Morgan Stanley just upgraded Tesla (NASDAQ:TSLA) stock to an “overweight” rating and raised its price target to $400 per share. Specifically, Morgan Stanley cited the electric vehicle (EV) maker’s opportunity to develop chips for autonomous driving that are superior to those of industry giant Nvidia (NASDAQ:NVDA).
That’s not all, either. Morgan Stanley analyst Adam Jonas also believes that Tesla’s supercomputing chip project — named Dojo — can increase Tesla’s enterprise value by $500 billion, making Tesla the next Nvidia.
TSLA Stock and the Dojo Chip
Tesla is developing a new chip called Dojo. As Jonas explains, “each [Dojo] chip is its own supercomputer” and “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.”
That includes Nvidia’s A100 and H100 offerings. As a result, Tesla’s chips may be superior to Nvidia’s when it comes to enabling and supporting self-driving.
Morgan Stanley elaborates further, per Financial Times:
“A problem that generative-AI and ML [machine learning] training systems are facing is that the advancement of hardware is well behind the software […] Tesla’s solution to this problem is developing their own innovative hardware structure, piece-by-piece, to provide the ideal architecture to run Tesla’s computations. The Dojo hardware was developed to accelerate itself without relying on an outboard device, as each chip is its own supercomputer.”
Jonas predicts that the Dojo chip will be “six times better” than the “current-but-one generation of Nvidia A100 GPU boxes” when it comes to self-driving cars.
How Tesla Will Monetize Its Chips, According to Morgan Stanley
According to Jonas, the Dojo chip may enable Tesla to generate huge revenue from both robotaxis and software-as-a-service (SaaS) offerings. The analyst even contends that Tesla could become a global leader in artificial intelligence (AI) chips.
Consequently, Jonas seems to be indicating that Tesla can eventually sell its AI chips to companies that will use them for projects other than self-driving vehicles.
Jonas estimates that the robotaxi market alone will be worth $10 trillion.
Analysts Have Mixed Views on Tesla
According to Barron’s, only slightly more than 40% of analysts have buy ratings on shares of Tesla. Currently, TSLA stock’s forward price-to-earnings (P/E) ratio of 54.64 is quite high, especially for an automotive stock. Typically, the P/E ratios of automakers tend to be much lower.
On the date of publication, Larry Ramer did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
