Shares in Tesla (TSLA) dropped today on fears that it is losing ground in the AI race after scrapping its Dojo supercomputer plans.
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According to a report in Bloomberg, Tesla has decided to break up the Dojo team, which was focused on developing in-house chips to power its self-driving technology.
Team Disbanded
It is understood that Dojo’s lead guru, Peter Bannon, is leaving the company, and the remaining team members will be reassigned to other data center and compute projects within Tesla.
The move follows the departure of around 20 workers, who left the automaker to start their own AI company called Density AI.
It is reportedly busy building chips, hardware, and software that will power data centers for AI that are used in robotics, by AI agents, and in automotive applications.
No reasons have been given for the strategic shift which will come as a blow to chief executive Elon Musk who wanted the market to view Tesla as an AI and robotics company. This is despite Auto revenues dominating the company’s top line – see above.
AI Pals
Indeed, Musk has said that Dojo was the cornerstone of Tesla’s AI ambitions and its goal to reach full self-driving due to its ability to “process truly vast amounts of video data.”
In 2023, Morgan Stanley predicted Dojo could add $500 billion to the company’s market value by unlocking new revenue streams in the form of robotaxis and software services.
It is making progress in this aim with the recent launch of its robotaxi service and advances in its self-driving technology. It also has Cortex, which is the company’s giant new AI training supercomputer being built in Texas and set to power the Tesla ecosystem -see below – including humanoid robot Optimus and self-driving cars.
Despite this, sources told Bloomberg that now Tesla plans to increase its reliance on Nvidia (NVDA), as well as other external tech partners like AMD (AMD) for compute and Samsung for chip manufacturing. Tesla recently signed a $16.5 billion deal with Samsung to make its AI6 inference chips, a chip design that promises to scale from powering self-driving and Optimus all the way to high-performance AI training in data centers.
Is TSLA a Good Stock to Buy Now?
On TipRanks, TSLA has a Hold consensus based on 13 Buy, 15 Hold and 8 Sell ratings. Its highest price target is $500. TSLA stock’s consensus price target is $305.37, implying a 5.24% downside.
