Tesla rallies to $80 billion after Morgan Stanley raises price target on AI optimism

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Tesla rallied to its highest share price in more than a month on Monday, following an upgrade from Morgan Stanley on non-vehicle revenue streams that could support a market capitalization of more than $1 trillion for the Elon Musk-led firm.

Key facts

Tesla stock rose nearly 10% to close at $274, closing at its highest level since July 19.

This is Tesla’s biggest one-day gain since January.

The gains come after Morgan Stanley analysts led by Adam Jonas changed their rating from hold to buy for the electric vehicle stock, raising their price target to $400 from $250.

Key behind Morgan Stanley’s upgrade was optimism for Tesla’s Dojo supercomputer, which Jonas estimates could add up to $500 billion in enterprise value for Tesla, which currently has a market capitalization of about $800 billion.

Dojo, which is Tesla’s artificial intelligence technology network designed primarily to train self-driving vehicles using video data, could help Tesla “grow beyond selling fixed-price vehicles” and become a power player in profitable software. Service Market, Jonas wrote.

Jonas & Company’s price target is easily the highest among any analysts tracked by FactSet, with Tesla forecast to move to a split-adjusted level starting in January 2022.

A large number

$79.9 billion. That’s why Tesla gained so much market cap on Monday that it surpassed Berkshire Hathaway to become the seventh most valuable company in the world.

The decisive quote

“Dojo could have the potential to be the core of the ‘musconomy,'” Jonas wrote, adding that machine learning technology could also become central to Tesla CEO Musk’s social media company X and aeronautics and communications firm SpaceX.

Main background

Musk told investors in July that Tesla would spend more than $1 billion developing Dojo over the next year. “With Dojo, (Tesla) believes it will be able to field a supercomputer designed specifically for its image and video processing needs,” Deutsche Bank analysts led by Emanuel Rosner wrote in a note to clients last week. Shares of Tesla are up more than 100% year-to-date, placing the stock among the top returners on the S&P 500 in 2023. Still, Tesla is down roughly 35% from its epidemic peak. Jonas had a change of heart about Tesla’s AI prospects, warning investors in June that “in our view, autonomous driving and generative AI are still two very different technological disciplines.” AI-exposed stocks have led the broader market’s gains this year, thanks to Nvidia’s more than 200% rise that pushed the graphics processing unit maker’s market cap past $1 trillion.

Chief Reviewer

Dojo is “the primary place where Tesla benefits from recent advances in AI,” but any revenue from selling services to outside companies is “a fairly long-term opportunity,” Barclays analysts led by Dan Levy wrote in June. .

Forbes assessment

Musk, Tesla’s largest individual shareholder, is worth $261 billion, according to the report Forbes‘ Calculation. He is by far the world’s richest person, worth more than $60 billion more than the next richest person, LVMH chairman Bernard Arnault. Musk became nearly $19 billion richer on Monday alone.

Further reading

More from ForbesTesla stock plunges 10% post-earnings—some say its $820 billion valuation is ‘disconnected from reality’
edgesTesla began production of the Dojo supercomputer to train driverless cars
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