Tesla Rides AI Wave to $400? MS Analysts Weigh on AI Mojo Dojo

In the latest research report Unlocking Tesla’s AI Mojo… Enter the Dojo: Upgrade to OW, PT $400, Top Pick by Morgan Stanley, analysts upgrade the price target for $Tesla Motors(TSLA)$ to $400:

We believe that Dojo can add up to $500bn to Tesla's enterprise value, expressed through a faster adoption rate in Mobility (robotaxi) and Network Services (SaaS).

The change drives our PT increase to $400 vs. $250 previously. We upgrade to Overweight and make Tesla our Top Pick.

What is Tesla’s AI mojo dojo?

Tesla has developed a supercomputing architecture, called Dojo by analysts of Morgan Stanley, aimed at solving the challenges of autonomy in self-driving cars.

Dojo is designed to train Tesla's full-self-driving (FSD) system, which relies on real-world video data to improve autonomous driving capabilities. It addresses the need for increased compute power to process vast amounts of data from Tesla's growing vehicle fleet.

This architecture utilizes custom silicon and is seen as a major advantage in a $10 trillion total addressable market (TAM).

How will AI mojo dojo help Tesla achieve $400?

Dojo is expected to accelerate the development and monetization of Tesla's software and services business, potentially extending Tesla's capabilities beyond the auto industry.

1) Significant growth in robotaxi and SaaS

With an expected revenue increase from $157 billion to $335 billion in 2040.

The report estimates that Dojo could add up to $500 billion to Tesla's enterprise value by accelerating the adoption of Mobility (robotaxi) and Network Services (SaaS). This upgrade in valuation leads to a new price target of $400.

2) Cost Savings - Tesla AI ASIC chip vs. $NVIDIA Corp(NVDA)$ A100s

Tesla claims that Dojo can achieve six times the cost savings compared to current GPU alternatives. These savings could amount to approximately $6.5 billion over the next few years.

Tesla has developed a custom AI ASIC chip to efficiently process vision-based data for autonomous driving.

This chip outperforms leading general-purpose chips like NVIDIA's A100s and H100s, both in terms of energy consumption and cost.

Bull, Base, and Bear Case Valuations

The report provides bullish, base, and bear case valuations, with the bull case reaching $550, the base case at $400, and the bear case at $120.

In addition to the keypoints highlight in this passage, the report also discusses why Tesla develops the dojo, Tesla's unique advantage in its extensive network of vehicles collecting data, broader implications for this industry, applications beyond automotive and so on.

Although Dojo is still early in its development, we believe that its applications long-term can extend beyond the auto industry.