WEBVTT - Tesla’s EV Sales Miss Expectations Again in Deepening Slump 

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<v Speaker 2>Getting back to Earth here, but we're still talking to

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<v Speaker 2>elon Musk. Tesla had some numbers come out that were,

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<v Speaker 2>in terms of deliveries a little bit disappointing. But I

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<v Speaker 2>guess I'm like a lot of people like, are.

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<v Speaker 3>They really a car company or is there something else.

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

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<v Speaker 2>That would be David Welchi's a Detroit Burrough chief for

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

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<v Speaker 2>us about Tesla's delivery numbers here. What did you see

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<v Speaker 2>and what's the company saying.

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<v Speaker 4>Look, it was a disappointing quarter no matter how you located.

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<v Speaker 4>Even though it was up over last year. There's some

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<v Speaker 4>complete there's some complexities there. So they were they greatly disappointed.

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<v Speaker 4>What analysts and investors expected them to sell. It was

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<v Speaker 4>up over last year, So how does that happen? Last year?

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<v Speaker 4>This time there was a backlash against Elon Musk over

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<v Speaker 4>Doge and everything he was doing with the Trump administration,

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<v Speaker 4>so sales had really pulled back from that. If you

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<v Speaker 4>look at this first quarter versus previous years, not twenty

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<v Speaker 4>twenty five, but twenty twenty four, twenty three, it's down

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<v Speaker 4>significantly from there. So Tesla's overall sales globally have just

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<v Speaker 4>been sliding here for quite a while. EV sales are

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<v Speaker 4>down all over the globe. I mean not in every market,

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<v Speaker 4>but the Chinese have pulled back on some of the

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<v Speaker 4>incentives there. Even Bid has seen a couple of tough

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<v Speaker 4>months in terms of sales with some of those government

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<v Speaker 4>based incentives going away. Trump administration got rid of them here.

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

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<v Speaker 4>They getting rid of the Model S and the Model X.

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<v Speaker 4>And you know, they're the companies trying to pivot toward

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<v Speaker 4>robotics and automated driving, both of which are very big

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<v Speaker 4>challenges to beat in the next few years. It's just

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<v Speaker 4>very difficult to get cars to drive themselves. And the

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<v Speaker 4>methodology Tesla is using is different from everybody's. They're relying

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<v Speaker 4>on their data, So look it's it's going to be

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<v Speaker 4>a tough road ahead, I think for Tesla to really

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<v Speaker 4>turn investor sentiment around, because they're not selling vehicles like

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<v Speaker 4>they used to, and there's there a lot of big

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<v Speaker 4>question marks on the new strategy and the big pivot

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<v Speaker 4>that Elon Musk is making with this company, all right, and.

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<v Speaker 5>That's kind of been the story with Tessa for a

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<v Speaker 5>while now that you know, even though it does still

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<v Speaker 5>sell cars, that that trajectory has gone down, and with

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<v Speaker 5>ev sales slowing overall, what's interesting is with the oil

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<v Speaker 5>prices now elevated, there is more interest among consumers at

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<v Speaker 5>least into looking into examining the prospect of buying an

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

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<v Speaker 5>David about Stillantis in talks.

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<v Speaker 3>To make Chinese evs in Canada.

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<v Speaker 5>I thought that the US car makers were staying far

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<v Speaker 5>far away from the Chinese ev makers.

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<v Speaker 4>They are, But then against Dealants is really a European

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

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<v Speaker 4>at Canada relies on the US companies and Toyota largely

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<v Speaker 4>for its auto industry. That's that's you know, it's for

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<v Speaker 4>GMS de Lantis and Toyota UH to a degree, Honda

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<v Speaker 4>that are making a lot of vehicles up there. That's

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<v Speaker 4>where they get you know, they're there their domestic supply

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<v Speaker 4>of cars that aren't imported and facing tariffs now and

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<v Speaker 4>also for employment. And if you're going to have this

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<v Speaker 4>trade tension between the US and Canada UH, which which

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<v Speaker 4>we have had for a while now, and and we're

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<v Speaker 4>unsure of what's going to happen with US mc A.

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<v Speaker 4>There's a lot of talk that you know, maybe Trump

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<v Speaker 4>will cut separate deals with Canada and Mexico, and he's

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<v Speaker 4>been very annoyed with Canada these days. Then Canada has

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<v Speaker 4>to look elsewhere for companies that are going to invest

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<v Speaker 4>in their industrial base and make vehicles there that aren't

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<v Speaker 4>going to be subject to different trade issues. And they're

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<v Speaker 4>increasingly looking to the Chinese, and I think they would

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

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<v Speaker 4>to get into the Western hemisphere with the hopes that

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<v Speaker 4>one day, if trade tensions between the US and Canada subside,

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<v Speaker 4>they could actually send some of those vehicles into the

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<v Speaker 4>US market And it's not a bad place. These would

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<v Speaker 4>be small plants, but it's not a bad place for

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<v Speaker 4>the Chinese companies to get in, even if they need

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<v Speaker 4>a partner to do it.

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<v Speaker 3>Stay with us. More from Bloomberg Intelligence coming up after this.

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<v Speaker 1>You're listening to the Bloomberg Intelligence podcast. Catch us live

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<v Speaker 1>weekdays at ten am Eastern on Apple, Coarclay, and Android

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<v Speaker 1>Auto with the Bloomberg Business App. Listen on demand wherever

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<v Speaker 1>you get your podcasts, or watch us live on YouTube.

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<v Speaker 5>When it comes to the drivers in the market, in

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<v Speaker 5>particular the tech part of the market, it's all about

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<v Speaker 5>the hyperscalers and how much.

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<v Speaker 3>Money they plan to spend this year going.

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

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<v Speaker 5>We're talking about Microsoft, We're talking about Meta. Microsoft was

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<v Speaker 5>one of the originals the ogs when it comes to

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<v Speaker 5>building out its AI infrastructure. Brody Ford is one of

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<v Speaker 5>our reporters here at Bloomberg. He covers the technology sector.

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<v Speaker 5>He covers software among other parts of tech, and he

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<v Speaker 5>has a Bloomberg Big Take story on how Microsoft's CFO

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<v Speaker 5>has some AI ambitions that are running up against the

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<v Speaker 5>tech bubble fears and Brody, you kind of write and

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<v Speaker 5>let's take you inside what's going on at Microsoft and

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<v Speaker 5>understand how the CFO amy Hood has made these decisions

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<v Speaker 5>on when to spend, when not to spend, when to

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<v Speaker 5>pull back. You didn't get a chance to speak with

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<v Speaker 5>her because she doesn't talk a lot to the public,

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<v Speaker 5>but you talked, You did a lot of reporting around

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<v Speaker 5>Microsoft with her team.

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<v Speaker 3>What did you learn.

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<v Speaker 6>So why this story is so interesting is Microsoft, as

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<v Speaker 6>you said, is kind of one of the original hyperscalers

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

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<v Speaker 6>And the big question the economy right now is are

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<v Speaker 6>all these data centers going to pay off? Are all

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<v Speaker 6>these tens and hundreds of billions of dollars actually going

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<v Speaker 6>to result in businesses that make margins that are worthwhile?

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<v Speaker 6>And at Microsoft, amy Hood has effectively become all powerful. Right,

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<v Speaker 6>you have a CFO who is making decisions about allocation

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<v Speaker 6>of resources and data centers and who.

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<v Speaker 7>Gets GPUs and where.

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<v Speaker 6>And what we largely found is that she took a

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<v Speaker 6>bit of a skeptical tone over the years. She took

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<v Speaker 6>a bit of an anxious tone, even that there were

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<v Speaker 6>moments where she said, man, we really might be overspending here.

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<v Speaker 2>So she decided to dial back some of that spending.

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<v Speaker 2>Was that a mistake in hindsight, A lot.

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<v Speaker 7>Of peop people would say it was. It was maybe

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<v Speaker 7>about a year year and a half ago.

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<v Speaker 6>She looked at the numbers that folks were giving her

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<v Speaker 6>and she said, Man, I don't believe this demand. I

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<v Speaker 6>questioned this demand, and you know, it's time to hit

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<v Speaker 6>pause on a lot of these data center projects. And

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<v Speaker 6>I don't know if you remember, but when this played

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<v Speaker 6>out in public, it rattled the markets. Everybody saw this as,

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<v Speaker 6>you know, a sign that Microsoft was getting cold feet.

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<v Speaker 6>And you know, we're able today to say that that

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<v Speaker 6>that is what that indicated at that time. Of course,

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<v Speaker 6>today Microsoft is in the position of finding that, golly,

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<v Speaker 6>we can't find enough data center capacity and our business

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<v Speaker 6>is being held back by it. And so it seems

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<v Speaker 6>clear that they undershot their demand projections. And you know,

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<v Speaker 6>we're in a moment right now where industry consensuses spend

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<v Speaker 6>as much as you can, as quick as you can

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<v Speaker 6>on data centers, and I'm sure in six to twelve

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<v Speaker 6>months we'll talk again and the consensus will flip once again.

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<v Speaker 5>And because Microsoft is one of the og hyperscalers. When

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<v Speaker 5>Amy Hood decided to pull back a bit on spending.

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<v Speaker 5>That not only caused questions in the market, but it

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

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<v Speaker 5>didn't it.

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<v Speaker 6>Well, I think it actually created an opening in many

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<v Speaker 6>cases a lot of the sites that Microsoft walked away from,

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<v Speaker 6>some of the younger rivals, think the core Weave, the Nebius,

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<v Speaker 6>the n scale.

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<v Speaker 7>They kind of.

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<v Speaker 6>Swooped in and said, Man, we're ready to buy some

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<v Speaker 6>data center capacity here. And I think all this kind

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<v Speaker 6>of shows just how difficult it is right now for

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<v Speaker 6>the big hyperscalers. I mean, you know, they for a

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<v Speaker 6>long time had a business model based around no assets

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<v Speaker 6>around software that hey, if you want to change your plans,

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<v Speaker 6>you really just kind of have to reallocate some coding teams,

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<v Speaker 6>and you know, you don't have these long term fixed

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<v Speaker 6>assets that depreciate over ten fifteen years. And now they're

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<v Speaker 6>in the position of trying to act almost more like

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<v Speaker 6>a Boeing or a ge these kind of old in

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<v Speaker 6>dust real giants, and you know, forecast out demand for

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<v Speaker 6>a technology that's still emerging. It's it's a really tough

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<v Speaker 6>balancing act. And I'd argue that there's nobody out there

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<v Speaker 6>who has more directly on their plate in this than

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<v Speaker 6>Amy Hood.

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<v Speaker 3>Does I like the way you put that.

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<v Speaker 5>They kind of went from it feels like asset light

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<v Speaker 5>to very asset heavy because they now own and oversee

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<v Speaker 5>these big, these big data centers. Does that mean that

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<v Speaker 5>investors eventually will kind of re rate these companies as

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<v Speaker 5>well given what they have on their on their balance sheet.

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<v Speaker 6>I sort of think we're seeing it happen already. I

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<v Speaker 6>mean Microsoft is down, you know, about a loss about

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<v Speaker 6>a quarter of its value over the last year, and

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<v Speaker 6>I think a big part of that is the margin

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<v Speaker 6>story that you know, their margins have been pretty steady,

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<v Speaker 6>but that's only because they've really been cutting in a

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<v Speaker 6>lot of the other parts of the business. Right, we

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<v Speaker 6>write in the story that you know, their cash cow businesses,

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<v Speaker 6>let's call it like a windows, have had had a

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<v Speaker 6>lot of cuts in them because this new AI business

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<v Speaker 6>the margins are so much lower, right, And so you

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<v Speaker 6>had a company that was printing some of the craziest

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<v Speaker 6>margins in the world now renting out servers at a

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<v Speaker 6>much lower margin and having all this, you know, tens

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<v Speaker 6>of billions of dollars of chips on their balance seat.

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<v Speaker 6>It does paint a different picture of a company right

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<v Speaker 6>and the question is are they going to keep spending

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<v Speaker 6>this way in perpetuity?

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<v Speaker 7>Are we in a phase?

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<v Speaker 6>I think that leaders like Amy Hood are really charting

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<v Speaker 6>in new territory and answering all this in real time.

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<v Speaker 2>The stock is down twenty five percent year to date.

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<v Speaker 2>Is Amy Hood feeling any pressure for some of her

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<v Speaker 2>maybe decisions as it released to AI spending.

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<v Speaker 6>Our understanding is a lot of folks in the company

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<v Speaker 6>were not happy with her around the pause last year.

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<v Speaker 6>That said, it wasn't our indicator that you know, hey,

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<v Speaker 6>she's going to get the boot over this or something.

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

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<v Speaker 6>That's a long time for any CFO, and it's our

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<v Speaker 6>understanding that there are starting to be succession conversations. We

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<v Speaker 6>heard some names that were interesting. Chris the CFO over

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

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<v Speaker 6>a name that comes up a lot because he used

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<v Speaker 6>to be at Microsoft. He knows the business he left

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<v Speaker 6>and kind of gained skills and could be primed for

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

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<v Speaker 6>her internal air apparent, right. I mean, his name will

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<v Speaker 6>certainly be in the ring here, and so I wouldn't

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<v Speaker 6>be surprised if in the next year or two we're

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<v Speaker 6>talking about, you know, the great Microsoft CFO search. But

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

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<v Speaker 6>she screwed up a decision and now she's getting the.

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<v Speaker 7>Can That's That's not what's happening. Stay with us.

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<v Speaker 3>More from Bloomberg Intelligence coming up after this.

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<v Speaker 1>You're listening to the Bloomberg Intelligence podcast. Catch us live

0:11:56.840 --> 0:11:59.880
<v Speaker 1>weekdays at ten am Eastern on Apple, Cocklay and Android

0:12:00.320 --> 0:12:03.400
<v Speaker 1>with the Bloomberg Business app. Listen on demand wherever you

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<v Speaker 1>get your podcasts, or watch us live on YouTube.

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<v Speaker 2>Let's stay with the tech theme a little bit, but

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<v Speaker 2>we'll go to the credit side of the equation. Why

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<v Speaker 2>because these companies are issuing debt handover fist, which is

0:12:14.480 --> 0:12:16.920
<v Speaker 2>something we haven't really been used to, but that is

0:12:16.960 --> 0:12:20.840
<v Speaker 2>something that is a big theme I think across the

0:12:20.840 --> 0:12:22.600
<v Speaker 2>tech space is kind of how they're funding some of

0:12:22.640 --> 0:12:26.240
<v Speaker 2>this AI. And the best name for us to chat

0:12:26.280 --> 0:12:28.280
<v Speaker 2>with on that story is Robert Schiffman. He is tech

0:12:28.280 --> 0:12:31.840
<v Speaker 2>credit analysts for Bloomberg Intelligence. Let's start with Intel, Rob.

0:12:31.880 --> 0:12:33.240
<v Speaker 2>I mean, I'm just looking at the stock and the

0:12:33.280 --> 0:12:36.800
<v Speaker 2>stock's really turned around, really working from a credit perspective.

0:12:36.800 --> 0:12:38.960
<v Speaker 2>What's the view of Intel, because there we're some concerns.

0:12:39.280 --> 0:12:42.400
<v Speaker 8>Sure, first, happy holidays to all. Unlike Ira, I will

0:12:42.400 --> 0:12:44.679
<v Speaker 8>not be working tomorrow. I will be eating through one

0:12:44.679 --> 0:12:46.680
<v Speaker 8>of our hundreds of boxes of matza.

0:12:46.800 --> 0:12:48.480
<v Speaker 2>Okay, so we have on the six floor.

0:12:48.559 --> 0:12:53.600
<v Speaker 8>God bless our our rates chief of staff. Yeah, listen,

0:12:53.640 --> 0:12:56.120
<v Speaker 8>it's nice to be talking about a name that actually

0:12:56.120 --> 0:12:59.800
<v Speaker 8>people like in the technology space. Now, stock is up

0:13:00.200 --> 0:13:02.360
<v Speaker 8>thirty odd percent this year. The S and P five

0:13:02.440 --> 0:13:06.319
<v Speaker 8>hundred Tech index is down almost ten percent. Spreads or

0:13:06.360 --> 0:13:10.040
<v Speaker 8>fifty basis points tighter over the past six months. I

0:13:10.080 --> 0:13:13.600
<v Speaker 8>actually think they they're the original poster child for AI.

0:13:14.200 --> 0:13:16.640
<v Speaker 8>They announced that they're going to be spending tens of

0:13:16.640 --> 0:13:20.800
<v Speaker 8>billions of dollars building foundries, not data centers, and free

0:13:20.800 --> 0:13:24.520
<v Speaker 8>cash went negative. They barred a lot, stock sold off,

0:13:24.600 --> 0:13:26.839
<v Speaker 8>bond sold off, and lo and behold. You know, they're

0:13:26.840 --> 0:13:28.839
<v Speaker 8>in the midst of a pretty major turnaround. I think

0:13:28.840 --> 0:13:31.839
<v Speaker 8>it's a plan others can can potentially follow over the

0:13:31.880 --> 0:13:32.640
<v Speaker 8>next couple of years.

0:13:32.800 --> 0:13:34.920
<v Speaker 5>But what makes Intel different, Why was it able to

0:13:34.960 --> 0:13:37.880
<v Speaker 5>pull it off? And how will other companies who might

0:13:37.920 --> 0:13:40.920
<v Speaker 5>want to follow in its footsteps be able to you know,

0:13:41.280 --> 0:13:43.319
<v Speaker 5>follow this blueprint and also succeed.

0:13:43.520 --> 0:13:46.880
<v Speaker 8>Yeah, well, there's a lot of benefits of having big,

0:13:46.920 --> 0:13:50.079
<v Speaker 8>powerful friends. So first, you know, the government converted some

0:13:50.120 --> 0:13:52.360
<v Speaker 8>of their grants into a ten percent equity state that

0:13:52.440 --> 0:13:54.920
<v Speaker 8>was over eight billion dollars, and Video wrote them a

0:13:54.960 --> 0:13:57.400
<v Speaker 8>five billion dollar check, and SoftBank wrote a couple of

0:13:57.440 --> 0:14:00.720
<v Speaker 8>billion dollar check. On top of that, they sold assets,

0:14:01.280 --> 0:14:04.480
<v Speaker 8>so they gained almost another ten billion dollars in assets

0:14:04.480 --> 0:14:08.079
<v Speaker 8>sales for non core businesses. So unlike others that have

0:14:08.440 --> 0:14:11.720
<v Speaker 8>been doing nothing but been borrowing and adding leverage, this

0:14:11.760 --> 0:14:15.559
<v Speaker 8>company has been on a de leveraging push. On top

0:14:15.600 --> 0:14:19.000
<v Speaker 8>of that, they're fundamentally their core business is starting to improve,

0:14:19.120 --> 0:14:22.040
<v Speaker 8>so a better balance sheet, a top line that we're

0:14:22.080 --> 0:14:25.600
<v Speaker 8>looking to see grow this year after falling five straight

0:14:25.680 --> 0:14:27.960
<v Speaker 8>years in a row. So they are doing things that

0:14:27.960 --> 0:14:29.880
<v Speaker 8>are different and they're getting paid for it all right.

0:14:29.960 --> 0:14:32.040
<v Speaker 2>So on the Bloomberg terminal, if you want to see

0:14:32.040 --> 0:14:34.360
<v Speaker 2>who the shareholders are of any particular company, you just

0:14:34.400 --> 0:14:39.960
<v Speaker 2>type in HDS for holders number one for Intel, black Rock, okay,

0:14:40.200 --> 0:14:44.440
<v Speaker 2>Number two Vanguard got it. Number three United States of America,

0:14:44.680 --> 0:14:47.760
<v Speaker 2>you don't see that every day, and number four Nvidia.

0:14:48.600 --> 0:14:53.240
<v Speaker 2>So those are the partners for Intel here. How about

0:14:53.280 --> 0:14:55.080
<v Speaker 2>the free cash flow story, because I was just looking

0:14:55.120 --> 0:14:57.760
<v Speaker 2>back at the FA function and as you said, negative

0:14:57.800 --> 0:15:00.480
<v Speaker 2>free cash because they're spending so much on capex. You're

0:15:00.480 --> 0:15:03.840
<v Speaker 2>a bond guy, you like free cash flow. How's that

0:15:03.880 --> 0:15:04.560
<v Speaker 2>story developing.

0:15:04.800 --> 0:15:06.880
<v Speaker 8>Yeah, we haven't had a lot of free cash flow

0:15:07.000 --> 0:15:09.440
<v Speaker 8>the last few months to talk about, and we haven't

0:15:09.480 --> 0:15:12.200
<v Speaker 8>been worried about it. Listen, Intel has been bleeding cash.

0:15:12.280 --> 0:15:14.240
<v Speaker 8>It looks like they're probably going to be around flatish

0:15:14.240 --> 0:15:17.040
<v Speaker 8>this year. That being said, though, with all these transactions

0:15:17.040 --> 0:15:20.720
<v Speaker 8>that they've done, they've built a pretty big base of

0:15:20.880 --> 0:15:24.120
<v Speaker 8>thirty seven and a half billion dollars of cash on

0:15:24.200 --> 0:15:26.920
<v Speaker 8>the books. They're using some of it to buy back

0:15:27.600 --> 0:15:31.360
<v Speaker 8>Apollo stake in one of their jps. It's a phenomenal move.

0:15:31.400 --> 0:15:33.120
<v Speaker 8>You know, we wrote yesterday that it was a sign

0:15:33.160 --> 0:15:36.040
<v Speaker 8>of strength. What this company had to do is some

0:15:36.120 --> 0:15:38.760
<v Speaker 8>creative financing, like you know we've seen with AI. We've

0:15:38.760 --> 0:15:41.640
<v Speaker 8>seen some of these off balance sheet SPVs to raise

0:15:41.680 --> 0:15:44.760
<v Speaker 8>money so it doesn't lever the companies. Intel was sort

0:15:44.760 --> 0:15:46.200
<v Speaker 8>of the first to do this, but they did it

0:15:46.240 --> 0:15:48.600
<v Speaker 8>with a variety of foundriies. They did a deal with Apollo,

0:15:48.680 --> 0:15:51.200
<v Speaker 8>and they did a deal with Brookfield. What they're doing

0:15:51.200 --> 0:15:53.440
<v Speaker 8>now is they're unwinding one of those and it's showing

0:15:53.480 --> 0:15:57.320
<v Speaker 8>that they now have the financial firepower to go into

0:15:57.360 --> 0:16:01.160
<v Speaker 8>this build on their own. They don't need partners anymore.

0:16:01.440 --> 0:16:04.160
<v Speaker 8>So they're using some of that cash that they've got

0:16:04.200 --> 0:16:07.320
<v Speaker 8>from their equity friends and they're using it now to

0:16:07.320 --> 0:16:10.320
<v Speaker 8>take a bigger stake in what will be upside in

0:16:10.400 --> 0:16:14.560
<v Speaker 8>terms of cash flow and EPs from this foundry business.

0:16:14.600 --> 0:16:17.040
<v Speaker 8>So it's a real sign of strength. It's not just

0:16:17.080 --> 0:16:19.360
<v Speaker 8>from US. SMP came out right away yesterday and said

0:16:19.720 --> 0:16:21.520
<v Speaker 8>thought it was credit neutral. Moodies came out and said

0:16:21.680 --> 0:16:24.720
<v Speaker 8>they thought it was credit positive because it was going

0:16:24.760 --> 0:16:28.600
<v Speaker 8>to enable quicker deleveraging over a shorter period of time.

0:16:28.720 --> 0:16:30.880
<v Speaker 8>So it's a real sign of strength, and it's one

0:16:30.880 --> 0:16:32.640
<v Speaker 8>of the few names that put the equity and the

0:16:32.640 --> 0:16:33.840
<v Speaker 8>bomb Mark's really love.

0:16:33.760 --> 0:16:35.920
<v Speaker 3>And very quickly, Robert, do we give all the credit

0:16:35.920 --> 0:16:37.000
<v Speaker 3>to Boomtown.

0:16:37.880 --> 0:16:39.480
<v Speaker 8>Let me tell you something. You bring in a new

0:16:39.560 --> 0:16:42.560
<v Speaker 8>CEO and you make the type of changes that he's made.

0:16:42.640 --> 0:16:46.360
<v Speaker 8>I think every technology firm would love to have a

0:16:46.360 --> 0:16:49.880
<v Speaker 8>CEO like that, so yeah, I'll credit kudos to him.

0:16:50.200 --> 0:16:54.920
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