Episode summary
Union Pacific Nears Norfolk Deal to Create $200 Billion Railroad | Bloomberg Intelligence
Bloomberg Intelligence
· · Hosts: Paul Sweeney, Lisa Mateo · Guests: Lee Klaskow, Steve Man, Siddharth Philip, Mandeep Singh
Summary
Union Pacific and Norfolk Southern are in advanced talks on a possible tie-up that would create the first true east-west transcontinental railroad in the U.S., but the guest said the deal still faces a long regulatory path. He put the odds of approval below 50%, estimated a two-year approval process, and said the Surface Transportation Board would need to be persuaded the combination is in the public interest. He also said the transaction could be worth roughly high $80 billion in enterprise value and might lower costs by reducing how often railcars are handled.
The discussion then turned to Tesla, where the guest said weaker Europe sales and cautious guidance drove the stock reaction after one of the company’s worst quarters in years. He argued the business is still being hurt by politics, the fading U.S. tax credit, and lower consensus delivery expectations for 2025 and 2026. Even so, he framed Tesla as a hybrid of autos and physical AI, with cars still serving as a crucial cash generator for robotics and autonomy investment.
On airlines, the guest said American Airlines and Southwest are signaling a weaker consumer recovery than Delta and United, with continued discounting even in summer. On Alphabet, the guest said strong AI-driven search growth, YouTube subscriptions, and cloud performance justify heavier capital spending, while the biggest overhang remains the upcoming remedies ruling in the antitrust case.
Key takeaways
- The guest said a Union Pacific-Norfolk Southern merger has only about a 25% to 35% chance of happening and could take about two years to win approval.
- He said the railroad deal could lower costs by reducing railcar handoffs, but shippers may resist because it would shrink competition among class-one carriers.
- On Tesla, the guest said Europe weakness, the fading U.S. EV tax credit and softer 2025-2026 delivery expectations point to tougher times ahead.
- He said Tesla is unlikely to be split up because cars remain a key cash source for the company’s physical AI strategy.
- On Alphabet, the guest argued that AI search gains, YouTube growth and cloud scale support the higher capex, though the antitrust remedies ruling remains the biggest risk.
Notable quotes
“we give it a relatively low probability, maybe 25 30 35% chance of of happening”
“I think if if they can make a case for that um they'll have an easier time of of getting getting a deal done”
“It's going to take time”
“I do think the ROI on their capex is higher because Gemini's cost is much lower than all the other large language models”
How the episode opens
Bloomberg Audio Studios, podcasts, radio, news. You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10 a.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts or watch us live on YouTube.
All right. I've been following the railroad stocks, folks. That's where I started my career covering the railroad stocks.
Here's a headline I never thought I'd see. And that's like 1986. Union Pacific Northern Southern in advanced talks.
I never thought I'd see that. Lee Klascow, senior transport uh analyst for Bloomberg Intelligence. Lee putting a west western railroad, Union Pacific, together with a Eastern Railroad, Norfick Southern, creating a east to west true railroad.
Can that happen? Will the regulators allow that to happen? I mean, it's possible uh given where the surface transportation um uh rules are now as it relates to large acquisitions.
You know, we give it a relatively low probability, maybe 25 30 35% chance of of happening. Uh the STB is actually in August reviewing some of its rules to streamline um uh some of the processes that that it deals with. Um but you know it's not impossible but uh again you know we think that the probability is below 50%.
Uh if it were to happen it would create the first transcon railroad uh and and that could be good uh it could be good because a a rail car would be touched less because it would wouldn't have to maybe inter be interchangeed with other railroads and that does you know the more time a rail car is touched uh the more times something could go wrong. Uh, and so that would would would probably reduce um you I I would have to say it probably could reduce um some some accidents.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- railroad mergers
- tesla earnings
- airline outlook
- alphabet ai capex
- consumer demand slowdown
Companies and tickers mentioned
- UNP
- NSC
- TSLA
- AAL
- LUV
- GOOGL
- GOOG
- Union Pacific
- Norfolk Southern
- Tesla
- American Airlines Group
- Southwest Airlines
- Alphabet
Watch the episode
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
More from Bloomberg Intelligence
-
Anthropic’s IPO Is Said to Be About Six Times Oversubscribed | Bloomberg Intelligence -
Instant Reaction: Nvidia CEO Jensen Huang Ousted by Nvidia Board | Bloomberg Intelligence -
Nvidia’s Huang Ousted by Board in Move That Roils AI Economy | Bloomberg Intelligence -
CoreWeave Shares Soar After AI Computing Firm Eases Debt Fears | Bloomberg Intelligence -
Anthropic Targets $1.4 Trillion Valuation in Blockbuster IPO | Bloomberg Intelligence -
Nvidia Probe Into CEO Affair Raises Thorny Questions for AI | Bloomberg Intelligence
Bloomberg Intelligence, this episode and its artwork belong to Bloomberg. Octagon is not affiliated with the show; this page is an independent summary.
