1 00:00:00,080 --> 00:00:02,000 Welcome back everyone and thank you for joining. 2 00:00:02,200 --> 00:00:06,240 Microsoft is getting crush. The stock is down 12%. 3 00:00:06,720 --> 00:00:09,520 A ton of software companies are also getting crushed as well. 4 00:00:09,720 --> 00:00:13,600 Whether it's Adobe or Salesforce or Intuit, you name it, if it's 5 00:00:13,600 --> 00:00:16,480 in the software category, odds are it's being sold off. 6 00:00:17,000 --> 00:00:19,840 We have a lot to go over to explain what's going on with 7 00:00:19,840 --> 00:00:22,680 software companies and in particular Microsoft. 8 00:00:23,200 --> 00:00:26,160 After all, it's not a frequent event that you see this company, 9 00:00:26,160 --> 00:00:28,840 one of the most predictable companies, one of the best ones, 10 00:00:28,840 --> 00:00:32,200 one of the most diversified ones, sell off a staggering 12% 11 00:00:32,200 --> 00:00:34,560 in a single day. It's dragging down the entire 12 00:00:34,560 --> 00:00:36,760 market sentiment. It's making investors feel 13 00:00:36,960 --> 00:00:39,640 incredibly bearish. In the meantime, we also have 14 00:00:39,640 --> 00:00:42,440 different stories going on right now, like Meta having a nice 15 00:00:42,440 --> 00:00:45,240 price surge and posting pretty neat earnings. 16 00:00:45,240 --> 00:00:46,760 We'll be looking at what's going on with Meta. 17 00:00:47,000 --> 00:00:49,920 We also have ASML that just posted earlier this week, one of 18 00:00:49,920 --> 00:00:51,640 my big holdings. We'll be going over that as 19 00:00:51,640 --> 00:00:53,800 well. We have MasterCard, one of the 20 00:00:53,800 --> 00:00:57,280 most significant buys that I've made, also posted earnings this 21 00:00:57,280 --> 00:00:59,880 morning and I want to highlight what I think is the most 22 00:00:59,880 --> 00:01:01,960 important take away from Mastercard's earnings. 23 00:01:02,560 --> 00:01:06,840 Then of course, we also have Tesla, everyone's favorite Tesla 24 00:01:06,840 --> 00:01:10,040 that reported their earnings. The numbers were terrible and it 25 00:01:10,040 --> 00:01:13,240 looks like a dying company, yet the stock is only down 2% and 26 00:01:13,240 --> 00:01:15,440 it's one of the most richly valued companies in the market. 27 00:01:15,840 --> 00:01:18,480 So what is going on with Tesla? We're going to break that down 28 00:01:18,480 --> 00:01:21,360 as well and see the new direction and the new light that 29 00:01:21,440 --> 00:01:24,000 Elon Musk is giving. This is going to be one of the 30 00:01:24,000 --> 00:01:26,440 most jam packed episodes. We're going to be going over all 31 00:01:26,440 --> 00:01:29,320 of this in depth to explain what's going on with these 32 00:01:29,320 --> 00:01:31,720 companies and why they're trading the way that they are. 33 00:01:32,000 --> 00:01:33,200 So let's go ahead and jump in now. 34 00:01:33,200 --> 00:01:35,480 We start things off by looking at what I believe is the most 35 00:01:35,480 --> 00:01:37,720 important news of the day, which is Microsoft. 36 00:01:37,720 --> 00:01:41,720 It's not every day that you see Microsoft this company fall 12 37 00:01:41,720 --> 00:01:44,560 to 13% after earnings. In fact, that's virtually 38 00:01:44,560 --> 00:01:46,480 unheard of. That really happens with a 39 00:01:46,480 --> 00:01:49,000 company this diversified and stable and predictable. 40 00:01:49,000 --> 00:01:51,800 When we look at Microsoft, it is dragging down the rest of the 41 00:01:51,800 --> 00:01:54,040 indices. It's also dragging down My 42 00:01:54,040 --> 00:01:56,520 Portfolio. My portfolio's down about 1 to 43 00:01:56,520 --> 00:02:00,040 2% on the day, somewhat in line, maybe a little bit less in the 44 00:02:00,040 --> 00:02:02,640 market, but it is a hit after all, because I do own some 45 00:02:02,640 --> 00:02:04,640 Microsoft. I own the stock in the passive 46 00:02:04,640 --> 00:02:08,880 income portfolio, $70,000 of it. It's still, even after this 47 00:02:08,880 --> 00:02:11,280 trade, down $27,000 in the green. 48 00:02:11,280 --> 00:02:13,160 So it's still well within the green. 49 00:02:13,160 --> 00:02:16,120 When I was buying Microsoft, I was paying around 2:20 for it. 50 00:02:16,200 --> 00:02:19,120 I also own a little bit of the stock in the story fund. 51 00:02:19,320 --> 00:02:23,520 This one is $8800 in the green after the trade down today. 52 00:02:23,600 --> 00:02:26,080 So what happened to 'cause this trade down? 53 00:02:26,080 --> 00:02:28,840 Well, at first glance, Microsoft's numbers look really 54 00:02:28,840 --> 00:02:30,720 good. For example, if we just jump 55 00:02:30,720 --> 00:02:34,040 into Qualtrum here and we pull up any of the numbers, revenue 56 00:02:34,040 --> 00:02:36,640 grew 17%. That looks great. 57 00:02:36,760 --> 00:02:38,800 We have that number called the remaining performance 58 00:02:38,800 --> 00:02:40,320 obligations. You're probably hearing about a 59 00:02:40,320 --> 00:02:43,880 lot the RPO, I call it the cloud backlog because that's 60 00:02:43,880 --> 00:02:46,440 essentially what it is and that's up a lot. 61 00:02:46,480 --> 00:02:49,480 That's up 110%. That does raise some eyebrows. 62 00:02:49,480 --> 00:02:50,760 We'll go into that a little bit later. 63 00:02:51,160 --> 00:02:53,080 We also have the EBITDA climbing dramatically. 64 00:02:53,080 --> 00:02:56,080 In fact, that's a big spike. Look at the EBITDA climb just 65 00:02:56,080 --> 00:02:59,640 this last quarter. We have net income looking like 66 00:02:59,640 --> 00:03:02,720 it's having an extra a strong climb this quarter. 67 00:03:02,960 --> 00:03:04,520 These numbers actually look incorrect. 68 00:03:04,600 --> 00:03:06,680 They're not incorrect. These are the real numbers. 69 00:03:06,680 --> 00:03:09,160 This is the real data. We have the net income growing. 70 00:03:09,160 --> 00:03:12,280 We have the free cash flow. That's also up dramatically. 71 00:03:12,440 --> 00:03:16,240 Look at it this quarter, this massive jump up from the 72 00:03:16,240 --> 00:03:19,160 previous quarter to this one. Why did earnings per share jump 73 00:03:19,160 --> 00:03:24,520 from $3.72 to $5.16? So all these numbers look great. 74 00:03:24,520 --> 00:03:26,760 In fact, some of them look a little too good to be true. 75 00:03:26,760 --> 00:03:28,480 Some of them look like they're growing too fast. 76 00:03:28,720 --> 00:03:31,800 But Even so, Microsoft's overall business looks very strong. 77 00:03:31,800 --> 00:03:33,400 Every number is going up and to the right. 78 00:03:33,920 --> 00:03:36,000 So what gives? Why is the stock down? 79 00:03:36,240 --> 00:03:39,400 Well, as you may have guessed, as you may be suspecting, 80 00:03:39,400 --> 00:03:42,080 there's some things that are inorganic with these numbers. 81 00:03:42,480 --> 00:03:45,040 When they jump that big, Microsoft needs to give an 82 00:03:45,040 --> 00:03:48,640 explanation of what's going on. And the explanation they gave 83 00:03:48,840 --> 00:03:51,960 showed something different about Microsoft, something that 84 00:03:51,960 --> 00:03:54,880 investors didn't really expect and it came down to the earnings 85 00:03:54,880 --> 00:03:56,400 call. When we look at the earnings 86 00:03:56,400 --> 00:03:59,080 call, we have a summary of it here in Qualtrim. 87 00:03:59,160 --> 00:04:02,480 This is a a summarized look at what they highlighted and under 88 00:04:02,480 --> 00:04:05,800 the category open AI relationship and RPO 89 00:04:05,800 --> 00:04:08,440 concentration. Remember, the RPO is the cloud 90 00:04:08,440 --> 00:04:12,360 backlog and concentrations, never a good thing when it comes 91 00:04:12,360 --> 00:04:14,800 to your customers. And this is where we get to the 92 00:04:14,920 --> 00:04:17,640 most important line of the entire earnings report. 93 00:04:18,320 --> 00:04:24,040 Approximately 45% of commercial RPO is from open AI commitments. 94 00:04:24,240 --> 00:04:27,680 Almost half of Microsoft's cloud commitments comes from open AI 95 00:04:27,680 --> 00:04:29,680 alone. When we look at the chart here 96 00:04:29,680 --> 00:04:31,560 again, we can go back to the RPOS. 97 00:04:31,560 --> 00:04:34,240 We have this nice chart. We see that it grew a lot, but 98 00:04:34,240 --> 00:04:37,960 then when you when you cross out 45%, it doesn't look like it's 99 00:04:37,960 --> 00:04:41,120 actually growing. When you strip out the Open AI 100 00:04:41,120 --> 00:04:45,360 contribution to their RPO growth, it goes from right now 101 00:04:45,360 --> 00:04:50,840 the 110% to 28%. So it's still growing, but it's 102 00:04:50,840 --> 00:04:55,000 a far cry from 110%. So immediately when you look at 103 00:04:55,000 --> 00:04:57,400 the numbers and you actually factor in what what Open AI is 104 00:04:57,400 --> 00:05:00,040 doing, they're making up for almost all the growth in their 105 00:05:00,040 --> 00:05:02,800 RPO. This entire number, the growth 106 00:05:02,960 --> 00:05:07,320 portion of it comes almost entirely from Open AI, only 28% 107 00:05:07,320 --> 00:05:10,080 growth without Open AI. OK, But what about these other 108 00:05:10,080 --> 00:05:11,560 numbers because they look good as well. 109 00:05:11,560 --> 00:05:14,280 For example, we have the EBITDA climbing up dramatically in the 110 00:05:14,280 --> 00:05:17,040 last quarter. We have net income up big in the 111 00:05:17,040 --> 00:05:18,960 last quarter. We have the earnings per share 112 00:05:18,960 --> 00:05:21,920 likewise up big in the last quarter, growing 60%. 113 00:05:21,960 --> 00:05:24,520 Well, there is an explanation for all these other numbers 114 00:05:24,520 --> 00:05:28,240 besides the RPO growth. So the explanation is again Open 115 00:05:28,240 --> 00:05:30,240 AI. If we go back to the earnings 116 00:05:30,240 --> 00:05:32,840 call transcript and we look here, it says that the earnings 117 00:05:32,840 --> 00:05:39,320 per share were only $4.14, up 24% excluding the accounting 118 00:05:39,320 --> 00:05:42,040 impact from Open AI. So the diluted earnings per 119 00:05:42,040 --> 00:05:45,960 share number is actually misleading because Open AI got a 120 00:05:45,960 --> 00:05:49,320 higher valuation and part of that higher valuation led to 121 00:05:49,320 --> 00:05:53,280 about $7.1 billion in equity gains from Microsoft. 122 00:05:53,520 --> 00:05:55,400 Now these are paper accounting gains. 123 00:05:55,640 --> 00:05:58,360 This isn't organic earnings per share growth by the company. 124 00:05:58,640 --> 00:06:03,000 When you erase those $7.1 billion, all of a sudden the 125 00:06:03,000 --> 00:06:04,880 numbers here look a little bit more in line. 126 00:06:05,120 --> 00:06:08,480 It'd be more like right there. So with Open AI's impact, the 127 00:06:08,480 --> 00:06:11,160 growth of their earnings per share is about 60% that you see 128 00:06:11,160 --> 00:06:13,720 here. Without Open AI's impact, their 129 00:06:13,720 --> 00:06:18,040 growth is 24%, still good, but again, a far cry from the number 130 00:06:18,040 --> 00:06:20,520 being reported here. And this makes Microsoft and all 131 00:06:20,520 --> 00:06:23,160 the earnings per share numbers look optically cheaper than they 132 00:06:23,160 --> 00:06:25,080 actually are. So all these numbers are 133 00:06:25,080 --> 00:06:26,520 starting to make a little bit more sense. 134 00:06:26,520 --> 00:06:29,920 Now we know that the rapid RPO growth or cloud backlog is a 135 00:06:30,040 --> 00:06:33,000 response of Open AI. We know that the income boost in 136 00:06:33,000 --> 00:06:37,200 the earnings per share in EBITDA or as a response of Open AI, it 137 00:06:37,200 --> 00:06:40,200 seems like a lot of what Microsoft's doing is as a 138 00:06:40,200 --> 00:06:44,280 consequence of Open AI and that's where we get a structural 139 00:06:44,280 --> 00:06:46,640 change in how investors are viewing Microsoft. 140 00:06:47,000 --> 00:06:51,120 For a long time, in fact up until today, investors viewed 141 00:06:51,120 --> 00:06:54,880 Microsoft is an incredibly diversified, predictable, in 142 00:06:54,880 --> 00:06:57,840 fact inevitable company. It was a globally and 143 00:06:57,840 --> 00:07:00,760 geographically and customer based diversified company. 144 00:07:01,240 --> 00:07:04,120 It had everybody using its products everywhere, distributed 145 00:07:04,120 --> 00:07:07,040 across all of planet Earth and Microsoft. 146 00:07:07,040 --> 00:07:09,320 Because of that, global diversification in both 147 00:07:09,320 --> 00:07:13,760 geographies and customers across Fortune 500 companies was always 148 00:07:13,760 --> 00:07:16,600 looked at as a steady, predictable company, one that 149 00:07:16,600 --> 00:07:20,440 was incredibly dependable. When I talked about Microsoft, I 150 00:07:20,440 --> 00:07:25,000 also looked at it that same way. I said that Microsoft over and 151 00:07:25,000 --> 00:07:28,960 over again was geographically and customer diversified, 152 00:07:29,440 --> 00:07:32,960 meaning that not one single entity could harm Microsoft to 153 00:07:32,960 --> 00:07:36,160 any significant degree. And because of that, Microsoft 154 00:07:36,160 --> 00:07:39,240 was treated like a treasury bond, like something that's so 155 00:07:39,240 --> 00:07:41,360 predictable it's basically risk free. 156 00:07:41,560 --> 00:07:44,040 It had a higher credit rating than the US government. 157 00:07:44,560 --> 00:07:48,840 Because of that, Microsoft commanded a premium multiple one 158 00:07:48,840 --> 00:07:52,160 in the mid 30s. Now what has changed is that 159 00:07:52,160 --> 00:07:55,160 investors are looking at this and their whole framing of the 160 00:07:55,160 --> 00:07:58,480 company, the entire structure of it, is being changed. 161 00:07:58,800 --> 00:08:03,160 Now Microsoft looks more like a levered bet on a single entity. 162 00:08:03,560 --> 00:08:07,200 That single entity that's making all their numbers go up into the 163 00:08:07,200 --> 00:08:10,120 right at enormous pace is open AI. 164 00:08:10,520 --> 00:08:12,920 That single entity that's causing their net income to jump 165 00:08:12,920 --> 00:08:16,360 $7 billion in their earnings per share, the one that's affecting 166 00:08:16,360 --> 00:08:18,880 all their capital allocation, the one that's affecting their 167 00:08:19,040 --> 00:08:24,120 major cloud growth is open AI. Now, Microsoft does not look 168 00:08:24,120 --> 00:08:28,080 like a company that is globally diversified and its customer 169 00:08:28,080 --> 00:08:30,760 base, and there's no single entity that can dictate its 170 00:08:30,760 --> 00:08:32,840 outcome. Now it's looking like one that 171 00:08:32,919 --> 00:08:36,080 put a lot of chips on the table into open AI. 172 00:08:36,240 --> 00:08:39,559 Simply put, Microsoft has a lot riding on open AI, and that's 173 00:08:39,559 --> 00:08:42,760 making investors rethink how they view the company and its 174 00:08:42,760 --> 00:08:45,320 risk profile. So investors are not selling 175 00:08:45,320 --> 00:08:49,960 down the stock today simply because of valuation concerns or 176 00:08:50,240 --> 00:08:52,200 because Microsoft is actually doing poorly. 177 00:08:52,680 --> 00:08:55,560 They're selling the stock down today because of a structural 178 00:08:55,560 --> 00:08:59,480 reframing of the company from a heavily diversified inevitable 179 00:08:59,480 --> 00:09:03,400 company to one that now has a more singular risk factor, which 180 00:09:03,400 --> 00:09:05,760 is open AI. And you can see the RE rating 181 00:09:05,760 --> 00:09:09,280 happen live. That's where you get a 12% down 182 00:09:09,280 --> 00:09:11,960 day, a RE rating in a stock as big as Microsoft. 183 00:09:11,960 --> 00:09:15,600 These don't happen frequently because events like this and 184 00:09:15,600 --> 00:09:19,480 knowing that 45% of your cloud business is coming from one 185 00:09:19,480 --> 00:09:21,800 company, that doesn't happen frequently. 186 00:09:21,800 --> 00:09:24,200 Now initially when looking at these numbers and you look at 187 00:09:24,200 --> 00:09:26,960 the RPO going up, you're impressed as a Microsoft 188 00:09:26,960 --> 00:09:29,040 investor, you're like everyone else. 189 00:09:29,040 --> 00:09:30,640 You look at it and you think this is a good thing. 190 00:09:31,040 --> 00:09:34,600 But then when you hear that 45% of it is due to open AI, that 191 00:09:34,600 --> 00:09:37,080 puts a little bit of a more sour note on it because you know that 192 00:09:37,080 --> 00:09:40,200 it's not entirely organic and it's heavily concentrated into 193 00:09:40,200 --> 00:09:42,280 one customer. That's never a good thing in and 194 00:09:42,280 --> 00:09:45,000 of itself. But then you also think, and 195 00:09:45,000 --> 00:09:48,840 this is what I thought about for a minute, where is Open AI 196 00:09:48,840 --> 00:09:53,240 getting the money to commit this much to a cloud backlog to begin 197 00:09:53,240 --> 00:09:55,360 with? After all, Open AI commitments 198 00:09:55,360 --> 00:10:00,480 are in order of $350 billion. Open AI does not make $350 199 00:10:00,480 --> 00:10:03,520 billion in revenue. So where are they getting the 200 00:10:03,520 --> 00:10:04,880 money? Well, of course, this is a 201 00:10:04,880 --> 00:10:08,040 rhetorical question. The money is coming from none 202 00:10:08,040 --> 00:10:11,560 other than Microsoft. Microsoft is the lung of Open 203 00:10:11,560 --> 00:10:13,440 AI. It's what makes them live. 204 00:10:13,680 --> 00:10:16,800 Without Microsoft, Open AI would cease to do business. 205 00:10:17,080 --> 00:10:18,720 They'd have no infrastructure to train on. 206 00:10:18,720 --> 00:10:21,680 They'd have no funding. Microsoft is the one funding 207 00:10:21,680 --> 00:10:25,480 this entire operation because Open AI has nowhere close to pay 208 00:10:25,480 --> 00:10:27,240 for these commitments in and of themselves. 209 00:10:27,320 --> 00:10:29,400 So we have a situation here similar to what we've seen 210 00:10:29,400 --> 00:10:32,040 before, where Microsoft is giving billions of dollars to 211 00:10:32,120 --> 00:10:34,680 Open AI. Open AI is being capitalized by 212 00:10:34,680 --> 00:10:37,760 Microsoft and then returning that capital with commitments to 213 00:10:37,760 --> 00:10:40,440 use Azure cloud growth. Microsoft's turning around and 214 00:10:40,440 --> 00:10:43,280 saying, look at our Azure cloud backlog grow with all these 215 00:10:43,280 --> 00:10:46,160 commitments, but that money is the money that Microsoft just 216 00:10:46,160 --> 00:10:48,840 handed them. They're just handing it back. 217 00:10:48,840 --> 00:10:51,480 So now we have a more complex, nuanced issue. 218 00:10:51,680 --> 00:10:55,000 Not only is Microsoft heavily concentrated into one customer 219 00:10:55,000 --> 00:10:58,560 for its cloud, but that customer is also capitalized by 220 00:10:58,560 --> 00:11:01,360 Microsoft. Without Microsoft, they couldn't 221 00:11:01,360 --> 00:11:03,400 even function or pay for this to begin with. 222 00:11:03,440 --> 00:11:06,080 So not only makes this a significant concentration 223 00:11:06,080 --> 00:11:09,360 problem, it also makes it a circular financing problem. 224 00:11:09,520 --> 00:11:12,040 So we've already identified an issue of customer concentration 225 00:11:12,080 --> 00:11:15,360 1 of wonky metrics because of one specific company, which is 226 00:11:15,360 --> 00:11:17,520 Open AI. And we also have the issue of 227 00:11:17,520 --> 00:11:20,200 circular financing making its way again in Microsoft's 228 00:11:20,200 --> 00:11:22,800 financials. But then we have one more issue 229 00:11:22,800 --> 00:11:24,800 and this is perhaps maybe even the biggest one. 230 00:11:25,120 --> 00:11:28,880 Microsoft's CapEx growth is out of control, especially relative 231 00:11:28,880 --> 00:11:31,440 to the revenue growth. When we look at the revenue 232 00:11:31,440 --> 00:11:33,360 growth of Microsoft, again, it looks decent. 233 00:11:33,560 --> 00:11:36,000 We look at the growth over time. Microsoft is growing very 234 00:11:36,000 --> 00:11:39,600 quickly and it's 16 to 17% as of last quarter. 235 00:11:39,800 --> 00:11:42,160 We have this nice growth over time, but if we look at that 236 00:11:42,160 --> 00:11:46,160 revenue growth relative to their capital expenditure growth, the 237 00:11:46,160 --> 00:11:48,440 CapEx growth is growing three times the speed. 238 00:11:48,720 --> 00:11:51,760 This is what it looks like when we index both of those to zero. 239 00:11:52,120 --> 00:11:55,400 You can see that when you're starting at 0, the revenue 240 00:11:55,400 --> 00:11:58,920 growth is growing at literally 1/3 the speed of the CapEx 241 00:11:58,920 --> 00:12:00,720 growth. This is on a trailing 12 month 242 00:12:00,720 --> 00:12:02,960 basis. Every single quarter, you can 243 00:12:02,960 --> 00:12:06,640 see the most previous quarter shows enormous growth in CapEx 244 00:12:06,840 --> 00:12:09,520 compared to the revenue growth. Microsoft also has an issue 245 00:12:09,520 --> 00:12:12,160 where the capital expenditures are growing three times the 246 00:12:12,160 --> 00:12:14,200 speed of revenue. So when we look at the overall 247 00:12:14,200 --> 00:12:18,120 reason that Microsoft's down 12% today, it's a combination of all 248 00:12:18,120 --> 00:12:20,360 these factors, a structural changing in the way that 249 00:12:20,360 --> 00:12:23,520 investors are viewing Microsoft, the circular financing, the 250 00:12:23,520 --> 00:12:27,160 levered bet on open AI and now the fact that Microsoft's future 251 00:12:27,160 --> 00:12:30,240 revenue is more heavily dependent on a separate company, 252 00:12:30,240 --> 00:12:33,400 open AI. If Open AI is at risk from say 253 00:12:33,400 --> 00:12:36,680 let's say Google, Microsoft's revenues at risk. 254 00:12:37,040 --> 00:12:40,080 Now Google's competing directly against Microsoft when they're 255 00:12:40,080 --> 00:12:43,560 competing against open AI. So this is a more complicating 256 00:12:43,560 --> 00:12:45,360 thing. And then you add in the fact 257 00:12:45,360 --> 00:12:48,920 that the CapEx is growing, you get a stock that's down 12% 258 00:12:48,920 --> 00:12:51,040 overall. Microsoft is not in trouble. 259 00:12:51,040 --> 00:12:53,520 The core financials of the company are fine. 260 00:12:53,520 --> 00:12:56,480 It's not one that you need to panic about, but investors are 261 00:12:56,480 --> 00:12:58,920 pricing the companies based on their relative risk. 262 00:12:59,200 --> 00:13:02,440 And Microsoft structurally has become slightly more risky than 263 00:13:02,440 --> 00:13:04,840 it was previously. So I'm not in a panic for 264 00:13:05,080 --> 00:13:06,680 Microsoft. I'm not going out and selling my 265 00:13:06,680 --> 00:13:08,680 stock today. I'm still going to continue to 266 00:13:08,680 --> 00:13:11,480 hold Microsoft and I believe it's a very good company, but 267 00:13:11,480 --> 00:13:14,400 it's moved into a bit of a different scenario now. 268 00:13:14,400 --> 00:13:17,600 Microsoft is a prove IT company. It's one where they need to 269 00:13:17,600 --> 00:13:21,240 prove that they can grow organically outside of open AI. 270 00:13:21,400 --> 00:13:25,080 They need to show, they need to show non open AI Azure growth 271 00:13:25,440 --> 00:13:27,320 and they need to show that they're not so heavily dependent 272 00:13:27,320 --> 00:13:30,000 on this one company with these circular financing deals. 273 00:13:30,320 --> 00:13:31,960 Microsoft can continue to do that. 274 00:13:31,960 --> 00:13:34,280 Over time, the stock will continue to make gains. 275 00:13:34,680 --> 00:13:37,640 Now moving on to another company that reported earnings that had 276 00:13:37,760 --> 00:13:40,040 the opposite scenario. We have Meta. 277 00:13:40,080 --> 00:13:43,160 Mark Zuckerberg gets the green light from Wall Street to keep 278 00:13:43,160 --> 00:13:46,160 pouring money into AI. Well, that seems a little 279 00:13:46,160 --> 00:13:48,160 strange. How did Meta get the green light 280 00:13:48,160 --> 00:13:51,480 to spend so much money on AI and on CapEx when Microsoft 281 00:13:51,480 --> 00:13:53,280 couldn't? Well, Meta has a lot of good 282 00:13:53,280 --> 00:13:54,680 things going. One of them is that their 283 00:13:54,680 --> 00:13:56,560 revenues growing incredibly fast. 284 00:13:56,680 --> 00:13:59,480 The numbers are in Meta stock is trading up after this earnings 285 00:13:59,480 --> 00:14:04,000 report, as it should. The revenue grew by 24%, massive 286 00:14:04,000 --> 00:14:07,040 revenue growth number. To add on to that, Meta is now 287 00:14:07,040 --> 00:14:09,560 guiding for 30% growth next quarter. 288 00:14:09,800 --> 00:14:11,880 So not only did they crush these earnings, but they're guiding 289 00:14:11,880 --> 00:14:14,800 for even faster acceleration revenue next quarter. 290 00:14:14,840 --> 00:14:17,840 We have the family daily active people which continues to grow 291 00:14:17,840 --> 00:14:21,080 now to 3.58 billion people. They already have such a huge 292 00:14:21,080 --> 00:14:22,960 user base. They don't really even need to 293 00:14:22,960 --> 00:14:25,120 grow that metric, but it's growing anyways. 294 00:14:25,160 --> 00:14:26,800 It's just another positive thing. 295 00:14:27,160 --> 00:14:30,240 When we look at the overall earnings per share, you can see 296 00:14:30,240 --> 00:14:33,800 that they had that one time quarter, the previous quarter 297 00:14:34,120 --> 00:14:36,440 that was super low because of a one time tax hit. 298 00:14:36,640 --> 00:14:38,680 Well, that's worked its way by and what do you know, Meta's 299 00:14:38,680 --> 00:14:41,800 earnings per share grew incredibly fast, proving that 300 00:14:41,800 --> 00:14:44,240 this was only because of a one time tax hit. 301 00:14:44,280 --> 00:14:46,920 And you can see that with the quarterly TTM, even with that 302 00:14:46,920 --> 00:14:49,240 one time tax hit, they're starting to work their way back 303 00:14:49,240 --> 00:14:50,960 up. This will naturally work its way 304 00:14:50,960 --> 00:14:53,040 back up when that moves out of the range. 305 00:14:53,480 --> 00:14:57,160 So this is also incredibly fast organic earnings per share 306 00:14:57,160 --> 00:14:59,400 growth. I made a few charts here to show 307 00:14:59,400 --> 00:15:02,240 how fast Met is growing and it is exceptional. 308 00:15:02,240 --> 00:15:04,880 The line above shows the operating margin of the company. 309 00:15:04,880 --> 00:15:06,560 So you can see that going down and up. 310 00:15:06,560 --> 00:15:08,680 You can see that that affects the profitability of the 311 00:15:08,680 --> 00:15:11,200 company. Then we have the light blue 312 00:15:11,320 --> 00:15:13,560 bars, which is the revenue. Those are the tall ones. 313 00:15:13,560 --> 00:15:16,200 And then you have the dark blue bars, which is the operating 314 00:15:16,200 --> 00:15:19,360 cash flow, the revenues marching up quarter after quarter. 315 00:15:19,640 --> 00:15:22,080 The operating cash flow is marching up quarter after 316 00:15:22,080 --> 00:15:24,800 quarter. This company is growing quickly. 317 00:15:24,880 --> 00:15:28,000 Now, Meta does have a CapEx issue, just like Microsoft. 318 00:15:28,000 --> 00:15:30,200 They're spending increasing amounts every single quarter. 319 00:15:30,200 --> 00:15:31,520 You can see that visualized hair. 320 00:15:31,680 --> 00:15:36,040 This is around $70 billion in trailing 12 months CapEx spend. 321 00:15:36,400 --> 00:15:40,120 An enormous amount of money is being thrown into CapEx, but in 322 00:15:40,120 --> 00:15:43,600 this case, investors are giving Meta an excuse to do this. 323 00:15:43,600 --> 00:15:45,960 They're saying that you can do this and we're happy about it 324 00:15:46,000 --> 00:15:48,520 because you're also getting extremely fast revenue growth 325 00:15:48,520 --> 00:15:51,840 and fast operating cash flow growth and because the CapEx 326 00:15:51,840 --> 00:15:55,040 growth can be pulled back into the core business very easily. 327 00:15:55,360 --> 00:15:58,200 It's not growth that's dependent on one single client or one 328 00:15:58,200 --> 00:16:01,040 outside entity. This is just organic growth from 329 00:16:01,040 --> 00:16:02,920 the company. Another chart that I thought was 330 00:16:02,920 --> 00:16:06,000 interesting to look at here. This goes back about 10 years 331 00:16:06,000 --> 00:16:08,800 with Meta, and you can see the red line there. 332 00:16:08,800 --> 00:16:11,640 That squiggly line is the price of Meta, and then you can see 333 00:16:11,640 --> 00:16:14,160 the free cash flow per share with the blue bars. 334 00:16:14,840 --> 00:16:18,320 Notice how the price almost perfectly matches the free cash 335 00:16:18,320 --> 00:16:21,640 flow per share that is the intrinsic value indicator of the 336 00:16:21,640 --> 00:16:23,880 company. Mark Zuckerberg wants to own his 337 00:16:23,880 --> 00:16:26,280 own destiny. He wants Meta to be less reliant 338 00:16:26,280 --> 00:16:29,400 on externalities like Apple and different companies for their 339 00:16:29,400 --> 00:16:32,880 future growth and potential. He's famously said before that 340 00:16:32,880 --> 00:16:35,880 without all the constraints that Apple gives him, Meta would 341 00:16:35,880 --> 00:16:39,000 likely be twice as profitable than it is today. 342 00:16:39,440 --> 00:16:42,080 That's just the effects of Apple on the company, and you can see 343 00:16:42,080 --> 00:16:44,240 that they're investing fully in their own destiny. 344 00:16:44,400 --> 00:16:46,440 They want to own their own AI model. 345 00:16:46,440 --> 00:16:48,360 They want to have their own super intelligence. 346 00:16:48,560 --> 00:16:50,320 They want to have their whole ecosystem. 347 00:16:50,320 --> 00:16:51,840 They want to have their own hardware. 348 00:16:52,240 --> 00:16:55,600 Meta is going for the entire prize, a company that wants to 349 00:16:55,600 --> 00:16:59,400 have an entire ecosystem, the full value chain from beginning 350 00:16:59,400 --> 00:17:01,400 to end within its entire company. 351 00:17:02,000 --> 00:17:04,960 What I see from Mark Zuckerberg is pretty incredible, and I've 352 00:17:04,960 --> 00:17:06,440 been more and more impressed with Meta. 353 00:17:06,440 --> 00:17:07,680 I'm impressed with the fundamentals. 354 00:17:07,720 --> 00:17:11,119 The mistake that I've made with not owning Meta is simply trying 355 00:17:11,119 --> 00:17:14,240 to be a little too cute with this company, waiting for too 356 00:17:14,240 --> 00:17:16,599 big of dips, always wanting a bit better of a price. 357 00:17:17,000 --> 00:17:19,720 When I look at it now, even though Meta is up 10% on the 358 00:17:19,720 --> 00:17:23,599 day, it's a company that trades at a relatively cheap Ford PE 359 00:17:23,599 --> 00:17:26,359 ratio, a decent healthy free cash flow yield. 360 00:17:26,720 --> 00:17:29,280 The trailing PE looks artificially high because of 361 00:17:29,280 --> 00:17:31,440 that tax hit to their previous quarter. 362 00:17:31,920 --> 00:17:34,200 And when we look at the growth of the company, it's expected to 363 00:17:34,200 --> 00:17:38,560 grow at 30% revenue growth next quarter, which is incredibly 364 00:17:38,560 --> 00:17:40,400 fast. When we look at the share price 365 00:17:40,400 --> 00:17:43,720 of Meta, it's true that it's up 10%, eleven percent on the day. 366 00:17:44,080 --> 00:17:47,600 But if we look at the past one year, Meta is only up 7%. 367 00:17:47,960 --> 00:17:50,920 This hasn't been some company like an ASML or a Google that's 368 00:17:50,920 --> 00:17:53,480 raised up double over the past one year. 369 00:17:53,800 --> 00:17:57,760 So Meta is a company that I still believe is a buy and it's 370 00:17:57,760 --> 00:18:00,240 one that I am strongly considering buying. 371 00:18:00,800 --> 00:18:04,000 I believe that right now this company is still priced 372 00:18:04,320 --> 00:18:07,120 undervalued and I believe that it will continue to have Ford 373 00:18:07,120 --> 00:18:09,720 momentum. The mode of it is significant. 374 00:18:09,760 --> 00:18:13,080 I can't think of anything that really will take this company 375 00:18:13,080 --> 00:18:16,520 and disrupt it and the growth potential is massive considering 376 00:18:16,760 --> 00:18:18,400 their install base and their user base. 377 00:18:18,400 --> 00:18:20,920 So when I look at Meta, this is one that I'm heavily considering 378 00:18:20,920 --> 00:18:23,480 buying over the upcoming days. Now next we get to a stock 379 00:18:23,480 --> 00:18:25,520 that's really done great, which is ASML. 380 00:18:25,520 --> 00:18:28,520 This one is up around 25% just year to date. 381 00:18:28,800 --> 00:18:31,880 We look over the past six months up 100%. 382 00:18:32,280 --> 00:18:35,080 So everybody that's bought this stock is happy with it. 383 00:18:35,080 --> 00:18:37,800 It's been a great one and the performance justifies it. 384 00:18:38,160 --> 00:18:40,920 Now, I assume that ASML would report great earnings, which 385 00:18:40,920 --> 00:18:43,040 they did. They beat on all the important 386 00:18:43,040 --> 00:18:46,360 aspects of it, and the stock still traded down 2 to 3%, as 387 00:18:46,360 --> 00:18:48,560 you'd expect with the company that ran up this much into 388 00:18:48,560 --> 00:18:50,720 earnings, but it's still holding its own. 389 00:18:51,160 --> 00:18:53,920 It's making it so that investors that really had all those great 390 00:18:53,920 --> 00:18:57,600 gains are keeping those gains. Even today, during a blood red 391 00:18:57,600 --> 00:19:00,280 day, ASML is in the green by 1.6%. 392 00:19:00,320 --> 00:19:02,560 When we look at what's going on with this company, the numbers 393 00:19:02,560 --> 00:19:05,640 look great. The revenues growing 15 to 16% 394 00:19:05,640 --> 00:19:07,920 per quarter. The net income is climbing. 395 00:19:07,920 --> 00:19:09,440 The earnings per share is climbing. 396 00:19:09,640 --> 00:19:12,560 The company's on a roll. Not only that, but they're also 397 00:19:12,560 --> 00:19:15,320 buying back shares aggressively. They say they're going to be 398 00:19:15,320 --> 00:19:18,480 doing even more buybacks since ASML is a company that makes so 399 00:19:18,480 --> 00:19:21,720 much money even above their employee costs, including any 400 00:19:21,720 --> 00:19:24,280 stock based compensation. They're so incredibly 401 00:19:24,280 --> 00:19:26,320 profitable. They can pour a lot of that 402 00:19:26,320 --> 00:19:28,000 money directly back into buybacks. 403 00:19:28,000 --> 00:19:31,000 And so anytime the stock drops down or even when it's just 404 00:19:31,120 --> 00:19:34,120 going along, they're always buying back shares, making it so 405 00:19:34,120 --> 00:19:36,600 their earnings per share and free cash flow per share grow 406 00:19:36,600 --> 00:19:39,560 faster. The stock initially popped 10% 407 00:19:39,560 --> 00:19:42,600 after earnings were reported. But management, like they are, 408 00:19:42,880 --> 00:19:45,200 is very conservative and they gave caution. 409 00:19:45,200 --> 00:19:47,960 And they said that even though the AI demand's very strong, 410 00:19:48,200 --> 00:19:51,000 they always want to kind of dampen people's expectations. 411 00:19:51,200 --> 00:19:53,920 So the stock came down a little bit after the earnings call. 412 00:19:54,200 --> 00:19:57,000 But in any case, this company is doing incredibly well. 413 00:19:57,080 --> 00:19:59,800 It's already a big winner this year, and I still see it as a 414 00:19:59,800 --> 00:20:02,080 monopoly that has a lot of growth ahead of it. 415 00:20:02,400 --> 00:20:04,760 For me, this one still maintains a whole position. 416 00:20:04,880 --> 00:20:07,480 Now, another important company that reported earnings today, 417 00:20:07,520 --> 00:20:10,840 and one of my largest positions right underneath Google is 418 00:20:10,840 --> 00:20:13,000 MasterCard. I've recently invested a lot of 419 00:20:13,000 --> 00:20:16,160 money into this company and it's been wavering a little bit 420 00:20:16,160 --> 00:20:18,680 because of all the talk of capping interest rates. 421 00:20:19,000 --> 00:20:21,920 That's caused some investors to become a little bit soured, but 422 00:20:21,920 --> 00:20:25,200 MasterCard just reported their numbers and this was a very high 423 00:20:25,200 --> 00:20:27,840 quality beat across the spectrum. 424 00:20:28,040 --> 00:20:32,000 This was an incredible beat. It's up 3.6% today after the 425 00:20:32,000 --> 00:20:33,480 report. And when we look at the numbers 426 00:20:33,480 --> 00:20:34,960 here, I just want to highlight a couple things. 427 00:20:35,440 --> 00:20:38,120 When we look at first of all the revenue growth of the company, 428 00:20:38,640 --> 00:20:44,240 revenue grew by 18% overall or 15% on a currency neutral basis. 429 00:20:44,680 --> 00:20:47,240 Now this revenue growth is between two different parts of 430 00:20:47,240 --> 00:20:49,680 the company. It's between the value added 431 00:20:49,680 --> 00:20:53,000 services, which is like their non network payment part of the 432 00:20:53,000 --> 00:20:58,200 company that grew by 24%. Then you have the network part 433 00:20:58,200 --> 00:21:01,720 that grew by 12%. So 12% for their core business, 434 00:21:01,720 --> 00:21:05,040 that's the part that most people know about MasterCard, and then 435 00:21:05,040 --> 00:21:07,160 24% for the value added services. 436 00:21:07,520 --> 00:21:12,000 That equates to 18% overall. What this shows is that 437 00:21:12,240 --> 00:21:15,480 MasterCard is decoupling its business from just a payment 438 00:21:15,480 --> 00:21:17,640 network. Overall, this development from 439 00:21:17,640 --> 00:21:20,720 MasterCard continuing to grow their value added services is 440 00:21:20,720 --> 00:21:22,640 exactly what this company needs to do. 441 00:21:22,680 --> 00:21:25,200 Another added benefit of MasterCard moving more towards 442 00:21:25,200 --> 00:21:28,520 services instead of just payment rails is that it further 443 00:21:28,520 --> 00:21:30,760 insulates them from government interference. 444 00:21:31,120 --> 00:21:34,120 The government can come in and make regulations about take 445 00:21:34,120 --> 00:21:36,640 rates and things with payments, but they can't really do the 446 00:21:36,640 --> 00:21:39,520 same thing for all the various services that MasterCard sells. 447 00:21:39,960 --> 00:21:42,640 So they know they're moving towards a more permissionless 448 00:21:42,640 --> 00:21:45,560 type of revenue, one where they can continue to grow and expand 449 00:21:45,560 --> 00:21:47,320 without as much government interference. 450 00:21:47,640 --> 00:21:50,560 And that old business, the one that's built on the rails, well, 451 00:21:50,560 --> 00:21:53,280 the government will meander in that, but they're already 452 00:21:53,280 --> 00:21:55,760 leaving that in the dust. When I look at MasterCard, I 453 00:21:55,760 --> 00:21:58,120 like the transition. I like the growth, I like the 454 00:21:58,120 --> 00:22:01,120 profitability. This is a company that is so 455 00:22:01,160 --> 00:22:03,760 wildly profitable. I like the report a lot, and I 456 00:22:03,760 --> 00:22:05,560 think that MasterCard and Visa are doing great. 457 00:22:05,600 --> 00:22:07,680 Now finally, we get to everyone's favorite, which of 458 00:22:07,680 --> 00:22:10,600 course is Tesla. It's down 2 1/2% today. 459 00:22:10,880 --> 00:22:13,400 The stock price is 420. Now, when we look at Tesla, 460 00:22:13,400 --> 00:22:15,840 there's a lot going on with this company, and it's usually what 461 00:22:15,840 --> 00:22:18,120 you would expect. When we look at the raw numbers, 462 00:22:18,120 --> 00:22:21,680 they don't look great. Revenue is down year over year. 463 00:22:21,840 --> 00:22:24,720 The automotive section of Tesla is down 10%. 464 00:22:25,080 --> 00:22:26,960 The energy section is the bright spot. 465 00:22:26,960 --> 00:22:30,080 So Tesla is becoming more of an energy company and the services 466 00:22:30,080 --> 00:22:32,480 are also growing. So basically they're selling 467 00:22:32,480 --> 00:22:35,600 fewer cars, but they're also making more money on energy and 468 00:22:35,600 --> 00:22:37,120 services. When we look at the vehicles 469 00:22:37,120 --> 00:22:39,320 delivered, we can smooth this out over time. 470 00:22:39,320 --> 00:22:42,920 This gives a clearer picture. Tesla is delivering fewer and 471 00:22:42,920 --> 00:22:45,800 fewer vehicles. The free cash flow is down 30%. 472 00:22:45,800 --> 00:22:48,040 We have the earnings per share, which of course are down as 473 00:22:48,040 --> 00:22:49,480 well. These numbers, of course, look 474 00:22:49,480 --> 00:22:52,360 terrible across the board. They are disastrous numbers. 475 00:22:52,360 --> 00:22:54,920 And in fact, it shows that Tesla's no longer a car company 476 00:22:55,160 --> 00:22:57,400 because it's being trounced as a car company. 477 00:22:57,560 --> 00:23:00,640 Without the tax incentive, Tesla's making less money per 478 00:23:00,640 --> 00:23:02,920 vehicle sold, and so they're trying to sell even fewer 479 00:23:02,920 --> 00:23:04,920 vehicles because they're less profitable. 480 00:23:05,360 --> 00:23:08,320 They've also clearly hit the Max sales delivery numbers that they 481 00:23:08,320 --> 00:23:11,160 possibly can because now they're dealing with intense competition 482 00:23:11,160 --> 00:23:13,640 with China. No longer is Tesla the one 483 00:23:13,640 --> 00:23:16,440 competing without any real competitors in the EV space, 484 00:23:16,640 --> 00:23:18,840 there's now very viable competition. 485 00:23:18,840 --> 00:23:22,200 So these numbers look terrible and this business is dying. 486 00:23:22,480 --> 00:23:25,200 But that's not a problem to the Tesla investor because these 487 00:23:25,200 --> 00:23:29,040 numbers in this very business doesn't represent the future of 488 00:23:29,040 --> 00:23:31,120 Tesla. What we're looking at here is 489 00:23:31,120 --> 00:23:33,800 simply the past phase of Tesla. Step one. 490 00:23:33,960 --> 00:23:37,000 It was the launching pad for what's going to happen in the 491 00:23:37,000 --> 00:23:39,800 future. Elon Musk has made it very clear 492 00:23:40,160 --> 00:23:43,080 that right now is the definitive point of a transition. 493 00:23:43,520 --> 00:23:44,880 This is where we get into the future. 494 00:23:44,880 --> 00:23:47,200 Let's go ahead and just read about it from Elon Musk. 495 00:23:47,720 --> 00:23:51,280 Tesla's mission, first of all, was updated to amazing abundance 496 00:23:51,520 --> 00:23:55,000 centered around AI and robotics, enabling the future of universal 497 00:23:55,000 --> 00:23:57,960 high income. So no longer our car is even 498 00:23:57,960 --> 00:24:00,320 part of the equation. It's AI and robotics. 499 00:24:00,320 --> 00:24:02,520 Management has framed the company as building the 500 00:24:02,520 --> 00:24:06,120 infrastructure for an era where autonomy, energy and robotics 501 00:24:06,120 --> 00:24:08,800 dramatically increase productivity while preserving 502 00:24:08,800 --> 00:24:12,280 the environment. In 2026, it's described as the 503 00:24:12,280 --> 00:24:15,680 start of a new book. Ignore all these numbers. 504 00:24:15,960 --> 00:24:18,360 That's the old stuff. If you're looking at that, 505 00:24:18,360 --> 00:24:20,080 you're myopic. You're looking backwards. 506 00:24:20,080 --> 00:24:22,120 You invest in the future, not in the past. 507 00:24:22,680 --> 00:24:26,280 We're starting a new book for Tesla with this period seen as 508 00:24:26,280 --> 00:24:29,120 the foundation for the next era of the company. 509 00:24:29,120 --> 00:24:31,440 So don't look over there. Don't look at those ugly 510 00:24:31,440 --> 00:24:33,120 numbers. Look over here. 511 00:24:33,160 --> 00:24:35,320 We have great things to point to in the future. 512 00:24:35,440 --> 00:24:38,960 Tesla's scrapping their Model X and Model S, That's real news. 513 00:24:39,320 --> 00:24:41,960 They're doing that next quarter, calling it an honorable 514 00:24:41,960 --> 00:24:44,520 discharge. The Fremont S&X production space 515 00:24:44,520 --> 00:24:46,920 will be converted into an Optimus factory, targeting 516 00:24:46,920 --> 00:24:49,040 1,000,000 Optimus units per year. 517 00:24:49,360 --> 00:24:52,720 In the long term. Now, in the long term, what does 518 00:24:52,720 --> 00:24:54,800 that mean? We don't know, but we assume 519 00:24:54,800 --> 00:24:57,280 it's a long ways out. Tesla will continue to support 520 00:24:57,280 --> 00:25:00,880 SNX owners, but it's clearly shifting resources from legacy 521 00:25:00,880 --> 00:25:03,680 premium models to autonomy and robotics. 522 00:25:03,840 --> 00:25:06,480 Tesla, and especially the leader, Elon Musk, continues to 523 00:25:06,480 --> 00:25:09,080 say these very aggressive timelines for the roll out of 524 00:25:09,080 --> 00:25:11,280 the robotaxi. So far, we haven't seen that, 525 00:25:11,280 --> 00:25:13,040 and some of the timelines have been pushed back. 526 00:25:13,400 --> 00:25:16,040 But investors in Tesla are very hopeful and they're patient in 527 00:25:16,040 --> 00:25:18,880 seeing this roll out because if it happens, the prize would be 528 00:25:19,160 --> 00:25:22,240 theoretically enormous. Now we also have the other big 529 00:25:22,240 --> 00:25:24,120 change. We don't only have the robotaxi, 530 00:25:24,120 --> 00:25:26,760 we have the Optimist. Tesla plans to unveil Optimist 531 00:25:26,760 --> 00:25:30,240 Gen. 3 within a few months. It is described as incredibly 532 00:25:30,240 --> 00:25:32,080 capable general purpose humanoid. 533 00:25:32,480 --> 00:25:35,440 The long term target is 1,000,000 Optimist units per 534 00:25:35,440 --> 00:25:40,040 year from the Fremont factory. Optimus 3 is designed to be very 535 00:25:40,080 --> 00:25:43,840 human, like an appearance in motion, which makes it easier to 536 00:25:43,840 --> 00:25:46,520 deploy in human environments and leverage existing 537 00:25:46,520 --> 00:25:49,280 infrastructure. It supports Tesla's AI strategy 538 00:25:49,280 --> 00:25:52,280 by learning tasks directly from observing humans from 539 00:25:52,280 --> 00:25:54,800 demonstrations, verbal instructions or video. 540 00:25:55,480 --> 00:25:58,200 In an early deployment, a small number of Optimus units have 541 00:25:58,200 --> 00:26:01,480 been performing basic tasks in Tesla factories, but this is 542 00:26:01,480 --> 00:26:04,680 still an R&D. They are not yet materially 543 00:26:04,680 --> 00:26:07,320 contributing to output. So basically they're going 544 00:26:07,320 --> 00:26:09,080 around, but they're not really helping out. 545 00:26:09,400 --> 00:26:11,440 It's like bringing your kid to work day, right? 546 00:26:11,480 --> 00:26:14,320 You're here, you're like trying to introduce them and have them 547 00:26:14,320 --> 00:26:16,040 learn a little bit. But they're, they're not really 548 00:26:16,040 --> 00:26:17,760 speeding up things. They're they're kind of keeping 549 00:26:17,760 --> 00:26:20,280 you slowed down. That's the phase that Tesla's 550 00:26:20,280 --> 00:26:23,440 Optimus is at right now. Now if shutting down two of 551 00:26:23,440 --> 00:26:26,120 their biggest car factories isn't evidence enough that 552 00:26:26,120 --> 00:26:29,840 Tesla's no longer a car company. If investing so much into 553 00:26:29,840 --> 00:26:33,600 robotaxi robotics as well as Optimus isn't proof that they're 554 00:26:33,600 --> 00:26:37,440 just not a car company anymore. They also did another non car 555 00:26:37,440 --> 00:26:39,520 company thing. One of them was to invest 556 00:26:39,520 --> 00:26:42,280 directly in X AI, another one of Elon Musk's ventures. 557 00:26:42,680 --> 00:26:45,720 Tesla announced an investment in X AI as described as part of its 558 00:26:45,720 --> 00:26:49,520 master plan for Tesla. Vehicles already use XA is crock 559 00:26:49,520 --> 00:26:52,400 model. The rationale is to offload or 560 00:26:52,400 --> 00:26:56,200 accelerate some AI work by leveraging XA IS instead of 561 00:26:56,200 --> 00:26:59,320 building everything in house so they see synergy. 562 00:26:59,440 --> 00:27:01,120 That's basically what he's pointing out here. 563 00:27:01,240 --> 00:27:04,120 To provide an orchestra conductor for large fleets. 564 00:27:04,400 --> 00:27:07,760 Managing millions of robo taxis for potential routing, charging, 565 00:27:07,760 --> 00:27:10,320 and maintenance. Coordinating large groups of 566 00:27:10,320 --> 00:27:13,800 optimist robots for complex projects, construction factories 567 00:27:13,800 --> 00:27:16,600 and refineries. Management noted that many Tesla 568 00:27:16,600 --> 00:27:19,640 shareholders have asked for closer alignment with XAI. 569 00:27:20,120 --> 00:27:24,040 So now XAI is no longer this thing that Elon Musk's doing 570 00:27:24,040 --> 00:27:25,840 that Tesla investors don't have any part in. 571 00:27:26,240 --> 00:27:29,560 Now they also have a part in this great product in this great 572 00:27:29,560 --> 00:27:31,240 company. And that is part of the reason 573 00:27:31,240 --> 00:27:34,280 that even with these frankly terrible numbers, and any Tesla 574 00:27:34,280 --> 00:27:36,800 investor will tell you that these numbers aren't good, with 575 00:27:36,800 --> 00:27:39,480 these terrible numbers, the stock is still relatively flat. 576 00:27:39,480 --> 00:27:40,880 It's not really falling a whole lot. 577 00:27:41,200 --> 00:27:43,720 And especially at the high valuation with so much priced 578 00:27:43,720 --> 00:27:46,960 in, terrible numbers typically take companies down. 579 00:27:47,240 --> 00:27:50,360 Revenue deceleration typically DE rates a company or makes it 580 00:27:50,360 --> 00:27:53,920 so the multiples compress. But because Tesla is infusing 581 00:27:53,920 --> 00:27:56,880 the company and changing directions, investors are now 582 00:27:56,880 --> 00:28:00,160 looking ahead to what's to come. If you believe in the vision of 583 00:28:00,160 --> 00:28:02,520 Tesla, it's not a bad bet. If you really think that all 584 00:28:02,520 --> 00:28:04,840 this stuff is going to happen, it's going to happen in a great 585 00:28:04,840 --> 00:28:07,080 timeline. But I still believe the the risk 586 00:28:07,080 --> 00:28:08,920 is there. It's a company that's promising 587 00:28:08,920 --> 00:28:11,240 a lot. Elon Musk has been known to be a 588 00:28:11,240 --> 00:28:13,880 little bit aggressive with his timelines from time to time. 589 00:28:13,960 --> 00:28:17,440 There is a big prize if he's able to execute really well on 590 00:28:17,440 --> 00:28:20,080 the things that he's promising. But for me, I'm a bit too 591 00:28:20,080 --> 00:28:22,680 conservative for this. Tesla's a very large company by 592 00:28:22,680 --> 00:28:24,600 market cap. They're promising a lot in the 593 00:28:24,600 --> 00:28:27,080 future, but I want to see them get a little further along 594 00:28:27,240 --> 00:28:29,040 before I jump into a company like this. 595 00:28:29,200 --> 00:28:32,000 Now that is going to be it. Wrapping up this busy week of 596 00:28:32,000 --> 00:28:33,640 earnings. We'll have more content out in 597 00:28:33,640 --> 00:28:35,160 the future. And if you want to see exclusive 598 00:28:35,160 --> 00:28:38,360 episodes, you can check out the membership at qualtrm.com. 599 00:28:38,600 --> 00:28:41,400 We have well over 12,000 active members. 600 00:28:41,600 --> 00:28:43,200 That's it for now, see in the next one.