Tesla's humanoid opportunity is 'bigger' than autonomous cars - Morgan Stanley

Morgan Stanley analysts explored how AI is transforming robotics, and they now see the humanoid opportunity as "far bigger and faster adopting than autonomous cars." Specifically, the analyst looked at Tesla's (NASDAQ:TSLA) Optimus humanoid robot.

"AI is driving transformational change in robotics," analysts at the firm proclaimed. "We believe the humanoids opportunity is far bigger and faster adopting than autonomous cars and will see a greater quantum of capital behind it. Tesla is at the epicenter of the theme. Investors may need to add new tabs to their excel models."

Commenting on why the world needs robots shaped like humans, the analysts said the strongest argument is that the world was already created for and by humans.  Nvidia’s CEO Jensen Huang agrees.  He recently said, “The easiest robot to adapt into the world are humanoid robots because we built the world for us."

So, how big is the humanoid opportunity?  The analysts said amid a theoretical $30 trillion global labor market, their US TAM model forecasts a humanoid population of 8 million units by 2040 ($357 billion wage impact) and 63 million units by 2050 ($3 trillion wage impact).

At Tesla's recent annual meeting, CEO Elon Musk said he believes that humanoids will eventually outnumber humans by two-to-one or more. "I think the ratio of humanoid robots to humans will probably be at least two-to-one, something like that," Musk said. "One-to-one for sure. So, which means like somewhere on the order of 10 billion humanoid robots. Maybe, maybe, maybe 20 billion or 30 billion."

The analysts believes Tesla is uniquely positioned to enable and benefit from humanoids.  He highlights three key factors supporting the Tesla "AI Enabler" case:

1. Massive data set that is both high quality (edge cases from unique driving situations) and continuously growing at an accelerating pace (constantly collecting data from increasing miles driven across growing car parc).
2. 2. Massive global manufacturing footprint with labor-intensive processes that are relatively simple to replicate via automation, which creates the opportunity to "observe" and collect data from its own workers to train bots (and continuously iterate upon that pattern).
3. 3. Experience in vertically integrating key hardware and software infrastructure.

The analysts highlight that their current $310 price target on Tesla is derived from the company’s auto (hardware), auto-related (software, services), and energy-related businesses, and they have not included the potential humanoid opportunity into Tesla's revenue streams.  The firm maintains an Overweight rating on the stock.