Tesla (NASDAQ:TSLA) stock today is synonymous with the AI robotics revolution. Through its driverless taxis and Optimus humanoids, it plans to pioneer two multi-trillion dollar markets over the next 20 years.
However, what puts me off today is the starting valuation. With a mammoth $1.27trn market cap, Tesla’s trading at 208 times forward earnings. This high multiple makes it far more difficult to produce explosive returns.
Of course, I may be wrong, as Elon Musk’s firm could go on to become even larger. But I’m looking for a robotics company that’s much smaller today.
Here’s one that interests me.
An emerging physical AI powerhouse?
I’m talking about XPeng (NYSE:XPEV), the Chinese EV maker that’s doing a Tesla by morphing into a physical AI company.
How so? Well, as cut-throat competition in the Chinese EV market intensifies, the company has been pivoting to robotaxis and humanoid robots. Its super-powerful Turing chips are inside both.
Indeed, when the firm unveiled its next-generation IRON humanoid in November, many spectators accused XPeng of putting a human in a suit because the bot’s gait was so fluid.
To prove them wrong, engineers did something straight out of The Terminator — they cut open the robot’s leg to expose the wiring underneath!
Then earlier this week, the company announced that its first mass-produced robotaxi had rolled off the production line in Guangzhou. By early 2027, it aims to have fully driverless rides with no safety officers inside.
I believe XPeng is at a historical inflection point for Physical AI applications. Our goal is not only to grow our global market share of AI-defined vehicles and bridge the gap from L2+ assisted driving to L4 autonomous driving, but also to bring our second-generation VLA model to international markets and achieve scale production of advanced humanoid robots.
CEO Xiaopeng He.
Some worries I have
Last year, Xpeng delivered 429,445 vehicles, an impressive 126% year-on-year increase. Revenue jumped 87.7% to RMB76.7bn (about $11bn), while its self-operated charging network reached 3,159 stations.
Now, as exciting as all this sounds, I do have a couple of worries. The first is that Xpeng only recorded its first positive quarterly net profit at the end of 2025.
While that’s undoubtedly a historic milestone, it’s possible the firm could slip back into the red as it ramps up physical AI production and navigates a tricky domestic EV market.
XPeng ended 2025 with a large cash pile ($6.8bn), but it’s aiming to potentially make thousands of robotaxis in the next 12 to 18 months, while funding cutting-edge AI research. So cash burn needs watching closely.
Another issue is that if trade tensions flare up again between the US and China, sentiment towards Chinese stocks could quickly sour.
A potential dark horse
On balance though, I think this is a potentially very interesting play on the robotics revolution. XPeng has a $14.7bn market cap, so is much smaller than Tesla, and could potentially offer more explosive growth over the next decade.
Moreover, after falling 25% in 12 months, the stock’s price-to-sales ratio is only 1.3 (versus Tesla’s 15). That’s low for a fast-growing company with global ambitions.
I’m going to read the firm’s Q1 results on 28 May to learn more. Until then, XPeng remains on my watchlist.
Should you invest £5,000 in XPeng right now?
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Ben McPoland has no position in any of the companies mentioned.
