1 00:00:01,440 --> 00:00:05,320 Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch US Live 2 00:00:05,400 --> 00:00:08,080 Speaker 1: weekdays at ten am Eastern on Apple car Playing and 3 00:00:08,240 --> 00:00:11,080 Speaker 1: Broud Auto with the Bloomberg Business app. Listen on demand 4 00:00:11,160 --> 00:00:15,960 Speaker 1: wherever you get your podcasts, or watch US live on YouTube. 5 00:00:16,560 --> 00:00:19,360 Speaker 2: Something that also is helping equities move higher. Here are 6 00:00:19,520 --> 00:00:22,079 Speaker 2: airlines you got. Delta has been up for the last 7 00:00:22,840 --> 00:00:24,280 Speaker 2: United I should say it's been up for the last 8 00:00:24,320 --> 00:00:27,560 Speaker 2: few days since it reported. You also had Southwest American 9 00:00:27,600 --> 00:00:30,960 Speaker 2: Airlines all kind of beating on earnings. The overall airline 10 00:00:31,000 --> 00:00:34,080 Speaker 2: passenger index is also doing quite well. Hi, Paul, I 11 00:00:34,080 --> 00:00:35,320 Speaker 2: thought no one was traveling anymore. 12 00:00:35,600 --> 00:00:35,960 Speaker 3: I don't know. 13 00:00:36,000 --> 00:00:37,640 Speaker 2: I mean he did, but he's a late bloomer. So 14 00:00:37,680 --> 00:00:40,400 Speaker 2: there's that. Joining us now is George Ferguson. He's a 15 00:00:40,400 --> 00:00:44,600 Speaker 2: Bloomberg Intelligence senior Aerospace, Defense and airlines analyst. George, I 16 00:00:44,880 --> 00:00:46,400 Speaker 2: thought we were going to be looking at twenty twenty 17 00:00:46,440 --> 00:00:49,000 Speaker 2: four weakness because everyone spent their money and they're done traveling. 18 00:00:49,520 --> 00:00:51,600 Speaker 2: What is happening with airline earnings right now? 19 00:00:52,720 --> 00:00:55,040 Speaker 4: I think a lot of it is being driven frankly 20 00:00:55,080 --> 00:00:58,560 Speaker 4: by guidance. Well you know, well some of the excuse me, 21 00:00:58,840 --> 00:01:02,520 Speaker 4: some of the profit reports becoming out better than people expected. 22 00:01:04,319 --> 00:01:07,080 Speaker 4: When I look at yields this morning, you know we 23 00:01:07,160 --> 00:01:11,080 Speaker 4: got American, Alaska, and Southwest yields were down in the 24 00:01:11,120 --> 00:01:14,680 Speaker 4: domestic business on all three. Alaska yields were down six 25 00:01:14,800 --> 00:01:19,959 Speaker 4: or seven percent, American yields down similar number. Southwest really 26 00:01:19,959 --> 00:01:23,240 Speaker 4: just let a load factor fade away into the seventies 27 00:01:23,600 --> 00:01:25,440 Speaker 4: and took a yield down sort of two percent. 28 00:01:26,000 --> 00:01:28,920 Speaker 5: So to me, you know they're guiding to better. 29 00:01:28,720 --> 00:01:31,520 Speaker 4: Results is as you know next year, as we get 30 00:01:31,520 --> 00:01:35,160 Speaker 4: into one actually one queue doesn't kind of doesn't look great, 31 00:01:35,319 --> 00:01:37,640 Speaker 4: but as we get past one queue, the overall guidance 32 00:01:37,640 --> 00:01:40,320 Speaker 4: for the year looks a bit better. So airlines, I think, 33 00:01:40,360 --> 00:01:42,520 Speaker 4: I think things are going to a firm as they 34 00:01:42,520 --> 00:01:44,160 Speaker 4: get into next year. But I don't think it looks 35 00:01:44,160 --> 00:01:46,560 Speaker 4: like a healthy market at all from the numbers I've 36 00:01:46,600 --> 00:01:47,560 Speaker 4: seen QUE four. 37 00:01:48,080 --> 00:01:51,400 Speaker 6: So it's interesting, George, are we give us a sense 38 00:01:51,400 --> 00:01:53,240 Speaker 6: of where we are and just in terms of air travel, 39 00:01:53,400 --> 00:01:57,640 Speaker 6: have we established a new post pandemic normality in terms 40 00:01:57,720 --> 00:02:00,440 Speaker 6: of where leisure traffic is and where business trasse? Do 41 00:02:00,480 --> 00:02:03,720 Speaker 6: we kind of know how that market looks? 42 00:02:03,840 --> 00:02:06,920 Speaker 4: So comments from United where that business traffic wasn't back 43 00:02:07,000 --> 00:02:08,200 Speaker 4: to twenty nineteen levels. 44 00:02:09,080 --> 00:02:11,320 Speaker 5: They said they saw hopeful signs in one queue. 45 00:02:12,160 --> 00:02:15,640 Speaker 4: So yeah, so, as near as we can tell, sorry, 46 00:02:15,880 --> 00:02:19,000 Speaker 4: with some of these results, business hasn't come back fully. 47 00:02:19,480 --> 00:02:21,760 Speaker 5: Is this the new normal? I would guess it is 48 00:02:21,840 --> 00:02:22,639 Speaker 5: right because. 49 00:02:22,400 --> 00:02:25,519 Speaker 4: We're, you know, we're I don't know when the pandemic 50 00:02:25,560 --> 00:02:28,200 Speaker 4: actually sort of ended, but we're probably a year and 51 00:02:28,200 --> 00:02:32,120 Speaker 4: a half past, and I would expect most of you know, 52 00:02:32,400 --> 00:02:35,280 Speaker 4: normality to have returned to our lives. So it seems 53 00:02:35,280 --> 00:02:38,320 Speaker 4: like we still have some level of deficit on pre 54 00:02:38,440 --> 00:02:42,960 Speaker 4: pandemic business travel, but leisure travel has definitely exceeded at 55 00:02:43,080 --> 00:02:46,079 Speaker 4: I think the airlines are just sold capacity. They would 56 00:02:46,120 --> 00:02:48,480 Speaker 4: have sold the businesses into the leisure side, and I 57 00:02:48,480 --> 00:02:49,840 Speaker 4: think that's making the fair softer. 58 00:02:50,680 --> 00:02:53,480 Speaker 2: So you say that the quarter, in that great first 59 00:02:53,560 --> 00:02:55,839 Speaker 2: quarter looks soft. I get that. But then you said 60 00:02:55,880 --> 00:02:58,600 Speaker 2: that after Q one things start to look a little better. 61 00:02:59,200 --> 00:03:01,840 Speaker 2: What's going to look a little better? Is it business travel? 62 00:03:02,000 --> 00:03:04,239 Speaker 2: Is it we just keep doing vacation stuff, we do 63 00:03:04,320 --> 00:03:07,200 Speaker 2: it domestically rather internationally, or is it still across the board. 64 00:03:08,440 --> 00:03:11,600 Speaker 4: I said that after Q one, the airlines, I think 65 00:03:11,639 --> 00:03:14,440 Speaker 4: it's going to look better I don't see it right. 66 00:03:14,480 --> 00:03:17,600 Speaker 4: I think the big leisure bounce back was last year, 67 00:03:18,240 --> 00:03:21,119 Speaker 4: twenty twenty three, and I think that you could see 68 00:03:21,160 --> 00:03:22,600 Speaker 4: software domestic yields all. 69 00:03:22,520 --> 00:03:23,000 Speaker 5: Through the year. 70 00:03:23,639 --> 00:03:26,919 Speaker 4: But you know, we had Scott Kirby at United Airlines 71 00:03:26,960 --> 00:03:30,000 Speaker 4: earning earlier in the week and he's telling us how 72 00:03:30,320 --> 00:03:33,480 Speaker 4: you know, he's getting traction from premium products and that's 73 00:03:33,480 --> 00:03:35,960 Speaker 4: going to help him drive better profitability through next year. 74 00:03:36,840 --> 00:03:42,000 Speaker 4: I mean, you know, companies like Alaska they have premium product, 75 00:03:42,040 --> 00:03:44,840 Speaker 4: but I think they're a roughly the same amount ni United. 76 00:03:44,880 --> 00:03:45,560 Speaker 5: It's adding it. 77 00:03:45,920 --> 00:03:49,760 Speaker 4: Southwest has no premium products, and there's a lot of 78 00:03:49,800 --> 00:03:52,120 Speaker 4: other airlines that have no premium product. And I think 79 00:03:52,160 --> 00:03:55,000 Speaker 4: they're going to be fighting for the base leisure traveler. 80 00:03:55,400 --> 00:03:57,840 Speaker 4: I think it's going to be difficult and jury against 81 00:03:57,840 --> 00:03:59,760 Speaker 4: the airlines, and they could see it coming. 82 00:03:59,760 --> 00:04:03,120 Speaker 6: Starry, George, you're out in Los Angeles the Aerospace Supply 83 00:04:03,400 --> 00:04:07,760 Speaker 6: Chain conference. How is the supply chain for the airline industry? 84 00:04:07,840 --> 00:04:09,280 Speaker 6: Can they get the planes they need? 85 00:04:11,120 --> 00:04:11,680 Speaker 5: That's rough. 86 00:04:12,280 --> 00:04:15,880 Speaker 4: So we saw the news I'm boeing today or I 87 00:04:15,920 --> 00:04:18,560 Speaker 4: guess late last night from the FAA about not allowing 88 00:04:18,600 --> 00:04:23,239 Speaker 4: them to increase the discussion that the Aerospace Supplier Conference 89 00:04:23,320 --> 00:04:25,320 Speaker 4: is all about labor, labor and labor. 90 00:04:25,839 --> 00:04:28,160 Speaker 5: There's been a lot of turnover. Yeah, there's a lot 91 00:04:28,160 --> 00:04:29,279 Speaker 5: of turnover in the industry. 92 00:04:29,920 --> 00:04:33,360 Speaker 4: The backfill needs to be trained, they're not fully trained, 93 00:04:33,400 --> 00:04:35,960 Speaker 4: they're not efficient, and there's still people having a hard 94 00:04:36,000 --> 00:04:40,960 Speaker 4: time finding labor. And so the US aerospace industry is 95 00:04:41,279 --> 00:04:44,839 Speaker 4: in pretty tough tough straits. I think, I think young kids, 96 00:04:44,880 --> 00:04:47,720 Speaker 4: you know, A lot of discussion here is that young kids, 97 00:04:47,760 --> 00:04:50,040 Speaker 4: you know, young professionals don't want to come to this industry. 98 00:04:50,080 --> 00:04:53,560 Speaker 4: They'd rather work for Amazon, they'd rather work for Google 99 00:04:54,040 --> 00:04:56,320 Speaker 4: than go to work in the aerospace industry, and so 100 00:04:56,480 --> 00:04:59,960 Speaker 4: having a real hard time backfilling and training and keeping 101 00:05:00,080 --> 00:05:01,200 Speaker 4: people in the industry. 102 00:05:01,800 --> 00:05:05,600 Speaker 2: So to that point, what happens if Boeing isn't allowed 103 00:05:05,640 --> 00:05:09,000 Speaker 2: to produce the plane that the FAA said, I can't 104 00:05:09,000 --> 00:05:11,200 Speaker 2: even treat keep track, to be honest with you. But 105 00:05:11,440 --> 00:05:13,680 Speaker 2: if they can't produce it, what happens to those that 106 00:05:13,760 --> 00:05:14,520 Speaker 2: have ordered it? 107 00:05:16,440 --> 00:05:16,800 Speaker 5: Okay? 108 00:05:16,880 --> 00:05:19,359 Speaker 4: So I mean right now, what the fa said is 109 00:05:19,360 --> 00:05:22,839 Speaker 4: that Boeing can't increase production, right, increase of the minutes 110 00:05:23,440 --> 00:05:26,159 Speaker 4: they're already building. They were building about thirty one a 111 00:05:26,200 --> 00:05:28,680 Speaker 4: month last year. They were supposed to rate break to 112 00:05:28,680 --> 00:05:29,839 Speaker 4: about thirty eight. 113 00:05:29,680 --> 00:05:30,800 Speaker 5: A month at the end of the year. 114 00:05:31,240 --> 00:05:34,360 Speaker 4: The question is have they so will the FA let 115 00:05:34,400 --> 00:05:37,000 Speaker 4: them continue at thirty eight? And then as I understand 116 00:05:37,040 --> 00:05:40,800 Speaker 4: that the FA is going to inspect their manufacturing processes 117 00:05:41,240 --> 00:05:44,880 Speaker 4: because they're quite concerned obviously after the Alaska incident, to 118 00:05:45,040 --> 00:05:47,960 Speaker 4: make sure it's stable, make sure that Bone can build 119 00:05:48,000 --> 00:05:51,440 Speaker 4: aircraft safely. So my guess is you got something that's 120 00:05:51,440 --> 00:05:54,400 Speaker 4: going to last part of this quarter. I mean, there's 121 00:05:54,440 --> 00:05:57,360 Speaker 4: only so many sites that can really inspect or You've 122 00:05:57,360 --> 00:06:00,040 Speaker 4: got a lot of inspection down in which Chitah, a 123 00:06:00,040 --> 00:06:01,040 Speaker 4: lot of inspection. 124 00:06:00,720 --> 00:06:02,080 Speaker 5: Up in Renton, Washington. 125 00:06:02,520 --> 00:06:05,120 Speaker 4: Those are the two main factories they f they could 126 00:06:05,120 --> 00:06:07,800 Speaker 4: go deeper into so many other suppliers, which they probably will, 127 00:06:08,200 --> 00:06:10,880 Speaker 4: but there's not a lot of sites to inspect. My 128 00:06:11,000 --> 00:06:14,360 Speaker 4: guess is that deliveries for customers that expect the airplanes 129 00:06:14,400 --> 00:06:17,760 Speaker 4: in twenty twenty four could get pushed out, probably will 130 00:06:17,800 --> 00:06:21,039 Speaker 4: get pushed out, maybe into twenty twenty five. Could be 131 00:06:21,080 --> 00:06:27,560 Speaker 4: customers core customers like United Southwest, Ryanair, Alaska Airlines, they 132 00:06:27,760 --> 00:06:30,520 Speaker 4: take the majority of the orders recently, so you'll hear 133 00:06:30,560 --> 00:06:33,240 Speaker 4: some howling from them. I think you already heard some 134 00:06:33,320 --> 00:06:37,920 Speaker 4: howling from United CEO Kirby right on the Max ten. 135 00:06:39,120 --> 00:06:40,400 Speaker 4: So I think that's what's going to happen. You go 136 00:06:40,440 --> 00:06:43,040 Speaker 4: to see deliveries get pushed out and pushed into next year. 137 00:06:43,600 --> 00:06:46,839 Speaker 4: Hopefully Bowling can recover that and bounce to higher rates. 138 00:06:46,880 --> 00:06:48,320 Speaker 4: That's all about their recovery. 139 00:06:48,680 --> 00:06:51,840 Speaker 6: So, I mean, the Boeing stock is off five point 140 00:06:51,880 --> 00:06:54,080 Speaker 6: eight percent today on the news, off twenty two and 141 00:06:54,120 --> 00:06:56,720 Speaker 6: a half percent year to date here, So the street 142 00:06:56,800 --> 00:07:01,000 Speaker 6: is really concerned, George, I mean, is there a I 143 00:07:01,080 --> 00:07:02,760 Speaker 6: mean I just kind of feel like they're kind of 144 00:07:02,760 --> 00:07:04,800 Speaker 6: too big to fail. They're too big for anybody to 145 00:07:04,800 --> 00:07:07,120 Speaker 6: really do anything because it's a daopoly them an airbus. 146 00:07:07,120 --> 00:07:10,040 Speaker 6: But are there some what is it like a downside 147 00:07:10,080 --> 00:07:13,240 Speaker 6: scenario here for Fox? It would it be government regulation? 148 00:07:13,640 --> 00:07:16,800 Speaker 6: Would it be what's kind of spooking the market? 149 00:07:17,880 --> 00:07:20,080 Speaker 4: Well, I think you already have part of that downside right, 150 00:07:20,120 --> 00:07:23,120 Speaker 4: and that's more intense oversighting regulation. 151 00:07:24,000 --> 00:07:26,000 Speaker 5: Frankly, that probably should have occurred anyways. 152 00:07:26,520 --> 00:07:28,640 Speaker 4: You know, the FAA has also going through some difficult 153 00:07:28,680 --> 00:07:32,000 Speaker 4: times during the pandemic, lost a bunch of personnel they 154 00:07:32,040 --> 00:07:37,400 Speaker 4: need their skill sets developed sharpened, so this process could 155 00:07:37,400 --> 00:07:40,120 Speaker 4: be slow. But I don't I mean, I do think 156 00:07:40,160 --> 00:07:43,240 Speaker 4: they're you know, I think they are close to too 157 00:07:43,280 --> 00:07:44,800 Speaker 4: big to fail, given that there's such an. 158 00:07:44,680 --> 00:07:47,160 Speaker 5: Important government contractor. 159 00:07:47,360 --> 00:07:50,000 Speaker 4: You know, one of the few big primes that can 160 00:07:50,040 --> 00:07:52,680 Speaker 4: make airplanes in serial production. 161 00:07:54,280 --> 00:07:54,679 Speaker 5: Questions. 162 00:07:54,880 --> 00:07:56,320 Speaker 4: You know, what could the government do if they had 163 00:07:56,360 --> 00:07:59,000 Speaker 4: real big problems on the commercial side. I don't think 164 00:07:59,040 --> 00:08:01,600 Speaker 4: we're there yet, though, I think it still is at duopoly. 165 00:08:01,920 --> 00:08:03,160 Speaker 4: If you wanted to get in the back of the 166 00:08:03,200 --> 00:08:06,480 Speaker 4: line for an Airbus eight three twenty the competitor right now. 167 00:08:07,280 --> 00:08:10,080 Speaker 4: You know, if we just add up all the orders 168 00:08:10,120 --> 00:08:12,679 Speaker 4: they have in their production increases, you're. 169 00:08:12,520 --> 00:08:15,560 Speaker 5: Out eight years. I think some of those orders are 170 00:08:15,560 --> 00:08:16,680 Speaker 5: definitely long data orders. 171 00:08:16,680 --> 00:08:18,680 Speaker 4: So maybe if you got in the back of that line, 172 00:08:18,720 --> 00:08:20,760 Speaker 4: you'd be out five or six years before you started 173 00:08:20,760 --> 00:08:24,400 Speaker 4: getting airplanes. That alone is going to keep Boeing, keep 174 00:08:24,440 --> 00:08:28,200 Speaker 4: folks going towards Boeing for airplanes. But that's only if 175 00:08:28,360 --> 00:08:31,120 Speaker 4: things don't degrade from air. Things degrave from air. You 176 00:08:31,200 --> 00:08:32,200 Speaker 4: got a much bigger. 177 00:08:31,880 --> 00:08:35,640 Speaker 2: Problem, George. You have like forty seconds. But for an 178 00:08:35,679 --> 00:08:37,560 Speaker 2: airline that was supposed to get a plane, that's not 179 00:08:37,640 --> 00:08:40,360 Speaker 2: getting it. Can they do they have other planes that 180 00:08:40,440 --> 00:08:42,600 Speaker 2: can suffice for them or are they going to be 181 00:08:42,640 --> 00:08:43,360 Speaker 2: in the hot seat. 182 00:08:44,840 --> 00:08:46,880 Speaker 4: So I think you're going to see the airlines holding 183 00:08:46,880 --> 00:08:49,400 Speaker 4: on to their older aircraft. If they have older aircraft, 184 00:08:49,600 --> 00:08:52,080 Speaker 4: will fly them longer. It's been good for the maintenance business. 185 00:08:52,440 --> 00:08:55,360 Speaker 4: If they don't, they'll have to shut down some of 186 00:08:55,360 --> 00:08:56,920 Speaker 4: their schedule will not fly as much. 187 00:08:57,679 --> 00:09:01,480 Speaker 5: That could you want a airline in twenty twenty four? 188 00:09:02,960 --> 00:09:05,520 Speaker 3: All right, George Ferguson, Thank you so much. We appreciate that. 189 00:09:05,720 --> 00:09:08,800 Speaker 6: George Ferguson, he's a senior aerospace, defense and airlines analysts 190 00:09:08,800 --> 00:09:09,800 Speaker 6: Bloomberg Intelligence. 191 00:09:11,520 --> 00:09:15,400 Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live 192 00:09:15,480 --> 00:09:19,000 Speaker 1: weekdays at ten am Eastern on applecar Play and Android 193 00:09:19,040 --> 00:09:21,800 Speaker 1: Auto with the Bloomberg Business app. You can also listen 194 00:09:21,920 --> 00:09:25,000 Speaker 1: live on Amazon Alexa from our flagship New York station, 195 00:09:25,400 --> 00:09:28,880 Speaker 1: Just say Alexa play Bloomberg eleven thirty. 196 00:09:29,720 --> 00:09:32,040 Speaker 6: One of the big drivers, as Nor was just reporting, 197 00:09:32,160 --> 00:09:35,000 Speaker 6: was ibm Our good Friends in ARMANC, New York, great 198 00:09:35,040 --> 00:09:38,120 Speaker 6: headquarters by the way up in ARMONK. This stock's a 199 00:09:38,240 --> 00:09:40,000 Speaker 6: big I mean it's close to when all time height. 200 00:09:40,000 --> 00:09:42,280 Speaker 6: It's at a fifty two week high. I'm going to 201 00:09:42,320 --> 00:09:45,079 Speaker 6: break out what's driving our good friends at IBM. On 202 00:09:45,320 --> 00:09:48,760 Speaker 6: rog Rana, he joins us. He covers set technology for 203 00:09:48,800 --> 00:09:51,120 Speaker 6: Bloomberg Intelligence and turns out he's pretty good at it. 204 00:09:52,600 --> 00:09:55,400 Speaker 6: On rug, you've been following Tessa for a long time, 205 00:09:55,440 --> 00:09:58,120 Speaker 6: give us the give us the bulk case for Tesla 206 00:09:58,160 --> 00:09:58,480 Speaker 6: right here. 207 00:09:58,520 --> 00:10:00,120 Speaker 3: That market really seems to like what they say on 208 00:10:00,120 --> 00:10:01,000 Speaker 3: the earnings last night. 209 00:10:01,280 --> 00:10:03,160 Speaker 7: So for IBM, you know, one of the biggest things 210 00:10:03,160 --> 00:10:06,160 Speaker 7: we talked about yesterday was the free cash flow number 211 00:10:06,520 --> 00:10:08,840 Speaker 7: came out at twelve billion. I think we were you know, 212 00:10:08,840 --> 00:10:11,439 Speaker 7: we were slightly above the street and saying that, you know, 213 00:10:11,480 --> 00:10:13,360 Speaker 7: I'll be happy if they do eleven billion. So I 214 00:10:13,400 --> 00:10:16,520 Speaker 7: think that really speaks both to the organic growth rate 215 00:10:16,600 --> 00:10:21,520 Speaker 7: of the company, operational efficiencies, you know, improving margins, taking 216 00:10:21,559 --> 00:10:24,560 Speaker 7: care of accounts, receivers, all sorts of things. So I 217 00:10:24,559 --> 00:10:27,880 Speaker 7: think it's really good print for IBM in terms of 218 00:10:27,880 --> 00:10:30,720 Speaker 7: free cash flow, but also the you know, the guidance 219 00:10:30,840 --> 00:10:34,920 Speaker 7: on the you know, organic growth rate because we were 220 00:10:34,920 --> 00:10:37,240 Speaker 7: going in so in fourth quarter they did three percent 221 00:10:37,280 --> 00:10:39,840 Speaker 7: growth rate in constant currency. We thought at least for 222 00:10:39,880 --> 00:10:41,840 Speaker 7: the first you know, a few quarters, they're going to 223 00:10:41,840 --> 00:10:44,360 Speaker 7: talk about three to four percent and then accel rate, 224 00:10:44,400 --> 00:10:47,040 Speaker 7: but they strayed away went with a mid single digit number. 225 00:10:47,120 --> 00:10:49,840 Speaker 7: So I think overall, good for IBM, good for the 226 00:10:49,880 --> 00:10:52,640 Speaker 7: rest of the tech space, and I feel pretty happy 227 00:10:52,679 --> 00:10:53,120 Speaker 7: about it. 228 00:10:54,120 --> 00:10:56,000 Speaker 2: What I know, this is kind of a probably dumb question, 229 00:10:56,080 --> 00:10:58,320 Speaker 2: but like what in IBM's business model to let it 230 00:10:58,440 --> 00:11:00,959 Speaker 2: like me, are they doing well? Like break down the 231 00:11:00,960 --> 00:11:03,000 Speaker 2: different categories in a way that makes sense to Alex 232 00:11:03,760 --> 00:11:04,240 Speaker 2: So they. 233 00:11:04,240 --> 00:11:06,640 Speaker 7: I mean, they still are a very big piece of 234 00:11:06,760 --> 00:11:09,880 Speaker 7: the entire tech ecosystem. They have very strong relationships, they 235 00:11:09,920 --> 00:11:12,600 Speaker 7: have a good consulting business, they have red hat, they 236 00:11:12,720 --> 00:11:15,440 Speaker 7: tell mainframes. Now, remember one thing, I mean, I know 237 00:11:15,480 --> 00:11:19,120 Speaker 7: people got very getting very excited, but if software spending 238 00:11:19,200 --> 00:11:22,520 Speaker 7: is climbing between ten to twelve percent, IBM still growing 239 00:11:22,679 --> 00:11:25,079 Speaker 7: you know, six to seven. So they are still underperforming 240 00:11:25,320 --> 00:11:28,600 Speaker 7: the entire broader software space. But that's okay because you know, 241 00:11:28,640 --> 00:11:31,280 Speaker 7: when you go from three to six, that's a big change. 242 00:11:31,320 --> 00:11:34,160 Speaker 7: Also in terms of the growth rates. This is just 243 00:11:34,280 --> 00:11:37,160 Speaker 7: a matter of overall tech spending improving after two years 244 00:11:37,160 --> 00:11:39,480 Speaker 7: of under investment. This is something that we have been 245 00:11:39,520 --> 00:11:42,240 Speaker 7: saying for so long. Tick as a portion of total 246 00:11:42,360 --> 00:11:45,400 Speaker 7: GDP is a very small number. Most of the companies 247 00:11:45,440 --> 00:11:48,520 Speaker 7: around the world, barring the consumer technology companies that we see, 248 00:11:48,720 --> 00:11:53,480 Speaker 7: have underinvested in technology. So when you have rail companies 249 00:11:53,600 --> 00:11:56,880 Speaker 7: or airlines or auto insurance companies, they really need to 250 00:11:56,880 --> 00:11:59,520 Speaker 7: be more digital. And one way to get digital is 251 00:11:59,559 --> 00:12:02,200 Speaker 7: to move a lot of their infrastructure in the cloud. 252 00:12:02,360 --> 00:12:04,520 Speaker 7: So all of those things play in well. We have 253 00:12:04,640 --> 00:12:07,080 Speaker 7: not seen good spending in two years. I'm pretty happy 254 00:12:07,160 --> 00:12:10,040 Speaker 7: that twenty twenty four May we may see a rebound. 255 00:12:10,760 --> 00:12:15,800 Speaker 6: So Anaur, how does IBM and fit into the AI discussion, 256 00:12:16,120 --> 00:12:19,160 Speaker 6: because I know the CEO called out the client demand 257 00:12:19,160 --> 00:12:20,960 Speaker 6: for AI is accelerating. 258 00:12:21,520 --> 00:12:22,720 Speaker 3: How do they play in that space. 259 00:12:23,559 --> 00:12:25,480 Speaker 7: The majority of the stuff that they're going to do 260 00:12:25,600 --> 00:12:27,319 Speaker 7: is on the consulting side. So if you are a 261 00:12:27,400 --> 00:12:29,400 Speaker 7: large company, you need to figure out what to do. 262 00:12:29,679 --> 00:12:31,520 Speaker 7: They have a lot of consultants that can help you 263 00:12:31,600 --> 00:12:34,679 Speaker 7: clean up the data. You know, use whichever model we 264 00:12:34,760 --> 00:12:36,400 Speaker 7: want to use. You want to use something from open 265 00:12:36,440 --> 00:12:39,320 Speaker 7: AI Andthropic, all these companies that are out there. They'll 266 00:12:39,360 --> 00:12:41,960 Speaker 7: help you with that, help you train the models, and 267 00:12:42,000 --> 00:12:43,960 Speaker 7: then at the end of the day make it for 268 00:12:44,040 --> 00:12:46,839 Speaker 7: your business case. It's not as easy as just you know, 269 00:12:47,000 --> 00:12:51,000 Speaker 7: using chat GPD and answering questions. For this, for an 270 00:12:51,120 --> 00:12:53,480 Speaker 7: enterprise use, you need to do a lot of data 271 00:12:53,520 --> 00:12:56,920 Speaker 7: clean up, data aggregation, because that's what's needed to clean 272 00:12:57,000 --> 00:12:59,120 Speaker 7: up your you know, the models itself. 273 00:13:00,240 --> 00:13:02,040 Speaker 2: And long can that kind of growth rate of six 274 00:13:02,120 --> 00:13:03,400 Speaker 2: seven percent go? 275 00:13:04,800 --> 00:13:06,560 Speaker 7: I think if this year they are able to go 276 00:13:06,679 --> 00:13:09,199 Speaker 7: to six seven percent, you know, I could expect then 277 00:13:09,360 --> 00:13:11,319 Speaker 7: you know, another one hundred to two hundred basis points 278 00:13:11,360 --> 00:13:14,320 Speaker 7: improvement next year. And that's actually not a bad deal 279 00:13:14,360 --> 00:13:16,719 Speaker 7: because you remember the old IBM just about four or 280 00:13:16,760 --> 00:13:19,200 Speaker 7: five years ago, they were not growing at all. So 281 00:13:19,360 --> 00:13:22,079 Speaker 7: in order for them to actually come up with a 282 00:13:22,160 --> 00:13:25,000 Speaker 7: high single legit number next year would be would be 283 00:13:25,080 --> 00:13:26,800 Speaker 7: really welcome by the market. 284 00:13:27,080 --> 00:13:30,200 Speaker 6: So what's the read through here, Ana rog for you know, 285 00:13:30,320 --> 00:13:31,680 Speaker 6: greater tech here from IBM? 286 00:13:31,720 --> 00:13:33,439 Speaker 3: As can I can? 287 00:13:33,480 --> 00:13:35,000 Speaker 6: I say, I'm just going to go out and start 288 00:13:35,200 --> 00:13:37,000 Speaker 6: buying more of these stands I'm looking at like Nvidia 289 00:13:37,040 --> 00:13:39,079 Speaker 6: for example, up one and a half percent today of 290 00:13:39,200 --> 00:13:40,960 Speaker 6: twenty five percent year to date, and of course up 291 00:13:40,960 --> 00:13:43,240 Speaker 6: two hundred and twenty percent over the trailing twelve months. 292 00:13:43,760 --> 00:13:45,360 Speaker 3: I guess this is a pretty good readthrough. Is that 293 00:13:45,440 --> 00:13:45,960 Speaker 3: can I do that? 294 00:13:46,679 --> 00:13:48,920 Speaker 7: Yeah, So for you know, we had run a CIO 295 00:13:49,000 --> 00:13:51,280 Speaker 7: survey back in December, and you know, we were we 296 00:13:51,800 --> 00:13:54,120 Speaker 7: kind of got the indication that it's going to be 297 00:13:54,200 --> 00:13:57,160 Speaker 7: a year of spending more aggressively compared to the last 298 00:13:57,160 --> 00:13:59,680 Speaker 7: two in twenty twenty four. But you know, the way 299 00:13:59,679 --> 00:14:01,719 Speaker 7: we have built that and you know, we got the 300 00:14:01,800 --> 00:14:04,680 Speaker 7: chip strength going on right now that probably carries on 301 00:14:04,760 --> 00:14:07,520 Speaker 7: till the summer, and then after that we see you know, 302 00:14:07,559 --> 00:14:10,240 Speaker 7: strength in the software and the and the consulting area, 303 00:14:10,280 --> 00:14:12,800 Speaker 7: which are more of the downstream play. But it's possible 304 00:14:12,880 --> 00:14:15,040 Speaker 7: that we may see that bounce back, you know, as 305 00:14:15,040 --> 00:14:17,600 Speaker 7: early as second quarter or you know, going into it 306 00:14:17,640 --> 00:14:20,880 Speaker 7: because you know things, I think the leading indicators are 307 00:14:20,880 --> 00:14:24,360 Speaker 7: good at this point. So so I'm pretty optimistic that 308 00:14:24,480 --> 00:14:26,560 Speaker 7: you know, when we were thinking about a second half 309 00:14:26,560 --> 00:14:30,000 Speaker 7: recovery for tech spending, you know, it may actually happen 310 00:14:30,000 --> 00:14:32,440 Speaker 7: in second quarter or maybe even as late late as 311 00:14:32,680 --> 00:14:33,240 Speaker 7: first quarter. 312 00:14:33,400 --> 00:14:36,000 Speaker 2: What are the derivative players from IBM, their suppliers that 313 00:14:36,080 --> 00:14:36,760 Speaker 2: kind of trade. 314 00:14:37,320 --> 00:14:40,120 Speaker 7: Yeah, so you have you know, companies on the services sides. 315 00:14:40,200 --> 00:14:43,840 Speaker 7: You have companies like Excenture, you have Capturemini in Europe, 316 00:14:43,880 --> 00:14:46,680 Speaker 7: you have TCS, and infests in India. So those are 317 00:14:46,720 --> 00:14:49,200 Speaker 7: the four big ones for the consulting side. On the 318 00:14:49,240 --> 00:14:51,880 Speaker 7: software side, I think this bodes well for everybody, whether 319 00:14:51,920 --> 00:14:57,680 Speaker 7: it's you know, Microsoft Aws Service Now, Sales Force, Workday, 320 00:14:57,800 --> 00:15:00,240 Speaker 7: you know, you know, the big software vendors, all of 321 00:15:00,240 --> 00:15:03,560 Speaker 7: them should see some downstream effect if we if you know, 322 00:15:03,600 --> 00:15:05,800 Speaker 7: text spending does recover this year. 323 00:15:06,080 --> 00:15:09,520 Speaker 6: All right, let's preview Microsoft here. I mean again, the 324 00:15:09,520 --> 00:15:13,600 Speaker 6: stoctors hit a three trillion dollar market capitalization, which got 325 00:15:13,600 --> 00:15:16,120 Speaker 6: a lot of people's attention. What's kind of the story 326 00:15:16,120 --> 00:15:16,960 Speaker 6: here for Microsoft? 327 00:15:17,560 --> 00:15:20,040 Speaker 7: Yeah, I mean it's a very similar story. We recently 328 00:15:20,040 --> 00:15:22,440 Speaker 7: published a piece today that says, you know, there is 329 00:15:22,480 --> 00:15:24,920 Speaker 7: going to be a bigger delta between Microsoft and Apple's 330 00:15:24,920 --> 00:15:27,960 Speaker 7: growth rate going forward, and large portion of that is 331 00:15:28,600 --> 00:15:30,960 Speaker 7: an improvement in the cloud and the other product growth 332 00:15:31,040 --> 00:15:33,200 Speaker 7: rate in the second half. Now, if you look at 333 00:15:33,240 --> 00:15:36,240 Speaker 7: the you know, the Bloomberg terminal and look at the 334 00:15:36,240 --> 00:15:39,440 Speaker 7: function EM ten, you will see that Microsoft growth rate 335 00:15:39,480 --> 00:15:42,720 Speaker 7: has picked up for the next four quarters. But majority 336 00:15:42,720 --> 00:15:45,040 Speaker 7: of that is because of the activation deal. If you 337 00:15:45,160 --> 00:15:48,080 Speaker 7: peel through that and you know, look at it organic 338 00:15:48,120 --> 00:15:50,800 Speaker 7: growth rate, Street is still expecting that eleven to twelve 339 00:15:50,840 --> 00:15:53,760 Speaker 7: percent over the next four quarters. We think that's going 340 00:15:53,760 --> 00:15:56,360 Speaker 7: to change. We think the second half that growth actual 341 00:15:56,440 --> 00:15:59,600 Speaker 7: rates to you know, thirteen percent or so, and that's 342 00:15:59,600 --> 00:16:03,240 Speaker 7: because of the reasons that we mentioned above that after 343 00:16:03,280 --> 00:16:07,000 Speaker 7: two years, companies are finally spending and one of the 344 00:16:07,000 --> 00:16:10,600 Speaker 7: things we saw was if you have a cloud business infrastructure, 345 00:16:11,040 --> 00:16:13,920 Speaker 7: then you can reduce your usage because that helps you 346 00:16:14,000 --> 00:16:16,080 Speaker 7: reduce your costs, and that's what a lot of the 347 00:16:16,080 --> 00:16:18,440 Speaker 7: companies have done over the last two years. We think 348 00:16:18,480 --> 00:16:21,560 Speaker 7: that's going to take a reversal this year. On top 349 00:16:21,640 --> 00:16:25,120 Speaker 7: of that, Microsoft should get more benefit of their relationship 350 00:16:25,120 --> 00:16:28,560 Speaker 7: with open Ai because their open Ai is back end infrastructure, 351 00:16:28,600 --> 00:16:31,600 Speaker 7: so I think that's also contributes. So we are expecting, 352 00:16:31,720 --> 00:16:33,720 Speaker 7: you know, growth rates to pick up for Microsoft in 353 00:16:33,720 --> 00:16:34,360 Speaker 7: the second half. 354 00:16:34,920 --> 00:16:38,960 Speaker 2: IMM trades at twenty estimated times PE and you're taking 355 00:16:38,960 --> 00:16:42,240 Speaker 2: a look at Microsoft trades like thirty five. Are these 356 00:16:42,240 --> 00:16:43,480 Speaker 2: accurately valued here? 357 00:16:44,400 --> 00:16:46,360 Speaker 7: I think it's it's a very tough question to say, 358 00:16:46,360 --> 00:16:48,520 Speaker 7: because you know, frankly speaking, I do not know if 359 00:16:48,560 --> 00:16:51,920 Speaker 7: IBM will ever catch up to the software industry growth 360 00:16:52,000 --> 00:16:54,360 Speaker 7: rates because they have two units in there that you know, 361 00:16:54,440 --> 00:16:57,440 Speaker 7: may may be able to bring it down. But Microsoft, 362 00:16:57,480 --> 00:16:59,840 Speaker 7: you know, one could argue being almost one third of 363 00:16:59,880 --> 00:17:02,680 Speaker 7: the software market, such a big company, it's still growing 364 00:17:02,680 --> 00:17:06,080 Speaker 7: twelve thirteen, fourteen percent. That's a that's a pretty big number. 365 00:17:06,160 --> 00:17:09,159 Speaker 7: And you can't really say that about any you know, 366 00:17:09,280 --> 00:17:12,720 Speaker 7: large tech company in terms of high growth margin and 367 00:17:12,840 --> 00:17:15,520 Speaker 7: high growth rate. It's very unusual to see that. 368 00:17:16,359 --> 00:17:19,040 Speaker 6: All right, Honor Agrana, thank you so much for joining us. 369 00:17:19,080 --> 00:17:23,399 Speaker 6: As always on Ragrana senior technology analyst for Bloomberg Intelligence, 370 00:17:23,600 --> 00:17:27,560 Speaker 6: coming to us from the technology capital that is, of course, Chicago, Illinois. 371 00:17:28,840 --> 00:17:32,720 Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live 372 00:17:32,800 --> 00:17:36,120 Speaker 1: weekdays at ten am Eastern on Appocarplay and Android Otto 373 00:17:36,200 --> 00:17:39,119 Speaker 1: with the Bloomberg Business app. Listen on demand wherever you 374 00:17:39,200 --> 00:17:42,880 Speaker 1: get your podcasts, or watch us live on YouTube. 375 00:17:43,600 --> 00:17:47,760 Speaker 6: Look at Tesla stocks down ten percent for most companies, 376 00:17:47,760 --> 00:17:49,800 Speaker 6: that would be tragic, but this is like another just 377 00:17:49,840 --> 00:17:52,320 Speaker 6: an average day for the volatility of this stock over 378 00:17:52,359 --> 00:17:52,760 Speaker 6: the years. 379 00:17:52,800 --> 00:17:55,399 Speaker 3: But again some fundamental concerns coming out of their earnings 380 00:17:55,440 --> 00:17:55,760 Speaker 3: last night. 381 00:17:55,840 --> 00:17:57,560 Speaker 6: That's where we want to start in the tech space today, 382 00:17:57,680 --> 00:17:59,600 Speaker 6: and we can do that with none better than Dan Ives, 383 00:17:59,600 --> 00:18:02,600 Speaker 6: Managing Director and senior equity analyst a web Buch Securities 384 00:18:02,880 --> 00:18:05,760 Speaker 6: joining us live here in our Bloomberg Interactive Broker studio. 385 00:18:05,800 --> 00:18:08,600 Speaker 6: So Dan, thanks so much for joining us here with Tesla. 386 00:18:08,920 --> 00:18:11,040 Speaker 6: And it's not just a Tesla sory, it's an EV story. 387 00:18:11,200 --> 00:18:14,399 Speaker 6: There's real concern in there about end of market demand 388 00:18:14,520 --> 00:18:17,680 Speaker 6: for evs. Did Tesla help us off last night or 389 00:18:17,680 --> 00:18:19,480 Speaker 6: maybe not so much on that particular issue. 390 00:18:19,520 --> 00:18:22,480 Speaker 8: Look, I think it was a train wreck conference call. 391 00:18:22,880 --> 00:18:25,960 Speaker 3: And is that a train wreck elon Musk? 392 00:18:26,080 --> 00:18:30,000 Speaker 8: Yeah, I would call this just a train wreck conference call, 393 00:18:30,200 --> 00:18:33,920 Speaker 8: even for Musk, because the problem here is that it's 394 00:18:33,960 --> 00:18:36,760 Speaker 8: actually not even so much demand issue. It's about the 395 00:18:36,760 --> 00:18:41,960 Speaker 8: price wars, okay, and not giving guidance, not giving strategic goalposts. Look, 396 00:18:42,000 --> 00:18:45,680 Speaker 8: the dream AI, we're a huge believers disruptive tech where 397 00:18:45,680 --> 00:18:48,480 Speaker 8: this is all going. But in the near term, when 398 00:18:48,480 --> 00:18:51,800 Speaker 8: the plane's crashing, people not focus on salt or on 399 00:18:51,920 --> 00:18:56,120 Speaker 8: salted Prenzels. And that's the problem here that's happening on 400 00:18:56,200 --> 00:18:58,959 Speaker 8: that call because of the price wars in China. 401 00:18:59,119 --> 00:19:03,080 Speaker 2: Well, it did Tesla miss a trick by not spending 402 00:19:03,119 --> 00:19:05,600 Speaker 2: more money making a cheaper car, no doubt. 403 00:19:05,680 --> 00:19:09,879 Speaker 8: I mean, like, if ideally right now, we'd have a 404 00:19:09,920 --> 00:19:11,280 Speaker 8: sub thirty thousand, Yeah. 405 00:19:11,119 --> 00:19:14,000 Speaker 2: Exactly, have a cyber truck that no one on city 406 00:19:14,040 --> 00:19:14,760 Speaker 2: street can park. 407 00:19:15,119 --> 00:19:17,639 Speaker 8: Look, I mean, but that's one of the balances because 408 00:19:17,680 --> 00:19:21,280 Speaker 8: they have to also go innovative, high end. You can 409 00:19:21,480 --> 00:19:25,399 Speaker 8: just be low cost and the technology here it's taken time. 410 00:19:25,480 --> 00:19:27,879 Speaker 8: I mean, you really had to have a Mexico facility. 411 00:19:27,880 --> 00:19:30,680 Speaker 8: You have to build out Austin. In terms of from 412 00:19:30,680 --> 00:19:34,879 Speaker 8: a gigafactory perspective, they are Look, they're doubling down. EV's 413 00:19:35,160 --> 00:19:38,320 Speaker 8: where Detroit and others are peeling back. No one argues 414 00:19:38,320 --> 00:19:41,919 Speaker 8: with the strategy longer term, but from an investor perspective, 415 00:19:41,960 --> 00:19:44,560 Speaker 8: a lot more questions and answers. And that's why I 416 00:19:44,600 --> 00:19:46,240 Speaker 8: think it was a little bit of a black eye 417 00:19:46,320 --> 00:19:48,320 Speaker 8: last night in terms of a call from Musk. 418 00:19:48,480 --> 00:19:52,639 Speaker 6: So where is the company in terms of communicating the 419 00:19:52,680 --> 00:19:55,440 Speaker 6: real on the ground situation in China? 420 00:19:55,800 --> 00:19:57,640 Speaker 3: What do they really think China can be for them? 421 00:19:57,880 --> 00:20:01,600 Speaker 8: Oktail two cities, the demand inside I think I actually 422 00:20:01,640 --> 00:20:06,000 Speaker 8: stabilized to They've gained some net share. Clearly BID is 423 00:20:06,359 --> 00:20:09,800 Speaker 8: really the formerable competitor there. But then it comes down 424 00:20:09,840 --> 00:20:12,359 Speaker 8: to the price war and that's Look, that's the crux 425 00:20:12,359 --> 00:20:12,840 Speaker 8: of everything. 426 00:20:12,960 --> 00:20:14,480 Speaker 3: Is there a price work just in Japan? Are we 427 00:20:14,520 --> 00:20:15,680 Speaker 3: talking kind of globally here? 428 00:20:15,840 --> 00:20:18,800 Speaker 8: I'd say globally, but the heart of the price war 429 00:20:19,000 --> 00:20:19,679 Speaker 8: is in China. 430 00:20:19,720 --> 00:20:20,840 Speaker 3: Okay, And with. 431 00:20:20,920 --> 00:20:24,280 Speaker 8: Price war, you've already had prices come down twenty twenty 432 00:20:24,280 --> 00:20:27,160 Speaker 8: five percent. You wanted to see last night a line 433 00:20:27,160 --> 00:20:29,359 Speaker 8: in the sand. Okay, we'll cut around the edges, but 434 00:20:29,480 --> 00:20:31,680 Speaker 8: we feel like most of that's in the rear view, 435 00:20:32,080 --> 00:20:35,240 Speaker 8: left the door open, and that's that's the frustration here. 436 00:20:35,520 --> 00:20:38,360 Speaker 8: This is really a more of a margin declining story 437 00:20:38,480 --> 00:20:40,879 Speaker 8: rather than a demand falling off story. 438 00:20:42,080 --> 00:20:45,040 Speaker 2: I have to say, Dan, this sounds like you're a 439 00:20:45,040 --> 00:20:47,639 Speaker 2: little bit cautious on Tesla. I always think of you 440 00:20:47,680 --> 00:20:50,080 Speaker 2: as like the tech bowl, like, no matter what, you 441 00:20:50,160 --> 00:20:52,960 Speaker 2: get to find the silver lining. Like this feels like 442 00:20:52,960 --> 00:20:53,520 Speaker 2: a big moment. 443 00:20:53,800 --> 00:20:56,680 Speaker 8: Look, I think it's I'll call it. It's another inflection 444 00:20:56,840 --> 00:21:00,240 Speaker 8: point where we've had over the last decade period. It's 445 00:21:00,280 --> 00:21:03,840 Speaker 8: where backwards against the wall, how you're going to perform 446 00:21:04,080 --> 00:21:06,320 Speaker 8: And this is another one of those. So the long terms, 447 00:21:06,440 --> 00:21:10,240 Speaker 8: to your point, the long term story decade long, it's there. 448 00:21:10,720 --> 00:21:13,040 Speaker 8: But also you can't be smoking mirror, right, I'm not 449 00:21:13,040 --> 00:21:15,480 Speaker 8: gonna wear the rosecr Glasses saying that this is a 450 00:21:15,480 --> 00:21:18,119 Speaker 8: great conference call. I mean, if you looked up in 451 00:21:18,200 --> 00:21:21,879 Speaker 8: the dictionary disaster right now, although there be a picture 452 00:21:21,880 --> 00:21:22,359 Speaker 8: that company. 453 00:21:22,400 --> 00:21:24,880 Speaker 6: Well, I think that the analys on the street reflected out. 454 00:21:24,960 --> 00:21:26,480 Speaker 6: I mean you look at the A n R function 455 00:21:26,520 --> 00:21:29,399 Speaker 6: on the Bloomberg terminal for analysts recommendations, there's twenty two buys, 456 00:21:30,000 --> 00:21:32,080 Speaker 6: twenty four holds, and twelve cells. 457 00:21:32,119 --> 00:21:34,320 Speaker 2: But this also raises the question and I got some 458 00:21:34,359 --> 00:21:37,280 Speaker 2: grief on this yesterday, but like what is Telsla? Is 459 00:21:37,320 --> 00:21:39,919 Speaker 2: a car company, is a software company, is a tech company? 460 00:21:39,920 --> 00:21:41,399 Speaker 2: And then how you value it? So if it's going 461 00:21:41,440 --> 00:21:44,600 Speaker 2: to be a software company, an AI company, maybe it's okay. 462 00:21:44,640 --> 00:21:46,000 Speaker 2: But if it's going to be a car company, and 463 00:21:46,000 --> 00:21:47,560 Speaker 2: then you can't value it the way it is, like 464 00:21:47,800 --> 00:21:49,960 Speaker 2: how do you even start to price all that in? 465 00:21:50,080 --> 00:21:52,200 Speaker 8: Yeah, and we've always viewed it and we talked about 466 00:21:52,200 --> 00:21:55,440 Speaker 8: a looting, the disruptive tech. It's all of it and that, 467 00:21:55,920 --> 00:21:59,200 Speaker 8: and it speaks to where I could argue like this 468 00:21:59,440 --> 00:22:02,560 Speaker 8: could be a trillion and a half mark cap as 469 00:22:02,560 --> 00:22:05,119 Speaker 8: it goes through on AI and the vision on evs, 470 00:22:05,200 --> 00:22:08,080 Speaker 8: especially as they double down, but as they go through 471 00:22:08,080 --> 00:22:10,399 Speaker 8: this interim period. Must talk about there in the middle 472 00:22:10,400 --> 00:22:13,800 Speaker 8: of two waves, and that's essential where they're caught. You 473 00:22:13,920 --> 00:22:18,800 Speaker 8: cannot keep giving up margins. You start selling Gucci sunglasses 474 00:22:18,800 --> 00:22:21,000 Speaker 8: for one hundred dollars of CVS, you're not selling for 475 00:22:21,000 --> 00:22:23,679 Speaker 8: two thousand dollars of Madison Avenue. So the problem is 476 00:22:23,720 --> 00:22:27,920 Speaker 8: that it's a margin story. That's the issue right now 477 00:22:27,960 --> 00:22:31,080 Speaker 8: for investors. You need guidance, you need an adult in 478 00:22:31,119 --> 00:22:34,640 Speaker 8: the room, and instead it was felt like more like preschool. 479 00:22:34,880 --> 00:22:36,560 Speaker 6: Well that's kind of what you know of the people 480 00:22:36,600 --> 00:22:37,880 Speaker 6: that aren't recommending the stuff. 481 00:22:38,560 --> 00:22:41,919 Speaker 3: Most of them are traditional auto analysts and they know it. 482 00:22:41,960 --> 00:22:45,560 Speaker 6: Eventually it gets down to bending metal and the bending 483 00:22:45,560 --> 00:22:49,200 Speaker 6: metal business is not a great profit business, sure. 484 00:22:49,040 --> 00:22:51,120 Speaker 8: And I think we've seen that in the three one 485 00:22:51,240 --> 00:22:54,000 Speaker 8: three area code is they're the transition to EV's and 486 00:22:54,040 --> 00:22:57,160 Speaker 8: everything that GM and Ford have gone through. But Paul, 487 00:22:57,240 --> 00:23:01,040 Speaker 8: to your point, like it is disruptive tech, but this 488 00:23:01,240 --> 00:23:03,760 Speaker 8: is this is a little white knuckle period right now. 489 00:23:03,840 --> 00:23:05,480 Speaker 2: All right, let's brought it now to other tech because 490 00:23:05,520 --> 00:23:10,840 Speaker 2: like IBM, awesome, Microsoft, three trillion dollar company, like I mean, 491 00:23:11,280 --> 00:23:13,399 Speaker 2: the old school what do you call them? Yesterday? 492 00:23:13,520 --> 00:23:13,959 Speaker 6: The boring? 493 00:23:14,600 --> 00:23:17,240 Speaker 2: Yeah, like you know tech like the old school tech 494 00:23:17,640 --> 00:23:19,760 Speaker 2: so hot right now sustainable? 495 00:23:19,760 --> 00:23:22,640 Speaker 8: What do you think the AI revolutions here? And we've 496 00:23:22,640 --> 00:23:25,479 Speaker 8: talked in the New Tech BALLMARKT, which is about starting 497 00:23:25,520 --> 00:23:28,120 Speaker 8: in the fall, we with this goes well in twenty 498 00:23:28,200 --> 00:23:31,680 Speaker 8: twenty five because it's the biggest tech transformation thirty years 499 00:23:31,680 --> 00:23:34,119 Speaker 8: since start the Internet nineteen ninety five. So when you 500 00:23:34,160 --> 00:23:36,240 Speaker 8: look at IBM, you look at SAP and some of 501 00:23:36,280 --> 00:23:38,960 Speaker 8: the others, they're going to benefit from this. They're clearly 502 00:23:39,080 --> 00:23:43,760 Speaker 8: reading this is the godfather of AI. Jensen Navidian. Of course, 503 00:23:43,840 --> 00:23:47,120 Speaker 8: what's happened Redman within Nadella, which is why I believe 504 00:23:47,640 --> 00:23:50,600 Speaker 8: in a year from now, we're talking about four trillion 505 00:23:50,640 --> 00:23:54,480 Speaker 8: dollar mark aps with Microsoft and Apple. And I think 506 00:23:54,480 --> 00:23:57,680 Speaker 8: that's why next week you look at Apple, you look 507 00:23:57,680 --> 00:24:00,320 Speaker 8: at Microsoft. I think that's really gonna be an eye 508 00:24:00,359 --> 00:24:03,359 Speaker 8: opener for a while. Those bears that maybe they came 509 00:24:03,400 --> 00:24:06,080 Speaker 8: out of hibernation mode a little the first week or 510 00:24:06,080 --> 00:24:08,680 Speaker 8: two of the of the year, I think it sends 511 00:24:08,760 --> 00:24:09,840 Speaker 8: back into the caves. 512 00:24:10,320 --> 00:24:14,200 Speaker 6: When we think about AI, that's clearly the long term, 513 00:24:14,440 --> 00:24:17,240 Speaker 6: intermediate term, long longer term growth driver for just all 514 00:24:17,240 --> 00:24:19,800 Speaker 6: things tech. I guess my question for smart people like you, 515 00:24:19,880 --> 00:24:21,399 Speaker 6: is how much of that spend do you think is 516 00:24:21,400 --> 00:24:24,320 Speaker 6: going to be incremental versus maybe just pulling out of 517 00:24:24,320 --> 00:24:26,520 Speaker 6: my IT tech budget or something like that. 518 00:24:26,760 --> 00:24:30,159 Speaker 8: I probably think about fifty to sixty percent of it 519 00:24:30,240 --> 00:24:33,360 Speaker 8: is incremental. And I think that's the difference is that 520 00:24:34,160 --> 00:24:38,800 Speaker 8: when you look at the incremental use cases, it's jaw dropping. 521 00:24:38,840 --> 00:24:43,800 Speaker 8: And I think that's why CIOs A recognizing the process 522 00:24:43,920 --> 00:24:46,920 Speaker 8: and actually the ability to use software. And we'd think 523 00:24:47,040 --> 00:24:49,880 Speaker 8: use cases right now are over eighty it was fifteen 524 00:24:49,960 --> 00:24:51,159 Speaker 8: use cases six months ago. 525 00:24:51,280 --> 00:24:52,919 Speaker 2: What I also find interesting about this is that this 526 00:24:52,960 --> 00:24:55,800 Speaker 2: is the structural shift in the industry, yet it's still 527 00:24:55,840 --> 00:24:59,320 Speaker 2: a cyclical industry. How do you know what an appropriate 528 00:24:59,400 --> 00:25:02,280 Speaker 2: valuation is looking at that, like, you know this is 529 00:25:02,320 --> 00:25:03,520 Speaker 2: going to be huge, you know this is going to 530 00:25:03,520 --> 00:25:05,879 Speaker 2: spend all the money, but hey, in the short term, 531 00:25:05,920 --> 00:25:06,880 Speaker 2: maybe there'll be a downturn. 532 00:25:06,960 --> 00:25:09,879 Speaker 8: Well, I think a lot of the DCF spreadsheet warriors, 533 00:25:10,160 --> 00:25:13,000 Speaker 8: what they can't find in their tenth four of their 534 00:25:13,000 --> 00:25:17,160 Speaker 8: office building in the spreadsheet is where growth going next 535 00:25:17,200 --> 00:25:19,600 Speaker 8: two to three years. So I think that they don't know, 536 00:25:19,920 --> 00:25:22,000 Speaker 8: and that's why we're boots on the ground trying to 537 00:25:22,080 --> 00:25:26,000 Speaker 8: understand like what the growth looks like two three years out, 538 00:25:26,080 --> 00:25:28,520 Speaker 8: then you could start to have a good better sense 539 00:25:28,640 --> 00:25:32,360 Speaker 8: incrementally what these stocks are valued. I still think numbers 540 00:25:32,400 --> 00:25:35,000 Speaker 8: for tech we sit here, I think numbers are Tech 541 00:25:35,000 --> 00:25:38,240 Speaker 8: are up another twelve to fifteen to twenty percent over 542 00:25:38,280 --> 00:25:40,159 Speaker 8: the next twelve to eighteen months, not just because of 543 00:25:40,160 --> 00:25:43,080 Speaker 8: the efficiency, but because right now, a lot of these 544 00:25:43,160 --> 00:25:46,439 Speaker 8: models I think very conservative relative how they're laid out. 545 00:25:46,680 --> 00:25:49,800 Speaker 3: So as you sit here, what's your top pick right here, Dan. 546 00:25:50,080 --> 00:25:53,600 Speaker 8: Well, it's Microsoft and Apple. I mean to me, Microsoft 547 00:25:53,920 --> 00:25:56,720 Speaker 8: as a cloud play Apple, I continue to think that's 548 00:25:56,760 --> 00:26:00,000 Speaker 8: probably the top tech pic here, especially on rnaissance of growth. 549 00:26:00,200 --> 00:26:02,880 Speaker 8: And then you look at cybersecurity. It's a golden need 550 00:26:03,000 --> 00:26:05,960 Speaker 8: for cybersecurity. You look in names like powe out though, 551 00:26:06,400 --> 00:26:09,520 Speaker 8: and for those looking for smidcap, the messy of AI, 552 00:26:09,960 --> 00:26:11,600 Speaker 8: you know that that's names like pall Andeer. 553 00:26:12,320 --> 00:26:12,960 Speaker 2: What don't you like? 554 00:26:13,520 --> 00:26:13,720 Speaker 9: Look? 555 00:26:13,800 --> 00:26:17,760 Speaker 8: So I think I most hated as Cisco just because 556 00:26:17,800 --> 00:26:20,320 Speaker 8: I think there is a shared donor and I think 557 00:26:20,440 --> 00:26:23,320 Speaker 8: that you're gonna continue to see the legacy b shared 558 00:26:23,320 --> 00:26:25,360 Speaker 8: donors software gonna be the shared gainers. 559 00:26:25,440 --> 00:26:27,520 Speaker 6: All right, I'm just gonna quote from Dan's research note 560 00:26:27,600 --> 00:26:30,040 Speaker 6: on Tesla, we maintain our outperform rating while lowering our 561 00:26:30,040 --> 00:26:32,080 Speaker 6: price target from three hundred and fifty dollars to three 562 00:26:32,119 --> 00:26:34,880 Speaker 6: hundred and fifteen dollars reflecting reduced estimates. Our near term 563 00:26:34,920 --> 00:26:38,480 Speaker 6: confidence in the story is shaken, but we remain firm 564 00:26:38,480 --> 00:26:40,760 Speaker 6: in our long term both pieces around Tesla and the 565 00:26:40,800 --> 00:26:43,359 Speaker 6: broader AI story set to take hold. This is a 566 00:26:43,359 --> 00:26:46,959 Speaker 6: pivotal period for Musk to get Tesla through. What will 567 00:26:47,000 --> 00:26:54,960 Speaker 6: help shape or haunt it's evy future. Serious check out 568 00:26:55,000 --> 00:26:58,240 Speaker 6: Dan's research out there from web Bush Securities. As tom 569 00:26:58,280 --> 00:27:02,640 Speaker 6: Kin likes to say, we protect the integrity of our research. Dan, 570 00:27:02,640 --> 00:27:05,400 Speaker 6: I've joined us managing director senior equity analysts for web 571 00:27:05,400 --> 00:27:06,280 Speaker 6: Bush Securities. 572 00:27:08,040 --> 00:27:11,920 Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live 573 00:27:12,000 --> 00:27:15,520 Speaker 1: weekdays at ten am Eastern on applecar Play and Android 574 00:27:15,560 --> 00:27:18,359 Speaker 1: Auto with the Bloomberg Business Act. You can also listen 575 00:27:18,480 --> 00:27:21,560 Speaker 1: live on Amazon Alexa from our flagship New York station 576 00:27:21,920 --> 00:27:26,600 Speaker 1: Just Say Alexa playing Bloomberg eleven thirty Alex. 577 00:27:26,680 --> 00:27:30,840 Speaker 6: Let's talk sustainable energy, actually investing in sustainable energy. If 578 00:27:30,840 --> 00:27:33,520 Speaker 6: you remember back to the Inflation Reduction Act at the 579 00:27:33,560 --> 00:27:34,800 Speaker 6: time back in mid twenty twenty two. 580 00:27:34,800 --> 00:27:35,679 Speaker 3: A lot of folks are sampoint. 581 00:27:35,720 --> 00:27:38,120 Speaker 6: This is going to be huge for sustainable energy investing. 582 00:27:38,800 --> 00:27:41,239 Speaker 6: One key investor is like, I'm not so sure right now. 583 00:27:41,320 --> 00:27:44,320 Speaker 6: Charles Charlie Donovan joins us. He's a senior economic advisor 584 00:27:44,359 --> 00:27:45,040 Speaker 6: at Impacts. 585 00:27:45,600 --> 00:27:48,360 Speaker 3: Charlie, you're part of a story on. 586 00:27:48,320 --> 00:27:51,840 Speaker 6: Bloomber the January fifteenth that says a fifty billion dollar 587 00:27:51,920 --> 00:27:55,400 Speaker 6: investor says Biden's green law in Rich's middlemen. 588 00:27:56,080 --> 00:27:59,119 Speaker 3: What's going on there, Charlie, Well. 589 00:27:59,000 --> 00:28:02,560 Speaker 9: As you said, Inflation Reduction Act in twenty twenty two 590 00:28:02,680 --> 00:28:06,160 Speaker 9: a lot of high hopes and clearly a necessary move 591 00:28:06,280 --> 00:28:09,880 Speaker 9: in order to reclaim leadership in a crucially important industry. 592 00:28:11,200 --> 00:28:14,919 Speaker 9: But we have seen the implementation quite honestly, be disappointing, 593 00:28:14,920 --> 00:28:16,800 Speaker 9: and a lot of that goes to the complexity around 594 00:28:16,800 --> 00:28:20,680 Speaker 9: relying upon tax equity as the major channel with which 595 00:28:21,119 --> 00:28:24,560 Speaker 9: new projects get done, and there are alternatives, there are 596 00:28:24,560 --> 00:28:26,640 Speaker 9: other ways to do this. So we really see right 597 00:28:26,640 --> 00:28:28,560 Speaker 9: now that the technology is in the right place, the 598 00:28:28,640 --> 00:28:31,600 Speaker 9: economics are increasingly in favor, but there are a number 599 00:28:31,600 --> 00:28:33,720 Speaker 9: of ways in which the implementation of the IRA has 600 00:28:33,760 --> 00:28:37,760 Speaker 9: proceeded more slowly than investors would have liked, and certainly 601 00:28:37,800 --> 00:28:43,240 Speaker 9: the complexity doesn't lend itself to a scale which what 602 00:28:43,320 --> 00:28:45,719 Speaker 9: is really trillions of dollars of new money that can 603 00:28:45,760 --> 00:28:49,000 Speaker 9: flow into infrastructure can do so at the pace that's necessary. 604 00:28:49,200 --> 00:28:51,200 Speaker 2: You're basically saying that a bill passed by the government 605 00:28:51,280 --> 00:28:54,240 Speaker 2: in some ways is inefficient. So I get that. However, 606 00:28:54,720 --> 00:28:56,840 Speaker 2: if we take a look at just GDP today, like 607 00:28:56,920 --> 00:29:00,560 Speaker 2: within that the contribution a business investment, you can make 608 00:29:00,600 --> 00:29:04,760 Speaker 2: an argument that that did reflect energy projects and also 609 00:29:04,840 --> 00:29:07,440 Speaker 2: the idea of the IRA. It is a ten year thing, 610 00:29:07,960 --> 00:29:10,240 Speaker 2: so just because you're not breaking ground today, it doesn't 611 00:29:10,240 --> 00:29:12,680 Speaker 2: mean you're not gonna be breaking breaking ground in three years. 612 00:29:13,920 --> 00:29:16,800 Speaker 9: Well, that's exactly right. And also we see a canvas 613 00:29:16,880 --> 00:29:19,880 Speaker 9: across a value chain in clean energy that is much 614 00:29:19,920 --> 00:29:23,680 Speaker 9: more expansive than just thinking about solar and wind manufacturers. 615 00:29:23,680 --> 00:29:26,280 Speaker 9: So we think about it in an area where there's upstream, 616 00:29:26,480 --> 00:29:28,600 Speaker 9: just like there is an oil and gas where that's 617 00:29:28,640 --> 00:29:31,720 Speaker 9: the production, but you have a much much bigger set 618 00:29:31,720 --> 00:29:33,800 Speaker 9: of companies who are involved in what we call midstream. 619 00:29:33,880 --> 00:29:37,280 Speaker 9: So this is transmission and distribution, it's about storage, and 620 00:29:37,320 --> 00:29:40,440 Speaker 9: then downstream, which is really much closer to the consumer 621 00:29:40,520 --> 00:29:44,360 Speaker 9: and reflects the changes in which electrification of N demand 622 00:29:44,480 --> 00:29:47,000 Speaker 9: is happening much more quickly than people thought. And there's 623 00:29:47,040 --> 00:29:50,080 Speaker 9: a huge number of companies who are benefiting from the 624 00:29:50,120 --> 00:29:53,080 Speaker 9: stimulus in more indirect ways there, and so it's really 625 00:29:53,160 --> 00:29:55,480 Speaker 9: important to keep in mind that, as you say, although 626 00:29:55,520 --> 00:29:58,320 Speaker 9: certain projects are now in the pipeline, have been announced, 627 00:29:58,360 --> 00:30:00,800 Speaker 9: will take some time to come through, there are another 628 00:30:01,080 --> 00:30:03,920 Speaker 9: number of other ways in which investors can play this, 629 00:30:03,920 --> 00:30:05,800 Speaker 9: this this structural theme. 630 00:30:05,560 --> 00:30:06,400 Speaker 5: In the years ahead. 631 00:30:06,880 --> 00:30:10,400 Speaker 6: So I guess Greed, thank you for the little button there, 632 00:30:10,560 --> 00:30:12,360 Speaker 6: Ken Green investors. 633 00:30:12,480 --> 00:30:17,280 Speaker 3: Oh it's not just me, No, No, I know, I 634 00:30:17,320 --> 00:30:19,320 Speaker 3: know you got a person I knew. This is day 635 00:30:19,320 --> 00:30:21,120 Speaker 3: three four, only a year four for me. 636 00:30:21,360 --> 00:30:23,920 Speaker 6: Tucker's been in this for thirty all right, So talk 637 00:30:23,920 --> 00:30:26,280 Speaker 6: to us about the investment returns that green investors have 638 00:30:26,360 --> 00:30:28,720 Speaker 6: been dealing with not so great here? 639 00:30:28,760 --> 00:30:31,040 Speaker 3: And if so, why why is that? 640 00:30:32,360 --> 00:30:34,080 Speaker 9: Well? I think it's important to keep in mind this 641 00:30:34,120 --> 00:30:35,920 Speaker 9: is an industry that has been around for a lot 642 00:30:35,920 --> 00:30:37,120 Speaker 9: of people think of it as new, but it's been 643 00:30:37,160 --> 00:30:39,400 Speaker 9: around for a while. We have had a number of 644 00:30:39,560 --> 00:30:43,240 Speaker 9: really important waves of interest and investment, you know, going 645 00:30:43,240 --> 00:30:45,800 Speaker 9: all the way back to the late nineteen nineteen nineties. 646 00:30:46,120 --> 00:30:48,240 Speaker 9: A lot of what we see in hydrogen today, for example, 647 00:30:48,240 --> 00:30:50,719 Speaker 9: are companies that had their IBOs in the late nineteen nineties. 648 00:30:50,760 --> 00:30:53,160 Speaker 9: So there are some there is some cyclicality here, and 649 00:30:53,200 --> 00:30:55,200 Speaker 9: there are going to be times at which sentiment is 650 00:30:55,240 --> 00:30:58,479 Speaker 9: more or less in favor. What's different now is that 651 00:30:58,520 --> 00:31:01,280 Speaker 9: we have lived in the last day through a technological 652 00:31:01,280 --> 00:31:04,920 Speaker 9: miracle in which the technologies then enable not just more 653 00:31:04,960 --> 00:31:08,280 Speaker 9: green energy, but actually a global energy transformation in which 654 00:31:08,400 --> 00:31:12,240 Speaker 9: electrons become the backbone of the energy system and begin 655 00:31:12,320 --> 00:31:17,440 Speaker 9: to increasingly replace hydrocarbons. We are on the cusp of 656 00:31:17,480 --> 00:31:19,600 Speaker 9: something that we've never seen before, and that's really about 657 00:31:19,640 --> 00:31:23,040 Speaker 9: where technology costs have gotten to. It has certainly something 658 00:31:23,080 --> 00:31:25,680 Speaker 9: to do with the policy environment, It has something to 659 00:31:25,720 --> 00:31:28,480 Speaker 9: do with what is able and the innovations that have 660 00:31:28,560 --> 00:31:32,120 Speaker 9: come through that drive to make this more accessible and 661 00:31:32,240 --> 00:31:35,400 Speaker 9: cheaper for consumers. So you know, there are going to 662 00:31:35,400 --> 00:31:36,840 Speaker 9: be ups and downs, as they're going to be in 663 00:31:36,880 --> 00:31:38,920 Speaker 9: every industry. But I think it's important to keep in 664 00:31:38,960 --> 00:31:42,640 Speaker 9: context with these previous waves and these previous areas of interest. 665 00:31:42,720 --> 00:31:44,720 Speaker 9: What's different now, and that finally comes down to the 666 00:31:44,720 --> 00:31:46,200 Speaker 9: economics of these technologies. 667 00:31:47,040 --> 00:31:48,720 Speaker 2: I mean, sure, but I got to be honest, Like 668 00:31:49,000 --> 00:31:52,760 Speaker 2: when I talk to clean energy players and even hydrocarbon companies, 669 00:31:53,080 --> 00:31:56,000 Speaker 2: what all they like these tax credits? Like they dig 670 00:31:56,040 --> 00:31:58,040 Speaker 2: them and they're in deep with them. And that's making 671 00:31:58,080 --> 00:32:01,440 Speaker 2: a lot of these projects economics. Like I hear you 672 00:32:01,520 --> 00:32:03,959 Speaker 2: that the cost of technology is going down, but without 673 00:32:04,000 --> 00:32:07,120 Speaker 2: certain parts of the IRA, their economics are toast when 674 00:32:07,160 --> 00:32:09,120 Speaker 2: it comes to this, and these are like billion dollar 675 00:32:09,200 --> 00:32:10,040 Speaker 2: worth of companies. 676 00:32:11,240 --> 00:32:14,400 Speaker 9: Absolutely, And what we have said and what we have 677 00:32:14,440 --> 00:32:18,920 Speaker 9: written about is that these are appropriate ways in which 678 00:32:18,960 --> 00:32:21,920 Speaker 9: to stimulate its industrial policy writ large and it really 679 00:32:21,960 --> 00:32:24,400 Speaker 9: is about the jobs and the inward investment that's going 680 00:32:24,440 --> 00:32:27,080 Speaker 9: to happen in the future, which industries and how is 681 00:32:27,120 --> 00:32:30,840 Speaker 9: the US in particularly in US companies positioned for that. 682 00:32:31,000 --> 00:32:33,320 Speaker 9: What we have tried to call out is the complexity 683 00:32:33,640 --> 00:32:37,000 Speaker 9: about how we get there. So it's not when you 684 00:32:37,040 --> 00:32:39,280 Speaker 9: look at the more broad canvas, and the IMF has 685 00:32:39,320 --> 00:32:42,520 Speaker 9: talked about seven trillion dollars last year of subsidy into 686 00:32:42,520 --> 00:32:44,960 Speaker 9: the oil and gas industry, we still have an un 687 00:32:45,040 --> 00:32:48,040 Speaker 9: leveled playing field and so that's why this kind of 688 00:32:48,040 --> 00:32:52,120 Speaker 9: stimulus is necessary. So it's not the reason for stimulus, 689 00:32:52,160 --> 00:32:54,960 Speaker 9: but it's much more about the mechanisms for implementation that 690 00:32:54,960 --> 00:32:58,000 Speaker 9: we're trying to shed light on because we see such 691 00:32:58,000 --> 00:33:01,840 Speaker 9: a vasked opportunity and we see how how many investors 692 00:33:02,320 --> 00:33:05,000 Speaker 9: are seeing just such a thin slice of this opportunity 693 00:33:05,040 --> 00:33:07,280 Speaker 9: and clearly trying to just call out that there are 694 00:33:07,600 --> 00:33:10,080 Speaker 9: a number of other ways in which this can happen, 695 00:33:10,560 --> 00:33:13,000 Speaker 9: and there's a much bigger value chain there that can 696 00:33:13,040 --> 00:33:13,760 Speaker 9: be invested in. 697 00:33:14,480 --> 00:33:18,360 Speaker 6: Hey, Charlie, let's step away from the inflation Reduction Act. 698 00:33:18,600 --> 00:33:21,160 Speaker 6: I get a sense, and it's just a sense from 699 00:33:21,200 --> 00:33:24,160 Speaker 6: an outsider that kind of the move to green energy 700 00:33:24,800 --> 00:33:28,680 Speaker 6: is stronger let's say in Europe that it is in US, 701 00:33:29,800 --> 00:33:31,600 Speaker 6: you know, and some are saying it's maybe getting a 702 00:33:31,640 --> 00:33:34,920 Speaker 6: little politicized here in the US. You can't even say 703 00:33:35,160 --> 00:33:38,960 Speaker 6: esg anymore in many parts, with many parts of the audience. 704 00:33:39,440 --> 00:33:43,600 Speaker 6: How do you view that broader sense in terms of support, Well. 705 00:33:43,440 --> 00:33:46,280 Speaker 9: This clearly, you know, Europe is more vulnerable on energy, 706 00:33:46,280 --> 00:33:50,320 Speaker 9: and so there's a very natural reason why that's the case. 707 00:33:50,320 --> 00:33:53,840 Speaker 9: And clearly what we see is on the policy side, 708 00:33:53,960 --> 00:33:59,520 Speaker 9: much more aggressive implementation of targets, much more national priorities 709 00:33:59,560 --> 00:34:03,880 Speaker 9: with regardards to both energy efficiency and clean energy itself. 710 00:34:04,480 --> 00:34:06,600 Speaker 9: But I don't think that any country in the world 711 00:34:06,800 --> 00:34:09,799 Speaker 9: is not touched by what is really now a competitive 712 00:34:09,880 --> 00:34:13,160 Speaker 9: race for positioning in what is going to be inevitably 713 00:34:13,160 --> 00:34:16,080 Speaker 9: a cleaner energy future. And that comes down to not 714 00:34:16,120 --> 00:34:19,399 Speaker 9: just cleaner, but also cheaper and so again coming back 715 00:34:19,440 --> 00:34:22,239 Speaker 9: to the point that yes, green energy is one way 716 00:34:22,280 --> 00:34:24,640 Speaker 9: to describe this, but actually the energy of the future, 717 00:34:24,680 --> 00:34:26,719 Speaker 9: I think is a much more viable way to think 718 00:34:26,760 --> 00:34:29,120 Speaker 9: about it. And in that sense, you know, the US 719 00:34:29,160 --> 00:34:32,040 Speaker 9: has been asleep at the wheel and really has ceeded 720 00:34:32,080 --> 00:34:35,760 Speaker 9: a lot of early technology leadership to companies in China. 721 00:34:36,200 --> 00:34:39,360 Speaker 9: And this is the European companies as well as American 722 00:34:39,360 --> 00:34:41,960 Speaker 9: companies are scratching their heads and figuring out how do 723 00:34:42,040 --> 00:34:44,239 Speaker 9: they get back into the driver's seat. And there are 724 00:34:44,239 --> 00:34:46,840 Speaker 9: some stunning examples of companies in Europe and the US 725 00:34:47,200 --> 00:34:50,279 Speaker 9: who have that advantage, but that is not a very 726 00:34:50,719 --> 00:34:52,840 Speaker 9: deep bench and in a lot of ways, that's what 727 00:34:52,960 --> 00:34:55,400 Speaker 9: needs to happen now is for those companies, whether the 728 00:34:55,520 --> 00:34:59,040 Speaker 9: European or American, to find a way to become competitive 729 00:34:59,040 --> 00:34:59,560 Speaker 9: in this race. 730 00:35:00,120 --> 00:35:02,280 Speaker 2: Charlie, we gotta leave it there. Thanks a lot, Charlie Donovan, 731 00:35:02,360 --> 00:35:06,960 Speaker 2: Senior Economic Advisor, at impacts on issues really investing sustainable. 732 00:35:07,520 --> 00:35:12,040 Speaker 1: This is the Bloomberg Intelligence Podcast, available on apples, Spotify, 733 00:35:12,239 --> 00:35:15,880 Speaker 1: and anywhere else you get your podcasts. Listen live each weekday, 734 00:35:16,000 --> 00:35:18,960 Speaker 1: ten am to noon Eastern on Bloomberg dot com, the 735 00:35:19,120 --> 00:35:22,520 Speaker 1: iHeartRadio app, tune In, and the Bloomberg Business app. You 736 00:35:22,560 --> 00:35:25,759 Speaker 1: can also watch us live every weekday on YouTube and 737 00:35:25,920 --> 00:35:27,560 Speaker 1: always on the Bloomberg terminal