US Auto Safety Regulators Investigate Tesla Door Handles

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1:46Anurag Rana:Bloomberg 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.

2:07Scarlet Fu:Stacey, I want to turn to a story that you highlighted earlier today, That's about Tesla fading U.S. auto safety investigations over its door handles. This is a story that Bloomberg had written about last week, and it got a lot of attention. Yes, the story itself is pretty amazing. The reporters here at Bloomberg did such an amazing job. And I have to say, I mean, the stories themselves were quite harrowing in some cases, people not being able to get out of their cars, people being trapped. It was, yeah, I'm glad that it is being looked into. All right, let's bring in Steve Mann, Bloomberg Intelligence Global Autos and an industrials research analyst.

2:41Scarlet Fu:And Steve, the fact that people don't know how to get out of a Tesla if it's locked in an emergency kind of situation on impact or if there's a fire is not new. Yet the National Highway Traffic Safety Administration did not act on anything until now. Why is that? Well, it is a very serious situation, serious safety situation. Now, Now, first of all, there is a manual release from the interior of the vehicle. But the safety issue is that you can't manually override the electronics and open the door from the outside. Now, this is an issue that's plaguing the whole industry. It's not just Tesla. Fair.

3:21Okay. And, you know, there's a number of automakers have solved the issue. And I think Tesla does need to solve this issue because, you know, people have died because of this problem here. I'm interested in, I was just looking, I was just catching up with Tesla stock. And for some reason, the shares continue a very enthusiastic upward march in spite of these really serious concerns. And like you say, you know, concerns where a solution isn't necessarily. Yeah, I think from the investor's perspective, there is a solution. There is a number of vehicles, for example, the Audi. They have actually solved that issue.

4:04And they solved it by having a double pull on the latch to actually open the vehicle manually. So I think from an investor perspective, it is an issue. It needs to be solved, and it's solvable. The reason why the stocks are going up, as you know, the trillion-dollar pay package and the reiteration of the company moving towards AI is really getting the investor very excited. The robo-taxies rolling out. Apparently, the extended Model Y is selling really well in China. So and then in Europe, where we saw a lot of decline in EV sales, seems to be ticking up.

4:47Scarlet Fu:But the pay package rewards Elon Musk for thinking really big, not dealing with how to unlock car doors in the event of some kind of problem. You say that Audi has solved this. Are Tesla engineers going to take their cue from Audi? Possibly. Really? Yeah, I mean, it's important. It's important that they solve this because Tesla, when they roll out the robotaxi, safety is an important issue for them. And it's an important issue not just for Tesla, I think for the whole industry. And it's a reputation that they're trying to build, especially, you know, they try to roll out robotaxi. And, you know, they want to project themselves as a safe automaker.

5:29So I think it's going to be a priority list for Elon Musk and the rest of the organization there. It does also seem that people are feeling quite optimistic about this stock, but also there does seem to be a liability issue in addition to a need to solve this problem issue. Is that at all a concern? I mean, from the markets, it would seem no, but. Yeah, it is a liability. And I wouldn't be surprised that there's going to be other legal issue that comes up. But I think from an investor perspective, this is normal business. Recalls are normal. And there are other safety issues that has been recalled, not just at Tesla, but other automakers.

6:20So I think the investor are taking this, I don't want to say lightly, but it's normal business that, you know, we're going to get over this.

6:32Scarlet Fu:It's a work in progress. Yes. Are there other safety issues in particular that Tesla needs to focus on, pay attention to that could, if left unresolved, could become legal liability issues? Oh, yeah, I actually thought about this. Robotaxi, right? And I think there's still a safety driver sitting on the passenger seat on pretty much on every robo taxi. I think there is discussions of taking the safety driver out at the end of the year. But I think they need to tread very, very carefully, especially for Tesla. It's a high profile company. Anything negative is going to damage their reputation. So if they don't take up the safety driver at the end of the year, I wouldn't be surprised.

7:17I think they do need to take it one step at a time and make sure everything goes well before they do a full launch without the safety driver.

7:28Scarlet Fu:All right. Steve Mann giving us something to look ahead to when it comes to Tesla. He is our global autos and industrials research analyst at Bloomberg Intelligence. 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. This has to be a tough statistic for some to hear. People who work so hard trying to grow their net assets, they want to protect that life work and they want to make sure that it is able to transfer in a seamless way.

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9:51Anurag Rana: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.

10:06Scarlet Fu:Let's talk a little bit about AI tech related companies. And I know that's so general and vague, but that's how I feel like you kind of encompass all of them. CoreWeave says its shareholder, NVIDIA, has agreed to buy cloud services valued at$6.3 billion, which sounds like a lot of money, but I think in this space may not be. Let's bring in Anurag Rana for us. He is Bloomberg Intelligence Technology Analyst to talk a little bit about this AI infrastructure demand. And Anurag, why is this cloud contract with NVIDIA important? So the reason why it's important is because CoreWeave is considered a new cloud or a cloud without, you know, you could say a backing like, you know, what we have from Amazon's other businesses or Microsoft's other businesses.

10:49So the two risks people think about CoreWeave is what if tomorrow the demand for AI cloud infrastructure drops or pricing drops? This deal basically says for the next several years, if there is any unused cloud capacity for CoreWeave, NVIDIA will come out and take that. So I think this is another way of telling the investors that please don't worry about the demand for AI infrastructure. you know, the parent of it all, which is NVIDIA, who's selling the chips to CoreWeave, will take care of the demand if there are any issues. Do you think that the amount of cloud space that AI will require will be smaller than we think it is?

11:31I mean, certainly that shook the markets a couple of months ago. Yeah. Well, at this point, there is more demand than capacity, which is why there is a big rush to create new data centers, install those new chips, create new networks, and go out and start to build applications that are AI-enabled. Having said that, people have seen this movie quite a bit back in the 2000 era when there was a glut of infrastructure built for internet, but then suddenly in the next two to three years, there was a drop in demand for that time. And this is what a lot of investors are fearing, And that's, I think, the big overhang on the space that at this point, everybody's happy.

12:122025 is great. 26 is great. But what happens after that is the big question mark.

12:17Scarlet Fu:Yeah, well, everyone has to get anxious about something, so we might as well look out to 2027 at this point. Anurag, let's talk about another company. You mentioned NeoCloud. Nebius plans to raise$3 billion in convertible notes and equity to help it expand. This follows a major deal to provide AI infrastructure to Microsoft. Is Nebius also a NeoCloud company? Yes, absolutely. It's the same kind of company. They are being funded by private credit, by investors, private investors. and they are creating a similar kind of a cloud infrastructure. And what's happening with Microsoft is there are two things that are important for people to understand.

12:55One, they run ChatGPT instances, which is when I'm tweeting or I'm looking at anything on OpenAI ChatGPT, those workloads are running on Microsoft's cloud infrastructure. It is lack of capacity. So it's going out to new clouds like Corvive and now Nebius to say, you know, I will buy that capacity for you as long as I can need it. So, it's Microsoft CapEx, but it's under leasing. Second aspect is Microsoft is basically saying, I don't want to build a lot more capacity for training of my models. I'm going to outsource that. So, which is why it's good for those new clouds. If Microsoft is going to spend that money, it's going to do rental from these cloud providers rather than building some of it in-house.

13:44Jumping now to Oracle, they're having a very good morning. And a lot of that has to do with the president, President Trump, announcing this morning or hinting anyway that Oracle might be involved in a TikTok deal. Can you talk a little bit about that? Yeah, to be very frank, I was a bit surprised about the stock reaction because I think it was very clear back in January that TikTok would be running in the U.S. and Oracle will be the cloud provider on the back end. So, similar to what I just mentioned on Microsoft Cloud, if somebody goes on TikTok and is running that application, Oracle runs that, the back end of it, or the Oracle cloud infrastructure.

14:20And that revenue was argued up for loss under the previous administration if TikTok was to be closed. But it seems back from January onwards that the president keeps on extending the ban on it. And, you know, Oracle's still making the money off it. The big question is, if there is a buyout that's led by U.S. companies, will Oracle have any equity stake in it? And, you know, we think it doesn't need to because it's already looking for so much of expansion capacity for its cloud infrastructure because of the OpenAI deal. So we don't think that's the case. But frankly speaking, nothing surprises us anymore.

14:58Scarlet Fu:That's a good way to end it, Anurag Rana. Bloomberg Intelligence technology analyst. Nothing surprises us anymore on the AI infrastructure demand, which seems never ending, at least for now. 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.

15:32Like, 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.

16:15Advisory services by Public Advisors, LLC, SEC Registered Advisor. Complete disclosures available at public.com slash disclosures. Ask yourself, what are your best people spending their time on right now? Expense reports, receipt chasing, month-end close that takes weeks. You become what you spend on, and that's not what you're building toward. Brex is the intelligent finance platform that eliminates that work before it starts. AI agents that handle the manual stuff automatically, so your team can spend their time on what actually compounds. It's time to get Brex AF. Learn more at brex.com slash AF.

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17:34Anurag Rana:Listen on demand wherever you get your podcasts or watch us live on YouTube.

17:40Scarlet Fu:All right, let's bring in Jeff Brown now. He is founder and CEO of T2 Capital Management. And Jeff is here to talk to us about commercial real estate. Jeff, this Fed rate cut that's going to happen tomorrow, it's pretty much baked in. And the big question is, what happens after tomorrow? Do we get a series of rate cuts? Do we continue cutting rates into 2026? And do we see a string of rate cuts in 2026? How is the commercial real estate market positioned right now? Yeah, I think the commercial real estate market is ready to breathe a big sigh of relief. It does seem like a foregone conclusion that 25 basis points is on the table for tomorrow.

18:15Expectations for, I think last I saw, we talked earlier this week in turn, I think it's two additional 25 basis point cuts going into the end of the year. And so, yeah, real estate's looking for a reprieve. We've endured these increased rate shocks from 2022 and 2023. A lot of people have been kind of clinging, holding on for dear life since then. And so, yeah, again, interest rates moving down is a big sigh of relief. I mean, they're not moving down that much. 25 basis points is a pretty little step down. Does that actually make a difference or is it more psychological? There's definitely a psychological element to it.

18:49I always say real estate developers are about the most optimistic people that you'll meet. So any kind of light at the end of the tunnel is grounds for optimism. There's at least some clarity now. I think a lot of people went through a period of time a couple years ago where you just didn't know what's going to happen next, what shoe is going to fall. Then there was great optimism with the current administration in the White House. We talked about President Trump and his background in real estate and so expectations that real estate would open up a little bit, transaction volume pick up. It hasn't manifested quite yet.

19:20We've had tariffs. We've had interest rates just kind of stagnate. Office seems to be getting back on its feet at this point. So again, it's not a big shock in the positive direction, but there is glimmers of hope and optimism now.

19:34Scarlet Fu:Even with the rate cuts last year, borrowing costs remain fairly elevated compared to where they were before the pandemic. And as Stacey points out, a 25 basis point cut today is not going to make tomorrow, I should say, is not going to make too much of a difference. You have some major intractable issues that are still holding up your industry, including costs, whether it's the cost of material or the cost of labor. Tell us a little bit about how much costs have risen over the last couple of years. Yeah, that has been a sore spot in real estate, frankly, is when COVID hit. So we're going back five years now, and we had this exacerbated increase in construction costs and construction labor, and all of a sudden, you know, it's supply issues and delivery issues.

20:19And again, I think we finally got through that. However, what has not really relented is the construction costs. And now as we're looking at, you know, there is a supply shortage that's upon us. There is just a dearth of construction that's out there at this point. So it favors existing landlords, people, you know, like T2 that own a fair amount of multifamily properties around the country, student housing properties around the country, because so few are being built at this point. Developers can't make numbers pencil to make a profitable construction development at this point. What is hampering, I guess, new development?

20:53Is it labor? Is it materials costs? I know lumber has been a big kind of topic that's come up quite a bit recently. Yep, and lumber's even retreated quite a bit. So that's been, again, a bit of a sigh of relief. There is a lot of volatility there, so who knows when that jumps back up. But yeah, I would say the costs in just labor and materials has been the driving factor toward constraining construction activity.

21:17Scarlet Fu:When you and your fellow titans of commercial real estate gather and talk, what do you find yourself lamenting the most? I wish I were in conversations with titans, for starters. As far as lamenting goes. What are you celebrating then, if not lamenting? You know, honestly, there's a lot of celebrating for clarity. I always say, you know, when I'm at a roundtable with other real estate investors, private equity fund managers and like, all we ask for is clarity. Like, define the boundaries, give us some clarity, and then we can operate, we can play the game. for the past three, four years, again, interest rate spikes, construction materials just running up unabated, tariffs implemented.