You can attribute that sky-high valuation on Tesla’s biggest bet of all: autonomy. The automaker, which would rather be viewed as a AI and tech company that just happens to build cars, believes it can solve self-driving with its Full Self-Driving software and its upcoming Robotaxi product. And investors believe that this risk could lead to a huge payday if it pays off.
Where did he get the 77% number? Can anyone figure out why people buy stocks?
Why focus solely on cars?
I would not invest in cars qua cars. Initially I did not believe EVs had a future, simply put, lead acid batteries were too heavy and were short lived. Lithium ion was the game changer. By 2020 the market had given EVs the stamp of approval, the technology had Crossed the Chasm. Time to start buying TSLA. The 50% annual growth quickly faded into the background while AI, the new version of AI, the Neural Network version of AI, finally also Crossed the Chasm. The question was, how to monetize AI? Make AI based machines that can be sold by the millions!
Between AI driven cars and AI driven humanoid robots I think the robots have fewer hurdles to jump, less red tape, fewer safety concerns, and a much larger, diverse market. The competition has some great ideas but few have the manufacturing skills to make the robots, and the in-house testing grounds to put them to work.
In any case the number to look at is the cashflow that enables the required investments. Few can compare with Tesla, one of the very few EV makers that makes a substantial profit on each EV
I would guess, and it is only a guess, that he took “car company” and “sales” and gave it a reasonable multiple based on that, perhaps a little higher because of growth which the old line companies do not have, and then subtracted that from their market cap. That would leave his hypothetical 77% for “something else.”
The “something else”, obviously, would be for full self driving (actual FSD, not the faux that is being peddled now) and the exponential growth that might accompany that. And other initiatives, I guess, using AI for {something} although what that might be is unclear.
If , in fact, that’s the thesis, I don’t think he’s too terribly wrong. And I have my doubts, because it’s unclear that Tesla will be the only one to solve it (indeed, others are ahead right now), or that when it is solved that it will lead a stampede to one manufacturer over another.,
There are other components, of course, notably solar and storage, but again there are lots of competitors in that space, and while Tesla has managed to establish a great brand it’s (so far) a near-commodity product (*Which could change if new technologies emerge - and again there’s no guarantee that Tesla will be the one to do it).
Anyway, that’s my guess as to where the 77% came from. I can’t be bothered to gin up mathematical models, nor frankly, to read the piece. So there’s my “studied” analysis
