Here's Why Elon Musk Just Downplayed Tesla's Prospects (Yes, You Read That Correctly)

The bull and bear debate over Tesla (NASDAQ: TSLA) is often framed in narrative terms. The salmon-grabbing bears usually classify Tesla as just a car company and wave a hand in the general direction of its astronomic earnings-based valuation. In contrast, the red-rag raging bulls tend to favor pricing in Tesla's growth initiatives as if they were just around the corner. But which is the more accurate approach to take, and why might CEO Elon Musk have inadvertently downplayed the company's prospects on the earnings call? Here's the lowdown.

How bears and bulls see Tesla

Tesla has generated $14.8 billion in earnings before interest, taxation, depreciation, and amortization (EBITDA), and has suffered declining electric vehicle (EV) market share and automotive revenue in 2025. Yet it trades on a market cap of more than $1.46 trillion. As such, it's not surprising that advocates of Tesla as a car company are negative about the stock.

On the other side of matters, Tesla stock advocates such as Cathie Wood's Ark Invest have argued that 88% of Tesla's enterprise value (market cap plus net debt) will be attributable to robotaxi in 2029, with just 9% from EVs, 2% from energy storage, and 1% insurance. Meanwhile, Elon Musk believes 80% of the company's value could come from Tesla's robot initiative, Optimus.

Just a car company, or the leader in AI?

It's initiatives, robotaxis, and Optimus that led Musk to "emphasize that Tesla really is the leader in real-world AI" on the recent earnings call. If you start pricing in assumptions over robotaxis, in line with Ark Invest's (which include bear and bull scenarios for autonomous ride-hail revenue ranging from $603 billion to $951 billion in 2029), then it's not difficult to start producing extremely bullish price targets.

Start penciling in Musk's argument that Optimus will contribute 80% of the value of a company that Ark thinks could be worth between $7 trillion and $10.9 trillion, without any attribution to Optimus, and the sky is the limit for Tesla's valuation.

Image source: Tesla.

How to think about Tesla stock

The reality lies somewhere in between these two extreme approaches. Tesla is obviously more than just a car company. Still, it's not quite a robotaxi/unsupervised full self-driving (FSD) company yet, nor is it a volume Cybercab-producing company or a volume Optimus robot producer yet.

All of this leads to Musk's comment on the earnings call that "You can think of Tesla as like, I don't know, a dozen start-ups in one company. And I've initiated every one of those start-ups."

He was answering a question aiming at defining Tesla's "core competency" areas and those "outside" of it. Musk's point is that none of Tesla's initiatives started as core competencies; however, his comment also serves to help define how investors might view the company.

In other words, it's seen as a kind of super-ETF of high-growth companies, and as every investor knows, high growth and high reward usually come with high risk and sky-high valuation, not least because the value in the company/companies hasn't been released yet.

Image source: Tesla.

Why the description downplays Tesla

It's a good way to think about Tesla, but adopting this approach runs the risk of downplaying one of the main reasons to buy Tesla stock -- that Tesla is essentially a dozen start-ups in one company. However, those "start-ups" come with massive pre-loaded advantages that help derisk the stock.

Let's put it this way: start-ups typically don't have the kind of financial firepower that Tesla has, or the potential to raise capital. Still, it's not all about access to capital and funding; Tesla's growth initiatives also come with tremendous technological and operational advantages.

Consider robotaxis. Tesla is already the dominant player in EVs (vehicles ideal for low-cost continual use) and is already set to volume-produce Cybercabs in 2026. Meanwhile, its peers are nowhere near this. Tesla's massive data advantage (coming from Teslas on the road) over rivals like Waymo isn't the kind of technological edge a young growth company enjoys.

Image source: Getty Images.

Meanwhile, publicly available unsupervised FSD (when released) will start with a huge installed base of potential customers, and possible future customers if the regulatory environment eases worldwide. As for Optimus, as CFO Vaibhav Taneja noted on the earnings call, "most of the engineering team, which is working on Optimus, has come from the vehicle side."

In addition, start-ups don't do $16.5 billion deals with Samsung to secure AI chips to power robotaxis and Optimus.

A stock to buy?

The examples above are just a few ways in which Tesla's growth initiatives have significant advantages, not only over start-ups but also over smaller businesses backed by large parent companies, such as Waymo or Zoox. As such, Tesla's businesses don't carry the same level of risks that high-growth companies usually do, and that needs to be factored into the bull and bear debate.

Lee Samaha has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Tesla. The Motley Fool has a disclosure policy.