Enter The Dojo
January 7, 2024
This Week in The Autonomy Economy, The Road to Autonomy Index declined 3.49%, Morgan Stanley analyst Adam Jonas assigned a $380 overweight price target to Tesla. The autonomous trucking industry is preparing for freight-only fully autonomous operations in 2024 and Grayson Brulte joined Dooner on FreightWaves WHAT THE TRUCK?!? where he shared his 2024 outlook for the autonomous trucking industry.
Tesla is one of Morgan Stanley’s top investment choices for 2024. In Mr. Jonas’ $380 price target, only $86 a share is accounted for Tesla’s core auto business, leaving 77% of the price target comprising the following businesses: “Network Services, Mobility, 3rd-party battery/FSD licensing, Energy and Insurance”.
Tesla is not a car company, it’s a vertically integrated technology company that is about to have its Amazon AWS moment — Enter The Dojo.
The same forces that have driven Amazon Web Services to reach 70% of Amazon’s total [operating profit] can work at Tesla.
– Adam Jonas, Analyst, Morgan Stanley
We believe that Tesla will follow the Amazon Web Services model and sell excess capacity on the Dojo supercomputer platform. When this action occurs, the company will unlock significant revenue growth and margin expansion. Setting the foundation for one of the future core pillars of Tesla’s business.
In our opinion, Tesla is a misunderstood company. One that a majority of analysts and pundits are not properly valuing because they are caught up in the noise that inherently surrounds the company. Remove the noise from the picture and you have an extremely healthy business.
Tesla’s core business, electric vehicles currently has a 55.1% market share in the United States according to Motor Intelligence. Any business that controls 55% of a market is a healthy business, yet the noise would not have you believe that.
The media finds the smallest minute perceived negative details about Tesla and turns it into headline grabbing news further feeding the noise. Why? Tesla articles drive clicks leading to increased ad sales. At the end of the day it all comes down to economics.
Economics are the backbone of business, and it’s unfortunate when facts and details get twisted to feed a narrative. Collectively the autonomous vehicle and truck industries face the same attacks on a regular basis which is unfortunate as these unprovoked attacks undermine public trust of autonomy.
Undermining public trust of autonomy will lead to long-term persistent inflation. Persistent inflation hurts the economy as cost of living increases and consumer spending power erodes.
Autonomy offers a long-term solution to lower inflation benefiting the economy, yet the detractors want the noise to continue. It’s a selfish move that will ultimately undermine the economy to everyone’s detriment.
Dave Matthews once sang, “Come in from the cold for a while, everything will be alright, come in from the noise for a time, everything will be alright”.
Tesla is a The Road to Autonomy Index component company
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What’s Moving the Markets
Will Dojo Become Tesla’s AWS?
That is the question that Tesla investors and analysts are being to ask.
Dojo. The same forces that have driven AWS to reach 70% of AMZN total EBIT can work at Tesla, in our view, opening up new addressable markets that extend well beyond selling vehicles at a fixed price. The catalyst? Dojo, Tesla’s custom supercomputing effort in the works for the past 5 years.
– Adam Jonas, Analyst, Morgan Stanley (Excerpt from Tesla 2024: Another Volatile, Idiosyncratic Year research note – December 26, 2023)
When Tesla opens the Dojo platform and creates Dojo Compute platform, the initial reaction from the market will be muted as it it is expected. What will move the market is when Tesla breaks out Dojo Compute revenue for the first time.
Using history as our guide, there is a precedence for such a move. When Amazon broke out AWS revenue for the first time on April 23, 2015, the stock soared 15% on the news. Amazon reported AWS revenue grew 49% in 2014 to $4.6 billion. In the first quarter of 2105, AWS revenue grew 49% to $1.6 billion.
On Amazon’s Q3 2023 earnings call, the company reported that AWS segment sales increased 12% year-over-year to $23.1 billion. Over the nine years since Amazon broke out AWS revenue for the first time, AWS revenue has increased by $18.5 billion.
In explaining his Dojo thesis, Morgan Stanley analyst Adam Jonas wrote the following in his January 3, 2024 Latest Thoughts Following 4Q Deliveries research note:
A Dojo-Enabled Double-Fly-Wheel. We believe TSLA can leverage its EV cost leadership to expand user base and generate a higher % of revenue from recurring/high- margin software & services. Dojo is the key accelerant at the intersection of hardware and software.
– Adam Jonas, Analyst, Morgan Stanley
AWS was an accelerant for Amazon and Dojo will be an accelerant for Tesla. The big difference between AWS and Dojo Compute will be FSD (Full Self-Driving) and the licensing + simulation platform opportunities that will be able to be created because of Tesla’s immense data set of real-world driving miles that is growing at a rate of 1 million new miles a day.
Dojo could be the next great revenue driver for Tesla followed by licensing FSD.
Our take: Tesla is just getting started. Once you realize Tesla is not a car company, you can begin to see the whole picture coming together.
Tesla is a The Road to Autonomy Index component company
Autonomous Trucking Becomes a Business
In a January 5, 2024 Bloomberg article, Thomas Black reported on the lead up to fully autonomous deployments of autonomous trucks.
2024 is the year that autonomous trucking becomes a business. This year, Aurora, Gatik and Kodiak will begin to operate freight-only fully autonomous operations. Marking a major milestone in the development and commercialization of autonomous trucks.
When fully autonomous operations begin in earnest, the economics of the business model will be validated. For the first time in history, multiple autonomous trucking companies will be conducting commercial operations on public roads with no driver.
These early deployments will take place in Texas mostly on the Dallas to Houston lane. In a statement to Bloomberg, the Texas Department of Transportation rightly pointed out the benefits of autonomous trucks.
Autonomous vehicles are expected to help improve safety, spur economic growth and improve the transportation experience for all Texans.
– Texas Department of Transportation Statement to Bloomberg
Autonomous trucks are good for the economy and they will spare economic growth. The economic growth created by autonomous trucking will lead to job creation and a higher quality of life.
Interested in learning more about Aurora, Gatik and Kodiak’s approach to autonomy, we recommend the following The Road to Autonomy podcasts:
The World’s Best Product is a Very Profitable Product (November 14, 2023)
Building an Autonomous Trucking Business (March 14, 2023)
Investing in Growth (November 2, 2021)
Our take: The future is now. 2024 will be a very big year for the autonomous trucking industry. A year that will pave the way for the long-term economic success of the industry.
Mobileye is Driving Down The Wrong Road
On January 4th, Mobileye released their preliminary FY2023 results and preliminary financial outlook for FY2024 and it disappointed, sending the stock down 25%.
Mobileye reported that the company expects 2024 revenue to be in the range of $1.83 billion to $1.96 billion. A roughly 9% decline from the company’s preliminary revenue reported for 2023. Wall Street was looking for a 23% increase in 2023 revenue.
There is no way to slice it, the company’s 2024 outlook is not pretty and it raises significant questions about the company and its path forward as an ADAS supplier.
We remind investors that MBLY base ADAS is on 42% of all new cars sold (65% of all cars made globally have some sort of driving assistance system and MBLY has 65% share of this). Given the very high market share, we believe the biggest factor for 2024 is the inventory reduction which could be a temporary phenomenon.
– Tom Narayan, Analyst, RBC Capital Markets (January 4, 2024 research note)
Even with their current ADAS marketshare and some analysts belief that the inventory reduction could be temporary, Mobileye is going to have to ask themselves hard questions about the business. As their stock continues to underperform Intel (88% ownership stake in Mobileye), questions will continue to linger.
Over the last year Intel has returned 63.21% compared to a 3.57% decline in Mobileye’s stock. Comparing both companies to the S&P 500 over this same timeframe, Intel outperformed the S&P 500 by 42.62%, while Mobileye has underperformed the index by 17.02%.
If this trend continues, investors are going to start asking more questions.
Our take: Mobileye is going to have to make a major announcement at CES next week that lays out the company’s long-term vision for autonomous vehicles, or the questions about the long-term healthy of the company will continue.
Mobileye is a The Road to Autonomy Index component company
Social Buzz
Autonomous Trucking is Good for the Economy
On January 5, 2024, The Road to Autonomy Founder Grayson Brulte joined Dooner on WHAT THE TRUCK?!? where he shared his insights on why autonomous trucking is good for the economy and his outlook for the autonomous trucking industry in 2024.
2024 is the year that autonomous trucking becomes a business. Aurora, Gatik and Kodiak are all planning freight-only driver-out operations this year. This is a major milestone for the industry as these operations will be revenue generating operations.
Watch the full interview on YouTube.
Our take: Autonomy is good for the economy. Autonomous trucks will play a vibrant role in the emerging autonomy economy.
Let the Self-Driving Era Begin
Autonomous vehicles are here today and the are driving on public roads, reducing drunk and distracted driving and having an all around positive effect on the local economy’s where they operate.
Our take: Waymo is the clear leader in the commercialization of autonomous vehicles.
Alphabet is a The Road to Autonomy Index component company
The Road to Autonomy Index® / Weekly Performance
The Road to Autonomy Index® is a high-definition lens into the emerging world of autonomous vehicles. It is the world’s first and only pure-play index designed to measure the performance of the autonomous vehicle/truck market.
For the week of January 2, 2023, The Road to Autonomy Index declined 3.49%, the S&P 500 declined 1.52% and the NASDAQ 100 declined 3.12%. The Road to Autonomy Index underperformed by the S&P 500 by 1.97% and underperformed the Nasdaq 100 by 0.37%.
The top performing stocks in The Road to Autonomy Index this week were:
- Toyota Motor Corp returned 4.28%
- CH Robinson Worldwide returned 2.55%
- Munich Re AG returned 2.53%
S&P Dow Jones Indices is the custom calculation agent for The Road to Autonomy Index.
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Latest The Road to Autonomy Podcasts
The Road to Autonomy podcast hosted by Grayson Brulte is a podcast featuring unconventional conversations about the future of mobility and the emerging autonomy economy. New episodes every Tuesday.
Scaling an Autonomous Trucking Company with Financial Discipline
James Reed, COO, Kodiak Robotics joined The Road to Autonomy podcast to discuss how Kodiak is scaling the business with financial discipline, economic scenario planning and operational readiness as the company ramps up commercial operations heading into 2024.
Listen on The Road to Autonomy | Apple Podcasts | Spotify
Tuesday, January 2, 2024
What is The Future of Cruise?
David Welch, Detroit Bureau Chief, Bloomberg joined Grayson Brulte on The Road to Autonomy podcast to discuss the future of Cruise and how the robo-taxi market will shakeout. What moves will Waymo, Zoox and Motional make now that Cruise has been sidelined for the foreseeable future?
Listen on The Road to Autonomy | Apple Podcasts | Spotify
Tuesday, December 26, 2023
What if we Electrified the Trailer?
Ali Javidan, Founder & CEO, Range Energy joined Grayson Brulte on The Road to Autonomy podcast to discuss electrified trailers and the impact that these trailers will have on truck fleets.
Listen on The Road to Autonomy | Apple Podcasts | Spotify
Subscribe to This Week in The Autonomy Economy™
A weekly newsletter featuring insight and analysis on the autonomy economy™ and how the financial markets are viewing its emergence.
All price references and market forecasts are as of the date that this newsletter has been sent. The Road to Autonomy is not providing any financial, economic, legal, accounting, or tax advice or recommendations in this newsletter. The information contained in this newsletter does not constitute investment advice and should not be relied upon to evaluate any potential transaction.
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