Tesla (NASDAQ:) has the potential to become a leader in AI, but for now the company should focus on stabilizing its core auto business, according to Morgan Stanley analysts.
Analysts say Tesla's ambitious AI projects, including self-driving cars and robotics, hold great promise, but the company must first address challenges within its key sectors.
Tesla recently postponed its highly anticipated Robotaxi Day from August to October, Bloomberg reported, a delay that is said to give the company's team more time to refine its vehicle prototypes.
Despite the delays, Morgan Stanley remains cautious about the timeline for fully self-driving cars, saying achieving aviation-level safety could take decades due to “moral, legal, ethical and regulatory realities.”
Tesla's AI ambitions go far beyond self-driving cars: “Robotics is bigger than cars,” Morgan Stanley noted, highlighting the potential for humanoid robots operating in controlled environments.
The bank added that the postponed Robotaxi Day could also showcase Tesla's wider AI capabilities, including its hybrid computing system and the integration of AI assistants like its xAI products into vehicles.
Analysts predict that the automotive industry will evolve into a hub of distributed computing, energy, and thermal management, driven by AI.
Despite Tesla's AI potential, its core auto business remains crucial, and Morgan Stanley has highlighted the company's need to stabilize downward revisions to auto division profits.
“We believe Tesla has the key attributes to be valued as a beneficiary of AI, but we must first see stabilization of earnings downside in its auto business,” they wrote. They feel this stabilization is essential for Tesla to be recognized as an AI company.
Morgan Stanley maintained its overweight rating on Tesla with a $310 price target. The firm values the company's core auto business at $56 per share, which represents 18% of its overall target.
Analysts suggest that while Tesla's developments in AI and energy storage are promising, the company should remain focused on stabilizing its auto business to ensure sustainable growth and investor confidence.
