Ron Baron, whose Baron Capital holds roughly $5 billion in Tesla (NASDAQ: TSLA) shares, told CNBC's Squawk Box the stock is a buy today, citing 11 million Full Self-Driving users and 55% year-over-year growth in new FSD adoption. The thesis arrives with Tesla trading at $357.83, down 20.43% year to date, operating margin compressed to 1.4%, and free cash flow swung negative.
The bull case rests on two legs. FSD is the first. Baron's 11 million user figure aligns with Tesla's own Q2 2026 data: active FSD subscriptions reached 1.48 million, up 56% year over year, and the attach rate on new North American deliveries exceeded 55%. On Tesla's July 22 earnings call, Musk put it plainly: "I think for a lot of people, they're actually buying Tesla full self-driving with a car attached as opposed to a car with FSD." Baron added a personal data point, describing how his Model S navigated his East Hampton property unassisted, opened the garage and gate, made turns, and stopped for ducks crossing the road.
Robotaxi is the second leg. Tesla has logged more than 380,000 miles of unsupervised service across six cities with no notable incidents, and Musk said those miles are growing at more than 10% per week. Tesla's autonomy chief Ashok described the trajectory as "literally exponential."
The counterargument
Q2 2026 revenue rose 25.52% year over year to $28.24 billion, so the growth story is intact. But operating margin compressed to 1.4% and free cash flow swung to negative $1.09 billion as capital expenditures more than doubled. Revenue that does not convert to margin or cash is a harder pitch at any price, let alone a stock still down 20% on the year.
Baron introduced one more variable he declined to explain. He told the Squawk Box anchor he had already walked Elon Musk through the arguments for and against folding Tesla and SpaceX together, then refused to share them. Baron Capital holds $25 billion of SpaceX alongside its Tesla position, and $30 billion of the $71 billion the firm has generated for clients has come from Musk-related investments. Polymarket bettors, on more than $600,000 of volume, currently put a Tesla-SpaceX merger announcement at 66% by December 31, 2027. Two days before Baron's appearance, Jim Cramer told Mad Money viewers a SpaceX acquisition was his only solution for the stock.
On balance, the read-through from Baron's call is that FSD adoption is tracking the way he described. The risk is that the capex cycle consuming cash is precisely what the stock is already pricing. The line to watch is whether free cash flow turns positive before the merger speculation becomes the dominant bid driver.