Morgan Stanley released a bold forecast claiming the humanoid robot market could expand to a staggering $5 trillion in annual revenue by 2050. Analysts at the investment bank predict this emerging sector will grow to roughly double the combined sales of the world’s 20 largest automakers.

This projection represents a massive opportunity for Tesla (TSLA). Apparently, the electric vehicle manufacturer is aggressively developing its Optimus humanoid robot. Tesla CEO Elon Musk has repeatedly emphasized that Optimus could eventually become the company’s most valuable product line, even surpassing its electric vehicle business.

A Massive Opportunity for Tesla

According to Morgan Stanley’s analysis, the adoption curve will be gradual but significant. The investment bank expects 13 million humanoid robots in use by 2035, primarily in commercial and industrial settings where tasks are repetitive and structured. By 2050, that number could explode to 1 billion units globally, though over 90% would still be deployed in industrial and commercial applications rather than households.

The investment bank singled out Tesla as a top potential winner, citing its “full-stack integration of hardware, software, and AI.” Morgan Stanley emphasized that robot integrators controlling the “brains, bodies, branding and ecosystems offer the highest value,” a description that perfectly fits Tesla’s vertical integration strategy.

Other tech giants like Nvidia (NVDA), Google (GOOGL), Microsoft (MSFT), Amazon (AMZN), and Meta (META) were also named key players in developing the AI “brains” powering these robots. Notably, component makers including Harmonic Drive Systems (HLIT), Nabtesco (NCTKY), Nidec, and Rockwell Automation (ROK) could also benefit significantly.

Musk recently revealed ambitious production targets, stating that the company is aiming to produce roughly 10,000 Optimus robots this year and plans to scale to approximately 50,000 units next year.

For context, Morgan Stanley’s $4.7 trillion market prediction would make humanoid robotics substantially larger than the current global pharmaceutical industry ($1.7 trillion) and nearly double current global defense spending ($2.7 trillion).

Cathie Wood Is Bullish on TSLA Stock

Last year, Cathie Wood’s ARK Invest updated its Tesla valuation model, projecting the stock could reach $2,600 per share by 2029, a 750% increase from current levels. The investment firm’s bull and bear cases suggest the stock could range between $2,000 and $3,100 per share.

In a significant shift from previous models, ARK estimates that nearly 90% of Tesla’s enterprise value and earnings will be attributed to its robotaxi business by 2029, while electric vehicle sales will account for just 10% of earnings despite representing about a quarter of total sales.

“We believe that Tesla will launch a robotaxi service within the next two years, and that the probability Tesla fails to launch a robotaxi service within five years is di minimis,” stated ARK in its analysis.

The firm expects Tesla to own and operate its initial robotaxi fleet, capturing all revenue per mile for the first one to three years, before transitioning to a model where third-party companies own and maintain vehicles while Tesla retains approximately 80% of the revenue.

ARK’s updated model estimates Tesla’s vehicle production will increase 45% annually through 2029, scaling from 1.8 million units today to between 5.8 million and 14.4 million per year. 

While the robotaxi business dominates ARK’s valuation model, the firm acknowledges several potential growth areas not factored into current projections, including the Optimus humanoid robot, stationary energy storage, Tesla Semi, Supercharger network expansion, FSD licensing, and AI-as-a-service offerings.

What Is the Target Price for Tesla Stock?

Tesla is the largest automobile company in the world, valued at a market near $1 trillion. TSLA stock went public in 2010 and has since returned close to 24,000% to shareholders. However, the EV stock has underperformed the broader markets in the last four years and is down roughly 40% from all-time highs. 

Tesla stock is priced at roughly 150 times adjusted forward earnings, higher than its five-year multiple of 115x. Out of the 41 analysts tracking TSLA stock, 16 recommend “Strong Buy,” two recommend “Moderate Buy,” 13 recommend “Hold,” and 10 recommend “Strong Sell.” The average target price for TSLA stock is $283, well below its current trading price.