Although electric vehicle sales are under pressure, the market holds high hopes for the company's progress in autonomous robotaxis, humanoid robots, and in-house developed chips. Analysts generally believe investors have grown accustomed to Elon Musk's over-promising and will not be overly concerned as long as visible progress is made. Year-to-date, Tesla's stock has risen over 25%, surpassing the S&P 500's 18% gain.

Tesla Motors, Inc.(TSLA.US)  is betting on artificial intelligence and autonomous driving technology to redefine its future.

Year-to-date, Tesla's stock has risen over 25%, surpassing the S&P 500's 18% gain, and reached an intraday all-time high of $498.83 in December.

Despite the pressure on EV sales, the market pins high hopes on the company's advances in robotaxis, humanoid robotics, and its own chips. Wedbush analyst Dan Ives predicts Tesla could reach a $3 trillion valuation after a "monster year," nearly double its current market cap.

However, multiple 2025 targets set by CEO Elon Musk have gone unmet. The company's robotaxi service operates only in Austin and the San Francisco Bay Area with about 160 active vehicles, far below Musk's pledge to deploy in at least eight metropolitan areas. Meanwhile, its U.S. EV sales are projected to fall 9%, sales in China are down 9% year-over-year, and EU sales have plunged 39%. Analysts widely agree that investors are accustomed to Musk's over-promises and won't fret excessively as long as tangible progress is visible.

Robotaxi Expansion Hits Roadblocks

The rollout of Tesla's robotaxi network has fallen significantly short of expectations.

Musk had pledged to operate in at least eight metro areas, including Phoenix and Las Vegas, by year-end and significantly expand fleets in Austin and the Bay Area.

According to crowdsourced data tracking, only about 160 vehicles are currently active, and Austin's fleet has not met the goal of reaching 60 vehicles by month's end.

The service Tesla currently offers in Austin and the Bay Area is not drastically different from Uber Technologies or Lyft, using Model Y SUVs equipped with the Full Self-Driving (FSD) system but still requiring employee supervision.

The company is testing unsupervised trips in Austin, with Musk hoping to remove in-car safety monitors before the end of December. CFRA analyst Garrett Nelson said: "In the past we've seen Musk overpromise on timing for product or service rollouts, and we expect that will be the case with robotaxis as well."

Analysts are divided on 2026 expansion expectations. Barclays and Truist Securities warn that unclear expansion cadence for Tesla versus competitors like Alphabet's Waymo could lead to stock volatility.

Deutsche Bank predicts the fleet could exceed 2,500 vehicles by June if Tesla meets its early-year target of 1,500 vehicles.

Institutions like Morgan Stanley use more conservative forecasts. Tesla's Cybercab robotaxi vehicle is also slated for production in 2026, though when it might operate on U.S. roads remains unclear.

Morningstar analyst Seth Goldstein noted that one reason for delays is Tesla's high priority on safety, as dangerous incidents could force a pause in testing—a problem encountered by GM's former robotaxi unit. He said: "I think they want to be extra careful to make sure when they do go to market, they are very effective."

FSD Overseas Expansion as a Key Variable

Adoption of the Full Self-Driving software has remained low.

As of Q3, only 12% of Tesla customers paid to activate FSD. However, overseas expansion could change that, bringing additional revenue, training data, and potentially boosting sales.

Musk stated Tesla will "hopefully" offer FSD in the UAE in January, which would be its first market in the Middle East. He also expects relevant overseas regulators to grant full approval for FSD "around February or March," which should help Tesla compete against rivals offering similar systems.

Goldstein noted that FSD approval in Europe is an "uncertain variable." Dutch regulators plan to test the system in February, potentially paving the way for approval in the Netherlands. According to Tesla, if FSD is approved in the Netherlands, other EU countries would have the right to recognize that exemption.

Subsequently, the company stated it will request formal approval for the software from the European Commission. This could help improve Tesla's sales in the EU-27, where sales for the first 11 months of the year are down about 39% year-over-year, amid increasingly fierce competition from rivals.

Tesla's U.S. sales are projected to fall 9% in 2025, with Musk calling the coming quarters "difficult." This is largely because the U.S. eliminated the previous tax credit that incentivized EV purchases, which has already prompted some consumers to cut back on buying electric vehicles.

But some analysts say this could benefit Tesla over time. Canaccord Genuity analyst George Gianarikas wrote in a recent report: "Only brands with great product, cost discipline, and loyalty will maintain/gain share. That's good for Tesla."

Robots and Chips Defining Long-Term Value

Tesla is about to start producing two products that could define its future: a line of humanoid robots and a tiny silicon chip.

According to Morgan Stanley estimates, the humanoid robot market could be worth $5 trillion by 2050, with the technology accelerating in the mid-2030s.

Musk has proposed selling the Optimus robot for about $30,000 for use in factories and homes, suggesting the product could one day account for 80% of Tesla's value.

But Tesla has a long way to go to achieve this. The company has faced challenges designing the robot's hands and forearms and sourcing components. Musk said in October: "Cars have ready-made supply chains, computers have ready-made supply chains. Humanoid robots do not have a supply chain."

According to Musk, the third version of the Optimus prototype, intended for mass production, is expected to be ready for a demonstration by March.

Nelson and other analysts look forward to learning more about the Optimus roadmap. But he said it remains a "secondary" product unlikely to begin contributing to Tesla's earnings in the near term.

Powering the robots, data centers, and robotaxis will be AI5, Tesla's next-generation chip slated for production start by the end of 2026. Musk claims AI5 offers significant improvements over the current AI4 and outperforms competing chips from Nvidia.

Musk said in October: "We are pursuing extreme minimalism. The net effect is, I think, AI5 may be best in performance per watt, maybe by two or three times, and maybe best in performance per AI dollar, maybe by 10 times."

Tesla's 2026 roadmap also includes producing new energy products and an update on the long-awaited next-generation Roadster. The all-electric Tesla Semi truck is also expected to enter mass production in the second half of 2026 after years of delays.