Tesla recently hosted its “We Robot” event, showcasing recent production innovations such as the CyberCab and Optimus Robot. While the company typically hosts an annual demonstration of its latest technology, this year’s event was expected to be groundbreaking. Tesla CEO Elon Musk posted on X weeks before the event that “this will be one for the history books.” However, the company fell short of expectations, with Tesla’s stock trading -7% the day after the event. That’s not to say the technology is defunct though. Deeper insights into its Full Self-Driving (“FSD”) technology and demonstrations of real-world artificial intelligence (“AI”) products, like Optimus, still dazzled attendees.
FSD technology has been one of the most hotly debated topics amongst Tesla investors for years. Recent updates from the company have emboldened investors that there may soon be a breakthrough, such as purchasing more powerful Nvidia GPUs to train their AI. Musk made specific comments about progress, such as “unsupervised FSD will be launching in Texas and California next year” which provided a constructive update. Pertinent questions about this technology remain, such as cost to users and universal operability. As well, Waymo has emerged as a competitor, with the company recently completing 50,000 rides in a single week. Investors likely understand that consumers are warming up to autonomous driving technology, though Tesla’s latest comments imply they are late to the market.
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Tesla sees a bigger opportunity to revolutionize the car market in addition to achieving autonomous driving. With the company delivering 1.8 million cars in 2023, skepticism remains about how much share of the global auto market they can win with newer, more affordable designs. Investors likely wanted to hear that these new vehicle models would raise the company’s long-term earnings potential, with comments that the next leg of growth could be less capital intensive and quicker to market, perhaps seen as bullish. However, many of Musk’s comments about this next generation car hinted that the company will need to build new manufacturing plants and lengthen the time to market. These factors create higher uncertainty for Tesla’s future and may have weighed on the stock.
Optimus, Tesla’s humanoid robot, also appeared at the event. This was perhaps the most constructive demonstration of the company’s technology. There was a fleet of Optimus robots walking on their own. More than just hype, Optimus was also shown to be catering to event attendees, such as serving refreshments. It is a stark advancement from Optimus’ debut just years ago and provides a reminder to investors of Tesla’s ability to push boundaries in robotics.
Taken as a whole, Tesla’s “We Robot” event was admittedly more of a show than a tangible business plan. Those skeptical of the stock likely saw the venue of the event, the Warner Bros. Studios, as a fitting location. Yet, investors may be well served to assess the bigger picture. Since news broke on June 13, 2024 that CEO Elon Musk’s pay package would be reinstated, Tesla stock has returned 25% versus a gain of 7% for the S&P 500, according to FactSet data. In just four months, Mr. Musk has catalyzed the investor base by offering a glimpse of what he thinks the company is capable of over the coming years. The possibility of safe FSD technology, a new generation of cars, and real-world AI products previously sounded like a Sci-Fi fantasy. A future like that may be just around the corner.
For more content by Blake Anderson, Senior Analyst, Investments click here.
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