Tesla Inc (NASDAQ:TSLA) had its price target raised modestly by UBS to $364 from $352, as the bank said the electric vehicle maker’s first-quarter update further highlighted its transition toward becoming a “physical AI company,” while maintaining a ‘Neutral’ rating on the stock.
Shares of Tesla traded hands at $445 on Wednesday afternoon, roughly flat in the year-to-date.
UBS said Tesla’s long-term opportunities in robotaxis, humanoid robots and AI infrastructure remain significant, but noted that rising spending and slower commercialization timelines could weigh on near-term financials.
“Tesla's physical AI ventures offer large potential revenue opportunities, but could take a while to get there,” the analysts wrote.
The bank highlighted Tesla’s decision to raise its 2026 capital expenditure forecast to $25 billion from $20 billion, with analysts expecting spending to remain elevated for several years. UBS said Tesla will likely be free-cash-flow negative for the remainder of 2026 as investment accelerates in AI, robotics and manufacturing infrastructure.
“We continue to believe Tesla is driven by narrative/sentiment not fundamentals,” UBS wrote, adding that “current levels more properly balance the long-term opportunity with near-term concerns on fundamentals and potential fund flows.”
Tesla reported first-quarter 2026 earnings per share of $0.41. UBS said automotive gross margins benefited from roughly $230 million in one-time warranty-related items and about $150 million in tariff relief, while the energy business also received a temporary tariff-related boost.
The analysts also pointed to what they described as “some doses of realism” from CEO Elon Musk regarding Tesla’s AI initiatives.
UBS noted Musk said Optimus robot production would likely ramp slowly and that “Unsupervised FSD or robotaxi revenue will not be material this year.”
On autonomous driving, UBS said Tesla expects unsupervised Full Self-Driving capability in consumer vehicles by the fourth quarter of 2026, though the bank believes commercialization could take longer. UBS also noted Musk’s comments that HW3 hardware “won’t work for unsupervised FSD.”
At the same time, UBS said Tesla continues to make progress on infrastructure and AI software development. The bank cited updates including the rollout of Cortex 2 AI compute capacity, expansion plans for robotaxi operations in additional US cities, and continued development of Optimus production lines in Texas.
UBS maintained its valuation methodology based on a 150x projected 2027 price-to-earnings multiple, which it said remains in line with Tesla’s average over the past year.