Veteran Tesla analyst drops urgent take ahead of earnings

Core Viewpoint - Tesla is facing significant scrutiny as it prepares to release its Q3 earnings on October 22, with investors focusing on both its automotive business and broader AI ambitions driven by Elon Musk's proposed $1 trillion compensation plan [1][3]. Group 1: Earnings and Market Sentiment - Tesla's Q3 results are expected to reset investor expectations regarding its car business and its larger AI narrative [1]. - The stock has surged over 30% since early September, returning to a trillion-dollar market cap, primarily driven by optimism surrounding AI rather than immediate business performance [6]. - Analyst Dan Levy from Barclays highlights a division in Wall Street sentiment, with contrasting narratives emerging ahead of the earnings report [4]. Group 2: AI and Autonomous Driving Narrative - The AI and autonomous driving narrative has gained momentum, particularly due to Musk's $1 trillion compensation package, which is tied to multi-year execution and valuation milestones [7]. - There is a focus on Tesla's potential equity stake in xAI or a full merger, with possibilities for IP licensing, shared computing, and enhanced data integration [7]. Group 3: Fundamental Performance Concerns - Tesla's fundamentals are showing signs of slowing, with Q3 deliveries expected to peak as buyers rushed to take advantage of the $7,500 EV tax credit before its expiration [5]. - Levy warns that while fundamentals may not seem critical now, they will eventually matter, as Tesla's automotive profits are essential for funding its cash-intensive robotaxi and AI projects [8].