Tesla’s EV Sales Miss Expectations Again in Deepening Slump

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2:19Scarlet Fu: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. Getting back to Earth here, but we're still talking to Elon Musk. Tesla had some numbers come out that were, in terms of deliveries, a little bit disappointing. But I guess I'm like a lot of people. Are they really a car company or is there something else? That's exactly right. So let's go to a car person. That would be David Welch. He's a Detroit borough chief for Bloomberg News. He's based in Detroit. Hey, David, talk to us about Tesla's delivery numbers here.

2:57What did you see and what's the company saying? Look, it was a disappointing quarter, no matter how you look at it, even though it was up over last year. But there's some complexities there. So they were they greatly disappointed what analysts and investors expected them to sell. It was up over last year. So how does that happen? Last year, this time, there was a backlash against Elon Musk over Doge and everything he was doing with the Trump administration. So sales had really pulled back from that. If you look at this first quarter versus previous years, not 2025, but 2024, 2023, it's down significantly from there.

3:40So Tesla's overall sales globally have just been sliding here for quite a while. EV sales are down all over the globe. I mean, not in every market, but the Chinese have pulled back on some of the incentives there. Even BYD has seen a couple of tough months in terms of sales with some of those government-based incentives going away. Trump administration got rid of them here. That's hurting EV sales here, and that's all they sell. They're getting rid of the Model S and the Model X, and the company's trying to pivot toward robotics and automated driving, both of which are very big challenges to beat in the next few years.

4:18It's just very difficult to get cars to drive themselves. And the methodology Tesla is using is different from everybody's. They're relying on their data. So look, it's going to be a tough road ahead, I think, for Tesla to really turn investor sentiment around because they're not selling vehicles like they used to. And there are a lot of big question marks on the new strategy and the big pivot that Elon Musk is making with this company.

4:42Scarlet Fu:All right. And that's kind of been the story with Tesla for a while now that, you know, even though it does still sell cars, that that trajectory has gone down. And with EV sales slowing overall, what's interesting is with oil prices now elevated, there is more interest among consumers, at least into looking into examining the prospect of buying an EV to save on gas costs. There's another story out today, David, about Stellantis in talks to make Chinese EVs in Canada. I thought that the U.S. car makers were staying far, far away from the Chinese EV makers. Well, they are. But then again, Stellantis is really a European company with a big U.S.

5:22arm, isn't it? But look, Canada relies on the U.S. companies and Toyota largely for its auto industry. That's, you know, it's Ford, GM, Stellantis, and Toyota, two-degree Honda, that are making a lot of vehicles up there. That's where they get, you know, their domestic supply of cars that aren't imported and facing tariffs now. And also for employment. And if you're going to have this trade tension between the U.S. and Canada, which we have had for a while now, and we're unsure of what's going to happen with USMCA, there's a lot of talk that maybe Trump will cut separate deals with Canada and Mexico, and he's been very annoyed with Canada these days, then Canada has to look elsewhere for companies that are going to invest in their industrial base and make vehicles there that aren't going to be subject to different trade issues.

6:13And they're increasingly looking to the Chinese. And I think they would welcome that. Stoantus' partner, Wheat Motor, I'm sure they'd love to get into the Western Hemisphere with the hopes that one day, if trade tensions between the U.S. and Canada subside, they could actually send some of those vehicles into the U.S. market. And it's not a bad place. These would be small plants, but it's not a bad place for the Chinese companies to get in, even if they need a partner to do it.

6:43Scarlet Fu:Stay with us. More from Bloomberg Intelligence coming up after this. 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. For many men, mental health challenges aren't recognized until they've already taken a toll.

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8:30Scarlet Fu: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. When it comes to the drivers in the market, in particular, the tech part of the market, it's all about the hyperscalers and how much money they plan to spend this year going forward on AI infrastructure. And hyperscalers, we're talking about Alphabet, we're talking about Microsoft, we're talking about Meta. Microsoft was one of the originals, the OGs, when it comes to building out its AI infrastructure. Brody Ford is one of our reporters here at Bloomberg.

9:08Scarlet Fu:He covers the technology sector. He covers software, among other parts of tech. And he has a Bloomberg Big Take story on how Microsoft's CFO has some AI ambitions that are running up against the tech bubble fears. And Brody, you kind of write and let's take you inside what's going on at Microsoft and understand how the CFO Amy Hood has made these decisions on when to spend, when not to spend, when to pull back. You didn't get a chance to speak with her because she doesn't talk a lot to the public. But you did a lot of reporting around Microsoft with her team. What did you learn? So why this story is so interesting is Microsoft, as you said, is kind of one of the original hyperscalers.

9:53And they're sitting on really a nation state size investment pool. And the big question in the economy right now is, are all these data centers going to pay off? Are all these tens and hundreds of billions of dollars actually going to result in businesses that make margins that are worthwhile? And at Microsoft, Amy Hood has effectively become all powerful, right? You have a CFO who is making decisions about allocation of resources and data centers and who gets GPUs and where. And what we largely found is that she took a bit of a skeptical tone over the years. She took a bit of an anxious tone even that there were moments where she said, man, we really might be overspending here.

10:38So she decided to dial back some of that spending. Was that a mistake in hindsight? A lot of people would say it was. It was maybe about a year, year and a half ago. She looked at the numbers that folks were giving her and she said, I don't believe this demand. I question this demand. And, you know, it's time to hit pause on a lot of these data center projects. And I don't know if you remember, but when this played out in public, it rattled the markets. Everybody saw this as, you know, a sign that Microsoft was getting cold feet. And, you know, we're able today to say that that is what that indicated at that time.

11:13Of course, today, Microsoft is in the position of finding that, golly, we can't find enough data center capacity and our business is being held back by it. And so it seems clear that they undershot their demand projections. And, you know, we're in a moment right now where industry consensus is spend as much as you can, as quick as you can on data centers. And I'm sure in six to 12 months, we'll talk again and the consensus will flip once again.

11:40Scarlet Fu:And because Microsoft is one of the OG hyperscalers, when Amy Hood decided to pull back a bit on spending, that not only caused questions in the market, but it caused other hyperscalers to kind of rethink their spending as well, didn't it? Well, I think it actually created an opening in many cases. A lot of the sites that Microsoft walked away from, some of the younger rivals think the CoreWeave, the Nebius, the N-Scale. They kind of swooped in and said, man, we're ready to buy some data center capacity here. And I think all this kind of shows just how difficult it is right now for the big hyperscalers.

12:20I mean, you know, they for a long time had a business model based around no assets, around software. that, hey, if you want to change your plans, you really just kind of have to reallocate some coding teams. And, you know, you don't have these long term fixed assets that depreciate over 10, 15 years. And now they're in the position of trying to act almost more like a Boeing or a GE, these kind of old industrial giants and, you know, forecast out demand for a technology that's still emerging. It's a really tough balancing act. And I'd argue that there's nobody out there who has more directly on their plate in this than Amy Hood does.

12:59Scarlet Fu:I like the way you put that. They kind of went from, it feels like asset light to very asset heavy because they now own and oversee these big data centers. Does that mean that investors eventually will kind of re-rate these companies as well, given what they have on their balance sheet? I sort of think we're seeing it happened already. I mean, Microsoft is down, you know, about a loss, about a quarter of its value over the last year. And I think a big part of that is the margin story that, you know, their margins have been pretty steady, but that's only because they've really been cutting in a lot of the other parts of the business.

13:37Right. We write in the story that, you know, their cash cow businesses, let's call it like a windows have had a lot of cuts in them because this new AI business, the margins are so much lower, right? And so you had a company that was printing some of the craziest margins in the world, now renting out servers at a much lower margin and having all this, you know, tens of billions of dollars of chips on their balance seat. It does paint a different picture of a company, right? And the question is, are they going to keep spending this way in perpetuity? Are we in a phase? I think that leaders like Amy Hood are really charting in new territory and answering all this in real time.

14:21The stock is down 25 % year to date. Is Amy Hood feeling any pressure for some of her maybe decisions as it relates to AI spending? Our understanding is a lot of folks in the company were not happy with her around the pause last year. That said, it wasn't our indicator that, you know, hey, she's going to get the boot over this or something. All that said, she's been in the seat for 13 years. That's a long time for any CFO. And it's our understanding that there are starting to be succession conversations. We heard some names that were interesting. Chris, the CFO over at Visa, well-regarded figure over there.

15:00He's a name that comes up a lot because he used to be at Microsoft. He knows the business. He left and kind of gained skills and could be primed for a return. There's somebody named Matt McBride, who's kind of her internal heir apparent, right? I mean, his name will certainly be in the ring here. And so I wouldn't be surprised if in the next year or two, we're talking about, you know, the great Microsoft CFO search. But at the same time, I don't think it's that, you know, she screwed up a decision and now she's getting the can. That's not what's happening. Stay with us. More from Bloomberg Intelligence coming up after this.

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17:19Scarlet Fu:Listen on demand wherever you get your podcasts or watch us live on YouTube. Let's stay with the tech theme a little bit, but we'll go to the credit side of the equation. Why? because these companies are issuing debt hand over fist, which is something we haven't really been used to. But that is something that is a big theme, I think, across the tech space is kind of how they're funding some of this AI. And the best name for us to chat with on that story is Robert Shiffman. He is tech credit analyst for Bloomberg Intelligence. Let's start with Intel, Rob. I mean, I'm just looking at the stock and the stock's really turned around, really working from a credit perspective.

17:53What's the view of Intel? Because there were some concerns. Sure. first happy holidays to all. Unlike Ira, I will not be working tomorrow. I will be eating through one of our hundreds of boxes of matzah. Okay. Which we have on the sixth floor. God bless our rates chief of staff. Yeah. Listen, it's nice to be talking about a name that actually people like in the technology space. Stock is up some 30 odd percent this year. The S &P 500 tech index is down almost 10 % spreads or 50 basis points tighter over the past six months. I actually think they're the original poster child for AI. They announced that they're going to be spending tens of billions of dollars building foundries, not data centers.

18:37And free cash went negative. They borrowed a lot. Stock sold off, bonds sold off. And lo and behold, they're in the midst of a pretty major turnaround. I think it's a plan others can potentially follow over the next couple of years.

18:49Scarlet Fu:But what makes Intel different? Why was it able to pull it off? And how will other companies who might want to follow in its footsteps be able to, you know, follow this blueprint and also succeed? Yeah, well, there's a lot of benefits of having big, powerful friends. So first, you know, the government converted some of their grants into a 10 % equity stake. That was over $8 billion. NVIDIA wrote them a$5 billion check and SoftBank wrote a couple billion dollar check. On top of that, they sold assets. So they gained almost another$10 billion in asset sales for non-core businesses. So unlike others that have been doing nothing but been borrowing and adding leverage, this company has been on a deleveraging push.

19:31And on top of that, fundamentally, their core business is starting to improve. So a better balance sheet, a top line that we're looking to see grow this year after falling five straight years in a row. So they are doing things that are different and they're getting paid for it. All right. So on the Bloomberg terminal, if you want to see who the shareholders are of any particular company, you just type in HDS for holders. Number one for Intel, BlackRock. Okay. Number two, Vanguard. Got it. Number three, United States of America. You don't see that every day. And number four, NVIDIA. So those are the partners for Intel here.

20:09How about the free cash flow story? Because I was just looking back at the fa function and as you said negative free cash flow because they're spending so much on capex you're a bond guy you like free cash flow um how's that story developing yeah we haven't had a lot of free cash flow over the last few months to talk about um and we haven't been worried about it listen intel's been uh bleeding cash it looks like they're probably going to be around flattish this year that being said though with all these transactions that they've done they've built up a pretty big base,$37.5 billion of cash on the books.

20:41They're using some of it to buy back Apollo stake in one of their JVs. Is that a good move? It's a phenomenal move. We wrote yesterday that it was a sign of strength. What this company had to do is some creative financing. We've seen with AI, we've seen some of these off-balance sheet SPVs to raise money so it doesn't lever the companies. Intel was sort of the first to do this, but they did it with a variety of foundries. They did a deal with Apollo and they did a deal with Brookfield. What they're doing now is they're unwinding one of those, and it's showing that they now have the financial firepower to go into this build on their own.

21:16They don't need partners anymore. So they're using some of that cash that they've got from their equity friends, and they're using it now to take a bigger stake in what will be an upside in terms of cash flow and EPS from this foundry business. So it's a real sign of strength. It's not just from us. S &P came out right away yesterday and said they thought it was credit neutral. Moody's came out and said they thought it was credit positive because it was going to enable quicker deleveraging over a shorter period of time. So it's a real sign of strength. And it's one of the few names that both the equity and the bond markets really love.

21:50Scarlet Fu:And very quickly, Robert, do we give all the credit to Boontown? Let me tell you something. You bring in a new CEO and you make the type of changes that he's made. I think every technology firm would love to have a CEO like that. So yeah, I'll credit and kudos to him.

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