Investment bank Morgan Stanley continues to be one of Tesla's biggest cheerleaders as it reasserts that the firm's future is dependent on humanoid robots and the AI revolution. Tesla's stock has been on a consistent downward trend this year as investors question the firm's vehicle deliveries. The shares dropped by 10% during trading yesterday before closing the day 2.6% lower after they jumped following a market rumor about President Trump deciding on a 90-day reprieve for his tariff announcements. In its note, Morgan Stanley maintains an Overweight rating on Tesla shares, maintains its $410 share price target and keeps the stock as a Top Pick.
Tesla To Benefit From "Embodied AI" Believes Investment Bank Morgan Stanley
Tesla's shares are on a tear today after having gained 4.8% in two hours of trading. The stock is still down by 2.8% since President Trump won the November election amidst a flurry of bearish notes and vehicle delivery problems. However, throughout the turmoil, Morgan Stanley has remained an ardent supporter of Tesla and continues to point out that it believes the firm benefits from longer-term tailwinds from AI, robots and other associated technologies.
Morgan Stanley's previous note for Tesla reduced the firm's share price target to $410 from $430 and kept an Overweight rating on the stock. The bank had trimmed the estimates to account for lower deliveries. Yet, the bank maintained that the lower deliveries did not change its narrative for the firm.
Morgan Stanley, in its latest note, outlines that the tariff-induced stock market selloff was driven by investor concerns about the US economy, changes in global geopolitical power balance and the overall benefits of AI. However, even as Tesla suffered amidst this uncertainty, as evidenced by its shares losing 17.5% between Wednesday and Monday close, the bank believes that the proliferation of robots will prove to be a key driver of Tesla's valuation.
"Regardless of the near-term policy path, we believe the march of Embodied AI will see a proliferation of machines embedded with sophisticated robotics that navigate and manipulate 3-dimensional physical space powered by agentic software foundation models," says Morgan Stanley. It adds that humanoid robots can change the "fundamental nature of ‘production’ and how an economy is defined." The bank believes that the ability to manufacture labor in factories, through robotic production, can also change GDP metrics such as "dependency ratios, retirement age and GDP per capita."
Morgan Stanley's bullishness comes amidst a topsy-turvy time for Tesla's shares. While the shares have dropped due to historic delivery reductions, they have rallied on reports of Musk leaving his government positions to focus on his car company. Additionally, analysts have remained doubtful on whether Musk's politics or production upgrades are driving Tesla's delivery drops. For his part, Musk has denied reports of leaving his position in the Trump administration, where he has embarked on an effort to reduce government spending in a bid to streamline US government spending.
About the author: Ramish is a seasoned technology writer and editor with more than a decade of experience. He specializes in semiconductor fabrication and market analysis. With a background in finance and supply chain management - via his bachelors in Finance and a micromasters in supply chain management from MIT - Ramish combines financial rigor with deep industry insight to deliver accurate and authoritative coverage.
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