People tend to listen when Cathie Wood speaks on Tesla (TSLA 0.99%). The founder and manager of Ark Invest was one of Tesla's most vocal supporters in the mid-to-late 2010s, before the company became the electric vehicle, energy storage, autonomous driving, and robotics company it is now, with a $1 trillion market cap.
Her Tesla call lifted her flagship fund, the ARK Innovation ETF, to Wall Street fame. She remains as optimistic about Tesla as ever.
Cathie Wood has maintained that Tesla's imminent Robotaxi business, a ride-hailing fleet of autonomous Tesla vehicles, will be a game changer for the stock's value. In a recent Bloomberg TV interview, she reiterated her prediction that the stock will soar to $2,600 in five years, over seven times its current price.
Cathie Wood was right about Tesla before, but her bold prediction has a big problem this time.
Image source: The Motley Fool.
What's the problem? Tesla isn't the leader this time around
Tesla pioneered the battery electric vehicle (BEV) industry. Its success showed that fully electric vehicles were viable and consumers would use them. Its success sent legacy brands scrambling to develop BEV models and paved the path for new electric vehicle start-ups.
But Tesla isn't the pioneer or the leader in autonomous driving. That distinction goes to Waymo, an Alphabet (Google) subsidiary, which began as a Google project in 2009 and has offered paid, driverless rides since March 2022.
During its Q1 2025 earnings call, Alphabet noted that Waymo currently performs over 250,000 weekly paid rides, up fivefold from a year ago. Tesla CEO Elon Musk recently confirmed that its Robotaxi service will launch by the end of June, starting with approximately 10 vehicles in Austin, Texas.
Tesla hopes to expand quickly. That's probably necessary to catch Waymo and reach Cathie's $2,600 price target in five years.
Robotaxi needs to expand quickly, and that won't be easy
That could be a tall order. In a recent interview, Ashok Elluswamy, Tesla's head of self-driving, even admitted that Waymo was probably a couple of years ahead of Tesla in self-driving.
Over three years after its launch, Waymo operates autonomously in four major cities, with two more coming soon. That doesn't mean Tesla can't grow Robotaxi faster. However, it's worth noting that Tesla's self-driving technology has only achieved level 2 autonomy, which requires constant supervision from a human driver. Due to its level 4 autonomy, Waymo can offer driverless rides.
It's hard to envision Tesla expanding Robotaxi quickly without a higher autonomy level. There could be state-level regulatory hurdles, and any Robotaxi accidents could be a tremendous liability, especially in the event of a passenger injury or death. Waymo's gradual expansion looks like the safe and smart route. It's also the likely path for Tesla and Robotaxi.
Investors shouldn't write off Tesla, but Ark's Tesla projections seem unlikely
It's challenging to arrive at Cathie Wood's five-year, $2,600 price target in this framework.
Alphabet doesn't break out Waymo's financials. Instead, it includes Waymo within its "Other Bets" segment. In Q1 2025, Alphabet's Other Bets generated $450 million in revenue and posted a $1.2 billion operating loss.
I don't want to assume anything, but it seems safe to say that Waymo isn't anywhere near large enough yet to operate profitably, let alone move the needle for Alphabet.
Therefore, it's not enough that Tesla must scale Robotaxi (and quickly) to 250,000 rides to catch Waymo. It must also grow Robotaxi much larger than that to reach the size needed to operate profitably, let alone justify Ark's projected enterprise value of $8.2 trillion within five years.
Ark's projection assigns 63% of Tesla's revenue to Robotaxi, so Cathie Wood's price target essentially falls apart if Robotaxi doesn't expand quickly enough.
It's never wise to dismiss a company as successful as Tesla, especially with Elon Musk as CEO. That said, investors should probably not count on such high returns over the next five years without ample evidence that Robotaxi is succeeding at an unprecedented level.
Tesla may reach $2,600 someday, but it will probably take longer than five years.
