FSD And AI May Not Add To Tesla’s (TSLA) Topline In 2025

Elon Musk has claimed that Tesla’s future is now associated with its AI ventures, not necessarily car delivery numbers. Tesla has always been more than just a car company, so nothing surprising in Musk’s point of view. The company’s energy division reported a revenue growth of 100%, adding $10 billion to its topline. BYD is the only other car maker that has an energy division. If a company can add $10 billion to its topline through a separate business segment, it certainly is more than just a car maker.

However, as we look deeper into Tesla’s AI advancements, it is hard to see topline growth from its new ventures in 2025. Let’s start with autonomous driving. Tesla wants to have a fleet of robotaxis. That objective is quite far away. For now, Musk would do a good job if he could get regulatory approval to operate Full Self Driving in just one city. Currently, the company has an FSD license for testing in Shanghai, China. Donald Trump’s government is not expected to hand out subsidies to the EV sector, but Musk could score a big win if he manages to get regulatory approval for testing the FSD in its current state in at least one US city.

While it is easy to say that the approval is dependent on Musk’s relationship with the new government, one cannot ignore the current state of the technology itself. Tesla has done a great job of achieving the FSD levels it has until now. That’s truly a remarkable feat. However, analysts believe Musk’s usage of cameras instead of LiDAR remote sensing technology is a hurdle in its progress. Unless the company implements a hardware change, FSD may remain a distant dream.

This will also have an impact on Tesla’s humanoid robot, Optimus. Autonomy is dependent on Tesla’s AI achievements and both Robotaxis and humanoid robots may arrive together. 2025 is not going to be the year for that, so investors may want to use any setback as a buying opportunity if they want to build a long-term position in the stock.

Tesla is 23rd on our latest list of the 30 Most Popular Stocks Among Hedge Funds. As per our database, 99 hedge fund portfolios held TSLA at the end of the third quarter which was 85 in the previous quarter. While we acknowledge the potential of TSLA as a leading AI investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for an AI stock that is as promising as TSLA but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.

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Disclosure: None. This article was originally published at Insider Monkey.