Intraday Surge of 10%! Goldman Sachs Hails Dojo Supercomputer to Unlock AI Magic, Tesla Valuation Could Skyrocket by $500 Billion

Morgan Stanley strongly advocates for Tesla's supercomputer Dojo, which has the potential to greatly enhance performance through artificial intelligence (AI). As a result, Tesla's stock price has skyrocketed.

On Monday, September 11th, Tesla's stock price rebounded strongly after three consecutive days of decline, opening more than 6.3% higher. At one point during the trading session, it approached $274.90, with an intraday gain of 10.6%. Ultimately, it closed up 10.09%, marking the largest intraday and closing gain since January 27th, at $273.58. This also represents the highest closing price since July 19th, with the market value increasing by over $70 billion in a single day.

During the midday trading session on Monday, several technology stocks, led by Tesla, rose, supporting the overall market. The Nasdaq rose by over 1%, the S&P 500 increased by nearly 0.7%, and the Dow Jones Industrial Average gained nearly 90 points, rising for the third consecutive day to its highest level since September 1st, breaking away from the low point since August 28th.

Apart from Tesla, other leading technology stocks mostly rose. At the close, Amazon and Meta increased by over 3%, Microsoft rose by over 1%, while Apple, Google, and Netflix rose by less than 1%. The Philadelphia Semiconductor Index, which had initially fallen by over 1%, closed slightly up by less than 0.1%. Qualcomm rose by 3.9%, while NVIDIA fell by nearly 0.9%, continuing its four-day decline.

Target price raised by 60%: Morgan Stanley compares Dojo to Amazon's AWS, expecting accelerated development of autonomous driving

What triggered the surge in Tesla's stock price on Monday was a report released by analysts from Morgan Stanley, including Adam Jonas, titled "Unlocking Tesla's AI Magic."

In the report, these analysts upgraded Tesla's stock rating from "hold" to "buy" and significantly raised the target price for the next 12 months from $250 to $400. This is currently the highest target price given by Wall Street institutions, with an increase of up to 60%.

This means that Tesla's stock price could rise by approximately 61% from last Friday's closing price, reaching a market value increase of up to $500 billion, as the AI learning-related Dojo supercomputer will accelerate the application of robot taxis and web services.

In the report, analysts such as Adam Jonas listed Tesla as their "top pick" and compared Tesla's Dojo supercomputer to Amazon's growth engine, the cloud service AWS. The report stated:

"Investors have long debated whether Tesla is an automotive company or a technology company. We believe it is both, but the biggest value driver is software and service revenue. We believe the same force that drives AWS to achieve 70% of Amazon's earnings before interest and taxes (EBIT) can also apply to Tesla, opening up new potential markets far beyond the scope of selling cars at fixed prices. What is the catalyst? Dojo, the customer supercomputer that Tesla has been working on for the past five years." "

The report suggests that Dojo, which aims to train a large amount of data in driving systems, could give Tesla an "asymmetric advantage" in a potential $10 trillion market.

Specifically, Dojo should help Tesla improve its fully autonomous driving technology, FSD, as this technology requires immense computing power, making it highly suitable for supercomputers like Dojo. A better fully autonomous driving product should bring higher profits and revenue to Tesla, as customers decide to add the optional FSD software when purchasing Tesla vehicles.

The report states:

"The more we research Dojo, the more we realize that the value of Tesla's stock may be underestimated. We believe Dojo can represent a significant change in the market's perception of Tesla."

The report estimates that as Tesla improves its computing power through its in-house supercomputer, Dojo could save Tesla $6.5 billion in costs over the next few years. The key is that Dojo can accelerate the development of autonomous driving capabilities.

Tesla claims that Dojo can reduce the time required for training workloads from over a month to less than a week. The report suggests that the potential efficiency, speed, and cost advantages can significantly shorten Tesla's development time for autonomous driving.

Furthermore, Dojo can also assist Tesla in developing humanoid robots and have a broader impact on various scientific projects that Tesla CEO Elon Musk is currently undertaking. This is why Tesla's possession of Dojo is so special for investors.

Seth Goldstein, a stock strategist at Morningstar Research Services, predicted on Monday that if Dojo is launched, operational, and takes over software training, it will allow Tesla to update software faster and increase the subscription volume of software profits, which could be a significant value driver."