Speaker 1: From Mahard where Innovation Money and power Collie in Silicon
Speaker 1: Vallet NBN.
Speaker 2: This is Bloomberg Technology with Caroline Hyde and Ed Ludlow.
Speaker 3: Like from New York. This is Bloomberg Technology coming up.
Speaker 3: AI investments, payoff for Meta details to come, and armed
Speaker 3: slumps as the chip company holds off boosting its outlook.
Speaker 4: We speak to the CEO Rene has plus.
Speaker 3: Nvidia shatters records, adding three hundred and twenty nine billion
Speaker 3: dollars to its market cap in a single session. Full
Speaker 3: coverage ahead. I want to start on that meta story.
Speaker 3: This is what the start looks like. You know, it's
Speaker 3: basically trading as it stands on track for its biggest
Speaker 3: jump since February. We know all about the capital expenditures
Speaker 3: commitment slightly boosting the bottom end of the range, but
Speaker 3: it looks it's like this whole AI thing is helping
Speaker 3: the top line at least if you look at the
Speaker 3: sales outlook for the current period. Throughout the show, we're
Speaker 3: going to get a lot more on meta now. One
Speaker 3: stock that's going in the other direction is the chit
Speaker 3: design firm ARM.
Speaker 4: I think we're down around fifteen percent as it stands.
Speaker 3: They smashed it in the quarter gone relative to street expectations.
Speaker 4: But the story around ARM, as we bring up the.
Speaker 3: Stock here down more than fifteen percent, is simply that
Speaker 3: they resisted the urge to boost their outlook, and that
Speaker 3: raises some questions. The question should be answered now we
Speaker 3: have ARM CEO, Rene has standing by joining us here
Speaker 3: on Bloomberg Technology.
Speaker 4: I mean, Renne, good morning to you. That that is
Speaker 4: the story. What were the factors behind you not boosting
Speaker 4: the outlook? What were the factors that made you cautious.
Speaker 4: Maybe it's specific end markets, maybe it's your view of
Speaker 4: the macro situation around the world.
Speaker 5: Yeah, thank you, Ed, and a great question to kick
Speaker 5: off with. The way I I think about it as follows.
Speaker 5: This is our fourth quarter as a public company. It
Speaker 5: is our fourth quarter of record revenues. As you said,
Speaker 5: we smashed it last quarter, over nine hundred and thirty
Speaker 5: million dollars of revenue.
Speaker 1: So super happy about the quarter. Last quarter.
Speaker 5: Ninety days ago, we raised the annual guidance about eight
Speaker 5: to ten percent. So when we looked at the outlook
Speaker 5: for the year ninety days later, coming off a great quarter,
Speaker 5: we just didn't feel the need to raise expectations again.
Speaker 5: So that's really just the backdrop. It's quite simple. We
Speaker 5: raised the guidance for the year last quarter, record quarter
Speaker 5: this quarter, and we're maintaining at this.
Speaker 3: Point, Renne, is there anything you can tell me about
Speaker 3: specific markets that you serve where you see some cause
Speaker 3: or some hesitation, but you're also able to see whatever
Speaker 3: it is holding you back working itself out.
Speaker 1: Yeah.
Speaker 5: Remember ed that we have two components to our business.
Speaker 5: We had the licensing business and the royalty business. The
Speaker 5: licensing business, which is really the forward indicator of demand
Speaker 5: for armed technology, never been stronger. The licensing revenue year
Speaker 5: on year up seventy percent. What's driving that, that's demand
Speaker 5: for building new complex chips, more demand for arm more
Speaker 5: compute capability, so that is a harborager of forward type
Speaker 5: of demand. Royalties were also up year on year almost
Speaker 5: twenty percent, largely driven by smartphone growth where units have
Speaker 5: been modest, but our new version nine is driving high
Speaker 5: royalty growth. So in general, we're very very optimistic about
Speaker 5: the long term outlook, particularly because of the licensing activity
Speaker 5: being so strong.
Speaker 3: One of the areas you know that I cover a
Speaker 3: bit more deeply is automotive technology, and I'm just trying
Speaker 3: to draw parallels with different names out there understand what's happening.
Speaker 3: Mobili told us this morning, for example, that particularly in China,
Speaker 3: but globally, some of their customers just stop making orders
Speaker 3: for the second half of this year. I understand that
Speaker 3: from arms perspective different Right you think about the pipeline
Speaker 3: of a specific chit that you're involved in the design of,
Speaker 3: it's much further afield longer term. But do you see
Speaker 3: in that industry in particular any sort of either cyclical
Speaker 3: process happening or some specific weakness.
Speaker 5: Now, I think the way we think about the automotive
Speaker 5: market is we are growing faster in terms of demand
Speaker 5: for our technology than the market itself. So we were
Speaker 5: actually up double digits last quarter in automotive royalties, and
Speaker 5: that's really a function of a gaining market share, But
Speaker 5: more importantly, the quality of the technology that's going in
Speaker 5: is much higher. These are more complex compute platform devices.
Speaker 5: They run a lot of software, whether it's for ibiev autonomous.
Speaker 5: So we're very, very bullish about the long term automotive outlook.
Speaker 5: The near term inventory issues that go back and forth,
Speaker 5: we haven't been impacted by that so much because, as
Speaker 5: I said, we're gaining share and the complexity of our
Speaker 5: own technology being used just keeps going up.
Speaker 3: Rennie, I don't know if you'd agree, but I think
Speaker 3: the common theme of this earning season is capital expenditures
Speaker 3: relating to infrastructure for AI. And my question simply is
Speaker 3: what direct benefit does ARM get from any of that
Speaker 3: process or investment cycle.
Speaker 5: Yeah, thank you for the question. We get a bit
Speaker 5: of a dual benefit. There is a lot of capex
Speaker 5: going into overall infrastructure scale out, there's general purpose compute.
Speaker 5: ARMED benefits there because our low cost, low power processors
Speaker 5: are very very efficient in terms of building data centers.
Speaker 5: You have AWS, you have Microsoft, you have Google. They've
Speaker 5: all announced products based on ARM. And then you have
Speaker 5: the AI data centers, which are very very complex, require
Speaker 5: a high degree of customization. Power efficiency even more important there,
Speaker 5: and that's been a great tailwind for our business. Just
Speaker 5: look at what Nvidia announced with Grace Blackwell, a very
Speaker 5: very complex not only chip but based on ARM, using
Speaker 5: their most advanced GPUs to drive the most complex AI
Speaker 5: data centers. So for US, we broadly view this AI
Speaker 5: capex expenditures as a tailwind for the business.
Speaker 3: Rennie, you mentioned Grace Blackwell, it takes me to one
Speaker 3: of our audience questions. When I said you were coming
Speaker 3: on the show on social media, I actually got quite
Speaker 3: a number of submissions for you, and one is straightforward.
Speaker 3: Does ARM plan to design its own accelerator to compete
Speaker 3: I guess against some of the partners that you're with
Speaker 3: or out in the marketplace.
Speaker 5: Yeah, no product announcements today, ed, Sorry, We're just here
Speaker 5: to kind of talk about the past quarter and our
Speaker 5: outlook going forward.
Speaker 3: No products announcement that that would indicate from a source
Speaker 3: of I suppose academic or R and D standpoint that
Speaker 3: you at least think about it.
Speaker 5: We think about a lot of things, right, I mean,
Speaker 5: our technology, as broad as it is, as many markets
Speaker 5: as we can play in. My job is to think
Speaker 5: about a lot of things. So I think that's a
Speaker 5: safe statement.
Speaker 3: Away from the sort of scale of infrastructure data centers,
Speaker 3: I think the AIPC is something that's pretty much dominated
Speaker 3: the news cycle so far in twenty twenty four. One
Speaker 3: of the other audience questions was when do we see
Speaker 3: sort of a truly competitive ARM based Windows product that
Speaker 3: can take on the performance of Max or Apple's owned
Speaker 3: Silicon that goes into a MAC. I know that you
Speaker 3: think about this field a lot. But on the competition side,
Speaker 3: what do you make of that question?
Speaker 5: Yeah, so I want to be respectful of my great
Speaker 5: partner Apple and their ecosystem, but there are some great
Speaker 5: products out there today. Dell XPS has some amazing technology.
Speaker 5: The battery life I think I was reading online. In fact,
Speaker 5: I was looking to buy one of them. The advertised
Speaker 5: battery life is nineteen hours now for a Windows machine.
Speaker 5: That's rather unprecedented in terms of battery life. All day
Speaker 5: use don't need a brick. So Dell and Michael and
Speaker 5: his team have done an amazing job developing some great products.
Speaker 5: So I think there are great products out there today.
Speaker 3: So all of the AIPC announcements, are there any examples
Speaker 3: of things that actually sort of translate into revenue for ARM?
Speaker 5: Well, again, when you think about AIPCS running on ARM,
Speaker 5: that's revenue fore ARM, and I think we're you know,
Speaker 5: the way we think about the AIPC Windows on our
Speaker 5: market is probably less about the shipments this quarter, but
Speaker 5: the long term trajectory. I think what you're now seeing
Speaker 5: is single suppliers that are in the market today. We've
Speaker 5: heard from a lot of sources that in the upcoming
Speaker 5: years there's going to be more and more vendors building
Speaker 5: chips for the Windows on our market. That's just going
Speaker 5: to be great for us because not only does it
Speaker 5: fill out the choices of units for the end market,
Speaker 5: but it's going to drive growth for US. So I
Speaker 5: said a few months ago that I thought ARM could
Speaker 5: be a fifty percent market share in the Windows market
Speaker 5: in five years. I do believe that we're about one
Speaker 5: hundred percent of the Apple operating system, so fifty percent
Speaker 5: of the Windows market doesn't seem too ambitious.
Speaker 3: In five year, four quarters ago, probably in a number
Speaker 3: of years ago, you and I might have started a
Speaker 3: conversation talking about the smartphone market.
Speaker 4: So we'll end there.
Speaker 3: You know what's going on in the smartphone market right
Speaker 3: now and whatever is happening as sort of an industry
Speaker 3: wide level, Is there anything specific relating to ARM or
Speaker 3: the high end of the smartphone market VISA v sort
Speaker 3: of lower end models the middle market that you can
Speaker 3: tell me about.
Speaker 5: Yeah, I don't want to sound like a broken record
Speaker 5: saying the trends that are going on in the smartphone
Speaker 5: market are good for ARM, but I'm going to say that,
Speaker 5: because what we're seeing in the smartphone market is while
Speaker 5: unit growth has been modest, single digits, there's been significant
Speaker 5: growth in the premium segment, the high end, and for
Speaker 5: ARM that's where we draw the highest level of revenue.
Speaker 5: The reason for that is we use Version nine up
Speaker 5: in that area of the stack. That's a much higher
Speaker 5: royalty rate than the previous version. And those Version nine
Speaker 5: smartphones in the premium space, they use a lot of
Speaker 5: ARMED processors, in some cases twelve four or fourteen sixteen,
Speaker 5: depending on the mix. So it's a true compute platform
Speaker 5: solution which drives growth for us, which is why in
Speaker 5: the last quarter, where units were single digits, our smartphone
Speaker 5: royalties were up fifty percent year on year.
Speaker 3: I had a similar conversation with Lisa suve AMD yesterday.
Speaker 3: But is that a reflective of a broad market movement
Speaker 3: or is it something special ARMS doing to outperform in
Speaker 3: the market.
Speaker 5: I think it's a combination of both. You know, a
Speaker 5: number of years ago with Version nine, we added some
Speaker 5: significant compute capability that was really to drive performance. Now,
Speaker 5: what we're seeing, particularly in the near term and going forward,
Speaker 5: is the skws that are being built. People are trying
Speaker 5: to put as much compute performance as possible in those phones.
Speaker 5: You know, for example, when you think about the large
Speaker 5: language models such as Lama or Gemini. When those phones
Speaker 5: were developed, those models didn't even exist. So not only
Speaker 5: are you having to run all the complex software the
Speaker 5: camera apps, but now you want to run an AI workload.
Speaker 5: So people are just put as much compute as possible
Speaker 5: in those high end ships, which is good for us.
Speaker 3: Rennie Haas, CEO of thank you very much, And for
Speaker 3: what it's worth, the stock hit session low down sixteen
Speaker 3: point two percent during that conversation, but a lot learned.
Speaker 4: Let's stick with earnings and look at Etsy.
Speaker 3: Which released their second quarter earnings on Wednesday after the
Speaker 3: closing bell. It's the CEO, Josh Silverman, join me. Let's
Speaker 3: talk about it. Have listened to this.
Speaker 6: We're really proud of the fact that in an environment
Speaker 6: where we're really swimming upstream with a really tough macro,
Speaker 6: and I think the story of this quarter has been
Speaker 6: for discretionary products in particular. It's a tough it's a
Speaker 6: tough time.
Speaker 4: And that's hitting the consumer directly.
Speaker 6: Basically, it's hitting the consumer directly. Wells Fargo published a
Speaker 6: report just recently saying sixty percent of American say that
Speaker 6: by the time they're done paying their essential bills, they
Speaker 6: have very little money left over for anything else. And
Speaker 6: yet we are actually maintaining, you know, we have roughly
Speaker 6: the same number of active biuses are all time high
Speaker 6: ninety one and a half million. We came in actually
Speaker 6: above the top of our guide or at the top
Speaker 6: of our guide on every metric, So we're really proud
Speaker 6: of how we're doing, and we're aware that it's a
Speaker 6: super vollato macro. But in this time when we're swimming
Speaker 6: upstream and maintaining, we're building muscle that we know is
Speaker 6: going to make us stronger, and most importantly, we're not
Speaker 6: letting ourselves be dragged down.
Speaker 1: We're in a moment where.
Speaker 6: There's a race to the bottom right now around who
Speaker 6: can sell things the cheapest, and Etsy is not focused
Speaker 6: on that. We're focused on making ets even more. Etsy
Speaker 6: leaning into our point of differentiation, and to your point
Speaker 6: about AI AI is going to be so helpful for
Speaker 6: us because, as you know, there's over one hundred and
Speaker 6: twenty million things for sale on Etsy, and every single
Speaker 6: one of them is unique, Every single one of them
Speaker 6: is made just for you, so organizing that in a
Speaker 6: way that's easy to navigate is a very tough challenge.
Speaker 6: There's no army of humans you could hire to do that,
Speaker 6: but lms are really good at organizing huge amounts of
Speaker 6: information in a way that's easy for humans to understand.
Speaker 4: That was at CCO, Josh.
Speaker 3: They're coming up Meta to the rescue, delivery on earnings
Speaker 3: and easing some of those big tech growth concerns. Stock
Speaker 3: up almost seven percent, But let's talk about this is
Speaker 3: bloombog technology.
Speaker 5: There are all the jokes about how all the tech
Speaker 5: CEOs get on these earnings calls and just talk about
Speaker 5: AI the whole time.
Speaker 1: It's because it's actually.
Speaker 5: Super exciting and it's going to change all these different
Speaker 5: things over multiple time arise.
Speaker 3: I think we should probably update that photo. That was
Speaker 3: Mark Zuckerberg, the Meta CEO. He doesn't look like that anymore.
Speaker 3: Meta posting better than expected Q two results and it
Speaker 3: signals that the company's AI investments are starting to pay off,
Speaker 3: triggering the stocks biggest one day rally in around five months.
Speaker 3: That level seven percent, game on track for his.
Speaker 4: Biggest jumps in February.
Speaker 3: Let's get right out to our meta reporter Cut Wagner.
Speaker 3: I mean that was the question. You spend all this
Speaker 3: money and the CAPEX number at the bottom end of
Speaker 3: the range slightly boosted, But does it help you make
Speaker 3: money in the sort of normal areas of your business?
Speaker 4: Did it.
Speaker 1: Well?
Speaker 7: This is the story that they're trying to tell, right,
Speaker 7: which is that AI investment is impacting their current ads business.
Speaker 7: It's making their ads more relevant, it's helping advertisers even
Speaker 7: create new ads with gen AI tools. It's helping the timeline,
Speaker 7: it's giving people more relevant content, so they're sticking around longer.
Speaker 7: This is the narrative that they're trying to tell on
Speaker 7: the more immediate side and the challenge of courses. As
Speaker 7: you point out, they're investing very heavily in the future
Speaker 7: as well, and so they're trying to balance like, hey,
Speaker 7: the AI is paying off now, but it will also
Speaker 7: pay off in a couple of years when these glasses,
Speaker 7: these large language models, the metaverse comes to fruition. It's
Speaker 7: a tough balance for them, but they were able to
Speaker 7: sort of do that with the Q two earnings.
Speaker 3: This week, we're just showing the numbers or the revenue
Speaker 3: numbers by business line, and I think that's the bit
Speaker 3: that we're trying to understand. You and I have all
Speaker 3: these conversations with very smart people outside of Meta who
Speaker 3: give them a lot of credit for their work in
Speaker 3: the field of large language models and the future applications
Speaker 3: of generative AI. But it seems like the story here
Speaker 3: is that it's really helping advertising, which is what they've
Speaker 3: been basing their business on all along.
Speaker 7: Yeah, and it's not as sexy as a story, right,
Speaker 7: because it's like, Hey, investing billions and billions of dollars
Speaker 7: into these large language models is going to improve the
Speaker 7: ROI on our ads product is not really the exciting
Speaker 7: AI story that a lot of people want to hear.
Speaker 7: You know, that's chatbots, that's AI smart glasses and assistants
Speaker 7: and things like that. But I do think there's an
Speaker 7: element of this investment that is paying off more in
Speaker 7: the short term. We heard a lot about that yesterday,
Speaker 7: But I don't think that's what gets Mark Zuckerberg as excited, Right,
Speaker 7: That's a necessity, that's what's going to fuel and fund
Speaker 7: these bigger visions he has. But I really think you know,
Speaker 7: when he talks about AI, he's predominantly talking about this
Speaker 7: futuristic technology, this next wave of this next computing platform
Speaker 7: that he really wants Meta to own.
Speaker 4: Just really quick.
Speaker 3: Our audience around the world will have different relationships with
Speaker 3: Meta in its products. But I found the data on
Speaker 3: growth across the family of apps or family of products
Speaker 3: really interesting. Why is that going well?
Speaker 8: Well?
Speaker 7: I mean, they have WhatsApp, I think is sort of
Speaker 7: a secret weapon that a lot of people don't think
Speaker 7: about because it's not as big a part of the business, right.
Speaker 7: But I think this is also just to the stain
Speaker 7: power of the core network Facebook and Instagram. It's like
Speaker 7: these are products that are still growing, that are still
Speaker 7: finding new people despite years and decades of existence. And
Speaker 7: you know, they're adding threads to the mix now too.
Speaker 7: I don't think that's counted in that daily act of
Speaker 7: people tally, but eventually it will be. And Mark Zuckerberg
Speaker 7: was talking about that with a lot of praise yesterday
Speaker 7: on the Earnians.
Speaker 3: Call Bloomber's Kurt Wagner, thank you very much. Now, the
Speaker 3: other sext we're looking at is chips. The US is
Speaker 3: weighing unilateral restrictions on China's access to AI memory chips
Speaker 3: and equipment capable of making those semiconductors as soon as
Speaker 3: next month. Back with her latest reporting, Bloomberg's Mackenzie Hawkins
Speaker 3: actually quite a lot about this on Bloomberg Technology that
Speaker 3: you know, for all the hype around AI and the GPU,
Speaker 3: you've got to have that high bandwidth memory access as
Speaker 3: well to make it competitive. Just give me the basics
Speaker 3: of what you've reported and when it's happening.
Speaker 9: So the US government recognizes that too, that you can't
Speaker 9: make it in video GPU work without access to memory,
Speaker 9: and officials have been considering for months, adding to the restrictions.
Speaker 8: That they've already replaced on China's access to.
Speaker 9: Logic chips, which are the brains of devices to attack
Speaker 9: the memory side, which handles data storage. And they're working
Speaker 9: on this massive export controls package, probably the most significant
Speaker 9: one that we've seen since the October twenty twenty two
Speaker 9: rules initially rolled out and sort of changed the global
Speaker 9: landscape for semiconductors. This list could include restrictions on high
Speaker 9: bandwidth memory above the two point zero generation, so capturing
Speaker 9: Samsung SKHINEX and Micron's latest models, also on the tools
Speaker 9: used to make those chips.
Speaker 8: Then there's a separate massive restriction.
Speaker 9: On additional tools and mint used across the industry that
Speaker 9: would primarily affect US equipment companies.
Speaker 8: So think Lam Applied material.
Speaker 9: KLA with carveouts for their Japanese and Dutch rivals.
Speaker 8: So this is really a massive package. It's what will
Speaker 8: probably be.
Speaker 9: The Biden administration's last big swing in this space, and
Speaker 9: it could be unveiled as soon as a couple weeks
Speaker 9: from now.
Speaker 3: The strategy to make US chip sector more competitive is
Speaker 3: two sides, restrictions like you just outlined and incentives. And
Speaker 3: the other big story you reported was one name, Applied
Speaker 3: Materials not getting access to funds in incentives.
Speaker 9: Right, So we have the expert control side of the coin,
Speaker 9: and we also have the Chips.
Speaker 8: Act, which is a thirty nine billion dollar subsidy.
Speaker 9: Program designed to bring chip manufacturing back to US soil.
Speaker 9: And so far we've seen over almost ninety percent of
Speaker 9: the funding committed to names like Intel, Samsung, TSMC, and
Speaker 9: Micron for these massive commercial fabrication facilities.
Speaker 8: But more more than six.
Speaker 9: Hundred and seventy companies expressed interest in the funding, so
Speaker 9: there were always going to be.
Speaker 8: Companies that didn't get it.
Speaker 9: The biggest name perhaps among them is Applied Materials. They
Speaker 9: have this four billion dollar research and development project that
Speaker 9: they're working on in Sunny Vale and they had hoped
Speaker 9: to get government.
Speaker 8: Support for that.
Speaker 9: Unfortunately that didn't work out for them after the US
Speaker 9: scrapped part of that grant program that was specifically designated
Speaker 9: for commercial r and D because of infighting about a
Speaker 9: separate program on military ships. So not a great piece
Speaker 9: of news for Applied Materials, and they've always said that
Speaker 9: the scope of that project will depend on US governments.
Speaker 3: Mackenzie just very quickly, is there any money left then
Speaker 3: from the Chips actor.
Speaker 4: It's now all accounted for.
Speaker 9: There's a bit left, something on the order of six
Speaker 9: billion to allocate.
Speaker 8: We should expect to see converce actor.
Speaker 9: Romando has said that we'll see announcements through the end
Speaker 9: of the year eating up all of that funding.
Speaker 8: And after we've seen announcements to the.
Speaker 9: Major big foundaries, we'll probably expect to see a lot
Speaker 9: of smaller supply chain investments between now and.
Speaker 1: The end of the year.
Speaker 3: Bloombergs Mackenzie. Hawk is very busy with a lot of reporting.
Speaker 4: Thank you. It's time now for talking tech.
Speaker 3: First up Olympic partner Atos reported a loss of two
Speaker 3: point one billion dollars for the first half of the
Speaker 3: year on weaker customer demand. The French IT company has
Speaker 3: struggled with debts, accounting errors, and industry wide headwinds that
Speaker 3: has wiped out nearly fourteen billion dollars of its market
Speaker 3: value over the past seven years plus. Reddit acquires startup
Speaker 3: Memorable AI in its first acquisition since going public in March.
Speaker 3: The startup uses generative AI to help marketers create better
Speaker 3: ads with more effective text, images, and videos. Reddit says
Speaker 3: the acquisition would improve the quality of its ads on
Speaker 3: their service, and Samsung's chips boss issues a warning saying
Speaker 3: the company.
Speaker 4: Get be at risk of getting a quote.
Speaker 3: Vicious cycle if it doesn't revamp its workplace culture. In
Speaker 3: an unusually harsh memo to employees, the head of the
Speaker 3: chip division.
Speaker 4: Said Samsung must take steps.
Speaker 3: To eradicate com communication barriers and stop quote hiding or
Speaker 3: avoiding problems. The letter comes after recent missteps by the
Speaker 3: company in supplying memory chips for AI. Now coming up,
Speaker 3: we're going to be joined by Denny Fish, portfolio manager
Speaker 3: at Janis Henderson to dive deeper into meta and the
Speaker 3: other tech earnings real quick check on shares of Mobilize.
Speaker 3: So this is the Jerusalem, Israel based maker of chips
Speaker 3: for advanced driver assistance systems that stock down twenty percent,
Speaker 3: trading at a record low. Why because two h it
Speaker 3: downgroaded its its revenue outlook, its automotive customers stop placing orders.
Speaker 3: This is Bloomberg Technology. Welcome back to Bloomberg Technology, Ed
Speaker 3: Ludlow here.
Speaker 4: In New York.
Speaker 3: We're going to check in on the markets. Big tech
Speaker 3: earnings in focus this week, Met posting better than expected
Speaker 3: quarterly results, helped by new investments in AI. The attention
Speaker 3: now turning to Apple, Amazon, both reporting after the closing bell.
Speaker 4: But let's stick with the equity story then, as that.
Speaker 3: One hundred pulling back after a monster rally led by
Speaker 3: Nvidia on Wednesday, the stock recording its biggest advance in
Speaker 3: over five months. And here's the bit, adding a record
Speaker 3: three hundred and twenty nine billion dollars to its market cap,
Speaker 3: destroying the single day record that it had previously already owned.
Speaker 3: There's a lot to talk about. Let's keep the conversation going.
Speaker 3: Denny Fish is portfolio manager at Janis Henderson Investors, and
Speaker 3: let's start with Nvidia. We say it's a moment in
Speaker 3: market's history. It broke its own record, but it's one
Speaker 3: of the bigger positions you hold, Denny. So when you
Speaker 3: see the red headline on the Bloomberg terminal, how do
Speaker 3: you react?
Speaker 4: How does that make you think?
Speaker 1: Well?
Speaker 10: I think you know, in Vidia has been a remarkable
Speaker 10: stock for the last year and a half, and that's
Speaker 10: primarily been because of the financial performance. I mean, the
Speaker 10: ramp and revenues that we've seen with its AI chips
Speaker 10: and GPUs is like nothing we've ever seen before. And
Speaker 10: you know, where the market's at right now, it's really
Speaker 10: this push and pull and what we've seen if you
Speaker 10: just look at the hyperscaler earning so far and particularly
Speaker 10: the cap X forecast, the market is just really hinging
Speaker 10: on every word that we're hearing. And you know, effectively,
Speaker 10: what we've heard is that nobody's blinking. And you have
Speaker 10: seen Capex go up at Google. You've seen Capex go
Speaker 10: up at Microsoft, and you're seeing Capex go up at Meta,
Speaker 10: and all of those companies seem to be implying that
Speaker 10: there's no end in sight at least, you know, through
Speaker 10: twenty twenty five, and that should be good for Nvidia,
Speaker 10: and you know it's you know, if we actually look
Speaker 10: at the other data points in the end, you no,
Speaker 10: AMD just reported and the numbers were fine, but you know,
Speaker 10: it's really just a really really small fraction of the
Speaker 10: amount of AI related chips that in video's selling and
Speaker 10: in videos embarking on. It's probably its most significant product
Speaker 10: cycle ever with blackwell as it goes to a full system's.
Speaker 1: Approach this far.
Speaker 3: So actually I ask you that about that specific point.
Speaker 3: You know, I've discussed with Gensen one the annual cadence
Speaker 3: of new product refresh. But the bit that's kind of
Speaker 3: concerning or hard to understand is what about all those companies,
Speaker 3: the hyperscalers but also others that invested at the H
Speaker 3: one hundred generation and they may have only just got
Speaker 3: that capacity online and then suddenly they have the option
Speaker 3: or choice of whether they buy the next cutting edge
Speaker 3: generation of chip upgrade. And I think that Jensen's probably
Speaker 3: talked to you as well, right about swap the ability
Speaker 3: to swap and in and out those those generations of
Speaker 3: GPU quite easily, But it's hard to fathom really.
Speaker 10: Yeah, Well, what's really interesting and I'll give you a
Speaker 10: couple of data points. Last night, Mark Zuckerberg announces publicly
Speaker 10: he talked about that LAMA four, which is the next
Speaker 10: iteration of their open source large language model that they
Speaker 10: just you know, have been evolving, is going to require
Speaker 10: ten x the compute that LAMA three required. And why
Speaker 10: that's important is, you know, if you talk to the
Speaker 10: leaders in industry, you'll hear a comment, and that comment
Speaker 10: is we want tomorrow's GPUs. And the reason you hear
Speaker 10: that comment is because one of the single biggest bottlenecks
Speaker 10: to actually advancing these large language models, whether it's open AI, Anthropic, Google, Gemini, Lama,
Speaker 10: whatever it might be, you need increased compute power. And
Speaker 10: that is exactly what Blackwell brings. And so the important
Speaker 10: part for these companies is making sure that they have
Speaker 10: the ability to actually create fungibility with the GPUs.
Speaker 1: So that when you use.
Speaker 10: H one hundreds and then you're going to move to Blackwell,
Speaker 10: you can actually use those H one hundreds for inference,
Speaker 10: or you can use them for other parts of your
Speaker 10: of your company, you know, whether you know, for Microsoft,
Speaker 10: that could be to support Office three sixty five and
Speaker 10: co pilot or a GitHub co pilot or in metas case,
Speaker 10: to support the recommendation engine or content creation or whatever
Speaker 10: it may be. And so having that fungibility of the GPUs,
Speaker 10: but then also having the ability to lean in hard
Speaker 10: to the latest generation so that you can push the
Speaker 10: envelope with these frontier models.
Speaker 3: So, Denny, this is a good point to go to
Speaker 3: Apple because it's a different story.
Speaker 4: Right.
Speaker 3: They are not a hyperscala. They don't make the same
Speaker 3: direct investment in infrastructure to Capex.
Speaker 4: Has always been low. But the AI story is the same.
Speaker 3: It's a smaller position for you that you're going into
Speaker 3: this evening.
Speaker 1: Well, it's always hard going.
Speaker 10: You just never know, right, you know, we're here on
Speaker 10: the day of earnings. But here's what I can say.
Speaker 10: We were really impressed with Apple Intelligence and what we saw.
Speaker 10: You know, the world was waiting to hear what they
Speaker 10: were going to deliver. It's not ready for prime time yet.
Speaker 10: This is unlikely to be a massive cycle, you know,
Speaker 10: with the with the sixteen, but as we start looking
Speaker 10: into next year and if they get Siri right and
Speaker 10: they're actually here's the beauty of the Apple model. All
Speaker 10: this Capex, this two hundred billion plus dollars that the
Speaker 10: hyperscalers are deploying into CAPEX. Apple gets to leverage that
Speaker 10: because they are the gateway to the AI enabled Internet,
Speaker 10: you know, through the iPhone interface, and I think that's
Speaker 10: really underappreciated as it's related to Apple. It's a very
Speaker 10: capital efficient model.
Speaker 3: And Denny, sorry to jump around, but Amazon, I mean,
Speaker 3: I think with the focus then switches back to AWS
Speaker 3: and whether the CAPEX still and the investment cycle is
Speaker 3: still intact.
Speaker 10: Yes, you know, Amazon's a little different. The reason it's
Speaker 10: a little different is, you know, as I mentioned, if
Speaker 10: you think about Alphabet, you think about Microsoft, you think
Speaker 10: about Meta and that fungibility element of GPUs and capital expenditures.
Speaker 1: Amazon doesn't quite have that.
Speaker 10: You know, they can't really repurpose a bunch of GPUs
Speaker 10: into their core business because it's not a daily engagement
Speaker 10: app like Office three sixty five or Copilot or Meta
Speaker 10: or Search, and it really does hinge on their ability
Speaker 10: to provide the underlying compute for other companies.
Speaker 1: And so they're really in.
Speaker 10: A push and pull of you know, having been the
Speaker 10: dominant provider of cloud computing services for the last fifteen
Speaker 10: years and now pivoting their business to try to compete
Speaker 10: as aggressively with Microsoft and Alphabet in this next generation
Speaker 10: of cloud compute, which is any AI.
Speaker 3: Enabled portfolio manager there at Janis Henderson really appreciate it.
Speaker 4: Thank you.
Speaker 3: Some breaking news crossing the wire. We're getting more details
Speaker 3: on the prisoner swap between the US and Russia where
Speaker 3: Wall Street Journal reporter Evan Gershkovich and former US marine
Speaker 3: Paul Willen are being returned. Vadimir Krasikov will be released
Speaker 3: in the historic seven count prisoner swap.
Speaker 4: Krasikoff was serving a life.
Speaker 3: Sentence in Germany for the twenty nineteen killing of a
Speaker 3: former Chechen rebel in Berlin. Will bring you any additional
Speaker 3: updates as they cross the wire. President Biden plans to
Speaker 3: deliver remarks at noon about the Americans freed from Russia. Okay,
Speaker 3: back to one of the other Bloomberg technology stories. Amazon
Speaker 3: is showing interests in robot software maker Covariant.
Speaker 4: That's according to sources.
Speaker 3: The company, which was founded in twenty seventeen, has raised
Speaker 3: two hundred and forty five million dollars from investors, and
Speaker 3: it was valued at six hundred twenty five million in
Speaker 3: a twenty twenty three funding round, joining me is Bloomberg's
Speaker 3: Katie Ruth and Katie you and I broke this story
Speaker 3: together last night along with Bloomberg's Spencer Sofa. It's it's
Speaker 3: very in line with what Amazon's focused on.
Speaker 4: Give me the details that.
Speaker 11: We know exactly, and so this is a warehouse robots
Speaker 11: software maker using AI. For those who have been paying
Speaker 11: attention for a while, it reminds of Amazon's acquisition of
Speaker 11: Kiva Systems in twenty twelve, where they bought a warehouse
Speaker 11: robot maker. But this is obviously, you know, modern technology
Speaker 11: in this space, and it could sync with other you know,
Speaker 11: warehouse type robots that you know, can put things together
Speaker 11: and package things, which is exactly what Amazon needs.
Speaker 3: We should point out that Amazon and Covariant both declined
Speaker 3: to comment on the story. You know, Amazon's at a
Speaker 3: stage where it has more than like seven hundred and
Speaker 3: fifty thousand robots around the world doing all sorts of things.
Speaker 3: You know, one one source kind of outlines me like Covariant,
Speaker 3: even though it's raised all this money is a little
Speaker 3: bit of more of an R and D like research project,
Speaker 3: and you kind of need Amazon to get going. The
Speaker 3: market is interesting because is money hard to come by, Katie,
Speaker 3: Do you need kind of a savior like an Amazon
Speaker 3: to come in if you're a smaller startup that's still
Speaker 3: kind of building out your tech.
Speaker 11: Sure, I mean there's certainly capital available for the very
Speaker 11: cream of the crop top startups right now, but a
Speaker 11: lot of investors are a little skittish given that we've
Speaker 11: been you know, there were a couple of years of
Speaker 11: a correction. So having a you know, large strategic like Amazon,
Speaker 11: you know, provide resources would certainly help this startup continue
Speaker 11: to grow and have inside Amazon.
Speaker 3: And Katie real quick with short time XAI looking at
Speaker 3: Character musk Wade in what's going on?
Speaker 11: Sure this is enough Ai acquisition rumor? You know we've
Speaker 11: heard there have been some sort of interaction between Character
Speaker 11: Ai and Xai about a potential acquisition. Obviously a deal
Speaker 11: is not yet done and that is what Elon is
Speaker 11: weighing in about. But you know, we have heard that
Speaker 11: there is something going on there, so it remains to
Speaker 11: be seen whether a deal actually happens.
Speaker 3: Yeah, I heard there's something going on there too. Bloombays
Speaker 3: Katie Ruth, thank you very much. Okay, before we head
Speaker 3: to break, we want to turn our attention to the
Speaker 3: Bank of England for a moment. The Bank of England
Speaker 3: cut interest rates for the first time since early twenty
Speaker 3: twenty and signaled further cautious reductions ahead. Moments ago, we
Speaker 3: sat down with Governor Andrew Bailey.
Speaker 4: Have a listen.
Speaker 12: Don't expect we're going back to zero because zero was
Speaker 12: the product of huge global shocks and it started with
Speaker 12: financial crisis and I'm seeing COVID as well. I think
Speaker 12: to get there, something really bad has to happen that
Speaker 12: we're not currently expecting will be lower than where we
Speaker 12: are today. But I think it's sorry to him that
Speaker 12: we're not going back.
Speaker 3: I want to talk about GitHub, a leading AI powered
Speaker 3: developer platform. The company announced expansions in their AI strategy
Speaker 3: with increased access to and new extensions.
Speaker 4: Of their co pilot models.
Speaker 3: GitHub CEO Thomas Stomka joins us now for more. And
Speaker 3: you've been very busy on social media.
Speaker 4: You've been hinting at what you've been working on.
Speaker 3: Now is the opportunity for you to talk about it
Speaker 3: a bit more explicitly.
Speaker 4: What's going on. It's an exciting day, you know.
Speaker 2: I'm so much, so full of energy this morning with
Speaker 2: GitHub models. We're bringing the power of industry leading AI
Speaker 2: models small and large, you know, open and close directly
Speaker 2: to the over one hundred million users on our platform,
Speaker 2: and you'll not develop us are no longer US wedding
Speaker 2: back end and front end code. They have to integrate
Speaker 2: different machine learning models right into their apps, and we
Speaker 2: want to catch them early in the autoper life cycle.
Speaker 2: So they're giving them access to popular models like Lama
Speaker 2: three point one or Mistrial large Poon. Of course the
Speaker 2: opening IGBT models, Microsoft's models for free ride on GitHub.
Speaker 2: So to enable them to explore, to play with these
Speaker 2: models and put them into their apps, and when they're
Speaker 2: ready to go to production, to give them a light
Speaker 2: path into Azua AI.
Speaker 3: You said on on X that hint, it's not co pilot,
Speaker 3: but it's not not AI. Just just explain in layman's
Speaker 3: terms what you were trying to get at with that.
Speaker 2: Yeah, you know, in the past, when I was on
Speaker 2: the show of when I was on media, we talked
Speaker 2: with an AI at GitHub mostly about Copilot, our AI
Speaker 2: plap program that helps develop us write code. It helps them,
Speaker 2: you know, to do the work on a day to
Speaker 2: day basis. With gidub models, we're giving them a component
Speaker 2: to put into the app. If we're giving them access
Speaker 2: to models like Lama Kohea, AI twenty one labs that
Speaker 2: they can play with, that they can send and then
Speaker 2: put that model, you know, into their application code and
Speaker 2: run their own scenarios on top of these models. So
Speaker 2: it's not copiled, but it's AI and it's machine learning
Speaker 2: models readily available for developers.
Speaker 3: The other big news of the week came during microsoft
Speaker 3: S earnings and the discussion around GitHub.
Speaker 4: It's your growth.
Speaker 3: I think the number to go to is the is
Speaker 3: the annual revenue run rate of two billion dollars? You know,
Speaker 3: for you something that seemed like a really important milestone.
Speaker 2: Why it's important, you know, from two perspectives. One six
Speaker 2: years ago, I was part of the team at Microsoft
Speaker 2: that acquired GitHub, and we had high hope for this
Speaker 2: to be a successful acquisition. So I think, you know,
Speaker 2: the two billion revenue run rate shows that we have
Speaker 2: done a good deal.
Speaker 4: At Microsoft.
Speaker 2: We not only bought a company, but we actually invested
Speaker 2: into GitHub. We set on the power of this developer
Speaker 2: community to create, you know, in an ever growing a
Speaker 2: revenue stream. In the earnings before this one, we said
Speaker 2: we are growing forty five percent year over year. This time,
Speaker 2: we announced that the rendred is now over two billion
Speaker 2: US dollars and more so, you know, in the last year,
Speaker 2: forty percent of our growth came from co pilot. Seventy
Speaker 2: seven thousand organizations are now on copilate. It's no longer
Speaker 2: you know, it's no longer about the early adopters.
Speaker 8: Coporlate has casted the chasm.
Speaker 2: The question really everybody needs to ask themselves, am I
Speaker 2: part of the early majority or am I going to
Speaker 2: evade and become you know, the laggards of adopting AAI
Speaker 2: technology in my developer life cycle.
Speaker 3: Thomas Dumcare, CEO Hub, It's great to have you back
Speaker 3: on the show. Greats catch up, Thank you very much.
Speaker 3: Let's get back to matter and matters results. The stock,
Speaker 3: by the way of session highs to SILL up six percent,
Speaker 3: the tech giant beating estimates on its advertising growth. In
Speaker 3: particular Rachel Tippograph, founder and CEO of the e commerce
Speaker 3: marketing platform. Mickmac joins us now and Rachel, you have
Speaker 3: this rich data set tracking where advertisers invest their dollars
Speaker 3: across not just meta but it's competitive landscape as well,
Speaker 3: and I think what's interesting is that the data you
Speaker 3: track was basically justified by their forecast for sales in
Speaker 3: the current period.
Speaker 4: Just your response to that.
Speaker 13: Yeah, thanks Meta for verifying our data. So yesterday Zuckerberg
Speaker 13: reported eleven percent year of a year revenue growth. Mickmac
Speaker 13: works with over seventeen hundred of the biggest brands in
Speaker 13: the world powering their commerce media. What did we see
Speaker 13: in our data? We saw ten percent year of a
Speaker 13: year revenue growth, So it's absolutely spot on. Meta remains
Speaker 13: the most traffic brand advertising channel at Nickmac. On any
Speaker 13: given day, it represents about forty percent of our total traffic.
Speaker 3: So what's interesting is you have the data and then
Speaker 3: what you need to do is find the reason behind
Speaker 3: the data. Right, And we went into the earning sprint
Speaker 3: solely focused on artificial intelligence. It seems like the early
Speaker 3: work and investment metas made in AI is just making
Speaker 3: their ads more competitive.
Speaker 4: Is that fair?
Speaker 13: AI is part of it, But I actually think something
Speaker 13: comes before it.
Speaker 8: For the last two and a half years.
Speaker 13: Meta has stopped focusing on shiny objects like the metaverse,
Speaker 13: and it got back to business and focused on its
Speaker 13: core revenue stream, which is advertising. Meta had to respond
Speaker 13: to Apple's privacy changes, and it.
Speaker 8: Responded in a big way.
Speaker 13: Meta did a huge campaign to every big global advertiser
Speaker 13: and essentially encouraged them to integrate with their Event Attribution API,
Speaker 13: which bullet proved the effectiveness of the ads. That was
Speaker 13: number one.
Speaker 1: Number two.
Speaker 13: Metas also made a concerted effort to partner with retailers
Speaker 13: and essentially enable off site retail media.
Speaker 8: Within the META platform that also.
Speaker 13: Improves the effectiveness of their ads.
Speaker 8: I would argue that AI is number three.
Speaker 13: What AI is doing for Meta and for really all
Speaker 13: advertising platforms is lowering the barrier to entertry. One of
Speaker 13: the major barriers to entry in advertising is creative and
Speaker 13: so if MENA can remove that barrier, it actually opens
Speaker 13: themselves up to any business on the planet. So I
Speaker 13: suspect with the investments in AI, you will see their
Speaker 13: small media business advertising grow.
Speaker 4: So I want to linger on that point at a
Speaker 4: moment longer.
Speaker 3: We just showed the pie chart breaking down where advertisers
Speaker 3: a place of their money.
Speaker 4: The story is so the one that you're.
Speaker 3: Telling at least is so similar to last week with Alphabet. Again,
Speaker 3: we went into it really focused on AI, but the biggest.
Speaker 4: Contributor to growth.
Speaker 3: To growth was just the search business, the legacy business.
Speaker 8: One hundred percent.
Speaker 13: It's all about making every dollar stretch for the biggest
Speaker 13: advertisers in the world world. You know, on top of
Speaker 13: the big tech earnings, you've also had the big CpG
Speaker 13: earnings in the past few days.
Speaker 8: And what they're struggling with is top wine growth. Where
Speaker 8: is top wine.
Speaker 13: Growth going to come from for these advertisers investing in
Speaker 13: channels like Meta, Google and TikTok. Going back to that
Speaker 13: pie chart, what you also see is, yes, Meta is
Speaker 13: the most traffic source within the micmac platform, But what's
Speaker 13: number two TikTok. TikTok now represents twenty percent of our
Speaker 13: total traffic. If we were speaking four years ago, TikTok
Speaker 13: wouldn't even be in that pie chart. So if I
Speaker 13: was Meta, I think the big headwind that they now
Speaker 13: need to worry about is TikTok, and they alluded to
Speaker 13: that in their earnings as well.
Speaker 3: We did allude to it, okay, So let's look at
Speaker 3: it from the opposite perspective. TikTok faces a divest or
Speaker 3: band scenario in the United States. If you're an advertiser,
Speaker 3: why would you keep putting dollars into that platform if
Speaker 3: you know that that's a potential risk down the road.
Speaker 8: Of the effectiveness of TikTok.
Speaker 13: The reality is with advertising, it's very easy to move
Speaker 13: dollars from channel to channel. We've been on the show,
Speaker 13: We've talked about X in the past.
Speaker 8: We saw one hundred percent the client and X traffic.
Speaker 13: Did that matter to advertisers No, they just realitated the
Speaker 13: dollars elsewhere. So until something actually happens with TikTok, you
Speaker 13: will continue to see brands invest in that platform because
Speaker 13: of the effectiveness of the apps. In one year, we've
Speaker 13: seen one hundred and ninety percent year.
Speaker 8: Over year increase in TikTok traffic.
Speaker 13: We only saw ten percent in Meta.
Speaker 8: Again I was Meta, I would be very concerned about
Speaker 8: TikTok right now.
Speaker 3: Ratil Tipograph, founder and CEO of Mick Mac excellent breakdown
Speaker 3: of your data and linking it to Meta's own data.
Speaker 4: Thank you very much.
Speaker 3: That does it for this edition of Bloomberg Technology. There
Speaker 3: is one big earnings evening left to go, but so
Speaker 3: much to recap on the podcast. You know exactly where
Speaker 3: to find it. Apple, Spotify also on iHeart this is
Speaker 3: what's to come right, and this is the picture of
Speaker 3: the markets right now. We await Apple which is down
Speaker 3: nine tens of percent. We aweight Amazon which is down
Speaker 3: nine tens of one percent. AI is going to be
Speaker 3: the story, but as our guest outline in the show,
Speaker 3: in very different ways, Meta off session highs but continues
Speaker 3: to trade contract for its biggest jump since February of
Speaker 3: this year with at the index level then as that
Speaker 3: one hundred down significantly now down one point five percent,
Speaker 3: and video a part of it.
Speaker 4: This is Bloomberg Technology