• Stocks: Indexes climbed as yesterday’s announcement of a possible SpaceX-Tesla merger revived a tech rally among traders; Meta earnings after the bell today will give more insights into the AI trade.
• Bonds: Treasury yields remained mostly steady as investors awaited more economic data—like initial jobless claims, which release tomorrow—before the Fed decides on interest rates next week.
• Commodities: Oil prices were also relatively stable, with traders worrying that the Middle East conflict will continue to create supply shortages.

M&A

Morning Brew Inc.

Just last week, Elon Musk unveiled a flying car that he claimed could accelerate from zero to 60 mph in less than a second and add a flip to the mix. When AI scientist Yann LeCun questioned the physics behind the stunt, Musk offered a sophisticated rebuttal: “I fart in your general direction.”

But Musk might soon have better than a Monty Python quip. During yesterday’s SpaceX earnings call, he said merging Tesla with his rocket company was a “good idea,” one that could bring engineering expertise behind both cars and rockets under one roof in a $3.5 trillion deal. Both companies have established independent committees to explore the possibility.

“There’s a lot to be gained from cooperating,” Musk said. The companies already collaborate on Terafab, a chipmaking project intended to power Tesla’s autonomous vehicles and robots alongside SpaceX’s AI operations.

There’s a financial incentive, too: SpaceX isn’t expected to generate positive free cash flow until 2031, so access to Tesla’s financial resources could help fund its ambitions. That said, the rocket maker did report pretty stellar earnings yesterday:

• Revenue soared 161% year-over-year to $14.6 billion, beating expectations of $12.7 billion.
• AI business generated $7.56 billion, more than half of total revenue and over nine times its year-earlier figure.
• Net income hit $4.4 billion, reversing a $1.1 billion loss a year earlier.

But the company also spent $19.6 billion on quarterly capital expenditures, more than its total revenue. Nonetheless, SpaceX shares jumped 7.79% today, while Tesla gained 3.41%.

A rocky road to orbit

Musk has tried bringing two of his businesses under one roof before, and it wasn’t exactly smooth sailing.

In 2016, Tesla acquired solar-panel maker SolarCity for $2.6 billion, sparking shareholder lawsuits alleging that Musk used the automaker to rescue a struggling company he held a major stake in.

While Musk ultimately prevailed in court, a merger could revive similar concerns: Musk owns roughly 48% of SpaceX but just 20% of Tesla—potentially giving him an incentive to use Tesla’s funds to underwrite SpaceX’s ambitions, while leaving Tesla shareholders to shoulder the risk.

JPMorgan Chase analyst Rajat Gupta expects those shareholders to demand a 30% to 35% premium on their shares, which could complicate negotiations with SpaceX investors. But while shareholders haggle over who gets what, Musk would be the biggest winner: Gupta estimates that the premium deal could give him more than 50% of the combined company’s voting rights.

The bigger obstacle may be China. SpaceX’s sensitive US defense contracts could clash with Tesla’s extensive Chinese operations, potentially complicating regulatory approval. Still, there’s reason for optimism, with both companies already sharing engineers, AI infrastructure, and Musk’s idiosyncratic leadership.

Investors may get more clues when Tesla reports earnings today, and decide whether Musk’s latest moonshot can get off the ground.—SY

      

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Stocks

🟢 What’s up

• Nvidia climbed 2.54% after CEO Jensen Huang unveiled Vera Rubin DSX Pods, a new AI data center system designed to be deployed in days rather than months.
• Super Micro Computer surged 9.55% after raising its fiscal first-quarter revenue forecast roughly $4 billion above its previous guidance.
• United Airlines gained 3.99% despite missing quarterly earnings and revenue estimates, as strong booking demand showed that travelers will pay higher fares.
• Bloom Energy rallied 7.11% ahead of its third-quarter earnings report on Thursday, with investors anticipating continued demand for its data center power systems.
• Capital One rose 2.53% after reporting quarterly profit of $3.5 billion, up from $3.2 billion a year earlier.
• Cloudflare jumped 5.38% on heightened demand for cybersecurity after the discovery of critical vulnerabilities affecting widely used PHP code.

🔴 What’s down

• Netflix sank 5.31% after issuing disappointing fourth-quarter revenue guidance, adding to concerns about slowing viewer engagement despite an earnings beat.
• Philip Morris International fell 1.22% as disruptions tied to conflicts in Ukraine and the Middle East clouded the tobacco giant’s earnings outlook.
• AT&T dropped 6.59% despite beating quarterly expectations, as weaker-than-expected wireless subscriber growth overshadowed stronger revenue.
• Telix Pharmaceuticals sank 10.13% despite reporting 19% quarterly revenue growth, as sales slipped from the previous quarter and investors took profits following a recent rally.

Stock of the day

Smart glasses lose focus

Illustration: Morning Brew Inc., Photos: Ray-ban

Smart glasses can translate languages, play music, and turn you into The Terminator. But for all their futuristic tricks, they still can’t touch Tom Cruise’s iconic aviators.

That’s the eye-opening takeaway from Ray-Ban maker EssilorLuxottica’s Q3 earnings: The French-Italian eyewear giant beat quarterly revenue estimates, raking in 7.49 billion euros (over $8.4 billion). Sales of its Meta-made smart glasses jumped 20%. But that growth has slowed considerably from earlier this year. The more surprising star? Traditional eyewear, which has been chugging along at a “pretty consistent pace,” CFO Stefano Grassi told analysts.

EssilorLuxottica shares soared 6.17% today on the news—a welcome rebound for a stock that’s lost over half of its value in the past year, providing hope that things are looking up.

Smarter smart glasses

Smart glasses aren’t necessarily a passing fad; the category is actually getting more crowded. Meta’s smart specs may dominate over 80% of the global AI eyewear market, but Alphabet’s Google is slated to launch its Gemini AI glasses by the end of 2026, and Apple will follow in 2027.

“The prospect of smart glasses disrupting traditional eyewear will likely stay as a ​sword of Damocles hanging over EssilorLuxottica,” Bernstein analyst Luca Solca said in a note to investors, adding that Google’s AI specs will be the company’s “first acid test.”

Then there’s the privacy problem: Smart glasses have been used to secretly film unsuspecting bystanders, who are none too thrilled about it. Camera-free, audio-only frames have launched to help combat a “pervert glasses” reputation, but they have a ways to go.

But maybe the biggest problem is that unlike traditional glasses, smart glasses aren’t a necessity—they’re a novelty. Maybe what they really need isn’t better tech, but a starring role in the next Mission: Impossible.—JD

AI

Illustration: Morning Brew Inc., Photo: Michael M. Santiago/Getty Images

If haunted houses aren’t doing it for you this Halloween, here’s something scarier: Anthropic may owe more than $600 billion in future computing costs before it’s even rung the IPO bell.

According to a confidential draft prospectus reported by the Wall Street Journal yesterday, the Claude maker generated $16.3 billion in revenue in the first half of 2026, up from just $1.1 billion a year earlier. Then third-quarter revenue jumped another 45% to $16.8 billion.

But it’s also committed to spend at least $518 billion on cloud services, chips, and infrastructure over the coming decade, and the total could eventually reach roughly $750 billion.

That makes Anthropic’s planned November IPO less about whether AI demand exists—it does. But the focus now is if demand can keep accelerating fast enough to support the bill Anthropic has already agreed to pay.

The math gets spooky

Compared to the shaky numbers leaked last month in another draft prospectus, Anthropic’s updated documents give investors a fresh look at what could go wrong.

• The $80.7 billion loss: Anthropic reported an $80.7 billion first-half net loss, but about $72 billion came from an accounting charge tied to convertible financing as the company’s valuation rose.
• The huge compute bill: Anthropic spent nearly $9 billion on infrastructure in the first half, up from $2.3 billion a year earlier. Many of its future cloud and chip contracts are long-term, noncancelable, or on the hook regardless of how much capacity Anthropic actually uses.
• The growth question: It has to stay massive. Anthropic’s revenue more than doubled from Q1 to Q2, then rose another 45% in Q3. But compared to its infrastructure commitments the company has made, some analysts have discussed lowering its valuation to $1.5 trillion, down from roughly $2 trillion.
• The few customers that matter a lot: Roughly 20% of Anthropic’s first-half revenue came from just two customers. That concentration looks great when they are spending aggressively and much less so if one of them cuts back.

In short: Anthropic has committed itself to a future where growth can’t afford to get boring.

AI watches for boogeymen

That matters for the larger market. Anthropic’s enormous costs become revenue for Amazon, Alphabet, Microsoft, Nvidia, Broadcom, and the wider data-center ecosystem—who all hold up the stock market at large. Many investors already own those companies through index funds and retirement accounts.

So Anthropic’s IPO will do more than put a price on Claude: It will give public investors one of their first chances to judge whether the customers driving the AI infrastructure boom can grow into all the capacity being built for them.

This fall season, we’ll see if the AI buildout convincingly soothes investors’ scaries. If it doesn’t, the fear won’t stop at Anthropic.—HC

      

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News

• The Bank of Dad never declines: Larry Ellison reportedly borrowed billions against stakes in Oracle, Tesla, and SpaceX to finance his son David’s bid for Warner Bros.
• PrizePicks is expanding beyond sports predictions with a new collectibles business, where the grand prize is an absurdly valuable Cooper Flagg card.
• Hermès is scouting wealthy American suburbs for store locations—proving that Birkin bags, like migrating birds, will eventually find the money.
• Waymo is making plans to put 20,000 robotaxis on the road by next year—a fivefold increase from its current fleet.
• Despite its stock rallying nearly 40% this year, eBay is cutting about 9% of its workforce to double down on a few fast-growing niches.
• EA is cutting 400 jobs and killing projects after a $55 billion buyout, including one release gamers have waited years for.
• Todd Boehly is defending his life insurance empire as investors ask increasingly uncomfortable questions about where all the money went.

Calendar

Weekly initial jobless claims hand down another indicator on the economy. We’ll also have a mix of earnings rolling in, with Procter & Gamble, Spotify, Comcast, Blackstone, Union Pacific, Lockheed Martin, Western Digital, Southern Copper, Newmont, and Honeywell all reporting.

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🪶 Feather your nest. One of the US’s biggest retirement-fund managers has revealed two key strategies for safely spending your 401(k).

⚡ The semiconductor market may be getting tricky, but one electronic stock pick offers a simple way to profit.

🛒 Who’s gamifying their grocery list? With inflation making everything more expensive, these five smart spending hacks can help stretch your dollar.

📢 Step aside, portfolio managers: Here’s why some of the strongest stock-pickers actually work in finance’s marketing department.

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