Tesla (NASDAQ: TSLA) shares have bounced in recent weeks as investors refocus on the company's artificial intelligence (AI) ambitions alongside its core electric vehicle (EV) business. The EV maker and energy company is pushing to commercialize an autonomous ride-hailing network, dubbed Robotaxi, that it says will lean on the same vision system already shipping in its cars.
Against that backdrop, the stock's rebound has reopened the debate: Without LIDAR (Light Detection and Ranging), a sensor system that uses lasers to measure distances and create 3D maps of surroundings, can Tesla really make self-driving work at scale?
What Elon Musk said late last year and then again this spring goes straight to the heart of that question. It also explains why Tesla continues to double down on a vision-only approach despite others continuing to pursue more sensor-heavy stacks.
Investors should first anchor on the business today. In the second quarter of 2025, Tesla's operating income fell 42% year over year to about $0.9 billion, producing a 4.1% operating margin, as pricing pressure and mix weighed on automotive profitability. Tesla produced over 410,000 vehicles and delivered more than 384,000 vehicles in the quarter, while energy storage deployments hit 9.6 gigawatt-hours (GWh) -- a bright spot as the nascent but important segment scales.
The first quarter painted a similar picture of near-term pressure in the core auto business, with revenue down year over year and management emphasizing cost work and software progress as offsets. Shares, meanwhile, have rallied from summer lows and recently traded at around $395, putting Tesla's market capitalization at around the $1.3 trillion mark, as investors again assign significant optionality to autonomy and artificial intelligence (AI).
Those fundamentals matter because they frame why autonomy is so central to the long-term story. If Tesla can layer higher-margin software revenue (Full Self-Driving subscriptions, ride-hailing take rates) on top of a large fleet, the earnings profile looks very different from that of a pure automaker.