Tesla rises 2% as Morgan Stanley backs AI, robotics efforts with 'top pick' status

By Kanchana Chakravarty and Aditya Soni

(Reuters) - Tesla shares rose 2% on Monday after Morgan Stanley reinstated the electric-vehicle maker as its top U.S. auto pick, saying the company's artificial intelligence and robotics efforts could power growth even as the mainstay car business stumbles.

The note dated Sunday was the latest from analyst Adam Jonas, a longtime Tesla bull who has praised the company's push beyond autos as sales face pressure from high U.S. borrowing costs and fierce Chinese competition including from BYD.

Industry data showed Tesla sales fell 45% in Europe in January while overall EV sales jumped 37% in the region.

Jonas said recent setbacks, including Tesla's first annual deliveries drop in 2024, signaled its shift from an "automotive pure play to a highly diversified play on AI and robotics."

He reaffirmed his $430 price target, one of Wall Street's highest, which implies a 44% upside to the stock's last trade.

The remarks echoed Tesla CEO Elon Musk, who has pivoted the automaker to robotaxis and AI in the past year, even as experts argue that large-scale adoption of the vehicles could be years away due to regulatory hurdles and technological limitations.

Jonas is no stranger to bold Tesla predictions. In September 2023, he said Tesla's Dojo supercomputer could boost its market value by nearly $600 billion through advancements in robotaxis.

Since then, Tesla's market value has risen by about $150 billion to nearly $950 billion.

But its shares have trailed the broader U.S. market this year, declining 27% as early euphoria over Donald Trump's election win waned, giving way to concerns about weakening sales and CEO Elon Musk's White House engagements.

While Musk has promised sales growth this year with the launch of cheaper models, Jonas said deliveries could decline in 2025, providing an "attractive entry point."

In October, Tesla showcased its robotaxi, while Musk touted progress on its humanoid robot "Optimus," which could eventually be priced at $20,000 to $30,000.

Musk has said Tesla will roll out driverless ride-hailing services in California and Texas this year but provided no further details.

(Reporting by Kanchana Chakravarty in Bengaluru; Editing by Tasim Zahid)