Elon Musk’s Tesla (TSLA) To Grab 85% Margins In Robotaxi, AI: Cathie Wood

Cathie Wood, the founder and CEO of ARK Invest, expressed her optimism regarding future prospects of Elon Musk’s Tesla. Moreover, she spotlighted the potential of its robotaxi network. Earlier, Wood highlighted Tesla’s increased investment in what she dubbed as “the largest AI project on Earth.” Moreover, she emphasized its differentiation from other companies in the automotive and technology sectors.

Cathie Wood Offers Analysis On Elon Musk’s Tesla

Wood pointed out the contrasting approaches of various companies. She noted that while some are prioritizing short-term gains such as profits, dividends, and share repurchases, Tesla’s continued investment in innovation sets it apart. Furthermore, Wood referenced Tesla CEO Elon Musk‘s suggestion during an earnings call that a US Original Equipment Manufacturer (OEM) might join Tesla’s autonomous network, potentially boosting its robotaxi forecast.

Additionally, Wood projected a significant increase in Tesla’s gross margin (GM) driven by the scalability of its CyberCab robotaxi network. While Tesla’s current GMs hover around 15-16%, Wood anticipates a substantial rise to 25-35% as electric vehicles (EVs) gain market share. Notably, she expects Tesla’s robotaxi margins to resemble Software as a Service (SaaS) models, reaching an impressive range of 70-85%.

Addressing recent reports suggesting Tesla’s shift toward heeding shareholder demands for reduced investment and increased cash reserves, Wood and her team at ARK Invest believe otherwise. They argue that Tesla is utilizing cost savings from its manufacturing processes to double down on both low-cost cars and the CyberCab network.

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Caution About Investor Trend & Implications On Tesla

Wood cautioned against the prevailing trend among investors where shorter time horizons have become the norm. Moreover, she underscored that this particularly happens in response to macroeconomic uncertainties. She highlighted the increasing exposure of active large-cap growth managers to the “Mag 6” stocks, referring to mega-cap innovation companies.

Furthermore, Wood believes this trend neglects pure plays in disruptive innovation. She also said it leads to potential subpar returns relative to smaller to larger cap stocks not included in broad-based benchmarks.

Though Elon Musk’s Tesla is included in broad-based benchmarks, Wood noted a shift in attention towards the “Mag 6” stocks. The Ark Invest CEO believes that the change is potentially driven by Elon Musk’s ambitious vision and aggressive investment approach in shaping the new world.

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