WEBVTT - Netflix Beats Every Wall St. Metric, iPhone Demand Surges in China 0:00:01.520 --> 0:00:05.160 From Marhart where Innovation of Money and Power Collie in 0:00:05.280 --> 0:00:06.800 Silicon Valley, NBN. 0:00:07.120 --> 0:00:11.080 This is Bloomberg Technology with Caroline Hyde and Ed Loved. 0:00:10.960 --> 0:00:26.759 Love Live from New York and San Francisco. This is 0:00:26.800 --> 0:00:30.240 Bloomberg Technology coming up. Netflix and a record the King 0:00:30.280 --> 0:00:35.520 of streaming, surpasses Wall Street's expectations on every major financial metric. 0:00:36.440 --> 0:00:39.640 Plus after iPhone sales store in a major market oversees 0:00:39.800 --> 0:00:42.040 a sign of success. 0:00:41.840 --> 0:00:44.559 And why Tesla is in the crosshairs of a federal 0:00:44.600 --> 0:00:45.839 agency's investigation. 0:00:46.360 --> 0:00:46.400 Ed. 0:00:47.159 --> 0:00:49.920 Yeah, let's get right to Netflix and this is the 0:00:49.920 --> 0:00:52.159 stock right you can see on the screen, the story 0:00:52.400 --> 0:00:54.880 on track for its biggest jump since January of this year, 0:00:55.200 --> 0:00:59.920 trading at a record high overall, and subscribers beat revenue 0:01:00.200 --> 0:01:03.560 beat And we always talk about earnings in the context 0:01:03.560 --> 0:01:07.760 of beating expectations numerically on metrics. But I think we 0:01:07.800 --> 0:01:10.840 both agree, right Caro, that the story was different to 0:01:10.880 --> 0:01:14.800 what we were expecting. A slow down in streaming. No, actually, 0:01:15.200 --> 0:01:17.360 things seem to be okay for Netflix. I think there's 0:01:17.360 --> 0:01:19.640 a lot to get into about what's happening with the 0:01:19.680 --> 0:01:23.760 consumer's attitude towards streaming platforms and how we're watching content 0:01:23.880 --> 0:01:24.280 right now. 0:01:24.400 --> 0:01:28.320 Yeah, the co CEO and sounding upbeat ted Surrandos really 0:01:28.360 --> 0:01:31.759 talking about how the company beat those expectations, but also 0:01:31.800 --> 0:01:33.520 what you can expect in twenty twenty five. 0:01:33.560 --> 0:01:34.080 Take a listen. 0:01:34.840 --> 0:01:37.240 Let's start with you know, looking into twenty twenty five, 0:01:37.280 --> 0:01:40.000 we're feeling really good about the business. We had a 0:01:40.000 --> 0:01:42.800 plan to reaccelerate growth, and we've delivered on that plan. 0:01:43.440 --> 0:01:45.560 You can see that in our twenty twenty four financials. 0:01:46.200 --> 0:01:48.920 We expect to deliver fifteen percent revenue growth and six 0:01:48.960 --> 0:01:53.080 percentage points about brading margin and brooman and engagement, which 0:01:53.120 --> 0:01:56.720 we view as our best proxy for member happiness, because 0:01:56.720 --> 0:01:59.640 when people watch more, they stick around longer, so that's retention. 0:02:01.040 --> 0:02:03.560 Felix Jellette joins us and Felix. 0:02:03.640 --> 0:02:06.920 It really was a case of even without the stellar 0:02:07.240 --> 0:02:10.960 slate they have coming up in fourth quarter, they managed 0:02:10.960 --> 0:02:14.160 to really build on that five million subscribers for the 0:02:14.200 --> 0:02:16.280 third Yeah. 0:02:16.080 --> 0:02:18.160 I think it was better than everyone expected. I think 0:02:18.160 --> 0:02:20.840 it's particularly impressive because you have to remember this is 0:02:21.400 --> 0:02:24.639 the year following the dual strikes in Hollywood, so there's 0:02:24.680 --> 0:02:26.959 this huge production slow down. At the time, everyone was 0:02:26.960 --> 0:02:29.919 speculating like, well, there's not enough new things to watch? 0:02:30.000 --> 0:02:33.880 Why would people keep subscribing to the streaming services, including Netflix. 0:02:33.919 --> 0:02:35.200 There's going to be a lot of churn, a lot 0:02:35.240 --> 0:02:38.280 of cancelations. And yet in spite of that, a year later, 0:02:39.240 --> 0:02:43.600 you know, Netflix adds another five million subscribers. This quarter 0:02:43.680 --> 0:02:46.600 is up to two hundred and eighty two plus million 0:02:47.320 --> 0:02:51.880 across the globe. So yeah, it's a very strong quorder 0:02:52.000 --> 0:02:55.320 for Netflix. And like Sorrendo said, they have an even 0:02:55.400 --> 0:02:57.639 better slate. I think you could argue coming up next 0:02:57.720 --> 0:02:58.840 quarter and next year. 0:03:00.560 --> 0:03:04.080 So he talks about this interesting metric, which is I 0:03:04.080 --> 0:03:07.639 think he called it engagement, right Felix and misterdirector, let's 0:03:07.639 --> 0:03:09.720 bring Felix is shot back up because I don't think 0:03:09.760 --> 0:03:12.480 he's had much time to watch Netflix. He's been too 0:03:12.560 --> 0:03:16.400 busy reading the piles of books either side of his shoulder. 0:03:17.000 --> 0:03:19.560 But there was a time where Netflix said, stop judging 0:03:19.600 --> 0:03:23.000 us on subscriber growth, just look at our financial metrics. 0:03:23.520 --> 0:03:26.200 Now they say, don't judge us on financial metrics. We 0:03:26.240 --> 0:03:28.399 really want to talk about this engagement number, what does 0:03:28.440 --> 0:03:30.880 it mean and where is it going? 0:03:32.400 --> 0:03:34.640 I think we do look at the engagement number. Part 0:03:34.639 --> 0:03:37.480 of that is where is their future growth going to 0:03:37.520 --> 0:03:41.040 come from, and a lot of that is advertising, right, 0:03:41.160 --> 0:03:43.560 they said yesterday, you know, we're not where we're at 0:03:43.760 --> 0:03:47.280 where we want to be out in terms of advertising revenue, 0:03:47.360 --> 0:03:52.280 but we're investing in technology, and we're investing in better inventory, 0:03:52.320 --> 0:03:54.960 and what that means is investing in better live programming. 0:03:55.280 --> 0:03:57.120 And they just have a ton of stuff coming down 0:03:57.240 --> 0:04:01.520 the pipeline, wrestling through our rest Live Wrestling. The week, 0:04:01.560 --> 0:04:05.920 they're going to have NFL games, They're doing more comedy 0:04:06.000 --> 0:04:08.800 live specials. Last week at our conference in LA, they 0:04:08.840 --> 0:04:12.080 announced they're going to do this live variety show. And 0:04:12.160 --> 0:04:14.720 I think that's going to be very appealing to advertisers 0:04:14.720 --> 0:04:18.120 once they get a certain crucial number of viewers there, 0:04:18.200 --> 0:04:20.200 and I think that's where the engagement comes from. And 0:04:20.240 --> 0:04:23.880 I think that's what they're really excited about now. But 0:04:23.960 --> 0:04:28.200 I think you can't separate that from their ambitions and advertising. 0:04:29.000 --> 0:04:32.000 Well, maybe he's kind of excited about the next edition 0:04:32.080 --> 0:04:36.720 of Wednesday because I can spot thing lurking behind your 0:04:36.800 --> 0:04:40.400 right shoulder at the moment. It's amazing, Felix Jdette, We 0:04:40.480 --> 0:04:41.280 thank you so much. 0:04:41.640 --> 0:04:41.680 Ed. 0:04:42.720 --> 0:04:45.040 Let's get some more data from branding Cats. He's the 0:04:45.080 --> 0:04:48.839 senior entertainment industry strategist at Parent Analytics, And there's actually 0:04:48.880 --> 0:04:51.800 a data point that you point to which I find fascinating, 0:04:51.800 --> 0:04:56.320 and that is Netflix's share in corporate demand. Explain that 0:04:56.440 --> 0:04:59.360 metric and why you think it makes Netflix a leader. 0:05:00.960 --> 0:05:04.479 So corporate demands share really looks at all the original 0:05:04.560 --> 0:05:08.320 programming that a company creates, and it helps value their 0:05:08.480 --> 0:05:12.160 viability in the current media market and potentially the value 0:05:12.200 --> 0:05:14.560 of that content on the opening market should they ever 0:05:14.560 --> 0:05:18.480 want to license it. For the first time ever, Netflix 0:05:18.480 --> 0:05:22.720 has leapbrogged a legacy media company by beating NBC Universal. 0:05:23.000 --> 0:05:27.080 And we have to remember NBC Universal's programming dates back 0:05:27.120 --> 0:05:29.960 to the nineteen forties with NBC, whereas Netflix has only 0:05:30.040 --> 0:05:33.560 been an original programmer for about twelve years. So the 0:05:33.600 --> 0:05:37.279 fact that their library has grown this significantly this quickly 0:05:37.400 --> 0:05:41.120 is a major testament to the amassed content that they 0:05:41.160 --> 0:05:41.839 have built. 0:05:42.240 --> 0:05:45.160 They have had to spend a lot on that content, 0:05:45.640 --> 0:05:47.440 and the point is now whether they have to spend 0:05:47.480 --> 0:05:50.560 a lot on live content on sports to really drum 0:05:50.640 --> 0:05:53.160 up this advertising process that actually Amazon seems to have 0:05:53.240 --> 0:05:54.120 nailed in many ways. 0:05:55.200 --> 0:05:57.800 Yeah, and with Amazon expanding its ads here next year 0:05:57.839 --> 0:06:00.760 to five additional markets. The pressure is on on Netflix 0:06:01.000 --> 0:06:04.359 to grow this advertising tier. It's been a slow but 0:06:04.560 --> 0:06:07.760 steady first two years. But what's really concerning is that 0:06:07.800 --> 0:06:11.440 Netflix is you Can average revenue per user has dropped 0:06:11.440 --> 0:06:14.599 for two straight quarters because of that ad tier growth. 0:06:14.600 --> 0:06:16.000 So it's a little bit of a give and take. 0:06:16.320 --> 0:06:18.800 I would not be surprised if, with the addition of 0:06:18.960 --> 0:06:22.599 WWE and NFL games, we see a increase in the 0:06:22.760 --> 0:06:25.160 price for the ad supported tier in twenty twenty five 0:06:25.240 --> 0:06:26.320 five sometime. 0:06:26.680 --> 0:06:29.640 What about price point of the service? More broadly, many 0:06:29.640 --> 0:06:31.479 anticipating that we could get some price hikes. 0:06:31.520 --> 0:06:32.920 In fact, they've just enacted some today. 0:06:34.360 --> 0:06:37.359 Absolutely, we're getting international price hikes. I would not be 0:06:37.440 --> 0:06:40.800 surprised if another you Can price hike is around the corner, 0:06:40.839 --> 0:06:45.000 particularly off the back of their extremely strong anticipated Q 0:06:45.200 --> 0:06:49.200 four content slate. And as they mentioned, the production logjam 0:06:49.240 --> 0:06:51.840 is starting to normalize following the strike, so we could 0:06:51.839 --> 0:06:54.520 probably expect a little bit more volume in terms of 0:06:54.560 --> 0:06:58.039 new originals in twenty twenty five, which also bolsters their 0:06:58.080 --> 0:07:01.719 case in raising prices yet again. Consumers, maybe I'll watch 0:07:01.800 --> 0:07:02.800 that while on a little bit. 0:07:02.720 --> 0:07:06.600 More Okay, if you're just joining us here, on Bloomberg Technology. 0:07:06.720 --> 0:07:09.040 Netflix shares are up more than ten percent, the biggest 0:07:09.080 --> 0:07:12.480 jump since January. But they're trading at their highest level 0:07:12.520 --> 0:07:15.320 ever on record, and I think a big part of 0:07:15.320 --> 0:07:19.720 that is is there is still subscriber growth, Brandon, and 0:07:19.760 --> 0:07:23.560 that was the story we were kind of considering with 0:07:23.760 --> 0:07:26.960 this slow down. You mentioned a moment ago the live events. 0:07:27.000 --> 0:07:29.520 I want to go deeper into that. How much of 0:07:29.520 --> 0:07:32.200 a feature this will be of the platform going forward. 0:07:33.760 --> 0:07:37.200 Yeah, live events has not worked seamlessly for any streaming 0:07:37.240 --> 0:07:41.560 platform consistently. It's always been simulcast on these legacy media 0:07:41.680 --> 0:07:45.440 distribution networks and their streaming services. So Netflix is really 0:07:45.440 --> 0:07:48.360 trying to break new ground by making live entertainment on 0:07:48.440 --> 0:07:51.400 a streaming only service work. And it is certainly a 0:07:51.520 --> 0:07:55.080 huge point of focus for them moving forward to supercharge 0:07:55.080 --> 0:07:58.440 their ads here, and I think them focusing the first 0:07:58.520 --> 0:08:01.360 ten years of their kind of original content development around 0:08:01.440 --> 0:08:04.280 building out the back end by licensing other content and 0:08:04.280 --> 0:08:06.560 building up a massive library is the right way to 0:08:06.560 --> 0:08:08.880 go about it. I think they're well positioned to dive 0:08:08.960 --> 0:08:10.560 deeper into sports because of it. 0:08:10.640 --> 0:08:13.880 Now, nice we got some bridges in up on the screen. 0:08:14.520 --> 0:08:17.320 That's a household favorite for us, what do you make 0:08:17.320 --> 0:08:19.760 in management? We're kind of in deeper into this period 0:08:19.760 --> 0:08:21.560 where you have the co CEO structure. 0:08:21.800 --> 0:08:23.080 You think they're doing a good job. 0:08:24.880 --> 0:08:26.680 I think they're doing a fantastic job. And I think 0:08:26.720 --> 0:08:30.120 Greg Peters is one of the only Hollywood media executives 0:08:30.160 --> 0:08:32.959 with actual coding and software experience. And I think as 0:08:33.000 --> 0:08:35.880 we dive into an even more digital future trying to 0:08:35.920 --> 0:08:39.040 capture gen V's atension and jen Alpha's attention, who are 0:08:39.040 --> 0:08:42.480 digital natives, it's going to be very, very very important 0:08:42.520 --> 0:08:45.559 to understand how the tech works and what the consumer 0:08:45.640 --> 0:08:48.800 experience on that tech is actually like. And Netflix is 0:08:48.840 --> 0:08:49.880 taking a step forward with that. 0:08:50.640 --> 0:08:52.800 Yeah, I mean they've really beefed out the ability to 0:08:52.960 --> 0:08:54.960 carry live events. I mean we all think back to 0:08:55.160 --> 0:08:57.600 The Lover's Blind disaster when they tried to carry that 0:08:57.640 --> 0:09:01.080 live and the demand just to get down. But from 0:09:01.160 --> 0:09:04.880 that just reflects a little bit on ultimately where else. 0:09:04.679 --> 0:09:06.080 Gen Z millennial are going. 0:09:06.160 --> 0:09:08.960 Because yes, you cite the old school that they've overtaken 0:09:09.000 --> 0:09:12.160 in terms of just shared volume of content, but people 0:09:12.200 --> 0:09:14.440 are spending their time on TikTok on YouTube. 0:09:14.640 --> 0:09:17.560 How are they matching up in terms of addiction there. 0:09:19.240 --> 0:09:22.240 The concern with Netflix is that it's a pure play 0:09:22.280 --> 0:09:25.920 traditional entertainment service that is focused on film and TV, 0:09:26.360 --> 0:09:30.600 and yet video games, short form media via the creator economy, 0:09:30.720 --> 0:09:33.600 and other new media are driving growth in the entertainment 0:09:33.600 --> 0:09:38.080 ecosystem as film and TV endure a painful contraction. Yes, 0:09:38.160 --> 0:09:40.480 Netflix is building out a suite of video games, but 0:09:40.559 --> 0:09:43.440 we've had no material updates on its impact as they 0:09:43.440 --> 0:09:46.360 try to build an added value in house bundle that 0:09:46.400 --> 0:09:49.400 goes beyond just traditional film and TV. So that's why 0:09:49.400 --> 0:09:53.000 I think perhaps Netflix is slightly overvalued at the moment, 0:09:53.080 --> 0:09:56.719 even as they clearly dominate in the traditional entertainment way. 0:09:56.880 --> 0:09:58.719 I've got we've got to jump in on that that 0:09:59.000 --> 0:10:01.719 gaming side of the equation and the lackluster I mean, 0:10:01.720 --> 0:10:03.880 are they going to continue down the gaming path? 0:10:03.960 --> 0:10:04.640 And wants to know. 0:10:06.200 --> 0:10:08.800 The reports are that they are developing a triple A game, 0:10:08.800 --> 0:10:11.240 which is what I think gamers most associate with those 0:10:11.280 --> 0:10:15.040 big classic console games. Now, the success or failure of 0:10:15.120 --> 0:10:17.560 that will certainly say a lot about the health and 0:10:17.640 --> 0:10:21.800 longevity of their video game efforts. Now, do they need 0:10:21.840 --> 0:10:24.240 it to succeed, not in the interim but moving forward 0:10:24.280 --> 0:10:26.240 long term? Yes, I think they need to branch out 0:10:26.280 --> 0:10:29.640 beyond just film and television to create a stickier bundle 0:10:29.800 --> 0:10:32.240 that solves for multiple consumer pain points. 0:10:33.559 --> 0:10:37.080 Brendan Katz, Senior Entertainment Industry Strategies at parad Analytic, it's 0:10:37.120 --> 0:10:38.959 great to have you back here on Bloomberg Technology. 0:10:39.240 --> 0:10:39.960 Thank you so much. 0:10:40.000 --> 0:10:44.440 Now coming up, Apple sees unexpected demand in China. We 0:10:44.480 --> 0:10:47.840 speak about that and the broader tech market with Angelo 0:10:47.960 --> 0:10:51.400 kal Kafa, so Edward Jones that conversations coming up. This 0:10:51.440 --> 0:11:00.800 is Bloomberg Technology. 0:11:02.960 --> 0:11:07.320 The renaissance of growth has begun for Apple with iPhone sixteen. 0:11:07.400 --> 0:11:09.680 I think China, Look, that was the biggest issue. 0:11:09.720 --> 0:11:10.559 That was a headwind. 0:11:10.600 --> 0:11:13.880 Now it's a tell when they have mojo going into 0:11:13.960 --> 0:11:15.839 the next I think six to nine months. And that's 0:11:15.840 --> 0:11:18.560 why I look, Wehi the Bears Vivey on fire and 0:11:18.600 --> 0:11:21.480 a crowd theater for the last month, but I think 0:11:21.480 --> 0:11:23.319 they go back in the hibernation mode. 0:11:23.400 --> 0:11:26.400 In our opinion, that was. 0:11:26.320 --> 0:11:29.440 A very colorful Dan Ives of web Bush Securities on 0:11:29.520 --> 0:11:34.160 Apple's China turnaround as the data provider. Counterpoint Research says 0:11:34.280 --> 0:11:38.360 iPhone sixteen sales saw twenty percent in the country in 0:11:38.400 --> 0:11:42.000 its first three weeks for more, let's bring a bloomberg 0:11:42.040 --> 0:11:46.200 to Mark German. Now, when we've discussed some third party data, 0:11:46.840 --> 0:11:50.760 it's usually been negative and then Apple, with actual data 0:11:50.840 --> 0:11:52.760 in the earnest context, has proven it wrong. 0:11:53.240 --> 0:11:55.079 This is counterpoint research. 0:11:54.800 --> 0:11:58.400 Data that is a surprise, and it's a positive surprise. 0:11:58.559 --> 0:12:02.120 What does it tell us about iPhone sixteen in that market? 0:12:04.559 --> 0:12:07.520 Dearly think it tells us anything new, right? 0:12:07.600 --> 0:12:10.000 I think it tells us that the first three weeks 0:12:10.000 --> 0:12:13.120 of iPhone sales, as they usually are, were pretty hot. 0:12:13.320 --> 0:12:13.520 Right. 0:12:13.559 --> 0:12:16.280 The issue was never the opening month of the device. 0:12:16.320 --> 0:12:19.680 The issue was over the long term, right, three six, 0:12:19.840 --> 0:12:22.559 nine months to twelve months, or the full cycle of 0:12:22.600 --> 0:12:25.720 that device. I think some analysts have been a little 0:12:25.800 --> 0:12:29.640 irrational or irresponsible in their commentary on the iPhone sixteen 0:12:29.720 --> 0:12:30.600 over the last several months. 0:12:30.640 --> 0:12:32.880 Some analysts have gone as far as claiming. 0:12:32.800 --> 0:12:35.560 That this is going to create a supercycle, something we 0:12:35.640 --> 0:12:38.880 haven't seen since the iPhone first launched on China mobile 0:12:38.920 --> 0:12:40.840 with bigger screens a decade ago. 0:12:41.200 --> 0:12:41.400 Right. 0:12:41.640 --> 0:12:45.319 They've been saying that Apple Intelligence is something that is 0:12:45.360 --> 0:12:48.240 going to drive a supercycle, despite the fact that Apple 0:12:48.240 --> 0:12:52.160 Intelligence is not available in China, right, So you can't 0:12:52.160 --> 0:12:54.760 necessarily have it both ways. You can't say that AI 0:12:54.840 --> 0:12:56.440 is going to create a supercycle in China. 0:12:56.840 --> 0:12:58.240 Well, AI is not available in. 0:12:58.240 --> 0:13:01.640 China, right, I'm not entirely surprise the iPhone sixteen is 0:13:01.679 --> 0:13:02.800 doing well in the region. 0:13:02.840 --> 0:13:04.040 There's a lot of pent up demand. 0:13:04.320 --> 0:13:06.360 There's a lot of people in China who didn't upgrade 0:13:06.360 --> 0:13:08.520 the prior to years, the iPhone fourteen Pro and the 0:13:08.520 --> 0:13:12.440 iPhone fifteen Pro. The iPhone sixteen has some nice improvements, right. 0:13:12.520 --> 0:13:15.600 I think the camera control interface is excellent, right. I 0:13:15.640 --> 0:13:18.439 think the speed improvements in the battery life improvements are 0:13:18.480 --> 0:13:21.520 really nice touches. I've enjoyed those personally, So I think 0:13:21.520 --> 0:13:23.520 it's a good upgrade for people who haven't bought a 0:13:23.559 --> 0:13:24.600 new iPhone in the past few years. 0:13:24.640 --> 0:13:26.360 So I'm not entirely surprised. 0:13:26.720 --> 0:13:29.440 And typically even when the data is negative, right, I 0:13:29.520 --> 0:13:31.440 typically come on here and say is we're not going 0:13:31.480 --> 0:13:34.040 to know the truth until Apple earnings. Right, That's the 0:13:34.080 --> 0:13:35.880 case even when it's positive, And so at the end 0:13:35.920 --> 0:13:38.079 of this month, we'll get a better idea of how 0:13:38.080 --> 0:13:39.440 accurate this information is. 0:13:39.920 --> 0:13:43.959 Mark next time we are bringing you and Dan i'ves 0:13:43.960 --> 0:13:47.000 super Cycle Man on together for some fighting talk. We 0:13:47.080 --> 0:13:49.960 love it today, but more broadly when you think that 0:13:50.480 --> 0:13:53.400 there is lot bits to love within iPhone sixteen, The 0:13:53.440 --> 0:13:56.200 bit I'm just so questioning is the AI element. You've 0:13:56.240 --> 0:13:59.439 told this story again and again on well your own 0:13:59.760 --> 0:14:03.240 X platform in particular, who are they going to partner 0:14:03.240 --> 0:14:03.800 with in China? 0:14:03.840 --> 0:14:06.280 How are they going to really read the benefits of 0:14:06.320 --> 0:14:07.560 the artificial intelligence? 0:14:08.920 --> 0:14:12.280 Yeah, so there's two components really to the AI push 0:14:12.320 --> 0:14:14.960 in the iPhone, right there's the in house large language 0:14:14.960 --> 0:14:17.000 models and generative AI features. 0:14:17.040 --> 0:14:19.760 Those are using an Apple model, those are running on 0:14:19.920 --> 0:14:20.760 Apple servers. 0:14:21.160 --> 0:14:24.320 And then there's the third party component that's integrated into 0:14:24.360 --> 0:14:26.040 Syria and other parts of the operating system. 0:14:26.120 --> 0:14:28.960 In the US, they're using so far Chat. 0:14:28.760 --> 0:14:32.000 GPT starting in December, and they're also planning to integrate 0:14:32.000 --> 0:14:35.200 Google Gemini and to open it up to other lms 0:14:35.280 --> 0:14:37.520 in the future. So you have an array of choices 0:14:37.960 --> 0:14:40.640 in China. Most of those providers in the US are 0:14:40.680 --> 0:14:43.480 not available, so they're going to have to partner with local. 0:14:43.280 --> 0:14:45.160 Entities by DO being one option. 0:14:45.320 --> 0:14:49.640 Obviously you have Tencent, Obviously you have different bespoke llms 0:14:49.680 --> 0:14:50.280 in the region. 0:14:50.680 --> 0:14:52.000 But the other component is. 0:14:51.960 --> 0:14:54.160 How is Apple going to get approval from the Chinese 0:14:54.200 --> 0:14:58.000 government to use their server infrastructure to power their in 0:14:58.040 --> 0:15:00.960 house generative AI models, which are in fact the bigger 0:15:01.000 --> 0:15:06.120 deal right for Apple Intelligence, notification summaries, writing tools, image 0:15:06.160 --> 0:15:09.640 generation gen moojis to create your own emojis. Right at 0:15:09.760 --> 0:15:12.880 least for iCloud, they have to use a partner right 0:15:12.960 --> 0:15:16.200 in China with government affiliation, and so they may end 0:15:16.280 --> 0:15:18.360 up having to do something similar if they want to 0:15:18.360 --> 0:15:21.560 get Apple Intelligence working in China, right, And China's one 0:15:21.560 --> 0:15:24.000 of two major markets, the other being the European Union 0:15:24.280 --> 0:15:26.960 where the AI features are not available on the iPhone 0:15:27.080 --> 0:15:29.240 and there's no clear release date for one that will happen, 0:15:29.480 --> 0:15:31.640 and I don't anticipate that happening for at least a year. 0:15:32.600 --> 0:15:34.880 Nice Bloomberg's Mark gun and keep your eyes peeled for 0:15:34.880 --> 0:15:37.840 his power on newsletter this weekend, and Caro, as we're 0:15:37.880 --> 0:15:40.800 showing clearly Apple and its gains are a factor in 0:15:40.840 --> 0:15:42.360 the market this Friday. 0:15:42.440 --> 0:15:42.800 They are. 0:15:43.240 --> 0:15:45.440 Let's talk about that about the broader market with the 0:15:45.440 --> 0:15:49.600 Angelo kokafas his senior investment stretches over at Edward Jones 0:15:50.040 --> 0:15:52.600 and just let's dwell on Apple for a moment and 0:15:52.640 --> 0:15:55.360 what it signals. But We've got UK retail data out 0:15:55.400 --> 0:15:57.960 today that said it was buoyed by things like the 0:15:58.000 --> 0:16:02.320 Apple phone, but also Google's pixel as well. How important 0:16:02.560 --> 0:16:05.880 is consumer to Apple right now and how resilient is it? 0:16:06.720 --> 0:16:11.200 Yeah, I think today's strength in MEGACAUP tech, including Apple, 0:16:12.200 --> 0:16:15.920 is really a reminder not to dismiss technology, and technology 0:16:15.960 --> 0:16:19.880 actually remains bright spot. The consumer clearly has been the 0:16:19.920 --> 0:16:22.880 main driver for not only some of these technology names, 0:16:22.920 --> 0:16:26.560 but for really the broader economy and the bullmarket. Fieceis 0:16:26.760 --> 0:16:29.600 and we keep getting good news on that front. Economic 0:16:29.640 --> 0:16:34.880 surprises are turning positive. Just retail sales this week express 0:16:34.960 --> 0:16:39.080 some strength and resiliency. So the economy is nowhere near recession, 0:16:39.200 --> 0:16:41.880 especially in the US, but the same applies to a 0:16:41.920 --> 0:16:45.440 broad now. China is a complicated story to say the least, 0:16:45.960 --> 0:16:48.520 but at the same time there's some signs of bottom 0:16:48.640 --> 0:16:51.680 in that also feeds into the Apple story. We've had 0:16:51.760 --> 0:16:55.640 plenses from policy makers to support growth. Many questions remain 0:16:55.880 --> 0:16:58.720 what's going to actually be delivered, But at least from 0:16:58.720 --> 0:17:02.360 a sentiment investors set perspective, it seems like the worst 0:17:02.440 --> 0:17:05.000 is behind US Angela. 0:17:05.240 --> 0:17:08.800 When you talk about profitable tech, historically it's like in 0:17:08.840 --> 0:17:13.080 the context of having amazing balance sheet in trench market position. 0:17:13.640 --> 0:17:16.640 But here on Bloomberg Technology we talk about innovation. That's 0:17:16.680 --> 0:17:19.840 what Mark was reporting on. Which is the more important 0:17:19.880 --> 0:17:21.119 factor to the investor? 0:17:22.480 --> 0:17:23.240 I think it's both. 0:17:23.480 --> 0:17:26.879 You have that long term secular thesis and there's a 0:17:26.880 --> 0:17:30.760 long runway for growth, especially on artificial intelligence, but also 0:17:30.760 --> 0:17:34.679 you have the reality of market swings and rotations that 0:17:34.800 --> 0:17:38.040 happen because of the interstrate backdrop in the more near term, 0:17:38.240 --> 0:17:40.640 and both materie based on your time horizon. 0:17:41.000 --> 0:17:42.840 Think about the current backdrop. 0:17:43.080 --> 0:17:45.560 We have an economy that is still growing at a 0:17:45.640 --> 0:17:49.000 very solid pace. Verberate profits are on the rise, and 0:17:49.080 --> 0:17:51.080 at the same time, interst rates are. 0:17:51.000 --> 0:17:54.000 Moving lower, and that backdrop provides a. 0:17:54.040 --> 0:17:57.280 Little more tail winds for areas of the market that 0:17:57.359 --> 0:18:00.280 have been really left behind over the past eighteen months. 0:18:00.920 --> 0:18:03.920 The big cap technology companies, they're in a NetCast position. 0:18:04.000 --> 0:18:06.800 They have more cast than that, so they've been benefiting 0:18:06.880 --> 0:18:08.160 from the rise in interest. 0:18:07.920 --> 0:18:09.720 Rates, right, and other areas have been here. 0:18:09.840 --> 0:18:12.159 But on the flip side, as interest rates move lower, 0:18:12.600 --> 0:18:15.080 you are seeing really that broadening start to play out. 0:18:16.560 --> 0:18:19.159 Angelo. It's been great having some time with you. Thank you. 0:18:19.240 --> 0:18:19.520 Very much. 0:18:19.560 --> 0:18:22.560 Indeed, talking all through the valuation story Angelo kocafas his 0:18:22.720 --> 0:18:31.520 senior investment strategist at Edward Jones. 0:18:32.760 --> 0:18:33.720 Let's turned to China. 0:18:33.760 --> 0:18:37.440 Now, investors are learning that Chinese stock ETFs are now among. 0:18:37.200 --> 0:18:40.360 The most risky. The performance over the long haul has made. 0:18:40.280 --> 0:18:44.560 Some of the biggest wealth destroyers among us ets Isabell 0:18:44.600 --> 0:18:46.960 Lee reported on this and time time again, you've come 0:18:46.960 --> 0:18:48.720 on to tell us about how China is faring in 0:18:48.720 --> 0:18:52.200 the macro context, and we're looking at Kweb in particular. 0:18:52.280 --> 0:18:55.440 It's got all of our Chinese tech names listed here. 0:18:55.800 --> 0:18:57.720 It's been painful, very painful. 0:18:57.720 --> 0:18:59.960 So this is a story about how market timing is tough, 0:19:00.080 --> 0:19:03.560 but especially tougher for other sectors, especially China. So we 0:19:03.600 --> 0:19:07.479 looked at all ETFs with an AOM of above one billion, 0:19:07.480 --> 0:19:10.359 and we basically subtracted the assets and net inflows because 0:19:10.400 --> 0:19:12.760 if net inflows is less than the assets, it means 0:19:12.840 --> 0:19:15.760 investors lost money over their lifetime. And among that list, 0:19:15.840 --> 0:19:19.320 Chinese ETFs were at the top, and Kathywood's ARC funds 0:19:19.320 --> 0:19:21.399 a couple of them. So back to Chinese etf you 0:19:21.440 --> 0:19:25.200 mentioned k Web over its inception since twenty thirteen, investors 0:19:25.200 --> 0:19:28.159 ploued in twelve billion, but its assets right now is 0:19:28.240 --> 0:19:30.720 just six point nine billion, so that's a valuation gap 0:19:30.840 --> 0:19:33.080 of five billion. And after k Web, it is a 0:19:33.320 --> 0:19:37.680 Kathywood's flagship ARC fund that also lost investors' money. For context, 0:19:37.720 --> 0:19:39.520 you look at SPY, which is the biggest and most 0:19:39.560 --> 0:19:42.520 liquid ETF investors plout in one hundred and sixty billion, 0:19:42.920 --> 0:19:45.520 right now is around seven hundred billion, So you see 0:19:45.520 --> 0:19:48.480 that investors were rewarded theirs. It's really hard for the 0:19:48.600 --> 0:19:51.240 Chinese ETFs is bo you. 0:19:51.200 --> 0:19:55.080 Said, timing the market is hard, but more recently China 0:19:55.200 --> 0:19:58.679 stimulus and then on the regulatory side, take video games 0:19:58.680 --> 0:20:03.160 for example, signal that policy might support some of those names. 0:20:03.400 --> 0:20:06.920 So now you're asking, okay, well, what's the trajectory. 0:20:06.320 --> 0:20:09.080 From here exactly? So I want to bring it back 0:20:09.119 --> 0:20:12.200 to twenty twenty one. So k Web saw fantastic INFLOWCE 0:20:12.240 --> 0:20:15.320 then seven point four billion. That's when investors were kind 0:20:15.320 --> 0:20:17.760 of optimistic that China will see a rebound from the 0:20:17.800 --> 0:20:20.480 dull drums of the pandemic. But also that year, to 0:20:20.600 --> 0:20:23.120 your point, we saw a deepening housing crisis, We saw 0:20:23.119 --> 0:20:26.560 some industries being really cracked down on, and we saw 0:20:26.560 --> 0:20:28.520 that ETF tumble fifty two percent. 0:20:28.920 --> 0:20:30.480