Tesla’s Chip Ambitions and FSD Credibility Test the Stock’s Patience

Tesla invests €25B in AI and chip manufacturing for autonomous driving, while a Reuters investigation questions safety claims, stalling European regulatory approval.

Tesla is caught between an audacious industrial future and an uncomfortable regulatory present. On one side, the company is ploughing over €25 billion into next-generation chip manufacturing and artificial intelligence, betting that vertical integration will cement its lead in autonomous driving. On the other, a Reuters investigation this week threw doubt on the safety statistics Tesla has used to convince European regulators to approve its Full Self-Driving system. The stock, trading near €354.55, has barely budged — an indication that investors are waiting to see which narrative will win out.

The centrepiece of Tesla’s hardware push is the Terafab project in Austin, Texas. Announced in March 2026, the €25 billion semiconductor plant is a joint venture with SpaceX and Intel. The goal is to free Tesla from reliance on external chip suppliers for the massive computing power needed for autonomous driving and the Optimus robot. On April 15, the company reached the tape-out milestone for its AI5 processor, the final design stage before production begins. That chip is expected to provide the on-board intelligence required for unsupervised self-driving and humanoid robotics — a critical piece of the puzzle if Tesla is to transform from an automaker into a technology platform.

Yet the regulatory path for that autonomous technology in Europe is becoming rockier. Late last year, Tesla approached the Dutch road transport authority RDW to kick-start approval for Full Self-Driving, pointing to its own safety report that claimed vehicles equipped with the system could travel more than seven times farther than the average US driver before a collision. A presentation sent to Swedish authorities went further, asserting that the technology could have prevented 32,000 deaths and 1.9 million injuries. Independent traffic researchers sharply criticised those extrapolations, noting that Tesla compared only severe airbag-deploying crashes against a much broader US accident dataset including minor fender-benders, and assumed every vehicle in the US — including trucks and motorcycles — would be replaced by a Tesla.

Both the Dutch and Swedish regulators have distanced themselves from Tesla’s claims. RDW said it bases decisions on its own road and test-track evaluations, while a Swedish examiner stated that his agency looks beyond headlines and does not rely on aggregated safety assertions. A Europe-wide authorisation requires support from member states representing 55% of countries and 65% of the EU population. The Reuters report could stiffen resistance among national authorities that had been sitting on the fence.

Meanwhile, the conventional car business remains the financial engine that underwrites these ambitious bets. Giga Shanghai set a monthly production record for 2026 in May, delivering nearly 86,000 vehicles. In Europe, Tesla is investing $250 million in Giga Berlin to increase capacity for 4680 battery cells to 18 gigawatt-hours annually, a move that shields the company from tariffs and shortens supply chains as Chinese rivals push into the region.

The conflict between technical promise and regulatory reality is reflected in the stock’s charts. Tesla shares have lost about 5% since the start of the year and are trading just below their 200-day moving average of €358.16. The relative strength index sits at a neutral 50.6. The stock is 41% above its July 2025 low of €251 but a long way from the 52-week peak of €424.10 reached in December. Wall Street consensus targets €362.78, implying a meagre 2.3% upside, though JPMorgan has begun to factor in Tesla’s energy storage, robotics, and licensing revenue into its valuation, nudging the debate away from a pure price-to-earnings multiple for an automaker.

Tesla plans to start series production of the Optimus 3 robot this autumn. Whether that transforms the investment case — or whether regulatory delays in Europe’s FSD approval sap the narrative — remains an open question. For now, the market is watching the Terafab floor as closely as the regulatory dossiers.