Tesla jumps on prediction supercomputer unit could add $600 billion to mkt value

(Reuters) -Tesla’s Dojo supercomputer could power a near $600 billion jump in the automaker’s market value by boosting the adoption of robo-taxis and its software services, Morgan Stanley analysts said, sending the electric vehicle maker’s shares up 6% in premarket trading on Monday.

Tesla (NASDAQ:), already the world’s most valuable automaker, started production of the supercomputer to train artificial intelligence (AI) models for self-driving cars in July and plans to spend more than $1 billion on Dojo through next year.

Dojo can open up new addressable markets that “extend well beyond selling vehicles at a fixed price,” Morgan Stanley analysts led by Adam Jonas said in a note on Sunday.

“If Dojo can help make cars ‘see’ and ‘react,’ what other markets could open up? Think of any device at the edge with a camera that makes real-time decisions based on its visual field.”

The Wall Street brokerage upgraded Tesla’s stock to “overweight” from “equal-weight” and made it their “top pick,” replacing Ferrari (NYSE:)’s U.S.-listed shares.

Morgan Stanley raised its 12-18 month target on Tesla’s shares by 60% to $400 – the highest among Wall Street brokerages, as per LSEG data – which, it estimated, would give the EV maker a market capitalization of about $1.39 trillion.

That’s about 76% higher than Tesla’s market value of about $789 billion, based on the stock’s close of $248.5 on Friday. The stock climbed about 6% to $264 before the bell on Monday.

Jonas expects Dojo to drive the most value in software and services.

Morgan Stanley raised its revenue estimate from Tesla’s network services business to $335 billion in 2040, from $157 billion earlier.

Jonas expects the unit to account for more than 60% of Tesla’s core earnings by 2040, nearly doubling from 2030.

“This increase is largely driven by the emerging opportunity we see in third-party fleet licensing, increased ARPU (average monthly revenue per user).”

Tesla’s 12-month forward price-to-earnings ratio of 57.9 is well ahead of legacy automakers Ford (NYSE:) at 6.31 and General Motors (NYSE:) at 4.56, per LSEG data.