Speaker 1: Bloomberg Audio Studios, podcasts, radio news. Bloomberg Tech is alive
Speaker 1: from coast to coast with Caroline Hide in New York
Speaker 1: and Vla Lowe in San Francisco.
Speaker 2: This is Bloomberg Tech coming up.
Speaker 3: Alphabet, Microsoft and Meta all outward results showing heavy spending
Speaker 3: on AI and data center construction.
Speaker 4: Plus Roebrock CEO David Zooki joins us to discuss the
Speaker 4: company's earnings as users and jumping, but so are costs.
Speaker 3: And we'll break down what was said during the meeting
Speaker 3: between President Trump and China's Jugen King, what wasn't discussed
Speaker 3: and vidiots, blackweld chips.
Speaker 5: Let's turn our attention to these markets.
Speaker 4: And after record high, after record high, we take a breather.
Speaker 4: Then that's that one hundred HUNDERD pressure off by almost
Speaker 4: a percentage point. This as we think about the FED
Speaker 4: maybe not baking in that December cut as much as
Speaker 4: the market had anticipated.
Speaker 5: You add to that some concerns about AI spending. You
Speaker 5: add to that a.
Speaker 4: China US trade deton for a year that many felt
Speaker 4: were priced in ed and we just come down some
Speaker 4: across all asset classes. But you're looking under what's in
Speaker 4: the ecty moves yep.
Speaker 3: Let's get through the top stories, and Video is down
Speaker 3: two percent. Blackwell, its latest processor was not discussed in
Speaker 3: the meeting between President Trump ands Ujenping. Later in the
Speaker 3: show out to South Korea to get the details of
Speaker 3: that meeting. Then there's earnings Microsoft thirty nine percent top
Speaker 3: line growth in Azure, the cloud computing unit, the only
Speaker 3: unit that mattered, but the stock selling off high bar
Speaker 3: for investors.
Speaker 2: Alphabet is the one that's higher.
Speaker 3: It told us what its capital expenditures are this year,
Speaker 3: but it also told us about growth a real number
Speaker 3: on AI or generatorve AI related products. Then Meta, it
Speaker 3: is the biggest decliner and the biggest drag capital expenditure concern.
Speaker 3: Then this morning, coming to market with an up to
Speaker 3: six part bond sale maturities ranging five to forty years.
Speaker 3: The forty year note one point four percent over treasury
Speaker 3: above treasuries. There's a lot to discuss in Meta's capital
Speaker 3: requirements and then what it has to show for it.
Speaker 3: Let's do that with Brent. Phil Jeffrey's analyst joins us.
Speaker 3: Right now, let's start with Meta. That's kind of the equation, right, Okay,
Speaker 3: Capital expenditures will be higher next year than they were
Speaker 3: this year. Then what give us more, give us some
Speaker 3: longer term outlook. There just wasn't a formal guidance. Is
Speaker 3: that what spooked the market.
Speaker 6: Yeah, Meta was just in a period of being really comfortable.
Speaker 6: Zuck had been very comfortable. The company had executed, they
Speaker 6: had invested, and they were harvesting those investments, and now
Speaker 6: they're going back into invest mode. So I think at
Speaker 6: the beginning of the year, advertisers were seeing that Meta
Speaker 6: was more sheltered because they didn't know what Google was
Speaker 6: going to do with AI, and we didn't know what
Speaker 6: was going to happen to TikTok. And then halfway through
Speaker 6: the year, everyone realized, hey, Google's got their act together
Speaker 6: and AI, and we know that TikTok now has more
Speaker 6: of the foundation. So I think, as I call it,
Speaker 6: there's less.
Speaker 2: Of a tailwind for Meta.
Speaker 6: It's not a headwind, but it's less of a tailwind
Speaker 6: that they had at the beginning of the year when
Speaker 6: you talk to advertisers, and I think what Zuck said
Speaker 6: last night on the call was the investments in AI
Speaker 6: are paying off, and they just need more of them
Speaker 6: because everything they built, they felt like they had overbuilt
Speaker 6: and they sold out of what they built.
Speaker 2: Yeah, so they have to build more and so yeah.
Speaker 6: It doesn't have anything to do with the fundamental position.
Speaker 6: It's are we going to see margin compression and then
Speaker 6: when does that return come back? But we already know that.
Speaker 6: Then they have a return. We've saw with Microsoft. They've
Speaker 6: given this margin expansion even in the face of AI.
Speaker 6: So this whole concept that AI doesn't pay off is silly,
Speaker 6: you see, because but the.
Speaker 5: Stock move is so big that we question.
Speaker 4: Yes, we see Zuck on the call saying, look, I'm
Speaker 4: worried about underinvesting. We hear once again from Susan Lee
Speaker 4: that they're going to make notable investments. Everyone new Capex
Speaker 4: is going to go up into the right. Why is
Speaker 4: there such an air pocket on this stage?
Speaker 6: You think, well, I think the outperformance of Google, I
Speaker 6: think you have money chasing weren't a momentum market. I mean,
Speaker 6: look at yesterday before any year, Needs everything and applications
Speaker 6: went down aing, and AI went straight up in infrastructure.
Speaker 6: So if you have Capex going this high, the pushback
Speaker 6: is why do I invest in internet and software right now?
Speaker 6: I should be invested in energy and land, and it
Speaker 6: all the enabling infrastructure, and the infrastructure goes up every day.
Speaker 6: Look at all the energy names, they're all ripping. And
Speaker 6: so I think there's a common pattern with tech investors
Speaker 6: right now.
Speaker 2: They're just broader.
Speaker 6: Investors are moving their investments to other categories, and then
Speaker 6: they're chasing momentum. It's just the market's so narrow and
Speaker 6: you're seeing this. So there was nothing that was fundamentally offline.
Speaker 6: They're making any investment. They've done this before. How many
Speaker 6: times have we seen mat to do this and then
Speaker 6: return the stock goes hired. They're going to do thirty
Speaker 6: dollars running to power, put a thirty multiple on it.
Speaker 6: You're nine hundred dollars on the stock. It's a buy
Speaker 6: on the pullback, Brent.
Speaker 3: The name of momentum is Alphabet and Google. Right, they
Speaker 3: gave us two data points cap too Expenditch is ninety
Speaker 3: one billion to ninety three billion dollars. But revenue from
Speaker 3: products that are built on Google's generaty of AI models
Speaker 3: grew more than two hundred percent from a year earlier.
Speaker 3: That second part your reaction to it.
Speaker 6: I mean AI is working, and I think the fear
Speaker 6: that investors have had is what happens when I go
Speaker 6: from a world of search to AI. And I think
Speaker 6: Google is showing they can do the high wire act.
Speaker 2: Very well between search to AI.
Speaker 6: Everyone thought search would implode in the last two quarters,
Speaker 6: they beat the search number.
Speaker 2: This quarter they accelerated their search number. So what they're
Speaker 2: seeing is that search can be anywhere. It can be
Speaker 2: inside AI, can be in their own.
Speaker 6: Engine, it could be a YouTube, it could be across
Speaker 6: different properties. And I think what what Google is demonstrating.
Speaker 6: And we've said this kind of for a while. They
Speaker 6: have better AI underneath the hood than they're articulating, and
Speaker 6: it's now coming out.
Speaker 7: You can see it.
Speaker 2: We said, you know, they kind of pulled up.
Speaker 6: To the I race, you know, on a Toyota Camry
Speaker 6: body that they have the biggest engine and they pop
Speaker 6: the hood and everyone's like, whoa, this is incredible. And
Speaker 6: so I think everyone was realizing. When you look at Gemini,
Speaker 6: I mean we ran bench tests, it's almost equivalent to
Speaker 6: chet GPT. And then you look at the breadth of
Speaker 6: their offering. And again remember they own the world's Internet data,
Speaker 6: so you need data users in capital for AI to work,
Speaker 6: and they have all of those almost better than Meta, Microsoft,
Speaker 6: many of the others. They have more data on anything
Speaker 6: in the world than anyone.
Speaker 2: So I think they're proving that this engine's working.
Speaker 6: The body didn't look great, you know, they're upgrading the body,
Speaker 6: but the engine look is really really good.
Speaker 4: But what's so interesting is clearly Microsoft is still working.
Speaker 4: When you're looking at asure growth of thirty nine percent,
Speaker 4: that was better than the market I anticipated. Sure it
Speaker 4: might not be much of a growth uplift, but what
Speaker 4: was it? What was the fly in the ointment for Microsoft?
Speaker 4: Where Aimyhood again is saying, my issue is supply, not demand.
Speaker 6: I don't understand the market because they just put up
Speaker 6: over fifty percent RPO backlog growth and one hundred and
Speaker 6: ten one hundred eleven percent commercial bookings.
Speaker 2: Those numbers are insane, and that.
Speaker 6: Didn't even include opening eyes two hundred and fifty billion
Speaker 6: incremental dollars. So I think the market's got this wrong honestly,
Speaker 6: that you got to look at the backlog. The backlog
Speaker 6: is leaning indicator of health. The reported AZURE number does
Speaker 6: not matter. When you're putting those backlog numbers up, that
Speaker 6: tells you their capacity constrained. You can't book that kind
Speaker 6: of revenue and not take it to Azure. And the
Speaker 6: differential is they just can't get the capacity up right now.
Speaker 6: But their customers want to spend, and their customers are
Speaker 6: spending and they know that what Microsoft has. So I
Speaker 6: think this is a common pattern where you're seeing massive
Speaker 6: backlog growth commitments to AI from their customers, but Microsoft
Speaker 6: can't literally physically provision it fast enough. And when we
Speaker 6: talk to Microsoft offline, like the Azure number would be
Speaker 6: way higher if we now have the capacity constraints. So
Speaker 6: this is not a demand issue, This isn't a competitive issue.
Speaker 6: This is an issue that the industry is facing right
Speaker 6: now across the board is they can't get enough of
Speaker 6: it to their customers. That number of have been way
Speaker 6: higher because you can't describe the math of the backlog
Speaker 6: being so high and Azure where it's at.
Speaker 2: So I think again, we look at it.
Speaker 6: It's important Wall Street cares like Wall Street should care
Speaker 6: more about backlog and bookings. This is again what all
Speaker 6: Oracle trades on. They don't care about revenue. Why does
Speaker 6: everyone just care about revenue now? So I think again,
Speaker 6: I think the Street's got it wrong.
Speaker 4: Streets got it wrong. Brent phil and Jeffrey's putting it right.
Speaker 4: We thank you so much. But coming up more about earnings.
Speaker 4: Roblock CEO David Zuki joining us to discuss the company's
Speaker 4: numbers daily active users for the gaming platform and toping
Speaker 4: one hundred and fifty one million ED.
Speaker 2: Let's look at Core.
Speaker 3: We've shares down more than six percent. Core Scientific investors
Speaker 3: have voted no on Core We've acquiring the company. You'll
Speaker 3: remember that Core. We've tried to buy Core Scientific in
Speaker 3: July nine billion dollars and the advisory firm said that
Speaker 3: undervalued it. BI reacting saying it actually won't impact operations
Speaker 3: of Coreweed but another headline on the terminal. As soon
Speaker 3: as that vote was decided, Core weave to buy Marimo
Speaker 3: terms not discos, maybe a sense that it's moving on
Speaker 3: very quickly. We'll have more when we can. This is
Speaker 3: Beningberg Tech.
Speaker 4: Grow regard ninety nine Nights in the Forest, still a
Speaker 4: brain rot three games, propelling Roadblocks to its highest level
Speaker 4: of daily active users, a company also posting nearly two
Speaker 4: billion dollars in bookings in the third quarter. Still shares
Speaker 4: of the company trading lower after the earnings. Let's talk
Speaker 4: all through all of this with Dave Zuki foundacy of
Speaker 4: Roadblocks and Dave this growth, this is real playing commitment
Speaker 4: comes at a cost, an infrastructure cost, and we see
Speaker 4: costs go up because of safety that you're enacting.
Speaker 5: But also the cloud compute.
Speaker 4: How do you start to monetize to make up for
Speaker 4: some of those costs.
Speaker 7: Yeah, thanks for noting the amazing quarter we just had.
Speaker 7: Both bookings growth was up seventy percent year on year
Speaker 7: at one point nine billion, and as you noted, our
Speaker 7: daily active users passed one hundred and fifty million, which
Speaker 7: is up seventy percent year on year. In addition to
Speaker 7: those three games you mentioned, we had seven games on
Speaker 7: Roadblocks in the last quarter, past ten million daily active
Speaker 7: users and a really healthy content ecosystem. Five of those
Speaker 7: seven experiences were created in the last year. We've hit
Speaker 7: some really peak numbers. We had forty five million concurrent
Speaker 7: players all at the same time. What we said on
Speaker 7: the earnings call is with all of this growth, which
Speaker 7: is cumulatively averaging thirty seven percent over the last two years,
Speaker 7: we are going to be spending on infra. What we
Speaker 7: said is the continued decreases in costs for infra, we
Speaker 7: may slow that down a bit as we spend, But
Speaker 7: the final thing I want to generate is the cash
Speaker 7: flow that we generated on the platform. We generated over
Speaker 7: four hundred and forty million of free cash flow in
Speaker 7: Q four.
Speaker 2: DAVE.
Speaker 3: Looking forward, then, how are you managing out some of
Speaker 3: the technology plays that you made age verification technology in
Speaker 3: a way that doesn't impact or slow the growth of
Speaker 3: both active users in the bookings.
Speaker 7: We've made a commitment a while by to what we
Speaker 7: believe will be the cold standard for safety on platforms
Speaker 7: like Roadblocks and throughout the industry. With new advances in AI,
Speaker 7: we're going to use facial age estimation to estimate the
Speaker 7: age of everyone on our platform. And in addition to
Speaker 7: the text filtering we do the critical harms monitoring the
Speaker 7: prevention of any image sharing. We're going to use that
Speaker 7: to help gate who communicates and who they communicate with.
Speaker 7: I was just in an executive staff meeting on Tuesday
Speaker 7: playing with the role out of this product. It's really
Speaker 7: elegant and we of course want to highlight there may
Speaker 7: be some friction, but I'm really optimistic this is the
Speaker 7: long term good play for Roadblocks, which is really establishing
Speaker 7: the standard of how we believe safety and civility is
Speaker 7: going to run in the future.
Speaker 4: And that your CFO made the point that's going to
Speaker 4: have long term value for shareholders. You make it again, Dave,
Speaker 4: talk to us there for about the new technology, not
Speaker 4: just in safety, but also in how you build gate
Speaker 4: and high fidelity feeling of a game. But some of
Speaker 4: these big winners that we've had, we just them at
Speaker 4: the top. They are kind of more old school feeling
Speaker 4: in many ways, but they're the ones breaking records, grow
Speaker 4: a garden, more classic and blockie.
Speaker 5: How do you compromise on that.
Speaker 7: We've highlighted our vision of getting the ten percent of
Speaker 7: all the global gaming content market running on roadblocks. In
Speaker 7: this quarter we pass three percent, so there's a lot
Speaker 7: of room to go. We have an enormous amount of
Speaker 7: new technology coming to support more diverse experiences, to support
Speaker 7: different types of avatars, to support competitive gaming and genres
Speaker 7: like racing or sports, to support role playing games and
Speaker 7: other types. And we really do have a vision for
Speaker 7: genre expansion, but in a really future looking way, and
Speaker 7: that when creators make experiences on roadblocks, they run well
Speaker 7: either on low end Android devices like a two gigabyte
Speaker 7: Android phone, or on high end gaming piecs and they
Speaker 7: run around the world. So we're optimistic. With the new technology,
Speaker 7: our economics and discovery, we're going to see a diversification
Speaker 7: of the types of experiences we see on our platform.
Speaker 3: Dave, you want ten percent of the gaming content market?
Speaker 3: That changed in the quarter. I saw layoffs at Amazon
Speaker 3: and Microsoft's gaming divisions. Electronic Arts elected to go private.
Speaker 3: The big publicly traded peer that you have private with
Speaker 3: the saudis. React with your interpretation of what that signals
Speaker 3: for the market you're trying to grow in well.
Speaker 7: People estimate the global gaming market somewhere between one eighty
Speaker 7: and two hundred billion. What we've seen on Roadblocks is
Speaker 7: really a future forward optimistic look at gaming. We've seen
Speaker 7: new types of genres given the Roadblocks platform, the ability
Speaker 7: to play with friends on different devices.
Speaker 1: You know.
Speaker 7: Addressed to Impress last year was a whole new type
Speaker 7: of experience. People competing in a fashion show grow a garden.
Speaker 7: I'm really proud of because hitting those top numbers, making
Speaker 7: new records for over twenty million. Concurrence is literally a
Speaker 7: game you can play either while you're there or when
Speaker 7: you're not there. Your garden keeps growing when you're not playing.
Speaker 7: So I think the way to think about this is
Speaker 7: not just protecting a bunst the history of gaming, but
Speaker 7: looking at whole new types of games that are going
Speaker 7: to be built on platforms like Roadblocks and accelerated with
Speaker 7: AI as every game starts to have access to AI
Speaker 7: as well.
Speaker 3: David Zuoki, Roadblock CEO, thank you very much. Let's stick
Speaker 3: with earnings in tech. Comcast was also out before the
Speaker 3: bell this morning, the company managing to slow the tide
Speaker 3: of broadbanding cable TV customer defections in the third quarter
Speaker 3: with help from an Internet price lock guarantee and some
Speaker 3: bundle plans. Let's get out to Bloomberg's entertainment reporter Kelsey
Speaker 3: Griffiths and DC give us the need to know on Comcast.
Speaker 8: Ist tenth straight quarter of broadband losses. So the company
Speaker 8: came into this quarter knowing that they had to do
Speaker 8: something to start stemming this tide. Like you just said,
Speaker 8: they did in fact succeed in kind of slowing some
Speaker 8: of those losses, even though those numbers weren't positive. Necessarily,
Speaker 8: they were losing customers at a slower rate than usual,
Speaker 8: and so the executives were saying that some of the
Speaker 8: changes they've made over this year earlier seemed to be working.
Speaker 5: Seeming working, but the share price is still lower.
Speaker 4: And what's interesting maybe in some of the analyst notes
Speaker 4: there is a concern that maybe they'll spend more, particularly
Speaker 4: when they're thinking making a bid for parts of Warner Brothers.
Speaker 5: What do you make of that, Kelsey, that's right.
Speaker 8: Warner Brothers is one piece of the strategy that Comcasts
Speaker 8: said they're looking at, although they didn't express a really
Speaker 8: high level of interest. They said, when something like this
Speaker 8: in our industry comes on the market, it is something
Speaker 8: that we have to take a look at. But look,
Speaker 8: we're good with our content strategy even without M and A.
Speaker 8: They just succeeded in Laurene Taylor Sheridan over from Paramount
Speaker 8: Plus and he is going to be a really big
Speaker 8: part of that content links get going forward for them.
Speaker 8: They also have NBA TV rights and those are things
Speaker 8: that they're really excited about in the nearer term.
Speaker 5: Great roundup, Kelsey Griffiths.
Speaker 4: We appreciate you on Comcast, and let's just stick with
Speaker 4: the Warner Brothers story a little bit more. Because CEO
Speaker 4: David Sazov said that the board would need a higher
Speaker 4: bid to justify a sale at the company. He said
Speaker 4: those comments during a town hall meeting for employees yesterday,
Speaker 4: according to sources. Now Sazadov also told the staff that
Speaker 4: the board had rejected three.
Speaker 5: Offers from Paramount Skydin send.
Speaker 2: Okay coming up.
Speaker 3: President Trump and China Jijingping attempt to ease trade tensions
Speaker 3: inside their high stakes talks on the future of the
Speaker 3: global supply chain. We have all the details. Next, this
Speaker 3: is bloom Bag Tech. M H.
Speaker 9: We did discuss chips and he's going to be They're
Speaker 9: going to be talking to the video and others about
Speaker 9: taking chips. We're not talking about the black one that
Speaker 9: just came out yesterday, but.
Speaker 2: A lot of chips, you know, a lot of the chips,
Speaker 2: and that's good for us.
Speaker 3: I was President Trump speaking to reporters on board Air
Speaker 3: Force one after meeting with Chinese President Jijingping, saying chips
Speaker 3: were in discussion, but in Nvidia's latest blackwell was left
Speaker 3: off the table.
Speaker 2: Blueboks.
Speaker 3: Tyler Kendall has been traveling with the President and joins
Speaker 3: us from South Korea.
Speaker 2: What is the absolute latest?
Speaker 3: What do we need to know about that came out
Speaker 3: of those talks between Trump and Jijingping.
Speaker 10: Yeah, hey, Ed, Well, when it comes to in video chips,
Speaker 10: it certainly dampens a speculation that Washington would go on
Speaker 10: to approve the sale of such chips to China. President
Speaker 10: Trump went on in that gaggle on Air Force one
Speaker 10: to be asked specifically whether or not anything was brought
Speaker 10: up about the potential for a downgraded version of the
Speaker 10: Blackwell processor. He said that it was not, but that
Speaker 10: ultimately in Vidia the company itself, is going to continue
Speaker 10: direct talks with Washington, as you well know, and Vidia
Speaker 10: has been trying to regain market access in China since
Speaker 10: twenty twenty two, after going from a ninety five percent
Speaker 10: market share peak down to zero. But I have to
Speaker 10: say this was welcome news in Washington this morning for
Speaker 10: those defense hawks who have previously advocated against such sales
Speaker 10: over national security concerns, Which brings us to the broader
Speaker 10: issue of the general trade talks, because while we are
Speaker 10: getting this easing intentions, our own analysts at Bloomberg Economics
Speaker 10: say those more fundamental issues, including national security, were not
Speaker 10: ultimately addressed. But Ed and Caroline, of course, a welcome
Speaker 10: news that we are seeing what appears to be at
Speaker 10: least a year extension when it comes to the broader
Speaker 10: trade troops.
Speaker 3: Yes, blueboth, Tyler Kendall, thank you so much. That's the
Speaker 3: latest from South Korea. Let's get more news, Carol.
Speaker 4: Yeah, it's time now aired for talking tech and first up.
Speaker 4: Open Ai is said to be preparing to file for
Speaker 4: an IPO as soon as next year that could value
Speaker 4: the company at one trillion dollars. But it's all according
Speaker 4: to a report from Reiters. The company is said to
Speaker 4: be considering finding the paperwork with regulators soon as second
Speaker 4: half of twenty twenty six plus. Microsoft says its cloud
Speaker 4: services are recovering from an outage that disrupted workplace software
Speaker 4: products and impacted several companies. For the outage prevented people
Speaker 4: from checking into Alaska Airline flights, for example, and disrupted
Speaker 4: features in Microsoft's own copilot AI. We are ex consultants
Speaker 4: from McKinsey, from Bain, from BCG are recently contracted to
Speaker 4: train AI models on entry level consulting work for open Ai.
Speaker 4: Now bluemeggers learn that our gentum project is run by
Speaker 4: the same third party firm using ex bankers to train
Speaker 4: open ai on financial.
Speaker 2: Models, said Okay coming out.
Speaker 3: We have more magnificent seven earnings coming up after the
Speaker 3: bell today with Apple and Amazon, and we're going to
Speaker 3: have what to expect from those giants next. Apple up
Speaker 3: treading water three ten percent, Amazon down nine tens to
Speaker 3: one percent. Maybe there's more read through there from the
Speaker 3: other cloud names and what that might or might not
Speaker 3: spell for Amazon or at least investors attitude towards it.
Speaker 2: Elsewhere. We know what the story is.
Speaker 3: And the top stories of the day stops moving in
Speaker 3: different directions on the earnings context. Met Us down twelve percent,
Speaker 3: really interesting, notably higher capex in twenty twenty six and
Speaker 3: twenty twenty five. Alphabet gave us the same number of capex,
Speaker 3: but they also told us how revenues directly tied to
Speaker 3: AI are growing, and right now the market's rewarding that
Speaker 3: with the Google pairing up five percent.
Speaker 11: This is Bloomberg Tech. Welcome back to Bloomberg Tech.
Speaker 3: Let's recap the three magnificent names that already reported last night.
Speaker 2: Different stories.
Speaker 3: Microsoft down three percent, as your growth was thirty nine
Speaker 3: percent above consensus, but it was a high bar quarter.
Speaker 3: Same story across all three of them, as we know
Speaker 3: the capital expenditures environment. Meta told us that capital expenditures
Speaker 3: would be notably larger next year than they were this year.
Speaker 3: But the investor bases spooked a little bit because we
Speaker 3: don't have this kind of longer term outlook for how
Speaker 3: that translates to sales apart from we do from Alphabet
Speaker 3: the parent of Google. So they told us what the
Speaker 3: capital expenditures picture looks like, but also that they're products
Speaker 3: that result from investment in data center capacity. AI models generative.
Speaker 3: AI grew two hundred percent year in year, and that
Speaker 3: name is up five percent in direct reaction, and there.
Speaker 2: Are so many more earnings out there current.
Speaker 4: There are, and another one on the rise is Service
Speaker 4: now ed it gave an outlook for strong revenue growth,
Speaker 4: said AI of course is helping the company reduce its
Speaker 4: own costs. We spoke with Service Now CEO Bill McDermott
Speaker 4: a little while ago.
Speaker 12: The most important thing is to reinvent and all of
Speaker 12: these back office operations and companies. So for example, in
Speaker 12: our company, whether it's IT support or customer support or
Speaker 12: security and risk, ninety percent of this work now is
Speaker 12: being done by agents, but not at the expense of people.
Speaker 12: The people in our company now have an AI teammate
Speaker 12: on their shoulder to do the things.
Speaker 2: That they'd really never really liked very much.
Speaker 3: Earning cities and continues with both Amazon and Apple reporting
Speaker 3: later today. Let's talk about what to expect, Bloomberg Execute's
Speaker 3: reporter Ryan Vastellika. Let's start with Amazon. Then it's down
Speaker 3: a percentage point. Maybe this read through from what we
Speaker 3: learned about cloud computing from the three that went last night.
Speaker 2: What are we expecting at.
Speaker 13: Yeah, absolutely, I'd say there's absolutely people looking at the
Speaker 13: results we saw last night from Microsoft and Alphabet and
Speaker 13: kind of extrapolating into what we could expect from Amazon.
Speaker 13: I will say that there has been growing concern about
Speaker 13: the strength of AWS, that's Amazon Web Services, the cloud
Speaker 13: computing business. There some concern that it is falling behind,
Speaker 13: maybe losing some market share, not as quite well positioned
Speaker 13: for the AI era, and maybe the fact that we
Speaker 13: saw such strong results, especially out of Alphabet, maybe indicates
Speaker 13: that maybe it's going to be on the back foot
Speaker 13: a little bit here. There also continues to be a
Speaker 13: lot of focus on how much these companies are spending. Amazon,
Speaker 13: of course has very high CAPBAX levels, not only with
Speaker 13: building out its data center, and cloud business, but all
Speaker 13: of US logistics operations. I'll be very curious to see
Speaker 13: there if we get any sort of improvement on the
Speaker 13: margin front, especially when it comes to commerce. I say
Speaker 13: that those are the two major things people are looking
Speaker 13: at there.
Speaker 4: A I use deployment all about for Amazon, almost for Apple,
Speaker 4: it's ignored. We're just wondering how iPhones seventeen in air
Speaker 4: are doing.
Speaker 2: Yeah, absolutely so.
Speaker 13: So far, it seems like the iPhone seventeen is selling
Speaker 13: pretty well, especially the higher end model. So that is
Speaker 13: atail one, especially when it looks at average selling prices
Speaker 13: right there. People I spoke to have said that maybe
Speaker 13: a lot of people who bought phones during the start
Speaker 13: of COVID and the pandemic five years ago, maybe they're
Speaker 13: just at a point right now where they're starting to upgrade,
Speaker 13: even without AI features, even without the foldable phone that's
Speaker 13: expected next year. So there is a lot of optimism
Speaker 13: that the strong iPhone sales that we've been seeing indications
Speaker 13: of so far, maybe there's room for this to grow
Speaker 13: over the coming quarters, especially as we get new designs,
Speaker 13: more AI features and so forth. Of course, now the
Speaker 13: question is you have a stock that's valued at four
Speaker 13: trillion dollars. It's in hitting record levels. Is all this
Speaker 13: optimis is going to be justified by the results that
Speaker 13: come out this afternoon.
Speaker 4: I mean, while Amazon languishes only about two and a
Speaker 4: half turning Bloomberg ran Plastelica, thank you very much, And
Speaker 4: let's just talk about where investors' heads are at, how
Speaker 4: they're reacting to this really busy week of earnings. Ibek
Speaker 4: oskodeshkay is with our senior market's analysts over at Swiss Quote.
Speaker 4: We had Brent sil from Jeffrey's on the top of
Speaker 4: the show, and he said he doesn't.
Speaker 5: Understand the market right now.
Speaker 4: Do you understand the market if you're looking at Meta
Speaker 4: being sold off so hard, Alphabet rising after earnings. We'll
Speaker 4: get back to her in a minute. Technology on technology
Speaker 4: shows and this many years into zoom, sometimes we don't
Speaker 4: press the right button, head, but really, I do think
Speaker 4: the one cell coming from Meta is a key one
Speaker 4: to be discussing because we have got this five vocated
Speaker 4: market where we're selling off certain names, in particular when
Speaker 4: we're worried about capital expenditure.
Speaker 5: But what more was better.
Speaker 4: To do twenty six percent growth in terms of revenue
Speaker 4: record numbers. We're also thinking about what therefore that pushes
Speaker 4: forward to Amazon and how much they have to vindicate
Speaker 4: the spend on capital expenditure too.
Speaker 3: Yeah, one thing I'd say is we go back to
Speaker 3: Epek Deshkai, who I think is now good, and back
Speaker 3: with us is with respect?
Speaker 2: Do investors have short memories?
Speaker 3: Because Meta told us in the prior quarter that CAFTO
Speaker 3: expenditures would be higher in the next fiscal year, they
Speaker 3: used a different language this time around, which was notably
Speaker 3: larger in fiscal twenty six and twenty five.
Speaker 2: But maybe it's what they didn't say.
Speaker 3: They didn't tell us what top line or bottom line
Speaker 3: growth directly from AI investments looks like what's your read?
Speaker 14: Well, actually, for Meta, the investments look more more riskcared
Speaker 14: than they are for Microsoft or Amazon.
Speaker 15: We do have these data centers and they say that
Speaker 15: if we over invest, we will have the option to
Speaker 15: sell this excess capacity.
Speaker 14: And if you're looking at the market reaction and the
Speaker 14: mixed reaction there, we also think that macraeconic context is
Speaker 14: here is very important.
Speaker 15: Important in the sense that just before these.
Speaker 14: Earnings came out yesterday, the Federal Reserves said that they're
Speaker 14: not sure that they will be cutting the interest raised
Speaker 14: by twenty five bases point. So I think that that
Speaker 14: also dumpened the mood just before the earnings came in.
Speaker 14: Looking at the spending these companies must spend in order
Speaker 14: to keep up with the man and Microsoft has been
Speaker 14: very clear about the fact that they have not been
Speaker 14: able to catch up with the significantly higher demand. So
Speaker 14: they must invest. They do have the free cash to invest,
Speaker 14: and if they do not invest and miss the turn,
Speaker 14: the AI turned that that would be worse for.
Speaker 15: Investors then seeing them over investing.
Speaker 14: So I think that in the in the context of
Speaker 14: the actual growth, these companies must invest and it doesn't
Speaker 14: really bother us as long as there are no concerns
Speaker 14: about oversupply, and this is not the case right now.
Speaker 4: You got Meta said if they have too much compute,
Speaker 4: they can start selling it to others.
Speaker 5: So is this an air pocket?
Speaker 4: Is this just where people buy into weakness or is
Speaker 4: there going to be a significant pullback in questioning of
Speaker 4: the market rit large if the FED isn't going to
Speaker 4: be cut in come December.
Speaker 14: Well, I think that the FED situation could eventually lead
Speaker 14: to a certain pullback in valiations. But I don't think
Speaker 14: that that's going to be a bubble pop kind of
Speaker 14: a market's reaction, because these companies must invest now in
Speaker 14: order to make sure that they don't hit into capacity
Speaker 14: constraints one year, one and a half year from now.
Speaker 14: I believe that investors understand that there is a bpoort
Speaker 14: showing that or claiming that the data capacity computing needs
Speaker 14: will be doubling every nine to eighteen months due to
Speaker 14: our AI application, So these companies must keep up with
Speaker 14: that pace. And again I believe that these fending plants
Speaker 14: have been almost in fairly you know.
Speaker 15: Put out there, so they have being revised higher. But
Speaker 15: this is not this is not a surprise coming in
Speaker 15: right now.
Speaker 14: Looking at the deals and the strength of the demand
Speaker 14: that we see in the sector, these companies are out
Speaker 14: there trying to keep up with the demand. And I
Speaker 14: believe that again, as the executives are also saying, not
Speaker 14: keeping up with the demand or risking to head into
Speaker 14: capacity constraints is worse than over investing right now.
Speaker 4: What's interesting is, of course, perhaps just to show the
Speaker 4: amount of spend that was necessary, Meta comes to market
Speaker 4: with a ginormous twenty five billion dollar bond sale and
Speaker 4: talk to us about demand across assets for AI related companies.
Speaker 4: Should we pull back inequities that their record highs. How
Speaker 4: is demand looking for the bond side of the equation.
Speaker 15: Well, I think the bond side is also looking well.
Speaker 14: Especially right now we have seen that the bond sales
Speaker 14: are have been quite interesting for these companies. I believe
Speaker 14: that in the actual environment as well, the bond sales
Speaker 14: are going to be interesting. So the investors who are
Speaker 14: not necessarily willing to take the equator risk at the
Speaker 14: higher valuations, they will be plugging into the bond side
Speaker 14: of the market. You are not expecting them to move separately.
Speaker 14: You expect them to do to move in tandem. But
Speaker 14: on the bond side the potential of rises less and
Speaker 14: the risk that we're taken for.
Speaker 15: It is also less.
Speaker 14: So this is another way of taking exposure and passive
Speaker 14: exposure to these companies without however, taking the risk of
Speaker 14: the equity fluctuations.
Speaker 2: Epeck.
Speaker 3: If I take the earning statements and cool transcripts of
Speaker 3: all the tech earnings we have so far, run them
Speaker 3: through chat GPT and ask chat GPT to cross reference
Speaker 3: for a theme that is not capital expenditures what would
Speaker 3: I get. What else do you see that they have
Speaker 3: common between them?
Speaker 15: Well, the couple of expenditures are actually rising.
Speaker 10: I don't know.
Speaker 15: I have an ass chat.
Speaker 14: Topt what he thinks about it. But what we see
Speaker 14: is that this is growing exponentially and there is investment
Speaker 14: worries about that. But if you do not invest today
Speaker 14: again a year and a year and a half from now,
Speaker 14: you might into bigger capacity constraints. What's happening right now
Speaker 14: is if today, for man one prosoft for example, you
Speaker 14: are not able to catch up with the demand, then
Speaker 14: tomorrow is going to be a harder because you know,
Speaker 14: we're just going divergently because the demand is going to
Speaker 14: be exponentially rising.
Speaker 15: And that's the main issue.
Speaker 14: That's why these companies are investing so badly or so highly.
Speaker 15: And this is I think what chatteropt will tell you.
Speaker 14: Because as AI applications will be and running, demand for
Speaker 14: competing is going to rise exponentially. And this is exactly
Speaker 14: why Nvidia is also not only concentrating today on the
Speaker 14: AI applications, but all on the networks and intelligence networks
Speaker 14: as well, to make sure that even the networks and
Speaker 14: the pipelines will be able to handle all that data
Speaker 14: flow down the road.
Speaker 3: We did get a FED cut quarter point for a
Speaker 3: second consecutive meeting, and we did get a warning that
Speaker 3: a December rate cut is not a foregone, foregone conclusion.
Speaker 3: Ipek Oskar Deshkaya Senior Markets and list at Swiss Quote
Speaker 3: having earnings and FED story ic