Latest / Best of Business / Sam Dickie: Fisher Funds expert on what the SpaceX financial result means for investors

Transcript

Sam Dickie: Fisher Funds expert on what the SpaceX financial result means for investors · Best of Business

• 0:09
  Speaker 1: You're listening to a podcast from Newstalk ZB. Follow this
• 0:13
  Speaker 1: and our wide range of podcasts now on iHeartRadio. Heather Duplessy-Allen.
• 0:18
  Speaker 2: Now, the AI funding story has wobbled badly these past
• 0:21
  Speaker 2: few weeks, and right on cue, two of the biggest
• 0:23
  Speaker 2: spenders on Earth reported earnings within hours of each other.
• 0:26
  Speaker 2: This is Meta, of course, and SpaceX. And Sam Dickey
• 0:28
  Speaker 2: from Fisher Funds is with us on this. Hi, Sam.
• 0:31
  Speaker 3: Good evening, Heather.
• 0:32
  Speaker 2: Now, remind us, Sam, why we saw the AI funding
• 0:35
  Speaker 2: story get the speed wobbles.
• 0:37
  Speaker 3: Well, it started with that unruly rise in global government
• 0:41
  Speaker 3: bond yields you and I have been talking about. Then
• 0:43
  Speaker 3: we got a slew of negative AI headlines. So anthropic
• 0:48
  Speaker 3: and open AI revenue might be a bit slower than
• 0:50
  Speaker 3: the market thought. And a Chinese AI memory chip player
• 0:54
  Speaker 3: is thought to be catching up quicker than expected with
• 0:56
  Speaker 3: US and Korean players and may bring on too much supply.
• 0:59
  Speaker 3: And given the huge amount of debt still to be
• 1:02
  Speaker 3: issued by AI players, investors started demanding an even higher
• 1:07
  Speaker 3: interest rate on top of the already high government interest rate.
• 1:10
  Speaker 3: And that kind of fed on itself. So CoreWeave is
• 1:14
  Speaker 3: the poster child of all of this. And they're building
• 1:16
  Speaker 3: AI data centers flat out funded with tons of debt.
• 1:19
  Speaker 3: And their bonds fell to 80 cents in the dollar.
• 1:23
  Speaker 3: And that's a distress level. And that means if their
• 1:25
  Speaker 3: bonds stay trading there, they will struggle to keep the
• 1:28
  Speaker 3: hamster wheel going.
• 1:31
  Speaker 2: So how was the SpaceX result? And did they wobble
• 1:34
  Speaker 2: on the spending?
• 1:37
  Speaker 1: Not at all.
• 1:38
  Speaker 3: Absolutely not. This funding wobble wasn't even in the ballpark
• 1:41
  Speaker 3: of Elon's thinking. He smashed his numbers again. Revenue and
• 1:44
  Speaker 3: profits in all divisions. So space, satellite internet and AI
• 1:48
  Speaker 3: factories well ahead of expectations. But with that comes a
• 1:52
  Speaker 3: sharp acceleration in spending. So the market had expected him
• 1:56
  Speaker 3: to spend about $ 20 billion next quarter in the fourth quarter.
• 2:00
  Speaker 3: And he said he'd spend $ 38 billion, so nearly double.
• 2:03
  Speaker 3: And you can't fault his ambition here. He's got about
• 2:06
  Speaker 3: 2.5 gigawatts. That's how AI computers measured today. And he
• 2:11
  Speaker 3: wants to have enough power and land for 20 gigawatts
• 2:14
  Speaker 3: by the end of next year. So to put that
• 2:15
  Speaker 3: in perspective, that is about 2.5 times New Zealand's peak
• 2:21
  Speaker 3: electricity usage. So one computer company is building 3.5 times
• 2:25
  Speaker 3: the entire New Zealand power load.
• 2:27
  Speaker 2: It really puts it in perspective. What about Meta?
• 2:32
  Speaker 3: Well, Zach, astonishingly, last couple of quarters appears to reign
• 2:36
  Speaker 3: in his enthusiasm for spending a little bit, a little bit,
• 2:40
  Speaker 3: at least temporarily. So he spent $ 7 billion less than
• 2:44
  Speaker 3: the market thought he would in the quarter, and he's
• 2:45
  Speaker 3: basically stopped raising his spending forecast. That's not to say
• 2:49
  Speaker 3: it's not still growing. It's just not getting upgraded every
• 2:53
  Speaker 3: quarter after two years of basically lifting it every single quarter. Meanwhile,
• 2:57
  Speaker 3: the business got much better. So revenue beat, profits beat
• 3:00
  Speaker 3: by about 10%. but I don't think his enthusiasm for
• 3:04
  Speaker 3: ramping spend has disappeared altogether. And this is a fascinating
• 3:07
  Speaker 3: side story here. He set up a new class of
• 3:10
  Speaker 3: shares with no voting rights attached, so he can raise
• 3:13
  Speaker 3: fresh equity to fund the AI build-out without diluting his
• 3:17
  Speaker 3: own control.
• 3:19
  Speaker 1: Interesting.
• 3:19
  Speaker 2: Okay, so what does it mean for investors?
• 3:22
  Speaker 3: Well, what was really interesting is both of these stocks
• 3:24
  Speaker 3: over the last 48 hours are being rewarded right now.
• 3:27
  Speaker 3: So Zuck for showing spending restraint, albeit we'll see how
• 3:31
  Speaker 3: long that lasts, while Musk is being rewarded for absolutely
• 3:36
  Speaker 3: swinging for the fences, ramping spending at an eye-watering pace,
• 3:40
  Speaker 3: which is really extraordinary. And it's going to be really
• 3:42
  Speaker 3: fascinating over the next week or so to see what Microsoft,
• 3:46
  Speaker 3: Amazon and Google say over this particular issue.
• 3:49
  Speaker 2: Yeah, thanks very much, Sam. Always good to talk to you.
• 3:51
  Speaker 2: We'll talk to you in a week's time. It's Sam
• 3:52
  Speaker 2: Dickey of Fisher Funds.
• 3:54
  Speaker 1: For more from Newstalk ZB, listen live, on air, or online.
• 3:58
  Speaker 1: And keep our shows with you wherever you go with
• 4:00
  Speaker 1: our podcasts on iHeart Radio.