Tesla Poised to Benefit from Renewed AI Focus Amid Chinese Competitor's Rise
The emergence of Chinese AI startup DeepSeek and its R1 reasoning model has sparked a market frenzy and raised concerns among investors about the potential impact on US tech giants. This renewed emphasis on AI presents a promising opportunity for Tesla (TSLA).
According to Morgan Stanley analyst Adam Jonas, DeepSeek's advancements have the potential to disrupt the industry. "Deepseek's R1 performance raises questions about intensifying global AI competition, computational efficiency, and national security," he notes.
Jonas believes that while chatbots and virtual assistants are important, "embodied AI" – where AI powers physical objects – could hold significant implications for the AI race. He emphasizes the growing investor interest in embodied AI, driven by advancements in generative AI and supercomputing.
For Tesla, this means that advancements in AI will enhance its self-driving and autonomous vehicles. Jonas suggests that EVs serve as "sockets" for embodied AI, and the US's embrace of electric mobility is crucial for its leadership in autonomy.
Moreover, Tesla's vast collection of visual data is crucial for training the vision models required for physical robots. "Just as chatbots need textual data, physical robots need vision data to train their VLA foundation models," Jonas explains.
Tesla's optimism regarding its Optimus robot aligns with the broader industry focus on embodied AI. Jonas projects half a million Optimus robots in service by 2027, representing a trillion-dollar market opportunity.
The national security implications of embodied AI, particularly in military settings, are also driving government attention and spending. Jonas highlights that advancements in generative AI and large language models directly impact the training of foundation models for robotics.
Morgan Stanley maintains its Top Pick rating for Tesla in the automotive sector, with a price target of $430.