Tesla Disappoints in Earnings, Robotaxi Delayed, Musk Asks: Should we invest in xAI?

Tesla released its second-quarter financial report after the market closed yesterday. Due to continued margin pressure from price cuts and increased investment in AI technology, Tesla's profit margin for the second quarter dropped to the lowest level in over five years. Additionally, CEO Musk confirmed that the Robotaxi launch will be delayed until October, causing the stock price to plummet over 7% after hours.

Robotaxi Launch Event Postponed to October

During the recent earnings call, Elon Musk confirmed that the Robotaxi launch event, originally scheduled for August, has been postponed to October 10th. When asked about when we might see "the first self-driving taxi on the road," Musk stated, "If we can't do it next year, I would be shocked," but he also acknowledged that his predictions have been overly optimistic. The deployment timeline for Robotaxi still depends on technological advancements and regulatory approvals.

On the other hand, Alphabet's self-driving car service Waymo has been offering paid ride-hailing services in the San Francisco and Phoenix areas. Alphabet has announced plans to expand its investments.

Continued Increase in AI Project Capital Expenditure

To keep up with the advancements in AI technology and improve the performance of its Full Self-Driving (FSD) system, Tesla increased its AI project capital expenditure in the second quarter. The financial report shows R&D expenses for the second quarter amounted to $1.07 billion.

Tesla has faced competition from Chinese car manufacturers cutting prices this year, and the slow recovery of the automotive market has led CEO Elon Musk to implement cost-saving measures, with restructuring costs totaling $620 million this quarter.

However, looking at Tesla's free cash flow, although it turned positive in the second quarter at $1.342 billion compared to -$2.531 billion in the first quarter, continued increases in capital expenditure could potentially lead to cash shortages in challenging times.

Tesla's $5 Billion Investment in xAI?

Following the meeting, Elon Musk asked for opinions on investing $5 billion in xAI on Twitter. While such a significant investment would require approval from the board of directors and shareholders, Musk wanted to gauge community sentiment first.

Elon Musk's xAI was founded in 2023 and has raised $6 billion in funding this year in a funding round, with investments from Sequoia Capital and Andreessen Horowitz. Musk has stated that Tesla is learning a lot from xAI and that it is indeed helpful in advancing full self-driving capabilities and establishing new Tesla data centers.

Tesla Holds 10,800 Bitcoins, Did Not Sell

After purchasing 48,000 bitcoins in 2021, Tesla sold 4,800 bitcoins in the first quarter of 2021 and 32,400 bitcoins in the second quarter of 2022. Since then, there have been no further changes, and Tesla still holds 10,800 bitcoins, with a book value of $184 million.