Electric stuff: Tesla’s energy business is seen benefiting from the AI boom

Morgan Stanley thinks Tesla (NASDAQ:TSLA) will be an even more important player in the U.S. energy market due to power needs from the AI boom.

The firm’s analysis indicates that U.S. data center power usage may be equivalent to the power used by 150 million electric cars by 2030. Or stated another way, the forecasted increase in U.S. data center power from 2023 through 2027 is the electrical energy equivalent to adding 59 million EVs to U.S. roads, or a 21% increase in total vehicles in service. Tesla (TSLA) is seen as uniquely positioned to benefit from investment in the U.S. electric grid, accelerated by the huge needs of AI processing and data centers.

“We forecast the storage business (GWh storage deployed) to grow at a faster rate (29% 2020-2040 CAGR) vs. the solar business (MW solar deployed) (24% 2020-2040 CAGR), and at a higher margin vs. the core auto business, with the inflection point in 2023.”

Assuming an operating margin rate of 16.2% and a tax rate of 25%, Jonas and his team think Tesla (TSLA) Energy has the potential to add $3.95 billion NOPAT (net operating profit after tax), or over $1 in earnings per share by 2030. While Tesla (TSLA) is becoming more of a direct competitor with Fluence Energy (FLNC), the energy storage market is seen growing fast enough for both to benefit. The Tesla Energy business is valued by Morgan Stanley at $130 billion, or $36 per Tesla (TSLA) share. Morgan Stanley has a price target of $310 on Tesla (TSLA).

Shares of Tesla (TSLA) moved up 0.58% premarket to $183.64.