vehicle deliveries. Moreover, as Optimus scales and becomes more integrated with the manufacturing process, Tesla may also be able to generate efficiencies from reduced labor costs -- thereby increasing its unit economics on each vehicle produced.
Is Tesla stock a buy right now?
I think the sell-off in Tesla looks worse than it really is because the stock was trading at all-time highs back in December, which really wasn't too long ago. If you look at Tesla stock from that lens, you'd see a 48% drop from prior highs.
Although Tesla's core EV business is currently in a tough spot operationally speaking, the financial results I explored above could have been much worse. Let's remember, 2024 was still a pretty tough year for the economy as consumers and businesses faced lingering impacts of inflation.
If you are interested in buying the dip in Tesla right now, the long-term thesis is not simply that the EV business will start to grow again. To me, the bull outlook for Tesla is more nuanced. Namely, an investment in Tesla today requires a conviction that Musk and his team will pull off their vision of commercially available autonomous vehicle fleets in combination with an enhanced labor force underscored by robotics. Taking this one step further, both of these AI ambitions have the opportunity not just to reignite sales, but, more importantly, widen Tesla's profit margin to a degree unmatched by the competition.
At the end of the day, I am aligned with Ives in that now is a good time to scoop up shares of Tesla stock. With that said, I would not be surprised if shares witness some further headwinds in the near term. Tesla is a heavily volatile stock -- it always has been. But in the long run, it's been a great name to own overall. I see AI as the next chapter in Tesla's history and think long-term investors should consider taking advantage of the ongoing sell-off right now.
