Tesla and SpaceX Weigh a Mega Merger

Talk about a mega-merger, as Elon Musk says that Tesla and SpaceX are discussing a potential tie-up. But I do think there's a lot of merit to combining companies as we are pretty much in the superintelligence singularity. Plus, the U.K. says yes to more North Sea gas as the Iran war raises energy security concerns. And we'll hear from staffing company Ronstadt about how AI is or isn't shaking up the job market. It's Wednesday, October 21st. I'm Luke Vargas for The Wall Street Journal, and here is the AM edition of What's News, the top headlines and business stories moving your world today. SpaceX and Tesla have formed special committees to discuss a potential merger. That's news that the chief executive of both. Both companies, Elon Musk, broke on SpaceX's earnings call last night. I think some people out there assume that a SpaceX and Tesla merger is a certainty, and I think that would be overstating it. Do I think it would be a good idea? Yes. But at the end of the day, the shareholders have to be supportive of this. He went on to say that a potential merger could bring together the company's efforts on chip design, AI, robotics, and more. Musk already merged his AI startup, XAI, into SpaceX earlier this year, and analysts have speculated that a Tesla-SpaceX merger could be in the cards, given their significant business ties. Though even if shareholders are open to the deal, a combination would face regulatory scrutiny due to its scale and size, given their combined roughly $3.5 trillion market valuation. SpaceX shares are up almost 10% off hours after reporting its first profit as a public company. Tesla, meanwhile, is set to reveal its latest results after the closing bell. Shares of Netflix are down more than 5% in off-hours trading, after the company reported its slowest revenue growth in years. Investors have been increasingly worried about Netflix's ability to grow, since its failed bid last year for Warner Bros. Discovery's film and TV studios and HBO Max. Speaking on our tech news briefing podcast, Journal deputy media editor Jessica Tunkel said that Netflix, has acknowledged that it needs to address slowing viewership growth and offer more U.S. programming. Netflix is very metrics-oriented. They've always been focused on that. And one thing that they look at is what they call subscriber engagement, which is the amount of time that subscribers are actually spending watching their shows and movies. And that has been on a decline this year. And depending on how you measure it, you could say it's getting better. But we know from our sources that that has been a source of concern, and they're talking about doing all these new things. You know, in the past five years, they've been trying to do more with games. They have gotten into video podcasts recently, doing more with creators. I'm not saying that they're going to abandon those efforts, but I do think that they're going to say, we want to really focus on our movies and shows, because that's what delights our subscribers, and we want to make sure that we keep them happy. Netflix stock is down more than 40% over the past year. And the British government, has given the go-ahead for natural gas production to begin at an offshore site in the North Sea that had been bogged down in legal disputes. Our Adam Whitaker says the approval comes as Labour Prime Minister Andy Burnham has been wrestling with Britain's vulnerability to energy shocks stemming from global conflicts. There's been a lot of debate in the UK as to whether this project should go ahead. It was given its first approval in 2022 before a legal challenge from Greenpeace halted proceedings. And the UK Labour Party, which is in power at the moment, has been grappling, with this issue for some time. It presents itself as an environmentally conscious party, but rising energy prices in the UK, fears around energy security, and also worries around the signal of if you do not approve this project, what does it mean for the beleaguered UK North Sea oil sector? I think all these have conspired to tip it in balance of approval. But now that we have the approval, we expect that Shell and Norway's Equinor, who's its joint venture partner on the project, can begin production within the next couple of weeks. Today's decision comes as UK and France, and inflation creeps further above the Bank of England's target, hitting 3.5% for September as the Iran war continues to push global energy costs higher. Oil prices are rising today after Iran's Revolutionary Guard Corps said that two oil tankers had struck mines in the Strait of Hormuz. For years, the New York Stock Exchange and the Nasdaq have been trying to one-up each other and competing for the hottest new listings. But recently, it hasn't been much of a fight. The Nasdaq has won 59 company listings this year, raising nearly $120 billion, while the NYSE has landed just 32 companies, raising a total of $20 billion. Here's Journal finance editor Alex Frankos. Basically, Nasdaq is eating NYSE's lunch in terms of the number of listings, number of companies IPO-ing, and then the amount of money that they've raised. Part of that is that Nasdaq got the SpaceX listing, which was like, a mega $86 billion IPO, like the biggest of all time. So that skews the numbers a bit. But even still, the gap between Nasdaq and NYSE has widened and just shows Nasdaq is more attractive to tech companies. That tends to be where they list. They also have this rule that they changed earlier this year, and you know, just for SpaceX so that if you get listed, you can join the Nasdaq 100 index within like 15 trading days. It used to be much longer. And NYSE doesn't have an index business. And so it doesn't have that attraction. The reason companies want to get into an index is that then there are lots of ETFs that follow those indexes. So they have to buy the shares. So if you're a company, you're like, well, that's built in demand for these shares that I'm going out to sell. So let me go that direction. Yeah. NYSE, you know, comes back and says, well, you know, we've gotten lots of good listings. We've had companies move over from Nasdaq to NYSE, but they are making some moves to try to kind of restart the engine. And Alex says there's also been a shift. A shift away from wall street altogether to the upstart Texas stock exchange. There've been for years attempts to upend the kind of duopoly between Nasdaq and NYSE. So Texas has come out and said, Hey, we're a big economy on our own. We have really low regulation. Why deal with New York and all its craziness come to Texas. And you know, they've, you know, attracted a few listings. Some companies have moved over the NYSE used to have an online exchange called NYSE Chicago, which they've rebranded to NYSE, Texas. And reincorporated, they're trying to build off of the economic boom that is Texas. And it's, you know, just very popular among a certain type of business to move to Texas, lower regulation, lower taxes. You've seen a lot of companies move from California to Texas. So they're trying to build this momentum there, you know, say, well, you know who needs New York? You can have Texas coming up. I'll talk to the CEO of staffing company Ronstadt about who's hiring in a relatively quiet labor market. And what, if anything, can be done to fix the mess that's applying for a new job. Stick around after the break. How is AI shaking up the job market? We've all been wondering, and there are few companies with a better vantage point to provide answers than Ronstadt, which helps to place hundreds of thousands of workers at jobs from warehouses and factories to offices and IT departments around the world. And fresh off earnings, this morning where the company reported almost 4% organic growth. I'm joined by Ronstadt CEO, Sander Van Ot Noordend. Sander, between improved margins and net income, you are obviously making money off of the current functioning of the labor market. But I'm curious if you would say this is actually a good labor market for workers. Sander Van Ot Noordend: I would say it's an improving labor market for workers and it has all the characteristics of a classical cycle. And what do I mean by that? Uh, generally our operational business, and that's people who work in the plant in the distribution center at the airport is coming back first. And that is what we clearly see in particular in the United States. Uh, by the way, we have a growth of almost 20% in that, uh, in that business. So operational in the United States is leading the way we have our professional business in the United States, which is also back to grow. So good news for the professionals, our digital business, our technology, business is still flattish, but moving in the right direction. Something else that we see is that larger corporations in our RPO business, our recruitment process, outsourcing are also hiring more. Peter Bell: Putting myself in the mindset of someone who's very concerned about AI's disruption to the labor market. I'm trying to detect where within those divisions you might be seeing effects by AI. I mean, is your operational division just growing because I don't know, there's a, there's an AI bubble, lots of data centers being built. And when you talk about outsourcing division, actually seeing some growth, is that a sign? Maybe that a bunch of jobs aren't just being taken over by, I don't know, AI call center agents or something like that. Peter Bell: No. So let me say that is no evidence whatsoever that AI is impacting the labor market at scale. Unemployment levels are at historically low levels in most developed markets in the U S it's been hovering around 3.8, 3.9 for, I don't know how many quarters, maybe 16 or 20 quarters after COVID. So there is no, AI impact at scale. There is obviously AI impact in pockets. So the jobs that are impacted are, you know, your administrative, jobs, clerks, accounting clerks, finance clerks, marketing, design, content fabrication, customer service in a call center or on a chat type of work. So those jobs are impacted. Interestingly enough, the software developers, they would expect, well, Claude can now do everything. Yes, Claude can indeed do everything, but that has resulted in a higher demand for software developers because there's a lot of automation still to do in the world. Also, business cases, applications that were out of reach before, now with improved productivity are in reach. So we need more software engineers, if you will. Okay. AI job disruption, you say, happening in pockets. For those people who happen to be in one of those pockets, where are unfilled jobs right now? Unfilled jobs, I would say definitely in technology, so in software development, et cetera, but also in a lot of services industry. If you look in the U.S. where the job growth has come. From over the last years, healthcare has been a big driver of growth, but also hospitality, I would say in general, people working with people. I think you've described these in the past as human-centric jobs minimally impacted by AI. Exactly, exactly, yeah. Talk to us about blue-collar employment trends. You know, I know the trades, particularly the skilled trades, have been identified by you and the company in the past as being a growth area and one that may have some staying power in the future. What are you seeing there? Yeah. So skilled trades is very important, especially these days in the data centers. Your electricians, your maintenance engineers, your HVAC engineers, I mean, those are in extremely high demand and they can make very good money above 100K. Is that sort of boom and bust demand, though? People might say, you know, you only build it once and then when you need to run a data center, there's not many people employed. Obviously, the data centers will see how that all evolves. If you hear the tech optimists, they say, well, we need more compute, we need more compute, we need more compute. Obviously, there is a lot of infrastructure investments also going on in stadiums, in manufacturing facilities, in bridges, railroads, you name it. So for engineers and skilled trades, that has not been a very popular career track over the last decades because parents used to say to their kids, I mean, go to college and take a job in an office. That's changing now. But for supply to catch up with demand, I think it will take some time. The other area is the demand. The other area that's been growing is everything, I would say, on the back of digitization, e-commerce. I mean, the number of trucks you see in the streets in the U.S. from the likes of Amazon, UPS, FedEx has grown tremendously. So everything in logistics, be it on the road or be it in the warehouse, has grown and will continue to grow. You'll have seen several months ago Bill Gates writing that AI will eventually come for those jobs as well. He puts it at, you know, within the decade. Are those jobs safe? Can we speak with any confidence about the more medium, long-term there? Yeah, I mean, I think Bill Gates and some of the other tech gurus with their scenarios that everybody's going to be out of a job, I don't think they're going to happen for a number of reasons. AI, first of all, a job is not a task, meaning AI can do tasks. But think about what you have done in the last week. You've talked to clients. You've talked to your colleagues. You have tried to convince people that the organization needs to move in a certain direction. AI can do a task, but AI cannot move organizations forward. So I think people will always be needed. And then in Randstad, we like to say, well, the job after your health and your family, the job is the most important thing in your life. So people are not going to give that up just like that. They're creative. They will come up with new jobs. We have 200 million influencers making some kind of money these days. We didn't have this 10 or 15 years ago. Finally, Sander, I want to ask about the hiring process. There is a word that I cannot say on this podcast. But let's call it encrapification, the sort of gradual worsening of things. It's been used to describe elements of the modern job search between AI written resumes, AI screening of candidates, AI interviews increasingly, and then often for people applying for jobs, just sort of silence. You get ghosted by a potential employer. Is there any hope for the job search, especially if a lot of people may need to be searching for jobs in the coming years? Definitely that hope is absolutely there. Let me explain. Because the current process, automating the current process is a dead end street. More resumes, more email is just a flurry of activity back and forth generated by AI. So what we are doing is creating communities, talent communities. And when demand comes in, we automatically match. We send you a message. We say, "Look, we have a best match for you in this job. Are you interested?" And then Luke looks at the job and he says, "Hey, that's indeed a job for me. I'm interested." So it's much more focused, much more personalized, and much faster for you as a candidate, but also for our clients. So that's the new model. You cannot just automate the hell out of the current model because it's a dead end street. Sander van Ad Noordend is the CEO of Ronstad. Sander, thank you so much for being with us on What's News. Thank you, Luke. And that's it for What's News for this Wednesday morning. Today's show was produced by Daniel Bach and Hattie Moyer. Our supervising producer was Sandra Kilhoff. And I'm Luke Vargas for The Wall Street Journal. We will be back tonight with a new show. Until then, thanks for listening.