In the third quarter, billionaire investor Peter Thiel sold his entire stake in a leading AI chipmaker and reallocated 39% of his hedge fund’s capital to Tesla. Thiel Macro’s new portfolio—now entirely invested in three artificial intelligence–focused companies—helped the fund outperform the S&P 500 by 16 percentage points over the past year. Thiel’s decision underscores growing confidence in Tesla’s long-term AI strategy despite recent challenges in its core electric-vehicle business.

Tesla’s full self-driving system relies exclusively on cameras and neural-network software rather than combining lidar, radar and multiple sensor types. According to estimates from Morgan Stanley, Tesla pays ten times less per vehicle for its vision-based sensor suite than competitors that use more expensive hardware arrays. This cost advantage supports fleet expansion for robotaxi services and reduces capital outlay per vehicle, positioning Tesla to scale autonomous ride-hailing operations more quickly than rivals employing pricier sensor stacks.

Tesla is developing a humanoid robot, code-named Optimus, which CEO Elon Musk has projected could account for up to 80% of the company’s long-term value. Industry research firms forecast robotaxi sales growing at nearly 100% annually through 2033 and humanoid robot shipments at roughly 54% annual growth through 2035. Musk’s vision of a future $25 trillion valuation—implying an upside of nearly 1,800%—hinges on successful commercialization of Optimus and disruption of global labor markets.