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Speaker 3: Tesla said it's moving forward with its robotaxiing affordable vehicle
Speaker 3: plans while reporting second quarter earnings that fell short of
Speaker 3: Wall Street's estimates of justin earnings forty cents per share
Speaker 3: that was just below the average analyst estimate. Revenue fell
Speaker 3: twelve percent to twenty two and a half billion dollars
Speaker 3: that was also lower than expectations and the sharpest decline
Speaker 3: in at least a decade. Gross margin, which is a
Speaker 3: measure of profitability, was higher than anticipated. Right Now shares
Speaker 3: down about six tenths of one percent, and Tesla did
Speaker 3: say many of its key in issaiess remain on track.
Speaker 3: Quote despite a sustained uncertain macroeconomic environment resulting from shifting tariffs,
Speaker 3: unclear impacts and changes to fiscal policy, and a political sentiment.
Speaker 3: Let's bring in a Bloomberg Intelligence Global Autos and Industrials
Speaker 3: research manager Steve Mann joining us once again from New Jersey.
Speaker 3: You gave us a great preview earlier in the afternoon.
Speaker 3: Now we have the numbers. Anything surprise you, Yeah.
Speaker 4: I think if you look at the stocks down after
Speaker 4: hours a bit, I think I think the most important
Speaker 4: thing there is they haven't given us enough visibility into
Speaker 4: the future what their outlook is going to be. I mean,
Speaker 4: the numbers they miss consensus. But if you kind of
Speaker 4: dig into a little bit more and look under the cover,
Speaker 4: it's actually not bad. If you look at automotive gross
Speaker 4: margin excluding credits, it's actually fifteen percent better than the
Speaker 4: last quarter of twelve and a half and better than
Speaker 4: consensus estimates. And then if you look at free cash flow,
Speaker 4: the reason why it's down versus the first quarter is
Speaker 4: because they spend an extra nine hundred million on capex,
Speaker 4: which is not a bad thing given that there's they're
Speaker 4: launching the cheaper model and the cyber cap So if
Speaker 4: you exclude that nine million of additional cap backs, their
Speaker 4: free cash flow is actually over a billion, more than
Speaker 4: six hundred and sixty million. In the first quarter.
Speaker 5: So that's good.
Speaker 4: That's good. I mean spending cap bacs given you know
Speaker 4: what their product launches are is not a bad thing.
Speaker 4: They're investing into the future. And look, they're also expanding internationally,
Speaker 4: right they have. You know, we've seen over the quarter
Speaker 4: improvement higher sales in South Korea, they announced entry into
Speaker 4: into India, and then they're launching the extended version of
Speaker 4: the Model Y in China. So it's a good thing.
Speaker 4: But look, we do want to hear what you on
Speaker 4: US has to say, uh, in terms of not just
Speaker 4: the robotaxi, but you know, how how are they going
Speaker 4: to face ahead when the challenges we were seeing the
Speaker 4: US market, which is critical. It's it's their one of
Speaker 4: the largest market uh in in their portfolio. So we'll
Speaker 4: we'll have to hear more, uh on the on the call.
Speaker 3: How do you think Tesla's robotaxi stands up to the
Speaker 3: other autonomous vehicle solutions that are out there right now,
Speaker 3: namely Wemo.
Speaker 4: Well, I think the market can be very big, especially
Speaker 4: in the US if we're not talking internationally, Uh, there's
Speaker 4: definitely room for multiple players. Uh. You know, my perspective
Speaker 4: is that you know, Tesla is using an all camera
Speaker 4: system that actually is gives them a greater flexibility and
Speaker 4: greater scalability with with that system.
Speaker 6: Uh.
Speaker 4: Weimo and others use a combination of radars lied on
Speaker 4: and camera system. Cameras just are just cheaper right to build,
Speaker 4: and uh, you know, and and so it's a lot
Speaker 4: easier to scale, cheaper to scale for Tesla. So but
Speaker 4: then again, I think the market's big enough. I think
Speaker 4: there's going to be users that want in all camera system.
Speaker 4: I think there's going to be users that don't feel
Speaker 4: comfortable with that and want the redundancy redundancy of lie doars.
Speaker 4: So you know, for example, Uber is partnering with Weimo.
Speaker 7: So I kind of go back to wait, all right,
Speaker 7: So I'm looking at the FA function on the Bloomberg
Speaker 7: and we just talked about free cash flow, and so
Speaker 7: it's one hundred and forty six million dollars versus six
Speaker 7: hundred and sixty four million in the first quarter of
Speaker 7: twenty twenty five, as our live blog says, dropping eighty
Speaker 7: nine percent. And I know what you're saying about, it's
Speaker 7: good that they're spending for the future, right because you said.
Speaker 5: To us earlier that the best way to get to.
Speaker 7: That one point fifty six million unit delivery for the year, right,
Speaker 7: that's the concessus estimate is that they've got to launch
Speaker 7: that cheaper vehicle, right, so they've got to bring stuff out.
Speaker 7: Do we have to be worried though about that low
Speaker 7: number or they're they're going to be fine.
Speaker 4: Well, it's uh, I mean, it's it's technical, right, It's
Speaker 4: that if free cash flow is overbuilain obviously the more
Speaker 4: the better it is. Down Yeah, it's you know, compared
Speaker 4: to a year ago, two years ago. But look like
Speaker 4: if you look at the model Y, if you look
Speaker 4: at the gross margin, you know, excluding credits, it is
Speaker 4: up right, that actually tells you that, uh, you know,
Speaker 4: the new vehicle is likely the model new model why
Speaker 4: is likely built. They're able to build at lower cost.
Speaker 4: The issue is, like I said in the preview, is
Speaker 4: they just don't have enough volume.
Speaker 5: Yeah.
Speaker 4: So so if if they can expand volume with the
Speaker 4: with the existing model Y, not just in the US
Speaker 4: but in the international markets and as well as introduced
Speaker 4: to cheaper model which is supposed to build to be
Speaker 4: built within the existing capacity, you know, there could be
Speaker 4: a lot upside, right in terms of margin in terms
Speaker 4: of free cash flow. So uh, you know, it's really
Speaker 4: execution at the moment, and that's what we want to
Speaker 4: hear from Elon Musk. You know, how where where is
Speaker 4: the second Where is the cheaper model? They said, it's
Speaker 4: actually they said the production has started. Initial production has
Speaker 4: started in June, but you know it could take some
Speaker 4: time right before they launch and I have to get
Speaker 4: all the kinks out. But you know, you want to
Speaker 4: hear about India. India is a huge market, right and
Speaker 4: where they taking India? Uh, you know, definitely Robotaxi is
Speaker 4: an important and then the cyber cap. You know, we
Speaker 4: need a little bit.
Speaker 5: More details, all right, details is certainly near.
Speaker 4: Term details, near term details.
Speaker 5: All right, great setup, Steve Man, thank you so much.
Speaker 7: We're going to look forward to reading your research in
Speaker 7: the after hours and certainly into tomorrow's trade. Deeman Bloomberg
Speaker 7: Intelligence Global Auto an Industrials research manager, joining us from
Speaker 7: BI headquarters in Princeton, New Jersey.
Speaker 3: I want to go right now and bring in Ross Gerber.
Speaker 3: He's president's CEO of Gerber Kawasaki Wealth and Investment Management.
Speaker 3: As at the end of last year, had about three
Speaker 3: point four billion dollars in assets under management. Long time
Speaker 3: outspoken Tesla bull more recently expressing concerns about the company,
Speaker 3: as he did three months ago after the last quarter
Speaker 3: report earnings report. According to the Bloomberg terminal, gerber Kawasaki
Speaker 3: still owns about seventy eight million dollars worth of Tesla stock. Ross,
Speaker 3: good to have you with us this afternoon. What have
Speaker 3: you been doing to your Tesla position over the last quarter?
Speaker 3: Just before we get your take on the numbers.
Speaker 1: You know, we've been selling for years and I continue
Speaker 1: to sell. I you know, we have so much stock,
Speaker 1: and we have a lot of clients that really believe
Speaker 1: in the Tesla story, and we've kept some stock obviously
Speaker 1: in our portfolios, but in my ETF, I'm out of Tesla,
Speaker 1: completely out of my GK. And it's mostly because the
Speaker 1: business is declining, and these earning results continue to show
Speaker 1: that the business continues to decline and in some kind
Speaker 1: of troubling ways. So as much as the previous guest
Speaker 1: is bullish on many of these things that Elon talks about,
Speaker 1: nobody wants to talk about the truth that nobody wants
Speaker 1: to buy Elon's products, like until that gets addressed there's
Speaker 1: a huge elephant in the room that nobody seems to
Speaker 1: want to point at because it's Elon. So he's the
Speaker 1: innovator behind all of the things that are great about Tesla,
Speaker 1: but he's also the sort of villain that's created so
Speaker 1: much animosity around him that nobody wants to buy his products.
Speaker 7: We've had a great cover story by the team of
Speaker 7: Max Chafkin and Ed Ludlow in Bloomberg business Week the
Speaker 7: new issue coming out, the August issue. It'll soon be
Speaker 7: on newstands, it's already on the Bloomberg But you know,
Speaker 7: the whole idea ross as you know, since you understand
Speaker 7: this guy, this company so well, you never kind of
Speaker 7: count Elon out, And so I wonder, you know, if
Speaker 7: he does get it right, if he maybe, I don't know,
Speaker 7: We'll see what happens in terms of his involvement in politics,
Speaker 7: because it does seem like he still wants to stay
Speaker 7: according to the SpaceX filing. But I mean there is
Speaker 7: always that caveat when it comes to Elon right that
Speaker 7: he sometimes pulls it out, or he often pulls it out.
Speaker 1: Yeah, And I think that's been true in the past,
Speaker 1: and I'm very grateful that he pulled it out five
Speaker 1: years ago when it really mattered and Tesla was almost
Speaker 1: on the verge of bankruptcy, and it has become a
Speaker 1: very successful company. But it doesn't mean he's going to
Speaker 1: do it again. And this idea that you know, these
Speaker 1: kind of entrepreneur rock star people don't fall is actually
Speaker 1: is not true. In fact, it's very common to what
Speaker 1: we call the rise in fall story. That's all the
Speaker 1: stories you see on Netflix and the documentaries, So you know,
Speaker 1: this might be a rise in fall story, and things
Speaker 1: don't rise forever, per se. And I always remind people.
Speaker 1: I don't think most people even know who invented the television,
Speaker 1: but the television was invented in the United States by
Speaker 1: a company called RCA, which was like the hottest stock
Speaker 1: of the fifties. Well, how many TVs are made in
Speaker 1: the United States today And the answer is zero. So
Speaker 1: the very same thing could happen in the ev business.
Speaker 1: But that said, Elon can fix the company. It's solely
Speaker 1: broken because of him. He can certainly fix the company
Speaker 1: if he wants to do what's necessary to improve his image.
Speaker 1: And in a year people forget and Tesla might be back.
Speaker 1: But he just doesn't seem to care about fixing his image,
Speaker 1: and he doesn't seem to be an understanding the responsibility
Speaker 1: goes to him on why sales are down so.
Speaker 3: Much, So why even have any Tesla stock right now?
Speaker 1: I think the reason I hold personally still some Tesla
Speaker 1: stock is for the same hope that we all have
Speaker 1: that they are definitely focused on a future, and especially
Speaker 1: for me a climate activist, you know, it's a green
Speaker 1: future that I'm pushing and Tesla still is the leader
Speaker 1: in green you know, transportation and energy, and I think
Speaker 1: it's an incredibly important company to succeed. Hence why I'm
Speaker 1: out here banging on elon all the time. It's not
Speaker 1: you know, for any other reason than wanting to see
Speaker 1: Tesla succeed because it's crucially important to climate change. But
Speaker 1: this robotaxi business is not crucially important to anybody. So,
Speaker 1: you know, I think Tesla's main business is selling evs
Speaker 1: that and energy storage, and they should be focused on
Speaker 1: repairing that main business. And I think there are other
Speaker 1: future end of ours are interesting and that's why it's
Speaker 1: a reason to hold the stock. But it also trades
Speaker 1: at one hundred and fifty times earnings that are going down, okay,
Speaker 1: and so you know you have to weigh that too.
Speaker 3: In the past, you've talked about how nice it is
Speaker 3: to drive a Rivian, for example. Are you willing to
Speaker 3: now invest in any other EV company that you've turned
Speaker 3: on Tesla?
Speaker 8: No.
Speaker 1: You know, I've lost a lot of money and EV
Speaker 1: businesses over the last five years that I've hoped would
Speaker 1: succeed in, including Rivian and many others, And unfortunately, many
Speaker 1: of the EV operators are now having all the incentives
Speaker 1: taken away from them as well as traditional car companies
Speaker 1: along with tariffs and everything else. It's just really a
Speaker 1: horrible setup to be a car company. The car company
Speaker 1: we own is Ferrari actually, which has no problem selling
Speaker 1: their cars at forty percent margins that make Tesla look
Speaker 1: like chump change. So you know, truthfully, it's just a
Speaker 1: tough to be in a global auto business on a
Speaker 1: great day, let alone with Trump as president. So it's
Speaker 1: a very tough time for the businesses, and I'm just
Speaker 1: not recommending that right now. Versus a stock like train
Speaker 1: technology that makes you know, clean energy air conditioning units,
Speaker 1: where the demand for air conditioning is off the charts,
Speaker 1: and that's been a wonderful green energy investment along with
Speaker 1: ge Vernova, which we also own. That's been a wonderful
Speaker 1: green energy investment. But it's not EV's.
Speaker 7: Hey, listen, I do want to go back to We've
Speaker 7: got the Tesla live blog going on and just tracking
Speaker 7: everything that's coming out of the earnings. Are down a
Speaker 7: Hull who covers Tesla and Elon, says Page twelve of
Speaker 7: the shareholder deck shows the Tesla ecosystem, which includes optimists.
Speaker 7: We know, the robot pushing a baby stroller, you know,
Speaker 7: you know ross When it comes to Tesla and the
Speaker 7: world of Elon, there are so many different moving parts.
Speaker 7: There's you know, the shining beacon of SpaceX right that
Speaker 7: that's a really great business. There's all the AI stuff
Speaker 7: that's going on. There's so many different moving pieces. What
Speaker 7: else do you want to know maybe on the call
Speaker 7: today about you know, from the Elon universe.
Speaker 1: Well, I think the most important thing in my mind
Speaker 1: that has the biggest opportunity to help Tesla is this
Speaker 1: low cost vehicle they keep talking about. They have so
Speaker 1: much excess capacity in their factories now because they're not
Speaker 1: selling more cars that they need a new vehicle. And
Speaker 1: also for addressing other markets, whether it be India, China
Speaker 1: and Europe. You need a small vehicle that's inexpensive to
Speaker 1: compete against the other EV players and regular traditional car companies.
Speaker 1: And they need to do this now, and the sooner
Speaker 1: they do this, the better, And that's the most important thing.
Speaker 1: I know. We like to talk about the day a
Speaker 1: robot is pushing my kid around in a stroller. That
Speaker 1: day is long in the tooth from coming. Nor does
Speaker 1: anybody in the world would trust some big robot made
Speaker 1: by Elon Musk. Yeah, when I get out of that fantasy,
Speaker 1: you know, Well, I was.
Speaker 3: Just going to say when I'm on my deathbed, I
Speaker 3: know I'm not going to say, wish I spent less
Speaker 3: time pushing my kid's stroller and had robots do it instead.
Speaker 3: The dishes I want done, not less.
Speaker 5: Time with my kids. Laundry done.
Speaker 1: Yeah, the dishes, But I don't know my wife actually
Speaker 1: likes doing the dishes, so I don't know.
Speaker 5: Tell her to ask her what her secret is. I
Speaker 5: would love to know. Hey, Rob, I don't know she
Speaker 5: likes it.
Speaker 7: Rus Gerber always appreciate you finding time for us.
Speaker 5: We got to run right now. Shares of Tesla just
Speaker 5: down about six tens of a percent.
Speaker 2: You're listening to the Bloomberg Business Weekdaily Podcast. Catch us
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Speaker 7: We do want to bring in to the conversation Brett Thill,
Speaker 7: he's senior technology research out and said Jeffries, he's got
Speaker 7: a buy rating on Alphabet. He's got a hold rating
Speaker 7: on IBM, which also is that with their results and
Speaker 7: we are seeing that that stock. Let me just bring
Speaker 7: it up real quickly on the Bloomberg shares of IBM
Speaker 7: or down about four point four percent, so we're both
Speaker 7: seeing some movement there and right now Alphabet down one.
Speaker 5: Point two percent.
Speaker 7: Hey Brent, good to have you here to the conversation
Speaker 7: with Tim Mandeep and myself. Your take on what we
Speaker 7: got from Alphabet, Yeah, I.
Speaker 8: Mean it was pretty in line. I don't think there
Speaker 8: was any big fireworks. You know, you had a bigger
Speaker 8: capex number was about four and app billion higher, which
Speaker 8: is a sign of investing in AI. They raised capex
Speaker 8: by ten bill which again everyone knows it's going to
Speaker 8: AI and so I think everyone likes that that they're
Speaker 8: spending to keep pace, but obviously it's having a drag
Speaker 8: on the margin. So the margin last course about forty percent,
Speaker 8: they're at thirty eight point three percent, so a little
Speaker 8: bit of a drag on the margin on the downside,
Speaker 8: and then you know, just magnitude of upside just you know,
Speaker 8: not a lot, and they don't give you a lot
Speaker 8: of color what they're doing. So I think, you know, look,
Speaker 8: this has been the worst sentiment of any name I
Speaker 8: cover an internet. Our investors are not bought in everyone
Speaker 8: starting their search, which actually BT and perplexity first be
Speaker 8: stelling up in Google, and so the big question is
Speaker 8: ultimately where are they going to end up in this
Speaker 8: in this AI race, And many of the advertisers are
Speaker 8: talking about the transition with AI overview and what they're
Speaker 8: going through that it's more expensive and they're getting a
Speaker 8: better impact from it. But it's still early. So you know, overall,
Speaker 8: Cloud you know was did well. YouTube was thirteen percent growth,
Speaker 8: it was ten last course, accelerated a bit off an
Speaker 8: easy comp and so yeah, I think it's just basic
Speaker 8: kind of quarter, nothing really exciting that The challenge right
Speaker 8: now is investors just don't believe. You know, any investor
Speaker 8: I talked to is like, I need to be underweight
Speaker 8: Google because I just don't believe they're going to make
Speaker 8: this transition.
Speaker 3: We'll make the case for us, make the case for
Speaker 3: us that you think they will make the transition.
Speaker 8: Well, the case for the transition is that you need
Speaker 8: three things for AI. You need data, users, and capital.
Speaker 8: And they have more data and more users than anyone
Speaker 8: in the world. So if like I've always said this,
Speaker 8: like I think this is like pulling up to a
Speaker 8: stoplight and you look right and it's like a tiny
Speaker 8: little car and you might be in a car that
Speaker 8: you think is faster, and then the car on the
Speaker 8: right just takes off and you're like, wow, I didn't
Speaker 8: realize that was underneath the hood or where the muscle
Speaker 8: come from.
Speaker 5: There.
Speaker 8: They have a lot more AI muscle under the hood
Speaker 8: than they're showing. They're terrible communicators, they're not good with investors.
Speaker 8: They don't give you guidance, they don't go on the road,
Speaker 8: they don't spend time with investors, like Nvidia, like Microsoft,
Speaker 8: like the Rust, and so investors are just like, look,
Speaker 8: they gave me the earnings call, four times a year,
Speaker 8: and that's about it, and then the filing and that
Speaker 8: there's nothing in it, and then I'm left to guess.
Speaker 8: So every investor has to do their own work, and
Speaker 8: we're all doing our own work. Your day starts in
Speaker 8: chat abt and Perplexiti. It's not and it was starting
Speaker 8: in Google maybe a year ago. There's alternatives. So I
Speaker 8: think this is the same thing we're seeing with Adobe,
Speaker 8: with Salesforce, other names we cover in tech. Is a
Speaker 8: new crop of AI stories going to effectively, not necessarily replace,
Speaker 8: but become the central spot where you start your your
Speaker 8: your your search. And I don't think that you know
Speaker 8: that that that boogeyman is going to go away for
Speaker 8: a while. So you know again, I think you know
Speaker 8: stocks underperformed has done nothing. You look at the IGV
Speaker 8: the software next, It's up twelve percent. Google's flat.
Speaker 6: You look at the.
Speaker 8: Other index, the SMH, the Internet of Index, it's You're
Speaker 8: up eighteen percent year.
Speaker 5: Date, Google's flat.
Speaker 8: I mean, there's literally been way better ways to make money,
Speaker 8: whether it's DoorDash. When you look at what's going on
Speaker 8: in meta, and we hear this from advertisers. Advertisers are
Speaker 8: obsessed with what Meta is doing in AI, and so
Speaker 8: again I'm not super super bearish or on Google, but
Speaker 8: I think what we're seeing are the facts of the facts,
Speaker 8: which is it's really hard to change the narrative and
Speaker 8: they're going to have to make a change in their
Speaker 8: own behavior, and the numbers and then the adoption rate,
Speaker 8: and so that again we're never going to rule them out.
Speaker 8: I think the stock's super cheap, so that's why I
Speaker 8: still have a buy in it. But I would say
Speaker 8: of all the large cap Internet names, they have the
Speaker 8: most work to do.
Speaker 5: All right, So Man Deep, come on back in are
Speaker 5: a Man Deep?
Speaker 7: Saying, globalhead of Technology research at our in house Bloomberg
Speaker 7: Intelligence Team.
Speaker 5: I mean, do you think they could do better in
Speaker 5: terms of messaging? I'm curious about your thinking.
Speaker 9: I agree with Brent on that that they are the
Speaker 9: ones who give you the least when it comes through
Speaker 9: the product pipeline and how it's going to change their business,
Speaker 9: especially given they are getting disrupted, so they could do more.
Speaker 9: But at the same time, like I said, you know,
Speaker 9: a search business that is their cash cow growing double
Speaker 9: digit is a very impressive performance. And to my mind,
Speaker 9: you know, given all the competitive threat that we talk about,
Speaker 9: they're still able to execute. And unless the search business
Speaker 9: really starts to decelerate sharply, I don't see anything in
Speaker 9: the fundamentals that has changed for Google.
Speaker 5: Is meta threat to Alphabet.
Speaker 9: No, because they're struggling with their own large anglid model.
Speaker 9: That's why they're making all the aqua hiers, so they
Speaker 9: don't have the talent. It's really Google and open Ais
Speaker 9: that are going neck and neck when it comes to
Speaker 9: the consumer side, and then you have Gottenthropic on the
Speaker 9: enterprise side. But these three dominate the large angred model
Speaker 9: race right now.
Speaker 8: Let me add that the advertisers are not saying that
Speaker 8: our advertisers are saying they're shifteen dollars from too Mata
Speaker 8: away from Google's. So I think when you look at
Speaker 8: actually advertising dollars, they are shifting and that's coming from
Speaker 8: our checks. So I think that there is a shift
Speaker 8: that's been happening. I don't think Google goes to zero,
Speaker 8: but I do think there's a shift in advertisers.
Speaker 9: Why did Google Search then grow double digits this quarter?
Speaker 8: It's starting to fade and we think that ultimately that
Speaker 8: is results are much stronger.
Speaker 9: Okay, I mean that's where we have to wait for meta.
Speaker 9: Maybe it grows high teens or over twenty percent, and
Speaker 9: then probably the meta.
Speaker 8: Stocks are twenty two percent. You're to date for a
Speaker 8: reason because the advertiser checks that. We all do are
Speaker 8: saying that. Secondarily, the framework of what they can do
Speaker 8: with AI is so much more powerful from what we're
Speaker 8: seeing in the experiences. So I'm not again, I'm not
Speaker 8: a Google hater. I just think that we're starting to
Speaker 8: see a sudden they are behind it.
Speaker 9: It comes to LLLM. So it's not because of their
Speaker 9: LLLM lead that their ad revenue is shifting. So it's
Speaker 9: just better at surface and how meta is monetizing. It's
Speaker 9: not Bella Lamps, right.
Speaker 8: I don't believe it's I don't believe it's because of
Speaker 8: l arm Stone.
Speaker 3: Yeah, So, Brent, if if indeed there is this shift happening,
Speaker 3: and I certainly see it in in my behavior, and
Speaker 3: I do end up going back to Google, but there
Speaker 3: is there are other options out there now, whether whereas
Speaker 3: there used to not be other options. Uh, if that happens,
Speaker 3: how does Google end up leveraging it's sor it's a
Speaker 3: iproduct for actual ad revenue, What does that what does
Speaker 3: that look like?
Speaker 8: Well, I think the challenge is when you go back
Speaker 8: to Gemini, that if you've gone into perplexity, into the
Speaker 8: app or chet Ebt where we all started in Gemini
Speaker 8: was late, how do you how do you transition out
Speaker 8: of those apps when you're when they're already front and center,
Speaker 8: and so they've got to get people to kind of
Speaker 8: get out of that. And then secondarily, like I go
Speaker 8: back to like I plan a family vacation in Europe
Speaker 8: on chet Ebt, and to your point, I had to
Speaker 8: go back to Google to find the boat, rent all
Speaker 8: the restaurants, all the things we want to do as
Speaker 8: a family. So I do think that you ultimately end
Speaker 8: up back. I think that the challenge right now is
Speaker 8: it's unclear exactly how they're going to navigate through this
Speaker 8: and are they going to end up in a better
Speaker 8: or worse position? And right now Wall Street's betting a
Speaker 8: worse position. Right stocks down on this print, which wasn't
Speaker 8: that bad. Why is it down? Why is the sentiment
Speaker 8: so bad? There's just better alternatives that people see, and
Speaker 8: you hear these advertisers, these big advertisers are spending billions
Speaker 8: of dollars a year on behalf of their clients, and
Speaker 8: they're saying, well, this is what I'm doing with my
Speaker 8: ad budget.
Speaker 5: So I think they need to do a better.
Speaker 8: Job of you know, you've got to get AIO review
Speaker 8: in the market and get usage. You have to effectively
Speaker 8: show a better ROI. You have to get Gemini usage up.
Speaker 8: I think you know from a Wall Street A lot
Speaker 8: of this is just actually management too, which is giving conviction.
Speaker 8: We covered Microsoft when Bomber was there and stock did
Speaker 8: nothing and people just didn't have a conviction. They had
Speaker 8: conviction when the Dela came in the stock one thirty
Speaker 8: and now it's five hundred and so a lot.
Speaker 5: Of this too is optical.
Speaker 8: You got to optically hold hands and help people. Because
Speaker 8: investors get the help from a lot of the other companies,
Speaker 8: they don't get the help from Google. So if you
Speaker 8: can drive a car, you're probably more likely to buy it.
Speaker 8: But if you can't drive it, then you know, like
Speaker 8: maybe I'll just go buy another car I know I
Speaker 8: can drive. So they need to do a better job
Speaker 8: on that side.
Speaker 9: And to Brent's point about Gemini usage, I think on
Speaker 9: the call, if they shared the token count, so last
Speaker 9: quarter they mentioned four hundred and eighty trillion was a
Speaker 9: token count and it grew almost you know, five x
Speaker 9: month over a month. Microsoft shared a similar metric, and
Speaker 9: to my mind, in the case of Alphabet, you'd not
Speaker 9: only have the cloud lift, so cloud consumption is driving
Speaker 9: token count, but also the surface area they have with
Speaker 9: their family of apps. So they have six apps with
Speaker 9: over two billion monthly active users. All the AI Gemini
Speaker 9: AI that they are deploying on those apps, including Search,
Speaker 9: that will show up in the token count. And that's
Speaker 9: why Google is almost ten times that of Microsoft. So
Speaker 9: Microsoft process fifty trillion tokens, right, Google process four hundred
Speaker 9: and eighty trillion tokens. That's because of the surface area
Speaker 9: they have to you know, show Gemini and deploy that,
Speaker 9: and that for me is the key metric on the
Speaker 9: earning score.
Speaker 5: So that's what you're going to be looking for.
Speaker 7: All right, We're gonna let you go because you, I know,
Speaker 7: have lots to do, man deep seeing you are such
Speaker 7: a gem Bloomberg Intelligence. Hey, bred before you go, just
Speaker 7: a quick thought on IBM because they also report and
Speaker 7: they're down almost five percent in the aftermarket.
Speaker 5: What do we need to know just quickly.
Speaker 8: Yes, software that did better consultings kind of like blah,
Speaker 8: and I think the CEO and mentioned they'd like to
Speaker 8: do better in consulting, but that that seems to be
Speaker 8: the biggest concern across consulting overall. So you know, tell
Speaker 8: two cities software business growing high single digit consulting not
Speaker 8: massive grower and flat on a constanqurency basis, And so
Speaker 8: you know you they're shifting to become a software company.
Speaker 8: Arvind has done a great job, the CEO. The stock's
Speaker 8: up almost thirty percent year today. The multiples almost at Microsoft.
Speaker 8: Like I'm much rather own Microsoft. I'm much rather on Google.
Speaker 8: There's other names I'd rather personally own. I can own
Speaker 8: any these names, but we're advising ARC clients to own on.
Speaker 5: Over over IBM.
Speaker 8: We just we just see, you know, the stock pretty
Speaker 8: full at the multiple it's at all.
Speaker 7: Right, just real quickly, what would be your top number
Speaker 7: one question on alphabet on the call here?
Speaker 5: And the stock's down one still one point six percent lower?
Speaker 8: Just quickly, you know, the continued adoption of AI overview
Speaker 8: and what's happening with Gemini?
Speaker 5: All right, gon I leave it there. This was fun, Brent,
Speaker 5: Thank you so much.
Speaker 7: Brent Delle, you see your technology research analyst over at
Speaker 7: Jeffries joining us on zoom on this Wednesday.
Speaker 2: This is the Bloomberg Business Week Daily Podcast. Listen live
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Speaker 7: So we've seen initial public offerings definitely picking up some
Speaker 7: momentum this year. As a group, IPOs are up about
Speaker 7: five percent year to date as measured by the Renaissance
Speaker 7: IPO Index, but up forty one percent from a low
Speaker 7: back on April eighth.
Speaker 5: We've got a couple of.
Speaker 7: IPOs today, both are trading lower in their first day
Speaker 7: of trading. We've got Niq Global Intelligence share slumping after
Speaker 7: the company raised more than a billion in its IPO,
Speaker 7: giving it tim.
Speaker 5: Just about a market cap of just under six billion dollars.
Speaker 3: Another a small cap Carls Med. It's a medtech company,
Speaker 3: slipping in its first day of trading after raise one
Speaker 3: hundred point five million dollars in its IPO. The company
Speaker 3: with it approximately three hundred and eighty seven million dollar
Speaker 3: market cap. Carlsmed uses AI to personalized spine surgery. It
Speaker 3: sold six point seven million shares after offering them for
Speaker 3: fourteen two sixteen dollars each. Here was more in the
Speaker 3: company in the first day of trading as a public company.
Speaker 3: Mike Cordonier, co founder and CEO and president of Carl's
Speaker 3: Med from the Nasdaq. Also joining us a Bloomberg News
Speaker 3: activities reporter and Tallya Kenny Javitch. She's here in the
Speaker 3: studio with us, Mike. The stock is down on the
Speaker 3: first day. How are you feeling on a day such
Speaker 3: as today? Stock not necessarily moving in the direction you
Speaker 3: want to see.
Speaker 10: Well, we're feeling really good about you know, how we're
Speaker 10: doing today. You know, continue to focus on our mission
Speaker 10: and building awareness about you know, really what we do
Speaker 10: that ultimately we know has transformed spine surgery, and so,
Speaker 10: you know, continue to focus on the fundamentals, and you know,
Speaker 10: it's it's ultimately going to be a really strong day
Speaker 10: for us.
Speaker 7: For those who mind, have I familiar Mike, just fill
Speaker 7: us in on exactly what you do. From what we
Speaker 7: understand you guys do personalized surgery, which got one of
Speaker 7: our producers c see a little word, because we thought
Speaker 7: all surgery was personalized elis. We hope that's the case
Speaker 7: when we go under the knife. So they say, so,
Speaker 7: what exactly do you guys do?
Speaker 10: Yeah, you know, we've really taken a very different approach
Speaker 10: to what really a medical device company is. And so
Speaker 10: we are a medical technology company, and we work with
Speaker 10: surgeons and patients, and we take digital imaging of the
Speaker 10: patients as well as surgical inputs from the surgeon, create
Speaker 10: a virtual plan of that patient surgery, and then we
Speaker 10: three D print personalized devices for their spine surgery, build
Speaker 10: those on demand, delivered directly to the operating room. And
Speaker 10: ultimately what this does is this gives a surgeon really
Speaker 10: power to be able to perform very precisely what can
Speaker 10: be a really complex spinal surgery.
Speaker 11: Mike Hi, congratulations on trading debut. I'm curious about your
Speaker 11: path to profitability because companies like yours typically require a
Speaker 11: lot of capecs. Do you guys have any timeline in
Speaker 11: mind on when you become profitable?
Speaker 10: Yeah, well, we haven't provided direct guidance to that. However,
Speaker 10: we have built our company very differently than a traditional
Speaker 10: medical technology company because we don't carry any inventory. Everything
Speaker 10: that we create is three D printed directly on demand.
Speaker 10: And so as we think about this public offering the
Speaker 10: use of capital to reinvest towards really our growth in
Speaker 10: being able to provide this technology to a lot more.
Speaker 5: Patients, what's proprietary?
Speaker 10: Yeah, Ultimately, you know, we have a broad technology platform
Speaker 10: that we built, and so as we think about rolling
Speaker 10: this out much more broadly, we've been able to create
Speaker 10: an end to end technology platform that is proprietary to
Speaker 10: us that we've called our Digital Production System, and this
Speaker 10: is a all in one system that allows us to
Speaker 10: take digital data about the patient, about the surgeon, create
Speaker 10: personalized plans and the devices to achieve those plans. And ultimately,
Speaker 10: when we started down this journey just.
Speaker 5: A few years ago.
Speaker 10: This whole end to end process took us a little
Speaker 10: bit longer than eight weeks. And now we've really reinvested
Speaker 10: in our proprietary system that allows us to do this
Speaker 10: in two weeks or less, which really allows these scheduled
Speaker 10: surgeries to be able to be done in the time
Speaker 10: that the surgeon and patient needs them.
Speaker 3: Mike, why was an IPO the right move here? If
Speaker 3: the broad adoption by doctors around the US and around
Speaker 3: the world. Is your goal here? Why not look to
Speaker 3: be acquired by let's say, a Medtronic or a Johnson
Speaker 3: and Johnson or a striker that already has these relationships
Speaker 3: with doctors and can these roll this out more broadly.
Speaker 10: Yeah, we really, you know, think about this much more
Speaker 10: than a product line and really much more as a
Speaker 10: new way to run a business, because, you know, very
Speaker 10: different than what the large players in this space do,
Speaker 10: which tends to be a very capital intensive business model.
Speaker 10: You know, we've built this new business model which is
Speaker 10: really digital first, allows us, in conjunction with the surgeon
Speaker 10: to do the procedure digitally first and then make one
Speaker 10: demand everything that's needed. And so because of this, because
Speaker 10: of ultimately our ability to do this on demand, we've
Speaker 10: built a very nimble, agile company that we can deeply
Speaker 10: target those key institutions and the patient population to directly
Speaker 10: deliver exactly what's needed. And we see this really as
Speaker 10: a platform technology that has a lot more applications, much
Speaker 10: beyond our current indications that we have for spinal fusion.
Speaker 7: So can I just ask you, so, does that mean
Speaker 7: you ultimately see yourself maybe for every complicated surgery figuring
Speaker 7: out how to.
Speaker 9: Do this just quick.
Speaker 10: Yeah, yeah, absolutely. You know, we see this as a
Speaker 10: continued innovation partnership with you know, surgeons as well as
Speaker 10: us on the technology side to be able to profinde
Speaker 10: a very novel personalized solution to patients.
Speaker 5: Yeah.
Speaker 10: That ultimately drives better outcomes because as we've looked at
Speaker 10: our early data for spine fusion surgery, we've been able
Speaker 10: to materially improve outcomes for patients because we can directly
Speaker 10: personalize the devices needed for their surgery.
Speaker 11: Mike, what is your tariff exposure?
Speaker 10: Yeah, so we are one hundred percent supply chain in
Speaker 10: the US, and so we're very well insulated from you know,
Speaker 10: the news that's coming out around tariffs.
Speaker 9: Hey.
Speaker 5: One thing I want to ask you though, in terms
Speaker 5: of the growth of the business.
Speaker 7: I know there's you're not going to give us anything
Speaker 7: on profitability or when you get there, but what's the
Speaker 7: growth that you are seeing in usage, growth in revenues?
Speaker 7: Can you give us some numbers? We are Bloomberg and
Speaker 7: you are a public now and ultimately you're going to
Speaker 7: be sharing this stuff.
Speaker 5: Just got about forty seconds.
Speaker 10: Yeah, absolutely, you know, we've we've grown phenomenally since we started,
Speaker 10: and we can we can report that, you know, in
Speaker 10: the first quarter of this year, you know, we grew
Speaker 10: one hundred percent year over year, and so you know,
Speaker 10: we see this adoption very apid, with new surgeons, new
Speaker 10: accounts coming on board, and you know, we anticipate, you know,
Speaker 10: continued wide adoption of this new standard of care.
Speaker 5: All right, I think we have to leave it there.
Speaker 7: Hey, listen, stay in touch, love to know as you
Speaker 7: continue along, and maybe on that first joarning you can
Speaker 7: come join us after that. Mike Coordinair he is co
Speaker 7: founder Cordon you or excuse me, co founder CEO president
Speaker 7: of carlsmed joining us from the Nasdaq on their first
Speaker 7: day of trading. And our own Natalia Kitty Javich, she's
Speaker 7: here in studio. She's our Bloomberg News Equities Reports.
Speaker 2: You're listening to the Bloomberg Business Weekdaily Podcast. Catch us
Speaker 2: live weekday afternoons from two to five pm Eastern Listen
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Speaker 7: Those latest trade agreements still waiting to be done, including
Speaker 7: one with the EU and then another that's already been
Speaker 7: hammered out with Japan.
Speaker 3: Tip weigh in both US Treasury Secretary Scott Besson follow
Speaker 3: by US Commerce Secretary Howard Lutnik.
Speaker 6: Fifteen percent for Japan for reciprocal terroriffts for autos. That
Speaker 6: is a different kind of deal. But because the Japanese
Speaker 6: proposed a very innovative solution, has it Russell's.
Speaker 5: Come up with anything innovative?
Speaker 6: Not yet. The EU has a collective action problem twenty
Speaker 6: seven countries.
Speaker 5: That's up to them to negotiate.
Speaker 10: Right, are they willing to open their market?
Speaker 5: I don't think.
Speaker 11: I don't think anybody.
Speaker 10: Europe's not going to go and give us a trillion
Speaker 10: dollars too.
Speaker 5: Well, can they get below fifteen percent? Or is fifteen
Speaker 5: percent now the floor for autos? I would I would
Speaker 5: know for a recip goal tariff the European.
Speaker 7: Union don't willing to accept.
Speaker 5: I don't think the countries can get low like that,
Speaker 5: all right?
Speaker 7: That, of course is US Commerce Secretary Howard Lutnik, proceeded
Speaker 7: there by US Treasury Secretary Scott Best. They were earlier
Speaker 7: on Bloomberg Surveillance on TV and radio. Hey, check out
Speaker 7: those full interviews. You can find them on the Bloomberg
Speaker 7: and at Bloomberg dot com. Hey for the town though
Speaker 7: on these trade agreements and what impact it may have
Speaker 7: on global trade and for investments in the US. We
Speaker 7: start in the Nation's Capital with a senior advisor in Japan,
Speaker 7: Cheer at CSIS. It's the set of for Strategic and
Speaker 7: International Studies, Christy Gavella, joining Tim and myself from the
Speaker 7: Nation's Capital. Christy, it does seem like things are moving
Speaker 7: along on trade deals according to what's kind of coming out.
Speaker 7: Are these good trade deals for the United States? Are
Speaker 7: they good for the economy? Are they good for the
Speaker 7: global economy?
Speaker 5: And why or why not?
Speaker 12: Well, it certainly seems that the Trump administration is gaining
Speaker 12: momentum in its quest to negotiate trade deals before the
Speaker 12: August one deadline. If we look at the deal that
Speaker 12: was announced with Japan yesterday, it's clear that these are
Speaker 12: good deals for the US in the sense that the
Speaker 12: US is raising tariffs by significant amounts and their horror
Speaker 12: administration also by getting increased investment that addresses the trade deficit.
Speaker 12: You know, some could argue that the concessions being offered
Speaker 12: are perhaps not as significant as they might have wanted,
Speaker 12: but they are getting, for example, Japan five hundred and
Speaker 12: fifty billion dollars in investments, as well as concessions on
Speaker 12: rice imports and also on auto safety standards. So these
Speaker 12: are meaningful deals in a sense, and the deal with
Speaker 12: Japan was the most substantial negotiated yet in terms of
Speaker 12: trade volume.
Speaker 3: In your view, does it seem like the deal with
Speaker 3: Japan is better for Japan or better for the United States?
Speaker 12: It represents a compromise on both sides. Japan's initial position
Speaker 12: was that it wanted the removal of all US triffs,
Speaker 12: which of course it did not receive. But a key
Speaker 12: issue for Japan was the tariffs on automobiles, which were
Speaker 12: at twenty five percent from earlier in the year. So
Speaker 12: Japan received a reduction to fifteen percent on autos. It
Speaker 12: also received an overall reduction from the proposed twenty five
Speaker 12: percent reciprocal terifts to fifteen percent, so that is a
Speaker 12: substantial improvement over the initial conditions Japan was facing. It's
Speaker 12: also the lowest reciprocal teriff rate that's been negotiated to
Speaker 12: date with a country that's running a trade surplus with
Speaker 12: the US. Make no mistake of fifteen percent tariffs are
Speaker 12: still a significant blow for the Japanese economy. So you know,
Speaker 12: things were given and things were gained on both sides.
Speaker 7: Hey, you know, there was a Bloomberg story Christie out
Speaker 7: this morning and included a quote from trin you and
Speaker 7: senior economists for Emerging Asia at New Texas, and she said,
Speaker 7: we live in a new normal where ten percent is
Speaker 7: the new zero, and so fifteen percent and twenty percent
Speaker 7: doesn't seem so bad if everyone else got it.
Speaker 5: And she's talking, of course, about teriff levels.
Speaker 7: She went on to say that at fifteen to twenty
Speaker 7: percent tariff level, it's still profitable for US companies to
Speaker 7: import from abroad rather than produce similar goods at home.
Speaker 7: So wait a minute, I thought these trade deals were
Speaker 7: about bringing back manufacturing and supply chains to the US
Speaker 7: and investment back to the US.
Speaker 5: Is that going to really happen?
Speaker 12: Well, on your initial point, it is true that the
Speaker 12: Trump administration has managed to reset people's perspectives on what
Speaker 12: constitutes reasonable tariffs. So you know, what we see with Japan,
Speaker 12: for example, would have been considered horrific. And the minimum
Speaker 12: one percent that seems to be on the table is
Speaker 12: also shocking. By previous standards, But it is true that
Speaker 12: in the longer term, it's still up in the air
Speaker 12: whether these tariffs will really achieve the goal of bringing
Speaker 12: investment and jobs back to the US in a substantial way.
Speaker 12: These tariffs are not necessarily the best tools to do that,
Speaker 12: and it also is very difficult to predict how companies
Speaker 12: and others will react to them, So we can only
Speaker 12: really see the short term consequences in terms of rising
Speaker 12: prices for consumers and also the revenue that it will
Speaker 12: generate in the short term, But companies and others will
Speaker 12: adjust in unpredictable ways, and it won't necessarily mean that
Speaker 12: they will come back to the US.
Speaker 3: The President has talked about trade deals and economies opening
Speaker 3: up to the United States, and in your view, was
Speaker 3: the Japanese economy closed to the United States? I mean,
Speaker 3: certainly from an automaker perspective. It's been a few years
Speaker 3: since I've been in Japan, but I didn't see any
Speaker 3: American cars on the roads of Japan. They were all
Speaker 3: Andanese cars there. But has the market been closed to
Speaker 3: the US?
Speaker 5: In general?
Speaker 12: Tariff barriers in Japan are not significant. Japan has had
Speaker 12: open trade with the US for a long time. But
Speaker 12: you're correct that on sensitive products like agriculture, there have
Speaker 12: always been high tariffs. That's not unique to Japan. So
Speaker 12: rice did become a significant issue in the negotiations. On
Speaker 12: auto's the main issue there is more complicated. So the
Speaker 12: concession that was given in the agreement related to auto
Speaker 12: safety standards, which have long been perceived to be a
Speaker 12: non tariff barrier that have made it more difficult for
Speaker 12: US automakers to sell in Japan because they have to
Speaker 12: meet different safety standards. But there are a host of
Speaker 12: market factors that make US cars less competitive in Japan
Speaker 12: that won't necessarily be addressed by these changes. So you know,
Speaker 12: there are areas, in short where Japan's market has been
Speaker 12: rather closed. But on the whole, you know, companies face
Speaker 12: relatively open conditions on a relatively free and fair playing field.
Speaker 7: We've seen some reports about the EU seem to be
Speaker 7: maybe working getting closer to a deal with the United States.
Speaker 5: We've got China next week.
Speaker 7: Just to wrap up, just remind everyone why having trade
Speaker 7: deals with these big trading partners is important for the
Speaker 7: US economy and the US overall.
Speaker 11: Well.
Speaker 12: From the perspective of the Trump administration. The issue is
Speaker 12: that these countries are running trade surpluses, so they are
Speaker 12: seen as a negotiating a tool in that sense. Overall,
Speaker 12: these are our major trading partners in the US, and
Speaker 12: so the trade volumes that are going through are significant
Speaker 12: to the economy. It's important that these relationships are maintained.
Speaker 12: It's important that, from the administration's perspective, they be rebalanced
Speaker 12: in various ways. So, you know, getting these deals ahead
Speaker 12: of the August one deadline minimizes disruptions to markets and
Speaker 12: to companies' activities, so it's important that they move forward.
Speaker 7: Yep, we can cross a big, big uncertainty off our
Speaker 7: list here, no doubt about it.
Speaker 5: Thank you so much. Christie Senior Advisor in Japan.
Speaker 7: Chair at CSIS, the Center for Strategic and International Studies,
Speaker 7: joining us from the nation's capital.
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