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Tesla (NASDAQ:TSLA) stock surged to a new all-time high of $498.83 in December, driven by optimism around its artificial intelligence (AI), robotics, and energy initiatives. However, shares have since pulled back 11%% amid broader market concerns. While these ancillary businesses contributed to the stock’s rally, Tesla remains primarily an electric vehicle (EV) company, even as global deliveries declined 8.6% in 2025 to 1.6 million units — the steepest annual drop in its history and the second consecutive year of falling sales.
Deliveries were down sharply in key markets like Europe (down almost 28%) and China (hitting a three-year low in October). Now, Tesla faces intensified pressure on the automotive front following Nvidia‘s (NASDAQ:NVDA) CES 2026 reveal earlier this month of advanced technology that could challenge its dominance in autonomous driving.
Nvidia’s Deep Roots in Automotive Tech
Nvidia has been a key player in the automotive sector since 2015 with its DRIVE platform, a scalable architecture for autonomous vehicles. DRIVE integrates high-performance computing, sensors, and software to enable advanced driver assistance and full autonomy. By 2026, the ecosystem includes partnerships with automakers like Mercedes-Benz and Volvo, using DRIVE Hyperion for Level 4-ready systems. The platform processes data from cameras, radars, and LiDAR, supporting simulation for safe testing. This long-term involvement has positioned Nvidia as a supplier-agnostic enabler, contrasting with Tesla’s vertically integrated approach.
The Alpamayo Breakthrough
At CES 2026 in Las Vegas, Nvidia unveiled the Alpamayo family, an open-source portfolio of AI models, simulation tools, and datasets aimed at accelerating safe, reasoning-based autonomous vehicle development. Alpamayo 1, a 10-billion-parameter vision-language-action model, introduces chain-of-thought reasoning to handle complex, rare scenarios like unpredictable pedestrians or adverse weather.
Paired with AlpaSim for high-fidelity testing and 1,700 hours of curated driving data, it emphasizes explainability and safety. Mercedes-Benz plans to integrate it into vehicles like the CLA, with U.S. deployments starting this year.
Alpamayo could also revolutionize self-driving by enabling any automaker to become an AV producer through open models that integrate with existing fleets. Developers can fine-tune on proprietary data and validate in simulation before deployment. Uber Technologies (NYSE:UBER), for example, has partnered on Alpamayo and DRIVE AGX Hyperion 10 for Level 4 autonomy, aiming to scale to 100,000 vehicles by 2027 with Stellantis (NYSE:STLA) initially supplying the cars. Others, including Bosch and Magna, are expanding adoption, potentially flooding the market with competitive AV options.
Tesla’s Growing Rivalries
Tesla, which is counting on its Cybercab to help revive its fortunes when it begins its production in Q2, trails Alphabet‘s (NASDAQ:GOOG)(NASDAQ:GOOGL) Waymo in autonomy, with Waymo logging over 100 million driverless miles and 450,000 weekly paid rides across five U.S. cities. Tesla’s 7 billion miles are supervised, requiring human intervention.
As more manufacturers adopt Alpamayo, Tesla could face more competition, eroding its EV sales further amid already declining deliveries.
Is Tesla panicking yet? Elon Musk announced on X that Tesla will stop selling Full Self-Driving (FSD) as a one-time $8,000 purchase after Feb. 14, offering it only as a $99 monthly subscription. This aims to boost adoption (currently at 12% of owners) and generate recurring revenue amid slumping sales. It may also hedge legal risks tied to unfulfilled autonomy promises. With more AV choices emerging, Tesla’s sales decline could worsen.
Key Takeaway
Nvidia’s Alpamayo isn’t an immediate Tesla-killer but could erode its edge by democratizing AV tech for rivals, pressuring Tesla’s core EV business amid an ongoing decline in EV demand. Still, Tesla’s long-term outlook as the U.S. EV leader remains strong, with analysts forecasting 12% delivery growth to 1.83 million in 2026, aided by a refresh of its Model Y.
Ancillary segments like energy storage (up significantly) and robotics could offset car woes, but success hinges on ramping up its robotaxi ambitions. Investors shouldn’t be too concerned yet about this threat, though it is real. And if it hits its autonomy milestones, Tesla stock could be considered a buy at this price point.
Although Tesla stock still trades at a premium, caution is warranted so I wouldn’t be picking up large tranches of shares just yet until it shows clear progress is being made.