Wall Street Just Found Tesla’s NEXT Big Market transcript

Big whale investors and Wall Street have finally woken up on Tesla. It seems they now realize big time that the next big market is, surprise, surprise, physical AI. And this week, they all place Tesla and SpaceX at the center of it. First, legendary investor Chris Camilillo of the Money says Tesla's real test is proving the robo taxi ramp is real. Prove that and the stock rerates and investors will believe Optimus is coming too.

That's a market he sees as 100 to a thousand times bigger. We'll watch that video. Second, in a new investor note, Morgan Stanley wrote that the deepening Tesla SpaceX alliance is the blueprint for physical AI. Tesla provides the physical body, SpaceX, the compute and connectivity soul. They even report Terafab is a $119 billion chip project with Intel. Third, the skeptics. Oenheimer agrees the physical AI pivot is progressing and praises cybercap manufacturing, but they believe Optimus is facing further ramp delays.

But meanwhile, China may have just answered them. State media reports Tesla began factory audits at three suppliers who already hold Optimus orders. Once the audits pass, production will commence shortly. What was just a rumor last week look more and more real now. And finally, JP Morgan now projects Tesla robo taxi revenue reaching $320 billion by 2035. So, is Optimus early or is it late? We'll wait the evidence. To help us do this is Jeff Lutz.

Jeff Lutz is a multi-deade supply chain executive and chief quality officer and now CEO of his own high-tech manufacturing consulting firm. Welcome, Jeff. >> Here, we're Yeah, this will be good to go through. We do have new information on Optimus. So, >> okay. And yeah, I'm very curious how you interpret that because I still think of it as rumors. Uh more more though, more reports are coming out. Maybe it's not just rumors about Tesla's Optimus production in CH the parts anyway supply chain in China.

Okay, let's start with Chris Camilllo. He's a legendary investor well known for social arbs where he kind of early on would track social media to see which companies are hitting it and he has successfully shown his track has been very good. Now he's got a good kind of pulse of the market uh Tesla and of course his knowledge on robotics is is also right up there early investor many robot companies. So, he said this about Tesla and I thought he had a very good point.

Let's play his video first and then we'll get your opinion on it. Uh, this is from his Dumb Money TV um podcast that they do. >> The only thing that matters because the entirety of the success of that program is baked into Tesla stock right now. But there's one thing that's not baked and that is if Tesla can actually execute on robo taxi, okay, in a very big way. The numbers are not going to really matter that much relative to the valuation of Tesla, but it's going to serve as a proof point that Tesla is more likely than not to pull off Optimus, which is roughly 100 to a,000 times the size of robo taxi.

Okay? So, if Tesla fails at this, people are going to be less confident in their ability to pull off something that is actually more difficult. But if they succeed and they execute and they show that they actually have their crap together, after the last few years of mis expectations, we'll start to develop a confidence that these guys can be a top one company globally in robotics, generalized robotics, and that is what gets you [music] the theoretical 10 trillion, 15, 20 trillion valuation at some point in the future. >> You do you do you like what he's saying?

Basically, look, here we are missed expectations the last several years. A lot of people are skeptical of Tesla. If they can show that robo taxi is real, they accomplished this thing, they invented this thing, it's actually happening, it's ramping, that will rerate the company, but more importantly, it's now the view of oh maybe they can accomplish Optimus 2 now that is he says 100 to a thousand times larger market than Optimus uh Robaxi and they'll pull that forward as well in terms of you know just how they view the company.

You like you like his thinking? >> Well, I I do uh typically I do like Chris's thinking. I think he's spot on in a number of areas and I do watch the show too. I think they do a great job with their show. So what I do agree with is that the demonstration of robo taxi at scale is a great kind of d-risking but also a proof point of uh what the I think a very few companies are going to be able to do with humanoid robots which is generalized um intelligence uh and in this thing where you can have actually have these things be useful without having 30 people trying to manage a single robot. those economics never work.

So there's a lot of things that have to come together to make a humanoid work and that's his point and if Tesla proves it on robo taxi that that is a good prove point for so check we agree there. Uh I partially agree with uh the comments on robo taxi and the Tesla valuation. There are people in the Tesla camp that think that there's this massive explosion coming immediately as soon as a thousand cyber cabs come out. I, you know, I think the 300 plus PE has some of that in there already.

I think a number of people believe that too, but I don't think it's all in there. And I don't think we quite, and this is, you know, Lars told us this during the conversation, and we've had, you've heard this before from other Tesla executives and from people outside of the industry as well, is I don't think people understand the scale of the transition. They're taking today's traditional ride sharing um uh market size plus some growth to it obviously for for automation and autonomy.

And then they're tacking it on and saying, "Well, Tesla, you're going to get this." And somebody's going to somebody who hasn't demonstrated anything is going to get that and somebody who hasn't demonstrated anything is going to get that. And I don't think it's going to be that way. I don't think Tesla's going to have 100% market share, but I think they are on a trajectory to have meaningful scale advantage driven by their economics.

So I don't think it's all baked in. So we don't agree there. I don't think it's all baked in. I think some of it is baked in. It's not zero. Uh but I don't think we agree there. And then on Optimus, I am less optimistic about other companies getting all the way to the door and bursting through it and being massively successful. Again, do I think Tesla is going to be alone on an island and the only humanoid out there?

No. But I don't think people honestly understand the bar. They think because all we talk about is manufacturing. We're going to talk about suppliers in a minute because I think there's a a real meaningful update there for Tesla, but a lot of people just talk about the start of production. They they almost they center the entire program around that and that's just one very small thing. Uh there are so many other things of getting this.

But I think the big thing is do you have a general intelligence framework, the software, the training, all the compute and the inference and all the timing and everything working together? I think there's going to be very few companies that going to be able to do that. And once you can do that, then the question is is can you build a robot economically at scale and there's going to be very few companies that can do that.

So you have the manufacturing piece, you have the general intelligence piece. Uh and I think there's going to be when you put companies through that filter, through that truth table, there's very few companies that are going to come out the other side. So we agree less on that. Um, but anyway, there's some interesting points about basically the proof point in robo taxi being the proof point in Optimus. I I think there's uh a lot of truth to that. >> Yeah, I love that point a lot.

I do uh lean towards Chris's uh thinking about what's going to happen to the robot robot market. I lean towards the fact that um you know the market is so massive. It is likely physical AI is the largest market ever. It's not just labor. It's not just humanoids. It's any intelligent form factor can do something. Now, there's going to be many different like you said, there's going to be few that's going to be able to match what Tesla is able to do across the board.

Intelligence, hardware, manufacturing, uh ju just the whole package of how that's going to be delivered. Even price point, they'll they'll they'll re revolutionize the industry. But they won't even at their 100 million per year run rate when they're making a 100 million bots per year. I I think the market is bigger than that. And so there's gonna be a demand. And so there will be weaker robots, dumber robots, cheaper or more expensive robots, but I think those companies could still survive.

Not not all. Many many companies will die, but like think of the think of the EV market. I know it's a incorrect. It's not a great comparison, but I'm just saying look at China. BYD BYD sells cars for $5,000 US dollars, right? So, it's like there's markets for all price points, all shapes, all form factors, you know, terrible terrible cars, but there's somebody the demand is so high. So, there will be more survivors than than than than not, but there will be a lot of people killed for sure.

They will not make it through, and they're all demos at this point, and they're all just kind of faking it at this point. So I I agree with you there. Okay. >> Yeah. I think you have a point of there there will be a spectrum of of less capable bots. But even even at that the question is is those companies may produce something for 6 months or a year but can they can they do they actually have a business to stand up would be the question.

And that's what's actually going on in EV. A lot of these companies don't even have a business but they're putting product out there. So we saw this in China. We saw 80 uh OEMs EV OEMs and you know most of those are are are gone. I've often said that those 10 robots that Jensen always appears on stage next to him on either side, I think 90% of those will will will not make it, >> but not all. I mean, there'll be something that goes through. >> Yep.

Okay. So, this is interesting. Um, let's go through what the big whales and uh or the uh institutional analysts are saying. Oppenheimer. Okay. So, now you're seeing more and more of them refer to Tesla's uh physical AI endeavor. Tesla's AI pivot progressing. Optimist delays likely. Okay, so they have kind of a a a nuanced answer. They do uh reiterate their perform rating on Tesla highlighting progress as the company transforms into a vertically integrated physical AI platform.

Uh they do see cyber cabab manufacturing is strong and their push into semiconductor manufacturing is strategically important. However, they think that Optimus is likely facing further ramp delays. Yeah. Thoughts on that analysis? >> Yeah. So, well, I mean, Elon said on an earnings column was this one or the the one prior, he said Optimus will be in production in I think he said June or July, maybe August. Uh, but it's none of those have happened.

And so, this is what a lot of these analysts hang on to. I know they have other in in inputs and sources of of data as well, but I I again I don't I think manufacturing is is key and I think it's going to kill a lot of other robotics companies to actually do this at scale economically. But I actually don't think it's the gating item. But there are gating items in there. If I were Tesla, I mean, if I I committed to this July, August production, unless something meaningful came up, I mean, yeah, they I mean, I think any day we're going to see uh a a post from the Tesla account of the production team standing around, at least the first one off the line. >> Yeah, >> I think they're getting pretty close to that.

Uh but we'll see. I' I've said end of summer, end of September, so we're right there. I guess summer is uh now over or about to be over here soon and uh I think we're I think we're close. But the question is is even if they start production, how meaningful is that? But I think it is I think if they if they do start production in this case, it's not everything and everybody's like kind of putting everything on production.

It's not everything. It's getting the general intelligence piece right. Can they demonstrate that? Uh we started to see some demonstration of that uh from figure and other companies. So, you know, where's Tesla's demo on that? I know Elon said they want to keep this as close to the vest as possible until they get into production, but I even think Tesla's production is going to be for internal use. So, I'm not sure uh why to hold it in much longer.

So, I'm expecting there there's a reveal in the next month. >> Excruciatingly slow even if there is start of production. But, you know, that's fine. That's fair. optimizing open armor. It's fair for them to say that it's low because there's truth to that as well. But so there's this uh kind of persistent rumor that's been coming around. Started about a month ago, came reared its head last week and now it's here again.

So, it's sounding like it's more than just a rumor at this point because more and more uh Chinese state media and other media, statebacked Chinese outlet, the paper, reported that Tesla's robotics team began supplier audits last week at Tupa Group uh Sah Sanua Intelligent Controls and Joyce Electronics. So, three companies, three suppliers. These firms primarily supply core electron mechanical components including joint modules, actuators, and precision structural parts.

Prior to these factory audits, each of these companies had already secured orders for Tesla's human and robot differing only in volume. The audits will evaluate the production lines regarding quality, compliance, and related standards. Once passed, production will commence shortly. That's what they say. And again, this is um you know, more and more of these reports are coming out. Uh more importantly, there's not these these are not just automotive suppliers being evaluated for potential robotics projects.

Sources say they have already received Optimus orders with the audits now focusing on production lines, quality, compliance before manufacturing begins. Okay. So, this is the this is what they're saying. Do you do you believe that this is more than just a rumor, Jeeoff? >> Yes. Uh now I the way that these rumors are coming out, what remember I used to be on the other side of these I would see rumors written about my company.

I knew how they were poorly written when they wouldn't site specific suppliers, which then I get pissed off and I go to figure out how these suppliers leaked something. I guess there's more specific information in these and it's reported by multiple outlets. The other thing that's interesting and something I've been saying for a couple of years now, it's coming to fruition, is that Tesla's auto supply base is is being converted into a humanoid supply base.

Now, this is very good for China. This is very good for Tesla. We know in China that they're killing themselves in the supply base for EV and it's a problem. So, this strategic movement by all these companies is very smart. It's very smart for China. I think they're handling this very well. Of course, uh I don't think we're handling it as well in the US to be honest with you. I think what you're going to see happen is Tesla gets started with a lot of this supply base and the reason why is the tooling capability is much better for complex tooling for long lead time tooling and for any kind of machining operation.

The rates are much lower there. So, what I see Tesla doing is using these suppliers for much of V3, and they're going to get nice big commits. They're going to get nice big awards, and they're going to learn a lot about making robotics parts. They're going to be fat, dumb, and happy working with Tesla. The Tesla name is a ticket for these companies to get much more business from both Chinese companies, Korean companies, from all from abroad.

So, this is a win-win for these suppliers on both sides. But I do see Tesla migrating more of this to either inhouse or to uh North America, America's supply base um over V3 and into V4. So, they'll use V3 as this uh again, you get parts faster out of the out of the tooling shops of these Chinese suppliers. you're getting them cheaper, but we know that there's these geopolitical strategic issues that are going on that could drive some some separation.

So, there's no way that this is the permanent supply base for Tesla. To me, this is a transition as they work through V3 and the V4. And that my guess is there's inside of Tesla, there is a metric of sourcing uh for for the for the Optimus supply base and they're going to drive that percent sourcing uh or that call call it that local content for us. are going to drive that percent way up over the next year. >> Great.

Good to hear that. That's how you evaluate this. You've got the experience for that. So, it's very likely, right? I mean, when you hear too many of these um messages consistently, it's more likely to be true than just a guess. Um so, we'll see. Well, right. And also, it makes sense that it should be happening now. This is the timing given the guidance even Tesla themselves have given. >> Yeah. >> Yeah. A lot of it makes sense.

So, a a lot of things, a lot of variables are coming together to say that there's some truth to this. Now, >> it's great. So, we're finally starting to see some movement on Optimus. Here's Morgan Stanley. They had a long note and they're saying that the deepening alliance between Tesla and SpaceX, they see that as the operational blueprint for the next frontier, physical AI. With large language models hitting diminishing returns, they're they're they keep, you know, competing against each other and catching up to each other.

The firm argues that AI value creation over the next decade will pivot toward real world execution. So this is important that analysts are recognizing Tesla is really one of the leaders and SpaceX in physical AI. The winners will build, power, connect and deploy intelligent hardware at scale under their shared goal to turn energy into intelligence. Tesla and SpaceX act as two halves of a single flywheel. Tesla provides a physical body.

SpaceX supplies a comput and connectivity soul. That convergence is already driving heavy infrastructure. The silicon road map centers on terafab. Tesla energy has also become the primary power layer. SpaceX has funneled hundreds of millions into Tesla mega packs and batteries uh to power the Colossus supercluster and all these integration between them. The industrial overlap span supply chains and materials. Both companies are targeting 100 gawatts of vertically integrated domestic solar capacity to be able to do all this.

Okay. So yeah, so they just they do think that the integration will happen. They see that it's it's real value. I think you wanted to highlight this paragraph specifically. This creates a clear two-way value exchange. SpaceX provides Tesla with massive compute capacity, low latency, low latency satellite connectivity and balance sheet liquidity. In return, Tesla supplies SpaceX with Optimus robots as edge data nodes, real world spatial training data, micro grid storage, automotive scale manufacturing.

Yes, I I think it's I I I think it's not discussed enough the amount of compute that's going to be needed. And one thing I've been saying for two years is it never made sense for me that a Tesla entity is buying training compute and an XAI or SpaceX AAI entity are buying compute. Like this should be shared and it should be utilized together so we're getting the most efficiency. And quite frankly, if there's downtime at Tesla for training, why why isn't that compute uh being sold as well or leased out as well?

So, uh I think that in itself is a big enough driver to drive uh the the the merger conversation, but there's so many other things, the the energy piece of it, um the original seating of the engineering as as well of XAI. So there's so much synergy here and I just wanted to call out it just it just it's just underdised that the fact that these companies have two separate bits of compute and they're going to both need tremendous tremendous more amount of compute and why not combine these cap tables together.

So you've got instead of having one company with 40 billion other one with around a hundred you've got the two together and hopefully growing that that cash pile as well. The other thing is SpaceX is going to have this very rapid ROI on some of the things that they're doing with compute and leasing. Sometimes even under a year is what the CEO CFO has said and then they're going to have this mixture of capex that's going to take a much longer time to return such as Terra Fab.

So I think the power of this combined cap table is also under discuss. So I just wanted to call those couple of points out. >> Yeah, that's a very important one. Um the thing that I really liked about this whole thing is edge data nodes. So you know with SpaceX trying to uh build out the SpaceX AI the data centers uh both orbital and terrestrial and then they've got Starlink and then they have Starlink mobile they need edge data nodes these are you know the mega packs the mega blocks the the what is that the mega what do they call those ones on on the superchargers um you know and then the cars mega pods >> right to many data centers on earth distributed with already power and batteries attached.

Then you've got the cars which has batteries and power attached. Then you've got um robots in the future. Like they're part of the same thing. You can't have them as separated. These edge data nodes and these orbital data centers and terrestrial data centers and then you have this Starlink mobile and Starlink internet. It's all connected together. Both intelligence and connectivity connected together to everything that Tesla makes.

All the cars, all the bots. Yeah. >> The best portfolio in tech. The this this combined portfolio is the best in tech and some of it is being realized right now. I think people see Starlink as an amazing experience. FSD is an it's a it's an amazing one-off experience that you can't get elsewhere. You can't personally own a vehicle that drives like FSD. You can't get internet anywhere like you can with Starlink. you you can't you don't have the payload capacity to launch what SpaceX is doing when they're doing 90% of the Earth's launch.

So, you have kind of n of one or oneoffs and there's so many one-offs at these companies that uh it's it's really hard to ignore that you're dealing with the best portfolio in tech and just the combined entity of it would make it even more powerful. >> Let's go back to Optimus. Um this is not Gen 3. This is I think Gen 2, but they wrapped it up. We've not seen Gen 3. We don't know anything about it. We don't know anything about the physical nature of it, the hardware nature of it.

We don't know anything about the hands. We don't know anything about the intelligence. All of it has been kept under wraps. So, we're just kind of like in faith faith that Tesla is going to do this. Now I have tremendous faith because they have they already proven intelligence through you know the the cars are you you're watching the reasoning you're watching the sentience it's they've got that solved but you know it's a lot of faith at this point but you tell me about your how you think of >> well I think it's fair to be to be skeptical I I think the other thing and it came out in Chris's uh conversation as well at the beginning of the show this talking about mis dates are blown dates. >> Yeah. >> You know, I think it's one thing if you're doing the iPhone 18 and you you missed the date on launch, it's like, what happened?

You've done 17 of these before. What's wrong with you? It's a rectangle. It's got a screen. It's got camera assist. Got a and there's so many changes that Apple made to that product and it, by the way, the Apple 18 Pro Max is a very good product, but it's so iterative. And so I think you can be upset at Apple if they're late on that or they have some massive quality issues. But with Tesla, I mean, you can be upset as well because they put their own commitments out there.

And I think there we always come back to this issue of what do they tell the public and what do they tell themselves. Tell your, you know, internally tell your teams the dates you want. That's fine. But I don't think the public understands how to absorb. I'm not saying the public isn't smart. I'm just I'm just saying that there's a comms issue here. uh that when you say that something is going to happen and it doesn't happen, it does damage credibility.

So even the smartest people that we respect on Wall Street, they call it this uh the so many there's so much lack of confidence. Well, what happens when you're going after things that have never been done before and that's all you do in your product roadmap? All you do is go after things that have never been done before. you're going to be, you know, you're going to be graded tough externally and your your even to your own internal commitment dates, you're going to be wrong most of the time when you're dealing with things that have never been done before.

I've personally experienced this in tech as well. But when Tesla does a Model Y, which is very iterative off the Model 3, that product actually launched early if people remember. So I I I think there's it's one thing to say that oh they're chronically this or chronically that. They're chronically going after the toughest things in tech and your hit rate on those dates are going to be the lowest of anything. But if you're doing more iterative stuff, you're always going to be on time.

The question is is how transformative is that? And what multiple do you put on that? why some of these companies have a single digit or you know low teens multiple be because they're more iterative and and when you I go back to this end of one conversation with Tesla and SpaceX there is no other Starship there is no other FSD there is no other Starlink none of these things at scale so I think when you have this conversation of you're going back to Optimus uh it's right to be skeptical because a lot of things have to come together.

But I think the end product Tesla is not going to dis disappoint us from a product perspective. They are going to do the best in terms of product management feature value trade-off. They're going to get that right. Look at they got it right with the Model 3. They got it right with Starlink. They're going to get that right. The the question is going to be around the the getting the general elements and the deployment date and this whole perception of it's you know this being late.

What else is out there that's at scale? >> There you go. I was waiting for you to say that. [laughter] That's at scale. You said it a few times because the difference is that Tesla doesn't just reinvent something, which they will, but they're doing it to massive scale. Massive scale. And that's the case, things take longer to pump out. If you wanted to do 10,000 robots, they could have built 10,000 robots, released it earlier this year.

Guarant,000 V25s easy. Yeah, but that's not their goal. Their goal is to have generalized robot and then to build factories that can produce 1 million per year and 10 million per year. And there's no one out there, no other, no Chinese, no other American uh robot company that has said that they're building a 10 million per year line and here's a factory and here's the lot and here's the effort we're already doing to build it and get started and here's the supercomputers that going to power it.

So there's a lot of fate, but that's that's part of the reason is that it's always at scale that they're trying to do things. And so that's also why the stock kind of behaves the way it does. It's flat for years and then all of a sudden they go, oh crap, they did solve this at scale like the entire world or like yeah, it'll be 10 million robots then all a sudden people wake up. So >> even the small Optimus factory Turbert I know I know 1X and Burn just did a video >> and it's impressive what they're doing with their with their robot but it's a a 50,000 unit they're going from a 10 to a 50,000 unit factory and here Tesla's small factory is going to be a million unit >> a million per year >> factory their small >> so I think people need to understand the scope of what we're dealing with and what they're designing I say we Tesla's designing for different targets than the rest of the industry.

I don't know if that's very well understood. It sounds like it's it's like coping. Oh, you're coping. Well, no. They're actually this is what they're doing. They're they have the number one selling EV for a reason and they're not building a bot just to get a bot out there. They could have shoved 5 to 10k Optimus out this year uh if they wanted to. So, this is I think we're building uh in the industry there. We're building different things in the industry.

And I say we, I say the collective industry. We're building for different things. Some companies have smaller targets that help them get a valuation to maybe do something bigger in the future. Some a lot of these companies aren't capitalized to build a million unit factory. So, and nor would people put the capital to risk that. So, uh it's very interesting to just understand those variables. >> Okay. Well, so the good news is that big whales and institutional analysts are now realizing that physical AI is the largest market that's possibly out there and SpaceX and Tesla together are the leaders.

So that's great because that that was not so clear a year ago, 6 months ago that people saw Tesla and SpaceX the leader in physical AI and that physical AI is bigger. Even Jensen Hong said it magnitudes bigger than agentic AI which is magnitudes bigger than LLMs. But now it's proof in the pudding. execution as always and we're waiting for Tesla to show their hand and to show milestones as they progress. So, we'll track it closely.

Thank you, Jeeoff. Appreciate your expertise here. Uh follow him on X, the Jeff Lutz. Thanks, everybody.