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Stacey, I want to turn to a story that you highlighted earlier today, and that's about Tesla fating US auto safety investigations over its door handles. This is a story that Bloomberg had written about last week and it got a lot of attention.
Yes, the story itself is pretty amazing. The reporters here at Bloomberg did such an amazing job, and I have to say, I mean the stories themselves were quite harrowing. In some cases people not being able to get out of their cars, people being trapped.
It was.
Yeah, I'm glad that it is being looked into.
All right, let's bring in Steve Man, Bloomberg Intelligence Global Autos and Industrials Research analyst, and Steve, the fact that people don't know how to get out of a Tesla if it's locked in an emergency kind of situation on impact or if there's a fire is not new. Yet the National Highway Traffic Safety Administration did not act on anything until now.
Why is that, Well, it is a very serious situations, serious safety situation. Now, first of all, there is a manual release from the interior of the vehicle. But the safety issue is that you can't manually override the electronics and open the door from the outside. Now, this is
an issue that's I'm plaguing the whole industry. It's not just Tesla, okay, And you know there's there's a number of automakers have solved the issue, and I think Tesla does need to solve this issue because you know, you know, people have have died because of this. Uh problem here.
I'm interested in. I was just looking. I was just catching up with Tesla stock, and for some reason, shares continue a very enthusiastic upward march in spite of these really serious concerns. And like you say, you know the concerns where a solution isn't necessarily Yeah.
I think I think from the investor's perspective, there is a solution. There is a number of vehicles. For example, the Aldi, they actually solved that issue, and they saw they solved it by you know, having a double pull on the lash to actually open the vehicle manually. So I think from an investor perspective, it is an issue.
It needs to be solved, and it's solvable. The reason why the stocks are going up, as you know, the trillion dollar pay package and UH and the reiteration of the company moving towards AI is really getting the investor very excited. The robo taxi is rolling out apparently the extended the model why is selling really well in China so and then in Europe where we saw a lot of decline line and EV sales seems to be ticking up.
But the pay package rewards Elon Musk for thinking really big, not dealing with how to unlock car doors in the event of some kind of problem. You say that Audi has solved this. Are Tesla engineers going to take their cueue from Audi?
Possibly? Really? Yeah? I mean it's it's it's important. It's important that they solve this because Tesla, when they roll out the robo taxi, safety is an important issue for them. It's an important issue not just for Tesla, I think for the whole industry, and it's a reputation that they're trying to build. Especially you know they're as they try to roll out robo taxi, and you know they want
to project themselves as a safe automaker. So I think it's going to be a priority list for Elon Musk and the rest of the organization there.
It does also seem that people are feeling quite optimistic about this stock, but also there does seem to be a liability issue in addition to a need to solve this problem issue. Is that at all concerned? I mean from the markets it would see no, but yeah.
It is. It is a liability and I wouldn't be surprised that you know, there's going to be other legal issue that comes up. But it's I think from an investor perspective, this is normal business. Recalls are normal and there are other safety issues that has been recall not just at Tesla but and other automakers. So I think the investor are taking this, I don't want to say lightly, but it's normal business that you know, we're going to get over this.
It's a work in progress.
Yes, are there other safety issues in particular that Tesla needs to focus on pay attention to that could if left unresolved, could become legal liability issues?
I yeah, I actually thought about this robotaxi right, and I think there's still a safety driver sitting on the passenger seat pretty much on every Robotaxi. I think there is discussions of taking the safety driver out at the end of the year, but I think they need to tread very very carefully, especially for Tesla. It's a high profile company. Anything negative is going to damage their reputation. So if they don't take up the safety driver at
the end of the year, I wouldn't be surprised. I think they do need to take it one step at a time, make sure everything goes well before they do a full launch without the safety driver.
All right, Steve Man giving us something to look ahead to when it comes to Tesla. He is our Global Autos and Industrials research channalyist at Bloomberg Intelligence. Stay with us more from Bloomberg Intelligence coming up after this.
You're listening to the Bloomberg Intellligion's podcast. Catch us live weekdays at ten am Eastern on Apple, Cocklay and Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts, or watch us live on YouTube.
Let's talk a little bit about AI tech related companies. And I know that's so general and vague, but that's how I feel like you kind of encompass all of them. Core Weave says it's shareholder, in Vidia, has agreed to buy cloud services valued at six point three billion dollars, which sounds like a lot of money, but I think in this space may not be.
Let's bring in on rog run up for us.
He is Bloomberg Intelligence technology analysts to talk a little bit about this AI infrastructure demand and arag why is this cloud contract within Vidia important.
So the reason why it's important is because Conviave is considered a neo cloud or a cloud without you know, you could say a backing like you know what we have from Amazon's other businesses or.
Microsoft other businesses. So the two risk people think about cold Weave is what if tomorrow the demand for AI cloud infrastructure drops or pricing drops. This deal basically says for the next several years, if there is any unused cloud capacity for core viv, Nvidia will come out and take that. So I think this is, you know, another way of telling the investors that you know, please don't
worry about the demand for AI infrastructure. You know, the parent of it all, which is Nvidia, who's selling the chips to gore Viv, will take care of the demand if there are any issues.
Do you think that the amount of cloud space that AI will require will be smaller than we think it is. I mean, certainly that shook the markets a couple of months ago.
Yeah.
Well, at this point there is more demand than capacity, which is why there is a big rush to create new data centers, you know, install those new chips, create new networks, and go out and start to build applications that are AI enabled.
Now, having said that.
You know, people have seen this movie quite a bit back in the two thousand era when there was a glut of infrastructure built for Internet, but then suddenly in the next two to three years there was a drop in demand for that time.
And this is what a lot of investors are fearing.
And that's I think the big overhang on the space that at this point everybody is happy. Twenty twenty five is great, twenty six is great, but what happens after that is the big question mark.
Yeah, well, everyone has to get anxious about something, so we might as well look out to twenty twenty seven. At this point, anark, let's talk about another company you mentioned, neocloud. Nebus plans to raise three billion dollars in convertible notes and equity to help it expand this follows a major deal to provide AI infrastructure to Microsoft.
Is Nebuus also a neocloud company?
Yes, absolutely, it's the same kind of company.
They are being funded by private credit, by investors, private investors, and they are creating a similar kind of a cloud infrastructure. And you know what's happening with Microsoft is there are two things that are important for people to understand. One they do they run chack GPT instances, which is when you know, when I'm tweeting or I'm looking at anything on open ai Chat GPT, those workloads are running on Microsoft's cloud infrastructure.
It has it is a lack of capacity, so it's going out.
To neoclouds like core Vi and now naby Is to say, you know, I will buy that capacity for you as long as I can need it. So that's it's Microsoft Capex, but it's underleasing. Second aspect is Microsoft is basically saying I don't want to build a lot more capacity for training off my models. I'm going to outsource that. So
which is why it's good for those neon clouds. If Microsoft is going to spend that money, it's going to do rental from these cloud providers rather than building some of it in house.
Jumping now to Oracle, they're having a very good morning, and a lot of that has to do with the president, President Trump announcing this morning or hinting anyway that Oracle might be involved in a TikTok deal. Can you talk a little bit about that.
Yeah, I was to be very frank, I was a bit surprised about the stock reaction because I think it was very clear back in January that TikTok would be running in the US and Oracle will be the cloud
provider on the back end. So when you know, similar to what I just mentioned on Microsoft Cloud, if somebody goes on TikTok and is running that application, Oracle runs that the back end of it or the Oracle Cloud infrastructure, and you know that revenue was was argued up for you know, loss under the previous administration when if TikTok was to be closed. But it seems, you know, back from January onwards, that the President keeps on extending the ban on it, and you know, we we you know,
Oracle still making the money of it. The big question is, if there is a buyout that's led by US companies, will Oracle have any equity stake in it? And you know, we think it doesn't need to because it's already looking for so much of expansion capacity for its cloud infrastructure because of the open the ideal, So we don't think that's the case.
But practice speaking, nothing surprises us anymore.
That's a good way to end it on ourragrana Bloomberg Intelligence technology analysts. Nothing surprises us anymore on the AI infrastructure demand, which seems never ending, at least for now.
Stay with us. More from Bloomberg Intelligence coming up after this.
You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at ten am easterne on Apple, Cocklay and Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts, or watch us live on YouTube.
All right, let's bring in Jeff Brown.
Now he is founder in CEO T two Capital Management, and Jeff is here to talk to us about commercial real estate. Jeff, this bad rate cut that's gonna happen tomorrow. It's pretty much baked in and the big question is what happens after tomorrow. Do we get a series of rate cuts, do we continue cutting rates into twenty twenty six, and do we see a string of rate cuts in twenty twenty six. How's the commercial real state market position right now?
Yeah, I think the commercial real estate market is ready to breathe a big sigh of relief. It does seem like a foregone conclusion that twenty five basis points is on the table for tomorrow. Expectations for I think last I saw we talked earlier this week, and turning, I think it's two additional twenty five basis point cuts going
into the end of the year. And so, yeah, real estate's looking for a reprief We've endured these rate these increased rate shocks from twenty twenty two and twenty twenty three. A lot of people have been kind of clinging, holding on for dear life since then. And so yeah, again, interest rates moving down is a big sigh of relief.
I mean, they're not moving down that much. Twenty five basis points is a pretty little step down. Does that actually make a difference or is it more psychological?
There's definitely a psychological element to it. I always say real estate developers are about the most optimistic people that you'll meet, So any kind of light at the end of the tunnel is grounds for optimism. There's at least some clarity now. I think a lot of people went through a period of time a couple of years ago where you just didn't know what's going to happen next,
you know what she is going to fall. Then there's great optimism with the current administration in the White House, and we talked about President Trump and his background in real estate, and so expectations that real estate would, you know, open up a little bit, transaction volume pick up. It hasn't manifested quite yet. We've had tariffs, you know, we've had registrates just kind of stagnate. Office seems to be
getting back on its feet at this point. So again, it's just a it's not a big shock in the positive direction, but there is glimmers of hope and optimism now.
Even with the rate cuts last year, bar and costs remained fairly elevated compared to where they were before the pandemic, and as Stacey points out, a twenty five basis point cut today is not going to make tomorrow I should say it's not going to make too much of a difference. You have some major intractable issues that are still holding up your industry, including costs, whether it's the cost of
material or the cost of labor. Tell us a little bit, how about how much costs have risen over the last couple of years.
Yeah, that has been a source spot in real estate. Frankly, is when COVID hit. So we're going back five years now and we had this exacerbated increase and construction costs and construction labor, and all of a sudden, you know, it's supply supply issues and delivery issues. And again I think we finally got through that. However, what has not really relented is the construction costs. And now as we're looking at you know, there is a supply shortage that's
that's upon us. There is just a dearth of construction that's out there at this point. So it favors existing landlords, people you know, like T two that own a fair amount of multi family properties around the country, student housing properties around the country. Because so few are being built at this point, developers can't make numbers pencil to make a you know, a profitable construction development at this point.
What is hampering I guess new development is it? Is it labor? Is it materials? Costs? I know lumber has been a big kind of topic that that's come up quite a bit recently.
Yep, and lumbers even retreated quite a bit. So that's that's spend again a bit of a sigh of relief. There is a lot of volatility there, so who knows when that jumps back up. But yeah, I would say the costs in you know, just labor and materials has been the driving factor toward constraining construction activity.
When you and your fellow Titans of commercial real estate gather and talk, what do you find yourself lamenting the most?
I wish I were in conversations with Titans for starters as far as lamenting goes.
What are you celebrating then? If not lamenting?
You know, honestly, there's a lot of celebrating for clarity. I always say I'm you know when I'm when I'm a round table at a round table with other real estate investors, private equity fund managers, Like all we ask for is clarity, Like define the boundaries, give us some clarity, and then we can operate, we can play the game. Uh, for the you know, past three or four years again, interest rates spikes, construction materials just you know, running up
on a tariffs implement to implemented. It's just been really really hard to just have a level playing field, have some visibility even six months down the road. And so what we celebrate is the appearance of some clarity at this point, and so it does kind of unlock some confidence, unlocks some capital. It's been really really hard just to
capitalize project in light of the uncertainty. How do you underwrite a project that's that you're intending to exit in five or seven, let alone ten years, just really really challenging in light of the lack of clarity that's been out there. So what we celebrate is clarity, and what we lament, I would say, is just frankly, the lack of clarity.
Is that lack of clarity? I mean, is there clarity right now? It seems like there's quite a bit of lack of clarity that can come into my mind, especially for companies that are contemplating opening up a factory or something in order to counteract tariffs. I feel like the uncertainty around the tariffs is preventing quite a bit of that. But is there clarity that I'm unaware of or what is this clarity that's getting celebrated.
It's a great point. See, Yeah, I think I don't know that there's crystal clarity at this point, but there is there's at least the expectation of a lack of a lot of volatility. Tariffs at least they've been digested, We've whether that storm at least temporarily. It doesn't seem like, you know, new terrorists are going to come to bear at this point. We all understand that interest rates kind of are where they are, if anywhere, they're going down.
And then we understand the fact that construction costs are elevated. And so again it's not it's not like celebratory worthy, but I would say at least there is some clarity even surrender to the facts, and we have reality, We have the playing field now we can operate, whether that's being very active or kind of retreated and being back on the sidelines.
So it's kind of an acceptance of the current conditions.
That's a fair, fair statement.
Yeah, Well, the acceptance of the current conditions is there's a lot of talk, a lot of happy talk about data centers, and I'm wondering how much of that talk is being translated into action.
Yeah, it does seem like there is action, and it is a kind of a new frontier. It is the gold rush and commercial real estate right now to get into the data center space. I think the news last week we're open AI and Oracle are partnering together on a if I understood correctly, a three hundred billion dollar project. That's that's real money and backed by you know, real
company and Oracle. We talked a little bit about you know, Blackstone here in New York is very active and very vocally active at least in the in the data center space. That's real, real capital behind those efforts. So I think it has some traction, But you know, how it unfolds and and what data centers look like in two three years. And I mean, frankly, this this AI revolution and the speed at which adoption is necessary is something I don't know if I've ever seen in the commercial real estate
space anyway. But it's here, it's got some real capital behind it, and I think, you know, we'll see how it plays out over the next few years.
All Right, good talking with you, Jeff, Thanks for us winging by. Come back again, maybe after a series of rate cuts, and we can talk a little bit about the increase in clarity that you and your peers are seeing. Jeff Brown is founder and CEO of Chitu Capital Management. They are investors in commercial real estate. They're also a private equity firm.
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