At this point, the biggest reason investors buy Tesla Inc (TSLA) stock, especially given how high it is relative to the company’s fundamentals, is the company’s technology. But what if Tesla doesn’t have the edge its bulls believe it has? One firm warned this week that this may be the case, at least in the area of autonomous driving. If this is true, it could have disastrous implications for Tesla Inc (TSLA) stock.
In a report on Monday, Bernstein analysts Max Warburton and Toni Sacconaghi, Jr. noted that Tesla certainly is great at marketing. CEO Elon Musk in particular is great at getting the masses excited about whatever he’s working on, and in some cases, it may have gotten both Musk himself and Tesla in trouble.
For example, Tesla Inc (TSLA) touted its Autopilot system in October 2016 as having “the hardware needed for full self-driving capability.” Perhaps partly because of that, there was a rash of serious accidents caused by people who took their hands off the steering wheel of their Teslas, with deadly results in some cases. You may recall that some have expressed concern about the automaker’s use of the term “Autopilot” for its semi-autonomous driving system because so many drivers seemed convinced they could take their hands off the wheel and stop paying attention despite being told that such actions are not safe.
Tesla Inc (TSLA) is now on its second version of Autopilot, and the Bernstein team believes that Autopilot 2.0 was “hastily brought to market after Tesla and Mobileye split.” This is particularly interesting, as is the analysts’ views on Autopilot 1.0, which they said isn’t much different than the semi-autonomous driving technology used by German automakers.
One key difference in Tesla’s vehicles was that Autopilot was “deployed more liberally” because drivers could keep their hands off the wheel for a longer period of time. The other big difference was that Tesla’s marketing of its tech “was more ambitious,” according to the Bernstein team. However, after all the high-profile accidents, Tesla Inc (TSLA) greatly dialed back Autopilot’s functioning, and according to Warburton and Sacconaghi, “it is now not much more ‘liberal’ in its functioning than the German systems.”
Tesla Inc (TSLA) stock has been falling steadily since Jefferies published its ultra-bearish note earlier this week, and then on Thursday, an interesting revelation came to light as far as the automaker’s technology. Citing unnamed sources, CNBC reported that Tesla is now working with AMD to develop its own AI chip for autonomous cars. The media outlet claims that the company has more than 50 employees working on the chip so that it won’t have to depend as much as it does on NVIDIA. Tesla Inc (TSLA) partnered with NVIDIA after splitting from Mobileye last year.
The timing of this reported leak is particularly interesting for Tesla Inc (TSLA) stock, given that it came the same day as Bernstein’s note, but later in the day. In their note, Warburton and Sacconaghi said they believe that the EV maker’s self-driving capabilities are “exaggerated,” and their note was the second of two hits to Tesla Inc (TSLA) stock this week alone, the first being Jefferies’ note.
So what does all this mean for Tesla Inc (TSLA) stock? Perma-bears have been arguing for years that the company’s valuation isn’t anywhere close to its fundamentals, and that’s unlikely to change anytime soon. Tesla Inc (TSLA) stock perma-bulls, on the other hand, believe that the company’s technology is ahead of every other company’s tech, so they want to get in early before everyone else realizes how ahead of the curve it is.
The Bernstein team’s claims are interesting if true because they would eliminate one of the key bull theses for owning Tesla Inc (TSLA) stock. They note that their understanding of Tesla’s autonomous technology and that of German automakers could be “flawed.” Nonetheless, they’ve learned enough to be willing to say that the company might not have the edge it claims to have in autonomous driving. In fact, they claim that the Teslas which are equipped with Autopilot 2.0, which doesn’t have Mobileye’s chip in them, “are less capable than a number of German OEMs [sic] products now on the road.”
Thus, it would seem that the chip is one part of Bernstein’s claim that Tesla’s autonomous driving capabilities aren’t as advanced as other automakers’ tech. It will be a while before we know whether AMD will be able to help Tesla Inc (TSLA) improve its autonomous driving tech, but Tesla Inc (TSLA) stock bulls may start rethinking their positions if the company really is exaggerating its prowess in this area.
Tesla Inc (TSLA) stock closed down 1.99% at $366.48 on Thursday.