Everything About AI
NextFin News - U.S. stocks rose Wednesday, with the S&P 500 extending its winning streak to three sessions, as blowout results from SpaceX reignited enthusiasm for AI-related companies. The Nasdaq Composite gained 1.05%, the S&P 500 rose 0.58% and the Dow added 0.69% to 52,856.09. The session's central tension pitted a rotation back into technology and industrials against lingering questions over AI financing and last week's hot inflation readings. The major averages pared gains in the final hour as oil stocks jumped and yields edged higher. After the close, Tesla and Meta both reported results with a clear pattern: strong operating performance, offset by heavy spending and headline-distorting items.
The Dow Jones Industrial Average rose 0.69%
The S&P 500 Index rose 0.58%
The Nasdaq Composite advanced 1.05%
Stock & Sector Performance
Technology and industrials led, with the S&P 500 technology sector up about 1.7% and industrials up about 0.9%. Defensive sectors that have led in recent weeks, including healthcare, consumer staples and utilities, lagged. SpaceX shares surged about 7.8%, and other space stocks rose in sympathy after a rough October for the group. Tesla gained 3.41% ahead of its earnings and on Elon Musk's comment that boards at SpaceX and Tesla have formed special committees to discuss a merger. Nvidia rose more than 1.5% and AMD about 2% as SpaceX's AI compute growth lifted chip stocks. The Russell 2000 gained 0.27% to 2,781. Danaher slid after a revenue miss, and Intuitive Surgical fell sharply before the open after its third-quarter results failed to impress.
Hot Sectors to Watch
AI infrastructure was the day's clearest theme. SpaceX's report offered the first data point of the earnings season supporting the bull case for AI cloud providers, according to analysts, at a time when financing concerns had pressured the group. Nvidia and SpaceX were the two biggest contributors to the Nasdaq's gain. The move looks like a relief rally rather than a confirmed new uptrend, since chip stocks had fallen eight straight days before Monday's bounce and the S&P 500 remains inside its 7,600 to 7,800 range.
Industrials continued to benefit from the earnings rotation that began Tuesday, though defensives' lag shows investors are rebuilding risk exposure. After the bell, Tesla and Meta put AI spending, not just AI demand, at the center of the conversation, which is the next test for the sector.
Major Story of the Day
SpaceX's third-quarter report was the dominant story. Revenue grew 161% from a year earlier to $14.58 billion, against the roughly $12.7 billion LSEG consensus. The company's AI business, which it now calls Super Intelligence, rose ninefold to $7.56 billion, overtaking Starlink's $5.25 billion, and net income reached $4.4 billion. SpaceX forecast first-quarter 2027 revenue of $33 billion to $37 billion, well above the $22.2 billion average analyst estimate. On the earnings call, Musk said a Tesla merger would be a "good idea" and that special committees have been formed.
After-Hours Earnings: Tesla and Meta
Tesla (TSLA) beat on the lines investors care about most. Adjusted EPS was $0.48 against $0.44 expected, and gross margin jumped to 19.6% from 16.8% last quarter, ahead of the 17.8% consensus. Revenue of $28.05 billion came in just under the $28.13 billion consensus. Free cash flow was positive $1.53 billion against a consensus of roughly negative $5 billion, but the beat was mostly timing: capex was $4.73 billion, down from $5.79 billion last quarter. Tesla has spent about $13 billion year to date against a 2026 guide of more than $25 billion, which implies roughly $12 billion of capex in the fourth quarter if the guide holds. The quality of the quarter lay in Full Self-Driving. More than 75% of new North American buyers now take FSD, up from 55% last quarter, and active FSD subscriptions reached 1.74 million, up 67% from a year ago and ahead of the 1.57 million estimate. Services and other revenue grew 33%. Operating income was $718 million, down 56% year over year, for a 2.6% operating margin, and GAAP EPS was $0.22, less than half the adjusted figure, with stock-based compensation including the CEO performance award a large part of the gap. The weak spot was energy: revenue fell 16% to $2.88 billion against a $3.91 billion estimate, though management cited record orders and backlog and the start of production at Megafactory Texas. On the business pipeline, Cybercab rides began in Austin on Sept. 3, unsupervised miles grew eightfold from the prior quarter, and Optimus production started on high-volume lines in Fremont.
Meta Platforms (META) reported earnings per share of $3.83, which looks like a miss but reflects a $9.9 billion legal charge from its settlement with state attorneys general. The roughly $18 billion, 10-year deal was announced in August, and Meta had said it expected to book about $10 billion of legal expense in the third quarter. Excluding the charge, operating income was about $22.9 billion against roughly $20.9 billion expected, with an operating margin near 35%, versus the reported 20% and 40% a year ago. Revenue rose 26% to $64.6 billion, beating estimates by more than $1 billion, and ad revenue was $63.06 billion against $61.85 billion expected. Price per ad rose 14% while impressions grew 10%, and headcount fell 15% from a year ago. Daily active people grew 3% to 3.64 billion. The pressure point was cash: capex reached $34.91 billion, and free cash flow turned negative at $2.12 billion despite nearly $33 billion of operating cash flow. Meta raised the low end of its 2026 capex range to $135 billion to $145 billion, the third straight quarter the floor has moved up, and guided fourth-quarter revenue to $73 billion to $76 billion, in line with consensus. The company also announced a one-time dividend of non-voting Class C shares starting in January 2027, which would let it issue stock without diluting Mark Zuckerberg's voting control. The release did not include a 2027 capex figure, which is the number the AI supply chain is waiting for, with buy-side expectations reported at $225 billion to $250 billion. Both stocks fell sharply after their previous reports, with Meta down 9.16% and Tesla down 15.63%.
Explore more exclusive insights at nextfin.ai.
