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Speaker 1: Bloomberg Audio Studios, podcasts, radio news. You're listening to the

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Speaker 1: Bloomberg Intelligence Podcast. Catch us live weekdays at ten am

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Speaker 1: Eastern on Apple Coarclay and Android Auto with the Bloomberg

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Speaker 1: Business App. Listen on demand wherever you get your podcasts,

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Speaker 1: or watch us live on YouTube.

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Speaker 2: I'm gonna start with the Meta news because it looks

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Speaker 2: like mister Zuckerberg really is putting himself personally on the

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Speaker 2: line here for some of their AI businesses. Ed Lodo

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Speaker 2: joins us Bloomberg b Tech co host. He's out there

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Speaker 2: in San Francisco where I think they have some technology people.

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Speaker 2: And what's the news coming out of Meta today? Can

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Speaker 2: you tell us what that is and kind of if

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Speaker 2: it's important or not.

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Speaker 3: Yeah, our reporting is very detailed. Which site sources that

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Speaker 3: Mark Zuckerberg is getting much more hands on on the

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Speaker 3: minut sha of generations generation model releases, AI model releases.

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Speaker 3: But the bigger picture is that Meta, which has kind

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Speaker 3: of been the stulwork of open source AI models, is

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Speaker 3: realizing that it may not be the viable path. So

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Speaker 3: there is a specific model that they're due to release

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Speaker 3: called Avocado, and at one time that had been due

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Speaker 3: to be an open source model. What we're reporting citing sources,

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Speaker 3: it's now likely to be a closed source model. Alexander Wang,

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Speaker 3: who leads this kind of AI lab team that marks

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Speaker 3: Zakovolk's put together, is a great advocate for closed source.

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Speaker 3: And what you need to know is that in the

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Speaker 3: earlier days, when models were much smaller and Meta kind

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Speaker 3: of wanted workshopping among industry and academics.

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Speaker 4: Worldwide, it worked.

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Speaker 3: But the problem now is that these models are so

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Speaker 3: big the resources required to utilize them are so severe

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Speaker 3: that it's just not realistic to have an open source

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Speaker 3: policy universally. Because you need money and private industry has money.

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Speaker 3: You have to make it a kind of for profit

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Speaker 3: exercise in order for the economics of training and then

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Speaker 3: running the models to work. And that's what our story details.

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Speaker 3: It's really is a must read. What I would say

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Speaker 3: is that Meta in its earning school in July did

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Speaker 3: kind of tell us this was coming. They're committed to

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Speaker 3: open source, but they're going to have to start looking

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Speaker 3: at the reality of what it takes to build and

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Speaker 3: train a model and then put it out into the

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Speaker 3: real world in terms of who can use it all.

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Speaker 5: Right, ed, you've been very busy.

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Speaker 6: I know you've been writing about SpaceX as well, so

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Speaker 6: I'm going to ask you about that.

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Speaker 5: Tell us about this IPO.

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Speaker 6: I mean, it seems like it's going to be trying

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Speaker 6: to rival the Aramco IPO that we saw a few

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Speaker 6: years ago one point five trill and evaluation. What's the

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Speaker 6: single biggest justification for that?

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Speaker 4: Yeah, I mean, we're reporting that it's happening.

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Speaker 7: You know.

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Speaker 3: My understanding from sources is the work as well underway.

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Speaker 3: They're speaking to the bankers, they've told the investors, they're

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Speaker 3: hiring for the internal roles that you need when you

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Speaker 3: do a big IPO, and the targets the middle of

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Speaker 3: next year.

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Speaker 4: You know.

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Speaker 3: The valuation is what everyone's talking about. One point five

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Speaker 3: trillion dollars. We confirmed that the company's latest valuation in

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Speaker 3: the private markets through a tender settled at more than

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Speaker 3: eight hundred billion, So that is kind of like a

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Speaker 3: stepping stone to an IPO. But what I understand is

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Speaker 3: they need some cash for a specific project. We can

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Speaker 3: get into it if you want. That cash is probably

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Speaker 3: well north of thirty billion dollars, maybe forty billion dollars,

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Speaker 3: and that would exceed what Aramco raised in twenty nineteen,

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Speaker 3: So from a dollar raised perspective, it would make it

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Speaker 3: the biggest IPO of all time, which is exciting.

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Speaker 2: It surely is. I mean, particularly for the bankers on that.

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Speaker 2: What's the total valuation? Do we know the total valuation

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Speaker 2: of SpaceX these days, because I've heard some just monster numbers.

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Speaker 3: So Elon Musk has been pushing back on X recently

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Speaker 3: about reports of SpaceX's valuation. What we have reported, and

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Speaker 3: this is we stand by that reporting, of course, is

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Speaker 3: SpaceX has gone through a tender, a secondary offering. That

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Speaker 3: is a mechanism where the company allows existing employees and

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Speaker 3: some insiders early investors to sell the shares they already have.

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Speaker 3: As part of that, SpaceX actually buys back some stock,

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Speaker 3: but they don't raise any new equity, They don't raise

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Speaker 3: any funds for.

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Speaker 4: The company's treasury.

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Speaker 3: But you still need a price for those shares, and

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Speaker 3: that determines the valuation. That price was settled at four

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Speaker 3: hundred and twenty one dollars a share, and that gives

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Speaker 3: evaluation north of eight hundred billion dollars.

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Speaker 4: And that's settled.

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Speaker 3: But again SpaceX does this twice a year typically, you know, tenders, buybacks,

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Speaker 3: et cetera. But in this case, this would be the

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Speaker 3: big one to kind of get fair market value ahead

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Speaker 3: of an IPO.

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Speaker 7: Stay with us. More from Bloomberg Intelligence coming up after this.

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Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live

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Speaker 1: weekdays at ten am Eastern on Apple, Cocklay and Android

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Speaker 1: Auto with the Bloomberg Business app. Listen on demand wherever

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Speaker 1: you get your podcasts, or watch us live on YouTube.

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Speaker 7: We had a client earlier.

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Speaker 2: Christine was referencing some funuciary trust is referenced on I'm

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Speaker 2: waiting for the BI survey on AI and like what

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Speaker 2: b I SERVI on AI? Matt Blocksham Joints is he's

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Speaker 2: a tech analyst for Bloomberg Intelligence. Hey, Matt, talk to

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Speaker 2: us about this BI survey on AI. What is it

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Speaker 2: and what's what's it telling you?

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Speaker 8: Yeah?

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Speaker 6: Sure.

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Speaker 8: So this was a big survey we did, polling the

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Speaker 8: views of six hundred and four C suite executives across

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Speaker 8: the range of industries across the world, really kind of

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Speaker 8: get trying to get a sense on how corporates are

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Speaker 8: assessing the current AI situation and what they think is

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Speaker 8: going to do to their businesses over the next kind

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Speaker 8: of two to three years. So we kind of looked

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Speaker 8: at the motivations for AI investment, what it could do

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Speaker 8: to headcount, what they're expecting in terms of revenue and

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Speaker 8: profit uptick, and you we had some kind of interesting

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Speaker 8: results out the survey. You know, not surprisingly, perhaps AI

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Speaker 8: is very much at the top of the c suite agenda.

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Speaker 8: Something like thirty six percent of those polls said it

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Speaker 8: was their top strategic priority. In another forty seven percent

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Speaker 8: said it was within the top three strategic objectives for them.

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Speaker 8: When we looked and asked about the main objectives behind

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Speaker 8: their AI strategies, what came out top was improving operational efficiency,

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Speaker 8: which was number one with forty seven percent of the respondents,

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Speaker 8: and in second place was boosting a revenue at twenty

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Speaker 8: one percent. Interestingly, headcount cuts were quite low down the

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Speaker 8: packing order. Only thirteen percent of respondents put that as

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Speaker 8: their top priority, and actually it was the highest ranked

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Speaker 8: in terms of the least priority. So I think it's

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Speaker 8: interesting that companies are looking to boost productivity, but they're

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Speaker 8: not afraid to make investments both in technology and headcount

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Speaker 8: in the near term to kind of release those opportunities.

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Speaker 8: And actually on a three year view, sixty two percent

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Speaker 8: of respondents they expect AI to lead to an increase

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Speaker 8: in headcount over the next three years, an increase, not

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Speaker 8: a decrease, and the average increase they're looking at is

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Speaker 8: about four percent. So that kind of flies in the

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Speaker 8: face of a little bit of you know, a lot of

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Speaker 8: the kind of headlines we see about job cuts. I

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Speaker 8: think overall, corporate see the need to invest more in staff,

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Speaker 8: you know, to roll out their AI strategies in the

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Speaker 8: coming years. Yeah.

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Speaker 6: Yeah, Well, Matt, you mentioned thirty six percent of c

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Speaker 6: suites now rank AA as their top priority. That number

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Speaker 6: actually strikes me as a little low. I would have

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Speaker 6: thought it would be at least half of the people's survey.

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Speaker 6: But what do you think, is that something that's just

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Speaker 6: set to grow in future surveys as really kind of

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Speaker 6: AI becomes central to a lot of companies workflows these days.

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Speaker 8: Yeah, I think so. I mean, like, you know, obviously,

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Speaker 8: if you add the forty seven percent that said it's

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Speaker 8: in the top three, I mean, you know, an overall

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Speaker 8: top three priority gives you the kind of vast majority

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Speaker 8: of the respondents. So obviously companies do have to wrestle

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Speaker 8: with lots of other issues too. You know that there

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Speaker 8: is going on in the world beyond AI, and obviously

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Speaker 8: trade policy is another big thing that's probably on the

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Speaker 8: radar for a lot of these companies too. So yeah,

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Speaker 8: you know, maybe it will kind of inch up, but

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Speaker 8: I think you've given that aggregate, you know, age percent

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Speaker 8: plus in the top three probably what you'd expect to see.

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Speaker 2: Matthew, how about return on investment here? That's kind of

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Speaker 2: what the streets starting to ask for now. We know

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Speaker 2: these companies can spend big money on AI, but what's

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Speaker 2: the return for shareholders?

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Speaker 8: Yeah, I think that's still very opaque. And actually, when

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Speaker 8: we asked the respondents to flag the biggest roadblocks they

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Speaker 8: could see to AI deployment, the investment needed in AI,

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Speaker 8: and the question marks around the return on investment, we're

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Speaker 8: definitely up there amongst some of the most important concerns

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Speaker 8: that respondents have, along side data security and clean data.

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Speaker 8: We didn't ask much of the most specific ROI expectations.

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Speaker 8: We just kind of get the sensor. It's a bit

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Speaker 8: too early to get an accurate read on that. I

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Speaker 8: think most companies are still kind of at a relatively

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Speaker 8: early stage of their AI trials, you know, lots of

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Speaker 8: them have moved out of the kind of testing lms.

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Speaker 8: They're into pilot phases, some of them are even moving

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Speaker 8: into scale deployment. I think it's fair to say a

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Speaker 8: lot of them are not really quite sure yet what

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Speaker 8: the return is going to be and how quick it's

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Speaker 8: going to come. And obviously it's kind of a bigger

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Speaker 8: issue for the wider tech sector. And you mentioned Oracle

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Speaker 8: as a kind of barometer for the kind of broader

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Speaker 8: pulse on AI, and I think the twenty twenty six

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Speaker 8: is going to be a really crucial year for kind

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Speaker 8: of what corporates make of the midterm ROI. And you know,

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Speaker 8: if they don't see a big ROI, then that's probably

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Speaker 8: going to slow the pace of revenue growth and that's

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Speaker 8: going to have a knock on effect to the levels

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Speaker 8: of investment we're seeing. But I likes of Oracle and

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Speaker 8: open eye on the revenues that bringing in.

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Speaker 7: Stay with us more from Bloomberg Intelligence coming up after this.

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Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live

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Speaker 1: weekdays at ten am Eastern on Applecarplay and Android Auto

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Speaker 1: with the Bloomberg Business app. Listen on demand wherever you

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Speaker 1: get your podcasts or watch us live on YouTube.

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Speaker 7: Let's switch gears.

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Speaker 2: Going back to earnings here, earnings continue to kind of

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Speaker 2: trickle out a little bit, particularly from the retail oriented

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Speaker 2: companies that packet foods companies. One of them is Chewy.

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Speaker 2: Let's break that down with Diana sat Open. Yes, she

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Speaker 2: is an analyst covering the retail space consumer product space

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Speaker 2: for Bloomberg Intelligence.

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Speaker 7: What are good friends at Chewy dot com doing?

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Speaker 5: They're doing fairly well.

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Speaker 9: You know, they actually reported sales and profitability that beat

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Speaker 9: analysts expectations, you know, for their outlook, it seems that

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Speaker 9: they're a little bit conservative that actually, you know, level

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Speaker 9: up some of the gains earlier this morning for the stock.

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Speaker 9: But again it seems that there's a lot of tailwinds

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Speaker 9: going forward.

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Speaker 6: Yeah, what's reaving that more conservative outlook that you mentioned, Diana,

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Speaker 6: Is it something related to you concerns about consumer demand

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Speaker 6: moving forward?

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Speaker 5: That is absolutely the case.

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Speaker 9: They're seeing household formation, which is adoption versus surrendering a

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Speaker 9: little bit subdued compared to historical averages, and they think

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Speaker 9: that that's going to overflow into twenty twenty six.

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Speaker 5: We're not necessarily agreeing with that.

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Speaker 9: We think at we're a little bit more optimistic in

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Speaker 9: terms of, you know, the pace of adoptions going forward.

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Speaker 9: So this is going to make the industry a little

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Speaker 9: bit more interesting.

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Speaker 2: This is it people recall definitely one of the pandemic

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Speaker 2: stocks that just surged to a high of at one

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Speaker 2: hundred and eighteen hundred nineteen dollars a share back in

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Speaker 2: early twenty twenty one and then came down to a

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Speaker 2: more normal level here. So going forward, what's the growth

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Speaker 2: drivers for Chewy? Is it taking share from the mom

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Speaker 2: and pop pet stores, is it we're just macro.

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Speaker 7: Stuff, household formation and things like that.

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Speaker 9: Well, there's gonna be a couple of things. They're focusing

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Speaker 9: on verticals besides merchandise, which is you know, they're doing

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Speaker 9: a lot of bad care. They're expanding into that. They

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Speaker 9: are currently have fourteen buildings on that they're expanding into

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Speaker 9: eighteen by the end of the year. So you know,

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Speaker 9: you have healthcare, you have sponsor ads in the website,

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Speaker 9: you have you know, the membership program, you have a

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Speaker 9: Chewy Plus. So all of those things were probably going

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Speaker 9: to be teilwinds for the company going forward. They're focusing

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Speaker 9: on like gaining mid to high single digit sales growth

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Speaker 9: over the next few years, which is I think it's

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Speaker 9: a normal forecast, but right now they're you know, growing

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Speaker 9: two times the size of the industry.

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Speaker 5: So yeah, it's interesting.

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Speaker 6: Is this a trend that you're seeing moving forward for

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Speaker 6: a lot of these kind of consumer based companies shifting

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Speaker 6: back a little bit to that in store sort of

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Speaker 6: experience because that seems to be a strategy that's worked

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Speaker 6: for other retailers outside of the space as well.

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Speaker 3: Yes.

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Speaker 9: So, you know, the pet industry, it's very sticky in

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Speaker 9: terms of demand. So once these companies get the pet

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Speaker 9: parent at the start of the you know, pet ownership,

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Speaker 9: they are going to have them for the rest of

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Speaker 9: the life of the pet. So you know, that is

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Speaker 9: obviously a very interesting dynamic compared to other retailers. But

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Speaker 9: in terms of, you know, the in store experience, this

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Speaker 9: is something that pet Co is also doing. They're leveraging

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Speaker 9: their fourteen hundred stores to also increase that traffic and penetration.

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Speaker 9: So definitely interesting times.

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Speaker 2: So Walmart, Amazon, how does Chewi compete against those players

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Speaker 2: that have big, big e commerce platforms.

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Speaker 5: So based off of them, they compete on price.

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Speaker 9: We a couple of years ago, we did a price

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Speaker 9: and study with Amazon, but Walmart and Chewy and other

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Speaker 9: retailers and Chewy and Amazon, we're pretty close in terms

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Speaker 9: of pricing where Amazon. Where Chewy beats Walmart and Amazon

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Speaker 9: is that their customer service. They you know, if you

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Speaker 9: call them and you have any questions about the food

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Speaker 9: that you're going to feed your dog, they're very knowledgeable

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Speaker 9: compared to you know, Amazon customer service.

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Speaker 5: So that is like the edge that they have.

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Speaker 6: Oh, very interesting.

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Speaker 10: Now.

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Speaker 6: Another bright spot, of course is autoship, right, which is basically,

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Speaker 6: if you're a pet owner, this is the thing that

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Speaker 6: you sign up for like my cat's food each month,

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Speaker 6: and then it just keeps charging me every month and

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Speaker 6: then I get surprice delivery of cat food that I

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Speaker 6: was not maybe expecting. But so obviously that's a bright

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Speaker 6: spot for Chewy. What's the outlook for that part of

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Speaker 6: the business. Is that something that could be sustainable?

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Speaker 5: Yes, absolutely so.

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Speaker 9: Right now, eighty four percent of their revenue comes from authorship,

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Speaker 9: which allows them to have a lot of scale and

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Speaker 9: allows them to be very profitable. So that is obviously

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Speaker 9: they have been growing since I started covering this company.

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Speaker 9: It was like in the seventies and now it's eighty four,

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Speaker 9: so it's probably going to get to the nineties soon.

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Speaker 6: It's very convenient because you sign up for it and

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Speaker 6: then you forget about it.

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Speaker 7: Stay with us. More from Bloomberg Intelligence coming up after this.

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Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live

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Speaker 1: weekdays at ten am easterne on Apple, Corplay and Android

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Speaker 1: you get your podcasts, or watch us live on YouTube.

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Speaker 2: Krakerbo reported some numbers today, some disappointing guidance stufs kind

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Speaker 2: of flat on the day, but the stock has been

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Speaker 2: down pretty significantly this year. They had that whole low

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Speaker 2: go change that was a real problem for them, and

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Speaker 2: they're starting to see in their traffic.

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Speaker 7: Pretty big time. Stocks down about fifty percent year to date.

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Speaker 2: Michael Halen joints his senior restaurant and food service analyst

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Speaker 2: for Bloomberg Intelligence. Michael, what did the company report today

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Speaker 2: and what's management saying about kind of the future plans here?

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Speaker 10: Yeah, so, you know, guidance was cut and this was

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Speaker 10: their fiscal first quarter, so it's it's always tough to

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Speaker 10: have a guidance, revenue and ebitdoc cut after your first report,

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Speaker 10: but they hadn't seen a bounce yet in their traffic

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Speaker 10: post logo change controversy and everything that that went along

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Speaker 10: with it, you know. On the positive side, they said,

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Speaker 10: you know, traffic has now steadied at this down ten

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Speaker 10: to eleven percent level, which is translating into a you know,

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Speaker 10: a down a mid single digit.

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Speaker 7: Same store sales.

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Speaker 10: You know, So if you're if you're a glass half

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Speaker 10: full investor, you're saying that, you know, after the stabilization

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Speaker 10: comes in improvement. You know, their new guidance has a

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Speaker 10: pretty wide range. So the low end of the range

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Speaker 10: is assuming no improvement through year end, which we think

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Speaker 10: could be sounds pretty conservative to us, you know, and

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Speaker 10: then on the higher end they would see a gradual

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Speaker 10: slow improvement in traffic going forward. So what are they

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Speaker 10: going to do? You know, it's going to be a

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Speaker 10: continue to be about improving the operations, right that's been

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Speaker 10: you know, a key tenant under under CEO Julie Messino.

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Speaker 10: It's also going to be food innovation. It's going to

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Speaker 10: be Southern favorites, it's going to be twists on old classics.

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Speaker 10: It's going to be bringing back items that people love

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Speaker 10: they want to see return to the menu. But I

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Speaker 10: think what really stood out is their willingness to listen

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Speaker 10: more closely to their customers. I think that's a big

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Speaker 10: key point of focus for them moving forward after the

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Speaker 10: controversy that they suffered.

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Speaker 6: Well, Michael, So in terms of what are they going

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Speaker 6: to do right, it seems as a cutting capex is

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Speaker 6: a part of the plan. Is that something that you

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Speaker 6: think wood single discipline or does it actually risk slowing

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Speaker 6: to turn around even more?

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Speaker 10: Well, they're going to still refresh the stores. What they're

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Speaker 10: cutting back on is a more extensive remodel, which was

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Speaker 10: in tandem with the logo change, which was something that

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Speaker 10: was angering customers.

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Speaker 4: Right.

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Speaker 10: So I think the capex change is probably you know,

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Speaker 10: the lowered capex is probably smart. But they're going to

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Speaker 10: continue to refresh their stores. They're going to continue to

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Speaker 10: give them a fresh coat of pain, improve floors where

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Speaker 10: they need to clean up the bathrooms, things of that

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Speaker 10: nature that nobody's going to get up in arms over.

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Speaker 2: I'm actually surprised in hindsight that maybe this manager team

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Speaker 2: kept theirs there. I mean, this was a real self

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Speaker 2: inflicted wound there. What's the shareholder's been saying. Has it

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Speaker 2: been any pushback other than selling the shares?

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Speaker 10: Yeah, So listen, Julie Messino the you know that you

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Speaker 10: make a great point, Paul and Julie Messino. The reason

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Speaker 10: why I believe she's still there is that she was

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Speaker 10: doing a great job until until this controversy hit. You know,

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Speaker 10: this is a chain that had been bleeding traffic for years, right,

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Speaker 10: They've been really struggling for a long time to bring

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Speaker 10: in younger consumers, right, and she had shown pretty good

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Speaker 10: success over the twelve months leading into the logo change.

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Speaker 10: Same Star sales at the restaurants were up five percent

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Speaker 10: in the August quarter. So I think that's why, you know,

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Speaker 10: the proxy fight kind of failed, the attempt to remove

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Speaker 10: her from the board failed, And why she still has

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Speaker 10: her job right now is that they this chain was

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Speaker 10: a mess prior to her arrival, and she was showing

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Speaker 10: some pretty good progress up until August.

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