- 7/24/2025
Daniel Newman, CEO of The Futurum Group, digs into each company’s Q2 earnings.
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00:00I am joined by Daniel Newman, CEO of Futurum Group.
00:04Daniel, great to have you here.
00:05It's great to be with you.
00:06So we are breaking down big tech earnings.
00:09Let's start with Tesla because that's the one that's moving the most following a miss on both the top and bottom line.
00:15Automotive sales down, what, 16 percent.
00:18You see those numbers, you hear what's said on the conference call, and you walk away thinking, what?
00:23Well, first of all, everyone knew that the numbers weren't going to be great.
00:27But Elon Musk is back four-time, full-time founder mode.
00:32And I think that's really what the street wanted to hear from him was, you know, he got into this kind of political era of his career.
00:40He was in Washington, not paying enough attention.
00:43Sales are down.
00:44Competition from companies like BYD in China, eroding market share.
00:49You've got a lot of focus on other tangential businesses.
00:52People still worry about the X business, the XAI business, SpaceX.
00:55Can he juggle everything?
00:57Because Tesla still is kind of the prized crown jewel of the Musk, you know, era.
01:04And so I think if you're looking at the numbers yesterday, if you're an investor in Tesla, you're kind of looking at the whole thing and saying, is the thesis still intact?
01:13Because it hasn't been about the automotive numbers for a very long time.
01:18It's been about autonomy.
01:20It's been about robotics.
01:21It's been about energy.
01:23And then, of course, it's looking at the kind of entire estate that is the Musk, you know, the Musk enterprise.
01:32And that includes space.
01:33That includes boring.
01:35That includes energy.
01:36That includes the all-in app that's going to do payments and rails and crypto and everything that he's trying to do.
01:42And kind of looking at how this might eventually come together to become something bigger.
01:45You heard the tease, Caroline, recently about, you know, should XAI, you know, and Tesla and SpaceX, and is there going to be money moving between these companies?
01:54Is there going to be fundraising?
01:56So all these things are happening.
01:57And I think Tesla investors are, A, they're glad to see them back in the chair.
02:00At the same time, though, you're asking the question of, is this robo-taxi thing going to take off?
02:05Is it going to drive revenue?
02:07Is the China disruption and the high-value, low-priced automobiles they're making going to help?
02:13And then, of course, there's things like the tax, the big, beautiful bill, some of the impacts to the business.
02:18So overall, the thesis is still intact, but it hasn't performed well for some time.
02:24But it keeps that trillion-dollar market cap.
02:25And you say that investors heard what they wanted to hear, that Elon Musk is back to sleeping at the office.
02:33But at the same time, we also heard Elon Musk on the call say Tesla could probably have a few rough quarters ahead as a result of the expiration of some of those EV tax credits, saying, I'm not saying that we will, but we could.
02:47What do investors do with that guidance?
02:49Because I understand the AI thesis, but it still has a core EV business as well.
02:54How big of a red flag is that?
02:56I mean, if you're an investor that likes to make decisions based on fundamentals, I see no way right now you would stay in Tesla.
03:04You know, you look at what Alphabet did this week and what it's accomplished.
03:07And while it did have a nice run, how undervalued it is.
03:10Then you look at Tesla and you look at the multiple trades that and you look at all the risk in that business.
03:15But the alpha there, the potential of that company taking off on a single piece of news, on a single deal, on, you know, when Musk says, I'm sleeping in the office, they get 6% bump.
03:26So it just doesn't trade normally.
03:29But people believe, and this is the thing that Musk has been able to accomplish, is that people believe in this bigger vision.
03:35They believe that Optimus is going to be a multi-trillion dollar physical AI opportunity.
03:40They believe that all the data that's come off of all the rides is going to create an autonomy business for robo taxis that will blow away Waymo and any other company, Uber, that is trying to get into that space.
03:51They're playing the long game.
03:53But if you're, like I said, if you're a fundamentals investor, it's not investable.
03:58And when we look at our power rankings on the MAG-7, it sits on the bottom because it just doesn't make any sense.
04:05But if you're a believer and you see how markets can be irrational, see how Palantir trades at a ridiculous multiple, it's bigger than so many companies that it does a fraction of the sales of.
04:15But when markets believe in something, and by the way, the power of retail, when retail believes in something, it can certainly propel the share prices well beyond what fundamentals would ever support.
04:26To that point, though, it does trade at this premium multiple.
04:29So does the thesis, the bull thesis that you're talking about, support that valuation?
04:35No.
04:36I mean, the actual valuation isn't supported by anything fundamentally.
04:40It is completely exuberant and irrational, but it's been this way for a very long time.
04:45But if you're going to bet on which company is going to win autonomy, and you believe that is a multi-trillion dollar opportunity five and ten years into the future, now may be the time to buy.
04:55Because the thing that people are afraid of, it's the FOMO, it's the chase.
04:58Like, what if I sell my position out now at $300 or $306, and in a month they see the autonomy, the robo-taxi business taking off, all of a sudden China numbers come in stronger than expected, and this thing runs to $500.
05:12You're going to have so much regret.
05:14So I think a lot of people like that expanded multiple.
05:17They like the fact that it can move without fundamentals.
05:19And they do believe at some point there will be this inflection that's going to send this stock parabolic to all-time highs.
05:25But there's so many other names that just make more sense.
05:29And that's why we sort of, you know, throw caution at this one.
05:32So what do you do?
05:33Do you buy the dip here, or do you wait it out?
05:36Yeah.
05:37Tesla's not going to be something I'd be adding into my portfolio at this point.
05:40Like I said, I like the company.
05:42I believe physical AI is something that Elon Musk will do well.
05:47But I still think the physical AI winner is NVIDIA.
05:50I think NVIDIA gets a piece of all of it.
05:52I think that it's become such a reasonably priced stock based on the expectation of the market share it will continue to take, the profits and cash flow that it continues to generate.
06:01So it's like you're playing this way and you want something with tons of upside, but you also want something that is supported by fundamentals.
06:07Every other company in the Max 7 needs NVIDIA, including Tesla.
06:10And by the way, every technology company in the world needs NVIDIA right now in some way, shape, or form.
06:16So I absolutely believe there.
06:18Tesla is an ancillary beneficiary to physical AI, but the revenue just doesn't support it.
06:23So I'd play the NVIDIA play and let Tesla benefit from using NVIDIA technology.
06:29And at some point, like I said, watch for Tesla to start showing signs that it can grow into the narrative.
06:35But I still want to see that car go across the country, the one I heard about like eight years ago.
06:39So there's just some things that, like I said, Musk just exists, functions, and succeeds on his own timeline.
06:43Again, the investors that buy, they understand that, know that, but there's significant risk associated with that.
06:49Okay, let's bring Alphabet into the conversation because that was a bit more straightforward of a report, a beat on both the top and bottom line.
06:57Would you buy shares of Alphabet, which had been underperforming the broader market heading into the report based on those results?
07:03Most undervalued stock in the Mag 7.
07:05I am an absolute believer.
07:06First of all, the full AI stack.
07:11Google is not appreciated.
07:12Alphabet is not fully appreciated for what it's been able to accomplish in AI.
07:15We know it acquired brain and deep mind and has had all this research lab.
07:19We talk so much about meta and super intelligence and what he's doing, Mark Zuckerberg is doing.
07:23They've been doing this for a long time.
07:24They've had this lab for multiple decades.
07:26They've been doing AI for multiple decades.
07:27They've been building infrastructure and chips.
07:30So you heard my NVIDIA thesis.
07:31Well, the only company on the planet that's actually able to build a high-performing, large-language model, deploy it to market, and drive revenue from it with their own infrastructure has been Alphabet.
07:44Google, TPU, partnered with Broadcom, built this custom chip.
07:47They've been doing this now for more than seven generations.
07:50Gemini Advanced, one of the highest and most performant models in the marketplace right now.
07:55And, of course, the AI story is also underappreciated.
07:57People are like, oh, they're going to lose to OpenAI.
07:58Well, OpenAI is constrained right now.
08:00They're constrained by lack of capital.
08:02They're constrained by Satya Nadella sort of controlling how much he's letting them do from becoming a public benefactor or going public at all to how much money they're able to raise by not allowing them to pursue some of their endeavors that are required from Mastasone and others that want to capitalize the company.
08:20On the other hand, Google has the AI layered in to everything.
08:27So you do a search now, right?
08:28And for all the Luddites and the laggards that didn't spend $200 a month on OpenAI and that literally just go to Google still and do search, they are able to benefit from Google AI right in the search.
08:40You're seeing AI populate in the search.
08:41You're seeing AI populate into workspace now.
08:43So if you're a Google Mail, if you're using Google Documents, and also, of course, in YouTube, they're using AI to optimize.
08:50And what a data foundation.
08:52What an incredible data lineage that they have with their search engines, with YouTube.
08:57So I just think the thesis is wrong.
09:01Where there is risk is regulatory.
09:03And the other area that there is risk is search revenue.
09:07Meaning that when you, now that they've successfully layered AI in, less people are going to need to click on searches because the good information shows up in the AI overview.
09:16Search is how they make money.
09:17But I think every business is going to have to rethink their revenue model, whether it's a company like Alphabet or Google, or it's going to be enterprise AI companies like Salesforce and ServiceNow, which had great numbers.
09:27But they're going to have to change how they charge because people aren't going to click as much when AI is delivering such good outputs.
09:35Yeah, it's interesting because I think going into this report, there was some concern about is search under pressure.
09:41We didn't necessarily see that in the numbers.
09:44It actually came in better than expected on the search front.
09:48But you don't look at chat GPT as a risk.
09:52I know myself personally, I'm using it more.
09:54And I always was a, you know, just go to Google kind of person.
09:57And Google was the verb.
09:59But, you know, we're not saying we're going to look it up on Gemini necessarily.
10:04It's chat GPT has really, you know, is the verb, if you will.
10:08Yeah, I think credit to Sam Altman OpenAI for being early and being first.
10:13I think there's a lot of risk there, as I mentioned, with Microsoft.
10:15There's also a lot of risk with them losing many of their top researchers right now.
10:18They've been poached substantially.
10:20Not by Google, though.
10:21Mostly by Meta.
10:22I think there's risk to the business model, period.
10:26So that was what I was trying to say before.
10:28I think there's real risk that search itself needs to be reconsidered.
10:33However, I don't necessarily know that we've seen as much of a transition.
10:38You just said it yourself.
10:39The search data, there was one quarter where search data showed somewhat of a stagnation or even maybe a slightly quarter over quarter downtick.
10:46And then ever since then, search is still going up.
10:50So I think we need to see more real market signs that search is deteriorating because it's a little bit like the Apple story.
10:57I'm quite pessimistic about Apple because of their lack of success in AI.
11:02Having said that, 2.2 billion plus devices that people love their Apple device.
11:08And nobody's saying, oh, because Siri's not great, I'm going to get rid of my iPhone.
11:13No, they're not saying that.
11:14They're saying we'll continue with this.
11:16We love the device.
11:16We love its functionality.
11:17We love our Apple ecosystem.
11:19We love our blue bubbles.
11:20We're going to stay with it.
11:21And if Apple can get intelligence correct, probably in the next two years, they probably won't see much market erosion.
11:28I think while people like us that are in tech, that are on top of media, that are constantly on our devices, have certainly played with and adopt perplexity.
11:37We've adopted open AI tools.
11:40Maybe we're playing with Anthropic.
11:41But I think deep down, the vast majority of people out there, call your uncles, your aunts, your brothers, sisters, moms, friends, still use Google pretty pervasively.
11:50Even if it's just in the Apple, when they're throwing it in the Safari browser, just search a term.
11:54They don't realize it's that Google relationship going back to Google.
11:56I think they have a stickiness.
11:58It'll take time.
11:59But open AI is a real threat to every business, by the way.
12:02Okay, well, speaking of Apple, Apple's next on tap as we think about next week's earnings.
12:07We have Meta, Apple, Microsoft, Amazon.
12:11What can we expect to get us prepared for those?
12:14Well, Apple, I think we're going to see a pretty, it's going to be pretty dry.
12:19You know, I'm hoping we're not just hearing about buybacks.
12:22They've had some big changes in management, COO stepping down.
12:25We've had some of their top AI talent poached.
12:28People are going to be looking at the handset number.
12:29They're going to be looking at impact from China.
12:31You know, we expect it to be pretty flattish.
12:34So we're not super excited about Apple.
12:36They're number six on my power rankings for the Mag 7 right now.
12:39Only Tesla sits below.
12:41Because at least Apple still has the cash machine.
12:43It's just, it's really struggling with innovation.
12:46Microsoft has been a juggernaut and very consistent with their Azure business.
12:50I am a little worried about its dependence on open AI because how fractured that relationship clearly is.
12:56But it's all about the Azure number with Microsoft.
12:58Is Azure growing in that Google number yesterday is going to be the comparison point.
13:02Are they growing as fast as Google or slower than Google?
13:06You know, Oracle's been a bit of the dark horse here because they've had this massive growth number.
13:10And of course, that's partially powered by open AI.
13:12So there's all these things happening.
13:14And then Amazon, AWS, that's where they make all their money.
13:18Now, their ads business has been impressive.
13:20It'll be another one to sort of compare against the YouTube and the Google click ad business yesterday.
13:27But we think that Amazon's thesis is intact.
13:31We think they've made good progress in AI.
13:33We expect that their growth will be the slower end.
13:36But they are still dealing with law of large numbers, Caroline.
13:39They are the largest cloud by a long margin.
13:42And so their growth has gone into the mid to high teens.
13:45So Amazon's solid.
13:46Apple, we continue to be worried about.
13:48But we know they know how to operate a new business.
13:51That's Tim Cook's special.
13:52So I don't think the earnings will be bad.
13:54I just think people continue to be a little bearish on the narrative.
13:57And then Microsoft, I think, will do the business.
13:59They've done it consistently.
14:01I don't see any reason to be too concerned here.
14:03OK, and you have your own ranking, as you've said, with NVIDIA on top and Tesla and Apple on the bottom.
14:09For so long, the Mag 7 traded as one.
14:11And we certainly haven't seen that this year.
14:13Do you think it's time for the Mag 7 to be broken up?
14:17We may need a new name for it.
14:19And we certainly see some divergence in the companies and just what they do, how they function, and why they're going to be important.
14:27The AI era has sort of created a new ranking and a new order.
14:31NVIDIA just stands in a class of its own right now.
14:33The only other company, I think, that has a moat as big as NVIDIA is TSMC.
14:36But TSMC is a little more boring.
14:38People get a little confused about the foundry business.
14:40But basically, no chips are made right now of any consequence without TSMC.
14:45So that's a really interesting one.
14:47But yeah, right below it, we love Meta.
14:49Meta is one of the few companies that actually is really putting AI to work.
14:53So their ads business and how they use AI to make money, their investments in superintelligence.
14:58And Zuck is making these $100 million-plus single-employee bets.
15:02By the way, Zuck, I'm in.
15:03Call me up.
15:04On single employees to basically drive the company to superintelligence.
15:08But I think there's trillions of dollars of market cap at stake.
15:11So he's basically looking at this like a professional sports franchise.
15:14Bring in the best talent, win the World Series.
15:16Are we the Yankees?
15:17Are we Manchester United?
15:18Whatever sport analogy you like.
15:19We'll buy the best players.
15:21We'll try to win that way.
15:22That's going to be the bet.
15:23Can he make that work?
15:24And then right behind it, we see that kind of Microsoft and Google sitting there right
15:30in the middle with Amazon.
15:30So the big hyperscalers, they're playing on both sides.
15:34They have consumer things, e-commerce.
15:35They have search.
15:36They have devices and productivity tools that everybody uses every day.
15:41Solid.
15:42But like I said, the two ends are diverging very quickly within the Meta.
15:46Okay.
15:46So just quickly, if it's not going to be called Magnificent, what should we call it?
15:50Fantastic.
15:51I don't know.
15:51I don't know.
15:52I don't know.
15:53Creative, I am not.
15:54But thank you so much for the opportunity to chat about all this.
15:57Daniel Newman, thank you.
15:59That is Daniel Newman, CEO of Futurum Growth.
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