Speaker 1: Bloomberg Audio Studios, podcasts, radio news from the heart of
Speaker 1: where innovation, money and power collide in Silicon Valley and beyond.
Speaker 1: This is Bloomberg Technology with Caroline Hyde.
Speaker 2: And Ed Ludlow live from New York and San Francisco.
Speaker 2: This is Bloomberg Technology coming up. Service now jumps as
Speaker 2: earnings results show resilience. Our conversation with the company's.
Speaker 3: CEO, plus Alphabet earnings looking to set the tone for
Speaker 3: megacat Tech later today, and Tesla's sales.
Speaker 2: They slump in Europe again as it's overtaken by VW
Speaker 2: as Europe's top ev seller. More on that this hour,
Speaker 2: But first we check in on the market and it
Speaker 2: is hope that we might get some sort of reprieve
Speaker 2: from the Federal Reserve. Maybe rates could move as soon
Speaker 2: as June. So being hinted at by some key people,
Speaker 2: the Cleveland president, for example, we're at one point eight percent.
Speaker 2: Big Tech manages to rally again. This is a third
Speaker 2: straight day of games on the Nastaq one hundred. We've
Speaker 2: added a trillion dollars in market capitalization to that benchmark
Speaker 2: in those three days. But I'm looking at bitcoin once again.
Speaker 2: The disconnect happening. In terms of stocks, we move in
Speaker 2: a different direction. Bitcoin maybe able a profit taking as
Speaker 2: we hit ninety three thousand en what have you got?
Speaker 3: Yeah, it's the companies that have reported earnings already. I
Speaker 3: think a lot of people were surprised by the strength
Speaker 3: of Texas Instruments resilient demand. These are the analog chips
Speaker 3: that go into everything, more basic chips, and they seem
Speaker 3: to do well. Later in the Albluem magazine, King will
Speaker 3: break it down for us. Then there's IBM and Service Now,
Speaker 3: two CEOs that you spoke to, and we'll hear from
Speaker 3: Service now resilience of demand, winning government contracts. By contrast,
Speaker 3: IBM losing government contracts, strong profit numbers, but people are
Speaker 3: worried about how they're interpreting the economy going forward. Again,
Speaker 3: we'll hear from both those CEOs and your conversations. Then
Speaker 3: there's what's to come alphabet parent of Google is after
Speaker 3: the bell and at the same time there's the news
Speaker 3: flow out of the doj Antitrust Remedies trial pushing higher
Speaker 3: at one point six percent. But this evening alphabet sets
Speaker 3: the tone, as we just said, for megacaps to come,
Speaker 3: and we have a lot of questions about the mag
Speaker 3: seven we do.
Speaker 2: We're anticipating what results of twelve percent increase in revenue,
Speaker 2: but the tone is going to really dictate big tech earnings.
Speaker 2: More broadly, You've got so many risks, said rising taris
Speaker 2: anti trustee that you just reference AI uncertainty. Raand Vastellac
Speaker 2: has been writing about all of it in the stock
Speaker 2: It's already been slammed so far this year. How anxious
Speaker 2: are investors?
Speaker 4: Hey, thanks for having me, I say. There is so
Speaker 4: much uncertainty surrounding Alphabet, a lot more than even some
Speaker 4: of the other MAGS seven names. It's true that Alphabet
Speaker 4: has less direct exposure to tear us, but there is
Speaker 4: still a lot of concern about the regulatory picture, about
Speaker 4: the risk of competition within AI. All this stuff has
Speaker 4: been really impacting the stop this year. That has some
Speaker 4: people saying that it looks like an attractive bargain here,
Speaker 4: But at the same time, the number of sort of
Speaker 4: existential concerns. Is there going to be a breakup, Is
Speaker 4: it going to lose its really dominant position with its
Speaker 4: biggest market with his Internet search. All these questions really
Speaker 4: have people wondering, how are they going to fare this quarter.
Speaker 4: What are they going to say about the economic backdrop
Speaker 4: and outlook? It's really going to be meaningful for I
Speaker 4: think the broader big tech.
Speaker 3: Space Boombos, Ryan Fastelica, thank you very much. Let's turn
Speaker 3: to IBM. The company beat first quarter expectations with fourteen
Speaker 3: point five billion dollars in revenue, boosted by strong software sales,
Speaker 3: but shares falling today is the company warned of delayed
Speaker 3: contracts due to economic uncertainty. IBM CEO Aarvin Krishna spoke
Speaker 3: to Caroline and said, quote, it's a dynamic environment where
Speaker 3: things are changing. We want to stay focused on the
Speaker 3: business and there's still a lot of business to be had.
Speaker 3: People are going to remain invested in tech. Ana rag Rana,
Speaker 3: a Bloomberg Intelligence joins us with his analysis, and I
Speaker 3: think about big blue right shift to software and consultancy.
Speaker 3: There's what they said and then there's weather. What they
Speaker 3: said is reflected in the forecast. Does IBM really understand
Speaker 3: how the economy is changing right now?
Speaker 5: In a rag.
Speaker 6: See to be very frank, I was surprised that the
Speaker 6: stocks down because you know, if you look at it,
Speaker 6: their consulting business is extremely susceptible to downgrades or deceleration.
Speaker 6: And it was okay, I mean, and they held up guidance,
Speaker 6: But it seems to me that maybe going into the quarter,
Speaker 6: investors were looking for maybe better commentary around software spending.
Speaker 6: Software did decelerate, which is what I mean, at least.
Speaker 7: I was expecting.
Speaker 6: But one of the comments I think that got me
Speaker 6: my attention was that the company's guidance does not take
Speaker 6: into account any material deterioration in economic climate or spending climate.
Speaker 6: And I think that's probably what's causing a little bit
Speaker 6: of hiccup because you know, we all know that if
Speaker 6: the tariff stocks don't, you know, hold true, and some
Speaker 6: of these spendings will will hit really hardbreak that has
Speaker 6: an impact on second half growth, not just for IBM,
Speaker 6: but the entire services and the software sector.
Speaker 2: Anna Agrana, Bloomberg Intelligence, the deep dive on IBM. We
Speaker 2: thank you. Let's go broader with earnings and the tech
Speaker 2: market volatility. More broadly, Anna Rathman's with US Seedbiz Investment
Speaker 2: Advisory Services, Global Market Structures previously and joining us as
Speaker 2: an investment strategist. Anna, I'm really interested as to what
Speaker 2: we glean from say Arvin over at IBM, he's saying, look,
Speaker 2: he puts a low probability on negative global GDP, and
Speaker 2: he's trying to say his business is resilient to any
Speaker 2: macro headwinds here more broadly, but he's also telling us, look,
Speaker 2: I'm worried about the implication of us the sentiment against
Speaker 2: American businesses. How are you hearing that during this earning season.
Speaker 8: Yeah, I mean, I think there is a lot of
Speaker 8: uncertainty still. I mean the terriff, the tariff talk is
Speaker 8: actually causing a lot more damage in terms of reallylationships.
Speaker 8: And I think that's going to be the longer term uncertainty.
Speaker 8: Is even if we arrive at some kind of a
Speaker 8: tariff situation where everyone agrees, what happens to all of
Speaker 8: those negative feelings in terms of being able to trust
Speaker 8: each other and to be able to do business together.
Speaker 8: I think this is going to be a longer term damage.
Speaker 3: To be honest with you, You're damned if you do
Speaker 3: and danned if you don't. If you think about what
Speaker 3: Anaag was just saying about IBM, his thesis is that
Speaker 3: they are not taking into account a deteriorating economic environment.
Speaker 3: But say they had cut guidance. I mean, then what
Speaker 3: would you do. I mean, what is it that you
Speaker 3: think the investor wants to hear from the company right now?
Speaker 3: A cut or adjustment to guidance, or just hold until
Speaker 3: you've got more information.
Speaker 8: Yeah, I'm not sure if you can give good guidance
Speaker 8: at this point, because you know, the tariffs.
Speaker 9: I mean, that's one thing. It's unilateral.
Speaker 8: We're talking about it at like a thirty thousand foot level.
Speaker 8: How it actually trickles down to actual supply chains and
Speaker 8: businesses and what choices management teams make in the face
Speaker 8: of this headwind.
Speaker 9: That's the unknown.
Speaker 8: So in terms of negative GDP, maybe perhaps there might
Speaker 8: be other alliances that are being made.
Speaker 9: We just don't know. But in terms of guidance, it's
Speaker 9: almost difficult to know.
Speaker 8: And even if they were to give guidance, I think
Speaker 8: we have to take with a huge grain of salt.
Speaker 8: So right now, I think investors, I think the best
Speaker 8: bet is to just hold and watch.
Speaker 3: One interesting angle out of Texas Instruments earnings was the
Speaker 3: idea that they had a good first three months of
Speaker 3: the year, but they said that was not necessarily reflective
Speaker 3: of people front running tariffs. How do you interpret that
Speaker 3: we had a lot of soft data from PC shipments,
Speaker 3: for example, smartphone shipments that very much told us in
Speaker 3: the world of technology, companies were front running tariffs in
Speaker 3: the first three months of the year.
Speaker 8: Yeah, I mean, I think companies that that consumers did that,
Speaker 8: and so really we don't have that much information because
Speaker 8: Liberation Day wasn't even a month ago, right, So you know,
Speaker 8: time this to the FED speek this morning about how
Speaker 8: we may have some economic numbers by June to be
Speaker 8: able to do something.
Speaker 9: I think that's too early.
Speaker 8: I think there's a lot of distortion in the data
Speaker 8: in terms of front running as well as just holding
Speaker 8: and waiting and watching with baited breath. I don't think
Speaker 8: there's going to be enough data for either investors or
Speaker 8: policy makers to be able to do anything definitively.
Speaker 2: So, Anna, if you're an investor and you haven't sold
Speaker 2: out during prior to any of this turbulence, do you
Speaker 2: just stay the course? Do you remain long the names
Speaker 2: that you've been committed to prior to this, and just
Speaker 2: hold steady until we come out the other side of
Speaker 2: what is a very much self induced period of instability.
Speaker 8: Yeah, I think that the self induced is right. I
Speaker 8: think US management can't make any real decisions at the
Speaker 8: moment or give guidance. I think it's difficult for investors
Speaker 8: to say either sell or buy.
Speaker 9: I think there it is very much a wait and see.
Speaker 8: Now if you're a long term investor, if your short term,
Speaker 8: I mean, the choices are to just sit and wait.
Speaker 8: You're long term investor, I don't think any of the
Speaker 8: propositions that.
Speaker 9: We have around AI, around tech and.
Speaker 8: Tech dominance is changing for you. So tech is still quality.
Speaker 9: They've got very good balance sheets.
Speaker 8: Tech is still utility in terms of the fact that
Speaker 8: modern life just doesn't work without tech. So if you're
Speaker 8: a long term investor, taking the course is not a
Speaker 8: bad idea either.
Speaker 3: Which corner of the technology market is going to come
Speaker 3: hurtling out of whatever happens next? Anna give me one
Speaker 3: specific area you're most excited about.
Speaker 8: You know, hardware has taken a lot of hit because
Speaker 8: of not only terrorists, but because of the strained relationship
Speaker 8: with China. But I think hardware is is actually maybe
Speaker 8: over sold and maybe are still a good bed. You're
Speaker 8: going to need hardware to develop software that's not going away,
Speaker 8: So I don't think there's anything bad to say necessarily
Speaker 8: for the long term for hardware, I would say maybe
Speaker 8: the bad news wouldn't hit hardware as much as it
Speaker 8: may software, given that it has sold off so much.
Speaker 3: You're going to need hardware to develop software. As the
Speaker 3: line that CEOs all over this planet are telling themselves
Speaker 3: every day at the moment, and are AFTEN consulting local
Speaker 3: market strategists.
Speaker 7: Thank you very much.
Speaker 2: Service now shares surging best state since twenty thirteen after
Speaker 2: earnings showed that the software demand looks pretty resilient despite
Speaker 2: the economic threat of tarists and the government's cost cutting efforts.
Speaker 2: I spoke with the CEO a little McDermott about it's
Speaker 2: pretty rosy outlook.
Speaker 10: Why we're so well positioned for this moment is companies today.
Speaker 10: You know, let's take auto industry as an example. You know,
Speaker 10: tariffs are on the table and that industry is affected.
Speaker 10: So these companies have to think about the marketplace very,
Speaker 10: very differently. They have to reorient their supply chains in
Speaker 10: real time, and only AI can do that. And you say, well,
Speaker 10: why do I have to do that? There's thirty thousand
Speaker 10: parts that go into manufacturing a single vehicle. They may
Speaker 10: not be able to pass on the ten thousand dollars
Speaker 10: increase to the consumer. So companies like Service Now can
Speaker 10: get them to tier two and three suppliers, sign up
Speaker 10: new suppliers in real time, and position these companies to win.
Speaker 10: And this is true in every industry. It could be insurance,
Speaker 10: it could be pharma, it could be retail manufacturing. It's
Speaker 10: all in the focus of Service Now to help these
Speaker 10: companies innovate.
Speaker 2: Let's go from private companies to the public sector. And
Speaker 2: I know that you've won a federal contract, but many
Speaker 2: had a lot of anxiety about what DOSEE meant for you.
Speaker 2: You said, those loves you, but why would those love
Speaker 2: you at this moment.
Speaker 10: Well, we're laser focused on modernizing government and elevating how
Speaker 10: it serves the American people in the US. And what's
Speaker 10: really interesting about DOZE it has formed a standard that
Speaker 10: other governments around the world are following. So our public
Speaker 10: sector business was up thirty percent year on year. We
Speaker 10: had six new public sector logos, including one large US
Speaker 10: federal agency. We have eleven federal deals greater than a million,
Speaker 10: and two of them were greater than five million. And
Speaker 10: this is net new software sales. So This is kind
Speaker 10: of a big moment because we are the only software
Speaker 10: platform I'm personally aware of that can take out billions
Speaker 10: in cost in government around the world, and certainly the
Speaker 10: United States is looking at that very closely, and we're excited.
Speaker 2: I mean, have you spoken to Elon about the work
Speaker 2: that he's doing. How did you make sure that you
Speaker 2: were protected in this moment to be able to bring
Speaker 2: the transformation, bring the efficiency.
Speaker 10: Well, you have to remember the agencies are run by
Speaker 10: amazing public servants and great leaders, and DOEGE is doing
Speaker 10: the right thing. They obviously want to make good for
Speaker 10: the American people, so the tax payers get their benefits.
Speaker 10: Our platform is front and center and helping them do that.
Speaker 10: You know, there's systems like COBOL systems in there and
Speaker 10: government entities since nineteen fifty nine, and then the twentieth
Speaker 10: century architectures where all of these legacy systems were departmentally organized,
Speaker 10: and then there was Maverick buying over decades of different administrations.
Speaker 10: We can come in there and consolidate all of these
Speaker 10: spends onto the Service Now platform and replace hundreds of systems.
Speaker 7: And who wouldn't want to do that?
Speaker 2: Service Now CEO Bill McDermott. Let's dig in more. Brody
Speaker 2: Ford is with us, who's been busy covering all of
Speaker 2: these earnings. Brody, we were all surprised by the resilience
Speaker 2: versus the public sector. But more broadly, they're just showing
Speaker 2: current remaining performance obligations are really strong.
Speaker 11: Exactly so yet meet right, it's been a kind of
Speaker 11: funky moment for the economy. Everyone's wondered if you're a
Speaker 11: software vendor, you're not impacted by tariffs, what does this
Speaker 11: mean for you? And what Service Now has shown us
Speaker 11: is maybe not a whole lot. The results were very solid.
Speaker 11: I mean, the stock was down like twenty some percent
Speaker 11: headed in through the results, and so expectations were quite low,
Speaker 11: but they did surpass that and they were able to
Speaker 11: show that, at least for the time being, not a
Speaker 11: whole lot of impacts from all the economic kind of
Speaker 11: chaos and fear we've been seeing out there.
Speaker 5: Right, what he.
Speaker 3: Had to say, Bill McDermott showed confidence. But actually we
Speaker 3: probably should focus on the full year guidance because the
Speaker 3: full year guidance definitely reflects the political uncertainty and perhaps
Speaker 3: in caution Brady.
Speaker 11: Correct, Yeah, factor in the currency it was just the
Speaker 11: slightest cut from their previous guidance in that environment. That's
Speaker 11: pretty good. They say in their commentary that the guidance
Speaker 11: reflected some caution that you know, they even though the
Speaker 11: trends were good, that they gave a conservative guidance because
Speaker 11: it allowed them to essentially, if things go a little
Speaker 11: wrong later in the year, they won't have to cut again,
Speaker 11: because yeah, it's still an open question. I mean, if
Speaker 11: we head into a true recession or if there's more
Speaker 11: aggressive federal cost cuts, Service now will not be immune.
Speaker 2: It was interesting Morgan Stanley's saying that they're de risking
Speaker 2: their forward guidance, but Brody, they also highlight how strong
Speaker 2: they've been in terms of generative AI. Are we back
Speaker 2: to talking about some of the efficiency that we've all
Speaker 2: been promised some of the productivity.
Speaker 11: Yes, every company right now is singing the song of
Speaker 11: our generative AI product is driving revenue. Not a ton
Speaker 11: of them are breaking out super specifically what that means.
Speaker 11: Service now has given some numbers, some guides, but I
Speaker 11: think still the generative AI uplift most analysts expect that
Speaker 11: to come next year, even the year after in a
Speaker 11: significant way, but still that's where the big growth bet
Speaker 11: is for all these companies. In service Now's case, it
Speaker 11: is a higher tier product that you would buy. You
Speaker 11: would uplift your license to be able to access the
Speaker 11: generative AI tools, and so certainly if you're a salesperson
Speaker 11: there that is priority number one right now.
Speaker 3: The most Brady Ford terrific reporting, Thank you very much.
Speaker 3: Coming up, Alphabet's cloud unit is expected to show growth
Speaker 3: off the back of the company's AI push. We'll discuss
Speaker 3: what's expected from the Google parents' earnings. This is what
Speaker 3: financial markets look like right now in the context of technology.
Speaker 3: So at the index level and as that one hundred,
Speaker 3: the vast majority of names are in the green.
Speaker 5: It is the.
Speaker 7: Megacaps that are pushing us higher.
Speaker 3: Though it's interesting that this is kind of broad based
Speaker 3: all corners of the tech market. You have software names,
Speaker 3: hardware names, social media names as well continuing to push higher.
Speaker 3: There is some reverberation of fear fe good. I would
Speaker 3: say from those names that we just covered. The earnings
Speaker 3: of Bitcoin is put off the gas a little bit
Speaker 3: in the moment, ninety hundred US dollars per token back.
Speaker 3: You know, we're four days into a week where we
Speaker 3: talked about bitcoin every day having some momentum, behaving like gold.
Speaker 3: There's a lot more to come in this hour. This
Speaker 3: is Bloombog technology.
Speaker 2: Google parent Alphabet. Well, it reports its earnings after the
Speaker 2: market close today. Let's get more and what to expect
Speaker 2: blooemeg Intelligence. As Man Deep singers here, there is a
Speaker 2: whole host of headaches for Alphabet right now, but revenue
Speaker 2: is still set to grow by twelve percent.
Speaker 12: Yeah, and search grew double digits last quarter, so I feel.
Speaker 5: The bar is high.
Speaker 12: And then I look at all the things that have
Speaker 12: transferred since the last time they're reported earnings. I feel
Speaker 12: on the margin it's gonna go down, and especially if
Speaker 12: they miss on search. I mean, you know, overall print,
Speaker 12: no matter how strong cloud is or YouTube is, it's
Speaker 12: not going to matter. So from a profitability perspective, it's
Speaker 12: all about search. And I can't imagine, you know, how
Speaker 12: they beat on the search revenue given all the stuff
Speaker 12: you have heard about t machine and advertisers pulling back
Speaker 12: even though they're ad pricing will be better than peers.
Speaker 12: But on the margin, I think I don't see them
Speaker 12: beating consensus numbers.
Speaker 7: You know what's interesting, Man, deep.
Speaker 3: I've spoken to several CEOs in the supply chain for
Speaker 3: Data Center right and they're so confident that cat TO
Speaker 3: expenditures will continue to rise on a multi year horizon.
Speaker 7: Google told us a number.
Speaker 3: How important is it or not that Google specifically sticks
Speaker 3: with that spending plan for the rest of the magnetic
Speaker 3: seven names that are to come.
Speaker 12: Absolutely, I think it's table stakes for someone like Google.
Speaker 12: And you know, they don't have a choice but to
Speaker 12: invest in their Gemini model because of the thread from
Speaker 12: CHATGPT and all the LM search vendors. So right now,
Speaker 12: what's insulating them is none of these guys have an
Speaker 12: AD platform. They're monetizing the engagement through subscriptions, but there
Speaker 12: is no doubt that they are taking volume of the searches,
Speaker 12: and so from that perspective, Google will see the impact
Speaker 12: in their volume. It's just if you're an online business,
Speaker 12: you have no way out but to spend your money
Speaker 12: on Google. And even in a recessionary environment, what we
Speaker 12: have seen is Google is the most insulated. That will
Speaker 12: remain the case when it comes to the ads spend,
Speaker 12: at least for now.
Speaker 2: At least for now at the moment, there's a whole
Speaker 2: host of anti trust issues, and I'm interested in just
Speaker 2: whether you think we'll hear a lot of analyst calls
Speaker 2: and requests to know more about that. How they preserve
Speaker 2: the business model in the face of it.
Speaker 12: Oh, absolutely, the Chrome one is huge. I mean, I
Speaker 12: think what they're going to do is with the Viz
Speaker 12: acquisition really deploy AI inside Chrome. So losing Chrome will
Speaker 12: be just catastrophic for Google. So from that perspective, that
Speaker 12: case is huge. I mean, they may have to do
Speaker 12: some remedies. They've already talked about keeping the cookies and
Speaker 12: all that, but at the end of the day, Chrome
Speaker 12: is how they have the distribution when it comes to
Speaker 12: their Gemini two point five model, which is just getting
Speaker 12: great review. So in the end, it comes down to
Speaker 12: having distribution, and Google has that with Chrome as well
Speaker 12: as the Android ecosystem, but Chrome is very important to
Speaker 12: cut it across the iOS and all the other devices.
Speaker 3: The Duck Duck Go CEO testified in that case and
Speaker 3: he put a fifty billion dollar or more value on Chrome,
Speaker 3: which I found fascinating. Same question I've asked you every
Speaker 3: year since I've lived in America. Does the stop reflect
Speaker 3: the antitrust risk that you continue to talk about and.
Speaker 12: Does I think right now Google is at the lowest
Speaker 12: valuation when it comes to all the max seven names
Speaker 12: in terms of multiples. So from that perspective, the chatchipt thread,
Speaker 12: the regulatory risks are reflected in the valuation. But like
Speaker 12: I said, you know, if something happens to that search revenue,
Speaker 12: then suddenly all the earning estimates are going to get
Speaker 12: revised lower. So from Google's perspective, you know, cloud is
Speaker 12: not how they make their money. It's search, and that's
Speaker 12: why it's all the more important to keep that intact.
Speaker 12: You know, when it comes to the regulatory risks that
Speaker 12: are out there.
Speaker 3: I bring it up because the DOJ is seeking divestment
Speaker 3: of Chrome, which would be a big thing. Bloomberg Intelligence
Speaker 3: is man deep saying terrific analysis.
Speaker 7: Thank you very much.
Speaker 2: Welcome back to Bloomberg Technology and Karine Hide in New.
Speaker 7: York and Amed love Loo in San Francisco.
Speaker 2: Let's got to check on these markets, said, because we
Speaker 2: are once again in rebound mode. We're up for a
Speaker 2: third straight day on the last like one hundred one
Speaker 2: point nine percent. Let's call it a macro picture. We're
Speaker 2: getting a few more dubvish tones coming from those fed
Speaker 2: presidents today. Could we see a move as the macro
Speaker 2: faces headwind of the headwind amid the tariff anxiety. We're
Speaker 2: currently at one point eight percent. Is big tech really
Speaker 2: leaves the charge? Drillian and I want to shine a
Speaker 2: light on chips. You've talked about Texas Instruments so well,
Speaker 2: but the socks is having a wonderful day, having its
Speaker 2: best day. The overall semiconductor index, well, we're seeing every
Speaker 2: single company in the green. Notably we're looking ahead to
Speaker 2: earnings of Intel. Is there going to be a pull
Speaker 2: forward on Intel numbers in terms of the amount of
Speaker 2: PCs that we've wanted to see in terms of inventory
Speaker 2: trying to get the head of tariffs, but we're likely
Speaker 2: to see overcall revenue on the downside. Texas Instruments really
Speaker 2: smashed it though, ed, Yeah.
Speaker 3: Let's stick with Texas Instruments and bring in Bloomberg, see
Speaker 3: and King. This is a maker of the more simple chips,
Speaker 3: goes in everything from cars to electronics.
Speaker 7: What do we learn from their numbers?
Speaker 13: Yeah, I mean they said everything essentially, everything is awesome.
Speaker 13: That's been the message so far for all TIP companies.
Speaker 13: Demand is good. It's coming back, just like we said
Speaker 13: it was, crosshold markets, cross old geographies.
Speaker 7: Everything is really good.
Speaker 13: But with the giant butt.
Speaker 3: Yeah, the giant but being tariffs and uncertain trade policy.
Speaker 3: The other one that caught the eye of night was
Speaker 3: sk heinez at a career key memory provider to Nvidia
Speaker 3: in the context data center.
Speaker 7: What's the read through to the big picture?
Speaker 13: Yeah, the same thing there. Everything is awesome, right, everything,
Speaker 13: the orders are coming in, selling a lot of chips.
Speaker 13: Demand fundamentally still strong.
Speaker 7: But tariffs.
Speaker 2: We want to thank you in King on all things chips.
Speaker 2: But meanwhile, going back to broader stories, right now, there
Speaker 2: are some breaking news that the US is set to
Speaker 2: demand that Putin of Russia accepts that Ukraine has a
Speaker 2: right to continue its military force. Now we go out
Speaker 2: to our Balance of Power co hosts Katie Lines, who
Speaker 2: can bring us some of the details here. There is
Speaker 2: an important meeting about to occur in Moscow, and this
Speaker 2: is the line when it comes to what Russia must
Speaker 2: accept in any sort of ceasefar Yeah, Bloomberg.
Speaker 14: According to sources familiar with the matter, Caroline is really
Speaker 14: providing some light as to what exactly in terms of
Speaker 14: concessions the US wants to ask of Russia after much
Speaker 14: reporting over all of the concessions that have been asked
Speaker 14: of Ukraine, and that does include a demand that Russia
Speaker 14: essentially accepts that Ukraine will have its own military force
Speaker 14: and defense industry as part of any deal. And our
Speaker 14: understanding is this is going to be presented as an
Speaker 14: issue when Steve Whitcoff, the US Special Envoy, meets with
Speaker 14: Vladimir Putin next in Moscow, which is expected to happen tomorrow.
Speaker 2: And in additional demand.
Speaker 14: Here as well, according to our reporting, is that Russia
Speaker 14: returns control of the Zaparijia Power nuclear power plant in
Speaker 14: Ukraine and that the US and theory would take over
Speaker 14: the operations of that. Now, it's not clear whether or
Speaker 14: not these are concessions that Vladimir Putin will be willing
Speaker 14: to accept. Is at least when it comes to the
Speaker 14: Ukrainian defense industry, that would mean Putin does not achieve
Speaker 14: one of his stated war aims. When he invaded Ukraine,
Speaker 14: he said part of the objective was to achieve the
Speaker 14: demilitarization of Ukraine. Now, of course, there are other objectives
Speaker 14: that based on our reporting on the deal, that had
Speaker 14: been presented to Ukraine from the US. That would mean
Speaker 14: Vladimir Putin would achieve including a commitment that Ukraine would
Speaker 14: never be able to join NATO, as well as recognition
Speaker 14: of Crimea, which Russia illegally annexed in twenty fourteen as Russian.
Speaker 14: That is something that ukrain and President Vladimir Zelinski has
Speaker 14: said he could not accept in any deal because it
Speaker 14: would violate the Ukrainian constitution, and of course President Trump
Speaker 14: was upset with that statement. He said that it is
Speaker 14: a deterrent or an impediment, if you will, to achieving peace,
Speaker 14: though he also has expressed ir with Vladimir Putin. Today,
Speaker 14: in the aftermath of deadly strikes in Kiev over a
Speaker 14: night which killed at least a dozen people and wounded
Speaker 14: dozens more, he says that Vladimir.
Speaker 2: Putin must stop.
Speaker 14: He says that the timing is very bad. It was
Speaker 14: not necessary. He says he is not happy with the
Speaker 14: Russian strikes on Kiev and it'll remain to be seen
Speaker 14: if Russia is happy with this architecture of a deal that, again,
Speaker 14: based on our reporting, the US is preparing.
Speaker 3: To present Balance and Power. Co host Katie Lynes thank
Speaker 3: you very much. Let's get back to technology earnings driving
Speaker 3: stocks today IBM underwhelming investors despite posting a sales beat.
Speaker 3: CEO of Vin Krishna expecting AI to continue to deve
Speaker 3: a telling Caro AI business is six billion dollars. It's
Speaker 3: pretty big compared to most others, and we are very
Speaker 3: happy people are using it to improve price, customer service,
Speaker 3: customer experience for more. David Bunts and the Buns And
Speaker 3: Group chief investment officer joins us now is company seven
Speaker 3: point one billion dollars of assets under management. You might
Speaker 3: have heard Bloombergsy and King a moment ago, also speaking
Speaker 3: in the context of the chip names, and in summary,
Speaker 3: everything is awesome IBM. The market is sort of not
Speaker 3: necessarily sharing the sentiment, but that start there. David, is
Speaker 3: everything awesome for technology in corporate America?
Speaker 15: Well, no, not everything is awesome in the sense of
Speaker 15: technology is not immune at all from the uncertainty generated
Speaker 15: by the tariffs and the questions as to what that
Speaker 15: will mean both to the economy but then also to
Speaker 15: actual policy and therefore expectations for corporate profits. So that
Speaker 15: uncertainty lingers. But I think everything is certainly wonderful. So
Speaker 15: far in terms of operating results that have been reported.
Speaker 15: We are holders of both Texas Instruments, which is upp
Speaker 15: today and IBM, which is down. But IBM has been
Speaker 15: an absolutely unbelievable performer, and really the AI side was
Speaker 15: good news. The stock would be down more today if
Speaker 15: it were not.
Speaker 7: For the AI boost.
Speaker 15: It's the software growth was only nine percent quarter over
Speaker 15: quarter when they had done eleven percent to the quarter before,
Speaker 15: so some deceleration and what's been a very successful growth
Speaker 15: in that hybrid cloud, the former red Hat business that
Speaker 15: they acquired. IBM has executed very well and we're big
Speaker 15: believers long term and what they're doing.
Speaker 5: That whole story.
Speaker 8: There's a lot of good news.
Speaker 15: In the technology sector, but you just simply can't overpay
Speaker 15: for the good news.
Speaker 2: David. What's so interesting is, yes, maybe there's some profit
Speaker 2: taking given the run up in IBM and its resiliency
Speaker 2: amid the tariff uncertainty. But Avin Christa said, look, demand
Speaker 2: signals are still unchanged. Is that what need to remain
Speaker 2: the case? How much are we already basically paying for
Speaker 2: inventory pulled forward by Texas Instruments and a resiliency consultancy
Speaker 2: that might not withstand what could be a real slow
Speaker 2: down in the economy.
Speaker 15: Well, there is a very big difference in the answer
Speaker 15: to that, from Texas Instruments to IBM, to other companies
Speaker 15: that are part of this AI capex story.
Speaker 5: Like let's say in Nvidia.
Speaker 15: Nobody's going to be immune if there's a system wide
Speaker 15: demand slowdown and a recession that lasts more than a
Speaker 15: few minutes. But there's uncertainty as to what exactly will happen.
Speaker 15: I expect that there will be a slowdown, and again
Speaker 15: we're not We don't own any company for the sake
Speaker 15: of one quarter of results, so I think you could
Speaker 15: very well see a slowdown that impacts fundamentals short term.
Speaker 15: The question is who has the resilience, who has the
Speaker 15: balance sheet? Who is the business model to most execute
Speaker 15: through that? I have no doubt Texas Instruments and IBM
Speaker 15: belong at the top of those lists. They're not dependent
Speaker 15: on a somewhat unsustainable AI capex cycle let alone. Are
Speaker 15: they relying on a pe ratio that has been totally
Speaker 15: unsustainable to hold the stock price up?
Speaker 7: Okay, who is at the top of that list for
Speaker 7: you in the weeks to.
Speaker 15: Come, Well, and video, I should go easy on them
Speaker 15: because they've obviously had a tough time through this. But
Speaker 15: I think when in Video is one hundred and fifty
Speaker 15: dollars trading eighty times forward earnings now down here to
Speaker 15: the lower hundreds, it's certainly cheaper, but it's very much
Speaker 15: tether do a big story around AI capex and suffers
Speaker 15: from law of large numbers. Just when you get to
Speaker 15: that three trillion market cap, it's very difficult for people
Speaker 15: to realize that a twenty percent gain, which is not
Speaker 15: really what their shareholders want. They want something more than that,
Speaker 15: but the math of that requires it to add like
Speaker 15: almost a trillion dollars of market capitalization. So it's just
Speaker 15: very difficult to make money out of those valuations. So
Speaker 15: in Video is a good example there. Look, we're givinging
Speaker 15: growth investors, and so in Video is not a name
Speaker 15: that we'd be looking at anyways. So I think IBM,
Speaker 15: if you look at the dividend on cost for people
Speaker 15: that were buying IBM a number of years ago, we
Speaker 15: entered the position about seven years ago. It's been unbelievable.
Speaker 15: And everyone focuses on how well the stock price is done,
Speaker 15: and that's great, it makes us look good, but for me,
Speaker 15: it's a cash on cash story. Their dividend growth has
Speaker 15: been remarkable.
Speaker 2: David, what about buybacks as well? Sorry to jump in there,
Speaker 2: but many expecting companies are going to make the most
Speaker 2: of that capital hall right now.
Speaker 15: Well, I think that stock buybacks to us are at
Speaker 15: best supplemental. Most technology companies don't use it as real
Speaker 15: capital return. They use it as executive compensation to the
Speaker 15: degree or at least buying back the shares that you
Speaker 15: issued because of stock options and executive comp I think
Speaker 15: that that's a very good thing as a capital return strategy.
Speaker 15: We prefer it the second tier, not first, and IBM
Speaker 15: is a good example.
Speaker 7: David bunts into the buns and group. Thank you very much.
Speaker 3: I want to get to a story I broke yesterday
Speaker 3: with bloomboas jillion ten Lommus Neuralink is planning to raise
Speaker 3: around five hundred million dollars at a pre money valuation
Speaker 3: of eight point five billion dollars.
Speaker 7: That's, according to sources.
Speaker 3: The brain implant company in clinical trials for its chip
Speaker 3: that allows patients to control computers with their brains, and
Speaker 3: a big jump in valuation. It was too now coming up,
Speaker 3: Ali Patovi an early investor in names like Facebook and Cusa,
Speaker 3: joins us to talk about finding and cultivating tech leaders.
Speaker 7: That's next. This is newbog technology.
Speaker 3: Ali Partovi, an early investor in Facebook, Airbnb, and drop Box,
Speaker 3: has announced a new three hundred and twenty million dollar
Speaker 3: fund from his company Neo to back early tech talent
Speaker 3: through a scholars program for college students, an accelerator which
Speaker 3: would compete with the likes of y Combinator. AI joins us. Now,
Speaker 3: welcome to the show. Welcome to the studio. That's the debate, right,
Speaker 3: is what you do venture capital with an accelerator offering?
Speaker 7: Or are you an accelerator?
Speaker 16: I define us as a mentorship community. I'm so excited
Speaker 16: to be here, Ed and Caroline. We've just raised three
Speaker 16: hundred and twenty million dollars. But what I'm most excited
Speaker 16: about is that we discover superstars earlier.
Speaker 5: Than anybody else.
Speaker 16: I started this company eight years ago with the vision
Speaker 16: that you can identify future billionaires when they're still in college,
Speaker 16: right and mentor them and help them accomplish their potential.
Speaker 16: And it's just amazing to see what Neo Scholars have
Speaker 16: gone on to do. Last year, all of open Aiy's
Speaker 16: new grad hires were neo scholars, and some of them
Speaker 16: go on to found you know, companies like Cognition and
Speaker 16: Cursor that are worth billions and that we back.
Speaker 2: Yeah. I mean, let's look at the case study of
Speaker 2: any sphere which makes Cursor such a hot product. You
Speaker 2: found Michael before anyone else. You were the first check
Speaker 2: in the fact that you've got such prior experience and wins.
Speaker 2: Is there a method? Is there something that you see
Speaker 2: in each founder?
Speaker 5: There is?
Speaker 16: And honestly, when I started, I had a little bit
Speaker 16: of insecurity of like, is it possible to build a machine,
Speaker 16: build an institution that systematically identifies future you know, future
Speaker 16: tech leaders when they're still sophomores in college and is
Speaker 16: it or you know, do I just have anc or
Speaker 16: can you do it systematically? And I feel pretty confident
Speaker 16: we've not proven that you can do it institutionally. Michael
Speaker 16: is a great example.
Speaker 5: You know.
Speaker 16: I met him when he was a rising sophomore at
Speaker 16: MIT and we helped mentor him not just towards becoming
Speaker 16: a founder, but helped him get his first startup internship.
Speaker 16: His co founder Oman, who was also an MIT student,
Speaker 16: We helped him get his first startup internship, and when
Speaker 16: they were starting a startup, we mentor with them regularly
Speaker 16: for almost a year before they raised funding.
Speaker 5: And they're not the only case.
Speaker 16: You know, I just mentioned Cognition co founder Walden Yan
Speaker 16: was a NEO scholar. That's a billion dollar company.
Speaker 3: So here's the thing, right, all of these people and
Speaker 3: their story is just at the core of Silicon Valley law.
Speaker 7: Right, they are talented.
Speaker 3: Where we are today is a discussion around how you
Speaker 3: do not need to be a computer scientist. You don't
Speaker 3: even need to learn to code anymore. What is the
Speaker 3: talent that you actually need to identify? Is it like
Speaker 3: a business acumen more than anything.
Speaker 5: It's a really interesting question ed.
Speaker 16: And it's funny because I remember when I was starting Neo,
Speaker 16: one of the top vcs in Silicon Valley said to me, Hm,
Speaker 16: you're focusing on computer science. Is that really necessary?
Speaker 5: Is that right? Maybe that doesn't make sense?
Speaker 16: And I was like, you know what, I'm focusing on
Speaker 16: computer science and the names I just mentioned are all
Speaker 16: computer science students. I think computer science teaches you how
Speaker 16: to You're probably correct that you may not need to.
Speaker 5: Know how to code.
Speaker 16: But your question, I would say, would you want people
Speaker 16: to know how to write because writing can also be
Speaker 16: done by AI, you know, but writing teaches you how
Speaker 16: to think, you know. Yeah, And computer science. I still
Speaker 16: we focus on computer science students because I think it
Speaker 16: does give them business acumen and just gives them strategic
Speaker 16: thinking abilities.
Speaker 2: It's why you founded code dot org with your brother
Speaker 2: all those years ago. Well, yeah, I'm going to get
Speaker 2: personal for a minute, Ali, because you're an immigrant yourself
Speaker 2: and your family fled the Uranian regime years ago. We're
Speaker 2: at a period where immigrants perhaps don't feel quite as
Speaker 2: accepted in the United States right now. Does that impact
Speaker 2: some of the founders that you're going to find?
Speaker 16: Honestly, I think there's an emerging question, and I'm still
Speaker 16: trying to figure out, you know, both how I feel
Speaker 16: and where we're going to end up. I still believe
Speaker 16: today the United States is the best haven for smart
Speaker 16: people who want to build something out of their careers
Speaker 16: and the and even immigrants. And you know, by the way,
Speaker 16: I was not only an immigrant. I was deported when
Speaker 16: I was very young and managed to come back.
Speaker 5: So I definitely understand the fear.
Speaker 16: And there's some really terrible things about the US immigration system.
Speaker 5: But I still think that in terms of the.
Speaker 16: Opportunity the US offers, it's better than any any other
Speaker 16: place on Earth, and I'd like to think that our
Speaker 16: immigration system will eventually get to where it makes more
Speaker 16: sense as well.
Speaker 3: Ali was short in time, but I want to just
Speaker 3: end by asking you what is the distinction or advantage
Speaker 3: you have against the Y Combinator or against what Jason
Speaker 3: Calacanis is doing for example.
Speaker 16: You know, I'd say there's a lot of incredible legacy
Speaker 16: programs from the past decades that inspired us and on
Speaker 16: whose shoulders we've built whose focus has been backing first
Speaker 16: time founders or identifying college students and you know, convincing them,
Speaker 16: you know, to start companies. And we today are the
Speaker 16: best of these programs. We discover superstars earlier than anybody else.
Speaker 16: And you know, if you look at the top AI,
Speaker 16: Company's cursor right now is basically the top of that list.
Speaker 16: And it was started by somebody who was a NEO
Speaker 16: scholar when he was a college student, and we were
Speaker 16: their first investor.
Speaker 3: Ali Potsov, CEO of Neo, thank you for joining us,
Speaker 3: really appreciate your time.
Speaker 7: Now.
Speaker 3: Some news out of China, Chinese ev maker, Neo is
Speaker 3: preparing to launch lower price models in Europe as it
Speaker 3: expands beyond Asia.
Speaker 7: Yesterday, CEO William.
Speaker 3: Lee spoke with Bloomberg about recent changes Neo's expansion strategy.
Speaker 17: Well in the next three years, our focus will undoubtedly
Speaker 17: remain on the Chinese market, as China is the world's
Speaker 17: largest and fastest growing markets for smart electric vehicles, which
Speaker 17: is also the most competitive. As a company founded in China,
Speaker 17: we must secure a sufficient market share in our home
Speaker 17: markets and achieve sustainable operations. This year, we have launched
Speaker 17: nine new products. Our chips, for example, can increase our
Speaker 17: gross margin by four to five percent. Additionally, we are
Speaker 17: making significant efforts in managing sales expenses and enhancing the
Speaker 17: efficiency of R and D costs. Therefore, we are very
Speaker 17: confident in achieving profitability in the fourth quarter of this year.
Speaker 18: You're seeing that, so I know your new brand, Firefly,
Speaker 18: You're going to be concentrated on Singapore and other markets
Speaker 18: including Europe UK.
Speaker 17: How are you.
Speaker 18: Going to change the model there? Because you did go
Speaker 18: into five fairly expensive, largely Nordic countries in Europe and
Speaker 18: you said you underestimated the cost structures there.
Speaker 7: So how are you going to.
Speaker 18: Change that cost structure at a time when there are
Speaker 18: tariffs as well.
Speaker 5: So.
Speaker 17: The tariffs will indeed impact our overall business plan. However,
Speaker 17: on the other hand, our new model Firefly is designed
Speaker 17: specifically for small car users. From a product perspective, it's
Speaker 17: very suitable for markets including Europe. The global market for
Speaker 17: small cars is approximately twenty million units. We will change
Speaker 17: our ways of cooperation. In the past few years, we
Speaker 17: have operated directly in five European countries. However, we will
Speaker 17: now collaborate more with local partners. We will have one
Speaker 17: partner in each country for long term cooperation, leveraging their
Speaker 17: capabilities to expand our presence.
Speaker 18: How are you going to stand out in the domestic market?
Speaker 18: You're doing the battery swapping technology with the Firefly. Are
Speaker 18: you in active discussions with partners?
Speaker 2: I know you have talks with coatl.
Speaker 18: But others who are going to be those who helped
Speaker 18: solder the immense cost of spreading across all the provinces
Speaker 18: in China.
Speaker 17: We have invested in three thy two hundred and seventy
Speaker 17: five battery swap stations in China for the past few years.
Speaker 17: This year we have an even more ambitious plan. We
Speaker 17: aim to build battery swap stations in every county across
Speaker 17: the twenty seven provincial level administrative regions in China. That
Speaker 17: means adding at least one thousand more battery swap stations
Speaker 17: this year. This will certainly be a significant capital expenditure FUS.
Speaker 17: We changed our approach this year by working with local
Speaker 17: partners in China which will handle the construction of those stations.
Speaker 17: We have built partnership with more than a dozen companies.
Speaker 17: We will then rent the battery swap stations from them,
Speaker 17: which can help reduce our capital expenditure.
Speaker 3: That was NEO CEO William Lee. European car sales rebounded
Speaker 3: in March, with electric vehicle deliveries in particular surging twenty
Speaker 3: four percent in the region, but that did not extend
Speaker 3: to Tesla, which saw new registrations full twenty eight percent
Speaker 3: in Europe last month. I want to bring in Kristen Whole,
Speaker 3: head of Near Impact Capital that holds some Tesla's share.
Speaker 3: You sold out of client funds two years ago, but
Speaker 3: you retain Tesla shares for the purposes of voting and
Speaker 3: vocalizing your thoughts your.
Speaker 7: Thesis on the stock. You are not bullish here.
Speaker 19: No, we're not. No, And it's interesting because we have
Speaker 19: seen shares drop thirty three percent so far this year,
Speaker 19: and yet there's a rally now even though we're seeing
Speaker 19: I believe that they are short on earnings thirty four percent.
Speaker 2: Let's just disentangle some of the pushes and pulls Hill Kristen,
Speaker 2: because many would say, oh, it's been production holts, or
Speaker 2: it's been a stale lineup, But how much are you
Speaker 2: measuring what seems to be a brand damage story that's
Speaker 2: particularly happened in Europe.
Speaker 19: Well, thank you, Caroline, and we have to look at
Speaker 19: everything here with this company because it's quite exceptional. There's
Speaker 19: a dream of automobiles, and yet we're seeing twenty percent
Speaker 19: drop in sales on the automobiles at Tesla. And what
Speaker 19: isn't coming up in the earnings reports that is important
Speaker 19: into investors is what is happening both to the brand
Speaker 19: the damage there. We've seen sales dropping in their major
Speaker 19: markets in both California and Europe, and with the alignment
Speaker 19: of the CEO with the current administration, that doesn't vode
Speaker 19: well for brand moving forward.
Speaker 7: We're also oh, no, I just want to jump into
Speaker 7: this point.
Speaker 5: You know.
Speaker 7: I'll also be honest with the audience.
Speaker 3: I don't hold any Tesla shares nor any shares of
Speaker 3: any company, but I do drive a Tesla. I have
Speaker 3: a powerwell home. The technology is fantastic. But many would
Speaker 3: say we welcome Elon Musk being a participant in the
Speaker 3: government and Doge. What's your reaction to him pledging to
Speaker 3: now come back to Tesla and dial back on the
Speaker 3: time at Doge. Does that give you some more confidence?
Speaker 5: No?
Speaker 19: No, not in this case where he's there talking about Doge,
Speaker 19: which is specifically about efficiencies, we're not seeing him practice
Speaker 19: that in his own company. And so what we're talking
Speaker 19: about here with efficiencies are human capital management. And we've
Speaker 19: seen so many, particularly top executives in charge of both
Speaker 19: engineering and safety leave the company, and they're also doing
Speaker 19: some pretty significant layoffs. We want to see really strong
Speaker 19: human capital management to be able to move this company forward.
Speaker 2: Exactly what because thus far you have been since twenty
Speaker 2: nineteen talking about human capital management needs to change, but
Speaker 2: many of us is just ultimately haven't cad Kristen, and
Speaker 2: the stock has continued to outperform give a take the
Speaker 2: last six months.
Speaker 19: That's right, Caroline, So We have been talking to Tesla
Speaker 19: and engaging since twenty nineteen about some of the significant
Speaker 19: issues for racial discrimination, and we're talking about really top
Speaker 19: innovation being able to attract and retain top talent, and
Speaker 19: that's an issue moving forward at Teslaine. I think we're
Speaker 19: seeing that in both the ability to innovate. They don't
Speaker 19: have their next lower price automobile out yet despite promises
Speaker 19: for years at this point, so we are quite concerned.
Speaker 2: We're pleased to say.
Speaker 19: That NIA has had a significant win and the board
Speaker 19: has committed to substantially what we asked for as far
Speaker 19: as oversight for human capital management and DEI programs at Tesla.
Speaker 2: To be fair, they do remain committed to that rollout
Speaker 2: of a more affordable vehicle by the first half of
Speaker 2: this year and Indy. We haven't reported any more recent
Speaker 2: headcount losses for the business. But Kristin Hull, it's always
Speaker 2: a joy to have you on the show. Thank you,
Speaker 2: Chief investment officer for Near Impact Capital. Now that does
Speaker 2: it for this edition of Bloomberg Technology Ed Boy, It's
Speaker 2: been a busy one and there's more to go.
Speaker 3: Yeah, I think let's go back to some of the
Speaker 3: top names we've been thinking about throughout the show. Then
Speaker 3: as that one hundred is pushing higher and it's all
Speaker 3: corners of tech, right other than IBM. So IBM had
Speaker 3: like strong profit in sales and investors are going like, yeah,
Speaker 3: it just wasn't enough for us. There's some concern about
Speaker 3: the economy. But the big one after the Bell Carro
Speaker 3: is Alphabet, the parent of Google.
Speaker 2: Can they deliver that twelve percent increase in revenue? Don't
Speaker 2: forget to check out our podcast too. You can find
Speaker 2: it on the terminal as well as online on Apples, Spotify,
Speaker 2: and I Hunt. This is technology.