Tesla Stock Rises Premarket: AI5 Chip Tapes Out, Analyst Says Physical AI Upside Now Balances EV Demand Risk

• UBS upgraded Tesla to ‘Neutral’ from ‘Sell,’ saying the stock now better balances near-term EV demand risks with long-term upside from robotics and autonomy.
• Tesla’s “physical AI” strategy is centered on robotaxis, the Optimus humanoid robot, and custom AI chips.
• Tesla still retained a dominant 54.2% EV market share in Q1, according to recent Cox Automotive estimates.

Shares of Tesla, Inc. (TSLA) rose about 1% in premarket trading on Wednesday after CEO Elon Musk confirmed the taping out of its next-gen AI5 chip, while a Wall Street analyst said the stock now more evenly reflects near-term EV demand pressures and long-term opportunities tied to robotics and autonomy.

TSLA stock ended Tuesday’s session over 3% higher, and added another 1% in extended trading. 

UBS Flags Tesla’s Physical AI Upside

On Tuesday, UBS upgraded Tesla to ‘Neutral’ from ‘Sell’ while retaining a $352 price target, saying current share levels “more evenly balance” near-term demand challenges and investment spending with longer-term upside from Tesla’s physical AI strategy.

Tesla’s physical AI strategy centers on extending its AI capabilities beyond software into robotaxis, humanoid robots and custom-designed chips that power autonomy. Musk has positioned the Optimus robot, Full Self-Driving software and the next-generation AI5 chip platform as core building blocks of the strategy. 

UBS said concerns around EV demand, a first-quarter energy shortfall, higher costs, rising capex requirements and slower progress on robotaxi and Optimus timelines had weighed on the stock earlier this year. Still, UBS expects eventual progress in autonomy and robotics, and views Tesla as a “leader in physical AI.”

Optimus, AI5 Chip Boost Tesla’s AI Push

Tesla’s robotics roadmap drew attention on Tuesday after the company’s China president, Allan Wang Hao, said the Shanghai gigafactory could support production of the Optimus humanoid robot as the company prepares for manufacturing scale-up.

Musk also confirmed on X early Wednesday that Tesla’s AI chip team has successfully taped out its next-generation AI5 processor, which is being manufactured by TSMC and Samsung Electronics. He said that the AI6 and Dojo3 are already in development, referring to Tesla’s in-house AI training platform to power autonomous-driving and robotics models, and added that the AI5 processor could become “one of the most produced AI chips ever.”

Musk previously called AI5 the “golden key” to Tesla’s physical AI era, with limited output expected in 2026 and volume production targeted for 2027.

Delivery Miss Keeps Pressure On TSLA

Even as Tesla advances its AI and robotics initiatives, the company’s core automotive business continues to face headwinds. According to recent Cox Automotive estimates, Tesla delivered 117,300 vehicles in the U.S. during the first quarter, down 8.4% from a year earlier. Still, the company retained a dominant 54.2% share of the U.S. EV market.

The Model Y remained Tesla’s largest contributor to volume, accounting for more than one-third of all EVs sold domestically during the quarter.

However, major brokerages including Goldman Sachs, Deutsche Bank and Truist Financial each lowered price targets earlier this month following Tesla’s delivery miss. They have all emphasized the importance of autonomy and AI initiatives to the company’s longer-term outlook.

How Do Retail Traders Feel About TSLA?

On Stocktwits, retail sentiment for TSLA hit its highest level so far this year (82/100) amid a more than 250% surge in message volume over the past month.

One user said, “If the earnings call delivers strong forward guidance on robotaxi rollout, Optimus milestones, or energy... or if there's fresh FSD hype.... it could easily run higher. I'm in.”

Another user said, “This is hitting $420 before earnings next week.”

TSLA stock has risen 44% over the past year.

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