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Speaker 2: You're listening to Bloomberg BusinessWeek with Carol Messer and Tim
Speaker 2: Stenebek on Bloomberg Radio.
Speaker 3: And a name that's certainly come up on our radar
Speaker 3: are is AMD stock was down about three percent at
Speaker 3: its lose today now down about one point three percent.
Speaker 3: Bloomberg reporting that US officials have told the company that
Speaker 3: the artificial intelligence chip that had tailored for the Chinese
Speaker 3: market too powerful to sell without a license, so ensnaring
Speaker 3: another American semiconductor company again, perhaps in Washington's crackdown on
Speaker 3: exports of advanced technologies.
Speaker 4: Tim Hey.
Speaker 2: For more, we turned to John Vinn, Managing director an
Speaker 2: equity research analyst at key Bank Capital Markets. John joining
Speaker 2: us from San Francisco where he's at the key Bank
Speaker 2: Capital Markets Emerging Tech Summit. John, before we get to
Speaker 2: the specifics of AMD, which is certainly one of the
Speaker 2: companies you cover, I do want to get your your
Speaker 2: thoughts on this market, Salaf, especially on the tech side.
Speaker 2: How are you interpreting the weakness that we're seeing today.
Speaker 4: Yeah, I think there's a number of different factors that
Speaker 4: are coming into play. Obviously, the geopolitical tensions with the
Speaker 4: China restrictions on AMD and I three hundred decks. Obviously,
Speaker 4: AI has been one of the kind of leading drivers
Speaker 4: of the sema conductor industry. You also have another, you know,
Speaker 4: reports out that iPhone sales are down over twenty percent
Speaker 4: in the China market, and obviously that's been a big
Speaker 4: driver of some actuctors spend out there as well. So
Speaker 4: there's just a lot of headlines out there that are
Speaker 4: just kind of impacting the semic conductor market at this point.
Speaker 3: Is there any of it though? Okay, so semiconductor, but
Speaker 3: I mean in overall the tech trade here, do you
Speaker 3: think the markets considering the run up that we've seen. Certainly,
Speaker 3: if you look at the Nasdaq one hundred this year,
Speaker 3: it makes sense to see somewhat of a pullback here
Speaker 3: or a little bit of a kind of maybe revaluation
Speaker 3: in terms of the run up that we've had.
Speaker 4: Sure, sure, absolutely, you know, I think what we're just
Speaker 4: seeing here is just a little bit of pullback just
Speaker 4: given how strong the overall tech markets have been, and obviously,
Speaker 4: you know, some of the conductors have been a big
Speaker 4: part of that. So it does make sense that just
Speaker 4: given the headlines and some of the concerns that we're
Speaker 4: seeing today. You know, it does make sense that we're
Speaker 4: seeing a little bit of a pullback.
Speaker 3: Let's remind everybody the socks is up sixteen percent this year,
Speaker 3: so quite a run up.
Speaker 2: So I mean, John, is it healthy to see a
Speaker 2: day like today or is it? Does it concern you?
Speaker 4: I'm not overly concerned. You know, obviously it shouldn't be
Speaker 4: a surprise that, you know, iPhones are kind of not
Speaker 4: doing as well in the China market right now, and
Speaker 4: talking about it from US, yeah, it's it's been weak.
Speaker 4: And you know, obviously we know Huawei's kind of back
Speaker 4: into the market, and obviously they've been we've been seeing
Speaker 4: signs over the last several months that they've been gaining
Speaker 4: spare at the expensive Apple and you know, on the
Speaker 4: on the AMD front, you know, that shouldn't be a
Speaker 4: surprise either. I'm not really overly concerned about it. If
Speaker 4: you think about am d's positioning there, they're coming from
Speaker 4: zero share in the a AI market and most of
Speaker 4: their share and revenue news that we expect this year
Speaker 4: are expected to be a really non Chinese driven. It's
Speaker 4: really going to be driven by all the major hyperscalers
Speaker 4: that are more North American base and less we see
Speaker 4: them less dependent upon the China market, at least in
Speaker 4: this early part of the c I cycle for them.
Speaker 3: Yeah, and if I look at the socks today, while
Speaker 3: it looks like every name, all of the thirty names
Speaker 3: and the Philadelphia Semiconductor Index are down today, John, and
Speaker 3: Nvidia is doing the best, just down about four tensive
Speaker 3: a percent. AMD is the third best, but it's still
Speaker 3: down about one point six percent, so definitely outperforming what
Speaker 3: we're seeing. More broadly, Let's go to Nvidia, right, best
Speaker 3: performing name in the S and P five hundred last year,
Speaker 3: best performing name in the S and P five hundred
Speaker 3: again this year. What are your expectations realistically that this
Speaker 3: is that this one will continue to outperform and fundamentally
Speaker 3: it has the reasons why.
Speaker 4: Yeah, we absolutely still believe that in video's well positioned
Speaker 4: to you all perform in the semi market right now.
Speaker 4: You know, obviously they are the clear major beneficiary of
Speaker 4: the investment we're seeing in generative AI. You know, we're
Speaker 4: here at the Emerging Tech Stomach conference, and you know,
Speaker 4: one of the trends that's very clear here is that
Speaker 4: AI is being embedded into literally every application and end
Speaker 4: devices out there. Right It all started in the data
Speaker 4: center with the training of these large language models, and
Speaker 4: over time, obviously that's going to move to inferencing. But
Speaker 4: you're seeing significant investment in software, and then you're also
Speaker 4: seeing significant investments in kind of pushing AI to the edge.
Speaker 4: I think that the next product cycle that we can
Speaker 4: probably look forward to over the next several years is
Speaker 4: potentially you know, edge AI, which includes you know, potentially
Speaker 4: the the proliferation of AI PCs as well as you
Speaker 4: know AI smartphones.
Speaker 2: Hey, John, you got an eleven hundred dollars price target
Speaker 2: on in videos, so significant ups side from here where
Speaker 2: it's trading at eight forty seven right now. One question
Speaker 2: that I've been grappling with over the last few months
Speaker 2: is really understanding the benefits of AI to a general company.
Speaker 2: We understand the beneficiaries as you know, super microcomputer, in
Speaker 2: Vidia a m D, but give me an idea about
Speaker 2: how the mom and pop company that can go out
Speaker 2: and buy one of these in Vidia chips will benefit
Speaker 2: from using AI. How will it get you know, people
Speaker 2: to buy more stuff, How will it get ads to
Speaker 2: be more efficient? How will it get fewer people to
Speaker 2: do to do more?
Speaker 4: Yeah, I think a lot of those questions are still
Speaker 4: kind of very early days. Obviously, chat GBT and open
Speaker 4: Ai has given us a flavor of it. Some of
Speaker 4: the applications that we see obviously still very early days
Speaker 4: that are always to improve significant efficiencies of small medium
Speaker 4: sized businesses are going to be potentially copilot, right, Copilot
Speaker 4: is embedded into off that's just going to make it
Speaker 4: more efficient for your average user to prepare presentations, right,
Speaker 4: to make a more efficient sales pitch. And then also
Speaker 4: again you know I talked about these EDGAI devices and
Speaker 4: endpoints such as AI smartphones. You know, I think one
Speaker 4: application that we potentially see and have heard about it
Speaker 4: in Qualcom, one of my other covered companies has talked
Speaker 4: about is like real time translation.
Speaker 1: Right.
Speaker 4: So today you can use Google Translate, but there's a
Speaker 4: there's a latency issue, right, so if you enter entered
Speaker 4: a phrase has to go to the cloud and then
Speaker 4: it comes back. But if you have a small, smaller size,
Speaker 4: large language model that it's embedded to your smartphones that
Speaker 4: is capable of supporting real time translation, right, I mean
Speaker 4: that's those are some applications that we look for that
Speaker 4: that could make things a lot more efficient.
Speaker 3: Yeah, that would be really useful. Hey, John, promise that
Speaker 3: we can check in with you after the conference and
Speaker 3: either come on by our studio or we'll cap remotely,
Speaker 3: because love to talk more about what you're hearing and
Speaker 3: making the connection between kind of all the stuff that's
Speaker 3: out there, especially in the AI space, in the semiconductor space,
Speaker 3: and how we kind of ultimately put it all to work.
Speaker 3: So thanks, thanks so much for taking time for us.
Speaker 3: Of course, John vid he's a managing director equity research
Speaker 3: analyst over at key Bank Capital Markets, joining us from
Speaker 3: San Francisco where he's at the key Bank Capital Market's
Speaker 3: Emerging Tech Summit.
Speaker 2: We got Andrew Collins with us. He's president and CEO
Speaker 2: of a Sentient Jet, also the COCO of the parent company,
Speaker 2: flex Jet. Good to have you back with us. Andrew,
Speaker 2: How are you good?
Speaker 1: Much? So?
Speaker 2: Did you see any of that weakness in twenty twenty
Speaker 2: three that Dasso referred to in their earnings report?
Speaker 1: You know, it's funny because we deal with a lot
Speaker 1: of OEMs at the Flexjet level and we have a
Speaker 1: fleet of about three hundred aircraft.
Speaker 3: There original equipment manufacturers.
Speaker 1: Original equipment manufacturers. Sorry, I know Embraer, Golfstream people like that, right.
Speaker 1: So at the end of the day, actually they had
Speaker 1: back orders and we had delays in getting aircraft and
Speaker 1: things like that. So I don't want to call to
Speaker 1: sew kind of an anomaly, But at the end of
Speaker 1: the day, we could fill that capacity and we could
Speaker 1: take those aircraft on, and we continue to take aircraft on.
Speaker 2: But what about demand. Was demand in twenty twenty three
Speaker 2: higher or lower?
Speaker 1: It depends on what you're looking at in the facet
Speaker 1: of the industry. So if you look at it from
Speaker 1: a fractional ownership standpoint, there was a lot of selling
Speaker 1: that happened and a lot of pent up hours that happened.
Speaker 1: So we just had the most flying we've ever had
Speaker 1: in company history over President Day weekend. Right. If you
Speaker 1: look at it from a jet card standpoint, which is
Speaker 1: Sentient Jet, we did see it kind of start to soften,
Speaker 1: and in the on demand market it's really getting back
Speaker 1: to kind of a it's still growth over twenty nineteen,
Speaker 1: and you're still seeing some of the people retain from
Speaker 1: the pandemic, but it isn't like twenty one and twenty
Speaker 1: two where I think everybody was running.
Speaker 3: Around with their hair on dig into that demand over
Speaker 3: President's Day holiday? Were there deals like I don't know how,
Speaker 3: you know it was industry, So what was it all about?
Speaker 1: No, it's it's you know, I'll tell you what. In
Speaker 1: twenty one and twenty two, it was long hours, long days,
Speaker 1: and every day felt like what we call a peak day.
Speaker 1: It just felt like everybody wanted to fly persistently. It
Speaker 1: used to be that like a Monday or a Tuesday
Speaker 1: or you know, you get a break. There was not
Speaker 1: a lot of breaks. Now what's happening is you're having
Speaker 1: high concentration days. And so in the fractional world, when
Speaker 1: somebody buys for a five year time horizon into an aircraft,
Speaker 1: they've bought the hours they're going to use that. So
Speaker 1: the owner demand for that spikes on certain days. And
Speaker 1: so collectively we've got the most hours under management we've
Speaker 1: ever had at a company and it unlocked on President's stable.
Speaker 3: How much is an inventory those hours? Like I'm always curious,
Speaker 3: like do you guys look at that of like, Okay,
Speaker 3: this is stuff that people have paid for, have to
Speaker 3: spend and use.
Speaker 1: Yeah, no, we it's actually one of the major KPIs
Speaker 1: in our business. It's called hours under management, and you
Speaker 1: have to look at it by product, by aircraft, and
Speaker 1: you have to think about it. And that's how you
Speaker 1: do your demand, your demand shaping, how you think about
Speaker 1: capacity planning and everything else.
Speaker 3: How much visibility does it give you right now?
Speaker 1: It gives me very good visibility, Like the forward looks
Speaker 1: really good, twelve months, still good, twenty four months. Depends
Speaker 1: on how our year goes. From a selling standpoint.
Speaker 2: Pilots having trouble getting pilots.
Speaker 1: No, I think the challenge for us. So we probably
Speaker 1: hired four hundred pilots at the flexjet level in twenty three.
Speaker 1: We'll do the same this year. I think what you
Speaker 1: have to think about is number one, we actually try
Speaker 1: to hire the best of the best pilots. We don't
Speaker 1: look for just any pilot, right.
Speaker 2: So where they coming from? Are they coming from regional carriers?
Speaker 2: Are they retiring from.
Speaker 1: No, they could be coming from a competitor, They could
Speaker 1: be coming from a regional carrier, They could be coming
Speaker 1: out of the military. Okay, But what we found is
Speaker 1: you want to make sure that if you're hiring somebody
Speaker 1: you're hiring on a track where they're going to stay
Speaker 1: through three years. They stay through three years, they're in
Speaker 1: for a career. We want it to be a career destination.
Speaker 1: We do find that. Excuse me, we're actually competing more
Speaker 1: with commercial airlines than we are any other competitor because
Speaker 1: the commercial airlines are really putting out large sums of
Speaker 1: money and large caps, and they're unionized, and they're unionized.
Speaker 1: But what people forget is the history of commercial right
Speaker 1: where there's furloughs and things happen, you know, and so
Speaker 1: so it looks very rosy right now. I think we've
Speaker 1: got a pretty methodical plan and a pretty good destination
Speaker 1: for you as a career type. So yeah, we've we've
Speaker 1: put a lot of money into recruiting our pilots.
Speaker 3: It was an ideal pilot in terms of age and
Speaker 3: hours that they've already got.
Speaker 1: So you want somebody that's got the time and type.
Speaker 1: You want somebody that's experienced. You want somebody that has
Speaker 1: at least a minimum of three thousand hours. You know,
Speaker 1: he really has. Like we actually increased it recently as
Speaker 1: opposed to decrease it. Most people are decreasing it.
Speaker 3: That's why I wanted to ask you.
Speaker 1: And that's actually a good bell weather for us. That
Speaker 1: just shows you the strength of who we are. We're
Speaker 1: trying not to fall into the trap of, you know,
Speaker 1: recruit at all costs. We're trying to get the best
Speaker 1: of the best.
Speaker 3: Can you remind us on pricing, give us an idea
Speaker 3: of like if somebody wants to take a trip and
Speaker 3: have you up in the last tie, so like my mother.
Speaker 1: So I let me speak to it at the card level,
Speaker 1: because that's that's where I had a lot of experience.
Speaker 1: At the end of the day during the surge, when
Speaker 1: everybody wanted it, we the market would bear any thing, right, Yeah,
Speaker 1: And for us, we had to keep up with the
Speaker 1: market and keep pace and make sure we were living
Speaker 1: up to the consumer promise. So we had to augment pricing. Okay,
Speaker 1: so we augmented pricing probably by thirty five percent. It's
Speaker 1: the biggest jump I've ever seen and we've kept it
Speaker 1: there and the market is bearing it. It's it's our
Speaker 1: cell through is probably about ten to fifteen percent less
Speaker 1: than what we were doing. But we're very happy with
Speaker 1: the clients we bring in.
Speaker 4: Got it.
Speaker 2: Hey, I want to talk sustainability a little bit, because
Speaker 2: sustainable is not something you think of when you think
Speaker 2: about private air track And I'm going.
Speaker 3: To tell you we're going to get a million of
Speaker 3: emails of people like you're talking private jets sustainability.
Speaker 2: Come on, you're burning dead dynas.
Speaker 1: Come on. I'm happy to do it. It's my favorite topic.
Speaker 3: Are you following Elon's jet? Are Tailor's jet?
Speaker 2: Yeah?
Speaker 1: I know all about it seriously, So how.
Speaker 2: Do you think about it? I mean, you guys hit
Speaker 2: a milestone recently, but it's carbon offsets, right.
Speaker 1: No, it's more than carbon offsets. You want to do
Speaker 1: full emissions. So this is the big mistake that people
Speaker 1: make in our industry, and we're trying to actually lead
Speaker 1: the pack. So we do three hundred percent offsetting and
Speaker 1: it's built into the pricing. It is no cost to
Speaker 1: the consumer. This is a choice we made three and
Speaker 1: a half years ago, and even during the time when
Speaker 1: we had to pay operators lots of money during the
Speaker 1: surge and really think about things, we never wavered on this.
Speaker 1: This is really important to us. You do a full
Speaker 1: emissions offset, it's not just doing carbon you know, a
Speaker 1: carbon offset, you're getting water vapors, aerosols, you know, every
Speaker 1: imprint that you possibly can, you're factoring that in. And
Speaker 1: we work with a partner who's gone through and certified
Speaker 1: a lot of different projects to help us with this,
Speaker 1: plus registering our offsets and everything else. So it's really
Speaker 1: important to us. We've probably offset about one point three
Speaker 1: one point four million metric tons of carbon dioxide at
Speaker 1: this point, and we're gonna keep going and we've got
Speaker 1: millions earmarked for it. We need to get to a
Speaker 1: world of sustainable aviation fuel and we need to get
Speaker 1: this electric kind of world to happen, and it's gonna
Speaker 1: happen further out than we hoped ten seconds.
Speaker 3: How quickly can we get there?
Speaker 1: Seven years? Seven years? Yeah, it used to be five.
Speaker 1: Everybody would say five. I think mass consumer, mass passenger.
Speaker 1: You'll see some hybrids, but I think it's about five
Speaker 1: to seven years minimum.
Speaker 3: Great stuff is always come back soon, absolutely anytime. Andrew Collins,
Speaker 3: president and CEO of Sentient Jet and co CEO of
Speaker 3: the parent company, Flexjet, joining us here in studio