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Tesla's board is offering Elon Musk a new compensation agreement potentially worth around a trillion dollars. Remember this is a company whose market cap right now is only one point one six trillion. I say only because you're comparing his potential pay with the market cap.
That's kind of crazy.
It is crazy. Is it's a number just kind of grabs you a little bit.
It's eye popping.
So let's bring in Steve Man, he's Bloomberg Intelligence Global Autos and Industrials Research manager, to discuss all of this. What is the justification that Tesla's board is offering that Elon Musk would be worth potentially a trillion dollars in pay?
Yeah, trilling dollar is a lot, but I think what they're looking for by twenty thirty five is really juice up that market cap to eight point five trillion. And if you look at the operational operational targets that's tied to it. It definitely confirms that this company is moving towards AI robotics, you know, robo taxi.
So what are some of the hurdles that are out there? Were mister Muslin maybe eventually get this.
Hey, yeah, you know, it's it's not going to be easy for him, and it's probably designed to be that way so that, you know, you know, make make sure the shareholders will vote for the for the proposal.
Don't make it too easy for him. So the easy, easy lift is really twenty million vehicle delivery. That's going to be a no brainer, easy to get to, given that it ships about one point million a year already. But the tough part, tough part is really a fifty percent take rate on FSD, the full self driving and a million shipments on robots, and so those are really
really tough to get. The third thing is really the EBITA adjusted EBITA a four herd billion between you know, getting there between now and twenty thirty five.
Okay, so he has a bit of time, and you know, he's someone who will start a narrative and stay on it. You mentioned FSD full self driving. Where are we in that effort for Tesla.
Yeah, it's still it's still below ten percent. It's probably around five six, maybe seven percent at the most. Uh, there is still some technological you know, hurdles that they have to to to overcome, and a lot of it is really getting you know, consumers to be comfortable with it. So take rate of you know, ten million subscribers with
twenty million vehicles shipped. It looks like a stretch, but it needs it because the margin for FSD is much higher than vehicle production, potential margins for robotaxis much.
Greater than.
Selling cars. So to get to the four hundred billion, he really needs to really focus on the AI capability of the company.
Hey, Steve, since Elon Musk has left DOGE, do we have any idea how much time he is actually spending at A good question.
Yeah, My impression is he's probably spending close to one hundred percent of his time, you know, not only based on this news where he's actually laying out a plan for Tesla, but look, he also had a very successful launch at SpaceX recently, so you know the impression is that he's full on in managing his companies.
And I like that question. Paul because we know that Elon Musk has previously been an activist and urging the board to come up with a new pay package for him, you know, he kind of suggested that maybe he could move on and do AI somewhere else, and do robotics somewhere else.
Yeah, I think from my perspective, I don't think he's going to go anywhere. This is still his baby.
I think empty.
I don't want to say empty threats. There's always a possibility, but I think the possibility is very low. But because this is his baby, and he's very very passionate about AI, about you know, energy sustainability, about sending people to Mars, and I think all of this is, you know, a part of that plan.
So let's get back to some nuts and bolts here. They got to compete against China and they're not. That's tough number one. Number two, we had some really disappointing delivery number of sales numbers out of Europe here, So just the day to day near term seems pretty challenging.
Yeah.
And also, don't forget the seventy five hundred dollars EV tax credit in the US actually is going away at the end of September, it is going to be the next pretty challenging for the industry. Six to nine months between now and nine months from now, it is going
to be very challenging. I think one bright spot, you know, if you heard b y D, one of the dominant Chinese automaker, is actually ratchet back their forecast on a sales forecast that actually tells us that, you know, maybe the pricing cut through pricing competition in China may be slowing down, and that would be positive for Tesla and the rest of the industry.
Yes, if Tesla launches that low cost EV, which there's been a lot to talk.
About, but we haven't actually seen any action on.
Is there a status update on that or is this something just that that just keeps getting pushed out timed again.
Yeah, I think it's going to come up pretty soon. In the last earnings call, they pretty much projected that the car is actually ready, but they have to hold off production because they want to produce as many Model wise and Model three before the end of the seventy seventy five hundred EV tax credit goes away, because they expect to sell a lot more in the next quarter or so. So I believe the car is ready, and
it probably likely will have to. I would hope it will actually come to market in the new year, because there's gonna be you know, Rivian's also launching a cheaper model by then. GM with the Chevy Ball is supposed to come online in the next six months, so they do need to launch that sooner rather than later.
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It's going to Lululemon here. This thing is not good. It's tough news coming out of there. Let's put it all into context. We could do that with Punam Boyle. She's a senior US retail analyst for Bloomberg Intelligence.
Punum Lululemon. I love my Lulu Lemon, but what happened.
What happened is that you like your performance, but do you like your casual where it's a casual wear part of the segment that's underperforming and causing for guidance to be cut on the sales side and then Tearff send a Minimus, causing the margin hit that we're seeing. So it's a sales and a margin story here. They're both underperforming.
So what's the prescription for that?
And is a company coming up with a strategy that is appeasing investors in any way?
Yeah, So the biggest issue on the sales side is the fact that they're not performing well on the casual part of the business. They don't have enough newness. Currently, unis in their pipeline stands at twenty three percent and they want to move it to thirty five percent by next year. So we hope to see more newness, but it won't be until spring of twenty twenty six, which means the back half of the year is going to be very sluggish.
That's a long time to wait for investors who have been sitting on the stock and have looked at a forty eight percent drop before today's trading. What's if investors, let me let me rephrase this. If consumers are swapping out of Lululemon going to Allo and worry, what are investors swapping out Lululemon for?
Well, I mean, look, i'd say, the performance side of their business is doing well. So when you say swapping out from the aligned leggings perhaps to the allos, that might be just broadening the assortment. The real issue is on the wide leg pants, on the casual assortment that is not trending well. That is what needs to do better. Competition has always been there. It's growing, for sure, but it's always been there. Lul knows how to compete when
they have the right product. The issue is they don't have enough new product. It's not coming fast enough and it won't come overnight. They hired a new AI head to drive innovation. That should help because AI is helping improve design timelines and so much more that we do think they can speed it up. But once again, nothing's happening.
This year.
They'll have a little bit more on new but it's not enough. Sales in the US are expected to decline and that's you know, we haven't seen a decline at Lemon. I can't remember when.
So I mean Lulu Lemon's down. The stock is down fifty five percent this year, Puma's down fifty five percent, Adidas twenty five, under, Armour thirty seven. Are these performances in stock declines. Are they primarily driven by concerns about tariffs.
Tariffs is definitely one concern, but I think that's not limited to just the athletic where it's for all apparel retailing. The other is just a shift in wardrobe.
Right.
If you think a few years back during COVID, where did the war ropes shift? A big part of your wardrobe was comfortable performance. Where right, we all had the leggings, we were wearing them at home while we were working, we were wearing them out. Today we're moving into a more structured wardrobe environment, which means that the closets are more balanced like they once used to be, and that's part of the reason why you're seeing underperformance also at the athletic ware companies.
So in the meantime, as the Little Lemon tries to get its product, its newness, its assortment back on track, it's making up for the week sales in the US with a lot of international sales. China is a big strong point. Global growth is still there. How much more can it ramp up that side of the business.
There's plenty of opportunity internationally. International is only twenty five percent of Little Lemon's total business. China's growing at over twenty percent, with the rest of international at around twenty percent, so a lot of runway there across both performance and casual wear. We think that's a bright spot that will remain a bright spot for the foreseeable future.
Punam, It's early September here, but it's certainly never too early to talk about holiday shopping. What's the expectation in your industry about how holiday shopping will be this year.
I think holiday will be okay as long as there are deals. The consumer is clearly focused on deals, and we think given the current TARFF situation, a lot of the inventory was up fronted, so retailers have most of holiday now in stock in their warehouses and also you know, starting to come into stories. We think the consumer will
come for deals. They'll be choosy. They have been choosy all year, so you're looking at the Walmarts, the Amazons of the world that will probably continue to take wallet's share.
Who's the strongest company in your space right now, poo.
I think Amazon's still one of the strongest retailers out there. They can compete with their large pocketbooks, They have the consumer mind share, and they're essentially focused on delivering value to their customer along with speed and convenience.
And Walmart's still doing well across the board.
Yeah, yeah, Walmart's still doing well. You know, both of them are thriving side by side. Walmart's a larger grocery business. Over fifty percent of their sales do come from grocery, so they do benefit from that. But they are increasing their marketplace. It's over one hundred billion dollars now their e commerce business.
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Let's bring in Mandeep Singh of Bloomberg Intelligence. Of course, he is our go to person for all things in the tech space, man deep. The news here is that Broadcom is going to help open AI, design and produce an AI accelerator and AI chip starting in twenty twenty six. And this is all to i don't know, not take market share from in video, but at least compete a little bit better with than video, isn't it.
Yes, And now that they have a ten billion dollar backlog from this new customer, open Ai. On the chip side, it's real money, so it's not just a proof of concept or anything like that. And that has always been the risk with Nvidia's growth is because of this concentration, whether it's from the hyperscale cloud players or the model providers like open Ai, if they were to do things on their own chip, that will have a big impact
on Nvidia. And clearly open Ai fields that they can optimize the chip and the model to run better on their own chip, and that's probably why you're seeing such a strong reaction. But clearly this is a twenty twenty six event, so we will still have to wait in terms of how that chip is going to stack up and what the media will have in twenty twenty six.
That's kind of where I wanted to go, Man, Deep, I guess if I were an Nvidia shareholder, I knew competition was coming and it just has to. But at the end of the day, I feel comfortable with the quality of my chips and my technology.
Is that kind of the feeling here today?
There is? And so look, I mean for a company like Google, which is also training their own model on their TPUs, they haven't been able to sell it to a non Google model provider, right, So it's really optimizing for your stack, which is what Apple has done over the years, but clearly that's worked very well for them. So Google really was the first one to train their model on their own chips, and I think that's what open ai is going after, is they feel they can
do something similar to Google. In fact, the people that they've hired to design this chip are you know, people from Google, so they've postal lot of people from there. And look, I think given the you know scale average open ai and Google are operating, the chip costs are pretty substantial. So if they are able to optimize the chip, even for their own use, that's going to have a
big impact on the gross margins. Which is why you see a big stock move, you know on Nvidia, because Nvidia relies on these large hyperscalers to continue to buy chips from them.
Okay, so in Nvidia down and the shares have actually deepened their losses now lower by four point one percent. Advanced micro Devices is off even more, MANDIP losing seven percent. Where does this lead leave AMD.
I mean, we know the revenue rundrate for Broadcom now, it's over twenty billion dollars. In fact, they guide it to acceleration. Anytime you see a company guide to accelerating revenue growth, I mean, that's great news in terms of multiple expansion. And so for a company like AMD whose hope was this market is large enough that they will also get that lift in terms of growth rates, clearly Broadcom is growing ahead of them and substantially. I mean
they guide it to six billion dollars plus in next quarter. So, I mean Broadcom has shown ten consecutive quarters of quarter over quarter growth and it's going to continue because that's been their guidance for twenty twenty six. So from that perspective, and the gains seems somewhat muted when you contrast that with Broadcom's expected growth.
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Higher education certainly under pressure from this administration. We had another piece of news out just recently concerning our friends at Northwestern University.
Get the last reporting there.
Janet Lauren joins his Bloomberg Higher Education Finance reporter.
Some turnover at Northwestern. What's going on there?
Janet?
Yes, So the president, Michael Schill, said he was resigning yesterday. He's been there for three years and it's been a bit tumultuous. In addition to protests and other things, he also had to deal with the settlement from the football coach who had sued the university over hazing. So he had made a deal with protesters during the height of all these protests in an effort to clear the encampment that was viewed as very unpopular.
I hadn't realized that he was under fire or the school was under fire, because most of our focuses on Trump's targeting the IVY leagues, for instance Harvard notably. To what extent does this clear the air with whatever discussions Northwestern is having with the White House?
It probably helps because you know they can say, well, our leader has left, we're going to put in a new person, new reform. But he was also brought before Congress. You remember the very high profile hearing with the presidents of Harvard, Penn, and MIT and Harvard and Penn's president stepped down. Was he there that one, No, he actually was called separately and he was grilled along with the
presidents of Rutgers and UCLA. And he had talked about Northwestern has a campus in Cutter and there said we would we would be reviewing the contract. It's not clear if whatever happened there so that he was under a lot of pressure. But don't discount the pressure also about the football team because they had a settlement that came
through late August. The football coach had sued the university for one hundred and thirty million dollars for wrongful termination and he denied knowledge of hazing, and he sued Northwestern is a member of the Big Ten. Don't forget, you know.
In contacts.
Yea, they may not be you know, UCLA and winning NCAA titles, but you know, same matter sports is, you know, is still kind of important there.
So where are we in terms of these certain universities dealing with the Trump administration. Is it trying to just come up with a financial settlement and kind of move forward and just is that kind of where we are?
Is that the model?
It's all unclear. I mean, we know what happened with Harvard, as we talked about yesterday. They had an incremental win. The court ruled in their favor. But we're just waiting for the administration to appeal as they said they would. It'll probably go up to the Supreme Court. So, you know, even though Harvard won an incremental victory, I mean, the judge did not rule on the funding free so that continues.
It still shows a lot of uncertainty. You know, Harvard is still not going to be getting any new grants, so and that still has a tremendous impact. You know, even though international students are okay there now, it still is a dampening on if I'm an international student, do I want to come to a school like, even though Harvard is my dream school, if things could be uncertain you know, it just it ramps up so much financial uncertainty.
Yeah, it's just easier to go to the UK, or to Australia or somewhere else.
Which school has settled on something with the White House. It's only Columbia, right.
No Brown Brown fifty million dollars settlement and theirs was pretty smart because it gave fifty million dollars to develop workforce within the state of Rhode Island. So in some ways it really bolsters their relationship with their neighbors. Penn very early settled about transgender athletes.
So you know, I think the way everyone else is outstanding, and that the goalposts cay move, keep moving on this correct and you know again.
It's we don't know what's going on behind the scenes. We think Cornell is, we think Northwestern is, Harvard is.
Harbord keeps thinking it's done, but it's not right.
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