Tesla's AI Drive: Accelerating Growth by 335%?

Published Date: 26/07/2024

Gene Munster predicts Tesla's valuation will surge to $3 trillion, driven by AI initiatives like full self-driving software and robotaxi services.

Gene Munster, co-founder and managing partner at Deepwater Asset Management, recently predicted that Tesla's valuation will surge to $3 trillion, driven by artificial intelligence (AI) initiatives like full self-driving software and robotaxi services. Munster believes these opportunities will be key growth drivers, although he didn't provide a specific timeline for this prediction.

Tesla's recent financial results were disappointing, with revenue increasing only 2% to $25.5 billion and GAAP net income nosediving 45% to $1.5 billion. However, demand for electric vehicles is expected to improve as the macroeconomic climate becomes more favorable for consumers. Pricing data from futures contracts implies three 25 basis-point rate cuts in 2024, which could catalyze a turnaround.

Tesla remains a formidable player in the electric vehicle market, accounting for 48% of battery electric vehicle sales in the US and 16% globally through May. The company's AI ambitions, particularly its full self-driving software, could support direct monetization via subscription and licensing, and indirect monetization via autonomous ride-hailing services.

In 2023, CEO Elon Musk predicted that robotaxis could push Tesla's gross margin toward 70%, a significant increase in profitability. Tesla's vast network of full self-driving-enabled vehicles provides a material data advantage, with over 1.3 billion miles driven and data accumulation 110 times faster than Alphabet subsidiary Waymo.

Gene Munster believes full self-driving could generate $100 billion in annual operating income through subscription and licensing fees within a decade. Tesla's Dojo supercomputer, featuring custom chips purpose-built for video training, could accelerate full self-driving development and potentially generate revenue through AI cloud services.

Tesla plans to unveil its robotaxi at a company event scheduled for October 10. With proof of concept, Tesla could monetize Dojo and drive growth. Wall Street expects Tesla to grow revenue and earnings per share at annual rates of 16% and 25%, respectively, through 2026. However, these estimates may be too pessimistic, and Tesla could grow earnings by 30% annually over the next decade, driven by electric-vehicle sales and the robotaxi market.

FAQS:

Q: What is Gene Munster's prediction for Tesla's valuation?

A: $3 trillion

Q: What are the key growth drivers for Tesla according to Munster?

A: Artificial intelligence initiatives like full self-driving software and robotaxi services

Q: What is the expected growth rate for electric vehicle sales through 2030?

A: 33% annually

Q: What is the expected growth rate for the robotaxi market through 2032?

A: 53% annually

Q: What is Tesla's current market capitalization?

A: $687 billion

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