100GW, far exceeding ground demand in the US! Tesla’s planned expansion of photovoltaic capacity is being prepared for space data centers.

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After Tesla put forward the concept of “adding 100GW solar manufacturing capacity,” the market's main concern is not whether it will get into the component business, but rather what role this plays in Tesla’s long-term blueprint. In Morgan Stanley’s latest research, the answer points to two key words: supply chain and data center—especially “space data centers.”

On February 11, according to news from Wind Chaser Trading Desk, Morgan Stanley analyst Andrew S Percoco pointed out in the latest report that the core driving force for Tesla to vertically integrate the photovoltaic supply chain is not to sell panels on Earth, but to serve the grand vision of “space data centers.”

The firm stated that against the backdrop of increasing geopolitical risks, ensuring the security of this key energy supply chain will not only bring about a 35% valuation increase for Tesla Energy, but is also a necessary step to complete the Starlink and space computing power ecosystem.

The research note also specifically points out that this strategy is not without cost. To achieve full industry chain coverage from raw materials to components, Tesla will need to invest between $30 billion to $70 billion in capital expenditures, but this amount is not included in its capital expenditure guidance of over $20 billion for 2026.

Morgan Stanley believes this large expectation gap has become the key variable in reassessing the valuation of Tesla’s energy business.

The intention is not in the wine, but in the space data center and supply chain security

According to the report, if looking purely at supply and demand fundamentals, Tesla entering the photovoltaic manufacturing sector at this time makes no sense.

Currently, the global capacity for photovoltaic components exceeds demand by nearly 40%. Even in the US market, which is protected by trade barriers, annual demand for utility-scale photovoltaics is only 30-40GW. If Tesla’s planned 100GW capacity were fully put on the market, it would face extremely fierce price competition.

However, the Morgan Stanley report reveals a critical mismatch in application scenarios: The vast majority of this 100GW capacity will be used for “space data centers,” not ground power plants.

Morgan Stanley notes that as AI computing power extends into orbit, energy supply for space data centers becomes a bottleneck. Musk repeatedly emphasized geopolitical threats to critical supply chains on earnings calls, suggesting that Tesla does not want to be constrained in this core energy link.

Tesla’s choice of vertical integration is to build an independent, controllable energy loop to support its long-term goal of deploying large numbers of data centers into space. In short, this is a “security premium” to establish strategic autonomy.

Hidden Bills and Trillion-Dollar Revenue Potential

The capital market is most concerned about how this investment adds up. According to Morgan Stanley’s calculations, the scale of Tesla’s investment depends on the degree of integration:

Full industry chain integration (from polysilicon, wafer to cell and module): Capex could reach $30 billion–$70 billion.Cell manufacturing only: Capex can be reduced to $15 billion–$20 billion. Though the initial investment is huge, once the 100GW is at full production capacity, cash flow effects will be equally impressive.

Assuming an average module selling price of $0.25/watt, this alone would bring $25 billion in annual revenue to Tesla. As a comparison, Tesla’s existing energy storage system (ESS) business is expected to bring in about $13 billion in revenue in 2025.

This means the photovoltaic business could replicate the revenue scale of two storage segments.

On the profit side, a mature, vertically integrated model could push gross margins as high as 20-25%. After deducting operating expenses, this is expected to contribute $3–4 billion in new EBIT (earnings before interest and taxes) to Tesla Energy.

IRA Act: Unignorable Arbitrage Space

The report notes that apart from strategic value, the enormous subsidies provided by the US Inflation Reduction Act (IRA) are another pillar supporting this business model.

Tax credits for different manufacturing links (45X Tax Credits) vary dramatically:

If Tesla achieves full industry chain domestic manufacturing, it could receive $0.17 per watt in subsidies. At 100GW full capacity, this means $17 billion a year in net profit gain.

If only engaged in cell manufacturing, subsidies are about $0.04 per watt, totaling around $4 billion a year in subsidies.

Morgan Stanley notes that this policy arbitrage provides a cushion for Tesla’s high capital expenditure. Even if profits from solar product sales are thin, huge tax credits can ensure the project’s investment returns.

Valuation Reconfiguration: The Last Piece of the Energy Puzzle

Under this logic, Morgan Stanley has revised its valuation model for Tesla’s energy business.

Currently, the stand-alone valuation for Tesla Energy is $140 billion (about $40/share), with solar manufacturing potentially adding an extra $25–$50 billion in equity value (about $6–$14/share).

The report points out that while this increment is not large compared to Tesla’s overall market cap, its strategic significance is in eliminating the “barrel effect.”

Morgan Stanley states that lacking its own solar supply capability, Tesla’s expansion in energy storage, space exploration, and AI computing power will eventually face an energy bottleneck.

This investment is essentially a premium “insurance policy” for Tesla’s future interstellar businesses, ensuring that in the current race for physical AI and space infrastructure, Tesla will not be choked by a tiny solar panel.

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