🦉 The Night Owl Newsletter for October 14th

Unsubscribe The Night Owl, From Early Bird Publshing. The 7 Stocks Quietly Gaining Attention Right Now (From StockEarnings)tc pixel Tesla Wants to Make Its Own Chips—What Could Go Wrong? Written by Sam Quirke Illuminated Tesla logo in a factory setting with robotic machinery and a semiconductor wafer in the foreground. Elon Musk has never been one to think small, and his latest ambition might be one of his boldest ideas yet. Tesla Inc. (NASDAQ: TSLA), the electric-vehicle giant increasingly being pitched as an AI and robotics company, is no longer content to design its own chips. It now wants to build and run the factory that makes them. The stock has been on a tear lately, up around 25% since the end of July to trade near $375, though it remains down about 19% in 2026 and, on the charts at least, still stuck in a downtrend. Investors clearly like the recent direction of travel, even if the longer-term picture looks far less settled. Musk first unveiled plans for Terafab, a massive AI chip manufacturing complex, in March. Earlier this month, he doubled down on the project, insisting that Tesla and SpaceX would build and operate the facility themselves rather than hand control to an established chipmaker like Taiwan Semiconductor Manufacturing Co. (NYSE: TSM). With earnings due Oct. 21, the question is whether this is visionary vertical integration or an expensive distraction. The Logic Behind Owning the Fab Strip away the bravado, and there is real strategic logic here. By controlling chip design, fabrication, and packaging in-house, Tesla could tailor its silicon to its own needs, from Full Self-Driving (FSD) to its Cybertruck robotaxis and Optimus robots. The prize isn't merely cheaper chips, but chips optimized for Tesla’s software, power limits, and autonomous-driving workloads. It fits the bigger story the bulls have told for a while: that Tesla is morphing from a carmaker into an AI-first business, with autonomy and robotics becoming the real profit engines. Owning the chip supply chain would hand it more control over that shift, and less dependence on outsiders. A Very Different Kind of Factory Here is the rub, however. Building cars, batteries, and robots is one thing; running an advanced semiconductor fab is entirely another, demanding expertise in process control, yield management, and clean-room manufacturing that Tesla doesn’t have today. Musk’s cheerful admission that he does not yet know how to make microchips is not a detail investors should wave away. Then there’s the timeline. A fab has to be built, equipped, qualified, and painstakingly ramped before it reliably produces anything, a process more likely to be measured in years rather than quarters. Any slip would leave Tesla funding an enormous facility while still leaning on the very suppliers it set out to replace, the worst of both worlds. Musk has floated roles for partners to share the load, with Intel Corp (NASDAQ: INTC) named as a development partner and TSMC possibly subleasing part of the site. All of this lands on top of an already steep capital-spending bill. While Tesla now expects to spend more than $25 billion this year, its largest ever, management has already conceded it may need additional funding to see the plans through. Add a chip-making factory, and that already heavy bill climbs even higher. Priced for a Lot to Go Right The bigger worry is what all this means for a stock that already prices in near-flawless execution. Even with the stock trending down since the start of the year, Tesla trades on a price-to-earnings ratio north of 300, which tells you just how much value the market is assigning to businesses that barely contribute to profit today. That leaves precious little room for disappointment, and Wall Street itself is split on whether the current price is a bargain or a stretch. A delayed or underused chip plant would not just be a costly misstep in isolation; it could be read as proof that Tesla’s whole AI and robotics timetable is slipping. For a stock priced on promises, perception matters almost as much as the numbers. What That Means for Next Week’s Report That is what makes the upcoming earnings report so important. Beyond the usual focus on deliveries and margins, investors will be hunting for signs that Terafab is a disciplined bet rather than an open-ended one, with clarity on how much capital it will consume and which partners are truly committed, plus evidence that robotaxi and FSD economics are improving with or without a fab attached. For all the obvious risks, betting against Musk’s ambition has rarely paid off for long, given how many of his longest shots eventually came good. But chipmaking is among the hardest games in technology, and with the stock already priced as if future success is guaranteed, Tesla has seldom needed to reassure investors more than it does in its upcoming release. READ THIS STORY ONLINE Forbes calls this a "golden era" for retirement income (Ad) tc pixel Forbes calls this a 'golden era' for retirement income Forbes recently called a new category of exchange-traded income funds a 'golden era,' and Bloomberg noted the eye-popping yields are fueling a boom among everyday investors. Three years ago, barely a dozen of these funds existed - today there are more than 100, holding over $140 billion. These funds trade on the NYSE and NASDAQ and are built to generate monthly income. Some investors are targeting $5,000 a month with roughly one-tenth of the nest egg Wall Street says you need. WATCH THE SHORT BRIEFING TO SEE HOW THIS INCOME APPROACH WORKS IREN Limited's AI Pivot Gains Traction—But Can Its Data Centers Deliver? Written by Thomas Hughes IREN logo in a data center aisle of server racks, highlighting crypto mining and AI infrastructure investment. IREN Limited (NASDAQ: IREN) drew market attention with its Q2 earnings release, prominently announcing a new multi-year deal with a frontier hyperscale AI lab. The news was compounded by an as-yet unconfirmed report that the customer may be Anthropic. Regardless, it is potentially game-changing news for the company, validating the shift from cryptocurrency mining to AI, and putting in place another long-term contract that improves revenue visibility. The question is what it means for the stock’s price, and the implications could be substantial. Hyperscale deals with leading frontier labs that provide greater visibility into future operations, validating the AI buildout industry-wide, but, more importantly, this company’s cash flow and future profitability. Among the questions answered is who will pay for IREN's capacity, and how. Assuming the contract is with Anthropic, Anthropic’s revenue run rate topped $65 billion as of July, up from $47 billion in May, underpinned by enterprise demand. Reported projections suggest Anthropic could generate roughly $190 billion to $200 billion in annual revenue by 2028. The question it doesn’t answer is whether Anthropic can monetize the capacity and sustain the contract longer term, providing value to its and IREN’s investors over time. IREN stock chart shows shares testing support after a volatile rally, with momentum indicators remaining weak. IREN Aggressively Expands Its Data Center Business IREN is aggressively expanding its data center business, having decommissioned cryptocurrency capacity sooner than expected to shift it to AI. The impact on results was tangible, leading to wider-than-expected losses, but it accelerated the timeline to monetize the backlog. As it stands, the company is targeting approximately 300MW of AI IT capacity by year-end and about 800MW by the end of 2027. Looking ahead, IREN has secured 5 GW of power across North America, Europe, and the Asia-Pacific regions, with additional AI infrastructure projects under construction and in development. Not all of that future capacity is covered by long-term contracts. Customer concentration risk remains, with most of the backlog tied to Microsoft (NASDAQ: MSFT), but the portfolio is growing. IREN’s announced AI cloud contracts exceed $13 billion in total value, underpinned by a $9.7 billion five-year contract with Microsoft. Microsoft booked 200MW of capacity over four installments, the first of which was delivered in August. It, along with other contracts with AI developers, brought contracted annualized run-rate revenue to $4 billion for planned 2026 capacity, compared with $1 billion in operating annualized revenue as of late August. Much of the associated GPU spending is covered by committed financing and customer prepayments. IREN’s outlook is also less risky, to some extent, because of its project funding, which includes upfront payments and innovative financing that help limit the need for dilutive funding. Microsoft agreed to pay 20% upfront to finance GPU capacity, while newer contracts include customer prepayments covering approximately 45% to 55% of GPU costs, with additional financing provided by private creditors. The Microsoft deal includes debt and upfront payments that total about 96% of the build, while the newer contracts are even more favorable. In some cases, financing and prepayments exceed the associated GPU costs. IREN Buys Growth, Expands Capacity in Spain IREN isn’t just building data centers; it's buying growth as it accelerates its AI infrastructure business. Recent additions include Spain’s Nostrum Group and Mirantis Inc., providing an entry into the European Union (EU) and shifting its business from infrastructure provider to full-stack AI factory original equipment manufacturer (OEM). Nostrum Group, notably, is the Spanish version of IREN, building eco-friendly data centers and power solutions, while Mirantis Inc. provides what it calls a “metal to models” platform that can automate data center operations from initialization to model training and deployment. And if there was ever any doubt about the seriousness of IREN’s build-out plans, investors need only look to the NVIDIA (NASDAQ: NVDA) partnership. Announced in May 2026, the deal aims to accelerate the deployment of up to 5 GW of NVIDIA-based capacity, with a focus on IREN’s 2 GW Sweetwater, Texas, facility. The partnership also includes a $3.4 billion contract for IREN to provide AI cloud capacity for NVIDIA’s own internal workloads. The next catalyst is the upcoming earnings report, expected in early November. Analysts are hopeful, but a hurdle remains: they forecast a year-over-year revenue decline tied to the decommissioned cryptocurrency business. Investors should focus on details such as new capacity, updates on its timing, new contracts, and balance sheet health. The balance sheet boasts significant growth and ample liquidity, offset by rapidly increasing debt. The good news is that the business is on track to pay it back, but it will take time, and that is the risk for investors. The company is on track to ramp up capacity, but the big jumps won’t happen until next year and 2028, a long time to wait. READ THIS STORY ONLINE The 7 Stocks Quietly Gaining Attention Right Now (Ad) tc pixel The 7 Stocks Quietly Gaining Attention Right Now Palantir, Micron and SanDisk show how fast a stock can become the trade everyone suddenly wants. That's often when investors make their costliest mistake: arriving after the easy part of the move is gone. A new premium eBook flags 7 stocks that may be worth knowing about before the broader crowd catches on. You don't need to buy any of them - just knowing what's quietly gaining attention can be useful. SEE THE 7 STOCKS ON THE WATCHLIST WHILE IT'S STILL FREE PBF Energy's Stunning Rally Faces a Critical Test Written by Peter Frank PBF Energy logo overlaid on a photo of an oil refinery with storage tanks and processing towers. Few stocks have had a year like PBF Energy (NYSE: PBF). The independent refiner has gone from a money-losing operation in 2025, weighed down by a damaged California plant, to one of the most profitable names in its industry. Its shares have followed, as the stock is up more than 230% this year. Behind the performance is a rare mix of a Middle East supply shock, a repaired refinery, and a balance sheet that looks nothing like it did a year ago. The question for investors is whether the profits are durable or whether the stock has already priced in the best of it. PBF's Earnings Show a Dramatic Turnaround The news around PBF has been heavy. The company signed a new $4 billion asset-based revolving credit facility on Sept. 30, several Wall Street firms have revised their views in recent days, and PBF will report third-quarter results at the end of October. Combine that with the disruptions that have taken place because of the Middle East tensions, and there is a lot to unpack. Start with the second-quarter numbers reported July 30. Revenue was $11.68 billion, up from $7.48 billion a year earlier and more than $2 billion above what analysts expected. Net income came in at $906 million, or $7.54 per share, in contrast to a net loss of 5 cents per share a year earlier. On an adjusted basis, earnings were $6.22 per share, compared with an adjusted loss of $1.03 a year ago, and well above the $4.15 analysts expected. Refining Margins Drive the Profit Surge The engine was the company’s refining margin, which climbed to several times its year-earlier level as crude prices jumped. Management said hostilities in the Middle East trapped crude and refined products and left millions of barrels a day of global refining capacity offline. That shortage is what helped turn PBF's plants into cash machines. For perspective, 2025 was ugly. PBF posted a full-year loss, and a fire at the company’s Martinez refinery in California was a big reason. PBF also operates facilities on the East Coast, Gulf Coast, and in Ohio, processing about 1 million barrels per day. The shutdown in northern California and the costs associated, though, had a significant impact on 2025 and first-quarter results. That makes this year's full restart, completed in the first part of 2026, a central part of the comeback story. Debt Reduction Strengthens PBF's Finances The balance sheet might be the most underrated part of the turnaround. Net debt fell more than 62%, or more than $1.4 billion, during the second quarter, and insurers have paid more than $1 billion on the Martinez claim so far. Looking ahead, management argues global product inventories are depleted and that restocking could keep margins elevated well into 2027. California imports close to one-third of the gasoline it uses, which is a structural opening for a West Coast refiner. A cost-cutting program is also on track to deliver more than $350 million of run-rate savings by the end of 2026. The valuation looks cheap on paper. The shares trade at a trailing price-earnings ratio of about 8 and an even lower multiple of forward estimates. PBF is not one of the classic dividend stocks, though. Its yield is about 1.2%, and management declined to commit to buybacks or bigger dividends on the earnings call. Analysts Remain Cautious About the Stock Wall Street is not nearly as excited as the tape might suggest. The consensus rating is Hold. Of the 15 analysts covering the stock, more than half recommend Hold with four rating shares a Buy and three suggesting Sell. Price targets span an unusually wide range, from a 12-month price target to $99 to as low as $23 per share, a sign of how hard it is to model a refiner riding a geopolitical shock. The stock has jumped so quickly based on geopolitical events that the consensus price target of $65.55 sits about 26% below the current price, illustrating where the price might settle if or when oil flow returns to normal levels. Falling Margins and Insider Sales Pose Risks Refining profits this large are a symptom of disruption, not a new normal. Analysts expect earnings per share to fall by roughly 18% next year, and it’s unclear where margins settle until crude flows return to historical patterns. A second red flag is who is selling. Insiders sold about $343 million of stock over the past three months, with no purchases listed since the start of the year. CEO Matt Lucey sold shares in August, and 10% owner Control Empresarial de Capitales has kept selling into October. Investors Should Prepare for More Volatility Even with expectations of a possible pullback, PBF is a much better company than it was a year ago. The Martinez refinery is running again, the balance sheet has been repaired, and cost savings are coming through. But the stock already trades above where most analysts think it should, the earnings are tied to a war-driven margin spike, and insiders are cashing out. Still, unlike growth stocks, refiners do not compound steadily, but surge and then give it back. For investors comfortable with that kind of volatility, building a position gradually after a pullback could be one way to buy into this slice of the energy business. READ THIS STORY ONLINE Trump goes "all-in" on Grand Canyon energy breakthrough (Ad) tc pixel Trump goes 'all-in' on Grand Canyon energy breakthrough A drilling crew near the Grand Canyon uncovered a clean energy well producing nearly eight times the output of Saudi Arabia's largest oil field, with potential to last two million years. While the One Big Beautiful Bill Act eliminated federal credits for solar, wind, and EVs, this energy source was reclassified alongside oil and nuclear power and given eight years of tax credits. Google signed a 15-year contract, and Bill Gates committed $100 million. One company controls the entire supply chain behind this discovery. SEE THE TICKER BEHIND THIS GRAND CANYON ENERGY BREAKTHROUGH NOW More Stories Intel Bets on Cheaper AI as Foundry Losses Mount Don’t Get NVIDIA’s Reflection AI Interest Wrong: Its Moat Could Deepen The Rumors About Elon’s Next Move Are Spreading Fast (Ad)tc pixel Venezuela's Oil Revival Is Gaining Momentum—3 Energy Stocks Positioned to Benefit High Voltage Returns: Navitas Rewires AI Data Centers PepsiCo's Earnings Beat Masks a Bigger Problem With Its North American Business Tax Credit Turmoil: Why Enphase and SolarEdge Face a Tough Road The Night Owl is a financial newsletter that provides in-depth market analysis on stocks of interest to individual investors. Published by MarketBeat and Early Bird Publishing, The Night Owl is delivered around 9:00 PM Eastern Sunday through Thursday. If you give a hoot about the market, The Night Owl is the newsletter for you. The Night Owl Newsletter. 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