Tesla Stock Soars 7% as Morgan Stanley Raises Price Target to New Heights

Tesla Stock Surges Amid Optimism on AI Technology

Overview

Tesla‘s stock rallied on Monday, reaching its highest share price in over a month, following an upgrade from Morgan Stanley. Analysts at the investment bank changed their rating for the electric vehicle (EV) company from hold to buy, and raised their price target from $250 to $400. The main driving force behind this upgrade was Morgan Stanley’s optimism for Tesla‘s artificial intelligence (AI) technology, specifically their supercomputer known as Dojo.

Morgan Stanley’s Optimism

Morgan Stanley estimates that Tesla‘s Dojo supercomputer has the potential to add up to $500 billion in enterprise value for the company. Dojo is an AI network designed to train the self-driving capabilities of Tesla‘s vehicles using video data. The analysts believe that Dojo could enable Tesla to expand beyond vehicle sales and enter the software-as-a-service (SaaS) market, which is highly profitable. They argue that this could justify a market capitalization of over $1 trillion for the Elon Musk-led firm.

The “Muskonomy”

Adam Jonas, the lead analyst at Morgan Stanley, suggests that Dojo may have the capability to become the core of what he calls the “Muskonomy.” He believes that this machine learning technology could also be applied to other companies founded by Elon Musk, such as SpaceX and X (Musk’s social media company). This vision of leveraging Dojo across multiple industries adds to the excitement surrounding Tesla‘s AI ambitions.

Background and Performance

Earlier this year, Elon Musk announced that Tesla would invest over $1 billion in the development of Dojo. The goal is to have a supercomputer specifically tailored to Tesla‘s image and video processing needs for autonomous driving. Despite the impact of the COVID-19 pandemic and supply chain challenges, Tesla‘s stock has performed remarkably well in 2023, with year-to-date gains of over 100%. However, the stock is still down approximately 35% from its peak during the pandemic.

Critical Voices and Long-Term Opportunity

Barclays analysts have cautioned that generating revenue from selling Dojo’s services to outside firms might be a long-term opportunity that is not immediately realized. They believe that Tesla‘s primary benefit from AI advancements will come from internal applications rather than external sales. It remains to be seen how Tesla will monetize its AI technology beyond the realm of EV production.

Conclusion and Outlook

Tesla‘s stock surge, driven by optimism surrounding Tesla‘s AI technology and supercomputer Dojo, highlights the potential for the company to diversify into the lucrative software-as-a-service market. Overcoming critical voices and generating revenue from AI is crucial for Tesla to justify its high valuation and remain a leader in the EV industry. As Tesla continues to develop and leverage its AI capabilities, it will be interesting to see how the company’s vision for the “Muskonomy” unfolds and whether it can meet the sky-high expectations set by analysts.