Elon Musk says Tesla is discussing licensing of self-driving technology with ‘one major automaker’. Here’s who I think it is and why I see Tesla stock as the better buy.

During the day Tesla‘S (NASDAQ: TSLA) Last week, Elon Musk made one thing abundantly clear: Tesla is an artificial intelligence (AI) and robotics company.

Naturally, after these comments, Musk was bombarded with questions about Tesla’s progress in autonomous driving – a pillar of the company’s AI roadmap.

He hinted at the company’s intentions to license its full self-driving technology (FSD) to other automakers, stating that Tesla is in talks with “one major automaker.”

Let’s take a look at who I think could explore licensing FSD, and why I see Tesla as the better buy.

Who would Tesla negotiate with?

While there are a number of companies pursuing self-driving vehicles, there are also the more mainstream players in the space Alphabet‘s Waymo, Cruise and of course Tesla.

During its early days, Cruise attracted a number of high-profile investors, including Soft Sofa, MicrosoftAnd General engines. Today Cruise is a subsidiary of General Motors.

However, Cruise has faced a number of setbacks in commercializing its autonomous vehicles, ultimately taking a toll on GM’s cash flow.

One of Tesla’s oldest bulls is Ron Baron, a mutual fund manager. In November, Baron sat down for a wide-ranging interview with CNBC’s Andrew Ross Sorkin. The profile mainly contained questions about Baron’s investment philosophy and his beliefs regarding Tesla.

During the segment, Baron revealed that he had made a small investment in Cruise. Not surprisingly, the billionaire investor has built a positive rapport with GM CEO Mary Barra.

But perhaps most intriguingly, Baron told a Sorkin a story in which Barra asked him to meet none other than Elon Musk. While the details surrounding her request remained private, I speculate that GM may be the major car company Musk referred to during Tesla’s earnings call.

Image source: Getty Images.

Why I see Tesla as the better buy

During the earnings call, investors learned that Tesla has collected more than 1.3 billion miles of driver data for FSD. This vast data library gives Tesla an unparalleled competitive advantage over its competitors.

Given GM’s ambitions with Cruise are looking increasingly bleak, I think it’s logical to suspect that this is who Tesla may be negotiating with when it comes to autonomous driving.

However, it is very important to understand that this is my own personal assessment. Furthermore, the details surrounding which company Tesla might be working with are less important in the grand scheme of things.

The bigger theme is that Tesla is making remarkable progress in FSD versus the competition, and the technology could be a major catalyst for the company in the long run.

For starters, if Tesla is the first major automaker to widely implement self-driving in its cars, it could create new demand for its vehicles. Furthermore, should Tesla gain a large lead over the competition, the company will always have the option to license FSD. By doing this, Tesla would essentially evolve from primarily an electric vehicle maker to a more productive AI platform and software-based company.

Baron describes this dynamic during his interview, comparing Tesla to Intel. Just as Intel supplies chips to leading hardware developers, Baron believes Tesla will be the ultimate provider of superior technology in the automotive industry.

It’s important to note that Tesla’s ongoing discussions with other automakers about FSD are not enough reason to buy the stock. Strategic partnerships are complicated and these deals can easily fall apart. Furthermore, even if a partnership is formed, it will likely be quite some time before Tesla makes any significant profits.

While autonomous driving is an exciting part of the AI ​​domain, there are significant regulatory hurdles that need to be overcome before this technology becomes mainstream.

Still, I see Tesla as the best opportunity at the intersection of AI and cars, and I think investors with a long-term horizon should consider picking up some shares.

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Suzanne Frey, a director at Alphabet, is a member of The Motley Fool’s board of directors. Adam Spatacco has positions at Alphabet, Microsoft and Tesla. The Motley Fool holds positions in and recommends Alphabet, Microsoft and Tesla. The Motley Fool recommends General Motors and Intel and recommends the following options: long January 2025 $25 calls on General Motors, long January 2025 $45 calls on Intel, long January 2026 $395 calls on Microsoft, short January 2026 $405 calls on Microsoft, and short May 2024 $47 appeals to Intel. The Motley Fool has a disclosure policy.