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So, Tesla held its big annual shareholder meeting yesterday, and that included a vote to (again) give Elon Musk by far the biggest CEO compensation package in history. But the biggest story at Tesla is the same as it was last quarter, last year, and in the years to come. The company is trying to shift into an AI and robotics company. While its revenue and profits are almost entirely from producing and selling cars right now, Elon Musk and the company have been very clear lately — if you don’t believe in Tesla’s AI and robotics work and plans, you shouldn’t be invested in Tesla. Again, this is what was emphasized in the annual Tesla shareholder meeting.
Tesla Chair Robyn Denholm noted that Tesla is unique in how large its retail shareholder base is. The fact is: institutional investors are less inclined to believe that something will happen that’s never happened before, that something will be created that hasn’t been created before. Retail shareholders are more inclined to believe in dreams. A decade ago, the dream was mass-produced, high-volume, affordable electric cars. Those who believed were rewarded when Tesla production and sales exploded. Those who didn’t believe and were ridiculed by critics for years got the last laugh. Today, the dream is something very different. Tesla sales have stagnated and even dropped after their long climb, but the focus is now on AI, true full self driving, and a new generation of robots that are more like humans and capable of doing a variety of tasks.
Tesla’s past success doesn’t predict what will happen in the future. It could be that Tesla again achieves what most think it cannot, or it could be that Tesla can’t succeed in this very different venture. The new goals are not as “simple” as scaling up mass manufacturing of electric cars. They involve going where no company has gone before in advancing artificial intelligence in order to enable widespread use of robotaxis by millions of people and artificial intelligence plus robotics in order to enable human-like robots that can perform a wide variety of tasks.
But how about some quotes from Tesla now? To kick off, from the recorded intro video for the meeting, Elon Musk states, “My prediction is that a majority of Tesla’s long term value will be Optimus.” He also states, “Regarding FSD version 12, it’s profound. The rate of improvement is rapid. It might be the biggest asset value appreciation in history when you can do unsupervised full self-driving.”
But, again, just because Tesla achieved what it did in the past doesn’t mean it will achieve these goals. It’s a whole different game. Again, you don’t have to take my word for it. Here’s what Elon Musk stated at yesterday’s meeting: “I think we’re not just opening a new chapter for Tesla. We’re starting a new book.”
I don’t think anyone knows for sure what will happen, but without a doubt, Elon Musk and Tesla shareholders believe in the story of this new book. If everything works, Tesla will be the only company in the world with broadly available unsupervised full self-driving capability in millions of consumer cars. It will also be bringing a new product — a new home and workplace robot — to who knows how many buyers? If these things work, potential growth and profits are impossible to imagine. And how long it would take other companies to catch up is also completely unpredictable, particularly due to Tesla’s unique data source and head start.
If these things don’t work, however, Tesla will continue to compete against hundreds of other automakers selling more and more, and better and better, electric vehicles. If it fails on these big attempts, that will be a tarnish on the company and it’s going to be very difficult to grow at anywhere close to the rate it has previously grown at. Meanwhile, really, if it continues to pour money into FSD and robots and they don’t bear fruit, especially financially, then Tesla could be pouring money down a drain and massively disappointing shareholders with billions of dollars of stock on the line. One could even say that if it fails on FSD and robotics, the company could collapse on itself — especially if it has overbuilt its factories, stores, and service centers. What happens if you plan for, and build for, 50% growth a year but then end up with 0% growth a year?
Being completely honest and frank, I don’t have a strong, clear opinion on what will happen. It’s hard to know what Tesla can and can’t achieve with its approach to FSD, robotaxis, and advanced robots. I’ve read countless comments for and against the company. Some seem convincing on one side, and some seem convincing on the other side. But none can definitively tell us if Tesla’s approach will work in the end. And we can’t blindly believe Elon Musk, who said there would be a full self-driving demonstration from San Francisco to New York City about 7 years ago, and has misjudged the progress and future of the technology for several years. We also can’t blindly believe expert critics who say Tesla won’t achieve these things because they haven’t been done before and Tesla doesn’t have the right technological approach, because we heard that about SpaceX’s reusable rockets (and other things), we heard that about the Tesla Model S, the Tesla Model X, the Tesla Model 3, and the Cybertruck. There are always some experts who are hyper-skeptical, have limited vision, and end up being wrong. I’ve seen it far too much, especially in the case of Tesla, to blindly believe experts.
At the moment, for me, it’s a stalemate. I see reasons to believe and reasons to not believe. The crazy thing is just how much is on the line in this case. It’s not a choice between a burger or a burrito. It’s about whether Tesla will become the biggest company in the world or stagnate and collapse. Perhaps we’ll have better insight into where things are headed by the end of the year, or perhaps even by the end of the summer. We’ll see. In the meantime, please do share extensive, detailed arguments that make the case for either side. I’m always looking for new clues!
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