Morgan Stanley says Elon Musk 'needs Tesla more than ever'

Elon Musk now “needs Tesla (NASDAQ:) more than ever,” Morgan Stanley (NYSE:) analysts stressed in a note released Monday.

As AI’s appetite for capital and data continues to grow at a rapid pace, Tesla’s importance within the ‘Muskonomy’ – the broad network of companies and ventures led by Elon Musk – increases accordingly.

According to Morgan Stanley, the broader group of Elon Musk’s businesses may collectively invest tens of billions of dollars in AI infrastructure in the coming years, pointing to the vital role the electric vehicle (EV) giant plays in this interconnected ecosystem.

“Cost of capital is deterministic for AI supremacy,” analysts highlighted.

They believe that Tesla’s success would play a crucial role in lowering the cost of capital within the broader Muskonomy. In contrast, if the company were to fail, it would raise the cost of capital for Musk’s interconnected business network.

“In addition to the cost of capital, we believe on a fundamental level that the data, infrastructure built and path to monetization within Tesla is critical to Musk’s seemingly ‘adjacent’ AI efforts,” analysts wrote.

Data captured by Tesla vehicles, both inside and out, notably improve AI learning and development, Morgan Stanley noted.

The automotive total addressable market (TAM), often referred to as the “internet of cars,” is one of the largest in the world, encompassing 12 trillion miles and hundreds of billions of vehicle hours.

The car’s unique attributes, such as mobile servers, computing capabilities, thermal management, and energy storage, are viewed as vital in the emerging AI-driven hybrid compute ecosystem, explained analysts.

These attributes have broad implications for the broader automotive industry, not just for Tesla, they added.

Meanwhile, the distinction between devices like phones, robots, and mobile AI assistants is becoming increasingly blurred, the Wall Street giant noted.

“Over time, we expect to see Mr. Musk’s efforts within social media/gen-AI, space/communications, automotive/transportation become more conspicuously linked,” the firm said.

Next month, Tesla will host its Annual Shareholder Meeting, an event analysts believe investors should closely monitor.


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