Morgan Stanley Raises Tesla's Price Target on AI-Driven Autonomous Vehicle Potential

Morgan Stanley Upgrades Tesla's Price Target

Morgan Stanley has significantly raised its price target for Tesla, reflecting growing confidence in the company's artificial intelligence (AI) and autonomous vehicle capabilities. Analyst Adam Jonas increased the base case target from $400 to $430 per share, with a bullish scenario projecting a potential doubling to $800 1

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AI and Autonomous Vehicles as Growth Drivers

The upgraded valuation is primarily driven by Tesla's advancements in autonomous vehicle technology and its integration of embodied AI. Morgan Stanley analysts believe that Tesla's unique combination of expertise in data collection, robotics, energy storage, and AI/compute infrastructure positions the company as a leader in the emerging autonomous mobility market 2

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Tesla Mobility and Network Services

A key component of the revised valuation is Tesla Mobility, the company's autonomous rideshare division. Morgan Stanley projects this fleet to grow to 7.5 million vehicles by 2040, generating an estimated revenue of $1.46 per mile with a 29% EBITDA margin 2

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. Additionally, Tesla's Network Services, including recurring revenue streams from Full Self-Driving (FSD), supercharging, and software upgrades, are expected to contribute significantly to the company's future earnings 2

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Projected Timeline and Challenges

Morgan Stanley anticipates Tesla's unsupervised autonomous vehicle fleet to debut in a city setting by 2026. However, widespread deployment is not expected until after 2030 due to technological, testing, and regulatory challenges 2

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. Elon Musk has announced plans for a "completely autonomous," unsupervised version of FSD to roll out later this year, with the Cybercab launching in 2026 3

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Expanding Total Addressable Market

Beyond 2025, analysts expect Tesla's total addressable market to expand into broader domains, many of which are not yet reflected in current financial models 3

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. This expansion includes potential applications in aviation, marine, and other sectors, leveraging Tesla's AI capabilities 2

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Humanoid Robots and Future Production

Tesla's AI ambitions extend beyond vehicles. Elon Musk has stated that the company aims to produce between 50,000 and 100,000 units of the Optimus humanoid robot in 2026, with plans to increase production tenfold the following year 3

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. This development could further diversify Tesla's AI-driven product portfolio.

Market Reaction and Challenges

Despite the optimistic outlook from Morgan Stanley, Tesla's stock has faced some headwinds in the current market environment. Shares were down 1% in recent trading, reflecting broader challenges in the tech sector due to rising bond yields and potential delays in Federal Reserve rate cuts 1

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. The company also continues to face competition and demand challenges in its core electric vehicle business 3

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