Latest / Bloomberg Intelligence / OpenAI inks AMD Chips Deal Worth Tens of Billions of Dollars

Transcript

OpenAI inks AMD Chips Deal Worth Tens of Billions of Dollars · Bloomberg Intelligence

• 0:02
  Speaker 1: Bloomberg Audio Studios, podcasts, radio news. You're listening to the
• 0:10
  Speaker 1: Bloomberg Intelligence Podcast. Catch us live weekdays at ten am
• 0:14
  Speaker 1: Eastern on Apple, Cocklay and Android Auto with the Bloomberg
• 0:17
  Speaker 1: Business App. Listen on demand wherever you get your podcasts,
• 0:21
  Speaker 1: or watch us live on YouTube.
• 0:24
  Speaker 2: And the big I think news that probably really surprised
• 0:28
  Speaker 2: people to the upside was this news on an Advanced
• 0:30
  Speaker 2: micro Devices signing that deal with open AI and AMD
• 0:35
  Speaker 2: just ripping, adding one hundred million dollars in market cap
• 0:38
  Speaker 2: today on that news. The numbers around these AI stories
• 0:41
  Speaker 2: are just bigger and bigger every single time. I think
• 0:44
  Speaker 2: it makes me feel uncomfortable. Some of the numbers that
• 0:47
  Speaker 2: are being thrown around makes me think about I woke
• 0:49
  Speaker 2: up this morning looking at this news and I felt like, man,
• 0:51
  Speaker 2: it just feels toppy to me.
• 0:52
  Speaker 3: This whole AI.
• 0:54
  Speaker 4: Story topy as in early two thousand seven, or like
• 0:57
  Speaker 4: mid two thousand and seven or eight two thousand, don't know.
• 1:00
  Speaker 2: It just feels like there's this too many big numbers
• 1:02
  Speaker 2: being thrown around too quickly. I'm not sure where the
• 1:04
  Speaker 2: returns are. It's one of those types of things. But
• 1:06
  Speaker 2: Ed Ludlow, this is his Bailely Wick. He's a Bloomberg
• 1:09
  Speaker 2: Tech co host. He is out there in Silicon Valley supposedly.
• 1:13
  Speaker 2: Who knows where this guy is all the time? And
• 1:15
  Speaker 2: what do you make of this news? These are some big.
• 1:17
  Speaker 3: Names Open Ai AMD, Yeah.
• 1:21
  Speaker 5: I mean the deal, the specifics of the deal are
• 1:24
  Speaker 5: really important. What is opening going to use AMD's technology for.
• 1:29
  Speaker 5: It's going to use it for inference, in other words,
• 1:31
  Speaker 5: running the models that already exist, not training them. It
• 1:35
  Speaker 5: is six gigawatts of capacity. The reason that that figure
• 1:40
  Speaker 5: is critical is that equates to the peak collectricity demand
• 1:43
  Speaker 5: of most major US cities. Like these are huge numbers,
• 1:47
  Speaker 5: as you say, but it just speaks to what's happening
• 1:51
  Speaker 5: to the mind of the participants in the industry, which
• 1:53
  Speaker 5: is they will need this capacity. You guys are using
• 1:58
  Speaker 5: words like top and bubble, and I think that's completely fair.
• 2:02
  Speaker 5: Maybe you saw my column this morning on the debt
• 2:05
  Speaker 5: role that in what's happening. But I would say that
• 2:09
  Speaker 5: AMD has done something interesting here which is different to
• 2:13
  Speaker 5: what Nvidia did, which is they will issue stock to
• 2:18
  Speaker 5: open Ai. AMD shares going to open Ai, but only
• 2:22
  Speaker 5: once open Ai is spent some money and actually built
• 2:26
  Speaker 5: some stuff. So where's open ai going to get the money?
• 2:30
  Speaker 4: Well, that's why Sam Allman has been traveling the world
• 2:32
  Speaker 4: meeting with all kinds of investors trying to get some funding.
• 2:36
  Speaker 4: You said the specifics matter ed, but we don't know
• 2:39
  Speaker 4: how much this partnership, this deal is worth beyond the
• 2:43
  Speaker 4: very generic tens of billions of dollars, right, that could
• 2:46
  Speaker 4: be ten billion dollars, that could be ninety nine billion dollars.
• 2:48
  Speaker 5: Yes, that's correct. I mean AMDCFO framed it as being
• 2:52
  Speaker 5: tens of billion dollars of revenue opportunity. But that's why
• 2:56
  Speaker 5: I think the specifics of the terms I've made a
• 2:58
  Speaker 5: careful examination of them are really important understand versus what
• 3:03
  Speaker 5: Nvidia did with open Ai. So Nvidia said it was
• 3:06
  Speaker 5: going to invest one hundred billion dollars into open Ai.
• 3:10
  Speaker 5: We don't even know if that was cash or chips
• 3:12
  Speaker 5: in lieu of cash, but basically in video would get
• 3:16
  Speaker 5: some equity in open Ai in return. In this instance
• 3:19
  Speaker 5: AMD and open Ai. Open ai is getting AMD shares,
• 3:24
  Speaker 5: but they are deliverable in tranches against milestones, which relate
• 3:28
  Speaker 5: to literally building the data centers. So for each gig
• 3:31
  Speaker 5: of what of capacity that comes online in video would
• 3:33
  Speaker 5: then say Okay, I'm sorry. AMD would then say, here
• 3:36
  Speaker 5: is this tranch of stock, and that's why I'm saying
• 3:39
  Speaker 5: focus on the open AI obligation here. They need actual
• 3:43
  Speaker 5: money to dig up the dirt, put the foundations in,
• 3:46
  Speaker 5: get the data center up, and put the servers in
• 3:49
  Speaker 5: before any of this stock comes into play.
• 3:52
  Speaker 3: Stay with us more from Bloomberg Intelligence coming up every this.
• 4:00
  Speaker 1: Listening to the Bloomberg Intelligence Podcast. Catch us live weekdays
• 4:04
  Speaker 1: at ten am Eastern on Apple, Coarclay, and Android Auto
• 4:07
  Speaker 1: with the Bloomberg Business App. Listen on demand wherever you
• 4:10
  Speaker 1: get your podcasts, or watch us live on YouTube.
• 4:14
  Speaker 3: Got an M and A trade in the regional bank business.
• 4:17
  Speaker 3: I think it's kind of a big one.
• 4:18
  Speaker 2: I like this one fifth Third Bank Corporate buying Co
• 4:21
  Speaker 2: America for about ten point nine billion dollars in stock
• 4:24
  Speaker 2: JP Morgan, Goldman Sachs and Keith Rutton Woods.
• 4:27
  Speaker 3: Those are the bankers getting paid.
• 4:28
  Speaker 2: And I always take a look at that first and foremost.
• 4:30
  Speaker 2: I go to the last paragraph of every column, every
• 4:33
  Speaker 2: story about it.
• 4:33
  Speaker 4: M A trade.
• 4:34
  Speaker 3: So who gets paid? Herman Chan Joints is here.
• 4:36
  Speaker 2: He covers the regional banks for Bloomberg Intelligence you like
• 4:40
  Speaker 2: to steal herman.
• 4:41
  Speaker 6: Yeah. I think it's a win win, okay for both.
• 4:43
  Speaker 6: Comerica has been sort of in the doldrums over the
• 4:45
  Speaker 6: past couple of years after the SVB debacle. It's taken
• 4:49
  Speaker 6: on some long time to get it under its own
• 4:51
  Speaker 6: footing and they've gotten a lot of agitated investors and
• 4:58
  Speaker 6: activists pushing for a sale and this was a great outcome.
• 5:01
  Speaker 6: On the other hand, for Fifth Third, it's a great deal.
• 5:04
  Speaker 6: It moves them into growth, growthier markets in Texas and California,
• 5:09
  Speaker 6: supplements their Michigan presence, and really builds out their branching
• 5:14
  Speaker 6: presence across the southeast and Southwest.
• 5:17
  Speaker 4: So within the regional banking space, what does this deal
• 5:20
  Speaker 4: put pressure on? Who does this deal put pressure on
• 5:23
  Speaker 4: to make a move of their own?
• 5:24
  Speaker 6: Yeah, So that's a question, the follow on question like
• 5:27
  Speaker 6: who's next. So there are other banks that are operating
• 5:31
  Speaker 6: within the size of a Fifth Third that have also
• 5:35
  Speaker 6: done deals, like a PNC and Huntington, and the others
• 5:38
  Speaker 6: that are still on the sidelines are banks like Regions
• 5:41
  Speaker 6: in the Southeast, Key Corp in Ohio as well, and
• 5:45
  Speaker 6: M and T and Citizens in the northeast, So those
• 5:48
  Speaker 6: are the ones that probably are going to get asked.
• 5:50
  Speaker 6: A lot of questions on the three to two earnings
• 5:52
  Speaker 6: go about M and A.
• 5:53
  Speaker 2: So what do we know about the Trumpet administration and
• 5:55
  Speaker 2: its view towards bank consolidation?
• 5:57
  Speaker 3: Are they a pined on this at all?
• 5:59
  Speaker 6: Yeah, and see that these bank deals are getting approved
• 6:02
  Speaker 6: at much faster clips. So I mentioned Huntingdon earlier. They're
• 6:06
  Speaker 6: buying a bank in Texas named Vera tex And it's
• 6:10
  Speaker 6: going to take them about ninety eight days from deal
• 6:13
  Speaker 6: closed from merger announcements. And that contrasts with under Biden administration,
• 6:19
  Speaker 6: it's taken four hundred to six hundred days for a
• 6:21
  Speaker 6: large banker may deal.
• 6:22
  Speaker 3: So these deals under.
• 6:24
  Speaker 6: Trump are being fast tracked, and it's really encouraging the
• 6:27
  Speaker 6: management teams to really go out there and search for deals.
• 6:31
  Speaker 4: So for so long, a lot of people had commented
• 6:33
  Speaker 4: that the US is overbanked. By one count there's almost
• 6:37
  Speaker 4: forty five hundred FDI and see insured banking institutions here.
• 6:41
  Speaker 4: Are we still over banked? Herman I would.
• 6:43
  Speaker 6: Say, so, there's a lot of competition, and that's the
• 6:47
  Speaker 6: reason why COO America is looking to sell because they
• 6:51
  Speaker 6: were lacking in the retail branch presence. They mostly bank
• 6:57
  Speaker 6: middle market commercial customers are grades, but it doesn't create
• 7:02
  Speaker 6: the diversity that they needed during time to stress like
• 7:06
  Speaker 6: the SVB environments. And so that was a lesson learned
• 7:10
  Speaker 6: for a lot of the banking industry that you need
• 7:12
  Speaker 6: to diversify your deposit base. And one way to diversify
• 7:16
  Speaker 6: as the cell to a larger organization.
• 7:18
  Speaker 4: Which segment of the banking industry is bloated, needs to
• 7:22
  Speaker 4: streamline the most.
• 7:24
  Speaker 7: Yeah.
• 7:24
  Speaker 6: So there you mentioned forty five hundred banks. Does there
• 7:28
  Speaker 6: need to be that many banks within the United States?
• 7:31
  Speaker 6: Probably not. They don't have to scale to operate a
• 7:34
  Speaker 6: retail branch presence. They don't have the capabilities on the
• 7:37
  Speaker 6: fee side and the advisory side to really help their
• 7:40
  Speaker 6: customers on the commercial side. And you see so much
• 7:45
  Speaker 6: competition from not only larger banks, but also the FinTechs
• 7:49
  Speaker 6: that are just binding at the heels on the consumer side.
• 7:53
  Speaker 6: So it's a really tough operating environment and we'd expect
• 7:58
  Speaker 6: more consolidation over the next several years.
• 8:00
  Speaker 2: All right, riddle me this year, why do banks even
• 8:03
  Speaker 2: have branches? I hear adding branches. I've been into a branch.
• 8:07
  Speaker 4: In years across the street from Bloomberg Headcutters, City Groups.
• 8:11
  Speaker 6: City Branch right across. A lot of it is marketing
• 8:15
  Speaker 6: because and a lot of it is scale. So for
• 8:18
  Speaker 6: a bank like Fifth Third, they're growing organically in the
• 8:22
  Speaker 6: Southeast and that's been a major growth driver for them.
• 8:25
  Speaker 8: If you need a branch, you you don't need a branch,
• 8:28
  Speaker 8: but you need the branch for a marketing aspect, so
• 8:31
  Speaker 8: you need to have ability, right It's a big billboards,
• 8:34
  Speaker 8: expensive billboard in markets where.
• 8:36
  Speaker 6: You have a lot of foot traffic and higher growth markets,
• 8:39
  Speaker 6: so it's a big billboard and it's been a proven
• 8:42
  Speaker 6: growth driver for banks. But on the other hand, branches
• 8:45
  Speaker 6: are declining. So if you have critical mass and scale
• 8:49
  Speaker 6: in your existing markets, you can trim your branch presence
• 8:53
  Speaker 6: and not affect your depositors. But if you're entering new markets,
• 8:57
  Speaker 6: then opening new branches is the way.
• 8:59
  Speaker 2: Do you think I could find my checkbook?
• 9:02
  Speaker 4: That raises a question does a fintech that wants to
• 9:04
  Speaker 4: be a bank need to therefore have a retail presence?
• 9:06
  Speaker 4: Do they need to open up a branch also across
• 9:09
  Speaker 4: the street from our office.
• 9:10
  Speaker 6: So that's that's the beauty of the fintech models that
• 9:13
  Speaker 6: they're issuing the branches. It's not a requirement. It's a
• 9:16
  Speaker 6: lower cost to serve because you don't have the physical
• 9:19
  Speaker 6: retail presence. And uh it's one way to to really
• 9:24
  Speaker 6: compete effectively with these with these legacy banks where you
• 9:29
  Speaker 6: have a really easy to use app and you you
• 9:33
  Speaker 6: aren't burden by this cost basis of owning the physical presence.
• 9:37
  Speaker 7: All right.
• 9:38
  Speaker 3: So when we had a couple of little blow ups
• 9:40
  Speaker 3: in your world a couple of years ago, I did.
• 9:42
  Speaker 2: I found this k r E the spider S and
• 9:44
  Speaker 2: P Regional Banking ETF.
• 9:46
  Speaker 3: That's right. How are you? How are the regional banks
• 9:49
  Speaker 3: training these days? Yeah, so they're they're really doing all right.
• 9:53
  Speaker 6: We're talking about price the tangibles around one point five
• 9:57
  Speaker 6: to one points uh times is during the height of
• 10:00
  Speaker 6: the weakest point during the SBB debacle, it was less
• 10:05
  Speaker 6: than one time. So they've rebounded really nicely despite some
• 10:09
  Speaker 6: of the uncertainty on the economy and what's hariffs, and
• 10:12
  Speaker 6: so we've seen some growth from them, especially on the
• 10:14
  Speaker 6: commercial lending side. That's really helped grow their top line.
• 10:19
  Speaker 3: Stay with us. More from Bloomberg Intelligence coming up after this.
• 10:26
  Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us Live
• 10:30
  Speaker 1: weekdays at ten am Eastern on Apple, Cocklay and Android
• 10:33
  Speaker 1: Auto with the Bloomberg Business App. Listen on demand wherever
• 10:36
  Speaker 1: you get your podcasts, or watch us live on YouTube.
• 10:40
  Speaker 2: We've had a management change in the telecom space. Verizon
• 10:43
  Speaker 2: Communications named Dan Shulman chief executive Officer, replacing Hans Wesberg.
• 10:49
  Speaker 3: That's effective.
• 10:49
  Speaker 2: Immediately looking over at the stock for Verizon down four
• 10:53
  Speaker 2: percent today, although it's up about four percent year today.
• 10:57
  Speaker 2: Let's see what this means for Verizon.
• 10:58
  Speaker 3: In for the telecom space.
• 11:00
  Speaker 2: We're joined by John Butler, senior telecomanals for Bloomberg Intelligencies
• 11:04
  Speaker 2: down there in our Princeton office. Hey, John, so a
• 11:07
  Speaker 2: change at the top four of Verizon. Was this expected
• 11:10
  Speaker 2: or is this something new for the company?
• 11:13
  Speaker 3: Not at all, Paul.
• 11:14
  Speaker 9: I mean, you know, when you think merger Monday. I've
• 11:17
  Speaker 9: had a lot of busy Mondays lately. But the last
• 11:21
  Speaker 9: piece of news I expected was this change in leadership
• 11:25
  Speaker 9: at Verizon. The company had really been sort of I
• 11:30
  Speaker 9: guess prepping the head of the consumer business or grooming
• 11:33
  Speaker 9: is a better word, summer. Ryan sam Path who is
• 11:38
  Speaker 9: just a phenomenal talent in my opinion, and he's been
• 11:42
  Speaker 9: sort of pushed out there doing a lot of investor
• 11:45
  Speaker 9: conferences and giving the investment community the impression that he
• 11:50
  Speaker 9: was the next in line. So when the news broke
• 11:52
  Speaker 9: this morning that Dan is taking over as CEO, it
• 11:56
  Speaker 9: really surprised a lot of people, including me.
• 11:59
  Speaker 3: So, what's what a company saying here?
• 12:01
  Speaker 2: Why do you think they chose this outsider versus somebody that,
• 12:03
  Speaker 2: again an insider that maybe the street thought was going
• 12:06
  Speaker 2: to be the next to line.
• 12:08
  Speaker 9: You know, I think for telecoms, all three of the majors,
• 12:12
  Speaker 9: the wireless business is slowing very rapidly on them. We're
• 12:17
  Speaker 9: seeing subscriber growth down a lot this year. There's a
• 12:21
  Speaker 9: lot of pressure on pricing, and I think the thought
• 12:23
  Speaker 9: is Dan Shulman used to be CEO of PayPal. He's
• 12:28
  Speaker 9: got experience at amex in the consumer finance business.
• 12:33
  Speaker 3: So they're thinking in terms of.
• 12:34
  Speaker 9: How to monetize the one hundred and fifty million consumer
• 12:38
  Speaker 9: relationships they have to move into adjacencies. The naming of Shulman,
• 12:43
  Speaker 9: in my mind, tells me they're looking to tap the
• 12:46
  Speaker 9: consumer finance market. You know, they've already got a credit
• 12:50
  Speaker 9: card business. I think it's probably doing pretty well. But
• 12:54
  Speaker 9: they're not actually in the loan business there, but they're
• 12:57
  Speaker 9: doing a lot of device finance, and so I think
• 13:01
  Speaker 9: the hope, maybe this is my speculation, maybe that they
• 13:05
  Speaker 9: can take that perhaps a step deeper into the consumer
• 13:09
  Speaker 9: finance market and maybe other adjacencies to be able to
• 13:13
  Speaker 9: monetize that base a little bit more and diversify away
• 13:17
  Speaker 9: from the slowdown and wireless.
• 13:19
  Speaker 2: And Verizon they've kind of dabbled over the years, and
• 13:23
  Speaker 2: other businesses, purchasing.
• 13:25
  Speaker 3: AOL and Yahoo. So what's the focus going forward here?
• 13:30
  Speaker 2: Is it to try to just manage the wireless business
• 13:33
  Speaker 2: as the decline in the wireless business as best they can.
• 13:38
  Speaker 9: So again it's the strategy here, Paul, I think, is
• 13:41
  Speaker 9: to sort of build off that base that they have.
• 13:44
  Speaker 9: The wireless business is stable, it's not going anywhere. It's
• 13:49
  Speaker 9: typically a GDP plus business. Again, we're seeing a slowdown now,
• 13:54
  Speaker 9: so it could move down to a GDP like growth rate.
• 13:59
  Speaker 9: But again it's all about extensions. So all three of
• 14:02
  Speaker 9: the majors here are pushing hard into consumer broadband. They're
• 14:07
  Speaker 9: doing very well there, both in the fiber and the
• 14:10
  Speaker 9: fixed wireless access business. But even that business is starting
• 14:15
  Speaker 9: to mature a bit as it saturates here in the US.
• 14:18
  Speaker 9: So the question becomes what's next, And maybe the what's
• 14:22
  Speaker 9: next could be consumer finance. If you look at T Mobile,
• 14:26
  Speaker 9: they've tapped the outdoor advertising market, which actually is growing
• 14:31
  Speaker 9: double digit. I never would have guessed, but the thought is, hey,
• 14:36
  Speaker 9: is people carry around these phones, we know where they are.
• 14:40
  Speaker 9: Perhaps we can leverage that and come up with very
• 14:44
  Speaker 9: innovative ways of increasing eyeballs on our outdoor advertising. So
• 14:50
  Speaker 9: I think they're looking for that type of creative thinking
• 14:54
  Speaker 9: to come up with new ways of generating growth. And again,
• 14:57
  Speaker 9: you're trying to leverage that huge core or base of
• 15:00
  Speaker 9: wireless subs that you have.
• 15:02
  Speaker 2: Just been at their balance sheet, John, this is a
• 15:05
  Speaker 2: this is company Verizon. It's got one hundred and seventy
• 15:07
  Speaker 2: billion dollars of total debt. There, how's the How does
• 15:11
  Speaker 2: the market feel about their balance sheet?
• 15:14
  Speaker 9: So I think of the big three, Verizon is probably
• 15:19
  Speaker 9: at a point where they want to be in terms
• 15:21
  Speaker 9: of financing the business. Can they load on a bunch
• 15:25
  Speaker 9: more debt? It's it's hard to say. I'm going to
• 15:29
  Speaker 9: defer to our credit as for that, Steve Flynn, But
• 15:34
  Speaker 9: I don't view their ability to finance new ventures as
• 15:38
  Speaker 9: an issue here at all. It's a very cash rich business,
• 15:42
  Speaker 9: wireless that is, and you know, I think that will
• 15:46
  Speaker 9: allow Verizon to bankroll any of the new ventures they
• 15:50
  Speaker 9: plan to push into from here.
• 15:53
  Speaker 2: And one thing I certainly pro shareholders is six point
• 15:55
  Speaker 2: six percent dividend yield?
• 15:56
  Speaker 3: Is that safe?
• 15:58
  Speaker 9: I think it is safe. That's a good question. I
• 16:01
  Speaker 9: think Verizon, of the big three, really sort of gets
• 16:05
  Speaker 9: it when it comes to the importance of the dividend
• 16:08
  Speaker 9: to the investment community. There's a lot of telecoms out
• 16:12
  Speaker 9: there at and T included that have cut the dividend
• 16:15
  Speaker 9: in the past and learned the hard way that that
• 16:18
  Speaker 9: really I call it the third rail of telecom. I mean,
• 16:21
  Speaker 9: you do not want to cut the dividend yep. So
• 16:25
  Speaker 9: my call here is that I think the dividend is safe.
• 16:28
  Speaker 3: Yes, stay with us. More from Bloomberg Intelligence coming up
• 16:32
  Speaker 3: after this.
• 16:35
  Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live
• 16:39
  Speaker 1: weekdays at ten am Eastern on Applecarclay, and Android Auto
• 16:43
  Speaker 1: with the Bloomberg Business app. Listen on demand wherever you
• 16:46
  Speaker 1: get your podcasts or watch us live on YouTube.
• 16:50
  Speaker 2: Let's get an update on what's going on in the
• 16:51
  Speaker 2: auto industry, particularly transition from internal combustion engines to electric vehicles.
• 16:58
  Speaker 3: I'm not sure where we are.
• 17:00
  Speaker 2: In the process now if we've kind of lost some
• 17:01
  Speaker 2: momentum of what's.
• 17:02
  Speaker 3: Going on there.
• 17:03
  Speaker 2: But let's check out with our next guest. There's some
• 17:05
  Speaker 2: thoughts here, agent Balfour. He's a founder and chairman of
• 17:08
  Speaker 2: and Vorso joining us. And Vorso is a consulting firm
• 17:13
  Speaker 2: specializing in digital transformation, AI and software driven innovation, with
• 17:17
  Speaker 2: a focus in part on the auto industry.
• 17:20
  Speaker 3: Adrian, thanks so much for joining us here.
• 17:22
  Speaker 2: Give us a sense of kind of where you think
• 17:24
  Speaker 2: we are here in this country, and then we can
• 17:26
  Speaker 2: go globally if you want on this. I guess transition
• 17:29
  Speaker 2: to electric vehicles.
• 17:33
  Speaker 7: Yeah, now, thanks for having me. I think you know
• 17:35
  Speaker 7: you take a look at it. We are transitioning to
• 17:38
  Speaker 7: an electric vehicle sort of infrastructure and a future going
• 17:41
  Speaker 7: forward with software defined vehicles. Various sort of like companies
• 17:46
  Speaker 7: have got certain advantages over others. Companies like stillant Us
• 17:51
  Speaker 7: have pulled back a little bit. I think some of
• 17:53
  Speaker 7: the traditional autos have spent too much money on it
• 17:56
  Speaker 7: and have achieved less than stellar results, and they tend
• 17:59
  Speaker 7: to be pulling back a little bit, whereas companies like Tesla, Lucid,
• 18:03
  Speaker 7: Rivian or kind of pushing forward. I think overall the
• 18:07
  Speaker 7: next sort of twenty twenty six twenty twenty seven, you're
• 18:10
  Speaker 7: going to see an increasing acceptance of the electrical vehicle
• 18:14
  Speaker 7: market as we go forward in the marketplace.
• 18:16
  Speaker 4: Yeah, your former employer Ford among those legacy automakers that
• 18:20
  Speaker 4: have perhaps spent too much and maybe aren't seeing enough return.
• 18:23
  Speaker 4: In the meantime, where are we, Adrian, now that the
• 18:27
  Speaker 4: seventy five hundred dollars us EN tax credit is gone.
• 18:30
  Speaker 4: How much momentum did that halt?
• 18:34
  Speaker 7: And I think you know, you saw like a seven
• 18:35
  Speaker 7: percent seven point four percent, I think increase in quarter
• 18:38
  Speaker 7: to quarter revenues for Tesla. I think that's going to
• 18:42
  Speaker 7: be hard to stay in going into Q four, So
• 18:45
  Speaker 7: that will be difficult, primarily because it was a bit
• 18:47
  Speaker 7: of a pull ahead. But as you look going into
• 18:49
  Speaker 7: twenty twenty six, you're going to see in particularly with Tesla,
• 18:52
  Speaker 7: with the advances of a sort of sub thirty thousand
• 18:56
  Speaker 7: dollars model. Ford are working hard to come out with
• 18:58
  Speaker 7: a sub thirty thousand dollars model as well, So I
• 19:00
  Speaker 7: think there's a big shift to apply software defined vehicles.
• 19:05
  Speaker 7: But the major issues is that the costs went too high.
• 19:09
  Speaker 7: So a lot of the automotive makers are now focusing
• 19:12
  Speaker 7: on the sub thirty thousand dollars category to try and
• 19:15
  Speaker 7: get something in there, to try and get a sort
• 19:17
  Speaker 7: of market presence. In particular, I'm interested in seeing how
• 19:20
  Speaker 7: test those launch goes with the model too, and I
• 19:23
  Speaker 7: think if that goes well, and if you can get
• 19:26
  Speaker 7: some of the ROBOTAXI legislation SLASH provides pilots to improve,
• 19:33
  Speaker 7: I think you're going to see a really big uptick
• 19:35
  Speaker 7: because the technology is pretty cool.
• 19:37
  Speaker 4: Right Well, you mentioned a couple of times a sub
• 19:40
  Speaker 4: thirty thousand EV, and of course we're not there yet,
• 19:43
  Speaker 4: but you do see that around the world. Chinese evs
• 19:46
  Speaker 4: are cheap and incredibly technologically advanced, and they're available everywhere
• 19:51
  Speaker 4: except the United States. Do we get to a point
• 19:54
  Speaker 4: where we might one day see Chinese main evs in
• 19:56
  Speaker 4: the US.
• 19:59
  Speaker 7: I think that's that's that's an ecumenical decision up to
• 20:02
  Speaker 7: the Congress. So I think right now there's very serious
• 20:06
  Speaker 7: sort of tariffs on the Chinese vehicles coming into the US,
• 20:10
  Speaker 7: and I think the idea there is to give the
• 20:13
  Speaker 7: US automakers a chance to play catch up. I mean,
• 20:16
  Speaker 7: if you go to Europe, you will see some thirty
• 20:19
  Speaker 7: dollars Chinese evs that are really high quality, and I
• 20:23
  Speaker 7: think it's really in the US we're really sort of
• 20:26
  Speaker 7: like playing catch up a little bit. So I think
• 20:28
  Speaker 7: the tariffs there are there designed to give us a
• 20:31
  Speaker 7: head start, or to give us, well not a head start,
• 20:33
  Speaker 7: but catch up time.
• 20:34
  Speaker 4: Play catch up.
• 20:35
  Speaker 7: Yeah, yeah.
• 20:37
  Speaker 2: What does this mean for the automakers forwards, the gms,
• 20:41
  Speaker 2: the Volkswagens. I mean it's a tough game for them
• 20:44
  Speaker 2: because I got to wean themselves off of these ice cars,
• 20:47
  Speaker 2: vehicles that make a lot of money for them, F
• 20:49
  Speaker 2: one fifty trucks and whatnot. How do you think they're
• 20:52
  Speaker 2: going to work this out?
• 20:54
  Speaker 7: Well, it's like it's like every sort of transition in
• 20:56
  Speaker 7: the economy, you know. The traditional automakers come from a
• 21:00
  Speaker 7: sort of modular basis where they buy modules from multiple suppliers.
• 21:04
  Speaker 7: So you may have one hundred modules in the particular
• 21:06
  Speaker 7: vehicles or one hundred plus modules in a particular vehicle
• 21:09
  Speaker 7: and they have to integrate that together. That's a very
• 21:12
  Speaker 7: complex sort of scenario versus something like a Chinese YV
• 21:16
  Speaker 7: that's a startup or a Tesla where they have two
• 21:19
  Speaker 7: to three modules in the vehicle that they have to integrate.
• 21:22
  Speaker 7: So it's a different framework from where you're coming from.
• 21:26
  Speaker 7: And so the automakers in the US have got the capital,
• 21:29
  Speaker 7: they've got the experience, and they've got the knowledge. They
• 21:31
  Speaker 7: will pull it off. They just need time to get there.
• 21:34
  Speaker 7: They have to move from over one hundred modules down
• 21:36
  Speaker 7: to less than ten, and they've got to do that
• 21:39
  Speaker 7: within three to four years. It's a difficult challenge.
• 21:42
  Speaker 4: It's a difficult challenge. I know you're in the business
• 21:44
  Speaker 4: of vehicles and auto suppliers. I want to get your
• 21:48
  Speaker 4: take on the financial troubles of First Brands and Tricolor,
• 21:51
  Speaker 4: which are of course tangentially linked to the auto industry.
• 21:55
  Speaker 4: What does it say about the strength of the auto
• 21:58
  Speaker 4: industry that these two companies have fallen into financial disfavor
• 22:02
  Speaker 4: so quickly and taken so many people by surprise. I
• 22:04
  Speaker 4: know there are some idiosyncratic reasons behind them, but it
• 22:07
  Speaker 4: does speak volumes about a certain segment of the US
• 22:10
  Speaker 4: consumer that is having trouble keeping up in this economy.
• 22:14
  Speaker 7: Yeah, I think US consumer is sort of like I think,
• 22:17
  Speaker 7: it was sort of pushed towards evs, and there's been
• 22:20
  Speaker 7: a negative reaction as part of that. But as people
• 22:23
  Speaker 7: buy evs and become more stealth mode, I think people
• 22:27
  Speaker 7: are going to start adopting them them faster and faster.
• 22:29
  Speaker 7: I know the people that I am familiar with that
• 22:32
  Speaker 7: have been very skeptical of evs, once they get an
• 22:35
  Speaker 7: EV they start to really like it. The difficulty still
• 22:38
  Speaker 7: becomes down to fear of you long long trips, travel,
• 22:42
  Speaker 7: charging networks, that sort of thing. But I think as
• 22:45
  Speaker 7: the consumer becomes more confident, and that is only going
• 22:49
  Speaker 7: to happen by stealth, that's only going to happen incrementally.
• 22:52
  Speaker 7: But as they do so it will be it will
• 22:55
  Speaker 7: be positive. The key thing is the getting Tesla to
• 22:58
  Speaker 7: get out there, because they are the market leader and
• 23:01
  Speaker 7: they are setting the tone for the rest of the industry.
• 23:04
  Speaker 7: If they continue to do that and then GMS the
• 23:06
  Speaker 7: Lantas and Ford Ribble to follow suit, then I think
• 23:09
  Speaker 7: the future is bright for the automotive world in the US,
• 23:12
  Speaker 7: provided the tires keep the Chinese out for the next
• 23:15
  Speaker 7: sort of profercable future.
• 23:17
  Speaker 1: This is the Bloomberg Intelligence Podcast, available on Apple, Spotify,
• 23:22
  Speaker 1: and anywhere else you get your podcasts. Listen live each
• 23:25
  Speaker 1: weekday ten am to noon Eastern on Bloomberg dot com,
• 23:29
  Speaker 1: the iHeartRadio app tune In, and the Bloomberg Business app.
• 23:33
  Speaker 1: You can also watch us live every weekday on YouTube
• 23:37
  Speaker 1: and always on the Bloomberg terminal.