The autonomous driving industry is moving rapidly towards commercialization, with competition intensifying as firms race to commercialize robotaxi services both domestically and overseas. China, in particular, is gaining growing recognition as a major player in the autonomous driving race.
Driverless vehicles are becoming a common sight in China, with companies including Baidu, Inc. (NASDAQ: BIDU), WeRide and Pony AI Inc. (NASDAQ:PONY) operating commercial robotaxi services within select areas. The country’s self-driving industry stands apart because it builds around a network of companies.
Autonomous vehicles are being made by established carmakers, specialists develop the software, and use the same batteries, sensors, and chips and as electric cars. The government is backing up the initiative through pilot programs, and China’s complex traffic environment helps generate vast amounts of data to improve software.
In its latest endeavor, Chinese autonomous driving company Pony.ai has announced a planned and potential overseas robotaxi deployments of more than 4,000 vehicles, aiming to expand beyond China. This macro setup remains favorable for long-term demand, but profitability inherently depends on factors such as regulatory approvals, vehicle economics, and utilization.
A driverless vehicle navigating city traffic, equipped with ADAS and safety features.
Bofa Cautiously Positive on Pony.ai
On August 18, BofA Securities lowered its price target on the stock to $17 from $19, still implying an upside of 113%. The firm kept a Buy rating on the stock. The rating update followed Pony AI Inc. (NASDAQ:PONY)’s Q2 2026 earnings report, posting revenues that beat Wall Street estimates backed by a massive surge in its robotaxi services.
The mixed reaction from the firm reflects the central debate around the company, accelerating expansion amid losses and a fresh round of heavy R&D investment. However, the bull case is easy to articulate for the company based on Q2 results.
Revenue for the company climbed to $36.2 million, up 69% from a year earlier and topping Wall Street estimates of $35.2 million. Robotaxi revenue surged 691% year over year to $12.1 million, while fare-charging revenue, the purest signal of actual commercial demand, was also up 849.3%. Commercial robotaxi activity also partly lead to a gross margin improvement from 16.1% to 17.5%.
Pony AI’s Uber partnership model, announced days ago, is further helping the company scale internationally without actually owning the fleet. The companies plan on collaborating on the deployment of more than 2,000 Pony.ai Robotaxis across Europe.
The partnership entails that Pony AI will provide its L4 autonomous driving technology, rider-experience and operational expertise while Uber will offer customer access through its leading global mobility platform. This includes booking, payment, and customer service capabilities, as well as its growing network of human drivers.
The company has also been advancing deployments with Bolt and Stellantis N.V. (NYSE:STLA) in Luxembourg and also launched public Robotaxi services in Singapore through ComfortDelGro’s Zig app. It also partnered with China Merchants Port to deploy Gen-4 driverless Robotrucks at Shenzhen’s Mawan Port.
With greater fleet density improving utilization and vehicle costs declining, the company could gradually move its operating leverage trajectory in the right direction.
Scale is Growing Faster Than Profits
Pony AI fell around 1-3% following its Q2 results, experiencing slight downward pressure and choppy premarket trading. The price target cut from Bofa highlights the same core tension: Pony AI’s growth may be real, but the path is long and expensive.
For the second quarter, the company reported research and development expenses of US$56.2 million (RMB381.6 million), up 14.7% from US$49.0 million in the second quarter of 2025. Operating expenses were US$72.1 million (RMB489.2 million), nearly double the quarterly revenue, and up 11.4% from US$64.7 million in the second quarter of 2025.
Even though revenue surged, non-GAAP net loss of $44.7 million was unchanged from $44.3 million a year earlier. As the company continues its Gen-7 fleet rollout and infrastructure buildout, capital expenditures rose to $32.2 million. Meanwhile, cash, investments, and related liquid assets declined sequentially to $1.39 billion. The company also reported an operating loss margin of 181.5%, narrowing from 285.6% in the second quarter of 2025. The number, however, remains deeply negative and implies that the path to profitability will take time.
Competition is also intensifying for PONY at a time when it is trying to expand internationally. WeRide and Apollo Go are two names who are also trying to expand, while Waymo has announced plans for a London launch, and Tesla also boasts aggressive robotaxi ambitions.
Hedge Fund Sentiment
Institutional interest leans more towards the bears. According to Insider Monkey’s database, 23 hedge funds held stakes in Pony AI at the end of the first quarter of 2026, down from 31 in the prior quarter. An estimated 22.97 million shares were sold short as of July 31, representing 5.29% of the public float and modest bearish sentiment.
Overall, Bofa’s decision to keep the Buy rating while cutting the price target captures Pony AI’s setup well. Q2 results do suggest that the robotaxi story is improving, but the $17 target depends on growing recognition that the path from $36 million in quarterly revenue to profitability will take years of heavy investment, regulatory navigation, and intense competition.
While we acknowledge the risk and potential of PONY as an investment, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than PONY and that has 10,000% upside potential, check out our report about this cheapest AI stock.
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