Tesla Poised to Benefit from AI Revolution Amidst Chinese Competition
As DeepSeek's AI breakthroughs stir concerns within the tech industry, sparking a market pivot towards AI, Tesla (TSLA) emerges as a potential beneficiary.
Morgan Stanley analyst Adam Jonas highlights the significance of DeepSeek's R1 reasoning model reportedly surpassing OpenAI's ChatGPT. This development raises questions about intensifying AI rivalry globally and its implications for computational efficiency, national security, and policy.
Jonas emphasizes that while DeepSeek and ChatGPT focus on chatbots and virtual assistants, it is "embodied AI" - AI-powered physical objects - that holds greater potential in the AI race.
Tesla's advancements in AI, whether stemming from OpenAI, DeepSeek, or its own initiatives, will enhance the capabilities of its millions of vehicles utilizing Autopilot and other self-driving technologies. Jonas asserts that electric vehicles serve as "sockets" for future embodied AI.
Moreover, the AI race generates a surge in demand for visual data, which Tesla collects extensively. Vision data is crucial for training AI models that enable physical robots to function.
Tesla's Optimus robot, which leverages embodied AI, stands to benefit from the renewed focus on this field. Musk predicts that half a million Optimus robots could be deployed by 2027, representing a trillion-dollar market opportunity.
National security considerations also contribute to increased investment in embodied AI. Jonas predicts that government attention to the implications of AI in military applications, including drones, will fuel spending and investor interest in this segment.
Morgan Stanley maintains its Top Pick rating for Tesla in the automotive sector and a price target of $430.