Tesla (NASDAQ:TSLA) stock can surge thanks to its Dojo Supercomputer says Morgan Stanley analysts after upgrading the rating to Overweight from Equal Weight.
Tesla stock is also a new Top Pick at Morgan Stanley with a price target of $400 per share, a new Street-high.
Shares in Tesla rose 5.5% on the news.
“Tesla has developed an advanced supercomputing architecture that pushes new boundaries in custom silicon and may put Tesla at an asymmetric advantage in a $10trn TAM,” the analysts wrote in a client note.
They liken Tesla to Amazon (NASDAQ:AMZN) after the e-commerce titan’s AWS was able to reach 70% of the company’s total EBIT.
“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),” they added.
Tesla has created Dojo, a dedicated supercomputer, to enhance and train its Full Self-Driving (FSD) system. Tesla's vehicles are equipped with numerous sensors and must make critical real-time decisions in unpredictable driving conditions.
To improve the FSD system's efficacy, Tesla needs to address challenges related to data collection, processing power, speed, efficiency, and scalability. Dojo is designed to meet these challenges by providing the computational power necessary to process extensive real-world data from Tesla's vehicles.
This enables Tesla to accelerate the development of its autonomous driving technology, a critical step toward achieving Full Self-Driving capabilities and enhancing road safety.
“While it is difficult to explicitly validate the many claims Tesla has made about Dojo's cost and performance, we believe Tesla has a chance of bringing forth a competitive customized solution given the company's innovation track record and capabilities,” the analysts further noted in a report.
The new Street-high price target includes “a degree of optionality for Tesla's AI potential,” they explained.
Tesla shares are up over 100% year-to-date.