TSLA : A business of businesses marching towards $1T

It’s 02/02/2020. Almost 3 years back, I posted this on Tesla – at the core its chemistry and intelligence. In many way, Elon and crew are well on their way of executing on both topics of speculation.

Battery Chemistry/Tech: The roadmap to hitting $100/KWh is well on its way and Tesla is leading it from all fronts. Manufacturing at scale, improving density with the acquisition of Maxwell and Hibar and of-course internal efforts. I love the way Jim Keller (another fellow chip nut) calls out Elon’s law “Figure out the optimal configuration of atoms first and figure out a way to put them there”. I love this quote. The quest for chemistry is deep rooted in principles of physics as applied to engineering and thus eventual value extraction. We have entered the knee of the curve with Tesla approaching and crossing million cars on the road in both being able to invest in chemistry and vice versa chemistry aiding the company to drive down the cost and range and thus value. Of-course distance itself from its competitors.

Artificial Intelligence: The million cars and 14 billion miles driven with partial autonomous driving is greatest field based iterative improvement in machine learning that is unmatched. Coupled that with brilliance of tech leaders in algorithms (Andrej Karpathy) and Silicon Design (Pete Bannon) and approach to machine vision and now using the currency, name and leadership to attract the best and brightest. Machine vision is the Tsunami will lift all ML boats and between the need for autonomy, the talent and approach (fast iterative design cycle), despite the billions of dollar investment .in other ML chip outfits by VC, this is going to standout. Who knows there might well be the next Data Center chip embedded in Tesla (Recall the wimpy 4004 calculator chip became the data center chip 25 years later).

So in Feb 2020, we have euphoria about this stock. Back in June 2017 the stock was at $353 and has been oscillating until now. Its unclear why its zooming this fast exponentially but a few events have happened.

The realization that competition is nowhere near Tesla’s manufacturing scale (Fremont and Shanghai and soon Berlin) with step and repeat like silicon fabs model (not copy exact like Intel did but copy similar), the cost of battery coming down, the excitement of the product roadmap (depth and breadth) [Can’t wait to get my hands on Cybertruck] and leadership in machine vision, we might have crossed the knee of the curve of the market opportunity/potential that the analyst and investment crowd are now jumping in like herds (as they always do).

While there is euphoria and the stock will go up and down (with Musk’s utternances and distractions), the roadmap to $1T and beyond seems more plausible.

There many lenses through which to look at this company today – but I look at it this way. Its better than Amazon. Its better than Alphabet and might be even better than Apple in the long run except in one dimension. Its better because inside today’s Tesla there is

  • A car company
  • A Battery company at planet scale
  • An AI/ML company (machine vision in particular)
  • An electric storage company
  • An Electric Utility company (low value but at scale gets interesting)
  • An energy distribution company
  • A potential Cloud or computer company (if a book store turns into cloud computing, an autonomous car can have the right assets for becoming a cloud company)
  • A big data/mapping/navigation company
  • A carless car company (i.e. Uber/Lyft killer robotaxi)
  • A machine vision driven robotics company
  • and more to come….(more than letters in the Alphabet)

The only limiter to realize all these companies – management bench strength to support Elon.

This is a half time report/summary. We have gone 3X in market cap in 2.5 years. The next 3 is going come faster than we can see…

Next check point 22/02/2022. Until then watch and load up on TSLA.

Author: renuraman

Always connecting the dots....

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