The Demand Aggregator Trap

Uber fully exited its equity position in Serve Robotics during Q2 2026 and will not renew its delivery partnership when the contract expires in 2027, forcing Serve to slash its full-year revenue guidance from $26 million to $10 million.

Chinese robotaxi operator CaoCao, backed by Geely, launched public driverless road testing with roughly 100 vehicles in Hangzhou and plans commercial deployment of its purpose-built EvaCab by 2027 with a target of 100,000 units by 2030. Boeing divested Wisk Aero, Insitu, and SkyGrid to Archer Aviation in an all-stock deal, giving Archer immediate defense revenue through Insitu’s $200 million annual revenue stream while Boeing retains up to a 19.75% equity stake.

All three signals, analyzed using OMEGA, point to a structural industry shift favoring vertically integrated operators over platform-dependent single-partner models.

Key Autonomy Signals Episode Questions Answered

Autonomy SignalsTopics & Timestamps

[0:00] KPMG Sponsor Introduction

KPMG works across the full autonomy ecosystem, advising operators, OEMs, suppliers, insurers, and investors as autonomous mobility scales.

[01:32] Signal 1: Uber and Serve Robotics Get Divorced

Uber liquidates its entire Serve Robotics stake and the delivery partnership ends in 2027, forcing Serve to slash revenue guidance from $26 million to $10 million and exposing the existential risk of relying on a single demand aggregator, a warning for every robotaxi operator on the Uber app.

[31:40] Signal 2: CaoCao Vertically Integrates Robotaxis

CaoCao goes driverless in Hangzhou with roughly 100 vehicles, backed by Geely’s manufacturing and a purpose-built EvaCab with a sub $35,000 BOM cost, after Geely got paid by Waymo to learn how to build robotaxis and is now competing with its own vertically integrated stack.

[1:00:10] Signal 3: Boeing Exits Autonomy with Archer Aviation Deal

Boeing sells Wisk, SkyGrid and Insitu to Archer Aviation for a 19.75% equity stake, ending its autonomy cash burn while Archer escapes pre-revenue purgatory by acquiring Insitu’s profitable defense drone business.

Full Episode Transcript

Uber Exits Serve Robotics

KPMG Introduction:​ The autonomy economy is real. Commercial robotaxi operations, humanless freight runs, AV infrastructure investment measured in billions. The question is no longer whether autonomous mobility scales, it’s who advises the companies building it. KPMG works across the full autonomy ecosystem: operators, OEMs, suppliers, insurers, and investors. At the moment it matters most, when the road ahead is uncertain, we’ve already been there. KPMG, accelerating what’s next in mobility.

Grayson Brulte: Rob, the autonomy economy continues to grow globally, and as it expands globally, OMEGA’s there at the forefront. This week, OMEGA uncovered that Waymo filed papers to expand to Switzerland. As we, as we know now, Waymo’s building that front near, perhaps Belgium’s next. Those signals are still emerging, so it’s not really much for us to dive into yet, but something’s cooking with Waymo in Europe. Which brings us to this week’s signals. The signals this week are Uber Serves Serve with divorce papers, hence our Elizabeth Taylor piece in the newsletter. CaoCao the Geely vertical stack comes online. And Boeing offloads autonomy. Archer trades equity for cash flow and scale. Those are the signals, and they’re presented by KPMG. Rob, let’s dive into yet another divorce from Uber. What do we know?

Rob Grant: Whether it’s Elizabeth Taylor, Jennifer Lopez, whoever it is, Uber cannot seem to keep its partners close. And there may be a, a reason for this particularly from the, the partner’s end. So what happened here? Uber fully exited its equity position in Serve Robotics during Q2 2026, liquidating its entire remaining stock holding as part of a multi-year wind down while Serve was reportedly, but we can’t verify, a little bit taken back, surprised by the exit. Serve Robotics then announced during its Q2 2026 earnings call that it will not renew its core delivery partnership with Uber when the existing contract expires in 2027. This was driven by operating model and fleet management disagreements between the two companies. As a result, driven by the declining order volumes from Uber, marking Uber’s first volume contraction after 17 consecutive years of growth and delivery, Serve drastically reduced its full year 2026 revenue guidance from $26 million to $10 million. Now Serve is attempting to offset the loss of Uber Eats order volume by accelerating fleet integrations with DoorDash and continues to grow, monetizing on robot advertising streams and expanding into indoor healthcare robotics. And for those that pay close attention to our indices, our autonomy indices, Serve currently ranks number three in The Road to Autonomy Delivery Bots Index. So a lot going on here. Both sides seem very unhappy with each other, and they just straight up called it quits

Grayson Brulte: You mentioned Jennifer Lopez. Is this a Ben Affleck, Jennifer Lopez situation where both sides are dueling in the media? Perha- perhaps that’s gonna emerge, and next thing you know, instead of People Magazine, it’s gonna be Autonomy Magazine. Well, you know, so-and-so said this, and so-and-so said this. Oh, yeah, that’s ’cause I’m old and I remember the grocery stores, you, people used to read it. Or if you wanna go way back, National Enquirer, I’m not going there. But today you have TMZ, and perhaps in the future you’re gonna have Robot Z, because it’s the, not the 30-mile zone, it’s the autonomy zone, so who knows where that’s going. But to me it’s, he said, she said, and we’re not gonna pick a side and say Uber’s right. We’re not gonna pick a side and say Seres right. But what I will say, for the record, is that somewhere in the middle there is the truth. And the thing that I think that the underlying this in re, to delivery bot companies and to robotaxi companies, and to certain autonomous trucking companies, you can’t be reliant on one partner to get all the demand because that partner could say, “Bye,” and it’s a real, real risk. And, and un- unfortunately for Serve’s situation, it’s playing out in real time now

Single-Partner Dependency Risk in Autonomous Delivery

Rob Grant: For sure, right? Th-th-this strategic rupture between Uber and Serve signals more than just a breakdown between these two companies, right? It, it exposes kind of, as you’re talking about, the underlying operational vulnerability of a single partner dependency, in this case, in autonomous delivery, but I think we can easily make the parallel to autonomous vehicles. I also think an-another signal that it, that it, it sends is there’s this structural breakdown in exclusive aggregator robotics partnerships where just pure play sidewalk delivery operators confront order utilization collapse as platforms really allocate capital towards robotaxis. And all that’s a fancy way to say is I think there is a, a growing preference for the economics that come with robotaxi and demand aggregator platforms over the economics that come with robotics and delivery partnerships. the unit economics are very difficult on the sidewalk delivery side and really depend on extremely high utilization and, and demand. And here, from the Uber side, you see them saying, ” We’d rather take that money and put it into robotaxis.” as we know, we’ve talked extensively, and we will continue to talk extensively about their kind of dis-support of, of partners that they have, and there’s a reason for that strategically. But to, to go back to the original point that you made you know, these severe Serves, I mean, entire economic model was premised on Uber Eats routing high density, short distance delivery orders to maintain their target fleet utilization levels. And then as that contracted during QT, alongside these operational disagreements over fleet management, Serve’s capacity utilization plummeted. and that resulted in this slashing of the full year revenue guidance. And it’s just, it’s very– I think the signal is it’s very difficult to sustain standalone economics, unit economics unless you have a guaranteed high frequency order dispatch. And if you do on your own, maybe you’re in a better position than perhaps if you’re doing it through an aggregator. And I think that’s the lesson that, that you and I walk away with as we look at what happened here and we look at what it means for robotaxis

Grayson Brulte: Yeah, and let’s just go back down memory lane. Before Serve, it was Postmates. At one point in time, Serve Robotics was part of Postmates. I think it was Postmates’ lab, and that’s where it was spun out. Uber, huh, emancipated their own child, not even a divorce, ’cause everybody’s looking at this as a divorce. It is a divorce, but it’s an emancipation. Say, okay, Uber, they, they bought Postmates, they incubated this company, th-they spun it out and took it public, and p-put Ali in charge, who’s doing a great job, and then all of a sudden said, “Nah, you’re emancipated. We don’t want anything to do with you.” That’s a question. I think th- th- a signal that we’re gonna have to dive into more there. And then let’s go w- back even further in time. What did JZ and Dave Ferguson at Nuro uncover when they shut down their bot early on? They had. Don’t forget, they had the Domino’s partnership. They had the Kroger partnership. They had various other large scale institutional household name partnerships, and they shut it down and went to a licensing model. And Andrew Chapman’s doing a great job implementing that model for them now. But what did they see in the market then? Is that what Uber is seeing now with Serve, or is there something more brewing under the scenes teams? It seems very odd. You spin the company out, and then you need to fully divest yourself. Yes, I know they, they have to increase their cash to invest the 10 billion they’re putting in robotaxis, but it just seems that we’re just touching the surface of truly what’s happening here

Rob Grant: Yeah, look, I mean, to me, I really focus even though it seems the obvious one here, right? Uber is, is taking a, a disciplined and strategic kind of look at their capital allocation, and they’re really allocating capital away from these low-margin micro logistics towards high-ticket autonomous lanes. Look, managing hardware-heavy sidewalk fleets introduces operational friction, curb space regulatory risk, limited basket size economics relative to passenger mobility. And so by ending its equity investment and letting the delivery contract lapse, Uber’s freeing capital and platform capacity to deepen partnerships with higher capacity, better economic level four robotaxi operators. and so I, I do think it’s a combination from the Uber side, at least, and maybe you could speak from what you’re seeing from the Serve side. From the Uber side, it’s a convergence of deteriorating unit economics, what seems to be irreconcilable deployment strategy disagreements, and a deliberate pivot away from illiquid small-cap hardware positions toward higher return autonomy assets. That, that to me explains the Uber position. Now, from the Serve side, as you said, they have their own perspective on what this means and, and, and that not necessarily seeing this as a complete setback.

Robotaxi Partner Prioritization on Uber’s Platform

Grayson Brulte: The way that I’m interpreting this, and this is based on the public statements that were made on Serve’s Q2 2026 earnings call, it seems to me that perhaps Uber Eats was not giving Serve the demand that they were hoping for. And reading between the lines on the Uber public statements, reading between the lines on the Serve public statements, that the relationship broke down quarters ago. This was an ongoing issue, which raises the big question, a- a- and, and comparing it to robotaxi. So let’s just use Las Vegas for an example. You have Zoox on the Uber app, you have Motional on the Uber app, and I’m gonna make a pretty good assumption that at some point you’ll have Nuro Lucid because their test track is out there in Vegas. How is Uber going to determine who, who gets what? Okay, so let’s say 30% of the volume’s gonna go to you, 30% of the volume’s gonna go, 30%’s gonna go to you. Okay, the final 10% are gonna go to human drivers. And then what happens if Uber picks a favorite child? How is that all going to work? ‘Cause let’s not forget, while Uber emancipated Serve, they divorced them, they said, “Bye bye, see you later,” they still have other delivery bot partners, and you’re– and we haven’t heard much about that. I know tho- those other ones aren’t publicly traded. But it seems that this is a demand issue, and I will go on the record and make a prediction here, ’cause at some point in the future when we do another Signals, there will be a similar situation that’s gonna happen with robotaxis. And then favored nation clauses are gonna come out, and then it’s gonna get very interesting. I think th- that what OMEGA’s pointing out in the data, this is foreshadowing something else that could potentially happen in the future

Rob Grant: 100%. I, I, I think when you add to the fact that we, you know, as we continue to examine the Uber-Waymo relationship and kind of what that means, you add that separation from this emancipation and and what it says to me, it sends an even stronger signal. And we talked about this when we talked about WeRide last week, and then Baidu the week before. If you have the capital allocation and will from your whether it’s parent company or within your board, as well as the ability to, to spend the time to build your own reputation with consumers to, to, to understand consumer demand and put your efforts there, I think people will come back to the fact, and by people I mean AV operators, whether in delivery trucking, robotaxi, you’re better off running your own platform than going to a demand aggregator. Now, you may need to go to the demand aggregator because you don’t have the capital to do it your own way, or you’re just getting started and it really benefits you to be introduced to consumers or to the regulators through a demand aggregator. But ultimately, unit economics and having your own say as to utilization, as to maintenance, as to priority, things like that, having that independence to determine all of those things, it it adheres for you to, to move away from a demand aggregator. And I think, I think we even heard that, you know, to bring in WeRide again, I think we even heard that on their Q2 earnings call. “Hey, if we get to the position where we can run our own demand aggregation platform, we have experience doing that do we need Uber?”

The Case for Building Your Own Demand Platform

Grayson Brulte: No, y-you don’t. And h-here’s something that w- that we’re going to watch in the market. In the future, perhaps, Serve announces what’s called Serve On Demand. We’ll deliver the food, and they build their own platform, and then all suddenly you start to see the revenue go up, and you see the deliveries go up. And let’s say it gets to a point where it is on par from the last publicly reported Uber number that they delivered. That starts to raise a question and puts another, pokes another hole in the demand aggregation layer. ‘Cause you factor, let’s say hypothetically, their food delivery business is equal to what they’re getting from Uber on their own. Then you factor in an advertising business on top of that, which is highly profitable by the way, and then you factor in a growing healthcare business. Th-that gets very, very interesting, and it’s exactly what WeRide said on their call, and it’s what other companies have said and what, what OMEGA’s picking up in signals is that once the brand’s established, and you have y- and you have the, the ability to, to generate demand on your own, you don’t need the platform. The platform brings you no value. All it brings you is what OMEGA u- is using the term internally which we uncovered, a toll tax. That’s all it is at the end of the day if you can replace that demand

Rob Grant: That’s right. And look, and what, what’s interesting here is Uber is saying, “Hey, guess what? If I don’t need you anymore, I’m gonna let you go.” So you gotta keep that in the back of your head. If you’re in Las Vegas and you’re emotional on Zoox and whoever else they might bring as their partners there, Lucid, Nuro AVride, at some point, you gotta be worried that Uber’s gonna go, “I’ve split the baby too many ways. You’re out. See ya.” And so it behooves you, even if you’re partnered for very good reasons because you don’t have the capital, you don’t have the consumer reputation, y- you don’t have experience running a demand, consumer demand-facing application, it behooves you to get smart on all those things because even if it’s your best interest and you don’t wanna go that way, Uber may force you that way. They may just say, ” You know what? I’m I’m doing a performance review here, right? And so we gotta get rid of the bottom, the bottom performers.” So if you’re, if you’re, if you’re ranking me one through five in a stack ranking and everybody who gets a five or below is out, you gotta worry where Uber’s gonna put you

Grayson Brulte: There it is. That’s the risk. There’s no other way to say it. And it’s not just a risk, it, it could be an existential risk to your business. If you built your whole business around, “I’m gonna build this technology and then I’m gonna let Uber handle everything else,” like -oh, they just decide, like you said, you get a five, see you later, alligator. What do you do? You gotta go back to the drawing board. And then, and I know I’ve been harsh at, at times about Zoox, but in the early days before they did the Uber deal, they’re vertical integration, they wanna control their own destiny. And I think you’re going to see more companies that are gonna say, “You know what? We’ll take the slow road to control our own destiny,” ’cause I think that risk is emerging and, and it’s getting too big for the market to ignore.

Rob Grant: I think that’s a really good observeation, and, and perhaps we will see more of these developers, even when they’re on the Uber app put out their own apps knowing that at first it’s not to generate a tremendous amount of demand but at least to preServe optionality should they find themselves in a situation similar to Serve. And, and Just quick right? I what’s, what’s super interesting is, yes, they have a plan for their operational pivot to DoorDash and monetization for indoor medical logistics and things like that. That’s gonna take some time to play out. hopefully they are able to find, you know, multi-tenants for their dispatch and keep their utilization high and to stabilize their revenue. But, you know, they’re gonna be under pr- pressure here in the short term as that revenue shortfall from Uber letting them go accelerates their cash burn. And so we’re gonna have to pay attention to our friends at Serve, who we wish well, as they may be forced into some interesting strategic positioning from, From the financial end. Like, will they have to do a dilutive equity capital raise or, Think of other ways to extend their Runway as they try to absorb the idle fleet capacity that Uber’s separation means? Now, they have some time to plan for that, right? That’s not coming for a couple of quarters. But it is, it is being in that position that I think brings us back to the first point that you were making, which is some of these robotaxi developers will see this and say, “Hey, we’ve gotta prepare for that day when Uber wakes up, looks over across the bedsheets and sees my face on the pillow and says, ‘I’m tired of looking at this face.'” and so they’re, they’re gonna be in all 10 toes down, as they say to really understand how Uber is feeling about their relationship, particularly in these soon-to-be cities where multiple AV partners are gonna be operating on the Uber app.

Grayson Brulte: Yeah. It’s autonomy’s making strange bedfellows, and there’s that song, If You Don’t Succeed, Try and Try Again. It just seems that’s what Uber’s doing, and, and we plugged it. They’re only six away from breaking Elizabeth Taylor’s divorce record. Five to tie, ’cause Elizabeth Taylor, she was married eight times, divorced seven. One ended in a death. And so Uber is well on their way to breaking her record, which brings us to OMEGA’s risk. Now, OMEGA highlighted some financial risks here that, that tell me it’s amazing how smart OMEGA continues and continues to get. And for the audience, OMEGA is opening up in the fall. If you want early access, send an email, [email protected]. We’ll put you on the list. OMEGA’s coming. Rob and I use it every day, and that’s what powers this show and all the intelligence work we do. Now, the risk here is the financial risk. OMEGA risks, “Elevated interest rate environment, 4.65 on the 10-year, continues to compress valuations for cash-burning autonomy hardware firms, validating Uber’s exit timing.” That is a good risk. But then I look at that and say, “Okay, but there’s Lucid.” I know they’re a hardware– They’re not autonomy, they’re a hardware firm, and that thing just Keeps losing money. But there is a real risk there as with the interest rate environment of getting these companies funded

Rob Grant: For sure. And, and for Uber who is making big, big bets, right? $10 billion worth of bets as they talked about and as we predicted and they talked about on their Q2 earnings call. You know, that money doesn’t come cost-free. And so as Uber looks at where it is investing its capital, Where they could invest it perhaps for a larger return, it, it took a really Critical eye at Serve and its cash-burning autonomy hardware bots and said, “You know what? We think we can get a return better somewhere else.” And as, as interest rates continue to, if they continue to rise, we don’t know that will only make that kind of look at where else I might get a either better or safer return look more valuable to Uber And so look, I Don’t think interest rate pressure was a huge issue here as to why Uber made this decision. I think it, it fits within a company who is making bigger bets on what they see as a a, a, an industry that has larger potential returns in terms of robotaxis. And given the longstanding investment, and like you said, this goes all the way back to Postmates, and I hadn’t thought about Postmates in, I don’t know, God knows how long. it was, it was for them, they were like, “It’s time. It’s time to end this.” and so, but I think Uber can justify its decision in the manner that OMEGA speaks here, right? in terms of interest rates you know compressing those valuations for those cash-burning autonomy firms. So this could validate Uber’s exit timing even further, but it’s kind of like an after-the-fact validation as opposed to I don’t think they went into this conversation in the boardroom of Dara’s leadership team saying, “Hey guys, let’s look at the Interest rates and see, see, see, how that’s Lining up with our Serve investment.”

Grayson Brulte: I agree with that. I don’t think it happened, but I Guarantee you at some point in some conversation, interest rates have popped up in Dara’s leadership teams thing. I know from I’ve laughed in the past, since you haven’t thought about Postmates, here’s another one for you, Drizly. I don’t know if you remember Drizly or not. They’re, they were acquired by Postmates. I remember Drizly ’cause they delivered wine. That’s how I remember them.

Rob Grant: I do remember that. Yeah. I, I, I remember a particular New Year’s Eve in New York City when I was young where we you know, used– It was either Drizzly or some similar Serveice it was very beneficial For, for those who may have been under a certain legal drinking Age

Grayson Brulte: New York has some of the greatest Delivery services. You get anything you want any time of the day, and I mean anything. But I’m gonna stay here ’cause we’re a G-rated program, which brings us to the next risk. DoorDash’s 50% sequential growth rate decelerates and fails to absorb Uber volume at scale, leaving Serveice fleet chronically underutilized. That’s a risk. That is a, a, a, a risk that we’re gonna have to monitor for multiple Quarters to come

Rob Grant: For sure. And we, and we started off this conversation pointing out that being dependent on one demand aggregator is a real risk, right? and yes, Serve has said that they’re looking to diversify going forward to lessen that risk. But here, you know, in their highest of hopes, I think they see DoorDash serving as that same anchor aggregator that Uber did. And this risk is just saying, you know, if DoorDash can’t deliver its continued growth in, in delivery robotics, and we all know DoorDash has its own DoorDash bot robot sidewalk Serveice out there you know, this, this could, could not necessarily fill the gap that Uber Eats and the loss of that to Serve is feeling. And I think this is a real risk because, you know, their, their DoorDash has its own Program going and and what they do with two programs Is gonna be Interesting

Grayson Brulte: But the key that you hit the nail on the head, internal program with the DoorDash Dot, which they currently have it deployed in Arizona. As OMEGA uncovered, there was regulatory filings looking to deploy it in New Mexico. But internal program, Tony and the leadership team at DoorDash and his co-founder that runs Labs, lot of credit because they’re investing. They understand the future of of autonomy is in-house. And not to mention that DoorDash even has their own in-house drone program. And so DoorDash is doing the complete opposite. Perhaps we should have Tony on the pod here to talk about it. DoorDash is doing the complete opposite of Uber. They’re investing, and, and yeah, they’re getting beat up for it. But in the end, I believe that they’re gonna be rewarded for it ’cause they’re gonna control their own destiny and they’re not gonna have to rely on partners. Brings us to the final risk here. This is a smart one. OMEGA says, “Operating burn rate of $64 million a quarter, a loss. Depletes a $240 million cash reServe faster than new verticals generate revenue, forcing dilutive ATM draws.” It’s, it’s, it is a, a very plausible situation. Not investment advice. A very plausible situation as OMEGA has crunched these numbers

Rob Grant: Yeah, look, there’s no doubt that this puts some severe stress on Serv. it doesn’t mean that they’re a distressed company. That’s not what we’re saying. It’s just, you know, everything that we mentioned in terms of you know, having to restate their revenue, in terms of fleet utilization, In terms of Having an anchor partner, it puts them under severe stress. And this is just saying that it’s, i- if, if some of the strategic swings that they have to do as a result of this stress don’t pay off or don’t pay off as fast as they anticipate, you know, th- they may be forced, when you do the raw math, to think about other ways to keep their, their capital and cash flow going. Doesn’t mean that that’s where they’re gonna end up. That’s not what I’m, you know, I don’t think either of us are in this risk that OMEGA’s calling out, predicting that that will happen. But it is something that we have to acknowledge that this is a an issue, a set of challenges for Ali and the leadership team but look, out of great challenges come great opportunities. that’s a good leadership team over there. I think they have a solid plan put in place. It’s about executing to that plan. It’s about seizing other opportunities that may arise. It may even be, as we mentioned, this is what, you know, you use some of that capital for, to, to generate your own aggregate demand platform, right? And so you know, from these moments grow leadership, grow opportunity, grow a chance to really show your mettle as a company and show the markets that, “Hey, we’re not a one-man, we were never a one-man show. We were never just some kind of offshoot of Uber Eats. We are a solid, Company, always have been, and we will continue to be.

Grayson Brulte: To me, and you’re, you’re right, a challenge great leadership turns around. They turn it around, they become profitable. That’s a badge of honor. At the end of the day, that, that is a complete badge of honor for that management team if they, if, if they can execute it. It’s a badge of honor. Whether they can or they can’t, we wish them well. We’re not gonna make a, an assumption one way or another, but we wish them well on this new journey, which brings us to OMEGA’s and is a meaty take, so stay with us, here, audience. “Uber’s clean break exit Serve robotics is not a one-off portfolio trim. It is the empirical proof that a- that platform aggregators have permanently repriced specialized delivery hardware from strategic asset to fungible utility, how do serve’s negative gross margin with a 65% guidance cut confirms the hardware-first pure play model is structurally broken at current fleet density. The $240 million cash buffer prevents intimate distress, but cannot replace the demand channel Uber represented. Every diversification vector, DoorDash, Diligent, non-food, requires 12 to 24 months to generate comparable dispatch volume, meaning Serve will burn through capital executing a pivot whose outcome is uncertain.” OMEGA’s looking at that like an analyst. Well, well-trained the way that we do this. There’s a lot, lot of truth there. I mean, there’s a lot, a lot of truth in that Take

Rob Grant: There is. There is. And, look, I mean, you know, there are times when the Numbers are just the numbers, right? And, and OMEGA is reading all the inputs, here, including the financial inputs, and putting out a very sober take about some of the challenges ahead for Serve also some of the, you know empirical reasons for Uber’s, from decision here. And so that’s why I always appreciate OMEGA. you and I right, we just spoke a little bit towards, you know, what is a leadership attitude? What do you make of this? How do you keep faith? How do you get the troops to rally around, you know, what may have not have been the per- you know, the plan and the plan has changed. But that’s, you know, like you said, that’s life, right? Sometimes you get smacked in the face. It’s not about you know, sitting down and crying about it. It’s like, how do you respond to it? and so OMEGA has got the head. It’s screwed on right. It’s all correct. you know me, I got a I heart. I wanna see that team succeed. I wanna see all these companies that we Talk about succeed even though it is a challenging time

Grayson Brulte: Heart is where the home is or home’s where the heart is. And yeah, you, you and I have a heart, and OMEGA’s looking at this at a, a pure factual standpoint. So when you combine the heart and facts, you get really at least from my perspec- from an analyst perspective. And a lot happening, so that’s thing. Signal two, Geely. That is a name that the world is becoming very familiar with. CaoCao, their wholly owned subsidiary for robotaxis. We’re getting signals out of Geely’s grand ambitions. And for the audience, you can follow CaoCao. They’re on The Road to Autonomy Robotaxi Index. What are the signals we’re getting out of CaoCao, Rob?

CaoCao Launches Driverless Robotaxis in Hangzhou

Rob Grant: Yeah, and this is why I love when we ask OMEGA. You can kind of see the theme here. We just talked about kind of why it might behoove some of Uber’s partners to really develop their own kind of vertically integrated everything from demand aggregation to hardware to software. and then we move right into CaoCao and some of the great things that they’re doing, but also, right, this is a company that understands that it needs to be vertically integrated. And so you’re right, you have Geely who’s the manufacturer. Geely– CaoCao before robotaxis has been a, Mobility provider, right? It’s in hundreds of cities in China. It runs a robotaxi, not a robotaxi, but a kind of Lyft and Uber type TNC Serveice over in China. And now The Serve A robotaxi angle to That as well. But it it owns the complete stack. it’s, developing its own autonomous system. it’s got the demand aggregation/ app layer to it for the consumer demand, and now it’s, it’s moving into the, the, the software even more quickly. And so why does this come up now, right? For those who follow CaoCao in China, they’re like, “Yeah, we know all that. That’s, that’s not necessarily new.” But for many CaoCao may not be a familiar name, but it, it should be one that they pay attention to if you’re really interested in understanding a lot of where the future robotaxi discussions will go. So CaoCao officially launched public road testing without a human safety driver behind the wheel in Hangzhou’s Binjiang District, deploying a feet of– a fleet of roughly 100 vehicles. The driverless fleet is integrated directly into CaoCao’s cloud-based Zhijing RAS remote safety Serveice platform, providing live remote monitoring, operational teleoperation, and emergency response capabilities. As you mentioned, Grayson, CaoCao is backed by parent Geely Automobile Holdings. CaoCao plans the commercial deployment of its natively engineered, purpose-built EvaCab robotaxi starting in 2027. Now, EvaCab will be interesting because it is, like I said, purpose-built. It is very similar to the vehicle that Zoox has built. No steering wheel, no brakes box shape. I think, I believe, and now I could be wrong ’cause I c-can’t completely envision the interior right now. I believe it has carriage seating as well. that’s starting in 2027. We’ll get into it, but the BOM costs for that are estimated to be about $35,000, which is extremely cheap Now the rollout targets for CaoCao and their Eva Cab include Abu Dhabi, Hong Kong, and five mainland Chinese cities, with a long-term goal of scaling to 100,000 units by 2030. But the fact that they went driverless with over 100 vehicles this week is why it’s a signal, because what we’re seeing here is, and I’ll, I’ll be brief and then I’ll turn it back to you, CaoCao is executing a highly defensible robotaxi strategy by collapsing software, cloud ba- cloud-based remote operations, and hardware manufacturing into a single vertically integrated stack backed by its OEM parent, Geely. And Geely is important because, as folks may know, Geely is the one that produces what vehicle? What vehicle is it, Grayson?

Grayson Brulte: The Ojai

Rob Grant: The Ojai, the RT6 as it’s called everywhere else, but Americanized here called the Ojai. So Geely is, is– it’s very interesting because they have the expertise in making vehicles, or at least shells, as Waymo was saying they are and shipping them over here, vehicle shells purpose-built for robotaxis. Now it’s got its own purpose-built robotaxi. It’s got its own current TNC-like Serveice Uber, Lyft-like Serveice already in play, and now it’s continuing to develop its L4. So this is a vertically integrated company that we haven’t heard much about here in the United States for CaoCao. Now we’ve heard about it for Waymo, but it is that mix that makes it such an interesting signal because moving to driverless operations with 100 vehicles, That’s small In some sense, but that is a big step for This company

Geely’s Manufacturing Advantage and the Ojai Learning Curve

Grayson Brulte: It’s a huge step and there’s no Uber platform risk. So, so there’s that aspect to it. The fact that they’re targeting 100,000 vehicles by 2030, that’s only basically all practical purposes, three years away, and you say, “Oh, it’s another big number.” They’re owned by Geely. We have reports now from the Port of Los Angeles, 3,200 Geelys are imported for Waymo. Geely has the ability to manufacture these vehicles. One, whether or not they hit that, that, that stated public target or whatever, I’m not gonna comment on that, but they have the manufacturing capabilities. Then if you look at the BOM cost, sub $35,000. You and I just did a report for a client where we estimated the cost of the Ojai, which proprietary to that client, I’ll just tease the audience, the BOM costs are more than double for the Ojai for Waymo. And if you look at the, the cost that we did for another client, for the, the Zoox BOM cost, I’ll just give you a little hint. It’s almost, it’s a little bit higher than that. So, if you’re looking at sub 35,000, v- vertical integration owned by a world-class manufacturer, have an ability to distribute the app, distribute rider demand, oh, boy. So now they’re gonna go global as we, as we know from that what they’ve stated. Now, once they go global, does this turn into a three-way race globally for the Chinese between Baidu Apollo Go, WeRide, and now CaoCao? We were early to CaoCao. OMEGA uncovered it. We, we put it in The index and everybody’s like, “Whoa, whoa, whoa, what’s that Well, We were there first. Perhaps there, perhaps this is another sign of the autonomous Belt and Road Initiative taking coming together

Rob Grant: I think it is. I think it is. And, and what to Me is really impressive that, separates CaoCao from Baidu and WeRide is the manufacturing. Geely, it, it is already producing vehicles that are designed for autonomous vehicles, so it is, it is an experienced manufacturer. the RT6 has been used by others. It’s been used by, I believe, Baidu in some of their deployments. and so being that you’re probably most advanced manufacturer for robotaxis, both those that are, Made in a traditional vehicle sense and those that are purpose-built really Is a strategic asset. And we’ve talked about this when we’ve talked about some of Waymo’s concerns, which is they don’t have the ability to manufacture their own vehicles, so fleet supply is always going to be a potential issue for them. And I certainly believe it’s an issue for them in the next 20– 12 to 24 months, right? Because their technology seems to be ready for scale, but the vehicle supply is something that lags behind for them. And you can tell others are thinking about vehicle supply. We just talked about the Uber-Lucid-Nuro partnership, right? Uber, the reason Lucid’s in that is because they are also concerned about vehicle supply going forward. And here you have a major Chinese OEM who already has manufacturing history, who can produce at scale, saying, Not only can I do that for other groups, but guess what? I’ve got my own internal group.” And when we just talked about Uber and prioritization, gosh, is it really that hard to draw the line when Geely is cranking out vehicles at scale, whose vehicles are they gonna prioritize? Is it gonna be Waymo’s and Ojai’s, or is it gonna be vehicles for CaoCao? So, I think that’s why this is a big signal is because this is kind of, I think, an under-the-radar Chinese competitor. Yes, it doesn’t have the scale that WeRide, Baidu, and Pony do, and, and kudos to them, those three groups, for having achieved a, a good degree of scale. and that’s why it’s reflected in our Robotaxi Index is they’re, they’re ahead of CaoCao right now. But over the long run, when vehicle and fleet supply really is a bottleneck, as it’s becoming for some of the American companies in this space, CaoCao will not have that issue. And so that I think will see them accelerate up our Robotaxi Index and become more of a well-known household name, Both in China, throughout Southeast Asia, the Middle East, and, and potentially Europe

Grayson Brulte: I think you’re right there, and OMEGA goes On to crunching the numbers, that she estimates that their BOM cost can get as low as 28,000. And that’s incredible, which you, and you raised a good point. So, okay, you’re Geely, you got CaoCao you’re, you’re global, you have this grand ambition. Do you do vehicles for Waymo or do you do your own vehicles? Well, it doesn’t take a rocket scientist to figure out, hmm, where you’re going to go, which then raises the question, was the Ohi for Waymo just an interim vehicle to get, to, to get them to Hyundai, which then I believe eventually get them to Toyota? So perhaps the Ohi was merely just a fill in the gap to get them to where they’re ultimately gonna go, ’cause they saw this Coming

Rob Grant: Yeah. And I, and I think, you know, from the, from the Waymo perspective that’s true, and then from Geely, it’s a learning vehicle, right? Hey, I learn all about the, tooling, the special design processes, the the amount of wiring, the weight, the, the balance how you ensure, you know, different hardware can be put in different places if you need to move it, right? Depending on the form factor or, or depending on how hardware changes. Hopefully, you know, I think everyone expects the hardware part of this to get smaller over time, right? So they they design a vehicle one way and then learn from it and say, “Hey, is there a way that we can make that more flexible in the future?” So yes, in, in some sense they are a, a, a foundry for Waymo for now. I don’t think either Scaling Or I think that’s going to be where Waymo gets the Bulk of its vehicle fleet five years from now. But it’s not that, It, it’s not that Geely Got suckered into this deal either, right? They’re learning a lot because they’re planning on building their own fleet at enormous scale, and this provides them both a source of revenue but a tremendous amount of learnings about not only how you build a vehicle, but the, maybe What you need to do to the factory floor to build that vehicle a certain way. What’s the production capacity? What are some of the specialized tooling? Things of that nature. and So they get a ton of learning out of that as well.

Grayson Brulte: If you’re listening to this and there’s a friend of Rob and I’s that listens and takes notes, and this gentleman, you know who you are, won’t say your name for privacy purposes, hit the rewind button ’cause Rob hit the nail on the head that has not been talked about in any media outlet until today when he hit the nail on the head. Tooling. That is the key to all of this. Geely got paid to update the tooling for robotaxis. Geely got paid to learn how to build a robotaxi. Yes, if you wanna call it a shell, you call it a shell. They got paid. They learned how to remove the electronics and whatever thing you wanna do to, with the connected car thing here in the United States. They got paid to do all that. And now they’re saying, “Okay, we’re going out on our own.” And now it’s like, buckle up. They got paid to learn and now they’re gonna compete. That is the key finding there

Rob Grant: 100%. It’s, it’s such a smart move, right? and people forget that that they got a tremendous amount out of this and got paid to do it by an American company. it’s, it’s so strategic and so smart. And so, you know look, CaoCao is executing, you know, and Geely is executing a genuine vertical integration strategy. But because it already has this human-based ride-hailing fleet as well, They can do the mixed fleet model as well for a while, right? So like, you know, Uber’s out there saying you need mixed fleets because you can’t handle everything in every situation and, and all sorts of arguments that they’re making that we covered way back in May, well before everybody else. they also get the benefit of being able to, to make that transition a little bit smoother in the cities. and, and in China, yes, they’re developing national standards, but it’s still very much a, a city-based relationship and, and permitting structure. And so being able to switch between the two platforms for a period of time, I think is gonna adhere to their benefit. And it goes, like I said, I’ll beat the dead horse. It goes back to the Serve thing. Like, Serve didn’t have its own platform, and it just got burned by Uber. Here, CaoCao already has its own platform and it will be able to use the learnings from that. It can use the, the demand hotspots and understand where they might want to be able to, to, to situate their fleet to Serve their robotaxi fleet to Serve the highest margin but maybe easiest routes or more consistent routes, right? They, they have all this knowledge, at least in China, and now what you will see them do, as you’re seeing Baidu and WeRide do, is start to learn those patterns, start to learn those consumer behaviors and build that consumer relationship in markets outside of China. Not because they have to, but because their success in China allows them to. And that’s, that’s really a source of strength for all these Chinese Operators right now.

Grayson Brulte: It’s the strength is manufacturing, and they’re ahead on it. And to the team at Geely, we know you listen. Rob and I would love to come do a field report at the factory and see these things being built, ’cause you’re doing a great job building. I mean, this is, OMEGA, when we asked her for the signals, came back with a prediction around this, and I wanna read you this prediction that OMEGA made. “OMEGA believes that CaoCao will expand its driverless robotaxi fleet to at least 500 vehicles across multiple Hangzhou zones and announce a second Chinese city pilot by the end of 2027. But human-driven vehicles will constitute over 90% of total dispatched trips network-wide.” OMEGA’s really diving into this data. That is a good prediction. I’ll go on the record and say I agree with OMEGA on That one

Rob Grant: I think that’s great. I, I, I do think it is a prediction that is both grounded in fact and a realization of all of the strengths that we just talked about from CaoCao, right? It recognizes that the, the human-driven vehicles remain a large part of their dispatched fleet, but it also recognizes that there will be growth across Hangzhou and then additional cities because the ability to manufacture vehicles And put them on the ground is not constrained here. And I think, i- if, if we see these numbers, and I believe we are more likely than not to see these numbers that’s really going to set CaoCao up For, I think, some incredible growth between 2028 and 2030

Grayson Brulte: That’s the strength. And now let’s go on to the Risks here. I’m gonna uncover some good risks. Risk one Mass production slips beyond 2027 due to regulatory approval delays for L4 driverless operations in Chinese cities. You can never forget the regulatory environment no matter where you are. Let, let’s call a, a spade a spade. But especially in China, that’s purely based on public statements from the past and incidents that we’ve seen happen on the mainland. So that is a good risk

Regulatory and Scale Risks for CaoCao

Rob Grant: 100%. And I think look, the Chinese officials in, in– You know, we will admit there’s not always the greatest transparency as to why these decisions are made or some of the incidents that may prompt some of these decisions, and we hope that that transparency increases. I think it will be forced to increase, particularly as these Chinese operators operate outside of China. But within China a little bit more opaque to Say it kindly, about what is prompting some of these decisions. That being said, they have not been afraid to act in a way that I think would scare the living pants off of American developers, right? They, they have been in instances, as we know, as, as, as, you know, earlier this year in March, Where China said, “Hey, I don’t– I know the localities you get a lot of say in this,” but the federal government said, “No new permits,” after An incident with a c- a couple of hundred vehicles stalling for Baidu, right? They said, “I don’t care who you are. No more new permits.” Right? And we’ve seen them say in other cities, “Guess what? This trial, over, done With. We didn’t like what happened there. Boom. I don’t care if we said it was gonna be a 24-month trial. It’s done after six months because we didn’t like it.” and so it’s always a potential that an incident, whether created by CaoCao or somebody else, puts a delay up from the regulatory end. And I will say, what we’re also starting to see increasingly in China is the local governments really try to balance the worry about worker displacement with growing autonomous systems, particularly in the robotaxi end. And so, this is where I do think having their– CaoCao’s ride-hailing Serveice human-based ride-hailing Serveice is going to be advantage to them because they will be able to say, “Hey, w-we, we can balance that mix. It’s not a hard transition,” right? It will be a softer transition.” and I, I get it. That’s, that’s a point that, that Uber has made, and, and it’s not without a, a certain level of validity to it. but I also don’t think it should be the reason that we slow down development of autonomous vehicles either. So I think they have an ability, I think, on the question of worker displacement, to answer that question, to allow them to continue to grow, as OMEGA even made in its prediction. But they do have to be worried that something out of their control, one of their competitors, a smaller name that we don’t even cover or haven’t raised yet creates a situation Where China, again says, “All right, we’re hitting pause.”

Grayson Brulte: Yeah. Th- th- those are real risks ’cause we have seen China, the Chinese government hit pause. When you said living, I thought you were going into an In Living Color moment, you’re gonna raise Fire Marshal Bill, the Jim Carrey character. I mean, absolutely br- brilliant. that’s a great show back, I think it was ’80s or ’90s, but I, I digress there. But a really great coloring And commentary There, especially on the regulatory Front

Rob Grant: Jennifer Lopez was on that show, In Living Color. She was a dancer. That’s how she started

Grayson Brulte: No, she wasn’t a dancer. She was the fly girl. That was the technical definition. It was a fl-

Rob Grant: The Fly Girl. Sorry. Yes, Fly Girl. Yes, Hey, man, she’s just Jenny from the block. That’s how I know her

Grayson Brulte: Oh, Jenny from the Block’s right. And the Wayans brothers were on there. I mean, That was- there was so much g- great programming on there. The thing about that, before I get to the next one, that was back when Fox pushed the envelope for, for, for, for mainstream TV. The, The Simpsons were pushing the envelope, and In Living Color was pushing the envelope. I mean, this- that was just great commentary. We grew up with some really great stuff. But that’s TV. And then if you wanna watch TV, you can follow the Paramount W- Warner Brothers fight with the state of California, and you can see where things are going. That’s a different show. Our next risk: 100,000 unit volume target will not be achieved by 2030, preventing BOM scale down to the sub $35,000 level. That is possible, ’cause again, it goes back to the risk that you’ve uncovered with the Chinese Government

Rob Grant: For sure. And look, I mean, I think we all understand that scale certainly affects unit economics, right? we see it in basically anything that, that you can look around your house and see, right? I- if you have a specialized computer, it’s gonna cost more. You have a specialized car, it’s gonna cost more. You know, specialized setup for podcasting like I have, right? It’s it’s gonna cost more. And so a lot of the Projections about the extreme kind of value in producing these Vehicles at a sub 35,000 BOM come with scale. and now I do think That scale will come by 2030, even if there’s a slight delay. That being said, there could be a longer delay. You know, and that could be something that’s not even regulatory, right? It could be something in the supply chain. It could be something as a result of geopolitics and tensions in the region and chips and all that kind of stuff. So it’s always, it’s always fair to say, you know, if you’re planning on a unit economics of this price based upon that scale, you gotta worry about both what goes into the economics of that unit in terms of the supply chain and everything like that, but you also have to worry about the things that might affect scale As well. And in this case, regulatory is a big potential concern for Scale

Grayson Brulte: The supply chain is always a Concern. What was it? Three months ago, four months ago, OMEGA uncovered, again, before it was covered anywhere, all the supply chain issues in the humanoid supply chain. OMEGA uncovered that. We get those reports to our clients, and they thank us for it ’cause it was so far ahead and she was so accurate on it. That’s the, that’s the thing about this show and the, the algorithm we wrote is, is being ahead. And for the audience that’s wondering, we only use publicly available data. Everything is licensed or publicly available. There is no MNPI. Point blank, only publicly available data. And we pass compliance, so if you’re a large institutional fund and you wanna use this, reach out. We go- we, we pass compliance. And let’s go to the f- to the final risk here. Baidu Apollo Go and Pony AI entrench Tier 1 city relationships before CaoCao scales, foreclosing first mover permit advantages. We did the whole permit thing last week, and then OMEGA’s saying, “Here they come.” Well, that’s a good Risk

Rob Grant: It is a good risk, particularly because we’re not seeing in every major city in China all three or four major, or five major Chinese operators operating in that city. And so, you know, just for folks, the five ones that come to my head are these are, these are robotaxi operators, not Just the licensors, so this excludes Momenta. We’re talking Pony.ai, WeRide, Baidu, Caocao, and Didi ’cause they have their own autonomous program going on. we’re not seeing a tremendous amount of places where three or four of them are operating in the same city. and so what this is saying is, you know, does China basically s- say, “Hey, you know, for Shanghai, it’s this company. For Guangzhou, it’s this company. For Hangzhou, it’s this company.” kind of seeing a little bit of that in the States right now, right? Up, you know, Las Vegas up until very recently basically a Zoox, City even though Motional was there, but small scale with Uber. you know, we’re seeing a lot of places that are Waymo only right now. and so will that play into account here? Will WeRide, if they’re operating in, in one of these major mega cities, and they’re there a year or two before CaoCao, will that consumer demand flow to the company that they know? and we saw this play out with Uber and Lyft, right? Some of the dynamics between market share in those cities haven’t changed drastically from where they were back in 2017 or 2015 when those companies first got there, right? you have some really unique cities like Austin that is almost 50/50, but it’s been almost 50/50 for a while. But in a lot of these other cities, Uber came in first, took 100% of the market share, and then after Lyft came in, retained somewhere between 70% and 80% of the market share, and that really hasn’t shifted all that much in the past Decade.

Grayson Brulte: You see some changes on the fringe where you have apps that compare prices. I know against, against the terms of Serveice Uber and Lyft. People still build the apps or you get the, I guess, the interesting person like myself that compares them. And I don’t care what they say on the record, there is massive price differential between Uber and Lyft in certain markets. It, it, it’s pretty amazing some of those price differences. And you just open both apps and, and you can see it. And so that’s– It’s really good to point that out, and we’ll have to see how that evolves, which brings us to OMEGA’s take. OMEGA says, “CowCow is a vertically integrated autonomous fleet operator in structural formation, not yet in commercial execution. The non-consensus signal is that CaoCao’s durable moat is the vertical stack. Geely OEM supply chain, battery swap infrastructure, 160 city demand data, and indirect RAS architecture, and that stack becomes defensible precisely because competitors cannot replicate it at the BOM cost and CowCow is targeting.” BOM cost. How many calls do you and I get on with large institutions and within the first five minutes, “What would you estimate the BOM cost to be? What would you estimate the BOM cost to be?” That is the question that you and I get more from all of our institutional clients than probably any other question we get

Rob Grant: 100%. 100%. And I’m always worried I’m gonna take that call in an and they’re gonna– somebody at TSA is gonna hear me talk about bomb costs and you’ll never see me again. So if I’m not answering your call, clients, this means I’m at the airport and I do not wanna talk about bomb Costs In the middle of SFO

Grayson Brulte: I love it. It’s like, it goes back to National Lampoon’s. Let’s go on the Damn Damn Tour. What do you wanna know? It’s the Bomb Bomb Course. Sir, what’d you say? Next thing you know, you’re calling me to bail you out. We don’t Want that Situation

Rob Grant: No, I do not want that situation

Grayson Brulte: No, that’d be a, that’d be a, we’d be in a lot of trouble. Which, Which brings us to signal three, which is aviation. It’s not about bombs, it’s about Boeing offloading their autonomy assets. Wisk is now part of Archer Aviation, along with a couple other companies. What do we know of this move of Boeing saying, “Nah we’re not gonna focus and develop This anymore”?

Boeing Offloads Wisk, Insitu, and SkyGrid to Archer Aviation

Rob Grant: Yeah, I I woke up on Monday, which was my 24th wedding anniversary, by the way and I was surprised by this move. I was like, “Wow.” I mean, obviously these things take time, so it’s been in, in discussion, but still surprising to me because I really, I really thought there was something special brewing at Wisk, and obviously Archer does too. But let’s, let’s give people a broader sense of what happened. So Archer signed– Archer Aviation and Boeing signed a definitive agreement on August 10th, 2026. where Archer acquires Boeing subsidiaries Wisk Aero, Insitu, and SkyGrid In an all-stock transaction expected to close by late 2026. In this deal, Boeing receives a Class A equity stake of up to 19.75% warrants a commitment to invest up to 55 million in an upcoming Archer funding round, and a cross-licensing technology agreement. And Insitu is really something that was part Of what made this deal really interesting to me because it it, it shows that the deal was not just about the potential in Wisk and SkyGrid, but also the need for Archer to gain some immediate revenue, because Insitu is a profitable defense drone business that was under the Boeing umbrella that generates over $200 million in annual revenue across 35 countries. Now, Wisk and Aero, they still bring a lot to Archer. They bring nearly two million combined historical fligh- flight hours to merge with Archer, and it, this is built on Wisk’s self-piloting software and SkyGrid’s airspace traffic management, and they’re all gonna build this into Archer’s proprietary ZEE or Z artificial intelligence foundation model. and so this really is a decisive consolidation in the advanced air mobility space, and it transforms, I believe, Archer from a pre-revenue air taxi developer into a vertically integrated civilian and defense autonomous aviation Platform

Grayson Brulte: They had to make a deal. There, I said it. They, Ar- Ar- Archer had to do a deal because you see the deals that, that Joby’s doing. Joby bought Blade, or acquired Blade. And then, and then if you look at the the economics of Blade and when they were publicly traded, it was a healthcare business. They were delivering blood and human organs and all sorts of stuff. That’s where it got going, but then Joby got revenue. Ar- Archer needed the revenue play. Y- you and I have had the opportunity where Wisk has hosted us at their headquarters, and we sat in, in the, in the simulator, and we, we put the goggles on and experienced what it would be, and we got to see the prototypes that they were building on. So thank you team Wisk for, for showing that to Rob and I. It’s going to be interesting to see how this all comes together, because when we were there meeting with Wisk, Wisk talked all about Boeing’s manufacturing capabilities, which are world-renowned. Yes, you can’t deliver Air Force One on time, but you do have world-class manufacturing. So it’s gonna be interesting to see where it goes, and then I think the other underlying thing that’s not discussed about, which you highlighted, is the defense merging with eVTOL. And then all suddenly that’s saying everybody wants to be Anduril. That’s what that says to me. Everybody wants to be their own version of Anduril, and as you And I’ve seen in all the conversations we’ve had, all the Data OMEGAs done, all the podcasts we’ve done, defense tech is hot. And the interesting thing that we’ve seen in our data, it only appeals to a certain segment of the market, but investors are going into it. So it’ll be really interesting to see how this goes, and as Archer becomes a larger business. let’s not forget, l- Archer now owns airports in the Los Angeles area. And so let’s see how they vertically integrate this and, and, and, and what it looks like and if there is any blowback from the local communities where they operate.

Rob Grant: Yeah. But I, I think you really did hit the nail on the head, right? And and, and the signal is, look, Archer needed revenue, right? It needed to get out of this pre-revenue purgatory, and it, it, it basically bought its way out of it, but not with cash, with equity, right? and, and this allows Boeing to kind of remove the cash burn that it was putting into Wisk and SkyGrid and take an, an, a kind of pure optionality play, still maintaining its ability to benefit from autonomy long run, but really just not funding it, right? and, you know, I think the the defense angle really is the angle to look at this from. it is it is the only, both in Situ is the only near-term profitable revenue stream in the deal. But as we talked about, it, it’s entrenched in DOD and foreign military sales, right? Across 35 countries. And so I think for institutional investors and, and those interested in this space, this transaction demonstrates that aerospace prime contractors are shifting from direct internal development toward equity-backed platform partnerships to manage these autonomous transition costs. And those that lack the pure play autonomous kind of air mobility developers like Archer, that lack the immediate defense capabilities or entree into c- defense sales they’re facing a, stark choice about how you get into that market because N- Nuro and others are, are kind of eating away at that market quickly. And so you need a, you need to kind of leverage your way into those conversations, and that’s exactly what I think Archer is trying to do here. And, you know, look, I, I, I still think this wasn’t necessarily like a surrender by Boeing. This doesn’t, this doesn’t scream to me Boeing didn’t believe in what Wisk was doing. I think Boeing still fundamentally believes in what is going on here. It’s not an ideological surrender, so to speak. It’s a pragmatic balance sheet triage, right? I mean, Boeing is retaining the optionality on autonomy without funding the cash burn. And, you know, for a company like Boeing, that’s a smart move. You know, they, they are not necessarily building their future based upon where their past has been on autonomy, but yet they want to be able to benefit from it. and this allows them their 20% stake, and then the cross-licensing agreement that they, they retain allows them to play a part in that growth, but without taking on the direct risk of a cash burn Of building up a new kind of sector within the Industry.

OMEGA’s Take: Boeing’s Strategic Balance Sheet Triage

Grayson Brulte: Yeah, and if you l- look back in history, it also went through 2023 Litigation over trade secrets between Archer and Wisk. That’s now gone. And if you look back similar, you had the Waymo-Uber trade secret litigation. That got resolved, so that there’s precedent there of where this is going. But then if you remove this and you put on, you know, our wonky hats, I look at this and says, “Okay, by moving the autonomy investments off balance sheet, by still retaining up to 19.75%, I eliminated one, maybe two major headaches going forward.” You remove the, the, the headache and the risk of the pilots unions and, a- and the stewardess unions saying, “Oh, you’re funding autonomy. You wanna push us out of business.” “No, we don’t own that business anymore. We just build aircraft.” It is a very clever move because as we’ve seen, the, the, that the airline unions can get a little hasty at times. And by saying, “Oh, we’re not doing this, we’re, we’re, we’re– it’s a necessary,” that’s interesting. But then the other side of me says, Airbus with their A3 lab, and they keep investing in it, I worry that Airbus could get so far ahead Boeing can never catch up. So that’s the risk. I think that there’s, there’s a lot of moving parts here. In reading all the s- all the documents that OMEGA hasn’t covered for us, all the, the institutional knowledge that we’ve had, I’m gonna go on the record here and say I think there’s something a lot more going on below the scenes that’s been, that’s been publicly reported here

Rob Grant: Yeah, I, I, I, I, I love the fact that you brought up those kind of dual-sided nature of, of dealing with the potential union issue, but also you know, what it might mean vis-a-vis their largest competitor, right? And B- Boeing and Airbus are, are literally the only two players in. the market that they participate in. virtually the only two. sorry, Boom Supersonic and others. maybe that will change. and I wish it does. I wish you good luck. but yeah, I, I think those are really cogent points to build up. And I do feel like this is not the last move in this space. I think this is the beginning of a series of moves as we saw Joby make some moves. We’ve seen now Archer. these folks are getting closer to a realization of maybe the civilian side of things is gonna take longer than the defense side of things. and So getting access to that defense market before you’re closed out by some of The growing interest by both the primes and, and the new primes, or the neo-primes, I guess is probably the right term for it. Moves have to be made in, in relatively short order because that, that market is moving fast because it, it is being driven by external events that are requiring it to move fast. And as tensions continue to ramp up in Ukraine, in the Strait of Hormuz, in places maybe off the coast of mainland China we’re seeing a, a pace of which autonomous advancement in defense applications is just outpacing, in some senses, in many senses, a lot of what we’re seeing out of the autonomy world, even though I mean, the, the, like, the trucking autonomy and the robotaxi autonomy, even though those continue to advance as well, just the external Forces are requiring an even faster pace from the defense world right Now

Grayson Brulte: Yep. And you’re, you’re right about the civilian. You, you have the FAA and the multiple certifications you have to go through, which I believe that over time these companies will get it. But then you have the civilian. Does an individual want to go in this vehicle type? You have that, and then you have the latest emerging all United Airlines Scott Kirby, CEO of United, has come out and publicly said this on multiple occasions, that they are starting to see their clientele is now shifting to RJ, potential regional jets, to get access to Starlink versus the main lines. And if you’re going to launch all of these EVTOLs, I got news for you. In this day and age, you better have Starlink, because you’re seeing what’s happening with United, and then that’s a big risk for Delta. I know they went with the Ama- the, the Amazon one. But if, if United’s CEO’s coming out and saying that behavior’s changing like this, and I believe it was also Boston Consulting Group came out and they said they saw a change in behavior. on these EVTOLs, if you don’t have Starlink, you got a problem

Rob Grant: Hey, look, I’m part of that trend. I, I literally search for the flights that will have Starlink on it. I will, I will take different flights even if it’s a little bit more expensive or a little bit more inconvenient because of the, the– Just having Starlink on a Flight Is, is just, it’s worth it. That’s all I can say. When your, when your, when your time in that air it’s a valuable amount of time, particularly if you’re doing long-haul travel like I often am, right? Whether that’s six hours, 12 hours, 17 hours on a flight and and Risk in Consistent Serveice hours of it, that’s– that, that that just drives me up the wall. It’s like seven wasted hours. and it, it’s, it’s. Yes, I understand, you know, it’s probably at times better for my mental health, right? But I’m, like many people that are in this cohort, just I wanna get stuff done. I wanna be productive. and while I enjoy watching, you know, various movies ’cause I’m a movie lover on the small screens in the airplanes, I, I’d much rather just be s- getting done my work, right? Getting that, that next spreadsheet out, that next report out learning about, you know, the next frontier model, understanding what an executive order is saying, all That stuff. ‘ That’s the stuff that I’m, I wanna get done in those hours on a plane

Grayson Brulte: It, it’s magical. You, you know this cause you and I communicate all the time, is that when I went to visit Kodiak in the Permian Basin and I went from Denver to Midland, it had Starlink. I was like, “Rob, this is great,” ’cause you and I had to get. We had a deadline for a report we had to get to a client. I got it done with Starlink. It was magical. I can’t tell you how magical this was. And for the record, the Starlink on the United flight was better than the air- Wi-Fi in the Denver International Airport. So just put that into perspective. It was amazing. It’s so amazing that I even went and bought a Starlink Mobile, so I’m connected no matter where I go. And the trend is only gonna continue, where if you don’t have Starlink on a flight, you’re not gonna take it. You’re gonna look for alternatives so you can stay connected, especially as you and I are co-founders of a business and we’ve gotta be on all the time. Starlink is the game changer there. And let’s get to the risks here, ’cause we, we praise Starlink, but we gotta get to the risks on this deal. So OMEGAs uncovered quite a few risks here. First risk here, Archer fails to absorb Wisk autonomous flight program, causing IP and talent attrition that voids Boeing’s cross-licensing value. That is a valid point. Does talent wanna stay? Do they, are they still hungry?

Rob Grant: Yeah. And, and, you know, I haven’t heard directly or anecdotally kind of what the employees got out of this deal. right? Were they– Was there equity exchange for Archer equity? Were the leadership team offered certain incentives to stay based upon, you know, maybe a year requirement or more to stay through the transition? And then there are those folks that like, how seriously is Archer going to integrate the work that they were doing? Or are they gonna say, “Hey, you know, we used to– we use this, and this is the Programs, and this is where I need you to be, so I need you to kind of drop all the research that you’ve been doing in the last five years.” So those are the unknowns that you see play out. Usually takes six to 12 months to see the transition, to see if it takes, to see if the cultures mesh, to see if the IP holds and the advancements can be of an accelerant to the new company. Obviously, Archer still believes that that’s to be the case or they wouldn’t have gone through this deal. I believe That Wisk and Boeing probably understand this as companies that have been through and leaderships that have been through these types of things, that you have to treat the co- the, the employees of, of Wisk and SkyGrid and Situ well in order to get them to stay, ’cause there’s gonna be a lot of angst about a move like this, right? A lot of turmoil. but these are, these are risks that you can’t answer on day one. You can prepare for day one after the announcement, but you really can’t answer them for A good six to 12 months, And we will see what happens with it

Grayson Brulte: Well said. Brings us to the next risk here. Boeing’s 19.75% stake dilutes materially if Archer raises additional equity rounds at distressed valuations eroding Boeing’s recovery value. That risk is real

Rob Grant: That is, and a lot of it depends on the success. Can Archer continue the success of Insitu, right? Is that a acquisition that they can build upon and grow that revenue stream? Is it a, a, a thing that they can build into building more of their autonomous flights and programs into what Insitu is selling to defense folks around the world? And it also just depends on their natural development on the commercial side as well, which has been not just for Archer, but for everybody in that space. Feels like two steps forward, one step back, right? all without really understanding a tremendous amount about consumer demand, as well as all the things that come with the follow-on after you, you maybe get validated for commercial operations, and maybe you get early feedback that consumer demand is there, but then you gotta build all the operational and infrastructure, the same things that we’re seeing on the robotaxi side, the same things that we’re seeing on the trucking side, as well as what we’re seeing on the humanoid side. There is a tremendous amount of work to do that first 90% seems really hard to get through, and then the next 90% is really hard to get through as well. and so, you know, they, they haven’t even encountered that yet. W- what is the capital it’s gonna take to do that? What environment are they gonna be raising capital in? What are the success stories that they’re gonna be able to sell? and so, you know, if, if those things are not going as well or is the market’s not as responsive to them as they are perhaps in the humanoid industry to a little bit of up and down you know, in terms of supply and demand there there’s still the belief that the promise that humanoids will pay off is the belief that the promise of EVTOL and autonomy is still there. And if not, does that make raising money harder and then thus diluting What Boeing has you know, achieved through this Deal?

Grayson Brulte: It’s something to watch, and that’s a, A great segue to the final risk, ’cause the final risk is around concentration. Institute revenue concentration in legacy scanning Eagle contracts creates cliff risk if DOD, sorry, DOW procurement shifts to next generation autonomous platforms from competitors. If you’re relying on one program and the head staff and team says, “Nope, we’re moving on to something else,” that’s a big Risk

Rob Grant: That is a big risk. That is a big risk. And, and, and look, I mean, they know the name Insitu, but now will they know the players, right? is that. Can they build upon that trust? Can they make sure that, that there’s no fracturing of that trust in this transition? and some of that will come down to are they able to retain the talent at Insitu, right? These, these contracts, they are often, right, they’re, they’re laborious to go through. That’s I know the DOW’s doing a good job of trying to make it an easier process, and I think they’re making progress in that. But it is still. A, a defense contract is completely different in nature in many ways from a civilian contract. and a lot of that is built on trust, it is built on longstanding relationships, it’s built on understanding of, of, of the ways in which DOW applications and chain of Command and things of that are done. and you know, the folks at Insitu have been doing it, they’ve been doing it well, but now they’re gonna probably be asked to sell something a little bit different. do they believe in that Do they have faith in that? And vice versa, do they stay? And Does that either erode or continue to build trust going forward?

Grayson Brulte: That’s the question to Watch, and if they hire their own version of Ted Lasso, then that’s something you can believe in. Which brings us to OMEGA’s take. “The August 10th, 2026 Archer Boeing transaction is a single coherent strategic event with three simultaneous effects. Boeing exits operational burn while retaining optionality via equity and cross-licensing. Instu immediately re-anchors Archer’s valuation on defense cash flow rather than EV tall speculation. And the Z platform absor- absorbs- absorbing of Wisk and SkyGrid makes autonomous certification a 2027 plus problem rather than a near term catalyst. The deal is best read as Boeing monetizing s- stranded assets into a liquidity equity stake while Archer acquires the one profitable revenue engine, Instu, that makes the entire package rationale.” That’s well said. I mean, this, this OMEGA impresses me every week. Every day we Actually use it

Rob Grant: Yeah. I mean, it, it is, it is direct, it is coherent, and it is intelligent. And, you know, I wish I could be all three of those things all 24 Hours of the day, but you have yet to achieve that, whereas OMEGA gets It every Day

Grayson Brulte: It is. and OMEGA is here for you We’re opening in. the fall, so, so reach out. And every week, Rob and I are here breaking down the signals in the autonomy economy. And as I said, you’re interested in learning about OMEGA, reach out to Alpha at A-U-T-N-M-Y.ai. You wanna learn what we do for institutional clients, reach out as well, because we’re here for you, and we’ve got our finger on the pulse. The future is bright, the future Thomas, the future is OMEGA. Rob, another great week. I love it. So we had In Living Color, we had Ted Lasso, we had a few music stuff. I mean, this was awesome. Oh, and Jenny From the Block. But so I gotta ask, so next time should we get the white Rolls Royce and, and the Ben Affleck when he wore the fur coat and did the video? I mean, that would make this thing come Full Circle

Rob Grant: So it’ll be good stuff. you Know? maybe we’ll get a little Lifestyles of the Rich and Famous reference in there As Well, you know? So champagne wishes and caviar dreams to all those listeners out there

Grayson Brulte: And on that note, good night