CNBC Daily Open: Nasdaq record, Tesla future value?
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This report is from today's CNBC Daily Open, our international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. Like what you see? You can subscribe here.
What you need to know today
Nasdaq record
The Nasdaq Composite hit its fifth consecutive record close, while the S&P 500 and Dow Jones Industrial Average saw slight declines. Consumer sentiment dropped in June, but hopes for cooling inflation boosted the S&P 500 and Nasdaq by 1.6% and 3.2% respectively for the week. Caterpillar and Boeing dragged down the Dow, while Carnival and Norwegian Cruise Line were the biggest laggards on the S&P 500. The yield on the 10-year Treasury slipped on easing inflation. U.S. oil prices snapped a three-week losing streak, rising 4%, on concerns about tightening supplies.
Total recall
Microsoft has delayed the release of Recall, an AI-powered activity tracking tool, on its new Copilot+ PC after backlash over privacy and security concerns. The feature takes regular screenshots to record user activity but industry experts worried that hackers could develop tools to retrieve user information, including usernames and passwords. Windows Corporate Vice President Pavan Davuluri wrote in the blog post Recall will shift from being a "broadly available" tool to a preview feature available only through the Windows Insiders Program, or WIP, when the new computer is released on June 18.
Tempus AI debut
Tempus AI, an AI-driven health-care diagnostics company, rose as much as 15% in its Nasdaq stock market debut. The Google-backed company raised $410 million and was briefly valued at $7 billion before the shares slipped back. Tempus AI aims to utilize artificial intelligence to assist doctors in making treatment decisions. It made a loss of $214.1 million on revenue of $531.8 million in 2023.Tempus AI CEO Eric Lefkofsky said on CNBC's "Squawk Box" he expects the company to be both cash flow and EBITDA positive within the next year.
Activist targets Autodesk
Activist investor Starboard Value has taken a $500 million stake in Autodesk and is considering legal action amid concerns about delayed disclosure of an internal investigation. This investigation, which led to the ousting of CFO Deborah Clifford, revealed that Autodesk executives misled investors about financial metrics. Starboard is considering legal action to reopen the nomination window for board directors, suspecting that Autodesk's delay was strategic to prevent shareholder nominations. Autodesk's market cap has dropped below $50 billion following the disclosure.
Asia-Pacific markets mostly lower
Markets in the Asia-Pacific region were trading mostly lower, with only Hong Kong's Hang Seng marginally in positive territory. While China's retail sales beat expectations, industrial output grew by 5.6% year-on-year, less than the expected 6% increase, sending mainland China's CSI 300 index down 0.2%. Japan's Nikkei 225 was the biggest laggard, down 2%. South Korea's Kospi and Australia's S&P/ASX 200 were also trading lower, while the Taiwan Weighted index was little changed after hitting another record high.
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The bottom line
What's a company worth? Elon Musk, fresh from the approval of his $56 billion compensation package, made yet another bold prediction: Tesla, he claimed, could eventually be worth half the value of the S&P 500 — a staggering $25 trillion. This valuation, however, wouldn't be based on Tesla's success as an electric vehicle manufacturer, but rather as a robotics company.
While Musk didn't provide a specific timeframe for this claim, he also suggested Tesla could reach a $5 trillion to $7 trillion valuation as a robotaxi company. Probably not a good idea to say when, as a 2020 promise has passed and the full self-driving car should have been on the road in 2018.
Supporting Musk's vision, ARK Invest CEO Cathie Wood has set a $2,600 price target for Tesla by 2029, envisioning it as an autonomous taxi platform with a recurring revenue model.
"What has to happen is an autonomous taxi platform," Wood told CNBC's "Squawk Box," "Instead of selling a car and a software package and that's it. This becomes a recurring revenue model — a slice of every mile driven on that autonomous taxi network."
Dan Ives, managing director of Wedbush, has a more immediate price target of $350 — and believes Tesla will have a market cap "north of $1 trillion."
This stands in stark contrast to Tesla's current market capitalization of $568 billion, more than half of its value in November 2021. In 2020, Tesla's worth even surpassed the combined value of Toyota, Volkswagen, Hyundai, GM, Ford and BMW.
Not everyone shares this optimistic outlook. Chris Ailman, chief investment officer of the $333 billion California State Teachers' Retirement System, sees Tesla as primarily an automaker and finds its current valuation, at 61 times expected earnings, absurd.
"Even if these cars had AI in them, they are not worth 60-times earnings," Ailman told CNBC. "That is absurd. Nvidia is only 40 times earnings, which is still crazy but they're growing. I don't think Tesla is growing that fast."
Well, shares of Tesla fell 2.4% on Friday the day after Musk's pay package approval and there are investors betting on the stock to fall a lot further. As for the markets, the S&P 500 has repeatedly hit all-time highs this year, yet investors are wary. The market's success is driven by a small group of tech companies, while most stocks lag. As CNBC's Michael Santoli writes, this lack of broad participation has led to small daily index movements and concerns about the market's sustainability.
— CNBC's Jeff Cox, Michael Santoli, Jordan Novet, Katie Bartlett, Pia Singh, Riley de León, Spencer Kimball, Lisa Kailai Han and Brian Evans contributed to this report.