Investing After Cloud Outages & The End for Electric Vehicles?

0:04AWS went down, GM reported a great quarter, and Apple is back. Motley Fool Money starts now.

0:25Everybody 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. Welcome to Motley Fool Money. I am Travis Hoyam, joined today by Lou Whiteman and Jason Hall. Let's start with the big topic of the week. That was AWS going down. This happened on Monday morning. It was down for a few hours, and it seemed like the world stopped, especially if you're trying to do some investment research or access your brokerage in some cases. One takeaway could be that Amazon showed just how much of the internet it runs.

1:05but this could also force customers to consider, do you want to be multi-cloud? Do you want to diversify away from AWS? Jason, how are you thinking about these big shutdowns and how it impacts companies you own? So I think it's a big deal, but it's just becoming more of the status quo and the aggregate outages are really far fewer from these cloud-based services versus when enterprises try to self-manage applications. But the difference is it's kind of become like a community event now, instead of just now my company's email is broken. I have to call my customers and ask them if they've sent me an email to find out if something's going on.

1:40So maybe that's better, but it's just different. Lou, this is something that we deal with every once in a while, but it's always shocking when Amazon and AWS are the one that's involved because it's such a big deal. There's so many companies that are built on AWS. Yeah, if you want the bullish take here, as we found out just how critical AWS is to everyone's infrastructure, just how big a market share they have. But look, I don't think it's a big deal until it becomes a pattern. Even with CrowdStrike, where you did see a stock reaction, and it's notable Amazon stock didn't really react to this, but even with CrowdStrike...

2:15Yeah, the shares were up, I believe. Yeah. Even during the outage. The recovery was pretty quick with the shares. Look, every one of these is different, but scarcity matters. There's only so many of these big cloud things. I don't know if anyone can really say, well, this can't happen to us. it's also really hard to shift things. So I think, you know, which is kind of, you know, you don't want to change unless you have to. If this becomes a multiple occasion thing where, you know, Amazon just becomes unreliable, I think that's a different story. But for now, a one-off, I think we just grin and bear it and it doesn't really affect the company's business.

2:54I think the last time there was a, the Amazon had a big outage like this was maybe 2016 or 2017. So that's a long time. but I did a little bit of research and basically every two, every, about twice a year, we see, uh, one of these outages, but I don't think we really tend to remember them. If you remember back in 2020 and 2021, Fastly and Cloudflare both had outages and millions, we're talking like basically half the internet was down around the world. And most people still like, you look back down, we don't even remember they happened. So it's, again, they're going to happen, but to same enterprises, then there's a problem.

3:30I think it's just more of a symptom of how the world runs now. I want to get your stock takes in just a second, but I want to start with how companies might be thinking about this. Because I look at, you know, there's basically three major cloud providers with Microsoft and Azure, Amazon and AWS, and then Google, Alphabet and GCP. Does this push more companies towards redundancy, multi-cloud? This is something we've been hearing about for a long time. I think that would be one of the bullish cases for the smallest one, which is Google, ironically. I was trying to look back how often search goes down because search is built on the same infrastructure that GCP is.

4:10It's not very often, and it's like an hour here or there. But could that be something, Jason, that is a little bit bullish for some of these other clouds, or is it just, you know what, this is the cost of doing business? I think it's mostly the cost of doing business. the bigger bullish reality is just the pure demand. We still haven't seen everything shift to the cloud. And then you factor in AI, and as more companies are going to be adding AI into their enterprise to these different applications, there's just a massive tailwind still for the cloud to continue to grow. Oracle is a good example.

4:41Obviously, it's tied a lot more to AI than cloud, but how many people forgot that Oracle existed until about six months ago? And now everybody knows that Oracle is one of the growing cloud companies. I think areas where there's probably a lot of opportunity are like the sales forces, where there are niche companies that do a thing that are also big cloud companies, where companies, they do want to diversify their cloud, and that's ways that they can do it. Honestly, redundancy to me, it's one of those things that sounds better on the PowerPoint than it does in real world. Okay, say you were a multi-cloud operation, and that meant yesterday, earlier in the week, half of your systems didn't work instead of all of your systems didn't work.

5:20Does that really make you more productive? You know, if you're a single cloud, you can at least blame it on Amazon. Right, right, right. You know, I mean, and if anything, it might make it harder to unwind if some things work and some things don't. I think, yeah, like Jason said, there's a ton of demand here. There's just I if I'm an IT person, I'm probably more focused on pricing and using these companies against each other to get better pricing than I am just trying to say, well, I need a third, to third to third just to make sure only some of my systems go down if AWS goes down. Jason, let's talk about how companies and stocks respond.

5:57So we're investors. Is this the kind of thing where you should maybe rethink your thesis behind Amazon and AWS? Or is this something we're going to completely forget about? Because I just go back through, you know, I've been doing this for a long time. And there are these terrible, seemingly terrible events that happen in the moment. And then you suddenly look back and companies like Netflix and the Quickster debacle just kind of fade into history. Is that what's going to happen with outages like this? Yeah, I think, and this is one that we're going to look back and we're going to have forgotten about it, even probably a year from now.

6:31You look like the CrowdStrike outage back in 2024. Beyond a few examples of customers that were out for weeks, most of the customers were back and up and running by that afternoon and things were back to business as normal. But what I like to look at is, does it create a competitive opportunity? Because they really are the biggest player. AWS is the biggest player, but there's two other really big players and a bunch of other smaller players, maybe that are more niche. So there's already a lot of competition here. I think it's the ones that become so dominant that maybe they lose their edge where it creates risk.

7:05And I don't think we see that for a company like AWS. In a way, this is maybe thesis confirming how important AWS as a business and how profitable it is. So, two thoughts here. For one, I think, if anything, there's a bullish argument out of this. As we said before, the world is reliant on these clouds. That's good news for the cloud providers. I think it's also bullish for all the security and support companies that make them work. So, I think, as an investor, if anything, you lean into this. The real question for me is, and guys, I don't know the answer here, It feels like this is important enough that it needs to be regulated.

7:40But I don't even know how that would work. You could regulate on price, but that's not going to solve anything. I don't know how you kind of do a regulatory scheme to try to force redundancies or to avoid accidents because accidents are very hard. Doesn't the market can at least partially take care of that? I mean, is it? We just said I don't think it's going to on a one off. I think the market to a certain extent already has. I think there's a lot of redundancy that is built in. And this was just a really rare, weird one-off where this was a system that hadn't been fully restarted in something like three years.

8:12And it got through some of their built-in kind of self-checks. These things are the exception. I think if we start trying to regulate around the exception, everything gets more expensive and innovation gets slowed down. I think you're right. And what I worry about is, is as these things make the news, the urge to regulate comes in and that might be kind of the pushback to the bull case on this. So the takeaway here is we need to do a hard reset of these servers every once in a while. Not during business hours, though. Not during business hours. Yeah, let's have these overnight. So tell me when it's not business hours for AWS.

8:49That's true. That's true. Let's move on to earnings. And for disclosure for everybody, we're recording a little bit early this week because The Motley Fool has a big event called Fool Fest later in the week. So we're recording on Tuesday. We don't have numbers from Tesla yet. But we did get numbers from GM this morning. GM's an interesting one because nobody seems to like GM in the investment community, yet they're a growing company in electric vehicles. They reported 8 % volume growth. So they are seeing some growth despite some challenges that they have with some of their engines and some of the more expensive vehicles.

9:28But Lou, what did you take away from this quarter? Because this seemed to be about as good as it gets for GM. It's as good as it gets, sure. And I think some of this, who knows how much of it is just trying to get ahead of things. But look, one real take, and we already knew this going in, is that the EV momentum is dead. And GM told us that$1.6 billion charge related to underused or unused EV capacity, they're going to assemble about one-third of the EVs this year that they once forecast they would, Travis. It's easy to blame the tax credit expiring, but the point is we needed the tax credit.

10:05That demand has not materialized absent stimulus the way we had hoped. That's not to say it's dead, but I think it's just the state of play right now. And it's good for GM because they have all those ICE vehicles, but this is a high capex, low margin industry. The cost of switching out and changing plans on the fly is in the billions. it's a risk to lean into old-fashioned ICE vehicles, but I think it's the right move. I think the things that we talk about, like range anxiety and some of those things are maybe not really stated the right way. I think this is just a great big change management reality for the auto industry, which is already a tough, cyclical, brutal, largely zero-sum industry.

10:51Change management, the bottom line is like, if you want people to change, the incentives to make that change have to vastly outweigh all of the perceived negatives. And we know those for EVs, right? They cost more for the range that we get. It takes longer to charge. People don't know where to go plug them in versus going to a gas station. All of those things are realities for the industry. And we're past the early adopter stage. So what GM's doing, Travis, is the smart thing for GM to do, to lean in where it can make the most money right now and have that money ready when the time comes for the change and be willing to be as nimble as it can for a big company in a really tough industry.

11:31The other reality is the vehicles that sell the most and make the most money are massive vehicles, and those make the least sense to put massive, massive batteries in them. You make them much more expensive. You make them much heavier. So if you're looking at making a Tahoe or a Suburban, which is really where GM is making its money, that's a that's a really hard transition to evs if you're living making a small car much much easier but gm doesn't really care about small cars these days in the u.s anyways lou i wanted to touch on their recurring revenue uh supercruise they they still talk about onstar can we get rid of the onstar brand that would be i want to lobby for that uh but two billion dollars in in revenue five billion dollars in uh deferred revenue so revenue that they'll be earning over time.

12:19That seems to be a growth business. This was always the story with Tesla, right? That sure, we're going to sell cars, but where we're really going to make money is as basically more of a SaaS company and that recurring revenue model. But GM's actually building it. And I think that's a little bit surprising for people who don't follow this all that closely. Yeah, 2 billion today, they're still saying 20 to 25 billion by 2030. So they see this as a huge growth opportunity. I think they're doing it the right way. I think the wrong way, and some automakers have played with this is to begin charging us for things that we've gotten for free.

12:51Yeah, BMW got in trouble for that with the heated seats. Right, right. Or if you want to use your air conditioner, pay a buck. You know, that's not going to work. But if they can succeed in building some of these driver assist and tools that we actually want to use, not that hotspot in your car, which, come on, with what they're charging for that, that didn't work. But that is the way about it. I'm a little skeptical about that target within five years, but it's certainly an opportunity. Well, when we come back, we're going to talk about the new trend, about moving to Co-CEOs, something we're seeing more and more in tech.

13:27You're listening to Motley Fool Money. In diesem Jahr werden über 10.000 Elektrofahrzeuge für Amazon Lieferungen in ganz Europa eingesetzt. Für Lieferungen wie Fußbälle für junge Kicker. I don't know. 10.000 Elektrofahrzeuge. And it will be more. Based on the planned vehicles of our supply partners in the EU and Britain until the end of the year.

13:58Welcome back to Motley Fool Money. We're seeing a trend of two people sharing the CEO role. Co-CEOs. Netflix has been doing this for years. but Spotify announced this recently after Daniel X stepped down. This used to be seen as a negative and people sharing power at the top of companies. You kind of go directionless. But Lou, this is something that seems to have kind of worked, especially in technology. You're seeing different roles amongst different people. Netflix, you have somebody who's in charge of technology and others in charge of content. That seems to kind of make sense. Is this the new future of leadership in corporate America, the co-CEO?

14:37So I should say I'm old and every fiber of my being wants to hate this. OK, I want the Harry Truman buck stops here. I want somebody who is you want someone to blame. Right. That said, you know, CEO has become this strange catch all title that means different things at different companies. It is just too big of a job for one person. Every good company has responsibility sharing, you know, whether or not they label it like that or not. So, in a sense, this is sort of just relabeling. The CEO job is really, one person can't do it. There's not enough hours in a day. Most people, it's the rare exception if you are good at everything the CEO requires.

15:19So, you should lean into strength. I do note that, you know, like Spotify, Netflix, you still have a founder who is sort of a North Star. And maybe that helps make this work. You know, the founder is still involved. That's dangerous. We saw with Starbucks, we saw with Disney that having someone in the boardroom meddling isn't good. But maybe the solution is to have a North Star, to have a board that's actively engaged and pointing in the right direction, and then break down the CEO role among people doing what they're good at. I don't think it's always the case, but it does seem like we've seen maybe a little bit better succession planning for the companies that have co-CEOs.

15:58Not always. I mean, for every KKR, right? You've got Joseph Bay and Scott Nuttall that are co-CEOs. And since 2017, they were co-presidents before they became co-CEOs. Joseph Bay built their Asia-Pacific business. Scott Nuttall has had a lot to do with finance and leading the company public. And they replaced co-CEOs that were there before them. So, a company like that, it works really well. Then you've got Boston Omaha, right? Their co-CEO structure obviously was not functional. You say what you want about their business model, maybe being the real problem there. But it doesn't always work. But I think when it does work, maybe it works really, really well.

16:38I think the Spotify example is really interesting because I listened to an interview with Daniel Eck recently and the current co-CEOs, the new co-CEOs and Eck actually all share an office and have for years. And so, Jason, it does seem like that building this relationship, this partnership at the top of the company. It is kind of like being co-founders of a company. Maybe you're going to take the head PR role and do the interviews, but I'm going to do tech stuff in the background because that's not your expertise. So maybe that is why it makes sense in some or why it's successful in some of these instances where they kind of know exactly what the deal is.

17:20And there isn't this GE power structure. That's the one that I always go back because there was three people there when Jack Welch left, you know, vying for that role. One of them won. They all ended up being pretty terrible CEOs, but they all kind of, you know, the other two left because they were like, if I'm not going to get this job, I'm going to go somewhere else. Yeah. But I think that's the key really does get back a lot to what Lou was talking about is the complexity, particularly of modern businesses that do a lot more things. Look at Oracle, for example, they've over various years going back over a decade, they've had it.

17:54And the new Oracle, one of their co-CEOs basically built their cloud business, which is very different from the legacy of Oracle. So sometimes it really does make sense, but I think you're right, Travis. It gets back to culture. The companies that have the right culture is where it really, really matters the most. They can leverage and they can lean into this sort of thing. Luke? So leaning into my grumpy old man from the top, it all works when times go well. The interesting thing is, is say Spotify has a terrible, I don't know, tech meltdown or a terrible quarter or Oracle, all these investments didn't pay off.

18:27Then is it two people in collaboration, maybe with the board saying, here's what we're going from here, or is it whispers in the Wall Street Journal, it was the other person's fault? This all works so well when things are going well. I am curious if things go south, if it looks so good then. The successful ones we're talking about, Lou, are also companies that have gone from founder to co-CEO. So what happens, what's the succession plan after that? I mean, look, I think having the founder around helps a lot, you know, because that is sort of the adult in the room or the referee. But yeah, when the founder goes away, even if the two CEOs are there, if you lose a referee, does that change the pattern?

19:08It'll be interesting to see if this becomes more common in corporate America, but it does seem to be the direction a lot of companies are going. When we come back, we are going to do Stock Market Jeopardy. You're listening to Motley Fool Money.

19:32When Johann Rahl received the letter on Christmas Day, 1776, he put it away to read later. Maybe he thought it was a season's greeting and wanted to save it for the fireside. But what it actually was, was a warning, delivered to the Hessian colonel, letting him know that General George Washington was crossing the Delaware and would soon attack his forces. The next day, when Raw lost the Battle of Trenton and died from two Colonial Boxing Day musket balls, the letter was found, unopened, in his vest pocket. As someone with 15 ,000 unread emails in his inbox, I feel like there's a lesson there. Oh well, this is The Constant, a history of getting things wrong.

20:12I'm Mark Chrysler. Every episode, we look at the bad ideas, mistakes, and accidents that misshaped our world. Find us at ConstantPodcast.com or wherever you get your podcasts.

20:33Welcome back to Motley Fool Money. Today, we're going to play a little game that I like to call Stock Market Jeopardy. I have four categories and we have three questions under each category, 100, 200 and 300 points. We're going to go snake style, guys. Jason is going to start first and you either get the question right or wrong. So you can't jump in afterwards, even if you know the answer and steal the points. So maybe a little different than Jeopardy, but hopefully this will be a fun little game here. Jason, you are going to go first. First, the four topics are the market, IPOs, founders, and fun facts.

21:09This is obviously about investing. So where do you want to start? What topic and what number do you want to go with? Let's go with fun facts for you pick the number, I guess. Let's start with 100. Okay, let's do that. What is the biggest electric vehicle manufacturer globally through the first three quarters of 2025? NIO. What is NIO? I believe the answer is BYD. It's BYD. It's absolutely BYD. Yeah. 1.6 million vehicles to 1.2 million at Tesla. So I just think it's interesting how we're in the U.S. here. We don't talk about these Chinese manufacturers. That's right. They are dominating the EV space right now.

21:58Well, BYD is dominating it because they're making EVs for less than 10 grand. Yeah, and this number is their fully electric vehicles. It does not include the hybrid number as well. So it will be very interesting to see what happens with China and that manufacturing because they could potentially take over the market, especially in places like Europe, unless they put huge tariffs like we have in the US. That's why a lot of these vehicles aren't making it here to the US. Lou, you are up next. Where do you want to go? The market, IPOs, founders, or fun facts? Go big or go home. The market for 300, Travis.

22:34How many companies today are worth over$1 trillion? Seven. You are close, and you may have been right a few months ago, but the number is 11 right now. Oh, wow. Okay. Yeah, you have Tesla jumping up in there. I believe Oracle was close. But yeah, a trillion dollars is the new baseline. Yeah, I remember, you know, growing up, it was a million dollars was a lot of money. That's a million times a million. All right, Lou, we're going to go snake order. So you get another crack at it here. Where do you want to go? We'll do fun facts for 200. When did Netflix launch its streaming service? I will I'll give you a I'll give you a three month plus or minus here.

23:22Oh, you want month, not just year. Not just year. That's a little too easy. Not for me. Maybe I should give you a six month plus or minus. The end of twenty twenty six, December, November twenty twenty six. You get it right. It is January two thousand seven. I assume you meant two thousand. Six, not 2026, but. Oh, yeah, yeah, yeah, yeah. I'm looking into the future. Sorry. All right, Jason, you are up next. All right. What are the topics left? We still have 300 under fun facts. Let's do that. All right. Renewable energy and nuclear energy accounted for what percentage of U.S. electricity supply?

24:10Of course, this is coming from the EIA, so the data is very old. This is from 2023, but it should directionally be correct today. And this is up your wheelhouse, so you should get pretty close here. Nuclear plus renewables as an electricity supply. Oh, wow. This is actually a little harder for me because the percentage that's nuclear, I can't remember off the top of my head. I'm going to say 35%. I'll give you this one. It's 40%. I was going to say plus or minus 5%. They're almost exactly 2020. Yeah, because it's amazing how much renewables has grown. Exactly. Yes. All right, you get the next one.