Elon Musk warned Bill Gates in advance on Tuesday not to mock him again. The Microsoft co-founder risks destruction if he makes another attempt to bet against Tesla.
That’s because Musk believes he will have transformed the automaker into an AI behemoth worth as much as $30 trillion once Tesla completes its pivot from primarily selling electric vehicles to operating a lucrative fleet of robotaxis and humanoid robots.
“Once Tesla has fully solved autonomy and has done so [its droid] Optimus in volume production, anyone still short will be destroyed,” he posted on social media on Tuesday. “Even Gates.”
😂
Once Tesla fully solves autonomy and has Optimus in volume production, anyone still shorting will be wiped out. Even Gates.
— Elon Musk (@elonmusk) July 2, 2024
The duo’s rivalry became public after an exchange was leaked in 2022 revealing that the world’s richest entrepreneur had refused to support Gates’s charity work when he learned that the latter still had half a billion dollars on a bet that Tesla’s stock price would valleys.
“Sorry, but I can’t take your climate change philanthropy seriously when you have a huge short position against Tesla, the company doing the most to solve climate change,” Musk wrote in the undated text messages.
By the time those messages leaked, so was Gates already regret it his bearish call on Tesla. It is unclear whether he still has a position in the shares and he could not be reached Fortune for comment.
However, Musk’s warning that shorts will be “obliterated” is a bold statement for someone whose company was the worst-performing name in the S&P 500 this year.
Tesla vehicle sales are down 6.6% in the first half of the year, its Cybertruck is struggling to meet high expectations and it ultimately missed Tesla’s goal of increasing volume from 1.8 million EVs last year to 20 million to be raised by 2030, buried.
Musk has been building a bottom under the stock since April
But Musk is not one to back down in the face of adversity, and he has fielded other famous Tesla shorts like David Einhorn and Jim Chanos, who made a fortune betting against Lehman Brothers and Enron, respectively.
In fact, Tesla’s CEO has been on a recovery since he put a bottom on the stock in April.
Firstly, he teased the unveiling of a new ‘CyberCab’ robotaxi model, implying that he will finally solve the problem of autonomy. He then announced that there could be a return to EV sales growth in 2025 with new, low-cost models marking the bottom in the stock.
Tesla Robotaxi unveils on 8/8
— Elon Musk (@elonmusk) April 5, 2024
Lingering concerns that the top CEO might resign entirely over the loss of his 2018 compensation deal – now worth as much as $70 billion at the current share price – were all but put aside last month when the world’s second-largest investor, Vanguard, joined the company. with others to support him.
Finally, Tesla revealed on Tuesday that it could have avoided an even sharper decline in car sales in the second quarter by liquidating excess inventory. Taking EV production to its lowest level since Q3 2022, he had spare battery cells that he could now deploy in his stationary energy storage business, more than doubling the already record volume in the first quarter to an unprecedented 9, 4 gigawatt hours.
Tesla has now added $100 billion in market cap in the last two days.
The stock is trading at seventy times next year’s earnings, a steep multiple even for a growth stock, let alone one whose revenue and earnings are both expected to shrink in 2024 – the period of greatest visibility – both .
However, if you’re one of the investors who believes Musk will do for robot butlers what he did for electric vehicles, that’s a small thing.
In his mind, there will not only be a robot in every business or home, but for everyone: from toddler to senior.
He therefore expects a demand of 1 billion droids per year, with Tesla conservatively controlling a tenth of the global market.
Tesla worth a third of the world’s current combined GDP?
He would sell these Optimus robots that are currently still in their possession early prototype phaseat a price tag of $20,000 per unit, even though the production cost per unit will only be $10,000, giving him a 50% margin per robot.
Total annual profit would take a hit in that scenario $1 trillionwhich, coupled with a fairly standard earnings multiple of 25, gives a market cap of $25 trillion.
Add a paltry $5 trillion to the robotaxi fleet once it launches, and you’re talking real value for investors buying into the current $740 billion market cap.
The problem with this kind of back-of-the-envelope math is that Musk’s assumptions can be off by orders of magnitude.
Musk predicts that unit volume in the market will be much closer to smartphone demand, which is nowhere near the $20,000 he expects. Cars are a better proxy here, and they tend to max out at 100 million new vehicles per year, partly because of their much higher price.
For example, Chanos argued that Musk’s latest prediction means that Tesla would have a market capitalization equal to almost a third of the entire world’s total annual economic output.
So 30% of global GDP….? Lol, okay. $TSLA https://t.co/KBysHiVDTR
— Diogenes (@WallStCynic) June 13, 2024
Take, for example, his calculations on Tesla’s now-defunct 2030 annual volume target. Most companies with serious targets conduct a bottom-up macroeconomic analysis of their markets and expected demand over time for the product categories in which they compete .
By comparison, Musk derived his sales figure of 20 million EVs, an amount greater than that of the world’s two largest automakers combined, by taking the globally installed fleet of 2 billion cars already on the road and assuming to reject that Tesla could replace 1% of that. every year.
No wonder it was buried well before 2030.
Unless Musk can provide solid numbers to back up his claims this time, Gates may back him on his bet.
