Tesla recently announced that its self-driving technology has collected over 1 billion miles of data.
One of the most volatile stocks is Tesla (TSLA -5.59%), a company that's a pioneer in electric vehicles (EVs) and a pillar in the sustainable energy movement.
While the S&P 500 and Nasdaq Composite inch closer to record levels, Tesla can't seem to find its mojo. Shares have plummeted 30% so far this year, and the company's prospects look cloudy.
Per usual, Tesla's CEO, Elon Musk, gave investors some reason to cheer by distracting them with an update on the company's autonomous driving progress.
A few days ago, Musk took to X -- the social media platform formerly known as Twitter -- to post that Tesla's full self-driving (FSD) technology has collected over 1 billion miles of driver data. Let's break down why this is important and what it could mean for the future of the company.
Enter the Dojo
Tesla vehicles are equipped with cameras and sensors that are constantly collecting various data. This includes maps of neighborhoods and cities, driving conditions in different areas, and more.
In turn, this data is directly fed back to a supercomputer called Dojo, the neural network that processes all of this driver data and helps refine the company's self-driving software.
Tesla is not the only company pursuing autonomous driving. General Motors and Alphabet have made significant investments in the technology. While the latter's Waymo subsidiary has made some notable progress in self-driving capabilities, General Motors has faced a number of setbacks as of late.
Tesla is considered by many on Wall Street to be in the lead with autonomous driving. The company has more data than its competitors, and as such, it's been able to make big changes to FSD over the years.
But even so, the idea of self-driving cars really does seem like science fiction. While the prospects are intriguing, is autonomous driving a reality?
Image source: Getty Images.
How close is full self-driving?
There are a couple of major selling points for autonomous driving. First, ride-hailing platforms such as Uber or Lyft theoretically stand to benefit from the technology since it could replace the cost of human drivers in the long run. The same idea applies to delivery services, including DoorDash or Instacart.
If any company can crack the code to self-driving vehicles at scale, it could license the technology to automakers. Subsequently, fleets of robotaxis could dominate the roads and significantly impact the labor market.
Around the same time that Musk posted that his company has collected over 1 billion miles of FSD data, he also took to X to proclaim that robotaxis could be here soon. While it's not entirely clear if Tesla's robotaxis will be on the road this year, Musk's cryptic social media posts suggest that something big could be in store over the summer.
He has taken to social media before to tease certain ideas or updates about Tesla. Moreover, his intense management style has also played roles in the company missing deadlines on numerous occasions.
Is Tesla stock a buy now?
Although the prospects of FSD and robotaxis are exciting, investors shouldn't pour into the stock on speculation that Tesla will unveil a new product or service in this category later this year.
Instead, zooming out and considering the bigger picture is more important. While the company's core EV business is enormous, its growth has stalled over the last year. This is not surprising, since unusually high inflation and rising interest rates have plagued the economy. As a car company, Tesla is going to be sensitive to high interest rates.
Nevertheless, with consistent free-cash-flow generation and $29 billion of cash on the balance sheet, Tesla has done a stellar job investing in high-growth opportunities. Namely, the company's pursuits in artificial intelligence (AI) are being overlooked as other mega-cap tech players take the spotlight.
TSLA PS ratio data by YCharts; PS = price to sales.
I would not be surprised if we catch the first glimpse of robotaxis this summer. But the bigger idea is that Tesla is collecting more data and developing autonomous driving software at a faster rate than the competition. So in the long run, I see the company as better positioned than its peers to profit from self-driving at the right time.
With a modest price-to-sales ratio of just 6.2, the stock trades well below its 10-year average and is significantly off its highs from a couple of years ago. While FSD's public debut remains somewhat of a mystery, I still see now as a compelling time to scoop up shares in Tesla.
Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool’s board of directors. Adam Spatacco has positions in Alphabet and Tesla. The Motley Fool has positions in and recommends Alphabet, DoorDash, Tesla, and Uber Technologies. The Motley Fool recommends General Motors and recommends the following options: long January 2025 $25 calls on General Motors. The Motley Fool has a disclosure policy.
