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Speaker 1: Bloomberg Audio Studios. Podcasts.
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Speaker 2: Radio.
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Speaker 3: News.
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Speaker 4: You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10 a.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts or watch us live on YouTube.
00:00:24
Speaker 5: The meta earnings here. I don't know, Scarlett, when I covered the stock, tons of free cash flow. Everything was easy. I turn it over to these technology analysts at Bloomberg Intelligence. Now I've got negative free cash flow, all this AI spending.
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Speaker 1: Very different profile.
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Speaker 5: It's a very different profile. It's a different world out there. Mandeep Singh, he and his team are on top of it. Mandeep covers all the technology stuff, leads our efforts there at Bloomberg Intelligence. Mandeep, what did you take away from the meta earnings release and their conference call?
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Speaker 3: That they are leading the pack when it comes to agentic AI on the consumer side. And now they are looking to expand the 10 million users who are using Muse to 100 million users and potentially a billion users. What was missing was the timeline in terms of when they will start monetizing that and what's the scale of CapEx they are planning to do in 2027 and 2028.
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Speaker 6: And if there'll be more equity issuance, which is why I think you see the negative stock react.
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Speaker 1: And do you expect more debt issuance?
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Speaker 7: Either way, there's a lot of money that they have ready to, I mean, they're committing to spending a lot more money given their plans.
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Speaker 6: And right now there is peer pressure.
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Speaker 3: So SpaceX the night before said they could add up to 10 gigawatt capacity. Now that equates to almost 400 billion in CapEx for a company that doesn't even generate $ 2.
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Speaker 6: Billion in free cash flow. They're talking big game.
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Speaker 3: So now I think everyone realizes the supply-constrained nature of chips and the AI infrastructure, and everyone wants to jack up their CapEx expectations. I expect the same from hyperscalers when they report next week, your Amazon, Google, and Microsoft. And that's why I think Meta didn't give a number yesterday, but they're clearly prepping for a big 2027 CapEx.
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Speaker 5: Talk to us about this non-voting stock. It's going to be, I guess, like a stock split, effectively, I guess. So everybody owns the non-voting stock today. It's one vote share for one vote. Now you're going to get a non-voting stock. This is going to help Mark Zuckerberg stay in California forever. Did you see that angle, that article?
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Speaker 6: Yes, I did.
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Speaker 5: So basically it's going to allow him, because he's going to be paid with this billion-dollar tax that's coming from the state of California, he's going to have to sell stock to pay this tax.
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Speaker 1: And he doesn't want to do that.
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Speaker 5: He doesn't want to sell any voting stock. So now they're going to grant him effectively, along with every other shareholder, a share of non-voting stocks.
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Speaker 1: So the shareholders pay for his tax bill.
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Speaker 6: Um, no, um, it's just in an indirect way.
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Speaker 2: I don't know.
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Speaker 6: I mean, they are diluting.
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Speaker 3: There's no doubt that existing shareholders will get diluted.
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Speaker 6: Yes.
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Speaker 1: So they're paying for it in a way.
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Speaker 6: They are paying for it in a way.
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Speaker 3: And it gives them the ability to issue more stock, which is what Alphabet did a few months back.
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Speaker 8: Yeah.
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Speaker 3: You know, you can't do it with all debt financing. That's why your spreads are going up. It's not the right message to the bond market, you know, when it comes to the kind of numbers they're talking about.
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Speaker 6: So they have to do some equity issuance.
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Speaker 2: Okay.
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Speaker 6: And I think this is a step in that direction.
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Speaker 7: But along the way, Mark Zuckerberg doesn't have to pay any big tax bill on his own.
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Speaker 1: That will be something borne by everyone.
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Speaker 6: Yeah, I mean, he's still going to have to.
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Speaker 5: hey, whatever the billions is, he's going to go to the state of California. But he won't have to sell his voting stock.
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Speaker 1: And give up his voting control.
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Speaker 6: Right.
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Speaker 5: But it was very, I thought, a pretty elegant way to do it. I thought it was, whatever Laura thought of that.
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Speaker 7: It's a very elegant way of putting it, and the CFO didn't talk about it in that way, but the reporting shows that this.
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Speaker 1: Is one of the motivations behind all of this.
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Speaker 7: Okay, so SpaceX and Meta have reported, they've made clear that they plan to do a lot more in the AI build-out, so they're going to have to... spend more money and therefore raise more money. What does this herald for Microsoft, for Alphabet and all the other hyperscalers?
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Speaker 3: I feel they will have a better story to tell in terms of monetization of this AI infrastructure that all these companies are building because of their cloud business. Remember, these companies have a backlog, Amazon, Microsoft, Microsoft, Alphabet, and I think Oracle combined have a backlog of $ 2 trillion. So a lot of that backlog will get converted to revenue.
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Speaker 6: So if you are saying.
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Speaker 3: My cloud business is now growing 100%, whereas previously it was growing 30%, That's a great story to tell and then raise your capex because you're showing the ROI. Whereas with Meta, there was no cloud business. Yes, agentic AI will eventually be monetized.
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Speaker 1: We're not there yet, though.
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Speaker 6: We're not there yet. And so that's the uncertainty with Meta.
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Speaker 3: But with Google or Microsoft or Amazon, it's going to show up in the numbers. Their cloud businesses are going to accelerate for the next three or four quarters, and they will beat their numbers, consensus numbers, handedly.
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Speaker 5: Anna Wong was just in here earlier this morning, Bloomberg Economics, and she said, hey, all the investment in AI this year equates to about half of U.S. real GDP.
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Speaker 7: So if we didn't have this AI boom, the economy would look very different. And this is an economy typically driven by consumer spending. And we know what's going on in the consumer sector.
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Speaker 5: Yeah, so she just put a number on it.
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Speaker 6: Meta does have a play with that.
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Speaker 3: So if agent AI takes off and your agent is transacting with the agent of the merchant, then Meta is a winner.
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Speaker 8: Stay with us. More from Bloomberg Intelligence coming up after this.
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Speaker 4: You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10 a.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts or watch us live on YouTube.
00:06:29
Speaker 2: Tesla.
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Speaker 5: I reported some results last night. I mean, are we still worried about them making cars? Isn't it all about merging with SpaceX?
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Speaker 1: They do make cars.
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Speaker 5: They do make cars, but although they don't talk about it a lot, I guess. I don't know.
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Speaker 8: David Welch, Detroit Bureau Chief for Bloomberg News.
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Speaker 5: He knows a thing or two about the auto industry. He's based in Detroit, but we got him in New York City here today in the studio. David, what did you take away from the Tesla results last night?
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Speaker 6: Like, it has been.
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Speaker 9: With Tesla, in most periods of the company's history, even when the financial results are relatively good, surprised in a lot of ways, it's not about that. Investors seem to react the way that shares traded after market last night more about the fact that they spend less on R & D. So they're worried that maybe the whole AI autonomous driving push isn't being developed as fast as Elon Musk has said. So they initially traded down. They're up a bit today, at least the last I looked. So it's doing all right. But given that the auto business actually has a decent bounce here, it really just didn't get the pop you would expect because it's all about what can you do for the robotaxi business and AI and all of these robots, all of these other things that people would rather they made besides low-margin, capital-intensive production of automobiles.
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Speaker 7: So Tesla shareholders don't seem to care that much about the auto business. Does the management care at all about the auto business? I mean, are they coming out with a new lineup? Are they going to refresh any of these vehicles? Are they coming out with the low-cost version of a Tesla car that Elon Musk had promised years ago?
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Speaker 9: No, the low-cost version of the car, he basically turned it into the Cybercat. So instead of a cheap, I think there were talking about calling it a Model 2, he kind of realized that they couldn't make it profitably, and they couldn't compete with Chinese automakers over there with their cost base.
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Speaker 1: But we don't sell Chinese EVs here.
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Speaker 9: No, but he does, he sells cars over there. He competes in China and he competes in Europe where the Chinese do sell cars. So he kind of scrapped that and turned it into the cyber cab and figured, okay, we're just going to be, we're going to compete with Waymo instead and go there. And look, if you've Yuan is pretty good at understanding market psychology. Actually, I would say he's very good at understanding market psychology and keeping a narrative going. And making cars had captured the imagination of investors when they were the only company in the U.S. really making EVs in a big way. So there was a huge growth track for them to run, and they did. And that's what powered their valuation. Once that started to taper off and you saw their shares go down a lot, Two years ago, because of that, and everyone else was coming out with EVs and it wasn't the latest thing, he started changing his focus. And so the narrative now is all about robotaxis. It's about AI. It's about robots. And if you look last week at their press conference with this flying Tesla car, I mean, that to me was the sort of automotive embodiment of talking about a Tesla merger, right? You have a car that's flying with rocket jets or rocket packs. So he's basically saying our future is merging up with SpaceX and being this technology conglomerate as opposed to a car company. Because, look, we saw General Motors buy back or announce a plan to buy back. $ 20 billion in shares. And the stock got crushed. And earnings were pretty good. But you talk about stock multiples, there are a few things less sexy than a conventional car company bending metal and assembling vehicles and selling them at retail to the public. So You look at what happened to GM shares, and Elon saw that a while ago, and he wants to be anything but a car company. So he's drifting away both with what Tesla has done, and if you merge it up with SpaceX, then it's really not a car company.
00:10:32
Speaker 5: So is it a foregone conclusion that the Tesla shareholders are going to line up to exchange their shares for SpaceX, that this is a fait accompli?
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Speaker 9: You never know. I would think they would. SpaceX has a pretty hot hand, especially with Trump in office. I've always thought that was a big part of Elon cozying up to Trump. Elon's politics, is he a super conservative? In some ways, but this is also a guy who pushed solar power and pushed electric vehicles. Not exactly a hard right guy with most of his businesses and how he made most of his money. Elon's about the politics of Elon and his companies and whatever it takes. And if cozying up to the Trump administration so SpaceX can be this big player for NASA helps that company, then he's going to do it.
00:11:19
Speaker 7: David, how much space does Elon take up in the brains and the heads of conventional car makers, CEOs? How much do they look at him and react to him? Or is it not a factor anymore?
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Speaker 9: It's a factor. Probably not as big a factor as it was. But a lot of what General Motors talked about here in New York yesterday was their own push into self-driving vehicles. So I think where companies are more worried about Tesla now is, does it become more of a legitimate competitor to Waymo with self-driving vehicles? And Waymo wants to be a robo-taxi service provider. They want to take on Uber and Lyft with self-driving vehicles. Tesla wants to do that as well, but They're also selling self-driving services in the way that GM is with Super Cruise. And in 2028, GM will have fully hands-free, eyes-free driving on the highway, and they eventually want to migrate that to off-highway driving and not just inexpensive Cadillacs but all of their vehicles. So they're watching General Motors and other companies who also have similar kinds of things in development will be watching Tesla to see where they get with personally owned self-driving vehicles. That's where the auto companies want to be. They don't want to run robotaxi services. They want to sell cars that, whenever you want, can drive them.
00:12:40
Speaker 8: Stay with us. More from Bloomberg Intelligence coming up after this.
00:12:47
Speaker 4: You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10 a.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts or watch us live on YouTube.
00:13:02
Speaker 5: Elon Musk, he confirmed that SpaceX and Tesla have formed special committees to examine a potential merger, with Musk noting his personal preference for a deal. Let's dig into that a little bit.
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Speaker 6: We can do that with Liam Neeson.
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Speaker 5: Denning, a Bloomberg opinion columnist covering the energy space. He has a column out, Space X and Tesla is a strange.
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Speaker 6: But certain deal.
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Speaker 8: Liam, thanks so much for joining us here.
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Speaker 6: What do you make of this?
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Speaker 5: Because, I mean, this is going to be a monster, monster consolidation merger. There's got to be some guardrails on there to make sure we've got some, this is a fair deal for everyone. How do you think this is going to play out?
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Speaker 6: Guardrails.
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Speaker 10: Guardrails.
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Speaker 6: So....
00:13:45
Speaker 10: Yeah, the thing, I mean, the thing to understand is these are both, you know, expressions of what the market thinks of as Elon Musk's genius and And so they are run in a way that I think for most ordinary companies wouldn't fly. And part of that is that Elon Musk essentially controls the direction of both of these companies. They of course have a board of directors and all that, and there's special committees that have been formed to look at this potential deal. But I think the overriding logic for this deal is essentially consolidating Elon Musk's power over his empire. I mean, he has talked in the past repeatedly about his desire to get greater control of Tesla. And with SpaceX, where he has a special class of shares that gives him overwhelming voting power, he has the perfect vehicle to do that.
00:14:49
Speaker 1: Is this a good thing or a bad thing for Tesla shareholders?
00:14:54
Speaker 10: So I can answer that on a couple of levels. I think Tesla is wildly overvalued. I think its latest results offered another proof point of that. The bulls will point to the fact that Tesla said, well, we're driving many more miles under unsupervised driving. The Optimus robots are only a couple of years away, et cetera. But this narrative continues to roll But if you look at the fundamentals of the business, they're not great. I mean, Tesla's main business, although they don't talk about it a lot anymore, is building and selling cars.
00:15:31
Speaker 2: It is, yeah.
00:15:32
Speaker 10: And that business hasn't been growing now for almost three years, despite the fact that the stock is.
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Speaker 6: Valued at nearly 200 times forward earnings.
00:15:41
Speaker 10: It is a narrative-driven stock, and the narrative is at odds with what it is actually achieving in the fields of self-driving and robots. So I think as much as... Tesla shareholders may be concerned about being rolled into a company where, you know, they have less voting power and that sort of thing. By my math, this deal will get done at a price that they can almost certainly live with. They'll end up owning more of the combined entity than their contribution to the profits would really warrant in a normal company. merger situation. So I think they'll be fine with it because in the end, look, if you own Tesla stock or you own SpaceX stock, it's a bet on Musk really either way. And you're happy to let him do what he wants. So what's changing really?
00:16:34
Speaker 5: And I guess one of the key issues is, is timing. I mean, I think presumably Elon Musk is what I've read reporting broadly is repaired his relationship with president Donald Trump. So presumably he would like to get this transaction completed while President Trump is still in office. How does that play into it, do you think?
00:16:55
Speaker 10: I mean, that may well be the case. Clearly, Musk has thrown in his lot with Trump and the Republicans, which I think, you know, has worked well for him the past couple of years. I tend to think, you know, as a CEO in general, If you live in a dictatorship, it's probably good to throw in your lot with one party in a country where power can shift around every couple of years. I don't know. There might be some risks around that. So, yeah, I think that could be a consideration for him. But I think, overall, the logic here is he wants to cement control over his empire. I also think, as I pointed out in my column this morning.
00:17:39
Speaker 10: These are two narrative-driven stocks, and the fact is SpaceX's narrative has now eclipsed Tesla's. I think the fact that Tesla cut its CapEx budget, and by the way, is still underspending even that cutback.
00:17:54
Speaker 6: CapEx budget.
00:17:57
Speaker 10: Is part and parcel of a situation where all the momentum now, I think, is swinging away. SpaceX and so therefore there is a certain value to subsuming Tesla's narrative into that more expansive one.
00:18:13
Speaker 1: Liam, what's the number one thing that could go wrong here?
00:18:18
Speaker 10: I think, look, the number one thing that can go wrong with any of Elon Musk's companies is that belief in the long-dated option cracks, right? I think with Tesla, we've seen instances where confidence has.
00:18:34
Speaker 1: Wavered, wavered, absolutely.
00:18:37
Speaker 10: As you would expect it to, you know, if you promise self-driving cars for 10 years and they still haven't really appeared and you're being eclipsed by rivals like Waymo, then you would expect confidence to wobble. But belief in Musk is incredibly strong. Same with SpaceX. I mean, SpaceX has a far stronger narrative than Tesla at the moment. But its valuation still rests on enormously ambitious readings.
00:19:03
Speaker 8: Stay with us. More from Bloomberg Intelligence coming up after this.
00:19:10
Speaker 4: You're listening to the Bloomberg Intelligence podcast. Catch us live weekdays at 10 a.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business app. Listen on demand wherever you get your podcasts or watch us live on YouTube.
00:19:25
Speaker 5: We had a couple of media companies report earnings here. Comcast reported, as did Spotify. Both stocks are trading higher today. Geetha Ranganathan joins us here. She is the media analyst for Bloomberg Intelligence. Geetha, I saw that Comcast lost more residential broadband customers than forecasted, but stocks up 4% today. What's going on?
00:19:44
Speaker 2: Yeah, stocks up, Paul, because somehow NBC actually kind of is offsetting a lot of those broadband pressures. So, you know, on NBC, they had obviously the huge benefit of the FIFA World Cup on Telemundo. And so we saw some really good numbers from the media division, as well as Peacock, which is their streaming platform, which has been historically posting very, very heavy losses, but has now actually turned a corner and is profitable. And so that somehow managed to, you know, keep EBITDA in decent shape.
00:20:15
Speaker 5: So what's the, are the core business, their cable TV business, their internet access, the broadband business, are they just, those are in secular declines.
00:20:25
Speaker 8: Are they just kind of managing that for cashflow?
00:20:28
Speaker 2: Yeah, pretty much, Paul, at this point. So 85% of Comcast's EBITDA right now comes from its cable business. But as you just pointed out, it is under tremendous secular decline. You're having telecom products like fiber, like fixed wireless access, and now even Starlink kind of really eat cable's lunch here. And so they've been losing market share. And it looks like just with those players getting so much more aggressive, it looks like they're going to continue to lose market share. And so, really, it's going to come down to a question, as you just pointed out, about stemming the bleed here. But one of the things that Comcast is doing is they're actually separating out their cable business from their media business. So, you know, oddly enough, media has actually been the outperformer for Comcast this year, and they plan to separate out NBC and Sky into a separate company by mid-2027. And the hope.
00:21:19
Speaker 2: I think that investors are kind of placing their bet on is that Comcast will eventually combine with the other big cable operator, which is Charter, given the whole shift in the market as we see it today.
00:21:33
Speaker 5: How about the theme park business for Comcast? They had the Warner Brothers. I mean, talk to us about just that Universal Studios and that whole part of the business.
00:21:43
Speaker 2: Theme Park has actually been, you know, really, really resilient across the board, especially for Disney and Universal when it came out with Epic Universe, you know, a few quarters ago. Recently, however, the theme park business has been struggling. So we've seen in Orlando that visitation has not really held up. They're having a weakness across some of their international parks as well. So theme parks right now, not such a hot commodity, but hopefully things settle down. And the good news for Comcast is as we kind of look out over the next few years, they're really investing very heavily in their theme parks. So this is You know, they're really looking to kind of take on Disney. They're going to have this huge theme park property that they're building in London. So really expanding their footprint in a pretty significant way to capture all of that growth.
00:22:34
Speaker 4: This is the Bloomberg Intelligence Podcast, available on Apple, Spotify, and anywhere else you get your podcasts. Listen live each weekday, 10 a.m. to noon Eastern on Bloomberg.com, the iHeartRadio app, TuneIn, and the Bloomberg Business app. You can also watch us live every weekday on YouTube and always on the Bloomberg Terminal.
Speaker 1: Bloomberg Audio Studios. Podcasts.
00:00:05
Speaker 2: Radio.
00:00:06
Speaker 3: News.
00:00:09
Speaker 4: You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10 a.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts or watch us live on YouTube.
00:00:24
Speaker 5: The meta earnings here. I don't know, Scarlett, when I covered the stock, tons of free cash flow. Everything was easy. I turn it over to these technology analysts at Bloomberg Intelligence. Now I've got negative free cash flow, all this AI spending.
00:00:40
Speaker 1: Very different profile.
00:00:41
Speaker 5: It's a very different profile. It's a different world out there. Mandeep Singh, he and his team are on top of it. Mandeep covers all the technology stuff, leads our efforts there at Bloomberg Intelligence. Mandeep, what did you take away from the meta earnings release and their conference call?
00:00:55
Speaker 3: That they are leading the pack when it comes to agentic AI on the consumer side. And now they are looking to expand the 10 million users who are using Muse to 100 million users and potentially a billion users. What was missing was the timeline in terms of when they will start monetizing that and what's the scale of CapEx they are planning to do in 2027 and 2028.
00:01:21
Speaker 6: And if there'll be more equity issuance, which is why I think you see the negative stock react.
00:01:29
Speaker 1: And do you expect more debt issuance?
00:01:30
Speaker 7: Either way, there's a lot of money that they have ready to, I mean, they're committing to spending a lot more money given their plans.
00:01:36
Speaker 6: And right now there is peer pressure.
00:01:38
Speaker 3: So SpaceX the night before said they could add up to 10 gigawatt capacity. Now that equates to almost 400 billion in CapEx for a company that doesn't even generate $ 2.
00:01:50
Speaker 6: Billion in free cash flow. They're talking big game.
00:01:54
Speaker 3: So now I think everyone realizes the supply-constrained nature of chips and the AI infrastructure, and everyone wants to jack up their CapEx expectations. I expect the same from hyperscalers when they report next week, your Amazon, Google, and Microsoft. And that's why I think Meta didn't give a number yesterday, but they're clearly prepping for a big 2027 CapEx.
00:02:23
Speaker 5: Talk to us about this non-voting stock. It's going to be, I guess, like a stock split, effectively, I guess. So everybody owns the non-voting stock today. It's one vote share for one vote. Now you're going to get a non-voting stock. This is going to help Mark Zuckerberg stay in California forever. Did you see that angle, that article?
00:02:43
Speaker 6: Yes, I did.
00:02:44
Speaker 5: So basically it's going to allow him, because he's going to be paid with this billion-dollar tax that's coming from the state of California, he's going to have to sell stock to pay this tax.
00:02:52
Speaker 1: And he doesn't want to do that.
00:02:53
Speaker 5: He doesn't want to sell any voting stock. So now they're going to grant him effectively, along with every other shareholder, a share of non-voting stocks.
00:03:00
Speaker 1: So the shareholders pay for his tax bill.
00:03:02
Speaker 6: Um, no, um, it's just in an indirect way.
00:03:06
Speaker 2: I don't know.
00:03:08
Speaker 6: I mean, they are diluting.
00:03:09
Speaker 3: There's no doubt that existing shareholders will get diluted.
00:03:13
Speaker 6: Yes.
00:03:14
Speaker 1: So they're paying for it in a way.
00:03:15
Speaker 6: They are paying for it in a way.
00:03:18
Speaker 3: And it gives them the ability to issue more stock, which is what Alphabet did a few months back.
00:03:23
Speaker 8: Yeah.
00:03:24
Speaker 3: You know, you can't do it with all debt financing. That's why your spreads are going up. It's not the right message to the bond market, you know, when it comes to the kind of numbers they're talking about.
00:03:37
Speaker 6: So they have to do some equity issuance.
00:03:39
Speaker 2: Okay.
00:03:40
Speaker 6: And I think this is a step in that direction.
00:03:42
Speaker 7: But along the way, Mark Zuckerberg doesn't have to pay any big tax bill on his own.
00:03:47
Speaker 1: That will be something borne by everyone.
00:03:49
Speaker 6: Yeah, I mean, he's still going to have to.
00:03:52
Speaker 5: hey, whatever the billions is, he's going to go to the state of California. But he won't have to sell his voting stock.
00:03:58
Speaker 1: And give up his voting control.
00:03:59
Speaker 6: Right.
00:04:00
Speaker 5: But it was very, I thought, a pretty elegant way to do it. I thought it was, whatever Laura thought of that.
00:04:06
Speaker 7: It's a very elegant way of putting it, and the CFO didn't talk about it in that way, but the reporting shows that this.
00:04:12
Speaker 1: Is one of the motivations behind all of this.
00:04:14
Speaker 7: Okay, so SpaceX and Meta have reported, they've made clear that they plan to do a lot more in the AI build-out, so they're going to have to... spend more money and therefore raise more money. What does this herald for Microsoft, for Alphabet and all the other hyperscalers?
00:04:30
Speaker 3: I feel they will have a better story to tell in terms of monetization of this AI infrastructure that all these companies are building because of their cloud business. Remember, these companies have a backlog, Amazon, Microsoft, Microsoft, Alphabet, and I think Oracle combined have a backlog of $ 2 trillion. So a lot of that backlog will get converted to revenue.
00:04:57
Speaker 6: So if you are saying.
00:04:59
Speaker 3: My cloud business is now growing 100%, whereas previously it was growing 30%, That's a great story to tell and then raise your capex because you're showing the ROI. Whereas with Meta, there was no cloud business. Yes, agentic AI will eventually be monetized.
00:05:15
Speaker 1: We're not there yet, though.
00:05:16
Speaker 6: We're not there yet. And so that's the uncertainty with Meta.
00:05:20
Speaker 3: But with Google or Microsoft or Amazon, it's going to show up in the numbers. Their cloud businesses are going to accelerate for the next three or four quarters, and they will beat their numbers, consensus numbers, handedly.
00:05:34
Speaker 5: Anna Wong was just in here earlier this morning, Bloomberg Economics, and she said, hey, all the investment in AI this year equates to about half of U.S. real GDP.
00:05:46
Speaker 7: So if we didn't have this AI boom, the economy would look very different. And this is an economy typically driven by consumer spending. And we know what's going on in the consumer sector.
00:05:56
Speaker 5: Yeah, so she just put a number on it.
00:05:58
Speaker 6: Meta does have a play with that.
00:06:00
Speaker 3: So if agent AI takes off and your agent is transacting with the agent of the merchant, then Meta is a winner.
00:06:07
Speaker 8: Stay with us. More from Bloomberg Intelligence coming up after this.
00:06:14
Speaker 4: You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10 a.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts or watch us live on YouTube.
00:06:29
Speaker 2: Tesla.
00:06:30
Speaker 5: I reported some results last night. I mean, are we still worried about them making cars? Isn't it all about merging with SpaceX?
00:06:36
Speaker 1: They do make cars.
00:06:37
Speaker 5: They do make cars, but although they don't talk about it a lot, I guess. I don't know.
00:06:40
Speaker 8: David Welch, Detroit Bureau Chief for Bloomberg News.
00:06:43
Speaker 5: He knows a thing or two about the auto industry. He's based in Detroit, but we got him in New York City here today in the studio. David, what did you take away from the Tesla results last night?
00:06:54
Speaker 6: Like, it has been.
00:06:55
Speaker 9: With Tesla, in most periods of the company's history, even when the financial results are relatively good, surprised in a lot of ways, it's not about that. Investors seem to react the way that shares traded after market last night more about the fact that they spend less on R & D. So they're worried that maybe the whole AI autonomous driving push isn't being developed as fast as Elon Musk has said. So they initially traded down. They're up a bit today, at least the last I looked. So it's doing all right. But given that the auto business actually has a decent bounce here, it really just didn't get the pop you would expect because it's all about what can you do for the robotaxi business and AI and all of these robots, all of these other things that people would rather they made besides low-margin, capital-intensive production of automobiles.
00:07:52
Speaker 7: So Tesla shareholders don't seem to care that much about the auto business. Does the management care at all about the auto business? I mean, are they coming out with a new lineup? Are they going to refresh any of these vehicles? Are they coming out with the low-cost version of a Tesla car that Elon Musk had promised years ago?
00:08:10
Speaker 9: No, the low-cost version of the car, he basically turned it into the Cybercat. So instead of a cheap, I think there were talking about calling it a Model 2, he kind of realized that they couldn't make it profitably, and they couldn't compete with Chinese automakers over there with their cost base.
00:08:29
Speaker 1: But we don't sell Chinese EVs here.
00:08:31
Speaker 9: No, but he does, he sells cars over there. He competes in China and he competes in Europe where the Chinese do sell cars. So he kind of scrapped that and turned it into the cyber cab and figured, okay, we're just going to be, we're going to compete with Waymo instead and go there. And look, if you've Yuan is pretty good at understanding market psychology. Actually, I would say he's very good at understanding market psychology and keeping a narrative going. And making cars had captured the imagination of investors when they were the only company in the U.S. really making EVs in a big way. So there was a huge growth track for them to run, and they did. And that's what powered their valuation. Once that started to taper off and you saw their shares go down a lot, Two years ago, because of that, and everyone else was coming out with EVs and it wasn't the latest thing, he started changing his focus. And so the narrative now is all about robotaxis. It's about AI. It's about robots. And if you look last week at their press conference with this flying Tesla car, I mean, that to me was the sort of automotive embodiment of talking about a Tesla merger, right? You have a car that's flying with rocket jets or rocket packs. So he's basically saying our future is merging up with SpaceX and being this technology conglomerate as opposed to a car company. Because, look, we saw General Motors buy back or announce a plan to buy back. $ 20 billion in shares. And the stock got crushed. And earnings were pretty good. But you talk about stock multiples, there are a few things less sexy than a conventional car company bending metal and assembling vehicles and selling them at retail to the public. So You look at what happened to GM shares, and Elon saw that a while ago, and he wants to be anything but a car company. So he's drifting away both with what Tesla has done, and if you merge it up with SpaceX, then it's really not a car company.
00:10:32
Speaker 5: So is it a foregone conclusion that the Tesla shareholders are going to line up to exchange their shares for SpaceX, that this is a fait accompli?
00:10:41
Speaker 9: You never know. I would think they would. SpaceX has a pretty hot hand, especially with Trump in office. I've always thought that was a big part of Elon cozying up to Trump. Elon's politics, is he a super conservative? In some ways, but this is also a guy who pushed solar power and pushed electric vehicles. Not exactly a hard right guy with most of his businesses and how he made most of his money. Elon's about the politics of Elon and his companies and whatever it takes. And if cozying up to the Trump administration so SpaceX can be this big player for NASA helps that company, then he's going to do it.
00:11:19
Speaker 7: David, how much space does Elon take up in the brains and the heads of conventional car makers, CEOs? How much do they look at him and react to him? Or is it not a factor anymore?
00:11:30
Speaker 9: It's a factor. Probably not as big a factor as it was. But a lot of what General Motors talked about here in New York yesterday was their own push into self-driving vehicles. So I think where companies are more worried about Tesla now is, does it become more of a legitimate competitor to Waymo with self-driving vehicles? And Waymo wants to be a robo-taxi service provider. They want to take on Uber and Lyft with self-driving vehicles. Tesla wants to do that as well, but They're also selling self-driving services in the way that GM is with Super Cruise. And in 2028, GM will have fully hands-free, eyes-free driving on the highway, and they eventually want to migrate that to off-highway driving and not just inexpensive Cadillacs but all of their vehicles. So they're watching General Motors and other companies who also have similar kinds of things in development will be watching Tesla to see where they get with personally owned self-driving vehicles. That's where the auto companies want to be. They don't want to run robotaxi services. They want to sell cars that, whenever you want, can drive them.
00:12:40
Speaker 8: Stay with us. More from Bloomberg Intelligence coming up after this.
00:12:47
Speaker 4: You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10 a.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts or watch us live on YouTube.
00:13:02
Speaker 5: Elon Musk, he confirmed that SpaceX and Tesla have formed special committees to examine a potential merger, with Musk noting his personal preference for a deal. Let's dig into that a little bit.
00:13:14
Speaker 6: We can do that with Liam Neeson.
00:13:15
Speaker 5: Denning, a Bloomberg opinion columnist covering the energy space. He has a column out, Space X and Tesla is a strange.
00:13:22
Speaker 6: But certain deal.
00:13:23
Speaker 8: Liam, thanks so much for joining us here.
00:13:25
Speaker 6: What do you make of this?
00:13:26
Speaker 5: Because, I mean, this is going to be a monster, monster consolidation merger. There's got to be some guardrails on there to make sure we've got some, this is a fair deal for everyone. How do you think this is going to play out?
00:13:40
Speaker 6: Guardrails.
00:13:41
Speaker 10: Guardrails.
00:13:43
Speaker 6: So....
00:13:45
Speaker 10: Yeah, the thing, I mean, the thing to understand is these are both, you know, expressions of what the market thinks of as Elon Musk's genius and And so they are run in a way that I think for most ordinary companies wouldn't fly. And part of that is that Elon Musk essentially controls the direction of both of these companies. They of course have a board of directors and all that, and there's special committees that have been formed to look at this potential deal. But I think the overriding logic for this deal is essentially consolidating Elon Musk's power over his empire. I mean, he has talked in the past repeatedly about his desire to get greater control of Tesla. And with SpaceX, where he has a special class of shares that gives him overwhelming voting power, he has the perfect vehicle to do that.
00:14:49
Speaker 1: Is this a good thing or a bad thing for Tesla shareholders?
00:14:54
Speaker 10: So I can answer that on a couple of levels. I think Tesla is wildly overvalued. I think its latest results offered another proof point of that. The bulls will point to the fact that Tesla said, well, we're driving many more miles under unsupervised driving. The Optimus robots are only a couple of years away, et cetera. But this narrative continues to roll But if you look at the fundamentals of the business, they're not great. I mean, Tesla's main business, although they don't talk about it a lot anymore, is building and selling cars.
00:15:31
Speaker 2: It is, yeah.
00:15:32
Speaker 10: And that business hasn't been growing now for almost three years, despite the fact that the stock is.
00:15:37
Speaker 6: Valued at nearly 200 times forward earnings.
00:15:41
Speaker 10: It is a narrative-driven stock, and the narrative is at odds with what it is actually achieving in the fields of self-driving and robots. So I think as much as... Tesla shareholders may be concerned about being rolled into a company where, you know, they have less voting power and that sort of thing. By my math, this deal will get done at a price that they can almost certainly live with. They'll end up owning more of the combined entity than their contribution to the profits would really warrant in a normal company. merger situation. So I think they'll be fine with it because in the end, look, if you own Tesla stock or you own SpaceX stock, it's a bet on Musk really either way. And you're happy to let him do what he wants. So what's changing really?
00:16:34
Speaker 5: And I guess one of the key issues is, is timing. I mean, I think presumably Elon Musk is what I've read reporting broadly is repaired his relationship with president Donald Trump. So presumably he would like to get this transaction completed while President Trump is still in office. How does that play into it, do you think?
00:16:55
Speaker 10: I mean, that may well be the case. Clearly, Musk has thrown in his lot with Trump and the Republicans, which I think, you know, has worked well for him the past couple of years. I tend to think, you know, as a CEO in general, If you live in a dictatorship, it's probably good to throw in your lot with one party in a country where power can shift around every couple of years. I don't know. There might be some risks around that. So, yeah, I think that could be a consideration for him. But I think, overall, the logic here is he wants to cement control over his empire. I also think, as I pointed out in my column this morning.
00:17:39
Speaker 10: These are two narrative-driven stocks, and the fact is SpaceX's narrative has now eclipsed Tesla's. I think the fact that Tesla cut its CapEx budget, and by the way, is still underspending even that cutback.
00:17:54
Speaker 6: CapEx budget.
00:17:57
Speaker 10: Is part and parcel of a situation where all the momentum now, I think, is swinging away. SpaceX and so therefore there is a certain value to subsuming Tesla's narrative into that more expansive one.
00:18:13
Speaker 1: Liam, what's the number one thing that could go wrong here?
00:18:18
Speaker 10: I think, look, the number one thing that can go wrong with any of Elon Musk's companies is that belief in the long-dated option cracks, right? I think with Tesla, we've seen instances where confidence has.
00:18:34
Speaker 1: Wavered, wavered, absolutely.
00:18:37
Speaker 10: As you would expect it to, you know, if you promise self-driving cars for 10 years and they still haven't really appeared and you're being eclipsed by rivals like Waymo, then you would expect confidence to wobble. But belief in Musk is incredibly strong. Same with SpaceX. I mean, SpaceX has a far stronger narrative than Tesla at the moment. But its valuation still rests on enormously ambitious readings.
00:19:03
Speaker 8: Stay with us. More from Bloomberg Intelligence coming up after this.
00:19:10
Speaker 4: You're listening to the Bloomberg Intelligence podcast. Catch us live weekdays at 10 a.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business app. Listen on demand wherever you get your podcasts or watch us live on YouTube.
00:19:25
Speaker 5: We had a couple of media companies report earnings here. Comcast reported, as did Spotify. Both stocks are trading higher today. Geetha Ranganathan joins us here. She is the media analyst for Bloomberg Intelligence. Geetha, I saw that Comcast lost more residential broadband customers than forecasted, but stocks up 4% today. What's going on?
00:19:44
Speaker 2: Yeah, stocks up, Paul, because somehow NBC actually kind of is offsetting a lot of those broadband pressures. So, you know, on NBC, they had obviously the huge benefit of the FIFA World Cup on Telemundo. And so we saw some really good numbers from the media division, as well as Peacock, which is their streaming platform, which has been historically posting very, very heavy losses, but has now actually turned a corner and is profitable. And so that somehow managed to, you know, keep EBITDA in decent shape.
00:20:15
Speaker 5: So what's the, are the core business, their cable TV business, their internet access, the broadband business, are they just, those are in secular declines.
00:20:25
Speaker 8: Are they just kind of managing that for cashflow?
00:20:28
Speaker 2: Yeah, pretty much, Paul, at this point. So 85% of Comcast's EBITDA right now comes from its cable business. But as you just pointed out, it is under tremendous secular decline. You're having telecom products like fiber, like fixed wireless access, and now even Starlink kind of really eat cable's lunch here. And so they've been losing market share. And it looks like just with those players getting so much more aggressive, it looks like they're going to continue to lose market share. And so, really, it's going to come down to a question, as you just pointed out, about stemming the bleed here. But one of the things that Comcast is doing is they're actually separating out their cable business from their media business. So, you know, oddly enough, media has actually been the outperformer for Comcast this year, and they plan to separate out NBC and Sky into a separate company by mid-2027. And the hope.
00:21:19
Speaker 2: I think that investors are kind of placing their bet on is that Comcast will eventually combine with the other big cable operator, which is Charter, given the whole shift in the market as we see it today.
00:21:33
Speaker 5: How about the theme park business for Comcast? They had the Warner Brothers. I mean, talk to us about just that Universal Studios and that whole part of the business.
00:21:43
Speaker 2: Theme Park has actually been, you know, really, really resilient across the board, especially for Disney and Universal when it came out with Epic Universe, you know, a few quarters ago. Recently, however, the theme park business has been struggling. So we've seen in Orlando that visitation has not really held up. They're having a weakness across some of their international parks as well. So theme parks right now, not such a hot commodity, but hopefully things settle down. And the good news for Comcast is as we kind of look out over the next few years, they're really investing very heavily in their theme parks. So this is You know, they're really looking to kind of take on Disney. They're going to have this huge theme park property that they're building in London. So really expanding their footprint in a pretty significant way to capture all of that growth.
00:22:34
Speaker 4: This is the Bloomberg Intelligence Podcast, available on Apple, Spotify, and anywhere else you get your podcasts. Listen live each weekday, 10 a.m. to noon Eastern on Bloomberg.com, the iHeartRadio app, TuneIn, and the Bloomberg Business app. You can also watch us live every weekday on YouTube and always on the Bloomberg Terminal.
