Morgan Stanley’s thoughts on Tesla’s evolving strategy:
EV Market Dynamics: According to Morgan Stanley, the electric vehicle industry is heading into what they term a “commoditized dark age.” They contrast this with the rapid advancements seen in AI and robotics. This context is crucial for understanding Tesla’s strategic decisions, especially as China emerges as a dominant force in traditional EVs.
Strategic Shift: Recent actions by Tesla, such as delaying the Model 2, reducing headcount by more than 10%, downsizing the supercharger team, and slowing gigacasting expenditure, indicate a pivot towards increased investment in AI infrastructure. Analysts see this as Tesla gearing up for what they describe as an AI “arms race.”
AI Integration: The fusion of large language models (LLMs) and vision language models (VLMs) within multimodal systems is enhancing the efficiency of robot learning. This advancement allows for the evolution of robots, including robotaxis and humanoids, to keep pace with the progress in generative AI and the growth of Nvidia’s data centers. Additionally, there’s a trend towards incorporating camera systems into various devices to train neural networks.
China Relations: Elon Musk’s recent visit to China is interpreted by analysts as a strategic maneuver to cultivate collaboration in critical technology and supply chain sectors amidst tensions between the US and China. They stress the importance of China’s involvement in addressing inflation within the automotive industry and in the broader industrialization efforts related to EVs, autonomous vehicles, and robotics.
Voting Control: Morgan Stanley underscores the significance of resolving Tesla’s voting control issue, suggesting that the company’s AI potential is currently “capped” until this matter is addressed. This limitation poses challenges for Tesla’s growth trajectory and presents obstacles for investors. Nevertheless, broader challenges within the global EV market and other entities under Musk’s control also contribute to Tesla’s strategic and structural considerations for the future.
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