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Tesla ( TSLA ) shares charged higher Monday after Morgan Stanley made the electric vehicle (EV) maker its "Top Pick" in the U.S. automobile sector as the firm expands its reach into artificial intelligence (AI) and robotics.

Analyst Adam Jonas wrote in a note to clients that while Tesla's year-to-date deliveries have been mostly below expectations, he didn't see it as "particularly narrative changing." Instead, Jonas said that was "emblematic of a company in the transition from an automotive 'pure play' to a highly diversified play on AI and robotics."

Jonas argued that as AI moves from the digital world to the physical world, Morgan Stanley expects to see Tesla's Technology Acceptance Model (TAM), which is used in self-driving cars and other applications, will "further expand to broader domains."

Jonas, who has an "overweight" rating on the stock, explained that he felt Tesla had a more than 50% upside to Morgan Stanley's price target of $430, with a " bull case" scenario of $800. He added that fiscal year 2025 deliveries could possibly fall, "creating an attractive entry point to our preferred embodied AI name."

Tesla shares, which advanced 2% to about $299 Monday morning, have increased by nearly 50% over the past year.

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