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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: Getting back to Earth here, but we're still talking to

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Speaker 2: elon Musk. Tesla had some numbers come out that were,

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Speaker 2: in terms of deliveries a little bit disappointing. But I

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Speaker 2: guess I'm like a lot of people like, are.

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Speaker 3: They really a car company or is there something else.

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Speaker 2: That's exactly right? So let's go to a car person.

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Speaker 2: That would be David Welchi's a Detroit Burrough chief for

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Speaker 2: Bloomberg News. He's based in Detroit. Hey, David, talk to

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Speaker 2: us about Tesla's delivery numbers here. What did you see

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Speaker 2: and what's the company saying.

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Speaker 4: Look, it was a disappointing quarter no matter how you located.

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Speaker 4: Even though it was up over last year. There's some

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Speaker 4: complete there's some complexities there. So they were they greatly disappointed.

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Speaker 4: What analysts and investors expected them to sell. It was

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Speaker 4: up over last year, So how does that happen? Last year?

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Speaker 4: This time there was a backlash against Elon Musk over

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Speaker 4: Doge and everything he was doing with the Trump administration,

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Speaker 4: so sales had really pulled back from that. If you

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Speaker 4: look at this first quarter versus previous years, not twenty

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Speaker 4: twenty five, but twenty twenty four, twenty three, it's down

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Speaker 4: significantly from there. So Tesla's overall sales globally have just

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Speaker 4: been sliding here for quite a while. EV sales are

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Speaker 4: down all over the globe. I mean not in every market,

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Speaker 4: but the Chinese have pulled back on some of the

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Speaker 4: incentives there. Even Bid has seen a couple of tough

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Speaker 4: months in terms of sales with some of those government

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Speaker 4: based incentives going away. Trump administration got rid of them here.

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Speaker 4: That's hurting EV sales here, and that's all they sell.

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Speaker 4: They getting rid of the Model S and the Model X.

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Speaker 4: And you know, they're the companies trying to pivot toward

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Speaker 4: robotics and automated driving, both of which are very big

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Speaker 4: challenges to beat in the next few years. It's just

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Speaker 4: very difficult to get cars to drive themselves. And the

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Speaker 4: methodology Tesla is using is different from everybody's. They're relying

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Speaker 4: on their data, So look it's it's going to be

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Speaker 4: a tough road ahead, I think for Tesla to really

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Speaker 4: turn investor sentiment around, because they're not selling vehicles like

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Speaker 4: they used to, and there's there a lot of big

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Speaker 4: question marks on the new strategy and the big pivot

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Speaker 4: that Elon Musk is making with this company, all right, and.

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Speaker 5: That's kind of been the story with Tessa for a

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Speaker 5: while now that you know, even though it does still

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Speaker 5: sell cars, that that trajectory has gone down, and with

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Speaker 5: ev sales slowing overall, what's interesting is with the oil

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Speaker 5: prices now elevated, there is more interest among consumers at

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Speaker 5: least into looking into examining the prospect of buying an

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Speaker 5: evy to save on gas costs. There's another story out today,

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Speaker 5: David about Stillantis in talks.

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Speaker 3: To make Chinese evs in Canada.

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Speaker 5: I thought that the US car makers were staying far

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Speaker 5: far away from the Chinese ev makers.

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Speaker 4: They are, But then against Dealants is really a European

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Speaker 4: company with a big US harm, isn't it? But look

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Speaker 4: at Canada relies on the US companies and Toyota largely

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Speaker 4: for its auto industry. That's that's you know, it's for

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Speaker 4: GMS de Lantis and Toyota UH to a degree, Honda

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Speaker 4: that are making a lot of vehicles up there. That's

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Speaker 4: where they get you know, they're there their domestic supply

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Speaker 4: of cars that aren't imported and facing tariffs now and

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Speaker 4: also for employment. And if you're going to have this

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Speaker 4: trade tension between the US and Canada UH, which which

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Speaker 4: we have had for a while now, and and we're

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Speaker 4: unsure of what's going to happen with US mc A.

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Speaker 4: There's a lot of talk that you know, maybe Trump

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Speaker 4: will cut separate deals with Canada and Mexico, and he's

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Speaker 4: been very annoyed with Canada these days. Then Canada has

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Speaker 4: to look elsewhere for companies that are going to invest

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Speaker 4: in their industrial base and make vehicles there that aren't

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Speaker 4: going to be subject to different trade issues. And they're

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Speaker 4: increasingly looking to the Chinese, and I think they would

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Speaker 4: welcome that. Stoantis's partner, Wheat Motor, I'm sure they'd love

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Speaker 4: to get into the Western hemisphere with the hopes that

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Speaker 4: one day, if trade tensions between the US and Canada subside,

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Speaker 4: they could actually send some of those vehicles into the

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Speaker 4: US market And it's not a bad place. These would

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Speaker 4: be small plants, but it's not a bad place for

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Speaker 4: the Chinese companies to get in, even if they need

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Speaker 4: a partner to do it.

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Speaker 3: 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 5: When it comes to the drivers in the market, in

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Speaker 5: particular the tech part of the market, it's all about

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Speaker 5: the hyperscalers and how much.

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Speaker 3: Money they plan to spend this year going.

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Speaker 5: Forward on AI infrastructure and hyperscalers. We're talking about Alphabet,

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Speaker 5: We're talking about Microsoft, We're talking about Meta. Microsoft was

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Speaker 5: one of the originals the ogs when it comes to

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Speaker 5: building out its AI infrastructure. Brody Ford is one of

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Speaker 5: our reporters here at Bloomberg. He covers the technology sector.

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Speaker 5: He covers software among other parts of tech, and he

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Speaker 5: has a Bloomberg Big Take story on how Microsoft's CFO

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Speaker 5: has some AI ambitions that are running up against the

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Speaker 5: tech bubble fears and Brody, you kind of write and

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Speaker 5: let's take you inside what's going on at Microsoft and

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Speaker 5: understand how the CFO amy Hood has made these decisions

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Speaker 5: on when to spend, when not to spend, when to

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Speaker 5: pull back. You didn't get a chance to speak with

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Speaker 5: her because she doesn't talk a lot to the public,

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Speaker 5: but you talked, You did a lot of reporting around

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Speaker 5: Microsoft with her team.

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Speaker 3: What did you learn.

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Speaker 6: So why this story is so interesting is Microsoft, as

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Speaker 6: you said, is kind of one of the original hyperscalers

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Speaker 6: and they're sitting on really a nation state size investment pool.

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Speaker 6: And the big question the economy right now is are

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Speaker 6: all these data centers going to pay off? Are all

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Speaker 6: these tens and hundreds of billions of dollars actually going

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Speaker 6: to result in businesses that make margins that are worthwhile?

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Speaker 6: And at Microsoft, amy Hood has effectively become all powerful. Right,

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Speaker 6: you have a CFO who is making decisions about allocation

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Speaker 6: of resources and data centers and who.

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Speaker 7: Gets GPUs and where.

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Speaker 6: And what we largely found is that she took a

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Speaker 6: bit of a skeptical tone over the years. She took

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Speaker 6: a bit of an anxious tone, even that there were

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Speaker 6: moments where she said, man, we really might be overspending here.

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Speaker 2: So she decided to dial back some of that spending.

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Speaker 2: Was that a mistake in hindsight, A lot.

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Speaker 7: Of peop people would say it was. It was maybe

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Speaker 7: about a year year and a half ago.

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Speaker 6: She looked at the numbers that folks were giving her

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Speaker 6: and she said, Man, I don't believe this demand. I

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Speaker 6: questioned this demand, and you know, it's time to hit

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Speaker 6: pause on a lot of these data center projects. And

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Speaker 6: I don't know if you remember, but when this played

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Speaker 6: out in public, it rattled the markets. Everybody saw this as,

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Speaker 6: you know, a sign that Microsoft was getting cold feet.

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Speaker 6: And you know, we're able today to say that that

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Speaker 6: that is what that indicated at that time. Of course,

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Speaker 6: today Microsoft is in the position of finding that, golly,

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Speaker 6: we can't find enough data center capacity and our business

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Speaker 6: is being held back by it. And so it seems

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Speaker 6: clear that they undershot their demand projections. And you know,

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Speaker 6: we're in a moment right now where industry consensuses spend

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Speaker 6: as much as you can, as quick as you can

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Speaker 6: on data centers, and I'm sure in six to twelve

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Speaker 6: months we'll talk again and the consensus will flip once again.

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Speaker 5: And because Microsoft is one of the og hyperscalers. When

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Speaker 5: Amy Hood decided to pull back a bit on spending.

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Speaker 5: That not only caused questions in the market, but it

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Speaker 5: caused other hyperscalers to kind of rethink they're spending as well,

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Speaker 5: didn't it.

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Speaker 6: Well, I think it actually created an opening in many

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Speaker 6: cases a lot of the sites that Microsoft walked away from,

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Speaker 6: some of the younger rivals, think the core Weave, the Nebius,

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Speaker 6: the n scale.

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Speaker 7: They kind of.

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Speaker 6: Swooped in and said, Man, we're ready to buy some

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Speaker 6: data center capacity here. And I think all this kind

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Speaker 6: of shows just how difficult it is right now for

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Speaker 6: the big hyperscalers. I mean, you know, they for a

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Speaker 6: long time had a business model based around no assets

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Speaker 6: around software that hey, if you want to change your plans,

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Speaker 6: you really just kind of have to reallocate some coding teams,

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Speaker 6: and you know, you don't have these long term fixed

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Speaker 6: assets that depreciate over ten fifteen years. And now they're

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Speaker 6: in the position of trying to act almost more like

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Speaker 6: a Boeing or a ge these kind of old in

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Speaker 6: dust real giants, and you know, forecast out demand for

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Speaker 6: a technology that's still emerging. It's it's a really tough

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Speaker 6: balancing act. And I'd argue that there's nobody out there

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Speaker 6: who has more directly on their plate in this than

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Speaker 6: Amy Hood.

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Speaker 3: Does I like the way you put that.

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Speaker 5: They kind of went from it feels like asset light

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Speaker 5: to very asset heavy because they now own and oversee

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Speaker 5: these big, these big data centers. Does that mean that

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Speaker 5: investors eventually will kind of re rate these companies as

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Speaker 5: well given what they have on their on their balance sheet.

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Speaker 6: I sort of think we're seeing it happen already. I

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Speaker 6: mean Microsoft is down, you know, about a loss about

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Speaker 6: a quarter of its value over the last year, and

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Speaker 6: I think a big part of that is the margin

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Speaker 6: story that you know, their margins have been pretty steady,

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Speaker 6: but that's only because they've really been cutting in a

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Speaker 6: lot of the other parts of the business. Right, we

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Speaker 6: write in the story that you know, their cash cow businesses,

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Speaker 6: let's call it like a windows, have had had a

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Speaker 6: lot of cuts in them because this new AI business

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Speaker 6: the margins are so much lower, right, And so you

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Speaker 6: had a company that was printing some of the craziest

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Speaker 6: margins in the world now renting out servers at a

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Speaker 6: much lower margin and having all this, you know, tens

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Speaker 6: of billions of dollars of chips on their balance seat.

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Speaker 6: It does paint a different picture of a company right

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Speaker 6: and the question is are they going to keep spending

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Speaker 6: this way in perpetuity?

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Speaker 7: Are we in a phase?

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Speaker 6: I think that leaders like Amy Hood are really charting

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Speaker 6: in new territory and answering all this in real time.

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Speaker 2: The stock is down twenty five percent year to date.

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Speaker 2: Is Amy Hood feeling any pressure for some of her

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Speaker 2: maybe decisions as it released to AI spending.

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Speaker 6: Our understanding is a lot of folks in the company

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Speaker 6: were not happy with her around the pause last year.

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Speaker 6: That said, it wasn't our indicator that you know, hey,

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Speaker 6: she's going to get the boot over this or something.

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Speaker 7: All that said, she's been in the seat for thirteen years.

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Speaker 6: That's a long time for any CFO, and it's our

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Speaker 6: understanding that there are starting to be succession conversations. We

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Speaker 6: heard some names that were interesting. Chris the CFO over

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Speaker 6: at VISA, well regarded figure over there. You know, he's

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Speaker 6: a name that comes up a lot because he used

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Speaker 6: to be at Microsoft. He knows the business he left

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Speaker 6: and kind of gained skills and could be primed for

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Speaker 6: a return. There's somebody named Matt McBride, who's kind of

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Speaker 6: her internal air apparent, right. I mean, his name will

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Speaker 6: certainly be in the ring here, and so I wouldn't

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Speaker 6: be surprised if in the next year or two we're

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Speaker 6: talking about, you know, the great Microsoft CFO search. But

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Speaker 6: at the same time, I don't think it's that, you know,

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Speaker 6: she screwed up a decision and now she's getting the.

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Speaker 7: Can That's That's not what's happening. Stay with us.

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Speaker 3: 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, Cocklay and Android

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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: Let's stay with the tech theme a little bit, but

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Speaker 2: we'll go to the credit side of the equation. Why

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Speaker 2: because these companies are issuing debt handover fist, which is

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Speaker 2: something we haven't really been used to, but that is

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Speaker 2: something that is a big theme I think across the

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Speaker 2: tech space is kind of how they're funding some of

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Speaker 2: this AI. And the best name for us to chat

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Speaker 2: with on that story is Robert Schiffman. He is tech

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Speaker 2: credit analysts for Bloomberg Intelligence. Let's start with Intel, Rob.

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Speaker 2: I mean, I'm just looking at the stock and the

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Speaker 2: stock's really turned around, really working from a credit perspective.

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Speaker 2: What's the view of Intel, because there we're some concerns.

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Speaker 8: Sure, first, happy holidays to all. Unlike Ira, I will

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Speaker 8: not be working tomorrow. I will be eating through one

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Speaker 8: of our hundreds of boxes of matza.

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Speaker 2: Okay, so we have on the six floor.

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Speaker 8: God bless our our rates chief of staff. Yeah, listen,

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Speaker 8: it's nice to be talking about a name that actually

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Speaker 8: people like in the technology space. Now, stock is up

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Speaker 8: thirty odd percent this year. The S and P five

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Speaker 8: hundred Tech index is down almost ten percent. Spreads or

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Speaker 8: fifty basis points tighter over the past six months. I

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Speaker 8: actually think they they're the original poster child for AI.

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Speaker 8: They announced that they're going to be spending tens of

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Speaker 8: billions of dollars building foundries, not data centers, and free

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Speaker 8: cash went negative. They barred a lot, stock sold off,

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Speaker 8: bond sold off, and lo and behold. You know, they're

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Speaker 8: in the midst of a pretty major turnaround. I think

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Speaker 8: it's a plan others can can potentially follow over the

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Speaker 8: next couple of years.

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Speaker 5: But what makes Intel different, Why was it able to

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Speaker 5: pull it off? And how will other companies who might

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Speaker 5: want to follow in its footsteps be able to you know,

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Speaker 5: follow this blueprint and also succeed.

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Speaker 8: Yeah, well, there's a lot of benefits of having big,

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Speaker 8: powerful friends. So first, you know, the government converted some

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Speaker 8: of their grants into a ten percent equity state that

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Speaker 8: was over eight billion dollars, and Video wrote them a

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Speaker 8: five billion dollar check, and SoftBank wrote a couple of

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Speaker 8: billion dollar check. On top of that, they sold assets,

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Speaker 8: so they gained almost another ten billion dollars in assets

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Speaker 8: sales for non core businesses. So unlike others that have

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Speaker 8: been doing nothing but been borrowing and adding leverage, this

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Speaker 8: company has been on a de leveraging push. On top

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Speaker 8: of that, they're fundamentally their core business is starting to improve,

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Speaker 8: so a better balance sheet, a top line that we're

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Speaker 8: looking to see grow this year after falling five straight

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Speaker 8: years in a row. So they are doing things that

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Speaker 8: are different and they're getting paid for it all right.

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Speaker 2: So on the Bloomberg terminal, if you want to see

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Speaker 2: who the shareholders are of any particular company, you just

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Speaker 2: type in HDS for holders number one for Intel, black Rock, okay,

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Speaker 2: Number two Vanguard got it. Number three United States of America,

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Speaker 2: you don't see that every day, and number four Nvidia.

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Speaker 2: So those are the partners for Intel here. How about

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Speaker 2: the free cash flow story, because I was just looking

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Speaker 2: back at the FA function and as you said, negative

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Speaker 2: free cash because they're spending so much on capex. You're

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Speaker 2: a bond guy, you like free cash flow. How's that

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Speaker 2: story developing.

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Speaker 8: Yeah, we haven't had a lot of free cash flow

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Speaker 8: the last few months to talk about, and we haven't

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Speaker 8: been worried about it. Listen, Intel has been bleeding cash.

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Speaker 8: It looks like they're probably going to be around flatish

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Speaker 8: this year. That being said, though, with all these transactions

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Speaker 8: that they've done, they've built a pretty big base of

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Speaker 8: thirty seven and a half billion dollars of cash on

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Speaker 8: the books. They're using some of it to buy back

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Speaker 8: Apollo stake in one of their jps. It's a phenomenal move.

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Speaker 8: You know, we wrote yesterday that it was a sign

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Speaker 8: of strength. What this company had to do is some

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Speaker 8: creative financing, like you know we've seen with AI. We've

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Speaker 8: seen some of these off balance sheet SPVs to raise

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Speaker 8: money so it doesn't lever the companies. Intel was sort

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Speaker 8: of the first to do this, but they did it

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Speaker 8: with a variety of foundriies. They did a deal with Apollo,

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Speaker 8: and they did a deal with Brookfield. What they're doing

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Speaker 8: now is they're unwinding one of those and it's showing

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Speaker 8: that they now have the financial firepower to go into

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Speaker 8: this build on their own. They don't need partners anymore.

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Speaker 8: So they're using some of that cash that they've got

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Speaker 8: from their equity friends and they're using it now to

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Speaker 8: take a bigger stake in what will be upside in

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Speaker 8: terms of cash flow and EPs from this foundry business.

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Speaker 8: So it's a real sign of strength. It's not just

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Speaker 8: from US. SMP came out right away yesterday and said

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Speaker 8: thought it was credit neutral. Moodies came out and said

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Speaker 8: they thought it was credit positive because it was going

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Speaker 8: to enable quicker deleveraging over a shorter period of time.

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Speaker 8: So it's a real sign of strength, and it's one

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Speaker 8: of the few names that put the equity and the

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Speaker 8: bomb Mark's really love.

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Speaker 3: And very quickly, Robert, do we give all the credit

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Speaker 3: to Boomtown.

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Speaker 8: Let me tell you something. You bring in a new

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Speaker 8: CEO and you make the type of changes that he's made.

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Speaker 8: I think every technology firm would love to have a

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Speaker 8: CEO like that, so yeah, I'll credit kudos to him.

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Speaker 1: This is the Bloomberg Intelligence Podcast, available on Apple, Spotify,

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