Tesla (NASDAQ: TSLA) bull Adam Jonas of Morgan Stanley is advising investors to use caution when discussing the company’s future as an artificial intelligence (AI) entity as monumental expectations from analysts and others could leave many disappointed, he said in a note.
“While we do agree with the merits of classifying Tesla as an ‘AI company,’ we would urge caution against grouping all aspects of AI (for example, LLM with vision-based neural network training) into one bucket. As a result, we believe Tesla’s current valuation is relatively ‘full,’” Jonas wrote.
Jonas and Morgan Stanley upgraded their price target to $250 from $200.
Tesla has experienced a dramatic upturn in value over the past several weeks, mostly due to the various agreements it has reached with rival automakers to open its Supercharger Network and expand the use of the NACS connector.
However, Jonas says, “I have to be up-front with you all. While the team has defended the Tesla OW rating all year, I did not see this 111% YTD rally coming (the S&P 500 is up 14% YTD, for context).”
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Despite the monumental climb, Jonas is recommending investors still proceed with caution, and that includes not mounting their position with additional shares, which is why the firm downgraded the stock from ‘Overweight’ to ‘Equal Weight.’
Despite Jonas’s advisory that would caution investors to consider it an automaker and “an AI beneficiary,” many other bulls have considered the company a mainstay in AI, especially with its self-driving efforts.
For example, Cathie Wood of ARK Invest has put major emphasis on the company’s bull case, which has the stock price at $3,000 by 2025, and it is mostly fed by the automaker’s Robotaxi fleet, which has yet to be established.
However, this is where definitions get confusing, as Jonas is cautious to consider Tesla’s AI and self-driving efforts as two different things:
“Autonomous driving and generative AI still remain, in our view, two very different technological disciplines. While the market may want to dream on the AI theme, we’d prepare to wake up to the sound of a blaring car horn.”
Tesla shares are trading up over 1.3 percent at 2:13 PM on the East Coast.
Disclosure: Joey Klender is a TSLA Shareholder, but does not own RIVN stock.
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