• Tesla (TSLA) plans to add 100 GW of solar manufacturing capacity, primarily to power AI data centers.
  • Morgan Stanley (MS) estimates Tesla Solar could add $20-$50 billion in equity value to its Energy business.
  • The expansion faces headwinds from U.S. solar policy, including tariffs on Chinese imports.

Tesla is aggressively expanding domestic solar cell manufacturing capacity with plans to reach 100 gigawatts annually, a move that Morgan Stanley says could unlock long-term growth and reduce energy bottlenecks supporting the company's broader ambitions. The firm reiterated its Equalweight rating and $415 price target on Tesla, citing the solar expansion as strategically important but not transformative on its own.

Elon Musk announced the initiative at the World Economic Forum in Davos, positioning it as critical infrastructure for powering AI systems both on Earth and in space. According to people familiar with the matter, Tesla is evaluating multiple U.S. locations for production, with concrete plans already underway at its Buffalo, New York facility, where capacity could reach 10 gigawatts. Other sites under consideration include Arizona and Idaho, with a second New York facility being eyed for longer-term expansion.

Vice President Bonne Eggleston is leading this effort and actively recruiting for domestic solar manufacturing positions, sources say. The company has commenced production of its proprietary TSP-415/420 solar modules, with initial output ramping to 300 MW annually as of February 2026. These modules feature 420W maximum output per panel and approximately 20.5% conversion efficiency, representing Tesla's shift from relying on external suppliers to establishing a fully integrated, domestically manufactured solar ecosystem.

Morgan Stanley's analysis estimates Tesla Solar could add $20-$50 billion in equity value to its Energy business. However, the expansion faces significant headwinds from current U.S. solar policy. President Trump's administration has rolled back solar incentives and maintained substantial tariffs on Chinese solar imports. Musk acknowledged on a recent podcast that current import tariffs are "gigantic" and described them as a barrier to domestic manufacturing, but he remains committed to expanding U.S. production regardless.

There is potential for a policy reversal, given that solar supply constraints directly impact the administration's technology competitiveness goals. If achieved, Tesla's 100 GW target would vastly exceed First Solar Inc., the current U.S. leader with expectations to boost output to 14 gigawatts this year. For context, Musk noted at Davos that China produces approximately 1,500 GW annually and deploys over 1,000 GW per year, highlighting the scale of the challenge.

Efforts to ramp up production have hit a snag, with some insiders pointing to regulatory hurdles and sourcing issues. Without a deal to ease tariffs, the company could face delays in meeting its ambitious targets. Tesla did not respond to requests for comment on the timeline or specific challenges.

The expansion represents a strategic pivot from Tesla's earlier solar efforts, which remained niche after the acquisition of SolarCity in 2016. Its "Solar Roof" product failed to achieve mainstream adoption, limiting it to a residential market. Now, the focus is on large-scale industrial solar cell manufacturing to address the massive electricity demands of AI data centers, where both Tesla and SpaceX are independently targeting 100 GW annual capacity within three years.

SpaceX's capacity will likely support its proposed network of millions of solar-powered AI satellites, while Tesla's focus remains on ground-based "Solar + Storage" ecosystem development. This dual approach aims to solve the energy bottleneck constraining AI development, as AI chip production increases exponentially while electricity capacity growth lags at roughly 4% annually.

In the short term, Tesla is expected to expand its Buffalo facility and scale TSP-415/420 module production. Long-term, the ambition could transform U.S. solar manufacturing infrastructure, currently underdeveloped relative to global competition. The scale—100 GW annually would represent roughly 33 times current U.S. solar cell production—signals a fundamental restructuring of domestic energy capacity, with implications for AI infrastructure and industry standards.

Correction: An earlier version of this article misstated the conversion efficiency of Tesla's TSP-415/420 modules; it is approximately 20.5%, not 25%.