WEBVTT - Fed Holds Interest Rates Before Microsoft and Meta Report Earnings 0:00:02.520 --> 0:00:07.040 Bloomberg Audio Studios, Podcasts, radio News. 0:00:08.920 --> 0:00:13.240 This is Bloomberg business Week Daily reporting from the magazine 0:00:13.240 --> 0:00:17.880 that helps global leaders stay ahead with insight on the people, companies, 0:00:17.920 --> 0:00:22.800 and trends shaping today's complex economy. Plus global business, finance 0:00:22.840 --> 0:00:26.160 and tech news as it happens. The Bloomberg Business Week 0:00:26.239 --> 0:00:31.760 Daily Podcast with Carol Masser and Tim Steneveek on Bloomberg Radio. 0:00:32.240 --> 0:00:35.480 It is the fifth FOMC decision of the year, that's 0:00:35.479 --> 0:00:37.920 for sure, and it was an interesting one. Got to say, 0:00:37.920 --> 0:00:41.360 first of all, FED officials as expected, leaving interest rates unchange, 0:00:41.600 --> 0:00:44.720 downgrading their view of the US economy. It's assigned policymakers 0:00:44.800 --> 0:00:47.560 could be edging closer to lowering barring costs. 0:00:47.560 --> 0:00:49.840 But gotta say we moved around a bit in terms 0:00:49.840 --> 0:00:50.800 of expectations. 0:00:51.080 --> 0:00:55.280 Governors Christopher Waller and Michelle Bowman voted against the decision 0:00:55.360 --> 0:00:57.240 in favor of a quarter point cut. 0:00:57.480 --> 0:00:58.760 You kept pointing this out to me. 0:00:58.960 --> 0:01:02.200 Yeah, it's the first dub descent going back to nineteen 0:01:02.720 --> 0:01:03.800 ninety three for the FED. 0:01:04.560 --> 0:01:06.600 So is that right in thirty years? 0:01:06.680 --> 0:01:11.520 Yeah, nineteen ninety three, So it's pretty wild. So one 0:01:11.560 --> 0:01:14.000 thing that I noticed about what Jay Powell said We're 0:01:14.000 --> 0:01:15.800 going to get to some of his comments in a second, 0:01:15.840 --> 0:01:18.479 but I just want to He was asked what their 0:01:18.480 --> 0:01:21.480 conversations were about the descents. He was like, I'm going 0:01:21.520 --> 0:01:23.559 to let them speak about it in the coming days, 0:01:23.560 --> 0:01:25.800 so you will hear from them. So stay tuned. 0:01:25.880 --> 0:01:29.080 Blackout period stops on Friday, so we're going to hear stuff. 0:01:29.120 --> 0:01:30.360 Hey, what we should point out? 0:01:30.400 --> 0:01:32.920 Man, It was kind of an interesting meeting at today's 0:01:32.920 --> 0:01:34.040 press conference with reporters. 0:01:34.040 --> 0:01:34.440 Fetcher J. 0:01:34.640 --> 0:01:35.920 Powell covered a lot of. 0:01:35.840 --> 0:01:38.560 Ground, a lot of ground, and what he said was 0:01:38.600 --> 0:01:41.240 one of the better meetings of the US Central Bank. 0:01:41.520 --> 0:01:44.520 Inflation has been running somewhat above our two percent longer 0:01:44.600 --> 0:01:48.480 run objective. Recent indicators suggests that growth of economic activity 0:01:48.520 --> 0:01:51.880 has moderated. The moderation in growth largely reflects a slow 0:01:51.920 --> 0:01:55.360 down in consumer spending. Inflation has eased significantly from its 0:01:55.440 --> 0:01:59.320 highs in mid twenty twenty two, but remains somewhat elevated. 0:01:59.400 --> 0:02:01.720 Higher tariffs have begun to show through more clearly to 0:02:01.840 --> 0:02:05.280 prices of some goods, but their overall effects on economic 0:02:05.320 --> 0:02:08.560 activity and inflation remain to be seen. Basically, this was 0:02:08.639 --> 0:02:11.240 quite a good meeting all around the table. We have 0:02:11.320 --> 0:02:12.880 made no decisions about September. 0:02:12.919 --> 0:02:15.760 We don't do that in advance, as you just heard 0:02:15.960 --> 0:02:18.600 a lot from the FED chair today, certainly in his 0:02:18.639 --> 0:02:20.880 statement as well as the Q and A with reporters. 0:02:21.280 --> 0:02:24.480 So it's made for an interesting trade because we definitely 0:02:24.480 --> 0:02:27.839 have stocks off of our highs of the session. We've 0:02:27.880 --> 0:02:31.440 seen rates bounce around as well, I think, initially moving 0:02:31.480 --> 0:02:33.840 a little bit lower and then bouncing back up. So 0:02:34.400 --> 0:02:37.600 there's a lot for investors and traders to take in 0:02:37.639 --> 0:02:38.440 from this FED meeting. 0:02:38.919 --> 0:02:41.400 Yeah, there really is. Let's bring in Karen very Para, 0:02:41.520 --> 0:02:44.160 managing director and head of I Shares US fixed income 0:02:44.200 --> 0:02:47.480 strategy at Blackrocks. She joins us from San Francisco. It 0:02:47.560 --> 0:02:50.600 is the world's largest asset manager, had twelve point five 0:02:50.600 --> 0:02:53.200 to three trillion dollars in assets under management at the 0:02:53.280 --> 0:02:56.079 end of the second quarter. Karen joins us once again 0:02:56.320 --> 0:02:59.359 from San Francisco. Karen, did the FED get this right? 0:03:01.000 --> 0:03:01.639 I think so. 0:03:01.639 --> 0:03:03.960 So we were just like also watching the press conference 0:03:04.000 --> 0:03:07.359 here on our trading desk, and I think that their 0:03:07.400 --> 0:03:11.080 main message was we're keeping rates on hold because inflation 0:03:11.200 --> 0:03:13.440 is still above target, and that would speak to really 0:03:13.520 --> 0:03:16.120 keeping a little bit more restrictive. So I think this 0:03:16.160 --> 0:03:17.760 is actually a good thing in the long run for 0:03:17.800 --> 0:03:21.880 investors because they're still getting higher levels of interest rates, 0:03:21.919 --> 0:03:26.080 they're able to reinvest and keep the fixed income asset 0:03:26.080 --> 0:03:28.600 allocation on track. And so I think for a lot 0:03:28.600 --> 0:03:31.520 of investors watching the FED, one of the things that 0:03:31.520 --> 0:03:33.359 they should take note of is really is if these 0:03:33.360 --> 0:03:35.160 inflation prints are going to continue to come in a 0:03:35.200 --> 0:03:38.000 little hotter than they expect, maybe you should consider adding 0:03:38.000 --> 0:03:40.200 some inflation links bonds to portfolios. So we're seeing that 0:03:40.240 --> 0:03:43.520 being a big trend, people really refocusing on adding inflation 0:03:43.600 --> 0:03:44.320 protection back in. 0:03:44.520 --> 0:03:45.480 I love that you went right there. 0:03:45.480 --> 0:03:47.680 I mean, anybody who's a bond investor, I mean at 0:03:47.720 --> 0:03:51.320 this point has to coming off of this press conference, 0:03:51.600 --> 0:03:53.920 with all the pressure that the FED chair has gotten 0:03:53.960 --> 0:03:58.000 from the President of the United States, have to think that, Okay, 0:03:58.200 --> 0:04:00.600 this guy is going to do his job no matter what. 0:04:01.360 --> 0:04:02.240 Yeah, I think that's right. 0:04:02.280 --> 0:04:05.760 I think we're just so focused here on the long 0:04:05.840 --> 0:04:08.360 term trends and meeting to meeting, we're going to see 0:04:08.720 --> 0:04:11.080 i'd say a lot of price action in the bond markets. 0:04:11.400 --> 0:04:13.400 But I think it's really important to think long term 0:04:13.440 --> 0:04:15.480 and whenever we're you know we're looking to the next meeting, 0:04:15.480 --> 0:04:19.640 as you highlighted September seventeenth, there's still a chance they're 0:04:19.640 --> 0:04:22.080 gonna cut at that meeting, but they've still got two. 0:04:21.880 --> 0:04:22.719 More on the calendar. 0:04:23.120 --> 0:04:24.440 And if we just take a look at the dot 0:04:24.480 --> 0:04:27.479 plot from June, we saw a couple of governors. Two 0:04:27.480 --> 0:04:29.400 governors favorite three cuts, and I think we now know 0:04:29.440 --> 0:04:32.320 who they are, But then the other eight favored about 0:04:32.320 --> 0:04:34.120 two cuts, and that's still what the bond market is 0:04:34.120 --> 0:04:36.640 pricing in. So I think anybody looking at at the 0:04:36.640 --> 0:04:39.320 short term focus, they can probably still use that as 0:04:39.360 --> 0:04:39.880 a barometer. 0:04:40.120 --> 0:04:41.760 So you say there's a chance that they'll cut at 0:04:41.760 --> 0:04:43.720 the September meeting, you don't think that's a done deal 0:04:43.760 --> 0:04:44.279 at this point. 0:04:46.360 --> 0:04:47.360 It's hard to say. 0:04:47.400 --> 0:04:51.920 I think, especially Chairman Pal's comments during the press conference, 0:04:51.960 --> 0:04:53.440 we're really telling is that they don't want to get 0:04:53.440 --> 0:04:56.799 ahead of themselves. We actually got core PCE coming out tomorrow, 0:04:57.160 --> 0:04:59.760 and that's also been trending about two point seven percent. 0:05:00.000 --> 0:05:03.000 I think that's an important number to watch, and we're 0:05:03.040 --> 0:05:05.440 seeing a lot of investors you are slowly starting to 0:05:05.440 --> 0:05:07.680 move back into fixed income assets even with some of 0:05:07.680 --> 0:05:10.960 the uncertainty here. There's still about seven trillion dollars sitting 0:05:11.000 --> 0:05:14.960 in money market funds, earning those overnight rates, and then 0:05:15.000 --> 0:05:18.200 we're slowly seeing people allocate back into more core fixed 0:05:18.240 --> 0:05:22.119 income exposures, even international bonds, rather than just sit in cash. 0:05:22.160 --> 0:05:23.960 And they're trying to get ahead of the FED meeting, 0:05:24.000 --> 0:05:25.360 and that's what we're seeing money move towards. 0:05:25.720 --> 0:05:28.479 You know what's interesting too, Diane Swank and our FED 0:05:28.480 --> 0:05:31.080 coverage earlier today, noting that we had an inflation print today, 0:05:31.080 --> 0:05:34.160 reminding us where we saw inflation in both goods and services. 0:05:34.880 --> 0:05:38.120 I am curious to throw on top of that tax 0:05:38.160 --> 0:05:45.800 cuts targeted spending by the legislation that just passed in Congress, 0:05:45.839 --> 0:05:51.520 expectations on more deregulation and AI making companies workers, if 0:05:51.560 --> 0:05:54.839 you will, more productive. That sounds to me like it's 0:05:55.000 --> 0:05:56.200 stimulative policies. 0:05:56.960 --> 0:05:59.200 I think that's really the trick is finding the balance 0:05:59.240 --> 0:06:01.360 between some of the good data that we are getting 0:06:01.360 --> 0:06:03.080 and some of the productivity gains. 0:06:03.600 --> 0:06:05.239 We've seen positive wage growth. 0:06:05.600 --> 0:06:07.800 I think there's been even though the GDP print came 0:06:07.839 --> 0:06:10.440 out higher than expected, there was a lot of noise 0:06:10.440 --> 0:06:13.160 in that, just with imports and exports. But I do 0:06:13.200 --> 0:06:15.520 think the economy is pretty strong, and the Feds just 0:06:15.520 --> 0:06:18.000 trying to get back to that neutral rate and figuring out. 0:06:17.839 --> 0:06:20.520 The timing of that is really the tough part. So 0:06:20.680 --> 0:06:21.839 there's a lot of investigation. 0:06:22.600 --> 0:06:24.200 No, I get it, there's a lot. So is it 0:06:24.720 --> 0:06:26.080 smarter in your view? 0:06:26.240 --> 0:06:28.440 And it sounds like this is where Jay Powell is 0:06:28.520 --> 0:06:31.720 leaning to make sure that inflation they really do have 0:06:31.800 --> 0:06:33.839 under control. You don't want to make the mistake of 0:06:33.880 --> 0:06:37.520 cutting and then having to kind of backtrack and re 0:06:37.720 --> 0:06:40.159 raise rates because of inflation taking higher. 0:06:41.800 --> 0:06:43.600 That's right. I think their weight and see approach is 0:06:43.640 --> 0:06:45.480 going to be the playbook for the rest of the year. 0:06:46.160 --> 0:06:47.200 So no more rate cuts. 0:06:48.320 --> 0:06:49.960 No, I think they're just going to wait and see 0:06:49.960 --> 0:06:52.280 what the data is telling them. So I mean, I 0:06:52.279 --> 0:06:55.480 think personally we'll still get one or two cuts, probably 0:06:55.480 --> 0:06:57.120 in the back half of the year. So that really 0:06:57.120 --> 0:07:00.640 speaks to those October December meetings. The Fed did not 0:07:00.680 --> 0:07:02.400 want to take September off the table either, so I 0:07:02.400 --> 0:07:04.919 think they left a lot of optionality open during this meeting. 0:07:05.000 --> 0:07:07.680 What would make you change your mind about September over 0:07:07.680 --> 0:07:11.680 the next month and say essentially that September will definitely 0:07:11.680 --> 0:07:12.400 see a right cut. 0:07:13.440 --> 0:07:14.720 I think a couple of factors. 0:07:14.760 --> 0:07:17.160 If we see some of those inflation prints coming in 0:07:17.240 --> 0:07:20.600 lower than expected in a meaningful way. I think if 0:07:20.720 --> 0:07:23.600 the trade deals solidify and we get some teriff rates 0:07:23.600 --> 0:07:26.520 that are not expected to be passed through with inflation, 0:07:26.640 --> 0:07:28.440 because that's still the big uncertainty out there. 0:07:29.200 --> 0:07:31.040 And just to make sure I have this clear from you, 0:07:31.080 --> 0:07:33.240 are you are you certain that the next move by 0:07:33.240 --> 0:07:36.360 the Fed will be a cut and not necessarily an increase. 0:07:38.080 --> 0:07:39.280 I don't think it'll be an increase. 0:07:39.320 --> 0:07:42.000 I think that's that's not really what's being priced into 0:07:42.040 --> 0:07:43.800 bond markets, and I think a lot of the discussion 0:07:43.840 --> 0:07:45.880 around the cuts is really just trying to move it 0:07:45.920 --> 0:07:47.960 back towards that neutral rate and not becoming more. 0:07:50.000 --> 0:07:51.720 The reason now, yeah, sorry to cut you off. We 0:07:51.760 --> 0:07:53.960 only have about a minute left. The reason I'm interested 0:07:53.960 --> 0:07:56.920 in that is because we haven't necessarily seen the effect 0:07:57.000 --> 0:08:00.640 or the impact of tariffs make their way into numbers. 0:08:00.680 --> 0:08:03.120 And what economists tell us is just wait, just wait, 0:08:03.200 --> 0:08:05.880 just wait, it'll happen. But it hasn't happened. So if 0:08:05.920 --> 0:08:09.000 that does happen, does that change the trajectory of the Fed? 0:08:09.600 --> 0:08:11.440 I think, if anything, it just keeps them on hold 0:08:11.480 --> 0:08:13.680 for even longer because I think they're going to be 0:08:13.720 --> 0:08:15.720 reluctant to do you have done a couple of cut 0:08:15.800 --> 0:08:18.120 a few cuts already and then and then make it hike. 0:08:18.520 --> 0:08:20.480 So I think it'll it'll really just come down to 0:08:20.520 --> 0:08:23.200 the data and how quickly they can model that. And 0:08:23.240 --> 0:08:24.960 I think that was something that was highlighted in the 0:08:25.000 --> 0:08:25.960 press conference today. 0:08:26.000 --> 0:08:27.360 Just to wrap up, because we talked a little bit 0:08:27.360 --> 0:08:30.160 about I think where you were finding either opportunities or 0:08:30.280 --> 0:08:35.280 suggestion to investors. But going back to a FED that 0:08:35.520 --> 0:08:39.040 and a FED share that understands is mandate, understands what 0:08:39.080 --> 0:08:42.120 the FED ja our's job is, understands what the fomc's 0:08:42.200 --> 0:08:45.000 job is, and the Federal Reserve in terms of monetary 0:08:45.080 --> 0:08:47.559 policy and what global investors expect. 0:08:47.559 --> 0:08:48.440 Having said that. 0:08:48.440 --> 0:08:52.120 You feel pretty confident maybe going longer out in terms 0:08:52.120 --> 0:08:54.600 of buying into the US treasury market and just quickly 0:08:54.760 --> 0:08:55.960 that about thirty seconds. 0:08:56.600 --> 0:08:56.840 Yeah. 0:08:56.880 --> 0:08:59.360 I think rates remaining high are good for investors. I 0:08:59.400 --> 0:09:02.040 think stepping out of cash if cash rates are projected 0:09:02.040 --> 0:09:04.520 to come down, locking in some of those bond yields 0:09:04.640 --> 0:09:07.160 are really good for investors. I think getting your duration 0:09:07.320 --> 0:09:09.840 back towards called the three to seven year. Part of 0:09:09.840 --> 0:09:12.360 the curve is probably prudent for a lot of investors 0:09:12.400 --> 0:09:13.800 right now. Her overweight cash. 0:09:13.880 --> 0:09:16.000 Great stuff, Karen, thank you so much busy, We know 0:09:16.120 --> 0:09:18.319 for you as well as for us, but really appreciate 0:09:18.800 --> 0:09:21.560 you carving out some time for us. Karen Vera Perry, 0:09:21.640 --> 0:09:23.480 she is head of US. I share his fixed income 0:09:23.480 --> 0:09:25.840 strategy over at the massively. 0:09:27.080 --> 0:09:28.640 Black Rock. I mean, what are we talking about? 0:09:28.760 --> 0:09:30.720 Massively massive blacks twelve. 0:09:30.480 --> 0:09:33.880 Point fifty three trillion in assets under management that was 0:09:33.920 --> 0:09:34.960 at the end of the second quarter. 0:09:35.400 --> 0:09:39.400 You're listening to the Bloomberg Business Weekdaily Podcast. Catch us 0:09:39.480 --> 0:09:42.920 live weekday afternoons from two to five pm Eastern. Listen 0:09:42.960 --> 0:09:46.520 on Apple CarPlay and Android Auto with the Bloomberg Business app, 0:09:46.679 --> 0:09:49.199 or watch us live on YouTube. 0:09:49.440 --> 0:09:52.000 All right, everybody, we've got meta platforms, Microsoft, both aut 0:09:52.000 --> 0:09:52.400 with earnings. 0:09:52.440 --> 0:09:53.160 Those are the big ones. 0:09:53.200 --> 0:09:55.800 There's a lot that are out there, but we want 0:09:55.840 --> 0:09:57.800 to get to We've got great team coverage here at 0:09:57.800 --> 0:10:00.280 Bloomberg and also some great outside voices, So let's get 0:10:00.280 --> 0:10:02.760 to it. With Dan Ives, he's managing director and senior 0:10:02.760 --> 0:10:06.520 equity analyst and global head of Technology research at Webbush Securities. 0:10:06.559 --> 0:10:09.320 We're going to start with meta. Let's talk about it. 0:10:09.320 --> 0:10:10.920 The stocks up about eight and a half percent of 0:10:10.960 --> 0:10:13.200 year in the aftermarket. What do you like and what 0:10:13.280 --> 0:10:15.240 don't you like? Do you not like anything? 0:10:15.880 --> 0:10:17.040 There's nothing not to lie. 0:10:17.080 --> 0:10:17.439 I like. 0:10:18.160 --> 0:10:23.120 Look it speaks to you go through this AI revolution. 0:10:23.720 --> 0:10:26.400 It's in this next stage of growth and all the 0:10:26.520 --> 0:10:29.760 money that you're seeing these big tech players at BACS 0:10:30.720 --> 0:10:34.080 now you're ultimately starting to see some of those differdence 0:10:34.160 --> 0:10:37.000 get being And then about the advertising growth and of 0:10:37.120 --> 0:10:39.559 what we saw with alphabet, what you see with meta 0:10:40.000 --> 0:10:41.280 subscriber growth. 0:10:41.480 --> 0:10:45.079 I mean this it's goldilocks, you know for tech. 0:10:46.240 --> 0:10:50.040 How does meta harness AI to make money? Apart from 0:10:50.200 --> 0:10:54.400 making its advertising more efficient, it's about. 0:10:54.200 --> 0:10:55.360 The billions of users. 0:10:55.920 --> 0:11:00.560 It's about going forward, how they're going to monetize AI. 0:11:00.720 --> 0:11:02.360 They're not just spending to spend. 0:11:03.040 --> 0:11:06.760 They're going to be able to monetize from an advertising perspective. 0:11:07.320 --> 0:11:09.280 When you think about the billions of users. 0:11:08.960 --> 0:11:10.680 They have, that's how do they do that? 0:11:10.760 --> 0:11:10.920 Though? 0:11:11.280 --> 0:11:14.959 Dan, and the reason Zuckerberg right now is what i 0:11:15.120 --> 0:11:16.920 U is like a wartime CEO. 0:11:18.080 --> 0:11:20.360 It's the view that when you. 0:11:20.280 --> 0:11:24.800 Think about AI today, this is just the beginning. You're 0:11:24.840 --> 0:11:28.760 gonna and you're going to have AI driven search, You're 0:11:28.760 --> 0:11:30.880 going to have sort of the future. 0:11:31.840 --> 0:11:37.560 That Meta alphabet are going to play huge pieces in 0:11:37.640 --> 0:11:38.920 the advertising piece. 0:11:40.480 --> 0:11:43.560 But I want to go so it's just advertising that 0:11:43.559 --> 0:11:45.400 that's where they're going to make all their money back. 0:11:45.440 --> 0:11:47.640 We know that they have been on such an aggressive 0:11:47.679 --> 0:11:51.600 AI talent grab and you know Meta has so you. 0:11:51.679 --> 0:11:55.520 Need hundreds of millions of dollars. Yeah, like pay individuals. 0:11:56.000 --> 0:11:59.480 So there that's all gonna pay off the return on 0:11:59.559 --> 0:12:00.640 in beginning. 0:12:00.880 --> 0:12:05.640 Okay, advertising advertising just to begin When you think about 0:12:06.080 --> 0:12:10.040 full what I've used sort of like FULLYGI and it 0:12:10.120 --> 0:12:13.280 was like the Holy graw. What Meta is trying to build? 0:12:13.280 --> 0:12:15.959 What every big tech player is trying to build. Meta 0:12:16.040 --> 0:12:19.440 is basically, we're going to create a whole nother. 0:12:19.320 --> 0:12:22.960 Company over the next decade. That's what they're spending on. 0:12:23.520 --> 0:12:25.800 This is what I'm still waiting for, like you know 0:12:26.600 --> 0:12:30.040 Meta platforms. Look, no question, this was an incredible quarter. 0:12:30.360 --> 0:12:32.360 The stock is up nine point three percent in the 0:12:32.400 --> 0:12:35.880 after hours. Just to repeat the numbers. Second quarter earnings 0:12:35.880 --> 0:12:39.080 per share a huge beat, seven dollars and fourteen cents. 0:12:39.120 --> 0:12:41.000 The estim was for five dollars and eighty nine cents. 0:12:41.040 --> 0:12:44.600 Second quarter revenue a huge beat, forty seven point five 0:12:44.800 --> 0:12:48.080 billion dollars. The estimate was for forty four point eight 0:12:48.200 --> 0:12:51.520 billion dollars. Third quarter revenue forty seven point five to 0:12:51.559 --> 0:12:54.280 fifty point five billion, that's the outlook. The estimate was 0:12:54.280 --> 0:12:56.720 for below that, at forty six point two billion. But 0:12:56.800 --> 0:12:58.600 I want, Dan, want, I want to look with you 0:12:59.600 --> 0:13:03.400 years out when the hardware that they're working on, that 0:13:03.440 --> 0:13:06.880 they're spending billions of dollars on will start paying dividends. 0:13:06.880 --> 0:13:09.160 What does that future look like for META users and 0:13:09.160 --> 0:13:10.480 for Meta investors? 0:13:11.000 --> 0:13:13.320 And you have to think about it, like, what's the 0:13:13.400 --> 0:13:18.240 future in terms of robotics, in terms of software, in 0:13:18.320 --> 0:13:20.760 terms of how AI is going to play a role 0:13:21.280 --> 0:13:23.959 in the every day of a consumer. I mean Meta 0:13:24.040 --> 0:13:29.200 is thinking not in the next year, three, five, eight, 0:13:29.679 --> 0:13:30.880 ten years out. 0:13:31.160 --> 0:13:33.280 I want to bring in man deep saying if I 0:13:33.320 --> 0:13:34.960 may of our Bloomberg intelligence team. 0:13:34.960 --> 0:13:36.120 I don't know if it's too soon. I know you're 0:13:36.160 --> 0:13:36.560 going through. 0:13:36.440 --> 0:13:37.880 All the numbers because I want to bring into the 0:13:37.880 --> 0:13:42.680 conversation with Dan, good quarter killer quarter, How do you 0:13:42.679 --> 0:13:43.440 see it for better? 0:13:43.520 --> 0:13:47.160 Yeah, I mean there is a sequential acceleration in ad 0:13:47.200 --> 0:13:51.319 impressions as well as at pricing growth, and to my mind, 0:13:51.360 --> 0:13:56.560 that is a sign of them applying AI to boost engagement. Obviously, 0:13:56.800 --> 0:13:59.880 the user growth has been almost the same every quarter, 0:14:00.240 --> 0:14:03.280 four to five percent, So the fact that impressions grew 0:14:03.360 --> 0:14:06.160 eleven percent is a sign that people are spending more 0:14:06.200 --> 0:14:09.199 time on their family of apps. And then the ad 0:14:09.280 --> 0:14:11.920 pricing going up nine percent, that to me is the 0:14:11.960 --> 0:14:17.000 real tailwind because that was the risky part Chinese advertisers 0:14:17.080 --> 0:14:20.640 like Timu and Cheen pulling back because of the Deminimus 0:14:20.680 --> 0:14:23.120 rule changes that didn't happen, that didn't show up in 0:14:23.160 --> 0:14:26.840 the numbers. And look when it comes to applying AI, 0:14:27.360 --> 0:14:31.560 I mean small advertisers are now connecting META to their 0:14:31.600 --> 0:14:36.040 CRM systems and actually that is what's driving the ad 0:14:36.120 --> 0:14:39.440 targeting and efficiency that wasn't the case before. That has 0:14:39.480 --> 0:14:42.040 been enabled by JENII. So that's why you see that list. 0:14:42.120 --> 0:14:42.920 Do you agree with Dan? 0:14:43.880 --> 0:14:47.800 I think JENNYI use case is quite prominent. We keep 0:14:47.840 --> 0:14:52.480 hearing about coding agents customer service. Here is the precise 0:14:52.640 --> 0:14:54.960 use case for META, and that is what they are 0:14:55.000 --> 0:14:56.760 showing in their ad pricing numbers. 0:14:57.440 --> 0:14:59.320 Dan, come on in I saw you you're saying something 0:14:59.520 --> 0:15:00.280 that sounds. 0:15:00.560 --> 0:15:04.720 That sounds like a bullish Man Deep. I mean that's 0:15:05.240 --> 0:15:08.880 like on the man Deep scale. That's that's pretty both. 0:15:09.960 --> 0:15:12.760 I like that. Hey, Dan, I noticed something striking today 0:15:13.200 --> 0:15:15.640 when I opened up Instagram. I was searching for a 0:15:15.840 --> 0:15:19.640 video from Mike Birbigli, a comedian who I really like. 0:15:19.720 --> 0:15:21.280 And what I noticed when I was just I was 0:15:21.320 --> 0:15:24.320 just looking for his profile. When I typed in his name, 0:15:24.960 --> 0:15:28.920 what appeared was as an AI answer about a biography 0:15:28.960 --> 0:15:30.880 of who he was. Information about him? 0:15:31.480 --> 0:15:31.960 Is the goal? 0:15:32.200 --> 0:15:34.360 What is the vision for Instagram? Is this going to 0:15:34.440 --> 0:15:36.240 be metas super app? 0:15:37.160 --> 0:15:40.280 To some extent, they're basically creating a super app, I mean, 0:15:40.600 --> 0:15:44.040 similar what you see in China, but an AI driven 0:15:44.120 --> 0:15:47.840 super abb that's and you start to go through that, 0:15:48.080 --> 0:15:49.720 you look in at a four digit stop. 0:15:50.600 --> 0:15:53.560 They tried to do this years ago with David Marcus 0:15:54.000 --> 0:15:57.560 on the messenger side Man Deep. It didn't necessarily work. 0:15:57.600 --> 0:16:01.520 It was supposed to be payments and and everything. Is 0:16:01.560 --> 0:16:04.920 that still, in your view an area of growth for 0:16:05.000 --> 0:16:07.480 the company here or is that strategy gone? 0:16:08.000 --> 0:16:10.480 I mean, right now it feels like they have a 0:16:10.520 --> 0:16:13.200 lot of runway with ads and there is a clear 0:16:13.480 --> 0:16:17.080 use case for JENNYI with ADS, I mean, they still 0:16:17.120 --> 0:16:20.960 have to fix the model. So I think the advantage 0:16:21.000 --> 0:16:23.200 that they have is really they are the best when 0:16:23.240 --> 0:16:27.440 it comes to at targeting and with everything that's going on. 0:16:27.680 --> 0:16:31.600 I mean, they have the surface area to apply GENAI. 0:16:31.800 --> 0:16:35.320 But look when it comes to payments and other areas, 0:16:35.880 --> 0:16:39.800 they still lack the diversification of a Microsoft or a Google. 0:16:40.160 --> 0:16:43.440 It's still a one trick set. I mean, albeit a 0:16:43.520 --> 0:16:46.840 twi dollar company, Yes, still dependent on ADS. 0:16:47.200 --> 0:16:47.400 Dan. 0:16:47.600 --> 0:16:49.440 You know, it's funny because I was thinking about that 0:16:49.480 --> 0:16:51.240 because we you know, we talk about all of these 0:16:51.240 --> 0:16:54.080 companies and I think about the hyperscalers like an alphabet. 0:16:54.080 --> 0:16:56.400 We've talked about that a lot in Mandeep, about just 0:16:56.480 --> 0:16:58.760 all of their different platforms and how much data that 0:16:58.800 --> 0:17:01.760 gives them to make their model smarter and smart smarter. 0:17:01.840 --> 0:17:03.920 I mean, Dan, is it going to be okay for 0:17:04.040 --> 0:17:06.240 Meta to be kind of a one trick pony, even 0:17:06.280 --> 0:17:08.080 if I mean it's a massive one trick pony. 0:17:08.320 --> 0:17:09.120 But is it enough? 0:17:10.400 --> 0:17:10.480 Well? 0:17:10.520 --> 0:17:12.359 I mean, like, look, I think if you think about 0:17:12.560 --> 0:17:15.200 going to packing scale, of course I can vidio the 0:17:15.320 --> 0:17:19.920 top Microsoft and you'll get these numbers just just unbelievable. 0:17:19.960 --> 0:17:23.920 In terms of you across the board. You look at Meta, Yeah. 0:17:23.760 --> 0:17:27.719 You call it one trick pony ish, but that's but 0:17:27.760 --> 0:17:31.639 they're going to significantly expand that over the coming years. 0:17:32.960 --> 0:17:35.520 I mean, at least for now, there is no proof. 0:17:35.640 --> 0:17:38.960 I feel they are under earning by twenty percent because 0:17:38.960 --> 0:17:41.919 of all the losses in reality labs. The Street doesn't 0:17:41.920 --> 0:17:46.600 care because their ad business is really going gangbusters. When 0:17:46.680 --> 0:17:49.520 the ads slow down and the comps will get tougher 0:17:49.560 --> 0:17:52.080 and there will be a point when ads will not 0:17:52.119 --> 0:17:55.720 grow twenty percent, that's when I think the question will 0:17:55.720 --> 0:17:58.119 be asked, why are they losing twenty billion dollars on 0:17:58.200 --> 0:18:00.800 reality labs because it's not me making any money. 0:18:00.960 --> 0:18:02.760 When will it start making money? 0:18:02.840 --> 0:18:03.040 Dan? 0:18:03.720 --> 0:18:04.440 And does it matter? 0:18:04.520 --> 0:18:07.200 I mean, look, that's it's gonna be okay, it's gonna 0:18:07.200 --> 0:18:10.120 be a while. But like the whole point is right now, 0:18:10.160 --> 0:18:13.639 that's background noise, Like you know, there's like Street wants 0:18:13.680 --> 0:18:17.439 them to continue to invest in vast builders further out 0:18:17.760 --> 0:18:19.520 and at the end of the day that is going 0:18:19.600 --> 0:18:23.320 to come into the fold. But you're not right now 0:18:23.400 --> 0:18:27.240 in this arms race in Big Tac. You're a weezer 0:18:27.480 --> 0:18:30.679 focused on who's going to be the winner, and that's 0:18:30.720 --> 0:18:34.280 what we're seeing from Microsoft to Alphabet to Meta you 0:18:34.280 --> 0:18:35.680 know obviously you know acrossbord. 0:18:35.720 --> 0:18:37.679 We'll see it with Amazon as well. Like it's an 0:18:37.760 --> 0:18:38.320 arms race. 0:18:38.720 --> 0:18:41.120 I mean. The one other data point I would want 0:18:41.160 --> 0:18:45.920 to bring in is token counts. So Google and Microsoft 0:18:46.400 --> 0:18:50.480 have shared the GENII consumption, the token count We don't 0:18:50.560 --> 0:18:54.040 know how much metas models are being used. Yes, there, 0:18:54.119 --> 0:18:57.359 AT targeting is great, which is why AT pricing was 0:18:57.400 --> 0:19:01.320