Tesla received a price target increase from Deutsche Bank on Friday, with the firm pointing to the electric vehicle maker’s artificial intelligence initiatives as a key growth driver that could help the company reinvent its growth story at a time of cooling EV demand.
The bank said Tesla’s AI-related projects could strengthen its competitive position and create new revenue streams beyond its core vehicle business. While details of the new target were not disclosed in the report summary, Deutsche Bank noted that advances in autonomous driving and AI-enabled software may play a larger role in Tesla’s valuation going forward.
The call reflects a broader theme among analysts, with several firms highlighting artificial intelligence as a central factor for stock performance. Just this week, Morgan Stanley reiterated Microsoft as a top pick on the same grounds, citing expanding demand for enterprise AI solutions. For Tesla, however, the context is different: AI is being framed not just as an added advantage, but as a much-needed lifeline amid a turbulent year.
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A backdrop of declining EV momentum
Tesla shares have had a volatile 2025, sliding after several quarters of mixed delivery numbers and shrinking margins. The company has faced intensifying competition from Chinese automakers such as BYD and Nio, who are aggressively cutting prices, while legacy automakers like Ford and Volkswagen are scaling up their EV offerings.
At the same time, high interest rates have dampened consumer appetite for big-ticket purchases like electric cars, pushing Tesla to introduce repeated price cuts across its vehicle lineup. While these moves preserved volume in some markets, they eroded profit margins — spooking investors who once saw Tesla as an unstoppable growth story.
Earlier this year, Tesla also announced production slowdowns in certain plants as part of a recalibration to match demand, further underlining the industry-wide slowdown. Wall Street analysts have noted that Tesla’s once-dominant share of the global EV market is narrowing, adding pressure to prove that its next phase of growth can come from innovation outside traditional vehicle sales.
AI as Tesla’s new frontier
That is where artificial intelligence enters the picture. For Tesla, AI is not just about improving cars but potentially redefining its entire business model. Beyond its core EV lineup, Tesla has been ramping up investment in its Full Self-Driving (FSD) package, which it charges thousands of dollars for upfront or as a subscription. The company has also laid out long-term ambitions for an autonomous ride-hailing network, leveraging its fleet of vehicles as robo-taxis powered by AI.
If successful, these initiatives are expected to create high-margin software revenue streams that insulate Tesla from the cyclical swings of the car business. Analysts say the pivot positions Tesla closer to a tech platform than a traditional automaker, potentially unlocking valuation multiples more akin to big technology firms than industrial manufacturers.
Why Deutsche Bank’s call matters now
Deutsche Bank is effectively betting that Tesla’s AI bets could counterbalance slowing EV momentum by raising its price target. The bank underscored that progress in autonomous driving and AI-enabled software may play a larger role in the company’s valuation than investors currently expect.
For now, Tesla still faces skepticism. The company’s third-quarter earnings in October are expected to provide a clearer picture, with investors scrutinizing not just deliveries and margins but also concrete evidence of progress in AI-related initiatives.
However, the Deutsche Bank note underscores a critical shift in investor expectations: while EV adoption remains Tesla’s foundation, its next chapter of growth may depend less on how many cars it sells and more on whether it can successfully monetize artificial intelligence as a scalable frontier.