Tesla supercomputer could boost EV maker's market cap by $600 billion – Morgan Stanley

(Reuters) -Tesla’s supercomputer, Dojo, could provide the electric vehicle manufacturer with an “asymmetric advantage” and boost its market capitalization by approximately $600 billion, according to an estimate from Morgan Stanley. Tesla began production of Dojo in July and plans to invest over $1 billion in it by next year.

Morgan Stanley analysts, led by Adam Jonas, stated in a note published on Sunday that Dojo could open up new addressable markets that go beyond simply selling vehicles at a fixed price. Jonas suggested that if Dojo can assist in enabling cars to “see” and “react,” it could potentially create opportunities in various markets where devices at the edge with cameras make real-time decisions based on their visual field.

In light of these prospects, the Wall Street brokerage upgraded its stock recommendation for Tesla from “equal-weight” to “overweight,” and made it their top pick, replacing Ferrari’s U.S.-listed shares. As a result, Tesla shares were up nearly 5% at $260.35 in premarket trading.

Morgan Stanley also raised its 12-18 month target on Tesla’s shares by 60% to $400, which is currently the highest among Wall Street brokerages according to LSEG data. This target would value the electric vehicle maker at about $1.39 trillion, compared to its current market value of approximately $789 billion.

Jonas, the analyst, believes that Dojo will be most valuable in the software and services sector. He increased his revenue estimate for Tesla’s network services business to $335 billion in 2040, up from a previously forecasted $157 billion. Jonas expects this unit to account for over 60% of Tesla’s core earnings by 2040, nearly doubling from its 2030 projection.

“This increase is largely driven by the emerging opportunity we see in third-party fleet licensing and increased ARPU (average monthly revenue per user),” Jonas explained.

Morgan Stanley’s bullish outlook on Tesla is centered around the capabilities of Dojo and its potential to revolutionize various industries through AI training. If Tesla succeeds in commercializing the technology, it could significantly transform and expand its revenue streams.

(Reporting by Roshan Abraham and Susan Mathew in Bengaluru; Editing by Savio D’Souza and Sherry Jacob-Phillips)