Review & Preview: Tesla Clings To the Club — Barron's
Dow Jones Newswires ·
By Al Root
Just before releasing second-quarter earnings this past Wednesday, Tesla was hanging on to membership in the "trillion-dollar market-cap club," at $1.07 trillion. But after weak earnings and an Elon Musk warning, Tesla finished the week at $1.02 trillion, remaining (barely) with Nvidia, Microsoft, Apple, Amazon.com, Alphabet, Meta Platforms, Broadcom, and Berkshire Hathaway. ( Taiwan Semiconductor has lately been in, out, in.)
In fact, Tesla has long been a trillion-dollar outlier. The stock trades for 182 times estimated earnings, versus an average of about 30 times for the other eight. Besides Tesla, Broadcom tops the range at 42 times; at the low end, Alphabet is at 19 times. Smaller investors hold more than 40% of Tesla shares; the average for the rest is 24%. Higher retail holdings can introduce more volatility into stocks than institutions, which trade less frequently. Tesla stock is about 2.5 times more volatile than the other eight.
And Tesla is still a car company. So why does it merit a trillion-dollar value? That's no mystery: artificial intelligence. The company, says Futurum chief market strategist Shay Boloor, has "four things" needed to thrive in AI: core AI technology, data to train AI models (from its cars and factories), a way to distribute AI applications (through its self-driving cars), and lots of Nvidia chips. Tesla and Alphabet, he notes, are the only AI contenders that have all of that in-house.
Write to Al Root at [email protected]
Last Week
Markets
Japan Prime Minister Ishiba clung to power despite his party losing its Upper House majority. U.S. inbound container shipping fell for the second straight month in June, down 7.9%. Treasury Secretary Scott Bessent called for an investigation into the "entire" Federal Reserve. Stocks edged up, with the S&P 500 and Nasdaq Composite hitting highs. The White House announced a Japanese trade deal of 15% tariffs and $550 billion in U.S. investment. Japanese and European auto stocks rallied and meme stocks soared. On the week, the Dow Jones Industrial Average rose 1.3%, the S&P, after five days of highs, closed up 1.5%, and the Nasdaq, 1.02%, also a record.
Companies
France launched a probe into Elon Musk's X for data tampering. Microsoft warned of cyberattacks against its server document-management software SharePoint, blaming Chinese hackers. Stellantis warned of a $2.7 billion first-half loss, citing U.S. tariff policy; General Motors, whose earnings fell 32% in the quarter, reported a $1.1 billion second-quarter tariff hit. Block joined the S&P 500, replacing Hess, acquired by Chevron. Coca-Cola and Alphabet beat on earnings, Tesla didn't. SoftBank and OpenAI scaled back near-term plans for their Stargate project.
Deals
Universal Music filed for an initial public offering...Italy's UniCredit withdrew its bid for Banco BPM after government resistance...The Federal Communications Commission cleared the $8 billion Paramount Global-Skydance merger.
Next Week
Tuesday 7/28
Second-quarter earnings season has gotten off to a strong start, with more than 80% of companies beating earnings-per-share estimates among the one-third of S&P 500 index companies that have reported so far. This week is the busiest on the calendar, with roughly another 150 S&P 500 companies reporting, including four of the Magnificent Seven. Procter & Gamble, UnitedHealth Group, and Visa release results on Tuesday, followed by Meta Platforms and Microsoft on Wednesday. AbbVie, Amazon.com, Apple, and Mastercard announce earnings on Thursday. Chevron and Exxon Mobil close out the week, reporting results on Friday.
Wednesday 7/30
The Federal Open Market Committee announces its monetary-policy decision. The FOMC is widely expected to keep the federal-funds rate unchanged at 4.25%-4.5%. Wall Street will be keen to see whether Fed Govs. Christopher Waller and Michelle Bowman dissent, should the central bank stand pat on interest rates.
Friday 8/1
The Bureau of Labor Statistics releases the jobs report for July. Economists forecast a 106,000 increase in nonfarm payrolls, after a 147,000 gain in June. The unemployment rate is expected to edge up to 4.2% from 4.1%.
The Numbers
464
Number of new exchange-traded funds launched in the U.S. this year through June, a record.
$3.4 T
The Congressional Budget Office's final call on the 10-year deficit from the Big Beautiful tax bill.
0.1%
The percentage of households in Silicon Valley that control some 71% of the tech region's wealth.
5%
The fall in new credit-card openings from four major lenders in 2Q, first decline in more than a year.
Write to Robert Teitelman at [email protected]
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Source:
Dow Jones Newswires