1 00:00:01,440 --> 00:00:06,720 Speaker 1: From Mahart where Innovation, money and power Collie in Silicon Valley, NBN. 2 00:00:07,040 --> 00:00:11,280 Speaker 1: This is Bloomberg Technology with Caroline Hyde and Ed loved Love. 3 00:00:25,800 --> 00:00:28,800 Speaker 2: From New York and San Francisco. This is Bloomberg Technology 4 00:00:28,880 --> 00:00:33,080 Speaker 2: coming up. Verizon agrees to buy Frontier Communications nearly ten 5 00:00:33,280 --> 00:00:36,200 Speaker 2: million dollars in cash to strengthen its fiber network. 6 00:00:36,240 --> 00:00:37,120 Speaker 3: We speak with the CEO. 7 00:00:38,040 --> 00:00:40,680 Speaker 4: Nvidia pushes back, saying it's been in contact with the 8 00:00:40,840 --> 00:00:44,120 Speaker 4: Justice Department that has not received a subpoena. 9 00:00:44,360 --> 00:00:48,080 Speaker 2: An HP enterprise comes up short as disappointing margins offset 10 00:00:48,120 --> 00:00:51,800 Speaker 2: AI related tailwinds. Another chief exec on the show, but first, 11 00:00:52,200 --> 00:00:55,800 Speaker 2: as check in on these markets, ED the Nasdaq outperforms. 12 00:00:55,840 --> 00:00:56,760 Speaker 3: Benchmarks are lower. 13 00:00:56,760 --> 00:01:01,440 Speaker 2: We're anxious around labor data coming tomorrow, but video and 14 00:01:01,480 --> 00:01:02,400 Speaker 2: Tesla do the work. 15 00:01:02,440 --> 00:01:03,120 Speaker 3: But there's m and A. 16 00:01:04,319 --> 00:01:08,200 Speaker 4: We have some MNA, and that is Verizon to buy Frontier. 17 00:01:08,360 --> 00:01:11,640 Speaker 4: Really interesting. Both stocks lower. The offer is thirty eight 18 00:01:11,680 --> 00:01:14,280 Speaker 4: dollars and fifty cents a share, which is a fit 19 00:01:14,360 --> 00:01:17,280 Speaker 4: thirty seven percent premium to the twenty eight dollars four 20 00:01:17,319 --> 00:01:19,960 Speaker 4: cents closing price on Tuesday. Because you'll remember, the reports 21 00:01:20,000 --> 00:01:23,959 Speaker 4: about this deal started surfacing during the day Tuesday. That's 22 00:01:24,040 --> 00:01:28,440 Speaker 4: Tuesday's closing price. Nine point six billion dollar deal value, 23 00:01:28,600 --> 00:01:31,000 Speaker 4: enterprise value greater than that if you take into account 24 00:01:31,080 --> 00:01:34,160 Speaker 4: debt the story carriers. You know full well it's about 25 00:01:34,200 --> 00:01:37,440 Speaker 4: being more competitive in the high speed internet business. And 26 00:01:37,520 --> 00:01:40,880 Speaker 4: Verizon down top percentage point. Frontier currently in the session 27 00:01:40,880 --> 00:01:45,319 Speaker 4: at thirty five dollars ten cent a share down nine percent, and. 28 00:01:45,480 --> 00:01:47,880 Speaker 2: We want to be digging into some of the share 29 00:01:47,920 --> 00:01:50,520 Speaker 2: price reaction that we have indeed been seeing. Why is 30 00:01:50,560 --> 00:01:55,040 Speaker 2: Frontier training below that current agreed price. And we're very 31 00:01:55,080 --> 00:01:56,760 Speaker 2: pleased to say we can talk about it a little 32 00:01:56,760 --> 00:02:00,400 Speaker 2: bit more now because we welcome to our global TV 33 00:02:00,560 --> 00:02:04,760 Speaker 2: and radio audiences. Verizon agreeing to buy rival telecom operator 34 00:02:04,800 --> 00:02:08,079 Speaker 2: Frontier Communications FRO about nine point six billion dollars in cash, 35 00:02:08,160 --> 00:02:09,600 Speaker 2: giving an enterprise value. 36 00:02:09,360 --> 00:02:12,040 Speaker 3: Of twenty billion dollars. This is the New York phone. 37 00:02:11,880 --> 00:02:14,799 Speaker 2: John looks to expand its high speed internet business. 38 00:02:15,200 --> 00:02:18,960 Speaker 3: Let's bring en Verizon CEO hands Versteg. We welcome you. 39 00:02:18,960 --> 00:02:21,760 Speaker 2: Sir, and look, it wasn't long ago that you actually 40 00:02:21,760 --> 00:02:25,360 Speaker 2: owned some of these assets. Why go back into wyline? 41 00:02:25,720 --> 00:02:27,720 Speaker 2: Why are we seeing this convergence again? 42 00:02:28,639 --> 00:02:30,919 Speaker 5: Thank you for having me first of all, I think 43 00:02:30,960 --> 00:02:34,160 Speaker 5: this is very straight into our core strategy. 44 00:02:34,440 --> 00:02:35,520 Speaker 6: We are sort of. 45 00:02:35,560 --> 00:02:39,440 Speaker 5: Inmobility and broadband serve basically all types of customers in 46 00:02:39,480 --> 00:02:44,360 Speaker 5: this market, CONSUMERSMBS, large entervice, and governments. This is just 47 00:02:44,520 --> 00:02:47,720 Speaker 5: extending the offerings and optionality for the customers we have. 48 00:02:47,919 --> 00:02:52,400 Speaker 5: So this is a really good decision by us to 49 00:02:52,440 --> 00:02:55,200 Speaker 5: do with an economical right. And on top of that, 50 00:02:55,680 --> 00:02:58,800 Speaker 5: as you mentioned, yes we own these assets before, but 51 00:02:58,880 --> 00:03:02,639 Speaker 5: they weren't totally different type of assets. There was basically 52 00:03:02,680 --> 00:03:07,320 Speaker 5: a copper based business. Nowadays Frontier is more than fifty 53 00:03:07,320 --> 00:03:10,480 Speaker 5: percent of the revenue is fiber and more than way 54 00:03:10,520 --> 00:03:13,200 Speaker 5: more than fifty percent of the DTA is coming from fiber. 55 00:03:13,480 --> 00:03:17,560 Speaker 5: So a large transformation have been done and it fits 56 00:03:17,560 --> 00:03:18,760 Speaker 5: in straight to our strategy. 57 00:03:18,760 --> 00:03:22,359 Speaker 4: Over is on hands, Good morning, it's head in San Francisco. 58 00:03:22,760 --> 00:03:25,720 Speaker 4: Frontier is trading at thirty five dollars a sherish below 59 00:03:25,760 --> 00:03:28,120 Speaker 4: the thirty eight dollars fifty cents per share offer. What 60 00:03:28,120 --> 00:03:31,600 Speaker 4: does that tell you about the market's reaction to the 61 00:03:31,639 --> 00:03:33,640 Speaker 4: offer and what you think might happen next? 62 00:03:35,280 --> 00:03:37,480 Speaker 5: I don't tell me so much is so early in? 63 00:03:37,640 --> 00:03:40,280 Speaker 5: Is it two hours of training? I think first of all, 64 00:03:40,320 --> 00:03:45,280 Speaker 5: we feel really good about this deal from also from 65 00:03:45,400 --> 00:03:48,600 Speaker 5: closing it and seeing that this is a possible transaction 66 00:03:48,880 --> 00:03:52,120 Speaker 5: from many angles, because given that we believe it's going 67 00:03:52,160 --> 00:03:55,920 Speaker 5: to take eighteen months and all the regulatory bodies of 68 00:03:55,920 --> 00:03:59,000 Speaker 5: course will be a thorough job, but this is improvements 69 00:03:59,000 --> 00:04:01,760 Speaker 5: for customers going in more choice, and not only that, 70 00:04:01,800 --> 00:04:05,280 Speaker 5: we can only bring our mobility broadband to these customers. 71 00:04:05,440 --> 00:04:07,440 Speaker 5: At the same time, we also have the offerings that 72 00:04:07,480 --> 00:04:10,720 Speaker 5: we have on our broadband today, which is everything from 73 00:04:10,760 --> 00:04:14,680 Speaker 5: streaming services, other services that we have on insurance, etc. 74 00:04:15,040 --> 00:04:17,600 Speaker 5: So we going to bring a lot on new opportunities 75 00:04:17,640 --> 00:04:21,880 Speaker 5: for the custom base or frontier. So I'm really positive 76 00:04:21,880 --> 00:04:22,719 Speaker 5: on this acquisition. 77 00:04:23,480 --> 00:04:25,360 Speaker 3: Can you tell us a little bit about the future 78 00:04:25,400 --> 00:04:25,719 Speaker 3: as well. 79 00:04:25,760 --> 00:04:30,800 Speaker 2: The short term is the convergence trade is wireless wireline content, 80 00:04:31,120 --> 00:04:33,480 Speaker 2: but then there's AI. Then we're talking about the Internet 81 00:04:33,520 --> 00:04:35,719 Speaker 2: of things as we've been talking about for years. Hands 82 00:04:35,960 --> 00:04:37,039 Speaker 2: where does that come into play. 83 00:04:37,920 --> 00:04:40,520 Speaker 5: It come definitely to play in these assets, and as said, 84 00:04:40,839 --> 00:04:43,400 Speaker 5: we expect this to take in a take eighteen months. 85 00:04:43,400 --> 00:04:47,240 Speaker 5: We're already right now have a sort of AI prepared 86 00:04:47,279 --> 00:04:50,039 Speaker 5: network with a lot of compute and storage at the 87 00:04:50,160 --> 00:04:53,839 Speaker 5: edge of the network. We decided already some six years 88 00:04:53,880 --> 00:04:57,320 Speaker 5: ago to fibriize all our transport, so we are really 89 00:04:57,320 --> 00:04:59,960 Speaker 5: prepared of it. The frontier acid is just coming in 90 00:05:00,040 --> 00:05:02,440 Speaker 5: as an extension of that, and we can meet even 91 00:05:02,560 --> 00:05:07,160 Speaker 5: more customers to have a processing storage at the edge 92 00:05:07,160 --> 00:05:11,880 Speaker 5: of the network with the fiberized transport, So this is 93 00:05:11,960 --> 00:05:15,159 Speaker 5: really also another advantage we're getting with the even more 94 00:05:15,200 --> 00:05:18,479 Speaker 5: assets in the ground, and of course serving consumers with 95 00:05:18,560 --> 00:05:22,080 Speaker 5: home broadband together with our mobile and home offering is 96 00:05:22,080 --> 00:05:25,440 Speaker 5: of course a strength in the overall acquisition where we're doing. 97 00:05:26,320 --> 00:05:26,560 Speaker 6: Hans. 98 00:05:26,600 --> 00:05:28,960 Speaker 4: We have a question from an audience member on Bloomberg 99 00:05:29,000 --> 00:05:32,960 Speaker 4: Technology who notes the twenty fifteen sale of wireline assets. 100 00:05:33,240 --> 00:05:35,080 Speaker 4: But I think the question that he and many others 101 00:05:35,120 --> 00:05:38,280 Speaker 4: have is what's changed around the economics in this deal. 102 00:05:38,320 --> 00:05:41,320 Speaker 4: You said the economics work, but give me specifics some 103 00:05:41,360 --> 00:05:44,360 Speaker 4: what's different, particularly for fiber in twenty twenty four. 104 00:05:45,360 --> 00:05:48,280 Speaker 5: So if you look at the deal right now at closing, 105 00:05:48,560 --> 00:05:51,520 Speaker 5: we believe that's going to be a creative of growth, 106 00:05:52,240 --> 00:05:57,400 Speaker 5: revenue growth anibita on day one, so that's really good economics. 107 00:05:57,680 --> 00:05:59,560 Speaker 5: And then it's going to take some twelve months and 108 00:05:59,640 --> 00:06:01,960 Speaker 5: EPA and cashual will be a creative as well. And 109 00:06:02,000 --> 00:06:03,800 Speaker 5: the reason it takes twelve months is there are some 110 00:06:03,880 --> 00:06:07,560 Speaker 5: integration costs coming up in the beginning. So definitely a 111 00:06:07,680 --> 00:06:12,719 Speaker 5: very economic sound business for us. But I said the 112 00:06:12,800 --> 00:06:15,839 Speaker 5: assets we sold the previously was, of course in a 113 00:06:15,880 --> 00:06:19,920 Speaker 5: totally different standard. The Frontier team has put in billions 114 00:06:19,960 --> 00:06:23,080 Speaker 5: and billions of dollars to fiberize the network to be 115 00:06:23,160 --> 00:06:26,000 Speaker 5: the next generation, and many of the metrics that they have, 116 00:06:26,120 --> 00:06:30,560 Speaker 5: you know, Sharen, penetration, etc. Are fairly similar to FiOS, 117 00:06:30,640 --> 00:06:33,360 Speaker 5: and FIUs is of course the best fiber network in 118 00:06:33,680 --> 00:06:36,440 Speaker 5: the States, so there's a lot of similarities on that 119 00:06:36,520 --> 00:06:38,720 Speaker 5: and that we can offer to our customers. 120 00:06:38,760 --> 00:06:41,359 Speaker 2: And some ANDAs we're a little bit surprised by the 121 00:06:41,400 --> 00:06:43,520 Speaker 2: timing and the fact that you're going all in on 122 00:06:43,560 --> 00:06:46,839 Speaker 2: convergence now a bold step. Some call it because of 123 00:06:46,880 --> 00:06:50,279 Speaker 2: your leverage and your commitment to reducing reducing your debt. 124 00:06:50,720 --> 00:06:53,480 Speaker 3: Why do this now? Are you worried about leverage? 125 00:06:54,320 --> 00:06:54,360 Speaker 7: No? 126 00:06:54,560 --> 00:06:56,200 Speaker 5: I think, first of all, we have a very strong 127 00:06:56,240 --> 00:06:59,600 Speaker 5: balance sheet and as we said this morning, at closing, 128 00:06:59,640 --> 00:07:03,159 Speaker 5: these be maybe zero point two zero point three notch 129 00:07:03,520 --> 00:07:06,560 Speaker 5: on our leverage, which is very very low. We still 130 00:07:06,600 --> 00:07:10,160 Speaker 5: are committed to our capt A location. Number One, invest 131 00:07:10,200 --> 00:07:12,760 Speaker 5: in the business and that's what we're doing today. Number 132 00:07:12,760 --> 00:07:15,000 Speaker 5: two committed to the dividend, and you might have seen 133 00:07:15,080 --> 00:07:18,920 Speaker 5: yesterday we came out with our dividend which was for 134 00:07:18,960 --> 00:07:22,800 Speaker 5: the eighteenth consecutive year we increased our dividend. And then 135 00:07:23,040 --> 00:07:25,800 Speaker 5: is to pay down our debt. We have been paying 136 00:07:25,840 --> 00:07:28,000 Speaker 5: down our debts since we bought a c band. We 137 00:07:28,040 --> 00:07:30,240 Speaker 5: still have some eighteen months here that we're going to 138 00:07:30,280 --> 00:07:32,280 Speaker 5: continue to pay down the debt. So we're going to 139 00:07:32,280 --> 00:07:35,800 Speaker 5: be in a really good position balance wise when this 140 00:07:35,960 --> 00:07:37,800 Speaker 5: deal is coming to fruition. 141 00:07:38,600 --> 00:07:41,280 Speaker 4: Hans, what opportunity is there for you in data center 142 00:07:41,360 --> 00:07:44,320 Speaker 4: interconnects DCI in the context of AI. Look at what 143 00:07:44,400 --> 00:07:46,840 Speaker 4: like Lumen's done with Microsoft for example. 144 00:07:47,800 --> 00:07:50,360 Speaker 5: I think that the difference here is that we have 145 00:07:50,480 --> 00:07:53,280 Speaker 5: so many assets in the ground. When it comes to 146 00:07:53,400 --> 00:07:57,120 Speaker 5: fiber and central offices. Many of these central officers of 147 00:07:57,160 --> 00:08:01,200 Speaker 5: course have compute storage power, it ex and many of 148 00:08:01,240 --> 00:08:04,160 Speaker 5: the AI solutions. When there is a real product, they 149 00:08:04,280 --> 00:08:08,840 Speaker 5: actually need to be way closer to the users, the corporations, 150 00:08:09,360 --> 00:08:12,480 Speaker 5: et cetera. And that means that because the transport costs 151 00:08:12,560 --> 00:08:15,080 Speaker 5: and many other things, it will be hosted at the 152 00:08:15,160 --> 00:08:17,760 Speaker 5: edge of the network. That's how we build the Verizon 153 00:08:17,840 --> 00:08:21,080 Speaker 5: Intelligence Edge Network in twenty eighteen when we started with 154 00:08:21,120 --> 00:08:24,000 Speaker 5: the Journey, which we now is just adding Frontier to it. 155 00:08:24,080 --> 00:08:26,520 Speaker 5: So I see a great opportunity for us on the 156 00:08:26,560 --> 00:08:30,520 Speaker 5: B to B side with this footprint to serve customers 157 00:08:31,120 --> 00:08:34,760 Speaker 5: that want to host AI at close to them, secure, 158 00:08:35,120 --> 00:08:36,880 Speaker 5: lower transport costs, and et cetera. 159 00:08:37,840 --> 00:08:40,600 Speaker 2: You're just announcing one deal, and you know we always 160 00:08:40,640 --> 00:08:43,680 Speaker 2: love to push forward hands are you going to continue 161 00:08:43,679 --> 00:08:45,920 Speaker 2: to be acquisitive when it comes to convergence. 162 00:08:47,000 --> 00:08:49,319 Speaker 5: I think, first of all, we are really happy with 163 00:08:49,400 --> 00:08:52,320 Speaker 5: assets we have and now we're adding Frontier. I don't 164 00:08:52,360 --> 00:08:54,000 Speaker 5: think we need much more. We're going to be the 165 00:08:54,040 --> 00:08:57,120 Speaker 5: biggest and wireless, We're going to be clearly the ones 166 00:08:57,160 --> 00:09:00,080 Speaker 5: having the largest broad but offering with fixed wires, access 167 00:09:00,120 --> 00:09:03,280 Speaker 5: and fiber in the market. We have the largest distribution 168 00:09:03,640 --> 00:09:05,439 Speaker 5: and the customers, so we're going to be in a 169 00:09:05,520 --> 00:09:08,120 Speaker 5: really good position to see that we execute for our 170 00:09:08,160 --> 00:09:11,760 Speaker 5: customers but also for our shareholders. So I'm really happy 171 00:09:11,800 --> 00:09:14,040 Speaker 5: with assets we're going to have and we have today. 172 00:09:14,360 --> 00:09:17,400 Speaker 5: When it comes to convergence, I think what is important 173 00:09:17,400 --> 00:09:21,400 Speaker 5: and convergence. We will have the scale of economy for both. 174 00:09:21,640 --> 00:09:24,920 Speaker 5: We will have the ownerships for the wireless network and 175 00:09:24,960 --> 00:09:27,880 Speaker 5: the fiber networks and fixed files access. If customers want 176 00:09:27,920 --> 00:09:30,280 Speaker 5: to make the convergence, we will have the economics for 177 00:09:30,360 --> 00:09:32,600 Speaker 5: doing it. I don't believe it's going to be sort 178 00:09:32,679 --> 00:09:35,959 Speaker 5: of you you discount one product for customer taking both. 179 00:09:36,200 --> 00:09:39,000 Speaker 5: That's not really there's two great products. And we all 180 00:09:39,040 --> 00:09:42,880 Speaker 5: know mobility in broadband is a centure for day society. 181 00:09:42,920 --> 00:09:46,520 Speaker 5: I mean everyone needs a division, corporation, a private person 182 00:09:47,280 --> 00:09:50,199 Speaker 5: or a corporation. You need these services that are even 183 00:09:50,320 --> 00:09:53,440 Speaker 5: more important today than we're five years ago. And Verison 184 00:09:53,520 --> 00:09:56,440 Speaker 5: is number one and basically every segment of that and 185 00:09:56,480 --> 00:09:58,760 Speaker 5: this is just fortifying it. So yeah, we're going to 186 00:09:58,760 --> 00:10:02,320 Speaker 5: see convergence. But it's not like we're going to discount products. 187 00:10:02,320 --> 00:10:04,319 Speaker 5: There are great two products that we're want to offer 188 00:10:04,400 --> 00:10:06,720 Speaker 5: our customers if they want to join. We have an 189 00:10:06,960 --> 00:10:10,079 Speaker 5: improvement on sheer and of course if customers both have 190 00:10:10,200 --> 00:10:12,679 Speaker 5: wibilated in broadland with us, and so we want to 191 00:10:12,720 --> 00:10:15,319 Speaker 5: see our best placehold in the market. Like clearly we're 192 00:10:15,320 --> 00:10:17,720 Speaker 5: going to be best position in the market. 193 00:10:17,800 --> 00:10:19,400 Speaker 6: Run and Council conmergence. 194 00:10:19,800 --> 00:10:26,840 Speaker 4: Verizon CEO Hans Vestberg, thank you very much. In Nvidia 195 00:10:27,000 --> 00:10:29,920 Speaker 4: said in a statement it has not received a subpoena 196 00:10:29,960 --> 00:10:32,800 Speaker 4: from the US Department of Justice, responding to a Bloomberg 197 00:10:32,840 --> 00:10:36,600 Speaker 4: News report published Tuesday that it had. The company said 198 00:10:36,600 --> 00:10:39,880 Speaker 4: it inquired with the DOJ, has not been subpoened, but 199 00:10:40,160 --> 00:10:45,640 Speaker 4: is happy to answer regulators questions. Bloomberg reports, citing a source, 200 00:10:45,640 --> 00:10:48,800 Speaker 4: that in Vidia did receive a request for information in 201 00:10:48,880 --> 00:10:52,760 Speaker 4: what's known as a civil investigative demand, or CID. A 202 00:10:52,880 --> 00:10:57,200 Speaker 4: CID is also commonly referred to as a subpoena, but 203 00:10:57,320 --> 00:11:01,680 Speaker 4: is often issued before any legal seedings are brought. According 204 00:11:01,720 --> 00:11:04,240 Speaker 4: to the Bloomberg source, the request for information issue to 205 00:11:04,360 --> 00:11:08,800 Speaker 4: Nvidia focuses on its acquisition of run Ai and aspects. 206 00:11:08,320 --> 00:11:09,120 Speaker 6: Of its chip business. 207 00:11:09,120 --> 00:11:13,240 Speaker 4: Bloomberg first reported the DOJ's probe of Nvidia in June. 208 00:11:13,480 --> 00:11:17,240 Speaker 2: Caroline coming up ed will be joined by another chief executive, 209 00:11:17,240 --> 00:11:19,880 Speaker 2: the CEO of C three AI. Once again, we're talking 210 00:11:19,920 --> 00:11:22,600 Speaker 2: about artificial intelligence and its latest earnings results. 211 00:11:22,840 --> 00:11:37,760 Speaker 3: This is Bloombog Technology back to tech earnings. 212 00:11:37,760 --> 00:11:41,040 Speaker 2: Now C three ai reporting subscription revenue for the first quarter. 213 00:11:41,280 --> 00:11:44,679 Speaker 2: There seems to be below many analysts expectations, shares off 214 00:11:44,679 --> 00:11:47,599 Speaker 2: by thirteen percent. Pt US dig into the numbers. The 215 00:11:47,679 --> 00:11:50,280 Speaker 2: CEO is with us, Tom Siebolf, you'll join us for more. 216 00:11:50,600 --> 00:11:52,440 Speaker 2: It is a painful sell off, and in fact you're 217 00:11:52,480 --> 00:11:54,719 Speaker 2: now training at the lowest since May twenty twenty three. 218 00:11:54,880 --> 00:11:55,800 Speaker 3: I'm sure you'll tell me. 219 00:11:55,720 --> 00:11:57,760 Speaker 2: You don't look at the share price, but it's trying 220 00:11:57,760 --> 00:12:00,600 Speaker 2: to tell you something. What is it that isn't enough? 221 00:12:00,600 --> 00:12:04,120 Speaker 2: And the numbers for the investor today, Tom, it was a. 222 00:12:04,040 --> 00:12:06,480 Speaker 7: Great quarter, Caroline. I mean a year over your growth 223 00:12:06,559 --> 00:12:09,240 Speaker 7: twenty one percent. That makes us I think one of 224 00:12:09,240 --> 00:12:13,240 Speaker 7: the fast ten fastest growing companies in the public software universe. 225 00:12:14,040 --> 00:12:17,880 Speaker 7: Cash op transaction volume up I think one hundred and 226 00:12:17,960 --> 00:12:22,240 Speaker 7: twenty one percent, pilot volume up one hundred and fifteen percent. 227 00:12:22,320 --> 00:12:24,120 Speaker 1: I think it was a solid quarter. 228 00:12:24,880 --> 00:12:29,440 Speaker 7: And the sometimes markets react in funny ways. Here we 229 00:12:29,520 --> 00:12:32,839 Speaker 7: have in video growing over the announced growth I think 230 00:12:32,880 --> 00:12:35,400 Speaker 7: well over one hundred percent year over your growth rate. 231 00:12:35,440 --> 00:12:36,240 Speaker 1: What's not to like? 232 00:12:36,760 --> 00:12:39,959 Speaker 7: The market reacts by taking what two hundred and seventy 233 00:12:40,040 --> 00:12:42,720 Speaker 7: billion dollars off the stock price the next day, So 234 00:12:43,240 --> 00:12:46,040 Speaker 7: you know, markets reacting funny ways, and you'll all sort 235 00:12:46,080 --> 00:12:47,000 Speaker 7: itself out of the long. 236 00:12:46,880 --> 00:12:51,600 Speaker 4: Run, Tom, I'm still trying to understand the business model, right, Yeah, 237 00:12:51,800 --> 00:12:55,520 Speaker 4: the subscription part and software and then services services seems 238 00:12:55,559 --> 00:12:58,520 Speaker 4: to be strong. What is the story behind software with you? 239 00:12:59,640 --> 00:13:02,160 Speaker 7: It's well, it's a little bit confusing a guy, because 240 00:13:02,400 --> 00:13:06,400 Speaker 7: seventy percent of that services revenue services number is actually 241 00:13:06,559 --> 00:13:09,960 Speaker 7: software delivered to the customer as part of our core 242 00:13:10,080 --> 00:13:12,079 Speaker 7: product that they pay for. 243 00:13:12,160 --> 00:13:13,520 Speaker 1: Over a long period of time. 244 00:13:13,559 --> 00:13:16,800 Speaker 7: So it's the core product functionality, seventy percent of the 245 00:13:16,840 --> 00:13:20,920 Speaker 7: services number, like order of ten million dollars of thirteen 246 00:13:20,920 --> 00:13:25,240 Speaker 7: point eight I think. But due to new accounting regulations 247 00:13:25,240 --> 00:13:28,880 Speaker 7: that came out called ASC six oh six, we have 248 00:13:28,960 --> 00:13:33,599 Speaker 7: to we have to treat these functional enhancements as professional services. 249 00:13:33,760 --> 00:13:36,760 Speaker 1: But it looks like software. It smells like software, It 250 00:13:36,840 --> 00:13:40,479 Speaker 1: is compiled, it's part of the core product. It is software. 251 00:13:40,559 --> 00:13:44,640 Speaker 7: But under the accounting regulations which we do comply with, 252 00:13:44,720 --> 00:13:51,720 Speaker 7: I assure you it is it gets recorded as professional services. 253 00:13:51,200 --> 00:13:52,359 Speaker 3: Stripping away accounting. 254 00:13:52,640 --> 00:13:54,960 Speaker 2: What people are trying to peel back is profitability and 255 00:13:55,000 --> 00:13:57,319 Speaker 2: how long they have to really wait for that profitability 256 00:13:57,360 --> 00:13:59,200 Speaker 2: to kick in. You have to invest in the time 257 00:13:59,240 --> 00:14:01,240 Speaker 2: to scale. I know, but are you just having to 258 00:14:01,240 --> 00:14:02,360 Speaker 2: sell investors to be patient. 259 00:14:02,400 --> 00:14:06,480 Speaker 7: Tom, Well, let's look at profitability. Our profit margins on 260 00:14:06,520 --> 00:14:10,160 Speaker 7: their professional services. I think it's ninety three percent gross margin. 261 00:14:10,559 --> 00:14:13,680 Speaker 7: I mean, it's good work if you can get it now. 262 00:14:14,600 --> 00:14:18,680 Speaker 7: Our revenue growth rates are substantially greater than our expense 263 00:14:18,760 --> 00:14:22,800 Speaker 7: growth rates historically. I think going forward, our revenue growth 264 00:14:22,880 --> 00:14:25,560 Speaker 7: rates will continue to generally be greater than our expense 265 00:14:25,640 --> 00:14:29,360 Speaker 7: for growth rates. Our gross profit margins are substantily greater 266 00:14:29,400 --> 00:14:33,120 Speaker 7: than our cost of sales. So non gap profitability is 267 00:14:33,160 --> 00:14:34,280 Speaker 7: simply a matter of scale. 268 00:14:34,400 --> 00:14:35,320 Speaker 1: This just happens with. 269 00:14:35,360 --> 00:14:38,960 Speaker 4: Time, Tom, I've been reading through the regulatory filings. It's 270 00:14:39,000 --> 00:14:41,520 Speaker 4: the kind of guy I am, and the disclosures and 271 00:14:41,600 --> 00:14:46,560 Speaker 4: the lawsuit suits against NL it seems to center around 272 00:14:46,600 --> 00:14:50,000 Speaker 4: a trade secret issue. But can you help us understand 273 00:14:50,040 --> 00:14:51,160 Speaker 4: more of what's going on there? 274 00:14:51,200 --> 00:14:51,520 Speaker 6: Please? 275 00:14:52,640 --> 00:14:56,120 Speaker 1: Yeah, this is a very unfortunate situation. This is very sad. 276 00:14:56,640 --> 00:15:01,160 Speaker 7: And now was a really valued customer that license a 277 00:15:01,200 --> 00:15:06,240 Speaker 7: lot of our technology, and it appears that they may 278 00:15:06,280 --> 00:15:11,520 Speaker 7: have copied literally thousands of lines of our source code 279 00:15:11,680 --> 00:15:15,760 Speaker 7: into our of our source code into a copy of 280 00:15:16,320 --> 00:15:18,040 Speaker 7: and basically copied our product. 281 00:15:18,360 --> 00:15:20,160 Speaker 1: So that's what this's complained about. 282 00:15:20,160 --> 00:15:23,920 Speaker 7: It appears to be a very significant kind of intellectual 283 00:15:23,960 --> 00:15:31,000 Speaker 7: property theft, and we're we're pursuing that in civil courts 284 00:15:31,160 --> 00:15:35,720 Speaker 7: in Italy and it's sad, and you know, it's actually 285 00:15:35,720 --> 00:15:38,200 Speaker 7: the first time I've seen this in my professional career 286 00:15:39,200 --> 00:15:42,400 Speaker 7: that a company would do such a thing. But we 287 00:15:42,480 --> 00:15:45,720 Speaker 7: are you know, we have to protect our intellectual property 288 00:15:45,800 --> 00:15:47,960 Speaker 7: rights for the benefit of our shareholders, and we are 289 00:15:48,000 --> 00:15:48,400 Speaker 7: doing that. 290 00:15:48,680 --> 00:15:51,360 Speaker 2: And we will see comment from n L you are 291 00:15:51,400 --> 00:15:54,920 Speaker 2: seeking two billion dollars from them in compensation. Tom, just 292 00:15:54,960 --> 00:15:58,200 Speaker 2: going back to ultimately the winning of clients. 293 00:15:58,720 --> 00:15:59,800 Speaker 3: How is market share? 294 00:15:59,840 --> 00:16:03,720 Speaker 2: How are you able to compete with the big companies 295 00:16:03,760 --> 00:16:05,080 Speaker 2: out there trying to compete with you? 296 00:16:06,640 --> 00:16:08,720 Speaker 7: Well, I think the companies that are perceived of as 297 00:16:08,760 --> 00:16:11,920 Speaker 7: accounting with competing with us would be Zoo, it would 298 00:16:11,920 --> 00:16:15,080 Speaker 7: be microsoftware is, z or AWS and Google, because the 299 00:16:15,160 --> 00:16:19,400 Speaker 7: real competition is building yourself. But understand, Caroline, seventy one 300 00:16:19,480 --> 00:16:22,880 Speaker 7: percent of our transactions the last quarter we closed with 301 00:16:23,040 --> 00:16:26,200 Speaker 7: one of Google Cloud aws ors or so we joint 302 00:16:26,240 --> 00:16:26,920 Speaker 7: market with them. 303 00:16:27,000 --> 00:16:28,800 Speaker 1: We joined sell seventy one percent. 304 00:16:29,200 --> 00:16:32,960 Speaker 7: So these are great marketing partners and they're perceived of 305 00:16:33,400 --> 00:16:36,240 Speaker 7: by some as being competitors, but they share looked at 306 00:16:36,240 --> 00:16:39,680 Speaker 7: me like partners, and they looked to our customers like partners. 307 00:16:39,720 --> 00:16:43,400 Speaker 7: So we appreciate the partnership and we go to market 308 00:16:43,480 --> 00:16:45,240 Speaker 7: with them very actively all around the world. 309 00:16:46,280 --> 00:16:49,280 Speaker 2: Well, for now, we really appreciate you coming on after 310 00:16:49,320 --> 00:16:52,280 Speaker 2: earnings shares off on the day. We appreciate the time 311 00:16:52,280 --> 00:16:55,520 Speaker 2: and the expertise. Three AAI CEO Tom siebel. 312 00:17:03,040 --> 00:17:03,520 Speaker 3: Hpe. 313 00:17:04,240 --> 00:17:06,040 Speaker 2: Now it's coming out with its earnings and for some 314 00:17:06,720 --> 00:17:09,320 Speaker 2: we saw profitability perhaps coming weak and then expected for 315 00:17:09,359 --> 00:17:13,679 Speaker 2: its third quarter, suggesting look that lower margins certainly that 316 00:17:13,760 --> 00:17:17,520 Speaker 2: anticipated in its business for selling service for AI seem 317 00:17:17,600 --> 00:17:20,720 Speaker 2: to be holding for now. Hpco, Antonio and Nery is 318 00:17:20,800 --> 00:17:23,280 Speaker 2: joining us, and that's just dwell on the margins for 319 00:17:23,280 --> 00:17:27,480 Speaker 2: a moment, Antonio, because some call it low calorie nature 320 00:17:27,600 --> 00:17:31,399 Speaker 2: of AI systems revenue, is it no calorie for the foreseeable. 321 00:17:32,520 --> 00:17:35,520 Speaker 8: Well, good morning, Kara, thanks for having me. We did 322 00:17:35,680 --> 00:17:38,600 Speaker 8: what we said would do and we had a very 323 00:17:38,640 --> 00:17:41,960 Speaker 8: strong quarter where we had double digits over year revenue 324 00:17:41,960 --> 00:17:44,840 Speaker 8: growth and to your point, was all on the back 325 00:17:44,880 --> 00:17:48,159 Speaker 8: of converting an amazing order book we have in AI 326 00:17:48,680 --> 00:17:52,320 Speaker 8: and continue to add to that order book. However, it's 327 00:17:52,359 --> 00:17:56,520 Speaker 8: also fair to say that we actually improve operating margins 328 00:17:56,600 --> 00:18:01,000 Speaker 8: quarter over quarter by fifty basis points, despite makes heavily 329 00:18:01,000 --> 00:18:04,359 Speaker 8: weighted to AI. And I will say that the reason 330 00:18:04,400 --> 00:18:08,040 Speaker 8: why the gross margin, not the operating margins, the gross 331 00:18:08,080 --> 00:18:11,280 Speaker 8: margin is year over year down is because we have 332 00:18:11,440 --> 00:18:15,040 Speaker 8: less contribution from the networking business, which as you know, 333 00:18:15,240 --> 00:18:18,639 Speaker 8: is going through a market transition through the cyclicality we 334 00:18:18,720 --> 00:18:21,400 Speaker 8: normally see in each of the businesses. So the main 335 00:18:21,480 --> 00:18:25,240 Speaker 8: driver for the gross margin decline was not AI. In fact, 336 00:18:25,320 --> 00:18:30,080 Speaker 8: our AI business, our server business grew operating margins year 337 00:18:30,080 --> 00:18:31,840 Speaker 8: over year by seventy basis points. 338 00:18:32,760 --> 00:18:35,320 Speaker 4: That's actually like an industry wide issue that you've brought 339 00:18:35,359 --> 00:18:36,800 Speaker 4: up that others have talked to us about. I think 340 00:18:36,840 --> 00:18:39,680 Speaker 4: the difference with you, Antonio is the customer bas is 341 00:18:39,720 --> 00:18:42,240 Speaker 4: like much more enterprise centric, and I think on the 342 00:18:42,280 --> 00:18:45,200 Speaker 4: call you talked about improvement in margins relating to that, 343 00:18:45,440 --> 00:18:47,119 Speaker 4: could you just talk a bit more about how the 344 00:18:47,240 --> 00:18:48,920 Speaker 4: enterprise customer is going to push you forward? 345 00:18:50,280 --> 00:18:53,440 Speaker 8: Absolutely, And as you know, at the HPD is covered 346 00:18:53,440 --> 00:18:57,040 Speaker 8: in Vegas, we introduce an HPE Private Cloud AI offering, 347 00:18:57,480 --> 00:18:59,640 Speaker 8: which I call it an AI in the box seat, 348 00:18:59,760 --> 00:19:03,879 Speaker 8: which is actually a four toun key solution for enterprises 349 00:19:04,080 --> 00:19:07,840 Speaker 8: of all sizes to train and deploy inference for their 350 00:19:07,880 --> 00:19:14,040 Speaker 8: specific applications. And that offer is targeted specifically for enterprises, 351 00:19:14,080 --> 00:19:18,280 Speaker 8: including very specific vertical solutions built on top. And we 352 00:19:18,440 --> 00:19:21,000 Speaker 8: just made that offer available just two days ago. It's 353 00:19:21,080 --> 00:19:25,320 Speaker 8: now available for global availability ordering and we are excited 354 00:19:25,359 --> 00:19:25,760 Speaker 8: about that. 355 00:19:25,880 --> 00:19:26,160 Speaker 5: Now. 356 00:19:26,240 --> 00:19:29,400 Speaker 8: In the order book we announced this order, we had 357 00:19:29,480 --> 00:19:32,680 Speaker 8: one point six billion dollars of new orders and meet 358 00:19:32,760 --> 00:19:35,320 Speaker 8: teams of those orders are enterprise related. 359 00:19:36,400 --> 00:19:40,000 Speaker 2: Let's just talk about macro challenges to those enterprises you 360 00:19:40,080 --> 00:19:44,040 Speaker 2: sell to. Are we seeing a pullback in confidence on spending? 361 00:19:45,680 --> 00:19:48,679 Speaker 8: Actually, I have not seen it, you know. In fact, 362 00:19:48,800 --> 00:19:52,879 Speaker 8: we saw orders growth in all our businesses on a 363 00:19:52,920 --> 00:19:56,520 Speaker 8: sequential basis, which tells me, Caroline, we are on a recovery. 364 00:19:56,920 --> 00:20:00,200 Speaker 8: In fact, our traditional server business had doubled it the 365 00:20:00,280 --> 00:20:04,440 Speaker 8: year over here and sequential growth in orders, which also 366 00:20:04,520 --> 00:20:08,320 Speaker 8: tells me there's no cannibalization from the AI servers into 367 00:20:08,400 --> 00:20:11,679 Speaker 8: the traditional servers. And it makes sense, Caroline, because when 368 00:20:11,720 --> 00:20:14,840 Speaker 8: you think about these legacy worloads, some of them are 369 00:20:14,880 --> 00:20:18,240 Speaker 8: not even cloud native worloads. It makes no sense to 370 00:20:18,280 --> 00:20:21,480 Speaker 8: put it on a more expensive infrastructure which should be 371 00:20:21,560 --> 00:20:25,520 Speaker 8: focused on really training these models with their data so 372 00:20:25,560 --> 00:20:28,080 Speaker 8: they can get the time to value from the deployment 373 00:20:28,119 --> 00:20:30,960 Speaker 8: through the business process. And then on the networking site, 374 00:20:31,000 --> 00:20:33,720 Speaker 8: which obviously has been a more negative store in the 375 00:20:33,800 --> 00:20:34,720 Speaker 8: last few quarters. 376 00:20:34,760 --> 00:20:35,720 Speaker 6: In line with the peers. 377 00:20:35,760 --> 00:20:39,080 Speaker 8: By the way, we saw sequential or the growth across 378 00:20:39,119 --> 00:20:44,040 Speaker 8: all geographies and we're driven by the wireless line, the 379 00:20:44,240 --> 00:20:47,000 Speaker 8: SASE deployment, which obvious security is very important at the 380 00:20:47,080 --> 00:20:48,840 Speaker 8: edge and data center networking. 381 00:20:50,480 --> 00:20:52,960 Speaker 4: And so I know you talked about your fiduciary duty 382 00:20:53,240 --> 00:20:58,200 Speaker 4: in pursuing damages in the sad incidents around mister Lynch. 383 00:20:58,920 --> 00:21:02,000 Speaker 4: Just because it's the first time our audience is hearing 384 00:21:02,040 --> 00:21:05,679 Speaker 4: from you, you explain that produciary duty and basically what 385 00:21:05,720 --> 00:21:08,840 Speaker 4: your end goal is in that piece of litigation. 386 00:21:10,480 --> 00:21:14,200 Speaker 8: Well, Lison had the doctor Lynch death is a tragedy, 387 00:21:14,480 --> 00:21:17,600 Speaker 8: as are the death of others in the on the ship. 388 00:21:17,720 --> 00:21:21,440 Speaker 8: So clearly it was a sad moment. However, it does 389 00:21:21,600 --> 00:21:25,320 Speaker 8: not change what happened. You know, the UK judge rule 390 00:21:25,400 --> 00:21:27,840 Speaker 8: that the company is victim of fraud. 391 00:21:27,960 --> 00:21:29,400 Speaker 1: That really happened last year. 392 00:21:30,119 --> 00:21:33,400 Speaker 8: As a physical is duty. We need to see the finalization, 393 00:21:33,520 --> 00:21:37,240 Speaker 8: does the proceedings and obviously our duties to also recover 394 00:21:37,320 --> 00:21:39,880 Speaker 8: the damages on that fraud. So we have to see 395 00:21:39,880 --> 00:21:42,840 Speaker 8: it through. That's what we are and we hope to 396 00:21:42,880 --> 00:21:45,000 Speaker 8: hear soon what are the next steps based on the 397 00:21:45,040 --> 00:21:47,560 Speaker 8: proceedings of the judge. 398 00:21:46,840 --> 00:21:49,520 Speaker 2: Antonia and Arry, we appreciate you tackling what is a 399 00:21:49,600 --> 00:21:51,840 Speaker 2: sensitive subject and indeed your earnings. 400 00:21:51,960 --> 00:21:52,440 Speaker 3: Thank you. 401 00:22:00,040 --> 00:22:02,119 Speaker 2: Welcome back to Blue BEG Technology. I'm Karen Hide in 402 00:22:02,160 --> 00:22:03,040 Speaker 2: New York and. 403 00:22:03,080 --> 00:22:04,560 Speaker 6: I met Ludlow in San Francisco. 404 00:22:04,840 --> 00:22:06,600 Speaker 2: Quick check on these market said, because we are being 405 00:22:06,600 --> 00:22:10,440 Speaker 2: whipswored once again. Yesterday we saw an eke out of 406 00:22:10,520 --> 00:22:13,240 Speaker 2: a recovery on the chip sector, but today we've gone 407 00:22:13,280 --> 00:22:14,520 Speaker 2: back in the red and it's going to be a 408 00:22:14,600 --> 00:22:15,359 Speaker 2: volatile session. 409 00:22:15,359 --> 00:22:17,560 Speaker 3: As we looked ahead tomorrow, of course to the all 410 00:22:17,600 --> 00:22:18,520 Speaker 3: important labor data. 411 00:22:18,640 --> 00:22:20,399 Speaker 2: Now's that one hundred under pressure, as you see, by 412 00:22:20,480 --> 00:22:23,240 Speaker 2: five ten percent, no longer outperforming the other benchmarks. We've 413 00:22:23,240 --> 00:22:25,880 Speaker 2: see the chip stocks down by more than a percentage point. 414 00:22:26,080 --> 00:22:28,280 Speaker 2: And also looking at crypto look, this is a risk 415 00:22:28,320 --> 00:22:30,560 Speaker 2: averse kind of a day once again. Bonds have been 416 00:22:30,600 --> 00:22:32,639 Speaker 2: training pretty flat, but I'm looking at cryptos thinking some 417 00:22:32,720 --> 00:22:34,359 Speaker 2: three point six percent move on and look at some 418 00:22:34,440 --> 00:22:37,640 Speaker 2: individual movers because amid what has been a volatile time 419 00:22:37,720 --> 00:22:40,480 Speaker 2: on the stock markets, companies still have well the ability 420 00:22:40,560 --> 00:22:43,000 Speaker 2: to splash some cash and more than nine billion dollars 421 00:22:43,040 --> 00:22:45,000 Speaker 2: of it coming from Verizon to be buying Frontier. We 422 00:22:45,080 --> 00:22:47,200 Speaker 2: just spoke to the CEO and why he's doing that deal. 423 00:22:47,560 --> 00:22:50,480 Speaker 2: In Vidia still managing just to be above water. But 424 00:22:50,560 --> 00:22:52,680 Speaker 2: remember this is a key stock. Is what's driven some 425 00:22:52,800 --> 00:22:54,960 Speaker 2: of the selloff, and mag seven not doing enough today 426 00:22:55,160 --> 00:22:57,399 Speaker 2: to stabilize the benchmarks. In Vidia up by just a 427 00:22:57,480 --> 00:22:59,679 Speaker 2: tenth of a percent, Tesla still up more than three 428 00:22:59,720 --> 00:23:00,560 Speaker 2: point eight percent. 429 00:23:00,840 --> 00:23:02,920 Speaker 3: This is it seems to be promising full self. 430 00:23:02,800 --> 00:23:05,320 Speaker 2: Driving Europe, China and of course all eyes and what 431 00:23:05,520 --> 00:23:09,439 Speaker 2: will become of a robotaxing conversation in October for that company. 432 00:23:09,520 --> 00:23:12,040 Speaker 3: But we've got to stick with overall outlook for chips 433 00:23:12,080 --> 00:23:12,320 Speaker 3: right now. 434 00:23:12,480 --> 00:23:17,680 Speaker 4: ED we do TSMC supplies Science Tech says AI demand 435 00:23:18,440 --> 00:23:22,520 Speaker 4: is here to stay, the CEO dismissing concerns over AI fatigue. 436 00:23:22,560 --> 00:23:23,639 Speaker 6: After chip stocks. 437 00:23:23,400 --> 00:23:27,320 Speaker 4: Recorded the biggest one month one day decline in a month, 438 00:23:27,440 --> 00:23:29,959 Speaker 4: Bloomberg sat down with CEO Hu ming Chi. 439 00:23:30,600 --> 00:23:35,280 Speaker 9: That's what he had to say from a personal perspective. 440 00:23:36,960 --> 00:23:43,960 Speaker 9: Liz bom In of our AI industry just begin there's 441 00:23:44,080 --> 00:23:49,120 Speaker 9: a lot of application. I do expect we're coming out 442 00:23:49,640 --> 00:23:50,560 Speaker 9: pretty soon. 443 00:23:53,440 --> 00:23:55,200 Speaker 6: For more on the markets and everything going on. 444 00:23:55,359 --> 00:23:58,920 Speaker 4: Christina Hooper, Investigo chief Global market strategist joins us. Now, 445 00:23:59,560 --> 00:24:02,720 Speaker 4: you know, we're learning every week, every month, every year 446 00:24:02,800 --> 00:24:05,960 Speaker 4: that one single session a market does not make But 447 00:24:06,080 --> 00:24:09,440 Speaker 4: where do you go the anxiety in semiconductor's AI demand. 448 00:24:09,480 --> 00:24:12,120 Speaker 4: We have economic data in twenty four hours time. That's 449 00:24:12,200 --> 00:24:14,680 Speaker 4: very important, and we're always thinking about the FED. When 450 00:24:14,680 --> 00:24:18,399 Speaker 4: you wake up, Christina, with a technology investors perspective, what 451 00:24:18,520 --> 00:24:19,359 Speaker 4: do you first think of? 452 00:24:20,320 --> 00:24:22,840 Speaker 10: First of all, I think it's important for investors to 453 00:24:23,000 --> 00:24:25,720 Speaker 10: recognize that they have a longer time horizon than one 454 00:24:25,840 --> 00:24:29,200 Speaker 10: day or one month or even several months, and so 455 00:24:29,320 --> 00:24:32,280 Speaker 10: it's important not to be too reactive. To understand that 456 00:24:32,520 --> 00:24:37,959 Speaker 10: valuations are relatively high. And so when stocks are priced 457 00:24:38,160 --> 00:24:41,720 Speaker 10: near perfection, we're likely to see jitters, we're likely to 458 00:24:41,760 --> 00:24:44,520 Speaker 10: see concerns, and I think one of the overarching concerns 459 00:24:44,600 --> 00:24:48,920 Speaker 10: we're seeing right now is this fear that it can't continue, 460 00:24:49,359 --> 00:24:53,760 Speaker 10: that we won't see companies continue to spend to invest 461 00:24:54,119 --> 00:24:58,600 Speaker 10: on AI, and I think that that's probably more a 462 00:24:58,760 --> 00:25:02,280 Speaker 10: fear than a reality, because what we're seeing is that 463 00:25:02,560 --> 00:25:10,639 Speaker 10: investment in productivity and enhancing areas has actually improved productivity growth. 464 00:25:11,040 --> 00:25:14,879 Speaker 10: And so this is something that companies recognize. And I 465 00:25:15,040 --> 00:25:19,239 Speaker 10: truly believe the risk of not investing is greater than 466 00:25:19,280 --> 00:25:24,200 Speaker 10: the risk of investing, but that might not come investors today. 467 00:25:24,840 --> 00:25:28,440 Speaker 10: So diversification certainly helps, but I think just understanding, we're 468 00:25:28,600 --> 00:25:31,359 Speaker 10: likely to see volatility, but that doesn't mean we won't 469 00:25:31,400 --> 00:25:34,879 Speaker 10: see significant gains over the course of a year, two years, 470 00:25:35,200 --> 00:25:36,040 Speaker 10: and even longer. 471 00:25:36,680 --> 00:25:39,680 Speaker 2: Nvidia back in the red once again and has raised 472 00:25:39,680 --> 00:25:41,159 Speaker 2: a lot of it's market capitalization. 473 00:25:41,400 --> 00:25:41,840 Speaker 3: Christina. 474 00:25:42,560 --> 00:25:44,639 Speaker 2: That has been an anxiety that we've just put too 475 00:25:44,760 --> 00:25:48,359 Speaker 2: much into too fewer companies. When you say diversify, what 476 00:25:48,920 --> 00:25:52,800 Speaker 2: into other technaus or just other types of companies. 477 00:25:52,920 --> 00:25:56,000 Speaker 10: Other types of companies. Let's face it that it all 478 00:25:56,119 --> 00:26:01,159 Speaker 10: goes well. If the thesis for a soft landing and 479 00:26:01,359 --> 00:26:03,880 Speaker 10: we see the FED start to cut rates, that could 480 00:26:03,960 --> 00:26:07,639 Speaker 10: create a very supportive environment for risk assets in general. 481 00:26:08,160 --> 00:26:12,520 Speaker 10: That doesn't mean that tech will outperform, but it's probably 482 00:26:12,600 --> 00:26:17,200 Speaker 10: going to keep up or follow closely behind cyclicals. Smaller caps, 483 00:26:17,280 --> 00:26:20,800 Speaker 10: those areas that are more sensitive to the economy. So 484 00:26:21,000 --> 00:26:24,640 Speaker 10: this could be a very positive environment and I think 485 00:26:24,840 --> 00:26:30,800 Speaker 10: one that investors will appreciate, even if we see some spasms, 486 00:26:31,480 --> 00:26:36,000 Speaker 10: some fits of fear and lack of confidence along the way. 487 00:26:37,840 --> 00:26:41,800 Speaker 4: Christina, you talked about sort of durations a moment, ago, weeks, months, years, 488 00:26:41,840 --> 00:26:44,879 Speaker 4: and in the context of Nvidia, for example, a lot 489 00:26:44,920 --> 00:26:46,879 Speaker 4: of the investors we had in the show after earnings 490 00:26:46,920 --> 00:26:50,080 Speaker 4: were long term investors who say, we accept the short 491 00:26:50,160 --> 00:26:53,560 Speaker 4: term volatility that we're holding because we understand the data 492 00:26:53,640 --> 00:26:57,399 Speaker 4: center build out that's happening. Is it important to be 493 00:26:57,560 --> 00:27:00,640 Speaker 4: diversified though, even if you take that much set. 494 00:27:02,280 --> 00:27:06,440 Speaker 10: So, you know, I think it's critical to recognize that 495 00:27:06,920 --> 00:27:10,720 Speaker 10: there are many many companies that will benefit from AI. 496 00:27:11,040 --> 00:27:16,840 Speaker 10: So if you're you're feeling very confident about the AI story, 497 00:27:17,480 --> 00:27:20,280 Speaker 10: that's going to help companies in a variety of different 498 00:27:20,400 --> 00:27:24,640 Speaker 10: sectors and industries. And in fact, we've heard on earnings 499 00:27:24,760 --> 00:27:28,440 Speaker 10: calls in the last quarter that companies have been using 500 00:27:28,560 --> 00:27:32,879 Speaker 10: AI already and seeing some really significant results in terms 501 00:27:32,960 --> 00:27:36,560 Speaker 10: of their sales, and so I think it's it's perhaps 502 00:27:36,680 --> 00:27:39,600 Speaker 10: taking that AI AI theme and looking to those other 503 00:27:39,840 --> 00:27:44,240 Speaker 10: sectors and industries, especially service areas of the economy to 504 00:27:44,359 --> 00:27:49,159 Speaker 10: find opportunities. There can be a significant diversification by just 505 00:27:49,240 --> 00:27:49,600 Speaker 10: doing that. 506 00:27:51,080 --> 00:27:56,880 Speaker 4: Christina, how important is tomorrow's jobs report? I'm sorry, how 507 00:27:56,960 --> 00:28:00,399 Speaker 4: important is Friday's jobs report? 508 00:28:01,640 --> 00:28:03,000 Speaker 6: So Friday's jobs report. 509 00:28:03,160 --> 00:28:04,920 Speaker 3: I think what we're really likely. 510 00:28:04,800 --> 00:28:08,760 Speaker 10: To see is job gains non farm payrolls around one 511 00:28:08,880 --> 00:28:13,000 Speaker 10: fifty one sixty in line with expectations, and that's appropriate 512 00:28:13,200 --> 00:28:15,280 Speaker 10: given where we are in the cycle. I think the 513 00:28:15,440 --> 00:28:17,840 Speaker 10: FED will be satisfied with that. I mean, it certainly 514 00:28:17,920 --> 00:28:21,119 Speaker 10: said it doesn't want to see any significant deterioration in 515 00:28:21,240 --> 00:28:23,440 Speaker 10: jobs from here. I don't think we see that, and 516 00:28:23,560 --> 00:28:27,280 Speaker 10: that's pretty much a pre pandemic trend level is to 517 00:28:27,359 --> 00:28:30,480 Speaker 10: get about one fifty one sixty one seventy. I don't 518 00:28:30,480 --> 00:28:33,080 Speaker 10: think there's anything that will come out of Friday's jobs 519 00:28:33,119 --> 00:28:37,640 Speaker 10: report that changes the Fed's decision in September. I think 520 00:28:37,680 --> 00:28:40,160 Speaker 10: we're going to get a twenty five basis point raycut. 521 00:28:40,360 --> 00:28:42,240 Speaker 10: I think if we get a week jobs report that 522 00:28:42,360 --> 00:28:44,200 Speaker 10: will not change that. I don't think we're going to 523 00:28:44,200 --> 00:28:47,280 Speaker 10: get a fifty basis point cut. That's because the FED 524 00:28:47,960 --> 00:28:51,760 Speaker 10: really does believe that it is doing the right thing. 525 00:28:51,920 --> 00:28:54,800 Speaker 10: It's on course a fifty basis point cut would be 526 00:28:54,920 --> 00:28:57,120 Speaker 10: an admission of guilt in my opinion, Even when it 527 00:28:57,200 --> 00:28:59,120 Speaker 10: was behind the curve in March of twenty twenty two, 528 00:28:59,480 --> 00:29:01,800 Speaker 10: it only hype grades twenty five basis points. So that's 529 00:29:01,800 --> 00:29:03,600 Speaker 10: how I think this is going to play out, and 530 00:29:03,720 --> 00:29:06,480 Speaker 10: that should be positive for markets. If we've got a 531 00:29:06,520 --> 00:29:09,480 Speaker 10: fifty basis point cut, we might actually see more volatility 532 00:29:09,600 --> 00:29:13,400 Speaker 10: and some kind of sell off because it suggests there's 533 00:29:13,520 --> 00:29:15,360 Speaker 10: more weakness in the economy than many thought. 534 00:29:16,080 --> 00:29:19,520 Speaker 3: Deja vous now versus beginning of August. 535 00:29:20,280 --> 00:29:22,719 Speaker 2: Are we going to get these bouts of volatility as 536 00:29:22,800 --> 00:29:24,680 Speaker 2: aggressive as we're suddenly seeing. 537 00:29:25,360 --> 00:29:27,680 Speaker 10: I suspect we will. There's a lot happening right now. 538 00:29:27,920 --> 00:29:30,240 Speaker 10: We not just have the FED meeting, but we have 539 00:29:30,320 --> 00:29:33,040 Speaker 10: a presidential election. We have a lot of other central 540 00:29:33,040 --> 00:29:36,080 Speaker 10: banks cutting at the same time. I think that creates 541 00:29:36,120 --> 00:29:41,200 Speaker 10: an environment where there's concern, where there's uncertainty. We also 542 00:29:41,400 --> 00:29:45,960 Speaker 10: have this dueling concern among investors where they're looking to 543 00:29:46,080 --> 00:29:48,800 Speaker 10: rate cuts and the opportunities presented by them, but they're 544 00:29:48,880 --> 00:29:52,000 Speaker 10: also still worried. There's this nagging concern that we could 545 00:29:52,080 --> 00:29:55,520 Speaker 10: still go into recession. And so I think that all 546 00:29:55,640 --> 00:29:59,640 Speaker 10: comes together in terms of outsize reactions to economic data 547 00:29:59,680 --> 00:30:00,560 Speaker 10: release as well. 548 00:30:01,240 --> 00:30:04,440 Speaker 2: Christina, so great to get the macro perspective. Christina Hooper, 549 00:30:04,520 --> 00:30:06,680 Speaker 2: chief Global market strategist in Invesco. 550 00:30:07,320 --> 00:30:08,000 Speaker 3: Now coming up. 551 00:30:08,360 --> 00:30:11,280 Speaker 2: Open ai Across is one million customer milestone from an 552 00:30:11,360 --> 00:30:12,160 Speaker 2: enterprise perspective. 553 00:30:12,200 --> 00:30:15,480 Speaker 3: More details on the company growth. Next, this is Blueberg Technology. 554 00:30:30,520 --> 00:30:34,120 Speaker 4: Bloomberg Power Players is underway in New York as Bloomberg Originals. 555 00:30:34,240 --> 00:30:37,680 Speaker 4: Jason Kelly is sitting down today with prominent people in 556 00:30:37,760 --> 00:30:41,200 Speaker 4: the sports industry. He's discussing the global sports boom right 557 00:30:41,280 --> 00:30:45,360 Speaker 4: now with Tony Wrestler, chairman of Arias Management and of 558 00:30:45,440 --> 00:30:46,240 Speaker 4: the Atlanta Hawks. 559 00:30:46,240 --> 00:30:47,960 Speaker 6: Listen to this. Never really helped me up on that, 560 00:30:48,040 --> 00:30:49,080 Speaker 6: and probably should. 561 00:30:50,000 --> 00:30:53,239 Speaker 11: The truth of the matter is many of these as 562 00:30:53,320 --> 00:30:56,440 Speaker 11: Green actually mentioned, a lot of these businesses and industries, 563 00:30:57,800 --> 00:31:01,920 Speaker 11: and certainly leagues and teams have gone through this massive evolution, 564 00:31:03,880 --> 00:31:05,360 Speaker 11: and at the end of the day, it takes a 565 00:31:05,400 --> 00:31:09,880 Speaker 11: long time for leagues franchises to make money to show 566 00:31:09,960 --> 00:31:14,480 Speaker 11: the valuation that the market is now seeing. And yes, 567 00:31:15,360 --> 00:31:18,800 Speaker 11: your point earlier, this is an asset class we had. 568 00:31:18,840 --> 00:31:19,880 Speaker 6: Areas would argue. 569 00:31:19,800 --> 00:31:21,760 Speaker 11: I don't know two and a half three trillion dollar 570 00:31:21,880 --> 00:31:25,320 Speaker 11: asset class people take a step back and say, well, 571 00:31:25,720 --> 00:31:28,880 Speaker 11: what are you even saying? If you think about the NFL, 572 00:31:29,360 --> 00:31:33,280 Speaker 11: there's thirty two franchises. Average franchises maybe five or six 573 00:31:33,400 --> 00:31:36,640 Speaker 11: billion dollars, so one hundred and fifty hundred and sixtyllion, 574 00:31:36,680 --> 00:31:40,320 Speaker 11: one hundred and eighty billion of value in just franchises, 575 00:31:40,600 --> 00:31:44,560 Speaker 11: and each of those franchises has all sorts of ancillary 576 00:31:44,640 --> 00:31:50,680 Speaker 11: businesses from stadiums to real estate developments, technology related businesses, 577 00:31:51,200 --> 00:31:55,000 Speaker 11: retail and food and beverage related businesses. So when people 578 00:31:55,160 --> 00:31:59,640 Speaker 11: say what is the size of this industry? I would 579 00:31:59,720 --> 00:32:03,400 Speaker 11: argue at least most folks looking at it are woefully 580 00:32:03,680 --> 00:32:06,200 Speaker 11: underestimating the value. 581 00:32:05,880 --> 00:32:08,240 Speaker 6: Of this sports world globally. 582 00:32:09,240 --> 00:32:12,480 Speaker 11: So when people take a step back and say, wow, 583 00:32:14,080 --> 00:32:17,520 Speaker 11: this is a really meaningful asset class, and frankly, it's 584 00:32:17,560 --> 00:32:20,400 Speaker 11: an asset class that's not just for rich people. Yeah, 585 00:32:20,600 --> 00:32:24,440 Speaker 11: it's an asset class for investors trying to now investors 586 00:32:24,480 --> 00:32:27,160 Speaker 11: that hopefully do real work and understand the difference. Some 587 00:32:27,360 --> 00:32:32,000 Speaker 11: leagues are really nasse and really early in their journey, 588 00:32:32,080 --> 00:32:36,040 Speaker 11: if you will, and some leagues are really comfortably seeing 589 00:32:36,200 --> 00:32:39,360 Speaker 11: each of their franchises make meaningful cash flow. So there 590 00:32:39,440 --> 00:32:44,080 Speaker 11: is analysis required, but the size and scope and excitement 591 00:32:44,160 --> 00:32:47,600 Speaker 11: of this industry is a little bit greater than most 592 00:32:47,680 --> 00:32:49,040 Speaker 11: folks might have anticipated. 593 00:32:49,480 --> 00:32:51,960 Speaker 6: Yeah, and there's so much to unpack in what you 594 00:32:52,040 --> 00:32:52,320 Speaker 6: just said. 595 00:32:52,360 --> 00:32:54,120 Speaker 12: But before we get too far for evaluations, I want 596 00:32:54,160 --> 00:32:56,680 Speaker 12: to put a poll up if we can, because we 597 00:32:56,760 --> 00:33:01,000 Speaker 12: want to ask the audience what they think about I 598 00:33:01,080 --> 00:33:04,800 Speaker 12: think US sport US sports teams valuations, So this is 599 00:33:04,840 --> 00:33:08,400 Speaker 12: sort of a goldilocks question. Are they too low, just right, 600 00:33:08,560 --> 00:33:13,200 Speaker 12: too high? Or sky high and ridiculous. I might wait 601 00:33:13,280 --> 00:33:15,000 Speaker 12: to see what the audience says before I ask you 602 00:33:15,600 --> 00:33:16,280 Speaker 12: if they agree. 603 00:33:16,320 --> 00:33:18,600 Speaker 6: But you know we we've shown up on the screen here. 604 00:33:18,960 --> 00:33:22,200 Speaker 12: I mean these are it's not quite you know, to 605 00:33:22,400 --> 00:33:25,000 Speaker 12: use the tired old term hockey stick, but it's pretty 606 00:33:25,040 --> 00:33:28,360 Speaker 12: close when you look at NBA valuations. 607 00:33:28,640 --> 00:33:29,760 Speaker 6: You know, your. 608 00:33:31,080 --> 00:33:33,560 Speaker 12: Your friends in Los Angeles, you know, Will Obey and 609 00:33:33,600 --> 00:33:36,479 Speaker 12: Bob Biger just bought the NWSL team, as was mentioned 610 00:33:37,200 --> 00:33:40,120 Speaker 12: out there, Angel City for two hundred fifty million dollars valuation. 611 00:33:40,240 --> 00:33:43,400 Speaker 12: Mat That's that's real money for women's soccer, all right. 612 00:33:43,480 --> 00:33:47,280 Speaker 12: So here's what the audience says. Just right takes it 613 00:33:47,800 --> 00:33:51,920 Speaker 12: with thirty nine percent and growing forty percent too high 614 00:33:52,560 --> 00:33:54,080 Speaker 12: skyhand ridiculous. 615 00:33:53,920 --> 00:33:57,200 Speaker 6: And they're not too low, So it seems like the 616 00:33:57,240 --> 00:33:58,200 Speaker 6: audiences agree with you. 617 00:33:58,920 --> 00:34:02,920 Speaker 12: How how does this play out in the near and 618 00:34:03,040 --> 00:34:05,520 Speaker 12: midterm and how do you as an investor think about. 619 00:34:06,120 --> 00:34:08,640 Speaker 11: Well, firstly, it's so hard, at least in my mind, 620 00:34:09,080 --> 00:34:11,200 Speaker 11: to answer a question like that, because each of the 621 00:34:11,320 --> 00:34:16,480 Speaker 11: leagues and each of the franchises have enormous differences in 622 00:34:16,600 --> 00:34:17,160 Speaker 11: what they're doing. 623 00:34:17,719 --> 00:34:20,719 Speaker 13: Those teams that really have a global or the ability 624 00:34:20,800 --> 00:34:24,960 Speaker 13: to have a global following, those leagues and those sports 625 00:34:25,040 --> 00:34:30,200 Speaker 13: that actually incorporate or expect to incorporate sports betting and therefore. 626 00:34:29,920 --> 00:34:35,239 Speaker 11: Increasing the obsession of young people into their sport have advantages. 627 00:34:35,800 --> 00:34:40,960 Speaker 11: Those that have really a huge amounts of cachet and 628 00:34:41,160 --> 00:34:45,080 Speaker 11: stars that can attract global media rights. These are things 629 00:34:45,120 --> 00:34:50,040 Speaker 11: that distinguish I think the long term winners versus There 630 00:34:50,080 --> 00:34:53,279 Speaker 11: may not be as many losers as people might argue, 631 00:34:53,719 --> 00:34:56,799 Speaker 11: but there'll be some. There'll be some that aren't extraordinary 632 00:34:56,960 --> 00:35:02,080 Speaker 11: and that aren't global and phenomenally valuable sports and sports franchises. 633 00:35:02,280 --> 00:35:06,480 Speaker 11: So I kind of go by sport, and yes, I 634 00:35:06,600 --> 00:35:09,200 Speaker 11: do believe at the end of the day, global media 635 00:35:09,280 --> 00:35:15,560 Speaker 11: rights is something that you have to aspire to, and yes, 636 00:35:15,800 --> 00:35:19,640 Speaker 11: I'm being a little partial to the NBA, but there 637 00:35:19,719 --> 00:35:24,719 Speaker 11: are so many additional ancillary values that come from a 638 00:35:24,760 --> 00:35:30,480 Speaker 11: global following. So to me, sports are not a single entity. 639 00:35:31,400 --> 00:35:33,920 Speaker 11: And one of the things we would argue is understanding 640 00:35:34,719 --> 00:35:38,040 Speaker 11: the benefits and detriments of not just the sport, but 641 00:35:38,160 --> 00:35:40,400 Speaker 11: of the market that they play in and of the 642 00:35:40,520 --> 00:35:43,920 Speaker 11: league that they operate in. And I don't want to 643 00:35:44,280 --> 00:35:47,960 Speaker 11: disparage a certain city versus another, but if you're the 644 00:35:48,360 --> 00:35:52,520 Speaker 11: thirtieth largest metro in America versus the first, second, or third, 645 00:35:52,800 --> 00:35:57,560 Speaker 11: or even the top ten, dramatic difference. So again, that 646 00:35:58,120 --> 00:36:00,440 Speaker 11: too is awfully relevant, not just the league in the 647 00:36:00,480 --> 00:36:02,240 Speaker 11: sport well, and it's interesting. 648 00:36:02,320 --> 00:36:05,120 Speaker 12: So let's talk about that in a little more depth because. 649 00:36:04,880 --> 00:36:05,239 Speaker 6: We believe it. 650 00:36:05,320 --> 00:36:05,480 Speaker 7: There. 651 00:36:05,760 --> 00:36:09,240 Speaker 2: Tony Wrestler, chairman of Areas Management and of the Atlanta Hawks, 652 00:36:09,280 --> 00:36:11,719 Speaker 2: along with our own Bloomberg originals Jason Kelly. 653 00:36:20,160 --> 00:36:23,440 Speaker 4: Open Ai hit a new milestone, reaching one million paid 654 00:36:23,560 --> 00:36:26,960 Speaker 4: users for the corporate version of Chat GPT. That's up 655 00:36:26,960 --> 00:36:29,839 Speaker 4: from around six hundred thousand the company told us about 656 00:36:29,840 --> 00:36:31,839 Speaker 4: here on the show in April. From all, let's bring 657 00:36:31,880 --> 00:36:34,680 Speaker 4: in Bloomberg's Rachel Metz who's leading the AI coverage and 658 00:36:35,360 --> 00:36:38,520 Speaker 4: the point I think is one million enterprise or corporate 659 00:36:38,640 --> 00:36:41,759 Speaker 4: or business customers. That's where the money is potentially at 660 00:36:42,000 --> 00:36:42,680 Speaker 4: for open Ai. 661 00:36:44,040 --> 00:36:47,360 Speaker 14: Absolutely, and this much growth in a short period of 662 00:36:47,440 --> 00:36:51,320 Speaker 14: time really indicates that despite having plenty of competitors and 663 00:36:51,719 --> 00:36:54,920 Speaker 14: businesses having to think more and more about, hey, are 664 00:36:54,960 --> 00:36:57,680 Speaker 14: we really getting a return on our investments in AI, 665 00:36:58,000 --> 00:36:59,640 Speaker 14: they are still bringing in users. 666 00:37:01,000 --> 00:37:02,719 Speaker 1: It's really quite a lot of growth. 667 00:37:02,800 --> 00:37:05,279 Speaker 14: It's what like sixty seven percent growth in over that 668 00:37:05,400 --> 00:37:08,200 Speaker 14: period of time, and they only started selling their the 669 00:37:08,440 --> 00:37:12,120 Speaker 14: enterprise version of chat GPT about a year ago exactly. 670 00:37:13,040 --> 00:37:15,120 Speaker 3: Meanwhile, it's looking to raise funds. 671 00:37:15,200 --> 00:37:19,640 Speaker 2: We understand at a head evaluation and talking of competitors, 672 00:37:19,719 --> 00:37:23,160 Speaker 2: Anthropic is just rolled out its clawed enterprise How face 673 00:37:23,680 --> 00:37:26,200 Speaker 2: is the fight for business users right now? 674 00:37:27,680 --> 00:37:28,520 Speaker 1: It's pretty fierce. 675 00:37:28,600 --> 00:37:31,560 Speaker 14: I mean, you certainly have a bunch of companies that 676 00:37:31,640 --> 00:37:34,560 Speaker 14: are interested in spending on this stuff, but as I mentioned, 677 00:37:34,640 --> 00:37:38,320 Speaker 14: there's more and more pressure to show what you're getting 678 00:37:38,480 --> 00:37:42,080 Speaker 14: from this. And though the companies might have I think 679 00:37:42,120 --> 00:37:47,120 Speaker 14: open ai has done some customer surveys and Entropic perhaps 680 00:37:47,200 --> 00:37:50,960 Speaker 14: has done similarly that show that their customers are liking 681 00:37:51,040 --> 00:37:54,120 Speaker 14: this stuff and getting productivity gains perhaps from it, using 682 00:37:54,160 --> 00:37:56,560 Speaker 14: it for different kinds of tasks. It's still, I think 683 00:37:56,640 --> 00:37:58,640 Speaker 14: for a lot of businesses, really hard for them to 684 00:37:58,719 --> 00:38:00,759 Speaker 14: tell what can do you use it? Or will it 685 00:38:00,840 --> 00:38:03,719 Speaker 14: actually be helpful. We know that these things may make 686 00:38:03,800 --> 00:38:06,279 Speaker 14: things up, and if you have to check a lot 687 00:38:06,320 --> 00:38:08,759 Speaker 14: of the results that you're getting from these systems, is 688 00:38:08,840 --> 00:38:10,040 Speaker 14: that really all that helpful to you? 689 00:38:10,640 --> 00:38:11,560 Speaker 6: It remains to be seen. 690 00:38:11,560 --> 00:38:13,239 Speaker 14: I think for a lot of businesses if this will 691 00:38:13,280 --> 00:38:13,640 Speaker 14: help them. 692 00:38:14,800 --> 00:38:18,680 Speaker 2: Rachel Mattz, we thank you all things, those chatbots, but 693 00:38:18,760 --> 00:38:21,399 Speaker 2: now let's just go back to some of the infrastructure needed. 694 00:38:21,400 --> 00:38:23,920 Speaker 2: We preview Broadcom set to release earnings after the closing 695 00:38:24,040 --> 00:38:26,840 Speaker 2: bell today Bloomberg Intelligence, saying that the company is poised 696 00:38:26,880 --> 00:38:29,480 Speaker 2: for another strong third quarter foroign growth in AI sales 697 00:38:29,880 --> 00:38:31,280 Speaker 2: and VMware's contribution. 698 00:38:31,640 --> 00:38:33,680 Speaker 3: Contin Savani is with us from Bloombag Intelligence. 699 00:38:33,760 --> 00:38:37,160 Speaker 2: You authored this note so the tailwinds can outstrip some 700 00:38:37,640 --> 00:38:39,880 Speaker 2: lagging soft areas in the chip market. 701 00:38:41,280 --> 00:38:41,640 Speaker 6: Exactly. 702 00:38:41,719 --> 00:38:44,400 Speaker 15: I mean the AI in the semis is likely to 703 00:38:44,520 --> 00:38:49,440 Speaker 15: offset its cyclical headwills in its legacy businesses. We think 704 00:38:49,560 --> 00:38:53,720 Speaker 15: in its legacy businesses, the enterprise wireless and server storage 705 00:38:54,000 --> 00:38:57,479 Speaker 15: likely to have hit some bottom, albeit the recovery would 706 00:38:57,560 --> 00:39:01,080 Speaker 15: more be moderate. But the key road driver in this 707 00:39:01,239 --> 00:39:03,120 Speaker 15: quarter in the next quarter is going to come from 708 00:39:03,200 --> 00:39:05,720 Speaker 15: the software, specifically the VMware. 709 00:39:05,400 --> 00:39:09,120 Speaker 4: Revenues pro comes to become a really big chip company 710 00:39:09,360 --> 00:39:12,960 Speaker 4: seven hundred pillion dollar market cap. It's important in data censers, right, 711 00:39:13,120 --> 00:39:16,840 Speaker 4: always think about it in these kind of two proms networking, 712 00:39:17,000 --> 00:39:20,920 Speaker 4: data center infrastructure stuff, but also custom asex explain the 713 00:39:20,960 --> 00:39:22,960 Speaker 4: customer a sex bay, what they do and what we 714 00:39:23,120 --> 00:39:23,520 Speaker 4: might hear. 715 00:39:24,120 --> 00:39:26,560 Speaker 15: Yeah, So whenever we've talked about Nvidia and right, the 716 00:39:26,640 --> 00:39:29,160 Speaker 15: key threat to in media is it's customers designing their 717 00:39:29,160 --> 00:39:32,440 Speaker 15: own chips. Well, Google TPU for example, Yes, Google TPU 718 00:39:32,480 --> 00:39:35,480 Speaker 15: for example. They do need a designed partner, a semi 719 00:39:35,520 --> 00:39:38,800 Speaker 15: conductor company which has experience and the IP set to 720 00:39:38,840 --> 00:39:41,399 Speaker 15: build these chips. So that's where broadcome comes in. It's 721 00:39:41,680 --> 00:39:43,560 Speaker 15: one of the heat has the largest share when it 722 00:39:43,640 --> 00:39:47,640 Speaker 15: comes to designing custom asex or accelerators in lieu of 723 00:39:47,719 --> 00:39:51,120 Speaker 15: the GPU's namely Google Meta. And the key thing going 724 00:39:51,200 --> 00:39:54,200 Speaker 15: into this earnings for investors will be do they announce 725 00:39:54,280 --> 00:39:57,560 Speaker 15: a new customer, which news have been saying likely to 726 00:39:57,600 --> 00:40:00,680 Speaker 15: be open AI and if they upside their AI revenue 727 00:40:00,719 --> 00:40:02,960 Speaker 15: guidance for the full year, which we think they will 728 00:40:03,120 --> 00:40:05,520 Speaker 15: in the range of five hundred million into a billion dollars. 729 00:40:06,080 --> 00:40:09,520 Speaker 2: The anxiety, Kunjin, is that right now the revenue growth 730 00:40:09,640 --> 00:40:12,920 Speaker 2: is strong. We're expecting forty seven percent increase, but it 731 00:40:13,040 --> 00:40:16,560 Speaker 2: dials down quite quickly into fiscal twenty five twenty six. 732 00:40:17,120 --> 00:40:19,840 Speaker 3: How committed is this AI spend. 733 00:40:22,160 --> 00:40:24,480 Speaker 15: So if you look at their two key sources of revenue, 734 00:40:24,560 --> 00:40:28,160 Speaker 15: one being connectivity which is really Ethernet in the AI 735 00:40:28,400 --> 00:40:30,480 Speaker 15: clusters and the back and AI in the front and 736 00:40:30,560 --> 00:40:34,440 Speaker 15: AI and the custom A six, both of these markets 737 00:40:34,520 --> 00:40:37,600 Speaker 15: have just started their beginning ramp. Both of these have 738 00:40:37,840 --> 00:40:41,480 Speaker 15: forecasted to grow significantly for at least the next three 739 00:40:41,520 --> 00:40:44,000 Speaker 15: to five years. And like I said, Broadcom being the 740 00:40:44,120 --> 00:40:47,640 Speaker 15: dominant in both of these areas, we expect these sources 741 00:40:47,640 --> 00:40:51,359 Speaker 15: of revenue for Broadcom to still continue significantly. However, at 742 00:40:51,400 --> 00:40:53,960 Speaker 15: this point, Dotcom is like a conglomerate. It has a 743 00:40:54,040 --> 00:40:58,320 Speaker 15: lot of other legacy semiconductor businesses and software businesses, so 744 00:40:58,520 --> 00:41:01,879 Speaker 15: those do weigh the strong AIRAM that we talked about. 745 00:41:01,960 --> 00:41:04,640 Speaker 4: Well, you forget we used to talk about pro Com 746 00:41:04,719 --> 00:41:07,840 Speaker 4: in the context of smartphones. Namingly Apple, I will be 747 00:41:07,920 --> 00:41:09,480 Speaker 4: going to Apple Park on Monday. 748 00:41:10,360 --> 00:41:12,759 Speaker 6: That business. Is it still relevant? What are they doing? 749 00:41:13,360 --> 00:41:16,640 Speaker 15: It's still relevant, It's still a significant, sizable business. We 750 00:41:16,760 --> 00:41:20,839 Speaker 15: don't expect any key high growth catalyst there because their 751 00:41:20,920 --> 00:41:23,320 Speaker 15: business has been very sticky with Apple right. They do 752 00:41:23,520 --> 00:41:27,120 Speaker 15: increase their asps and growth margins slowly every year. There 753 00:41:27,200 --> 00:41:30,719 Speaker 15: might be some options of some small content gains, but 754 00:41:30,920 --> 00:41:34,480 Speaker 15: nothing very sexy, but still a very high free castle 755 00:41:34,560 --> 00:41:35,320 Speaker 15: generating business. 756 00:41:36,880 --> 00:41:43,680 Speaker 2: We think also of how chips perform after smashing expectations. Conjin, 757 00:41:43,800 --> 00:41:47,960 Speaker 2: who are fundamentals guy? How we positioned into this set 758 00:41:48,000 --> 00:41:48,560 Speaker 2: of earnings? 759 00:41:50,320 --> 00:41:54,000 Speaker 15: Yeah, Broadcom doesn't really is known for very massive beat 760 00:41:54,080 --> 00:41:57,280 Speaker 15: and raises. However, like I said, if they do address 761 00:41:57,360 --> 00:42:00,360 Speaker 15: a couple of the points, a new custom or is 762 00:42:00,400 --> 00:42:03,840 Speaker 15: it customer announcement be upside to their AI revenues and 763 00:42:04,480 --> 00:42:07,920 Speaker 15: VMware is faster integration update, I think that would be 764 00:42:08,080 --> 00:42:10,800 Speaker 15: a significant positive for the sock reaction post learnings. 765 00:42:10,920 --> 00:42:12,759 Speaker 3: Hendre Savani, so great to have you on the show 766 00:42:12,800 --> 00:42:15,640 Speaker 3: Boomberg Intelligence. We thank you now. That does it for 767 00:42:15,680 --> 00:42:17,560 Speaker 3: this edition of Bloomberg Technology. 768 00:42:19,120 --> 00:42:20,880 Speaker 6: Tomorrow. Interesting interview. 769 00:42:20,960 --> 00:42:24,640 Speaker 4: We're joined by the Weimo co CEO Takdra Mawakana an 770 00:42:24,680 --> 00:42:27,360 Speaker 4: exclusive interview, and there's been a lot of news around 771 00:42:27,400 --> 00:42:30,120 Speaker 4: Waimo of late, a lot going on today's show as well. 772 00:42:30,480 --> 00:42:31,880 Speaker 4: It was a short week with a lot in it. 773 00:42:32,120 --> 00:42:34,520 Speaker 4: Don't forget to recap on the podcast. You know exactly 774 00:42:34,880 --> 00:42:37,520 Speaker 4: where to find the Bloomberg Tech podcast from SF in 775 00:42:37,600 --> 00:42:39,520 Speaker 4: New York. This is Bloomberg Technology