Tesla (NASDAQ: TSLA) shares surged more than 4% in early trading Monday, reaching $396.64, as investor sentiment strengthened ahead of the company's second-quarter delivery report due later this week. The broader market also provided tailwinds, with the S&P 500 up 0.8% and the Dow Jones Industrial Average gaining 0.3%.
The rally comes after a challenging week for the electric vehicle maker, with traders now focusing on the upcoming delivery figures scheduled for release on Thursday. Analysts currently project Tesla will report deliveries of approximately 405,000 vehicles, up from roughly 384,000 in the same period last year.
FSD Update for Older Hardware Boosts Sentiment
Part of Monday's upward move was attributed to comments from CEO Elon Musk on social media regarding Tesla's Full Self-Driving (FSD) technology. Musk announced that the company has begun rolling out a new version of its FSD software for customers using AI3 hardware, the onboard computer platform introduced in 2019.
Newer Tesla vehicles are equipped with AI4 hardware, launched in 2023, which offers significantly greater computing capability. Musk noted that the AI3 computer has only about 15% of the effective memory bandwidth of AI4, making the software adaptation a challenging task. The update could expand the addressable market for Tesla's FSD subscription service, currently priced at $99 per month, by improving functionality for owners of older vehicles.
Analysts Raise Delivery Forecasts
Wall Street has grown increasingly optimistic about Tesla's delivery numbers following stronger-than-expected sales data from key markets. Morgan Stanley raised its second-quarter delivery forecast to approximately 413,000 vehicles from a prior estimate of roughly 373,000 units, citing stronger registration trends in Europe and improving demand in China.
According to Morgan Stanley, Europe provided the largest upside, with registrations running significantly above year-earlier levels as the region continues recovering from a weaker 2025. China also showed improving momentum, with domestic sales rebounding in May after two consecutive months of annual declines. Despite the higher delivery forecast, Morgan Stanley maintained its $415 price target and remained cautious on Tesla's energy storage business, forecasting second-quarter deployments of 11.8 gigawatt-hours, below Street expectations of roughly 14.3 gigawatt-hours.
Barclays also raised its delivery expectations, now forecasting approximately 418,000 vehicle deliveries for the quarter. The brokerage expects European deliveries to reach roughly 90,000 units, Tesla's strongest regional performance since 2023, and China deliveries of about 135,000 vehicles, supported by improving domestic demand and export activity. Production is expected to reach about 430,000 vehicles, with inventory levels remaining well below the elevated build seen in the first quarter. Barclays maintained its Equal Weight rating and $360 price target.
Focus Shifts Beyond Vehicle Sales
While stronger vehicle deliveries remain important for generating cash flow, Barclays noted that investor attention has increasingly shifted toward Tesla's longer-term artificial intelligence initiatives. Programs such as Robotaxi, Optimus, and autonomous driving technology are now key areas of focus for the market. For more on Tesla's AI ambitions and recent delivery performance, see Tesla Slips 2% as AI Ambitions, SpaceX Merger Hurdles Overshadow Strong Deliveries.
The company's recent launch of robotaxi services in Miami has also drawn attention, though fleet size remains smaller than competitors like Waymo. For details, read Tesla Launches Robotaxi Service in Miami, Fleet Size Trails Waymo in Texas.
As Tesla continues to navigate a complex landscape of vehicle demand, technological upgrades, and AI-driven growth initiatives, the upcoming delivery report will provide a key data point for investors assessing the company's near-term trajectory.
This article is for informational purposes only and does not constitute financial advice.
