The Tesla stock story gained renewed attention as CEO Elon Musk announced the revival of Dojo3, the company’s third-generation AI supercomputer. This comes just five months after the project was abruptly paused, signaling a strategic pivot in Tesla’s approach to AI infrastructure. The move coincides with progress on Tesla’s AI5 chip, which Musk described as being in strong shape. Together, these developments highlight Tesla’s focus on controlling its AI technology stack, an area expected to be increasingly critical to the company’s future growth.

Originally, the Dojo supercomputer was designed to train Tesla’s Full Self-Driving (FSD) models. However, Musk’s latest vision for Dojo3 extends to space-based AI computing, reflecting an ambitious plan to reduce dependence on Earth-based power grids and explore off-planet data centers. Investors are closely watching whether these AI initiatives can meaningfully impact Tesla’s bottom line or remain long-term strategic bets.

EV Sales and Revenue Trends

Despite the excitement around AI, Tesla stock is still largely influenced by its electric vehicle business. Valued at $1.4 trillion, TSLA shares are down over 15% from all-time highs. The company faces challenges including slowing consumer demand, rising interest rates, and competition from Chinese automakers. Forecasts suggest Tesla will end 2025 with sales of $94.66 billion, slightly down from $96.77 billion in 2023.

Gross margins have compressed from 25.3% in 2021 to a projected 17% in 2025, driven by aggressive pricing strategies to maintain demand. As a result, free cash flow is expected to decline to $4.87 billion, down from $7.6 billion in 2022. These factors underscore the balance investors must consider: while AI initiatives like Dojo3 could create long-term value, short-term EV profitability remains the core driver of TSLA stock.

Q3 Highlights Show Strong Execution

Tesla’s Q3 performance demonstrated the company’s operational momentum. Deliveries hit record levels, energy storage deployments surged, and free cash flow exceeded $4 billion. Tesla ended the quarter with over $41 billion in cash and investments. Deliveries grew 33% in Greater China, 29% in Asia Pacific, 28% in North America, and 25% in Europe.

The refreshed Model Y lineup, including Long Wheelbase, Performance, and Standard Range variants, drove much of the delivery growth. Meanwhile, Tesla’s energy storage business continued to post record gross profit and margins, despite $200 million in tariff-related headwinds. Management emphasized that grid-scale storage could double electricity output from existing grids, reinforcing Tesla’s clean energy mission.

AI and Full-Self Driving Initiatives

Tesla stock is also being shaped by its autonomous vehicle and AI strategies. Full-Self Driving has already covered 250,000 miles in Austin without supervision and surpassed 1 million miles in the Bay Area. Tesla plans to expand Robotaxi operations to multiple metro areas, contingent on regulatory approval.

On the chip front, the AI5 chip promises up to 40 times better performance than its predecessor. Production will be handled by TSMC (NASDAQ:TSM) and Samsung (SMSN.L.EB), ensuring supply flexibility for Tesla’s growing AI and autonomous vehicle needs. These investments underline how Tesla is blending AI hardware and software to secure a competitive edge.

Capital Expenditures and Growth Outlook

Looking ahead, Tesla plans to accelerate capital spending in 2026, targeting vehicle production expansion and AI projects, including the Optimus humanoid robot program. While these initiatives may pressure near-term margins, they signal Tesla’s ambition to diversify revenue streams and solidify long-term growth potential.

Tesla Stock Price Targets and Analyst Sentiment

Analysts remain mixed on Tesla stock. Revenue is forecast to grow from $94.66 billion in 2025 to $210 billion by 2029, while adjusted EPS is projected to rise from $1.64 to $8.30. Out of 41 analysts covering TSLA, 14 recommend “Strong Buy,” one “Moderate Buy,” 17 “Hold,” and nine “Strong Sell.” The average price target is $395.09, below the current price of $421, suggesting limited upside in the near term but recognition of the company’s long-term growth potential.

Conclusion: Strategic Ambitions vs. Current Challenges

In summary, the revival of Dojo3 and AI5 chip progress highlights Tesla’s long-term ambitions in AI, autonomous driving, and energy storage. However, the near-term outlook for Tesla stock remains tied to EV sales, margins, and competition. Investors must weigh these short-term operational pressures against the potential for Tesla’s AI and Robotaxi initiatives to transform the company over the next several years.