Tech Stocks Take a Dive | Pivot

1. 0:00 – 0:51

   NASDAQ slides on Alphabet and Tesla earnings: what spooked markets

   1. KSKara Swisher0:00

      Scott, we're back for our second big story. The NASDAQ has taken its biggest tumble since 2022, thanks to earnings reports from Alphabet and Tesla. Alphabet's quarterly earnings showed a slowing growth in advertising sales with ad sales rising 11%, down from 13% in the previous quarter. On top of that, Wiz, the cybersecurity startup we had talked about Alphabet planned to acquire, had decided to turn down the $23 billion offer. Alphabet shares are down almost 5% in the last five days at the time of the taping. Um, I wanna talk about this, but I'm gonna mention Tesla earnings have showed a 7% decline with auto revenue, with earnings per share coming down below Wall Street estimates. Tesla shares are down 10% in the last five days, giving up a lot of the gains they've been making. Um, NASDAQ is down over 3% in the last five days, and the S&P is down 2% 'cause of these tech companies. Um, I'd love to hear your thoughts on this. This is your big area of expertise. Talk a little bit about, uh, Alphabet first and then Tesla.

2. 0:51 – 1:18

   Alphabet’s ‘decent’ quarter vs. an AI identity crisis

   1. SGScott Galloway0:51

      Well, Alphabet actually had a decent quarter. It's just that, one, I mean, eh, Alphabet's dealing with this existential issue of having one foot in and one foot out of AI in the sense that they have Gemini, but Gemini gets about an eighth of the traffic of OpenAI or-

   2. KSKara Swisher1:06

      Mm-hmm.

   3. SGScott Galloway1:06

      ... of ChatGPT. And when you think about all the head start and the captive audience, uh, across Google and Android, to have only the eighth of the traffic of what is supposed to be a startup but is really just Microsoft AI-

   4. KSKara Swisher1:18

      Mm-hmm.

3. 1:18 – 1:57

   YouTube softness and the AI CapEx arms race hits margins

   1. SGScott Galloway1:18

      ... is unusual. And the question is, they're trying to incorporate AI into their core platform search, and they're still a little bit, people would argue, trapped in the innovator's dilemma. And that is they don't wanna go all in on Gemini at the risk of cannibalizing this quarter of a trillion-dollar tollbooth, amazing, best business probably in history called Search. So they're still kind of, I would argue, a little bit one foot in, one foot out, trying to have their cake and eat it too. I understand why they're doing. People got spooked about YouTube, uh, sales slowing. I didn't think it was that big a deal. And the other thing that's hurting their earnings is, like everyone else, they're now, uh, except for Apple, they're now in this arms race, and their CapEx-

   2. KSKara Swisher1:55

      Right.

   3. SGScott Galloway1:55

      ... was, um, dramatically up, sort of-

   4. KSKara Swisher1:57

      Smart, yeah.

4. 1:57 – 2:37

   Why Tesla is the bigger worry: EV market enters a shakeout

   1. SGScott Galloway1:57

      ... which sort of hit, hit earnings. The, the bigger story, I think, or what was more, like, genuinely bad news was, um, Tesla.

   2. KSKara Swisher2:07

      Mm-hmm.

   3. SGScott Galloway2:07

      And that is the EV market, I think it's interesting. An interesting analogy would be the streaming market, and that is, it was overinvested 'cause people saw it as the future, and now there's a bit of a shakeout. And that is, eh, and the way you see the shakeout is in a, an intense price competition. A year ago, the equivalent EV was $8,500 more expensive than its, um, than its internal combustion, uh, peer. Now, that number, that margin, that premium has dropped to $1,500. In the F-150 Lightning, the

5. 2:37 – 3:01

   Tesla’s growth stalls and the product lineup feels ‘tired’

   1. SGScott Galloway2:37

      EV is actually $10,000 less than its internal combustion, uh, counterpart, probably 'cause they produced too many. In addition, the, while the market continues to grow, Tesla has not. A lot of people would describe its products-

   2. KSKara Swisher2:50

      Mm-hmm.

   3. SGScott Galloway2:50

      ... as a bit tired. They have made a lot of progress around-

   4. KSKara Swisher2:52

      Not describe them. They are a bit tired. Let's, like, you know, we've been saying that for a year, like, "Where's their new stuff-"

   5. SGScott Galloway2:58

      By the way, I-

   6. KSKara Swisher2:58

      "... except for that heinous h- hot Cybertruck?"

6. 3:01 – 3:37

   Cybertruck as spectacle: attention vs. brand risk

   1. SGScott Galloway3:01

      I have driven a m- A friend of mine is this master of the universe hedge fund guy, and I went out to the Hamptons to see him, and he has a matte black Cybertruck. And people-

   2. KSKara Swisher3:09

      No.

   3. SGScott Galloway3:09

      ... were stopped and staring at it, and it's just I, I drove in it. I would describe it as a ridiculous car out of a, out of a Simpsons episode. I think it's insane, but-

   4. KSKara Swisher3:17

      Were you embarrassed to get in it? I'd be embarrassed to get in it.

   5. SGScott Galloway3:21

      Oh, no, there's a lot of shit I've done that's much more embarrassing. (laughs)

   6. KSKara Swisher3:25

      (laughs)

   7. SGScott Galloway3:25

      Um-

   8. KSKara Swisher3:25

      But what's the problem? What's-

   9. SGScott Galloway3:26

      That's nothing.

   10. KSKara Swisher3:26

       What does he have to do here? He obviously was... He took a vote on Twitter w- whether to, to invest $5 billion in xAI. I mean, I'm literally like, when is the SEC gonna come and arrest this fella?

7. 3:37 – 4:14

   Investor patience snaps on robotaxi promises during the earnings call

   1. SGScott Galloway3:37

      Well, uh, uh, first, I mean, there's a couple things. One, the way... If you listen to the earnings call, the questions were more pointed and more heated than they've been in a long time. To this point, the earnings calls have been a bunch of stenographers and sycophants thanking him for a great quarter. This one was distinctly like, "Boss, we have been waiting for a robotaxi for five years." You know how frustrating that is to be on a corner when you call and they say, "Oh, a robotaxi is just, it's a minute away. It's a year away." He's even saying now that it could be by the end of the year, but it might be 2025. He said, I think, in 2019 or 2020 we were a year away, and people's patience-

   2. KSKara Swisher4:12

      Right. Oh, no. No. He constantly, constantly.

8. 4:14 – 4:46

   Valuation reality check: Tesla priced like a different kind of company

   1. SGScott Galloway4:14

      People's patience is, is, um, really, uh, really wearing thin. But more than anything, I'm a valuation guy.

   2. KSKara Swisher4:21

      Mm-hmm.

   3. SGScott Galloway4:21

      If you look at forward earnings-

   4. KSKara Swisher4:23

      Mm-hmm.

   5. SGScott Galloway4:24

      ... Ford trades at seven times forward earnings. GM trades at five times forward earnings.

   6. KSKara Swisher4:28

      Right.

   7. SGScott Galloway4:28

      Ferrari, an amazing company with... You wanna talk about a moat.

   8. KSKara Swisher4:32

      Beautiful car.

   9. SGScott Galloway4:32

      Trades at 50 times, right?

   10. KSKara Swisher4:35

       Mm-hmm.

   11. SGScott Galloway4:36

       Um, uh, Tesla trades at 99 times forward inning, earnings.

   12. KSKara Swisher4:40

       Yeah.

   13. SGScott Galloway4:40

       And the moment you say that people say, "Well, it's not a car company. It's an energy company. It's gonna be a robotaxi company."

   14. KSKara Swisher4:45

       Better be something else.

9. 4:46 – 5:22

   Robotaxi dependency: profits projected from a product not yet delivered

   1. SGScott Galloway4:46

      The scariest thing in that earnings call is that their 2030 projected profits, they're saying 80% of those projected profits will come from its robotaxi division.

   2. KSKara Swisher4:58

      Right.

   3. SGScott Galloway4:58

      So they are estimating that four-fifths of their profit are gonna come from a division and a technology that they haven't shown an ability to even deliver yet.

   4. KSKara Swisher5:07

      I know.

   5. SGScott Galloway5:08

      I, I need to... I, just real quick, need to correct myself. It wasn't the company, it was our Cathie Woods, which makes it batshit crazy anyways, but she was saying 90% of Tesla's enterprise value earnings will be attributed to the robotaxi business by 2021.

10. 5:22 – 5:47

    Kara’s ‘wasted potential’ thesis: from dominance to self-inflicted drag

    1. KSKara Swisher5:22

       You know what I was thinking when I heard these ear- I was like, "This guy had everything." Like, he had it. Like, he could've shifted into new products, new exciting things. He could have owned it, like really been Ferrari, right? And he's just blown it here in a way that I, I... It's sort of sad 'cause it was, uh, a very good company, and it still is in a lot of ways. It's just, I- I'm, I'm just...

11. 5:47 – 6:35

    Governance and xAI funding: why the board should intervene

    1. SGScott Galloway5:47

       The corporate governance here, I mean, it's just the idea that you would say to Tesla shareholders, "I'm gonna take $5 billion of our hard-earned cash flow and use it to try and take my other failing company and put on an AI dress." You just... That wouldn't even be a conversation at a board level at most companies. It'd be like, "No, stay focused on we do cars, boss."

    2. KSKara Swisher6:11

       Yeah.

    3. SGScott Galloway6:11

       "We're not, we're not in media, and we're not interested in funding your adventures in AI media with our har- hard-earned money."

    4. KSKara Swisher6:18

       Right.

    5. SGScott Galloway6:18

       And instead, he takes to a Twitter poll?

    6. KSKara Swisher6:21

       Right.

    7. SGScott Galloway6:21

       Like, have you polled your board members that represent the shareholders at Tesla? But again, it just corporate governance is sort of a, a, a cute novelty we used to talk about before, before Musk.

12. 6:35 – 6:52

    Closing reflection: bad choices and an avoidable outcome

    1. KSKara Swisher6:35

       It is such a waste. I was just thinking, you know, I'm not, uh, inclined to him in any way, but I feel bad 'cause it was a really good... You know what I mean? Like, you're like, "Why did you go out with that girl-

    2. SGScott Galloway6:44

       (laughs)

    3. KSKara Swisher6:44

       ... when you had this girl?" Anyway, people make bad choi- bad choices.

Episode duration: 6:52