Macro thesis
- Physical AI and autonomy will be the next area of massive capital allocation once the current data center build out phase cools off
- Camera only approach like TSLA is fucking retarded
- LiDAR sensors are the way to digitize the real world and are powering autonomous driving today, and will the robotics revolution
- LiDAR industry is conservatively estimated to have 40+% CAGR in the next 4 years
- Companies like BYD are using up to three LiDAR sensors per car now and European carmakers are waking up to the necessity of the technology to stay competitive.
- Massive robotics production is around the corner
Skip to TL:DR if you are afraid of words
Individual thesis
There are three main candidates to consider here I believe. Hesai, RoboSense and Ouster.
Option 1 - Hesai
Strengths: Vertically integrated market leader with 55% market share, by far the highest quality sensors on the market, currently building a fully automated production plant in Thailand to meet production demand for a huge order from Mercedes, actually profitable business, huge cash pile, guiding for 38.5% yearly revenue growth
Risks: Chinese, getting dicked down by American very free market restrictions, weak Q1 numbers
Option 2 - RoboSense
Strengths: Cheap, just-good-enough sensors that target the less advanced or safety-intensive market like lawnmowers. Mass production putting price pressure on the broader market.
Risks: Chinese as hell, not fully vertically integrated, not profitable and not planing to be anytime soon.
Option 3 - Ouster
Strengths: Currently highest margin in the industry due to most solidified software integration and outsourced production, American
Risks: Not vertically integrated, to manufacture the chips and LiDAR they use subcontractors in Thailand, buying production time in large packaging lines. No cheap way to scale up production, margin will shrink fast as production has to scale and costs rise, not quite profitable
Your and every other smart analyst's conclusion
Ouster is America, ouster has margin, me buy ouster
Actual conclusion
Companies in an industry that is slated to grow so dramatically can only grow with it if they have vertically integrated processes and the ability to scale quickly and efficiently. When production output has to multiply, Ouster's margin will evaporate and go entirely towards buying premium production time in packaging lines.
RoboSense is not set up to capture the market growth in robotics and autonomous driving as the quality requirements are much higher for safety reasons, and they have a very high burn rate that makes it impossible to keep flooding the market with cheap sensors indefinitely anyway.
Hesai's weak Q1 numbers are just the result of chinese new year and order clumping at the end of the year, they are still guiding for the same Q2 growth as before. Stock has been kept down for months because they've been put on some Pentagon list for being too chinese and as a result can't sell to the American military, which they weren't doing anyway.
The obvious winner of the sensor play is Hesai, and I'm all in at an average 19.74
TL:DR - HSAI will 5x in the next 18 months