Tesla, Inc. (NASDAQ:TSLA) reported disappointing Q4 earnings last month, missing both EPS and revenue. The company has experienced slowed revenue growth, declining margins, and a decreasing stock price. It has become clear that Tesla is falling behind as a car maker and will not be able to achieve the necessary margins and revenues solely through car sales. As a result, Tesla owners are now betting on CEO Elon Musk’s artificial intelligence (AI) vision. Musk has expressed his desire to own 25% of the company in order to pursue his AI ambitions.
Tesla has several AI projects in the works, including Dojo, Optimus, and potentially becoming the world’s largest computing power provider. In this article, the author analyzes each of these endeavors qualitatively to assess Tesla’s advantage in the AI segment. While the author acknowledges the disappointing Q4 results, they remain bullish on the future of the company, albeit with a lower rating due to the poorer outlook for the business in this quarter and 2024.
The article highlights the latest earnings, showing a 15% growth in automotive revenues for the year, with energy storage and services experiencing larger increases. However, operating margins have decreased, and production of models other than the Model Y has declined. Tesla’s market share in Europe and China is also under threat from increasing competition. European automakers are catching up in the EV market, while in China, Tesla has fallen to fifth place in terms of market share. As China accounted for 22.5% of Tesla’s revenues in 2023, this market loss is significant.
The author then delves into Tesla’s AI initiatives, starting with Dojo and the full self-driving (FSD) technology. Dojo, a supercomputer, runs on Tesla’s custom-designed D1 chips and is used to train machine learning models for self-driving technology. While the Dojo is considered a long shot, FSD software continues to accumulate driven miles, and Tesla’s fleet of cars provides valuable data for machine learning models.
The article also discusses Optimus, Tesla’s humanoid robot, which has the potential to greatly impact the robotics industry. Tesla is already a major player in the robotics market through its production of cars, and Optimus further expands its capabilities. However, competitors such as Microsoft and Figure AI are also entering the market.
Tesla’s energy business is another area where the company can leverage AI technology. The Tesla Autobidder, an algorithm that optimizes energy operations, has generated over $330 million in profits for its users. The energy segment is a growing part of Tesla’s revenue, and integrating AI technology could further enhance its profitability.
While Dojo and Optimus do not currently generate revenue, they have the potential to contribute in the future. FSD technology and a fleet of robo-taxis could increase service revenues, while Optimus could become a significant player in the robotics market.
In conclusion, Tesla’s car business is slowing down, and investors are now betting on Musk’s AI vision. While there are risks involved, including increased competition and geopolitical risks, Tesla has the tools and talent to become a leading AI and robotics company. As a result, the author remains bullish on the future of Tesla and believes in Musk’s capabilities.
