Tesla’s Market Soars as Morgan Stanley Predicts a $500 Billion Boost from Dojo Supercomputer

Analyst Upgrades Tesla Stock on AI Optimism

In a groundbreaking development for Tesla, a renowned Wall Street analyst has expressed strong confidence in the company’s supercomputing project, potentially ushering in a monumental shift. Adam Jonas, a senior analyst at Morgan Stanley, has raised eyebrows by suggesting that Tesla’s foray into supercomputing through its Dojo project could catapult the electric vehicle (EV) giant’s enterprise value by an astonishing $500 billion. This bold prediction has captured the attention of investors, sending Tesla’s shares skyrocketing by more than 7% in early trading on Monday.

Dojo Supercomputer: Tesla’s Hidden Gem

While Tesla is primarily recognized for its EVs, the company has been quietly expanding its horizons into other domains, with the Dojo supercomputer operation at the forefront of this innovation. In a groundbreaking move, Jonas upgraded Tesla’s stock from “equal weight” to “overweight” and dramatically increased his price target from $250 to $400, all on the potential he sees in the Dojo project.

Jonas envisions that Dojo’s power can rival the success of Amazon’s cloud business, which now constitutes a staggering 70% of Amazon’s earnings. The key lies in the transformative potential of Dojo, which could unlock hitherto unexplored markets that extend far beyond conventional vehicle sales.

Dojo’s Versatile Applications

Tesla’s Dojo is primarily focused on advancing its autonomous driving capabilities. Still, Jonas foresees a broader spectrum of applications, including selling its computing power to various industries. The possibilities are vast: envision any device equipped with a camera making real-time decisions based on visual data. Dojo’s potential extends far beyond the realm of EVs.

A Long Road Ahead

While the excitement surrounding Dojo is palpable, it’s essential to temper expectations with a dose of reality. Jonas reminds investors that these predictions are built on potential, and there’s significant work ahead before Dojo can fulfill its visionary potential.

Acknowledging Tesla’s past tendency to overpromise, Jonas cautions, “It is difficult to explicitly validate the many claims Tesla has made about Dojo’s cost and performance.” However, he believes that the sky’s the limit, and if Dojo delivers on its promise, Tesla’s network services business could generate a staggering $335 billion in sales by 2040, constituting more than half of the company’s core earnings by that time.

Tesla’s Market Surge: The Road Ahead

The impact of Jonas’s prediction was immediate, propelling Tesla’s stock to its highest levels in over a month. The stock surged by approximately 10% to nearly $274, marking its most substantial single-day gain since January.

This surge also resulted in Tesla leaping to become the seventh-most valuable company globally, with an $80 billion rally. Jonas’s price target, which is the highest among Wall Street analysts, suggests that Tesla’s market capitalization could reach a staggering $1.39 trillion, which is 76% higher than its current value of around $789 billion.

Dojo’s Role in the ‘Muskonomy

Jonas’s vision for Dojo extends even further, speculating that the supercomputer could become integral not only to Tesla but also to Elon Musk’s other ventures, including SpaceX and a potential social media company called X. The machine learning technology could find applications in diverse sectors such as robotics, healthcare, and security.

A Revolution in AI and Software Services

Dojo’s potential isn’t limited to Tesla’s internal operations. Morgan Stanley anticipates that Dojo could revolutionize the software-as-a-service market, opening up new revenue streams for Tesla by offering third-party Dojo services. This could translate into substantial recurring revenue for Tesla in the coming years.

Challenges and Critiques

While the outlook for Dojo is promising, some analysts remain cautious. Barclays analysts have pointed out that generating revenue from selling Dojo services to outside firms could be a long-term endeavour. This highlights the challenges Tesla may face in realizing Dojo’s full potential.

Tesla’s Remarkable Year

Tesla’s stock has already been on a remarkable journey in 2023, with its shares surging over 100% year-to-date, making it one of the top-performing stocks on the S&P 500. Despite this impressive growth, it’s worth noting that Tesla is still down approximately 35% from its pandemic peak.

The Evolving Landscape of AI Stocks

Tesla’s AI ambitions align with the broader trend in AI-exposed stocks, where companies like Nvidia have seen significant gains. The AI market continues to evolve rapidly, and Tesla’s foray into supercomputing positions it as a key player in this dynamic landscape.

Elon Musk’s Vision and Wealth

Elon Musk’s vision for Tesla and his other ventures is closely tied to Dojo’s success. As Tesla’s largest individual shareholder, Musk’s net worth has continued to rise substantially, further underscoring the potential of Tesla’s AI endeavours.

The Road Ahead for Tesla

Tesla’s journey into the world of supercomputing with the Dojo project represents a pivotal moment for the company. While the road ahead is filled with challenges and uncertainties, the visionary potential of Dojo could reshape not only Tesla but also the broader tech landscape.

Tesla’s stock surge following Morgan Stanley’s bullish outlook on Dojo underscores the transformative power of AI and supercomputing in the world of EVs and beyond. As Tesla continues to innovate and expand its horizons, the future holds immense promise for the company and its investors.