Tesla shares are climbing, fueled by developments in China. On Thursday, the stock was up 0.6% in premarket trading, adding to a gain of more than 14% over five of the last six sessions. Investors are increasingly optimistic that Tesla’s Full Self-Driving technology may soon get regulatory approval in China. While a launch could have a big impact on the stock, Wall Street remains cautious despite the recent rally.
Building on this optimism, CEO Elon Musk is traveling in China with President Donald Trump, which investors see as a positive sign for FSD approval. Tesla’s Full Self-Driving system can handle most driving tasks on its own, but it still requires a human supervisor. This technology also powers Tesla’s robotaxi service, which started in Austin, Texas, in June and has now expanded to four U.S. cities.
If China approves FSD, it would create a major new source of revenue for Tesla. The company already earns a large share of its yearly revenue from China. Introducing FSD as a subscription in the world’s biggest electric vehicle market would therefore give Tesla a steady stream of income that it does not have now.
However, this optimism comes at a cost. Tesla expects to spend about $25 billion on capital projects in 2026, almost three times the $9 billion it spent in 2025, as it grows its AI and self-driving efforts. UBS has a Hold rating and a $364 price target for the stock, noting that Tesla’s AI projects could generate significant revenue, though tangible results may take time.
About 45% of analysts rate Tesla a Buy, lower than the typical 55%-60% for S&P 500 peers. The average price target is around $400.
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