What happened
Elon Musk is making his first visit to China in three years, and investors like the implications of that. Shares of Tesla (TSLA 1.69%) jumped higher by as much as 6% on that and other news to start the trading week. As of 10:35 a.m. ET today, the stock was still higher by 4.3%.
NASDAQ: TSLA
Key Data Points
Tesla stock has had a good month, up almost 25% in May.
So what
Investors likely think Musk's visit signals a renewed focus on Tesla -- and China in particular -- after he hired a new CEO to run Twitter. He met with China's foreign minister, Qin Gang, and is expected to tour the company's Shanghai manufacturing plant.
Tesla shares are also benefiting from investor excitement surrounding artificial intelligence (AI) after the widely followed investor Cathie Wood said on Twitter that the electric vehicle (EV) manufacturer is the best way for investors to play the boom in the use of AI.
Now what
Tesla's largest plant is in Shanghai and can produce about 1 million vehicles annually. The company has also announced plans to build a battery factory there. While the details of Musk's meeting with the foreign minister weren't released, it's possible that the company also plans on adding capacity in the country.
Tesla has been battling rising competition in China by cutting vehicle prices, but Musk has said there is more to that strategy than just fighting near-term competition. He believes that his company will see rising future profits from software-like margins when it releases autonomous driving capability and other upgrades to customers. That's why he wants to focus on volume, rather than profits, at this time.
That is one obvious area for Tesla to profit from AI. It uses AI for its models to train software to drive vehicles. The company is trying to perfect its full self-driving technology and build vehicles for driverless taxi service. But Wood also thinks that AI being used for Tesla's humanoid robot project called Optimus could bring huge future profits for Tesla.
Shareholders have seen the stock rise recently from ongoing AI hype and its potential. Today the stock got an extra boost as Musk renews his personal relations with leaders in China. Investors hope this is a sign that there will be more gains to be had in that large EV market.
