Musk Offers Loft Promises After $1 Trillion Tesla Payday

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1:02Bloomberg Audio Studios. Podcasts. Radio. News. 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. Tesla shareholders approved Elon Musk$1 trillion pay package. And we had some comments from Tesla General Counsel Brandon Earhart. Let's take a listen. Sixth and finally on the 2025 CEO Performance Award to our founder and CEO Elon Musk, with over 75 percent voting in favor. Approved. All right. That's a good day for Elon Musk.

1:52That was Tesla General Counsel Brandon Earhart. To see what this means for the company, for the stock, Let's check in with Steven Mann. He's Global Autos and Industrials Research Channels for Bloomberg Intelligence. So, Steve, a good day for Elon Musk. What does it mean for the company here to get this pay package through? Yeah, he did seem pretty upbeat last night at the shareholder meeting. You know, he was I mean, he was talking a lot about what the future looks like. It almost feels like I'm watching a Star Trek episode when he talked about robots. I think it's a big relief for the company as well as the shareholders.

2:35It looks like a lot of shareholders, given that about 75 % voted for the pay package. I think now the company and he can actually start focusing on delivering those metrics, which is, you know, eight and a half trillion dollar market cap in 10 years, you know, 400 billion EBITDA during that time. So this is a lot of things he needs to do. So those are the very specific financial metrics that he needs to achieve if he wants to get paid what shareholders have approved. But in terms of actually getting there, Musk made some big promises. Humanoid robots will be doing a lot of beyond human precision surgery, for instance.

3:21And robots will play a big role in setting a basis on the moon and in Mars. And which of the predictions did he make sound reasonable at this point? I mean, robotics is an evolution. I think there is still a lot of technical challenges to make the humanoid work just as well as a human. So we're, you know, at BI, we think humanoid robots are actually a little bit ways off. But what was really interesting and kind of, you know, caught my attention was that he wanted to build, well, he's currently designing his own chips for autonomy, but he also wants to build his own fab for autonomy. And that's really a direct competition to companies like NVIDIA and some of the fab companies like TSMC.

4:16Now, his chips are a little bit different. It's a special purpose chip where NVIDIA's AI chips are made to accommodate many AI applications. is it specifically for autonomy like robots and cars? All right. The math I do is, you know, in order for Mr. Musk to achieve his full trillion dollars in comp, the market cap would have to get to like eight and a half trillion. It's at one and a half trillion now. So that's incremental$7 trillion in market cap he thinks he can create. And if he wants to take a billion of it, that's fine with me. I'll take the rest. And I think that's kind of what shareholders were saying with 70 % of them, 75 % of them are proving.

4:55A trillion, you mean? Yeah. for a trillion so i mean you know if he's going to make incremental six you know seven trillion dollars for shareholders he can have a trillion as far as he says but look like remember he's not taking the cash a lot of his stock right at the end of the day he just wanted greater control over the company 25 control of the company but he has to deliver yeah has to deliver so how do we think about this even the car business now steve it's almost an afterthought for this entire story How are investors thinking about kind of what is the core business today? Look, I think, yeah, you're right.

5:30A lot of people think cars are their thought, but I actually have a different view. What he's really trying to achieve is physical AI. So quite different than what, you know, what Google is doing or ChatGPT is doing. He's actually, you know, creating AI through cars, mobile devices, cars and robots. robots. So, you know, for him to proliferate autonomy, physical AI, he still needs to produce cars, right? I don't think he's going to license the full self-driving to any other automakers that he's doing. So for him to proliferate autonomy, he does have to produce cars. And then that's why he's also very focused on, you know, improving the design of the optimized robot so he can actually you know build more and and sell more to the market yeah cars is important still that's the understanding of the cars is still important i'm almost like spin out the car business and just have that maybe it will happen and just have the rest of it is kind of this is the moon i think this is elon inc if you want to buy into all the stuff about elon and then here's your your way i'm so glad you bring that up because there was also proposal seven that was voted on at the shareholders meeting, Steve, where it was a non-binding request for the board to authorize an investment in XAI, which is essentially Elon Musk's side gig, right?

6:53The company that holds X as well as the Grok chatbot. That gives the board the option to invest Tesla's money into XAI. What does that tell us about where Tesla's headed as a company? It's an interesting proposal. And they are going to, they'll probably take some time to think about that. But it's all interrelated, right? A lot of the stuff that he talked about last night about autonomy, Optimus Robot from Tesla and how those robots can be used in Mars, they're all connected. All AI is connected. So, you know, does it make sense for Tesla to invest in XAI? Yeah, I think there's a lot of technology that can actually be shared between the different AI platforms.

7:44And, you know, right currently, if you know, Tesla vehicles do come with Grok, which is part of XAI. So, you know, if if vehicles are autonomous, you know, Grok would and other assistant would be very useful in a vehicle for the passenger. We have a listener question coming in. Ryan from New York City asks, what's the likelihood Tesla can compete on the global level versus Chinese robot companies? Is it maybe it's the leader in the US, but where does it stand versus those in Asia? Oh, you know, we actually publish a report on humanoid robots, but specifically on auto manufacturing. What we've learned is that Chinese are very, very far ahead.

8:28They have a number of startups working on humanoid robotics, you know, trying to improve dexterity, trying to improve the technology stack. It will be interesting to see. And I think some people have written out the Chinese, but the fact that they have a lot of investment and a lot of startups looking at this, they'll be a formidable competitor. Stay with us. More from Bloomberg Intelligence coming up after this. This is Tom Keen inviting you to join us for the Bloomberg Surveillance Podcast. It's about making you smarter every business day. I'm Paul Sweeney. We bring you complete coverage of the U.S.

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10:27On their phone, on their phone usually. Okay, so this Grand Theft Auto thing, for people, I guess it's a piece of news, right? Yeah, no, it's a big deal because this is something they've been working on for a long time. And this is the sixth part of the franchise, the sixth iteration of it. And it's supposed to take place in Miami, but a fictional version of Miami. And it's supposed to be like the hot game when it eventually comes out. That's the issue. We don't know whether they're going to meet their deadline. And they've delayed it twice. All right. Let's talk to somebody who knows this stuff for a living, I guess.

10:59That's the best we can do here. Nathan Nadeau, Technology Research Channel for Bloomberg Intelligence. He joins us here. Grand Theft Auto postponed again. Take-Two, the stock is down almost 9 % on this news here. Nathan, what do you make of it? Yeah, so that's a good point on the GTA or Grand Theft Auto 6 iteration being a big factor actually in today's sell-off. And I think, you know, GTA 6, let's call it in short, has been the prospects of it rather has been priced in into Take-Two shares. And last I checked, you know, Take-Two is trading at about 60 percent premium to the only other big U.S.

11:40publishers, Electronic Arts. And that's 60 percent premium and even higher compared to an average of about 10 peers. And so, you know, valuations and expectations were high up until that point. So obviously, valuations were going to be a bit sensitive to any sort of downside risk. And as we have seen today is the delay of GTA 6. But I don't think this second delay officially is necessarily going to do any more impact than the first delay, because the first delay actually skipped the holiday season. This time around, it pulls the launch timing closer to the holiday season, and actually a season that usually see a lot more activity on the player side.

12:21Okay, yeah, to your point, the original release date was back in fall 2025, then it was delayed until May 2026, and now it's been delayed by another six months to November 2026. Nathan, I'm going to ask the dumb question. If they delayed it twice, they might delay it again. Why are they delaying this game? What's proving to be difficult or problematic about this? yeah so uh according to the words by the company themselves they want to give the publish the developers rather a bit more time to polish the game game like the gta uh you know gta to take a step back grand theft also is easily the top five selling games uh franchise of all time globally so there this game has quite a bit of an account following you know it has sold more than 450 million units right and so I think it doesn't make a big difference whether it's delayed you know in this round of delay because you know this game regardless of when it is launched is gonna it's gonna bring back those core loyal fan base and we're talking about 15 to 20 millions of people playing GTA 5 the the current version every month so you know that that proves my point and And also, launching in November, which is the high sales season for any sort of video games or any sort of products, rather, is actually a better timing.

13:43And it might work in GTA 6's favor in the end, I think. All right, Nathan, in your world of online gaming, can you size out how big this business is? Because I think a lot of people don't have a good idea of just how big the gaming business is. I feel like it's bigger than Hollywood, right? Bigger than the movie business. Exactly. How big is it and kind of what's the growth parameters for this industry? Yeah, so, you know, the overall video game market is inching towards like 180 billion US dollars in sales last year. And, you know, that is actually bigger than films and, you know, other easily, right, other entertainment forms.

14:26And GTA, you know, if we assume that if we assume that the GTA 6 sells about 35 to 45 million units, that's about two to three billion U.S. dollars in upfront revenue to the company. And that's just one game. Men age 18 to 49. Oh, my God. It's just the advertiser's dream is, I guess. Yeah. Yeah. I mean, I this Pong count. No, no. Pong doesn't count. Sorry. No one's monetizing off Pong anymore. Nathan, do you know what Pong is? Yeah, you mean like age cohort? No. Okay, we're showing our age now. All right, so Nathan, for Take-Two, is that just really a play on Grand Theft Auto? Is it that dependent on that game?

15:17Yeah, so Take-Two actually has a few other big franchises under its belt, like Red Dead Redemption, for example, and Take-Two is also big in sports game, whether that's football. And so GTA is certainly the biggest game, but it's not the only pieces of the puzzle in terms of how it is driving Take-Two top line as well as bottom line. But it is certainly going to be the biggest game launch next year, and that's coming from Take-Two. And given the game is actually in-house, meaning it generates a lot more to bottom line and then games that are based on third-party intellectual property where a royalty payment is involved.

15:57So, you know, we can expect similar significant boost to Take-Two's profit as well next year. And actually, the company is expecting to, you know, generate positive free cash flow again because they're currently running on negative. Okay, I have a question here because usually when we talk about Take-Two, I look at how the other video game publishers are performing. And right away, I thought, oh, check EA. EA is barely moving, but that's also because EA is going to be bought out by private equity. Is Take-Two a candidate for a buyout? So Take-Two is certainly a good candidate. And it would be the only surviving U.S.

16:37game publisher of scale if the EA deal actually completes and goes through. And EA is expecting that deal to close in the April to June period next year. and EA is a good candidate because it has a robust sport franchises and and obviously Grand Theft Auto is a game that has survived more than two decades and it continued to attract millions of players actually you know at about 15 and up million of players every month so you know with with attention increasingly being scarce you know games that continue to perform well actually are games that were published six year or earlier so there's actually not a lot of room for brand new games to grow in this market in fact new zoo actually mentioned that for brand new titles only eight percent of the gameplay hours are up for grab so you know that just says like well-established franchises with a cult following certainly has its value and we actually saw Tencent's investment in Ubisoft you know a French game company and Tencent obviously needs no introduction is a tech giant in in china and certainly a giant in gaming yeah they invested about you know a few billion euros to take a quarter of a subsidiary of ubisoft that actually owns you know a quarter of ubisoft three most valuable franchises if you like ninjas assassins we're talking about assassin creed here we're talking about tom clancy and a few shooter shooter games so there's definitely a general direction of companies with resources eyeing companies with great ip if those two do not currently exist together and we certainly see that ea ea deals coming through uh kind of place into the saudi ambitions for esports and saudi prince which is you know the chair of the sovereign wealth fund uh there is actually an avid gamer himself, and which I suspect is one of the factors behind why EA is a good fit for the deal, because EA has the most popular soccer game out there.

18:42Well, I say soccer because I'm in Europe right now. I need to differentiate from football. Stay with us. More from Bloomberg Intelligence coming up after this. I'm Carol Masser. And I'm Tim Stenevek, inviting you to join us for the Bloomberg Businessweek Daily Podcast. Now, every day we are bringing you reporting from the magazine that helps global leaders stay ahead. We've got insight on the people, the companies and trends that are shaping today's complex economy. That's right, Tim. We're all over global business, finance, tech news, all as it is happening in real time. And we've got complete coverage of the US market close.

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19:59you'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 wendy's i guess the way bloomberg news is reporting it they reported better than feared the three q results so there's some concern out there about the consumer, particularly on the lower end of the consumer, and how that's impacting various industries, including the food industry, the restaurant business. And so we want to get the latest on what's happening out there in the world of food and restaurants.

20:34We go to Mike Halen. He covers the restaurants for Bloomberg Intelligence. Mike, talk to us about Wendy's. What did they say on their call? What did you learn with their results? And by the way, I'm a big fan of the Baconator. Yeah, Baconator is great. Chicken's great. You know, historically Wendy's has been known for great food, but their food has suffered over, especially in the last year or two, mainly because the previous management team, who I said in a previous interview, lit this company on fire and then headed for the excess like George Costanza in Seinfeld, knocking over women and children on the way.

21:15And, you know, what they did was just flood the system with LTOs. And it didn't give people a chance to... Flood the system with what? Limited time offers, LTOs. And every two weeks, there was a new offer, a new value meal, a new food item. And it didn't give them ability to market it correctly. And people would come in and thinking they were going to be able to get one item and they'd have to switch to something else, right? And it led to complexity in the store, poor operations, which led to poor food quality, for customer service down the line. You know, so this company had a tough quarter.

21:53It's going to have a tough fourth quarter as well, but a lot of it is self-inflicted. They did speak about, you know, their expectation for low-income consumers to continue to be pressured in these next two quarters. So I know for McDonald's, the vast, vast majority of their stores are franchised. Is that the case for Wendy's as well? Yeah, that's the case for Wendy's. One of the things that they mentioned on the call is that they're going to be closing roughly 5 % of their store base in the coming quarters because franchisees have not been performing very well. right sales have cratered and when there's a lot of operating leverage in this model when you're a franchisee so when your sales decline your margins decline even faster so um you know they're going to be closing a bunch of stores but we think that could actually accelerate the turnaround right so as they close underperforming stores this should boost sales at the surrounding locations uh and management has a pretty good plan you know there's not a whole lot of they still don't have a permanent CEO and there's not a lot of restaurant experience at the top.

23:01The interim CEO was the CFO who came from outside of the restaurant industry, but we think he's pushing the right buttons. I think hiring Greg Creed, who was the previous CEO of Taco Bell and then Yum Brands, arguably the QSR GOAT, to do some consulting work, I think is a really good move. I think that's really going to help their marketing. And it's a great brand that has a lot of things it can market from the past. Like, where's the beef? You know? And they're doing a lot less LTOs, and they're going to work on fixing the operations. They're spending money on training, doing things that we think can really make a difference in 2026.

23:39You know, the hamburger business has changed a lot since I was a kid when it was basically, you know, McDonald's, you know, Burger King. Then Wendy's came along. That was kind of it. Now you've got all these, I don't know what you guys call them, specialty burgers, like Smash Burger, Five Guys, all that kind of stuff shake shack how's the burger business these days man people love burgers but you're right there there is a it is a saturated market with all of those burger better chains you know I think it's good for the overall industry that Wendy's is closing some stores Jack in a Box is going to be closing some stores right like to me this is a this is a part of the restaurant business that's oversupplied and it's been growing faster than population growth.

24:26And so to see some chains start to close some stores, we think that's healthy and we think it's gonna improve results in the future. How's the burger business been impacted by the cost of beef? I've been reading that beef costs have been elevated for a while now. So how are they dealing with that? Beef costs are a killer, especially if you're not able to drive traffic into your restaurants. Um, so for Wendy's franchisees, it's been absolutely crushing for them, right? They're more than 95 % franchise. So the corporation is going to take a hit on the 5 % of stores or so that it owns. Um, but most of the inflation and the margin compression is going to come on the franchisee side and, and they're the ones that are struggling and there's the ones that are going to be, be closing stores.

25:17What's, uh, where, where's the best value in your universe of, um, restaurants, Mike? Are you talking about valuation? Yeah. Well, this one is interesting. Right now, it's trading at 10 times 2026 EPS, right? And historically, these names trade at 15 to 30 times because being a franchise chain, it's very easy to predict your earnings and your cash flow, right? And they're insulated against inflation. So historically, it's 15 to 20. So we think at some point, you know, ahead of the sales inflection that we think is likely in the first quarter, that investors could look more closely at this need.

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