emily: i am emily chang in san francisco. coming up in the next hour, the nasdaq posts its worst day since 2011. the s&p 500 and the dow wipe out their gains for the year, and tech leads the way down. plus, truly historic. that is how elon musk is describing tesla's third-quarter. their first profit in five years. can they do it again and again?

complex, thestrial apple ceo goes after his data-driven rivals. why he says companies like -- the waysbusiness companies like facebook do business should make you uncomfortable. tesla usually gets about too weeks notice -- to bring weeks notice. two weeks barely -- notice. they barely gave two days. analysts expect a loss. positive cash flow. 881 -- $881 million. tesla is the 12th best performance in the nasdaq 100. joining us now is a kelly book -- kelley blue book analyst. the big thing is that they are profitable. the first time since the third

quarter of 2016. this is their third profitable longer in the company's history. demand was a strong. they pulled out all of the stops in q3 and there would be the more demand, but the customer deposit number is still like -- emily: $900 million in deposits. dana: right. even if they work through some resolution -- reservations, more people are offering -- buying them. >> this is what we're watching for. there was a lot of speculation some of these numbers might be frontloaded, but this was a huge beat we also all. -- we all saw. expect to bewould profitable from q3 forward. this shows the power of the brand more than anything. emily: i want to talk a little bit about the death of because normally there is a significant amount of notice. this happened in less than two

days. monday night, we found out tesla would be reporting today. is there anything unusual about that? fair, tesla always reports earnings on wednesday. next wednesday is halloween. askingand analysts were the company could you please not do it on halloween. at of us have kids. we were expecting earnings would come next tuesday or possibly pushing to november, but the company has a good story to tell and might as well tell it early. the fact they pulled earnings forward, everyone was expecting this would be good news. emily: let's take a deeper dive into the actual numbers. the company is still on target to deliver 100,000 model s and x cars this year. we are always looking at the model three. when we look at the delivery numbers, are you liking what you see? the big things about the delivery numbers is

all the models were strong. keep in mind, we have not seen the baselevel model three at. that is a key part of what we are looking at going forward. once i comes out, a lot of consumers will come out wanting this. there is of demand for tesla and brand likeit is a google and apple. emily: tesla trading a new sessions highs up 14%. dana, this is after a very tumultuous quarter. run with the sec after he claims he is get a take tesla private and had the funding secured for it, tesla and musk have been fined collectively $40 million, and he is stepping down as chairman. what are the outstanding issues of the settlement? we're waiting to see who will become tesla chair. dana: we should know that by mid-november. then the board have to appoint

two new directors by the end of december. the board has been really mum about the search process. it is not clear if they are leading it internally are contracted a search firm. that will change the dynamics of the board. emily: they are supposed to be monitoring his tweets and communications, correct? dana: that is not kicked in yet. emily: the tweets have kshay,uedemily: and, a i'm curious if you remain concerned about his behavior and if that is something you are watching? akshay: it is something we are definitely watching. the reality is, tesla has a lot of leeway as a brand when it comes to consumer perceptions. scrutiny, butnder a lot of consumers see this as elon is different as long as he does not do anything egregious, we can take some of that if they are building these beautiful cars and the quality comes with it. i think the brand has leeway with consumers. emily:dana, we have any

indication of who the chair will be? dana: no. we really don't. a lot of names are floated but that is wishful thinking. the chair could be someone existing who already is on the board and does not necessarily have to be someone outside. emily: akshay, who would you like to see in the role? akshay: there is so much speculation right now. one of the important things is that the model three is tesla's first go around with mass-producing a vehicle. for a lot of consumers, it will be their primary vehicle. i think someone with the auto industry experience might be important. we have seen rumors of james murdoch in other people. like dana said, it will be somebody with deep leadership experience. emily: we've also seen analysts who have been pessimistic about tesla and changed their view and now they are optimistic. what are the outstanding

concerns you are hearing from investors and analysts? dana: i think the concerns have shifted. first it was, can they produce the car. then it was can they sell the cars. now you will see the questions around the service. now they have built and sold the cars, can they service them. if people have issues with the vehicles, can they be fixed in a timely fashion. tesla is building the infrastructure around that and they have had snafus. people are on twitter asking elon for help. emily: and sometimes he responds so that can be an expert move. akshay, think you for joining us. emily: tesla is facing rising competition from traditional automakers like ford and gm. ford reported earnings and david westin caught up with the cfo from dearborn michigan. david started by asking about ford's investment in electronic cards and pointing out the

company is lagging behind gm. >> we actually are in the process of testing our business models in miami. we announced we will take that into washington dc. i think we feel comfortable we are on track to launch a commercially viable business around moving people and goods in 2021. i think the progress we are making is what we had expected. david: can you do that on your own or do you need partners? you have restructured your business so you can theoretically bring investment in. where are you in that process? bob: we have set up what we call av llc where we could potentially partner with others. since we made the announcement of that, we received interest

from a number of different parties. nothing to announce today, but that is an opportunity and something we are open to. emily: david westin are speaking with bob shanks. i want to bring in the destroyed bureau chief for more on the growing competition in the ev markets. but florida gm into context with tesla and the latest numbers we just see. >> sure. bob shanks may be comfortable with this, but their progress share.wn to $.29 per they beat estimates and beat on revenue, but if you dig in, it is not look great. they beat revenue because people bought more expensive trucks. they lost money in europe. i know the shares were up after market, i wonder if there will be give back because the ceo has pulled back on their margin targets for 2020. that is not a good sign looking

forward for the business. they have channeling ahead. gm numbers will come out later next week. a have had issues with sales being down in china and in the u.s. in the quarter. gm is still making good money, but with sales being down, there will be pressure there. on the other side you have tesla. their first really big profits and it looks sustainable. they generated $881 million in free cash flow which is a big number for them. elon musk says they can do it again next quarter the cousin model three is up to fast production and has a lot of buyers. things are looking up for tesla and looking rough in detroit. emily: tesla and elon running a victory lap right now. when you look into the future of this market, there have been -- has been skepticism that tesla is not a carmaker like these on the manufacturers and they would than thele to keep up

traditional automakers electric cars. does that look plausible or is tesla too far ahead? david: tesla has a really big lead here. they will sell something like 340,000 electric cars. when you add in the model s and ask, that is a lot -- and x, that is a lot of vehicles. the german makers are just getting these cars out in numbers and general motors has a bunch coming, what you are talking about 2023 when they will have 20 of those vehicles onto the market. or they is catching up are engineering vehicles to catch up. they are a few years away so tesla has a lot of room to get ahead of everybody and establish the tesla brand is synonymous with ev to buyers in the u.s. already. and they will go to europe in china next year. they have a big brand and market advantage given the technology on the road.

critic isocal tesla saying thatptimist tesla is taking business from jim. coming up, how microsoft is writing the cloud-based services to record quarter revenue. that is next. . if you like bloomberg news, check us out on the radio. listen on the bloomberg app, bloomberg.com, and, in the u.s., sirius xm. this is bloomberg. ♪

emily: microsoft first quarter numbers are in and their cloud business is still driving growth. profit and sales exceeded estimates. revenue was up 19%. azuree from microsoft's cloud services jumped 76% to read as they work to fulfill the vision of transforming the company into a cloud venture business. to break it down, we had to new york where the bloomberg senior analyst is standing by. i want to ask you about these cloud numbers. growth continues to soar, but not quite so fast as in the prior quarter. can microsoft keep this up? -- 76% is still

2.5 times bigger than the other market so that is very strong. of 18% intal revenues constant currencies are the strongest numbers i've seen for his long as i can remember. the entire industry is growing at about 7% and microsoft is growing at 18. that is big. emily: 365 sales jumping 36% and it seems like the turnaround and transformation of the company is working. what could undermine that? what are the headwinds? anurag: the headwind could be macro weaknesses across the world next year where the comparison is really tough for them. apart from that, i do not see a is now because microsoft the de facto leader in cloud. overnvestments they made the last several years are paying off. both in revenue growth and

margin expansion. any macro headwinds, i see no structure problems here. emily: there is a big pentagon cloud contract that it is competing for. the microsoft and amazon ceo says they believe the government deserves to be defended in response to concerns about companies working with the government. how big a deal would it be if amazon -- excuse me, if microsoft won the contract over amazon? anurag: i think it would be a very big deal. it would be a signature statement. a few years ago, amazon beats microsoft for a similar contract with the cia. beats amazon, it will announce that their cloud products are better than amazon which will make a big statement. emily: google is on both of their heels, how significant is google at this point? anurag: google is good when

you're looking at a cloud company or somebody that is a startup. spending,f the i.t. google is trying to get a good foothold in that. for amazon, they have partnered where microsoft has its foot in both worlds. anurag, thanks for stopping by. coming up, tim cook takes on silicon valley talk. we will tell you more, next. "bloomberg technology" is livestreaming on twitter. check us out @technology, and be sure to follow our global news network, @tictoc, on twitter. this is bloomberg. ♪ oc, on twitter. this is bloomberg. ♪

>> we should not sugarcoat the consequences. this is surveillance. these stockpiles of personal data serve only to enrich the .ompanie that collect thems this should make is very comfortable. emily: tim cook taking shots at

apple's competitors. the ceo made those comments in brussels on wednesday. cook has made this before reminding the business model depends on you buying their products, not them reselling or using your personal data. it also comes a month after the news that at least 30 million facebook user's data was exposed and after a bloomberg report saying apple was a victim of a chinese supply attacked. war ofuss this latest words, we have mark gurman nla. what do you make of tim cook continuing to push on this in the face of opposition from other companies? he has made privacy is number one priority in terms of ceo when he talks about things all the time. they have always had

introduction to talk about how their products are responsible with the environment and now they have the same thing going with privacy. either has a new privacy related speech or software at every launch. emily: mark zuckerberg has hit back before. take a listen to what he said the of video at this conference in brussels. mark: we've have reduced the ways advertisers can target ads and we are building a new tools so people can clear their history of facebook. we are investing heavily in privacy and security. we now have more than 20,000 people working to keep people safe and protect their information. we recently created a new data used team with of the sold focus of giving people more control over their data. emily: mark zuckerberg made the point they would developer -- deliver facebook for free if

they did not charge advertisers. as we know, apple products are fairly expensive. is it a little hypocritical for tim cook to be taking this line or does he have a point? hypocritical,t more of a marketing element. they're saying we will not release free products, we will release expensive products that integrate all of these features. it is something they have been harping on and made a court to the company in recent years, more so than any time in the company's history before. the creator of the internet -- the so-called creature of the internet weighed in on this. we don't have that quote but he talks about how users to have the power to be part of that conversation. my question is, do users care? how much do users really care about the privacy giving how

willing they have been to hand over their data to google and facebook for the last several years? largei think there is a contingent of users who care about their privacy and want to know their text messages, calendar appointments, all of that stuff on your phone is encrypted. the bigger question being raised here, does the functionality of these products take a hit because they are developed with privacy in mind? if you look at the war between siri and alexa and google assistant, siri is widely considered subpar compared to the competition. one of the driving forces behind that is that a lot of techniques that apple uses is on device processing and that is not as good a story things on the cloud. apple says they are already there, but a lot of people do not agree. emily: we are expecting another apple event next week. what are you watching for?

mark: october 30 in brooklyn, they are launching new macs and the biggest update to the ipad pro since it launched three years ago. emily: mark gurman for us in l.a. who covers apple for us, thank you for joining us. soaringp, tesla shares as the company reports is first moneymaking quarter in years. we will talk to a tesla shareholder and he what he has to say about the historic quarter next. the, bad news for semiconductor industry. how u.s. and china trade tensions may be hurting chipmakers globally. this is bloomberg. ♪

emily: this is "bloomberg technology." elon musk is calling this a historic corner, and he's not wrong. tesla not only made a profit, but the company generated in hundred $81 million in free cash flow. the company has been a quarterly cash burner and even though musk promised a good quarter, it was tough to believe as the company frequently fails to deliver. the company making big revenue

and profits. ceo of gerber kawasaki. investor, you must be pretty pleased. what is your biggest take away from this report? mr. gerber: it's even better than i expected. we modeled out certain numbers ourselves, and he beat those, and i really the only guy on wall street -- well, i'm not on wall street, but i'm the only guy in the industry that 's numbers, soon i'm pleased to see the margins they been shooting for our there. they sold higher-end models this quarter, but it was much more profitable than expected. emily: when it comes to the broader landscape and investing,

is tesla creating a tough hill to climb for everyone else? tommy: i think they are. i think they are beginning to build that defensive mode, which a lot of people are looking to and wondering if it would be a disadvantage to some extent or create the demand for electric vehicles in the big guys would come in and sweep it up, and i think what we are seeing is elon musk making good on his promises to generate profitability in q3 and q4, and i think it is a historic day. i think tesla are right when they say that. for the model three to be the revenue ing car by think is historic, and it goes to show that tesla can make good on their promises and play by wall street rules. we've seen a lot of issues with upn musk winding short-sellers and having his run-in with the sec, but this was a good day for musk and

tesla. emily: how much better do you think the tesla story can get? mr. gerber: this is the beginning of what will be a historic run for the company over the next five years. story can grow exponentially as they now accelerate production plans in china. china is really all in on the easy -- the ev story can grow exponentially as they now accelerate production business d being the only 100% u.s.-owned company in shanghai is a huge opportunity for tesla to make a fortune in one of the best ev markets -- it is the best ev market in the world. of the truck,nch hopefully the roadster soon, continuing to ramp up their growth at a level we have not seen really from any tech company recently, but especially any car company. emily: you have other carmakers

questions ifels, tesla can continue to service these cars. now that they are out there in the wild, can tesla keep it up? mr. stadler: i think it's a great question. they have a very different distribution model, a lot of owned dealerships. i think you raise a good point -- how do they deal with these wild? the we have not seen large volumes year upon year, so that will be a challenge, but they keep facing those challenges head on. what i would like to see, if i were an investor, which i'm not benchla, that executive of leadership he built out a little bit. obviously, they're going to see a new chairman come in or chairwoman, but they have also had some departures at the executive level, which you probably want to see that bench deepened to bring in the

experience to deal with those issues you talked about. emily: how much of the problems are a concern to you, ross? as to gerber: the in norma's stress -- mr. gerber: the enormous stress the company has been under is not preferable, but i agree the most important thing they do is build confidence around -- by building around elon.team around this is the opportunity for the board and company to make strong steps to build a plan to be a much bigger company. we cannot have a company where only one guy is the main factor in the company. secession planning is hugely important. i agree -- i think the next big step for tesla is to continue to mature as a company.

emily: it seems elon musk has been able to do that at spacex but not over and over again at tesla. , even though he has things,ed for certain it does not seem as if his behavior is really changing. can we be confident that will happen? mr. stadlen: i don't think you can ever be confident elon musk will conform. he is the ultimate nonconformist, and he has taken a lot of criticism for that. you would like to think he is intelligent enough to stop that kind of behavior, but i think he has taken a lot of criticism and today is at some level a vindication for him. this is a guy who has almost single-handedly dragged forward electric vehicles and made it aspirational and single-handedly dragged the rest of the auto industry with him to say, "ok, we are moving to an electric vehicle world," and that is huge news for tesla. it is huge news for society as

well. there has certainly been lots of bad news in the relationship between business and society, particularly in tech, and here you see someone who is genuinely making the world a better place. he is nonconformist, but i think investors knew what they were getting in for. they were investing in a company with the ceo who is a visionary who could disrupt the industry but who would never be a career ceo who played by the rules. he has to play by legal rules, and i think he is learning on the job, and, yes, he has to learn how to move from an ultra growth phase and learn to scale that into the mature company tesla can and should become. emily: elon musk certainly deserves credit for all of that. let's look at some of the other things that happened this quarter, one of which was promising he would take tesla

private and have the funding secured to do so, which was, in fact, not true. tesla and musk had to pay $20 million because of that. he has smoked weed in a video podcast. he has cut off analysts and been outright disrespectful on earnings calls. as much as you like elon musk, what would you like to be -- to see less of? your criticism is fair, but when you look at the ceo's like les moonves being employeesr attacking and employees and that type of stuff, this is benign stuff compared to what you see in ceo offices around corporations in america. let's keep in mind smoking pot versus sexual harassment, for example. i don't personally think elon is normal or should try to act normal when he is not. i think the tweet was a mistake

and a costly mistake, but far from the worst thing a human could do. it is a hypersensitive environment around tesla. a lot of elon fans like he is a real person -- like that he is a real person at a human being and probably a fun guy, too. some of that criticism is , but we lived fair in a different world today. when you look at how the president acts, and as the president of our nation, elon's behavior seems quite normal. emily: to be fair, we are not comparing his behavior to anyone you just mentioned. i'm asking about potentially defrauding investors. he gerber: i don't think defrauded investors. the sec documents convey he deal.t he had a

it was a mistake, and i'm not trying to minimize that, but this once again is far from the type of corporate scandals we see at facebook, for example. it's nothing. side, itom the saudi certainly seems not clear that there was ever a deal in place -- mr. gerber: yeah, but they are buying everything. are buying everything they can, and now we understand why. emily: thank you. appreciate you sharing your views. thank you both for joining us. i'm sure elon will give us plenty to talk about in the weeks and months to come. u.s.g up, a selloff in stocks. disappointing earnings from at&t and texas instruments drove the decline. we will break it all down next. this is bloomberg. ♪

the nasdaq took a plunge into correction territory wednesday as a selloff in semiconductor stocks continued to rattle the market following disappointing earnings including texas instruments, who missed analyst estimates while also issuing weak fourth-quarter outlook. the forecast is bad news for investors who have already seen disappointing earnings including texas instruments, who this philadelphia semiconductor index fall drastically this as tensions between the u.s. and china continue to escalate, the company warns of further issues with demand.

selloff?ehind the chip >> and a lot of it is about economic slowdown. a lot of analysts have said we are at the end of a cycle, and this is a cyclical sector. what you are hearing from companies, not only texas instruments, but you are just not seeing the kind of read through into the economic conditions, if it's building for computers or for smartphones, or four cars for all the other items out there. we are just not seeing the read through in terms of order. you are seeing inventory buildup, pricing pressure, and as they are getting forecast for 2019 and beyond, they are not giving investors anything to hang their hat on. emily: do you see this as a problem? is this the new normal? >> good question. growingstry has been

the last few years. problem? is this the newi think the longe have seen, so from that perspective, it's probably not a vix apprise we are starting to see the sort of reversal of the growth. the big topic is the situation .etween the u.s. and china i think it's anyone's guess how that will progress going forward. us through what these valuations in particular are telling you in the context of what you see in the broader tech market, which is not great. mr. bostick: you're talking about a sector that was overvalued and overcrowded as looking forward at what future earnings will be, what revenue growth will be and what pricing power will be, for a lot of these companies, the outlook is not as good. fortill expect 19% growth

eps for the tech sector as a whole. that's good and high on a historical basis, but it's lower than what you will get out of the broader s&p. this is the first quarter during this bull market where the tech sector will have earnings growth that lacks the broader market, and these are stocks that have had the highest valuations over the past eight years, so at some .oint, we have to revalue this the nasdaq 100 trading at 24 times price-to-earnings. even when you look at price to sales to take a better account of the nature of these companies, it is still about 3.4 times sales on an annual basis, well above the s&p 500, and you have to ask yourself as an investor -- do you want to pay that? emily: this is a space that has seen tremendous m&a over the last several years and more .ecently, a lot of failed m&a do you expect the current state to put a chill on deals going forward? : m&a has been for

the committee's in this space the last five years, but we have been saying that kind of party is ending -- in a has been m&a has been tremendous in this space over the last five years, but we have been saying that kind of party is ending. as interest rates start to go rise,st of capital on the once that happens, it will be more difficult for companies to make the math work, especially for the actual acquirer of another asset. banks -- thanks so much. coming up, it has been almost a an online personal styling company hit the market. as amazon moves into apparel,

can stitch fix stay the course? ♪

emily: welcome back. we have quick breaking news on the subject we talked about earlier. broadcom set to face eu antitrust scrutiny over its dominance. this coming from bloomberg sources. the eu inquiry will focus on chips in set-top boxes. we will continue to follow this story, but as we have reported, broadcom attended to by qualcomm in what what have been one of the best tech takeovers in history. the white house stood in the way of that. we will continue to monitor this inquiry. increasingly turning to ai and data to compete, and when it comes to apparel, stitch fix is turning out to be an algorithm success

story featuring a unique combination of user data and human styling expertise. 29%ch fix users have grown in the last year and while many users using a i feel threatened by amazon's presence, stitch fix says it's the business of personalization that sets them businessesile many using ai feel threatened by amazon's presence. >> amazon is amazing if you want to get something cheap and fast delivered to your home. the reality is for apparel, there is much more nuance. all you and looking for his jeans that will fit your body well. we feel a lot of confidence and strength and our focus on the discovery element.

emily: would you ever sell to amazon or a larger retail giant? >> i think it's clear we have chosen an independent path. we are clear on the outcomes potentially available to us. stille a deep belief and this is a company that deserves to be an independent publicly traded company, and they're still tons of market opportunity ahead, and we are very focused on independence. emily: there are a lot of companies trying to do what you do. lake: what differentiates our business is not the subscription tag. the business is when you can do monthly or a la cart, and people are not paying the same amount as you would in a normal's description business. we are in the business of personalization -- one 21 human personalization scalable he --

scalably. what we're doing is actually high signal data people are thately sharing with us pertains exactly to the experience they are having. people will try things on and let us know -- these were too big, these were too small, this is too expensive, i love this but i already have it, i love it in a different color. these are things people naturally are sharing with us to help us understand what they like and don't like about the product. 100% of the time because of the data we have, we know who buys what. a 25-year-old woman in louisiana bought these genes. why.f the time we know she is letting us know these are too expensive, this is too cheap, i love this, i love the way this fits on my body. depth of thend

is valuable. emily: if you have all that data, do you need the stylist? ms. lake: the stylist are a very important part. that data allows us to have predict ability on clothes and people and what can happen, so we are able to highly accurately predict this has a 72% chance of working, this has a 32% chance of working, and that data is presented to the stylist. the stylist is part of the selection process and part of the relationship building, explaining why she chose things and building the relationship. emily: stitch fix went public at a $1.5selection process and parf the relationship building, explaining why billion valuatio. you are also the youngest female founder to take a company public. how does that feel? process was not as smooth as you would want to see in a perfect world, but at the end of the day, it does not

really matter and this is a company that has been underestimated before, and we are happy to prove ourselves in a public market, and that day is kind of being able to celebrate and remember the journey we are on. it was an incredible day and an incredible day to be able to share with our clients and employees and investors and the people who have had such a meaningful impact on how we got to where we are, but it definitely was a day i will never forget. emily: what is it like on the other side post-ipo? easier? harder? ms. lake: it is different. every year, i think of myself as rehiring myself in a new job and committing to that new job. every year has been so different than years past. there were years when my job was making sure everybody was in doorgetting pieces out the so our fixes would arrive to clients on time.

emily: what is your job this year? ms. lake: we are building trust with investors and spending time of. and earning the trust there are small things that change, but the heart and soul of the company has not changed. in the way that it is different, i think it has made us better. financials with more vigor than we did before. at the end of the day, we are focused on making sure we build long-term value for shareholders , and i think we feel a lot of responsibility for that. emily: you can catch the full episode tonight, 9:30 pm eastern time, 6:30 p.m. pacific. just to recap a busy earnings day, microsoft turned and brisk revenue this quarter as it continues to expand in the cloud . speaking of strong quarters, tesla had what elon musk calls a historic one in which the ev made prophet and

finally stopped burning cash. we will continue to cover the headlines right here on bloomberg television. that does it for me today. this is bloomberg. ♪

>> welcome to "daybreak australia." >> we are counting down to asia's major market open. >> here are the top stories we are covering in the next hour -- the selloff in u.s. stocks rolls on, wiping of gains for the year and the s&p and dow. treasuries rally on demand for havens.