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Speaker 2: More news.
Speaker 3: Manus out of our good friends at Tesla. Tesla cuts
Speaker 3: roughly forty person growth content advertising team, so they're elimiting
Speaker 3: the marketing team is part of those layoffs. That's according
Speaker 3: people familiar with the matter. Here, stock off four percent today,
Speaker 3: fifty two week low down forty three percent a year
Speaker 3: to date. Let's check in with Steve Man. He's a
Speaker 3: global autos analyst for Bloomberg Intelligence. He joins us from
Speaker 3: the Princeton campus and I mean campus down there. It
Speaker 3: is beautiful down there in Princeton. That's kind of where
Speaker 3: we got a lot of the Bloomberg Intelligence folks housed
Speaker 3: down there. Steve, this is brutal here. Let's start with
Speaker 3: something basic, which is really the fundamental issue here, which
Speaker 3: is pricing. I believed mister Musk cut prices. Again, if
Speaker 3: he wakes up on the wrong side of the bed,
Speaker 3: does he cut prices? What's going on with the pricing
Speaker 3: and Testa these days.
Speaker 4: There's a lot of things going on at Tesla right now.
Speaker 4: Bruto is probably not it's that's mildly calling it. You know,
Speaker 4: we always thought that they will have to reverse prices.
Speaker 4: We're not sure why. You know, early in the year
Speaker 4: they increase prices. But you know, price prices have been
Speaker 4: dropped in the US, prices over the weekend, it's been
Speaker 4: dropped in China. China is a different quite different market.
Speaker 4: It's hyper competitive. Everybody's cutting prices, especially by d early
Speaker 4: in the year and late last year. So we're not
Speaker 4: surprised going to cut prices. The question is, you know,
Speaker 4: where are the earnings going to be? And there's gonna
Speaker 4: be a lot of questions that Elon must has to
Speaker 4: answer tomorrow at their earnings call.
Speaker 5: Yep uh. Web Bush Securities were with me a couple
Speaker 5: of weeks ago and they said, it's a hurricane five
Speaker 5: storm coming towards him. That's gone from a Cinderella story
Speaker 5: to that. But who if you look at BYD, if
Speaker 5: you look at Lee, and you look at Tesla, they're
Speaker 5: all cutting prices. So is is is this the bottom
Speaker 5: of that cycle? Has Tesla got the capacity to weather
Speaker 5: a price cutting storm in China.
Speaker 4: That's a good question. I don't think it's the end
Speaker 4: of it. We're actually seeing second quarter sales to be uh,
Speaker 4: you know, uh probably the same as what we saw
Speaker 4: in the first quarter. And remember our first quarter Tesla
Speaker 4: actually in the industry itself actually show uh slower growth
Speaker 4: and even some declinentes uh for certain automakers like Tesla.
Speaker 4: So uh, you know, second quarter is not gonna be
Speaker 4: pretty as well. And I think Tesla, you know, fortunately
Speaker 4: for them, they are pr They are still the only
Speaker 4: profitable EV maker in the industry right now. You know,
Speaker 4: they have about seventeen percent gross margin compared to four
Speaker 4: in GM. They're at you know, single high single digit,
Speaker 4: so you know, they do have some room to give.
Speaker 4: And you know, I think part of it is really
Speaker 4: they're they're really hoping, Tesla is really hoping to drive
Speaker 4: more volume, generate more cash. And you know, one of
Speaker 4: the things that they want to get to sooner than
Speaker 4: rather than later is really to you know, monetize that
Speaker 4: robo taxi. All the investment they've made in AI and
Speaker 4: autonomous vehicles.
Speaker 3: Gross margin is seventy percent, is that just on the
Speaker 3: manufact on the manufacturing side, or is that with the
Speaker 3: credits and so on and so forth, Because my question is,
Speaker 3: you know, if they start cutting prices, are they going
Speaker 3: to sacrifice unit profitability?
Speaker 4: Yeah, the seventeen percent thinking autumn, Yeah, seventeen is on
Speaker 4: the automotive side. Look, they you know, we're hoping they
Speaker 4: don't cut more prices because seventeen percent is not as
Speaker 4: good as the mid twenty percent they were getting last
Speaker 4: year and the year before. And cutting prices is not
Speaker 4: the not the solution. You know, the industry does not
Speaker 4: need to be in that spiral of cutting tit for
Speaker 4: tat price cuts. It's gonna hurt everyone, and at the
Speaker 4: same time, it's gonna hurt you know, the GMS and
Speaker 4: four because it doesn't really make it, you know, feasible
Speaker 4: even for them to roll out a cheaper model down
Speaker 4: the road. So, you know, what we're trying to do
Speaker 4: is create greater adoption in the EV market, in the
Speaker 4: EV industry for every consumer, and cutting prices is gonna
Speaker 4: you know, weed out a lot of the competition that
Speaker 4: are actually trying to introduce a more affordable model for
Speaker 4: the for the market, for the greater market Steve, I mean.
Speaker 5: We can debate adaptability in China in the United States
Speaker 5: of America forever. I mean the infrastructure is one could
Speaker 5: coin phrase probably not there again, going back to a
Speaker 5: web Bush note delivered in my inbox this morning by
Speaker 5: Dan Ives, which is it comes down to delivering a
Speaker 5: model TO in the next twelve to eighteen months to
Speaker 5: deliver a second wave of growth. If they don't deliver
Speaker 5: a new model TO, that growth will not come and
Speaker 5: robotaxis would be a tragic gamble in our opinion, as
Speaker 5: full autonomy we do not see until twenty thirty. This
Speaker 5: comes down to innovation in model two at the base,
Speaker 5: doesn't it.
Speaker 4: Yeah, Model two is important. I think what the industry
Speaker 4: is looking for and what investors are looking for is
Speaker 4: looking They're looking for more affordable models for consumers so
Speaker 4: that the penetration rates, so the addressable market for EV. Actually,
Speaker 4: it's going to be greater than what it is today now.
Speaker 4: Like I said earlier, Tesla it has been aggressive, probably
Speaker 4: the most aggressive and cunning EV prices, and they've redesigned
Speaker 4: a vehicle that they can manufacturing at a lower cost
Speaker 4: than you know, than it is today.
Speaker 2: So you know, they.
Speaker 4: Could launch a model to the other option. You know,
Speaker 4: I don't think the market has really talked about is
Speaker 4: you know, the price cutting will allow them potential, the
Speaker 4: cost cutting will probably allow him the cut prices even further.
Speaker 4: You know, it wouldn't be a surprise down the road
Speaker 4: that they're going to offer the model three below thirty thousand,
Speaker 4: you know, if they can manage that costs wisely.
Speaker 3: Hey, Steve, After the close tomorrow, Tesla will report numbers.
Speaker 3: They have a conference called five thirty pm Wall Street Time.
Speaker 3: What does Elon Musk need? What message does he need
Speaker 3: to get across to kind of you know, shore up
Speaker 3: this stock price.
Speaker 4: Here well as you know, the stock price is you know,
Speaker 4: mostly driven by the anticipation of robotaxi, of autonomous vehicle
Speaker 4: of AI. I think what he needs really needs to
Speaker 4: come out and tell people, give certain milestones for the
Speaker 4: investors to follow. Understand, you know, how he's taking that
Speaker 4: company forward into you know, into the next decade, how
Speaker 4: his robotaxi is going to generate the revenue and the
Speaker 4: profit that he's so much been advocating for. So, you know,
Speaker 4: automotive business. We all know it's it's it's a small
Speaker 4: part it's in terms of valuation, but they you know,
Speaker 4: I think Elon Musk and the company really needs to
Speaker 4: come out to make the investor feel comfortable that he
Speaker 4: is still on track and there is a light at
Speaker 4: the end of the tunnel sooner rather than later.
Speaker 3: Is there a sense that he's focused enough on this
Speaker 3: company here? Is there still that concern that he spread
Speaker 3: too thin?
Speaker 2: Do you think?
Speaker 4: I don't think so. I think, you know, he's He's
Speaker 4: one person. I mean, he's done a lot with SpaceX uh,
Speaker 4: he's done a lot with Tesla obviously, and I think
Speaker 4: he's even though there's been some departure, I think still
Speaker 4: I think he still has a very very strong behind him.
Speaker 4: He's still hiring a lot for the AI for the
Speaker 4: town of his vehicle business. So I'm not too concern
Speaker 4: at the moment. I think communication is key for the
Speaker 4: company in the next you know, tomorrow, in the next
Speaker 4: few weeks yep, and through August eighth, when he actually
Speaker 4: reveals his ROBOTAXI.
Speaker 3: Oh, okay, all right, Well I'm going to listen to
Speaker 3: this call tomorrow, so that'll be interesting. I think I
Speaker 3: think a lot of people are going to pay attention
Speaker 3: to that call. Steve, thanks so much for joining us.
Speaker 3: Steve Man Global Global Autos and Industrials research Channels for
Speaker 3: Bloomberg Intelligence, joining USROM Princeton, New Jersey via zoom.
Speaker 2: And here it's you know, it's Dan Iives of.
Speaker 3: Webbush said, this is a critical, critical, maybe the most
Speaker 3: important conference call for Elon Musk here because there.
Speaker 2: Is a whole host of headwinds for this company.
Speaker 5: It's about reinstilling confidence.
Speaker 2: Yeah, it's confidence in genius. I never said the genius
Speaker 2: had left right. No, exactly right. So we'll see that
Speaker 2: Tesla again.
Speaker 3: Fifty two week low here today off about forty five percent,
Speaker 3: just a year to date, significant loss of value.
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Speaker 3: The Right Smack in the Middle Earning season Menace Verizon Communications.
Speaker 3: I'm a customer of Horizon Wireless.
Speaker 2: You know I think I am as well. Yes, I
Speaker 2: am the riison.
Speaker 3: I've gotten, I've cut my kids off just about everywhere. Financially,
Speaker 3: they're pretty much on their own. With one glaring exception
Speaker 3: the Celluar telephone bill. They're all still on this whole
Speaker 3: family plan. I'm carrying all of them, so I haven't
Speaker 3: figured out how to get rid of them.
Speaker 2: Maybe that helped with the Verizon's earnings.
Speaker 5: Here.
Speaker 3: John Butler joins us. He covers all things telecom for
Speaker 3: Bloomberg Intelligence. He's here in the Bloomberg Interactive Broker studio.
Speaker 3: He doesn't mail it in like some of his managers do.
Speaker 3: He comes into the New York office, which we appreciate.
Speaker 2: John. What'd you see from Verizon this quarter?
Speaker 6: So, Paul, I thought, overall, a very solid quarter from Verizon.
Speaker 6: I mean, one thing that I always look at is pricing,
Speaker 6: right because when they raise prices, which they did on
Speaker 6: me and you, by the way, it extends across the
Speaker 6: whole base, their base of one hundred million plus subscribers.
Speaker 6: So pricing was up strongly in the quarter, and I thought, overall,
Speaker 6: a solid quarter. I mean, it's interesting because the telecoms
Speaker 6: throw all these metrics at you, and you can always
Speaker 6: point to one or two and say they were weak.
Speaker 6: Here they were strong there, you know, and it all
Speaker 6: comes out in the wash. In my opinion, I sort
Speaker 6: of look, I take that ten thousand foot view and
Speaker 6: I say, how is pricing and how were subscriber net ads?
Speaker 6: How many netnews subscribers did they add? And there's still
Speaker 6: a shared donor. They're still losing a bit of subscribers
Speaker 6: on the margin.
Speaker 2: At every quarter they're getting better and better.
Speaker 6: So on balance, I thought a decent quarter in terms
Speaker 6: of the trends, and.
Speaker 2: You know, I like where they're headed for the year.
Speaker 5: I remember when we used to try to get used
Speaker 5: to acronyms when we were covering Vodafone and different things
Speaker 5: in Europe. You know, you've got your average revenue per user,
Speaker 5: but you look at the you just switch on your
Speaker 5: television at home, and you got Apple, You've got Netflix,
Speaker 5: you've got Prime, and you've got you just consuming so
Speaker 5: much more at so much more faster speed. So where
Speaker 5: are they in terms of pricing differential for that additional
Speaker 5: bandwidth that I'm I'm going to use more of. It's
Speaker 5: just a natural evolution of gorging on data.
Speaker 6: Well, I'm glad you asked that, manus, because what Verizon
Speaker 6: is doing so well is They've come out with a
Speaker 6: new family of unlimited plans called My Plan, and it
Speaker 6: allows people to not only buy wireless service, but also
Speaker 6: so the streaming services at.
Speaker 2: A pretty good deal.
Speaker 6: Finally, there's a bundle, right, there is a bundle praise,
Speaker 6: and you get to control the bundles, so they don't
Speaker 6: set preset bundles and say you can get planned a
Speaker 6: B or C. You can sort of mix and match
Speaker 6: and say I want wireless service and I want Disney
Speaker 6: but not Hulu, so you can sort of customize the
Speaker 6: plan yourself. Ergo the name my Plan, and it's resonating
Speaker 6: really well, Like I'm really surprised after about a year
Speaker 6: they've got a quarter of the base on My Plan.
Speaker 6: It's very good for them because they're highly profitable plans,
Speaker 6: and by year end they hope to have half the
Speaker 6: base on that My Plan structure, which is big.
Speaker 3: You know, I'm looking at the stock here about two
Speaker 3: and a half percent today, but up about five percent
Speaker 3: year to date.
Speaker 2: This seems got a six and a half percent dividend yield.
Speaker 2: That's what I'm talking about.
Speaker 3: So I don't know why you can't talk to your
Speaker 3: good I saw Tim Cook that Duke recently and I said,
Speaker 3: can you raise your dividend.
Speaker 2: A little bit? And he gave me the heisman. But
Speaker 2: six percent dividend, seven percent divin in yield? Yeah, is
Speaker 2: that sustainable for these guys?
Speaker 6: You know, I think most telecoms know the danger of
Speaker 6: cutting a dividends. So let's put it that way. But
Speaker 6: if you look at Verizon stock you touched on it,
Speaker 6: it's had a bit of a run here, and so
Speaker 6: is that stock price goes up? Obviously the yield goes down.
Speaker 6: But you know they're very focused on shareholder returns as
Speaker 6: they mature here AT and T is the same way,
Speaker 6: so is T Mobile, and so in terms of the divinend,
Speaker 6: I think it's very safer right now.
Speaker 5: You see, you use the web maturity and that brings
Speaker 5: that brings a lot of connotations, and one of them
Speaker 5: is M and A. You remember the most fabled disaster
Speaker 5: telecoms murder of all time at and what was it?
Speaker 5: Aol Time Warner. But when you use the word maturity.
Speaker 2: Got paid on that, thank you? Yeah, we got paid Yeah, good.
Speaker 5: For you represent everything, We represent what you know what.
Speaker 5: But there's the question is is the next iteration in
Speaker 5: this market some form of M.
Speaker 2: And A or is it innovation?
Speaker 6: So they got asked that in the call, and I
Speaker 6: thought the answer was very good, which is, we have
Speaker 6: the assets in place right now to execute on the
Speaker 6: growth plan that we see for the next few years.
Speaker 6: And I think that's right. But they also have the
Speaker 6: ability if they want to make either tuck in acquisitions.
Speaker 2: He wants disitions.
Speaker 6: I think I think they know that investors want that dividend.
Speaker 6: So in terms of any grand ambition, ambitious M and
Speaker 6: A like we saw with AT and T in Time Warner,
Speaker 6: I'm not saying it with Verizon.
Speaker 2: What's the competitive landscape these days? Is it just price, price,
Speaker 2: price price.
Speaker 6: It is very tough at the low end, it's all
Speaker 6: about price. At the higher end, which is where Verizon plays, it's.
Speaker 2: All about value.
Speaker 6: What kind of value are you offering with that package?
Speaker 6: And I think we were talking about verizons my plan,
Speaker 6: the mix and match that has high value, and I
Speaker 6: think I think it's resonating well with the subscriber base.
Speaker 3: All right, very good, John Butler. He has our go
Speaker 3: to guy and all things telecom. Verizon putting out some
Speaker 3: numbers here, decent number stock off a couple of percent. Today,
Speaker 3: John Butler covers telecom for Bloomberg Intelligence.
Speaker 2: We appreciate getting some of his time.
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Speaker 3: So my tech m and A bankers are not happy
Speaker 3: because it apparently Salesforce takeover talks with Informatica are cooling off,
Speaker 3: and that might have been a nice mm A trade
Speaker 3: in the tech space. Let's break it down a little
Speaker 3: bit here on a rag ran a senior technology analyst.
Speaker 2: You know him. He's out in Chicago. This guy I.
Speaker 3: Don't know Sunil rog Gopaul, senior software analyst. But the
Speaker 3: goodness is he's in our Bloomberg Interactive Broker studio. He
Speaker 3: doesn't mail it in from Chicago like an rock Ron.
Speaker 3: It does, Honor Rock. I didn't hire this guy, Roger
Speaker 3: Capal did. I.
Speaker 2: I don't know him.
Speaker 7: No, Samiel's awesome and he does all things infrastructure. You'll
Speaker 7: really like him.
Speaker 2: Good stuff. At least he's here in the office. We
Speaker 2: make note of that. All right. So, Anrak, I was
Speaker 2: kind of surprised to see.
Speaker 3: This news to begin with, Like, I didn't think Salesforce
Speaker 3: needed to really buy.
Speaker 2: Anything, So what's going on here do you think?
Speaker 7: Yeah, it was just a big head scratcher for us
Speaker 7: to almost a few days ago because last March, Bennehoff
Speaker 7: comes and says, I've disbandled the MNE committee, no more
Speaker 7: m and A. I'm going to focus on margins and
Speaker 7: organic growth. And in less than a year, you know,
Speaker 7: just around that one year mark, he's like, oh, we've
Speaker 7: got to go back and you know, buy something now.
Speaker 7: He didn't say that, the company didn't say that, but
Speaker 7: that was the rumor on the street that they're looking
Speaker 7: to buy Informatica. For us, that was a bit of
Speaker 7: a surprise because Informatica grows six to seven percent compared
Speaker 7: to Salesforce, which is growing north of ten percent. So
Speaker 7: why would anybody buy something that.
Speaker 2: Is slow growth?
Speaker 7: I get the data angle of it, but you know,
Speaker 7: it was it was not something that we really liked.
Speaker 3: Sunil, first of all, thanks so much for joining us
Speaker 3: here in studio. Sunil Rochkopal, senior software analyst for Bloomberg Intelligence,
Speaker 3: tell us about Informatica, I don't know a lot about it.
Speaker 3: I don't think a lot of investors know a lot
Speaker 3: about it. And that was one of the reasons that
Speaker 3: they're saying, what is Salesforce buying here or maybe thinking
Speaker 3: about buying? What tell us about this company?
Speaker 8: Sure, Informatica is all about data management, which is about
Speaker 8: clean cleaning all the data that comes from different sources
Speaker 8: and aligning it with the applications and getting all things
Speaker 8: sorted out. For data, so data comes in various shapes,
Speaker 8: forms and different sources, so all of that needs to
Speaker 8: be cleaned up to be used in a proper shape.
Speaker 8: So I think Informatica is that layer that acts as
Speaker 8: a cleanser of data and gets you to that right usage.
Speaker 8: So that's where it comes in as a player.
Speaker 3: So with if they're not going to tie up with Salesforce,
Speaker 3: what's the call on this company, what's the call on
Speaker 3: the stock?
Speaker 2: Either you know, bullsh or bears.
Speaker 8: Look strategically for Informatica, such an alliance would have been
Speaker 8: a great move that would have helped fuel its cloud journey,
Speaker 8: and that now accounts for roughly one third of its revenues.
Speaker 8: With the deal not happening. Informatica now has to focus
Speaker 8: on fueling its cloud growth organically. The company is boosting
Speaker 8: its partnership and rolling out new AI powered features, but
Speaker 8: this space is highly fragmented and competitive. The company has
Speaker 8: continued to lose market share, especially with the challengers that
Speaker 8: have risen substantially over the last few years. There are
Speaker 8: other big players like SAP and IBM that also compete,
Speaker 8: So I think going forward the market will definitely look
Speaker 8: a lot more challenging because now Salesforce are not having
Speaker 8: to go through with this tale will put more resources
Speaker 8: into MuleSoft, which I think will raise the competitive intensity
Speaker 8: and I think that is a big challenge for Informatical
Speaker 8: going forward.
Speaker 3: An rag on your side from the Salesforce side, I mean,
Speaker 3: is it just steady as she goes?
Speaker 2: I mean, it's just such a great company.
Speaker 3: What's the call for the next twelve to eighteen months
Speaker 3: for Salesforce dot com?
Speaker 7: So, Paul, what we're thinking. You know, hopefully by the
Speaker 7: end of this year we get a little more clarity
Speaker 7: on technology spending and perhaps from next year onwards we
Speaker 7: can see that, you know, load double digit growth in
Speaker 7: earnings as well as I take that back load. Double
Speaker 7: digit growth in sales coupled with some margin expansion getting
Speaker 7: you to that mid to high teens earnings growth. That's
Speaker 7: what we want from salesforce, organic growth, organic earnings, not
Speaker 7: so much driven by M and A. And I'm hoping
Speaker 7: that that's what the company delivers.
Speaker 3: On the software side, what are the most exciting areas
Speaker 3: for you?
Speaker 2: You that you're looking at here.
Speaker 8: Look for me in the overall enterprise software space, I
Speaker 8: still like names in the observability sector. The Yeah, all right,
Speaker 8: So the observability is they act as a layer that
Speaker 8: monitors all of your systems applications, so be it any
Speaker 8: kind of an application that you're running your enterprise, everything
Speaker 8: needs to be monitored if there are like any bugs,
Speaker 8: if there are like system downtimes, et cetera. So observability
Speaker 8: vendors typically monitor all your applications and the infrastructure. So
Speaker 8: they play a very critical role in the overall enterprise
Speaker 8: software space. And I think players such as the data
Speaker 8: Dog diner trays are very well positioned in.
Speaker 2: Public recently, like recently as a couple of years.
Speaker 8: Yeah, yes, that's right.
Speaker 2: So so what is I mean? I love the name.
Speaker 3: I'm looking at the stock here and bringing up the
Speaker 3: stock Data Dog.
Speaker 2: The DG this is kind of forty billion dollar market cap.
Speaker 3: It's kind of flat stock price on the year, but
Speaker 3: up to seventy five percent over the trailing twelve months.
Speaker 2: What's the call on Data Dog here?
Speaker 8: Look, it's a very I would say it has been
Speaker 8: a fast growing company. And of course last year we
Speaker 8: have seen a slow down in the overall enterprise software space,
Speaker 8: and the Data Dog of course has been impacted with
Speaker 8: that slow it spending trends. But overall, if you look
Speaker 8: at the observability space as we see, I think that
Speaker 8: is a space that will continue to grow because the
Speaker 8: number of applications and the infrastructure that enterprises are deploying,
Speaker 8: especially with what is supposed to come with Jenny AI
Speaker 8: and others, we will continue to see a massive rise
Speaker 8: in the infrastructure and applications and that should all bode
Speaker 8: well for Data Dog and the players such as a Diner,
Speaker 8: Trace and others in the observatory space.
Speaker 3: An rob We've getting earnings coming up for the tech names.
Speaker 2: What are you looking for here?
Speaker 3: Should we be just kind of saying count how many
Speaker 3: times they mentioned AI and the conference call?
Speaker 7: Yeah, a little bit of that I think it's going
Speaker 7: to be a steady growth rate. But I'm getting a
Speaker 7: little concerned about the guidance because I think the macro
Speaker 7: environment is getting a little bit diceee, not sure what's
Speaker 7: going to happen in the Middle East. So I'll be
Speaker 7: very surprised if any company comes up with a bullish guidance,
Speaker 7: but I think, you know, one should be prepared for
Speaker 7: it because we have seen some of these names go
Speaker 7: up pretty strong over the last twelve months, so they
Speaker 7: could be a period of consolidation for the next quarter
Speaker 7: or two.
Speaker 8: You know.
Speaker 7: Our big call is that we do see tech spending recovery,
Speaker 7: perhaps now in the later half of the year into
Speaker 7: next year, but we don't want any one of that
Speaker 7: to be delayed, So not baking any massive positive surprises
Speaker 7: over the next quarter or two, but hoping for a
Speaker 7: rebound by the end of the year.
Speaker 3: So but a rebound, you're I mean, there's no declines here.
Speaker 3: Let's be clear, it's just a question what is the
Speaker 3: growth rate in tech spending? So just give us an
Speaker 3: eyeball kind of where we are now, where it has been,
Speaker 3: and where do you think it could go.
Speaker 7: So let's talk about, for example, I'll throw out a
Speaker 7: number a w as constant currency growth rate. That's a
Speaker 7: big leading indicator of what's happening. Last quarter it was
Speaker 7: thirteen percent in constant currency, the quarter before that twelve,
Speaker 7: and the quarter before that twelve. We think this time
Speaker 7: it comes to around fourteen to fifteen. But next quarter
Speaker 7: again it comes to in that same range of about
Speaker 7: fourteen to fifteen because now we are looking at stabilization
Speaker 7: of the growth rates, but we do we expect that
Speaker 7: to pick up by the end of the year. You
Speaker 7: can correlate that for any company, whether it's Salesforce, whether
Speaker 7: it's Microsoft, as your growth rate a similar chart in
Speaker 7: the rate of growth of the growth rates rather than
Speaker 7: anything else. And that's why I'm saying the next quarter
Speaker 7: or two is where we see stabilization in that rather
Speaker 7: than a big leg up.
Speaker 3: So Neil, in your software space where you play, are
Speaker 3: you trying to are your companies trying to go them
Speaker 3: onto the AI trend?
Speaker 2: And if so, how are they doing it?
Speaker 8: Look, I think most of the companies that I cover
Speaker 8: are in the initial phase of the AI wave, and
Speaker 8: most of them are piloting new products, bringing up features
Speaker 8: like copilot and others But one interesting fact that data
Speaker 8: Doc pointed out very recently is three percent or so
Speaker 8: of their arr is being driven by these gen AI
Speaker 8: focused companies, which is interesting that you're still in very
Speaker 8: early stages, and I think that will be a momentum
Speaker 8: that will continue to grow.
Speaker 2: Are we going to get Sneil?
Speaker 3: Do you think like I came up when the Internet
Speaker 3: was first started, you had companies from public that were
Speaker 3: Internet names, whether it was America Online, whether it was
Speaker 3: Google for.
Speaker 2: Search, Facebook for social.
Speaker 3: You had companies that defined or help define and then
Speaker 3: so simple people like me could say, oh, if I
Speaker 3: want explosures to the Internet by go by Google or
Speaker 3: by Facebook, if I want social. Are we gonna have
Speaker 3: AI specific companies coming public?
Speaker 2: Do you think?
Speaker 8: I think that's a move that everyone is watching. Of course,
Speaker 8: we have companies like open ai and others that are
Speaker 8: potentially growing in size and have a massive amount of
Speaker 8: I mean say users, etc. So that's a market that
Speaker 8: will continue to be on watch out. And there are
Speaker 8: a number of other smaller companies that are coming up
Speaker 8: in the AI space. I think over the course of
Speaker 8: next twelve months we will see a lot of them
Speaker 8: in the market.
Speaker 2: All right, good stuff studio.
Speaker 3: Roj Capal, senior software Anas Bloomberg Intelligence, joining us here
Speaker 3: in a studio, and of course Ana rod ron, a
Speaker 3: senior technaist for Bloomberg Intelligence at Chicago, breaking down what's
Speaker 3: happening in the world of technologies. Apparently Salesforce, the rumor
Speaker 3: discussions between Salesforce and software company Informatica cooling off here,
Speaker 3: so we're seeing the Informatica stock down a little bit today.
Speaker 3: We thank both of those guys for bringing us up
Speaker 3: to speed here.
Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live
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Speaker 3: Coming into today's trading, SMP five hundred goes down roughly
Speaker 3: five percent off of its recent high, and a lot
Speaker 3: of folks were just saying, hey, is this.
Speaker 2: A bump in the road.
Speaker 3: Is this the beginning of a sustained drawdown which may
Speaker 3: or may not be healthy for this market longer term.
Speaker 3: That's some of the questions we've been hearing from a
Speaker 3: lot of the smart folks who cover these markets. Sylvia
Speaker 3: Jablonski Joints, and he's the chief executive officer and chief
Speaker 3: investment officer at Defiance ETFs. Sylvia, how do you view
Speaker 3: the trading we've seen over here over the last week
Speaker 3: and a half here, this five percent pullback in the market,
Speaker 3: How does that kind of strike.
Speaker 2: You in terms of the overall market behavior?
Speaker 9: Good morning.
Speaker 10: Well, it's you know, it's been a painful couple of weeks,
Speaker 10: that's for sure. You know, I think that some new
Speaker 10: headwinds came into the market, right that that kind of
Speaker 10: weren't there before.
Speaker 9: We came out of the gate really strong.
Speaker 10: The inflation readings were looking you know, kind of good
Speaker 10: and solidly pointing downward, and then you know, we got
Speaker 10: some potter than expected factory number jobs numbers CPI and
Speaker 10: things like this recently. And so I think that until
Speaker 10: we get the data going back in the direction that
Speaker 10: we want it too, which is essentially you know, coming
Speaker 10: in below estimates and downward on inflation, and then we
Speaker 10: start to feel the security of the Fed potentially cutting
Speaker 10: this year again, whether it's one or two times, and
Speaker 10: you know, kind of just knowing that the foot the
Speaker 10: FED put is still in play, right and that we're
Speaker 10: not going to turn around the other way.
Speaker 9: I think that'll help the markets turn around.
Speaker 10: And then I think the other thing that you know
Speaker 10: is sort of trepidations for investors is geopolitics. I mean,
Speaker 10: there's there's some you know, notable things going on in
Speaker 10: the world right now that I think really rocked markets
Speaker 10: over the last.
Speaker 9: Week and a half.
Speaker 10: And then I you know, I think that there's a
Speaker 10: need for kind of knowing what happens next there. But
Speaker 10: in terms of like the fundamentals and the macro picture,
Speaker 10: you know, I'm still very constructive and bullish on the market,
Speaker 10: provided that those things, you know, don't surprise us out
Speaker 10: of left field.
Speaker 3: How About on the earnings front here, we're just kind
Speaker 3: of another real busy week here for the S and
Speaker 3: P five hundred earnings. What do you think this market
Speaker 3: needs to see?
Speaker 2: I mean, how dependent?
Speaker 3: I mean, and obviously earnings matter, but it seems like
Speaker 3: this is a market that's been pushed around by the
Speaker 3: FED one way.
Speaker 2: Or the other. Here, what are you looking for in
Speaker 2: earnings this cycle?
Speaker 10: So, I mean, I guess the you know, the good
Speaker 10: thing about earnings is over the past couple of weeks
Speaker 10: or so, a lot of analysts have revised their earnings
Speaker 10: expectations downward, and so I think that you know, beats
Speaker 10: are going to be easier to come by in terms
Speaker 10: of earnings.
Speaker 9: You know, we live in this world now where the
Speaker 9: Mac seven.
Speaker 10: You know, maybe we've subtracted Tesla from that list or
Speaker 10: or you know a couple of names here and there.
Speaker 10: But the top tech companies, let's call it as well
Speaker 10: as Navidia are are really you know, names that investors
Speaker 10: want good news from, and so then I think if
Speaker 10: they deliver, that tends to broaden the rally, and that
Speaker 10: tends to lift stocks in other sectors. You know, bank
Speaker 10: earnings haven't been so bad, right and we haven't seen
Speaker 10: kind of this this you know recent from that news.
Speaker 10: So it's really those names that I think that have
Speaker 10: to perform. So I'll be looking at that.
Speaker 3: So, you know, one of the the big themes last
Speaker 3: year and coming into this year was AI and obviously
Speaker 3: Nvidia and all.
Speaker 2: Those types of things.
Speaker 3: We saw some pretty violent action on Friday some of
Speaker 3: those names kind of coming down.
Speaker 2: Was that kind of a technical move for you or
Speaker 2: do you.
Speaker 3: Feel like the bloom is kind of coming off the
Speaker 3: roads a little bit on some of those AI driven
Speaker 3: thematic names.
Speaker 10: So I think that this is you know I always
Speaker 10: talk about like buy on the dip opportunities.
Speaker 9: This is it.
Speaker 10: I mean, I think that with some of the top names,
Speaker 10: if you're looking to get invested in AI or quantum computing,
Speaker 10: and you know you're a stock picker, you're an ETF buyer,
Speaker 10: these five to ten percent recent pullbacks and some of
Speaker 10: these top names are really good opportunities to get back in.
Speaker 10: You know, AI innovation isn't going anywhere. It's just in
Speaker 10: the beginning. It's it's in its infancy. And when you
Speaker 10: think about when other companies and sectors start talking about
Speaker 10: how AI has transformed what they do, whether it's the
Speaker 10: defend section or you know, banks talking about better risk mitigation,
Speaker 10: pharmaceuticals talking about more efficient drug discovery, price discovery, you know,
Speaker 10: more effective surgeries in the healthcare system, things like this.
Speaker 9: You know you're going to start to.
Speaker 10: See how compelling it is to continue to buy these stocks.
Speaker 10: Is that innovation builds out and you know, we're barely
Speaker 10: scratching the surface with supercomputing and quantum competing too. So
Speaker 10: when you have all of this data, it has to
Speaker 10: be processed quickly. In order for that to happen, you're
Speaker 10: going to have to kind of like buy up supercomputers
Speaker 10: and quantum computers and things like this too. So I
Speaker 10: just think that it's a great time to get back
Speaker 10: in or get in if you know, if you've kind
Speaker 10: of had FOMO.
Speaker 9: Even though the stock prices are high, they have pulled back.
Speaker 3: What's the I guess you know, it defines ETFs. Where
Speaker 3: are you guys seeing the fund flows these days?
Speaker 10: Yeah, so two places, well the three places really, So
Speaker 10: we see a lot of flows into target income funds.
Speaker 10: So the investor that just likes to have that, you know,
Speaker 10: double digit monthly return at the end of the month
Speaker 10: and have broad based index exposure.
Speaker 9: So we see a lot of flows.
Speaker 10: Into our SPYT and iwmy off of investors that want dividends.
Speaker 10: But I would say the fun that people are talking
Speaker 10: about the most and has kind of grown the most,
Speaker 10: even though it's been around kind of the longest is quantum.
Speaker 9: And that's the AI and machine learning what we were
Speaker 9: just talking about.
Speaker 10: You know, I think a lot of investors realize that
Speaker 10: Navidia and AMD while they all know stocks, there's got
Speaker 10: to be something else. They don't necessarily know who the
Speaker 10: winners are going to be, or who that's something else,
Speaker 10: what that something else is, And so they liked the
Speaker 10: you know, equal weighted basket of seventy stocks that are
Speaker 10: covering semiconductors, graphics, you know, technology, computers, cloud, cyber things
Speaker 10: like this, and so we've seen a lot of interest
Speaker 10: there from investors.
Speaker 3: How about only the fixed income side, I mean, are
Speaker 3: you seeing money flow in? Because I mean you can
Speaker 3: sit there at a two year treasure, you can get
Speaker 3: close to the five percent. I know some folks were
Speaker 3: saying in some ETFs they were seeing like the folks
Speaker 3: at bond blocks, for example, will focus on ETFs seeing
Speaker 3: a lot of fun flow into there.
Speaker 2: Are you seeing that as well?
Speaker 7: Yeah?
Speaker 10: And so when the market pulls back, I mean we
Speaker 10: definitely see that. We don't see that on our side,
Speaker 10: we don't really have those types of products. But when
Speaker 10: when you see that, it's usually you know, it was
Speaker 10: it was years of inflation that was too high and
Speaker 10: stocks thats just weren't running like a twenty twenty two
Speaker 10: tech recession where you're going to put your money at
Speaker 10: five percent treasuries made sense, but I would argue that
Speaker 10: this year is different, and those trillions of dollars that
Speaker 10: are sitting in those products and on the sidelines, I
Speaker 10: think we'll eventually make their way back into the market.
Speaker 10: You know, Yes, we've had a five percent pullback, but
Speaker 10: look at Broadway secuity performance this year. I think you'd
Speaker 10: rather be invested there than you wouldn't treasuries. And I
Speaker 10: think that that'll slowly start to you know, revert back
Speaker 10: into the markets, particularly if we get you know, a broadening.
Speaker 9: Of performance in the markets. But for now, you know,
Speaker 9: market pulls back yup.
Speaker 10: Geopolitical risk you have, you know, a FED that's kind
Speaker 10: of you know, less less iffy about those rate cuts
Speaker 10: and things like that, and some investors tend to flee
Speaker 10: to safety, you know.
Speaker 3: So if I know one of the names on your list,
Speaker 3: and we've talked about it in the past, is IBM
Speaker 3: in the world of AI or in quantum computing, what
Speaker 3: does it the likes of an IBM play.
Speaker 7: Yeah.
Speaker 10: So it's so funny because I think, and we talked
Speaker 10: about this before too, it's almost like that sleeper tech
Speaker 10: tech stock, right, just what happened to IBM, And I
Speaker 10: would say that they're back, you know, I mean they
Speaker 10: were always here, they had Watson. They're sort of the
Speaker 10: first you know, true AI play I think, but they
Speaker 10: just weren't kind of known for it, I guess. And
Speaker 10: now they're coming out of the woodworks because they're doing
Speaker 10: so much work in quantum computing and supercomputing and they're
Speaker 10: you know, kind of providing services to Fortune five hundred
Speaker 10: companies using their AI technology. But then they're also building
Speaker 10: and scoping out quantum computing. So they have deals with
Speaker 10: Cleveland Clinic to to you know, create better drugs and
Speaker 10: pharmaceutical discovery processes.
Speaker 9: They have a project with Korea Quantum where they're looking.
Speaker 10: At, you know, more precise information around aerospace and defense
Speaker 10: and then also you know military types of logistical projects
Speaker 10: that they're working on. And you know, you think about
Speaker 10: the US government pumping into pumping money into you know,
Speaker 10: kind of defense and quantum competing in AI as it
Speaker 10: relates to that, You're going to see IBM have a
Speaker 10: good seat at the table I think in the future.
Speaker 3: All right, Sylvia, thanks so much for joining us. Always
Speaker 3: appreciate getting a few minutes of your time. Sylvia Jablonski,
Speaker 3: Chief Executive Officer and Chief Information Officer Defiance ETF.
Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live
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Speaker 1: Say Alexa playing Bloomberg eleven thirty.
Speaker 3: Last week, Alex and I were at the Bloomberg BNF
Speaker 3: conference that's New Energy Finance. These are the folks that
Speaker 3: really look at the energy space in depth, including all
Speaker 3: the new energy and new energy businesses that are being created.
Speaker 2: Across the world.
Speaker 3: Where we're looking at from the business perspective of global energy.
Speaker 3: They had great conference last week in New York, some
Speaker 3: really smart people. They were talking about some of the
Speaker 3: bigger picture, bigger picture issues and what's getting done on
Speaker 3: the ground. David dharerty joints US here today. He's head
Speaker 3: of Oil and Renewable Fuels Research at Bloomberg BNEF here
Speaker 3: in our Bloomberg Interactive Broker Studios. So, David, great conference
Speaker 3: you guys had last week. I learned a lot because
Speaker 3: I'm not an energy geek like Alex is, so I
Speaker 3: learned a lot here just buy and large. What's the
Speaker 3: view of the big energy companies here in the US
Speaker 3: towards making that migration to maybe greener energy.
Speaker 2: How committed are they? How long of a path do
Speaker 2: you think this will be for global energy?
Speaker 11: Yeah, long path, regardless whether you're European or American and
Speaker 11: an oil producer, completely different angles. US companies have gone
Speaker 11: into sort of a cleaner molecule when they're willing to
Speaker 11: invest in low carbon tech, so think of like renewable
Speaker 11: fuels ccs, hydrogen, and the Europeans have pretty much piled
Speaker 11: into a bit of everything, but a lot of clean electrons, wind,
Speaker 11: solar batteries, evs. Very different cultures. You know, Europe doesn't
Speaker 11: produce as much oil as the US, so you know,
Speaker 11: default position makes sense.
Speaker 3: I think are you surprised just looking at I'm looking
Speaker 3: at Brent crude here, You've got your Irish accent. I'm
Speaker 3: assuming you look at Brent more than my WTI crude
Speaker 3: oil just under eighty seven dollars per barrel.
Speaker 2: I could make a case that it should be a
Speaker 2: lot higher.
Speaker 3: Given what's going on in the world with in the
Speaker 3: Middle East, in Ukraine, with Russia and so on.
Speaker 2: What's going on in it energy markets?
Speaker 11: Yeah, everybody's looking at one hundred dollars, right, three digits
Speaker 11: that the eyes are sort of focused on. The market's
Speaker 11: just completely different to the way it used to be. Right,
Speaker 11: if you had an attack on Iran five years ago,
Speaker 11: you would have seen fifteen dollars upside on the price.
Speaker 11: The market's one smarter. We've satellites, we can track things.
Speaker 11: We've got people like Bloomberg, you know, counting ships going
Speaker 11: in and out of regions. But also the market was
Speaker 11: braced for it. It wasn't news, right, it wasn't.
Speaker 5: It wasn't.
Speaker 11: I guess we're expecting something to happen. The price is
Speaker 11: built in. We've had a couple of months of sort
Speaker 11: of like anxiety around the oil price, what could happen
Speaker 11: to fundamentals? And then it was a bit anticlimactic. I
Speaker 11: guess in the end, I mean.
Speaker 2: I guess what's changed?
Speaker 3: Just we're talking about it in the break here, I mean,
Speaker 3: just in the blink of an eye. It seems like
Speaker 3: the United States has gone from a big, big net
Speaker 3: importer of oil so now being a pretty big net
Speaker 3: exporter of oil. What does that mean for the global markets?
Speaker 3: Does that mean we don't have to worry about Opek
Speaker 3: or any of those guys.
Speaker 11: Absolutely have to worry about Opeking.
Speaker 2: Those guys.
Speaker 8: Yeah, yeah, I.
Speaker 11: Mean, if you look at the world of sanctions about
Speaker 11: just over, just over, the amount of Saudi Arabia and
Speaker 11: exports is now sanctioned Venezuela around and Russia. Right, that's huge.
Speaker 11: You're taking let's say, the equivalent of the biggest producer
Speaker 11: that's falling under our form of sanctions. US produces a
Speaker 11: bunch of oil, yes, but it's not the right kind
Speaker 11: of oil for the US, so it's got to swap
Speaker 11: it out into the market.
Speaker 2: You know, there's a lighter crud.
Speaker 11: Yeah, exactly where You've got really great refineries here that
Speaker 11: are built for Venezuela and Mexican oil. Right, Okay, so
Speaker 11: there's this swap happening. And then if you bring in
Speaker 11: sort of disruptions around straights from US et cetera, any
Speaker 11: disruption and shipping adds back clog into the whole, you know,
Speaker 11: the pipeline of how to get oil from A to
Speaker 11: B where it's needed. So the market's changing, the disruptions
Speaker 11: are changing. The US is a big producer and we've
Speaker 11: seen that makeup for some of those OPEC cuts in
Speaker 11: the last couple of months, but absolutely still got to
Speaker 11: pay attention to what OPEC seeing and those big sanctioning exports.
Speaker 2: Well, let's go to the sanctions.
Speaker 3: I mean, I'm just I don't know anything about the
Speaker 3: energy market other than what alex Steel tells me. But
Speaker 3: it just doesn't seem like sanctions really work on it.
Speaker 3: The oil finds its way around, whether it's from Russia
Speaker 3: to India. India refines it and then it ends up
Speaker 3: in my car in New Jersey. I mean, how does
Speaker 3: the sanctions work from your perspective?
Speaker 11: I think they're probably working the way they're intended to
Speaker 11: this time. But this sort of round and sanctions on
Speaker 11: Russian Russian oil is just meant to be different to
Speaker 11: those on around Right. If you think about Iran, it
Speaker 11: was like stop exporting, stop producing, they want to contain it.
Speaker 11: We've saw obviously volumes get to China about one and
Speaker 11: a half million hours a day go to China from
Speaker 11: around right, So pretty big Russia. The idea was not
Speaker 11: to shock the market right by taking this big, big
Speaker 11: export off the off of the market. About four million
Speaker 11: bars per they exported out of Russia. That's huge, right,
Speaker 11: much bigger than a run election year. They don't want
Speaker 11: to rock the boat too much. Gasoline prices even when
Speaker 11: you're seeing evs in California breach like twenty percent of sales.
Speaker 11: You tell your average person on the street that and
Speaker 11: they'll say, why is my gasoline gallon so expensive? Right?
Speaker 11: Super sensitive election? You're us people like to drive. You
Speaker 11: don't want to have that taken out of the pocket.
Speaker 3: Right, all right, So as you sit back and take
Speaker 3: a look at your history is with oil trading, oil,
Speaker 3: all the distillates, all that kind of stuff you're from.
Speaker 3: You know, you're kind of like John Talkern, we're kind
Speaker 3: of old energy people. But you live in a world
Speaker 3: of new energy finance. How do you think, Like if
Speaker 3: you what's what are the NEF people saying ten years now,
Speaker 3: twenty years now, what percentage of global energy supply will.
Speaker 2: Be you know, lack of a better word, green.
Speaker 3: Versus kind of the fossil fuels is or a feeling
Speaker 3: that that could be material.
Speaker 2: It will be material.
Speaker 11: But it's important to put into context what's growth versus
Speaker 11: what's currently existing. Right, the world isn't slowing down and
Speaker 11: its energy can asumption growth story. So you're seeing more green,
Speaker 11: but it's meeting a lot of that upside that growth. Right,
Speaker 11: You're still seeing a lot of fossil fuels in the mix.
Speaker 11: That's way harder to displace. So you're seeing evs being
Speaker 11: like really high percentage of sales in places like China,
Speaker 11: but you're still seeing healthy internal combustion engine sales in China, right,
Speaker 11: That growth and mobility demand in markets like that. It's
Speaker 11: just outstripping anything we can do to disrupt the sort
Speaker 11: of status quo of a fossil any.
Speaker 2: So, where's the argument today, which I've heard for twenty years?
Speaker 2: Peak oil? Are we is that even a concept?
Speaker 3: Or is because the world economy is growing that there
Speaker 3: always will be I guess increasing demand for oil.
Speaker 2: I don't know.
Speaker 11: I mean, yeah, we are house here is twenty twenty nine, right,
Speaker 11: but it's you know, it's modeling, it's it's oil at
Speaker 11: twenty twenty nine demand exactly, Yeah, twenty twenty nine. For
Speaker 11: every EV displaced, does an airplane going into the sky
Speaker 11: or demand for plastics. Some things are a lot easier
Speaker 11: to displace than others. But road is important. It's really interesting.
Speaker 11: It's forty five percent of all oil consumers wheels on
Speaker 11: the ground. Right, So this electric story that people sometimes
Speaker 11: shift off and say whatever, Yep, that's the one to watch,
Speaker 11: I think.
Speaker 3: So, I mean, do you think that, Like here, Tesla
Speaker 3: stocks down over forty percent year to date, Some people
Speaker 3: think we've seen peak EV demand.
Speaker 2: What do you think?
Speaker 3: Because I know in other parts of the world it
Speaker 3: continues to grow dramatically.
Speaker 11: You know, that will get clicks in a headline, but
Speaker 11: realistically that's the world is not just Tesla when it
Speaker 11: comes to EV's and if you look outside of the US,
Speaker 11: there's a huge range of automakers piling into that. China,
Speaker 11: Europe over twenty percent of sales. We're at the point
Speaker 11: the US might not be. California is rapid tipping point.
Speaker 11: Some will go faster than that. There's in some some wones, right,
Speaker 11: there's a lot of growth there still in some markets.
Speaker 3: Yeah, I mean, I thanks to Matt Miller, I drove
Speaker 3: testra of the F one fifty electric thing.
Speaker 2: That was a right beast man. That is really cool.
Speaker 3: So I could see a bunch of the F one
Speaker 3: to fifty people switching over electric. It looked, I mean
Speaker 3: looked great, drove great had huge power, so good stuff.
Speaker 3: Will see how it goes Tesla earnings after the closes tomorrow.
Speaker 3: Listened in that it's called David Dharty joins us here.
Speaker 3: Appreciate getting a couple of minutes of his time. He's
Speaker 3: set of Oil and Renewable Fuels research at Bloomberg NEEF.
Speaker 3: That's new Energy finance for the people that don't know.
Speaker 3: Joining us here in our Bloomberg Interactive Brooker Studio.
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