Tesla Inc (NASDAQ:TSLA)’s Dojo supercomputer could add as much as $500 billion to the company’s market value through faster adoption of robotaxis and network services, according to Morgan Stanley (NYSE:MS).
Dojo can open up new markets, just like AWS did for Amazon.com Inc (NASDAQ:AMZN), analysts at the investment bank said, upgrading the stock to overweight from equal-weight and raising its 12-month price target to $400 per share from $250.
"The same forces that have driven AWS to reach 70% of Amazon total EBIT can work at Tesla, in our view, opening up new addressable markets that extend well beyond selling vehicles at a fixed price," the broker added.
MS also raised its bull case valuation to $550 from $450 and made Tesla its top pick.
“In its quest to solve for autonomy, Tesla has developed an advanced supercomputing architecture that pushes new boundaries in custom silicon,” the bank said.
“Investors have long debated whether Tesla is an auto company or a tech company. We believe it's both, but see the biggest value driver from here being software and services revenue,” it added.
Dojo is a purpose-built supercomputer designed in-house by Tesla to train the full-self-driving system that sits inside every Tesla vehicle.
“We believe Dojo can represent the next step-change in market perception of Tesla,” MS analysts said.
The bank thinks that as well as accelerating the development and monetization of Tesla's software and services business, there is scope for Dojo to provide avenues for Tesla's software and hardware capabilities to extend well beyond the auto industry
“The more we looked at Dojo, the more we realized the potential for underappreciated value in the stock,” it added.
Shares rose 6.3% in pre-market trading to $264.13.