In a remarkable development, Tesla’s stock surged by 6% on Monday, following an upbeat assessment by Morgan Stanley. The renowned investment bank asserted that Tesla’s cutting-edge Dojo supercomputer has the potential to propel the electric car manufacturer’s market value by nearly $600 billion. This surge would be driven by the acceleration of Tesla’s foray into robotaxis and software services.
Already holding the distinction of being the world’s most valuable automaker, Tesla initiated production of the Dojo supercomputer in July. The primary purpose of this supercomputer is to train artificial intelligence (AI) models essential for self-driving cars. The company has committed to investing over $1 billion in Dojo over the next year.
Morgan Stanley’s analysts, led by Adam Jonas, conveyed in a note on Sunday that Dojo could unlock new addressable markets that extend far beyond the traditional business model of selling vehicles at fixed prices. They stated, “If Dojo can help make cars ‘see’ and ‘react,’ what other markets could open up? Think of any device at the edge with a camera that makes real-time decisions based on its visual field.”
In light of this bullish outlook, the Wall Street brokerage upgraded Tesla’s stock rating from “equal-weight” to “overweight.” Furthermore, they replaced Ferrari’s U.S.-listed shares with Tesla as their “top pick.”
Morgan Stanley substantially increased its 12-18 month target for Tesla’s shares by a remarkable 60%, setting it at $400, which is the highest among all Wall Street brokerages, according to LSEG data. This revised target could result in Tesla attaining a market capitalization of approximately $1.39 trillion, marking a substantial 76% increase from Tesla’s current market value of approximately $789 billion, based on the stock’s closing price of $248.5 on Friday. On Monday, Tesla’s stock experienced a 5.7% uptick, reaching $262.70.
Adam Jonas anticipates that Dojo will deliver the most significant value in the realm of software and services. The bank revised its revenue projection for Tesla’s network services business, foreseeing it reaching $335 billion by 2040, up from the previous estimate of $157 billion. Jonas expects this segment to constitute over 60% of Tesla’s core earnings by 2040, nearly doubling its contribution from 2030.
It’s important to note that Tesla’s 12-month forward price-to-earnings ratio currently stands at 57.9, significantly outperforming traditional automakers such as Ford with a ratio of 6.31 and General Motors at 4.56, according to LSEG data. This underscores the market’s high expectations for Tesla’s continued growth and innovation in the electric vehicle and AI sectors.
