Can Tesla help the U.S. catch up to China in the robot race?

Investing.com -- Tesla (NASDAQ:TSLA) could play a major role in helping the U.S. catch up to China in the race to develop autonomous machines, a contest Morgan Stanley (NYSE:MS) frames as one of geopolitical and national security importance.

In a new report, the bank says that China currently holds a significant lead in the field of “embodied AI” — including autonomous vehicles, drones, and humanoid robots — driven largely by superior capabilities in hardware manufacturing.

“China makes more drones in a day than the U.S. makes in a year,” Morgan Stanley analysts wrote, noting that AI is radically improving efficiency.

With AI, a single operator could control 100 drones, forming a swarm of autonomous systems with potential defense and industrial implications.

While the U.S. government is beginning to recognize the urgency, policy gaps remain. Transportation Secretary Sean Duffy recently stressed that “America is in the middle of an innovation race with China and the stakes couldn’t be higher,” calling for unified national standards for autonomous vehicles to replace the current patchwork of state-level regulations.

Morgan Stanley sees Tesla as the best-positioned U.S. company to lead this charge.

The Wall Street giant highlights Tesla’s competitive edge across six pillars — Data, Robotics, Energy, AI, Manufacturing, and Space — dubbed the company’s “DREAMS.”

According to the note, Tesla has “7 million cars on the road today” and is building toward over 100 million by 2035, while also leading in in-house robotics and battery tech.

But manufacturing may be Tesla’s most important advantage. Elon Musk considers it the core of the company’s moat, the analysts said.

“You need to make the probes, to collect the data to improve the probes to collect more data to improve the probes… you get the idea,” Morgan Stanley analysts led by Adam Jonas said in the report.

Tesla’s vehicles serve not just as products, but as platforms to develop and refine AI systems for broader applications.

“The car is to Tesla what the book was to Amazon (NASDAQ:AMZN),” Jonas continued.

Tesla’s planned launch of unsupervised autonomous vehicles in Austin by the end of June could serve as a major milestone. Unlike California, Texas regulations appear more accommodating for such deployments.

As the U.S. seeks to reawaken its “Apollo spirit” and close the innovation gap, the report concludes with a pointed message: “If Tesla doesn’t help narrow the gap, who will?”