Morgan Stanley has released a comprehensive analysis on Tesla (TSLA, Financial), elevating its stock rating to "Overweight" with a target price of $430. This upgrade underscores Morgan Stanley's strong confidence in Tesla's prospects in the embodied AI sector and its potential for future growth.
The report highlights a shift in investor focus from Tesla's traditional automotive business to its advancements in embodied AI. At a recent investor meeting, discussions centered around Tesla's full self-driving (FSD) technology, Cybercab/Robotaxi developments, and the Optimus humanoid robot, rather than its core car business. Although Optimus is not yet valued in Morgan Stanley's sum-of-the-parts (SOTP) valuation for Tesla, it has garnered significant investor interest as a potentially valuable future business segment.
Morgan Stanley notes that the embodied AI market extends beyond humanoid robots to include any machine capable of reasoning and interacting with the physical world. These machines act as "sensors" for visual language execution (VLA) models, driving AI development through enhanced training and simulation technologies. Tesla is seen as having a competitive edge in this expanding market.
However, the growth of embodied AI faces challenges, particularly in robot hardware components. The global production of these components, especially in China, raises concerns about supply chain resilience and security. Tesla's role in bridging the gap between reliable supply and component demand is crucial for its growth and shareholder value.
Looking ahead, Morgan Stanley anticipates Tesla's total addressable market (TAM) to expand into new areas, prompting a reassessment of its models for network services and autonomous shared mobility.
