Speaker 1: From Marhart where Innovation of Money and Power Collie in
Speaker 1: Silicon Valley, NBN.
Speaker 2: This is Bloomberg Technology with Caroline Hyde and Ed Loved.
Speaker 3: Love Live from New York and San Francisco. This is
Speaker 3: Bloomberg Technology coming up. Netflix and a record the King
Speaker 3: of streaming, surpasses Wall Street's expectations on every major financial metric.
Speaker 4: Plus after iPhone sales store in a major market oversees
Speaker 4: a sign of success.
Speaker 3: And why Tesla is in the crosshairs of a federal
Speaker 3: agency's investigation.
Speaker 5: Ed.
Speaker 4: Yeah, let's get right to Netflix and this is the
Speaker 4: stock right you can see on the screen, the story
Speaker 4: on track for its biggest jump since January of this year,
Speaker 4: trading at a record high overall, and subscribers beat revenue
Speaker 4: beat And we always talk about earnings in the context
Speaker 4: of beating expectations numerically on metrics. But I think we
Speaker 4: both agree, right Caro, that the story was different to
Speaker 4: what we were expecting. A slow down in streaming. No, actually,
Speaker 4: things seem to be okay for Netflix. I think there's
Speaker 4: a lot to get into about what's happening with the
Speaker 4: consumer's attitude towards streaming platforms and how we're watching content
Speaker 4: right now.
Speaker 3: Yeah, the co CEO and sounding upbeat ted Surrandos really
Speaker 3: talking about how the company beat those expectations, but also
Speaker 3: what you can expect in twenty twenty five.
Speaker 6: Take a listen.
Speaker 7: Let's start with you know, looking into twenty twenty five,
Speaker 7: we're feeling really good about the business. We had a
Speaker 7: plan to reaccelerate growth, and we've delivered on that plan.
Speaker 7: You can see that in our twenty twenty four financials.
Speaker 7: We expect to deliver fifteen percent revenue growth and six
Speaker 7: percentage points about brading margin and brooman and engagement, which
Speaker 7: we view as our best proxy for member happiness, because
Speaker 7: when people watch more, they stick around longer, so that's retention.
Speaker 6: Felix Jellette joins us and Felix.
Speaker 3: It really was a case of even without the stellar
Speaker 3: slate they have coming up in fourth quarter, they managed
Speaker 3: to really build on that five million subscribers for the
Speaker 3: third Yeah.
Speaker 8: I think it was better than everyone expected. I think
Speaker 8: it's particularly impressive because you have to remember this is
Speaker 8: the year following the dual strikes in Hollywood, so there's
Speaker 8: this huge production slow down. At the time, everyone was
Speaker 8: speculating like, well, there's not enough new things to watch?
Speaker 8: Why would people keep subscribing to the streaming services, including Netflix.
Speaker 8: There's going to be a lot of churn, a lot
Speaker 8: of cancelations. And yet in spite of that, a year later,
Speaker 8: you know, Netflix adds another five million subscribers. This quarter
Speaker 8: is up to two hundred and eighty two plus million
Speaker 8: across the globe. So yeah, it's a very strong quorder
Speaker 8: for Netflix. And like Sorrendo said, they have an even
Speaker 8: better slate. I think you could argue coming up next
Speaker 8: quarter and next year.
Speaker 4: So he talks about this interesting metric, which is I
Speaker 4: think he called it engagement, right Felix and misterdirector, let's
Speaker 4: bring Felix is shot back up because I don't think
Speaker 4: he's had much time to watch Netflix. He's been too
Speaker 4: busy reading the piles of books either side of his shoulder.
Speaker 4: But there was a time where Netflix said, stop judging
Speaker 4: us on subscriber growth, just look at our financial metrics.
Speaker 4: Now they say, don't judge us on financial metrics. We
Speaker 4: really want to talk about this engagement number, what does
Speaker 4: it mean and where is it going?
Speaker 8: I think we do look at the engagement number. Part
Speaker 8: of that is where is their future growth going to
Speaker 8: come from, and a lot of that is advertising, right,
Speaker 8: they said yesterday, you know, we're not where we're at
Speaker 8: where we want to be out in terms of advertising revenue,
Speaker 8: but we're investing in technology, and we're investing in better inventory,
Speaker 8: and what that means is investing in better live programming.
Speaker 8: And they just have a ton of stuff coming down
Speaker 8: the pipeline, wrestling through our rest Live Wrestling. The week,
Speaker 8: they're going to have NFL games, They're doing more comedy
Speaker 8: live specials. Last week at our conference in LA, they
Speaker 8: announced they're going to do this live variety show. And
Speaker 8: I think that's going to be very appealing to advertisers
Speaker 8: once they get a certain crucial number of viewers there,
Speaker 8: and I think that's where the engagement comes from. And
Speaker 8: I think that's what they're really excited about now. But
Speaker 8: I think you can't separate that from their ambitions and advertising.
Speaker 3: Well, maybe he's kind of excited about the next edition
Speaker 3: of Wednesday because I can spot thing lurking behind your
Speaker 3: right shoulder at the moment. It's amazing, Felix Jdette, We
Speaker 3: thank you so much.
Speaker 5: Ed.
Speaker 4: Let's get some more data from branding Cats. He's the
Speaker 4: senior entertainment industry strategist at Parent Analytics, And there's actually
Speaker 4: a data point that you point to which I find fascinating,
Speaker 4: and that is Netflix's share in corporate demand. Explain that
Speaker 4: metric and why you think it makes Netflix a leader.
Speaker 2: So corporate demands share really looks at all the original
Speaker 2: programming that a company creates, and it helps value their
Speaker 2: viability in the current media market and potentially the value
Speaker 2: of that content on the opening market should they ever
Speaker 2: want to license it. For the first time ever, Netflix
Speaker 2: has leapbrogged a legacy media company by beating NBC Universal.
Speaker 2: And we have to remember NBC Universal's programming dates back
Speaker 2: to the nineteen forties with NBC, whereas Netflix has only
Speaker 2: been an original programmer for about twelve years. So the
Speaker 2: fact that their library has grown this significantly this quickly
Speaker 2: is a major testament to the amassed content that they
Speaker 2: have built.
Speaker 3: They have had to spend a lot on that content,
Speaker 3: and the point is now whether they have to spend
Speaker 3: a lot on live content on sports to really drum
Speaker 3: up this advertising process that actually Amazon seems to have
Speaker 3: nailed in many ways.
Speaker 2: Yeah, and with Amazon expanding its ads here next year
Speaker 2: to five additional markets. The pressure is on on Netflix
Speaker 2: to grow this advertising tier. It's been a slow but
Speaker 2: steady first two years. But what's really concerning is that
Speaker 2: Netflix is you Can average revenue per user has dropped
Speaker 2: for two straight quarters because of that ad tier growth.
Speaker 2: So it's a little bit of a give and take.
Speaker 2: I would not be surprised if, with the addition of
Speaker 2: WWE and NFL games, we see a increase in the
Speaker 2: price for the ad supported tier in twenty twenty five
Speaker 2: five sometime.
Speaker 3: What about price point of the service? More broadly, many
Speaker 3: anticipating that we could get some price hikes.
Speaker 6: In fact, they've just enacted some today.
Speaker 2: Absolutely, we're getting international price hikes. I would not be
Speaker 2: surprised if another you Can price hike is around the corner,
Speaker 2: particularly off the back of their extremely strong anticipated Q
Speaker 2: four content slate. And as they mentioned, the production logjam
Speaker 2: is starting to normalize following the strike, so we could
Speaker 2: probably expect a little bit more volume in terms of
Speaker 2: new originals in twenty twenty five, which also bolsters their
Speaker 2: case in raising prices yet again. Consumers, maybe I'll watch
Speaker 2: that while on a little bit.
Speaker 4: More Okay, if you're just joining us here, on Bloomberg Technology.
Speaker 4: Netflix shares are up more than ten percent, the biggest
Speaker 4: jump since January. But they're trading at their highest level
Speaker 4: ever on record, and I think a big part of
Speaker 4: that is is there is still subscriber growth, Brandon, and
Speaker 4: that was the story we were kind of considering with
Speaker 4: this slow down. You mentioned a moment ago the live events.
Speaker 4: I want to go deeper into that. How much of
Speaker 4: a feature this will be of the platform going forward.
Speaker 2: Yeah, live events has not worked seamlessly for any streaming
Speaker 2: platform consistently. It's always been simulcast on these legacy media
Speaker 2: distribution networks and their streaming services. So Netflix is really
Speaker 2: trying to break new ground by making live entertainment on
Speaker 2: a streaming only service work. And it is certainly a
Speaker 2: huge point of focus for them moving forward to supercharge
Speaker 2: their ads here, and I think them focusing the first
Speaker 2: ten years of their kind of original content development around
Speaker 2: building out the back end by licensing other content and
Speaker 2: building up a massive library is the right way to
Speaker 2: go about it. I think they're well positioned to dive
Speaker 2: deeper into sports because of it.
Speaker 9: Now, nice we got some bridges in up on the screen.
Speaker 4: That's a household favorite for us, what do you make
Speaker 4: in management? We're kind of in deeper into this period
Speaker 4: where you have the co CEO structure.
Speaker 9: You think they're doing a good job.
Speaker 2: I think they're doing a fantastic job. And I think
Speaker 2: Greg Peters is one of the only Hollywood media executives
Speaker 2: with actual coding and software experience. And I think as
Speaker 2: we dive into an even more digital future trying to
Speaker 2: capture gen V's atension and jen Alpha's attention, who are
Speaker 2: digital natives, it's going to be very, very very important
Speaker 2: to understand how the tech works and what the consumer
Speaker 2: experience on that tech is actually like. And Netflix is
Speaker 2: taking a step forward with that.
Speaker 3: Yeah, I mean they've really beefed out the ability to
Speaker 3: carry live events. I mean we all think back to
Speaker 3: The Lover's Blind disaster when they tried to carry that
Speaker 3: live and the demand just to get down. But from
Speaker 3: that just reflects a little bit on ultimately where else.
Speaker 6: Gen Z millennial are going.
Speaker 3: Because yes, you cite the old school that they've overtaken
Speaker 3: in terms of just shared volume of content, but people
Speaker 3: are spending their time on TikTok on YouTube.
Speaker 6: How are they matching up in terms of addiction there.
Speaker 2: The concern with Netflix is that it's a pure play
Speaker 2: traditional entertainment service that is focused on film and TV,
Speaker 2: and yet video games, short form media via the creator economy,
Speaker 2: and other new media are driving growth in the entertainment
Speaker 2: ecosystem as film and TV endure a painful contraction. Yes,
Speaker 2: Netflix is building out a suite of video games, but
Speaker 2: we've had no material updates on its impact as they
Speaker 2: try to build an added value in house bundle that
Speaker 2: goes beyond just traditional film and TV. So that's why
Speaker 2: I think perhaps Netflix is slightly overvalued at the moment,
Speaker 2: even as they clearly dominate in the traditional entertainment way.
Speaker 3: I've got we've got to jump in on that that
Speaker 3: gaming side of the equation and the lackluster I mean,
Speaker 3: are they going to continue down the gaming path?
Speaker 6: And wants to know.
Speaker 2: The reports are that they are developing a triple A game,
Speaker 2: which is what I think gamers most associate with those
Speaker 2: big classic console games. Now, the success or failure of
Speaker 2: that will certainly say a lot about the health and
Speaker 2: longevity of their video game efforts. Now, do they need
Speaker 2: it to succeed, not in the interim but moving forward
Speaker 2: long term? Yes, I think they need to branch out
Speaker 2: beyond just film and television to create a stickier bundle
Speaker 2: that solves for multiple consumer pain points.
Speaker 4: Brendan Katz, Senior Entertainment Industry Strategies at parad Analytic, it's
Speaker 4: great to have you back here on Bloomberg Technology.
Speaker 9: Thank you so much.
Speaker 4: Now coming up, Apple sees unexpected demand in China. We
Speaker 4: speak about that and the broader tech market with Angelo
Speaker 4: kal Kafa, so Edward Jones that conversations coming up. This
Speaker 4: is Bloomberg Technology.
Speaker 5: The renaissance of growth has begun for Apple with iPhone sixteen.
Speaker 5: I think China, Look, that was the biggest issue.
Speaker 10: That was a headwind.
Speaker 5: Now it's a tell when they have mojo going into
Speaker 5: the next I think six to nine months. And that's
Speaker 5: why I look, Wehi the Bears Vivey on fire and
Speaker 5: a crowd theater for the last month, but I think
Speaker 5: they go back in the hibernation mode.
Speaker 10: In our opinion, that was.
Speaker 4: A very colorful Dan Ives of web Bush Securities on
Speaker 4: Apple's China turnaround as the data provider. Counterpoint Research says
Speaker 4: iPhone sixteen sales saw twenty percent in the country in
Speaker 4: its first three weeks for more, let's bring a bloomberg
Speaker 4: to Mark German. Now, when we've discussed some third party data,
Speaker 4: it's usually been negative and then Apple, with actual data
Speaker 4: in the earnest context, has proven it wrong.
Speaker 9: This is counterpoint research.
Speaker 4: Data that is a surprise, and it's a positive surprise.
Speaker 4: What does it tell us about iPhone sixteen in that market?
Speaker 11: Dearly think it tells us anything new, right?
Speaker 12: I think it tells us that the first three weeks
Speaker 12: of iPhone sales, as they usually are, were pretty hot.
Speaker 10: Right.
Speaker 11: The issue was never the opening month of the device.
Speaker 12: The issue was over the long term, right, three six,
Speaker 12: nine months to twelve months, or the full cycle of
Speaker 12: that device. I think some analysts have been a little
Speaker 12: irrational or irresponsible in their commentary on the iPhone sixteen
Speaker 12: over the last several months.
Speaker 11: Some analysts have gone as far as claiming.
Speaker 12: That this is going to create a supercycle, something we
Speaker 12: haven't seen since the iPhone first launched on China mobile
Speaker 12: with bigger screens a decade ago.
Speaker 1: Right.
Speaker 12: They've been saying that Apple Intelligence is something that is
Speaker 12: going to drive a supercycle, despite the fact that Apple
Speaker 12: Intelligence is not available in China, right, So you can't
Speaker 12: necessarily have it both ways. You can't say that AI
Speaker 12: is going to create a supercycle in China.
Speaker 11: Well, AI is not available in.
Speaker 12: China, right, I'm not entirely surprise the iPhone sixteen is
Speaker 12: doing well in the region.
Speaker 11: There's a lot of pent up demand.
Speaker 12: There's a lot of people in China who didn't upgrade
Speaker 12: the prior to years, the iPhone fourteen Pro and the
Speaker 12: iPhone fifteen Pro. The iPhone sixteen has some nice improvements, right.
Speaker 12: I think the camera control interface is excellent, right. I
Speaker 12: think the speed improvements in the battery life improvements are
Speaker 12: really nice touches. I've enjoyed those personally, So I think
Speaker 12: it's a good upgrade for people who haven't bought a
Speaker 12: new iPhone in the past few years.
Speaker 11: So I'm not entirely surprised.
Speaker 12: And typically even when the data is negative, right, I
Speaker 12: typically come on here and say is we're not going
Speaker 12: to know the truth until Apple earnings. Right, That's the
Speaker 12: case even when it's positive, And so at the end
Speaker 12: of this month, we'll get a better idea of how
Speaker 12: accurate this information is.
Speaker 3: Mark next time we are bringing you and Dan i'ves
Speaker 3: super Cycle Man on together for some fighting talk. We
Speaker 3: love it today, but more broadly when you think that
Speaker 3: there is lot bits to love within iPhone sixteen, The
Speaker 3: bit I'm just so questioning is the AI element. You've
Speaker 3: told this story again and again on well your own
Speaker 3: X platform in particular, who are they going to partner
Speaker 3: with in China?
Speaker 6: How are they going to really read the benefits of
Speaker 6: the artificial intelligence?
Speaker 12: Yeah, so there's two components really to the AI push
Speaker 12: in the iPhone, right there's the in house large language
Speaker 12: models and generative AI features.
Speaker 11: Those are using an Apple model, those are running on
Speaker 11: Apple servers.
Speaker 12: And then there's the third party component that's integrated into
Speaker 12: Syria and other parts of the operating system.
Speaker 11: In the US, they're using so far Chat.
Speaker 12: GPT starting in December, and they're also planning to integrate
Speaker 12: Google Gemini and to open it up to other lms
Speaker 12: in the future. So you have an array of choices
Speaker 12: in China. Most of those providers in the US are
Speaker 12: not available, so they're going to have to partner with local.
Speaker 11: Entities by DO being one option.
Speaker 12: Obviously you have Tencent, Obviously you have different bespoke llms
Speaker 12: in the region.
Speaker 11: But the other component is.
Speaker 12: How is Apple going to get approval from the Chinese
Speaker 12: government to use their server infrastructure to power their in
Speaker 12: house generative AI models, which are in fact the bigger
Speaker 12: deal right for Apple Intelligence, notification summaries, writing tools, image
Speaker 12: generation gen moojis to create your own emojis. Right at
Speaker 12: least for iCloud, they have to use a partner right
Speaker 12: in China with government affiliation, and so they may end
Speaker 12: up having to do something similar if they want to
Speaker 12: get Apple Intelligence working in China, right, And China's one
Speaker 12: of two major markets, the other being the European Union
Speaker 12: where the AI features are not available on the iPhone
Speaker 12: and there's no clear release date for one that will happen,
Speaker 12: and I don't anticipate that happening for at least a year.
Speaker 4: Nice Bloomberg's Mark gun and keep your eyes peeled for
Speaker 4: his power on newsletter this weekend, and Caro, as we're
Speaker 4: showing clearly Apple and its gains are a factor in
Speaker 4: the market this Friday.
Speaker 6: They are.
Speaker 3: Let's talk about that about the broader market with the
Speaker 3: Angelo kokafas his senior investment stretches over at Edward Jones
Speaker 3: and just let's dwell on Apple for a moment and
Speaker 3: what it signals. But We've got UK retail data out
Speaker 3: today that said it was buoyed by things like the
Speaker 3: Apple phone, but also Google's pixel as well. How important
Speaker 3: is consumer to Apple right now and how resilient is it?
Speaker 13: Yeah, I think today's strength in MEGACAUP tech, including Apple,
Speaker 13: is really a reminder not to dismiss technology, and technology
Speaker 13: actually remains bright spot. The consumer clearly has been the
Speaker 13: main driver for not only some of these technology names,
Speaker 13: but for really the broader economy and the bullmarket. Fieceis
Speaker 13: and we keep getting good news on that front. Economic
Speaker 13: surprises are turning positive. Just retail sales this week express
Speaker 13: some strength and resiliency. So the economy is nowhere near recession,
Speaker 13: especially in the US, but the same applies to a
Speaker 13: broad now. China is a complicated story to say the least,
Speaker 13: but at the same time there's some signs of bottom
Speaker 13: in that also feeds into the Apple story. We've had
Speaker 13: plenses from policy makers to support growth. Many questions remain
Speaker 13: what's going to actually be delivered, But at least from
Speaker 13: a sentiment investors set perspective, it seems like the worst
Speaker 13: is behind US Angela.
Speaker 4: When you talk about profitable tech, historically it's like in
Speaker 4: the context of having amazing balance sheet in trench market position.
Speaker 4: But here on Bloomberg Technology we talk about innovation. That's
Speaker 4: what Mark was reporting on. Which is the more important
Speaker 4: factor to the investor?
Speaker 10: I think it's both.
Speaker 13: You have that long term secular thesis and there's a
Speaker 13: long runway for growth, especially on artificial intelligence, but also
Speaker 13: you have the reality of market swings and rotations that
Speaker 13: happen because of the interstrate backdrop in the more near term,
Speaker 13: and both materie based on your time horizon.
Speaker 10: Think about the current backdrop.
Speaker 13: We have an economy that is still growing at a
Speaker 13: very solid pace. Verberate profits are on the rise, and
Speaker 13: at the same time, interst rates are.
Speaker 10: Moving lower, and that backdrop provides a.
Speaker 13: Little more tail winds for areas of the market that
Speaker 13: have been really left behind over the past eighteen months.
Speaker 13: The big cap technology companies, they're in a NetCast position.
Speaker 13: They have more cast than that, so they've been benefiting
Speaker 13: from the rise in interest.
Speaker 10: Rates, right, and other areas have been here.
Speaker 13: But on the flip side, as interest rates move lower,
Speaker 13: you are seeing really that broadening start to play out.
Speaker 6: Angelo. It's been great having some time with you. Thank you.
Speaker 6: Very much.
Speaker 3: Indeed, talking all through the valuation story Angelo kocafas his
Speaker 3: senior investment strategist at Edward Jones.
Speaker 6: Let's turned to China.
Speaker 3: Now, investors are learning that Chinese stock ETFs are now among.
Speaker 6: The most risky. The performance over the long haul has made.
Speaker 3: Some of the biggest wealth destroyers among us ets Isabell
Speaker 3: Lee reported on this and time time again, you've come
Speaker 3: on to tell us about how China is faring in
Speaker 3: the macro context, and we're looking at Kweb in particular.
Speaker 3: It's got all of our Chinese tech names listed here.
Speaker 6: It's been painful, very painful.
Speaker 14: So this is a story about how market timing is tough,
Speaker 14: but especially tougher for other sectors, especially China. So we
Speaker 14: looked at all ETFs with an AOM of above one billion,
Speaker 14: and we basically subtracted the assets and net inflows because
Speaker 14: if net inflows is less than the assets, it means
Speaker 14: investors lost money over their lifetime. And among that list,
Speaker 14: Chinese ETFs were at the top, and Kathywood's ARC funds
Speaker 14: a couple of them. So back to Chinese etf you
Speaker 14: mentioned k Web over its inception since twenty thirteen, investors
Speaker 14: ploued in twelve billion, but its assets right now is
Speaker 14: just six point nine billion, so that's a valuation gap
Speaker 14: of five billion. And after k Web, it is a
Speaker 14: Kathywood's flagship ARC fund that also lost investors' money. For context,
Speaker 14: you look at SPY, which is the biggest and most
Speaker 14: liquid ETF investors plout in one hundred and sixty billion,
Speaker 14: right now is around seven hundred billion, So you see
Speaker 14: that investors were rewarded theirs. It's really hard for the
Speaker 14: Chinese ETFs is bo you.
Speaker 4: Said, timing the market is hard, but more recently China
Speaker 4: stimulus and then on the regulatory side, take video games
Speaker 4: for example, signal that policy might support some of those names.
Speaker 4: So now you're asking, okay, well, what's the trajectory.
Speaker 14: From here exactly? So I want to bring it back
Speaker 14: to twenty twenty one. So k Web saw fantastic INFLOWCE
Speaker 14: then seven point four billion. That's when investors were kind
Speaker 14: of optimistic that China will see a rebound from the
Speaker 14: dull drums of the pandemic. But also that year, to
Speaker 14: your point, we saw a deepening housing crisis, We saw
Speaker 14: some industries being really cracked down on, and we saw
Speaker 14: that ETF tumble fifty two percent.
Speaker 6: Fast forward to today, we.
Speaker 14: Saw a massive stimulus blitz in three weeks. We saw
Speaker 14: a lot of indexes tracking Chinese stocks rice forty percent,
Speaker 14: and we saw investors also plowing billions into the Chinese ETFs,
Speaker 14: including k Web. But then now taking a step back,
Speaker 14: Chinese shares are kind of faltering. We're seeing that rally
Speaker 14: kind of fizzle. So it raises a question, well we
Speaker 14: see something like that again, and China is really just
Speaker 14: it's a very vulnerable vehicle.
Speaker 6: It's very volatile.
Speaker 14: So it's really one thing that investors to think about
Speaker 14: when they invest in kind of ETFs.
Speaker 4: Bloomberg Sisvali, it's one of the best read stories today
Speaker 4: on the Bloomberg terminal and dot com and that's why
Speaker 4: we wanted you on the program.
Speaker 9: Thank you very much.
Speaker 3: Indeed, welcome back to Bloomberg Technology. I'm Caroline Hide, New
Speaker 3: York and.
Speaker 9: I med love Loo in San Francisco.
Speaker 6: Check on these markets.
Speaker 3: Ed because we've had a volatile one, let's put it,
Speaker 3: because the NASDAC has been pushed around by those chip
Speaker 3: names that we're going to dig into in a moment.
Speaker 3: We're currently still holding on the ground four tens percent
Speaker 3: for the last five training days. Tell you what, I's
Speaker 3: had a nice little five day performance Crypto. Moving on
Speaker 3: and have a look at what's happened with MicroStrategy Benchmark
Speaker 3: also the analyst there raising the price target. But MicroStrategy
Speaker 3: one of the biggest points contributors to the NASA one hundred. Today, Netflix,
Speaker 3: I mean the standout of the day, up ten percent,
Speaker 3: record high five million subscribers being added in the previous
Speaker 3: quarter and they're going to eclipse that in the fiscal
Speaker 3: fourth quarter. And largely I look at ASML, this is
Speaker 3: a recovery, maybe a buy the dip story. On this
Speaker 3: particular day, we're up just three percent on the US
Speaker 3: listed and European list, and I'm currently looking at the
Speaker 3: mv ones up some three percent. It has been sold
Speaker 3: off fourteen percent over the course of the week. We
Speaker 3: know why the war is on orders, the warriors on
Speaker 3: everything else bar Ai chip equipment. Basically, when we got on.
Speaker 4: The chip sector, let me take you on a journey
Speaker 4: over just five days, there's been seismic shifts in semiconductor sentiment.
Speaker 4: It all started with chip equipment maker ASML surprising with
Speaker 4: early release of results, cutting its outlook and injecting growth concerns.
Speaker 4: But by week's end, TSMC chip contract manufacturers the world
Speaker 4: settled nerves, boosting sales, growth predictions and spending plans, signaling
Speaker 4: the AI investment cycle might be okay. In Nvidia is
Speaker 4: flirting with some new record highs. Bloomberg's in King, who
Speaker 4: lead semiconductor coverage, is here with us. And that's the point.
Speaker 4: The AI bit of the semiconductor industry is okay. Everything
Speaker 4: else I think we're still a little bit worried about.
Speaker 10: Absolutely, right.
Speaker 15: The biggest concern, because that's what all the money's been
Speaker 15: poured into, is is this AI demand that we've seen,
Speaker 15: are these huge orders for Nvidia supported? Is this something
Speaker 15: that can continue? And we got evidence that yes, that's
Speaker 15: the case, at least for now. What investors turn their
Speaker 15: attention to is that other areas automotive industrial PC maybe
Speaker 15: not so good.
Speaker 3: Let's dwell on the automotive part though, in because you
Speaker 3: had a great story with Mackenzie Hawkins talking about how
Speaker 3: wool Speed is going to be getting money from the
Speaker 3: likes of Apollo, going to be expanding its manufacturing for
Speaker 3: EV chips.
Speaker 15: So why that, Yeah, I mean, this is the little
Speaker 15: chip company that apparently now can. There were existential concerns
Speaker 15: about this company. Literally it was running out of money.
Speaker 15: It's had a lot of problems ringing online, some new manufacturing,
Speaker 15: and you know, there are a lot of notes out there,
Speaker 15: a lot of analysts saying maybe this company needs to
Speaker 15: be bought, needs to go away, needs something. And now
Speaker 15: it got this, you know, massive injection into its balance
Speaker 15: sheet which should allow it to emerge from this dark
Speaker 15: place that it's been in. Huge share reaction to that
Speaker 15: that we've obviously seen this week, but still the stock
Speaker 15: market does not love this company.
Speaker 4: The funny thing is is that earning season is kind
Speaker 4: of back again. And to go to your first point
Speaker 4: on the everything else part, Texas Instruments is kind of
Speaker 4: up first. It's the everything chips name. Just explain that
Speaker 4: and why you'll be paying close attention.
Speaker 15: Yeah, we're going to have them reporting on Tuesday, And
Speaker 15: like you said, they are everything else. Automotive industrial are
Speaker 15: their two biggest markets. They make analog and embedded processes.
Speaker 15: These markets haven't been great. You know a lot of
Speaker 15: the typical sort of everybody in everybody out cycle of
Speaker 15: PC and smartphone, that kind of trend has kind of
Speaker 15: gone away, and we've seen all of these individual markets
Speaker 15: moving in different ways. Texas Instruments has been really struggling.
Speaker 15: How they might change the narrative is if they give
Speaker 15: us any hour kind of comments about what's coming in
Speaker 15: the future that says maybe we're through the worst, that
Speaker 15: could be a positive. But if you actually look at
Speaker 15: the numbers, we're still struggling.
Speaker 4: Dombasi and King rest up we go again next week.
Speaker 4: Thank you very much, Caro.
Speaker 3: Look, we've got to talk now about how politics plays
Speaker 3: its role as well, the intersection of technology and politics.
Speaker 3: A major decision facing whoever, of course, wins the White
Speaker 3: House next month, how to regulate US chip industry, in
Speaker 3: particular to stay ahead of global competition and stick into that.
Speaker 3: Michelle Grida, she's the Sea of Cratch Institute for Tech
Speaker 3: Diplomacy at Purging University. Michelle, the context with which we
Speaker 3: talk about in Nvidia and some of the other key
Speaker 3: players is the limitations are selling into China.
Speaker 6: That was a key.
Speaker 3: Story for ASML for example. Going forward, is that going
Speaker 3: to perpetuate itself?
Speaker 16: Caroline, You're right, context is really important here, and when
Speaker 16: you think about it, it's just reflective of the new
Speaker 16: paradigm that we're in in which tech has to do
Speaker 16: very much with the future of American prosperity in American
Speaker 16: national security. So just as we have to scrutinize which
Speaker 16: countries we're sending F thirty fives to, we also have
Speaker 16: to scrutinize where we're sending our most advanced chips to,
Speaker 16: which also power our F thirty fives. And these aren't
Speaker 16: hair dryers that we're talking about. And why we have
Speaker 16: to look at this is ultimately it comes down to trust.
Speaker 16: Do we trust the companies? Do we trust the countries
Speaker 16: that we're going to be sending our Nvidia chips and
Speaker 16: our most advanced critical technology to with the understanding that
Speaker 16: it's not going to end up in the hands of
Speaker 16: some of our adversaries like Russia, like China and the
Speaker 16: People's Liberation Army.
Speaker 4: Do you have a clear sense of any benefit being
Speaker 4: derived from current and existing policy on semiconductors for the
Speaker 4: United States.
Speaker 16: Look, we've taken measures over the course of a couple
Speaker 16: of administrations now to make sure that we're preventing our
Speaker 16: most critical technology from going to our adversaries and specifically China.
Speaker 16: But this is why tech diplomacy is also really important.
Speaker 16: When I was Assistants Secretary of State, I was traveling
Speaker 16: all across the world, and the number one thing that
Speaker 16: you hear from our allies and partners is that they
Speaker 16: want US private sector investment. Well, it's really hard to
Speaker 16: do that when you have Chinese technology, untrusted technology embedded
Speaker 16: into your government infrastructure and across your country.
Speaker 11: And so you want to make sure that you're.
Speaker 16: Using trusted technology. If you look at the US and
Speaker 16: twelve of our closest democratic partners, we make up twelve
Speaker 16: almost two thirds of global GDP, China, Russia, Iron Venezuela's
Speaker 16: less than twenty percent of GDP. So you want to
Speaker 16: be a part of the big network. There's a lot
Speaker 16: of financial opportunity, diplomatic opportunity in that. And so we
Speaker 16: started to, through American policy, implement the right policies around
Speaker 16: semiconductors to make sure that we are helping the partners
Speaker 16: in that trusted network and not in the untrusted.
Speaker 9: Network, Michelle.
Speaker 4: Earlier this week, Bloomberg's editor in chief John Mickelfwaite spoke
Speaker 4: to former President Trump and very directly tried to get
Speaker 4: a sense of what his policy will be with regards
Speaker 4: to China.
Speaker 9: Let's listen to his comments.
Speaker 6: Well, the reason they're doing it now is they're not
Speaker 6: going to do it afterwards.
Speaker 9: Okay, you know, so they're doing it now.
Speaker 6: They want to do a chain.
Speaker 12: Now.
Speaker 6: Look, I had a very.
Speaker 9: I had a good relationship with President She. It's had
Speaker 9: a very good relationship with Putin, and a very good
Speaker 9: relationship with Kim Jong on, who has a nuclear force
Speaker 9: that you won't even believe.
Speaker 4: President Trump discussed his good relationship with She, but I
Speaker 4: think many agree that we didn't get an understanding of
Speaker 4: whether he would continue with the existing stance of sort
Speaker 4: of export control on leading edge chip. What is your
Speaker 4: expectation if President Trump were to take office in November
Speaker 4: or in January of next year.
Speaker 16: Well, remember export controls on critical technology from China began
Speaker 16: under President Trump, and specifically with Huawei. This was with
Speaker 16: regards to five G. Huawei ultimately lost thirty billion dollars
Speaker 16: in annual revenue because the United States under President Trump
Speaker 16: worked with sixty countries and two hundred telecommunications companies to
Speaker 16: only use trusted vendors in five G and that did
Speaker 16: not include Huawei. We've seen those export controls continue now
Speaker 16: under the Biden administration. It's been on chips lately, but
Speaker 16: I think you can start to see this is American
Speaker 16: foreign policy now. Not only that the Congress is very bipartisan.
Speaker 16: Just a couple of days ago that China Select Committee
Speaker 16: called for putting more Chinese companies on the entity list.
Speaker 16: Is his Huawei's network of clandestine companies which American companies
Speaker 16: are sending semiconductor manufacturing equipment. So this is a very
Speaker 16: bipartisan thing and we should expect it to continue.
Speaker 3: And yet Michelle companies still want to access the Chinese consumer.
Speaker 3: Apple still wants to build its phones there, still wants
Speaker 3: to access the consumer there. And Vidia still wants to
Speaker 3: sell it's less sophisticated chips over to China too.
Speaker 6: What is a CEO to do?
Speaker 3: What is Jensen Wang or Tim Cook to do in
Speaker 3: that situation?
Speaker 11: Well, it's really interesting.
Speaker 16: Actually it was a Bloomberg reporter just a couple of
Speaker 16: weeks ago had asked Jensen Huang his take on the
Speaker 16: China export controls, and he said he had to defer
Speaker 16: policy making to the United States. Unfortunately, in the world
Speaker 16: that we live in, when it comes to American national security.
Speaker 16: That's not anything that any CEO of a critical tech
Speaker 16: company can differ. We all have to be in this
Speaker 16: together and in what's ultimately a technology race, American CEOs
Speaker 16: and tech CEOs in particular need to make sure that
Speaker 16: we are advancing our tech competitiveness at the same time
Speaker 16: we're not giving that technology to our adversaries who are
Speaker 16: dedicated to our demid So there's a very big leadership
Speaker 16: role for CEOs.
Speaker 6: Michelle Guida, fantastic to have some time with you.
Speaker 3: Thank you, CEO of the Crash Institute for Tech to
Speaker 3: Premacy at the Purdue University. Coming up, why Tesla driving
Speaker 3: a car program is the target for federal investigators. This
Speaker 3: is pretty bad technology. That's optimisticals.
Speaker 10: Okay.
Speaker 4: Last week's Tesla Robotaxi event was so underwhelming that Wall
Speaker 4: Streets questioning the stock's premium valuation. The so called robotaxi
Speaker 4: has been crucial to keeping Tesla's stock at lofty heights.
Speaker 4: It's trading at around seventy five times forward earnings on
Speaker 4: hopes that AI will recreate the auto industry through Musque's vision.
Speaker 4: Here's a look at the stock since the event. The
Speaker 4: next catalyst to watch is of course third quarter results,
Speaker 4: for which I will be glued to my desk along
Speaker 4: with everyone else around the world.
Speaker 9: Caroline, will you be, of.
Speaker 6: Course what brutal chart.
Speaker 3: Meanwhile, we've got to be glued to something else. In
Speaker 3: the National Highway Traffic Safety Administration, it's investigating Tesla's partial
Speaker 3: AutoMotion system. They market it as full self driving and
Speaker 3: following concerns it is defective after a series of crashes,
Speaker 3: one which resulted in a fatality. The most Crowdrudell relentless
Speaker 3: on this craig is with the weather.
Speaker 17: Right, Yeah, this is at least sort of the grounds
Speaker 17: for the investigation that NITZA is sort of narrowly looking
Speaker 17: at the issue of, you know, when teslas are being
Speaker 17: operated on FSD and in in an environment where visibility
Speaker 17: isn't great, so think of like foggy conditions. But I
Speaker 17: would point out that it's it's not necessarily the case
Speaker 17: that these investigations would sort of stay in that narrow
Speaker 17: scope where we've seen a precedent just with autopilot, this
Speaker 17: sort of standard driver assistant system that you get when
Speaker 17: you buy a Tesla that we saw NITSA open an
Speaker 17: investigation after multiple crashes involving police cars or fire trucks,
Speaker 17: and that investigation led to a much broader recall where
Speaker 17: Tesla sort of, you know, came around to this idea
Speaker 17: that you know what nitsa You're right, we will sort of,
Speaker 17: you know, find that there's a defect with our that
Speaker 17: people aren't paying enough attention while they use it, and
Speaker 17: we'll do a remedy to try and address that.
Speaker 4: Craig, as you know, because you're one of the editors
Speaker 4: on my reporting about Tesla, I'm an FSD user and
Speaker 4: actually I've posted on x quite a lot about using
Speaker 4: it in foggy conditions and some of the bizarre happenings
Speaker 4: when using the technology. One question that I have and
Speaker 4: many have, is about this probe and how it's different
Speaker 4: from prior probes and why actually this time around it
Speaker 4: may have teeth, so to speak, whereas you know, in
Speaker 4: the past, we haven't seen much happen after the probe.
Speaker 17: Yeah, I think it's interesting. These defect investigations tend to
Speaker 17: take quite a bit of time. I mentioned that Autopilot
Speaker 17: wanted took you know, I think several years really for
Speaker 17: anything to really to come of that. And you know,
Speaker 17: so that is one thing to note that NITSA tends
Speaker 17: to move at a speed that is no sort of
Speaker 17: befiting of our you know, modern sort of daily drumbeat
Speaker 17: of headlines age. I do think that what's interesting here
Speaker 17: is that, you know, just with that that autopilot investigation
Speaker 17: that precipitated or recall, Tesla was able to address that
Speaker 17: with and over the air software update, or at least
Speaker 17: they tried to do so. NITSA has gone back and said,
Speaker 17: you know what, we're not sure that that went far enough.
Speaker 17: So I think when you ask about, you know, whether
Speaker 17: or not this could have teeth, I think the real
Speaker 17: question here if you're a Tesla investor, is you know,
Speaker 17: will Nitsa get to the point where they say, you
Speaker 17: know what, Tesla, we think that you don't have a
Speaker 17: sufficient hardware too for people to be able to use
Speaker 17: these systems safely. And do you need to do more
Speaker 17: for you know, monitoring drivers better and install equipment to
Speaker 17: do that. Do you need to put in sensors to
Speaker 17: handle these these poor visibility conditions that would cost Tesla
Speaker 17: some real money.
Speaker 3: And does that question the pace, which is slower than
Speaker 3: rivals of a cyber cab or fully independently driving car
Speaker 3: that we already see on the streets in Weimar.
Speaker 17: Yeah, I think it's it's key here that you know, NITSA.
Speaker 17: I think NITSA is going to have to you know,
Speaker 17: have some say in Tesla. Following through on what Musk
Speaker 17: said last week about being able to offer a version
Speaker 17: of FSD that doesn't have to be supervised, at least
Speaker 17: in certain states, you know, Musk mentioned that in Texas
Speaker 17: and California. You know, It's it just strikes me as
Speaker 17: hard to sort of take him at his word that
Speaker 17: that timeline can possibly be achieved when we're seeing evidence,
Speaker 17: you know, year after year of crashes involving people using
Speaker 17: these systems and the end you know, them not necessarily
Speaker 17: you know, being safe enough to regulators liking.
Speaker 3: Musk ambitious on timelines. Craig tell we thank you.
Speaker 4: Welcome back to Bloomberg Technology. Let's take a look at
Speaker 4: where Netflix is at right now. Earnings just beating investor expectations,
Speaker 4: the stocks up ten and a half percent, biggest jump
Speaker 4: since January of this year, and the stock is trading
Speaker 4: at all time highs. Let's go in house. Let's bring
Speaker 4: in Gita Ranganathan Bloomberg intelligence and Gita your research you
Speaker 4: published this morning, will get right to it. You look
Speaker 4: at the subscriber gains, that was a surprise, but you're
Speaker 4: also judging Netflix on its margins. And it's really interesting
Speaker 4: to me because Netflix for ages was like, stop obsessing
Speaker 4: over subscribers, judge us on our financial metrics.
Speaker 9: Well you are why.
Speaker 6: Yeah, absolutely, ed.
Speaker 1: So you know, it was really a broad based, very
Speaker 1: very good report, as you just pointed out. And yes,
Speaker 1: this has shifted now from being just principally a subscriber
Speaker 1: story to now more of an all rounded kind of
Speaker 1: financial story as well. So good top line revenue growth,
Speaker 1: but more importantly that top line revenue growth kind of
Speaker 1: translating into very very solid bottom line growth, very solid
Speaker 1: you know, profitability, and we saw that yesterday and Netflix
Speaker 1: almost flirting with thirty percent operating margin.
Speaker 6: In the third quarter. And then look at their guidances.
Speaker 1: You know, when we came into twenty twenty four, they
Speaker 1: were you know, expecting or they were guiding margins at
Speaker 1: about twenty two percent. Yesterday they lifted it again from
Speaker 1: you know, twenty four, twenty five, twenty six and now
Speaker 1: twenty seven percent operating margins. And again the target that
Speaker 1: they set for twenty twenty five looks really really conservative
Speaker 1: to us. But this is basically this goes back to
Speaker 1: the age old question of us always asking, you know,
Speaker 1: do streaming economics really do they make sense? Can this
Speaker 1: model be as good as the original traditional TV model?
Speaker 1: And Netflix has proven to us that it can be done.
Speaker 3: What's interesting, though, is the previous chart we just showed
Speaker 3: is strong subscribers still a slow in growth trajectory, and
Speaker 3: I'm interested by perhaps Latin America seeing no growth and subscribers.
Speaker 6: Why is that happening? Where is it happening.
Speaker 1: Yes, so you know, it is a little bit of
Speaker 1: up and down. So they did talk about Latin America
Speaker 1: being a little bit of a timing issue. They're actually
Speaker 1: now continuing to see good growth starting, you know, in
Speaker 1: the calendar fourth quarter. But you know, there are mature
Speaker 1: markets and there are markets where there is going to
Speaker 1: be a lot of growth. So if you kind of
Speaker 1: just look at it as US versus rest of the world,
Speaker 1: eighty percent of subscriber growth comes from rest of the world.
Speaker 1: So the US obviously is the most mature market, but
Speaker 1: there still are pockets across the world. Caroline, whether you're
Speaker 1: looking at Asia Pacific or India. India for instance, last
Speaker 1: quarter for them was one of their most highest growing
Speaker 1: markets in terms of a number of new subscribers as
Speaker 1: well as in.
Speaker 6: Terms of revenue growth.
Speaker 1: So they do have pockets all across the world, whether
Speaker 1: it's an Eastern Europe, whether it's an Asia Pacific where
Speaker 1: they are going to try and reintegrate subscriber growth, and
Speaker 1: those are going to be their biggest areas of opportunity
Speaker 1: going forward.
Speaker 4: Giza, Bloomberg Intelligence House cool. Is Netflix still the number
Speaker 4: one streamer and will it always be the number one streamer?
Speaker 6: I think so, ed.
Speaker 1: I mean, they definitely have won the streaming wars right
Speaker 1: now as we as we kind of look at it
Speaker 1: way ahead of everybody else, way ahead of the competition,
Speaker 1: not just in terms of subscriber numbers, even if you
Speaker 1: look at them in terms of engagement.
Speaker 6: Remember they are just a smidge behind.
Speaker 1: YouTube, and YouTube has over two billion viewers across the world.
Speaker 1: It's a free service, right and you're looking at Netflix
Speaker 1: where you know you're it's a paying subscription service, a
Speaker 1: little bit of a different model, but they still have
Speaker 1: almost close to ten percent of viewing time in the
Speaker 1: US which is just a smidge again behind YouTube, so
Speaker 1: I think, you know, definitely the number one service globally
Speaker 1: and they will consolidate that lead over all of their rivals.
Speaker 3: Great research, great recap, Ethan anging Atham, and we thank
Speaker 3: you from Bloomberg Intelligence and as IT for this edition
Speaker 3: and Blomberg Technology what we.
Speaker 4: Yeah, it was an astonishing week and now earning season
Speaker 4: is back upon us so much to recap. You know
Speaker 4: where to find the podcast. It is online on Apple, Spotify, iHeart,
Speaker 4: and we publish it.
Speaker 9: To all the Bloomberg platforms.
Speaker 4: Thank you to the team in New York City, Thank
Speaker 4: you to the team in San Francisco. Happy weekends all
Speaker 4: of you around the world. This is Bloomberg Technology.