Reasons to Buy Tesla Stock: Autonomous Driving Technology

Tesla's stock has surged 142% year-to-date, surpassing a $900 billion valuation. However, according to DataTrek Research co-founder Nicholas Colas, there's only one compelling reason to buy Tesla at its current levels, and it has nothing to do with its EV business.

Legacy automakers are struggling to compete, as evidenced by stagnant stock prices of companies like Ford, Mercedes, Honda, and General Motors, despite transitioning their fleets to electric vehicles.

Colas highlights that to invest in Tesla with its current valuation, one must believe in the company's self-driving technology, as a significant portion of its market value is tied to the potential success of autonomous driving. Around $600 billion to $700 billion of Tesla's current market value is considered a "call option on autonomous driving." If Tesla's self-driving technology can achieve a truly autonomous threshold, it opens up a trillion-dollar opportunity, but it remains a challenging task.

The remaining $200 billion to $300 billion of Tesla's market valuation is attributed to its EV business, which is comparable to Toyota's current market valuation.

Colas advises that investors should avoid traditional auto stocks and consider overweighting Tesla only if they have confidence in Elon Musk and his team's ability to deliver a truly autonomous vehicle in the near future.

Note: This article is for informational purposes only. Investors should conduct their research and analysis before making any investment decisions.