Cathie Wood of Ark Invest has placed a significant wager on Tesla, predicting that it will become the world’s largest publicly-traded company with a $6 trillion market capitalization within the next 4 to 5 years. Stay tuned until the end to discover why.
Tesla has distinguished itself as a prominent leader in the field of artificial intelligence, a segment that has seen intense interest and competition among companies across various industries. Historically, Tesla was predominantly recognized as an automaker or battery manufacturer, with a market capitalization of $648 billion as of Q2 2023.
However, the company’s innovation in AI, particularly in autonomous driving technology, has caught the eye of influential investment professionals.
Cathie Wood and her team at Ark Invest have been consistent proponents of Tesla’s potential, with Ark Innovation ETF having Tesla as its largest holding, comprising nearly 8% of the portfolio as of July 2023. This strategic positioning raises an important question for investors. Should Tesla’s prominence in AI translate into an integral part of your investment strategy?
A comprehensive analysis of the company’s AI initiatives, growth prospects, and competitive landscape may provide the insights necessary to make an informed decision.
Tesla has strategically elected to cultivate its AI capabilities internally.
Its in-house innovations encompass a wide array of components including the Tesla Bot, cutting-edge semiconductors like the Dojo chip, the Full Self-Driving chip, sophisticated neural networks, and a robust evaluation infrastructure.
As of Q2 2023, Tesla’s integration of AI into its automotive products has become a defining feature, particularly within its autonomous driving suite.
The company’s AI-powered autonomous vehicles stand as a testament to its technical prowess, leveraging complex algorithms to facilitate self-navigation. Tesla offers this technology through a Software-as-a-Service model, a key component of their emerging robotaxi business.
This initiative aligns with their broader strategy to monetize AI, potentially offering significant growth prospects as the autonomous vehicle market is projected to reach $556.67 billion by 2026, growing at a compound annual growth rate of 39.47% from 2021 to 2026, according to market research.
This underscores the potential value of Tesla’s in-house AI development and its applications in current and future market landscapes.
Ark Invest, under the guidance of Cathie Wood, initiated its position in Tesla during the fourth quarter of 2016, acquiring shares within the price range of approximately $12 to $14.50 per share. This investment was not solely based on Tesla’s promise as a leading electric vehicle manufacturer but also on its potential to pioneer “Transportation as a Service” through AI-powered autonomous cars.
Cathie Wood’s foresight led her to predict that Tesla’s stock would escalate to a split-adjusted price of $267 per share in 2018. Though this target was not achieved in the projected time frame, Tesla’s stock did surpass that level in 2021, validating Ark’s optimistic assessment.
This investment strategy proved lucrative for Ark Invest, as the firm steadily augmented its Tesla holdings over a period of 6.5 years.
As of Q2 2023, Ark’s portfolio encompasses more than 4.3 million Tesla shares, reflecting an extraordinary return on investment. Tesla now constitutes nearly 8% of Ark’s combined fund holdings, a testament to both the company’s performance and Ark’s strategic investment acumen.
It’s worth noting that during this period, Tesla’s market capitalization soared, and the stock experienced a 5-for-1 split in August 2020, further enriching the portfolio’s value. Consequently, Ark Invest’s commitment to Tesla has become a hallmark of its successful growth-oriented investment philosophy.
Ark Invest has outlined a compelling forecast for Tesla, envisioning the stock reaching $2,000 per share by 2027.
This bullish projection incorporates a more conservative bear case scenario of $1,400 per share or less, under assumptions where electric vehicle and robotaxi platform sales might not meet the anticipated benchmarks.
As of Q2 2023, Tesla’s stock is trading at approximately $240 per share, corresponding to a market capitalization of roughly $770 billion. Should Tesla attain the projected $2,000 per-share price target, its market capitalization would soar to over $6 trillion.
This figure would not only represent a remarkable growth trajectory but also position Tesla as the world’s largest publicly traded company. To put this in perspective, the current largest company by market capitalization, Apple, supports a valuation of just under $2.8 trillion.
Such a meteoric rise in Tesla’s valuation underscores the potential transformation of the automotive and technology sectors, contingent on successful execution of its ambitious EV and robotaxi strategies.
The Final Thought!
Hence, investors have to remember that these predictions may or may not come true. Investors contemplating exposure to Tesla’s stock should carefully consider these predictions, in conjunction with a thorough analysis of market trends, technological advancements, and regulatory landscapes, to make informed decisions aligned with their investment goals and risk tolerance.