Shares of Tesla are down sharply on this headline. Shares were working on a 13(!)-day winning streak earlier today but this should be the end of that.
The initial event was scheduled for August 8 but it appears as though the robotaxi won't be ready. I think one of things driving the recent rally was a belief that FSD was solved (or that someone buying it knew it was).
Interestingly, Morgan Stanley was out with a note today highlighting that they still hadn't received an invitation to the August event.
So hot rn. It's true. Tesla's stock has been hot lately. But during my run (jog?) this morning I was thinking that it's just really hot outside… right now. If you are reading this somewhere where there is a heat wave or heat advisory alert that has been issued, stop and think for a moment about all that you have to do today. Now imagine that the air conditioning went out. Whatever you thought you were going to do, you're probably not doing it anymore. Then think about all the people in Houston that lost power following Beryl. Imagine what it must feel like in Delhi (approx. 34 million people) when temps hit 126.1F last May. It's little wonder why the leader of the world's largest democracy travelled to Novo-Ogaryovo this past Monday to give someone a hug. AI may be very important. AC is more important. In a hot world, AC > AI.
Some pithy thoughts on Tesla following our most recent bull-bear lunch on Wednesday:
- For the first time in memory, the majority of the more than 20 client lunch attendees believe the next $50 move in the stock is higher rather than lower with a majority expecting the stock to outperform the market through year-end.
- At the same time, the vast majority of attendees said they did not own TSLA stock in their portfolios in any meaningful size.
- Just our opinion, but we think this dichotomy of a market that is prepared for the stock to go higher vs. having low or no exposure is related to an acceptance that the stock is being driven by momentum and other factors that cannot be measured with any acceptable accuracy. The struggling car business (90% of revenues) can be measured and ‘tracked.’ The AI, robotics, FSD/robotaxi and much of the energy business is seen as too small to matter or does not produce the same quantum of weekly/monthly information to be tracked. This makes it difficult for some institutions to justify owning the stock in size.
- Here’s the other thing about yesterday’s lunch that I actually didn’t realize until one client brought it to my attention later that afternoon. The core auto business barely came up at all. For 90 minutes, we talked energy storage, megapacks, AI, FSD, China, geopolitics and the 8/8 ‘robotaxi day’ (invitation still not received) and other topics. The topic of cars was almost completely absent from the discussion.
- Severe storms and unusual global weather phenomena (including heat waves) may be focusing investor attention on companies that may be well positioned to address climate and energy-related problems.
- Tesla has long been absent from the broader market discussion about AI for much of this year.
- Tesla is a car company. But, in our opinion, it is just now starting to get more institutional investor attention about its other capabilities including energy, manufacturing, AI and robotics. Cars are just one of many form factors of embodied AI/robotics.
- Part of our bull thesis is our belief that investors will continue to appreciate Tesla’s ability to collect monumental amounts of data that can be used to improve its AI and robotics capabilities. Over time, we expect there to be an entirely different industry classification of the company as it diversifies beyond an ‘auto pure play’ over which time different types of analysts (ie not auto analysts) may be more dominant in covering the name. There is precedent here.
Lastly on Tesla’s ‘Megafactory’ in Lathrop
- The Lathrop factory which has 40GWh of capacity (10,000 megapacks/year) can produce storage products that could generate profit equivalent to as many as 1 million Tesla vehicles.
- The Lathrop factory sits just outside of Stockton in the site of a former JC Penney distribution center. Check it out on Google Maps and you will see it’s right next to an Ashley Furniture warehouse and down the street from an In-N-Out Burger distribution center. It’s around 4.36k square feet.
- See the relatively small size of the Lathrop factory. The Lathrop facility packages Tesla battery packs (shipped from Giga Nevada) into shipping container sized battery modules combined with bi-directional inverter, thermal management system, and AC main in a single electronic system. The Lathrop factory compares to the 10 million square foot Giga Texas vehicle factory in Austin.
- See our recent report where we increased the value of Tesla Energy to $50/share from $36 previously while reducing the value of the core auto business to $380/share from $422/share.
- Investors have taken for granted that the US energy grid will be stable although generating power equivalent to EV sales. Given increasing demands from buildings and AI/datacenters, rising temperatures and stress to the grid, and given that fewer accidents we are increasingly worried about the stress on the grid and the need for adoption.
- US data center power usage may be equivalent to the power used by 150 million electric cars by 2030. We estimate a typical EV has a distribution efficiency of approximately 4 miles/kWh by 2030. MOST EVs can today achieve ranges of approximately 3-4 miles per kWh. Assuming a data center has a power usage effectiveness of approximately 1.2 (meaning a data center uses 1.2kWh to deliver 1.0kWh of power to its server racks) then 500MW of data center power usage at 90% efficiency means the effective range in TWh of power consumed by data centers by 2030 can be the equivalent of 1.8 million EVs in one year or 5.0 million miles driven (3-4 miles/kWh times 150 million EVs) versus approximately 1.0 TWh today, or approximately 3 million miles. This implies an effective range of approximately 3 miles/kWh for a typical EV.
The IBM Global Team Tech and Global Sustainability team’s forecast of FY27 data center power usage of 337 TWh is equivalent to the usage of 112mm EVs.
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Of course the pullback comes right after the bolded.
h/t @SawyerMerritt
