Tesla shares rally on optimism over new supercomputer

The news: Tesla shares rallied on the Nasdaq overnight after Morgan Stanley analysts upgraded the stock on hopes its new Dojo supercomputer could drive a foray into robotaxis and software services.

The numbers: Tesla shares jumped more than 10% to USD273.58 each after Morgan Stanley raised its 12-18 month target on the stock by 60% to USD400 - the highest among Wall Street brokerages. MS also raised its revenue estimate for Tesla's network services business to USD335 billion ($521 billion) in 2040 from USD157 billion earlier.

The context: The upgrade comes after Tesla started production of its Dojo supercomputer to train artificial intelligence (AI) models for self-driving cars in July. MS analysts on Monday said Dojo could open up new addressable markets for the company that "extend well beyond selling vehicles at a fixed price," and see it driving the most value in software and services. The analysts expect Tesla's network services business to account for more than 60% of core earnings by 2040.