Why investing in Tesla is more of an investment in the future.
tesla (TSLA -1.11%) recently announced its first quarter results, but the company's performance was not good as sluggish sales of electric vehicles (EVs) weighed on the company's performance. Total deliveries decreased 9%, auto revenue decreased 13% to $17.4 billion, and overall revenue decreased 9% to $21.3 billion. Meanwhile, earnings per share fell 47% to $0.45, resulting in a cash outflow of $2.5 billion.
Not a great start to the year. However, Tesla's stock price still rose 12% following the results.
Why is there such a positive reaction to such lackluster results? Because CEO Elon Musk has changed the narrative about what kind of company Tesla will be in the future.
AI robotics company Tesla
During Tesla's first-quarter earnings call, Musk told investors that Tesla should be viewed as an artificial intelligence (AI) and robotics company, and that trying to value Tesla as a car company is the wrong way to look at it. . He added that if you don't think Tesla will resolve its autonomy, you shouldn't be an equity investor.
The term “autonomy” refers to self-driving cars. Tesla's self-driving cars are based on an AI-based self-driving technology called FSD V12. Musk said about 1.8 million vehicles on the road have the feature turned on, and about half of drivers use it.
But Musk's big plans for Tesla and self-driving revolve around building large-scale robotaxis and cybertaxis. The company said in an investor presentation that it will consider adopting an “innovative 'boxless' manufacturing strategy” for robotaxis to reduce manufacturing costs. Tesla plans to unveil its robotaxi strategy in a big presentation in August.
But given how much computing power Tesla cars have, Musk has no intention of wasting it just sitting around. He envisions cars being able to perform distributed inference when they are not in use. Basically, he thinks he can use his Tesla to run AI models when he's not driving his car. He said this would be very powerful if there were 100 million Tesla cars on roads around the world.
Musk compared this idea as follows: Amazon and its cloud service business, AWS. He also pointed out that when Amazon was known for selling books online, people didn't expect this to be its most valuable part.
Of course, Musk's vision of distributed inference comes with some questions. Ownership is very important because Tesla does not own the vehicle once it is sold. AI computing power is also very energy-intensive and may not be economically viable. Also, who will pay for this energy consumption? A Tesla-owned robotaxi vehicle would likely solve some of these problems because Tesla would own the vehicle and be responsible for its energy consumption. To do. However, robotaxis are likely to be most used in cities where electricity prices are less attractive.
Tesla's other big business is a humanoid robot called Optimus. Musk said he believes robots will be able to perform useful tasks inside factories by the end of this year, and possibly start selling outside the company by the end of 2025. On Tesla's conference call, he also said Optimus could eventually be put into production. It's worth more than everything else in Tesla combined.
visionary mask
Elon Musk is right about one thing. If you only look at Tesla as a car company, it's probably not a great investment. The company trades at more than 55 times expected earnings and more than 5 times sales, making it a much higher valuation than traditional automakers such as: ford and general motors. At the same time, emerging EV manufacturers are finding it difficult to even make a profit.
But if Tesla can transform into an AI robot company, the sky is definitely the limit. An investment in Tesla is an investment in Elon Musk and his vision for the future. While EVs are just one part of the equation and will have a big impact on the company's performance in the near future, investing in Tesla means more than investing in EVs. Not all of Musk's visionary ideas work out, but if most do, the stock has a bright future ahead of it.
With Tesla stock down more than 40% from recent highs, now may be the time to invest in Tesla and Musk's AI robot vision.
John Mackey, former CEO of Amazon subsidiary Whole Foods Market, is a member of the Motley Fool's board of directors. Jeffrey Seiler has no position in any stocks mentioned. The Motley Fool has positions in and recommends Amazon and Tesla. The Motley Fool recommends General Motors and recommends the following options: Long January 2025 $25 Calls on General Motors. The Motley Fool has a disclosure policy.