Tesla reminded the market how violently the stock can move when the narrative lines up. Shares climbed about 7–8% on Wednesday, briefly trading near 400 dollars, after two catalysts hit within hours: UBS pulled the name off its Sell list, raising the rating to Neutral while keeping a 352 dollar target, and Elon Musk confirmed that Tesla’s next‑generation AI5 chip has reached tape‑out, the final design step before manufacturing.
UBS analyst Joseph Spak argued that after a more than 20% year‑to‑date drop the current price “more evenly” reflects weak near‑term EV demand and heavy capex against Tesla’s long‑run potential in so‑called physical AI – robotaxis, autonomous driving and the Optimus humanoid robot – even as the bank openly notes that the stock trades more on sentiment and momentum than fundamentals.
AI5: a new chip as the backbone of the physical AI strategy
Elon Musk followed up the upgrade by posting a picture of the new AI5 chip being developed by Tesla AI on the social network X. This is the next generation of proprietary hardware to gradually replace today's AI4 chips in controllers for fully autonomous driving and robotics.
Musk has previously said that the AI5 design is "almost done" and that the company is also working on the first version of the successor AI6 in parallel, with the goal of getting on a roughly nine-month cycle for new generations of chips. The AI5 is said to have up to 50 times the performance of the current AI4 generation - combining roughly ten times the raw computing power, nine times the memory capacity and several times the speedup in key operations for neural networks.
Technical details leaked to the media suggest that an entire AI5 computer could be in the range of roughly 2,000-2,500 TOPS, while today's AI4 offers approximately 300-500 TOPS. In doing so, Musk is comparing a single AI5 chip with the performance of Nvidia's $NVDA H100 GPU for Tesla's specific tasks, and a pair of chips with the next-generation Blackwell - with Tesla targeting a significantly lower price and power consumption.
Musk also claims that AI5 could become "one of the most produced AI chips in the world", and thanks partners in the form of TSMC $TSM and Samsung $SSNLF to produce the chip for Tesla. The first limited quantities are expected to arrive in 2026, he says, but mass production is not expected until after 2027, when AI5 should appear in more cars and in the infrastructure for training and inferencing models.
What exactly has the upgrade from UBS changed
The UBS rating is sensitive for Tesla precisely because the bank has long been one of the more skeptical houses. The change from "Sell" to "Neutral" relies on several points:
after a more than 10% decline in 2026, UBS says part of the downside scenario (weaker EV demand, margin pressure, high capex) is priced in
the bank assumes a relatively conservative scenario: around 1.6 million vehicles delivered in 2026 and only around 2 million by 2030, i.e. growth of around 7% per year
For robotaxis and the Optimus robot, UBS does not adopt Musk's aggressive estimates, but assumes a slower ramp-up - on the order of thousands of robot units in the second half of the decade, not hundreds of thousands
Crucially, UBS openly says that Tesla is trading more on sentiment and momentum than on traditional fundamentals, and that current levels no longer justify a "Sell," though the $352 price target is still below where the stock was trading intraday during Wednesday's trading. It was that combination - the removal from the "Sell" category plus the news around AI5 - that was enough to get retail and some institutional investors to add to their short-term buying.
The market is waiting for concrete numbers and milestones
Despite the sharp overnight growth, Tesla remains in the red since the start of the year and its performance has lagged the broader technology sector. The company is set to release its first quarter results on April 22, and investors will be particularly interested in a trio of themes:
how margins are trending in the automotive division after a series of discounts and intense competition in China and Europe.
whether Tesla will offer a more concrete plan for deploying fully autonomous driving and robotaxis in each region
what the timeline and financial framework will be for AI5, AI6 and other AI projects, including capex estimates and cash flow impact
So far, the overnight rally following the release of the UBS photo of the chip and upgrade mainly reflects a change in mood and renewed interest in Tesla's "AI story". Only the results and a more concrete roadmap around AI5, Robotaxis and the Optimus robot will tell if the current enthusiasm will gain a firmer footing or if this will just be another brief episode in an otherwise very volatile year for Tesla stock.