Autonomous Vehicles Hit an Inflection Point & GPT-5 Is Here

0:04Travis Hoium:We are in the heart of earnings season, but autonomous vehicles have caught our attention. Motley Fool Money starts now.

0:25Travis Hoium:Everybody needs money. That's why they call it money. The best things in life are free, but you can give them to the birds and bees. From Fool Global Headquarters, this is Motley Fool Money. I'm Travis Hoyam, joined by Lou Whiteman and John Quass. Today, we're going to cover earnings from the Trade Desk and Crocs, get our pulse on the economy. But first, autonomous vehicles have reached something of an inflection point. We've heard from nearly all the mobility companies over the past two weeks, and the theme is autonomous driving. It's not just Tesla that's talking about autonomy. Uber and Lyft made it a central piece of their earnings releases and conference calls.

1:06Travis Hoium:Mobileye seems to be gaining some traction with Volkswagen. Zook's got an approval. It needed to roll out kind of its mini bus design to more places. John, it seems like we're at an inflection for autonomy. Is that really the case today? Listen, Travis, is it OK for me to say that I don't really like the idea of autonomous vehicles? I think you're always going to find me. Of course, that's on brand for you, John. Yeah, I mean, I'm going to be behind the wheel of a car with the open road ahead. But I do want to be really fair to your point here about the industry reaching an inflection point. There is indeed concrete data that supports that statement.

1:42So if you look at Waymo, for example, the driverless car division of tech giant Alphabet. In late 2020, Waymo launched driverless rides to the general public. By the end of last year, it had completed 5 million rides. But in May of this year, it announced it already completed 10 million. So it took four years to get to 5 million rides, then five months to get to another 5 million. That seems like an inflection point. Yeah, and I like the fact that you mentioned Uber and Lyft here, Travis, because I think that these companies are just looking ahead, seeing the future for what it is and trying to position themselves accordingly.

2:18And I like Lyft's vision approach here in particular with fleet management. It's fleet management business flex drive. I think that if ride hailing truly moves more and more autonomous, I think it's likely that there's going to be large fleets of vehicle businesses that run fleets of these autonomous vehicles. And if you're going to do that, if you're going to put your fleet on a ride hailing app, you're still going to need fleet management. You're still going to need somebody who's cleaning the cars, making sure the tires are inflated, things like that. Lyft's flex drive business addresses that potential need in the future.

2:54And so that's one of the reasons I do like Lyft here.

2:57Travis Hoium:Yeah, it's interesting. All these companies are trying to figure out the business model. Even Waymo has a different business model in Atlanta than it does in Austin than it does in San Francisco, for example. So we're really in this testing phase. But speaking of testing, the Chinese automakers seem to be kind of pulling ahead in a lot of different ways. they're going to be launching or launch partnerships at least with companies like Lyft in Europe. Volkswagen is partnering with Mobileye. They've got a hundred vehicles, over a hundred vehicles on the road. You have May Mobility. Well, the names that we haven't brought up here are the names like General Motors, Ford, Stellantis, the US, Detroit auto companies.

3:35Travis Hoium:Lou, are they getting left in the dust or are they waiting in the wings with some sort of brilliant strategy that we just haven't seen yet.

3:42Lou Whiteman:So yeah, for better or worse, Detroit is sitting on the sidelines to kind of let in this play out. And to be clear, this could be for the worse. I don't think anyone has a real sense of where things will be a decade from now. It could be they are way behind. But I'm inclined to give the benefit of doubt here. For one, these companies know better than we do the cost and what goes into autonomous. It isn't like they've had their head in the sand. Ford with Argo, GM with Cruz. They looked at the costs. They looked at the benefits and they made a choice. I think their calculus here is that their manufacturing footprint makes them relevant.

4:16Lou Whiteman:We will still need vehicles, whether they have steering wheels or not. And look, automakers for the last century have done a good job incorporating new technologies from third parties into their vehicles. They know how to do this. Travis, all of these players, all these potential options, I think there's at least a chance the actual tech will be somewhat commoditized, that bet will pay off. And just like they used to add cruise control or add all sorts of things from other vendors, one day they'll just add autonomy.

4:46Travis Hoium:It does seem like everyone is at least trying to lay the groundwork. Lou, you mentioned that it isn't like GM and Ford have been completely asleep at the wheel. They did have acquisitions that they made that just kind of decided to go a different direction than companies like Tesla have. But look, Elon Musk has been thinking that we could fall asleep in LA and wake up in New York City for over a decade at this point. And we aren't there yet. But as we think about this potentially being an inflection point, Uber launched in 2010. And it was unheard of to get into a stranger's car at that point for a ride.

5:21Travis Hoium:A decade later, 110 million people were using Uber. The company was doing 7 billion trips a year. Five years from now, will we be seeing a similar explosion in adoption for autonomy, John? You know, no, I don't think that we're going to see that same level of explosion in adoption. I think that Uber was addressing something with a wider use case personally. You know, a couple of weeks ago, Tesla CEO Elon Musk said, I think we'll probably have autonomous ride hailing and probably half the population of the U.S. by the end of the year. Personally, I would be surprised if it got to half of the U.S.

5:57population in five years. The reason being, and Musk did allude to this, there's red tape involved here. And for better or for worse, there needs to be consensus on the regulatory front. And in a polarized political environment, sometimes that can be hard to come by. And so I think where we're going to see autonomy taking off most is where we see ride hailing thriving right now. The denser the city, the better it is for this kind of adoption.

6:24Lou Whiteman:So I'm not going to be the Luddite here because I'm in Atlanta. Waymo is all over Atlanta. I was downtown not too long ago, early in the morning, and it was just me and a bunch of Waymos driving, positioning themselves for the day. Really freaky. And you know what? I'm starting to get used to it. I'm starting to be a believer. And Travis, I do think, yes, we are going to see an explosion in adoption in the coming years. But I think John's right. It's not going to be everywhere. It's not going to be ubiquitous. I think the use case will remain limited, or at least not unlimited, if that makes sense.

6:58Lou Whiteman:I don't think we're just going the way of everybody right now. We're still a long way from riding around with vehicles without steering wheels. But yeah, I think just looking at what's going on in Atlanta, I think that that can be transferred to other cities. And I think we are going to see just these numbers go up big time very quickly from here.

7:17Travis Hoium:Yeah, I'm in Minnesota and I saw a May Mobility vehicle driving around last week. So that was a shock to me because this is not usually the kind of place where you're going to be adopting autonomous vehicles first with the winters that we have here. So, I mean, it sounds like there's an opportunity, especially if, Lou, if you're seeing this, you know, they've only been in Atlanta for a few weeks now. And if you're already kind of getting used to it, I think that shows how quickly our attitudes can change about technology. So look, this is an investing podcast. And as we're looking at autonomous vehicle stocks and what people may want to be putting on their watch list, what stocks are you looking at and what metrics are you looking at for success over the next decade, Lou?

7:58Lou Whiteman:So this is kind of boring. I'll give you two, though. For me, the big winner here, the one I'm interested in is Alphabet, partially because seeing is believing and what Waymo is doing is really remarkable. So, I'm kind of biased by that. And partially because, look, I don't know what's going to happen. I am not convinced I know what the future is with kind of how we get around. And with Alphabet, you have so many non-transportation ways to win. It feels like that Waymo is kind of just the icing on the cake of a good stock, and it feels like cheating. So, I like that. Second for me is Uber, because again, as I said before, I do think the actual tech could end up commoditized, just kind of like with Apple and their control of the consumer and what that gives them with the phone space.

8:41Lou Whiteman:Having the customer already, the customer might be what everyone fights over and Uber has it already. Yeah, you know, Travis, for me, I don't know which direction this space is going to go. So, I do like something that's a little bit more automaker agnostic, platform agnostic. I do like businesses that have large first-party data sets. For me, Mobileye does check a lot of boxes in that regard. In 2022, it said it had over 200 petabytes of driving data. I'm not sure exactly where that number is today, but that's a lot of data that it can use to train these models that are so needed for really widespread adoption in the space.

9:22Travis Hoium:Yeah, and the companies that are talking about collecting a lot of data, the Teslas, the Rivians of the world. Mobilize is just kind of hiding there in plain sight. They are on millions of vehicles today. Their technology may be on the vehicle that you're driving. If you have something like smart cruise control or lane assist, that probably comes from Mobilize. So it'll be interesting. The other one that we brought up here that I think on that demand side is going to be interesting to watch if I can just add one is Lyft. I think Uber and Lyft aggregating that demand and trying to commoditize those supplies Uber is investing a lot of money in partnerships to effectively make sure there's a dozen suppliers for autonomous vehicles and autonomous technology.

10:03Travis Hoium:So this will be fascinating to see play out, but don't be surprised if this is bigger than we all think a decade from now. When we come back, GPT-5 is here. This is Motley Fool Money.

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11:32Travis Hoium:The day we've all been waiting for is here. GPT-5 has arrived. Sam Altman compared this to the difference between the iPhone pre-retina display and post-retina display, which kind of made me chuckle because I couldn't tell you which version of the iPhone that was. and we're early in chat GPT5. I've already found a few flaws in the few questions and I've been able to answer, but the benchmarks that they're comparing themselves against, tell us that this is a huge step forward. John, do you believe it? I would love to answer with a simple yes or no here, but I think that an answer requires a little bit more nuance than that.

12:09So in the GPT5 demo, one of the things that the presenters did was have it explain the Bernoulli effect. That's something important for aerodynamics. In GPT-5's answer, it wasn't completely accurate. Now, the parts that were inaccurate weren't necessarily GPT-5's fault. It's a common, repeated, wrong answer out there. And so AI can only do as well as the input that it's been trained with. And so if you get a wrong input, you're going to have a wrong output. That would seem to be the case there. Just a minor thing. But I don't want to undersell this tech either. So while they were doing this demo, they created a language learning app for French, kind of on the fly, made it like a little game.

12:56And Duolingo stock actually took a hit during this demonstration because it was so fast. It was so effective. And so, yeah, in some regards, I would say that GPT is a step forward here, but it's not necessarily a game changer.

13:10Lou Whiteman:You know, Travis, I chuckled, too, at Altman's kind of comparison, because I do think it's telling that we're using vague kind of other product comparisons. And that's what we're getting at, because, look, he's marketing the product. He's trying to capture the imagination, as he should be. Do I believe it? I mean, I believe it's better than what came before, and I believe the next iteration will be better than this. The important thing is, is that do customers believe it? Because OpenAI needs customers. As a consumer, I personally have found models that I like better. As an investor, I can't buy into OpenAI even if I want to.

13:45Lou Whiteman:So I'm not going to waste too much of my personal processing power trying to figure out the rate of progress. I think everybody's making progress here, and we're all just kind of racing towards the unknown. So it's better, and it will continue to get better. End of story.

14:00Travis Hoium:There are a dozen companies or more that this is relevant to. One that we've talked about recently is Alphabet. Google Cloud grew 32 % in the most recent quarter. They're actually running some of ChatGPT now. Gemini, which is their competing app, is up to 450 million monthly active users. ChatGPT said they were at 700 million weekly active users, so we can't ever have apples to apples numbers. But is this the kind of improvement that is going to stop a product like Gemini or maybe make an impact on Microsoft's productivity tools as they make their way into enterprise, Lou?

14:35Lou Whiteman:So, first of all, I don't know what to make of these user numbers. I have to be honest. I mean, for OpenAI or anyone, I am constantly getting nagging pop-ups when I'm in Excel telling me to use Copilot. Does that make me an active user? And every Gmail I get, I get a summary that I basically ignore. So, am I an active Gemini user because of that? So, I mean, these numbers, I believe, again, are made for effect. That said, there's definitely stuff going on here. What I would say is I know we are very early in this race. There is no winner yet. I don't think anything OpenAI did this week makes them a winner.

15:11Lou Whiteman:Yes, chat GDP has some really impressive numbers, but Microsoft and Alphabet have what OpenAI can only dream of, reliable conduits to the end users. All those things that I said are annoying today. They can get a lot better and they are sitting there right in front of me. They don't have to market that. It is already right there. I'm not going to predict the doom of Copilot or Gemini, even if this is as amazing as Altman says it is. We're still early in the race, and Microsoft and Alphabet have advantages that OpenAI just don't. Yeah, I agree with Lou here. Look, even if GPT-5 is an order of magnitude superior than everything else out there, these big tech giants aren't just going to take that lying down.

15:52They have already invested so much in their AI products that they're going to keep doing that. And so it's not going to derail the other tech companies as far as their own roadmaps, including Elon Musk's XAI. So I'm not sure in the end which platform is going to demand the most users, which one's going to make the most money. I think right now everyone's still just trying to build and push the envelope as far as they can.

16:19Travis Hoium:Yeah, the reports are that the next Gemini, which would be three, is kind of waiting in the wings for OpenAI to release this. Well, the other piece that we heard this week is that OpenAI's employees in a secondary offering are potentially going to be able to sell their stock at a$500 billion valuation. Now, we don't have all the financial information that you would get from an S1 that's just pre-IPO. But based on what we know, John, are you a buyer at that price? Absolutely not, Travis. Mostly because I'm not 100 % sure that it can deliver$500 billion in shareholder value. You think about these AI models.

16:56Do all of these AI models out there kind of reach the same capabilities for the end user? If they do, then there is somewhat of a commoditization risk and consequently a lower profit margin risk over the long term. So OpenAI, congrats on everything you've done so far. I'll use GPT-5 for things here and there. but I'll invest my money other places.

17:19Lou Whiteman:Yeah, kind of what he said. I know kind of harping on valuation, many fortunes have been missed because you're too caught up in valuation, but I want to see more results and more what the meat is here before I can look past valuation. I believe in AI. I believe in the future. I believe there are so many ways to ride the coattails of AI and benefit from its continued process. Kind of like what we said about mobility. There are so many better diversified bets. I'm not going to pay up and pay a high valuation for a concentrated bet on one system. It's just too early for that.

17:54Travis Hoium:Let's get to an early look at earnings before our next break. As we've gone through earnings season, we haven't gotten a lot of warning signs about the consumer, but Crocs reported earnings and the stock dropped 29%. Tariffs were part of the story. Crocs inventory was part of the story. But what was the takeaway that we need to take from Crocs' big drop this week, John? Well, Travis, I think the story here is really specific to Crocs. I don't think it's so much of a tariff issue. In reality, management had laid out previously a worst-case scenario for tariffs for the business. And based on where the policy is at right now, the business isn't facing the worst-case scenario.

18:34So that's good. Inventory is a little bit high for Crocs. But they were basically trying to get the inventory in before some of the tariffs took place. And so it's not really a big concern. I think the big story here is that Crocs acquired a company called Hey Dude, a shoe brand called Hey Dude, back in early 2022 for$2.5 billion. It still really isn't living up to expectations. Profits haven't improved as they've hoped. And now Crocs had to take a Goodwill impairment charge of$737 million. That stinks for shareholders because it means that Crocs overpaid for Hey Dude back in 2022. The silver lining here is that it's a non-cash charge.

19:17It does impact the second quarter headline numbers. And I think that investors were a little bit spooked by that. But in reality, it didn't really make any money changes to the business. So there's at least a little bit of consolation in that.

19:31Travis Hoium:As always, people on the program may have interest in the stocks they talk about in The Motley Fool, may have formal recommendations for or against, so don't buy or sell stocks based solely on what you hear. All personal finance content follows Motley Fool editorial standards and is not approved by advertisers. Advertisements are sponsored content and provided for informational purposes only. To see our full advertising disclosure, please check out our show notes. Next up, we are going to get to the trade desk, which is down almost 40 % on Friday, and we're going to play buy, sell, or hold. You're listening to Motley Fool Money.

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