Dear Reader,
“There’s just no substitute for a massive amount of data.”
That was what Elon Musk said during Tesla’s earnings call last week.
To date, Tesla has gathered 300 million miles of road data. The company believes it will reach billions of miles soon.
Tesla began testing Full Self-Driving (FSD) software in 2020 and now has 360,000 users. It relies on collecting visual road data from Tesla vehicles on the streets. This data is used to train AI to recognize obstacles, pedestrians, and various other elements.
Elon Musk says it’s more data than all other car companies combined.
This extensive dataset behind its products gives the EV maker a competitive advantage. It also allows the company upward pricing power.
When Tesla initially introduced the FSD option, it was priced at $5,000. However, Tesla has raised the price 200% to $15,000 in under three years.
Tesla’s pursuit of gathering driving data has given it a revenue stream few other automakers can compete with.
This helps explain why Tesla’s market valuation is higher than that of the next five largest automakers combined.
Tesla’s next move involves licensing the software to other car manufacturers.
It wouldn’t be the first time competing automakers adopted Tesla’s tech. Ford, GM, Mercedes-Benz, and Volvo have all committed to adopting Tesla’s charging system.
FSD is just one example of cutting-edge AI being fueled by large datasets. The hundreds of millions of miles driven in Teslas are being used to train an AI that can drive alongside humans.
Tesla has a head start because it started collecting data back in 2014 when it first rolled out autopilot features. That means other car makers that are only now realizing they need to start collecting data are at a huge disadvantage.
But having massive amounts of data isn’t limited to car makers.
Access Offers Success
Over the past year, we’ve seen Microsoft, Alphabet, Meta, and Apple announce AI plans. Some like Microsoft are already starting to charge for AI services… while Apple is still trying to decide what its dedicated AI service will look like.
But all of these companies have one thing in common… access to massive amounts of proprietary data.
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Microsoft 365 has over 1 billion daily users.
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Alphabet has 4.3 billion users.
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Meta has 3.7 billion users.
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And Apple has 1.5 billion users.
These large user bases are a huge moat for these companies in the AI race. Any up-and-coming, pure AI company is going to have to form a partnership with one of the giants to gain access to this wealth of data.
We’ve already seen that with OpenAI and Anthropic.
Microsoft invested $1 billion into OpenAI in 2019 and committed to building an AI platform with OpenAI. Since then, Microsoft has invested a total of $13 billion into OpenAI and allowed it to use its Azure cloud resources. Undoubtedly, Microsoft’s support has helped catapult ChatGPT to a household name.
Similarly, Alphabet invested $400 million into Anthropic to support its AI development. Anthropic has produced Claude, a competitor to ChatGPT.
Without these partnerships, OpenAI and Anthropic would not be leaders in the current generation of AI.
What you need to understand is that the tech giants are only going to get bigger under this regime. In the AI era, the key elements are access to extensive datasets and cloud computing resources.
Startups will need to partner with them for a chance at success. And customers will have to choose among a handful of tech companies for AI products.
That’s the value of data.
Regards,
Colin Tedards
Editor, The Bleeding Edge