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Tesla<\/a> Inc. forming an autonomous taxi platform will be the catalyst for a roughly 10-fold increase in its share price, Ark Investment Management LLC\u2019s Cathie Wood<\/a> said, echoing years of bullish predictions about a business the carmaker has yet to stand up.<\/p>\n Describing the autonomous taxi ecosystem as an \u201c$8 trillion to $10 trillion global revenue opportunity,\u201d Wood sees platform providers including Tesla taking as much as half that. Investors are shifting away from valuing Tesla purely as an electric-vehicle maker and pricing in some of the autonomous taxi potential, she told Bloomberg Television\u2019s David Ingles and Bloomberg Intelligence\u2019s Rebecca Sin for the Tiger Money podcast.<\/p>\n \u201cAutonomous taxi platforms are the biggest AI project evolving today,\u201d she said, adding Ark has primarily based its Tesla valuation on its autonomous-driving potential. \u201cIf we are right, the stock has miles to go.\u201d<\/p>\n Wood and Ark have been promulgating the potential of a Tesla autonomous-taxi network since at least\u00a0early 2017<\/a>, months after Chief Executive Officer Elon Musk said the company would one day set up such a service. Tesla has yet to bring vehicles to market that are capable of navigating roads without constant human supervision in the eight years since Musk outlined those\u00a0plans<\/a>.<\/p>\n Optimism about Tesla\u2019s efforts to bring robotaxis to market have fueled its shares erasing as much as a 43% decline for the year as of April 22. While the stock rallied all the way back into\u00a0positive territory<\/a>\u00a0early this month, it\u2019s still underperformed Magnificent Seven peers by wide margins over the last year.<\/p>\n Wood has been bullish on Tesla for a long time, making it a top holding in her Ark Innovation ETF. The fund has lost nearly 9% this year, while assets slumped about a third, partly due to redemptions. That compares with an 18% gain in the S&P 500 Index. Wood is known for making outsize predictions, including her call that Bitcoin would reach as much as\u00a0$1.48 million<\/a>\u00a0by 2030.\u00a0<\/p>\n Autonomous taxi networks will be a \u201cwinner-takes-most\u201d opportunity, where the provider that can get passengers from point A to point B in the safest and quickest fashion will clinch the lion\u2019s share of business, Wood said. The network provider will be able to take a 30% to 50% share of revenue generated by fleet owners on its platform, giving it \u201ca recurring revenue with explosive cash flows\u201d as well as a profit margin north of 50%, she added. That departs from the build and sell, or \u201cone and done\u201d business model of making vehicles.<\/p>\n \u201cThat is what we think people are missing: the size of the opportunity, how quickly it\u2019s going to scale, and how profitable it\u2019s going to be,\u201d she said, adding she expects Tesla to lead the US market.\u00a0<\/p>\n Tesla\u2019s weighting in the $6.5 billion ARK Innovation ETF Fund surpassed 15% last week. Ark doesn\u2019t usually add to a position once its weight in the portfolio hits 10%, Wood said. While a holding may drift higher from share appreciation, the firm would usually start selling well before it hits Tesla\u2019s levels.\u00a0<\/p>\n The asset manager has taken some profits on Tesla but has permitted it to surge beyond the normal ceiling, believing Musk\u2019s company is on the cusp of sharing a lot more information on its robotaxi project, she said.\u00a0<\/p>\n Tesla delayed its planned robotaxi unveiling by roughly two months, to October, to allow teams more time to build additional prototypes, Bloomberg News\u00a0reported<\/a>\u00a0last week. The news sent the stock down 8.4%, the steepest one-day drop since January. Wood is unfazed.<\/p>\n \u201cWe\u2019re probably getting closer to this robotaxi opportunity, not further away,\u201d she said. Musk \u201cwants to show us something more awe-inspiring than we might have seen on Aug. 8. And he believes it\u2019s possible by October.\u201d<\/p>\n Ark\u2019s valuation model hasn\u2019t taken into account much of Tesla\u2019s potential in China or in the humanoid robot and energy-storage space. Musk in April won in-principle approval from Chinese officials to deploy its driver-assistance system into the world\u2019s biggest auto market, after reaching a mapping and navigation pact with Chinese tech giant Baidu Inc. and meeting requirements for data-security and privacy protection.<\/p>\n Wood sees autonomous trucks undercutting rail in pricing and providing point-to-point services. The railway systems favored by veteran investor Warren Buffett may be \u201cstuck with stranded assets,\u201d she said.<\/p>\n Ark\u2019s founder and chief executive officer continued to cast doubts on Nvidia<\/a> Corp.\u2019s valuation. Ark bought the AI-focused chipmaker at $4 in 2014 and held it until it approached $40 on a split-adjusted basis. It sold most of its stake before the stunning rally since last year.<\/p>\n Investors who sent the stock to current levels haven\u2019t baked in the amount of time it will take businesses to figure out how to adopt transformational AI technology. \u201cIt is simply, in our view, too much, too soon,\u201d Wood said.<\/p>\n Investors have been piling into the Magnificent Six, driving stock market concentration to a level higher than that of 1932, she said. Back then, investors flocked to mega stocks such as AT&T Inc., whose huge cash cushions and free cash flow were seen as boosting their chances of survival after the Great Depression. The four ensuing years instead saw smaller companies outperform.\u00a0<\/p>\n Similarly, higher interest rates have driven investors toward the Magnificent Six for their massive cash positions and in part for their AI-propelled revenue growth. Investors\u2019 risk appetite will broaden to other stocks with disruptive technologies as interest rates fall.<\/p>\n \u201cNow would be the wrong time to sell our strategy,\u201d Wood said. \u201cWe believe interest rates are going to come down and going to come down more dramatically than most people think.\u201d<\/p>\n<\/div>\n\nMarket Concentration<\/h2>\n
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