Morgan Stanley Flags High Volatility Ahead for Tesla Stock on Robotaxi and AI Updates

Morgan Stanley has warned that Tesla’s fourth-quarter earnings could lead to an unusually wide range of outcomes for the stock, with investor reaction likely driven less by near-term financials and more by updates on robotaxis, Full Self-Driving (FSD), and Tesla’s expanding artificial intelligence hardware ambitions. According to analyst Andrew Percoco, the market’s response will hinge on how incremental Tesla’s progress appears in scaling its robotaxi and Cybercab initiatives, launching Unsupervised FSD, advancing Optimus Gen 3, and developing its next-generation AI5 chip.

From a financial perspective, Morgan Stanley remains more cautious than the broader market. The bank forecasts Tesla deliveries of 1.6 million vehicles in 2026, roughly 9% below current consensus estimates. It also projects automotive gross margins of 14.2%, compared with the Street’s expectation of around 15%. Percoco further cautions that Tesla could burn approximately $1.5 billion in free cash flow in 2026, a sharp contrast to consensus forecasts calling for positive free cash flow of about $3.1 billion. This divergence is largely attributed to what Morgan Stanley expects to be a significant increase in capital expenditures as Tesla ramps investment in AI, robotics, and autonomy.

Beyond headline numbers, Morgan Stanley identifies several key catalysts that could meaningfully move Tesla shares. Chief among them is the robotaxi rollout, particularly the timing of a public launch in Texas without a safety monitor. Updates on miles driven in Austin are expected to be closely scrutinized by investors. Progress toward Unsupervised FSD is another major focus, with Tesla’s cumulative FSD miles now estimated at roughly 7.4 billion. Percoco suggests that a more advanced “eyes-off” driving experience could begin rolling out in stages through 2026.

Investors are also likely to seek clarity on Tesla’s AI5 chip design and the broader roadmap that includes AI6 and Dojo. The Optimus humanoid robot remains a growing part of the Tesla narrative, with a Gen 3 unveiling targeted for February or March 2026. Finally, Morgan Stanley highlights the increasing convergence across Elon Musk’s ventures, often referred to as the “Muskonomy,” as an emerging theme that could further influence sentiment around Tesla stock.