Tesla Surges 7% as Musk Touts AI Chip Ambitions Amid Regulatory Hurdles

Tesla shares jumped over 6% on Monday, driven by CEO Elon Musk's announcement that the company plans to build more AI chips than all competitors combined. Musk stated he is "deeply involved" in design meetings and revealed Tesla is hiring aggressively for its chip development push, with AI5 chips nearing tape-out and early work beginning on AI6. The company has already deployed several million proprietary chips across its vehicles and data centers to power its real-world AI systems.

Melius Research upgraded its outlook on Tesla, calling the stock a "must own" and raising its price target to $450, citing the company's autonomous driving technology approaching a potential industry tipping point. The firm argues Tesla's lead in full self-driving capabilities could trigger a massive value shift in the automotive sector.

However, regulatory challenges emerged as Dutch safety authority RDW denied Tesla's claims about FSD approval in Europe and announced it would conduct testing in February 2025. The agency also asked Tesla supporters to stop pressuring officials regarding the FSD Supervised system. Additionally, Tesla lacks the regulatory exemption needed to sell its steering wheel-less, pedal-less Cybercab, which Musk claims will enter production in April.

Tesla reported a three-year low in China sales, though analysts noted this was not a primary concern for the investment thesis. Charles Schwab added over 400,000 Tesla shares in Q2, making it the firm's ninth-largest holding at $5.9 billion.