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Artificial intelligence (AI) is probably one of the biggest trends that will change our daily lives in the coming decades. Although AI is still in its early stages of development, companies are liking it Nvidia And Palantir have already seen an impact on their business growth in recent quarters.
Still, some winners have yet to make money selling AI-related services and products, but they are well positioned to do so in the future. Tesla (NASDAQ: TSLA)one of the leading technology companies of our generation, is one of those companies.
From EV to autonomous driving
Tesla has undoubtedly contributed more to the automotive industry than any established car manufacturer Ford Motor Company introduced its Model T in the early 20th century. The EV maker has almost single-handedly driven mass adoption of electric cars in the US, while most incumbents were skeptical of electric cars’ potential.
And while the EV transition will likely take decades, the tech company is now pursuing an even more important autonomous driving trend. According to McKinsey & Company, advanced driver assistance and autonomous driving systems for passenger cars could generate $300 billion to $400 billion in revenue by 2035. And that’s just income from the sale of these systems. The rise of autonomous driving systems could also open up other business opportunities for Tesla, such as launching a robotaxi service.
There are good reasons to believe that Tesla is a frontrunner well positioned to capture a decent, if not substantial, market share in this emerging industry. Tesla, for example, has a huge fleet (in the millions) that continuously generates real-world driving data. This massive (and growing) data set will help train Tesla’s models used to develop autonomous driving software, helping the tech company maintain its leadership in the autonomous driving race.
Furthermore, Tesla’s vertical integration from car manufacturing to software and chip design gives the company the speed and flexibility to optimize and improve its manufacturing processes. AI systems instead of relying on external parties for critical software or components. To that end, Tesla’s custom Dojo supercomputers help train complex AI models with massive amounts of driving data, giving the company an edge in large-scale, low-cost computing.
While it’s too early to declare victory, Tesla’s early-mover advantage and its massive investments in AI position the company well to maintain its leadership in the emerging autonomous driving industry. If it can maintain its current leadership, it’s probably only a matter of time before it makes billions from this venture.
AI and robotics
Another area where Tesla has big ambitions is building and selling humanoid robots. Known as Optimus, these Tesla bots can help solve problems in almost every sector, from manufacturing to healthcare, home care, education, etc.
According to Tesla CEO Elon Musk, the company could make trillions in profits by selling these robots to perform tasks like teaching children, babysitting, working in factories and more. The idea is that eventually every human will own one (or more) of these robots, and if Tesla captures a substantial market share of, say, 10% and makes $10,000 in profit from each robot, this would translate into trillions of dollars. on the bottom line.
While these predictions are probably too rosy – Musk is never shy about setting huge goals – the opportunities are still enormous, even if the company could achieve just 5% of that goal.
As a leading player in AI and car manufacturing, Tesla can leverage its technological knowledge and vast resources to develop and grow this business. In fact, the company expects to start using Optimus robots in its factory next year and hopefully start selling them to external customers by 2026. While these dates may change (or be postponed), their public announcement indicates that Tesla is on track to make Optimus a reality.
Suppose the company can continue to improve its AI software systems and integrate them with hardware through its advanced technical capabilities. Then there is a good chance that we will be able to get our hands on these robots in the coming years. This business could be worth more than Tesla’s auto business at some point.
What does it mean for investors?
Tesla has been an early proponent and heavy user of AI for years, even though this may not seem obvious to many investors. This will change, especially as autonomous driving continues to increase and humanoid robots become a reality. While this won’t happen overnight, the impact should be huge for Tesla and its shareholders.
Investors should continue to keep an eye on the company.
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Lawrence Nga has no position in any of the stocks mentioned. The Motley Fool holds and recommends positions in Nvidia, Palantir Technologies, and Tesla. The Motley Fool has one disclosure policy.
1 solid AI stock that Nvidia or Palantir won’t focus on for years to come was originally published by The Motley Fool