Morgan Stanley told clients in a note on Tuesday that Tesla will need clearer evidence that its Robotaxi effort is scaling to strengthen investor conviction, following feedback from conversations after the company's second-quarter earnings. Analyst Andrew Percoco said investors remain constructive on Tesla's "Physical AI" opportunity, supported by stronger adoption of its Full Self-Driving software, but stronger conviction "will require clearer evidence that Robotaxi is scaling and more tangible Optimus proof points to support the ROI on elevated capex." The analyst added that the quarter did not materially alter his long-term thesis that Tesla is positioned to lead in Physical AI. However, weaker gross margins, higher research and development spending and extended free cash flow burn have "sharpened our (and investors') focus on measurable progress across Robotaxi and Optimus." Morgan Stanley noted that the most constructive feedback centered on FSD adoption, noting a 55% attach rate on North America deliveries, well above its prior 25% to 30% expectation. Investors are said to have viewed the Robotaxi disclosures as helpful "on the margin," but remain focused on whether Tesla can build density within existing cities while maintaining safety and improving utilization. On Optimus, the market "is still looking for evidence beyond commentary around SOP." Greater conviction in the stock, Percoco said, "will depend on evidence that the Robotaxi flywheel is working," with more vehicles on the road, higher city-level density, rising weekly unsupervised miles and improving unit economics. He called Robotaxi "