Tesla fall on earnings… the coming age of humanoids… how to invest in it… what the MSFT hack exposes… revisiting Louis Navellier’s REE broadcast… keep an eye on private credit

As I write Thursday afternoon, Tesla shares are down nearly 9% after the electric vehicle giant reported a second straight quarter of declining auto sales.

Contributing to the selloff is CEO Elon Musk’s comment that his company “probably could have a few rough quarters” coming because of the expiration of federal electric vehicle tax credits.

Tesla remains one of the most captivating – and controversial – companies on the planet. But with shifting competitive dynamics and Musk’s broadening focus, questions are mounting:

• How will Tesla respond to the growing threat of low-cost Chinese automakers, especially those advancing rapidly in autonomous vehicle capabilities?
• How durable is Tesla’s brand and pricing power in a world where premium features are increasingly being offered by competitors at lower cost?
• Will Musk return to a more focused, hands-on leadership role at Tesla? Or will his attention continue to be divided across his political ventures and other companies like SpaceX, X (formerly Twitter), and xAI?
• Is Tesla still primarily an electric vehicle company? Or are we witnessing a transition toward a robotics and AI-focused future – and if so, how do you value a company in the midst of that kind of identity shift?

This last question is the most interesting, and it dovetails into another Tesla-related headline from this week.

Let’s go to our technology expert Luke Lango:

On the corner of Santa Monica Boulevard and the future, Tesla (TSLA) just flipped the switch on its latest project: a retro-futuristic charging station doubling as a ‘50s-inspired diner and drive-in movie theater.

The Tesla Diner and Drive-In is part EV pit stop, part comfort-food haven, and part immersive media experience complete with 80 v4 Supercharger stalls, two 45-foot LED movie screens, Cybertruck-shaped meal boxes, and food orders delivered by waiters on wheels. (Roller skates are back, baby.)

Though the entire drive-in is quite the spectacle, one of the major attention-grabbers is Tesla’s real-life humanoid robot Optimus – serving popcorn and waving to visitors.

It wasn’t overly gimmicky or promotional. It was just an actual humanoid doing real work. And it has enormous implications for not just Tesla, but our way of life.

Here’s Luke:

What Tesla just debuted feels different – and may prove to be a watershed moment for the humanoid space…

Whether it’s fully autonomous is still a bit of a mystery (of course, Tesla isn’t saying). But the point is that Optimus is live. And it’s doing something useful, in front of everyday folks with smartphones and expectations.

That’s a new milestone.

With Optimus now serving popcorn in a restaurant, it’s not a huge leap before humanoids are helping us with all sorts of domestic and workplace chores.

Keep in mind, Optimus is already folding laundry… Figure’s robot is stocking shelves… and Sanctuary’s AI-powered humanoid is operating tools and handling logistics.

Once these robots can perform basic, repetitive tasks as well as a human – and then scale – that’s a tipping point.

They’re starting right now in warehouses and factories, transforming labor economics. But the next stop is your home. Cooking. Cleaning. Assisting the elderly. Helping raise children.

We’ll soon look back and wonder how we ever managed without them, much like we do today with smartphones. And like smartphones (think Apple) did for early investors, the proliferation of humanoids will create life-changing wealth.

But rather than gamble on which humanoid maker will become the preferred choice of consumers, consider this approach…

A completed, functional humanoid will require thousands of different parts that Tesla doesn’t manufacture in-house. They came from myriad other companies – many times, much smaller companies.

Tesla – already a mega-cap stock – will have to sell huge volumes of completed Optimus robots to move the economic needle. But many of those smaller, components suppliers will have their businesses (and stock prices) transformed if Optimus takes off.

Back to Luke:

Every revolution has its ecosystem.

Just as the iPhone created fortunes for component suppliers like Skyworks (SWKS) and Cirrus Logic (CRUS), Optimus will likely mint new industrial titans as demand for chipmakers, sensor suppliers, actuator specialists, and materials innovators takes off.

These components makers will be supplying the eyes, brains, muscles, and bones of the robot revolution. And they could see 10X, 20X, even 50X growth as a result…

For those with the foresight to act now, the potential rewards could be enormous.

Luke recently put together a free research video on some of the small suppliers on his radar today that you can check out here.

Bottom line: As we try to find the biggest winners of the coming age of robotics, let’s remember the question that Luke is asking today:

Who’s building the picks and shovels for this tech gold rush?

Earlier this week, Bloomberg broke a concerning story…

Chinese state-sponsored hackers have been exploiting a flaw in Microsoft’s SharePoint software to break into the U.S. National Nuclear Security Administration.

No sensitive or classified files have been confirmed stolen, but what if they were? What if stolen authentication keys enabled deep penetration into our nuclear program?

The hack wasn’t limited to the Nuclear Security Administration.

Here’s The New York Times:

Microsoft said in its blog post that investigations into other actors also using these exploits were still ongoing.

Eye Security, a cybersecurity firm, said that it had scanned more than 23,000 SharePoint servers worldwide and discovered that more than 400 systems had been actively compromised.

This isn’t just another cyberattack; it’s a stark demonstration of the covert battlefield in the U.S./China AI war. This attack demonstrated how vulnerable our key institutions are.

That means winning the AI war isn’t optional – it’s existential.

But we can’t win without one thing…

Control over rare earth elements (REEs).

As we’ve covered in the Digest, these critical materials fuel powerful magnets, sensors, semiconductors, and defense tech. Without them, we don’t have any cutting-edge technologies.

Right now, China controls roughly 69% of global REE production and approximately 90% of refining capacity. That stranglehold allows Beijing to throttle supplies or jack prices – exposing our key Achilles Heel in the AI war.

If they chose to weaponize REEs by cutting us off completely, we’d face massive disruptions across our entire economy and national defense capabilities.

Enter President Trump, who has begun aggressively pursuing U.S. REE sovereignty…

This is exactly what legendary investor Louis Navellier discussed in a live broadcast just over two weeks ago. The event dovetailed into how investors can position themselves for this massive REE overhaul.

During his broadcast, Louis revealed one of his top picks to attendees – MP Materials (MP).

The very next morning, the Pentagon announced a $400 million investment into MP Materials, instantly positioning the company as a strategic national security play – and sending its stock soaring 51% on Thursday.

Then, a week ago Tuesday, we learned that Apple is investing $500 million into MP Materials.

Overall, since Louis gave away MP Materials, it has climbed 102%.

If you missed this move, it doesn’t mean that you’ve missed the opportunity. Returning to the data above, China controls almost 70% of global REE production and about 90% of refining capacity.

That’s not a head-start – that’s complete domination.

If Trump is serious about breaking free from China’s chokehold on REEs – and the recent policy momentum suggests he is – then the runway for growth remains long. We’re only at the 1-yard line.

Keep in mind, we don’t just need to mine these elements; we need to build out the entire processing and refining infrastructure from scratch. That’s a multi-year, national-scale effort.

So, while a 100% gain from MP might feel like a big move, in the context of reshoring a critical part of the AI supply chain from near-zero capacity, we’ve barely begun.

By the way, if you joined Louis in Breakthrough Stocks after his event, congratulations. Four of the five additional REE stocks that Louis recommended in his special report The Critical Five: Five AI Mineral Stocks That Could Jump 1,000% are up since that evening – and not by just a little bit.

As I write, their respective returns are: 24%, 38%, 53%, and 63%.

And there’s still time to position yourself in REE stocks. We’re making a free replay of Louis’ broadcast available today, so you can join the opportunity. Click here for all the details. (Please note that July 22 – the date Louis had his eye on – has passed.)

Though we expect volatility and profit-taking, the tailwinds behind this trade will likely blow for a long time.

A market hot spot on Louis’ radar

If inflation runs too hot, or if the economy grows too cold, one corner of the market is going to run into trouble – with widespread ripple effects.

I’m talking about private credit, which Louis warned about last week in his Growth Investor Flash Alert.

To make sure we’re all on the same page, “private credit” is the name for loans made to individuals or businesses from any lender other than a traditional bank.

For borrowers, these non-bank lenders offer a way to access funds when traditional banks are reluctant because of tougher regulatory hurdles and/or lending standards. For the lending institutions, these loans have become big business, providing a reliable stream of high-yield income.

In the wake of the global financial crisis, regulatory bodies clamped down on lending practices from big banks. This created space for non-banks to step into the void. And step in they did.

Here’s Louis with how big the space has become:

Private credit is a $3 trillion-a-year industry.

Adam Johnson was on Navellier Market Buzz pointing out that’s about 10% of GDP (gross domestic product), by the way.

So, what’s the problem?

It’s the same time-bomb that’s been at the root of all sorts of economic explosions over the centuries – debt.

Back to Louis:

Private credit is still promising 11% yields, but they are leveraging these loans to get those yields.

If the private credit industry ever blew up because of economic weakness or whatever, or them just trying to out-leverage each other to outdo each other, the Fed would have to start slashing rates to save the economy.

The danger isn’t limited to economic weakness. If inflation rises materially, we’ll see problems too.

In an interview in April, Dan Pietrzak, Global Head of Private Credit at KKR, was asked “What if inflation resurfaces and rates reverse course?”.

Here’s his response:

That is our downside scenario.

If inflation does flare up, we would anticipate higher defaults – particularly for levered companies where free cash flow is already tight, and the company has less cushion to deal with the negative impacts.

This is where credit asset selection matters the most.

But Bloomberg reports that we’re already seeing the consequences of poor credit asset selection today:

The companies that get private credit loans are looking increasingly wobbly and banks are among those that could eventually be on the hook for losses.

Many companies getting direct loans from private lenders are struggling to produce cash, by at least one key measure: At the end of 2024, more than 40% of borrowers had negative free cash flow from their businesses, the International Monetary Fund warned in a report this past week. That’s up from closer to 25% at the end of 2021.

Borrowers that aren’t generating enough cash flow are at greater risk of defaulting, a particular concern as trade wars lead to fears of economic stagnation.

Turning to action steps for your portfolio, a few illustrations of companies that have exposure here are Apollo Global Management (APO), Ares Management Corporation (ARES), Blackstone Inc. (BX) (Disclaimer: I own BX), and Blue Owl Capital Inc. (OWL).

To be clear, we’re not predicting an imminent collapse. But there’s real – and growing – risk.

Here’s Louis’s takeaway:

Leveraged debt created the 2008 financial crisis, so we want to keep a good eye on this.

Wrapping up…

All eyes on humanoids and their supplier ecosystem… you’re not too late to capitalize on Trump’s REE push… and ride this private credit momentum as far as it takes you but be aware of the growing risk.

We’ll keep you updated on all these stories here in the Digest.

Have a good evening,

Jeff Remsburg