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- [00:00]
A
Foreign. Elon Musk just pitched his next big idea. This is Motley Fool Money. Welcome to Motley Fool Money with the Hidden Gems team. I'm John Quass, joined today by Matt Frankel and Rachel Warren. Today we're talking about Elon Musk's big idea, as well as some other big ideas that we really like. But first, I kind of wanted to avoid it, but we have to talk about it. Early this morning, before the market opened, US President Trump announced that they'd had productive talks with Iran over the weekend. Of course, we all know that the operations happening in Iran have had a huge impact on oil prices. It's been a roller coaster ride, and I'm positive we have not reached the final chapter of this ride yet. But with the market up so sharply today, I felt like we needed to talk about it, acknowledge it. Rachel and Matt, the market was down last week, up sharply this morning. Was the announcement from the president that good? Was the news that good?
- [01:16]
B
Well, yes and no. So for one thing, I mean, you said we, we try to avoid talking about the war, but it's nice to talk about it on a somewhat positive note for a change. For one thing, take this news with a big grain of salt. As you said, we're probably not close to the final chap. The president decided to delay certain strikes specifically on Iran's energy resources after productive talks. And right after he said that, Iran quickly denied that any talks had actually taken place. So Iran, at the beginning of the war, if you remember, they said that their, I think it was their prime minister, is that what it's called, was alive and well after he had been killed in airstrikes. So, you know, who's to say what did or did not happen and if talks happened, how productive they actually were. Of course, this is two different sides telling two kind of very biased sides of the story, I guess I would say. But on the other hand, the market was clearly ready for any signs of de escalation in the conflict. And we finally got one. For the past few weeks, I don't know about you guys, it seemed like the situation was gradually getting worse and more uncertain on a daily basis. It was a nice change of pace. So just to be clear, the war is still going on. I want to get that right out there. So we're not likely to see a broad sustained rebound in the market unless further developments happen. Even after today's move, my portfolio is still very much down. I don't know if you're in the same boat. So essentially all that's happened is that the president is agreeing to delay escalating the conflict even further. He's not really dialing back to anything that's already happening at this point. It's just delaying what he threatened to do to escalate it even further. So keep that in mind.
- [02:47]
C
Yeah, I think Matt laid that out really well. I do think the global markets are really looking for sort of any sign of relief. And President Trump's true social announcement of a five day pause, it was very specific to military strikes against Iranian power plants. That is nothing to say as just strikes across the country towards other military targets. But basically what had happened over the weekend was President Trump had threatened to obliterate Iran's energy infrastructure if the Strait of Hormuz was not reopened. And so we're sort of seeing, you know, this morning this sudden shift to a rhetoric of, you know, quote, unquote, productive conversations. And I think that perhaps that is easing some fears of what has been feared would be, you know, a global energy crisis comparable to 1970s oil shocks. So when the market opened this morning and we saw the dow jump over 800 points, the S&P 500 and Nasdaq rose about 1.4 and 1.6%, respectively. We saw European indexes flipped from losses to gains at the market open. And then Brent crude, of course, which had topped I think around 114 a barrel earlier in the day, plunged double digits after the news. Of course, that could have changed as we are recording this podcast. Right. We also saw a response from airline and cruise line stocks. Right. Which of course are companies that are very sensitive to fuel costs. And then conversely, you saw shares of energy stocks like Occidental Petroleum retreat a little bit. I think it's important to underscore here the situation is very fragile. As Matt noted, Iranian officials have publicly denied that direct talks took place. There's some suggestions that the move maybe is a tactic to try to get energy prices to tamp down a bit. I do think that investors should expect the market roller coaster to continue even as this five day potential window unfolds. I think it could get worse before it gets better. I don't think we have seen even close to the end of this.
- [04:38]
A
Okay, so that is the more news angle. This is what has happened. This is what is happening. But I want to take a step back and just kind of advocate ask some questions on behalf of our listeners. I think if I'm a listener to this show regularly, if I'm listening to Motley Fool Money, I'm here Hearing from the analysts regularly to take a long term view with investing. I want to take a long term approach to buying stocks, investing in these companies. And yet we're seeing something so consequential. Oil, energy prices. This is very consequential to the global economy and they are behaving somewhat erratically. Social media posts can come out and cause trillions of dollars of change in the stock market. I think I'm asking, if I'm a listener, how am I supposed to take a long term view when things can change so quickly on a day to day basis? Any thoughts that either of you can provide to our listeners that helps them understand how to contextualize this?
- [05:37]
B
Sure. And if I'm being totally honest, this is one of the reasons why I generally don't own energy stocks in my portfolio. They could be more unpredictable than most of the other sectors I like to invest in. So if you have stock in Chevron or Exxon or any of these really well run oil businesses, even things like war, weather, if a hurricane happens, for example, they can move the price of oil dramatically through no fault of the company. The company can be doing everything it's supposed to be doing and you need to be prepared for that as an investor. We've seen massive swings. Even before the Iran conflict started, the worse than expected winter weather was driving the price of oil up. So there's a lot that can go wrong in oil. But you're right, John, and you kind of alluded to this. The moves in oil prices have much more economic implications beyond just higher or lower prices at the gas pump. You know, the transportation costs of getting food to grocery stores. There's a bunch of different kind of trickle down effects, but none of those are permanent. They're all just kind of, you know, ebbs and flows in the economy. I mean, energy costs, transportation costs, materials costs, those are all going to be a little bit erratic over time. But when you zoom out, the impact of transportation costs on things like grocery prices really tends to smooth out over time. So if you're an energy sector investor, be prepared for these kinds of swings. If you're invested in stocks that have kind of more secondary impacts of oil price swings, then just know that it's not a permanent headwind for the business, it's just a temporary condition. And if you're invested in great businesses, then it'll even out over the long term.
- [07:10]
C
Yeah, I think those are really great points and I think it's important to remember that so many of these elements are beyond our control as retail Investors, it's really, really important to focus on what we can control and the efficiencies that we can build into our portfolio. I as investors, when you're hearing about oil prices swinging $30 in a day or headlines that seem to change every few hours, I think the really important thing is to remember the difference between noise and signals, right? I mean, daily volatility is almost always noise. The market reacting to fear and uncertainty rather than actual long term damage to global businesses. That doesn't mean that they're not going to be impacts, you know, these energy cost inputs. Even if the war were to grind to a halt now, there will be some impact for that probably well into the end of the year. And historically, you know, these kind of whipsaws that we see in the market, they can feel overwhelming in the moment, no matter what industries you're invested in, but they really do very rarely change the long term trajectory of really productive quality companies. You sort of think of your portfolio like a house. A storm might shake the windows today, but if the foundation, which is hopefully a diversified mix of quality assets, is solid, the house should still be standing long after the weather clears. So again, really focusing on building a robust, profitable portfolio rather than trying to, you know, predict sort of the next chapter of what will happen in the market. And the other thing I'll add is that volatility can really provide long term investors with opportunities to rebalance, to buy quality companies at a discount. But again, really staying diversified, keeping that long term mindset, it ensures that headlines don't derail the financial future you're trying to build. You know, the goal is not to time the market, but just spend enough time investing in the market over the duration of your investing journey to really let the power of growth outweigh any temporary spikes that you might see in your portfolio.
- [08:56]
A
Well, whatever happens, you can be sure that we will join you along for the rollercoaster ride. After the break, we're going to talk about Elon Musk and he's anything but subtle. He gave the investing community plenty of buzz over the weekend. You're listening to Motley Fool Money.
- [09:11]
D
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- [10:16]
A
welcome back to Motley Fool Money with the Hidden Gems team. So Elon Musk did his best Bonnie Rate impression over the weekend. He said let's give him something to talk about. He held an event in Austin on Saturday to talk about something his companies are launching called Terrafab. Rachel, what is Tarafab?
- [10:36]
C
So Terrafab is a $25 billion joint venture between Tesla, SpaceX and XAI. And Musk is framing it as, quote, the most epic chip building exercise in history. So Terrafab is going to be a vertically integrated semiconductor factory designed to produce an unprecedented 1 terawatt or 1 trillion watts of AI computing power annually. And unlike traditional factories that specialize in one part of the process, Musk envisions that Terrafab will handle everything, design, lithography, fabrication, packaging under a single roof to bypass global supply chain bottlenecks. You know, for Tesla, this is really and Musk, this is really about achieving total self reliance for the physical AI ambitions. I mean, the idea is the facility will mass produce the inference chips needed to power Cybercab, robotaxis and Optimus humanoid robots. Musk estimates that all current global chip makers combined can only provide about 2% of the compute capacity his companies will eventually require. One final thing I want to note, I mean, there's some kind of major implications here for Space X as well. That 80% of Terrafab's output is earmarked for space based applications, specifically for a new constellation of orbital AI satellites. And basically the satellites will use custom chips to run massive AI workloads in orbit and take advantage of the vacuum of space for better thermal management and more solar energy than on Earth. So it's a, it's a very big promise that Musk is making a massive vision that he has for Terrafab. It'll be very interesting to see, see how this plays out.
- [12:03]
A
Yeah, it was so interesting to hear Elon talking about how essentially they want to buy so much semiconductor products from their partners, but the partners just aren't making enough to meet their needs, so they're going to take it on themselves with this ambitious project. Matt, just how ambitious is it?
- [12:19]
B
It certainly is ambitious, but I mean, first of all, keep in mind that the Gigafactory seemed like a very ambitious project at first and that was delivered. But keep it in perspective. The three companies that you mentioned, XAI, SpaceX and Tesla, they have a combined valuation of well over $2 trillion, over 3 trillion, depending on who you ask. So spending 25 billion in capex, even if it's on the largest chip factory that will ever have been built in the world, it isn't exactly a massive bet in terms of spending, especially when you consider Amazon is spending 200 billion on CapEx this year. And Tesla has always liked to handle as much as possible internally. I mentioned the Gigafactory with batteries. Take it with a grain of salt. Musk does have a history of not necessarily under delivering and over promising, but really aiming for the stars when it comes to innovations. And he usually gets about 80, 90% of the way there. So we'll see how this goes.
- [13:11]
A
What's interesting to me is that at some point in the last year or so we stopped measuring AI compute with GPUs. We switched to measuring it by how much power is needed. And we're normally talking about gigawatts or if you're a Back to the Future fan, to gigawatt, but terrafab is looking at a terawatt watt of compute power annually. Rachel. I mean, I, I just want to underscore that this is a huge number.
- [13:38]
C
Yeah, I mean, so gigawatts is a billion watts, right? A terawatt is a trillion watts. I mean, this is a massive leap that almost no one else is currently making. To kind of put it in perspective, a single terawatt is about the total power capacity of the entire US grid. Right. And basically this is a bet that the future requires a nation's worth of computing power to run things like Tesla's global robot fleets and orbital AI networks. But I think it is important to kind of put some of this in context.
- [14:03]
A
Really.
- [14:03]
C
The effectiveness of Tarifab is going to really depend on whether Musk can solve the task of entering a field, semiconductor manufacturing, where his companies have zero experience. I mean, there's been a lot of critics and industry experts that have come out saying, you know, this plan is virtually impossible. Chip fabrication is vastly more complex than building cars or rockets. It requires atomic level precision that takes decades to master. Some people have pointed to Tesla's 4680 battery cells as a cautionary tale. You know, this was sort of a project that promised to revolutionize energy but faced years of delays and did not meet its original performance targets. But of course, we have seen Musk bring his scale of innovation and I think surprise the naysayers many times before. So a lot to watch here. It is certainly a very interesting bet on the future of semiconductor manufacturing, and I think investors will be excited to watch what happens coming next.
- [14:51]
A
Yeah, we definitely don't know when it comes to the timetable or the scale, just how well Musk will deliver on his promises here, but we will be keeping an eye on it because he's definitely moving in that direction. It could really be an interesting thing to watch. When we come back, we're talking about some of our favorite investing trends. You're listening to Motley Fool Money.
- [15:11]
E
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- [16:15]
A
Welcome back to Motley Fool Money with the Hidden Gems team. We'd like to use this Monday episode of the podcast to talk about some of our favorite investing principles on the Hidden Gems team. On previous episodes, we've talked about things like overlooked components of the business that make a difference. We've talked about leadership teams. Today we want to acknowledge that we like big picture growth sectors. We like secular growth trends. Maybe it goes without saying, but why do we look at this when we are looking for stocks to invest in?
- [16:44]
B
So think back to some things that are now commonplace in our everyday life that were major trends not too long ago. Things like software as a service and smartphones are even. And I can even remember back to when E commerce really was an early stage trend. Aging myself a little bit there. There were some generational wealth creation opportunities in those days and most of which are really only obvious in hindsight. Amazon was not Amazon. It was the best time to invest in it and in the moment they were far tougher to spot. So it's a nice challenge. And by acknowledging and studying the trends today that are in the earlier stages, we can set ourselves up to find tomorrow's big winners.
- [17:18]
C
Yeah, I mean when you focus on secular growth trends, it's very much a tailwind that can carry a company forward regardless of what the broader economy is doing. I mean, think of transform shifts like the rise of AI, the shift to renewable energy, aging global populations. When you're investing in these kind of megatrends, you're betting on a fundamental change in human behavior or technology that's likely to last for a decade or more. And a lot of those trends really provide a stable foundation that can help investors weather portfolio and market shifts. It also really allows you to kind of ignore the noise of market cycles and focus on compounding returns through companies that are capturing value in really fast growing sectors.
- [17:57]
A
So this is for each of you. Let's not just talk about big trends. In theory, what are some trends that you believe will experience incredible growth over the next 10 years? And which ones do you love most today? Matt, let's start to you.
- [18:13]
B
Yeah, so one of my favorite trends to watch is quantum computing. But it may be a little early to effectively invest in. I think of it like if you were to invest in E commerce like five or six years before it was actually possible to do E commerce. So I'm closely watching IBM. That's the company that I'm using as like my G here as like an early quantum play. It's not only the furthest along when developing viable quantum computing hardware, but the company has consistently met its development milestones well ahead of schedule. So arguably the biggest question in quantum computing is when will it be commercially viable? And depending on who you ask. There's like a ten year window when it could finally reach an inflection point. So I'm watching for clues when that might happen. As we get a little bit closer,
- [18:55]
C
I'm really excited by the rise of physical artificial intelligence, which is basically, you know, advanced software moving and acting in our world rather than just staying inside a screen. I mean, you can see this happening right now in healthcare with surgical robotics. Right. I mean, these systems are acting as a superhuman partner for doctors, particularly with the advent of AI offering precision. This simply isn't possible for a human alone. I think it's a much larger move towards personalized medicine where technology helps tailor every treatment to a patient's specific needs. And you know, there's a few kind of companies I watch in this space. Obviously Intuitive Surgical is a big name here. Their, their systems are already used in millions of robotic assisted procedures. But you've also got major players like Medtronic and Johnson and Johnson. I think it's a really fascinating space to watch. And again, we're looking at companies that aren't just selling a piece of equipment once, but are creating a whole ecosystem of specialized tools and services that generate steady revenue. So a lot of exciting things happening in healthcare.
- [19:49]
A
Yeah, those are a couple of good trends. Personally, I like domestic manufacturing and that kind of trend, but unfortunately we don't have time to talk about that today. Matt and Rachel, thank you so much for sharing your thoughts. I need to say the disclosure and that'll be the end of today's episode. Thanks for joining us. As always, people on the program may have interest in the stocks they talk about and the Motley fool may have formal recommendations for or against. So don't buy or sell stocks based solely on what you hear. All personal for finance content follows Motley fool editorial standards and is not approved by advertisers. Advertisements are sponsored content and provided for informational purposes only. To see our full advertising disclosure, please check out our show notes. Thanks to our producer, Bart Shannon and the rest of the Motley fool team. For Rachel, Matt and myself, thank you so much for listening and we'll chat again soon.