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Should You Buy Tesla (TSLA) Stock Ahead of Its AI Day 2022?

Over the years, Tesla TSLA has evolved into a dynamic technology innovator. The electric vehicle (EV) titan will hold its much-awaited Artificial Intelligence (AI) Day event tomorrow as confirmed by the company’s ingenious CEO Musk on Twitter. The event will outline Tesla’s latest technologies and approaches to AI technology in order to achieve a driverless future.

The company’s AI Day generates an enormous buzz among Tesla fans and investors, as well as tech enthusiasts at large as it’s packed with exciting innovations and big surprises. Tesla’s 2021 AI Day knocked the audience for six as a dancing robot walked onto the stage to accompany Musk. However, it quickly got clear that it was a guy in a robot suit. That was our introduction to the humanoid robot, Optimus. Will it come to life this time around?

After the massive attention it drew, we expect Optimus to be the highlight of the show this year as well. As Musk himself mentioned in his tweet on Jun 3, “Tesla AI Day pushed to Sept 30, as we may have an Optimus prototype working by then.” On Aug 8, Musk posted a picture of two robot hands forming a heart shape. It seems like this time around Tesla’s self-driving projects will take a backseat to Optimus.

But the question is, as an investor should you place your bets on TSLA now going by the crazy hype surrounding its AI Day 2022? Well, last year, Tesla did make a lot of noise at the event and shares got a boost from its AI Day. So, should you capitalize on the fanfare at the current levels in the hopes of similar price appreciation? We will discuss that. But first, let’s take you through some major updates and developments that the company might be shedding light on at its AI Day.

What to Expect From AI Day 2022?

A Date With Optimus: This is indeed going to be the focus of the event as audiences will be waiting with bated breath to catch the first glimpse of the new innovation. As Musk tweeted on Sep 20, “Note, Autopilot/AI team is also working on Optimus and (actually smart) summon/autopark, which have end of month deadlines.” One can expect to see a prototype of Optimus — a 5’8″, 125-pound humanoid robot powered by Tesla's AI that could revolutionize the way people do things. The bot will be designed to handle dangerous, repetitive and dull tasks, helping the company solve the problem of labor to some extent.

Updates on FSDs: While Optimus might be the show stealer, most people are also awaiting updates on Tesla’s fully self-driving (FSD) beta technology. All new Tesla cars today are equipped with a driver-assist feature called Autopilot. Owners can add the FSD option for an additional $15,000. But to date, the system is considered by industry experts as “Level 2.” At this level, the car can go autonomous but a driver must monitor the performance all time. As FSD is the key to Musk’s vision to become a leader in AI, we anticipate the EV giant to offer specific updates about the next version of the FSD beta.

Get Up to Speed with Robotaxi: On Tesla's first-quarter 2022 earnings call, Musk said, "We aspire to reach volume production of [the robotaxi] in 2024." Musk promised that the robotaxis would offer riders the cheapest mode of transportation, costing less than a subsidized bus ticket.Per the current goals, Tesla is targeting 2024 for mass production of its robotaxi fleet. But what’s to be noted here is the fact that since Musk first announced the idea of robotaxis in 2016, he has set several release dates for the same but has fallen short of his targets. Until early this year, Musk had aimed for 1 million robotaxis by the end of 2022, but in April, he retracted from that goal and instead targeted to have 1 million vehicles in FSD beta by the end of the year. So, we can expect another update on robotaxis, hopefully a final release date. We will be all ears if Musk provides specifics about how the robotaxis will look like and how they will be commercialized.

More Details on Dojo: Expect the company to share more information on Dojo, Tesla's in-house supercomputer for machine learning. Last year, the company rolled out its in-house computer chip named D1, which will be used to power Dojo. Having a super-fast computer is crucial for Tesla since it relies on cameras instead of lidar and radar for driverless operations. This speed, of course, will depend on the processing power of D1. Tesla is likely to reveal new updates about Dojo’s AI system architecture. Stay tuned for more details on the practical applications of Dojo.

Is TSLA a “Buy” Now?

Well, Musk has already said that 2022 will be a year of ramp up and 2023 will witness the launch of several new products. One can expect eyebrow-raising announcements from the upcoming AI event. And that can immediately result in a sharp rise in stock price. Day traders can take advantage of that and make quick money. But if you are an investor eyeing short-term gains, you can skip buying on the current levels just on the AI Day hype. That’s because the near-term concerns remain for Tesla.

The sky-high inflation is likely to hit Tesla in more than one way. As we know, inflation causes disposable income to reduce, prompting consumers to put off the purchase of high-price discretionary items like cars. Also, amid aggressive rate hikes, the cost of vehicle financing is becoming costlier in the coming months. Tesla might be forced to slash prices of some models in a bid to remain competitive if demand starts to subside amid an economic slowdown.

Having said that, Tesla is indeed a buy for long-term investors. Its high valuation metrics shouldn’t keep you from parking your money in the stock. It has fully established its EV operations, thrusting it years ahead of its competitors. The company is the market leader in battery-powered EV sales in the United States, with a market share of a steep 70%. So, it deserves a spot on any EV stock watchlist for investors looking to tap into a supercharged industry. TSLA currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

2 Buy-Ranked Auto Stocks

Rush Enterprises RUSHA: Rush operates a regional network of commercial vehicle dealerships and sells new and used heavy-duty and medium-duty trucks and buses. The purchase of certain assets of Summit Truck Group in December 2021 has strengthened its dealership network. The acquisition of an additional 30% interest in Rush Truck Centers of Canada Limited in May 2022 also expanded business. RUSHA’s current dividend yield is 1.88%, with a five-year dividend growth rate of 35.6%.

Rush carries a Zacks Rank #2 (Buy) and has a VGM Score of A. The expected long-term earnings growth rate for the stock is 15%.

BorgWarner BWA: Michigan-based BorgWarner is a global leader in clean and efficient technology solutions required for combustion, hybrid and electric vehicles. Strategic buyouts like Delphi Technologies, AKASOL and Santroll's light vehicle eMotor business have bolstered BWA’s portfolio. BorgWarner’s Charging Forward project to accelerate its electrification strategy bodes well. The company’s current dividend yield is 2.03%.

BorgWarner carries a Zacks Rank #2 and has a VGM Score of A.  The expected long-term earnings growth rate for the stock is 26.8%.

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