Tesla (TSLA) Chief Executive Elon Musk suggested on Sunday that Warren Buffett should invest in the EV giant, after the ‘Oracle of Omaha’ addressed Tesla’s Full Self-Driving (FSD) efforts during Berkshire Hathaway‘s (BRKB) annual shareholders meeting. TSLA shares rose early Monday.
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Billionaire Warren Buffett commented over the weekend on the potential risk auto insurers like Berkshire’s Geico could face if Elon Musk and Tesla succeed in their push for automated driving.
“If the number of accidents is reduced by 50%, it will be good for society and bad for insurance companies’ volume,” said Buffett. “But good for society, that’s what we’re looking for.”
Berkshire Hathaway CEO Ajit Jain added at the annual meeting that while Tesla feels the number of car accidents is falling because of its technology, the cost of repairing each accident could rise.
“If you multiply the number of accidents by the cost of each accident, I’m not sure the total number has gone down as much as Tesla would have us believe,” Jain said. He added that Tesla insurance so far “hasn’t really been a success.”
“Time will tell, but I think automation shifts a lot of the cost from the operator to the equipment supplier,” says Jain.
Warren Buffett and Elon Musk
Following these comments, Elon Musk posted on X, formerly Twitter, that Warren Buffett “should take a position in Tesla.”
“It’s an obvious move.” Musk said.
Buffett has been investing in China-based rival Tesla for years BYD (BYDDF), but has so far decided not to invest in Tesla. Warren Buffett has reduced his stake in BYD in recent years, but still has a significant stake.
Tesla shares rose 0.9% in premarket trading on Monday. On Friday, shares rose 0.7% to 181.19.
Elon Musk and Tesla focus on AI
During Tesla’s recent earnings call, Musk spent a lot of time touting FSD, autonomy and artificial intelligence.
Tesla also recently moved from FSD Beta to FSD supervised fully self-driving. The EV giant reported it would recognize deferred revenue of $281 million by the end of the first quarter, according to regulatory filings.
“The way to think about Tesla is almost entirely in terms of solving for autonomy and being able to enable that autonomy for a massive fleet,” Elon Musk said during the earnings call.
Musk later added: “If someone doesn’t believe Tesla is going to solve autonomy, I don’t think he or she should be an investor in the company.”
Tesla’s free cash flow also turned negative in the first quarter, hitting $2.5 billion, as Tesla spent $1 billion on “AI infrastructure.”
Tesla stock performance
TSLA shares rose 7.7% to 181.19 last week, after rising 14.4% the week before. Shares of Tesla rose 15.3% to 194.05 last Monday, making a decisive move above a key resistance level after regulators in China provisionally approved the introduction of FSD.
Since Tesla reported first-quarter earnings and revenue on April 23, TSLA shares are now up about 25%. Tesla shares hit a 52-week low of 138.80 on April 22. Shares are still down 27.1% in 2024 as of May 3.
After rallying after first-quarter earnings, Tesla stock has cleared resistance at its 10-week moving average, MarketSurge analysis shows.
Tesla struggled to regain this level for much of 2024.
Tesla stock ranks eighth in the 35-member IBD Auto Manufacturers industry group. The stock has a Composite Rating of 41 out of a best value of 99. Tesla stock also has a Relative Strength Rating of 21 and an EPS Rating of 62.
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