Concerns About Uber

I wouldn’t classify the ride-sharing tech company Uber (UBER) as a tier 1 tech company.

That means they are more susceptible to the twists and turns of the variables they cannot control.

The market got slammed this morning, and there was a general risk-off move that hit tech hard.

The issue I have with non-AI stocks is that they usually don’t rebound as fast nor furiously as tech stocks that fetch the AI premium.

As I write this, Uber is going through an existential crisis with Tesla threatening their business model.

Tesla’s robo taxi business is essentially Uber without the driver, and they produce their own car.

Talking about the emperor with no clothes on!

As the market begins to stumble a little, I took this chance to execute a short position in Uber shares.

In the short-term, I see several vulnerabilities in its business model, with its latest earnings report being a red flag I cannot ignore. 

Uber’s company’s total gross bookings of $40.97 billion fell short of the $41.25 billion forecast. This miss in bookings—a critical metric encompassing ride-hailing, food delivery, and freight revenue—signaled potential demand weakness.

Economic uncertainty and high inflation continue to pressure consumer spending, particularly in the ride-hailing sector.

There’s a growing shift toward more cost-effective transportation options, and people could end up riding a bicycle everywhere, considering how expensive grass-fed steaks are at the store. 

With an uncertain economy weighing on commuters, demand for premium ride-hailing services may soften, impacting Uber’s ability to raise fares without losing customers.

Uber’s business model, heavily reliant on human drivers, faces existential risks from emerging technologies, particularly autonomous vehicles.

Tesla’s Full Self-Driving (FSD) technology offers a superior experience, potentially disrupting Uber’s core ride-hailing business.

If Tesla scales autonomous ride-sharing faster than Uber, the company could face significant margin pressure, as it would need to invest heavily to compete or partner with autonomous vehicle providers.

The company’s “upfront pricing” strategy, which uses AI to optimize fares and driver pay, has increased its take rate to around 42% by late 2024, up from 32% in 2022.

While this has driven profitability, it risks alienating drivers by reducing their earnings, potentially leading to higher turnover or reduced driver availability.

This could impair service quality and customer satisfaction, further pressuring bookings. Additionally, Uber’s freight segment, with only 2% revenue growth in Q3 2024, remains a drag on overall performance, and the delivery segment (Uber Eats) faces intense competition from DoorDash and others, limiting margin expansion.

I cannot simply ignore the disappointing bookings growth, macroeconomic pressures, competitive threats from autonomous vehicles, and a stretched valuation. These are all no bueno.

I’m not saying that shares of Uber are headed off a cliff, but I really doubt they are going to report great earnings, and it’s time to position myself for that.

Shares of Uber are up over 53% in 2025, and for a non-AI stock, that’s quite miraculous.

I don’t see it.

Uber doesn’t deserve that type of follow-through in its stock at this late stage of the bull market cycle.

I don’t believe that AI will result in the tide lifting all boats, and Uber is due for a nice pullback.