Despite facing a raft of challenges including higher interest rates, inflationary pressures and a cooling global economy, the share prices of technology companies have shot higher this year. Electric vehicle pioneer Tesla Inc (NASDAQ: TSLA) has more than doubled year-to-date, while chip-maker NVIDIA Corp (NASDAQ: NVDA) share price has tripled, owing to investor enthusiasm for artificial intelligence. ​

In fact, at the end of May, the magnificent seven tech giants, which also include Alphabet (NASDAQ: GOOG), Amazon (NASDAQ: AMZN), Meta Platforms (NASDAQ: META), Apple (NASDAQ: AAPL) and Microsoft (NASDAQ: MSFT) accounted for over 70% of index gains.

We discussed earlier in the year our continued interest in innovation, specifically regarding electric vehicles and the global mobility revolution. There is still considerable technological progress required and time for market disruptors to emerge, presenting discerning investors today with the opportunity to get in early on what we see as an incredible investment megatrend. Below, we will provide an update on the recent performance of three companies playing an integral role in the mobility transition, before delving into broader industry tailwinds and developments.

Tesla achieved another record quarter, delivering its best production and delivery result to date. Model Y production increased 90% year-on-year and is the best-selling vehicle of any kind in Europe. Total production including Model Y and Model X increased 86%. Tesla also set a new record for revenue, with the three months to June 30 generating US$24.9 billion.

Tesla’s operating margin finished at 9.6% for the quarter, a fall on the highs made in 2022, however, remains above the industry average and includes price reductions made earlier this year. For comparison, legacy automaker Ford Motor (NYSE: F) achieved an operating margin of 4.5%.

Production of the highly anticipated Cybertruck will launch at the end of this year. It will be the first sub-19-foot truck – the typical length of a garage – that has both four doors and a 6-foot boot bed. The Cybertruck will break many conventional auto practices, in line with how Tesla thinks about vehicle engineering, manufacturing and technology.

Several companies and competitors, including Ford, General Motors, Mercedes, Nissan, and Volvo will adopt North American Charging Standards – Tesla’s in-house charging standard developed over a decade ago. This will further widen the electric vehicle charging network available to Tesla owners and encourage electric vehicle adoption. ​​

Management reiterated Tesla’s goal of rapidly scaling production as quickly as possible. In 2021 the company guided to a 50% annual growth rate. Some years will be faster, including 2023, while others may be slower. However, this compounding effect, if achieved, will be unrivalled by other large companies. Five years of 50% growth would grow production by 7.5-times increase, while ten years would increase deliveries 57-fold. Investors can expect plenty of growth from Tesla in the years ahead.

Shares in chip maker NVIDIA have exploded 217% this year fuelled by investor zeal for artificial intelligence; it is now just one of seven US companies to reach the coveted $1 trillion valuation. NVIDIA became the poster child of the artificial intelligence revolution when ChatGPT, a language processor that produces human-like conversation and text, was released in November powered by NVIDIA chips.

As the market leader, NVIDIA’s chips are essential to building the most innovative artificial intelligence applications. There is now a scramble by major tech behemoths, including Google and Microsoft − who are dedicating billions of dollars of investment to artificial intelligence applications − to source the required power and computational capacity.

“It’s more profound than fire or electricity” – Sundar Pichai, Alphabet (parent company of Google) CEO

“GPUs at this point are considerably harder to get than drugs” – Elon Musk, Tesla CEO

“It’s like toilet paper during the pandemic” – Sharon Zhou, Lamini CEO

NVIDIA benefits as the hardware platform of choice. Chief executive Jensen Huang summarises it best: “We’re the world’s engine for AI”. Using NVIDIA’s products, DNA sequencing reduces from weeks down to hours. Amazon uses it to power its autonomous robots and optimise warehouse space. Mercedes uses the NVIDIA platform for its autonomous driving technology.

https://www.youtube.com/watch?v=IVTyLYupECI

In its most recent update in May, NVIDIA said it expects to achieve US$11 billion in sales next quarter, blowing away analyst expectations of US$7 billion and reflecting the insatiable demand related for artificial intelligence and language models. Impressively, this comes despite recent intervention by the US government’s to cut off China’s supply to the most advanced semiconductors, which NVIDIA estimates will cost the company US$1.6 billion in revenue annually. ​

Uber Technologies (NYSE: UBER), the company behind the popular ride-hall app, achieved gross booking growth of 18% to US$33.6 billion for the second quarter of 2023. Travellers continue to outsource travel needs, with mobility bookings up 28%. Demonstrating an ability to push through price increases, take rates in the mobility segment increased from 26.6% to 29.3%. Moreover, delivery bookings are up 14%.

Uber announced a partnership with Waymo, Google’s autonomous vehicle driving fleet, to make vehicles available on the Uber platform starting in Phoenix, Arizona. This is the first step towards the mass adoption of autonomous vehicle networks, and while still nascent, provides a glimpse of what investors can expect in the future.

Management has turned its focus towards profitability, with Uber producing an operating cash flow of US$1.2 billion and a free cash flow of US$1.1 billion. Adjusted earnings have more than doubled, and there is a clear cadence towards expanding profit margins.

From an operational standpoint, Uber continues to attract and retain customers on its platforms. Monthly active customers increased 12%, while trips jumped 22%. The Uber One membership platform is now available in 15 countries including Australia and the United States, encouraging customer loyalty and building a recurring revenue base. The membership includes free delivery orders, 5% off rides and guaranteed arrival estimates.

In the first half of 2023, the number of plug-in vehicles, which include both battery-electric vehicles and plug-in hybrid vehicles, increased by 40% from the prior corresponding year. Plug-in vehicles now account for 15% of total car sales globally.

China continues to lead the world vehicle adoption, accounting for 57% of global new vehicle registrations in June. The top five automakers command over half the markets share of of all plug-in registrations:

Disclaimer: As of the date of publication GOOG and AAPL are as at date of article publication. Holdings can change substantially at any given time.