Tesla Is Still a ‘Leader in Physical AI’ and You Should Buy TSLA Stock Now, Says UBS
Shares of Tesla (TSLA) have hit a speed bump this year, tumbling nearly 22% from their December peak of $498.83 as investor confidence starts to wobble. Until recently, Tesla wasn’t just being seen as an electric vehicle (EV) maker. The company was being priced as a frontrunner in robotics, automation, and physical AI, a narrative that helped fuel its rich valuation and relentless bullish sentiment. But that story is now under pressure. Weak delivery data released earlier this month has snapped the focus back to Tesla’s core EV business, where slowing demand and a lack of tangible progress on its automation ambitions are becoming harder to overlook.
Nevertheless, not everyone on Wall Street is turning bearish yet. UBS Group recently upgraded the stock to “Neutral” from “Sell,” signaling that the recent pullback has made the risk-reward more balanced. The firm believes much of the near-term demand weakness is already reflected in the stock, bringing valuations back to more reasonable levels. While risks still linger, UBS continues to see long-term upside in Tesla’s physical AI vision, including its robotaxi push and Optimus robot. So, keeping all these factors in mind, should investors step in or wait for clearer signs of execution?
Founded in 2003, Tesla has evolved from a niche EV startup into one of the most closely watched companies in global markets. Headquartered in Austin, Texas, the company built its name by disrupting the automotive industry with a compelling lineup of electric vehicles, advanced battery technologies, and integrated energy solutions. But Tesla’s story has clearly outgrown cars.
In recent years, Tesla has been actively repositioning itself as a full-fledged technology powerhouse, pouring investments into artificial intelligence (AI), autonomous driving, robotics, and robotaxi services. The ambition is to move beyond the label of an automaker and establish itself as a dominant force in physical AI, robotics, and energy infrastructure. That strategic pivot is reshaping the market’s view of the company now.
Still, the spotlight hasn’t fully moved away from its EV business, something that became painfully clear on Apr. 2, when Tesla reported disappointing delivery figures, sending the stock tumbling more than 5% in a single session. So far in 2026, Tesla has been trailing the market, with shares down 13.68%, a sharp contrast to the S&P 500 Index ($SPX), which has edged up roughly 2.37% year-to-date (YTD). The company’s market capitalization currently stands at approximately $1.37 trillion.
Tesla’s fiscal 2025 fourth-quarter earnings report, released in late January 2026, painted a mixed but compelling picture of a traditional auto business losing momentum even as a next-generation energy and AI powerhouse begins to accelerate. For the quarter, total revenue dipped 3% year-over-year (YOY) to $24.90 billion, while adjusted EPS fell 17% to $0.50. The results marked Tesla’s third consecutive quarterly revenue decline, and more notably, full-year 2025 sales dropped for the first time in the company’s history.
Yet, despite the softness, Tesla still managed to outperform Wall Street expectations, which had called for $24.78 billion in revenue and $0.45 in EPS. The drag came largely from a cooling automotive segment, where rising global competition, especially from Chinese EV makers, continues to chip away at growth. Automotive revenue fell 11% to $17.7 billion during the quarter, while total vehicle deliveries declined 16% to 418,227 units, underscoring the pressure on Tesla’s core business.
But beyond autos, the story looks very different. Tesla’s energy generation and storage segment surged 25% YOY to $3.84 billion, up from $3.06 billion a year earlier, while its services and other segment grew 18% to $3.37 billion compared to $2.85 billion last year. Even more impressive, Tesla delivered its highest gross margin in two years at 20.1%, up sharply from 16.3%, signaling improving operational efficiency despite automotive headwinds.
With the EV business facing clear challenges, Elon Musk and his leadership team are actively shifting the narrative toward Tesla’s next wave of growth. During the earnings call, CFO Vaibhav Taneja highlighted plans for roughly $20 billion in capital expenditures this year, aimed at building new factories and scaling investments in Optimus and AI computing infrastructure. At the same time, Tesla is doubling down on expanding its product ecosystem with a focus on cost efficiency, scale, and future monetization through AI-driven software.
Looking ahead, the roadmap remains ambitious. Tesla confirmed that Cybercab, Tesla Semi, and Megapack 3 are all on track for volume production starting in 2026. Meanwhile, first-generation production lines for the Optimus humanoid robot are already being installed, setting the stage for eventual mass production and reinforcing Tesla’s push beyond EVs into robotics and physical AI.
The latest delivery update from Tesla has done little to reassure investors. While expectations heading into the print were already muted, the numbers still fell short of the mark, reinforcing growing concerns around slowing demand and intensifying competition in the EV space.
For the first quarter of fiscal 2026, Tesla reported total deliveries of 358,023 vehicles, marking a sharp 14.4% decline from the prior quarter’s 418,227 vehicles, though slightly above the 336,681 delivered in the year-ago period. The miss becomes more evident when stacked against expectations. Analysts were looking for around 370,000 deliveries, while Tesla’s own company-compiled consensus, published on March 26, pegged the average estimate at 365,645 units for the quarter.
The bulk of deliveries once again came from its core lineup, with the Model 3 sedan and the popular Model Y SUVs contributing 341,893 units during the period. With sentiment already under pressure, all eyes are now on Tesla’s fiscal Q1 2026 financial results, scheduled to be reported after market hours on Wednesday, Apr. 22, for clearer insight into how the company plans to navigate the growing headwinds.
Despite the recent slump in Tesla shares, sentiment got a lift after UBS adopted a more balanced stance, upgrading the stock to “Neutral” and raising its price target to $352. The move helped push shares roughly 3.3% higher on Apr. 14, as the firm highlighted that Tesla’s current valuation more fairly reflects the tug-of-war between near-term EV demand headwinds and the significant long-term upside tied to its physical AI ambitions.
Analyst Joseph Spak emphasized that Tesla continues to trade heavily on sentiment and narrative rather than pure fundamentals. Ongoing concerns, including softer EV demand, a Q1 energy segment shortfall, rising costs, increased capital spending, and slower-than-expected progress on robotaxi and Optimus, are likely to keep volatility elevated. Even so, UBS maintains that Tesla remains a leader in physical AI, with future advancements in robotaxis and Optimus offering meaningful upside, balancing out near-term pressures and a still-elevated valuation.
Overall, Wall Street is still taking a cautious stance on Tesla, with the stock carrying a consensus “Hold” rating. Opinions remain sharply divided. Among 43 analysts, 15 are firmly bullish with “Strong Buy” calls, two lean “Moderate Buy,” 17 prefer to stay on the sidelines with “Hold,” while nine remain outright bearish with “Strong Sell.”
Even with the mixed sentiment, the upside case is still in play. The average price target of $401.39 points to a potential gain of about 2.8%, while the most optimistic forecast of $600 on the Street suggests Tesla could rally as much as 53.7% from current levels if its long-term bets begin to pay off.
On the date of publication, Anushka Mukherji did not have (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article is solely for informational purposes. This article was originally published on Barchart.com