Morgan Stanley believes that Tesla aims to build an independent energy closed-loop. This production capacity primarily serves 'space data centers' and ensures supply chain security, rather than merely selling components. Despite facing tens of billions of dollars in capital expenditures, subsidies from the IRA bill and the advantages of vertical integration are expected to generate hundreds of billions in revenue and significantly enhance the valuation of its energy business.
$Tesla (TSLA.US)$ After proposing the idea of 'adding 100 GW of solar manufacturing capacity,' what the market is most concerned about is not whether it will enter the module business, but rather what role this initiative plays in Tesla's long-term strategy. Morgan Stanley's research points to two key terms as the answer: supply chain and data centers—especially 'space data centers.'
On February 11, according to information from the Wind Tracking Trading Platform, Morgan Stanley analyst Andrew S Percoco noted in the latest research report that the core driver behind Tesla's vertical integration of its photovoltaic supply chain is not to sell panels on Earth, but to serve the grand vision of 'space data centers.'
The bank stated that against the backdrop of escalating geopolitical risks, ensuring the security of this critical energy supply chain could not only boost the valuation of Tesla Energy by approximately 35%, but is also a necessary step to close the loop between Starlink and space computing power.
The research report also highlighted that this strategy is not without cost. To achieve full coverage of the entire industry chain from raw materials to components, Tesla would need to invest between $30 billion and $70 billion in capital expenditures, an amount not included in its 2026 capital expenditure guidance of over $20 billion.
Morgan Stanley believes that this significant expectation gap is becoming a key variable in reassessing the valuation of Tesla's energy operations.
The true intention lies not in wine, but in space data centers and supply chain security.
According to the report, if viewed purely from the perspective of supply and demand fundamentals, Tesla’s entry into photovoltaic manufacturing at this time makes no logical sense.
Currently, global photovoltaic module production capacity already exceeds demand by nearly 40%. Even in the U.S. market, which is protected by trade barriers, annual utility-scale photovoltaic demand amounts to only 30-40 GW. If Tesla were to release all of its planned 100 GW capacity into the market, it would face fierce price competition.
However, Morgan Stanley’s report revealed a key mismatch in application scenarios: the majority of this 100 GW capacity will be used for 'space data centers' rather than ground-based power stations.
Morgan Stanley noted that as AI computing power extends into orbit, the energy supply for space data centers has become a bottleneck. Musk repeatedly emphasized the threat of geopolitics to critical supply chains during conference calls, hinting that Tesla does not wish to be constrained by others in the core energy sector.
Tesla's choice of vertical integration aims to build an independent and controllable energy closed-loop to support its long-term goal of sending a large number of data centers into space. In short, this is a 'security premium' aimed at establishing strategic autonomy.
Hidden Bills and the Potential for Hundred-Billion-Dollar Revenue
What the capital market cares about most is how this account will be calculated. According to Morgan Stanley’s estimates, Tesla's investment scale will depend on the depth of integration:
Full industry chain integration (from silicon materials, silicon wafers to batteries and components): Capital expenditure could reach 30 to 70 billion US dollars.
Battery manufacturing only: Capital expenditure could drop to 15 to 20 billion US dollars. Despite the substantial initial investment, once the 100GW production capacity reaches full operation, the resulting cash flow effect would also be remarkable.
Assuming an average selling price of 0.25 US dollars per watt for the components, this alone could generate 25 billion US dollars in annual revenue for Tesla. By comparison, Tesla's existing energy storage business (ESS) is expected to generate approximately 13 billion US dollars in revenue by 2025.
This implies that the photovoltaic business has the potential to double the revenue scale of two energy storage divisions.
On the profit side, a mature vertical integration model is expected to push gross margins up to 20-25%. After deducting operating expenses, it is projected to contribute 3 to 4 billion US dollars in additional EBIT (Earnings Before Interest and Taxes) to Tesla’s energy business.
IRA Act: An Arbitrage Opportunity That Cannot Be Ignored
Research reports indicate that apart from strategic value, the substantial subsidies provided by the US Inflation Reduction Act (IRA) are another pillar supporting this business model.
The tax credits (45X Tax Credits) for different manufacturing segments vary significantly:
If Tesla achieves full localization of its supply chain, it could receive a subsidy of $0.17 per watt. At full production capacity of 100GW, this translates to an annual profit increase of $17 billion.
If the company only engages in battery manufacturing, the subsidy would be approximately $0.04 per watt, resulting in an annual subsidy of about $4 billion.
Morgan Stanley stated that this policy arbitrage provides a safety net for Tesla’s high capital expenditures. Even if the sales profit of photovoltaic products themselves is minimal, substantial tax credits can still ensure the return on investment for the project.
Valuation Reconstruction: The Final Piece of the Energy Business Puzzle
Based on this logic, Morgan Stanley has revised its valuation model for Tesla’s energy business.
Currently, Tesla's energy business is valued independently at $140 billion (approximately $40 per share), with photovoltaic manufacturing expected to add an additional $25–50 billion in equity value (approximately $6–14 per share).
The research report noted that although this incremental value is relatively small compared to Tesla’s overall market capitalization, its strategic significance lies in eliminating the 'weakest link' effect.
Morgan Stanley stated that without its own photovoltaic supply capabilities, Tesla’s expansion into energy storage, space exploration, and AI computing power will eventually face an energy bottleneck.
This investment is essentially a high-cost 'insurance policy' purchased for Tesla’s future interplanetary operations, ensuring that it will not be constrained by a small solar panel in the current race for physical AI and space infrastructure.
Editor/Jayden