Tesla's Disappointing Sales
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From the heart of where innovation, money, and power collide in Silicon Valley and beyond, this is Bloomberg Technology with Caroline Hyde and Ed Ludlow. Good morning, everybody. I'm Tim Stenevek. And I'm Katie Greifeld. Both

both in New York. This is Bloomberg Technology. Coming up, Tesla's annual EV sales dropped for the first time in over a decade. And speaking of Tesla, the company also in focus following a Cybertruck explosion outside the Trump Las Vegas hotel yesterday. We'll have the latest. Man, TikTok is feeling the heat as its potential ban draws near. We'll discuss a little later this hour.

First, though, a check on markets on this first trading day of 2025. Katie, I don't know about you, but I'm still writing 2024 on all my checks. That's terrible. I think we can still safely say Happy New Year, though. Okay. Happy New Year it is.

lot of investors are happy we turned the page. I think they are too, although the NASDAQ had great years back to back in 2024 and 2023. Up today, the NASDAQ 100 by three tenths of one percent. We do have about 70 percent of the stocks in the NASDAQ 100 higher today. Five of the seven MAG 7 higher with only Tesla and Apple lower. Weighing on today's trade, Katie, I know you're going to have more on Tesla in just a minute. I mentioned back to back years of gains.

2024, the NASDAQ 100 was up nearly 25%, 2023,

by more than 50%. Speaking of back-to-back years of gains, Bitcoin higher today for a third day in a row, 1.7% to the upside, up by about $1,600. It did fall about 3% in December, up more than 120% in 2024, Katie, up more than 150% in 2023. That's the thing. You mentioned some of those stats, those yearly stats, especially for the NASDAQ 100. That's easy.

even with the big benchmarks puking in the final week of the year. So clearly a bit of relief today, even with Tesla doing its darndest to try to drag this index down. Let's take a look at shares right now. You can see down about 5.6%. Of course, we got there

fourth quarter deliveries this morning coming in at 495,000 vehicles that missed analyst projections. They had been penciling in about 512,000 vehicles delivered. And you can see that disappointment in the shares right now. Tesla also had a fantastic year in 2024, but it came with a ton of volatility. And, uh,

a lot of political cross currents as well. Yeah, that's certainly something we'll be talking about in just a few minutes. But how about this last few months of 2024 for Tesla? I know. Incredibly remarkable. Well, remarkable too, because Elon Musk, some have been calling him the co-president. President-elect Donald Trump doesn't love that. And President-elect Donald Trump absolutely dominating all of the year ahead outlooks. Let's talk a little bit more about that because Wall Street has its eyes laser focused on Trump's return to the White House and trying

to gauge what to expect this year from his anticipated pro-business policies, but also his tough talk on global trade and general unpredictability. You can call it that. Bloomberg News has collated over 700 key calls from more than 50 leading financial institutions, and Bloomberg's Danica Seikova is here to break it all down. It's the subject of today's Big Take. Danica, it's great to have you with us. I made this point, of course, on open interest, so I'll make it again. It's really hard

to talk about 2025 without talking about Donald Trump. Yeah, it's clearly the biggest word this year. Everything is Donald Trump, tariffs, American exceptionalism. These are the words we saw through all those outlooks which were compiled by Sam Potter, of course. And last year, the year before, we were talking about hard landing. We were talking so much about monetary policy. We were talking about the economy, which is still an important factor here.

but definitely Donald Trump has taken center stage. What we have seen is a lot of people are betting on American companies and are not really warming up towards international companies, despite the fact that they obviously are a lot cheaper. But U.S. assets are taking center stage. J.P. Morgan says U.S. exceptionalism is getting reinforced. We're talking about

AI, we have a big call from BNY saying that AI's role in the world will surpass that of other technologies that propel earlier periods of such growth. So we're seeing a lot of AI optimism.

that comes also with cautious cause of broadening of the rally of people saying that more and more companies will use AI. Hence, they will join that AI euphoric rally. It's a great piece. Check it out by Bloomberg's Sam Potter, Danica Tsikova, also working on that along with many other folks of the Bloomberg News team. You can check it out now at Bloomberg.com slash Big Take.

Well, let's now bring in Keith Buchanan, Senior Portfolio Manager at GloBalt Investments. It has about $3 billion in assets under management. For more, Keith, you heard me mention the back-to-back years of gains on the NASDAQ 100. Remarkable couple of years. Do you think there's still room to run for mega cap tech? Hi, and thanks again for having me. We actually have been moving into more balanced stance over the last couple of months.

And we're really focused on the growth versus value collision course, if you will, that's set up for 2025, among other actually precarious collision courses across our macro economy and also for markets. So we've moved into a more balanced stance because we look at growth as dominant, really, over the marketplace for really since the great financial crisis, minus a few years, most recently in 2022.

And that latest phase, of course, has been moved by AI spending and storing. But he questioned at what cost does that come at? Are we looking at valuation that grows to infinity? And what point does that price end the scenario that we're in now? Also, the growth that's to come over the next couple of years.

Also, what cost does this AI spending and its productivity come? Of course, that's a boon to earnings, but does it come in wage gains and workers that could cause a little more consternation among the consumer and consumer spending? So balancing all those right now, and it led us to a more balanced approach is how we look at the U.S. markets and not preferring growth over value any longer. And we actually have been in that stance for several years prior.

Well, when it comes to big tech and when it comes to the Magnificent Seven, I think a lot of people would agree with you on these stretched valuations. But the pushback I keep hearing to that point is that you have the earnings growth to back it up, that basically the fundamentals are justifying these eye-watering valuations. And if you expect to see some of the momentum behind big tech fade, are you saying that you would expect earnings to disappoint a bit in 2025?

Not necessarily. That's why we haven't gone underweight in growth. We actually are just in a neutral stance, if you will. We don't see the case for that disappointment to come in 2025, even 2026. As we grow into, like you mentioned, earnings have grown into multiples that seemed lofty a year and a half ago, don't seem as lofty anymore today. But that

maturation of this growth phase in investment has to come at some point where the market prices in fully the bolus of spending that's flooding this marketplace. Again, we don't feel like these stocks are broken or any other part of the story is amiss at all. But we think that growth actually could

come more in sync with value as far as the performance over the next couple of years as the market digests those valuations in time. Well, let's talk a little bit more about value because, of course, value has broken a lot of hearts over the past couple of years, and many expect that to continue. So you have the value.

piece looking good when it comes to a lot of these value names, a lot of these value indexes. But are you expecting to see actually that earnings growth broaden out, especially if we are in a higher for longer sort of environment where the Fed can't cut as much as maybe some had been hoping?

It almost has to. And we've looked at this closely. From a bottom-up standpoint, the market expects earnings per share growth of 13 percent over 2025. That's not as concentrated in the MAG7 as it was in 2022 and 2023.

and especially in 2024 as well. So that broadening has to occur, and evaluations just don't show that that broadening is expected. If you look at names like financials have started to appreciate some of that, and those stocks have performed over the past 12 months. We're looking at other spaces like that that offer the opportunity for the valuations to grow into a broadening of earnings growth.

that the market expects from a bottom-up standpoint, but from a top-down standpoint and also from an index standpoint, really hasn't really materialized in a lot of those value names in those industries that traditionally are categorized as value-oriented. So we're really excited about just the balance that earnings growth could lead to performance and value sectors. And we feel like growth doesn't necessarily have to bleed out in order for that to happen.

Keith, over the last couple of years, really since the public introduction of ChatGPT, we've seen a lot of the AI gains go to just a handful of companies, including the mega caps, hyperscalers and whatnot. I'm wondering when we're starting to see those AI gains go to other types of companies. When is AI going to allow Procter & Gamble to sell more Tide and toilet paper with fewer people?

We're starting to see actually some implementation of AI that could benefit sectors and names and industries outside of the MAC-7 already. You see that in healthcare. I started talking about how some development of drugs has accelerated and they feel like they can be more efficient at how they allocate resources because of artificial intelligence they've implemented within those platforms.

Again, the spending comes first, productivity gains come next. And we should see that materialize across the board. Again, that's the case for the spending, of course, will grow to those names that put this technology and implement this within the economy. But as all industries start to implement some level of higher productivity, that benefits names across the board. And those with lower valuations, in theory, should have a quicker move up when those earnings start to accelerate.

And it'll be fascinating to see when the investing timeline sort of turns to more of those applications versus just the hardware and the chip makers. But Keith, we got to leave it there. Great to kick off 2025 with you. That is Keith Buchanan. He is Senior Portfolio Manager over at Global Investments. Now coming up, Tesla disappoints. More on the carmaker's delivery miss next. This is Bloomberg.

89% of business leaders say AI is a top priority, according to research by Boston Consulting Group. But with AI tools popping up everywhere, how do you separate the helpful from the hype? The right choice is crucial, which is why teams at Fortune 500 companies use Grammarly.

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Tesla fourth quarter sales out today. The electric car maker disappointing investors, posting an annual vehicle sales drop for the first time in more than a decade. Joining us now is Bloomberg's Detroit Bureau Chief David Welch. David, 1.79 million vehicles sold in 2024. Fourth quarter deliveries, 495,570. Tesla stock taking a hit as the result. To what can we attribute this decline to?

I think it's just purely greater competition, whether it's in China where BYD and the domestic EV players are doing very well with competitive product and helped by a lot of Chinese government subsidies. It's tougher sledding there. And there is more competition in the US. You've got a lot of new EVs out there from Hyundai, Kia, General Motors. They're all pushing pretty hard here.

GM's got a pretty cheap one with the Equinox, sells for under $35,000. That's going to put pressure on the market. And also EV sales generally, still some growth there, but slower growth. So you have slower growth for the total industry and more players fighting for that piece of the pie. And look, Tesla's not immune to that either.

The other thing, look, Tesla's got this lineup of four vehicles that can sell in pretty decent numbers. A niche cyber truck, which has not set the world on fire in terms of growth. Unless they get this cheaper Model 2 type of vehicle out there, you're probably not going to see a lot of electric vehicle growth from them in the U.S. market. And they're going to have really tough competition in Europe and China going forward. So,

It's not a growth story on the EV side of their business right now. So maybe the hope is then that, of course, Tesla, which already is the market leader, would take share from some of its competitors because Elon Musk on the latest earnings call said that he sees 20 to 30 percent growth this year, which seems optimistic. Are we hearing anywhere close to those figures when you take a look at what the sell side is actually expecting?

The sell side is not expecting that. There isn't a lot of credibility. We've seen a lot of skepticism over the 20% to 30% growth. Now, what we don't know, Tesla is supposed to have this cheaper EV coming out this year.

They famously miss their targets for production and sales all the time. But if it does come out, it is cheaper. That's where they would presumably get some growth. It's going to be really hard to steal that much market share and less Tesla resorts to some really deep discounting. I mean, look, there's a wild card here, too, which is,

If Tesla's not reliant on government subsidies, the 7500 tower tax break for EVs and the other companies are, maybe they can gain share that way. But there's just not that much growth in the EV market where I think they're going to see 20% to 30% growth based off its U.S. sales. And again, the Chinese competition is just too tough for them to get huge numbers there either. David, a little closer to home here in the U.S., is there political risk given Elon Musk's close alliance with President-elect

Donald Trump and that it could alienate potential folks who would say, you know, in another world, I would have gone for a Tesla, but these days, no thanks.

Look, that phenomenon I think is real. I also think it's kind of baked in already because Elon kind of went to the right side of the political aisle some time ago with the things he's been saying on X, and he's been working with Donald Trump for months now. There may be more of that coming. People who are predisposed to buying EVs, many of them are interested in climate change and they buy them for that reason. Others are not.

I think Elon has probably alienated a certain kind of consumer. How big of an impact that's having, it's tough to quantify, but I think that does have an effect for sure. Well, let's talk about the flip side of that, David, because, okay, maybe the left-leaning customer base of Tesla doesn't want to buy

more Teslas. But there's a lot of expectations, and you can see that in the stock price, that a Donald Trump administration, the second Donald Trump administration, is going to be good news for Tesla. I mean, what are some of the actual policies that are potentially on the table here that would benefit Tesla?

The big one, I think, is the Trump administration's priority of setting up a federal framework for autonomous vehicles. What's really pushing this stock, I think, to a large degree is this idea that Tesla's not just an automaker in the way that General Motors or Daimler or BMW or Toyota are.

It's an AI company. It's a tech play, right? And you can only do that if you do have robots, you do have self-driving cars. And without a federal framework that enables somebody like Tesla to put a vehicle on the road with no steering wheel, no brake and accelerator pedals, totally robot-driven, that's not going to happen. The Trump administration will make it a priority. Elon is...

camped out at Mar-a-Lago trying to help write that, I would assume. But anyway, he's going to have influence. That will help Tesla, certainly, depending on how the rules are done. And then, look, the other thing Elon has said, we don't need federal subsidies to sell our EVs. It would affect other companies more. And he's probably right about that. But how much getting rid of those would help Tesla sell more EVs, you know, that

remains to be seen. I think it's tough on them to get rid of those incentives as well, because one, that's free money to consumers that they don't get anymore. And two, Tesla may have to discount more. So even if they do steal market share, it might be less profitable share if they have to have big discounts in order to sell those vehicles. So the bottom line is any kind of tax policy on EVs

could benefit Elon if he has an outsized voice in crafting it to help his company. So, you know, we don't know what that looks like, but that certainly could happen. Well, Tesla shares currently down almost 6%. David Welch, thank you for that. Let's turn to the other major Tesla news that we're following this morning, and that is Elon Musk saying that the explosion of a Tesla Cybertruck outside of the Trump Las Vegas hotel was probably an act of terrorism. The driver was killed and seven people suffered minor injuries.

injuries. For more, let's break it down with Bloomberg's Mike Shepard joining us now. And this is a developing situation, of course, Mike, but what do we know so far?

Well, what we know is that this vehicle, like the vehicle used in the New Orleans terror attack, was rented via the Turo app. But the company itself maintains that there is no connection whatsoever between them, that they can see neither the suspect in New Orleans nor the man who rented the Cybertruck that exploded in Las Vegas had any kind of a criminal background that would have shown up in the checks that

the company runs. What we know about the man he has been identified in Las Vegas is that he is identified as an Army reservist who was on leave from the service temporarily. He was from Colorado Springs. And we don't know yet what exactly the cause was of this explosion in Las Vegas. Elon Musk has said

on X, he posted last night that he thought it looked more like, and the company concluded but did not offer more evidence of, an explosion related to either what he said were fireworks or perhaps a bomb in the bed or back of the truck, rather than a malfunction by the batteries we've seen in some other Tesla vehicles.

Mike, as Katie said, this is a developing story. We don't know much yet, but I'm curious what has come out at this point. Do we know how, if any, the ignition actually happened? How whatever was in the back of the truck ignited? And do we know if the vehicle's battery burned or if fire officials were able to put out the fire before that happened?

Those are really good and still very open questions, Tim, that we're waiting for authorities to shed more light on. We have heard, of course, from Elon Musk, the world's richest man, and one of the co-founders of Tesla and now the owner of X, laying this out for us on social media. But the detailed account from authorities, including the Las Vegas Fire Department and FBI, which is also investigating this incident,

We still do not have a full accounting of what had happened, including the kind of forensic questions that you're asking now. So we'll be eager to hear from law enforcement and safety authorities there as we get more answers. Again, more questions than answers that we have right now, Mike. But I'm curious about...

Potential similarities between what happened in New Orleans and what happened in Las Vegas, the tech angle here with vehicles rented on the AppTurro, the connection of both being members or former members of U.S. Armed Forces. What are similarities we have right now?

You know, those are similarities, but authorities would be quick to caution that they are all coincidental. Many people use this Turo app to rent vehicles. Conversing with a friend this morning, they happened to note that, hey, you know, I have an acquaintance

who rented a cyber truck in Las Vegas about the same time. So it is not an uncommon thing for people to be using something like this. If it were Avis or Hertz, I don't know if we'd be asking sort of the same kinds of questions. And again, when it comes to prior military service, we have seen this again and again, that sometimes actors in these mass casualty events, and we can think

all the way back to 1995, the bomb that took out the Edward R. Murrah building in Oklahoma City. That was perpetrated by two men who had previously served in the U.S. Army. So, again, coincidence, but we don't know whether there is any connection valid or viable whatsoever, or even if what happened in Las Vegas was an accident or a deliberate and malicious act.

All right, Mike, really appreciate your reporting here. That is Bloomberg's Mike Shepard. And of course, we'll bring you more details as we have them. But let's switch gears here and discuss the future of H-1B visas under the new administration and the impact on America's tech industry. Of course, this was a firestorm over social media over the holiday. Well, coming up, much more on Bloomberg technology. This is Bloomberg.

89% of business leaders say AI is a top priority, according to research by Boston Consulting Group. But with AI tools popping up everywhere, how do you separate the helpful from the hype? The right choice is crucial, which is why teams at Fortune 500 companies use Grammarly.

With over 15 years of experience building responsible, secure AI, Grammarly isn't just another AI communication assistant. It's how companies like yours increase productivity while keeping data protected and private.

Designed to fit the needs of business, Grammarly is backed by a user-first privacy policy and industry-leading security credentials. This means you won't have to worry about the safety of your company information. Grammarly also emphasizes responsible AI so your company can avoid harmful bias. See why 70,000 teams and 30 million people trust Grammarly at grammarly.com slash enterprise. That's Grammarly at grammarly.com slash enterprise.

Grammarly. Enterprise-ready AI.

Bloomberg Invest returns on March 4th and 5th. This is Shinali Basick. Join me and many of the most important institutional investors and money managers for New York's top finance event. Come face to face with the leading voices in markets. Identify the next big investments, forge meaningful connections, and swap strategies. Register now at BloombergLive.com slash invest. That's BloombergLive.com slash invest.

Well, 2024 was deemed the year of artificial intelligence, but many are waiting to see if Wall Street will grow impatient with the AI movement. Bloomberg Opinions' Dave Lee wrote about it in his latest column. He joins us now.

Tie this into what you call the brain rot economy, all this enthusiasm that we're seeing over AI and what's actually happening on a lot of these apps. Yeah, well, I mean, we're seeing investors being extremely excited that AI is going to come good this year, earn them lots of money, the revenue is going to start pouring in, and that's going to offset the worries about capital expenditure going through the roof for just about all major tech companies.

in 2024. Where that links with the brain rot side of things is that one of the early uses of AI has been to fill things like Facebook with just nonsense, really, like pictures that don't make any sense or text that's been generated that isn't really fun to read.

And I think, and in my column there, I wrote that there's going to be this sort of awakening, I hope, from people saying, well, why am I looking at this? And as soon as people stop looking at this, that could spell trouble for companies like Meta that rely on that. Well, maybe they move away from that and go to TikTok. Your prediction about TikTok this year, at least here in the U.S., will it be banned? Well, the question is, you know, what the Supreme Court's going to do. They're going to hear arguments on January 10th.

And many legal observers say it's unlikely that the Supreme Court is going to overturn the lower court's ruling, which was that the ban was constitutional. The next wild card is going to be what's Donald Trump going to do? Now, he's already asked for the ban to be paused. He's asked the Supreme Court for that. Whether or not they grant him that is not clear yet.

But I think it's going to take some overturning for this ban on TikTok to stop. So I think if you're on TikTok, you should be getting ready to perhaps sort of move somewhere else. Well, Dave Lee from Bloomberg Opinion, that is the perfect segue into our next guest. Let's keep this discussion going now with Gautam Hans. He is a law professor at Cornell and founder

director of the university's Civil Rights and Civil Liberties Clinic. Great to have you with us, of course. So the Supreme Court will hear TikTok's arguments on January 10th. Of course, the ban would kick in on January 19th if it goes through.

That is a very, very quick possible turnaround. And then you add President Donald, President-elect, rather, Donald Trump into the equation. How are you thinking that things will shake out from where it stands right now? Yes, so thank you for having me. I am...

skeptical that the Supreme Court will overturn the lower court's ruling. I think the schedule of the argument means that we may hear something quickly before the effective date of the ban, but I am not optimistic that the court will make a different finding

whether or not President-elect Trump is able to change that through urging Congress to override or rescind the law or some other kind of executive action, I think we'll have to wait and see. I also don't think the Supreme Court itself will take up

President-elect Trump's call for a stay, given the sort of lack of precedent for that kind of move. You have been supportive of TikTok from a legal perspective. Why is that? What's the case? I think that this law is targeted pretty explicitly at the company itself.

The Congress people who talked about it at the time of its enactment earlier in 2024 said that there were major national security concerns that they had been briefed on privately. But that evidence has not been made public. And while I agree that national security is an important governmental interest, I also think that when it comes to banning a social media platform where millions of people exchange content and ideas, that evidence should be public.

I did sign on to an amicus brief, both in the D.C. Circuit and the Supreme Court. We in that amicus brief argued that the law really creates some fundamental First Amendment problems that I don't think are supported by the Supreme Court precedent here. But of course, we'll have to see what the court itself says in the coming weeks.

Cornell Law Professor Gautam Hans, thanks so much for joining us. Do appreciate it. Now a potential TikTok ban would also pave the way for Meta's Reels or YouTube Shorts to fill an entertainment void for 170 million Americans. Entertainment and the online advertising that comes with it.

Let's bring in Rachel Tippegraff, founder and CEO of Micmac. It's an e-commerce marketing platform for multi-channel brands. Good to have you with us, Rachel. You have some incredible data on the Micmac platform about where the advertising money is leaving to go to TikTok. Let's start there for context. - Yeah. - Who's losing money as a result of TikTok's growing popularity? - Absolutely. My company, Micmac, works with over 2,000 of the biggest brands in the world. And what we've seen this year is a 200% year-over-year growth in TikTok.

At the same time, we've seen a 65% decline in Alphabet. Alphabet for us is paid search. It's YouTube. It's DV360. Everyone else is menial compared to this. So if a TikTok ban were to occur, you can believe that Alphabet is going to see big regains in brand advertising traffic.

It's interesting. I mean, I'm speaking from personal experience. When I talk about TikTok shop, I actually used it for holiday shopping, which I wasn't expecting to do. You think about TikTok potentially being banned. That would theoretically, as Tim mentioned, be a benefit for YouTube Shorts, for, of course, Meta's Reels as well. But when it comes to the actual e-commerce bit, do they have the same infrastructure and ease of use as you have on a TikTok shop? It's interesting about TikTok.

TikTok has the power of television with the backbone of direct response advertising. So you can build brand and drive conversion all at once. That being said, when it comes to bottom of the funnel, I want to drive sales advertising. The two best places to do it today still are Alphabet, meaning paid search, and Meta.

And so if this were to happen, I still believe you're going to see a massive shift back to Alphabet, a little bit back to Meta. But in terms of TikTok, it has become the fourth biggest marketplace in the U.S. So who's going to gain from marketplace sales? It's going to be Amazon. It's going to be Walmart. It's going to be eBay. It's going to be Taimou. So there's going to be a lot of

companies to gain in this disruptive shift if a TikTok ban were to occur. Rachel, who do you think or what should the companies that are clients of yours be doing to prepare for a possible ban? How should they be changing the way they're looking at things?

I believe, first of all, that a ban is going to be delayed. I think that this is a hot opportunity for the Supreme Court and Trump. That's my hot take as Rachel. But in terms of my customers, I'm working with the biggest brands in the world. They're used to this. When Elon Musk took ownership of Twitter, now X, we saw X traffic go to zero.

What did they do? They just reallocated spend overnight. It's not the big brands to be worried about. It's the small medium businesses that are heavily dependent on TikTok and the creators. Some people rely 100% on TikTok for their income.

The big brands will be resilient. The small businesses are the ones who are going to experience tough times. And Rachel, we only have about 30 seconds, but you mentioned some of the beneficiaries here. Of course, the Amazons, the Alphabets of the world. What about Etsy? What about eBay? Some of these marketplaces that have been kind of left behind. Yeah, there's going to be a shift back

back to seeing sales in places like eBay and Etsy and Taimou. But Walmart and Amazon are huge players now in 3P marketplaces. All of these players will see gains.

All right, Rachel, really appreciate you taking the trip to New York. Of course, that is Micmac founder and CEO Rachel Tippegraph. And that does it for this edition of Bloomberg Technology. I believe we'll both be back tomorrow. Hey, if they'll have us, we'll be back. Don't forget to check out our podcast, though. In the meantime, you can find it on the terminal as well as online at Apple, Spotify and iHeart. This is Bloomberg.

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