It’s usually a mistake to bet against Elon Musk. The recent performance of Tesla (NASDAQ:) stock is a good example.
True, Elon Musk may say some wacky things and make some big mistakes. But in the end, he always seems to find ways to achieve his lofty goals.
Earlier in the year, TSLA appeared to be in a bleak situation, and there was many questions about its outlook. How would it become profitable? Was its production system stable? And what about the departure of its high-level executives?
But Elon Musk relishes challenges. And since Tesla’s third-quarter earnings report, TSLA stock has been a rocket, going from $254 to $350, putting its market cap at $63 billion.
In Q3, TSLA posted a profit, which was a huge surprise. Musk noted that the company would have more profitable quarters soon.
Elon Musk has been focused on bringing down costs and finding ways to increase the company’s profitability through growth. In the meantime, demand for the Model 3 has been rising.
According to : “Central to the long-term bull thesis on TSLA stock is that Tesla has been selling, still is selling, and will continue to sell more and more of its signature electric vehicles.”
The AI Advantage
The competition is certainly getting more intense, as car makers like GM (NYSE:), Ford (NYSE:), BMW, Volkswagen and Mercedes-Benz ramp up their own electric-car efforts. What’s more, Tesla’s foray into the Chinese market will meet with lots of resistance as well, since there are over 480 EV companies in the country!
Granted, Tesla has some major competitive advantages. TSLA has a premium brand, a deeply loyal customer base, talented engineers and a strong Intellectual Property foundation.
But Tesla’s expertise in AI could be its biggest advantage. From its early days, the company built its cars with systems that collect enormous amounts of data,using sensors and over-the-air updates. As a result, it’s been able to use much more powerful AI systems.
A big part of Tesla’s AI efforts, of course, occurred in conjunction with the creation of Autopilot. That system enables cars to automatically drive to designated locations. It also enables cars to park themselves. Finally, cars with Autopilots can be summoned with smartphones.
To pull this off, Tesla has installed on-board computers with 40 times the power of prior systems and sophisticated AI.
It’s true that real autonomous driving is still not imminent. But Tesla is definitely aggressively trying to reach that goal. For example, the company recently acquired DeepScale, which is a cutting-edge developer of neural network systems.
For the most part, DeepScale’s focus is on solving the extremely tough problem of energy consumption with AI chips
The Bottom Line on TSLA Stock
The irony is that Elon Musk has said that AI is more dangerous than nuclear war! But then again, he has a tendency to exaggerate a great deal.
But it’s good to see a CEO who is freewheeling and creative. More importantly, AI will likely be a difference maker when it comes to the next-generation cars launched by TSLA. For now, Tesla’s competitors are mostly playing catch-up.
Tom Taulli is the author of the book, . Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.
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