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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 Coarclay, 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: One of the stories that we've been talk about today

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Speaker 2: is super Microcomputer. There's a company started the day with

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Speaker 2: like twenty five billion a market cap and they announced

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Speaker 2: a seven billion dollar equity raise.

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Speaker 3: Kids. I don't know how you do the math, but

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Speaker 3: that's diluted.

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Speaker 2: I don't know by how much, but in the stocks

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Speaker 2: down seventeen eighteen percent today.

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Speaker 3: You just don't see that very often, would you know?

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Speaker 2: Joins us here senior technology channels for Bloomberg Intelligence, which

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Speaker 2: I've been doing.

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Speaker 3: This Wall Street thing a long time.

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Speaker 2: That's a monster follow on equity offering given the market

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Speaker 2: cap size.

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Speaker 3: What's the math tell you?

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Speaker 4: The math quite frankly tells me at face value. What

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Speaker 4: we wrote was twenty percent plus diluted to shareholders. I

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Speaker 4: think there's another sale sider who said it's up to

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Speaker 4: twenty seven percent.

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Speaker 5: Deluded to shareholders.

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Speaker 4: So yeah, investors aren't happy, about it. But but quite frankly,

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Speaker 4: like Christina said earlier on a recap, short term pain

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Speaker 4: mainly to long term gain.

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Speaker 6: Okay, they're going to use the money for what? And

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Speaker 6: when does it pay off? Two big questions?

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Speaker 4: Yeah, yeah, hey, hey Charlie so so hey John, sorry

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Speaker 4: about that mehe so really really straightforward. Look, seven billion

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Speaker 4: dollars in equity financing, and you you try to back

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Speaker 4: that with the thirty nine billion dollars in orders. Most

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Speaker 4: of those orders are coming in fiscal twenty twenty seven,

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Speaker 4: which is starts in July. And you know, the way

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Speaker 4: I'm factoring it in is like thirty let's just say

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Speaker 4: thirty billion of that comes in the second half of

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Speaker 4: this year, specifically orders for what AAI servers? Okay, right,

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Speaker 4: and these deals are really really expensive. So if you

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Speaker 4: think about it from from this standpoint, a typical AI

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Speaker 4: server deal can range anywhere between a billion to five

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Speaker 4: billion dollar each billion dollars each. So we're talking about

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Speaker 4: a handful of deals that they're trying to fulfill. And look,

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Speaker 4: they only had a billion dollars in gross cash, and

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Speaker 4: they really needed the cash to buy the GPUs to

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Speaker 4: fill those orders.

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Speaker 2: So I go to the FA screen for super microcomputer,

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Speaker 2: and I'm looking at kind of their growth rates and

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Speaker 2: profit margins. I'm surprised to see a profit margin on

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Speaker 2: the net income line of kind of like.

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Speaker 3: Four or five percent.

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Speaker 2: That's not the usually seeing a lot fatter margins for

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Speaker 2: tech companies. Talk to us about just kind of the

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Speaker 2: business here.

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Speaker 4: Yeah, look, Hardward margins are pretty awful, and and AI

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Speaker 4: server margins are probably one of the worst in the industry,

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Speaker 4: primarily because you're selling in a large scale and you

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Speaker 4: have very little control in terms of the GPU pricing.

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Speaker 4: I will tell you, and I'm gonna get a little

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Speaker 4: nerdy here, is that there is part of the sales

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Speaker 4: include something that they sell called.

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Speaker 5: Uh uh what is it?

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Speaker 4: Dc bb S, right, And that's a margin. That's a

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Speaker 4: margin creative business. Now, Consensus has gross margin around eight

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Speaker 4: point two eight point three percent for the next next year.

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Speaker 4: If they can get a half of you know, fifty

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Speaker 4: BIPs on gross margin improvement, we're talking about a dollar

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Speaker 4: dollar EPs secretion if they were able to get sixty

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Speaker 4: billion dollarsand sales instet of fifty billion dollars in sales

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Speaker 4: for next year. So look, this is why I think

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Speaker 4: This could be ultimately positive over the long term, even

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Speaker 4: though shareholders are hurting right now.

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Speaker 6: Who's their big competition, like every building?

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Speaker 4: No, no, no, Look, we've been joking around on this

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Speaker 4: program quite a few times. You got to get a Dell, right,

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Speaker 4: and Michael Dell has just been killing it on the

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Speaker 4: AI server side. Sixty billion dollars in AI servers on

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Speaker 4: tractive for this year, and I think consensus has about

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Speaker 4: seventy five billion dollars in next year. And that's one

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Speaker 4: of the reasons why that super Ma. I'm kind of

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Speaker 4: positive on the demand side for super Micro because they're

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Speaker 4: only one of two of these providers in the US

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Speaker 4: that can provide that level of scale for AI servers.

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Speaker 7: 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 Eastern on Applecarplay and Android Auto

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Speaker 1: with the Bloomberg Business app. Listen on demand wherever you

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

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Speaker 3: Got a big IPO pricing tomorrow.

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Speaker 2: We Do, We Do, We Do, And it's spaceships, it's Mars,

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Speaker 2: it's AI, and it's el On.

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Speaker 3: So it's about everything. It's got something for somebody everybody else.

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Speaker 2: It's got a lot of promises, yes, and we need

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Speaker 2: some clear reporting on that.

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Speaker 3: So we turned to Caroline Hide, she is a betech

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Speaker 3: co anchor.

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Speaker 6: Here.

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Speaker 3: What are we hearing about the road show, Caroline? I mean,

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Speaker 3: there's one.

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Speaker 8: An extraordinary road show.

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Speaker 3: What an extraordinary I saw the.

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Speaker 9: Jammy Diamonds hosting the bro Love that went on.

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Speaker 7: That was very cool.

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Speaker 3: I saw the video look pretty cool. I mean, there's

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Speaker 3: seeming like something for everyone out there. But boy, you

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Speaker 3: really have to just hit your wagon too, Eli.

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Speaker 6: I goett to just say for that road show. The

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Speaker 6: next day, I was reporting on it for the morning

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Speaker 6: and I was trying to pull a cut of Elon. Yeah.

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Speaker 6: I couldn't use anything. Now, I don't know what the

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Speaker 6: hell he was talking about.

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Speaker 9: You had to be there as a JP Morgan client

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Speaker 9: listening inherently, and then Morgan Stanley's been doing it too. Look,

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Speaker 9: all of this is as the hype around this IPO

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Speaker 9: is extraordinary. It's done everything slightly differently. Like we know

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Speaker 9: the price that they're raiming for even though they're so

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Speaker 9: called technical pricing. Tomorrow it's gonna be one hundred and

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Speaker 9: thirty five dollars. We understand, of course it's we be

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Speaker 9: raising up to one point eight trillion dollars of market

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Speaker 9: valuation and so many five billion dollars of new equity.

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Speaker 9: But this is going to be thirty percent outlocated to

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Speaker 9: the retail community.

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Speaker 8: They're still going to get all tomorrow.

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Speaker 9: What's interesting is, of course, depending who you get allocation

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Speaker 9: through is how quickly you're allowed to flip it. Now

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Speaker 9: a lot of these retail offerings, if you go and

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Speaker 9: buy it through fidelity, they're going to punish you if

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Speaker 9: you try and sell her on the day, so you're

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Speaker 9: going to be like contained for fifteen days. But there's

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Speaker 9: a lot of volatility that's going to go into this,

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Speaker 9: and many think that the price is going to be

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Speaker 9: pushed higher by the amount of passive funds they're going

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Speaker 9: to rush in to buy SpaceX because there's been this

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Speaker 9: fast tracking of entry into a lot of the main

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Speaker 9: indices like then as that for example of SpaceX shares,

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Speaker 9: and so suddenly if you're a passive fund and you

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Speaker 9: need allocation, there's going to be the sort of fuel

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Speaker 9: and frenzy behind it.

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Speaker 8: But all of this is to say that demand is

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Speaker 8: clear two hundred and.

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Speaker 9: Fifty billion dollars worth is what's been reported by Reuters,

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Speaker 9: and we understand from our sources that that is similar

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Speaker 9: in terms of level of demand.

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Speaker 7: Some big fund.

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Speaker 9: Managers are coming in asking for up to ten billion

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Speaker 9: dollars worth of SpaceX shares because of course they've got

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Speaker 9: so many funds they've got to distribute it within. And

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Speaker 9: then you're looking at which particular areas in geographically the

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Speaker 9: Middle East, in investors who have been very long the

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Speaker 9: Ai trade very much puning into Xai, Open Ai Andthropic. Well,

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Speaker 9: we know the Kuwaiti Investment Fund has been asking for

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Speaker 9: about five billion dollars worth. We know that there's been

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Speaker 9: big demand coming from the other players as well. So

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Speaker 9: clearly the hype cycles there. I mean, we just got

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Speaker 9: two more days to white knuckle this.

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Speaker 6: Yeah, like Prince aloied Bin Tallala, he was one of

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Speaker 6: the early backers of Elon Musk. He's going to get

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Speaker 6: a big pay day, it looks like, right, And it's.

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Speaker 9: Going to be interesting as to whether people hold on

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Speaker 9: to their allocation, whether it's paper money, whether they want

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Speaker 9: to sell more broadly in the future. And look, this

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Speaker 9: is why there was that great reporting yesterday, wasn't there

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Speaker 9: showing the truest data that if you look back at

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Speaker 9: the thirty biggest tech IPOs in the last fifteen years,

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Speaker 9: generally they all a majority of them will sink in

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Speaker 9: their first twelve months of trade. That's because lockups expire

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Speaker 9: CEOs and people want to be able to make some profits.

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Speaker 9: Liquidity wanted from some of the people that work at

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Speaker 9: these companies, so there is some sort of pressure. But

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Speaker 9: more broadly, this looks as though a lot of people

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Speaker 9: are going to be not only holding it in their

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Speaker 9: private funds, but maybe you wanted to even buy it

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Speaker 9: in their public funds.

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Speaker 8: Too, maybe want even more skin in the game.

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Speaker 3: All right, I'm going to put on my analyst hat

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Speaker 3: here valuation.

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Speaker 2: Bloomberg Television had a great graphic they ran yesterday just

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Speaker 2: looking at IPOs, big tech ipeos multiples of revenue and

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Speaker 2: fifteen here twenty times there. Crazy stuff we never talked

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Speaker 2: about back in the day. This one SpaceX ninety five

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Speaker 2: times revenue.

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Speaker 6: It's Tesla right, Yeah, well I could possibly go wrong.

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Speaker 2: Is there any pushback we've heard from the marketplace from

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Speaker 2: some of these meetings on vaguation?

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Speaker 3: I haven't really seen any.

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Speaker 9: I think it's all about whether you believe in a

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Speaker 9: the cultivly La masque, whether you believe in the idea

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Speaker 9: of getting orbital data centers. They've started to at least

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Speaker 9: show demonstrations pictures if you like, of how that might work,

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Speaker 9: So that's been a key focus. But really, in the

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Speaker 9: same way that Tesla does not trade on fundamentals of

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Speaker 9: electric vehicles, nor does SpaceX. It's bigger than the sum

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Speaker 9: of its parts when you're putting all the business together,

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Speaker 9: because it is the idea of Mars, it is the

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Speaker 9: idea of the Moon. It is the idea though that

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Speaker 9: this currently is almost a monopoly.

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Speaker 8: Look who else.

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Speaker 9: Has been making these reusable rockets, the cadence and the

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Speaker 9: reliability that we've seen with a Falcon nine, now with

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Speaker 9: Starship managing to demonstrate such feats of science.

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Speaker 8: I think for many it's just.

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Speaker 9: Like, well, I've been burned if I if I've been

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Speaker 9: against him in the past.

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Speaker 6: But there has been some pushback, particularly New York and

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Speaker 6: California pensions controllers, and the concern there by the controllers

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Speaker 6: seems to be Elon has too much.

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Speaker 9: Control governance, and in fact, funnily enough, Shot Carr who's

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Speaker 9: weighed into this as well is Elizabeth Warren Is sending

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Speaker 9: a last minute ditch attempt to the SEC Paul Atkins, saying, look,

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Speaker 9: you've got to stop this IPO process because I'm worried

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Speaker 9: about governance and I'm worried about that the safety of

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Speaker 9: retail investors as you are seeing the fast tracking of

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Speaker 9: shares going into these some of these big indices. Look,

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Speaker 9: whether you like it or not, you're probably going to

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Speaker 9: have exposure to SpaceX because it's going to be in

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Speaker 9: your four oh one k It's going to be in

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Speaker 9: some of these as you say, the funds that are

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Speaker 9: managed by the New York City, by New York State,

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Speaker 9: they're pension funds, right, and they're saying, look, we're not

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Speaker 9: so averse to this that we're going to rule out

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Speaker 9: them in our in our funds, but we are going

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Speaker 9: to keep trying to chew Elon's ear, trying to get

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Speaker 9: letters to him, which he thus far hasn't responded to.

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Speaker 8: Saying we're worried about this.

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Speaker 9: We worried about your eighty percent voting rights, We're worried

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Speaker 9: about the overall governance structure of the business.

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Speaker 8: Like for many investors, they want a founder mindset.

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Speaker 9: They want the ability of Elon must to be able

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Speaker 9: to drive forward with the big decisions.

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Speaker 8: And for many long term betters on him in the

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Speaker 8: private markets. They kind of love that.

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Speaker 9: In fact, that's why they think eventually SpaceX and Tesla

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Speaker 9: should merge.

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Speaker 7: Stay with us. More from Umoric 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 Eastern on Applecarplay and Android Auto

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

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

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Speaker 2: We got the SpaceX IPO. That is the big news.

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Speaker 2: But kind of like a corollary to that is what

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Speaker 2: is Elon musking to do with the rest of his

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Speaker 2: stuff that he owns and most notably Tesla and all

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Speaker 2: the stuff that's in Tesla.

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Speaker 3: What does he do with that? I don't know.

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Speaker 2: A lot of folks, I think are suspecting that at

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Speaker 2: some point, if nothing else, he'll just kind of roll

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Speaker 2: it up into one big company there under SpaceX.

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Speaker 3: Steve Man, he covers Tesla.

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Speaker 2: He's global Autos and Industrials analysts for Bloomberg Intelligence. Hey, Steve,

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Speaker 2: when you talk to Tesla investors. Is there an expectation

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Speaker 2: that at some point Elon, Musk and SpaceX will buy

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Speaker 2: in Tesla.

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Speaker 10: It really depends on the timeline you're talking about. I mean,

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Speaker 10: you can speculate there's a lot of synergies probably many

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Speaker 10: years away from now that for example, uh, you know,

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Speaker 10: the Tesla vehicles could be could be riding on or

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Speaker 10: driving on uh you know the surface of the Mars,

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Speaker 10: or the boring company is you know, drilling tunnels in

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Speaker 10: Mars for colonization. But you know, that's that's very very

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Speaker 10: far away. You know, we published a piece of research today,

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Speaker 10: you know, and we looked at it and really the

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Speaker 10: only thing that you know, Tesla is really contributing in

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Speaker 10: a consistent, consistent, meaningful way is actually the battery source

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Speaker 10: storage business. And even that, it's it's a small chunk

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Speaker 10: of you know, Tesla's profits. So we don't really see uh,

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Speaker 10: you know, imminent or near term synergies for a merger.

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Speaker 6: Okay, So if there were to be a merger, roll

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Speaker 6: up or whatever you want to call it, is that

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Speaker 6: an admission that one company is not really performing that

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Speaker 6: it would need the other to help prop it up.

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Speaker 10: I wouldn't necessarily say that. I think Elon really has

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Speaker 10: a long term view on what he wants to do,

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Speaker 10: so specifically in space exploration, and that's where you know,

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Speaker 10: Tesla could really contribute. Like I was saying earlier, you know,

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Speaker 10: you can have you know, cars, automated cars driving on

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Speaker 10: you know, another planet, or you can have uh, you know,

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Speaker 10: uh compute or satellites and communications through their uh you

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Speaker 10: know satellite system that communicates between you know, inner innercontent,

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Speaker 10: interplanetary communication. I mean, you can see all the possibilities

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Speaker 10: in both energy and and vehicle, but you know, I

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Speaker 10: think you know a lot of those a lot of things,

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Speaker 10: those things need to be proven out first, and I

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Speaker 10: think that's what they're trying to do, uh in in

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Speaker 10: on Earth first. And secondly, Tesla really the focus is

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Speaker 10: really on autonomy, the robotaxi, and I don't think you know,

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Speaker 10: combining the two company is a good time at the moment,

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Speaker 10: it's it serves as a distraction.

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Speaker 5: Really.

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Speaker 2: Bloomberg News has got some reporting out on the autonomous vehicle.

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Speaker 2: Tesla has just not fifty nine vehicles in its robotaxi

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Speaker 2: fleet as of Tuesday, limited to three Texas cities. After

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Speaker 2: Elon Musky Company would have an autonomous right haling in

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Speaker 2: about half the population of the US at the end

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Speaker 2: of twenty twenty five. Talk to us about that part

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Speaker 2: of the business and where we are and maybe where

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Speaker 2: the company's falling short.

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Speaker 10: Yeah, I think, I think, I think for most some investors,

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Speaker 10: it is falling behind. They were hoping the rollot's a

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Speaker 10: little bit faster, but they you know, the company did

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Speaker 10: tell us in the first quarter earnings that you know,

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Speaker 10: a bulk of this rollout is in.

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Speaker 5: The second half.

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Speaker 10: I wouldn't be surprised that, you know, they're you know,

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Speaker 10: they're waiting for that. You know, the steering wheel lists

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Speaker 10: the break pedalists cybercap to be ready before they you know, uh,

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Speaker 10: you know ramp up that you know, up ramp up

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Speaker 10: that service in more cities around around the country.

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Speaker 5: So you know, let's let's wait and see.

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Speaker 10: Uh maybe the cyber cap you know, build out and

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Speaker 10: and uh and and roll out.

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Speaker 5: Will be will be at the turning point.

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Speaker 6: All right, did elon over I'm trying to get you

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Speaker 6: in trouble here, did the over promise?

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Speaker 5: Well, you know how he is right. I think he

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Speaker 5: has grand plans.

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Speaker 10: He has grand plans It's not a bad thing, you know,

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Speaker 10: stretch targets, you want to call it that, but you know,

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Speaker 10: like the reality is, you know, these technologies do need time, uh,

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Speaker 10: to to to to play out and to do you know,

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Speaker 10: to be invented, to be discovered, to be developed, and

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Speaker 10: to make it commercially viable.

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Speaker 5: So you know, these things do take time.

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Speaker 2: Steve, one of the concerns from Tesla investors when Elon

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Speaker 2: Musk was in the US government running the Doge campaign

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Speaker 2: was that he wasn't paying enough attention to Tesla. Is

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Speaker 2: there a concern now with SpaceX that once again his

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Speaker 2: attention will be diverted away from Tesla.

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Speaker 5: It's it's it's very interesting.

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Speaker 10: You know, he was very visible within the government early

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Speaker 10: in the year, uh, kind of quiet down, but now

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Speaker 10: we're seeing him, you know, on Air Force one from

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Speaker 10: time to time. I'm sure he's he's got one foot

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Speaker 10: in and and then he needs to write a lot

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Speaker 10: of these businesses require regulatory approvals, and you know, I

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Speaker 10: wouldn't be surprised that you know, he's working on on

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Speaker 10: all those fronts to you know, make sure his business

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Speaker 10: you know, runs well and and and gains you know,

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Speaker 10: gains business new.

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Speaker 6: Businesses is is Tesla becoming more of this one thing

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Speaker 6: that does excite me, Paul, more of a battery company

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Speaker 6: where I can you know, load up on batteries at

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Speaker 6: my house and draw from the grid at night when

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Speaker 6: electricity prices are much lower, you know that sort of thing.

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Speaker 10: Yeah, that's a that's a great question, because, uh, battery

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Speaker 10: business is becoming, uh you know, a bigger part of

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Speaker 10: the Tesla. You know, it's thirteen percent revenue, but if

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Speaker 10: you look at the you know, the gross profit line,

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Speaker 10: you're you're looking at a quarter to a third of contribution,

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Speaker 10: and battery sales are becoming more important, especially during.

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Speaker 5: This in this AI you know build out phase.

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Speaker 10: A lot of these data center actually requires you know,

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Speaker 10: their own power systems to to to to run the chips,

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Speaker 10: and part of that is really having battery backup to

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Speaker 10: make sure these AI data.

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Speaker 5: Center is running twenty four to seven.

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Speaker 10: So you know, you saw a Ford Motor Company getting

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Speaker 10: into that business, you know, and and Ford's been doing

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Speaker 10: the Yeah.

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Speaker 6: I think GM is doing the same thing too.

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Speaker 2: Yeah.

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Speaker 10: GM is is also doing the same thing, you know,

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Speaker 10: repurpose those battery plans that we use for evs into

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Speaker 10: battery storage. I think there's a demand for that.

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Speaker 7: 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 Eastern on Apple, Coarclay, 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: All right, let's go to some some earnings here at Chewy.

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Speaker 2: For those dog lovers out there and pet owners out there,

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Speaker 2: Shares drop as much as six and a half percent

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Speaker 2: after management gave additional guidance metrics on the conference call,

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Speaker 2: including cautious comments on customer editions.

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Speaker 3: It's all about the poochat there.

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Speaker 2: Diana reset Opina, consumer Staples analysts for Bloomberg Intelligence strengths

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Speaker 2: here house business at Chewy because we got a lot

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Speaker 2: of viewers and listeners that are big fans and consumers

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Speaker 2: of Chewy.

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Speaker 3: Yeah.

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Speaker 11: Well, I mean they were cautious even though results were

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Speaker 11: were good. Uh, they lower revenue guidance and that was

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Speaker 11: pretty much because they don't necessarily expect a lot of

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Speaker 11: discretionary spending going forward. They're you know, they're seeing that

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Speaker 11: consumers are being strategic. It's something that we have seen

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Speaker 11: across across our consumer staples worlds, so we're not that surprised.

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Speaker 6: But still I don't know if given a choice between

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Speaker 6: cutting back the pets and cutting back on the kids,

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Speaker 6: I got to.

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Speaker 7: Be honest, sorry, I agree.

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Speaker 11: I think it's more onlike the discretionary spending of it.

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Speaker 6: They may not food, but like the big fluffy whatever.

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Speaker 11: Screech, yeah, toys and the like. Obviously there's some stabilization

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Speaker 11: on the pet population, so that is also a headwind

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Speaker 11: to discretionary so you're not going to likelation. There's there's

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Speaker 11: a fewer well, it's it's been, it's stabilized. In the

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Speaker 11: past couple of years. There's been some surrendering more than

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Speaker 11: adoptions because people that adopted pets during the pandemic they

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Speaker 11: had to get rid of them, so that obviously diminished

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Speaker 11: the population in the United States. So now it seems

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Speaker 11: to stabilize, which is not necessarily a good omen for

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Speaker 11: discretionary spending in terms of creates and new like leashes

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Speaker 11: and stuff like that.

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Speaker 3: Is Chewy a global company or the US only US only.

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Speaker 11: They're having some operations in Canada and the like. They're

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Speaker 11: exploring that, but it's mostly US.

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Speaker 2: So you're modeling out this company in the revenue, do

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Speaker 2: you do it by dog like is it dog population

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Speaker 2: increasing or is it just a function of like GDP

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Speaker 2: kind of growthro I mean, because it seems like we

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Speaker 2: did as you mentioned, people are probably peaked in their

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Speaker 2: dog adoption and so on during the pandemic and then

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Speaker 2: it's been winding down since.

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Speaker 7: Yeah. So there's two metrics that are important for Chewing.

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Speaker 11: It's the active consumer growth, so people going into the

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Speaker 11: platform and being acquired in the platform, like you know,

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Speaker 11: in you know, becoming.

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Speaker 3: Customers of Chewy.

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Speaker 7: And also how much they're spending, and.

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Speaker 11: Right now they're getting closer to usually the typical consumer

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Speaker 11: is spending about.

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Speaker 7: Six hundred dollars a year on Chewy.

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Speaker 11: That has increased and that is the biggest metric that

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Speaker 11: they say that they're probably going to see softness in

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Speaker 11: twenty twenty six.

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