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Tesla Has Long Been a ‘Hope’ Stock. But What Are Investors Hoping for Now?

Elon Musk’s changing personal priorities raise questions about where the automaker is heading

Tesla has long sold investors on the hope of a brighter future. But these days, what is that mission?

At first, the electric automaker, founded 20 years ago, was to many investors and fans the answer to climate change, especially as Elon Musk showed the world that a zero-emissions vehicle could be both cool and profitable. At one point, he said helping to reduce the risk of catastrophic climate change is why Tesla “exists.”

As time wore on and others began chasing the EV dream, Musk positioned Tesla as something else, a gateway for artificial intelligence to move from the digital world into the physical world through driverless cars and then humanoid robots.

Tesla, it seemed, was full of limitless potential.

But lately, Musk sounds less urgent about climate change. And last month, Musk threw investors a curveball. That bright AI future he has talked about for so long? Well, he doesn’t feel comfortable doing it at Tesla after all—unless he gets another giant payday that gives him more control.

Such threats immediately raise an existential question for Tesla investors: What makes the company special in a world where Musk doesn’t see climate change as a near-term risk and is wavering on his commitment to pursue AI at Tesla?

Shares of Tesla, which have already valued the company well beyond any other mere carmaker, have fallen more than 20% this year through Friday while other tech giants, such as Microsoft and Nvidia, have seen huge gains fueled by excitement around their work in AI.

In January, Adam Jonas, a high-profile analyst with Morgan Stanley, attributed 22% of his price target for Tesla’s stock to the future value created by an autonomous car fleet of about 220,000 vehicles by 2030. But he also pulled back some of his expectations after Musk’s comment about control.

“Tesla is the only truly AI-enabling stock under our coverage,” Jonas told investors in a note. “Any change of organizational or legal structure that impedes Tesla’s ability to participate in the development of AI could be detrimental to the…investment thesis.”

Success in bringing out a profitable EV with the Model 3 sedan helped make Tesla the first automaker to be valued, for a time, at more than $1 trillion. After years of struggle, Musk had delivered one of his most ambitious promises, giving him new credibility for what else he might tackle.

During that run up in 2020, Jonas remarked that the “power of hope” was helping fuel Tesla’s dramatic rise that defied traditional automotive valuations.

By then, Musk had long been selling the future of Tesla as something more than just electric cars.

In 2016, for example, he painted a picture of the automaker’s future with fully autonomous vehicle technology evolving out of its driver-assistance Autopilot efforts. He targeted demonstrating a driverless car crossing the country by the end of 2017. That didn’t occur.

In 2019, as some Tesla investors questioned whether the Model 3 could live up to Musk’s goals, the CEO held a special presentation for investors to tout the company’s efforts to develop the autonomous technology and aimed for a robot taxi fleet by the end of 2020. That didn’t occur.

Then, almost a year ago, Musk asked Tesla investors to take a leap of faith that the company’s future was all about rolling out AI software to enable robot cars as its once-explosive delivery growth showed signs of slowing and he was resorting to price cuts on an aging lineup.

“We do believe we’re…laying the groundwork here, and that it’s better to ship a large number of cars at a lower margin, and, subsequently, harvest that margin in the future as we perfect autonomy,” Musk told investors last April after disappointing quarterly results.

Investors seemed to buy into it. Shares more than doubled last year after a bad 2022, in part driven by investors worried that Musk was too distracted by his acquisition of the social-media platform now known as X.

Those distractions have only multiplied as he takes increasingly more-controversial positions on X that worry Tesla fans. That concern erupted anew this past week when some loyal faithful, including a supporter named Chuck, asked him to show more restraint.

“Chuck labors under the illusion that western civilization is not at risk, when it clearly is. If America falls, nothing else matters, not stocks, not properties, nothing,” Musk replied. “All civilizations eventually fall, as history shows, but we want this one to last as long as possible.”

That was the kind of passion Musk once brought to Tesla’s mission.

“Climate change is the biggest threat that humanity faces this century, except for AI,” Musk told a journalist in 2017. “I keep telling people this. I hate to be Cassandra here, but it’s all fun and games until somebody loses a f—ing eye.”

These days, Musk’s tone has changed. He has been advocating against corporate values such as ESG, or environmental, social and corporate governance, that aim to encourage investments in the kinds of goals he once touted. “ESG is the devil,” Musk has said.

And Musk appears to be distancing himself from some of the green movement that had so embraced him years ago. At a public event in December, Musk described the alarm over climate change as “somewhat overblown in the short term,” and called for a pragmatic approach to reducing carbon over the “next several decades.”

“Some of the environmentalist movement…is part of what is causing people to lose hope in the future,” Musk said. “So, I guess what I’m trying to say is that we should have hope in the future. We should be excited about the future, and we should build the future we want.”

That future, in Musk’s telling, involves humanoid robots, dubbed Optimus, that he says Tesla is working to develop, using the technology behind its driverless cars.

“Optimus, obviously, is a very new product, an extremely revolutionary product and something that I think has the potential to far exceed the value of everything else at Tesla combined,” Musk told analysts in January.

“I think,” he added, “we’ve got a good chance of shipping some number of Optimus units next year.”

Fabio Panetta says eurozone inflation is falling faster than expected

Italy’s new central bank chief has said the time for cutting interest rates is “fast approaching” and dismissed fears of a fresh inflationary spiral, in the latest sign that pressure is mounting to loosen eurozone monetary policy.

Fabio Panetta, who became head of the Banca d’Italia in November, said inflation in the euro area was falling faster than expected, challenges were intensifying for Europe’s already stagnant economy and recent data “clearly point to ongoing disinflation”.

“Fears that inflation would stop falling after the initial rapid decline — the ‘last mile problem’ — now appear unwarranted: inflation is falling at the same rate or faster than it has risen,” Panetta said in a speech on Saturday.

He added that after the eurozone economy stagnated for five quarters, with the region’s industrial sector “in recession” and bank lending slowing, “disinflation is at an advanced stage and progress towards the 2 per cent target [for inflation] continues to be rapid”.

“The time for a reversal of the monetary policy stance is fast approaching,” added Panetta, one of the most dovish voices on the European Central Bank’s rate-setting governing council.

Eurozone inflation has declined rapidly from its record high of 10.6 per cent in October 2022, after a surge in energy and food prices faded. In January, annual price growth in the bloc was 2.8 per cent, close to the ECB’s target of 2 per cent.

Investors are betting the ECB will start cutting borrowing costs as early as April. But the likelihood of that receded last week after other rate-setters warned there were still risks of fresh pressure on prices.

Isabel Schnabel, an ECB executive board member, told the Financial Times: “We must be patient and cautious because we know, also from historical experience, that inflation can flare up again.”

ECB chief economist Philip Lane said in a speech that recent data suggest disinflation “may run faster than previously expected”. But he also warned price pressures were expected to pick up as energy inflation stabilises, labour costs rise, demand recovers, and government support measures end.

He said: “We need to be further along in the disinflation process before we can be sufficiently confident that inflation will hit the target.”

Panetta dismissed fears that rapid wage growth — as workers try to recover the purchasing power they lost in the biggest surge of the cost of living for a generation — could cause a major rebound in inflation.

He pointed out that labour accounts for less than 40 per cent of total costs for the average eurozone company and any increase was likely to be offset by falling prices of intermediate goods and energy.

“A hypothetical increase in wage growth is currently highly unlikely to trigger a wage-price spiral,” he said.

• Sidtek, which develops and manufactures OLED microdisplays, raised a Series A worth approximately $140 million.

Changes to Stability and Growth Pact will increase pressure on governments to spend less

The EU has agreed a much-delayed reform of its fiscal rules, in a move that economists say will usher in an era of tighter budgets, even as European growth prospects are set to weaken.

After weeks of haggling, EU negotiators on behalf of governments and the European parliament on Saturday agreed to set annual targets for cutting public debt and limits for public spending — a key German demand.

The compromise gives treasuries more room for public investments by allowing countries to bring down excess debt at a slower pace over four to seven years. Also, in a nod to France and Italy, a number of exemptions allow for a more gradual tightening of the public purse.

The deal comes after the so-called Stability and Growth Pact that limits public deficits to 3 per cent of gross domestic product and national debt at 60 per cent of GDP was suspended over the past four years to allow countries to rebound from the pandemic and cushion the impact of Russia’s invasion of Ukraine — with debt and deficits ballooning across the bloc.

Economists concur that the reformed fiscal rules will lead governments to progressively rein in spending, affecting the region’s struggling economy. 

After expanding at a tepid rate of 0.5 per cent in 2023, the eurozone is set to grow 0.8 per cent this year, according to the European Central Bank. The European Commission is likely to revise its own growth estimates for 2024 downward next week.

Dani Stoilova, an economist at French bank BNP Paribas, estimated that the new fiscal requirements would knock about 0.1 to 0.2 percentage points off GDP over the next two years.

Spain, the eurozone’s fourth-largest economy, would have to do the most extra fiscal tightening among the bloc’s biggest members under the new rules, reducing its structural primary deficit by an extra 1 percentage point of GDP more than planned in 2025, according to an estimate by BNP Paribas.

The rules will have little impact on Germany, the biggest economy in Europe, where a recent constitutional court ruling on national budgetary rules forced the government to reduce its planned spending even further.

France has not managed to achieve a surplus in its primary budget that excludes interest costs since 2008 and rating agency S&P Global this week forecast that on this measure its deficit would remain one of the biggest in the eurozone over the next three years. Morgan Stanley estimated recently that France was the least likely of the four biggest eurozone economies to meet the targets set under the new rules.

Italy, which has the highest debt burden among major eurozone economies, will also struggle to reduce it, according to Morgan Stanley economists.

“Italy has historically posted primary surpluses but its ability to achieve the required adjustment is not a given, in a context where it has to pay high interest expenses,” they wrote recently in a note to clients.

Overall, the consensus view is that the rules are more demanding than the status quo, but more lax than the former framework that was suspended in 2020, and which was not consistently enforced.

“The risk with the new rules is that they will fall flat at the first hurdle, compelling a level of fiscal adjustment that is counter-productive given the growth and strategic challenges the EU is facing,” said Mujtaba Rahman, managing director for Europe at Eurasia Group.

A lot will hinge on the degree of flexibility with which the commission will apply the new rules, which will apply from 2025.

“This final agreement is not the pact of my dreams, it is different from the commission proposals, especially because it is a lot more complicated,” said EU economy commissioner Paolo Gentiloni, whose original proposal was the basis for the final framework.

“But when we take this decision, we should be very serious about the fact that we have to implement it and enforce it.”

Uranium dipped in price this past week after hitting its highest level in 16 years. Is it about to get lithium-ed?

Lithium, the lightest metal, multiplied more than five times in price in less than a year after CME Group launched a futures contract in 2021. Then it collapsed, and now it’s lower than it started.

Uranium, one of the heaviest metals, doubled in price since summer to a recent $106 per pound before dipping to just below $100. Two niche exchange-traded funds, Global X Uranium and Sprott Uranium Miners, together took in more than $1 billion in fresh investor cash over the past year, as assets under management swelled to a combined $5 billion.

Along the way, meme traders on Reddit took an interest. One typical post from last fall featured a photo of three posh young women in a convertible with the caption, “Get in losers, we’re cornering a market.” That one requires a working knowledge of the 2004 film Mean Girls, but the post’s title was less subtle: “Uranium to Uranus,” with a rocket ship emoji.

In fact, uranium was discovered in 1789, eight years after the planet for which it’s named. That’s right: If you enjoy tangential fun facts, strap in.

Bulls say the uranium market will be undersupplied for decades to come. Bears, well, there aren’t many of them. Cameco, a big, publicly traded uranium producer in Canada, is covered by 13 analysts, according to FactSet. Eleven say to buy, and the remaining two say to hold. The Kazakhstan-based industry giant, National Atomic Company Kazatomprom, has five buys and one hold, which, percentage wise, makes it slightly more popular than Alphabet Uranium’s superpower is that it can produce lots of energy for its size—20,000 times as much as coal. It’s also 500 times as plentiful as gold. More than 99% of naturally occurring uranium is U-238, which doesn’t have much oomph. It’s what’s known as fissionable, not fissile—you can split atoms to release energy, but you won’t typically get a chain reaction. For that you need U-235, which is three neutrons short of U-238. But it makes up just 0.72% of natural uranium.

No problem: Just turn the metal into a gas, spin it, and harvest higher concentrations of the lighter isotope. Less than 5% U-235 “enrichment,” as it’s called, will do for electricity generation. Higher levels are for nuclear submarines, or nuclear weapons, or nuclear submarines with nuclear weapons. Also, I should point out that Canada with its Candu reactors can create chain reactions with regular U-238, holding down fuel costs, but those use something called heavy water as a moderator, which is pricier than the regular water used by typical reactors.

Two key events have whipsawed uranium prices. In March 2011, a tsunami struck a nuclear plant in Fukushima, Japan, disabling the fuel cooling system. The resulting radiation release is estimated at a tenth that of 1986’s Chernobyl disaster, with no deaths and minimal health effects. But the public soured on nuclear power and called for early plant retirements. Uranium fell from over $60 a pound to under $20 from 2011 to 2016.

“Almost no mine in the world could operate profitably,” says John Ciampaglia, CEO of Sprott Asset Management. “Mines were put on care and maintenance. When that happens, you basically live off of inventories.” As recently as 2021, before the U.S. reported unusual Russian troop movements near Ukraine, uranium sold for $30 a pound. Then, Russia invaded and turned its role as energy supplier into a weapon. “We all learned in 2022 what happens when your natural gas gets cut off,” says Ciampaglia. “You either have no gas or you pay 10 times for it.”

The result: a nuclear power revival. “We are seeing life extensions, reactor refurbishments, and the call for new builds,” Cameco CEO Timothy Gitzel told investors during a Thursday earnings call. “And we have a technological evolution on the horizon as well, with SMRs.” That stands for small modular reactors. There are 434 operating nuclear power reactors worldwide, with 59 being built, including 23 in China. These will be traditional large-scale facilities. In markets like the U.S., where the bill is footed by private payers and new construction has stalled, companies are experimenting with small reactors using factory components.

There is more than just a warming up to nuclear power at work here. Kazakhstan is running desperately low on the sulfuric acid used to leach uranium from underground deposits. Kazatomprom says it will increase production only modestly this year, despite high selling prices. On the other hand, Cameco, which this past week reported a doubling of earnings, says it will produce 36 million pounds of uranium at two key facilities this year, up from 28.6 million last year. Its shares gave up 7% on earnings day. Last year, Cameco and Brookfiel d Asset Management bought Westinghouse Electric, which makes components for nuclear plants.

Then there are the investment buyers. In 2018, Yellow Cake, whose main business is holding uranium, went public. In 2021, Sprott bought an investment vehicle called Uranium Participation Corp. Today, it goes by Sprott Physical Uranium Trust and is the largest holding in the company’s miners ETF. Last fall, TD Securities estimated that the two companies had together acquired 63 million pounds of uranium since Yellow Cake’s initial public offering, significantly tightening the market.

Uranium’s demand outlook might warrant the rocket emojis and Mean Girls memes, but before jumping in, consider again lithium’s example. Its superpower is its light weight—it would float, if not for the fact that it reacts violently with water. That gives it the lowest charge-to-weight ratio of any battery metal and a secure spot in the long-term shift from gasoline to battery-powered vehicles, and maybe to utility-scale battery storage of solar power. But the Sprott Lithium Miners ETF, which launched a year ago at $20, is now a little over $9. This past week, J.P. Morgan wrote that the lithium market looks likely to remain oversupplied through 2028.

It’s a whole new ballgame.

Walt Disney, Fox, and Warner Bros. Discovery this past week announced a new sports-only streaming joint venture that will offer viewers content from all the major college and pro sports, bundling together ESPN, ABC, Fox, TNT, TBS, and an assortment of other sports-focused networks.

So far, the new venture has no name, and the companies haven’t unveiled a leadership team or provided details on pricing. But this new service—if launched as planned this fall—could shake the already rickety foundation of the U.S. television market to its core. With this deal, TV shifts from evolution to revolution.

Effectively, the three companies are building a sports-based version of services like YouTube TV and Sling TV that offer digital alternatives to old-school cable. They’re removing news and entertainment programming from the cable bundle, leaving only sports behind.

Michael Nathanson, an analyst with MoffettNathanson, described the plan as “the skinny sports bundle that we’ve been waiting for,” a service that “strips out the bloat.”

This is a problem if you run linear news or entertainment channels, i.e., “the bloat.” And that is hardly the only complication.

“Whether you are Paramount, Comcast, NFL Network, AMC Networks, A&E Networks, or station groups with large numbers of NBC or CBS stations, the successful launch of [the sports] bundle is your worst nightmare,” wrote Lightshed Partners analyst Rich Greenfield. Here’s why.

Cord-cutting will accelerate: Since 2018, a quarter of all U.S. households have dropped their pay-TV services, as viewers cut the cord and refocused on streaming services. One of the main reasons for keeping that cord has been sports, but the new bundle could offer a non-cable, cheaper alternative to sports fans.

Analysts have already speculated that the new service would be priced around $40 a month. The bundle won’t quite be enough for NFL fans, since it lacks Comcast’s NBC and Paramount’s CBS; but you can solve that with subscriptions to Peacock and Paramount+ at $6 a month each. That gets you to $52. Compare that with $73 a month for YouTube TV—and more if you subscribe to conventional cable.

Disney and Fox have said the offering is focused on “cord-nevers” rather than cord-cutters, but that feels like wishful thinking. There has been little reason to hang on to conventional pay-TV services other than sports and news content. And now a big part of that reason is going away.

The new package highlights a double standard in the world of television bundling. Disney is now offering a direct package of ESPN and other sports content directly to consumers, while still forcing cable providers like Comcast to pay for its other channels—including Freeform and Disney Jr.—if it wants ESPN.

“Every distributor we have ever talked to has wanted more flexibility in how they package and price bundles of linear TV channels,” Greenfield wrote about the deal.

It’s a disaster for nonsports content: Shares of E.W. Scripps fell 24% in the wake of the sports bundle announcement. The company owns a collection of nonsports cable networks like Court TV, ION, Bounce, Grit, Laff, and Defy TV that suddenly look more vulnerable if viewers cut ties with their cable or satellite service. Shares of AMC Networks sold off, too.

And it isn’t great for Paramount. The company still owns CBS and other linear channels. Its sports content was left out of the new streaming partnership.

Even Warner Bros. Discovery and Fox, which are part of the sports bundle, risk losing more business than they gain. WBD owns nonsports channels like the Food Network, CNN, and the Travel Channel, while Fox has Fox News. Both stocks moved lower after the sports bundle was unveiled. (Fox and News Corp, the parent company of Barron’s publisher Dow Jones, share common ownership.)

It’s trouble for local TV affiliates: This deal is prickly for local TV stations that have been relying on cable and satellite providers for distribution. Shares of TV Gray Television and Nexstar Media Group, which own multiple local-market TV outlets, sold off on the news.

Gray tried to keep things positive: “Gray welcomes any venture that expands the reach of local broadcasting stations, which in turn supports the ability of local stations to maintain trusted local news operations that benefit everyone,” the company said. Investors are less convinced—the stock sold off 15% after the sports bundle was announced.

It’s an issue for Fubo: FuboTV is a sports-focused virtual cable service that includes most of the channels in the new bundle—it lacks TNT and TBS. The company’s entry level “Pro” account runs $79.99 a month for a collection of 190 channels that also includes some of the above-mentioned “bloat” such as Bravo, E!, and USA. Fubo’s shares lost about a fifth of their value this past week, and the company isn’t happy.

“Every consumer in America should be concerned about the intent behind this joint venture and its impact on fair market competition,” Fubo said in a statement.

Paging Lina Khan: This isn’t a merger, but the new bundle feels a lot like the dominant players in sports TV teaming up in a way that could hurt smaller players. Will the FTC look at this? Or the FCC? Or Justice? Will they get sued by Fubo, sports leagues, or local TV networks? To lever the now antiquated metaphor: Stay tuned.

German football needs to open up to outside investors says Leverkusen boss

Fernando Carro, CEO of the Bayer-owned side, believes scrapping the rule tying control of teams to club members will revive the Bundesliga

German football should ditch its ownership rules and allow investors to buy majority stakes in clubs to make the game more exciting and build an international following, says the chief executive of current league leaders Bayer Leverkusen.  

The so-called 50+1 rule limits the involvement of outside investors in German football by ensuring that club members retain control of their teams. Leverkusen, which is owned by chemicals company Bayer, is one of a handful of exceptions.

Speaking ahead of a crucial clash on Saturday against second-placed Bayern Munich, Fernando Carro said that German teams should be allowed to bring in new shareholders to make the league less predictable and more entertaining for viewers. 

Other countries, such as England, France and Italy, have welcomed international capital into domestic football — from US billionaires and private equity firms to Gulf sovereign wealth funds.

“The 50+1 rule nowadays does not make sense. We’re competing internationally — we’re not in an isolated world. Imposing something like this via regulation is no longer valid,” said Carro. “If 50+1 wasn’t there, owners could put money into other clubs.” 

German football supporters, in particular the clubs’ core fan base known as the fanatic ultras, vehemently oppose opening the league to outside investors keen to acquire majority stakes in clubs.

Carro dismisses their argument that it would be the end of traditional football. “I like tradition,” he said, stressing it was possible to protect Germany’s football heritage while modernising the game.

Leverkusen have been on a remarkable run this season under their young coach Xabi Alonso, and remain unbeaten in 30 matches. On Tuesday, the team reached the semi-finals of the German cup, and topped their group in the first round of the Europa League, leaving them on track for a possible treble this season.

Bayern Munich head into Saturday’s match two points behind Leverkusen. The Bavarian club are the reigning German champions — last season’s victory extended their run to 11 consecutive titles.

Based in a city on the outskirts of Cologne, Leverkusen is small compared with the top German teams, with a home stadium which holds just over 30,000 fans, less than half that of Bayern Munich and Borussia Dortmund. Deloitte ranks Bayern Munich as the club with the sixth highest revenue in football, while Leverkusen does not feature in the top 30.

The lack of jeopardy has hampered the international appeal of German football, affecting the league’s revenues.

The Bundesliga currently earns around €200mn annually from its overseas rights, compared with €2bn for the Premier League and €900mn for Spain’s La Liga. Domestic rights for the Bundesliga are currently out to tender, although recent deals elsewhere in Europe point to a softening market for live football. 

“For German football, it is very important to have other winners of the league because definitely there’s a big impact on how attractive it is to watch,” said Carro, Leverkusen chief executive since 2018.  

The DFL, which operates the Bundesliga, is in the midst of talks with private equity firms CVC Capital Partners and Blackstone over a potential €1bn investment in the league’s commercial operations. However, Carro believes changes to ownership rules would be far more effective in improving the prospects of German football. 

“If you want to have more clubs trying to be at the level of Bayern Munich, getting rid of 50+1 would have much more impact,” said Carro.

Owing to the team’s recent success, Carro said that the club has been forced to introduce a season ticket waiting list for the first time, and has been overwhelmed with demand for sponsorship and corporate hospitality. 

Data consultancy Twenty First Group estimates that Leverkusen currently have a 42 per cent chance of winning the league this year, although that would jump to 64 per cent with victory over Bayern on Saturday. Last season, Bayern snatched the league title from rival Borussia Dortmund when it won its last game by scoring a decisive goal in the 89th minute.

The last time Leverkusen came close to winning three trophies was in 2002, when it notoriously squandered the opportunity to win the Bundesliga, the Champions League and the German cup final, ending up second in all three competitions.

Alonso has been linked with a move to Premier League leaders Liverpool, where he was previously a player. The team’s current head coach, German Jurgen Klopp, recently announced his intention to step down at the end of the season following nine years in charge. 

Carro said that he was “not at all worried” about Alonso’s future plans. “He is extremely happy here. We have a long-term contract, and we assume he’ll stay for a long time.”