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Vested Shorts: Tesla’s business, US rating downgrade, SuperApp X, Bitcoin ETF, and Amazon expands US delivery network

by Parth Parikh
August 5, 2023
3 min read
Vested Shorts: Tesla’s business, US rating downgrade, SuperApp X, Bitcoin ETF, and Amazon expands US delivery network

In today’s edition

  • Under the Spotlight: Tesla’s business
  • US rating downgrade
  • Musk and SuperApp X
  • Bitcoin and Ethereum ETFs are coming
  • Amazon expands US delivery network

Market Snapshot

The major U.S. stock indexes had a tough week. They went up briefly after the jobs report on Friday but finished the day lower. The Dow lost about 1% over the week, while the S&P 500 and NASDAQ fell over 2%.

So far, 84% of the companies in the S&P 500 have shared their earnings for the second quarter of 2023. Among these, 79% did better than expected, which is a bit higher than the average over the last five years.

Data as of market close 04 Aug 2023

The week ended on 04 Aug 2023. Source: AlphaScreener

Under the Spotlight

A narrative is emerging that questions whether Elon Musk’s leadership at Tesla may have done more harm than good for the overall EV industry. According to a Facebook and Asana co-founder Dustin Moskovitz’s post, Tesla’s misleading claims about vehicle range and autonomous driving capabilities diverted customers, talented employees, and funding away from other potential EV innovators. He argues that companies like BYD, Toyota, and Nikola could have progressed further without Tesla’s dominant presence. However, the counterpoint is that Tesla’s staggering $850 billion market cap has pressured traditional automakers like Ford to invest in EVs. The company’s public success, even more than its achievements as a carmaker, has been a significant factor driving the global shift toward electric vehicles.

For a detailed analysis of Tesla’s journey as an electric vehicle manufacturer and a peek into its future, head to our comprehensive blog, part of Vested’s ‘Under the Spotlight’ series.

News Summaries

Fitch Ratings has downgraded the United States’ rating from AAA to AA+, citing deteriorating fiscal health and a chaotic governance process. The agency identified rising debt levels and a divisive political environment as factors making the US less reliable in debt repayment. This symbolic move reflects concerns about governance standards over the past two decades, particularly around fiscal and debt matters. The downgrade reinforces the view that rising inflation and debt burdens will cause investors to seek more compensation for long-term government debt risk, leading to steeper yield curves in developed markets.

Elon Musk has rebranded Twitter as ‘X.’ Musk aims to transform the platform into an “everything app,” combining elements of Twitter, Substack, YouTube, PayPal, Amazon, TikTok, WeChat, and Baidu, allowing users to fulfill various tasks from one centralized hub. Musk’s ambitious goal with X is to create a trillion-dollar company that reimagines content and journalism. The plan is to replicate the success of super-apps like WeChat, used by 1.32 billion people for various tasks ranging from messaging to food ordering. Despite his grand statements, there has been little progress in the nine months since taking over Twitter. 

The cryptocurrency world is buzzing with the prospect of Exchange Traded Funds (ETFs), particularly those based on Ethereum (ETH) and Bitcoin. Over the past week, six asset management companies, including VanEck, ProShares, Grayscale, Bitwise, Roundhill, and Volatility Shares, have applied to the SEC to launch ETH futures-based ETFs, with a decision expected by mid-October. Simultaneously, according to Bloomberg analysts, the likelihood of approving a Bitcoin ETF has risen to 65%, up from 1% a few months ago. The surge in odds is believed to be due to pressure from BlackRock and Congress, which might make denial of the ETFs difficult for the SEC. However, it’s worth noting that, like weather forecasts, analysts’ predictions should be taken with a grain of caution.

Amazon’s US delivery network has significantly expanded and accelerated, delivering over 1.8 billion items to Prime members either the same day or the next, four times the volume compared to the same period in 2019. The enhancement of Amazon’s supply chain operations involved reorganizing inventory placement, focusing on regional distribution networks, and establishing smaller facilities for same-day deliveries to metropolitan areas. The approach has reduced the distance between Amazon’s sites and the customer by 15%, with 12% fewer touchpoints in their middle-mile network. As competitors like Walmart and Target look to transform their physical stores into fulfillment centers, they’ll need to enhance their operations to match Amazon’s speed. 

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