Tesla Plunges Most in a Year on Investor Angst Over AI Spending

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1:38Catch 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. Tessa reported some numbers last night that profit tumbled despite strong electric vehicle deliveries in the most recent quarter. And that's putting pressure on Elon Musk's plan to refocus the company on artificial intelligence and robots. Kevin China joins us here, director of research for the Presidio Group. He's been following the auto industry for decades here. Kevin, I'm not sure Tesla's even an auto company anymore.

2:13How are you viewing what you heard last night from Elon and company? Yeah, look, there was a lot of automotive-type results in that release, right? And you talked about it. Volume that you buy is not necessarily demand, right? Like that's spend. And you saw mix deteriorate, right? And so margins compress. So selling more things at lower margin is not necessarily the way, although it is common in the auto industry for manufacturers. you know, over the decades. And that's how that happens. Best thing, though, about that is that you did not see them compress margins and not get the volume. At least they got the volume, but it winds up doing more harm than good to your pricing and your profit dynamics when that happens, though.

3:05Kevin, Tesla has been promising for years a cheap or affordable EV, a lower cost EV. Does that even matter to the company? Is it a priority at this point? I mean, it feels like the company has so de-emphasized its traditional auto business that people don't care about it. And I wonder if the company cares about it. Well, two things, Scarlett. One, I would say is that, look, if you're having problems with margins and mix, the answer is not a more affordable vehicle, right? Because material costs, input costs, production costs are all inflating. The answer is not to get to$25 ,000. That actually compounds the problem.

3:47But yeah, as a passenger car company, you know, obviously the narrative is not that, and it's probably not the way forward for this company going forward. So, you know, the idea of maybe more models, they're going in the other direction, right? Model Model S, Model X production has ceased now. You're talking about three nameplates, Y3 and Cybertruck for what that's worth. So, you know, not acting like an automaker that's putting product in all segments and able to grow volume that way, healthy through more demand. It's really about mix, price reductions, discounting and exporting cheaper products to other parts of the world.

4:32Kevin, I read a really interesting article over the weekend, I think it was in the New York Times, about kind of the U.S. automakers, how they've pivoted back to what actually makes money for them, which are trucks and SUVs and de-emphasizing their EV businesses. And while that's good for near-term, intermediate-term profitability, they run the risk of falling behind the rest of the world in terms of EV technology. How do you think the U.S. auto companies are thinking about that EV strategy longer term? Yeah, look, and the products are there, the technology is there. But to your point, the profitability isn't.

5:12Look, and as a global manufacturer of really anything, you want to share as many platforms, parts as you can. But the demand profile in each country, if not region, is not the same. Where money is made here are on big trucks and SUVs, pickups and SUVs. The small products that work in maybe Europe or even in China, India, they don't make sense here and they don't make money. So the idea that falling behind on EV necessarily matters if profit is the driver here. You know, I'm not sure why we need to go toe to toe on EV any more than we already are or tried if the profitability isn't there. I get maybe it's technology shaming, you know, by the rest of the world that says you're not keeping up.

6:05But but it's not what our demand profile in this country looks like. We're not going to out export China. We're not a low cost manufacturer. So the idea that we're going to overtake China in EV, in export or domestically, it's just not going to happen. To me, that fight is already over. So I think manufacturers probably, for the time being, need to be doing what makes money and enables them to innovate from there. We already see it with people in California facing$6 a gallon gas. And now you have the Iran war flaring up again and oil prices are back up again. And at some point, the consumer behavior is going to tip over, isn't it?

6:46Well, the consumer can only buy what the manufacturer is building, right, and selling to the dealerships. And those products tend to be what makes the manufacturer money. This is really a push market on the supply side from the manufacturer. And what you're talking about is the pull side. So ultimately, and the difference between, say, the U.S. and China in terms of EV adoption is subsidizing your manufacturers, which we don't and probably won't do here. So if you have a manufacturer looking at an EV platform that loses, I don't know, five figures,$10 ,000,$15 ,000 per unit, you just don't have the motivation to build it.

7:25Now, the government makes you whole by subsidizing your losses. It's a different story, which is what happens with Chinese manufacturers. But ultimately, the automakers are going to go where the profit is. And EVs, even for Tesla, have proven that they're just not there. We don't own any of the supply chain either. China does. So the idea that this gets more cost effective going forward is also a difficult case to make. Stay with us. More from Bloomberg Intelligence coming up after this. Over$100 trillion estimated to be transferred to generations in the next 25 years. It's both a risk and an opportunity because we see that only about 18-19 % of high net worth investors plan on sticking with their advisor post-transfer.

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10:12Catch 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 talk technology. Google reported numbers after the close. The kids call it alphabet. But those of us who were there at the beginning, we're sticking with Google. And the CapEx numbers, first of all, the operating numbers look good to me, but I don't know. But the CapEx raised maybe spooking some people. Mandeep Singh, he's part of that whole technology cabal there. He runs it for Bloomberg Intelligence.

10:44Mandeep, give us your overview of kind of what you heard, what you saw from Google last night. Yeah, I mean, the entire call was about Google Cloud and TPUs. Not even one question on the core ad search business, which is surprising, you know, given how the calls used to be. But look, they talked about how supply constraints remain when it comes to AI data center capacity. They're actually renting data center compute from third party providers, despite all this. He wants more compute than at Google. Yeah, but they they want more. Because right now, anybody who was early to invest in power and computing and data center capacity is looking like a genius.

11:33Who are those people? All of these hyperscalers. So Google's renting space from? From SpaceX. Potentially Meta. Again, they didn't specify. But Meta has data centers to spare? Like, that's what I don't understand. They don't have a model which is comparable to an Enthropic or Gemini. And so right now they are following the SpaceX playbook, which is if you rent your one gigawatt compute, you can generate up to a 20 billion dollars in rental revenue just by renting the compute. Nothing. By being a landlord. By being a landlord for your compute. Yeah. At what point is investing in all this too much?

12:11I mean, right now, investors have been following this guideline of as long as I see a return on this, as long as it's paying off. But at some point, is it just too much and investors will balk? I think so. We will hit that point. But Google also said they will be significantly raising their compute for 2027. So there is the full year guide for 26 by about 10, 15 billion dollars at the midpoint. And then they said 2027 would be a significant increase. Now, my interpretation of significant is it's at least 50 % because this year was 100%. Wow. Their CapEx doubled in 2026. 50 % increase equals significant increase.

12:51At least in my book. According to Mandeep. Yes. So it's not changing anytime soon to your question. All right. So I'm looking at the FA function on the Bloomberg terminal, folks, which gives you a financial analysis. That's what it stands for. CapEx for this company, Google, in 2022, CapEx was$30 billion. in 2026 expected to be almost i'll call it 190 billion going to 280 next year there ain't no free cash flow left for this company which was a free cash flow juggernaut yeah they were negative free cash flow even for this quarter it was first time ever right first time ever so uh and they just did an equity raise 85 billion dollars so and and the justification is we will uh invest significantly in training our own model, Gemini 4.

13:40And, you know, the cloud business really is super strong. So 82 % growth when you have$100 billion business. It's like show me any other company that's growing 80 % at$100 billion run rate. Stay with us. More from Bloomberg Intelligence coming up after this. Support for the show comes from public.com. If you're actively involved in your portfolio, you probably catch yourself repeating the same actions. Buying the dip, manually sweeping idle cash, putting on a hedge. On public, you can now create AI agents that handle all these tasks on your behalf. Just describe what you want to do in plain English.

14:18Like, if the VIX hits 25, buy a put option on the S &P 500. Or, if my cash balance goes above$20 ,000, move the excess into my direct index. You approve of the workflow and your agent handles the rest. Monitoring the market, watching for your conditions, and executing your strategies exactly as defined. An investing platform driven by your intent, not just your clicks. You can also get full read and write access to your account via the public API. Go to public.com slash market and fund your account in five minutes or less. That's public.com slash market. Paid for by Public Investing. Brokered services by Open to the Public Investing, Inc., Member FINRA and SIPC.

15:01Advisory services by Public Advisors, LLC, SEC Registered Advisor. Complete disclosures available at public.com slash disclosures. So 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 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.

15:59With our unified Team Michigan approach, businesses scale faster and compete at the highest level. Michigan, pure opportunity. Seize your opportunity at michiganbusiness.org. 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. Let's switch gears towards the media space. Lots of news there. As always, we could talk to Geetha Ranganathan every day if we wanted to, but she's got a day job. She covers the media stocks for Bloomberg Intelligence.

16:36Hey, Geetha, let's just start with Comcast. A, they reported numbers here. Give us like a couple notes on their quarter. But more importantly, what do you think the strategy is of the Comcast company going forward? Yeah, thanks so much, Paul. For Comcast, really, as you pointed out, it's more about the strategy than the second quarter results. But just a few high points from the results. So remember, they are the largest broadband provider in the United States. They have about a 25 percent share of the market. But that share has been rapidly declining. And we continue to see that in the numbers today.

17:09So they again lost broadband subscribers. And really, I mean, I think what investors are focused on, Paul, is that, you know, the story is not getting any better. So over the past four years, we've seen intense competition from the telecoms, both on the fixed wireless side as well as fiber. And then now this year you have this new competition with Starlink. And, you know, just with kind of the expansion in V3 satellites next year, the expansion in broadband capacity, there is so much fear on the street that Starlink is going to become another big competitor for cable. And so just the story doesn't get any better.

17:46Now, Comcast, what they've done is they have altered their go-to-market strategy by becoming much more competitive in terms of broadband pricing. But that obviously has resulted in EBITDA getting crushed. And so we saw it again fall about 6 percent this quarter. Again, they're pointing to the story getting slightly better in the second half. But again, it's a little bit of a wait and watch longer term. I just don't think investors are optimistic about this cable broadband turnaround at all. OK, so it's kind of like managing the decline of its business right now, its main business. What's is it is the company offering up any kind of growth story for investors to get excited about?

18:28Yeah, I'm glad you asked that. Actually, they did that just three weeks ago, Scarlett. So, you know, they are an interesting company because they're a vertically integrated media company. So, of course, broadband makes up 85 percent of their EBITDA. But they do have a great media business with NBC. And they announced plans just a few weeks ago to actually separate out that media business, which is, you know, the NBC Universal business along with Sky into a separate company, which is supposed to happen sometime next year. Now, the whole story here has been that with the whole Warner Brothers bidding war, media assets have actually been really played up.

19:06And if you look at Comcast NBC, for instance, just the collection of assets, it's a stellar collection of assets. And it almost resembles a Disney, if you will, because they are one of the few media companies that actually has theme parks very similar to Disney, has Studio, has a broadcast network, had some cable networks and has Peacock, the streaming platform. And so the big argument here was, you know, cable multiples have actually declined. They've halved. So they've gone from, you know, 10 times EBITDA just about three, four years ago to five times. And NBC, because it's being clubbed with Comcast, is suffering here.

19:40And so if you look at Disney, for instance, you know, Disney trades at about nine, 10 times. And so the question was, you know, why are we punishing NBC for, you know, cable's poor performance? So I think investors definitely are happy about that because it now kind of shines NBC in this new light. and it definitely gives them some strategic optionality as well. Stay with us. More from Bloomberg Intelligence coming up after this. Support for the show comes from public.com. If you're actively involved in your portfolio, you probably catch yourself repeating the same actions. Buying the dip, manually sweeping idle cash, putting on a hedge.

20:14On public, you can now create AI agents that handle all these tasks on your behalf. Just describe what you want to do in plain English. Like, if the VIX hits 25, buy a put option on the S &P 500. Or, if my cash balance goes above$20 ,000, move the excess into my direct index. You approve of the workflow and your agent handles the rest. Monitoring the market, watching for your conditions, and executing your strategies exactly as defined. An investing platform driven by your intent, not just your clicks. You can also get full read and write access to your account via the public API. Go to public.com slash market and fund your account in five minutes or less.

20:56That's public.com slash market. Paid for by Public Investing. Brokered services by Open to the Public Investing, Inc., member FINRA and SIPC. Advisory services by Public Advisors, LLC, SEC Registered Advisor. Complete disclosures available at public.com slash disclosures. So 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.

21:40Let's create smarter business. IBM. 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. Michigan, pure opportunity. Seize your opportunity at michiganbusiness.org. You're listening to the Bloomberg Intelligence Podcast.

22:18Catch 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. Looking at the healthcare space here, Eli Lilly, its next generation weight loss shot has cleared another hurdle. that is just a massive market that continues to show tremendous growth. Madison Muller joins us here. She's a health care reporter for Bloomberg News. What's going on in Eli Lilly, Madison? We had an important update from Lilly today about when it plans to file for regulatory approval for its next generation weight loss shot, Red at True Tide, which is going to be a pretty big product for Lilly if it ends up being approved already.

23:01There are a lot of people seeking out black market versions of this drug just because they've heard about all of the potentially incredible effects, everything from 30 percent, up to 30 percent weight loss to liver impacts and all of these other potential health benefits like anti-inflammation and all of these things. So Lilly said that they are going to apply for FDA approval sometime in the first quarter of 2027, which is a little bit later than some analysts had expected. But that's just because the data package and the filing that they have to put together is so big. So how will this be materially different or better than what's on the market right now?

23:39Because people are getting really substantial weight loss and it seems to be working already. What's this new one going to do? Yeah, that's exactly right. I mean, Zepbound, which is Lily's other weight loss shot and Wagovi, which is a Novo Nordisk product, are really good. And like you said, people are getting a lot of success with those now. Reditrutide, which that's the sort of generic chemical name, it doesn't have a brand name yet because it's not approved, combines three different gut hormones. So it's GLP-1, which we've all heard so much about, plus another one called glucagon and another called GIP.

24:10Basically, it just supercharges the drug a little bit. It targets some different receptors and is maybe better for things like removing fat from the liver and other health impacts. And there are a certain percentage of people that don't see success on the currently available GLP-1. So for people that need that higher degree of weight loss, this is something that could be a really good product for them. Can you explain to me the I see the ads all over the place, Serena Williams. How are these are they generics? Are they compounds? How are they different from the stuff you have to get a prescription for?

24:46Yeah, well, at one point, a lot of those ads that you were seeing from companies like Roe and Hims and Hers, those were for compounded products. So those are products that are made by compounding pharmacies, and they're not exactly the same as the drugs that the pharmaceutical companies sell. They're not approved or reviewed by the FDA in sort of the same way. But a lot of the telehealth companies have recently moved into selling the brand name medications. They were really pushing the compounded versions when there were supply shortages. Now those supply shortages have ended. They've moved to selling the brand name medications.

25:21However, there are still a lot of compounding pharmacies and a lot of smaller telehealth companies that have continued to sell these cheaper compounded ones, even though the FDA has said that that's not allowed anymore. Interesting. What's the where are we with the oral dosage? That is that's in the market now, right? Yeah, it is, which was a big development this year. We go V. There's a we go V pill. There's also another pill from Lily called found a oh, both of those are selling really, really well. People are, I mean, especially the Wagovi pill has been a huge product for Novo, which is something they really needed.

25:57Novo has fallen behind Lilly sort of in the weight loss drug race, even though they were the ones that really created this modern weight loss market with their products. So Zempik and Wagovi, Lilly leapfrogged them with some more effective options and also just understanding how to sell products directly to patients and build these sort of telehealth or online infrastructures that were really appealing to patients. So they saw that opportunity and moved into it quickly, helped them sort of surpass Novo. But now Novo's come back with this oral version of Wagovi that's extremely popular. And so that's been helping them as of late.