For years, TeslaTSLA was synonymous with electric vehicles (EVs). It was the first name that came to mind when talking about EVs. But competition intensified, EV adoption got slower than expected, and Tesla’s market share began to slip. An aging model lineup and CEO Elon Musk’s political involvement weighed significantly on sales.
Now, amid a sluggish EV market — especially in the United States, where policy dynamics have turned less favorable — Musk is pivoting aggressively toward artificial intelligence (AI), robotaxis and robotics. Tesla is no longer positioning itself as just a carmaker. In fact, Musk believes autonomy and AI would become the company’s biggest long-term growth drivers.
While Tesla aims to transform into a tech powerhouse, NIO Inc.NIO is taking a different route. The Chinese automaker is doubling down on EVs in its domestic market while expanding globally. Once dubbed the “Tesla of China,” NIO is showing fresh momentum. Its deliveries are rising, while Tesla posted its second straight annual decline in 2025. Tesla’s adjusted net profit fell more than 25% last year, whereas NIO is eyeing its first-ever quarterly adjusted operating profit in the fourth quarter of 2025.
So, on one hand, Tesla is betting big on AI-driven optionality. On the other hand, NIO is focused on steady execution in EVs. Against this backdrop, let’s assess which stock deserves a place in your portfolio now.
The Case for Tesla
Tesla’s deliveries declined in 2025 for the second straight year, and the slowdown is accelerating. Volumes slipped just 1% in 2024 but fell more than 8% in 2025, which raises concerns about demand, competition and pricing power. Musk also announced plans to end the production of the Model S and Model X, which now contribute less than 5% of revenues and just more than 3% of deliveries — too small to justify continued capital and factory allocation.
One bright spot is Tesla’s energy generation and storage segment. The division posted record deployments of 14.2 GWh in the fourth quarter and 46.7 GWh for the year, up 49% year over year. Growth is expected to continue with the rollout of Megapack 3 and the new Megablock solution. Tesla expects to recognize nearly $5 billion in deferred revenues this year from energy projects already underway.
The bigger story is Tesla’s aggressive pivot toward AI, autonomy and robotics. Management expects capital expenditures to exceed $20 billion in 2026 — more than double last year’s $8.5 billion and above the prior peak of $11.3 billion in 2024. The spending will support six major facilities, including a refinery, LFP battery plant, CyberCab and Semi factories, a new mega factory, and production lines for the Optimus robot. Significant investments in AI compute infrastructure are also planned.
Robotaxi services are slated to expand to seven new U.S. cities in the first half of the year. Musk has suggested autonomous Teslas could reach up to half of the U.S. population by year-end, pending regulatory approvals. Similar timelines have slipped before, so it’s natural to be a bit skeptical.
While these ambitious projects related to autonomy, robotaxis and AI could define Tesla’s next era, they also come with high execution risk and could take years to meaningfully contribute to the company’s overall revenues and profits.
The Zacks Consensus Estimate for Tesla’s EPS has declined in the past 30 days.
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The Case for NIO
NIO appears to be entering a stronger growth phase, supported by momentum across products, margins, technology and global expansion.
The company offers one of the broadest lineups among Chinese automakers, including the ES6, ES8, ET5, ET7, EC6, and EC7, along with newer models under the Onvo and Firefly brands. This wide portfolio allows NIO to target multiple price points and customer segments. Deliveries reached 326,028 vehicles in 2025, up nearly 47% year over year, with contributions from all three brands. The momentum has extended into 2026, as January deliveries surged 96% year over year to 27,182 units, led by the third-generation ES8. NIO has also crossed 1 million cumulative deliveries — a key scale milestone.
Margins are trending upward as volumes rise and supply-chain costs improve. Vehicle margin expanded to 14.7% in the third quarter of 2025 from 13.1% a year earlier. Management is targeting a 20% vehicle margin over time. Three new premium large SUVs slated for launch this year are expected to support that goal, benefiting from pricing strength and platform synergies. NIO expects adjusted operating profit of 700 million to 1.2 billion yuan in the fourth quarter of 2025, a sharp turnaround from the 5.54 billion yuan adjusted operating loss reported in the corresponding quarter of 2024.
Battery swap technology remains a structural differentiator. NIO has completed more than 100 million swaps since 2018 and operates 3,790 swap stations globally, with 1,000 more planned by 2026. Partnerships with CATL could further standardize swap models in China.
Beyond China, NIO is expanding into Central Asia, Australia, New Zealand and multiple European markets. At the same time, software upgrades like the NIO WorldModel are enhancing assisted driving and safety features, strengthening user engagement and brand loyalty.
The Zacks Consensus Estimate for NIO’s loss per share implies a year-over-year narrowing.
Image Source: Zacks Investment Research
Valuation Check
From a valuation standpoint, NIO appears more attractive, trading at a significantly lower price-to-sales multiple than Tesla. NIO’s P/S ratio is also below its five-year average, while Tesla is trading above its historical average. At current levels, Tesla’s valuation still implies substantial optimism relative to its near-term fundamentals.
Image Source: Zacks Investment Research
Conclusion
NIO appears better positioned for investors seeking improving fundamentals and valuation comfort. The company is delivering strong volume growth, expanding margins, nearing operating profitability and trading below its historical valuation average.
In contrast, Tesla faces declining deliveries, downward earnings revisions, heavy capital spending commitments and stretched valuation. Given the significant execution risk tied to AI and robotaxis, risk-reward appears less favorable for Tesla in the near term.
For now, NIO looks worth holding, while Tesla is better avoided. NIO carries a Zacks Rank #3 (Hold), while Tesla has a Zacks Rank #4 (Sell).
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
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This article originally published on Zacks Investment Research (zacks.com).
