1 Popular AI Stock to Sell Before It Falls 45% According to 1 Wall Street Analyst (Hint: It's Not Nvidia)

Key Points

• Tesla's robotaxi pilot in Austin is an important milestone, but vehicles still require human monitors.

• The company's valuation leaves little room for error, with shares trading at about 192 times earnings.

• A Guggenheim analyst sees about 45% downside risk for the stock.

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Tesla (NASDAQ: TSLA) is one of the market's favorite artificial intelligence (AI) plays. The pitch is simple: autonomy, ride-hailing, and software-like margins layered onto a global electric vehicle platform. Yet, earlier this month, a Guggenheim analyst reiterated a sell rating and a $175 price target for the stock. The analyst has concerns about Tesla's plans for its autonomous ride-sharing network, called Robotaxi. He believes its rollout will be lengthy, costly, and risky, featuring a significant cash burn, technical hurdles, and regulatory risk.

But is the analyst right to be so bearish on Tesla?

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Robotaxi progress is real -- but supervised

Tesla began a small, invite-only robotaxi pilot in Austin this summer. Rides are geofenced and -- crucially -- still include an in-car supervisor. That's progress, but it is not unsupervised autonomy. This is an important distinction, because to live up to the stock's sky-high valuation, we're going to need fully unsupervised autonomous ride-sharing.

Regulators had been watching even before the pilot launched. In May, the National Highway Traffic Safety Administration (NHTSA) sent Tesla a detailed information request describing plans to operate a Model Y fleet on Austin roads starting in June and asking for technical specifics and safety protocols. The agency's interest underscores the compliance work still ahead -- work that rarely moves as fast as software.

Of course, Tesla's Robotaxi pilot program can still be a win. Further, real-world Robotaxi miles (even if they're supervised) will undoubtedly help the company make improvements to the technology and service. The problem, however, is investor expectations. If a broadly available, unsupervised autonomous ride-sharing network ends up requiring years of iteration, approvals, and capital, near-term economics will look more like research and development than recurring software.

Financials and valuation leave little room for error

Unfortunately, Tesla stock's valuation (as of this writing, the growth stock trades at about 192 times earnings) demands new, profitable revenue streams sooner rather than later. The company's latest quarter captured deteriorating financials.

Second-quarter revenue was $22.5 billion, down 12% year over year, as automotive revenue fell 16% year over year. Income from operations fell to $923 million from $1.6 billion a year ago -- down 42%. Earnings per share declined 18% year over year to $0.33. These figures reflect a tough automotive environment and possibly even cooling demand for Tesla vehicles overall. This is happening at the same time that Tesla is investing heavily in its next act.

But liquidity is solid, which gives Tesla room to invest. Cash, cash equivalents, and short-term investments totaled about $36.8 billion at quarter-end. Operating cash flow for the first half was $4.7 billion against $3.9 billion of capital expenditures, illustrating how autonomy, AI training, and capacity expansion are already claiming sizable dollars.

Ultimately, near-term profits are shrinking while the company invests for an uncertain long-term payoff.

Put the pieces together and Guggenheim's stance becomes easier to understand -- even if you disagree with the exact price target. Autonomy is likely to be a drawn-out grind rather than a flip of a switch. Regulatory scrutiny will remain intense. And scaling a supervised pilot into an unsupervised, commercially durable network will take time and money. If that journey stretches on too long and investors are already paying for a swift outcome, downside risk grows.

Tesla has surprised skeptics before, and the optionality here is real -- from Robotaxis to energy to lower-cost vehicles. But great companies are not always great stocks at every price. For investors who want AI exposure without assuming years of execution and policy risk, it may be prudent to wait for a price that better reflects the Robotaxi service's timeline risks.

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Daniel Sparks and/or his clients have positions in Tesla. The Motley Fool has positions in and recommends Nvidia and Tesla. The Motley Fool has a disclosure policy.