The Best AI Stock to Buy Right Now, According to a Wall Street Analyst (Hint: Not Nvidia or Palantir)

For the past few years, Wall Street has been fixated on Nvidia and Palantir Technologies as the defining artificial intelligence (AI) stocks. Nvidia designs the powerful graphics processing units (GPUs) that fuel generative AI, while Palantir delivers industry-leading data analytics software for enterprises and government agencies.

Yet, one veteran analyst believes investors are overlooking a much larger opportunity hiding in plain sight. Dan Ives of Wedbush Securities argues that Tesla (NASDAQ: TSLA) is potentially the most misunderstood and underappreciated large cap AI stock in the market today.

According to Ives, most investors continue to see Tesla as no more than an electric vehicle (EV) and energy storage business. In reality, Tesla is rapidly transforming into an AI powerhouse, building proprietary hardware, neural networks, and autonomous systems that could redefine its future.

Let's explore how Tesla is disrupting two potential trillion-dollar businesses in autonomous driving and robotics, which could cement its position as one of the world's leading AI companies.

Tesla's growing AI edge: From cars to chips

Tesla's AI strategy begins with autonomy. The company's Full Self-Driving (FSD) software is powered by advanced neural networks trained on billions of miles of real-world driving data -- a competitive advantage that few rivals can match.

What truly sets Tesla apart, however, is its ambition to design custom AI chips purpose-built for its autonomy ecosystem. While Tesla currently uses Nvidia chips in some capacity, the company is also developing its own in-house silicon -- known as AI5 and AI6.

By creating its own AI hardware, Tesla is moving toward full vertical integration of its technology stack, mirroring Apple's walled-garden approach of controlling both hardware and software. This strategy could lower costs, boost performance, and give Tesla greater independence and scalability as AI workloads grow.

Image source: Tesla.

Robotaxi: The autonomous gold rush

The first pillar of Tesla's next growth chapter is its long-awaited robotaxi network -- an ambitious plan to deploy a global fleet of autonomous Teslas providing rides on demand. Picture an Uber Technologies-like platform powered entirely by self-driving vehicles.

This innovation could disrupt the ride-sharing, delivery, and even car rental industries, creating a new source of recurring, high-margin revenue tied to software rather than one-time car sales. With the ability to manufacture millions of vehicles already equipped with autonomy, Tesla could activate one of the world's largest driving fleets almost overnight.

While Alphabet's Waymo has been an early mover in autonomous transportation, Tesla's massive real-world driving dataset could give it a decisive edge.

Of course, challenges remain -- from regulatory approvals and safety validation to public adoption. But if Tesla executes, the robotaxi revolution could mark a defining inflection point in both the company's history and the future of AI-powered mobility.

Optimus: The moonshot AI bet

Then there's Optimus -- Tesla's humanoid robot that Elon Musk envisions performing everything from warehouse labor to everyday household chores. Though still in the early stages of development, Optimus has already demonstrated key milestones, including coordinated motion, object manipulation, and the ability to perform repetitive tasks with precision.

What truly sets Optimus apart from other robotics efforts is Tesla's unmatched integration of AI, chip design, and manufacturing scale. The company is effectively applying the same vision-based neural networks that guide its self-driving cars to help robots interpret, move through, and interact with the physical world.

Musk has gone as far as to suggest that Optimus could eventually account for 80% of Tesla's long-term value, eclipsing its automotive and energy businesses. If humanoid robots achieve mass-market adoption, they could redefine the global labor economy, automating physical work much as AI software is transforming digital tasks.

Still, Optimus remains an ambitious moonshot. Developing machines that are both capable and affordable is an enormous challenge. Competitors such as Boston Dynamics and Figure AI are also racing to commercialize their own designs, yet none have proven they can scale these machines profitably.

Can Tesla's valuation contain its potential?

Today, Tesla's robotaxi business generates little revenue, and Optimus remains in active development. While these projects give Tesla an unmatched level of optionality, they also introduce enormous uncertainty. In short, Tesla's future combines limitless potential with considerable execution risk.

At a forward price-to-earnings (P/E) ratio near 256 and a market capitalization of roughly $1.4 trillion, it's fair to say that Tesla stock already reflects investor optimism surrounding its ambitious AI roadmap. The real question is how much of that optimism will ultimately be justified.

TSLA PE Ratio (Forward) data by YCharts.

If Tesla succeeds, it could dominate two entirely new markets -- autonomous mobility and robotics -- both of which could redefine the company's long-term trajectory. However, delays, regulatory hurdles, or intensified competitive headwinds could temper near-term expectations.

Still, for investors who believe in Musk's vision, Tesla represents a high-conviction bet on the convergence of AI, automation, and mobility -- a company positioned not just to participate in the next industrial revolution but take the lead in building it.

Adam Spatacco has positions in Alphabet, Apple, Nvidia, Palantir Technologies, and Tesla. The Motley Fool has positions in and recommends Alphabet, Apple, Nvidia, Palantir Technologies, Tesla, and Uber Technologies. The Motley Fool has a disclosure policy.