WEBVTT - Tech Megacap Wrap: Amazon, Apple, Intel Earnings 0:00:02.480 --> 0:00:07.720 Bloomberg Audio Studios, Podcasts, radio news. 0:00:09.680 --> 0:00:12.800 This is the Bloomberg Daybreak Asia podcast. I'm Doug Krisner. 0:00:12.920 --> 0:00:15.400 You can join Brian Curtis and myself for the stories, 0:00:15.440 --> 0:00:18.520 making news and moving markets in the APAC region. You 0:00:18.600 --> 0:00:21.439 can subscribe to the show anywhere you get your podcast 0:00:21.520 --> 0:00:24.919 and always on Bloomberg Radio, the Bloomberg Terminal, and the 0:00:24.920 --> 0:00:26.080 Bloomberg Business app. 0:00:26.400 --> 0:00:28.920 Let's get to our guest. It's Melissa Auto, head of 0:00:29.080 --> 0:00:34.040 TMT Research SMP Global Visible Alpha. Melissa, thank you for 0:00:34.159 --> 0:00:37.240 joining us. Well, markets are showing that they're pretty jittery 0:00:37.320 --> 0:00:40.839 here at the moment. We did have jobless claims rising 0:00:40.880 --> 0:00:44.080 fourteen thousand to two hundred and forty nine thousand. That 0:00:44.200 --> 0:00:46.360 in itself is probably not enough, and maybe even the 0:00:46.360 --> 0:00:50.120 manufacturing numbers not enough. It seems like it might be 0:00:50.200 --> 0:00:53.360 more thinking that these are examples that the FED could 0:00:53.360 --> 0:00:56.280 be falling behind the curve on cutting interest rates. 0:00:56.360 --> 0:00:57.920 How do you see the balance of risk here? 0:01:00.000 --> 0:01:00.319 Thank you. 0:01:00.560 --> 0:01:05.200 Indeed, it's been a tumultuous earning season so far, particularly 0:01:05.240 --> 0:01:08.520 for the megacat tech stocks. I mean, tonight we saw 0:01:09.240 --> 0:01:13.600 really a tale of two cities. But even for Apple, 0:01:14.080 --> 0:01:16.600 who put up you know, an inline quarter gave a 0:01:16.640 --> 0:01:20.759 decent outlook, both in line with expectations, with the stock flat. 0:01:21.280 --> 0:01:26.240 Then Amazon stocked down over five percent revenue and operating profit, 0:01:26.640 --> 0:01:31.760 beating expectations in the quarter, but that guidance a little 0:01:31.760 --> 0:01:35.400 bit light of expectations took the stock down. You know, 0:01:35.440 --> 0:01:38.680 I think in terms of where the FED comes out 0:01:38.720 --> 0:01:42.080 on this, it's a close call. SMP Global Market Intelligence 0:01:42.640 --> 0:01:45.800 had been calling for a December rate cut, but you know, 0:01:46.720 --> 0:01:50.360 looking at the data, you know acknowledges that you know, 0:01:50.400 --> 0:01:54.000 maybe September is starting to look a little bit like 0:01:54.080 --> 0:01:56.640 it's coming on the table. Hard to call at this point. 0:01:56.960 --> 0:01:58.560 So when you look at the themes here, I mean, 0:01:58.600 --> 0:02:01.840 what jumps off the pages are official intelligence? How do 0:02:01.920 --> 0:02:04.120 you see this bet right now? I mean, is it 0:02:04.960 --> 0:02:07.520 something where we can expect more air to come out 0:02:07.600 --> 0:02:09.880 of a I don't want to call it a bubble necessarily, 0:02:09.919 --> 0:02:12.840 but a pocket enthusiasm. 0:02:13.360 --> 0:02:17.480 It's a long term secular trend, and I think a 0:02:17.560 --> 0:02:20.760 lot of the growth we saw it really come into 0:02:20.919 --> 0:02:27.520 earnings revisions pretty aggressively because what happened earlier this year 0:02:27.960 --> 0:02:31.440 was cloud service providers started to really ratchet up their capex. 0:02:31.639 --> 0:02:36.840 That capex ultimately led to earnings revisions at Nvidia, and 0:02:37.240 --> 0:02:39.600 investors started to say, well, who else is going to 0:02:39.639 --> 0:02:43.480 benefit from generative AI? Where else? Maybe where may we 0:02:43.560 --> 0:02:47.720 see these sorts of earnings revisions and especially to the 0:02:47.760 --> 0:02:51.160 magnitude that we've seen it in Vidia. And so I 0:02:51.200 --> 0:02:54.760 think those revisions started to get put into the market, 0:02:54.880 --> 0:02:58.280 started to come into some of these megacap stocks, and 0:02:58.360 --> 0:03:00.680 I think, what's starting to happen. But now as we're 0:03:00.680 --> 0:03:05.160 seeing a normalization of those expectations, as the realities of 0:03:05.240 --> 0:03:07.000 what the market is actually going to do, what it's 0:03:07.040 --> 0:03:09.040 going to deliver, is starting to come to fruition. 0:03:10.000 --> 0:03:12.280 Yeah, when you think about it, the valuations are pretty 0:03:12.320 --> 0:03:15.760 high on these companies, and the hopium is pretty high too. 0:03:15.880 --> 0:03:17.680 That's tied to AI, as Doug. 0:03:17.560 --> 0:03:20.120 Mentioned, And then you know, you look at some of 0:03:20.160 --> 0:03:22.920 these statements like out of Amazon, the earnings actually wasn't 0:03:22.960 --> 0:03:25.839 so bad, but Amazon is saying that profits will take 0:03:25.880 --> 0:03:28.960 a back seat for now too heavy spending on AI. 0:03:29.160 --> 0:03:32.360 So you also have spending levels that investors are fretting with, 0:03:32.400 --> 0:03:33.880 and you add it all up and it's just kind 0:03:33.919 --> 0:03:35.320 of like, well, let's trim here. 0:03:36.880 --> 0:03:42.800 Yeah, I think that's a fair assessment. We've seen capex 0:03:42.920 --> 0:03:47.080 ratcheting up across the board for all of the megacap 0:03:47.120 --> 0:03:53.000 stocks you particularly in the cloud service providers. Meta was 0:03:53.080 --> 0:03:57.680 probably the rare example that didn't exceed expectations in terms 0:03:57.720 --> 0:04:02.200 of their CAPEX, but speaking, they're still spending a lot, 0:04:02.600 --> 0:04:05.400 and the overall space is spending a lot. So I 0:04:05.440 --> 0:04:10.200 think the one beneficiary of this is probably in Nvidia. 0:04:10.480 --> 0:04:13.680 At the end of the day, that is probably not 0:04:13.760 --> 0:04:14.640 going to slow down. 0:04:15.560 --> 0:04:17.839 So when you look at the content that's being created 0:04:17.880 --> 0:04:22.279 by companies in the media space using technology, telecom providers 0:04:22.480 --> 0:04:24.800 as well, that may benefit a little bit from this. 0:04:25.680 --> 0:04:28.200 I'm wondering about the degree to which there's going to 0:04:28.200 --> 0:04:30.880 be pressure on AD sales going forward. And maybe you 0:04:30.880 --> 0:04:32.679 can take us back to what we learned this week 0:04:32.680 --> 0:04:35.279 from Meta platforms. What do you see when you look 0:04:35.320 --> 0:04:36.919 at the AD spending business. 0:04:38.560 --> 0:04:44.400 Yeah, ads are It's it's an interesting backdrop because we 0:04:44.480 --> 0:04:48.520 saw softness in YouTube. Those numbers came in lower than expectations. 0:04:48.960 --> 0:04:51.479 Netflix is saying that their ADS business is off to 0:04:51.520 --> 0:04:55.240 a slow start, but then Meta actually had a pretty 0:04:55.240 --> 0:04:58.039 good quarter. They're actually doing pretty well, and I think 0:04:58.080 --> 0:05:02.840 it you know, there is they are very different business models. 0:05:02.839 --> 0:05:08.600 So the businesses that are aligning and adhering to certain 0:05:08.680 --> 0:05:12.520 aspects of what a customer wants, they're curating it. They're 0:05:12.600 --> 0:05:16.800 leveraging their AI in a way that's aligning ads in 0:05:16.839 --> 0:05:21.560 a way that's creating better curation. Seems to be resonating, 0:05:21.600 --> 0:05:23.240 you know, we're seeing that in the numbers. 0:05:24.880 --> 0:05:26.719 So I want to swing it around to the jobs 0:05:26.800 --> 0:05:29.760 data because we've seen a lot of volatility here. 0:05:29.760 --> 0:05:30.960 I mean, it might very well. 0:05:30.800 --> 0:05:34.039 See volatility the upside if you get a solid number. 0:05:34.480 --> 0:05:36.960 One of the first questions I asked yesterday after the 0:05:36.960 --> 0:05:39.719 FED meeting to our multiple guests on the program was 0:05:40.400 --> 0:05:43.800 didn't jer own Pals sound pretty positive to me? That 0:05:43.920 --> 0:05:47.360 was a key thing. He was like, this economy is humming. 0:05:47.440 --> 0:05:50.840 It is not anywhere close to falling off the table. 0:05:51.080 --> 0:05:54.400 And now we get some disappointing news and investors react 0:05:54.400 --> 0:05:56.400 as though it is falling off the table. So what 0:05:56.440 --> 0:06:00.000 are you expecting with jobs? 0:05:59.800 --> 0:06:02.320 It's hard to call it this at this point, you know, 0:06:02.360 --> 0:06:06.960 I think there is some seasonality and we will just 0:06:07.040 --> 0:06:10.080 really need to look at the sequential data as it 0:06:10.120 --> 0:06:14.720 comes out and hear the further commentary that he gives, 0:06:14.800 --> 0:06:17.360 you know, and I think, you know, it'll be it'll 0:06:17.400 --> 0:06:22.159 be interesting to see how they position over the next 0:06:22.160 --> 0:06:28.200 couple of weeks and what sort of additional feedback we get. 0:06:28.360 --> 0:06:31.640 But yeah, I mean, it wasn't a bright spot today 0:06:31.720 --> 0:06:34.880 for sure, and it certainly spooked the market clearly. 0:06:34.880 --> 0:06:36.800 When you look at the Intel news after the bell 0:06:36.920 --> 0:06:40.680 fifteen thousand workers, that's fifteen percent of Intel's global workforce. 0:06:41.040 --> 0:06:43.920 What do you think of a company like Intel in 0:06:43.960 --> 0:06:47.760 an environment where semiconductors have really been kind of at 0:06:47.400 --> 0:06:54.640 the front end of this trade in artificial intelligence, Intel 0:06:54.760 --> 0:06:55.000 is in. 0:06:54.960 --> 0:06:59.680 An unusual position. They have probably not innovated in the 0:06:59.720 --> 0:07:02.039 same way or invested in the same way that we've 0:07:02.080 --> 0:07:05.279 seen at the at the megacap companies, and may have 0:07:05.600 --> 0:07:09.400 fallen behind in a couple of key areas, and we're 0:07:09.440 --> 0:07:13.120 seeing that come to roosts, particularly in the quarter today. 0:07:13.560 --> 0:07:15.000 You know, one of the other things that I'll go 0:07:15.040 --> 0:07:19.240 back to your earlier question about the jobs number and 0:07:19.640 --> 0:07:22.560 about the consumer. You know, one of the things that 0:07:22.640 --> 0:07:26.560 Tim Cook did call out is how consumers are just 0:07:26.840 --> 0:07:30.800 incredibly deal sensitive. You know that they are really looking 0:07:31.560 --> 0:07:36.000 at promotions, They're very price sensitive, They're avoiding some of 0:07:36.080 --> 0:07:39.200 the higher ticket items. There is some indications of that, 0:07:39.920 --> 0:07:42.600 so there does seem to be some sensitivity at the 0:07:42.640 --> 0:07:43.560 consumer level. 0:07:44.720 --> 0:07:47.160 All right, Melissa, thanks so much for joining us. Back 0:07:47.160 --> 0:07:50.400 to Intel for a moment the previous question. At stock 0:07:50.520 --> 0:07:52.360 is now down more than fifty. 0:07:51.960 --> 0:07:53.320 Percent year to date. 0:07:54.000 --> 0:07:57.160 It's a really interesting story because trying to reshore in 0:07:57.160 --> 0:08:00.640 the United States and that elevates the cost level for sure, 0:08:00.640 --> 0:08:02.400 and now all of a sudden they're having to try 0:08:02.400 --> 0:08:05.040 to really cut costs. So it's one that we'll be 0:08:05.080 --> 0:08:08.600 watching closely. Melissa Otto has been with us here. She's 0:08:08.640 --> 0:08:12.320 with S and P Global Visible Alpha. This is Bloomberg. 0:08:18.800 --> 0:08:21.840 We're joined by Mark German, now Bloomberg Chief correspondent on 0:08:21.840 --> 0:08:26.480 Global Technology, for a closer look at Apple earnings. So 0:08:26.520 --> 0:08:30.800 we focus on China because this is Bloomberg Daybreak Asia. 0:08:31.360 --> 0:08:33.480 We had revenue down six and a half percent to 0:08:33.520 --> 0:08:36.800 fourteen point seven billion in the third quarter. That was 0:08:36.840 --> 0:08:40.520 short of the fifteen point three billion, So in all, 0:08:41.120 --> 0:08:43.480 it sounds like a lot, but it's not very much 0:08:43.559 --> 0:08:46.720 when you compare it to overall sales of eighty five 0:08:46.800 --> 0:08:52.160 point eight billion, almost a rounding error. Things are looking 0:08:52.200 --> 0:08:54.720 pretty good for Apple. Is that fair to say or 0:08:54.800 --> 0:08:56.120 is China a major drag? 0:08:57.480 --> 0:09:00.280 I mean, obviously the third quarter that's finished, and you know, 0:09:00.520 --> 0:09:03.000 the results we got today are a picture in time 0:09:03.080 --> 0:09:05.600 of how Apple is doing financially. So if you look 0:09:05.640 --> 0:09:08.600 at that ninety day period, I think they did really good. 0:09:09.480 --> 0:09:12.800 China side. That is still a billion dollar annual decline, 0:09:12.920 --> 0:09:15.040 it's a little bit better than they did in the 0:09:15.080 --> 0:09:16.800 first half of the year in China, so you are 0:09:16.840 --> 0:09:20.480 seeing some improvement there. The iPhone did decline about one percent. 0:09:20.880 --> 0:09:23.680 Could have been worse, certainly should have and could have 0:09:23.720 --> 0:09:26.320 been better. The one thing they didn't talk about was 0:09:26.400 --> 0:09:29.600 guidance for the fourth quarter in terms of the iPhone. 0:09:29.640 --> 0:09:31.240 The new iPhone is going to go on sale at 0:09:31.280 --> 0:09:33.440 the tail end of Q four, sometime in the second 0:09:33.480 --> 0:09:36.480 half of September, and they didn't say if the iPhone 0:09:36.520 --> 0:09:40.000 revenue is going to accelerate, decelerate, be in line. So 0:09:40.120 --> 0:09:43.440 that makes me think that it's going to basically be 0:09:43.520 --> 0:09:46.040 stagnant on an annual basis, which of course is not 0:09:46.080 --> 0:09:48.200 the end of the world. But here they are hyping 0:09:48.240 --> 0:09:50.760 Apple intelligence and how this is going to drive iPhone 0:09:50.760 --> 0:09:54.080 sales and a new supercycle and such but I don't 0:09:54.080 --> 0:09:57.200 believe that is going to happen. My other takeaway is 0:09:57.240 --> 0:10:00.920 not much talk about the Vision pro. This just launched internationally. 0:10:01.160 --> 0:10:03.520 This is their first new product category in a decade. 0:10:04.520 --> 0:10:08.800 Way overpriced, It's a cumbersome product. It takes a lot 0:10:08.800 --> 0:10:11.959 of energy to actually use it. I was actually using 0:10:11.960 --> 0:10:14.839 it last night. It was kind of painful, and that's 0:10:14.960 --> 0:10:17.560 something that they need to address. Where is the innovation, 0:10:17.679 --> 0:10:19.960 Where is the future of this company? Because I certainly 0:10:19.960 --> 0:10:22.640 think they're lagging an AI and I certainly think that 0:10:22.720 --> 0:10:25.400 their first take at VR is simply not it. 0:10:25.840 --> 0:10:27.880 Do you think there's a danger that Apple is overly 0:10:27.920 --> 0:10:31.240 optimistic about it's future in China, particularly when you look 0:10:31.280 --> 0:10:34.320 at the competition there, and you also look at the 0:10:34.360 --> 0:10:38.440 fact that Apple Intelligence will not be available in China 0:10:38.480 --> 0:10:41.680 at least immediately. Are they is cook overly optimistic? 0:10:42.960 --> 0:10:46.000 I think that there's what they say publicly and there's 0:10:46.000 --> 0:10:50.000 what they feel in their private time right at the office, 0:10:50.400 --> 0:10:53.040 And I think there is quite a bit big of 0:10:53.080 --> 0:10:53.680 a difference. 0:10:53.920 --> 0:10:54.120 Right. 0:10:54.240 --> 0:10:56.640 I mean, publicly, he's going to say all the right things, 0:10:56.880 --> 0:11:00.160 They're incredibly reliant on China. He needs to say that 0:11:00.200 --> 0:11:03.880 they have a very strong relationship with China. From a 0:11:03.920 --> 0:11:07.520 production standpoint, still, the vast majority of products are produced 0:11:07.520 --> 0:11:12.040 at box Con across the Greater China area. At the 0:11:12.080 --> 0:11:16.160 same time, their actions tell a different story, opening new 0:11:16.160 --> 0:11:19.640 retail stores in Southeast Asia, putting a lot of prominence 0:11:19.640 --> 0:11:24.880 on moving production to Malaysia, Vietnam, and most notably India. Right, 0:11:25.200 --> 0:11:27.440 and so, like I said, there's what they say, and 0:11:27.480 --> 0:11:30.520 there's how they feel. And if you go by their actions, 0:11:30.559 --> 0:11:33.120 we actually know how they feel, which is, you know, 0:11:33.360 --> 0:11:35.480 this China thing could be running into a wall at 0:11:35.480 --> 0:11:35.920 some point. 0:11:36.360 --> 0:11:38.800 Yeah, they talked up Malaysia, and then when I saw that, 0:11:38.880 --> 0:11:41.800 I thought, oh boy, you're talking about Malaysia. That's kind 0:11:41.840 --> 0:11:47.480 of interesting. Small country. Anyway, we talked about overconfidence. The 0:11:47.960 --> 0:11:51.360 market itself seems a bit overconfident on Apple. If you 0:11:51.840 --> 0:11:54.560 look at profit up eight percent in this last quarter, 0:11:54.960 --> 0:11:57.360 it's tough to match that up against a forward pe 0:11:57.440 --> 0:12:00.600 of thirty. It means that there's a lot of hope 0:12:00.600 --> 0:12:03.640 that Apple will sell a lot more phones because of AI. 0:12:03.760 --> 0:12:06.760 So we need to ask you, is AI that great 0:12:06.960 --> 0:12:10.040 in Apple intelligence that people will buy a lot of phones? 0:12:10.520 --> 0:12:14.040 No, no, no, I've been playing with Apple intelligence. The 0:12:14.320 --> 0:12:17.000 initial beta version for developers over the last week or so. 0:12:17.480 --> 0:12:20.080 There's nothing that I'm seeing here that provides a compelling 0:12:20.160 --> 0:12:23.640 reasons to update. And I truly mean that. I think 0:12:23.679 --> 0:12:26.200 if you're going to see AI induced upgrades, that's something 0:12:26.240 --> 0:12:28.560 that's going to happen in the second half of next 0:12:28.640 --> 0:12:31.160 year when you have sort of the full scope of 0:12:31.200 --> 0:12:34.080 those changes. Right based on the earnings call and the 0:12:34.160 --> 0:12:37.000 questions that were being asked by analysts, one, I don't 0:12:37.000 --> 0:12:42.000 believe they understand how and when Apple Intelligence is actually 0:12:42.120 --> 0:12:44.920 rolling out, and I don't believe they've actually used it. 0:12:45.480 --> 0:12:47.000 So maybe if you're going to get on an Apple 0:12:47.040 --> 0:12:50.200 earnings call, you probably want to do that to me. 0:12:51.480 --> 0:12:54.000 You have really nice writing tools, so it can rewrite 0:12:54.080 --> 0:12:57.000 paragraphs and essays for you make things either sound more 0:12:57.000 --> 0:13:01.600 friendly or more professional, So that's new. There's proofreading, which 0:13:01.600 --> 0:13:05.120 we've had in Microsoft Word and Apple Zone iWork pages 0:13:05.160 --> 0:13:09.640 for multiple decades. The best feature of Apple Intelligence is 0:13:09.679 --> 0:13:12.439 being able to record phone calls, whether or not you're 0:13:12.480 --> 0:13:14.760 allowed to do that, and whatever country or state you're 0:13:14.760 --> 0:13:16.800 in as another question, and then at the end it 0:13:16.840 --> 0:13:18.960 can pop out a summary of everything that was discussed. 0:13:19.000 --> 0:13:23.000 So that's pretty nifty. But the other stuff is very 0:13:23.040 --> 0:13:24.839 much par for the course, not a lot of reason 0:13:24.880 --> 0:13:26.160 to buy a new phone if you ask me. 0:13:26.320 --> 0:13:28.440 So, you make an interesting point where you were able 0:13:28.480 --> 0:13:31.880 to access the beta version of Apple Intelligence. I think 0:13:31.920 --> 0:13:34.360 a lot of the other software developers were able to 0:13:34.360 --> 0:13:36.520 get a peek at this too. Talk to us about 0:13:36.559 --> 0:13:40.480 the degree to which Apple is really banking on those 0:13:40.520 --> 0:13:46.920 relationships to drive innovation in Apple Intelligence. It's the app developers, right. 0:13:48.360 --> 0:13:51.560 They are banking heavily on this app ecosystem, in this 0:13:51.640 --> 0:13:55.880 app paradigm, and why wouldn't they. They made twenty four 0:13:55.920 --> 0:13:59.480 billion dollars in the third quarter, mostly due to the 0:13:59.480 --> 0:14:02.680 App Store, and that's the services number. I have to 0:14:02.720 --> 0:14:05.000 tell you, though, I really think the industry is shifting 0:14:05.000 --> 0:14:07.280 away from this app paradigm where you go into an app, 0:14:07.320 --> 0:14:10.120 you launch the app, and I think it's moving way 0:14:10.160 --> 0:14:13.480 more towards deeply integrated AI and cloud, and I think 0:14:13.520 --> 0:14:15.440 over time they're gonna have to move away from this paradigm. 0:14:15.480 --> 0:14:18.960 So they're banking on I think an an an aging idea. 0:14:19.840 --> 0:14:21.840 It's interesting because Tim Cook said it's now in the 0:14:21.840 --> 0:14:24.000 hands of developers, which is true, and he wants to 0:14:24.000 --> 0:14:27.200 see what developers make with it. But in order for 0:14:27.240 --> 0:14:30.880 developers to integrate AI and Apple Intelligence into their applications, 0:14:31.240 --> 0:14:34.440 there have to be frameworks and developer tools available to 0:14:34.480 --> 0:14:37.840 do so, and to date they haven't released any of 0:14:37.840 --> 0:14:39.160 those frameworks as developers. 0:14:39.440 --> 0:14:41.120 All right, Mark, thank you for joining us. 0:14:41.120 --> 0:14:45.520 Mark German and Bloomberg chief correspondent on global technology. 0:14:50.920 --> 0:14:53.160 After the bell, we heard from Amazon and the company 0:14:53.200 --> 0:14:56.360 reported quarterly sales pretty much in line with estimates. However, 0:14:56.960 --> 0:14:59.960 at the same time, Amazon projected profit for the current 0:15:00.160 --> 0:15:03.840 quarter well below estimates. The message seems to be profits 0:15:03.880 --> 0:15:05.680 are going to take a back seat while the company 0:15:05.680 --> 0:15:09.640 spends heavily on artificial intelligence. Let's take a closer look 0:15:09.680 --> 0:15:12.880 now with Bloomberg Spencer Soper. He is our e commerce 0:15:12.960 --> 0:15:15.880 reporter joining us from Seattle. Good of you to join 0:15:15.880 --> 0:15:17.760 a spencer. I'm sure it's been a busy day for you. 0:15:17.840 --> 0:15:22.120 This seems slightly reminiscent of the best Jeff Bezos days 0:15:22.400 --> 0:15:24.800 in the early days, right where you spend at the 0:15:25.200 --> 0:15:27.680 expensive profits. Is that the way you see it? 0:15:29.280 --> 0:15:33.160 Yeah, that's That's pretty much been the constant push and 0:15:33.240 --> 0:15:37.200 pull between Amazon and the investment community. It's just now 0:15:37.200 --> 0:15:41.920 it's happening under Jasse instead of you know, current CEO 0:15:42.000 --> 0:15:46.160 Andy Jassey instead of founder Jeff Bezos, and Jasse made 0:15:46.200 --> 0:15:51.240 the case to investors on the earnings call why he 0:15:51.360 --> 0:15:54.400 thinks this is such a big opportunity and why Amazon 0:15:54.520 --> 0:15:56.760 needs to spend now so that it could meet demand 0:15:57.240 --> 0:16:01.640 down the road. And the CFO even said, look, this 0:16:01.720 --> 0:16:03.760 is a this is a good indicator. You know, it's 0:16:03.800 --> 0:16:06.520 good that we expect our business to grow this much 0:16:06.520 --> 0:16:08.880 and that we're investing in it now. But yeah, there's 0:16:09.040 --> 0:16:12.880 there's still just some skepticism in the investment community about 0:16:13.240 --> 0:16:18.360 all of this artificial intelligence infrastructure investment and when it could. 0:16:18.200 --> 0:16:21.760 Pay off, and to a degree it's already paying off, 0:16:21.800 --> 0:16:24.600 because you did have a beat on AWS, which I 0:16:24.600 --> 0:16:28.240 think a lot of analysts and really focusing on that issue, 0:16:28.440 --> 0:16:32.080 maybe up more than the seventeen and change percent that 0:16:32.200 --> 0:16:35.640 was expected, so you get it up nineteen percent, but 0:16:35.800 --> 0:16:37.040 just that it was overshadowed. 0:16:38.520 --> 0:16:44.960 Yeah, and you have to peel apart aws's performance from 0:16:46.040 --> 0:16:49.240 you know, artificial intelligence investments and future growth and its 0:16:49.280 --> 0:16:52.520 core business of just cloud computing and you know, data 0:16:52.560 --> 0:16:56.000 centers that are accessed by via the Internet, because that's 0:16:56.000 --> 0:16:57.800 still a very big business as well, And what they 0:16:57.840 --> 0:17:00.160 were saying is that you know, folks that had kindkind 0:17:00.160 --> 0:17:03.800 of hit the pause on those migrations, you know, from 0:17:04.040 --> 0:17:08.240 from having their own data centers to to using Amazon 0:17:08.280 --> 0:17:11.920 Web Services data centers, that that folks kind of stepped 0:17:12.080 --> 0:17:14.040 that back up, that their customers were back in an 0:17:14.080 --> 0:17:17.359 investment mode and and doing that after after a pause. 0:17:17.400 --> 0:17:19.560 So that was part of the part of the AWS 0:17:19.680 --> 0:17:21.920 B And then on the miss you have to look 0:17:21.960 --> 0:17:26.359 at some softness and some concerns around the consumer. For 0:17:26.440 --> 0:17:29.920 Amazon's core e commerce business. Let's not forget they make 0:17:30.000 --> 0:17:33.840 most of their money, you know, selling things online, and 0:17:34.520 --> 0:17:40.400 that's uh, that's showing some signs of weakness from the consumer. 0:17:40.440 --> 0:17:43.959 People are trading down, buying cheaper things, and so that 0:17:44.040 --> 0:17:46.480 is affecting their outlook and profitability. 0:17:46.640 --> 0:17:49.240 I go back to Bezos again, one of his great sayings, 0:17:49.359 --> 0:17:52.200 your margin is my opportunity. How are the margins holding 0:17:52.280 --> 0:17:55.159 up for Amazon right now? On the retail side. The 0:17:55.200 --> 0:17:58.360 online retail business that they're. 0:17:58.160 --> 0:18:01.600 Saying is is doing is doing hey, and the danger 0:18:02.359 --> 0:18:05.440 so they're they're making they're they're making improvements in efficiency, 0:18:05.920 --> 0:18:08.720 which is helping the margins. But then when you have 0:18:08.760 --> 0:18:12.000 people trading down and buying cheaper goods. Generally, a cheaper 0:18:12.040 --> 0:18:14.600 product that the same size as a more expensive product 0:18:14.640 --> 0:18:17.360 is still cost the cost the same amount to put 0:18:17.359 --> 0:18:18.840 it in a box and get it to your house, 0:18:19.280 --> 0:18:22.879 you know. So so that's the that's the margin pressure there, 0:18:23.240 --> 0:18:26.639 that's kind of offsetting the progress they're making on on 0:18:26.680 --> 0:18:30.120 improving efficiency. So there there's some push and pull there 0:18:30.320 --> 0:18:32.879 as as well. And I think investors are probably just 0:18:32.880 --> 0:18:37.080 worried that the consumer sentiment that that that could last. 0:18:37.400 --> 0:18:39.919 And Amazon even hinted at that, saying it's it's just 0:18:40.000 --> 0:18:43.560 very difficult to forecast right now, and they mentioned just 0:18:43.600 --> 0:18:46.480 a lot of what they described as distractions with like 0:18:46.640 --> 0:18:50.280 the election in the US and UH and the Summer Olympics. 0:18:50.680 --> 0:18:54.359 On e commerce, a lot of competition from Ali Express 0:18:54.480 --> 0:18:56.600 and some of the other Chinese players like Shean. 0:18:58.760 --> 0:19:02.320 Yeah, you're definitely seeing step the competition, you know, domestically 0:19:02.359 --> 0:19:05.760 from the likes of Walmart, it has a better e 0:19:05.800 --> 0:19:10.200 commerce game and is offering Amazon like subscriptions. And then yeah, 0:19:10.200 --> 0:19:13.320 you're also seeing this factory direct model from companies like 0:19:13.359 --> 0:19:16.720 Timu and she In that's really making inroads because it's 0:19:16.720 --> 0:19:20.280 a it can be a quite staggering price difference. If 0:19:20.320 --> 0:19:22.680 you find just some kind of generic product on Amazon 0:19:23.000 --> 0:19:26.080 and then cross reference and find the same thing on Timu, 0:19:26.160 --> 0:19:27.840 you might you might wait a few more days to 0:19:27.840 --> 0:19:30.040 get it, but you can save a lot of money. 0:19:30.040 --> 0:19:32.280 I mean, the difference can be like fifty seventy five 0:19:32.359 --> 0:19:33.840 percent in price. 0:19:34.119 --> 0:19:36.000 Hey, Spencer, thank you so much for making time to 0:19:36.080 --> 0:19:38.919 chat with us about Amazon. Spencer Sober there Bloomberg e 0:19:39.080 --> 0:19:43.560 commerce reporter joining us from Seattle here on Daybreak Asia. 0:19:48.920 --> 0:19:49.040 Well. 0:19:49.119 --> 0:19:51.760 Joining us now on the program is Mark Matthews, head 0:19:51.760 --> 0:19:56.600 of Asia Research at Julius Bear to talk about markets, Mark, 0:19:57.119 --> 0:19:59.040 the markets are pretty jittery here. 0:19:58.920 --> 0:19:59.520 At the moment. 0:19:59.840 --> 0:20:03.080 More we've seen some pretty big sell offs on stocks. 0:20:03.119 --> 0:20:06.560 You see that as tied to valuation more or to 0:20:06.800 --> 0:20:10.280 maybe now fears that growth is slowing, not only in 0:20:10.320 --> 0:20:11.440 the US but elsewhere. 0:20:12.440 --> 0:20:15.120 Brian, I think it's very much the first one, and 0:20:15.160 --> 0:20:19.639 it's very much concentrated in the technology sector, and a 0:20:19.680 --> 0:20:23.919 big story has emerged around the investments that big technology 0:20:23.920 --> 0:20:26.840 companies are making to get ready for the new AI world. 0:20:27.600 --> 0:20:29.720 And I think they're kind of darned if they do 0:20:29.760 --> 0:20:32.080 and darned if they don't, because On the one hand, 0:20:32.800 --> 0:20:35.520 if they don't make these investments in AI, they'll be 0:20:35.880 --> 0:20:39.359 seen as failing to innovate and on their way to 0:20:39.400 --> 0:20:42.800 becoming like a Kodak or a Blockbuster. On the other hand, 0:20:42.800 --> 0:20:45.000 if they do make these big investments, then they'll be 0:20:45.080 --> 0:20:48.359 seen as putting capital at risk for something that's a 0:20:48.359 --> 0:20:52.919 big unknown, and that I think is what's causing the volatility. 0:20:52.920 --> 0:20:56.000 If you exclude technology, the rest of the market, in 0:20:56.040 --> 0:20:57.280 my mind, is pretty solid. 0:20:57.640 --> 0:21:00.199 Yeah, it held up remarkably well, and I'm wondering if 0:21:00.280 --> 0:21:03.000 this narrative having to do with the FED being behind 0:21:03.080 --> 0:21:06.360 the curve potentially is a little overblown. Would you say 0:21:06.359 --> 0:21:07.080 that's possible. 0:21:07.920 --> 0:21:08.359 I would. 0:21:08.400 --> 0:21:10.360 I mean, the first thing I would say is there 0:21:10.400 --> 0:21:14.520 are many recessions that were forecasts that never happened, But 0:21:14.560 --> 0:21:18.040 there were equally as many recessions that did have forecast 0:21:18.200 --> 0:21:22.360 did happen. They weren't forecasts, So we're notoriously bad at 0:21:22.359 --> 0:21:26.399 predicting recessions. But to the best of my ability, I 0:21:26.400 --> 0:21:29.719 don't see one on the horizon. We're looking at GDP 0:21:29.840 --> 0:21:32.639 growth above two percent in the US next year. I 0:21:32.680 --> 0:21:36.920 know there was a lot of noise around that ism 0:21:37.040 --> 0:21:40.720 manufacturing PMI number for July that came out last night 0:21:40.760 --> 0:21:43.720 at forty six point eight. But I just point out 0:21:43.760 --> 0:21:46.800 that number was around forty six all of last year. 0:21:47.040 --> 0:21:50.960 We didn't have a recession this year. Manufacturing has not 0:21:51.080 --> 0:21:53.480 been the driver of the economy for the last few years. 0:21:54.000 --> 0:21:57.359 It's less than ten percent of GDP, eight percent of employment. 0:21:59.359 --> 0:22:02.480 From what I can see, the economy is still strong. 0:22:03.920 --> 0:22:06.440 Yeah, and that's what we heard from the Fed chief yesterday. 0:22:06.840 --> 0:22:09.960 He was actually quite strident in talking about how growth 0:22:10.080 --> 0:22:13.800 was pretty solid. I'm imagining that you're somebody who really 0:22:13.880 --> 0:22:17.360 likes the breadth that we've seen of late in markets. 0:22:17.920 --> 0:22:20.520