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 in all probability seen the video, and you already know it wasn’t your typical new automobile announcement.
The Roadster accelerated from zero to 60 miles per hour in lower than a second, a feat that may make it the fastest-accelerating manufacturing automobile in historical past. That alone would have been sufficient to make headlines world wide.
However then it drove the other 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 reworked the automotive business.
However why did Musk select a SpaceX facility to unveil his newest Tesla? And why was know-how developed for rockets abruptly getting used to make automobiles fly?
I’m assured these particulars weren’t a coincidence.
And I believe the largest shock from final week’s demonstration might 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 few 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 yr, may purchase Tesla.
I’ve suspected for a while that Musk would ultimately merge these corporations. It’s a serious purpose TSLA is a maintain in our Strategic Fortunes mannequin portfolio.
And the extra I give it some thought, the extra sense it makes.
In any case, Tesla makes electrical automobiles, 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 growing what Musk calls bodily AI, synthetic intelligence that operates in the true world.
Take into consideration Tesla’s self-driving automobiles and its Optimus humanoid robots.
Picture: Tesla
Each want AI methods that may perceive their environment, make choices and reply to always altering circumstances.
In the meantime, SpaceX has develop into a serious participant in AI by means of 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 may use Grok’s know-how to make its robots higher at understanding and responding to individuals. SpaceX’s Starlink community may present connectivity for Tesla automobiles world wide. And Tesla’s power storage methods may assist energy the large knowledge facilities wanted to run AI.
However another excuse why Musk may wish to deliver these companies collectively is Terafab.
Earlier this yr, Tesla and SpaceX introduced plans to construct an unlimited semiconductor manufacturing undertaking in Texas, with the purpose of manufacturing superior laptop chips that energy every thing from self-driving automobiles and humanoid robots to AI methods working in area.
Right now, growing 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 personal.
Musk would like to do far more of the latter.
With Terafab, his corporations may design and manufacture chips for their very own AI functions, lowering dependence on exterior suppliers.
And that’s the place this merger would actually make sense.
As an alternative of working as separate companies, Tesla and SpaceX may share sources, develop know-how collectively and make choices underneath one roof.
In different phrases, Musk wouldn’t simply be combining a automobile firm with a rocket firm.
He’d be making a know-how big that might develop its personal AI, manufacture the chips that energy it and put that intelligence to work in automobiles, robots, satellites and different machines.
And yesterday, Musk confirmed that it could possibly be transferring nearer to actuality.
Throughout SpaceX’s quarterly earnings name, he revealed that Tesla and SpaceX have shaped particular committees of impartial administrators to discover a possible merger.
Musk stated there’s “quite a lot 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 sensible.
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 want shareholder approval.
However the truth that each corporations are actually formally exploring the thought is a serious growth.
And Musk has already demonstrated how applied sciences developed by certainly one of his corporations can remodel 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 an important future.
Actually, I believe the corporate could possibly be heading towards certainly one of its strongest quarters ever.
Increasingly individuals in my life are speaking about shopping for a Tesla. Even my spouse stated she’s involved in getting one.
And I can perceive why.
When you’re purchasing for a brand new automobile within the $50,000 to $60,000 vary, why wouldn’t you need one that might ultimately drive itself?
Tesla’s Full Self-Driving know-how can already navigate metropolis streets, change lanes and reply to visitors lights. It nonetheless requires an attentive driver, however the software program is enhancing, 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 notably wish to drive anymore. Sometime quickly, she may merely get into the automobile, inform it the place she wished to go and let the car deal with every thing else.
That form of independence may change thousands and thousands of lives. And I imagine it’s changing into a strong purpose to think about shopping for a Tesla.
The corporate’s newest gross sales figures are encouraging, too.
Tesla delivered 486,532 automobiles within the third quarter, beating Wall Avenue’s expectations by roughly 25,000. That’s nonetheless about 2% under final yr’s document, however I believe the fourth quarter could possibly be even stronger.
Particularly after final week’s Roadster demonstration, which reminded thousands and thousands of individuals simply how far Tesla is prepared to push the boundaries of what’s potential.
However I’d like to know what you suppose. Would you ever purchase a automobile that might drive itself?
Ship an e mail along with your ideas to dailydisruptor@banyanhill.com.
We gained’t reveal your full title if we publish your response, so don’t maintain again. I’d love to listen to what you actually suppose.
Regards,
Ian King
Chief Strategist, Banyan Hill Publishing
