Tesla (TSLA) shares experienced a slight decline in early trading but are positioned to end the week positively, potentially breaking an eight-week downward trend. Positive developments regarding semiconductor manufacturing appear to be contributing to this surge.
On Wednesday, Tesla’s stock surged by 7.6% before experiencing a small pullback on Thursday. Although there wasn’t an extensive flow of news associated with Tesla, traders and analysts perceived a correlation between this stock movement and CEO Elon Musk’s announcement regarding the completion of the chip design process for the forthcoming AI5 chip. This chip, slated for use in future electric vehicles (EVs), training clusters, and Optimus robots, is seen as a significant milestone.
Deepwater Asset Management’s Gene Munster indicated that he believes the bulk of Wednesday’s stock fluctuation can be attributed to Musk’s late-night post announcing the chip tape-out. He stated, “Given that cars are evolving into computers on wheels, a fivefold enhancement in chip performance will be crucial for unlocking Full Self-Driving (FSD) capabilities and Robotaxi services.” Munster speculated that while the AI4 chip began production in 2023, the AI5 chip might debut in the middle of next year, although Musk has yet to comment on its exact timeline.
Tesla’s plans to manufacture its chips at the forthcoming Terafab site further complicate matters. This initiative is considered ambitious and presents considerable engineering challenges. The arrival of the AI5 chip, though it has faced delays of a couple of years, has been received positively by investors as production inches closer.
On Thursday, Bloomberg reported that Musk is urging suppliers to expedite the provision of chip manufacturing equipment and necessary materials. He is reportedly seeking quick answers regarding costs and timelines, aiming to secure these supplies ahead of competitors by potentially offering higher payments. Key suppliers involved in this push include Applied Materials, Tokyo Electron, and Lam Research.
Despite this urgency, sources within Tesla revealed that the fab is expected to begin producing silicon by 2029, with plans for gradual scaling. Analysts from Bernstein have projected that the entire Terafab project could require a staggering capital investment ranging from $5 trillion to $13 trillion—a figure nearly beyond comprehension.
Despite challenges related to speed and ample financing, Musk has a track record of undertaking significant efforts to deliver on ambitious timelines. Investors will have more insight into Tesla’s strategic plans when the company is scheduled to report its earnings after the market closes on April 22.
In summary, while Tesla’s shares have shown signs of recovery due to developments in chip technology, the road ahead remains fraught with challenges and monumental financial requirements.
