WEBVTT - Oracle Slides by Most Since January on Mounting AI Spending 0:00:02.720 --> 0:00:10.559 Bloomberg Audio Studios, podcasts, radio news. You're listening to the 0:00:10.600 --> 0:00:14.560 Bloomberg Intelligence podcast. Catch us live weekdays at ten am 0:00:14.600 --> 0:00:17.880 Eastern on Apple, Cocklay and Android Auto with the Bloomberg 0:00:17.920 --> 0:00:21.040 Business app. Listen on demand wherever you get your podcasts, 0:00:21.360 --> 0:00:23.080 or watch us live on YouTube. 0:00:23.880 --> 0:00:26.960 Oracle taking it on the chin today. You know, they 0:00:27.000 --> 0:00:29.160 put us a big revenue numbers. I thought, I mean 0:00:29.200 --> 0:00:32.400 thirty percent here, sixty percent here, but not enough for 0:00:32.600 --> 0:00:34.720 the street. And same time with Jack up your capex, 0:00:34.760 --> 0:00:36.800 and I think the street gets a little bit nervous 0:00:36.800 --> 0:00:38.720 about that. So this dock is trading down pretty big. 0:00:38.960 --> 0:00:42.600 Second with anarag Rana, he covers all the technology spased 0:00:42.600 --> 0:00:45.640 in your technis for Bloomberg Intelligence. So on our why 0:00:45.680 --> 0:00:48.919 do you think Oracle's selling offs so much today? 0:00:50.600 --> 0:00:52.360 So there are a few things to keep in mind. 0:00:52.479 --> 0:00:55.480 You know, the number one thing is cloud infrastructure growth. 0:00:55.800 --> 0:00:59.080 Consensus was sixty nine percent, decame at sixty six. I 0:00:59.160 --> 0:01:02.600 know it's a very big number. However, in the cloud world, 0:01:02.760 --> 0:01:05.800 missing by even one percentage point is not good. So 0:01:05.800 --> 0:01:08.000 that's first thing. But you know, there's a very logical 0:01:08.040 --> 0:01:10.280 reason about it. Everybody can see the backlock, so it's 0:01:10.319 --> 0:01:12.560 not as if they don't have a business there, but 0:01:12.680 --> 0:01:15.440 converting that backlog into sales is an issue. Everybody knows 0:01:15.440 --> 0:01:18.000 that there is a capacity constraints out there, whether it's 0:01:18.120 --> 0:01:20.920 data center, whether it's networking, et cetera. Power is a 0:01:20.959 --> 0:01:23.440 very big issue, for example. So that's one area of it. 0:01:23.520 --> 0:01:25.480 But although I would say the management did not harp 0:01:25.520 --> 0:01:27.759 on it as much as we would wanted them to be, 0:01:28.000 --> 0:01:32.039 that to explain why the growth can improve going forward. 0:01:32.080 --> 0:01:34.720 So that's one factor. But I think the biggest question 0:01:34.840 --> 0:01:37.640 is something that we had discussed earlier. Also is everybody 0:01:37.680 --> 0:01:39.920 is questioning that out of their big backlock, which is 0:01:39.959 --> 0:01:43.000 over five hundred billion right now, three hundred plus billion 0:01:43.040 --> 0:01:46.000 of that comes from open ai. Now open ai currently 0:01:46.200 --> 0:01:49.360 or the order book is from open Ai. By the 0:01:49.480 --> 0:01:51.880 end of this year, open ai will have a revenue 0:01:51.920 --> 0:01:54.840 round it off about twenty billion. So everybody is saying that, okay, 0:01:54.960 --> 0:01:57.400 well tell me, if you have revenue of twenty billion, 0:01:58.080 --> 0:01:59.760 how are you going to spend three hundred billion just 0:01:59.800 --> 0:02:02.440 with Oracle. So there's a big question mark. But then 0:02:02.440 --> 0:02:04.640 your question is, well, why didn't this happened when they 0:02:04.640 --> 0:02:07.680 first announced it? Well, their bottle was at the top 0:02:07.720 --> 0:02:10.440 at that point, and right now Google's Gemini has caught up, 0:02:10.480 --> 0:02:13.760 so people don't know what will Openaize future look like 0:02:13.840 --> 0:02:16.040 two years from now, three years from now, and so forth. 0:02:16.200 --> 0:02:19.320 So there are multiple factors that are going into this equation. 0:02:19.840 --> 0:02:22.720 And not to mention something, you just remarked that capex 0:02:22.800 --> 0:02:25.519 is going to go up by fifteen billion, So thirty 0:02:25.520 --> 0:02:29.000 five billion going to fifty billion. So it's a big, big, 0:02:29.440 --> 0:02:32.880 you know, change across four or five different vectors that 0:02:32.919 --> 0:02:34.280 are having an impact on the stock. 0:02:34.919 --> 0:02:38.160 So the cloud strategy of Oracle continues to evolve. What 0:02:38.280 --> 0:02:40.840 is the next major inflection point for you when you 0:02:40.880 --> 0:02:46.840 see these cloud companies really move towards more AI driven efforts. 0:02:47.720 --> 0:02:49.600 So the big thing is that five hundred billion a 0:02:49.639 --> 0:02:52.720 backlock needs to bleed into revenue. For that, they need 0:02:52.760 --> 0:02:55.800 to open new data center. But even to open new 0:02:55.880 --> 0:02:58.840 data center, they need more cash. So the big catalyst 0:02:58.919 --> 0:03:01.680 for them is they need go out. Most likely they 0:03:01.720 --> 0:03:04.560 need to create a special purpose vehicle where they can 0:03:04.800 --> 0:03:08.520 raise funds with the help of private equity investors, private 0:03:08.600 --> 0:03:12.000 credit and basically you know, keep that off Oracles balance 0:03:12.040 --> 0:03:15.880 sheet and that will help pacify the fears that they 0:03:15.919 --> 0:03:18.760 actually have the way, a way to finance this big 0:03:18.880 --> 0:03:19.760 order book that they have. 0:03:21.200 --> 0:03:23.560 All right, look, well you mentioned open Ai. Can you 0:03:23.639 --> 0:03:26.400 refresh my memory? Because I have no idea where do 0:03:26.440 --> 0:03:28.960 they get their money that they like? Where are they 0:03:28.960 --> 0:03:31.360 getting the money? I don't do all this stuff. 0:03:32.040 --> 0:03:34.679 So the single biggest is the consumer app right now, 0:03:34.800 --> 0:03:37.120 That's where most of the money is coming in because 0:03:37.360 --> 0:03:39.280 you know, if you want the best model, you're going 0:03:39.320 --> 0:03:41.080 to pay twenty dollars a month. I mean, you can 0:03:41.080 --> 0:03:43.480 get the free version of it. But that's one area. 0:03:43.520 --> 0:03:45.800 They have over nine hundred million users right now, but 0:03:45.880 --> 0:03:47.960 only a small portion of them are paying customers. So 0:03:48.000 --> 0:03:51.480 that's one. Second is if you as a company, let's 0:03:51.480 --> 0:03:54.560 say you're you know, let's call a hypothetical bank, and 0:03:54.600 --> 0:03:58.080 you're creating a chat pot which needs intelligence or a 0:03:58.160 --> 0:04:01.760 large language model, You're going to use APIs from open Ai, 0:04:02.280 --> 0:04:06.080 and that gets embedded intelligence into whatever system that you're creating, 0:04:06.280 --> 0:04:09.680 your chatboard that becomes smarter. They get paid from that. 0:04:09.960 --> 0:04:12.440 So those are the two I think big elements or 0:04:12.480 --> 0:04:15.760 the big sources of revenue for them. And there is 0:04:15.800 --> 0:04:20.039 a huge you could say, looking ahead, all the enterprises 0:04:20.080 --> 0:04:23.480 around the world will have some intelligence into their core applications, 0:04:23.720 --> 0:04:26.280 and they're going to use model from somebody, whether it's Google, 0:04:26.520 --> 0:04:28.520 whether it's Anthropic, whether it's open AI. 0:04:29.000 --> 0:04:31.239 How are you thinking of the leadership in this company? 0:04:31.279 --> 0:04:34.440 How will the company's direction be affected down the line. 0:04:35.520 --> 0:04:37.760 I think they really need to talk a little bit 0:04:37.760 --> 0:04:41.280 about their expansion plans. I think this concept of you know, 0:04:41.320 --> 0:04:43.440 he went out and talked about I'm going to spend 0:04:43.480 --> 0:04:45.960 a trillion dollars in data centers. Then he went to 0:04:46.000 --> 0:04:48.000 the government and say, well, is there a backstop to 0:04:48.040 --> 0:04:51.720 this needs a little bit more clear on its expansion strategy, 0:04:51.880 --> 0:04:53.320 because if he goes out and say, you know what, 0:04:54.000 --> 0:04:56.200 I don't, I'm not spending a trillion dollars maybe one 0:04:56.240 --> 0:04:58.240 hundred two hundred million or so. I think they needs 0:04:58.279 --> 0:05:00.480 to tone down that rhetoric a little bit. But I 0:05:00.480 --> 0:05:03.359 mean otherwise or he has to show a lot of 0:05:03.400 --> 0:05:06.479 revenue growth over the next one years to one year 0:05:06.560 --> 0:05:10.039 to pacify this particular uncertainty that has cropped up. 0:05:10.120 --> 0:05:12.800 Right now and around thirty seconds left, this is Oracle 0:05:12.839 --> 0:05:14.480 News kind of highlight the risk of some of these 0:05:14.520 --> 0:05:15.719 circular deals. 0:05:17.320 --> 0:05:19.800 See, I think it's not so much the circular deal 0:05:19.839 --> 0:05:22.400 when it comes to the entire space. But there is 0:05:22.440 --> 0:05:26.640 a question mark between what Opening is doing along with 0:05:26.839 --> 0:05:30.479 Oracle and an Nvidia. So it's this three people for 0:05:30.640 --> 0:05:33.640 this particular aspect of it that people are questioning whether 0:05:33.800 --> 0:05:36.800 this is going to lead any issues. Whether it's Microsoft 0:05:36.800 --> 0:05:39.480 and AWS and Google. I'm not concerned about those three. 0:05:40.040 --> 0:05:43.160 Stay with us. More from Bloomberg Intelligence coming up after this. 0:05:46.760 --> 0:05:50.440 You're listening to the Bloomberg Intelligence Podcast. Catch us live 0:05:50.520 --> 0:05:53.919 weekdays at ten am Eastern on Applecarplay and Android Auto 0:05:54.000 --> 0:05:57.080 with the Bloomberg Business App. Listen on demand wherever you 0:05:57.120 --> 0:06:00.520 get your podcasts, or watch us live on YouTube. 0:06:00.920 --> 0:06:03.200 Isabelle sitting in for Scarlet Fu and Paul Sweeney Life 0:06:03.200 --> 0:06:06.600 here on our Bloomberg Interactive Brokers Studio streaming live on YouTube. 0:06:07.120 --> 0:06:09.159 We're still waiting to see what's going to happen. 0:06:09.040 --> 0:06:11.279 With Warner Brothers Discovery. We're talking about a ninety billion 0:06:11.320 --> 0:06:14.200 dollar enterprise value m and a trade going to hit 0:06:14.200 --> 0:06:17.000 the tape. But we've got two suitors out there, and 0:06:17.080 --> 0:06:18.520 I'm not sure what the sello wants to do. 0:06:18.600 --> 0:06:18.760 Here. 0:06:18.960 --> 0:06:21.000 Ethan Roung and Nathan joints that she's a US media 0:06:21.000 --> 0:06:24.360 analyst for Bloomberg Intelligence. I guess the only new thing 0:06:24.440 --> 0:06:27.520 I saw was President Donald Trump kind of weighing in here, 0:06:27.520 --> 0:06:29.719 and he says, hey, whoever buys this thing, you got 0:06:29.720 --> 0:06:31.599 to sell CNN or something like that. 0:06:33.080 --> 0:06:33.760 What do you make of that? 0:06:33.800 --> 0:06:36.359 I mean, CNN is like not even really relevant to 0:06:36.360 --> 0:06:38.919 the entire company, is it not? 0:06:39.120 --> 0:06:43.880 Really? But I think obviously Donald Trump has a huge 0:06:43.960 --> 0:06:49.800 history with CNN, has despised the network always, so you know, 0:06:49.880 --> 0:06:51.800 naturally he's kind of laying down this condition. But what 0:06:51.839 --> 0:06:55.279 we think is it obviously complicates the deal a little 0:06:55.279 --> 0:06:58.960 bit for Netflix. Remember Netflix is only buying the streaming 0:06:59.000 --> 0:07:02.760 and studio portion of Warner Brothers Discovery, So obviously if 0:07:02.800 --> 0:07:05.520 they are going to go with Netflix, you know, the 0:07:05.680 --> 0:07:10.000 WBD team will have to find some way of offloading CNN, 0:07:10.000 --> 0:07:12.320 which I'm not so sure how it's going to do that. 0:07:12.400 --> 0:07:16.440 It obviously complicates the process with Paramount. That's not going 0:07:16.480 --> 0:07:19.080 to be a problem because Paramount is buying the whole 0:07:19.160 --> 0:07:22.840 company that includes the studio, the streaming platform, as well 0:07:22.880 --> 0:07:24.480 as the TV network's business. 0:07:26.160 --> 0:07:28.800 Talk to us why this deal is so polarizing. To 0:07:28.880 --> 0:07:31.840 Paul's point, the President made a comment. Actress Jane Fonda 0:07:32.120 --> 0:07:37.440 spoke out against a Netflix deal. Y. Both policymakers from 0:07:37.480 --> 0:07:42.840 both aisles are also making comments. We will discuss that 0:07:42.880 --> 0:07:45.720 comment later. I'm also interested, But Giza, why is it 0:07:45.800 --> 0:07:46.560 so divisive? 0:07:48.280 --> 0:07:52.680 It is divisive because this really will change or reshape 0:07:52.760 --> 0:07:56.320 the whole media landscape. Isabelle, So, I think majority of 0:07:56.400 --> 0:08:00.880 the content community, you know, writers, actors, talent, they're really 0:08:00.920 --> 0:08:04.400 worried that if Netflix gets a hold of Warner Brothers 0:08:04.480 --> 0:08:08.280 Discovery Studio, it kind of totally changes things, right, It 0:08:08.320 --> 0:08:11.600 could potentially disrupt the theatrical model as we know it. 0:08:12.640 --> 0:08:16.040 You know, all of the legacy media revenue streams are 0:08:16.160 --> 0:08:21.120 at risk. It could potentially reduce output. Licensing from one 0:08:21.160 --> 0:08:24.400 of the studios could be completely folded into Netflix's operation. 0:08:24.760 --> 0:08:28.080 So there are obviously a lot of very many different risks, 0:08:28.520 --> 0:08:32.680 very tangible risks that you know, could materialize in case 0:08:33.280 --> 0:08:36.719 Netflix goes after or they're already after, in case they 0:08:36.760 --> 0:08:40.360 win the Warner Brothers Studio asset. Now with paramount, I 0:08:40.400 --> 0:08:43.520 think people generally see that more of a status quore, 0:08:43.640 --> 0:08:46.040 just a continuation there. You know, they've obviously committed to 0:08:46.160 --> 0:08:49.760 keeping the studio. We know David Ellison loves movies. He's 0:08:49.760 --> 0:08:52.440 made a huge commitment to increase theatrical output. So I 0:08:52.440 --> 0:08:55.240 don't think people necessarily view that deal as that much 0:08:55.400 --> 0:09:00.680 more disruptive than the Netflix deal. The other political you 0:09:00.679 --> 0:09:04.160 know issue there is obviously with CNN again, that's definitely 0:09:04.280 --> 0:09:09.400 very polarizing considering you know, it's it's always kind of 0:09:09.440 --> 0:09:13.480 been a little bit of an anti Trump kind of platform. Again, 0:09:13.640 --> 0:09:17.559 everybody has a view on this deal from many different angles. 0:09:17.559 --> 0:09:18.760 I would say it's about. 0:09:18.679 --> 0:09:20.839 Hey, Keith, I've been reading some of the research from 0:09:20.840 --> 0:09:23.679 your colleague Stephen Flynn is a credit analyst for Bloomberg 0:09:23.679 --> 0:09:26.040 Intelligence looking at the media companies from the credit perspective. 0:09:26.640 --> 0:09:29.400 Man if Paramount Wincessing, they're going to have a lot 0:09:29.440 --> 0:09:31.840 of debt on their balance sheet, like a lot is 0:09:32.440 --> 0:09:34.640 the equity folks, are they concerned about that? 0:09:36.320 --> 0:09:39.600 So the way that Paramount has really framed this whole argument, 0:09:39.600 --> 0:09:42.520 Paul is they're talking about a lot of synergies. Okay, 0:09:42.520 --> 0:09:45.240 so they're talking about sixteen billion dollars in EBITDA. So 0:09:45.280 --> 0:09:48.160 remember next year, paramounts Guida and standalone is going to 0:09:48.200 --> 0:09:50.440 generate about three to three and a half billion dollars 0:09:50.480 --> 0:09:54.600 in IBADA. If they do succeed in getting oneer Brothers Discovery, 0:09:54.679 --> 0:09:58.040 they are promising about sixteen billion dollars in EBITDA, so 0:09:58.080 --> 0:10:01.840 we're we're talking almost, you know, taking this fivefold, which 0:10:01.880 --> 0:10:04.520 is why this DAL is so transformative. So yes, they 0:10:04.559 --> 0:10:07.400 might have about eighty to ninety billion dollars in debt, 0:10:07.480 --> 0:10:10.400 but their whole argument is that we can support it 0:10:10.520 --> 0:10:13.839 just kind of given the amount of EBITDAD that we're 0:10:13.880 --> 0:10:16.520 going to be generating free cash flow generator conversion from 0:10:16.520 --> 0:10:19.280 ibadah is going to also be robust, So that's their 0:10:19.320 --> 0:10:21.720 whole argument. Of course, I'm not so sure the street 0:10:21.760 --> 0:10:25.640 is necessarily convinced because those synergy targets could be pretty aggressive. 0:10:26.040 --> 0:10:29.120 Stay with us. More from Bloomberg Intelligence coming up after this. 0:10:33.080 --> 0:10:36.800 You're listening to the Bloomberg Intelligence podcast. Catch us live 0:10:36.880 --> 0:10:39.920 weekdays at ten am Eastern on Apple, Cocklay and Android 0:10:39.960 --> 0:10:43.280 Auto with the Bloomberg Business app. Listen on demand wherever 0:10:43.320 --> 0:10:46.440 you get your podcasts, or watch us live on YouTube. 0:10:47.320 --> 0:10:49.640 One of the stock story's been following today's Eli Lilly 0:10:50.120 --> 0:10:53.480 some Morgan news on some of their obesity work there. 0:10:53.559 --> 0:10:56.400 The stocks up three point four percent today of thirty 0:10:56.440 --> 0:10:57.439 three percent year to date. 0:10:57.480 --> 0:10:57.800 I forgot. 0:10:57.880 --> 0:11:01.079 This thing's got a monster market caply nine hundred and 0:11:01.160 --> 0:11:04.760 seventy billion dollar market kept, so just extraordinary. There a 0:11:04.760 --> 0:11:05.240 big winner. 0:11:05.400 --> 0:11:08.200 Madison Muller, she is Bloomberg News reporter. 0:11:08.320 --> 0:11:11.319 She's been following this space, Madison joints us here in 0:11:11.360 --> 0:11:13.160 our studio, Madison, what's going on with Lily? Here? They 0:11:13.200 --> 0:11:14.479 got some more good news today. 0:11:14.440 --> 0:11:16.240 More good news for Lily. That's sort of been the 0:11:16.240 --> 0:11:18.640 theme of the last year. I mean, Lily has really 0:11:18.760 --> 0:11:22.200 surpassed its rival Novo Nordisk in terms of developing these 0:11:22.280 --> 0:11:25.480 next generation weight loss drugs that can be potentially easier 0:11:25.520 --> 0:11:29.240 to take, easier to manufacture, elicit more weight loss than 0:11:29.320 --> 0:11:31.600 Wigovi and Zepbound, which are the shots that are currently 0:11:31.640 --> 0:11:34.079 on the market. And so Lily has a shot or 0:11:34.160 --> 0:11:36.880 a pill potentially coming next year. And then this shot 0:11:37.040 --> 0:11:39.760 read a true Tide, which is a triple agonist. It 0:11:39.920 --> 0:11:43.160 relies on three different hormones rather than just two or 0:11:43.200 --> 0:11:45.840 one like GLP ones that we all know so well, 0:11:46.400 --> 0:11:49.560 and so great results this morning for them, up to 0:11:49.720 --> 0:11:52.360 twenty three percent weight loss in a study, which is 0:11:52.679 --> 0:11:54.960 the most of really any of the shots that we've 0:11:54.960 --> 0:11:55.520 seen yet. 0:11:55.600 --> 0:11:59.120 I'm doing the math here twenty three. Wow, you make 0:11:59.200 --> 0:12:00.000 John skinny again? 0:12:00.520 --> 0:12:02.800 Yes, exactly right, I gues it's like it's a quarter 0:12:02.840 --> 0:12:04.200 of someone's body weight almost. 0:12:04.200 --> 0:12:05.320 It's pretty incredible. 0:12:05.520 --> 0:12:08.480 Just give me unintended consequences there. I just feel like it. 0:12:08.520 --> 0:12:10.120 I don't know it does. 0:12:10.480 --> 0:12:13.840 In Madison story, it's said that participants on the highest 0:12:13.880 --> 0:12:16.480 dose experience of more than sixty two percent reduction in 0:12:16.559 --> 0:12:18.840 knee pain. And I feel like when people think of weight, 0:12:19.080 --> 0:12:22.439 most of them associated with vanity or just looks, but 0:12:22.600 --> 0:12:27.120 for others it could really mean health changes and lifestyle improvements, and. 0:12:27.040 --> 0:12:29.040 Totally that's a really important part of this. 0:12:29.120 --> 0:12:29.760 And the market. 0:12:29.800 --> 0:12:31.839 In your story, also you say that it's expected to 0:12:31.920 --> 0:12:34.520 hit one hundred billion dollars by twenty thirty. 0:12:34.360 --> 0:12:36.440 Right, And a lot of that is exactly what you 0:12:36.480 --> 0:12:39.120 were saying, that this is more than just I mean, 0:12:39.120 --> 0:12:40.880 for some people, they are going out there and looking 0:12:41.040 --> 0:12:43.160 to lose a couple of hoss. But in terms of 0:12:43.240 --> 0:12:46.000 you know, reasons for why insurers should cover these drugs 0:12:46.000 --> 0:12:48.560 and reasons why these drugs are expected to be such 0:12:48.559 --> 0:12:51.120 a big market is because they are helping people with other, 0:12:51.640 --> 0:12:54.520 you know, important health issues like heart disease, knee pain. 0:12:55.040 --> 0:12:58.480 Lily's studying this drug in liver disease or kidney disease 0:12:58.559 --> 0:13:01.160 and heart disease and all of these things that are 0:13:01.200 --> 0:13:03.880 linked to weight loss. But there is also potentially some 0:13:04.000 --> 0:13:07.559 weight loss independent reduction of inflammation and things like that. 0:13:07.640 --> 0:13:10.800 So these drugs are working in pretty incredible ways. They're 0:13:10.800 --> 0:13:13.920 also setting them now in addiction and things like alcohol 0:13:14.040 --> 0:13:17.080 use disorder. So there's just so much here, and that 0:13:17.200 --> 0:13:18.480 is a really important piece of this. 0:13:19.040 --> 0:13:21.920 So I guess the end all be off for these 0:13:21.920 --> 0:13:26.400 pharmaceutical companies asn't relate to this particular area. Is I 0:13:26.440 --> 0:13:28.679 guess to get it into a form that more people 0:13:28.720 --> 0:13:33.679 can use ipill, maybe reduce side effects, but most importantly 0:13:33.920 --> 0:13:37.040 at an affordable cost. Is there an expectation that those 0:13:37.080 --> 0:13:38.959 three things can happen at some point over the next 0:13:39.040 --> 0:13:39.600 several years. 0:13:39.679 --> 0:13:41.840 Yeah, and I mean they are starting to happen. That's 0:13:41.840 --> 0:13:44.400 one of the things that Trump administration actually struck a 0:13:44.400 --> 0:13:47.120 deal with Novo and Lily to lower the cost of 0:13:47.160 --> 0:13:51.240 some of these medications beginning next year. There's also efforts 0:13:51.280 --> 0:13:54.640 from the pharmaceutical companies themselves to lower the direct to 0:13:54.640 --> 0:13:57.800 consumer cash pay prices so that people who don't have 0:13:57.880 --> 0:14:00.000 insurance coverage for these drugs, which is still a lot 0:14:00.160 --> 0:14:03.720 of people can get them metamore affordable price. So that's 0:14:03.720 --> 0:14:06.200 brought down the costs from over one thousand dollars a 0:14:06.240 --> 0:14:09.280 month to more like two hundred three hundred dollars a month, 0:14:09.559 --> 0:14:11.680 and so there are some of those efforts. Part of 0:14:11.679 --> 0:14:14.800 the Trump administration deal was also that the lowest dose 0:14:14.840 --> 0:14:17.000 of the pills, which are expected to start rolling out 0:14:17.000 --> 0:14:20.080 within the next couple of months next year, they'll start 0:14:20.080 --> 0:14:21.960 at one hundred and fifty dollars a month. So that's 0:14:22.000 --> 0:14:25.600 also pretty steep reduction from where the prices are at currently. 0:14:26.080 --> 0:14:29.400 We see investors really cheer this move today. But how 0:14:29.480 --> 0:14:31.920 high are the stakes is if they fail? Because it's 0:14:31.960 --> 0:14:35.400 experimental and I'm not the expert on this, but it's still. 0:14:35.200 --> 0:14:37.800 Experimental exactly, and the stakes are high. 0:14:37.840 --> 0:14:40.400 And we've seen because the drugs that are currently on 0:14:40.440 --> 0:14:42.920 the market with Goovi and Zebound are so good and 0:14:42.960 --> 0:14:46.240 they work so well, that the stakes for developing next 0:14:46.280 --> 0:14:49.080 generation drugs are higher. I mean, you have to get 0:14:49.200 --> 0:14:51.040 more weight loss than the drugs that are currently on 0:14:51.080 --> 0:14:53.880 the market. And at the same time, the safety risks 0:14:53.920 --> 0:14:56.600 are really real. We don't want drugs that are going 0:14:56.640 --> 0:14:58.800 to give someone even more health problems. I mean, of 0:14:58.800 --> 0:15:01.840 course always, but the sort of risk benefit analysis with 0:15:01.880 --> 0:15:04.840 weight loss drugs are different, and that's one of the 0:15:04.880 --> 0:15:06.600 things that we begin to see too with some of 0:15:06.640 --> 0:15:10.480 these next generation compounds. Amjin, for example, has a drug 0:15:10.520 --> 0:15:12.760 that had really high rates of side effects. It's supposed 0:15:12.760 --> 0:15:15.880 to be a once monthly drug, but investors haven't loved 0:15:15.920 --> 0:15:18.040 that one because of the high rates of side effects. 0:15:18.760 --> 0:15:21.680 In Lily's trial today, there were pretty high rates of 0:15:21.720 --> 0:15:24.560 side effects as well. People were having some weird like 0:15:24.760 --> 0:15:29.240 nerve pain tingling sensations and then the classic nausea, vomiting, 0:15:29.600 --> 0:15:32.120 constipation that are seene with these drugs, and so that's 0:15:32.120 --> 0:15:34.160 a really important piece to watch as well. 0:15:34.360 --> 0:15:37.080 Thirty seconds and asking for a friend hair loss drugs 0:15:37.080 --> 0:15:38.520 once that that's gonna be the next week. 0:15:38.960 --> 0:15:41.520 I mean, they're kind of starting to be out there already. 0:15:41.520 --> 0:15:44.160 A lot of these companies too, like Hymns and Hers 0:15:44.200 --> 0:15:46.680 and a lot of these telehealth companies are really going 0:15:46.720 --> 0:15:48.080 hard on the hair loss drugs. 0:15:48.600 --> 0:15:49.160 Wow. 0:15:49.520 --> 0:15:51.040 I mean I went to like had at dinner with 0:15:51.040 --> 0:15:53.160 some of my high school buddies recently. It was grim. 0:15:53.640 --> 0:15:55.840 It was grim. I mean, I'm just laying it out there. 0:15:56.000 --> 0:15:58.640 They can go to Turkey, yes, or the hair loss 0:15:58.720 --> 0:16:02.000 drugs they are gender neutral. Is that the right fra? 0:16:02.560 --> 0:16:02.760 Yeah? 0:16:02.840 --> 0:16:03.360 Yeah, yeah. 0:16:03.360 --> 0:16:05.320 And there are some I mean Hymns and Hers has 0:16:05.360 --> 0:16:08.680 some products that they've developed specifically for women and they 0:16:08.720 --> 0:16:12.480 have different formulations like shampoo, whatever. So people are, you know, 0:16:12.720 --> 0:16:15.000 more comfortable with different products. 0:16:15.680 --> 0:16:18.840 Stay with us. More from Bloomberg Intelligence coming up after this. 0:16:22.720 --> 0:16:26.440 You're listening to the Bloomberg Intelligence podcast. Catch us live 0:16:26.520 --> 0:16:29.600 weekdays at ten am Eastern on Apple, Cocklay and Android 0:16:29.640 --> 0:16:32.920 Auto with the Bloomberg Business app. Listen on demand wherever 0:16:33.000 --> 0:16:36.080 you get your podcasts, or watch us live on YouTube. 0:16:36.880 --> 0:16:37.560 Let's take a look. 0:16:37.720 --> 0:16:39.920 One of the questions that I think the FED has, 0:16:40.000 --> 0:16:43.800 I think investors have is how's the US consumer doing 0:16:43.800 --> 0:16:44.080 out there? 0:16:44.080 --> 0:16:45.600 And there's a lot of ways we try to get 0:16:45.640 --> 0:16:46.000 to that. 0:16:46.440 --> 0:16:48.760 We talked to Michael Halean he covers all the restaurants 0:16:48.800 --> 0:16:52.080 for Bloomberg Intelligence to talk to analysts who cover different 0:16:52.080 --> 0:16:55.320 parts of the economy and see how their companies are 0:16:55.440 --> 0:16:57.200 kind of talking about the consumer. One of the folks 0:16:57.200 --> 0:17:00.280 we like to talk to is Lindsay, Dutch consumer Hardlinei's 0:17:00.360 --> 0:17:03.720 senior analysts for Bloomberg Intelligence think, you know, I think 0:17:03.760 --> 0:17:06.560 companies like Best Buy, Dixboarding Goods, that kind of thing, 0:17:07.160 --> 0:17:10.360 the hard lines, lindsay, talk to us about how your 0:17:10.400 --> 0:17:14.160 stocks performed in twenty twenty five and what's the expectation 0:17:14.200 --> 0:17:16.520 for twenty twenty six for some of those hardline rekillers. 0:17:17.680 --> 0:17:20.879 Hi, Paul, thanks for having me. I think if you 0:17:20.960 --> 0:17:23.439 look at, you know, the guidance for the rest of 0:17:23.480 --> 0:17:25.880 the year, I think a lot of these big hardline 0:17:25.880 --> 0:17:29.040 companies are baking in a lot of uncertainty with the consumer. 0:17:29.440 --> 0:17:32.000 But the reality is that if we look back, you know, 0:17:32.520 --> 0:17:35.919 to performance to date and results to date, results have 0:17:36.160 --> 0:17:39.520 you know, largely been better than expected. And and a 0:17:39.520 --> 0:17:43.080 lot of these retailers are sort of tracking to the 0:17:43.160 --> 0:17:45.960 upper half of their guidance range for the year because 0:17:46.000 --> 0:17:49.080 that consumer has stayed pretty pretty resilient. You know, we 0:17:49.119 --> 0:17:52.000 see strength you know, continuing to come from that higher 0:17:52.000 --> 0:17:55.040 income consumer, while the lower income might be you know, 0:17:55.080 --> 0:17:57.320 continuing to pull back a little bit. And if you 0:17:57.359 --> 0:18:01.280 think about companies like best Buy, All, Tom Williams, Sonoma, 0:18:01.680 --> 0:18:04.520 Dick Spoarding Goods, you know they are bringing you know, 0:18:04.680 --> 0:18:08.760 premium products, new products, exclusive products to that consumer, and 0:18:08.800 --> 0:18:11.199 the consumers are willing to pay up for that. 0:18:12.040 --> 0:18:14.000 What was the one trend that shocked you this year? 0:18:14.040 --> 0:18:14.800 Now that you look. 0:18:14.680 --> 0:18:17.679 Back, I think a lot of the trends have been 0:18:17.720 --> 0:18:21.679 a continuation of what we've been seeing. I think, you know, 0:18:21.680 --> 0:18:23.960 if we go back to late twenty twenty two, that 0:18:24.080 --> 0:18:28.000 is when the first pullback in that discretionary spend has been. 0:18:28.480 --> 0:18:32.280 But this is the first year that we've seen more newness, 0:18:32.320 --> 0:18:37.119 and newness is really a key driver to getting consumers 0:18:37.160 --> 0:18:40.840 in the store and to fueling transactions. So the best 0:18:40.880 --> 0:18:45.000 retailers are getting both transaction and ticket growth. But I 0:18:45.040 --> 0:18:49.960 think those innovation pipelines that maybe we're you know, settled 0:18:49.960 --> 0:18:52.920 down a bit during COVID, they've picked up again and 0:18:53.240 --> 0:18:56.080 bringing more newness is driving those transactions. 0:18:56.520 --> 0:19:00.879 How promotional do you think retailers will be in twenty 0:19:00.920 --> 0:19:03.720 twenty six to kind of drive the consumer to the 0:19:03.760 --> 0:19:05.680 store or to the mouse to click. 0:19:07.040 --> 0:19:11.920 So promotions are very important to bring shoppers to the store, 0:19:12.359 --> 0:19:15.080 you know, especially for someone like a best Buy. You know, 0:19:15.119 --> 0:19:19.440 promotions are very key, especially around holiday. We have seen 0:19:19.480 --> 0:19:22.480 that promotions are about flat, you know, in twenty five 0:19:22.640 --> 0:19:25.399 versus twenty four, and I would sort of expect a 0:19:25.400 --> 0:19:29.520 continuation of that in twenty six unless we see a 0:19:29.600 --> 0:19:31.919 huge spike in demand, in which case the retailers might 0:19:31.960 --> 0:19:34.480 be able to pull back on that promotional lever a 0:19:34.480 --> 0:19:37.639 little bit. But this year so far it's been about flat. 0:19:38.000 --> 0:19:42.840 You do see companies like a William's Sonoma very select promotions. 0:19:42.880 --> 0:19:44.959 This has been a strategy coming out of COVID. They 0:19:45.000 --> 0:19:48.320 sort of have stuck with it. They're even sticking with it, 0:19:48.640 --> 0:19:51.400 you know, through this season going into next year. Pottery 0:19:51.400 --> 0:19:54.200 Barn was a big focus for them. You know, they 0:19:54.240 --> 0:19:57.040 need a rebound in that brand and growth is slowly 0:19:57.119 --> 0:20:00.680 coming back, but they are staying steadfast and keeping those 0:20:00.720 --> 0:20:02.200 promotions very limited. 0:20:03.000 --> 0:20:04.760 I was going through your notes and then I read 0:20:04.800 --> 0:20:07.960