Tesla reported a drop in third-quarter profits on Wednesday but topped analyst estimates as multi-billionaire Elon Musk's electric vehicle maker invested heavily in new technologies. Texas-based Tesla reported profits of US$787 million, down 42.7 percent from the year-ago period. Besides marginally lower car sales, Tesla saw a drop in revenues from regulatory credits and energy and storage, while spending on research and development jumped. Revenues were essentially flat at US$28 billion. "We continue to invest in the future through R&D and Capex spend across our businesses, including SI, robotics and energy," said Tesla, referring to the Trump administration's favoured term, "Super Intelligence" instead of artificial intelligence. "Much hard work lies ahead, but we are as optimistic as ever," the company added in the earnings release. The results follow Musk's disclosure on Tuesday that special committees of independent directors at both SpaceX and Tesla have been set up to discuss a merger of the two companies. Analysts had been cautious about Tesla's third-quarter financial performance heading into Wednesday's release. While third-quarter auto sales topped estimates due in part to an uptick in European markets amid high petrol prices, better sales have not always translated into a lift into Tesla's bottom line. Also impactful, capital spending more than doubled to US$4.7 billion. The company has also faced questions about the rollout of Tesla's robotaxi venture that has progressed much more slowly than hoped. Musk has repeatedly made overly rosy forecasts about self-driving technology, as in 2019 when predicted there would be more than a million robotaxis the following year. In Texas, where Tesla has focused its robotaxi launch, there are currently about 800 robotaxis, according to FSD Database. Tesla's release highlighted the September 3 launch of robotaxi services in Austin and said "cumulative unsupervised Robotaxi miles grew eightfold quarter over quarter." For much of this year, Tesla has also encountered scrutiny over a steep increase in annual capital spending to US$25 billion or more to fund ambitious programmes in artificial intelligence, robotics and autonomous driving. But such issues have been upstaged by the prospects of a merger between the two Musk businesses, which have a combined equity value of more than US$3.5 trillion. "We think it's a matter of when, not if" the two companies combine, said CFRA Research equity analyst Garrett Nelson. "That's the whole issue," Nelson said of a potential mega-deal. "Tesla as we know it today may not exist in six to 12 months." On SpaceX's conference call on Tuesday night, Musk said the committees have not agreed on the terms of any deal and there is no guarantee they will. Musk said the two companies could gain from working together on AI software, chip design, robotics and space-based computing. Shares of Tesla rose 1.4 percent in after-hours trading. (AFP) Edited by Cecil Wong

The Nasdaq led Wall Street to a higher close on Wednesday after quarterly results from SpaceX and Super Micro Computer improved investor appetite for artificial intelligence-related stocks while weakness in communication services stocks capped gains. SpaceX shares finished up 7.8 percent after Elon Musk's rocket and space technology firm posted its first profit as a public company. Musk said, following the report, that a merger of SpaceX and Tesla would be "a good idea," also boosting Tesla shares. Elsewhere in earnings, Super Micro shares jumped 9.6 percent and it was among the S&P 500's top gainers after the AI server maker forecast quarterly revenue and profit margin above Wall Street estimates, signalling that AI demand remained resilient. The report also benefited peers HPE, which rose 3.7 percent, and Dell, which rose 5.3 percent. The reports provided some reassurance to investors who have been worried about the sustainability of massive spending on AI buildouts and their profitability. The technology sector was hammered last week by a selloff in AI-linked stocks, with data centre operator CoreWeave at the centre of the storm. The SpaceX news "pushes back on some of the investor worries" about AI along with some help from Super Micro, according to Angelo Kourkafas, senior global strategist at Edward Jones. Kourkafas said the reports will not "answer all the questions investors have on returns on AI investments, but it's a good start." As a result, the S&P 500 Information Technology index finished up 1.6 percent, the biggest gainer among the S&P 500's 11 major industry sectors. "It's really a positive technology story for almost anyone that is somewhat involved in the artificial intelligence ecosystem," said Marc Dizard, chief investment officer at Huntington Bank. "The technology market reaction has been a reaffirmation that the artificial intelligence trade is still intact," he added. However, Dizard said sentiment can quickly shift around AI and that investors will seek reaffirmation when they monitor earnings reports from other companies. Shares in Meta rose 3 percent in late trading after it released its quarterly results following the regular session's close. After finishing up 3.4 percent in the regular session, Tesla shares rose another 1.6 percent following its report, which was also issued after the close. The Dow Jones Industrial Average rose 360 points, or 0.7 percent, to 52,856, the S&P 500 gained 44 points, or 0.6 percent, to 7,757 and the Nasdaq Composite gained 278 points, or 1.1 percent, to 26,702. Gains in the benchmark S&P 500 were limited by a 1.3 percent decline in communication services stocks. The biggest losers included telecom operators such as AT&T, which sank 6.5 percent even as it beat third-quarter revenue and profit expectations. The SpaceX results, along with a recent wireless spectrum purchase, fanned fears that it could become a formidable competitor in telecoms, according to Dizard. T-Mobile US shares fell 2.5 percent and Verizon Communications lost 2.2 percent. Also in communications services, Netflix shares sank 5.3 percent after the video streaming company issued a weaker-than-expected forecast for its fourth-quarter profit. Google's parent Alphabet also declined 1.6 percent. (Reuters) Edited by Cecil Wong

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