#351: Tesla is Delivering...What's Next? & More

Wells Fargo, JP Morgan Chase, Bank of America, and four other US banks reportedly are planning to launch a consumer digital wallet for online purchases to compete against popular digital wallets such as Cash App and Apple Pay. Early Warning Systems, the bank-owned company that operates Zelle, will manage the wallet. Zelle is the peer-to-peer payment service for transfers among a number of banks in the US.

According to various reports, the wallet will be tied to consumer debit and credit cards instead of bank accounts, allowing the banks to capture interchange fees, bolstering their non-interest revenue. For perspective on that important line item, reportedlyBank of America derived ~30% of its non-interest revenue from card payments in 2022, or ~15% when excluding rewards and other incentive costs.

Will the bank-operated digital wallet succeed? History suggests not. In 2012, a group of US retailers, including CVS Health, Target, and Walmart, launched the mobile payment system MCX, later named CurrentC, to compete against Apple Pay. In 2014, Walmart refused to accept Apple Pay, a block still in place today. Given Apple Pay’s success, CurrentC never gained traction, so JP Morgan Chase bought it to power its Chase Pay system, a QR-code-based payment service and digital wallet. After investing more than $100 million in Chase Pay, JP Morgan shut it down in 2020.

During its earnings call last week, although Tesla projected that EV production would increase 31% to 1.8 million units in 2023, Elon Musk noted that a 46% increase to 2 million vehicles was possible. He also noted that recent orders have been increasing at twice the rate of production, quelling investor concerns about demand.

Elon also shared his conviction that autonomous taxi platforms could result in the largest asset value creation in history. According to ARK’s research, autonomous ride-hail could turn cars—stranded assets used less than 5% of the day—into assets generating significant recurring cash flows: each of Tesla’s autonomous ride-hail vehicles could generate ~$20,000 annually, contributing importantly to our published price target for 2026.

During the earnings call, Tesla’s management also alluded to new products, including an inference computer for applications beyond automotive. Elon suggested that some of these applications will “blow people’s minds when revealed.” Other than its robotaxi or humanoid robot, Optimus, what could these new products be? In our view, its data library and training/inference tools are positioning Tesla to build other autonomous machines that navigate the physical world, perhaps drones or last-mile delivery robots. ARK estimates that real-time delivery robots that fly and roll could generate revenue of $1 trillion in 2030.

De novo DNA synthesis synthesizes new strands of DNA letter by letter without the use of a DNA template. Developed in the 1970s, de novo synthesis has enabled important applications, including genetic engineering, drug development, and basic research. Its ability to create custom-designed DNA sequences has enabled researchers to study the function of specific genes and create new biopharmaceutical products.

In a paper recently published in Nature Reviews Chemistry, researchers highlight new advances and trends in de novo DNA synthesis. The use of DNA-based technologies in fields such as medicine, biotechnology, and agriculture has spurred demand for DNA sequencing and, in a virtuous cycle, innovation in de novo DNA synthesis, synthetic biology, gene therapy, and precision medicine. As a result, DNA synthesis should advance thanks to cost declines like those in DNA sequencing during the past 15-20 years.