Tesla supercomputer may boost market value by $600 bn: Morgan Stanley

Tesla's Dojo supercomputer could power a near $600 billion jump in the automaker's market value by boosting the adoption of robotaxis and its software services, Morgan Stanley analysts said.

The electric-vehicle maker (EV) started production of the supercomputer used 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 its recommendation on Tesla's stock to "Overweight" from "Equal-weight" and made it their "top pick," replacing Ferrari's U.S.-listed shares.

Tesla shares were up nearly 5.7% at $262.63 in premarket trading.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 compares with its current market value of about $789 billion, after the stock closed at $248.5 on Friday.

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 U.S. legacy automakers Ford at 6.31 and General Motors at 4.56.