After XPeng's AI Day, Bank of America raises its target price: optimistic about the "physical AI" strategy and ability to commercialize technology.

After XPeng's AI Day, Bank of America raises its target price: optimistic about the "physical AI" strategy and ability to commercialize technology.

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The "Physical AI" blueprint outlined by XPeng Motors at its AI Day has earned further recognition from Wall Street.

According to Chase Wind Trading Desk, a report released by Bank of America on November 6 reaffirms its "Buy" rating on XPeng Motors and raises its American Depository Share (ADS) target price from $26 to $27, while its Hong Kong stock target price has also been raised from HK$101 to HK$105.

This move comes right after XPeng's 2025 AI Day on November 5, where the company detailed its latest progress in artificial intelligence, including the VLA 2.0 large model, autonomous taxis (Robotaxi), humanoid robots, and flying cars—a series of disruptive products.

The most significant news from the event was Volkswagen's endorsement. The report reveals that Volkswagen has become the first customer of XPeng's VLA 2.0 large model and has ordered the self-developed Turing AI chip from XPeng.

This cooperation is seen by Bank of America as a key signal, proving that XPeng's leading edge in Advanced Driver Assistance Systems (ADAS) is beginning to translate into tangible commercial revenue, providing strong evidence for technology monetization.

However, the optimistic long-term outlook is accompanied by cautious adjustments to short-term finances. The report points out that, considering changes in the product portfolio and other factors, Bank of America has widened XPeng's expected non-GAAP net loss for 2025 by 36.7%, while cutting the net profit forecast for 2026 and 2027 by 4.5% and 5.5% respectively.

“Physical AI”: Volkswagen Becomes First External Customer

The core of this AI Day at XPeng was the release of the "Physical AI" concept—enabling AI to deeply understand, interact with, and change the physical world. Its foundation is the brand-new VLA 2.0 (Vision-Language-Action) large model, which the report describes as "the operating system controlling the cerebellum in the world of Physical AI."

According to the report, VLA 2.0 has the following features:

  • Powerful Computing: Driven by XPeng's in-house Turing AI chip, boasting up to 2,250 TOPS of computing power with a 12-fold improvement in inference efficiency.
  • Large Model Foundation: Trained on a 30,000-card computing cluster on Alibaba Cloud and a base model with 7.2 billion parameters.
  • Broad Applications: The model can be applied to cars, Robotaxi, robots, and flying vehicles.

For investors, the most critical incremental information is that the report clearly points out Volkswagen has become the first customer of XPeng's VLA 2.0 and has already ordered the Turing AI chip from XPeng. This partnership is the strongest evidence yet of XPeng's AI technology commercialization capability, demonstrating that its advanced ADAS development skills are turning into direct service revenue.

Future Blueprint: Robotaxi, Robots, and Flying Cars All to Launch in 2026

Beyond the core AI model, XPeng also laid out a clear vision for its future business landscape and has provided a concrete timeline for investors.

  • Robotaxi: Plans to launch three Robotaxi models in 2026, equipped with four Turing chips (total computing power of 3,000 TOPS) and the VLA 2.0 model. The report mentions Amap as its first global ecosystem partner.
  • Humanoid Robot (IRON): The new generation humanoid robot is expected to achieve mass production by the end of 2026. Highlights include the use of solid-state batteries and prioritizing applications in business scenarios such as guiding and patrolling. The report reveals Baosteel Group will use XPeng's IRON robot for inspection work.
  • Flying Car (ARIDGE): The ARIDGE brand’s "land aircraft carrier" (for personal users) plans to begin mass production and delivery in 2026. The flying car factory's annual planned capacity is 10,000 units.

Financial Considerations Behind the Target Price Increase

Bank of America set XPeng's new target price at $27, based on an average of the EV/Sales (Enterprise Value/Sales) and DCF (Discounted Cash Flow) valuation methods.

The report explains that although the target EV/Sales multiple in their valuation model was lowered from 1.8x to 1.5x, moving the valuation basis from 2025/2026 forecast sales to full-year 2026 actually led to an increase in fair value based on the EV/Sales method. Analysts believe that compared to peers, XPeng's higher sales growth expected in 2025-2026, and the launch of new businesses like humanoid robots and Robotaxis, merit a higher valuation multiple.

Although the target price was raised, Bank of America's profit forecast on XPeng has become more conservative. The report expects the company's gross margin will face pressure due to product mix adjustments, leading to increased losses in 2025. However, the bank still expects XPeng to achieve profitability in the fourth quarter of 2025.

 

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