Is Now the Time to Buy Tesla Ahead of a Potential AI and Autonomous Driving-Driven Re-rating?

Tesla Inc. (TSLA) has long been a bellwether for innovation in electric vehicles and artificial intelligence. As of late 2025, the company stands at a critical juncture, with its Full Self-Driving (FSD) technology, strategic partnerships, and regulatory challenges shaping its trajectory. For investors, the question remains: Is now the time to buy Tesla ahead of a potential re-rating driven by AI and autonomous driving?

Strategic Growth Catalysts

1. FSD Expansion and AI Infrastructure
Tesla's FSD (Supervised) system is now operational in key markets, including the U.S., Canada, China, and Australia, with plans for further global expansion according to Tesla's official website. The system leverages data from over six million vehicles, enabling rapid iteration through real-world scenarios equivalent to 100 years of driving in just 10 minutes as reported by Tesla. This data-centric approach positions Tesla to refine its neural networks and custom AI inference chips, such as the AI6, which are critical for scaling autonomous capabilities according to Tesla's technical documentation.

A pivotal catalyst is Tesla's $16.5 billion partnership with Samsung to manufacture the AI6 chip at Samsung's Taylor, Texas, facility. This collaboration, described as one of Samsung's largest foundry contracts, ensures secure, U.S.-based production of components for FSD, Optimus, and AI training infrastructure according to industry analysis. By reducing reliance on third-party GPU suppliers, Tesla strengthens its vertical integration and accelerates hardware-software synergy.

2. Energy Business as a Revenue Anchor
While profitability in the automotive segment has waned-Q3 2025 saw a 37% year-over-year decline in net income to $1.37 billion-Tesla's energy division has emerged as a stabilizing force. Revenue grew 44% year-over-year to $3.42 billion, driven by Megapack deployments and data center projects. This diversification underscores Tesla's evolving role in energy infrastructure, complementing its AI ambitions.

3. Regulatory and Market Dynamics
Elon Musk has emphasized that unsupervised FSD is a "key unlock" for Tesla's growth, with plans to remove safety drivers in Austin by year-end. If achieved, this could catalyze a re-rating by demonstrating the commercial viability of autonomous driving. However, regulatory hurdles persist. For instance, California regulators have threatened to suspend Tesla's sales license over deceptive marketing claims related to "Autopilot" and "FSD" as reported by 10News. Such actions highlight the tension between innovation and public safety, which could delay broader adoption.

Near-Term Execution Risks

1. Regulatory and Legal Constraints
The "Stay in Your Lane Act," proposed by Senator Ed Markey, seeks to restrict autonomous systems to predefined operational domains, such as highways. If enacted, this could limit Tesla's ability to deploy FSD in complex urban environments. Additionally, California's 90-day ultimatum to revise marketing language for FSD underscores the reputational and compliance risks tied to regulatory scrutiny.

2. Financial Pressures and Cost Challenges
Tesla's Q3 2025 results revealed a 18% automotive gross margin, down from 19.8% in 2024, driven by aggressive price cuts and rising tariffs. While revenue hit a record $28.1 billion, declining regulatory credit income and increased R&D spending have pressured profitability as detailed in financial analysis. These financial headwinds could strain resources as Tesla invests in AI and robotics, particularly the underperforming Optimus project according to financial reports.

3. Robotaxi Ambitions and Technical Hurdles
Despite Musk's optimism, Tesla's robotaxi fleet has faced setbacks, including underperformance in expansion and legal requirements for driver oversight. While the company aims to launch robotaxi services in 8–10 metro areas by year-end as reported by financial news, execution risks remain high. Delays in achieving unsupervised autonomy could erode investor confidence and delay monetization.

Conclusion: Balancing Catalysts and Risks

Tesla's AI and autonomous driving roadmap remains a compelling long-term story, underpinned by its data advantage, strategic partnerships, and energy diversification. The Samsung chip deal and AI6 development are particularly noteworthy, as they address critical bottlenecks in hardware scalability. However, near-term risks-including regulatory pushback, financial pressures, and technical delays-pose significant challenges.

For investors, the decision to buy Tesla hinges on their risk tolerance. While the company's AI-driven re-rating potential is substantial, execution risks could weigh on short-term performance. A cautious approach might involve monitoring regulatory developments and FSD deployment timelines, while hedging against volatility in the automotive segment. In the end, Tesla's ability to navigate these challenges will determine whether its AI ambitions translate into sustainable value creation.