Tesla Bot Valuation: $15,625 per Share Possible?

5/5 - (7 votes)

I’ll present my personal valuation thesis for the Tesla stock in this article, assuming the Optimus program will succeed. My optimism caused me to put ~80% of my stock investment portfolio into TSLA.

Learning From the Smartphone Market

200 million people decide to buy an iPhone every year (source):

1.5 billion people buy a smartphone every single year (source):

When these hardware devices were launched in 2007, almost every “expert” underestimated the total addressable market (TAM) of the smartphone market.

In hindsight, it makes sense, though. The value proposition of smartphones is significant.

7 Benefits That Made The Smartphone an Irresistible Product

Here are some of the benefits you’d be missing out on if you didn’t own a smartphone:

  1. Communication: Smartphones provide a wide range of communication methods, from traditional calls and text messaging to video calls and instant messaging applications, enabling us to stay connected with people worldwide.
  2. Information Access: With internet connectivity, smartphones provide access to an immense amount of information at our fingertips. Whether it’s looking up a recipe, checking the news, or learning about a new topic, the internet and smartphones make it easy.
  3. Mobility: Due to their portable nature, smartphones allow us to carry our digital lives wherever we go. This makes it possible to work, communicate, and access entertainment on the move.
  4. Personalization: Smartphones offer a high degree of personalization. Users can customize their device to their preferences, from the layout of their home screen to the apps they frequently use.
  5. Assistive Technology: Smartphones come with a variety of features designed to assist individuals with disabilities. Features such as screen readers, voice recognition, and text-to-speech help make smartphones accessible to all users.
  6. Automation of Routine Tasks: Smartphones can automate many routine tasks. With the help of apps, they can set reminders, schedule appointments, and even automate home appliances if connected to a smart home system.
  7. Entertainment: Smartphones are a versatile entertainment device. They allow us to play games, listen to music, watch videos, and even read books, keeping us entertained wherever we are.

Certainly, while smartphones have greatly impacted our daily lives, humanoid robots could potentially bring an even greater value proposition.

Humanoid Bots >> Smartphones

Let’s consider the same aspects:

  1. Communication: While smartphones allow for efficient communication, humanoid robots could take this a step further. Not only could they facilitate communication in the same way, but they could also serve as a physical presence for remote communication. For example, a humanoid robot could allow a physician to virtually visit a patient at home, providing a more human-like interaction.
  2. Information Access: Smartphones provide immediate access to vast amounts of information, but humanoid robots could interact with this information in a more human-like and interactive manner. They could provide information in context, understand complex queries, and even proactively provide information based on observed or predicted needs.
  3. Mobility: Smartphones are portable, but humanoid robots could actually move and perform actions in the physical world. This would allow them to do tasks in various locations, such as fetching items, cleaning, or even providing physical assistance to the elderly or disabled.
  4. Personalization: Just like smartphones, humanoid robots could be customized to the needs of individual users. However, their personalization could be more profound, adapting not only to the user’s digital preferences but also to their physical environment and daily routines.
  5. Assistive Technology: Humanoid robots could vastly enhance the assistive capabilities of technology. They could provide physical assistance to people with disabilities, helping them move, perform tasks, and interact with their environment in ways that smartphones simply can’t.
  6. Automation of Routine Tasks: While smartphones can automate digital tasks, humanoid robots could automate physical tasks. They could perform household chores, assist in cooking, or even drive cars, freeing up a significant amount of time for their users.
  7. Entertainment: Beyond games and media, humanoid robots could provide interactive entertainment, participate in physical games, tell stories, and create a more immersive and interactive entertainment experience.

Considering these factors, I would argue that the potential value proposition of humanoid robots could be 10 times or more than that of smartphones.

I created a full blog article that shows 50 activities the Tesla bot could do along with possible hourly rates:

πŸ“ˆ Recommended: 50 Activities a Humanoid Bot Could Do [Table]

Especially as there are many “killer apps” for humanoid bots that couldn’t be done by smartphones.

Here’s one:

Killer App – Growing Old in Dignity

As I contemplate the journey of growing older, I can’t help but recognize the potential for a humanoid robot to greatly enhance my quality of life and maintain my dignity. Here’s how:

  1. Maintaining Independence: My humanoid companion could assist with daily tasks that might become challenging as I age, like cooking, cleaning, and gardening. This would allow me to continue living in my own home comfortably and independently, rather than relying on others or considering a care facility.
  2. Healthcare Assistance: The robot could help manage my medications, reminding me when it’s time to take them and ensuring I don’t take the wrong ones. It could also monitor my health vitals and coordinate with healthcare providers to keep them informed about my wellbeing.
  3. Mobility Support: As my mobility potentially decreases, my robotic aide could assist with physical tasks such as fetching items, helping me up from a chair, or even assisting me as I walk. This would reduce the risk of falls and injuries, and it would allow me to navigate my home with confidence.
  4. Companionship: Loneliness can be a significant issue in old age. My humanoid robot could provide companionship, engaging in conversation, playing games, and even reading to me. While it wouldn’t replace human companionship, it could certainly help fill my day with interactive engagement.
  5. Communication: If my hearing or eyesight declines, the robot could facilitate communication, reading out loud messages or emails, and helping me video call my family and friends. This would ensure I stay connected with my loved ones.
  6. Emergency Response: In case of an emergency, the robot could immediately contact healthcare services or my family, providing a swift response when it’s most crucial. This would give both me and my loved ones peace of mind.
  7. Dignity in Personal Care: Tasks related to personal hygiene can become difficult as I age, and having a human caregiver assist with them can sometimes feel uncomfortable. A humanoid robot could help me with these tasks while maintaining my privacy and dignity.

All these potential benefits make me feel optimistic about facing old age. I can picture my humanoid robot not as a cold, mechanical device, but as a dignified, respectful assistant that enables me to live my later years with grace and independence.

Note that this is only a single industry branch the humanoid bot could be useful for hundreds of millions of people. Here are a couple of additional industries (non-exclusive) that would benefit from the humanoid bot:

Economics of a Functioning Humanoid Bot

  1. Housekeeping: Picture a robot tidying up my living room, dusting the shelves, vacuuming the carpet, and even washing the windows. This could save around $20 per hour, the average rate for a housekeeper.
  2. Culinary Assistance: Imagine having my own personal sous-chef, chopping up vegetables, stirring pots, and even plating meals like a professional. A sous-chef can cost approximately $15 per hour.
  3. Laundry Service: How wonderful would it be if a robot could handle my laundry? Loading the washing machine, transferring clothes to the dryer, and even folding and organizing them in my closet. This could save around $13 per hour, the average cost for a laundry service.
  4. Gardening: Visualize a robot tending to my garden, watering the plants, pruning the bushes, and mowing the lawn. This could save me around $30 per hour, the average rate for a gardener.
  5. Physical Therapist: A robot could guide me through my physical therapy exercises, providing support and monitoring my progress. This could be especially helpful for people recovering from surgeries or injuries, saving around $80 per hour, the rough rate for a physical therapist.
  6. Personal Care: Maintaining my dignity and privacy, a humanoid robot could assist me with personal care tasks like bathing or grooming, saving around $22 per hour, the average cost for a personal care aide.
  7. Handyman Services: Imagine a robot fixing that leaky faucet, changing light bulbs, or even painting a room in my house. This could save around $60 per hour, the average cost for a handyman service.
  8. Pet Care: My robot could feed my pets, play with them, or even take my dog for walks, saving me about $15 per hour, the average rate for a pet sitter.
  9. Home Security: Beyond simple alarms, my robot could patrol my property, identify potential security threats, and alert the authorities if needed, potentially replacing a security service that could cost around $20 per hour.
  10. Tutoring: The robot could tutor me or my children in various subjects, physically demonstrating concepts and providing real-time feedback, saving approximately $45 per hour, the average rate for a private tutor.

If a humanoid robot could perform all these tasks, it could provide an immense amount of value, potentially saving hundreds of dollars per day.

The bot would be a no-brainer investment for factories where each bot could save the equivalent salary of a factory worker ranging from $20k to well over $80k per year:

🏭 Factory Example:

Imagine a factory owner who employs 100 workers in a 24/7 operation, with three shifts of approximately 33 workers each.

If each worker earns an average wage of $15 per hour, the owner is paying roughly $36,000 a day in labor costs alone.

Now, suppose the owner replaces half the workforce with robots. These robots can work all three shifts without breaks, potentially doing the work of 50 workers but for 24 hours instead of just 8.

Even if the robots cost $1 million each and have an operational lifespan of 5 years, the cost per robot per day would be approximately $55. If the factory owner bought 50 robots, the daily cost would be $2,750, a fraction of the labor cost saved, which could be around $18,000 per day.

Over time, these savings could be significant, potentially leading to millions of dollars saved over several years.

So at a price point of $1M per functioning humanoid bot, the total addressable market would be in the tens or hundreds of millions of sold units per year.

How much would you have to pay per day to finance a humanoid robot at different price points? Here’s a quick overview assuming a 5 year lifespan and a 5% cost of capital:

Price Point ($)Annual Payment ($)Daily Cost ($)
10,0002,309.756.33
50,00011,548.7431.64
100,00023,097.4863.28
1,000,000230,974.80632.81

So for a price point of $50k per bot, you can purchase it for $30 per day.

At this price point, not only would every factory owner purchase as many of them as they can possibly lay their hands on, but hundreds of millions of people would purchase the bot for themselves (see some killer apps above) because the ROI is so positive and the utility value is so high.

Costs of Humanoid Robot (Millions of Units Produced)

Estimating the production costs of a humanoid robot can be quite complex as it depends on various factors including the size of the robot, its capabilities, the quality of the materials used, the complexity of the design, and the costs of research and development.

However, to provide a rough estimate, we can consider three main categories of costs:

  1. Materials: A humanoid robot would require various materials including metals for the frame, plastic for the casing, and silicon for the electronic components. If we look at a high-end smartphone, which also uses these types of materials, the cost of the materials is often several hundred dollars. However, a humanoid robot would likely require more of these materials, so a rough estimate might be in the low thousands of dollars.
  2. Manufacturing: The costs of manufacturing would include assembly, testing, and quality control. Again, using the smartphone as a benchmark and considering that the assembly of a humanoid robot would be more complex, a rough estimate might be in the low thousands of dollars per unit.
  3. Research and Development: The costs of research and development would be spread over all the units produced. For a new technology like a humanoid robot, these costs could be substantial. However, if millions of units are being produced, these costs per unit might also be in the low thousands of dollars.

Adding these costs together, a rough estimate for the production costs of a humanoid robot might be in the order of several thousand dollars per unit, possibly in the range of $5,000 to $10,000. This estimation is in line with some Tesla and robotics experts like Dr. Scott Walker, Dr. Randy Kirk, and Dr. John Gibbs.

Total Addressable Market (TAM) for Functioning Humanoid Bots

Let’s estimate the annual revenue for the total addressable market of selling a functioning humanoid bot to the masses for various price points:

Price per Bot ($)100M Units500M Units1B Units10B Units
20,000$2 trillion$10 trillion$20 trillion$200 trillion
50,000$5 trillion$25 trillion$50 trillion$500 trillion
100,000$10 trillion$50 trillion$100 trillion$1000 trillion

These annual sales numbers would have to be multiplied by 5 (assumed lifetime of a bot) to obtain the total number of deployed humanoid robots worldwide.

I have highlighted the three cells I found most likely, i.e., the number of sold units would increase with decreasing price.

Realistically, the annual revenue for bot sales would be between $10 trillion to $20 trillion in these scenarios.

Valuation Tesla

Nobody knows who’ll win the race for humanoid robots. Many companies are competing in the space that is already rapidly growing. Tesla has produced dozens of bots already scaling up prototyping fast.

The units of personal and domestic service robot shipments is on an exponential trendline:

Technologically, the end scenario of billions of humanoid bots deployed seems inevitable with the recent explosion of artificial intelligence progress (ChatGPT passing the medical bar in the US, open-source LLMs scaling to 200k tokens of context).

Here’s a table showing the market capitalization of a company selling humanoid robots for different market shares and Price/Earnings (P/E) ratios, given an annual income from the Total Addressable Market (TAM) of $10 trillion (note the high profit margins of bots that will be north of 50% and probably much higher):

Market ShareP/E Ratio of 20P/E Ratio of 33P/E Ratio of 50
25%$50 trillion$82.5 trillion$125 trillion
50%$100 trillion$165 trillion$250 trillion
75%$150 trillion$247.5 trillion$375 trillion

These values represent the potential market capitalization of a specific company under these conditions, assuming that the company’s earnings are equivalent to its share of the TAM income and that investors are willing to pay the given P/E ratio for the company’s earnings.

Tesla has several advantages that could make it a leader in humanoid robot manufacturing:

  1. Battery Technology: Tesla is a leader in battery technology, which is crucial for efficient and long-lasting humanoid robots. Tesla’s advancements in energy density, charge time, and battery lifespan could give their robots superior performance.
  2. Full Self-Driving (FSD): Tesla’s progress in autonomous vehicle technology could be directly applicable to humanoid robots. The ability to navigate complex, real-world environments is a key challenge for humanoid robots, and Tesla’s expertise in this area could give them an edge.
  3. AI and Machine Learning: Tesla has made significant investments in AI and machine learning for their vehicles. These technologies are also key for humanoid robots, enabling them to learn, adapt, and make intelligent decisions.
  4. Production Capacity: Tesla has demonstrated its ability to scale up production quickly and efficiently, as shown by its rapid expansion in electric vehicle manufacturing. This experience could help them ramp up production of humanoid robots.
  5. Commitment to Innovation: Tesla, under Elon Musk’s leadership, has shown a strong commitment to pushing the boundaries of technology and taking on ambitious projects. This mindset could drive them to overcome the many challenges of humanoid robot development.
  6. Experience in Robotics: Tesla’s production lines are highly automated, giving the company experience with robotics. This knowledge could be useful in designing and producing humanoid robots.
  7. Brand and Reputation: Tesla’s strong brand and reputation as a tech innovator could help them attract talent, partners, and customers in the humanoid robot market.
  8. Integration with Existing Products: Tesla could potentially integrate humanoid robots with their existing products, such as electric vehicles and energy products. For example, a Tesla robot could drive a Tesla car or help manage a home equipped with Tesla solar panels and Powerwalls.
  9. Financial Resources: As a profitable company with a high market capitalization, Tesla has the financial resources to invest in long-term, capital-intensive projects like humanoid robot development.
  10. Visionary Leadership: Elon Musk has shown a willingness to tackle grand technological challenges, and his visionary leadership could guide Tesla to success in the humanoid robot market.

In fact, Tesla is the world’s leader in real-world AI that has proven its high level of experience in software, AI, hardware, and production capabilities to produce millions of robots (=intelligent cars). They have also committed the whole company to the challenge — an important necessary precondition for a company to succeed.

If we assume the most conservative numbers that Tesla takes a 25% market share and is valued only at a 25 price-to-earnings ration (P/E), its market cap could eventually reach $50 trillion USD (see table). With roughly 3.2 billion outstanding shares, the per share valuation would be $15,625 per share.

Here’s the current price per share:

Of course, you need to multiply any per-share valuation with the likelihood of that scenario happening and sum over all possible scenarios to obtain a more robust theoretical framework for TSLA valuation. This article merely provides one valuation path, nothing more.