Super Micro Falls on $7 Billion Offering to Fund AI

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0:32So there's a lot of noise about AI, but time's too tight for more promises. So let's talk about results. At IBM, we work with our employees to integrate technology right into the systems they need. Now, a global workforce of 300 ,000 can use AI to fill their HR questions, resolving 94 % of common questions. Not noise. proof of how we can help companies get smarter by putting AI where it actually pays off, deep in the work that moves the business. Let's create smarter business. IBM. Being a small business owner isn't just a career, it's a calling. Chase for Business knows how much heart and effort go into building something of your own.

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1:57Listen on demand wherever you get your podcasts or watch us live on YouTube. One of the stories that we've been talking about today is Supermicrocomputer. Here's a company started the day with like$25 billion in market cap, and they announced a$7 billion equity raise. Kids, I don't know how you do the math, but that's dilutive. I don't know by how much, but the stock's down 17, 18 percent today. You just don't see that very often. And Woo Jin-ho joins us here, senior technology analyst for Bloomberg Intelligence. Woo, I've been doing this Wall Street thing a long time. That's a monster follow-on equity offering given the market cap size.

2:31What's the math tell you? The math, quite frankly, tells me at face value, what we wrote was 20 % plus dilutive to shareholders. I think there's another sell-sider who said it's up to 27 % dilutive to shareholders. So, yeah, investors aren't happy about it. But quite frankly, like Christina said earlier on a recap, short-term pain may lead to long-term gain. Okay, they're going to use the money for what? And when does it pay off? Two big questions here. Yeah. Hey, Charlie. John, actually, but that's right. Oh, hey, John. Sorry about that. You can call me anything you want. So, really straightforward.

3:13forward, look,$7 billion in equity financing, and you try to back that with the$39 billion in orders. Most of those orders are coming in fiscal 2027, which starts in July. And the way I'm factoring it in is like, let's just say$30 billion of that comes in the second half of this year. Specifically, orders for what? AI servers. Okay. Right? And these deals are really, really expensive. So if you think about it from this standpoint, a typical AI server deal can range anywhere between a billion to five billion dollars each. So we're talking about a handful of deals that they're trying to fulfill.

3:58And look, they only had a billion dollars in gross cash. And they really needed the cash to buy the GPUs to fill those orders. So I go to the FA screen for Super Microcomputer, and I'm looking at kind of the growth rates and profit margin. I'm surprised to see a profit margin on the net income line of kind of like 4 % or 5%. That's not the, I'm usually seeing a lot fatter margins for tech companies. Talk to us about just kind of the business here. Yeah, look, hardware margins are pretty awful. And AI server margins are probably one of the worst in the industry, primarily because you're selling in large scale and you have very little control in terms of the GPU pricing.

4:46I will tell you, and I'm going to get a little nerdy here, is that part of the sales includes something that they sell called DCBBS. And that's a margin of creative business. Now, ConsenSys has gross margin around 8.2%, 8.3 % for the next year. if they can get a half of 50 bps on gross margin improvement, we're talking about a dollar in EPS accretion if they were able to get$60 billion in sales instead of$50 billion in sales for next year. So look, this is why I think this could be ultimately positive over the long term, even though shareholders are hurting right now. Who's their big competition?

5:38Like everybody? No, no, no. Look, we've been joking around on this program quite a few times. You got to get a Dell, right? And Michael Dell has just been killing it on the AI server side. $60 billion in AI servers on track for this year. And I think ConsenSys has about$75 billion in next year. And that's one of the reasons why I'm kind of positive on the demand side for Supermicro because there are only one of two of these providers in the U.S. that can provide that level of scale for AI servers. Stay with us. More from Bloomberg Intelligence coming up after this.

6:37The thing about AI for business, it may not automatically fit the way your business works. At IBM, we've seen this firsthand. But by embedding AI across HR, IT, and procurement processes, we've reduced costs by millions, slash repetitive tasks, and freed thousands of hours for strategic work. Now we're helping companies get smarter by putting AI where it actually pays off, deep in the work that moves the business. Let's create smarter business, IBM. Support for the show comes from Public. Public is an investing platform that offers access to stocks, options, bonds, and crypto. And they've also integrated AI with tools that can assist investors in building customized portfolios.

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8:36Got a big IPO pricing tomorrow. We do? We do. We do. And it's spaceships, it's Mars, it's AI, and it's Elon. So it's got everything. It's got something for somebody, everybody else. It's got a lot of promises. Yes. And we need some clear reporting on that. So we turn to Caroline Hyde. She is a BTEC co-anchor here. What are we hearing about the roadshow, Caroline? I mean, there's... What an extraordinary roadshow. What an extraordinary. I saw the video. Jimmy Diamond hosting, the bro love that went on. That was very cool. I saw the video, looked pretty cool. I mean, there's seemingly like something for everyone out there, but boy, you really have to just hit your wagon to Eli.

9:17I got to just say, from that roadshow, the next day I was reporting on it for the morning, and I was trying to pull a cut of Elon. I couldn't use anything. I don't know what the hell he was talking about. You had to be there as a JP Morgan client listening inherently. And then Morgan Stanley's been doing it too. Look, all of this is as the hype around this IPO is extraordinary. It's done everything slightly differently. Like we know the price that they're aiming for, even though there's so-called technical pricing tomorrow. It's going to be$135, we understand. Of course, it's going to be raising up to$1.8 trillion dollars of market valuation and 75 billion dollars of new equity but this is going to be 30 percent allocated to the retail community they're still going to be able to get allocations tomorrow what's interesting is of course depending who you get allocation through is how quickly you're allowed to flip it now a lot of these retail offerings if you go and buy it through fidelity they're going to punish you if you try and sell it on the day so you're going to be like contained for 15 days but there's a lot of volatility that's going to go into this and many think that the price is going to be pushed higher by the amount of passive funds.

10:19They're going to rush in to buy SpaceX because there's been this fast tracking of entry into a lot of the main indices, like the Nasdaq, for example, of SpaceX shares. And so suddenly, if you're a passive fund and you need allocation, there's going to be this sort of fuel and frenzy behind it. But all of this is to say that demand is clear. $250 billion worth is what's been reported by Reuters. And we understand from our sources that that is similar in terms of level of demand. Some big fund managers are coming in asking for up to$10 billion worth of SpaceX shares because, of course, they've got so many funds they've got to distribute it within.

10:53And then you're looking at which particular areas, geographically, the Middle Eastern investors who have been very long in the AI trade, very much palling into XAI, OpenAI, Anthropic. Well, we know the Kuwaiti Investment Fund has been asking for about$5 billion worth. We know that there's been big demand coming from the other players as well. So clearly, the hype cycle's there. I mean, we've just got two more days to white-knuckle this. Yeah, like Prince Elohim, Bin Talal. He was one of the early backers of Elon Musk. He's going to get a big payday, it looks like, right? Yeah, and it's going to be interesting as to whether people hold on to their allocation, whether it's paper money, whether they want to sell more broadly in the future.

11:32And look, this is why there was that great reporting yesterday, wasn't there, showing the truest data that if you look back at the 30 biggest tech IPOs in the last 15 years, generally, a majority of them will sink in their first 12 months of trade. That's because lockups expire. CEOs and people want to be able to make some profits. Liquidity wanted from some of the people that work at these companies. So there is some sort of pressure. But more broadly, this looks as though a lot of people are going to be not only holding it in their private funds, but maybe wanting to even buy it in their public funds too.

12:03Maybe you want even more skin in the game. All right, I'm going to put on my analyst hat here. Valuation. Bloomberg Television had a great graphic they ran yesterday. just looking at it, IPOs, big tech IPOs, multiples of revenue, 15 here, 20 times there, crazy stuff we never talked about back in the day. This one, SpaceX, 95 times revenue. It's kind of like Tesla, right? Yeah. What could possibly go wrong? Is there any pushback we've heard from the marketplace from some of these meetings on valuation? I haven't really seen any. I think it's all about whether you believe in A, the cult of Elon Musk, whether you believe in the idea of getting orbital data centers.

12:41They've started to at least show demonstrations, pictures, if you like, of how that might work. So that's been a key focus. But really, in the same way that Tesla does not trade on fundamentals of electric vehicles, nor does SpaceX, it's bigger than the sum of its parts when you're putting all the business together, because it is the idea of Mars. It is the idea of the moon. It is the idea, though, that this currently is almost a monopoly. Look, who else has been making these reusable rockets So the cadence and the reliability that we've seen with the Falcon 9, now with Starship managing to demonstrate such feats of science, I think for many, it's just like, well, I've been burnt if I've been against him in the past.

13:21But there has been some pushback, particularly New York and California pension funds. The controllers. And the concern there by the controllers seems to be Elon has too much control. Governance. And in fact, funnily enough, shock horror, who's weighed into this as well, is Elizabeth Warren, is sending a last minute ditch attempt to the SEC. Paul Atkins saying, look, you've got to stop this IPO process because I'm worried about governance and I'm worried about the safety of retail investors. As you are seeing the fast tracking of shares going into some of these big indices. Look, whether you like it or not, you're probably going to have exposure to SpaceX because it's going to be in your 401k.

13:57It's going to be in some of these, as you say, the funds that are managed by New York City, by New York State, they're pension funds, right? And they're saying, look, we're not so averse to this that we're going to rule out them in our funds. But we are going to keep trying to chew Elon's ear, trying to get letters to him, which he thus far hasn't responded to, saying, we're worried about this. We're worried about your 80 % voting rights. We're worried about the overall governance structure of the business. But look, like for many investors, they want a founder mindset. They want the ability of Elon Musk to be able to drive forward with the big decisions.

14:32And for many long-term bettors on him in the private markets, they kind of love that. In fact, that's why they think eventually SpaceX and Tesla should merge. Stay with us. More from Bloomberg Intelligence coming up after this. Support for the show comes from Public. Public is an investing platform that offers access to stocks, options, bonds, and crypto. And they've also integrated AI with tools that can assist investors in building customized portfolios. One of these tools is called Generated Assets. It allows you to turn your ideas into investable indexes. So let's say you're interested in something specific like biotech companies with high R &D spend, small cap stocks with improving operating margins, or the S &P 500 minus high debt companies.

15:16Chances are there isn't an ETF that fits your exact criteria. But on Public, you just type in a prompt and their AI screens thousands of stocks and build a one-of-a-kind index. You can even backtest it against the S &P 500. Then you can invest in a few clicks. Go to public.com slash market and earn an uncapped 1 % bonus when you transfer your portfolio. That's public.com slash market.

15:49Sample prompts are for illustrative purposes only, not investment advice. All investing involves risk of loss. See complete disclosures at public.com slash disclosures. As industries evolve faster than ever, companies need an environment that accelerates strategic growth. And Michigan delivers on that promise. From emerging startups to global enterprises, Michigan offers what executives value most. A resilient, innovative ecosystem. Diverse communities that attract top talent. And a quality of life that supports work-life balance. With our unified Team Michigan approach, businesses scale faster and compete at the highest level.

16:23Michigan, pure opportunity. Seize your opportunity at michiganbusiness.org. Running a small business takes everything you've got, but with Chase for Business, you're not alone. They bring together local support and a broad range of resources to more than 7 million customers. With a deep understanding of your day-to-day needs, they provide products and guidance built to help you thrive. Right now, earn$500 when you open a new Chase Business Complete Checking account for new business checking customers with qualifying activities. Offer expires June 18th, 2026. Chase Business Complete Checking has the flexible tools you need to accept payments, make deposits, and manage your finances with confidence.

17:02Learn more at chase.com slash podcast biz offer. Chase, make more of what's yours. These may apply to Chase Business Complete Checking accounts. The$500 offer is available for new business checking accounts with qualifying activities through June 18, 2026. Eligibility and qualification requirements must be met. Additional restrictions may apply. Please speak with a business banker for more information. JPMorgan Chase Bank, N.A., member FDIC. 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.

17:39Listen on demand wherever you get your podcasts or watch us live on YouTube. We got the SpaceX IPO. That is the big news. But kind of like a corollary to that is, what is Elon Musk going to do with the rest of his stuff that he owns and most notably Tesla and all the stuff that's in Tesla? What does he do with that? I don't know. A lot of folks, I think, are suspecting that at some point, if for nothing else, he'll just kind of roll it up into one big company there under SpaceX. Steve Mann, he covers Tesla. He's a global autos and industrial analyst for Bloomberg Intelligence. Hey, Steve, when you talk to Tesla investors, is there an expectation that at some point, Elon Musk and SpaceX will buy in Tesla?

18:20It really depends on the timeline you're talking about. I mean, you can speculate, there's a lot of synergies, probably many years away from now, that, for example, the Tesla vehicles could be riding on or driving on the surface of the Mars, or the boring company is drilling tunnels in Mars for colonization. But, you know, that's very, very far away. You know, we published a piece of research today, and we looked at it. And really, the only thing that, you know, Tesla is really contributing in a consistent, meaningful way is actually their battery storage business. And even that, it's a small chunk of, you know, Tesla's profits.

19:08So we don't really see, you know, imminent or near-term synergies for a merger. Okay, so if there were to be a merger, roll-up, or whatever you want to call it, is that an admission that one company is not really performing, that it would need the other to help prop it up? I wouldn't necessarily say that. I think Elon really has a long-term view on what he wants to do, specifically in space exploration. And that's where Tesla could really contribute. Like I was saying earlier, you can have cars, automated cars driving on another planet, or you can have compute or satellites and communications through their satellite system that communicates between interplanetary communication.

20:07I mean, you can see all the possibilities in both energy and vehicle. But, you know, I think, you know, a lot of those things need to be proven out first. And I think that's what they're trying to do on Earth first. And secondly, Tesla, really the focus is really on autonomy, the robo taxi. And I don't think, you know, combining the two companies is a good time at the moment. It serves as a distraction, really. Bloomberg News has got some reporting out on the autonomous vehicle. Tesla has just 59 vehicles in its robo-taxi fleet as of Tuesday, limited to three Texas cities after Elon Musk said the company would have an autonomous ride hailing in about half the population of the U.S.

20:55by the end of 2025. Talk to us about that part of the business and where we are and maybe where the company is falling short. Yeah, I think for some investors, it is falling behind. They were hoping the rollout's a little bit faster. But the company did tell us in the first quarter earnings that a bulk of this rollout is in the second half. I wouldn't be surprised that they're waiting for the steering wheel-less, the brake pedal-less cyber cab to be ready before they ramp up that service in more cities around the country. so um you know let's wait and see uh maybe the the cyber cap you know build out and and roll out um will be will be the turning point all right did elon over i'm trying to get you in trouble here did he over promise well you know how he is right i think he has grand plans he has grand plans it's not a bad thing you know stretch targets you want to call it that uh but you know like reality is you know these technologies do need time uh to to to to play out and to do you know to be invented to be discovered to be developed and to be make it commercially viable so you know these things do take time steve one of the concerns from tesla investors when elon musk was in the u.s government running the Doge campaign was that he wasn't paying enough attention to Tesla.

22:33Is there a concern now with SpaceX that once again, his attention will be diverted away from Tesla? It's very interesting. You know, he was very visible within the government early in the year. Kind of quiet down. But now we're seeing him, you know, on Air Force One from time to time. I'm sure he's got one foot in and then he needs to, right? A lot of these businesses require regulatory approvals. And, you know, I wouldn't be surprised that, you know, he's working on all those fronts to, you know, make sure his business, you know, runs well and gains, you know, gains business, new businesses. Is Tesla becoming more of this one thing that does excite me, Paul?

23:22Okay. more of a battery company where I can, you know, load up on batteries at my house and draw from the grid at night when electricity prices are much lower, you know, that sort of thing. Yeah, that's a great question because battery business is becoming, you know, a bigger part of Tesla. You know, it's 13 % revenue, but if you look at the, you know, the gross profit line, you're looking at a quarter to a third of contribution. And battery sales are becoming more important, especially during this AI build-out phase. A lot of these data centers actually require their own power systems to run the chips.

24:11And part of that is really having battery backup to make sure these AI data centers are running 24-7. So, you know, you saw Ford Motor Company getting into that business, you know, and Ford's been doing. Yeah, I think GM's doing the same thing, too. Yeah, GM is also doing the same thing. You know, repurpose those battery plants that we use for EVs into battery storage. I think there's a demand for that. Stay with us. More from Bloomberg Intelligence coming up after this. Support for the show comes from Public. Public is an investing platform that offers access to stocks, options, bonds, and crypto.

24:49And they've also integrated AI with tools that can assist investors in building customized portfolios. One of these tools is called Generated Assets. It allows you to turn your ideas into investable indexes. So let's say you're interested in something specific like biotech companies with high R &D spend, small cap stocks with improving operating margins, or the S &P 500 minus high debt companies. Chances are there isn't an ETF that fits your exact criteria. But on public, you just type in a prompt and their AI screens thousands of stocks and builds a one-of-a-kind index. You can even backtest it against the S &P 500.

25:25Then you can invest in a few clicks. Go to public.com slash market and earn an uncapped 1 % bonus when you transfer your portfolio. That's public.com slash market. Add paid for by Public Holdings. Brokered services by Public Investing, member FINRA SIPC. Advisory services by Public Advisors, SEC Registered Advisor, crypto services by ZeroHash. Sample prompts are for illustrative purposes only, not investment advice. All investing involves risk of loss. See complete disclosures at public.com slash disclosures. As industries evolve faster than ever, companies need an environment that accelerates strategic growth, and Michigan delivers on that promise.

26:02From emerging startups to global enterprises, Michigan offers what executives value most, a resilient, innovative ecosystem, diverse communities that attract top talent, and a quality of life that supports work-life balance. With our unified Team Michigan approach, businesses scale faster and compete at the highest level. Michigan, pure opportunity. Seize your opportunity at michiganbusiness.org. Running a small business takes everything you've got, but with Chase for Business, you're not alone. They bring together local support and a broad range of resources to more than 7 million customers with a deep understanding of your day-to-day needs, they provide products and guidance built to help you thrive.

26:40Right now, earn$500 when you open a new Chase Business Complete Checking account for new business checking customers with qualifying activities. Offer expires June 18th, 2026. Chase Business Complete Checking has the flexible tools you need to accept payments, make deposits, and manage your finances with confidence. Learn more at chase.com slash podcast biz offer. Chase, make more of what's yours. These may apply to Chase Business Complete Checking Accounts. The$500 offer is available for new business checking accounts with qualifying activities through June 18, 2026. Eligibility and qualification requirements must be met.

27:17Additional restrictions may apply. Please speak with a business banker for more information. JPMorgan Chase Bank, N.A., member FDIC. 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. All right, let's go to some earnings here. Chewy, for those dog lovers out there and pet owners out there, shares dropped as much as 6.5 % after management gave additional guidance metrics on the conference call, including cautious comments on customer additions.

27:57It's all about the pooch out there. Diana Rosetta-Pena, consumer, staples, analyst for Bloomberg Intelligence. How's business at Chewy? Because we got a lot of viewers and listeners that are big fans and consumers of Chewy. Yeah, well, I mean, they were cautious, even though results were good. They lower revenue guidance. And that was pretty much because they don't necessarily expect a lot of discretionary spending going forward. They're seeing that consumers are being strategic. It's something that we have seen across our consumer staples world. So we're not that surprised, but still. I don't know.