Investor's Corner
Tesla sets record vehicle production, $2.7 billion revenue, Model 3 on track for July production
Tesla released its first quarter 2017 earnings after the closing bell on Wednesday, surprising Wall Street with record production, delivery and revenue numbers. The electric car maker reported revenue of $2.7 billion in GAAP revenue, with $2.28 billion from automotive revenue. The GAAP net loss was $2.04, with non-GAAP loss of $1.33 a share, much larger than expected. This quarter compares well with Q4’16, when TSLA surprised Wall Street after posting a fourth quarter earnings loss of 69 cents a share, and revenue of $2.28 billion. The complete text of the Tesla First Quarter 2017 Update letter can be seen at the end of this article.
Revenue
In the letter, Tesla announced that “Q1 GAAP and Non-GAAP loss from operations improved from Q4.” As in the previous quarter, the estimates between analysts varied widely. According to a consensus poll with analysts conducted by FactSet, Tesla was expected to report a GAAP loss $1.15 a share in the quarter compared with a loss of $2.13 a share in the year-ago period, and an adjusted loss for one-time items of 83 cents. Estimize, a crowdsourcing platforms that polls analysts, hedge-fund managers executives and others, expected a loss of just 17 cents a share. E*trade provided its usual estimate range from its poll of analysts: 0.230 | -0.812 | -1.690 (High | Mean | Low), also with an average of about 82 cents.
Model 3
Many analysts have suggested that eyes would be focused intensely on Tesla’s upcoming milestones, particularly its progress on its Model 3 sedan. In the letter, Tesla announced that “Model 3 vehicle development is nearly complete as we approach the start of production. Release Candidate vehicles, built using production-intent tooling and processes, are being tested to assess fit and finish, to support vehicle software development and to ensure a smooth and predictable homologation process. Road testing is also underway to refine driving dynamics and ensure vehicle durability.” Additionally, “simultaneously, preparations at our production facilities are on track to support the ramp of Model 3 production to 5,000 vehicles per week at some point in 2017, and to 10,000 vehicles per week at some point in 2018.”
The company also reported record high orders in Q1 for its Model S and X vehicles. The big run up to the stock in 2017 started when Tesla reported first-quarter deliveries, just over 25,000, on the high end of expectations. Investors will be listening for additional information about the status of the Model 3 manufacturing during the First Quarter 2017 Financial Results Q&A Conference Call scheduled for 2:30 pm PT today. The run up of the stock is also due to the fact that many on Wall Street believe that Tesla has worked out some of its manufacturing kinks and is on track to start delivering to employees the first few Model 3 sedans in July, as promised.
Cash
In the letter, Tesla announced that “Q4 to Q1 cash increased by over $4 billion. Cash at the end of Q4 2016 was $3.4 billion. Tesla raised more capital in the quarter with its March $1.5B Offering of Common Stock and Convertible Senior Notes.
TSLA Stock
Tesla shares have been going though the roof, up 80% to a record close of $322.83 on Monday, since the December low when they closed at $181.47. The past three weeks has experienced a string of record highs and the stock has traded above $300 for the better part of April, with an intra-day high of $327.66 on Monday. From a technical perspective, the sky is the limit, and while the shares have been overbought since the beginning of the year when they were trading at $214, there does not seem to be any bad news that can stop the stock from going up. This week TSLA market cap, again, topped GM as the most valuable car maker in the US with a value of over $52B vs. GM’s $50B.
While TSLA stock has soared, traders short selling TSLA have lost $3.7B in 2017, far more than has been lost shorting any other U.S. stock. This is more than the combined losses of short sellers in Apple (AAPL), Amazon (AMZN) and Netflix (NFLX), according to financial analytics firm S3 Financial Partners. Short bets against TSLA have grown to $10.1B from $8.7B at the start of April, when the more recent TSLA run started. “Momentum” traders are riding TSLA stock up and making incredible returns, especially on options, while “fundamental” traders hold onto their shorts and actually continue to build on them, hoping that the shoe will eventually drop.
As reported by Reuters in “Einhorn, nursing losses on Tesla, says investors ‘hypnotized’ by Musk”, hedge fund manager David Einhorn said on Wednesday that “Einhorn’s Greenlight Capital hedge fund bet against Tesla shares during the first three months of year, racking up losses on its short position. Greenlight did not disclose its current position on Tesla.” Unfortunately for David and other short sellers, barring a delay on delivery of Model 3, the momentum traders may still have the upper hand, at least for the rest of 2017. Today’s session ended up closing 2.55% lower at $310.76. Looking at the extended trading action after the close, the initial reaction to the numbers for Q1 2017 is nil: stock moved to $312. Expect an uneventful opening on Thursday.
Tesla First Quarter 2017 Update http://www.teslarati.com/wp-content/uploads/2017/05/TSLA_Update_Letter_2017_1Q.pdf
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 $134.27, according to Stocktwits.
Investor's Corner
Musk’s Tesla and SpaceX decline after Democratic Midterm sweep
Tesla and SpaceX shares fell on Wednesday after Democrats swept both chambers of Congress. The decline stood out as broader market securities recovered and turned positive, while both of Musk’s publicly traded companies lagged.
CEO Elon Musk already joked about the unsuccessful campaigning for the Republicans, but now the new party will make pretty drastic changes to how it handles Tesla and SpaceX, and those companies will adjust their outlook.
Let’s take a deeper look.
Tesla ($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.