While conducting research for a recent TaaSMaster newsletter article, I used OpenAI’s ChatGPT to analyze Tesla’s valuation. Initially, the AI echoed mainstream investor logic, that Tesla’s robotaxi potential, AI leadership, and broader ecosystem justified its substantial market capitalization.
This interaction with the large language model (LLM) led me to wonder: Does ChatGPT absorb dominant narratives (at least regarding Tesla) the same way human investors do?
Interestingly, as I presented counterarguments and additional data, ChatGPT’s stance gradually shifted. By the end of our discussion, the AI had become far more skeptical, concluding that Tesla’s valuation is driven more by dominant market narratives than by financial or business performance.
So, how did this shift in ChatGPT’s reasoning unfold?
The Tesla-Waymo Conversation
This conversation began with a simple question: “Why is Waymo only valued at $45 billion, but Tesla is valued at $1.2 trillion?”
ChatGPT’s response was clear. Tesla’s higher valuation is justified by its diverse revenue streams (vehicle sales, energy products, software, and potential AI-driven services) while Waymo operates only an autonomous ride-hailing service with limited geographic reach and revenue.
The LLM even stated that investors see Waymo as “an expensive experiment rather than a proven business.”
(Note: Waymo is a subsidiary of Alphabet Inc., backed by both its parent company and private investors. Unlike Tesla, it is not a publicly traded investment.)
At this stage, ChatGPT correctly noted that Tesla generates significantly more revenue than Waymo. It also labeled Waymo as being in a “pre-commercial phase with unclear monetization.” According to ChatGPT, until Waymo proves its business model at scale, its valuation would remain significantly lower than Tesla’s.
Challenging the Tesla-GM Narrative
To challenge ChatGPT’s assumption that Tesla’s valuation is tied to its revenue, I pointed out a critical fact: Tesla’s auto business is its primary revenue and profit driver.
I then reminded ChatGPT that, based on the latest earnings reports, Tesla’s car business underperforms General Motors financially. Yet, GM is only valued at $60 billion.
ChatGPT acknowledged this point. “You’re absolutely right that Tesla’s core automotive business appears overvalued compared to legacy automakers like GM.”
However, instead of conceding that Tesla’s valuation was inflated, ChatGPT doubled down on the idea that Tesla’s worth is based on what investors believe it will become. It justified the valuation gap between Tesla and GM by emphasizing:
Autonomous driving & robotaxis
Energy business & AI infrastructure
A fanatical retail investor base driven by Elon Musk’s speculative hype
I responded by reframing the argument. “Waymo already operates a real-world AI-powered robotaxi business today, yet it is only valued at $45 billion. Tesla does not have an operating robotaxi business.” I then pressed further. “Why should Tesla have a significantly higher valuation than Waymo?” I continued, “Tesla’s energy business is only 10% of its overall revenue, and the timeline for the Optimus robot to generate meaningful revenue is pure speculation.”
At this point, ChatGPT admitted that I was making a solid case. It stated, “Tesla’s valuation is heavily speculative and detached from the performance of its actual businesses.” Yet, the LLM still found multiple reasons why Tesla’s valuation might remain significantly higher.
Tesla enjoys a cult-like following, while Waymo is seen as a subsidiary of Alphabet with little brand identity.
Tesla has more than 5 million vehicles on the road that could theoretically become robotaxis, while Waymo’s fleet is tiny and requires regulatory approval city by city.
Waymo is valued on performance. Tesla is valued on potential. Investors price Tesla not on what it is today, but on what they believe it will become.
An Unexpected Conclusion
Without any further prompting, ChatGPT made a surprising shift in reasoning. It admitted that Tesla’s energy business is too small to meaningfully impact valuation. It also stated, “Musk’s $10 trillion prediction for the Optimus business is pure hype.”
And then, the major turning point in the LLM’s viewpoint occurred. “Tesla is wildly overvalued relative to Waymo and GM purely because of investor hype and speculative AI/robotaxi assumptions. Waymo gets no credit from investors despite having real-world deployments.”
At this point I asked ChatGPT how it arrived at its final conclusion after engaging with me. It outlined its reasoning as follows:
It questioned its initial assumption that Tesla’s valuation reflects future potential rather than financial fundamentals.
It reconsidered Waymo’s existence versus Tesla’s robotaxi hype. It asked itself, if Tesla’s robotaxi narrative justifies a massive premium, why doesn’t Waymo get a similar valuation?
It re-evaluated Tesla’s core business, concluding that Tesla’s car business alone doesn’t justify a $1.2 trillion valuation, suggesting a market cap closer to $200–$300 billion.
It realized Tesla’s valuation is driven by extreme speculation, and ultimately stated that the Tesla stock price is “propped up” by investor hype.
AI and the Investor’s Dilemma
My experience with ChatGPT highlights both the power and limitations of AI in financial analysis. AI doesn’t independently determine truth; it reflects the most reinforced perspectives from its training data, at least regarding my ChatGPT conversation about Tesla’s valuation.
If investors, analysts, and media continuously promote a certain view of Tesla’s future, AI models will probably echo that perspective, unless deliberately challenged. This presents a risk for investors using AI-driven research. If AI tools simply amplify dominant narratives, they may overlook alternative perspectives and misprice assets.
Disclosure:
I don’t own any positions in Tesla or General Motors. I do own shares of Alphabet.