Tesla (NASDAQ:TSLA) may need to demonstrate clearer progress in scaling its Robotaxi business before investors gain greater confidence in the company’s broader Physical AI strategy, according to Morgan Stanley.
In a note to clients on Tuesday, analyst Andrew Percoco said feedback following Tesla’s second-quarter earnings showed investors remain constructive on the long-term opportunity, particularly given stronger adoption of the company’s Full Self-Driving software.
However, increased spending and pressure on cash flow have raised the importance of showing measurable progress in Robotaxi and the Optimus humanoid robot programme.
Robotaxi scaling becomes key test for Tesla
Percoco said stronger investor conviction “will require clearer evidence that Robotaxi is scaling and more tangible Optimus proof points to support the ROI on elevated capex.”
Morgan Stanley said Tesla’s latest quarter did not materially change its longer-term view that the company could lead in Physical AI.
At the same time, weaker gross margins, increased research and development expenditure and an extended period of free cash flow burn have “sharpened our (and investors’) focus on measurable progress across Robotaxi and Optimus.”
That puts greater emphasis on Tesla demonstrating that its investment in autonomous vehicles and robotics can translate into operating progress.
FSD adoption provides a positive signal
One of the more encouraging elements highlighted by Morgan Stanley was the adoption rate for Tesla’s Full Self-Driving software.
The firm pointed to a 55% FSD attach rate on North American deliveries, substantially above its previous expectation of between 25% and 30%.
Investor feedback around Tesla’s Robotaxi disclosures was also viewed as helpful “on the margin,” according to the note.
Attention, however, remains focused on whether Tesla can increase the density of Robotaxi vehicles within existing cities while maintaining safety standards and improving utilisation.
Investors seek more evidence from Optimus
Morgan Stanley indicated that Tesla’s Optimus programme remains at an earlier stage in terms of providing investors with measurable evidence.
For Optimus, the market “is still looking for evidence beyond commentary around SOP.”
The distinction makes Robotaxi the more immediate test of whether Tesla’s Physical AI investments can begin demonstrating tangible progress.
According to Percoco, greater confidence “will depend on evidence that the Robotaxi flywheel is working.”
The indicators investors are likely to watch include a growing number of vehicles operating on the road, greater density within individual cities, increasing weekly unsupervised miles and improving unit economics.
Percoco described Robotaxi as “the nearer-term validation point” for Tesla’s wider Physical AI strategy.
For investors, the Morgan Stanley assessment suggests the focus is shifting from the scale of Tesla’s ambitions towards evidence of execution. Stronger FSD adoption provides one encouraging indicator, but measurable Robotaxi expansion and more tangible Optimus milestones may be needed to support greater conviction as elevated investment continues.
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