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Speaker 1: Jamison Greer is joining us now, Jamison, Ambassador, Thank you
Speaker 1: so much for being with us. I know you've been
Speaker 1: incredibly busy. I can imagine you haven't slept much. I
Speaker 1: am curious how much we're seeing the end of negotiations
Speaker 1: or the beginning of the end, as there still seem
Speaker 1: to be some loose ends to be tied up.
Speaker 3: Well, I would say that, you know, we've spent the
Speaker 3: past one hundred and twenty days negotiating with dozens and
Speaker 3: dozens of countries, and with some of these countries, the
Speaker 3: deals have been good enough that the President's been willing
Speaker 3: to accept them. With other countries, they're just going have
Speaker 3: a tariff. But we have you know, you can look
Speaker 3: at some of the information that's gone out there. We
Speaker 3: have fact sheets, we have a joint statement with Indonesia
Speaker 3: that give some details. You know, we'll be finishing the
Speaker 3: paperwork in the next weeks and maybe a couple of months,
Speaker 3: but these deals are pretty much set.
Speaker 4: They are set, right.
Speaker 3: We wouldn't make an agreement unless we all knew the
Speaker 3: contours of it and the countries knew it. And it's
Speaker 3: an exciting time because the president has essentially reset the
Speaker 3: global trading system, and so we'll be you know, finalizing
Speaker 3: everything that's been agreed to on paper and then monitoring
Speaker 3: compliance going forward.
Speaker 5: And Messagre, Can you help us understand how you landed
Speaker 5: on some of these rates, Specifically a country like Switzerland,
Speaker 5: it went from thirty one percent on Liberation Day, April
Speaker 5: second to now thirty nine percent, even though you and
Speaker 5: your colleagues were in negotiations with the Swiss trading partners.
Speaker 6: Sure well.
Speaker 3: So, first of all, the rates are largely determined by
Speaker 3: the trade deficit of a country with the United States
Speaker 3: and what the country is willing to do to address
Speaker 3: that trade deficit Switzerland. You know, this is surprising to
Speaker 3: some to hear, but we have nearly forty billion dollar
Speaker 3: trade deficit with Switzerland for a country of nine million.
Speaker 3: Now we value our relationship with Switzerland certainly, but during
Speaker 3: our discussions with them, you know, we weren't able to
Speaker 3: reach agreement on the best way to reduce that trade
Speaker 3: deficit at all. Right, they ship enormous amounts of pharmaceuticals
Speaker 3: to our country. We want to be making pharmaceuticals in
Speaker 3: our country. So this is a challenging situation. And so
Speaker 3: we have, you know, high tariffs not just on Switzerland,
Speaker 3: but many countries where we weren't able to fully resolve
Speaker 3: a path forward on reducing the trade deficit and opening markets.
Speaker 5: My understanding was that the US in Switzerland actually had
Speaker 5: a negotiated text and it was just waiting on sign
Speaker 5: off from President Trump.
Speaker 1: Is that accurate?
Speaker 4: I think that's an overstatement.
Speaker 3: I mean, the reality is all of these countries you
Speaker 3: trade back and forth paperwork and then you take it
Speaker 3: back to your leaders to get guidance from them, and
Speaker 3: so nothing's agreed, and tell everything's agreed. That's what every
Speaker 3: trade negotiator knows. So you know, the reality is we
Speaker 3: negotiate with lots of countries. Listen, there are a lot
Speaker 3: of countries that didn't get a deal that we've been
Speaker 3: negotiating with, and they, of course, they all want a deal.
Speaker 3: They all want to deal with the United States. So
Speaker 3: I can understand that. You know, folks may want to
Speaker 3: try to manifest a deal in the last minutes, but
Speaker 3: we just have to do it's right for America, and
Speaker 3: the President stands that too.
Speaker 5: I'm thinking of other countries like Taiwan, which that rate
Speaker 5: went down, India, Switzerland. Of course we know you are
Speaker 5: in negotiations with So between now and August seventh, could
Speaker 5: some of these countries that you spent a lot of
Speaker 5: time with your counterparts get a deal.
Speaker 4: Well, that's not my focus.
Speaker 3: I feel like we've been able to get everything set
Speaker 3: on August first. Of course, any country that wants to
Speaker 3: talk to us, they can always talk to us, and
Speaker 3: I'm sure some will be eager to find ways to
Speaker 3: reduce the deficit, open their markets, etc.
Speaker 4: But we're really focused right now on implementing the deals
Speaker 4: that have been reached, well.
Speaker 7: On implementing those deals. Representative, you meant that you would
Speaker 7: be looking and monitoring them for any violations. How will
Speaker 7: this administration judge what is a violation and what the
Speaker 7: consequences of that would be.
Speaker 3: So, for example, you know, we put out a fairly
Speaker 3: detailed joint statement with Indonesia and we're finalizing the underlying agreement,
Speaker 3: and in there you can see that they've made commitments
Speaker 3: on tariff levels where they're going to remove all of
Speaker 3: their tariffs. They've made commitments on non tariff barriers with
Speaker 3: respect to you know, agricultural inspections and the way they
Speaker 3: treat certain digital trade. And so our office, which has
Speaker 3: hundreds of people, the Office of the gust Trade Representative,
Speaker 3: they watch this and they make sure that Indonesia actually
Speaker 3: does what it's supposed to do, and if they don't,
Speaker 3: the President has his teriff authority. I mean, all of
Speaker 3: the deals are premised and the modified rates for these
Speaker 3: countries are premised on them actually opening their market, making
Speaker 3: the investment and purchase commitments they've agreed to, and if
Speaker 3: you don't, you can have the tariffs go back into place.
Speaker 4: This is basic trade enforcement. That's what we intend to
Speaker 4: do here, Ambassador.
Speaker 1: Right now, there are a number of countries coming out
Speaker 1: and saying this is part of a negotiation, and they
Speaker 1: plan to keep talking with the team over in the
Speaker 1: Trade Organization and trade representatives from the United States. Is
Speaker 1: that just messaging to their own political constituents or is
Speaker 1: that reality?
Speaker 3: Well, listen, they certainly have their domestic constituents they have
Speaker 3: to talk to. You can be sure that I woke
Speaker 3: up this morning to a number of trade ministers texting
Speaker 3: me and emailing me, and I'm sure they're reaching out
Speaker 3: to my colleague, Secretary LATINX, Secretary Beston, et cetera.
Speaker 4: And my job is to talk to these folks.
Speaker 3: I'm always going to talk to these folks, and you know,
Speaker 3: if they have proposals, you know, I'll talk to them
Speaker 3: and I'll brief the president. You know, we're focused on
Speaker 3: implementation and doing, you know, what's right to change the
Speaker 3: trading system to one that benefits American workers.
Speaker 1: How much are you also hearing from US companies concerned
Speaker 1: about certainty and whether they're going to get clarity on
Speaker 1: exactly what the rates are going to be, whether they
Speaker 1: will stick, whether there will be adjustments, and how some
Speaker 1: of these things will work with transcenational shipments of getting
Speaker 1: penalized forty percent.
Speaker 3: So So with respect to certainty, you know, President Trump
Speaker 3: has been talking about a new tariff program.
Speaker 4: For for literally years, decades.
Speaker 3: In some instances, you know, he has tariffs from his
Speaker 3: first term that are still in place. So sometimes when
Speaker 3: companies say we want certainty, what they mean is we
Speaker 3: want a different outcome, right, And you know by by
Speaker 3: putting you know, the market has baked in a lot
Speaker 3: of the tariffs we put in. You know, the new
Speaker 3: tariffs that we issued last night are firm. That's why
Speaker 3: we put it out in a very clear list. Everyone
Speaker 3: can see it and understand. With surotect a transhipment that's
Speaker 3: always been illegal, and so we're just going to put
Speaker 3: an additional forty percent tariff on that. So, you know,
Speaker 3: I understand that there are going to be edge cases
Speaker 3: where companies have to change their supply chains and no
Speaker 3: one wants to do that. They just want status quo.
Speaker 3: But we can't have the status quo. The status quo
Speaker 3: is what led to offshoring and the loss of some
Speaker 3: of our key industries. So during that supply chain shift,
Speaker 3: you know, that can be challenging for some companies. And
Speaker 3: I talk to a lot of these folks. I wanted
Speaker 3: to understand the president's trade policy. I want to hear
Speaker 3: about any you know on in tended consequences. But the
Speaker 3: presence trade policy is moving forward and we're shifting from
Speaker 3: a seventy year policy based on purely efficiency to a
Speaker 3: new policy based.
Speaker 4: On fair and bounce trade, and the world is agreeing
Speaker 4: with US.
Speaker 1: Investor agree.
Speaker 5: What about the unintended consequences of what's going on with
Speaker 5: the sectoral tariffs on autos? The Ford CEO was on
Speaker 5: Bloomberg Television yesterday talking about the price disadvantage compared to
Speaker 5: auto companies if they're making a car in Japan because
Speaker 5: of the input costs of twenty five percent on those
Speaker 5: inputs that they need to make the car coming into
Speaker 5: the United States versus the fifteen percent right that Japan
Speaker 5: now has. What's the point of the auto sectoral tariff
Speaker 5: if basically it's going to be bilateral now with country
Speaker 5: by country.
Speaker 3: So first of all, you know, there are only a
Speaker 3: handful of countries that export cars to US, right essentially,
Speaker 3: you know Germany, Japan, in a couple of countries of
Speaker 3: the European Union. We also have Canada, Mexico, and we
Speaker 3: had our domestic producers. You know, choose over a couple
Speaker 3: of decades off for a lot of that production to Mexico,
Speaker 3: and so naturally there is some some challenge as they
Speaker 3: as they continue to reshure that and we understand that, right,
Speaker 3: I mean, our goal is long term. We're not looking
Speaker 3: at quarterly earnings as policy makers. We're looking at a
Speaker 3: way to make sure that we have a strong, robust
Speaker 3: industrial base here that provide good jobs for our workers
Speaker 3: and support the national security. So you know, we're in
Speaker 3: constant contact with the domestics, with the unions and everybody.
Speaker 3: And you know, I understand that the that the auto
Speaker 3: companies are receiving a credit for content that's made in America,
Speaker 3: which is how it should be.
Speaker 4: That's what we're trying to incentivize.
Speaker 5: When you're looking and you're thinking long term, are you
Speaker 5: preparing for Supreme Court ruling against using IEPA for these tariffs?
Speaker 5: And if so, what's the plan be.
Speaker 3: So the case is at the Federal Circuit right now.
Speaker 3: We had the arguments yesterday. You know, lots of questions,
Speaker 3: a lot of preparation. Dog did a great DJ did
Speaker 3: a great job. We had a great team out there.
Speaker 3: We feel very confident in the case. You know, if
Speaker 3: if there's still questions coming out of the Federal Circuit
Speaker 3: or further litigation that goes to the Supreme Court, we're
Speaker 3: confident there that this statue clearly says the President has
Speaker 3: the authority to regulate imports.
Speaker 4: That's the language.
Speaker 3: No, not my words, it's a statute statutes language.
Speaker 4: You know.
Speaker 3: In case there's a national emergency, the Presence declared a
Speaker 3: national emergency, So we feel confident, you know, if it
Speaker 3: goes the other way, then we'll manage that. The reality is,
Speaker 3: the countries understand the type of leverage that President Trump
Speaker 3: has created. That's why they're doing these deals, and they're
Speaker 3: going to stick regardless of what happens in litigation.
Speaker 1: That's where I wanted to finish, And we just have
Speaker 1: a couple of minutes. We are out of time with you,
Speaker 1: I know, but I am curious what the game plan
Speaker 1: is should there be some sort of overruling of IEPA.
Speaker 1: Do you already have section two thirty two and others
Speaker 1: lined up?
Speaker 3: Well, well, listen, we always have all kinds of plans.
Speaker 3: And I'm not going to go deep into our strategy here,
Speaker 3: mostly because we're pretty confident on the current plan. But
Speaker 3: we will do whatever it takes to make sure that
Speaker 3: the President can continue to rectify the trade deficit and
Speaker 3: change the global trading system. This is a historic thing.
Speaker 3: This is once in a hundred years that you have
Speaker 3: the chance to reorder global trade like this, and we're
Speaker 3: doing it, and we'll use whatever tools are necessary to
Speaker 3: do it.
Speaker 1: US Trade Representative Jamison Greer, thank you so much for
Speaker 1: being with it. Stephanie Rothawolf research still here and I'm
Speaker 1: looking right now at some of the internals of this data,
Speaker 1: and it includes average hourly earnings that ticked up to
Speaker 1: three point nine percent from the previous three point seven percent.
Speaker 1: You can see right now across the board there are
Speaker 1: still signs that things are solid, you know, even the
Speaker 1: unemployment rate. Yes, it ticked up, but not to the
Speaker 1: significant degree that some people were worried about. What is
Speaker 1: the inflationary risk here longer term at a time when
Speaker 1: the Fed is being prompted to cut from a number
Speaker 1: of different reasons, and there still are these tariffs in
Speaker 1: the system.
Speaker 4: Yeah, this is a challenge.
Speaker 8: The data that we're seeing is largely appears to be
Speaker 8: rifferent by immigrat and that actually tightens the labor market
Speaker 8: for blue collar workers.
Speaker 1: So what we might.
Speaker 8: See is a labor market, which is something that was
Speaker 8: kind of known heading into this event, but it's now
Speaker 8: the reality. It's kind of painful because what we're seeing
Speaker 8: is job gains that have slowed down tremendously. It results
Speaker 8: in upward pressure on wages and then upward pressure from tariff.
Speaker 8: So it's like a stagflationary type of thoughts shop, which
Speaker 8: we're starting to see play out in the data. It's
Speaker 8: just a really complicated mix for the FED to kind
Speaker 8: of deal with from here. So it looks like the
Speaker 8: labor market is okay, it's not as weak as these
Speaker 8: numbers today suggest. This is largely different by immigration in
Speaker 8: an economy that's hanging in there.
Speaker 1: Mike, to that point, maybe the economy is hanging in there,
Speaker 1: but on the margins, this is by government bonds sell
Speaker 1: corporate bonds.
Speaker 9: You know, corporate bond spreads, as you know, as we've
Speaker 9: all been talking about, are really tight. I mean, you're
Speaker 9: not getting a lot of extra yield to buy corporates
Speaker 9: and high yield bonds, and obviously you're seeing a little
Speaker 9: bit of a knee jerk reaction negative action in the
Speaker 9: stock market as well, and this, you know, this whole
Speaker 9: tariff theme is definitely one of of not only inflationary,
Speaker 9: you know, is you know we just talked about the
Speaker 9: stagflationary risk is real, but it can certainly result in
Speaker 9: margin pressures for companies and I think that is still
Speaker 9: to come, and I think we are starting to see
Speaker 9: some early evidence of that. And obviously that could put
Speaker 9: some pressure on corporate earnings, that could put some pressure
Speaker 9: on credit quality and and on corporate spread. So yeah,
Speaker 9: I think higher quality bonds and adding duration are the
Speaker 9: two themes we've we've been sticking here. The big question
Speaker 9: for the FED, right, and Stephan you kind of talked
Speaker 9: about this. I let's say growth is zero and the
Speaker 9: unemployment rate is you know, four and a half or five,
Speaker 9: but inflation is at three. You know, what does the
Speaker 9: FED do in that world? Right, that that kind of
Speaker 9: stagflationary world. And and my gut is, you know, the
Speaker 9: FED and even Powell, who is is a labor market dove,
Speaker 9: would err on the side of saving the economy, saving jobs,
Speaker 9: saving the labor market and write off this inflationary risk
Speaker 9: as being a one off. So I think that's the
Speaker 9: kind of the risks the way they're skewed.
Speaker 1: My colin Symphijian fixed Income, thank you so much for
Speaker 1: your time. And before we got this number, we saw
Speaker 1: a forty percent chance of a rate cutpying bike bakes
Speaker 1: into the market if for the month of September, And
Speaker 1: right now we have a seventy one percent chance of
Speaker 1: a rate of a rate cut in September. Joining us
Speaker 1: now is Jeff Rosenberg of a Black Rock we heard
Speaker 1: there from Mike Collins by Bonds. Is that your takeaway?
Speaker 10: Well, certainly the market takeaway because the market's repricing September
Speaker 10: and it makes a lot of sense, and you guys
Speaker 10: hit on it, and I think it is the takeaway
Speaker 10: from today's report, which is it's the revision's story.
Speaker 6: Remember there's been this undercurrent.
Speaker 10: Of a debate about whether non farm payrolls in the
Speaker 10: labor market report is really mismeasuring the deterioration, and you
Speaker 10: see that in these first prints versus the revisions.
Speaker 6: Wallers talked about it.
Speaker 10: It's a little bit of vindication here, and that's basically
Speaker 10: saying his argument may hold sway or convince more people
Speaker 10: to come on his side of the argument. And you know,
Speaker 10: maybe they missed the opportunity in July, but it certainly
Speaker 10: raises the odds that you get it in September. And
Speaker 10: that's why you're seeing the big move. As you pointed
Speaker 10: out in the front end.
Speaker 6: Of the curve.
Speaker 1: Well, the President agrees with you.
Speaker 5: He took to true socials had strong descents on the
Speaker 5: FED board and will only get stronger given the revisions.
Speaker 5: The downside revisions, Is this now a trend of this
Speaker 5: fragility we're seeing in the labor market.
Speaker 10: Well, it was one of the numbers that Mike highlight
Speaker 10: it at the beginning. You know, when you take the
Speaker 10: revisions into account, you know, the three month average change
Speaker 10: in non for barrows drops from one hundred and fifty
Speaker 10: thousand average. There's just really a very you know, pretty
Speaker 10: strong labor market to thirty five thousand, which is which
Speaker 10: is you know, a dramatic shift. Now, as Mike just mentioned,
Speaker 10: you know, maybe we need to reset what we think
Speaker 10: is break even. But with the revisions, it's a dramatically
Speaker 10: different picture to what the labor market is saying. And
Speaker 10: as also Mike was talking about, you know, you have
Speaker 10: a pretty strong year over year average hourly earnings figure,
Speaker 10: wage inflation. You know, the market is not caring about
Speaker 10: that because I agree with Mike. I think in the
Speaker 10: debate between the dual mandate of inflation versus full employment,
Speaker 10: they're going to air on the side of full employment.
Speaker 10: And that's why, again, I think you're seeing this big
Speaker 10: move in the front end of the curve despite you
Speaker 10: know what we're not really talking a lot about, which
Speaker 10: is the wage number.
Speaker 7: Jeff, I just wanted to jump in because we had
Speaker 7: heard from Powell this week who de emphasized the nonfarm
Speaker 7: payroll numbers themselves and said pay attention to the unemployment rate,
Speaker 7: and we were just talking with Stephanie about this idea
Speaker 7: of it being impacted more by labor supply and things
Speaker 7: like imm So given that, couldn't you say maybe for
Speaker 7: this bond market, I shouldn't get over my skis in
Speaker 7: joining this rally because we did have things like PCE
Speaker 7: yesterday which showed a stubborn rate of inflation.
Speaker 10: Yeah, it's a really good point, and he did focus
Speaker 10: on that, and the unemployment rate, you know, ticked up
Speaker 10: one tenth and that was kind of aligned with expectations.
Speaker 10: But he also said in that press conference that the
Speaker 10: slowing in the labor markets even if it's both demand
Speaker 10: and supply with the equilibrium raises the risk that the
Speaker 10: downside risk would be to labor markets.
Speaker 6: It was a little bit of a tell on.
Speaker 10: Yes, we're in equilibrium now because you're getting both the
Speaker 10: supply and the demand side falling. But the risk is
Speaker 10: that the supply side sort of stops falling and the
Speaker 10: demand side continues. And I think that's kind of what
Speaker 10: the market is looking through here, particularly around this trend
Speaker 10: with the revisions, you know, more accelerated than say what
Speaker 10: we've seen in terms of labor force participation which you
Speaker 10: mentioned a minute ago, which actually tacked down here again
Speaker 10: a tenth. But maybe you start to see that stabilize
Speaker 10: while the demand side doesn't stabilize.
Speaker 6: And that's the risk that the market's pricing in right now.
Speaker 4: Jeff.
Speaker 7: Not all markets are pricing in things equally. I just
Speaker 7: pulled up what the future session is doing. You actually,
Speaker 7: just looking at the line chart would not even have
Speaker 7: any idea that we had any big economic piece of
Speaker 7: data come out s and P five hundred futures are
Speaker 7: basically at the level they were before. Is this a
Speaker 7: market that's not paying attention to the jobs numbers or
Speaker 7: it's just not bad enough for them to react, or
Speaker 7: maybe it's smooth sailing because it means that we could
Speaker 7: get cuts. What do you make of how risk is not.
Speaker 10: Reacting well, you know, and I looked at some of
Speaker 10: the futures and they looked like they were reacting and down.
Speaker 10: I think when you look cross market, you know, we
Speaker 10: talked a little better about this earlier this week. You've
Speaker 10: got to be a little bit careful about reading into
Speaker 10: the equity market. You know, this is very much sort
Speaker 10: of a macro conversation fed policy macroeconomic performance. The stock
Speaker 10: market is not the economy, and the stock market is
Speaker 10: not even the S and P five hundred. It's really
Speaker 10: the S and P seven or six, and then you've
Speaker 10: got the.
Speaker 6: Four ninety three. There's tremendous differential.
Speaker 10: Look at sort of small cap performance versus you know,
Speaker 10: S and P five hundred performance, which is again it's
Speaker 10: sort of more dominated.
Speaker 6: By the tech story.
Speaker 10: So those stories and we're in the middle of earning season,
Speaker 10: you know, they can be much more dominant and reflective
Speaker 10: of those issues than they are what we're talking about
Speaker 10: here in the macro data.
Speaker 6: I think when you look at the.
Speaker 10: Two year that's mapping to FED expectations, and that's a
Speaker 10: pretty good message.
Speaker 6: I think when you start looking across.
Speaker 10: Into the equity market, you've got to be a little
Speaker 10: bit more aware that you know there's other factors going
Speaker 10: on in this environment of very concentrated equity valuation within
Speaker 10: the indices that can kind of lead to a misread
Speaker 10: across from the macro data.
Speaker 1: Jeff Rosenberg of Blackrock, thank you so much for being
Speaker 1: with us. And as Jeff was talking about the chances
Speaker 1: of a September a FED rate cut, we're increasing it
Speaker 1: again to seventy six percent now from forty percent. Stephanie
Speaker 1: Rotha full Research here with us for a final thought.
Speaker 1: You've been parsing through all of this. Notably, the three
Speaker 1: month average of the net change in jobs has fallen
Speaker 1: to its lowest level going back to July of twenty
Speaker 1: twenty or June of twenty twenty. What's your takeaway.
Speaker 8: I think the labor market has softened. Part of it
Speaker 8: is a big part of it has to do with immigration.
Speaker 8: Another big part of it has to do with government.
Speaker 8: About half of the revisions are driven by the government sector.
Speaker 8: So we're looking at an economy that's holding up, labor
Speaker 8: market has cooled down, and inflation is going to be
Speaker 8: heating up. This is a really challenging backdrop for August
Speaker 8: for risk markets.
Speaker 6: And Marie.
Speaker 1: The President's responding, he's coming out on truth social.
Speaker 5: Yeah, he's not exactly saying what's happening in the jobs market,
Speaker 5: but he's signaling. This is the reason why he thinks
Speaker 5: the Fed is quote his words too little, too late.
Speaker 6: Powell is a disaster. Dropped the rate.
Speaker 1: I Meanwhile, the SMP not even responding. It's all about
Speaker 1: big tech.
Speaker 6: No, not responding at all.
Speaker 7: Again, you would have no idea that this piece of
Speaker 7: data came out. It is the bond market that is responding,
Speaker 7: sending us to a more than seventy percent odds that
Speaker 7: we will get that rate cut next decision.
Speaker 1: Stephanie Roth of Wolf Research, thank you so much. Apple
Speaker 1: reporting is best quarter in over three years. Is iPhone
Speaker 1: demand picked up worldwide, including in China. Amazon shares and
Speaker 1: meanwhile falling after reporting the tech client underwhelming cloud growth.
Speaker 1: Joining us now is Tom Forte of the Maxim Group. Tom,
Speaker 1: how bad really was Amazon versus just not absolutely moonshot
Speaker 1: blowing out expectations like some of the other tech giants.
Speaker 11: Yeah, I definitely think that Amazon was a victim of expectations.
Speaker 11: Had the company reports before Microsoft instead of after, we
Speaker 11: might be talking differently without downplaying investor concerns about the
Speaker 11: competitive landscape in cloud computing and artificial intelligence. But I
Speaker 11: do see the market's reaction to Amazon as more reflection
Speaker 11: of high expectations than poor performance. Sales and profits were
Speaker 11: better for the quarter, and if you look at the
Speaker 11: ranges for the outlook for next quarter, they were better
Speaker 11: as well.
Speaker 1: So tob Before we get to Apple, there is this
Speaker 1: issue of what the constraint is for Amazon's AWS, their
Speaker 1: cloud computing unit, which has really been their main profitability driver.
Speaker 1: Is it just capacity? Is it that they can't build
Speaker 1: out quickly enough to meet demand, or is it that
Speaker 1: they're losing share that they don't have the same kind
Speaker 1: of AI advancement that's say the Googles and the Microsoft have.
Speaker 11: Yeah, so I would argue that it's more about capacity.
Speaker 11: So Microsoft is working closely with OpenAI, Amazon's working closely
Speaker 11: with anthropic. Amazon is the market leader as far as
Speaker 11: market share. Google to their credit and Microsoft, to its credit,
Speaker 11: are growing at faster rates off smaller bases, but I
Speaker 11: would argue that of those choices, it's more about capacity
Speaker 11: than necessary market share.
Speaker 7: Tom, how do you understand whether we reward these companies
Speaker 7: or punish them for the capital expenditures that they're doing.
Speaker 7: Is there a hint of that in Amazon, that they're
Speaker 7: spending too much to justify what isn't as strong growth
Speaker 7: as the other mag seven in big hyperscalers.
Speaker 6: Yes.
Speaker 11: So I think the beauty of Andy Jassey as CEO
Speaker 11: versus Jeff Bezos is Andy's fond a way for the
Speaker 11: company to continue to generate strong profits and free cash
Speaker 11: flow and invest So I think that if we were
Speaker 11: talking about a Jeff Bezos led Amazon, there would be
Speaker 11: kind of ebbs and flows of investment spending. Andy has
Speaker 11: figured out a way to unlock sustain profitability even with
Speaker 11: heightened investment. And I think Amazon, both under Bezos and
Speaker 11: under Jasse has investors trust that the investments will ultimately
Speaker 11: pay off, including for our official intelligence.
Speaker 7: And then there was Apple, Tom, And one of the
Speaker 7: more interesting things that Tim Cook said on the call
Speaker 7: was that he thinks only one percentage point of the
Speaker 7: ten percentage growth in revenue was due to a pull
Speaker 7: forward effect. Tom, is that even measurable. How much faith
Speaker 7: do you put in that number?
Speaker 6: Yeah.
Speaker 11: So they looked at their sales trends in April as
Speaker 11: it pertained to iPhones and max and discerned that consumers,
Speaker 11: hearing all the chatter on tariffs, bought ahead of concerns
Speaker 11: that tariffs would raised the prices of those products, and
Speaker 11: as you pointed out, it contributed to about one hundred
Speaker 11: basis points of growth on a ten percentage point growth.
Speaker 11: So I think that.
Speaker 6: Pull forward was a factor.
Speaker 11: The concerning thing to me in Apple's results is that
Speaker 11: they're acknowledging that they're behind on artificial intelligence. The good
Speaker 11: news is they're taking action. They're raising their capex, which
Speaker 11: is much more modest versus Amazon, and they even hinted
Speaker 11: at strategic M and A, which I thought highly unusual
Speaker 11: for Apple.
Speaker 5: Is it a little too late though, when it comes
Speaker 5: to what Apple's doing in terms of AI, given the
Speaker 5: fact that we see Meta basically go in take their
Speaker 5: top talent and leave Apple still struggling.
Speaker 11: Yeah, I think I don't know that I would say
Speaker 11: it's too late.
Speaker 6: It's definitely late.
Speaker 11: So the good news is now we know that we
Speaker 11: should expect an elevated Sirian next year enhanced by artificial intelligence.
Speaker 11: That was a question mark even into the Developers conference. Recently,
Speaker 11: I think Apple has shown a consistent ability to play
Speaker 11: catch up. They're not always first, but their best. Maybe
Speaker 11: they won't be the best in AI, but certainly they
Speaker 11: can be better than what they are today.
Speaker 5: Does this show you the fact that Apple is saying
Speaker 5: that potentially is going to have to look elsewhere for AI,
Speaker 5: that they're just changing their strategy for a company that
Speaker 5: we know loves to build in house.
Speaker 11: I think they're saying that everything's on the table. So
Speaker 11: I don't think they're saying, hey, we're going to lean
Speaker 11: into strategic m and A unlike we've done in the past.
Speaker 11: I think that they're going to pull every lever they
Speaker 11: can to materially enhance the artificial intelligence experience on their products.
Speaker 11: That's how I view that statement, Tom forty.
Speaker 1: This past week has been about American exceptionalism driven by
Speaker 1: big tech, and we've certainly seen some blockbuster results. We're
Speaker 1: quibbling with the details about Amazon, but still a pretty
Speaker 1: solid set of numbers. And I just wonder when you
Speaker 1: have the likes of Michael hartnant Over at Bank of
Speaker 1: America talking about a bubble in tech stocks and evaluation
Speaker 1: that just seems to have gotten over the skis even
Speaker 1: of all of the optimism that you saw in the earnings.
Speaker 1: What's your response.
Speaker 11: Yeah, So if you looked at the peer set for Apple,
Speaker 11: the PE went to about thirty five times from closer
Speaker 11: to twenty eight times between last quarter and this quarter.
Speaker 11: So I think there's a lot of high expectations in
Speaker 11: big tech that they're going to lay in the plane
Speaker 11: or however you want to think about it when it
Speaker 11: comes to both tariffs, AI investment and getting a return
Speaker 11: on the AI investment. So, as a long time followed
Speaker 11: the industry, going back to ninety six, having survived the
Speaker 11: dot com bubble, I do think that there's a lot
Speaker 11: of high expectations. It's reflected in the big PE multiples
Speaker 11: you're seeing in big tech.
Speaker 1: Tom Forte of Maxim Group, thank you so much for that.
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