Baird: Tesla’s Future Lies in ‘Physical AI,’ Not Just Cars
The market rally just widened, with small caps finally joining the climb. The Russell 2000
RUT +2.51% closed at its first record high since 2021, alongside fresh peaks for the S&P 500
SPX +0.48%, Dow DJIA +0.27%, and Nasdaq COMP +0.94%.
That broadening strength is good news for investors, but big tech — and Tesla in particular — remains a focal point. Despite a -2.12% dip Friday, Tesla TSLA shares have soared 22.6% over the past month. Now Baird analyst Ben Kallo has upgraded the stock to outperform and lifted his price target from $320 to $548.
Kallo’s bullish call isn’t based on Tesla’s car sales, which have softened. Instead, he points to what Elon Musk calls Tesla’s transformation into a “physical AI” company through robots and robotaxis.
“Muted stock reactions after weak quarters suggest investors are already looking past EV sales and toward Tesla’s long-term initiatives,” Kallo wrote in his note.
Here’s what Baird’s 10-year roadmap (2026–2035) assumes:
- 20M vehicles sold by 2035 (with potential negative annual growth after 2025).
- 10M self-driving subscriptions if half of buyers adopt FSD software.
- 1M robots, likely Optimus, at ~$20K each with 50% gross margins.
- 1M robotaxis, enabled by leveraging customer-owned Teslas.
If Tesla meets these minimum milestones, Baird estimates a market cap above $5.5 trillion and a stock price of $1,412.
In a more aggressive “bull volume case,” doubling those targets could push Tesla’s valuation to $12 trillion, with shares hitting $3,043.
Kallo is quick to caution this is not his base case. Still, he argues that even somewhere between those outcomes would make Tesla a dominant force in what he calls the future of physical AI.
