Research and Analysis… Not Journalism

Editor’s Note: The Brownstone Research offices are all abuzz with energy right now…

We’ve got a lot of exciting things coming up over the coming weeks and months. We’re making calls and writing reports… keeping our thumb on the pulse of the latest news out of the tech industry… diving deep into our research and making the most of this incredible momentum we’ve got going…

And we truly can’t wait to show you everything we’ve got going on behind the scenes right now.

All this to say, it’s been a busy week over here. And as such, we are a little later than usual getting your AMA issue of The Bleeding Edge to you.

We hope you enjoy it and wish everyone a wonderful weekend.

How Will the Average Person Afford Personal Autonomous Robots?

Hi,

Dumbfounded. I ask that Jeff explain his position that people will easily fork over $20,000 per robot. How does he justify his position when the American consumer has the highest credit card debt on record and somewhere between 40-60% of Americans have less than $600 in their bank account?

With Gen Z and Millennials unable to purchase “starter homes”, does Jeff think they’ll buy a robot first? Give up purchasing a new vehicle? My point is, where is the money coming from to afford such a luxury if a large portion of the American population is living paycheck to paycheck with lots of personal bankruptcies being filed? Or, were his comments directed to high-net-worth individuals

It appears to me that Jeff lives in a bubble (just like Washington, D.C.). Due to his wealth, [in my opinion], his vision of the real financial landscape of what Americans can afford is severely biased and distorted. It might be of use to readers of The Bleeding Edge for Jeff to lay out and describe in detail how his Utopian vision all works out! Because he is up against the “*human nature* does not change” theory argued by Armstrong. Thank you.

– Timothy E.

Hi Timothy,

I’m glad you wrote in with this question. It’s an important question that allows us to explore the impact of how technology will change business models and the affordability of advanced technology.

Sometimes this is hard to see when our reference point is right now, dealing with the challenges of this ridiculous world we find ourselves in.

Let’s take what Tesla is doing with autonomous driving technology as an example.

Teslas tend to be more expensive than internal combustion engine cars. Almost all electric vehicles (EVs) are more costly due to the high costs of producing the batteries needed for an EV. Tesla’s Model 3 is the most accessible – current prices are shown below:

But to your point, $27,740 is still a lot of money, and many can’t afford a new Tesla Model 3. Elon Musk and his team also know this. And that’s one of the reasons that Tesla has been working so hard on autonomous driving technology.

Musk has long spoken about robotaxis and a shared autonomous vehicle network. In fact, there will be a major announcement about this in about one month, on October 10. What do robotaxis have to do with affordability?

Everything.

Consumers who own or lease a Tesla with self-driving software will have the ability to “opt in” their Tesla into the shared autonomous vehicle network.

When they don’t need their car during the day, they can send their Tesla to go out and work for them. Depending on how much your autonomous Tesla works, it can generate enough cash to pay for the monthly lease or car loan payment.

This will make Teslas affordable to the majority of the population. It is a brilliant business strategy to develop a technology that will go to work and pay for itself.

This is an example of why we need to have a different framework for understanding how advanced technology will impact the economics of consumers.

The costs of ground transportation will decline as a result of this technology. It won’t be necessary to own a car either. This means a consumer who relies on a shared autonomous vehicle network to get around won’t need to buy car insurance. And in time, as autonomous driving proliferates, even those who own self-driving Teslas will pay much less to have their car insured.

Let’s take another step further and consider your specific question about robots. Tesla has already stated an initial target price of an autonomous robot at $25,000 – less than their cheapest EV. Then, with volume production, Musk expects the price to quickly drop below $20,000.

It’s still expensive, but if we can imagine that we no longer need to be a car owner… or a family that used to have three cars now only needs two cars… the robot becomes accessible to a large part of the consumer market.

But what if we can put the robot to work performing meaningful economic tasks (i.e. tasks that can generate income)?

Or if we think about companies like Amazon, Google, or Meta that have other business models through advertising revenues and e-commerce, we can imagine their goals are different.

Their goal isn’t to make a profit selling a home robot. Their goal will be to get the robot into a consumer’s home. The cost of the robot will subsidize future advertising revenues and/or e-commerce revenues.

It’s conceivable that the robots will be accessible for just a few thousand dollars – or even for free – if we consider the new economic framework enabled by this advanced artificial intelligence and robotics technology.

Timothy, I don’t think that we’re ever going to live in a utopia. It’s a nice thought, but there are simply too many elites and politicians who want to take away our individual and constitutional rights. They want power and control over the masses, and I’m afraid that we’ll be fighting that battle for a long time.

But we are going to live in a world of abundance full of limitless cheap clean energy (nuclear fusion), dramatically less disease, longer life, and radically improved transportation, among many other things.

And I can assure you that I don’t live in a bubble, and I always make efforts to ensure that I don’t fall into that trap. That’s why I don’t hide behind my computer or sit in a glass-walled office in a skyscraper.

It’s also why I travel a lot in the field, so I can see what’s really going on. My work in high tech was always customer-facing, never cloistered up in headquarters subject to groupthink. And I count among my friends people from all walks of life.

I came from nothing. And I built my career on extremely hard work, consistently, over decades.

I consider myself an optimistic realist. And as an analyst, I have to consider not only the technological development but also the economics (to your point) that drive technology adoption.

That’s true whether I’m considering technology to be sold to the enterprise market, the public sector, or to consumers. And if the economics don’t work, then adoption won’t happen either.

To see the future and predict what’s going to happen, we sometimes need to change our frame of reference to understand what’s possible.

I hope that perspective is helpful.

Full Self-Driving Is Practically Here

Negative Tesla news. One of many.

Tesla self-driving vehicles not ready for big rollout, critics say. A tech analyst who tested Elon Musk’s self-driving cars says they’re still not ready for widespread release.

– Brian C.

Hi Brian,

I’m not sure which specific piece of negative Tesla news you’re referring to, so I can only provide a more general response.

And the truth is, I cannot remember there ever not being some kind of negative news about Tesla.

There are always people trying to short the company… claiming that it will go bankrupt… that its technology doesn’t work… and, most recently, that people will stop buying Teslas because Elon Musk believes in freedom of speech.

What I can say is that something very special happened with Tesla’s neural network – its self-driving “brain” – with the release of version 12.5.1. I know because I have a Tesla and I test the self-driving technology every week.

And I just received version 12.5.2 two days ago… and it’s even better.

I’ve been having Teslas drive me around for years now. The software has been in the learning process. What’s so impressive has been the rate of improvement over time. And the technology is just remarkable today.

I’ve been through some complex situations on the road and my Tesla continues to navigate them perfectly.

The timing of your question is great as it was just yesterday that the AI team at Tesla put out a current product roadmap for the self-driving AI.

Version 12.5.2 is being rolled out widely right now. What’s significant is that the software runs on both the Hardware version 3 and Hardware version 4 Teslas (this is what Tesla is referring to with AI3 and AI4).

This is significant because it means Teslas with either Hardware version 3 or Hardware version 4 make up about 90% of all Teslas on the road. And Tesla just shipped its 7 millionth Tesla.

The other major news from the new roadmap is that version 13 was just introduced and is expected to drop in October. Tesla only jumps up to a new number (from 12.X.X to 13.X.X) when there is a major product improvement.

As we can see above, it states that there are ~6X improved miles between necessary interventions. And this comes after ~3X improved miles between necessary inventions with the Version 12.5.2 upgrade happening this week.

These are major improvements over a very short time frame and are also consistent with my own testing of the technology.

What does this all mean? From my perspective, the measurable pace of improvement this year indicates that Tesla will have its full self-driving (FSD) software ready by the end of this year. And that software will be pushed out to the majority of all Teslas and be in widespread use.

What is less certain is when there will be regulatory approval for a commercial robotaxi service. Tesla is collecting safety data so rapidly due to the size of its “fleet” currently running its self-driving software, it will have billions of miles to demonstrate that its technology is safer than human drivers and is therefore ready to move into commercial service.

We’ll of course be tracking these developments closely. We’re also looking forward to seeing what Tesla presents at the October 10 event for its robotaxis.

More to follow…

Graphene

Dear Jeff,

I am an early reader of your subscription. I bought NVDA when you recommended in 2016.

I understand the upcoming technology in making chips will be in “Graphene.” I appreciate your thoughts on Graphene. Is there any company in this field to put on my watchlist?

Thank you for your attention.

Best regards.

– Alexander H.

Hi, Alexander. Thanks for writing in & congratulations on NVDA!

For the benefit of newer subscribers, I recently wrote about graphene in another AMA issue, The Bleeding Edge – The Threat to U.S. Dollar Supremacy.

Graphene is an incredible, highly conductive material 200 times stronger than steel and five times lighter than aluminum. It can handle heat up to 1,300 degrees Fahrenheit.

It’s an attractive alternative to the less conductive materials, like silicon, that are more prominent in industries where efficient heat management is essential. Think semiconductors, primarily… though with its strength, flexibility, and conductive properties, it’s easy to imagine how it could benefit plenty of other industries.

However, the problem with graphene is its economics. It’s excruciatingly expensive to manufacture in a process that demands a lot of energy. I previously wrote…

Graphene can cost as much as $200,000 per ton. The industry is, of course, working towards a breakthrough that could radically reduce the costs of producing graphene. But until that happens, it is very difficult to scale production for commercial manufacturing.

And not to get too technical, but one of the reasons that graphene is so good at conducting electricity is because it doesn’t have an energy band gap.

There is an energy band gap in silicon which is the difference between the valence band (which is filled with electrons) and the conduction band (which is an empty state). And without a band gap – as is the case of graphene’s natural state – graphene can’t stop conducting electricity.

This makes it hard to use for applications like transistors and thus semiconductors.

There are some solutions to this problem, but they have not been commercialized. And it would make the manufacturing process more complex, which means even more expensive.

It’s such an incredible material, and I’m very excited about future applications, but at the moment the economics just don’t make a lot of sense. I do track the materials space closely, but at the moment I just don’t have any related companies, public or private, that I can suggest watching quite yet.

Let’s keep our eyes open for something interesting…

No Stopping NVIDIA?

That article sounded like it was written by AI. An article written by a real journalist would have both sides of the story.

Yeah, sure a couple of companies are making money but what about the rest? If some of the other big boys fail to translate their massive data center purchases into profits then the entire house of cards could collapse.

It may not happen but an unbiased article would mention the possibility. Otherwise, you just sound like a cheerleader for a best-case scenario which we all know doesn’t always play out in the real world!

– Ivo J.

Hello Ivo,

I can assure you that it wasn’t written by an AI. I wrote and researched that issue of The Bleeding Edge entirely myself.

But I would like to make an important distinction to clear up any misunderstanding… I am not a journalist. I’m an analyst. And I’m most definitely not a cheerleader.

The Bleeding Edge is very expensive to produce and distribute and requires an extraordinary amount of my time, but I’ve been committed to keeping it as a free research letter.

As an analyst, not a journalist, I form opinions, investment theses, and also predictions based on years of research and analysis, and I share that research with subscribers.

Most journalists these days are no longer objective and heavily biased (politically).

A perfect example of this is to see how the press treats Elon Musk and his remarkable accomplishments with his companies, simply because he supports our constitutional rights.

If you have a chance, please read yesterday’s Bleeding Edge – Money Moves in Quiet Places. It’s not journalism. It’s research and analysis. And I’ll let you be the judge as to whether or not you think that the investment and infrastructure buildout will continue to support AI.