I agree. The entire Tesla gamble really hinges on whether the HW3 + current sensor suite is sufficient for them to achieve a safe enough degree of autonomy. It's about as minimal as it gets from the hardware front, and is entirely dependent on the machine learning side to evolve rapidly along with rapid software update deployments.
I feels there's a broad misconception across many of these types of discussions, where people assume that just because Tesla has not chosen to widely deploy LIDAR across their vehicle fleet, that they do not understand it's benefits nor value them. This is entirely false. For several years now, Tesla has driven test vehicles with very high end Lidar units to basically generate "ground truth" understanding of the world that can be then used to test and improve their camera-only FSD inference. They heavily relied upon it to build ML models to generate depth maps across frames, and that capability is already widely deployed via Autopilot (poor man's FSD). That it works in itself is somewhat shocking to me.
Lastly, if there's any indication of a mea culpa coming from Musk on this front, those ideas should be easily put to rest. Recent FSD footage shows rapid and drastic improvements to the capabilities of the FSD-beta system, and Musk himself is still repeatedly bellowing about how his personal vehicle with the latest software is able to handle more and more challenging scenarios. If anything, Tesla is doubling down, and expects to win. Given their history, if I was a competitor, I would be troubled at least.