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For years, Tesla sold millions of cars with a promise attached: Pay extra for Full Self-Driving, and your vehicle would eventually drive itself. Software updates would get it there. The hardware was ready.On April 23, Elon Musk finally said out loud what Tesla owners had suspected for a long time. And the fallout is only beginning.What Musk said on the earnings call”Unfortunately, Hardware 3, I wish it were otherwise but Hardware 3 simply does not have the capability to achieve unsupervised FSD,” Musk said on Tesla’s Q1 2026 earnings call on April 23. He identified the hardware’s “memory bandwidth” as the “chokepoint,” according to the earnings call transcript.That is a direct admission that the hardware installed in millions of Tesla vehicles since early 2019 cannot deliver what customers paid for. Not because of a software limitation that can be patched. Because of the physical chip itself.Related: JPMorgan has a stark warning on Tesla stockMusk’s proposed solution: build “microfactories” in major cities to retrofit HW3 vehicles with a new computer and camera system. He also said Tesla plans to convert all HW3 cars to HW4, because “that’s what enables them to enter the Robotaxi fleet and have unsupervised FSD,” the transcript confirmed. He mentioned a “discounted trade-in” program but offered no further details on cost, timeline, or scope.Why this matters to millions of Tesla ownersTesla began installing Hardware 3 in early 2019 and sold it to customers as the system that would eventually support full autonomy through over-the-air software updates. Owners paid thousands of dollars above the base vehicle price to access Full Self-Driving, trusting that the hardware was sufficient for the feature to eventually work.Musk first conceded that HW3 was not sufficient in January 2025, according to The Verge. But the April 23 earnings call was the most direct public statement yet, and it came more than six years after Tesla started selling vehicles with the hardware.For owners, the admission reopens every uncomfortable question. What exactly did they pay for? When will the retrofit happen? Who covers the cost? And can they trust the next promise Tesla makes about autonomy?The legal pressure is mountingThe admission lands in the middle of active litigation. Tesla owners have filed numerous class action lawsuits claiming Musk misled them for years about the capabilities of the Full Self-Driving system, according to Electrek.More Tesla:Elon Musk’s Terafab bet: what it means for Tesla investorsBank of America revamps Tesla stock priceUBS has a message for Tesla stock investorsMusk’s language on the earnings call was unambiguous enough to become exhibit material. Saying publicly that HW3 “simply does not have the capability” to achieve unsupervised driving directly supports the claims of customers who say they were sold a feature their hardware could never deliver.California regulators have previously argued that Tesla’s vehicles could not do what buyers were led to believe, and that the company’s marketing created a misleading impression. The April 23 statement makes that argument harder to contest.Key facts from Tesla’s HW3 Full Self-Driving situation:Tesla began installing Hardware 3 in early 2019, selling it as future-proof for Full Self-Driving autonomy, according to Futurism.Musk first admitted HW3 was insufficient in January 2025, more than six years after the hardware launched, The Verge reported.On the April 23 Q1 2026 earnings call, Musk said HW3 “simply does not have the capability to achieve unsupervised FSD,” citing memory bandwidth as the chokepoint, per the earnings transcript.Tesla plans to build microfactories in cities to retrofit HW3 vehicles with HW4 hardware, Musk said on the call.A discounted trade-in program was mentioned but no timeline, cost structure, or eligibility details were provided.Multiple class action lawsuits have been filed by HW3 owners alleging years of misrepresentation, according to Electrek.Tesla’s Q1 2026 results showed profitability remains thin amid plummeting European sales, Futurism reported.

This admission lands in the middle of active litigationDietsch/Getty Images

Why the retrofit plan raises more questions than it answersMusk framed the microfactory approach as a solution. But the logistics of retrofitting millions of vehicles across major metropolitan areas are enormous. Setting up new production lines in cities is expensive. Tesla has not provided a timeline. And the company’s Q1 2026 earnings showed profitability is as thin as ever following years of declining revenues in key markets.Electrek pointed out that the cost of building dedicated urban retrofit facilities would be substantial, and the plan as described leaves core questions unanswered about who pays, how long it takes, and whether current HW3 owners are legally entitled to the upgrade at no charge.There is also a credibility dimension. Musk has made and revised autonomy promises repeatedly since 2016. Promising a widespread hardware retrofit carries the same structural risk: it is ambitious, expensive, and dependent on execution that Tesla has repeatedly deferred.What it means for Tesla’s autonomy storyTesla’s valuation has long included a premium for the autonomous driving and robotaxi opportunity. If Full Self-Driving requires a hardware retrofit for millions of existing vehicles before the robotaxi fleet can scale, the timeline for that revenue is pushed further out. And the cost of the retrofit program, however it is structured, adds a new financial liability that was not previously priced in.For investors, the most important question is not whether Tesla can eventually deliver unsupervised FSD. It is whether the path there is as clean as the company’s stock price has assumed. Musk’s April 23 admission suggests it is not. The hardware gap is real, the legal exposure is real, and the retrofit plan is still largely undefined.Tesla has built one of the most loyal customer bases in the auto industry. But loyalty has limits. And the owners who paid thousands of dollars for a feature their cars cannot deliver are now watching to see whether the company’s solution matches the scale of the problem it created.Related: UBS has a message for Tesla stock investors

Apple is heading into its April 30 earnings report, with investors focused on iPhone demand, outlooks, and what’s next for its AI strategy under its upcoming new CEO.The iPhone maker’s stock has lagged this year, down about 0.64% year to date compared with a 4.67% gain for the S&P 500 index, Yahoo Finance data shows. Concerns about rising memory costs and the potential hit to smartphone margins have weighed on sentiment, even as the company continues to post rosy growth in its business.In its last earnings report, Apple announced excessively strong sales of the iPhone, particularly in China. Quarterly revenue from iPhone surged 23% year over year to $85.27 billion, driven by strong sales of the iPhone 17 models. iPhone sales account for nearly 60% of Apple’s total revenue.  Next week’s report will also be the first since Apple’s recent leadership transition announcement. Investors will look for signs of stability and direction. Beyond earnings, the company has a busy calendar, with its Worldwide Developers Conference in June expected to bring updates on AI features, followed by a major new iPhone release later in the year.Goldman Sachs is rethinking its outlook for Apple stock. Here’s what the firm sees:Apple investors are “overly pessimistic,” Goldman saysGoldman Sachs reiterated a $330 price target with a buy rating on the shares, arguing that recent concerns around margins and demand may be overstated, according to a recent research note sent to TheStreet.

Goldman expects iPhone revenue to reach about $56.6 billion for the fiscal second quarter, up 21% from a year earlier and ahead of consensus estimates.Getty Images

The bank pointed to a sharp rise in memory prices as a key source of investor anxiety.“With DRAM (Dynamic random-access memory) prices experiencing a massive surge since Fall 2025 driven by an AI-induced supply shortage, concerns around smartphone gross margin pressures and pricing-driven demand destruction and component shortages have driven underperformance,” the firm wrote.In the January earnings call, Apple’s current CEO Tim Cook acknowledged that the rising chip prices will have a “bit more of an impact” on the company’s Q2  gross margin. Still, Apple forecast a gross margin of 48% to 49% for the quarter to be reported.Related: Morgan Stanley resets Apple stock forecast before earningsGoldman said Apple is better positioned to manage those pressures. “We believe concerns for Apple are overly pessimistic given its much stronger relative position,” the analysts added.The firm pointed to Apple’s outperformance in high-end smartphones (highlighted in TSMC’s latest earnings call and  iPhone share gains in China), and reports that the company is “securing as much mobile DRAM on the market while keeping pricing competitive.” Goldman expects iPhone revenue to reach about $56.6 billion for the quarter, up 21% from a year earlier and ahead of consensus estimates.The firm expects Apple to report revenue of $110.3 billion, up 16% from a year earlier and at the high end of the company’s guidance, along with earnings per share of $2.00, above the $1.93 consensus estimate.Apple’s AI updates in focusBeyond hardware, Apple’s services business remains a key piece of the story.Goldman expects services revenue to grow about 14% year over year, supported by subscriptions such as iCloud+ and AppleCare+, along with pricing increases and advertising expansion.“Results should also be flattered by favorable forex (foreign exchange), as well as strong underlying Services revenue growth,” the firm said.Related: Fidelity sends blunt message on S&P 500 after sudden reboundEven with slower App Store growth, Goldman sees other areas picking up the slack. “We believe product-related Services drivers such as iCloud+ and AppleCare+, along with prior price increases on AppleTV+ and solid advertising performance, should support another quarter of teens Services revenue growth,” the analysts said.Looking ahead, investors are focused on future catalysts for Apple stock.Apple’s Worldwide Developers Conference in June is expected to bring more details on its AI plans, including updates to Siri. The company has been slower than some peers to roll out generative AI features, and any progress could help shift sentiment.Later in the year, Apple is expected to launch a new iPhone lineup, which Goldman described as the “most innovative” in years, with the introduction of a foldable model. That could drive a new upgrade cycle, especially as older devices struggle to support newer AI features.However, risks remain, including potential weaker consumer demand, supply chain disruptions, and competition across both devices and services. “Apple generated ~50% of its revenue from iPhones (F2025), which is highly dependent on purchases driven by upgrades,” the analysts warned.Apple stock closed at $271.06 on April 24.Related: Cathie Wood buys $900,000 of surging megacap stock