In a resounding surge, Tesla (TSLA) experienced a commendable 10% boost in its stock value on Monday, following an endorsement from a distinguished Wall Street analyst who lauded the electric vehicle titan’s artificial intelligence (AI) prospects. Morgan Stanley analyst Adam Jonas, in a research report titled “Unlocking Tesla’s AI mojo,” not only elevated Tesla’s rating from Equal Weight to Overweight but also upped the price target from $250 to an impressive $400.
For years, the debate has raged on whether Tesla is primarily an automotive or technology entity. Jonas contends it is both, asserting that the paramount value generator going forward lies within its software and services revenue stream. Drawing parallels to the transformative journey of Amazon Web Services (AWS), Jonas posited that analogous forces could propel Tesla to similar heights, creating opportunities far beyond conventional vehicle sales.
Notably, Jonas had previously tempered his assessment of Tesla in June amidst a remarkable surge in its stock, cautioning investors to temper their enthusiasm for the AI-driven vision. However, he now pivots to spotlight the immense potential of Tesla’s bespoke supercomputing system, known as Dojo, which underpins the training of its full-self driving model.
According to Jonas, Dojo stands poised to augment Tesla’s enterprise value by a staggering “up to” $500 billion, attributed to an accelerated adoption rate in mobility, including the advent of robotaxis, and network services. Jonas elaborated, stating, “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.”
Presently, Tesla leans on Nvidia for its chip requirements, as affirmed by CEO Elon Musk. However, due to soaring demand, the company encounters constraints in accessing as many chips as it desires. Tesla is now resolved to forge a more streamlined system that sidesteps Nvidia chips. Musk expounds, “With a highly experienced semiconductor team, Tesla has built a custom AI ASIC chip, that, due to its core function of processing vision-based data for autonomous driving use cases, can operate more efficiently (energy consumption, latency) than the leading cutting-edge generative AI-purpose chips on the market (NVIDIA’s A100s and H100s), and at a fraction of the cost.”
This week, Tesla inked a pivotal agreement with Hilton Hotels to join its Supercharger Network, a development perceived by investors as a fresh source of revenue beyond conventional car sales. Furthermore, the AI chips championed by Tesla could potentially underpin further expansion of this burgeoning venture.
Jonas underscored, “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. We also, for the first time, incorporate non-Tesla fleet licensing revenue into our Network Services model as we expect recent charging station cooperation will extend into FSD licensing (discussions ongoing) and operating system licensing.”
The dramatic 10% surge in the stock value of Tesla on Monday was a direct response to the comprehensive report issued by Morgan Stanley’s astute analyst. Such reports have sparked considerable interest among potential investors, prompting them to ponder the formidable potential of AI-driven revenue streams for Tesla, particularly through its software and services, and the burgeoning Supercharger Network.
Source: Yahoo Finance
