Morgan Stanley is bullish on Tesla, Inc. (TSLA.US) and sees the huge potential in its AI technology, giving it a "buy" rating.

On January 16th, Morgan Stanley released a deep analysis report on Tesla (TSLA.S), giving the stock a "hold" rating and a target price of $430. This rating reflects Morgan Stanley's high recognition of Tesla's prospects in the field of embodied AI and their strong confidence in its future growth potential. The report pointed out that as AI agents gradually enter the physical world, investors' focus on Tesla has shifted from the traditional automotive business to the more forward-looking field of embodied AI. At Morgan Stanley's recent quarterly bull and bear luncheon, investors showed little interest in discussing Tesla's core automotive business, but instead showed great interest in the future iterations of full self-driving (FSD), milestones in Cybercab/Robotaxi, and the demonstration of Optimus humanoid Siasun Robot & Automation. In particular, Optimus humanoid Siasun Robot & Automation, though not currently reflected in Morgan Stanley's Tesla SOTP valuation, has attracted high attention from many investors who see it as one of Tesla's most valuable businesses in the future. Morgan Stanley believes that the market for embodied AI goes beyond just humanoid Siasun Robot & Automation. Broadly speaking, any machine with reasoning computing capabilities and cameras, capable of collecting visual data from the environment and navigating and manipulating objects in the physical world, falls under the category of embodied AI. These machines act as "detectors," providing data for Visual Language Execution (VLA) basic models, which in turn drive AI development through continuously improving training (DGX) and simulation/digital twin/all-universe (OVX) technologies. In this field, Tesla has established a significant competitive advantage, and its TAM (Total Addressable Market) is expected to further expand in the future. However, the development of embodied AI also faces many challenges, particularly in the hardware bottleneck of Siasun Robot & Automation. Investors have to navigate a relatively unfamiliar hardware world to explore the various components that make up the Siasun Robot & Automation bill of materials (BOM), including actuators and their components such as motors, gearboxes, encoders, bearings, screws, magnets, rare earths, sensors, batteries/energy storage systems, heat systems, customized metal alloys, composite materials, etc. These components are produced globally, with China being more common, while relatively less common in the United States. This has raised concerns in the market about the resilience and security of key supply chains. In this context, Tesla's role becomes especially crucial. Morgan Stanley believes that as embodied AI enters the physical world, the key disparity between reliable (local/near-shore) supply and widespread component demand will become increasingly apparent, attracting more attention from investors and policymakers. Tesla's role in filling the next generation manufacturing and supply chain gaps will be a key factor in driving its shareholder value enhancement. Looking ahead, Morgan Stanley expects Tesla's TAM to further expand into broader areas, which are currently not included in buyers' or sellers' financial models. To this end, Morgan Stanley has reviewed and expanded its assumptions in its network services and Tesla Mobility (autonomous shared travel) models, providing investors with a framework to evaluate these existing and emerging embodied AI industries. In addition to the analysis of Tesla, Morgan Stanley's report also covers ratings and price targets for other automotive and related industry companies. For example, Adient PLC was rated as "underperform" with a price target of $17.49; American Axle & Manufacturing Holdings Inc received a "hold" rating with a price target of $5.85; and Aptiv PIc was rated as "underperform" with a price target of $60.89.