Tesla Stock Has Defied the Odds in 2025. Can It Happen Again in 2026?

The interior of a Tesla Cybercab robotaxi. Coming into Monday trading, Tesla stock was up about 18% year to date. (Photo by JONAS ROOSENS/BELGA MAG/AFP via Getty Images)

Key Points

• Tesla’s stock performance in 2025, up about 18% year to date, indicates investor focus has shifted from car sales to AI-trained robo-taxis.
• Despite falling earnings estimates and car sales, investors are driven by the narrative of future ‘inflection points’ in robo-taxi, Optimus, and AI.
• Tesla is the most expensive stock in the S&P 500, trading at about 220 times estimated earnings, with significant expectations for robo-taxi progress in 2026.

Tesla stock has had an unusual 2025, which tells investors one thing: car sales don’t matter much anymore. Now, it’s all about AI-trained robo-taxis.

CEO Elon Musk fed that narrative again over the holiday period.

Tesla stock was down 1.5% in premarket trading on Monday at $468.28, while S&P 500 and Dow Jones Industrial Average futures were 0.2% and flat, respectively.

Coming into Monday trading, Tesla’s stock was up about 18% year to date. That’s despite falling earnings estimates and car sales.

For 2026, Wall Street projects earnings per share of $2.17. A year ago, that estimate was about $4.25. For the fourth quarter, Wall Street expects EPS of 44 cents, down from 73 cents a year ago. Fourth quarter car sales are expected to be about 440,000 vehicles, down from about 496,000 a year ago. Fourth-quarter car sales estimates have been falling as well, with the newest estimates closer to 415,000 vehicles.

Falling sales just haven’t bothered investors, though. “Auto volumes (and broader fundamentals) have increasingly become an afterthought,” wrote Barclays analyst Dan Levy in a recent report. “At this point, we believe the stock is being driven almost exclusively by narrative, with hopes for a number of ‘inflection points’ ahead for Tesla in Robo-taxi, Optimus [humanoid robot], and AI.”

Levy rate shares Hold and has a $350 price target for shares.

Those “inflection points” include removing safety monitors from Tesla’s robo-taxi service, which was launched in Austin, Texas, in June.

Musk tweeted on Dec. 24 that he was driving in a robo-taxi without a safety monitor, fueling hopes that that milestone could be reached by the end of 2025.

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Another milestone would be service expansion. Musk mused in July that Tesla’s robotaxi service could cover half the U.S. population by the end of 2025. That won’t happen now.

Still, Wedbush analyst Dan Ives believes Tesla robo-taxis will be operating in 30 cities by the end of 2026. That would very likely move Tesla past Alphabet’s autonomous taxi service Waymo, which operates in five cities and has plans to roll out to more than a dozen additional cities in the months ahead.

Ives rates Tesla stock Buy and has a $600 price target for shares.

A lot is riding on robo-taxi progress in 2026. The 2025 setup has left Tesla as the most expensive stock in the S&P 500. Shares trade for about 220 times earnings estimated over the coming 12 months. AI software company Palantir Technologies is the second most expensive at closer to 190 times earnings.

Either a lot of Teslas are driving themselves with paying passengers, and no safety monitors in 2026, or the stock could be in trouble.

Predicting Tesla stock, however, is never easy. Shares will almost certainly finish higher in 2025. Tesla stock has only dropped twice on a full-year basis since going public in 2010. That happened in 2016 and 2022.

Write to Al Root at allen.root@dowjones.com