Andy,
Final Thursday, Tesla (Nasdaq: TSLA) unveiled its long-awaited Roadster at a SpaceX (Nasdaq: SPCX) rocket testing facility in Texas.
By now you’ve most likely seen the video, and you realize it wasn’t your typical new automotive announcement.
The Roadster accelerated from zero to 60 miles per hour in lower than a second, a feat that might make it the fastest-accelerating manufacturing automotive in historical past. That alone would have been sufficient to make headlines around the globe.
However then it drove the wrong way up, launched itself into the air, flipped over a row of Teslas and landed just like the flying DeLorean from Again to the Future.
Picture: Tesla
It was a mind-blowing show of engineering from an organization that’s already remodeled the automotive business.
However why did Musk select a SpaceX facility to unveil his newest Tesla? And why was expertise developed for rockets all of a sudden getting used to make vehicles fly?
I’m assured these particulars weren’t a coincidence.
And I believe the most important shock from final week’s demonstration could have had little or no to do with the Roadster itself.
Is Musk Planning One thing Larger?
Inside hours of final week’s Roadster demonstration, Wall Avenue was buzzing a couple of potential merger between Tesla and SpaceX.
Barclays analyst Dan Levy believes a deal could possibly be introduced earlier than Tesla’s annual shareholder assembly on December 3. And he thinks SpaceX, which went public earlier this 12 months, might purchase Tesla.
I’ve suspected for a while that Musk would finally merge these corporations. It’s a significant motive TSLA is a maintain in our Strategic Fortunes mannequin portfolio.
And the extra I give it some thought, the extra sense it makes.
In spite of everything, Tesla makes electrical autos, batteries and humanoid robots. SpaceX builds rockets and operates Starlink, its world satellite tv for pc communications community.
And what do each corporations have in widespread?
Synthetic intelligence.
Tesla is creating what Musk calls bodily AI, synthetic intelligence that operates in the true world.
Take into consideration Tesla’s self-driving autos and its Optimus humanoid robots.
Picture: Tesla
Each want AI methods that may perceive their environment, make choices and reply to continuously altering situations.
In the meantime, SpaceX has grow to be a significant participant in AI via its acquisition of Musk’s xAI enterprise, which developed the Grok chatbot.
It’s additionally investing closely within the computing infrastructure wanted to coach and function highly effective AI methods.
By combining these capabilities, Tesla might use Grok’s expertise to make its robots higher at understanding and responding to individuals. SpaceX’s Starlink community might present connectivity for Tesla autos around the globe. And Tesla’s power storage methods might assist energy the large knowledge facilities wanted to run AI.
However another excuse why Musk would possibly wish to deliver these companies collectively is Terafab.
Earlier this 12 months, Tesla and SpaceX introduced plans to construct an unlimited semiconductor manufacturing venture in Texas, with the purpose of manufacturing superior laptop chips that energy all the things from self-driving vehicles and humanoid robots to AI methods working in area.
In the present day, creating highly effective AI requires huge quantities of computing energy. Which means both shopping for superior chips from corporations like Nvidia or manufacturing specialised processors of your individual.
Musk would favor to do far more of the latter.
With Terafab, his corporations might design and manufacture chips for their very own AI functions, lowering dependence on outdoors suppliers.
And that’s the place this merger would actually make sense.
As an alternative of working as separate companies, Tesla and SpaceX might share sources, develop expertise collectively and make choices underneath one roof.
In different phrases, Musk wouldn’t simply be combining a automotive firm with a rocket firm.
He’d be making a expertise big that might develop its personal AI, manufacture the chips that energy it and put that intelligence to work in vehicles, robots, satellites and different machines.
And yesterday, Musk confirmed that it could possibly be shifting nearer to actuality.
Throughout SpaceX’s quarterly earnings name, he revealed that Tesla and SpaceX have shaped particular committees of unbiased administrators to discover a possible merger.
Musk mentioned there’s “lots of benefit” to combining the businesses, pointing particularly to alternatives in AI software program, chip manufacturing and robotics.
In different phrases, lots of the similar causes I’ve been arguing {that a} merger is smart.
After all, a deal is much from sure. Musk isn’t collaborating within the discussions due to his possession stakes in each corporations. And any merger would wish shareholder approval.
However the truth that each corporations at the moment are formally exploring the concept is a significant improvement.
And Musk has already demonstrated how applied sciences developed by considered one of his corporations can rework one other.
Final week’s flying Roadster was a spectacular instance.
And I believe it gained’t be the final.
Right here’s My Take
Tesla doesn’t want to merge with SpaceX to have a terrific future.
The truth is, I feel the corporate could possibly be heading towards considered one of its strongest quarters ever.
Increasingly more individuals in my life are speaking about shopping for a Tesla. Even my spouse mentioned she’s fascinated about getting one.
And I can perceive why.
Should you’re searching for a brand new automotive within the $50,000 to $60,000 vary, why wouldn’t you need one that might finally drive itself?
Tesla’s Full Self-Driving expertise can already navigate metropolis streets, change lanes and reply to visitors lights. It nonetheless requires an attentive driver, however the software program is bettering, and it at the moment prices simply $99 a month.
Take into consideration what that might imply for somebody like my mom, who doesn’t significantly wish to drive anymore. Sometime quickly, she might merely get into the automotive, inform it the place she wished to go and let the car deal with all the things else.
That type of independence might change hundreds of thousands of lives. And I consider it’s changing into a robust motive to think about shopping for a Tesla.
The corporate’s newest gross sales figures are encouraging, too.
Tesla delivered 486,532 autos within the third quarter, beating Wall Avenue’s expectations by roughly 25,000. That’s nonetheless about 2% beneath final 12 months’s document, however I feel the fourth quarter could possibly be even stronger.
Particularly after final week’s Roadster demonstration, which reminded hundreds of thousands of individuals simply how far Tesla is keen to push the boundaries of what’s potential.
However I’d like to know what you assume. Would you ever purchase a automotive that might drive itself?
Ship an e-mail together with your ideas to dailydisruptor@banyanhill.com.
We gained’t reveal your full identify if we publish your response, so don’t maintain again. I’d love to listen to what you actually assume.
Regards,
Ian King
Chief Strategist, Banyan Hill Publishing
