Tesla (TSLA) CEO Elon Musk unveiled “Macrohard,” which is a joint project between the company and xAI, his artificial intelligence (AI) startup. The “Digital Optimus” is yet another assault on the Software as a Service (SaaS) model and ignites SaaSpocalypse fears. In this article, we’ll examine what the Digital Optimus means for Tesla and whether the stock is a buy.
Tesla Invested in xAI
For context, in January, Tesla agreed to invest $2 billion in xAI, which has since merged with SpaceX, another of Musk’s private companies. The transactions between Tesla, a publicly traded company, and xAI, a startup founded by its CEO, are not exactly an example of strong corporate governance, and in 2024, Tesla shareholders sued Musk for starting a competing artificial intelligence company while Tesla itself was pivoting to AI.
The Tesla-xAI joint project will combine xAI’s large language models with Tesla’s AI agent, and per Musk, Macrohard can “emulate the function of entire companies.” In his X post, Musk said that the system will use Tesla’s AI4 chip “with relatively frugal use of the much more expensive xAI Nvidia hardware.” Musk, who seldom shies away from making bold predictions, said that “it will be the only real-time smart AI system.”
It is yet another AI offering from Tesla, which has been positioning itself as an AI play rather than an EV company. The way I see it, the transition was largely complete when Tesla did not provide 2026 delivery guidance during the Q4 2025 earnings call and instead released the full self-driving (FSD) subscription numbers for the first time. By literally swapping delivery guidance with FSD subscription numbers, Tesla reemphasized the dwindling importance of the former and the growing importance of the latter.
Tesla Is More About AI Than Cars Now
Tesla’s reimagination as an AI company makes sense as the company’s EV business has sagged, with deliveries falling annually for the last two years. That said, Tesla wasn’t about only electric cars anyway, or else markets wouldn’t have given it the kind of valuation that it commands, with its market capitalization outstripping the combined market cap of other leading automakers.
Tesla’s story was built on autonomous driving and its ability to reach full autonomy, which would then lay the base for robotaxis. While the company hasn’t yet reached full autonomy despite multiple “end of the year” predictions by Musk, the software has made great progress over the last couple of years. Last year’s robotaxi rollout was also nearly seamless, and the company continues to expand in new cities.
Over the last few years, Tesla has expanded its target market with the unveiling of AI chips and the Optimus humanoid. Optimus could particularly be a key growth driver for Tesla even as the company will need to compete with Chinese companies in that business, and it remains to be seen whether humanoids actually become as big a market as some, including Musk, are predicting.
The electric vehicle industry is a case in point, as the U.S. EV adoption rates should have been much higher, going by even the bearish forecasts from earlier this decade. However, the demand turned out to be much weaker than anticipated, with the withdrawal of the EV tax credit only worsening the situation.
Should You Buy Tesla Stock Here?
While I had been bearish on Tesla for the last few months, I believe it is time to turn bullish as the company expands its AI capabilities. The EV business is currently witnessing a slowdown, and analysts are increasingly forecasting deliveries to fall for the third consecutive year – something I have been talking about for quite some time. That said, I expect Tesla’s deliveries to return to growth in 2027 and beyond as the company ramps up Cybercab production. Moreover, as U.S. legacy automakers roll back their EV ambitions, Tesla is gaining market share, and we should hopefully see some sanity on pricing.
I also see a tactical buying opportunity in Tesla amid the oil supply disruption. Notably, the war in Iran is a crude reminder of dependence on imported oil (CLJ26), and an elongated conflict could prompt some countries to rethink their energy mix. Global EV adoption might get some support from higher oil prices even as the bulk of the incremental volumes, particularly in Asia, might not come to Tesla but to Chinese companies, which have gained market share in the region with their competitive offerings.
That said, I believe the time is ripe to start nibbling on Tesla shares near $400 price levels as the company expands its AI offerings while its EV business stabilizes. The stock might remain volatile in the short term amid the broader market volatility, but the long-term outlook is promising as the company progresses in AI in a capital-efficient way.
On the date of publication, Mohit Oberoi had a position in: TSLA , NVDA . All information and data in this article is solely for informational purposes. For more information please view the Barchart Disclosure Policy here.
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