Tesla Shuts Down Dojo AI Project, May Redirect Resources to Robotics

Morgan Stanley analyst Adam Jonas sees Tesla scaling back its in-house supercomputer program, Dojo, as part of a broader efficiency drive to trim costs from AI initiatives. Jonas believes this pivot could strengthen the case for tighter collaboration between Tesla and Musk's privately held xAI, and potentially redirect incremental capex and R&D toward driving down robot production costs and improving manufacturability. Jonas maintains his Overweight (Buy) rating for TSLA stock with a $410 price target, indicating ~21% upside.

Tesla (NASDAQ:TSLA) has announced a significant shift in its AI strategy, moving away from its in-house supercomputer program, Dojo, and towards partnerships with external suppliers. Morgan Stanley analyst Adam Jonas has highlighted this pivot as part of a broader efficiency drive aimed at trimming costs from AI initiatives. According to Jonas, this strategic move could strengthen collaboration between Tesla and Musk's privately held xAI venture, potentially redirecting resources towards driving down robot production costs and improving manufacturability.

The decision to scale back Dojo follows years of development and persistent delays, with key personnel, including Peter Bannon and Ganesh Venkataramanan, leaving to form DensityAI. Tesla's new focus will be on AI5 and AI6 chips, manufactured by TSMC and Samsung respectively, which will power its Full Self-Driving (FSD) and autonomous driving capabilities. A new supercomputer cluster, Dojo 3, will be built using these chips.

Jonas maintains his Overweight (Buy) rating for TSLA stock with a $410 price target, indicating approximately 21% upside. He believes the improved GPU supply dynamics and the availability of proven partners like Nvidia and Samsung make this strategic pivot viable. This move also aligns with Musk's broader vision of integrating xAI with Tesla's robotics and autonomous systems, leveraging X's data for training.

While the disbanding of the Dojo team may disappoint those who viewed it as a potential market cap catalyst, it eliminates a costly and resource-intensive project that had outlived its strategic utility. The inference-first strategy, prioritizing real-time data processing, positions Tesla to outperform competitors in speed to market and cost efficiency.

References:
[1] https://finance.yahoo.com/news/5-key-thoughts-tesla-reportedly-135028168.html
[2] https://www.ainvest.com/news/tesla-disbands-dojo-ai-training-supercomputer-team-shifts-focus-ai5-ai6-chips-2508/
[3] https://finance.yahoo.com/news/tesla-axing-dojo-supercomputer-plans-172735139.html
[4] https://www.tipranks.com/news/tesla-could-lead-the-ai-robot-revolution-says-morgan-stanley-analyst
[5] https://finance.yahoo.com/news/tesla-tsla-faces-brand-headwinds-112157436.html