TSX higher amid U.S. government shutdown
Tesla (NASDAQ:TSLA) is the leading manufacturer of electric vehicles (EVs) in the US and second, behind BYD, in the world. Despite its strong position in the EV market, Tesla is only the fourteenth largest auto manufacturer. Despite its low ranking, it has a market capitalization that is almost four times that of Toyota (NYSE:TM), the second-largest auto manufacturer by market capitalization.
Why is that? The primary rationale in investors’ minds appears to be the promise of robots, not EVs. To wit, on Monday, Elon Musk reiterated that Tesla’s Optimus Robots will drive 80% of Tesla’s value. In November 2024, he stated:
Optimus will be more valuable than everything else at Tesla combined
If Musk is correct, the company will likely shift its focus away from EVs. Currently, automobiles account for approximately three-quarters of Tesla’s revenue. The graph below, shows that Tesla’s revenues have been flat since 2023. Therefore, given its enormous valuation and paltry growth, investors are likely making a big bet that Tesla will dominate the home and business robotics market.
Furthermore, they must think that robots will be a standard feature in most homes and businesses. We leave you with a paragraph from Yahoo Finance:
Speaking at the Tesla Owners Silicon Valley’s X Takeover event in 2024, Musk said, “I think that’s probably correct if we execute well on autonomous transport and Optimus,” in response to claims that Tesla could reach a $25 trillion market capitalization in the future.
JOLTS Report Shows Labor Market Weakness
Like other employment data, the latest JOLTS report shows weakness in the labor market. The headline Job Openings figure fell to 7.18 million, down from 7.36 million. Moreover, last month’s number was revised lower by 100k. Pertinent to Friday’s BLS data, the layoff level rose to 1.81 million, up from 1.64 million the previous month.
Additionally, last month’s layoffs level was revised higher by 400k jobs. The second graph below shows the steadily higher trend in layoffs. Furthermore, the recent level of layoffs is comparable to pre-pandemic numbers.
The data further supports the market’s notion that the Fed will cut rates at the September 17th FOMC meeting. The JOLTs data boosted the odds of such a rate cut to 92%.
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