100GW, far exceeding the ground demand in the United States! Tesla is preparing to expand its photovoltaic production capacity for space data centers

# Dong Jing

Morgan Stanley believes Tesla aims to build an **independent, closed-loop energy system**. The planned capacity will mainly serve **space data centers** and secure supply chain safety, rather than simply selling solar modules. Despite hundreds of billions of dollars in capital expenditure required, IRA subsidies and vertical integration advantages could generate **hundreds of billions in revenue** and significantly raise the valuation of Tesla’s energy business.

After Tesla unveiled its vision to **add 100GW of solar manufacturing capacity**, the market’s key focus is not whether it will enter the module business, but what role this plays in Tesla’s long-term strategy. Morgan Stanley’s research points to two core themes: **supply chain security** and **data centers** — especially **space data centers**.

On February 11, according to追风交易台 (Zhuifeng Trading Desk), Morgan Stanley analyst Andrew S Percoco stated in a new research note that Tesla’s core motivation for vertically integrating the photovoltaic supply chain is **not to sell panels on Earth**, but to support its ambitious vision for **space data centers**.

Against rising geopolitical risks, securing the supply chain for this critical energy component will not only lift the valuation of Tesla Energy by about 35%, but is also essential to closing the loop between Starlink and space-based computing power.

The report also emphasized that this strategy does not come without cost. To achieve full industry-chain coverage — from raw materials to modules — Tesla would need to invest **$30–70 billion** in capital expenditure, an amount **not included** in its 2026 capex guidance of over $20 billion.

Morgan Stanley views this large expectation gap as a key variable in re-evaluating the valuation of Tesla’s energy segment.

## Real goal: space data centers and supply chain security

From a fundamental supply-demand perspective, Morgan Stanley noted, Tesla’s entry into PV manufacturing makes little sense.

Global solar module capacity already exceeds demand by nearly 40%. Even in the U.S. market, protected by trade barriers, annual utility-scale PV demand is only 30–40GW. If Tesla’s 100GW of capacity were fully sold into the open market, it would face brutal price competition.

However, the report highlights a critical mismatch:

**Most of the 100GW capacity will be used for space data centers, not ground-based power stations.**

As AI computing power moves into orbit, energy supply for space data centers has become a bottleneck. Musk repeatedly emphasized geopolitical threats to critical supply chains during earnings calls, signaling Tesla’s unwillingness to be constrained in core energy components.

By vertically integrating, Tesla aims to build a **self-reliant, controllable energy closed loop** to support its long-term goal of deploying large numbers of data centers in space. In short, this is a **“security premium”** investment to secure strategic autonomy.

## Hidden costs and $100-billion revenue potential

According to Morgan Stanley’s estimates, Tesla’s investment will depend on integration depth:

- **Full industry-chain integration** (polysilicon, wafers, cells, modules): capex of **$30–70 billion**

- **Cell manufacturing only**: capex reduced to **$15–20 billion**

Despite heavy upfront investment, the cash flow impact at full 100GW production would be substantial:

At an average module price of $0.25/W, this business alone could generate **$25 billion in annual revenue** — nearly double Tesla’s existing Energy Storage (ESS) revenue of around $13 billion in 2025.

On the profit side, mature vertical integration could push gross margins to **20–25%**. After operating expenses, it is expected to contribute **$3–4 billion** in incremental EBIT for Tesla Energy.

## IRA Act: significant policy arbitrage

Beyond strategic value, massive subsidies under the U.S. Inflation Reduction Act (IRA) represent another pillar supporting the business model.

45X tax credits vary sharply across manufacturing stages:

- If Tesla achieves **full domestic integrated manufacturing**: **$0.17/W** subsidy → **$17 billion annual profit boost** at 100GW

- If only cell manufacturing: **$0.04/W** subsidy → around **$4 billion annually**

Morgan Stanley said this policy arbitrage provides a cushion for high capital spending. Even if module sales generate thin profits, the tax credits alone ensure project returns.

## Valuation restructuring: the final piece of the energy puzzle

With this logic, Morgan Stanley revised its valuation model for Tesla Energy.

It currently assigns a **standalone valuation of $140 billion** (≈$40 per share) to Tesla Energy.

The PV manufacturing business could add an extra **$25–50 billion** in equity value (≈$6–14 per share).

While the absolute increase is modest relative to Tesla’s overall market cap, the strategic significance is eliminating the **“bucket effect”**.

Without in-house PV supply, Tesla’s expansion in energy storage, space exploration, and AI computing would eventually hit an energy bottleneck.

This investment is essentially a high-value **insurance policy** for Tesla’s future interplanetary businesses, ensuring it is not held back by solar panels in the race for **physical AI and space infrastructure**.

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The above content is from 追风交易台 (Zhuifeng Trading Desk).

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