Mark Mulhern (Manu Invests) on Autonomous Taxis and the Buying Opportunity in Uber

0:17Today's show is sponsored by Tucriam. Looking to diversify your portfolio beyond stocks and bonds? Commodities are getting more and more attention as we enter 2026. Tuqueum's agricultural ETFs offer a way to access the futures prices of essential crops. These funds may help manage inflation risk and add diversification to your portfolio. Ask your financial advisor or explore Tuqueum ETFs on your own. visit to cream.com that's t-e-u-c-r-i-u-m.com click the link in the show notes for more yep it's your boy downtown josh brown i'm back for a new edition of live from the compound we have a first-time guest with us i'm so excited to chop it up with mark Mulhern, better known as Manu Invests, to his audience.

1:11Mark is the creator of one of the best-selling sub-stacks in the category right now. It's called Fundamentally Sound. He has a degree in economics and finance, and after a decade in the industry, Mark now serves as the executive director of a non-profit. He bridges the gap between high-level financial analysis and the Everyday Investor with a mission to make research approachable and actionable for everyone. Mark, welcome to the show. Thanks, Josh. Thanks for reaching out. I'm super excited to be here. Big fan of the show and super excited to be part of it. All right. Is that a couch behind you with like a little throw blanket?

1:49What's going on there? All right. Listen, I got the wife too involved. She overthought it. She thought it should look crumbled up. No, I like it. It looks It looks nonchalant, but like, all right. It's an office slash guest bedroom. All right. Before we get into the topic of the show today, can you tell us where the name Manu Invests comes from? Am I saying it right? Yeah, Manu. So I can. So yeah, originally I was in a couple investing communities on Discord and full disclosure, I'm a gamer, build my own PCs and stuff like that. Well, we knew that when you said Discord. Yeah, so an old gamer tag was Manu Militari, and I built a little audience on Discord.

2:31People knew me as Manu, so as I launched the Substack, I kind of rolled with it, and it stuck. All right, we love it. Today, we're going to talk about a topic that you have been writing incessantly about, and you have become one of my favorite voices on this topic. You've been talking a lot about Uber, and so have I. Full disclosure, both of us own the stock. I'm not trading it. I'm a shareholder. And I've been in the name since it came public, and I've added to it on the massive sell-offs that we've experienced. And as a result, it's become one of, personally, one of my largest positions. Uber had an awesome year last year and the year before.

3:13But ultimately, I think it's the most disrespected stock in the NASDAQ. I think just people are giving them absolutely no credit and don't believe that Uber will be able to navigate the autonomous future. And that's evidenced by the valuation. So let's start there. I think this stock is now trading 16 times next year's earnings estimate with 25 % cash flow growth expected and a big fat buyback too. Yeah. Why is this stock selling at half the multiple of the tech growth stock universe? What is going on here? Yeah. So I completely agree with you. I think it's one of the most hated and misunderstood stocks that are out there right now.

4:07Surface level, people see AVs. It's funny because Uber has such like a love-hate reaction with AVs. Waymo's come out, the stock price goes up. Tesla postpones, the stock price goes up. Waymo does well, stock price goes down. So, you know, the thing about Uber is that its financials and its business, I don't think are easily understood at a surface level, right? So when you start talking about AVs, people see human ride share, and they make the assumption that it's going to like disappear overnight. And And simply that's not the case. You've read my stuff. You know that I actually think AVs are going to be a big tailwind for Uber.

4:49Yeah. So why do you think – is it just because people are scared of the resources of Alphabet and the kind of like the throat-slitting mentality of the Elon Musk cyber cab project? It's cyber cap talks in terms of they're going to own the whole industry. And Waymo basically has a money printer in the basement, otherwise known as Google search and now Gemini and unlimited resources to do battle. And people look at Uber and they say, well, you're not building cars. You don't have the money printer in the basement and you're not Elon Musk. Therefore, you must be you must be screwed and this must be an existential risk for you.

5:37So why do people feel so strongly about that? I mean, when you hear me say it out loud, the narrative does make sense. Yeah. And yeah, so I think you nailed it. I think, you know, in regards to Tesla, those are shareholders of their own style, right? Anytime you speak about Uber, it's as if you're speaking about shorting Tesla. And, you know, Google Alphabet is one of my favorite companies in the world. Endless money printer, endless resources, has their hand in everything. And so I think at surface level, people see like Uber is just an app. Why can't Google or Alphabet just replicate it, right?

6:21They have all the data. They have all the user data. They have Google Maps. They have all our search history. Tesla is going like full stack. They're going to be cheaper than everybody. But what I think people fail to realize is that, you know, Uber took a long time to become profitable, right? It was 10 years of cash burning to build this platform, to build, you know, and it's not just an app, right? It's a complex system underneath it all to make it work. And they spent all this money on building a consumer base that is more than 190 million monthly active users. So, you know, I don't see it.

7:01I think one of the biggest misconceptions is that it's like a this or that endgame, right? Like Waymo is only going to eventually go direct to consumer from their own app. Like Tesla is going to take over the world. When the reality is, you know, Dara is very clear that, you know, Uber made the decision to go asset light for a reason and spin off their AV stuff because the largest service that they offer is maximizing utilization for people that are on the marketplace. right so they already got partnerships with uber they already got a ton of partnerships with other av providers people see um you know elon musk they see the waymo name and they talk about it like it's just going to be a market that is uh pick or choose tesla or waymo and i don't think that's going to be the case at all well i think the thing with waymo is that when people land in san francisco or elsewhere where Waymo is operating or Austin, there's sort of like a thrill associated with download the Waymo app and try it.

8:09And who wouldn't? Myself included. Just because the novelty of I heard everybody talking about these autonomous cabs. I want to take one on the way from the airport to my hotel. And they work. And people are really happy with them. Very well. And they have flooded the zone in those locations. And so you're not waiting 30 minutes. Now, it might be different if you're at a golf course somewhere in a remote area in the mountains, somewhere in California, and you need a ride back to the resort hotel you're staying at. That might not be snap a finger the way an airport ride to your hotel is. So there's that part of it.

8:49And so the trial makes sense. And so in places where Waymo is and there's consumer awareness, the trial, new user trial goes through the roof. Of course it does. Okay. But the thing is I sort of think the default becomes what car shows up faster. And for 99 % of people who are not socially awkward or bizarre, they don't care if it's a person or a robot. They just want to get where they're going for a reasonable price. I don't think it's going to be like, no, I only take robots. So if I end up being right about that, then the network with the most ridership and the most drivers and the most vehicles and the highest availability across the board is going to be the default app that people open.

9:40If I'm wrong about that, it's a whole different story. Do you see it? Do you see it that way? It's sort of a binary thing. You either think people want speed and convenience or you think they care about something different. Yeah. So spot on. So I have a very similar take on the situation. You know, I try and look through investments through my lens as a consumer as well. Right. And, you know, I'm willing to have a little saying like buy nice or buy twice. Right. I'm willing to pay for convenience. And I think you're spot on right now. We're in these geo-fenced areas where supply is flush, prices are subsidized to really encourage ridership.

10:23But that's only – ridership isn't a problem right now because there's not enough Waymos to meet demand, right, to meet the novelty, curiosity that people have. to scale that onto a major city level or nationwide isn't going to happen next year or the year after or the year after that, right? As the novelty of like these AVs and cyber cabs kind of wears off, it really comes down to busy professionals or people that are trying to get where they're going as fast as they can, right? I, you know, I'll go as far as to say like I genuinely don't think people will have any preference. there will always be some people who have a preference but yeah majority some people will prefer the human yeah some the majority my wife is one of them she's like i'm not getting in a waymo i'm like we need to go somewhere that has a waymo you know and um because i'm in boston we don't got them yet but um people aren't going to care if it's a person or a car driving itself right what it's going to come down to is what ride gets here the fastest i want to ride in three minutes and I want to get there in a trusted ride, which is Uber.

11:34And like, and the reality is over time as AV prices come down as well. Like people pay for convenience. I mean, we see it with Uber eats people pay 30 % more. I know for a meal, my kids for, for something that's down the street because they're too lazy to go. So you're going to tell me that someone's not going to pay an extra dollar a mile to have a car show up in three minutes rather than 20 minutes. Uh, I think that's nuts my my kids will uber eats starbucks it's it's a three-quarter of a mile walk um and my daughter drives yeah and it doesn't matter so um you use the term subsidized and i want to i want to dig into that for a minute there's just no possible way cyber cab will be profitable anytime soon now historically that hasn't mattered to tesli shareholders but just generally speaking There is a limit somewhere where it's like, okay, we have revenue growth, but we can't keep losing billions of dollars quarter after quarter after quarter making these rides cheap enough to prove a point.

12:43And, you know, Elon has kind of gone all in on autonomy, including CyberCab and robots, etc., to the point where they've discontinued the manufacture of, I think, the Model S and the Model X. So they're going to focus on Model 3 and Y, which are better sellers, and they're going to divert resources toward more autonomous. So he's not going away, and he's going to expand to more cities this year. he will never hit the targets that he's been talking about. For example, last year he said by year end we'll be in 30 cities or something. None of that's going to happen at the rate that he promotes it.

13:20But it is inevitable. The question is, is there any limit to how much money they're willing to lose in the pursuit of market share in autonomous taxis? Maybe the answer is there's no limit. I think that's sort of scary. And we'll talk about Waymo subsidizing in a minute. But like what are your thoughts on whether or not there is any governor on what Tesla will be willing to spend here? Yeah. So obviously that is scary, you know, fully burning cash to gain market share. But, you know, at the end of the day, still like one of the prime arguments, too, is that like why list on why list on Uber when you can go to direct and get a dollar, you know, get 100 percent of the money.

14:07Right. Yeah. But why would, in other words, why would Elon allow cyber cabs to be on the Uber app? OK. And so Elon and Tesla are, you know, pretty black and white. Right now they're saying they're not going to be on Uber. But the reality is, you know, if you if you make 75 cents for every dollar on Uber or you make a dollar direct to consumer through the Tesla app, right, 75 cents is better than a car sitting empty. And I think people are also thinking that it has to be like this or that. Like CyberCab can always prioritize direct-to-consumer, but there's no downside of having an empty vehicle be listed on the Uber marketplace, right?

14:49It's the same way that planes, they're flying one way or another. So they'd rather list discounted seats last minute or put them on Expedia and booking and whatnot just to fill a seat and get some revenue for it. So I think down the line, that'll become more of a reality. Me as an investor, I do think there has to be a bottom line for cash burning to gain market share. But Tesla investors are a breed of their own and might not see things the same way. But the other reality is, too, that Tesla is not level four right now. There could be regulatory requirements that require LIDAR. like costs could change before mass market adoption for cybercabs yeah to be clear they have autonomous taxis with a human driver in them for the time being and this is like one of the big things that they keep giving guidance about to the street is when will the drivers be removed from the from the cybercabs um there's also a lot of timeline shifting with like when people's regular Teslas are going to be lit up and turned on so that they themselves can become taxis.

15:59He keeps saying that's like tomorrow, but it never seems to happen. Okay. But to push back a little bit, the argument for Elon not having cyber cabs listed on Uber is if you want to change behavior and you want to stop people from opening the Uber app. And it seems like that's what he wants to do. In a way that Waymo, so far, they've launched two cities with Uber, and they're launching all the rest of the cities on their own. And I think that's sort of like a hedging their bet. And they might decide one day we are pulling our cars off the Uber app in Atlanta and Austin. I think Uber goes down 10 points that day.

16:44Yeah, I agree. No matter what price it's trading at. It could be at 80. It could be at 100. It's dropping 10 points. or they might decide to announce three more cities with Uber because the partnership is serving their needs and they see the value in mass utilization of the vehicles more than proprietary app usage. I couldn't guess which way that's going to go, nor can Dara. Really, nobody can handicap that. And I will tell you the day that Waymo announces, we're going to have more vehicles on Uber in more cities, America, international, it almost doesn't matter. Uber will go up 10 points. I almost think that is the fulcrum issue.

17:32So what are your thoughts about Uber's willingness to burn cash and go it alone and have cars potentially sit idle rather than cooperate more with Uber? Yeah. So I think we are definitely in like a one to three year kind of critical phase right now. You know, I don't think we're going to get much insight from Waymo about like what's working and what's not. I think they're going to keep it close to their chest until they make a decision. So like you said, they're probably in a little testing phase. And to your point about trying to pull consumers, very valid. And I think Uber, you know, Uber is a cash machine right now, right?

18:10They're not the negative free cash flow company that they were a few years ago. And Dara has been very clear that Uber is willing to use its balance sheet to help fragment the market, right? So already Uber has AVs on the app, and there's more coming, right? They got all the partnerships with Neuro, Lucid. John, pop that slide while Mark is talking. We have all these logos that Uber has commitments and partnerships with on the left. and then on the right you see other players who might be potential partners and of course Tesla is listed there um but just let me fill people in who are listening not watching Mark yep on the left Uber current partners um commercial commercial operations with Waymo which we talked about with WeRide and with Pony AI a lot of this stuff is happening internationally in Asia, the Middle East.

19:09Then they've got announced deals with AV Ride, Neuro, Aurora, Wave, which is backed by NVIDIA, Motional, and Wabi. And again, some of these are in the UK. Like there's all sorts of global partnerships that Uber is pursuing. And it's in their, I think it's worth saying, it's in their best interest for there to be a fragmented market with dozens of different OEMs and software companies who have various types of autonomous services. And Uber becomes the demand aggregator that's got 190 million users and is diverting opportunities to all of those players. That's what Dara, that's his bet that he can do that.

19:57But the market doesn't seem to think that he can do it. Yeah. So that's the bet. That's the play, right? And I think that's what we need to see work out. There was just a new investment in Wabi announced the other day. You know, CES is NVIDIA. Keynote speech was awesome about essentially making AV tech plug and play for car companies. And I think every car company can build an autonomous vehicle via NVIDIA's technology. Yep. And so Uber is providing them, you know, millions of miles to help train that. Uber's investing in these companies. They're getting equity back, you know, so they're getting kind of being a VC, helping these companies start up and build traction.

20:42But at the same time, they're getting exclusivity agreements, right? They got cars lined up from Neuro and Lucid, Wabi, you know, Mercedes-Benz is coming out equipped with NVIDIA technology. So, you know, ideally, based on announcements, there's going to be a whole lot of rollouts in 2026, which I'm very excited about. And I think that that's what Uber needs to do, right? Even, you know, in my opinion, even if you pull Waymo and Tesla off of the Uber marketplace, Uber can succeed and experience a tailwind from AVs by listing all the like tier two providers. Because it still comes down to Uber is no longer, if you open the Uber app today and compare it to a year or two ago.

21:28Oh, yeah. It's groceries. It's everything. It's freight. It's, yeah. Right. So it's not just. Retail delivery. It's not just a taxi app. It's not just a real ride hail app anymore. Right. They got Uber one. They got last mile drop off shopping. So there's a stickiness inherent to it. And I think that's also why they're launching a lot of the things like grocery and retail, because they see the threat of Waymo and Tesla trying to pull consumers off of their ecosystem and into their own apps. But when people are living in Uber, consumer behavior is sticky. People have habits. I think it's stickier than people expect.

22:08And I think even if Uber gets 15 % to 25 % of the AV market share with tier two providers alone, I think they're going to have a lot of success with margin compression, cost reduction, increased ride liquidity. I still think they'll be the number one place to get a ride in under three minutes for a reasonable price. That's a really good point on the cost side. One of Uber's, obviously, one of Uber's highest costs is the human being sitting in the seat, whether it's a professional driver or it's an UberX. The take rate for the driver versus the take rate for Uber is like one of the variables that could be most changed if and when there are autonomous vehicles in every city.

22:55Yeah, I would have I would have guessed that the street would see autonomy as a tailwind for Uber on the cost side. But again, the street seems to be consumed with this narrative that there's going to be two apps and Uber won't be one of the two. Yeah. But like financially, what does an autonomous vehicle with a lower cost per mile mean for the financials of this company? Yeah. So Uber, so spot on with the take rate, you remove the human driver. What a lot of people don't realize too, is that Uber has a ton of pass through costs, right? So they gross their revenue. So included in their revenue is money they're paying out as incentives for like surge pricing and high demand events.

23:42And also Uber insures in house. So they are charging the driver for insurance per ride, and it's coming into Uber as revenue, but then it goes right out for provision for losses, right? Right. Useless. Useless. So with an AV, the way AVs are set up right now is the states that do have laws require that the operator insures them, and the states that don't, it defaults anyways to the owner of the vehicle. So having an AV on the Uber platform removes the insurance cost, which is like conservatively 30 % of their take rate, removes the driver incentives, which is like another 25 % of their take rate.

24:25So that's 50 % of their expense dropped right down to the bottom line. So with that, Uber can have a lower headline take rate number for AVs. They don't have to be at 30%. They could be at 20, 18 % and still end up with a higher actual margin than they do with the human driver. So none of that, none of that is priced into the stock right now. None. No one appreciates it. And I understand why, other than the Waymo partnership and some shit in Saudi Arabia, you do not see, you do not walk out of the terminal at LAX or in Las Vegas or anywhere that matters for visibility and see an autonomous Uber.

25:10There's no autonomous Uber brand. So people don't understand how big of a player they could be in AV. They think it's blockbuster. Yeah, people regularly comment to me pictures of Blockbuster and BlackBerry and stuff like that. All right, put this slide – John, can you put this slide up? Partnership with NVIDIA. So this is part of Uber's last quarterly earnings supplemental materials. And they're showing for the listener, they're showing how NVIDIA's L4 software and AI platform combined with Uber's network of users and data and what the benefits end up being. So basically, they are pitching this as an AV technology ecosystem.

25:59NVIDIA comes to the table with end-to-end AV brain. So that's their chip that's built deliberately for autonomous driving. They come with supercomputers for AI training, and they come with a unified architecture for OEMs to build on. So Mercedes, Cadillac, Chevy, all of these OEMs can plug in NVIDIA's chips and software, and instantly they are producing autonomous vehicles. Very exciting. Uber brings to the table their global mobility ecosystem, which again is the largest in the world, real-world driving data, which they have been collecting and analyzing for 12 years, and AV fleet management expertise, which we could talk about in a second, but that's an underrated part of the story, fleet management.

26:49And the end result is more Uber-ready autonomous vehicles hitting the market. every OEM producing vehicles that instantly, they just have to be owned by someone, probably a corporation or a private equity firm. But there will be autonomous fleets of every car you can imagine, powered by NVIDIA, put into use by Uber all over the world. And their partner is NVIDIA, for God's sake. If anyone keeps Elon Musk up at night, it's Jensen. and his vision for robotics and autonomy. What do you think it'll take for people to wake up to that version of the future, which is clearly not priced in? Yeah, what I really would love, I mean, I think production is really gonna be the wake up call, right?

27:44We've got a lot of in 2026, in 2026, coming soon. So I think as things start to roll out this year, But also, I would love – once we start getting like AV KPIs from Dara on earnings calls and stuff to show that like the amount of miles that are being driven. They got AVs operating in Dallas I think it is right now and then obviously internationally. But I think once they show that like we have AVs on the platform and they're being used. Oh, like AVs were 3 % of all ride share last quarter. Yeah. All we have now is press releases and partnerships. We don't get any hard data to show that what we're doing right now is working.

28:30And it's probably they're keeping a lot close to the chest as they work it all out. But I think over the next year, as we start to get these graphics and stuff with specific – Uber does a great investor presentation every time they do earnings. So as soon as we get actual AV imagery and AV data points that are showing like this is the percentage of our rides in cities that are now AVs. This is the average time weight total between AV and human. You know, this is the AV demand. I think that the sentiment will really shift and people will see that like Uber is listing AVs and they're working. You know, toss that, add that in with, you know, margin expansion and continued growth.

29:12And I think we get a sentiment shift. I think it's a great point. I want to go through some of these partnerships with you. So we'll skip Waymo. WeRide, they have just expanded robo-taxi services to 15 more cities and public operations in Saudi Arabia and the United Arab Emirates. These are big markets. It's not New York City, but it's a huge market that does not necessarily have a better alternative or like this entrenched thing with millions of drivers. So I find that – look, I find that to be far out of the public eye of Wall Street investors. There's no way a successful WeRide partnership is priced into Uber stock right now.

29:54Would you agree? The whole conversation is US-focused right now. OK. I agree with that. I mean rightfully so. US is the main market and the fastest AV rollout in the world. but Uber, over 50 % of their business right now is international. No one else is global. So Uber has the foundation built across the world to roll these partnerships out. You know, we're starting to see like Waymo in London, I think, but no one else is in the Middle East. And you're talking about like Dubai and stuff as well. You're not talking about no-name cities. You're talking about some of the technological capitals of the international world, right?

30:33And I think that that's being completely overshadowed by the U.S. argument. All right. You mentioned Dallas. That's the partnership with AV Ride. Yep. RoboTaxi rides are now available in Dallas. AV Ride, was that the thing that spun out of Yandex and is now partially owned by a company that's based in the Netherlands? Yeah, it is. Is that the Nebius? It was from, yes, NBIS. Yep. So it was the spin out. And yeah, it is Nebius. All right. Baidu's Apollo Go, a collaboration announced to accelerate autonomous deployment in Asia and the Middle East with Uber. So Uber is the only one who's got a footprint in Southeast Asia at all.

31:19Okay. Volkswagen, which is a pretty big deal, obviously, in Europe. Long-term partnership to deploy autonomous ID buzz vehicles on Uber's platform. Is that a meaningful partnership or just one of many and not worth really diving into? Well, hold on. Baidu, I think, is about to be involved in London, actually, as well. So I think Baidu's about to roll out in London with Waymo. Volkswagen, so not as big as the other names, but I think it's still important. You're talking about a major well-known player that's about a well-respected brand that's about to roll out cars in the US. And I think the more, you know, the more that NVIDIA technology gets adopted, the more stuff we're going to see like this, right?