Source: Barron's
Author: Allen Luth
As CEO Elon Musk traveled to China, $Tesla (TSLA.US)$the stock price rose in early trading on Wednesday, then fell before rebounding again.
The electric vehicle maker's shares closed up 2.7% for the day at $445.27. Meanwhile, $S&P 500 Index (.SPX.US)$the broader market rose 0.6%, while the Dow Jones Industrial Average fell 0.1%.
Tesla’s stock fell 2.6% on Tuesday, ending a four-day rally that had driven the stock up more than 14%. One major catalyst driving the stock recovery is the market expectation that Tesla will soon be approved to launch its Full Self-Driving (FSD) driver-assistance system in China.
American users pay $99 per month to access FSD functionality. Data released by Tesla in April showed that as of the end of the first quarter, FSD subscriptions reached 1.3 million, compared to approximately 850,000 a year earlier. The rollout of FSD in China would mark significant progress in Tesla’s AI endeavors — the company has staked its future on applications such as FSD, autonomous robotaxis, and humanoid robots.
The importance of this development to Tesla’s stock should not be underestimated. In a recent report, UBS Group analyst Joseph Spak wrote: 'Tesla is driven by narrative/sentiment rather than fundamentals.' He added that Tesla's Q1 earnings report reinforced this AI narrative.
Spak noted: 'On one hand, we are seeing updates to several technology roadmaps... but at the same time, the investment in AI-driven physical products is substantial, and costs are beginning to show.' Tesla plans to increase capital expenditures to $25 billion by 2026, significantly higher than the less than $9 billion expected for 2025. Spak expects the company’s capital spending to remain high in the coming years, commenting that 'Tesla's AI-driven physical products hold immense revenue potential, though realization will take time.'
Now, Musk has arrived in China with his AI ambitions. Earlier on Wednesday, Musk posted on social media that he had boarded Air Force One, joining the delegation for his visit to China.
Also accompanying the visit are numerous executives from leading American companies, including $GE Vernova (GEV.US)$ CEO Larry Culp, $Boeing (BA.US)$CEO Kelly Ortberg, $NVIDIA (NVDA.US)$CEO Jensen Huang, $Apple (AAPL.US)$ CEO Tim Cook, $Citigroup (C.US)$ CEO Jane Fraser, among others.
U.S. President Trump posted on Truth Social on Tuesday: 'I will request **** – an extraordinary leader – to make China "further open up," enabling these outstanding talents to contribute and help propel China to new heights of development.'
This schedule has postponed the delivery event for the final batch of Model S and Model X vehicles. Production of these two models was halted earlier this month as Tesla prepares to repurpose this capacity for its humanoid robot production line.
Investors are anticipating the performance debut of Tesla's third-generation humanoid robot, Optimus. The company stated that Optimus V3 is expected to be unveiled in the summer of this year. Tesla has been discreet in showcasing the robot, citing concerns about potential imitation by competitors. During Tesla's Q1 earnings call on April 22, Musk remarked, 'We have observed that every time we release related content, competitors analyze it frame by frame and attempt to replicate all technical details to the best of their ability.'
The overseas rollout of FSD and the mass production of robots represent two potential catalysts driving Tesla’s stock price.
Editor/Rocky