Tesla saw a temporary 10% bump in its stock price following a research note from Morgan Stanley analyst Adam Jonas. Tesla’s stock remains 5% up over the last 5 days and 11% over the month.
This brought Tesla’s NASDAQ trading price up to $271. The catalyst for this investor enthusiasm appears to be Dojo – Tesla’s in-house supercomputing system designed for training its self-driving car algorithms.
Morgan Stanley analyst Adam Jonas identifies Dojo as a “key to unlocking Tesla’s double-flywheel effect—integrating and accelerating the synergies between Tesla’s Core Auto Flywheel and Tesla’s SAAS Flywheel.”
Jonas further suggests that Dojo could add an astonishing $500 billion to Tesla’s market capitalization, underscoring the immense demand for AI-ready hardware.
Dojo was initially conceived as a solution to Tesla’s over-reliance on GPUs supplied by Nvidia.
“Not exactly a competitor to Nvidia, as we aren’t selling Dojo computers (although it could be sold as service). We just need a crazy amount of training compute to get full self-driving 10X safer than human, but can’t get enough GPUs, plus prices are extremely high!” tweeted Elon Musk in June.
Not exactly a competitor to Nvidia, as we aren’t selling Dojo computers (although it could be sold as service).
We just need a crazy amount of training compute to get full self-driving 10X safer than human, but can’t get enough GPUs, plus prices are extremely high!
— Elon Musk (@elonmusk) June 21, 2023
What this could mean for Tesla’s future
According to Jonas, shortages in AI hardware present Tesla with an opportunity. Indeed, this presents an opportunity for virtually any company that can produce AI hardware.
When Musk announced his AI startup xAI, he hinted at leveraging Tesla’s computing power.
Musk said, “We are going to work with Tesla on the silicon front and maybe on the AI software front as well.”
Jonas believes that Tesla’s Dojo could outperform Nvidia by operating “more cheaply and efficiently for the purposes of ‘vision-based data for autonomous driving use cases,'” in contrast to Nvidia’s “generative AI-purpose chips.”
Not everyone agrees with Jonas’s optimistic outlook, however. Investment management firm ARK Invest cautioned that mega-cap tech stocks might not necessarily be the primary beneficiaries of the AI wave.
“Our research suggests that many of the blue-chip, mega-cap stocks are sporting high relative valuations and are, themselves, at risk of disruption,” ARK noted in a research paper last month.
Tesla’s stock surge reflects growing investor confidence that the company can be a significant player in the AI field.
Whether it can compete with industry titan Nvidia is another question altogether.