Speaker 1: Bloomberg, Audio Studios, podcasts, radio news.
Speaker 2: Another week, another AI induced panic in the markets.
Speaker 3: An AI scare trade right now. We saw that sell
Speaker 3: off over in the US, another AI scare grips of
Speaker 3: the market.
Speaker 2: And market is just taking a look around at any
Speaker 2: possible sector that could be disrupted by AI, selling first.
Speaker 4: Asking questions later.
Speaker 2: Part of the reason for this week's sell off was
Speaker 2: a thought experiment posted by a research group called Satrini
Speaker 2: playing out some of the ways artificial intelligence could disrupt
Speaker 2: the economy by twenty twenty.
Speaker 1: Eight, Zaitrini Research publishing a hypothetical scenario where the agentic
Speaker 1: AI commerce routing of retail payments up ends apparently the
Speaker 1: E merchant subsidy businesses of names like American Express, Syncrity,
Speaker 1: and Capital One, those names plunging.
Speaker 2: The hypothetical scenario played into fears that have been rippling
Speaker 2: through the market for a while, fears that AI could
Speaker 2: make entire lines of Business Week with consequences for consumer spending,
Speaker 2: real estate, and financial markets. One of the AI tools
Speaker 2: getting attention right now is in thropics Claude Chatbop, which
Speaker 2: promises to write code that businesses have traditionally paid programmers
Speaker 2: or other companies to make Claude has even caught the
Speaker 2: eye of the Pentagon, which is pressing Anthropic to give
Speaker 2: it full access to the technology. On Tuesday, the company
Speaker 2: released new features that had investors fearing further disruption.
Speaker 3: That and thropping out with an update on Claude that
Speaker 3: talked about modernizing the Cobol programming language of dated programming
Speaker 3: language that IBM uses, and that set the IBM share
Speaker 3: price down by thirteen percent. And so it sorts of
Speaker 3: questions about where you could hide, if anywhere.
Speaker 2: And there's a second concern in the market that some
Speaker 2: of the biggest tech companies that place some of the
Speaker 2: biggest bets on AI may not have enough to show
Speaker 2: for it.
Speaker 4: Most notably, you've seen all of the major hyperscalers. So
Speaker 4: the companies that are really spending aggressively on AI, this
Speaker 4: is your Microsoft, Meta Alphabet, Amazon. The market has become
Speaker 4: a lot more impatient looking at this spending, wondering when
Speaker 4: are we going to start seeing this money paying off.
Speaker 2: Ryan Vlastilica covers tech stocks for Bloomberg, and he says
Speaker 2: that as the AI scare trade grips the market, there's
Speaker 2: one company that's been remarkably insulated.
Speaker 4: Now Apple manages to be nowhere near either of these
Speaker 4: central narratives right now. If you look at the two
Speaker 4: major themes in the technology sector, it is concerns about
Speaker 4: AI capex, which Apple isn't doing, and it's concerns about
Speaker 4: AI related disruption, And it doesn't really seem like Apple
Speaker 4: is really in the path of AI disruption in the
Speaker 4: same way that you would say software companies are, or
Speaker 4: just growing list of companies and sectors are as.
Speaker 2: Most of the NASDAC has trended down in recent weeks,
Speaker 2: Apple stock has often moved in the opposite direction.
Speaker 4: The overall moves of the major ends aren't dictating the
Speaker 4: way Apple moves. This has really been visible in days
Speaker 4: when there's been a lot of AI related against in
Speaker 4: the market. Things are down pretty broadly except for Apple,
Speaker 4: which is up pretty solidly. So we've been describing this
Speaker 4: as Apple decoupling itself from the broader market.
Speaker 2: That's something Ryan says hasn't happened to this degree since
Speaker 2: the days of the iPod.
Speaker 4: This level of decoupling, we're at a nearly two decade long.
Speaker 2: So far, AI jitters don't seem to be hitting Apple
Speaker 2: as hard as its competitors, and Bloomberg's Apple reporter Mark
Speaker 2: German says that's a mixed blessing.
Speaker 5: If you asked Apple six months ago, would you like
Speaker 5: to be an AI company at the forefront or not,
Speaker 5: they would say yes. But they're extremely behind, not on
Speaker 5: purpose but by accident.
Speaker 2: I'm Sarah Holder, and this is the big take from
Speaker 2: Bloomberg News today on the show Apple and the AI
Speaker 2: scare trade. Is Apple a safe haven for investors freaking
Speaker 2: out over AI? And is that a good thing for
Speaker 2: the company long term? Bloomberg's Ryan Vlastilica says that Apple's
Speaker 2: decoupling from the Nasdaq is notable because, if anything, Apple
Speaker 2: has been a longtime market bellweather.
Speaker 4: I think in a normal kind of environment, when you
Speaker 4: don't have this sort of AI wildcard, it's pretty common
Speaker 4: to see Apple moving somewhat more or less in line
Speaker 4: with the overall market because it has sort of traditional
Speaker 4: drivers like consumer spinning, consumers sentiment, overall growth rates. How
Speaker 4: what is GDP doing right now? All those other factors now,
Speaker 4: Applestock has been a pretty strong performer. That's why it's
Speaker 4: one of the biggest companies in the world.
Speaker 2: To understand just how far Apple has diverged from its
Speaker 2: peers in the Nasdaq. Ryan looks at correlation.
Speaker 4: Basically, you measured on a range of positive one to
Speaker 4: negative one. So positive one would be complete correlation, two
Speaker 4: different securities moving in complete synchronicity with each other, and
Speaker 4: of course negative one would be complete inverse correlation. Say
Speaker 4: oil prices in airline stocks, so if oil prices are
Speaker 4: going up, airline stocks are probably going down, so that
Speaker 4: would be inverse correlation.
Speaker 2: And he applied that analysis to Apple.
Speaker 4: So we charted out correlation between Apple and the NASTAQ
Speaker 4: one hundred, which is primarily composed of these big tech companies.
Speaker 4: If you want to put a number on it, it
Speaker 4: fell to a correlation of think point two one.
Speaker 2: That's a forty day average, and that zero point two
Speaker 2: one from earlier in February was the lowest level since
Speaker 2: two thousand and six. Ryan says it's bounced up a
Speaker 2: little since then.
Speaker 4: Apple is basically no correlation at all, which means it's
Speaker 4: not really moving on the major themes that are driving
Speaker 4: the overall index, the.
Speaker 2: Big themes like the AI hype cycles and selloffs. Over
Speaker 2: the past month, at least, Apple hasn't really been getting
Speaker 2: caught up in the drama. While the mag seven is
Speaker 2: down about four and a half percent so far in February,
Speaker 2: Apple is up. That's after underperforming the MAG seven in
Speaker 2: the longer term. Ryan says, there's a number of reasons
Speaker 2: for this.
Speaker 4: It's not a major spinder, and it doesn't seem like
Speaker 4: it's really at risk of AI disruption in the way
Speaker 4: that some of these other stocks are.
Speaker 2: But that doesn't mean investors see a bet on Apple
Speaker 2: as a bet against AI.
Speaker 4: The fact that you can get all of these AI
Speaker 4: services on the iPhone, the fact that people will be
Speaker 4: accessing AI through the iPhone or other Apple products means
Speaker 4: that if you are still optimistic about the potential of AI,
Speaker 4: Apple isn't a terrible way to play that thesis, because
Speaker 4: it is something that could see as AI proliferates increased
Speaker 4: growth or adoption. People aren't going to start abandoning their
Speaker 4: phones on account of this issue. As somebody told me,
Speaker 4: no one is out there vibe coding of a new iPhone
Speaker 4: for themselves.
Speaker 2: So it's clear that investors are treating Apple as a
Speaker 2: bit of an outlier right now, But it's not as
Speaker 2: simple as Apple going up. While others are going down.
Speaker 2: Apple shares have had their own ups and downs even
Speaker 2: over the past two weeks. They're just out of sync
Speaker 2: in this way that you're describing. Can this be explained
Speaker 2: by investors seeing Apple as this kind of hedge against
Speaker 2: AI bets or are they also responding to other kinds
Speaker 2: of news coming out of the company.
Speaker 4: I do think a lot of it is Apple's sort
Speaker 4: of insulation from some of these a cross currents.
Speaker 5: Now.
Speaker 4: I was speaking to someone who basically said, the fact
Speaker 4: that correlation is so low with the broader market does
Speaker 4: kind of increase its value as sort of diversification within
Speaker 4: the overall market, especially since you do have this sort
Speaker 4: of AI upside optionality from the fact that if AI
Speaker 4: really proliferates and everyone is using it, maybe that needs
Speaker 4: more demand for the next generation of iPhone or other
Speaker 4: Apple products like that, so you can use these things
Speaker 4: on the most advanced hardware that you can get.
Speaker 2: Yes, and we'll talk to Mark about some of the
Speaker 2: ways that Apple is investing in AI moving forward and
Speaker 2: how it's AI bets have gone so far. But I'm
Speaker 2: wondering why this decoupling matters right now. What does it
Speaker 2: reveal about how investors are viewing the AI race more
Speaker 2: broadly because these two fears that you laid out, that
Speaker 2: companies are spending too much on AI or that AI
Speaker 2: is going to disrupt all these software companies, they feel
Speaker 2: a little bit in intention.
Speaker 4: Yes, I think you're right about that. I think there
Speaker 4: is a lot of concern right now about when are
Speaker 4: we going to see this payoff? And at the same time,
Speaker 4: is this going to destroy everything? So those two narrios
Speaker 4: have been very much president in the market, and you're
Speaker 4: right that there might be some tension. But I think
Speaker 4: people if you're looking around and you're trying to find
Speaker 4: something that feels like a safe bet right now, Apple
Speaker 4: is sort of a kind of obvious place, especially within
Speaker 4: big tech, to look for something like that.
Speaker 2: Coming up. Bloomberg's Mark German on how a series of
Speaker 2: missteps and missed opportunities put Apple in this position in
Speaker 2: the first place, and what the company is doing to
Speaker 2: catch up on AI. This Winter Olympics, there was a
Speaker 2: video going around from the two thousand and two Winter
Speaker 2: Games in Salt Lake City. It was that year's thousand
Speaker 2: meters short track speed skating final, and it's relevant to
Speaker 2: today's AI race.
Speaker 4: I promise this is a nine lap race and now
Speaker 4: it's only one man across the line for gold, it'll
Speaker 4: be over.
Speaker 2: In ninety six, five skaters were competed, including Apollo Ono,
Speaker 2: the American speed skating icon. By the final lap, Ono
Speaker 2: is at the head of a tight pass and an
Speaker 2: Australian skater, Stephen Bradbury, is dead last. But then something
Speaker 2: remarkable happens and the other three leading skaters topple onto
Speaker 2: the ice.
Speaker 4: Say brad your class the line.
Speaker 2: And Bradbury glides past them for the gold, Australia's first
Speaker 2: in the Winter Games. To this day, when somebody wins
Speaker 2: because the rest of the field has flamed out, Australians
Speaker 2: call it doing a Bradbury. I wanted to bring Bloomberg's
Speaker 2: chief Apple correspondent, Mark German into the conversation and ask him,
Speaker 2: with Apple getting investor love for effectively being behind in AI,
Speaker 2: is the company doing a Bradbury?
Speaker 5: Well, if they're doing a Bradberry, I think they fell
Speaker 5: backwards into it, because the plan certainly wasn't for them
Speaker 5: to do a Bradbury. The reality is is that Apple
Speaker 5: was caught flat footed, and so yes, they're getting the
Speaker 5: benefit on the stock right now because of that. But
Speaker 5: that's not a good thing for the long term business
Speaker 5: being so behind in a core technology, and we're talking
Speaker 5: about the core technology of all core technologies here.
Speaker 2: So right Apple has trailed its magnificent seven peers pretty significantly,
Speaker 2: at least when it comes to spending on AI, even
Speaker 2: though the company famously is sitting on a lot of cash.
Speaker 2: So when you think about Apple's position right now, how
Speaker 2: much of the you know, separation from the pack is
Speaker 2: due to a strategy or is it a result of
Speaker 2: a failed strategy?
Speaker 5: Oh, I absolutely think it's the result of failed strategy.
Speaker 5: And then they've seen how these other companies are having
Speaker 5: their own financial issues and their own problems, and they said,
Speaker 5: you know, maybe it's kind of a good thing that
Speaker 5: we failed, So maybe let's turn the failed strategy into
Speaker 5: our strategy. Is that what's happening I think to some extent.
Speaker 2: Yeah, is that what you're hearing from people at Apple
Speaker 2: that they want to lean into this now?
Speaker 5: Well, no, I haven't heard specifically they want to lead
Speaker 5: into it, but they're you know, very careful when it
Speaker 5: comes to investing. They've had opportunities to buy you know,
Speaker 5: major AI companies like Mistral out of France and Perplexity,
Speaker 5: that search engine AI app, and they've chosen not to
Speaker 5: make those major investments. They're partnering with Google to help
Speaker 5: them build their own new Apple Foundation model using Gemini.
Speaker 5: So they're going at it very slow after trying to
Speaker 5: race into it and it blowing up in their faces.
Speaker 5: I mean, Apple Intelligence lags behind the competition significantly. They've
Speaker 5: been trying to release this new version of Siri now
Speaker 5: for two years that uses AI to let you tap
Speaker 5: into your personal data and on screen content and control
Speaker 5: applications in a more precise way. It's going to take
Speaker 5: them another you know, three to six months, maybe even
Speaker 5: longer to get those features out. They're not going to
Speaker 5: launch their first chatbot into the tail end of this year,
Speaker 5: so they're definitely behind by any metric, and trust me,
Speaker 5: it wasn't supposed to be this way.
Speaker 2: In some ways, Apple is being rewarded by investors for that.
Speaker 2: Can you talk more about how you're viewing this decoupling dynamic.
Speaker 5: I think investors have realized that Apple is failing in AI,
Speaker 5: and they're seeing Apple as a company that's very focused
Speaker 5: on the hardware, and if you look at you know
Speaker 5: investments and portfolio diversification. You know, Apple really is not
Speaker 5: an AI company. It's a hardware company, whereas all these
Speaker 5: other companies have become AI companies. And it's not the
Speaker 5: way it was supposed to be. Apple was supposed to
Speaker 5: become an AI company by now, but it's diversified because
Speaker 5: it's simply not.
Speaker 2: How does the company think about its place in the
Speaker 2: AI race.
Speaker 5: It depends who you're asking, It depends when you're asking them.
Speaker 5: If you ask them in an official setting, they'll probably
Speaker 5: tell you that they think they're doing a great job
Speaker 5: in AI. The reality is is that they're trailing all
Speaker 5: their competitors in AI. Their lms are subpar, their models
Speaker 5: for all intentsive purposes or subpar. Their integration of AI
Speaker 5: across the software stack is subpar. They're only really getting
Speaker 5: religion now on using AI to run the company, so
Speaker 5: they are very much far behind.
Speaker 2: Apple has declined to comment on Bloomberg's reporting about these
Speaker 2: AI efforts.
Speaker 5: Will they turn things around, Absolutely, But will they be
Speaker 5: pushed to the forefront. No. But I think with the
Speaker 5: right combination of models and the combination of their hardware,
Speaker 5: I think from an AI hardware perspective, they could definitely
Speaker 5: be a leader.
Speaker 2: Well, Apple does have several AI hardware products on their way.
Speaker 2: Tell me a little bit more about those.
Speaker 5: So they're working on three main ones. One is a
Speaker 5: version of air pods with cameras, One is smart classes
Speaker 5: with cameras, and one is a necklace slash pendant that
Speaker 5: you can wear on your shirt or run your neck
Speaker 5: with cameras. And the idea is to use visual intelligence
Speaker 5: the environment around you to feed data into sery for
Speaker 5: it to help you take action. One classic example is
Speaker 5: you know, right now, if you're wearing air pods or
Speaker 5: using an Apple device while on a walk and you
Speaker 5: have turned by turn directions on in maps, it'll tell
Speaker 5: you, you know, make a turn four hundred and fifty feet
Speaker 5: or in one mile or whatever. Now it could tell
Speaker 5: you make a right turn past the gray three story
Speaker 5: building because it can see what's around you, not only
Speaker 5: no distances.
Speaker 2: So it's not investing in chapbots to the same scale
Speaker 2: as some of its competitors, but it is investing in
Speaker 2: these hardware products. Can you talk about how that's a
Speaker 2: different strategy than some of the other mag seven companies
Speaker 2: and why you think it's developed that way, Well, they.
Speaker 5: Are building a chatbot. They are going to revamp theory
Speaker 5: around this chatbot type of interface later this year and
Speaker 5: deeply integrate these Gemini models across iOS, IPOs and macOS
Speaker 5: with the next major versions that are going to be
Speaker 5: introduced in June and released in September.
Speaker 2: But they're late on that front.
Speaker 5: Yeah, they're you know, pretty late. And then in terms
Speaker 5: of hardware, you know, Apple makes eighty percent of the
Speaker 5: revenue from products. They're a hardware business. They have not
Speaker 5: really shown a way that they're going to be able
Speaker 5: to monetize AI in the near future from a software
Speaker 5: stack standpoint, and so the only way they're going to
Speaker 5: be able to monetize AI to any considerable degree for
Speaker 5: the underlying business is going to be through hardware. So
Speaker 5: from that standpoint, AI hardware is the game in town
Speaker 5: for Apple to augment iPhone revenue.
Speaker 2: So if investors get past their ditters about AI and
Speaker 2: they decide in whatever way that the technology will be
Speaker 2: transformative will support high company valuations and massive spending, what
Speaker 2: does it mean for Apple from.
Speaker 5: An investment standpoint? I just don't see how Apple being
Speaker 5: so behind and not showing any engineer in terms of
Speaker 5: AI makes them an interesting company to invest in right
Speaker 5: They're an interesting company to invest in because everyone knows
Speaker 5: they're going to come out with great hardware. Everyone knows
Speaker 5: that they're forecasting solid results for the current quarter. Everyone
Speaker 5: knows they're going to continue making a ton of money
Speaker 5: on the devices. But in terms of future upside, it's
Speaker 5: just not exciting to investors right now in my view.
Speaker 2: This is the Big Take from Bloomberg News. I'm Sarah Holder.
Speaker 2: To get more from The Big Take and unlimited access
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Speaker 2: Thanks for listening. We'll be back tomorrow