Why Tesla Stock Is Bouncing Back Today

Tesla (NASDAQ: TSLA) shares sank more than 4% yesterday. But the stock of the electric vehicle (EV) leader is rebounding today.

Yesterday's sell-off was triggered by what looked like a massive vehicle recall on the surface. But a more detailed analysis showed there was much less to the story. And Tesla's technology will help address the issue.

That's why shares are bouncing back today -- investors are back focusing on Tesla's technology. After jumping as much as 5.4% this morning, Tesla stock was still trading higher by 3.6% as of 10:55 a.m. ET.

Tesla is spending on artificial intelligence (AI)

The recall included 1.85 million Tesla EVs, including Models S, X, Y, and 3. But the company said a hood latch that is responsible for potential unintended hood openings only affects about 1% of the recalled cars. Tesla has also already deployed over-the-air software updates to detect an open hood and alert vehicle drivers.

With the recall effectively a nonissue, investors are shifting the focus to Tesla's technologies today. That comes after earnings reports yesterday from tech companies including Microsoft and AMD highlighted the spending occurring in the artificial intelligence (AI) space.

Tesla CEO Elon Musk has been stressing how much the company has been spending more recently on its AI initiatives. That includes commercializing self-driving vehicles, as well as humanoid robots that can improve efficiencies at manufacturers and other businesses. In the second quarter alone, Tesla invested $600 million on AI infrastructure .

With tech companies reiterating AI developments and rising demand, investors are beginning to try and calculate what the technology can do for companies like Tesla that are highly focused on expanding AI use cases. That has investors shrugging off yesterday's recall news, instead contemplating how much Tesla could gain from AI going forward.

Howard Smith has positions in Microsoft and Tesla. The Motley Fool has positions in and recommends Advanced Micro Devices, Microsoft, and Tesla. The Motley Fool recommends the following options: long January 2026 $395 calls on Microsoft and short January 2026 $405 calls on Microsoft. The Motley Fool has a disclosure policy .