Tesla‘s (TSLA +2.45%) most recent quarterly update was mixed. The company’s top-line came short of expectations, but earnings were stronger than anticipated. Beyond the company’s financial results, though, one important storyline to watch these days is that Tesla is increasingly shifting its strategy. The electric vehicle (EV) leader is branching out beyond its core market and planning to ramp up production of its Optinus humanoid robot this year, while making progress with its robotaxi service. Tesla’s vision for the future looks ambitious, and in its efforts to make it happen, the company will likely make moves that will benefit none other than Nvidia (NVDA 0.48%).

Recent comments from CEO Elon Musk were arguably a bullish signal for Nvidia. Let’s look into them and discuss what all that means for both companies.

Tesla is betting big on the future

Artificial intelligence (AI) has become central to Tesla’s vision. Whether we are talking about the company’s Optimus robot — that can apparently handle many everyday tasks and learn by watching humans or videos — or its robotaxi service powered by its FSD (full self-driving) software. To scale both of these projects to the levels it desires, the company plans to invest money, a lot of it. Says Musk:

We’re going to be substantially increasing our investments in the future, so you should expect to see a very significant increase in capital expenditures.

He then continued:

We’re investing in and improving our core technologies, battery powertrain, AI software, AI training, chip design, laying the groundwork for significantly increased manufacturing production.

This is good news for the company that remains the leader in providing AI training platforms, namely, Nvidia. Now, it’s important to note that Tesla is actually building its own AI chips. However, like several other tech leaders nowadays, the EV maker uses a dual approach. It relies on internally designed chips whenever possible — which is sometimes more cost-effective — while also buying Nvidia’s chips for training AI. Last year, Musk said that Tesla was not looking to replace Nvidia. So, the company’s massive investments will benefit Nvidia, at least to some extent.

Today’s Change

(2.45%) $9.34

Current Price

$390.97

The implications for Tesla

Musk thinks the increased spending is worth it because of the revenue potential it will allow the company to tap into. Indeed, if the company’s vision becomes reality, we could be looking at a transformative revolution. Tesla’s Optimus robot could replace thousands of workers if it can be manufactured cost-effectively at scale and can actually perform certain tasks. Further, as Tesla’s FSD software improves, the company’s robotaxi service could also help it capitalize on an attractive opportunity.

EV sales may have been sluggish for Tesla over the past two years (they rebounded somewhat in the first quarter), but that won’t matter much in a decade, provided the company can execute. That said, there are significant risks, including legal and regulatory ones, stiff competition, and others, that investors should keep in mind. Tesla’s shares also look expensive, trading at 178.6x forward earnings.

Tesla could more than justify its valuation in the long run, but investors should be cautious as the stock could plummet if anything goes wrong with its Optimus or robotaxi projects. In other words, Tesla is a great stock to consider for investors comfortable with heightened risk.

Nvidia

Today’s Change

(-0.48%) $-0.96

Current Price

$198.61

The implications for Nvidia

The demand for Nvidia’s AI training chip is still booming, and that may remain the case for a while. Tesla alone increasing its capex spending may not be indicative of that, but as Musk pointed out, it isn’t only Tesla:

I think you’ve seen in most, if not all, certainly the major technology companies substantially increasing their capital investments.

Nvidia’s own internal projections point toward the same conclusion. The company’s CEO, Jensen Huang, said earlier this year that it expects $1 trillion in purchase orders through 2027 for its Vera Rubin (set to be released in the second half of the year) and Blackwell AI chips. So, despite fears that the AI bubble will burst and Nvidia’s shares will fall off a cliff, the company’s medium-term prospects remain attractive. Analysts are also bullish on Nvidia: The company boasts an average price target of $269.17 (according to Yahoo! Finance), which represents an upside of almost 35% from its current levels, as of writing.

The bottom line: Even after scorching the market in recent years and now standing as the largest company in the world by market cap, Nvidia remains a table-pounding buy.