3 things to watch from the Tesla shareholders' meeting, plus Palantir tops estimates

Key Concepts

• Market Performance: Mixed trading with the Dow down, S&P 500 and Nasdaq Composite up.
• AI Deals: Significant partnerships and investments in Artificial Intelligence, particularly involving Amazon, OpenAI, and Nvidia.
• Federal Reserve Policy: Uncertainty surrounding interest rate cuts, with differing views among Fed officials on inflation versus employment risks.
• Investor Positioning: Focus on technology stocks, with discussions on valuations and potential rotation to defensive sectors.
• Company Earnings & Outlooks: Analysis of recent earnings reports and future guidance for companies like Amazon, Palantir, AMD, McDonald's, Spotify, and Tesla.
• Cryptocurrency Market: Weakness observed in Bitcoin and Ethereum.
• Autonomous Vehicles (AVs): Uber's strategy and potential growth driven by AV partnerships.
• Government Shutdown: Impact on economic data availability and Fed decision-making.

Market Overview and Key Movers

The market is trading mixed as the closing bell approaches. The Dow Jones Industrial Average is down approximately 200 points, or about 0.51%, while the S&P 500 is up around 0.21%. The Nasdaq Composite is the biggest gainer, boosted by shares of Amazon and Nvidia.

Specific Stock Performance:

• Amazon: Up over 4%, driven by a $38 billion deal with OpenAI for Nvidia chips.
• Nvidia: Up over 2%, also benefiting from AI-related deals.
• Tesla: Higher, up more than 2.5%.
• Bitcoin: Down over 3%.
• Ethereum: Down 7%.

Oil Market: Oil prices are steadying after OPEC increased its output for December but paused further hikes for early 2026, which the market interprets as a response to oversupply.

Federal Reserve Policy and Interest Rate Outlook

There is considerable uncertainty regarding the Federal Reserve's next move on interest rates. Fed Chair Powell indicated division within the committee about a potential rate cut in December.

Key Fed Official Commentary:

• Chicago Fed President Austin Goulme: More concerned about inflation than employment, noting it has been above the 2% target for 4.5 years and moving in the wrong direction. He expressed unease about relying on inflation being transitory and acknowledged the lack of clear inflation data due to the government shutdown. His threshold for cutting rates is higher.
• San Francisco Fed President Mary Daly: Agreed with the previous rate cut but will "keep an open mind" for December, balancing inflation risks with weaker job growth.
• Fed Governor Lisa Cook: More worried about the job market than inflation, which influenced her vote for the previous rate cut. She stated that policy is not on a predetermined path and December is a "live meeting."

Investor Positioning and Market Sentiment

Wall Street is attempting to carry October's momentum into November, with investors increasing their exposure to technology stocks, fueled by new AI deals. Despite this, risks such as a prolonged government shutdown and a potential pause in Fed rate cuts are being brushed aside.

Expert Insights:

• Michael Sers (Rockland Trust): Believes technology companies, particularly the "Magnificent 7," are likely to lead the market through the end of the year, citing historical seasonality. However, he anticipates a potential "growth scare" in early 2026, possibly leading to a rotation into defensive sectors.
• Valuation Concerns: The significant investments in AI, such as Amazon's $38 billion OpenAI partnership and Oracle's $300 billion tie-up, raise questions about potential bubble territory.
• Discerning Investors: Following recent earnings, investors are becoming more discerning, not rewarding higher capital expenditure (CapEx) spending from hyperscalers at the same rate. Amazon and Microsoft were rewarded for accelerated cloud revenue growth, while Meta's increased CapEx with a more dubious ROI timeline was viewed less favorably.

Defensive Sector Recommendations:

• Michael Sers: Recommends focusing on the healthcare sector, highlighting Veeva Systems as a software provider for the healthcare industry, similar to Salesforce for big pharma and biotech. Veeva's CRM capabilities, a settlement with IQVIA allowing data collaboration and product development, and the rollout of AI bots are seen as drivers for significant uplift. The healthcare sector is up around 5% year-to-date, significantly underperforming the tech sector's 30% gain.

Major AI Deals and Partnerships

The market is buzzing with significant AI-related deals, indicating a strong push in the artificial intelligence space.

Amazon, OpenAI, and Nvidia Partnership:

• Details: Amazon is striking a $38 billion deal with OpenAI, granting the ChatGPT maker access to Amazon's cloud infrastructure and Nvidia's AI technology.
• Mechanism: This partnership allows OpenAI to rent server capacity on Amazon Web Services (AWS), similar to its previous arrangement with Microsoft Azure.
• Context: This move comes after Microsoft, OpenAI's initial exclusive cloud provider, struggled to keep up with OpenAI's capacity demands. A recent deal between Microsoft and OpenAI removed Microsoft's right of first refusal, freeing OpenAI to partner with other cloud providers like AWS.
• Significance for AWS: This is a major win for AWS, which was perceived to be falling behind in the AI race due to the lack of a high-profile customer like OpenAI.

Microsoft's UAE Investment:

• Details: Microsoft announced a $15 billion investment in the UAE, along with approval to export advanced Nvidia chips there.
• Purpose: This enables Microsoft to build data centers in the UAE, expanding its AI infrastructure globally.
• Regulatory Approval: The Trump administration's approval was a key factor, overcoming past concerns about the UAE's ties with China and security implications.

Mark Mahaney (Evercore ISI) on AWS and AI Momentum:

• "AWS Unlock Quarter": Mahaney views Amazon's third quarter as a turning point for AWS.
• Deal Impact: The OpenAI partnership is seen as a significant addition to AWS's backlog, which already saw substantial deals in October.
• Stock Performance Driver: The performance of AWS has been the primary factor influencing Amazon's stock price over the past 2.5 years, and its recent upturn is expected to drive the stock higher.
• Unfathomable AI Spend: The sheer amount of money being invested in AI is described as "unfathomable," but it's being spent by highly profitable companies with strong cash flows.
• AGI/Superintelligence Goal: The focus of these tech giants on achieving Artificial General Intelligence (AGI) or superintelligence suggests a significant underlying opportunity.
• Meta's AI Success: Meta's aggressive deployment of AI has already demonstrated a return on investment (ROI) by boosting ad revenue, user growth, and engagement.

Other Tech Plays and Earnings Previews

Uber and Lyft Earnings Preview:

• Uber: Expected to sustain close to 20% bookings growth and expand operating margins. Key focus will be on autonomous vehicle (AV) deals. Uber's strategy relies on proving that multiple AV companies can successfully integrate with its network in various cities, similar to its success with Waymo in Austin and Atlanta.
• Lyft: Also reporting, with investors looking for similar consistency in growth and margin expansion.

AI's Role in Uber's Valuation:

• The extent to which AI and autonomous driving are priced into Uber's stock is debated. While its growth rate is high relative to its multiple, uncertainty about the future of AVs (e.g., Waymo vs. Tesla dominance) may be limiting its valuation.

Trending Tickers and Earnings Reports

AMD:

• Performance: Shares are up significantly, around 50-60% in the past month and over 100% year-to-date.
• AI Growth Story: Investors are looking for strong outcomes from its MI450 AI chips.
• Competition with Nvidia: AMD is increasingly seen as a rival to Nvidia in the AI space, having inked deals with OpenAI and Oracle.
• Market Cap: Significantly smaller than Nvidia, with a market cap of around $420 billion compared to Nvidia's estimated $4-5 trillion.

McDonald's:

• Context: Investors are watching closely after lackluster results from Chipotle and Shake Shack, indicating a pullback in the fast-food consumer.
• Expectations: The report will provide insight into whether McDonald's regained its leadership position.
• Recent Initiatives: Introduction of the snack wrap, reduced combo meal costs (15%), and "extra value meals" at $5 and $8 price points.
• Analyst Expectations: US same-store sales are expected to grow by about 2%.
• Catalysts: New beverages and the return of the Monopoly game are anticipated for late 2025 and 2026.
• Stock Performance: Shares are up only around 2% year-to-date, underperforming the S&P 500.

Spotify:

• Recent Performance: Stock is down since its second quarter results due to disappointing guidance.
• CEO Transition: CEO Daniel Ek is stepping down at the end of the year.
• Catalysts: Potential price hikes and expanded shareholder returns are key catalysts for 2025.

Palantir Technologies Earnings Analysis

Third Quarter Results:

• Beat Expectations: Palantir exceeded revenue and earnings expectations.
• Raised Outlook: The company increased its fourth quarter and full-year sales outlook.
• Stock Movement: Shares were up around 4% in after-hours trading.
• Revenue: $1.18 billion, a 63% increase year-over-year, surpassing the expected $1.09 billion.
• US Government Contracts: Revenue jumped 52% to $486 million, exceeding expectations.
• US Commercial Segment: Revenue soared to $397 million, with CEO Alex Karp calling it an "absolute juggernaut."
• Earnings: Adjusted EPS of 21 cents, ahead of the expected 17 cents and more than double the previous year's 10 cents.

Business Model and AI Role:

• Palantir sells AI software to governments and businesses for applications like supply chain analysis, surveillance, and identifying military targets.
• The government business is crucial, especially amidst ongoing government spending and shutdowns.

Valuation and Growth:

• High Valuation: Palantir trades at a very high multiple, with the stock up 388% in the last year.
• "Priced for Perfection": The stock is seen as priced for an idealized future of all-encompassing Palantir AI in both government and US commercial sectors.
• Growth Acceleration: The commercial revenue growth rate has continued to accelerate, with a 121% increase reported.
• Profitability: The company is demonstrating incredible profitability.
• Retail vs. Professional Investors: There's a question of how the market will react, with intense retail interest potentially leading to a different response than professional investors.

International Business:

• The international business has struggled, with commercial revenue abroad falling below expectations in the past two quarters.
• Palantir has stated it will focus on the US and its allies, with a recent deal in the UK.

Ethical Concerns:

• Analysts have flagged ethics as a growing concern for retail investors, given protests against Palantir's deals with ICE and the Israeli military.
• The sentiment is that "capitalism is winning over ethical concerns," but investors are encouraged to consider their investment choices.

Tesla Shareholder Vote and European Market Performance

Shareholder Vote on Thursday:

• Musk's Pay Package: The primary focus is on Elon Musk's $1 trillion pay package, which is on the line.
• Board Lobbying: Chair Robin Denholm has been lobbying investors to vote for Musk's package, emphasizing the need to incentivize him and ensure his continued control.
• Control and Incentives: Musk aims to increase his ownership from 13% to 25% to exert control. Experts suggest alternative ways to provide control without such a large financial package.
• Director Elections: Three directors are up for election: Ira Ehrenpreis, Joe Gebbia, and Kathleen Wilson Thompson.
• X AI Investment: A proposal for Tesla to invest in Musk's other company, X AI, is also on the ballot, with the board taking no position and leaving the decision to shareholders. Proxy advisors consider this a management issue.

Lackluster European Delivery Numbers:

• Significant Losses: Tesla has experienced substantial sales losses in Europe over the past 8-9 months.
• October Data: While France showed a 2% increase, this is due to a significant drop the previous month. Other countries like Norway (-50%), Netherlands (-47%), Spain (-30%), Sweden (-90%), and Denmark (-86%) show heavy losses.
• Model Y Impact: The launch of the new Model Y has not improved sales in these countries.
• Contributing Factors: Competition from Chinese and European automakers, as well as the "Musk factor," are potential reasons for the decline.
• US Performance: US sales were boosted by the expiration of the EV tax credit, raising questions about future performance in the US as well.

Economic Calendar and Fed Policy Watch

Tuesday, November 4th:

• Earnings: Pfizer, Uber, Spotify, BP (before market open); AMD, Pinterest, Rivian, Cava (after market close).
• Economic Data: ADP's new weekly labor market report.
• Government Shutdown: The shutdown will mark its 35th day, tying the record for the longest in history.
• Fed Policy: Fed Vice Chair for Supervision Mickey Bowman participating in a banking conference in Spain. This follows Chicago Fed President Austin Goulsby's comments about being uneasy with frontloading rate cuts and not being decided on a December cut.

Sam Bankman-Fried Case:

• Oral arguments are scheduled for Sam Bankman-Fried's appeal of his fraud conviction related to the FTX collapse. He is currently serving a 25-year sentence.

US Elections:

• Election day in many cities and states, with the New York City mayoral race being a key focus for Wall Street.

Conclusion and Synthesis

The market is navigating a complex landscape characterized by strong AI-driven momentum in tech, particularly in companies like Amazon and Nvidia, alongside significant investments and partnerships. However, underlying concerns about valuations, the Federal Reserve's uncertain path on interest rates, and potential economic slowdowns in early 2026 persist. Investors are advised to be discerning, with some suggesting a potential rotation to defensive sectors like healthcare. The performance of major tech companies, the impact of AI on various industries, and the Federal Reserve's policy decisions will be critical drivers in the coming months. Palantir's strong earnings highlight the rapid growth in the AI software sector, though its high valuation and ethical considerations remain points of discussion. Tesla faces a pivotal shareholder vote on Elon Musk's compensation package, while its European sales performance raises questions about global brand strength amidst increasing competition. The ongoing government shutdown continues to obscure economic data, adding another layer of uncertainty for the Fed and investors.