- Investors are pouring cash into Tesla stock as part of a broader bet on the future of AI.
- Vanda Research said retail purchases of EV stocks other than Tesla made up just 6% of average daily Tesla purchases.
- Vanda says there are signs Tesla is catching a ride on the wave of AI hype rolling through the stock market.
Retail investors are dumping money into Tesla shares, with the stock increasingly seen as a bet on artificial intelligence in addition to the leader in the electric vehicle space.
According to Vanda Research, retail traders have ramped up their bullish bets on the EV maker this year, with the 10-day moving average of retail flows into Tesla far outpacing retail flows into other EV stocks, as well as flows into AI stocks, per Vanda data.
Retail purchases of EV stocks other than Tesla make up just 6% of average daily Tesla purchases, and make up just 5%-10% of average daily Tesla purchases compared to the fourth quarter of 2020 and the first quarter of 2021, when Tesla inflows peaked.
But it's not just a bet that Tesla will be the top dog in the EV fight that's driving more investment, Vanda says. The blistering rally in Tesla shares in 2023 is partly attributable to the excitement for artificial intelligence technology, which has taken large-cap tech stocks higher through 2023.
"This hardly looks like a resurgence of the EV theme from a retail perspective," the research group said in a note on Thursday. "Hence, we can confidently say that retail investors perceive TSLA as an AI proxy more than an EV story, at least for now."
Institutional investors have also ramped up their Tesla bets, the note added, a sign that the appetite for Tesla stock has room to grow.
Though Tesla CEO Elon Musk has long been vocal about the dangers of AI, he's hinted for months that Tesla could incorporate artificial intelligence into its own business amid the hype for ChatGPT. In April, he quietly set up a new AI startup in Nevada called X.ai, which he suggested could roll out a ChatGPT competitor called TruthGPT.
Despite its strong performance in 2023, Tesla is still battling economic headwinds as high inflation and elevated interest rates continue to weigh on the broader market. And though the company has slashed prices on its car models repeatedly in the past year to fight off competitors, those discounts are eating into its profit margins, an issue that has caused concern among Wall Street analysts and investors.