Tesla Inc.’s relentless pursuit of innovation is once again making waves in the tech and automotive industries. The company’s cutting-edge supercomputer, known as Dojo, is poised to unlock an estimated $500 billion in added market value.
According to analysts at Morgan Stanley, this technological marvel is set to pave the way for faster adoption of robotaxis and network services, reshaping the landscape of the electric vehicle giant.
Unlocking New Markets
Comparing the transformative potential of Dojo to Amazon Web Services (AWS) for Amazon.com Inc., Morgan Stanley’s lead analyst, Adam Jonas, upgraded Tesla’s stock from “equal-weight” to “overweight.” Furthermore, they have raised the 12-month price target for Tesla to a staggering $400 per share, marking a significant increase from the previous target of $250. This bullish sentiment sent Tesla’s already soaring shares climbing by as much as 8% on the day.
The Power of Dojo
Dojo is more than just another addition to Tesla’s technology arsenal; it’s a game-changer. This supercomputer is purpose-built to handle immense datasets for training autonomous driving systems. According to Jonas, it positions Tesla at an “asymmetric advantage” in a market that could be worth an astonishing $10 trillion. The real game-changer here is the potential for software and services to become the primary driver of value for Tesla, transcending its hardware offerings.
Upcoming Milestones to Watch
Jonas emphasises the significance of Tesla’s upcoming milestones, including the next version of its full self-driving system, expected by year-end. Moreover, Tesla’s potential Artificial Intelligence Day in 2024 could provide further insight into the company’s vision for AI and self-driving technology. While the latter has not been formally announced by Tesla, it remains an event of great anticipation within the tech and automotive sectors.
Jonas’ Past Predictions
It’s worth noting that Adam Jonas has previously made dramatic changes to his outlook for Tesla shares, largely based on bullish predictions about the company’s autonomous driving capabilities, some of which have yet to materialise. Nonetheless, his recent enthusiasm for Dojo underscores the magnitude of its potential impact.
Tesla’s Billion-Dollar Investment in AI
Tesla has been touting Dojo’s advantages in AI and self-driving technology since at least 2021. CEO Elon Musk revealed in July of this year that the company plans to invest over $1 billion in the project by the end of 2024. This commitment showcases Musk’s urgency in fulfilling his predictions regarding Full Self-Driving (FSD) technology.
Gene Munster, co-founder and managing partner at Deepwater Asset Management, noted the aggressive nature of this investment, drawing a comparison to Nvidia’s $7 billion annual research and development expenditure. Tesla’s focus on a single product, Dojo, underscores Musk’s determination to deliver on FSD promises.
Morgan Stanley’s Bold Target
Morgan Stanley’s target price of $400 per share places Tesla near its previous record close of $409.97 in November 2021. This projection stands out significantly, especially when compared to the average price target among analysts tracked by Bloomberg, which currently sits at $268.42.
Adam Jonas explains this bullish stance, saying, “The more we looked at Dojo, the more we realised the potential for underappreciated value in the stock.”
Dojo’s Impact on Software and Services
While most analysts have yet to quantify the impact of Dojo, Seth Goldstein of Morningstar Research Services LLC points out that Elon Musk’s ambitious timelines often face delays. However, this doesn’t diminish the progress Tesla is making. Once Dojo is fully operational and takes over software training, it will enable Tesla to update software more rapidly, leading to increased subscriptions and higher software margins—a potential game-changer for Tesla’s value proposition.
As Tesla continues to push the boundaries of technology, Dojo emerges as a point of innovation, poised to drive the company’s market value to unprecedented heights. However, it’s essential to be mindful of the challenges and uncertainties that come with ambitious technological endeavours. Tesla’s journey with Dojo is one that tech enthusiasts, investors, and the entire automotive industry will watch closely in the coming years.