Tesla’s stock is experiencing a notable rebound, rising significantly and aiming to break an extended eight-week losing streak. The positive momentum in the stock’s performance may be linked to promising developments in chip production.
In early trading on Thursday, shares of Tesla surged following a substantial 7.6% increase on Wednesday. Although there was limited news specific to Tesla, analysts have suggested that the stock’s upward trajectory corresponds to CEO Elon Musk’s announcement regarding the completion of the final stage of chip design for the upcoming AI5 chip. This new chip is anticipated to play a crucial role in future electric vehicles, extensive training clusters, and the company’s Optimus robotics project.
Gene Munster of Deepwater Asset Management noted that a significant portion of the stock’s rise can be traced back to Musk’s update, referring to it as a “tape out” announcement. Munster remarked, “In a world where cars are essentially computers on wheels, a five-fold improvement in chip performance could substantially enhance Tesla’s capabilities in full self-driving and Robotaxi services.”
As a reference point, Munster indicated that the AI4 chip began rolling out in 2023, while he speculates that the AI5 chip could make its debut sometime in the middle of the next year, although Musk has not disclosed a specific timeline.
This latest chip development comes amid Tesla’s ambitious plans to establish its own chip manufacturing facility, termed the Terafab, in Austin, Texas. While the project is viewed as a formidable engineering challenge, it represents a significant milestone for the company.
Reports indicate that although the AI5 chip’s production has been delayed by a couple of years, the news of its impending production has been positively received by the market. Bloomberg further revealed that Musk is urging suppliers to expedite the acquisition of chipmaking equipment and necessary materials. He is reportedly seeking rapid responses regarding costs and timing and is willing to pay a premium to ensure that Tesla stays ahead of other customers.
However, even with this aggressive timeline, sources have reportedly indicated that the Terafab is not expected to begin manufacturing silicon until 2029, with plans to scale up production afterward. This ambitious initiative requires staggering capital investments, estimated to range between $5 trillion and $13 trillion, a figure that underscores the enormity of the endeavor.
Despite the challenges, rapid progress, significant financial investment, and the relentless pace that Musk has set are not unfamiliar themes in Tesla’s trajectory. Investors and analysts are expected to gain further insights into the company’s plans when it reveals its earnings on April 22nd.
