Tesla supercomputer likely to boost stock price, Morgan Stanley predicts

Tesla Inc.'s Dojo supercomputer could power a near $600 billion jump in the automaker's market value by boosting the adoption of robotaxis and its software services, Morgan Stanley analysts said.

The electric-vehicle maker started production of the supercomputer used to train artificial intelligence (AI) models for self-driving cars in July and plans to spend more than $1 billion on Dojo through next year.

Dojo can open up new addressable markets that "extend well beyond selling vehicles at a fixed price," Morgan Stanley analysts, led by Adam Jonas, said in a note on Sunday.

The stock on Monday was on track to add about $46 billion in market value. Morgan Stanley is one of Musk’s key advisory firms, including on the $44 billion takeover of Twitter Inc., now known as X.

Tesla shares rose 10.09 percent to close at $273.58 Monday.

The analysts' report said: "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."

The Wall Street brokerage upgraded its recommendation on Tesla's stock to "overweight" from "equal-weight" and made it their "top pick," replacing Ferrari's U.S.-listed shares.

Morgan Stanley raised its 12-18 month target on Tesla's shares by 60 percent to $400 — the highest among Wall Street brokerages as per LSEG data — which, it estimated, would give the EV maker a market capitalization of about $1.39 trillion.

That compares with its current market value of about $789 billion, after the stock closed at $248.5 on Friday.

Jonas expects Dojo to drive the most value in software and services.

Morgan Stanley raised its revenue estimate from Tesla's network services business to $335 billion in 2040, from $157 billion earlier.

Jonas expects the unit to account for more than 60 percent of Tesla's core earnings by 2040, nearly doubling from 2030.

"This increase is largely driven by the emerging opportunity we see in third-party fleet licensing, increased ARPU (average monthly revenue per user)."

Jonas has previously made dramatic changes to his outlook for Tesla shares based on bullish predictions about the company’s autonomous-driving capabilities, which have yet to materialize.

In August 2015, he hiked his price target for the shares by 66 percent based on his view that Tesla would launch an app-based on-demand mobility service to compete with the likes of Uber Technologies Inc. and Lyft Inc. Eight years later, Tesla has yet to introduce such a service, and features the company markets as Autopilot and Full Self-Driving require constant driver supervision.

Tesla has been mentioning how Dojo gives it an edge in AI and self-driving technology since at least 2021. In July this year, CEO Elon Musk told investors that the carmaker plans to invest more than $1 billion on the project by the end of 2024.

That base-case target from Morgan Stanley would put the stock near its record close of $409.97 in November 2021. That makes the firm a notable outlier: The average price target among analysts tracked by Bloomberg is $268.42.

“The more we looked at Dojo, the more we realized the potential for underappreciated value in the stock,” the Morgan Stanley analysts said.

Reuters and Bloomberg contributed to this report.