Tesla’s stock saw a remarkable surge of 10% following a significant upgrade from Morgan Stanley, which raised its price target for the electric vehicle (EV) giant to $400 per share. This boost represents a remarkable 46% upside from current levels, signaling growing optimism about Tesla’s future prospects.
The Upgrade Catalyst
Morgan Stanley’s upgrade of Tesla was primarily anchored in the company’s impressive artificial intelligence (AI) capabilities, notably its cutting-edge supercomputer known as Dojo. This advanced machine-learning system has caught the attention of analysts, who believe it holds the key to Tesla’s continued success.
AI Driving Tesla’s Growth
One of the standout advantages of Tesla’s AI capabilities is its ability to use its proprietary chips. This strategy not only enhances profit margins but also reduces operating costs by eliminating the need to rely on third-party chip manufacturers such as Nvidia. Currently, Tesla’s AI technology is already integrated into the company’s autopilot features, which adds significant value to the company’s offerings.
Dojo: A Game-Changer
Dojo, Tesla’s ambitious AI project, is at the forefront of the excitement. Morgan Stanley is bullish on its potential, stating that it could potentially add up to a staggering $500 billion to Tesla’s valuation in the long term. CEO Elon Musk has previously revealed plans to invest over $1 billion in Dojo by the end of 2024. This supercomputer is designed to facilitate AI machine learning and computer vision training for Tesla’s vehicles and emerging robotics endeavors.
Expanding Beyond the Auto Industry
Morgan Stanley’s highly bullish analyst, Adam Jonas, believes that Dojo’s applications extend far beyond the automotive sector. He envisions Dojo’s ability to process visual data laying the foundation for vision-based AI models in areas such as robotics, healthcare, and security. According to Jonas, “third-party Dojo services can offer investors the next leg of Tesla’s growth story.”
Recurring Revenue on the Horizon
In addition to Dojo, Morgan Stanley anticipates that Tesla will generate significant recurring revenue, projecting $2,160 per month from vehicle owners by 2030. This income is expected to come from services enabled by Dojo and subscription-based software in Tesla’s vehicles, including self-driving systems, vehicle charging services, maintenance, software upgrades, content, and more.
Tesla’s Dual Identity
Investors have long debated whether Tesla should be categorized as an auto company or a tech company. Morgan Stanley’s viewpoint is that Tesla is both, with the biggest value driver in the future being software and services revenue. This assertion draws parallels to Amazon Web Services (AWS), which accounts for a substantial portion of Amazon’s total earnings.
Risks and Competition
While Morgan Stanley is optimistic about Tesla’s AI ventures, it’s essential to note that other firms like Deutsche Bank have pointed out potential risks, including production shutdowns and inventory discounts in the third quarter. Competition in the electric vehicle market remains fierce, but Tesla’s AI prowess and its vision for future growth continue to attract significant attention from investors and analysts alike.
Conclusion
Tesla’s remarkable stock surge, fueled by Morgan Stanley’s bullish upgrade and its faith in Tesla’s AI capabilities, has sparked excitement in the market. As Tesla positions itself as a leader in electric vehicles and AI technology, the company’s future appears promising, offering a compelling investment opportunity for those with a long-term perspective. Tesla’s journey from an automaker to a tech-driven powerhouse is a testament to the transformative potential of AI in the automotive industry and beyond.
