By Andrew Ross Sorkin, Bernhard Warner, Sarah Kessler, Michael J. de la Merced, Niko Gallogly, Brian O’Keefe, Sri Muppidi and Vivienne Walt
Andrew here. How high can energy prices go without hurting the stock market? Brent crude, the global benchmark for oil, topped $110 a barrel this morning, yet surprisingly — unless you believe that strong corporate earnings mean energy costs don’t matter — the stock market has stayed calm. But if oil stays here or climbs higher, companies’ bottom lines could get squeezed. We’re focusing on earnings this week, as heavyweights like Netflix, G.M. and United Airlines report, as well as Space X, which we get into below.
When Space X reports quarterly earnings on Tuesday, there will be plenty for Wall Street to keep an eye on. Investors and analysts will study Elon Musk’s trillion-dollar colossus over its artificial intelligence spending. And then there’s the question of whether Musk will announce a long-awaited combination of Space X with Tesla (which reports earnings on Wednesday).
Space X is increasingly an A.I. story. Tech stocks went up on Monday, as investors appeared to set aside their worries about the scale and speed of the A.I. buildout. Companies like Anthropic have continued to demonstrate a hunger for computing power — a need that Space X is betting on by building huge, and hugely expensive, data centers. Last quarter, Space X’s A.I. spending exploded to $15.8 billion in the quarter, more than double its previous quarterly outlay. Wall Street watchers are less concerned about whether Space X can get the financing than about how much doing so will cost, Adam Jonas, an analyst at Morgan Stanley, wrote in a recent research note.
Also watch Starlink, the satellite internet service that generates a majority of Space X’s revenue. Analysts will look to see whether the business is still growing strongly, after revenue rose 66 percent year on year last quarter. Space X recently battered U.S. telecom stocks with its deal to buy billions of dollars’ worth of wireless spectrum, raising the prospect of it offering cellular phone service. But it also faces challenges in Europe: Several telecom companies there announced plans to explore creating a satellite mobile phone service. What about a Tesla tie-up? Investors have long speculated that Musk would seek to unite the two companies, as he has done again and again. Some on Wall Street have speculated whether that transaction could be announced before year end. But uniting the two makes sense, Gene Munster, whose Deepwater Asset Management is invested in both companies, told Deal Book’s Brian O’Keefe.
Source: New York Times Business · Summarized by HeadlinesBriefing