1
00:00:02,759 --> 00:00:10,600
Speaker 1: Bloomberg Audio Studios, podcasts, radio news. You're listening to the

2
00:00:10,640 --> 00:00:14,600
Speaker 1: Bloomberg Intelligence podcast. Catch us live weekdays at ten am.

3
00:00:14,640 --> 00:00:17,279
Speaker 1: He's done on Apple, Cocklay and Android Auto with the

4
00:00:17,320 --> 00:00:21,080
Speaker 1: Bloomberg Business App. Listen on demand wherever you get your podcasts,

5
00:00:21,400 --> 00:00:23,120
Speaker 1: or watch us live on YouTube.

6
00:00:23,800 --> 00:00:27,720
Speaker 2: Tesla's board is offering Elon Musk a new compensation agreement

7
00:00:28,040 --> 00:00:30,840
Speaker 2: potentially worth around a trillion dollars. Remember this is a

8
00:00:30,880 --> 00:00:33,120
Speaker 2: company whose market cap right now is only one point

9
00:00:33,159 --> 00:00:36,199
Speaker 2: one six trillion. I say only because you're comparing his

10
00:00:36,320 --> 00:00:38,240
Speaker 2: potential pay with the market cap.

11
00:00:38,400 --> 00:00:39,240
Speaker 3: That's kind of crazy.

12
00:00:39,280 --> 00:00:41,320
Speaker 4: It is crazy. Is it's a number just kind of

13
00:00:41,640 --> 00:00:42,559
Speaker 4: grabs you a little bit.

14
00:00:42,880 --> 00:00:43,720
Speaker 3: It's eye popping.

15
00:00:43,840 --> 00:00:46,760
Speaker 2: So let's bring in Steve Man, he's Bloomberg Intelligence Global

16
00:00:46,800 --> 00:00:49,919
Speaker 2: Autos and Industrials Research manager, to discuss all of this.

17
00:00:50,400 --> 00:00:54,120
Speaker 2: What is the justification that Tesla's board is offering that

18
00:00:54,440 --> 00:00:58,280
Speaker 2: Elon Musk would be worth potentially a trillion dollars in pay?

19
00:00:59,240 --> 00:01:02,440
Speaker 5: Yeah, trilling dollar is a lot, but I think what

20
00:01:02,440 --> 00:01:06,440
Speaker 5: they're looking for by twenty thirty five is really juice

21
00:01:06,480 --> 00:01:10,319
Speaker 5: up that market cap to eight point five trillion. And

22
00:01:10,959 --> 00:01:15,280
Speaker 5: if you look at the operational operational targets that's tied

23
00:01:15,319 --> 00:01:19,240
Speaker 5: to it. It definitely confirms that this company is moving

24
00:01:19,280 --> 00:01:23,400
Speaker 5: towards AI robotics, you know, robo taxi.

25
00:01:23,800 --> 00:01:26,240
Speaker 6: So what are some of the hurdles that are out there?

26
00:01:26,480 --> 00:01:28,520
Speaker 6: Were mister Muslin maybe eventually get this.

27
00:01:28,760 --> 00:01:32,000
Speaker 7: Hey, yeah, you know, it's it's not going to be

28
00:01:32,040 --> 00:01:34,880
Speaker 7: easy for him, and it's probably designed to be that

29
00:01:34,920 --> 00:01:37,440
Speaker 7: way so that, you know, you know, make make sure

30
00:01:37,480 --> 00:01:40,759
Speaker 7: the shareholders will vote for the for the proposal.

31
00:01:40,800 --> 00:01:44,160
Speaker 5: Don't make it too easy for him. So the easy,

32
00:01:44,480 --> 00:01:49,760
Speaker 5: easy lift is really twenty million vehicle delivery. That's going

33
00:01:49,840 --> 00:01:52,360
Speaker 5: to be a no brainer, easy to get to, given

34
00:01:52,360 --> 00:01:55,440
Speaker 5: that it ships about one point million a year already.

35
00:01:56,360 --> 00:01:59,559
Speaker 5: But the tough part, tough part is really a fifty

36
00:01:59,600 --> 00:02:03,840
Speaker 5: percent take rate on FSD, the full self driving and

37
00:02:04,000 --> 00:02:09,080
Speaker 5: a million shipments on robots, and so those are really

38
00:02:09,120 --> 00:02:12,280
Speaker 5: really tough to get. The third thing is really the

39
00:02:12,360 --> 00:02:16,880
Speaker 5: EBITA adjusted EBITA a four herd billion between you know,

40
00:02:16,919 --> 00:02:19,320
Speaker 5: getting there between now and twenty thirty five.

41
00:02:19,639 --> 00:02:21,480
Speaker 2: Okay, so he has a bit of time, and you know,

42
00:02:21,639 --> 00:02:24,639
Speaker 2: he's someone who will start a narrative and stay on it.

43
00:02:25,000 --> 00:02:28,240
Speaker 2: You mentioned FSD full self driving. Where are we in

44
00:02:28,240 --> 00:02:29,320
Speaker 2: that effort for Tesla.

45
00:02:30,240 --> 00:02:33,280
Speaker 5: Yeah, it's still it's still below ten percent. It's probably

46
00:02:33,280 --> 00:02:37,160
Speaker 5: around five six, maybe seven percent at the most. Uh,

47
00:02:37,320 --> 00:02:42,799
Speaker 5: there is still some technological you know, hurdles that they

48
00:02:42,840 --> 00:02:46,040
Speaker 5: have to to to overcome, and a lot of it

49
00:02:46,080 --> 00:02:50,160
Speaker 5: is really getting you know, consumers to be comfortable with it.

50
00:02:50,960 --> 00:02:55,600
Speaker 5: So take rate of you know, ten million subscribers with

51
00:02:55,800 --> 00:02:59,960
Speaker 5: twenty million vehicles shipped. It looks like a stretch, but

52
00:03:00,240 --> 00:03:03,959
Speaker 5: it needs it because the margin for FSD is much

53
00:03:04,040 --> 00:03:10,560
Speaker 5: higher than vehicle production, potential margins for robotaxis much.

54
00:03:10,480 --> 00:03:11,239
Speaker 8: Greater than.

55
00:03:12,639 --> 00:03:15,680
Speaker 5: Selling cars. So to get to the four hundred billion,

56
00:03:16,120 --> 00:03:20,279
Speaker 5: he really needs to really focus on the AI capability

57
00:03:20,320 --> 00:03:20,960
Speaker 5: of the company.

58
00:03:21,639 --> 00:03:26,040
Speaker 6: Hey, Steve, since Elon Musk has left DOGE, do we

59
00:03:26,080 --> 00:03:28,520
Speaker 6: have any idea how much time he is actually spending

60
00:03:28,639 --> 00:03:29,959
Speaker 6: at A good question.

61
00:03:31,200 --> 00:03:34,560
Speaker 5: Yeah, My impression is he's probably spending close to one

62
00:03:34,600 --> 00:03:39,360
Speaker 5: hundred percent of his time, you know, not only based

63
00:03:39,400 --> 00:03:43,120
Speaker 5: on this news where he's actually laying out a plan

64
00:03:43,920 --> 00:03:47,480
Speaker 5: for Tesla, but look, he also had a very successful

65
00:03:47,560 --> 00:03:53,120
Speaker 5: launch at SpaceX recently, so you know the impression is

66
00:03:53,120 --> 00:03:56,960
Speaker 5: that he's full on in managing his companies.

67
00:03:57,040 --> 00:03:59,120
Speaker 2: And I like that question. Paul because we know that

68
00:03:59,120 --> 00:04:03,840
Speaker 2: Elon Musk has previously been an activist and urging the

69
00:04:03,880 --> 00:04:06,000
Speaker 2: board to come up with a new pay package for him,

70
00:04:06,040 --> 00:04:08,160
Speaker 2: you know, he kind of suggested that maybe he could

71
00:04:08,200 --> 00:04:11,080
Speaker 2: move on and do AI somewhere else, and do robotics

72
00:04:11,080 --> 00:04:11,600
Speaker 2: somewhere else.

73
00:04:13,440 --> 00:04:18,000
Speaker 5: Yeah, I think from my perspective, I don't think he's

74
00:04:18,040 --> 00:04:19,960
Speaker 5: going to go anywhere. This is still his baby.

75
00:04:20,040 --> 00:04:21,720
Speaker 8: I think empty.

76
00:04:23,600 --> 00:04:26,880
Speaker 5: I don't want to say empty threats. There's always a possibility,

77
00:04:27,120 --> 00:04:30,000
Speaker 5: but I think the possibility is very low. But because

78
00:04:30,120 --> 00:04:34,600
Speaker 5: this is his baby, and he's very very passionate about AI,

79
00:04:35,760 --> 00:04:39,280
Speaker 5: about you know, energy sustainability, about sending people to Mars,

80
00:04:39,680 --> 00:04:42,440
Speaker 5: and I think all of this is, you know, a

81
00:04:42,480 --> 00:04:43,280
Speaker 5: part of that plan.

82
00:04:44,960 --> 00:04:46,960
Speaker 6: So let's get back to some nuts and bolts here.

83
00:04:47,440 --> 00:04:50,120
Speaker 6: They got to compete against China and they're not. That's

84
00:04:50,279 --> 00:04:52,880
Speaker 6: tough number one. Number two, we had some really disappointing

85
00:04:54,440 --> 00:04:56,560
Speaker 6: delivery number of sales numbers out of Europe here, So

86
00:04:56,760 --> 00:04:59,360
Speaker 6: just the day to day near term seems pretty challenging.

87
00:05:00,160 --> 00:05:00,400
Speaker 3: Yeah.

88
00:05:00,600 --> 00:05:04,840
Speaker 5: And also, don't forget the seventy five hundred dollars EV

89
00:05:04,960 --> 00:05:07,039
Speaker 5: tax credit in the US actually is going away at

90
00:05:07,080 --> 00:05:09,240
Speaker 5: the end of September, it is going to be the

91
00:05:09,279 --> 00:05:13,679
Speaker 5: next pretty challenging for the industry. Six to nine months

92
00:05:14,160 --> 00:05:17,080
Speaker 5: between now and nine months from now, it is going

93
00:05:17,120 --> 00:05:20,680
Speaker 5: to be very challenging. I think one bright spot, you know,

94
00:05:20,760 --> 00:05:23,719
Speaker 5: if you heard b y D, one of the dominant

95
00:05:24,120 --> 00:05:30,000
Speaker 5: Chinese automaker, is actually ratchet back their forecast on a

96
00:05:30,120 --> 00:05:33,839
Speaker 5: sales forecast that actually tells us that, you know, maybe

97
00:05:34,000 --> 00:05:37,880
Speaker 5: the pricing cut through pricing competition in China may be

98
00:05:38,040 --> 00:05:41,000
Speaker 5: slowing down, and that would be positive for Tesla and

99
00:05:41,040 --> 00:05:42,040
Speaker 5: the rest of the industry.

100
00:05:42,240 --> 00:05:46,080
Speaker 2: Yes, if Tesla launches that low cost EV, which there's

101
00:05:46,120 --> 00:05:47,280
Speaker 2: been a lot to talk.

102
00:05:47,040 --> 00:05:49,479
Speaker 3: About, but we haven't actually seen any action on.

103
00:05:50,080 --> 00:05:51,840
Speaker 2: Is there a status update on that or is this

104
00:05:52,000 --> 00:05:55,240
Speaker 2: something just that that just keeps getting pushed out timed again.

105
00:05:55,760 --> 00:05:57,760
Speaker 5: Yeah, I think it's going to come up pretty soon.

106
00:05:58,520 --> 00:06:01,480
Speaker 5: In the last earnings call, they pretty much projected that

107
00:06:03,279 --> 00:06:05,920
Speaker 5: the car is actually ready, but they have to hold

108
00:06:05,960 --> 00:06:10,279
Speaker 5: off production because they want to produce as many Model

109
00:06:10,320 --> 00:06:13,760
Speaker 5: wise and Model three before the end of the seventy

110
00:06:14,720 --> 00:06:17,640
Speaker 5: seventy five hundred EV tax credit goes away, because they

111
00:06:17,720 --> 00:06:20,960
Speaker 5: expect to sell a lot more in the next quarter

112
00:06:21,040 --> 00:06:23,880
Speaker 5: or so. So I believe the car is ready, and

113
00:06:24,040 --> 00:06:27,320
Speaker 5: it probably likely will have to. I would hope it

114
00:06:27,320 --> 00:06:30,600
Speaker 5: will actually come to market in the new year, because

115
00:06:30,680 --> 00:06:33,760
Speaker 5: there's gonna be you know, Rivian's also launching a cheaper

116
00:06:33,800 --> 00:06:37,839
Speaker 5: model by then. GM with the Chevy Ball is supposed

117
00:06:37,880 --> 00:06:41,760
Speaker 5: to come online in the next six months, so they

118
00:06:41,800 --> 00:06:44,680
Speaker 5: do need to launch that sooner rather than later.

119
00:06:45,240 --> 00:06:48,400
Speaker 4: Stay with us. More from Bloomberg Intelligence coming up after this.

120
00:06:50,360 --> 00:06:54,040
Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live

121
00:06:54,120 --> 00:06:57,239
Speaker 1: weekdays at ten am Eastern on Apple, Cocklay and Android

122
00:06:57,240 --> 00:07:00,040
Speaker 1: Auto with the Bloomberg Business app. Listen on demand and

123
00:07:00,200 --> 00:07:04,080
Speaker 1: wherever you get your podcasts, or watch us live on YouTube.

124
00:07:05,200 --> 00:07:07,880
Speaker 6: It's going to Lululemon here. This thing is not good.

125
00:07:07,920 --> 00:07:10,640
Speaker 6: It's tough news coming out of there. Let's put it

126
00:07:10,640 --> 00:07:12,600
Speaker 6: all into context. We could do that with Punam Boyle.

127
00:07:12,680 --> 00:07:16,840
Speaker 6: She's a senior US retail analyst for Bloomberg Intelligence.

128
00:07:18,160 --> 00:07:21,720
Speaker 4: Punum Lululemon. I love my Lulu Lemon, but what happened.

129
00:07:21,920 --> 00:07:24,720
Speaker 9: What happened is that you like your performance, but do

130
00:07:24,760 --> 00:07:27,440
Speaker 9: you like your casual where it's a casual wear part

131
00:07:27,440 --> 00:07:30,880
Speaker 9: of the segment that's underperforming and causing for guidance to

132
00:07:30,920 --> 00:07:33,600
Speaker 9: be cut on the sales side and then Tearff send

133
00:07:33,600 --> 00:07:36,520
Speaker 9: a Minimus, causing the margin hit that we're seeing. So

134
00:07:36,680 --> 00:07:40,240
Speaker 9: it's a sales and a margin story here. They're both underperforming.

135
00:07:41,560 --> 00:07:43,360
Speaker 3: So what's the prescription for that?

136
00:07:43,640 --> 00:07:46,800
Speaker 2: And is a company coming up with a strategy that

137
00:07:47,120 --> 00:07:48,840
Speaker 2: is appeasing investors in any way?

138
00:07:49,720 --> 00:07:51,960
Speaker 9: Yeah, So the biggest issue on the sales side is

139
00:07:52,000 --> 00:07:54,520
Speaker 9: the fact that they're not performing well on the casual

140
00:07:54,560 --> 00:07:57,800
Speaker 9: part of the business. They don't have enough newness. Currently,

141
00:07:58,000 --> 00:08:01,560
Speaker 9: unis in their pipeline stands at twenty three percent and

142
00:08:01,600 --> 00:08:04,920
Speaker 9: they want to move it to thirty five percent by

143
00:08:04,960 --> 00:08:08,280
Speaker 9: next year. So we hope to see more newness, but

144
00:08:08,360 --> 00:08:11,679
Speaker 9: it won't be until spring of twenty twenty six, which

145
00:08:11,760 --> 00:08:13,880
Speaker 9: means the back half of the year is going to

146
00:08:13,920 --> 00:08:15,080
Speaker 9: be very sluggish.

147
00:08:15,320 --> 00:08:17,680
Speaker 2: That's a long time to wait for investors who have

148
00:08:17,760 --> 00:08:19,760
Speaker 2: been sitting on the stock and have looked at a

149
00:08:19,840 --> 00:08:26,320
Speaker 2: forty eight percent drop before today's trading. What's if investors,

150
00:08:26,600 --> 00:08:29,000
Speaker 2: let me let me rephrase this. If consumers are swapping

151
00:08:29,000 --> 00:08:32,240
Speaker 2: out of Lululemon going to Allo and worry, what are

152
00:08:32,240 --> 00:08:33,840
Speaker 2: investors swapping out Lululemon for?

153
00:08:35,160 --> 00:08:38,080
Speaker 9: Well, I mean, look, i'd say, the performance side of

154
00:08:38,080 --> 00:08:40,079
Speaker 9: their business is doing well. So when you say swapping

155
00:08:40,120 --> 00:08:44,040
Speaker 9: out from the aligned leggings perhaps to the allos, that

156
00:08:44,240 --> 00:08:48,080
Speaker 9: might be just broadening the assortment. The real issue is

157
00:08:48,120 --> 00:08:51,600
Speaker 9: on the wide leg pants, on the casual assortment that

158
00:08:51,760 --> 00:08:54,720
Speaker 9: is not trending well. That is what needs to do better.

159
00:08:55,240 --> 00:08:59,040
Speaker 9: Competition has always been there. It's growing, for sure, but

160
00:08:59,120 --> 00:09:01,559
Speaker 9: it's always been there. Lul knows how to compete when

161
00:09:01,559 --> 00:09:04,640
Speaker 9: they have the right product. The issue is they don't

162
00:09:04,720 --> 00:09:08,680
Speaker 9: have enough new product. It's not coming fast enough and

163
00:09:08,960 --> 00:09:11,880
Speaker 9: it won't come overnight. They hired a new AI head

164
00:09:12,280 --> 00:09:15,360
Speaker 9: to drive innovation. That should help because AI is helping

165
00:09:15,440 --> 00:09:18,960
Speaker 9: improve design timelines and so much more that we do

166
00:09:19,000 --> 00:09:21,720
Speaker 9: think they can speed it up. But once again, nothing's happening.

167
00:09:21,720 --> 00:09:22,040
Speaker 8: This year.

168
00:09:22,080 --> 00:09:23,880
Speaker 9: They'll have a little bit more on new but it's

169
00:09:24,080 --> 00:09:26,880
Speaker 9: not enough. Sales in the US are expected to decline

170
00:09:27,559 --> 00:09:30,600
Speaker 9: and that's you know, we haven't seen a decline at Lemon.

171
00:09:31,000 --> 00:09:32,319
Speaker 9: I can't remember when.

172
00:09:32,920 --> 00:09:35,280
Speaker 6: So I mean Lulu Lemon's down. The stock is down

173
00:09:35,320 --> 00:09:37,760
Speaker 6: fifty five percent this year, Puma's down fifty five percent,

174
00:09:37,800 --> 00:09:42,960
Speaker 6: Adidas twenty five, under, Armour thirty seven. Are these performances

175
00:09:43,120 --> 00:09:46,880
Speaker 6: in stock declines. Are they primarily driven by concerns about tariffs.

176
00:09:48,080 --> 00:09:50,600
Speaker 9: Tariffs is definitely one concern, but I think that's not

177
00:09:50,720 --> 00:09:54,200
Speaker 9: limited to just the athletic where it's for all apparel retailing.

178
00:09:54,480 --> 00:09:56,480
Speaker 9: The other is just a shift in wardrobe.

179
00:09:56,559 --> 00:09:56,719
Speaker 8: Right.

180
00:09:56,760 --> 00:09:59,559
Speaker 9: If you think a few years back during COVID, where

181
00:09:59,600 --> 00:10:02,080
Speaker 9: did the war ropes shift? A big part of your

182
00:10:02,120 --> 00:10:08,560
Speaker 9: wardrobe was comfortable performance. Where right, we all had the leggings,

183
00:10:08,600 --> 00:10:10,439
Speaker 9: we were wearing them at home while we were working,

184
00:10:10,480 --> 00:10:13,800
Speaker 9: we were wearing them out. Today we're moving into a

185
00:10:13,800 --> 00:10:18,000
Speaker 9: more structured wardrobe environment, which means that the closets are

186
00:10:18,000 --> 00:10:20,480
Speaker 9: more balanced like they once used to be, and that's

187
00:10:20,640 --> 00:10:23,719
Speaker 9: part of the reason why you're seeing underperformance also at

188
00:10:23,760 --> 00:10:25,040
Speaker 9: the athletic ware companies.

189
00:10:25,600 --> 00:10:27,559
Speaker 2: So in the meantime, as the Little Lemon tries to

190
00:10:27,559 --> 00:10:30,800
Speaker 2: get its product, its newness, its assortment back on track,

191
00:10:31,440 --> 00:10:34,960
Speaker 2: it's making up for the week sales in the US

192
00:10:35,080 --> 00:10:38,080
Speaker 2: with a lot of international sales. China is a big

193
00:10:38,120 --> 00:10:42,160
Speaker 2: strong point. Global growth is still there. How much more

194
00:10:42,160 --> 00:10:43,840
Speaker 2: can it ramp up that side of the business.

195
00:10:44,640 --> 00:10:48,200
Speaker 9: There's plenty of opportunity internationally. International is only twenty five

196
00:10:48,240 --> 00:10:51,559
Speaker 9: percent of Little Lemon's total business. China's growing at over

197
00:10:51,600 --> 00:10:54,640
Speaker 9: twenty percent, with the rest of international at around twenty percent,

198
00:10:54,880 --> 00:10:57,920
Speaker 9: so a lot of runway there across both performance and

199
00:10:58,120 --> 00:11:00,880
Speaker 9: casual wear. We think that's a bright spot that will

200
00:11:00,920 --> 00:11:03,120
Speaker 9: remain a bright spot for the foreseeable future.

201
00:11:03,880 --> 00:11:06,800
Speaker 6: Punam, It's early September here, but it's certainly never too

202
00:11:06,800 --> 00:11:11,000
Speaker 6: early to talk about holiday shopping. What's the expectation in

203
00:11:11,040 --> 00:11:13,640
Speaker 6: your industry about how holiday shopping will be this year.

204
00:11:14,360 --> 00:11:16,280
Speaker 9: I think holiday will be okay as long as there

205
00:11:16,280 --> 00:11:19,800
Speaker 9: are deals. The consumer is clearly focused on deals, and

206
00:11:19,840 --> 00:11:22,200
Speaker 9: we think given the current TARFF situation, a lot of

207
00:11:22,200 --> 00:11:26,360
Speaker 9: the inventory was up fronted, so retailers have most of

208
00:11:26,400 --> 00:11:30,280
Speaker 9: holiday now in stock in their warehouses and also you know,

209
00:11:30,400 --> 00:11:33,280
Speaker 9: starting to come into stories. We think the consumer will

210
00:11:33,280 --> 00:11:35,840
Speaker 9: come for deals. They'll be choosy. They have been choosy

211
00:11:35,880 --> 00:11:38,880
Speaker 9: all year, so you're looking at the Walmarts, the Amazons

212
00:11:38,920 --> 00:11:42,280
Speaker 9: of the world that will probably continue to take wallet's share.

213
00:11:42,800 --> 00:11:45,480
Speaker 3: Who's the strongest company in your space right now, poo.

214
00:11:46,400 --> 00:11:49,360
Speaker 9: I think Amazon's still one of the strongest retailers out there.

215
00:11:49,440 --> 00:11:52,720
Speaker 9: They can compete with their large pocketbooks, They have the

216
00:11:52,760 --> 00:11:56,839
Speaker 9: consumer mind share, and they're essentially focused on delivering value

217
00:11:56,880 --> 00:11:58,839
Speaker 9: to their customer along with speed and convenience.

218
00:11:59,800 --> 00:12:03,800
Speaker 6: And Walmart's still doing well across the board.

219
00:12:03,920 --> 00:12:06,600
Speaker 9: Yeah, yeah, Walmart's still doing well. You know, both of

220
00:12:06,640 --> 00:12:10,640
Speaker 9: them are thriving side by side. Walmart's a larger grocery business.

221
00:12:10,679 --> 00:12:13,000
Speaker 9: Over fifty percent of their sales do come from grocery,

222
00:12:13,040 --> 00:12:16,120
Speaker 9: so they do benefit from that. But they are increasing

223
00:12:16,120 --> 00:12:19,280
Speaker 9: their marketplace. It's over one hundred billion dollars now their

224
00:12:19,280 --> 00:12:20,280
Speaker 9: e commerce business.

225
00:12:20,440 --> 00:12:21,080
Speaker 8: Stay with us.

226
00:12:21,200 --> 00:12:23,600
Speaker 4: More from Bloomberg Intelligence coming up after this.

227
00:12:25,679 --> 00:12:29,360
Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live

228
00:12:29,440 --> 00:12:32,520
Speaker 1: weekdays at ten am Eastern on Apple, Cocklay and Android

229
00:12:32,559 --> 00:12:35,840
Speaker 1: Auto with the Bloomberg Business app. Listen on demand wherever

230
00:12:35,920 --> 00:12:39,439
Speaker 1: you get your podcasts, or watch us live on YouTube.

231
00:12:40,240 --> 00:12:43,560
Speaker 2: Let's bring in Mandeep Singh of Bloomberg Intelligence. Of course,

232
00:12:43,840 --> 00:12:46,480
Speaker 2: he is our go to person for all things in

233
00:12:46,520 --> 00:12:49,880
Speaker 2: the tech space, man deep. The news here is that

234
00:12:49,960 --> 00:12:53,440
Speaker 2: Broadcom is going to help open AI, design and produce

235
00:12:53,480 --> 00:12:57,480
Speaker 2: an AI accelerator and AI chip starting in twenty twenty six.

236
00:12:57,559 --> 00:13:00,440
Speaker 2: And this is all to i don't know, not take

237
00:13:00,480 --> 00:13:03,800
Speaker 2: market share from in video, but at least compete a

238
00:13:03,840 --> 00:13:05,360
Speaker 2: little bit better with than video, isn't it.

239
00:13:06,679 --> 00:13:10,560
Speaker 8: Yes, And now that they have a ten billion dollar

240
00:13:10,760 --> 00:13:14,920
Speaker 8: backlog from this new customer, open Ai. On the chip side,

241
00:13:15,040 --> 00:13:17,920
Speaker 8: it's real money, so it's not just a proof of

242
00:13:18,040 --> 00:13:22,360
Speaker 8: concept or anything like that. And that has always been

243
00:13:22,400 --> 00:13:27,160
Speaker 8: the risk with Nvidia's growth is because of this concentration,

244
00:13:27,360 --> 00:13:30,960
Speaker 8: whether it's from the hyperscale cloud players or the model

245
00:13:31,000 --> 00:13:36,160
Speaker 8: providers like open Ai, if they were to do things

246
00:13:36,240 --> 00:13:39,280
Speaker 8: on their own chip, that will have a big impact

247
00:13:39,440 --> 00:13:43,520
Speaker 8: on Nvidia. And clearly open Ai fields that they can

248
00:13:43,640 --> 00:13:48,280
Speaker 8: optimize the chip and the model to run better on

249
00:13:48,320 --> 00:13:51,520
Speaker 8: their own chip, and that's probably why you're seeing such

250
00:13:51,520 --> 00:13:54,120
Speaker 8: a strong reaction. But clearly this is a twenty twenty

251
00:13:54,160 --> 00:13:57,040
Speaker 8: six event, so we will still have to wait in

252
00:13:57,160 --> 00:13:59,760
Speaker 8: terms of how that chip is going to stack up

253
00:14:00,120 --> 00:14:02,480
Speaker 8: and what the media will have in twenty twenty six.

254
00:14:02,600 --> 00:14:04,200
Speaker 6: That's kind of where I wanted to go, Man, Deep,

255
00:14:04,240 --> 00:14:06,520
Speaker 6: I guess if I were an Nvidia shareholder, I knew

256
00:14:06,520 --> 00:14:10,760
Speaker 6: competition was coming and it just has to. But at

257
00:14:10,760 --> 00:14:12,319
Speaker 6: the end of the day, I feel comfortable with the

258
00:14:12,400 --> 00:14:14,640
Speaker 6: quality of my chips and my technology.

259
00:14:14,920 --> 00:14:16,280
Speaker 4: Is that kind of the feeling here today?

260
00:14:17,800 --> 00:14:20,760
Speaker 8: There is? And so look, I mean for a company

261
00:14:20,840 --> 00:14:24,200
Speaker 8: like Google, which is also training their own model on

262
00:14:24,280 --> 00:14:28,680
Speaker 8: their TPUs, they haven't been able to sell it to

263
00:14:29,080 --> 00:14:34,000
Speaker 8: a non Google model provider, right, So it's really optimizing

264
00:14:34,080 --> 00:14:36,680
Speaker 8: for your stack, which is what Apple has done over

265
00:14:36,720 --> 00:14:39,760
Speaker 8: the years, but clearly that's worked very well for them.

266
00:14:39,840 --> 00:14:44,240
Speaker 8: So Google really was the first one to train their

267
00:14:44,320 --> 00:14:46,960
Speaker 8: model on their own chips, and I think that's what

268
00:14:47,160 --> 00:14:49,840
Speaker 8: open ai is going after, is they feel they can

269
00:14:49,880 --> 00:14:54,200
Speaker 8: do something similar to Google. In fact, the people that

270
00:14:54,240 --> 00:14:57,880
Speaker 8: they've hired to design this chip are you know, people

271
00:14:57,920 --> 00:15:01,080
Speaker 8: from Google, so they've postal lot of people from there.

272
00:15:01,120 --> 00:15:05,600
Speaker 8: And look, I think given the you know scale average

273
00:15:05,640 --> 00:15:08,320
Speaker 8: open ai and Google are operating, the chip costs are

274
00:15:08,360 --> 00:15:12,320
Speaker 8: pretty substantial. So if they are able to optimize the chip,

275
00:15:12,440 --> 00:15:15,040
Speaker 8: even for their own use, that's going to have a

276
00:15:15,080 --> 00:15:17,480
Speaker 8: big impact on the gross margins. Which is why you

277
00:15:18,160 --> 00:15:21,240
Speaker 8: see a big stock move, you know on Nvidia, because

278
00:15:21,320 --> 00:15:26,200
Speaker 8: Nvidia relies on these large hyperscalers to continue to buy

279
00:15:26,280 --> 00:15:26,960
Speaker 8: chips from them.

280
00:15:27,040 --> 00:15:29,760
Speaker 2: Okay, so in Nvidia down and the shares have actually

281
00:15:29,760 --> 00:15:32,440
Speaker 2: deepened their losses now lower by four point one percent.

282
00:15:32,800 --> 00:15:36,760
Speaker 2: Advanced micro Devices is off even more, MANDIP losing seven percent.

283
00:15:36,880 --> 00:15:39,120
Speaker 2: Where does this lead leave AMD.

284
00:15:39,680 --> 00:15:42,520
Speaker 8: I mean, we know the revenue rundrate for Broadcom now,

285
00:15:42,560 --> 00:15:45,360
Speaker 8: it's over twenty billion dollars. In fact, they guide it

286
00:15:45,400 --> 00:15:50,440
Speaker 8: to acceleration. Anytime you see a company guide to accelerating

287
00:15:50,480 --> 00:15:54,520
Speaker 8: revenue growth, I mean, that's great news in terms of

288
00:15:54,600 --> 00:15:58,080
Speaker 8: multiple expansion. And so for a company like AMD whose

289
00:15:58,120 --> 00:16:01,120
Speaker 8: hope was this market is large enough that they will

290
00:16:01,160 --> 00:16:04,680
Speaker 8: also get that lift in terms of growth rates, clearly

291
00:16:04,800 --> 00:16:09,280
Speaker 8: Broadcom is growing ahead of them and substantially. I mean

292
00:16:09,320 --> 00:16:12,760
Speaker 8: they guide it to six billion dollars plus in next quarter. So,

293
00:16:13,680 --> 00:16:16,880
Speaker 8: I mean Broadcom has shown ten consecutive quarters of quarter

294
00:16:16,920 --> 00:16:20,160
Speaker 8: over quarter growth and it's going to continue because that's

295
00:16:20,200 --> 00:16:23,560
Speaker 8: been their guidance for twenty twenty six. So from that perspective,

296
00:16:23,640 --> 00:16:28,080
Speaker 8: and the gains seems somewhat muted when you contrast that

297
00:16:28,200 --> 00:16:30,040
Speaker 8: with Broadcom's expected growth.

298
00:16:30,360 --> 00:16:31,000
Speaker 3: Stay with us.

299
00:16:31,160 --> 00:16:33,520
Speaker 4: More from Bloomberg Intelligence coming up after this.

300
00:16:35,840 --> 00:16:39,520
Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live

301
00:16:39,600 --> 00:16:42,720
Speaker 1: weekdays at ten am Eastern on Apple, Cocklay and Android

302
00:16:42,720 --> 00:16:46,040
Speaker 1: Auto with the Bloomberg Business App. Listen on demand wherever

303
00:16:46,080 --> 00:16:49,400
Speaker 1: you get your podcasts, or watch us live on YouTube.

304
00:16:50,760 --> 00:16:54,240
Speaker 6: Higher education certainly under pressure from this administration. We had

305
00:16:54,280 --> 00:16:58,160
Speaker 6: another piece of news out just recently concerning our friends

306
00:16:58,200 --> 00:17:00,000
Speaker 6: at Northwestern University.

307
00:17:00,040 --> 00:17:00,960
Speaker 4: Get the last reporting there.

308
00:17:01,040 --> 00:17:04,600
Speaker 6: Janet Lauren joins his Bloomberg Higher Education Finance reporter.

309
00:17:05,280 --> 00:17:07,960
Speaker 4: Some turnover at Northwestern. What's going on there?

310
00:17:08,040 --> 00:17:08,399
Speaker 9: Janet?

311
00:17:08,480 --> 00:17:13,200
Speaker 10: Yes, So the president, Michael Schill, said he was resigning yesterday.

312
00:17:13,600 --> 00:17:15,919
Speaker 10: He's been there for three years and it's been a

313
00:17:15,920 --> 00:17:20,359
Speaker 10: bit tumultuous. In addition to protests and other things, he

314
00:17:20,440 --> 00:17:22,560
Speaker 10: also had to deal with the settlement from the football

315
00:17:22,600 --> 00:17:27,639
Speaker 10: coach who had sued the university over hazing. So he

316
00:17:27,720 --> 00:17:30,760
Speaker 10: had made a deal with protesters during the height of

317
00:17:30,760 --> 00:17:34,080
Speaker 10: all these protests in an effort to clear the encampment

318
00:17:34,119 --> 00:17:36,000
Speaker 10: that was viewed as very unpopular.

319
00:17:36,920 --> 00:17:38,919
Speaker 2: I hadn't realized that he was under fire or the

320
00:17:38,960 --> 00:17:41,560
Speaker 2: school was under fire, because most of our focuses on

321
00:17:42,640 --> 00:17:47,000
Speaker 2: Trump's targeting the IVY leagues, for instance Harvard notably. To

322
00:17:47,040 --> 00:17:50,320
Speaker 2: what extent does this clear the air with whatever discussions

323
00:17:50,320 --> 00:17:51,880
Speaker 2: Northwestern is having with the White House?

324
00:17:52,320 --> 00:17:56,200
Speaker 10: It probably helps because you know they can say, well,

325
00:17:56,520 --> 00:17:58,399
Speaker 10: our leader has left, we're going to put in a

326
00:17:58,440 --> 00:18:03,399
Speaker 10: new person, new reform. But he was also brought before Congress.

327
00:18:04,359 --> 00:18:07,120
Speaker 10: You remember the very high profile hearing with the presidents

328
00:18:07,119 --> 00:18:10,520
Speaker 10: of Harvard, Penn, and MIT and Harvard and Penn's president

329
00:18:10,600 --> 00:18:13,040
Speaker 10: stepped down. Was he there that one, No, he actually

330
00:18:13,080 --> 00:18:16,919
Speaker 10: was called separately and he was grilled along with the

331
00:18:16,920 --> 00:18:19,879
Speaker 10: presidents of Rutgers and UCLA. And he had talked about

332
00:18:21,200 --> 00:18:24,280
Speaker 10: Northwestern has a campus in Cutter and there said we

333
00:18:24,280 --> 00:18:27,200
Speaker 10: would we would be reviewing the contract. It's not clear

334
00:18:27,560 --> 00:18:30,040
Speaker 10: if whatever happened there so that he was under a

335
00:18:30,040 --> 00:18:33,120
Speaker 10: lot of pressure. But don't discount the pressure also about

336
00:18:33,160 --> 00:18:37,080
Speaker 10: the football team because they had a settlement that came

337
00:18:37,160 --> 00:18:42,240
Speaker 10: through late August. The football coach had sued the university

338
00:18:42,359 --> 00:18:45,240
Speaker 10: for one hundred and thirty million dollars for wrongful termination

339
00:18:45,800 --> 00:18:50,080
Speaker 10: and he denied knowledge of hazing, and he sued Northwestern

340
00:18:50,160 --> 00:18:52,800
Speaker 10: is a member of the Big Ten. Don't forget, you know.

341
00:18:53,200 --> 00:18:54,040
Speaker 3: In contacts.

342
00:18:54,119 --> 00:18:56,800
Speaker 10: Yea, they may not be you know, UCLA and winning

343
00:18:56,920 --> 00:19:01,359
Speaker 10: NCAA titles, but you know, same matter sports is, you know,

344
00:19:01,720 --> 00:19:03,280
Speaker 10: is still kind of important there.

345
00:19:03,920 --> 00:19:08,160
Speaker 6: So where are we in terms of these certain universities

346
00:19:08,200 --> 00:19:11,679
Speaker 6: dealing with the Trump administration. Is it trying to just

347
00:19:11,680 --> 00:19:14,280
Speaker 6: come up with a financial settlement and kind of move

348
00:19:14,359 --> 00:19:16,479
Speaker 6: forward and just is that kind of where we are?

349
00:19:16,520 --> 00:19:17,159
Speaker 4: Is that the model?

350
00:19:17,840 --> 00:19:21,399
Speaker 10: It's all unclear. I mean, we know what happened with Harvard,

351
00:19:21,440 --> 00:19:24,400
Speaker 10: as we talked about yesterday. They had an incremental win.

352
00:19:24,560 --> 00:19:26,800
Speaker 10: The court ruled in their favor. But we're just waiting

353
00:19:26,840 --> 00:19:29,160
Speaker 10: for the administration to appeal as they said they would.

354
00:19:29,240 --> 00:19:32,720
Speaker 10: It'll probably go up to the Supreme Court. So, you know,

355
00:19:32,800 --> 00:19:36,399
Speaker 10: even though Harvard won an incremental victory, I mean, the

356
00:19:36,520 --> 00:19:40,120
Speaker 10: judge did not rule on the funding free so that continues.

357
00:19:40,520 --> 00:19:43,240
Speaker 10: It still shows a lot of uncertainty. You know, Harvard

358
00:19:43,280 --> 00:19:45,200
Speaker 10: is still not going to be getting any new grants,

359
00:19:45,760 --> 00:19:48,040
Speaker 10: so and that still has a tremendous impact. You know,

360
00:19:48,080 --> 00:19:51,600
Speaker 10: even though international students are okay there now, it still

361
00:19:51,760 --> 00:19:55,560
Speaker 10: is a dampening on if I'm an international student, do

362
00:19:55,600 --> 00:19:57,480
Speaker 10: I want to come to a school like, even though

363
00:19:57,560 --> 00:20:01,000
Speaker 10: Harvard is my dream school, if things could be uncertain

364
00:20:01,119 --> 00:20:04,320
Speaker 10: you know, it just it ramps up so much financial uncertainty.

365
00:20:04,440 --> 00:20:06,520
Speaker 2: Yeah, it's just easier to go to the UK, or

366
00:20:06,640 --> 00:20:08,480
Speaker 2: to Australia or somewhere else.

367
00:20:09,640 --> 00:20:12,320
Speaker 3: Which school has settled on something with the White House.

368
00:20:12,359 --> 00:20:13,560
Speaker 3: It's only Columbia, right.

369
00:20:13,760 --> 00:20:17,760
Speaker 10: No Brown Brown fifty million dollars settlement and theirs was

370
00:20:17,840 --> 00:20:21,560
Speaker 10: pretty smart because it gave fifty million dollars to develop

371
00:20:21,640 --> 00:20:24,000
Speaker 10: workforce within the state of Rhode Island. So in some

372
00:20:24,040 --> 00:20:27,760
Speaker 10: ways it really bolsters their relationship with their neighbors. Penn

373
00:20:27,960 --> 00:20:30,960
Speaker 10: very early settled about transgender athletes.

374
00:20:31,880 --> 00:20:34,240
Speaker 2: So you know, I think the way everyone else is outstanding,

375
00:20:34,240 --> 00:20:36,560
Speaker 2: and that the goalposts cay move, keep moving on this

376
00:20:36,800 --> 00:20:38,360
Speaker 2: correct and you know again.

377
00:20:38,200 --> 00:20:40,480
Speaker 10: It's we don't know what's going on behind the scenes.

378
00:20:40,720 --> 00:20:44,080
Speaker 10: We think Cornell is, we think Northwestern is, Harvard is.

379
00:20:44,200 --> 00:20:46,480
Speaker 3: Harbord keeps thinking it's done, but it's not right.

380
00:20:47,000 --> 00:20:51,719
Speaker 1: This is the Bloomberg Intelligence Podcast, available on Apple, Spotify,

381
00:20:51,880 --> 00:20:55,400
Speaker 1: and anywhere else you get your podcasts. Listen live each

382
00:20:55,400 --> 00:20:59,160
Speaker 1: weekday ten am to noon Eastern on Bloomberg dot Com,

383
00:20:59,280 --> 00:21:02,800
Speaker 1: the Iheartrate dio app, tune In, and the Bloomberg Business app.

384
00:21:03,240 --> 00:21:06,120
Speaker 1: You can also watch us live every weekday on YouTube

385
00:21:06,560 --> 00:21:08,800
Speaker 1: and always on the Bloomberg terminal.