Tesla Inc.’s (NASDAQ:TSLA) shares took a leap in early market trading on Monday, following an upgrade from Morgan Stanley (NYSE:MS). The financial firm recognized the potential of Tesla’s artificial intelligence (AI) capabilities and subsequently became the most bullish analyst for the electric vehicle company’s stock.
In a recent report, Morgan Stanley analyst Adam Jonas upgraded TSLA from equal weight to overweight. This recommendation is based on Jonas’ renewed confidence in Tesla, driven primarily by the EV’s cutting-edge machine-learning supercomputer, Dojo.
Dojo, an innovative AI network developed by Tesla, primarily functions to enhance the training of the company’s self-driving vehicles using video data. This technology, according to Jonas, has the potential to propel Tesla “extend well beyond selling vehicles at a fixed price” and establish itself as a formidable competitor in the profitable software-as-a-service market.
Based on Jonas’ estimation, Dojo has the potential to contribute up to $500 billion in market value to Tesla, a company that currently boasts a market cap of approximately $870 billion. Along with this, Jonas increased his price target on the name from $250 to a whopping $400 per share, a 60% hike.
Jonas’ forecast suggests TSLA could reach its peak split-adjusted level since January 2022, making it the most optimistic prediction in the market.
In a comprehensive report, in which Jonas’recommendation was included, a team of Morgan Stanley analysts, under the guidance of Edward Stanley, emphasized the significance of discovering “feasible, scalable Moonshots that have not yet been fully discounted by the market.” They underscored that Tesla’s supercomputer project appears to fulfill all these criteria.
The upgrade was a part of this broader discussion, highlighting the untapped potential that lies within innovative projects like Dojo.
Tesla’s stock has seen a meteoric rise in 2023, with an increase of over 120% since the start of the year. This remarkable surge places Tesla among the highest performers on the S&P 500 for this year. However, it’s worth noting that the company’s shares are still approximately 10% lower on a year-over-year basis.
Analyst Jonas, who had previously expressed skepticism about Tesla’s scope in artificial intelligence, underwent a shift in perspective. In June, he cautioned investors that “autonomous driving and generative AI still remain, in our view, two very different technological disciplines.” However, his recent outlook seems more optimistic.
It’s clear that stocks with strong AI exposure have driven significant growth in the broader market this year. Nvidia (NASDAQ:NVDA), a leading graphics processing unit manufacturer, is a prime example. Its impressive 208% year-to-date gain has catapulted the company’s market cap beyond the $1 trillion mark, demonstrating the immense potential in the AI sector.
In mid-trading session, Tesla’s shares surged by more than 9%, or 24 points, to about $273 per share, printing their highest intraday level since August 1.
If this momentum is sustained, the stock is set for its highest close since late July.
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