Tesla as an AI Powerhouse

Investing.com — Tesla (NASDAQ:TSLA)’s long-term potential as an AI powerhouse might be closer than ever, according to Morgan Stanley.

The investment bank stated in a note Tuesday that it believes the development of Generative AI (Gen AI) and Large Language Models (LLMs) could be the “great unlock” for Tesla’s value, particularly in monetizing its AI capabilities.

When assessing what it will take to make Elon Musk’s ambitious dreams a reality, Morgan Stanley highlighted Tesla’s “We, Robot” event on October 10th, viewing it as a potential catalyst for changing the narrative around Tesla shares, which are currently trading nearly 40% below their all-time highs.

According to Morgan Stanley, Tesla’s stock performance has been largely tied to its automotive business, accounting for over 80% of its forecasted FY24 revenues.

The analysts noted, “Easily 90% of incoming client questions are focused on short-term auto-related data (such as 3Q deliveries).”

However, the bank suggests that as Musk continues to develop Tesla’s AI and compute infrastructure—especially with the integration of xAI, his new AI venture—investors may start to recognize the broader “surface area” between Tesla and other aspects of Musk’s ecosystem, or “Muskonomy.”

This includes cars, robots, and other AI-driven technologies.

With an Overweight rating on Tesla, Morgan Stanley breaks down its $310 price target into six components. The core Tesla Auto business is valued at $59 per share, based on an expectation of 5.4 million units sold in 2030.

Tesla’s mobility business, including autonomous driving, is estimated at $62 per share. The energy business contributes $49 per share, while Tesla’s third-party supplier business and insurance add $40 and $5 per share, respectively.

The largest growth potential, however, comes from Tesla’s network services, which Morgan Stanley estimates could reach $96 per share by 2030, driven by 14.3 million monthly active users and $180 average revenue per user (ARPU).