Morgan Stanley: In the next round of AI investments, Tesla is the key "ace in the hole"

In the competition of AI giants, the halo of electric car giant Tesla is far less than that of Nvidia, Microsoft, and others. However, Morgan Stanley believes that Tesla holds a "key card" that can make it a crucial "trump card" in the next round of AI investments. This "key card" is not Tesla's AI or robotics business, but its solar and energy storage business.

On June 25th local time, Morgan Stanley analyst Adam Jonas published a research report titled "Tesla Energy: Can GenAI Ignite This $130 Billion Business?" In Adam Jonas's view, AI data centers are being built across the United States, which will become "power-hungry monsters" and bring huge loads to the U.S. power grid.

Jonas said: "We recently released an analysis report showing that by 2030, the electricity consumption of U.S. data centers may be equivalent to the electricity consumption of 150 million electric vehicles. In other words, from 2023 to 2027, the projected growth in electricity consumption of U.S. data centers is equivalent to adding 59 million electric vehicles on U.S. roads, an increase of 21% in the total number of vehicles in service."

Jonas firmly believes in Tesla's energy business and thinks that the surge in AI will create a demand for electricity that will make Tesla a key player in the U.S. energy market.

Morgan Stanley predicts that Tesla's energy business is expected to increase its after-tax net operating profit by $3.95 billion by 2030, with earnings per share exceeding $1. Morgan Stanley values Tesla's energy business at $130 billion.

At the same time, Morgan Stanley has raised Tesla's target price to $310 and given it a "hold" rating. With Tesla's current stock price around $196, this implies about a 58% upside potential.

Public information shows that Tesla's energy storage business mainly includes two products: Powerwall and Megapack. Powerwall is a household energy storage device that can store electricity generated by solar panels for use during the night or power outages. Megapack is a commercial energy storage device suitable for large commercial and industrial customers such as data centers, hospitals, and schools.

In Morgan Stanley's research report, Jonas explained the key role Tesla Energy will play in upgrading the U.S. national grid for AI iteration and provided relevant valuations and forecasts. Here are some key points from the report:

1. Valuation and Forecast of Tesla Energy Company

• The valuation of Tesla Energy Company is $130 billion, equivalent to $36 per share.
• Tesla Energy Company's revenue for the 2024 fiscal year is expected to exceed $7 billion, with profit margins expected to exceed those of Tesla's automotive business by next year.
• It is expected that by 2026, Tesla Energy Company's earnings per share will reach $0.5, and by 2030, it will exceed $1.

II. Energy Demand for AI

• The accelerated development of AI is expected to significantly increase energy demand, with AI electricity demand equivalent to the power consumption of 150 million electric vehicles by 2030.
• The power usage of AI data centers is expected to increase significantly.

III. Tesla Energy Products

• Powerwall: A 13.5kWh lithium-ion battery pack for homes, capable of storing solar or grid energy and providing power during outages.
• Solar Panels and Solar Roofs: Providing solar solutions for residential customers, with solar roof tiles directly integrated into the roof structure.
• Megapack: A large-scale battery storage solution for commercial and utility use, designed for easy installation and high energy density.

IV. Strategic Advantages of Tesla Energy

• With the growing energy demand from artificial intelligence and data centers, Tesla's capabilities in distributed energy generation (solar) and storage will benefit the company.
• Tesla's innovation and scale in the energy storage market make it a disruptive force that can compete with existing players.

V. Tesla Energy Case Studies and Global Deployment

• Various case studies highlight successful deployments of Tesla Energy, such as emergency backup systems for railways, energy savings for breweries, and large renewable energy storage projects.
• Tesla's global footprint covers numerous facilities in residential, commercial, and utility sectors.

VI. Future Outlook and Challenges

• The growth rate of Tesla's energy storage business is expected to surpass its solar business, making a significant contribution to Tesla's overall profitability by 2030.
• Tesla faces competition from other energy storage and solar companies, but its innovative products and integrated business model put it in a favorable position.

VII. Regulatory and Market Dynamics

• Federal and state-level policy incentives (such as tax credits and rebates) support the adoption of Tesla's energy products.

In fact, as early as April 5, 2023, Tesla's "Secret Master Plan" Chapter Three mentioned that achieving a sustainable energy economy requires reaching these goals: 240TWh of energy storage, 30TW of renewable power, $10 trillion in manufacturing investment, sustainable energy investment accounting for 10% of global GDP in 2022, renewable energy facilities requiring only 0.21% of the global land area, etc.

In response to Morgan Stanley's research report, some netizens commented: "Tesla's role in the development of the U.S. power grid is very interesting. Exciting potential!"