WEBVTT - Tesla’s Sales Fall Most in a Decade, Alphabet Boosts Guidance for 2025 Spending 0:00:02.520 --> 0:00:07.040 Bloomberg Audio Studios, Podcasts, radio news. 0:00:08.920 --> 0:00:13.240 This is Bloomberg Business Week Daily reporting from the magazine 0:00:13.240 --> 0:00:17.880 that helps global leaders stay ahead with insight on the people, companies, 0:00:17.920 --> 0:00:22.800 and trends shaping today's complex economy. Plus global business finance 0:00:22.840 --> 0:00:26.160 and tech news as it happens. The Bloomberg Business Week 0:00:26.239 --> 0:00:31.600 Daily Podcast with Carol Masser and Tim Stenebek on Bloomberg Radio. 0:00:32.120 --> 0:00:35.519 Tesla said it's moving forward with its robotaxiing affordable vehicle 0:00:35.560 --> 0:00:38.479 plans while reporting second quarter earnings that fell short of 0:00:38.560 --> 0:00:41.640 Wall Street's estimates of justin earnings forty cents per share 0:00:41.680 --> 0:00:44.720 that was just below the average analyst estimate. Revenue fell 0:00:44.760 --> 0:00:47.240 twelve percent to twenty two and a half billion dollars 0:00:47.240 --> 0:00:50.080 that was also lower than expectations and the sharpest decline 0:00:50.120 --> 0:00:52.880 in at least a decade. Gross margin, which is a 0:00:52.920 --> 0:00:57.800 measure of profitability, was higher than anticipated. Right Now shares 0:00:57.840 --> 0:01:01.120 down about six tenths of one percent, and Tesla did 0:01:01.120 --> 0:01:02.880 say many of its key in issaiess remain on track. 0:01:02.960 --> 0:01:07.759 Quote despite a sustained uncertain macroeconomic environment resulting from shifting tariffs, 0:01:08.120 --> 0:01:12.120 unclear impacts and changes to fiscal policy, and a political sentiment. 0:01:12.480 --> 0:01:15.199 Let's bring in a Bloomberg Intelligence Global Autos and Industrials 0:01:15.280 --> 0:01:19.040 research manager Steve Mann joining us once again from New Jersey. 0:01:19.120 --> 0:01:22.280 You gave us a great preview earlier in the afternoon. 0:01:22.319 --> 0:01:26.360 Now we have the numbers. Anything surprise you, Yeah. 0:01:26.200 --> 0:01:28.800 I think if you look at the stocks down after 0:01:29.760 --> 0:01:33.160 hours a bit, I think I think the most important 0:01:33.200 --> 0:01:37.400 thing there is they haven't given us enough visibility into 0:01:37.440 --> 0:01:40.240 the future what their outlook is going to be. I mean, 0:01:40.280 --> 0:01:43.240 the numbers they miss consensus. But if you kind of 0:01:43.400 --> 0:01:46.280 dig into a little bit more and look under the cover, 0:01:46.720 --> 0:01:51.360 it's actually not bad. If you look at automotive gross 0:01:51.360 --> 0:01:55.400 margin excluding credits, it's actually fifteen percent better than the 0:01:55.480 --> 0:01:57.440 last quarter of twelve and a half and better than 0:01:57.480 --> 0:02:01.880 consensus estimates. And then if you look at free cash flow, 0:02:01.960 --> 0:02:05.000 the reason why it's down versus the first quarter is 0:02:05.040 --> 0:02:09.320 because they spend an extra nine hundred million on capex, 0:02:09.400 --> 0:02:11.720 which is not a bad thing given that there's they're 0:02:11.760 --> 0:02:15.600 launching the cheaper model and the cyber cap So if 0:02:15.600 --> 0:02:19.880 you exclude that nine million of additional cap backs, their 0:02:19.919 --> 0:02:22.520 free cash flow is actually over a billion, more than 0:02:22.560 --> 0:02:25.000 six hundred and sixty million. In the first quarter. 0:02:26.000 --> 0:02:27.639 So that's good. 0:02:29.320 --> 0:02:32.840 That's good. I mean spending cap bacs given you know 0:02:32.880 --> 0:02:36.440 what their product launches are is not a bad thing. 0:02:36.480 --> 0:02:40.920 They're investing into the future. And look, they're also expanding internationally, 0:02:41.040 --> 0:02:44.000 right they have. You know, we've seen over the quarter 0:02:44.840 --> 0:02:49.680 improvement higher sales in South Korea, they announced entry into 0:02:49.919 --> 0:02:53.320 into India, and then they're launching the extended version of 0:02:53.320 --> 0:02:57.239 the Model Y in China. So it's a good thing. 0:02:57.320 --> 0:03:00.200 But look, we do want to hear what you on 0:03:00.320 --> 0:03:03.240 US has to say, uh, in terms of not just 0:03:03.320 --> 0:03:06.520 the robotaxi, but you know, how how are they going 0:03:06.600 --> 0:03:09.240 to face ahead when the challenges we were seeing the 0:03:09.360 --> 0:03:12.320 US market, which is critical. It's it's their one of 0:03:12.400 --> 0:03:16.680 the largest market uh in in their portfolio. So we'll 0:03:17.080 --> 0:03:20.120 we'll have to hear more, uh on the on the call. 0:03:20.320 --> 0:03:23.840 How do you think Tesla's robotaxi stands up to the 0:03:23.919 --> 0:03:26.880 other autonomous vehicle solutions that are out there right now, 0:03:27.000 --> 0:03:27.880 namely Wemo. 0:03:29.280 --> 0:03:33.840 Well, I think the market can be very big, especially 0:03:33.880 --> 0:03:37.720 in the US if we're not talking internationally, Uh, there's 0:03:37.760 --> 0:03:42.960 definitely room for multiple players. Uh. You know, my perspective 0:03:43.080 --> 0:03:45.360 is that you know, Tesla is using an all camera 0:03:45.480 --> 0:03:51.440 system that actually is gives them a greater flexibility and 0:03:51.640 --> 0:03:54.720 greater scalability with with that system. 0:03:55.040 --> 0:03:55.360 Uh. 0:03:55.600 --> 0:03:59.840 Weimo and others use a combination of radars lied on 0:04:00.440 --> 0:04:05.760 and camera system. Cameras just are just cheaper right to build, 0:04:06.360 --> 0:04:08.960 and uh, you know, and and so it's a lot 0:04:09.200 --> 0:04:14.480 easier to scale, cheaper to scale for Tesla. So but 0:04:14.680 --> 0:04:17.520 then again, I think the market's big enough. I think 0:04:17.560 --> 0:04:20.160 there's going to be users that want in all camera system. 0:04:20.480 --> 0:04:23.160 I think there's going to be users that don't feel 0:04:23.200 --> 0:04:27.520 comfortable with that and want the redundancy redundancy of lie doars. 0:04:27.680 --> 0:04:31.120 So you know, for example, Uber is partnering with Weimo. 0:04:32.440 --> 0:04:34.760 So I kind of go back to wait, all right, 0:04:34.800 --> 0:04:36.720 So I'm looking at the FA function on the Bloomberg 0:04:36.760 --> 0:04:39.480 and we just talked about free cash flow, and so 0:04:39.839 --> 0:04:42.080 it's one hundred and forty six million dollars versus six 0:04:42.160 --> 0:04:44.960 hundred and sixty four million in the first quarter of 0:04:45.040 --> 0:04:48.160 twenty twenty five, as our live blog says, dropping eighty 0:04:48.240 --> 0:04:50.040 nine percent. And I know what you're saying about, it's 0:04:50.040 --> 0:04:53.120 good that they're spending for the future, right because you said. 0:04:52.920 --> 0:04:54.960 To us earlier that the best way to get to. 0:04:54.920 --> 0:04:59.160 That one point fifty six million unit delivery for the year, right, 0:04:59.200 --> 0:05:01.760 that's the concessus estimate is that they've got to launch 0:05:01.800 --> 0:05:04.359 that cheaper vehicle, right, so they've got to bring stuff out. 0:05:04.600 --> 0:05:07.800 Do we have to be worried though about that low 0:05:07.880 --> 0:05:09.800 number or they're they're going to be fine. 0:05:11.360 --> 0:05:15.760 Well, it's uh, I mean, it's it's technical, right, It's 0:05:15.760 --> 0:05:19.720 that if free cash flow is overbuilain obviously the more 0:05:19.760 --> 0:05:22.839 the better it is. Down Yeah, it's you know, compared 0:05:22.920 --> 0:05:26.880 to a year ago, two years ago. But look like 0:05:27.360 --> 0:05:29.120 if you look at the model Y, if you look 0:05:29.160 --> 0:05:31.960 at the gross margin, you know, excluding credits, it is 0:05:32.080 --> 0:05:35.719 up right, that actually tells you that, uh, you know, 0:05:35.800 --> 0:05:39.440 the new vehicle is likely the model new model why 0:05:39.520 --> 0:05:42.600 is likely built. They're able to build at lower cost. 0:05:43.360 --> 0:05:45.400 The issue is, like I said in the preview, is 0:05:45.400 --> 0:05:46.799 they just don't have enough volume. 0:05:47.040 --> 0:05:47.400 Yeah. 0:05:47.480 --> 0:05:52.599 So so if if they can expand volume with the 0:05:52.839 --> 0:05:55.880 with the existing model Y, not just in the US 0:05:55.920 --> 0:05:59.880 but in the international markets and as well as introduced 0:05:59.880 --> 0:06:03.279 to cheaper model which is supposed to build to be 0:06:03.360 --> 0:06:06.800 built within the existing capacity, you know, there could be 0:06:06.839 --> 0:06:09.800 a lot upside, right in terms of margin in terms 0:06:09.800 --> 0:06:13.320 of free cash flow. So uh, you know, it's really 0:06:13.600 --> 0:06:16.279 execution at the moment, and that's what we want to 0:06:16.279 --> 0:06:19.640 hear from Elon Musk. You know, how where where is 0:06:19.680 --> 0:06:22.360 the second Where is the cheaper model? They said, it's 0:06:22.400 --> 0:06:25.840 actually they said the production has started. Initial production has 0:06:25.880 --> 0:06:28.159 started in June, but you know it could take some 0:06:28.200 --> 0:06:29.880 time right before they launch and I have to get 0:06:29.920 --> 0:06:32.440 all the kinks out. But you know, you want to 0:06:32.440 --> 0:06:35.600 hear about India. India is a huge market, right and 0:06:36.279 --> 0:06:41.640 where they taking India? Uh, you know, definitely Robotaxi is 0:06:41.680 --> 0:06:44.159 an important and then the cyber cap. You know, we 0:06:44.200 --> 0:06:44.920 need a little bit. 0:06:44.839 --> 0:06:47.320 More details, all right, details is certainly near. 0:06:47.279 --> 0:06:50.039 Term details, near term details. 0:06:50.080 --> 0:06:53.360 All right, great setup, Steve Man, thank you so much. 0:06:53.680 --> 0:06:55.400 We're going to look forward to reading your research in 0:06:55.440 --> 0:06:58.920 the after hours and certainly into tomorrow's trade. Deeman Bloomberg 0:06:58.960 --> 0:07:02.480 Intelligence Global Auto an Industrials research manager, joining us from 0:07:02.520 --> 0:07:04.400 BI headquarters in Princeton, New Jersey. 0:07:04.520 --> 0:07:07.159 I want to go right now and bring in Ross Gerber. 0:07:07.279 --> 0:07:11.400 He's president's CEO of Gerber Kawasaki Wealth and Investment Management. 0:07:11.600 --> 0:07:13.120 As at the end of last year, had about three 0:07:13.120 --> 0:07:16.520 point four billion dollars in assets under management. Long time 0:07:17.000 --> 0:07:21.920 outspoken Tesla bull more recently expressing concerns about the company, 0:07:21.960 --> 0:07:24.600 as he did three months ago after the last quarter 0:07:24.760 --> 0:07:28.520 report earnings report. According to the Bloomberg terminal, gerber Kawasaki 0:07:28.600 --> 0:07:34.200 still owns about seventy eight million dollars worth of Tesla stock. Ross, 0:07:34.240 --> 0:07:37.040 good to have you with us this afternoon. What have 0:07:37.080 --> 0:07:39.400 you been doing to your Tesla position over the last quarter? 0:07:39.440 --> 0:07:41.640 Just before we get your take on the numbers. 0:07:42.320 --> 0:07:45.560 You know, we've been selling for years and I continue 0:07:45.600 --> 0:07:48.000 to sell. I you know, we have so much stock, 0:07:48.040 --> 0:07:50.040 and we have a lot of clients that really believe 0:07:50.040 --> 0:07:53.640 in the Tesla story, and we've kept some stock obviously 0:07:53.680 --> 0:07:57.480 in our portfolios, but in my ETF, I'm out of Tesla, 0:07:57.560 --> 0:08:02.120 completely out of my GK. And it's mostly because the 0:08:02.160 --> 0:08:06.440 business is declining, and these earning results continue to show 0:08:06.480 --> 0:08:10.160 that the business continues to decline and in some kind 0:08:10.200 --> 0:08:14.000 of troubling ways. So as much as the previous guest 0:08:14.280 --> 0:08:17.280 is bullish on many of these things that Elon talks about, 0:08:17.640 --> 0:08:20.200 nobody wants to talk about the truth that nobody wants 0:08:20.240 --> 0:08:24.280 to buy Elon's products, like until that gets addressed there's 0:08:24.320 --> 0:08:27.080 a huge elephant in the room that nobody seems to 0:08:27.080 --> 0:08:29.920 want to point at because it's Elon. So he's the 0:08:29.920 --> 0:08:33.160 innovator behind all of the things that are great about Tesla, 0:08:33.240 --> 0:08:36.640 but he's also the sort of villain that's created so 0:08:36.720 --> 0:08:39.720 much animosity around him that nobody wants to buy his products. 0:08:39.760 --> 0:08:42.480 We've had a great cover story by the team of 0:08:42.520 --> 0:08:45.280 Max Chafkin and Ed Ludlow in Bloomberg business Week the 0:08:45.320 --> 0:08:48.480 new issue coming out, the August issue. It'll soon be 0:08:48.480 --> 0:08:50.800 on newstands, it's already on the Bloomberg But you know, 0:08:51.000 --> 0:08:54.240 the whole idea ross as you know, since you understand 0:08:54.360 --> 0:08:57.360 this guy, this company so well, you never kind of 0:08:57.400 --> 0:09:01.240 count Elon out, And so I wonder, you know, if 0:09:01.240 --> 0:09:04.160 he does get it right, if he maybe, I don't know, 0:09:04.200 --> 0:09:08.199 We'll see what happens in terms of his involvement in politics, 0:09:08.240 --> 0:09:10.200 because it does seem like he still wants to stay 0:09:10.360 --> 0:09:14.840 according to the SpaceX filing. But I mean there is 0:09:14.880 --> 0:09:18.240 always that caveat when it comes to Elon right that 0:09:18.559 --> 0:09:21.560 he sometimes pulls it out, or he often pulls it out. 0:09:22.960 --> 0:09:24.880 Yeah, And I think that's been true in the past, 0:09:24.920 --> 0:09:27.679 and I'm very grateful that he pulled it out five 0:09:27.760 --> 0:09:30.880 years ago when it really mattered and Tesla was almost 0:09:31.080 --> 0:09:33.199 on the verge of bankruptcy, and it has become a 0:09:33.320 --> 0:09:35.840 very successful company. But it doesn't mean he's going to 0:09:35.840 --> 0:09:39.160 do it again. And this idea that you know, these 0:09:39.280 --> 0:09:43.640 kind of entrepreneur rock star people don't fall is actually 0:09:44.280 --> 0:09:47.080 is not true. In fact, it's very common to what 0:09:47.120 --> 0:09:49.080 we call the rise in fall story. That's all the 0:09:49.120 --> 0:09:52.360 stories you see on Netflix and the documentaries, So you know, 0:09:53.000 --> 0:09:56.319 this might be a rise in fall story, and things 0:09:56.360 --> 0:09:59.920 don't rise forever, per se. And I always remind people. 0:10:00.520 --> 0:10:03.679 I don't think most people even know who invented the television, 0:10:03.679 --> 0:10:06.400 but the television was invented in the United States by 0:10:06.400 --> 0:10:09.320 a company called RCA, which was like the hottest stock 0:10:09.400 --> 0:10:11.800 of the fifties. Well, how many TVs are made in 0:10:11.800 --> 0:10:14.719 the United States today And the answer is zero. So 0:10:15.120 --> 0:10:17.560 the very same thing could happen in the ev business. 0:10:18.200 --> 0:10:21.800 But that said, Elon can fix the company. It's solely 0:10:21.840 --> 0:10:24.760 broken because of him. He can certainly fix the company 0:10:24.800 --> 0:10:28.120 if he wants to do what's necessary to improve his image. 0:10:28.200 --> 0:10:31.240 And in a year people forget and Tesla might be back. 0:10:31.280 --> 0:10:34.880 But he just doesn't seem to care about fixing his image, 0:10:34.880 --> 0:10:39.240 and he doesn't seem to be an understanding the responsibility 0:10:39.480 --> 0:10:42.160 goes to him on why sales are down so. 0:10:42.200 --> 0:10:44.800 Much, So why even have any Tesla stock right now? 0:10:46.360 --> 0:10:49.440 I think the reason I hold personally still some Tesla 0:10:49.440 --> 0:10:51.560 stock is for the same hope that we all have 0:10:51.720 --> 0:10:54.960 that they are definitely focused on a future, and especially 0:10:55.000 --> 0:10:59.240 for me a climate activist, you know, it's a green 0:10:59.360 --> 0:11:03.160 future that I'm pushing and Tesla still is the leader 0:11:03.400 --> 0:11:07.120 in green you know, transportation and energy, and I think 0:11:07.240 --> 0:11:11.120 it's an incredibly important company to succeed. Hence why I'm 0:11:11.160 --> 0:11:13.720 out here banging on elon all the time. It's not 0:11:14.160 --> 0:11:16.080 you know, for any other reason than wanting to see 0:11:16.120 --> 0:11:20.600 Tesla succeed because it's crucially important to climate change. But 0:11:21.120 --> 0:11:25.040 this robotaxi business is not crucially important to anybody. So, 0:11:25.520 --> 0:11:28.520 you know, I think Tesla's main business is selling evs 0:11:28.679 --> 0:11:31.840 that and energy storage, and they should be focused on 0:11:32.040 --> 0:11:34.520 repairing that main business. And I think there are other 0:11:34.559 --> 0:11:37.240 future end of ours are interesting and that's why it's 0:11:37.280 --> 0:11:39.240 a reason to hold the stock. But it also trades 0:11:39.400 --> 0:11:42.400 at one hundred and fifty times earnings that are going down, okay, 0:11:42.400 --> 0:11:44.760 and so you know you have to weigh that too. 0:11:45.160 --> 0:11:47.360 In the past, you've talked about how nice it is 0:11:47.400 --> 0:11:49.720 to drive a Rivian, for example. Are you willing to 0:11:50.600 --> 0:11:53.520 now invest in any other EV company that you've turned 0:11:53.520 --> 0:11:55.079 on Tesla? 0:11:55.280 --> 0:11:55.400 No. 0:11:56.000 --> 0:11:57.560 You know, I've lost a lot of money and EV 0:11:57.679 --> 0:12:00.800 businesses over the last five years that I've hoped would 0:12:00.800 --> 0:12:05.520 succeed in, including Rivian and many others, And unfortunately, many 0:12:05.520 --> 0:12:08.600 of the EV operators are now having all the incentives 0:12:08.600 --> 0:12:11.720 taken away from them as well as traditional car companies 0:12:11.760 --> 0:12:14.560 along with tariffs and everything else. It's just really a 0:12:14.640 --> 0:12:17.480 horrible setup to be a car company. The car company 0:12:17.480 --> 0:12:20.960 we own is Ferrari actually, which has no problem selling 0:12:21.000 --> 0:12:24.040 their cars at forty percent margins that make Tesla look 0:12:24.120 --> 0:12:28.160 like chump change. So you know, truthfully, it's just a 0:12:28.240 --> 0:12:30.440 tough to be in a global auto business on a 0:12:30.480 --> 0:12:33.640 great day, let alone with Trump as president. So it's 0:12:33.640 --> 0:12:35.960 a very tough time for the businesses, and I'm just 0:12:36.000 --> 0:12:39.040 not recommending that right now. Versus a stock like train 0:12:39.160 --> 0:12:44.240 technology that makes you know, clean energy air conditioning units, 0:12:44.360 --> 0:12:47.280 where the demand for air conditioning is off the charts, 0:12:47.320 --> 0:12:49.960 and that's been a wonderful green energy investment along with 0:12:50.000 --> 0:12:54.040 ge Vernova, which we also own. That's been a wonderful 0:12:54.040 --> 0:12:56.000 green energy investment. But it's not EV's. 0:12:56.160 --> 0:12:58.199 Hey, listen, I do want to go back to We've 0:12:58.240 --> 0:13:01.680 got the Tesla live blog going on and just tracking 0:13:01.679 --> 0:13:03.719 everything that's coming out of the earnings. Are down a 0:13:03.840 --> 0:13:07.400 Hull who covers Tesla and Elon, says Page twelve of 0:13:07.440 --> 0:13:12.199 the shareholder deck shows the Tesla ecosystem, which includes optimists. 0:13:12.200 --> 0:13:15.200 We know, the robot pushing a baby stroller, you know, 0:13:15.520 --> 0:13:17.880 you know ross When it comes to Tesla and the 0:13:17.920 --> 0:13:20.959 world of Elon, there are so many different moving parts. 0:13:21.000 --> 0:13:25.440 There's you know, the shining beacon of SpaceX right that 0:13:25.440 --> 0:13:28.199 that's a really great business. There's all the AI stuff 0:13:28.240 --> 0:13:31.600 that's going on. There's so many different moving pieces. What 0:13:31.760 --> 0:13:33.880 else do you want to know maybe on the call 0:13:33.960 --> 0:13:36.800 today about you know, from the Elon universe. 0:13:38.360 --> 0:13:40.520 Well, I think the most important thing in my mind 0:13:40.559 --> 0:13:43.679 that has the biggest opportunity to help Tesla is this 0:13:43.760 --> 0:13:47.200 low cost vehicle they keep talking about. They have so 0:13:47.360 --> 0:13:51.240 much excess capacity in their factories now because they're not 0:13:51.280 --> 0:13:54.559 selling more cars that they need a new vehicle. And 0:13:55.080 --> 0:13:58.679 also for addressing other markets, whether it be India, China 0:13:58.720 --> 0:14:02.840 and Europe. You need a small vehicle that's inexpensive to 0:14:02.880 --> 0:14:07.160 compete against the other EV players and regular traditional car companies. 0:14:07.360 --> 0:14:09.880 And they need to do this now, and the sooner 0:14:09.920 --> 0:14:12.719 they do this, the better, And that's the most important thing. 0:14:12.920 --> 0:14:14.679 I know. We like to talk about the day a 0:14:14.800 --> 0:14:17.760 robot is pushing my kid around in a stroller. That 0:14:17.880 --> 0:14:20.520 day is long in the tooth from coming. Nor does 0:14:20.560 --> 0:14:23.840 anybody in the world would trust some big robot made 0:14:23.840 --> 0:14:26.640 by Elon Musk. Yeah, when I get out of that fantasy, 0:14:26.720 --> 0:14:27.400 you know, Well, I was. 0:14:27.360 --> 0:14:28.680 Just going to say when I'm on my deathbed, I 0:14:28.720 --> 0:14:30.160 know I'm not going to say, wish I spent less 0:14:30.160 --> 0:14:32.840 time pushing my kid's stroller and had robots do it instead. 0:14:33.400 --> 0:14:35.160 The dishes I want done, not less. 0:14:34.920 --> 0:14:36.360 Time with my kids. Laundry done. 0:14:36.440 --> 0:14:38.600 Yeah, the dishes, But I don't know my wife actually 0:14:38.680 --> 0:14:40.520 likes doing the dishes, so I don't know. 0:14:41.960 --> 0:14:43.760 Tell her to ask her what her secret is. I 0:14:43.760 --> 0:14:45.360 would love to know. Hey, Rob, I don't know she 0:14:46.280 --> 0:14:46.560 likes it. 0:14:47.920 --> 0:14:51.120 Rus Gerber always appreciate you finding time for us. 0:14:51.480 --> 0:14:53.680 We got to run right now. Shares of Tesla just 0:14:53.680 --> 0:14:55.080 down about six tens of a percent. 0:14:55.640 --> 0:14:59.600 You're listening to the Bloomberg Business Weekdaily Podcast. Catch us 0:14:59.680 --> 0:15:03.160 live weekday afternoons from two to five pm Eastern. Listen 0:15:03.160 --> 0:15:06.760 on Applecarplay and Android Auto with the Bloomberg Business app, 0:15:06.880 --> 0:15:08.720 or watch us live on YouTube. 0:15:09.640 --> 0:15:12.720 We do want to bring in to the conversation Brett Thill, 0:15:12.800 --> 0:15:15.920 he's senior technology research out and said Jeffries, he's got 0:15:15.920 --> 0:15:18.440 a buy rating on Alphabet. He's got a hold rating 0:15:18.480 --> 0:15:22.000 on IBM, which also is that with their results and 0:15:22.080 --> 0:15:24.040 we are seeing that that stock. Let me just bring 0:15:24.080 --> 0:15:27.000 it up real quickly on the Bloomberg shares of IBM 0:15:27.080 --> 0:15:29.160 or down about four point four percent, so we're both 0:15:29.680 --> 0:15:31.960 seeing some movement there and right now Alphabet down one. 0:15:31.840 --> 0:15:32.600 Point two percent. 0:15:32.880 --> 0:15:35.520 Hey Brent, good to have you here to the conversation 0:15:35.800 --> 0:15:39.040 with Tim Mandeep and myself. Your take on what we 0:15:39.080 --> 0:15:40.840 got from Alphabet, Yeah, I. 0:15:40.760 --> 0:15:43.160 Mean it was pretty in line. I don't think there 0:15:43.200 --> 0:15:46.440 was any big fireworks. You know, you had a bigger 0:15:46.520 --> 0:15:49.800 capex number was about four and app billion higher, which 0:15:49.840 --> 0:15:52.880 is a sign of investing in AI. They raised capex 0:15:52.920 --> 0:15:55.760 by ten bill which again everyone knows it's going to 0:15:55.800 --> 0:15:59.840 AI and so I think everyone likes that that they're 0:16:00.080 --> 0:16:03.080 spending to keep pace, but obviously it's having a drag 0:16:03.160 --> 0:16:05.840 on the margin. So the margin last course about forty percent, 0:16:06.400 --> 0:16:08.600 they're at thirty eight point three percent, so a little 0:16:08.600 --> 0:16:11.440 bit of a drag on the margin on the downside, 0:16:11.480 --> 0:16:14.320 and then you know, just magnitude of upside just you know, 0:16:14.480 --> 0:16:15.760 not a lot, and they don't give you a lot 0:16:15.800 --> 0:16:18.720 of color what they're doing. So I think, you know, look, 0:16:18.760 --> 0:16:22.160 this has been the worst sentiment of any name I 0:16:22.200 --> 0:16:25.600 cover an internet. Our investors are not bought in everyone 0:16:25.760 --> 0:16:29.200 starting their search, which actually BT and perplexity first be 0:16:29.320 --> 0:16:31.480 stelling up in Google, and so the big question is 0:16:31.560 --> 0:16:34.520 ultimately where are they going to end up in this 0:16:34.720 --> 0:16:37.160 in this AI race, And many of the advertisers are 0:16:37.600 --> 0:16:42.480 talking about the transition with AI overview and what they're 0:16:42.520 --> 0:16:45.320 going through that it's more expensive and they're getting a 0:16:45.360 --> 0:16:51.080 better impact from it. But it's still early. So you know, overall, 0:16:51.120 --> 0:16:55.800 Cloud you know was did well. YouTube was thirteen percent growth, 0:16:55.800 --> 0:16:57.960 it was ten last course, accelerated a bit off an 0:16:57.960 --> 0:17:03.240 easy comp and so yeah, I think it's just basic 0:17:03.840 --> 0:17:07.800 kind of quarter, nothing really exciting that The challenge right 0:17:07.840 --> 0:17:10.560 now is investors just don't believe. You know, any investor 0:17:10.640 --> 0:17:13.080 I talked to is like, I need to be underweight 0:17:13.160 --> 0:17:15.679 Google because I just don't believe they're going to make 0:17:15.680 --> 0:17:16.280 this transition. 0:17:16.359 --> 0:17:18.399 We'll make the case for us, make the case for 0:17:18.480 --> 0:17:20.000 us that you think they will make the transition. 0:17:21.119 --> 0:17:23.920 Well, the case for the transition is that you need 0:17:23.960 --> 0:17:27.640 three things for AI. You need data, users, and capital. 0:17:27.920 --> 0:17:31.160 And they have more data and more users than anyone 0:17:31.160 --> 0:17:35.359 in the world. So if like I've always said this, 0:17:35.520 --> 0:17:37.520 like I think this is like pulling up to a 0:17:37.560 --> 0:17:39.840 stoplight and you look right and it's like a tiny 0:17:39.880 --> 0:17:41.439 little car and you might be in a car that 0:17:41.480 --> 0:17:43.080 you think is faster, and then the car on the 0:17:43.119 --> 0:17:44.840 right just takes off and you're like, wow, I didn't 0:17:44.840 --> 0:17:47.160 realize that was underneath the hood or where the muscle 0:17:47.240 --> 0:17:47.560 come from. 0:17:47.560 --> 0:17:47.800 There. 0:17:48.359 --> 0:17:50.760 They have a lot more AI muscle under the hood 0:17:50.840 --> 0:17:55.359 than they're showing. They're terrible communicators, they're not good with investors. 0:17:55.520 --> 0:17:58.080 They don't give you guidance, they don't go on the road, 0:17:58.240 --> 0:18:01.520 they don't spend time with investors, like Nvidia, like Microsoft, 0:18:01.600 --> 0:18:04.359 like the Rust, and so investors are just like, look, 0:18:04.359 --> 0:18:06.520 they gave me the earnings call, four times a year, 0:18:06.520 --> 0:18:08.679 and that's about it, and then the filing and that 0:18:08.760 --> 0:18:10.760 there's nothing in it, and then I'm left to guess. 0:18:11.040 --> 0:18:13.280 So every investor has to do their own work, and 0:18:13.280 --> 0:18:15.840 we're all doing our own work. Your day starts in 0:18:15.920 --> 0:18:18.959 chat abt and Perplexiti. It's not and it was starting 0:18:19.000 --> 0:18:22.240 in Google maybe a year ago. There's alternatives. So I 0:18:22.240 --> 0:18:24.680 think this is the same thing we're seeing with Adobe, 0:18:24.720 --> 0:18:28.239 with Salesforce, other names we cover in tech. Is a 0:18:28.280 --> 0:18:33.240 new crop of AI stories going to effectively, not necessarily replace, 0:18:33.400 --> 0:18:36.960 but become the central spot where you start your your 0:18:37.280 --> 0:18:40.560 your your search. And I don't think that you know 0:18:41.040 --> 0:18:43.320 that that that boogeyman is going to go away for 0:18:43.359 --> 0:18:47.199 a while. So you know again, I think you know 0:18:47.280 --> 0:18:51.360 stocks underperformed has done nothing. You look at the IGV 0:18:51.560 --> 0:18:54.320 the software next, It's up twelve percent. Google's flat. 0:18:54.400 --> 0:18:55.360 You look at the. 0:18:55.320 --> 0:18:57.959 Other index, the SMH, the Internet of Index, it's You're 0:18:58.040 --> 0:18:58.960 up eighteen percent year. 0:18:58.920 --> 0:19:00.560 Date, Google's flat. 0:19:00.680 --> 0:19:03.000 I mean, there's literally been way better ways to make money, 0:19:03.000 --> 0:19:06.520 whether it's DoorDash. When you look at what's going on 0:19:06.560 --> 0:19:09.520 in meta, and we hear this from advertisers. Advertisers are 0:19:09.560 --> 0:19:13.080 obsessed with what Meta is doing in AI, and so 0:19:13.320 --> 0:19:18.159 again I'm not super super bearish or on Google, but 0:19:18.200 --> 0:19:20.320 I think what we're seeing are the facts of the facts, 0:19:20.359 --> 0:19:23.760 which is it's really hard to change the narrative and 0:19:23.800 --> 0:19:25.280 they're going to have to make a change in their 0:19:25.320 --> 0:19:29.040 own behavior, and the numbers and then the adoption rate, 0:19:29.680 --> 0:19:32.800 and so that again we're never going to rule them out. 0:19:32.880 --> 0:19:34.760 I think the stock's super cheap, so that's why I 0:19:34.800 --> 0:19:36.640 still have a buy in it. But I would say 0:19:36.680 --> 0:19:38.600 of all the large cap Internet names, they have the 0:19:38.600 --> 0:19:39.400 most work to do. 0:19:39.440 --> 0:19:41.159 All right, So Man Deep, come on back in are 0:19:41.160 --> 0:19:41.680 a Man Deep? 0:19:41.720 --> 0:19:44.960 Saying, globalhead of Technology research at our in house Bloomberg 0:19:45.000 --> 0:19:45.840 Intelligence Team. 0:19:45.920 --> 0:19:48.399 I mean, do you think they could do better in 0:19:48.480 --> 0:19:50.919 terms of messaging? I'm curious about your thinking. 0:19:51.040 --> 0:19:53.800 I agree with Brent on that that they are the 0:19:53.840 --> 0:19:56.560 ones who give you the least when it comes through 0:19:56.560 --> 0:19:59.880 the product pipeline and how it's going to change their business, 0:20:00.359 --> 0:20:04.520 especially given they are getting disrupted, so they could do more. 0:20:05.000 --> 0:20:06.959 But at the same time, like I said, you know, 0:20:07.119 --> 0:20:10.840 a search business that is their cash cow growing double 0:20:10.880 --> 0:20:15.040 digit is a very impressive performance. And to my mind, 0:20:15.080 --> 0:20:18.320 you know, given all the competitive threat that we talk about, 0:20:18.920 --> 0:20:23.320 they're still able to execute. And unless the search business 0:20:23.480 --> 0:20:28.320 really starts to decelerate sharply, I don't see anything in 0:20:28.359 --> 0:20:31.440 the fundamentals that has changed for Google. 0:20:31.240 --> 0:20:33.879 Is meta threat to Alphabet. 0:20:33.720 --> 0:20:36.760 No, because they're struggling with their own large anglid model. 0:20:36.800 --> 0:20:39.199 That's why they're making all the aqua hiers, so they 0:20:39.200 --> 0:20:43.280 don't have the talent. It's really Google and open Ais 0:20:43.520 --> 0:20:45.679 that are going neck and neck when it comes to 0:20:45.960 --> 0:20:48.480 the consumer side, and then you have Gottenthropic on the 0:20:48.600 --> 0:20:52.640 enterprise side. But these three dominate the large angred model 0:20:52.720 --> 0:20:53.359 race right now. 0:20:53.440 --> 0:20:55.560 Let me add that the advertisers are not saying that 0:20:55.640 --> 0:20:59.040