Tesla Launches Roadster at SpaceX Site in Latest Merger Hint

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0:24 All right.

0:24 Well, in any case, let's talk about cars because Tesla finally rolled out its long-delayed Roadster sports car. Actually, that's not exactly accurate. It launched the vehicle into the sky because this is Tesla, this is Elon Musk, and he's nothing but a showman.

0:37 Exactly.

0:37 David Welch is our Detroit bureau chief, and he joins us now for more on this. So, obviously, when the Roadster actually launches, it's not going to be capable of being launched into the sky. What was the purpose of I don't know, introducing the car in this way. What's the message Tesla wanted to send, David?

0:58 Look, Elon Musk is great at feeding a narrative. And one of them is, could SpaceX and Tesla merge up? And I think this is sort of a literal version of what one could possibly see if the two companies merged. I don't think they would actually make a flying car. I think if you were to talk to a lot of aerospace and aeronautic engineers, a car shape would not be what you would design for something that's going to fly.

1:25 But look, that was a pretty impressive display of this vehicle taking off and landing with rockets. There'd be too many safety issues, I think, with a car that, one, drives that fast, and two, is going to fly, and a lot of regulatory stuff around it. So I wouldn't look at this literally. I think it's more a story of what you could have in terms of technology sharing if Tesla and SpaceX were to merge. And it's also just to get a lot of hype for this Roadster that's going to go into production in a couple of years.

1:57 The Roadster was the first vehicle Tesla sold a long time ago, and it was basically a Lotus Elise with a Tesla electric drivetrain in there. This is a purpose-built pretty cool-looking roadster that won't even sell in big numbers but could generate a lot of excitement for the Tesla brand, which has a pretty limited product lineup right now, and sales are kind of bumping along. So it's generating excitement about Tesla's vehicles, but also potential for sharing mergers, that sort of thing within Elon's empire of companies.

2:32 Hey, David, I just got back from some time over in Paris, and boy, A lot of electric cars over there, a lot of electric taxis. Got in a couple of the BYD cars for the first time ever. Those were pretty awesome.

2:44 Like lots of screens all over the place, right?

2:46 Yeah.

2:46 I mean, boy, what's the feeling in Detroit these days as to their EV strategy? What's kind of the current thinking in your world?

2:55 It's pretty tough for the Detroit companies with EVs because they are– clearly strongest, get most of their profits from the U.S. market. Even with a little bit of a bounce of EV sales in the third quarter, still 5% to 6% of the market. You're starting to see some discounting out there of the EVs that are for sale in the U.S. So the EVs you're seeing being developed are mostly for China, for the European market where regulations and incentives are still keeping sales going. Here it's just the opposite. The Trump administration's gotten rid of the requirements that pushed automakers to develop them and the sales incentives that helped consumers buy them. So they're kind of in this holding pattern where they know they have to keep

3:42 developing EV technology for the long-term future. It just doesn't sell in the market where they make the most money. So you're looking at engineering and development that's just not going to generate a return for a while. And I think that's pretty frustrating for them because they know they have to spend it, but There's no ROI on it in their biggest market.

4:01 Yeah.

4:01 So they don't like spending it.

4:03 Yeah.

4:03 I get that.

4:04 But at the same time, if you live in California and a gallon of gas costs you almost $ 7, you're looking at EVs with a new eye. So for any consumer that is intent on buying an EV, what are their options? What's available out there?

4:18 There are a lot of EVs out there. General Motors still has a dozen EVs on the market. They have not canceled those. You've got the Tesla models. Hyundai has a couple of them, of course. Most companies actually do have a few models out there. So there is variety in the market in the big segments where most consumers shop, which is crossover SUVs and luxury SUVs that are electric.

4:42 You do have the Tesla models, of course. And But the vehicles that are there just don't sell all that well. I think how people are reacting to gasoline prices in the U.S. is they're buying hybrids, which is why I've seen Toyota and Hyundai sales do so well. Not even plug-in hybrids, just your basic hybrid that doesn't require any charging.

5:03 So if you're on a road trip, you're getting your gas mileage, but you're not really worried about having to stop someplace for half an hour to top up.

5:09 Right.

5:10 That's how Americans are looking at this.

5:12 Yeah, we got the number four sibling, the hybrid.

5:14 Awesome. I mean, it's just awesome technology.

5:16 And the number four sibling is in California where it matters the most.

5:19 Yes.

5:20 So what, they're.

5:20 Getting like 40 miles a gallon, 50 miles per gallon?

5:23 Yeah, I don't know.

5:24 I'm not paying for it, so I'm not paying for the gas. I paid for the lease, so.

5:28 So you paid for it in some way.

5:30 In some way.

5:30 It always happens.

5:32 David, Tesla's going to report earnings coming up, I guess, the 21st here. What do people want to hear from Elon about this company these days, do you think?

5:43 I think you might see some better numbers because they did surprise on the upside with their third quarter vehicle sales. And analysts are basically forecasting better. Finally, some growth in Tesla's total vehicle sales after a couple years of decline. So on the basic operations of the company, you'll see that.

6:02 I think investors that were going to be more interested in the robo-taxi business, how that's being rolled out, how that's coming, because that's really Elon's big play here is the cyber cab and whether or not that can start to get into many cities and compete with Waymo, which has been rolling out city by city for over a year now.

6:21 So no indication that we're going to get any kind of Tesla-SpaceX merger that you kind of referenced at the top of our conversation.

6:30 I doubt he would announce it there. There's a lot of speculation in analyst reports that we're going to see it sometime soon and that investors are widely expecting it. Elon's done this before when they had SolarCity many years ago and the company was struggling to make any money and to get investor interest. It was basically, you know, folded into Tesla because Tesla at the time had unlimited ability to raise funds. But that hasn't gone anywhere. Tesla's got a business with much better staying power than the solar business did. But could it use an injection like being folded into SpaceX? Perhaps yes.

7:05 Stay with us.

7:06 More from Bloomberg Intelligence coming up after this. You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10 a.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts or watch us live on YouTube.

7:27 I guess we all know that Apple is coming out with a new phone. I guess it's a foldable phone. iPhone Duo, I guess, is its brand name. And apparently there's pre-orders pretty darn strong here. So Let's break it down, see what it means for our good friends at Apple. Anurag Rana, Senior Technology Analyst for Bloomberg Intelligence, joins us from Chicago. Anurag, talk to us about what we know about maybe some of the early demand for this new foldable phone from Apple.

7:52 Yeah, thanks.

7:52 So about a week ago, we got some news from Asia that iPhone 18 orders are a bit light and they are telling their component makers to hold back on that. And one of our first reactions was that, listen, it's possible that the Pro and the Pro Max model customers, which are the more affluent customers, may be just waiting for this foldable.

8:13 And frankly speaking, this morning was a big surprise for us.

8:16 I mean, I logged in exactly at the time when the orders were coming. And I think I was within the first three, four minutes. And the delivery time for my phone is December 1st. But within, I would say, 15 minutes, it went up to January of next year. So very strong demand right now. This basically shows that all the stuff about consumer weakness or memory prices is not making any dent to the ultra high-end buyer for the iPhone.

8:45 I'm sure, I don't know, you have some special phone number to dial in to get at the head of the line, given who you are, that's for sure. Talk to us about what's, what do you guys, what's the street think, how important this phone will be here? It's kind of a big price tag, like close to $ 2, 000. So is this going to impact their top line?

9:02 Oh, it should impact their top line by a big amount.

9:05 I mean, before we haven't done our numbers for the next, but we were higher than most people out there with about 14 million phones for this particular device that is about 28 billion in sales for next year. We'll have to go out and do the math to see how much could they do. But frankly speaking, think about it this way. For the last nine years, Samsung has had a foldable in the market. Apple decided not to do one because they wanted to make sure that there is technology out there to ensure that when you open the foldable phone, that there is no crease in the middle.

9:39 And they decided to wait that long.

9:41 The first form factor change in years, because if you look at 17, 18, they all look pretty much alike. So a completely different viewpoint. And we've always said Apple is a luxury brand. It's not so much a consumer device company. So when you look at it from that point of view, we see this to be one of the bigger hits for the company that we're going to see over the next 12 months.

10:03 Is this going to bring people, who's going to come to this phone? Are these going to be existing iPhone users that just want a new form factor or are they going to be taking from other foldable phones that are out there in the market? Where are these 14 million units going to come from?

10:18 Yeah, we think it's just a shift from Pro Max or the Pro or the Pro Max. These are the people who are already buying a $ 1, 300 phone or a $ 1, 400 phone, depending on what skew it is. They are the ones who is going to transfer. You know, you're really not going to see somebody who uses a higher end Galaxy to move over to Apple because this is not a compelling reason for them. I mean, they live in whatever ecosystem you are on the higher end, you're most likely going to stay there.

10:41 You're not going to convince, you know, Like our.

10:43 Boss, he's not going to change his Galaxy or Android device to go into an Apple.

10:49 It's not going to happen.

10:50 But it's the current existing user where you're going to see the transfer.

10:54 All right.

10:55 What's the current just Apple call out there on global Wall Street here? What's the focus these days? What's the next seminal event that's going to change how people think about this story?

11:07 I think a lot of that has already been played out.

11:09 I mean, the new Siri launch, they're using Google's models to take care of that. Stock's at 36 times earnings. I mean, if you look at it compared to Microsoft, which is at 23 or Amazon at 20, I think a lot of what we are talking today, especially even with the demand, I mean, stock would have been up far more than just 1% if we would have any other environment. But I think the valuation takes care of a lot of the excitement there.

11:36 Of what's happening with Apple.

11:37 Yep, stock is up 27% year-to-date. You mentioned Microsoft. That's another name you follow, Anurag. You followed it for a long time. What's the call on that stock these days?

11:47 Yeah, we published a report today that basically says that, listen, we understand what's happening in the market when it comes to AI slowdown fears, and we completely get it for the vendors that are extremely levered in the market. But when you look at the top two vendors, whether it's Microsoft or Amazon, we think they're very well positioned, not just for the next two quarters, but going into 27, because they have a massive backlog on their balance sheets.

12:11 They have the capital to make sure that there is no funding problems. And to be honest, if anything, if there is a slowdown in buildup because of elections or any reason, I don't mind that for either Microsoft or Amazon because it will give them a chance to collect more of that CapEx that they're spending. Let's say it comes back a little bit and they can accumulate that for the year after.

12:33 What is the CapEx kind of outlook here from Microsoft? Are they going to have to continue to ramp up big time?

12:40 Yeah, but at least for this year and next year, I think there's going to be very few changes. But the big question is what happens in 28? Because if you look at some of the AI infrastructure play, which is either the memory stocks or the chip stocks, people anticipate that machine or the, you could say, the train to continue to go upwards for many years to come.

12:59 I think that's being questioned in the last one week, whether that's going to happen or not. And partially the sell-off that you see in the market is driven by that. But when we look at Microsoft's backlog or Amazon's backlog, I don't see any reason for them to slow down their spending, at least for the end of next year.

13:16 And then we'll see what happens in 28.

13:19 Stay with us. More from Bloomberg Intelligence coming up after this.

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13:40 So, Paul, before you went away, CoreWeave was fine. I mean, it wasn't in any kind of distress mode.

13:47 Now it is.

13:48 Which means we have to talk to like the credit guys now.

13:50 Yes.

13:51 Which you know how much I enjoy talking to credit analysts, you know, so. Let's get right to it. We can do that. Talk about CoreWeave and what's going on in the AI trade and how the bond market, which has been such a big supplier of capital, is dealing with that now. Rob Schiffman, Senior Tech Credit Analyst for Bloomberg Intelligence. Rob, talk to us about CoreWeave from a credit investor's perspective.

14:11 Is this company over-levered?

14:13 Are they okay?

14:14 Is the market missing something? How do you approach it?

14:17 Well, CoreWeave is trading stress today. And I would say my level of stress is also a little bit higher because The market sometimes doesn't act so rationally. One day as an analyst, you come in, you look like you're a genius, and the next day you look like you have no idea what you're talking about. And people generally just remember the days you don't know what you're talking about.

14:35 And I think the move in CoreWeave has a lot to do with sentiment and nothing to really do with fundamentals. The stock sell-off, the bond sell-off wasn't on any real news. They didn't announce worse earnings. They didn't announce CapEx is going higher. They didn't announce that they weren't able to raise money in the markets. It's just a sort of a confidence issue. The reality is when you start thinking about stress, you know, a lot of people have talked about core weave bonds trading in the 80s or below 80 cents on the dollar. I tell you to go look at the Bloomberg Terminal and see where some Microsoft long bonds are trading. AAA rated. No one's really worried about them. They trade 50 cents on the dollar. So

15:11 there's a lot to do with what's going on with rates. Bad CPI and PPI prints worry people about inflation, the cost of borrowing for high yield names in particular, and the ones that need to borrow the most like core weaves are being stressed because people are fearful of what the markets could look like in terms of capital access in the future, but not necessarily something that's happened today.

15:31 And I think if you listen to what Jensen said yesterday, that CourtWeave is pretty well positioned. Their cost of capital is actually lower because they've been able to borrow a whole bunch of secure debt. at single-digit rates. And I think over time, listen, this AI trade fear, it's not going away anytime soon. This is going to take a few years to play out. And we're going to have days where the markets are jittery. We're going to have weeks where the markets are jittery, maybe even months. And then we'll see turnarounds. I don't think people should be overly concerned about CoreWeave. But in particular, if you just think about this space, it's dominated by what we call the hyperscalers, which are AA and AAA-rated credits that that

16:10 have access to unlimited amounts of capital. And that is not going away. And that means this whole AI trade is not going away.

16:18 All right.

16:18 Jensen Huang, by the way, CEO of NVIDIA, which is a CoreWeave shareholder and supplier.

16:22 So it all is kind of interconnected.

16:25 Having said all of that, and you're looking at it from a credit point of view, there was an analyst, Gil Loria, Dave Davidson, who said that he could see the stock going to zero. Is the stock price driving CoreWeave's debt or is CoreWeave's debt making people question the stock?

16:40 What's the catalyst?

16:42 Yeah, I hate to, you know, I say that there's not going to be an AI bubble burst, but I'll burst everybody's bubble. Any stock could go to zero, right? That's happened before. So we covered a lot of stocks that went to. So listen, that's great fear mongering. I think like those sort of headlines get attention and get mentions on the radio. I think that's wildly unrealistic where we've plays a huge part in the whole AI ecosystem as one of the largest neoclouds, both public and private.

17:13 I think they have a lot of big friends. We wrote a note saying that one of the largest shareholders is NVIDIA. They own 10% of the stock. They also have some of their biggest partners. The ones that they have the largest contracts with are Meta and Microsoft. So there's a lot of money that I think can come Corweave's way. And quite frankly, there's lots of different ways to get access to capital. It's not just the unsecured market.

17:35 So yeah, bonds are trading in and around 15%. We're actually in the 14% range this morning. But they could borrow unsecured. They can borrow secured. They could do private chip deals. They could do data center lease deals. I think the access to capital for them is going to remain abundant. It's not the same as for AA or AAA rated name, which is unlimited and the cost doesn't actually matter. But I think Corey is going to have a lot of different ways to play this. And thinking about that going to zero as a credit guy, I know the bonds are not going to go to zero, certainly the secured bonds. But I think that's just hyperbole to try to get attention.

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