Shares of Tesla TSLA climbed above their 50-day moving average in the previous session, marking the fifth straight day of gains. The stock rose more than 7% yesterday, reflecting growing investor optimism after CEO Elon Musk announced that Tesla has completed the design phase of its AI5 chip.
That said, Tesla’s core EV business is under pressure. After two consecutive years of annual decline in 2024 and 2025 deliveries, first-quarter 2026 deliveries missed expectations and fell sequentially. To offset EV weakness, Musk is pivoting toward artificial intelligence (AI), autonomous driving, and robotics—positioning them as Tesla’s next phase of growth. Progress on the AI5 chip marks a key step in that direction.
But is that enough to justify buying the stock now, or is it better to wait? Let’s take a closer look.
TSLA Stock Surpasses 50-Day SMA
Tesla’s AI5 Chip Progress
Tesla’s next-generation AI5 chip hit a key engineering milestone, with Musk confirming on X yesterday that it has entered the “tape-out” stage—the final step before manufacturing begins. This means the high-performance chip is now ready to move toward production, marking solid progress in Tesla’s in-house AI ambitions.
Unlike the current AI4 hardware, which already powers Full Self-Driving (FSD) in hundreds of thousands of vehicles and delivers safety metrics better than human drivers, AI5 will be used for higher value opportunities like Optimus humanoid robot and large-scale AI training systems.
Musk had previously indicated that AI5 would support both robotaxi and Optimus applications. However, with AI4 already proving capable for current FSD needs, Tesla plans to avoid expensive hardware retrofits across its vehicle fleet. This allows the company to channel its next wave of computing power into more advanced initiatives.
Terafab Strengthening Tesla’s AI Ambitions
Beyond the AI5 chip, another recent development adding to investor optimism is Musk’s Terafab project. The initiative gained fresh momentum after Intel INTC joined forces with Tesla and SpaceX, aiming to build a potentially disruptive platform in the AI hardware space.
For Tesla, the key advantage here is greater control over its chip supply. As the company pushes deeper into autonomous driving and robotics, having reliable access to customized, high-performance chips becomes increasingly important. Relying less on external suppliers could help Tesla avoid bottlenecks and move faster on critical projects like Full Self-Driving, robotaxis and the Optimus robot.
UBS Rating Upgrade
On Tuesday, UBS upgraded Tesla stock to Hold from Sell, citing a more balanced risk-reward profile. While near-term demand challenges persist, UBS thinks that the valuation has become more reasonable. The firm expects gradual progress in Tesla’s long-term AI ambitions, including robotaxis and the Optimus robot.
Tesla’s Earnings Surprise History & Estimates
In the last four reported quarters, Tesla surpassed the earnings estimates twice for as many misses.
The Zacks Consensus for TSLA’s 2026 sales and EPS implies year-over-year growth of 6.5% and 23%, respectively. But the estimates have been trending south over the past 60 days.
How to Play Tesla Stock Now
Tesla’s recent rally suggests investors may be looking past near-term EV headwinds and focusing more on its long-term AI potential. Progress on the AI5 chip, momentum around the Terafab initiative, regulatory approval for supervised Full Self-Driving in the Netherlands, and new software updates like the Grok AI assistant have all supported sentiment.
However, execution risks remain significant. Capital spending is set to rise sharply, with more than $20 billion planned for 2026, even as the core EV business shows signs of slowing. Meanwhile, Tesla’s robotaxi rollout is still in its early stages, limited to a few cities and operating at Level 2 autonomy. Competitors like Alphabet's GOOGL Waymo already have more advanced, scaled deployments, highlighting a clear gap. Importantly, many of Tesla’s AI and robotics bets will take time to translate into meaningful financial returns.
Given this backdrop, chasing the stock at current levels may not be prudent. Existing investors can stay invested, but fresh buying may be better timed after more clarity—especially around AI progress and upcoming quarterly results on April 22.
Tesla currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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This article originally published on Zacks Investment Research (zacks.com).