Warren Buffett weighs the effects of Tesla FSD, and Elon Musk says he should buy Tesla stock

Tesla (TSLACEO Elon Musk on Sunday suggested that Warren Buffett invest in the electric car giant, after the “Oracle of Omaha” addressed Tesla’s efforts in full self-driving (FSD) during… Berkshire Hathaway‘s (I ride) Annual shareholders meeting. TSLA shares advanced early Monday.

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Billionaire Warren Buffett commented over the weekend on the potential risks that auto insurance companies, like Berkshire’s Geico, could face if Elon Musk and Tesla are successful in their automated driving endeavors.

“If accidents decrease by 50%, it will be good for society and it will hurt the size of insurance companies,” Buffett said. “But good for society is what we’re looking for.”

Ajit Jain, CEO of Berkshire Hathaway, added during the annual meeting that while Tesla feels the number of car accidents has decreased due to its technology, the costs of repairing each accident may rise.

“If you multiply the number of accidents by the cost of each accident, I’m not sure the total number has decreased as much as Tesla would like us to believe,” Jain said. He added that Tesla’s insurance so far “hasn’t had much success.”

“Time will tell, but I think automation shifts a lot of expenses from the operator to the equipment provider,” Jain said.

Warren Buffett and Elon Musk

Following these comments, Elon Musk posted on X, formerly Twitter, that Warren Buffett “should take a position at Tesla.”

“It’s an obvious step.” Musk said.

Buffett is a long-time investor in China-based rival Tesla BYD (BDDF) but has so far decided not to invest in Tesla. Warren Buffett has reduced his holdings in BYD in the past two years, but he still owns a significant stake.

Tesla stock rose 0.9% during pre-market trading on Monday. On Friday, shares rose 0.7% to 181.19.

Elon Musk and Tesla focus on artificial intelligence

During Tesla’s recent earnings call, Musk spent a lot of time touting FSD, autonomy, and artificial intelligence.

Tesla also recently reworked full self-driving from FSD Beta to supervised FSD. The electric vehicle giant said it will recognize $281 million in deferred revenue by the end of the first quarter, according to regulatory filings.

“Tesla’s thinking is almost entirely in terms of an autonomy solution and the ability to operate that autonomy for a massive fleet,” Elon Musk said on the earnings call.

Musk later added that “if someone doesn’t think Tesla is going to solve the autonomy problem, then I think they shouldn’t be an investor in the company.”

Tesla’s free cash flow also turned negative by as much as $2.5 billion in the first quarter, as Tesla spent $1 billion on “AI infrastructure.”

Tesla stock performance

TSLA shares jumped 7.7% last week to 181.19 after rising 14.4% the previous week. Tesla stock jumped 15.3% to 194.05 last Monday, making a decisive move above a key resistance level after regulators in China initially approved the introduction of FSD.

Since Tesla reported first-quarter earnings and revenue on April 23, TSLA shares are now up about 25%. Tesla stock hit a 52-week low of 138.80 on April 22. Shares are still down 27.1% in 2024 as of May 3.

After rising after first-quarter earnings, Tesla stock advanced through resistance at its 10-week moving average, according to Marketsorg analysis.

Tesla struggled to regain this level through most of 2024.

Tesla stock ranks eighth in the 35-member IBD Automotive Manufacturers Industry Group. The stock has a Composite Rating of 41 out of a top 99. Tesla stock also has a Relative Strength Rating of 21 and an EPS Rating of 62.

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