Investor's Corner
The Model Y represents a wiser Tesla and it should wake up the auto industry
It is now just a matter of time before Tesla unveils the next vehicle in its product roadmap — the Model Y. Aimed at the auto industry’s most lucrative segment today, the all-electric SUV and its potential success could definitively establish Tesla’s reputation as a successful carmaker. With this in mind, the Model Y’s 2019 release could be seen as a strategic move for Tesla, since the company is now at a point where it has matured enough to produce a vehicle of such magnitude and caliber as the all-electric SUV.
A competitive segment
The compact SUV segment in the United States is an incredibly competitive market. In 2018 alone, auto sales tracking website CarSalesBase noted that the Toyota Rav4 — the reigning king of compact SUVs — sold 427,168 units in the United States. In second place was the Nissan Rogue with 412,110 vehicles sold, and in third place was the Honda CR-V, which sold 379,013 units during 2019. Each of these vehicles sold so well, their individual sales exceeded Tesla’s record-breaking 2018 sales of 245,240 electric cars, which included 145,846 Model 3.
That said, Tesla’s 2018 sales for the Model 3 were no joke. With more than 145,000 units sold over the year, the electric sedan ended 2018 as the US’ best-selling luxury vehicle, far outselling its closest competitor — the Lexus RX, which also happens to be an SUV. It should be noted that the Model 3 accomplished this feat despite the United States generally preferring SUVs and pickup trucks over passenger cars. With the Model Y, Tesla would be removing this handicap, as the company would be competing in the SUV segment with an all-electric SUV that is bred to dominate.
From the Model 3 to the Model Y
The success of the Model 3 and the tribulations Tesla passed through during the vehicle’s ramp all contribute to help in the production of the Model Y. When Tesla started producing the Model 3, it was a carmaker whose experience was limited to the production of two relatively low-volume premium vehicles, and CEO Elon Musk was still prone to hyper-ambitious goals that border on the unrealistic. As Tesla went through the Model 3’s production challenges, and as the company hit its stride with the vehicle’s manufacturing, the electric car maker matured. This maturity became evident in Tesla’s Q2 2018 earnings call, when Elon Musk showed a notable amount of restraint and humility. Musk’s timelines since then have remained ambitious — though a lot more realistic — as shown in the company’s timetable for Gigafactory 3.
With a more mature Tesla and a more experienced Elon Musk leading the Model Y charge, the electric car maker could escape a considerable amount of the challenges it faced with the Model 3. Musk had expressed his optimism with Model Y production during the recently held fourth-quarter earnings call, when he noted that the vehicle would require much lower CAPEX than the electric sedan. Discussing the upcoming vehicle’s production further, Musk stated that the Model Y would likely see a seamless buildout, considering that it would likely be built in Gigafactory 1. This would be a notable advantage for the Model Y, considering that its battery packs would be made in the same site.
“Three-quarters of the Model Y is common with the Model 3, so it’s a much lower CAPEX per vehicle than Model 3, and the rest is also quite low. Model Y is, I think, 76% was when it got in common with the Model 3. And we’re most likely going to put Model Y production right next to — in fact, it’s part of our main Gigafactory in Nevada. So, it will just be right there. Batteries and powertrains will come out and go straight into the vehicle. So that also reduces our risk of execution and reduces the cost of having to transfer parts from California to Nevada. It’s not a for sure thing, but it’s quite likely, and it’s our default plan. I would expect Model Y will probably be — the thematic Model Y will be maybe 50% higher than Model 3, could be even double,” Musk said.
-
- A Tesla Model Y rendering. (Credit: Reese Wilson/Teslarati)
-
- Tesla Model Y rendering via AutoExpress
-
- Tesla Model Y rendering from Peisert Design
-
- An artist’s render of the Tesla Model Y. [Credit: Miguel Massé/Twitter]
The Tesla Model Y as imagined by concept artists. (Credit: Reese Wilson, AutoExpress, Peisert Design and Miguel Masse)
An impending disruption
The Model Y’s dominance will not be focused solely on the United States, either, considering that Tesla’s Gigafactory 3 in China is expected to manufacture the affordable versions of the all-electric SUV, which would be distributed to the Chinese market. Just like the United States, China is also a market that has a soft spot for SUVs. Such is the reason why the Tesla Model X — rather expensive vehicle that Musk describes as the “Fabergé egg of cars,” — is popular in China. With a lower-cost car like the Model Y in the market, Tesla’s potential in the Asian economic superpower would likely see a boost as well.
It could be said that much of Tesla’s challenges over the years were the result of its own hubris, as evidenced by the Model X’s overloaded tech and the Model 3 ramp’s over-reliance on automation. That said, there’s a good chance that Tesla would not make these same mistakes with the Model Y. With this in mind, it would be wise for veterans in the auto industry to take the upcoming vehicle seriously, and maybe come up with compelling electric cars of their own — not like seemingly converted vehicles like the Mercedes-Benz EQC either, but more like the Porsche Taycan, which was designed from the ground up as EV.
Just as the Model S and Model X caused a disruption on the higher end of the auto market, so would the Model 3 and Model Y. Provided that Tesla manages to produce both vehicles at scale, and provided that the company can release lower-cost variants that can attract a broader audience, the Model Y and its sedan sibling could ultimately become the electric cars that cement the company’s place in the hyper-competitive auto industry.
Elon Musk
SpaceX’s Anthropic deal has a catch, and Elon Musk just addressed it
Elon Musk says SpaceX’s Anthropic compute deal cuts both ways after Chamath floats higher prices.
Elon Musk pushed back on Sunday against the idea that SpaceX’s compute contract with Anthropic is a one way bet, after venture capitalist Chamath Palihapitiya argued the company could use a termination clause to charge the AI lab far more.
“It works both ways, of course. If compute becomes plentiful and cheap, SpaceX revenue will drop. No crying in the casino for either party,” Musk wrote on X Sunday evening, replying to a clip of Palihapitiya’s comments shared by AI commentator Rohan Paul.
On the All-In podcast released Sunday, Palihapitiya said either side can walk away from the agreement on 90 days’ notice. If data center supply tightens, he argued, SpaceX could exercise that option and bring the contract back at two to three times the current price, and Anthropic would have little choice but to accept. He called it “the kingmaking move,” according to BigGo Finance.
The clause itself is not new. SpaceX disclosed in its IPO filings in May that Anthropic would pay $1.25 billion per month for dedicated capacity at its Colossus clusters through May 2029, nearly $45 billion in total, with both companies able to terminate on 90 days’ notice, as Teslarati reported at the time. SpaceX’s later compute deals with Google and Reflection AI carry similar exit terms.
What has changed is the political backdrop. Palihapitiya’s thesis rests on incoming Democratic governors pulling tax incentives for data centers and slowing new construction. In Texas, Gov.-elect Gina Hinojosa campaigned on a moratorium on new data center approvals, and Deutsche Bank analysts warned last week that SpaceX’s Texas compute capacity could face delays. SpaceX and Tesla shares both fell after the midterm results.
A slowdown would favor companies that already own capacity. SpaceX acquired xAI in February and has been renting data centers to outside AI labs before the space is needed for Grok. At the Baron Investment Conference on Friday, Musk said SpaceX was “getting 50 billion a year for 35 billion dollar investments” and that it can bring a data center online in eight or nine months, compared to two and a half years for competitors. He also said SpaceX is tracking toward an annualized revenue rate above $100 billion in December, with a “best guess” of $500 billion by December 2027.
Musk’s reply points to the other side of the clause. Anthropic has signed large compute agreements with Amazon, Google and Microsoft, and if that capacity comes online faster than new construction slows, the AI lab would have its own leverage to renegotiate or leave. Musk has called Anthropic “obviously currently the leader in AI,” and it remains one of SpaceX’s largest compute customers.
SpaceX shares rose more than 2 percent in overnight trading late Sunday after closing Friday at $134.27, according to Stocktwits.
Tesla and SpaceX shares fell on Wednesday after Democrats swept both chambers of Congress. The decline stood out as broader market securities recovered and turned positive, while both of Musk’s publicly traded companies lagged.
CEO Elon Musk already joked about the unsuccessful campaigning for the Republicans, but now the new party will make pretty drastic changes to how it handles Tesla and SpaceX, and those companies will adjust their outlook.
Let’s take a deeper look.
Tesla ($TSLA)
Tesla shares traded lower during the regular session after Democrats secured both the House and Senate. The stock was down 2.32 percent at around 1:45 p.m. on the East Coast, trading at around $389.30.
The pressure is tied to more than the raw scale of Musk’s political spending, estimated at $450–474 million this cycle with roughly $224 million directed at Texas. In that state, Tesla now faces a Democratic governor and a Democratic senator after Gina Hinojosa unseated Greg Abbott and James Talarico defeated Ken Paxton.
The Austin Gigafactory, Robotaxi pilot programs in multiple Texas cities, and any related AI compute expansion sit under a new state executive who campaigned against certain corporate subsidies and floated a moratorium on new data-center construction.
Federally, Democratic control of key committees opens the door to deeper examination of Tesla’s autonomous-driving safety record, federal energy-storage and manufacturing incentives, and the national-security implications of any combination with SpaceX.
Investors are also weighing whether the company’s historically close alignment with the prior Republican leadership will invite slower permitting, additional hearings, or tighter rules on Full Self-Driving deployment.
For Tesla, the political shift adds near-term friction around state permitting and federal regulatory approvals for autonomy and energy storage. A potential merger with SpaceX may face slower review even if it proceeds.
Core growth drivers such as vehicle deliveries, energy deployments, and robotaxi rollout remain intact, yet the stock now carries a higher political-risk premium that could weigh on valuation until the company demonstrates workable relationships with the new Texas leadership and congressional majorities.
SpaceX ($SPCX)
SpaceX shares also declined in live trading on November 4 following the Democratic midterm sweep. The stock traded at $134.97, down 4.49 percent. The drop occurred even as broader indexes stabilized, highlighting a company-specific reaction to the election outcome.
Musk’s large contributions, concentrated in Texas races that both companies lost, place SpaceX’s Starbase launch facility and headquarters under a new Democratic governor.
At the federal level, Democratic control of Congress enables greater scrutiny of NASA, the Department of Defense, and other contracts that support a meaningful share of revenue, along with reviews of Starlink national-security uses and any Tesla merger. Analysts have noted that empowered committees can hold hearings and request documents on these relationships.
For SpaceX, the results raise the risk of delayed contract awards, higher compliance costs, and tighter constraints on AI and satellite infrastructure expansion, particularly in Texas where a data-center moratorium has been discussed.
A merger with Tesla could encounter political friction that slows integration of launch, connectivity, and autonomy capabilities.
While Starlink growth and launch cadence continue as primary drivers, the company faces a more contested path for federal funding and state-level operations, requiring management to rebuild ties with the new congressional majorities and Texas leadership to limit the overhang.
Elon Musk
Elon Musk calls Earth’s data centers “peanuts” next to what SpaceX is planning in orbit
Elon Musk says SpaceX capex efficiency is underestimated as orbital data centers loom by 2028.
Elon Musk is pushing back on one of the biggest worries hanging over SpaceX stock. In a reply on X on Sunday, Musk said the company’s capital expenditure efficiency is severely underestimated. He was responding to a Milk Road Stocks post citing analyst Kyle Reidhead, who estimates SpaceX will need to spend roughly $470 billion over the next five quarters.
Reidhead built that figure around the target SpaceX set on its third quarter earnings call: 13 gigawatts or more of compute by the end of 2027. In his breakdown, Nvidia captures 83 to 89 percent of the spending. SpaceX ended the quarter with 1.7 GW of nameplate compute and guided to $35 billion to $40 billion in fourth quarter capex, as Teslarati reported.
Musk did not attach a number to his claim, but the earnings call shows the argument. CFO Bret Johnsen said new compute currently pays for itself in under a year at today’s pricing, and Musk said that window could shrink to six months next year. Using that pace, Reidhead argues about $230 billion of the $470 billion could come from operating cash flow and about $60 billion from SpaceX’s roughly $90 billion cash pile, leaving around $180 billion to borrow. Musk confirmed last week that SpaceX had already closed a new $40 billion debt raise to buy GPUs.
The ground buildout is not the end goal. It is what is meant to pay for the move to orbit. Replying on Friday to charts built from Sequoia partner Shaun Maguire’s SpaceX model, Musk wrote that “Terrestrial compute will be peanuts compared to orbital compute,” adding that orbital compute deployed per month “probably exceeds terrestrial around the end of 2028 and then far exceeds it in 2029.”
Maguire’s model shows how steep that path is. It has capex climbing from $88 billion this year to $290 billion in 2027 and $369 billion in 2028, with SpaceX burning $77.8 billion in cash this year and $122.6 billion next year before turning $114.9 billion cash positive in 2028. Musk’s response to the model was, “I think we can do better.”
The orbital half runs through Starmind. SpaceX plans to operate up to 1 million AI satellites flying in clusters of about 10, linked by roughly 10 terabits of bandwidth, with deployment of thousands of units starting as soon as late 2027 out of its Gigasat factory in Bastrop, Texas, according to SpaceX’s space safety page. Musk has said each Starmind spacecraft will carry more than 250 kW of solar power.
Getting there depends on launch volume. Maguire’s model assumes 250 Starship flights in 2028, up from two this year and 38 next year. The nearer test is financial: SpaceX guided to $33 billion to $37 billion in first quarter 2027 revenue, more than double the $14.58 billion it booked in Q3, and Musk reposted that guidance again on Sunday morning.
Tesla begins groundworks on $10B ‘Project Crystal Sun’ in Texas
Elon Musk keeps justifying Tesla Cybertruck’s cancelation, but it’s confusing
