00:00 Speaker A
Elon Musk says Tesla shareholders will vote on whether or not to invest in XAI, saying on social media, if it was his decision, Tesla would have invested long ago in his startup, but he does not support a merger between the two companies. Joining me now, Yahoo Finance senior reporter, Pras Subramanian. Timmer Banovich, still with us, Innovator Capital Management chief investment strategist, Pras.
00:36 Speaker A
Um, it’s not too often, so I shouldn’t say that. Musk does ask people’s opinions sometimes about various things, but not necessarily when it comes to Tesla and sort of the direction and different decisions that are being made there.
01:08 Pras Subramanian
Yeah, I I guess I mean doing a research really I remember last year he actually asked with whether Tesla should invest in XAI.
01:20 Speaker A
Oh and what did people say then?
01:23 Pras Subramanian
Well, I think he kind of knows what he knows doesn’t want them to do it. And so that’s maybe I don’t know. It’s almost like he knows what they’re going to say on Tesla. He knows they’re going to agree with him. It’s like, should we invest in XAI, you know? And then, and then they say, yes, of course. But so I mean, this was in response to a to a user asking, it’s not it’s unfair that Tesla investors can’t take part in XAI XAI investment, right, as as retail investors. And this comes after the weekend we’re looking at where SpaceX invested $2 billion into I’m sorry, a good amount of money into into XAI. SpaceX being another Musk company. So it’s this whole Musconomy thing. They invest in one another, they get bought up by one another. Solar City is a very big prime example of that. And it all sort of the Musconomy working together in that regard. And then you could say, well, hey, is is is is there a conflict here? Is is Musk conflicted because he owns more of XAI than he does Tesla, et cetera, et cetera. So that always that talk there. But, you know, he’s talked about how I’m not going to I don’t prefer that there’s a full merger. Some analysts think that that is the next the next phase is potentially there would be a full merger of XAI with with Tesla, but he’s saying no, I don’t want that to happen.
03:25 Speaker A
Just from what what exactly does XAI do at this point? Is it just Grok that they have?
03:43 Pras Subramanian
Grok, I mean, we we read the chatbot the chatbot Grok with now Tesla integration with the cars, right? So it’s I mean, it’s it’s it’s probably both an AGI type play but also a supercomputing play, right? So that sort of makes sense that there be a Tesla a lot of overlap there Tesla, I imagine.
04:22 Speaker A
And and actually, someone, my producer is just telling me that there’s now a report now that XAI has launched Grok for government, that they have a contract with the US Department of Defense. Um, so that’s the latest. Not, not that anybody said anything about conflict of interest anywhere, but, um, he doesn’t work in the government anymore, so um, but yeah, so that’s, I guess, part of, part of the business as well. Tim, um, as somebody who has Tesla in the various portfolios, is is this a good thing for investors? Is it agnostic? Like, what do you think?
05:23 Timmer Banovich
It’s a it’s a good question. And um, you know, I think overall we look at Tesla. It’s very hard for us to figure out that valuation. The 155 times earnings, I mean, we keep going back to that. Shareholders have not seemed to care for the last several years, so they may not start caring anytime soon. I think they have a great product. I own the product. It’s a phenomenal product. But as an investment, yeah, I I I struggle to see, you know, really how they get that monetization going. And and and if you look at the trends, Julie, I don’t think, you know, the EV trends are necessarily favorable. They’re they’re not heading in the right direction. I think there’s still a lot of headwinds to to get over. Um, you look at the the charging networks, you know, there there’s a lot of limitations and even the inconvenience of having to go to those charging stations, spend 30 minutes to charge up your vehicle. You know, I I don’t know that necessarily the broader adoption that everybody thought there was going to be with this whole EV revolution is going to be happening as quickly as once thought.
06:51 Speaker A
But of course, that’s not why people buy Tesla the stock for the most part, right? They buy it for the robots and the robo taxis and the AI. I mean, you know, Musk has even said that. So I guess the question is, if it does become more concretely an AI play and not AI in the future of taxis, but XAI that actually does it today, does that change the the sort of way that you think about it, invest in it?
07:38 Timmer Banovich
Well, I think that’s absolutely the way investors are thinking about it right now. I think the struggle is trying to figure out what does that end market actually look like in terms of the revenue that is going to be able to be generated across the board. And what does Tesla’s market share look like? And and that’s that is a big question mark. So we take a step back, you look at what is being priced in right now, could Tesla deliver? Absolutely. But at that valuation, there’s a lot of risk that they have to start delivering on a lot of these things. And what we typically see with anything Musk or Tesla related, those things tend to take a little bit longer than originally advertised.
08:30 Speaker A
Right. Right. Um, I I didn’t realize he’d asked about that investment a year ago. So speaking of taking time.
08:43 Pras Subramanian
Well, I forgot about that as well. But but I will say this about about XAI is that Bloomberg reported that the company burned through like a billion dollars a month or something insane like that, right? So I could see how a Tesla investment or even Tesla merger could help in terms of defray some of those costs, use each other’s assets in a more efficient manner. So maybe there is a benefit to that. But you know, we’re all sort of speculating at this point.
09:16 Speaker A
We are. Grok just got added to Tesla, didn’t it somehow?
09:23 Pras Subramanian
Yeah, yeah, yeah, yeah. After it’s other controversies.
09:30 Speaker A
Yeah. We’ll leave that for another time.