Artificial intelligence (AI) is likely to be 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 such as Nvidia And Palantir have already seen an impact on their business growth in recent quarters.
However, there are still winners who do not make money from 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 among those companies.
From EV to autonomous driving
Tesla has reportedly contributed more to the auto industry than any established automaker since Ford Motor Company introduced its Model T in the early 1900s. The EV maker was almost single-handedly responsible for the mass adoption of electric cars in the US, when most established companies were skeptical about the potential of EV cars.
And while the EV transition will likely take decades, the tech company is now riding the even bigger wave of autonomous driving. According to McKinsey & Company, advanced driver-assist and autonomous driving systems for passenger cars could generate $300 billion to $400 billion in revenue by 2035. And that’s just the revenue from sales 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 that is well positioned to capture a sizable, if not substantial, market share in this emerging industry. For example, Tesla has a massive fleet of vehicles (in the millions) that are constantly generating real-world driving data. This massive (and ever-growing) data set helps train Tesla’s models used to develop autonomous driving software, allowing the tech company to maintain its leadership in the autonomous driving race.
Additionally, Tesla’s vertical integration from manufacturing its cars to designing its software and chips gives it the speed and flexibility to optimize and improve its AI systems rather than relying on outside parties for critical software or components. To achieve this goal, Tesla’s custom-built 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 massive investment in AI positions the company well to maintain its leadership in the emerging autonomous driving industry. If it can maintain its current leadership, it’s likely 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. These Tesla bots, known as Optimus, could help solve problems in almost every sector, from manufacturing to healthcare, home care, education, and more.
Tesla CEO Elon Musk says 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 person will own one (or more) of these robots, and if Tesla grabs a substantial market share of, say, 10% and makes $10,000 in profit from each robot, that would translate into trillions of dollars in profit on the bottom line.
While these predictions are likely overly optimistic (Mus isn’t afraid to set big goals), the opportunities are still enormous even if the company could only achieve 5% of that goal.
As a leader in AI and automotive manufacturing, Tesla can leverage its technological know-how and vast resources to develop and grow this business. In fact, the company expects to deploy Optimus robots in its factory next year and hopefully sell them to external customers in 2026. While these dates are subject to change (or delay), Tesla’s public announcement indicates that it is well on its way to making Optimus a reality.
Suppose the company can continue to improve its AI software systems and integrate them with hardware through its advanced engineering capabilities. In that case, there’s a reasonable chance that we could get our hands on these robots in the coming years. This business could eventually be worth more than Tesla’s car business.
What does this mean for investors?
Tesla has been an early adopter and heavy user of AI for years, even though it may not seem obvious to many investors. This will change, especially as autonomous driving gains traction and humanoid robots become a reality. While this won’t happen overnight, the impact should be huge for Tesla and its shareholders.
Investors should keep an eye on the company.
Should You Invest $1,000 in Tesla Now?
Before buying Tesla stock, here’s what to consider:
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Lawrence Nga has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Nvidia, Palantir Technologies and Tesla. The Motley Fool has a disclosure policy.
1 Solid AI Stock Not to Focus on in the Next Years Is Nvidia or Palantir originally published by The Motley Fool
