We recently published a list of Top 10 AI Stocks to Watch In February. In this article, we are going to take a look at where Tesla (NASDAQ:TSLA) stands against other top AI stocks to watch in February.
Barry Bannister, Stifel’s chief equity strategist, said in a latest program on CNBC that the macroeconomic factors are finally catching up to the AI-led bull market. He expects inflation to remain sticky and no further rate cuts from the Federal Reserve in the short term. The analyst also rejected the notion that the massive tech selloff after the launch of DeepSeek was a buying opportunity.
“Over 30 years ago, we used to joke about how technology was such a displacement event business where new competitors would come in and destroy the entrenched stocks, that it deserved a lower multiple because of that. It’s a short life cycle business that’s got a very short competitive advantage period. But investors forgot about that. They bid up the stocks. The growth relative to value large-cap total return, one divided by the other on a 10-year compound basis, reached the absolute outer limits of the past 90 years. And that exact limit line is exactly where it peaked—the price earnings multiple and the outperformance of growth. So, for us, it’s just a very bubbly market that’s just gotta take some air out of it.”
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For this article, we chose 10 AI stocks currently making moves in the market. With each stock, we have mentioned the number of hedge fund investors. Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
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Tesla Inc (NASDAQ:TSLA)
Number of Hedge Fund Investors: 99
Andy Swan from LikeFolio explained in a latest program on Schwab Network why he’s bullish on Tesla (NASDAQ:TSLA). The analyst said he maintains an “infinitely long” bullish position” on the EV maker.
“I think you can just look at the fact Elon Musk bet very big on this election and he won. I think that is, you know, there’s good reason to think he will continue to win with this new administration in place, and that is a deregulated environment that allows not just the AI part of things but also the full self-driving features that Tesla has rolled out and the path to autonomous vehicles, the autonomous taxis rolling out. I think it’s just gotten a lot clearer with a Trump administration rather than one that’s a little more heavy-handed from a regulation side.
As far as LikeFolio data goes, we’re seeing Tesla kind of buck what everybody thought was happening, which is everybody thought that Tesla was getting less popular via its founder or not its founder, but its CEO’s political takes. What we’re seeing is that web visits are up year-over-year, app usage is up year-over-year considerably, and we look at the app usage of Tesla as a really kind of cool metric in terms of Tesla being a viral kind of word-of-mouth product. Because what Tesla’s integrated into the app are some really cool features that pretty much no other car in the world has, such as the ability for the car to come pick you up from an empty parking spot to the door of the restaurant that you’re just leaving. So, that type of word-of-mouth viral type of feature set in the app is starting to grow in usage, and that means more and more people getting exposed to Tesla. So, we maintain our multi-e, you know, infinitely long bullish position on Tesla.”
Analysts are still trying to look beyond Elon Musk’s claims and find out the specifics on the company’s EV and robo-taxi plans.
Tesla Inc’s (NASDAQ:TSLA) product lineup is showing signs of stagnation, with over 95% of sales still coming from the Model 3 and Model Y. Meanwhile, competitors are rolling out more advanced models. According to Reuters, Tesla’s market share in Europe is slipping as legacy automakers like BMW post stronger sales. Chinese competitor BYD is also gaining ground in Europe, despite talk of tariffs.
Infuse Asset Management stated the following regarding Tesla, Inc. (NASDAQ:TSLA) in its Q4 2024 investor letter:
“I’ve been very patient with Tesla, Inc. (NASDAQ:TSLA). Frankly, I’m a big believer in Elon but I also hate investing in companies where the narrative far outweighs any financial evidence. I do see a path to Tesla being one of the world’s largest companies but slight growth in a cyclical industry with very little pricing power is not a recipe for strong forward returns. Though the AI/robotics narrative is strong, I’m not adding at current prices since we haven’t seen much of the narrative translate into the earnings yet. This cognitive dissonance can be an uncomfortable tension but I’m trying to look at the big picture here. So while I fully admit that Tesla may be overvalued in the short run, the long-term destination of the company should not be underestimated.”
Overall, TSLA ranks 7th on our list of top AI stocks to watch in February. While we acknowledge the potential of TSLA, our conviction lies in the belief that under the radar AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than TSLA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
