TOP STORY
📉 Meta Tanks 10% on Negative Cash Flow, Taking the Market Down With It

☀️ Happy Sunday everyone!

😭 I’d love to tell you markets calmed down this week, but unfortunately, that was not the case…

😬 After the very rough results last week (with the Nasdaq-100 falling 5.5% on AI debt worries), all eyes were on Meta, Tesla, and SpaceX’s earnings to hopefully turn things around.

✨ And at the start of the week, things were looking hopeful with SpaceX ($SPCX) reporting blowout earnings and helping drive the Nasdaq up 2% from Monday to Wednesday…

📉 But then on Thursday, Meta and Tesla’s earnings (our top story for today) brought the AI spending fears right back to the forefront, driving the Nasdaq’s worst day since June and ending the week in the red (although not nearly as bad as last week):

• The S&P 500 fell -0.47%

• The Nasdaq 100 fell -0.79%

• The TSX fell -1.07%

😨 With the drop over the past 2 weeks, the mood has shifted to extreme fear, according to CNN’s Fear & Greed Index (which you can track on Blossom):

👀 While AI fears are the ones in the headlines, another factor at play here may be the Midterm elections, with Bloomberg calling out that based on historical data, “stock prices tend to drop in the months ahead of a midterm vote” and that, no matter the election outcome, “the S&P 500 Index has risen in the 12 months after every midterm election in the post-World War II era” (see full article here)

🛢️ Oil was also a factor, with Brent Crude gaining roughly 6% on the week to its highest level since late April (settling near $117/barrel) after fresh Houthi attacks on Saudi Arabia and reports that the US and Israel could resume strikes on Iran after the November midterms.

🇨🇳 And while we normally focus on the US markets, China's stock market is also having a rough go - now trailing the US by the widest margin in history, with China's CSI 300 index slipping into a bear market this week (down 20% from its highs) as Alibaba and other Chinese AI names sold off.

😭 This one is personally painful, as my China position in $CHQQ (~4% of my portfolio) is now down 33% year-to-date… a mix of China’s own AI price war squeezing margins, regulators knocking on Alibaba’s door again, and global money stampeding into the US AI trade instead.

🎯 My long-term thesis on China hasn’t changed (and I may pick up some more CHQQ this week at these levels)… but my ‘long-term’ view is definitely hurting in the short term 😅

👀 My personal portfolio woes aside, let’s dive into what’s going on with SpaceX, Meta, and Tesla’s earnings and what they mean for the market and the AI trade at large…

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TOP STORY
🚀 SpaceX Soars and Meta Sinks as the Market Grades the First AI Earnings Reports

👀 Last Sunday, we talked about how CoreWeave’s debt scare drove fear and questions around the rising costs of the AI buildout, and that we’d have to wait until this week to see if those fears were overblown with Meta, Tesla, and SpaceX’s earnings reports…

🧐 So now that all 3 have reported, let’s see what each has to say about the AI trade:

🚀 SpaceX’s AI Segment Turns a Profit

💰 First up, SpaceX ($SPCX) reported earnings on Tuesday, beating both revenue and profit targets, with its AI segment turning profitable for the first time ever:

• ✅ Revenue hit $14.58 billion vs. $12.8 billion expected, up 161% year-over-year

• ✅ EPS came in at $0.35 vs. $0.15 expected, a swing to profitability (net income of $4.4 billion vs. a $1.1 billion loss a year ago)

• 🛰️ Starlink added 1.6 million subscribers (now 13.6 million total) and nearly doubled its operating profit from a year ago

• 🤖 And the biggest surprise: AI segment revenue hit $7.56 billion, up 830% year-over-year and nearly triple last quarter… swinging from a $1.26 billion operating loss to a $431 million profit

😮‍💨 This drove a huge sigh of relief for the market, as with tons of companies borrowing billions to build AI infrastructure, SpaceX just showed that this borrowing can pay itself back quickly.

✨ CFO Bret Johnson said new compute deployments now pay for themselves in less than a year, with Musk saying SpaceX is being “hounded relentlessly by every hyperscaler” to rent more computing power… and that the payback timeline could get even faster:

📰 All this led to a wave of optimistic headlines, with Barron's running "SpaceX Saves the AI Trade, Meta Can Reignite It"… although, as we now know, the second half of that headline did not go to plan.

😰 But Spending Is Rising Even Faster…

🧮 The counter-argument to Musk's payback math is that it depends on AI demand (and pricing) staying this hot… and SpaceX is making one of the biggest bets in corporate history that it will: with nearly $20 billion in CapEx this quarter alone, plans for another $35-40 billion in the fourth quarter, and a reported $40 billion raise in the works with Goldman Sachs and Apollo.

🏗️ And by its own targets, SpaceX plans to build out ~8x more computing power by the end of 2027…

💸 Short-seller Jim Chanos estimates that much compute would require $500+ billion of capital spending (roughly 3x what analysts expect the entire company to spend in 2027).

⚖️ So Musk’s big bet is whether the next, much bigger wave of spending pays back the same way. But if demand cools before those data centers fill up, that could spell major trouble.

🤝 Still, with revenue growing just as fast as the spending, analysts are willing to give SpaceX the benefit of the doubt. As JPMorgan put it:

📈 As for the stock: SpaceX jumped ~8% on Wednesday after the report… but gave most of the gains back on Thursday, when Meta and Tesla's earnings soured the market's mood on everything AI.

🥊 So even the week's best AI report couldn't hold its gains once the other two landed. So let’s get into them… starting with Meta.

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TOP STORY CONT.
📉 Meta Falls ~10% After Announcing Nonvoting Shares to Pay Its AI Bills

🤖 Next up: Meta ($META), which reported a very strong quarter on paper:

• ✅ Revenue hit an all-time high of $64.60 billion vs. $63.34 billion expected, up 26% year-over-year

• ✅ EPS came in at $3.83 vs. $3.56 expected (and would have been $7.40 without the one-time legal charge from Meta's teen-safety settlement)

• 🔮 Q4 guidance came in strong too, at $73-76 billion vs. the $73.73 billion analysts expected

🚀 The star of the show, Muse, also keeps growing like crazy, with Zuckerberg saying more than 10 million people across the US and Canada have set up Muse accounts in just a month and a half, and that he expects Muse to eventually serve "billions of people"… it's even part of why Muse is still free:

🤔 So why the drop? A few reasons:

• 💸 Meta raised its 2026 capex floor AGAIN (now $135-145 billion, up from $130 billion) and posted negative free cash flow of $2.12 billion… joining Google, Tesla, and Amazon, which have all gone cash-flow negative as the AI spending ramps up.

• 🎟️ Muse is a money pit: as we broke down two weeks ago, free users consume an estimated ~$1,100 a year in computing while generating just ~$64 in revenue… a gap that only widens as more people use Muse daily

🎙️ Meta's CFO Susan Li addressed the Muse problem directly on the call:

💰 Meta's (and the AI Trade’s) Big Problem: Money Isn't Free Anymore

🏦 But perhaps the biggest reason for the drop (that rippled across the whole market) was Meta announcing a whole new class of non-voting shares to raise capital… which some analysts read as a red flag for the AI buildout.

📜 How it works: every existing shareholder will get one new nonvoting "Class C" share for each share they own (effectively a 2-for-1 stock split), with the new shares set to start trading in January 2027. The structure lets Meta raise billions in outside capital without diluting Zuckerberg's voting control…

🤔 But the share class itself isn't really the story… it's what it says about the AI Trade at large. In the official filing for the new shares, Meta admitted that recent capital raises by "Alphabet, SpaceX, Anthropic, and OpenAI… have resulted in an increasingly challenging environment for raising capital."

🗣️ Nvidia CEO Jensen Huang explained the worries:

😨 And this was really the main fear-driver of the week: if even Meta (a company that made $9.8 billion in profit this quarter) needs outside money to keep building, then the cheap capital funding the entire AI buildout is officially running out… and on Thursday, the market repriced every AI name accordingly.

⚖️ Despite these fears, most of Wall Street stayed bullish on Meta, with at least 13 analysts raising their price targets after the report (Bank of America went to $845 from $810), and D.A. Davidson's Gil Luria noting Meta is "gaining share from Google" with ad sales still growing.

🔁 So for Meta, the AI cycle continues: it needs to raise more cash, to fuel the success of Muse, which in the short term at least will just drive a need for even more cash… which leads us to our final report of the week: Tesla, the one company that actually but its AI spending… and ironically got punished for that too.

🚘 Tesla Slides 3% As It Reduces Its Capex

🤯 And last but not least, we have Tesla ($TSLA), which reported the same night as Meta, but delivered the strangest result of the three.

📊 By the numbers:

• ✅ Revenue hit $28.05 billion vs. $27.90 billion expected, flat year-over-year (down 0.2%)

• ✅ Adj. EPS: $0.48 vs. $0.43 expected, down 4% year-over-year (compared to $0.50 in Q3 2025)

✂️ But the big headline was that Tesla is the first Big Tech company to cut its AI spending plans this year, lowering its 2026 CapEx to ~$20 billion just 6 months after raising the target above $25 billion, while also spending nearly half of what analysts expected it to on CapEx this quarter ($4.73 billion vs. $7.95 billion).

🤔 Now, spending less is usually a good thing, but as Roundhill CEO Dave Mazza explained, Tesla is a massive exception to that rule, because it’s trading at a $1+ trillion valuation based on robots and robotaxis, not cars (things that CapEx is supposed to be building):

😬 Musk admitted on the earnings call that the Optimus robot timeline will likely slip to the end of 2027 (the robot’s hands are proving harder to build than expected), while Tesla ended the quarter with its largest vehicle backlog in 4 years due to battery shortages, and the company quietly lined up $30 billion in new loans and credit lines.

🤝 The potential saving grace (given SpaceX’s incredible quarter) is Musk confirming that Tesla and SpaceX have formed special committees to explore a possible merger to create a roughly $3.5 trillion company, which he says “has merit.” And while Musk says he’s recused from talks, he supports a deal. Though analysts aren’t convinced:

📉 Shares of Tesla fell about 3% on Thursday and are now down 14% year-to-date.

💊 Ok, now that we’ve covered what’s happening in the AI world, let’s quickly give an update on one of our top stories from a few weeks back: Moderna. But first let me shout out some of the top posts and discussions in the

FROM THE BLOSSOM COMMUNITY
⭐️ Featured Posts & Discussions of the Week

👇 Click to see the full post!

BIOTECH
💉 Moderna Stock Falls 25% After Its Cancer Vaccine Data Leaks

🧬 While tech earnings were busy taking up the headlines, Moderna ($MRNA) had its own wild ride when data on its individualized skin cancer vaccines (co-developed with Merck) apparently leaked ahead of the full presentation.

📉 The stock closed the week down 12% on the news after falling as much as 25% on Thursday, erasing around $15 billion of market value in a single session.

✨ It Was Actually Good Results

🤔 Now the ironic part is that the results were good, with the report showing the vaccine cut the risk of recurrence or death by 42%, and roughly 82% of patients on the combination were cancer-free at 2 years versus 70% on immunotherapy alone.

💬 Bernstein called it a ”strong Phase 3 result and meaningful validation of Moderna’s individualized neoantigen platform.”

🤷‍♂️ So, why the plunge?

📉 A Classic “Sell the News” Reaction

🫣 The main reason for the drop was sky-high expectations. As we covered back in August when Moderna soared a record 177% in a day (read that here), the stock is up an astronomical ~548% this year EVEN AFTER this week's drop…

Good results simply weren't good ENOUGH, with analyst Myles Minter noting this is a classic "sell-the-news reaction playing out."

🎲 Overall, Wells Fargo says concerns over the trial data “may be overdone,” noting that recurrence-free survival exceeded investor expectations. Though commercial success remains a big dice roll:

🛑 Analysts currently rate Moderna shares a “Hold,” with an average price target of $123.75, or roughly 38% lower than current prices, mostly due to valuation.

🐝 And that’s all for this week! Next Sunday, we’ll be breaking down earnings from Microsoft, Alphabet, and Amazon, plus rate decisions from BOTH the Fed and the Bank of Canada on Wednesday… so it’s going to be a big one. See you then!