Can Tesla, which is on a soaring trend, continue to surge? Morgan Stanley downgrades the automotive industry rating, but remains confident that Tesla can continue to rise

According to the financial news app Zhitong Finance, Wall Street investment banking giant Morgan Stanley has downgraded the entire US automotive industry's rating to "in line with the market" rating, after previously widely rating the industry as "having strong investment appeal" . Looking into details, different automotive companies are in different rating ranges, with Tesla (TSLA.US) and Ferrari (RACE.US) still maintaining the "buy" rating given by Morgan Stanley, while the US electric vehicle newcomer Lucid Motors (LCID.US) is rated as "sell".

The Morgan Stanley analyst team led by Adam Jonas warned in the report: "From a high-level perspective, our overall downgrade of the US automotive industry is jointly driven by international, domestic, and strategic factors. We believe that investors may not fully realize these factors."

Morgan Stanley now believes that US automotive inventory is on the rise, with many American families still unable to afford cars. In addition, at the subprime level, credit losses and delinquencies continue to rise. Jonas and his team also emphasized that the growth engine in the Asian region has reversed, which is a negative sign for the automotive industry.

Jonas and his team also stated that the optimistic sentiment surrounding US automotive stocks as drivers and beneficiaries of the artificial intelligence wave is being offset by concerns about the massive capital commitments needed for large-scale artificial intelligence development, artificial intelligence infrastructure, and the establishment of artificial intelligence cloud computing/data centers. Some institutional investors seem to believe that the previous investments in artificial intelligence far exceed the profit scale in the near to mid-term.

As part of the reset of the US automotive industry, Morgan Stanley in this latest research report has downgraded many automakers that were previously favored by the bank and Wall Street, such as downgrading Ford (F.US) from "buy" to "in line with the market", downgrading General Motors (GM.US) from "buy" to "in line with the market", downgrading the US electric vehicle newcomer Rivian Automotive (RIVN.US) from "buy" to "in line with the market", downgrading Phinia (PHIN.US) from "buy" to "in line with the market", and downgrading Magna International (MGA.US) from "buy" to "in line with the market".

Morgan Stanley holds a more optimistic view on the US automotive retail business, and has upgraded the ratings of Group 1 Automotive (GPI.US), Lear Automotive (LEA.US), Penske Group (PAG.US), and AutoNation (AN.US) to "buy". The main point of view of Morgan Stanley's analyst team is that with the foreseeable trend of decreasing car loan payments, multiple expansions of franchise dealers can continue.

Furthermore, this Wall Street investment bank believes that there are clear profit opportunities in the automotive industry, and Morgan Stanley continues to maintain the "buy" rating for Tesla (TSLA.US), Ferrari (RACE.US), CarMax (KMX.US), and has upgraded AutoNation (AN.US) to a "buy" rating, and will continue to include Tesla in the institution's "preferred automotive stocks" Maintaining the "reduce" rating for Adient (ADNT.US), Aptiv (APTV.US), QuantumScape (QS.US), and Lucid Motors (LCID.US).

Morgan Stanley: Optimistic about Tesla's stock price despite the downgrade of the entire US auto industry

Morgan Stanley, a Wall Street giant known as a long-time bull on Tesla, maintains a buy rating on Tesla with a target price as high as $310. In contrast, Tesla recently experienced a significant rebound and closed at $254.27 on Tuesday, with Tesla's stock price rebounding nearly 20% since September, driven by the Robotaxi.

Regarding Tesla's upcoming Robotaxi unveiling event, Morgan Stanley believes it will be a strong catalyst for Tesla's stock price to continue to rise. Undoubtedly, if Tesla can prove that they are progressing as planned or accelerating the development of Tesla's fully autonomous driving system, based on Tesla's FSD system supported by massive AI training/inference computing resources, and when Robotaxi will generate revenue for Tesla when fully deployed in the market, then this Robotaxi unveiling event could indeed be a real breakthrough.

NVIDIA CEO Jensen Huang recently praised Tesla's FSD built on AI supercomputing in a media interview. Tesla's FSD is based on the Dojo supercomputer chip and NVIDIA's high-performance AI GPUs (mainly H100 and H200, Musk stated that they will purchase Blackwell architecture AI GPUs in the future), relying on these powerful hardware systems to support Tesla's FSD's massive training/inference computing needs. Huang and other tech giants have publicly stated that Tesla's FSD is currently the most advanced driver assistance system, which can fully achieve autonomous driving in most cases, completely freeing human hands.

Tesla's long-awaited autonomous robot taxi service (Robotaxi) will be based on the latest upgraded FSD fully autonomous driving technology. Tesla envisions these self-driving vehicles being able to handle various complex transportation tasks without human driver intervention, including large-scale passenger transport, integrating these vehicles into Tesla's broader AI and electric vehicle strategy. However, global deployment still requires comprehensive approval from regulatory authorities.

Under the leadership of "Wood Sister" Cathie Wood, Ark Invest's confidence in Tesla's ability to launch a robotaxi network in the next five years has greatly increased. The firm believes that in the future, each Tesla vehicle will become a cash flow-generating machine driven by artificial intelligence, expecting Tesla's business model to shift from one-time car sales to recurring sales revenue.

The outlook for Tesla's energy storage business is also a key factor in Morgan Stanley's bullish view on Tesla's stock price. The Morgan Stanley analysis team stated that Tesla's solar and energy storage business, benefiting from the global AI trend, may be the most attractive to investors in the future. This year, the strongest performing categories within the US utility sector have been focused on electricity stocks and renewable energy stocks The main logic behind this is that these two subcategories are seen as one of the biggest beneficiaries of the unprecedented wave of global corporate AI deployment. After all, the exponential expansion of high-energy-consuming AI data centers due to the fierce demand for AI chips cannot be separated from the large-scale electricity supply infrastructure. This is also the origin of the mainstream market view that "electricity is the end of AI".

The extremely strong demand for renewable energy such as solar energy in global data centers is mainly due to the global decarbonization trend. Under this trend, solar energy and other renewable energy sources may become the most important source of electricity generation, even without exception. The Tesla energy storage equipment required for long-term storage of large-scale solar energy will undoubtedly play a core role similar to a "shovel seller"