This week, we discuss Tesla's latest developments in AI, the recent strong performance of robotics and automation companies in China, and the latest buzz on gene editing company, Editas. We are also hosting a webinar on September 22nd about noteworthy M&A activity across disruptive technology. Reserve your seat here. Please enjoy these insights from our research team.
Evolution of Tesla: More Than a (Profitable) EV Car Company
A member of the THNQ index, Tesla recently held “Tesla AI Day” to showcase its technology and provide a glimpse of its vision for the future of the company. The first big announcement was its key investment and focus around the new D1 Dojo AI Chip for AI training, which is expected to be operational in 2022. Dojo targets to be a massive leap forward for training and to offer 4x the performance with 5x a smaller footprint than Nvidia – and perhaps more importantly an improvement in network bandwidth, thus reducing latency. The chip will be used to continuously improve and train machine-learning models on Tesla fleet’s data and hopefully to significantly reduce the barrier and time to reaching level 5 autonomous vehicles, with a goal to create and capture the potentially trillion-dollar opportunity of next-gen transportation.
With the world’s focus on ESG and infrastructure investment, and with the supply chain issues seen in chips this year, it makes sense that CEO Elon Musk would want to own more of the ecosystem stack to avoid dependence wherever possible while aiming to push the limits of technology.
Musk also gave the first preview of their Humanoid Robot concept, codenamed Optimus, for which they aim to have a prototype out in 2022 that can perform “household” tasks. Their approach is significantly different from others, going with a “brain” first approach versus a purely mechanical solution. The bigger picture here is that Musk’s vision of the future includes a comprehensive set of increasingly complex, yet game-changing innovative technologies – from chips to batteries to robots – which will compound with each other. Tesla is proving to be more than a car company as the auto industry is becoming more fiercely competitive.
China's Robotics Arms Race
This summer provided a sharp reminder of the risks of investing in China, as a widening regulatory crackdown on internet powerhouses sent the market value of China’s top five tech stocks down more than a third. While the authoritarian government aims to curb problematic practices at internet companies, it also signaled that it remains committed to rapid technological development, especially in high-tech manufacturing. China has a goal of both increasing robot density (currently ranked 15th) across manufacturing and logistics, as well as boosting the adoption of Chinese-made robots in the fast-growing and largest potential robotics market in the world.
This is reflected in the strong share price performance of the China-based robotics and automation companies in the ROBO Index over the past three months, while the rest of the market has gotten pummeled. Siasun Robot & Automation, the domestic leader in industrial and logistics automation, is up more than 40%, as is Hollysys, the process automation company that has received two takeout offers. Han’s Laser, the leader in automated laser processing and an important supplier to Apple, rose 23% as well, as has Shenzhen Inovance Technology, the provider of electronic components for factory automation. We believe that China will remain the fastest-growing market for automation products and services in the foreseeable future. The ROBO Index includes technology and market leaders, both domestic and foreign companies, best positioned to benefit. Chinese companies currently account for around 4% of the ROBO Index.
Eyes are on Editas as It Seeks to Cure Blindness
Gene editing stocks have enjoyed a derivative trade on the back of Intellia and Regeneron’s success with CRISPR/Cas9 data reported in June, when they released data from their ATTR amyloidosis trial showing that gene editing works in humans. This update marked a major breakthrough in gene editing. The HTEC Index provides investors with exposure to this theme with companies such as Vertex, Regeneron, and Editas.
Editas has drawn further attention recently as many investors look forward to updates on their Phase 1/2 BRILLIANCE trial at the upcoming Retinal Degeneration meeting this fall. This treatment aims to treat LCA10, an early onset retinal degenerative disease that causes blindness. Aside from this, there is also speculative buzz around Moderna’s recent announcement that it will explore expansion opportunities in gene editing. Editas owns the IP in the U.S. for Cas9, and is trading at a discount relative to its gene editing peers. We view the Cas9 capability as a strong strategic complement to Moderna’s current mRNA technology. Moderna is another member of the HTEC Index.