Tesla stock drops to end the week as robotaxi optimism battles AI bubble jitters

Tesla (TSLA) stock closed lower on Friday, shedding gains late in the day as robotaxi optimism tried to overcome AI bubble fears gripping the market.

The down session comes after Thursday’s peak-to-trough sell-off brought down Big Tech names like Tesla and other “Magnificent Seven” stocks, despite a strong earnings report from Nvidia (NVDA) on Wednesday night. Tesla stock fell over 2% on Thursday, and dropped another 1% on Friday.

The most recent bout of AI skepticism is fueled by concerns that tech giants like Nvidia are making investments in companies like OpenAI (OPAI.PVT), which are committing more than $1 trillion to build out data centers without generating positive cash flow.

Read more: How to protect your portfolio from an AI bubble

Tesla, with its big AI investments in data centers, chips, and software for products like Full Self-Driving (FSD), has become more of an AI robotics bet than an automotive bet, and that may be a reason for recent weakness.

That’s not to say Tesla hasn’t had good news on that front.

As first reported by Business Insider on Friday, Tesla completed the self-certification process to operate robotaxis in the state of Nevada, per a Department of Motor Vehicles (DMV) source. This means Tesla can operate rototaxis on the road but not commercially until the Nevada Transportation Authority gives it approval.

A Nevada DMV spokesperson confirmed Tesla obtained an “Operations Certificate of Compliance,” meaning it can now “deploy [robotaxis] and operate its autonomous vehicles on public roads in Nevada.”

Earlier this week, the Arizona Department of Transportation (ADOT) said Tesla had completed the final step to launch a robotaxi service in the state, per TechCrunch, citing an ADOT spokesperson. An ADOT representative confirmed that Tesla completed the process to begin operations.

Tesla’s Arizona robotaxi service would still include a safety driver, however, similar to what the company is doing in Austin, Texas, and the San Francisco Bay Area.

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Tesla has expanded its service in Austin and the Bay Area over the past few months, with safety drivers present. Competitors like Waymo operate in several service areas across the US, but Waymo doesn’t need to include safety drivers since its service is already level 4 ready, meaning fully self-driving in a specific area.

Despite Tesla not reaching level 4 status yet, Tesla robotaxi optimism has Wall Street bulls upping targets.

The most recent came on Monday when Stifel’s Stephen Gengaro upped his Tesla price target to $508 from $483 and maintained his Buy rating, citing Tesla’s strength in FSD and its robotaxi service.