In a remarkable turn of events, Tesla’s stock prices shot up by 6% on Monday, following Morgan Stanley’s bold assertion that their supercomputer, Dojo, could potentially elevate the electric vehicle manufacturer’s market capitalization by nearly $600 billion. This revelation has implications not only for Tesla’s dominance in the automobile industry but also for its imminent foray into robotics and software services.
Already acclaimed as the world’s most valuable automaker, Tesla commenced production of the Dojo supercomputer in July. This formidable machine is designed to train artificial intelligence models specifically for autonomous driving. Tesla’s commitment to the project extends to a planned investment of over $1 billion in Dojo over the coming year.
Morgan Stanley analysts, led by Adam Jonas, have expressed that Dojo possesses the capability to open up new markets far beyond conventional vehicle sales. In their note on Sunday, they mused, “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.”
This groundbreaking potential prompted the Wall Street brokerage to elevate Tesla’s stock status from “equal-weight” to “overweight,” effectively replacing Ferrari’s U.S.-listed shares as their “top pick.”
Morgan Stanley’s target price for Tesla stock for the next 12-18 months now stands at $400, a 60% increase from the previous target. This estimate, if realized, would catapult Tesla’s market capitalization to approximately $1.39 trillion, a staggering 76% surge from its current market value of around $789 billion, as of Friday’s closing price of $248.5. On Monday, Tesla’s shares soared by approximately 5.7% to reach $262.70.
Adam Jonas envisions that Dojo’s most significant contributions will emerge in the realm of software and services. Accordingly, Morgan Stanley has boosted its revenue projection for Tesla’s network services business to $335 billion by 2040, up from the previous estimate of $157 billion.
By 2040, Jonas anticipates that this segment will account for over 60% of Tesla’s core revenues, nearly doubling the share projected for 2030. He explains, “This growth is largely driven by new opportunities we see in third-party vehicle fleet licensing and an increase in ARPU (average revenue per user).”
As per LSEG data, Tesla’s 12-month forward price-to-earnings ratio, currently at 57.9, significantly outpaces traditional automakers such as Ford (FN) with 6.31 and General Motors (GM.N) with 4.56. This underlines the market’s high expectations for Tesla’s future performance and the transformative potential of Dojo.
