A prominent investment firm's co-founder expressed apprehension regarding Tesla's evolving strategic direction, suggesting that a reduced emphasis on electric vehicle development could be a critical miscalculation. He further voiced concerns about recent statements made by Elon Musk concerning the development of AI and robotics, and also criticized Musk's harsh remarks aimed at proxy advisory entities regarding his compensation package.
The investor underscored that while Tesla's fundamental automotive and energy divisions remain robust, a substantial part of its market valuation is currently speculative, tied to the anticipated success of emerging technologies like robotics and advanced self-driving systems. This reliance on future potential over tangible present-day achievements, coupled with a perceived neglect of the core EV business, could potentially undermine the company's established profitability and brand standing.
Strategic Implications of Tesla's Evolving Focus
Ross Gerber, a co-founder of Gerber Kawasaki, has articulated his view that Tesla's shift in focus away from its core electric vehicle (EV) business could represent a significant strategic error for the company. Despite this concern, his firm continues to maintain a substantial investment in Tesla stock, valued at over $80 million for clients, and Gerber himself remains a personal shareholder. He estimates that Tesla's fundamental automotive and energy divisions alone justify a share price of $150, reflecting their inherent value and profitability. However, Gerber points out that the additional $300 per share in Tesla's stock price is predominantly driven by market anticipation and speculation surrounding future endeavors, such as advanced robotics and Full Self-Driving (FSD) capabilities, rather than current operational realities. This valuation, he argues, is built on potential rather than concrete achievements.
Gerber emphasizes that the path to profitability for Tesla's robotics initiatives, including projects like Cybercab, is likely to be a protracted one. He strongly advocates for Tesla to re-prioritize its EV operations, which he describes as "wildly profitable" and responsible for producing what he considers "the best cars in the world." According to Gerber, allowing the EV sector to waver would be a strategic misstep. He urges Tesla to concentrate on bolstering car sales to restore and enhance the brand's image, particularly as the company navigates its transition towards the future vision championed by Elon Musk. This perspective highlights a tension between immediate, proven profitability and long-term, speculative innovation, suggesting that abandoning the former for the latter could carry substantial risks.
Musk's Controversial Comments and Shareholder Scrutiny
Elon Musk's recent remarks have drawn scrutiny, particularly his comments during an earnings call regarding the creation of a "robot army" and the imperative for him to maintain control over it. Ross Gerber, among others, publicly questioned these statements on social media, expressing concern over the implications of Musk's desire for absolute influence over such advanced technological developments. This discussion unfolds ahead of a crucial shareholder meeting in November, where investors are slated to vote on a new compensation package for Musk, potentially worth $1 trillion, contingent upon Tesla achieving a series of ambitious milestones. Musk has clarified that his push for this substantial compensation is not primarily for personal wealth accumulation but rather to ensure he retains significant control over the future trajectory of the EV giant, especially as it delves deeper into AI and robotics.
Further exacerbating tensions, Musk publicly denounced proxy advisory firms that have recommended shareholders vote against his proposed compensation package, labeling them "corporate terrorists." He accused these firms of basing their advice on "random political lines" rather than objective financial analysis. This criticism echoed earlier sentiments from Tesla's Board Chair, Robyn Denholm, who had also characterized the proxy advisors' recommendations as "misguided," arguing that their "one-size-fits-all approach" was inappropriate for evaluating Musk's unique compensation structure. These events underscore a growing discord between Tesla's leadership and certain shareholder advisory bodies, raising questions about corporate governance and the alignment of interests between executives, the board, and investors, particularly concerning the strategic direction and future valuation drivers of the company.