00:00You think about what we heard from Tesla, adjusted EPS coming in at 33 cents. That is
00:05well below the analyst expectation of about 51 cents on average. It's not often that you see a
00:12miss of that magnitude for a company as mature and as large as Tesla. So back this out for me
00:18and sort of make the math work. Katie, I think it's compounded in that they beat the top line
00:27revenue by close to $3 billion. So you have a massive top line beat and then you have this
00:32bottom line huge miss. And in the car business, that's pretty straightforward math. They are
00:38falling to the temptation of feeding the top line, which is a beast, to continue to keep growing
00:45with discounts. And when you discount in the form of price and in the form of the APR that people
00:52are paying and they've done both, you see what happens to margins. They can have a huge top
00:57line beat because of course people are going to buy a less expensive product or a below market
01:02price product, but then the profitability falls dramatically. And in this case, they miss DPS
01:07by more than a third. And I think that's the story here. This is not an AI investment story.
01:11This is a story in the base business. And the base business, I think, is giving hints that the product
01:16lineup is older. It's dated. And in order to move that product, you've got to discount it.
01:23And that hits the bottom line. And that's exactly, I think, what we're seeing here in these earnings.
01:28Yeah, absolutely. A big tension there. And you think about the issues that they are having when
01:32it comes to their base business, the car business. How much of a setback is that for some of the
01:38ambitions that we know that the stock has been valued on? When you think about AI, autonomous vehicles,
01:44robotics, the list goes on. Well, I think the original plan was you've got a cash-flowing
01:49auto business that's going to fund you to the future of autonomous cars, robotaxis, and robots.
01:56But you've got to have that cash flow. And that cash flow has to be healthy. And to the extent
02:01that
02:01your base business isn't funding the future, now you've got to go out and either fund it through
02:06equity or debt on top of this. And so I think that's the question for investors is to look forward
02:12and to really try to determine how much capital it's going to take to get to that future and then
02:17where that capital is going to come from. I think we see this across industries. It's one of the
02:22reasons we formed VistaShares is because the market tends to focus on end producers like Tesla.
02:29And the money is actually made in the supply chain. The supply chain has doubled the profit margins
02:34that Tesla has in the end. And so although Tesla's getting squeezed by the end market,
02:38their supply chain is likely much healthier. And that's probably where investors want exposure
02:44versus betting on Tesla's end producer here. But I mean, but don't they kind of go on hand in
02:49hand, John? And I mean, you raise an issue here about kind of the staleness, my words, not yours,
02:54of their product lineup. And from at least what we know, it doesn't appear to be anything
02:59major on the horizon unless Elon Musk is holding back on us. We're also supposed to see the robo-taxi
03:05rollout mid-year. I don't see any real mention of that in the earnings statement itself.
03:10So what is that sort of flywheel from the actual production of cars to these other ancillary areas?
03:19Romain, you're right. And I think you nailed it. What they would say, I think, and probably what
03:23they're going to be talking about in the earnings call, is trying to get the investors to focus on
03:28robo-taxi as that flywheel. Robo-taxi is the next car product. Robo-taxi is the bridge
03:35into the robotic future that they see. The challenge is, as you said, they haven't had much
03:39luck rolling out robo-taxi. It's a very small number, it's much smaller than they've originally
03:44projected. Much fewer vehicles, much fewer cities, and lower capability. And so I think it would be
03:52helpful if they could provide an honest assessment of where they are, where they see the rollout,
03:58because the car business really depends on the robo-taxi business to get Tesla into the robot
04:07business, which is their Optimus robots. Well, let's talk a little bit more about it. And they
04:11do actually mention that here. But I think, at least based on what we know publicly, that still seems
04:15a long way off. And we talk about some of your ETFs, so obviously a focus on robotics, but also
04:21space.
04:21And I do want to kind of get to the elephant in the room, which is that a lot of
04:24investors
04:24seem to be speculating, maybe embedding on this idea that Tesla will be folded into SpaceX in some
04:31way or another, what the timeframe for that would actually be if it were to happen. But if it was,
04:37just to talk hypotheticals here, John, is Tesla additive to SpaceX, or does it actually detract
04:45from what SpaceX is trying to do? I think it's highly complimentary. If I'm sitting in Elon's
04:51chair and making that decision, I'm thinking about a couple of things. Number one, as you know,
04:55he's a fan of simplification. So running one public company is easier than running two, for sure.
05:02The second is the AI assets that are now sitting within SpaceX really are much closer aligned to
05:11the Tesla business. Robo-taxi is an AI business. Robots are actually an AI business.
05:17And so those assets should be closer to each other. I think the third problem this solves
05:23on Elon's list is control. He's always been concerned about control chair at Tesla. He doesn't
05:31have it. He does at SpaceX. And a combination of the current valuations of SpaceX and Tesla would mean
05:38that he would now have the control he sought for so long at Tesla. So I think if you put
05:44yourself in
05:44his shoes and the problems that are front and center for him, this makes a lot of sense,
05:49both from simplification, from the cap table in control, and from the proximity of the assets,
05:56just having teams not have to cross companies to work on things like Robo-taxi.
06:01So, John, before we let you go, and this broadens it out beyond Tesla, but
06:05when we got that last earnings report out of NVIDIA, Judson Wong talked a lot about kind of this
06:11physical AI, sort of the next stage of this AI cycle. And there was a big focus on robotics.
06:15And obviously, Elon Musk and Tesla are trying to be a part of that as well. But when I look
06:20at your
06:20ETF, your R2 ETF, which is focused on robotics, I'm struck by one thing. And it's something that
06:26someone raised when Jensen Wong talked about this, how so many of the robotics companies,
06:31at least the ones that seem to be poised to really take advantage of this, aren't based in the U
06:35.S.
06:35And some of your largest weightings in there are companies based in Asia. In fact, I was going
06:40down the list. You can correct me if I'm wrong. But the first U.S. company, at least in terms
06:44of
06:44your weighting, was Rockwell Automation. Why are we seeing so many non-U.S. companies sort of at the
06:50top of the list? Why are they ahead of the United States in that race?
06:55Gosh, Romain, it's a really good insight on your part and a good question. That is because China is the
07:00largest supplier of robots in the world, the largest deployer of robots in the world. And not
07:06far behind them is Korea. So you've got a corner of the world that is really focused on robotics
07:12and executing at a very high level and executing at volumes far greater than the U.S. So as we
07:17went
07:18and combed the world for the supply chain in which stocks we wanted to have in that ETF, you're
07:23absolutely right. It turns out to be a lot of Asian exposure and some European exposure as well,
07:28but mainly Asian exposure because the end producers are there and therefore the supply chain is there.
07:34And that's really where the action in robotics has been for the last five to 10 years. And it's
07:39been quiet. Like we haven't paid a lot of attention to this in the West. We're starting to pay attention
07:43to it now, of course. But those two areas in terms of China and Korea, they're the countries to beat
07:52as it comes to a robotics war and robotics race to the finish line.
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