Tesla ETF Skids as Nvidia Unveils Toyota Deal at CES

Shares of the electric vehicle maker Tesla Inc. dropped about 4% Tuesday as investors digested comments from the CEO of a big partner and potential competitor.

Jensen Huang, CEO of AI chip giant Nvidia Corp., announced a partnership with Toyota Motor Corp. in his keynote address at the Consumer Electronics Show in Las Vegas on Monday.

“Toyota, the world’s largest automaker, will build its next-generation vehicles on NVIDIA DRIVE AGX Orin, running the safety-certified NVIDIA DriveOS operating system. These vehicles will offer functionally safe, advanced driving assistance capabilities,” Nvidia said in a separate press release.

Nvidia’s automotive platform offers customers like Toyota the ability to train AI models and deploy them into cars, with the goal of bringing autonomous vehicles to market.

The partnership with Toyota and other automakers could be a competitive force for Tesla, one of the world’s largest EV makers with autonomy ambitions of its own.

Much of the massive run-up in Tesla’s shares at the end of 2024 was related to excitement about the company’s robotaxis, which CEO Elon Musk said could hit the market as soon as next year.

TSLL Price Volatility

The $4.8 billion Direxion Daily TSLA Bull 2X Shares (TSLL) rocketed more than four times higher between the end of October and its peak in mid-December but fell 8.1% to $25.94 Tuesday. Tesla shares dropped 4.1% to $294.36.

Tesla uses Nvidia chips to train its AI algorithms. Along with Alphabet's Waymo, it's seen as a leader in the autonomous vehicle space today. 

Robotics' ChatGPT Moment

In addition to pushing into the autonomous vehicle arena, Huang highlighted his company’s goal to dominate the robotics industry, another area where Tesla has big plans. 

“The ChatGPT moment for general robotics is just around the corner,” Huang said.

But just like generative AI and autonomous vehicles, Nvidia’s primary aim is to be a supplier of chips and software for other companies, rather than a creator of end products for consumers and businesses. 

Nvidia’s tools could help other companies compete with Tesla’s humanoid robots in the future, though there's plenty of room for multiple winners with a market opportunity so large. 

Nvidia shares closed 6.2% lower, to $140.14, Tuesday.