As is the case with NVIDIA, Jim Cramer continues to believe in Tesla, Inc. (NASDAQ:TSLA) even though the shares have been weak. They are down by close to 1% over the past year and by a whopping 30% year-to-date. On the 23rd, Tesla Inc. (NASDAQ:TSLA)’s shares closed 14.5% lower. On the 22nd, the firm had reported its fiscal second-quarter earnings. The results saw it post $28.24 billion in revenue and $0.33 in earnings per share. While Tesla Inc. (NASDAQ:TSLA)’s revenue beat analyst estimates, its earnings missed estimates of $0.51. As concerns about lower vehicle selling prices and regulatory credit revenue were raised, the CNBC TV host kept the faith in CEO Elon Musk:
“I’m waiting for the, always Tesla bulls to come on and make [inaudible]. Like Tesla has one of the situations where you can say, you know I hear all that you’re saying Carl, but you don’t know what you’re talking about. Because the man who runs it is a guy named Elon Musk. And David, when you’re up against Elon Musk and you, he’s a fearsome competitor. Don’t give up on him so quick.”
Several factors are driving Tesla Inc. (NASDAQ:TSLA)’s narrative, of which Musk is a key part. While his firm makes most of its money by selling cars, the CEO has insisted on multiple occasions that the firm is a robotics and AI company. Consequently, with Tesla Inc. (NASDAQ:TSLA) having marked $26 billion in 2026 capital expenditure, with most of it to go to AI infrastructure, concerns about its ability to monetize the investment are quite common.
This debate also divides the bulls and bears. Tesla Inc. (NASDAQ:TSLA)’s bulls believe that Musk’s plans for the Optimus humanoid robot, robotaxis and the assisted driving platform FSD carry the potential to drive revenue and bolster margins. Consequently, they view Tesla Inc. (NASDAQ:TSLA) as a top long term play if one is targeting the robotics sector. In fact, the bulls use these to point out that not only is the massive 2026 capital expenditure a necessity, but they also believe that Tesla Inc. (NASDAQ:TSLA)’s cars are, in reality, hardware for a recurring revenue-driven software business.
However, the bears point to the financial impact of the heavy spending. They quote Tesla Inc. (NASDAQ:TSLA)’s negative free cash flow of $1.09 billion during the second quarter to outline that it was the first such reading in two years. Additionally, the bears also believe that Tesla Inc. (NASDAQ:TSLA)’s forward price-to-earnings multiple of 158x is unsupported by the firm’s margins. The sentiment is also divided on the firm’s ability to deliver on its timelines.
The hedge funds, it appears, are cautious as well since in Q4 2025, 137 out of the 1,041 funds part of Insider Monkey’s database had bought Tesla Inc. (NASDAQ:TSLA)’s shares, while the figure dropped to 123 out of 1,022 in Q1 2026. A notable jump came from ExodusPoint Capital as it grew its stake by 5,869% to $1.8 billion, while Holocene Advisors cut the stake by 37% to $1.3 billion.
While Insider Monkey acknowledges the risk and potential of TSLA as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and have limited downside risk. If you are looking for an AI stock that is more promising than TSLA and that has 100x upside potential, check out our report about the cheapest AI stock.
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Disclosure: None.
