Elon Musk is an abrasive and frequently infuriating presence and is the focal point of loathing for the establishment. In the UK, members of the Labour cabinet view him as a threat to the administrative order. Yet he is a living example of the Great Man theory of history; “great” meaning a person of consequence, rather than good. The theory is that a single, determined will can move humanity more than the masses. The modern world would rather fiddle and legislate while Elon Musk seeks to act and solve civilisational challenges.

No number of committee meetings could conjure a Starship booster returning from the edge of orbit. This skyscraper-sized rocket fell through the sky only to be plucked to safety by mechanical chopsticks. A decade ago, this would have appeared only in science fiction, but today it is a reality. This is just one example of the way Musk's maniacal focus pushes the boundaries of the possible. Musk has many detractors, particularly in political circles. But politicians curate their personas to seek approval; people like Musk actually drive progress. History will record the man who caught the skyscraper-sized rocket long after his critics are forgotten.

Elon Musk is dedicated to human progress

Musk was already very rich by the age of 27 after netting $22 million from the sale of his first business, Zip2. The sale of PayPal a few years later made him another $180 million. He was barely 30 and possessed enough wealth to purchase a private island and vanish from public view. Instead, he chose to dedicate himself to “the mission” of human progress. He views wealth as fuel for missions rather than a reward for success.

He founded SpaceX and funded Tesla as attempts to solve humanity's challenges. He viewed the stagnation of aerospace and the slow development of electric cars as problems that required a focused, engineering-based response. By committing $100 million to rockets and $70 million to electric vehicles, he bet most of his wealth that he could solve the problems. He couldn't do this alone, but his willingness to bet big acted as a radical sorting mechanism for recruitment. Elite engineers joined because they recognised a founder willing to risk bankruptcy in the pursuit of a better future.

In 2008 the dream almost ended as both firms spiralled toward collapse. SpaceX had endured three launch failures and could afford one more failure before bankruptcy. Tesla was weeks away from exhausting its cash. Musk was borrowing money for rent while sleeping on factory floors to supervise production. Many would sacrifice one company to save the other, but he refused. Only a contract win from US space agency Nasa prevented liquidation. This helped create a culture in his companies that treats adversity as a mere stepping stone towards achieving the objective.

“Idiot Index”: the key to Elon Musk's success

The key to his success is to focus on what is possible, not what has been done before. Musk operates on the principle that “the only rules are the ones dictated by the laws of physics. Everything else is a recommendation”. His method is to strip a problem down to fundamental parts and then reason towards the goal. Most managers make incremental changes to existing models; Musk rejects precedent, believing the way things have always been done is irrelevant to the way they should be. He applies a metric known as the “Idiot Index” to maintain this discipline. This measures the ratio of a finished product's cost to the costs of its raw materials. A high ratio, such as is typical for space rockets, indicates an inefficient process. Musk expects his engineers to identify the best and worst parts of their systems through this lens at all times. This approach allowed Tesla to cut battery costs and manufacturing time by focusing on the component elements, not simply the price of the finished product.

He puts these principles into practice through five steps. First, question every step in the process and seek out flaws. Second, cut out any unnecessary part or process. Third, simplify or optimise, but only after part two is exhausted so as to avoid optimising a process that should not be there. Fourth, accelerate. Fifth and finally, automate. This sequence ensures engineers never waste effort on perfecting an irrelevance.

The Tesla Giga Press is an example. Traditionally, car manufacturers built underbodies by welding 70 or more separate parts together. Most accepted this complexity because they followed tradition. Musk looked at the simplicity of toy car manufacturing and wondered why full-sized vehicles were not cast as single pieces. He commissioned the creation of the largest casting machines in the world to produce a car underbody in one operation. This eliminated hundreds of robots from the production line and drastically improved structural rigidity. By scaling up the logic of a toy, he proved that a better, cheaper and stronger vehicle could be built more quickly and with fewer potential areas for failure.

Twitter layoffs illustrated Price's Law

The acquisition of Twitter (now called X) and the changes brought about there was an experiment in Price's Law. This states that in any productive domain, the square root of the total number of people involved produces 50% of the results. So in a firm of 10,000 people, 100 individuals would account for 50% of the total value. This suggests that most people in a large workforce are redundant. When Musk reduced the headcount at Twitter by 80%, critics predicted a collapse. They assume that productivity is a function of the number of hours worked by the average employee. Price's Law reveals that productivity is concentrated in a tiny elite.

Price's Law is a counter to Marxian economics, which assumes that the worth of a product derives from the labour time required to produce it, seeing progress as a collective process. Musk works on the idea that you should only employ the real talent. Even then, once an employee is no longer driving the mission forward, they are replaced by someone who will. In X, he maintained the output of the platform while shedding the bureaucratic weight that had stifled innovation. The results were a faster and more feature-rich platform.

The modern Western world is choked by layers of managers managing managers who contribute nothing useful. These individuals thrive on the belief that committees lead to better outcomes. In high-stakes engineering and innovation, however, the many are a burden on the few who actually build. This “special forces” model of management prioritises individual brilliance over collective averages. By identifying and motivating this core, Musk forces a level of productivity that bureaucracies can't replicate.

Elon Musk has achieved orbital hegemony

Musk is perhaps best known for his relationship with Donald Trump or his management of Tesla, but his most impressive achievement is SpaceX. SpaceX has achieved a global monopoly through sheer competence. By 2025, SpaceX was responsible for delivering about 90% of the total weight of usable cargo moved into space. Most of the rest was handled by China. Musk achieved this by refusing to accept the “aerospace welfare state” that had defined the industry. Since the 1960s, firms such as Boeing and Lockheed Martin operated under cost-plus contracts, a system that essentially rewarded inefficiency where the government reimburses all costs and adds a guaranteed fee for profit, ensuring that the longer a project overran, the more the contractor was paid.

Musk set SpaceX's engineers to build rockets that were not just functional, but also economically superior. The result was to go back to first principles on every conceivable part of a space rocket, from materials used, to complexity of design and, most notably, reusability. Before SpaceX, throwing away a multi-million-dollar rocket after a single flight was normal. Musk viewed this as an absurdity, akin to discarding a Boeing 747 after a one-way trip across the Atlantic. SpaceX pioneered the landing and reuse of boosters and has reduced the cost of access to space by an order of magnitude. The Pentagon estimates that this shift has already saved the US taxpayer more than $40 billion in procurement costs.

The difference between SpaceX's “special forces” engineering culture and Boeing's bureaucracy is clear when you compare their passenger spacecraft. Despite receiving billions more in funding, Boeing's programme was plagued by years of delays and emergency technical failures, while SpaceX's leaner team delivered a reliable service for 60% less cost per seat. This performance gap continues to widen. The introduction of the SpaceX Starship V3 is intended to enable full reusability. Each engine generates more thrust than a jumbo jet, while the system is designed to be flown, landed and relaunched with high frequency. Soon SpaceX might render traditional expendable rockets obsolete.

Elon Musk's superpower

Ten years ago, Elon Musk was influential but relatively uncontroversial; his alignment with Trump has since made him a more polarising figure. But this political foray too reflects an engineering mindset rather than a thirst for office. Musk views the US state as a legacy system suffering from bloat. He applied his management process to the federal bureaucracy with characteristic ruthlessness. An initial audit uncovered “zombie payments” worth hundreds of billions of dollars. These funds were being sent to individuals who were either deceased, or, according to government records, not born yet. This foray into public service was only ever temporary and he completed a 100-day contract. His reason for doing it was that he believed it was the right thing to do. He didn't care that alignment with Trump would draw fury.

Musk believes that one of his greatest powers is simply not caring what people think of him. This insulation stems from his neuro-atypicality. Musk, who has said he has Asperger syndrome, tends to prioritise data over social cues; ignoring consensus and focusing on physical constraints, often treating social norms as secondary to progress. In the UK, energy secretary Ed Miliband has branded Musk a “dangerous person” and told him to keep out of this country and its politics. The irony is that Miliband, a man who has spent his entire professional life in non-jobs and a zealous proponent of net-zero, is criticising the man who has done more for sustainable energy through Tesla and SolarCity (yet another of Musk's firms) than any person alive. British ministers talk about some better future, but it's people like Musk who are building it. Politicians can only legislate, they can't magic into existence space-based clean energy (another of Musk's missions).

Let history be the judge of Elon Musk

Musk is a difficult man. We should not expect him to be easy or agreeable, as such traits are rarely found in those who actually change the world. If it were not for people like him dreaming about what is over the next hill, humanity would still be a small group of cavemen huddled together in fear. History will judge Musk by the 250-tonne rocket he caught and the progress he forced, not by the social approval he never sought.

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Tesla is continuing its push into artificial intelligence (AI) and autonomy, but is having to spend big in order to do so. Is that making investors nervous?

Electric vehicle (EV)-maker Tesla (NASDAQ:TSLA) is frequently one of the most popular stocks among DIY investors. It is also one of the ‘Mag 7’ big tech stocks.

Tesla’s share price initially rose over 4% in after-hours trading following the announcement of better-than-expected results on 22 April, before slumping later. By the end of after-hours trading Tesla’s shares were 0.3% below their market close.

“Shares initially moved higher after Tesla’s latest results, with a big underlying earnings beat and broadly solid margins giving investors some early encouragement,” said Matt Britzman, senior equity analyst at Hargreaves Lansdown. “Revenue was up for the first time since 2024, and free cash flow was a standout positive, but there are signs this was a softer beat than it first appeared, with some one-off or timing benefits helping flatter the numbers.”

Investors often look to Tesla’s CEO Elon Musk for characteristically upbeat commentary on Tesla’s future during its earnings calls, but his comments left markets flat this time around.

“The sticking points were familiar, but still important,” said Britzman. “Progress on robotaxis continues, with new cities added and miles driven rising, but the fully unsupervised rollout remains slow, and Musk’s comments suggest that a cautious pace will continue as the software evolves.”

What did its Q1 results tell us about Tesla – is the automaker’s business stalling, or is its drive into physical AI paying off?

Tesla’s results in detail

Tesla had been expected to post earnings per share (EPS) of $0.37 on revenue of $22.7 billion, according to consensus estimates from analysts polled by London Stock Exchange Group.

The results exceeded these expectations. Tesla reported adjusted EPS of $0.41 – up 52% year-on-year – with revenue up 16% to $22.4 billion.

However, there are some caveats over these seemingly positive numbers. The GAAP (non-adjusted) EPS figure of $0.13 implied just 8% earnings growth, suggesting that there had been a lot of one-off adjustments contributing towards the headline EPS figure.

Capital expenditure (capex) was another focus area, with spending during the quarter increasing 67% year-over-year to $2.5 billion. Tesla’s CFO Vaibhav Taneja indicated that capex for the year will increase to $25 billion – with Tesla having previously guided for around $20 billion – in order to support the development of six factories (some of which have already begun operation or will do this year) and the further rollout of AI initiatives such as robotaxis or the Optimus robot launch.

However, these investments mean that Tesla will see negative free cash flow for the rest of the year.

These forecasts appear to have spooked the market, with Tesla shares falling sharply in after-hours trading during the earnings call on 22 April.

Should you invest in Tesla?

Ultimately, whether or not you invest in Tesla depends on your personal circumstances and investment goals.

Big tech companies have the potential to deliver strong returns for investors.

However, they can also come with stretched valuations, and Tesla is a prime example of this; as of 22 April, it traded at a price/earnings ratio of over 355 – which is incredibly high. In order to justify this kind of valuation Tesla would have to increase its earnings rapidly over many, many years.

When stocks trade at multiples this high, it can lead to sharp selloffs in the short term if anything happens to dampen market expectations of this growth materialising.

“Ultimately, the valuation still leans heavily on Musk delivering breakthrough products that open entirely new markets,” said Britzman. “While progress is being made, last night’s comments were another example of the goalposts moving further out.”

What is enshittification?

“Enshittification” is a term coined by the British-Canadian technology critic and author Cory Doctorow in 2022 to describe how the digital services that increasingly dominate our lives – Meta, Amazon, Alphabet and the rest – all turned to crud at the same time. Not everyone is as comfortable with vulgarity as Doctorow. When speaking about the phenomenon in public forums, the author plumps for “enpoopification”, employing a more decorous euphemism – poop – that dates from the mid-18th century. Here, though, we ask readers to tolerate a word that has been in continuous usage in England for about a millennium and which has only been considered rude for the past four centuries or so. “Sometimes a term is so apt, its meaning so clear and so relevant to our circumstances, that it becomes more than just a useful buzzword and grows to define an entire moment,” said Kyle Chayka in The New Yorker. Enshittification is the only word that does justice to what is going on.

What are some examples of enshittification?

This (Generation X) MoneyWeek writer no longer chats pleasurably with old university friends on Facebook because the platform has become so unashamedly crap. Ten years ago, a Facebook feed was made up of friends’ news, views and recommended articles. Now it’s an incomprehensible cesspit of advertisements and pathetic videos. For a while, you wondered if it was just you suffering. Then you realise it’s everybody. That’s enshittification. Or remember when Twitter gave you instant access to your own curated pick of the best journalism, insight and a “livestream feed of smart people on the ground at the most pressing events of the day, not to mention the wisecracks and insights of your friends”? Now, says Charles Barbour on The Conversation, it’s rammed with “ads, gore, porn, toxicity, AI slop and scams of all variety”. That, too, is enshittification. “Facebook, Instagram, TikTok, Amazon, Google, Apple, Uber, Spotify: everything turns to shit. And no one is able to escape.”

Will switching digital platforms stop the enshittification?

That won’t necessarily help. Enshittification is not the result of a business failure that risks driving customers to other platforms. It’s about intentionally letting your platform get crappier once customers are locked in, whether by their own commercial imperatives or by network effects. Enshittification is a strategy, not an accident. In Doctorow’s conception – in numerous essays and laid out more fully in his recent book Enshittification: Why Everything Suddenly Got Worse and What to Do About It – the process of enshittification has three distinct phases. At first, products are great for end users: they let old chums reconnect for free, say, with no surveillance and no “boosted” slop. Next, they abuse those end users to benefit their business customers. They find ways to lock end users in – switching costs, network effects, contracts, digital rights management – and once users are stuck, the company makes the product worse for them to extract more value.

What's the third stage of enshittification?

Finally, platforms use their surpluses to woo business customers (advertisers, sellers, creators), lock them in and start making the product worse for the business side, too. This is the highest form of enshittification: when platforms abuse their business customers, and a lack of meaningful competition and regulation means they can still increase profits. The defining feature of the process is not “things got worse”: it’s “things got worse and we stayed”. For example, in 2019, Google had a 90% market share in search, but growth had stalled, so a strategy was pitched to make search worse so that users would have to run multiple queries and see more advertisements. “That’s enshittification in a nutshell – and we all kept using Google anyway.”

Is this a sustainable model for companies?

The assumption that enshittified companies are doomed to die may be optimistic, says Henry Mance in the Financial Times. Today on Amazon, the top search results are more expensive and sometimes fraudulent. The product you want is, on average, 17th in the results – yet Amazon is thriving. Apple surveils its users as much as Facebook, and refuses to let companies sell refurbished iPhone parts. It lured customers “into its walled garden, which was then revealed to be a prison”, says Doctorow. Now, car firms such as Tesla charge drivers monthly subscriptions for features they have already bought. Indeed, Doctorow’s concept is so “brilliant” it should be applied more broadly, says Paul Krugman in his blog on Substack – a platform that recently pulled off a fundraising round that valued it at $1.1billion, raising fears about its own future path. The logic of enshittification “applies to any business characterised by network effects. It may go under different names such as ‘penetration pricing’, but the logic is the same.” Others go even further, positing Donald Trump, for example, as the “enshittifier-in-chief” of US politics.

Is there a way to combat enshittification?

Doctorow’s book is less convincing on solutions than on entertainingly setting out the problems. But the combination of Trump’s tariffs (undercutting US trade threats) and Brexit (restoring regulatory autonomy) provides a striking opportunity to gain back control of our digital lives, Doctorow argues in The Guardian. Outside the EU, Britain could choose to legalise reverse-engineering for interoperability and user benefit, thus allowing UK firms to modify and improve US tech products, and undercut the rent-extraction models of US platforms. Such a move would attract talent and capital spooked by Trump, reclaim digital sovereignty, and build a profitable tech sector focused on “disenshittifying” platforms. The opportunity is narrow and fraught with political and economic risk. But, says Doctorow, it is “the most exciting proposition in decades”.

This article was first published in MoneyWeek's magazine. Enjoy exclusive early access to news, opinion and analysis from our team of financial experts with a MoneyWeek subscription.

Our annual conference, which this year coincided with the magazine’s 25th birthday, was a roaring success. For those who weren’t there, here is an overview of what you missed. Andrew opened proceedings by noting that the magazine’s quarter-century was bookended by two huge technology booms, while the years in between had seen extraordinary events ranging from a financial crisis to a pandemic.

The only thing it hadn’t seen was a normal business cycle, thanks to constant interference in economic cycles and economies by central banks. Calderwood Capital’s Dylan Grice underlined how state meddling was a recurrent theme – well-intentioned efforts to regulate the market only deepened the crises leading to the American and French revolutions. Throw in today’s geopolitical, technological and financial uncertainty, and extreme caution is called for.

Diversify as follows, he says: construct an equally weighted portfolio comprising equities, commodities, precious metals, real bonds, nominal bonds and securities offering exposure to insurance and reinsurance, such as CAT bonds.

The panel following Dylan’s speech, hosted by MoneyWeek’s columnist Rupert Hargreaves of City A.M. and consisting of Jasmine Yeo of Ruffer, Troy Asset Management’s Charlotte Yonge, RIT Capital Partners’ Frank Ducomble and Charlie Morris of ByteTree, highlighted the scope for gold, bitcoin and index-linked bonds to shield investors’ holdings. Charlie said he was convinced that AI is a massive bubble that peaked in late October.

MoneyWeek Wealth Summit highlights

The emphasis then switched to long-term growth opportunities. Enter Vietnam, which has been one of our favourite stock markets since 2005. Dominic Scriven of Dragon Capital says the economy is growing at 7%-8% a year. Exports have moved up the value chain from raw materials to electronics, and consumption is rising. The pro-business Communist government is sacking one million civil servants to make the public sector more efficient.

Japan, meanwhile, is making its private sector more efficient. Nicola Takada Wood of AVI reviewed the progress of the campaign to shake up corporate governance and unlock value. AVI has been a key activist investor in the under-researched small-cap segment of the market. There is still room for improvement – a large majority of the firms trading below book value in the market are small caps.

Ben James of Baillie Gifford focused on AI. It is the latest technological revolution in a series that began with the industrial revolution, the last one being information technology. We are in the early phase of the machine era, and a key theme will be robotics, with robots doing manual tasks everywhere. In this context, Aurora, an unmanned truck group, and Tesla’s robots have caught Baillie Gifford’s eye.

Next we heard from India Capital Growth Fund’s Gaurav Narain. India continues to exhibit robust growth of about 6% a year, powered by a young population’s household spending – the median age is 28. The stock market remains buoyant, too, accounting for a third of flotations worldwide.

A lunchtime discussion about gold was led by Cris Heaton, who quizzed James Proudlock of OptionsDesk and Erik Norland of CME Group. A snap poll of the audience afterwards was bullish.

After lunch, our founding editor, Merryn Somerset Webb, now at Bloomberg, reviewed the lessons of MoneyWeek’s 25 years. Two of them were that diversification and mean reversion always matter. And hold gold.

Then Laura Foll of Janus Henderson explored the perennial problem of the British stockmarket withering away, with former MoneyWeek editor John Stepek, also now at Bloomberg. The market’s overall valuation is in line with its long-term average, while small and mid caps still look cheap. Foll highlighted commercial property as an area unlikely to become obsolete as technological advances gather pace.

Diana Choyleva of Enodo Economics has become more positive on China in the past few years. There is scope for a bull market now that the government is trying to encourage people to hold stocks rather than property. Pantheon International’s Charlotte Morris reminded the audience that privately held companies outnumber listed companies threefold, so it is important to have exposure to private equity. The same goes for healthcare, according to James Douglas of Polar Capital. The pace of innovation remains impressive and demand robust – concern over the Trump administration’s capricious health policies has eased and valuations are appealing.

The afternoon panel, focusing on diversifying beyond the US and its AI-driven tech stocks, along with the relative merits of small and large caps, was hosted by MoneyWeek’s columnist David C. Stevenson. David was joined by Martin Connaghan of the Murray International Trust, Simon Barnard of the Smithson Investment Trust and Swathi Seshadri of MCP Emerging Markets. Value lies beyond the US, while Simon Barnard noted that the AI boom may be like the railroad one – more useful to future users than the original investors.

Following Dr Pippa Malmgren’s riveting explanation of how stablecoins could remodel the global financial order, MoneyWeek’s funds columnist, Max King, finished the conference by reminding readers to stay optimistic and recall that sometimes value stocks were cheap for a reason. The FTSE 100 should soon reach 10,000, he said. This week, it is tantalisingly close.

Thank you to our headline partner Aberdeen, event partners India Capital Growth Fund, OptionsDesk, Polar Capital, QuotedData, RIT Capital Partners, Smithson Investment Trust and Vietnam Enterprise Investments; and association partner The Association of Investment Companies for their support.

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In the late 1990s, a young Stella Li landed in Rotterdam from China with $30,000, a container load of lithium-ion batteries and an order from head office: “sell them to survive”. She clinched a deal with Nokia, then the number one mobile-phone maker. Never one for false modesty, she told the Financial Times: “I opened the door and moved BYD to another level.”

Nearly 30 years on, the company has moved far past its roots as a battery maker to become one of the world’s most powerful manufacturers of electric vehicles. Globe-trotting Li remains so firmly at the heart of its international expansion that colleagues have dubbed it “The Stella Show”. Yet the stakes, while much higher, are just as existential. BYD sales grew by 40% last year, but it is having to grapple with both rising Western protectionism and a darkening domestic outlook in China in the teeth of cut-throat competition. It’s going to be “very difficult for BYD to continue to grow the way it’s been growing”, says analyst Tu Le of Sino Auto Insights.

“A diminutive woman with almost frenetic energy,” Li, 55, “zips across the globe furiously, rarely making it back to her current home in Los Angeles”, says Fortune. In a typical day, BYD’s “crucial ambassador and strategist” might wake up in Istanbul, fly to a meeting in Vienna and then spend the night in Germany. The carmaker now exports to roughly 95 markets, but Europe is particularly crucial to its global push. In markets such as Britain – which this year became BYD’s biggest outside China – the company has become “Elon Musk’s worst nightmare”.

At its heart, BYD – which was founded in Shenzhen in 1995 by Wang Chuanfu – has always been a partnership. While Li led marketing and expansion, Wang, 59, was the engineer behind the group’s rapid technological advancements and manufacturing prowess. He never wavered from his dream of building electric cars, even when it looked like a long shot. The pair met soon after Li had graduated from Shanghai’s prestigious Fudan University and the relationship developed romantically as well as commercially.

BYD stands for “Build Your Dreams”, but back in the early days when Li was pestering mobile-phone executives in Atlanta suburbs with her box of battery samples, she used to joke that it stood for “Bring Your Dollars”, says Bloomberg Businessweek. Her great strength then was persistence. It took her two years to win a contract from Motorola. But by 2002, when BYD went public in Hong Kong and Shenzhen, the company was on a roll. Many investors were furious when Wang bought a majority stake in a failing state-owned carmaker a year later – appalled that BYD “was wading into a market it knew nothing about”. At the time, Wang didn’t even know how to drive, but was convinced that electric cars were “a natural extension” of the battery business.

The first clunky models did nothing to dissuade the critics, but Wang continued to pour cash into product development.

Stella Li's deal with Warren Buffett

The deal that put BYD on the map was Berkshire Hathaway’s landmark $232 million investment in 2008, says the FT. Li was introduced to Warren Buffett and Charlie Munger by her friend Li Lu, a billionaire hedge-fund manager. In the nearly two decades that Berkshire stuck with BYD until completing its exit this year, it reportedly netted a return of about $7 billion. In that time, BYD has achieved what Tesla, Ford and the rest of the car industry haven’t, says Businessweek: “build an affordable electric car for the masses and make money doing it”. Jean-Francois Baril, chair of Nokia’s owner HMD Global, who has known Li for more than two decades, credits her with “bridging the East and the West”, says the FT. She’ll need all that skill to keep BYD on the road in the years ahead.

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Tesla has applied to the regulator Ofgem for a license to supply electricity to UK households. This move suggests the e-vehicle giant has ambitions to challenge big energy suppliers like British Gas, OVO and Octopus.

Tesla has only applied for an electricity license meaning households on a dual-fuel contract (electricity and gas) may be less interested in switching, if the company’s application is ultimately approved.

The application was published on the regulator’s website on 25 July and could take up to nine months to be processed.

Elon Musk’s company already has an electricity supplier in Texas called Tesla Electric, launched in 2022. It describes itself as “a retail electricity provider that helps you power your home, charge your electric vehicle and support the grid with low-cost, 100% Texas-generated sustainable electricity”.

Texan customers don’t need to own a Tesla product to be eligible, suggesting a similar model could be adopted in the UK if Ofgem approves Tesla’s application. Tesla owners could be more likely to use the provider, though, thanks to possible perks like cheap charging.

“Although its EV sales have dipped sharply this year, Tesla still boasts significant car ownership in the UK and has sold thousands of home storage batteries here,” said Susannah Streeter, head of money and markets at investment platform Hargreaves Lansdown.

“This could mean Tesla Electric has access to a willing customer base, especially if it follows the model of its business in Texas which allows owners of its EVs to charge their cars cheaply and pays them for feeding surplus electricity back to the grid.”

Taking on the ‘big six’ providers and disrupting the UK energy market could be easier said than done, though.

“Tesla is entering a heavily regulated market in which margins have been squeezed to the narrowest possible extent and in which it faces competitors who have already invested in novel tariff offers,” said Adam Bell, ex-head of energy at the department for business, energy and industrial strategy, now director of policy at consultancy group Stonehaven.

“Even with access to an ecosystem of Tesla EV and Powerwall owners, it will find making headway challenging,” he told MoneyWeek.

Could Tesla disrupt the energy market?

Taking on the biggest energy providers is no easy feat. The share of the domestic energy market held by small and medium-sized suppliers fell to just 8.6% in the second quarter of 2025, according to figures published last month by consultancy Cornwall Insight.

The six largest suppliers now make up more than 90% of the domestic market – a far larger share than before the energy crisis.

“Tesla’s entry into the UK electricity supply market could add competitive pressure and bring more innovative tariff options, particularly for EV owners and households with solar panels who have the flexibility to shift demand,” said Bridget Payne, head of energy forecasting at advisory firm Oxford Economics.

“While this supports wider system decarbonisation goals identified by National Grid and the National Energy System Operator (NESO), time-of-use tariffs are already available in the market, so the move may be more of an evolution than a disruption.”

Back in 2020, Tesla partnered with Octopus Energy to launch the Tesla Energy Plan – a smart import/export tariff for those with solar panels and Tesla’s energy storage batteries. The plan allowed customers to access electricity at discounted rates and sell excess energy back to Octopus for the same price.

Tesla ended the plan three years later but Octopus still offers a similar plan through Octopus Flux.

Other providers also offer time-of-use tariffs which vary the cost of electricity based on the time of day you use it. These and EV tariffs can be popular among those with electric vehicles.

Summary

• Alphabet announced earnings per share (EPS) of $2.31 and revenue of $96.4 billion, beating analyst estimates
• Tesla’s results showed EPS of $0.40 and revenue of $22.50 billion, down year-over-year, but in line with analyst estimates
• Tesla shares fell over 4.6% during the earnings call
• Five other Magnificent Seven companies announce earnings next week. Nvidia announces at the end of August

The MoneyWeek team is bringing you rolling previews and analysis, along with live coverage and reaction. Keep following for the latest.

| Magnificent Seven latest | Invest in Tesla? | S&P 500 | AI ETFs |

Good morning, and welcome to our live coverage of another big tech earnings season.

Two of the industry’s heavy hitters – Netflix (NASDAQ:NFLX) and Taiwan Semiconductor Manufacturing Company (NYSE:TSM) – got things underway last week, but big tech earnings season truly kicks into gear this week, as the first two of the Magnificent Seven companies announce their results on Wednesday.

Alphabet’s earnings release will be an intriguing glimpse into how the company is navigating the choppy waters that artificial intelligence poses. Is its core Search business holding up in the face of increased AI competition? If not, can growth of its Google Cloud service make up for any shortfall?

Then there is Tesla. Once again, quarterly delivery numbers have disappointed, calling Musk’s much-publicised political activity into question. But Tesla is now a robotics company – didn’t you know? – so updates on this month’s robotaxi launch will be the focus of attention at Tesla’s earnings call.

We will bring you rolling updates, preview and analysis, throughout this week and next.

When are Alphabet’s and Tesla’s earnings releases?

Both Alphabet and Tesla announce earnings after US markets close on Wednesday 23 July.

Alphabet’s earnings call is scheduled for 1.30pm Pacific Time (9.30pm in the UK), half an hour after US markets close. Its earnings will likely be published online during that window.

Tesla’s earnings call is scheduled to start at 4.30pm central time – 10.30pm in the UK, so one hour later than Alphabet’s.

TSMC results paint upbeat picture for big tech earnings

Taiwan Semiconductor Manufacturing Company – often referred to as TSMC for short – is rarely included in any of the big tech groupings, and isn’t anything like as much of a household name, but that is perhaps unfair.

In a nutshell, it is the world’s most advanced manufacturer of computer chips. Nvidia, which is the best-known semiconductor company in the world, doesn’t actually build any of its chips. TSMC does. It also builds chips for Apple, Arm, Qualcomm, AMD and Broadcom.

TSMC announced a 61% increase in profits last week, with revenue rising 39%. Yesterday, the company joined several of its high-profile customers in the $1 trillion market cap club.

Given that it builds the hardware that the rest of the tech industry depends on, TSMC’s success is a good bellwether for the health of the sector.

Netflix shares fall despite earnings beat

Streaming giant Netflix also posted its results last week. Shares fell in after-hours trading following the announcement, despite an earnings beat, exemplifying the weight of expectation that big tech companies are under at present.

Netflix was once numbered among the world’s most prominent big tech stocks during the ‘FAANG’ (Facebook, Amazon, Apple, Netflix and Google) era. Now, with a market cap around $520 billion, it is no longer in the upper echelons of big tech stocks, analysts, if not the market as a whole, were impressed with its 16% year-on-year revenue growth, and 47% increase in earnings.

“Netflix continues to produce phenomenal results with ever more growth in its sights,” said Alicia Reese, SVP Media & Entertainment equity research at Wedbush Securities. “Even as investor expectations were high heading into the print, and shares reflected some disappointment in the size of the beat and raise, the quality of the beat and raise keeps us positive as we assess the ongoing expansion of Netflix’s free cash flow.”

See our explainer on the results and subsequent Netflix shares reaction for more detail.

S&P 500 earnings strong so far

TSMC and Netflix are two of the highest-profile tech companies to have beaten earnings estimates so far, but it’s a trend that is playing out across the S&P 500.

Around 60 of the biggest 500 US companies have declared Q2 results so far. Of those, more than 80% have beaten expectations.

“That’s not unusual,” says Tom Stevenson, investment director at Fidelity International. “Companies tend to massage forecasts lower in the run up to results season.

“But it does suggest that earnings growth will continue at around the long-run average of 7%,” he adds.

Of course, with their high valuations, most of the Magnificent Seven stocks are expected to grow their earnings above this rate. Will they deliver?

Alphabet earnings: the watch-outs

Let’s take a closer look at the big tech earnings releases coming up this week, starting with Google’s parent company Alphabet.

Market sentiment towards Alphabet has dimmed in recent months. It is the cheapest of all the Magnificent Seven companies relative to past and projected earnings, trading at 21.22 times trailing earnings and 20.46 times projected earnings – below the S&P 500’s average on both fronts.

The fact that those two figures are so close to each other highlights part of the problem: analysts do not see Alphabet’s earnings growing significantly in the near future.

Many fear that generative AI could cut into demand for Google’s core Search business.

“New competition from language models like ChatGPT [is] a genuine threat,” says Matt Britzman, senior equity analyst at Hargreaves Lansdown. “Alphabet has a quality lineup of businesses, but its long-standing crown as the entry point to the internet is under pressure, and that’s put the valuation under strain.”

There is also the possibility that regulators could force a breakup of Google’s business, with two antitrust cases having found that the company operates an illegal monopoly over internet search over the last year.

“Calls for a forced Chrome divestment could challenge Alphabet’s search dominance, and that will keep some investors cautious until there’s more clarity,” said Josh Gilbert, market analyst at eToro.

Google has said it will appeal the decisions, but with Search lying at the heart of Google, any updates will be closely monitored on Alphabet’s earnings call on Wednesday.

Alphabet earnings: the tailwinds

While generative AI poses a threat to Alphabet’s business, it also offers opportunities, and investors will watch out for these keenly at the earnings call tomorrow.

For one thing, AI demand is driving growth of Google Cloud, with analysts projecting top-line cloud revenue growth of around 26-27%.

“Alphabet is continuing to invest heavily in Gemini, its flagship AI assistant, as well as AI-powered ad products and enterprise tools,” says Josh Gilbert, market analyst at eToro. “With growing investor interest in monetisable AI applications, updates on Gemini’s integration into Search, Workspace and Cloud could be a key focus this quarter.”

Capital expenditure is likely to rise, but the market won’t necessarily regard that as a negative given the arms race that big tech companies are engaged in over AI.

“In this environment, it’s spend or get left behind,” says Gilbert.

Tesla earnings: under-delivery becoming a habit

Tesla’s earnings will be released under a cloud: delivery numbers fell year-on-year for the second consecutive quarter. The company announced a total of 384,122 deliveries for the quarter on 2 July.

Shares in Tesla actually rose by 4% following the announcement, but fell 8.4% on 7 July. Tesla shares have fallen nearly 20% this year, as the relationship between CEO Elon Musk and president Donald Trump has soured.

“Elon’s position as a Tony Stark-like personality at the head of the company was a boon for a long time, but it’s hard to argue that his prominence isn’t having some detrimental effect on the brand,” says Josh Gilbert, market analyst at eToro. Read more on Musk’s changing relationship with Tesla here: Who’s driving Tesla?

Cybertruck sales have also continued to decline, having hit their lowest level in a year during the last quarter.

Fairly poor financial results can be almost baked-in for Tesla, barring any major cost-cutting achievements. As is often the case with the company, the short-term share price movements might hinge more on what Musk says that what the numbers show.

Tesla earnings: the robo-revolution

Tesla believers, though, don’t tend to have their faith shaken easily. Few are more bullish than Dan Ives, global head of technology research at Wedbush Securities.

Ives points to an uptick in Chinese sales during June as one reason for optimism ahead of Tesla’s earnings.

“Despite seeing more low-cost models enter the market from Chinese OEMs like BYD, Nio, Xpeng, and others, the company’s recent updates to the Model Y spurred increased demand,” says Ives.

With the long-awaited robotaxi launch having taken place in Austin earlier this month, there will be plenty for Musk to shout about if he wants to. Investors will look for updates on all things robotics when gauging Tesla’s mid-term prospects.

“There are a number of other key endeavors at Tesla including Optimus and the future of robotics, with Tesla one of the clear future leaders in AI in our view,” says Ives.

Thanks for following our reporting ahead of Tesla and Alphabet's earnings. We're leaving things here for today, but join us here again tomorrow morning for a full day of preview and analysis ahead of live coverage of the earnings releases in the evening.

Good morning, and welcome back to our live coverage of big tech earnings season.

This evening sees both Google parent Alphabet and Elon Musk's Tesla announce their second quarter (Q2) results.

Both companies are coming into this earnings season facing challenges as well as headwinds from the rise of artificial intelligence (AI). Follow here live for rolling previews and live updates from both earnings calls.

When do Alphabet and Tesla announce earnings?

To recap, both Tesla and Alphabet announce their Q2 earnings today, after US markets close. That means any time from 9pm in the UK.

Tesla and Alphabet will host an earnings call where management will field calls from analysts. These are scheduled to take place back to back. The earnings release for each company could land any time between the close of markets and the start of the earnings call, but they tend to land fairly soon after markets close.

The key timings are summarised in the table below:

Alphabet and Tesla earnings: what to expect

Analysts are forecasting the below revenue and earnings per share figures at Alphabet and Tesla’s releases this evening, according to consensus estimates from analysts polled by FactSet and LSEG:

Based on FactSet estimates, analysts expect Tesla’s revenue to fall 12.6% year-on-year, and for its earnings to fall by 23.1%.

The forecasts imply a 10.9% increase in revenue and a 15.3% increase in earnings for Google’s parent company Alphabet.

Alphabet earnings: beyond the numbers

As ever with big tech earnings, it is less likely to be the headline numbers that dictate which way Alphabet's shares trade immediately after it announces results today.

Instead, the data and comments from management surrounding the longer-term challenges and opportunities is likely to be the main driver.

In Alphabet's case, this all boils down to whether or not the potential gains from AI outweigh the threats it causes to the Google parent company's business.

"The rise of ChatGPT and other AI platforms has created unprecedented challenges for Google's search business," says Fabien Yip, market analyst at IG. "These new competitors offer conversational interfaces that provide intellectual answers to complex questions, potentially reducing users' reliance on traditional search engines and the advertising revenue they generate."

Google has developed competitors to ChatGPT, particularly its latest model Gemini 2.5 Pro, and investors will look for evidence of growth and adoption of Gemini during tonight's earnings call.

There is also the opportunity for Google Cloud to keep taking market share from competitors, like Amazon Web Services and Microsoft Azure.

"Innovation in AI enterprise solutions will be crucial for Google Cloud's continued success," says Yip. "The company's ability to integrate cloud offerings with other Google products like Workspace provides a competitive advantage that rivals find difficult to replicate."

Could Tesla invest in xAI?

One topic that could come up on Tesla’s earnings call this evening is the possibility of the company investing money into Elon Musk’s artificial intelligence start-up, xAI, which makes the Grok chatbot.

“Tesla is about to embark on an aggressive AI-focused strategy that we believe will include owning a significant piece of xAI,” says Dan Ives, global head of technology research at Wedbush Securities. “While near-term and this quarter the numbers are nothing to write home about, we believe investors are instead focused on the AI future at Tesla.”

Tesla investing in xAI would be subject to a shareholder vote later this year. Historically, Tesla investors have tended to follow Musk’s lead when it comes to corporate votes, but Josh Gilbert, market analyst at eToro, feels that convincing investors to put Tesla money into another Musk company could be a hard sell.

“Even if there is a theoretical future benefit for Tesla, it’s going to be a very hard case to make,” he says.

Winning the AI race: Trump to speak at AI summit as Tesla announces earnings

Today’s tech earnings announcements are conveniently timed, coinciding as they do with a major event in American AI.

President Donald Trump is due to speak at the ‘Winning the AI Race’ summit hosted by the All-In podcast and the Hill and Valley Forum in Washington, DC today.

Along with senior leaders from tech companies like Palantir and VC firms such as Y Combinator, Trump is expected to outline a roadmap to making the US the world’s leading AI economy.

Dan Ives, global head of technology research at Wedbush Securities, anticipates three main strands:

• The build-out of AI infrastructure;
• Innovation aimed at blocking states’ ability to hinder AI development with regulation;
• Ensuring that global US allies adopt its models, rather than those of “foreign adversaries”.

“The Trump keynote will likely aim at outlining a national AI strategy while targeting aggressive plans to accelerate chip exports reflecting the new administration’s elevated focus on winning the AI race,” says Ives.

Trump’s address is scheduled to take place at 5pm Eastern time, and as such could overlap with both Alphabet and Tesla’s earnings calls.

TSLA and GOOGL shares: one hour until US markets open

There is just under an hour to go until US markets open for the final session before Tesla and Alphabet announce their results.

Yesterday, Tesla stock gained 1.1%, but pre-market moves suggest Tesla shares could open today slightly below this level.

Alphabet shares likewise saw gains yesterday, of around 0.65%, but look set to open slightly down today.

Tesla share price opens 0.4% down ahead of earnings

US markets are now open, and shares in Tesla have opened the final session before the Q2 earnings release 0.4% below yesterday’s close.

Tesla shares have fallen around 18.3% so far this year

Alphabet’s shares opened today’s session slightly above yesterday’s close, but have since slipped below it.

Investors can expect big changes in both Alphabet and Tesla’s share price in after-hours trading following their earnings announcements today.

Magnificent Seven earnings calendar

Alphabet and Tesla are the first two Magnificent Seven companies to announce their Q2 earnings. Here’s the full schedule with the rest of the season’s releases:

There is a big gap between the first six companies and Nvidia, as is usual. Some semiconductor companies, such as Broadcom, won’t release their results until September.

Google revenue: what to watch in Alphabet's earnings release

Google’s heart and soul is its Search business, but its Cloud division is the fastest-growing segment by some distance.

“Cloud growth is the other key driver for Alphabet, with Google Cloud looking much more competitive for AI workloads than it was in previous cloud wars,” says Matt Britzman, senior equity analyst at Hargreaves Lansdown.

Analysts are forecasting somewhere between 26-27% revenue growth for Google Cloud, implying a figure of $13.04-13.14 billion.

Alphabet’s share price movements following the earnings call could largely depend on whether the figure comes in above or below this level.

Look out also for Google Services revenue. This division includes the core search and advertising revenue that Google’s empire is built upon.

Analysts expect growth here to slow to 8.5%, implying a figure of $80.21 billion. Beating that would suggest that Google Search is more resilient than thought to the generative AI threat – for now at least. However, falling short could set alarm bells ringing.

We're going to pause coverage for a few hours, but we'll be back around 9pm, when US markets close. Join us then as we report Tesla and Alphabet's earnings releases live.

Tesla shares look set to close up ahead of earnings

Good evening, and welcome back to our live coverage of Alphabet and Tesla's results.

Tesla shares opened this session down, but are around 0.3% up for the day as we head into the final minutes of regular trading.

Shares in Alphabet, though, have fallen through this session. Will Q2 results, and the subsequent earnings calls, change the picture for either stock?

US markets close; Alphabet and Tesla results now due

US markets have now closed. Alphabet shares finish this session 0.58% down, while Tesla's stock gained 0.14%.

Attention now shifts to the imminent release of each company's Q2 earnings report. As a reminder, here's what analysts polled by FactSet and LSEG are expecting:

BREAKING: Alphabet earnings rise 22% year-on-year

Alphabet's headline figures are in:

• Revenue of $96.4 billion, 14% up year-on-year
• Earnings per share of $2.31, up 22%

Alphabet beats on revenue and earnings

Both earnings and revenue came in above analysts' expectations. Google Search and Google Cloud revenue have both beaten expectations too.

Services revenue increased 12% to $82.5 billion, while Cloud revenue grew 32% to $13.6 billion. Analysts had been forecasting these segments to grow by 8.5% and 27% respectively.

Despite this, Alphabet shares have fallen 2.3% in after-hours trading. A reflection, perhaps, of how high market expectations are on the big tech giants.

BREAKING: Tesla earnings fall by 23%

Tesla has now released its results. The headline figures:

• Total revenues down 12% year-on-year to $22.50 billion;
• Earnings per share down 23% to $0.40.

Numbers like these were expected; earnings per share is exactly as FactSet analysts had forecast, while revenue is a touch higher.

Tesla shares are, in fact, gaining ground in after-hours trading following the earnings release.

Alphabet bumps capex to $85 billion

Alphabet's results make great reading on the face of it. Beats across the board, and the core Google business lines (especially Search and Cloud) have outperformed expectations.

The share price is tanking all the same.

One reason for this could be a big spending announcement.

"We are increasing our investment in capital expenditures in 2025 to approximately $85 billion and are excited by the opportunity ahead," said Alphabet CEO Sundar Pichai in the earnings release.

Has this big spending increase caught the market off-guard? AI is known to need big cap-ex from the major players, but some investors may be baulking at the level of this spend.

Tesla: affordable car is now in production

Tesla stock made gains immediately after its results were released - though these have since reversed.

Poor financial results had already been factored in ahead of today's results, given the deliveries were announced earlier in the month.

But there are positives in the earnings release. One of these is an announcement that the long-awaited affordable car began production in June, and that this will scale up in the second half of 2025.

The announcement also states that Cybercab will enter volume production in 2026. Anything relating to the self-driving car business is going to attract investors' attention. Expect Elon Musk to dive into detail on this during this evening's earnings call.

Alphabet earnings call starts

Alphabet's earnings call is now getting underway. Management will flesh out the raw numbers that have already been released.

Shares are down about 1.25% in after-hours trading at the start of the call.

Alphabet earnings highlights: Alphabet CEO says AI is benefitting Google Search

Alphabet CEO Sundar Pichai is delivering his open remarks, and striking an emphatic tone on the positive impacts of AI on Google’s business.

AI Overviews in Google Search now has over 2 billion monthly users, across more than 200 countries, according to Pichai.

The Gemini app has over 450 million monthly active users. Daily requests were 50% higher in June alone than in the first quarter of the year.

“AI features cause users to search more, as they learn that search can meet more of their needs,” says Pichai. That seems to be a direct response to market fears that generative AI could eat into demand for Google Search.

The market is responding positively to these comments. Alphabet stock has rebounded to above where it closed today’s session, reversing the share price drop that accompanied the results’ initial release.

Alphabet’s capital expenditure in focus

According to Alphabet’s CFO Anat Ashkenazi, the extra $10 billion that Alphabet is spending this year largely reflects “additional investment in servers, the timing of delivery of servers and an acceleration in the pace of data centre production, primarily to meet cloud customer demand”.

Both she and Pichai have spoken of a tight supply environment for compute power, as the world’s technology companies vie for access to the world’s data centre resources.

Part of Alphabet’s response to that tight market is to increase the supply, by building out its own data centre infrastructure. But Pichai warns there will be a lag before that new capacity comes online; demand for compute power is going to outstrip supply for the foreseeable future.

Alphabet's share price has now gained more than 3% in after-hours trading, as investors digest management's framing of the results.

Can Google Search keep making money in the AI era?

A question has come in on the monetisation of Google Search, given the falling number of ad impressions available per click-through in the era of AI Overviews.

Google's chief business offer Philipp Schindler replies: "AI Overviews... continue to drive higher satisfaction [and] higher search uses.

"We see monetisation at approximately the same rate, which gives us a really strong base on which we can then innovate and drive more innovative, next-generation ad formats."

Alphabet's earnings call sees shares gain 2.7%

Alphabet's earnings call has now finished. Shares are up 2.7% in after-hours trading at the end of it.

Now our attention turns to Tesla, whose earnings call will start shortly. At present, Tesla shares are down around 0.4% in after-hours trading.

Tesla: robotaxis could serve half US population by the end of the year

Tesla's earnings call starts with some big statements on the rollout of its (geofenced) robotaxi service.

Robotaxi is set to expand to "well in excess of what competitors are doing" in the next two weeks, says Tesla CEO Elon Musk.

The company is also seeking regulatory approval to launch in the San Francisco Bay Area, Arizona and Florida. Musk says that by the end of the year, Tesla will "technically" be able to offer self-driving rides to half the US population.

"That's our goal, subject to regulatory approvals," said Musk.

Musk aims for 1 million Optimus robots annually within five years

Optimus, Tesla's humanoid robot, will have prototypes this year, followed by scaled production next year, says Musk.

He says that the objective will be to produce one million units per year as quickly as possible - hopefully, within five years, he says.

Market will need more convincing on Google’s AI staying power

The conundrum that surrounded Alphabet, and whether AI is a headwind or a tailwind for Google, still remains even after a strong set of results.

“Alphabet is being forced to adapt or risk becoming a dinosaur in the new AI age,” says Matt Britzman, senior equity analyst at Hargreaves Lansdown.

The numbers on the key areas – Search and Cloud revenue – were impressive. But the question of monetisation remains.

“The Alphabet AI investment case is something of an enigma,” says Britzman. While the market seems to have decided that Alphabet is destined to be a loser in the AI race, Britzman feels that view is “both short-sighted and overly pessimistic.

“That said,” he adds, “until there’s more confidence that AI integration won’t cannibalise core search revenue, and some clarity around ongoing legal battles, there’s enough uncertainty to cap near-term upside.”

Customers love robotaxi, says Tesla

The opening remarks in Tesla's earnings call are now done. They were unusually uneventful, the robotaxi and Optimus plans notwithstanding.

The first analyst question asks for more detail on the robotaxi rollout.

"Robo taxi has been doing great so far in Austin," replies Tesla's CFO Vaibhav Taneja. "Customers really love the experience. Super smooth, very safe, and just a great experience overall."

He adds that expansion in Austin has already started, and that testing in a number of other cities has already started.

Tesla CFO: not appropriate to discuss xAI investment in earnings call

A question is asked about the benefits of Tesla invested into xAI.

CFO Janeja replies that this isn't the forum to discuss that issue, and that "if there is something which we need to discuss, we'll discuss it separately".

Musk then adds, "Obviously, we're a publicly-traded company. Shareholders are welcome to put forward any shareholder proposals that they'd like. I personally encourage that."

Tesla stock falls 2.8% in after-hours trading

Tesla shares slumped at around the time that Elon Musk finished his prepared remarks. They are now down around 2.8% in after-hours trading.

Most of the comments have been a little underwhelming, and non-specific. A lot of reasons given for delays in delivery - but many of these same reasons have been given at previous earnings calls.

Is the market starting to lose patience with Tesla?

How will the end of EV tax credits impact Tesla?

The end of tax credits could lead to "a few rough quarters", says Musk in response to a question on the subject. President Donald Trump has said that he will remove the electric vehicle (EV) tax credits that were introduced during the Biden era later this year.

Musk says that while tax incentives for EVs are vanishing in the US, they are still in place in much of the rest of the world.

"On the other hand, autonomy is most advanced and available from a regulatory standpoint in the US. So does that mean we could have a few rough quarters? Yeah, we probably could."

While the second half of this year and the first half of next could be tricky, Musk says that "once you get to autonomy at scale in the second half of next year... I'd be surprised if Tesla's economics weren't very compelling".

That's the end of Tesla's earnings call. Shares are down over 4.6% in after-hours trading, with investors having responded negatively to a cautious set of responses from Musk and his team.

Thank you for following our live coverage. That's everything for this evening, but we will be back tomorrow morning with rolling analysis and reaction to Google and Tesla's earnings.

Tesla’s long game

Good morning, and welcome back to live coverage. We’ll spend today breaking down the implications of last night’s earnings results from Alphabet and Tesla.

There are two contrasting stories there. Alphabet’s share price gained 2.3% in after-hours trading as management was able to paint an upbeat picture of Google’s place in the AI ecosystem, in spite of the challenges to its core business that the technology poses.

But Tesla’s share price fell 6.1% in after-hours trading, as CEO Elon Musk warned that the company could be set for a tough period until the second half of 2026.

“The typical playbook for the past few quarters has been declining fundamentals but enough AI hype to keep investors sleeping at night,” said Matt Britzman, senior equity analyst at Hargreaves Lansdown.

Musk’s cautious tone went against this typical pattern, but he was as ever bullish about the longer-term plan for Tesla, saying it is easier to predict where the company will be in five years’ time than in one or two.

“Tesla is in a very small cohort of companies with enough growth potential that investors are, for now at least, willing to look past weakening core financials,” says Britzman. “Last night's comments confirmed many fears around tariffs, rising costs, tougher margins, and struggling cash flows.

“But with that now firmly built in as the base case, the AI story can take back the wheel.

Robotaxi versus Waymo

One of the big questions that surrounds Alphabet and Tesla – and which both management teams discussed on last night’s earnings calls – is the future of the self-driving car market. Google’s Waymo and Tesla’s robotaxi are viewed as the two front-runners.

Waymo has now covered 100 miles on public roads, it was revealed yesterday. But Elon Musk went out of his way to talk down Waymo’s prospects, saying “Google is good at AI, yes, but they’re not good at real-world AI”.

ARK Invest – known for its bullish stance on Tesla – explains why they feel Tesla is the frontrunner in this race.

“Waymo in San Francisco, while more expensive than Uber and Lyft, are already starting to take share,” says Sam Korus, director of research for autonomous technology & robotics at ARK Invest. “And there are a lot of reasons why Tesla should be able to offer rides for a lower price than Waymo.

“They're using vision only, so their vehicles are less expensive. They have an adaptable fleet, so they can meet peak trough demand, without having underutilised vehicles. And they've got manufacturing scale so don't have to negotiate with other auto manufacturers.”

He adds that Tesla produces around 5,000 cars per day, which is around double the size of Waymo’s entire fleet. All of these can hypothetically become self-driving robotaxis.

“At the end of the day, people are going to look at an app and say, I can get from point A to point B for less money,” adds Korus.

Google Search looks safe for now

A major highlight for Alphabet last night was the resilience that its core Google Search business showed.

“Management commentary should alleviate investor caution around the perceived risks of generative AI on the Search business,” said Scott Devitt, managing director, Equity Research at Wedbush Securities. “These concerns are overdone, in our view, with Alphabet validating its ability to navigate this period of transition by exhibiting healthy query volume growth across both new and traditional surfaces.”

Top-line revenue growth for the Search arm beat analysts’ expectations, coming in at 11.7%. Paid click growth accelerated from 2% in Q1 to 4% in Q2.

While Alphabet still trades at the lowest earnings multiple of all Magnificent Seven companies, Devitt feels there is room for this improve over the coming quarters as investors become more comfortable with “the current macro environment, regulatory risk and the impact of generative AI on the business”.

Tesla and Alphabet earnings recap

Here’s a reminder of the headline results that Alphabet announced last night:

Tesla’s results looked like this:

Expectations are based on the consensus estimates of analysts polled by FactSet.

Tesla stock continues to fall

Any hope that Tesla stock would bounce back quickly from its after-hours decline has been dashed today.

Tesla's share price opened today's session 6.8% below yesterday's close, and has since fallen further, currently down around 7.6%.

The data centre supply gap

There was much talk during Alphabet’s earnings call yesterday on the tightness of compute supply: that is, how much resource is available in AI-dedicated data centres compared to the demand for it.

That tight supply is what eventually ameliorated the market’s response to Alphabet’s eye-watering $85 billion capex figure for 2025. There is huge demand for resources, and with Google Cloud revenue growth exceeding expectations, it makes sense for Alphabet to invest in capturing this market.

“AI adoption is growing at a speed far greater than what anyone is prepared for,” says Hortense Bioy, head of sustainable investing research at Morningstar Sustainalytics. Morningstar’s demand model forecasts US data centre capacity to triple between 2024 and 2030.

So while Google’s investment seems extreme at first glance, this is a market with significant growth potential. Google Cloud’s backlog increased 38% year-on-year, “implying continued momentum in the coming periods”, says Scott Devitt, managing director, Equity Research at Wedbush Securities.

Thank you for following our coverage of Alphabet and Tesla's earnings releases. We're going to end things here for now, but we'll be back next week for coverage of the next four Magnificent Seven stocks to announce earnings: Amazon, Apple, Meta and Microsoft.

Tesla shares opened 1.8% higher on Friday 20 June as, at long last, the company’s eagerly-awaited ‘robotaxi’ launch was confirmed.

Fully self-driving (FSD) Teslas carried paying customers on the streets of Austin, Texas, for the first time on Sunday 22 June. With CEO Elon Musk having first predicted in 2015 that Tesla would launch self-driving cars within two years, there have been multiple delays and setbacks in Tesla’s robotaxi launch schedule since.

But Sunday’s pilot could mark a key turning point in this narrative.

“Today's successful robotaxi launch is really just the beginning of the Tesla AI story,” said Dan Ives, global head of technology research at Wedbush Securities, after taking part in the pilot. “The Robotaxis we experienced today were foundational… [they] exceeded our expectations and offered a seamless and personalized travel experience that has lit the spark for autonomous driving.”

Special invitations were sent to selected Tesla Model Y drivers early in the morning of 20 June, giving them permission to use their cars for the city’s geo-fenced robotaxi launch.

That pushed Tesla shares higher in pre-market trading on Friday, even as S&P 500 futures fell on concerns over president Trump’s response to the escalating crisis in the Middle East. Tesla frequently ranks as one of the top stocks among retail investors and the robotaxi launch could be the first step in repaying this faith.

“We view this autonomous chapter as one of the most important for Musk and Tesla in its history as a company,” said Ives.

What did the Tesla robotaxi launch in Austin involve?

The initial launch was very limited. Reuters reported that approximately 10 vehicles were involved, in the South Congress neighbourhood of Austin.

That should just be the start, though.

“This service should steadily ramp throughout the summer in Austin and it's our view Tesla will launch and scale its robotaxi service to roughly 25 cities in the US over the next year,” said Ives. “Rome was not built in a day...and neither will Tesla's autonomous and robotics strategic vision,” he added.

While the cars involved in Sunday’s robotaxi launch in Austin had empty driver seats, there was a human seated in the passenger seat as a safety monitor. It is unclear how much control they have over the vehicles.

Rides were initially being offered for a flat fee of $4.20.

Despite these limitations, it marks a significant milestone for Tesla as it seeks to gain ground on Alphabet’s Waymo, which already has 1,500 self-driving taxis operating in four US cities, including Austin.

There are key differences in the technology being used to power each version of self-driving cars. Tesla uses a vision-only system of cameras fitted across the car in order to provide the information the self-driving system needs to navigate.

Waymo uses a system called LiDAR which stands for Light Detection and Ranging, which bounces lasers off surrounding objects in order to judge how far away they are (similar to the principle behind radar or sonar). Musk has previously asserted that LiDAR is prohibitively expensive and unscalable compared to Tesla’s method.

The launch marks “a critical real-world test of Tesla’s vision-only approach to autonomous driving,” according to Matt Britzman, senior equity analyst at Hargreaves Lansdown. “It’s not the fully unchained future Elon Musk has promised just yet, but make no mistake, this is a pivotal first step to realising that dream.

“When you're one of the most heavily scrutinised companies on the planet, slow and steady wins the race, and by most counts, yesterday was a very successful soft launch.”

Why does the robotaxi launch matter for Tesla stock?

Out of all the Magnificent Seven stocks, Tesla is by far the most expensive compared to its past performance. A price-to-earnings ratio of around 185 means that, if its profits never increased, it would take nearly two centuries for anyone who bought Tesla shares today to get their money back in equity.

Tesla stock is so expensive because the business as it stands is essentially just a carmaker, but there is widespread belief among investors that in the future it will have a much larger revenue stream from its robotaxi business.

“We estimate the AI and autonomous opportunity is worth at least $1 trillion alone for Tesla,” said Ives.

The theory is that Tesla vehicles – perhaps, over time, every Tesla on the road – will be upgraded to become a robotaxi which can generate revenue for their owners by ferrying other travellers when they would otherwise be sitting idle.

“If you could have somebody drive you around for a dollar a mile, that's a great deal and everybody will take that,” said Brett Winton, chief futurist at ARK Invest.

Tesla would of course take a cut too – meaning that the company could generate ongoing revenue from hundreds of thousands of vehicles that it has already sold.

“Once robo taxis are in the market, [Tesla] then becomes a point-to-point transportation provider rather than just a seller of hardware assets,” said Winton.

This hypothetical future business model is largely what the market prices Tesla stock by.

Investors have been taking it on faith from Musk for some time that the robotaxi launch is just around the corner. Now, the attention shifts from whether and when the robotaxi launch will happen, to how successful it turns out to be.

Tesla shares fell 14.3% yesterday (5 June) as CEO Elon Musk entered into a public spat with US president Donald Trump.

The share price slump knocked over $150 billion off the value of Tesla, the largest single-day value decline in the company’s history. While frequently one of the most-bought stocks in the world, Tesla’s shares are facing multiple headwinds, and a feud between Musk and Trump now seems to be one more to add to the list.

Tesla’s share price had been staging a recovery since April. A sorry set of delivery numbers coincided with tariff-driven uncertainty to make the month a nightmare for the company’s shareholders.

The latest slump, though, has reversed the nascent recovery. Tesla shares are now down 29.5% since the start of the year, and 40.7% since their all-time high on 17 December.

“Just when Tesla investors were hoping for a period of calm on the global political stage, Elon Musk has started a new war of words,” says Matt Britzman, senior equity analyst at Hargreaves Lansdown. “This time, with the very man he’s been so voraciously backing – president Trump.”

Musk, who last week quit his role working for the Trump government fully, has spent much of this week criticising the bill on X, calling it “a disgusting abomination” and issuing tacit electoral threats to Republicans backing it.

That has swiftly descended into a heated exchange between the two, with Trump claiming that Musk’s main gripe is with the removal of the electric vehicle (EV) mandate, and that “the easiest way to save money in our Budget… is to terminate Elon’s Governmental Subsidies and Contracts”.

Musk responded by suggesting that his rocket launch company SpaceX begin decommissioning its Dragon spacecraft, which NASA uses to take astronauts to the International Space Station. He also posted a claim that the president is included in the Jeffrey Epstein files and that that is why they haven’t yet been made public. He also claimed that Trump’s tariffs will prompt a US recession.

Why has the Trump/Musk feud impacted Tesla’s shares?

Tesla’s share price reached a peak in the weeks and months following Trump’s election victory on a belief that Musk’s proximity to the incoming president would be a huge benefit to Tesla.

It is expected to launch its robotaxi service in Austin, Texas next week (12 June). The primary barrier to wider rollout is thought by many to be regulatory rather than technological; having the ear of the US president, it was believed, would see self-driving Teslas gain approval that much sooner.

This public spat obviously dismantles this theory. Rather than preferential treatment, Tesla now looks in line for whatever wrath president Trump feels he can bring towards it.

“Investors fear that this Musk/Trump battle will stop their friendship and change the regulatory environment for Tesla on the autonomous front over the coming years under the Trump administration,” Dan Ives, global head of technology research at Wedbush Securities wrote in a note seen by MoneyWeek.

“The quickly deteriorating friendship and now "major beef" between Musk and Trump is jaw dropping and a shock to the market and putting major fear for Tesla investors on what is ahead,” he added.

It isn’t just Tesla’s shares that have been impacted. “The feud also weighed on US risk assets more broadly,” says Jim Reid, global head of macro research and thematic strategy at Deutsche Bank. The S&P 500 fell 0.5% yesterday, and ten of its eleven sector groups fell on the day. Other Magnificent Seven stocks like Nvidia and Meta also saw share price declines.

Will the Trump/Musk feud be resolved?

Both Musk and Trump are fiery characters. They are two of the most powerful people in the world, and in some respects it’s not surprising that they’ve fallen out over issues that divide their respective interests.

They are both, though, pragmatists at heart. It could well be the case that the feud is resolved. The White House has scheduled a call between the two today, which Ives hopes will cool the tensions.

“We believe cooler heads will prevail today and into the weekend (hopefully),” said Ives.

Ives wrote yesterday that “this feud does not change our bullish view of Tesla and the autonomous view but clearly does put a fly in the ointment of the Trump regulatory framework going forward.”

A swift resolution would be positive for Tesla’s shares, making the feud just one more volatile patch in this temperamental stock.

“Investing in Tesla isn’t for the faint of heart, and Musk’s enthusiasm for topics close to heart is both a blessing and, at times, a curse,” said Britzman. “For now, markets are willing to look past the weakening auto business with AI and automation the real prizes. But with such a pivotal few months ahead for the autonomous strategy, investors will want to see Musk give his full attention back to Tesla.”

Tesla is no longer the world’s largest electric car supplier, having been overtaken by Chinese rival BYD.

Tesla’s (NASDAQ:TSLA) full-year vehicle deliveries totalled 1,636,129 for 2025. That marked a decline of 8.6% from 2024’s numbers, and fell below the 2,256,714 electric vehicles (EVs) that BYD (HK:01211) delivered during the year.

Shares in Tesla fell 2.6% on 2 January, the day the delivery numbers were announced, though they rebounded strongly in the following session, gaining 3.1% on 5 January.

That leaves Tesla stock trading around 10% higher than it was 12 months ago. Some investors are now shying away from Tesla; its shares dropped off the list of the most-bought stocks on Interactive Investor during December.

“Tesla is dealing with a series of challenges,” said Victoria Scholar, head of investment at Interactive Investor. “Deliveries fell by more than expected in the fourth quarter and BYD recently overtook Tesla to become the world’s top EV seller.”

The outlook doesn’t look promising assuming that Tesla is being assessed as an EV business.

Growth in passenger EV sales is expected to slow to 12% in 2026, compared to 23% last year, according to Bloomberg.

Global EV sales growth will suffer from a reduction in some Chinese subsidies, US policymakers and consumers veering away from EVs, and Europe considering watering down plans to phase out combustion engines.

But most Tesla bulls take a view that Tesla’s stock isn’t about its EV business.

Can Tesla dominate the world of autonomy?

Those who say that Tesla’s stock is worth buying believe that it is poised to take a leading position in the development of self-driving cars and other forms of autonomy, such as humanoid robots.

Last year saw the launch of Tesla’s long-awaited robotaxi, initially in Austin, Texas, though it has now expanded to San Francisco too (with human monitors in the driver’s seat).

Cybercab, Tesla’s fully autonomous two-person car, is expected to enter production in April, and could be pivotal to Tesla’s future success.

“[Tesla] has started to test the all-important Cybercab in Austin over the past few weeks,” said Dan Ives, global head of technology research at Wedbush Securities. Ives believes that cybercab “remains the golden goose in unlocking Tesla’s artificial intelligence (AI) valuation”.

Ives estimates that the AI and autonomous opportunity is worth $1 trillion to Tesla and that the company will control approximately 70% of the global autonomy market over the next decade.

Is Tesla stock a buy or a sell?

Tesla’s stock currently has a market capitalisation of around $1.5 trillion. Ives believes that progress on robotaxi rollout and cybercab production could lift this figure to $2 trillion – or even $3 billion in his most bullish scenario – by the end of 2026.

But before diving in, investors need to decide whether its growth prospects justify the level it is currently trading at.

Even at its low points, Tesla has been the most expensive Magnificent Seven stock based on its fundamentals for over a year. According to Macrotrends data, the company’s price to earnings (P/E) ratio rose from around 200 at the end of December 2024 to over 300 a year later.

The next highest price-to-earnings ratio in the group is Nvidia’s, at around 47 times trailing earnings – meaning that, in comparison to their earnings over the past year, Tesla stock is more than six times as expensive as Nvidia’s.

Tesla shares closed at $451.67 on 5 January, 50% above ratings agency Morningstar’s fair value estimate of $300.

There is already a lot of assumed good news baked into Tesla’s price: investors need to decide on the relative likelihood of Tesla exceeding or undershooting these expectations before deciding whether or not to invest in Tesla.

The Magnificent 7 – or Mag 7 – is a group of seven companies that are viewed as some of the leading names in artificial intelligence (AI) and technology.

These are frequently popular stocks with DIY investors, given their perceived leadership of crucial tech trends, as well as their massive global reach.

At the start of 2023, the seven tech companies collectively comprised approximately 20% of the S&P 500 between them. Now, they make up more than a third (34%) of the index.

So, which companies make up the Mag 7?

What are the Mag 7 stocks?

The seven companies that comprise the Mag 7 group are:

• Alphabet (NASDAQ:GOOGL) – the parent company of Google, as well as other companies such as the AI lab DeepMind;
• Amazon (NASDAQ:AMZN) – originally an online bookstore, now a giant of e-commerce and cloud computing via AWS;
• Apple (NASDAQ:AAPL) – the tech hardware company that brought the world the MacBook and the iPhone;
• Meta (NASDAQ:META) – formerly Facebook, the company is now heavily focused on ‘Metaverse’ technology as well as AI products, like the Llama model;
• Microsoft (NASDAQ:MSFT) – the computing giant behind the Windows operating system and the Azure cloud platform;
• Nvidia (NASDAQ:NVDA) – the hardware developer that pioneered GPUs, the chips that power AI data centres;
• Tesla (NASDAQ:TSLA) – the electric vehicle manufacturer that launched its long-awaited robotaxi service in Austin, Texas in 2025.

The term ‘Magnificent 7’ was coined by Bank of America analyst Michael Hartnett in 2023. By then, the group was already starting to dominate the stock market in the wake of the AI and tech stock mania that followed the public launch of ChatGPT in late November 2022.

While most of the group are highly diversified – Amazon is an e-commerce company as well as the world’s largest cloud services provider; Alphabet makes phones, self-driving cars and owns YouTube in addition to its cloud computing division and its core internet search business) – AI is their unifying feature as a group.

Some (like Nvidia) sell the hardware that underpins AI, or the cloud services on which models are trained and distributed (Amazon, Microsoft and Alphabet hold a 63% share of the global cloud market between them). Others develop AI platforms, such as Meta’s Llama or Microsoft’s Copilot, or integrate ‘physical AI’ into robots and self-driving cars (especially Tesla).

They are stock market behemoths; all have a market capitalisation (market cap) over $1 trillion as of 17 April. Nvidia, currently the largest in the group, has a market cap of close to $5 trillion.

How have the Mag 7 stocks performed over time?

Over recent years, each of the Magnificent 7 stocks have seen substantial increases in their share price.

In the five years to 17 April 2026, the Mag 7 stocks registered the following share price performance:

• Nvidia: +1,170%
• Alphabet: +202%
• Meta: +127%
• Apple: +107%
• Microsoft: +69%
• Tesla: +62%
• Amazon: +47%

In terms of how the group as a whole has performed, the CNBC Magnificent 7 Index – which tracks the seven stocks – gained 328% between its inception in October 2022 and 17 April 2026.

Why invest in the Mag 7 stocks?

It is no coincidence that the Mag 7 are some of the world’s most popular stocks to invest in.

“These stocks have a history of technological innovation and investment, which has allowed them to become the frontrunners in their field,” said Lee Wild, head of equity strategy at investing platform Interactive Investor. “Vast financial resources mean they can continue to spend heavily on further research and development.”

If you think about how frequently you search on Google, order goods from Amazon or check your iPhone, it soon becomes apparent just how wired in these companies are to daily life all over the world.

“Throughout the years, Magnificent 7 companies have grown significantly in size, enjoying market dominance and significant brand power,” said Wild. “They also have global recognition and large loyal customer bases, which helps reinforce their growth credentials.”

That has translated into rapid earnings growth for these companies, which in turn has underpinned the kind of share price gains noted above.

The risks of investing in the Mag 7 Stocks

However, popular stocks bring risks with them, regardless of how large and successful they are.

“All stock markets experience some level of volatility, but technology shares can experience greater price movements given the sector’s growth potential,” said Wild.

Tech companies in particular often trade on high price/earnings multiples given the expectation that their business will grow at pace many years into the future, and this is especially true of the Mag 7.

“However, if growth is slower than expected, or something goes wrong, share prices can sharply fall,” said Wild.

He added that their global reach can expose these companies to legal and regulatory scrutiny. Last year, Alphabet won an antitrust lawsuit that had been brought against it claiming that Google had a monopoly over online search.

There are also geopolitical risks in operating such massive businesses in innovative fields, as the various blockers that both the US and China have tried to raise against Nvidia selling its most cutting-edge chips into the Chinese market.

“As companies grow larger, they might reach a scale whereby it becomes more difficult to maintain a level of high growth that investors have become accustomed to,” said Wild. “They might also become vulnerable to competition either from smaller, more nimble rivals within their sector, or from alternative technologies.”

Are the Mag 7 still magnificent?

This group of stocks started being referred to as the Magnificent 7 during the rise of AI and in the aftermath of the Covid pandemic.

But up until then, the most common grouping to refer to big tech stock market giants was ‘FAANG’ – standing for Facebook (now Meta), Amazon, Apple, Netflix (NASDAQ:NFLX) and Google (now Alphabet). These five garnered lots of hype in the years leading up to and, particularly, during the pandemic, but since then AI’s rise (and the stagnation of the work-from-home economy) has seen Microsoft, Nvidia and Tesla gain more attention, while Netflix has been slightly left behind.

A similar process might be underway at present. The Mag 7 are not the largest companies by market cap – semiconductor companies Broadcom (NASDAQ:AVGO) and Taiwan Semiconductor (NYSE:TSM), as well as Saudi Arabia’s state-owned oil company Saudi Aramco (TADAWUL:2222) – are all valued higher than Meta and Tesla as of 17 April.

Some investors discuss the ‘BATMMAAN’ stocks – Broadcom, Alphabet, Tesla, Meta, Microsoft, Amazon, Apple and Nvidia – or the ‘10 titans’, which adds Broadcom, Oracle (NASDAQ:ORCL) and Netflix to the Mag 7.

Additionally, Elon Musk’s SpaceX is expected to IPO at some point this year and recent reports suggest it could be worth more than Tesla or Meta when it lists. If so, that could prompt a reshuffle in how investors categorise the top tech stocks.

What are the most popular SIPP investments?

A self-invested personal pension (SIPP) gives you greater control over how you invest for retirement, and there’s usually a wider selection of funds, shares and investment trusts to choose from.

You may choose to have a SIPP alongside your workplace pension.

SIPPs – DIY ‘pot-for-life’ pensions – are increasing in popularity. The total assets held in SIPPs stood at almost £650 billion in 2025, with more than six million investors, according to MoretoSIPPs, a specialist consultancy run by SIPP industry veteran John Moret.

The midpoint of the year can be an excellent time to review your SIPP – - perhaps the funds you have are not quite working for you or you want to add some additional picks to take advantage of growing opportunities.

With thousands of investment options to choose from, it can be difficult to know which ones to add to your SIPP portfolios.

We spoke to one of the leading platform providers to find out which investments are the most popular with its SIPP holders to help give you some ideas and starting points as to the stocks, funds and trusts you might want to add.

The most popular SIPP investments with Interactive Investor

The most-bought SIPP investments on investment platform Interactive Investor between 1 October 2025 and 31 March 2026 reflected the current divergence between optimism and pessimism surrounding the stock market.

Precious metals were well-represented as the price of gold and silver remained elevated during the period, though no longer at record highs.

iShares Physical Gold ETC (LON:SGLN) topped the list of the most popular SIPP investments on the direct-to-consumer investment platform among real-time investors (as opposed to regular investors, who typically favoured funds). The iShares Physical Silver ETC (LON: SSLN) came in third.

Artificial intelligence (AI) stalwarts Nvidia (NASDAQ:NVDA) and Tesla (NASDAQ:TSLA) took the fourth and fifth spots, while a money market fund came second (money market funds effectively replicate cash-like returns and risk profiles).

On the platform, the top 10 most popular SIPPinvestments among real-time investors between Q4 2025 and Q1 2026 were:

• iShares Physical Gold ETC
• Royal London Short Term Money Market
• iShares Physical Silver ETC
• Nvidia
• Tesla
• Strategy
• Microsoft
• Artemis Global Income Fund
• Vanguard Lifestrategy 80% Equity
• Amazon

The picture was more fund-focused among regular investors during the same period, where globally diversified equity funds dominated. Here are their top 10 picks:

• Vanguard Lifestrategy 80% Equity
• HSBC FTSE All World Index
• Vanguard Lifestrategy 60% Equity
• Vanguard Lifestrategy 100% Equity
• L&G Global Technology Index Trust
• Vanguard FTSE Global All Cap Index
• iShares Physical Gold ETC
• Vanguard S&P 500 UCITS ETF
• Scottish Mortgage
• Fidelity Index World

Craig Rickman, personal finance expert at Interactive Investor, says: “When it comes to the investments people have favoured, funds are the go-to choice for regular contributions, occupying seven out of the top 10 positions. Three out of the top four most popular are various flavours of Vanguard’s LifeStrategy Range, with another global strategy, HSBC’s FTSE All-World Index, sandwiched between them.

“The situation with real-time investments is more disparate, with a mixture of direct equities – notably tech giants like Microsoft, Nvidia, and Tesla – ETFs, global strategies and commodities. The surging prices of precious metals clearly caught investors’ eyes, with two iShares exchange traded commodities, physical gold and physical silver, in the top three positions.”

What else should I consider when choosing my SIPP investments?

The first things to think about when considering your SIPP investments are your age and expected time horizon – how long are you investing for? When do you plan to retire?

In most cases, the longer your time horizon, the more risk you can take. This includes having more exposure to equities, which can be more volatile in price but the longer time frame allows your investments time to recover.

It’s also worth blending a couple of different strategies together to maximise the diversification benefits without risk of overlap, such as a passive developed market and actively managed emerging market fund. Perhaps you want to have some broad market exposure like a global index fund, complemented with some more thematic or specific funds, if there’s a region or industry sector you’re particularly keen on. Bear in mind a more concentrated portfolio brings associated risks.

For investors later in their journey, or retired clients using their SIPP in drawdown, an income generating option makes sense. Many experts also consider bringing down the equity risk in a portfolio as one nears retirement, looking for a total return through mixed assets.

The net worth of the richest person in the world is double that of the billionaire with the second-largest fortune.

While the wealthiest people in the world often change places on the rich list, the one person who has consistently held the top spot since 2025 is Tesla CEO and SpaceX founder Elon Musk – except for one time when he briefly dropped to second place, behind Oracle’s Larry Ellison last year.

In total, the five richest people in the world have a combined net worth of close to $2 trillion, according to Bloomberg’s Billionaire Index. Using the same index, we explore their wealth in detail below.

As the wealthiest bunch are all men, we take a look at the richest woman in the world in a separate guide.

The richest person in the world

1. Elon Musk  

Elon Musk is the richest person in the world, with a staggering $733 billion to his name.

The South African entrepreneur has added over a hundred billion to his net worth in the past year, thanks to buzz around the upcoming SpaceX initial public offering (IPO), touted to be the largest IPO in history. It has made him richer than the two billionaires right below him on the rich list combined.

Moreover, Tesla stock has surged nearly 14-fold since the pandemic, with a market capitalisation of $1.36 trillion at the time of writing.

Musk owns around 11% of Tesla and roughly 50% of SpaceX. We break down Elon Musk’s net worth in a separate guide.

2. Larry Page

Alphabet co-founder Larry Page’s net worth has topped $300 billion for the first time in history, as Google’s parent company’s stock rose in the latest Mag 7 earnings season after increased AI spending. His net worth now stands at $328 billion.

A majority of Page’s wealth comes from his stake in Google, which rebranded as Alphabet in 2015, grouping all its divisions – including Gmail, Android and YouTube – under one umbrella. He’s not the only mind behind Google in the rich list – as you’ll see below.

Find out more about Larry Page's net worth.

3. Sergey Brin

Sergey Brin, co-founder of Alphabet, is a new entrant to this list. He has a net worth of $305 billion, not far behind that of fellow co-founder Larry Page.

The American businessman was the president of Alphabet until 2019, and has since remained a board member and a controlling shareholder. He co-founded Google with Larry Page in 1998, after the two met at Stanford University.

Alphabet became the fourth company to achieve a market capitalisation of $4 trillion, joining the likes of Nvidia, Microsoft and Apple to hit the milestone. Its stock grew by 65% last year, marking the largest single-year jump for the company since 2009.

Brin has been donating millions of dollars of his shares in Alphabet to fund research on Parkinson’s disease.

4. Jeff Bezos

Jeff Bezos has a net worth of $284 billion. The billionaire is most famous for founding Amazon in 1994, which started when Bezos saw a gap in the market for e-commerce and began to sell books online, working out of his garage. Now, the empire has a market capitalisation of $2.85 trillion.

Bezos also owns The Washington Post, one of the largest newspapers in the United States. He also has a stake in Blue Origin, a space exploration company he founded in 2000.

Bezos is increasingly looking to dominate the world of film and fashion. He was the lead sponsor and honorary co-chair of the 2026 Met Gala and donated $10 million, making it the largest individual financial commitment in the event’s history.

Moreover, last year, Amazon took creative control of the James Bond franchise. Back in 2021, it acquired MGM Studios, a historic American production company, for $8.45 billion. Some of MGM’s most popular films include The Wizard of Oz, Gone with the Wind and 2001: A Space Odyssey.

Find out more about the factors that contributed to Jeff Bezos’ net worth.

5.  Larry Ellison

Larry Ellison is the man behind one of the world’s largest software companies, Oracle, which he founded in 1977. His net worth is $248 billion.

Ellison owns more than 40% of Oracle – making him the largest shareholder – and has holdings in Tesla, having been one of the company’s board of directors from 2018 to 2022.

On 10 September 2025, Ellison briefly overtook Elon Musk as the richest person in the world, a title Musk had claimed for just over 300 days. This was due to Oracle’s earnings report, which revealed a deal with OpenAI.

It resulted in gains of 36% in a single day for the database software company’s share price, adding almost $250 billion to its market capitalisation and around $89 billion to Ellison’s personal wealth. Major Oracle shareholders also became wealthier instantly.

Read more on Larry Ellison’s net worth and how he makes the rest of his billions away from Oracle.

Investors are increasingly buying into the AI trend, while their love affair with Tesla continues, according to new data showing the most popular stocks of 2023.

Interest in Netflix, on the other hand, has plummeted, and the streaming giant is no longer in the top 10 list of most traded stocks.

The investment platform Saxo reveals that Tesla is the most traded stock by UK clients so far this year (from 1 January to 18 July), continuing its dominance as the number one share.

Amazon and Apple have switched places, with Amazon now in second place, and Apple third.

However, perhaps most notable is two AI stocks that are climbing up the top 10 ranks. Nvidia has edged into the top five while Palantir Technologies, which didn’t make the top 10 for the same period in 2022, ranks ninth for 2023. 

Meanwhile, Netflix has crashed out of the top 10, suggesting it could be struggling in the streaming wars against newer competitors. It has also made significant changes recently to its account models like cracking down on password-sharing. 

Anaam Raza of investment platform Saxo says that AI companies like Palantir Technologies and Nvidia becoming some of the most popular rising investments of 2023 “does not come as a surprise considering the overwhelming interest in this industry and megatrend”.

She adds: “The fast-growing nature of AI, which has been a hot topic both inside and outside of the world of trading, makes it an attractive option for investors to back. 

The competition will no doubt grow fierce in the second half of 2023 as companies put cash behind the ever-innovating sector in an effort to keep up with the big players, such as the success of OpenAI’s ChatGPT.”

Holly Mackay, founder of the financial website Boring Money, calls it an “AI frenzy” and says in her blog that the share prices of Tesla and Nvidia have shot up this year. 

“Tesla has accelerated by over 100% and Nvidia has swollen its waistline by 190% since January,” she comments. “Nvidia recently joined the exclusive $1 trillion market capitalisation club, nipping at the heels of Amazon and getting closer to Alphabet, Facebook and Apple. 

Collectively these five companies (which I like to summarise as NAAAF) make up one-quarter of the S&P 500 and have accounted for almost all of its gains this year. So it’s a pretty polarised story that can be loosely summarised as AI = good and Everything Else = bad.”

The Saxo data also shows that Microsoft has held its spot in fourth place, while Mark Zuckerberg’s Meta slipped two places from fifth to seventh in a year that saw the company make significant job cuts after reporting earnings were down at the latter end of 2022. 

Alphabet, Alibaba and Rolls-Royce make up the rest of the top 10, taking the sixth, eighth and tenth spots respectively. Last year, BP was in ninth position but it has now disappeared from the top 10.

In terms of Netflix’s departure from the top 10, Raza comments: “This indicates Netflix may be losing the streaming wars in what has become quite a saturated market for consumers. 

With the company recently also announcing changes to its subscription model for new users and the scrapping of its basic ad-free tier, investors may have doubts about the stability of Netflix’s future.”

The popularity of electric cars is surging. Rising fuel costs, environmental concerns and an influx of new makes and models are spurring more motorists to ditch the petrol pump where prices have been rising for a plug.

Electric vehicles (EVs) accounted for more than one in three registrations throughout March. according to the Society of Motor Manufacturers and Traders (SMMT) – a clear indication of their growing popularity. You may already be a driver of the 712,000 EVs currently on UK roads, according to the RAC.

Low running costs and zero emissions are the two major selling points for EVs, but one factor is prohibitive – the cost.

“Electric cars remain an expensive choice,” says the AA. While older models are now available on the second-hand market for less than £10,000, the average cost of new models is around £50,000, according to NimbleFins.

If you’re asking whether now’s the right time to buy an electric vehicle, here’s what you need to know.

Is now a good time to get an EV?

EVs have been mainstream for a few years now. We looked at them here at MoneyWeek back in 2019, and found that, given how many new models had emerged, there was no need to drive “something clunky and ugly” – especially when you’d also get to feel “mildly smug about helping the environment”.

All of that still stands true, and factoring in the fuel costs for petrol cars, emissions penalties and Ultra Low Emission Zone (ULEZ) restrictions, the case for getting an EV is increasingly strong.

But EVs do cost more upfront and there is now less financial support for would-be EV drivers.

The Department for Transport (DfT) previously offered a subsidy for plug-in hybrid and electric cars to reduce purchase costs and encourage sales. The scheme was dropped after the government said it had “succeeded in creating a mature market for ultra-low emission vehicles”.

How to lease an EV

Much like any other vehicle, you can hire an EV through leasing, personal contract hire or hire purchase. Each of these approaches differs, so it’s important to opt for the scheme that makes the most financial sense for you and your needs.

Leasing is currently the most popular and most affordable option for financing an electric car, according to the RAC.

Some deals can be as low as £200 a month, although expect to pay more than twice that for a Tesla or Volvo – two of the most popular brands for high-end EVs.

But remember: when leasing a car, you don’t own it. There may be constraints, such as a mileage limit, and you won’t be able to make any modifications to the vehicle.

One popular route for leasing an EV is through a salary sacrifice scheme. In this instance, an employer leases the electric vehicle through a finance company and offers the scheme to their employees as a perk, as DriveElectric explains.

This can work out favourably for the employee, as payments are made out of their monthly salary before tax – cutting their contributions each month.

Although you will still be liable for a benefit in kind tax charge, it is currently at a low rate of 2%. This rate will slowly rise, however, so it may be worth taking advantage of it while you can.

Personal contract purchase (PCP) or hire purchase (HP)?

Another popular form of financing is a personal contract purchase (PCP) deal, where you pay an initial deposit and borrow towards some of the car’s remaining value. Once the contract ends you have a decision to make – either pay a final larger payment and keep the car for good, or simply return it.

Hire purchase (HP) agreements are also popular. These deals are fairly straightforward and can often be cheaper than PCPs. You spread the cost of a new electric car over a fixed period and own it at the end, and, while monthly payments tend to run higher than on a PCP deal, the balance on your finance will reduce more quickly with an HP.

But an HP agreement may not be the most practical option for an EV, warns the RAC, as “the rate of development in the field of battery technology is such that you could find that your EV is slightly outdated and outmoded by the end of the contract”.

If you want to own the vehicle, another option is to get a car loan. “You’ll own the car outright from when you take out the loan, paying back the debt in monthly payments,” according to MoneySuperMarket.

One other option is an EV subscription from the likes of Volvo or Hyundai. These work much in the same way as a lease, as you’ll never own the car outright. But they do have other services, including maintenance, breakdown cover and tax, bundled into one fixed monthly cost. Contracts typically last from one to 24 months and so can be a good way to see if an EV suits your lifestyle and needs.

But, as Maria McCarthy warns in the Evening Standard, EV finance deals can be “complex”, with plenty of variables including mileage allowances, fees for vehicle damage, insurance, a charge for additional drivers and maintenance fees.

It’s vital you spend time studying the small print, as being locked into a deal could prove costly in the long term.

And while EVs look set to become the future of motoring, not everyone should immediately buy one. If it suits your needs and your budget, consider taking advantage of the deals and incentives currently on offer. As the EV market matures, the cost of owning one is expected to fall, so it may be worth holding off until they become more affordable.

Elon Musk is now not only the richest person in the world but also the first and only trillionaire in history.

After SpaceX’s highly anticipated IPO on 12 June, Forbes reported that Musk added $188 billion to his already astronomical wealth. It means that his net worth is now more than that of the four billionaires after him on the Forbes Real Time Billionaires List.

But where exactly did it all start, and how did the South African tycoon add 12 zeroes to his net worth?

We chart how his wealth has grown from his early years of founding what is now PayPal, joining Tesla, and launching SpaceX.

Elon Musk’s net worth over the years

At the time of writing, Elon Musk’s net worth is $1.3 trillion, according to Forbes.

To put that into perspective, Sarah Coles of AJ Bell says: “If you aimed for a trillion pounds and you were starting from scratch, you could put away £500 a month and, with growth at 5% a year and contributions rising 2% a year, it would take around 316 years.”

Musk’s net worth has grown substantially over the past few years, driven largely by his stakes in electric vehicle company Tesla and aerospace firm SpaceX.

He first appeared on Forbes’s World’s Billionaires list in 2012, when he had an estimated fortune of $2 billion, making him the world’s 634th richest person. From then on, it took Musk less than a decade to take the top spot, dethroning Amazon CEO Jeff Bezos as the world’s richest person in January 2021.

Elon Musk’s early life and career

Musk was born in South Africa on 28 June 1971. From an early age, he showed an interest in technology and innovation.

His first major success came with Zip2, a company that provided online business directories and maps to newsletters. In 1999, Compaq acquired Zip2 for nearly $300 million, paving the way for Musk into the tech industry.

Musk used proceeds from the sale to launch X.com, an online payment platform that eventually evolved into PayPal. In 2002, eBay acquired PayPal for $1.5 billion. That same year, Musk used $100 million of his own fortune to start SpaceX, aiming to make space exploration more accessible and colonise Mars.

In 2004, Musk joined Tesla Motors and became the company’s CEO four years later. Under his leadership, Tesla emerged as one of the world’s most electric vehicle companies, with a market capitalisation of over $1.12 trillion.

Musk also co-founded solar panel installation firm SolarCity, neurotechnology company Neuralink and tunnel construction firm The Boring Company.

How SpaceX became the largest IPO in history

SpaceX’s meteoric rise to become the world’s largest-ever initial public offering can be attributed to Elon Musk’s larger-than-life public persona, widening interest in investing in space, and rising AI spending by tech megacaps.

On 12 June, shares in the AI and space company began trading on the Nasdaq at $150 per share, raising $75 billion and closing with a market cap of $2.11 trillion.

It makes SpaceX one of the world’s most valuable companies, reaching the milestone in an extremely short timespan.

Elon Musk’s role in the Trump administration

Elon Musk’s influence extends far beyond the tech world. He was a prominent supporter of Donald Trump during the 2024 US presidential election, spending over $290 million to get Trump into the White House, according to CNN.

Following Trump’s victory over Democratic nominee Kamala Harris, Musk secured a position in his administration, serving as the leader of the Department of Government Efficiency (DOGE).

DOGE emerged as a means to cut US government spending, which resulted in mass workforce layoffs and controversial cuts to USAID, which is responsible for foreign aid and humanitarian relief. On 28 May 2025, Musk departed from the role to focus on Tesla.

Elon Musk’s property portfolio and car collection

Musk has built up a vast property empire over the years. In 2020, he stated on X that he would sell all his “physical possessions” and “own no house”. At that time, the asking prices for his seven homes were more than $100 million in total, according to Architectural Digest, including a 16,000-square-foot home in Los Angeles, which sold for $29 million.

After shedding his property portfolio, Musk moved into a tiny home in Boca Chica, Texas, close to the SpaceX headquarters. In 2022, he bought a 6,900-square-foot mansion in West Lake Hills, Texas, worth $6 million.

The billionaire has also built his own company town called Starbase, named after his rocket launch site, on the southern tip of Texas. The city covers around 1.6 square miles and is home to some 500 people, according to The Guardian.

The Tesla CEO has a large collection of cars, ranging from a Ford Model T, a 1997 McLaren F1, a Tesla Roadster and the 1976 Lotus Espirit that James Bond drove in the 1977 film The Spy Who Loved Me. Musk bought it at an auction in 2013 for nearly $1 million, according to the BBC. He also owns private jets, each worth millions of dollars.

How does Elon Musk manage his wealth?

With so many billions to his name, it’s not surprising that Elon Musk has a wealth manager. His fortunes are handled by Excession LLC, a single-family office formed in 2016. It’s run by James Birchall, Musk’s trusted advisor and CEO of Neuralink.

While Musk doesn’t donate his wealth as generously as other billionaires like Bill Gates, Jeff Bezos and Mark Zuckerberg, he still gives away billions in shares to charities. He has an organisation called the Musk Foundation, with more than $14 billion in assets. However, The New York Times reported that the charity failed to give away the minimum amount required by law for the fourth year in a row.

The CRUX Asia ex-Japan Fund aims to find the highest-growth companies in the region by identifying opportunities in the market before the mainstream becomes alert to their potential, and holding them for three to five years through their early and mid-growth phases.

We look for companies on course to generate revenue growth of 15% per annum, irrespective of size. This often means we are positioning the fund to benefit from technological disruption. We do not buy blindly into an idea. Our strategy is to marry conviction in a theme with a thorough bottom-up approach: is management top-quality? Does the company have an edge via intellectual property or a process that is hard to replicate? And, critically, does it have adequate capital to deliver? One area where we have high conviction for growth potential is the electric-vehicle (EV) industry in China. These are the three Chinese EV carmakers we think are best positioned and can grow market share.

Drawing comparison with Tesla

Firstly, the dragon in the room: BYD (Hong Kong: 1211). Weighing in at $95bn market cap and selling for 12.5 times forecast 2025 earnings, BYD is notable for being early to EVs, and for gaining early support from Berkshire Hathaway’s Warren Buffett.

With 1.87 million EV vehicles delivered last year, BYD has sparked furious debate as to how comparable it is to Tesla, which produced 1.31 million pure electric-battery vehicles. Besides scale, BYD’s biggest advantage is being highly integrated – it also makes the batteries and many of the electronic parts that go into their cars.

Then there is the worldly old-hand, Geely Automobile Holdings (Hong Kong: 175). Geely Auto, its parent Zhejiang Geely, or its owner/operator Li Shufu either owns or holds long-time stakes in British, European and Asian carmakers.

The most recognisable is the London Electric Vehicle Company, which makes the iconic London black cabs. Geely also owns Volvo Car, Polestar and Lynk & Co, and has stakes in Aston Martin, Proton and Lotus. Though well- established abroad, Geely sells many more cars at home.

This $13bn market cap firm’s domestic EV offerings are thoughtful and well targeted; we expect Geely to re-rate eventually as an EV carmaker, from the legacy carmaker valuation it has now. Geely is on a 2025 price/earnings (p/e) ratio of 9.1.

Young upstart will roar ahead

Finally, the young upstart – Li Auto (Hong Kong: 2015). We think this $25bn market cap company, established in 2015, has the highest risk/reward profile of the new Chinese EV carmakers and is the most comparable to an early Tesla.

Li Auto’s focus should allow it to dominate its niche in family sport-utility vehicles (SUVs), which are bigger cars that borrow design elements from heavier duty off-road vehicles. It is concentrating its manpower, engineering and manufacturing into a simple product offering with a lower price point and a higher-value proposition than competitors, which we believe will enable it to gain market share from established (and perhaps more complacent) brands. Li Auto is trading at 21 times forecast 2025 profits.

Picking the right stocks can really pay dividends, and if you happened to have picked some of the top performing ones five years ago, then you may well have found yourself in profit by as much as 4,501%.

Although investing consistently over the long term and making the most of your stocks and shares ISA is important, investors who made informed decisions on their stocks may find they have done well on some of their picks five years ago.

We reveal the top performing stocks over the last five years and just how much return you will have seen if you took a stake of at least £1,000.

The stocks that have grown the most since 2018

These stocks, which may not come as a surprise to some investors, have had the strongest growth since 201, according to investment platform Saxo.

While second-placed Tesla is something of a household name, others may not be one that investors are commonly aware of - a useful reminder that sometimes the biggest returns can come from spotting businesses before they truly break out, something often overlooked by cautious investors.

How much cash would you have made with top stocks?

If you had put £1,000 in Enphase Energy stocks five years ago, you would now have £45,010 in your portfolio.

A £1,000 investment in Tesla would have made £10,690 since 2018.

ChemoMetec would have made you £10,390, Advanced Micro Device would have bagged you £8,750, and Sean would have earned you £6,680.

Past performance is no guarantee of future success

With all forms of investing it is important to bear in mind that past successes are no guarantee of further gains to come.

Just because certain stocks have had a fantastic few years, and delivered significant returns, that does not mean they will continue to deliver at the same rate ‒ or even at all ‒ for investors in the years ahead.

In fact, chasing stocks based on their previous gains can be an expensive mistake, should circumstances change and the business hits issues.

However, you can take lessons from individual stocks that have performed well, and apply those lessons when determining which stocks to invest in future. For example, there is a ‘green’ energy theme to the top two performing stocks according to the research, with Enphase Energy a manufacturer of renewable energy technology, and Tesla a manufacturer of electric cars.

With the UK’s push towards reaching net zero, it may be that certain businesses involved in this sector enjoy further success in the years ahead.

Making the most of your ISA allowance

If you really want to make the most of the returns from your investments, whether they are strong performers like Enphase Energy or not, then it is important to utilise your ISA allowance.

Everyone enjoys a £20,000 annual ISA allowance, which can be split across different types of ISA. The allowance runs from the start of the tax year, and can not be carried over.

Worldwide spending on the shift to low-carbon energy rose by 27% to $755bn in 2021, according to a new report from research group BloombergNEF. This illustrates just how strong investor appetite was becoming for cleaner and greener technologies, even before Russia’s invasion of Ukraine turned global energy markets upside down and pushed some of the world’s largest consumers of fossil fuels to think seriously about renewable energy options.

Despite the shift in sentiment, even the most upbeat forecasts do not expect a big move away from oil, gas and coal any time soon. Oil cartel Opec believes that oil and gas demand will rise steadily to around 106 million barrels a day in 2030, before starting to decline in 2035. This partly reflects the fact that demand for electricity is growing faster than renewable capacity can keep up. According to the International Energy Agency, global electricity needs rose 5% last year, with fossil fuels generating 45% of the extra demand. New renewables capacity is expected to cover only about half the extra demand this year.

As Tesla boss Elon Musk noted on the group’s first-quarter 2021 earnings call, “if all transport goes electric” the world will need to double its current electricity output. Based on today’s trends, there’s no way we will be able to build enough renewable capacity fast enough to meet this demand (barring a giant leap forward in technology). These figures illustrate the challenges policymakers face in trying to drive the green agenda forward – but they also show just how big the opportunity is for businesses with exposure to the sector. One commodity will benefit, no matter how the energy mix changes in the next 15 years: copper.

Global copper demand is soaring

In April last year, the commodities team at Goldman Sachs published a report on the state of the global copper market titled Green Metals: Copper is the New Oil. The title says it all. Not only is copper a key component in all clean energy technologies, but it’s also an essential part of today’s digital economy. From skyscraper-sized wind turbines to the circuits in wireless headphones, every piece of equipment that uses or produces power requires copper.

As Goldman notes, green technologies might be better for the environment in some respects, but they are far more copper-hungry than older technology. Electric vehicles require four times more copper than internal combustion engines. A three megawatt (MW) wind turbine can contain up to four tonnes of copper (and the most powerful turbines can produce up to 14MW of power). The bank’s analysts predict that copper demand from electric vehicles alone could hit as much as 3.2 million tonnes (mt) by 2030. Overall, it’s forecasting an extra 5mt of demand by 2029, equivalent to 16% of global production today.

Goldman isn’t alone in this view. Last year, Gary Nagle, the head of Glencore, one of the world’s largest commodity companies, told the Financial Times that the copper supply would need to rise by an extra million tonnes a year by 2050 to meet green energy targets. As most of the world’s easy-to-access copper deposits have already been mined, Glencore reckons the price of the metal will have to hit $15,000 a tonne to justify further investment. That’s around 67% above current levels.

The challenge for producers (and indeed the world) is that it’s not terribly easy to set up a new copper mine. It takes about three years to expand a mine and eight years to start a new one. Nor are there many alternatives to copper. Aluminium is one, but it has only 61% of the conductivity and is less durable (the aluminium market also has its own supply issues). Freeport-McMoRan’s CEO summed up the state of the industry in 2021 when he said, “the price of copper could double overnight… and we couldn’t add new production of significance for a number of years”.

Legacy of the boom-bust cycle

To understand how the copper market has reached this stage, we need to go back to 2011. The price of copper surged by nearly 500% from mid-1993 to February 2011, and miners rushed headlong into the market. They capitalised on crisis-era central bank policies to borrow huge sums to invest in ramping up copper output. Unfortunately, just as these projects started to come online, copper’s value slumped. By 2015, the copper price had crashed more than 50% from its peak.

In 2015, analysts at Morgan Stanley estimated that between 2005 and 2014 the sector’s three largest operators, Rio Tinto, BHP and Anglo American, had spent $246bn on capital projects, overloading global commodity markets with supply. They lost nearly $50bn between 2011 and 2014 in the resulting crash.

After these losses, miners revisited their spending plans. Rather than chasing extravagant “growth-at-any-price” projects, managers began focusing on cutting costs and improving efficiency. Output growth suddenly became very “uncool”. As a result of this new operating model, the number of new copper projects under development and in the design stages has plunged by 60%. Although some new projects are slated to come on stream over the next few years, they’re not going to be sufficient to meet exploding demand.

World’s largest producer

The most important region in the world for the copper industry is Chile. More copper is mined in the South American country than in any other nation on earth. Six of the top ten largest copper mines in the world are located in Chile and its state miner, Codelco, is the world’s largest producer of the commodity. Codelco produced 1.7 million tonnes of fine copper from its own operations and joint ventures in 2021.

However, output growth is being hampered by another issue: water scarcity. In April, Chile announced an unprecedented plan to ration water as the country’s drought entered its 13th year. It now has some of the worst levels of water scarcity in the world. As you might imagine, producing copper requires a huge amount of water. In 2019, it was estimated that Chile’s mining industry consumes around 500 million litres of water a year.

With access to water limited, the supply picture for copper becomes a lot more uncertain. Codelco has plans to build desalination plants to solve its water issues, but this will take time and money. The company is looking for funding partners on 34 new projects across the country, its first such move into joint exploration. Still, even if Chile can find the water, money and partners it needs, it’s going to take years to bring new copper to the market.

Biggest “green metal” producers

Besides Codelco, the largest producers of copper are Freeport, BHP and Glencore. BHP and Glencore have an advantage over the Chilean and American miners as they’re well diversified. Copper is only part of BHP’s portfolio, alongside iron ore, nickel and coal. Glencore also produces copper and coal, but its mines also draw zinc, lead, cobalt, nickel, gold and silver. According to Rystad Energy, global nickel demand is expected to outstrip supply by 2024 as it is a key component in both steel production and batteries for electric vehicles. Battery demand also accounts for around two-thirds of global demand for cobalt.

In some respects then, Glencore and BHP are some of the best ways to invest in the green energy boom. Not only do they provide exposure to the metal itself but also other key components of the battery supply chain. Still, there are some drawbacks to investing in these businesses. As well as producing commodities, Glencore trades commodities around the world through its marketing arm. This business can be highly profitable and it’s also pretty difficult to get into, which gives the group a competitive advantage. No other company in the world has as much insight into global commodity markets as the trading giant.

This year the trading house has been capitalising on what it is calling “pricing differentials” in disrupted energy markets. As a result of these “differentials” the company expects half-year adjusted earnings before interest and tax (EBIT) of $3.2bn for its marketing and trading arm this year. That’s at the top end of management’s long-term EBIT guidance band.

However, Glencore does not provide granular information on how this side of the business operates. In fact, it’s a bit of a black box. Trading commodities requires access to huge amounts of short-term capital to fund purchases. This money is paid back when the commodity is delivered to a client, and to make sure it doesn’t lose out on the deal, Glencore also relies on derivative contracts to guarantee a fixed price on delivery. On a day-to-day basis the corporation may have tens of billions of dollars of short-term loans outstanding with billions more in derivative contracts. So in some regards Glencore is an investment bank as well as a mining group.

BHP does not have the same financial exposure. Unlike Glencore its primary business model is and has always been producing commodities. Over the past five years, BHP has undergone a significant transformation. It has cut costs and dramatically improved efficiency, putting it in the perfect place to capitalise on the current commodity price boom. Last year the group generated operating cash flow of $11.5bn and free cash flow of $8.5bn. BHP is a lot easier to understand than Glencore primarily because it does not have a trading business. Strong cash flows have allowed the group to reduce net debt to $6.1bn (from $11.8bn in 2020) and distribute record amounts of cash to investors. Over the 18 months to the end of December, BHP returned $22bn (£18.3bn) to shareholders. To put that into perspective, there are only 26 companies in the FTSE 100 with a market capitalisation greater than £18.3bn.

BHP was kicked out of the FTSE 100 earlier this year when the company consolidated its dual UK-Australia listing, but UK investors can still buy the shares on the London Stock Exchange.

Investors cannot ignore the environment

Copper has an important role to play in the 21st century economy but the environmental issues facing the industry need to be considered. As the world becomes increasingly aware of the environmental cost of global development, governments are bringing in new rules that increase the cost for producers. Consumers are also becoming more aware of where goods and services come from. In this environment, corporations need to be thinking about their environmental impact.

In most regions around the world, policymakers are developing instruments to encourage businesses to think about their impact on the environment. These range from measures as simple as banning plastic bags to those as complex as carbon emission trading schemes.

Taxes are another tool policymakers use to force companies to change their ways. Chile is working towards introducing a mining royalty bill, which will dramatically increase royalty taxes on mining groups extracting copper and lithium. Support for the bill has grown as corporations such as BHP are seen to be raking in billions of dollars in profits while the country rations its most essential resource: water. Meanwhile, 70% of the world’s cobalt comes from the Democratic Republic of Congo, where Glencore has a large operation. The region’s questionable labour laws have resulted in some difficult questions for the miner.

New environmental rules and regulations could increase the cost of doing business for these companies. While rising copper prices might offset some of the extra cost, it is something to bear in mind, especially as the world becomes more aware of its impact on the environment. Miners could also be hit with large fines if they breach environmental standards, which would almost certainly have an effect on shareholder returns, and their reputation in the mining community.

Still, there’s no denying that these businesses have a vital role to play in helping the world clean up its act. If policymakers are serious about getting emissions under control, they will have to work with miners to find a solution to these issues. A balance will need to be struck between all stakeholders. Meanwhile, we look below at how you can get exposure.

How to invest in the long-term copper boom

A good place to start looking for the best opportunities in the copper business is with a look at the copper production cost curve. For the bulk of the industry, the average production cost for one pound of copper is in the region of $1.20, although for some producers the cost can be as high as $3 per pound.

Australian mining company OZ Minerals (ASX: OZL) is one of the lowest-cost producers of copper in the world. Its cash cost per pound of copper last year was just $0.64, well below the sector average. While the firm is much smaller than some of the sector’s larger players (last year it produced 125,000 tonnes of copper compared with BHP’s 1.5mt) its low-cost model is incredibly appealing.

Canadian miner Lundin (Toronto: LUN) is another low-cost producer, with an average cash cost of below $1 per pound. The group is roughly twice the size of OZ and recently paid $483m to acquire Josemaria Resources, owner of the Josemaria project in Argentina. While still at an early stage, projections suggest it could increase Lundin’s copper output by a third for a cost of $4bn. That’s a big bill, but with $700m of net cash at the end of March and copper prices rising, the business should be able to afford it.

Three other options are London-listed Antofagasta (LSE: ANTO), Freeport-McMoRan (NYSE: FCX) and Teck Resources (NYSE: TECK). Both Antofagasta and Freeport sit at the higher end of the copper cost curve, with an average cash cost of production of $1.87/lb and $1.29/lb respectively, even though they are some of the largest pure-play copper producers on the market.

Teck’s cash cost sits in the middle of this range, but it’s the company’s growth prospects over the next couple of years that are really exciting.

The group is undertaking a major expansion of its Quebrada Blanca project, which will roughly double copper production when it comes online in the second half of the year, at an average cash cost of $1.24/lb.

On top of this project, Teck has five other mines in development. Management pegged the value of these projects at $3bn in 2017, when the price of copper was significantly below current levels.

The group has the cash to fund these projects, mainly as a result of surging coal prices. Coking coal for steel-making currently accounts for approximately two-thirds of Teck’s output, and thanks to rising prices, gross profit from this division hit $1.8bn in the first quarter, up from $196m in the same period last year.

For broad exposure to the sector the Global X Copper Miners ETF (LSE: COPX) holds Teck and Glencore as two of its top three positions. The BlackRock World Mining Trust (LSE: BRWM) is my favourite investment trust pick in the sector. The largest single stock holding is Glencore and 20% of the portfolio is allocated to copper stocks, with 41% in diversified miners (including firms with exposure to copper production). The trust also comes with a dividend yield of 6%, an attractive level of income in today’s interest-rate environment. The trust is trading roughly in line with its net asset value, reflecting the sector’s popularity.

SEE ALSO:

Industrial metals: electric vehicles are driving a boom in prices

Three stocks that will profit from electric-vehicle growth

The UK’s new energy strategy has been revealed – here’s how you can profit

How are the mighty fallen – the Nasdaq has had its worst week since March 2020 and is down by 28% this year.

Scottish Mortgage is down 41% in the year to date – and is no longer the largest investment trust in the UK – while the Ark Innovation ETF in the US is down 59% in 2022.

Both investments massively outperformed any index you care to choose over the past five years; both have now given up the majority of that outperformance. Just like that.

Look at a few individual stocks and you can see the pain: Netflix is down 70% from its highs, Amazon 40% and Tesla 40%. This, Scottish Mortgage manager Tom Slater told a conference this week, has been the worst start to a year for growth stocks in 90 years.

On the face of it he is absolutely right; look at the way different investment styles have performed so far this year and you can see that growth is very much out of favour. Numbers from Waverton Asset Management show that if you divide the MSCI AC World Index up by style it is what the analysts call “high growth” that is really taking the hit this year so far – down 23.1%. Next up (or down, should I say) is “growth” – down 10.9%.

Look at it by sector and you will see something similar – those that have given us the most growth in value are the ones now suffering the most. This year, consumer discretionary stocks inside the S&P 500 are down 30% – pity the holders of Peloton, down 85% in the past 12 months.

Communication services are down 26% this year and information technology is down 21%.

But compelling as the growth-is-out-of-favour argument sounds, it is not the whole story. We might instead say that this has been the worst start to a year for very expensive stocks in 90 years.

Value stocks are outperforming growth stocks

Look again at the investment style split and you will see that the outperformance comes from value stocks. Waverton says stocks it categorises as “deep value” are up 5.6% on the year, while value stocks are up 2.1%.

Look at the sector breakdown and the stuff that has gone up is not necessarily stuff that is the opposite of growth – it is just stuff that wasn’t expensive before. So energy is up 38% and consumer staples are more or less flat.

Andrew Lapthorne of Société Générale sees it like this too. Disentangle the data, he says, and you can see that it is the most expensive quintile of stocks that is moving most: down 30% from its highs in the US and 20% in Europe.

Compare and contrast as well, the overall performance of the S&P 500 and the FTSE 100: the latter ended last year looking expensive in terms of price/earnings (p/e) ratio; the former ended it fairly reasonably cheap.

But it is the US index which is down 18% so far this year, and the London one which is down by only 3%. The truth is that while it is growth stocks that are falling fastest, they are probably not falling purely because they are growth stocks but because they are – in some cases we can now say were – expensive stocks.

It is not entirely straightforward, of course. Growth stocks have been expensive largely because, with interest rates so low, markets have been prepared to pay for the expectation of high future earnings (jam tomorrow).

This is just maths – and when interest rates rise, or are expected to rise, the dynamic reverses. Investors are prepared to pay less for promises of jam tomorrow, however innovative and exciting it might be, and more for jam now.

Today, inflation is both far too high and far too sticky for comfort – the US consumer price index came in just above expectations at 8.3% this week. And rates are obviously expected to rise.

So the fall in share prices of the big names is not really a comment on the likely success of their businesses. There is some concern about earnings growth falling into a recession, of course – which makes being absolute about anything hard.

But, in general, few people have sold Moderna because they think a rise in interest rates makes its vaccines business less good, or Tesla because they no longer believe in computers on wheels, or Ocado because they no longer think warehouse automation is kind of cool. They have been selling because in a world of slightly tight monetary policy, January’s share prices were wrong; investors have not turned against growth so much as the price of growth. That’s it.

You can blame any losses you might have on inflation, on war, on Chinese lockdowns, or on the US Federal Reserve, or whatever, but you will also know that had we entered this nasty environment with cheap markets they would have been much less likely to spark a bear market.

“Growth” may soon be cheap, too

So will prices go back up to their previous levels? Sure they will, if the underlying companies eventually show the market the money. What they may not achieve is the heroic p/e levels they hit last year.

Earnings now matter. If you want a historical comparison for this, look at January 1969 to June 1970. Share prices had doubled in the previous two years. That made them expensive – the UK All Share Index was on a historic p/e of 23 times against 13 times when the bull market began.

Then, labour relations began to turn nasty, interest rates shot up, with the benchmark yield going from 6% to over 9%, and the UK chancellor decided to do a bit of fiscal showing off by putting up both employment and corporate taxes. Does this sound familiar? The London stockmarket fell 36.6%. Depressing stuff.

There is a glimmer of hope. The past few weeks have done wonders for valuations. William Dinning of Waverton has done the numbers. This week he had global equity markets on an average forward p/e of 15.2 times (it could be lower by the time you read this!).

That is the lowest level since the bear market of early 2020 (when it was 14.1 times). On Dinning’s numbers the US is still at the upper end of its historic, 20-year, p/e range. But take that out and the rest of the world is below its historic average. A few markets – the UK stands out on a forward p/e of 10.4 times – are trading at “meaningful discounts” to historic averages.

That doesn’t mean the bear market is over. A recession, very possible at this point, would hit earnings and so crash the “e” in p/e. But it does suggest that if you are looking for long-term value, some is beginning to emerge. Not long now and you may even be able to buy cheap growth.

• This article was first published in the Financial Time

Twitter founder Jack Dorsey and its probable new owner Elon Musk don’t agree on who should and should not be allowed to tweet. They don’t see eye to eye on how the social-media platform should monetise its few hundred million users. Nor do they have much common ground on how a business should finance itself.

There is, however, one point on which they are united: the CEO is no longer necessary. Indeed, the over-mighty, imperial chief executive might as well be a dinosaur from another age. And perhaps many more companies could get along just fine without one.

Last week, Jack Dorsey, who has moved on from the site he created to a financial payments start-up called Block, decided to change his title from CEO to Block Head. The man who is now taking over Twitter similarly stopped calling himself the CEO of Tesla, the company that has made him the richest man in the world, and insisted he be called Technoking instead.

The staff at both companies probably joined the rest of us in rolling their eyes. Yet it is possible that both men are on to something. After all, Musk is, for all the controversy he creates, by far the smartest entrepreneur alive today (only Jeff Bezos at Amazon comes close). Twitter may not have made a lot of money yet but there is no question Dorsey knows how to create a business that matters.

And in deciding to ditch the CEO label they are not completely alone. The co-founders of Hence Technologies, for example, have decided they don’t need anyone to be the actual chief executive. The Orpheus Chamber Orchestra has won lots of awards and rave reviews for its concerts and recordings, even though it has got rid of conductors. The idea is starting to catch on.

Three reasons to ditch the chief executive

There are three reasons many businesses might be better off without a CEO. For starters, CEOs often don’t have a very clearly defined role. They don’t manage the finances, oversee the marketing, control production, or come up with new products. Indeed, as anyone who has ever worked at a big company will readily testify, it is often quite hard to work out exactly what it is that they are doing all day. Often they just get in the way of people getting on with a job that they can do perfectly well left to themselves.

Next, they take the limelight, concentrate glory and power in one person, and in order to prove themselves, often end up making stupid mistakes. The standard CEO does not last long. The average FTSE 100 boss is only in office for 4.6 years and that figure has been dropping all the time. They only have a few years in charge, and very often feel they have to do something amazing in that time. It might be a reorganisation, or moving into fresh territory, or worst of all a major acquisition that ends up costing hundreds of millions in losses. Whatever it is, it is often a waste of everyone’s time, and without a CEO the business could have simply chugged along making profits and paying out dividends to its shareholders.

Finally, they are expensive. The average FTSE CEO now earns £2.7m. Add in bonuses and share options and it is often much more. In the US, the equivalent figure is $13m (£10.4m). It is a huge sum and, of course, the CEO has to be paid more than anyone else, even if the product designer, or the marketing director is actually far more important to the business. That is fine if they are genuinely adding that kind of value; if they aren’t, it is a colossal waste of money that would be better spent elsewhere.

True, some firms do need real leadership. If a business is in deep trouble, and has to be completely turned around to be saved, then that is a huge task, and someone firm and decisive needs to be in charge. If there is a merger with a rival for which there is a real commercial case, then that requires leading from the front. But those two circumstances aside, a firm would often do better with a calmer, collective team in charge. Everyone can get on with their own job, less time will be wasted, and the customers won’t even notice. The imperial, overbearing, overnight CEO may well have had his – or her – day.

There’s a lot of excitement in the industrial metals market at the moment. Prices have gone up due to supply chain issues, which have been made worse by the war in Ukraine. However, there’s also a longer-term story playing out as we transition towards renewable energy.

The most commonly understood version of this is that we will all be buying lots more batteries to stick in our cars, hook up to at home, or place in containers which are then connected to the grid to provide stability because of intermittent renewable energy supplies.

But the energy transition will have a much wider impact than just batteries. The key driver is the electrification of lots of things, ranging from steel production through to aircraft, all of which will require more metals.

Soaring demand

This will drive immense demand for the usual candidates of lithium, nickel and zinc. So it’s entirely plausible that we will run out of key supplies of strategic energy transition metals in the next few decades. And if we don’t, then it’s likely we’ll run into a surge in prices.

Westbeck Capital, one of the few active fund managers in the battery space, notes that a number of metals have jumped in price recently, such as the 75% leap in lithium carbonate in China this year. Electric vehicle (EV) manufacturers such as Lucid, Tesla, and Rivian have either cut production or announced delays. Chinese EV maker NIO says it will raise prices in May and Mercedes-Benz has become the first major manufacturer to acknowledge supply chain issues.

There are two ways of investing in the expected surge in demand and rising prices. The first is to buy into individual mining stocks exposed to this space, or into a diversified fund such as BlackRock World Mining (LSE: BRWM).

The managers of this trust are betting heavily on this strategic metals super cycle: for example, more than 20% of the portfolio is invested in copper miners. It may be a surprise to see that only just over 1% is in nickel, but this is slightly misleading because the big diversified miners – which make up 40% of the portfolio – are also the major nickel producers.

A direct play on prices

I’ve highlighted nickel here because while everybody seems to focus on other metals such as lithium, we seem to have ignored the crucial role of nickel. For a sense of how important it really is, look at two new exchange-traded commodity (ETC) funds from WisdomTree that invest in the metals that are likely to play a key role in the energy transition.

WisdomTree Energy Transition Metals (LSE: WENT) is the broader of the two: it has 25% in nickel, 20% in copper, 15% in aluminium, 13% in silver and 12% in zinc, plus smaller amounts in tin, platinum and gold. WisdomTree Battery Metals (LSE: WATT) is more focused and has 48% in nickel, 26% in aluminium, 16% in copper and 10% in zinc.

One could argue that a mining fund such as BlackRock World Mining is the safer way to invest into this long-term theme. Its focus on diversified miners with strong balance sheets and generous dividends should help dampen down some of the inevitable commodity volatility. However, these big companies are subject to lots of risks. Rio Tinto just announced a decline in earnings due to various operational issues, for instance. Investing in a basket of commodities is a direct way to play the cycle, stripping away corporate risk.

What’s more, if prices shoot up it’s not unreasonable to expect many governments to demand bigger royalties and taxes or even to threaten to nationalise key strategic metal assets. That might be bad news for equity investors but good news for investors in pure commodity markets. So a smarter course of action might be to invest in direct equities or a diversified fund, while also playing the direct commodity markets for these increasingly strategic metals through ETCs.

SEE ALSO:

The case for nickel – a crucial metal in the Green Energy Revolution

Three stocks that will profit from electric-vehicle growth

Why investors should consider adding Glencore to their portfolios

It looks as if Elon Musk and Twitter’s (NYSE: TWTR) board of directors are close to reaching a deal.

The billionaire investor and CEO of Tesla announced an offer of $54.20 for Twitter stock, which he later called his “best and final” bid for the company.

Musk wants to buy Twitter personally. Tesla is not involved in the deal, although there has been speculation that he will merge the two operations with his other businesses, including SpaceX, into one single holding company, after registering a company called X Holdings.

Musk’s offer for Twitter stock looks like a done deal

As the richest person in the world, Musk shouldn’t have any trouble raising funding for the deal. According to a regulatory filing, he has already lined up $25.5bn in debt financing from key banking partners and is looking to provide $21bn of equity for the deal himself. These funds may come from Tesla’s controversial 2018 bonus scheme.

I say he shouldn’t have any trouble raising the funds as there’s no guarantee Musk’s banking partners will stump up the cash. Part of the debt financing is a margin loan of $12.5bn secured against his stake in Tesla. Equity market volatility could send bankers running if Tesla shares suddenly plunge in value.

There are plenty of other hurdles the deal will have to overcome before the finish line, but where there’s a will there’s a way. While the current market price of Twitter stock is below the offer price of $54.20 (suggesting investors are sceptical), Musk has the resources to push through any deal.

Most importantly it seems as if he has won over the support of Twitter’s management, which only last week tried to block any potential deal by putting in place a so-called poison pill. This would have diluted the billionaire’s stake if he’d bought more than 15% of the business without their approval.

Investors should take the money and run

With tech stocks across the market facing heavy selling pressure, Musk has emerged as a white knight for Twitter’s investors. His interest in the business has shielded its shareholders from the wider market sell-off. As the tech-heavy Nasdaq index has plunged 20% this year, Twitter stock has jumped 20%.

Still, there are many reasons why the deal could fall apart, and considering the current market conditions, there is no telling where Twitter could end up if it does.

As uncertainty prevails, the best option for shareholders may be to take the money and run.

It seems that Elon Musk is still serious about trying to take Twitter (NYSE: TWTR) private.

In the latest twist, the billionaire has unveiled a $46.5bn financing package to fund his buyout.

It’s not surprising he’s managed to find the money – the billionaire executive of Tesla (Nasdaq: TSLA) is currently the richest person in the world, according to the Bloomberg Billionaires Index, with a fortune of $260bn.

Musk has lined up $25.5bn in debt financing, including a margin loan of $12.5bn against his stake in Tesla, from his major banking partners. He is also looking to provide $21bn of equity for the deal himself.

A bit of financial gymnastics will allow the billionaire to put up this figure without too much pain. The margin loan is secured against 85% of his 17% stake in Tesla, which is worth around $170bn at current prices.

That limits the amount of stock Musk can sell to fund the deal. However, under Tesla’s controversial 2018 bonus scheme, the CEO has three opportunities to buy more than eight million shares (each time) in the electric vehicle manufacturer at a 90% discount. With the next tranche of the bonus scheme set to kick in soon, this could provide the extra funding he needs for the equity slice.

Elon Musk needs to convince Twitter to sell

However, finding the money to finance the bid – which is an interesting challenge – was never really the biggest problem for Musk. Convincing the company to give itself up was always going to be a bigger headache.

And it doesn’t look as if Twitter is going to bend to Musk's wishes any time soon.

Last week it launched a so-called “poison pill” defence against the bid, aimed at blocking him from building a stake of more than 15%. The structure will allow existing investors to buy more shares at a heavy discount if Musk or anyone else attempts to buy more than 15% of the company without the board‘s backing.

Tesla’s CEO already owns 9.2% of Twitter and has said he is exploring a tender offer to buy a bigger stake in the company. Such a move is usually considered a hostile act because it bypasses the board of directors, who are ultimately supposed to represent shareholders. And now it would trigger the poison-pill defence, diluting his stake, and increasing the cost of a potential buyout.

Interestingly, Twitter has yet to issue a formal response to the initial buyout offer, so there could be yet another twist in this tale.

Is there something else going on behind the scenes?

The bigger question is what does Musk really want with Twitter? He has claimed that the company is a platform for free speech around the world and he wants to defend this right. However, the enterprise does not fit well alongside his collection of other businesses, namely Tesla and SpaceX, and the group is struggling for direction.

Twitter is trying to boost revenues by getting advertisers to pay more for their brands to appear on users' timelines, but it is still losing money. It reported a net loss of $221m in 2021 on revenues of more than $5bn.

Some of Musk’s critics have speculated that he could be pursuing Twitter in order to divert attention from as-yet-to-be-seen problems. If this is the case, it’s an expensive way to distract the media, but for a billionaire who has a history of playing fast and loose with the rules – and one whose own Twitter stream is essentially an ongoing publicity stunt – it would not be out of character.

It might be best for investors to sit this one out, rather than trying to guess what’s in store for either side of this increasingly bitter battle.

Twitter (NYSE: TWTR) certainly punches above its weight in the world of social media. The platform only has 217m daily active users compared to Facebook’s (NASDAQ: FB) 2bn-plus, but Twitter’s users move markets, create news stories and drive political decisions.

It has also become a platform for figures like Elon Musk and Donald Trump to reach their supporters around the world (although Trump was banned at the beginning of 2021). And Musk has now decided to take his love of the platform further by acquiring a 9.2% stake in the social media company.

It seems the billionaire bought the majority of this $2.9bn stake in early March when shares in the social media company were trading in the low $30s. After his position was announced, the stock jumped to more than $50.

The billionaire has acquired a major position in one of his favourite toys

Musk is one of the platform’s most prolific users with more than 80m followers. He’s also used Twitter to reach out and appeal to his band of loyal followers around the world.

Last year he famously asked if he should sell 10% of his stock in his electric car firm Tesla (NASDAQ:TSLA). Twitter users said 'yes' and Musk sold around $5bn (£3.7bn) of his stake, although he still owns 17% of the company (worth around $200bn at today’s price).

The billionaire’s antics have produced a huge amount of publicity for Twitter, and for a company that thrives off attention and advertising, that is no bad thing.

Advertising made up 89% of Twitter’s revenues in the fourth quarter, so this is where the real money comes from. The enterprise also sells data subscriptions to companies and developers, an important and growing revenue stream.

Advertising includes Promoted Ads and Follower Ads, which can cost anywhere from $0.50-$4 for every time a user clicks on the ad or follows the advertiser’s account. Around 85% of the advertisers on the platform are large companies like Disney (NYSE: DIS), but 15% are small and medium-sized businesses.

Over the past two years, the group has really stepped up its growth ambitions, laying out an ambitious target to generate revenues of $7.5bn in 2023, more than double the $3.5bn reported for 2019. And there is certainly plenty of room for the company to expand. The global advertising market (excluding China) was worth around $500bn in 2021.

Twitter continues to seek out new ways to monetise its content

To hit its growth targets, the platform will need more users. Having high-profile accounts on the platform like Musk is helping the group reach a larger audience. The pandemic has also helped as users have come to rely on Twitter for breaking news and health updates over the past two years.

Tweeters (or to give them their full name, Average Monetizable Daily Active Users) grew 13% last year as a result of “product improvements, as well as global conversation around current events.” The company’s new CEO, Parag Agrawal, who took the helm in November 2021, thinks the social network can reach 315m daily users by the end of 2023.

What does Musk want with the business?

Musk’s stake in the company has certainly generated a lot of buzz, and Twitter’s decision to appoint the billionaire to its board of directors is a notable development. Still, it is unclear if his presence will translate into a longer term benefit for the company.

It could be the case that the billionaire is trying to change the company from within. He has been campaigning for Twitter users to have the ability to edit tweets and he has also criticised the platform for its free speech policies.

But even if he is able to drive through changes, it is difficult to say if they will have a noticeable impact on user growth and revenue generation. As social media users tend to be quite resistant to change, any new features Musk drives through might cause a backlash. Past changes to Twitter’s layout have caused uproar.

After the events of the past week, Twitter shares are trading on a forward price-to-earnings (p/e) ratio of 44. That seems expensive even for the high-flying US tech sector. Facebook sits on a forward p/e of 16 while Snap (LSE: SNAP) and Pinterest (LSE: PINS) are trading on multiples of 38 and 19.4 respectively. Twitter’s growth potential explains some of this premium, but not all of it. And this growth is only projected, not guaranteed.

Musk’s decision to make himself one of Twitter’s largest investors has certainly generated a lot of chatter on and off Twitter, but if the company cannot meet its ambitious growth targets, he might regret his decision.

Companies that convert classic cars into electric vehicles (EVs) generally swap the engines for the batteries and electric motors from crashed Teslas. Everrati, which has “given a true British icon, the original Land Rover”, the EV treatment”, does things differently, says Tim Pitt in City AM.

Everrati specialises in converting opulent gas-guzzlers into debonair eco-friendly motors and “substituting cubic inches for kilowatt-hours”. Having previously converted the classic Porsche 911 and Ford GT4 of Le Mans fame, the company has now turned its attention to the Land Rover. It rebuilds the classic workhorse “from the ground up”, with upgraded brakes, suspension and steering, and the result will still turn heads like any retro marvel should.

Characterful flaws

Everrati has done well to retain the car’s character, even going as far as to retain a few of the flaws that Land Rover enthusiasts love so much. Everrati’s Series IIA, like the car it is based on, remains “a frankly terrible drive – it’s noisy, unrefined, wanders about the road and hops over even the smallest bump like a spring lamb”, says Sam Burnett in Top Gear. But it remains “glorious” for all that. A Land Rover should be bulky, a little unwieldy perhaps, with endearing quirks and a charmingly rugged character. And Everrati’s version is just that. It will still excel off-road too, with plenty of power to deliver a respectable performance. It’s pretty comfortable inside as well. The interiors have been refurbished to compete with the best that today’s motoring has to offer, boasting re-trimmed leather seats and an audio system slotted nicely into the old central cubby box.

Even those who miss the clattering diesel engine and crunching gears are catered for, says Adam Hay-Nicholls in GQ. The ride is nearly silent, but you can project engine noises through the car’s exterior. “One customer has specified the sound of a galloping horse. Why not a stampede? With the app, you can do both – or anything else that takes your fancy.” Price: £150,0

The government’s ambition of creating new industries, levelling up the regions and turning post-Brexit Britain into a tech powerhouse has generated lots of rhetoric so far, but not much in the way of concrete plans.

Last week, we finally saw an actual decision. The business secretary, Kwasi Kwarteng, announced that the ambitious start-up Britishvolt would get £100m of state funding to help it build a vast new factory to make the batteries for electric cars in Northumberland. The gigaplant has the potential to make batteries for 300,000 cars a year, creating 3,000 skilled jobs on the site, and another 5,000 among suppliers. If it all goes according to plan, it will make the UK a player in the battery industry.

Danger: high-voltage risk

Of course, everyone wishes Britishvolt well. There is no question that the world will need lots of car batteries. The market for electric cars is exploding. Tesla already makes one of the best-selling models in the UK and every major car manufacturer is pouring billions into creating new models. In a decade, petrol-powered cars may well be a historical relic. But just because an industry is huge doesn’t mean it can be profitable. The battery business faces some big challenges.

First, soaring raw-material prices. Batteries that are powerful enough to drive a car have lots of metals inside them, many of which are in short supply. Lithium is the most crucial, and the price has more than doubled over the last ten years. Cobalt and nickel are almost as important, and miners are struggling to keep up with soaring demand. Building a huge new plant is one thing. Getting the supply chains in place to feed in all the raw materials will be far harder. There will be a constant threat of shortages and rising prices destroying any profit margin that might otherwise be there.

Second, we are about to see massive overinvestment. Just about every other country in the developed world is trying to get into battery production. French president Emmanuel Macron is putting €700m into a plan to develop a domestic battery industry. The German government is putting in €1bn. The EU has launched a European Battery Alliance to funnel subsidies into plants across the continent.

On the other side of the Atlantic, US president Joe Biden is spending billions on developing the American industry, with huge subsidies for US manufacturers, along with subsidies for charging networks.

It is not hard to work out what is about to happen. In a few years’ time, there will be far too many batteries being produced by companies that have been massively subsidised to ramp up production. That is great for anyone thinking of buying a new car. But with prices falling and many state-owned companies selling at below cost price, it will be terrible for manufacturers.

A fast-moving target

Finally, the technology behind electric vehicles is still developing very rapidly, and so are customers’ preferences. Is a 400- or 500-mile range crucial, or does it not make much difference, given that most of us typically only drive ten or 20 miles a day? Will rapid charging make it irrelevant anyway? Will we actually own an electric car, or prefer simply to borrow one on an app when we actually need it? The market has not decided yet, but it will make a huge difference to the type of batteries that are in demand.

Likewise, we hardly even know what materials will be used. For example, India’s giant Reliance Industries is spending big money on developing sodium- rather than lithium-based batteries, including on the acquisition of UK-based Faradion, a specialist in the technology. Sodium is far cheaper than lithium, and there is plenty of it in the world. Until the answers to these questions become clear, it is impossible to know what batteries will be needed, with what capacity, and what they will be made of.

In truth, many of the state-backed battery plants have the potential to turn into massive white elephants. We have plenty of history to tell us that governments are typically very bad at making those kinds of strategic choices. They back the wrong technologies and spend too much money at a time when everyone else is getting into the market. This gamble could turn out to be a 21st-century Concorde.

You could be forgiven for thinking the new electric Tesla Model Y is just a Tesla Model 3, the best-selling car in Britain, “that’s been pumped full of growth hormone”, says What Car magazine. It has a higher driving position and more room inside than its hatchback predecessor. And like the Model 3, there is a Long Range version and a Performance model. The Model Y is not quite as rapid as the Model 3 due to the extra weight it carries, but the Performance version can still hit 60mph from a standing start in 3.5 seconds. As for going the distance, the Long Range can officially clock up 315 miles on a single charge. Sure, you won’t get that in the real world, but 250 miles should be possible if you take it easy.

Even so, in Performance guise, the Model Y is fully “capable of embarrassing much more expensive machinery off the line”, says Auto Express. “Not bad for a family-friendly SUV.” The dual-motor/all-wheel-drive set-up helps put the power down, while providing added reassurance when the roads are slippery. But it’s inside where Tesla has really outdone itself, says Will Dron for The Sunday Times. The Model Y has kept the Model 3’s minimalist design, with clean lines, lots of space and an “airy feel in the cabin”. The dashboard is dominated by the huge touchscreen, from which most of the car’s functions are controlled. You can check the speed limits of the roads you are driving on, as well as battery range and level. There is also a large satnav that is “nicely integrated with the car”, and an infotainment system for web browsing, music streaming and even playing video games. Tesla has “nailed it” when it comes to keeping customers entertained while waiting for their electric cars to charge. “It’s very, very smart stuff.” Not that you will have much time. Tesla claims the Model Y can “swallow 150 miles of charge in 15 minutes on the punchiest superchargers”, of which Tesla has around 800 in the UK, says Car magazine’s Phil McNamara.

The first Long Range Model Ys, priced at £54,990, are expected to arrive in Britain in the next few weeks, with the £64,990 Performance arriving in the summer. The price is high for a hatchback/SUV crossover. But if you’re not fazed, you might want to consider getting one. The Performance is “dynamic to drive and addictively fast… [although] the Long Range is plenty quick enough to be honest, and enjoyable to drive”. The Model Y has set the new crossover benchmark.

Scottish Mortgage investment trust (LSE: SMT) (one of the components of the MoneyWeek investment trust portfolio) continued to trade at a discount to its net asset value (NAV, otherwise known as the value of the underlying portfolio) in March this year.

But the discount marginally narrowed from 0.7% to 0.5%, suggesting that the trend of a widening discount could be turning. The trust typically trades at a premium to its NAV, but its share price declined every month from November to February.

Despite the narrowing of the discount, the trust’s share price has continued to tumble in recent days as investors ditched growth stocks in favour of value stocks.

Tech stocks, which have come under pressure from rising interest rates and a more hawkish stance from central banks, form a core part of the trust’s holdings.

SMT’s holdings are risky

As the trust has shed around 30% in the six months, investors may consider the stock to be cheap. But James Fox in the Motley Fool still urges investors to exercise caution and “reconsider the valuation of Scottish Mortgage”.

Some of the holdings in the trust are overvalued, says Fox. The value of Moderna, one of the leading vaccine producers during the pandemic, is uncertain as its profits are predicted to fall from $12bn in 2021 to just $2bn in 2024 once the demand for Covid-19 jabs is expected to dissipate.

He also cast doubt on the value of other stocks that feature heavily in the trust such as electric car manufacturer Tesla, which hit a valuation of $1trn at the end of last year, and Chinese tech firm Tencent.

“Tencent also represents a major holding and the Chinese firm has reported falling revenue growth in recent years,” Fox says.

But there is no denying the trust has had a very impressive record so far. SMT rose by around 638% in the last ten years compared to just 232% for the FTSE All-World Index, the trust’s benchmark index.

A glance at SMT’s top ten holdings

Moderna remained the company’s biggest holding, increasing from 6.3 to 7.1%.

Tesla moved from fourth to second place, accounting for 6.6%.

French luxury company Kering dropped from eighth place to ninth place, representing 2.4% of the trust. The trust retained all holdings in its trust in March that it had the month before.

Biotech company Illumina dropped from third to fourth position, while American multinational technology firms Nvidia and Amazon retained their sixth and seventh spots, respectively.

Chinese shopping platform company Meituan dropped from ninth place to tenth place, accounting for 2.3% of the fund. This represents a 0.2% fall compared to February levels.

Welcome back,

There is never a dull moment when it comes to Elon Musk and cryptocurrencies, but this time it’s the meme cryptocurrency doge making headlines, rather than bitcoin.

Here are the top stories that caught our eye this week.

Dogecoin rises after Elon Musk signals Tesla will accept payment using dogecoin

Joke cryptocurrency, dogecoin, which has little value or practical use, jumped by more than 20% on Tuesday after Tesla’s Elon Musk said the electric vehicle company will accept dogecoin as a form of payment (though not necessarily for its cars).

“Tesla will make some merch buyable with Doge & see how it goes,” the billionaire wrote on Twitter, though he fell short of clarifying which specific Tesla products would be purchasable using doge.

Dogecoin was created in 2013 by software engineers Jackson Palmer and Billy Markus. It is based on the popular internet “meme” of a Japanese type of dog, the shiba inu. But even though it began as a joke, the cryptocurrency now boasts a market cap of around $23bn, according to CoinMarketCap data.

This is not the first time Musk has lifted the price of cryptocurrencies, including dogecoin, via his Twitter account. Earlier this year, Musk made headlines when he said that his company would accept payment using bitcoin, only to make a series of apparent U-turns over concerns on the environmental impact of bitcoin mining (the process by which new bitcoins are created).

Doge has quickly gained recognition as Musk’s favourite coin. The listing of dogecoin on Coinbase Pro in May also lent the joke cryptocurrency some legitimacy (dogecoin was already listed on Coinbase, but not on Coinbase Pro).

Worker who threw out £340m-worth of cryptocurrency hires NASA experts to help him retrieve data

A man who infamously threw out a hard drive that contained roughly £340m-worth of bitcoin (based on current prices) has hired Nasa data experts to help him in his quest to retrieve the cryptocurrency. James Howells, an IT worker based in Newport, claims he accidentally threw out a hard drive containing about 7,500 bitcoins back in 2013.

Howells has been trying to locate the hard drive for the last eight years, lobbying hard to win approval (so far unsuccessfully) from Newport City Council to search the local landfill site in which he thinks the hard drive has ended up.

Howells has hired workers at Ontrack, a data recovery company which was hired by Nasa in 2013 to help retrieve a hard drive that was onboard the Columbia space shuttle when it exploded after take-off in 2003. The company was able to recover 99% of the data. It is clear Howell is hoping for similar luck with this hard drive of bitcoins.

Ontrack reckons there’s an 80%-90% chance that Howell’s missing bitcoin can be recovered – assuming no damage to the hard drive.

Howells has been denied permission by the council to dig up the landfill several times, despite garnering the support of hedge funds who are willing to foot the bill for the cost of the search and equipment. He is also asking to carry out a 3-month feasibility study with the council so he can sit down and address the council’s concerns.

The council says it is concerned about the impact digging up the landfill will have on the environment; and about who foots the bill if the hard drive is never found, or is damaged to such an extent that the bitcoins are not retrievable. The latter point is behind Howells recruitment of Ontrack: "They were able to recover from a shuttle that exploded and they don't seem to think that being at a landfill will be a problem”.

Bank of England warns of growing cryptocurrency risks

The Bank of England warned on the growing risks posed by cryptocurrencies in its December Financial Stability Report. It said that while at present cryptocurrencies pose limited direct risks to the stability of the UK's financial system, they will inevitably become a more significant problem if the cryptocurrency market continues to grow at current levels. The report called for greater regulatory scrutiny both at global and a domestic level.

Markets

Here’s what happened to five of the largest cryptocurrencies by market cap – according to data compiled by Coinmarketcap – in the last seven days:

• Bitcoin fell 3% to $47,023
• Ether fell 8% to $3,830.
• Binance Coin fell 9.5% to $525.
• Tether fell three points to $1.00
• Solana fell 1.6% to $175.6.

What you need to watch out for

Coinbase Global is developing a non-fungible token (NFT) marketplace which could become a “super app” for trading, lending digital assets and custody, according to Barron’s.

Welcome back,

It was an eventful week in the world of crypto, with bitcoin slipping to $58,000, its lowest level in two weeks. Although the popular cryptocurrency recovered and traded above the $60,000 mark for most of the week, questions remain about how sustainable bitcoin’s comeback is.

Here are the top stories that caught our eye.

Bitcoin fell below $60,000 this week

After a spate of factors including approval of a bitcoin ETF helped bitcoin cross $60,000 in recent days, the popular cryptocurrency fell again this week to below the $60,000 mark.

The cryptocurrency traded as low as $58,113 this week, just a week after the cryptocurrency had hit a fresh all-time high of almost $67,000 last week.

This means the cryptocurrency’s honeymoon period could potentially be coming to an end.

Bitcoin was very much the darling of markets at the start of the year before a number of countries such as China announced tougher scrutiny of the sector and even banned cryptocurrency mining in China. Policy U-turns by popular figures such as Tesla’s Elon Musk also kept the cryptocurrency volatile.

But still, bitcoin is up more than 116% since the start of the year.

Tesla may accept bitcoin again

That being said, in another apparent U-turn, Elon Musk doesn’t appear to have completely abandoned crypto payments yet. The company said in its third quarter earnings release this week that it may accept payments using cryptocurrencies for its services and products at some point in the future.

“We may in the future restart the practice of transacting in cryptocurrencies ("digital assets") for our products and services,” Tesla said in the filing.

The comments come as Tesla’s market cap exceeded the $1trn mark this week.

The company also announced that it purchased an aggregate $1.5bn worth of bitcoin in the nine months ending 30 September.

“In addition, during the three months ended March 31, 2021, we accepted bitcoin as a payment for sales of certain of our products in specified regions, subject to applicable laws, and suspended this practice in May 2021,” the filing said.

Musk’s comments, and U-turns are both important for the world of cryptocurrencies, as a number of endorsements, and announcements such as Tesla purchasing $1.5bn worth of bitcoin earlier this year, was a key factor propelling bitcoin and some other cryptocurrencies to record highs.

Crypto markets were badly affected earlier this year when Musk signalled Tesla would not accept bitcoin as payment due to concerns bitcoin mining is bad for the environment

El Salvador purchased $25 million worth of bitcoin

El Salvador added a further 420 bitcoins to its official bitcoin portfolio- worth $25m- the country’s president Nayib Bukele revealed in a Tweet this week.

The latest purchase paves the way for the country’s bitcoin holdings to total 1,120 coins.

The purchase can be seen as an attempt to capitalise on bitcoin's fall to $58,000 this week.

The purchase also follows El Salvador’s purchase of 150 coins in September when the country became the world’s first to officially adopt bitcoin as legal tender.

Back in September, El Salvador’s government started building bitcoin ATMs and created a $150m fund to help facilitate exchange between bitcoin and the US dollar.

The decision to make bitcoin legal tender came from the fact that El Salvador is highly dependent on remittances and the government hoped that making bitcoin the official currency in the country would make it cheaper to send money overseas.

However, the country’s adoption of bitcoin has been marred with chaos and even mass protests.

Here’s what happened in the cryptocurrency market in the last seven days:

• Bitcoin is flat at $61,899.
• Ether is up 9% to $4,382.
• Dogecoin is up 19% to $0.29.
• Cardano is down 6% to $2.
• Solana is up 6% to £200.

Iran set to pilot its central bank digital currency

The Central Bank of Iran is to pilot its own “national cryptocurrency” soon, says Bitcoin.com. The Islamic Republic is “studying potential risks and benefits” and will launch it “once the Money and Credit Council approves it”, said Ali Salehabadi, the governor of the central bank.

Bitcoin hits new high of over $67,000

Bitcoin hit a new high this week, hitting $67,016, boosted by the launch of a new ETF that tracks the cryptocurrency’s price (see below). It has risen by more than 130% since the start of the year – though not without a lot of volatility. The new high leaves bitcoin as the world’s 13th biggest currency with a market cap of $18.85m, says the Independent, surpassing the Swiss franc and Russian rouble. In terms of the world’s biggest companies, it now ranks higher than Facebook and Tesla.

Bitcoin ETF launches with more in the pipeline

As you may have read in Dominic’s Money Morning this week, the ProShares Bitcoin Futures ETF launched on the New York Stock Exchange this week. The ETF will hold futures that track the bitcoin price. Two more ETFs from Van Eck and Grayscale are also set to launch.

The SEC’s decision not to oppose the fund is “a sign that major global regulators are becoming more comfortable with crypto-backed products, even if they remain cautious on the industry more widely” says the FT.

Pennsylvania bitcoin miner debuts on Nasdaq

Stronghold Digital Mining (Nasdaq: SDIG), which mines bitcoin using energy from waste coal, made its stockmarket debut this week. It launched at $19 a share and quickly climbed to $31.90, ending its first day of trading at $28.90. The company went public via a traditional IPO rather than using a special purpose acquisition company as it gave investors more confidence, having been “been vetted by the SEC the regular way”.

The company takes spoil from Pennsylvania’s coal mines – co-founder Bill Spence reckons there are 840 slag heaps dotted around the state – and uses “fluidised bed boilers to remove toxins”, says CNBC, which helps produce the power used to mine bitcoin. The company made a loss of $3.5m in the first half of the year on revenues of $7.9m

Want free crypto? Just get your retina scanned.

In the hopes of getting some free cryptocurrency more than 100,000 people have had their retinas scanned by a startup called Worldcoin, reports the FT, as part of a project to distribute digital money to over one billion people worldwide.

The idea is to give the coins to everyone on earth free tokens, based on the ethereum blockchain which, the company says will “increase individual empowerment and equality of opportunity on a global scale”. The retina scanning is to prove you’re a human; once you’ve been eyeballed, you will at some point in the future receive your crypto.

The company has so far distributed 30 “orb” eye-scanning devices around the world, and hopes to “distribute 4,000 devices per month”.

The Orb “captures an image of a person’s eyes, which is converted into a short numeric code, making it possible to check whether the person has signed up already. If not, they receive their free share of Worldcoin”, the company says on its website.

HMRC to send “nudge” letters to cryptocurrency investors

HM Revenue and Customs is planning to send cryptocurrency investors “nudge letters” reports the FT, “​​warning them to check they have paid the right tax”. Investors will be urged to check they have paid the appropriate amount of capital gains tax or income tax on their holdings, but “​​it does not necessarily mean you have made an error on your tax return”.

HMRC says it is just helping people get their tax affairs right. “We regularly undertake activity to educate customers who might need help. Our letter asks cryptoasset holders to review their transactions to ensure that they are declared correctly”, it said.

FCA goes on TikTok to warn of cryptocurrency risks

The Financial Conduct Authority, the UK’s financial regulator, has launched a campaign on video-based social media platforms TikTok and Youtube to warn young cryptocurrency speculators of the risks they face, reports the i newspaper. The campaign, called InvestSmart, wants people to ask themselves five questions:

1. Am I comfortable with the level of risk? Can I afford to lose my money? 2. Do I understand the investment and could I get my money out easily? 3. Are my investments regulated? 4. Am I protected if the investment provider or my adviser goes out of business? 5. Should I get financial advice?

The FCA is worried that investors are buying high-risk products with little knowledge of the dangers. It surveyed 18-40 year olds and found 76% made investment decisions “driven by a sense of competitiveness with friends or family”, 43% saying they wanted to “beat their peers when it came to making returns”.

“We don’t want to limit choice”, said the FCA’s Sarah Pritchard, “we are just asking investors to pause and consider. Are you prepared to lose all your money? If the answer is yes, then fine.”

Cybercriminals have stolen almost £150m of cryptocurrency so far this year

Action Fraud, the UK's national reporting centre for fraud and cyber crime, says cybercriminals made off with £146m in cryptocurrency in the first nine months of this year, reports the Daily Mail. That’s 30% more than in the whole of 2020. A total of 7,118 reports of cryptocurrency fraud, with the average victim losing £20,500. One in ten victims were aged between 18 and 25, and more than half were under 45. Criminals create “fraudulent advertisements with photographs of unsuspecting celebrities and use made up quotes to offer fake testimonials to make their offer look legitimate”

Cryptocurrency markets this week

• Bitcoin rose 6.6% to $63,211
• Ether rose 8.6% to $4,108
• Dogecoin rose 8% to $0.24
• Cardano rose 1.5% to $2.19
• Solana rose 27.5% to $202

What to look out for

Iran set to pilot its central bank digital currency

The Central Bank of Iran is to pilot its own “national cryptocurrency” soon, says Bitcoin.com. The Islamic Republic is “studying potential risks and benefits” and will launch it “once the Money and Credit Council approves it”, said Ali Salehabadi, the governor of the central bank.

In 2011, the libertarian Silicon Valley financier Peter Thiel created a $100,000 scholarship to encourage promising young entrepreneurs to drop out of university and start their own ventures. Dozens of tech prodigies have passed through the programme to pursue their dreams – none quite so spectacularly as Austin Russell. The 26-year-old founder and CEO of Luminar Technologies is one of the few people to have amassed a fortune in the world of self-driving cars.

Following Luminar’s float last December, which valued his stake at $2.4bn, Russell can lay claim to being the youngest self-made billionaire in the world. More to the point, perhaps, the lanky six-foot-four entrepreneur – who “could pass, quite easily, for a young American pastor” – is one of the few people who has “got Elon Musk worried”, says The Times.

A tech prodigy to rival Musk

Luminar’s great breakthrough has been to produce a “relatively cheap” (in some cases less than £1,000 per unit) iteration of “lidar”: the laser-beam technology that enables driverless cars to “see” their surroundings, thereby allowing them to navigate and avoid obstacles. Considered by some to be the “keystone” to the autonomous driving revolution, Russell’s ultimate ambition is to see Luminar’s version “incorporated as standard into all vehicles”. If the $3trn-a- year industry backs him, Russell’s fortune could explode exponentially. But not everyone is sold on the technology –notably Musk, who is championing a different approach at Tesla involving digital video cameras, and has called lidar “a fool’s errand”.

Russell and Musk might disagree on this point, but the two entrepreneurs have plenty in common – not least being endowed with a powerful urge to invent. Russell has always been a prodigy, says The Verge. Born in California in the spring of 1995, even his birth date is “auspicious”: 14 March (or, in its US numerical format, 3.14) marks “Pi Day” – the annual celebration of the mathematical constant pi, and also happens to be Albert Einstein’s birthday.

“At an age when most toddlers are still in diapers, Russell memorised the periodic table of elements,” says CNBC. By the age of 10 or 11, he was writing software. When his parents – neither of whom had a technical background – refused to buy him a mobile phone, he re-wired his Nintendo DS game console as a substitute: “It did actually work”. Russell filed his first patent, for an underground system that would recycle sprinkler water, at 13, says The Times. Soon after, “he became fascinated with laser technology and turned the family garage into a makeshift lab”. He won a place at Stanford to study physics, but dropped out midway through his freshman year, aged 17, after winning the $100,000 Thiel Fellowship for his lidar concept. He founded Luminar in 2012 – “not long”, notes Forbes, “after obtaining his driver’s licence”.

It isn’t easy being brilliant

The route to scaling up the company and floating on Nasdaq hasn’t been easy. “To quote Elon, being an entrepreneur is like chewing glass while staring into an abyss,” says Russell, who regularly works 100-hour weeks. It’s such a rollercoaster that you need “some type of higher driver or passion”. After embracing the world of driverless cars, one of his is eradicating road accidents. But although development is racing ahead – Luminar has already secured deals with Volvo, Audi, Toyota and others, and eventually hopes to build its own car – he’s the first to admit there’s a long way to go, says The Verge. “We’re still years, if not decades, away from fully self-driving cars.” Fortunately for Russell and his investors, in this game, “youth is definitely an advantage”.

“Tesla will give you a giant contract for a long period of time if you mine nickel efficiently and in an environmentally sensitive way,” said Tesla CEO Elon Musk in July 2020.

In September he reiterated his position: “In order to scale, we really need to make sure that we’re not constrained by total nickel availability. I spoke with the CEO of the biggest mining company in the world and said, ‘Please make more nickel, it’s very important.’”

One year on from those big statements, we consider the investment case for nickel.

Nickel wants to go higher

Nickel, like all metals, has had quite a time of it over the last few years. Today it trades around US$19,500/tonne – a seven-year high.

The lows came in 2015-2016 – and, short of some kind of deflationary bust – I doubt we’ll ever see them again. We didn’t even touch them during the March 2020 Covid panic. Those lows were around $8,000/tonne.

However, the all-time high for nickel came in May 2007. It perhaps marked peak mania towards the end of the last great commodity supercycle. $54,300 was the price, so we are still some way off that.

If I look at a short-term chart of nickel I have to say I am not greatly encouraged by the price action. We hit a high in February, re-tested it last week and failed, and since then the price has been sliding.

However, if I look at a longer-term chart, I see a huge base that has formed over many years, with consistently higher lows since 2016, and that now looks like it wants to go higher, a lot higher. We are a long way from the speculative manias you find at the end of large bull markets.

Here’s a screenshot from the London Metals Exchange (LME) – what do you make of it?

Perhaps we just need to digest and consolidate the gains of the past year for a little longer before the bull market can get going again. Summer doldrums and all that.

Nickel’s role in the Green Energy Revolution

Nickel is the fifth most common element on earth. Humans have been using it since the bronze age, but it wasn’t officially recognised until 1751. Ancient Chinese manuscripts refer to “white copper”, while northern European miners in the Middle Ages called it Kupfernickel, which translates as “Old Nick’s copper” or “devil’s copper”, because the reddish ore looked like copper, but they couldn’t get any copper out of it.

Nickel has a high melting point, resists corrosion and oxidation, is ductile, magnetic at room temperature and alloys readily. It can be deposited by electroplating, has catalytic properties and recycles well – it can be re-used again and again. With these properties, its biggest use by far – almost 80% of annual demand – is in stainless steel. The rest comes from alloys (10%), plating (4%), electric vehicle batteries (3%) and, of course, “other”. Nickel use has been growing at a rate of about 4% per annum since 2010.

The excitement around the metal lies in its use in electric vehicle (EV) batteries. Nickel is a key component for EV cathodes. “Green energy will play a key role in nickel’s future,” says the LME. “The rapid rise of electric vehicles and growing importance of battery technology are likely to increase demand for higher purity nickel. Whilst EV’s only represent a small share of the current nickel story, government policy and the strategic plans of well-known automotive players are driving the renewable automotive manufacturing, and in turn a small part of the energy industry forward, which will impact the nickel futures market.”

It’s that Green Energy Revolution again, and the huge demands it places on natural resources.

Demand from electric vehicles is small – but that will change

Eddy Haegel, president of BHP Nickel West, said this week: “We believe that over 2020 to 2030, overall nickel demand will grow at 5% compound annual growth rate, and that nickel-in-battery demand will grow at a rate of 21% CAGR.” He sees EVs accounting for 25% of all vehicles sold by 2030.

Meanwhile, we have Elon Musk saying, “Please make more nickel, it’s very important.” Musk likes the greater energy density of nickel-rich, cobalt-free cathodes. That’s why he wants nickel. Robyn Denholm, chair of Tesla, says it will purchase around $1bn per year in battery minerals from Australia alone.

Nickel demand in the EV and energy storage sectors remains relatively small, but the outlook is that this will change. The International Energy Agency estimates a rise of 4,000% over the next 20 years — “from 81 metric tons in 2020 to 3,352 metric tons by 2040”. How they can be quite so precise, I’ve no idea, but one presumes there is a methodology.

80% of all nickel historically mined, says the Nickel Institute, was extracted over the past three decades. Worldwide, around 2.5 million tonnes of nickel are mined per year, according to this year’s US geological survey. Indonesia (760,000 tonnes) is the world’s biggest producer, followed by the Philippines (320,000 tonnes), Russia (280,000 tonnes), New Caledonia (200,000 tonnes), Australia (170,000 tonnes) and Canada (150,000 tonnes).

The world’s nickel resources are currently estimated at 300 million tonnes, and there are thought to be significant deposits in the deep sea, which no doubt humans will eventually start mining (if they don’t get to outer space first).

The world’s biggest producers are Vale, Norilsk Nickel, Jinchuan Group International Resources, Glencore and BHP Group – the latter two being the simplest option for UK investors. But they are far from pure plays: BHP’s nickel division accounts for less than 1% of its earnings.

The small and mid-cap pure plays are where the big nickel bucks will be made – and lost.

Tesla is roaring ahead, says Lex in the Financial Times. Sales reached almost $12bn in the second quarter, nearly double the level of a year ago, while operating profits tripled to $1.3bn. Tesla “benefited from higher sales volumes and reined in its operating costs”. Tesla also seems optimistic about the future, as it has already announced “robust” deliveries of new vehicles for the second quarter, despite supply-chain problems.

The latest figures suggest that Tesla “has finally joined the grown-ups”, says Antony Currie on Breakingviews. Its pre-tax profit margin of 11% rivals Toyota and General Motors (GM). Still, this doesn’t mean the shares are worth buying. They look wildly overvalued at 115 times forward earnings. Meanwhile, the group is facing growing competition from both “established manufacturers”, such as Volkswagen, Ford Motor and GM, and “young start-ups” such as Lucid. Tesla may have avoided the fate of other electric carmakers, such as Faraday Future, Fisker Automotive and Lordstown Motors, which either went bankrupt or failed to break through, but even CEO Elon Musk accepts that Tesla’s future may not be as rosy as its past, says Io Dodds in The Daily Telegraph.

He warned against complacency, cautioning that “the seeds of defeat are sown on the day of victory”. In particular, he admitted that Tesla was vulnerable to further supply-chain pressures, while Tesla continues to experience “repeated turbulence” in China due to a series of protests by consumers about “alleged safety errors”.

Is the bitcoin bust over? The cryptocurrency has tumbled 37% since hitting an all-time high in mid-April. Yet the mini-bear-market may have bottomed out. At the time of writing bitcoin was trading just below $40,000, having gained more than 8% since the start of the month.

Sentiment towards bitcoin has improved on positive regulatory news, says Anthony Cuthbertson in The Independent. The Basel Committee, the global banking regulator, last week “formally recognised” the digital currency as an asset class. That paves the way for banks to hold crypto-assets. This marks “another major milestone” for the recognition of cryptocurrencies in “the world of traditional finance”. A day earlier the central American nation of El Salvador became the first in the world to make bitcoin legal tender. Elon Musk also had a hand in the latest bitcoin bounce, says Barbara Kollmeyer for Barron’s. The Tesla CEO confirmed that the company has only sold 10% of its bitcoin holdings, despite refusing to accept payments in bitcoin because of environmental concerns about its enormous energy impact. Bitcoin is thought to consume more electricity than the entire nation of Kazakhstan and not far short of “what is used by the Netherlands”.

Institutional adoption is gathering pace, says Laurence Fletcher in the Financial Times. A survey of hedge-fund managers by Intertrust Group finds that they expect “to hold an average of 7.2% of their assets in cryptocurrencies in five years’ time”, implying “$312bn of assets in cryptos”, according to Intertrust’s calculations. Current holdings are unknown but more institutional money is entering the market. The total market capitalisation of all cryptocurrencies is now about $1.7trn, equivalent to the size of Amazon.

Bitcoin jumped to an almost two-week high overnight after another tweet from Elon Musk. So what has he said now? He said Tesla would start accepting bitcoin as payment for its electric cars again if cryptocurrency miners were to use clean energy for their transactions.

In a Twitter post on Sunday, Musk said: “When there’s confirmation of reasonable (~50%) clean energy usage by miners with [a]positive future trend, Tesla will resume allowing Bitcoin transactions.”

Bitcoin jumped 10% to more than $39,000.

Musk was responding to criticism from Magda Wierzycka, chief executive of South African asset management firm Syngia, who had said that the US Securities and Exchange Commission should have investigated his recent spate of controversial tweets, alleging that they amounted to market manipulation.

Elon Musk’s whipsaw effect on the bitcoin price

Musk has pretty much been the “Fed” of the crypto world in recent months, able to move markets with his pronouncements. Last month, he sprung a nasty surprise on bitcoin hodlers last month when he announced Tesla would no longer accept bitcoin as payment for its cars because of concerns over high electricity usage in cryptocurrency mining.

That stunned the crypto world, and the bitcoin price slid by 13%.Before that, the cryptocurrency had been on a huge bull run, and Musk was a big part of that. Tesla bought $1.5bn worth of bitcoin in February and later it announced it started accepting bitcoin as a form of payment for its cars.

Musk’s outlandish love for the cryptocurrency, along with moves by major banks such as BNY Mellon and Goldman Sachs, appeared to usher in a new era of cryptocurrency turning mainstream. Added to that was euphoria around the listing of Coinbase, America’s largest cryptocurrency exchange, which went public in April.

But concerns over bitcoin’s effect on the environment, along with other factors, has helped it shed almost 40% from a high of almost $65,000 two months ago.

In another market-moving tweet, Musk said last month he held talks with bitcoin miners on improving the sustainability of the digital coin.

So why are some market watchers getting nervous about bitcoin’s energy usage?

Bitcoin’s energy concerns

Bitcoin mining is the process by which new bitcoins are created and the blockchain is maintained, with new transactions added and verified. Critics of the cryptocurrency – often derisively dubbed “no coiners” – point out the vast amounts of energy used by cryptocurrency mining.

Indeed, a study published by the University of Cambridge earlier this year shows that the bitcoin network’s annual electricity usage – currently at around 121 terawatt hours – is higher than that of Sweden. A separate report published in 2020 found that at present only 39% of proof-of-work mining – the method by which bitcoin transactions are verified – is powered by renewable energy

But, as Fred Thiel, chief executive of cryptocurrency mining firm Marathon Digital Holdings notes in Bloomberg, the cryptocurrency mining may be closer to becoming 50% clean than one would think, hinting that Musk may indeed allow cars to be purchased using bitcoin.

This is because China has already shut down many bitcoin mining operations in provinces that were powered by coal, which should theoretically contribute to cleaner mining processes.

What this means for investors

So with all that in mind, what does Musk’s latest tweet mean for investors?

The industry’s energy concerns are yet another obstacle in the way of mainstream adoption of bitcoin. The cryptocurrency market has been beset by one regulatory setback after another, and is prone to regulatory shocks. We saw that on Friday when the Basel Committee floated the idea of setting higher capital requirements on banks holdings of cryptocurrencies.

China has also banned its institutions from providing cryptocurrency services, and is cracking down on bitcoin mining in the country. So, clean or not so clean, Musk’s tweet may do little to give investors confidence that holding bitcoin will be smooth sailing.

It is still worth paying attention to bitcoin and cryptocurrencies, and learning as much as you can. But until the market can be moved to the “moon” and back by a single tweet from a capricious CEO, it can’t be said to be a reliable long-term investment.

Banks holding cryptocurrencies may have to set aside much higher levels of capital to reflect the growing risks of holding them, global regulators said this week.

The recommendations came as part of a consultation report released by the Basel Committee on Banking Supervision, which sets global standards for the regulation of banks.

The report called crypto assets an “immature asset class” that pose several major risks to banks, including credit risk; market risk; operational risk (including fraud and cyber risks); money laundering and terrorist financing risk; and legal and reputation risks.

What is the Basel Committee proposing?

The committee is proposing to divide cryptocurrencies into two different groups.

The first group proposes placing tokenised assets and stablecoins under the existing Basel Framework with some modifications and guidance. It proposes regulating them in the same way as other financial instruments such as loans, deposits, equities, bonds. “Tokenised assets” are simply blockchain tokens whose value is tied to a real asset, such as gold. Stablecoins are a similar concept, but are specifically tied to fiat currencies.

As such, the regulators perceive both tokenised assets and stablecoins to be slightly more “stable” compared to the likes of bitcoin and other digital currencies.

The second category involves subjecting cryptocurrencies such as bitcoin to a “new conservative prudential treatment”, the statement said, which would apply a 1,250% risk weighting to the banks’ exposure to digital currencies. This means that banks may have to hold a dollar of capital for every dollar held in bitcoin, so a $100 exposure to bitcoin would result in a capital requirement of $100.

However, after the announcement, bitcoin rose briefly to more than $38,000, which implies that markets had been expecting tougher action.

Also while regulators are clamping down on the still immature crypto market, the tougher rules also suggest they are slowly starting to perceive crypto as an asset class, something which lent support to the market.

Denis Vinokourov, head of research at Synergia Capital, echoes this point: “as cryptocurrencies begin to make their way into the traditional financial ecosystem, it is only normal to expect various regulatory bodies to begin to set and then also try to coordinate regulatory initiatives to protect savers and investors”, Vinokourov told CoinDesk.

Crypto markets have weakened in recent weeks, due to a bout of bad news – regulatory clampdowns by countries such as China, and a series of U-turns by Tesla’s Elon Musk, who is known in some circles as “the Federal Reserve of the crypto world”.

So if crypto prices were creeping downwards anyway, then why is the Basel committee worried about banks’ exposure to crypto?

Governments have been getting nervous about cryptocurrencies for a while

Crypto markets have spent much of the last few months hitting record after record. Much of it had to do with greater mainstream adoption by banks such as BNY Mellon and Goldman Sachs and a series of bullish statements by Elon Musk.

Tesla said it bought $1.5bn worth of bitcoin in February and later announced it started accepting bitcoin as a form of payment for its cars. The listing of Coinbase – America’s largest cryptocurrency exchange – in April also lent support to the crypto market.

But Musk backtracked on his love for bitcoin and last month said Tesla would no longer accept it because of concerns of high electricity usage in bitcoin “mining”, the process by which new cryptocurrency units are created.

This came just days after China banned its institutions from providing cryptocurrency services, and banned bitcoin mining in the country.

The rise in cryptocurrencies has alarmed regulators and many countries such as China, the US, Japan, the UK, to name a few are looking at launching central bank digital currencies (CBDCs), their response to a cashless economy. Countries are unlikely to want competition to their own CBDCs.

Bitcoin has lost more than 30% in a month. But even with this, it is up 30% since the start of the year and is trading below $38,000, at the time of writing.

So given bitcoin and some digital currencies were falling anyway, should investors care about the Basel proposals?

What this means for digital currencies and investors

The Basel Committee suggestions are “a piece of news that both advocates and critics of bitcoin will declare as a win”, says Luke Sully, chief executive of Legermatic.

On one hand investors may rejoice in the fact that bitcoin is now a recognised asset class, but the more onerous capital requirements may “make it an unpalatable business” for banks. So if it is going to cost banks more to hold cryptocurrencies, they may theoretically hold less.

But at the same time, perhaps these recommendations – if realised – could be a turning point where regulators are giving banks the green light to get involved, in a safer way, albeit at a higher cost.

Nigel Green, chief executive of advisory company deVere Group shares the same view, saying that the the tough stance “would further help protect investors, shore-up the market, tackle criminality, and reduce the potential possibility of disrupting global financial stability, as well as offering a potential long-term boost to those banks that introduce it”, he said.

For investors, it’s still probably worth paying attention to the sector – the market is growing and it could be said that regulators caring about it enough to propose safer ways for banks to hold them is evidence of the market maturing. But remember that putting money into bitcoin – or any other digital currency – remains a highly speculative punt.

Buying foreign shares directly remains a minority sport among British investors. There were around one million trades on overseas exchanges through UK stockbrokers in the last quarter of 2020, compared with around 7.5 million trades in UK securities, according to analysis from Compeer, a benchmarking firm that compiles data for the wealth-management industry. However, this is substantially higher than it was just a couple of years ago, when international trades would never come close to half a million even in a strong quarter.

Even allowing for the fact that many people traded far more than normal in the turmoil of 2020, it’s clear that investors are becoming more willing to invest in overseas stocks than they used to be. Particularly popular international shares such as Tesla now routinely appear in lists of the most actively traded shares at major UK stockbrokers – something that we almost never saw before.

MoneyWeek has always believed that investors should think internationally, so this is a trend that we’re pleased to see (even if we’re not entirely convinced that Tesla is worth 135 times forecast earnings). There’s no real reason why investors should favour UK stocks over major American, European or Asian ones to the extent that they do: it’s a legacy of the time when trading on international exchanges used to be far more difficult and costly and so few private investors did so. If you’re considering investing in overseas stocks for the first time, these are a few of the most useful things to know.

What markets can I invest in?

The US, Canada and western Europe are the easiest markets to access. That’s partly because most stocks can be held as Crest Depository Interests (CDIs), which means that the trade can be settled via Crest (the UK’s central securities depository, which keeps shares in electronic form). This is largely invisible to you as an investor, but makes the whole process of trading and settlement much simpler for brokers – they don’t need to have custodians in other countries to hold the stocks on their behalf or to be members of the local securities depository in their own right.

CDIs aren’t available for other major markets, so these require more work and costs for brokers to put trading arrangements in place. Hence most UK brokers don’t offer them and those that do are only likely to bother with a limited number of countries, such as Australia, Hong Kong, Japan and Singapore. The obstacles to dealing in many smaller markets or emerging markets include demand (not enough people are interested for it to be worthwhile), but also sometimes legal restrictions on foreign investors or frictions that make trading more bureaucratic.

For example, China doesn’t let foreigners trade directly in shares listed in Shanghai or Shenzhen (although it is possible to trade some major ones through the Shanghai-Hong Kong and Shenzhen-Hong Kong Stock Connect). India requires foreign individual investors to register with the local authorities and open dedicated accounts with a very limited number of local brokers; it’s bureaucratic and I don’t know anybody who’s done so. Korea and Taiwan are open to foreign investors and have large liquid markets with interesting high-tech companies, but have requirements that make it more of a hassle to trade and demand is not high enough to make this worthwhile for UK-based brokers.

That said, a substantial number of major companies from awkward markets are available as American Depository Receipts (ADRs) listed in New York or Global Depository Receipts (GDRs) listed in London. ADRs and GDRs are securities that give you rights over one or more underlying shares in a company listed on its local stock exchange (including receiving dividends). So while you may not be able to trade directly in Korea or Taiwan through a UK broker, you will be able to buy ADRs in Taiwan Semiconductor Manufacturing or GDRs in Samsung Electronics, or any number of Russian stocks with London-listed GDRs.

Which brokers can I use?

This means that you have a fair amount of choice when it comes to the US and Europe. AJ Bell Youinvest, Hargreaves Lansdown, iDealing, Interactive Brokers, Interactive Investor and Saxo Capital Markets all offer a wide range of markets, while Halifax/iWeb/Lloyds Share Dealing (the same firm under different brands) and IG offer a much more limited range.

Beyond that, the shortlist gets smaller. Interactive Brokers and Saxo offer the major Asian markets for online trading (AJ Bell will trade in them by phone, but with a £10,000 minimum trade size), while Interactive Investor offers Australia, Hong Kong and Singapore (not Japan). Interactive Brokers and Saxo cover most of eastern Europe between them. South Africa is available through AJ Bell (by phone) and Saxo (online), while Interactive Brokers is the only UK-regulated discount broker that trades in Mexico. Many of these markets and perhaps a couple of others may be available through traditional stockbrokers such as Charles Stanley, Killik & Co or Redmayne Bentley – but you will pay substantially higher fees.

Which brokers are cheapest?

It’s impossible to say which of these brokers offers the best value, because that depends on what you need and how you trade, but there is one wrinkle that is worth keeping in mind when comparing costs. While the headline dealing rate for foreign securities is often the same as for UK securities, converting sterling into foreign currency usually comes with a substantial mark-up over the prevailing exchange rate.

Some brokers only allow you to hold sterling in your account, so you have to change currencies every time, while others let you hold foreign currency. If you are going to be trading in and out of shares in the same currency regularly, the ability to keep proceeds in that currency is likely to save on costs over the long term, but if you trade infrequently and hold for longer periods the impact of this may still be outweighed by other costs.

You can expect to pay between 0.5% and 1.5% in foreign exchange (FX) commission – this varies between brokers and will often depend on the size of the trade. The main exception is Interactive Brokers (a large US broker with a UK-regulated arm), which charges only a negligible FX margin and has exceptionally low trading commissions. So if you are looking for the cheapest international broker, it probably ticks that box for most active traders and even some long-term investors. Set against that, it is aimed at experienced investors (so the platform is more complex than most of the other brokers), it does not offer an individual savings account (Isa) and administration fees for a self-invested personal pension (Sipp) are higher than most.

Can I hold foreign shares in an Isa or a Sipp?

Isas and Sipps can be used to shelter you from UK income and capital-gains taxes on foreign shares in the same way as with UK shares. However, the rules for Isas include one awkward restriction: the shares must trade on what HM Revenue & Customs considers to be a recognised stock exchange.

This rather arbitrary status includes most major markets, but has some surprising exclusions and applies to where the underlying security is listed rather than where you trade it. This means that while most foreign shares you buy through a UK broker are likely to be Isa-eligible, you will encounter some major shares that trade in London or New York as GDRs or ADRs that are not. This restriction does not apply to Sipps, which have the ability to hold a much wider range of assets.

Isas are also not permitted to hold foreign currency, so you will have to trade in and out of sterling each time – meaning that FX mark-ups can become pretty significant. Sipps are allowed to hold foreign currency, but not all brokers will support this. Sipps that do so tend to have higher administration fees than those that just allow you to hold sterling.

Will foreign governments tax me on dividends?

While Isas and Sipps save you paying UK income tax, they are of only limited use when it comes to the greatest frustration of international investing: withholding taxes on dividends. Many governments deduct a percentage of every dividend before it’s paid to you. The amount that they are allowed to deduct is capped under tax treaties between the UK and the other country – typical treaty rates are 10% or 15%. However, many countries withhold more (Switzerland takes an extortionate 35%) and tell foreign investors that they can reclaim it if they are entitled to a lower rate.

Needless to say, reclaiming tax from a foreign tax authority is generally a bureaucratic process that is openly designed to minimise the amount of tax that is ever likely to be reclaimed and is rarely worth considering unless you are receiving very substantial dividends. So it’s important to look at foreign dividends net of the withholding tax that you will pay when deciding how attractive they are, and pay particular attention to countries with low, or no, withholding tax.

It would clearly be better if brokers could arrange for dividends to be paid with the right level of withholding tax deducted, but for obvious reasons very few countries have such a helpful system. The notable exception is the US (strangely, given how incredibly dystopian its tax system is in many other ways). If your broker supports it (most do, but not all), completing form W-8BEN will allow your dividends in a regular account or Isa to be taxed at 15% rather than 30%. Some brokers – AJ Bell and Hargreaves Lansdown are examples – can also get tax relief on Canadian shares if you complete form NR301.

If your broker has set up its Sipp arrangements in the optimal way (with US holdings for their Sipp clients separate from other US investments), they will also be able to get US dividends paid with no withholding tax. This is by no means ubiquitous, so check before you open an account because the extra tax savings could be helpful for income investors.

Microchips – or semiconductors – are used in the production of a huge range of products, from cars to computers, fridges and much more.

Right now, the world is facing an acute shortage which is wreaking havoc for many companies. At the same time, demand is peaking, leading to supply chain issues for a number of sectors.

Tesla’s Elon Musk recently likened the current semiconductor shortage to the great toilet paper drought at the start of the Covid crisis. “Our biggest challenge is supply chain, especially microcontroller chips. Never seen anything like it”, he said.

In a sign that the world’s largest economy is getting increasingly worried about the supply chain issues related to microchips, US president Joe Biden this week announced he will establish a “supply-chain disruptions task force” to address supply chain shortage in a number of crucial fields.

So why is the world running short on semiconductor supply and who all does it affect? Here’s a broad summary of the story so far.

What are semiconductors and why are they important?

Semiconductors form the backbones of most modern electronic equipment. They are usually made of silicon and, as their name implies, they conduct an electrical charge more than an insulator, such as ceramic, but less than a true conductor such as metal.

Controlling their electrical conductivity means they can be used to switch or amplify electrical signals, and can be used to form integrated circuits, memory chips and microprocessors.

Any disruption in the supply of semiconductors could halt production across multiple industries worldwide. This is because the supply of chips cannot be easily increased or decreased at a stroke. Changing the production line can be a lengthy process and takes weeks or even months.

Why is there a shortage?

In the early days of the covid pandemic, staff at microchip production plants in China and globally were unable to work. And, as the world locked down, the lack of demand forced many microchip producers to shutter operations or operate at very low capacity.

But while Covid-19 lockdowns caused lower demand for some industries, others, such as laptop manufacturers, saw a surge in demand for products as much of the world moved to working from home. So demand for microchips bounced back faster than many producers anticipated, bringing us to where we are today.

On top of all that, a series of unfortunate events around the world worsened the situation. A fire broke out at a plant near Tokyo belonging to chip supplier Renesas; Texas suffered an unusually cold spell earlier this year; and Taiwan saw the worst droughts in its 56-year history.

Why are car producers so heavily affected by the chip shortage?

The car manufacturing industry is highly dependent on semiconductors. As Dan Hearsch, managing director in AlixPartners’ automotive and industrial practice points out, the automotive industry uses more chips than other sectors; chips are necessary for basic functions of vehicles, including power steering and brakes, to operate.

“There are up to 1,400 chips in a typical vehicle today, and that number is only going to increase as the industry continues its march toward electric vehicles, ever-more connected vehicles and, eventually, autonomous vehicles”, he says.

The chip shortage has forced some major vehicle-makers to leave some features out of the vehicles they produce. Nissan reportedly excluded navigation systems out of some of its completed vehicles, and Renault stopped offering an oversized digital screen behind its steering wheel, reports Bloomberg.

Both Ford and General Motors have warned of huge losses in the coming year due to supply chain issues. Ford expects the chip shortage to hammer its earnings by around $2.5bn in 2021, while General Motors is bracing for losses in the range of $1.5bn-$2bn. Consulting firm AlixPartners has warned the global chip shortage will reduce the global vehicle industry’s revenue by $110bn in 2021.

Apart from the automotive industry, all consumer technology industries are highly vulnerable to the shortage. Goldman Sachs expects it to have ripple effects across 169 industries in some way or another, reports Yahoo Finance.

When is the semiconductor shortage expected to end?

Most market watchers expect the shortage to persist at least until early next year. Flex, the world’s third-largest manufacturer, warned last weekend the shortage will last until at least mid-2022. Goldman Sachs was more upbeat, suggesting that the chip shortage will dissipate in the second half of 2021.

“Our analysts believe we’re probably in the worst period of that right now. That is, we’re seeing the biggest disruption downstream (in) industries like auto right now and that will gradually ease over the back half of the year,” Andrew Tilton, the bank’s chief Asia economist told CNBC this week.

Rising Covid cases in Asian countries such as South Korea, Vietnam and Taiwan could lead to further supply chain issues and worsen the shortage of chips. But Tilton doesn’t think the situation has caused a significant shortfall in production.

How will the shortage affect investors?

A shortage in semiconductors means many producers could pass on the cost of higher raw materials (due to scarcity) on to consumers, which may be inflationary.

But at the same time, the shortage also means chip producers could be more profitable than ever. Bank of America is recommending Qualcomm for its “high margin royalty business”, Analog Devices for its “diverse product lines”, and Qorvo for its “diverse 5G handset exposure with solid infra (infrastructure) portfolio,” reports CNBC.

Will there be a supply glut later on?

While most of the world is worried about a shortage of chips, the lead time – how long it takes to get a chip once ordered – may actually be a sign that a supply glut in microchips may follow.

Bloomberg reported in March that microchips are witnessing higher lead times. So there is the risk that the supply chain issues force companies to “over order” and also the risk that the world is left with too many microchips which may then result in the opposite story: a crash in the price of microchips. Time will tell.

Electric-vehicle manufacturer Tesla (Nasdaq: TSLA) has epitomised the boom in tech shares. Despite predictions from a range of pundits that the surging stock was about to slump, it has gone from strength to strength, while the group has started turning a profit. Each of my three recommendations that you short it, in March 2017, April 2018 and March 2019, has lost money. Even though Tesla’s shares have fallen after CEO Elon Musk’s foray into bitcoin, they have still risen 17-fold in two years.

Nevertheless, there are some solid reasons to think that the share-price surge may be overdone. Firstly, the enthusiasm for electric cars among governments around the world, with the UK announcing last November that it planned to ban the sale of petrol and diesel cars from 2030, is a double-edged sword for Elon Musk’s company. This is because the car industry is now pouring billions of dollars into its own models, with General Motors alone announcing at the start of this year that it is going to invest $27bn in electric-vehicle development.

Rivals are catching up

Perhaps the strongest potential competitor is Volkswagen (VW), which is winning plaudits for its new generation of electric vehicles. VW already has ambitious plans to overtake Tesla in the number of electric vehicles that it sells. Meanwhile, car companies are also becoming more environmentally friendly in terms of the amount of carbon that is produced during the manufacturing process. This is important because Tesla currently makes the vast majority of its profits from selling carbon credits to companies such as Stellantis (formed out of the merger between PSA and Fiat Chrysler), which recently announced that it would stop buying credits from Tesla.

Even if Tesla can find someone else to buy its carbon credits, its valuation seems excessive. Its current market capitalisation of £427bn means that it is worth seven times more than General Motors and more than Toyota, Volkswagen, Daimler and Ford put together. Another sign of its overvaluation is a 2022 price/earnings (p/e) ratio of 101 and a multiple of 16 times current sales, figures that would seem excessive for an internet start-up, let alone a capital-intensive car company likely to find it very hard to scale up its production to the levels that would justify such a valuation.

Tesla’s share price has declined by nearly 30% from its peak at the start of this year, which suggests to me that investors are finally beginning to turn sour on the company. So I would recommend going short against Tesla for a fourth time at the current price of $637. However, given Musk’s ability to move markets in both directions, I would suggest that you do so at £3 per $1, and set a stop-loss at $967, which gives you a total downside of $990.

Trading techniques: dividends deliver

Last year was brutal for income investors. More than half of the companies in the FTSE 100 decided to cut, defer, or even cancel their payouts to shareholders. In some cases this was a voluntary measure in order to conserve cash during a time of uncertainty. In others, notably in the banking sector, pressure from regulators prompted companies to act. The outlook has improved, however. Investment platform AJ Bell notes that while a few companies have cut dividends so far this year, all the indications suggest that listed firms will be increasing them by around a fifth in 2022.

But what might this mean for share-price returns? In theory a firm’s decision to increase dividends should have a neutral impact on share returns, since any money that the shareholders receive will be balanced by the fact that a company has less money to pay down debt or put back into the business.

Some people even argue that it could be a negative sign that the company is running out of ways to reinvest money profitably. However, increasing dividends are usually seen as a positive sign: the company is generating plenty of cash. A study by Jason Turkiela of the University of Oregon in 2014 of a sample of US equities between 2002 and 2012 found that the decision to increase quarterly dividends did lead to a higher share price in the next few days, although most of the rise took place in the first day. Another analysis by Ned Davis Research and Hartford Funds found that between 1973 and 2020, $100 invested in an index of firms that had either increased their dividend or started paying one in the previous year, would have grown to $11,346, compared with $3,764 for the S&P 500. But $100 invested in those who had cut or eliminated their payout would have shrunk to $56.

How my tips have fared

In the past six weeks three of my six long tips have risen. Media group ITV climbed from 122p to 128p, cruise-ship operator Norwegian Cruise Line increased from $27.97 to $31.90 and construction firm Morgan Sindall Group went up from 1,918p to 2,205p.

However, US housebuilder DR Horton fell from $95.72 to $95.29 and spread-betting firm Plus500 declined from 1,514p to 1,511p. What’s more, while transport group National Express fell from 309p to 304p, it dipped below 290p, the level at which I suggested that you close your position. Overall, then, my long tips (counting National Express) are making a total profit of £6,619, up from £6,380,

My short tips are also a mixed bag, with three appreciating and two falling. Electric-lorry manufacturer Nikola increased from $10.29 to $14.96, cloud-computing specialist Snowflake went up from $230 to $238 and hydrogen-fuel electric-vehicle maker Plug Power increased from $25.24 to $30.70.

However, online grocery firm Ocado fell from 2,059p to 1,889p. Bitcoin also fell below the $40,000 level at which I suggested that you started shorting it, and is currently at $34,132. In total my shorts are making profits of £2,561, up from £2,380.

I now have five long tips (ITV, Norwegian Cruise Line, Morgan Sindall, DR Horton and Plus500) and five shorts (Nikola, Snowflake, Plug Power, Ocado and bitcoin), which is a good balance, so I don’t recommend closing any more positions.

However, I would increase the stop-loss on DR Horton to $64 (from $63). I also suggest you reduce the level at which you cover Snowflake to $410 (from $420) and cut the price at which you cover Nikola to $22 (from $23).

There comes a time “in the life of every cryptocurrency investor… when they watch a significant amount of their money disappear in the span of a few hours”, says Jen Wieczner in New York magazine.

Bitcoin fell by 30% last week and is down by more than 40% from its mid-April highs. The past week has seen a stomach-churning series of rallies and reverses, including a 30% fall in a single day on 19 May.

Bitcoin is a poor store of value

At the time of writing bitcoin was still well short of $40,000; it traded as low as $31,970 at the weekend. The price has been hit by news from China, where regulators last week banned banks and payment companies from accepting cryptocurrencies. Elon Musk’s Tesla also says it will no longer accept payments in bitcoin because of the environmental impact of bitcoin mining.

Even after this fall, a person who bought the cryptocurrency five years ago is still “sitting on gains of over 6,000%”, says Aaron Back in The Wall Street Journal. The “libertarian cryptoevangelists” hope digital currencies will one day replace government-issued money. But this bout of extreme volatility is a reminder that bitcoin is a lousy store of value or means of exchange.

If bitcoin isn’t a currency, then what is it? asks John Authers on Bloomberg. Perhaps the best analogy is with big tech stocks such as Facebook or Google. At a market capitalisation of more than $800bn, bitcoin is comparable in size to some of these firms. Bitcoin often mirrors their price movements too. If anything, the cryptocurrency resembles an early-stage tech company, with “promising but unproven technology that people are prepared to buy”.

Blue-chip bitcoin?

The bitcoin market is refusing to mature. As Avi Salzman notes in Barron’s, the market capitalisation of bitcoin has risen almost 100 times since 2016, but it “is just as volatile as it was five years ago”. That is “almost unheard of in other markets”. Usually “an asset becomes less volatile as its value grows and its investor base widens”.

Big institutional investors had driven much of the enthusiasm about cryptocurrencies this year, but they could be getting cold feet. JPMorgan reports that “professional investors have been shifting their crypto assets to gold”, the first time that has happened for several months. Long reluctant to dive into unregulated assets, the big investment banks have been forced into the crypto market by “obsessive interest from some customers”, says The Economist. Goldman Sachs recently relaunched its crypto desk, while BNY Mellon is working on rolling out bitcoin exchange-traded funds. Wall Street’s financial “muscle” will be vital if bitcoin is to flourish, but a “prolonged rout could…scare off prospective converts and trigger a regulatory crackdown”.

Bitcoin has been declared dead after previous crashes only to “pick itself up and start again”, says Authers. It helps that it inspires “cultish devotion”, with buyers resembling “believers rather than investors… was this the top of the bubble? It might be, but it probably isn’t”.

Elon Musk, known in some circles as the “Fed” of the crypto world, has helped bitcoin recover some of its losses by tweeting that he held talks with bitcoin miners on improving the sustainability of the digital coin.

The bellwether cryptocurrency is trading 3% higher today, just below $38,000, adding to a 12% gain overnight after Musk’s tweet on Tuesday, where he said: “Spoke with North American bitcoin miners. They committed to publish current & planned renewable usage & to ask miners WW [worldwide] to do so. Potentially promising.”

Last week, Tesla’s chief executive sprung a nasty surprise on bitcoin hodlers when he said his company Tesla will no longer accept bitcoin as a form of payment, a decision he claims was prompted by environmental concerns of the cryptocurrency’s high energy usage. The decision had stunned the crypto world as Musk gave bitcoin a mega endorsement back in February when he announced that Tesla had purchased $1.5bn worth of bitcoin.

Bitcoin and the wider cryptocurrency markets have struggled in recent week, in part due to Musk’s announcement, but also due to a double whammy clampdown by China, which banned its institutions from providing cryptocurrency services, and banned bitcoin mining in the country. More than 65% of cryptocurrency mining takes place in China.

Is Musk’s latest announcement of holding mining talks enough to reduce volatility in the market?

Environmental concerns aren’t bitcoin’s only problems

Bitcoin mining is the process by which new bitcoins are created and the blockchain technology is maintained. Crypto haters (often called “no-coiners”) note the high energy usage involved in mining. A study by the University of Cambridge, published earlier this year, shows the bitcoin network’s annual electricity usage exceeds that of Sweden’s, at around 121 terawatt hours.

Even if Musk’s talks accelerate greater change and result in a more environmentally-friendly crypto market, digital currencies have several other hurdles to cross. Several countries are piloting central bank digital currencies (CBDCs), as their response to a cashless economy (my colleague John looked at this in more detail last week).

China said in a statement last week that it will “crack down on bitcoin mining and trading behavior and resolutely prevent the transfer of individual risks to the society.”

Crypto-mining operators, including the likes of Huobi Mall and BTC.TOP, announced that they would withdraw some of their services in China following the clampdown on crypto miners.

China is exploring the digital yuan, so it is more likely that its clampdown are measures the country is taking to cut out competition from parallel currencies.

While bitcoin is still up by more than 300% in the last 12 months, it has shed more than 40% since touching an all-time high of $64,748 in mid-April.

Bitcoin is touted as a hedge against inflation. But, with the US potentially heading for a big bout of inflation, investors need to be aware of the fact that a market so vulnerable to tweets from one billionaire means that it cannot be relied on as an inflation hedge nor a serious long-term investment.

By all means pay attention to the space. Take a modest position, perhaps. But don’t bet your house on it.

Just when the crypto market was reeling from Elon Musk’s U-turn on bitcoin, China sprung another nasty surprise on investors.

The authorities have issued a scathing statement saying that digital currencies shouldn’t be used as payment, and have banned financial institutions from providing crypto services.

The statement on Tuesday – issued by the country’s National Internet Finance Association, the China Banking Association, and the Payment and Clearing Association of China – stated that virtual currency “is not a real currency” and thus “should not and cannot be used as currency in the market”.

What was the result? A bitter-sell off in cryptocurrencies which were already having a topsy turvy week.

A hard week for crypto investors

Bitcoin fell to its lowest level in around four months on Wednesday. The cryptocurrency fell to $30,262 at the session lows, a level not seen since the end of January.

The bellwether cryptocurrency has been on a tear for most of this year, particularly since Elon Musk announced in early February that electric car giant Tesla had bought $1.5bn in bitcoins, and that it would start accepting the cryptocurrency as payment for its cars.

But Musk’s announcement last week that Tesla will no longer accept bitcoin as payment – combined with a number of contradictory tweets signalling that Tesla may have sold its bitcoin holdings – ignited a brutal sell-off for the cryptocurrency, which was already wobbling having hit a fresh all-time high above $60,000 last month.

China’s crackdown has merely added fuel to the fire, leaving bitcoin down as much as 30% at one point on Wednesday. At the time of writing, bitcoin is trading 16% lower, just shy of the $37,000 mark. Today’s volatility makes China’s other warning in today’s statement – about the risks of speculative crypto trading – look somewhat redundant.

What is China proposing and how will it impact bitcoin?

This isn’t China’s first crackdown on crypto. In 2017, it shut down many cryptocurrency exchanges, and banned initial coin offerings. But why the fresh reaction now?

There are all sorts of possible reasons of course. The statement hints at a paternalistic concern for speculators: “Recently, crypto currency prices have skyrocketed and plummeted, and speculative trading of cryptocurrency has rebounded, seriously infringing on the safety of people’s property and disrupting the normal economic and financial order”.

It’s a nice idea, but there’s another reason why China – and indeed, most governments around the world – don’t like the idea of independent cryptocurrencies taking off. That’s because it has its own digital currency to protect and promote – the digital yuan.

China is heavily dependent on electronic payments and has been exploring the launch of the digital yuan since 2014. It’s far from the only country to be interested in creating a central-bank digital currency (CBDC) – most big economies have at least some plans to introduce one in the long run. The UK is studying the potential of launching a “Britcoin”.

But last month, China became the first major economy to announce a blockchain-based version of its digital currency.

While bitcoin and the digital yuan are both virtual currencies, the resemblance ends there. Cryptocurrencies such as bitcoin are decentralised in nature, so they are not controlled by a central bank or any other authority – there is no centralised issuer. But China’s digital yuan is very much centralised – as with any other “fiat” currency, supply is entirely controlled by the central bank and the government, which is precisely what bitcoin was designed to bypass.

So as Adam Reynolds, chief executive for Asia Pacific at Saxo Markets, puts it, chances are that China’s new crypto concern is driven more by the threat cryptocurrencies pose to China’s CBDC ambitions.

“Chinese capital controls can be challenged by cryptocurrency purchases in the country and transfers out of the country,” Reynolds says. “So avoiding use of them in the country is essential to maintaining capital controls. The only tolerable digital currency to a government with strong capital controls is their own CBDC”.

What does this mean for you?

There are several key messages to take away from China’s ban and the last few days in the crypto world. One obvious one is that while it makes sense to familiarise yourself with the usage of cryptocurrencies, it’s still not a market to base your retirement portfolio on.

Perhaps more importantly, it’s a reminder that governments don’t like competition. And China is unlikely to be the only one. As Neil Wilson, chief market analyst at Markets.com, points out: “China has for some time been putting pressure on the crypto space, but this marks an intensification – other countries might follow now as central banks make strides towards their own digital currencies… Until now western regulators have been pretty relaxed about Bitcoin, but this might change soon,” he adds.

For more on how far bitcoin might have to fall, read my colleague Dominic Frisby’s latest take on the market here.

If you bought bitcoin or another cryptocurrency in the last few months, chances are your portfolio has seen both pain and joy in equal measure. We saw that yesterday when bitcoin tanked after Tesla’s Elon Musk said the company would no longer allow its cars to be bought with bitcoin.But crypto portfolios could face a much bigger threat in coming weeks: the capital gains taxes announced in US president Joe Biden’s $1.8trn “American Families Plan” last month.

What has he proposed and why does this spell trouble for crypto hodlers – even those who aren’t liable for the tax themselves?

Biden’s big capital gains tax hike

Biden wants to raise the highest long-term capital gains tax (CGT) rate in the US from 20% to 39.6% for people earning more than $1m a year. In the US, there are short-term (less than 12 months) and long-term (over a year) capital gains tax rates. Short-term gains are taxed at between 10% and 37%, while long-term gains attract a tax rate of 0%, 15% or 20%, depending on the individual’s income.

Bitcoin and several other cryptocurrencies have risen exponentially in the past year. As a result, longer-term holders now face the spectre of higher capital gains taxes –assuming that they keep holding. Those earning over $1m could end up paying 43.4% on any profits (that includes the existing 3.8% surcharge on higher income investors). And those in areas such as California or New York, with other taxes to add on top, could face handing over more than 50% of the profits on their crypto assets.

That’s quite the increase. And while Republicans strongly oppose Biden’s tax plans (which are partly to fund his two-stage infrastructure package, the “Build Back Better” plan), in reality he can push the package without bipartisan support if it turns out to be necessary. So there’s a decent chance of it actually getting onto the statute books.

The tax measures may trigger a sell-off in crypto markets

Clearly, if you’re going to see profits taxed more highly in the future, then some investors might like to take their profits now to be taxed at the lower rate. So it’s no surprise that news of the measures, proposed late last month, triggered a slide in the value of many crypto currencies.

And if the measures are pushed through, then the crypto market should brace itself for a sharp selloff, according to several tax experts MoneyWeek spoke to. “It’s a fair assumption that if the proposals become reality that it could generate some significant turbulence in the crypto markets as US investors seek to crystallise gains before any tax increase takes place,” says Chris Etherington, a private client tax partner at RSM UK.

Alex Straight, a partner at Blick Rothenberg, notes: “If Biden raises the long term capital gains tax rate to 39.6% for high earners who fall into that tax bracket, the benefit of holding onto your asset for greater than 12 months to achieve a tax saving would disappear. This tax difference is a key cost for regular people buying and selling cryptocurrency for ordinary use in the US.”

But he notes that as the tax benefit of holding for longer disappears as and when rates rise, more people could then trade more freely.

In the longer run however, the CGT measures will greatly alter the value of the crypto market, says Leigh Sayliss, partner at law firm Howard Kennedy: “Investors may wish to sell cryptocurrency, in order to crystallise any capital gain at the current tax rates – but that does not necessarily prevent other investors from wanting to buy the same currency once their gains have been locked in.”

Jason Cozens, founder and chief executive of fintech Glint says fears of higher inflation may still keep demand for cryptocurrencies strong irrespective of Biden’s plans: “Although the new CGT measures may be somewhat targeted at crypto holders, this could actually drive more consumers towards alternative currencies such as cryptos and gold as consumers are hit by increased taxation just as inflation spikes and interest rates remain at historic lows”.

So while investors should definitely have these tax rises on their radar, it isn’t a reason to completely freak out yet. Pay attention to the space but don’t put all your eggs in one bitcoin.

There’s never a dull moment in the crypto world. Bitcoin has crashed by more than 10% after Musk, the self-styled “Technoking”, said that Tesla is suspending purchases of its cars using bitcoin, due to concerns about the impact of cryptocurrency mining on the environment.

The announcement comes as a surprise to the crypto world – Musk gave bitcoin a mega endorsement in February when he revealed that his company had purchased $1.5 billion worth of bitcoin.

At the time of writing, bitcoin is down more than 13%, trading just below the $50,000 mark. The bellwether cryptocurrency tanked 13% after Musk’s announcement.

So what has prompted this apparent change of heart and what does this mean for bitcoin investors?

Bitcoin uses more energy than Sweden

“We are concerned about rapidly increasing use of fossil fuels for bitcoin mining and transactions, especially coal, which has the worst emissions of any fuel”, said Musk. “Cryptocurrency is a good idea on many levels and we believe it has a promising future, but this cannot come at great cost to the environment.”

That said, Musk said that Tesla will “not be selling any bitcoin”. He also said that the company still plans to use it for transactions once the mining of the coins uses more sustainable energy. He also said the firm will be looking at other cryptocurrencies “that use less than 1% of bitcoin’s energy per transaction”.

Critics of bitcoin point to the high electricity consumption involved in bitcoin mining, the process by which new bitcoins are created and the blockchain technology is maintained. Research from the University of Cambridge – published earlier this year - shows that the bitcoin network already uses more electricity per year than Sweden (the researchers reckon that bitcoin consumes more than 121 terawatt hours annually).

The price of bitcoin has hit a record high in April, on the back of higher mainstream adoption, record low interest rates and as America’s largest cryptocurrency exchange Coinbase went public. Even with Tesla suspending payments with bitcoin, the cryptocurrency is up more than 70% since the start of the year. Hgher prices act as an incentive for cryptocurrency miners to “mine” even more for digital currencies.

While Musk has endorsed both bitcoin and dogecoin – which started as a joke and is up around 8,600% a year – there are clear signs that Musk may actually be backtracking on some of his love for the crypto market.

Musk announced in quarterly results last month that Tesla sold 10% of its bitcoin holdings to foster greater confidence in holding “Bitcoin as an alternative to holding cash on balance sheet”. As such, Tesla cashed out $272m in digital assets, making more than $100m in profit.

The entire value of the crypto market fell to $2.06trn on Wednesday after Musk’s tweet, wiping as much as $365bn off the entire market, notes CNBC.

The implications for cryptocurrencies

With all that in mind, is bitcoin worth investing in?

Bloomberg argues that Elon Musk has become the “central banker of crypto”. And the fact that the cryptocurrency can tumble so sharply after just one tweet from a CEO shows how vulnerable the market is. It’s not just bitcoin. Doge had a rough week after Musk’s appearance on US comedy show, Saturday Night Live, where he likened the digital currency to a “hustle”, just days after it was trading at an all-time high.

Tesla’s announcement shows mainstream adoption of cryptocurrency is highly uncertain, says Laith Khalaf, a financial analyst at investment platform AJ Bell. “Tesla’s decision certainly puts pressure on other big companies who accept bitcoin to review their practices, because boardrooms will now be wary about getting it in the ear from ESG investors on the shareholder register”, Khalaf says. “This highlights that the long-term adoption of cryptocurrencies by businesses, consumers and investors is still highly uncertain, as Tesla itself has pointed out.”

So, while bitcoin has been embraced by institutions this year, long-run adoption may be a while away yet. That said, this will also act as an incentive for bitcoin miners – and also for other coins – to find solutions that allow them to fit better with our current ESG-fixated investment universe.

As far as your investments go, again we’d just reiterate – we don’t think you should ignore crypto. Become familiar with it and if you feel like putting some money into crypto, then by all means do. Just don’t bet your house on it.

Central bank digital currencies (CBDCs) received yet another shot in the arm last week after the Bank of England (BoE) and the Treasury launched a taskforce to look into a potential digital currency for Britain, nicknamed “Britcoin”.

The launch comes at a time when many central banks around the world are growing increasingly concerned at the breakneck speed at which cryptocurrencies are growing and being embraced by institutions.

Many Wall Street players and other institutions ranging from Tesla to payments processors like Visa have expressed a desire to allow their clients to invest or accept payments using bitcoin.

News of the taskforce also came shortly after Coinbase, America’s largest cryptocurrency exchange, went public earlier this month. So how might Britcoin work and how would it affect you?

What is Britcoin?

Britcoin is in very early stages and no actual decision has been made on whether to introduce the CBDC in the UK. But CBDCs have been on the BoE’s radar for a while. It’s been the topic of several speeches and also a discussion paper published last year.

The latest taskforce will be co-chaired by Jon Cunliffe, the central bank’s deputy governor for financial stability, and Katharine Braddick, the Treasury’s director general of financial services.

CBDCs may be inspired by cryptocurrencies, but in reality they are very different. For one thing, CBDCs will be controlled by central banks. This is the complete opposite to cryptocurrencies, which are decentralised – in other words, they are not backed by any central authority at all, instead by a network of users. Indeed, bitcoin was created in 2009 to bypass the traditional banking system in the wake of the anger felt at the sector in 2008.

So how would a centralised currency work? In the case of Britcoin, the BoE would create e-money tokens in the same way that paper money is created. This would pave the way for people to use Britcoin to buy and sell goods and services, effectively bypassing the middlemen, in this case commercial banks.

The BoE has also launched a CBDC engagement forum to talk to senior “stakeholders” and gain strategic insight into the non-technological aspects of the CBDC, as well as a CBDC Technology Forum to address the technological side of things.

How Britcoin compares to the rest of the world

Yet even with the launch of all the above, the UK lags a number of countries which are already well down the road to creating or releasing their own CBDCs.

The best example is perhaps Bahamas, which launched the world’s first CBDC – the “sand dollar” – last year. It was partly driven by the damage caused by Hurricane Dorian which devastated many bank branches and accelerated the use case for digital currencies.

PWC’s Global CBDC Index 2021 ranked the sand dollar and Cambodia’s CBDC project as first and second-highest in terms of progress. China’s digital yuan, which recently launched several pilot projects and may even be tested by foreign visitors at China’s 2022 Olympics, came third.

China has been exploring its digital yuan since 2014 as the world’s second-largest economy is heavily dependent on electronic payments. While its progress has been welcomed by some, many fear that it represents an extraordinarily powerful tool of social control by an authoritarian government – and also that it might be a step on the road to China taking on the US dollar’s status as reserve currency.

One thing is clear – the major developed nations are taking longer and being more cautious about the embrace of CBDCs. The European Central Bank recently published the findings of a consultation on digital currencies, while the US Federal Reserve is a few years away from developing its “digital dollar”.

Britcoin is likely to cut banks out as the “middleman”

That said, a number of Wall Street banks view virtual currencies as the next big disruptive force, says CNBC. The benefits of CBDCs are obvious – cost and speed are two, particularly for global transactions.

“Seamless cross-border transactions, businesses, and consumers can interact directly with the bank without spending a fortune on different intermediaries,” says Marie Tatibouet, chief marketing officer at cryptocurrency exchange Gate Technology.

Britcoin (and other CBDCs) also make a central bank’s life far easier. For example, rather than quantitative easing (printing money to buy government bonds), central banks could simply credit emergency funds to every individual directly, notes Tatibouet.

However, this would all be bad news for commercial banks. If consumers could hold an account with the central bank (which would then be viewed as the “safest” bank) that would represent an extraordinary level of competition. This is also one reason the BoE has been so keen to emphasise that Britcoin would sit alongside cash and bank deposits, rather than replacing them.

Will the BoE become “Big Brother”?

While Britcoin could have many advantages, the bigger concern is that it would also give the BoE (and therefore the government) the power to act as a “Big Brother” and spy on the financial affairs of its citizens.

Jason Cozens, founder and chief executive of Glint Pay, an online gold investment platform notes: “There is concern around the unprecedented level of data that governments and central banks will hold, as well as to what extent they may implement this level of control over consumers,” he says. “Big Brother is no longer just watching you, it's interfering in your finances.”

If this were to come true, it would have a host of adverse implications far beyond the discomfort of knowing there is surveillance. The government might decide to use this extra insight into people’s financial decisions and spending habits to try to nudge (or force) people to spend and save in a certain way.

Also, confiscatory monetary policy such as negative interest rates could be adopted by the BoE much more easily. If there is no physical cash and the central bank is the only account provider, then there is no alternative for your savings.

These might seem like extreme ideas, but we need only look back as far as 2008 to see that what seems extreme outside of times of crisis (money printing, negative interest rates in other parts of the world) rapidly becomes mainstream and then is never wound back when things calm down again.

As for what it means for decentralised “traditional” cryptos? That entirely depends on how public confidence fares in Britcoin or any CBDC and how central banks market CBDCs. In theory CBDCs are quite different from crypto, and shouldn’t hugely affect the crypto market.

But if governments did start to see CBDCs as the future, it’s hard to see them being keen on competition from other “independent” currencies – after all, history shows that the authorities rarely like to cede control over the financial printing press.

If you’d like to know more about bitcoin and cryptocurrrencies, you can get a free beginner’s guide to the cryptocurrency when you subscribe to MoneyWeek magazine. Find out more here.

Dogecoin is a cryptocurrency, just like bitcoin. Unlike bitcoin, it was launched as a joke. That was back in 2013. On Friday, it almost doubled – in a day. Today it has hit an all-time high of $0.43. All told, it has risen by more than 9,000% since the start of this year. Bitcoin has “only” doubled. What on earth is going on?

Dogecoin was created by software engineers Jackson Palmer and Billy Markus. It’s based on a popular internet “meme” which features a cute picture of a Japanese breed of dog – the Shiba Inu. As Markus (who left the dogecoin project in 2015) reiterated in a tweet at the weekend, “dogecoin started as a parody” of the crypto sector.

Yet today dogecoin is deemed far more valuable than many other “serious” crypto projects. It currently boasts a “market cap” of more than $50bn (clearly this will have fluctuated by the time you read this) which makes it the fifth-largest cryptocurrency by this measure, according to industry website CoinMarketCap.

So what began as little more than an internet sensation, now regularly ranks as a top ten cryptocurrency by market capitalisation.

How a joke cryptocurrency took off

Why has it taken off? Dogecoin’s most recent surge has coincided with the euphoria around last week’s public listing of America’s largest cryptocurrency exchange Coinbase. As such a number of cryptocurrencies including bitcoin, hit fresh records highs.

But dogecoin has also attracted a number of high-profile endorsements. The world’s richest man, Tesla founder Elon Musk has been following the coin for some time. In February it shot up after he tweeted that “Dogecoin is the people’s crypto”.

Last week, he tweeted an image of Spanish artist Joan Miro’s painting, “Dog Barking at the Moon”, with the caption “Doge barking at the Moon”. Dogecoin, which was already having a stellar week, rose 50% on the day Musk tweeted the picture.

Meanwhile, billionaire Mark Cuban and American rapper Snoop Dogg have also spoken in favour of the digital token.

Doge has also been targeted by a Reddit group called SatoshiStreetBets, similarly to the WallStreetBets group which pushed “meme” stocks such as video games retailer GameStop higher at the start of this year.

What’s the difference between dogecoin and bitcoin?

Dogecoin is similar to bitcoin in that it’s a digital medium of exchange. Lots of other cryptocurrencies have other uses – ether, the second-biggest crypto, is used in “smart contracts” on the ethereum blockchain, for example. But dogecoin is basically just meant to be digital money.

However, unlike bitcoin, the supply of dogecoin is not fixed, and it inflates at a faster rate. Technically, that should mean it’s less valuable than bitcoin, but it also means that it’s easier to “mine”, which in turn may have contributed to its recent rise.

As BitDegree, an online crypto education platform, puts it: “Dogecoin mining difficulty is more than one million times less than Bitcoin mining difficulty. This means you are much more likely to win the block reward when you mine Dogecoin.”

While both bitcoin and dogecoin use “proof of work” – the most popular method to agree how transactions (blocks) are added to the blockchain – dogecoin has a block time of one minute, and the total supply is unlimited. Under bitcoin, the block time is ten minutes with a supply of 21 million coins which reduces over time.

The reward under dogecoin may also be an incentive for miners to mine the cryptocurrency over others. Mining one block of dogecoin – which can be done solo or in a mining pool – fetches 10,000 dogecoins. For bitcoin the reward is currently 6.25 bitcoins for each block mined.

So even though the supply is increasing more rapidly, the relative ease of mining means that the currency has remained in the public eye.

Dogecoin is in a bubble waiting to burst

So with all that in mind, what’s next for dogecoin? Is this something to put your money in, or is it just another bubble waiting to pop?

“Dogecoin’s rise is a classic example of greater fool theory at play, Dogecoin investors are basically betting they’ll be able to cash out by selling to the next person wanting to invest”, says David Kimberly, an analyst at financial technology company Freetrade. And it’s very hard to disagree with him.

Investors – or, rather, speculators –may be tempted by its very low price per coin (compared to ether and bitcoin) which may act as an incentive to enter cheaply and invest. The problem with dogecoin is that there is absolutely no credible reason to explain its surge apart from general sentiment and a few flashy endorsements.

And investors should remember that wild moves in the cryptocurrency market are not that unusual, even though the scale of dogecoin’s gains has been quite extraordinary. We saw that with bitcoin this weekend – after it hit a fresh record last week, it fell by as much as 15% on Sunday alone, and rival coins such as ether and ripple also fell.

So dogecoin could be a fun bet, but as Kimberly warns, when everyone is buying something just to boost its price and get rich quick, it only takes one “to dump all their holdings for the entire market to tank”.

Perhaps it’s best to leave the last word to Markus, who when asked by Bloomberg what was going on in February this year, replied: “Maybe it’s that dogecoin can be a good barometer for how far from reality things can get.”

How to invest in Dogecoin (if you choose to ignore me)

The quickest way to buy or sell dogecoin is at any exchange that offers the digital token, such as Binance or Kraken, or, if you are in the US, via the Robinhood stocktrading app.

Last week, US Federal Reserve chair Jerome Powell made his views on bitcoin clear: it’s “an asset for speculation”, one that “is essentially a substitute for gold rather than for the dollar”, Powell told the Bank for International Settlements’ digital banking conference. Nor is it “a useful store of value” because of its volatility.

Powell’s comments are perhaps unsurprising. You wouldn’t expect the governor of the world’s most important central bank to say: “rush out and buy bitcoin”. Yet his views are not necessarily shared by Wall Street, with the likes of BNY Mellon and Goldman Sachs taking bigger steps into the area of cryptocurrencies in general.

It’s little wonder that institutions are becoming more interested. Bitcoin has now been around since 2008; in that time it has survived several boom and bust phases, and in each boom phase, people have potentially made a lot of money.

Today, despite all the scepticism, it remains trading close to its recent all-time high of $61,644, thanks to a search both for inflation hedges (given the scale of public debt and money being printed by central banks) and, for returns in a low-interest rate environment coupled with frothy equity and bond markets, points out Anthony Hardy, research analyst at Franklin Equity Group.

So are cryptocurrencies becoming mainstream – and should you invest?

Banks are turning bullish on crypto

Mainstream adoption of cryptocurrencies is growing fast. Since the start of the year, several big banks have embraced crypto. Goldman Sachs, for example, reintroduced plans to launch a cryptocurrency desk for futures trading.

It’s not alone. Just a few months after America’s oldest bank – Bank of New York Mellon – announced it will roll out a new digital custody unit later this year, Morgan Stanley became the first bank to give its wealth management clients access to three cryptocurrency funds, according to CNBC.

Meanwhile, in a 108-page report published in February (which came in for some criticism), Citigroup gave bitcoin a big endorsement, saying that it “may be optimally positioned to become the preferred currency for global trade”.

It is not just the banks who are increasingly endorsing crypto. Tesla’s Elon Musk started accepting bitcoin as payment for cars earlier this month, just a few weeks after Tesla shifted $1.5bn into bitcoin.

The crypto rally has also captured the attention of individual investors who view bitcoin as a potentially better hedge against inflation than traditional hedges such as gold, primarily because bitcoin has a fixed long-run supply of 21 million coins, compared to central banks’ ability to print as much fiat currency as they like.

The US recently approved a $1.9trn stimulus plan which market participants think may be seen as the tipping point for inflation to stage a comeback (and now Joe Biden’s administration is pushing for a further $3trn spending plan). And with the Fed signalling that it won’t raise rates until 2024 at the earliest, inflation is very much at the fore of investors’ minds.

Why bitcoin may not be the best hedge against inflation

But are people really buying bitcoin because they think it’s a good hedge against inflation? Bank of America doesn’t seem to think so. “Bitcoin has… become related to risk assets, it is not tied to inflation, and remains exceptionally volatile, making it impractical as a store of wealth or payment mechanism”, Bank of America’s commodity and derivatives strategist Francisco Blanch, said in a recent note, according to CNBC.

Economist Nouriel Roubini – renowned for his bearish views and a long-time critic of digital currencies – agrees. “If people were really worried about inflation they would diversify in a wide range of assets that are historical good hedges against inflation. That's not happening”, he says.

Another point is that, while bitcoin does have a fixed supply in much the same way other assets viewed as inflation hedges such as gold, it’s still possible to launch competing cryptocurrencies which can expand the market, argues Daniel Kern, chief investment officer at TFC Financial Management.

Should you invest in cryptocurrencies?

Discussions about cryptocurrencies can be quite polarised. True believers get very defensive, while ardent crypto critics act as though the whole thing is on the verge of collapse. We take more of a middle view.

Ignoring crypto seems unwise. It’s clear that digital currencies and the blockchain are of great interest to governments and central banks. And bitcoin has now managed to survive enough booms and busts to convince us that it’s not a flash in the pan. So investors should pay attention to the space and educate themselves on it.

In a recent issue of MoneyWeek magazine, Charlie Morris made the case for holding both bitcoin and gold as hedges against different stages of inflation – he believes they complement rather than compete with one another.

Equally, if you’re not an early adopter or particularly tech-minded, we wouldn’t worry too much. If crypto becomes significant enough to be considered an asset class in its own right (rather than an evolution of currencies, say), then institutional adoption will eventually lead to investment vehicles that are more easily accessible to private investors.

If you’re interested to learn more about bitcoin generally, then you can currently get a free beginner’s guide to bitcoin when you subscribe to MoneyWeek. Get the report, plus your first six issues, absolutely free here.