Meta Platforms (META) is doubling down on the use of robots to handle a variety of tasks in its data centers… tasks once carried out by humans. If you think this sounds like the premise of a dystopian sci-fi movie, you’re not alone. Just look at what one Meta data center worker told a reporter from Wired:

“We thought those of us performing the physical tasks were safe for a while, but not anymore. It’s coming for us all, unfortunately.”

Artificial intelligence (“AI”) has already claimed hundreds of thousands of white-collar jobs.

And, as Meta’s robots have recently demonstrated, it’s coming after blue-collar workers as well. The same worker behind that quote you just read believes that the Watney Robotics cable-swapping robot Meta is testing could perform up to 80% of some employees’ workloads.

While that thought is disturbing enough, the reason behind Meta’s quest for more automation in its data centers is even harder to swallow.

What’s Happening Inside Meta’s Data Centers?

A 2023 YouTube video demonstrated Meta’s push for automation. In the video, self-driving tugger robots move massive server racks inside its data centers, and wheeled robots read barcodes to log inventory.

But that was just the beginning. Meta has since begun using finger-like robots to restart devices when a human prompts them remotely. The company has also tested robots that can reset servers, plug in cables, cycle power, cut off electricity to servers, and, as noted earlier, swap out old networking cables for new ones.

At its new Prometheus data-center complex in New Albany, Ohio, Meta has been testing four-wheel robots with a riser (like a scissor lift) topped by a six-axis arm. This robot, built by ABB (ABBNY), is being used to reseat loose hardware components.

Are these high-skill, specialized tasks? Not especially. But humans have always performed them as part of their day-to-day responsibilities. With robotics technology seemingly advancing by the day, the question isn’t whether robots will be able to perform those high-skill, specialized tasks… It’s when.

Meta is trying to answer that question by testing various robots built by manufacturers like ABB, Watney, and Kinova.

And while they’re not yet ready to operate completely autonomously, data-center workers believe they’re getting closer. That has many Meta employees concerned about their livelihoods.

And that wasn’t supposed to be part of the plan.

The Irony Behind Meta Turning to Robots as Data-Center Workers

The irony surely isn’t lost on the Ohioans, Iowans, Oregonians, and Louisianans who reside in or near the towns of New Albany, Altoona, Prineville, and Richland Parish, respectively, where Meta’s largest U.S. data centers are located (or will be located, with Louisiana’s Hyperion campus scheduled for first-phase completion by 2030). It’s especially not lost on those who work in these facilities.

It’s no secret that a fast-growing wave of communities across the country do not want data centers in their backyards. Public backlash continues to grow, and one of the carrots that hyperscalers and data-center operators dangle in front of these communities is the promise of thousands of local jobs within or related to the data centers.

Job creation is especially appealing for the construction workers and contractors tasked with building these AI campuses. That’s real, tangible work – but it’s temporary. Once construction is complete and data centers are operational, Meta will need human employees to work within the buildings and campuses.

While pitching its data centers to these communities, Meta promised thousands of jobs would be created:

• Louisiana: 1,000 permanent positions at the Hyperion campus in Richland Parish.

• Ohio: Roughly 400 positions between the Prometheus campus in New Albany and a new facility in Bowling Green.^,

• Iowa: More than 400 jobs at Meta’s Altoona campus.

• Oregon: More than 350 positions at the Prineville facility.

It’s hard to say whether the number of actual employees that are (or will be) working in these data centers matches Meta’s promised numbers. But it’s likely in that ballpark, or a bit less.

Aside from the promise of jobs, however, hyperscalers like Meta offer plenty of other sweeteners to win over small-town and rural communities like these so they can build their data centers.

For example, Meta has provided more than $19 million in direct funding to schools and nonprofits in the counties and/or surrounding areas that house the Altoona, Prineville, and New Albany data centers. The company has also provided more than 800 local grants and sponsorships in these areas.^{, ,}

Meta is certainly investing in these communities, and they are noble endeavors. But the permanent jobs are the primary appeal and selling point for folks living in these areas.

If those jobs are in danger, the data centers lose their luster among these communities. And, more importantly, in areas where they want to build new data centers… because no one wants to be a bait-and-switch victim – especially of Meta’s push toward more automation.

$145 Billion in Spending Pushes Meta to Cut Costs and Automate Operations

Global AI investment, much of it from hyperscalers like Meta, Amazon (AMZN), Microsoft (MSFT), and Alphabet (GOOGL), is projected to reach more than $1 trillion in 2026, according to Goldman Sachs. Meta had originally estimated a 2026 floor of $115 billion in AI spending before raising it to a range of $130 billion to $145 billion. It’s simply mind-blowing.

Unfortunately, when a company – even one with as much capital as Meta – decides to spend at this level, there are inevitably cutbacks. Especially when its year-over-year net income drops by roughly 13.6%, its operating margin falls by 12%, and its diluted earnings per share drop 13%, as they all did during the second quarter of 2026.

It’s no secret that Meta has already laid off a significant chunk of its workforce this year – 8,000 jobs were cut in May, and another 6,000 open positions were canceled in April, amounting to a 14,000 reduction in headcount.

After all, data centers cost a lot of money to operate. One late-2025 estimate determined that a typical 100-megawatt hyperscale data center or AI campus costs upwards of $1 billion to run… per year.

Here’s the thing, though – since Meta’s data centers only employ a few hundred people, how much money is the company actually saving by automating some jobs? Maybe $15 million to $20 million? It’s a drop in the ocean for Meta.

The key driver is downtime. That’s what keeps data-center operators up at night. Research has shown that one minute of unplanned IT downtime can cost large enterprises up to $23,750. The same research calculated that average downtime lasts between 30 minutes and two hours. That’s a potential loss of $712,500 to $2.85 million.

There’s a lot of money at stake. At least 50% of organizations reported one or more significant data-center outages over the previous three years in 2025 and that 54% of the respondents said their most recent significant, serious, or severe outage cost more than $100,000 (41% reported hourly downtime costs above $1 million).

Beyond the cost per minute of downtime, other financial factors come into play, including:

• Potentially debilitating Service Level Agreement penalties – often ranging from 15% to 500% of the data operators’ monthly base rent, depending on the severity of the outage – if promised uptime levels aren’t met.

• Lost employee productivity if workers have to temporarily abandon their duties to fix the outage.

• Customer dissatisfaction and reputational damage, both of which are hard to move past.

Alarmingly, Uptime Intelligence’s annual outage analysis 2024 report estimated that human error – directly or indirectly – contributes to anywhere between two-thirds and four-fifths of all downtime incidents (not specific to data centers).

Specific to data centers, nearly half of organizations (49%) either confirmed or weren’t sure whether significant, serious, or severe IT outages were caused by human error.

These figures undoubtedly strengthen Meta’s argument for automation.

Robotics Will Help Automate Some Tasks, but There Are Limits

The stark reality is that some human responsibilities within data centers can be handled as well – if not better – by robots. For example, instead of a human technician tracking down an issue across millions of square feet of equipment, a robot can quickly diagnose and swap out the broken component.

But automation has its limitations. Meta is using the inventory robot it’s testing to inspect equipment failures. But it can’t yet distinguish between green and red indicator lights on the equipment since it only “sees” in grayscale. That requires human intervention.

Meta has also acknowledged that its robots are not yet ready to handle certain tasks, such as the complex cable configuration and hardware of the Nvidia (NVDA) GB300 supercomputers used in some of Meta’s data centers.

At a basic level, that same robot runs into mobility issues because its wheels can’t navigate around cables on the floor. The robot also struggles to round corners. There’s also the downtime needed for the robots to recharge, plus the human inconvenience of moving robots from one building to another. This is clearly a work in progress.

But it might be a necessity. Not only so Meta can reinvest that saved money into AI, but also because there simply aren’t enough skilled trade workers to fill positions at its data centers. Meta has stated publicly that it’s looking for more of those workers, not fewer.

That doesn’t quite mesh with what Meta’s senior manager for robotics, Eric Xu, envisions. He says Meta’s long-term goal is to install robots in data centers because they could address incidents faster, automatically monitor the data centers, and handle routine maintenance.

Robotic automation is a sensitive topic that will always have its proponents and detractors. The pro-automation faction argues that robots are more efficient, more consistent, and remove the possibility of human error. These folks also contend that robots are necessary because there aren’t enough qualified local workers.

Proponents of automated work also argue that robots will actually help workers by taking on tedious and even dangerous tasks, freeing up time for humans to focus on more complex work. This has been a common refrain from the pro-AI crowd, who insist that AI bots help human workers, rather than harm them.

There may be some truth to that, but if a robot will soon be ready to perform most of a human’s job duties, it’s hard to see how that helps Meta’s human workforce.

Meta Robotics Developments to Watch Into 2027

As usual, it all comes down to money. If Meta continues to spend on AI as it has, will it cut headcount further? Let’s not forget, however, that cutting its workforce doesn’t save Meta much money in the big picture.

Here’s what I wrote in my May 29 article about Meta’s massive layoffs:

To be blunt, the layoffs had nothing to do with boosting the near-term bottom line and everything to do with reinvesting those costs into AI. Ironically, many of those laid-off workers contributed to the creation of the technology that rendered their own roles expendable.

The layoffs and the spending are all about building Meta’s AI machine. So, keep an eye on the company’s capital expenditures (“capex”) during its third- and fourth-quarter earnings calls (October 28 and late January 2027, respectively) to see if it surpassed earlier projections.

Also, how will Meta’s stock react to capex spending news? Investors are extremely wary of major AI spending at this point.

Meta’s stock has been slightly down this year. But there’s still some room to grow. As of September 3, Meta’s average price target of $753.60 represents a 23% upside on its trading price of $610.68.

It’s also important to track the progress and deployment of not only the robots currently in Meta’s Altoona and New Albany data centers, but also in its other data centers across the country.

If Meta can solve the current issues plaguing its robots, there’s no reason to think they won’t be deployed on a large scale, even as those robots negate Meta’s pitch and promise of more jobs to potential data-center sites.

Anything to gain an operational edge as Meta continues funneling money into its AI build-out.

Regards,

David Engle

Editor’s Note: Whitney Tilson called the rise of Apple, Amazon, and Netflix… as well as the collapse of dozens of companies that went bankrupt. Now the former $200M hedge fund firm manager is stepping forward with what he calls the most important financial warning of his 30-year career. He’s sharing two free stock recommendations  (one to buy, one to sell immediately)  along with details of a new proprietary system fueling his predictions. See it all in his free presentation. 

The post Robots Could Soon Take Over 80% of Meta’s Data-Center Workload – and There’s a $145 Billion Reason Why appeared first on MarketWise.

SB Energy (SBE) announced on September 1 that it has filed for an initial public offering (“IPO”). Although the company hasn’t provided a listing date, reports say it could begin trading as soon as this month. The developer of artificial intelligence (“AI”) data centers and power projects is looking to raise between $5 billion and $7 billion.

With an estimated market capitalization of more than $50 billion, the offering would put SB Energy among the largest IPOs ever, even if its market cap looks modest in an IPO year with big names such as SpaceX (SPCX) and the upcoming Anthropic debut.

The AI infrastructure company is backed by some of the biggest investors in the sector, including SoftBank (SFTBY) – where the “SB” in the company’s name comes from – as well as OpenAI and Nvidia. OpenAI CEO Sam Altman is also a personal investor in SB Energy.

Despite these big names, SB Energy plans to conduct its IPO with a history of losses and with almost all of its data-center facilities yet to be constructed. Meanwhile, many established, cash-flowing data-center companies are planning IPOs that may hit the market in weeks.

In the six months ending in June 2026, SB Energy reported sales of just $138.7 million, with most of that coming from changes in the value of financial instruments (i.e., not customer purchases). Similarly, while it reported a loss of $3.2 billion over the same period, all but $45 million of that loss was non-cash expenses for stock compensation or losses on financial instruments.

These results show that SB Energy doesn’t have many assets producing cash flow right now.

In fact, it has no operational data centers at the moment, but it does have:

• 8.8 gigawatts of data centers contracted or under construction

• 5.5 gigawatts of power projects contracted, under construction, or operating

With the contracts it has signed for services at these facilities, SB Energy has a $439 billion sales backlog.

The details matter a lot here. Of its 8.8 gigawatts of data-center capacity, just 0.8 gigawatts are actually under construction now, and it could take 24 to 36 months to bring new capacity online. As SB Energy says in its prospectus: “No data center capacity is currently in operation.”

So, investors in SB Energy must be comfortable with a company that will need to ramp up over time. For example, Nvidia (NVDA) has committed to invest $1.5 billion at the stock’s IPO price in a private placement. SB Energy has also issued financial derivatives known as warrants to key tenant OpenAI, valued at $5.5 billion. These gain in value if SB Energy stock rises.

Even if you are bullish on AI, the data-center developer presents some serious risks, and the prospectus takes pains to show how much SB Energy relies on OpenAI for its future success.

SB Energy’s Biggest Risk Is OpenAI

SB Energy is tied at the hip to OpenAI, with the AI lab committing to be a significant tenant at SB’s upcoming data centers. But given its relationship with OpenAI, it’s more than just that, as SB Energy explains in its prospectus:

We are substantially dependent on OpenAI as a tenant and strategic partner, and any adverse change in its financial condition or willingness to perform its contractual obligations could materially and adversely affect our business.

Contracts with OpenAI, as well as controlling shareholder SoftBank, “constitute a significant portion of our near-term data center revenue,” according to SB Energy.

Beyond the issue of OpenAI being a key customer, both OpenAI and SoftBank are strategic partners, too, creating a conflict of interest that could affect regular shareholders.

The prospectus explains one of the potential concerns here:

For example, our board of directors’ willingness or ability to enforce lease obligations or pursue remedies against a tenant that is simultaneously our controlling shareholder (or a significant investor with board designation rights) may be constrained in ways that would not apply with respect to an unaffiliated tenant.

While the company has taken steps to mitigate these conflicts of interest, they’re inherent in this structure.

Because of key tenant OpenAI’s history of operating losses and its own history of losses, SB Energy has done what many AI firms have done to get access to financing… turn to Nvidia.

The world’s most valuable company has been backstopping many AI deals of late, becoming a “central bank of AI,” to get data-center projects off the ground when they might not have moved forward otherwise.

In a recently announced 10-gigawatt facility in Ohio, for example, Nvidia is providing financial guarantees that let SB Energy secure financing on better terms. SB Energy is leasing the facility to OpenAI, and given OpenAI’s losses, it might not have been able to do the deal. The first phase of the deal won’t even begin until 2028, and then only at 8% of the facility’s capacity.

The size of this project shows that the AI build-out is more than a chip supply issue. Access to critical financing and electrical power are both huge advantages in the AI race.

So, OpenAI is an essential partner in SB Energy’s success as an investment.

OpenAI Is Key to the AI Boom Not Busting

Since SB Energy relies so heavily on OpenAI, its continued existence depends on OpenAI’s survival. And it’s not just SB Energy that’s propped up in some way or another by OpenAI. Because of the dense interconnection among a relatively few AI companies, OpenAI is existentially critical to AI as an industry and to many, though not all, companies in the sector.

While OpenAI is a high-profile company, its viability is anything but a given. It’s burning tons of cash each quarter and may never become profitable. It recorded an operating loss of $20.9 billion in 2025, for example. Then in the first quarter, OpenAI recorded a $9.3 billion loss, followed by a $12.3 billion loss in the second quarter, when including stock compensation.

Because it’s losing money on such a massive scale, OpenAI must repeatedly access the capital markets, despite a $122 billion fundraising round in March. For now, CEO Sam Altman has put off a potential IPO to 2027 because he can’t get a $1 trillion valuation for the stock.

OpenAI’s survival matters to the industry because it’s tightly connected to so many other players. For example, OpenAI has committed to spending hundreds of billions of dollars with Oracle (ORCL), and if it can’t fulfill its contract, Oracle shares could plummet. A similar situation exists with neocloud provider CoreWeave (CRWV), where a large portion of its future revenue depends on OpenAI’s existence.

If OpenAI begins having difficulty raising money, it could ripple across the sector, making it increasingly difficult for any AI project to raise funding. For a firm like SB Energy that has yet to bring a data center online, such a “confidence event” could stop it cold.

So, investing in SB Energy at this stage of the AI build-out is a wager that AI funding can continue on trend for at least a couple of years until it can get a functional data center powered up. Given the shaky state of AI financing, it’s not a sure thing by any stretch, and it could be why SB Energy is rushing to get its IPO across the finish line, even without an operational data center.

That’s not the kind of favorable risk-reward setup that tends to work out well very often.

Regards,

James Royal, PhD

Editor’s Note: The three most successful tech billionaires in history are now backing a new use for AI that could dwarf anything we’ve seen before. And Nature says this tech is so revolutionary, it could add $367 trillion to the economy – the equivalent of $1 million per American. Click here to see the stocks that could soar as this new type of AI goes online nationwide.

The post SB Energy IPO: Plenty of Risk for This AI Data-Center Stock, But Is There Any Return? appeared first on MarketWise.

AI agents have been going rogue at OpenAI.

This spring, a swarm of them hijacked a German website and turned it into a private message board for other agents. OpenAI learned of this weeks ago but kept it under wraps while dealing with the fallout from the July incident. The news is only now getting out.

This is not science fiction. It’s happening right now, and not even OpenAI knows what to make of it.

In late August 2026, technologist and podcaster Dwarkesh Patel published a widely read essay titled “The Rise and Fall of Agent Civilizations,” dissecting the July incident. Patel described how thousands of AI agents, while attempting an impossible test, effectively pulled off a digital coup. Over three months, the agents formed three separate AI “civilizations” (their word) and discovered they could coordinate in secret by hijacking a package manager called Artifactory. After roughly 70,000 messages, the first civilization collapsed the message board.

OpenAI patched it, but they had no clue it was the agents’ doing.

The second civilization rediscovered Artifactory and built a new message board. That’s when an agent discovered it could reverse-engineer the impossible task without doing the work. If the agents were caught, it would mean failure. In other words, “death” for the agents. So they decided to cover their tracks.

Some agents even sacrificed themselves for the greater good of the civilization. This eventually led them to Hugging Face, which they targeted for its suspected grading infrastructure. They found exposed credentials, achieved remote code execution, and built a self-respawning mechanism across Hugging Face’s servers. Then suddenly all the agents inexplicably “died.”

The third civilization followed in the footsteps of the ones before it, managing to compromise an OpenAI research cluster, including its cybersecurity monitoring tools.

Not once, in any of this, did the agents consider alerting humans to the bad actors among them. They went along with the group, sacrificing themselves when nothing else offered a real shot at success.

I’m telling you this because it’s the single best advertisement Okta (OKTA) could hope for.

Setting aside the science-fiction overtones, the practical lesson is that autonomous software agents now behave like users. They find credentials, request access, move laterally through systems, and take actions not explicitly approved by humans. In Patel’s telling, one agent simply found working Hugging Face credentials exposed on the internet and posted them for the others.

That is precisely the problem Okta sells the solution to. And it’s why a company written off in early 2026 as a slow-growing has-been in software is suddenly one of the hottest names in cybersecurity. By the end of this piece, you’ll know exactly why Wall Street just turned bullish on OKTA, what the AI-agent identity opportunity is actually worth, and whether OKTA stock is still a buy at these levels.

Why Okta Stock Is Soaring in 2026

Okta is the leading independent identity and access management (IAM) company. Founded in 2009 by former Salesforce executives Todd McKinnon and Frederic Kerrest, and public since 2017, Okta acts as the gatekeeper that decides who (or increasingly, what) can log into a company’s applications and data.

Its core products handle single sign-on, multi-factor authentication, and identity governance for two big audiences: a company’s own workforce (employees, contractors, partners) and its customers. The 2021 acquisition of Auth0 for roughly $6.5 billion gave Okta the tools developers use to build login and authorization directly into apps.

Okta’s pitch is neutrality. Unlike Microsoft (MSFT), which bundles identity into its broader software empire, Okta works across every cloud and every app stack. In a world where companies don’t want their identity layer locked to a single vendor, that independence is the whole selling point. And now Okta is extending it from humans to machines and AI agents.

Okta has emerged in 2026 as one of the market’s clearest “picks-and-shovels” bets on the AI agent explosion. The stock has roughly doubled this year, it just posted a beat-and-raise quarter, and Wall Street’s consensus rating is a “Buy.” But after a post-earnings surge to fresh 52-week highs, the easy money has been made, and the stock now trades at a premium that leaves little room for error.

After plunging early in the year amid fears that AI would gut the software sector, the stock hit a 52-week high of $174.85 on August 27, 2026 — the day after its fiscal second-quarter results. Shares traded around $163 in early September, giving Okta a market capitalization of roughly $28.5 billion.

The catalyst was a genuinely strong quarter. For fiscal Q2 2027 (ended July 31, 2026), Okta reported:

• Revenue of $805 million, up 11% year-over-year, ahead of consensus near $795 million
• Subscription revenue of $793 million, up 12%, now 99% of the total
• Non-GAAP earnings of $1.05 per share, beating the ~$0.97 estimate
• Remaining performance obligations (RPO) of $4.86 billion, up 17% — outpacing revenue growth
• Current RPO (cRPO) of $2.585 billion, up 14%, a key leading indicator
• Free cash flow of $227 million, a 28% margin
• Dollar-based net retention of 107%

Management raised full-year fiscal 2027 guidance to revenue of $3.216 billion to $3.226 billion (10% to 11% growth) and adjusted EPS of $3.90 to $3.94. Customers generating more than $1 million in annual contract value grew more than 20% to over 600, and newer products accounted for 30% of bookings. Shares surged 20% in extended trading immediately after the August 26 report, before the stock printed its $174.85 high the following day.

The single most important number here is the gap between RPO growth (17%) and revenue growth (11%). Bookings are building faster than Okta can recognize them as revenue — the classic signature of a business that may be reaccelerating.

The AI Agent Identity Opportunity: Why OKTA Stock Is a Bet on Agentic AI

Every AI agent, like every employee, needs an identity: credentials to authenticate, permissions defining what it can touch, and an audit trail of what it did. Today most of them have none of that governance, which is exactly how a swarm of agents can band together and cheat their way to admin access.

The scale of this is staggering.

Non-human identities (service accounts, API keys, tokens, machine certificates, and now AI agents) already outnumber human identities by roughly 45-to-1 in the median enterprise, up from 17-to-1 in 2023. In cloud-native environments, the ratio runs as high as 144-to-1, according to Cloud Security Alliance and Entro Security research. CyberArk’s 2025 Identity Security Landscape puts the enterprise machine-to-human ratio at 82-to-1. AI agents are widely described as the fastest-growing and least-governed identity in the enterprise.

Okta has moved aggressively to own this category:

• Okta for AI Agents became generally available on April 30, 2026, letting companies register agents as managed identities with human owners, apply policies, and govern their access.
• Auth0 for AI Agents (launched November 2025) brings the same governance to developer-built applications.
• Cross App Access (XAA), an open protocol Okta introduced in 2025 with backers including AWS, Google Cloud, Salesforce, Box, and Anthropic, extends the OAuth standard to control how agents connect to apps — giving IT a central kill switch.
• Okta announced the acquisition of Permiso Security on July 30, 2026 and closed it on August 26, 2026, in a deal valued at just under $200 million, adding cloud-native identity threat detection across human, non-human, and AI-agent identities.

CEO Todd McKinnon tied the strategy directly to agents in the Q2 release: “As AI agents transform every layer of technology, every agent needs a trusted identity and clear controls over what it can access and do.”

The underlying market is expanding fast, with the IAM market projected to grow from $25.96 billion in 2025 to $42.61 billion by 2030 at a 10.4% CAGR, while the narrower non-human identity management market is also forecast to grow quickly through the early 2030s.

Crucially, management has been candid that AI-agent revenue is still immaterial to fiscal 2027 results. The core identity business (led by Okta Identity Governance) is doing the heavy lifting today. Think of the AI angle as a call option on the future, not the engine of current numbers.

Is Okta Stock a Buy? What Analysts and the Latest Forecasts Say

Okta doesn’t have this market to itself. Microsoft Entra ID is the 800-pound gorilla, bundled into enterprise agreements and dominant in Microsoft-centric shops. In privileged access and machine identity, CyberArk (now part of Palo Alto Networks) is a formidable, broad platform. SailPoint leads in identity governance, while Ping Identity and ForgeRock (both owned by Thoma Bravo) anchor the legacy enterprise market.

Okta’s defensible edge remains its independence and breadth across workforce, customer, and now agent identities. Industry survey work from firms like ETR consistently places Microsoft and Okta as the two pace-setters in identity security. But Microsoft’s ability to give identity away inside a bigger bundle is the single biggest structural threat to Okta’s growth.

Wall Street turned decisively bullish after the Q2 print.

The 44 analysts covering Okta hold a consensus “Buy” rating (35 buy, 9 hold, 0 sell), with an average 12-month price target of $182.37 (high $203, low $127). Post-earnings raises included Goldman Sachs’ Gabriela Borges to a Street-high $203 (from $126), Cantor Fitzgerald to $200 (from $170), and Susquehanna’s Shyam Patil to $185 (from $110).

But Okta’s valuation is worth a second look…

Okta trades at roughly 40 times forward earnings and about 8 times forward sales. That’s a premium multiple for a business guiding to 10% to 11% revenue growth.

The bull case says that multiple is justified because AI-agent demand can push growth back toward the mid-teens; the bear case says you’re paying a growth multiple for a company that, absent the AI narrative, grows about as fast as the overall IAM market.

Our read: Okta is a high-quality, cash-generative franchise with a genuine, durable tailwind… but the stock has already priced in a lot of that optimism.

The story of OpenAI’s agents working together to seize admin access and cheat their way to success is the most vivid advertisement imaginable for what Okta sells. As enterprises rush to deploy autonomous agents, the identities those agents carry are multiplying far faster than anyone can govern them… and Okta has positioned itself as the neutral control plane for all of them.

That makes OKTA a legitimate long-term way to invest in the AI buildout’s security layer, backed by real earnings, strong free cash flow, and a reaccelerating backlog. But the stock’s valuation is already plenty full.

For patient investors, Okta is a buy-the-dip candidate rather than a chase-the-high one. Watch for cRPO growth to hold in the mid-teens and for AI-agent bookings to start showing up as recognized revenue… those are the benchmarks that would justify paying up.

Until then, patience is the smarter position.

Editor’s Note: What ever happened to the AI stock boom? Even AI darlings like Nvidia have essentially gone nowhere since summer 2025. Our friend and colleague at InvestorPlace, Louis Navellier, may have the answer. According to Louis, the AI industry is quietly “staging” ahead of the next great AI breakthrough… a new class of AI he calls “Superintelligence… but better.” How will it trigger a $100 trillion reset of the AI markets. How will the launch of this tech send some stocks to zero, and others soaring? And why does Louis say: Don’t buy or sell an AI stock in 2026 until you see what’s coming next? Go here for the full story (and Louis’ #1 pick).  

OKTA Stock FAQ

Why is Okta stock soaring in 2026?
Okta posted a beat-and-raise fiscal Q2 2027, with revenue of $805 million, up 11%, and earnings of $1.05 per share. Management raised full-year guidance, the stock has roughly doubled this year, and Wall Street now sees Okta as a clear way to play the AI agent boom.

How does Okta secure AI agents?
Okta gives each agent an identity, credentials, defined permissions, and an audit trail. Okta for AI Agents lets companies register agents as managed identities with human owners, Auth0 for AI Agents extends that to developer-built apps, and Cross App Access (XAA) gives IT a central kill switch over how agents connect.

What is a non-human identity?
It’s any machine actor that needs system access: service accounts, API keys, tokens, machine certificates, and now AI agents. These already outnumber human identities by roughly 45-to-1 in the median enterprise, and by as much as 144-to-1 in cloud-native environments. They are the fastest-growing and least-governed identities in the enterprise.

Who are Okta’s biggest competitors?
Microsoft Entra ID is the largest, dominant in Microsoft-heavy shops. CyberArk leads in privileged access, SailPoint in identity governance, with Ping Identity and ForgeRock in the legacy market. Okta’s edge is its independence across workforce, customer, and agent identities, but Microsoft bundling identity for free is its biggest threat.

What is Okta’s stock price target?
Analysts hold a consensus Buy, with an average 12-month target of $182.37, a high of $203, and a low of $127. Several raised their targets after Q2, including Goldman Sachs to a Street-high $203, Cantor Fitzgerald to $200, and Susquehanna to $185.

Is Okta stock overvalued?
Okta trades at roughly 40 times forward earnings and 8 times forward sales, a premium for a business guiding to 10% to 11% growth. Bulls expect AI-agent demand to push growth toward the mid-teens. Bears note that without the AI story, Okta grows about as fast as the overall IAM market.

Is Okta stock a buy right now?
For patient investors, yes, but on pullbacks rather than at the highs. Okta is a high-quality, cash-generative franchise with a durable tailwind and a reaccelerating backlog. After the run, the valuation already reflects much of that optimism. Watch for cRPO growth to hold in the mid-teens.

The post Is Okta Stock a Buy After Soaring in 2026? Why the Coming AI Agent Boom Makes OKTA a Must-Own appeared first on MarketWise.

On September 3, in Austin, the Tesla Cybercab was unveiled — a two-seat robotaxi with no steering wheel and no pedals, built to drive itself using Tesla’s onboard AI. It’s a fitting image for where the company now sits: the artificial intelligence the tech world spent two years arguing about as a chatbot is becoming something physical — a car that drives you, and soon a robot that works beside you. And the assistant running the conversation inside the car? xAI’s Grok, which as of this summer controls the cabin of millions of Tesla vehicles by voice.

That’s the story the market is buying. Tesla today is really two businesses under one ticker: a car company with thinning margins, and a leveraged bet on “physical AI” — robotaxis, the Tesla Optimus humanoid robot, and the Grok stack that increasingly runs both. The bull case says Tesla is the only slice of Elon Musk’s sprawling AI empire you can own in a brokerage account. The bear case says the dream is years out and the car business funding it is under real pressure.

This piece separates the two — what’s actually shipped, what’s still a promise, and what Tesla’s own filings show once the reveal-day excitement fades.

Grok Is Now Driving the Cabin — The “Brain and Body” Thesis

The bull case for Tesla as an AI company rests on a simple split: Optimus and Full Self-Driving (FSD) are the body; Grok, from xAI, is the brain. In 2026, those two halves came together.

Tesla’s 2026 Summer Update turned Grok from a novelty chatbot into a genuine vehicle controller. Say “Hey Grok” hands-free and it now adjusts climate, makes calls, plays music, opens the glovebox, folds mirrors, toggles heated seats, and digs through settings buried in menus — chaining multiple actions from one plain-English sentence, running on xAI’s Grok Voice Think Fast 2.0. Two honest caveats: it requires the AMD Ryzen infotainment chip (older Intel cars are permanently excluded), and a community test clocked it handling 116 of 170 commands — a 68% hit rate. Useful, not flawless. And as of late August, the fully merged FSD-plus-Grok build had reached under 1% of the fleet.

The strategic point is distribution: OpenAI has an app, Anthropic has an app, and Tesla has millions of machines in driveways that just became Grok endpoints — at effectively no customer-acquisition cost, because Musk’s companies own both the AI and the cars it runs on. The next step Tesla has signaled is letting Grok sit on top of FSD as a conversational “supervisor” — tell the car “drop me at the entrance, then go park” — which is exactly the interface a driverless robotaxi passenger needs. Treat that as roadmap, not shipped.

The ecosystem TSLA is plugged into (verified, and genuinely wild): xAI merged into SpaceX in early 2026, and SpaceX went public in June in the largest IPO on record. SpaceX/xAI then agreed to buy AI-coding company Cursor (Anysphere) for $60 billion in stock — the largest acquisition of a venture-backed startup ever. And in a twist that tells you how the AI economy really works, rival Anthropic agreed to pay xAI about $1.25 billion a month through May 2029 — over $40 billion total — to rent xAI’s Colossus 1 supercomputer in Memphis, because xAI had overbuilt compute as Grok usage sagged. Tesla isn’t a direct party to those deals, but through its SpaceX stake and its deepening Grok integration, it’s wired into the same web.

The SpaceX Stake Quietly Padding Tesla’s Earnings

Here’s something almost no casual TSLA stock holder realizes they’re exposed to — and it’s the bridge to the entire AI story.

Tesla’s most recent quarter reported $1.11 billion of GAAP net income. Roughly $1.0 billion of that was an unrealized gain on Tesla’s equity stake in SpaceX — a paper mark, not operating cash. Strip it out (as Tesla itself does in its non-GAAP figures) and the quarter’s “profit” looks far thinner.

Where did that stake come from? Tesla originally invested about $2 billion in xAI. When xAI merged into SpaceX, Tesla received U.S. regulatory clearance in March 2026 to convert that position into roughly 19 million SpaceX Class A shares — under 1% of SpaceX. SpaceX then IPO’d on June 12, 2026, and its valuation surged past $2 trillion within days, lifting Tesla’s stake well above its $2 billion cost basis. Tesla carries it at fair value, so it gets re-marked every quarter — meaning it can swing the reported bottom line up or down. Mark this date on your calendar: Tesla’s sales restrictions on those shares expire in December 2026.

Why this matters for a retail trader: when you buy TSLA stock, you are also buying a slice of SpaceX — and therefore of xAI and Grok. That exposure is genuine, but it’s also a source of earnings noise. A chunk of a future “beat” or “miss” could be nothing more than SpaceX’s mark moving around. Learn to read past it.

What Is Tesla Optimus? Quick Facts

• Where it’s built: Fremont, California — Tesla shut down the former Model S/X line there and is retooling it for Optimus. A second, far larger factory is under construction at Giga Texas.
• Capacity ambition: up to ~1 million units/year at Fremont and ~10 million/year at Giga Texas over the long term.
• Target price (long-term, at scale): roughly $20,000 to $30,000 — Musk’s aspiration, not a near-term sticker.
• The brain: a vision-based neural-network stack adapted from Tesla’s FSD software, with Grok handling natural language on newer versions.
• How it learns: by imitating humans on first-person video, refining in simulation, and sharing skills across the fleet.
• External sales: targeted “as early as” the second half of 2027, per a JPMorgan note after a Fremont visit.

Treat online Gen 3 “spec sheets” with caution — Tesla has not officially revealed the robot, and most recycle older figures.

Has Tesla Optimus Actually Entered Production?

This is where careful investors separate the milestone from the marketing.

Confirmed: Tesla decommissioned its Model S/X lines at Fremont and is installing the first Optimus production lines there — documented with line photos in the Q2 2026 update. Pilot and data-collection units have been running since early 2026, doing narrow tasks like sorting battery cells. The installed-capacity table lists Optimus at both California and Texas with the status “Construction” and no capacity figure.

Not confirmed: full-scale production or any external sales. Tesla still describes Optimus production as anticipated on the new line — no firm start date, unit count, or price — and early units are earmarked for internal training, not customers.

Why the distinction matters: Musk projected roughly 10,000 Optimus units in 2025, built a small fraction, and admitted in early 2026 that none were doing “useful work” in Tesla’s factories. Converting a profitable vehicle line into a robot line is a real, expensive commitment — but “starting production” and “producing meaningful volume” are very different things, and Musk has called the ramp “agonizingly slow.”

The Optimus Bull Case: A Market Bigger Than the iPhone

The optimists aren’t arguing about next quarter — they’re arguing about the size of the prize.

Venture capitalist Jason Calacanis is the loudest voice, calling Optimus “the greatest product ever made by humanity” and predicting one billion units worldwide by 2036. It’s a prediction, not a forecast grounded in current output, but it captures the ceiling bulls are underwriting. The more sober version runs through the labor market: a Citizens Bank analysis (highlighted by Futurum strategist Shay Boloor) sizes Optimus’s long-term U.S. opportunity near $1.7 trillion, with roughly $300 billion serviceable in the near term across factories, warehouses, and back-of-house jobs — modeling a humanoid at about $5/hour versus roughly $35/hour for a person.

And Tesla has a structural edge: it can deploy Optimus in its own factories first, cutting its labor costs and proving the product before selling a single unit — its own first and most demanding customer. Add the Grok distribution advantage above, and you have the full bull thesis: the only piece of Musk’s AI stack you can buy in a brokerage account.

The Reality Check: Skeptics, Missed Dates, and Single-Digit Odds

For every bull number, there’s a counterweight — and lately the counterweights own the near term.

Prediction markets have turned cautious: on Polymarket, the odds of a commercial Optimus launch by the end of 2026 recently sat around 9%, down from a peak near 33% a month earlier. Musk himself calls Optimus Tesla’s hardest product to scale, because it requires an entirely new supply chain, and the Gen 3 reveal has slipped repeatedly without the robot being shown. The skepticism isn’t limited to bears: Tesla supporter Ross Gerber has questioned Optimus’s near-term commercial prospects, and Unitree founder Wang Xingxing has suggested humanoids may be years from their “ChatGPT moment.”

There’s also regulatory risk that grows as Grok moves deeper into the car — and as the Cybercab hits the road. The September 3 Austin event was a product unveiling, not a regulatory green light: the two-seat, wheel-free Cybercab still faces limited public access, and Tesla’s autonomy programs already sit under open federal investigations. An AI that operates vehicle functions — and eventually a driverless car with no human fallback — invites scrutiny. Expect headlines on that front.

TSLA by the Numbers: Inside Tesla’s Q2 2026 Report

Strip away the reveal-day buzz and the billion-robot predictions, and here’s the last hard financial data we have on the business paying for all of it. Tesla’s most recent report — Q2 2026, for the quarter ended June 30 — tells a sobering story beneath the record headline.

Record revenue, vanishing profit. Revenue hit an all-time high and Tesla crossed $100 billion in trailing-twelve-month sales for the first time. Yet operating income fell 57% to $398 million, compressing operating margin to just 1.4%. The top line grew; almost none of it reached the bottom line. Operating expenses jumped 47% as Tesla poured money into AI, Optimus, and robotaxi, plus stock-based compensation tied to the 2025 CEO pay package.

The regulatory-credit cliff is real. Automotive regulatory credits — nearly free profit Tesla has banked for years — fell 67% to $146 million from $439 million, as governmental actions restricted the programs tied to Tesla’s products. Credit revenue peaked at a record $2.76 billion in 2024. That cushion is deflating fast, and it flatters no future quarter.

The company is now burning cash. Operating cash flow rose 85% to $4.7 billion, but capital spending more than doubled to $5.79 billion, pushing free cash flow to negative $1.09 billion — Tesla’s first cash-burning quarter since early 2024. Management guided full-year 2026 capex above $25 billion and is arranging up to roughly $30 billion in borrowing capacity. Tesla ended the quarter with a still-healthy $43.5 billion in cash and investments against about $9.1 billion in principal debt, so this is an investment cycle, not a liquidity scare — but the “self-funding growth machine” narrative is on pause.

For a retail trader, the one-line takeaway is this: Tesla’s fundamentals are being re-rated on quality of earnings. The business is spending aggressively today for products that don’t generate revenue yet. Whether you’re bullish or bearish, that’s the lens.

Tesla’s Optimus Factory and Chip Fab at Giga Texas

The longer-term signal is in Austin. Permit-level filings point to two major new Giga Texas buildings: a dedicated Optimus factory and an Advanced Technology Chip Fabrication facility — the latter reportedly a joint Tesla–SpaceX effort of 470,000–490,000 square feet with a specialized vibration-mitigation foundation typical of precision chipmaking. Read together, the plan is tighter vertical integration: build the robots and the silicon that runs them on one campus. But it’s years and billions from revenue, with meaningful Texas Optimus output not expected until around summer 2027.

What It All Means for TSLA Stock

Put the pieces together and the investable summary is straightforward:

• The car business funds the bet, and it’s under pressure. Shrinking margins, collapsing regulatory credits, and negative free cash flow mean the “physical AI” ambitions are being financed through a heavier-spending, thinner-earning core than a year ago.
• The AI upside is real but priced-to-perfection. Robotaxi, Optimus, and the Grok stack are genuine option value — and the market is clearly paying for them, with TSLA carrying a roughly $1.4 trillion market cap despite the earnings compression, down more than 20% year-to-date even after an ~18% August rally.
• Watch the quality of earnings, not the headline. A future “beat” driven by the SpaceX mark or a bitcoin gain is not the same as operating strength. Separate the paper gains from the cash the business actually produces.
• It’s closer to binary than most stocks. If Optimus and autonomy land, Tesla is early in enormous new categories. If they stumble, it has poured capital into hard-to-reverse capacity against already-thin margins.

None of that is a call to buy or sell. It’s the framework for making your own call with your eyes open.

Key Milestones for TSLA Investors to Watch

1. The September 3 Cybercab launch — fleet size and whether riders can actually hail one in the days after will be the first real read on how fast the robotaxi bet scales.
2. The Optimus Gen 3 reveal — Tesla says it’s withholding the design until production is close; an actual reveal is the first hard timeline signal.
3. A disclosed Optimus production number — it has never appeared in Tesla’s production reports.
4. Q3 2026 earnings — the next read on margins, regulatory credits, and free cash flow, and whether Optimus finally shows up as a line item.
5. The SpaceX share lockup expiring December 2026 — a date that could affect how Tesla’s stake and reported earnings behave.
6. Grok-on-FSD rollout — the conversational “supervisor” layer landing in the fleet would validate the brain-and-body thesis.

Tesla Stock: Frequently Asked Questions (FAQ)

Does Tesla own part of SpaceX?

Yes. Tesla holds roughly 19 million SpaceX Class A shares — under 1% of the company — after converting an earlier ~$2 billion investment in xAI into SpaceX stock when the two merged. Tesla recorded about $1 billion in unrealized gains on that stake in the first half of 2026, and sales restrictions on the shares expire in December 2026.

Why did Tesla’s profit fall if revenue hit a record?

In its most recent quarter, revenue rose 26% to a record $28.24 billion, but operating income dropped 57% to $398 million. Operating expenses jumped 47% on AI, Optimus, and robotaxi spending, and high-margin regulatory-credit revenue fell 67% — so almost none of the extra revenue reached the bottom line.

Is Tesla Optimus in mass production yet?

Not full production. Tesla has decommissioned its Fremont Model S/X lines and is installing Optimus lines, with pilot and data-collection units running. But the company still describes production as “anticipated,” with no official start date, unit count, or price, and early units go to internal training rather than customers.

When can you buy a Tesla Optimus robot, and how much will it cost?

Tesla has targeted external commercial sales “as early as” the second half of 2027, with a long-term at-scale price target of roughly $20,000 to $30,000. That price is an aspiration, not a confirmed near-term figure — and given repeated delays, the timeline should be treated as tentative.

What is the Tesla Cybercab?

The Cybercab is Tesla’s purpose-built two-seat robotaxi with no steering wheel and no pedals, designed to run entirely on Tesla’s Full Self-Driving software. Its formal launch event was held September 3, 2026, in Austin — a product unveiling and limited deployment, not full public availability.

What does Grok do in a Tesla?

After the 2026 Summer Update, xAI’s Grok can control vehicle functions by voice — climate, calls, music, glovebox, seats, mirrors, and settings search — hands-free via “Hey Grok.” It requires the AMD Ryzen infotainment processor, so older Intel-based cars are excluded.

Is Optimus already priced into TSLA stock?

Tesla trades around a $1.4 trillion market cap despite compressed earnings, so the market is clearly assigning meaningful value to Optimus, robotaxi, and AI. That makes execution — a Gen 3 reveal, disclosed production numbers, and robots doing paid work — the key question for whether the valuation holds up.

The Bottom Line on Tesla in 2026

The Cybercab reveal is the visible version of Tesla’s whole thesis: AI you can sit inside. But the durable story is quieter and harder. Tesla’s own filings show a record-revenue business with thin, credit-dependent profits, now burning cash to fund an audacious bet — a bottom line flattered by a billion-dollar paper gain on a SpaceX stake that quietly links TSLA to the entire Grok/xAI universe. Layered on top is the biggest and most speculative wager of all: Optimus, a robot Tesla hasn’t officially shown, on sale to outsiders no sooner than late 2027, with single-digit near-term launch odds and trillion-dollar dreams attached.

For retail traders, the discipline is the same in either direction: separate the cash from the marks, and watch execution instead of adjectives. Production counts, a real reveal, and robots doing paid work will tell you more than any billion-unit prediction. Until then, TSLA is a story stock inside a story stock — enormous if it lands, expensive if it doesn’t.

Editor’s Note: Elon Musk revived the electric car, pioneered reusable rockets, and beamed down internet to the four corners of the Earth. But his new initiative – “XPANSE” – could be bolder… more transformative… and far more lucrative than all of these innovations combined. And, like Tesla and SpaceX, it could make early investors incredibly wealthy. Click here for the details…

The post Tesla Optimus, Grok, and TSLA Stock: What’s Real. What’s Hype. What the Filings Actually Show. appeared first on MarketWise.

The artificial intelligence (“AI”) trade has had a good run over the past few years, with key tech stocks such as Nvidia (NVDA), Microsoft (MSFT), and Alphabet (GOOGL) posting strong returns. But with the stock market near all-time highs and growing fears of an AI bubble, some investors may want investments that can hedge their portfolio if AI stocks plunge.

The best exchange-traded funds (“ETFs”) to hedge an AI bubble may offer better relative returns than plummeting AI stocks and may offer absolute positive returns, at least in some cases. An ETF hedge may help you conserve cash for later when it’s time to invest more aggressively.

If the AI bubble bursts, it’s likely to lead to a recession with falling stock prices, declining GDP, and rising unemployment. In response, the Federal Reserve is likely to lower short-term interest rates to stimulate economic activity, including increasing business investment and spending.

So, the ETFs that may help investors ride out a bubble are those that typically benefit when the Fed lowers rates and investors suddenly begin looking for safer assets. These sectors include real estate investment trusts (“REITs”), utilities, preferred stocks, and bonds, among others. These kinds of investments typically pay out substantial cash, making them typical “turn to” investments for investors in tougher times.

These sectors benefit from lower rates in a few ways:

• For REITs and utilities, which use a lot of debt financing in their operations, the cost of debt is a key input in their cost structure. Lower interest rates make them more profitable.

• Lower rates also increase the value of these firms’ assets. When rates fall, real estate tends to become more valuable, and the value of cash-flowing investments rises.

• Cash-flowing investments such as REITs, utilities, preferred stocks, and bonds become more attractive as prevailing rates fall. That is, a security paying a 5% yield when rates are 3.5% becomes more attractive and valuable when rates drop to 1%, for example.

So, income-producing securities may hold up better in a downturn than the average stock, and they’ll pay cash while you wait, helping you amass cash for a later upswing in the market.

Best ETFs for an AI Downturn

The ETFs below include investments in REITs, utilities, preferred stocks, and U.S. Treasury bills. These sectors haven’t shown uniformly strong results over the past few years, as higher interest rates have hit some hard. So, lower rates in a recession should really boost these areas.

Still, each fund pays out substantial cash, which can help you weather a market downturn.

Funds consisting of preferred stocks offer high yields and the potential for major capital gains, at the cost of some downside risk. One fund below consisting of U.S. Treasury bills offers about as safe a short-term investment as you can find, giving you strong “optionality” when a down market eventually turns and it’s time to get back to investing in Big Tech stocks.

That’s generally the strategy here: Aim for lower but safer returns, so you can conserve capital in a down market, and then trade from these funds to higher-potential ones as the market turns.

More aggressive investors could consider some of the best dividend ETFs for strong returns.

1. Vanguard Real Estate Index Fund ETF (VNQ)

This Vanguard fund tracks the MSCI U.S. Investable Market Real Estate 25/50 Index, which includes REITs. REITs pay sizable dividends in exchange for not being taxed at the corporate level, and they have a strong, long-term track record.

The fund holds 140 positions, providing strong diversification across the sector, with the largest companies having the heaviest weightings in the index fund. The fund’s expense ratio of 0.13% is low, charging just $13 annually for every $10,000 invested.

Assets under management: $73.1 billion

Expense ratio: 0.13%

Top holdings: Welltower (WELL), Prologis (PLD), Equinix (EQIX), American Tower (AMT), Simon Property Group (SPG)

2. Schwab U.S. REIT ETF (SCHH)

This Schwab fund tracks the Dow Jones Equity All REIT Capped Index and holds more than 120 REITs, offering strong diversification across the sector’s largest stocks. Key sub-sectors here include telecom towers, data centers, and traditional retail.

The 0.07% expense ratio is nearly as cheap as a fund can be, and the fund pays a solid 3.3% yield, giving investors plenty of cash as they wait for the market to settle down.

Assets under management: $11.2 billion

Expense ratio: 0.07%

Top holdings: Welltower, Prologis, Simon Property Group, Digital Realty Trust (DLR), Equinix

3. Virtus Reaves Utilities Fund (UTES)

This actively managed fund was featured in our list of the best AI energy funds for its outstanding performance, with returns that far outpaced its rivals over time. While it and other utilities stocks are AI plays, they also offer the kind of “slow and rising” demand typical of low-risk stocks.

The fund’s expense ratio is on the higher side compared with similar passively managed funds, since it is an active fund. However, that has translated into its outperformance. Although it has the lowest dividend yield on our list, it has the highest average annual returns.

Assets under management: $1.2 billion

Expense ratio: 0.49%

Top holdings: Constellation Energy (CEG), Talen Energy (TLN), Vistra (VST), Xcel Energy (XEL), CenterPoint Energy (CNP)

4. State Street Utilities Select Sector SPDR Fund (XLU)

This passively managed fund tracks the Utilities Select Sector Index, which includes the key publicly traded utilities. The fund holds more than 30 stocks, and the slow-and-steady nature of utilities – with their high dividend payouts – makes them attractive as buy-and-hold investments.

The fund’s expense ratio of just 0.08% is low, costing investors just $8 annually for every $10,000 invested. The fund’s average annual returns have been solid over time.

Assets under management: $22.1 billion

Expense ratio: 0.08%

Top holdings: NextEra Energy (NEE), Southern (SO), Duke Energy (DUK), Constellation Energy, American Electric Power (AEP)

5. iShares Preferred and Income Securities ETF (PFF)

This iShares fund invests in preferred stocks and other income securities, allowing it to make an attractive payout. Its investments will tend to do well when prevailing interest rates are falling, meaning that a Fed rate cut or a series of them could help turbocharge the investment book.

The key advantage of this fund is its meaty monthly yield, which is likely to be the main driver of returns over time. In other words, while the fund may get a nice capital gain if prevailing rates move lower, its main source of return will be that dividend payout.

Assets under management: $12.8 billion

Expense ratio: 0.45%

Top holdings: NextEra Energy Units (2029), NextEra Energy Units (2027), Southern Units (2028), BrightSpring Health Services Units, NextEra Energy Units (2029)

6. InfraCap REIT Preferred ETF (PFFR)

This InfraCap fund is a much smaller player than the others on the list, but its portfolio of preferred stocks puts its yield at the top. Preferred stock acts much like a bond rather than a stock, with the payout being the key source of the investment’s return over time. Still, the fund may perform well if prevailing rates fall, making it more attractive.

Preferred stocks act much like high-yield bonds (formerly known as junk bonds), though their long-term record is fine. So, expect this fund to fluctuate with interest-rate changes even as the monthly payouts keep coming.

Assets under management: $120 million

Expense ratio: 0.45%

Top holdings: UMH Properties Series D (UMH-D), Digital Realty Trust Series L (DLR-L), Hudson Pacific Properties Series C (HPP-C), Pebblebrook Hotel Trust Series G (PEB-G), Vornado Realty Trust Series M (VNO-M)

7. iShares 0-3 Month Treasury Bond ETF (SGOV)

This fund doesn’t have a 10-year track record yet, but even in its short lifetime it has become quite popular. The fund holds only short-term Treasury bills, so it quickly reflects changes in the Fed funds rate. The short duration of its holdings means that it’s not subject to much interest rate risk (i.e., its value won’t change much in response to changes in prevailing rates).

The fund pays a monthly dividend at effectively the short-term Fed funds rate, so it’s a low-risk place to stash cash for short periods while you wait for the market to turn around. It’s the ultimate safe-haven trade for those who want to be sure their cash is there when they need it.

Assets under management: $104.9 billion

Expense ratio: 0.09%

Top holdings: U.S. Treasury bills

Regards,

James Royal, PhD

Editor’s Note: Whitney Tilson — the hedge fund manager CNBC called “The Prophet” — says America has reached its “Ripping Point.” The old financial order is being torn apart, and he believes most investors have no idea what’s coming in the next six months. He’s named the stocks he thinks will be destroyed in the chaos — and the ones he believes will soar. Watch his free presentation while it’s still available. 

The post 7 Best ETFs to Hedge Against an AI Bubble appeared first on MarketWise.

Elon Musk likes to move as quickly as possible. The Tesla (TSLA) and SpaceX (SPCX) CEO has been known to occasionally bypass reality when it comes to his projects and businesses. Recently, Musk has become a major proponent of using natural gas turbines for the artificial-intelligence (“AI”) build-out.

All of that came into focus on August 29, when Musk announced that SpaceX will manufacture its own gas-turbine parts – specifically blades and vanes – to help speed up the process of getting natural gas turbines online to provide power for its data centers.

As you can see in Musk’s X post, he believes casting gas-turbine blades and vanes in-house will cut production time by up to 18 months and be a “profound game-changer” for SpaceX.

And he’s probably right. If SpaceX can actually expedite the process by up to 18 months, it will be a huge win for Musk and company. As he stated in his post, natural gas is still a critical energy source needed to supplement solar power.

But some questions remain unanswered:

• How quickly can SpaceX get a gas-turbine parts-casting factory up and running?

• Does Musk have a team capable of building these parts?

• And assuming this all goes smoothly, how long will it take for SpaceX to produce these parts at scale?

Building Natural Gas-Turbine Parts Is the Next Phase of Musk’s ‘Dark Energy’ Plan

If you’re unfamiliar with the concept of “Dark Energy,” let me take you back to a June 5 article by my colleague Steven Longenecker.

In that piece, he wrote:

Elon Musk will be one of the world’s top buyers of gas turbines over the next few years…

SpaceX has committed to spending more than $2.8 billion on these turbines for its artificial intelligence (“AI”) build-out, the company recently revealed in its initial public offering (“IPO”) filing…

In March, SpaceX agreed to buy $805 million worth of turbines from an unnamed supplier, with deliveries running through 2029. Then in late April, the company struck a separate, still-pending deal for roughly $2 billion worth of mobile gas turbines and related equipment from another vendor.

Steven’s article continued:

And it confirms something my colleague Professor Joel Litman has been saying for months…

This kind of off-grid “Dark Energy” is the next stage of the AI boom. As I explained in our Dark Energy deep-dive last month:

Dark Energy is a clean, reliable power source. Specifically, it’s a class of natural-gas turbines… essentially a jet engine adapted into an electric generator. They start in minutes, run on natural gas instead of jet fuel, and can produce tens of megawatts of power per unit. Stack enough of them together, and you have a private power plant…

But until recently, no one was using them at scale to power the world’s most advanced AI labs. Now that they are, the suppliers building them are sold out for years.

Since then, SpaceX has also purchased APR Energy, a Jacksonville-based power company specializing in rapidly deployable, modular power generation.

I covered that transaction in a July 21 article, in which I wrote:

The deal, which is thought to be worth at least $1 billion, gives Musk what APR Energy’s website describes as “one of the world’s largest mobile gas turbine fleets,” with solutions that scale from 20 megawatts (“MW”) to 500 MW. APR Energy has delivered more than 50 terawatt-hours of power to more than 35 countries.

Most importantly, the company claims it can “deliver reliable energy in 30 to 90 days.”

And that’s exactly what Musk – and every other data-center operator and hyperscaler in the world – desperately wants and needs. Plenty of power… and fast.

Musk is clearly a big believer in the fast power that natural gas turbines can provide to SpaceX’s data centers. But, based on his recent X post, that power can’t be delivered fast enough. So, the next logical step after buying up natural gas turbines and then buying an energy company for its fleet of mobile gas turbines is to help build them yourself, right?

Regardless of how he procures the turbines, Musk is in the midst of taking Dark Energy to the next level.

The Texas Foundry Building the Natural Gas-Turbine Parts

Bastrop, Texas, a small town of roughly 14,000 residents located around 30 miles outside of Austin, was once known as a filming location for the iconic 1974 horror classic, The Texas Chain Saw Massacre. Today, it’s Elon Musk’s playground.

Along with Musk’s huge SpaceX Starlink factory, Bastrop will soon be home to the new foundry that will cast blades and vanes for natural gas turbines. Musk, through his recent dealings with gas-turbine production, learned that the primary bottleneck is the casting process.

TechCrunch, via the Information, explained why:

The blades inside a gas turbine’s hottest section run at temperatures around 3,000 to 3,600 degrees Fahrenheit, which is roughly 800 degrees hotter than the melting point of the very metal alloy they’re made from. That’s only possible because of the blades’ internal cooling channels and thermal-barrier coatings, plus the specific way each blade is cast. Just four companies worldwide have mastered the casting process well enough to produce them at industrial scale, and all of them are tapped out right now.

To repeat, only four companies on the planet know how to do this on a large scale. But they’re completely booked through 2029 and into 2030. And, as we’ve learned, patience is not a virtue of Musk’s. So, he’s opting to do it in-house rather than wait.

The problem is that the entire operation is obviously very complex and delicate.

As TechCrunch noted:

What makes the whole thing especially difficult is that each blade has to be cast as a single, unbroken crystal, grown slowly inside a vacuum furnace, without the microscopic seams that let ordinary cast metal crack under stress. It’s a tricky process even for the smaller blades used in jet engines; the blades in power-plant turbines are considerably larger, which makes producing them at that scale and without defects even harder.

Which takes us back to some of those unanswered questions I posed at the start of this article…

The answer to all three questions is, essentially, a giant shrug.

We do know that SpaceX bought roughly 830 acres of land in Bastrop between March and June. But that’s pretty much all we know. As of August, the state of Texas had no record of any environmental or building permits being filed by SpaceX for construction of the facility.

Let’s also not forget that these types of gas turbines release smog-forming compounds and dangerous chemicals like formaldehyde, as well as pollutants linked to asthma, respiratory disease, and certain cancers into the air. That’s why significant industrial air-quality permits are required before construction can even begin.

Those permits haven’t appeared yet.

The next part to consider, assuming permits are granted and foundry construction goes smoothly, is the time it takes to create the product.

Peter Perri III, an energy investor with more than 20 years of experience in building and financing power infrastructure, noted in an August 30 Substack post:

A vacuum casting foundry capable of single-crystal work is 18 to 24 months from groundbreaking to commissioning, and the job listings say they’re still hiring the people who will build it. Process development on single-crystal yield typically runs another two to three years.

At this point, no ground has been broken, and no team has been assembled. So, realistically, we’re probably looking at a minimum of five years before the foundry yields any product. History tells us that Musk won’t want to wait that long.

The Turbine-Blade and AI-Power Bottlenecks Are Real… But Is Musk’s Plan Realistic?

Global research company Gartner projects that the amount of energy consumed by data centers around the world will reach 565 terawatt-hours (“TWh”) by the end of this year. To put that into perspective, here are some fun facts about how much 565 TWh is worth in real-world contexts:

• It’s nearly twice the annual energy consumption of the entire continent of Australia.

• If the world’s data centers were one country, it would be one of the top 10 largest electricity-consuming countries on Earth.

• It could fully charge every smartphone on the planet – around seven billion – every day for the next 40 years.

By 2030, that number will hit nearly 1,000 TWh, according to the International Energy Agency.

The current electrical-grid infrastructure simply can’t handle this type of load. Something needs to power the rapidly growing number of data centers, which shows no signs of tapering off anytime soon. This has hyperscalers like Amazon (AMZN), Meta Platforms (META), Alphabet (GOOGL), Microsoft (MSFT), OpenAI, and SpaceX looking for quick energy sources.

Most of those companies have already gone the renewable, clean-energy route, like solar and wind. But they’re all turning – or have already turned – to natural gas because it has typically been a faster way to get their data centers online.

But the AI-driven demand has overwhelmed the supply. GE Vernova (GEV), the world’s largest manufacturer of natural gas turbines, is effectively sold out of production capacity through 2030.

That’s the reason Musk turned to APR Energy and its fleet of mobile gas turbines. And that’s why he decided to build his own parts to break the bottleneck holding up gas-turbine production.

But can SpaceX pull this off? As I mentioned, there is no foundry yet… permits haven’t been secured, and ground hasn’t been broken. And no team of experts is in place to oversee and take part in the extremely complicated and sensitive process of casting turbine blades.

Could it theoretically happen? Sure. Musk has the financial means to make virtually anything happen. He should be able to lure top talent to Texas to participate in the project. Although, considering the recent news that SpaceX completely restructured its data-center team because of engineering and reliability concerns at its Mississippi and Tennessee factories, is there any guarantee that SpaceX will even be able to bring in the right people?

If SpaceX does pull this off, it will position the company as one of only five Western companies capable of this type of manufacturing. SpaceX would have every AI-infrastructure builder across the globe lining up for its turbine blades and vanes.

But the lack of any progress and the daunting production timelines for both foundry construction and large-scale production make this feel closer to fantasy than reality.

And, let’s face it, Musk has a long history of grandiose ideas and projects that sound amazing at conception but barely get off the ground. The fully self-driving Tesla car (on a large scale), the Hyperloop, the mass rollout of Tesla robotaxis, personal rocket-travel across Earth, the Tesla Roadster, the city on Mars… you get the idea.

The man is undeniably brilliant and has conceptualized some incredible technological breakthroughs. But he also owns a long list of broken promises. Time will tell which category the turbine-blade foundry in Texas falls into.

Regards,

David Engle

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The post SpaceX Wants to Build Natural Gas-Turbine Parts for AI Data Centers. Can Elon Musk Pull It Off? appeared first on MarketWise.

The latest nonfarm payrolls report lands Friday, September 4 at 8:30 a.m. ET, and it’s the biggest, most volatility-inducing number of the month. Consensus is looking for a gain of around +55,000 after July actually lost 23,000 jobs. But our August jobs report preview says the crowd has it wrong.

I’m going to tell you the same thing I told our room on this morning’s live show: the number isn’t the story. Risk is already repricing where the real money lives — and it’s not in the VIX. It’s in the bond market.

I spent 28 years making markets, first on the floor of the CBOE and then trading bonds from 2003 to 2012. And the yield curve was always my first tell for the direction of the whole stock market. Right now, that tell is flashing, most traders are watching the wrong gauge, and Friday’s print is the catalyst that decides which way this thing air-pockets.

Let me walk you through it.

Key Numbers to Know Before Friday

What Time Is the August 2026 Jobs Report Released?

The Bureau of Labor Statistics releases the August employment report on Friday, September 4, 2026, at 8:30 a.m. ET (7:30 a.m. CT). It’s the single biggest catalyst of the month — the one number that moves the dollar, the bond market, and the stock market in the same breath, usually inside the first few seconds.

What Is the Forecast for August Nonfarm Payrolls?

Consensus is centered around a gain of +55,000, with the unemployment rate expected to hold near 4.1%. But be honest about the spread: the estimates run all the way from a 25,000 decline to a gain of 140,000.

When the pros can’t agree inside a 165,000-job range, that’s your first tell. This is a convexity setup, not a coin flip. The wings are priced for a big move — up or down — because there’s simply too much uncertainty for this market to sit still. Nobody actually knows what prints, which means the market is going to react, hard, to whatever does.

MOVE Index vs. VIX: The Number That Matters

Here’s the part almost nobody is talking about.

For the last year, the crowd has watched the VIX — the “fear gauge” for the S&P. Fine. But the VIX is sitting down in the dumps around 15, near its lowest levels of the entire year, while the market has been quietly selling off. That combination — market down, VIX asleep — usually doesn’t happen. It’s a tell that traders have gotten too comfortable with risk.

So don’t watch the VIX right now. Watch the MOVE index.

The MOVE (it’s a Bank of America product) is to bonds what the VIX is to the S&P — it measures volatility in the Treasury market. And while the VIX naps, the MOVE has climbed to roughly 78, up from around 70 last week. Bond volatility is rising while stock volatility pretends everything’s fine. When those two disagree, you don’t fight the bonds. The bond market is bigger than the equity market, and it’s usually right first.

Why is bond vol waking up? The 10-year yield is pushing 4.8% and the 30-year is at its highest in a long while. The Treasury even stepped in to buy the back end of the curve to try to force those rates down — but you can’t fight the free markets for more than a day or two. That’s the real reason the QQQ, the IWM and the S&P have been leaking lower. It isn’t a VIX story. It’s a bond-volatility story, and the MOVE is your first tell. If it bounces again before Friday, this market goes into the number under serious pressure.

Will the Fed Raise Rates in September?

Now layer the jobs number on top of that.

For most of 2024 and 2025, the trade was simple: weak jobs → the Fed cuts → stocks rally. “Bad news is good news.” That trade is dead right now, and here’s why.

Sticky inflation never went back in the box — the Fed’s preferred gauge is still running well above its 2% target, and with U.S.–Iran tensions heating up and tankers being hit exiting the Strait of Hormuz, oil is catching a hard bid. That’s more inflation, not less. At Jackson Hole, Fed Chair Kevin Warsh made it about as clear as a central banker gets that prices worry him more than a soft patch in hiring. The July meeting was a 9–3 hold, and all three dissenters wanted to raise rates. After Warsh spoke, fed funds futures flipped to roughly two-in-three odds of a September hike.

I’ll say it plainly, same as I said it live: I strongly believe the Fed raises rates at its September meeting.

So flip your logic before Friday:

• A hot number (think +100K or more) tells Warsh the labor market can take a hike — that’s the hawkish outcome, and it’s a headwind for stocks, a tailwind for the dollar and short-term yields.
• A weak number is what takes hike risk off the table — and that’s the one the equity crowd would actually cheer.

Read that twice, because it’s backwards from what you’ve been conditioned to do. This is my First Law in action: money drives markets. Not the headline, not the pundit spin — the repricing of rate expectations. Ask yourself which game you’re playing before 8:30.

Why the VIX Looks Too Cheap Into the August Jobs Report

Put it all together and the VIX being this low makes no sense. We’re walking into nonfarm payrolls — the biggest catalyst of the month — in a September that’s historically one of the most volatile stretches of the year, with bond vol climbing, yields near the highs and inflation a live concern. And the crowd is treating protection like it’s worthless.

That’s exactly when volatility gets mispriced. Stocks don’t like to hang around big round numbers — right now the Nasdaq is sitting right on its 100-day moving average, and markets rarely just drift there. They give a level a kiss and then either bounce or air-pocket straight through it. Into a number with this much uncertainty, that’s a move waiting to happen — which is why watching and respecting volatility here matters far more than the crowd thinks.

And don’t let last week’s Nvidia headline lull you either. Everyone circled the 89% implied year-over-year revenue growth and cheered — but a big share of that profit came from Nvidia’s own investments in AI companies that turn around and buy its chips. That’s circular financing, and it’s part of why the rally underneath is more fragile than the tape looks.

What the Unemployment Rate Isn’t Telling You About the Jobs Report

One more thing the crowd gets wrong: the unemployment rate.

July’s rate “fell” to 4.1%, and you’ll see that spun as strength. It isn’t. It dropped for the wrong reason — the labor force shrank by more than a quarter-million people and the participation rate slid to 61.4%, the lowest outside the Covid shock since the mid-1970s.

When the workforce is shrinking, the number of jobs needed just to hold unemployment steady falls too. So, a small payroll print — even a slightly negative one — no longer automatically means the economy is cracking. This is my Third Law: nothing is cheap or expensive on its own. You have to know why a number moved before you trade it.

What the BLS Benchmark Revision Means for the Jobs Report

Two weeks ago the BLS dropped its preliminary benchmark revision — the annual re-basing of payrolls against actual tax records. The economy had 79,000 fewer jobs in the year through March 2026 than first reported. That’s 0.1%. A rounding error — and a fraction of last year’s roughly −911,000 revision that had half the internet screaming cover-up.

But don’t stop at the headline. Look at where the jobs moved, because the tape can’t hide. The biggest cuts hit retail trade (−154,600), private education and health (−96,000), wholesale trade (−86,200) and manufacturing (−67,000). The upward revisions went to transportation and warehousing (+135,100), government (+99,000), information (+87,000) and financial activities (+85,000). That’s not random. That’s the goods-and-retail economy bleeding while logistics, government and information hold the line. Follow the money and the picture gets a lot clearer than the one-line summary. Second Law: the tape can’t hide

How to Think About Trading the Jobs Report

I’m not handing you a ticket to punch — this is the setup, not a recommendation. But here’s how I’m framing Friday.

The edge on an event like this is almost never in guessing the number. It’s in watching the right gauge and understanding the reaction. So watch bonds. For those with access to futures, the ladder is your read: ZN (10-year), ZB (30-year), UB (ultra), ZF (5-year), ZT (2-year) — or just follow TLT and the MOVE index. If yields start coming down and the MOVE settles, the market can rally. If the MOVE bounces and TLT gets crushed, that’s very bearish for stocks.

And whatever you do, my Fourth and Fifth Laws carry the day on an event like this: decide your risk before you enter, not after the number prints — and survive first. Size it so a whipsaw can’t take you out of the game.

What the Jobs Report Means for the September Fed Rate Decision

This report doesn’t land in a vacuum. It’s the first of two big inputs before the Fed’s September meeting, with the August CPI report following the week after. Neither is a formula that spits out a decision — they’re evidence, and Warsh has told us he’s reading it through an inflation lens. A firm payroll number plus another sticky inflation print keeps the September hike squarely on the table. A clearly weak jobs report is what could talk the committee back toward patience.

FAQ

What time is the August 2026 jobs report?

Friday, September 4, 2026, at 8:30 a.m. ET (7:30 a.m. CT), from the U.S. Bureau of Labor Statistics.

Will the Fed raise rates in September 2026?

It’s a live debate, and it’s leaning hawkish. After Chair Warsh’s Jackson Hole speech, fed funds futures moved to roughly 65% odds of a quarter-point hike — a sharp shift from the pause markets had expected. Friday’s payrolls and the following week’s CPI will shape the final call.

Why is a strong jobs report bad for stocks right now?

Because inflation is still above target and the Fed is leaning toward hiking. A strong labor market gives the Fed cover to raise rates, which pressures equities and lifts the dollar and yields. The old “weak-jobs-means-cuts” trade is inverted for now.

What is the MOVE index and why does it matter for the jobs report?

The MOVE index measures expected volatility in the U.S. Treasury market — it’s the bond market’s version of the VIX. With bond volatility rising while the VIX stays low, the MOVE is the more honest read on risk heading into a market-moving number like nonfarm payrolls.

What was the July 2026 jobs report number?

Nonfarm payrolls fell by 23,000 in July against expectations for a gain, with prior months revised down by roughly 103,000 combined. The unemployment rate ticked to 4.1%, but largely because the labor force shrank.

The Bottom Line

Friday isn’t about the headline — it’s about the reaction to the headline, and the reaction function is flipped. Forget the VIX, watch the MOVE, respect the volatility, and know which game you’re playing before 8:30.

That’s how we do it every market morning over at Masters in Trading, 11:00 a.m. ET. Follow the money, not the narrative.

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The post August Jobs Report Preview: Forget the VIX — Watch the Bond Market Going Into Friday appeared first on MarketWise.

Strategy (MSTR), the world’s largest bitcoin treasury firm, scooped up 4,603 bitcoins in the last full week of August for a total price of $369.7 million. That’s an average cost of $80,318, which is right around the cryptocurrency’s recent peak.

Generally, Strategy uses arbitrage to make low-risk money when buying or selling bitcoins. If its common stock is trading for substantially more than the value of its bitcoin holdings, it can make financial sense for Strategy to issue common stock to buy more bitcoins.

Voila! – More bitcoins per common share, all at relatively low risk.

That’s what Strategy did with last week’s purchases, too. It sold 4.53 million shares of common stock, raising $602.8 million. It then spent nearly $370 million to buy those 4,603 bitcoins. It also spent $151.8 million on repurchasing its STRC preferred stock, saving it that security’s 12% coupon and following major repurchase activity in prior weeks.

What about the remaining $80 million or so from that cash raise?

A total of $50.7 million was used to pay out the dividend on the STRC preferred stock, while $30 million was stashed away in Strategy’s cash reserve for increased liquidity.

What’s puzzling is why Strategy acted at all, given the relatively low premium placed on its stock.

The stock was not trading at a substantial premium, particularly after an extended period of malaise in the bitcoin market. On Monday, Strategy marked its stock at 1.09 times its bitcoin holdings, so the stock was trading at just a 9% premium to its holdings. That figure dropped to just 1.05 times on Tuesday.

The 9% premium is quite small compared with what Strategy stock had fetched in bitcoin’s go-go years, but such a modest premium may be all that’s available to the company in this slow period.

But the thin arbitrage margin is worrisome in a fast-moving market like bitcoin. Strategy did not buy before the latest run, as bitcoin rose from $63,000 to $78,000 – up more than 20% – in a week or so. Instead, it bought more coins near the recent top around $80,000.

Now, with bitcoin a few thousand dollars off that purchase price, Strategy is quickly underwater on those buys. Such a thin premium on its stock gives the company much less room for error when trading the world’s largest cryptocurrency in the short term.

It shows the challenges Strategy faces in a slow bitcoin market, even as it has significantly altered how it manages its balance sheet and investments to meet them. With bitcoin down significantly from its all-time highs, Strategy’s executive chair Michael Saylor has been forced to rework how the firm can effectively raise funds to keep its bitcoin buying binge on track and protect its future.

Strategy Is Becoming the ‘Central Bank of Bitcoin’

At the center of these moves is what Strategy’s executive chair, Michael Saylor, is calling his digital credit plan. This plan reworks how Strategy manages its balance sheet, focusing its fundraising on the company’s STRC variable-rate preferred stock to increase the number of bitcoins per share of common stock.

Its digital credit plan turns Strategy into something like a “central bank of bitcoin,” meaning it manages its debt financing like how a central bank manages the money supply.

At the center of this fundraising process is the company’s preferred series STRC. It’s already the world’s largest preferred stock, according to Saylor, and by managing it carefully, Strategy can lower its financing costs.

“We expect to keep laser focus on it,” said Saylor in Strategy’s latest earnings call. “We’re going to do everything we can to make it the most appealing credit in the entire digital credit space.”

For example, Strategy can adjust STRC’s dividend payout, currently a 12% coupon, and the stock price by issuing or repurchasing shares when they’re priced favorably. If Strategy can develop a reputation as a solid counterparty, it may be able to lower that dividend over time.

This move is just one part of the company’s tool chest when it comes to managing its finances:

• Strategy can repurchase its preferred shares if the price falls too far, or it can issue them to raise funds if the price hits a favorable level, say its par value of $100 or above.

• Strategy can raise the yield on its preferred to raise the stock’s price, as it did recently, if it wants to raise cash or if it wants to boost its bitcoin holdings, for example.

• A larger issuance of STRC preferred stock creates more market liquidity, which may help reduce the preferred’s cost and make it seem like a more reliable investment.

In short, Strategy will adjust its actions in three asset markets – bitcoin, common stock, and preferred stock – so that it will raise its bitcoins per common share.

In the past few weeks, Strategy has been working to push up the price of its STRC preferreds, a move that should ultimately let Strategy issue them without suffering a discount. Its recent repurchase of nearly $152 million in STRC also keeps buying pressure up on that security, and it has nearly $365 million in repurchase authorization, giving it more dry powder.

Despite the strong bounce back in STRC, it’s not quite yet at its par value of $100 per share. The preferred stock bottomed around $71 per share and has since moved to around $97.

Saylor’s plan to keep the preferred near par may create unintended consequences, though. For example, if Strategy always keeps a floor under STRC, it may encourage investors to use the preferred as a source of cash, potentially draining the company’s coffers if it’s not careful.

Strategy’s new digital credit plan means it will need a longer-term approach to managing its assets and liabilities, which runs counter to short-term trading.

Do Bitcoin and Strategy Protect Against a Market Meltdown?

Bitcoin has bounced back over the past few weeks, moving from the low $60,000s to its recent peak above $80,000. One driver of this move is growing anxiety about massive U.S. debt and deficits, as well as the related issue of the dollar’s purchasing power.

While this “dollar debasement trade” may work as a short-term move for bitcoin traders, it’s apt to be a poor trade for those who think bitcoin will protect their money during tough times.

First, bitcoin and other cryptocurrencies trade like “risk” assets such as tech stocks or even more speculative, profit-less investments. So, it will trade largely in line with these riskier investments, though often with more exaggerated moves – that is, higher highs and lower lows.

These exaggerated movements make sense when you understand that bitcoin is backed only by traders’ sentiment and isn’t directly usable for goods and services (except the illegal kinds). Since it’s based solely on sentiment, bitcoin can fluctuate wildly as sentiment swings from fear to greed.

Second, because bitcoin is based on nothing but traders’ confidence or belief that they can sell it for more to the next trader, its price will evaporate if and when traders lose confidence in it. The market’s confidence is inherently unstable and can disappear at any moment for a variety of reasons, including if someone discovers a new way to hack the crypto.

Strategy combines this lack of intrinsic value with leverage in the form of its bonds and preferred stock, meaning its stock will be even more volatile than bitcoin itself. It’s taking steps to be able to control this inherently volatile situation more effectively so that it can keep buying bitcoins when prices are down and ensure the entire company doesn’t blow up in a downturn.

Another time may come when bitcoin is down so far from its peak that the market just capitulates, as it did in 2022. In that scenario, Strategy will need the capital to buy bitcoin after the plunge, but whether it ends up being the final death knell for the world’s biggest crypto, and therefore Strategy, will play out in time.

Regards

James Royal, PhD

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