Tesla, the electric car manufacturer led by CEO Elon Musk, experienced a significant boost in its stock price on Monday. The surge came after Morgan Stanley upgraded the company’s outlook and praised its potential in the field of Artificial Intelligence (AI).
Morgan Stanley analysts argue that Tesla should be seen as more than just an electric car maker – it should be considered a tech company. The firm’s upgraded price target of $400 per share, up from $250 previously, reflects its belief in Tesla’s AI capabilities, particularly its Dojo supercomputer project and custom silicon. Dojo has the potential to add up to $500 billion to the company’s overall value in the long term.
Dojo is a crucial component of Tesla’s AI strategy. Tesla plans to invest over $1 billion in Dojo by the end of 2024. This supercomputer is being developed to facilitate AI machine learning and computer vision training for Tesla’s vehicles and emerging robotics initiatives. By utilizing video clips and data from customer vehicles, Tesla aims to improve its current software and develop new features.
In addition to the automotive sector, Tesla sees great potential for Dojo’s applications in other industries. Highly bullish analyst Adam Jonas states that once Tesla makes progress in autonomy and software, third-party Dojo services could become the next growth story for the company. Dojo’s ability to process visual data lays the foundation for vision-based AI models in areas such as robotics, healthcare, and security.
Morgan Stanley predicts that by 2030, Tesla could generate $2,160 in recurring revenue per month from its vehicle owners. This revenue would come from services enabled by Dojo and subscription software, including self-driving systems, vehicle charging services, maintenance, software upgrades, and future content.
Elon Musk had previously promised that a Tesla vehicle would complete a self-driving cross-country demonstration without any human intervention by the end of 2017. However, Tesla vehicles still only offer advanced driver assistance systems, requiring human input for steering or braking. While Tesla has made significant progress in autonomous driving, it still faces challenges in achieving full autonomy.
Despite the positive outlook on Tesla, Deutsche Bank highlighted some potential risks for the company in its third quarter. These risks include planned summer production shutdowns, which may impact both production and delivery volumes, as well as discounts on inventories. Limited positive cost offsets during this period may also affect the company’s performance.
To mitigate potential challenges, Tesla recently slashed the prices of its electric vehicles and its premium driver assistance system, known as Full Self-Driving (FSD). These price cuts, along with other factors, had previously caused a decline in Tesla’s share price. However, after the release of the optimistic Morgan Stanley note, Tesla’s shares experienced a sharp spike, surpassing $272.
The upgraded outlook from Morgan Stanley and the emphasis on Tesla’s AI capabilities have instilled confidence in the market. Tesla’s investments in the Dojo supercomputer and its AI-driven initiatives have the potential to revolutionize not only the automotive industry but several others as well. While risks and challenges exist, Tesla’s stock price resurgence demonstrates the market’s optimism regarding the company’s future.
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