Latest / The Financial Exchange Show / Tesla braces for 'rough' quarters ahead

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Tesla braces for 'rough' quarters ahead · The Financial Exchange Show

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Speaker 1: donation today. This is the Financial Exchange with Chuck Zadath
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Speaker 1: and Mike Armstrong.
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Speaker 2: Chuck, Mike and Tucker with you here, and as we
1:15
Speaker 2: continue through a busy week, but not as busy as
1:19
Speaker 2: next week, which is.
1:22
Speaker 3: Next week.
1:23
Speaker 2: Next week is Christmas in July. Let's just call it
1:27
Speaker 2: what it is. It is Christmas in July.
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Speaker 3: Next week.
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Speaker 2: I know that's technically tomorrow, but hey, next week is
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Speaker 2: close enough. And what we are getting this week is
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Speaker 2: more news on the trade front. Obviously, late Wednesday news
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Speaker 2: broke of the deal between the United States and Japan.
1:49
Speaker 2: Yesterday around eleven fifty four AM, stocks jumped about third
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Speaker 2: of a percent, and I said, gee, like what caused that?
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Speaker 2: And it turns out it was a report from I
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Speaker 2: believe it was the Financial Times correct that the United
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Speaker 2: States and EU are close to a deal that would
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Speaker 2: set tariff rates at fifteen percent for imports to the
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Speaker 2: United States as well. And so this leads us to
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Speaker 2: this piece from the Wall Street Journal, which is titled
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Speaker 2: Trump's new trade standard takes shape with a fifteen percent
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Speaker 2: tariff deal, and that seems to be I think for
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Speaker 2: countries that are close and large trading partners of the US,
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Speaker 2: that seems to be the standard. For those who are
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Speaker 2: not as close. It seems like twenty to twenty five
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Speaker 2: percent is going to be the standard based on the
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Speaker 2: announcements without confirmation from Vietnam and.
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Speaker 3: Not is it Malaysia.
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Speaker 4: Did we get anything else other than Vietnam. In the
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Speaker 4: UK it was.
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Speaker 2: The Philippines, which I also don't think was confirmed by
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Speaker 2: the other side.
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Speaker 3: And there's one little bit more.
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Speaker 5: Yeah, okay, but in any case, the news that broke
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Speaker 5: from Financial Times yesterday I seem to insinuate that where
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Speaker 5: we would land with the European Union would be Philpins
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Speaker 5: was nineteen fifteen percent range, I guess, yeah.
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Speaker 2: And so basically where this is pointing is that the
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Speaker 2: April second tariff announcements, which obviously were much much higher
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Speaker 2: and subsequently revised down to ten percent on April ninth,
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Speaker 2: are likely going to see those rates escalate further, probably
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Speaker 2: to somewhere between fifteen and twenty five percent. I'm guessing
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Speaker 2: the average is probably gonna end up being like seventeen
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Speaker 2: or eighteen percent.
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Speaker 5: I'd go closer to fifteen given if you land there
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Speaker 5: with Europe Japan. I guess it depends where China lands.
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Speaker 2: I mean, China's not getting fifteen, No, they're not. You know,
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Speaker 2: Vietnam came into twenty, Philippines are at nineteen. Like, I
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Speaker 2: think you're gonna end up like probably averaging somewhere in
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Speaker 2: like the high teens. Yeah, when it's all said and
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Speaker 2: done on a weighted basis, ithing like, I don't care
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Speaker 2: if Sri Lankan imports our tariff. I think it was
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Speaker 2: announced at like a forty percent rate or something like that.
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Speaker 2: Because we import next to nothing from Sri Lanka. I'm
4:06
Speaker 2: sure it's not great for the importers of Sri Lankan
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Speaker 2: goods to be like, hey, I have to deal with this.
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Speaker 2: Like it's not to say that for that particular business
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Speaker 2: it's easy, but the broad impact on the US economy
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Speaker 2: is next to nothing from that because we just don't
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Speaker 2: import much from Sri Lanka. It's it's not an important
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Speaker 2: trading partner.
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Speaker 5: And as we've been talking about now for weeks, the
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Speaker 5: effect on the overall economy by higher tariffs, I mean
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Speaker 5: there's a few obviously, but as the Treasury has pointed
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Speaker 5: out many times, we're talking about largely a one time
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Speaker 5: price adjustment and higher inflation over a period of the
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Speaker 5: next twelve months, at which point if the tariff rates
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Speaker 5: are actually stable and predictable, Is it my favorite tool
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Speaker 5: to use in order to, you know, impact things in
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Speaker 5: the economy.
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Speaker 4: No.
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Speaker 5: We've talked at length about how most of our views
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Speaker 5: is that free trade is better for the United States
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Speaker 5: and other countries. But if it's stable, predictable, and you
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Speaker 5: know where tariff rates are going to be over the
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Speaker 5: next few years and they're not in the fifty percent
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Speaker 5: on average range, then it's something that you can actually
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Speaker 5: build upon and build a business model upon.
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Speaker 2: The question is will these rates be stable and predictable predictable.
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Speaker 3: Because here's the thing.
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Speaker 2: If we look at how these have evolved just over
5:27
Speaker 2: let's look at the period from well, I guess it's
5:31
Speaker 2: basically the whole term.
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Speaker 3: So if we look at a.
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Speaker 2: Few areas, just as an example, stealing aluminum tariffs went
5:38
Speaker 2: into effect early.
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Speaker 3: It was it was in Q one.
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Speaker 2: Yeah, I can't remember if it was February or March
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Speaker 2: twenty five percent about a month or so ago announcement
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Speaker 2: that aluminum and steel tariffs going up to fifty percent,
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Speaker 2: so they moved up further. Copper not tariff initially. Now
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Speaker 2: you have these fifty percent tariffs that are going into
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Speaker 2: effect on August first. The interesting thing this is kind
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Speaker 2: of wild. Actually, have you seen what is going on
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Speaker 2: with shipping in order to deal with this. Yep, there
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Speaker 2: are a bunch of ships that are coming from Southeast Asia.
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Speaker 2: Most of the copper that we get is from South America,
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Speaker 2: but some of it is you know, mined in Southeast
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Speaker 2: Asia as well. And there are a number of ships
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Speaker 2: I think it's five or six of them that originally
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Speaker 2: we're supposed to be heading to mainland US ports that
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Speaker 2: are now making a beeline for Hawaii in order to
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Speaker 2: get the copper some of the US before August first.
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Speaker 2: It's also really unclear that Hawaiian authorities have the wherewithal
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Speaker 2: and means to actually clear the copper through customs there,
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Speaker 2: just because it doesn't normally show up there in these quantities.
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Speaker 2: And so it's one of these things where it's like, hey,
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Speaker 2: these are these weird dislocations that you have here, where
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Speaker 2: you've got a bunch of copper headed places that it
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Speaker 2: wouldn't normally go. Just in order to manage the tariff
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Speaker 2: side of things when we will get the country specific tariffs,
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Speaker 2: you have ten percent is kind of this blanket baseline
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Speaker 2: that was in place in April now heading up to
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Speaker 2: probably between fifteen and twenty five percent, depending on the country.
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Speaker 2: So again they're moving up there at the same time
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Speaker 2: auto tariffs on Japan heading down from twenty five to
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Speaker 2: fifteen same on the EU. It sounds like, though we
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Speaker 2: still don't have any specifics or confirmation on exactly what
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Speaker 2: we're getting there, and so I guess my point is twofold.
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Speaker 2: The first is you can make a case the tariffs
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Speaker 2: are a one time price it if there is a
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Speaker 2: one time increase in tariffs, right.
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Speaker 4: If they constantly change, if they're.
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Speaker 2: Increasing or changing every three to four months, it's no
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Speaker 2: longer a one time price increase. Because sure, while auto
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Speaker 2: tariff's coming down has an impact on people buying cars,
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Speaker 2: the fact is the US sells within its borders about
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Speaker 2: sixteen million cars in any particular given year. There are
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Speaker 2: three hundred and thirty plus million people here, so about
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Speaker 2: five percent of Americans make a car purchase every year.
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Speaker 2: But all of the other stuff that gets imported from Japan.
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Speaker 2: You think about all the people that buy PlayStations, all
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Speaker 2: the people all the factories that are buying you know,
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Speaker 2: high end Japanese industrial equipment. Now you're saying, Okay, that
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Speaker 2: stuff's being taxed at a higher rate than it was previously,
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Speaker 2: so you have to figure out.
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Speaker 3: You know what that does.
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Speaker 2: The other piece on the auto tariffs that I'll add
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Speaker 2: is those tariffs coming down now. To me, especially when
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Speaker 2: you're raising the price of intermediate goods such as steel, copper,
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Speaker 2: and aluminum, it doesn't seem to be creating the best
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Speaker 2: environment for domestic manufacturing because you're making the steel, aluminum,
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Speaker 2: and copper that domestic manufacturers need more expensive than the
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Speaker 2: stuff that's produced elsewhere.
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Speaker 4: And it's still not terribly clear to us, or it's
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Speaker 4: not clear to me. Maybe you have an answer for me.
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Speaker 5: But if I buy, if we import a Japanese made Toyota, yes,
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Speaker 5: are we facing a purely fifteen percent tariff rate or
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Speaker 5: are they attempting to calculate how much copper is in
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Speaker 5: that car and assign a higher tariff rate to that vehicle?
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Speaker 3: Unclear?
9:20
Speaker 4: I think so too.
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Speaker 5: But if they're not, if they're just saying no, fifteen
9:23
Speaker 5: percent on the value of that imported car, yeah, you're right.
9:27
Speaker 5: For four General Motors and Stilantis for them to go
9:30
Speaker 5: and manufacture that same vehicle here domestically in the United States.
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Speaker 5: Without some sort of break on those terraffs on copper
9:36
Speaker 5: still in aluminum, plus the complexities of twenty five percent
9:40
Speaker 5: auto tariff rates on vehicles manufactured in Mexico and Canada,
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Speaker 5: it gets complicated.
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Speaker 2: Which is why I continue to come back to, Hey,
9:51
Speaker 2: pay attention to what people do, not what people say.
9:56
Speaker 2: And ultimately, if you look at the the actions that
10:01
Speaker 2: are being taken, it seems to me that this is
10:03
Speaker 2: more And I'm not saying this is good or bad.
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Speaker 2: I'm just saying this. This is like my read on it.
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Speaker 2: The Trump administration wants the tax revenue from this.
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Speaker 3: The other stuff.
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Speaker 2: You know, Hey, we want to you know, increase the
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Speaker 2: competitive competitiveness of American manufacturing, especially in like places like autos.
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Speaker 2: A fifty percent tarify on steel and aluminum doesn't really
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Speaker 2: reflect that. In my opinion, it makes it more challenging.
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Speaker 2: I'm not saying that maybe you don't eventually get to
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Speaker 2: a point where you're, you know, doing what you want,
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Speaker 2: but based on what I see, I think it's more
10:37
Speaker 2: about the revenue than anything else. And to this point,
10:44
Speaker 2: the cost of that revenue has not shown up broadly
10:47
Speaker 2: in the US economy will.
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Speaker 3: It at some point.
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Speaker 2: I suspect it will, and we're we're starting to see
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Speaker 2: like the first signs of it in these earnings reports
10:57
Speaker 2: that we're getting and in the June I'm very interested
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Speaker 2: to see what the next couple months of data show,
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Speaker 2: just because it we'll have had more time for things
11:06
Speaker 2: to seep in. These higher rates we'll have you know,
11:08
Speaker 2: started to kick in as well in some cases, and
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Speaker 2: so I think.
11:14
Speaker 3: We're at a point right now where there's a lot.
11:17
Speaker 2: Of complacency right now that hey, these tariffs have been
11:20
Speaker 2: in place for a few months and things are fine,
11:22
Speaker 2: but it takes a while for stuff to actually go
11:25
Speaker 2: through the system here. And I'm not saying that we
11:28
Speaker 2: will or won't see bigger problems, but we just need
11:32
Speaker 2: to see kind of what unfolds here in the next
11:35
Speaker 2: couple months. To take a quick break, when we return,
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Speaker 2: let's talk Tesla. They reported earnings after the bell yesterday
11:44
Speaker 2: and the stock is on the move today. So we'll
11:47
Speaker 2: discuss Tesla and mister Musk right after.
11:50
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12:51
Speaker 2: So Tesla reported earnings after the closing bell yesterday. They
12:56
Speaker 2: should do something different from a bell.
13:01
Speaker 4: Acknowledge it.
13:02
Speaker 3: The bell's a little outdated.
13:05
Speaker 4: I wouldn't mind a closing gong once a week.
13:07
Speaker 3: A closing gong, I think would be good. I don't
13:11
Speaker 3: think we could go wrong with that.
13:12
Speaker 5: But anyway, in bell closing gong, but only once. You
13:15
Speaker 5: can't do that every day. That would get exhausting.
13:17
Speaker 3: Maybe you just do the gong when the market closes down.
13:20
Speaker 4: Okay.
13:21
Speaker 2: In any case, Tesla reported earnings here, and I'm just
13:24
Speaker 2: going to read a quote from elon Musk.
13:26
Speaker 3: We could probably have a few rough quarters, but.
13:29
Speaker 2: Once you get to autonomy at scale in the second
13:31
Speaker 2: half of next year, certainly by the end of next year,
13:34
Speaker 2: I would be surprised if Texel's economics are not very compelling.
13:38
Speaker 2: So pretty much what he is talking about is you've
13:41
Speaker 2: got these ev incentives that are going to be dropping
13:45
Speaker 2: off the board later this year. Seventy five hundred dollars
13:49
Speaker 2: federal tax credit. Yes, and pretty much what he's saying.
13:53
Speaker 2: And he came out and said this because they were talking.
13:55
Speaker 4: About about September thirtieth. By the way that that disappears.
13:57
Speaker 2: Yeah, I don't know the exact date, but he was
14:00
Speaker 2: he was talking about the cheaper model why that they're
14:04
Speaker 2: going to be rolling out. They were talking about, you know, hey,
14:06
Speaker 2: when's your low cost thing, you know, coming, And he said, well,
14:08
Speaker 2: we've started production on it. And just so you know,
14:10
Speaker 2: it's it's a cheaper model. Why it's not a you know,
14:12
Speaker 2: separate model. And he said in no uncertain terms that
14:16
Speaker 2: the problem that we're having is that people can't afford
14:18
Speaker 2: our cars right now. We need to get the prices down,
14:22
Speaker 2: and obviously, when you lose a seventy five hundred dollars
14:24
Speaker 2: tax incentive, the price is going to go up.
14:28
Speaker 5: So I'm on their website right now, and just so
14:31
Speaker 5: you know, the advertised price, for example, for a long
14:34
Speaker 5: range all wheel drive Model three is the advertised price
14:38
Speaker 5: is thirty nine thousand dollars. You hover over the information
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Speaker 5: piece here that includes a nine hundred and sixty dollars
14:45
Speaker 5: price reduction and seventy five hundred dollars tax credit. This
14:48
Speaker 5: is a forty seven forty eight thousand dollars car.
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Speaker 2: Sure And so I think where we're at is now,
14:54
Speaker 2: look that there are two consecutive quarters of declining year
14:58
Speaker 2: over year sales. The loss of that incentive is going
15:01
Speaker 2: to create a further problem for them, and margins are narrowing.
15:07
Speaker 2: It's something where the core business is shrinking right now,
15:10
Speaker 2: which is not great. If you are an automaker, you're
15:13
Speaker 2: not really built to see fifteen sixteen percent year over
15:16
Speaker 2: year declines in sales volume because your factories need to
15:19
Speaker 2: be working at full tilt in order for them to
15:20
Speaker 2: be profitable. So this is once again a case where
15:28
Speaker 2: if you want to believe in the company, you kind
15:30
Speaker 2: of got to take that leap of faith that, hey,
15:32
Speaker 2: the ten to twenty robotaxis that they've been running in Austin, Texas,
15:36
Speaker 2: are they going to be able to scale them up
15:38
Speaker 2: to a profitable business in the next twelve to eighteen months.
15:43
Speaker 2: That's the bet that you're making. Historically, Tesla has always
15:49
Speaker 2: been behind their set timelines, including the rots of the robotaxes.
15:54
Speaker 2: They've been talking about these for nine ten years, and
15:57
Speaker 2: it's not to say that this won't be the time
15:58
Speaker 2: that they finally get it right, but the track record
16:02
Speaker 2: of you know, time technology is not great for them.
16:08
Speaker 2: They have solved a number of problems with making EV's
16:13
Speaker 2: profitably that a lot of other automakers couldn't figure out,
16:16
Speaker 2: but that was before there was the amount of competition
16:18
Speaker 2: there was. And you know that the market looks somewhat
16:20
Speaker 2: saturated as well in terms of EV demand right now.
16:25
Speaker 5: So they face they face problems on a lot of
16:27
Speaker 5: front And I'll start by acknowledging that I've driven a
16:29
Speaker 5: Tesla and compared to any other EV that I've been
16:35
Speaker 5: in and compared to you know, gas powered vehicles like
16:38
Speaker 5: the technology and a Tesla I find very compelling. I
16:42
Speaker 5: have a new Toyota which comes with the New Toyota App.
16:45
Speaker 5: The New Toyota app is useless. It doesn't actually do anything,
16:48
Speaker 5: whereas the Tesla app. I can start the car, I
16:49
Speaker 5: can air condition the car, I can leave my dog.
16:51
Speaker 3: Like, does Toyota have an app?
16:53
Speaker 1: Then?
16:53
Speaker 3: What does it do?
16:54
Speaker 4: I don't know what it is.
16:55
Speaker 3: What can you do?
16:56
Speaker 5: You can book an appointment at a dealerships, get your
17:01
Speaker 5: car service, and you can navigate to the dealership.
17:03
Speaker 4: Not useful, No, not at all, not useful.
17:05
Speaker 5: It sends you some alerts if the locks are if
17:09
Speaker 5: the doors are unlocked, but you can't lock the vehicle
17:11
Speaker 5: from the app, so also useless, doesn't actually do anything
17:14
Speaker 5: for you. And that's where my point would be. Tesla
17:17
Speaker 5: has a compelling vehicle that they can't seemingly pull off
17:21
Speaker 5: sales with. And there's more than one reason for this.
17:25
Speaker 5: Elon Musk himself is a big part of that. He
17:28
Speaker 5: is sure, pardon my language, but he's pissed off people
17:31
Speaker 5: all around the world on the left and the right.
17:35
Speaker 5: Probably more importantly than that, every auto manufacturer in the
17:39
Speaker 5: world has cut up with making evs and making them
17:42
Speaker 5: at scale.
17:43
Speaker 3: More competition now, much.
17:45
Speaker 5: More competition, and worst the worst piece of that competition
17:49
Speaker 5: is not coming from Ford in General Motors and Mercedes.
17:52
Speaker 5: The toughest part of that competition is coming from China,
17:55
Speaker 5: which is not an issue here domestically in the United
17:58
Speaker 5: States because we don't allow them to sell their vehicles here,
18:01
Speaker 5: but in most of the rest of the world, it
18:06
Speaker 5: is a real challenge for Tesla, who has previous who
18:09
Speaker 5: was previously counting on those sales in Europe, in China,
18:12
Speaker 5: in other parts of Asia and Latin America. No, you're
18:16
Speaker 5: getting absolutely dominated by byd and other Chinese automakers.
18:21
Speaker 2: So as a result of this, Tesla stock down around
18:24
Speaker 2: eight point six percent today to three hundred and four
18:26
Speaker 2: bucks and change actually now moving south of three h
18:29
Speaker 2: four to the high three oho threes, and so there
18:33
Speaker 2: clearly is an issue that they are facing. It's been
18:37
Speaker 2: a tough quarter for all automakers that have been reporting
18:40
Speaker 2: because remember these are also companies that are dealing with
18:42
Speaker 2: higher input costs because of you know, steel and aluminum
18:45
Speaker 2: prices that are moving up and so there's some real
18:48
Speaker 2: challenges that Tesla is going to be facing.
18:52
Speaker 3: And here's the thing.
18:54
Speaker 2: When you're an automaker that starts to get into trouble,
18:58
Speaker 2: it becomes very challenging to get out of it because
19:02
Speaker 2: of how much capital is required in order to do
19:06
Speaker 2: the things that typically turn a car company around, new models,
19:10
Speaker 2: refreshed features, things along those lines. Tesla went through refreshes
19:15
Speaker 2: already of its Model Y and Model three and Q
19:18
Speaker 2: one of this year, and the Q two sales numbers
19:21
Speaker 2: reflect those new models that didn't really make a difference
19:24
Speaker 2: in the overall trajectory.
19:26
Speaker 4: Relying on that self driving now more than ever.
19:28
Speaker 3: Quick break here.
19:29
Speaker 2: When we come back, we got Wall Street Watch, and
19:31
Speaker 2: then we're talking the googs.
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Speaker 6: Markets are mixed as investors digest MAGS seven earnings from
20:06
Speaker 6: Alphabet and Tesla, where Alphabet's results impressed, yet Tesla's revenue disappointed.
20:12
Speaker 6: Right now, the Dow is off by about a third
20:14
Speaker 6: of a percent, or one hundred and forty seven points.
20:16
Speaker 6: SMP five hundred is up modestly by ten points, nearly
20:20
Speaker 6: two tenths of one percent, Nasdaq is edging eleven points higher,
20:25
Speaker 6: mostly flat, Russell two thousand is off seven tenths of
20:28
Speaker 6: one percent. Ten year treasure yield up two basis points,
20:32
Speaker 6: now a four point four to one percent, and crude
20:34
Speaker 6: oil is of one point three percent, trading just above
20:38
Speaker 6: sixty six dollars a barrel. Alphabet shares climbing nearly two
20:41
Speaker 6: percent after the parent company of Google and YouTube posted
20:44
Speaker 6: a jump in revenue in the second quarter, driven by
20:48
Speaker 6: cloud growth. The tech giant also upped its annual capital
20:52
Speaker 6: expenditure forecasts. Chuck and Michael at moorn Google's Alphabet in
20:56
Speaker 6: a matter of moments. As for Tesla, the ev maker
20:59
Speaker 6: reported sixteen percent drop in quarterly net income for the
21:02
Speaker 6: previous quarter and said car sales continued to fall. CEO
21:06
Speaker 6: Elon Musk highlighted plans to release a lower priced model
21:10
Speaker 6: y and talked up plans to greatly expand the company's
21:14
Speaker 6: Railbow taxi service to half the country by the end
21:17
Speaker 6: of the year. Tesla stock is now down over eight percent,
21:21
Speaker 6: IBM falling about eight percent despite the tech company's earnings
21:24
Speaker 6: beat with a growth in cloud software his sales. IBM
21:27
Speaker 6: also raised its forecast for full year free cash flow. Meanwhile,
21:33
Speaker 6: Union Pacific is in advanced discussions with Norfolk Southern about
21:37
Speaker 6: a potential combination of two of the US's freight railroad leaders.
21:41
Speaker 6: Union Pacific stock is pulling back over one percent, while
21:44
Speaker 6: Norfolk stock is up modestly. Chipotle is sinking over eleven
21:49
Speaker 6: percent after the brito chain cut its same store sales
21:52
Speaker 6: forecast after posting weaker revenue for the previous quarter. American
21:56
Speaker 6: Airlines beat on the top and bottom lines for the
21:58
Speaker 6: previous quarter, but it's current quarter profit forecast fell short
22:03
Speaker 6: of estimates, sending that stock down seven percent, And after
22:07
Speaker 6: launching an ad campaign featuring actress Sydney Sweeney, American Eagle
22:12
Speaker 6: Outfitter seems to be garnering meme stock attenting joining the
22:17
Speaker 6: likes of recent newcomers Open Door, Go Pro Colls, and
22:20
Speaker 6: Krispy Kreme. American Eagle shares are now up over eight
22:23
Speaker 6: percent on Tucker Silva, and that is Wall Street Watch.
22:27
Speaker 2: Let's talk a little bit about Google's earnings in a
22:31
Speaker 2: little bit more depth here.
22:32
Speaker 3: So big thing.
22:33
Speaker 2: Google had earnings yesterday and they were good. The business
22:38
Speaker 2: overall continues to show really solid growth. Their AD sales
22:43
Speaker 2: were up ten point four percent year over year. Cloud
22:46
Speaker 2: unit revenue was up thirty two percent from the previous
22:49
Speaker 2: year compared to twenty eight percent in the first quarter,
22:51
Speaker 2: So actually an acceleration on the cloud side of things
22:55
Speaker 2: for them. And you know the question that people were asking,
22:59
Speaker 2: I forget who it was. It was one of the
23:00
Speaker 2: Apple execs maybe a few months ago, was talking about how,
23:05
Speaker 2: you know, Google, like people were going to stop using
23:07
Speaker 2: Google because of AI and everyone was going to migrate
23:11
Speaker 2: away from it. And obviously that's not what you're seeing here.
23:13
Speaker 5: And I was gonna say, the two dominant themes that
23:15
Speaker 5: I can think of when it comes to Alphabet, Google's
23:18
Speaker 5: parent company have been how is AI going to detract
23:21
Speaker 5: from your business? And what does antitrust mean for you?
23:25
Speaker 5: And so I'd like to kind of focus this review
23:28
Speaker 5: of their earnings on those two subjects as you were doing,
23:31
Speaker 5: which is, yeah, the AI threat to this point has
23:35
Speaker 5: been pretty overblown for Alphabet.
23:37
Speaker 2: Well here's the thing, like, let's let's let's really talk
23:41
Speaker 2: about this for a minute. This the whole AI and
23:45
Speaker 2: search of the people that I know, like in my
23:50
Speaker 2: life that I spend a lot of time with, you know,
23:52
Speaker 2: my parents, my wife, a few close friends. I would
23:57
Speaker 2: say the vast majority of them don't use AI on
24:03
Speaker 2: any regular basis.
24:05
Speaker 6: Now.
24:05
Speaker 2: It's not say they won't eventually, but sometimes I think
24:10
Speaker 2: in our conversations about artificial intelligence, we get sucked into
24:16
Speaker 2: kind of this this view that like everyone's like super
24:20
Speaker 2: online and plugged into the newest technologies, and we're gonna
24:24
Speaker 2: not just surf the web, We're gonna hyper surf the webman,
24:28
Speaker 2: And that's just not who like normal humans are. Like
24:32
Speaker 2: most people are just like trying to like get through
24:36
Speaker 2: their day from point A to point B, and generally
24:38
Speaker 2: are doing the same things they did the day before.
24:42
Speaker 2: So it's it's not to say that the artificial intelligence
24:45
Speaker 2: hype is overblown, but much more that there's still a
24:49
Speaker 2: lot of people that don't use artificial intelligence on a
24:53
Speaker 2: regular basis, And when they're searching for something, they do
24:57
Speaker 2: the same thing they've always done on their iPhone or
25:00
Speaker 2: on their Android phone, which is, hey, in the search
25:03
Speaker 2: bar for whatever the browser is, they type in what
25:06
Speaker 2: they want to see and it takes them automatically to Google.
25:09
Speaker 3: And that's how things.
25:12
Speaker 5: Work now practically speaking, I just did that and I
25:17
Speaker 5: randomly searched what are some good gluten free dining options
25:20
Speaker 5: in Barcelona, Spain.
25:22
Speaker 3: You type that whole thing up.
25:23
Speaker 5: I type that whole thing up to see what the
25:25
Speaker 5: AI overview was, because this is where I am seeing
25:29
Speaker 5: it seep into the everyday person like your parents, where
25:32
Speaker 5: I'm performing a Google search, but I'm not getting a
25:36
Speaker 5: traditional result. Instead, I am getting an AI overview of
25:39
Speaker 5: the results that Google.
25:40
Speaker 4: Was able to find.
25:41
Speaker 5: What I find when I do this sort of thing
25:44
Speaker 5: is that I end up clicking the links and end
25:47
Speaker 5: up going to the sites that are directly on the
25:48
Speaker 5: right of the search that are relevant to the search
25:51
Speaker 5: that I did. And so I think Google in many
25:54
Speaker 5: ways has fended off the threat the threats of artificial
25:59
Speaker 5: intelligence to their or a business model, and this seems
26:02
Speaker 5: to be a pretty good success story for how they're
26:04
Speaker 5: able to do so by still getting people to drive
26:08
Speaker 5: through to those links who are paying Google to be there.
26:11
Speaker 2: So the other the interesting thing, though, is there are
26:15
Speaker 2: a number of reports that traffic from search engines in
26:20
Speaker 2: a few KI areas are dropping pretty significantly, So I'm
26:22
Speaker 2: trying to reconcile all of this and the thing that
26:26
Speaker 2: I keep coming back to that I just and again,
26:31
Speaker 2: this is obviously a dramatization to a certain extent. I
26:38
Speaker 2: kind of wonder if AI is going to kill the Internet.
26:44
Speaker 2: In two different respects. The first is there's so much
26:48
Speaker 2: AI generated slop out there.
26:51
Speaker 4: Yeah, I thought you were going.
26:53
Speaker 3: There are two different pieces.
26:54
Speaker 2: The first is a you just see so much badly
26:58
Speaker 2: written crap that's obviously from AI because it's different badly
27:01
Speaker 2: written crap than human badly written crap.
27:04
Speaker 3: Yeah, you know, it's just like repetitive. It's uh like
27:09
Speaker 3: it has all.
27:10
Speaker 4: Takes the exact same format.
27:12
Speaker 3: Correct.
27:14
Speaker 2: Beyond that, just the idea of okay, now we have
27:16
Speaker 2: all these image generation and video generation things that are
27:19
Speaker 2: making it hard for us to distinguish what's real from
27:21
Speaker 2: what isn't.
27:22
Speaker 5: I know, you're not on social media as much as
27:25
Speaker 5: others are, truck like, you can't really go through Facebook
27:29
Speaker 5: without seeing fake AI generated crap now, and it is.
27:34
Speaker 4: It's infuriating. It's infuriating and dry.
27:36
Speaker 5: Like I saw one the other day about how Connor
27:40
Speaker 5: McDavid's grandmother was supposedly in the Massachusetts nursing home fire.
27:44
Speaker 5: And and there's a bunch of AI generated bul just blooney,
27:49
Speaker 5: all attached to it, and you just look at that
27:53
Speaker 5: like one why, I guess you're attracting clicks by doing so,
27:58
Speaker 5: but it just makes you want to disassociate with the Internet.
28:02
Speaker 2: You're right, So I think that's a problem. But the
28:04
Speaker 2: other one is the AI summaries. I wonder how many
28:06
Speaker 2: people just read those and don't go to the links,
28:09
Speaker 2: and how much that continues to drop traffic that's going
28:13
Speaker 2: to different areas. And I don't know what the answer
28:17
Speaker 2: is on all of these, but I gotta tell you,
28:21
Speaker 2: And I know all of us think that everything was
28:24
Speaker 2: better when we were kids, But the Internet was better
28:26
Speaker 2: when we were kids, Like it didn't suck as much
28:29
Speaker 2: as it sucks now. There are good parts to it still,
28:33
Speaker 2: Like I don't you know, I don't disparage the whole
28:37
Speaker 2: thing in its entirety. I do because in the aggregate
28:39
Speaker 2: it's it's way worse, But it was a way more
28:44
Speaker 2: useful place before all of this, Like the if I
28:52
Speaker 2: could go back to the two thousand.
28:54
Speaker 3: And four Internet, there's the peak that was the peak.
29:00
Speaker 5: Google's results are further complicated when it comes to AI
29:04
Speaker 5: by their differing businesses. Obviously, they absolutely dominate in search
29:09
Speaker 5: in ways that no other companies do on other areas,
29:14
Speaker 5: though they also have a full cloud division. What does
29:17
Speaker 5: that cloud division sell? Well, they sell computing power to
29:20
Speaker 5: data centers, they sell clouds to really dry places. No,
29:24
Speaker 5: they sell computing power to all sorts of companies that
29:27
Speaker 5: are trying to run artificial intelligence models.
29:29
Speaker 4: Guess what.
29:29
Speaker 5: That stuff's gotten more expensive over the last few years
29:32
Speaker 5: because of the demand, and so they don't have the
29:35
Speaker 5: dominant position there that they do in search. You've got Amazon,
29:39
Speaker 5: You've got Oracle, You've got Microsoft that compete with them
29:42
Speaker 5: in that same space. But it is when you see
29:47
Speaker 5: their overall revenue increase fourteen percent a year over year,
29:51
Speaker 5: it becomes a little bit tricky to draw. Hey, what
29:53
Speaker 5: is that overall AI impact? Is it truly benefiting? Is
29:56
Speaker 5: it benefiting for the short term with some long term drawbacks,
30:00
Speaker 5: or will they find ways to dominate in that space
30:04
Speaker 5: with the what is it now eighty five billion dollars
30:06
Speaker 5: that they plan to spend on AI R and D
30:09
Speaker 5: over the course the next year.
30:10
Speaker 3: Take a quick break.
30:11
Speaker 2: When we come back, we're talking in video and more
30:15
Speaker 2: artificial intelligence.
30:16
Speaker 1: When we return, find daily interviews and full shows of
30:19
Speaker 1: the Financial Exchange on how are YouTube page get cut
30:22
Speaker 1: up on anything and everything you might have missed. This
30:25
Speaker 1: is the Financial Exchange Radio Network. Text us six one
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Speaker 1: seven three six two one three eight five with your
30:33
Speaker 1: comments and questions about today's show. This is the Financial
30:36
Speaker 1: Exchange Radio Network.
30:49
Speaker 2: All right, We got a couple in vidio stories here.
30:52
Speaker 2: The first is that the Trump administration rolled out a
30:59
Speaker 2: new artificial intelligence action plan yesterday, and they had the
31:04
Speaker 2: CEOs of in Nvidia and AMD and a few other
31:08
Speaker 2: you know tech CEOs there as well, uh, in order
31:11
Speaker 2: to talk about this. And it's pretty clear to me
31:16
Speaker 2: that I would say, since midate May, uh, there's a
31:21
Speaker 2: big push from the administration to basically allow semiconductor companies
31:26
Speaker 2: to sell as many chips as possible to as many
31:28
Speaker 2: places as possible.
31:30
Speaker 5: Yeah, I think that's the push. I also think that
31:33
Speaker 5: what the administration is doing is paving the way for
31:37
Speaker 5: not only the manufacturer design of these types of things
31:39
Speaker 5: and the revenue that would incentivize it, but in the
31:43
Speaker 5: use cases of artificial intelligence attempting to create a very
31:48
Speaker 5: relaxed regulatory environment for doing so. I think through like
31:52
Speaker 5: what that might mean for our own industry for a
31:55
Speaker 5: moment here, and yeah, it's it's probably going to mean
31:59
Speaker 5: a bigger push by big investment firms to try out
32:03
Speaker 5: different AI technologies without being concerned that the SEC is
32:06
Speaker 5: breathing down their neck on the advertising of the tools
32:10
Speaker 5: and the use of the tools as they were previously,
32:13
Speaker 5: and that probably permeates through healthcare, through other industries as well.
32:18
Speaker 2: The second story that we have here that relates to this,
32:20
Speaker 2: and this is from this is the Financial Times. The
32:25
Speaker 2: headline is Nvidia AI chip's worth a billion dollars smuggled
32:28
Speaker 2: to China after Trump export controls. And this gets to
32:31
Speaker 2: the fact that, look, even if you have export controls
32:34
Speaker 2: in place, there obviously are people and institutions that are
32:38
Speaker 2: willing to pay a pretty penny in order to circumvent
32:42
Speaker 2: smuggle ye, and so that stuff happens as well. I
32:46
Speaker 2: don't think that necessarily means that you just give up
32:48
Speaker 2: and say, Okay, we're not going to do this, but
32:51
Speaker 2: it does speak to the challenge in trying to enforce
32:54
Speaker 2: these just because you say, okay, you can't send these
32:56
Speaker 2: chips to China. Great, they went to Singapore and then
32:59
Speaker 2: someone you know pop them in you know, a container
33:02
Speaker 2: and got them to China through you know, a back
33:05
Speaker 2: channel on a boat that you know was flagged out
33:08
Speaker 2: of Liberia and this and that.
33:09
Speaker 3: You know, it.
33:10
Speaker 5: Seems to me that, yeah, the push since May has
33:13
Speaker 5: been an acknowledgment that stopping that sort of thing is
33:17
Speaker 5: going to be tremendously difficult, and you'd have to severely
33:21
Speaker 5: inhibit the sales of these semiconductors to a bunch of
33:23
Speaker 5: countries other than China in order to do so. And
33:27
Speaker 5: it doesn't seem to be something that Trump administration is
33:29
Speaker 5: willing to do.
33:30
Speaker 4: Right.
33:31
Speaker 5: If you really want to stop it, you've got to
33:32
Speaker 5: really slow down the sales to, like you said, Singapore,
33:36
Speaker 5: to Vietnam, to to to companies that.
33:38
Speaker 4: Are doing the Middle Middle East.
33:39
Speaker 5: And it's tough to do that and fulfill the other
33:44
Speaker 5: objectives you had have when it comes to negotiating trade deals,
33:47
Speaker 5: when it comes to paving the way for us to
33:52
Speaker 5: dominate the AI story. And so what's going to happen
33:55
Speaker 5: is it's going to be easier for Chinese companies to
33:58
Speaker 5: buy the latest and greatest in video chips, even though
34:00
Speaker 5: they're technically not allowed to.
34:01
Speaker 3: Still doesn't feel great to me.
34:04
Speaker 4: It's a big gamble.
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35:10
Speaker 2: Story today out of the Boston Globe. Fenway Park concession
35:13
Speaker 2: workers say they will strike on Friday unless they get
35:16
Speaker 2: a new contract. The union authorized a strike last month
35:22
Speaker 2: I think it was mid juneish somewhere in that ballpark.
35:25
Speaker 2: And the big things that the union wants they want
35:27
Speaker 2: better pay and they want to reduce the use of
35:31
Speaker 2: automatic kiosks and self checkout machines.
35:34
Speaker 5: Check This is going to be the story that dominates
35:38
Speaker 5: any sort of not even retail, many many industries across
35:43
Speaker 5: our workforce for the next five years. We saw it
35:46
Speaker 5: with the dock workers strike last year. We're seeing it
35:49
Speaker 5: now with Fenway concessions. It's obvious why I've talked about
35:53
Speaker 5: it on this program. If I am walking through a
35:55
Speaker 5: self checkout kiosk where I place my beer on a
35:59
Speaker 5: camera and it identifies what I'm buying, rings me up,
36:02
Speaker 5: and all the person does is open the cans of beer.
36:05
Speaker 5: I'm not gonna tip like I would if somebody had
36:08
Speaker 5: to pour a draft. And so they have identified something
36:11
Speaker 5: that's hurting their wages. I don't think that Fenway is
36:14
Speaker 5: gonna be or Aramark, the operator of the concessions is
36:18
Speaker 5: gonna be willing to move too much on that. But
36:21
Speaker 5: this is going to this is this same debate is
36:24
Speaker 5: going to play out in many industries.
36:26
Speaker 3: So I've got a.
36:27
Speaker 2: Few different thoughts on this, just because there's a lot
36:29
Speaker 2: to get to. The First thing just to be aware of.
36:33
Speaker 2: So the strike would last for three days. It would
36:36
Speaker 2: be the series with the Dodgers that kicks off Tomorrow, Friday,
36:39
Speaker 2: Saturday Sunday. First thing, if if you go and purchase
36:46
Speaker 2: food or any concessions from a concession stand at Fenway
36:51
Speaker 2: during that time, you're crossing a picket line.
36:54
Speaker 3: True, don't do that, Okay, Like, just don't do that again.
37:01
Speaker 2: I know that this might mean that you don't get
37:02
Speaker 2: to enjoy the game the same way because you don't
37:04
Speaker 2: get your hot dog and beers and whatever, but don't
37:07
Speaker 2: cross pick of lines like it.
37:08
Speaker 4: Don't do that.
37:09
Speaker 1: Uh.
37:10
Speaker 2: The second piece here, as someone I get to typically
37:14
Speaker 2: one Red Sox game a year now. Used to be
37:16
Speaker 2: a huge Red Sox fan. As I got older and
37:17
Speaker 2: it just became too much. It's I just I can't
37:19
Speaker 2: keep up with them. But I get to one a year.
37:21
Speaker 2: So I went with my dad a few weeks ago.
37:24
Speaker 2: We had a really good time, Like ballpark looks great
37:26
Speaker 2: and everything. The one thing I'll say, having gone to
37:28
Speaker 2: one game a year for like the last four or
37:30
Speaker 2: five years, the concessions experience at Fenway is the slowest
37:35
Speaker 2: I have ever seen.
37:37
Speaker 3: Really it is.
37:38
Speaker 2: It is horrible, and it's not on the workers. Like
37:41
Speaker 2: whatever the system they have set up is just terrible.
37:45
Speaker 2: I compare it to the Bruins, where I go to
37:47
Speaker 2: a number of games each year and you are in
37:49
Speaker 2: and out of concessions at the Garden lickety split. It
37:53
Speaker 2: is slow as heck, and it's it's not on the workers,
37:56
Speaker 2: it's whatever the system is that they have set up
37:59
Speaker 2: just doesn't work.
38:01
Speaker 3: And the lines are horrible at Fenway.
38:04
Speaker 2: So air Market needs do some work on that and
38:07
Speaker 2: getting the system squared away finally again, even though you
38:12
Speaker 2: don't want to be someone who crosses a picket line, Look,
38:15
Speaker 2: we don't want to keep jobs just for the sake
38:18
Speaker 2: of keeping jobs. We want to improve productivity. Let's figure
38:21
Speaker 2: out how to do these things together. Quick break next hour.
38:24
Speaker 2: We're coming up in a bit