Speaker 1: From Mahart of We're Innovation, Money and Power.
Speaker 2: Collie in Silicon Vallet NBN.
Speaker 1: This is Bloomberg Technology with Caroline Hyde.
Speaker 2: And Ed Ludlow.
Speaker 3: Im Ed Ludlow here in San Francisco. Caroline Hyde is
Speaker 3: off today. This is BlueBag Technology. Let's get after it.
Speaker 3: Coming up, Intel surging as it's longer way to come
Speaker 3: back is underway. We're going to break down the company's
Speaker 3: earnings with the CEO, Pat Gelsinger. Plus we're gonna have
Speaker 3: an exclusive interview with the CEO of by Now Pay
Speaker 3: Later company affirm his outlook on fintech and the payment space.
Speaker 3: And we'll push ahead to what's going to be another
Speaker 3: crazy week in tech earnings with Amazon, Apple, and Qualcom
Speaker 3: all reporting next week. We're going to stick with tech
Speaker 3: out this way out West earnings next week include Apple, Amazon,
Speaker 3: and it's been an interesting dynamic where the market is
Speaker 3: so hyped up about AI, but if you look at
Speaker 3: the trading, I think we're kind of focused on some
Speaker 3: of the core businesses of these names.
Speaker 4: Will that be the story next week?
Speaker 3: Let's ask Jonathan Curtis, director of portfolio management for Franklin Equity,
Speaker 3: overseeing nine point five billion dollars in assets under management.
Speaker 4: What do you make of that, Jonathan?
Speaker 3: Investors love AI, but this week it seems like they
Speaker 3: traded on the fundamentals the core business.
Speaker 5: Yeah, well so, certainly there's a lot of excitement and
Speaker 5: appropriately so around AI, but we are in the stage
Speaker 5: of this opportunity that we like to call the experimentation phase.
Speaker 5: Companies are learning about how to use generative AI. They've
Speaker 5: been reorientary, reorienting their product roadmaps to take advantage of AI.
Speaker 5: They're starting to figure out what their customers are going
Speaker 5: to be willing to pay for some of these capabilities.
Speaker 1: But we're not really in the scale at stage.
Speaker 5: We think that's going to come here in the next
Speaker 5: two day, three, maybe four quarters. And the biggest, most
Speaker 5: important thing to be watching there is what platforms like
Speaker 5: Microsoft or Adobe or other companies that have many hundreds
Speaker 5: of millions of users can do when they start putting
Speaker 5: these AI capabilities in their products where hundreds of millions
Speaker 5: of knowledge workers and media creators operate every single day.
Speaker 1: We're quite excited about what that means.
Speaker 5: And how that will put pressure on the underlying infrastructure
Speaker 5: and semi conductor layer and keep the growth going for
Speaker 5: a lot of these companies.
Speaker 3: So we do this every quarter now, track the number
Speaker 3: of times AI as a phrase, a word is.
Speaker 4: Mentioned on an earnings call.
Speaker 3: Do you go through the transcript and say, okay AI
Speaker 3: number one, AI number two.
Speaker 4: I mean, seriously, how much we did do that?
Speaker 5: Yeah, so this past earning cycle, not this current one,
Speaker 5: because we're not completely through it. We did go through
Speaker 5: and count how many references there were to artificial intelligence,
Speaker 5: and then we compared it to references to things like
Speaker 5: mobile back around the launch of the iPhone, because we
Speaker 5: wanted to get a sense for how quickly this was
Speaker 5: dispersing through the economy relative to other big cycles that
Speaker 5: we've seen in the past.
Speaker 3: And why why, Jonathan, they're just words? What do they
Speaker 3: tell you?
Speaker 1: They're not just words?
Speaker 5: Their intentionality And what's important about that intentionality is it
Speaker 5: tells you how much the other sectors outside of the
Speaker 5: outside of tech are gearing up and getting curious about
Speaker 5: this opportunity and ultimately what the big spending is going
Speaker 5: to come. And what's fascinating about the analysis we did
Speaker 5: ninety days ago was that we saw much more dispersion
Speaker 5: for artificial intelligence than we did for mobile back at
Speaker 5: the start of the iPhone cycle, the iPhone opportunity, so
Speaker 5: that gives us a little bit of confidence that this
Speaker 5: could be even bigger than other big cycles we've seen
Speaker 5: in the past.
Speaker 1: Like mobile.
Speaker 3: Jonathan, I want to talk about the semiconductor name. We're
Speaker 3: going to be speaking to Pat Gelsinger in about five
Speaker 3: minutes time, the CEO of Intel. You do not hold Intel,
Speaker 3: but I believe you do hold Nvidia an AMD. Explain
Speaker 3: that thesis to me and why they are the winners
Speaker 3: in AI.
Speaker 5: Yeah, so, certainly Intel's an amazing company. There are funds
Speaker 5: within Franklin that own Intel. They are in the midst
Speaker 5: of a challenging transformation, and they're a little too PC
Speaker 5: centric for our growth needs, and they're in a heavy
Speaker 5: investment stage right now. So we're watching Intel closely. We
Speaker 5: like Nvidia because they're highly aligned with the AI opportunity
Speaker 5: and an incredible mode there. We like AMD because they
Speaker 5: are a share gainer in the server space at the
Speaker 5: expense of Intel. We also like TSMC, which is one
Speaker 5: of Intel's emerging competitors in the fabrication of chips and
Speaker 5: a MD and TSMC and Nvidia and TSMC together are
Speaker 5: really helping set the next stage of growth in the
Speaker 5: semiconductor space, and Intel is just playing catchup quite frankly and.
Speaker 4: As a little two PC centric for our interests PC centric.
Speaker 3: The other area we want to talk about is cloud,
Speaker 3: and we started this conversation Jonathan by pointing out that
Speaker 3: a lot of the trading this week was done on
Speaker 3: core legacy businesses. Abigail mentioned Microsoft, where investors looked at
Speaker 3: the performance of the cloud business from a top line
Speaker 3: growth perspective and weren't as happy.
Speaker 4: What do you see there?
Speaker 5: Well, encouragingly, we are starting to see some of that
Speaker 5: deceleration that we've been seeing in cloud in this post
Speaker 5: COVID era starting to calm down a bit, and in
Speaker 5: fact the deceleration that Microsoft witnessed and into cloud business
Speaker 5: slowed a bit, and encouragingly, we're starting to see the
Speaker 5: real positive impacts from the AI experimentation phase that we're
Speaker 5: in right now, impacting the cloud operators like Microsoft, like Google.
Speaker 5: So we think that we are getting through the optimization
Speaker 5: is post COVID. We are getting into easier comps there
Speaker 5: and now we're starting to see AI become a material
Speaker 5: contributor to these cloud businesses. So we think in our
Speaker 5: broader digital transformation thesis, AI is still misunderstood by investors.
Speaker 5: They don't understand how profound the impacts of this is
Speaker 5: going to be. And then the cloud opportunity is going
Speaker 5: to be a big participant along with AI. But also
Speaker 5: as digital transformation continues, and we're starting to see that stabilization.
Speaker 5: So we're quite encouraged by both what we're seeing in
Speaker 5: AI and in cloud.
Speaker 3: All right, Jonathan Curtis, Franklin Equity Group Director, Report further Strategy.
Speaker 3: Just such a wide ranging conversation, and as we discuss,
Speaker 3: the next big conversation is going to be about the
Speaker 3: chip sector. Thank you very much. Coming up, stay tuned
Speaker 3: because we will sit down with the CEO of Intel,
Speaker 3: Pat Gelsinger.
Speaker 4: The market really.
Speaker 3: Liked what it had to hear about the quarter just
Speaker 3: gone and the outlook for the current quarter, but there
Speaker 3: are long term questions here about Intel returning to a
Speaker 3: position of leadership when it comes to the cutting edge
Speaker 3: of chip manufacturing, chip making technology, and also what is
Speaker 3: the future of this company in the field of AI.
Speaker 3: Pat Gelsinger, Intel CEO coming up next here here in
Speaker 3: San Francisco. This is Bloomberg Technology. I want to welcome
Speaker 3: our global Bloomberg TV and radio audiences. Intel shares are jumping,
Speaker 3: with investors buying into signs that the chip maker's long
Speaker 3: awaited comeback is underway. Intel's forecasting sales in the current
Speaker 3: quarter of thirteen point nine billion dollars, ahead of expectations.
Speaker 4: The company also notched.
Speaker 3: A surprise profit of thirteen censor sharing in the corner
Speaker 3: just gone as a slump in demand for personal computers
Speaker 3: appears to be come into an it's not all good news.
Speaker 3: Serve demand isn't recovering as quickly. The company is still
Speaker 3: a little bit far from its heyday where margins where
Speaker 3: it's sixty percent sales were nearer to twenty billion dollars.
Speaker 3: Even so, joining us now Intel's CEO Pat Gelsinger, You know, Pat,
Speaker 3: this is the second consecutive quarter where investors have cheered
Speaker 3: the earnings results shares her up and I think before
Speaker 3: twenty twenty three, ten out of the eleven earnings prints
Speaker 3: that you had shares fell. Is this job done for
Speaker 3: you in the turnaround at Intel?
Speaker 6: Well, we have a long way to go yet, but boy,
Speaker 6: having two good beaten Ray quarters in a row, you know,
Speaker 6: was a super positive and really I think in the
Speaker 6: KP of that turning point for the company.
Speaker 1: But we still have a lot of work to do yet.
Speaker 6: You know, as we said, our client business as now
Speaker 6: healthy footing. You know, we've returned markers shared to where
Speaker 6: it traditionally was a strong roadmap. You know, the markets recovering,
Speaker 6: inventory levels are good, you know, Data Center, we still
Speaker 6: have work to do, but boy, you know, two quarters
Speaker 6: in a row where we did a bit better than
Speaker 6: we expected, you know, but we still have challenges and
Speaker 6: AI you know, and many of our really good products
Speaker 6: are only.
Speaker 1: Coming to market over the next year. You know.
Speaker 6: Networking is still a lot of inventory to work through,
Speaker 6: and our foundry business is still just a seedling, just
Speaker 6: starting to show some green shoots. So I'll say, boy,
Speaker 6: far from finish, but it is nice bouncing off the
Speaker 6: bottom of a bit.
Speaker 1: And feeling that momentum in the market.
Speaker 3: Response, Pat, why do you have the confidence to kind
Speaker 3: of cool the end of the PC slump and also
Speaker 3: at the same time state that the server recovery is
Speaker 3: delayed to the end of the year.
Speaker 1: Yeah, and the.
Speaker 6: PC side inventory levels are now healthy, right, you know,
Speaker 6: everything that we've seen and a lot of the issues
Speaker 6: that we worked through Q four, Q one and Q
Speaker 6: two were over inventory levels by the OEMs and the channel,
Speaker 6: and now everything is healthy. Our roadmap is very good.
Speaker 6: We've gained share multiple times in a row. I think
Speaker 6: we're now at five out of six quarters where we've
Speaker 6: gained market share. So I just say in the PC
Speaker 6: business healthy, Our position is good, and we're looking forward
Speaker 6: to the AI PC and with our launch of our
Speaker 6: next generation product, meteor Lake later this year. You know,
Speaker 6: we believe that ushers in the AI PC generation and
Speaker 6: I've compared that to like Centrino and Wi Fi, you
Speaker 6: know two decades ago, a major new use case for
Speaker 6: why the PC is the best platform. So we're quite
Speaker 6: excited about that. On the data center side, you know,
Speaker 6: we still saw that, you know, the inventory levels still persist.
Speaker 6: You know, China was weaker than expected. Their recovery is
Speaker 6: going slower. And you know, cyclically we see the shift
Speaker 6: toward AI you know, these big training machines. Every cloud
Speaker 6: vendor is shifting their dollars to more.
Speaker 1: Focus on that.
Speaker 6: So those three things are leading to a bit longer
Speaker 6: recovery cycle.
Speaker 1: On the data center.
Speaker 6: Well, like I said, we performed a bit better than
Speaker 6: we thought on the data center in Q one AM
Speaker 6: Q two. So we're feeling like our momentum and execution
Speaker 6: is rebuilding despite some of those headwinds that are still
Speaker 6: persist in that area.
Speaker 3: For our global TV and radio audience. Here at Bloomberg,
Speaker 3: we're speaking to Pat Elsing at the Intel CEO. Pat,
Speaker 3: you're forecasting gross margin of forty three percent in the
Speaker 3: current period, but it's a long way from that sixty
Speaker 3: percent gross margin level. You know, Wall Street used to
Speaker 3: look at Intel and say sixty percent. You know, they
Speaker 3: cheer you as a leader in that space. Can you
Speaker 3: just explain to our global audience the timeline and path
Speaker 3: to getting back to profit at that level.
Speaker 6: Yeah, and we're working our way back to margins and
Speaker 6: obviously a nice bet in Q two on margins, and
Speaker 6: we forecast Q three a bit better and Q four
Speaker 6: a bit better, you know. And part of it is
Speaker 6: the cyclicality of the semiconductor industry is brutal on margins.
Speaker 6: And when we had an oversupply situation inventory, you know,
Speaker 6: that just depresses margins because you know, the factories cost
Speaker 6: the same whether they're full or whether they're empty, So
Speaker 6: you end up with these charges that you burden the
Speaker 6: price points and depressed margins. We also realize that our
Speaker 6: own product execution has weakened our product position which doesn't
Speaker 6: have asps as strong as well, so that's another factor.
Speaker 6: And the last factor here is, you know, the plan
Speaker 6: that my CFO Dave and I have laid out is
Speaker 6: an expensive plan. We are making aggressive investments to build
Speaker 6: the capacity to get back to leadership and thus we're
Speaker 6: moving through nodes very rapidly. We sat five nodes in
Speaker 6: four years, so that causes us to have a lot
Speaker 6: of undepreciated capacity that we're working through quite aggressively. Also
Speaker 6: building up a bit more capacity for our foundry initiatives.
Speaker 6: So all of those factors depressed margins to historically low
Speaker 6: levels in the first part of the year and we're
Speaker 6: just seeing ourselves now working to build back to margin levels.
Speaker 6: But we're still very confident that as we build our
Speaker 6: foundry business get back to leadership and process and products.
Speaker 6: You know that those kind of margins, that's exactly what
Speaker 6: Dave and I aspire to to the future, and we
Speaker 6: feel like you two was a good marker. You know that, yes,
Speaker 6: we're building momentum to get back there.
Speaker 3: Thank you for joining us here on Bloomberg Television and
Speaker 3: radio worldwide. We're joined by Pat Gelsinger, Intel CEO. You
Speaker 3: described the foundry business as a seedling, but every time
Speaker 3: you and I have spoken, you've hinted that there is
Speaker 3: a big customer waiting in the wings to give life
Speaker 3: to that business.
Speaker 4: What can you tell us about that, Pat.
Speaker 6: Yeah, and we're having good momentum, and as I said
Speaker 6: on the Ernie's call yesterday, we have two big customers
Speaker 6: in particular that we made very good progress over the
Speaker 6: last quarter for our foundry business. We did have one,
Speaker 6: i'll say confirmatory, not as big a customer, but the
Speaker 6: Ericsson announcement their commitment to eighteen A and our next
Speaker 6: generation work with them that we announced this quarter. So
Speaker 6: I'll say overall, we're seeing good momentum and a really
Speaker 6: strong pipeline of customers, and we hope to make meaningful
Speaker 6: announcements later this year on that. We also pointed out
Speaker 6: on our earnings call that now we're seeing a lot
Speaker 6: of interest in our packaging technologies.
Speaker 1: So it isn't just wayfer.
Speaker 6: Manufacturing, it's also package assembly and tests.
Speaker 1: And Intel has long.
Speaker 6: Term been a leader in packaging technologies, and because of
Speaker 6: key areas like high performance computing and AI, there's tremendous
Speaker 6: interest in these advanced packaging technologies, and we're finding a
Speaker 6: lot of customer interest in that incremental area of the
Speaker 6: foundry business as well.
Speaker 1: So overall, you.
Speaker 6: Know, and the numbers were good for us in Q
Speaker 6: two for Foundry, great pipeline of activities, great progress on
Speaker 6: a couple of these most major opportunities. I'm feeling good
Speaker 6: like we're starting to really see that momentum build in
Speaker 6: this new business area for Intel or Intel Foundery services.
Speaker 3: If we think about what a potential customer might be,
Speaker 3: you know, at the scale of Apple, Google or Video,
Speaker 3: what is it that they want from you? What is
Speaker 3: it do you think that you can provide them?
Speaker 1: Yeah? You know, when I view it, you know, we
Speaker 1: have to go through four stages. You know.
Speaker 6: One is are my transistors good? You know, can they
Speaker 6: build good products using Intel? Second is do I have
Speaker 6: the design tools? You know, the cadences and synopsis, c
Speaker 6: das and the IP libraries. Have we gotten all of
Speaker 6: those basics done so that they can design on us?
Speaker 1: You know?
Speaker 6: Then Third, you know, do we have good terms and conditions?
Speaker 6: Are they better off coming to me versus you know,
Speaker 6: TSMC or Samsung as an alternative, And then finally, are
Speaker 6: we customer oriented? Can they really have the support because
Speaker 6: my factory becomes their factory, you know, So we have
Speaker 6: to work through all four of those stages before they're
Speaker 6: ready to commit major businesses to us.
Speaker 1: And that's why it takes a while.
Speaker 6: You know, they got to do designs and tests and pilots,
Speaker 6: and you know, work through the financials, and you know,
Speaker 6: this isn't a mature business area for us. But I'll
Speaker 6: just say we're making great progress, and in particular, you know,
Speaker 6: the two most significant opportunities. It was a really good
Speaker 6: quarter and I'm feeling very optimistic that yes, we'll bring
Speaker 6: them across the line and start to really accomplish what
Speaker 6: we've laid out, you know, with our reshoring and building
Speaker 6: the Western founder.
Speaker 1: And we also had great success.
Speaker 6: With both the EU and the US chipsack this last quarter,
Speaker 6: which are affirming the strong support you know, of the
Speaker 6: Western governments on this strategy.
Speaker 1: It's the right strategy at the right time. We're making
Speaker 1: good progress.
Speaker 3: A big part of your smart capital approach, we have
Speaker 3: to talk about AI. You see, a world in which
Speaker 3: the PC plays a role for localized running of l
Speaker 3: l ms. But what are the use cases that you
Speaker 3: see PAT, The applications PC with AI specific chips is relevant.
Speaker 6: Yeah, you know, to some degree. They're numerous ed. You know,
Speaker 6: let's just give one example. You know, in the future,
Speaker 6: my word processor, you know, I'm going to hit a
Speaker 6: button and say, give me a legal brief that describes this,
Speaker 6: and it's going to get locally generated. You know, my
Speaker 6: video conferencing, my zine, my teams or zooms. I'm going
Speaker 6: to say, you know, give me, you know, real time
Speaker 6: translation across multiple languages, you know, for this meeting, and
Speaker 6: I'm going to have that in real time on my PC.
Speaker 6: You know, my games, you know, for my you know,
Speaker 6: all of that is going to become synthetically generated worlds
Speaker 6: locally on my PC in real time. So we see
Speaker 6: it across creator, across productivity, you know. And as I've said,
Speaker 6: this is sort of like a Wi Fi moment, you know,
Speaker 6: for the PC of the future, and that begins with
Speaker 6: our meteor like launch in the second half of this year.
Speaker 3: PAT quickly a one billion dollar pipeline for AI products
Speaker 3: through twenty twenty four. Just me a sense of the
Speaker 3: pace at which that pipeline is growing.
Speaker 6: Now, Yeah, we had a super exciting quarter. As I said,
Speaker 6: we six sect that pipeline in Q two, so we
Speaker 6: saw a huge uptick on that, you know, and I've
Speaker 6: deployed a lot more sales resources, software resources, you know,
Speaker 6: to jump on those opportunities worldwide. You know, when we
Speaker 6: have our Gouty two chip that is now in volume.
Speaker 6: You know, we've just seen the first wafers on the
Speaker 6: next generation Gouty three, which will be our twenty twenty
Speaker 6: four product, and then we have our twenty five and
Speaker 6: twenty six products underway.
Speaker 1: So you know, we're seeing a lot of momentum there.
Speaker 6: And the world is looking for a great alternative, an
Speaker 6: open alternative, a more cost effective alternative, and Intel is
Speaker 6: a trusted supplier. We think this is a great area
Speaker 6: for us to put a lot of energy into and
Speaker 6: we're seeing the response from the marketplace now.
Speaker 3: Intel CEO Pat Gelsinger, we appreciate your time here on
Speaker 3: Bloomberg TV and radio.
Speaker 4: Thank you, thank you so much.
Speaker 1: Always a pleasure.
Speaker 4: Time for talking tech.
Speaker 3: First up, KLA reported strong earnings for the current period.
Speaker 3: It signals that the chip industry may be nearing a recovery.
Speaker 3: Shares increase around four point five percent in this session,
Speaker 3: but it's unclear how long this upspring will last. Of course,
Speaker 3: it's a sign that chip makers are ready to spend
Speaker 3: on new equipment. Plus, a burning ship near the Netherlands
Speaker 3: has almost five hundred electric cars on board. The cause
Speaker 3: of the blaze still unknown, but the Coast Guard has
Speaker 3: denied reports that the fire broke out in the section
Speaker 3: of the carrier where the electric cars were stored. And finally,
Speaker 3: China has asked its largest tech companies to provide case
Speaker 3: studies of their most successful startup investments. The askers the
Speaker 3: sign authorities are ready to grant them broaderly, way after
Speaker 3: a crackdown that brought them to a virtual halt two
Speaker 3: years ago. All right, coming up, threads, The Twitter like
Speaker 3: app might help bring the center of Internet culture back
Speaker 3: to meta.
Speaker 4: Look at the new app and its potential impact.
Speaker 3: This is Bloomberg Technology. Welcome back to Bloomberg Technology ed
Speaker 3: lovelow here in San Francisco. This week we mentioned the
Speaker 3: idea of everything apps not only for x the company
Speaker 3: formerly known as Twitter, but that conversation now going to
Speaker 3: TikTok as well. Just twenty four hours ago, we spoke
Speaker 3: to metacfo Susanly about the concept of everything apps and
Speaker 3: if Meta would consider itself heading in that direction.
Speaker 4: Here's what she had to say.
Speaker 7: We're really invested in the opportunities that we have ahead
Speaker 7: of us across our family of apps right now, including Threads,
Speaker 7: which is the newest standalone app in our portfolio. And
Speaker 7: then there's just a lot that we can do to
Speaker 7: make the experiences across our family of apps richer and
Speaker 7: more engaging with the investments that we've made already in
Speaker 7: AI and especially recommending content that you don't already follow,
Speaker 7: and we know that that's brought richer content experiences to people,
Speaker 7: is growing engagement across the apps, and we'll release you know,
Speaker 7: we'll be releasing features over the course of the next years.
Speaker 7: But we're really excited about what we think that this
Speaker 7: is going to bring to bear for the consumer experience
Speaker 7: and of course also eventually for businesses to connect with
Speaker 7: consumers across the family of apps too.
Speaker 4: The Everything app.
Speaker 3: Let's break it down with Bloomberg's Alex Brinka, who covers
Speaker 3: the social platforms for US, and Rachel Tippograph, CEO and
Speaker 3: founder of mick Mac, a global e commerce enablement and
Speaker 3: analytics platform for multi channel brands.
Speaker 4: First of all, Rachel, give me.
Speaker 3: Your definition, your definition of an everything app?
Speaker 8: And everything app is a place where I'm going to
Speaker 8: spend the majority of my time to connect with my
Speaker 8: friends and family, be inspired, potentially, do work, start a business,
Speaker 8: and transact.
Speaker 3: So the newspeg this week is X, the everything app.
Speaker 3: It's officially happened. Twitter logo's gone, the Bluebird's gone, we
Speaker 3: have an X, But TikTok and meta is still part
Speaker 3: of this conversation. Do you realistically see a world in
Speaker 3: which we see all three move towards in everything app?
Speaker 8: I think for everything apps to work, we have to
Speaker 8: let go of the notion of wald gardens because to
Speaker 8: be everything you need to integrate with the infrastructure of society.
Speaker 8: So if you want to drive commerce, you need to
Speaker 8: integrate with the biggest players in commerce, Amazon, Target, Walmart,
Speaker 8: payments like PayPal. If you want to integrate into work,
Speaker 8: you got to integrate into Salesforce and Slack and Oracle
Speaker 8: and SAP.
Speaker 4: The approach that the wald.
Speaker 8: Garden apps have taken is, hey, we want to do
Speaker 8: everything ourselves.
Speaker 4: That typically doesn't work out.
Speaker 8: So for everything apps to come to life, there really
Speaker 8: needs to be a partner ecosystem that allows them to
Speaker 8: flourish in everyday life.
Speaker 3: So I want to go back to the metapart of
Speaker 3: this equation, Alex Brinka, You've written a story published on
Speaker 3: Bloomberg this morning. Meta has a rare opportunity to seize
Speaker 3: momentum with threads, and I know you were watching the
Speaker 3: interview with Susan Lee really closely. They're playing down the
Speaker 3: sort of near term monetization of threads. But is that
Speaker 3: the app that represents an opportunity for Meta to broaden
Speaker 3: itself out a bit?
Speaker 9: And the reason I made that argument is because it's
Speaker 9: not just Twitter or the formerly known as Twitter X.
Speaker 9: It's not just x that is kind of the biggest
Speaker 9: competition here for Meta. Even if, as CFO Susan Lee says,
Speaker 9: the Everything app isn't their kind of current focus, it's
Speaker 9: actually TikTok. Meta used to be kind of the king
Speaker 9: maker of Internet culture. Instagram used to really rule the zeitgeist,
Speaker 9: and things that happened online happen there first. Right now,
Speaker 9: TikTok really has that position and That's the argument I
Speaker 9: kind of laid out it in that piece is Meta
Speaker 9: has a rare community here, not to kill Twitter, but
Speaker 9: to actually bring kind of the center of Internet culture
Speaker 9: back to Meta because TikTok, while that is the place
Speaker 9: right now, TikTok's a video platform. Making videos is a
Speaker 9: lot harder than posting text online, so there could be
Speaker 9: this moment of opportunity and Edwhen you and Caroline chatted
Speaker 9: to Susan Lee yesterday, I was really struck when you
Speaker 9: asked her about kind of how you bring that zeitgeist back.
Speaker 9: She went straight to talking about product updates and changes
Speaker 9: to features, which is a little bit different than I
Speaker 9: know that TikTok thinks of itself. They talk about culture
Speaker 9: and bringing creators and you know, music and fashion, and
Speaker 9: it's a little bit of a different flavor. But I
Speaker 9: think it's an important distinction as they continue to figure
Speaker 9: out what threads fits, how threads fits into the meta universe.
Speaker 3: I like the historic dynamic, which is that you know
Speaker 3: what people say right when something's trending on TikTok, your
Speaker 3: parents might see it on reels or Instagram six weeks later.
Speaker 3: So with that in mind, Rachel, you know Alex tried
Speaker 3: to outline Meta's position, which is that they want to
Speaker 3: seize the cultural moment. Do you see that happening or
Speaker 3: do you think TikTok leads in that respect?
Speaker 8: So first to debunk the myth. There are plenty of
Speaker 8: gen X and boomers on TikTok. Nearly fifty percent of
Speaker 8: their users are not millennials and not Gen Z. So
Speaker 8: culture is happening there, but culture is now multi generational
Speaker 8: in terms of TikTok. Yes, it is taking over search,
Speaker 8: which I think is a key indicator that culture is
Speaker 8: moving there. When it comes to Meta, there is a
Speaker 8: huge difference. Meta is an identity service, and because it's
Speaker 8: an identity service, it had an enormous amount of data
Speaker 8: to build a really really robust advertising business on top
Speaker 8: of and move people down the path to purchase. TikTok
Speaker 8: has stayed more upper funnel has focused on consumer engagement.
Speaker 8: They do a great job of that, and now are
Speaker 8: trying to figure out, hey, can we actually steal market
Speaker 8: share from Meta by monetizing the data that we have
Speaker 8: on the platform. How they both use the data, and
Speaker 8: how they've been building advertising businesses and commerce businesses on
Speaker 8: top of each other have differed because of the nature
Speaker 8: of the apps, but Meta, being a center for culture,
Speaker 8: they have yet to demonstrate that they have the ability
Speaker 8: to do that again.
Speaker 3: All right, thanks to Rachel Tippograph and our own an
Speaker 3: It's Brinker, we probably could do a full hour on
Speaker 3: the media social media landscape right now.
Speaker 4: We will have both of you back. Thank you very much. Affirm.
Speaker 3: The popular buy now pay Lata service has gained traction
Speaker 3: in recent years as inflation repressures way on consumer purchasing power.
Speaker 3: With more than sixteen million active customers and more than
Speaker 3: two hundred and forty five thousand merchants, the company as
Speaker 3: a marker for tracking consumer trends across various set is
Speaker 3: now it's expanding its reach in the travel space by
Speaker 3: partnering with airline Cafe Pacific. Very happy to welcome Max
Speaker 3: Leftchin to the show, CEO of a firm and my
Speaker 3: good friend Blimberg's Shnali Basic.
Speaker 10: Thank you Ed, and thank you Max for joining us.
Speaker 10: When you took a look at this deal that you
Speaker 10: just cut with Cathay Pacific, This idea that more airlines,
Speaker 10: more travel is drawing by now pay later options. You
Speaker 10: know it's very expensive to travel right now. How much
Speaker 10: kind of heat is there in the consumer wallet to
Speaker 10: be traveling with these kinds of prices, given kind of
Speaker 10: strains all their wallet right now.
Speaker 11: Well, I think we're still recovering from COVID and the
Speaker 11: need to get out of the house to see the
Speaker 11: world is intense, and prices are absolutely high. We are
Speaker 11: seeing very expensive travel, and yet we're almost at the
Speaker 11: peak of twenty.
Speaker 2: Nineteen, right before the pandemic.
Speaker 11: And so part of a reason for the reason we're
Speaker 11: seeing so much success, so much pick up in the
Speaker 11: travel industry is the airlines cannot do enough to bring
Speaker 11: all these people chance to travel, but it is expensive.
Speaker 11: So being able to afford it and with affirm without lateps,
Speaker 11: without gimmicks, without tricks, is a really powerful sales pitch.
Speaker 10: Well, here's a course partner I have about the airlines
Speaker 10: as well, because if you think about it, the credit
Speaker 10: card companies just reported earnings, they're extending loans like crazy.
Speaker 10: The consumer looks a little stretched when you look at
Speaker 10: how much debt they've taken out. There's a question about
Speaker 10: whether they'll hit a cliff at the end of this year.
Speaker 4: So how much can.
Speaker 10: They really buy now pay later even more to fund
Speaker 10: things that they want to do, go out and buy
Speaker 10: luxury goods, and to take an airplane to Europe.
Speaker 11: I think fundamentally consumers will borrow to meet their goals,
Speaker 11: and my job is to provide a bible, transparent, and
Speaker 11: fundamentally better alternative credit cards. If you see the growth
Speaker 11: of buy now, pay later, you can see that we
Speaker 11: are making a real dent and taking over more and
Speaker 11: more of than consumer or spend. We are absolutely not
Speaker 11: adding to it in terms of incremental debt.
Speaker 2: That is unsustainable as a firm.
Speaker 11: Other players can do other things, but our fundamental design
Speaker 11: criteria is if we don't believe you can pay us back,
Speaker 11: we will not lend you money. That is what's enshrined
Speaker 11: in our design notion of no light fees, no gimmick,
Speaker 11: no tricks. We will not benefit if you cannot pay
Speaker 11: us back. Therefore will only lend if you can.
Speaker 4: Max.
Speaker 3: I understand the technological and cash flow advantage of buying now,
Speaker 3: pay later. My question is what is the limit in
Speaker 3: use cases? So you know an airline ticket can cost
Speaker 3: you a few hundred dollars or a few thousand dollars.
Speaker 3: I wonder what the point is where a firm says,
Speaker 3: you know what we cannot do this, be it you know,
Speaker 3: another luxury item or another product category.
Speaker 11: So one of the advantage of bin now appilator to
Speaker 11: the consumer is that, in particular with a firm, again,
Speaker 11: we evaluate every transaction separately. So every time when you
Speaker 11: choose to use a firm, there is a chance we
Speaker 11: will tell you we think you are over extending yourself.
Speaker 11: It is not financially healthy for you to make this transaction.
Speaker 11: Please to make a larger down payment, don't transact. Find
Speaker 11: something cheaper, and so you will or someone will hear
Speaker 11: that every minute of the day today, and on and on.
Speaker 11: We underwrite every single transaction. That's why our credit results
Speaker 11: have been as strong as they have been. That is
Speaker 11: part of the design, and that's why buy now apailiator
Speaker 11: and a firm in particular is better than credit cards.
Speaker 4: Max.
Speaker 3: Twenty four hours ago, we had Zach Pere, the Plaid CEO,
Speaker 3: on the show, and he talked about using AI in
Speaker 3: assessing credit worthiness and lending. I wondered if you could
Speaker 3: explain to our audience what a firm is doing with
Speaker 3: AIS in its decisions on buy now, Pay later.
Speaker 11: I'll nerd out for a couple of seconds, because I
Speaker 11: think it's important to AI is now this overused umbrella
Speaker 11: term that means everything to every So there's a couple
Speaker 11: of different flavors of machine intelligence.
Speaker 2: Let's call it something neutral.
Speaker 11: There's machine learning, which has been around for quite some time,
Speaker 11: and it is statistical learning all sorts of different terms,
Speaker 11: but what it means is using statistical analysis and more
Speaker 11: sophisticated mathematical techniques to assess ability to repay by looking
Speaker 11: at past trends and data.
Speaker 2: And we use that and have been using it since inception.
Speaker 11: That's where a lot of our underwriting advantage comes from.
Speaker 11: The other more currently exciting, excitable part of machine intelligence
Speaker 11: is generative AI, things like Dolly and open AI and chatbots.
Speaker 11: We do not use that to assess your credits because
Speaker 11: we don't think the technology is mature enough and frankly, it
Speaker 11: wasn't built for that. We do use it for exciting
Speaker 11: things like developer productivity, making more data available internally faster
Speaker 11: through chat interfaces. So there's lots and lots to gain
Speaker 11: from various flavors of machine intelligence, but each tool is
Speaker 11: for a different job, and we've been using it since
Speaker 11: the day we're start the company.
Speaker 10: You know, Max, You think about technology, You think about
Speaker 10: what the PayPal mafia has done, and when it comes
Speaker 10: to payments online, and you have Elon Musk trying to
Speaker 10: expand on this everything app What role is social media
Speaker 10: going to be playing in payments ultimately and how long
Speaker 10: will it take to get there.
Speaker 11: I think social media has already emerged as kind of
Speaker 11: the next shopping format. We're all sort of swiping up
Speaker 11: on Instagram and TikTok and on and on, and we
Speaker 11: see a beautiful thing warn't by a beautiful person. Sometimes
Speaker 11: we want to buy it. I think again, not to
Speaker 11: serve food my own horm too much. A firm brings
Speaker 11: certainty and sense of control and lack of gimmicks and
Speaker 11: these into a situation that is sped up. When you're
Speaker 11: tapping to buy something on your social media environment, you're
Speaker 11: not thinking very hard about what financial tool you're going
Speaker 11: to use, but you do want that peace of mind,
Speaker 11: so picking a firm will help you, will keep you protected.
Speaker 11: We are seeing a huge percentage of interaction with computers
Speaker 11: and with phones in particular, shift to the bite sized
Speaker 11: social media modalities, and that's just in your normal talk.
Speaker 10: To us about competition, this idea of Apple pay later.
Speaker 10: You are also partnered with large tech companies yourself, like Amazon,
Speaker 10: but Apples move into the buy now, pay later space.
Speaker 10: How much of an impact could that have on you
Speaker 10: in the future.
Speaker 11: You know, for the moment, we're all taking share from
Speaker 11: credit cards and perhaps even more fundamentally cash. The online
Speaker 11: e commerce in the O salone is nearing a trillion
Speaker 11: farmer correctly, offline is four times that size. The penetration
Speaker 11: into that entire thing is sub one percent if you
Speaker 11: take the totality, and sub five percent.
Speaker 2: If you look at just e commerce.
Speaker 11: And so for the moment, most buy now pay latter
Speaker 11: players are not exactly bumping into each other in a
Speaker 11: hallways trying to convince that last consumer.
Speaker 2: There's lots and lots and lots of greenfield before.
Speaker 11: Competition matters more than just converting folks from credit cards
Speaker 11: onto a firm, And we're making pretty good progress.
Speaker 4: There, Max, really quick.
Speaker 3: I do want you to reflect again on your PayPal
Speaker 3: days and the idea of turning X into a place
Speaker 3: of transactional e commerce. Do you see it as a reality?
Speaker 2: You know, don't ever put anything past you on.
Speaker 11: I think I think he has proven time and time
Speaker 11: again that he can achieve crazy things.
Speaker 2: I do think.
Speaker 11: That the Everything app worked really well in a place
Speaker 11: and a time in a different country. I don't think
Speaker 11: us consumer is looking for a version of a ten
Speaker 11: cent product.
Speaker 3: All right, thanks to a firm CEO Max Levchin, alongside,
Speaker 3: of course Bloomberg Snali Bassett, Happy Friday to you both.
Speaker 3: Right back here in SF, California's largest utility, PG and
Speaker 3: E says it's more prepared than ever for the threat
Speaker 3: of wildfires. The company spent five years modernizing its infrastructure
Speaker 3: in America's most popular state. It's now turning to AI
Speaker 3: to predict and control wildfire impact. Take listen to my
Speaker 3: exclusive interview with PG and E CEO Patti Poppy.
Speaker 12: Ed I think you'd be quite impressed if you could
Speaker 12: see the wildfire science that underpins the activation of the technology.
Speaker 12: The hardware is activated by the software we have that
Speaker 12: data system. We've actually divided up our entire service area
Speaker 12: two thirds of the state of California into two kilometer
Speaker 12: polygons we call them, and we have readings because of
Speaker 12: our weather stations, our high definition cameras that are using
Speaker 12: artificial intelligence to know the difference between fog and smoke.
Speaker 12: That are identifying the fuel, moisture levels, the humidity, the
Speaker 12: wind speed, the temperatures, the grass levels, any open maintenance tags,
Speaker 12: and that two kilometer block, any tree that's within strike
Speaker 12: distance of the line and that two kilometer block. And
Speaker 12: we have technology then that we can activate when the
Speaker 12: conditions are such that a catastrophic wildfire is possible.
Speaker 3: So we're talking about spread modeling essentially trying to predict
Speaker 3: the path that a fire would take if it was
Speaker 3: her cust exactly.
Speaker 12: So we use the spread modeling with this artificial intelligence
Speaker 12: engine in to then activate our hardware on any given.
Speaker 4: Day of the year.
Speaker 12: We have an operation center that's monitoring conditions twenty four
Speaker 12: hours a day, seven days a week, three hundred and
Speaker 12: sixty five days a year, and they monitored those real
Speaker 12: time indicators and then use that AI model to predict
Speaker 12: risk and then we activate our hardening system. We've put
Speaker 12: in layers of protection, including our ten thousand mile undergrounding plan,
Speaker 12: which is sort of old school construction, but it works.
Speaker 12: It's very risk mitigating combined with our technology platform to
Speaker 12: be prepared every single day to prevent the next catastrophic wildfire?
Speaker 4: Do you have to make further investment?
Speaker 3: I mean he talked about it being old school putting
Speaker 3: the cabling underground, but that's how it's worked in the past,
Speaker 3: right above ground cables through a number of factors contributing
Speaker 3: to the.
Speaker 4: Cause of a fire.
Speaker 3: Where else do you have to invest and continue to
Speaker 3: grow your tech play?
Speaker 4: Yeah, well, the.
Speaker 12: Tech play in undergrounding is actually quite excited. We use
Speaker 12: those models and all of that AI to determine what's
Speaker 12: the next best mile to bury. We get lots of
Speaker 12: calls people want us to bury the lines. So a
Speaker 12: lot of people would like this to bury their strategic
Speaker 12: about it. Yes, but we have to use ask that
Speaker 12: risk modeling to determine the best miles, and then we're
Speaker 12: deploying all sorts of new technology to make it way
Speaker 12: less old school. We actually demoed at an investor event
Speaker 12: in San Ramon a couple of maybe a month or
Speaker 12: so ago, what we call at grade undergrounding, utilizing a
Speaker 12: new steel form with a polymer insert with conduit where
Speaker 12: we run the conductor and can bury the lines much
Speaker 12: less deeply right at surface, and it takes a diamond
Speaker 12: cutter to cut through this. So there's infrastructure technology that
Speaker 12: we're deploying, and of course we're deploying all sorts of
Speaker 12: tools to make sure that every minute we spend doing work,
Speaker 12: we're doing it in a smarter way.
Speaker 3: That was PG and Eco Patty Poppy the main takeaway.
Speaker 3: Wildfire risks from equipment ninety four sent less likely now
Speaker 3: than in twenty seventeen because of that tech investment. Check
Speaker 3: out the full interview on bloomberg dot Com.
Speaker 4: Time out for What's going viral?
Speaker 3: Do you remember a scare last year when a man
Speaker 3: in possession of ammunition slipped through a clear screening line
Speaker 3: at Reagan National Airport. While that incident was a catalyst
Speaker 3: to a government pro that uncovered flaws in clears practices,
Speaker 3: at times capturing blurry or obscured images of travelers, Clear
Speaker 3: responded to Bloomberg in a statement saying, quote, it is
Speaker 3: deeply disappointed to us that images were shared with the
Speaker 3: federal government as part of its review.
Speaker 4: We share TSA's on waivering.
Speaker 3: Commitment to aviation security and have proven ourselves a capable
Speaker 3: and trusted partner for more than thirteen years.
Speaker 4: One that everyone's talking about on social Media.
Speaker 7: Now.
Speaker 3: That does it for this edition of Bloomberg Technology. Happy Friday,
Speaker 3: have a good weekend, but don't forget. You can recap
Speaker 3: everything for today's episode in the podcast wherever you get
Speaker 3: your podcast, Apple, Spotify, iHeart, and of course, on the
Speaker 3: Bloomberg platforms Big earning season next week.
Speaker 4: This is Bloomberg Technology.