Morgan Stanley just did what Tesla hasn’t: put a real number on the 100-gigawatt solar bet we warned readers about four days ago. The answer is somewhere between $30 billion and $70 billion. For context, Tesla’s entire capital expenditure budget this year is already north of $20 billion before a single solar cell rolls off the line.

The fact: Morgan Stanley analyst Andrew Percoco estimates Tesla’s vertically integrated solar manufacturing push could cost $30 billion to $70 billion, or $15 billion to $20 billion if the company limits itself to cell production only.
The delta: The majority of that solar capacity isn’t destined for rooftops or utility grids. According to Percoco, most of it will feed SpaceX’s proposed orbital data center constellation of up to one million satellites.
The buyer impact: Morgan Stanley now projects Tesla will burn $8.1 billion in cash during 2026, with negative free cash flow continuing into 2027. If you’re waiting on a price cut for the Model 3 or Model Y, this spending spree may delay it.

Morgan Stanley values Tesla’s energy division at $140 billion, with room to grow

Percoco, who replaced longtime Tesla analyst Adam Jonas in August 2025, currently values Tesla’s energy business at $140 billion, or roughly $40 per share. That accounts for about 10% of Morgan Stanley’s $415 price target. The solar expansion could add $20 billion to $50 billion on top of that, pushing the energy division’s total potential value to $190 billion.

At full scale, Percoco estimates Tesla could generate $25 billion in annual revenue from a vertically integrated solar operation. That would nearly double what the energy generation and storage division brought in during 2025.

The numbers also come with billions in potential tax credits, though that claim gets awkward fast. The Trump administration already eliminated the clean energy incentives that Tesla Energy itself publicly criticized last May. Whether new production-focused credits survive congressional politics is anyone’s guess.

America’s solar supply chain can’t support what Musk is promising

The scale mismatch remains staggering, and it’s the same problem we detailed in our February 6 coverage. The U.S. currently produces 65.1 GW of solar modules annually but only 3.2 GW of solar cells, according to the Solar Energy Industries Association. Annual domestic demand for utility-scale solar tops out at 40 GW. Musk wants to build 100 GW of cell manufacturing capacity by the end of 2028.

Tesla has begun evaluating production sites including its existing factory in Buffalo, New York, and locations in Arizona and Idaho, Bloomberg reported last week. The Buffalo plant currently operates at roughly 300 MW of panel assembly capacity. Musk is promising more than 300 times that output.

The company unveiled its first fully designed and manufactured solar panel in January, built at the Buffalo facility alongside Tesla’s Solar Roof product. First deliveries are expected in Q1 2026.

The real customer isn’t homeowners. It’s SpaceX.

Here’s where the Morgan Stanley note gets interesting. Percoco writes that only “a portion” of Tesla’s planned solar capacity will serve the U.S. utility market. The majority will instead supply space-based data centers.

SpaceX filed with the FCC on January 30 to launch up to one million satellites designed to function as orbital data centers for AI workloads. The satellites would orbit between 500 and 2,000 kilometers, running on near-constant solar power. SpaceX is also building its own 100 GW of solar cell capacity. The connection between Tesla’s solar buildout and SpaceX’s space ambitions is now explicit in Morgan Stanley’s analysis.

“We believe Tesla’s plan to vertically integrate solar manufacturing is representative of Elon Musk’s goal to send a significant amount of solar-powered data centers into space,” Percoco wrote.

This frames Tesla’s solar investment less as an energy play and more as a supply chain move for Musk’s broader orbital computing vision. The question for Tesla shareholders is whether they’re comfortable funding a $30 billion to $70 billion bet whose primary beneficiary may be a separate, privately held company.

The cash burn math is brutal

Morgan Stanley now projects Tesla’s 2026 capital expenditures will exceed $20 billion, more than double what the market previously expected at $11 billion. The result: negative free cash flow of $8.1 billion in 2026. Cash consumption continues into 2027. A return to positive free cash flow isn’t expected until 2028.

That three-year burn period coincides with Tesla navigating an automotive business already under pressure from expired tax credits, rising Chinese competition, and declining global deliveries. Tesla posted its second consecutive year of declining vehicle deliveries at the close of 2025.

EVXL’s Take

We wrote four days ago that Musk’s 100 GW solar promise should worry investors. Now Morgan Stanley has confirmed the price tag: up to $70 billion, with Tesla bleeding cash for three straight years to get there.

The energy storage business is real. We’ve covered its growth from a small segment to Tesla’s most profitable division, with 30% gross margins that put the 17% automotive margins to shame. The 164-stall solar-powered Supercharger in Lost Hills proved Tesla can integrate solar, storage, and charging at scale. The Megapack business is expanding globally, and Tesla is the only AAA-rated supplier in the BESS bankability space.

But battery storage and solar cell manufacturing are completely different supply chains. One Tesla has mastered. The other is dominated by China, which controls over 80% of the global solar supply chain from raw silicon to finished panels. And now we learn that most of the solar output isn’t even for Tesla’s own energy customers. It’s for SpaceX satellites.

Percoco himself admits this isn’t material to Tesla’s valuation on a standalone basis. The justification is that without the solar investment, Tesla faces “energy-related bottlenecks” across its broader business. That’s a polite way of saying Musk needs solar panels for his space company and wants Tesla shareholders to fund the factory.

Expect Morgan Stanley’s $8.1 billion cash burn projection to become the benchmark number analysts use to pressure Tesla on its Q1 2026 earnings call. If capex comes in higher than $20 billion without a clear path to solar cell production at scale, the stock’s premium valuation loses one of its remaining supports.

Editorial Note: AI tools were used to assist with research and archive retrieval for this article. All reporting, analysis, and editorial perspectives are by Haye Kesteloo.