Citizens JMP Initiates Tesla at Market Perform

Citizens analyst Andrew Boone initiates coverage on Tesla (NASDAQ: TSLA) with a Market Perform rating.

“We are launching coverage on Tesla because of the potential of physical AI.

The analogy for us is that physical AI can unlock work around unstructured tasks in the way AI is currently accelerating knowledge work by better understanding unstructured data.

Specifically, the building blocks for robotics to materially advance are now in place as AI and world models improve, faster chips enable better edge compute, and new robotic capabilities (e.g., Tesla’s Optimus hand) are being created.

To be clear, the creation of AI-enabled robots will take time, but we note Tesla has all the necessary assets to materially advance and create true “abundance” by automating labor.

Specifically, Tesla has 1) leading autonomy models; 2) its own silicon; 3) advanced manufacturing; 4) state-of-the-art batteries; and 5) CEO Elon Musk’s engineering prowess.

To that end, we are positive on the long-term Tesla vision as we believe automating the physical world is one of the largest opportunities across our coverage universe.

However, this grand vision will take time to achieve, and we think the market’s near-term expectations are too optimistic given the tremendous complexity of bringing an advanced humanoid robot to market.

We expect Optimus to incur a new level of production complexity, with delays and greater spending, and we view Tesla as being at the beginning of an Optimus investment cycle.”

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