Tesla Motors Inc (NASDAQ:TSLA) and Mobileye NV (NYSE:MBLY) shares have been trending this week amid a Bloomberg story that 26 year-old hacker George Hotz (also known as geohot) has built a self-driving car in his garage. George Hotz has some esteemed credentials, as he is the first person to hack the iPhone and hack the PS3. With $50,000 dollars and a few months of work, Hotz wrote 2,000 lines of AI code that teaches cars to drive much in the same way as a human does (by learning through observation) rather than going the conventional way of writing hundreds of thousands of lines of code to prepare the car for any situation that should arise. Hotz thinks he will have a finished solution in about four months from now (right now he has a minimally viable product).
This is news for Tesla Motors Inc (NASDAQ:TSLA) and Mobileye NV (NYSE:MBLY) as Elon Musk apparently made a million-dollar offer to Hotz if his software were to work. Musk implied that Tesla might ‘discontinue’ using Mobileye NV (NYSE:MBLY)’s driving product if Hotz’s solution worked better and award Hotz the contract instead. Partly because of Musk’s comments, Citron Research labeled Mobileye as ‘short of the year’ for 2016. Musk backtracked a little, however, saying:
“We think it is extremely unlikely that a single person or even a small company that lacks extensive engineering validation capability will be able to produce an autonomous driving system that can be deployed to production vehicles… This is the true problem of autonomy: getting a machine learning system to be 99% correct is relatively easy, but getting it to be 99.9999% correct, which is where it ultimately needs to be, is vastly more difficult. One can see this with the annual machine vision competitions, where the computer will properly identify something as a dog more than 99% of the time, but might occasionally call it a potted plant. Making such mistakes at 70 mph would be highly problematic.”
If Hotz’s product works as advertised, Mobileye certainly has a lot of downside, and Hotz’s startup would be worth a lot of money. His startup would instantly be one of the leaders in Artificial intelligence, which is the ultimate winner-take-all of winner-take-all categories. Musk would certainly be right to offer Hotz a job or to try to acquire his startup in the early stages. If Hotz’s product doesn’t work, Mobileye’s fundamental upside depends on whether another company would want to buy it, as it might have a difficult time going against industry giants such as Apple and others trying to do the same thing.
As long as Elon Musk is CEO, we’re optimistic on Telsa for the long run, although its shares lack any upside catalysts in the short term for now. According to our data, 32 funds owned $704.98 million worth of Mobileye NV (NYSE:MBLY) shares (accounting for 7.10% of the float) while 26 funds were long $1.01 billion worth of Tesla Motors Inc shares (3.20% of the float) on September 30.