Speaker 1: Bloomberg Audio Studios, podcasts, radio news. Bloomberg Tech is alive
Speaker 1: from coast to coast with Caroline Hide in New York
Speaker 1: and ever Low in Sent Francisco.
Speaker 2: This is Bloomberg Tech coming up, Qualcom and arm out
Speaker 2: with their earnings. Will break them down with the two CEOs,
Speaker 2: Christiano Amon and Rene haass.
Speaker 3: Plas Alphabet's capex mic drop record spending plans hit the
Speaker 3: stock despite strong earnings.
Speaker 2: And Bitcoin falls below seventy thousand US dollars for the
Speaker 2: first time since late twenty twenty four. Will break down
Speaker 2: the negative momentum impacting crypto.
Speaker 3: Markets and that negative momentum is affecting markets more broadly.
Speaker 3: At the moment, check out the nasak off by one
Speaker 3: point four percent. We are training the lowest since November.
Speaker 3: Right now at the moment ed we are seeing pain
Speaker 3: across the board. And that's why we've got to go
Speaker 3: to our Bloombost Cross Asset reporter to say we can
Speaker 3: dig into all of these moves across asset classes with
Speaker 3: Alexander Zamaneva, who's with us now, I don't know where
Speaker 3: to look at the moment, everything is in the red.
Speaker 4: It has been a really ugly week, Caroline. We have
Speaker 4: obviously seen corrections in tech over the last three years
Speaker 4: since the launch of chat GPT, but nothing has rivaled
Speaker 4: the sheer magnitude of this sell off that we're seeing
Speaker 4: in the sector across various assets, hitting both stock and
Speaker 4: credit market. Software stocks, of course, have been at the
Speaker 4: forefront of this. They are down about fifteen percent this
Speaker 4: week and twenty nine percent from their all time highs
Speaker 4: in September. It's also important to note that this selloff
Speaker 4: has triggered a number of extreme levels. From a technical perspective.
Speaker 4: The share of software stocks at over sold levels eclipsed
Speaker 4: seventy percent yesterday. That is an all time high. In
Speaker 4: the broader tech sector that shares about forty five percent,
Speaker 4: also a record and another barometer of how painful it
Speaker 4: has been. The I Shares Expanded Tech Software ETV that
Speaker 4: is ticker IGV compared to the S and P five
Speaker 4: hundred is the most over sold that it has ever been,
Speaker 4: and of course that risk off sentiment is spreading today.
Speaker 4: What we've seen so far is that it has really
Speaker 4: been focused on tech, so up until today, it's really
Speaker 4: been a rotation out of tech and in two other
Speaker 4: pockets of the market, and now we're really seeing the
Speaker 4: sell off broad and out. Looking at the S and
Speaker 4: P five hundred, it is down one point two percent
Speaker 4: right now. The Dow Jones Industrial Average, which up until
Speaker 4: today has been kind of shielded from this, is now
Speaker 4: down one point two percent. Also, the SNP equal weight yesterday,
Speaker 4: for example, was up zero point nine percent even as
Speaker 4: the broader market sold off. It is down again today,
Speaker 4: So really risk off across the board. And we have
Speaker 4: to talk of course about Bitcoin. It fell below sixty
Speaker 4: eight thousand today, which is the lowest since November twenty
Speaker 4: twenty four, down about forty five percent from it's October high.
Speaker 4: Also big news today that crypto exchange Gemini plans to
Speaker 4: cut about twenty five percent of its workforce, so really
Speaker 4: seeing the pain of that.
Speaker 2: Bloomberg's Alexandre just Semonova with the macro picture at the
Speaker 2: index level, this is what matters when it comes to
Speaker 2: technology earnings.
Speaker 5: Caroline called it the mic drop moment.
Speaker 2: Alphabet parent of Google with a Capex forecast for the
Speaker 2: fiscal year of one hundred and eighty five billion dollars.
Speaker 2: The street had forecast just shy of one hundred and
Speaker 2: twenty billion dollars. That's a bit of a delta. The
Speaker 2: stockdown almost five percent, on track for its biggest drop
Speaker 2: since May of last year, a big number to digest earnings.
Speaker 2: Also in the chip sector, Qualcomm down almost eight percent.
Speaker 2: It gave a forecast for the current period eleven billion
Speaker 2: dollars in sales at the top end. How much better
Speaker 2: would that have been were it not for the impact
Speaker 2: of what's happening in memory chips right now?
Speaker 5: In the memory market, ARMED.
Speaker 2: Similarly, but actually it is up five percentage points and
Speaker 2: it's accelerated throughout the session. Sales and fiscal fourth quarter
Speaker 2: will be about one point four to seven billion dollars,
Speaker 2: just ahead of consensus. How are they managing what's happening
Speaker 2: in the memory shortage and when is they going to
Speaker 2: transition from the handset story to the data center story.
Speaker 2: Let's talk through it. ARM CEO Rene Husk joins us. Now, Rene,
Speaker 2: good morning, thank you for joining us. That there is
Speaker 2: a lot going on. Let's get the sort of handset,
Speaker 2: smartphone and memory situation out of the way. If that's okay,
Speaker 2: You know clearly this is impacting outlook for the smartphone
Speaker 2: market across this calendar year.
Speaker 5: How do you think it showed.
Speaker 2: Up in the earnings that you posted and would it
Speaker 2: have been slightly better if the situation were different?
Speaker 6: Yeah, good morning, Good morning, ed. So, first off, the
Speaker 6: quarter was amazing for us. We had not only record revenue,
Speaker 6: but record royalties one point two to four billion in revenue,
Speaker 6: nearly seven hundred and forty million dollars in royalties, and
Speaker 6: if you just stack that up, that's twenty seven percent
Speaker 6: year on year. Our data center business is exploding. We
Speaker 6: were up one hundred percent year on year, probably north
Speaker 6: of one hundred percent year on year. So to your question, no,
Speaker 6: the memory situation isn't really impacting arms so directly. And
Speaker 6: you might ask, well why is that? Well, Number one,
Speaker 6: we are a spread across a lot of different businesses.
Speaker 6: As I said, the data center business is increasingly growing
Speaker 6: for us, and we think in a few years it'll
Speaker 6: be our largest business.
Speaker 7: Secondly, our products are used across the.
Speaker 6: Board, so we tend to see in memory shortages is
Speaker 6: the bottom end of the stack starts to get impacted,
Speaker 6: and that's actually lower royalty rates for us.
Speaker 7: So as a result, we don't get impacted very much.
Speaker 6: So no, short answer is no impact this quarter, and
Speaker 6: we raised our guidance for the next quarter because, as
Speaker 6: I said, we're just not seeing that kind of impact,
Speaker 6: but I'm not denying that it's there. But for the
Speaker 6: ARMED business, the impact is quite minimal.
Speaker 5: Renee, thank you for that.
Speaker 2: Data center royalty revenue grown one hundred percent year on year,
Speaker 2: As you outlined, I get the same question for you
Speaker 2: from everyone's sell side through the buyside, which has give
Speaker 2: me a specific year.
Speaker 5: Market on the calendar.
Speaker 2: When ARM goes from being handset to data center and
Speaker 2: it accounts for more of your business, is that selection
Speaker 2: points clear on your calendar?
Speaker 6: At least it's very clear, And that's why in the
Speaker 6: earnings call, I said in a few years. As you know,
Speaker 6: we don't typically provide forward guidance on an annual basis,
Speaker 6: but we have a line of a site that says
Speaker 6: we see it coming and it's probably coming sooner than
Speaker 6: we had thought. And the reason for that is the
Speaker 6: data center growth. But if you click below that, why
Speaker 6: is data center growing so rapidly, it is the a
Speaker 6: presence of ARM CPUs in the data center. We're now
Speaker 6: over fifty percent market share with the hyperscalers. Secondly, the
Speaker 6: CPUs that are being used are using more arm CPUs
Speaker 6: inside the chip one hundred and ninety two cores for
Speaker 6: example inside a graviton chip going from ninety six VERA
Speaker 6: and video VERA going from seventy two cores on grace
Speaker 6: now to eighty eight. So what does that mean. That
Speaker 6: means more cores, means more royalties and high growth rate. Well,
Speaker 6: why are there more cores? When you think about agentic
Speaker 6: AI and everything associated with agents moving workloads across systems,
Speaker 6: managing workflows, et cetera, et cetera. That's the kind of
Speaker 6: work only CPUs can do. So to your question, while
Speaker 6: we're not giving a date, we can see it and
Speaker 6: it's coming sooner than we had thought, even probably six
Speaker 6: to nine months ago.
Speaker 3: And probably on the back of when you look at
Speaker 3: an alphabet increasing its capital expenditure by another well potentially
Speaker 3: one hundred and eighty five billion dollars renee. Is the
Speaker 3: AI bubble this worry about AI infrastructure build out a
Speaker 3: thing of the past to you, or there are still
Speaker 3: somewhat bottleneck issues that you're concerned about.
Speaker 6: Yeah, so it's a great observation, Caroline, and yes, there's
Speaker 6: huge growth in Google's capex not all of that one
Speaker 6: hundred and eighty billion dollars as coming does of course,
Speaker 6: but what does that say. We continue to see investments
Speaker 6: in the data center, whether it's what Meta had announced
Speaker 6: or Microsoft announced and now Google Alphabet that exceed what
Speaker 6: people had originally thought was even possible even a couple
Speaker 6: of years ago. If you go back to when we
Speaker 6: announced the Stargate initiative in January of twenty twenty four,
Speaker 6: five hundred billion dollars over a number of years, people
Speaker 6: looked at those numbers and said, how is that even possible?
Speaker 6: Now eighteen months later, it looks quite quite credible. So
Speaker 6: bottom line is we are seeing such an investment because
Speaker 6: the AI opportunity, the way I like to think about it,
Speaker 6: is kind of the final frontier relative technology. When you
Speaker 6: think about what could be on beyond AI, it's really
Speaker 6: hard to imagine. So also the fact that AI has
Speaker 6: really had very little penetration, let's say, into large enterprise
Speaker 6: or into our health systems or things around drug discovery.
Speaker 7: So there's a long, long runway.
Speaker 6: I think people are a little nervous about it as
Speaker 6: decidedly so because we've not seen it before, right we've
Speaker 6: not seen the order of magnitude we're talking about, so
Speaker 6: it's somewhat natural for you to look at it and say, well,
Speaker 6: gravity's got to hit it sometime. But then if you're
Speaker 6: a little intellectually look at it and say, my gosh,
Speaker 6: is AI going to be something that will change and
Speaker 6: trainansform how everything is done well? Of course, and then
Speaker 6: there's going to be an investment to support that. And
Speaker 6: that's what we're saying, investment.
Speaker 3: To support that. We don't mention stargate. That immediately makes
Speaker 3: me think of Massa. And you were clear on the
Speaker 3: call yesterday that you've spoken to him. You don't think
Speaker 3: Soft bangk is in any way going to sell down
Speaker 3: at stake in ARM. But how much is that an
Speaker 3: overhang in the longer term and how much actually do
Speaker 3: you want to see more free float of your stock?
Speaker 6: Well, I have one very large shareholder who I talked
Speaker 6: to quite frequently who loves ARM and he's very long
Speaker 6: on ARM. So he has no intention to sell at all.
Speaker 6: And I shouldn't even say anytime soon. I don't know
Speaker 6: when that would be. Quite frankly, we do talk about it.
Speaker 6: He said he's got no interest in selling how that
Speaker 6: impacts the float and etc. You know, that's not something
Speaker 6: candidly I spend a whole lot of bandwidth thinking about.
Speaker 6: But he's very, very long on ARM because he sees
Speaker 6: the enormous opportunity that we have. And if you think
Speaker 6: about what we've done since we've gone public, Carol, and
Speaker 6: in the Flaw of twenty twenty three, we told the
Speaker 6: world we'd be growing at twenty five percent year on
Speaker 6: year for two three years, and people didn't believe it
Speaker 6: was possible. Here we are now a couple of years later,
Speaker 6: and we're beyond what we told investors during our roadshow,
Speaker 6: and things are even stronger than they were at their time.
Speaker 7: So as a result, he sees it.
Speaker 6: He sees probably more of the data than anyone does,
Speaker 6: and that's why he's not selling RAN now.
Speaker 5: I want to go back to CPU.
Speaker 2: January twenty sixth, Bloomberg speaks to Nvidia CEO Jensen Wang,
Speaker 2: and he speaks for the first time about selling to
Speaker 2: the market via CPU as a standalone. And that seems
Speaker 2: critically important because if you think about the pipeline for
Speaker 2: Blackwell and Rubin, right, those are GPUs coded in on
Speaker 2: based architecture and those building they don't want to sort
Speaker 2: of have to cross pollinate x eighty six based platforms
Speaker 2: with their ARM based GPUs. It seemed to be really substantive.
Speaker 2: You explain how much of a boost that was for
Speaker 2: ARM and whether this idea that the VIA CPU goes
Speaker 2: into the market as a standalone product changes the trajectory
Speaker 2: at all, because at the same time a video talks
Speaker 2: up about how much content it owns proportionally in the
Speaker 2: overall system.
Speaker 6: Just take it and run with it, please, Yeah, you know, so,
Speaker 6: first off, thrilled to see Jensen say that they're a
Speaker 6: great partner and Vera is a great product.
Speaker 7: And as I mentioned earlier, VERA has gone from.
Speaker 6: Has gone now eighty eight CPUs inside it CPU cores
Speaker 6: from seventy two. So why is that a really good
Speaker 6: thing for us going forward? Well, primarily because when you
Speaker 6: think about the data centers and how they're evolving to
Speaker 6: from what is general purpose compute moving to AI compute
Speaker 6: a mix of training and inference, and those inference workloads
Speaker 6: are urgentic. That's right down the center of the plate
Speaker 6: for what the CPU not only is good at, but
Speaker 6: can only do, can only do. So what that means
Speaker 6: is inside the data center. You're going to start to
Speaker 6: see movement towards a homogeneous type of structure where people
Speaker 6: would love to have the ARM stack running almost everything.
Speaker 6: It's just easier from a maintenance standpoint, it's easier from
Speaker 6: an upgrade standpoint, it's easier from a cost standpoint. So
Speaker 6: and also the flexibility it can affords you can build
Speaker 6: a tremendously efficient custom system based on ARM. The Vera
Speaker 6: Reuben platform AD compared to Grace Blackwell uses six x
Speaker 6: the number of CPUs and that's when you look at
Speaker 6: the storage, the DPU, the offload. That's a huge increase.
Speaker 6: So yes, selling loose veras that's a great thing. We're
Speaker 6: super happy to see that.
Speaker 3: Briefly, Renee, you have such a bird side perspective because
Speaker 3: you're working with Nvidia, but also you're working with open Ai.
Speaker 3: It was reported potentially was looking with you at your
Speaker 3: technology to be working with its own custom ship with Broadcom.
Speaker 3: You've got Meta looking at custom chips you of course,
Speaker 3: how do you see this evolving?
Speaker 7: Yeah, I have a lucky job.
Speaker 6: I get to work with just about everybody in the
Speaker 6: industry across the planet, whether it's in the fab foundry area,
Speaker 6: whether it is a chip company, whether it's an OEM,
Speaker 6: whether it's a software provider. We work and talk to
Speaker 6: everyone because ARM is just so pervasive. The common theme
Speaker 6: we see is continued investment in AI, and not just
Speaker 6: at the data center. It's trying to figure out how
Speaker 6: do you run those AI workloads everywhere?
Speaker 7: How do you run them in wearables, how.
Speaker 6: Do you continue to make them more efficient in a
Speaker 6: smartphone or a PC, or in physical AI, whether it's
Speaker 6: autonomous driving and or robotics. So we're involved in all
Speaker 6: the conversations and the common theme is heavy, heavy investment.
Speaker 6: And one of the challenges that we see in the
Speaker 6: chip world around this is, as you know, it takes
Speaker 6: a couple of years to build a chip, the IP
Speaker 6: that we developed that goes into the chips a couple
Speaker 6: maybe a couple of years in before it. Trying to
Speaker 6: predict what the architectures look like four years after the
Speaker 6: chip has been designed where the AI models are going
Speaker 6: is really very tricky. That lends itself also though, very
Speaker 6: well to ARM because we are programmable, we are flexible,
Speaker 6: and we are low power, meaning that wherever the chips
Speaker 6: drop no pun intended, we should be in a very
Speaker 6: good position to be able to drive those workloads.
Speaker 3: I'm cia n A has with the broader perspective. We
Speaker 3: thank you for it. Now coming up, we got more
Speaker 3: earnings to talk about. Alphabet's results. Expectations for Amazon just
Speaker 3: coming thick and fast, folks.
Speaker 8: As a bitty bag tech.
Speaker 3: Record spending by cloud providers, Well, it's raining on the parade.
Speaker 8: Of big tech earnings.
Speaker 3: Following Alphabet's results last night, Let's talk it through with
Speaker 3: Ioko Yoshioka, who say with Wealth Enhancement Group. Ioko, it
Speaker 3: looked at one point after the announcement yesterday that we
Speaker 3: were going the way of Meta that even though Capex
Speaker 3: was going up, we were celebrating the AI rewards and
Speaker 3: the revenue boost, and then we went more the way
Speaker 3: of Microsoft and we were worrying about the said to
Speaker 3: the Kapex are you selling on this?
Speaker 9: No, Caroline, We're not selling on this. You know, these
Speaker 9: companies are still high quality companies and they're still growing
Speaker 9: very quickly. I think it's just an adjustment from a
Speaker 9: valuation standpoint in terms of what are these companies worth
Speaker 9: over the long term, how much longer are they going
Speaker 9: to be spending at these levels, because the issue for
Speaker 9: investors is really just the sort of collapse in free
Speaker 9: cash flow that we, you know, have been just grown
Speaker 9: accustomed to. These these companies used to return so much
Speaker 9: of that free cash flow to shareholders and now it's
Speaker 9: being spent for investment for good reason, and over the
Speaker 9: long term this should.
Speaker 5: Help them grow.
Speaker 9: However, it just means that the investor kind of gets
Speaker 9: put to the to the side for a little bit.
Speaker 3: Are you worried in any way about the free cash
Speaker 3: flow the alphabet is perhaps taking a hit on because
Speaker 3: from what we could understand from the numbers, in fact,
Speaker 3: the becoming ever more efficient. The marginison is being supported
Speaker 3: because they're to be integrated. They're able to cash in
Speaker 3: on growing cloud and focus on compute much more than
Speaker 3: rivals per se.
Speaker 9: Absolutely, I mean with you know, the cloud business growing
Speaker 9: forty eight percent, well beyond what investors were expecting at
Speaker 9: around thirty percent. If that continues, the investment that they're
Speaker 9: doing is justified, and I think investors will eventually reward
Speaker 9: them for that. It's just in the meantime. Meantime just
Speaker 9: recalibrating really what you want to pay. And the momentum
Speaker 9: had been so strong for Alphabet going into earnings that
Speaker 9: there's just a little bit of a you know, take
Speaker 9: profit attitude going on in marketing.
Speaker 2: Right, Okay, let's bring back the capital expended. Just chart,
Speaker 2: wait for some TV magic. It's going to appear any second.
Speaker 2: And then you look at that and you go, my goodness,
Speaker 2: you know it is Caro called it mic drop moment.
Speaker 5: It is shocking.
Speaker 2: But what you said a moment ago, Google Cloud growing
Speaker 2: at forty eight percent, Like the whole Microsoft anxiety was
Speaker 2: that Azure was off by a percentage point? Why is
Speaker 2: Alphabet not getting the credit for the Google Cloud growth?
Speaker 2: And everyone's just staring at that chart.
Speaker 5: It's a great question.
Speaker 9: I mean, you know, Microsoft missed by zero point four percent.
Speaker 9: You know they posted thirty nine percent instead of thirty
Speaker 9: nine point four, and you know, yet Google really sort
Speaker 9: of blew it out of the water. And you know,
Speaker 9: I really feel like it's that focus on that CAPAC
Speaker 9: spend in twenty twenty six more so than anything else.
Speaker 9: It's great that we're seeing that growth on the cloud
Speaker 9: for both Microsoft and for Alphabet, but really it's that
Speaker 9: spend in order to get those growth numbers, I think
Speaker 9: is what is giving investors a little pause.
Speaker 5: Amazon's down four percent.
Speaker 2: How much is that just anxiety about what they will
Speaker 2: won't need to say tonight?
Speaker 8: Absolutely?
Speaker 9: I think I'll lot of it has to do with
Speaker 9: the anxiety about what they'll say tonight and how much
Speaker 9: investors might be off or the street might be off.
Speaker 9: In terms of the estimate for twenty twenty six CAPEX
Speaker 9: for Amazon, I think investors are anticipating about one hundred
Speaker 9: and twenty five billion in spend, which is up twenty
Speaker 9: two percent or so from twenty twenty five. And so
Speaker 9: we'll have to see if Amazon decides to spend a
Speaker 9: little bit more.
Speaker 2: Yoka Yoshoka, Wealth Enhancement Group, really good summary of what's
Speaker 2: going on in the mag seven.
Speaker 5: Thank you so much for coming up.
Speaker 2: AI tools keep coming for the enterprise software market, But
Speaker 2: will they be the existential threat that investors fit?
Speaker 5: We've got more on that next. This is been Big Tech.
Speaker 3: And it's introducing a new platform to help companies deploy
Speaker 3: AI agents more easily and pave the way for broader
Speaker 3: adoption among corporate customers. The new product called Frontier, and
Speaker 3: iizations to build and manage those AI tools so that
Speaker 3: each agent has appropriate guardrails and data access ed.
Speaker 8: What have you got?
Speaker 2: Speaking of the enterprise shakeup caused by AI anthropics, legal
Speaker 2: plug in, for its clawed cowork, may not be as
Speaker 2: devastating a blow to legal solutions providers as according to
Speaker 2: research from John Davies at Bloomberg Intelligence, who joins us
Speaker 2: now at John as someone that's suffered through years of
Speaker 2: law school and was born to two attorneys.
Speaker 5: I enjoyed reading it.
Speaker 2: Your conclusion is that Claude Legal is insufficiently expert to
Speaker 2: mount a challenge. Just dig a bit deeper into your thesis.
Speaker 10: Absolutely, and hello.
Speaker 11: I think the key thing is that all these generic
Speaker 11: tools don't have access to the vast googles of data
Speaker 11: which the very specialized tools which the established companies have
Speaker 11: access to, which it built up really over many decades,
Speaker 11: even centuries. In some cases, they're not easily replicable sets
Speaker 11: of data. It's a lot of shoe leather involved. You've
Speaker 11: got to visit vast numbers of courthouses, and it's not
Speaker 11: simply a question of digitizing the information.
Speaker 10: You've also got to put it in context.
Speaker 11: So the companies we're talking about here are West Law
Speaker 11: and Lexus and Nexus each employ many hundreds of legal
Speaker 11: professionals and have done for a very long time, and
Speaker 11: all that information is caught up inside their products. And
Speaker 11: that's the thing which I think the generic tools won't
Speaker 11: have access to don't have access to, and therefore they're
Speaker 11: more likely to make mistakes, to hallucinate and to lead
Speaker 11: people astray. And you can't really work this stuff out
Speaker 11: from first principles because sometimes the law defies logic.
Speaker 10: It's not really like a science problem.
Speaker 5: Here defies logic.
Speaker 8: It's interesting John that in many ways.
Speaker 3: Look Claude Cowork had said that in a statement, they said, look,
Speaker 3: you still need a human in the loop. We're not
Speaker 3: suggesting this to just run wildly free. And particularly we
Speaker 3: had an investor on yesterday, Ude Charuvu who's from Harding Loafner,
Speaker 3: who is saying the thing with the Lexus and Nexus though,
Speaker 3: is that it is a point solution, it's not a
Speaker 3: platform solution. And that's why people have the anxiety that
Speaker 3: might be knocked out in such a way. What more
Speaker 3: could we see from these AI developments that might give
Speaker 3: you pause about Alexus, Nexus or whoever's being competed against.
Speaker 11: I think if they, if they do somehow manage to
Speaker 11: gain access to the data, and clearly, you know, while
Speaker 11: it's expensive to replicate, these companies have a vast amount
Speaker 11: of money, so that could be could be one angle,
Speaker 11: and I guess I guess the other one is if
Speaker 11: in some way it's a bit like proving a negative
Speaker 11: but if they can somehow prove that they're no longer hallucinating,
Speaker 11: then and they can they can point to where they
Speaker 11: don't have the knowledge and say, okay, beyond this point
Speaker 11: you need as a lawyer to go and do the
Speaker 11: work yourself. But here is the kind of basic tool
Speaker 11: set that could become quite a useful product which could
Speaker 11: be sold, perhaps at a much lower cost than the
Speaker 11: number of providers have at the moment. But it really
Speaker 11: seems like quite a stretch, and there's an enormous amount
Speaker 11: of experience built into the use of the existing products
Speaker 11: people have been using in the decades, much.
Speaker 10: Like they have various tools in financial markets.
Speaker 3: And your notes point out they've also been enthusiastic adoptors
Speaker 3: of AI themselves, so have been major innovating too. John Davies,
Speaker 3: Bloomberg Intelligence is a great note. Thanks for bringing it
Speaker 3: to us. Meanwhile, coming up, put it all about crypto
Speaker 3: increasingly under pressure. We'll break down what's behind these moves. Next,
Speaker 3: this is Bloomberg Tech.
Speaker 5: Welcome back to Bloomberg Tech.
Speaker 2: In the last thirty minutes or so, actually markets have
Speaker 2: come off session lows and as that one hundred is
Speaker 2: down nine tenths of a percent, had been down about
Speaker 2: one point eight percent and trading at its lowest level
Speaker 2: since November. We'll keep an eye out on the Bloomberg terminal.
Speaker 2: I'm not really sure what the news flow is. Maybe
Speaker 2: this is just to kind of market sentiment thing that's
Speaker 2: going on. Earnings though, of course, are a big factor
Speaker 2: in it. We talked about Alphabet, which itself is on
Speaker 2: track for its worst day since May. After the bell,
Speaker 2: we get Amazon, and Amazon's down four percent. Right, you
Speaker 2: don't usually see a name that's going to report earnings
Speaker 2: after the bell decline with that conviction, usually you're treading water.
Speaker 2: But because Alphabet, the parent of Google, posted such a
Speaker 2: monster capital expenditures forecast for this year one hundred and
Speaker 2: eighty five billion dollars, maybe there's some read through their cara.
Speaker 2: Maybe the market's like, oh wow, what's Amazon going to say?
Speaker 2: Like what do we thinks coming here? And of course
Speaker 2: we're bracing.
Speaker 3: Yeah, we're bracing. Meanwhile, well, if you're bracing for crypto
Speaker 3: to be falling further, you got that delivered. We're off
Speaker 3: by six percent today, we're below the important seventy thousand
Speaker 3: dollars level, and that negative momentum is just accelerating across
Speaker 3: cryptocurrency is written large.
Speaker 8: Look, it's driven maybe.
Speaker 3: In part by vanishing marginal demand amid this week's volatility
Speaker 3: in other areas tech equities, precious metals. The most cryptove
Speaker 3: reporter Ioshan joins us, Now we are is this people
Speaker 3: selling crypto to cover losses elsewhere?
Speaker 8: Is it more fundamental than that?
Speaker 12: Right now, it feels like there's some more fundamental issues
Speaker 12: within the cryptoal industry style based on what I'm talking
Speaker 12: like everyone I'm talking to in the crypto industry, there's
Speaker 12: a crisis face right, Like you know digital digital currencies
Speaker 12: like promise of like we build this like internet like
Speaker 12: Internet money, and that's kind of disappearing because like when
Speaker 12: prices are going down of assi class that's supposed to
Speaker 12: be going up, that's like really hard to sell the moment.
Speaker 8: It's a store of value.
Speaker 5: It yes, losing faith.
Speaker 12: Yeah, not just not just bicoin as a digital goal.
Speaker 12: Also other cryptocurrencies, right, like you see like Etherian Solana.
Speaker 12: All these blockchains and crypto are supposed to sort of
Speaker 12: build like rebuild a Wall Street and rebuild fintech and
Speaker 12: Neil Bank and whatsoever. But that's not really happen right now.
Speaker 12: Even if they're happening, as we're seeing some adoption from
Speaker 12: Wall Street for example, right we start institutes are getting
Speaker 12: into the space, but that's also not affecting prices. I
Speaker 12: think that's a bigger puzzle for the industry to resolve
Speaker 12: at the moment.
Speaker 2: I think you wrote a really excellent summary using data
Speaker 2: in the chart that actually, for all the hype around bitcoin,
Speaker 2: if you compare to other asset classes, it has lagged,
Speaker 2: not just in the short term but on a longer
Speaker 2: term basis.
Speaker 5: Just explain the reporting.
Speaker 12: I think the issue is that, like you know, Bitcoin
Speaker 12: is supposed to be like the digital gold, but what's
Speaker 12: happening again, as I just mentioned to Caroline, that is like,
Speaker 12: you know, we have this digital gold that's price is
Speaker 12: supposed to go up, but we are seeing that gold
Speaker 12: and solar prices are going up, but meanwhile Bitcoin is selling.
Speaker 12: That's the issue of crypto right, like you don't have
Speaker 12: a fundamental happening right now. That's like proving what like
Speaker 12: all the bitcoin fans are trying to sell to the
Speaker 12: market at the moment.
Speaker 5: Right the most motion, thank you very much.
Speaker 2: Another source of pain right now software debt, and just
Speaker 2: for weeks, nearly eighteen billion dollars in loans has been
Speaker 2: pushed into distressed territory, the highest level since October twenty
Speaker 2: twenty two. For more, Bloomberg Americans finance edits a Sally
Speaker 2: Bakeworld joins a Sally. There's enough anxiety and concern in
Speaker 2: the market right now as software before we even started
Speaker 2: writing about the debt pile. But it's the smart thing
Speaker 2: to do explain what's at issue here, right and in
Speaker 2: that kind of milestone that I just read out.
Speaker 13: So I think the big question here for debt investors,
Speaker 13: for the market more broadly, is how much of this
Speaker 13: sell off in loans that are tied to software is justified. Now,
Speaker 13: that's the big question that we can get to. But
Speaker 13: in the meantime, it is providing a lot of potential
Speaker 13: opportunities for investors who are scaring the market looking for
Speaker 13: companies that are sort of good software loans I that
Speaker 13: can withstand and maybe even benefit from AI, versus those
Speaker 13: that are likely to be made obsolete or have their
Speaker 13: revenue severely stressed by AI.
Speaker 8: So that's sort of the big question.
Speaker 13: And what is interesting is the sort of spirited defense
Speaker 13: that some of the loan buying community, some of the
Speaker 13: biggest loan buyers, have come out with. Aries said some
Speaker 13: interesting things on its earnings call that you know, there
Speaker 13: are different kinds of kinds of companies and a lot
Speaker 13: of them will benefit from AI, and that AI cannot
Speaker 13: actually replicate replicate a database, It cannot replicate proprietary data,
Speaker 13: and so if you build a software portfolio around elements
Speaker 13: like that, you can actually build a portfolio that's resistant
Speaker 13: to AI and actually will benefit from it.
Speaker 3: In fact, Mike Arraghetti join previous earlier shows. Today the
Speaker 3: CEO of ARES talking about people are not really understanding
Speaker 3: how senior and safe a lot of these loans are
Speaker 3: as well. Is this a case of sort of throwing
Speaker 3: the baby out with the bath water, or when are
Speaker 3: we starting to potentially see people getting more nuanced on
Speaker 3: which loans are exposed, which software names aren't adopting AI
Speaker 3: fast enough sally.
Speaker 13: Companies like aries like blue Al, They've all and tom O, Bravo,
Speaker 13: who you know who buy in the space or borrow
Speaker 13: heavily to fund in this space. They're probably all going
Speaker 13: through all of their portfolios right now to look at this.
Speaker 13: You know that there are AI companies, there are software
Speaker 13: companies out there that generate billions of dollars of revenue,
Speaker 13: and they're actually showing earnings that are accelerating, not declining,
Speaker 13: So you know, they're using words sort of like it's
Speaker 13: not monolithic. You don't just have this sort of very
Speaker 13: binary situation, and you do have to look at the
Speaker 13: nuances of some of the companies there. But there's some
Speaker 13: really interesting dynamics going on in the loan market. For example,
Speaker 13: clos collateralized loan obligations. They're big buyers of these loans
Speaker 13: and they're only they have limits on what they can hold,
Speaker 13: so they may become sort of fource sellers of loans
Speaker 13: that do slip into distress set territory based on this
Speaker 13: sell off, and again that could pose a lot of
Speaker 13: buying opportunities which investors have to look through and sort
Speaker 13: of sort out the good from the bad as.
Speaker 3: It were, So interesting how John Z's however, Apollos sort
Speaker 3: of talked about questioning if the real risk is if
Speaker 3: software is dead, and they'd cut their exposure by half.
Speaker 3: In twenty twenty five, we'll see how this continues to
Speaker 3: ripple through the market. Sally Beekwell with the cross asset
Speaker 3: AI read across. Let's talk about now SpaceX holding meetings
Speaker 3: with banks from outside the US for its IPO, including
Speaker 3: from Europe and other regions, and that's what According to sources,
Speaker 3: the meetings took place before SpaceX announced that it would
Speaker 3: acquire Xai, but the combined company is still expected to
Speaker 3: hold the IPO later this year.
Speaker 5: Ed Okay, coming up.
Speaker 2: Snap Paid subscribers rise, but the company sees a dip
Speaker 2: in daily active users, particularly in America. The more in
Speaker 2: those numbers. Next down nine percent. This is Bloomberg Tech.
Speaker 7: Time.
Speaker 2: Now for talking tech. Let's go through some more of
Speaker 2: the earnings. First up, Sony reporting a twenty two percent
Speaker 2: rise in profit over the holiday quarter, and it said
Speaker 2: it secured sufficient memory supply for its key PlayStation five
Speaker 2: business this year.
Speaker 5: The company did caution, however.
Speaker 2: The profitability of the wider games and networking division worsened
Speaker 2: due to rising hardware costs, plus a video partner on
Speaker 2: Hi saw revenue time thirty five point five percent in
Speaker 2: January to the equivalent of twenty three billion US dollars.
Speaker 2: The tai One based company is one of the key
Speaker 2: players in the AI hardware industry and is benefiting from
Speaker 2: the billions being spent on the gear needed to train
Speaker 2: and operate the models. And shares of Peloton a down
Speaker 2: after the fitness company provided a weaker than expected revenue.
Speaker 5: Forecast for the fiscal third quarter.
Speaker 2: Investors have been hoping the release of AI powered treadmills, bikes,
Speaker 2: and other new products would put some muscle into Peloton's
Speaker 2: turnaround efforts.
Speaker 5: Like that character pardon your puns.
Speaker 3: Meanwhile, let's continue this theme of earnings and those that
Speaker 3: are falling on the back of it. Snap down more
Speaker 3: than eight percent amid a drop in daily active users
Speaker 3: here in the United States. Still, the company actually posted
Speaker 3: better than expected holiday quarter sales and actually paid subscrires.
Speaker 3: We're rising twenty four million, So let's break it down.
Speaker 3: Mitter Smiley Emake to senior analysts with us, it's many
Speaker 3: pronged conversation we can have about Snap, But first and
Speaker 3: foremost why are we seeing a decline in users in
Speaker 3: the United States.
Speaker 8: Yeah, it's a great question.
Speaker 14: I mean, I think Snapchat definitely has kind of a
Speaker 14: stickiness problem. I feel like we see people often age
Speaker 14: out of it as they grow older, and then we're
Speaker 14: also seeing reports that younger people are not adopting it.
Speaker 14: You know, I'm talking jen now for really young people
Speaker 14: aren't adopting it at the same rate that gen z
Speaker 14: might have.
Speaker 8: So they're kind of in this tough spot.
Speaker 14: It's interesting we see a lot of the other social
Speaker 14: platforms like Facebook, for instance, they're really trying to court
Speaker 14: young users, and I feel like Snapchat in some ways
Speaker 14: has the opposite issue, where it sort of has a
Speaker 14: hold on this specific generation of young people, but when
Speaker 14: you go above and below that, it is struggling a
Speaker 14: bit more and I think that is why we're seeing
Speaker 14: some of those falls.
Speaker 3: And interestingly, you go back to November when we had
Speaker 3: the previous earnings numbers and the shares skyrocketed, not just
Speaker 3: a back of numbers, but on the back of a
Speaker 3: deal they were meant to be had four hundred million
Speaker 3: dollars in Mikestro cash and Acty with Perplexity, a partnership
Speaker 3: to AI.
Speaker 8: Any news on.
Speaker 14: That, Yeah, I think everyone was kind of hoping this
Speaker 14: earnings call, which shed a bit more late on this
Speaker 14: deal and what's going on there. Of course, they ended
Speaker 14: up saying that it's been delayed. They didn't provide a
Speaker 14: ton of detail. And it's interesting because when the deal
Speaker 14: was first announced, it was certainly welcomed by investors. I
Speaker 14: think they were excited to kind of see a new
Speaker 14: revenue stream for Snapchat and also just see how snap
Speaker 14: is kind of looking into how it wants to compete
Speaker 14: in the broader AI race, and so to see not
Speaker 14: really any updates there is concerning and it also just
Speaker 14: raises a lot of questions people already had around, you know,
Speaker 14: sort of why Perplexity in the first place, Why was
Speaker 14: the deal only for one year, How is it going
Speaker 14: to fit into you know, how is Perplexity going to
Speaker 14: fit into Snapchat's broader interface and whatnot.
Speaker 8: So more questions and answers at this point. For sure, I'm.
Speaker 2: Trying to understand where Snap fits in the world. It's
Speaker 2: the first time he uses decline since twenty eighteen. I
Speaker 2: haven't been on Snap for a very long time, and
Speaker 2: twenty eighteen I certainly wasn't that.
Speaker 5: Sounds like a worrying signal.
Speaker 2: Right, you know, you're talking about the different revenue streams,
Speaker 2: But at the end of the day, what is snap
Speaker 2: and what does the shrinking user base suggest to you
Speaker 2: MINDA Yeah.
Speaker 14: I mean I think it's a fair question, and I
Speaker 14: think that partly explains why we are seeing the shrinking
Speaker 14: user base. I think a lot of users just aren't
Speaker 14: seeing the value in it that they used to, especially
Speaker 14: as we see Instagram, TikTok now YouTube really really gains
Speaker 14: team and just really take a chip away a time spent.
Speaker 8: That's something we see in our own forecast at E Marketer.
Speaker 14: I mean, we are seeing time spent on Snapchat decline
Speaker 14: year over year, at least in the US, and we're seeing.
Speaker 8: Them try to, you know, try to fix that. Really.
Speaker 14: That's why they're investing in things like games, and we're
Speaker 14: seeing they introduced other features last year that are really
Speaker 14: just meant to get people keep people on the app longer.
Speaker 8: But it is tricky, you know.
Speaker 14: Snapchat is really distinct and the social media landscape, which
Speaker 14: in some ways I think has worked to its advantage,
Speaker 14: but also has heard it because it really kind of
Speaker 14: seems to struggle to keep up with the broader trends
Speaker 14: unfolding in the broader landscape.
Speaker 2: You know, it's easy to try and compare and contrast
Speaker 2: with Meta, right, particularly in the glasses context. You know,
Speaker 2: Meta has a generative AI tool, Meta AI and the
Speaker 2: glasses have been the surprise package, the modus operandi by
Speaker 2: which people interface with that with that AI tool. Can
Speaker 2: you see the same story as snap with the glasses
Speaker 2: and what the point of them will be ultimately?
Speaker 14: Yeah, I think, you know, personally, I'm pretty I'm pretty
Speaker 14: much a skeptic when it comes to the smart glasses
Speaker 14: space in general. I just think it's you know, it
Speaker 14: still remains really niche, and I think there's still a
Speaker 14: lot of uncertainty around to what extent it will ever
Speaker 14: hit mass adoption. And I think, but you know, even
Speaker 14: say it does take off, people do end up wanting
Speaker 14: these glasses. Snapchat is still in a tough position. I mean,
Speaker 14: it is competing with pretty much all the all the
Speaker 14: major tech giants who are investing in this space, who
Speaker 14: are pouring tons of resources in this space. They all
Speaker 14: have a lot more money than Snapchat. So yeah, it's
Speaker 14: interesting to see them. Bet on it. It makes sense
Speaker 14: with their history of augmented reality and whatnot, but I
Speaker 14: think they're in a tough position going forward in that space.
Speaker 2: Minder Smiley a v marketer, Thank you very much. Now
Speaker 2: coming up, we speak with Qualcomm CEO Christiano Amon. That
Speaker 2: conversation's next. This is Bloomberg Tech. Let's focus in on
Speaker 2: Qualcom shares right now down about eight percent, on track
Speaker 2: for their biggest drop since last summer. At one point
Speaker 2: in the session, we were down eleven percent, on track
Speaker 2: for the biggest drop since March of twenty twenty. The
Speaker 2: world's largest maker of smartphone processors issued a lackluster revenue forecast,
Speaker 2: raising some concerns that memory supply constraints could push prices higher,
Speaker 2: which in turn with weigh on the handset demand. Joining
Speaker 2: us to discuss is Christiana Ammon quil Comco. Christiano A
Speaker 2: good morning. Thank you for becoming a morning bow Tech.
Speaker 2: That I give you that what's happening in memory is
Speaker 2: completely outside of your control, right, but the forecast of
Speaker 2: the current period of sales up to eleven billion dollars,
Speaker 2: I suppose one way of looking at it is how
Speaker 2: much better would that have been were the market not
Speaker 2: so constrained by the supply of memory right now, but
Speaker 2: also the pricing pressure that that supply deficit puts in place.
Speaker 15: Yeah, look, it's a very interesting situation. You know, in
Speaker 15: one hand, I'm incredibly happy with the business, like everything
Speaker 15: is going well. Demand, the strong macroeconomic indicators are good.
Speaker 15: Demand for HANC it is strong. We have seen we
Speaker 15: had like a record quarter in Q one. We saw
Speaker 15: all of our customers reporting sell true data better than expectations.
Speaker 15: But then the industry is now defined by the availability
Speaker 15: the memory that is is going to be available for
Speaker 15: consumer electronics, and it creates, you know, a sudden change
Speaker 15: in how OEMs look at their build plan and they say, look,
Speaker 15: I have to size the size of the market not
Speaker 15: based on demand, but the memory that I can get
Speaker 15: for consumer electronics. And that one makes it like this
Speaker 15: unique period there's a go ahead.
Speaker 5: Let me drop it.
Speaker 2: But you know, within that market there are some specific
Speaker 2: interesting case studies. Right the premium segment is good, like
Speaker 2: from a demand side, particularly in China. So usually like
Speaker 2: in any hardware environment where your supply constrained but demand
Speaker 2: is high, like that's a good thing. And increasingly, like
Speaker 2: think about the content in the phone that you provide.
Speaker 2: How can you kind of navigate this to your advantage?
Speaker 16: Yes, and that's a great observation.
Speaker 15: That's why I think there's a lot of I think
Speaker 15: a lot of unnecessary I think speculation. Right now, here's
Speaker 15: what's going to happen. We saw this with Covid. OEM
Speaker 15: is the first thing they're going to do. They're going
Speaker 15: to prioritize premium and high tier, you know, because those
Speaker 15: are more resilient I think.
Speaker 16: To price increases.
Speaker 15: They are we are going to see probably adjustment in
Speaker 15: prices on hences and because you know demand it's strong,
Speaker 15: it is very likely that the premium and the high
Speaker 15: tier is going to be less impacted than the mass
Speaker 15: tier on phones. And we have seen that the premi
Speaker 15: teer continue to expand regardless, regardless over the several years,
Speaker 15: the premi teer is expanding, and we're more concentrated on
Speaker 15: the premium and the high tier.
Speaker 16: So your your theory is one hundred percent correct.
Speaker 15: All that happened is OEM's had thinking about a particular
Speaker 15: size of the year that got resized by the memory availability.
Speaker 15: They're adjusting their build plans and we're going to see
Speaker 15: how this is going to play out in the next
Speaker 15: few quarters. That's that's really the story. The good thing
Speaker 15: is demand as high.
Speaker 3: So the second quarter chip sales guidance was what worried people,
Speaker 3: But third quarter, fourth quarter, it's going to play out
Speaker 3: over that time frame.
Speaker 15: Do you think it's one thing that I carefully worded.
Speaker 15: I think during our earnings call, I said the memory
Speaker 15: availability in pricing will be the defining factor for the
Speaker 15: size of the hands and market. And we talk about
Speaker 15: the size of hands and market because we have visibility
Speaker 15: whole market because of our licensing business. But now we're
Speaker 15: going to see how this play out. And I'm a
Speaker 15: little hesitant to make a very definitive prediction on how
Speaker 15: this is going to play out in Q three and Q.
Speaker 16: Four, But the pandemic was a good proxy.
Speaker 15: When we have something like that and we have a
Speaker 15: semiconductor shortage, we saw the PREMI teer has been more resilient,
Speaker 15: and you know, we're going to be working with our
Speaker 15: customers as they move the roadmap to kind of those
Speaker 15: type of devices.
Speaker 3: And now you control the controllables, and those controllables have
Speaker 3: been diversification in many ways. This speaks to why you've
Speaker 3: been focusing in on new areas of growth, whether it
Speaker 3: be autos or we connected devices, whether it be the
Speaker 3: future of robotics, whether of course of BAI Christiana, how
Speaker 3: much can you accelerate that to make up for the
Speaker 3: handset issues.
Speaker 15: Look, we we you know, it's not hopefully it's not
Speaker 15: lost on people that we had another record in automotive.
Speaker 15: We had actually a record in the company in Q one,
Speaker 15: and not only we continue to be satisfied with the
Speaker 15: direction the company is going on diversification, we had a
Speaker 15: new things like robotics, for example, we had a record
Speaker 15: in automotive. A couple of things that happen in the
Speaker 15: quarter that are very very important. One is we announce
Speaker 15: a broad partnership of Volkswagen Group across all the brands
Speaker 15: to build you know, the Snapdragon digital chassis for Volkswagen.
Speaker 15: We saw the launch of the Raw four or one
Speaker 15: of the top selling cars in the world for digital cockpit,
Speaker 15: and IoT is growing. We we enter robotics in a
Speaker 15: short period of time with some major customers, so we're
Speaker 15: excited about that. The fundamentals of the company are actually incredible,
Speaker 15: and we just navigate to another phone cycle.
Speaker 2: Christiano second consecutive quarter where automotive is above a billion dollars.
Speaker 2: And I remember over years us discussing what was a
Speaker 2: backlog in automotive. Right, apply that story and that experience
Speaker 2: to your hopes in data center. You know, you've told
Speaker 2: us when this will happen and who it will happen
Speaker 2: with first, But how do you see that translating from
Speaker 2: your order backlog to revenue growth and hitting milestones like
Speaker 2: a billion dollar quarter.
Speaker 16: Yes, we we.
Speaker 15: We restated the data center will start showing up in
Speaker 15: fiscal twenty seven. We have been talking for a while
Speaker 15: that the data center is going to change. It's going
Speaker 15: to go from the current focus on training into inference.
Speaker 15: We have been saying, I think before what's popular, that
Speaker 15: a different architecture will be required. I think the post
Speaker 15: GPU architecture interesting. That the Grock development is kind of
Speaker 15: validating that, and we're getting a lot of good feedback.
Speaker 15: We have a new architecture, including for memory. We don't
Speaker 15: need HBM, which is causing all of this memory situation,
Speaker 15: and it's we have been very encouraged by the traction
Speaker 15: we're getting. So it's going to be material in twenty seven,
Speaker 15: and you know, we're going to provide a lot of
Speaker 15: details in ourcoming investor event.
Speaker 3: Just broadly, how are you thinking about the actual consumer
Speaker 3: right now as well, Christiana?
Speaker 15: Just briefly, yes, so phone is a great proxy for
Speaker 15: consumer microeconomic indicators are strong. Consumer demand very strong. And
Speaker 15: one of the things I said in the earnings called
Speaker 15: sell true data on phones, and we have visibility because
Speaker 15: of our licensing business exceeded all expectations.
Speaker 16: Phones are getting off the shelf.
Speaker 15: Well, it's not a demand issue, it's just a memory
Speaker 15: supply issue.
Speaker 3: We'll come Seo, Cristiano Aman, We so appreciate you joining
Speaker 3: on this day after the earnings.
Speaker 8: Stay well.
Speaker 3: Meanwhile, that does it for another extraordinary edition at Bloomberg Tech.
Speaker 3: There is so much market volatility for earnings coming think
Speaker 3: and fast. We've got Amazon for tomorrow ed.
Speaker 2: Yeah, so Alphabet has the mic drop of one hundred
Speaker 2: and eighty five billion dollar CAPEX forecast. Is Amazon judged
Speaker 2: by the same metric and they communicate that differently. Recap
Speaker 2: those conversations on podcasts, two important CEO interviews.
Speaker 5: A lot going on.
Speaker 2: You know where to find it online, Apple, Spotify, iHeart
Speaker 2: and of course on all the Bloomberg platforms from San
Speaker 2: Francisco and New York.
Speaker 5: This is Bloomberg Tech