Tesla stock price increased as much as 10% on Monday, adding more than $70 billion to its market value after Morgan Stanley upgraded the stock to “Overweight.” Tesla stock price increase was more than 10% Monday after a Morgan Stanley upgrade, and optimistic note that envisioned Tesla selling AI technology to other automakers, and saving money by using its own GPUs as much as possible, rather than paying for chip supply from Nvidia.
Morgan Stanley’s renewed bullishness towards the electric vehicle company is driven by the upside potential in Tesla’s Dojo supercomputer, which the bank says can add another $500 billion to Tesla’s market valuation.
Tesla market valuation
Morgan Stanley analysts led by Adam Jonas called Tesla a “top pick” and raised their price target to $400 from $250, representing potential upside of nearly 50% from current levels leading to Tesla’s stock price increase.
“The same forces that have driven AWS to reach 70% of Amazon total EBIT can work at Tesla, in our view, opening up new addressable markets that extend well beyond selling vehicles at a fixed price. The catalyst? Dojo, Tesla’s customer supercomputing effort in the works for the past 5 years,” Adam Jonas said.
Tesla Dojo supercomputer
Tesla Dojo supercomputer should help improve its full-self driving technology, which requires immense computing power that is well-suited for a supercomputer like Dojo. And a better full-self-driving product should lead to more higher-margin revenues for Tesla, as customers decide to include the add-on FSD software capabilities to their car purchase.
“The more we looked at Dojo, the more we realized the potential for underappreciated value in the stock,” Jonas said. “We believe Dojo can represent the next step-change in market perception of Tesla.”
Why Morgan Stanley increased Tesla’s market valuation
He estimated that Tesla’s Dojo supercomputer could drive $6.5 billion in cost savings over the next couple of years as the company increases its computing power with the in-house developed supercomputer.
And importantly, Tesla’s Dojo supercomputer, which is comprised of thousands of GPU chips from Nvidia, can speed up the development of autonomous driving capabilities.
According to Tesla, Dojo can shorten the time needed for training workloads to less than a week from more than one month.
“The potential efficiency, speed, and cost benefits compared to current GPUs could allow Tesla to materially reduce their autonomy timeline,” Jonas said.
Tesla’s Dojo supercomputer could also help the company develop its humanoid robot and have broader implications for the various science projects being worked on by Musk. And that’s what makes Tesla’s ownership of the supercomputer so special for investors.
“The point we’d make to investors is that Tesla is just one part of a larger area of scientific and commercial interests on which Elon Musk is allocating time, financial resources and talent. We see Tesla as one of the more complex and ‘unifying’ businesses which can serve as an ‘experimental lab’ to iterate on advanced technologies with high degree of mission difficulty,” Jonas said.
Deutsche Bank’s Tesla market valuation
By contrast, another firm that is bullish on Tesla, Deutsche Bank, noted risks to the EV maker in Q3 from “planned summer production shutdowns which will push both production and deliveries down QoQ, discounts on inventories, and limited positive costs offsets in the quarter,” and set a price target at $300 in a note out September 6.
Earlier this quarter, Tesla slashed the prices of its electric vehicles after executives cautioned investors that production and delivery volumes would likely decline this period versus the second quarter due to planned factory closures. Those price cuts, among other things, had weighed on Tesla’s share price in recent weeks.
If Tesla reaches Morgan Stanley’s $400 price target, it would have a market valuation of nearly $1.3 trillion. Tesla stock price increase with a record high of $414.50 in November 2021.
Tesla stock price increase
After the Morgan Stanley note on Monday, Tesla stock price increased above $272 mid-day.
