Tesla's big test

Good morning,

Many kids dream of becoming astronauts (as will soon be evidenced by Halloween costumes), but what about astro-investors? Yesterday, Elon Musk said he’ll give every child in America one of his shares in SpaceX — which is slated to report Q3 earnings today before Tesla tomorrow. In today’s edition:

• Tesla deliveries fall, but the EV market has a tailwind
• New Ramp data shows more cracks in the AI thesis
• The “casino” comparison that tanked chip stocks
• $500K households are living paycheck to paycheck

Tesla’s earnings will test its big ambitions as EVs lose their credits but find their spark

To infinity and Elon? After Tesla unveiled its flying car last week, the EV giant is preparing to unveil something much more grounded: its third-quarter earnings results. We already know Tesla’s delivery and production #s from the quarter, and they’re not especially energizing.

• Tesla delivered 486.5K cars (98% of which were Model 3 or Y), down 2% from the same quarter a year earlier.
• That’s a reversal from the growth seen in the first two quarters of the year (in Q2 alone, Tesla’s deliveries were up nearly 100K from a year earlier).
• On the brighter side: Tesla reported 9.6% growth in its energy business (think: solar panels, Powerwalls, and battery energy storage).

Back to the futures: Analysts expect Tesla’s revenue to come in slightly lower than in Q2, but its EPS to rise. Tesla’s results tomorrow, combined with SpaceX’s today, will test whether EV + Starlink profits can keep powering Musk’s AI spending ambitions amid rumblings of a potential merger between his two companies.

Tesla’s delivery drop is reflective of a broader downturn in the U.S. electric vehicle market, where sales have fallen since EV tax credits were scrapped late last year. U.S. EV sales saw double-digit YoY declines in the first three quarters of the year, according to data from Cox Automotive’s Kelley Blue Book. But over the course of this year, the figures have been trending up:

• “EV sales in Q3 accounted for approximately 6.4% of all new-vehicle sales… the strongest share since Q3 2025, when EV share moved above 10% for the first time ever,” according to a reportfrom Cox Automotive.
• Global EV sales ticked down year-over-year in September, snapping a six-month growth streak, but that’s largely because of a tough comparison with September 2025—the last month before the U.S. federal $7.5K EV tax credit expired.

The bottom line:

Credits or not, gas prices are hot… With U.S. gas prices staying above $4/gallon for a record number of days and global fuel prices spiking, we can expect EV demand to keep creeping back. Europe’s electric car sales jumped a whopping 70% last month, a September record. In the U.S., used EV sales hit the highest level on record in Q3. Meanwhile, hybrids are having a moment, with U.S. sales up nearly 27% in the past year, according to Edmunds data.

Fresh data from Ramp Economics Lab

There’s been a massive slowdown in AI spend growth over the past two months.

What’s driving it?

According to Ramp economist Ara Kharazian: “The main driver is price declines at the frontier, in addition to efficiency and quality improvements for models across intelligence levels, that are driving the blended price per million tokens down.”

See the latest Ramp data pointing to cracks in the AI thesis.

Sound bite: the casino analogy

Chip stocks fell last Tuesday after Broadcom CEO Hock Tan compared many AI investors to casino gamblers.

• "A lot of investors have no clue what they are investing in," Tan said. They "set very extreme expectations only to find out that it's almost like they are in a casino."

South Korea’s Kospi index and Japan’s Nikkei tumbled after the comments, while U.S. heavyweights like Micron and AMD also dropped.

Tan questioned the long-term economics of heavy AI investments and posited that insufficient capital could constrain the industry’s future growth.

Survey signals

Nearly 37% of U.S. households earning over $500K say they are living paycheck to paycheck, a new survey from Goldman Sachs Asset Management showed.

• Households above the $500K threshold were the second-most likely group to say they’re living paycheck to paycheck, after those earning less than $50K.

The survey suggests financial security doesn’t uniformly improve with income. Goldman says it follows a U-shaped pattern, with strain being felt in sub-$100K households, then improving up to $300K.

Above that $300K threshold, self-reported financial security declined.

Signals Shortlist

• Apple announces product launch event for Oct. 28 (CNBC)
• Disney agrees to hire the majority of CharacterAI’s workforce (TechCrunch)
• Holiday spending set to increase 4% while shoppers focus on value (Deloitte)
• U.S. budget deficit swells to almost $2T for fiscal 2026, up 12% YoY (CNBC)
• Apprehension grows as U.S. retailers adopt AI-assisted pricing (AP)

🗓️ Leading Events:

Tuesday, October 20: Housing starts. Earnings expected from SpaceX, Netflix, United Airlines, GM, 3M, and Capital One

Wednesday, October 21: Earnings expected from Meta, Tesla, Abbott, IBM, AT&T, and Texas Instruments

Thursday, October 22: Weekly jobless claims. Earnings expected from American Airlines, Blackstone, Comcast. Spotify, and Procter & Gamble

Friday, October 23: University of Michigan consumer sentiment (final). Earnings expected from American Express