Morgan Stanley analyst Adam Jonas believes artificial intelligence is about to “get physical.”
That has big implications for the manufacturing economy—and for Tesla Motors stock.
A while ago, “We told our clients that Tesla sits at the epicenter of a potential Cambrian Explosion of technology ushering in a new morphological era,” wrote Jonas in a report Tuesday.
That’s a mouthful. The Cambrian explosion refers to a period of rapid evolution some 500 million years ago. Diversity flourished and animals emerged with features such as compound eyes, gills, and teeth. Changes in oxygen levels might have jump-started the explosion.
Barron’s isn’t sure what happened or why—the biology lesson is for illustration. For Jonas, AI is the environmental change that can drive a Cambrian-like changes in global manufacturing.
In the first iteration of AI, ChatGPT and other so-called large language models use text to learn. In the next generation of AI, Tesla, Alphabet ’s Waymo, and Nvidia are using visual data to train self-driving cars, robots, and drones.
One of his points: Tesla has the capital and visual data required to win as AI diffuses into physical things. What is that ability to capture and analyze visual data? Jonas isn’t sure. “A lot more than zero.”
Jonas’s report is more of a thought experiment than financial projections.
“How many of you reading this report have seen a robot today….How many of you have experienced Tesla [Full-Self Driving software] or have ridden in a Waymo robotaxi?” asked Jonas.
If investors haven’t, testing the tech out is a good idea—if for no other reason because the way Tesla shares trade demonstrates that investors see it as much more than a car company.
It trades like a leading AI investment.
Jonas is a Tesla bull, rating shares Buy. His price target is $430 a share. Roughly $260 of that price target is derived from AI-related self-driving technology. He doesn’t have a value for humanoid robots yet. (Tesla wants to start selling significant volumes of those in 2026).
Tesla stock fell 2.1% Wednesday closing at $415.11 while the S&P 500 and Dow Jones Industrial Average rose 0.6% and 0.3%, respectively.
Shares weren’t helped by a target price increase from Wedbush analyst Dan Ives. He raised his price target to $550 from $515 a share and maintained his Buy rating on the stock. “The Golden Age of autonomous [driving] and Optimus is here,” wrote Ives.
“Golden Age” is another way to say AI will be big.
Coming into Wednesday, Tesla stock has risen about 5% this year and has jumped about 69% since the Nov. 5 presidential election. It has risen about 78% since the company’s Oct. 10 robotaxi event.
The average analyst price target for Tesla stock is about $339, according to FactSet, up about $104 since the election. About 46% of analysts covering shares rating them Buy. The average Buy-rating ratio for shares in the S&P 500 is about 55%.
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