The People vs. Elon Musk
Everyone is hating on Elon Musk right now for one reason or another.
He upset Tesla investors back in May during a conference call saying if they “are concerned about volatility, they should definitely not buy our stock.”
That didn't go over so well.
Since then, Musk has rattled social media with arguments over royalties for a “farting unicorn” image used on a coffee mug and calling one of the Thai cave rescuers a “pedo.”
The Facebook and Twitter sharks were fast to circle.
Financial media headlines are now questioning Musk's ability to run his companies. Fortune asks, “Is Elon Musk too volatile to run Tesla and SpaceX?” CNN Money questions, “Has Elon Musk lost control of his hype machine?”
But throughout all of this, there's one thing that's important to remember: Elon Musk is only one guy.
Musk is obviously an important figure in the lithium battery and electric vehicle space. But there's a much larger battery revolution taking place that's surrounding the man.
The growth of battery technology has lagged behind that of other technology over the past several decades. The standard principle for computer processing technology, Moore's Law, states power doubles every two years at the same cost. But this hasn't been the case for batteries.
In a recent Forbes article, battery technology researcher Mike Toney says, “The equivalent of Moore’s law for batteries is that they improve about 3% every year.”
But the lithium-ion battery is a much younger technology. And recent advancements may have created an environment for battery technology to now keep pace with Moore's Law.
The batteries we have in our laptops and cell phones are going to be lousy compared to those we'll have in just 10 years. And in 20 years, they'll be complete garbage. Consider this...
What was your cell phone like in the late 1990s? Something like this?
Now, take a look at the smartphone sitting next to you.
Advancements in lithium battery technologies could be just as rapid.
Debate over Elon Musk will probably continue for now. And falling shares of Tesla will likely have a ripple effect across the entire lithium and electric vehicle sector. But long-term lithium and EV investors should use this pullback as an opportunity to buy.
It doesn't matter what Elon Musk does or says — in fact, it wouldn't matter if Musk completely disappeared from Earth. There's simply no stopping the battery revolution. Elon Musk is only one character in the bigger picture.
With its electric vehicles and Powerwall products, Tesla is a major consumer of lithium right now. But any general pullback in lithium production stocks as a result of the "Musk Effect" should be seen as a buying opportunity. Because for lithium producers, there will be a consistent demand, whether it comes from Tesla or not.
A recent study by Roskill Information Services projected global lithium demand from companies that produce batteries will increase by an incredible 650% by 2027.
New mine supply is expected to keep lithium prices moderate in the short term. But long-term investors can sleep well.
The price of lithium has fallen off its high over the past few weeks. So lithium stocks are generally down a bit across the board. But if you see any major pullback from the "Musk Effect" in your lithium stocks, it's probably wise to add a bit more.
Until next time,
As an editor at Energy and Capital, Luke’s analysis and market research reach hundreds of thousands of investors every day. Luke is also a contributing editor of Angel Publishing’s Bubble and Bust Report newsletter. There, he helps investors in leveraging the future supply-demand imbalance that he believes could be key to a cyclical upswing in the hard asset markets. For more on Luke, go to his editor’s page.
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