October 2, 2025 • 42 mins
Bloomberg’s Caroline Hyde and Ed Ludlow discuss OpenAI becoming the largest startup after it closed a deal allowing current and former employees to sell shares at a $500 billion valuation. Plus, Tesla's vehicle sales jumped to a worldwide record in the third quarter as US buyers got in before US tax credits expired. And Microsoft has inked more than $33 billion in commitments to neocloud providers, as it aims to cope with a shortage of AI data center capacity.
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Speaker 1 (00:02):
Bloomberg Audio Studios, podcasts, radio news. Bloomberg Tech is a
live from Coast to Coast with Caroline Hide in New
York and Eva low in sentrances go.
Speaker 2 (00:21):
This is Bloomberg Tech coming up.
Speaker 3 (00:22):
Open Ai becomes the world's largest startup with a five
hundred billion dollar valuation following an employee share sale.
Speaker 4 (00:30):
Plus Tesla's vehicle sales jumped to a worldwide record in
the third quarter, a surprise increase after several quarters of
sales slumps. How much did the ev tax credit exploration.
Speaker 3 (00:40):
Helped, and how Microsoft aims to cope with a shortage
of AI data center capacity, striking deals with so called
neo clouds.
Speaker 4 (00:48):
So first we check in on these publicly traded markets
that were at record highs clinging to them as we speak.
The NASAK one hundred is up but five points now. Notably,
we've got a wall of worry coming towards the markets
at the moment. But there have been this desire to
buy into chip stocks, in particular the open ai valuation
that we'll dig into, the idea of the contracts that
(01:08):
they're building with sk Heinex, with Samsung, all of that
had really helped lift the socks. I'm looking at that
at one point thirty percent, but really there's other stocks
that are dragging the overall benchmarks a little bit lower.
Speaker 5 (01:18):
Edd.
Speaker 3 (01:19):
Yeah, the part of the argument is that it's Tesla
that's doing that.
Speaker 2 (01:22):
Right.
Speaker 3 (01:22):
We had been higher pre market when the delivery numbers broke.
Four hundred and ninety seven ninety nine evs delivered in
the third quarter, an astonishing turnaround, a huge beat against consensus.
But as we've been talking about for a while now,
they started advertising in the quarter. They started emailing on
a daily basis, saying, by the way the federal tax
credit runs out, how big a fact was that that
(01:44):
it's an isolated quarter of an elevated proportion of sales.
Speaker 2 (01:49):
Let's go to private markets.
Speaker 3 (01:50):
Big piece of reporting from Bloomberg Shering Gafari open AI
five hundred billion dollar valuation based on employee share sale
to a really intro seen group of investors. Remember Sharen
broke this story first on August the sixth, But now
it's done and there's actually a lot of interesting data
in the report Caro about who opted to or not
(02:12):
to participate. If you're an employee that had two years
of holding the.
Speaker 4 (02:15):
Shares and let's get straight to sharm Gafari extraordinary scoop
that first came in August. Now we get the real
details and perhaps those current employees and former employees not
setting as much as they could have done.
Speaker 2 (02:29):
That's right.
Speaker 6 (02:30):
So you know, again, this is a record valuation for
Open Eye and for just startups right now, surpassing SpaceX
as the most highly valued startup. That being said, there
was more. There could have been more units sold, is
what we're told. And actually employees shows not to take
(02:50):
up all of that potential share sale, so you know,
it could indicate that employees are feeling, you know, the
optimistic about the future of the company and that the
valuation could go even higher. But of course this is
an ongoing story and there are still a lot of
uncertainties as well in opening Ice future, including its ability
to go forward with the restructure.
Speaker 3 (03:13):
When there is a tender or a secondary or any
kind of financial transaction. Sharene there's always a data room,
just take my word for it. And so I find
the group of investors here really interesting third parties that
were able to buy those shares from employees. Just run
us through the list and any that caught your eye.
Speaker 6 (03:31):
That's right, so many of them were expected. We have Thrive,
also a former large investor, as well as SoftBank, another
major partner. We also have Abu, Abu, Dhab, MGX, Dragonear,
and t Row And you know, MGX is an interesting
one given we're seeing more money coming in from overseas,
from the Middle East into AI companies. And you know,
(03:54):
this is just an ongoing as I find an AI.
Once one investment closes, it's the beginning of another one.
So we can expect these sizes to just get bigger
and bigger in terms of funds going in and sales
being shares being seld.
Speaker 4 (04:08):
I mean, that's what's extraordinary is the fact that they
raised money fresh money from SoftBank back in March, and
the valuation is just spiraled even since then, staring even
as remind us of the data and the fundamentals. The
company remains unprofitable and at the moment, revenue is tiny
in comparison to say a Netflix, which is also worth
about five hundred billion dollars.
Speaker 2 (04:30):
That's right.
Speaker 6 (04:31):
So while we're seeing the revenue increase rapidly, they have
something like seven hundred million users. At the same time,
the company is also unprofitable, and that's because of the
large cost to fuel basically the development of AI. There's
huge data compute costs. Here are these unprecedented data centers
(04:53):
that they're building out, there are researchers.
Speaker 5 (04:56):
All of that takes a lot of money.
Speaker 6 (04:58):
So it's still a highly capital intensive, an unprofitable business,
even though the revenue is growing at a very fast rate.
Speaker 3 (05:04):
Bembo Sharen Gafari, It's Dev Dave Open Ai Monday, and
I think we're going to be able to pose questions
that might give us some of the answers to what's
really going on top and bottom line at open Ai.
Let's pivot from the private market side to the public
public side because open AI's story is driving US equities
to fresh highs. We've seen some pullback since the show started,
but generally the idea was that the open ai valuation
(05:26):
signaled a lot of optimism for AI across those public names.
Nancy Tengler, CEO and CIO of Lafetengla Investments, joins us
now for more. There's a lot of life in secondary markets.
Right sharm was running us through tro price participating in
that round. I know that this might not be your domain.
(05:46):
But what did you make of the open ai valuation?
And if someone came to you and said, Hey, Nancy,
I'm putting together an SPV or something like that, would
you try and get in on open ai at this
private level.
Speaker 7 (05:57):
Yes, we would, yes, and we're actually in the process
of working with a firm to do just that. But
we're also interested in you know, SpaceX and XAI and
many of the other names that are still private, and
I think for retail investors it's an opportunity and then
of course for the insiders it provides liquidity at least
(06:18):
through the provider.
Speaker 5 (06:19):
We're working with one.
Speaker 3 (06:21):
One sec Marguerite, bring up the chart there it is okay,
so open ai five hundred billion dollar valuation, SpaceX number two,
four hundred billion, and then I don't see XAI in there,
but I reported that XAI is raising money at a
two hundred million dollar valuation. Of those three, what's your
top priority?
Speaker 7 (06:41):
SpaceX is my greatest interest. I think we know the
AI game and there's a lot of ways to play it.
Speaker 5 (06:47):
It's not a game, but the.
Speaker 7 (06:48):
Opportunity and I really want to get more exposure to space.
So we just launched a fund a strategy that is
focused on all of the above quantum space, nuclear robotics,
and spaces of particular interest to us.
Speaker 4 (07:04):
Fascinating that you're looking at basically these valuations in the
private side, as well as, of course all the exposure
that you build and the public side. Nancy, what draws you?
Is it just too hard to ignore when you're seeing
companies staying private for so much longer?
Speaker 7 (07:20):
Yeah, well right, I mean, Caroline, we used to have
the Wilshire five thousand, and now it's the Wilshair thirty
five hundred. I think, you know, as an investor, my
job is to look around and try to figure out
ways to make money for my clients. When you're going
through a transformative technological revolution like we are, you get
these concentrations, you get higher than normal valuations. But that
(07:43):
is not to say this cannot continue for some time.
And as you know, I've drawn the analogy to the
nineteen nineties. I think the technologies we are seeing now
are much more robust than just eyeballs on a screen,
which was what we were measuring in the nineties. So
I'm excited about all the opportunity and really working hard
to try to figure out ways to gain exposure. Because
(08:04):
the private markets are open to a very lead group
of investors, certainly we want to open it up to
our clients as well.
Speaker 4 (08:11):
Nazie, talk about the fundamentals that you like within these companies,
because yes, you're saying valuations can continue up into the
right for foreseeable future. You think it's underlying technology that
gets us there rather than the market being a rational
lesson in some sort of hype cycle.
Speaker 7 (08:26):
Absolutely, so, just think back as far as Amazon. I mean,
that was a valuable lesson for me as a as
a value investor trained as a you know, buy when
things go down valuation matters. I could never figure out
how the company couldn't report earnings and continue to drive forward.
I think that, and so ultimately we became we participated
(08:47):
in the name and learned a lesson that during certain
periods of time, that's what you're going to see, and
you have to depend on management. You have to be
focused on the underlying fundamentals. And that's that's our job,
and that's why we have a team of analysts that
support me and the other portfolio managers at the firm.
So we're primarily focused on catalyst forout performance in the
(09:09):
soft site, we look at all the numbers that everybody
else looks at on the quantitative side, but qualitatively, we're
looking for catalyst for out performance and strong management teams,
and you can measure those over time. It's obviously a
subjective decision, but we spend a lot.
Speaker 5 (09:23):
Of time on it.
Speaker 3 (09:24):
Nancy, We're going to go very, very deep on Tesla
in the next segment. But actually, as a team, when
we were talking about today's show yesterday, your name came up, right,
you join us all the time. Four hundred and ninety
seven ninety nine vehicles delivered in the third quarter, a record.
The stock rose and now it's down almost two percent.
Just your reaction and to what extent you see the
(09:46):
expiry of the federal tax credit being the principal factor.
Speaker 5 (09:50):
Well, I do think it's a principal factor.
Speaker 7 (09:52):
And I mean I think there was some strength seen
in China which was good or at least less deterioration.
So I think that that is a rebound that we're
going to be watching and continuing to watch closely. But
for us, and I've said this to you, historically, we're
interested in the name because of the energy business, which
we've been talking about for two years, and I think
(10:13):
now people are sort of, you know, excited about that business.
We're interested, obviously, as everyone else is in FSD. They
seem to be seeing really robust improvements. It may not
be a linear acceleration. It may just be at one
point we see that FSD is at the levels we need,
(10:33):
and then they've got seven billion miles traveled and that
Dwarf's Weimo. I live in Weimo Land. You know, you
can't stop at a stoplight in Arizona without seeing four
or five of them. And Tesla's way ahead on that.
So they just need to catch up on the technology
and they will because they have the data. So we're
very excited about the new model Robotaxi, all of the others,
(10:55):
and then of course Optimists, which I'm counting on as
my home health care solution.
Speaker 4 (11:01):
My kids asking me yesterday when we're going to be
getting a robot in the home, Nanci and I can
see that we're all waiting on tent to hoax. But
so too is the comp package for your musk. It's
tied to real delivereralies of Optimus of Robotaxes twenty million
evs on the roads.
Speaker 2 (11:16):
Are you going to be voting in favor of that?
Speaker 3 (11:19):
Oh?
Speaker 7 (11:19):
Yes, absolutely, and the Ai you know, the XAI fundraise.
We would love to see the companies melt together and
get access to SpaceX and XAI. We'll see. I mean
that's me talking, not Elon, but we will definitely be
voting in favor. I love when incentives for the management
team or the visionary CEO are lined up with me
(11:42):
and my shareholders. So we're very excited about the future
of Tesla. And remember it doesn't go straight up. It's
a volatile name. We were buying at two forty in
the spring during the tariff tantrum. We will we will
buy again when stock dips down. But it's a six
percent holding in our strategy, which is the macrocycle opportunities,
(12:03):
and then in our growth strategy it's four and a
half percent holding. So we're committed to the name, and
you know, we believe, we believe in Elon. Maybe I'll
get a T shirt made well when the space fun
goes live.
Speaker 4 (12:17):
When you've got the money coming in for the private
funds as well, do join us. I mean you're always
joining us, and we love it and that's a Tangler
CEO C that's Tangler Investments. Stay well. Meanwhile, coming up,
we're diving for into Tesla, into the vehicle sales that
jump to a worldwide record and third quarter. I'm going
to be going into what's behind this, whether it's sustainable.
Stay with us. This is Bloomberg Tech.
Speaker 3 (12:45):
US customers help drive Tesla's third quarter sales to a
record high as buyers rush to take advantage of federal
tax credits before they expire. I want to get out
to London and Bloomberg's Automotive.
Speaker 2 (12:58):
Zar Craigtrude out.
Speaker 3 (13:00):
Data is really important here, Okay, third quarter four hundred
and ninety seven ninety nine vehicles. The expectation was we'd
see a drop year on year, even if it was
a sequential improvement. This this is an anomaly. This is
like something happened in the quarter. Just explain it.
Speaker 8 (13:19):
Yeah, you know, I think this is a surprise if
you're looking at the consensus and yet if you sort
of were watching closely to where an estimates were coming in.
Towards the very end of the month of September, a
lot of sales side analysts were saying, we think these
deliveries are going to be much higher than that. I
think even having said that, you know, this is a
(13:39):
surprise even for those who are you know, bullish going
into this print. And you know, you do have to
hand it to this company to have delivered more vehicles
than they ever have, even if there are some real
questions about whether there's some staying power to these numbers.
Without the seventy five hundred dollars tax credit in the US,
that's going to be you know, the I guess fourner
(14:00):
and twenty dollars question on the earnings.
Speaker 4 (14:03):
Call in a few weeks for twenty Craig. I'm interested though,
like you are, sat in the heart of the UK,
and indeed Europe has been against Tesla's basically we've seen
sales destruction over there in large part people blaming the
politics of Elon Musk. Is that still the sentiment that
you're seeing. Are you getting any other granular data that
shows that maybe other regions in the world have liked
(14:26):
the model wise and the upgrades.
Speaker 8 (14:27):
Of late Yeah, I mean, I think in terms of
the way things have been trending in Europe, it's been
very consistent. There's maybe some you know, kind of marginal
narrowing of the declines over here in Europe, but still
substantially down in a market that is up substantially, and
in China you've seen, you know, at best, shipments move
(14:50):
sideways flat, you know, down by small percentages in a
market where you know, BYD and Jawmi and you know,
domestic players really are making a lot of noise. We did,
you know, see just recently some loss of momentum on
BYD's part, but that's from a standpoint of really just
(15:11):
dominating their local markets. So sort of by process of elimination,
we really, you know, can can sort of come to
this conclusion that the US is really what drove.
Speaker 2 (15:22):
This result for Tesla. We'll see to what extent.
Speaker 8 (15:25):
You know, Elon Musk is willing to sort of get
into that, but I think we've already heard from him
during the last earnings call that you know, this this
could be a company that's in for a few rough
quarters as a result of this pullback of support from
the US government.
Speaker 4 (15:39):
Really most crowdu down. Thank you as always for the
thorough analysis. Let's stick with Tesla sales. Bring in Stephanie
Valdez Street. She is the director of Industry insights of
Coxa Automotive and just the larger picture in the US.
For Stephanie, it was but earlier in the week that
we saw Jim Farley, CEO of Ford saying the EV
market in the US is going to slump by half
because of the policy is currently being enacted here. And
(16:01):
meanwhile we see Tesla jump but because of that EV
tax credit expire, potentially, what is the forward looking analysis
of yours for US EV sales for Tesla?
Speaker 9 (16:13):
Yeah, definitely, we knew Q three was going to be
a record quarter, right driven by policy. Right, everyone created
a sense of urgency, whether it was dealers, OEMs, and
so consumers reacted. So we're probably going to reach about
four hundred and ten thousand, probably ten percent market share
in the US market, and Tesla has definitely taken advantage
of that, but once again, that was policy driven. Moving
(16:34):
into Q four, we're going to see a slowdown. However,
I've already seen and you've probably seen some of the
manufacturers are going to continue a seventy five hundred dollars
credit going into Q four. On leasing, Hyundai mentioned they're
going to reduce their Ionic five by you know, ninety
eight hundreds and twenty six model and continue to offer
the seventy five hundred.
Speaker 3 (16:54):
So just very specifically, Stephanie, in this quarter that's just
been reported. In the Tesla's case, specifically, you see evidence
that the consumer knew that the federal tax credit was
running out and so took advantage of that to make
a decision and either purchase or lease a vehicle.
Speaker 9 (17:12):
Oh definitely, Yeah, Like, I think the consumers became very
aware of this incentive. If you went to any online
search website, you saw that, you know, the tax credit
was there, it was winding down, And I think definitely
this sense of urgency created consumer reaction, and we're seeing
that in the data. The numbers are still coming in
for September in the US, but definitely going to be
(17:33):
a record quarter and you know, highest market share to date.
Speaker 3 (17:38):
Go There's so many things that I want to poke
around at. Like what sources inside Tesla told me in
recent weeks was like, hey, have you been noticing the
advertising we've been doing on YouTube and Instagram, something that
Elon Musk historically is completely against. But I'm also like,
almost five hundred thousand vehicles in the quarter. Do you
see that as just being a one time thing like
(18:00):
would this be replicated because it has to if he's
going to deliver twenty million vehicles over a ten year period.
That's the math five hundred thousand a quarter.
Speaker 9 (18:10):
Yeah, I think it's going to be challenging, right because
I think just I think a lot of consumers that
were considering buying a vehicle EV specifically pulled ahead bought
it in Q three because of the incentives, and so
I think just we're going to see that slowdown coming
Q four and we'll start to see the market stabilize.
What's that natural demand for evs? And I think it's
going to be dependent on for Tesla, right once again
(18:33):
having some product, new product that's going to resonate with consumers.
And then I think the other challenge for Tesla is
navigating the changes in the regulatary policy. You know that
revenue that've gotten from carbon credit will soon disappear, and
so how do they navigate that? And once again, I
think they do have some opportunities with energy storage. They
have their AI ROBOTAXI, so they have stuff in play,
(18:56):
but it's navigating the short term when demand goes down
and have I not the product available, new product that
resonates with customers.
Speaker 4 (19:03):
It's definite go global because we can with you. And
what's so interesting is while the EV market is getting
smaller here in the US as a policy, China is
going up into the right. Europe it's expanding. But Tesla's
foothold has not been Can they turn that around?
Speaker 9 (19:18):
I think they can if they continue. I mean the
model why. I think the sixth three row or the
sixty model why is really doing well in China now.
I think if they continue to, you know, once again
have new product. But I think the Chinese OEMs, you
have voids shell me that are really gaining market share,
and I think Tesla has stiff competition. So I think
it's going to come down to having product and being
(19:41):
able to resonate that with the consumer.
Speaker 2 (19:42):
There definitely.
Speaker 3 (19:43):
Voudez Tred, director of Industry in Sitess Auto Motive, we
really appreciate having you.
Speaker 2 (19:47):
On the show. CARO like check me on this.
Speaker 3 (19:50):
When we spoke to Robin Denholms, she was crystal clear
like the twenty million EV sales targets there for a
reason I went onto the Tesla I our website. All
of their factories around the world are capable of building
two million vehicles a year, so he's going to have
to hit five hundred thousand every quarter.
Speaker 2 (20:06):
Like, am I understanding that? Right?
Speaker 4 (20:08):
Delivery is what I'm interested? Is production pulled back a
bit as well? And tell us is that about the
change in the way that they're moving to different vehicles
and they thinks about increasing improving model wise and model threes.
Speaker 3 (20:20):
The data not in this press release on quarterly deliveries
is inventory and inventory days and you know, look at that.
Actually you can you can kind of work out using
satellite imagery how many vehicles are really hot on a
lot exactly. But yeah, and then the sheer reaction is
kind of weird, right, you know. I guess people are
saying this was a one time thing because of the
(20:41):
tax credit.
Speaker 4 (20:42):
And the shares have done rather well. We maybe have
a little bit of a profit taking moment. It's time
now for talking tech and first up AI language platform
deep l It is said to be exploring in potential
us ipo now. According to sources, the Google Translate rival
(21:02):
based in Europe, has held preliminary discussions with advisors on
the listing. The possibility of share sales taking place as
soon as next year. Plus a notorious ransomware group have
claimed to install in data from a suite of Oracle apps.
Speaker 10 (21:15):
Now.
Speaker 4 (21:15):
The hackers claimed to have reached Oracle's e business suite,
giving them access to finances, supply chains, and customer relationships.
In one case, the group has demanded a ransom after
fifty million dollars and then Musk and X they have
settled with three former senior Twitter executives who said that
they were wrongly denied fifty three million dollars worth in
severance after the takeover. Now the deal comes six weeks
(21:37):
after Musk and X moved to settle a separate class
action alleging six thousand laid off workers will own as
much as five hundred million dollars at least in severance
ed okay.
Speaker 3 (21:48):
Coming up on the program, Microsoft copes with data center
shortages through a thirty three billion dollar deal with Nebus Group.
The idea is that if you can't do it with
your own gear looked. The Neo Cloud stock down one
point six percent in the market. Nebuus is up higher.
But there's also a bigger picture story at play in
the market today about how optimistic or not we are
(22:11):
about AI. This is Bloomberg Tech. Welcome back to Bloomberg Tech.
I'm going to take another look at Tesla. Look, we're
down when the numbers hit in pre market. We were
up significantly almost five hundred thousand vehicles delivered in the
third quarter. But it's a one time anomaly and it's
(22:33):
driven by consumers, particularly in the United States, flocking to
Tesla vehicles because of the expiring of a federal tax credit.
It's also stocked that was up twelve percent year to date,
had a sort of a rebound from April lows, and
maybe there's a bit of pulling back here. I don't
really know, but the consensus seems to be this was
a one time deal and what was a record corder
for deliveries, and the future isn't even about.
Speaker 2 (22:55):
Cars, is it. I'm also looking at Microsoft.
Speaker 3 (22:57):
This is kind of interesting because there's some newsflow about Microsoft.
We're about to get to it, but the early part
of trading in the session was actually about open AI's
valuation five hundred billion dollars per Bloomberg reporting in a
secondary and the simple logic that it's a signal of
optimism for AI broadly, and it carries a lot of
names with it, we're now down one point six percent Carroc.
(23:18):
There's also the neocloud deals and.
Speaker 4 (23:20):
We've got to dig into that because it's a fascinating
perspective of just the rampant demand for AI compute right
now across the world. And to break that the story down,
it's Bloomberg's Brodie Ford who is articulated and found out
that basically there's been thirty three billion dollars spent by
Microsoft on neo clouds. You're talking European players like n Scale, Nebeus.
(23:40):
There's also local player core Weave. Why would the AI
data center like render outer of that we all know
for asu're be turning to others.
Speaker 10 (23:51):
Yeah, it's kind of funky, right, It's like if I
was paying somebody to write stories and I was still
writing stories. I mean, it's like, essentially, because we have
huge capacity strains, right, Microsoft needs to get as many
chips online as it can, both for its customers itself
and open AI, and it's needing to kind of pull
every single lever it can, and so it's emerged as
(24:12):
a major customer for all of these names like the
core weaves and the nebuuses which have become you know,
very newsy in recent months.
Speaker 3 (24:20):
It's like managing assets, right, and you know the point
of a neocloud is it's dedicated to AI, either training
or influence and you know storage running other software.
Speaker 2 (24:31):
You know, that's a different thing.
Speaker 3 (24:32):
Talls me about the figure of thirty three billion dollars though, like,
is that news? Is it something that we were able
to work out? Because Microsoft doesn't disclose it in like
quarterly earnings or something like that.
Speaker 10 (24:41):
So Microsoft has just kind of disclosed it in piecemeal ways,
and likely it is going to be much higher than
that thirty three. What we have been able to discover
is what this capacity is actually being used for. And
in many cases it's for Microsoft to build their own
AI models. And that's surprising because it's there's a larger
amount of investment in their own internal AI teams than
(25:03):
many had realized. And the points to them saying, man,
we better catch up with the open eyes and anthropics
and have our own models on hand, and we're going
to use the neo clouds to do it.
Speaker 4 (25:13):
And Mostphah Sulliman, who came from deep Mind, went to
Microsoft with an inflection being bought in this rather odd way.
He's the man behind the consumer AI offering. He's I mean,
you've found out that basically the first larger language model
they're building internally under him been using care Weave's assets
over in Oregon.
Speaker 3 (25:30):
I think it is, which is another way of saying
that're using Nvidia Gear to do it.
Speaker 4 (25:35):
Yeah, using basically via core Weave. But also what's interesting
is the numbers that you have to orientate yourself around,
because basically it allows Amy Hood not to have to
write this all as KPEX.
Speaker 10 (25:47):
That's a really important point, right If you buy a
bunch of servers, now you have to appreciate them. Now
it's on your capital expenditures, not you're operating, and investors
want to see a good balance there. And you know,
Microsoft's then able to one's surrending from neal clouds to
say if in five years we actually don't really need
that many GB three hundreds, would rather use more Vera Rubins,
(26:08):
bye bye, We don't need a deal with all these
servers or you don't have necessarily a use for That's
what it allows them to do.
Speaker 3 (26:14):
Potentially, Brody thrown around your GB three hundreds if there
are rubebins appreciate the reforming.
Speaker 4 (26:21):
At has he bench pressed them, though that is a
question for.
Speaker 3 (26:24):
Those uninitiated in video. Once, let me pick up an
h A DGX, which is an eighty pound We'll get
to it another time. Let's talk about the investor perspective
of Brian Kirshman, GQG Partner's portfolio manager joins us Now.
Gkg's portfolios have recently turned significantly underweight Tech on concerns
of deteriorating fundamentals, and a part of what Brody was discussing, right.
(26:45):
I know that we can talk about Microsoft here because
there's some exposure in the funds, but the idea that
you rely on the neo clouds so it doesn't show
up on the balance sheet in the capex. What was
your sort of reaction to hearing that?
Speaker 11 (27:00):
So, I think what it speaks to from a Microsoft
perspective is sort of that Capex sort of notion where
you don't necessarily want to spend all of your capacs
on sort of an asset that could depreciator. It may
not necessarily be as advantageous for you on a go
forward basis. There's a lot of things that are evolving
really quickly when it comes down to these things, but
if I were to take a step back and you
(27:20):
had mentioned sort of we've become a little bit more
as cautious, so to speak, on sort of these names
in general and from an AI perspective, And I think
one of the reasons for that is there's been a
whole lot of spending on the capack side of things,
six hundred billion dollars in spending in CAPEX, and really,
if you take out the infrastructure spending side of this,
there's only been about thirty billion dollars in revenue that
(27:40):
have been generated off of this. So our issue here
is that there is a lack of headroom sort of
returns that are coming through on a lot of these
types of businesses over the course of time. Now, Microsoft,
to its credit, has a software business. They have sort
of steady earnings. They have been able to deliver some
decent results over the course of time, But we are
becoming more skeptical about sort of a lot of things
on the A side where these returns coming from you,
(28:02):
the open AI in particular.
Speaker 4 (28:03):
Yeah, I'm sorry, I mean, Brian, we're looking at a
note that your team put out September the eleventh. You
rang that alarm bell basically saying, we believe that the
sector has a significant inflection point and everyone's making a
one way better as you see it on ai Mania,
and they're ignoring the alarming fundamentals. For you, the alarming
fundamentals are that there is a lack of revenue today,
(28:24):
is it not? Therefore, can you not just make that
bet that eventually open ai will make three hundred billion
dollars worth in revenue by twenty thirty. That vindicates the
amount that they have to spend on all this compute.
Speaker 11 (28:36):
So I think it becomes hard because if you actually
look at the data behind the set, look at open ai,
and they have about a two percent conversion rate in
terms of people that actually want to pay for the service.
That means ninety eight percent of people that use open
ai aren't actually paying for it. So now they have
seven hundred million users globally, about half of those are
coming from the emerging markets. And what's interesting there if
(28:56):
you think about the unit economics of sort of cloud
and I'm sorry, sort of the ai sort of side
of things, is that this isn't like SaaS. So this
isn't like a CRM business where you add additional users
and it all sort of that revenue drops to the
bottom line. There is a high cost to compute that
comes along with this, So you need to generate some
sort of revenues off of each one of these users. Now,
(29:16):
with half of that user base coming from the emerging markets,
a significant chunk coming from India. For example, if I
can get a five G telephone plan within India for
less than ten dollars a month, do I really think
that folks are going to pay twenty dollars a month
for a subscription to chagbt?
Speaker 2 (29:32):
Okay, here we go.
Speaker 3 (29:33):
I like this because we're I think we're looking at
the same data sets. So the top story today is
open ai being valued at five hundred billion dollars on
the latest secondary round. But the big question here is
is where the future for open ai lays on subscriptions
or on enterprise. The data point that I look at
is that it has a user base. You know, it's
like seven hundred million a monthly, right, Caro, how much
(29:55):
of that user base is free and then converted to
being a paying subscribe Because that kind of answers all
your questions.
Speaker 11 (30:03):
Yeah, So that's exactly the stat that I was referring
to from what we've seen, only about two percent of
those folks actually convert over to being paying users, which
means two percent yes, And so that means that ninety
eight percent of folks that are using this actually don't
find enough value to actually sort of spend money on this. Now,
going back to that India data point that I was
referencing earlier, if you think about those folks and you
(30:25):
need to sort of charge call it twenty dollars a
month for some sort of subscription to make this break
even profitability or even come close to that. In India,
you have you know, Barthi Airtel that has a deal
with Perplexity that offers this service for free across parties.
So it becomes really hard to see where the monetization
path comes on a lot of these things over the
course of time. Now, the other side of this is
(30:47):
on the enterprise side. So a lot of people say, okay, well,
maybe it's more of a B to B sales. And
there's a lot of things that people are investigating or
looking at from the enterprise side in terms of I
can use AI to get efficiencies and things like that study.
I think we all know that by now being quoted
in terms of the lack of sort of effectiveness, and
a lot of those We've talked to other tech consultants recently.
(31:07):
In fact, one one of the big three consultant firms,
so that eighty five percent of the projects that they're
working on, so the four hundred projects they've been done
on a year to day basis, eighty five percent of
those projects were absolutely useless.
Speaker 5 (31:18):
I said, fifteen percent generates some sort of benefit.
Speaker 4 (31:21):
You're literally sort of echoing exactly the conversation that we
had with Synthesia's CEO founder yesterday, saying basically, only about
fifteen percent or even vainly working, and only five percent
actually working well. But Brian, can you not think that
eventually they will work? And that's actually more to implementation
issues rather than actually the fact that they're not adding value.
Speaker 11 (31:45):
So I think you have to show me sort of
the math and the monetization and then the pathway for
that working. There's a lot of data organization that needs
to happen. There's a lot of things that need to
happen to get to that point. And what we're seeing
in terms of large language models is we're kind of
peeking out in terms of what the capabilities are, and
you saw that sort of transitioning from GPT four to
GPT five. It's not simply you throw more compute at
(32:08):
the problem and you solve bigger and more complex large
language models. There's more post training types of things that
are coming through, and you're seeing that the models are
actually peeking out in terms of their effectiveness. And at
the end of the day, these are extrapolators, so you're
guessing what the next letter is, what the next word
is based on a large training set. I can't think
for you, and it can't sort of, you know, make
(32:28):
those decisions for you. And I think you're starting to
see that within the enterprise side of things. Now to
pivot to an even bigger question here is where has
this spending actually come through and where are we actually
seeing the money spent. And that is actually more on
the hyperscaler side of things, so actually providing the cloud
services where the data is coming through and where you're
paying for it on the cloud side of things, and
(32:50):
this is also fairly concerned.
Speaker 3 (32:51):
I'm sorry to jump in because we'll run out of time.
That linked to that, including the top line growth discussion,
what we've asked private Market and public MARKETATIST Week is
their assessment of the role debt is playing in all
of these infrastructure projects and how worried or not one
should be about that.
Speaker 5 (33:09):
Yeah, so debt or nodebt.
Speaker 11 (33:11):
One of the points that I was trying to make
earlier was that if you look at the pricing dynamics
within cloud, they're coming under a lot of pressure and
there's a lot of increased competition that's coming through, and
I think that's where we're really struggling on a lot
of these things. Or you have Oracle coming in and
undercutting price by forty to seventy percent on a lot
of these enterprise deals, and you're seeing that dragging down
(33:31):
in terms of the pricing a lot of across a
lot of the cloud players, including like an AWS and
things like that. So it becomes a less profitable venture.
The switching costs are becoming a little bit lower, and
the economics aren't quite as good. It's becoming more commoditized,
and that's where we really struggle because there's a whole
host of investments that's happening in this area and it's
becoming increasingly commoditized. Similar to the fiber build out, so
(33:52):
to speak back in the dot com boom and bus cycle.
Speaker 4 (33:55):
The commoditized element of concern, What about the circularity argument
that we can and that feeds into the debt question
in many.
Speaker 5 (34:02):
Ways absolutely so.
Speaker 11 (34:04):
Then the other question to ask is, if this is
such a fantastic investment on a go forward basis, why
do you have participants in the ecosystem that are actually
funding their customers and then those cash flows are then
coming back to them. So in a lot of the
sort of obscure sort of arrangements and deals as well
in terms of special purpose vehicles JV structures, where are
you putting some of these assets into other sort of
(34:26):
places where you can depreciate the debt or you can
depreciate the assets within those other vehicles and it's not
sitting directly on your balance sheet. So this tends to
happen later in a cycle where you start to see
a little bit more aggressive accounting coming through, and you
start to see some of these things that are starting
to become a little bit more obscure. That has us
concern that we can't see a true sort of trajectory
(34:48):
where the economics are coming through.
Speaker 5 (34:50):
That's what has this concern right now and.
Speaker 4 (34:52):
Why you've gone under way. Brian Kirshman. Great to have
you come back soon. GQG Partners, We thank you for
coming up. Apple hits pauls on read I think it's
Vision Pro headsets. We discussed the rivalry with Meta as
a Bloomberg.
Speaker 3 (35:04):
Tech Apple is said to be ditching plans to revap
its Vision pro headsets. Instead, the iPhone maker is said
to be looking to fast track and develop smart glasses
to rival metas ray bands.
Speaker 2 (35:16):
That's the reporting.
Speaker 3 (35:17):
Let's get to the analysis of Apple's entry into the
smart glass glasses category of anaag Rana Bloomberg Intelligence senior
tech analysts. They have a lot on their plate right
now to shift a new generation of handset of smartphone.
But have you modeled for the idea that they enter
a new category, the smart glass, away from augmented in VR.
Speaker 12 (35:37):
No, not yet, Danil. We have to see what it is.
We have to see what kind of potential reception it's
going to be. I think Meta has a massive lead here,
so you know, you just can't sign off just because
it's an Apple product that it's going to do well.
I think it's going to have to see the details
and before we start to model any you know, kind
of shipment.
Speaker 2 (35:55):
Should they be fast tracking?
Speaker 12 (35:58):
I mean it is, but at the end of the day,
a lot depends on the models that go into it.
So AI is a very big on device. AI is
a very big part of any of these edge products,
and I think, as we know, Apple has to get
that thing first right before they can move on to
some of those features.
Speaker 3 (36:14):
Anarag, I've been reading your latest research wait times, inventory
handsets of the IFN seventeen generation.
Speaker 2 (36:21):
Your conclusion, yeah, I see.
Speaker 12 (36:23):
I think that's a good part is the base model's
doing very well, the pro is doing very well, but
iPhone Air is not at all doing well. And frankly,
that was the one model we thought could get some traction.
But it seems like the battery life is an issue there.
And the second piece could be it's not available in
China right now and that could be another driving factor.
Speaker 4 (36:42):
Must read always Bloomberg Intelligence. Anna Ragrana, thanks so much
for spending time with us. Meanwhile, Peloton shares, let's talk
about half they've performed after yesterday. They continued to be
on the downside after unveiling revamped hardware software along with
new higher prices for its equipment and subscriptions. We spoke
with Peter Stern to CEO yesterday about the new features.
Speaker 13 (37:03):
We are focused both on existing members as well as
non members. For existing members, they're getting so much today.
We are introducing for everyone, regardless of when you bought
your equipment, the benefits of peloton Iq, and that's just
included in your membership. We are now including a new
acquisition that we did a company called breath Work, because
(37:23):
we know the power of breathing and how it can
help people with stress and anxiety and depression and improve
heart rate variability and improve blood pressure. So everyone's getting that.
Major partnerships, for example, one with the Hospital for Special
Surgery to focus on injury prevention and rehabilitation. All of
these things happen for existing members, but if you're not
an existing member, there has never been a better time
(37:46):
to become one. With the launch of this all new
equipment lineup the Cross Training Series. Now we're delivering the
benefits of both cardio and strength because we know that
adults should be doing a couple of hours at a
week of cardio and two days of strength training every week.
You can do that now, all with one piece of
equipment that makes it super easy.
Speaker 4 (38:08):
It's almost in many ways like cross training is the
way that which you're sort of identifying it. But if
I look at the analyst notes and maybe the reaction
from the stock is because a lot.
Speaker 2 (38:17):
Of this have been maked in.
Speaker 4 (38:18):
You've already given us full year forecasts that in many
way talk about what churn you're expecting, but what subscriber growth,
what do you think this will spur in terms of support.
Speaker 13 (38:26):
So we knew, of course as we went into this
year what we were going to be launching, and we
were able, as you point out, Caroline, to bake all
of that into our guidance for the year. But we
also included in our guidance that as the year progresses,
we will be inflecting back toward growth. And that's a big,
big step for us as a company. We had a
(38:47):
couple of years where we've been down as we have
regrouped after the pandemic, and we are now in such
a good place where you see us having reignited our
innovation engine. Of course, our customer love has never left us.
Customers really just appreciate what Peloton does for them and
in particular have their deep connection with our instructors. So
(39:09):
we're building on that foundation and now feel even more
confident about our future than ever before.
Speaker 3 (39:14):
That was Peloton's CEO Peter Stern speaking to Caro in
a big conversation.
Speaker 4 (39:25):
Who will be the next CEO of Disney? The searches
on and right now the board has focused on four
internal candidates, including Josh Damarrow, Banna Walden, Alan Bergman, and
Jimmy and Pataro. Now this is the company is getting
ready to name a new CEO early next year, but
it sounds though conversations are starting to steer towards one
particular name. Lucas Shaw has the details. Why after Bob Chapek,
(39:48):
would it be deemed that the person in charge of
experiences and parks is the right pick?
Speaker 14 (39:52):
Lucas well, Look, it's both about personality and the future
of Disney. You look at where Disney's putting all of
its money going forward, it's into that parts and experience.
Speaker 5 (40:02):
This division.
Speaker 2 (40:02):
Most of the capex over the.
Speaker 14 (40:03):
Next decade is going there, whether expanding existing parks or
building new parks. And Josh is also a very different
personality than Bob Shapek, right, he seems to have more
facility with other parts of the business. He frankly looks
like a Disney CEO, as weird as that may be
to sound, or as weird as that may sound, And
he is just seen as very well qualified relative to
(40:28):
the other candidates in the business and a Disney lifer,
which matters at a company that has a very distinct culture.
Speaker 3 (40:35):
He was around and hanging out in some valley in
July saw him. The screen Time team gave a detailed
report about a breakfast that took place Lucas, I think
it's worth you explaining to the audience what happened, why
it's significant.
Speaker 14 (40:50):
Well, Bob Iger, the current CEO of Disney, who's been
at the company for more than two decades, was having
breakfast with someone who said what many in Hollywood are
already thinking and saying, which is Josh is going to
have the job, and said something positive about how he
would do in it, and Bob reacted very negatively, insisting
(41:10):
that the board has not made a decision. And there's
two important things to know about this. One is that
Disney is a company. Even though everyone in Hollywood believes
that Josh is now the clear front runner, the company
is insisting and has made no decisions, and it's not
going to make any news about this until early next year.
The other is that Bob Iger, who has been pretty
(41:31):
involved in succession the last few times, which have not
processes that have not gone well, is said to be
more marginalized this time because the board knows they need
to get it right, and one way to get it
right is to not have the current CEO as involved
as he has been. And so I think this is
just a source of great frustration for Bob, who doesn't
want to be seen as a lame duck, but also
doesn't have as much control over this as he has.
Speaker 4 (41:53):
Briefly, Lucas, I just want to switch Gears to Netflix.
It's down for four straight days now. There is growing
anxiety about what happening over an X Andino Musk.
Speaker 14 (42:04):
I mean maybe growing anxiety among a few investors. I
am not detecting that with my sources at the company,
most of whom would point out that it's a little
bit ironic for someone who's been a free speech warrior
to browbeat them for a television show that was released
like three to five years ago.
Speaker 3 (42:22):
Bloombergs Lucashaw, who leads the screen time team, Thank you
so much. That does it for this edition of Bloomberg Tech.
But screen Time returns next week live from Los Angeles.
You got a tune in conversations with the best of
the entertainment industry, including Jimmy Kimmel, Caroline Yeah.
Speaker 4 (42:40):
I cannot wait to go. Cannot wait to hear the
conversations Lucas is going to conduct to many others do not.
In the meantime, forget to check out our podcast. Find
it on the terminal as well as online on Apple, Spotify,
and iHeart. This is Bloomberg Tech from New York.
Bloomberg Audio Studios, podcasts, radio news. Bloomberg Tech is a
live from Coast to Coast with Caroline Hide in New
York and Eva low in sentrances go.
Speaker 2 (00:21):
This is Bloomberg Tech coming up.
Speaker 3 (00:22):
Open Ai becomes the world's largest startup with a five
hundred billion dollar valuation following an employee share sale.
Speaker 4 (00:30):
Plus Tesla's vehicle sales jumped to a worldwide record in
the third quarter, a surprise increase after several quarters of
sales slumps. How much did the ev tax credit exploration.
Speaker 3 (00:40):
Helped, and how Microsoft aims to cope with a shortage
of AI data center capacity, striking deals with so called
neo clouds.
Speaker 4 (00:48):
So first we check in on these publicly traded markets
that were at record highs clinging to them as we speak.
The NASAK one hundred is up but five points now. Notably,
we've got a wall of worry coming towards the markets
at the moment. But there have been this desire to
buy into chip stocks, in particular the open ai valuation
that we'll dig into, the idea of the contracts that
(01:08):
they're building with sk Heinex, with Samsung, all of that
had really helped lift the socks. I'm looking at that
at one point thirty percent, but really there's other stocks
that are dragging the overall benchmarks a little bit lower.
Speaker 5 (01:18):
Edd.
Speaker 3 (01:19):
Yeah, the part of the argument is that it's Tesla
that's doing that.
Speaker 2 (01:22):
Right.
Speaker 3 (01:22):
We had been higher pre market when the delivery numbers broke.
Four hundred and ninety seven ninety nine evs delivered in
the third quarter, an astonishing turnaround, a huge beat against consensus.
But as we've been talking about for a while now,
they started advertising in the quarter. They started emailing on
a daily basis, saying, by the way the federal tax
credit runs out, how big a fact was that that
(01:44):
it's an isolated quarter of an elevated proportion of sales.
Speaker 2 (01:49):
Let's go to private markets.
Speaker 3 (01:50):
Big piece of reporting from Bloomberg Shering Gafari open AI
five hundred billion dollar valuation based on employee share sale
to a really intro seen group of investors. Remember Sharen
broke this story first on August the sixth, But now
it's done and there's actually a lot of interesting data
in the report Caro about who opted to or not
(02:12):
to participate. If you're an employee that had two years
of holding the.
Speaker 4 (02:15):
Shares and let's get straight to sharm Gafari extraordinary scoop
that first came in August. Now we get the real
details and perhaps those current employees and former employees not
setting as much as they could have done.
Speaker 2 (02:29):
That's right.
Speaker 6 (02:30):
So you know, again, this is a record valuation for
Open Eye and for just startups right now, surpassing SpaceX
as the most highly valued startup. That being said, there
was more. There could have been more units sold, is
what we're told. And actually employees shows not to take
(02:50):
up all of that potential share sale, so you know,
it could indicate that employees are feeling, you know, the
optimistic about the future of the company and that the
valuation could go even higher. But of course this is
an ongoing story and there are still a lot of
uncertainties as well in opening Ice future, including its ability
to go forward with the restructure.
Speaker 3 (03:13):
When there is a tender or a secondary or any
kind of financial transaction. Sharene there's always a data room,
just take my word for it. And so I find
the group of investors here really interesting third parties that
were able to buy those shares from employees. Just run
us through the list and any that caught your eye.
Speaker 6 (03:31):
That's right, so many of them were expected. We have Thrive,
also a former large investor, as well as SoftBank, another
major partner. We also have Abu, Abu, Dhab, MGX, Dragonear,
and t Row And you know, MGX is an interesting
one given we're seeing more money coming in from overseas,
from the Middle East into AI companies. And you know,
(03:54):
this is just an ongoing as I find an AI.
Once one investment closes, it's the beginning of another one.
So we can expect these sizes to just get bigger
and bigger in terms of funds going in and sales
being shares being seld.
Speaker 4 (04:08):
I mean, that's what's extraordinary is the fact that they
raised money fresh money from SoftBank back in March, and
the valuation is just spiraled even since then, staring even
as remind us of the data and the fundamentals. The
company remains unprofitable and at the moment, revenue is tiny
in comparison to say a Netflix, which is also worth
about five hundred billion dollars.
Speaker 2 (04:30):
That's right.
Speaker 6 (04:31):
So while we're seeing the revenue increase rapidly, they have
something like seven hundred million users. At the same time,
the company is also unprofitable, and that's because of the
large cost to fuel basically the development of AI. There's
huge data compute costs. Here are these unprecedented data centers
(04:53):
that they're building out, there are researchers.
Speaker 5 (04:56):
All of that takes a lot of money.
Speaker 6 (04:58):
So it's still a highly capital intensive, an unprofitable business,
even though the revenue is growing at a very fast rate.
Speaker 3 (05:04):
Bembo Sharen Gafari, It's Dev Dave Open Ai Monday, and
I think we're going to be able to pose questions
that might give us some of the answers to what's
really going on top and bottom line at open Ai.
Let's pivot from the private market side to the public
public side because open AI's story is driving US equities
to fresh highs. We've seen some pullback since the show started,
but generally the idea was that the open ai valuation
(05:26):
signaled a lot of optimism for AI across those public names.
Nancy Tengler, CEO and CIO of Lafetengla Investments, joins us
now for more. There's a lot of life in secondary markets.
Right sharm was running us through tro price participating in
that round. I know that this might not be your domain.
(05:46):
But what did you make of the open ai valuation?
And if someone came to you and said, Hey, Nancy,
I'm putting together an SPV or something like that, would
you try and get in on open ai at this
private level.
Speaker 7 (05:57):
Yes, we would, yes, and we're actually in the process
of working with a firm to do just that. But
we're also interested in you know, SpaceX and XAI and
many of the other names that are still private, and
I think for retail investors it's an opportunity and then
of course for the insiders it provides liquidity at least
(06:18):
through the provider.
Speaker 5 (06:19):
We're working with one.
Speaker 3 (06:21):
One sec Marguerite, bring up the chart there it is okay,
so open ai five hundred billion dollar valuation, SpaceX number two,
four hundred billion, and then I don't see XAI in there,
but I reported that XAI is raising money at a
two hundred million dollar valuation. Of those three, what's your
top priority?
Speaker 7 (06:41):
SpaceX is my greatest interest. I think we know the
AI game and there's a lot of ways to play it.
Speaker 5 (06:47):
It's not a game, but the.
Speaker 7 (06:48):
Opportunity and I really want to get more exposure to space.
So we just launched a fund a strategy that is
focused on all of the above quantum space, nuclear robotics,
and spaces of particular interest to us.
Speaker 4 (07:04):
Fascinating that you're looking at basically these valuations in the
private side, as well as, of course all the exposure
that you build and the public side. Nancy, what draws you?
Is it just too hard to ignore when you're seeing
companies staying private for so much longer?
Speaker 7 (07:20):
Yeah, well right, I mean, Caroline, we used to have
the Wilshire five thousand, and now it's the Wilshair thirty
five hundred. I think, you know, as an investor, my
job is to look around and try to figure out
ways to make money for my clients. When you're going
through a transformative technological revolution like we are, you get
these concentrations, you get higher than normal valuations. But that
(07:43):
is not to say this cannot continue for some time.
And as you know, I've drawn the analogy to the
nineteen nineties. I think the technologies we are seeing now
are much more robust than just eyeballs on a screen,
which was what we were measuring in the nineties. So
I'm excited about all the opportunity and really working hard
to try to figure out ways to gain exposure. Because
(08:04):
the private markets are open to a very lead group
of investors, certainly we want to open it up to
our clients as well.
Speaker 4 (08:11):
Nazie, talk about the fundamentals that you like within these companies,
because yes, you're saying valuations can continue up into the
right for foreseeable future. You think it's underlying technology that
gets us there rather than the market being a rational
lesson in some sort of hype cycle.
Speaker 7 (08:26):
Absolutely, so, just think back as far as Amazon. I mean,
that was a valuable lesson for me as a as
a value investor trained as a you know, buy when
things go down valuation matters. I could never figure out
how the company couldn't report earnings and continue to drive forward.
I think that, and so ultimately we became we participated
(08:47):
in the name and learned a lesson that during certain
periods of time, that's what you're going to see, and
you have to depend on management. You have to be
focused on the underlying fundamentals. And that's that's our job,
and that's why we have a team of analysts that
support me and the other portfolio managers at the firm.
So we're primarily focused on catalyst forout performance in the
(09:09):
soft site, we look at all the numbers that everybody
else looks at on the quantitative side, but qualitatively, we're
looking for catalyst for out performance and strong management teams,
and you can measure those over time. It's obviously a
subjective decision, but we spend a lot.
Speaker 5 (09:23):
Of time on it.
Speaker 3 (09:24):
Nancy, We're going to go very, very deep on Tesla
in the next segment. But actually, as a team, when
we were talking about today's show yesterday, your name came up, right,
you join us all the time. Four hundred and ninety
seven ninety nine vehicles delivered in the third quarter, a record.
The stock rose and now it's down almost two percent.
Just your reaction and to what extent you see the
(09:46):
expiry of the federal tax credit being the principal factor.
Speaker 5 (09:50):
Well, I do think it's a principal factor.
Speaker 7 (09:52):
And I mean I think there was some strength seen
in China which was good or at least less deterioration.
So I think that that is a rebound that we're
going to be watching and continuing to watch closely. But
for us, and I've said this to you, historically, we're
interested in the name because of the energy business, which
we've been talking about for two years, and I think
(10:13):
now people are sort of, you know, excited about that business.
We're interested, obviously, as everyone else is in FSD. They
seem to be seeing really robust improvements. It may not
be a linear acceleration. It may just be at one
point we see that FSD is at the levels we need,
(10:33):
and then they've got seven billion miles traveled and that
Dwarf's Weimo. I live in Weimo Land. You know, you
can't stop at a stoplight in Arizona without seeing four
or five of them. And Tesla's way ahead on that.
So they just need to catch up on the technology
and they will because they have the data. So we're
very excited about the new model Robotaxi, all of the others,
(10:55):
and then of course Optimists, which I'm counting on as
my home health care solution.
Speaker 4 (11:01):
My kids asking me yesterday when we're going to be
getting a robot in the home, Nanci and I can
see that we're all waiting on tent to hoax. But
so too is the comp package for your musk. It's
tied to real delivereralies of Optimus of Robotaxes twenty million
evs on the roads.
Speaker 2 (11:16):
Are you going to be voting in favor of that?
Speaker 3 (11:19):
Oh?
Speaker 7 (11:19):
Yes, absolutely, and the Ai you know, the XAI fundraise.
We would love to see the companies melt together and
get access to SpaceX and XAI. We'll see. I mean
that's me talking, not Elon, but we will definitely be
voting in favor. I love when incentives for the management
team or the visionary CEO are lined up with me
(11:42):
and my shareholders. So we're very excited about the future
of Tesla. And remember it doesn't go straight up. It's
a volatile name. We were buying at two forty in
the spring during the tariff tantrum. We will we will
buy again when stock dips down. But it's a six
percent holding in our strategy, which is the macrocycle opportunities,
(12:03):
and then in our growth strategy it's four and a
half percent holding. So we're committed to the name, and
you know, we believe, we believe in Elon. Maybe I'll
get a T shirt made well when the space fun
goes live.
Speaker 4 (12:17):
When you've got the money coming in for the private
funds as well, do join us. I mean you're always
joining us, and we love it and that's a Tangler
CEO C that's Tangler Investments. Stay well. Meanwhile, coming up,
we're diving for into Tesla, into the vehicle sales that
jump to a worldwide record and third quarter. I'm going
to be going into what's behind this, whether it's sustainable.
Stay with us. This is Bloomberg Tech.
Speaker 3 (12:45):
US customers help drive Tesla's third quarter sales to a
record high as buyers rush to take advantage of federal
tax credits before they expire. I want to get out
to London and Bloomberg's Automotive.
Speaker 2 (12:58):
Zar Craigtrude out.
Speaker 3 (13:00):
Data is really important here, Okay, third quarter four hundred
and ninety seven ninety nine vehicles. The expectation was we'd
see a drop year on year, even if it was
a sequential improvement. This this is an anomaly. This is
like something happened in the quarter. Just explain it.
Speaker 8 (13:19):
Yeah, you know, I think this is a surprise if
you're looking at the consensus and yet if you sort
of were watching closely to where an estimates were coming in.
Towards the very end of the month of September, a
lot of sales side analysts were saying, we think these
deliveries are going to be much higher than that. I
think even having said that, you know, this is a
(13:39):
surprise even for those who are you know, bullish going
into this print. And you know, you do have to
hand it to this company to have delivered more vehicles
than they ever have, even if there are some real
questions about whether there's some staying power to these numbers.
Without the seventy five hundred dollars tax credit in the US,
that's going to be you know, the I guess fourner
(14:00):
and twenty dollars question on the earnings.
Speaker 4 (14:03):
Call in a few weeks for twenty Craig. I'm interested though,
like you are, sat in the heart of the UK,
and indeed Europe has been against Tesla's basically we've seen
sales destruction over there in large part people blaming the
politics of Elon Musk. Is that still the sentiment that
you're seeing. Are you getting any other granular data that
shows that maybe other regions in the world have liked
(14:26):
the model wise and the upgrades.
Speaker 8 (14:27):
Of late Yeah, I mean, I think in terms of
the way things have been trending in Europe, it's been
very consistent. There's maybe some you know, kind of marginal
narrowing of the declines over here in Europe, but still
substantially down in a market that is up substantially, and
in China you've seen, you know, at best, shipments move
(14:50):
sideways flat, you know, down by small percentages in a
market where you know, BYD and Jawmi and you know,
domestic players really are making a lot of noise. We did,
you know, see just recently some loss of momentum on
BYD's part, but that's from a standpoint of really just
(15:11):
dominating their local markets. So sort of by process of elimination,
we really, you know, can can sort of come to
this conclusion that the US is really what drove.
Speaker 2 (15:22):
This result for Tesla. We'll see to what extent.
Speaker 8 (15:25):
You know, Elon Musk is willing to sort of get
into that, but I think we've already heard from him
during the last earnings call that you know, this this
could be a company that's in for a few rough
quarters as a result of this pullback of support from
the US government.
Speaker 4 (15:39):
Really most crowdu down. Thank you as always for the
thorough analysis. Let's stick with Tesla sales. Bring in Stephanie
Valdez Street. She is the director of Industry insights of
Coxa Automotive and just the larger picture in the US.
For Stephanie, it was but earlier in the week that
we saw Jim Farley, CEO of Ford saying the EV
market in the US is going to slump by half
because of the policy is currently being enacted here. And
(16:01):
meanwhile we see Tesla jump but because of that EV
tax credit expire, potentially, what is the forward looking analysis
of yours for US EV sales for Tesla?
Speaker 9 (16:13):
Yeah, definitely, we knew Q three was going to be
a record quarter, right driven by policy. Right, everyone created
a sense of urgency, whether it was dealers, OEMs, and
so consumers reacted. So we're probably going to reach about
four hundred and ten thousand, probably ten percent market share
in the US market, and Tesla has definitely taken advantage
of that, but once again, that was policy driven. Moving
(16:34):
into Q four, we're going to see a slowdown. However,
I've already seen and you've probably seen some of the
manufacturers are going to continue a seventy five hundred dollars
credit going into Q four. On leasing, Hyundai mentioned they're
going to reduce their Ionic five by you know, ninety
eight hundreds and twenty six model and continue to offer
the seventy five hundred.
Speaker 3 (16:54):
So just very specifically, Stephanie, in this quarter that's just
been reported. In the Tesla's case, specifically, you see evidence
that the consumer knew that the federal tax credit was
running out and so took advantage of that to make
a decision and either purchase or lease a vehicle.
Speaker 9 (17:12):
Oh definitely, Yeah, Like, I think the consumers became very
aware of this incentive. If you went to any online
search website, you saw that, you know, the tax credit
was there, it was winding down, And I think definitely
this sense of urgency created consumer reaction, and we're seeing
that in the data. The numbers are still coming in
for September in the US, but definitely going to be
(17:33):
a record quarter and you know, highest market share to date.
Speaker 3 (17:38):
Go There's so many things that I want to poke
around at. Like what sources inside Tesla told me in
recent weeks was like, hey, have you been noticing the
advertising we've been doing on YouTube and Instagram, something that
Elon Musk historically is completely against. But I'm also like,
almost five hundred thousand vehicles in the quarter. Do you
see that as just being a one time thing like
(18:00):
would this be replicated because it has to if he's
going to deliver twenty million vehicles over a ten year period.
That's the math five hundred thousand a quarter.
Speaker 9 (18:10):
Yeah, I think it's going to be challenging, right because
I think just I think a lot of consumers that
were considering buying a vehicle EV specifically pulled ahead bought
it in Q three because of the incentives, and so
I think just we're going to see that slowdown coming
Q four and we'll start to see the market stabilize.
What's that natural demand for evs? And I think it's
going to be dependent on for Tesla, right once again
(18:33):
having some product, new product that's going to resonate with consumers.
And then I think the other challenge for Tesla is
navigating the changes in the regulatary policy. You know that
revenue that've gotten from carbon credit will soon disappear, and
so how do they navigate that? And once again, I
think they do have some opportunities with energy storage. They
have their AI ROBOTAXI, so they have stuff in play,
(18:56):
but it's navigating the short term when demand goes down
and have I not the product available, new product that
resonates with customers.
Speaker 4 (19:03):
It's definite go global because we can with you. And
what's so interesting is while the EV market is getting
smaller here in the US as a policy, China is
going up into the right. Europe it's expanding. But Tesla's
foothold has not been Can they turn that around?
Speaker 9 (19:18):
I think they can if they continue. I mean the
model why. I think the sixth three row or the
sixty model why is really doing well in China now.
I think if they continue to, you know, once again
have new product. But I think the Chinese OEMs, you
have voids shell me that are really gaining market share,
and I think Tesla has stiff competition. So I think
it's going to come down to having product and being
(19:41):
able to resonate that with the consumer.
Speaker 2 (19:42):
There definitely.
Speaker 3 (19:43):
Voudez Tred, director of Industry in Sitess Auto Motive, we
really appreciate having you.
Speaker 2 (19:47):
On the show. CARO like check me on this.
Speaker 3 (19:50):
When we spoke to Robin Denholms, she was crystal clear
like the twenty million EV sales targets there for a
reason I went onto the Tesla I our website. All
of their factories around the world are capable of building
two million vehicles a year, so he's going to have
to hit five hundred thousand every quarter.
Speaker 2 (20:06):
Like, am I understanding that? Right?
Speaker 4 (20:08):
Delivery is what I'm interested? Is production pulled back a
bit as well? And tell us is that about the
change in the way that they're moving to different vehicles
and they thinks about increasing improving model wise and model threes.
Speaker 3 (20:20):
The data not in this press release on quarterly deliveries
is inventory and inventory days and you know, look at that.
Actually you can you can kind of work out using
satellite imagery how many vehicles are really hot on a
lot exactly. But yeah, and then the sheer reaction is
kind of weird, right, you know. I guess people are
saying this was a one time thing because of the
(20:41):
tax credit.
Speaker 4 (20:42):
And the shares have done rather well. We maybe have
a little bit of a profit taking moment. It's time
now for talking tech and first up AI language platform
deep l It is said to be exploring in potential
us ipo now. According to sources, the Google Translate rival
(21:02):
based in Europe, has held preliminary discussions with advisors on
the listing. The possibility of share sales taking place as
soon as next year. Plus a notorious ransomware group have
claimed to install in data from a suite of Oracle apps.
Speaker 10 (21:15):
Now.
Speaker 4 (21:15):
The hackers claimed to have reached Oracle's e business suite,
giving them access to finances, supply chains, and customer relationships.
In one case, the group has demanded a ransom after
fifty million dollars and then Musk and X they have
settled with three former senior Twitter executives who said that
they were wrongly denied fifty three million dollars worth in
severance after the takeover. Now the deal comes six weeks
(21:37):
after Musk and X moved to settle a separate class
action alleging six thousand laid off workers will own as
much as five hundred million dollars at least in severance
ed okay.
Speaker 3 (21:48):
Coming up on the program, Microsoft copes with data center
shortages through a thirty three billion dollar deal with Nebus Group.
The idea is that if you can't do it with
your own gear looked. The Neo Cloud stock down one
point six percent in the market. Nebuus is up higher.
But there's also a bigger picture story at play in
the market today about how optimistic or not we are
(22:11):
about AI. This is Bloomberg Tech. Welcome back to Bloomberg Tech.
I'm going to take another look at Tesla. Look, we're
down when the numbers hit in pre market. We were
up significantly almost five hundred thousand vehicles delivered in the
third quarter. But it's a one time anomaly and it's
(22:33):
driven by consumers, particularly in the United States, flocking to
Tesla vehicles because of the expiring of a federal tax credit.
It's also stocked that was up twelve percent year to date,
had a sort of a rebound from April lows, and
maybe there's a bit of pulling back here. I don't
really know, but the consensus seems to be this was
a one time deal and what was a record corder
for deliveries, and the future isn't even about.
Speaker 2 (22:55):
Cars, is it. I'm also looking at Microsoft.
Speaker 3 (22:57):
This is kind of interesting because there's some newsflow about Microsoft.
We're about to get to it, but the early part
of trading in the session was actually about open AI's
valuation five hundred billion dollars per Bloomberg reporting in a
secondary and the simple logic that it's a signal of
optimism for AI broadly, and it carries a lot of
names with it, we're now down one point six percent Carroc.
(23:18):
There's also the neocloud deals and.
Speaker 4 (23:20):
We've got to dig into that because it's a fascinating
perspective of just the rampant demand for AI compute right
now across the world. And to break that the story down,
it's Bloomberg's Brodie Ford who is articulated and found out
that basically there's been thirty three billion dollars spent by
Microsoft on neo clouds. You're talking European players like n Scale, Nebeus.
(23:40):
There's also local player core Weave. Why would the AI
data center like render outer of that we all know
for asu're be turning to others.
Speaker 10 (23:51):
Yeah, it's kind of funky, right, It's like if I
was paying somebody to write stories and I was still
writing stories. I mean, it's like, essentially, because we have
huge capacity strains, right, Microsoft needs to get as many
chips online as it can, both for its customers itself
and open AI, and it's needing to kind of pull
every single lever it can, and so it's emerged as
(24:12):
a major customer for all of these names like the
core weaves and the nebuuses which have become you know,
very newsy in recent months.
Speaker 3 (24:20):
It's like managing assets, right, and you know the point
of a neocloud is it's dedicated to AI, either training
or influence and you know storage running other software.
Speaker 2 (24:31):
You know, that's a different thing.
Speaker 3 (24:32):
Talls me about the figure of thirty three billion dollars though, like,
is that news? Is it something that we were able
to work out? Because Microsoft doesn't disclose it in like
quarterly earnings or something like that.
Speaker 10 (24:41):
So Microsoft has just kind of disclosed it in piecemeal ways,
and likely it is going to be much higher than
that thirty three. What we have been able to discover
is what this capacity is actually being used for. And
in many cases it's for Microsoft to build their own
AI models. And that's surprising because it's there's a larger
amount of investment in their own internal AI teams than
(25:03):
many had realized. And the points to them saying, man,
we better catch up with the open eyes and anthropics
and have our own models on hand, and we're going
to use the neo clouds to do it.
Speaker 4 (25:13):
And Mostphah Sulliman, who came from deep Mind, went to
Microsoft with an inflection being bought in this rather odd way.
He's the man behind the consumer AI offering. He's I mean,
you've found out that basically the first larger language model
they're building internally under him been using care Weave's assets
over in Oregon.
Speaker 3 (25:30):
I think it is, which is another way of saying
that're using Nvidia Gear to do it.
Speaker 4 (25:35):
Yeah, using basically via core Weave. But also what's interesting
is the numbers that you have to orientate yourself around,
because basically it allows Amy Hood not to have to
write this all as KPEX.
Speaker 10 (25:47):
That's a really important point, right If you buy a
bunch of servers, now you have to appreciate them. Now
it's on your capital expenditures, not you're operating, and investors
want to see a good balance there. And you know,
Microsoft's then able to one's surrending from neal clouds to
say if in five years we actually don't really need
that many GB three hundreds, would rather use more Vera Rubins,
(26:08):
bye bye, We don't need a deal with all these
servers or you don't have necessarily a use for That's
what it allows them to do.
Speaker 3 (26:14):
Potentially, Brody thrown around your GB three hundreds if there
are rubebins appreciate the reforming.
Speaker 4 (26:21):
At has he bench pressed them, though that is a
question for.
Speaker 3 (26:24):
Those uninitiated in video. Once, let me pick up an
h A DGX, which is an eighty pound We'll get
to it another time. Let's talk about the investor perspective
of Brian Kirshman, GQG Partner's portfolio manager joins us Now.
Gkg's portfolios have recently turned significantly underweight Tech on concerns
of deteriorating fundamentals, and a part of what Brody was discussing, right.
(26:45):
I know that we can talk about Microsoft here because
there's some exposure in the funds, but the idea that
you rely on the neo clouds so it doesn't show
up on the balance sheet in the capex. What was
your sort of reaction to hearing that?
Speaker 11 (27:00):
So, I think what it speaks to from a Microsoft
perspective is sort of that Capex sort of notion where
you don't necessarily want to spend all of your capacs
on sort of an asset that could depreciator. It may
not necessarily be as advantageous for you on a go
forward basis. There's a lot of things that are evolving
really quickly when it comes down to these things, but
if I were to take a step back and you
(27:20):
had mentioned sort of we've become a little bit more
as cautious, so to speak, on sort of these names
in general and from an AI perspective, And I think
one of the reasons for that is there's been a
whole lot of spending on the capack side of things,
six hundred billion dollars in spending in CAPEX, and really,
if you take out the infrastructure spending side of this,
there's only been about thirty billion dollars in revenue that
(27:40):
have been generated off of this. So our issue here
is that there is a lack of headroom sort of
returns that are coming through on a lot of these
types of businesses over the course of time. Now, Microsoft,
to its credit, has a software business. They have sort
of steady earnings. They have been able to deliver some
decent results over the course of time, But we are
becoming more skeptical about sort of a lot of things
on the A side where these returns coming from you,
(28:02):
the open AI in particular.
Speaker 4 (28:03):
Yeah, I'm sorry, I mean, Brian, we're looking at a
note that your team put out September the eleventh. You
rang that alarm bell basically saying, we believe that the
sector has a significant inflection point and everyone's making a
one way better as you see it on ai Mania,
and they're ignoring the alarming fundamentals. For you, the alarming
fundamentals are that there is a lack of revenue today,
(28:24):
is it not? Therefore, can you not just make that
bet that eventually open ai will make three hundred billion
dollars worth in revenue by twenty thirty. That vindicates the
amount that they have to spend on all this compute.
Speaker 11 (28:36):
So I think it becomes hard because if you actually
look at the data behind the set, look at open ai,
and they have about a two percent conversion rate in
terms of people that actually want to pay for the service.
That means ninety eight percent of people that use open
ai aren't actually paying for it. So now they have
seven hundred million users globally, about half of those are
coming from the emerging markets. And what's interesting there if
(28:56):
you think about the unit economics of sort of cloud
and I'm sorry, sort of the ai sort of side
of things, is that this isn't like SaaS. So this
isn't like a CRM business where you add additional users
and it all sort of that revenue drops to the
bottom line. There is a high cost to compute that
comes along with this, So you need to generate some
sort of revenues off of each one of these users. Now,
(29:16):
with half of that user base coming from the emerging markets,
a significant chunk coming from India. For example, if I
can get a five G telephone plan within India for
less than ten dollars a month, do I really think
that folks are going to pay twenty dollars a month
for a subscription to chagbt?
Speaker 2 (29:32):
Okay, here we go.
Speaker 3 (29:33):
I like this because we're I think we're looking at
the same data sets. So the top story today is
open ai being valued at five hundred billion dollars on
the latest secondary round. But the big question here is
is where the future for open ai lays on subscriptions
or on enterprise. The data point that I look at
is that it has a user base. You know, it's
like seven hundred million a monthly, right, Caro, how much
(29:55):
of that user base is free and then converted to
being a paying subscribe Because that kind of answers all
your questions.
Speaker 11 (30:03):
Yeah, So that's exactly the stat that I was referring
to from what we've seen, only about two percent of
those folks actually convert over to being paying users, which
means two percent yes, And so that means that ninety
eight percent of folks that are using this actually don't
find enough value to actually sort of spend money on this. Now,
going back to that India data point that I was
referencing earlier, if you think about those folks and you
(30:25):
need to sort of charge call it twenty dollars a
month for some sort of subscription to make this break
even profitability or even come close to that. In India,
you have you know, Barthi Airtel that has a deal
with Perplexity that offers this service for free across parties.
So it becomes really hard to see where the monetization
path comes on a lot of these things over the
course of time. Now, the other side of this is
(30:47):
on the enterprise side. So a lot of people say, okay, well,
maybe it's more of a B to B sales. And
there's a lot of things that people are investigating or
looking at from the enterprise side in terms of I
can use AI to get efficiencies and things like that study.
I think we all know that by now being quoted
in terms of the lack of sort of effectiveness, and
a lot of those We've talked to other tech consultants recently.
(31:07):
In fact, one one of the big three consultant firms,
so that eighty five percent of the projects that they're
working on, so the four hundred projects they've been done
on a year to day basis, eighty five percent of
those projects were absolutely useless.
Speaker 5 (31:18):
I said, fifteen percent generates some sort of benefit.
Speaker 4 (31:21):
You're literally sort of echoing exactly the conversation that we
had with Synthesia's CEO founder yesterday, saying basically, only about
fifteen percent or even vainly working, and only five percent
actually working well. But Brian, can you not think that
eventually they will work? And that's actually more to implementation
issues rather than actually the fact that they're not adding value.
Speaker 11 (31:45):
So I think you have to show me sort of
the math and the monetization and then the pathway for
that working. There's a lot of data organization that needs
to happen. There's a lot of things that need to
happen to get to that point. And what we're seeing
in terms of large language models is we're kind of
peeking out in terms of what the capabilities are, and
you saw that sort of transitioning from GPT four to
GPT five. It's not simply you throw more compute at
(32:08):
the problem and you solve bigger and more complex large
language models. There's more post training types of things that
are coming through, and you're seeing that the models are
actually peeking out in terms of their effectiveness. And at
the end of the day, these are extrapolators, so you're
guessing what the next letter is, what the next word
is based on a large training set. I can't think
for you, and it can't sort of, you know, make
(32:28):
those decisions for you. And I think you're starting to
see that within the enterprise side of things. Now to
pivot to an even bigger question here is where has
this spending actually come through and where are we actually
seeing the money spent. And that is actually more on
the hyperscaler side of things, so actually providing the cloud
services where the data is coming through and where you're
paying for it on the cloud side of things, and
(32:50):
this is also fairly concerned.
Speaker 3 (32:51):
I'm sorry to jump in because we'll run out of time.
That linked to that, including the top line growth discussion,
what we've asked private Market and public MARKETATIST Week is
their assessment of the role debt is playing in all
of these infrastructure projects and how worried or not one
should be about that.
Speaker 5 (33:09):
Yeah, so debt or nodebt.
Speaker 11 (33:11):
One of the points that I was trying to make
earlier was that if you look at the pricing dynamics
within cloud, they're coming under a lot of pressure and
there's a lot of increased competition that's coming through, and
I think that's where we're really struggling on a lot
of these things. Or you have Oracle coming in and
undercutting price by forty to seventy percent on a lot
of these enterprise deals, and you're seeing that dragging down
(33:31):
in terms of the pricing a lot of across a
lot of the cloud players, including like an AWS and
things like that. So it becomes a less profitable venture.
The switching costs are becoming a little bit lower, and
the economics aren't quite as good. It's becoming more commoditized,
and that's where we really struggle because there's a whole
host of investments that's happening in this area and it's
becoming increasingly commoditized. Similar to the fiber build out, so
(33:52):
to speak back in the dot com boom and bus cycle.
Speaker 4 (33:55):
The commoditized element of concern, What about the circularity argument
that we can and that feeds into the debt question
in many.
Speaker 5 (34:02):
Ways absolutely so.
Speaker 11 (34:04):
Then the other question to ask is, if this is
such a fantastic investment on a go forward basis, why
do you have participants in the ecosystem that are actually
funding their customers and then those cash flows are then
coming back to them. So in a lot of the
sort of obscure sort of arrangements and deals as well
in terms of special purpose vehicles JV structures, where are
you putting some of these assets into other sort of
(34:26):
places where you can depreciate the debt or you can
depreciate the assets within those other vehicles and it's not
sitting directly on your balance sheet. So this tends to
happen later in a cycle where you start to see
a little bit more aggressive accounting coming through, and you
start to see some of these things that are starting
to become a little bit more obscure. That has us
concern that we can't see a true sort of trajectory
(34:48):
where the economics are coming through.
Speaker 5 (34:50):
That's what has this concern right now and.
Speaker 4 (34:52):
Why you've gone under way. Brian Kirshman. Great to have
you come back soon. GQG Partners, We thank you for
coming up. Apple hits pauls on read I think it's
Vision Pro headsets. We discussed the rivalry with Meta as
a Bloomberg.
Speaker 3 (35:04):
Tech Apple is said to be ditching plans to revap
its Vision pro headsets. Instead, the iPhone maker is said
to be looking to fast track and develop smart glasses
to rival metas ray bands.
Speaker 2 (35:16):
That's the reporting.
Speaker 3 (35:17):
Let's get to the analysis of Apple's entry into the
smart glass glasses category of anaag Rana Bloomberg Intelligence senior
tech analysts. They have a lot on their plate right
now to shift a new generation of handset of smartphone.
But have you modeled for the idea that they enter
a new category, the smart glass, away from augmented in VR.
Speaker 12 (35:37):
No, not yet, Danil. We have to see what it is.
We have to see what kind of potential reception it's
going to be. I think Meta has a massive lead here,
so you know, you just can't sign off just because
it's an Apple product that it's going to do well.
I think it's going to have to see the details
and before we start to model any you know, kind
of shipment.
Speaker 2 (35:55):
Should they be fast tracking?
Speaker 12 (35:58):
I mean it is, but at the end of the day,
a lot depends on the models that go into it.
So AI is a very big on device. AI is
a very big part of any of these edge products,
and I think, as we know, Apple has to get
that thing first right before they can move on to
some of those features.
Speaker 3 (36:14):
Anarag, I've been reading your latest research wait times, inventory
handsets of the IFN seventeen generation.
Speaker 2 (36:21):
Your conclusion, yeah, I see.
Speaker 12 (36:23):
I think that's a good part is the base model's
doing very well, the pro is doing very well, but
iPhone Air is not at all doing well. And frankly,
that was the one model we thought could get some traction.
But it seems like the battery life is an issue there.
And the second piece could be it's not available in
China right now and that could be another driving factor.
Speaker 4 (36:42):
Must read always Bloomberg Intelligence. Anna Ragrana, thanks so much
for spending time with us. Meanwhile, Peloton shares, let's talk
about half they've performed after yesterday. They continued to be
on the downside after unveiling revamped hardware software along with
new higher prices for its equipment and subscriptions. We spoke
with Peter Stern to CEO yesterday about the new features.
Speaker 13 (37:03):
We are focused both on existing members as well as
non members. For existing members, they're getting so much today.
We are introducing for everyone, regardless of when you bought
your equipment, the benefits of peloton Iq, and that's just
included in your membership. We are now including a new
acquisition that we did a company called breath Work, because
(37:23):
we know the power of breathing and how it can
help people with stress and anxiety and depression and improve
heart rate variability and improve blood pressure. So everyone's getting that.
Major partnerships, for example, one with the Hospital for Special
Surgery to focus on injury prevention and rehabilitation. All of
these things happen for existing members, but if you're not
an existing member, there has never been a better time
(37:46):
to become one. With the launch of this all new
equipment lineup the Cross Training Series. Now we're delivering the
benefits of both cardio and strength because we know that
adults should be doing a couple of hours at a
week of cardio and two days of strength training every week.
You can do that now, all with one piece of
equipment that makes it super easy.
Speaker 4 (38:08):
It's almost in many ways like cross training is the
way that which you're sort of identifying it. But if
I look at the analyst notes and maybe the reaction
from the stock is because a lot.
Speaker 2 (38:17):
Of this have been maked in.
Speaker 4 (38:18):
You've already given us full year forecasts that in many
way talk about what churn you're expecting, but what subscriber growth,
what do you think this will spur in terms of support.
Speaker 13 (38:26):
So we knew, of course as we went into this
year what we were going to be launching, and we
were able, as you point out, Caroline, to bake all
of that into our guidance for the year. But we
also included in our guidance that as the year progresses,
we will be inflecting back toward growth. And that's a big,
big step for us as a company. We had a
(38:47):
couple of years where we've been down as we have
regrouped after the pandemic, and we are now in such
a good place where you see us having reignited our
innovation engine. Of course, our customer love has never left us.
Customers really just appreciate what Peloton does for them and
in particular have their deep connection with our instructors. So
(39:09):
we're building on that foundation and now feel even more
confident about our future than ever before.
Speaker 3 (39:14):
That was Peloton's CEO Peter Stern speaking to Caro in
a big conversation.
Speaker 4 (39:25):
Who will be the next CEO of Disney? The searches
on and right now the board has focused on four
internal candidates, including Josh Damarrow, Banna Walden, Alan Bergman, and
Jimmy and Pataro. Now this is the company is getting
ready to name a new CEO early next year, but
it sounds though conversations are starting to steer towards one
particular name. Lucas Shaw has the details. Why after Bob Chapek,
(39:48):
would it be deemed that the person in charge of
experiences and parks is the right pick?
Speaker 14 (39:52):
Lucas well, Look, it's both about personality and the future
of Disney. You look at where Disney's putting all of
its money going forward, it's into that parts and experience.
Speaker 5 (40:02):
This division.
Speaker 2 (40:02):
Most of the capex over the.
Speaker 14 (40:03):
Next decade is going there, whether expanding existing parks or
building new parks. And Josh is also a very different
personality than Bob Shapek, right, he seems to have more
facility with other parts of the business. He frankly looks
like a Disney CEO, as weird as that may be
to sound, or as weird as that may sound, And
he is just seen as very well qualified relative to
(40:28):
the other candidates in the business and a Disney lifer,
which matters at a company that has a very distinct culture.
Speaker 3 (40:35):
He was around and hanging out in some valley in
July saw him. The screen Time team gave a detailed
report about a breakfast that took place Lucas, I think
it's worth you explaining to the audience what happened, why
it's significant.
Speaker 14 (40:50):
Well, Bob Iger, the current CEO of Disney, who's been
at the company for more than two decades, was having
breakfast with someone who said what many in Hollywood are
already thinking and saying, which is Josh is going to
have the job, and said something positive about how he
would do in it, and Bob reacted very negatively, insisting
(41:10):
that the board has not made a decision. And there's
two important things to know about this. One is that
Disney is a company. Even though everyone in Hollywood believes
that Josh is now the clear front runner, the company
is insisting and has made no decisions, and it's not
going to make any news about this until early next year.
The other is that Bob Iger, who has been pretty
(41:31):
involved in succession the last few times, which have not
processes that have not gone well, is said to be
more marginalized this time because the board knows they need
to get it right, and one way to get it
right is to not have the current CEO as involved
as he has been. And so I think this is
just a source of great frustration for Bob, who doesn't
want to be seen as a lame duck, but also
doesn't have as much control over this as he has.
Speaker 4 (41:53):
Briefly, Lucas, I just want to switch Gears to Netflix.
It's down for four straight days now. There is growing
anxiety about what happening over an X Andino Musk.
Speaker 14 (42:04):
I mean maybe growing anxiety among a few investors. I
am not detecting that with my sources at the company,
most of whom would point out that it's a little
bit ironic for someone who's been a free speech warrior
to browbeat them for a television show that was released
like three to five years ago.
Speaker 3 (42:22):
Bloombergs Lucashaw, who leads the screen time team, Thank you
so much. That does it for this edition of Bloomberg Tech.
But screen Time returns next week live from Los Angeles.
You got a tune in conversations with the best of
the entertainment industry, including Jimmy Kimmel, Caroline Yeah.
Speaker 4 (42:40):
I cannot wait to go. Cannot wait to hear the
conversations Lucas is going to conduct to many others do not.
In the meantime, forget to check out our podcast. Find
it on the terminal as well as online on Apple, Spotify,
and iHeart. This is Bloomberg Tech from New York.
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