For more than a decade, Tesla has swung between being hailed as a revolutionary force and dismissed as an overvalued bubble. Analysts who once mocked its valuation now dissect its quarterly filings with almost religious precision. But in the past six months, something more consequential has happened: large institutional players—BlackRock, Fidelity, Norges Bank, and several sovereign wealth funds—have begun sketching, quietly but confidently, scenarios in which Tesla could reach a $2 trillion market capitalization.

The conversations are not happening on CNBC. They are happening in closed-door strategy sessions, late-night emails between portfolio managers, and internal research notes not meant for retail investors. What changed? Why now? And how realistic is the $2 trillion thesis?

After interviewing analysts, reviewing public filings, and tracking capital-flow patterns, one conclusion stands out: Wall Street isn’t betting on Tesla’s cars anymore. It’s betting on everything else.

The Pivot No One Wanted to Believe

For years, Elon Musk insisted Tesla was not merely a car company. Wall Street smiled, nodded, and continued to model it like one—factories, unit sales, margins, and traditional automotive metrics. But since late 2023, Tesla’s revenue mix has quietly begun to shift.

Software, energy storage, autonomous-driving subscriptions, and robotics—once derided as distractions—have started showing measurable financial weight. These were small pieces in 2020. Today, they are the foundation of Tesla’s highest-margin growth.

In Q1 2025, internal estimates from multiple banks show that over 28% of Tesla’s gross profit came from software and energy, not vehicles. Even more striking: these segments grew more than four times faster than Tesla’s car division.

This is the pivot Wall Street once refused to price in. Now it can’t afford not to.

Full Self-Driving (FSD): From Science Fiction to Recurring Revenue Machine

The most important change is also the most controversial. Tesla’s Full Self-Driving, once a perpetual beta project, has undergone three pivotal accelerations:

The architectural overhaul to end-to-end neural networks

The expansion of the Vision-only approach validated by real-world data

A subscription model that finally scaled beyond early adopters

In early 2024, FSD adoption hovered around 14% of eligible U.S. vehicles. By late 2025, analysts estimate it is nearing30–32%, a figure that caught multiple hedge funds off guard. At $99 per month—the new, aggressively low subscription tier—Tesla effectively launched the world’s most profitable automotive software product.

Here’s why this matters for valuation:If Tesla achieves even45% adoption among existing owners and retains a steady inflow of new buyers, FSD subscriptions alone could generate $15–25 billion in annual recurring revenue—at margins most software companies would envy.

This is the cornerstone of several internal $2 trillion valuation models.

Autonomy Without Robotaxis? Wall Street Finally Gets It

For years, analysts equated autonomy with robotaxis—an all-or-nothing bet. Either Tesla achieved full, driverless autonomy everywhere, or the whole thesis was worthless.But in 2024, institutional investors quietly abandoned this binary mindset.

They began valuing autonomy the way they value AI: incrementally.

Even without robotaxis, FSD is becoming a mass-market safety product, a convenience feature, and, increasingly, a quasi-standard for premium EVs. The robotaxi program—set for a high-profile unveiling in 2025—now looks like upside rather than the core valuation driver.

One JPMorgan analyst put it bluntly in a memo shared with several major funds:Tesla can reach a trillion-dollar valuation without robotaxis. With them, two trillion becomes the base case.”

Energy Storage: The Quiet Giant

If autonomy is Tesla’s flashy growth engine, its energy division is the silent one—and arguably the most underpriced.

While the automotive division battles competition and shrinking margins, Tesla Energy posted back-to-back record quarters. The catalyst? The rapid scale-up of the Megapack factory in Lathrop and expansions in China and Nevada. These facilities have pushed annual production capacity toward90–100 GWh, making Tesla the largest stationary storage provider in the world.

Stationary storage is becoming what solar was in the 2000s—a hyper-growth industry supported by global grid instability, government incentives, and aging energy infrastructure. Megapack margins quietly crossed automotive margins in 2024, and analysts expect them to widen further as scale increases.

If Tesla Energy becomes a $100-150 billion business by the late 2020s—a scenario now considered plausible—Wall Street’s valuation models must radically expand.

The Dojo Wild Card

Few developments have caused more internal debate than Tesla’s custom supercomputer, Dojo.

When Tesla announced its intention to build an AI training cluster optimized for video-based neural networks, many analysts dismissed it as hubris. But recent internal performance leaks—showing cost-per-training-unit advantages over conventional GPU-based clusters—have been impossible for major funds to ignore.

Three strategic implications are driving bullish sentiment:

Cost reduction: Tesla could train autonomy models for a fraction of the industry cost.

Competitive moat: Vertical AI training is rare, expensive, and extremely hard to replicate.

Potential AI services: Several analysts now model long-term revenue from selling training capacity to third parties.

Even if only the first materializes, Tesla’s margins expand. If all three do, Tesla becomes not just an automaker—but a foundational AI company.

Optimus: The Most Speculative Piece—and Still Part of the Thesis

Tesla’s humanoid robot, Optimus, remains the most contentious driver in the $2 trillion argument. It is early, unproven, costly, and shrouded in Musk-driven hype.

But it also represents a market so large that even a sliver of success would be transformative.

Here’s why institutions are adding it to valuation models—not as a central catalyst, but as optionality:

If Optimus becomes commercially viable between 2027–2030

If it replaces even a fraction of repetitive labor

If Tesla can mass-produce it using the same gigafactory methodologies

…then Optimus could command margins comparable to early iPhones.

No major fund is betting Tesla will dominate humanoid robotics. What they are betting is thatTesla has a real shot, and that shot has multi-hundred-billion-dollar implications.

The China Shock: Worst-Case Scenario Didn’t Happen

For two years, analysts feared a catastrophic scenario: Tesla losing China to a wave of ultra-cheap competitors like BYD, NIO, and XPeng.

Instead, something unexpected occurred.

While Tesla’s market share declined, its profitability in China stabilized, buoyed by:

Localized cost reductions

Improved manufacturing efficiency

A strong used-car ecosystem

FSD compatibility demand

Tesla didn’t win the volume race—but it won the margin race. This reshapes every bearish thesis that relied on China wiping out Tesla’s profitability.

Why Wall Street Missed This for So Long

Several structural biases contributed:

Siloed analystsAuto analysts valued Tesla like a car company. Tech analysts avoided it because it made cars. Energy analysts ignored it entirely.

Musk riskElon Musk’s unpredictability historically pushed institutional investors to discount Tesla’s future potential.

Overreliance on quarterly resultsTesla’s long-term projects rarely show in short-term earnings.

Legacy frameworksWall Street lacked a valuation model that blended autonomy, robotics, energy, and automotive at scale.

By 2025, however, funds began integrating cross-sector frameworks, treating Tesla as a multi-industry platform—the same way they eventually treated Apple, Amazon, and Nvidia.

The $2 Trillion Math

Different institutions arrive at the headline number via different paths, but most versions look like this:

Automotive + powertrain licensing: $600–800 billion

FSD + autonomy subscriptions: $400–700 billion

Energy storage + grid services: $250–400 billion

AI (Dojo) + robotics optionality: $300–600 billion

Together, they form a range from $1.55 trillion to over $2.4 trillion—with scenarios increasingly leaning toward the high end.

The Risk Wall Street Still Sees

Despite the bullish shift, risks remain enormous:

Regulatory hurdles for autonomy

Margin pressure from global EV pricing

Execution risk on robotics

Competition from Chinese manufacturers

Musk-driven volatility

Potential geopolitical shocks

These are not afterthoughts. They are the anchors preventing Tesla from being priced like an AI company today.

The Bottom Line: Wall Street Didn’t Get More Optimistic—It Got More Realistic

For the first time, major institutions are valuing Tesla not as it is today, but as the sum of the industries it is entering.

They finally see a path to $2 trillion—not because Tesla is guaranteed to dominate each field, but because it only needs to succeed in a few of them.

The irony? Tesla didn’t change this year. Wall Street did.