Why Tesla Stock Stepped on the Gas Monday Morning
Key Points
CEO Elon Musk discussed soaring data center demand in a weekend post on X.
SpaceX will manufacture gas turbine blades to meet demand more quickly.
Shares of Tesla (NASDAQ: TSLA) stepped on the gas Monday morning, gaining as much as 4.9% in early trading. As of 11:22 a.m. ET, the stock was still up 4.5%.
The catalyst that sent the electric vehicle (EV) specialist higher was a weekend missive from CEO Elon Musk.
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The data center conundrum
In a post on X this weekend, Musk replied to a post about plans by Space Exploration Technologies (NASDAQ: SPCX), aka SpaceX, to manufacture its own gas turbine blades to remove one bottleneck in data center construction. He noted that both SpaceX and Tesla were "each building 100 gigawatts per year of solar production capacity as fast as possible," but that the process would take several years.
Natural gas would be needed to fill the gap in the interim, but the "limiting factor" on current production is the time-intensive process of casting gas turbine blades. "By doing in-house casting at SpaceX, we can accelerate [natural] gas turbines coming online by up to 18 months, which is a profound game-changer."
Investors were reminded that Tesla's energy segment produces solar panels that will be a critical component of Musk's far-reaching plans, and the company stands to benefit by supplying much-needed power for the ongoing data center build-out to support artificial intelligence (AI).
Tesla's EV sales have struggled over the past couple of years, but its solar solutions and battery storage together provide reliable energy generation and storage, and will be instrumental in reducing strain on power grids as more data centers come online.
At 169 times next year's expected earnings, there's a lot of growth already baked into Tesla's share price, so investors should weigh the potential against the cost.
Danny Vena, CPA has positions in Tesla. The Motley Fool has positions in and recommends Tesla. The Motley Fool has a disclosure policy.