Could Elon Musk’s controversial automaker, Tesla, profit from the development of artificial intelligence? Adam Jonas, a Morgan Stanley analyst, appears to agree.
The auto industry analyst increased Tesla’s stock to “overweight” in a recently released research note, indicating that it will outperform rivals, and increased his price objective from $250 to $400. The modification caused TSLA, which is traded on the Nasdaq, to increase by 10% on Monday, reaching $271.
Dojo, Tesla’s specialized supercomputing system for training its self-driving cars, was highlighted in the paper as a possible accelerator for development, with greater adoption of its “mobility” (robotaxi) and network services potentially boosting the company’s worth by $500 billion.
“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,” Jonas commented.
Tesla started developing Dojo to address a GPU deficit that Nvidia, which has greatly benefited from this year’s AI growth, could not fill. The company’s excessive reliance on the chipmaker was addressed by Musk on an earnings call in July. “If [Nvidia] could deliver us enough GPUs, we might not need Dojo, but they can’t,” he stated.
However, Jonas believes that Tesla can surpass Nvidia with Dojo since it can operate more affordably and effectively than the latter’s “generative AI-purpose chips” for the sake of “vision-based data for autonomous driving use cases.”
“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,” the analyst commented.
Tesla’s foray into chip production reflects a wider shift toward AI among companies that earlier experimented with Bitcoin, crypto, and Web3. The automaker only has $184 million worth of Bitcoin on its bank sheet as of June 30th, 2023, down from its infamous $1.5 billion purchase in February 2021. Last month, SpaceX, Musk’s company that makes rockets, wrote down $373 million worth of Bitcoin on its balance sheet.
ARK Invest, Cathie Wood’s investment management company, recently asserted that “mega cap” tech stocks won’t be the primary winners of the AI boom, according to Jonas.
“Our research suggests that many of the blue-chip and mega-cap stocks are sporting high relative valuations and are, themselves, at risk of disruption,” ARK stated in a research paper last month.
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