Raphael ThysBy Abhishek Vishnoi and Subrat Patnaik
September 12, 2023 — 1.09pm
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Tesla’s Dojo supercomputer may add as much as $US500 billion ($777 billion) to the company’s market value through faster adoption of robotaxis and network services, according to Morgan Stanley.
Dojo can open up “new addressable markets,” just like AWS did for Amazon.com, analysts led by Adam Jonas wrote in a note, upgrading the stock to overweight from equal-weight and raising its 12-month price target to a Street-high $US400 per share from $US250. If it reached that level, the company would be worth around $US1.4 trillion.
Tesla CEO Elon Musk told investors in July that the carmaker plans to invest more than $US1 billion on the project by the end of 2024.
Shares of Tesla, which have already more than doubled this year, soared by 10.1 per cent on Wall Street. Morgan Stanley is one of Musk’s key advisory firms, including on the $US44 billion takeover of Twitter, now known as X.
The supercomputer, designed to handle massive amounts of data in training driving systems, may put Tesla at “an asymmetric advantage” in a market potentially worth $US10 trillion, said Jonas, and could make software and services the biggest value driver for Tesla from here onward.
The next version of Tesla’s full self-driving system, expected by year-end, and the company’s potential Artificial Intelligence Day in 2024 are worth watching, he added. Tesla has not formally announced an AI Day for next year.
Jonas has previously made dramatic changes to his outlook for Tesla shares based on bullish predictions about the company’s autonomous-driving capabilities, which have yet to materialise.
In August 2015, he hiked his price target for the shares by 66 per cent based on his view that Tesla would launch an app-based on-demand mobility service to compete with the likes of Uber and Lyft. Eight years later, Tesla has yet to introduce such a service, and features the company markets as Autopilot and Full Self-Driving require constant driver supervision.
Tesla has been mentioning how Dojo gives it an edge in AI and self-driving technology since at least 2021. In July this year, CEO Elon Musk told investors that the carmaker plans to invest more than $US1 billion on the project by the end of 2024.
“As a point of reference, in 2022, Nvidia spent $US7 billion across the entire company on research and development,” Gene Munster, co-founder and managing partner at Deepwater Asset Management, wrote in a note in July. “In other words, spending $US1 billion plus on a single product is aggressive and speaks to Musk’s urgency at making good on this FSD prediction.”
Morgan Stanley says Tesla’s Dojo supercomputer could be a game changer.Credit: AP
Meanwhile, that base-case target from Morgan Stanley would put the stock near its record close of $US409.97 in November 2021. That makes the firm a notable outlier: The average price target among analysts tracked by Bloomberg is $US268.42.
“The more we looked at Dojo, the more we realised the potential for underappreciated value in the stock,” Jonas said.
While most other analysts have still to outline Dojo’s impact on the company, Seth Goldstein of Morningstar Research Services LLC says that, “while it’s good for Elon to push the team to go as quickly as possible, in reality Tesla usually sees a delay from Elon’s original timelines.”
“It doesn’t mean they aren’t making progress,” Goldstein said in a phone interview.
“Once Dojo is up and running and takes over the software training, it will allow Tesla to update software more quickly and increase subscriptions at software margins, which can be a big value driver.”
Bloomberg
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