Investor's Corner
Elon Musk makes a rare appearance on SolarCity’s Q2 conference call
SolarCity reported its Q2 quarterly results on Tuesday August 9, 2016, but unlike calls from the past where CEO Lyndon Rive’s provides a financial outlook for the nation’s largest full-service solar provider, Tesla CEO and SolarCity Chairman Elon Musk took stage to discuss future plans for the company. This marks a rare occasion for Musk and arrives at a time when discussions for the impending merger between Tesla and SolarCity is the hot topic among shareholders and analysts.
SolarCity provided shareholders with a Q2 2016 Shareholder Letter and accompanying Slide Presentation. While there might be little interest in the earnings report for Tesla owners and fans, quite a few interesting tidbits were provided during the afternoon SolarCity Analysts conference call by Musk.
Tesla Acquisition
Philip Lee-Wei Shen of ROTH Capital Partners asked why “the final deal and offer price was actually lower than the original price.”
Elon responded that “this is a negotiation of the independent board members. I actually wasn’t part of – and part of it was simply what they came up after, I think, a quite exhaustive discussion that lasted a week or two. So I’ve not inquired about the details and I’m not privy to the details, but it was ultimately what they concluded was fair between the independent board members of SolarCity and the board members of Tesla. Obviously, this is now up to the shareholder votes, independent shareholder votes where, I would say, I’m recusing myself. I’m not legally obligated to recuse myself, I’m just doing so, because I think it’s morally the right thing to do and so is Lyndon and Pete and JB Straubel.”
A new Product: Solar Roof
SolarCity is going to enter the “solar roof” market.
“We’re going to be making a pretty interesting product and I’m excited to kind of reveal to you all at some point, but it is not just your typical module, it is both very efficient and it looks really, really good,” said Peter Rive (CTO).
Elon elaborated that “It’s a solar roof as opposed to a module on a roof. I think, this is really a fundamental part of achieving a differentiated product strategy – it’s not a beautiful roof, that it is a solar roof, it’s not a thing on a roof, it is the roof. That’s – which is quite a difficult engineering challenge, and not something that is available really anywhere else that is at all good. I think this will be something that’s quite a standout. So one of the things I’m really very excited about the future.”
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“It’s just addressing a really big market segment, so just in the U.S., there is 5 million new roofs installed every year,” said Lyndon Rive (CEO).
“The interesting thing about this is that it actually doesn’t cannibalize the existing product of putting solar on roof, because essentially if your roof is nearing end-of-life, you definitely don’t want to put solar panels on it, because you’re going to have to replace the roof,” said Elon Musk (Chairman). “So, there is a huge market segment that is currently inaccessible to SolarCity, because people know they’re going to have to replace their roof, you don’t want to put solar panels on top of a roof you’re going to replace. However, if you are close – if your roof is nearing end-of-life, well, you’ve got to get a new roof anyway, there’s 5 million new roofs a year just in the U.S. And so, why not have a solar roof that’s better in many others ways as well. We don’t want to show all of our cards right now, but I think people are going to be really excited about what they see.”
Notice that roof solar is a business where there are players already: Luma Resources, CertainTeed and Integrated Solar Technology, in particular and one that DOW Chemical just exited.
The solar roof product will be manufactured in Buffalo, NY. Elon added that “it’s really important to manufacturing in-house because its panels control the aesthetics and ideally really design – it’s kind of like making a custom car, like when somebody orders a car from Tesla, they’ll pick a wide array of options, that car will be custom made to their preferences, and you really want the roof custom-made to the individual customer as a kit and then sent to, that will be, the delivery team to get installed.”
Home Energy Management
Colin Rusch of Oppenheimer inquired “how long is it going to be before the combined entity [Tesla Motors + SolarCity] introduces a home energy management system or some sort of robust energy efficiency offering?”
To which Elon joked that “solar and battery go together like peanut butter and jelly. You obviously need the battery, particularly as you get to scale and you want to have solar be a bigger and bigger percentage of the grid. If you don’t have the batteries there to balance the grid and buffer the power, you really can’t go beyond a certain percentage of solar in a particular neighborhood. Maybe you can go up to about 20% solar, but more than that, it starts to unbalance the grid and you need to buffer it, because the energy generation is low at dawn and dusk, it’s high in middle of the day, and it’s at zero during at night. So you got to smooth that out.”
Elon reiterated the usual “sustainable energy” mantra he has been preaching for a decade: “if you like sort of fast forward to where do we want the world eventually to be is want the world to have a sustainable energy generation, a sustainable energy consumption, so that it really requires the three critical ingredients for that, there is the solar panels, the stationary batteries, and electric vehicles.”
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Who is going to Win? Rooftop or centralized generation?
“You’ll have millions of these batteries, you’ve got to manage that and integrate it with the utility,” said Elon. “I do want to emphasize, there’s still a very important role for utilities here, sometimes people think that this is an either/or thing, it’s like either rooftops are going to win or centralized generation is going to win and actually both are going to win, because the electricity usage is going to increase dramatically as we transition away from burning old dinosaurs to electric cars, and then to electric transport, we would see roughly a doubling of electricity consumption as all transport moves to electric. And then, there is a tripling of electricity usage if you take all heating and make that electric as well, because obviously most heating is from oil and natural gas particularly.”
Combining battery and rooftop solar
Gordon Johnson of Axiom Capital Management inquired what was the rationale behind the acquisition [of SolarCity by Tesla] when “combining a battery and a rooftop solar company didn’t make a ton of sense because when you have a rooftop solar company with net metering, the grid acts as, effectively, a battery, ruling out the need for a battery technology.”
“Where we see net metering evolving over the next few years, I think this is a really important part of how storage is a combination with the solar,” answered Peter Rive (CTO). “A case that I’d like everybody to review is what just recently happened in New York. This is a collaboration of the local utilities and the solar industry. And the collaboration is net metering for the next three years and then a phasing to more of a grid services model, where you combine solar, storage, smart inverters and provide all these additional grid services, and you phase that in and then essentially you phase-out net metering into that grid services model.”
Peter concluded that “we see that probably happening as a standard policy and we’re going to promote that across all the different states. But you – we have to get to a point where it is the grid services, so that, actually it recognizes the value that solar and storage can provide you to grid.”
I think Peter Rive indeed sees the writing on the wall for “net metering” as being phased out over time. Net metering has disappeared already from states like Nevada, and while it has been retained in California, at least until 2019, all local utilities are switching gradually to TOD (Time-of-Day) billing (the “grid services” model Peter references above), where a “smart battery storage” product that provides “time-shifting” will solve the solar basic dilemma: while solar production peaks during midday, energy consumption is highest in the morning and evening. With storage, you can save the energy you produce for when you need it most, and at the same time you limit the output to the grid, a benefit to the local utility.
Source: Enphase Energy
Elon Musk
SpaceX’s next trillion dollar bet has nothing to do with rockets, Musk tells staff
Elon Musk told SpaceX staff AI revenue will soon dwarf rockets and Starlink combined entirely.
Elon Musk told SpaceX employees this week that artificial intelligence, not rockets, will soon carry the company’s revenue. In a roughly 29 minute internal address posted on SpaceX’s X account on Tuesday, Musk said AI revenue will pass every other line of business at SpaceX “probably in September” and pull further ahead by the fourth quarter.
The numbers he gave are specific. SpaceX currently runs 1.4 gigawatts of AI compute capacity. Musk wants that at 10 gigawatts by the end of 2027, a jump he tied directly to revenue: “if we bring 10GW of AI online by the end of next year, it will be $300 billion to $500 billion a year in revenue.” He called those “big numbers,” which undersells a projection larger than what most countries produce in a year.
We made rockets reusable and are rebuilding the internet in space. The next challenge: making life multiplanetary and understanding the true nature of the universe
Watch @ElonMusk deliver a company update to @SpaceX employees pic.twitter.com/5c8rxoCQfu
— SpaceX (@SpaceX) August 11, 2026
Musk went further on where AI fits into SpaceX’s future. “Probably in four or five years, AI will be 99% of the value of SpaceX,” he told staff, adding that digital intelligence would eventually run “a trillion times” ahead of biological intelligence as computing scales. He tied that growth to the company’s founding mission, telling employees “we must win on AI, because the future is overwhelmingly AI and robots,” with the payoff meant to help fund Starship and a Mars program that increasingly runs through Terafab, the joint Tesla, SpaceX and xAI chip plant.
Elon Musk launches TERAFAB: The $25B Tesla-SpaceXAI chip factory that will rewire the AI industry
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None of this is entirely new territory. SpaceX told investors much the same story during its first earnings call as a public company on August 4, where Musk moved the company’s $1 trillion revenue target up a year to 2030 and said Starlink could someday carry a majority of the world’s internet. What the all hands video adds is a hard deadline and a specific power figure Musk had not given publicly before, along with a franker pitch to his own workforce that AI, not launch cadence, is now the thing SpaceX is betting its future on.
The AI revenue itself is not coming from SpaceX training its own models. It is largely Starlink acting as the network layer for xAI’s workloads, plus SpaceX renting out compute capacity directly, the same approach behind the roughly $16 billion the company spent on AI infrastructure in a single quarter.
Musk closed the video with a pitch aimed at recruiting and retention rather than investors, telling employees that anyone who helps SpaceX win the AI race will eventually get the chance to go to the moon or Mars themselves. Whether SpaceX can turn 1.4 gigawatts into 10 in seventeen months is the more immediate question, and one that will show up in quarterly numbers well before anyone leaves Earth.
In a new note to investors on Tuesday, Morgan Stanley analyst Andrew Percoco said that Tesla has one big financial question to answer for investors regarding its Robotaxi rollout, Full Self-Driving software, and Optimus.
Percoco said in the note that, for the most part, investors are still very positive about the direction the company is headed. However, there are some things the firm would like to see, and they have to do with financials.
Tesla (TSLA) Q2 2026 earnings results: miss on EPS, beat on revenue
Tesla bulls are more than convinced that the company’s Full Self-Driving software is proof it can develop physical AI. Financially, however, there are still some questions, especially on elevated spending, which CEO Elon Musk said would occur as the company works to roll out Robotaxi faster and continue developing its Optimus robot.
The latter two are where Tesla will have to prove progress to investors, as Percoco writes that both projects “will require clearer evidence that Robotaxi is scaling and more tangible Optimus proof points to support the ROI on elevated capex.”
Percoco said the second quarter earnings call did not change his long-term thesis of where Tesla is positioned in the AI race, which is out in front. However, there are concerns that weaker gross margins and higher R&D spend will stress financials, and that has “sharpened our (and investors’) focus on measurable progress across Robotaxi and Optimus.”
Additionally, Robotaxi still needs to be proven with more operation in existing cities while maintaining safety but improving how many rides it gives in any given time, he said. For Optimus, Percoco wrote that he is “still looking for evidence beyond commentary around SOP.”
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Morgan Stanley put Percoco in charge of covering Tesla after long-time analyst Adam Jonas transitioned to the automotive side.
Currently, Morgan Stanley has a $415 price target on Tesla and a ‘Hold’ rating on the stock. It is trading at around $330 at the time of publication, which was 2:30 P.M. on the East Coast.
SpaceX’s massive investment in AI will make it a big winner, Argus Research said after the company’s successful earnings call last week.
The firm also upgraded shares to a Buy from Hold and set a $160 price target.
SpaceX (NASDAQ: SPCX) is currently recovering from its heavy AI infrastructure investments, as it spent nearly $16 billion in Q2 alone. The company did this primarily by monetizing high-demand GPU compute capacity at a much faster pace than traditional data center economics would suggest.
Company CFO Bret Johnsen said that SpaceX would be able to pay back anything on new deployments within a year.
There are plenty of ways the company can do this:
Leasing excess compute capacity through contracts
SpaceX has already built Colossus and Colossus II, largely for its own model training. However, much of that capacity is already rented out to third parties. It already has major deals with Anthropic, Google, and Reflection AI. These partnerships are adding billions per month to SpaceX’s spreadsheet.
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High utilization driven by industry-wide scarcity
The demand for advanced AI training and inference capacity continues to exceed what is available for use. SpaceX can fill new racks quickly after they come online, so the capital deployed converts into revenue with minimal idle time.
Additionally, management and outside observers have described the new compute capital as behaving more like a cost-of-goods-sold than traditional multi-year capex, especially because of this rapid monetization pattern.
Capacity has already scaled from ~0.4 GW a year to 1.4 GW annually by the end of Q2. There are targets of more than 2 GW by year-end.
High incremental margins on the rental business once capacity is online
GPU cloud providers often operate at strong gross margins. SpaceX can monetize capacity that was already partially built or can be added efficiently. This means that incremental EBITDA margins on the rental revenue are usually high. This accelerates cash recovery relative to the gross capital outlay.
Parallel monetization of its own AI software and applications
Beyond pure infrastructure rental, SpaceX also generates revenue from Grok through subscriptions and usage, from X through ads, data, and other related services, enterprise APIs, and the planned integration of the Cursor coding tools acquisition.
These application layers ride on the same compute infrastructure and provide additional high-margin streams that could offset build-out costs. AI-segment revenue overall rose sharply to about $2.6 billion in Q2, according to Motley Fool. This was driven primarily by the infrastructure contracts, but the software side is also partially responsible.
Efficient, large-scale deployment and vertical integration advantages
SpaceX has emphasized the rapid construction of power and cooling infrastructure and favorable cost-per-megawatt economics relative to industry benchmarks in some disclosures.
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Combined with its ability to scale capacity aggressively and the fact that many contracts start generating revenue within months of capacity coming online, the effective payback compresses dramatically compared with more conventional multi-year data-center projects.
SpaceX’s dominant near-term recovery path will turn the AI clusters into a hyperscale-style compute rental business for other leading AI companies while still using a portion for internal models.
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