We recently published a list of Top 10 AI Stocks That Should Be On Your Watchlist for 2025. In this article, we are going to take a look at where Tesla Inc (NASDAQ:TSLA) stands against other top AI stocks that should be On your watchlist for 2025.
Investors are looking for new growth horizons in the AI industry to gauge whether the current market rally can continue for the years to come. Chetan Puttagunta, Benchmark general partner, said he’s noticed a lot of innovation in the past few weeks focused on improving the efficiency of algorithms.
“In the last six to eight weeks, we’ve seen a tremendous amount of innovation, especially at the model layer, and then for the last two years at the application layer, taking advantage of all the advances in the AI models. Specifically, what’s happening at the model layer is, as we move into an inference-time or test-time compute paradigm, you’re seeing a lot more advantage to entrepreneurs and technical founders that are able to push to the frontier with algorithmic innovation.”
To explain how AI is now actually improving workflows, Puttagunta gave the example of Sierra, a conversational AI startup making customer service solutions.
“So think of this Sierra AI agent, if you will, delivering the best customer service agent experience every time, replicated an infinite number of times. And that’s an experience that was previously not possible without AI.”
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For this article, we picked 10 AI stocks that are making moves amid the latest news. With each stock, we have mentioned its hedge fund sentiment. 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).
Tesla Inc (NASDAQ:TSLA)
Number of Hedge Fund Investors: 99
Karl Braue from iSeeCars said while talking to Schwab Network in a latest program that Tesla Inc (NASDAQ:TSLA) is positioned well to benefit in the Trump administration despite an expected tough environment for the EV industry.
“The Trump administration is going to roll back both the CO2 standards and likely the $7,500 credit for electric vehicles. I think downgrades to Rivian because of these likely scenarios coming soon make sense. I think that’s what a lot of electric car makers are going to be facing.
The next question is, well, then why is Tesla Inc (NASDAQ:TSLA) doing so well? Anytime you get in an environment where it’s a tougher world or tougher market for a large number of companies, the largest company, the dominant company, is the one that usually does the best because some of these smaller second-tier players get taken out.
Between Tesla Inc (NASDAQ:TSLA) current market share in the U.S. and what looks like continued record sales in China, even with this executive leading, it looks like they’re positioned to benefit actually from what is going to otherwise be a tough electric vehicle environment in the U.S.”
Looking beyond the recent spike in Tesla shares amid Donald Trump’s victory, Tesla’s fundamentals are challenged. 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. 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.
Polen Focus Growth Strategy stated the following regarding Tesla, Inc. (NASDAQ:TSLA) in its Q3 2024 investor letter:
“The largest relative detractors during the quarter were Apple, Airbnb, and Tesla (not owned). We’ve spoken at length about our rationale for not owning Tesla, Inc. (NASDAQ:TSLA). In short, the market seems to be pricing in a lot of positive optionality for this company in the near-to-intermediate term (and particularly a fully autonomous fleet of electric vehicles in the medium term). What exists today is an automobile manufacturer limited to the higher-income segment that is increasingly challenged to sell vehicles when interest rates are not zero. We continue to question the company’s long-term growth profile and governance.”
Overall, TSLA ranks 6th on our list of top AI stocks that should be On your watchlist for 2025. 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.