Motley Fool Money - Has Ferrari Lost Its Mind?

Episode Date: May 26, 2026

Ferrari Luce has been announced and it’s getting widely criticised by for the design, which is very un-Ferrari. But maybe that’s the point for a company that sells vehicles that are more show item than utility. Plus, we discuss why the market is bullish on an Iran agreement and how AI spending may take a hit. Travis Hoium, Matt Frankel, and Lou Whiteman discuss: - Ferrari Luce - The market thinks the Iran conflict is coming to an end - Is AI compute spending slowing down Companies discussed: Ferrari (RACE), Apple (AAPL), Uber (UBER), Duolingo (DUOL). Host: Travis Hoium Guests: Matt Frankel, Lou Whiteman Engineer: Dan Boyd Disclosure: Advertisements are sponsored content and provided for informational purposes only. The Motley Fool and its affiliates (collectively, “TMF”) do not endorse, recommend, or verify the accuracy or completeness of the statements made within advertisements. TMF is not involved in the offer, sale, or solicitation of any securities advertised herein and makes no representations regarding the suitability, or risks associated with any investment opportunity presented. Investors should conduct their own due diligence and consult with legal, tax, and financial advisors before making any investment decisions. TMF assumes no responsibility for any losses or damages arising from this advertisement.We’re committed to transparency: All personal opinions in advertisements from Fools are their own. The product advertised in this episode was loaned to TMF and was returned after a test period or the product advertised in this episode was purchased by TMF. Advertiser has paid for the sponsorship of this episode.Learn more about your ad choices. Visit ⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠⁠megaphone.fm/adchoices Learn more about your ad choices. Visit megaphone.fm/adchoices

Can Ferrari go all-electric? Motley Fool, Hidden Gems, investing starts now. Welcome to Motley-Cool, Hidden Gems Investing. I'm Travis Hoym, joined today by Lou Whiteman and Matt Frankel. And, guys, one of the big items over the weekend that I think we got to start with is Ferrari introducing their all-electric luce, if I'm saying that correctly. We have a pizza luce down the street from me. Probably not related. But this is something that we've seen at least the guts of, John.

Johnny Ives company, Love from, design some of the internals. So we saw a little bit of that, but we actually saw the outside. The reaction from the media from, you know, influencers and people like that, Matt, was not all that positive. So what do you think about Ferrari making this step into the EV space? I mean, I could have told you before they made this product announcement that the market was going to react negatively. because it's going to be really tough for Ferrari to differentiate itself in the EB space. The company's own executives seem to think that this is the feature of the company, and I don't buy it. People buy Ferraris for specific reasons.

One, they sound different than every other car on the road. They have race car like handling, which is almost impossible with an EV because your batteries weigh 2,000 pounds. I mean, there's a lot. People who buy Ferraris don't care about being able to drive 3,000 miles in a clip. The average Ferrari goes about 2,000 miles a year. or being able to do. They're not actually for driving as much as they're probably very fun to drive. I've driven on once, but they are more of kind of a showcase than anything else.

Yeah, I think I was there when you drove your Ferrari. Yes, that's right. And being able to carry five passengers in their luggage, no one buys a Ferrari for that, especially a $600,000 upscale version. And with EB's being able to do zero to 60 and two and a half seconds is not a differentiator. You can do that with the Tesla Model S Plaid for one fifth of the price, less if you buy one used. It's not as much of a differentiator as it is when you're buying, you know, a sports car. A Ferrari sports car is noticeably faster than a Camaro. It's not noticeable will be faster

than my wife's Cadillac EB because it has instant power delivery. So I feel like the market's reaction is correct and that the EB focus is a bit of a misstep for the Ferrari. The company's, The plug-in hybrid they released not long ago was a big success. And I think that's really the direction they're going to end up going. Yeah, Lou, what's so interesting about this is the design is so different than most Ferraris. And we've seen this before. If you remember, Porsche, when they came out with their SUVs, that was actually a huge success for them. Financially, that arguably saved the company.

But this one almost seems to go a little further in that direction. I said in our show notes that it reminds me of Apple's unapologetically plastic iPhones. It kind of has that sheen to it. So it just seems like it's so far off that that's what's throwing people off. That all said, I still kind of like it. Yeah, you know, Matt, Matt's all this reaction coming. I didn't because to be honest, I'm surprised investors care.

This to me feels like the placeholder. You're a European automaker. You're an automaker in general, but especially a European automaker. You have to have something in this segment, period, just for just to just, just the politicians don't bug you when you call them up. I don't think this is a needle mover. I mean, if they really want to move the needle, they should start fulfilling some of their wait list, which has been their problem. But look, I'm not going to say that there isn't a market for five passengers with luggage. I wouldn't have thought the Porsche Cayenne would

work either. There are people who will pay ridiculous amounts to brag about what they're really, when they're just buying a, and the Cayenne kind of looks like the Kia. you ask me in a lot of ways. But, you know, so there is always a market out there for this maybe. But for the most part, you know, they're not trying to differentiate there. They're not trying to do anything more than check the box, get something in this market and then let it evolve from there. Ferrari's big differentiator is that they have the best in class margins. They don't lose money on new models. They have, they do a great job of keeping demand just ahead of supply, even on on all their new model launches.

And like we said, they have a giant wait list for most of their models. And the Porsche Cayenne was not a $700,000 vehicle, is a big thing to point. Much more mass market than Ferrari has ever been. Right. And I don't have the number in front of how much they spent developing this. But I think the investor reaction is that it won't produce the kind of margins that Ferraris used to, that they're not going to get the ROI on that spending that they do on like the plug-in hybrid, which sells for, I think, like, $800,000.

and has a long wait list. So that's really what we're seeing here, that they're not going to get the ROI on their spend, not just the look of the vehicle, but just that they're not going to make their money back. This is such a R&D intensive industry. And again, I don't know how they can avoid. I mean, nothing Matt said is wrong,

but I think it misses just a reality if you have to be doing something here and doing some of their terms. You know, I don't know. If the market was surprised by this, I think the market's got better gripes with Fri right now than this. I'll just say that. Then maybe their F1 team did have a pretty good weekend, at least with Lewis Hamilton.

So maybe that's not something that they're griping about. Lou, Mercedes also came out with a concept. That's not as close to production as it seems like the Lucha is. But is that something that it's not quite as off the kind of traditional style of a Mercedes vehicle? is that maybe going to be a little bit more successful? Or does that even matter? Is it just this placeholder that you need to kind of check the box and say you're involved in EVs,

but you're not necessarily looking to sell a lot of these? Kind of same answer, but I do think there's probably more opportunity for sales there just because nature of their customer. Look, I look through that one too, and that looked like my neighbor's Audi. So I've got out of nowadays. I don't know how you really differentiated something more.

And to be honest, I mean, you know what differentiated itself in the market it was the cyber truck. So maybe differentiating shouldn't be your number one goal. Look, of the two, I think the Mercedes can sell more, but I actually think Ferrari could turn theirs into a higher margin thing. 20% or so of that high margin is customization. That has always been Ferrari's superpower.

They designed the Luce for that. If they can, you know, if the world moves towards EVs and they have at least a concept in place that they can get some of those Ferrari-type customizations mods on. I think this could be a success, but no, I mean, again, I don't think you can invest on it today. I think you invest on whether or not they can fulfill their backlog. The people who are giving Ferrari flack today are probably also not the people who are going

to be buying a Ferrari or making those customizations. The answer is going to be who is the billionaire, the several hundred millionaire who was willing to drop, you know, $800,000, a million on a new electric vehicle to differentiate themselves from the crowd. I think those people will be out there. When we come back, we're going to turn ourselves to why the market is up today, and that has to do with Iran. You're listening to Motley Fool, Hidden Jem's Investing. Dell PCs with Intel Inside are built for the moments that matter for the moments you plan and the ones you don't. Built for the busy days that turn into all-night study sessions, the moment you're working from a cafe and realize every, every,

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NASDAX's up over 1% as we're recording, and oil is down 2.4% lieu. The reaction is due to a new piece-ish deal in the Middle East. It seems like we're going back and forth on this, I don't know, almost a daily basis. But the market continues to react. And so I wanted to get your thoughts on whether this is something, Is this nothing? Is the current situation where oil price is now $94 a barrel, at least WTI,

that seems like it's going to continue to trickle its way through the economy. So how should investors be thinking about this kind of back and forth with the stock markets and the real, data that's coming out that showing that gas prices are high for longer than we expected, and inflation may be a little bit sticky? It seems like the difference this time is both sides seem to think that they're talking this time. And previous announcements apiece, maybe we're more one-sided. I do think we should wait and actually see what happens before we assume, but the market doesn't agree with me there. So the market is up on this assumption. It would help. It definitely would help. You've mentioned oil prices

are trending down. But more importantly, what we've learned from this is oil prices don't matter so much as the refined products and the products that come out of oil. That's going to take time. Gas didn't spike up. Gas has trickled up the last few months. I don't think there's any reason to think that it won't, that same thing won't happen on the way down. There's plenty of unknowns here, even if the straight is actually opened. We still need ship captains to test that the straight is open. I mean, look, we talk about this like a commodity. There are human beings about to sail through that, you know, so it tends to open up slower. If the Red Sea is any guide, it's, it's a good. tends to open up slower than what you think. How much damage was there to the infrastructure? Normalization on oil flows is going to take months, if not years. I don't think the economic impact on reopening will happen any faster. An immediate knee-jerk reaction is what we might see if we get a deal. I'm just looking back when we had that two-week ceasefire deal that was announced in April,

oil prices crashed by about 16 percent the next day. But lower and, quote, back to where we were are two very different things. As Lou mentioned, there are the numbers over 800 tankers that are stuck in the Strait of Hormuz that need to get moving. You know, supply chain, shipping routes, energy infrastructure, that's not just going to snap back overnight. Economists widely expect oil prices to stay above pre-war levels until the end of the year, even if a deal is reached. And same goes for inflation. I don't expect to snap back to 2% immediately. And not just because of energy prices. I mean,

peace deal is, it's a positive catalyst for lower inflation, but it's not deflationary. So it's really important to differentiate between those two terms. Matt, this reminds me of when we talked about inflation

coming out of COVID being transitory. And what do you do if you're the Fed? If inflation is transitory, it turns out it was kind of transitory, but that transitory lasted a while. It was not a, you know, spikes up for six months, and then comes back down to where it was.

I think it was like a two-year span. We raised interest rates tremendously. Is this what you would expect to see is, hey, yeah, maybe this is the beginning of the end of this conflict and the economic impacts, but we're going to be feeling this for quite a while? Yeah, I mean, I'm pretty sure Jerome Powell wishes he could take that word back transitory when he said it.

We still have not gotten back to the 2% target if it's worth mentioning, even now. You know, inflation was the highest. it's been since 2023 last month. And it's not just energy. There's a lot, there are other contributing factors as well. I mean, when we came into 2026, I thought tariff uncertainty was a thing of the past. And then, you know, boom, it just shot back up. So it's not just the energy price inflation. But, no, I think it's going to take a little longer to cool off. I think the Fed's going to be a little bit more deliberate in acknowledging that it's going to take a little longer

to cool off than they had been before. I still think over the next two years, that the general direction of inflation and interest rates is lower, but it's going to be a much more steady and slow decline than a lot of people think. Yeah, and it may be lower from the peak, but I don't, I question what the forces are that's going to really push, put pressure on rates and put pressure on inflation. We talk, I mean, wouldn't it be great, Travis, if we could just go back to talking about things like the deficit and stuff like that

is it as driving things, but it is, it is, it is, is really, really hard to see the bond market believing that we are in a above average credibility market, even if all of these external factors go away overnight. I think more normalized inflation relative to the beginning of this decade should be expected. Is it down from the highs? probably, but we aren't going anywhere near to lows. And if anything, I think we should learn to live what we've had the first few months of the year. I think this is going to feel more normal than a few years ago. Yeah, and we are stock investors, but just a reminder that bond investors run about 10 times more money. The bond market is much, much bigger than the stock market.

So it is important from time to time to listen to what they're telling us with what's going on with rates, and it seems like those expected rates are going higher, at least later this year. Something to keep an eye on for investors. When we come back, we're going to talk about a potential slowdown in AI spending from some of the big tech companies you're listening to. Motley Cool, Hidden Gems investing. The Madamy Holmes bike for brain health supporting Baycrest returns on May 31st for its fifth anniversary with a new start and finish at the Aga Khan Museum. Join thousands of cyclists as we take over the DVP and Gardner Expressway in support of dementia

research and brain health. Writers of all abilities are welcome, and both regular bikes and e-bikes can participate. Bring your friends, family, or corporate team, and make an impact. Register today at bikeforbrainhealth.ca. Welcome back to Molly Fool, Hidden Gems, investing. AI has obviously been the talk of the market over the past few years, and this year it is what's driving a lot of stocks higher, particularly in semiconductors and all the big Kappex spending. But over the last few days, and particularly over the weekend, we got some indications from some

pretty big names in artificial intelligence that maybe the payoff that they were looking for is not necessarily there. Matt, Uber, Valve, and Duolingo were three of the companies that have at least given us indications. I think Uber was kind of the most vocal, but indications that, hey, we're spending a lot of money on AI. We don't know that there's a real ROI there. So are we at a new phase where the token consumers, which are these companies, are

questioning, hey, is there really a payback here? Yeah, and to be clear, if we see more CFOs and CLOs start to question their AI spend, that's a generally good thing. You know, no one wants the companies they invest into waste money. It's a good thing overall. Uber, just to kind of add a little bit of context, their CFO, he publicly admitted that the company cannot, you know, show a clear connection between how much they're spending on AI tokens and how much value they're getting out of it.

just the numbers. Uber has about 5,000 engineers, each of which are spending about between $500 and $2,000 a month on AI tools, depending on what sorts you're looking at. I mean, that's millions of dollars a month with no clear payoff yet. And it's not, this is not to say we're in an AI spending bubble. It's the use cases for AI are different depending on what your business is. I mean, just for example, financial services. That's an area that I follow very closely. If you can use your AI tokens to automate document processing, to automate loan approvals, things that you would normally have to pay somebody to do, you can more clearly show an ROI on what you're doing. So there are applications in the retail space to automate certain processes, logistic space.

So basically, if you can use your AI tokens to automate processes and reduce labor costs and show clearly what you're going to do, do with it. It's a much better, you know, use case than just to, you know, help write code and things like that that don't have a clear immediate payoff. And that's what we're starting to see executives question. Yeah, Lou, we've also seen the word token maxing be something that people have talked about. When you put incentives in to say, hey, use more AI and maybe you'll get the promotion, maybe you'll get a raise, the incentives, you know, show me the incentives. I'll show you the outcome, and maybe that outcome doesn't lead to a lot of ROI. Yeah.

Not everybody here can be right. And I don't think we know what part is wrong. And that sort of scares me as an investor. Matt's right. It might be that just this is a good tool for some things, but not everything. But we just had a company file in IPO saying their enterprise AI total addressable market is about two thirds of total US GDP. Yeah.

So again, something can't be right there. or just AI has to get cheaper to kind of fulfill the goal. And we talked about this last week. It's actually getting more expensive. Focons are getting more expensive. Not only is it getting more expensive, but the AI hyperscalers are companies that have traditionally enjoyed a mid-teens return on invested capital.

Right now, their return is negative. So they have to either figure out how, I mean, at some point, hopefully the buildout won't go on forever, but it is going to go on for a while. at some point they're going to have to figure out how to, I don't know, 15X the revenue they are bringing in here somehow on the same cost basis? All of this can't be true. We can't have this just as kind of select, but not everything, but it's going to take, it's going to eat software. We can't have it. Well, it needs to get cheaper, but the hyperscalers need to generate this ROIC.

we don't yet know which way it breaks, but mark my words, something is going to break here. Not everything the market believes right now and not everything we are seeing as a trend can be true at the same time. There's a tension there. That tension will resolve itself at some point. Yeah, definitely something that we're trying to figure out exactly what's going on. We've covered this a few times on the show and kind of the different angles with the buildout with, you know, what is the ROI?

what are customers saying, where is the real payback? And I think we may be entering a different phase. We saw last week some of these hypers increasing their prices. That's telling you that they're thinking about the economics of their business. Now you hear Uber say, you know what? Maybe we're spending too much on tokens. They're thinking about the economics of their business. So that can be good for some of those players,

but there's definitely not going to be some players that aren't going to like this willy-nilly spending. So something we'll be definitely covering in the future. as always, people on the program may have interests in the stocks they talk about, and the Motley Fool may have four more recommendations for or against, so don't buy or sell stocks based solely on what you hear. All personal finance content follows the Motley Fool's 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. For Lou Whiteman, Matt Frankel, and Dan Boy Behind the Glass, I'm Travis Oam. Thanks for listening. We'll see you here tomorrow.