Can Tesla's Optimus Robots Really Be Worth $25 Trillion?

INSIGHT WEEKLY: July 7, 2024

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🌐 Major indexes and major stocks

Four records in the week (shaded in blue below) S&P500, Nasdaq, Nikkei 225, and India’s Nifty50 hit new highs.

Magnificent 7:

Tesla had a huge gain of 27% in the week, recovering losses earlier in the year. See comments on Tesla below.

Major Semiconductor stocks:

Highest value companies (market capitalization) in $ trillion:

Tesla is eleventh at $0.802 trillion.

Elon Musk claims that Tesla’s Optimus robots will add $25 trillion to the company’s valuation in the future and that autonomous vehicles will add between $5-10 trillion!

See comments on Tesla below in the AI section.

🇬🇧 UK

Growth is being set as a major objective of the new UK government. The “mandate for growth” is expected to rely on significant investment from the private sector. It is not clear if the new government will seek to improve Foreign Direct Investment (FDI). The latest data for 2023, shows FDI increased by 13% over 2022. Much depends on international investors' confidence in the new UK government's economic plans and the tax regime.

UK was in recession in Q3 and Q4 2023. What will 2024 and 2025 look like?

FTSE100 is flat to last week and +6.1% this year.

🇺🇸 US

Lower manufacturing activity as reported by the Institute for Supply Management (ISM) indicates contraction. It is the lowest level since pandemic lockdowns in early 2020.

Jobs data was mixed. Labor Department’s JOLTS report showed job openings increased slightly in May, but April was exceptionally low. 

The same report showed that the “quits rate” and hiring are back at pre-pandemic levels, and also that employment growth was stronger than expected.

Inflation outlook is good, according to Chair Powell. While the 2% target is unlikely to be hit, progress has been good. Will the target be modified (as it appears it cannot be reached), and the first interest rate cut be done in September?

Stock markets gained in the week with the S&P500 and the Nasdaq making new record highs during the week. Growth stocks moved up in the week.

S&P500 is +2% this week and +16.7% this year.

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🇯🇵 Japan

Yen weakened further and approached the 162 level. it is not clear if there was government intervention.

Tourism is booming with an expected 34 million visitors this year. With low inflation and a currency that has weakened by 45% (v the USD), visiting Japan has become more affordable.

This article in the Japan Times explains it well:

Stock markets gained as the yen weakened, providing a boost to exporters.

Nikkei 225 Index was +3.4 % last week hitting a new record in the week. It is +22.3% in the year and is now above the 1989 high.

See previous spotlight on Japan.

🌐 Artificial Intelligence

This cover has been designed using assets from Freepik.com

Google greenhouse gas emissions are up 48% since 2019. It had planned to cut in half by 2030 but instead, the emergence of AI has increased the emissions from its data centers, and also from its supply chain. Data centers were already power-hungry but AI compute has made it even more so.

Data centers are dedicated buildings holding a large collection of computer servers, and AI uses a lot of these.

Google’s data centers use 10% of global data center electricity demand.

Data centers use 1% of the world’s electricity according to the International Energy Agency.

Google’s report says that most of its data centers in Europe and the Americas get their energy from carbon-free sources but this proportion is much less in other locations.

Google is still maintaining its 2030 target.

Tesla’s Optimus humanoid robots are going to be a big earner for Tesla, according to Elon Musk. He estimates that Tesla could even have a thousand working at Tesla’s factories by 2025. Musk sees the total market for humanoid robots as one billion units per year, and that Tesla could have at least a 10% market share, building robots for $10,000 and selling them for $20,000 yielding a profit of $1 trillion. This expected profit will increase valuation by $25 trillion? Looks like he assumes a P/E ratio of 25. Tesla’s current P/E is 64.

Building prototypes is one thing, manufacturing at scale is another. Musk claims that Tesla has both development and manufacturing expertise.

Is Tesla an AI company? It is heavily involved in robotics and AI. The car may become a robot, especially with Full Self Driving (FSD), and its plans for Robotaxi fleets.

Will robotics and AI take the stock back up to its 2021 highs?

Tesla share price change :

🌐 Crypto Corner

Tracking Bitcoin price :

Over different periods:

Mt. Gox began repaying bitcoin to creditors, after over ten years since the exchange collapsed. In 2014, over 950,000 bitcoin disappeared. This is worth over $55 billion at current prices! This is thought to have been the work of hackers who moved bitcoin out of customer accounts. Around 140,000 bitcoin was recovered. At the time of the bankruptcy, the price of bitcoin was around $600. Now it is around $58,000 or about 97 X 2014 prices.

There is expected to be heavy selling of bitcoin, as investors take profits from an investment that has performed exceptionally well since 2014. The price has dropped around 6% in the last week.

see the previous spotlight on Bitcoin halving 

🏅5️⃣ Billionaire Leaderboard

Mostly driven by stock market performance :

Change in week :

1. Elon Musk (Tesla, SpaceX) $251bn ⬆️ $38bn (Tesla is +27% this week)

2. Jeff Bezos (Amazon) $216bn ⬆️ $6bn (Amazon is now a $2 trillion company)

3. Bernard Arnault and family (LVMH) $196bn ⬆️ $2bn

4. Mark Zuckerberg  (Facebook/Meta) $189bn ⬆️ $16bn (Meta is +7% this week)

5. Larry Ellison (Oracle)  $179bn ⬆️ $9bn

SPOTLIGHTS

Links to earlier spotlights :

Residential property ;

Japan ;

India - an emerging economic power ;

Recession ;

AI chips ;

Bitcoin halving ;

US National Debt ;

Gold ;

Nvidia ;

The $84 trillion wealth transfer