One of the biggest factors backing Tesla's (TSLA 5.42%) $1.2 trillion valuation is its investments into robotaxis. The robotaxi market, according to some experts, could eventually be worth up to $10 trillion globally. And by many accounts, Tesla has an enviable position when it comes to taking a heavy share of this emerging market opportunity.
There's just one problem: The U.S. National Highway Traffic Safety Administration (NHTSA) recently escalated its investigation into Tesla's full self-driving (FSD) features, which are active in 3.2 million of its vehicles. How big a deal is this investigation? Tesla investors -- as well as investors in other electric vehicle (EV) stocks and autonomous driving stocks -- should pay close attention.
NASDAQ: TSLA
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Here are the details of Tesla's regulatory probe
According to reports from Reuters (part of Thomson Reuters), the "NHTSA first opened a preliminary evaluation into the automaker's FSD software in October 2024 in 2.4 million vehicles." But in recent weeks, that evaluation was expanded to 3.2 million vehicles, with the NHTSA fearing that "the system may fail to detect or warn drivers in poor visibility." The NHTSA has already reviewed several crashes involving Tesla's FSD system, and claims that the software occasionally "lost track of or never detected a lead vehicle in its path."
Image source: Tesla.
How big of a deal is this inquiry? It's hard to know exactly what the impacts will be this early. But what we do know is that the investigation strikes at the heart of what's driving Tesla's valuation these days.
In recent years, Tesla's sales growth has slowed tremendously. In 2025, the company actually delivered fewer cars than it did in 2024, leading to its first-ever annual sales decline.
How, then, has its valuation continued to rise despite flagging sales growth? Robotaxis are arguably the biggest driver of Tesla's valuation, which well exceeds $1 trillion. And yet for now, the company generates far less than 1% of its revenue from its nascent robotaxi business. The market, it seems, is already pricing in huge growth potential for this business segment.
While the recent probe won't completely derail Tesla's dreams of robotaxis, it does have the potential to delay their launch, possibly impacting its ability to secure early market share. "We are now at engineering interrogation," wrote Gordon Johnson, CEO of GLJ Research. "One step from a mandatory recall."
A recall could cause investors to question how much the market has already priced in Tesla's robotaxi growth potential. "You cannot build a $1.2T [$1.2 trillion] robotaxi company on software the federal government is one determination away from forcing off the road," Johnson wrote. "A forced recall on the software stack that powers the robotaxi story ends the robotaxi story. This is not priced in."
It's hard to question Johnson's logic. Tesla's automotive business is no longer a reliable growth driver. Meanwhile, the company is investing billions of dollars into business ventures that largely remain pre-revenue. Selling additional stock with a $1.2 trillion valuation has made the financing of this transition very feasible. But if we see a recall, Tesla's valuation premium could shrink quickly, adding even more uncertainty about its ability to transition itself from an energy and auto conglomerate into a robotics and robotaxi giant.
