October 2, 2025 • 21 mins
Watch Scarlet and Paul LIVE every day on YouTube: http://bit.ly/3vTiACF.
Bloomberg Intelligence hosted by Paul Sweeney and Scarlet Fu
- Ed Ludlow, BTech Co-Anchor, discusses OpenAI completing a deal to help employees sell shares in the company at a $500 billion valuation, making it the world’s largest startup. Current and former OpenAI employees sold about $6.6 billion of stock to investors, boosting the US company’s price tag well past its previous $300 billion level.
- Craig Trudell, Bloomberg Global Autos Editor, discusses Tesla and Rivian deliveries. Tesla reported a surprise record quarter of vehicle sales as US consumers accelerated electric-car purchases before federal tax credits expired. Rivian Automotive narrowed its annual delivery guidance toward the lower end of its prior range, the latest pullback as the electric-vehicle maker grapples with the loss of consumer incentives in the US.
- Matthew Palazola, Bloomberg Intelligence, Senior Analyst, P&C Insurance, discusses Warren Buffett’s Berkshire Hathaway reaching a deal to buy Occidental Petroleum Corp.’s petrochemical business for about $9.7 billion in cash.
- Kristina Peterson, Bloomberg Food Reporter, discusses the Bloomberg Big Take story: “McDonald's Quest for 50,000 Restaurants Starts With Texas Growth.” McDonald's is embarking on a multibillion-dollar global expansion to increase its store count and revenue, after falling behind in population growth areas.
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Episode Transcript
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Speaker 1 (00:02):
Bloomberg Audio Studios, podcasts, radio news. You're listening to the
Bloomberg Intelligence Podcast. Catch us live weekdays at ten am
Eastern on Apple, Cocklay and Android Auto with the Bloomberg
Business App. Listen on demand wherever you get your podcasts,
or watch us live on YouTube.
Speaker 2 (00:23):
Another big trade happened today. I mean, the AI valuation
story just gets bigger. Every single day.
Speaker 3 (00:28):
There's a new impressive and it's because of this guy,
Ed Ludlow, Bloomberg Tech co host, joining us a live.
Speaker 2 (00:35):
Here in our Bloomberg Interactive Brokers studio. He's based in
San Francisco. We've got him on East coast here for
a little while. So, Ed, what happened?
Speaker 3 (00:42):
What's the deal that just put evaluation of five hundred
million dollars on open ASP.
Speaker 4 (00:47):
So, actually, the mechanics of it are the one of
the most interesting parts. It's a secondary or an employee tender.
In other words, if you are a existing employee or
even a former employee, you can sell your shares in
open AI. The eligibility requirements were that you held them
or you had a vesting period of two years. But
the reason I say that's interesting is that this is
(01:11):
a valuation dictated by a third party group of investors
buying those shares from employees. So the company doesn't raise
any new money, but there has to be a valuation
set because a price has to be set. And so
these investors wanted even more. They wanted like ten billion
dollars worth of employee shares. In the end they got
six point six billion dollars. So what does that tell you.
(01:33):
There's probably a load of open a employees that were like,
you know what, I'm not going to sell. I'm holding
on because if I'm at the five hundred billion dollar valuation,
you know, and there's still a corporate restructures go through,
you know, a future IPO, maybe, then then hold. So
I thought that was really fascinating. But I would just
point out that Sharin Gafari, really talented colleague of mine
(01:55):
out in San Francisco Bloomberg Newsroom. She did break this
story in August six, just the close of the round.
Speaker 5 (02:01):
Okay, So now that open ai is valued at five
hundred billion dollars, that puts it over SpaceX, which is
valued at four hundred billion. And I bring this up
because there's a common thread between open ai and SpaceX
and that is Elon Musk is part of open Ai
before leaving under some clouds.
Speaker 4 (02:19):
Yep, he has a fractious relationship specifically with some Altman,
you know, the the other founder and now CEO of
open Ai. You know what I've written a lot about
in Bloombot BusinessWeek magazine and in some of the reporting
is present day. Musk has kind of a little bit
of a chip on his shoulder. I think, well, specifically
(02:40):
about the idea that Xai, his ai company, should have
a valuation that is near to open ayes so, and
you know there's been litigation. You know, there's a public forum,
slinging match on social media between the two. Sam Altman
gets asked about it a lot. But you know, I
(03:01):
think the main thing is that remember also that Xai has,
as we've reported it sought to raise money at two
hundred million dollar valuation this year. You know, it's tides
and rising ships in that field.
Speaker 2 (03:14):
Really, so do we know who was selling here in
this round?
Speaker 6 (03:17):
No?
Speaker 4 (03:18):
I mean all I know about the eligibility rules. You know.
The one thing I've reflected on reading the story and
speaking to sources that the company is Remember in November
of twenty twenty two when Sam Outman was briefly ousted
from open ai. There was just a few hundred people
that worked there at that time. You know, so that
was three years ago and almost three years ago, and
(03:40):
now there are thousands of people that work there. So yeah,
some tenure would probably be a factor here.
Speaker 5 (03:46):
Okay, So now the world's biggest startup worth half a
trillion dollars, but open ai is not making money.
Speaker 2 (03:51):
It's not part ofable. Yeah.
Speaker 4 (03:53):
So on Monday, open ai has its dev day, its
developers day in San Francisco, and are we going? And
it's a good opportunity to ask hard questions like these.
There's a data point that's going around right now, which
is that open ai is only converting two percent of
its free users to paid subscribers. Now, that for me
(04:14):
is an interesting data point. So it's been on that
is that there's a lot of room for growth, right,
and so you know software, you know, this is core
bi analysis, right, Software is traditionally a higher margin business.
But the problem is that because of compute expenses and
op X now talent compensation, even the revenue they are
making probably ain't that high margin, is it. You know,
(04:36):
if it's all. So the big question is, Okay, if
we know that you're not really doing a lot to
convert the consumers from free to paid, what do your
enterprise business look like? And that's probably the domain where
we'll focus. Hey, when you even do a secondary or
attender with employees, you've got to put a deck together
that justifies evaluation. So those group of investors, they will
(04:58):
have seen something in the data room that would say
this is a five hundred billion dollar company. Like, of
course they would, that's how it works.
Speaker 2 (05:04):
Well, how come you don't. You haven't gotten your hands
on that deck?
Speaker 4 (05:06):
You know, a trepid reporter, you know, No, I'll be
honest about this, Like Sharena has been smashing this story.
She covers a covery so deeply. And I was on
vacation for most of August, so you know, I've not
tracked it as closely for me. You know, the big
story to focus on with open ai is the corporate restructure,
you know, from where you have a not for profit
(05:28):
board that owns the for profit company. That's going to change.
Speaker 2 (05:31):
Okay, So that's where I'm focused. Stay with us. More
from Bloomberg Intelligence coming up after this.
Speaker 1 (05:41):
You're listening to the Bloomberg Intelligence Podcast. Catch us live
weekdays at ten am Eastern on Apple, Corplay and Android
Otto with the Bloomberg Business App. Listen on demand wherever
you get your podcasts, or watch us live on YouTube.
Speaker 5 (05:55):
Let's talk a little bit about Tessa right now, because
it reported global vehicle delivery and it was a surprise
to the upside, so that means we need to bring
in Craig Trudell. He is our Global autos editor for
Bloomberg News, joining us from London right now. Craig, not
a surprise insofar as there was this expiration of the
federal tax credits for evs coming up, so people were
(06:17):
kind of rushing to make good use of those tax
credits before they went away.
Speaker 7 (06:21):
Yeah, that's exactly right. I think there was a widespread
expectation that, you know, given that the clock was ticking
on those tax credits, that we were going to see
a strong third quarter. But this this was even better
than was you know, expected by by analysts that follow
the company. I think, you know, we did get indications
as the month of September was coming to a close
(06:42):
that more and more analysts were much higher than where,
you know, where the average was the consensus, if you will,
And also I should add two just on the energy
side of the business. It was another record quarter of
energy storage product deployments. So you know that that is
still a much smaller portion of of Tesla's you know,
(07:03):
top and bottom lines, but it was a business that
you know, was growing pretty rapidly that you know, along
with the car business was struggling in the first half
of this year. So to see see that tick up
as well is another positive for the company.
Speaker 3 (07:17):
Craig, can you give us an update where we are
in the US in terms of charging capabilities? I mean,
that's I know, that's a gating issue for a lot
of people that just don't feel like there's enough charging
capacity in this country.
Speaker 2 (07:28):
Where are we now and what are some of the
goals do you think?
Speaker 7 (07:30):
Yeah, I mean, Tesla, you have to give them credit
for still being you know, really sort of ahead of
the curve in that regard and to the extent that
other manufacturers have had, you know, some progress in charging
getting getting better, it's because Tesla made this decision, you know,
not that long ago to open up its network to
other manufacturers. I think that that also is you know
(07:53):
something that you know, perhaps you know, if you look
at in hindsight, you know, maybe sort of created something
of an opening for for other carmakers that you know,
have made Tesla's life a little bit more difficult in
the US because they went from having a network that
was you know, really intuitive and easy to use, that
that was all to themselves, to opening that to others.
(08:13):
They of course, you know, that that's become something of
of a you know business for them to be able
to you know, charge non Tesla drivers for those charging sessions.
But that is you know, sort of a drop in
the bucket relative to to the car business for them.
Speaker 2 (08:32):
Stay with us. More from Bloomberg Intelligence coming up after this.
Speaker 1 (08:40):
You're listening to the Bloomberg Intelligence podcast. Catch us live
weekdays at ten a m. Eastern on Apple, Cocklay and
Android Auto with the Bloomberg Business App. Listen on demand
wherever you get your podcasts, or watch us live on YouTube.
Speaker 3 (08:54):
There was a deal today in this space petrochemical space.
Warren Buffet's Berkshire Hathway reached a deal to buy Occidental
Petroleum Corporation's petro chemical business for about nine point seven
billion dollars. Let's break that down with Matthew Pathlosola, senior
analys covering the insurance business, has been covering Berkshire Hathaway
and Warren Buffett for many, many years. He's so Bloomberg
(09:16):
Intelligence joining us via zoom. Here Matthew talk to us
about what a deal like this means for Berkshire Hathaway.
Speaker 6 (09:25):
Hey, Paul, Yeah, I think it's a good deal for
Berkshire Hathaway. When you really break it down, the nine
point seven billion dollars is three percent of the cash
that Berkshire has on hand, So it's funny to say it,
but kind of a low stakes deal for Berkshire. I
think this deal helps Occidental. They really need to de lever,
so they're going to use six point five billion dollars
(09:47):
with that cash to de lever, which could help their stock,
which then could also have hel help Berkshire's eleven billion
dollar steak in Occidental. So I think it's kind of
a multi layered win for Berkshire Hathaway.
Speaker 5 (10:00):
What does it say about Warren Buffett's willingness to buy
right now when the market is trading at much higher
valuations than historically it has been, And I get that
most of that is because of the tech industry. But
even beyond that, overall valuation is not low.
Speaker 6 (10:18):
Yeah, Scarlett, I would say Buffett's inclination to be buying
anything is probably low. At the moment. Berkshire has not
been buying back their own stock, which is up ten
percent year to date, so their buybacks are essentially nil.
They and their equity portfolio they've sold about eleven billion
dollars net year to date. So you're a spot on
(10:41):
to say valuations are high and Berkshi is probably not
buying a lot of stuff. I think this was probably
just a unique opportunity. The deal valuation is pretty good,
the terms are pretty good, so I think this was
Berkshire taking advantage of their relationship with Occidental and doing
something that could help both. This is some sort of
statement on wanting to buy more in the market, all right.
Speaker 3 (11:05):
Well, on the same day that Bircher Hathaway spends ten
billion dollars on a petrochemical business, Open Ai, some employees
there sold some stock to private equity at a five
hundred billion dollar valuation, how does Bircher Hathaway think about tech?
Because if you want to put money to work, there's
(11:27):
some big evaluations out there in the world of tech technology,
But how did they generally think about tech?
Speaker 6 (11:32):
Yeah, Paul generally been tech adverse, right. I think Buffett
has tended to invest in things that he has a
deep understanding of. He has said it was a mistake
to not invest in Amazon sooner, which you call it
tech or retail, but he lamented that obviously big investor
(11:54):
in Apple, which though he kind of sees as a
retail consumer company versus more than tech. So they have
very little in the way of cutting edge tech plays
or AI investments. The investment managers will probably be a
little more inclined to do that, and maybe Greg Abel.
So Buffett has only got a couple of months left
(12:16):
totally at the HELM, I'm sure he'll be involved kind
of tangentially, but you might see a shift in the
upcoming years towards more tech investments.
Speaker 5 (12:26):
I'm so glad you mentioned Greg Gable because this latest
purchase of oxy can nine point seven billion dollars. You
were saying that Berksher is not making a lot of
purchases right now. Is this being spearheaded by Warren Buffett
or is this a Greg Abel call?
Speaker 6 (12:41):
So we don't really know. I mean the press release
that came out had a quote from Greg Gable only
in it. I would suspect that Greg probably did most
of the work on this. Buffett has been saying for
a while now that he's stepped back from the day
to day operations of the company, and Greg is kind
of doing a lot of that leg I would think
(13:01):
on something of this size, even though I just said
it was three percent of Burcher's cash, it's still almost
ten million dollars in a lot of money. I think
Buffett was probably involved, but if I had to guess,
I would think Abel probably did a lot of the
legwork on this deal.
Speaker 3 (13:14):
It was a beautiful afternoon yesterday at the Jersey shore.
I hopped on the Vestpa went to the beach and
I could not believe how rough.
Speaker 2 (13:20):
The surf is.
Speaker 3 (13:21):
And apparently there's a couple of hurricanes and storms out
at sea that's really churning things up, which got me
thinking about you, Matt, talk to us about the hurricane
season from the insurance perspective. Has it been so far
this season?
Speaker 6 (13:34):
Yeah, thanks Paul. Whenever you think of hurricanes, please think
of this natural disasters. It was exactly so. It's been
a very mild hurricane season in terms of land falls, right,
you haven't. You haven't talked to me much, right, so
we haven't seen a lot. What actually happened was there
was a hurricane coming and it was headed right towards
the Carolinas, and then another hurricane, which is a category
(13:56):
five completely over the ocean, sucked it away and kind
of pulled it away way from the US coast, kind
of saved the day for it. They are impacting Bermuda.
Now I don't expect major insured losses from that, but
so pretty benign season, good for reinsurance companies, Paul, your
favorite stocks, and we do have something. The National Hurricane
(14:18):
Center is identified another system that is brewing up and
could develop into something next week, so we'll stay tuned
for that. But mile season so far.
Speaker 5 (14:29):
Yeah, I feel like I never want to talk about
this because the minute you'd be talking about how quiet
it is is when things really gear up and you
get a massive storm like the next week.
Speaker 3 (14:38):
Yeah, like, and that happens so real quick, Matt. Just overall,
how your stock's performing this year? The property and casually insures.
Speaker 6 (14:47):
Not great, the underperforming year to date. We've got tower
of pressure. Everything can costs more to repair. Lower interest
rates are not a good thing for the P and
C names. So Bircher's actually stand out, you know, not
being an actual peer play P and C company that
that stocked up ten percent year to date, but the
rest of the group is down here to date, So
(15:07):
we're probably looking at peak ros and evaluations got peaked
before that, So I think that's what we're seeing with
the P and C stocks.
Speaker 2 (15:14):
Stay with us. More from Bloomberg Intelligence coming up after this.
Speaker 1 (15:21):
You're listening to the Bloomberg Intelligence podcast. Catch us live
weekdays at ten am Eastern on Apple, Cocklay and Android
Auto with the Bloomberg Business app. Listen on demand wherever
you get your podcasts, or watch us live on YouTube.
Speaker 2 (15:35):
We were just.
Speaker 5 (15:36):
Talking about McDonald's and how we don't get a chance
to go very often, even though there is a McDonald's
Paul just across the street from US at Worldwide Headquarters.
Speaker 3 (15:43):
Well, I should go to McDonald's fast food when I
was traveling in airports that would meet by.
Speaker 2 (15:46):
Oh that'd be my one time, I'll goo. Yeah, it's
just all high end stuff.
Speaker 5 (15:51):
Well, I think we need to move to northern Texas
because that is where McDonald's is focused on in terms
of expanding and building out restaurants. This is actually our
big Take story of the day. Christina Peterson is Bloomberg's
food reporter and she was the author of the story.
And Christina, this is about how McDonald's is looking to
build out fifty thousand restaurants overall. Where are we in
(16:12):
terms of that goal to get to fifty thousand or
is it like a third of the way there, halfway there,
three quarters of the way there.
Speaker 8 (16:18):
They're more than that. They are in the forty thousand range.
I think it was forty one thousand about a year ago,
so steadily getting closer. That actually will not make them
the biggest restaurant train in the world. That has mixed
you the Chinese bubble team makers at fifty three thousand,
but they will definitely be closer.
Speaker 4 (16:35):
To that goal.
Speaker 3 (16:36):
Hey, Subway, I bet you's up there too, because they're everywhere. Christina,
So what's going on here with Donald's. I would have
if you had to ask me how, I would have said,
there's some McDonald's on every corner in every city USA.
Why are they going on this expansion?
Speaker 6 (16:51):
Right?
Speaker 8 (16:52):
Well, for years they were actually shuddering more restaurants than
they were opening. Between twenty fifteen and twenty twenty one,
they closed a net of nine hundred sum stores, some
of them were inside walmarts. But since twenty twenty two,
they have been reversing that strategy and expanding, opening new locations,
and they've really been trying to follow where the population
(17:13):
is going. So, for example, North Texas is a place
where people are just flooding. Texas in general has seen
two million people move there since twenty twenty, So they
are chasing those new diners, trying to get as close
to where people are living now as they can. And
McDonald says that its goal is to be within a
five minute drive from as many people as possible, So
(17:34):
they're just trying to go where those people are now.
Speaker 5 (17:36):
Yeah, we were just talking earlier about how Dallas has
really exploded in terms of population growth, in terms of
being a place where folks want to move to because
of the lower cost of living. Is McDonald's an early
bird or a latecomer to the population boom in Northern
Dallas Northern Texas?
Speaker 4 (17:53):
Is it?
Speaker 5 (17:53):
You know, the master planned communities are building out, but
are there stores or brands that are ahead of McDonald
in that effort to populate it.
Speaker 8 (18:02):
It's such an interesting point because they are still earlier
than many other brands, but they are not as early
in these spots as they once would have otherwise been.
Oftentimes McDonald's is one of the first businesses to open
in places like this. They aren't the earliest. We see
forty some McDonald's in the Dallas area in the past
few years, but the population there has been absolutely exploding,
(18:26):
so they're still ahead of the full wave. But they
were not the very earliest pioneers in these places where
many people would have expected them to be.
Speaker 2 (18:36):
Christina.
Speaker 3 (18:37):
I know you traveled to North Texas for this story.
My question is, where's Texas putting all these people? Are
they just building houses in the middle of the desert somewhere.
Speaker 8 (18:45):
The houses are just popping up. When I was there,
I would talk to people who had moved to the
area weeks or even days earlier. They're an enormous number
of houses being built, and they're expanding. The Dallas North Tollway,
which goes north from Dallas. Slina, where I went, was
about fifty minutes away, and that highway is going to
reach there by twenty twenty seven. So you see, as
(19:08):
transit gets easier, as it's faster to get to these places,
more and more people are moving there.
Speaker 5 (19:14):
So a company like McDonald's is massive, and I imagine
that a goal to get to fifty thousand restaurants takes
some time to play out. So the fact that it's
doing all this, is this a move now to expand
in response to conditions that it spotted. I don't know,
a year ago, or three years ago or five years ago.
I'm just wondering how quickly McDonald's can decide on something
(19:35):
and then execute on it.
Speaker 8 (19:38):
Yeah, I mean this is definitely years in the making.
Being convenient as a cornerstone of their strategy, and I
think they've just had to reconfigure where that convenience is,
where the people are. They have a very extensive team
that follows demographics other people in the industry watch to
see where McDonald's open. We spoke to an executive who
(19:59):
had previously been at Chipotle, and she said she knew
when there were three McDonald's in an area, they were
ready for other restaurants. So they're very sophisticated with these
kinds of calculations.
Speaker 3 (20:09):
Any early feedback on how some of these new stores
are doing.
Speaker 8 (20:13):
Yeah, we looked at third party data that showed that
these stores are not quite as busy as more established
stores and denser areas. McDonald's told us it typically takes
two or three years for a new location to catch
up on traffic with older stores, and they see positive signs.
So it could be that as these cities become more populous,
(20:34):
these McDonald's will become more frequently visited. And it was
interesting other businesses in these Texas towns said they weren't
being cannibalized by McDonald's opening. There's just a lot of
business for everyone where cities are growing as fast as
these are.
Speaker 5 (20:49):
Christian. Final question to you, how is this expansion going
to show up in the financials? And I wonder whether
investors will give McDonald's credit for it, because, as you know,
typically analyst tracks seam stores sales sales at stores open
for at least a year to gauge demand, and now
McDonald's is building out new stores, which I guess don't
quite filter into the revenue number in the same way.
Speaker 8 (21:09):
Well, one thing that's interesting is that McDonald's has raised
the royalty fee for many new franchise owners, so there
is more revenue that they are getting from these stores.
Same store stales hit their lowest point in a decade
last year, but have been more positive this year, so
there are signs that this is good for McDonald's corporate numbers.
Speaker 1 (21:30):
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Business App. Listen on demand wherever you get your podcasts,
or watch us live on YouTube.
Speaker 2 (00:23):
Another big trade happened today. I mean, the AI valuation
story just gets bigger. Every single day.
Speaker 3 (00:28):
There's a new impressive and it's because of this guy,
Ed Ludlow, Bloomberg Tech co host, joining us a live.
Speaker 2 (00:35):
Here in our Bloomberg Interactive Brokers studio. He's based in
San Francisco. We've got him on East coast here for
a little while. So, Ed, what happened?
Speaker 3 (00:42):
What's the deal that just put evaluation of five hundred
million dollars on open ASP.
Speaker 4 (00:47):
So, actually, the mechanics of it are the one of
the most interesting parts. It's a secondary or an employee tender.
In other words, if you are a existing employee or
even a former employee, you can sell your shares in
open AI. The eligibility requirements were that you held them
or you had a vesting period of two years. But
the reason I say that's interesting is that this is
(01:11):
a valuation dictated by a third party group of investors
buying those shares from employees. So the company doesn't raise
any new money, but there has to be a valuation
set because a price has to be set. And so
these investors wanted even more. They wanted like ten billion
dollars worth of employee shares. In the end they got
six point six billion dollars. So what does that tell you.
(01:33):
There's probably a load of open a employees that were like,
you know what, I'm not going to sell. I'm holding
on because if I'm at the five hundred billion dollar valuation,
you know, and there's still a corporate restructures go through,
you know, a future IPO, maybe, then then hold. So
I thought that was really fascinating. But I would just
point out that Sharin Gafari, really talented colleague of mine
(01:55):
out in San Francisco Bloomberg Newsroom. She did break this
story in August six, just the close of the round.
Speaker 5 (02:01):
Okay, So now that open ai is valued at five
hundred billion dollars, that puts it over SpaceX, which is
valued at four hundred billion. And I bring this up
because there's a common thread between open ai and SpaceX
and that is Elon Musk is part of open Ai
before leaving under some clouds.
Speaker 4 (02:19):
Yep, he has a fractious relationship specifically with some Altman,
you know, the the other founder and now CEO of
open Ai. You know what I've written a lot about
in Bloombot BusinessWeek magazine and in some of the reporting
is present day. Musk has kind of a little bit
of a chip on his shoulder. I think, well, specifically
(02:40):
about the idea that Xai, his ai company, should have
a valuation that is near to open ayes so, and
you know there's been litigation. You know, there's a public forum,
slinging match on social media between the two. Sam Altman
gets asked about it a lot. But you know, I
(03:01):
think the main thing is that remember also that Xai has,
as we've reported it sought to raise money at two
hundred million dollar valuation this year. You know, it's tides
and rising ships in that field.
Speaker 2 (03:14):
Really, so do we know who was selling here in
this round?
Speaker 6 (03:17):
No?
Speaker 4 (03:18):
I mean all I know about the eligibility rules. You know.
The one thing I've reflected on reading the story and
speaking to sources that the company is Remember in November
of twenty twenty two when Sam Outman was briefly ousted
from open ai. There was just a few hundred people
that worked there at that time. You know, so that
was three years ago and almost three years ago, and
(03:40):
now there are thousands of people that work there. So yeah,
some tenure would probably be a factor here.
Speaker 5 (03:46):
Okay, So now the world's biggest startup worth half a
trillion dollars, but open ai is not making money.
Speaker 2 (03:51):
It's not part ofable. Yeah.
Speaker 4 (03:53):
So on Monday, open ai has its dev day, its
developers day in San Francisco, and are we going? And
it's a good opportunity to ask hard questions like these.
There's a data point that's going around right now, which
is that open ai is only converting two percent of
its free users to paid subscribers. Now, that for me
(04:14):
is an interesting data point. So it's been on that
is that there's a lot of room for growth, right,
and so you know software, you know, this is core
bi analysis, right, Software is traditionally a higher margin business.
But the problem is that because of compute expenses and
op X now talent compensation, even the revenue they are
making probably ain't that high margin, is it. You know,
(04:36):
if it's all. So the big question is, Okay, if
we know that you're not really doing a lot to
convert the consumers from free to paid, what do your
enterprise business look like? And that's probably the domain where
we'll focus. Hey, when you even do a secondary or
attender with employees, you've got to put a deck together
that justifies evaluation. So those group of investors, they will
(04:58):
have seen something in the data room that would say
this is a five hundred billion dollar company. Like, of
course they would, that's how it works.
Speaker 2 (05:04):
Well, how come you don't. You haven't gotten your hands
on that deck?
Speaker 4 (05:06):
You know, a trepid reporter, you know, No, I'll be
honest about this, Like Sharena has been smashing this story.
She covers a covery so deeply. And I was on
vacation for most of August, so you know, I've not
tracked it as closely for me. You know, the big
story to focus on with open ai is the corporate restructure,
you know, from where you have a not for profit
(05:28):
board that owns the for profit company. That's going to change.
Speaker 2 (05:31):
Okay, So that's where I'm focused. Stay with us. More
from Bloomberg Intelligence coming up after this.
Speaker 1 (05:41):
You're listening to the Bloomberg Intelligence Podcast. Catch us live
weekdays at ten am Eastern on Apple, Corplay and Android
Otto with the Bloomberg Business App. Listen on demand wherever
you get your podcasts, or watch us live on YouTube.
Speaker 5 (05:55):
Let's talk a little bit about Tessa right now, because
it reported global vehicle delivery and it was a surprise
to the upside, so that means we need to bring
in Craig Trudell. He is our Global autos editor for
Bloomberg News, joining us from London right now. Craig, not
a surprise insofar as there was this expiration of the
federal tax credits for evs coming up, so people were
(06:17):
kind of rushing to make good use of those tax
credits before they went away.
Speaker 7 (06:21):
Yeah, that's exactly right. I think there was a widespread
expectation that, you know, given that the clock was ticking
on those tax credits, that we were going to see
a strong third quarter. But this this was even better
than was you know, expected by by analysts that follow
the company. I think, you know, we did get indications
as the month of September was coming to a close
(06:42):
that more and more analysts were much higher than where,
you know, where the average was the consensus, if you will,
And also I should add two just on the energy
side of the business. It was another record quarter of
energy storage product deployments. So you know that that is
still a much smaller portion of of Tesla's you know,
(07:03):
top and bottom lines, but it was a business that
you know, was growing pretty rapidly that you know, along
with the car business was struggling in the first half
of this year. So to see see that tick up
as well is another positive for the company.
Speaker 3 (07:17):
Craig, can you give us an update where we are
in the US in terms of charging capabilities? I mean,
that's I know, that's a gating issue for a lot
of people that just don't feel like there's enough charging
capacity in this country.
Speaker 2 (07:28):
Where are we now and what are some of the
goals do you think?
Speaker 7 (07:30):
Yeah, I mean, Tesla, you have to give them credit
for still being you know, really sort of ahead of
the curve in that regard and to the extent that
other manufacturers have had, you know, some progress in charging
getting getting better, it's because Tesla made this decision, you know,
not that long ago to open up its network to
other manufacturers. I think that that also is you know
(07:53):
something that you know, perhaps you know, if you look
at in hindsight, you know, maybe sort of created something
of an opening for for other carmakers that you know,
have made Tesla's life a little bit more difficult in
the US because they went from having a network that
was you know, really intuitive and easy to use, that
that was all to themselves, to opening that to others.
(08:13):
They of course, you know, that that's become something of
of a you know business for them to be able
to you know, charge non Tesla drivers for those charging sessions.
But that is you know, sort of a drop in
the bucket relative to to the car business for them.
Speaker 2 (08:32):
Stay with us. More from Bloomberg Intelligence coming up after this.
Speaker 1 (08:40):
You're listening to the Bloomberg Intelligence podcast. Catch us live
weekdays at ten a m. Eastern on Apple, Cocklay and
Android Auto with the Bloomberg Business App. Listen on demand
wherever you get your podcasts, or watch us live on YouTube.
Speaker 3 (08:54):
There was a deal today in this space petrochemical space.
Warren Buffet's Berkshire Hathway reached a deal to buy Occidental
Petroleum Corporation's petro chemical business for about nine point seven
billion dollars. Let's break that down with Matthew Pathlosola, senior
analys covering the insurance business, has been covering Berkshire Hathaway
and Warren Buffett for many, many years. He's so Bloomberg
(09:16):
Intelligence joining us via zoom. Here Matthew talk to us
about what a deal like this means for Berkshire Hathaway.
Speaker 6 (09:25):
Hey, Paul, Yeah, I think it's a good deal for
Berkshire Hathaway. When you really break it down, the nine
point seven billion dollars is three percent of the cash
that Berkshire has on hand, So it's funny to say it,
but kind of a low stakes deal for Berkshire. I
think this deal helps Occidental. They really need to de lever,
so they're going to use six point five billion dollars
(09:47):
with that cash to de lever, which could help their stock,
which then could also have hel help Berkshire's eleven billion
dollar steak in Occidental. So I think it's kind of
a multi layered win for Berkshire Hathaway.
Speaker 5 (10:00):
What does it say about Warren Buffett's willingness to buy
right now when the market is trading at much higher
valuations than historically it has been, And I get that
most of that is because of the tech industry. But
even beyond that, overall valuation is not low.
Speaker 6 (10:18):
Yeah, Scarlett, I would say Buffett's inclination to be buying
anything is probably low. At the moment. Berkshire has not
been buying back their own stock, which is up ten
percent year to date, so their buybacks are essentially nil.
They and their equity portfolio they've sold about eleven billion
dollars net year to date. So you're a spot on
(10:41):
to say valuations are high and Berkshi is probably not
buying a lot of stuff. I think this was probably
just a unique opportunity. The deal valuation is pretty good,
the terms are pretty good, so I think this was
Berkshire taking advantage of their relationship with Occidental and doing
something that could help both. This is some sort of
statement on wanting to buy more in the market, all right.
Speaker 3 (11:05):
Well, on the same day that Bircher Hathaway spends ten
billion dollars on a petrochemical business, Open Ai, some employees
there sold some stock to private equity at a five
hundred billion dollar valuation, how does Bircher Hathaway think about tech?
Because if you want to put money to work, there's
(11:27):
some big evaluations out there in the world of tech technology,
But how did they generally think about tech?
Speaker 6 (11:32):
Yeah, Paul generally been tech adverse, right. I think Buffett
has tended to invest in things that he has a
deep understanding of. He has said it was a mistake
to not invest in Amazon sooner, which you call it
tech or retail, but he lamented that obviously big investor
(11:54):
in Apple, which though he kind of sees as a
retail consumer company versus more than tech. So they have
very little in the way of cutting edge tech plays
or AI investments. The investment managers will probably be a
little more inclined to do that, and maybe Greg Abel.
So Buffett has only got a couple of months left
(12:16):
totally at the HELM, I'm sure he'll be involved kind
of tangentially, but you might see a shift in the
upcoming years towards more tech investments.
Speaker 5 (12:26):
I'm so glad you mentioned Greg Gable because this latest
purchase of oxy can nine point seven billion dollars. You
were saying that Berksher is not making a lot of
purchases right now. Is this being spearheaded by Warren Buffett
or is this a Greg Abel call?
Speaker 6 (12:41):
So we don't really know. I mean the press release
that came out had a quote from Greg Gable only
in it. I would suspect that Greg probably did most
of the work on this. Buffett has been saying for
a while now that he's stepped back from the day
to day operations of the company, and Greg is kind
of doing a lot of that leg I would think
(13:01):
on something of this size, even though I just said
it was three percent of Burcher's cash, it's still almost
ten million dollars in a lot of money. I think
Buffett was probably involved, but if I had to guess,
I would think Abel probably did a lot of the
legwork on this deal.
Speaker 3 (13:14):
It was a beautiful afternoon yesterday at the Jersey shore.
I hopped on the Vestpa went to the beach and
I could not believe how rough.
Speaker 2 (13:20):
The surf is.
Speaker 3 (13:21):
And apparently there's a couple of hurricanes and storms out
at sea that's really churning things up, which got me
thinking about you, Matt, talk to us about the hurricane
season from the insurance perspective. Has it been so far
this season?
Speaker 6 (13:34):
Yeah, thanks Paul. Whenever you think of hurricanes, please think
of this natural disasters. It was exactly so. It's been
a very mild hurricane season in terms of land falls, right,
you haven't. You haven't talked to me much, right, so
we haven't seen a lot. What actually happened was there
was a hurricane coming and it was headed right towards
the Carolinas, and then another hurricane, which is a category
(13:56):
five completely over the ocean, sucked it away and kind
of pulled it away way from the US coast, kind
of saved the day for it. They are impacting Bermuda.
Now I don't expect major insured losses from that, but
so pretty benign season, good for reinsurance companies, Paul, your
favorite stocks, and we do have something. The National Hurricane
(14:18):
Center is identified another system that is brewing up and
could develop into something next week, so we'll stay tuned
for that. But mile season so far.
Speaker 5 (14:29):
Yeah, I feel like I never want to talk about
this because the minute you'd be talking about how quiet
it is is when things really gear up and you
get a massive storm like the next week.
Speaker 3 (14:38):
Yeah, like, and that happens so real quick, Matt. Just overall,
how your stock's performing this year? The property and casually insures.
Speaker 6 (14:47):
Not great, the underperforming year to date. We've got tower
of pressure. Everything can costs more to repair. Lower interest
rates are not a good thing for the P and
C names. So Bircher's actually stand out, you know, not
being an actual peer play P and C company that
that stocked up ten percent year to date, but the
rest of the group is down here to date, So
(15:07):
we're probably looking at peak ros and evaluations got peaked
before that, So I think that's what we're seeing with
the P and C stocks.
Speaker 2 (15:14):
Stay with us. More from Bloomberg Intelligence coming up after this.
Speaker 1 (15:21):
You're listening to the Bloomberg Intelligence podcast. Catch us live
weekdays at ten am Eastern on Apple, Cocklay and Android
Auto with the Bloomberg Business app. Listen on demand wherever
you get your podcasts, or watch us live on YouTube.
Speaker 2 (15:35):
We were just.
Speaker 5 (15:36):
Talking about McDonald's and how we don't get a chance
to go very often, even though there is a McDonald's
Paul just across the street from US at Worldwide Headquarters.
Speaker 3 (15:43):
Well, I should go to McDonald's fast food when I
was traveling in airports that would meet by.
Speaker 2 (15:46):
Oh that'd be my one time, I'll goo. Yeah, it's
just all high end stuff.
Speaker 5 (15:51):
Well, I think we need to move to northern Texas
because that is where McDonald's is focused on in terms
of expanding and building out restaurants. This is actually our
big Take story of the day. Christina Peterson is Bloomberg's
food reporter and she was the author of the story.
And Christina, this is about how McDonald's is looking to
build out fifty thousand restaurants overall. Where are we in
(16:12):
terms of that goal to get to fifty thousand or
is it like a third of the way there, halfway there,
three quarters of the way there.
Speaker 8 (16:18):
They're more than that. They are in the forty thousand range.
I think it was forty one thousand about a year ago,
so steadily getting closer. That actually will not make them
the biggest restaurant train in the world. That has mixed
you the Chinese bubble team makers at fifty three thousand,
but they will definitely be closer.
Speaker 4 (16:35):
To that goal.
Speaker 3 (16:36):
Hey, Subway, I bet you's up there too, because they're everywhere. Christina,
So what's going on here with Donald's. I would have
if you had to ask me how, I would have said,
there's some McDonald's on every corner in every city USA.
Why are they going on this expansion?
Speaker 6 (16:51):
Right?
Speaker 8 (16:52):
Well, for years they were actually shuddering more restaurants than
they were opening. Between twenty fifteen and twenty twenty one,
they closed a net of nine hundred sum stores, some
of them were inside walmarts. But since twenty twenty two,
they have been reversing that strategy and expanding, opening new locations,
and they've really been trying to follow where the population
(17:13):
is going. So, for example, North Texas is a place
where people are just flooding. Texas in general has seen
two million people move there since twenty twenty, So they
are chasing those new diners, trying to get as close
to where people are living now as they can. And
McDonald says that its goal is to be within a
five minute drive from as many people as possible, So
(17:34):
they're just trying to go where those people are now.
Speaker 5 (17:36):
Yeah, we were just talking earlier about how Dallas has
really exploded in terms of population growth, in terms of
being a place where folks want to move to because
of the lower cost of living. Is McDonald's an early
bird or a latecomer to the population boom in Northern
Dallas Northern Texas?
Speaker 4 (17:53):
Is it?
Speaker 5 (17:53):
You know, the master planned communities are building out, but
are there stores or brands that are ahead of McDonald
in that effort to populate it.
Speaker 8 (18:02):
It's such an interesting point because they are still earlier
than many other brands, but they are not as early
in these spots as they once would have otherwise been.
Oftentimes McDonald's is one of the first businesses to open
in places like this. They aren't the earliest. We see
forty some McDonald's in the Dallas area in the past
few years, but the population there has been absolutely exploding,
(18:26):
so they're still ahead of the full wave. But they
were not the very earliest pioneers in these places where
many people would have expected them to be.
Speaker 2 (18:36):
Christina.
Speaker 3 (18:37):
I know you traveled to North Texas for this story.
My question is, where's Texas putting all these people? Are
they just building houses in the middle of the desert somewhere.
Speaker 8 (18:45):
The houses are just popping up. When I was there,
I would talk to people who had moved to the
area weeks or even days earlier. They're an enormous number
of houses being built, and they're expanding. The Dallas North Tollway,
which goes north from Dallas. Slina, where I went, was
about fifty minutes away, and that highway is going to
reach there by twenty twenty seven. So you see, as
(19:08):
transit gets easier, as it's faster to get to these places,
more and more people are moving there.
Speaker 5 (19:14):
So a company like McDonald's is massive, and I imagine
that a goal to get to fifty thousand restaurants takes
some time to play out. So the fact that it's
doing all this, is this a move now to expand
in response to conditions that it spotted. I don't know,
a year ago, or three years ago or five years ago.
I'm just wondering how quickly McDonald's can decide on something
(19:35):
and then execute on it.
Speaker 8 (19:38):
Yeah, I mean this is definitely years in the making.
Being convenient as a cornerstone of their strategy, and I
think they've just had to reconfigure where that convenience is,
where the people are. They have a very extensive team
that follows demographics other people in the industry watch to
see where McDonald's open. We spoke to an executive who
(19:59):
had previously been at Chipotle, and she said she knew
when there were three McDonald's in an area, they were
ready for other restaurants. So they're very sophisticated with these
kinds of calculations.
Speaker 3 (20:09):
Any early feedback on how some of these new stores
are doing.
Speaker 8 (20:13):
Yeah, we looked at third party data that showed that
these stores are not quite as busy as more established
stores and denser areas. McDonald's told us it typically takes
two or three years for a new location to catch
up on traffic with older stores, and they see positive signs.
So it could be that as these cities become more populous,
(20:34):
these McDonald's will become more frequently visited. And it was
interesting other businesses in these Texas towns said they weren't
being cannibalized by McDonald's opening. There's just a lot of
business for everyone where cities are growing as fast as
these are.
Speaker 5 (20:49):
Christian. Final question to you, how is this expansion going
to show up in the financials? And I wonder whether
investors will give McDonald's credit for it, because, as you know,
typically analyst tracks seam stores sales sales at stores open
for at least a year to gauge demand, and now
McDonald's is building out new stores, which I guess don't
quite filter into the revenue number in the same way.
Speaker 8 (21:09):
Well, one thing that's interesting is that McDonald's has raised
the royalty fee for many new franchise owners, so there
is more revenue that they are getting from these stores.
Same store stales hit their lowest point in a decade
last year, but have been more positive this year, so
there are signs that this is good for McDonald's corporate numbers.
Speaker 1 (21:30):
This is the Bloomberg Intelligence Podcast, available on Apple, Spotify,
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ten am to noon Eastern on Bloomberg dot com, the
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