Elon Musk’s Bold Statements

Although Tesla is best known for its fleet of EVs, Musk has made it abundantly clear on several occasions that he sees the company as an artificial intelligence (AI) and robotics business.

During Tesla’s second-quarter earnings call, Musk didn’t mince his words when he boldly said, “I recommend anyone who doesn’t believe that Tesla would solve vehicle autonomy should not hold Tesla stock. They should sell their Tesla stock.”

To me, this was Musk’s version of drawing a line in the sand. If investors think the idea of autonomous driving carries too much execution risk or is merely something more akin to science fiction, they should move on, Musk told investors.

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Risks and Opportunities in Autonomous Driving

Tesla’s autonomous-driving software is referred to as full self-driving (FSD) by management. Right now, there are two key ways that FSD can help ignite further growth at Tesla.

First, if Tesla’s FSD proves to be better than other autonomous-driving platforms available on the market, it could lead to an influx of new EV buyers.

The second opportunity for FSD lies in Tesla’s vision to build a large-scale fleet of self-driving cars — an initiative referred to as Robotaxi.

However, there are inherent risks. Tesla could be hurt if FSD does not scale exponentially. It’s pretty difficult to quantify how many people actually want to buy a car that drives itself or would feel comfortable riding in one.

Secondly, the Robotaxi rollout hasn’t been flawless so far, delaying Tesla’s progress in this area.

Developing self-driving technology requires robust spending on engineering, quality-assurance testing, and more.

For all of these reasons, if you can’t fully buy into the notion of autonomous driving, its potential to scale, and Tesla’s ability to execute, then Musk’s advice to pass over Tesla stock might be absolutely correct.

Looking at the Big Picture

Throughout history, many successful businesses branched out from their initial products and evolved into more sophisticated operations. Tesla is very much at a point in its evolution that it no longer should be viewed as an automobile company.

The company’s transition from an EV and energy-storage business to a full-blown AI enterprise serves as the next frontier for Tesla.

Musk’s comments should not be seen as intimidating or a warning. Rather, he’s making it clear that Tesla has an ambitious vision revolving around AI. If you’re not aligned with that, holding the stock will likely just be frustrating for you.