Why does Tesla want to build 100 gigawatts of solar energy manufacturing capacity?

Investing.com - According to a report by Morgan Stanley this week, Tesla’s plan to develop 100 gigawatts of solar manufacturing capacity reflects a long-term strategic outlook shaped by geopolitical factors, supply chain risks, and the growing electricity demand from next-generation data centers.

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Analyst Andrew Percoco wrote, “We believe TSL’s decision to allocate capital to solar manufacturing is based on a long-term strategic outlook surrounding evolving geopolitical issues and data center demand.”

He told clients that deeper vertical integration could also strengthen the company’s energy business.

Morgan Stanley believes Tesla’s solar ambitions could add $25 billion to $50 billion (per share $6 to $14) in equity value to its Tesla Energy division, which the firm currently values at $140 billion.

The report added that once scaled, Tesla’s solar business could generate $25 billion in revenue and an additional $3 billion to $4 billion in pre-tax profit.

Building 100 gigawatts would require significant investment, potentially costing $30 billion to $70 billion in capital, which is not included in Tesla’s 2026 capital expenditure guidance.

However, Morgan Stanley believes the long-term benefits could justify this investment, especially considering the strategic link to Tesla’s energy storage business.

Importantly, Percoco stated that the firm believes “a large portion of the 100-gigawatt capacity will be used for data centers in space,” with a smaller share allocated to facilities on Earth.

The report notes that this aligns with Elon Musk’s goal of “sending data centers powered by large amounts of solar energy into space,” avoiding energy bottlenecks that could hinder Tesla’s broader ambitions.

Although the global solar market is currently oversupplied, Morgan Stanley expects Tesla’s new capacity to be primarily used for specialized applications, insulating it from traditional supply and demand dynamics.

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