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 (EV), autonomous driving, and AI humanoid robot sectors, has exceptionally strong upside potential for its stock price. The firm reiterated its base price target of $410, with the most bullish scenario target price soaring to $800.

The Morgan Stanley analysis team, led by Adam Jonas, predicts that Tesla will emerge as the core beneficiary of the AI era and the U.S.-China autonomous driving technology competition. This outlook is primarily based on the widespread adoption of Tesla's Full Self-Driving (FSD) system, its Robotaxi fully autonomous taxi network, and its vast AI humanoid robot business, which Morgan Stanley estimates could far surpass the current global automotive market in scale.

Morgan Stanley (hereafter referred to as "MS") analysts argue that Tesla's current high market valuation, significantly higher than traditional automakers, cannot be justified by its conventional business profitability alone. Investors typically assign only 50–100 per share to its automotive business before stopping, a limitation akin to viewing Amazon as merely an online retailer or Apple as a hardware manufacturer. MS emphasizes that the core logic of Tesla's value lies in its "portfolio of cutting-edge startup businesses"- AI models, autonomous driving networks, humanoid robots, battery energy, energy storage, and other future potentials.

With ChatGPT's global popularity and DeepSeek's new "AI large model computing paradigm"- characterized by "extremely low costs" and "high efficiency" rivaling OpenAI- ushering in a new wave of AI advancements, large AI models are increasingly integrating with industries like healthcare, finance, and education, as well as consumer electronics and other application terminals. Humanity is entering the AI era. In MS's view, Tesla, with its Dojo AI supercomputing system and Optimus robot (humanoid robot) framework, stands to be one of the biggest beneficiaries.

Tesla boasts a world-class AI team, and Musk's AI venture, xAI, which developed the Grok series of AI models, may eventually integrate deeply with Tesla's AI supercomputing infrastructure. Tesla has already developed FSD, the Dojo supercomputer, and custom AI chips. With the integration of Grok's advanced AI models, Tesla's FSD system- built on the Dojo AI framework- could see a "significant boost in intelligence," which would also serve as a powerful catalyst for Optimus, which requires rapid visual scene inference capabilities.

MS analysts believe that the long-term U.S.-China competition in autonomous driving will also be a major catalyst for Tesla's valuation and business expansion. Tesla and other U.S. automakers going "all-in on autonomous driving" is seen as the inevitable response to China's EV price war. Tesla, with its long-term strategic investments in autonomous driving and potential regulatory easing under a Trump administration, could see its FSD system adopted via subscription models by major U.S. automakers like Detroit's Big Three.

Additionally, many U.S. auto industry insiders MS spoke with expressed openness to collaborating with Chinese EV manufacturers, particularly in importing their key manufacturing capabilities and autonomous driving technologies to the U.S. Tesla, with its vast trove of U.S. road mapping data and expanding AI data centers, could play a pivotal role in facilitating deep collaborations with Chinese EV or autonomous driving firms, especially on sensitive issues like data and AI computing power. Tesla may also serve as a key intermediary in localizing Chinese battery electric vehicle (BEV) manufacturing technologies in the U.S.

The AI Era Has Arrived: Tesla Poised to Tap One of the Largest TAMs in History

The "AI investment thesis" has regained momentum in global equity markets, or rather, AI- AI-the hottest investment theme since 2023- has recaptured global capital attention following positive U.S.-China trade developments. This resurgence is also a key driver behind the rebound in Tesla's stock price, as the EV and autonomous driving leader has been deeply entrenched in AI.

Elon Musk's Tesla, leveraging its Dojo AI supercomputing system, has developed an increasingly mature FSD system and a Robotaxi fully autonomous taxi network, cementing its status as a "hot AI stock." Tesla's continued diversification into AI and "AI + humanoid robots" is a core reason why some Wall Street institutions remain bullish on its long-term prospects.

Looking at Invesco's aggressive investments in the "Magnificent Seven" U.S. tech stocks in Q1- particularly in Microsoft, Nvidia, Amazon, and Tesla- it's clear that the firm strongly endorses the "AI investment thesis." The sustained robust demand for AI computing infrastructure and AI applications like FSD is expected to propel related tech companies into a new growth phase, a key reason why the seven tech giants have led U.S. stock gains since 2023.

The MS team notes that viewing Tesla as a "collection of startups" poses a challenge for public investors. Most of Tesla's $1.1 trillion market cap corresponds to business segments that are either under-disclosed, lack public data, or haven't yet launched. This alone makes managing such a portfolio amid market volatility and uncertainty highly risky. The bigger challenge lies in valuing these "revenue-less" businesses, which is why some investors and traditional asset managers remain cautious about Tesla.

However, MS analysts believe Tesla's stock could still reach the $800, a bull-case target, if the company can achieve at least $20 in EPS. This would require Tesla to successfully execute its autonomous driving strategy beyond EVs and Robotaxis, such as significantly expanding FSD adoption via the Dojo AI system. MS projects Tesla's global vehicle fleet could approach 50 million by the mid-2030s, with an average revenue per vehicle (ARPU) of $100 per month (potentially from FSD subscriptions, charging, connectivity, upgrades, content, used car sales, parts/maintenance, and software licensing). This could even include Optimus humanoid robot sales far exceeding expectations, powered by AI technologies developed jointly by Tesla and xAI.

In a Tuesday interview, Musk did not rule out merging Tesla with xAI, stating, "Anything is possible," though there are "no current plans." He noted that such a move would require Tesla shareholder approval. Earlier this year, Musk mentioned that Grok would be integrated into Tesla vehicles, though no specific timeline was provided.

Deutsche Bank recently stated in a report that humanoid robots will see mass production and widespread adoption in the next decade, projecting the market to reach $75 billion by 2035 and $1 trillion by 2050, with global sales exceeding 70 million units.

U.S.-China Autonomous Driving Competition Begins: Tesla Stands to Benefit Most

MS analysts note that Chinese manufacturers may have already won the EV hardware and manufacturing battle, while U.S. players like Tesla are pivoting to an all-out autonomous driving software war.

The report cites Xiaomi's SU7 as the latest example of Chinese tech firms pushing EV performance and cost to new heights. If China has won the EV manufacturing war, the U.S.-China autonomous driving race will be decisive.

For Tesla, FSD adoption and Robotaxi expansion could drive sustained valuation growth. MS adds that many auto CEOs doubt U.S. tariffs alone can block Chinese EV tech, with many open to partnering with Chinese leaders to localize key technologies, though data and AI computing sensitivities remain. Tesla, with its vast U.S. road data and AI data centers, could mediate such collaborations, paving the way for Chinese autonomous platforms in the U.S. and creating new revenue streams.

MS also notes that Western automakers are seeking ways to boost U.S. production, improve capital efficiency, and reduce execution risk, making partnerships with Chinese EV firms increasingly attractive. Tesla could play a key role in localizing Chinese BEV manufacturing tech.