Tesla Stock Surges 7% After Morgan Stanley Ups Price Target To $400 On AI Optimism
Tesla experienced a significant surge in its stock price, reaching its highest level in over a month during early trading on Monday. The catalyst behind this rally was a notable upgrade from Morgan Stanley, which highlighted the potential for a substantial non-vehicle revenue stream that could potentially support a market capitalization of over $1 trillion for the electric vehicle pioneer, led by Elon Musk. Tesla’s stock price saw a gain of approximately 7%, reaching around $265 during morning trading, marking its highest intraday value since August 1.
This positive momentum was driven by an upgrade from Morgan Stanley analysts, led by Adam Jonas, who decided to change their rating for Tesla’s stock from ‘hold’ to ‘buy.’ Simultaneously, they raised their price target significantly, upping it from $250 to an impressive $400.
Tesla Stock
The key driver of Morgan Stanley’s bullish outlook is their optimism surrounding Tesla’s Stock Dojo supercomputer. Adam Jonas estimated that the AI-driven capabilities of Dojo could contribute an astounding $500 billion in enterprise value to Tesla Stock. Currently, Tesla Stock boasts a market capitalization of approximately $800 billion. Dojo, which serves as Tesla’s artificial intelligence network primarily designed for training self-driving vehicles using video data, holds the potential to propel Tesla beyond the traditional vehicle sales model. Instead, it positions Tesla as a formidable player in the highly lucrative software-as-a-service market, as articulated by Jonas.
The $400 price target set by Jonas and his team is notably the most bullish among all analysts tracked by FactSet. If Tesla achieves this valuation, it would mark a significant milestone, surpassing its highest split-adjusted level since January 2022. Jonas further speculates that Dojo could become the linchpin of what he dubs the ‘Muskonomy,’ suggesting that this machine learning technology could play integral roles not only at Tesla but also in Elon Musk’s other ventures, such as his social media company, X, and his aerospace and communications firm, SpaceX.
Elon Musk himself emphasized the importance of Dojo during an investor presentation in July, revealing that Tesla plans to invest “well over” $1 billion in the development of this advanced supercomputer over the next year. In the eyes of Deutsche Bank analysts, Tesla’s vision for Dojo centers around creating a supercomputer tailored explicitly for image and video processing requirements.
It’s important to note that while Dojo holds immense potential, generating revenue by offering its services to external companies might be a long-term opportunity, according to Barclays analysts led by Dan Levy. Nevertheless, Tesla’s shares have displayed remarkable resilience and growth, surging by more than 100% year-to-date. This impressive performance has positioned Tesla as one of the top-performing stocks on the S&P 500 in 2023. However, it’s worth mentioning that Tesla’s stock is still down by approximately 35% from its peak during the pandemic.
Adam Jonas’ change in perspective regarding Tesla’s AI prospects is notable. Just a few months earlier, in June, he had cautioned investors, stating that “autonomous driving and generative AI still remain, in our view, two very different technological disciplines.”
In the broader context of the stock market, AI-focused companies have been at the forefront of gains in 2023. Leading the charge is Nvidia, which has witnessed an astonishing increase of more than 200% in its Tesla stock price, propelling its market capitalization to over $1 trillion.
While Tesla Stock continues to be a focal point of interest for investors, it’s important to monitor how the implementation of Dojo and Tesla’s expansion into AI-driven services will unfold and impact the company’s long-term growth and valuation. Elon Musk, Tesla’s largest individual shareholder, remains one of the wealthiest individuals globally, with an estimated net worth of $261 billion, significantly exceeding the next-richest person, Bernard Arnault, the chairman of LVMH, by over $60 billion according to Forbes’ calculations.