Investors turned positive on the Tesla Inc (NASDAQ: TSLA) share price last night after one analyst shared their latest perspective on the electric vehicle company.
With a light shone on Tesla's strides in supercomputing through its Dojo technology, the market paid attention. Shares in the aspirant autonomous car company sprung 10% higher to US$273.58 apiece — an exceptional move when compared to the 1.14% increase in the Nasdaq Composite.
In a report compiled by analysts at Morgan Stanley, the Wall Street analysts articulated how Dojo could potentially deliver US$500 billion in additional enterprise value.
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Laser-like focus is the edge
Tesla CEO Elon Musk is the 'little boy who cried autonomy' for many people. The promises of full self-driving have been slow to materialise, creating doubts about whether the company is deserving of its more premium valuation.
However, Morgan Stanley analyst Adam Jonas and his team now believe Dojo's contribution could be an undervalued part of the business — resulting in an upgraded Tesla share price target.
In fact, the research report goes as far as to say that it might be akin to the impact of Amazon Web Services at Amazon.com Inc (NASDAQ: AMZN) — a segment that now constitutes 70% of total earnings before interest and tax.
Specifically, the team states up to half a trillion dollars of value could be added to Tesla through:
- Dojo unlocking a faster adoption rate in mobility (robotaxis); and
- Network services (software as a service)
The analysts are bullish on the Dojo supercomputer for one main reason… specificity.
Anyone who has dabbled in cryptocurrency probably has heard of an ASIC miner. It's an application-specific integrated circuit (ASIC) — or, in layman's terms, compute hardware made for a singular and distinct purpose.
Unlike a Nvidia Corp (NASDAQ: NVDA) graphics card, an ASIC card doesn't need to cater to all types of workloads. Similarly, Tesla's Dojo is narrowly geared toward processing tonnes of vision-based data. On this, the Morgan Stanley team states:
With a highly experienced semiconductor team, Tesla has built a custom AI ASIC chip, that, due to its core function of processing vision-based data for autonomous driving use cases, can operate more efficiently (energy consumption, latency) than the leading cutting-edge general-purpose chips on the market (NVIDIA's A100s and H100s), potentially at a fraction of the cost.
Hence, the broker hiked its Tesla share price target from US$250 to US$400. In the same report, Morgan Stanley shifted the EV company from an equal-weight to an overweight rating — making it Jonas' 'top pick'.
Tesla share price against Nvidia
The report broadly suggests that Tesla could become a leader in artificial intelligence (AI). It's an industry that has showered participants, such as Nvidia, with monumental returns this year.
On a year to date basis, Nvidia shares have skyrocketed 215%, making it one of the best-performing stocks on the market. Meanwhile, the Tesla share price has enjoyed a respectable rally of 153%.
