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Speaker 1: Bloomberg Audio Studios, Podcasts, radio news. You're listening to the

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Speaker 1: Bloomberg Intelligence Podcast. Catch us live weekdays at ten am

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Speaker 1: Eastern on Apple, Cocklay and Android Auto with the Bloomberg

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Speaker 1: Business App. Listen on demand wherever you get your podcasts,

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Speaker 1: or watch us live on YouTube.

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Speaker 2: Stacey, I want to turn to a story that you

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Speaker 2: highlighted earlier today, and that's about Tesla fating US auto

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Speaker 2: safety investigations over its door handles. This is a story

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Speaker 2: that Bloomberg had written about last week and it got

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Speaker 2: a lot of attention.

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Speaker 3: Yes, the story itself is pretty amazing. The reporters here

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Speaker 3: at Bloomberg did such an amazing job, and I have

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Speaker 3: to say, I mean the stories themselves were quite harrowing.

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Speaker 3: In some cases people not being able to get out

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Speaker 3: of their cars, people being trapped.

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Speaker 4: It was.

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Speaker 3: Yeah, I'm glad that it is being looked into.

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Speaker 2: All right, let's bring in Steve Man, Bloomberg Intelligence Global

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Speaker 2: Autos and Industrials Research analyst, and Steve, the fact that

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Speaker 2: people don't know how to get out of a Tesla

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Speaker 2: if it's locked in an emergency kind of situation on

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Speaker 2: impact or if there's a fire is not new. Yet

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Speaker 2: the National Highway Traffic Safety Administration did not act on

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Speaker 2: anything until now.

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Speaker 5: Why is that, Well, it is a very serious situations,

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Speaker 5: serious safety situation. Now, first of all, there is a

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Speaker 5: manual release from the interior of the vehicle. But the

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Speaker 5: safety issue is that you can't manually override the electronics

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Speaker 5: and open the door from the outside. Now, this is

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Speaker 5: an issue that's I'm plaguing the whole industry. It's not

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Speaker 5: just Tesla, okay, And you know there's there's a number

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Speaker 5: of automakers have solved the issue, and I think Tesla

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Speaker 5: does need to solve this issue because you know, you know,

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Speaker 5: people have have died because of this. Uh problem here.

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Speaker 3: I'm interested in. I was just looking. I was just

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Speaker 3: catching up with Tesla stock, and for some reason, shares

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Speaker 3: continue a very enthusiastic upward march in spite of these

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Speaker 3: really serious concerns. And like you say, you know the

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Speaker 3: concerns where a solution isn't necessarily Yeah.

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Speaker 5: I think I think from the investor's perspective, there is

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Speaker 5: a solution. There is a number of vehicles. For example,

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Speaker 5: the Aldi, they actually solved that issue, and they saw

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Speaker 5: they solved it by you know, having a double pull

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Speaker 5: on the lash to actually open the vehicle manually. So

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Speaker 5: I think from an investor perspective, it is an issue.

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Speaker 5: It needs to be solved, and it's solvable. The reason

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Speaker 5: why the stocks are going up, as you know, the

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Speaker 5: trillion dollar pay package and UH and the reiteration of

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Speaker 5: the company moving towards AI is really getting the investor

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Speaker 5: very excited. The robo taxi is rolling out apparently the

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Speaker 5: extended the model why is selling really well in China

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Speaker 5: so and then in Europe where we saw a lot

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Speaker 5: of decline line and EV sales seems to be ticking up.

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Speaker 2: But the pay package rewards Elon Musk for thinking really big,

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Speaker 2: not dealing with how to unlock car doors in the

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Speaker 2: event of some kind of problem. You say that Audi

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Speaker 2: has solved this. Are Tesla engineers going to take their

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Speaker 2: cueue from Audi?

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Speaker 5: Possibly? Really? Yeah? I mean it's it's it's important. It's

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Speaker 5: important that they solve this because Tesla, when they roll

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Speaker 5: out the robo taxi, safety is an important issue for them.

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Speaker 5: It's an important issue not just for Tesla, I think

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Speaker 5: for the whole industry, and it's a reputation that they're

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Speaker 5: trying to build. Especially you know they're as they try

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Speaker 5: to roll out robo taxi, and you know they want

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Speaker 5: to project themselves as a safe automaker. So I think

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Speaker 5: it's going to be a priority list for Elon Musk

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Speaker 5: and the rest of the organization there.

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Speaker 3: It does also seem that people are feeling quite optimistic

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Speaker 3: about this stock, but also there does seem to be

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Speaker 3: a liability issue in addition to a need to solve

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Speaker 3: this problem issue. Is that at all concerned? I mean

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Speaker 3: from the markets it would see no, but yeah.

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Speaker 5: It is. It is a liability and I wouldn't be

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Speaker 5: surprised that you know, there's going to be other legal

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Speaker 5: issue that comes up. But it's I think from an

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Speaker 5: investor perspective, this is normal business. Recalls are normal and

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Speaker 5: there are other safety issues that has been recall not

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Speaker 5: just at Tesla but and other automakers. So I think

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Speaker 5: the investor are taking this, I don't want to say lightly,

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Speaker 5: but it's normal business that you know, we're going to

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Speaker 5: get over this.

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Speaker 6: It's a work in progress.

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Speaker 2: Yes, are there other safety issues in particular that Tesla

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Speaker 2: needs to focus on pay attention to that could if

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Speaker 2: left unresolved, could become legal liability issues?

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Speaker 5: I yeah, I actually thought about this robotaxi right, and

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Speaker 5: I think there's still a safety driver sitting on the

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Speaker 5: passenger seat pretty much on every Robotaxi. I think there

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Speaker 5: is discussions of taking the safety driver out at the

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Speaker 5: end of the year, but I think they need to

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Speaker 5: tread very very carefully, especially for Tesla. It's a high

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Speaker 5: profile company. Anything negative is going to damage their reputation.

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Speaker 5: So if they don't take up the safety driver at

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Speaker 5: the end of the year, I wouldn't be surprised. I

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Speaker 5: think they do need to take it one step at

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Speaker 5: a time, make sure everything goes well before they do

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Speaker 5: a full launch without the safety driver.

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Speaker 2: All right, Steve Man giving us something to look ahead

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Speaker 2: to when it comes to Tesla. He is our Global

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Speaker 2: Autos and Industrials research channalyist at Bloomberg Intelligence. Stay with

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Speaker 2: us more from Bloomberg Intelligence coming up after this.

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Speaker 1: You're listening to the Bloomberg Intellligion's podcast. Catch us live

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Speaker 1: weekdays at ten am Eastern on Apple, Cocklay and Android

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Speaker 1: Auto with the Bloomberg Business App. Listen on demand wherever

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Speaker 1: you get your podcasts, or watch us live on YouTube.

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Speaker 2: Let's talk a little bit about AI tech related companies.

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Speaker 2: And I know that's so general and vague, but that's

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Speaker 2: how I feel like you kind of encompass all of them.

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Speaker 2: Core Weave says it's shareholder, in Vidia, has agreed to

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Speaker 2: buy cloud services valued at six point three billion dollars,

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Speaker 2: which sounds like a lot of money, but I think

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Speaker 2: in this space may not be.

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Speaker 6: Let's bring in on rog run up for us.

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Speaker 2: He is Bloomberg Intelligence technology analysts to talk a little

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Speaker 2: bit about this AI infrastructure demand and arag why is

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Speaker 2: this cloud contract within Vidia important.

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Speaker 7: So the reason why it's important is because Conviave is

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Speaker 7: considered a neo cloud or a cloud without you know,

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Speaker 7: you could say a backing like you know what we

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Speaker 7: have from Amazon's other businesses or.

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Speaker 4: Microsoft other businesses. So the two risk people think about

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Speaker 4: cold Weave is what if tomorrow the demand for AI

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Speaker 4: cloud infrastructure drops or pricing drops. This deal basically says

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Speaker 4: for the next several years, if there is any unused

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Speaker 4: cloud capacity for core viv, Nvidia will come out and

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Speaker 4: take that. So I think this is, you know, another

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Speaker 4: way of telling the investors that you know, please don't

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Speaker 4: worry about the demand for AI infrastructure. You know, the

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Speaker 4: parent of it all, which is Nvidia, who's selling the

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Speaker 4: chips to gore Viv, will take care of the demand

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Speaker 4: if there are any issues.

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Speaker 3: Do you think that the amount of cloud space that

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Speaker 3: AI will require will be smaller than we think it is.

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Speaker 3: I mean, certainly that shook the markets a couple of

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Speaker 3: months ago.

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Speaker 4: Yeah.

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Speaker 7: Well, at this point there is more demand than capacity,

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Speaker 7: which is why there is a big rush to create

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Speaker 7: new data centers, you know, install those new chips, create

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Speaker 7: new networks, and go out and start to build applications

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Speaker 7: that are AI enabled.

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Speaker 4: Now, having said that.

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Speaker 7: You know, people have seen this movie quite a bit

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Speaker 7: back in the two thousand era when there was a

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Speaker 7: glut of infrastructure built for Internet, but then suddenly in

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Speaker 7: the next two to three years there was a drop

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Speaker 7: in demand for that time.

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Speaker 4: And this is what a lot of investors are fearing.

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Speaker 7: And that's I think the big overhang on the space

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Speaker 7: that at this point everybody is happy. Twenty twenty five

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Speaker 7: is great, twenty six is great, but what happens after

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Speaker 7: that is the big question mark.

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Speaker 2: Yeah, well, everyone has to get anxious about something, so

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Speaker 2: we might as well look out to twenty twenty seven.

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Speaker 2: At this point, anark, let's talk about another company you mentioned, neocloud.

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Speaker 2: Nebus plans to raise three billion dollars in convertible notes

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Speaker 2: and equity to help it expand this follows a major

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Speaker 2: deal to provide AI infrastructure to Microsoft.

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Speaker 6: Is Nebuus also a neocloud company?

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Speaker 4: Yes, absolutely, it's the same kind of company.

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Speaker 7: They are being funded by private credit, by investors, private investors,

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Speaker 7: and they are creating a similar kind of a cloud infrastructure.

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Speaker 7: And you know what's happening with Microsoft is there are

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Speaker 7: two things that are important for people to understand. One

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Speaker 7: they do they run chack GPT instances, which is when

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Speaker 7: you know, when I'm tweeting or I'm looking at anything

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Speaker 7: on open ai Chat GPT, those workloads are running on

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Speaker 7: Microsoft's cloud infrastructure.

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Speaker 4: It has it is a lack of capacity, so it's

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Speaker 4: going out.

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Speaker 7: To neoclouds like core Vi and now naby Is to say,

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Speaker 7: you know, I will buy that capacity for you as

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Speaker 7: long as I can need it. So that's it's Microsoft Capex,

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Speaker 7: but it's underleasing. Second aspect is Microsoft is basically saying

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Speaker 7: I don't want to build a lot more capacity for

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Speaker 7: training off my models. I'm going to outsource that. So

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Speaker 7: which is why it's good for those neon clouds. If

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Speaker 7: Microsoft is going to spend that money, it's going to

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Speaker 7: do rental from these cloud providers rather than building some

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Speaker 7: of it in house.

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Speaker 3: Jumping now to Oracle, they're having a very good morning,

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Speaker 3: and a lot of that has to do with the president,

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Speaker 3: President Trump announcing this morning or hinting anyway that Oracle

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Speaker 3: might be involved in a TikTok deal. Can you talk

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Speaker 3: a little bit about that.

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Speaker 7: Yeah, I was to be very frank, I was a

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Speaker 7: bit surprised about the stock reaction because I think it

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Speaker 7: was very clear back in January that TikTok would be

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Speaker 7: running in the US and Oracle will be the cloud

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Speaker 7: provider on the back end. So when you know, similar

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Speaker 7: to what I just mentioned on Microsoft Cloud, if somebody

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Speaker 7: goes on TikTok and is running that application, Oracle runs

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Speaker 7: that the back end of it or the Oracle Cloud infrastructure,

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Speaker 7: and you know that revenue was was argued up for

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Speaker 7: you know, loss under the previous administration when if TikTok

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Speaker 7: was to be closed. But it seems, you know, back

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Speaker 7: from January onwards, that the President keeps on extending the

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Speaker 7: ban on it, and you know, we we you know,

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Speaker 7: Oracle still making the money of it. The big question is,

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Speaker 7: if there is a buyout that's led by US companies,

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Speaker 7: will Oracle have any equity stake in it? And you know,

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Speaker 7: we think it doesn't need to because it's already looking

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Speaker 7: for so much of expansion capacity for its cloud infrastructure

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Speaker 7: because of the open the ideal, So we don't think

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Speaker 7: that's the case.

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Speaker 4: But practice speaking, nothing surprises us anymore.

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Speaker 2: That's a good way to end it on ourragrana Bloomberg

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Speaker 2: Intelligence technology analysts. Nothing surprises us anymore on the AI

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Speaker 2: infrastructure demand, which seems never ending, at least for now.

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Speaker 6: Stay with us. More from Bloomberg Intelligence coming up after this.

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Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live

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Speaker 1: weekdays at ten am easterne on Apple, Cocklay and Android

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Speaker 1: Auto with the Bloomberg Business App. Listen on demand wherever

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Speaker 1: you get your podcasts, or watch us live on YouTube.

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Speaker 6: All right, let's bring in Jeff Brown.

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Speaker 2: Now he is founder in CEO T two Capital Management,

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Speaker 2: and Jeff is here to talk to us about commercial

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Speaker 2: real estate. Jeff, this bad rate cut that's gonna happen tomorrow.

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Speaker 2: It's pretty much baked in and the big question is

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Speaker 2: what happens after tomorrow. Do we get a series of

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Speaker 2: rate cuts, do we continue cutting rates into twenty twenty six,

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Speaker 2: and do we see a string of rate cuts in

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Speaker 2: twenty twenty six. How's the commercial real state market position

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Speaker 2: right now?

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Speaker 8: Yeah, I think the commercial real estate market is ready

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Speaker 8: to breathe a big sigh of relief. It does seem

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Speaker 8: like a foregone conclusion that twenty five basis points is

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Speaker 8: on the table for tomorrow. Expectations for I think last

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Speaker 8: I saw we talked earlier this week, and turning, I

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Speaker 8: think it's two additional twenty five basis point cuts going

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Speaker 8: into the end of the year. And so, yeah, real

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Speaker 8: estate's looking for a reprief We've endured these rate these

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Speaker 8: increased rate shocks from twenty twenty two and twenty twenty three.

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Speaker 8: A lot of people have been kind of clinging, holding

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Speaker 8: on for dear life since then. And so yeah, again,

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Speaker 8: interest rates moving down is a big sigh of relief.

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Speaker 3: I mean, they're not moving down that much. Twenty five

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Speaker 3: basis points is a pretty little step down. Does that

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Speaker 3: actually make a difference or is it more psychological?

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Speaker 8: There's definitely a psychological element to it. I always say

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Speaker 8: real estate developers are about the most optimistic people that

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Speaker 8: you'll meet, So any kind of light at the end

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Speaker 8: of the tunnel is grounds for optimism. There's at least

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Speaker 8: some clarity now. I think a lot of people went

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Speaker 8: through a period of time a couple of years ago

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Speaker 8: where you just didn't know what's going to happen next,

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Speaker 8: you know what she is going to fall. Then there's

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Speaker 8: great optimism with the current administration in the White House,

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Speaker 8: and we talked about President Trump and his background in

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Speaker 8: real estate, and so expectations that real estate would, you know,

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Speaker 8: open up a little bit, transaction volume pick up. It

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Speaker 8: hasn't manifested quite yet. We've had tariffs, you know, we've

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Speaker 8: had registrates just kind of stagnate. Office seems to be

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Speaker 8: getting back on its feet at this point. So again,

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Speaker 8: it's just a it's not a big shock in the

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Speaker 8: positive direction, but there is glimmers of hope and optimism now.

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Speaker 2: Even with the rate cuts last year, bar and costs

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Speaker 2: remained fairly elevated compared to where they were before the pandemic,

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Speaker 2: and as Stacey points out, a twenty five basis point

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Speaker 2: cut today is not going to make tomorrow I should

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Speaker 2: say it's not going to make too much of a difference.

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Speaker 2: You have some major intractable issues that are still holding

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Speaker 2: up your industry, including costs, whether it's the cost of

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Speaker 2: material or the cost of labor. Tell us a little bit,

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Speaker 2: how about how much costs have risen over the last

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Speaker 2: couple of years.

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Speaker 8: Yeah, that has been a source spot in real estate. Frankly,

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Speaker 8: is when COVID hit. So we're going back five years

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Speaker 8: now and we had this exacerbated increase and construction costs

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Speaker 8: and construction labor, and all of a sudden, you know,

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Speaker 8: it's supply supply issues and delivery issues. And again I

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Speaker 8: think we finally got through that. However, what has not

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Speaker 8: really relented is the construction costs. And now as we're

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Speaker 8: looking at you know, there is a supply shortage that's

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Speaker 8: that's upon us. There is just a dearth of construction

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Speaker 8: that's out there at this point. So it favors existing landlords,

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Speaker 8: people you know, like T two that own a fair

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Speaker 8: amount of multi family properties around the country, student housing

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Speaker 8: properties around the country. Because so few are being built

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Speaker 8: at this point, developers can't make numbers pencil to make

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Speaker 8: a you know, a profitable construction development at this point.

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Speaker 3: What is hampering I guess new development is it? Is

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Speaker 3: it labor? Is it materials? Costs? I know lumber has

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Speaker 3: been a big kind of topic that that's come up

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Speaker 3: quite a bit recently.

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Speaker 8: Yep, and lumbers even retreated quite a bit. So that's

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Speaker 8: that's spend again a bit of a sigh of relief.

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Speaker 8: There is a lot of volatility there, so who knows

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Speaker 8: when that jumps back up. But yeah, I would say

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Speaker 8: the costs in you know, just labor and materials has

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Speaker 8: been the driving factor toward constraining construction activity.

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Speaker 2: When you and your fellow Titans of commercial real estate

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Speaker 2: gather and talk, what do you find yourself lamenting the most?

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Speaker 8: I wish I were in conversations with Titans for starters

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Speaker 8: as far as lamenting goes.

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Speaker 6: What are you celebrating then? If not lamenting?

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Speaker 8: You know, honestly, there's a lot of celebrating for clarity.

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Speaker 8: I always say I'm you know when I'm when I'm

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Speaker 8: a round table at a round table with other real

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Speaker 8: estate investors, private equity fund managers, Like all we ask

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Speaker 8: for is clarity, Like define the boundaries, give us some clarity,

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Speaker 8: and then we can operate, we can play the game. Uh,

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Speaker 8: for the you know, past three or four years again,

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Speaker 8: interest rates spikes, construction materials just you know, running up

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Speaker 8: on a tariffs implement to implemented. It's just been really

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Speaker 8: really hard to just have a level playing field, have

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Speaker 8: some visibility even six months down the road. And so

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Speaker 8: what we celebrate is the appearance of some clarity at

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Speaker 8: this point, and so it does kind of unlock some confidence,

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Speaker 8: unlocks some capital. It's been really really hard just to

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Speaker 8: capitalize project in light of the uncertainty. How do you

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Speaker 8: underwrite a project that's that you're intending to exit in

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Speaker 8: five or seven, let alone ten years, just really really

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Speaker 8: challenging in light of the lack of clarity that's been

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Speaker 8: out there. So what we celebrate is clarity, and what

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Speaker 8: we lament, I would say, is just frankly, the lack

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Speaker 8: of clarity.

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Speaker 3: Is that lack of clarity? I mean, is there clarity

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Speaker 3: right now? It seems like there's quite a bit of

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Speaker 3: lack of clarity that can come into my mind, especially

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Speaker 3: for companies that are contemplating opening up a factory or

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Speaker 3: something in order to counteract tariffs. I feel like the

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Speaker 3: uncertainty around the tariffs is preventing quite a bit of that.

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Speaker 3: But is there clarity that I'm unaware of or what

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Speaker 3: is this clarity that's getting celebrated.

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Speaker 8: It's a great point. See, Yeah, I think I don't

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Speaker 8: know that there's crystal clarity at this point, but there

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Speaker 8: is there's at least the expectation of a lack of

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Speaker 8: a lot of volatility. Tariffs at least they've been digested,

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Speaker 8: We've whether that storm at least temporarily. It doesn't seem like,

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Speaker 8: you know, new terrorists are going to come to bear

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Speaker 8: at this point. We all understand that interest rates kind

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Speaker 8: of are where they are, if anywhere, they're going down.

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Speaker 8: And then we understand the fact that construction costs are elevated.

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Speaker 8: And so again it's not it's not like celebratory worthy,

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Speaker 8: but I would say at least there is some clarity

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Speaker 8: even surrender to the facts, and we have reality, We

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Speaker 8: have the playing field now we can operate, whether that's

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Speaker 8: being very active or kind of retreated and being back

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Speaker 8: on the sidelines.

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Speaker 6: So it's kind of an acceptance of the current conditions.

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Speaker 8: That's a fair, fair statement.

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Speaker 2: Yeah, Well, the acceptance of the current conditions is there's

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Speaker 2: a lot of talk, a lot of happy talk about

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Speaker 2: data centers, and I'm wondering how much of that talk

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Speaker 2: is being translated into action.

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Speaker 8: Yeah, it does seem like there is action, and it

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Speaker 8: is a kind of a new frontier. It is the

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Speaker 8: gold rush and commercial real estate right now to get

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Speaker 8: into the data center space. I think the news last

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Speaker 8: week we're open AI and Oracle are partnering together on

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Speaker 8: a if I understood correctly, a three hundred billion dollar project.

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Speaker 8: That's that's real money and backed by you know, real

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Speaker 8: company and Oracle. We talked a little bit about you know,

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Speaker 8: Blackstone here in New York is very active and very

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Speaker 8: vocally active at least in the in the data center space.

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Speaker 8: That's real, real capital behind those efforts. So I think

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Speaker 8: it has some traction, But you know, how it unfolds

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Speaker 8: and and what data centers look like in two three years.

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Speaker 8: And I mean, frankly, this this AI revolution and the

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Speaker 8: speed at which adoption is necessary is something I don't

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Speaker 8: know if I've ever seen in the commercial real estate

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Speaker 8: space anyway. But it's here, it's got some real capital

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Speaker 8: behind it, and I think, you know, we'll see how

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Speaker 8: it plays out over the next few years.

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Speaker 2: All Right, good talking with you, Jeff, Thanks for us

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Speaker 2: winging by. Come back again, maybe after a series of

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Speaker 2: rate cuts, and we can talk a little bit about

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Speaker 2: the increase in clarity that you and your peers are seeing.

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Speaker 2: Jeff Brown is founder and CEO of Chitu Capital Management.

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Speaker 2: They are investors in commercial real estate. They're also a

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Speaker 2: private equity firm.

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