Tesla Investors Rejoice: A Long-Awaited Breakthrough Finally Arrives
After months of turbulence, Tesla bulls just got a reason to crack open the champagne.
The EV giant's latest pivot—or was it a Hail Mary?—has Wall Street scrambling to revise targets. Whether it's battery tech, AI, or just Elon's Twitter antics paying off, something's moving the needle.
Meanwhile, shorts are sweating. The same analysts who called Tesla 'overvalued at any price' last quarter are now quietly recalculating their models. Classic hedge fund whiplash.
One thing's clear: When Tesla zig-zags, markets follow. And this time, the zag looks downright profitable.
(Cynical finance jab: Unless you're still holding those $900 calls from 2021—condolences.)
Vehicle as a platform?
Gone are the days of a traditional hardware-centric approach with fixed features at the time of manufacture. In its place are software-defined vehicles (SDVs) that have the ability to receive updates and new features. It all revolves around SDVs, or at least that's what many analysts think about the automotive industry. Software is expected to be the primary revenue growth driver for automakers by 2030.
Tesla helped turn "over-the-air" from buzzword to commonplace. But this goes beyond simply an infotainment system offering your favorite apps. SDVs have software controlling critical systems such as braking, steering, and energy optimization. So it shouldn't surprise many to hear that Tesla is the closest to offering complete SDVs, at 80% to 85%, according toVice President of Research Pedro Pacheco, via Automotive News.
Image source: Tesla.
As investors might expect,anddirectly trail Tesla, along with U.S. EV start-upsand, per Gartner's 2024 Digital Automaker Index, which gauges progress in hardware, implementation of over-the-air updates, use of artificial intelligence (AI) in vehicle software, and firmware update capabilities. Here's a look at just how the automotive industry shook out, the higher the score the better.
Data source: 2024 Gartner Digital Automaker Index. Chart by author.
The future is coming soon
Full SDVs could be hitting the market as soon as next year and in three to five years vehicles will likely work as a platform, according to, an IT and consultancy focused on helping companies drive revenue growth. Accenture also predicts digital services could bring $3.5 trillion globally by 2040, or roughly 40% of all automotive revenue.
This is good news for Tesla, as the company is currently leading in the SDV space, per Gartner, and it could also open doors to new revenue investors haven't often considered. Rivian gained quite a bit of credibility for its software stack when it inked a joint venture with global juggernaut, for the latter to use the former's software stack in its long list of vehicles. It was a big deal valued at up to $5.8 billion. It's entirely possible, assuming Tesla is interested in the idea, for the leading company in SDVs to partner and generate revenue from licensing its software to more traditional companies struggling with reinventing their technology.
For investors, it's just a little good news amid a flurry of negative developments. Leading in SDV is a big deal currently, and will be an even bigger deal when leading in SDVs is worth billions on the bottom line. Tesla is currently at an inflection point when it's essentially deciding if it's an automaker, robot maker, robotaxi service, or artificial intelligence company -- or perhaps some combination of all four. Long-term investors should stay the course, but not all of these negative developments will blow over quickly. It might be time to revisit your investment thesis on Tesla because its future could go in a wildly different direction than we thought a few years ago -- for better, or worse.
