Speaker 1: Welcome to the Bloomberg Markets Podcast. I'm Paul Sweeney, alongside
Speaker 1: my co host Matt Miller.
Speaker 2: Every business day, we bring you interviews from CEOs, market pros,
Speaker 2: and Bloomberg experts, along with essential market moving news.
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Speaker 1: Let's talk about WTI Crudo. Matt just called it at
Speaker 1: where Dan We hit eighty dollars a barrel yesterday on
Speaker 1: WTA Crude. I don't know where this is coming, so
Speaker 1: let's bring in some people.
Speaker 2: And it was fast, right. We went from seventy eighty
Speaker 2: very quickly.
Speaker 1: Exactly. We're blow sixty eight dollars in late June for
Speaker 1: w TA crude. Now here we are at eighty. Go
Speaker 1: figure Mike McLoone, though he knows what's going on. So
Speaker 1: does Fernando Valley. They are both analys covering the energy
Speaker 1: space for Bloomberg Intelligence. Hey, Mike, let's start with you. You're
Speaker 1: done in Bambi, Miami, Florida. How is it now, tough guy?
Speaker 3: It's actually cooler here than you are there. You're high
Speaker 3: yesterday ninety in the low eighties, so you got it
Speaker 3: comes out the cool op.
Speaker 1: All right, buddy. How did we get here with wtacrude
Speaker 1: oil at eighty bucks a barrel?
Speaker 2: We were at seventy at the beginning of July, so
Speaker 2: within a month we're up ten bucks.
Speaker 3: So let's look at it in the year. It's unchanged
Speaker 3: basically still actually down in the year, so it's basically
Speaker 3: bouncing from getting two over sold. But look at the
Speaker 3: macro big picture. What we did last year was one
Speaker 3: of the biggest pumps on a two year basis ever
Speaker 3: and it's in the back end of that. And the
Speaker 3: history of these things are very bad for crude oil,
Speaker 3: particularly if you have the federal reserve still tightening and
Speaker 3: disappointing data out of China. Those are current trends. So
Speaker 3: I'm still very veriss crude oil. I see it at
Speaker 3: the upper end of the range. I still think it's
Speaker 3: more likely head towards forty and right now. One key
Speaker 3: thing that's really mattering for everything and muchly all risk asses,
Speaker 3: most notably copper and crude oils. The US stock market
Speaker 3: basically has to keep going just for these markets to
Speaker 3: stay stable. So that's the problem. If stock market actually
Speaker 3: drops a little bit. These assets are probably going to
Speaker 3: continue reverting last year's pumps.
Speaker 2: So that's the trader perspective, Fernando, What do we know
Speaker 2: about and demand here?
Speaker 4: Well, on the demand side, of course, Northern Hemisphere summer,
Speaker 4: Paul's driving more to the shore. Yep, they're driving a
Speaker 4: little bit more consumption, but it's been slightly underwhelming on
Speaker 4: the last few numbers of the EIA. In July, of
Speaker 4: course you had the start of the Saudi Arabia the
Speaker 4: additional cuts that they promised in the last so Pack
Speaker 4: plus meeting, so that's probably sapping a little bit on
Speaker 4: the supply side. But when we look at the inventory figures,
Speaker 4: it hasn't changed drastically. It's really been this whole all right.
Speaker 4: We're coming to a soft landing in the economy, which
Speaker 4: Mike is just showing that the current data is not
Speaker 4: really pointing towards that direction. But there's an expectation that
Speaker 4: the soft landing is what will really put a pushes
Speaker 4: over the edge, and that's likely what's driving oil prices
Speaker 4: higher and the OPEC plus cut at least in the
Speaker 4: short term.
Speaker 1: Excellent kind of missed numbers today. How do you do
Speaker 1: that if you're an energy company, I could make money
Speaker 1: as an energy company. What happened xceon.
Speaker 4: They've made money, And to be fair, they told you
Speaker 4: they came right on in the range that they guided.
Speaker 1: Okay, four weeks ago.
Speaker 4: It's just going sense. It's a little slow to update sometimes. Okay,
Speaker 4: you know, unless they're a little stubborn, you wouldn't know
Speaker 4: anything about that. But they still generated significant free cash flow,
Speaker 4: not enough to cover their buybacks, but they generated enough
Speaker 4: free cash flow. The good thing is they came into
Speaker 4: the quarter with almost thirty three billion dollars in cash,
Speaker 4: the debt under zero point two times. It stayed at
Speaker 4: that level, so they can still get to their thirty
Speaker 4: five billion dollars of buybacks by the end of twenty
Speaker 4: twenty four. Of course, that will probably mean higher leverage
Speaker 4: unless Brent goes above eighty five.
Speaker 2: Mike, how do you play earnings as a trader or
Speaker 2: do you give us give us some trader insight for
Speaker 2: for those at home that want to play along. I mean,
Speaker 2: when an earning season comes around, usually analysts are low balling, right,
Speaker 2: but in this case is Fernando points out, they haven't
Speaker 2: caught up with the with the forecast cut that we
Speaker 2: got out of xceon how do you how do you play?
Speaker 2: Is an opportunity the earnings.
Speaker 3: Well, the key thing to remember about energy equities versus
Speaker 3: underlying energy measures as measured by the Bloomberg Energy Commodity Index,
Speaker 3: is the equities typically outperforming. That was definitely the case
Speaker 3: last year, and it's still been the case this year.
Speaker 3: The key thing is you look like the XL that's
Speaker 3: like the major ETF the tracks energy prices they're up.
Speaker 3: It's almost almost the same thing as S and P
Speaker 3: five hundred. So that's the key thing. Remember, the energy
Speaker 3: equities can create more with less every day, and the
Speaker 3: actual underlying commodities are succumbing to that, which is by
Speaker 3: the price of crudial. Now it's first traded in about
Speaker 3: two thousand and six. But the key thing I want
Speaker 3: to point out is a recent day that you mentioned
Speaker 3: supplying demand. I enjoyed putting in my energy outlook is
Speaker 3: this month the latest estimates and Department Energy is this
Speaker 3: month in July that the US is consuming about nine
Speaker 3: million barrels a day of motor fuel gasoline, which includes
Speaker 3: that's and a I know Matt loves that compared to
Speaker 3: twenty nineteen. In July, it's five percent below. And here's
Speaker 3: another statistic I really like pointing out that really accelerated
Speaker 3: is bloomb New Energy Finance point out that global EV
Speaker 3: sales are now about fifteen percent of new auto sales,
Speaker 3: compared to the same period in twenty nineteen, it was
Speaker 3: three percent. Wow, where's that going?
Speaker 2: Yeah, that's crazy. And by the way, that's only going
Speaker 2: up right, I mean, who was it? I think I
Speaker 2: was talking a fatty b roll of the IA and
Speaker 2: he said he expects it to go over twenty percent
Speaker 2: this year.
Speaker 3: So but those of us own ebs, I said, there's
Speaker 3: no way I'm going back. It's just a better way
Speaker 3: to get around, all right.
Speaker 2: Fernando, I'm gonna go ahead and disagree with you.
Speaker 3: There.
Speaker 1: There's no replacement for displacement there, Mike, So, Fernando, our
Speaker 1: good friends. Then in the Permian, I mean, in other
Speaker 1: shell areas in US, they're pumping, aren't they.
Speaker 4: Yeah, I mean, Chevron just broke their record seven hundred
Speaker 4: and seventy two thousand barrels a day in the second quarter,
Speaker 4: so they're trending towards that one million barrel a day
Speaker 4: by twenty twenty six that they aimed in excellent as well,
Speaker 4: producing significant barrels there. And I think we mentioned last time,
Speaker 4: but we think the five lar just producers in the
Speaker 4: Permian are going to account for nearly fifty percent of
Speaker 4: production by the end of the decade. That's Excellent, Chevron, Conical, Phillips, Pioneer,
Speaker 4: and Occidental. So they are growing. It's just not as
Speaker 4: fast as that was once hoped. You know, the dreams
Speaker 4: of us getting to sixteen eighteen million barrels a day
Speaker 4: are probably in the rear view mirror.
Speaker 1: So what do we do now?
Speaker 4: We do about twelve and a half, just under twelve
Speaker 4: and a half.
Speaker 1: Okay, how much do we We're net exporter.
Speaker 4: Right, yes and no, it depends because we don't have
Speaker 4: all the crews that we need, so we import some.
Speaker 4: And yes, on a net.
Speaker 1: Stait, I think I can go down to Texas, Houston,
Speaker 1: you know, raise some money from some good old boys
Speaker 1: and start putting some holes in the ground, and eighty
Speaker 1: dollars a barrel, I can make a lot of money.
Speaker 5: You would.
Speaker 2: My cost it's like forty.
Speaker 4: Right, it's it's it's forty just on the drilling side.
Speaker 4: But then you have all the I mean, you're not
Speaker 4: cheap okay, and you have to pay for you you
Speaker 4: have to pay for your CFO, you have to pay taxes,
Speaker 4: so your overall fully loaded costs are higher.
Speaker 1: Me a wildcat.
Speaker 4: And then you don't get eighty dollars, you get a
Speaker 4: discount on that. And you don't only produce oil, you
Speaker 4: produce other things.
Speaker 2: Hey, Mike, does does the SPR play any play at
Speaker 2: all into the equation here? I mean, I know that
Speaker 2: we we drained it, you know, to buy votes for
Speaker 2: the Democratic Party before the midterms, which is you know
Speaker 2: that's what the SPR was for.
Speaker 1: Nice straight?
Speaker 2: Are we gonna fill it back up? I thought the
Speaker 2: idea was we're going to do that when it was low,
Speaker 2: and it was low, and we didn't.
Speaker 3: There was no hurry to do that. If you really
Speaker 3: compare it to when I was pumping gas at a
Speaker 3: gas station in nineteen seventy nine is a gas jockey
Speaker 3: and gas price went over a dour. We had a
Speaker 3: price in half gallons because of the analog tanks couldn't
Speaker 3: do that. There is a massive excess of supply. If
Speaker 3: you look at liquid fuels of US and Canada, around
Speaker 3: four million barrels a day. For those old days when
Speaker 3: US was a net importer are over. So the only
Speaker 3: really reason you need the SPR notes for offsetting things
Speaker 3: like hurricanes and stuff, because we could ramp up that
Speaker 3: supply even more so if we want. I'm looking at
Speaker 3: liquid fuel products in his countries. Basically all new high
Speaker 3: include liquid fuels because they have to include ethnome from
Speaker 3: the farm. It's almost twenty million barrels a day. Our
Speaker 3: consumption peeked about fifteen years ago. So there's a very
Speaker 3: bad trend for prices. And that's the key thing about SPR.
Speaker 3: President Biden might go down as one of the best
Speaker 3: oil traders in history.
Speaker 2: All Right, all right, I heard it here. That's fascinating stuff.
Speaker 1: Petroleum distribution engineer, that is the term.
Speaker 2: That's what the gas jockey is. Were you pumping leaded gas?
Speaker 1: Yes?
Speaker 2: Was that leaded? Mike?
Speaker 1: I guess he's yes. Stop all right, all right, Mike mcloan,
Speaker 1: he's back at on the pump. Mike mcgloan, Fernando Valley.
Speaker 1: They cover all the energy space for Bloomberg Intelligence. They
Speaker 1: put it in perspective for us.
Speaker 6: You're listening to the Team ken'shar Live program. Bloomberg Markets
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Speaker 1: Some of these central banks share we've had a lot
Speaker 1: of activity, including the Bank at Japan today. It I mean,
Speaker 1: when I look at the ECB, when I look at
Speaker 1: the FED, it seems like they're saying we're pretty much done.
Speaker 1: Is that kind of your takeaway?
Speaker 7: Yeah, I mean we knew that we were close to
Speaker 7: the end of the cycle, so the question was always
Speaker 7: would it take another turn of the screw basically to
Speaker 7: get us into the landing zone for both the FED
Speaker 7: and the ECB. And you know, the the central banks
Speaker 7: are signaling, are reinforcing that they essentially agree with the
Speaker 7: markets that that we're near the end. I still feel that,
Speaker 7: you know, we are currently in the state of I
Speaker 7: was thinking of using the term disinflation euphoria, but I
Speaker 7: think that kind of is a little too prioritive disinflation optimism,
Speaker 7: because there is you know, there's there's a reason, there's
Speaker 7: reason for it. But broadly speaking, I think that through
Speaker 7: the course of this whole inflation cycle, the our kids
Speaker 7: and policy makers have underestimated the resilience of the economy.
Speaker 7: They sort of look through a lot of the you know,
Speaker 7: the demand driven components of inflation, and people look very
Speaker 7: much at sort of you know, the the the subcomponents
Speaker 7: of you know of inflation used card.
Speaker 2: I have no idea why economists ignore it. Seems like
Speaker 2: ignore the demand driven side of it. Yeah, I don't
Speaker 2: get why. Why is that?
Speaker 7: Yeah, I think people want to declare victory, you know,
Speaker 7: and I think policy makers, everybody wants this to be over.
Speaker 2: Well, yesterday we talked with Cam Harvey at Duke and
Speaker 2: he said, you know that the Fed's got it all wrong.
Speaker 2: It's not three percent inflation, It's like zero point one
Speaker 2: percent inflation. Like he said, the picture is completely skewed
Speaker 2: by the housing the way they calculate housing in there.
Speaker 2: And I think a lot of people agree with him
Speaker 2: that it's much lower than the FED expects. Are you
Speaker 2: worried that the FED put pushes us into a recession
Speaker 2: by hiking too much.
Speaker 7: I'm not worried that the FED pushes us into recession.
Speaker 7: I think that it will take a recession, and I
Speaker 7: don't think the FED, the FED, the ECB everybody is
Speaker 7: now managing towards growth. So this is what's new here
Speaker 7: with this inflationary cycle. As we get closer to the
Speaker 7: to the top, they're more you know, looking on a
Speaker 7: two sided view, trying to balance the soft landing that
Speaker 7: everybody's talking about. And you know, I don't want to
Speaker 7: policy error, as you know, maybe it's too easy of
Speaker 7: glib of a word to say, because I understand what
Speaker 7: they're trying to achieve here. But you know, to the
Speaker 7: extent that spot inflationary numbers are showing a disinflationary trend,
Speaker 7: I think people really underestimate the self reinforcing elements of inflation,
Speaker 7: don't I think we have, you know, I mean I
Speaker 7: don't want to sound like you know all back in
Speaker 7: my day, but I think that that that you know,
Speaker 7: the that that the global central bank community, you know,
Speaker 7: back when they did the new Framework and all that,
Speaker 7: they said, inflection, will we know how to deal with
Speaker 7: it when we see it, And you know, they were
Speaker 7: kind of caught deer in the headlights. They scrambled to
Speaker 7: catch up. But I think there's still this this this
Speaker 7: tendency to think that that to to underestimate the forces
Speaker 7: of inflation pressures once you unleash them. For example, you
Speaker 7: know the nominal spending. I mean we look in you know,
Speaker 7: corporate profits, and you look at how you have to
Speaker 7: think in nominal terms a lot here and you see,
Speaker 7: you know, the corporate America is doing well. They're still
Speaker 7: able to pass the price pricing, you know, is being
Speaker 7: passed through to the consumers. Europe is a little bit
Speaker 7: different story. We're seeing obviously more slow down in Germany
Speaker 7: in particular, but uh, they're there. I think there are
Speaker 7: two things that really stand out to me. One is
Speaker 7: that the underestimating the self reinforcing elements of inflationary dynamics
Speaker 7: once it sets in. And the other is that I
Speaker 7: think people still even today underestimate the power of the
Speaker 7: fiscal impulse that was put into the system. And economists
Speaker 7: and you know, the central bankers they don't like to
Speaker 7: especially the FED, they don't like to talk about fiscal policy,
Speaker 7: but you know, we still have you know this these it's.
Speaker 2: Too big to be left out of the station, still
Speaker 2: feeding through, it's still feeding the Paul. This morning, as
Speaker 2: I was driving to work, I was on a call.
Speaker 2: I'm driving right now, I'm driving Alfa Romeo we'll talk
Speaker 2: about that. But I was on the phone with the
Speaker 2: CEO of.
Speaker 1: Masarati apparently not paying tolls either.
Speaker 2: No, John, what do you drive?
Speaker 6: Uh?
Speaker 1: Super a super got everybody off track?
Speaker 2: Sorry, No, I was just no, No, Uh, Super is
Speaker 2: a great car. I was talking to CEO of Maserati,
Speaker 2: David de Grasso, and he said they still have inflation.
Speaker 2: They still feel it pretty strongly in their input costs, right,
Speaker 2: and so they're passing that along. To prove your point,
Speaker 2: the Maserati Gricalai Trofeo, which is a small suv, is
Speaker 2: going for over one hundred thousand dollars.
Speaker 1: Yeah, yep, which no problem for Memlania. All right. Soissan,
Speaker 1: before you were found at sgh Macroadvisors in two thousand
Speaker 1: and nine, you made your living trading currencies here. So
Speaker 1: I gotta ask you. I got the dollar down, I
Speaker 1: don't know, ten percent from its high back in the fall.
Speaker 5: Here.
Speaker 1: What you call on the dollar here? Is there a
Speaker 1: bearish call on the Dollar's just just a little trade down?
Speaker 7: No, I think there's a bearish call on the dollar.
Speaker 7: I think, as you know, I mean, it might seem
Speaker 7: at odds with the notion that we still have inflation
Speaker 7: we have more room to hike rates, but you know,
Speaker 7: we have to look at it, you know, and this
Speaker 7: is always a tricky part with currencies. You know, to
Speaker 7: have a dollar call is really you got to look
Speaker 7: at what dollar yen is kind of a different animal than.
Speaker 2: Almoly goodness what happened yesterday.
Speaker 7: But yeah, you know, I they pulled it off very nicely.
Speaker 7: I think, Yeah, the Bank of Japan, you know, they
Speaker 7: and you know, it's it's people were expecting this to
Speaker 7: be sort of a huge, you know, explosive event for markets.
Speaker 2: We had to end still in the same range that
Speaker 2: it was one forty, right, US treasure you're still under four.
Speaker 7: Yeah, And importantly, the JJB yields, you know, they they
Speaker 7: went up to like fifty six basis points and settled
Speaker 7: in like the mid fifties. So it's not like they
Speaker 7: lifted a fifty you know, fifty basis point ceiling and
Speaker 7: it went and it went to one hundred. And you
Speaker 7: know the reason is, and this is why I think
Speaker 7: you Eda did a nice job on this is that
Speaker 7: and we've kind of been flagging this that the tactical
Speaker 7: window for them to do this what was going to
Speaker 7: be at a time when there wasn't a lot of
Speaker 7: bearish pressure on global bond markets, which you know, we
Speaker 7: look at what's happening in the US and what's happening
Speaker 7: the ed to be it was a really nice window
Speaker 7: for them to sort of, uh to walk in and
Speaker 7: you know and manage it. So Dollar call, you know,
Speaker 7: I I think, you know, we're close to the end
Speaker 7: of the cycle. I don't think we're at the end
Speaker 7: of the cycle. I think we still have a couple
Speaker 7: more hikes, you know. I think we have at least
Speaker 7: one more hike left, you know, for for the fad
Speaker 7: And I sort of think that, you know, looking ahead,
Speaker 7: the central banks might need to, you know, put another
Speaker 7: turn on the screw on tightening because.
Speaker 2: Well Pal said that, he said September, he kind of
Speaker 2: warned us about September.
Speaker 7: Right, Yeah, yeah, I mean September. The market is a
Speaker 7: price to everything out you know, for the US right now.
Speaker 7: And I think that the issue with September is just
Speaker 7: that it's going to be hard for them to explain
Speaker 7: or to even want to, you know, press for a
Speaker 7: hike when you know, when when the when the inflation
Speaker 7: numbers are going to are most likely going to come
Speaker 7: in benign, you know, and markets have been expecting that,
Speaker 7: and I think there's no reason.
Speaker 2: But they can prove their point. He can say, listen,
Speaker 2: I was telling you all year, I want to get
Speaker 2: to two percent. Three percent is not good enough. Yeah,
Speaker 2: you know. Yeah.
Speaker 7: I think that's the broader point is that the both
Speaker 7: the ECB and the FAD, I think their current stance.
Speaker 7: I think the you know, putting aside the twenty twenty
Speaker 7: three numbers, if you look at kind of the twenty
Speaker 7: twenty four forecast, I think it's a little aspirational the
Speaker 7: pace at which that they expect that, you know, that inflation,
Speaker 7: the disinflationary trend is going to continue when that manifests itself.
Speaker 7: You know, I still think the UCB is going.
Speaker 2: To hike in September summer.
Speaker 1: Yeah, fun, I'm done. I'm done. I've taken a recession
Speaker 1: off the table. I'm done with rate hikes. I got
Speaker 1: earnings troughing here. I'm set up for a ripping market.
Speaker 1: That's my call.
Speaker 7: I'm still one of the problems for traders has been
Speaker 7: that I think they haven't been able to square the
Speaker 7: circle with interest rate hikes versus stock market going up.
Speaker 2: It can still happen.
Speaker 1: Yeah, all right, Sissan, thank you so much. Sassan Goa Rimani, President,
Speaker 1: CEO and founder of sg H Macro Advisors. We appreciate
Speaker 1: you coming here.
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Speaker 6: Markets weekdays at ten am Eastern on Bloomberg Radio, the
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Speaker 1: The Bloomberg Intelligence b I go on yourternal Bloomberg Intelligence
Speaker 1: is the biggest research department on Wall Street, and more importantly,
Speaker 1: I believe the best research department on Wall Street. So
Speaker 1: we have access to all their analysts, including Matt Hendrickson.
Speaker 1: He's a senior Ecura analyst covering medical technology. He joins
Speaker 1: us here in our Bloomberg Interactive Broker Studio. And one
Speaker 1: of the things we like about our BI analysts often
Speaker 1: bring us companies that we never would have thought about,
Speaker 1: never would have really you know, think of as an investment.
Speaker 1: But here's dex Com. D x CM is a symbol.
Speaker 1: This is a fifty billion dollar market cap. Stock hit
Speaker 1: fifty two week high today, it's up twenty one percent. Matt.
Speaker 1: What is Dexcom and what's going on with this stock today?
Speaker 8: Yeah, SOX makes what they're called cgms. It's that's short
Speaker 8: for continuous glucose monitors, And basically this technology is replacing
Speaker 8: what is antiquated, which is fingersticks, which is you have
Speaker 8: to prick your finger three or four times a day
Speaker 8: to get your glucose reading.
Speaker 1: Wasn't there a company that kind of did that a
Speaker 1: little bit of their nose or something.
Speaker 4: Oh, that's a that's a different story, but the same thing.
Speaker 8: Though, prick your finger, get four ings a day, that's antiquated.
Speaker 8: It hurts, it's a pain in the butt. Yeah, exactly.
Speaker 8: So cgms come in. It's on your arm or on
Speaker 8: your abdomen. It does a reading every five minutes, so
Speaker 8: that's two hundred eight readings the day without pricking your finger.
Speaker 8: You get the trends, you get the ups the downs.
Speaker 8: It's predictive, so it says you're going to be up,
Speaker 8: you're going to be down. That's what Type one diabetes
Speaker 8: patients need to be able to treat. You know, the
Speaker 8: highs and the lows.
Speaker 2: So it's amazing that it's I mean, it's amazing that
Speaker 2: a fifty four billion dollar company just has one kind
Speaker 2: of trick. Yeah, I mean that's all they focus on.
Speaker 8: That's all they focus on. But that's all the trick
Speaker 8: they need right now, because you have thirty five million
Speaker 8: diabetic patients in.
Speaker 2: The US alone and climbing I'm assuming.
Speaker 8: Climbing, yes, and we'll get into those type two patients
Speaker 8: a little bit more, but right now they're only focusing
Speaker 8: on the type ones and those patients that really.
Speaker 2: What's the difference, by the way, type one type two.
Speaker 8: Oh so type one is more genetic, and you your
Speaker 8: pancreas cannot create insulin, so you need to inject yourself
Speaker 8: with insulin to lower your blood sugar. But you know
Speaker 8: the problem with taking too much insulin is that your
Speaker 8: low blood sugar and then you could pass out or
Speaker 8: even worse. That's why you need the CGM or that's.
Speaker 2: Why you need's that you inherit that's not yeah, that's all.
Speaker 2: That's drinking way too much No.
Speaker 8: No, no, that's uh, that's that's when you get the
Speaker 8: type two and by drinking so much soda or eating
Speaker 8: so many candy bars. Your pancreas just cannot produce enough
Speaker 8: insulin anymore, and it kind of just shuts down because
Speaker 8: it's overloaded.
Speaker 2: And that's the I guess the big problem that we're
Speaker 2: looking at in terms of the climbing numbers.
Speaker 8: Right, yes, and so when you see like the climbing numbers,
Speaker 8: it's mostly type two and it's mostly due to these
Speaker 8: lifestyle decisions.
Speaker 2: Just eating nerds all day long, yeah.
Speaker 8: And you know, sitting at your desk all day long.
Speaker 1: All right, So dex Com this is a way to
Speaker 1: play that market. And the day of some earnings recently
Speaker 1: or some.
Speaker 8: Yeah, so they reported last night and their recent product there,
Speaker 8: it's the seventh generation so obviously called G seven that
Speaker 8: launched earlier this year, and that's helped boost revenue. So
Speaker 8: they beat in the quarter and then they raised their guidance.
Speaker 8: So now they're up to three and a half billion
Speaker 8: to three point five to five billion. That's twenty to
Speaker 8: twenty two percent growth on a three billion dollar revenue
Speaker 8: run rate. So the market like that, and so we've
Speaker 8: seen the kind of the rally today.
Speaker 5: All right.
Speaker 1: So in the world of kind of medical equipment, what
Speaker 1: are some of the hotters. What are the areas that
Speaker 1: that kind of get your attention?
Speaker 8: Yeah, I mean, and so the big themes in medtech
Speaker 8: right now is is diabetes is one and robotics is
Speaker 8: another one. The main company participating in robotics is Intuitive Surgical.
Speaker 1: Is Surgical I SRG.
Speaker 8: Okay, and so you're talking about a fifty billion dollar company,
Speaker 8: this is one hundred billion dollar market cap.
Speaker 1: You just don't know these companies. Where have I been?
Speaker 6: All right?
Speaker 1: What did they do?
Speaker 8: So they are creating robotics systems that help with various surgeries.
Speaker 8: It can be anything from general surgery, so hernia repair,
Speaker 8: bariatric surgery.
Speaker 1: Robot is doing this.
Speaker 8: Yeah, well, I mean it's so this is where you
Speaker 8: get your kids to start playing video games.
Speaker 1: Okay.
Speaker 8: It's controlled by a video game or what looks like
Speaker 8: a video game controller.
Speaker 1: Okay.
Speaker 2: So the surgeon uses a joystick essentially to do things
Speaker 2: in extremely precise way exactly.
Speaker 8: And but basically, you know, even you know, when you
Speaker 8: talk think about a surgeon, what do they have? They
Speaker 8: have a very steady hand. But even the steadiest hand,
Speaker 8: by the steady.
Speaker 1: Yeah, you know, I would not want to it's John Tucker.
Speaker 2: Yeah, Paul's hands are too shaky. I knew a surgeon
Speaker 2: in London he had to knock back basically a bottle
Speaker 2: of Scotch before he could do any kind of operation.
Speaker 1: That's not good. Yeah, and this is the guy you
Speaker 1: went to.
Speaker 2: Yes, it's a friend of mine.
Speaker 8: Well, yeah, that's why you should never mix friends and work.
Speaker 2: Right, So, so intuitive surgical. I wonder if there's any
Speaker 2: AI involved. I've noticed we've all noticed, I think lately,
Speaker 2: that every company seems to be using artificial intelligence. Are
Speaker 2: you seeing that in any of the companies that you.
Speaker 8: Cover, Yeah, there's it's AI, and it's for medtech. It's
Speaker 8: specifically machine learning. So you're learning from the past procedures,
Speaker 8: whether it's surgery, whether it's knee replacements, and you're learning
Speaker 8: to see what went right, what went wrong. You're learning
Speaker 8: with these patients how the recovery is, and then you're
Speaker 8: trying to use those and you're trying to show the doctor, hey,
Speaker 8: why don't we try this method next time? And so
Speaker 8: it's kind of you're building this big data machine learning
Speaker 8: aspect to try to really streamline and kind of make
Speaker 8: the surgery just more efficient.
Speaker 1: All right, the two companies are three companies you've given
Speaker 1: us so far, they're all up twenty thirty percent this year.
Speaker 1: So in a medical technol and medical equipment business, this
Speaker 1: is just a play that post pandemic, we're now going
Speaker 1: back and getting procedures done. So your companies are doing well.
Speaker 8: Yeah, I mean that's pretty much. Yeah, you're just answering
Speaker 8: for me. Yeah, I can do his job.
Speaker 1: I go want into Fidelity tomorrow and say buy these
Speaker 1: stocks because.
Speaker 8: Yeah, but you know what, the thing though, is that
Speaker 8: because of the rally of this year so far, this earnings,
Speaker 8: you've had to be have had a perfect report or
Speaker 8: else the market's going to kick back. And you know,
Speaker 8: Intertutive Surgical, for example, they beat estimates, they raised guidance,
Speaker 8: but in their call they made one comment that there
Speaker 8: is slower growth in bariatric surgery, which is just a
Speaker 8: small portion of the total surgeries, and the reason was
Speaker 8: that patients are trying ozeenpic and other weight loss drugs
Speaker 8: before going to weight loss surgery, and so that big competition,
Speaker 8: a big competition there.
Speaker 2: Yeah, why go under the knife if you can just
Speaker 2: give yourself a shot in the arm or wherever they
Speaker 2: get it and and lose weight. That way.
Speaker 1: All right, are you gonna you're gonna come back and
Speaker 1: talk to U about zempek at zempic or whatever it is.
Speaker 1: I don't, I can't. Image.
Speaker 2: Got to get me a prescription.
Speaker 1: Man, You got a money buddy. All right, Matt, thanks
Speaker 1: so much for joining us. Matt Hendrickson, he's a senior
Speaker 1: equity analyst covering the medtech space for Bloomberg Intelligence and again,
Speaker 1: terminal users can find all the research at b I Go.
Speaker 6: You're listening to the team. Ken's are Live program Bloomberg
Speaker 6: Markets weekdays at ten am Eastern on Bloomberg dot com,
Speaker 6: the iHeartRadio app, and the Bloomberg Business App, or listen
Speaker 6: on demand wherever you get your podcasts.
Speaker 1: All right, let's talk space. Let's talk investing in space.
Speaker 1: Justice Palmer joins this year. He's the CEO and founder
Speaker 1: for Tuna Investments. He joins us here in our Bloomberg
Speaker 1: Interactive Broker studio. He is streaming on YouTube. Justice talk
Speaker 1: to us about Fortuna, what do you guys do, And
Speaker 1: talk to us about kind of your investments in space.
Speaker 9: Absolutely so. We're an award winning venture capital firm. We've
Speaker 9: had a tremendous track record in other industries. We famously
Speaker 9: made a name for ourselves back in twenty sixteen, twenty seventeen.
Speaker 9: That was back when Elon and Tesla were just beginning
Speaker 9: to take off. It wasn't the star. Tesla was not
Speaker 9: the star then that it is now. Just to give
Speaker 9: you context, Elon was selling like sixty thousand cars a year.
Speaker 9: He's selling two million cars a year now.
Speaker 1: And you guys invested in So we didn't.
Speaker 9: We stayed away from Tesla. But what we did was
Speaker 9: we realized it was the lithium ion batteries that were
Speaker 9: fueling this electrification. And so what we did is we
Speaker 9: founded and we co founded a couple companies in that industry.
Speaker 9: One went to a billion dollars on NASDAC and the
Speaker 9: other one was sold last year for four hundred and
Speaker 9: sixty million dollars. So we've had a tremendous track record
Speaker 9: in other industries. Now we've turned our attention to this
Speaker 9: new space economy. We believe this to be a once
Speaker 9: in a lifetime opportunity and we're so happy to be
Speaker 9: on the front line.
Speaker 2: And so Starfighters Space is the first investment that you're making.
Speaker 2: Tell us about this company is not everyone's heard of it.
Speaker 9: Yeah, So it's a private company. They're they're located at
Speaker 9: the John F. Kennedy Space Center at NASA, right beside
Speaker 9: Jeff and Elon. And so what Elon and obviously SpaceX
Speaker 9: gets a lot of headlines. And so the secret sauce
Speaker 9: what Elon's doing is he's got this Falcon nine rocket cranking.
Speaker 9: He's he's taking it up every single week, and he's
Speaker 9: focusing on the heavy payload, big satellites, heavy payload. That's
Speaker 9: what he's got going on. And so for us at Fortuna,
Speaker 9: we realize there's a void in the market because the
Speaker 9: small satellites are actually being neglected in a certain way
Speaker 9: and technology is actually getting smaller and smaller and smaller.
Speaker 9: So we've made a fifty million dollar commitment to Starfighters
Speaker 9: to help grow this beautiful space ecosystem that's that's starting
Speaker 9: to emerge.
Speaker 2: So small satellites, they're like shoebox size satellites right that
Speaker 2: are getting launched in the dozens with these kind of
Speaker 2: you have a f one to zero four supersonic aircraft,
Speaker 2: How did they how do they launch those? They just
Speaker 2: fly up to the top and kick them out or
Speaker 2: what is their paid delivery, you know your stuff.
Speaker 1: It's amazing.
Speaker 9: So yeah, so the short answers, Yes, technologies getting smaller
Speaker 9: and smaller, and so they could be anywhere from like
Speaker 9: a pizza box all the way to even the size
Speaker 9: of your iPhone. And they're called small SATs nanosats. And
Speaker 9: so Starfighters with our funding is actually going to get
Speaker 9: their launch license. So they expect to have their launch
Speaker 9: license in the next eight to twelve months. And as
Speaker 9: soon as we get that launch license, as Paul said,
Speaker 9: we already have the nine F one oh four fighter
Speaker 9: jets that fly mock two speeds tremendously fast. Obviously, and
Speaker 9: if you think about the nine fighter jets that we have,
Speaker 9: that's bigger than I don't know Switzerland's you know air force,
Speaker 9: are certain countries air force. Right, So we've got this
Speaker 9: as a private company, one hundred percent own, no debt,
Speaker 9: and we look really forward to taking this next step
Speaker 9: in terms of the launch game.
Speaker 1: How do retail investors play, you know, investing in space.
Speaker 9: Sure, and so it's a bit of a loaded question,
Speaker 9: but here's what I'll say. I believe that the mark
Speaker 9: So we've come off the worst market crash in the
Speaker 9: last twenty years, since two thousand and eight, almost twenty years,
Speaker 9: and so a lot of the stocks have been extremely
Speaker 9: depressed in that industry, in all industries, albeit obviously there's
Speaker 9: been an uptick in the last couple of months or so.
Speaker 9: But we have fortuna believe that the markets to perform
Speaker 9: extremely well over the next couple of years. Reason being
Speaker 9: is there's trillions of dollars of cash on the sidelines.
Speaker 9: We've we've seen peak interest rates. We also realize that
Speaker 9: there's gonna be a many activity galore, and there's a
Speaker 9: lot and it's a US presidential here coming up, so
Speaker 9: there's a lot of really interesting catalysts coming up for
Speaker 9: the equity markets. We think the market's going to perform well.
Speaker 9: And within their space has been a depressed category that
Speaker 9: we think is going to perform very well of the
Speaker 9: next couple of years.
Speaker 2: So what I was gonna ask, what else is there
Speaker 2: besides launching satellites. We hear so much about space mining,
Speaker 2: but I don't think anyone's ever really achieved that, and
Speaker 2: it seems like it must be a decade away. So
Speaker 2: what else?
Speaker 5: I mean?
Speaker 2: I know Elon Musk wants to go to Mars and
Speaker 2: put a colony there. What are we talking about?
Speaker 9: Yeah, so we at Fortuna. So we're blasted. We've got
Speaker 9: you know, almost thirty individuals, thirty folks on our team.
Speaker 9: You know, these are research analysts, these are investment bankers.
Speaker 9: CCFA is all sorts of brilliant people. So we actually
Speaker 9: get pitched three, four, up to five times a day
Speaker 9: from various space companies looking for investment. So to answer
Speaker 9: your question, Matt, we see it all or not all,
Speaker 9: but we see a lot of really really interesting things
Speaker 9: coming through our desks. And so I agree with you.
Speaker 9: I think that the space mining is still maybe eight
Speaker 9: to twelve years out potentially, but there are interesting applications
Speaker 9: such as, for example, solar solar energy. We have for
Speaker 9: tune our big and solar energy. We've got solar energy
Speaker 9: investments here in the US. But just conceivably, if you
Speaker 9: think about it, the Sun that we get on planet
Speaker 9: Earth here, it's actually diluted, It's diluted by the Earth's atmosphere,
Speaker 9: and we got a very deluded version of the Sun.
Speaker 9: And so if, if, and when we're able to have
Speaker 9: satellites with solar in outer space, you think about that
Speaker 9: it's gonna be ten times, ten thousand times more powerful.
Speaker 9: Clean sun and things like this are going to be
Speaker 9: the few of this beautiful industries that's just starting to
Speaker 9: come together.
Speaker 2: The scoard would be so long, you know, yeah, exactly.
Speaker 1: So, I mean, kind of what's the VC world like
Speaker 1: today in terms of raising capital deploying capital. We've got
Speaker 1: higher interest rates. The world's really changed from that free
Speaker 1: money of just you know a couple of years ago.
Speaker 1: How has it kind of impacted your business?
Speaker 9: Yeah, so that's just it. The growth stuff has been
Speaker 9: really really hurt. Vcs are very shy to put money out,
Speaker 9: although that might have changed in the last thirty days
Speaker 9: with this AI push. Aside from the AI, it's been
Speaker 9: a really really tight industry. A lot of guys are
Speaker 9: licking their chops because they've financed companies at extremely high valuations,
Speaker 9: many of which will probably never be seen before.
Speaker 2: So it's really tricky.
Speaker 9: But for us at Fortuna, we monitored the space industry.
Speaker 9: We actually thought it was a little bit two point
Speaker 9: over the last couple of years with the spack craze
Speaker 9: and some of these things are going on. We did
Speaker 9: our homework and we're actually using this as a perfect
Speaker 9: entry point in our opinion, where technology has been the
Speaker 9: furthest it's ever been, and valuations have actually been the cheapest.
Speaker 9: We played a long game, We played five year, ten
Speaker 9: year cycles, and so for that reason alone, it's a
Speaker 9: tremendously exciting opportunity.
Speaker 2: Did you see the congressional hearing the other day on UFOs.
Speaker 1: Yeah, they're working on that.
Speaker 2: So apparently we have some alien wreckage. It's top secret,
Speaker 2: totally classified.
Speaker 1: So why are you saying it? You're just out the whole.
Speaker 2: I mean, that was that was the big thing about this, uh,
Speaker 2: this congressional panel. If we could just if we could
Speaker 2: just get some of that technology, imagine how much you could,
Speaker 2: you know, supersize the space investment.
Speaker 1: Yep. So I mean all right, so just moving.
Speaker 2: I mean you know what I was thought. I thought
Speaker 2: of it because you asked how does a retail investor
Speaker 2: get in in space? And my immediate reaction is to
Speaker 2: type in ETF go on the Bloomberg terminal. So I
Speaker 2: do that, and I put space in the description, and
Speaker 2: then I get rc X is an ETF you.
Speaker 6: Could use it?
Speaker 9: And so Athy Wood UFO IF is another one rocket
Speaker 9: r O K T it is hitting fifty two week highs.
Speaker 9: Take a look at Rocket. It's a really nice basket.
Speaker 9: The stock looks from the bottom left to the top
Speaker 9: right General Electric for example. That's a great way, in
Speaker 9: my humble opinion, to play it.
Speaker 6: Obviously, talk to.
Speaker 9: Your own financial advisors, not financial advice, but you know,
Speaker 9: ge was a global congomerate. They're getting rid of everything,
Speaker 9: including healthcare, and they're only focusing on aerospace and avionics.
Speaker 9: And if you take a look at that chart, it's
Speaker 9: been one of the best performing stocks out there. And
Speaker 9: so that's another, you know, low access, easy way to
Speaker 9: start to you know, look at these things. Because the
Speaker 9: reality is all the listeners at home and some of
Speaker 9: the folks they don't have the chance to necessarily buy
Speaker 9: the SpaceX is or the Relativities or the Fireflies or
Speaker 9: some of these private companies that the VC world are currently.
Speaker 2: Can you buy SpaceX on the secondary market?
Speaker 9: Yeah, we ironically, we had an opportunity to buy it
Speaker 9: back in twenty fifteen at a fifteen billion dollar valuation.
Speaker 9: Obviously we did not do that. Why would we still
Speaker 9: kind of kicking ourselves, but yeah, we do get offered
Speaker 9: the SpaceX rounds of financing absolutely, But what we try
Speaker 9: and look for we try and find the SpaceX is
Speaker 9: before they turn into the SpaceX, So we're not necessarily
Speaker 9: looking for a fifty billion dollar company. We're looking for
Speaker 9: an earlier stage.
Speaker 1: Is private space industry? Is it primarily a US industry?
Speaker 1: Are there other countries doing it as well?
Speaker 7: Though?
Speaker 9: It is a global industry. It's a five hundred and
Speaker 9: forty billion dollar global industry. Of that, the US base
Speaker 9: US is over two hundred billion, so it's almost half
Speaker 9: of the global output. We Fortuna believe it's going to
Speaker 9: a trillion dollar industry this decade. It's going to be
Speaker 9: the fastest growing industry next to potentially AI coming up here,
Speaker 9: which is one of the reasons we're so excited about
Speaker 9: this industry.
Speaker 2: A lot of those launches go out of French.
Speaker 1: Guyana yep right, yep, yeap went down there once back
Speaker 1: in the day for one of the when the satellite
Speaker 1: industry is just kind of kicking off. It's a good trip. Actually,
Speaker 1: just as palm Our, CEO and founder Fortuna Investments, joining
Speaker 1: us here in our Bloomberg Interactive broken student's talking about space.
Speaker 1: Investing in space as a venture capitalist lots of opportunities.
Speaker 1: There SMP five hundred. There's opportunities right there. It's up
Speaker 1: over one percent today. The Nasdaq is up one point
Speaker 1: nine percent, So there you go. The market's definitely liking
Speaker 1: what they heard from the earning side and liking what
Speaker 1: they heard from some of these central bankers, reflecting that
Speaker 1: in the marketplace.
Speaker 6: You're listening to the tape catchur live program Bloomberg Markets
Speaker 6: weekdays at ten am Eastern on Bloomberg Radio, the tune
Speaker 6: in app, Bloomberg dot Com, and the Bloomberg Business app.
Speaker 6: You can also listen live on Amazon Alexa from our
Speaker 6: flagship New York station. Just say Alexa play Bloomberg eleven thirty.
Speaker 1: Let's bring that conversation. Intel C Pat Gelsinger. He joins
Speaker 1: Edla alone Caroline Height on Bloomberg Technology today after reporting earnings.
Speaker 1: Let's go to that conversation right now.
Speaker 10: I wants to welcome our global Bloomberg TV and radio audiences.
Speaker 10: Intel shares are jumping, with investors buying into signs that
Speaker 10: the chip maker's long awaited comeback is underway. Inteler's forecasting
Speaker 10: sales in the current quarter of thirteen point nine billion
Speaker 10: dollars ahead of expectations.
Speaker 1: The company also notched.
Speaker 10: A surprise profit of thirteen cents a share in the
Speaker 10: quarter just gone as a slump him demand for personal
Speaker 10: computers appears to be come into an end. It's not
Speaker 10: all good news. Server demand isn't recovering as quickly. The
Speaker 10: company is still a little bit far from its heyday
Speaker 10: where margins where at sixty percent sales were nearer to
Speaker 10: twenty billion dollars. Even so, joining us now Intel's CEO
Speaker 10: Pat Gelsinger. You know, Pat, this is the second consecutive
Speaker 10: quarter where investors have cheered the earnings results shares her
Speaker 10: up and I think before twenty twenty three, ten out
Speaker 10: of the eleven earnings prints that you had shares fell.
Speaker 2: Is this job done for you?
Speaker 10: In the turnaround at Intel?
Speaker 5: Well ed?
Speaker 11: We have a long way to go yet, but boy,
Speaker 11: having two good Beaten Ray quarters in a row, you know,
Speaker 11: is a super positive and really I think in THEKPI
Speaker 11: of that turning point for the company. But we still
Speaker 11: have a lot of work to do yet. You know,
Speaker 11: as we said, our client business is now healthy foot.
Speaker 11: You know, we've returned market shared to where it traditionally
Speaker 11: was a strong roadmap.
Speaker 5: You know, the markets recovering. Inventory levels are.
Speaker 11: Good, you know, Data Center, we still have work to do,
Speaker 11: but boy, you know two quarters in a row where
Speaker 11: we did a bit better than we expected, you know,
Speaker 11: but we still have challenges in AI, you know, and
Speaker 11: many of our really good products are only coming to
Speaker 11: market over the next year.
Speaker 5: You know.
Speaker 11: Networking is still a lot of inventory to work through,
Speaker 11: and our foundry business is still just a seedling, just
Speaker 11: starting to show some green shoots. So I'll say, boy,
Speaker 11: far from finished, but it is nice bouncing off the
Speaker 11: bottom a bit and feeling that momentum in the market.
Speaker 10: Response, Pat, why do you have the confidence to kind
Speaker 10: of cool the end of the PC slump and also
Speaker 10: at the same time state that the server recovery is
Speaker 10: delayed to the end of the year.
Speaker 11: Yeah, and the PC side, you know, inventory levels are
Speaker 11: now healthy, right, you know, everything that we've seen and
Speaker 11: a lot of the issues that we work through Q four,
Speaker 11: Q one and Q two were over inventory levels by
Speaker 11: the OEMs and the channel, and now everything is healthy.
Speaker 11: Our roadmap is very good. We've gained share multiple times
Speaker 11: in a row. I think we're now at five out
Speaker 11: of six quarters where we've gained market share so I
Speaker 11: just say in the PC business healthy, Our position is good,
Speaker 11: and we're looking forward to the AI PC and with
Speaker 11: our launch of our next generation product, meteor Lake later
Speaker 11: this year. You know, we believe that ushers in the
Speaker 11: AI PC generation and I've compared that to like Centrino
Speaker 11: and Wi Fi, you know, two decades ago, a major
Speaker 11: new use case for why the PC is the best platform.
Speaker 5: So we're quite excited about that.
Speaker 11: On the data center side, you know, we still saw that,
Speaker 11: you know, the inventory levels still persist. You know, China
Speaker 11: was weaker than expected. Their recovery is going slower. And
Speaker 11: you know, cyclically we see the shift toward AI you know,
Speaker 11: these big training machines. Every cloud vendor is shifting their
Speaker 11: dollars to more focus on that. So those three things
Speaker 11: are leading to a bit longer recovery cycle on the
Speaker 11: data center. Well, like I said, we performed a bit
Speaker 11: better than we thought on the data center in Q
Speaker 11: one m Q two, So we're feeling like our momentum
Speaker 11: and execution is rebuilding despite some of those headwinds that
Speaker 11: still persist in that area.
Speaker 10: For our global TV and radio audience here at Bloomberg,
Speaker 10: we're speaking to Pat Gelsinger, the Intel CEO. Pat you're
Speaker 10: forecasting gross margin of forty three percent in the current period,
Speaker 10: but it's a long way from that sixty percent gross
Speaker 10: margin level. You know, Wall Street used to look at
Speaker 10: Intel and say sixty percent. You know, they cheer you
Speaker 10: as a leader in that space. Can you just explain
Speaker 10: to our global audience the timeline and path to getting
Speaker 10: back to profit at that level.
Speaker 11: Yeah, and we're working our way back in margins and
Speaker 11: obviously a nice beat in Q two on margins, and
Speaker 11: we forecast Q three a bit better and Q four
Speaker 11: a bit better, you know. And part of it is
Speaker 11: the cyclicality. The semiconductor industry is brutal on margins. And
Speaker 11: when we had an oversupply situation inventory, you know, that
Speaker 11: just depresses margins because you know, the factories cost the
Speaker 11: same whether they're full or whether they're empty, so you
Speaker 11: end up with these charges that you burden the price
Speaker 11: points and depressed margins. We also realize that our own
Speaker 11: product execution has weakened our product position, which doesn't have
Speaker 11: asps as strong as well, So that's another factor. And
Speaker 11: the last factor here is, you know, the plan that
Speaker 11: my CFO Dave and I have laid out is an
Speaker 11: expensive plan. We are making aggressive investments to build the
Speaker 11: capacity to get back to leadership, and thus we're moving
Speaker 11: through nodes very rapidly. We said five nodes in four years,
Speaker 11: So that causes us to have a lot of undepreciated
Speaker 11: capacity that we're working through quite aggressively. Also building up
Speaker 11: a bit more capacity for our foundry initiatives. So all
Speaker 11: of those factors depressed margins to historically low levels in
Speaker 11: the first part of the year and we're just seeing
Speaker 11: ourselves now working to build back to margin levels. But
Speaker 11: we're still very confident that as we build our foundry
Speaker 11: business get back to leadership and process and products. You
Speaker 11: know that those kind of margins, that's exactly what Dave
Speaker 11: and I aspire to to the future. And we feel
Speaker 11: like you two was a good marker you know that, Yes,
Speaker 11: we're building momentum to get back there.
Speaker 10: Thank you for joining us here on Bloomberg Television and
Speaker 10: Radio worldwide. We're joined by Pat Gelsinger, Intel CEO. You
Speaker 10: described the foundry business as a seedling, but every time
Speaker 10: you and I have spoken, you've hinted that there is
Speaker 10: a big customer waiting in the wings to give life
Speaker 10: to that business. What can you tell us about that, Pat.
Speaker 11: Yeah, and we're having good momentum, and as I said
Speaker 11: on the Ernie's call yesterday, we have two big customers
Speaker 11: in particular that we made very good progress over the
Speaker 11: last quarter for our foundry business. We did have one,
Speaker 11: i'll say confirmatory, not as big a customer, but the
Speaker 11: Ericsson announcement their commitment to eighteen A and our next
Speaker 11: generation work.
Speaker 5: You know with them that we announced this quarter.
Speaker 11: So I'll say overall, we're seeing good momentum and a
Speaker 11: really strong pipeline of customers, and we hope to make
Speaker 11: meaningful announcements later this year on that. We also pointed
Speaker 11: out on our earnings call that now we're seeing a
Speaker 11: lot of interest in our packaging technologies. So it isn't
Speaker 11: just wayfer manufacturing, it's also package assembly and tests. And
Speaker 11: Intel has long term been a leader in packaging technologies,
Speaker 11: and because of key areas like high performance computing and AI,
Speaker 11: there's tremendous interest in these advanced packaging technologies and we're
Speaker 11: finding a lot of customer interest in that incremental area
Speaker 11: of the foundry business as well. So overall, you know,
Speaker 11: and the numbers were good for us in Q two
Speaker 11: for foundry, great pipeline of activities, Great progress on a
Speaker 11: couple of these most major opportunities. So I'm feeling good
Speaker 11: like we're starting to really see that momentum build in
Speaker 11: this new business area for Intel or Intel Foundery services.
Speaker 10: If we think about what a potential customer might be,
Speaker 10: you know, at the scale of Apple, Google, or Video,
Speaker 10: what is it that they want from you? What is
Speaker 10: it do you think that you can provide them?
Speaker 5: Yeah? You know when I view it, you know, we
Speaker 5: have to go through four stages.
Speaker 7: You know.
Speaker 5: One is are my transistors good? You know?
Speaker 11: Can they build good products using Intel? Second is do
Speaker 11: I have the design tools? You know, the cadences and synopsis,
Speaker 11: c das and the IP libraries. Have we gotten all
Speaker 11: of those basics done so that they can design on us?
Speaker 7: You know?
Speaker 11: Then third, you know, do we have good terms and conditions?
Speaker 11: Are they better off coming to me versus you know,
Speaker 11: TSMC or Samsung as an alternative?
Speaker 5: And then finally are we customer oriented?
Speaker 11: Can they really have the support because my factory becomes
Speaker 11: their factory, you know, So we have to work through
Speaker 11: all four of those stages before they're ready to commit
Speaker 11: major businesses to us, and that's why it takes a while.
Speaker 11: You know, they got to do designs and tests and
Speaker 11: pilots and you know, work through the financials, and you know,
Speaker 11: this isn't a mature business area for US. But I'll
Speaker 11: just say we're making great progress, and in particular, you know,
Speaker 11: the two most significant opportunities. It was a really good
Speaker 11: quarter and I'm feeling very optimistic that yes, we'll bring
Speaker 11: them across the line and start to really accomplish what
Speaker 11: we've laid out, you know, with our reshoring and building
Speaker 11: the Western founder.
Speaker 5: And we also had great.
Speaker 11: Success with both the EU and the US chipsack this
Speaker 11: last quarter, which are affirming the strong support you know,
Speaker 11: of the Western governments on this strategy.
Speaker 5: It's the right strategy at the right time. We're making
Speaker 5: good progress.
Speaker 10: A big part of your smart capital approach, we have
Speaker 10: to talk about AI. You see a world in which
Speaker 10: the PC plays a role for localized running of l ends.
Speaker 10: But what are the use cases that you see pat
Speaker 10: the applications where PC with AI specific chips is relevant.
Speaker 11: Yeah, you know, to some degree, they're numerous. Ed you know,
Speaker 11: let's just give one example. You know in the future,
Speaker 11: my word processor, you know, I'm going to hit a
Speaker 11: button and say, give me a legal brief that describes this,
Speaker 11: and it's going to get locally generated, you know, my
Speaker 11: video conferencing, my zine, my teams or zooms. I'm going
Speaker 11: to say, you know, give me, you know, real time
Speaker 11: translation across multiple languages, you know, for this meeting, and
Speaker 11: I'm going to have that in real time on my PC.
Speaker 11: You know, my games, you know, for my you know,
Speaker 11: all of that is going to become synthetically generated worlds
Speaker 11: locally on my PC in real time. So we see
Speaker 11: it across creator, across productivity, you know. And as I've said,
Speaker 11: this is sort of like a Wi Fi moment, you know,
Speaker 11: for the PC of the future. And that begins with
Speaker 11: our meteor like launch in the second half of this year.
Speaker 10: Pat quickly a one billion dollar pipeline for AI products
Speaker 10: through twenty twenty four. Just give me a sense of
Speaker 10: the pace at which that pipeline is growing.
Speaker 11: Now, Yeah, we had a super exciting quarter. As I said,
Speaker 11: we six xt that pipeline in Q two, so we
Speaker 11: saw a huge uptick on that, you know, and I've
Speaker 11: deployed a lot more sales resources, software resources, you know,
Speaker 11: to jump on those opportunities worldwide. You know, when we
Speaker 11: have our Gouty two chip that is now in volume.
Speaker 11: You know, we've just seen the first wafers on the
Speaker 11: next generation Gouty three, which will be our twenty twenty
Speaker 11: four product, and then we have our twenty five and
Speaker 11: twenty six products underway. So you know, we're seeing a
Speaker 11: lot of momentum there and the world is looking for
Speaker 11: a great alternative, an open alternative, a more cost effective alternative,
Speaker 11: and Intel is a trusted supplier. We think this is
Speaker 11: a great area for us to put a lot of
Speaker 11: energy into and we're seeing the response from the marketplace now.
Speaker 10: Intel CEO Pat Gelis, you know, we appreciate your time
Speaker 10: here on Bloomberg TV and Radio. Thank you.
Speaker 6: You're listening to the tape. Catch our live program Bloomberg
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Speaker 2: I want to get to cars right now.
Speaker 1: Oh there, we go.
Speaker 2: I'm so happy to be back on this program and
Speaker 2: talk about the car industry. I've been covering it for
Speaker 2: twenty years now and as a result, as you know,
Speaker 2: manufacturers often give me vehicles to test out. It's the
Speaker 2: best part of the job. This week, I am driving
Speaker 2: the Alfa Romeo Tanali, which is a subcompact suv. It's
Speaker 2: a very crowded segment, but this one is electrified. It's
Speaker 2: got a hybrid drive train. It has a very tiny
Speaker 2: gas motor one point three leader four cylinder motor driving
Speaker 2: the front wheels, electric motor driving the back, and it
Speaker 2: can do more than thirty miles of rain on the
Speaker 2: battery by itself, so it's a very interesting vehicle. Also
Speaker 2: joining us to talk about Alfa Romeo stilantis As, which
Speaker 2: is the owner as well as the broader car industry,
Speaker 2: is one of the few people who has driven more
Speaker 2: cars than me. Bloomberg Pursuits. Hannah Elliott joins us from
Speaker 2: Los Angeles and I'm really glad hen I've been chasing
Speaker 2: after you for weeks to get you on the show.
Speaker 2: Thanks so much for joining us. What do you think,
Speaker 2: as you know, someone who is a huge car enthusiast,
Speaker 2: someone who loves older cars as well as newer cars.
Speaker 2: About the Alfa Romeo brand, the Alpromeo story, I mean.
Speaker 12: First of all, thanks for keeping on the chase. I'm
Speaker 12: so happy to be here with you, Matt. Second of all,
Speaker 12: what's not to love? This is one hundred plus year
Speaker 12: old brand with real racing history. It was history, it
Speaker 12: was winning the Targa Florio in the early nineteen twenties.
Speaker 12: Of course we have you know, famous Alpha Romeo movie
Speaker 12: cars like the Little Spider and the Graduate. Of course
Speaker 12: everyone knows and loves It's got real history, it's Italian.
Speaker 12: Who doesn't love Italians? And it's it's owned by the
Speaker 12: largest carbrand in the fourth largest sorry Carbred in the world, Stilantis.
Speaker 12: Like you said, there's a lot going for I actually
Speaker 12: like how even the modern cars look. I think they
Speaker 12: look distinctive, they look interesting, and they're pretty well built.
Speaker 12: They've got some great specs. They're competitive within the market share.
Speaker 12: But my caveat is, for whatever reason, Alpha Romeo has
Speaker 12: really struggled to gain real momentum and real ground.
Speaker 2: It's very true. I looked at the stats and last
Speaker 2: year Alfa Romeo sold twelve eight hundred and forty five cars,
Speaker 2: which is very little, right. BMW sold more than three
Speaker 2: hundred thirty thousand, Mercedes sold more than three hundred forty thousand.
Speaker 2: Teslas sold almost half a million cars last year in
Speaker 2: the US market. So my question is, why doesn't Carlos Tavars,
Speaker 2: why doesn't Stilantis and this is sixty billion dollar company
Speaker 2: invest more in this brand. Listen to what Tavares told
Speaker 2: us on Wednesday, off.
Speaker 13: Roll maybe is a big success since Stanatius was created.
Speaker 13: We made a huge turnaround of the business model. It's
Speaker 13: now a highly profitable brand. It's a growing brand, sixty
Speaker 13: per volume growth on the H one twenty twenty three
Speaker 13: compared to last year, so it's growing. It's highly profitable.
Speaker 13: We have turnaround, We are happy to be in Formula one,
Speaker 13: and we are going to increase our presence in the US,
Speaker 13: including at one pointeen ten.
Speaker 2: So it's interesting that they're getting back into raising Hannah,
Speaker 2: And I'm sure that's key for an enthusiast like you,
Speaker 2: But the problem for me is not only well, this
Speaker 2: car that I was test driving is front wheel drive,
Speaker 2: which is already like forget about.
Speaker 6: It for me.
Speaker 2: Yeah, and I mean, that's just not my thing. But
Speaker 2: for some people it's a great vehicle because it has
Speaker 2: its good in the snow, good electric range it has
Speaker 2: I guess it's okay in the snow, and you could
Speaker 2: also take longer trips with the motor. But my problem
Speaker 2: is it breaks down so much much. In JD Power's
Speaker 2: initial quality survey, they showed two hundred and four issues
Speaker 2: per hundred vehicles, and that's only the first three months.
Speaker 2: So in the first three months, every owner essentially has
Speaker 2: more than two mechanical problems. That's something that they.
Speaker 6: Have to fix.
Speaker 12: That's just completely untenable. And unfortunately in the US especially,
Speaker 12: that has been the existing reputation for Alfa Romeo so
Speaker 12: much so that it's kind of a joke, even for
Speaker 12: people who really love the brand and who collect the
Speaker 12: old cars and who want to buy the new cars.
Speaker 12: That is just the sticky reputation that they have. And
Speaker 12: you know, of course, of ours is saying they're pumping
Speaker 12: money into it and it's successful, but he's talking on
Speaker 12: a global level. In the US, Alfa Romeo has had
Speaker 12: a very spotty history history. Let's not forget they were
Speaker 12: dormant and didn't sell any cars here for several decades.
Speaker 12: In twenty sixteen, they sold less than fewer than six
Speaker 12: six hundred cars for the full year in the US.
Speaker 12: These twelve thousand that they've sold last year were down
Speaker 12: from the previous year, and this year on they're on
Speaker 12: track to sell even fewer. There's probably gonna sell around
Speaker 12: ten thousand. So in the US specifically, you're right. You know,
Speaker 12: when you think about Alpha Romeo being in the same
Speaker 12: competitive set as Audi, BMW, Mercedes, even Bolvo, even Jaguar,
Speaker 12: there's there are a lot of options, so when you're
Speaker 12: having reliability problems, it's an automatic no go.
Speaker 2: It's too bad because the Julia and the Stelvio apparently
Speaker 2: are amazing performance cars, but if they break down, you know,
Speaker 2: that's that's kind of a deal breaker. Also, you know, Hannah,
Speaker 2: I was joking with you and you pointed out that
Speaker 2: everybody made the same joke about the new Ferrari suv.
Speaker 2: It kind of looks like a maz To Suv. This
Speaker 2: Alpha Romeo Tonale that I was test driving looks exactly
Speaker 2: like the Dodge Hornet. I think we might have video
Speaker 2: of the Dodge Hornet. The reason is that they're essentially
Speaker 2: the same car. Dodge saw that Alpha was making this,
Speaker 2: they wanted an entry into the sub compact market, so
Speaker 2: they just stole it being a sister brand and changed
Speaker 2: like a couple pieces of sheet metal. But it's ten
Speaker 2: thousand dollars less, and I can't imagine why anybody would
Speaker 2: want to pay more for the Alpha when you could
Speaker 2: get the same car as a Dodge for so much cheaper.
Speaker 12: Okay, this is where we may disagree, and in a
Speaker 12: good way, because I feel like you really understand, like
Speaker 12: the paper the paperwork says the Dodge is the better buy.
Speaker 12: But I still am a little bit shallow, and I
Speaker 12: like this sort of Italian cachet that Alpha Romeo has,
Speaker 12: even though all the things we already know about Alpha Romeo.
Speaker 12: To me, it does at least have this sort of
Speaker 12: Italian luxury cachet. So I'm going to still probably go
Speaker 12: with the Alpha Mao over the Dodge. I also think
Speaker 12: the interior of the Alpha Romeo looks a little more
Speaker 12: interesting than the interior of the Hornet. Tell me if
Speaker 12: I'm wrong, but that's my take.
Speaker 2: I think you're You're probably right.
Speaker 1: By the way.
Speaker 2: The good news is I went on a call it
Speaker 2: was way too early for you. But this morning at
Speaker 2: six thirty am, Maserati Ceo da Vido Grosso had a
Speaker 2: conference call and he said they have poured money into
Speaker 2: the quality issues to try and fix. Obviously it's a
Speaker 2: very different brand and a different segment, but they're still
Speaker 2: both owned by Stalantis. Said they're going to try and
Speaker 2: fix the quality issues there and they made great headway.
Speaker 12: I mean, I'm glad to hear it. I do think
Speaker 12: perception lags behind reality, so maybe a few years before
Speaker 12: the public consumers pick up on this improvement. And I
Speaker 12: do think, you know, Alfa Romeo hasn't been marketed strongly
Speaker 12: in the US the same way that Audi's are marketed,
Speaker 12: so some of it could just you know, if they
Speaker 12: keep throwing money at it, we may be we may
Speaker 12: see some growth.
Speaker 5: Who knows.
Speaker 1: All right, Hanna, thanks so much for joining us. Hanna Elliot,
Speaker 1: staff writer for Bloomberg BusinessWeek from Los Angeles, talking to us.
Speaker 1: We card talk right there. Why not?
Speaker 2: Thanks for listening to the Bloomberg Markets podcast. You can
Speaker 2: subscribe and listen to interviews at Apple Podcasts or whatever
Speaker 2: podcast platf form you prefer. I'm Matt Miller, I'm on
Speaker 2: Twitter at Matt Miller nineteen seventy three, and I'm Paul Sweeney.
Speaker 1: I'm on Twitter at pt Sweeney. Before the podcast, you
Speaker 1: can always catch us worldwide at Bloomberg Radio