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A Tesla car is driven past a store of the electric vehicle (EV) maker in Beijing, China January 4, 2024. 

Florence Lo | Reuters

It was a brutal first quarter for Tesla investors.

Shares of the electric vehicle maker plunged 29% in the first three months of the year, the worst quarter for the stock since the end of 2022 and the third worst since Tesla went public in 2010. It was also the biggest loser in the S&P 500.

Chief among concerns on Wall Street is Tesla’s core business. The company is poised to report first-quarter vehicle production and deliveries in coming days, and even bulls are expecting sluggish results, despite price cuts and incentives for buyers dangled throughout the quarter.

As of Thursday, the last trading day of the quarter, analysts were expecting around 457,000 deliveries for the period, according to the average of 11 analyst estimates compiled by FactSet. That would mark an increase of 8% from 422,875 a year earlier. Estimates for the quarter ranged from 414,000 to 511,000 deliveries.

Analysts who updated their numbers in March were the most bearish, with their estimates ranging from 414,000 to 469,000. Independent autos industry researcher “Troy Teslike” expects the company’s deliveries to come in below even the lowest estimate captured by FactSet.

Deliveries are the closest approximation of sales reported by Tesla but are not precisely defined in the company’s shareholder communications.

Here are four major reasons for Tesla’s first-quarter slide.

Unrelenting competition in China

In China, there’s competition from an onslaught of fully electric vehicles, including new models that cost less than Tesla’s popular Model Y SUV and Model 3 sedan.

To end 2023, China’s BYD dethroned Tesla as the world’s top EV maker. In the first quarter of this year, BYD kept up the pressure, launching its Qin Plus EV at a starting price of around $15,200, followed by its BYD Seagull, a small all-electric hatchback with a starting price below $10,000.

The rapid rise of Chinese electric vehicle maker BYD

Chinese smartphone company Xiaomi is getting in the game with its first vehicle, a fully electric SUV that costs far less than Tesla’s entry-level Model 3 sedan. Xiaomi CEO Lei Jun said the standard version of the SU7 will sell for the equivalent of $30,408 in China, a price he acknowledged would mean the company is losing money on each sale. Tesla’s Model 3 is about $4,000 more than that. 

Tesla slashed prices in response, but sales were still sluggish.

According to data from the China Passenger Car Association, Tesla sold 71,447 of its China-made cars in January, including 39,881 sold domestically, representing a drop from December. The numbers slid again in February to 60,365 China-made Teslas, including exports.

As sales dipped, Tesla reduced production at its Shanghai factory, shifting staffers from working six and a half days to week to five days, Bloomberg first reported.

Tesla didn’t offer guidance for 2024 in its earnings call in January, but analysts see Tesla’s China struggles as a harbinger for a rough quarter, if not full year.

Deutsche Bank analyst Emmanuel Rosner lowered his price target on Tesla this week, citing weaker-than-expected China sales and the company’s recent plan to cut production in the region. Rosner is now expecting Tesla to report deliveries of 414,000 for the first three months of 2024, and is predicting just mid-single-digit growth for the year from Tesla.

Red Sea attacks, activist clashes in Europe

There was also drama in Europe.

Tesla and other manufacturers like Volvo suspended some production on the continent in January due to a shortage of components following attacks on shippers in the Red Sea. Iran-backed Houthi militia attacks have continued to disrupt one of the world’s busiest routes.

Elon Musk, CEO of Tesla Inc., arrives at the Tesla plant in Gruenheide, Germany, on March 13, 2024.

Krisztian Bocsi | Bloomberg | Getty Images

Then in March came a dramatic protest by environmentalists in Germany. Objecting to Tesla’s plans to expand the footprint of its car and battery factory in Brandenburg, outside of Berlin, the protesters set fire to electrical infrastructure near the Tesla plant. While the fire didn’t spread to the factory, it left the facility without sufficient power for operations, forcing a temporary suspension in production.

CEO Elon Musk visited the German factory after the attack to reassure employees. He also called the protest “extremely dumb.” Tesla’s head of policy, Rohan Patel, wrote on X that Tesla’s mission is to “create zero emissions products” but to do that well, “we also focus on creating the most sustainable factories along with a culture to do the right thing in our community.”

Meanwhile, in Nordic countries, Tesla service technicians and other workers have been on strike in support of the Swedish labor union IF Metall. The labor group has been pressuring Tesla, since October 2023 to negotiate and sign a collective bargaining agreement with its workers.

IF Metall’s website says that nine out of 10 workers are union members in Sweden, yet Tesla has resisted unions, as it consistently does in the U.S., and rebuffed IF Metall’s efforts to negotiate.

Aging lineup, early days for Cybertruck

While EV sales are still gaining popularity worldwide, the growth rate has slowed. And with Tesla no longer the dominant player, every new product becomes more crucial. There’s not a lot in the hopper.

The Cybertruck is still in its very early days and has a niche audience. The company began delivering the angular, unpainted steel model of the truck in December at a promotional event in Austin, Texas.

Musk previously stated on an earnings call that Tesla “dug its own grave,” with the sci-fi inspired Cybertruck. In an interview with Tesla fan and auto critic Sandy Munro in late 2023, Musk cautioned that the “Cybertruck is not something that will be material to Tesla’s financials” in 2024, and “will probably be material in 2025.”

A Tesla Cybertruck at a Tesla store in San Jose, California, on Nov. 28, 2023.

Bloomberg | Bloomberg | Getty Images

Tesla has been gearing up production of its refreshed Model 3, known as the Highland, in Fremont, California. Forbes’ Larry Magid wrote, “Visually, the changes on the outside are subtle.” He also disliked Tesla’s controversial design decision to omit “stalks” from sides of the steering wheel. Highland drivers use buttons and on-screen controls to shift between drive, reverse and park or to signal a turn or lane change.

Tesla does have a totally new platform in the works, a more affordable EV that fans refer to as the “Model 2.” But it won’t be delivered to customers for years.

Musk control and controversy

Musk has continued to bet that Tesla customers and shareholders will stick with the company regardless of his increasingly incendiary rhetoric on X and beyond.

Earlier this month, Musk met with former President Donald Trump in Florida. He’s called for a “red wave” in upcoming U.S. elections, and he’s shared, liked or otherwise promoted far-right accounts and content on X, where he now has 178.8 million listed followers. He has repeatedly disparaged undocumented immigrants, ranted against corporate diversity initiatives and made absurd claims that migrants from Haiti are cannibals.

Musk’s political ideology stands at odds with groups of people most likely to buy his products. Proponents of electric vehicles tend to be left-leaning ideologically, according to research from Pew Research and Gallup last year.

Musk has also wagered that Tesla shareholders and its board of directors will follow his lead. In February, Musk said he would move for a shareholder vote to transfer Tesla’s site of incorporation to Texas from Delaware, after a judge in Delaware voided the $56 billion pay package that he was granted in 2019 on grounds that the board failed to prove “the compensation plan was fair.”

Before the ruling, Musk had begun pressuring shareholders and the Tesla board to give him more control of the EV maker.

“I am uncomfortable growing Tesla to be a leader in AI & robotics without having ~25% voting control,” Musk wrote in a post in January.

Investor Ross Gerber, a longtime Tesla bull, called the demand tantamount to “blackmail” in an interview with CNBC.

Bears cleaning up

It all adds up to over $230 billion in lost market cap for Tesla and its shareholders since the calendar turned to 2024. That made for a very lucrative quarter for short sellers, who’ve been expecting such a downturn.

According to data from S3 Partners, Tesla shorts are up more than $5.77 billion in 2024, making it the most profitable name in the U.S. Short interest at the end of trading on Thursday was about 3.76% of float, representing $18.71 billion in notional value.

Altimeter Capital’s Brad Gerstner is buying the dip. Gerstner told CNBC this week that the company is now making “massive progress at an accelerating rate” on its self-driving technology efforts.

Musk has been making such pronouncements for years. In 2015, he told shareholders that by 2018 Tesla’s cars would achieve “full autonomy,” and be able to drive themselves. In 2016, he said Tesla would able to send one of its cars on a cross-country drive without requiring any human intervention by the end of the following year.

Tesla still has yet to deliver a robotaxi, autonomous vehicle or technology that can make its cars into “level 3” automated vehicles. However, Tesla offers advanced driver assistance systems (ADAS), including a standard Autopilot option, or premium Full Self-Driving “FSD” option, the latter of which costs $199 a month for subscribers in the U.S. or $12,000 up front.

In a push for end-of-quarter sales, Musk recently mandated that all sales and service staff install and demo FSD for customers before they hand over their cars. He wrote in an e-mail to employees, “Almost no one actually realizes how well (supervised) FSD actually works. I know this will slow down the delivery process, but it is nonetheless a hard requirement.”

Despite its name, Tesla’s premium option requires a human driver at the wheel, ready to steer or brake at any moment.

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Cloud software vendors Atlassian, Snowflake and Workday are betting on security startup Veza

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Cloud software vendors Atlassian, Snowflake and Workday are betting on security startup Veza

From left, Veza founders Rob Whitcher, Tarun Thakur and Maohua Lu.

Veza

Tech giants like Google, Amazon, Microsoft and Nvidia have captured headlines in recent years for their massive investments in artificial intelligence startups like OpenAI and Anthropic.

But when it comes to corporate investing by tech companies, cloud software vendors are getting aggressive as well. And in some cases they’re banding together.

Veza, whose software helps companies manage the various internal technologies that employees can access, has just raised $108 million in a financing round that included participation from software vendors Atlassian, Snowflake and Workday.

New Enterprise Associates led the round, which values Veza at just over $800 million, including the fresh capital.

For two years, Snowflake’s managers have used Veza to check who has read and write access, Harsha Kapre, director of the data analytics software company’s venture group told CNBC. It sits alongside a host of other cloud solutions the company uses.

“We have Workday, we have Salesforce — we have all these things,” Kapre said. “What Veza really unlocks for us is understanding who has access and determining who should have access.”

Kapre said that “over-provisioning,” or allowing too many people access to too much stuff, “raises the odds of an attack, because there’s just a lot of stuff that no one is even paying attention to.”

With Veza, administrators can check which employees and automated accounts have authorization to see corporate data, while managing policies for new hires and departures. Managers can approve or reject existing permissions in the software.

Veza says it has built hooks into more than 250 technologies, including Snowflake.

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The funding lands at a challenging time for traditional venture firms. Since inflation started soaring in late 2021 and was followed by rising interest rates, startup exits have cooled dramatically, meaning venture firms are struggling to generate returns.

Wall Street was banking on a revival in the initial public offering market with President Donald Trump’s return to the White House, but the president’s sweeping tariff proposals led several companies to delay their offerings.

That all means startup investors have to preserve their cash as well.

In the first quarter, venture firms made 7,551 deals, down from more than 11,000 in the same quarter a year ago, according to a report from researcher PitchBook.

Corporate venture operates differently as the capital comes from the parent company and many investments are strategic, not just about generating financial returns.

Atlassian’s standard agreement asks that portfolio companies disclose each quarter the percentage of a startup’s customers that integrate with Atlassian. Snowflake looks at how much extra product consumption of its own technology occurs as a result of its startup investments, Kapre said, adding that the company has increased its pace of deal-making in the past year.

‘Sleeping industry’

Within the tech startup world, Veza is also in a relatively advantageous spot, because the proliferation of cyberattacks has lifted the importance of next-generation security software.

On the public markets, the First Trust Nasdaq Cybersecurity ETF, which includes CrowdStrike and Palo Alto Networks, is up 3% so far this year, compared with a 10% drop in the Nasdaq.

Veza’s technology runs across a variety of security areas tied to identity and access. In access management, Microsoft is the leader, and Okta is the challenger. Veza isn’t directly competing there, and is instead focused on visibility, an area where other players in and around the space lack technology, said Brian Guthrie, an analyst at Gartner.

Tarun Thakur, Veza’s co-founder and CEO, said his company’s software has become a key part of the ecosystem as other security vendors have started seeing permissions and entitlements as a place to gain broad access to corporate networks.

“We have woken up a sleeping industry,” Thakur, who helped start the company in 2020, said in an interview.

Thakur’s home in Los Gatos, California, doubles as headquarters for the startup, which employs 200 people. It isn’t disclosing revenue figures but says sales more than doubled in the fiscal year that ended in January. Customers include AMD, CrowdStrike and Intuit.

Guthrie said enterprises started recognizing that they needed stronger visibility about two years ago.

“I think it’s because of the number of identities,” he said. Companies realized they had an audit problem or “an account that got compromised,” Guthrie said.

AI agents create a new challenge. Last week Microsoft published a report that advised organizations to figure out the proper ratio of agents to humans.

Veza is building enhancements to enable richer support for agent identities, Thakur said. The new funding will also help Veza expand in the U.S. government and internationally and build more integrations, he said.

Peter Lenke, head of Atlassian’s venture arm, said his company isn’t yet a paying Veza client.

“There’s always potential down the road,” he said. Lenke said he heard about Veza from another investor well before the new round and decided to pursue a stake when the opportunity arose.

Lenke said that startups benefit from Atlassian investments because the company “has a large footprint” inside of enterprises.

“I think there’s a great symbiotic match there,” he said.

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IBM pledges $150 billion to boost U.S. tech growth, computer manufacturing

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IBM pledges 0 billion to boost U.S. tech growth, computer manufacturing

Arvind Krishna, chief executive officer of International Business Machines Corp. (IBM), during a Bloomberg Television interview at the World Governments Summit in Dubai, United Arab Emirates, on Tuesday, Feb. 11, 2025.

Christopher Pike | Bloomberg | Getty Images

International Business Machines Corporation on Monday announced it will invest $150 billion in the U.S. over the next five years, including more than $30 billion to advance American manufacturing of its mainframe and quantum computers.

“We have been focused on American jobs and manufacturing since our founding 114 years ago, and with this investment and manufacturing commitment we are ensuring that IBM remains the epicenter of the world’s most advanced computing and AI capabilities,” IBM CEO Arvind Krishna said in a release.   

The company’s announcement comes weeks after President Donald Trump unveiled a far-reaching and aggressive “reciprocal” tariff policy to boost manufacturing in the U.S. As of late April, Trump has exempted chips, as well as smartphonescomputers, and other tech devices and components, from the tariffs.

IBM said its investment will help accelerate America’s role as a global leader in computing and fuel the economy. The company said it operates the “world’s largest fleet of quantum computer systems,” and will continue to build and assemble them in the U.S., according to the release.

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IBM competitor Nvidia, the chipmaker that has been the primary benefactor of the artificial intelligence boom, announced a similar push earlier this month to produce its NVIDIA AI supercomputers entirely in the U.S. 

Nvidia plans to produce up to $500 billion of AI infrastructure in the U.S. via its manufacturing partnerships over the next four years.

Last week, IBM reported better-than-expected first-quarter results. The company said it generated $14.54 billion in revenue for the period, above the $14.4 billion expected by analysts. IBM’s net income narrowed to $1.06 billion, or $1.12 per share, from $1.61 billion, or $1.72 per share, in the same quarter a year ago.

IBM’s infrastructure division, which includes mainframe computers, posted $2.89 billion in revenue for the quarter, beating expectations of $2.76 billion.

The company announced a new z17 AI mainframe earlier this month.

CNBC’s Jordan Novet contributed to this report.

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Meta’s AI spending comes into focus amid Trump’s tariff policies

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Meta’s AI spending comes into focus amid Trump’s tariff policies

Meta CEO Mark Zuckerberg looks on before the luncheon on the inauguration day of U.S. President Donald Trump’s second Presidential term in Washington, U.S., Jan. 20, 2025. 

Evelyn Hockstein | Reuters

Mark Zuckerberg’s plan is to make Meta the market leader in artificial intelligence. Investors will want to know how President Donald Trump’s tariffs-heavy trade policies will impact that strategy. 

Those answers could start to come as soon as this week as Meta’s AI strategy takes center stage when the company hosts its first Llama-branded conference for AI developers on Tuesday then reports its latest quarterly earnings the next day.

Already, tech companies are starting to talk about the potential impact they’re bracing for as a result of the Trump tariffs. 

Intel Chief Financial Officer David Zinsner said Thursday during the chip giant’s first-quarter earnings call that U.S. trade policies “have increased the chance of an economic slowdown, with the probability of a recession growing.” Meanwhile, Google CFO Anat Ashkenazi said that day during a first-quarter earnings call that the tech giant remains committed to its $75 billion investment in capital expenditures, or capex, this year, but also acknowledged that the “timing of deliveries and construction schedules” could cause some quarter-to-quarter spending fluctuation. 

For now, analysts expect Meta to follow Alphabet’s lead and remain firm in its plan to spend as much as $65 billion in capex for AI infrastructure this year when it reports earnings Wednesday. Some analysts believe Meta could even raise the figure because AI is a core priority for the company.

“We do not expect META to cut its CapX guidance of $60B-$65B in 2025, for its GenAI infrastructure,  because they see this as an important 10-year investment, we believe,” Needham analysts wrote in a research note published Wednesday. “However, tariffs add risks of upward cost revisions.”

Investors will also be monitoring Meta’s LlamaCon event at its Menlo Park, California, headquarters for any signs that its AI investments are having an immediate business impact. This will be the first time Meta hosts a developer conference specifically for its Llama family of AI models.

“Investors want to see ROI on all these AI investments, and while Meta has shown clear benefits from leveraging AI to improve its products and drive faster revenue growth, it’s been hard to quantify those benefits,” Truist Securities analyst Youssef Squali told CNBC.

Meta in April released a couple of its new Llama 4 models, which Meta Chief Product Officer Chris Cox previously said can help power so-called AI agents that can perform tasks for users via web browsers and other online interfaces.

It’s critical that Meta keep improving Llama to create a major business involving AI agents that companies can use to interact with their customers within apps like Facebook and WhatsApp, William Blair research analyst Ralph Schackart said.

Meta has an early mover advantage at scale in a multi-trillion dollar market,” Schackart said in an email. “We believe Meta is very well positioned to leverage its billions of global users across multiple platforms.”

Meta is unlikely to curb its Llama investment any time soon, but should eventually consider doing so if it fails to generates enough money to justify its costs, said Ken Gawrelski, a Wells Fargo managing director of equity research.

“We do believe that over time Meta needs to continue to evaluate whether Llama needs to be competitive with the leading-edge models,” Gawrelski said. “This is a very expensive proposition and thus far, unlike Google, Meta does not directly monetize its model in any material way.”

Chris Cox, Chief Product Officer at Meta Platforms, speaks during The Wall Street Journal’s WSJ Tech Live Conference in Laguna Beach, California on October 17, 2023. 

Patrick T. Fallon | AFP | Getty Images

Meta AI and the consumer

Analysts are also following the Meta AI digital assistant. That’s because the ChatGPT rival represents the second pillar of Zuckerberg‘s AI strategy. 

Zuckerberg in January said he believes 2025 “is going to be the year when a highly intelligent and personalized AI assistant reaches more than 1 billion people, and I expect Meta AI to be that leading AI assistant.”

In February, CNBC reported that Meta was planning to debut a standalone Meta AI app during the second quarter and test a paid subscription service, in which users could pay monthly fees to access more powerful versions like users can with ChatGPT. 

Although Meta’s enormous user base across its family of apps gives Meta AI an advantage over rivals like ChatGPT in terms of reach, they may not interact with Meta AI in the same way they do with rival chat apps, said Cantor Fitzgerald analyst Deepak Mathivanan.

Gawrelski said that people may not want to use Meta AI within Facebook and Instagram if all they want to do is passively watch the short videos that Meta algorithmically recommends to their feeds.

“This is why a separate Meta AI, where Meta could clearly articulate its use case and value proposition, could be helpful,” Gawrelski said.

A standalone Meta AI app could help the company better market the digital assistant and distinguish it from rivals, said Debra Aho Williamson, founder and chief analyst for Sonata Insights.

“ChatGPT has such wide brand awareness, that it’s become a moat that is soon going to be very hard to overcome,” Williamson said.

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