Is Tesla the next big AI stock?
Self-driving technology, robotics, the Dojo supercomputer… Tesla is going all-in on AI
Tesla stock has been on a tear lately.
After plunging 44% in early 2024, TSLA has now recovered those losses. It surged 87% since its April low, and is now positive for the year:
I think this momentum could continue for one simple reason:
Tesla is morphing into an AI company
Elon Musk is a pioneer in AI.
He co-founded ChatGPT creator OpenAI in 2015. And Tesla has been working on self-driving technology — AI that drives your car — since 2014.
Nearly 1 million Tesla owners in the US and Canda currently pay for its “full self-driving” (FSD) mode. It costs $8,000 up front, or you can pay a subscription price of $99/month.
These folks are now driving roughly 15 million miles on FSD per day. Take your hands off the wheel, and the car drives itself.
Is this feature perfect? No. It has plenty of flaws. But the important thing is it continues to improve rapidly.
A friend who owns a Tesla told me the latest self-driving upgrade (V12) is a game-changer. “I used the last version every now and then. With this upgrade, I use it every time I drive and don’t want another family car without it.”
This will become a multibillion-dollar business for Tesla. The tech is going to get so good, other automakers will tear the hinges off the door to license it.
A big catalyst for Tesla could be when it reveals its robotaxi platform on August 8.
Imagine turning all the Teslas in America into a fleet of self-driving Ubers. You could earn money “renting” out your car when working or on vacation. It’ll pick up and drop off passengers all day and arrive back at the office just in time to drive you home.
This is the future Elon is trying to create with the robotaxi platform. Owning a Tesla is about to get a whole lot more exciting (and cheaper).
FSD and robotaxis are powered by Dojo: Tesla’s $300 million AI supercomputer.
Dojo is building the world’s most experienced driver. It ingests every single mile each Tesla drives and learns from it. This is similar to how ChatGPT works. The more examples it sees, the smarter it gets.
Each Tesla then “downloads” these updates, just like you download a new version of Zoom. Tesla will make a ton of cash “renting” out Dojo’s expertise to other AI companies.
Tesla is also a major player in robotics.
Step inside a Tesla factory, and you’ll see robots whizzing around, bolting tires onto cars and spray-painting doors. Here’s a glimpse:
Source: Tesla
Selling cars is a notoriously low-margin business. Ford (F) and General Motors (GM) make little profit on each car sold.
But Tesla cut the cost to make each of its cars in half by automating various steps with robotics. This allowed it to triple profits between 2021 and 2023.
When most people hear “AI,” they think of software like ChatGPT.
But the big opportunity is when AI gets “physical.” In other words, AI-powered self-driving cars and robots that can reinvent American factories. This is where Tesla shines.
Bottom line: Today, investors have their heads stuck in spreadsheets, calculating how much money Tesla makes on its cars. They’re missing the big opportunity: AI.
Self-driving cars, robotics, and its Dojo supercomputer is why Wall Street analysts will soon refer to Tesla as an AI stock.
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I publish fresh research every M/W/F.
— Stephen McBride, Chief Analyst at RiskHedge
