#401: Is Meta Disrupting The Consumer Hardware Duopoly?, & More

Last week, Meta Platforms released[i] blowout fourth-quarter results, including higher-than-expected revenue growth of 22% on a year-over-year basis and an operating margin that soared 21 percentage points to 41%. The social media giant guided to another acceleration in revenue growth to 25% this quarter. After delivering a year of efficiency, management also initiated a $0.50 dividend and authorized $50 billion in share repurchases in addition to its existing $31 billion authorization.

During the call, management highlighted smart glasses and generative AI as the next consumer hardware/software paradigm in a post-smartphone world. According to Mark Zuckerberg, sales of the Ray-Ban Meta smart glasses have been higher than expected:

Now, it seems quite possible that smart glasses that have AI assistance built in will be the killer app and that the holograms and sense of presence will come later as a—maybe on the same time horizon we were talking about before but could end up being just as important as we expected, but there could be a big market here even before that. So, I think we'll figure that out over the next few years.

Given the recent proliferation of AI hardware product launches—such as the Humane Ai Pin, Tab, Rabbit R1, and the Ray-Ban Meta smart glasses—next gen consumer hardware seems to be fragmenting much like personal computers and smartphones did in their early days. Given mixed reviews[ii] of Apple’s recently launched Vision Pro as well as recent developer outrage[iii] at Apple’s policies, new AI consumer hardware could be in the process of disrupting the longstanding smartphone duopoly.

During Tesla’s earnings call last week, Elon Musk responded, “I don’t know” to a query about the size of its addressable market.[iv] According to our updated research for Big Ideas 2024,[v] with the planned release of its low-cost, next-gen vehicle platform towards the end of 2025, Tesla’s addressable market could increase 10-fold.

In 2023, the best-selling vehicle in the world was the Model Y, at 1.2 million units,[vi] —despite a sticker price in the low $40,000s.[vii] Importantly, at prices of ~$40,000+, only ~5% of the market is addressable, but our research suggests that at $25,000 it expands to 50%, as shown below.

Stay tuned to ARK’s Research as we continue to size the opportunity for Tesla’s next-gen vehicle platform.

*Older data points adjusted to 2023 dollars using CPI. Source: ARK Investment Management LLC, 2024, based on a range of data from external sources, which may be provided upon request. For informational purposes only and should not be considered investment advice or a recommendation to buy, sell, or hold any particular security or cryptocurrency. Past performance is not indicative of future results.

Surpassing an important milestone in Elon Musk’s quest to create brain-machine interfaces (BMIs),[viii] Neuralink’s robots have inserted[ix] a chip, flush into a persons’ skull. For some perspective, please see the size of the chip below.

Source: Chappell 2024.[x] For informational purposes only and should not be considered investment advice or a recommendation to buy, sell, or hold any particular security.

While Musk said that ”the patient is recovering well” and “initial results show promising neuron spike detection,” Neuralink’s Precise Robotically Implanted Brain Computer Interface (PRIME) study must prove the safety, privacy, and value of the chip. Predecessor technologies have demonstrated efficacy. The Utah Array and Deep Brain Stimulation, for example, can control robotic arms[xi] and address obsessive compulsive disorder (OCD), memory, consciousness, and movement disorders.[xii] More recently, Australia’s Synchron used microelectrode mesh threaded through brain blood vessels to treat two patients. Suffering from ALS, the first trial patient, Graham, was able to connect[xiii] with his wife via chip-mediated thought.

While BMIs could hold significant long-term potential, their short-term impact appears quite compelling as well. Aided by higher definition robotics, surgeons should develop more precision and control.

[i] Meta. 2024. “Meta Reports Fourth Quarter and Full Year 2023 Results; Initiates Quarterly Dividend.”

[ii] Patel, N. 2024. “Apple Vision Pro review: magic, until it’s not.” The Verge.

[iii] Spotify. 2023. “Read Spotify’s Joint Letter with European Companies Calling for Meaningful Regulatory Action Against Apple.”

[iv] SA Transcripts. “Telsa, Inc. (TSLA) Q4 2023 Earnings Call Transcript.” Seeking Alpha.

[v] ARK Investment Management. 2024. “Big Ideas 2024: Disrupting The Norm, Defining The Future.”

[vi] Tesla. 2024. “Q4 and 2023 Update.”

[vii] Tesla. 2024. “Model Y.”

[viii] In July of 2020, the FDA designated Neuralink ‘s technology a “breakthrough device”; the FDA approved testing in human clinical trials during May 2023. See Whooley, S. 2020. “Elon Musk’s Neuralink moving forward with brain implant.” +Mass Device. See Knutson, J. 2024. “How Elon Musk's Neuralink brain chip got approval for a human trial.” Axios.

[ix] Guarino, B. 2024. “Elon Musk’s Neuralink Has Implanted Its First Chip in a Human Brain. What’s Next?” SciAM.

[x] Chappell, B. 2024. “What to know about Elon Musk's Neuralink, which put an implant into a human brain.” NPR.

[xi] Bullard, A. 2019. “Feasibility of Using the Utah Array for Long-Term Fully Implantable Neuroprosthesis Systems.” Dissertation, University of Michigan.

[xii] Queensland Brain Institute. 2023. “Deep brain stimulation: merging brains and machines.”

[xiii] Synchron. 2024. “Neurotechnology to address the limitations of the human body.”