Tesla stock hits record high, completing stunning turnaround fueled by AI and Robotaxi Dreams

Tesla has officially closed at a fresh, record high of $489.88, completing a dramatic, months-long rebound that saw the stock more than double from its lows earlier this year. The surge, which gives the electric vehicle maker a valuation of over $1.6 trillion, signifies a decisive shift in investor focus from the company's core automotive business to its pioneering role in Artificial Intelligence (AI) and robotics.

The record close, which surpasses the previous high set a year ago, solidifies the narrative that Wall Street now views Tesla as an AI company first, and a car company second

The AI and robotaxi engine

The spectacular turnaround, which overcame severe losses and market skepticism earlier in the year, was largely driven by recent advancements and renewed commitment to Tesla’s autonomous future:

The immediate catalyst for the final push to the record was CEO Elon Musk’s announcement that Tesla had begun testing fully unoccupied, self-driving Robotaxis in Austin, Texas. This marks a critical step toward realizing Musk's vision of launching an autonomous ride-hailing network.

Moreover, investors have largely bought into the company’s broader mission to lead in "Physical AI", the combination of self-driving software, the Optimus humanoid robot, and its vast supercomputing resources. This enthusiasm mirrors the broader market frenzy for AI-related stocks.

Musk's renewed commitment

Another significant factor in the stock's stability and rally was the shareholder approval of a massive, long-disputed compensation plan for Elon Musk. This approval reassured investors about the CEO's long-term commitment to the company, overcoming governance concerns that had previously weighed on shares.

Overcoming headwinds

The record high comes despite significant challenges in Tesla's traditional electric vehicle (EV) segment, including intense global competition and slowing profit margins.

Tesla posted strong Q3 delivery numbers, but the underlying EV business has faced increasing pressure from both established automakers and aggressive Chinese rivals, leading to price cuts that hurt profitability.

The company also continues to face regulatory challenges, including a recent ruling by the California DMV regarding misleading marketing language around its "Full Self-Driving" (FSD) software.

Still, analysts believe the potential revenue streams from FSD subscriptions and the future Robotaxi network are now the overwhelming valuation drivers, overshadowing short-term weakness in car sales.