Morgan Stanley deeply decodes the catalysts for Tesla's stock price surge to $800: AI and the Sino-US autonomous driving game

According to the Zhitong Finance APP, Wall Street financial giant Morgan Stanley recently released two heavyweight research reports, jointly revealing that Tesla (TSLA.US), the absolute leader in the global electric vehicle and autonomous driving, as well as AI humanoid robot sectors, has an incredibly strong potential for stock price appreciation. They reiterated a baseline target price of $410, with the most bullish scenario reaching as high as $800. As of Tuesday's market close, Tesla's stock price was $343.820, indicating that Morgan Stanley's analysis team is quite optimistic about the prospects for a significant stock price increase for Tesla in the next 12 months.

The Morgan Stanley analysis team, led by Adam Jones, predicts that Tesla will become the core beneficiary in the AI era and amid the competition in autonomous driving technology between China and the U.S., primarily based on the widespread adoption of the FSD autonomous driving system, the fully autonomous Robotaxi network, and the immensely large AI humanoid robot business—Morgan Stanley estimates that its market size could far exceed the current global automotive market.

The Morgan Stanley (hereinafter referred to as "Morgan Stanley") analysis team believes that Tesla's current high market value and its significantly higher valuation compared to traditional automakers are still difficult to support with traditional business profitability. Investors generally stop valuing its automotive business at $50-100 per share. This limitation is akin to viewing Amazon merely as an ordinary online retailer or considering Apple as just a hardware manufacturer. Morgan Stanley states that the core logic of Tesla's value lies in its "a series of cutting-edge startup business combinations"—artificial intelligence large models, autonomous driving networks, humanoid robots, battery energy, energy storage, and other future potentials.

With ChatGPT continuing to gain popularity worldwide and the new "AI large model computing paradigm" led by DeepSeek, which focuses on "ultra-low cost" and "high efficiency" comparable to OpenAI, a new wave of AI is emerging. Artificial intelligence large models are beginning to deeply integrate with various industries such as healthcare, finance, and education, as well as consumer electronics and other application terminals, ushering humanity into the AI era. In Morgan Stanley's view, Tesla, which possesses the Dojo AI supercomputing system and the Optimus robot (Optimus humanoid robot) system, will be one of the biggest beneficiaries.

Tesla has a world-class AI team, and the Grok series of AI large models launched by xAI, a new AI force founded and led by Elon Musk, may soon be deeply integrated with Tesla's AI supercomputing system. Tesla has developed FSD (Full Self-Driving), the Dojo supercomputer, and customized AI chips. The FSD built on the Dojo AI supercomputing system, with the integration of Grok's advanced large model, is equivalent to "the brain experiencing an intelligence upgrade," which is also a strong catalyst for Optimus, which requires rapid reasoning capabilities based on visual scenes in an extremely short time. **

According to Morgan Stanley, the long-term game between China and the United States in the field of autonomous driving will also be a significant catalyst for Tesla's valuation and fundamental expansion. Tesla and traditional American automakers going "All-in on autonomous driving" will be an inevitable choice to counter the price war of Chinese electric vehicles, and Tesla, with its long-term deep layout in the autonomous driving field and the Trump administration's deregulation on autonomous driving, is expected to help Tesla's FSD autonomous driving system penetrate into American automakers like the Detroit Three through a subscription model.

In addition, many industry insiders in the American automotive sector who have communicated with Morgan Stanley's analysis team are very willing to cooperate with Chinese electric vehicle companies, especially in "importing" the latter's key manufacturing capabilities and autonomous driving technology to the U.S. market. With its vast mapping data of American roads and an expanding AI data center, Tesla is expected to achieve deep cooperation with Chinese electric vehicle or autonomous driving-related companies on sensitive issues related to data and AI computing power. Tesla may also play a key role in localizing Chinese BEV manufacturing technology in the U.S.

The AI era has arrived, and Tesla is expected to tap into one of the largest TAM markets in history

The "AI investment logic" has recently resurfaced in global stock markets, or rather, the AI theme, which has been the hottest investment topic globally since 2023, has regained global funding focus and favor after reaching a positive consensus on U.S.-China trade. This is also an important logic behind the rebound in Tesla's stock price, which has been deeply engaged in the AI field as a leader in electric vehicles and autonomous driving.

Tesla, led by the world's richest man Elon Musk, has developed an increasingly mature fully autonomous version of FSD based on the Dojo artificial intelligence supercomputing system, as well as a fully autonomous Robotaxi system based on FSD, which keeps Tesla among the "popular AI concept stocks." Tesla's continuous diversification into artificial intelligence (AI) and cutting-edge technology fields such as "AI + humanoid robots" is also the core logic for some Wall Street investment institutions to maintain a long-term bullish stance on Tesla's stock price.

From the funding trends of asset management giant Invesco, which significantly increased its holdings in the seven major U.S. tech giants in the first quarter—especially favoring Microsoft, NVIDIA, Amazon, and Tesla—it can be said that this asset management giant highly recognizes the "AI investment logic," which suggests that the sustained strong demand for AI computing infrastructure and AI application software like FSD is expected to drive the performance and valuation of related tech companies into a new growth trajectory. This is also the core logic behind the seven major tech giants deeply engaged in AI leading the U.S. stock market since 2023.

The Morgan Stanley analysis team stated that viewing Tesla as "a combination of multiple startups" is a tricky issue for public investors. Currently, most of the business segments corresponding to Tesla's market value of approximately $1.1 trillion are either inadequately disclosed, lack public data, or have not yet been truly brought to market. Just based on this, managing such a business portfolio amid current market volatility and uncertainty is fraught with risks. The greater challenge lies in the need to value these "yet-to-generate-revenue" businesses, which is why some public investors and traditional asset management giants maintain a cautious stance on Tesla in the long term However, according to the Morgan Stanley analysis team, Tesla's stock price still has a strong chance of hitting the bullish scenario target price of $800, provided that Tesla needs to achieve at least $20 in earnings per share (EPS). This requires Tesla, led by Musk, to successfully implement its autonomous driving strategy in more areas beyond electric vehicles/Robo autonomous taxi business.

For example, the large-scale expansion of FSD penetration based on the Dojo AI supercomputer system—Morgan Stanley expects that by the mid-2030s, Tesla's global vehicle ownership will approach 50 million units, with an average revenue per vehicle (ARPU) of $100 per month (potentially from FSD autonomous driving subscriptions, charging, connectivity features, upgrades, content services, used car sales, parts/maintenance services, software licensing, etc.), and even include sales of the Optimus humanoid robot powered by AI technology co-developed by Tesla and xAI, which could far exceed expectations.

In an interview on Tuesday, Musk stated that he does not rule out the possibility of merging his electric vehicle company with the AI startup xAI. When asked about the possibility of a merger between Tesla and xAI, Musk said, "Anything is possible," although there are currently "no plans to do so." He added, "It's not impossible, but it clearly requires support from Tesla shareholders." Musk mentioned in a live broadcast earlier this year that xAI's AI chatbot Grok would be included in Tesla's vehicles, but did not provide a specific release date.

"Most of the automotive and robotics experts we communicate with believe that the market for humanoid robots is much larger than the current total addressable market (TAM) for global automobiles," the Morgan Stanley analysis team wrote in their research report.

Morgan Stanley noted that the global workforce is approximately 4 billion people, with an average annual salary of about $10,000—corresponding to a labor market of about $40 trillion. If an Optimus humanoid robot is rented at a cost of $5/hour, it could replace two human workers earning $25/hour—based on this calculation, each humanoid robot has a net present value (NPV) of about $200,000. The U.S. labor market has about 160 million workers. Conservatively estimating, if 1% of the workforce is replaced by humanoid robots, it would create over $300 billion in value, equivalent to an increase of about $100 per share in Tesla's market value. Therefore, the boost from the Optimus humanoid robot is astonishing for Tesla's future stock price and market value prospects.

Morgan Stanley stated that as we enter the AI era, the market space targeted by Tesla in the future could be unprecedentedly large, potentially opening up the largest TAM market in history—humanoid robots. Here are 10 key insights provided by the Morgan Stanley analysis team:

As software becomes more "intelligent and empowered," robots are becoming true agents in the real world.

All electrified machines serve as physical "outlets" for AI brains.

Any machine that can be automated will ultimately be automated (perhaps including yourself). If a company can conquer fully autonomous driving, then the problem of autonomous operation of everything will be easily solved.

AI humanoid robots are just one of the thousands of embodied AI forms.

More broadly, any machine that can collect photons, perceive the environment, learn, navigate, or manipulate three-dimensional space falls under the category of embodied AI.

Embodied AI is closely linked to national security through its "dual-use" attributes.

Embodied AI could even form natural monopolies and utility-like networks, with a potential market size measured in trillions of dollars.

Morgan Stanley's mention of "embodied AI" refers to the cutting-edge robotics technology field represented by "AI humanoid robots."

Deutsche Bank recently stated in a research report that humanoid robots will see large-scale production and widespread application in the next decade; the Deutsche Bank analysis team expects the humanoid robot market size to reach $75 billion by 2035, and by 2050, the market size is expected to reach $1 trillion, with global sales potentially exceeding 70 million units.

The US-China Autonomous Driving Game Begins, Tesla Expected to Be the Biggest Beneficiary

Morgan Stanley's analysis team pointed out that Chinese manufacturers may have already won the battle in electric vehicle hardware and vehicle manufacturing, while American companies like Tesla are betting everything on the fierce competition in autonomous driving software.

Morgan Stanley stated that the Xiaomi YU7 is just the latest sign, indicating that Chinese tech companies are bringing electric vehicle performance and costs to a new level. China may have already won the battle in electric vehicle manufacturing, so who ultimately wins the competition in autonomous driving between the US and China will be crucial.

In Morgan Stanley's view, the long-term game between the US and China in the field of autonomous driving will also be a significant catalyst for Tesla's valuation and fundamental expansion. Tesla, equipped with the FSD system, may become the strongest competitor against electric vehicle giants like Xiaomi and BYD in China and even globally in the autonomous driving field. Morgan Stanley emphasized that with the subscription revenue brought by fully autonomous FSD and the growing demand for Tesla models, as well as Tesla's brand Robotaxi autonomous taxi network spreading worldwide, Tesla's valuation is expected to continue to expand.

The Morgan Stanley analysis team mentioned in the research report: "We have yet to hear of any automotive CEO who believes that US government tariffs alone can completely block Chinese electric vehicle technology from the US market. Many industry insiders we have spoken to are very willing to collaborate with leading Chinese electric vehicle companies to 'import' their key technologies into the US, but sensitive issues such as data and AI computing power need to be noted." For Tesla, with its exclusive and vast mapping data of American roads and the continuously expanding AI data center's computing power, there is hope for deep cooperation with Chinese electric vehicle or autonomous driving-related companies on sensitive issues related to data and AI computing power. This could pave the way for Chinese autonomous driving platforms to enter the U.S. market, thereby bringing new revenue engines for Tesla.

Morgan Stanley also stated that traditional Western automakers are seeking new ways to increase domestic production scale in the U.S., improve capital efficiency, and reduce execution risks. Strategic cooperation with these Chinese electric vehicle manufacturers is becoming attractive, and Tesla is very likely to play a key role in localizing Chinese BEV manufacturing technology