WEBVTT - Tech Earnings: Google’s Spending, Arm’s AI Data Center Push 0:00:02.520 --> 0:00:13.440 Bloomberg Audio Studios, podcasts, radio news. Bloomberg Tech is alive 0:00:13.480 --> 0:00:17.279 from coast to coast with Caroline Hide in New York 0:00:17.560 --> 0:00:19.520 and ever Low in Sent Francisco. 0:00:22.680 --> 0:00:25.320 This is Bloomberg Tech coming up, Qualcom and arm out 0:00:25.320 --> 0:00:27.920 with their earnings. Will break them down with the two CEOs, 0:00:28.000 --> 0:00:30.200 Christiano Amon and Rene haass. 0:00:30.080 --> 0:00:34.080 Plas Alphabet's capex mic drop record spending plans hit the 0:00:34.120 --> 0:00:35.960 stock despite strong earnings. 0:00:36.280 --> 0:00:39.440 And Bitcoin falls below seventy thousand US dollars for the 0:00:39.479 --> 0:00:42.520 first time since late twenty twenty four. Will break down 0:00:42.520 --> 0:00:45.600 the negative momentum impacting crypto. 0:00:45.240 --> 0:00:48.839 Markets and that negative momentum is affecting markets more broadly. 0:00:48.880 --> 0:00:50.479 At the moment, check out the nasak off by one 0:00:50.479 --> 0:00:53.199 point four percent. We are training the lowest since November. 0:00:53.320 --> 0:00:55.600 Right now at the moment ed we are seeing pain 0:00:55.680 --> 0:00:57.360 across the board. And that's why we've got to go 0:00:57.600 --> 0:01:00.600 to our Bloombost Cross Asset reporter to say we can 0:01:00.600 --> 0:01:03.320 dig into all of these moves across asset classes with 0:01:03.360 --> 0:01:06.960 Alexander Zamaneva, who's with us now, I don't know where 0:01:07.040 --> 0:01:08.640 to look at the moment, everything is in the red. 0:01:08.880 --> 0:01:11.000 It has been a really ugly week, Caroline. We have 0:01:11.120 --> 0:01:14.240 obviously seen corrections in tech over the last three years 0:01:14.400 --> 0:01:17.360 since the launch of chat GPT, but nothing has rivaled 0:01:17.600 --> 0:01:20.160 the sheer magnitude of this sell off that we're seeing 0:01:20.200 --> 0:01:24.000 in the sector across various assets, hitting both stock and 0:01:24.200 --> 0:01:26.760 credit market. Software stocks, of course, have been at the 0:01:26.800 --> 0:01:29.600 forefront of this. They are down about fifteen percent this 0:01:29.720 --> 0:01:32.440 week and twenty nine percent from their all time highs 0:01:32.440 --> 0:01:35.120 in September. It's also important to note that this selloff 0:01:35.360 --> 0:01:39.040 has triggered a number of extreme levels. From a technical perspective. 0:01:39.360 --> 0:01:43.160 The share of software stocks at over sold levels eclipsed 0:01:43.200 --> 0:01:46.120 seventy percent yesterday. That is an all time high. In 0:01:46.160 --> 0:01:49.160 the broader tech sector that shares about forty five percent, 0:01:49.360 --> 0:01:52.440 also a record and another barometer of how painful it 0:01:52.520 --> 0:01:55.640 has been. The I Shares Expanded Tech Software ETV that 0:01:55.760 --> 0:01:58.280 is ticker IGV compared to the S and P five 0:01:58.360 --> 0:02:00.920 hundred is the most over sold that it has ever been, 0:02:00.960 --> 0:02:03.920 and of course that risk off sentiment is spreading today. 0:02:03.960 --> 0:02:06.360 What we've seen so far is that it has really 0:02:06.400 --> 0:02:09.160 been focused on tech, so up until today, it's really 0:02:09.240 --> 0:02:11.799 been a rotation out of tech and in two other 0:02:11.880 --> 0:02:13.760 pockets of the market, and now we're really seeing the 0:02:13.800 --> 0:02:15.840 sell off broad and out. Looking at the S and 0:02:15.840 --> 0:02:17.959 P five hundred, it is down one point two percent 0:02:18.040 --> 0:02:21.040 right now. The Dow Jones Industrial Average, which up until 0:02:21.080 --> 0:02:23.440 today has been kind of shielded from this, is now 0:02:23.480 --> 0:02:27.240 down one point two percent. Also, the SNP equal weight yesterday, 0:02:27.240 --> 0:02:29.880 for example, was up zero point nine percent even as 0:02:29.919 --> 0:02:32.399 the broader market sold off. It is down again today, 0:02:32.480 --> 0:02:34.600 So really risk off across the board. And we have 0:02:34.639 --> 0:02:37.919 to talk of course about Bitcoin. It fell below sixty 0:02:37.919 --> 0:02:41.000 eight thousand today, which is the lowest since November twenty 0:02:41.040 --> 0:02:44.560 twenty four, down about forty five percent from it's October high. 0:02:44.600 --> 0:02:48.000 Also big news today that crypto exchange Gemini plans to 0:02:48.040 --> 0:02:50.840 cut about twenty five percent of its workforce, so really 0:02:50.880 --> 0:02:51.760 seeing the pain of that. 0:02:52.960 --> 0:02:56.080 Bloomberg's Alexandre just Semonova with the macro picture at the 0:02:56.120 --> 0:02:58.640 index level, this is what matters when it comes to 0:02:58.680 --> 0:02:59.480 technology earnings. 0:02:59.520 --> 0:03:01.639 Caroline called it the mic drop moment. 0:03:01.800 --> 0:03:05.160 Alphabet parent of Google with a Capex forecast for the 0:03:05.200 --> 0:03:08.919 fiscal year of one hundred and eighty five billion dollars. 0:03:09.280 --> 0:03:12.040 The street had forecast just shy of one hundred and 0:03:12.080 --> 0:03:14.239 twenty billion dollars. That's a bit of a delta. The 0:03:14.280 --> 0:03:16.680 stockdown almost five percent, on track for its biggest drop 0:03:16.840 --> 0:03:20.919 since May of last year, a big number to digest earnings. 0:03:21.000 --> 0:03:24.919 Also in the chip sector, Qualcomm down almost eight percent. 0:03:25.000 --> 0:03:27.600 It gave a forecast for the current period eleven billion 0:03:27.639 --> 0:03:30.679 dollars in sales at the top end. How much better 0:03:30.720 --> 0:03:32.520 would that have been were it not for the impact 0:03:32.520 --> 0:03:34.240 of what's happening in memory chips right now? 0:03:34.240 --> 0:03:36.080 In the memory market, ARMED. 0:03:35.960 --> 0:03:39.080 Similarly, but actually it is up five percentage points and 0:03:39.120 --> 0:03:42.800 it's accelerated throughout the session. Sales and fiscal fourth quarter 0:03:42.800 --> 0:03:45.040 will be about one point four to seven billion dollars, 0:03:45.160 --> 0:03:48.560 just ahead of consensus. How are they managing what's happening 0:03:48.800 --> 0:03:51.160 in the memory shortage and when is they going to 0:03:51.200 --> 0:03:55.320 transition from the handset story to the data center story. 0:03:55.800 --> 0:03:59.040 Let's talk through it. ARM CEO Rene Husk joins us. Now, Rene, 0:03:59.040 --> 0:04:01.160 good morning, thank you for joining us. That there is 0:04:01.200 --> 0:04:04.840 a lot going on. Let's get the sort of handset, 0:04:04.880 --> 0:04:08.720 smartphone and memory situation out of the way. If that's okay, 0:04:09.080 --> 0:04:12.640 You know clearly this is impacting outlook for the smartphone 0:04:12.680 --> 0:04:14.720 market across this calendar year. 0:04:15.200 --> 0:04:16.560 How do you think it showed. 0:04:16.400 --> 0:04:19.120 Up in the earnings that you posted and would it 0:04:19.120 --> 0:04:21.800 have been slightly better if the situation were different? 0:04:22.839 --> 0:04:26.440 Yeah, good morning, Good morning, ed. So, first off, the 0:04:26.720 --> 0:04:30.400 quarter was amazing for us. We had not only record revenue, 0:04:30.400 --> 0:04:33.480 but record royalties one point two to four billion in revenue, 0:04:34.240 --> 0:04:38.800 nearly seven hundred and forty million dollars in royalties, and 0:04:38.839 --> 0:04:40.920 if you just stack that up, that's twenty seven percent 0:04:41.040 --> 0:04:45.680 year on year. Our data center business is exploding. We 0:04:45.680 --> 0:04:48.080 were up one hundred percent year on year, probably north 0:04:48.080 --> 0:04:51.840 of one hundred percent year on year. So to your question, no, 0:04:52.440 --> 0:04:55.440 the memory situation isn't really impacting arms so directly. And 0:04:55.920 --> 0:04:59.159 you might ask, well why is that? Well, Number one, 0:04:59.600 --> 0:05:01.680 we are a spread across a lot of different businesses. 0:05:01.680 --> 0:05:04.800 As I said, the data center business is increasingly growing 0:05:04.800 --> 0:05:06.520 for us, and we think in a few years it'll 0:05:06.520 --> 0:05:07.520 be our largest business. 0:05:08.400 --> 0:05:11.480 Secondly, our products are used across the. 0:05:11.400 --> 0:05:14.640 Board, so we tend to see in memory shortages is 0:05:14.800 --> 0:05:17.280 the bottom end of the stack starts to get impacted, 0:05:18.120 --> 0:05:20.440 and that's actually lower royalty rates for us. 0:05:20.520 --> 0:05:23.159 So as a result, we don't get impacted very much. 0:05:23.240 --> 0:05:27.240 So no, short answer is no impact this quarter, and 0:05:27.440 --> 0:05:30.520 we raised our guidance for the next quarter because, as 0:05:30.560 --> 0:05:32.760 I said, we're just not seeing that kind of impact, 0:05:32.760 --> 0:05:35.440 but I'm not denying that it's there. But for the 0:05:35.560 --> 0:05:38.120 ARMED business, the impact is quite minimal. 0:05:39.040 --> 0:05:40.120 Renee, thank you for that. 0:05:40.400 --> 0:05:43.320 Data center royalty revenue grown one hundred percent year on year, 0:05:43.360 --> 0:05:46.280 As you outlined, I get the same question for you 0:05:46.360 --> 0:05:49.480 from everyone's sell side through the buyside, which has give 0:05:49.560 --> 0:05:50.960 me a specific year. 0:05:51.440 --> 0:05:52.640 Market on the calendar. 0:05:53.160 --> 0:05:57.200 When ARM goes from being handset to data center and 0:05:57.279 --> 0:06:00.279 it accounts for more of your business, is that selection 0:06:00.440 --> 0:06:02.279 points clear on your calendar? 0:06:02.320 --> 0:06:06.479 At least it's very clear, And that's why in the 0:06:06.520 --> 0:06:10.000 earnings call, I said in a few years. As you know, 0:06:10.040 --> 0:06:12.960 we don't typically provide forward guidance on an annual basis, 0:06:13.560 --> 0:06:16.039 but we have a line of a site that says 0:06:16.080 --> 0:06:19.760 we see it coming and it's probably coming sooner than 0:06:19.800 --> 0:06:23.039 we had thought. And the reason for that is the 0:06:23.120 --> 0:06:25.800 data center growth. But if you click below that, why 0:06:25.880 --> 0:06:29.160 is data center growing so rapidly, it is the a 0:06:29.520 --> 0:06:31.880 presence of ARM CPUs in the data center. We're now 0:06:31.960 --> 0:06:35.880 over fifty percent market share with the hyperscalers. Secondly, the 0:06:35.880 --> 0:06:39.080 CPUs that are being used are using more arm CPUs 0:06:39.120 --> 0:06:42.000 inside the chip one hundred and ninety two cores for 0:06:42.080 --> 0:06:48.200 example inside a graviton chip going from ninety six VERA 0:06:48.240 --> 0:06:51.200 and video VERA going from seventy two cores on grace 0:06:51.279 --> 0:06:53.520 now to eighty eight. So what does that mean. That 0:06:53.600 --> 0:06:57.320 means more cores, means more royalties and high growth rate. Well, 0:06:57.360 --> 0:06:59.679 why are there more cores? When you think about agentic 0:06:59.720 --> 0:07:05.080 AI and everything associated with agents moving workloads across systems, 0:07:05.560 --> 0:07:07.880 managing workflows, et cetera, et cetera. That's the kind of 0:07:07.880 --> 0:07:11.400 work only CPUs can do. So to your question, while 0:07:11.400 --> 0:07:13.720 we're not giving a date, we can see it and 0:07:13.760 --> 0:07:16.080 it's coming sooner than we had thought, even probably six 0:07:16.080 --> 0:07:17.080 to nine months ago. 0:07:17.520 --> 0:07:19.240 And probably on the back of when you look at 0:07:19.280 --> 0:07:23.160 an alphabet increasing its capital expenditure by another well potentially 0:07:23.160 --> 0:07:26.720 one hundred and eighty five billion dollars renee. Is the 0:07:26.960 --> 0:07:29.680 AI bubble this worry about AI infrastructure build out a 0:07:29.680 --> 0:07:31.400 thing of the past to you, or there are still 0:07:31.440 --> 0:07:33.720 somewhat bottleneck issues that you're concerned about. 0:07:34.640 --> 0:07:37.640 Yeah, so it's a great observation, Caroline, and yes, there's 0:07:37.760 --> 0:07:40.440 huge growth in Google's capex not all of that one 0:07:40.520 --> 0:07:42.520 hundred and eighty billion dollars as coming does of course, 0:07:42.880 --> 0:07:47.280 but what does that say. We continue to see investments 0:07:47.760 --> 0:07:50.280 in the data center, whether it's what Meta had announced 0:07:50.400 --> 0:07:54.880 or Microsoft announced and now Google Alphabet that exceed what 0:07:55.000 --> 0:07:57.960 people had originally thought was even possible even a couple 0:07:57.960 --> 0:08:00.480 of years ago. If you go back to when we 0:08:00.520 --> 0:08:04.080 announced the Stargate initiative in January of twenty twenty four, 0:08:04.880 --> 0:08:07.080 five hundred billion dollars over a number of years, people 0:08:07.120 --> 0:08:09.280 looked at those numbers and said, how is that even possible? 0:08:09.440 --> 0:08:15.040 Now eighteen months later, it looks quite quite credible. So 0:08:15.880 --> 0:08:20.480 bottom line is we are seeing such an investment because 0:08:20.520 --> 0:08:22.720 the AI opportunity, the way I like to think about it, 0:08:22.760 --> 0:08:25.800 is kind of the final frontier relative technology. When you 0:08:25.840 --> 0:08:29.080 think about what could be on beyond AI, it's really 0:08:29.080 --> 0:08:32.679 hard to imagine. So also the fact that AI has 0:08:32.760 --> 0:08:36.280 really had very little penetration, let's say, into large enterprise 0:08:36.559 --> 0:08:40.040 or into our health systems or things around drug discovery. 0:08:40.360 --> 0:08:42.080 So there's a long, long runway. 0:08:42.120 --> 0:08:44.720 I think people are a little nervous about it as 0:08:44.840 --> 0:08:47.880 decidedly so because we've not seen it before, right we've 0:08:47.880 --> 0:08:50.040 not seen the order of magnitude we're talking about, so 0:08:50.480 --> 0:08:52.560 it's somewhat natural for you to look at it and say, well, 0:08:52.960 --> 0:08:55.319 gravity's got to hit it sometime. But then if you're 0:08:55.320 --> 0:08:57.560 a little intellectually look at it and say, my gosh, 0:08:57.840 --> 0:08:59.760 is AI going to be something that will change and 0:08:59.760 --> 0:09:03.120 trainansform how everything is done well? Of course, and then 0:09:03.200 --> 0:09:06.160 there's going to be an investment to support that. And 0:09:06.200 --> 0:09:09.000 that's what we're saying, investment. 0:09:08.559 --> 0:09:12.120 To support that. We don't mention stargate. That immediately makes 0:09:12.120 --> 0:09:14.320 me think of Massa. And you were clear on the 0:09:14.360 --> 0:09:16.720 call yesterday that you've spoken to him. You don't think 0:09:16.760 --> 0:09:18.839 Soft bangk is in any way going to sell down 0:09:18.880 --> 0:09:20.840 at stake in ARM. But how much is that an 0:09:20.840 --> 0:09:22.839 overhang in the longer term and how much actually do 0:09:22.880 --> 0:09:24.559 you want to see more free float of your stock? 0:09:26.200 --> 0:09:29.080 Well, I have one very large shareholder who I talked 0:09:29.120 --> 0:09:32.400 to quite frequently who loves ARM and he's very long 0:09:32.440 --> 0:09:37.200 on ARM. So he has no intention to sell at all. 0:09:37.240 --> 0:09:39.080 And I shouldn't even say anytime soon. I don't know 0:09:39.360 --> 0:09:42.320 when that would be. Quite frankly, we do talk about it. 0:09:42.400 --> 0:09:45.360 He said he's got no interest in selling how that 0:09:45.400 --> 0:09:47.600 impacts the float and etc. You know, that's not something 0:09:47.679 --> 0:09:49.960 candidly I spend a whole lot of bandwidth thinking about. 0:09:50.480 --> 0:09:53.520 But he's very, very long on ARM because he sees 0:09:53.600 --> 0:09:57.040 the enormous opportunity that we have. And if you think 0:09:57.080 --> 0:10:00.040 about what we've done since we've gone public, Carol, and 0:10:00.640 --> 0:10:03.360 in the Flaw of twenty twenty three, we told the 0:10:03.360 --> 0:10:05.760 world we'd be growing at twenty five percent year on 0:10:05.880 --> 0:10:07.920 year for two three years, and people didn't believe it 0:10:07.960 --> 0:10:11.360 was possible. Here we are now a couple of years later, 0:10:11.520 --> 0:10:14.439 and we're beyond what we told investors during our roadshow, 0:10:14.440 --> 0:10:17.040 and things are even stronger than they were at their time. 0:10:17.120 --> 0:10:18.880 So as a result, he sees it. 0:10:19.160 --> 0:10:21.120 He sees probably more of the data than anyone does, 0:10:21.440 --> 0:10:24.200 and that's why he's not selling RAN now. 0:10:24.200 --> 0:10:25.440 I want to go back to CPU. 0:10:25.760 --> 0:10:29.720 January twenty sixth, Bloomberg speaks to Nvidia CEO Jensen Wang, 0:10:30.320 --> 0:10:33.680 and he speaks for the first time about selling to 0:10:33.720 --> 0:10:37.760 the market via CPU as a standalone. And that seems 0:10:37.800 --> 0:10:41.600 critically important because if you think about the pipeline for 0:10:41.720 --> 0:10:46.720 Blackwell and Rubin, right, those are GPUs coded in on 0:10:46.840 --> 0:10:51.760 based architecture and those building they don't want to sort 0:10:51.760 --> 0:10:55.480 of have to cross pollinate x eighty six based platforms 0:10:55.520 --> 0:10:59.040 with their ARM based GPUs. It seemed to be really substantive. 0:11:00.080 --> 0:11:03.160 You explain how much of a boost that was for 0:11:03.360 --> 0:11:08.440 ARM and whether this idea that the VIA CPU goes 0:11:08.440 --> 0:11:11.560 into the market as a standalone product changes the trajectory 0:11:11.559 --> 0:11:13.280 at all, because at the same time a video talks 0:11:13.360 --> 0:11:16.880 up about how much content it owns proportionally in the 0:11:16.920 --> 0:11:17.800 overall system. 0:11:18.520 --> 0:11:21.960 Just take it and run with it, please, Yeah, you know, so, 0:11:22.040 --> 0:11:25.200 first off, thrilled to see Jensen say that they're a 0:11:25.200 --> 0:11:27.640 great partner and Vera is a great product. 0:11:27.720 --> 0:11:30.079 And as I mentioned earlier, VERA has gone from. 0:11:30.559 --> 0:11:34.040 Has gone now eighty eight CPUs inside it CPU cores 0:11:34.320 --> 0:11:37.520 from seventy two. So why is that a really good 0:11:37.520 --> 0:11:41.199 thing for us going forward? Well, primarily because when you 0:11:41.240 --> 0:11:44.240 think about the data centers and how they're evolving to 0:11:44.360 --> 0:11:48.720 from what is general purpose compute moving to AI compute 0:11:49.120 --> 0:11:52.640 a mix of training and inference, and those inference workloads 0:11:52.679 --> 0:11:55.440 are urgentic. That's right down the center of the plate 0:11:55.520 --> 0:11:57.680 for what the CPU not only is good at, but 0:11:57.800 --> 0:12:01.440 can only do, can only do. So what that means 0:12:01.559 --> 0:12:03.520 is inside the data center. You're going to start to 0:12:03.520 --> 0:12:07.720 see movement towards a homogeneous type of structure where people 0:12:07.760 --> 0:12:10.440 would love to have the ARM stack running almost everything. 0:12:10.480 --> 0:12:12.880 It's just easier from a maintenance standpoint, it's easier from 0:12:12.920 --> 0:12:16.720 an upgrade standpoint, it's easier from a cost standpoint. So 0:12:17.559 --> 0:12:20.720 and also the flexibility it can affords you can build 0:12:20.760 --> 0:12:24.840 a tremendously efficient custom system based on ARM. The Vera 0:12:24.960 --> 0:12:30.040 Reuben platform AD compared to Grace Blackwell uses six x 0:12:30.080 --> 0:12:31.880 the number of CPUs and that's when you look at 0:12:31.880 --> 0:12:36.000 the storage, the DPU, the offload. That's a huge increase. 0:12:36.440 --> 0:12:39.960 So yes, selling loose veras that's a great thing. We're 0:12:40.000 --> 0:12:40.920 super happy to see that. 0:12:41.320 --> 0:12:44.000 Briefly, Renee, you have such a bird side perspective because 0:12:44.040 --> 0:12:47.439 you're working with Nvidia, but also you're working with open Ai. 0:12:47.559 --> 0:12:50.440 It was reported potentially was looking with you at your 0:12:50.640 --> 0:12:53.480 technology to be working with its own custom ship with Broadcom. 0:12:53.559 --> 0:12:55.560 You've got Meta looking at custom chips you of course, 0:12:55.880 --> 0:12:58.199 how do you see this evolving? 0:12:59.760 --> 0:13:02.160 Yeah, I have a lucky job. 0:13:02.240 --> 0:13:04.960 I get to work with just about everybody in the 0:13:05.000 --> 0:13:10.240 industry across the planet, whether it's in the fab foundry area, 0:13:10.400 --> 0:13:13.080 whether it is a chip company, whether it's an OEM, 0:13:13.120 --> 0:13:15.440 whether it's a software provider. We work and talk to 0:13:15.440 --> 0:13:19.440 everyone because ARM is just so pervasive. The common theme 0:13:19.800 --> 0:13:23.480 we see is continued investment in AI, and not just 0:13:23.520 --> 0:13:26.040 at the data center. It's trying to figure out how 0:13:26.040 --> 0:13:28.800 do you run those AI workloads everywhere? 0:13:29.480 --> 0:13:31.160 How do you run them in wearables, how. 0:13:31.040 --> 0:13:33.160 Do you continue to make them more efficient in a 0:13:33.360 --> 0:13:36.480 smartphone or a PC, or in physical AI, whether it's 0:13:36.520 --> 0:13:40.400 autonomous driving and or robotics. So we're involved in all 0:13:40.400 --> 0:13:44.760 the conversations and the common theme is heavy, heavy investment. 0:13:44.880 --> 0:13:46.960 And one of the challenges that we see in the 0:13:47.040 --> 0:13:50.400 chip world around this is, as you know, it takes 0:13:50.440 --> 0:13:52.160 a couple of years to build a chip, the IP 0:13:52.360 --> 0:13:54.920 that we developed that goes into the chips a couple 0:13:55.040 --> 0:13:57.440 maybe a couple of years in before it. Trying to 0:13:57.480 --> 0:14:00.760 predict what the architectures look like four years after the 0:14:00.840 --> 0:14:04.240 chip has been designed where the AI models are going 0:14:04.400 --> 0:14:07.439 is really very tricky. That lends itself also though, very 0:14:07.440 --> 0:14:10.839 well to ARM because we are programmable, we are flexible, 0:14:11.280 --> 0:14:15.160 and we are low power, meaning that wherever the chips 0:14:15.240 --> 0:14:17.520 drop no pun intended, we should be in a very 0:14:17.520 --> 0:14:19.720 good position to be able to drive those workloads. 0:14:20.400 --> 0:14:23.480 I'm cia n A has with the broader perspective. We 0:14:23.560 --> 0:14:25.720 thank you for it. Now coming up, we got more 0:14:25.720 --> 0:14:29.400 earnings to talk about. Alphabet's results. Expectations for Amazon just 0:14:29.400 --> 0:14:30.400 coming thick and fast, folks. 0:14:30.440 --> 0:14:31.520 As a bitty bag tech. 0:14:36.320 --> 0:14:39.520 Record spending by cloud providers, Well, it's raining on the parade. 0:14:39.240 --> 0:14:40.080 Of big tech earnings. 0:14:40.120 --> 0:14:42.600 Following Alphabet's results last night, Let's talk it through with 0:14:42.680 --> 0:14:47.120 Ioko Yoshioka, who say with Wealth Enhancement Group. Ioko, it 0:14:47.120 --> 0:14:50.280 looked at one point after the announcement yesterday that we 0:14:50.280 --> 0:14:52.360 were going the way of Meta that even though Capex 0:14:52.440 --> 0:14:55.040 was going up, we were celebrating the AI rewards and 0:14:55.080 --> 0:14:58.040 the revenue boost, and then we went more the way 0:14:58.280 --> 0:15:00.320 of Microsoft and we were worrying about the said to 0:15:00.360 --> 0:15:02.280 the Kapex are you selling on this? 0:15:03.920 --> 0:15:07.200 No, Caroline, We're not selling on this. You know, these 0:15:07.280 --> 0:15:11.000 companies are still high quality companies and they're still growing 0:15:11.200 --> 0:15:14.440 very quickly. I think it's just an adjustment from a 0:15:14.520 --> 0:15:18.680 valuation standpoint in terms of what are these companies worth 0:15:18.760 --> 0:15:21.160 over the long term, how much longer are they going 0:15:21.200 --> 0:15:25.040 to be spending at these levels, because the issue for 0:15:25.240 --> 0:15:28.720 investors is really just the sort of collapse in free 0:15:28.720 --> 0:15:31.440 cash flow that we, you know, have been just grown 0:15:31.440 --> 0:15:34.760 accustomed to. These these companies used to return so much 0:15:34.760 --> 0:15:37.240 of that free cash flow to shareholders and now it's 0:15:37.280 --> 0:15:40.280 being spent for investment for good reason, and over the 0:15:40.320 --> 0:15:41.600 long term this should. 0:15:41.360 --> 0:15:42.280 Help them grow. 0:15:42.640 --> 0:15:45.480 However, it just means that the investor kind of gets 0:15:45.480 --> 0:15:48.000 put to the to the side for a little bit. 0:15:49.200 --> 0:15:51.360 Are you worried in any way about the free cash 0:15:51.360 --> 0:15:54.080 flow the alphabet is perhaps taking a hit on because 0:15:54.120 --> 0:15:56.000 from what we could understand from the numbers, in fact, 0:15:56.120 --> 0:15:58.960 the becoming ever more efficient. The marginison is being supported 0:15:59.000 --> 0:16:02.480 because they're to be integrated. They're able to cash in 0:16:02.560 --> 0:16:05.600 on growing cloud and focus on compute much more than 0:16:05.680 --> 0:16:06.440 rivals per se. 0:16:07.440 --> 0:16:11.000 Absolutely, I mean with you know, the cloud business growing 0:16:11.040 --> 0:16:15.600 forty eight percent, well beyond what investors were expecting at 0:16:15.640 --> 0:16:19.920 around thirty percent. If that continues, the investment that they're 0:16:19.960 --> 0:16:24.560 doing is justified, and I think investors will eventually reward 0:16:24.600 --> 0:16:27.640 them for that. It's just in the meantime. Meantime just 0:16:27.760 --> 0:16:31.160 recalibrating really what you want to pay. And the momentum 0:16:31.160 --> 0:16:34.800 had been so strong for Alphabet going into earnings that 0:16:34.880 --> 0:16:38.000 there's just a little bit of a you know, take 0:16:38.080 --> 0:16:40.520 profit attitude going on in marketing. 0:16:40.560 --> 0:16:44.200 Right, Okay, let's bring back the capital expended. Just chart, 0:16:44.360 --> 0:16:46.960 wait for some TV magic. It's going to appear any second. 0:16:47.280 --> 0:16:50.120 And then you look at that and you go, my goodness, 0:16:51.520 --> 0:16:53.640 you know it is Caro called it mic drop moment. 0:16:53.680 --> 0:16:54.360 It is shocking. 0:16:54.840 --> 0:16:58.040 But what you said a moment ago, Google Cloud growing 0:16:58.040 --> 0:17:03.000 at forty eight percent, Like the whole Microsoft anxiety was 0:17:03.000 --> 0:17:05.960 that Azure was off by a percentage point? Why is 0:17:06.040 --> 0:17:10.080 Alphabet not getting the credit for the Google Cloud growth? 0:17:10.560 --> 0:17:13.240 And everyone's just staring at that chart. 0:17:15.480 --> 0:17:16.479 It's a great question. 0:17:16.680 --> 0:17:20.160 I mean, you know, Microsoft missed by zero point four percent. 0:17:20.920 --> 0:17:23.960 You know they posted thirty nine percent instead of thirty 0:17:24.000 --> 0:17:27.760 nine point four, and you know, yet Google really sort 0:17:27.800 --> 0:17:30.159 of blew it out of the water. And you know, 0:17:30.440 --> 0:17:33.640 I really feel like it's that focus on that CAPAC 0:17:33.720 --> 0:17:37.359 spend in twenty twenty six more so than anything else. 0:17:37.760 --> 0:17:40.760 It's great that we're seeing that growth on the cloud 0:17:40.800 --> 0:17:44.720 for both Microsoft and for Alphabet, but really it's that 0:17:44.920 --> 0:17:48.160 spend in order to get those growth numbers, I think 0:17:48.240 --> 0:17:50.280 is what is giving investors a little pause. 0:17:51.760 --> 0:17:53.479 Amazon's down four percent. 0:17:53.920 --> 0:17:56.280 How much is that just anxiety about what they will 0:17:56.400 --> 0:17:57.560 won't need to say tonight? 0:17:58.920 --> 0:17:59.400 Absolutely? 0:17:59.480 --> 0:18:01.199 I think I'll lot of it has to do with 0:18:01.280 --> 0:18:04.000 the anxiety about what they'll say tonight and how much 0:18:04.840 --> 0:18:07.080 investors might be off or the street might be off. 0:18:07.119 --> 0:18:10.200 In terms of the estimate for twenty twenty six CAPEX 0:18:10.520 --> 0:18:14.520 for Amazon, I think investors are anticipating about one hundred 0:18:14.520 --> 0:18:17.400 and twenty five billion in spend, which is up twenty 0:18:17.480 --> 0:18:20.679 two percent or so from twenty twenty five. And so 0:18:20.800 --> 0:18:23.760 we'll have to see if Amazon decides to spend a 0:18:23.760 --> 0:18:24.400 little bit more. 0:18:26.240 --> 0:18:29.600 Yoka Yoshoka, Wealth Enhancement Group, really good summary of what's 0:18:29.640 --> 0:18:31.080 going on in the mag seven. 0:18:31.119 --> 0:18:32.199 Thank you so much for coming up. 0:18:32.440 --> 0:18:36.320 AI tools keep coming for the enterprise software market, But 0:18:36.400 --> 0:18:40.000 will they be the existential threat that investors fit? 0:18:40.040 --> 0:18:42.520 We've got more on that next. This is been Big Tech. 0:18:50.320 --> 0:18:52.840 And it's introducing a new platform to help companies deploy 0:18:53.000 --> 0:18:55.919 AI agents more easily and pave the way for broader 0:18:55.960 --> 0:18:59.560 adoption among corporate customers. The new product called Frontier, and 0:18:59.640 --> 0:19:03.000 iizations to build and manage those AI tools so that 0:19:03.119 --> 0:19:06.520 each agent has appropriate guardrails and data access ed. 0:19:06.520 --> 0:19:07.040 What have you got? 0:19:07.880 --> 0:19:11.760 Speaking of the enterprise shakeup caused by AI anthropics, legal 0:19:11.800 --> 0:19:14.440 plug in, for its clawed cowork, may not be as 0:19:14.480 --> 0:19:18.359 devastating a blow to legal solutions providers as according to 0:19:18.400 --> 0:19:21.919 research from John Davies at Bloomberg Intelligence, who joins us 0:19:21.920 --> 0:19:24.800 now at John as someone that's suffered through years of 0:19:24.880 --> 0:19:26.879 law school and was born to two attorneys. 0:19:27.600 --> 0:19:28.719 I enjoyed reading it. 0:19:29.080 --> 0:19:35.480 Your conclusion is that Claude Legal is insufficiently expert to 0:19:35.960 --> 0:19:38.720 mount a challenge. Just dig a bit deeper into your thesis. 0:19:40.080 --> 0:19:41.080 Absolutely, and hello. 0:19:41.440 --> 0:19:45.760 I think the key thing is that all these generic 0:19:45.840 --> 0:19:48.879 tools don't have access to the vast googles of data 0:19:49.480 --> 0:19:53.760 which the very specialized tools which the established companies have 0:19:53.960 --> 0:19:57.560 access to, which it built up really over many decades, 0:19:57.600 --> 0:20:02.760 even centuries. In some cases, they're not easily replicable sets 0:20:02.800 --> 0:20:05.679 of data. It's a lot of shoe leather involved. You've 0:20:05.680 --> 0:20:08.359 got to visit vast numbers of courthouses, and it's not 0:20:08.400 --> 0:20:10.600 simply a question of digitizing the information. 0:20:11.000 --> 0:20:12.639 You've also got to put it in context. 0:20:13.160 --> 0:20:16.440 So the companies we're talking about here are West Law 0:20:16.640 --> 0:20:20.440 and Lexus and Nexus each employ many hundreds of legal 0:20:20.440 --> 0:20:24.040 professionals and have done for a very long time, and 0:20:24.080 --> 0:20:28.359 all that information is caught up inside their products. And 0:20:28.400 --> 0:20:31.440 that's the thing which I think the generic tools won't 0:20:31.480 --> 0:20:34.200 have access to don't have access to, and therefore they're 0:20:34.240 --> 0:20:37.760 more likely to make mistakes, to hallucinate and to lead 0:20:37.800 --> 0:20:41.280 people astray. And you can't really work this stuff out 0:20:41.280 --> 0:20:43.879 from first principles because sometimes the law defies logic. 0:20:44.200 --> 0:20:46.280 It's not really like a science problem. 0:20:46.080 --> 0:20:48.679 Here defies logic. 0:20:49.040 --> 0:20:51.760