Ply your trade in the markets long enough and you’ll eventually suffer a faceplant moment. I’m experiencing that right now with Tesla Inc (NASDAQ:TSLA). For more than a year, I’ve been consistently bullish on Tesla stock. Admittedly, though, much of that time has been spent frustratingly watching TSLA go sideways.
My only consolation at this point was that, in January of last year, I urged readers to buy TSLA stock due to a number of fundamental reasons.
Other than that, the downfall is tough to stomach. Year to date, shares are down more than 17%. This month, TSLA is on track to lose 25% of itsmarket value. Without qualification, it’s a bloodbath.
By now, you’ve heard the headlines regarding the company’s Model X involved in a fatal crash. This incident is coming off the backdrop of an Uber self-driving vehicle killing a pedestrian. After personally reacting gutturally towards the news, I’ve had time to think clearly about the future impact on Tesla stock.
My initial reaction was probably similar to that of most people — dump TSLA stock. Apparently, artificial intelligence is spiraling out of control. As evidence, our own Brad Moon reported that Nvidia Corporation (NASDAQ:NVDA) suspended its autonomous car testing. The optics certainly looked bad. This was guilty admission through silence.
I completely understand if people still want to sell Tesla stock; it could very well be a smart, protective exercise, given that I believe further pain will come. However, what I’ve also realized is that we have to separate perception from reality.
People Think Tesla Stock Is an AI Investment
On a fundamental level, TSLA critics are primarily concerned about two things: its promised production numbers and its difficult cash-crunch problem. These two headwinds have dogged Tesla stock, keeping it locked in a frustrating consolidation pattern.
We would still be talking about these issues exclusively were it not for the Model X crash, and justifiable fears about driverless technologies. If the fatal tragedy hadn’t occurred, TSLA stock might be at parity for the year. I say this because on the day that this accident happened, shares opened at $311.25. The opening price for this year was $312.
Now, we’re at the federal investigators’ mercy. They’re going to dig into the details, and look at the company’s Autopilot feature. Since Tesla considers Autopilot the precursor to its autonomous driving ambitions, investors are anxiously holding their breath.
This is where things get tricky for Tesla stock. People think that it’s an AI investment, but is it really? Keep in mind that Autopilot is a driver-assistance feature, not a driverless technology. It’s supposed to warn you about obstacles, and may even stop the car should you doze off. But it’s not 100% reliable (obviously) and you’re still responsible for your actions.
The distinction is very important because, as impressive as driverless technologies appear, we just learned it’s actually extremely limited. True AI doesn’t really exist — a computer can only “learn” within a predefined context. In a dynamic, “open source” environment, artificial intelligence isn’t that intelligent.
The problem is that Tesla wants to be an AI company, and willingly invites that confusion; hence the pain in TSLA stock, and more pain to come.
TSLA Is Still a Long-Term Tech Play
After Tesla eats a truckload of humble pie, is TSLA stock a reasonable contrarian opportunity? It’s not the most popular opinion right now, but I believe in its potential.
One of the mistakes I made about TSLA and other companies was grading AI technology too highly. In many ways, AI, as it’s presented to us, is a scam. Now, I view prior government frameworks for driverless vehicles as laughable. I’ll be surprised if we have a truly autonomous transportation system in my lifetime.
Again, perception is king, and this will hurt Tesla stock. But once the AI controversy fades, we’ll go back to the reasons why I loved TSLA early last year: a burgeoning market for electric vehicles, and its penchant for innovation (minus the AI). We’re also approaching the price point when I started pushing the company.
Will that be enough to overcome its more administrative, somewhat pedantic criticisms? I think it is. If we step aside from its self-imposed and now tragic detractions, Tesla is still Tesla.
As of this writing, Josh Enomoto did not hold a position in any of the aforementioned securities.