Tesla Stock Investors Just Got Good News From Elon Musk About a Trillion-Dollar Market

Tesla (NASDAQ: TSLA) stock is down 18% from its peak, and the company is wrestling with an assortment of headwinds. Tariffs on imported auto parts have lowered margins, CEO Elon Musk's politics have upset potential buyers, and the expiration of federal tax credits has reduced demand for electric vehicles in general.

Those challenges have led to disappointing financial results for several consecutive quarters, and the situation may not improve much this year. Tesla reported 358,023 deliveries in Q1 2026, which was about 12,000 less than what Wall Street anticipated, and the consensus estimate had already been revised lower.

However, Tesla stockholders recently got some good news. Musk over the weekend wrote on X, "Try Tesla Robotaxi in Dallas & Houston!" His post included a video that showed its Model Ys navigating the cities without a driver or safety monitor in the front seats.

Image source: The Motley Fool.

Tesla's autonomous ridesharing business could expand rapidly in 2026

Tesla introduced "autonomous" ridesharing services in two markets last year: Austin and San Francisco. I use quotes because the company's robotaxis still require human safety drivers in California. But the addition of Dallas and Houston extends its coverage to four markets.

Tesla plans to bring its robotaxis to several more metropolitan areas (across three U.S. states) in the first half of 2026: Las Vegas, Miami, Orlando, Phoenix, and Tampa. By year's end, Elon Musk says robotaxis will be live in dozens of major cities: "We expect to have fully autonomous vehicles in somewhere between a quarter and half of the United States."

Musk added that expansion depends on regulatory approval, so investors shouldn't get too excited just year. After all, Musk initially predicted Tesla would have robotaxis covering half the U.S. population by the end of 2025. But the company did not come anywhere close to that target.

Tesla's robotaxis may move the needle in 2026, but the full impact is years away

Musk says autonomous ridesharing could move the financial needle for Tesla as early as the second half of 2026. "Once it does move the financial needle in a significant way, it will really go exponential from there," he told analysts last spring.

How big is the total addressable market? Morgan Stanley analysts say at least $1 trillion in the U.S. alone, but it could be much larger. Light duty vehicles traveled 3.4 trillion miles in the U.S. in 2024, and ridesharing services currently charge an average of $1.70 per mile. Even if robotaxis cut the price by two-thirds, robotaxis' total addressable market would still be almost $2 trillion.

Of course, adoption will take time, and consumers are unlikely to use robotaxis for every trip. So the actual market will be smaller than the total addressable market. However, even at 25% penetration, robotaxi revenues in the U.S. could total $250 billion to $500 billion per year in the future.

Tesla could grow into its valuation as the physical AI boom unfolds

Morgan Stanley analysts believe the car is to Tesla what the book was to Amazon. Just as Amazon used its competence as an online bookseller to build a vast online marketplace, which ultimately gave rise to adjacent cloud and advertising businesses, Tesla is using its expertise as an electric car manufacturer to build physical artificial intelligence platforms, which should give rise to autonomous driving and humanoid robotics businesses.

Tesla currently trades at 240 times adjusted earnings, an absurdly expensive valuation tied to growth prospects in those markets. But Morgan Stanley estimates earnings will increase at 27% annually to reach $18.18 per share in 2035, driven by especially large contributions from full self-driving software, autonomous ridesharing, and humanoid robots. That means Tesla currently trades at 22 times forecasted earnings in 2035.

That does not make the stock cheap, but it does leave room for Tesla to grow into its valuation. Demand for physical AI products should still be thriving when 2035 rolls around, which means Tesla's earnings trajectory could be just as impressive over the subsequent decade. Investors confident in that outcome should feel comfortable buying shares today, provided they are willing to hold the stock for a decade or two.

Trevor Jennewine has positions in Amazon and Tesla. The Motley Fool has positions in and recommends Amazon and Tesla. The Motley Fool has a disclosure policy.