1. Meta, SpaceX, and Tesla Are All Spending Big on AI
Meta Platforms (META -0.43%) posted record revenue and, for the first time Team Rule Breakers analyst Tim Beyers can remember, no free cash flow. SpaceX (SPCX +1.81%) and Tesla (TSLA +0.52%) each beat on a headline number. All three are spending heavily.
- Meta’s bill is still coming. A $9.89 billion legal settlement ate into cash. Another $52 billion to $62 billion of capital spending is due by year-end. Shares rose more than 5% after hours on Wednesday, but were down on Thursday along with a market jittery on AI spending.
- SpaceX’s AI sells more, but Starlink earns more. SpaceX’s AI business rents computing capacity and includes the Grok AI models and the Cursor coding tool. SpaceX’s AI revenue jumped ninefold from a year ago to $7.56 billion, which is now more than the $5.25 billion its satellite internet service Starlink brings in. Starlink still earns most of the profit, with $2.37 billion in operating income compared with $431 million from AI. SpaceX plans to spend more than the market expected, and a $63 billion backlog backs that plan. Shares jumped nearly 10%.
- Tesla’s cash was a surprise. Wall Street expected a $4.92 billion free cash burn. It generated $1.53 billion instead, largely because it spent less than analysts feared. Tesla plans over $25 billion of 2026 spending on robots, AI, and a chip plant.
These three companies are racing to grow revenue faster than spending before cash runs too thin. With its $63 billion backlog, SpaceX looks well positioned.
2. Walmart Opened the Door to AI Shoppers
More than half of internet traffic this year wasn’t human. Daily requests from AI agents on Cloudflare’s (NET +6.08%) network grew more than 1,700% in a year. Two of the biggest retailers have responded in opposite ways.
- Agents welcome, with limits. Walmart (WMT -0.80%) launched Agent Gateway on Wednesday. The server lets approved AI agents search its inventory and buy on shoppers’ behalf. Starting next month, shoppers can cap what each agent spends or approve every order. It already works with Muse, Meta’s agent that can buy for users. Amazon (AMZN -0.46%) went the other way last month and blocked agents from buying.
- Cloudflare is counting the crowd. Cloudflare, recommended by both Team Hidden Gems and Team Rule Breakers, says more than 10 million developers now build on its platform, up from 7.4 million a quarter ago.
Walmart and Amazon may disagree on letting agents in, but Cloudflare’s traffic says the bots are coming regardless. For Cloudflare, that growth turns into revenue only if the developers pay, and Cloudflare has yet to say how many do.
3. Braze Got a 58% Premium and Still Trails the Market
Salesforce (CRM -1.76%) offered $47.50 a share in cash for Braze (BRZE +0.02%), 58% above Monday’s close. Braze had been recommended twice in Rule Breakers, and Tim Beyers calls the deal a disappointment. Both picks will make money, he says, and lose to the market.
- Why Tim isn’t celebrating. “I was too early and paid too much,” he wrote. Braze now trades largely on the offer price, so what’s left depends on the deal closing. Salesforce expects the deal could take until January 2028 to close.
- What Salesforce gets. Braze makes AI marketing tools, the real-time engagement engine Salesforce’s Marketing Cloud lacked. It’s paying about 6.8 times trailing revenue for a business growing over 25% a year. Salesforce shares were roughly flat.
- What it doesn’t get. Motley Fool Chief Investment Officer Andy Cross says the days of Salesforce growing 20% a year are behind it. He expects 7% to 10% and market-matching returns at best. Tim thinks Salesforce gets more interesting with Braze inside.
Salesforce, a Team Hidden Gems recommendation in Stock Advisor, made a sensible purchase. Andy’s 7% to 10% range doesn’t beat the market, and nothing this week suggests Braze lifts Salesforce above it.
4. Netflix and Intuitive Raise Doubts About Pricing Power
Two Foundational Stocks — Intuitive Surgical (ISRG +2.86%) in Rule Breakers and Netflix (NFLX -0.71%) in Stock Advisor — fell after reporting on Tuesday night. Each gave investors a reason to doubt its pricing power.
- Intuitive’s blades get cheaper. Intuitive sells the da Vinci robot once and earns on instruments every time a surgeon uses it. Next year it will extend the life of some instruments and add volume-based pricing. A government-driven price cut in China starts next month. Management expects instrument revenue per procedure to fall roughly 3% to 5% once fully rolled out. Shares fell 7%. Emily Flippen, an analyst for Team Rule Breakers, says Intuitive’s two-decade monopoly may be running out.
- Netflix hit a wall. Netflixgrew third-quarter revenue 12%, its third straight quarter of slowing growth and the slowest since 2023. Andy Cross expects this year’s price increases to “start hitting more of a wall.” Netflix cut this year’s ad target to about $2.7 billion from $3 billion. Shares fell about 5%. Andy is still OK owning it, with expectations “more muted.”
Intuitive can keep on winning if surgeries keep growing faster than its prices fall. Intuitive has the smaller hurdle, because Netflix needs ads to replace price hikes and its ad target fell.
5. Cisco, Corning, and EQT: Old Economy, New AI Customers
The week’s team statements kept landing on old-economy businesses the AI buildout can’t skip.
- Cisco Systems (CSCO +1.47%): Cloud giants placed about $9.3 billion of AI orders with Cisco in fiscal 2026. Team Hidden Gems first recommended it in Hidden Gems in September 2024 at about $47. Shares are up about 130%.
- Corning (GLW +1.11%): Faster AI chips need more of its fiber. Corning signed five multibillion-dollar supply deals this year. Team Rule Breakers first recommended it in Stock Advisor in August 2011; it’s up nearly 1,400% and remains a Buy there.
- EQT (EQT +2.33%): America’s leading independent natural gas producer grew free cash flow about 78% in the past year. Team Hidden Gems first recommended EQT in November 2023 at roughly $38. Shares are up about 36%. The team thinks the market still prices it like a gas-price wager.
One recommendation sits at the other end of the spectrum. It’s a growth company giving up earnings on purpose to win customers.
- MercadoLibre (MELI -0.77%): Latin America’s e-commerce and payments leader grew revenue about 50% in the second quarter. Earnings per share fell about 11%, because management spent heavily on free shipping and marketing. Both teams call that a down payment on market share.
6. Today’s Question!
Which of these companies would you trust most to turn today’s spending into tomorrow’s cash: Meta, SpaceX, or Tesla? Why?
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