WEBVTT - Bloomberg Surveillance TV: August 4th, 2026 0:00:02.400 --> 0:00:07.440 Bloomberg Audio Studios, Podcasts, radio news. 0:00:11.800 --> 0:00:15.600 This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 0:00:15.640 --> 0:00:18.840 with Lisa Bromwitz and Amrie Hordert. Join us each day 0:00:18.880 --> 0:00:22.440 for insight from the best in markets, economics, and geopolitics 0:00:22.560 --> 0:00:25.080 from our global headquarters in New York City. We are 0:00:25.079 --> 0:00:27.840 live on Bloomberg Television weekday mornings from six to nine 0:00:27.880 --> 0:00:31.440 am Eastern. Subscribe to the podcast on Apple, Spotify or 0:00:31.480 --> 0:00:34.120 anywhere else you listen, and as always on the Bloomberg 0:00:34.200 --> 0:00:37.400 Terminal and the Bloomberg Business app. We begin this out 0:00:37.400 --> 0:00:39.879 we're stocks trading at all time highs as tech concerns 0:00:39.880 --> 0:00:42.839 continue to ease. David Levitz of JP Morgan Asset Management, 0:00:43.000 --> 0:00:46.960 writing hyperscaler earnings results reinforce our positive outlook for corporate 0:00:46.960 --> 0:00:51.040 profits well maintain a pro res view in portfolios. David 0:00:51.080 --> 0:00:53.440 joined us Now for more, David good Mornick. Since we 0:00:53.520 --> 0:00:57.040 got those earnings, those hyperscalers have been offset the races. 0:00:57.040 --> 0:00:59.440 I'm talking about gains of ten to twenty five percent 0:00:59.720 --> 0:01:01.640 of the last three or four days for a handful 0:01:01.680 --> 0:01:04.240 of some of the biggest companies on the planet. What 0:01:04.440 --> 0:01:07.560 was in the data The earnings that has started this move. 0:01:08.000 --> 0:01:08.240 Well. 0:01:08.280 --> 0:01:10.600 So I think what's really interesting is we've seen this 0:01:10.920 --> 0:01:13.440 over the past couple of quarters, where coming into the 0:01:13.480 --> 0:01:16.360 earnings announcements, you see this skepticism begin to rise. You know, 0:01:16.440 --> 0:01:18.399 maybe profit growth won't be as good as it has 0:01:18.440 --> 0:01:20.720 been made, margins will finally start to come back in, 0:01:21.160 --> 0:01:22.360 and then they impress, and. 0:01:22.319 --> 0:01:24.000 For the most part, you know, the numbers are good. 0:01:24.040 --> 0:01:25.560 They may or they may not be, but I think 0:01:25.600 --> 0:01:27.959 the market is focused on the fact that even if 0:01:27.959 --> 0:01:31.360 you exclude the equity investment gains from the overall earning 0:01:31.360 --> 0:01:34.319 season number, you're still looking at earnings growth of thirty percent, 0:01:34.560 --> 0:01:37.319 and so these are just unequivocally good numbers. I think 0:01:37.319 --> 0:01:38.760 a lot of it ties back to the point you 0:01:38.800 --> 0:01:41.920 were just making. You're seeing this AI trade broaden out. 0:01:41.959 --> 0:01:44.240 You're seeing a show up in the manufacturing economy, the 0:01:44.240 --> 0:01:47.039 industrial economy, the real economy at the end of the day, 0:01:47.040 --> 0:01:49.840 and that's what's giving this story legs, right, That's what's 0:01:49.880 --> 0:01:51.800 making it a more durable trade. It's not just this 0:01:51.920 --> 0:01:53.480 flash in the pan We're going to spend a bunch 0:01:53.520 --> 0:01:55.520 of money and then move on to the next project. 0:01:55.520 --> 0:01:58.680 This is really something that's transforming the growth rate and 0:01:58.720 --> 0:02:00.720 the growth trajectory of the US economy. 0:02:00.760 --> 0:02:03.240 For much of the year, it was hyper scandal, chips 0:02:03.440 --> 0:02:05.640 one or the other, not both. It was chips or 0:02:05.680 --> 0:02:08.480 software one or the other, not both. Is that still 0:02:08.520 --> 0:02:09.960 the story or things changed? 0:02:10.240 --> 0:02:12.160 So I think things are changing. 0:02:12.160 --> 0:02:13.760 And I think last time I was on with you guys, 0:02:13.800 --> 0:02:15.560 we were talking a little bit about how markets are 0:02:15.560 --> 0:02:19.120 becoming increasingly discerning between the different players, and so you know, 0:02:19.120 --> 0:02:20.800 what I think you're going to see going forward is 0:02:21.080 --> 0:02:23.760 within software, who are the winners and who are the losers? 0:02:23.800 --> 0:02:26.040 Within chips, who are the winners? Who are the losers? 0:02:26.280 --> 0:02:28.440 You to and extent saw it in the hyperscalers throughout 0:02:28.480 --> 0:02:30.280 this earning season. Who are the winners and who are 0:02:30.280 --> 0:02:32.880 the losers? What is the market looking for? They're looking 0:02:32.880 --> 0:02:35.480 for that ROI. They're looking for that that inclination that 0:02:35.520 --> 0:02:38.240 there is going to be a profit benefit down the road. 0:02:38.240 --> 0:02:39.919 And I think that you're starting to see that come 0:02:40.000 --> 0:02:41.160 through in a more durable way. 0:02:41.240 --> 0:02:43.440 How much you seeing discernment and how much you seeing 0:02:43.480 --> 0:02:45.720 relief that maybe some of the leverage has been pushed 0:02:45.720 --> 0:02:48.240 out of the system, either with situational awareness or with 0:02:48.400 --> 0:02:50.640 the situation over in Korea. 0:02:50.680 --> 0:02:51.480 So it's funny. 0:02:51.520 --> 0:02:53.400 I remember being an analyst and like, if the market 0:02:53.440 --> 0:02:55.120 moved two percent in one day, it was a really 0:02:55.200 --> 0:02:56.800 really big deal. And now we have these two percent 0:02:56.840 --> 0:02:59.000 moves and people kind of like shrug their shoulders. 0:02:58.639 --> 0:03:01.160 And twenty percent and he'll do it. We'll do it 0:03:01.160 --> 0:03:01.680 again tomorrow. 0:03:01.720 --> 0:03:04.520 I mean, look, clearly, there was a technical element of 0:03:04.520 --> 0:03:07.040 what was going on here in terms of the selling, 0:03:07.080 --> 0:03:09.519 in terms of the leverage and some of these ATF products. 0:03:09.919 --> 0:03:11.760 But that's the market that we're in today. And I 0:03:11.760 --> 0:03:14.760 think kind of thinking about the volatility angle and going 0:03:14.800 --> 0:03:16.560 back to some of the comments that you guys were 0:03:16.560 --> 0:03:20.280 making about Kevin Warsh and how the market's digesting everything there. 0:03:20.480 --> 0:03:22.400 You know, yes, on the one hand, you could say 0:03:22.480 --> 0:03:25.000 the market is doing the work for him. My question 0:03:25.120 --> 0:03:27.840 is how long are markets going to be content doing 0:03:27.840 --> 0:03:30.079 the work for the chairman of the Federal Reserve. I 0:03:30.080 --> 0:03:32.919 think at some point you get market exhaustion, and that's 0:03:32.919 --> 0:03:34.440 when they want a little bit of guidance as to 0:03:34.480 --> 0:03:36.480 what to expect. And so, you know, the Fed's walking 0:03:36.520 --> 0:03:38.120 a very fine line here, and I think that the 0:03:38.160 --> 0:03:39.920 earnings are really what's bailing them out at the end 0:03:39.920 --> 0:03:40.240 of the day. 0:03:40.280 --> 0:03:41.839 The fundamental story is just very good. 0:03:41.920 --> 0:03:43.520 What's notable to me is that when we talk to 0:03:43.560 --> 0:03:45.480 people about at what point the long end of the 0:03:45.520 --> 0:03:48.440 yield curve will constrain some of the ambitions within the 0:03:48.880 --> 0:03:51.160 S and P five hundred, they say, we're not there yet. 0:03:51.280 --> 0:03:53.520 But it's because earnings are so strong. It's because we 0:03:53.600 --> 0:03:56.320 can look past this. When does that change? 0:03:57.000 --> 0:04:00.000 So I think that you're starting to see debt markets 0:04:00.120 --> 0:04:02.400 begin to push back on a lot of this financing. 0:04:02.440 --> 0:04:04.800 And it's not problematic when you go from a negative 0:04:04.840 --> 0:04:07.040 leverage ratio to a leverage ratio of one. I mean, 0:04:07.080 --> 0:04:08.600 you're still going to be able to bring paper to 0:04:08.640 --> 0:04:11.520 market at fairly attractive spreads. But we have seen spreads 0:04:11.520 --> 0:04:14.120 for the hyperscalers begin to move wider. You look at 0:04:14.200 --> 0:04:16.800 high yield, the picks and shovels trade, some of those 0:04:16.800 --> 0:04:18.640 issues are getting a little bit more wobbly. You know, 0:04:18.760 --> 0:04:21.640 one time subscribe instead of multiple times oversubscribe. And so 0:04:22.000 --> 0:04:23.760 that's what I think you want to watch there is 0:04:24.080 --> 0:04:27.200 when do these AI players recognize that they can't just 0:04:27.240 --> 0:04:29.120 do it with debt, they can't just do it with equity, 0:04:29.120 --> 0:04:30.640 they can't just do it with cash flow. They need 0:04:30.680 --> 0:04:33.240 to figure out a mix of all three, because if 0:04:33.279 --> 0:04:35.400 this is really going to extend over the next couple 0:04:35.440 --> 0:04:37.240 of years, you can't be a one trick pony when 0:04:37.240 --> 0:04:38.920 it comes to financing this investment. 0:04:38.960 --> 0:04:41.400 A week close to exhilisting, what's avaiable to them to 0:04:41.440 --> 0:04:42.880 issue debt to issue equity. 0:04:43.560 --> 0:04:45.400 I think that there's more room to run. 0:04:45.600 --> 0:04:47.880 I think you look at some of the hyperscalers this year, 0:04:47.920 --> 0:04:49.760 and part of what happened was you had so much 0:04:49.800 --> 0:04:51.920 debt coming to market in such a short period of 0:04:51.920 --> 0:04:54.520 time and not really giving investors the heads up that 0:04:54.560 --> 0:04:56.480 it was coming. And so you know, if we begin 0:04:56.560 --> 0:04:59.200 to see a little bit more of a steady drip 0:04:59.240 --> 0:05:01.279 instead of a fire, I think that that will help 0:05:01.320 --> 0:05:04.000 markets digest. But you know, clearly, the fact that markets 0:05:04.000 --> 0:05:06.560 are requiring a greater spread in the IG space, in 0:05:06.600 --> 0:05:08.840 the high yield space to take down this paper tells 0:05:08.839 --> 0:05:11.080 you something about the sheer volume we've seen so far 0:05:11.120 --> 0:05:11.520 here today. 0:05:11.600 --> 0:05:13.080 Back in the day, if you sort of moved like 0:05:13.120 --> 0:05:15.039 that and spread to still steeper tite, but if it's 0:05:15.040 --> 0:05:17.960 not to see them one to night, you'd worry about equities. 0:05:18.080 --> 0:05:19.000 Is it the same story. 0:05:19.320 --> 0:05:21.880 So I think what's interesting to me is that up 0:05:21.960 --> 0:05:24.919 until this point, the equity market and the credit markets 0:05:24.960 --> 0:05:27.000 were kind of two different things. 0:05:27.080 --> 0:05:27.320 Right. 0:05:27.640 --> 0:05:30.679 You didn't have a huge hyperscaler presence in the IG space, 0:05:30.680 --> 0:05:32.440 you didn't have a huge data center presence in the 0:05:32.480 --> 0:05:34.760 high yield space. You had a bunch of software sitting 0:05:34.800 --> 0:05:37.000 in private credit and direct lending. But you know, hey, 0:05:37.000 --> 0:05:38.800 that only marks four times a year, so you only 0:05:38.880 --> 0:05:40.600 need to pay attention to it four times a year. 0:05:40.960 --> 0:05:43.400 Now you're seeing that the tech trade, in the AI 0:05:43.440 --> 0:05:45.599 trade is infiltrating. 0:05:45.000 --> 0:05:47.120 Both the debt and the equity side of the equation. 0:05:47.240 --> 0:05:50.000 So I think that there's more signal coming from what's 0:05:50.000 --> 0:05:53.200 happening with spreads than there was previously. But at the 0:05:53.279 --> 0:05:55.040 end of the day, you look at where spreads are, 0:05:55.120 --> 0:05:58.200 I mean, there's still pretty tight by historic standards, and 0:05:58.200 --> 0:06:00.240 you look at what's going on in high yield two 0:06:00.320 --> 0:06:03.080 seventy over, I mean, I struggled to get overly concerned 0:06:03.080 --> 0:06:05.120 about the trajectory of the economy when that's what we're 0:06:05.160 --> 0:06:06.880 seeing from a financing cost perspective. 0:06:06.960 --> 0:06:10.440 Does sixty forty have any relevance whatsoever anymore? In the 0:06:10.480 --> 0:06:12.000 backdrop that you're just explaining. 0:06:12.440 --> 0:06:14.400 So I think it does. 0:06:14.440 --> 0:06:16.800 And I think one of the misconceptions that investors have 0:06:16.960 --> 0:06:19.320 is that when you say sixty forty, you mean a. 0:06:19.279 --> 0:06:20.840 Public sixty forty. Right. 0:06:21.000 --> 0:06:23.360 Private equity and public equity are still equity at the 0:06:23.440 --> 0:06:25.480 end of the day. Private credit and public credit are 0:06:25.480 --> 0:06:27.200 still credit at the end of the day. And so 0:06:27.440 --> 0:06:30.279 one of the things we're encouraging investors is, hey, sixty 0:06:30.320 --> 0:06:32.760 forty might make sense, seventy thirty might make sense, But 0:06:32.839 --> 0:06:35.800 beneath the surface, what does your credit allocation look like? 0:06:36.000 --> 0:06:38.400 What does your equity allocation look like? And do you 0:06:38.440 --> 0:06:41.120 need to think about other alternatives things like real assets 0:06:41.120 --> 0:06:44.480 to help play defense against higher inflation volatility going forward. 0:06:44.520 --> 0:06:47.160 At the end of last year, a lot of debt 0:06:47.160 --> 0:06:49.040 investors credit investors were saying there was more of an 0:06:49.040 --> 0:06:52.120 opportunity in equities than there was in credit, just simply 0:06:52.160 --> 0:06:55.000 because the upside looked so much better and the potential 0:06:55.040 --> 0:06:59.719 downside was potentially worse for bond investors. Has that pendulum 0:06:59.760 --> 0:07:02.280 shit lifted as yields have go materially higher. 0:07:02.160 --> 0:07:04.480 So I think that it has become more balanced. I'm 0:07:04.520 --> 0:07:06.799 hesitant to say that it's completely shifted because the earning 0:07:06.839 --> 0:07:09.400 story still is so strong, and so if you believe 0:07:09.400 --> 0:07:11.920 in the idea that over time stock prices will follow 0:07:11.960 --> 0:07:14.000 profits and profit growth is still going to be there, 0:07:14.080 --> 0:07:16.440 then maybe there's more juice to get squeezed out of 0:07:16.440 --> 0:07:18.960 that orange. But you know, seven and a quarter seven 0:07:19.000 --> 0:07:20.680 and a half on high yield, which we know is 0:07:20.720 --> 0:07:22.760 a higher quality asset than it once was with a 0:07:22.760 --> 0:07:26.880 fairly low duration, to me, feels pretty interesting in an economy, 0:07:26.880 --> 0:07:29.760 In an economic environment where growth is clearly above trend. 0:07:29.800 --> 0:07:32.400 If I think about the skew to risk free rates, 0:07:32.680 --> 0:07:34.800 it's very much to the upside. So if I can 0:07:34.840 --> 0:07:36.880 pick up some spread on top of that and maintain 0:07:37.040 --> 0:07:39.640 a below bench mark duration, that's going to be interesting. 0:07:39.680 --> 0:07:40.720 From an overall portfolio. 0:07:40.760 --> 0:07:43.200 The sieve into Canada's side might be the biggest concents 0:07:43.280 --> 0:07:45.640 this time around Roid ninj and nine high oout. 0:07:45.760 --> 0:07:47.880 You've got a duration concern and you've got a much 0:07:47.920 --> 0:07:51.760 more concentrated AI concern. So at a certain point, tight spreads, 0:07:52.000 --> 0:07:55.920 more duration, more AI exposure that potentially is fraught with disruption, 0:07:56.280 --> 0:07:59.960 suddenly starting to look at IG that has potentially more risk. 0:08:00.000 --> 0:08:02.520 It's been a lower duration high yield portfolio. I mean, 0:08:02.520 --> 0:08:04.640 it's sort of an interesting kind of turning upside down 0:08:04.640 --> 0:08:04.960 at risk. 0:08:05.960 --> 0:08:06.600 Stay with us. 0:08:06.920 --> 0:08:20.200 More Bloomberg Surveillance coming up after this. The President's slamming 0:08:20.200 --> 0:08:22.680 Exon and Chefron has higher prices from the war in 0:08:22.720 --> 0:08:25.320 a round way on consumers and fuel profits for the 0:08:25.440 --> 0:08:28.200 ord giants. The company's ranking going to combined twenty nine 0:08:28.280 --> 0:08:30.760 billion in the second quarter, more than triple the same 0:08:30.760 --> 0:08:33.640 time last year. Stephen Shock of the Show Grew joined us. 0:08:33.679 --> 0:08:36.240 Now for more, Steven, let's talk about where the profits 0:08:36.400 --> 0:08:39.600 are coming from. Have the money's being made, what happened 0:08:39.600 --> 0:08:42.000 at Exon, what happened at Chefron, The upset of the 0:08:42.000 --> 0:08:43.240 president so much? 0:08:44.280 --> 0:08:47.600 Oh well, it's understandable here. I mean, we finally found 0:08:47.640 --> 0:08:51.319 an issue that Trump and a democratic socialist can agree. 0:08:51.400 --> 0:08:54.440 He's chastising in the industry that has made money in 0:08:54.480 --> 0:08:57.480 a quarter on a war that he started and has 0:08:57.559 --> 0:09:01.600 no apparent plan on ending. Now he's going full Bernie 0:09:01.600 --> 0:09:04.560 Sanders on the market, telling us, now, Excellent has to 0:09:04.600 --> 0:09:06.000 turn that money over. 0:09:06.120 --> 0:09:09.000 Chavon has to turn that money over. He said it himself. 0:09:09.200 --> 0:09:12.880 They're making money from shortage and making money relative to 0:09:12.880 --> 0:09:15.560 a year ago. But it's a shortage that he created, 0:09:15.720 --> 0:09:18.840 and he has again no plan is from the market's 0:09:18.880 --> 0:09:23.000 perspective of alleviating. So, yes, companies are going to make 0:09:23.080 --> 0:09:27.360 money when you start and you artificially inflate the price 0:09:27.559 --> 0:09:30.880 due to your own actions. So he is flailing right now, 0:09:31.840 --> 0:09:35.200 reaching out and slamming everyone because it's not going the 0:09:35.240 --> 0:09:39.000 way he had expected. Clearly when this all started going 0:09:39.000 --> 0:09:40.040 on six months. 0:09:39.760 --> 0:09:43.080 Ago, Steven, Clearly, refining is a major feature of what's happening. 0:09:43.120 --> 0:09:46.080 Care what kind of utilization rates are you're seeing across 0:09:46.120 --> 0:09:49.400 the industry. Where is the capacity to bring more refining 0:09:49.440 --> 0:09:52.520 online and to help get the gasoline price lower, not 0:09:52.600 --> 0:09:54.319 just stay signed, but around the world. 0:09:54.880 --> 0:09:57.439 No, virtually No, I mean, because we were looking at 0:09:57.480 --> 0:10:00.720 a market where crudel is going up in down every 0:10:00.720 --> 0:10:04.400 time the President changes his rhetoric. West Thursday, human full 0:10:04.480 --> 0:10:06.640 doctor strange love, I'm going to blow a round up 0:10:06.800 --> 0:10:09.280 to twenty four hours later, I'm John Lennon. 0:10:09.360 --> 0:10:10.439 Let's give a piece of chance. 0:10:10.679 --> 0:10:13.920 And oil prices are reacting to everything the President says. 0:10:14.200 --> 0:10:18.680 What doesn't react is the reality refining margins the product markets. 0:10:19.000 --> 0:10:21.839 The market is telling us through the forward curve, both 0:10:21.880 --> 0:10:24.040 in the diesel marketing and the gasoline market that we 0:10:24.120 --> 0:10:27.280 are short of product, and hence, now the margins, the 0:10:27.360 --> 0:10:31.920 difference between diesel and gasoline and CRUDEO are massive. Therefore, 0:10:32.040 --> 0:10:37.080 the refiners are doing everything they possibly can to capture 0:10:37.120 --> 0:10:40.600 those margins, and therefore they are running. In the Midwest, 0:10:41.000 --> 0:10:43.720 they are running at virtually one hundred percent of capacity. 0:10:43.880 --> 0:10:46.679 In the refinery epicenter, in the Gulf Coast, they're running 0:10:46.760 --> 0:10:50.600 at ninety seven percent of capacity. So the refining industry, 0:10:50.640 --> 0:10:53.840 he's already pushed to its max at this point. So 0:10:53.840 --> 0:10:56.640 there's a very little more margin that the industry can 0:10:56.760 --> 0:10:58.920 do to get more gasoline to the market. 0:10:59.120 --> 0:11:01.720 They just can't ad a loan and there's some pixie 0:11:01.760 --> 0:11:02.160 dust on. 0:11:02.120 --> 0:11:06.400 The market and all of a sudden bring retail prices lower. No, 0:11:06.559 --> 0:11:09.640 retail prices are higher because there is a shortage of 0:11:09.720 --> 0:11:13.480 product and the ability refiners to bring more product to 0:11:13.559 --> 0:11:15.640 the market is already stretched to the max. 0:11:15.760 --> 0:11:18.960 Stephen, can the president do anything along the lines of 0:11:19.000 --> 0:11:21.760 what he's suggesting. I mean, if you channel Mike Worth 0:11:22.080 --> 0:11:23.480 and you try to get into his head, is he 0:11:23.559 --> 0:11:25.760 just sort of rolling his eyes and saying, what a 0:11:25.760 --> 0:11:27.800 bunch of hooey? And it's never going to come to pass. 0:11:28.559 --> 0:11:29.640 No, absolutely, everyone. 0:11:29.760 --> 0:11:31.440 I mean, I don't know Mike Worth personally and I 0:11:31.440 --> 0:11:34.480 haven't spoken to him, but everyone I do speak an interest. Yes, 0:11:34.559 --> 0:11:38.000 they are rolling their eyes at a situation where you 0:11:38.200 --> 0:11:40.720 go on and you could take such a populous view 0:11:41.080 --> 0:11:44.040 that stems from a war that you created when the 0:11:44.120 --> 0:11:47.000 industry is responding the way you would expect the responding. 0:11:47.200 --> 0:11:49.720 The old adage is that high prices are the cure 0:11:49.760 --> 0:11:52.439 for high prices. We have those high prices, and why 0:11:52.440 --> 0:11:54.920 are they a cure because you're going to bring product 0:11:55.000 --> 0:11:57.600 to the market, to Britain, the pod to exploit those 0:11:57.640 --> 0:12:01.199 high prices. But we're already there. What we can address 0:12:01.240 --> 0:12:04.720 now is the shortage of product because once again, there's 0:12:04.880 --> 0:12:08.120 very little that the industry. The industry is doing essentially 0:12:08.160 --> 0:12:11.600 everything it can. It's responding to high prices. What it 0:12:11.720 --> 0:12:15.520 cannot do is respond to the uncertainty. Look, I could 0:12:15.559 --> 0:12:18.120 price a ninety five dollars war. I could price a 0:12:18.160 --> 0:12:21.160 seventy five dollars piece. What I cannot do, and what 0:12:21.200 --> 0:12:23.440 the market cannot do, is price a ninety five dollars 0:12:23.440 --> 0:12:26.559 war and the seventy five dollars piece when it alternates, 0:12:26.559 --> 0:12:29.920 the ping puns within every single news cycle. So there's 0:12:29.960 --> 0:12:32.240 a price to be paid for that uncertainty, and the 0:12:32.280 --> 0:12:34.120 market is paying that price right now. 0:12:34.200 --> 0:12:36.880 Do you like the oil majors as a group in 0:12:36.960 --> 0:12:39.440 terms of the share price given the volatility that we've 0:12:39.440 --> 0:12:42.400 seen in oil prices, the shortages that are ongoing, and 0:12:42.440 --> 0:12:45.079 the fact that high prices haven't gotten high enough to 0:12:45.200 --> 0:12:47.400 for demand destruction in a real way, at least not 0:12:47.400 --> 0:12:48.240 in the United States. 0:12:49.000 --> 0:12:52.200 Yeah, absolutely, And that's the here that we're having because 0:12:52.200 --> 0:12:56.040 there's two ways to impact elasticity of demand of any commodity, 0:12:56.160 --> 0:12:57.920 bring more supply to the market. 0:12:57.760 --> 0:12:58.640 Or kill demand. 0:12:58.960 --> 0:13:02.320 Well, our ability to supply the market, as we've said, 0:13:02.320 --> 0:13:05.320 has already pushed to the market to the margin. So 0:13:05.400 --> 0:13:08.200 therefore the only other issue to bring prices down is 0:13:08.240 --> 0:13:11.640 demand destruction, and of course that's economic contraction, and that 0:13:11.760 --> 0:13:14.160 is the fear in the market. As the longer we go, 0:13:14.480 --> 0:13:17.600 and as we have the uncertainty of how long this war, 0:13:17.880 --> 0:13:20.199 how long this destruction to the flow of oil around 0:13:20.240 --> 0:13:22.400 the world through the stranger who moves or through the 0:13:22.760 --> 0:13:26.320 bob LMD into Red Sea, how long does that remain disturbed? 0:13:26.400 --> 0:13:28.720 And right now we don't have an answer to that. 0:13:29.080 --> 0:13:33.040 Therefore, we have extreme uncertainty volatility in the market. And 0:13:33.080 --> 0:13:36.320 when the market's uncertain, when the market is volatile, prices 0:13:36.320 --> 0:13:37.080 are going to be high. 0:13:37.080 --> 0:13:39.720 You're going to have to pay for that for that uncertainty. 0:13:40.200 --> 0:13:43.679 Stay with us, multile Inpex Savandan's coming up after this. 0:13:52.880 --> 0:13:55.800 Let's talk about chips A massive month behind us. They 0:13:55.840 --> 0:13:59.480 declined by more than twenty percent. A big afternoon coming up, 0:13:59.800 --> 0:14:02.240 a d sets report earnings after the bow. The chip 0:14:02.280 --> 0:14:05.160 makers lofty second quarter goals, aiming to close the competitive 0:14:05.160 --> 0:14:08.360 gap within video. Angelo Zeno of CFRRA maintaining a strong 0:14:08.400 --> 0:14:11.200 binder stock and a six hundred dollars price target rising. 0:14:11.200 --> 0:14:15.400 These ambitious targets reflect AMD's confidence in capturing a significant 0:14:15.400 --> 0:14:19.280 share of the expanding AI market. Execution will be critical. 0:14:19.440 --> 0:14:22.040 Angelo joins us. Now for more, Angela, welcome to the program. 0:14:22.080 --> 0:14:24.040 Let's just start that that story. How big is the 0:14:24.080 --> 0:14:27.480 gap between AMD and in video right now? Is it closing? 0:14:27.600 --> 0:14:29.560 And why does that gap even exist? What is one 0:14:29.560 --> 0:14:32.440 company doing better or have done better than the other? 0:14:33.880 --> 0:14:35.160 Yeah? So, John, thanks for having me. 0:14:35.360 --> 0:14:38.160 I'd say overall, listen, there's a huge gap here and 0:14:38.480 --> 0:14:41.480 the biggest reason for the gap is you've got in Video, 0:14:41.560 --> 0:14:45.280 which essentially has been doing their Kuda software for let's 0:14:45.280 --> 0:14:47.320 call it two decades at this point in time, so 0:14:47.360 --> 0:14:50.640 they had a huge, massive lead in terms of the 0:14:50.680 --> 0:14:54.480 start of this AI revolution. They've essentially dominated the whole 0:14:54.520 --> 0:14:57.320 AI accelerator market over the last couple of years, and 0:14:57.360 --> 0:15:00.000 more importantly, within video, they've kind of shifted to these 0:15:00.120 --> 0:15:03.600 large scale RAX solutions, which everyone has kind of the 0:15:03.640 --> 0:15:06.200 whole industry has migrated to. When you kind of look 0:15:06.240 --> 0:15:10.240 at AMD here, they are now starting to kind of 0:15:10.280 --> 0:15:15.120 shift to large scale rack scale solutions. Actually the Helius 0:15:15.160 --> 0:15:19.360 platform is ramping here, will ramp in Q three. More 0:15:19.400 --> 0:15:20.800 of the kind of the upside going to be in 0:15:20.920 --> 0:15:23.680 Q four and into Q one of next year. But 0:15:23.720 --> 0:15:25.240 also when you look at what they're doing on the 0:15:25.560 --> 0:15:28.320 software side of things, they're now really starting to make 0:15:28.360 --> 0:15:30.720 some good progress there and you're going to see more 0:15:30.720 --> 0:15:33.880 developers on their platform, and that makes them a real 0:15:34.000 --> 0:15:36.200 kind of thread to in Nvidia kind of looking here 0:15:36.240 --> 0:15:38.200 over the next couple of years, where they've got a 0:15:38.320 --> 0:15:41.520 very small share and actually negligible share when you start 0:15:41.520 --> 0:15:44.440 thinking about the actual large scale rack solutions. So there's 0:15:44.480 --> 0:15:47.520 a lot of upside here for AMD, and it's why 0:15:47.600 --> 0:15:48.720 it's our top pick here. 0:15:48.920 --> 0:15:50.760 Over the next couple of years, AMD. 0:15:50.560 --> 0:15:54.200 Has announced relationships with some of the frontier models of 0:15:54.280 --> 0:15:58.720 AI we've heard just generally chip chip companies have gone 0:15:58.720 --> 0:16:02.000 after deals with the likes of open ay and Anthropic. 0:16:02.080 --> 0:16:04.640 To what degree is that a benefit and attribute and 0:16:04.640 --> 0:16:07.240 to what degree is that potentially detrimental? 0:16:08.320 --> 0:16:09.600 No, I mean, it's it's important. 0:16:09.640 --> 0:16:13.080 These partnerships are absolutely important for a company like A 0:16:13.240 --> 0:16:16.920 and D. They need to kind of prove their you know, 0:16:17.120 --> 0:16:19.920 their position in the market at this point in time, 0:16:20.000 --> 0:16:22.640 and the best way to do that is with these partnerships, 0:16:23.400 --> 0:16:26.760 whether it be Anthropic, open AI, which they now have 0:16:26.880 --> 0:16:30.560 good partnerships with, as well as recent announcements with the 0:16:30.720 --> 0:16:34.480 likes of Meta as well as Microsoft. So they're in 0:16:34.480 --> 0:16:36.840 a pretty good position here and it's also kind of 0:16:36.880 --> 0:16:39.560 helps now build a very good pipeline for them for 0:16:39.640 --> 0:16:40.720 over the next couple of years. 0:16:40.720 --> 0:16:43.120 Are there margin levels that are too good from your 0:16:43.200 --> 0:16:43.840 vantage point? 0:16:44.000 --> 0:16:44.840 The potentially are. 0:16:44.760 --> 0:16:49.000 So high as to essentially ask for some competitive pressure. 0:16:50.720 --> 0:16:54.120 If we're looking all across the kind of the you know, 0:16:54.160 --> 0:16:57.040 the semi ecosystem. Yeah, I mean there's I think there 0:16:57.040 --> 0:16:59.760 are points there, you know, where you get to points 0:16:59.760 --> 0:17:01.360 on the on the margin side of things where it 0:17:01.360 --> 0:17:05.919 gets a little bit too lofty, too good. But you know, 0:17:06.000 --> 0:17:09.240 for a company like AMD, you're not there, nowhere near 0:17:09.280 --> 0:17:11.399 there at this point in time, especially relative to some 0:17:11.480 --> 0:17:14.760 of the other players across the semi ecosystem. 0:17:14.880 --> 0:17:16.400 Angela, I know you have sort of bought them up 0:17:16.680 --> 0:17:18.639 and you're covering single names, but I want your reaction 0:17:18.720 --> 0:17:21.320 to what happened with situation Lawhanis last week, because a 0:17:21.320 --> 0:17:23.240 lot of bulls willing to buy this sect and now 0:17:23.640 --> 0:17:26.040 pointing to that as a clearing event, which you points 0:17:26.040 --> 0:17:27.760 to the same thing. How do you think about that 0:17:27.880 --> 0:17:28.600 kind of dynamic? 0:17:30.000 --> 0:17:31.879 Yeah, I know, I think that's a good question, you know, 0:17:31.920 --> 0:17:35.440 when we think about that situation in itself. Yeah, I mean, 0:17:35.840 --> 0:17:37.400 I think there was a lot of momentum that's really 0:17:37.480 --> 0:17:41.280 kind of been built within the entire semi ecosystem, and 0:17:41.560 --> 0:17:44.800 to an extent, you needed to see some sort of 0:17:45.200 --> 0:17:48.000 kind of wash out, which you know that probably attributed 0:17:48.080 --> 0:17:50.440 to here over the last couple of weeks. I think 0:17:50.480 --> 0:17:53.399 you're still in this kind of price discovery phase as 0:17:53.440 --> 0:17:56.560 far as the semi ecosystem is concerned. We've kind of 0:17:56.960 --> 0:18:01.120 essentially kind of hit peak growth rates back in Q two, 0:18:01.480 --> 0:18:02.960 so you're going to see growth for its start to 0:18:03.000 --> 0:18:06.159 decelerate for the semi ecosystem over the next couple of 0:18:06.240 --> 0:18:09.000 quarters and years. The market needs to digest that and 0:18:09.040 --> 0:18:11.200 find kind of a proper multiple. 0:18:10.800 --> 0:18:12.919