Nasdaq record, $25 trillion Tesla?

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.

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. 

Adobe soars
Adobe‘s stock surged 15% on Friday, its largest single-day gain since March 2020, after the creative software company exceeded analysts’ expectations for both earnings and revenue. CEO Shantanu Narayen attributed the strong performance to growth across its product lines and advancements in AI, which is attracting new customers. Adobe’s report contrasts with recent weaker results from other software companies like Salesforce, signaling a potential bright spot in the sector.

Confronting China 
The Group of Seven nations pledged to tackle what they say are China’s economic clout and harmful business practices. Their focus included addressing unbalanced markets in electric vehicles, steel and renewable energy, emphasizing fair competition without hindering China’s economic development. Additionally, the G7 warned of actions against Chinese financial institutions aiding Russia. Pope Francis, addressing AI’s potential and risks, also attended the summit.

[PRO]  AI tailwinds
With shares down over 6% this year, JPMorgan is bullish on this cybersecurity stock, predicting a resurgence in data security demand and potential AI tailwinds. The company recently beat earnings expectations and is well-positioned to capitalize on the rising threat of ransomware attacks. 

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.