Ross Gerber 'Impressed' With Tesla FSD Improvements, But Says It's 'Still Not Good Enough' — Calls Waymo Robotaxi 'Leader'

Investor Ross Gerber said Tesla's FSD v14.2 shows meaningful improvement but remains a supervised (Level 2) system and would require Tesla to accept liability to be considered Level 3; he flagged mapping issues despite progress. Gerber contrasted Tesla with Waymo, calling Waymo the leader with Level 4, driverless highway operations and rapid scaling, while Tesla recently secured Nevada self-certification enabling commercial deployment of its autonomous vehicles. TSLA closed up 1.71% at $426.58, reflecting modest positive market reaction amid ongoing competitive and regulatory questions.

Analysis

Market structure: Waymo (GOOGL) is the clear near-term winner as expanding driverless highway miles compress per-mile cost and increases pricing power for Alphabet’s services and ads tied to mobility; Tesla (TSLA) benefits on sentiment and margin leverage from scale but faces slower monetization because FSD remains level‑2 supervision with liability friction. Increased supply of driverless miles from Waymo signals downward pressure on ride-hail ARPU over 2–5 years and a transfer of value toward software/platform owners and mapping/data providers, while legacy ride-hail and certain auto suppliers face margin erosion.

Risk assessment: Tail risks include a high‑profile fatality or state/federal regulatory clampdown that could wipe 20–50% of robotaxi TAM assumptions within weeks; if Tesla agrees to assume liability, balance-sheet and insurance costs could increase by several billion dollars, causing a multi-quarter margin shock. Immediate (days) moves will be headline-driven, short-term (3–12 months) hinge on state approvals and deployments, and long-term (2–5 years) depend on unit economics and insurance/OS ecosystem rollouts.

Trade implications: Favor GOOGL as a long-duration call on Waymo’s moat and AI stack (establish 2–3% position over 2–8 weeks), while trimming TSLA exposure and using options to hedge; implement a relative-value pair (long GOOGL, short TSLA) to capture widening fundamental divergence. Use 6–12 month calendars/vertical spreads: buy 9–12 month GOOGL 10–20% OTM calls and buy 3–6 month TSLA 10–20% OTM put spreads sized to 0.5–1% portfolio risk.

Contrarian angles: The market underestimates capex and operating cost timelines — robotaxi unit economics likely take 3–6 years to match ride-hail margins, so current multiples on TSLA tied to near-term robotaxi profits are overstretched. Conversely, GOOGL’s valuation may not fully price in near‑term monetization of scaled driverless ops; the large driverless rollout could provoke insurance and antitrust responses that temporarily re-rate both names.

Key Decisions for Investors

• Establish a 2–3% long position in GOOGL over the next 2–8 weeks as a directional play on Waymo scale; add up to +1% if Alphabet reports >20% sequential growth in Waymo driving‑miles or launches in 2+ new metro/highway markets, target 12–18 month horizon, take profits at +25–35% or if relative P/E expands >20%.
• Reduce TSLA exposure by ~25% from current overweight to neutral within 30 days; implement a tactical 1% portfolio hedge via a 3–6 month TSLA 10–15% OTM put spread (buy puts, sell lower strike) to capture a 15–30% downside while limiting premium outlay.
• Deploy a pair trade: long GOOGL (1.5% portfolio) vs short TSLA (1.0% portfolio) on a 6–12 month horizon to exploit fundamental divergence; rebalance or close if the pair moves >10% in favor of the short leg or if Tesla formally assumes liability for FSD.
• Use options to express asymmetric risk: buy 9–12 month GOOGL 10–20% OTM calls sized to 0.5–1% portfolio for convex upside; concurrently sell 1–3 month TSLA covered calls or implement short-dated call spreads to collect premium while waiting for regulatory clarity.
• Monitor regulatory and liability catalysts closely: if Tesla secures commercial driverless deployment approval (state or federal) or publicly assumes liability within 30–90 days, re-evaluate and consider redeploying up to 2% into TSLA; if a major safety incident occurs, reduce cyclic auto/supplier exposure by 3–5% within 72 hours.