Could the growth of artificial intelligence benefit Tesla, Elon Musk’s infamous automaker? Morgan Stanley analyst Adam Jonas seems to think so.
In a newly published research note, the auto-industry researcher boosted Tesla’s stock to “overweight” (implying it will outperform competitors) and raised his price target from $250 to $400. The change spurred a 10% jump in TSLA—which trades on the Nasdaq—on Monday up to $271.
The note highlighted Dojo—Tesla’s custom supercomputing system for training its self-driving cars—as a potential catalyst for growth, possibly adding $500 billion to the company’s value through faster adoption of its “mobility” (robotaxi) and network services.
"Dojo is the key to unlocking Tesla's double-flywheel effect—integrating and accelerating the synergies between Tesla's Core Auto Flywheel and Tesla's SAAS Flywheel ... accelerating time to market and expanding the addressable market," Jonas wrote.
Tesla began working on Dojo to solve for a shortage of GPUs suppliable by Nvidia, which has strongly benefitted from the AI boom this year. “If [Nvidia] could deliver us enough GPUs, we might not need Dojo, but they can’t,” Musk said during an earnings call in July, addressing the company’s overreliance on the chipmaker.
With Dojo, however, Jonas is confident that Tesla can outdo Nvidia, which he says is capable of operating more cheaply and efficiently for the purposes of “vision-based data for autonomous driving use cases,” versus the latter’s “generative AI-purpose chips.”
"With significantly increased computing power and faster processing speeds (latency), Tesla's path to monetizing vehicle software can materialize sooner, and at higher recurring revenue rates," the analyst wrote.
Tesla’s voyage into chip manufacturing reflects a broader pivot to AI among firms once exploring Bitcoin, crypto, and Web3. Since its notorious $1.5 billion Bitcoin buy in February 2021, the automaker only held $184 million of the asset on its balance sheet as of June 30 2023. Musk’s spacecraft manufacturer, SpaceX, wrote down Bitcoin on its balance sheet by $373 million last month.
Unlike Jonas, Cathie Wood’s investment management firm ARK Invest recently suggested that “mega cap” tech stocks won’t be the biggest beneficiaries from the AI boom,
“Our research suggests that many of the blue-chip, mega-cap stocks are sporting high relative valuations and are, themselves, at risk of disruption,” wrote ARK in a research paper last month.