Tesla (NASDAQ:TSLA) has been making waves with its adoption of AI technology, and according to Goldman Sachs analyst Mark Delaney, the company is at the forefront of developing AI training technology. With its own chip and compute hardware, Tesla is one of the few companies capable of leading in this space.
The significance of Tesla’s AI technology goes beyond its potential benefits. Delaney believes that Tesla’s leading position in AI will allow the company to expand businesses like Full Self Driving (FSD) for its fleet of vehicles. Although Tesla’s vehicles are not fully self-driving yet, FSD generates around $1-3 billion in revenue annually. This revenue primarily comes from upfront license sales, priced at $12,000, and a subscription option at $199 per month.
The potential for growth in Tesla’s licensing business is significant. Delaney highlights that Nvidia’s datacenter segment is projected to exceed $50 billion in revenue by 2024, while AWS is expected to surpass $100 billion. Tesla’s software-related revenue, including FSD and licensing Dojo or selling FSD to other Original Equipment Manufacturers (OEMs), could reach tens of billions of dollars per year by 2030.
Delaney also envisions the long-term potential of the automotive software and services industry, suggesting that the total addressable market (TAM) could surpass $1 trillion annually. This estimate takes into account the transformation of the global installed base of over 1 billion vehicles towards connectivity and software-defined capabilities over the next 10 to 20 years.
Despite the optimistic outlook, Delaney maintains a Neutral rating on TSLA, suggesting that the stock is currently fully valued. However, he highlights that if Tesla demonstrates faster progress with FSD/AI products or reaches a significant catalyst, his overall thesis might become more positive.
In conclusion, Tesla’s leading AI technology positions the company for massive growth in the coming years. With its innovative chip and compute hardware, Tesla has the potential to dominate the AI training technology space. As the automotive software and services industry continues to evolve, Tesla’s revenue from FSD and licensing could reach staggering heights, contributing to a potential trillion-dollar TAM.