Morgan Stanley Weighs In on Tesla Stock as Musk Reallocates Resources

Business Insider

a day ago

Tesla (NASDAQ:TSLA) has long considered itself much more than an EV maker, but might it have bitten off more than it can chew? Signs are pointing that way, with the company now appearing to scale back at least one of its ambitious initiatives.
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That initiative is Dojo – Tesla's in-house supercomputer program designed to process the massive volumes of data and video collected from its vehicles to train AI models for the FSD (full self-driving) system and the Optimus robot.
Last Thursday, Bloomberg News reported that Tesla is shutting down the program, with team leader Peter Bannon set to depart, according to sources familiar with the matter. The report claims CEO Elon Musk made the call as Tesla leans more heavily on external partners like Nvidia and AMD for computing power, and Samsung Electronics for chip production. About 20 Dojo engineers have reportedly left for the startup DensityAI, while the remainder will be reassigned to other computing projects.
For Morgan Stanley analyst Adam Jonas, the news raises important strategic and financial implications. He sees the move as potentially part of a broader efficiency drive, aimed at trimming costs from a project that likely carried substantial capital and operating expenses. Tesla's Q2 results already flagged higher opex tied to AI initiatives, expanded training capacity at its Texas Gigafactory, and an FY25 capex forecast north of $9 billion – much of it earmarked for AI-related investments.
One possible beneficiary of this pivot is Musk's privately held xAI. Jonas notes that xAI has been handling a growing share of Tesla's AI 'brain' development, leveraging both social media data from X and real-world driving data from Tesla vehicles. Scaling back or eliminating Dojo could strengthen the case for tighter collaboration between the two entities.
Jonas also sees a potential shift in Tesla's focus toward robotics and edge inference capabilities. Musk has often pointed to the 'latent strategic potential' of Tesla's global vehicle fleet as a distributed inference network. With Optimus moving closer to commercialization, Jonas thinks Tesla may redirect incremental capex and R&D toward driving down robot production costs and improving manufacturability – whether for robotaxis or humanoid robots.
And timing may be on Tesla's side. The once-severe GPU shortage that Musk often cited has eased considerably, removing one of the key constraints that had made in-house compute resources like Dojo more urgent in the past.
For now, Jonas is holding firm on his Overweight (i.e., Buy) rating for TSLA stock, keeping a $410 price target that points to ~21% upside. (To watch Jonas' track record, click here)
That bullish stance stands in contrast to the broader Street, where TSLA carries 15 Holds, 14 Buys, and 8 Sells, for a Hold (i.e., Neutral) consensus overall. With shares trading at $339.03, the average price target of $307.23 points to a potential 9% pullback over the next year. (See TSLA stock forecast)
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