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Speaker 3: Well, got to say investors like in this report in
Speaker 3: the aftermarket stock still up about two percent here in
Speaker 3: the postmarket trade. Hey, let's see what Bloomberg News Managing
Speaker 3: editor for Global Tech Consumer Tech thinks about this. He
Speaker 3: is Mark German, knows everything about this company, lots of exclusives.
Speaker 3: This feels pretty good.
Speaker 4: Jim Cook has to keep his job, at least for now.
Speaker 4: This is a massive, massive, massive quarter. This is a
Speaker 4: home run. Their greatest quarter ever by orders of magnitude.
Speaker 4: It's a gigantic beat on overall revenue. China is back.
Speaker 4: You have a big beat on the iPhone in particular.
Speaker 4: Eighty five billion dollar quarter is just insane. The installed
Speaker 4: base two and a half billion, The numbers are just
Speaker 4: beyond excellent. We could ignore the fact that they missed
Speaker 4: on wearables, home and accessories. We can ignore the fact
Speaker 4: they missed on Mac. We could ignore the fact that
Speaker 4: they barely you know, crossed expectations on services. I guess
Speaker 4: none of that matters when the iPhone is selling so well.
Speaker 4: But still there's the big existential question of what's next.
Speaker 4: It's an important question because of AI and Apple absolutely
Speaker 4: needs to figure out it's AI strategy. There needs to
Speaker 4: be an AI reckoning of some sort there. But they
Speaker 4: just bought themselves a very long time with this just
Speaker 4: insanely great quarter.
Speaker 1: So let's talk about a couple of the areas that
Speaker 1: you highlighted there, China, and another one is the sort
Speaker 1: of the concerns that people had about memory chips in
Speaker 1: this quarter and the rising prices of memory chips. How
Speaker 1: was Apple able to navigate this so it didn't hit
Speaker 1: its margins like people thought it would.
Speaker 4: They buy components and memory components quarters and months in advance,
Speaker 4: sometimes years in advance. They have these deals struck, so
Speaker 4: they're working off of numbers and pricing and materials here
Speaker 4: that really give them extensive pricing power over competitors. So
Speaker 4: we'll hear more about that on the call today. But
Speaker 4: it seems like they're fine.
Speaker 3: Mark, I love this. I mean, I'm looking at our
Speaker 3: live blog, so you must have kicked this out before
Speaker 3: you jumped on air with us. But you did mention
Speaker 3: that the significant things on the call, You've already talked
Speaker 3: about the AI strategy succession. You've kind of said maybe
Speaker 3: that's off the table for now because this was such
Speaker 3: a blowout quarter. You talk about the long term viability
Speaker 3: of the business if it doesn't get its AI act together.
Speaker 3: It's hard to even think about that when you see
Speaker 3: the numbers here and just what a big company this
Speaker 3: is and how significant is I feel like in so
Speaker 3: many different people's lives, like I have an Apple household.
Speaker 3: I think Tim has an Apple household. Is that is
Speaker 3: that really the long term viability if they don't get
Speaker 3: AI together, call me Tim Apple In fact they do,
Speaker 3: that's yes.
Speaker 4: I said long term, right and the fucking really and
Speaker 4: talking really long okay, the little, the little, the really
Speaker 4: long term here, right, Like, at some point there is
Speaker 4: going to be a need to fulfill these AI desires
Speaker 4: and you know they're going to have to figure that out.
Speaker 2: Well.
Speaker 3: On o agranav Our BI team, he talked with Tim
Speaker 3: and I just moments ago, and he talked about, you know,
Speaker 3: how they're working with Google when it comes to AI,
Speaker 3: relying on them right now for their models, and so
Speaker 3: they're not doing the big AI spend. That makes sense
Speaker 3: for now too. So do you agree that that's kind
Speaker 3: of a smart strategy now and kind of waiting it
Speaker 3: out a little bit, But at some point they've got
Speaker 3: to kind of do their own thing.
Speaker 4: It's not that they're waiting it out. Oh, it's that
Speaker 4: they have no choice, they have nothing internal. It's not
Speaker 4: that they're waiting it out. It's that they need to
Speaker 4: do it, and so they're partnering with the best partner
Speaker 4: they can. It's going to offer them the best pricing power,
Speaker 4: which for now is Google. They initially wanted to work
Speaker 4: with Anthropic, but from a pricing standpoint, that didn't work out.
Speaker 4: They couldn't work with open Ai because they're you know,
Speaker 4: hardcore competitors at this point. So Google was all who
Speaker 4: was left. And obviously the judge didn't break up the
Speaker 4: search deal there, so it made sense and it'll aligned
Speaker 4: pretty nicely for them.
Speaker 1: Okay, do we know yet how Apple was able to
Speaker 1: beat expectations in China once again for the first quarter,
Speaker 1: the most recent quarter, Greater China revenue came in at
Speaker 1: twenty five point five to three billion dollars. Twenty one
Speaker 1: point eighty two was the estimate you said it minutes ago.
Speaker 1: It is back in China. You're holding up an iPhone
Speaker 1: right now. That's what they did.
Speaker 4: I'm answering your question. I'm answering your question.
Speaker 1: It was the iPhone seven color orange. Oh, it's the
Speaker 1: color orange. It's that easy.
Speaker 4: Because the promax. No, it's designed. People buy the new designs.
Speaker 4: This is the first new in half a decade. You
Speaker 4: got it done. That's why you do new designs, because
Speaker 4: you're trying to bring in new customers. Why is for upgrades?
Speaker 4: And but that's the way to do it.
Speaker 1: Didn't they know that?
Speaker 4: Of course they know that. But it takes time to
Speaker 4: do these new designs, and you kind of want to
Speaker 4: get it right. And then you can't do it too
Speaker 4: often because if you do it too often, it doesn't
Speaker 4: have the power that it has if you do it
Speaker 4: only every so often.
Speaker 3: Hey, I want to roll into this a story you've
Speaker 3: got on the Bloomberg that you put out today, and
Speaker 3: this has to do with Apple buying the Israeli AI
Speaker 3: startup that interprets facial movement. QAI is this important.
Speaker 4: I think it's going to enable some features for future
Speaker 4: air pods and smart glasses and mixed reality headsets and
Speaker 4: all that, but it's not fundamental to the overall AI strategy,
Speaker 4: which I think they're still trying to figure out. Also,
Speaker 4: just one piece of the puzzle.
Speaker 1: Okay, Mark. Another story that you reported on this week,
Speaker 1: Apple's Tim Cook calls for a DS after Alex Pretti's
Speaker 1: shooting in Minneapolis. There's this thread that Tim Cook is
Speaker 1: trying to a needle that Tim Cook is trying to thread.
Speaker 1: He was at the White House on Saturday, and.
Speaker 4: They do a very good job. Why not the needle? Well,
Speaker 4: I think his statement was kind of worthless in some respects.
Speaker 4: I think that he spent I don't know if it's
Speaker 4: at a statement talking about how the president, the one
Speaker 4: who's overseeing the policies that led to the situation of Minneapolis,
Speaker 4: has his ears wide open to listen to feedback. I mean,
Speaker 4: I'm not sure that's what his employees, who are sort
Speaker 4: of revolting internally about this, we're looking for. I think
Speaker 4: they were looking for Tim Cook to take some sort
Speaker 4: of stand here, and he really didn't. You know. From
Speaker 4: his perspective is he's scared to upset Trump and get
Speaker 4: tariffs and other policies slapped onto Apple's business. So you'll
Speaker 4: see him continue to do what he's doing because this
Speaker 4: is not about taking a stand at this point for him,
Speaker 4: This is about protecting the underlying business. And the results
Speaker 4: speak for themselves. Underlying business seems pretty well protected, all right, like.
Speaker 3: We like to do, and you know we're going to
Speaker 3: go there. What do you think are the top two
Speaker 3: questions that's got to be asked on this call?
Speaker 4: They got to ask about AI and they got to
Speaker 4: ask about succession. I'm sure they're not going to though,
Speaker 4: I mean maybe AI, but like they're not going to
Speaker 4: ask about succession and risk not being invited back next
Speaker 4: quarter to ask more questions.
Speaker 3: Are they going to ask about him being at the
Speaker 3: White House to see the Millennia movie?
Speaker 4: Like I said, they don't want to risk being banned
Speaker 4: from asking questions next quarter, So no one's going to
Speaker 4: ask anything that rocks the boat. All right, we'll see
Speaker 4: I hope I'm wrong.
Speaker 3: Okay, great stuff as always, and we'll be looking for
Speaker 3: your reporting after that call as well. He is Mark,
Speaker 3: or he's thank you, Mark, Managing Editor for Global Consumer
Speaker 3: Tech for Bloomberg News. Out there out there on the
Speaker 3: West Coast.
Speaker 1: Stay with us. More from Bloomberg Business Week Daily coming
Speaker 1: up after this.
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Speaker 1: Well, let's bring in Ed Ludlow. He's the cost of
Speaker 1: Bloomberg Tech on Bloomberg TV. He joins us from our
Speaker 1: San Francisco bureau.
Speaker 4: Ed.
Speaker 1: The story from Mark German is out sales trouncing estimates
Speaker 1: after iPhone fuels record quarter. Tim Cook called the demand
Speaker 1: quote unprecedented. Is this all about the iPhone doing well
Speaker 1: around the world?
Speaker 5: Yeah, all about the iPhone, And in some ways it's
Speaker 5: like an issue of chronology and timing.
Speaker 6: Right.
Speaker 5: Think about when Apple announces the iPhone seventeen generation and
Speaker 5: we're all there in Cooper Tino for it, and then
Speaker 5: it goes on sale when you have the holiday quarter,
Speaker 5: so you know, actually it goes a little bit beyond that. Yeah,
Speaker 5: you know, this is where the Bloomberg terminal comes in useful.
Speaker 5: So that is a big beat. You can just see
Speaker 5: it looking at the headline on a dollar basis. But
Speaker 5: not only is it nine percent above consensus even the
Speaker 5: top end of the most bullish ranges on how this
Speaker 5: iPhone would do, we're only about eighty one billion dollars.
Speaker 5: I think it came in above eighty five billion dollars.
Speaker 5: So they've done something. Either the phone has got traction
Speaker 5: or they've done something smart with the timing of it
Speaker 5: and it's sold well. The bit that's missing, of course,
Speaker 5: is that that commentary does not have anything specific to
Speaker 5: do with Greater China. We know the numbers in Greater
Speaker 5: China are really good, but how did this iPhone do there?
Speaker 3: Yeah, like, is it just WHOA just a good quarter
Speaker 3: or do was it luck or was it really strategy?
Speaker 4: Right?
Speaker 5: I've understod I'm super cautious because sometimes we've relied on
Speaker 5: third party data, like you know, I won't name it,
Speaker 5: it would be a bit unfair, but there are various
Speaker 5: third party data sets that say, oh no, Apple's doing
Speaker 5: really bad.
Speaker 1: And knows what you're talking about.
Speaker 5: It's okay, okay, I'll stick to my guns, you know.
Speaker 5: And then Apple comes around with earnings and the opposite
Speaker 5: has been true on more than one occasion. But this occasion,
Speaker 5: like the third party data, this sort of incremental and
Speaker 5: anecdote or of people queuing up for the iPhone seventeen
Speaker 5: in all markets, but like Greater China, it was kind
Speaker 5: of there. So that's interesting. Where else do you want
Speaker 5: to go? I mean this, you know, this is Apple.
Speaker 5: There's anything we want to go to AI?
Speaker 1: Because you want to.
Speaker 5: Ask me about the thing that they have nothing to
Speaker 5: say about that?
Speaker 2: Yeah, sure, thanks jam.
Speaker 1: Every analyst has really pointed to that. I mean, we
Speaker 1: can we can talk about the relationship that Apple has
Speaker 1: with Google and Progemini. We could talk about all the
Speaker 1: money going to Open AI potentially from Amazon and other companies,
Speaker 1: about a potential one hundred billion dollar fundraising around. We
Speaker 1: could talk about Apple relying on third parties rather than
Speaker 1: building its own Is there a risk in doing that?
Speaker 5: I go back to basics, and you know, I kind
Speaker 5: of rely on Bloomberg's Mark Gumman, who is one of
Speaker 5: the world's leading journalists when it comes to covering not
Speaker 5: just Apple, but can Humor, electronics, and in the context
Speaker 5: of this earnings print. What he's written is probably true
Speaker 5: that Apple has done enough to mask over or allay
Speaker 5: the concerns that investors have about a lack of progress
Speaker 5: in AI as a product. You know, the reporting's quite clear,
Speaker 5: and it's been announced now officially, right that at least
Speaker 5: on the interim, Apple's AI generation of Siri will be
Speaker 5: underpin underpinned by Gemini. And Mark's reported a lot about
Speaker 5: the financials around that, right, it's a one billion perannum agreement.
Speaker 5: We don't we don't and we won't get this sort
Speaker 5: of announcement like here it is, here's the date it's coming,
Speaker 5: and this is what it can do until it's here.
Speaker 5: You know, that's not how Apple operates.
Speaker 3: Yeah, it's just you know, I mean it's pretty like
Speaker 3: where do you go? Where do you go?
Speaker 4: You know?
Speaker 3: Here we are looking. I mean, the stock isn't up
Speaker 3: as much as it was earlier. We were talking about,
Speaker 3: you know, more than a two percent gain I think
Speaker 3: at its highs here in the aftermarket, it's just up
Speaker 3: about three quarters of one percentage point. What is it
Speaker 3: that they need to do? Maybe on the call? Is
Speaker 3: it AI? Is it that this is sustainable. This is
Speaker 3: a strategy. This is you know, we figured out China,
Speaker 3: Like what is it?
Speaker 5: Well, you know that I didn't forgive me because I
Speaker 5: was blogging. I didn't hear what you guys were talking
Speaker 5: about just before. But in this very limited earnings release
Speaker 5: and statement, you guys maybe you went over the risk
Speaker 5: factors and forward looking.
Speaker 1: Yeah, we talked about that. We talked about that, you know,
Speaker 1: I talked about how you started pointing that out back
Speaker 1: in May of last year.
Speaker 5: Middle in May of last year, I was sat next
Speaker 5: to the you two in New York studio, do you remember,
Speaker 5: and we were like, oh, well, that's interesting, and they've
Speaker 5: never said that before.
Speaker 1: But that was only your first report post Liberation Day.
Speaker 5: Right that. The only observation I'll make in line with
Speaker 5: that is that this release also says nothing about the
Speaker 5: environment for memory chips. And you know, like memory chip
Speaker 5: prices are very.
Speaker 3: High, but their market was so sad, right.
Speaker 5: And their margins were pretty good, and there's a scarcity,
Speaker 5: and that the principal difference is like this, This is
Speaker 5: why it's so fun to cover hardware companies, and it's
Speaker 5: a privilege to be a technology journalist when you get
Speaker 5: access to all these companies and speak to the CEOs.
Speaker 5: If you're a very big company, you have leverage with
Speaker 5: your supply base. If a supplier has to choose, I've
Speaker 5: got this number of things, and I can only send
Speaker 5: them here, or I can send them there, or I
Speaker 5: can split. It helps to be Apple, is what I'm saying.
Speaker 5: And there are companies that I've covered whose CEOs you know,
Speaker 5: will privately just agonize over how difficult it is to
Speaker 5: convince supplies to give them the things they need. So
Speaker 5: on the call that will come up, you know, the
Speaker 5: cell sider likely to ask about it.
Speaker 1: But you know there are high prices, and then there's
Speaker 1: Apple dealing with high prices. And when I asked Mark
Speaker 1: this question about how they were able to successfully navigate
Speaker 1: these higher memory prices, he said, well, one they're Apple,
Speaker 1: and two they buy so far in advance, and they
Speaker 1: buy the components too that go in. So at a
Speaker 1: certain point ed it hit them right.
Speaker 5: Well, it's not just that the memory prices are high.
Speaker 5: The reason that memory prices are high is that historically
Speaker 5: memory dram and and flash memory is a very cyclical
Speaker 5: up and down business boom and bust. You know, That's
Speaker 5: what Iaan King would say, boom and bust In King
Speaker 5: leads our semiconductor coverages right at at Bloomberg. And it
Speaker 5: is correct that Apple's supply chain teams are its secret source.
Speaker 4: You know.
Speaker 5: That was Tim Cooks whole thing. He was coo like,
Speaker 5: that's what he was good at. But the reason prices
Speaker 5: are high is because of scarcity of availability, you know,
Speaker 5: because there is such demand for the equivalent chips that
Speaker 5: are going to data centers. And so, like Mark's answer
Speaker 5: is appropriate. Apple has leverage and the ability of scale
Speaker 5: to say like, okay, we have got ahead of this,
Speaker 5: and one would imagine that their supply chain team is
Speaker 5: sophisticated enough to have foreseen some of the things that
Speaker 5: we're now experiencing in that man.
Speaker 1: So one one the first thing Mark said to us,
Speaker 1: I no, no, you were blogging ed and you were
Speaker 1: you were looking at the results. Was Tim Cook just
Speaker 1: bought himself time? Tim Cook gets to keep his job.
Speaker 1: I mean, there's been a lot of questions about succession.
Speaker 1: Mark says, That's one of two questions he would ask
Speaker 1: on the call. The other would be about AI. In
Speaker 1: your view, was was his job not not at risk?
Speaker 1: But you know there are questions about who leads this
Speaker 1: company after Tim Cook.
Speaker 5: I am not Bloomberg's Mark Gum nor am I right?
Speaker 5: Is that when Mark did that recent reporting and it's
Speaker 5: been it's been over a period of time about which
Speaker 5: executives are now more at the forefront of Apple's future,
Speaker 5: he was crystal clear in that reporting that there is
Speaker 5: no suggestion that Tim Cook being replaced or stepping down
Speaker 5: or retiring is imm and you know that this was
Speaker 5: a longer term thing. What I would reflect on is
Speaker 5: the conversations that I have with people in industry and
Speaker 5: those that come on the show and talk about it,
Speaker 5: is you know, Tim Cook is the operator that many
Speaker 5: people would want. In an environment like this where we
Speaker 5: still have trade and tariff considerations, the movement of goods
Speaker 5: between borders from point A to point B is quite difficult.
Speaker 5: And as we just talked about, you know, like specifically
Speaker 5: memory pricing, that's within his you know, his range. This
Speaker 5: is not me speaking, This is how people would relay
Speaker 5: it to me. Mark when he goes on air and
Speaker 5: when he writes, and again I'm not speaking on his behalf,
Speaker 5: he would talk a lot more about the product, you know,
Speaker 5: fresh products reiterated and renewed products and the product pipeline
Speaker 5: for the future, and right now, I don't know that
Speaker 5: people are necessarily so worried about that, at least in
Speaker 5: my world, they are worried about when they're going to
Speaker 5: get the software bit right with AI.
Speaker 2: You know.
Speaker 3: So it's interesting, you say AI. It's something we talked
Speaker 3: about just briefly with Mark German. It's a story that
Speaker 3: he put out Apple Buys is really AI startup that
Speaker 3: interprets facial movements. He's like, you know, interesting will help
Speaker 3: in terms of I guess product development, but not necessarily
Speaker 3: a big, big deal. But you know, what is the
Speaker 3: number one question from that they should be getting on
Speaker 3: the call when it comes to AI.
Speaker 5: Yeah, you know, if I had the opportunity to interview
Speaker 5: Tim Kirk, and let me be honest about it, I
Speaker 5: haven't had that opportunity or in any other of Apple executive.
Speaker 5: You know, the big question is in the future, what
Speaker 5: is the form factor by which we interact with our
Speaker 5: official intelligence, in particular voice based AI assistance? Right For
Speaker 5: the most part, I use and I don't know about
Speaker 5: you guys, but I use chat GPT's voice mode quite
Speaker 5: a lot on my phone, and I use other generative
Speaker 5: AI tools through my laptops. And because I'm a nerd,
Speaker 5: and because Bloomberg issues me different things, I have my
Speaker 5: own MacBook and I have a Windows based PC. Right,
Speaker 5: there are other people that envisage a world where the
Speaker 5: form factor device, the thing that we interact with is
Speaker 5: not a phone. It's the glasses per Meta, And look
Speaker 5: at the surprise upside from Meta's earnings about aiglasses tripling.
Speaker 5: You know, That's what i'd ask Apple, what do you
Speaker 5: see in the future about how people use your AI?
Speaker 1: So and we have one time for one more question,
Speaker 1: and we'd be really remiss if we didn't ask you
Speaker 1: your view on Amazon. This news coming just late in
Speaker 1: the day, switching gears a little bit still on AI.
Speaker 1: Amazon talk and talks to invest fifty billion dollars and
Speaker 1: open ai expandize. This could be part of a one
Speaker 1: hundred billion dollar funding round, which would value open ai
Speaker 1: at more than eight hundred billion dollars. When we're talking
Speaker 1: about a funding round of one hundred billion dollars, I
Speaker 1: mean we're talking about just the massive, massive scale. What
Speaker 1: does it mean that that Amazon could invest this much money.
Speaker 5: Well, Amazon probably can invest that much money. You know,
Speaker 5: what we've seen is most of the hyperscalers that were
Speaker 5: wedded to one player have diversified, and Thropic and Microsoft
Speaker 5: have deepened their interaction. And Thropic was very heavily aligned
Speaker 5: with Amazon. Google and Anthropic have very heavily aligned. Afropic
Speaker 5: relies on TPUs. Amazon, from a software perspective, has tried
Speaker 5: to accommodate all the players on its Bedrock platform, which
Speaker 5: is basically a workplace where you can either train or
Speaker 5: build on top of existing models. So the financials are there,
Speaker 5: like if you if people are watching that are investors
Speaker 5: in those companies, phone me explain the dilution to me,
Speaker 5: explain the post and pre money valuation. But open ai
Speaker 5: needs capital. It is coming from multiple places apparently, and
Speaker 5: one would imagine based on the reporting that's been done
Speaker 5: by Bloomberg and others, this is a big, large anchor
Speaker 5: round before a future IPO as well of some part
Speaker 5: of the open ai entity.
Speaker 1: The scale is just other words, the amounts of money
Speaker 1: that we're talking about right now.
Speaker 3: Yeah, just kind of close our mind. Yeah, all right,
Speaker 3: we get a run. We know you're gonna be we
Speaker 3: know the Apple call, what the Analyson investors is coming
Speaker 3: up in just about four and a half minutes time,
Speaker 3: and we know Ed'll be on it and our live blog.
Speaker 3: We'll be tracking all of it at Ludlow. Thank you,
Speaker 3: Thank you, of course, co host at Bloomberg Tech on
Speaker 3: Bloomberg TV. Catch it at eleven am to noon with
Speaker 3: Caroline Hi, another co host. It's always on Bloomberg TV
Speaker 3: Monday through Friday.
Speaker 2: This is the Bloomberg Business Week Daily Podcast. Listen live
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Speaker 3: We want to talk a bit more about Tesla.
Speaker 1: Tom Ryan is lead equity analyst Global Autos at RBC
Speaker 1: Capital Markets. Tom good to have you on the program
Speaker 1: and joins us from New York. I want to start
Speaker 1: with the sort of the headlines out of the Tesla
Speaker 1: call yesterday, as somebody who's followed the company for quite
Speaker 1: a while were all surprised about the models and model acts, essentially,
Speaker 1: in the words of Craig Trudell, being put out to pastor.
Speaker 6: Out no not at all. I think that was pretty
Speaker 6: much expected, right, I mean this company is moving to
Speaker 6: more towards autonomy. It's more of an AI investment, right, robotaxi, humanoids. Right,
Speaker 6: the car business is in the past. Really, we've known
Speaker 6: about this for a while now. Maybe it's the final
Speaker 6: nail in the confidence so to speak.
Speaker 1: Well, wait, you just said that the car business is
Speaker 1: Wait repeat what you said about the car business, because
Speaker 1: I think people still even though they don't value the
Speaker 1: company as a car company, but you know, it's still
Speaker 1: thought of by many people as a car company. The
Speaker 1: car business is what at Tesla?
Speaker 6: Yeah, in terms of valuation, right, it's a one point
Speaker 6: four trillion dollar market cap. Right, the most all of
Speaker 6: new cars sales could ever be is something like two
Speaker 6: point seven trillion dollars. They sell two percent of all
Speaker 6: the cars in the world. Right, So mathematically it's not
Speaker 6: a car company. Right, How do you get to one
Speaker 6: point four trillion dollars of value?
Speaker 4: Then?
Speaker 1: What is it?
Speaker 6: Clearly that it's a it's an autonomy company, right, it's humanoids,
Speaker 6: it's robotaxi. Right, it's not a private car that you
Speaker 6: and you and I buy and drive around.
Speaker 4: Oh, that's it.
Speaker 6: You'll never get to one point four trillion dollars of value.
Speaker 3: That's because those business segments are already contributing so much
Speaker 3: to the top line.
Speaker 1: She's being sarcastic, Tom, she's being sarcastical.
Speaker 3: Look at the FA page on the Bloomberg. You know
Speaker 3: where they make money right now. Automotive eighty six billion
Speaker 3: in revenue expected in the twenty twenty six year and
Speaker 3: then energy generation and stewage that's almost Yeah, it's a
Speaker 3: little bit more than seventeen billions, So that's where they
Speaker 3: make it. I get what everybody's saying. And I feel
Speaker 3: like Tesla's always been like, well, wait, not what we're doing,
Speaker 3: but what we're going to be doing. But how long
Speaker 3: do we have to wait to have it grow into
Speaker 3: that valuation that is much more like a tech company.
Speaker 6: Yeah, you have a long way to go to get there. Absolutely,
Speaker 6: But I think the way to look at this is
Speaker 6: not the bottom up, right, how many cars are selling each.
Speaker 4: Quarter, et cetera.
Speaker 6: But you look top down, what is the market value
Speaker 6: of robotaxis? It is enormous, Right, It's a much more
Speaker 6: economical and it's a much more efficient mode of transportation,
Speaker 6: and it's going to generate a lot more revenues. Look
Speaker 6: how much you spend on ubers relative to what you
Speaker 6: were willing to spend on owning a private car. And
Speaker 6: then the humanoid space, which I don't know if that's
Speaker 6: the right word humanoid. I think it's better to look
Speaker 6: at robotics. Okay, so many industries are being upended by this.
Speaker 6: The tams for both of these are in the multiple
Speaker 6: trillions of value. All Tesla needs to do is capture
Speaker 6: small percentages of this to get to its market capitalization
Speaker 6: that it has today. So I get it. This is
Speaker 6: far in the future. But I mean you could said
Speaker 6: the same thing about a lot of companies. Right, Netflix
Speaker 6: when it was renting DVDs. Right, it's not doing that anymore.
Speaker 6: It's doing something totally different, and I haven't years.
Speaker 1: Yeah, I think that's a really good looking I think
Speaker 1: that's a good corollary. And at a certain point Netflix
Speaker 1: stopped sending DVDs by mail. It wasn't that long ago,
Speaker 1: But before they did that, they made it very difficult
Speaker 1: to actually, you know, sort of subscribe to that. They
Speaker 1: wanted to really push people to the digital video on demand,
Speaker 1: which is obviously the right direction if you were to
Speaker 1: do that for Tesla, though, then then why even bother
Speaker 1: selling cars to consumers right now? Why not just focus
Speaker 1: on creating these fleets of robotaxis and work on autonomy,
Speaker 1: work on robotics, and really go all in there.
Speaker 6: Yeah, I think you can't really have one without the other. Right.
Speaker 6: Remember FSD the software that powers the robotaxis, especially unsupervised,
Speaker 6: it comes from all the millions of miles and data
Speaker 6: collected from the cars that have FSD or have autopilot, etc.
Speaker 6: So it's a flywheel. You need to have the data
Speaker 6: to build upon that. And then once you have the robotaxis,
Speaker 6: there is a theory that that could then go backwards
Speaker 6: and make people buy more cars, and the subscription for
Speaker 6: FSD on private cars could be another profit center. So
Speaker 6: while I do agree that in the year twenty fifty,
Speaker 6: I don't know if selling boxes with wheels is going
Speaker 6: to be the meaningful driver of value for Tesla. I
Speaker 6: don't think it will. I think in the evolution of
Speaker 6: the company, you need this to build the next generations
Speaker 6: and to get to these autonomy innovations that they're trying
Speaker 6: to achieve.
Speaker 3: All right, So when does Tesla grow into this valuation
Speaker 3: I mean, when does the reality growing like match up
Speaker 3: with the valuation. I'm looking at a pe. This is
Speaker 3: just one metric three forty five, so three hundred and
Speaker 3: forty five times current earnings, almost two hundred times future earnings.
Speaker 3: So how long do we You said it's gonna take
Speaker 3: a long time. How long?
Speaker 6: So my evaluation, right, I have FSD. I look at
Speaker 6: it at twenty thirty five, ROBOTAXI I look at it
Speaker 6: on twenty forty, right, Humanoids, I look at it at
Speaker 6: twenty fifty basis and then I discount those back, right,
Speaker 6: So you may have to wait a long time to
Speaker 6: actually see the earnings where it results in a multiple
Speaker 6: that's a market multiple, right, But that's you could say
Speaker 6: that about a lot of companies. Right Again, I think
Speaker 6: the way to look at it is, what do you
Speaker 6: think about these and markets? And these you know, robotaxis
Speaker 6: the market and humanoids is a market, and what penetration
Speaker 6: do you think these guys could achieve?
Speaker 3: Is that captured?
Speaker 6: And where the stock is now? That I think is
Speaker 6: the way to think about it.
Speaker 3: Well, the stock right now down about three points seven
Speaker 3: percent four hundred and fifteen dollars a share. Tom n
Speaker 3: Ryan thinks so much. Appreciate it. Lead equity analyst Global
Speaker 3: Autos over at RBC Capital Markets.
Speaker 1: Stay with us more from Bloomberg Business Week Daily coming
Speaker 1: up after this.
Speaker 2: You're listening to the Bloomberg Business Weekdaily Podcast. Catch us
Speaker 2: live weekday afternoons from two to five pm Eastern. Listen
Speaker 2: on Apple CarPlay and Android Auto with the Bloomberg Business app.
Speaker 1: Or watch us live on YouTube. A lot to get
Speaker 1: to with Lauren Goodwin. She's an economist. She's Chief market
Speaker 1: strategist at New York Life Investments. She joins us here
Speaker 1: in the Bloomberg Interactive Brokers Studio. We kind of went
Speaker 1: through a lot right there, but I want to get
Speaker 1: to sort of those individually. But before we do that,
Speaker 1: I just want you to answer for us. The biggest
Speaker 1: risk out there for markets right now that you see
Speaker 1: and the.
Speaker 7: Economy right now, it's if in a couple of weeks
Speaker 7: we have an inflation report that shows inflation is moving
Speaker 7: back up. I think that the reason that the market
Speaker 7: has been able to digest so many big developments and
Speaker 7: so many questions uncertainties is because we have contained inflation.
Speaker 7: If that data looks a little different, then the Fed's
Speaker 7: dynamic looks different, people's economic forecasts look different. I think
Speaker 7: it really disrupts the frankly, the consensus that the market
Speaker 7: has right now.
Speaker 1: She didn't say geopolitics.
Speaker 3: You didn't say geopologics.
Speaker 1: I saw you geopology.
Speaker 3: I want to want I want to come back to that,
Speaker 3: but I want to go back to what you said
Speaker 3: about inflation, because J. Powell, FED Chair, of course said
Speaker 3: it pretty confident about the mandate, right, the dual mandate
Speaker 3: of the Federal Reserve, and in terms of inflation and
Speaker 3: in terms of the labor market. I mean pretty confident,
Speaker 3: don't you think I do? And I, for what it's worth,
Speaker 3: I agree with him. Okay, our base case economic scenario
Speaker 3: calls for inflation to stay around where it is, maybe
Speaker 3: move a little closer to three percent, a little over.
Speaker 3: That's not a horrifically bad scenario. And that's probably a
Speaker 3: scenario where you get one or two cuts from the
Speaker 3: FED this year and they stay put that and for
Speaker 3: markets in the economy, that's really still a goldilocks backdrop.
Speaker 3: Oh louyjah, Because I have to say, going through what
Speaker 3: he said, especially initially but even throughout, that's what I
Speaker 3: came to mind, Lauren is goldilocks, like this is a
Speaker 3: pretty good spot to be in, right.
Speaker 7: It is a good spot, and that's why I think that.
Speaker 7: I mean, look, geopolitics would be a way more interesting
Speaker 7: and fun key risk to talk about. But when it
Speaker 7: comes to what really disrupts the market, we've been talking
Speaker 7: on the desk constantly that six months ago it was
Speaker 7: impossible to have any sort of certainty or any sort
Speaker 7: of view. Now it's really difficult to get out of consensus.
Speaker 7: Most people are expecting a pretty good growth backdrop, but
Speaker 7: pretty good earnings backdrop thanks to a FED that's moderately easing,
Speaker 7: good fiscal policy support out of keep.
Speaker 3: Hearing about the tax refunds that everybody's going to get
Speaker 3: and tax advantages for corporations.
Speaker 7: A little bit of dollar weekening, a lot of portfolio
Speaker 7: sort of diversification and rebalancing. That's our view too, But
Speaker 7: it's difficult to break outside of that consensus. And I
Speaker 7: think the one thing that really disrupts the consensus for us,
Speaker 7: but for the FED as well is if that sort
Speaker 7: of single idea that we will get a couple of
Speaker 7: rate cuts and certainly rates wouldn't be moving back the
Speaker 7: other direction just gets questioned. I think it also, you know,
Speaker 7: we talk a lot about the short end of the
Speaker 7: curve with the Fed's policy rate on FED Day especially,
Speaker 7: but inflation starts to call into question this conversation that
Speaker 7: FED is having about independence and really impacts the long
Speaker 7: end of the curve. Now, so much of not only
Speaker 7: the affordability question in the US, but also risk assets
Speaker 7: are priced off of the long end. And so it's
Speaker 7: a boring answer, but I think that inflation number is
Speaker 7: just a key to keeping the market as well behaved
Speaker 7: as it's been.
Speaker 1: So why why aren't geopolitics, to you the number one risk?
Speaker 1: We have an armada according to the President heading to
Speaker 1: Iran yesterday, these the President and the Iranians were trading
Speaker 1: barbs about that. I think has some people concerned that
Speaker 1: things could escalate, potentially what we saw in Venezuela something similar.
Speaker 1: We've already bombed that country.
Speaker 7: Two parts to this answer. The first is that there's
Speaker 7: no doubt in my mind that the change in the
Speaker 7: geopolitical backdrop is meaningfully impacting the way we need to
Speaker 7: think about portfolio construction. No doubt in my mind this
Speaker 7: is not about a single administration. This is a fifteen
Speaker 7: year post financial crisis.
Speaker 3: In the flows right starting and elsewhere, and it's.
Speaker 7: Been exacerbated by a pandemic and Russia's invasion of Ukraine
Speaker 7: and all these things that just brought more attention to
Speaker 7: the fact that supply chains are vulnerable and that you
Speaker 7: might want technology, healthcare, energy, and a couple of other
Speaker 7: things at home, and that sort of the competition that
Speaker 7: that's bringing that matters. That's why we are seeing so
Speaker 7: many countries investing in and really trying to secure commodities
Speaker 7: in certain other supply chains.
Speaker 3: So when you say those sectors, are you saying diversification
Speaker 3: here in the US in terms of your exposure? Are
Speaker 3: you saying also diversification outside the US?
Speaker 7: I'm saying that countries and companies are realizing that we
Speaker 7: had just in time so apply chains for those things.
Speaker 7: And unlike maybe many other goods and services, those are
Speaker 7: ones that you have to have secure access to it,
Speaker 7: not at home than somewhere else. And so that's impacting
Speaker 7: the way we think about a global portfolio in a
Speaker 7: major way. But when I think about individual risks, they
Speaker 7: certainly matter for the societies in which they happen, for
Speaker 7: human beings, for the way that we think about the
Speaker 7: world in general. But when I think about what disrupts
Speaker 7: the market, if you have US companies printing reasonable profits,
Speaker 7: then what happens to oil prices when so much energy
Speaker 7: production has come online in the US doesn't matter nearly
Speaker 7: the same way that it used to. And so again
Speaker 7: I'm not saying that it doesn't matter. It wouldn't prompt volatility,
Speaker 7: but those tend to be shorter lived unless they disrupt
Speaker 7: that market consensus in the way I was.
Speaker 3: But the only thing I would say is those supply chains, right,
Speaker 3: they don't move overnight. And we've talked to lots of
Speaker 3: CEOs that yeah, I mean they are thinking about supply
Speaker 3: chains around the world, like to where they sell. But
Speaker 3: some of this build, whether it's manufacturing here in the
Speaker 3: US right to reduce our exposure overseas. None of this
Speaker 3: happens overnight.
Speaker 7: Oh that's right. That's why I think it's become more
Speaker 7: of a part of the base case allocation question for
Speaker 7: investors and less of a risk.
Speaker 2: Now.
Speaker 7: One thing I think, though, that's really interesting about the
Speaker 7: business business decision that you're bringing up is and I
Speaker 7: was speaking about this last last night, we had a
Speaker 7: global roundtable of our investment leads talking about some of
Speaker 7: these sticky issues, and one of the things that we
Speaker 7: were speaking to was you have a again a lot
Speaker 7: of investor consensus around a constructive economic backdrop investment, et cetera.
Speaker 7: But it hinges on you know, the top very small
Speaker 7: percent of consumers deciding that they're still going to spend.
Speaker 7: It hinges on businesses continuing to make the decision that
Speaker 7: it is worth investing in these areas that are becoming
Speaker 7: more and more fragile. It's a little bit of a
Speaker 7: of a behavioral question, very difficult to answer in the aggregate.
Speaker 7: And so though I think that that inflation number is
Speaker 7: or that inflation dynamic is one of the kept the
Speaker 7: markets the most stable, you could see how over the
Speaker 7: course of the year worries could build up.
Speaker 4: Again.
Speaker 7: It's not our base case, but I think it's a
Speaker 7: very reasonable question to raise.
Speaker 1: We are going to be speaking with Josh Green in
Speaker 1: just a minute. He wrote the Bloomberg Business Week cover
Speaker 1: story on Gavin Newsom, who we just heard from with
Speaker 1: our own Brad Stone in a fireside chat. Governor Newsom
Speaker 1: said during that chat that markets and their negative reactions
Speaker 1: to some policies have been a check on the president.
Speaker 1: Do you agree with that? It's not and I don't
Speaker 1: mean it to be a political question. It's just like
Speaker 1: we have seen just the reality and the reality. But
Speaker 1: we saw the president, you know, in April said the
Speaker 1: bond market got yippie. We did see him soften his
Speaker 1: stance in Davos post a selloff last week, stopped in
Speaker 1: his stance toward Greenland. People accused him then of that,
Speaker 1: of tackling on that.
Speaker 7: I do believe that the market is an incredibly important
Speaker 7: constraint on not just this administration, but frankly anymore on
Speaker 7: the economy. One just to give an example of something
Speaker 7: that we've been researching really in depth, is the concept
Speaker 7: that you've spoken about a lot of the key shaped economy.
Speaker 7: You have sort of wealthier consumer spending, the lower income
Speaker 7: consumers really really struggling in this environment. And people say, well,
Speaker 7: that doesn't really matter for the market. I beg to differ.
Speaker 7: Not only has it impacted sort of the political backdrop
Speaker 7: in a meaningful way, but what it's done, more importantly
Speaker 7: to your question, is it's brought what happens in the
Speaker 7: market closer to what happens in the real economy. If
Speaker 7: we see the ten year run up and a ten
Speaker 7: to fifteen to twenty percent correction in the S and
Speaker 7: P five hundred relative to wealth for these wealthy spenders
Speaker 7: two years ago, that's not a big deal. The market's
Speaker 7: been so constructive. But if they pull back spending from
Speaker 7: their pockets by five, ten, fifteen percent as a result,
Speaker 7: that's a major hit to this economy right now. That's
Speaker 7: a major change in people's expectations.
Speaker 3: I love you because I feel like we all so
Speaker 3: many people point, well, the market another record, this is great,
Speaker 3: this is all good. But we've also done some reporting
Speaker 3: about how much of the consumer spending is that wealthier group.
Speaker 3: One last question, Chris Waller fed governor one of the
Speaker 3: descents yesterday, the other one Stephen Myron, which we expected
Speaker 3: to be a descent. Having said that, is that his
Speaker 3: move in your view, that he really wants to be
Speaker 3: fed chair.
Speaker 7: I have no idea, but I do think that we're
Speaker 7: very lucky as a sort of investing populist that right
Speaker 7: now there is still actually real debate about whether the
Speaker 7: policy rate should be one or two twenty five bases.
Speaker 3: So that doesn't say to you that maybe that's a
Speaker 3: sign of the FED not being independent. Not yet, Okay,
Speaker 3: not yet.
Speaker 7: That's what I want to ask that it's such an
Speaker 7: important question, but we're still in the range where debate
Speaker 7: is reasonable.
Speaker 3: Yeah, debate's good. We love debate.
Speaker 1: Lauren Goodwin, economists and chief market strategy at New York
Speaker 1: Life Investments, joining us here in the Bloomberg Interactive Brokers Studio.
Speaker 2: This is the Bloomberg Business Week Daily podcast, available on Apple, Spotify,
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