Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
Speaker 2: From Mahart where Innovation, money and power Collie in Silicon
Speaker 2: Valley NBN.
Speaker 3: This is Bloomberg Technology with Caroline Hyde and.
Speaker 4: Ed Ludlow.
Speaker 5: Live from New York and San Francisco. This is Bloomberg
Speaker 5: Technology Coming up.
Speaker 6: Google's AI bet is paying.
Speaker 5: Off shares surging on the company's cloud growth.
Speaker 4: Plus byd beats Tesla on quarterly revenue for the first
Speaker 4: time in the battle between the two ev giants.
Speaker 5: And super Micro, shares plunge after Ey resigns as the
Speaker 5: auditor to the troubled server maker.
Speaker 4: But first, Ed, Yeah, straight to that top story. Super
Speaker 4: Micro is a server maker. It takes those high performance
Speaker 4: GPUs from names like n Video and AMD packages them
Speaker 4: up for data centers. Ey, its auditor, has resigned citing
Speaker 4: concerns about the company's ethics, its integrity, and specifically management
Speaker 4: in the audit committee. The stock is down more than
Speaker 4: thirty percent. That puts it on track for its biggest
Speaker 4: drop since October twenty eighteen. This is complex and there
Speaker 4: is a backstory and a series events that went on
Speaker 4: with super Micro. Let's bring in bloombergs brody Ford to discuss.
Speaker 4: Ey told us about this brody in a regulatory filing.
Speaker 4: First off, what did they say.
Speaker 7: Yes, these are some words that you never want to
Speaker 7: hear from your auditor. Right, we only got a snippet
Speaker 7: of the resignation Letterer, but effectively, Ey said that they
Speaker 7: received some information that made them feel that they could
Speaker 7: not continue with this. And in addition, they felt that
Speaker 7: there was information they weren't getting right. So there was
Speaker 7: something that made them feel that they were not right,
Speaker 7: and that they said they weren't willing to put their
Speaker 7: name behind reports that came out from this management committee.
Speaker 7: Obviously investors have to read a bit of tea leaves here,
Speaker 7: but they're not exactly mincing words. It doesn't look great
Speaker 7: for a company that's financials are on pause. We are
Speaker 7: waiting to see them. Yeah, and they say that they
Speaker 7: are not going to restate, but clearly the shares today
Speaker 7: there's anxiety that they will right.
Speaker 6: Berdy to the point of tea leaves. This tea has
Speaker 6: been being made for a long time.
Speaker 5: They've had the Hindenburg research, We've had many people calling
Speaker 5: out concerns in this way.
Speaker 7: Yeah, and I mean even going back to twenty twenty,
Speaker 7: super Micro paid to settle claims from the SEC about
Speaker 7: accounting issues, right, and so there has been these kind
Speaker 7: of murmurs for a little while that super Micro had
Speaker 7: some accounting issues that were going on. As you said that,
Speaker 7: there was a large Hindenburg report. About a month later,
Speaker 7: the company said that, hey, we're going to you know,
Speaker 7: delay our annual filing, a very rare step of a
Speaker 7: company of this scale. It's something you do not see
Speaker 7: very often. When you do, often there are no issues
Speaker 7: at the end. Not to say that there are. We're
Speaker 7: we're still waiting to see you. But yes, this has
Speaker 7: been kind of bubbling for a while, and this is
Speaker 7: certainly a moment where the pot seems to be tipping'.
Speaker 4: Okay, I just want to do this. It's important for
Speaker 4: our audience. Super Micro settled in accounting probe in twenty
Speaker 4: twenty with the SEC. But in April this year, a
Speaker 4: former employee accused them through litigation of exaggerating or misstating revenue.
Speaker 4: Then you had the Hindenburg report in August, and then
Speaker 4: last month the stock sank because of reports that the
Speaker 4: DOJ's investigating. That's the background, but we care about super
Speaker 4: Micro because of its role in AI infrastructure. Explain that part, Brady.
Speaker 7: Yes, very expert history there. I appreciate you giving that
Speaker 7: in simple English. But yeah, we care about super Micro
Speaker 7: because all of a sudden, everybody needs to run these
Speaker 7: advanced work flows for AI and it requires much more
Speaker 7: powerful servers. And there's really three companies that are selling
Speaker 7: these right now. Right it's HPE, Dell and super Micro,
Speaker 7: and so super Micro this year has seen an incredible
Speaker 7: ramp at revenue. There are debates over the margins some
Speaker 7: of that revenue, because you know, it requires these super
Speaker 7: expensive chips. But the server makers, which were somewhat of
Speaker 7: a sleepier segment of the tech industry maybe two years ago,
Speaker 7: have really come into the center of the zeitgeist, which
Speaker 7: makes this whole disruption kind of all the more. You know, cinematic.
Speaker 5: Cinema is what potentially we'll get on November the fifth,
Speaker 5: not because it's election day only, but because that is
Speaker 5: when we will see the earnings being restated. We understood
Speaker 5: by the company, as you mentioned before, Brody, super Micro
Speaker 5: does not expect the issues to lead to revisions in
Speaker 5: previously issued financials.
Speaker 6: We want to thank you, Brodie Ford.
Speaker 5: Now we've got a lot to digest today Alphabet up
Speaker 5: five percent. We were higher than this earlier, but we
Speaker 5: surge on the back of of course AI paying off Alvabit. Look,
Speaker 5: they might not be buying all their chips from AMD
Speaker 5: at the moment it would.
Speaker 6: Seem, but they are investing.
Speaker 5: They're raising their capital expenditure, but it's paying off dividends.
Speaker 5: People are really buying into the cloud, offering a thirty
Speaker 5: five percent growth in cloud. Let's just see what the
Speaker 5: CEO Snapitchi was particularly pleased about in terms of adoption
Speaker 5: of AI offerings.
Speaker 6: Take a listen.
Speaker 2: I'm very pleased with our growth. This business is real
Speaker 2: momentum and the overall opportunity is increasing as customers embrace
Speaker 2: jen Ai. We generated Q three revenues of eleven point
Speaker 2: four billion dollars, up thirty five percent over last year,
Speaker 2: with operating margins of seventeen percent.
Speaker 5: Let's get an invest to take now, like im Asinos
Speaker 5: with our CEO of we family offices AI paying office
Speaker 5: some not others. Let's just hear about Alphabet's perspective.
Speaker 8: I definitely think one of the interesting things is everybody
Speaker 8: was worried about how much money they were spending on AI,
Speaker 8: and now they're using AI, and I heard their CFO
Speaker 8: speak yesterday talking about how they're going to be using
Speaker 8: AI to actually become more productive and reduce expenses. So
Speaker 8: I think they're already starting to become more productive using AI.
Speaker 5: Itself, using AI managing to build up in terms of
Speaker 5: the cloud offering.
Speaker 6: We're also seeing not.
Speaker 5: Much competition eating in to their search offering. Are they
Speaker 5: going to manage to keep that mote there well?
Speaker 8: And I think with the search of offering, and as
Speaker 8: sun Dar was talking about that yesterday, people are asking
Speaker 8: customers are asking more questions, They're asking more important questions,
Speaker 8: more complex questions, and AI is delivering, and so I
Speaker 8: think the opportunity is tremendous.
Speaker 4: Well, final question on Alphabet, but sort of looking ahead
Speaker 4: as well to Microsoft and later Amazon, the calculus is
Speaker 4: the same, right, you look at capital expenditures going forward
Speaker 4: and then decide if it's showing up in revenue growth
Speaker 4: and bottom line growth in terms of do you see
Speaker 4: that with Google?
Speaker 8: Yes, I do see that with Google, and I see
Speaker 8: her with the other two as well. I think I
Speaker 8: think we sort of underestimate just the incredible impact of
Speaker 8: AI in terms of productivity and efficiency in these companies
Speaker 8: as well as in revenue.
Speaker 4: World, AMD is going to do about twelve billion dollars
Speaker 4: of data center sales this year. In video is going
Speaker 4: to do one hundred and ten billion dollars. What do
Speaker 4: you make of AMD?
Speaker 8: I think they've got a catchup extrapolate opportunities there.
Speaker 6: Okay, let's talk about the opportunities that are there.
Speaker 5: Because is it that the market just wants too much
Speaker 5: too quickly? From Lisa suit because she has been pointing
Speaker 5: that twenty twenty five is where they're making inroads. She
Speaker 5: anticipates that they're making big moves. Analysts call out the
Speaker 5: Middle East in particular, going well, they talk about Meta
Speaker 5: being a key well buyer of AMD.
Speaker 6: They think at least is that.
Speaker 5: Likely to be where they need to make the inroads.
Speaker 8: I think how you manage the narrative is very important.
Speaker 8: And I think that the street tends to get ahead,
Speaker 8: whether it's about interest, whether it's about interest rates or
Speaker 8: revenue or whatever. And I think that's a little bit
Speaker 8: of the story here. She's been signaling what actually has happened,
Speaker 8: but the market wanted more.
Speaker 4: It's a really interesting time to be a technology journalist.
Speaker 4: And I imagine an investor in the technology sector. I
Speaker 4: note that Google said the election was a tailwind for
Speaker 4: their search business and other parts. Try and tie that
Speaker 4: all together for us. If you're an investor this week
Speaker 4: looking at the sector, where's your attention focused.
Speaker 8: I'm not focused on the election at all. I'm focused
Speaker 8: on the long term tailwinds for the technology sector and
Speaker 8: for risk assets in general. All we get is good news.
Speaker 8: We have sunny skies out there. Look at the GDP
Speaker 8: report this morning, up two point eight percent. Look at
Speaker 8: the employment report this morning. Interest rates are going to
Speaker 8: come down, maybe not as fast as the market wanted,
Speaker 8: but they're going to come down. The housing market, housing
Speaker 8: sales are actually up. Everything that we have in the economy,
Speaker 8: all the drivers of the economy are pointing green, and
Speaker 8: so I think it's not about the election. Actually, the
Speaker 8: only thing that I think can mess up this sunny
Speaker 8: outlook is mistakes that politicians might make, because when we
Speaker 8: look at the fundamentals of economic growth, they're all there.
Speaker 8: The US economy is in a fantastic space. And from
Speaker 8: an investor perspective, no matter whether you're going to invest
Speaker 8: in fixed income, in real estate, in the equity market,
Speaker 8: it's all green light ahead.
Speaker 5: All these valuations within Nvidia trading at forty.
Speaker 6: Nine times future earnings.
Speaker 5: The right level for these green skies at green the
Speaker 5: outlook of being a positive one, Well.
Speaker 8: It depends how long your timeline is. I mean, if
Speaker 8: I wouldn't be without Emdia in my portfolio, I wouldn't
Speaker 8: be without any of these hyperscalers in my portfolio, because
Speaker 8: that's that's the future, and you buy them and you
Speaker 8: hold them.
Speaker 4: Oh, if we had more time, I would ask you,
Speaker 4: how on earth you know what's going to happen in
Speaker 4: the world in twenty twenty seven, twenty twenty eight, But
Speaker 4: we don't, so we'll save it for next time. Melga Messino,
Speaker 4: CEO of we Family of this, thank you, Okay. Other
Speaker 4: earnings that we're watching Reddit in particular, it's fiscal fourth
Speaker 4: quarter outlook. Yes, that is a stock that's up forty
Speaker 4: one percent in the session. Yes, it was a stock
Speaker 4: that post ipo in March was already up one hundred
Speaker 4: and forty percent. And basically they're making money in different ways.
Speaker 4: The ad business is strong, but also there's the data
Speaker 4: licensing and AI part. It's a pretty astonishing jump and
Speaker 4: a lot of optimism that Reddit will continue to grow,
Speaker 4: even though Carro points out something interesting the user base
Speaker 4: if you compare it to like a snap very small,
Speaker 4: They're just gould at squeezeing dollars out of them.
Speaker 5: I'm with a market cap of now excess a twenty
Speaker 5: one billion extraordinary.
Speaker 8: Ed.
Speaker 5: Meanwhile, coming up another earning story BYD it's now beating
Speaker 5: Tesla on quarterly revenue for the first time. We'll have
Speaker 5: all the details. As of Blueberg technology, the European Union
Speaker 5: has imposed those higher tariffs of up to forty five
Speaker 5: percent on electric vehicles from China, so ratcheting up trade
Speaker 5: tensions between the world's leading export powers. The regulation was
Speaker 5: published in the EU's official journal last night, going into
Speaker 5: force today after months of negotiations.
Speaker 4: ED Yeah, let's stick with EV's Chinese clean energy vehicle
Speaker 4: Giant BYD posted quarterly sales that eclipse Tesla's for the
Speaker 4: first time, but the race to dominate the EV market
Speaker 4: is very much still on Blueberg's. Danny Lee is still
Speaker 4: awake for us in Hong Kong, and I posted on
Speaker 4: social media about this this metric. Many would point out
Speaker 4: this is not apples to apples right, because you need
Speaker 4: to explain to us Danny that within those BYD sales
Speaker 4: include plug in hybrids and the scales are completely different.
Speaker 4: What do we learn in the court just gone.
Speaker 9: I mean we learn in the quarter how BID is
Speaker 9: continue to dominate the China market where it gets most
Speaker 9: of its sales. But when you look at how BYD
Speaker 9: and Tesla are both building out the electric vehicles, BID
Speaker 9: obviously has its hybrids and so it has a greater
Speaker 9: advantage in particularly at the time when demander is skewed
Speaker 9: when it comes to electric vehicles and hybrids and the
Speaker 9: infrastructure is not necessarily always there around the world. But clearly,
Speaker 9: when you look at how BID is doing on a
Speaker 9: per employee basis, Tesla earns six times more per employee.
Speaker 9: So as much as the figure shows a new landmark
Speaker 9: for BID, clearly there are still other metrics to show
Speaker 9: just how efficient Tesla is. And you know, whether you
Speaker 9: get those who support must those who are big fans
Speaker 9: of Tesla who point out otherwise, clearly it's still a.
Speaker 4: Good run for BYD.
Speaker 9: We had that run last year of them eclipsing pure
Speaker 9: D sales, but this time on revenue.
Speaker 5: Talk about that vertical integration though, that we do see
Speaker 5: with BID in its supply chain, can it ring out
Speaker 5: more efficiencies, can it start to produce more per capita.
Speaker 9: It's already got the efficiencies there, and what it is
Speaker 9: doing now, particularly where it's nine hundred thousand employees, is scale, scale,
Speaker 9: and what it's doing is to try and build as
Speaker 9: many cars as possible, not just in China but now
Speaker 9: around the world with all the factories it's committed to.
Speaker 9: So you know, it's got the efficiency there and now
Speaker 9: it can use it to its advantage. And that is
Speaker 9: what is scaring the European and US automakers who are
Speaker 9: really struggling with the EV transition. But when you look
Speaker 9: at Tesla and BYD combined the might of them, they
Speaker 9: can show that profitable path to get into that EV transition,
Speaker 9: which the others out there, the legs you'll becerus, are struggling,
Speaker 9: which is why you see Tesla and BODS at one
Speaker 9: and three. In terms of valuations, it is hard to
Speaker 9: compare them.
Speaker 4: I look at gross margin for example, where like BYD
Speaker 4: in the Quarrid was near to twenty two percent and
Speaker 4: Tesla just under twenty percent. But again it's not apples
Speaker 4: to apples. Many point out well, Tesla's an AI and
Speaker 4: robotics company and it's investing there. How is BYD different,
Speaker 4: you know, what are its product lines? Where is it
Speaker 4: moving toward?
Speaker 9: BUID has very much focused itself on the product, the
Speaker 9: car itself, and so it doesn't necessarily have those wildly
Speaker 9: big evaluations that Tesla has with that you know, full
Speaker 9: self driving that it's been pushing constantly. So BID is
Speaker 9: starting to think about how it's looking to be more
Speaker 9: more savvy with its digital skills because on the roads
Speaker 9: in China it does have this level of automation which
Speaker 9: could match Tesla frankly, and so with its scale in China,
Speaker 9: it's all its learnings perhaps that can be extrapolated into
Speaker 9: something more meaningful in a long run.
Speaker 5: More than eight hundred billion dollar valuation for Tesla just
Speaker 5: over one hundred billion BYD. Dannie Lee stays late for US,
Speaker 5: We thank you now. Despite more than six years of
Speaker 5: US tariffs, expert controls, financial sanctions, China is making steady
Speaker 5: progress in position itself to dominate the industries of the future,
Speaker 5: like the one we were just discussing.
Speaker 6: There's some new research by.
Speaker 5: Blue Meg Economics and Blueberg Intelligence diving into thirteen key technologies,
Speaker 5: and it shows that China achieved a global leadership position
Speaker 5: in five of them, catching up fast in seven others.
Speaker 5: We're pleased to welcome to the show that the author
Speaker 5: of this piece, Jered Dipipio from Bloomberg Economics, who takes
Speaker 5: part in the report in Gerard, just outline the five
Speaker 5: where they're dominant and the areas that they're growing.
Speaker 10: Right, So we looked with our Bloomberg Intelligence and Economics
Speaker 10: colleagues at thirteen key technologies that are part of China's
Speaker 10: Made in China twenty five initiative from about ten years ago.
Speaker 10: The five areas where China is clearly leading as of
Speaker 10: this year would be drones, high speed rail evs, as
Speaker 10: you were just discussing, solar panels, and graphing. So some
Speaker 10: advanced materials where there are competitive would be things like semiconductors, AI,
Speaker 10: machine tools, LERG carriers they have like a big ship
Speaker 10: target and drugs like pharmaceuticals. Where they're really behind is
Speaker 10: commercial aircraft, interesting toads.
Speaker 4: You just read out the sort of dream smallus board
Speaker 4: of Bloomberg technology stuff. I think one thing we reflect
Speaker 4: on in the show is that some of those key areas, right, semiconductors,
Speaker 4: even drones. In EV it's very policy focused. In other words,
Speaker 4: the government in China change their minds, but they're often
Speaker 4: willing to support those industries through finance or policy to
Speaker 4: make them successful.
Speaker 10: Indeed, I mean industrial policy is a big part of it.
Speaker 10: China's new energy vehicle targets and plans go back to
Speaker 10: around two thousand and nine, so they predate Man in
Speaker 10: China twenty five. How they do this it's hard to quantify,
Speaker 10: but there are a lot of subsidies for buyers for firms.
Speaker 10: There's state backed credit, state backed investment funds, government procurement, etc.
Speaker 10: But I think BYD is a good example. So the
Speaker 10: EV sector clearly benefited from Chinese industrial policy, but the
Speaker 10: industrial policy also didn't pick winners, so to speak. BYD
Speaker 10: was the one that rose to the top, in part
Speaker 10: because consumers were ultimately the ones sociding. And now it
Speaker 10: is a globally competitive firm.
Speaker 5: Let's just talk about what this means for the US
Speaker 5: as well, because the US has been trying to prevent
Speaker 5: great strides in certain areas of technology. AI chips comes
Speaker 5: first to mind by limiting trade from the US, but
Speaker 5: also from its allies.
Speaker 6: What does this do if China gets there?
Speaker 10: Anyway, The US measures I media tariffs are kind of
Speaker 10: more macro in terms of hitting many things. The expert
Speaker 10: controls are very much focused on van semic conductors and
Speaker 10: things related to artificial intelligence. The US concern, as articulated
Speaker 10: by Jake Sullivan recently, is basically that they're afraid that
Speaker 10: China having advanced leading these things while having military application,
Speaker 10: particularly for things like artificial intelligence. But there's also an
Speaker 10: economic side, because these are the industries of the future,
Speaker 10: and from a competitiveness perspective, especially if you think China
Speaker 10: is benefiting from its own industrial policy. The US thinks,
Speaker 10: you know, in a sense, it's quote unfair and that
Speaker 10: they don't want to be left behind.
Speaker 4: Job, let's do semiconductors as one final case study, please,
Speaker 4: partly because it's also been in the news cycle. Right, Yes,
Speaker 4: US export controls, but China's responded and tried to champion
Speaker 4: specific names. What did your research find in that space?
Speaker 10: So, I mean China's main fab is Smick, right, and
Speaker 10: Smick is sort of their TSMC equivalent. It receives heavy subsidies.
Speaker 10: But then there are other firms like Quawei, which is
Speaker 10: ultimately buying the chips that they're making that are also
Speaker 10: being state supported. So in general, I think the US
Speaker 10: export controls have probably done less damage in many in
Speaker 10: the US government would have hoped two years ago. China
Speaker 10: is still making strides, but it's also clear that or
Speaker 10: at least maybe debatable, how good THEO strides are. And
Speaker 10: even recently Bloomberg was reporting that maybe Huawei was getting
Speaker 10: chips from TSMC through a carve out right, So there's
Speaker 10: still leakage in the export controls and this is something
Speaker 10: that the Biden administration in its final days is looking
Speaker 10: to address.
Speaker 4: Gerard DiPippo from Bloomberg Economics, just incredible, Thank you so much,
Speaker 4: really appreciate it.
Speaker 5: Time now for talking tech. First up, in Or Musk's startup, Xai,
Speaker 5: seeking new funding at a roughly forty billion dollar valuation,
Speaker 5: according to a person familiar with the matter, and the
Speaker 5: company's valuation was twenty four billion, including the six billion
Speaker 5: dollar raised during its last funding round back in May.
Speaker 5: This week, Musk said that his aim was to double
Speaker 5: Xai's access to compute, of course, the resource that fuels
Speaker 5: official intelligence, plus open Ai is working with broad content
Speaker 5: developing custom AI chip focused on running AI models. After training,
Speaker 5: the chips will run I software that responds to user
Speaker 5: requests and is expected to be in some high demand.
Speaker 5: You are Apple again this hour, veiling an updated MacBook
Speaker 5: Pro lineup with new M four chips, looking to entice
Speaker 5: shoppers with Speedia processing and of course AI capabilities. Is
Speaker 5: part of a flurry of Mac upgrades this week. The
Speaker 5: company also released Apple Intelligence, it's new AI platform.
Speaker 6: Earlier in the week ed what are you watching?
Speaker 4: Super Micro the server maker again reminder it's down significantly,
Speaker 4: biggest drop since twenty eighteen. Ey It's auditor resigned. It's
Speaker 4: concerned about ethics and integrity of the management team and
Speaker 4: the audit committee. This is Bloomberg Technology.
Speaker 5: Welcome back to Bloomberg Technology. I'm karenine Hyde.
Speaker 4: In New York and I'm ed Lovelo in San Francisco.
Speaker 4: Let's get back to the technology earning story. Social media
Speaker 4: kind of a focus snaps up the most in six months.
Speaker 4: User growth looks good. Sales in the cour have gone
Speaker 4: above expectations, and it's like they've done a lot of
Speaker 4: work on advertising to make them more relevant. They're getting
Speaker 4: rewarded for that. Also Reddit biggest jump since IPO day
Speaker 4: March twenty first, a strong outlook for the holiday quarter
Speaker 4: again ad business, but of course they had the data
Speaker 4: licensing side with AI as well. We're going to talk
Speaker 4: about that in just a moment. And then Meta up
Speaker 4: eight ten to one percent. I think this is going
Speaker 4: to be a megaprint. You know, Meta, the social media company, Meta,
Speaker 4: the AI company, Meta, the biggest runner of data centers
Speaker 4: that no one talks about that kind of stuff, Garrett.
Speaker 6: Someone talks about all of it.
Speaker 5: We're pleased to have flue megazation accounts across a florry
Speaker 5: of social media moves. Let's just start with snap because
Speaker 5: they are managing to show that they can still get
Speaker 5: growth outside of the US. It seems to mainly be
Speaker 5: and also people subscribing.
Speaker 11: Yeah, I mean the snapsom was really interesting. As you
Speaker 11: mentioned earlier, they tend to have a lot of altility.
Speaker 11: Sometimes they're not always rewarded for the investments that they're
Speaker 11: making in their advertising business. But they put a lot
Speaker 11: of money, spent a lot of money on artificial intelligence
Speaker 11: and machine learning. So it really is coming to fruition
Speaker 11: across multiple areas. Better targeting ads, better recommending video content,
Speaker 11: and then as you mentioned, subscriptions. Subscription revenue is now
Speaker 11: about one hundred and twenty three million dollars in the quarter,
Speaker 11: which is eight to nine percent of the revenue. So
Speaker 11: they're one of the few social media companies that's really
Speaker 11: been able to benefit from subscriptions and really turn that
Speaker 11: into a notable business.
Speaker 4: He shoul Let's talk about Reddit, I mean a bit
Speaker 4: of a surprise in the session of forty percent gain
Speaker 4: on the stock. You spoke to Steve Hoffman, the CEO.
Speaker 4: What do we learn about how it's going and what
Speaker 4: the Reddit platform is doing to be different?
Speaker 11: I mean, of course the simple advertising story, right, they've
Speaker 11: really been able to convince advertisers to actually buy ads.
Speaker 11: So part of that is expanding Reddit to other languages
Speaker 11: so they can have more users and more advertisers across
Speaker 11: the world. Part of it is just investing in artificial intelligence,
Speaker 11: machine learning, better targeting ads, and then educating the market.
Speaker 11: Reddit is very different than our social media platforms. You
Speaker 11: target based off of topics, not necessarily personal data. A
Speaker 11: lot of users are anonymous, so they've really had to
Speaker 11: do a lot of educating the market and that's seen
Speaker 11: you pay off, and then of course there's the AI
Speaker 11: story selling their data to AI companies, having partnerships with
Speaker 11: open ai and Google that's really pushing their revenue over
Speaker 11: the edge. And then again coming into the holiday, core
Speaker 11: huge beat on what they're forecasting for the holiday.
Speaker 6: So all that is really led to that stock rise.
Speaker 5: It's just so interesting though, Like Eda and I were
Speaker 5: having this back and forth earlier about when you look
Speaker 5: at the underlying amount of users of both of these platforms.
Speaker 5: We won't even get into meta quite yet, but Reddit's
Speaker 5: got what just over ninety seven million users. Snap has
Speaker 5: way more, and they also have far bigger revenue, I
Speaker 5: mean four times that of Reddit, yet their market capitalizations
Speaker 5: are about the same.
Speaker 6: At this level, where is.
Speaker 5: The market seeing the future potential of Reddit versus Snap?
Speaker 11: I think it really comes down to that data licensing business.
Speaker 11: When I was talking to Steve yesterday, one of the
Speaker 11: things he mentioned was he said every large language model
Speaker 11: has used Reddit data to train, and so he's like,
Speaker 11: that right there, shows you the potential of the value
Speaker 11: of the data on the site. So I think investors
Speaker 11: are really seeing that. Some investors are projecting as much
Speaker 11: as six hundred million dollars a year in data licensee revenue,
Speaker 11: which is huge, and so I think part of it's that.
Speaker 11: And then you know Snap has been public for a
Speaker 11: lot longer, so the expectations may be a little bit higher.
Speaker 11: Right of course, Reddit just in March they beat expectations
Speaker 11: every quarter, and so we'll see if they can continue
Speaker 11: to do that.
Speaker 4: The biggest of them all in the social media context,
Speaker 4: but a lot more is meta. After the bell today,
Speaker 4: what's going to happen.
Speaker 11: I expect revenue to beat expectations. I mean, they're definitely
Speaker 11: going to have a higher bar. Their peers, as we
Speaker 11: just talked about, have done really well. Google also did
Speaker 11: really well in their earnings, and so I think the
Speaker 11: bar is going to be high. But over the past
Speaker 11: quarters they've achieved double digit revenue growth, oftentimes as much
Speaker 11: as twenty percent in Quortant, So we'll expect that, and
Speaker 11: then we'll expect to hear more about the AI story,
Speaker 11: so whether it's their AI video generator movie Gin that
Speaker 11: they just announced they have new AI tools for creators,
Speaker 11: for advertisers. I mean, they really doubled down on finding
Speaker 11: ways to put a in front of users and then
Speaker 11: not even to mention their METAAI assistant, which has five
Speaker 11: hundred million users that are chatting with AI across Facebook
Speaker 11: and Instagram. So we'll expect to see that, expect to
Speaker 11: hear them continue to talk about how they're getting a
Speaker 11: return on their investments in AI. And as you mentioned,
Speaker 11: they have tons of data centers. They spend a lot
Speaker 11: of money on infrastructure, and so part of the story
Speaker 11: too will be will they not spook investors with how
Speaker 11: much they're spending on infrastructure like they did a couple
Speaker 11: of quarters ago.
Speaker 6: Investors for sort of.
Speaker 11: Worry about how much money they were spending there. So
Speaker 11: we'll be looking for all those things.
Speaker 4: Stay tuned after the market closed. Blim Baxasia counts on
Speaker 4: a trio of earnings. Thank you very much. Let's keep
Speaker 4: talking about technology and means with Jeffrey's analyst Brent Till
Speaker 4: And you know, I think that if you're trying to
Speaker 4: find the common denomination to particularly if it's like the
Speaker 4: Hyperscala's meta, et cetera, for me, it's that the calculus
Speaker 4: is the same as last quarter, right, capex money going in,
Speaker 4: how much money's coming out, particularly in AI. Have you
Speaker 4: seen some good evidence that that's the case so far.
Speaker 12: Well, we're early in the curve, so you know that
Speaker 12: the revenue is not coming in because remember you know,
Speaker 12: for Microsoft, we're on a recurring subscription model. So even
Speaker 12: if they plowed ten dollars into AI today, you're paying
Speaker 12: a monthly fee.
Speaker 4: So no, we haven't.
Speaker 12: But I think we're seeing proof that if you had
Speaker 12: all the hyperscalers at their total bookings relative to their
Speaker 12: capex and their actual booking numbers accelerated. That's not all AI,
Speaker 12: but we are seeing that return. We're also seeing in pricing.
Speaker 12: I mean, Microsoft's double the cost of office. See, if
Speaker 12: you're paying thirty dollars per se per office, you just
Speaker 12: double your AI, Like it doesn't cost double that to serve.
Speaker 12: They're making a lot of money. Look at last year,
Speaker 12: amy Hood gave you a hundred basis points of margin
Speaker 12: improvement in the in the beginning of AI, and this
Speaker 12: year they're guying to about one hundred basis points aheadwind.
Speaker 12: But like, this isn't this isn't like they're losing money, right,
Speaker 12: they made money in your an AI like so Brenda,
Speaker 12: I mean these are incredible numbers, So like this isn't
Speaker 12: a wasteland and this is the number one question we're
Speaker 12: getting whereas all this capital are going. Well, you can
Speaker 12: see in the booky number, you can see it in
Speaker 12: the margins, you can see it now on the incremental revenue,
Speaker 12: you can see it in the pricing, and then you
Speaker 12: can start to see it in the in the customer
Speaker 12: case studies.
Speaker 4: Brent, you're excited about Microsoft. I can tell we're all excited.
Speaker 4: That never makes I mean the thing about Microsoft, they've
Speaker 4: always been good at selling software that you can otherwise
Speaker 4: get for free somewhere else. Meta is a different beast, Right,
Speaker 4: you have this bio meta and in the AI story
Speaker 4: it's like interesting the business model, Like I've been using
Speaker 4: the ray Baan metas for about a month now, That's
Speaker 4: how I use meta AI. What are you ex expecting
Speaker 4: in the earnings print and the sort of belief that
Speaker 4: they can demonstrate this feature business model?
Speaker 12: Well, I think again, we're super early across the entire
Speaker 12: industry when we think about AI in applications, right, we're
Speaker 12: not early in AI and infrastructure. We see it in
Speaker 12: all Nvidia, all the numbers, right, you see it. It's
Speaker 12: going to be a delayed reaction, So I want to
Speaker 12: be careful like you're not going to solve This isn't
Speaker 12: going to pop out of pop, pop out of the
Speaker 12: cake and surprise everyone. Like this is going to be slow, steady,
Speaker 12: a gradual ramp like we've said, like this is is
Speaker 12: going to be game changing. So I'm a believer in meta.
Speaker 12: I think ultimately, over time we as users will get
Speaker 12: a better experience because of AI. The advertisers which pay
Speaker 12: the bill. Again, none of us pay to build. It's
Speaker 12: a meta, right, it's all out ad driven. If you
Speaker 12: if you can create an easier ad campaign, uh, and
Speaker 12: do it quickly and do it more cost efficiently, Like
Speaker 12: our sizes are going to stampede because all the users
Speaker 12: are going to stay there and more people are going
Speaker 12: to be there because the experience is so good. So again,
Speaker 12: I think it's a phased approach. I don't think it's
Speaker 12: going to be overnight success.
Speaker 4: But I think what.
Speaker 12: Zuck has been doing, Like he's very confident, right, you
Speaker 12: can see it in his style, his T shirt, his necklace,
Speaker 12: his hair.
Speaker 6: You can just see it.
Speaker 12: He's not he's not.
Speaker 5: He's got a stylist man, he's got himself a good style.
Speaker 6: Stand. We all love to see it. I'm a big
Speaker 6: approver and appreciate it.
Speaker 5: But Brent, what's also interesting is there were some news
Speaker 5: as to whether or not Meta AI is ultimately trying
Speaker 5: to build its own search, real time search within its
Speaker 5: Meta AI offering, becoming less dependent on the likes of
Speaker 5: being which is Microsoft of Google Search, which of course
Speaker 5: his alphabets.
Speaker 6: How much do you.
Speaker 5: Think these frenemies will continue to use each other? Of course,
Speaker 5: Meta in some ways when it depends on access to
Speaker 5: compute or just building its ownes and going to Nvidia
Speaker 5: and the others the ecosystem.
Speaker 12: Own searches and no brain I mean, think about it,
Speaker 12: like if you buy a golf shirt or or you
Speaker 12: buy something for your house and you want to find
Speaker 12: something else on the platform, why can't you just go
Speaker 12: on their platform search for it. It's it's not a
Speaker 12: good search experience today. It should be a better search experience.
Speaker 12: So is in an area that they can improve upon.
Speaker 12: Does that mean I'm not going to Google Maps because
Speaker 12: I'm going from San Francisco down to the valued visit
Speaker 12: a company and I'm going to jump on on their
Speaker 12: you know there, I'm not going to search there for
Speaker 12: traffic and all the other things. So but I think
Speaker 12: the experience is going to get better because it's not
Speaker 12: great right now, and there's no question all the data
Speaker 12: that's trapped in that platform. I mean it's really really
Speaker 12: hard to find something that you've seen and go back
Speaker 12: and try to find it. I'm not a the experience
Speaker 12: is going to get better, but it's not going to
Speaker 12: box out Google. It's not going to box up Perplexity.
Speaker 12: It's not going to change. I think the the opportunity
Speaker 12: for the others, and we saw that at Google's number, right.
Speaker 12: I meant digit.
Speaker 5: About talk to us about how they're managing to finding
Speaker 5: meet the different but ins the rewards of an AI investment, Well.
Speaker 12: I think you go back to it's not all AI driven,
Speaker 12: which is you get in your car, use ways to
Speaker 12: get to work. You you effectively looking for a restaurant.
Speaker 12: What are the hours you don't you don't go to
Speaker 12: other you don't go to other engines like Perplexity of
Speaker 12: other places for that information. You may want to say,
Speaker 12: how do I stop my washer driver from blinking? I'll
Speaker 12: go to Perplexity and do that on eve go to
Speaker 12: Google anymore. But I'm not like, I think the thing
Speaker 12: is we're having a higher query volume, and then all
Speaker 12: of us are becoming more comfortable that they're different tools,
Speaker 12: and so we're just increasing our usage across all these platforms.
Speaker 12: And so it's like everyone wants to Hey, this vendor
Speaker 12: is gonna gonna die, and this vendor is gonna win.
Speaker 4: Like I think everyone seems to be then in a
Speaker 4: good spot or winning.
Speaker 12: And that is again these bigger platforms, right, AI needs
Speaker 12: three things capital, users, and data and and when you
Speaker 12: think about all the big platforms Amazon, Google, Microsoft.
Speaker 4: They all have that matter incredible usage.
Speaker 12: Obviously to argue is the big keep getting bigger and
Speaker 12: it's a really boring storyline, Like I wish I had
Speaker 12: a better storyline, but like I'm sorry, but like they're
Speaker 12: just going to keep getting bigger and better.
Speaker 5: Regulators might have something to say about it, but for you,
Speaker 5: you've got to buy across the border and all those names.
Speaker 5: Jeffrey's analyst Brent Thill, we thank you so much for
Speaker 5: joining us today. Meanwhile, coming up and look at the
Speaker 5: major impact of the results in the upcoming election could
Speaker 5: have on technology and innovation.
Speaker 6: Linden Melman's joining us.
Speaker 5: From bl Government Strategies team.
Speaker 6: That's next.
Speaker 5: This is a BlueBag technology conspiracy theorists who believe that
Speaker 5: Donald Trump won the twenty twenty election. I'm making plans
Speaker 5: online to monitor and film polling places in swing states,
Speaker 5: a move that some groups argue amounts to voter suppression.
Speaker 5: Jeff Stone has been reporting on this, joining us now.
Speaker 5: This is surrounding the messaging app Telegram, in particular, where
Speaker 5: these conversations and views to meet the happening.
Speaker 3: That's right, Caroline. Telegram is an incredibly popular app, certainly globally,
Speaker 3: and it's gained a lot more attention in the United
Speaker 3: States over the past couple of years. There's large communities,
Speaker 3: tens of thousands of people through the country, many of
Speaker 3: them in swing states Georgia, Wisconsin, who are making plans
Speaker 3: and trying to coordinate to take efforts to do what
Speaker 3: would they describe as stopping another stolen election.
Speaker 4: So, Jeff, I'm not a Telegram user. It's a cloud
Speaker 4: based messaging app basically, right. Take that explain literally what
Speaker 4: people are doing to communicate. But why it's noteworthy, why
Speaker 4: this is a news item in the context of this election.
Speaker 3: This is important because the way that Facebook and formerly
Speaker 3: Twitter now x have you know, really removed a lot
Speaker 3: of conspiratorial and false election related to content over the
Speaker 3: past few years that doesn't exist on Telegram. So Telegram
Speaker 3: was a Russia founded app. It has nearly a billion users,
Speaker 3: and people communicate in large communities, so they're a lot
Speaker 3: like large group chats, almost like WhatsApp. Without that moderation,
Speaker 3: things can get pretty extreme and pretty radical. Sometimes there's
Speaker 3: calls for violence. And really what's happening now is that
Speaker 3: some of these groups are circulating petitions. They are circulating
Speaker 3: calls for volunteers, looking for people who are willing to
Speaker 3: stand outside of ballot boxes in the middle of the night. Again,
Speaker 3: some places that are pretty key to the election.
Speaker 4: And it's worth pointing out that in our reporting, Telegrams
Speaker 4: press team did not respond to requests for comment Bloomberg's
Speaker 4: Jeff Stone, that's really important one week out, Thank you
Speaker 4: so much. Let's stay with the election and the technology industry.
Speaker 4: Immigration is one of the most hotly contested topics in
Speaker 4: the upcoming US election, but there's one area of general agreement.
Speaker 4: A recent pewpole finds the vast majority of both Harris
Speaker 4: and Trump voters support allowing high skilled immigrants into the country.
Speaker 4: For example, doctors engineers, but also computer scientists. Let's discuss
Speaker 4: this with Linda melmad He's a partner at BAL and
Speaker 4: oversees the company's government strategies group. This is interesting. It
Speaker 4: is a policy topic at the heart of the election.
Speaker 4: But do you have a firm understanding of either candidate's
Speaker 4: position on this, even if the voting base agrees.
Speaker 1: Well, first, thank you for having me on today, and
Speaker 1: you're correct that the asylum crisis on the border has
Speaker 1: certainly dominated the conversation. But behind the curtain, there is
Speaker 1: a lot of commonality across voters of both parties that
Speaker 1: high skilled immigration is beneficial for the United States. And
Speaker 1: I think Americans understand immigration better than a lot of
Speaker 1: people give them credit for. They see CEOs, foreign born
Speaker 1: CEOs at companies like Google, Uber Chabani, and they know
Speaker 1: that they want those individuals investing and creating jobs in
Speaker 1: the United States. But this election will be the most
Speaker 1: consequential election for immigration policy, both in terms of that
Speaker 1: asylum crisis, but also for high skilled immigration because the
Speaker 1: candidates will implement very different policies and that will affect
Speaker 1: how companies hire and attract and build out their talent pipelines.
Speaker 5: Okay, So I'm an employer, I want to get access
Speaker 5: to AI talent, I need to go abroad for it.
Speaker 6: What can I anticipate?
Speaker 5: How do I need to align my business hiring with
Speaker 5: either outcome from the election.
Speaker 1: Well let's start with that. So you know, if President
Speaker 1: Trump is elected, we all recall back in twenty sixteen
Speaker 1: that he put travel bans in place, and we are
Speaker 1: planning for that eventuality. So if he is elected again,
Speaker 1: we could see travel bands going to affect as early
Speaker 1: as the first week. They won't necessarily target AI specifically,
Speaker 1: but there could be peripheral damage, so to speak, if
Speaker 1: they target nationalities China, for example, or just particular visa
Speaker 1: categories that employ a number of AI professionals in it.
Speaker 1: So really, as early as the first week, we could
Speaker 1: see an impact on the ability to bring new AI
Speaker 1: talent into the United States. But that's only part of
Speaker 1: the story. I think approximately two thirds of graduate students
Speaker 1: in AI fields are foreign born, and what we are
Speaker 1: expecting is that there will be restrictions on the ability
Speaker 1: of companies to hire foreign born talent out of US universities.
Speaker 1: And that's on top of a broken system that already
Speaker 1: exists today. It's already very difficult to transition someone from
Speaker 1: a foreign student to work visa, but it could get
Speaker 1: worse if Trump is elected.
Speaker 4: We're just showing this brilliant chart of the top technology
Speaker 4: companies are the beneficiaries of H one B visas, Amazon
Speaker 4: the most and Apple the fewest. Based on this data
Speaker 4: from UCIS, you must know what the company's attitudes are
Speaker 4: towards this. How active are they in this election cycle
Speaker 4: in impressing the importance of skilled labor to either candidate
Speaker 4: in either party.
Speaker 1: Well, all the companies have been operating under a dysfunctional
Speaker 1: immigration system for as long as they've been around, and
Speaker 1: this isn't the first election that they have to prepare
Speaker 1: for different scenarios, and even within any particular administration, there's
Speaker 1: very competing views about how to implement immigration policy. So
Speaker 1: all of them are preparing for both eventualities and putting
Speaker 1: really the teams and people in place to be able
Speaker 1: to react. One thing to understand is that if President
Speaker 1: Trump is elected, a lot of those action plans will
Speaker 1: get started right away. During the lame duck period of time,
Speaker 1: there might be a small window to try and get
Speaker 1: some policies done under a Biden administration during those final
Speaker 1: few weeks that might be beneficial to those companies. But
Speaker 1: I think it's best to describe their activity going into
Speaker 1: this election as preparing for all eventualities. No one, of course,
Speaker 1: knows for sure how the election is going to play
Speaker 1: out in a few next week, but the companies are
Speaker 1: prepared from a workforce perspective. Probably the most difficult challenge
Speaker 1: for them is the fact that a lot of their
Speaker 1: foreign workers like to travel holidays like all of us do,
Speaker 1: and that that could be difficult for them to put
Speaker 1: in place quickly.
Speaker 5: Bender moment, thank you so much uponner at Baal, whoever
Speaker 5: sees the company's government strategies. More big tech earnings after
Speaker 5: the bell, Let's get to it with Bloomberg Intelligence senior
Speaker 5: and mis Manning Singh, who joins us. Now, you're just saying,
Speaker 5: how the gargantuan beat that you saw out with Alphabet,
Speaker 5: is that going to be a read across to the
Speaker 5: metas to the Microsoft's.
Speaker 13: I mean, look at industry is doing well, and that's
Speaker 13: what we saw with Reddit's app and Alphabet all calling
Speaker 13: that out. I think the magnitude of Google beat, you
Speaker 13: know that two billion dollar on the top line what's
Speaker 13: pretty impressive. You're not going to see that sort of
Speaker 13: beat from Microsoft or Meta if I had to take
Speaker 13: a guess, But clearly I think with Alphabet specifically their
Speaker 13: LLLM integration across their family of apps with two billion
Speaker 13: plus users is what's driving you know, the positive sentiment today.
Speaker 4: Mandie, Really quick, do you see the market share split
Speaker 4: in cloud changing based on Google's progress?
Speaker 13: It could simply because you know, everyone is getting the
Speaker 13: same allocation of GPUs, So if Google is using more
Speaker 13: of their TPUs for training, they can have and Vidia
Speaker 13: GPUs on their cloud that can generate revenue, whereas some
Speaker 13: of the other cloud providers are using it for their
Speaker 13: own training. So from that perspective, it'll be interesting to
Speaker 13: see if Azure prints more than thirty four percent growth tonight,
Speaker 13: But anything less than that I think will be disappointed.
Speaker 5: We have so much still to digest when it comes
Speaker 5: to these magnificent five for this week that are reporting
Speaker 5: of course, just in video that we lack now for
Speaker 5: the next weeks to come. Bloomberg Intelligence senior Alis Man
Speaker 5: Yep saying love having him. Meanwhile, that does it for
Speaker 5: an extremely busy addition Bloomberg Technology, it was and.
Speaker 4: It's just going to continue. It's amazing there's so much
Speaker 4: focus on tech all the time. Recap on the podcast,
Speaker 4: you know where to find it online on those platforms
Speaker 4: and on the Bloomberg ones as well. Thank you team
Speaker 4: in New York, thank you team here in San Francisco.
Speaker 4: Get some rest because there's a lot more to come.
Speaker 4: This is Bloomberg Technology.