Tesla Deliveries Jump 25%

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1:56Bloomberg Tech is live from the heart of Silicon Valley with Ed Ludlow in San Francisco. This is Bloomberg Tech. Coming up, OpenAI held early stage discussions about giving the U.S. government a 5 % equity stake, according to reports. We have the details. Plus, Tesla's delivery numbers jumped 25 % from a year ago, beating Wall Street's expectations by a wide margin. And we're joined by Judson Althoff, CEO of Microsoft's commercial business, to talk forward deployed engineers. Let's get to our top story. OpenAI has held early stage discussions about potentially giving the US government a 5 % equity stake.

2:40That's according to a report in the Financial Times. CEO Sam Altman is said to have held discussions with President Trump, U.S. Commerce Secretary Howard Lutnick and U.S. Treasury Secretary Scott Besant. Bloomberg Senior Tech Editor Mike Shepard is with us from D.C. Again, this is an FT report. Bloomberg's not yet verified that reporting or done its own report. But the idea of stakes in technology companies and specifically in Frontier Labs has come up with this administration. Let's start by recapping what's in that FT report. Well, looking at the FT report, the biggest headline in it is the 5 % stake.

3:20You know, this is an idea that has come up before. Even President Donald Trump has indicated he embraced at least a vision for giving the government a piece of the action in these companies. But he hasn't gone into specifics. And they never really talked about just how much the government would actually acquire or hold in these ventures. But the 5 % is new. It's unclear, Ed, how advanced these discussions are with the government. Sam Altman was here in Washington last month where he met with some administration officials and brought the idea up again. It also came up during a visit to Capitol Hill.

3:59And this was an idea that was floated by OpenAI to the administration back in early 2025. So it's been kicking around. And back in early 2025, you'll remember the president did sign that executive order trying to set the stage for creating a sovereign wealth fund. That proposal hasn't really gained much traction here. It's quite complex and probably would need Congress to get involved. At that time in February 2025, you know, the president was saying, well, many other nations have a sovereign wealth fund. The United States should have one. And he specifically talks about the idea that that would be the vehicle for a U.S.

4:33stake in TikTok. That was the case study, I think, that the president gave. In the FT report, there is a broader idea, which is it seems to be the pitch from OpenAI to the U.S. government is the U.S. government should do this with a broad range of AI companies, but they're not named. Well, that's right. They took pains not to name the companies, but it is an idea that Sam Altman has been pushing. And it's really less, say, a sovereign wealth fund, but more a public benefit fund. And that's akin to a proposal we've also seen from Bernie Sanders, who has called for and even proposed legislation that would put a one-time 50 % tax on the top AI labs using their stock and then taking the proceeds to seed this public benefit fund.

5:20And the idea would be twofold. The goal would be to get the government at least some skin in the game to feel like it has some responsibility in the development of this technology, but then also to use the fund to redistribute the benefits of AI more equitably across the society and address some of the concerns that we have seen raised, especially recently with the oncoming wave of IPOs from OpenAI and Anthropic, that perhaps there could be a new generation of billionaires minted from this. and increasing the gap between the rich and the poor in this country. Bloomberg Tech has gone out to open AI, the other AI labs, the US government to comment on this story.

6:00Haven't heard back yet. Bloomberg's Mike Shepard. Thank you very much indeed. Anthropic may be the latest AI company designing its own chips. The information reports that the startup is in early talks with Samsung to manufacture a custom AI processor. It's the latest sign AI companies are looking to diversify beyond NVIDIA as demand for computing power continues to search. Again, we'll track that story. Staying with chips, it's not just AI companies rethinking their supply chains. Apple is also exploring new sources for critical components. According to sources, the company is in talks to buy memory chips from two Chinese suppliers that are on the Pentagon's blacklist for use in devices that are sold in China.

6:43The discussions are ongoing and no deal has been finalized for more. Bloomberg's Maggie Eastland with us also in D.C. Really, really detailed reporting. There are slightly separate issues here, right? There is the supply constraint that is memory. There is getting U.S. approval to do something. And then the main point that I just read, securing memory chips from a Chinese supplier for use in that market, devices that go to China. Start by bringing us the reporting. Right, Ed, a lot of nuance here. So one thing to note is that this Pentagon sort of watch list does not actually directly restrict Apple from purchasing memory from these two Chinese companies, CXMT and YMTC.

7:27However, it would be seen as potentially a political mismaneuver if they weren't to go ahead and get the U.S. permissions. Since the Trump administration has already shown They have some concerns about these memory companies being connected to the Chinese military. So the pitch here, and we've reported that Tim Cook has reached out to Treasury Secretary Scott Besant because Apple has been forced to raise prices due to the memory shortage. So the pitch here is that the shortage is so intense, maybe the U.S. should let up on some of its restrictions on these Chinese memory companies. Maggie, this is your reporting with the team, right?

8:06and it's based on sources explaining the situation. What has Apple said? And what has the U.S. government said about our report? Look, I think the best evidence we have here is that Tim Cook went to Scott Besson, obviously someone who cares a lot about inflation. Apple has also been talking a lot about this, talking about how memory price increases are driving the price increases for things like laptops and iPads. As Mark Gurman has reported, and who's also helped on this report. So I think the pitch here is that even though the U.S. government might have some security concerns, maybe it makes sense to allow Apple to purchase Chinese memory in these scenarios just because the price of consumer electronics is increasing so rapidly.

8:53But of course, there are going to be China hawks in Washington who have concerns about this. We included in our report from Chairman Brian Mast, who leads a committee here in the House that oversees foreign affairs. And he is very against this move and is advising the Trump administration not to do this. So we're certainly going to see a fight here in Washington over this. Bloomberg's Maggie Eastland, thank you very much. Coming up, Tesla surprises Wall Street with the strength of its second quarter deliveries. Cox Automotives Director of Industry Insights, Stephanie Valdis-Stridi, back on Bloomberg Tech.

9:29Stock, kind of interesting reaction here. We'll get to it. This is Bloomberg Tech.

9:44Tesla's released its vehicle delivery numbers for the second quarter. The EV maker delivering 480 ,126 vehicles globally, outstripping analyst estimates by more than 20%. I think this is the best second quarter that they've ever had. The stock is down almost 7%. It's on track for its biggest drop in almost a year. So that's an interesting market reaction to that news. Joining us is Bloomberg's managing editor, Craig Trudell. So, you know, this was way ahead of consensus. It's a change in the trajectory of what's been happening with Tesla's vehicle sales story overall. What else do we need to know?

10:26What else do we know from the limited release the company put out? Yeah, ahead of competitors with the one big exception of BYD, but I don't think that that's something to really get, you know, sort of too hung up on. This is a release where the numbers are great. I mean, it's, you know, I think the expectations were low going into this print. That being said, we did see, you know, four sessions where the stock ran up 13 percent. So when you kind of, you know, just pan back maybe over the last week, is this move quite as dramatic as it looks at first glance? Maybe not. But I think, you know, the big takeaway here is that Tesla's vehicle business is recovering.

11:03And also that maybe the first quarter on the energy side was maybe a bit of a blip. It was quite disappointing, their energy storage deployments. And in the second quarter, we saw a pickup that was fairly substantial. The limited sell side commentary is that, you know, Europe and China seems to be improving for Tesla. Comparing and contrast, Rivian is up 10%. And Rivian that's kind of cut back its annual forecast for delivery and production has now raised it again. What do we know? Yeah, I think with Rivian and also with Lucid, which is out with numbers this morning, I think the bar has been set much lower for them because they've had so much of an issue with kind of chasing Tesla, right?

11:43I think there were expectations when these companies went public, in Rivian's case, by IPO, in Lucid's by way of SPAC deal. There were expectations that these companies would sort of take on Musk in a much more meaningful way. But we've really seen them struggle to gain traction. We're seeing this morning more sort of moves at the executive level for Lucid. And with Rivian, I think there's a lot of hopes and anticipation of the R2, this lower cost platform that's coming to market. And if this company can execute better with these lower priced vehicles, it unlocks maybe much more of a market for this company going forward.

12:24Bloomberg's Craig Jadel, thank you very much. It's a story that definitely merits more analysis and discussion. Stephanie Valdestreet is the director of industry insights at Cox Automotive and joins us now. Let's start with the Tesla number. I mean, it was we are comparing it to an average of analysts estimates. And so from that standpoint, it was a massive surprise. You know, the other way of looking at it is the most vehicles they've ever delivered in a second quarter. Is there anything that you see that explains it? Yeah, I think, you know, the market was expecting some stabilization, which we got.

13:00But then Tesla actually delivered some acceleration. And when I look at the market, I think if you look later to kill the onion, it's the European market. That's really, I think, helping Tesla in Q2. Our estimates for Q2 in the U.S. are Tesla down sales 20 % year over year and about 2.2 % quarter over quarter. So I think the European market is really driving sales for Tesla in Q2. And, you know, it makes sense. The German, the French incentives came back. High gas prices, right? That's another headwind that really or tailwind that helped Tesla in Q2. So I think that's kind of looking at it broadly.

13:39That's what's really helped Tesla in Q2. Yeah, the high oil price and gas prices narrative is very interesting. What you were talking there about, you know, Europe relative to other markets from a regulatory or consumer incentive standpoint is interesting. Where are we at in this kind of multi-speed market where Europe was ahead on adoption anyway? China was ahead and has a much greater proportion of new energy vehicle sales. but pure battery electric sales relative to the U.S. anyway.

14:20And I think the one thing in Europe, right, they have once again, they have better infrastructure. They have the incentives coming back. China's kind of slowing down. But the Chinese OEMs, right, they're exporting to all these countries. So they're gaining share. And so I think they're providing a lot of affordable EVs. So I think the European market's going to continue to grow. I had a colleague post something earlier today saying in Australia, for the second month in a row, Tesla is number one. And so I think Tesla is finding its way to kind of beat out some of the Chinese OEMs. But I think there's a lot of competition.

14:57If you look at the second half of this year, they're going to have to contend with that as well in both Europe and China market. Stephanie, I looked a little confused for a second there because we lost your microphone just for the first five seconds of your answer on that. But I think we have you back. Worry not. Right now, I think there is a big focus on probably still consumer spending power and affordability. So you had told us that your data pointed to a Tesla sales decline in the United States market. What's the bigger picture of the U.S. auto buyer right now?

15:34price premium between a new ev and a new ice vehicles got into about 5 500 so the lowest it's ever been but that's more about a product mix um but i think looking forward to the rest of the year you have some more affordable evs launching you have you know toyota has a chr um the woodland has come out you have um subaru launching a couple so i think there's some new product coming out. But at the end of the day, I think getting that monthly payment down is the biggest prohibitor for any vehicle, right? And especially for EVs where there's still a price premium. So I think at the end of the day, we need more affordable EVs launched in the US, and that's going to help.

16:12Fortunately, we're seeing infrastructure growth. So I think that's a positive sign. But once again, I think the affordability continues to be the theme throughout the automotive sector. Director of Industry Insights at Cox Automotive, Stephanie Valdestrilli back on Bloomberg Tech. It's been great to have you. Thank you very much. Another news story. Uber has dismissed two tech leaders at its nascent AI data labeling business, shaking up a key division that the ride hail company is positioned as a key growth driver. Uber says the departures are part of a broader leadership transition at the division.

16:46The unit, which launched in 2024, uses a network of gig workers to handle tasks needed for preparing data to be used in AI models. Okay, coming up, we're going to take the pulse of tech markets with Fiona Sincoda from Citi Index in what is a short week here in the United States for trading days, but a lot to discuss. This is Bloomberg Tech. With the highest number of young STEM graduates per capita in the EU, Ireland has the people and skills your company needs to succeed here. IDA Ireland, the National Investment Development Agency, can help you find and nurture the people you need to internationalise and thrive.

17:29Our talent is just one of the extraordinary benefits Ireland has to offer. Learn more at IDAireland.com. Invest in extraordinary.

17:41Get the news you need in just 15 minutes. Start your day with Bloomberg Daybreak, the podcast with a global view on the stories that matter. I'm Nathan Hager. And I'm Karen Moscow. Join us each morning for curated stories on current events, politics, business, and foreign relations. Plus one conversation on the day's biggest developments, all in just 15 minutes. Subscribe to Bloomberg Daybreak for a precise, thoughtful take on the stories that matter. Listen to Bloomberg Daybreak each morning on Apple, Spotify, or anywhere you listen.

18:18U.S. hiring slowed sharply last month with non-farm payrolls rise by just 57 ,000. The jobs market is facing headwinds from the Iran war, but also downbeat consumer sentiment. When it comes to tech's impact, these figures show manufacturing and construction jobs rose, possibly linked to the AI build out. While, as we discussed yesterday, big tech firms have been cutting roles to offset AI spending, kind of competing dynamics. This is what markets look like and how the technology sector has kind of reacted in part to that job set. And as that 100 is down 1.4%, the Philadelphia Semiconductor Index, or SOX, is down 4.5%.

19:00We've seen big swings in both directions on the SOX for a couple of weeks now. We're on track for back-to-back weekly declines on the socks. For the first time since March, the Nasdaq 100 on the week still up a percentage point. I say on the week, it is a short week. It is a holiday in the United States. Tomorrow, Friday, July 3rd, because of the July 4th holiday, the socks down 3.4%. And as I said, back-to-back weekly drops. Again, a shortened week. Let's get more on what's happening in markets. Fiona Sincoda, City Index Senior Market Analyst. joins us. I guess let's start with the moment in time that was the latest economic data.

19:38And what I did not say in a bit of a ramble just then was, you know, now the market's recalculating what they think the Fed will do this year, pushing back the idea of a hike to December. Why is that important? I mean, the fact that we've got the market getting a little bit more relaxed about what Federal Reserve could be doing with interest rates is sort of helping investors sort of reassess where they're positioning. And the reason this is important is because when you have higher interest rates, you often find that this weighs on high growth tech stocks just because of their future valuations.

20:18So, they're less valuable in the future if we've got higher interest rates. Now, the fact that we've got those interest rate hike expectations decreasing is usually beneficial for tech stocks. So, we would usually expect that to see actually an increase in the tech stocks. But that's interestingly, it's not what we're necessarily seeing today. And I do think that this is potentially related to some concerns over that sort of AI trade, the really strong rally that we've seen in memory stocks and chip stocks and tech stocks. and we're seeing some profit taking, as you've mentioned. We've seen a couple of weeks now where we've seen some lower closes and I think this is all just coming ahead of earnings season.

21:07I think we're just seeing this recalibration, a repositioning because obviously investors are nervous that there is a potential for this rally to have overextended and so I think that's what we're seeing play out right now. one of the drivers of this market has been semiconductors but in particular memory and something that keeps coming up time and time again on the show is that if you take micron as a case study um it's quite reasonably valued you know based on forward 12 months uh price to earnings and the question for everyone in the market well what happens next right does it continue to go on the run that it has been does that where you look kind of a sort of fundamentals and valuation level?

21:50Yes, I think you've got to take it to quite a few things into account here. You look at the fundamentals of valuation, you also need to look at the technicals. Is the rally overrun? Is it in overbought territory? But then we've also got to have a look at the bigger macro picture as well, as we've talked about here, you know, the potential for federal reserve rate hikes or not, I think also does have some sort of implication in where we are. So, you know, taking all that into account. But I mean, what we have seen, as you said, is this phenomenal rally in the memory chips, memory stock and chip stocks as well.

22:24So I think there is naturally going to be pullbacks. I mean, we know these stocks don't just go up. But if it is considered to be reasonably priced, which is what we're seeing right now, then that does leave a potential for further gains. Another big technology news story today, SAP will cut back hiring and travel to save costs as it devotes more resources to developing AI and fending off new competitors. According to an email to staff from the executive board that was reviewed by Bloomberg, SAP will, quote, exclusively focus new hiring on selected profiles only, mainly core AI roles that are critical for our long-term success, end quote.

23:06Fiona, I wanted to do that news story because I think it's something that's crossed your desk this morning, right, and that you have seen in the news cycle. What do you make of that, particularly in a European tech context as a case study? Yeah, so I think this is really interesting because, I mean, there's very much a focus, I think, of, you know, how are businesses dealing with these increased costs? How are they going to balance them out? What it means for hiring as well, you know, from a personal perspective and for, you know, people looking for jobs. So the fact that they are looking to sort of rein in spending in one area in order to be able to focus on, you know, that AI related investment is really interesting because obviously that's what we do want to see.

23:52We can't just continue to spend without the means to doing it. But also this idea that they are going to continue hiring for very AI specific positions, I think is really key. And I think this is just something that we are sort of thinking about more broadly is, you know, what does employment, what does hiring look like in this sort of new AI world? And there have obviously been some sort of changing perspectives. You know, does it mean loads of layoffs, you know, such as Oracle? We've seen them laying off staff and citing the reason for job cuts as AI. But then you've also got Federal Reserve Chair Kevin Walsh yesterday, who was actually suggesting the opposite, that technical innovations have the potential to lift productivity and increase employment.

24:39So this is definitely sort of an argument that we're looking at. But for SAP to hear that they are actually making clear decisions to going towards AI, I think should be a good thing for the company. Fiona Sincato, Citi Index. Thank you very much indeed. Now, coming up, Judson Althoff, CEO of Microsoft's commercial business, is joining us. They're making a$2.5 billion bet on forward deployed engineers, FDE. We're going to discuss that next. It's halftime here in San Francisco. Do not go far. We've got so much more to come in the show. This is Bloomberg Tech.

25:22Welcome back to Bloomberg Tech. We're taking a very quick look at shares of SpaceX. It's kind of been interesting to track what has been up and down and a little bit sideways trading. $157,$158 a share. Remember, this is an IPO that priced at$135. The opening trade was$150. And now we're getting more information. One of the key questions asked about the Elon Musk led company, is it valued properly? Next week, investors may get a clearer picture when a host of new research, price targets and growth estimates come out from the banks that worked on the IPO. Bloomberg's Carmen Reinecke is here with the DEETs.