WEBVTT - Semis in Focus, Private Aviation Business Flying High

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<v Speaker 1>Bloomberg Audio Studios, podcasts, radio news.

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<v Speaker 2>You're listening to Bloomberg BusinessWeek with Carol Messer and Tim

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<v Speaker 2>Stenebek on Bloomberg Radio.

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<v Speaker 3>And a name that's certainly come up on our radar

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<v Speaker 3>are is AMD stock was down about three percent at

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<v Speaker 3>its lose today now down about one point three percent.

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<v Speaker 3>Bloomberg reporting that US officials have told the company that

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<v Speaker 3>the artificial intelligence chip that had tailored for the Chinese

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<v Speaker 3>market too powerful to sell without a license, so ensnaring

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<v Speaker 3>another American semiconductor company again, perhaps in Washington's crackdown on

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<v Speaker 3>exports of advanced technologies.

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<v Speaker 4>Tim Hey.

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<v Speaker 2>For more, we turned to John Vinn, Managing director an

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<v Speaker 2>equity research analyst at key Bank Capital Markets. John joining

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<v Speaker 2>us from San Francisco where he's at the key Bank

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<v Speaker 2>Capital Markets Emerging Tech Summit. John, before we get to

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<v Speaker 2>the specifics of AMD, which is certainly one of the

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<v Speaker 2>companies you cover, I do want to get your your

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<v Speaker 2>thoughts on this market, Salaf, especially on the tech side.

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<v Speaker 2>How are you interpreting the weakness that we're seeing today.

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<v Speaker 4>Yeah, I think there's a number of different factors that

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<v Speaker 4>are coming into play. Obviously, the geopolitical tensions with the

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<v Speaker 4>China restrictions on AMD and I three hundred decks. Obviously,

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<v Speaker 4>AI has been one of the kind of leading drivers

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<v Speaker 4>of the sema conductor industry. You also have another, you know,

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<v Speaker 4>reports out that iPhone sales are down over twenty percent

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<v Speaker 4>in the China market, and obviously that's been a big

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<v Speaker 4>driver of some actuctors spend out there as well. So

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<v Speaker 4>there's just a lot of headlines out there that are

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<v Speaker 4>just kind of impacting the semic conductor market at this point.

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<v Speaker 3>Is there any of it though? Okay, so semiconductor, but

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<v Speaker 3>I mean in overall the tech trade here, do you

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<v Speaker 3>think the markets considering the run up that we've seen. Certainly,

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<v Speaker 3>if you look at the Nasdaq one hundred this year,

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<v Speaker 3>it makes sense to see somewhat of a pullback here

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<v Speaker 3>or a little bit of a kind of maybe revaluation

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<v Speaker 3>in terms of the run up that we've had.

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<v Speaker 4>Sure, sure, absolutely, you know, I think what we're just

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<v Speaker 4>seeing here is just a little bit of pullback just

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<v Speaker 4>given how strong the overall tech markets have been, and obviously,

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<v Speaker 4>you know, some of the conductors have been a big

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<v Speaker 4>part of that. So it does make sense that just

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<v Speaker 4>given the headlines and some of the concerns that we're

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<v Speaker 4>seeing today. You know, it does make sense that we're

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<v Speaker 4>seeing a little bit of a pullback.

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<v Speaker 3>Let's remind everybody the socks is up sixteen percent this year,

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<v Speaker 3>so quite a run up.

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<v Speaker 2>So I mean, John, is it healthy to see a

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<v Speaker 2>day like today or is it? Does it concern you?

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<v Speaker 4>I'm not overly concerned. You know, obviously it shouldn't be

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<v Speaker 4>a surprise that, you know, iPhones are kind of not

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<v Speaker 4>doing as well in the China market right now, and

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<v Speaker 4>talking about it from US, yeah, it's it's been weak.

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<v Speaker 4>And you know, obviously we know Huawei's kind of back

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<v Speaker 4>into the market, and obviously they've been we've been seeing

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<v Speaker 4>signs over the last several months that they've been gaining

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<v Speaker 4>spare at the expensive Apple and you know, on the

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<v Speaker 4>on the AMD front, you know, that shouldn't be a

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<v Speaker 4>surprise either. I'm not really overly concerned about it. If

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<v Speaker 4>you think about am d's positioning there, they're coming from

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<v Speaker 4>zero share in the a AI market and most of

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<v Speaker 4>their share and revenue news that we expect this year

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<v Speaker 4>are expected to be a really non Chinese driven. It's

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<v Speaker 4>really going to be driven by all the major hyperscalers

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<v Speaker 4>that are more North American base and less we see

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<v Speaker 4>them less dependent upon the China market, at least in

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<v Speaker 4>this early part of the c I cycle for them.

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<v Speaker 3>Yeah, and if I look at the socks today, while

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<v Speaker 3>it looks like every name, all of the thirty names

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<v Speaker 3>and the Philadelphia Semiconductor Index are down today, John, and

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<v Speaker 3>Nvidia is doing the best, just down about four tensive

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<v Speaker 3>a percent. AMD is the third best, but it's still

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<v Speaker 3>down about one point six percent, so definitely outperforming what

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<v Speaker 3>we're seeing. More broadly, Let's go to Nvidia, right, best

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<v Speaker 3>performing name in the S and P five hundred last year,

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<v Speaker 3>best performing name in the S and P five hundred

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<v Speaker 3>again this year. What are your expectations realistically that this

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<v Speaker 3>is that this one will continue to outperform and fundamentally

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<v Speaker 3>it has the reasons why.

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<v Speaker 4>Yeah, we absolutely still believe that in video's well positioned

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<v Speaker 4>to you all perform in the semi market right now.

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<v Speaker 4>You know, obviously they are the clear major beneficiary of

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<v Speaker 4>the investment we're seeing in generative AI. You know, we're

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<v Speaker 4>here at the Emerging Tech Stomach conference, and you know,

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<v Speaker 4>one of the trends that's very clear here is that

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<v Speaker 4>AI is being embedded into literally every application and end

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<v Speaker 4>devices out there. Right It all started in the data

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<v Speaker 4>center with the training of these large language models, and

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<v Speaker 4>over time, obviously that's going to move to inferencing. But

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<v Speaker 4>you're seeing significant investment in software, and then you're also

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<v Speaker 4>seeing significant investments in kind of pushing AI to the edge.

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<v Speaker 4>I think that the next product cycle that we can

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<v Speaker 4>probably look forward to over the next several years is

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<v Speaker 4>potentially you know, edge AI, which includes you know, potentially

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<v Speaker 4>the the proliferation of AI PCs as well as you

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<v Speaker 4>know AI smartphones.

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<v Speaker 2>Hey, John, you got an eleven hundred dollars price target

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<v Speaker 2>on in videos, so significant ups side from here where

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<v Speaker 2>it's trading at eight forty seven right now. One question

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<v Speaker 2>that I've been grappling with over the last few months

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<v Speaker 2>is really understanding the benefits of AI to a general company.

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<v Speaker 2>We understand the beneficiaries as you know, super microcomputer, in

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<v Speaker 2>Vidia a m D, but give me an idea about

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<v Speaker 2>how the mom and pop company that can go out

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<v Speaker 2>and buy one of these in Vidia chips will benefit

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<v Speaker 2>from using AI. How will it get you know, people

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<v Speaker 2>to buy more stuff, How will it get ads to

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<v Speaker 2>be more efficient? How will it get fewer people to

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<v Speaker 2>do to do more?

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<v Speaker 4>Yeah, I think a lot of those questions are still

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<v Speaker 4>kind of very early days. Obviously, chat GBT and open

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<v Speaker 4>Ai has given us a flavor of it. Some of

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<v Speaker 4>the applications that we see obviously still very early days

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<v Speaker 4>that are always to improve significant efficiencies of small medium

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<v Speaker 4>sized businesses are going to be potentially copilot, right, Copilot

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<v Speaker 4>is embedded into off that's just going to make it

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<v Speaker 4>more efficient for your average user to prepare presentations, right,

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<v Speaker 4>to make a more efficient sales pitch. And then also

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<v Speaker 4>again you know I talked about these EDGAI devices and

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<v Speaker 4>endpoints such as AI smartphones. You know, I think one

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<v Speaker 4>application that we potentially see and have heard about it

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<v Speaker 4>in Qualcom, one of my other covered companies has talked

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<v Speaker 4>about is like real time translation.

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<v Speaker 1>Right.

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<v Speaker 4>So today you can use Google Translate, but there's a

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<v Speaker 4>there's a latency issue, right, so if you enter entered

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<v Speaker 4>a phrase has to go to the cloud and then

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<v Speaker 4>it comes back. But if you have a small, smaller size,

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<v Speaker 4>large language model that it's embedded to your smartphones that

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<v Speaker 4>is capable of supporting real time translation, right, I mean

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<v Speaker 4>that's those are some applications that we look for that

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<v Speaker 4>that could make things a lot more efficient.

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<v Speaker 3>Yeah, that would be really useful. Hey, John, promise that

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<v Speaker 3>we can check in with you after the conference and

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<v Speaker 3>either come on by our studio or we'll cap remotely,

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<v Speaker 3>because love to talk more about what you're hearing and

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<v Speaker 3>making the connection between kind of all the stuff that's

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<v Speaker 3>out there, especially in the AI space, in the semiconductor space,

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<v Speaker 3>and how we kind of ultimately put it all to work.

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<v Speaker 3>So thanks, thanks so much for taking time for us.

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<v Speaker 3>Of course, John vid he's a managing director equity research

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<v Speaker 3>analyst over at key Bank Capital Markets, joining us from

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<v Speaker 3>San Francisco where he's at the key Bank Capital Market's

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<v Speaker 3>Emerging Tech Summit.

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<v Speaker 2>We got Andrew Collins with us. He's president and CEO

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<v Speaker 2>of a Sentient Jet, also the COCO of the parent company,

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<v Speaker 2>flex Jet. Good to have you back with us. Andrew,

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<v Speaker 2>How are you good?

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<v Speaker 1>Much? So?

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<v Speaker 2>Did you see any of that weakness in twenty twenty

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<v Speaker 2>three that Dasso referred to in their earnings report?

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<v Speaker 1>You know, it's funny because we deal with a lot

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<v Speaker 1>of OEMs at the Flexjet level and we have a

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<v Speaker 1>fleet of about three hundred aircraft.

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<v Speaker 3>There original equipment manufacturers.

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<v Speaker 1>Original equipment manufacturers. Sorry, I know Embraer, Golfstream people like that, right.

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<v Speaker 1>So at the end of the day, actually they had

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<v Speaker 1>back orders and we had delays in getting aircraft and

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<v Speaker 1>things like that. So I don't want to call to

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<v Speaker 1>sew kind of an anomaly, But at the end of

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<v Speaker 1>the day, we could fill that capacity and we could

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<v Speaker 1>take those aircraft on, and we continue to take aircraft on.

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<v Speaker 2>But what about demand. Was demand in twenty twenty three

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<v Speaker 2>higher or lower?

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<v Speaker 1>It depends on what you're looking at in the facet

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<v Speaker 1>of the industry. So if you look at it from

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<v Speaker 1>a fractional ownership standpoint, there was a lot of selling

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<v Speaker 1>that happened and a lot of pent up hours that happened.

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<v Speaker 1>So we just had the most flying we've ever had

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<v Speaker 1>in company history over President Day weekend. Right. If you

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<v Speaker 1>look at it from a jet card standpoint, which is

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<v Speaker 1>Sentient Jet, we did see it kind of start to soften,

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<v Speaker 1>and in the on demand market it's really getting back

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<v Speaker 1>to kind of a it's still growth over twenty nineteen,

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<v Speaker 1>and you're still seeing some of the people retain from

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<v Speaker 1>the pandemic, but it isn't like twenty one and twenty

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<v Speaker 1>two where I think everybody was running.

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<v Speaker 3>Around with their hair on dig into that demand over

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<v Speaker 3>President's Day holiday? Were there deals like I don't know how,

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<v Speaker 3>you know it was industry, So what was it all about?

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<v Speaker 1>No, it's it's you know, I'll tell you what. In

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<v Speaker 1>twenty one and twenty two, it was long hours, long days,

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<v Speaker 1>and every day felt like what we call a peak day.

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<v Speaker 1>It just felt like everybody wanted to fly persistently. It

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<v Speaker 1>used to be that like a Monday or a Tuesday

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<v Speaker 1>or you know, you get a break. There was not

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<v Speaker 1>a lot of breaks. Now what's happening is you're having

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<v Speaker 1>high concentration days. And so in the fractional world, when

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<v Speaker 1>somebody buys for a five year time horizon into an aircraft,

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<v Speaker 1>they've bought the hours they're going to use that. So

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<v Speaker 1>the owner demand for that spikes on certain days. And

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<v Speaker 1>so collectively we've got the most hours under management we've

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<v Speaker 1>ever had at a company and it unlocked on President's stable.

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<v Speaker 3>How much is an inventory those hours? Like I'm always curious,

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<v Speaker 3>like do you guys look at that of like, Okay,

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<v Speaker 3>this is stuff that people have paid for, have to

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<v Speaker 3>spend and use.

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<v Speaker 1>Yeah, no, we it's actually one of the major KPIs

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<v Speaker 1>in our business. It's called hours under management, and you

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<v Speaker 1>have to look at it by product, by aircraft, and

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<v Speaker 1>you have to think about it. And that's how you

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<v Speaker 1>do your demand, your demand shaping, how you think about

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<v Speaker 1>capacity planning and everything else.

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<v Speaker 3>How much visibility does it give you right now?

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<v Speaker 1>It gives me very good visibility, Like the forward looks

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<v Speaker 1>really good, twelve months, still good, twenty four months. Depends

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<v Speaker 1>on how our year goes. From a selling standpoint.

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<v Speaker 2>Pilots having trouble getting pilots.

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<v Speaker 1>No, I think the challenge for us. So we probably

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<v Speaker 1>hired four hundred pilots at the flexjet level in twenty three.

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<v Speaker 1>We'll do the same this year. I think what you

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<v Speaker 1>have to think about is number one, we actually try

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<v Speaker 1>to hire the best of the best pilots. We don't

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<v Speaker 1>look for just any pilot, right.

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<v Speaker 2>So where they coming from? Are they coming from regional carriers?

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<v Speaker 2>Are they retiring from.

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<v Speaker 1>No, they could be coming from a competitor, They could

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<v Speaker 1>be coming from a regional carrier, They could be coming

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<v Speaker 1>out of the military. Okay, But what we found is

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<v Speaker 1>you want to make sure that if you're hiring somebody

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<v Speaker 1>you're hiring on a track where they're going to stay

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<v Speaker 1>through three years. They stay through three years, they're in

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<v Speaker 1>for a career. We want it to be a career destination.

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<v Speaker 1>We do find that. Excuse me, we're actually competing more

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<v Speaker 1>with commercial airlines than we are any other competitor because

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<v Speaker 1>the commercial airlines are really putting out large sums of

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<v Speaker 1>money and large caps, and they're unionized, and they're unionized.

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<v Speaker 1>But what people forget is the history of commercial right

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<v Speaker 1>where there's furloughs and things happen, you know, and so

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<v Speaker 1>so it looks very rosy right now. I think we've

0:11:04.280 --> 0:11:07.920
<v Speaker 1>got a pretty methodical plan and a pretty good destination

0:11:08.440 --> 0:11:11.120
<v Speaker 1>for you as a career type. So yeah, we've we've

0:11:11.160 --> 0:11:14.240
<v Speaker 1>put a lot of money into recruiting our pilots.

0:11:14.280 --> 0:11:16.200
<v Speaker 3>It was an ideal pilot in terms of age and

0:11:16.280 --> 0:11:17.640
<v Speaker 3>hours that they've already got.

0:11:17.679 --> 0:11:19.720
<v Speaker 1>So you want somebody that's got the time and type.

0:11:19.720 --> 0:11:22.960
<v Speaker 1>You want somebody that's experienced. You want somebody that has

0:11:23.000 --> 0:11:25.200
<v Speaker 1>at least a minimum of three thousand hours. You know,

0:11:25.240 --> 0:11:28.840
<v Speaker 1>he really has. Like we actually increased it recently as

0:11:28.880 --> 0:11:31.040
<v Speaker 1>opposed to decrease it. Most people are decreasing it.

0:11:31.120 --> 0:11:32.079
<v Speaker 3>That's why I wanted to ask you.

0:11:32.960 --> 0:11:35.320
<v Speaker 1>And that's actually a good bell weather for us. That

0:11:35.480 --> 0:11:37.600
<v Speaker 1>just shows you the strength of who we are. We're

0:11:37.640 --> 0:11:40.160
<v Speaker 1>trying not to fall into the trap of, you know,

0:11:40.200 --> 0:11:42.200
<v Speaker 1>recruit at all costs. We're trying to get the best

0:11:42.200 --> 0:11:42.640
<v Speaker 1>of the best.

0:11:42.760 --> 0:11:45.199
<v Speaker 3>Can you remind us on pricing, give us an idea

0:11:45.200 --> 0:11:46.560
<v Speaker 3>of like if somebody wants to take a trip and

0:11:46.600 --> 0:11:50.120
<v Speaker 3>have you up in the last tie, so like my mother.

0:11:50.880 --> 0:11:52.960
<v Speaker 1>So I let me speak to it at the card level,

0:11:52.960 --> 0:11:54.640
<v Speaker 1>because that's that's where I had a lot of experience.

0:11:54.880 --> 0:11:57.800
<v Speaker 1>At the end of the day during the surge, when

0:11:57.840 --> 0:12:00.960
<v Speaker 1>everybody wanted it, we the market would bear any thing, right, Yeah,

0:12:01.040 --> 0:12:03.000
<v Speaker 1>And for us, we had to keep up with the

0:12:03.040 --> 0:12:05.160
<v Speaker 1>market and keep pace and make sure we were living

0:12:05.200 --> 0:12:07.840
<v Speaker 1>up to the consumer promise. So we had to augment pricing. Okay,

0:12:07.880 --> 0:12:10.320
<v Speaker 1>so we augmented pricing probably by thirty five percent. It's

0:12:10.320 --> 0:12:13.120
<v Speaker 1>the biggest jump I've ever seen and we've kept it

0:12:13.120 --> 0:12:16.480
<v Speaker 1>there and the market is bearing it. It's it's our

0:12:16.559 --> 0:12:19.320
<v Speaker 1>cell through is probably about ten to fifteen percent less

0:12:19.320 --> 0:12:21.080
<v Speaker 1>than what we were doing. But we're very happy with

0:12:21.120 --> 0:12:22.000
<v Speaker 1>the clients we bring in.

0:12:22.120 --> 0:12:22.440
<v Speaker 4>Got it.

0:12:23.080 --> 0:12:24.960
<v Speaker 2>Hey, I want to talk sustainability a little bit, because

0:12:25.000 --> 0:12:26.880
<v Speaker 2>sustainable is not something you think of when you think

0:12:26.880 --> 0:12:28.199
<v Speaker 2>about private air track And I'm going.

0:12:28.160 --> 0:12:29.240
<v Speaker 3>To tell you we're going to get a million of

0:12:29.280 --> 0:12:31.800
<v Speaker 3>emails of people like you're talking private jets sustainability.

0:12:31.840 --> 0:12:33.360
<v Speaker 2>Come on, you're burning dead dynas.

0:12:33.480 --> 0:12:35.880
<v Speaker 1>Come on. I'm happy to do it. It's my favorite topic.

0:12:35.960 --> 0:12:38.600
<v Speaker 3>Are you following Elon's jet? Are Tailor's jet?

0:12:39.679 --> 0:12:39.959
<v Speaker 2>Yeah?

0:12:40.040 --> 0:12:43.680
<v Speaker 1>I know all about it seriously, So how.

0:12:43.559 --> 0:12:44.720
<v Speaker 2>Do you think about it? I mean, you guys hit

0:12:44.720 --> 0:12:47.000
<v Speaker 2>a milestone recently, but it's carbon offsets, right.

0:12:47.160 --> 0:12:49.000
<v Speaker 1>No, it's more than carbon offsets. You want to do

0:12:49.040 --> 0:12:51.439
<v Speaker 1>full emissions. So this is the big mistake that people

0:12:51.440 --> 0:12:53.080
<v Speaker 1>make in our industry, and we're trying to actually lead

0:12:53.120 --> 0:12:55.600
<v Speaker 1>the pack. So we do three hundred percent offsetting and

0:12:55.640 --> 0:12:57.640
<v Speaker 1>it's built into the pricing. It is no cost to

0:12:57.679 --> 0:13:00.680
<v Speaker 1>the consumer. This is a choice we made three and

0:13:00.679 --> 0:13:03.920
<v Speaker 1>a half years ago, and even during the time when

0:13:03.920 --> 0:13:06.040
<v Speaker 1>we had to pay operators lots of money during the

0:13:06.040 --> 0:13:08.600
<v Speaker 1>surge and really think about things, we never wavered on this.

0:13:08.600 --> 0:13:10.920
<v Speaker 1>This is really important to us. You do a full

0:13:10.920 --> 0:13:14.080
<v Speaker 1>emissions offset, it's not just doing carbon you know, a

0:13:14.120 --> 0:13:17.480
<v Speaker 1>carbon offset, you're getting water vapors, aerosols, you know, every

0:13:17.559 --> 0:13:20.600
<v Speaker 1>imprint that you possibly can, you're factoring that in. And

0:13:20.640 --> 0:13:23.400
<v Speaker 1>we work with a partner who's gone through and certified

0:13:23.440 --> 0:13:25.280
<v Speaker 1>a lot of different projects to help us with this,

0:13:25.640 --> 0:13:29.160
<v Speaker 1>plus registering our offsets and everything else. So it's really

0:13:29.240 --> 0:13:32.480
<v Speaker 1>important to us. We've probably offset about one point three

0:13:32.559 --> 0:13:36.200
<v Speaker 1>one point four million metric tons of carbon dioxide at

0:13:36.200 --> 0:13:38.160
<v Speaker 1>this point, and we're gonna keep going and we've got

0:13:38.160 --> 0:13:40.640
<v Speaker 1>millions earmarked for it. We need to get to a

0:13:40.679 --> 0:13:43.640
<v Speaker 1>world of sustainable aviation fuel and we need to get

0:13:43.640 --> 0:13:46.680
<v Speaker 1>this electric kind of world to happen, and it's gonna

0:13:46.720 --> 0:13:49.240
<v Speaker 1>happen further out than we hoped ten seconds.

0:13:49.280 --> 0:13:50.240
<v Speaker 3>How quickly can we get there?

0:13:50.440 --> 0:13:52.800
<v Speaker 1>Seven years? Seven years? Yeah, it used to be five.

0:13:52.880 --> 0:13:55.640
<v Speaker 1>Everybody would say five. I think mass consumer, mass passenger.

0:13:55.880 --> 0:13:57.719
<v Speaker 1>You'll see some hybrids, but I think it's about five

0:13:57.720 --> 0:13:58.720
<v Speaker 1>to seven years minimum.

0:13:59.000 --> 0:14:02.680
<v Speaker 3>Great stuff is always come back soon, absolutely anytime. Andrew Collins,

0:14:02.679 --> 0:14:05.080
<v Speaker 3>president and CEO of Sentient Jet and co CEO of

0:14:05.120 --> 0:14:07.360
<v Speaker 3>the parent company, Flexjet, joining us here in studio