There are plenty of artificial intelligence (AI) stocks for investors to choose from right now, but one pick that some analysts have started to get bullish on recently is Tesla (TSLA +0.64%). The electric vehicle (EV) company is in the midst of a major transition to autonomous vehicles (AVs) and humanoid robots. But Tesla is also a controversial AI pick right now, given the company's falling sales and earnings, rising expenses, and expensive share price.
Here's why some on Wall Street think Tesla is a good AI pick and why investors may want to avoid it for now.
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Some analysts are getting more optimistic about Tesla
I wrote a few months ago that a growing number of analysts were becoming bullish on Tesla, partly because of its self-driving car ambitions. And following the recent release of Tesla's fourth-quarter results, it appears the optimism is growing. Wolfe Research analyst Emmanuel Rosner said recently that 2026 will be a "catalyst-rich year" for Tesla, and that the company's robotaxi revenue could reach $250 billion by 2035. Other analysts were optimistic as well, with at least 17 analysts having a buy rating on Tesla stock.
Part of the optimism came from Tesla's improving gross margin, which reached 20.1% in the fourth quarter, the highest it has been in two years. Tesla also ended 2025 with $44 billion in cash and investments, up from 20% in 2024, which will help the company invest in expanding its robotaxi service and ramping up production of its Optimus humanoid robots.
Some rosy perspective makes sense, considering AVs could eventually be worth $1.4 trillion by 2040 and humanoid robotics will be worth an estimated $5 trillion by 2050. Unfortunately, the large size of these markets is just part of the story.
NASDAQ: TSLA
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Despite the optimism, it's probably best not to buy Tesla right now
While Tesla has the potential to tap into the expanding AV and robotics markets, there are significant hurdles for the company to overcome before I'd feel comfortable buying the stock.
For one, Tesla's sales and earnings are declining. The company's revenue fell by 3% in 2025, its first-ever annual decline, and earnings tumbled 47% annually to $1.08 per share. The problem for Tesla is that its vehicle revenue fell 10% last year to $65.5 billion as consumer demand for EVs slowed and Tesla suffered brand damage from CEO Elon Musk running the former Department of Government Efficiency.
In addition its falling sales and earnings, Tesla is ramping up spending as it transitions to AVs and robotics, with Musk saying on the fourth-quarter earnings call that capital expenditures (capex) would more than double to $20 billion this year.
In short, while Tesla might be pursuing solid long-term opportunities, the company's current financial picture isn't great. Making matters worse, investors are paying a hefty premium if they buy Tesla's shares right now. The stock has a price-to-earnings ratio of 393, which is far higher than the tech sector's average P/E ratio of 43.
Until the company can prove it has turned things around, I believe investors are better off leaving Tesla stock alone for now.
