Elon Musk has revealed the first physical sample of Tesla’s AI5 processor, a chip designed to power future self-driving cars, Optimus robots, and potentially xAI data centers. This unveiling has sent Tesla’s stock soaring, with a 14% increase in just 5 days.
Stock Performance
The significant boost in stock price comes just a week before Tesla’s Q1 earnings report. Despite a year-to-date decline of 23% following a Q1 delivery miss, the stock has begun to recover. The question remains whether this rally is a pre-earnings short squeeze or the start of a new narrative for the company.
AI5 Chip Details
The AI5 chip, as shown in the image shared by Musk, features an ASIC die roughly half the size of a standard reticle. It is ringed by 12 SK hynix memory packages, likely GDDR6 or GDDR7, suggesting a 384-bit memory interface. Musk claims the AI5 could be up to 40 times faster than the current AI4 chip in certain scenarios.
Production and Deployment
Musk has thanked TSMC and Samsung Foundry for their help in producing the chip. However, the AI5 is not expected to reach Tesla’s cars in volume until 2027 at the earliest. Additionally, Musk has confirmed that AI6 and a revived Dojo 3 training system are in the works, despite previous reports suggesting the wafer-level Dojo program had been shelved.
Market Analysis
Tesla’s inventory issues persist, with the company having built 50,000 more cars than it sold in Q1. This has led to a significant inventory pileup, the largest in the company’s history. JPMorgan’s Ryan Brinkman has maintained a bearish $145 price target, citing the inventory issues. On the other hand, UBS has upgraded Tesla’s stock to Neutral at $352, acknowledging that the stock trades on sentiment rather than fundamentals.
Demand Picture
The demand picture beneath the rally remains soft. According to S&P Global Mobility data, SpaceX alone absorbed over 18% of US Cybertruck registrations in Q4, with other Musk-run companies picking up an additional 60 units.
Prediction Markets
Polymarket traders are skeptical about the products AI5 is meant to serve arriving on schedule. The likelihood of a California robotaxi launch by June 30 is priced at 10%, while Optimus hitting public sale by the same date sits at 5%. A contract on the Robovan gives a 30% chance it will be available for sale before the end of the year.
Conclusion
The April 22 earnings call will be crucial for Musk to sell a new story and shift focus away from the current numbers. The AI5 photo is just the beginning of this pitch, and the market will be watching closely to see how the story unfolds.