July 24, 2025 • 47 mins
Big Tech earnings are rolling in and Alphabet just dropped a strong quarter, with search and cloud firing on all cylinders. Anthony and Piers unpack why fears of AI eating into Google’s ad machine are overblown (for now), and what a mind-bending $85 billion AI spend tells us about the battle for dominance.
Meanwhile, Tesla’s numbers paint a rougher picture. Revenue down, profits off a cliff, and EV incentives scrapped. But Musk’s betting big on robotaxis and he’s not alone. The guys break down the race between Tesla, Waymo, and Amazon’s Zoox for the future of driverless mobility.
Also in this episode: Trump’s new Japan trade pact sends Japanese automakers soaring, a look at how the carry trade could backfire on the US, and why meme stocks like Krispy Kreme are suddenly back in the spotlight.
(00:00) Intro
(03:07) Alphabet Earnings
(07:08) Google Cloud & AI
(09:26) $85B AI Spend
(14:29) Mag 7 Check-In
(16:53) Tesla Misses
(21:24) Musk’s Big Bets
(23:20) RoboTaxi Showdown
(28:39) Can Tesla Win?
(32:38) Trump’s Japan Deal
(36:54) Carry Trade Risk
(40:43) Meme Stocks Return
(46:23) WallStreetBets Redux
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
(00:00):
Hello and welcome back to the Market Maker podcast.
And Piers, you've just sent overyour notes to me and I know that
you're such a diligent guy, but my God, I feel like we could be
here for hours. So I'm, I'm actually very keen
to see how you condense this down.
But to give the listeners a bit of an idea of what we're we're
(00:23):
going to cover, we've had Alphabet, so one of the first
the big tech companies come out and report.
And obviously we had the big bank earnings last week we
talked about. So this really kicks off the
tech side of things, which is obviously incredibly influential
for the overall indices. I was just thinking of some
stats, preparing for some slidesfor tomorrow and just looking at
(00:43):
like the the amount of contribution these stocks are
doing, dragging these indices upto these record levels.
But Alphabet profits jumped 20%,particularly with strength in
search and cloud units, but maybe not all sunshine and
rainbows. So we'll have a look at that.
And then Tesla faces some rough quarters amid Trump's EV policy
(01:05):
shift. And also we'll have a look at
what would it take for robo taxis to go globals because you
sounded quite excited when you had a little breakdown on this
one. And then obviously Trump's been
in deal mode. He's he's done it again.
Trump has struck a trade pact with Japan, but also EU is
(01:26):
pending. And on the back of that, that
news, I think on Tuesday, on Wednesday, Marcus hit record
highs once again, baby. And then meme stock mania
returns. So if you like your your Krispy
Kremes. And I didn't even know Gopros
was still a thing, to be honest,but that probably what qualifies
(01:47):
them for meme stock status. So, yeah, we'll talk a little
bit about that as well. So yeah, where do you want to
start, Piers? Well, pack it in.
I like the fact that you're implying, you know, I put in a
huge volume of work to prepare for this this episode.
I like that. In truth, you know, you.
(02:11):
Well, part of this episode is going to be about AI, obviously
talking about these tech stocks and particularly Google, they
say. But yeah, AII mean look, in
terms of make driving efficiencies in the workplace,
Yeah, I reckon I spent 60 seconds putting this sort of
summarized overview together forthis episode.
Obviously, I've read all these articles, so I'm not saying I
(02:33):
haven't spent time, but yeah, interms of like shaping a podcast
episode, yeah, wow. I mean, that work would have
taken definitely a couple of hours and it took 60 seconds.
Are you saying you've been spending a couple of hours for
the last 324 episodes? Where?
(02:53):
Where have you been hiding? Under a rock or something?
Look. I'm I'm embracing the future and
60 seconds starts nags. We're going to start with
Alphabet. And as you said, obviously this
is massive for what just global markets and that's because it's
(03:16):
the US big tech stocks. It's earning season.
It's kind of the latest sort of check temperature check, right?
What's happening, how are they getting on?
And like Google here are the kind of one of the first ones
up. But also as you were implying
with regards to markets there like for the S&P 500, don't
forget that you know, over 30% of that index is US big tech.
(03:38):
So what happens with these thesecompanies and their earnings,
it's absolutely phenomenally keyto what happens with U.S. stock
indices. And right now the S and PS
punching more new all time highs.
You know, we were talking a few weeks back about that radical
bounce from the 8th of April lowup over 30%.
(04:00):
But it's just it's just carryingon going.
We're at 6367 on the S&P 500 now.
So look, Alphabet, I mean, the main thing here is relief that
their search revenues. So Google searching is, as of
yet at least, not being cannibalized by the Chat GPTS of
(04:21):
this world. That's been the big issue with
kind of Alphabet, or we should say, obviously, Alphabet's the
parent company of Google. So Google's revenues, you know,
the majority of them are from search advertising.
And so one of the key risks herewas that maybe AI, maybe the
Chat GPTS of this world were finally going to topple Google's
(04:43):
monopoly on this thing called search.
And we would no longer just typestuff into the Google search bar
and then get 10 blue links and then have to, I mean, Can you
imagine, have to go and actuallyclick on these links and
actually do our own reading onceyou get to the website that it's
pointed you to? That seems quite archaic now
that we'll just get ChatGPT to read the actual articles and
(05:06):
just give me a summary. Thanks.
So the idea was that advertisingrevenues would really be
cannibalized what we've seen from these earnings from quarter
2. So look, this is May, sorry,
April, May, June 2025, we are seeing that there's no
cannibalization whatsoever. And in fact, their revenues from
search alone are punching higherthe, and they look, they've
(05:28):
added, look, they're kind of on their way to evolving their,
their offering from a user's perspective.
Because as you'll know, using Google Now, you get the, what's
called the AI overviews. So once you bang in your Google
search, you'll get that little segment at the top, which is a
little bit of an AI sort of summary.
Yeah, I use that. I use that quite often.
I'd say. Yeah, like I was doing some
(05:51):
using some new software and I was like, well, how do I do
this? And how do I was using, I can't
remember, Adobe Premiere. And I was like, well, how do I
chop this element and that and actually just went bang, bang,
bang, step by step. Yeah, I don't know why I went
there rather than in ChatGPT. It just felt like a more natural
place to go at this point. Well, that's it.
And I think there is a time factor here for Google because
(06:14):
right now most of the planet just Google's, you know, yes,
volumes on the chat GPTS of thisworld obviously are are growing
and growing and growing. And I think actually chat GPTS
monthly active users right now is 600 million, which is a hell
of a lot, right. But the 7 billion people on the
planet and there's way more people that are still Googling
(06:36):
rather than getting onto this AIdriven ChatGPT situation.
So Google have to get they're first so that most of the people
don't pivot to ChatGPT, right? And so they've still got time,
but obviously they've got their own equivalent, which is Gemini
AI, which is a separate app fromtheir search bar that's actually
(06:59):
got 450 million monthly active users now.
So actually that's catching up with it's not far off Chat GPTS,
but you know, back to the actualstraight up search, search
volumes were up by 10% year on year in quarter 2.
So as I said, rather than that cannibalization risk, actually
their volumes are still climbing.
(07:20):
So that's been, I'd say that's the really big key take away
from their earnings here. And as a result, their net
income rose 19%. So $28.2 billion worth of profit
in three months, which is decent.
But then there's search and advertising revenue.
If you take that segment out, that was up 12%.
(07:41):
So that in itself generated 54.2billion.
So that that's that's really key.
The second part of this earningsreport is that their cloud
revenue, which is stepping away from all that search and
advertising stuff. Now that cloud revenue was up
32%. So that's now clocking in at a
really meaningful 13.6 billion for the quarter.
(08:04):
And obviously that is that's them benefiting from just the AI
evolution, right? Because obviously AI and all
these machine learning, all these training tools and so on,
they need to compute. And so, you know, all the cloud
providers, the big ones like AWSand Azure, Microsoft and
(08:24):
obviously Google Cloud, they're the three big guns.
And so that that is just going through the roof here.
So, you know, these are all the positives from the Alphabet
earnings and that has led to a, a little bump.
I mean, from their share price perspective, you know, these
numbers beat expectations, but their share price was up about
(08:45):
2% in overnight trading. And look, they've had a good run
from sort of their sort of startof April low share price was
down at about $144.00. So now it's clocking at 190.
So you know, that's a big run up.
So look, they're off the back ofa strong rally, but adding a
small minor, you know, a little bit.
(09:06):
I'd say this upward trend that we've had for the last couple of
months would probably justification that that's going
to continue. It's not like we've popped 10%
off these earnings or anything. And really the target from a
technical perspective is the on the high of the year, which was
set back on January just above 200 bucks.
But there's always the but with Google and the reason why it
(09:30):
got, it's been underperforming not over the last few weeks or a
couple of months, but prior to that, Google was
underperforming. I should say Alphabet was
underperforming the other Max Sevens for a couple of kind of
key reasons. So one was some news earlier
this year, some antitrust issuesand there was risk that they're
(09:51):
going to lose the default searchstatus on Apple devices.
So iPhone. So right now Google Pay, I think
they pay Apple $10 billion a year to be the default search
browser on the iPhone. And the idea that this is an
antitrust issue that the US government have picked up and
(10:11):
they want to force them to forceApple now to, you know, present
users with options of browsers that they can use, right?
So that's one thing. The other thing then is their
spend on AI, which is more broadly a, a factor for all of
these big tech giants. And here in this earnings report
there, I mean, this is just, it's just insane what's
(10:34):
happening here. But they are now increasing.
So they've announced that they're accelerating and
increasing their spend on the AIrace.
It's now forecast to be $85 billion in 2025.
To give that some context, in 2024, they spent $53 billion on
AI, 85 billion. I mean, I just can't even kind
(10:59):
of imagine that amount of spend on.
It's just insane. And actually just all of these
big tech firms, it's a similar story.
And it just from an antitrust perspective, how the hell do you
compete with a cheque book or a set of cheque books that are
that big, right when you look across those big tech firms?
So that that news in the in the earnings report last night, I
(11:24):
would say has just curbed enthusiasm with regards to the
what would have been a probably bigger share price, positive
bump to the upside that that bigincrease in spend as just again,
everyone's just taken a sharp intake of breath and let's see
if we know, can anybody actuallywin this race and make this just
(11:46):
disgusting amount of money that's getting thrown at it make
that pay off. Yeah, I'd, I'd love to know,
like if anyone listening knows the breakdown of the 85 billion,
that's a. Really good question.
Like, yeah, how do you spend that?
Because, well, a. Lot of the build out.
And infrastructure isn't that, isn't that someone else doing
(12:08):
that? You're not building an in house
centres, right? I don't.
Know the breakdown, but I can I bet what's the biggest line item
in that costing that's got to beNVIDIA GPUs, isn't it?
Look, they're building out theirdata centres and that you know
(12:30):
they've that cloud service you know for them to be able to
compete with the larger Awss andas yours right, those two are
bigger than Google cloud. So infrastructure build out to
to handle what is obviously an exponentially growing kind of
demand, compute demand as these chat GPTS, you know, get more
(12:57):
advanced And at the same time, user growth is like rapid.
So both of those things require more compute power, right?
So it's just kind of building that out now from Google's point
of view, they're saying, well, look, we're, we're spending this
on stuff that's you, you know, generating US money.
It's not like, it's not like it's not like Facebook a few
(13:21):
years back, Facebook going, right, we're going to spend, I
can't remember the exact numbersnow, but I'm going to make them
up. We're going to spend 40 billion
on the metaverse, OK? That's what Zuckerberg said a
few years back. And then the Facebook stock
dumped 30% because the metaverse, I mean, well, it's
not, it's not a thing, you know,it's not that's, that's a moon
(13:42):
shot for like a decade plus. This is, I mean, from Google's
point of view, at least they're spending it on stuff that's
immediately generating some, some, some money.
So there's that. But still, it's just you just, I
mean, it's, I can't even kind offathom.
I just asked the AI how do they spend 8085 billion and what I
(14:02):
got back was roughly so CapEx breakdown.
Roughly 2/3 of the 85 billion goes to servers, including
tensor processing unit hardware TP use, and the remainder goes
to global data centre build outsand networking gear.
Yeah. But yeah, let me just to
conclude then, so on the year todate so far, Google is basically
(14:25):
flat. And so that that now unbalanced
MAC7, you've got Tesla at the bottom down 18, Apple down 15,
then Google. And then on the upside, you've
got Microsoft up 20, Metra up 22, NVIDIA up just under 30.
Yeah, exactly. That splits them out perfectly.
(14:49):
You got the laggards, the Tesla and Apple, you've got then an an
Alphabet or Google's kind of just in the middle.
Now catching back up, I would say flat on the years doesn't
quite tell the story because theall time high for Google was set
on the 1st of January. So it's back to all time highs.
(15:09):
But like the metas and the Nvidias and the Microsofts have
smashed their all time highs from right.
So yeah, but you know, I don't know this is this is all very
positive. A bit of a relief.
No cannibalization yet to their search revenues.
That was key, obviously big explosive growth on the cloud
side. And so we we crack on.
So let's kind of switch to the opposite side of the pendulum
(15:32):
maybe, yeah. One thing is it wouldn't have
the competitive contention amongst these big tech in the AI
space if they go to to 53 to 85 billion, doesn't that just force
the hand then of the others to follow suit and so then they
just get backstopped by you cannot not spend now.
(15:52):
That's right, exactly that. That's it.
You know, you're, you're, you'restarting.
They're well beyond the sort of point of no return.
There's so much that's been spent.
They've just got to carry on. So it's just interesting to
think about, well, who wins. And actually, most likely
they'll be multiple winners. And right now, most likely
(16:14):
they'll be the big giant tech firms because they'll just
outspend everyone else. Now, is that a problem from an
innovation point of view? You could argue definitely.
That's why antitrust risks loom,because, you know, it stifles
innovation, right? We'll talk about one of those in
a minute. When we talk about robo taxis,
there's a there's a start up that's trying to fight against
(16:38):
these big boys. But yeah, it's a, it's a
difficult race to join. And you've either got to have
some kind of massive edge on thekind of technology side, or
you've got to have a massive checkbook.
Let's go to Let's go to Tesla then how are they getting on?
And then the robo taxi situation.
Well. Tesla are having a shocker.
(17:00):
I mean, I mean, the numbers are quite alarming on the one hand.
And if it wasn't for stuff that's further down the track
that could possibly turn this around, then I think their share
price would be in a whole different place, IE much lower.
But right now the numbers are crazy really.
So their profits for quarter 2 dropped 23%.
(17:23):
Their revenues are down 12% compared to quarter 2 of 2024.
So their revenues were came in at 22.5 billion.
Now the reason why I'm, you know, this, this is shocking
because the share price of Teslaand their kind of valuation as a
result from a kind of price to earnings perspective is really
high. It's price they're they're
(17:45):
they're rated as a sort of rapidly growing tech firm,
except not only are they not rapidly growing, they're not
growing. In fact they're contracting.
So it definitely doesn't add up towards their kind of
valuations, but revenues down 12%.
Obviously there's reasons for this many reasons and that's the
(18:08):
thing which ones you point at, but there's an ageing model line
up. They're trying to address that
with the kind of new model. Why?
But it's still hasn't quite comethrough yet.
Obviously, it's the competition that they're getting from the
likes of the Chinese electric vehicle makers, the Byds of this
world, which has really, really been a killer.
(18:29):
So you've got that going on. Then you've got the tariffs.
So tariff. And actually it was interesting
that they reported that in quarter 2, they had $300 million
in extra costs due to tariffs. They've never reported anything
like that. That is definitely Musk making
it very clear Donald Trump, thisis what you're doing to US
(18:52):
businesses with your tariff policy.
You are we are paying more, we're paying 300 million bucks
more in costs. And they said that that would
they're expecting that to continue to rise.
So obviously that's a negative that's squeezing their margins.
Then on top of all of that, thisbig beautiful bill that Trump
rolled out in it were two big, big negatives.
Firstly, the EV incentives, so you if you're an American, you
(19:16):
get 707,500 bucks of subsidies if you know as in discounted off
the price of the car because thegovernment will fund that.
If you buy an electric vehicle that is coming to an end in
September, scrapped entirely notreducing it.
It's literally 0 no more incentive for no more subsidies
for someone to buy an EV. Secondly, a kind of big, under
(19:40):
the bonnet sort of revenue driver for Tesla were selling
what what were called these regulatory credits and their
revenue from that halved in quarter 2 compared to the year
before. So 439,000,000.
This is basically Tesla, which is an EV selling regulatory
credits to some of the big, let's say automotives that have
(20:00):
huge emissions outputs. So those big automotive
companies would buy these credits off Tesla to comply with
the emissions regulations. And the that there's penalties
on, on emissions outputs in the US.
Well, that's all been scrapped. There's no penalties now.
So no one needs to buy regulatory credits off Tesla.
(20:21):
So that's another kind of big kind of kick in the face, to be
honest. And so all of This is why.
And obviously then there's the political kind of negative sort
of flag that Musk has been getting as a result of his sort
of, well, controlling US politics.
Would that be too strong a phrase?
(20:41):
So this, you know, and, and him meddling with European politics
unnecessarily. So, you know, from APR
perspective, it's been an absolute shocker.
So look, all this winds up to say that in quarter 2, they sold
384,122 vehicles, which was 13% down on the same point last
year. And, and Musk was saying, look,
(21:03):
there's some rough quarters ahead because of all of these
regulatory changes and, and so on.
So yeah, I mean, there's no goodnews in here.
And their stock's down 6% now inaftermarket trading.
Obviously the stock won't open until New York opens at 2:30 UK
time, which says we're recordings in like 4 hours.
(21:24):
So I'm. Assuming Musk adopts 2
strategies here, there's the thepivot as to the moon shots not
that far away strategy, right? And to deflect attention away
from the things that you've described.
And then there's also then the calling out of Donald Trump and
(21:47):
some of these political noises about his own party and and so
forth. Yeah, And so, like, I mean, on
that last point, I don't know, from an investor's point of
view, you might even see that asa negative because hang on.
I thought he'd stepped out of the Trump administration now.
And he said, right, my full focus is back on Tesla and what
now he's starting a new political party.
Doesn't sound like his full focus is back on Tesla.
(22:09):
But he's quick to point out on this earnings call, you know,
he's looking into the future and#1 is he now expects that they
will be building 100,000 OptimusAI robots per year within five
years. So that's like the moon shot.
That's like the metaverse sort of equivalent.
(22:31):
And look, who's to say? I mean, obviously, there's
competitors in that space. But Tesla have, you know, a
really, really attractive, interesting product.
It's just it's 5-10 years down the track before that's going to
really come through, right? And will they win that race?
There are competitors. So the other one, which is
nearer term, which segues into our next segment is then the,
(22:54):
well, actually, sorry, one more before we go robo taxi.
That's the affordable EV. And he's been banging on about
how Tesla are going to be rolling out this affordable EV
for years and it's never happened.
And now he's saying again, it's going to be mass production in
second-half of this year. Well, we're already in the
second-half of this year, so is this another line that they
(23:16):
don't deliver on? Obviously, this is to try and
compete with the Chinese. Obviously, Trump tariffs in this
instance are a good thing for Tesla.
We'll talk about the Japan deal and the EU trade deal in a
second. But that those those
negotiations are positive for Tesla from the point of view of
(23:37):
foreign cars coming into the country are going to get
tariffed, right? But anyway, he says they are
going to roll out this EV mass production affordable car.
This does tie into his robo taxidream because look, there's a
few players in this robo taxi sort of space.
There's the three sort of big guns.
(24:01):
Waymo, that's Alphabets company that came out of Google.
They spun it out and set it up as his own entity, still under
the alphabet umbrella. But Waymo now is the leader with
regards to monthly rides, let's say.
And actually it's quite amazing.Oh, sorry, weekly rides.
(24:25):
Do you know this figure? So per what's the what's the
number of paid for Waymo rides per week right now?
Do you know how many per week? No idea.
I don't even know which states of.
Well, it's 5 cities. They are.
They operate in five cities OK in the all in the US.
(24:47):
I'm assuming these are large popular cities, assuming they're
fairly affluent ones like California, and the people that
use them are probably fairly affluent, so probably use them
quite often. I don't know 100,000.
I like your rationale this kid 250,000 per week so that I mean
(25:09):
that look, robo taxis was alwaysthis thing in the future, right?
Not it's here literally now it'shappening.
So you've obviously got Waymo here.
And by the way, to give that some context, if you go back
just 12 months, I want to give you like the growth rate here.
If you go back 12 months, it waslike, well, actually I've got
(25:30):
monthly figures here now, sorry.So monthly paid for trips are
now up to 700,012 months ago it was 100,000.
So it's kind of seven Xed in volume in 12 months and
obviously that growth rate is expected to be sustained.
And this is only just five cities, right?
(25:51):
So obviously the size of this market, if you think about it,
it's kind of it was hard to kindof get your head around and
actually obviously hard to forecast right now.
In 2024, the size of the market was tiny, tiny, tiny $1.9
billion. By 2030, it's expected to be
somewhere between 40 billion to 100 billion.
(26:13):
So that's at least you know thatthat that could be 50 times
growth in 4 1/2 years, right? By 2040, expected to be 1.2
trillion. Now, obviously that's a long way
in the future and that estimate carries a lot of, you know,
where can. I buy these but this?
(26:34):
Is my point right? This is a massive, massive
future market and so who's goingto win it?
And again, perhaps not one single player, but well, if you
talk to Musk, then he'll tell you because in his earning score
yesterday, he said, he said, hang on, here's the quote.
(26:54):
Talking about robo taxis. Once it does start to move the
financial needle in a significant way, IE revenues
from robo taxiing, it will really go exponentially from
here. And he predicted that Tesla will
have a 99% market share. That's, that's a lot of hot air.
No one's going to have 99% market share.
(27:16):
But look, if it's going to be 1.2 trillion, you know, the size
of the market in 15 years time, then you know, even if I don't
know, even if a even a big minority chunk of that, that's a
lot of money. Remember, Tesla at the moment
generate 100 billion revenue a year, right?
Let's just say they had a quarter of that market in 2040,
(27:38):
Then you know, that's that's 300billion.
So you know, and that you would say that would be maybe a
conservative estimate of the amount of market share they
might have. And so look, Waymo are ahead at
the moment in terms of weekly rides.
Tesla, they started to roll out their kind of cyber cab in Texas
(28:01):
earlier this year. The the other player you might
not be aware of listeners is Zooks, so ZOOX and that is whose
that is Amazon's player, right? So you've got you've got the
three big tech, another set of giant chequebooks that are just
(28:24):
all over this market. You might remember Apple tried
to had a go at this few years back.
They failed and ditched it and caved and just gave up.
So you got these three big guns that are plowing forwards,
right? And, and, and we'll see, right?
There's different now the, the obviously to win this big giant
market share in the future, it'sabout scale.
Now you have to say on this front, Tesla are absolutely in
(28:47):
the driving seat, even though Waymo is right now out in front.
The problem Waymo have is their vehicle costs right now they're
partnering with Jaguar and there's a huge amount of of
equipment because it's not just cameras.
They have late Lidar, which is this these laser detectors as
well. So right now one vehicle is a
is, is is expected to cost Google $150,000 to get it on the
(29:12):
road. That's a lot of rides you need
to kind of make that money back before then actually you're so
they're definitely losing money right now.
One way that Google have got. So the point here is Google
don't make their own cars, so they're having to partner with
someone else. They're they're switching to
Hyundai and that's expected to bring that cost down.
(29:36):
But still the equipment is really expensive.
If you look at Tesla, they reckon because Tesla just use
cameras only it's a more advanced technology.
It's still behind in terms of its level of autonomy.
But if the if, if Tesla can get it up to what's called a level 4
fully self drive signed off by the regulator technology, then
(29:58):
their system is while Musk says it costs about 400 bucks for a
set of cameras and find a bit ofa software download.
Meaning two things. He can mobilize the entire
existing Tesla fleet that are already out there in the wild,
right? If you own a Tesla, it can be a
robo taxi #2 Obviously Tesla arein the business of manufacturing
(30:22):
cars. You know his news that this
cheap vehicle is going to get mass production second-half of
this year. Well, that's where he's going to
get his robo taxi from. And he reckons he can build robo
taxis for $30,000. So he could have his own fleet
at $30,000 a pop on the road versus Tesla's currently, sorry,
(30:45):
versus Google's current cost of 150,000.
So look, they've got the, the, if they can get regulatory sign
off now, obviously he's falling out with Trump.
So that hurdle's got higher thenfrom a scale point of view.
And Tesla are looking pretty good here.
(31:05):
There's a lot of a lot way, longway to go.
Zooks, they've gone a different route where they've got the same
technology as Google in terms ofusing the Lidar stuff.
They're also then trying to build their own cars.
It's apparently they're calling it a toaster.
I haven't actually seen one. It's like a glass toaster is
apparently what it looks like. But again, it's hugely
(31:25):
expensive. So obviously a long way to go in
this race, but from way more leading terms of weekly rides
like by miles. But Tesla are sitting on the ace
cards if they can get this technology through the
regulator. So it'll be interesting to see.
(31:46):
Makes sense to me then for Musk to turn political allegiance and
back to Democrats in time and take like a right position
within the Democratic Party. That's such a good point.
That is such a good point that that so maybe this new party
idea may maybe actually it's just the kind of stepping Segway
(32:09):
stepping stone steps back to theDemocrats.
Yeah, scared. But look from him, right that
that regulation, if he can get it through, I mean, I mean,
Tesla could become the biggest company on the part the.
Deal for the Democrats to sign up to the Musk Show, Yeah.
And he's happy to play the long game.
(32:31):
He's happy to play the long game.
That's that is a great show. I like it.
OK, well look, talking of the main, the main man himself, the
Donald. The Donald, I mean.
He's been a busy boy and you know, he's been doing the
business again, it seems. So what's, what's the latest
then? I think Japan was was the big
(32:51):
one right this week. And he was like, there was a
small. One that earlier in the week
where Besson does the Treasury Secretary announced that he's
going to meet with the Chinese in Sweden next week.
So obviously that's that's a good sign.
The deadline for the Chinese deal just quickly was the August
(33:11):
12th. Remember, like back when I think
they got up to what was it, 145%tariffs on China?
And then they came together and did a kind of deal and Trump
said, right, we'll give you 90 days.
Well, that expires on the August12th.
So a meeting next week in Swedenis obviously a good sign also.
With Besson, the Treasury Secretary, he said on Tuesday.
(33:32):
Look, we're not going to fire Powell.
Yeah. So that's.
Also another little element for the, I think the positivity in
markets as well, I. Agree.
Absolutely. And then the Japanese news, so
they've done, they've done the deal.
And actually, Japan have officially also announced that
the deal's been done. So, yeah, look, this is this is
(33:53):
this is a good thing on that kind of trade war risk
barometer. So they've agreed 15% tariffs on
all Chinese goods. That's a drop from the 25% that
Trump had threatened. OK.
They've also carved out a kind of deal on automotives.
So yeah, auto tariffs, remember the US have a global 25% tariff
(34:18):
on autos, full stop, all autos coming in.
They've carved out an exception for Japan, again at 15%.
So instead of 25% on Japanese autos and obviously the Toyotas
of this world, etcetera, that's a really massive piece of that
Japanese exporting industry. So they've, they, they've cut
(34:38):
that. So that's a really good thing.
In return, Japan are committed to 550 billion investment fund
for the US Don't know what that means.
But then questions remain on like defence obligations and
what's going to happen with steel tariffs.
But look, net net, the Nikkei jumped 3 1/2% off the back of
this news. So, and, and being LED and look,
(35:00):
that index is heavily packed with the big autos like, and so
it's not just Toyota, of course.You might have heard of Mazda,
you might have heard of Subaru, you might have heard of
Mitsubishi Honda, you know, these are global giants of the
auto industry. And so they are, they're,
they're through the roof that Mazda's share price was up, I
(35:21):
think 17 1/2% off this announcement.
They were worried that they weren't expecting to get a
concession on the auto tariff. They thought that's it, we're
just locked in on 25% with the rest of the planet.
But no, and actually there was aSide Story here because the US
are negotiating with the EU and the EU are also got a big giant
(35:42):
automotive industry. So they're like, oh, hang on, we
can perhaps have this carve out as well.
So you had EU big giant automotive, you know,
Volkswagen, BMW, all the rest ofthem that they obviously
benefited from this story as well.
But yeah, look, this is Japan. They're a big player.
If you think about the global, if you think about the trade war
(36:03):
risk, when you think about the big giant economy as well, China
are the second biggest economy. Obviously the US are the
biggest, right? China a second.
Besant's going to meet them in Sweden next week.
The euro area looks like. So the EU are apparently on the
cusp of a deal. We will see.
Japan's in the bag, EU KS done. India actually.
(36:26):
Where are we with India? Is that the one where they
announced a deal but then India didn't confirm it?
I can't remember now, but that basically basically takes care
of the top 10 biggest economies on the planet, right?
So then actually fine. You're then looking at
individual countries. Rather than it being a global
risk, it then really becomes more of an isolated risk to the
(36:50):
individual countries that are onthe other side of it, right.
So, so yeah, look, Trump in dealmode.
And that's been a real boost formarkets generally there.
There is a quite a complicated sort of secondary impact to this
Japanese deal. There's a quite a few steps to
(37:12):
it which could circle back and bite the US in the ass.
And this is just due to something called the carry
trade. So basically the historic, like
if you take the last 30 years, Japanese interest rates have
been 0. And that's because they had
(37:34):
basically a deflation crisis. They had a financial crisis in
the 90s, deflation trap ever since interest rates at zero.
So the carry trade for my entirecareer, which is a long time,
has been borrow money in yen because the interest you pay on
your yen loan is super low because their interest rates are
(37:56):
0. Borrow in yen, then take that
yen, convert it to a different currency like the dollar, and
buy U.S. Treasuries, which is a higher
yield. OK, so you're borrowing in yen
at a low rate, and then you're lending to a government.
Let's take the US government at a higher rate and there's your
(38:18):
profit, right? There's a lot of money parked in
that trade. Now, the Japanese economy is
actually, ironically, after COVID and the inflation crisis
for the whole planet, it was actually a really good thing for
Japan, got them out of deflation.
OK, their economies had some challenges, but this is a
positive thing for their economy.
(38:38):
The, the thought is that inflation's going to stay.
The thought is that the central bank are going to start to hike
rates, finally get them off thatzero floor, right.
But that is a problem for the carry trade.
If Japan can hike this year and we're actually, we're now
pricing in one hike if they can,well, then how many times do you
(39:00):
think they might hike next year and the year after?
And actually does the differential between the US
rates and Japanese rates? Because remember, US rates are
coming down. They're being cut, or at least
they were. And they will be again next year
when Trump's new kind of Fed chair comes in, right?
So you got US rates coming down and maybe Japanese rates coming
up. So that differentials going to
close. And that might mean an unwinding
(39:22):
of the carry trade. The problem there is that that's
a big part of the demand of U.S.debt.
It's the carry trade, borrowing yen, buy US bonds.
But if you're going to unwind that where you're going to sell
US bonds, right? And we got a debt problem in the
US So it could through some complicated kind of set of
(39:46):
circumstances circle back and actually exacerbate the US debt
risk. So that's just kind of one side
caveat. But like put park that for now.
This is a good, obviously a positive thing.
Japanese trade deal in the bag and S&P Nikkei.
Let's go. Yeah, And I think I saw some
(40:10):
some news about he's got some deals over with Columbia, the
university and things like that.So OK, it seems like everyone
has read that everyone's thinking into line basically and
either paying up or doing at least half of what was
requested. So it's an interesting strategy.
Like you said, it's high risk but seemingly yielding some
(40:34):
results, but not without it's secondary consequences.
I guess this point you're making.
All right, Well, look to to wrapit up then.
Everyone loves a little bit of meme stock mania because we all
think, Oh, well, we're another opportunity where I can make a
quick buck. So rather than eating my Krispy
(40:55):
Kremes, do you think I should bebuying stocking Krispy Kremes
and and dusting off the GoPro? So yeah, so so why?
Why has this become a thing again?
Well, first of all, slight side,no, you know right when US,
sorry, when stocks list on a Stock Exchange, they have a
(41:16):
ticker, right? And it's 4 letters if you're on
AUS Stock Exchange. So you got to pick 4 letters.
They're kind of, and mostly it'skind of a shortened version of
your company's name, right? So you've got to pick 4 letters.
Obviously it's got to be 4 letters that no one else has.
I love Krispy Kreme's ticker code, which is D nut DNUT.
(41:38):
Anyway, slight size, sorry there, but they're D nut ticker
code is revving up on what's called Wall Street Bets, which
is one of the which is the famous kind of Reddit channel.
You know, back back at what whatwhat was it like 4 in 2021, four
years ago now it was GameStop. Everyone I'm sure will have
(42:02):
heard about and there's a movie about it now.
It was out last year. I can't even remember the name
of the movie. Maybe you can tell me, but it
was a quite a quite a good movieactually, in terms of actually
representing what was happening.Anyway, this was the meme stock
kind of mania. Anyway, it's mildly back and
Krispy Kreme are leading this aswell as GoPro.
(42:24):
Another one is Open Door Technologies and then coal, OK,
these four have been kind of singled out as being significant
upside. And actually Krispy Kreme's
stock is up 100% in July, right?So that's three weeks, it's
doubled, 3 weeks it's doubled. Now, that doesn't tell the story
(42:45):
because, well, what happened before July?
Well, this, this stock has been absolutely crunched.
And like, if you go back to lastyear, it's trading at sort of
$12.00 and it traded down to below 3 as of the start of July.
OK, so it's been killed. Why?
Well, hedge funds are shorting it, which is your first item on
(43:08):
the list of right, which stock might become a meme stock?
It's one where the like classic kind of fundamental analysis of
the business is incredibly bad and then the professionals short
it, right. So hedge funds, they, they sell
(43:29):
the stock to try and profit fromit falling.
Why are the fundamentals bad? Well, and actually at the moment
about 30% of the Krispy Kreme shares are out on loan for hedge
funds to short. So this is where investment
banks, let's say we'll have inventory of Krispy Kreme shares
and they'll lend these shares toa hedge fund who will then sell
(43:52):
them, looking to them, buy them back at a lower price and give
them back to the bank. So about 30% of the float is now
out on short selling positions, which is really high.
OK, Why is a why? Well, firstly, the fundamentals.
They got a lot of debt. So their debt is about $935
million at the moment. And you might have heard
(44:12):
interest rates are staying stubbornly high.
They've got negative margins. So they're they're losing money.
And look, this is all around stuff like, you know, like the,
you know, the big, the, the craze in the weight loss drugs
at the moment in the US, it's thought, well, OK, junk food,
that's a problem because if people don't have an appetite
(44:34):
anymore, they're not going to buy unhealthy stuff, right?
So that was one thing. And then on top of that,
obviously then you've got this, this kind of set up where they
got too much, they're too levered, too much debt, their
margins were super thin, such asthey've now gone negative.
And so right, everyone's jumpingon this short.
OK, so the market went from the the share price went from $12.00
(44:55):
to to three Q The Wall Street bets.
And this is where now you've gotMain Street, you've got the
retail army are kind of coming in and saying like, screw you
hedge funds, let's let's squeezeyou out, right?
So they the the the retail traders are plowing into this
(45:17):
stock, lifting it up 100% up. I mean it's only at $4.30 by the
way, but that is like 100% off the low from three weeks ago.
But don't forget it was at $12.00 like literally four
months ago. So we're still nowhere near back
to, it's not like GameStop, which went thousands of percent
(45:38):
and to all time highs. We're nowhere near that yet in
brackets. I don't know.
But but it's just quite an interesting story that you've
got the retail army back on the battlefield looking to take on
some of these big hedge funds. Yeah, I'm just wondering like,
well, why are they bored or theythere was stimmy checks at the
(46:04):
time, which made a lot of sense because there was like, here's a
check and you're like, OK, cool,I'll get a new widescreen TV and
park a lot of money that I neverearned.
I'm willing to risk it all and burn it all tomorrow.
So. So yeah, I wonder what's changed
this time to like galvanized theArmy.
(46:25):
I don't, I don't know enough. And maybe there's people within
the threads that could inform usof maybe something's happened
unbeknown to us. Bitcoins had a good year.
True. Maybe cashing out, maybe people.
Are cashing out a bit on their Bitcoin and they've got some
some ammunition looking to park it somewhere spicy.
(46:49):
But yeah, it that's why, you know, I made that very specific
point. It's at $4.00.
Yeah, 100% up on the month, but still 70% down on the year.
So the point here is, yeah, Will, will this take off like a
proper mean stock? I don't know.
(47:10):
I'm not, I'm not buying. Let's just put it that.
Way no. You've just literally given the
the army all that they need. I'm not buying property honest.
Quickly get on the way. OK.
All right. Well, look well, we'll wrap the
show up there for for this week.So thanks as always for for
(47:32):
listening. Any questions as to any views
you want to share things of thatnature, please do just drop us a
comment. Let us know we'd love to hear
and we will see you same time next week.
Take care. Catch you later.
Hello and welcome back to the Market Maker podcast.
And Piers, you've just sent overyour notes to me and I know that
you're such a diligent guy, but my God, I feel like we could be
here for hours. So I'm, I'm actually very keen
to see how you condense this down.
But to give the listeners a bit of an idea of what we're we're
(00:23):
going to cover, we've had Alphabet, so one of the first
the big tech companies come out and report.
And obviously we had the big bank earnings last week we
talked about. So this really kicks off the
tech side of things, which is obviously incredibly influential
for the overall indices. I was just thinking of some
stats, preparing for some slidesfor tomorrow and just looking at
(00:43):
like the the amount of contribution these stocks are
doing, dragging these indices upto these record levels.
But Alphabet profits jumped 20%,particularly with strength in
search and cloud units, but maybe not all sunshine and
rainbows. So we'll have a look at that.
And then Tesla faces some rough quarters amid Trump's EV policy
(01:05):
shift. And also we'll have a look at
what would it take for robo taxis to go globals because you
sounded quite excited when you had a little breakdown on this
one. And then obviously Trump's been
in deal mode. He's he's done it again.
Trump has struck a trade pact with Japan, but also EU is
(01:26):
pending. And on the back of that, that
news, I think on Tuesday, on Wednesday, Marcus hit record
highs once again, baby. And then meme stock mania
returns. So if you like your your Krispy
Kremes. And I didn't even know Gopros
was still a thing, to be honest,but that probably what qualifies
(01:47):
them for meme stock status. So, yeah, we'll talk a little
bit about that as well. So yeah, where do you want to
start, Piers? Well, pack it in.
I like the fact that you're implying, you know, I put in a
huge volume of work to prepare for this this episode.
I like that. In truth, you know, you.
(02:11):
Well, part of this episode is going to be about AI, obviously
talking about these tech stocks and particularly Google, they
say. But yeah, AII mean look, in
terms of make driving efficiencies in the workplace,
Yeah, I reckon I spent 60 seconds putting this sort of
summarized overview together forthis episode.
Obviously, I've read all these articles, so I'm not saying I
(02:33):
haven't spent time, but yeah, interms of like shaping a podcast
episode, yeah, wow. I mean, that work would have
taken definitely a couple of hours and it took 60 seconds.
Are you saying you've been spending a couple of hours for
the last 324 episodes? Where?
(02:53):
Where have you been hiding? Under a rock or something?
Look. I'm I'm embracing the future and
60 seconds starts nags. We're going to start with
Alphabet. And as you said, obviously this
is massive for what just global markets and that's because it's
(03:16):
the US big tech stocks. It's earning season.
It's kind of the latest sort of check temperature check, right?
What's happening, how are they getting on?
And like Google here are the kind of one of the first ones
up. But also as you were implying
with regards to markets there like for the S&P 500, don't
forget that you know, over 30% of that index is US big tech.
(03:38):
So what happens with these thesecompanies and their earnings,
it's absolutely phenomenally keyto what happens with U.S. stock
indices. And right now the S and PS
punching more new all time highs.
You know, we were talking a few weeks back about that radical
bounce from the 8th of April lowup over 30%.
(04:00):
But it's just it's just carryingon going.
We're at 6367 on the S&P 500 now.
So look, Alphabet, I mean, the main thing here is relief that
their search revenues. So Google searching is, as of
yet at least, not being cannibalized by the Chat GPTS of
(04:21):
this world. That's been the big issue with
kind of Alphabet, or we should say, obviously, Alphabet's the
parent company of Google. So Google's revenues, you know,
the majority of them are from search advertising.
And so one of the key risks herewas that maybe AI, maybe the
Chat GPTS of this world were finally going to topple Google's
(04:43):
monopoly on this thing called search.
And we would no longer just typestuff into the Google search bar
and then get 10 blue links and then have to, I mean, Can you
imagine, have to go and actuallyclick on these links and
actually do our own reading onceyou get to the website that it's
pointed you to? That seems quite archaic now
that we'll just get ChatGPT to read the actual articles and
(05:06):
just give me a summary. Thanks.
So the idea was that advertisingrevenues would really be
cannibalized what we've seen from these earnings from quarter
2. So look, this is May, sorry,
April, May, June 2025, we are seeing that there's no
cannibalization whatsoever. And in fact, their revenues from
search alone are punching higherthe, and they look, they've
(05:28):
added, look, they're kind of on their way to evolving their,
their offering from a user's perspective.
Because as you'll know, using Google Now, you get the, what's
called the AI overviews. So once you bang in your Google
search, you'll get that little segment at the top, which is a
little bit of an AI sort of summary.
Yeah, I use that. I use that quite often.
I'd say. Yeah, like I was doing some
(05:51):
using some new software and I was like, well, how do I do
this? And how do I was using, I can't
remember, Adobe Premiere. And I was like, well, how do I
chop this element and that and actually just went bang, bang,
bang, step by step. Yeah, I don't know why I went
there rather than in ChatGPT. It just felt like a more natural
place to go at this point. Well, that's it.
And I think there is a time factor here for Google because
(06:14):
right now most of the planet just Google's, you know, yes,
volumes on the chat GPTS of thisworld obviously are are growing
and growing and growing. And I think actually chat GPTS
monthly active users right now is 600 million, which is a hell
of a lot, right. But the 7 billion people on the
planet and there's way more people that are still Googling
(06:36):
rather than getting onto this AIdriven ChatGPT situation.
So Google have to get they're first so that most of the people
don't pivot to ChatGPT, right? And so they've still got time,
but obviously they've got their own equivalent, which is Gemini
AI, which is a separate app fromtheir search bar that's actually
(06:59):
got 450 million monthly active users now.
So actually that's catching up with it's not far off Chat GPTS,
but you know, back to the actualstraight up search, search
volumes were up by 10% year on year in quarter 2.
So as I said, rather than that cannibalization risk, actually
their volumes are still climbing.
(07:20):
So that's been, I'd say that's the really big key take away
from their earnings here. And as a result, their net
income rose 19%. So $28.2 billion worth of profit
in three months, which is decent.
But then there's search and advertising revenue.
If you take that segment out, that was up 12%.
(07:41):
So that in itself generated 54.2billion.
So that that's that's really key.
The second part of this earningsreport is that their cloud
revenue, which is stepping away from all that search and
advertising stuff. Now that cloud revenue was up
32%. So that's now clocking in at a
really meaningful 13.6 billion for the quarter.
(08:04):
And obviously that is that's them benefiting from just the AI
evolution, right? Because obviously AI and all
these machine learning, all these training tools and so on,
they need to compute. And so, you know, all the cloud
providers, the big ones like AWSand Azure, Microsoft and
(08:24):
obviously Google Cloud, they're the three big guns.
And so that that is just going through the roof here.
So, you know, these are all the positives from the Alphabet
earnings and that has led to a, a little bump.
I mean, from their share price perspective, you know, these
numbers beat expectations, but their share price was up about
(08:45):
2% in overnight trading. And look, they've had a good run
from sort of their sort of startof April low share price was
down at about $144.00. So now it's clocking at 190.
So you know, that's a big run up.
So look, they're off the back ofa strong rally, but adding a
small minor, you know, a little bit.
(09:06):
I'd say this upward trend that we've had for the last couple of
months would probably justification that that's going
to continue. It's not like we've popped 10%
off these earnings or anything. And really the target from a
technical perspective is the on the high of the year, which was
set back on January just above 200 bucks.
But there's always the but with Google and the reason why it
(09:30):
got, it's been underperforming not over the last few weeks or a
couple of months, but prior to that, Google was
underperforming. I should say Alphabet was
underperforming the other Max Sevens for a couple of kind of
key reasons. So one was some news earlier
this year, some antitrust issuesand there was risk that they're
(09:51):
going to lose the default searchstatus on Apple devices.
So iPhone. So right now Google Pay, I think
they pay Apple $10 billion a year to be the default search
browser on the iPhone. And the idea that this is an
antitrust issue that the US government have picked up and
(10:11):
they want to force them to forceApple now to, you know, present
users with options of browsers that they can use, right?
So that's one thing. The other thing then is their
spend on AI, which is more broadly a, a factor for all of
these big tech giants. And here in this earnings report
there, I mean, this is just, it's just insane what's
(10:34):
happening here. But they are now increasing.
So they've announced that they're accelerating and
increasing their spend on the AIrace.
It's now forecast to be $85 billion in 2025.
To give that some context, in 2024, they spent $53 billion on
AI, 85 billion. I mean, I just can't even kind
(10:59):
of imagine that amount of spend on.
It's just insane. And actually just all of these
big tech firms, it's a similar story.
And it just from an antitrust perspective, how the hell do you
compete with a cheque book or a set of cheque books that are
that big, right when you look across those big tech firms?
So that that news in the in the earnings report last night, I
(11:24):
would say has just curbed enthusiasm with regards to the
what would have been a probably bigger share price, positive
bump to the upside that that bigincrease in spend as just again,
everyone's just taken a sharp intake of breath and let's see
if we know, can anybody actuallywin this race and make this just
(11:46):
disgusting amount of money that's getting thrown at it make
that pay off. Yeah, I'd, I'd love to know,
like if anyone listening knows the breakdown of the 85 billion,
that's a. Really good question.
Like, yeah, how do you spend that?
Because, well, a. Lot of the build out.
And infrastructure isn't that, isn't that someone else doing
(12:08):
that? You're not building an in house
centres, right? I don't.
Know the breakdown, but I can I bet what's the biggest line item
in that costing that's got to beNVIDIA GPUs, isn't it?
Look, they're building out theirdata centres and that you know
(12:30):
they've that cloud service you know for them to be able to
compete with the larger Awss andas yours right, those two are
bigger than Google cloud. So infrastructure build out to
to handle what is obviously an exponentially growing kind of
demand, compute demand as these chat GPTS, you know, get more
(12:57):
advanced And at the same time, user growth is like rapid.
So both of those things require more compute power, right?
So it's just kind of building that out now from Google's point
of view, they're saying, well, look, we're, we're spending this
on stuff that's you, you know, generating US money.
It's not like, it's not like it's not like Facebook a few
(13:21):
years back, Facebook going, right, we're going to spend, I
can't remember the exact numbersnow, but I'm going to make them
up. We're going to spend 40 billion
on the metaverse, OK? That's what Zuckerberg said a
few years back. And then the Facebook stock
dumped 30% because the metaverse, I mean, well, it's
not, it's not a thing, you know,it's not that's, that's a moon
(13:42):
shot for like a decade plus. This is, I mean, from Google's
point of view, at least they're spending it on stuff that's
immediately generating some, some, some money.
So there's that. But still, it's just you just, I
mean, it's, I can't even kind offathom.
I just asked the AI how do they spend 8085 billion and what I
(14:02):
got back was roughly so CapEx breakdown.
Roughly 2/3 of the 85 billion goes to servers, including
tensor processing unit hardware TP use, and the remainder goes
to global data centre build outsand networking gear.
Yeah. But yeah, let me just to
conclude then, so on the year todate so far, Google is basically
(14:25):
flat. And so that that now unbalanced
MAC7, you've got Tesla at the bottom down 18, Apple down 15,
then Google. And then on the upside, you've
got Microsoft up 20, Metra up 22, NVIDIA up just under 30.
Yeah, exactly. That splits them out perfectly.
(14:49):
You got the laggards, the Tesla and Apple, you've got then an an
Alphabet or Google's kind of just in the middle.
Now catching back up, I would say flat on the years doesn't
quite tell the story because theall time high for Google was set
on the 1st of January. So it's back to all time highs.
(15:09):
But like the metas and the Nvidias and the Microsofts have
smashed their all time highs from right.
So yeah, but you know, I don't know this is this is all very
positive. A bit of a relief.
No cannibalization yet to their search revenues.
That was key, obviously big explosive growth on the cloud
side. And so we we crack on.
So let's kind of switch to the opposite side of the pendulum
(15:32):
maybe, yeah. One thing is it wouldn't have
the competitive contention amongst these big tech in the AI
space if they go to to 53 to 85 billion, doesn't that just force
the hand then of the others to follow suit and so then they
just get backstopped by you cannot not spend now.
(15:52):
That's right, exactly that. That's it.
You know, you're, you're, you'restarting.
They're well beyond the sort of point of no return.
There's so much that's been spent.
They've just got to carry on. So it's just interesting to
think about, well, who wins. And actually, most likely
they'll be multiple winners. And right now, most likely
(16:14):
they'll be the big giant tech firms because they'll just
outspend everyone else. Now, is that a problem from an
innovation point of view? You could argue definitely.
That's why antitrust risks loom,because, you know, it stifles
innovation, right? We'll talk about one of those in
a minute. When we talk about robo taxis,
there's a there's a start up that's trying to fight against
(16:38):
these big boys. But yeah, it's a, it's a
difficult race to join. And you've either got to have
some kind of massive edge on thekind of technology side, or
you've got to have a massive checkbook.
Let's go to Let's go to Tesla then how are they getting on?
And then the robo taxi situation.
Well. Tesla are having a shocker.
(17:00):
I mean, I mean, the numbers are quite alarming on the one hand.
And if it wasn't for stuff that's further down the track
that could possibly turn this around, then I think their share
price would be in a whole different place, IE much lower.
But right now the numbers are crazy really.
So their profits for quarter 2 dropped 23%.
(17:23):
Their revenues are down 12% compared to quarter 2 of 2024.
So their revenues were came in at 22.5 billion.
Now the reason why I'm, you know, this, this is shocking
because the share price of Teslaand their kind of valuation as a
result from a kind of price to earnings perspective is really
high. It's price they're they're
(17:45):
they're rated as a sort of rapidly growing tech firm,
except not only are they not rapidly growing, they're not
growing. In fact they're contracting.
So it definitely doesn't add up towards their kind of
valuations, but revenues down 12%.
Obviously there's reasons for this many reasons and that's the
(18:08):
thing which ones you point at, but there's an ageing model line
up. They're trying to address that
with the kind of new model. Why?
But it's still hasn't quite comethrough yet.
Obviously, it's the competition that they're getting from the
likes of the Chinese electric vehicle makers, the Byds of this
world, which has really, really been a killer.
(18:29):
So you've got that going on. Then you've got the tariffs.
So tariff. And actually it was interesting
that they reported that in quarter 2, they had $300 million
in extra costs due to tariffs. They've never reported anything
like that. That is definitely Musk making
it very clear Donald Trump, thisis what you're doing to US
(18:52):
businesses with your tariff policy.
You are we are paying more, we're paying 300 million bucks
more in costs. And they said that that would
they're expecting that to continue to rise.
So obviously that's a negative that's squeezing their margins.
Then on top of all of that, thisbig beautiful bill that Trump
rolled out in it were two big, big negatives.
Firstly, the EV incentives, so you if you're an American, you
(19:16):
get 707,500 bucks of subsidies if you know as in discounted off
the price of the car because thegovernment will fund that.
If you buy an electric vehicle that is coming to an end in
September, scrapped entirely notreducing it.
It's literally 0 no more incentive for no more subsidies
for someone to buy an EV. Secondly, a kind of big, under
(19:40):
the bonnet sort of revenue driver for Tesla were selling
what what were called these regulatory credits and their
revenue from that halved in quarter 2 compared to the year
before. So 439,000,000.
This is basically Tesla, which is an EV selling regulatory
credits to some of the big, let's say automotives that have
(20:00):
huge emissions outputs. So those big automotive
companies would buy these credits off Tesla to comply with
the emissions regulations. And the that there's penalties
on, on emissions outputs in the US.
Well, that's all been scrapped. There's no penalties now.
So no one needs to buy regulatory credits off Tesla.
(20:21):
So that's another kind of big kind of kick in the face, to be
honest. And so all of This is why.
And obviously then there's the political kind of negative sort
of flag that Musk has been getting as a result of his sort
of, well, controlling US politics.
Would that be too strong a phrase?
(20:41):
So this, you know, and, and him meddling with European politics
unnecessarily. So, you know, from APR
perspective, it's been an absolute shocker.
So look, all this winds up to say that in quarter 2, they sold
384,122 vehicles, which was 13% down on the same point last
year. And, and Musk was saying, look,
(21:03):
there's some rough quarters ahead because of all of these
regulatory changes and, and so on.
So yeah, I mean, there's no goodnews in here.
And their stock's down 6% now inaftermarket trading.
Obviously the stock won't open until New York opens at 2:30 UK
time, which says we're recordings in like 4 hours.
(21:24):
So I'm. Assuming Musk adopts 2
strategies here, there's the thepivot as to the moon shots not
that far away strategy, right? And to deflect attention away
from the things that you've described.
And then there's also then the calling out of Donald Trump and
(21:47):
some of these political noises about his own party and and so
forth. Yeah, And so, like, I mean, on
that last point, I don't know, from an investor's point of
view, you might even see that asa negative because hang on.
I thought he'd stepped out of the Trump administration now.
And he said, right, my full focus is back on Tesla and what
now he's starting a new political party.
Doesn't sound like his full focus is back on Tesla.
(22:09):
But he's quick to point out on this earnings call, you know,
he's looking into the future and#1 is he now expects that they
will be building 100,000 OptimusAI robots per year within five
years. So that's like the moon shot.
That's like the metaverse sort of equivalent.
(22:31):
And look, who's to say? I mean, obviously, there's
competitors in that space. But Tesla have, you know, a
really, really attractive, interesting product.
It's just it's 5-10 years down the track before that's going to
really come through, right? And will they win that race?
There are competitors. So the other one, which is
nearer term, which segues into our next segment is then the,
(22:54):
well, actually, sorry, one more before we go robo taxi.
That's the affordable EV. And he's been banging on about
how Tesla are going to be rolling out this affordable EV
for years and it's never happened.
And now he's saying again, it's going to be mass production in
second-half of this year. Well, we're already in the
second-half of this year, so is this another line that they
(23:16):
don't deliver on? Obviously, this is to try and
compete with the Chinese. Obviously, Trump tariffs in this
instance are a good thing for Tesla.
We'll talk about the Japan deal and the EU trade deal in a
second. But that those those
negotiations are positive for Tesla from the point of view of
(23:37):
foreign cars coming into the country are going to get
tariffed, right? But anyway, he says they are
going to roll out this EV mass production affordable car.
This does tie into his robo taxidream because look, there's a
few players in this robo taxi sort of space.
There's the three sort of big guns.
(24:01):
Waymo, that's Alphabets company that came out of Google.
They spun it out and set it up as his own entity, still under
the alphabet umbrella. But Waymo now is the leader with
regards to monthly rides, let's say.
And actually it's quite amazing.Oh, sorry, weekly rides.
(24:25):
Do you know this figure? So per what's the what's the
number of paid for Waymo rides per week right now?
Do you know how many per week? No idea.
I don't even know which states of.
Well, it's 5 cities. They are.
They operate in five cities OK in the all in the US.
(24:47):
I'm assuming these are large popular cities, assuming they're
fairly affluent ones like California, and the people that
use them are probably fairly affluent, so probably use them
quite often. I don't know 100,000.
I like your rationale this kid 250,000 per week so that I mean
(25:09):
that look, robo taxis was alwaysthis thing in the future, right?
Not it's here literally now it'shappening.
So you've obviously got Waymo here.
And by the way, to give that some context, if you go back
just 12 months, I want to give you like the growth rate here.
If you go back 12 months, it waslike, well, actually I've got
(25:30):
monthly figures here now, sorry.So monthly paid for trips are
now up to 700,012 months ago it was 100,000.
So it's kind of seven Xed in volume in 12 months and
obviously that growth rate is expected to be sustained.
And this is only just five cities, right?
(25:51):
So obviously the size of this market, if you think about it,
it's kind of it was hard to kindof get your head around and
actually obviously hard to forecast right now.
In 2024, the size of the market was tiny, tiny, tiny $1.9
billion. By 2030, it's expected to be
somewhere between 40 billion to 100 billion.
(26:13):
So that's at least you know thatthat that could be 50 times
growth in 4 1/2 years, right? By 2040, expected to be 1.2
trillion. Now, obviously that's a long way
in the future and that estimate carries a lot of, you know,
where can. I buy these but this?
(26:34):
Is my point right? This is a massive, massive
future market and so who's goingto win it?
And again, perhaps not one single player, but well, if you
talk to Musk, then he'll tell you because in his earning score
yesterday, he said, he said, hang on, here's the quote.
(26:54):
Talking about robo taxis. Once it does start to move the
financial needle in a significant way, IE revenues
from robo taxiing, it will really go exponentially from
here. And he predicted that Tesla will
have a 99% market share. That's, that's a lot of hot air.
No one's going to have 99% market share.
(27:16):
But look, if it's going to be 1.2 trillion, you know, the size
of the market in 15 years time, then you know, even if I don't
know, even if a even a big minority chunk of that, that's a
lot of money. Remember, Tesla at the moment
generate 100 billion revenue a year, right?
Let's just say they had a quarter of that market in 2040,
(27:38):
Then you know, that's that's 300billion.
So you know, and that you would say that would be maybe a
conservative estimate of the amount of market share they
might have. And so look, Waymo are ahead at
the moment in terms of weekly rides.
Tesla, they started to roll out their kind of cyber cab in Texas
(28:01):
earlier this year. The the other player you might
not be aware of listeners is Zooks, so ZOOX and that is whose
that is Amazon's player, right? So you've got you've got the
three big tech, another set of giant chequebooks that are just
(28:24):
all over this market. You might remember Apple tried
to had a go at this few years back.
They failed and ditched it and caved and just gave up.
So you got these three big guns that are plowing forwards,
right? And, and, and we'll see, right?
There's different now the, the obviously to win this big giant
market share in the future, it'sabout scale.
Now you have to say on this front, Tesla are absolutely in
(28:47):
the driving seat, even though Waymo is right now out in front.
The problem Waymo have is their vehicle costs right now they're
partnering with Jaguar and there's a huge amount of of
equipment because it's not just cameras.
They have late Lidar, which is this these laser detectors as
well. So right now one vehicle is a
is, is is expected to cost Google $150,000 to get it on the
(29:12):
road. That's a lot of rides you need
to kind of make that money back before then actually you're so
they're definitely losing money right now.
One way that Google have got. So the point here is Google
don't make their own cars, so they're having to partner with
someone else. They're they're switching to
Hyundai and that's expected to bring that cost down.
(29:36):
But still the equipment is really expensive.
If you look at Tesla, they reckon because Tesla just use
cameras only it's a more advanced technology.
It's still behind in terms of its level of autonomy.
But if the if, if Tesla can get it up to what's called a level 4
fully self drive signed off by the regulator technology, then
(29:58):
their system is while Musk says it costs about 400 bucks for a
set of cameras and find a bit ofa software download.
Meaning two things. He can mobilize the entire
existing Tesla fleet that are already out there in the wild,
right? If you own a Tesla, it can be a
robo taxi #2 Obviously Tesla arein the business of manufacturing
(30:22):
cars. You know his news that this
cheap vehicle is going to get mass production second-half of
this year. Well, that's where he's going to
get his robo taxi from. And he reckons he can build robo
taxis for $30,000. So he could have his own fleet
at $30,000 a pop on the road versus Tesla's currently, sorry,
(30:45):
versus Google's current cost of 150,000.
So look, they've got the, the, if they can get regulatory sign
off now, obviously he's falling out with Trump.
So that hurdle's got higher thenfrom a scale point of view.
And Tesla are looking pretty good here.
(31:05):
There's a lot of a lot way, longway to go.
Zooks, they've gone a different route where they've got the same
technology as Google in terms ofusing the Lidar stuff.
They're also then trying to build their own cars.
It's apparently they're calling it a toaster.
I haven't actually seen one. It's like a glass toaster is
apparently what it looks like. But again, it's hugely
(31:25):
expensive. So obviously a long way to go in
this race, but from way more leading terms of weekly rides
like by miles. But Tesla are sitting on the ace
cards if they can get this technology through the
regulator. So it'll be interesting to see.
(31:46):
Makes sense to me then for Musk to turn political allegiance and
back to Democrats in time and take like a right position
within the Democratic Party. That's such a good point.
That is such a good point that that so maybe this new party
idea may maybe actually it's just the kind of stepping Segway
(32:09):
stepping stone steps back to theDemocrats.
Yeah, scared. But look from him, right that
that regulation, if he can get it through, I mean, I mean,
Tesla could become the biggest company on the part the.
Deal for the Democrats to sign up to the Musk Show, Yeah.
And he's happy to play the long game.
(32:31):
He's happy to play the long game.
That's that is a great show. I like it.
OK, well look, talking of the main, the main man himself, the
Donald. The Donald, I mean.
He's been a busy boy and you know, he's been doing the
business again, it seems. So what's, what's the latest
then? I think Japan was was the big
(32:51):
one right this week. And he was like, there was a
small. One that earlier in the week
where Besson does the Treasury Secretary announced that he's
going to meet with the Chinese in Sweden next week.
So obviously that's that's a good sign.
The deadline for the Chinese deal just quickly was the August
(33:11):
12th. Remember, like back when I think
they got up to what was it, 145%tariffs on China?
And then they came together and did a kind of deal and Trump
said, right, we'll give you 90 days.
Well, that expires on the August12th.
So a meeting next week in Swedenis obviously a good sign also.
With Besson, the Treasury Secretary, he said on Tuesday.
(33:32):
Look, we're not going to fire Powell.
Yeah. So that's.
Also another little element for the, I think the positivity in
markets as well, I. Agree.
Absolutely. And then the Japanese news, so
they've done, they've done the deal.
And actually, Japan have officially also announced that
the deal's been done. So, yeah, look, this is this is
(33:53):
this is a good thing on that kind of trade war risk
barometer. So they've agreed 15% tariffs on
all Chinese goods. That's a drop from the 25% that
Trump had threatened. OK.
They've also carved out a kind of deal on automotives.
So yeah, auto tariffs, remember the US have a global 25% tariff
(34:18):
on autos, full stop, all autos coming in.
They've carved out an exception for Japan, again at 15%.
So instead of 25% on Japanese autos and obviously the Toyotas
of this world, etcetera, that's a really massive piece of that
Japanese exporting industry. So they've, they, they've cut
(34:38):
that. So that's a really good thing.
In return, Japan are committed to 550 billion investment fund
for the US Don't know what that means.
But then questions remain on like defence obligations and
what's going to happen with steel tariffs.
But look, net net, the Nikkei jumped 3 1/2% off the back of
this news. So, and, and being LED and look,
(35:00):
that index is heavily packed with the big autos like, and so
it's not just Toyota, of course.You might have heard of Mazda,
you might have heard of Subaru, you might have heard of
Mitsubishi Honda, you know, these are global giants of the
auto industry. And so they are, they're,
they're through the roof that Mazda's share price was up, I
(35:21):
think 17 1/2% off this announcement.
They were worried that they weren't expecting to get a
concession on the auto tariff. They thought that's it, we're
just locked in on 25% with the rest of the planet.
But no, and actually there was aSide Story here because the US
are negotiating with the EU and the EU are also got a big giant
(35:42):
automotive industry. So they're like, oh, hang on, we
can perhaps have this carve out as well.
So you had EU big giant automotive, you know,
Volkswagen, BMW, all the rest ofthem that they obviously
benefited from this story as well.
But yeah, look, this is Japan. They're a big player.
If you think about the global, if you think about the trade war
(36:03):
risk, when you think about the big giant economy as well, China
are the second biggest economy. Obviously the US are the
biggest, right? China a second.
Besant's going to meet them in Sweden next week.
The euro area looks like. So the EU are apparently on the
cusp of a deal. We will see.
Japan's in the bag, EU KS done. India actually.
(36:26):
Where are we with India? Is that the one where they
announced a deal but then India didn't confirm it?
I can't remember now, but that basically basically takes care
of the top 10 biggest economies on the planet, right?
So then actually fine. You're then looking at
individual countries. Rather than it being a global
risk, it then really becomes more of an isolated risk to the
(36:50):
individual countries that are onthe other side of it, right.
So, so yeah, look, Trump in dealmode.
And that's been a real boost formarkets generally there.
There is a quite a complicated sort of secondary impact to this
Japanese deal. There's a quite a few steps to
(37:12):
it which could circle back and bite the US in the ass.
And this is just due to something called the carry
trade. So basically the historic, like
if you take the last 30 years, Japanese interest rates have
been 0. And that's because they had
(37:34):
basically a deflation crisis. They had a financial crisis in
the 90s, deflation trap ever since interest rates at zero.
So the carry trade for my entirecareer, which is a long time,
has been borrow money in yen because the interest you pay on
your yen loan is super low because their interest rates are
(37:56):
0. Borrow in yen, then take that
yen, convert it to a different currency like the dollar, and
buy U.S. Treasuries, which is a higher
yield. OK, so you're borrowing in yen
at a low rate, and then you're lending to a government.
Let's take the US government at a higher rate and there's your
(38:18):
profit, right? There's a lot of money parked in
that trade. Now, the Japanese economy is
actually, ironically, after COVID and the inflation crisis
for the whole planet, it was actually a really good thing for
Japan, got them out of deflation.
OK, their economies had some challenges, but this is a
positive thing for their economy.
(38:38):
The, the thought is that inflation's going to stay.
The thought is that the central bank are going to start to hike
rates, finally get them off thatzero floor, right.
But that is a problem for the carry trade.
If Japan can hike this year and we're actually, we're now
pricing in one hike if they can,well, then how many times do you
(39:00):
think they might hike next year and the year after?
And actually does the differential between the US
rates and Japanese rates? Because remember, US rates are
coming down. They're being cut, or at least
they were. And they will be again next year
when Trump's new kind of Fed chair comes in, right?
So you got US rates coming down and maybe Japanese rates coming
up. So that differentials going to
close. And that might mean an unwinding
(39:22):
of the carry trade. The problem there is that that's
a big part of the demand of U.S.debt.
It's the carry trade, borrowing yen, buy US bonds.
But if you're going to unwind that where you're going to sell
US bonds, right? And we got a debt problem in the
US So it could through some complicated kind of set of
(39:46):
circumstances circle back and actually exacerbate the US debt
risk. So that's just kind of one side
caveat. But like put park that for now.
This is a good, obviously a positive thing.
Japanese trade deal in the bag and S&P Nikkei.
Let's go. Yeah, And I think I saw some
(40:10):
some news about he's got some deals over with Columbia, the
university and things like that.So OK, it seems like everyone
has read that everyone's thinking into line basically and
either paying up or doing at least half of what was
requested. So it's an interesting strategy.
Like you said, it's high risk but seemingly yielding some
(40:34):
results, but not without it's secondary consequences.
I guess this point you're making.
All right, Well, look to to wrapit up then.
Everyone loves a little bit of meme stock mania because we all
think, Oh, well, we're another opportunity where I can make a
quick buck. So rather than eating my Krispy
(40:55):
Kremes, do you think I should bebuying stocking Krispy Kremes
and and dusting off the GoPro? So yeah, so so why?
Why has this become a thing again?
Well, first of all, slight side,no, you know right when US,
sorry, when stocks list on a Stock Exchange, they have a
(41:16):
ticker, right? And it's 4 letters if you're on
AUS Stock Exchange. So you got to pick 4 letters.
They're kind of, and mostly it'skind of a shortened version of
your company's name, right? So you've got to pick 4 letters.
Obviously it's got to be 4 letters that no one else has.
I love Krispy Kreme's ticker code, which is D nut DNUT.
(41:38):
Anyway, slight size, sorry there, but they're D nut ticker
code is revving up on what's called Wall Street Bets, which
is one of the which is the famous kind of Reddit channel.
You know, back back at what whatwhat was it like 4 in 2021, four
years ago now it was GameStop. Everyone I'm sure will have
(42:02):
heard about and there's a movie about it now.
It was out last year. I can't even remember the name
of the movie. Maybe you can tell me, but it
was a quite a quite a good movieactually, in terms of actually
representing what was happening.Anyway, this was the meme stock
kind of mania. Anyway, it's mildly back and
Krispy Kreme are leading this aswell as GoPro.
(42:24):
Another one is Open Door Technologies and then coal, OK,
these four have been kind of singled out as being significant
upside. And actually Krispy Kreme's
stock is up 100% in July, right?So that's three weeks, it's
doubled, 3 weeks it's doubled. Now, that doesn't tell the story
(42:45):
because, well, what happened before July?
Well, this, this stock has been absolutely crunched.
And like, if you go back to lastyear, it's trading at sort of
$12.00 and it traded down to below 3 as of the start of July.
OK, so it's been killed. Why?
Well, hedge funds are shorting it, which is your first item on
(43:08):
the list of right, which stock might become a meme stock?
It's one where the like classic kind of fundamental analysis of
the business is incredibly bad and then the professionals short
it, right. So hedge funds, they, they sell
(43:29):
the stock to try and profit fromit falling.
Why are the fundamentals bad? Well, and actually at the moment
about 30% of the Krispy Kreme shares are out on loan for hedge
funds to short. So this is where investment
banks, let's say we'll have inventory of Krispy Kreme shares
and they'll lend these shares toa hedge fund who will then sell
(43:52):
them, looking to them, buy them back at a lower price and give
them back to the bank. So about 30% of the float is now
out on short selling positions, which is really high.
OK, Why is a why? Well, firstly, the fundamentals.
They got a lot of debt. So their debt is about $935
million at the moment. And you might have heard
(44:12):
interest rates are staying stubbornly high.
They've got negative margins. So they're they're losing money.
And look, this is all around stuff like, you know, like the,
you know, the big, the, the craze in the weight loss drugs
at the moment in the US, it's thought, well, OK, junk food,
that's a problem because if people don't have an appetite
(44:34):
anymore, they're not going to buy unhealthy stuff, right?
So that was one thing. And then on top of that,
obviously then you've got this, this kind of set up where they
got too much, they're too levered, too much debt, their
margins were super thin, such asthey've now gone negative.
And so right, everyone's jumpingon this short.
OK, so the market went from the the share price went from $12.00
(44:55):
to to three Q The Wall Street bets.
And this is where now you've gotMain Street, you've got the
retail army are kind of coming in and saying like, screw you
hedge funds, let's let's squeezeyou out, right?
So they the the the retail traders are plowing into this
(45:17):
stock, lifting it up 100% up. I mean it's only at $4.30 by the
way, but that is like 100% off the low from three weeks ago.
But don't forget it was at $12.00 like literally four
months ago. So we're still nowhere near back
to, it's not like GameStop, which went thousands of percent
(45:38):
and to all time highs. We're nowhere near that yet in
brackets. I don't know.
But but it's just quite an interesting story that you've
got the retail army back on the battlefield looking to take on
some of these big hedge funds. Yeah, I'm just wondering like,
well, why are they bored or theythere was stimmy checks at the
(46:04):
time, which made a lot of sense because there was like, here's a
check and you're like, OK, cool,I'll get a new widescreen TV and
park a lot of money that I neverearned.
I'm willing to risk it all and burn it all tomorrow.
So. So yeah, I wonder what's changed
this time to like galvanized theArmy.
(46:25):
I don't, I don't know enough. And maybe there's people within
the threads that could inform usof maybe something's happened
unbeknown to us. Bitcoins had a good year.
True. Maybe cashing out, maybe people.
Are cashing out a bit on their Bitcoin and they've got some
some ammunition looking to park it somewhere spicy.
(46:49):
But yeah, it that's why, you know, I made that very specific
point. It's at $4.00.
Yeah, 100% up on the month, but still 70% down on the year.
So the point here is, yeah, Will, will this take off like a
proper mean stock? I don't know.
(47:10):
I'm not, I'm not buying. Let's just put it that.
Way no. You've just literally given the
the army all that they need. I'm not buying property honest.
Quickly get on the way. OK.
All right. Well, look well, we'll wrap the
show up there for for this week.So thanks as always for for
(47:32):
listening. Any questions as to any views
you want to share things of thatnature, please do just drop us a
comment. Let us know we'd love to hear
and we will see you same time next week.
Take care. Catch you later.
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