Speaker 1: Bloomberg Audio Studios, podcasts, radio news. Bloomberg Tech is alive
Speaker 1: from coast to coast with Caroline Hyde and New York
Speaker 1: and Eva Low in San Francisco.
Speaker 2: This is Bloomberg Tech coming up.
Speaker 3: Netflix beats expectations for second quarter results, but the bars
Speaker 3: high and it may not be enough to keep the
Speaker 3: rally going. Plus, we'll hear from TSMC's CFO on business opportunities,
Speaker 3: the impact of tariffs, and much more. In an exclusive
Speaker 3: interview and a look at the expansion plans of defense
Speaker 3: manufacturing company Hadrian to help build AI powered factories here
Speaker 3: in America.
Speaker 2: We speak to the CEO. I want to get to
Speaker 2: some news that broke in the last few minutes.
Speaker 3: JP Morgan, one of the biggest research shops on the street,
Speaker 3: is expanding its coverage to private companies and that includes
Speaker 3: some of the most important tech start up. Open ai
Speaker 3: is where their debut research has launched.
Speaker 2: So interesting.
Speaker 3: The analysts on that note saying basically they can't defend
Speaker 3: the moat that they have on llm's and in part
Speaker 3: because of no profitability till twenty twenty nine, they're worried
Speaker 3: about how much patience investors have. Really interesting development when
Speaker 3: you track the private sector and the world's biggest startups.
Speaker 2: Let's get to earnings and Netflix.
Speaker 3: Netflix shares down significantly right now, five percent in the session.
Speaker 3: That's the most since the beginning of April, as it
Speaker 3: stands on an inter day basis. But they beat on
Speaker 3: all of these classic financial metrics. Netflix has been saying
Speaker 3: for ages, judge us, please Wall Street on these financial metrics,
Speaker 3: and they did great in the second quarter, boosting their
Speaker 3: outlook as well. The content slate looks strong, and the
Speaker 3: ad supported cheer is going to grow doubling in twenty
Speaker 3: twenty five.
Speaker 2: Let's get out to blue both. Lucas.
Speaker 3: Sure, he's a managing editor for screen Time. That's our
Speaker 3: group that basically tracks the culture and our coverage of
Speaker 3: media entertainment and what was not to light with Netflix, Right, Lucas,
Speaker 3: this is just like a high bar that's been set
Speaker 3: by Wall Street and the company did really well.
Speaker 4: Yeah, I think you nailed it with the high bar. Look,
Speaker 4: there was nothing in the results to dislike. It's not
Speaker 4: like they beat on any metric by some huge amount,
Speaker 4: but they beat on everything. I think it's a stock
Speaker 4: that has doubled over the last year. It's a stock
Speaker 4: that had been up by forty to fifty percent so
Speaker 4: far this year, and it's even though it is now
Speaker 4: the most established and most valuable sort pure play entertainment
Speaker 4: company out there, it still has this momentum behind it
Speaker 4: where people think it has a lot of room to grow,
Speaker 4: and so by most conventional you know, PD ratio metrics,
Speaker 4: it's overvalued, and so if it only slightly beats, people
Speaker 4: just aren't as excited.
Speaker 3: Netflix does this thing where it basically like pre records
Speaker 3: its earnings cool and then dumps it as a YouTube video.
Speaker 3: This is what Ted Surroundos had to say on AI.
Speaker 5: We remain convinced that AI represents an incredible opportunity to
Speaker 5: help creators make films and series better, not just cheaper.
Speaker 5: There are AI powered creator tools, so this is real
Speaker 5: people doing real work with better tools. Our creators are
Speaker 5: already seeing the benefits in production through pre visualization and
Speaker 5: shot planning work and certainly visual effects.
Speaker 2: Lucause.
Speaker 3: I don't know how much attention the street was really
Speaker 3: paying to that commentary on AI. There was a lot
Speaker 3: of focus on the content slate, but do we learn
Speaker 3: anything new about Netflix's strategy going forward?
Speaker 2: Nothing kind of Macro High Level.
Speaker 4: Ted has been pretty consistent on his views on AI,
Speaker 4: which is that it is a tool, it will be used,
Speaker 4: and it's not just about cost cutting. They think it
Speaker 4: can make product better. But I think what was new
Speaker 4: was him talking about using it on a show. Most
Speaker 4: of these Hollywood companies have been very wary of kind
Speaker 4: of sharing how they're using AI, unless it's in sort
Speaker 4: of a gimmicky way, like they're going to dage someone
Speaker 4: for a character nobody are from a movie or show.
Speaker 4: But it gets two worked up about that. But this,
Speaker 4: along with this Amazon show House of David, are probably
Speaker 4: the two highest profile examples, just given how important Netflix
Speaker 4: and Amazon art of the ecosystem.
Speaker 3: Lucas all over the socials is Stephen Colbert saying that
Speaker 3: the Late Shows canceled?
Speaker 2: Do we know anything? What are the details here?
Speaker 4: Well, we know that the show is going to end
Speaker 4: in May of next year, and it's not just the
Speaker 4: you know, Stephen Colbert leaving the show. The Late Show,
Speaker 4: which started in I believe nineteen ninety three, will cease
Speaker 4: to exist. So it's the end of an era in
Speaker 4: late night television and there will be a lot of
Speaker 4: speculation as to what happens next to Jimmy Kimmel's Show,
Speaker 4: or to the Night to the Tonight Show with Jimmy Fallon.
Speaker 4: You know, CBS is really trying to position this as
Speaker 4: a financial decision. I don't think it would surprise anyone
Speaker 4: to know that ratings for late night shows have gone down,
Speaker 4: the cost of doing it hasn't gone up or hasn't
Speaker 4: gone down either, So you know, the profit made from
Speaker 4: these types of shows is now very slim. Some might
Speaker 4: even say they don't make money. But it's hard not
Speaker 4: to believe that there is some political angle to this,
Speaker 4: given what has happened between with the repair amount deal
Speaker 4: and the Trump administration. But nobody has any hard reporting
Speaker 4: on that.
Speaker 3: I know that was a jump from Netflix earnings to
Speaker 3: the Late Show, but it's what everyone's talking about right
Speaker 3: now online Bloombos. Lucashaw, who leads the screen Time team,
Speaker 3: thank you very much. I want to stick with Netflix.
Speaker 3: Dan kern Or Benchmarks Senior Anlyst joins us now. Benchmark
Speaker 3: currently has a hold on Netflix. What we didn't get into,
Speaker 3: Lucas was the ad supported tier. They're saying that that
Speaker 3: is in sort of a revenue contribution terms it's going
Speaker 3: to double in twenty twenty five. But did we learn
Speaker 3: anything more beyond the financials on how the consumer is
Speaker 3: engaging with that ad supported tier?
Speaker 6: Dan, Yeah, Can I actually just go back to something
Speaker 6: Lucas said for a second. I think that there was
Speaker 6: some bits to pick with relation to the report. I mean,
Speaker 6: if you wanted to be negative on the stack, you
Speaker 6: would basically say that almost all of the Guide inturies
Speaker 6: came from FX and less from member growth and growth
Speaker 6: and monetization, particularly in that ad supported chair that you
Speaker 6: just mentioned. And in addition, their engagement grew by only
Speaker 6: one percent, which while it's been stable for the last
Speaker 6: two and a half years, you've had the rest of
Speaker 6: Hollywood kind of pulling back on content spend, and so
Speaker 6: why are they not growing their engagement faster as they
Speaker 6: continue to spend I think sixteen eighteen billion dollars this
Speaker 6: year and then growing that a little bit less than
Speaker 6: revenue going forward. So that's just one point I'd make
Speaker 6: on the ad supported side. Yes, I think we did
Speaker 6: learn a little bit more last night. We learned that
Speaker 6: retention remains strong. We learned that ad supported is now
Speaker 6: more than fifty percent of new sign ups but we
Speaker 6: also learned later in the call and the callback that
Speaker 6: their pricing is improving on ad monetization, and so I
Speaker 6: do think if you wanted to be more positive on
Speaker 6: the story, you would say, okay. So even if most
Speaker 6: of the guidance rays came from FX, they still be
Speaker 6: it on member growth, which we thought would happened going
Speaker 6: to the print. And they also improve monetization on the
Speaker 6: ad supported, which is going to be the long tail
Speaker 6: of the growth story, and so numbers for twenty twenty.
Speaker 2: Six should also then move slightly higher.
Speaker 3: There are gonna be lots of people watching bluebexs Het
Speaker 3: right now saying hold on. If Netflix was so good,
Speaker 3: why is the stock down five percent? And of course,
Speaker 3: as of last night's close, it was a stock that
Speaker 3: was up forty three percent, market cap of five hundred billion,
Speaker 3: and that eclipses you know, your Disneys and your Warner
Speaker 3: Brother Discoveries by some distance. Right, this is a company.
Speaker 3: Would you say that's in good health?
Speaker 6: I think they're in fantastic health. I mean they're the
Speaker 6: king of the streamers.
Speaker 2: Right.
Speaker 6: You can argue YouTube, and you can argue YouTube monetization.
Speaker 6: You can argue how much room Netflix has to run,
Speaker 6: but by almost all engagement metrics, by subscriber metrics, they're
Speaker 6: dominating the streaming industry, and they're doing it as opposed
Speaker 6: to all the rest of the companies that you mentioned.
Speaker 6: They're doing it profitably and very much so. If anything else.
Speaker 6: You know, they actually took up their operating margin guidance
Speaker 6: this year and it continues to create higher and so
Speaker 6: maybe that's one of the reasons why they're not splashing
Speaker 6: out more cash on content spen. They're trying to do
Speaker 6: it in a thoughtful manner, which we saw others do
Speaker 6: in maybe a less thoughtful manner, and they're trying to
Speaker 6: dig out of their holes. So Netflix is a terrific
Speaker 6: position going forward. But as Lucas said, you know, expectations
Speaker 6: are very elevated.
Speaker 3: Dan, what are you watching right now on Netflix and
Speaker 3: what are you excited about in the content s Late.
Speaker 6: Squid Games three looks super exciting, the new animated stuff
Speaker 6: they've got coming out since we talked about that. Really
Speaker 6: interesting articles out today about how also kids content is
Speaker 6: leading sort of the retention charge. So very interested to
Speaker 6: see what they produce. Being a family guy here, really
Speaker 6: interested to see what they produce downslate, but you know
Speaker 6: there are gonna be some unique events fights in the
Speaker 6: back half.
Speaker 2: Of the year. I look forward to those.
Speaker 6: And then of course you've got the NFL Christmas Day
Speaker 6: Games and who could miss those, right, that's.
Speaker 3: A great summary of both the produced and live content.
Speaker 3: Dan khanas bench Mark Capital is seene around this. Great
Speaker 3: to have you on the show. Now let's get some news. Overnight,
Speaker 3: Meta hired a pair of key AI researchers from Apple,
Speaker 3: not long after already poaching their former boss from the
Speaker 3: iPhone maker. Sources say that Mark Lee and Tom Gunter
Speaker 3: were hired for Meta's Superintelligence Labs team, and one of
Speaker 3: them has even started the new job already. So a
Speaker 3: part of a scramble for AI talent across the tech
Speaker 3: industry lately, with Meta proving especially aggressive in its recruiting.
Speaker 3: That was another Bloomberg exclusive overnight. Now coming up, we're
Speaker 3: going to have to take a look at how uncertainty
Speaker 3: over whether President Trump will fire fed chair your own
Speaker 3: power is impacting technology investors.
Speaker 2: I also want to get out.
Speaker 3: To shares of crypto related stocks and take a look
Speaker 3: at bitcoin. This is more about stable coin, but the
Speaker 3: Genius Act has gone through the stable coin legislation. Coinbas
Speaker 3: is actually office section highs up four percent circles bin volatle.
Speaker 3: But what we know is that this will be sent
Speaker 3: to the President's desk today and that they'll be as
Speaker 3: signing ceremony later today.
Speaker 2: Stick with us. What im more on that this is
Speaker 2: Bloomberg Tech.
Speaker 3: It's been another wild week in tech, particularly in financial markets,
Speaker 3: lurching on every twist. In a saga around President Donald
Speaker 3: Trump and FED Chair Jerome Powell, the President says he's
Speaker 3: not firing Powell, but somehow that statement still felt like
Speaker 3: a threat that chaos has very real consequences for policy
Speaker 3: and for technology investors. Joining us now Joe Joub, managing
Speaker 3: partner at Lenia Capito and crucially a former FED insider
Speaker 3: and staffer who worked on markets and monetary policy inside
Speaker 3: the belly of the beast. Joe, it's going to have
Speaker 3: you back on Bloomberg Tech. You know what it's like
Speaker 3: being inside the FED. You understand the independence of the FED,
Speaker 3: But what have you made of this scenario as somebody
Speaker 3: that's now left the FED behind and works principally as
Speaker 3: a private markets stuff.
Speaker 7: Yeah.
Speaker 8: Look, I think the most direct relationship between FED policy
Speaker 8: and technology investing adventure capital investing is the path of
Speaker 8: interest rates, and in particular what that means is, you know,
Speaker 8: interest rates have such a huge impact on valuations and
Speaker 8: returns in private markets, especially as companies go public. So
Speaker 8: so now, as an entrepreneurial investor running my own firm,
Speaker 8: I don't you know, I don't think as much about
Speaker 8: who's sort of driving the buzzer because ultimately macroeconomics is
Speaker 8: a very much rules and and sort of a principle
Speaker 8: based uh sort of a profession, and whether it's this
Speaker 8: chair another chair, the path of interest rates between A
Speaker 8: and B wouldn't be that much different just because for
Speaker 8: a couple of reasons. One, if there's also eleven other
Speaker 8: voting members in the room, and so so in my book,
Speaker 8: you know rates are coming down, when whether they come
Speaker 8: down in July or September the start of the cut,
Speaker 8: it doesn't really significantly impact private markets valuations. Also, you
Speaker 8: know in private market, if there's a lag of many
Speaker 8: months before asset prices are just in the staff market,
Speaker 8: that might impact plus IPO stocks a bit more. But
Speaker 8: as to cut to sum it up, in private markets,
Speaker 8: we're working at often the path of interest rates to
Speaker 8: put into our financial models, and between you know, the
Speaker 8: chair or another chair, that the delta wouldn't be significant.
Speaker 3: There's a difference, of course, of being a staffer or
Speaker 3: working at the Federal Reserve and then being an appointed
Speaker 3: official at the top of the Federal Reserve. But would
Speaker 3: you just reflect a little bit like what it was
Speaker 3: like to work their research there at the time, and
Speaker 3: whether you or your colleagues would really pay any attention
Speaker 3: to the politics of the day.
Speaker 8: You know, to be honest, you know, there's not much
Speaker 8: that the staffers could do. And now at the board
Speaker 8: level and the involuntate level often you know, the board
Speaker 8: is you know, very influential, but there's still eleven other uh,
Speaker 8: twelve other banks sort.
Speaker 7: Of in the room.
Speaker 8: And and so you know, I think the last thing
Speaker 8: I'll say on this top, you know, because I worked
Speaker 8: there ten more than ten years ago, and I was
Speaker 8: there during the transition from burning into the yelling and
Speaker 8: and and at that point you realize, whoever was you know,
Speaker 8: if you were driving the bus, shouldn't impact MONITOR policy
Speaker 8: that much because ultimately MONITOR policy is made on a
Speaker 8: set of rules tailored the tailor rule you know, markets
Speaker 8: and the GDP and inflation so so so. So that's
Speaker 8: why as a result, as a staffer, you don't you
Speaker 8: don't really pay that much attention to the politics. Now
Speaker 8: on the private market side, I pay a little bit
Speaker 8: more attention to the chair because that will impact sort
Speaker 8: of the path of interest rates. But again it just
Speaker 8: is not it's not significant to what we do.
Speaker 3: We've been using the phrase private markets, but you're also
Speaker 3: almost all intensive purposes a venture capital investor, right. And
Speaker 3: the way that it's always explained to me is when
Speaker 3: you think about the makeup of the LPs. They might
Speaker 3: be high network individuals or family offices. They have a
Speaker 3: choice go with various assets where rates and the current
Speaker 3: yield on any given treasury is one factor. But they
Speaker 3: might also say, well, over a ten year horizon, I
Speaker 3: want to get one hundred X on my investment or
Speaker 3: something like that. Just explain the mechanics of how that
Speaker 3: factor is in.
Speaker 8: Yeah, well, look, as a matter of principle, as an investor,
Speaker 8: you know there's sort of average returns you sort of expect,
Speaker 8: like if you can always get two to five percent
Speaker 8: in money markets on average, because Fetch finds is two
Speaker 8: percent on average, and you can go up to five
Speaker 8: percent like in the last couple of years, and then
Speaker 8: in terms of and then you can sort of go
Speaker 8: into the higher risk assets like private credit, public credit,
Speaker 8: getting in real estate getting eight twelve percent.
Speaker 2: But then you often go.
Speaker 8: Get the risk current and work for text acts and
Speaker 8: venture capital seeking twenty percent returns a year now because
Speaker 8: because the risk free rate is sort of the alternative,
Speaker 8: the lower the rate, the more risk seeking the average
Speaker 8: allocator becomes, and vice versas. So as rays are coming down,
Speaker 8: you would expect this, all things equal, sort of allocators
Speaker 8: should be allocating more into risk assets. This is sort
Speaker 8: of the opposite of what happened during Q either. The
Speaker 8: point of QUE was to suppress eels, to kind of
Speaker 8: you know, enforcing investors to go into risk assets, and
Speaker 8: so the last couple of years that kind of winning
Speaker 8: reverse and now we're kind.
Speaker 2: Of getting back again. Joe, we're showing your portfolio earlier.
Speaker 3: One of the names you're in Scale AI or were
Speaker 3: in I think your reaction and your summary of that
Speaker 3: Meta superintelligence team and the Aquaharer Scale.
Speaker 8: Yeah, we're still a significant you know, investor in the company,
Speaker 8: so as a as a as a a to take
Speaker 8: step back. You know, in the last eighteen months, we've
Speaker 8: deployed over nine figures of capital into the air foundational companies,
Speaker 8: and some of them are listed. There's others we didn't
Speaker 8: list on our website for for ada reasons, and Scale
Speaker 8: is one of those investments. And so I sort of,
Speaker 8: you know, I've read a lot about what's covered in
Speaker 8: the present. My take is I still believe in the
Speaker 8: long term potential of that business for a few reasons.
Speaker 8: One is like it's business model is more of assass
Speaker 8: and consulting, a business model where who's at the helm
Speaker 8: impacts the company's future a bit less than if this
Speaker 8: were at a large language model company where the leadership
Speaker 8: team and the family and team and the engineers were
Speaker 8: probably would account for this majority of the value. So
Speaker 8: you know, Scale has many large, large contracts from the government,
Speaker 8: from corporations, and these are recurring businesses. So after the
Speaker 8: sort of the transaction by Wally, you know, we receive
Speaker 8: some stream.
Speaker 3: Sorry real quick, we're short on time, but I really
Speaker 3: wanted to ask you about this. We reported that JP
Speaker 3: Morgan is moving into research a private company starting with
Speaker 3: open AI. Do you have exposure to just thirty seconds,
Speaker 3: but you're going to read that research.
Speaker 2: Honestly.
Speaker 8: Pubably market investors tend to less understand private markets a
Speaker 8: bit more. I heard the show a little earlier. In
Speaker 8: private markets, companies are supposed to be burning cash. They're
Speaker 8: kind of like students in undergrad or in college. You
Speaker 8: want to be burning cash in maximized growth. So to
Speaker 8: whether the company becomes proper twenty twenty seven twenty twenty
Speaker 8: nine is probably not as important as the public markets
Speaker 8: invest research animals make it make the scene.
Speaker 3: Joe's out managing partner Millennia Capital on all of the
Speaker 3: news of the week in the day.
Speaker 2: We really appreciate it. Thank you very much for coming up.
Speaker 3: We're going to hear from the CFO of TSMC about
Speaker 3: the chip makers efforts to expand into the United States.
Speaker 2: That's coming up next. This is Bloomberg Tech.
Speaker 3: Taiwan Semiconductor Manufacturing says it plans to remain prudent about
Speaker 3: spending this year even as the chip maker works to
Speaker 3: build out production capacity in the US. TSMC CFO ween
Speaker 3: to one set down exclusively with Bloomberg discuss some of
Speaker 3: the risks for the Taiwanese company setting up in the US.
Speaker 9: The same problems that we faced before. You have a
Speaker 9: culture difference, the generally more expensive here, all these things
Speaker 9: they are facing.
Speaker 10: The same thing for suppliers that are considering from Taiwan
Speaker 10: moving some operations to the US. What sort of assistance
Speaker 10: can TSMC provide.
Speaker 9: We understand the challenges for these suppliers because we've been
Speaker 9: through it. So we brought us these challenges to the
Speaker 9: attention of the government about permit application and things like that,
Speaker 9: the humor resources availability. That's what we can do to
Speaker 9: urge the government try to solve this issue for these suppliers.
Speaker 3: That was TSMC CFO wend L Juan, who can check
Speaker 3: out the entire interview on bloomberg dot com. Bloomberg's Annabelle
Speaker 3: Drewlers joins us now after conducting that interview late night
Speaker 3: in Taipei. There was so much more in it. What
Speaker 3: were the other key themes?
Speaker 10: Yeah, I think if you were to sort of take
Speaker 10: a step back and think, what was the key message
Speaker 10: out of these earnings, and I think in one word,
Speaker 10: it was conservative Because tsmcs we know, had a very
Speaker 10: strong quarter. They managed to lift their full year growth forecast.
Speaker 10: For instance, the thirty percent. That was up from around
Speaker 10: twenty five percent, and even when you think about how
Speaker 10: they performed in the first half of the year, their
Speaker 10: guidance for the third quarter, it's very strong and it's
Speaker 10: well that so the key question was sort of what
Speaker 10: exactly is going to be happening in your fourth quarter
Speaker 10: and just how bad could it get as well. But essentially,
Speaker 10: Wendelwang he told me that they are just very concerned
Speaker 10: about the macar uncertainties. That really relates to tariffs, of course,
Speaker 10: and that also played into the Kapex story, which was
Speaker 10: another big talking point in the interview, because they've kept
Speaker 10: that at thirty eight to forty.
Speaker 7: Two billion dollars.
Speaker 10: He said that they're going to be sticking with that
Speaker 10: again given those uncertainties. Even though he sat for a
Speaker 10: company of that size, you don't expect it to have
Speaker 10: any sort of big fluctuations year to year. So he
Speaker 10: still does say it's sustainable.
Speaker 3: And I'm alsothing really key to understand about TSMC, Like
Speaker 3: it's the crown jewel of Taiwan, right, but it operates
Speaker 3: in Taiwanese dollars while booking its revenue in US dollars,
Speaker 3: hence the FX impact. How did they explain that to
Speaker 3: you and how it will manifest I guess throughout the
Speaker 3: rest of the year.
Speaker 10: Yeah, that's it. I mean Taiwan or TSMC. As you said,
Speaker 10: it is the major company in Taiwan. It's by far
Speaker 10: the heaviest waiting on the local benchmark here. But as
Speaker 10: you said, it's got basically one hundred percent of its
Speaker 10: revenue and US dollars around seventy five percent of its costs,
Speaker 10: its outgoings or in Taiwanese dollars, and in the past
Speaker 10: few months there's been a rapid appreciation in the taiwan
Speaker 10: dollars that's having a really big impact on the company
Speaker 10: earnings because actually, if you had looked at them just
Speaker 10: in usd figures, the numbers would have been even stronger,
Speaker 10: but it was around a four and a half five
Speaker 10: percent hit for the period. But in terms of how
Speaker 10: they're managing this, we'll asked about sort of the different
Speaker 10: hedging tools that are available to them. They said that
Speaker 10: they do prefer vanilla strategies, but some of the things
Speaker 10: they're doing that he spoke about included selling Taiwanese dollars
Speaker 10: or US dollars rather in the spot market they're injecting money.
Speaker 10: We've seen them injecting ten billion dollars for instance, recently
Speaker 10: into TSMC Globals that's a subsidiary. Then they also use
Speaker 10: forward contracts as well, so essentially just trying to manage
Speaker 10: those risks.
Speaker 7: But were actually do un to stand.
Speaker 10: They're a very big Bloomberg customer as well, because they
Speaker 10: are trying to manage these basically on a daily basis.
Speaker 2: Anabel's super quick summarize their AI demand.
Speaker 7: AI demand is super robust.
Speaker 10: I mean that was really really clear out of these
Speaker 10: figures as well, and they're basically guiding for very strong
Speaker 10: demand from some of their key customers. Of course, we
Speaker 10: know that's in Video, we know that's Apple, and we
Speaker 10: don't really see so much optimism from them generally. But
Speaker 10: when they're saying things like robust demand, I mean, the
Speaker 10: market really needs to be paying attention to that.
Speaker 3: Bloomberg's, Anabel Rulers and Taipei thank you very much. Now
Speaker 3: coming up, we're going to continue the tech earnings discussion
Speaker 3: with Martin Norton from Empower, a conversation that you do
Speaker 3: want not want to miss because looking at that calendar,
Speaker 3: my goodness, there's a lot to come. This is Bloomberg Tech.
Speaker 3: Welcome back to Bloomberg Tech. Netflix is worth recapping right.
Speaker 3: The stocks down almost five percent. That puts it on
Speaker 3: track for its biggest drop since the first week of April.
Speaker 2: But it is a stock there was up more than.
Speaker 3: Forty percent so far this year in excess of five
Speaker 3: hundred billion dollars market cap.
Speaker 2: Beat across the board.
Speaker 3: Strong forecast, but a very high bar and that's kind
Speaker 3: of a big factor and the only real stock story
Speaker 3: that's out there in the market right now, though for
Speaker 3: a couple of more to come. Now, what happens next?
Speaker 3: Big tech earnings on the docket Next week you have Tesla,
Speaker 3: and then you have Alphabet, and then it just comes
Speaker 3: thick and fast the week after with Apple, Amazon, and
Speaker 3: then much later in August Nvidia. Earnings in the tech
Speaker 3: space is back in focus. Thank goodness, what are we expecting?
Speaker 3: Martin Norton, chief investment strategist at Enpower is with us.
Speaker 3: It's my happy time, right, this is what we're so
Speaker 3: excited about. We get that granular detail on capital expenditures,
Speaker 3: on the big picture of what's happen happening with the
Speaker 3: customer base, what is it that you're most focused in
Speaker 3: on and zero in on this earnings period.
Speaker 11: Well, you know what's interesting when I reflect back on
Speaker 11: it's been such a busy year, so much news. But
Speaker 11: one of the things that I think has been maybe
Speaker 11: appreciated by the market but not appreciated as much by
Speaker 11: the commentators is what a reinforcing narrative we've seen around AI.
Speaker 11: So of course we're focused on tariffs, We're focused on
Speaker 11: everything that's happening at the FED. But if we roll
Speaker 11: the clock back to the start of the year and
Speaker 11: all the questions that we're surfacing around deep seek, let
Speaker 11: alone concerns about where AI demand is, what we've really
Speaker 11: seen as.
Speaker 7: The year has progressed, is.
Speaker 11: That capex, you know, continuing and then also these nascent
Speaker 11: signs of AI demand in AI implementation, which has been
Speaker 11: such a boon for the hyperscalers in particular. So I
Speaker 11: think watching that AI narrative continue is especially important in
Speaker 11: this in this earning season.
Speaker 3: A team in New York, let's bring back the calendar.
Speaker 3: I just want to make one point on in video
Speaker 3: because in VideA comes so late in the season. But
Speaker 3: what I reflect on is that when in Nvidia hit
Speaker 3: four trillion dollars of market cap. All of the research
Speaker 3: I was reading was about how the data in the
Speaker 3: ninety days prior to that had basically shown that Nvidia's
Speaker 3: most important customers had that commitment that you just outlined
Speaker 3: on capital expenditures. Take that forward into this next period
Speaker 3: and bear with me. You know, is it just as
Speaker 3: simple as you need to see Alphabet, Microsoft Meta continue
Speaker 3: to say we're committed to this for in Nvidia, then
Speaker 3: to have a great print when it comes around.
Speaker 11: Well, I think that's that's the first derivative if you
Speaker 11: do want to see the customers showing that commitment kind
Speaker 11: of reinforcing what they've suggested in terms of capex estimates,
Speaker 11: which are very tremendous as we've seen. But then also
Speaker 11: that second derivative, which is what I think of as
Speaker 11: that AI implementation both within the tech sector but then
Speaker 11: for the economy overall. And I think as you start
Speaker 11: to see that that second derivative that demand come through,
Speaker 11: I think that is reinforcement for the pick and shovels,
Speaker 11: for the NVIDIAs of the.
Speaker 2: World, the world cord is tariffs.
Speaker 3: Well, how are the analysts on your desks kind of
Speaker 3: thinking about that and modeling for that right now.
Speaker 11: Well, you know, it's so interesting because if we're taking
Speaker 11: a look just at price performance since that bottom on
Speaker 11: April eighth, if you're looking at it, you know, in particular,
Speaker 11: it's a forty five percent run.
Speaker 7: There has been this massive.
Speaker 11: Enthusiasm where the market is beginning to appreciate what's happening
Speaker 11: with AI and maybe sigh of relief in terms of
Speaker 11: the resilience of the economy. But I think when we're
Speaker 11: taking a look at terrifs, we haven't really seen the
Speaker 11: full force of those costs come into effect, and so
Speaker 11: of course we want to see what happens with corporate
Speaker 11: earnings in Q two. But as I think about longer
Speaker 11: term and kind of this rollback of globalization, I guess
Speaker 11: my thought is, you know, longer term, what does.
Speaker 7: This mean for corporate profitability?
Speaker 11: And you know, there's a revenue that the government is
Speaker 11: collecting that's coming from corporations, and so what that looks
Speaker 11: like That is kind of the wild card in terms
Speaker 11: of how that weighs on you too, But longer term
Speaker 11: what that means for earnings Marty.
Speaker 3: I really appreciated you you going back to reference that
Speaker 3: kind of deep Seak moment in April where long story
Speaker 3: short markets were roiled by the performance of deep Seats
Speaker 3: model and the cost of it getting there. But one
Speaker 3: of the things was happened was there was a kind
Speaker 3: of a valuation reset on the MAG seven. Have they
Speaker 3: climbed back to a level where you're still like or
Speaker 3: is there some some interest to look at the MAG
Speaker 3: seven in a portfolio right now?
Speaker 7: Well, that's what jumps out to me.
Speaker 11: So when we're taking a look at valuations, what we
Speaker 11: really want to focus on is the extremes. So for example, technology,
Speaker 11: if we're looking at its valuations, price to forward earnings
Speaker 11: over kind of a history for that particular sector, it
Speaker 11: is in those extremes.
Speaker 7: It's in those ninth tenth defiles.
Speaker 11: But when we're looking at the MAG seven, we don't
Speaker 11: see that same I guess extreme valuation picture. So I
Speaker 11: think it's really that once you punch that we saw
Speaker 11: for the MAG seven, first getting hit by the deep
Speaker 11: seat questions, then getting hit on the tariff that have
Speaker 11: made those those companies a little bit more approachable in valuation.
Speaker 11: And when you think about the health of these companies,
Speaker 11: kind of their their ties to AI and their general
Speaker 11: kind of strength within the overall economy. It's hard not
Speaker 11: to consider the MAG seven a bit of an opportunity,
Speaker 11: at least offering a bit more margin of safety than
Speaker 11: some of the other tech related names.
Speaker 3: Marta, I'm going to go to a question I've not
Speaker 3: had the opportunity to ask for many months now, how
Speaker 3: good which is how are you you using AI in
Speaker 3: each of your sort of daily tasks?
Speaker 2: It works seriously? And which tools do you rely on?
Speaker 7: Well, you know, it's a good question.
Speaker 11: I am a slow adapter, so you know, I'm definitely
Speaker 11: representing more of the tail or more the average of
Speaker 11: the investment community. And I do you know, I'll use
Speaker 11: chat GPT on the regular just to get a quick
Speaker 11: summary view of what things look like. Hey, give me
Speaker 11: the lay of the land in this, give me the
Speaker 11: lay of the land in that. And more increasingly beginning
Speaker 11: to think about what we can do to automate tasks,
Speaker 11: especially that spreadsheet build those deeper analytical fis. What can
Speaker 11: we do to make that faster so that we can
Speaker 11: get the heart of the questions sooner and spend more
Speaker 11: time on the analysis. So I'm really thrilled about it,
Speaker 11: despite the fact that I'm a late adapter in most things.
Speaker 11: I think this is something that is really opening up
Speaker 11: the bandwidth to explore the more interesting stuff of my job.
Speaker 2: I really appreciate the answer.
Speaker 3: It's like a lot of our audience are facing the
Speaker 3: same questions with themselves. Something we reported earlier in the
Speaker 3: program is that JP Morgan, basically the biggest research shop
Speaker 3: right on the street, is expanding its research coverage to
Speaker 3: private companies, and they're starting with open AI.
Speaker 2: What I wanted to ask you about that.
Speaker 3: Was like almost as like a private proxy when you
Speaker 3: think about your own portfolio management, would you read research
Speaker 3: of those private companies to kind of think about the
Speaker 3: exposure your public companies have to that name open AI,
Speaker 3: or just to inform like future investment opportunity, you know.
Speaker 11: I think that convergence of public private is really important
Speaker 11: for the investment community. I think it's really tempting to say,
Speaker 11: you know, on the private equity side, are we looking
Speaker 11: at a market peak or you know.
Speaker 7: Begetting tactical with it.
Speaker 11: But the reality is that so much of the US
Speaker 11: market is actually private at this point, and so for
Speaker 11: us to really understand the dynamics of the public market,
Speaker 11: we have to have better understanding of the private market
Speaker 11: and getting those you know, those bits of information. It's
Speaker 11: it's kind of an inefficient market at this point. So
Speaker 11: the more that we can dig in, the more systems
Speaker 11: that we can build, the more landscape that we can view,
Speaker 11: combining the public and the private, I think that will
Speaker 11: inform our analysis all the better.
Speaker 3: Martin Norton Empower Chief Investment Strategy, is great to have
Speaker 3: you back on the show.
Speaker 2: Thank you very much.
Speaker 3: Now, coming up, manufacturing company Hadrian announces expansion plans to
Speaker 3: help build out AI powered factories here in America. This
Speaker 3: is the defense use case. We're going to speak to
Speaker 3: CEO Chris Power. Next, this is Bloomberg Tech. Defense manufacturing
Speaker 3: company Hadrian has announced it's raised the two hundred and
Speaker 3: sixty million dollar Series C that will be used to
Speaker 3: expand its footprint in California and Arizona. The company's building
Speaker 3: AI and robot automated factories across the US, utilized heavily
Speaker 3: in the aerospace and defense industries. Chris Powers, Hadrian, CEO,
Speaker 3: joins US now and Chris, welcome to Bloomberg Tech. It's
Speaker 3: really great to have you on. One of your investors
Speaker 3: says that the product is the factory. Just explain that.
Speaker 12: So we view our job as to reindustrialize the country
Speaker 12: and from the seventies to the twenty twenties, we really
Speaker 12: like offshot everything we possibly could. And it's this whole
Speaker 12: system of both our software powered by Opus as well
Speaker 12: as this new American workforce that creates this factory system,
Speaker 12: and that that is the real output to our customers.
Speaker 12: It's like, what are we producing, how accurate it is,
Speaker 12: how on time it is, and this full stack factory
Speaker 12: of time and the new American workforce we're enabling with
Speaker 12: that alongside is the most important thing we're building. And
Speaker 12: that's why we think the factory system that we're building
Speaker 12: with people and technology combined is the product sizeable round.
Speaker 3: Interesting group of investors, founders, fund in rees and Luxe capital.
Speaker 3: Why the size of the round, the difficulty or not
Speaker 3: in raising it, and what you plan to do with it, Chris.
Speaker 12: We're very lucky that we're open and shut within a
Speaker 12: small handful of weeks, less than a month. Really, that's
Speaker 12: just a credit to a fundraising ability of the market.
Speaker 12: It's just the team's hard work over the last year.
Speaker 12: What we will do with this capital is expand into
Speaker 12: Arizona with a new factory for our customers that's four
Speaker 12: times a size, as well as use that capital to
Speaker 12: hire more people so we can ship more manufacturing capabilities
Speaker 12: to our customers, both in aerospace and defense sectors, commercial manufacturing,
Speaker 12: and obviously you know the d D as well.
Speaker 3: In January of this year, I was with the Anderill
Speaker 3: team in Ohio when they announced and confirmed that would
Speaker 3: be the side of Arsenal one, and part of the
Speaker 3: discussion I had with Palmer Lucky was why not California.
Speaker 3: You know, Hadrian also has this big footprint in California,
Speaker 3: but you've looked to Arizona for your expansion. I think
Speaker 3: that's really worth discussing.
Speaker 12: Yeah, we all have you know, R and D in California,
Speaker 12: and we're not moving out of California. But one of
Speaker 12: the most important things is that we're creating thousands and
Speaker 12: thousands of new manufacturing jobs in every state. Arizona's been
Speaker 12: great to work with on the practical stuff like permitting workforce,
Speaker 12: getting energy connected to the building, all these basic things
Speaker 12: that are harder to do in some states. So we're
Speaker 12: really happy to expand into Arizona. But it also won't
Speaker 12: be the last. You know, our goal is to have
Speaker 12: factories in every state and creating you know, millions of
Speaker 12: new manufacturing jobs along the way.
Speaker 3: Because something that I think was kind of missed from
Speaker 3: your post and the announcement was what you're expanding into
Speaker 3: welding casting additive, is that just because that's where the
Speaker 3: demand is, particularly from the DoD and the the defense
Speaker 3: apparatus of this country.
Speaker 2: That's right.
Speaker 12: I think if you look at you know, pretty public
Speaker 12: information from the Secretary of the Navy or the Army
Speaker 12: in areas like shipbuilding, the nuclear force, munitions, there's these
Speaker 12: huge lack of skills in the country. You know, we
Speaker 12: need millions of world as, we need millions of machinists,
Speaker 12: we need millions of quality inspectors in all these manufacturing
Speaker 12: capability areas, and we just don't have the skilled workforce
Speaker 12: of that volume anymore. And this is what we're really
Speaker 12: doing with factories as the service, which is combining technology
Speaker 12: to make people ten times more efficient and enabling them.
Speaker 12: It's not about replacing workforce and manufacturing, because we just
Speaker 12: don't have a manufacturing workforce anymore in this country. So
Speaker 12: we really need to combine the two things that America
Speaker 12: is best at, you know, American software, in the American spirit,
Speaker 12: to get this ten times advantage over our global competitors.
Speaker 12: And yeah, we're working on those categories primarily because they're
Speaker 12: so important for areas like shipbuilding.
Speaker 3: Chris, when your peers come on this program, you know Castellian,
Speaker 3: Saronic vanavar Land or the Aerill team, they frame it
Speaker 3: in the context of China, China's manufacturing prowess, its competence
Speaker 3: in areas like software and hardware. How do you think
Speaker 3: about China and what is the sort of Hadrian mission
Speaker 3: statement with regards to China, if indeed you take it
Speaker 3: into consideration.
Speaker 12: Yeah, we think that the arsenal of inventory is not deterrence.
Speaker 12: It's the ability to produce fast and onshore, not just
Speaker 12: in areas of defense, but in pharmaceuticals. And that's why
Speaker 12: you have to reindustrialize the country.
Speaker 2: And I agree.
Speaker 12: You know, we've given the farm away to the CCP
Speaker 12: by letting them have all our manufacturing capability of the
Speaker 12: last three decades, and now we're in a position where
Speaker 12: that really degraded the skill set of the trades in
Speaker 12: the US. And this is why, you know, building ships,
Speaker 12: building munitions, building machine components in this country is very
Speaker 12: difficult because we kind of offshore that talent of the Chinese.
Speaker 12: I certainly think that, you know, the US needs to
Speaker 12: be the strongest industrial power, like we werest World War
Speaker 12: two again in order to to prevent or meet that threat.
Speaker 3: Chris, is your ceiling limited just by the idea that
Speaker 3: your core customer is the DoD or in the future,
Speaker 3: do you do business with these other primes and other
Speaker 3: startups as well?
Speaker 2: Very quick?
Speaker 12: So all of our customers are you know, a defense
Speaker 12: startup or a stage startup from day one up to
Speaker 12: all the mega primes through that whole chain. The deity
Speaker 12: is I think we've been recently a part of our business,
Speaker 12: but we are working with the vast majority of hardware
Speaker 12: startups all the way through to the megacap, public prime
Speaker 12: and everything in the middle.
Speaker 2: Chris Power, Adrian CEO, really grateful for your time on
Speaker 2: Bloomberg Tech. Thank you very much. Now I want to
Speaker 2: get to a story out of China.
Speaker 3: China's top venture capital firms are back in the market,
Speaker 3: raising over two billion dollars in new dollars denominated funds.
Speaker 3: Light Speed China is targeting four hundred million dollars for
Speaker 3: deep Tech.
Speaker 2: Monolith, which backs.
Speaker 3: Moonshot AI, plans a second fund worth at least two
Speaker 3: hundred and sixty five million dollars at least six major firms,
Speaker 3: according overseas investors, signaling renewed global interests in China's startup
Speaker 3: ecosystem from AI to consumer tech. Okay, coming up, President
Speaker 3: Trump is set to release new AI guardelines. We're gonna
Speaker 3: have all the details on that. Next, this is Bloomberg Tech.
Speaker 3: President Trump is expected to announce you AI policy guidelines
Speaker 3: calling for an easing of regulation and an expansion to
Speaker 3: energy sources for its data centers. For more, I want
Speaker 3: to get out to bloombergs Mike Shephard in Washington, DC.
Speaker 3: What's the need to know here, Mike, Well.
Speaker 13: The thing we need to know is that this will
Speaker 13: be the administration's most significant policy statement to date on
Speaker 13: artificial intelligence. It's been in the works for about six months.
Speaker 13: This is one of the first things the presidents set
Speaker 13: out to do upon taking office. We tap David Sachs,
Speaker 13: the venture capitalist, somebody who's been on this program even
Speaker 13: just this week to talk about artificial intelligence, to lead
Speaker 13: this effort along with Michael Kratzios, another regular guest on
Speaker 13: these airwaves, and together they have been trying to turn
Speaker 13: away from what have been seen as a rules heavy
Speaker 13: approach under the prior administration. They want to do something
Speaker 13: that will do more to ensure and speed adoption of
Speaker 13: this technology while also still trying to set a few
Speaker 13: rules of the road. We're expecting the President to deliver
Speaker 13: remarks on AI at an event at the White House
Speaker 13: on Wednesday, July twenty third. David Sachs will be here.
Speaker 13: It's an event that's being put together with the folks
Speaker 13: from the All In podcasts, where David Sachs is one
Speaker 13: of the co hosts. And we're also expecting the President
Speaker 13: to be signing a few executive orders connected with all
Speaker 13: of that. It's not going to be as far reaching
Speaker 13: a statement on the technology itselfless to be focused more
Speaker 13: on executive branch actions, yet it still will carry some weight.
Speaker 13: We'll be watching it very closely here.
Speaker 2: All eyes on Washington next week. I think that's fair
Speaker 2: to say.
Speaker 3: I see some breaking news this morning, which is that
Speaker 3: the House Select Committee on China essentially criticizing or reprimanding
Speaker 3: the president allowing chip makers and Vidia the focus in
Speaker 3: being able to resume some limited chip sales back into China.
Speaker 13: What do we know, Well, we're hearing from the top
Speaker 13: Republican on the committee, one of the toughest China hawks
Speaker 13: in town, really raising questions about this decision to allow
Speaker 13: Nvidia to resume sales of the H twenty AI chip
Speaker 13: in China. Remember, the Trump administration have barred sales and
Speaker 13: shipments of that chip to China over national security concerns
Speaker 13: just back in April. But in the past week or so,
Speaker 13: we have seen that restriction lifted, and that was a
Speaker 13: huge win for Nvidia, but it prompted questions from John Molnar,
Speaker 13: the Michigan Republican who heads this committee, focused on the
Speaker 13: competition and with China and the challenge that the world's
Speaker 13: second largest economy poses to the US. Now Mullinara is
Speaker 13: raising the concern that look, if we allow these age
Speaker 13: twenty chips to be sold once again in China, this
Speaker 13: will simply allow Beijing to acquire more capabilities and artificial intelligence,
Speaker 13: including some that could go to fuel its military and
Speaker 13: intelligence complex.
Speaker 3: In Bloomberg's Mike Shepard, thank you very much. Staying in Washington,
Speaker 3: the US Commerce Department is set to impose preliminary anti
Speaker 3: dumping duties of ninety three point five percent on imports
Speaker 3: of Chinese graphite that's a key component of battery manufacturing.
Speaker 3: I want to get out to Evelyna Stoikeu of Bloomberg
Speaker 3: ne ef Evelina. You kind of lead our analysis and
Speaker 3: in house research of the battery supply chain as a start,
Speaker 3: Why would this penalty on graphite have impact?
Speaker 2: Why do we need to know about this?
Speaker 14: Well, as you mentioned that graphite is a key component
Speaker 14: for batteries and these terrorists would basically increase the cost
Speaker 14: of making battery cells in the US now. Batteries are
Speaker 14: important for a variety of sectors, including evs and stationary storage,
Speaker 14: and as the US is pushing for more domestic production
Speaker 14: for battery cells is a key component around energy, we're
Speaker 14: going to see likely increased cost. Most of graphite is
Speaker 14: coming from China, and in the US around seventy five
Speaker 14: percent of synthetic graphite imports, which is the type of
Speaker 14: graphite that is mostly used for batteries, is coming from China.
Speaker 14: So we expect a big impact for the battery industry.
Speaker 3: When the news broke I saw that Tesla shares fell significantly.
Speaker 2: They're now up higher in this session.
Speaker 3: But one of the things I was thinking about is
Speaker 3: for those US domestic battery manufacturers. I was at Panasonic
Speaker 3: in Kansas earlier this week. There are some US based
Speaker 3: producers of graphite.
Speaker 14: On there, Yeah, there are, and the domestic graphite production
Speaker 14: is increasing. Among many other companies were lobbying against these
Speaker 14: tariffs in the early stages, claiming that the graphic quality
Speaker 14: or the graphic quantity was not at the stage that
Speaker 14: they wanted at least at that stage. However, eventually these
Speaker 14: GRAPHI terriffs are going to incentivize local production. But we
Speaker 14: do remain to see whether this graphite is going to
Speaker 14: be enough to meet demand and of low cost in
Speaker 14: order to meet many cost targets that battery manufacturers and
Speaker 14: automakers have in the US.
Speaker 2: Evelina.
Speaker 3: Right now, what is the biggest headwind or factor for
Speaker 3: the EV battery supply chain? We focused on graphite, but
Speaker 3: there are many other things happening around the world right now.
Speaker 7: Yeah.
Speaker 14: Absolutely, It's definitely a time where a lot of things
Speaker 14: are changing when it comes to policy that is impacting
Speaker 14: both EV's and batteries in the US. Right now, I
Speaker 14: think the challenge is going to be figuring out the
Speaker 14: supply chain and using suppliers in order to comply and
Speaker 14: try to qualify for many of the important task credits.
Speaker 14: As now there are new restrictions around where many of
Speaker 14: these components can be can be sourced. So I think
Speaker 14: this is going to be top of mind for a
Speaker 14: lot of the players in the US because this push
Speaker 14: to source everything domestically and to manufacture everything domestically might
Speaker 14: come for with a cost to consumers.
Speaker 3: Evelina Stoiku, Bloomberg New Energy Finance, Bloomberg n EF. Great
Speaker 3: to have you on the program. Thank you very much.
Speaker 3: So that does it for this edition of Bloomberg Tech.
Speaker 3: What a week it's been, from policy to politics, AI
Speaker 3: to everything else in between. Don't forget to recap the
Speaker 3: show on the podcast. You know where to find it.
Speaker 3: It's on all the Bloomberg platforms as well as online
Speaker 3: on Apple, Spotify, and iHeart chep said it just a
Speaker 3: minute ago, But next week it's all eyes in Washington, DC.
Speaker 3: Pay close attention and always do it here on Bloomberg Tech.