Investing in AI: the Incredible Tesla Opportunity (part 1)

For years I used to be a 100% Bitcoin maximalist. I basically used all of my investment-related time to better understand Bitcoin and the crypto ecosystem. I loved understanding the market dynamics better than most and made many good friends in the space over the years. But looking back I closed my eyes a bit for what else was happening in the investment world. It went so far that I didn’t even want to spend much time looking at the stock market (except for some Bitcoin-related stocks), because I thought nothing would outperform Bitcoin in the long run.

But things have changed a bit, and over the past couple of months my main focus has slowly shifted from crypto to AI. Of course I still follow everything that happens in the crypto space on a daily basis, but because I have less time available now that I also focus on other things, I don’t listen to all the podcasts anymore and I tend to stay away from the often toxic crypto discussions on Twitter.

Part of the reason is that the crypto space has changed a lot, there is a lot more of a focus on quick money now and I see scams everywhere. That is not my world. I also got a bit bored, I have seen everything so many times already. The Bitcoin drama (especially on Twitter) simply doesn’t excite me that much anymore. I know Bitcoin will keep going up long term and that we will likely see a huge bull market later this year, so I am not interested in all the people that tweet about panic selling because they don’t understand what’s happening in the market.

At the same time I realised that there may be other investments that could potentially do better than Bitcoin over the next couple of years. Since I got into Bitcoin I have seen a 500X price increase, but unless the USD gets inflated away that likely won’t happen again. Long term Bitcoin might do another 50X, but there are other investments (in crypto or outside crypto) that are easier to understand and that could generate similar returns. 

Artificial Intelligence

I have been looking at AI for years and even did some online AI courses about 7 years ago already. But those were quite technical (‘How do neural networks work?’ etc.) and they didn’t really open my eyes to the possibilities that I am seeing right now. Only since ChatGPT became mainstream in my world about 1.5 years ago, I realised what the potential opportunities were. So a couple of months ago I decided it was time to go much deeper into AI. I read technical papers and books, but mostly started using a lot of the existing Large Language Models to understand what they can (and can’t) do, and how they are different. I went to AI conferences and started to follow AI blogs, podcasts and YouTube experts. Because of this I simply didn’t have the time anymore to focus on Bitcoin as much as I did before.

Based on the knowledge I gained about AI I developed a new investment thesis, and I decided to take the summer off to mostly focus on that thesis and to start making investments. Over the past couple of weeks I have been spending 4-6 hours every day reading, writing and thinking about investment strategies for AI. I believe that when you go really deep and you combine it with in-depth knowledge of other industries, you will see things that others don’t see (yet). It worked for me in the past and I believe it will pay off this time as well.

Initial findings

My findings so far have been remarkably simple. In times of exponential change you can make enormous amounts of money if you invest early and don’t sell during market downturns (HODLing as Bitcoiners call it). This was the case with Internet companies, later with Bitcoin and I believe now with AI stocks. Anybody who had done his/her research and invested early in quality Internet stocks or in Bitcoin, could have easily turned $1 into at least $100. That is also the case with AI right now, maybe not 100X anymore because many stocks already made huge moves over the past year, but still sufficient to generate real wealth. I have selected a portfolio of about 10 companies that I am focusing on as investment targets and most of these are large public companies. 

Investing in AI start-ups?

Unlike in many other sectors, I believe that investing in AI start-ups is not the way to get rich, simply because in order to become successful they need a) lots of money, b) lots of chips and c) lots of power. Maybe start-ups can raise a lot of money, but getting access to chips will be a lot harder. Nvidia simply puts its largest customers (Google, Meta, OpenAI, Microsoft, Amazon and Tesla) first because the demand for GPU chips is much higher than their chip production. Why sell to a small start-up while saying no to your best customers?

The access to power is another problem that start-ups will face once they start growing. There is a reason why all the large tech companies have their own data centers and power supply agreements: it’s the only way they can secure their future energy needs. Start-ups simply don’t have the resources to do that and so they will eventually hit a ceiling.

Another reason is that AI’s capabilities have been growing exponentially. That means that what a specialised AI company has built over a period of say a year, can all of a sudden be part of a new LLM update and so that company suddenly becomes obsolete. Each time OpenAI announces a new version of ChatGPT a number or AI companies are immediately put out of business, because ChatGPT can suddenly do what they have been building. I am not saying that no AI start-ups will be successful, but I believe that investing in selected public companies may be the easiest and most liquid way to make outsized returns over the coming years.

Ultra-cap companies

One of my conclusions is that AI will fairly soon lead to something that I call ultra-cap companies. My definition of an ultra-cap company is a business with a market cap of $10 trillion or more. Currently the largest company in the world is Microsoft with a market cap of $3.4 trillion, meaning it would have to grow by 300% to become an ultra-cap. Ultra-caps will become so big because of what I would call dehumanisation: taking away human jobs, with the monetary value of these jobs ending up as revenue for these future ultra-caps.

Emerging ultra-caps will set themselves apart by their ability to dominate new sectors. You already see that domination with companies like Nvidia, Amazon, Apple and Tesla. I expect that dehumanisation will for a large part happen by replacing human labour with humanoid robots. These humanoids will transform how we make things and perform tasks, and will create a massive new industry. I am now convinced that the robot industry that is starting to take shape will become the largest industry in the world.

My favourite potential ultra-cap: Tesla

My favourite AI company is Tesla, partly because I think they could end up dominating the humanoid robot industry, making $TSLA potentially the biggest company in the world (they are currently about 5 times smaller than Microsoft). Tesla could also outperform Bitcoin over the next couple of years. Maybe Bitcoin will do better than Tesla during the next 12-18 months, but after that Tesla will shine. I started investing in Tesla about 2 weeks ago (I posted it on Twitter) and the stock has already gone up over 25% since then. I have to admit that that timing was lucky, but I do expect the stock to go up a lot more soon.

The second part of this post will go into much more detail about why I think Tesla is a potential ultra-cap and why I believe most analysts don’t see it yet. I plan to write part 2 later this week.