Capital markets have voted. Technology companies are in, and Texas oil and gas companies are out. Thats not necessarily all bad news for Texas, which has been courting companies like Tesla and Amazon to set up shop here, but with mixed results. News that electric automaker Teslas market capitalization has surpassed that of ExxonMobil reflects more than questionable premises about the growth potential of electric cars and the sunsetting of the gasoline engine. It reflects investors hopes and fears for the future. In a world where longstanding lifestyles were abandoned overnight in the shadow of a global pandemic, financial bets on companies proficient in self-transformation and technological innovation seem prudent. ExxonMobils pitch that it has staying power when incumbent oil and gas infrastructure takes years to revamp is simply not resonating with investors.

The sudden love affair with Tesla stock is partly linked to new potential for growth. Since it opened its Shanghai, China giga factory, analysts forecast increasing cash flow for the firm, which in March captured 30 percent of the crowded Chinese electric vehicle market amid depressed demand due to COVID-19. Teslas market capitalization has now surpassed $300 billion, up 175,000 percent since 2010. By contrast, ExxonMobils market capitalization has now fallen to around $185 billion, down from $350 billion a decade ago.

But Teslas attractions go beyond its improving financial outlook. Investors are betting on its expansive innovation potential. Not only has Tesla Energy installed the worlds largest lithium-ion battery to mitigate wind generation intermittency in South Australia, it has provided small-scale, household solutions to reduce the regions frequent brownouts. The company offers a load-balancing system in which solar panels are matched with in-home battery storage and smart inverters to bolster the grid when electricity demand peaks, creating a virtual power plant. Tesla CEO Elon Musk has alluded to the possibility of deploying a similar model with vehicle batteries, allowing Tesla owners to use their cars as backup power sources or even sell their battery storage back to the grid.

Tesla has weighed in on a policy debate in Texas over whether the state should loosen restrictions so electricity distribution companies can own storage to buttress operations, but regulatory disputes over who can own and operate Tesla battery systems in the state are ongoing. Texas, with its weather and other load challenges, would do well to follow Teslas advice to loosen who can own battery systemswhile protecting consumers and competitive markets for local energy generatorsso benefits are shared from the kind of forward-looking innovation the state is well known for.

For investors, Teslas innovation goes beyond cars and energy. It has also developed a giant HEPA filter, installed in Model S and Model X vehicles, which Tesla claims stops 99.97 percent of particles 0.3 micrometers or larger from entering the vehicle. Amid endemic pollution in major cities and growing questions about airborne COVID-19 transmission, its no wonder that Teslas Bioweapon Defense Mode is a hit.

Then there is Californias new Advanced Clean Trucks rule, which requires truck manufacturers to sell an annually increasing percentage of zero-emission trucks in the state over the next two decades. With its light-duty Cybertruck and heavy-duty Semi model due for release in 2021, Tesla is well positioned to supply the new market. The Cybertruck already has over 650,000 pre-orders, and Austin is knee-deep in competition with Tulsa, Okla., to house a new giga-factory for its production. Meanwhile, Teslas vehicle software is growing ever closer to facilitating full, self-driving autonomy.

The point is that Tesla is no longer just a car company. It is a technology company creating products with cross-industrial applications fit to solve some of the societys most pressing challenges. Ditto Amazon, which is an increasingly important bridge between many Americans and essential household supplies. At $1.65 trillion, Amazons capitalization is now 160 times higher than ExxonMobils as the marketplace and logistics company looks to new vertical integration opportunities including autonomous delivery vehicles.

Research and development spending made up 32.5 and 35.8 percent respectively of Teslas and Amazons total operating expenses in 2019, according to Bloomberg News. By contrast, ExxonMobils R&D budget was a paltry 8.7 percent of its operating expenses based on our calculations from Bloomberg data. Unlike its European peers who are actively pivoting to new energy businesses, ExxonMobils admirable R&D in algae biofuel and carbon sequestration has brought neither technology to scale. Rather, ExxonMobils notable technology and process improvement gains focus on the companys here and now oil opportunities in places like West Texas and Guyana, and thereby lack the visionary pizazz and breadth of wider applicability that draw investors to Tesla.

ExxonMobil continues to try to mobilize its base of investors around the idea that the company is well positioned with a strong balance sheet, promising legacy assets and topnotch engineering knowhow to both weather the current oil downturn and meet rebounding oil demand when the economy recovers. But sell-side analysts say current oil prices are too low for ExxonMobil to generate sufficient cash flow to cover its dividends without cutting spending, discouraging bargain hunters from bottom-picking the companys stock.

ExxonMobils plight is a cautionary tale for Texas industry and Houston as the energy capital. Though other companies like Hess, ConocoPhillips and Chevron are garnering some positive investor attention based on cash outlooks, the heady days when Texas shale was lauded as a growth business are fading, at least for now. The solution to investor apathy might not just be cutting costs, but a reemphasis on transformative technological innovations.

Myers Jaffe is author of the forthcoming book Energys Digital Future: Harnessing Innovation for American Resilience and National Security. Schreiber is a summer intern at the Council on Foreign Relations and an undergraduate student at Rice University.

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Opinion: Teslas rise is a message to big oil in Texas its time to transform - Houston Chronicle