Tesla’s turning point: From automotive business to AI narrative
TSLA stock finds itself at a crucial moment. With the S&P 500 index at all-time highs, a U.S. labor market with some cracks but still solid, and inflation that appears to be currently under control, TSLA must prove it can follow the market after consolidating above the $400 threshold, which in recent years has been a resistance zone that formed local peaks.
Weekly chart of TSLA, the dashed black line marks the $400 threshold
Tesla shares have always been a nightmare for every value investor. Just think about what Charlie Munger, Warren Buffett’s longtime partner, would respond when asked what he thought about the stock: “I would never buy it, I would never sell it short, I would never have anything to do with it.”
Tesla stock price has always followed sentiment and the hype of the moment rather than fundamentals, given the eclecticism of its CEO, and has been marked by absurd valuations and stratospheric multiples compared to automotive competitors.
However, the company has consolidated and (thanks also to the help of federal incentives from past U.S. administrations) has sold millions of cars worldwide. With the arrival of Chinese competition (BYD surpassed Tesla in 2025 as the world’s first electric vehicle producer by volume), and the elimination of the $7,500 federal tax credit in the United States, it recorded net income down 61% year-over-year, and an 11% decrease in vehicle sales revenue compared to the previous year. Furthermore, for the second consecutive year, deliveries have declined: 1.64 million units in 2025, down 8% from 2024.
From here, a drastic change of course was necessary. And so it was. During the Q4 2025 earnings conference call, Elon Musk announced a decision that marks a turning point: the cessation of Model S and Model X production by the second quarter of 2026, given that sales of the two models collapsed to less than 50,000 units in 2025, representing just 3% of total deliveries versus 1.58 million Model 3 and Model Y vehicles. The two models that contributed to building the brand’s reputation will leave space for mass production of the Optimus robot at the Fremont plant. The goal is to reach production capacity of up to one million Optimus robots per year. CFO Vaibhav Taneja also revealed that the company expects capital investments of $20 billion in 2026, destined for new plants, the Optimus project, and computing resources for artificial intelligence.
Despite this negative financial data, Tesla stock rose 2% in after-hours trading and an additional 1.93% in the overnight session, settling around $440.
The crucial point for an investor is understanding the timing of the transition. The automotive business remains essential to finance Musk’s robotics vision, which is still in the heavy capex phase and far from large-scale commercialization. The automotive margin improved sequentially from 15.4% to 17.9%, a positive signal but still below the company’s historical levels.
On the opportunities side: the Energy Storage business, which recorded revenues of $12.8 billion in 2025 (+26.6% annually) and could reach 25% of total profits by 2027; the potential launch of the “Model 2,” an economy vehicle that could reignite volume growth; the possible licensing of the FSD system to other automakers, which would guarantee a high-margin revenue stream; and achieving concrete milestones on robotaxis, with coverage planned in several U.S. cities that could validate the “transportation-as-a-service” model.
Conclusions
The discontinuation of Model S and Model X marks a profound transformation of Tesla’s business model, now a player completely focused on artificial intelligence and robotics, with all the consequences this entails for volatility and investment time horizons. With a market cap exceeding $1.4 trillion and a P/E that remains elevated despite declining earnings, it already heavily discounts Optimus’s future success and its robotaxi program. Those operating on the stock will need to closely monitor three key metrics in the coming quarters: stabilization of automotive margins, concrete progress in Optimus production with verifiable timelines, and actual geographic expansion of the robotaxi service.
In a market context that has seen rotation from Magnificent Seven stocks toward small caps and value, Tesla represents a crucial test of the “AI narrative” that has sustained tech valuations over the last two years.