AI Race Heats Up, Driving Market Focus to AI-Powered Embodied Devices
DeepSeek's R1 reasoning model, surpassing OpenAI's ChatGPT, has sparked a renewed interest in AI. Morgan Stanley analyst Adam Jonas views this development as a potential game-changer for companies like Tesla (TSLA).
"Embodied AI," physical objects powered by AI, is considered a key area of the AI race. Jonas believes that this technology could be vital for Tesla's self-driving and potential Robotaxi vehicles.
"EVs are the 'sockets' for the forthcoming physical ('embodied') AI," says Jonas. "If the US wants to be a leader in autonomy, it must ultimately embrace electric mobility."
The demand for visual data, collected extensively by Tesla, also aligns with the rise of embodied AI. "Physical robots need vision data to train their VLA [vision, language, actuation] foundation models," explains Jonas.
Tesla's Optimus robot, powered by embodied AI, stands to benefit from the heightened focus on this technology. Elon Musk predicts half a million Optimus robots in service by 2027, representing a trillion-dollar market.
National security concerns and potential government funding further contribute to the investor interest in embodied AI.
Morgan Stanley maintains its Top Pick rating for Tesla and a $430 price target, citing the company's leadership in the automotive space and its potential in embodied AI.