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Speaker 2: highly anticipated. They reported numbers inline, guidance in line. But
Speaker 2: it wasn't a beat and raised Like a lot of
Speaker 2: investors had become accustomed to a lot of fuzziness in
Speaker 2: the numbers and the estimates out there, whether to include
Speaker 2: China revenue, not to include China revenue. Who are you
Speaker 2: given the US government it's fifteen percent cut. I think
Speaker 2: the numbers are kind of squishy out there, at least
Speaker 2: in the near turn. It's a CFA term squishy. Cu
Speaker 2: John Sabani. It's his job to kind of make sense
Speaker 2: of it. He's a senior analyst covering semiconductors for Bloomberg Intelligence.
Speaker 2: He's based out there in San Francisco. Cu John, love
Speaker 2: to get your informed opinion about what you saw from
Speaker 2: the good folks at in video last night.
Speaker 3: Yeah, like you said, it was once again a solid
Speaker 3: sprinted guide. It checked all the fundamental key boxes, but
Speaker 3: as has been the case with this name, you know,
Speaker 3: the expectations always run higher, and maybe not all the
Speaker 3: numbers were able to clear that high hurdle of expectations.
Speaker 3: Specifically the data center compute numbers in two Q. You
Speaker 3: would have liked to see that come in a little
Speaker 3: bit high. But there was still a lot of strong
Speaker 3: positive underlyings. One, the networking was a significant bead, which
Speaker 3: shows the strength and the attachment that they're getting from
Speaker 3: their networking switches and chips in the Blackwell ramp.
Speaker 4: Second, like you mentioned, the.
Speaker 3: Three Q consensus had China included, and they still beat
Speaker 3: their three Q guide without China. If you add in
Speaker 3: the China guide of two to five billion, they would
Speaker 3: have handsomely beaten the three Q numbers. So that noisy
Speaker 3: sort of consensus shadowed the goodness is coming out of
Speaker 3: the guide of Nvidia.
Speaker 2: All right, So what's the company telling us now about China?
Speaker 2: Guess quite frankly, I just I'm reading the press. I
Speaker 2: don't know whether they're going to be able to sell
Speaker 2: stuff in the China or when, or whether they're going
Speaker 2: to have to give a fifteen percent cut to the
Speaker 2: US government.
Speaker 5: How's that going to play out?
Speaker 3: Yeah, so China still remains, you know, after learning sort
Speaker 3: of that overhang in terms of uncertainty. The company did
Speaker 3: guide to a two to five billion revenues from the
Speaker 3: age twenty in China next quarter, which is positive.
Speaker 4: That means they feel confident that they'll.
Speaker 3: At least be able to ship some and get some
Speaker 3: of the revenues back. But yes, you know, the spark
Speaker 3: here for the China story will not appear until we
Speaker 3: have a clarity, and we believe until they have a
Speaker 3: blackwell version of a China chip, which they get approval
Speaker 3: from the government, that will end really open up a
Speaker 3: massive amount of revenues coming from China. And there's a
Speaker 3: lot of hurdle's unit to clear. Right, there's the government,
Speaker 3: which has nothing to do with in media. The US
Speaker 3: China relationship needs to get sorted out because now even
Speaker 3: China can put in a roadblock from Nvidia selling or
Speaker 3: allowing their companies in China from buying in media chip.
Speaker 4: So there is work to be done.
Speaker 3: As you mentioned, the fifteen percent cut is not ironed
Speaker 3: out in terms of laws. There is We've heard new
Speaker 3: stories about potential lawsuits.
Speaker 4: So those two.
Speaker 3: Government and geopolitical angle needs to be cleared before we
Speaker 3: can start seeing billions of dollars of data center China
Speaker 3: revenue coming.
Speaker 2: In Ku John, we're what's the competitive landscape here for
Speaker 2: these chip companies VISA, v in Nvidia and just kind
Speaker 2: of positioning for AI.
Speaker 5: I assume in Vidia's position A. Who's kind of B
Speaker 5: and C.
Speaker 3: Yeah, So you know this space is divided into two categories.
Speaker 3: One is the merchant GPUs, which is what in Vdia
Speaker 3: sells and dominates that landscape, this sort of second competitor there,
Speaker 3: or the B is AMD, which is a very far distant.
Speaker 3: You know, Nvidia today has about over ninety percent in
Speaker 3: terms of revenue share and the remaining is going to
Speaker 3: a very small to AMD.
Speaker 4: But there's another piece, which is.
Speaker 3: We call what we call A six, which is what
Speaker 3: these big hyperscalers and cloud providers like Amazon and Google
Speaker 3: designed their own chips. So that's sort of the other
Speaker 3: competitive landscape where there's a risk of the A six
Speaker 3: taking sort of share away from merchant GPUs even though
Speaker 3: they don't compete directly for the same socket, they could
Speaker 3: take away the wallet share.
Speaker 2: And so does that mean companies like Nvidia have to
Speaker 2: pour money into R and D for that next chip
Speaker 2: to stay on front, because I know in your business
Speaker 2: technology changes quickly.
Speaker 4: Yeah, definitely.
Speaker 3: I mean, look, and Media has been even before the
Speaker 3: AI event happened, and Media has been the biggest R
Speaker 3: and D spender. They have continued and this is what
Speaker 3: really got them to the stage of being ahead of
Speaker 3: everyone else, and they have to continue spending out spending
Speaker 3: everyone else to sort of keep that lead. Their roadmap
Speaker 3: for the next two and a half years does suggest
Speaker 3: that they should be able to keep this lead handsomely,
Speaker 3: and for that it will definitely require high R and
Speaker 3: D spending.
Speaker 2: So this name to me who I'm used to stocks
Speaker 2: trading in, you know, much lower multiples in my world,
Speaker 2: But this seems like a stock that can actually earn
Speaker 2: its way, and we have seen it earn its way
Speaker 2: into its multiple.
Speaker 5: I mean, you can make an argument this is not
Speaker 5: an expensive.
Speaker 4: Stock, You're right.
Speaker 3: I mean, if you look at from a historical perspective,
Speaker 3: it's actually the multiple is much more lower than what
Speaker 3: we have seen in media trade in the past two years.
Speaker 3: So given that fact, and also when we look at
Speaker 3: the relative comparison when you think about a company growing
Speaker 3: at fifty percent and making revenue in the hundreds of billions,
Speaker 3: that isn't unprecedented, especially growing with gross margins of seventy
Speaker 3: mits or low seventy percent. I mean, you're talking about
Speaker 3: a financial profile for software company, not a seving net company.
Speaker 3: So definitely, when you take into those two things into account,
Speaker 3: it does seem that it might not be really highly valuable.
Speaker 2: Stay with us more from Bloomberg Intelligence coming up after this.
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Speaker 2: Dollar General the stocks pretty much, they reported numbers, lifted
Speaker 2: their guidance. Stock's flat today, but boy, it's a forty
Speaker 2: seven percent year to date, so the street definitely likes
Speaker 2: what's going on at DG. Let's talk to an expert
Speaker 2: on this, Jen bartashes. She covers all the retail stuff
Speaker 2: for Bloomberg Intelligence. Jen, what'd you take away from Dollar
Speaker 2: General's results?
Speaker 6: Yeah, Hi, Paul, you know, overall, the results were pretty encouraging,
Speaker 6: and you know, we're looking at the consumer who is
Speaker 6: willing to spend selectively, and the value proposition for people
Speaker 6: who are in the discount space is really resonating. And
Speaker 6: so the tactics that the companies put in place to
Speaker 6: really improve store operations and things like that seem to
Speaker 6: be gaining traction and drawing more people into the.
Speaker 7: Stores, drawing more people into the stores, and drawing people
Speaker 7: from different income strata as well. More higher income customers
Speaker 7: are coming in. So that being the case, GEN does
Speaker 7: it need to broaden its selection of products available to customers.
Speaker 6: Well, I don't know that they need to broaden the selection,
Speaker 6: but they need to be thoughtful about the selection that's
Speaker 6: in the stores. I mean, these are small boxes, so
Speaker 6: you have very limited space, and in order to retain
Speaker 6: those higher income consumers from middle income, high income that
Speaker 6: are coming into Dollar General, part of it is going
Speaker 6: to be making sure that there are things that are
Speaker 6: fresh and interesting but still at very good value. And
Speaker 6: I think one of the interesting points is that Dollar
Speaker 6: General has been able to maintain a selection of things
Speaker 6: at one dollar price point, and when you think about it,
Speaker 6: their biggest rival in the Dollars Tree, the dollar space.
Speaker 6: Dollar Tree move to one twenty five as their baseline price,
Speaker 6: So there's definitely some opportunity there to appeal to that
Speaker 6: value seeker and give them something to be excited about.
Speaker 2: So if I look on the back of or on
Speaker 2: a tag for most of those items, I'm going to
Speaker 2: see made in China or something like that. How are
Speaker 2: they dealing with tariffs? How much are they passing on
Speaker 2: to consumers versus maybe taking in their margin.
Speaker 6: I think one of the advantages Dollar General has is
Speaker 6: that they have a lot less exposure to imports than
Speaker 6: most other retailers in the discount space, and that's really
Speaker 6: because over eighty percent of their sales are consumables, which
Speaker 6: is more food and household items, and the discretionary parts,
Speaker 6: which would be the decorations, the apparel. That sort of
Speaker 6: stuff is a much smaller part of their business, so
Speaker 6: they're able to mitigate some of the costs they are.
Speaker 6: They did talk about passing through prices when absolutely necessary,
Speaker 6: but I think that's part of the solution for Dollar
Speaker 6: General is that that product mix is playing in their
Speaker 6: favor right now.
Speaker 7: Right so they're like a smaller scale Walmart in many respects,
Speaker 7: rather than a smaller scale five below for instance. So
Speaker 7: given all of that, Jen, you had mentioned Dollar Tree
Speaker 7: being one of the biggest competitors to Dollar General. That
Speaker 7: company reports September third. How much can we take away
Speaker 7: from Dollar General and apply it to Dollar Tree.
Speaker 6: Well, I think Dollar Tree is in a bit of
Speaker 6: a unique position because they've shed off the Family Dollar operations,
Speaker 6: which means that they can really now focus on getting
Speaker 6: Dollar Tree to function at the best that it possibly can.
Speaker 6: I think that you have customers who are going into
Speaker 6: Dollar Tree. They have a multi price point program that
Speaker 6: they've been rolling out that's been doing pretty well. That
Speaker 6: should help support some of the top line growth. It's
Speaker 6: really going to be a question about margin for Dollar
Speaker 6: Tree and how much tariffs are impacting them already, although
Speaker 6: from what we've seen from other retailers, that impact may
Speaker 6: still be delayed into further in the second half of
Speaker 6: this year, just because they already had things in inventory
Speaker 6: that they're currently selling.
Speaker 2: So, Jen, in any town, USA, do these four dollars stores,
Speaker 2: Dollar Tree, Dollar Rama all that did? They are they
Speaker 2: all in the same town together? Is it more regionally
Speaker 2: carved out?
Speaker 6: Well, Dollar General by far has the greatest penetration into
Speaker 6: what you would call rural America and so you find
Speaker 6: them in very small communities sometimes is one of the
Speaker 6: key retailers in very small towns. When you look at
Speaker 6: like Family Dollar, it tends to skew a little bit
Speaker 6: more urban. There is some there is some rural presence,
Speaker 6: but not nearly as much. And they're in the process
Speaker 6: of closing a lot of stores for the other dollar,
Speaker 6: you know, the other dollar in low price you know,
Speaker 6: providers like A five below. They're still in the growth stage,
Speaker 6: so they don't have nearly a number of stores. You know.
Speaker 6: You have to remember Dollar General has over twenty thousand
Speaker 6: store locations just the United States, so it is pervasive
Speaker 6: through a lot of smaller communities.
Speaker 5: That's amazing. I didn't know that.
Speaker 7: That is pretty remarkable. Now now that Dollar Tree is
Speaker 7: shedding Family Dollar, what kind of opportunities does that provide
Speaker 7: for Dollar General.
Speaker 6: Well, it certainly gives an opportunity to look, especially where
Speaker 6: stores are closing, in terms of gaining market share, but
Speaker 6: it's also about re asserting value position and you know,
Speaker 6: capturing customers that have been dissatisfied or who may be
Speaker 6: looking for another alternative. We also saw Party City close,
Speaker 6: you know, last year and into the beginning of this year,
Speaker 6: and so you know there are there are strategic opportunities
Speaker 6: where they can go after you know, some of those
Speaker 6: types of occasions that historically people might not have gone
Speaker 6: to Dollar General for.
Speaker 5: Say, with us. More from Bloomberg Intelligence coming up after this.
Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us Live
Speaker 1: weekdays at ten a m. Eastern on Apple, Cocklay and
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Speaker 5: One of the ones I always like is Dick's Sporting Goods.
Speaker 2: Give a sense of how the sporting goods business is doing,
Speaker 2: and they reported some number stock trading off a little bit.
Speaker 4: Here.
Speaker 2: Lindsay Dutch joins US Consumer Hardlines senior analyst from Bloomberg Intelligence. Lindsay,
Speaker 2: talk to us about dick Sporting Goods. What did they
Speaker 2: report most recently.
Speaker 8: Hi, Paul, thanks for having me. Yes, Dick's Sporting Goods
Speaker 8: had another strong quarter five percent same story growth. That's
Speaker 8: an acceleration sequentially and year over year. You know they're
Speaker 8: seeing strength across apparel, footwear, team sports, and golf. So
Speaker 8: a strong quarter, but the stock is trading off, and
Speaker 8: I think a lot of that is sort of a
Speaker 8: conservative outlook for the second half, you know, with some
Speaker 8: uncertainty and a lot of investors are still worried about
Speaker 8: the incorporation of Footlocker. With that deal to close in September, talk.
Speaker 5: Just about the foot Locker deal, what's the upside there?
Speaker 8: Yeah, So the Footlocker deal is a little bit different
Speaker 8: for DIS in terms of, you know, it leans a
Speaker 8: little bit more towards lifestyle rather than sport. It is
Speaker 8: it is a big acquisition, you're talking about adding about
Speaker 8: eight billion dollars in revenue. It also Footlocker skews to
Speaker 8: a lower income consumer and they have mall based stores,
Speaker 8: so it's a little bit of a different animal for DIS.
Speaker 8: You know, Dix has proven their own turnaround over the
Speaker 8: past couple of years and they really have strong demand
Speaker 8: with their assortment, but they're going to have to show
Speaker 8: that they can do that again with Footlocker.
Speaker 7: Is there is there a carefully articulated strategy about integrating
Speaker 7: Footlocker into Dix or I know they said that they're
Speaker 7: going to run as separate business unit. So I'm wondering,
Speaker 7: what's the point of buying footlocker then.
Speaker 8: So you're right correct, they're going to keep the footlocker banners,
Speaker 8: They're going to keep the stores there. As a customer,
Speaker 8: you might not even know that Dix has made this purchase.
Speaker 8: I think the big thing for Dix is expanding, you know,
Speaker 8: their customer reach and therefore the longer term opportunity for
Speaker 8: the company as a whole. So, like I said, you know,
Speaker 8: Dicks already caters to more of a sports type focused customer,
Speaker 8: you know, a higher income consumer. A foot locker is
Speaker 8: bringing a whole nother consumer set to two Dicks, and
Speaker 8: they're going to really try to lean into their expertise
Speaker 8: on assortment, bring newness to footwear, bring a little bit
Speaker 8: more apparel into those foot locker stores, and they're going
Speaker 8: to try to gain market share, you know, with this
Speaker 8: broader reach.
Speaker 2: Lindsay, what are the the the.
Speaker 5: The Dicks of the world, the footlockers, the lord.
Speaker 2: What are they saying about tariffs and how much they're
Speaker 2: going to take in the margin, how much they're going
Speaker 2: to pass a on the consumers. What's the because I
Speaker 2: think a lot of sneakers come from China.
Speaker 8: Yes, So Diggs noted that they have seen you know,
Speaker 8: some price increases they sound more sporadic in nature. That's
Speaker 8: relatively consistent with the other you know, coverge in my
Speaker 8: retail universe. You know, we're seeing very few retailers you
Speaker 8: to take every single item up by a certain amount.
Speaker 8: So the price increases are coming in more selectively. They're
Speaker 8: most easily passed through to the consumer when it's a
Speaker 8: new product, you know, something that people are willing to
Speaker 8: pay up for anyway, so you know they have seen,
Speaker 8: you know, new things coming from saying Nike for example,
Speaker 8: you may be able to get that customer to just
Speaker 8: take on that price increase in terms of margin. When
Speaker 8: I think about Dix, you know they're still expecting expansion
Speaker 8: both on the growth basis and on an operating basis
Speaker 8: this year. You know, they are trying to manage costs
Speaker 8: as well, but this company is also investing. They're opening
Speaker 8: new stores, and so that that is adding you know,
Speaker 8: additional cost pressure, not just on on.
Speaker 6: The product side.
Speaker 5: So Lindia, I got to ask you about that, spy
Speaker 5: as well.
Speaker 7: The stock is down more than six percent in early trading,
Speaker 7: even though the second quarter did beat analyssessments and the
Speaker 7: company ended fourteen straight quarters of quarterly sales declines. What
Speaker 7: has investors disappointed?
Speaker 8: I think the real worry bead for Best Buy is
Speaker 8: demand for second half. So even this year, you know,
Speaker 8: just for the first eight months of the year has
Speaker 8: been a little bit of.
Speaker 5: A wild ride for Best Buy.
Speaker 8: You know, we came into the year with positive demand momentum,
Speaker 8: things were looking good, you know, then we got tariff announcements,
Speaker 8: we had to roll back guidance. You know, there was
Speaker 8: a lot more uncertainty, and now we're flipping back with
Speaker 8: these results to more on the positive side. So I
Speaker 8: think there's concern entering the second half of the year
Speaker 8: about you know, where demand is going to shake out.
Speaker 8: We did see strength, you know, in gaming, particularly with
Speaker 8: the Nintendo switch to for the second quarter. We're seeing
Speaker 8: momentum continue in computing and phones for the third quarter.
Speaker 8: All of that is positive, but home theater and appliances
Speaker 8: have sort of remained weak for Best Buy, and at
Speaker 8: home theater entertainment category, that's a really big one.
Speaker 5: For the fourth quarter. Stay with us. More from Bloomberg
Speaker 5: Intelligence coming up after this.
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Speaker 7: We want to go back to company news and how
Speaker 7: the NASAC is the lone index there that is really
Speaker 7: moving higher right now. A lot of it can be
Speaker 7: due to earnings from companies like Snowflake, like CrowdStrike, not
Speaker 7: necessarily do in video, which is lower. So let's bring
Speaker 7: in Mandeep seeing Bloomberg Intelligence senior tech industry analysts, and Mandep,
Speaker 7: I want to start on I wanted to start on
Speaker 7: CrowdStrike because I know what they do, but I'm going
Speaker 7: to go to Snowflake, which is up about eighteen and
Speaker 7: a half percent trading right now. It's another one of
Speaker 7: these enterprise software companies that there are so many of.
Speaker 7: So let's talk first about what Snowflake said that got
Speaker 7: investors so excited and how tied the AI story it is.
Speaker 9: Yeah, I mean, Snowflake is another one of those database
Speaker 9: analytics companies that got beaten up because everyone thought lms
Speaker 9: will take share from them. And there's been a pretty
Speaker 9: wide spectrum when you look at the valuations for database
Speaker 9: and analytics companies. On the one hand, you've got a
Speaker 9: palenteer that's trading at almost one hundred times sales, not
Speaker 9: earning sales. And on the other hand, you've got you know,
Speaker 9: players like Snowflake that are at a much more reasonable valuation.
Speaker 9: Mango dB, I mean, the stock is up almost fifty
Speaker 9: percent since they reported earning three days back. So to
Speaker 9: answer your question, what they said was they are now
Speaker 9: participating in this AI agent deployment. Basically, all these enterprises
Speaker 9: who are renting the GPU capacities, who are trying to
Speaker 9: build a product on chat GPT, they're actually deploying that
Speaker 9: in production. Now that AI agent, customer service agent, or
Speaker 9: that search chat pot is getting deployed with enterprise data.
Speaker 9: And that is what I think is helping someone like Snowflake,
Speaker 9: which caters to enterprises. But everyone thought they would be
Speaker 9: disintermediated with the chat GPT solving all the problems. So
Speaker 9: that's not the case. That's why Mango dB did well,
Speaker 9: That's why Snowflake did well. Not every company is going
Speaker 9: to participate like that, but clearly these companies have, and
Speaker 9: that's why you're seeing their stock getting bid up.
Speaker 2: So these I guess, I know, I guess they're classified
Speaker 2: as infrastructure software.
Speaker 9: Yeah, databases yeah, and their databases yeah.
Speaker 2: And so databases you're going they're going to have value
Speaker 2: in an AI world, right. I would just think it's
Speaker 2: the raw material of data for this launch language model.
Speaker 9: You go back in the last thirty years, database is
Speaker 9: one of the stickiest business. Like think of Oracle database.
Speaker 9: Nobody was able to get rid of their Oracle database databases. Look,
Speaker 9: I mean, and that's why databases are like so hard
Speaker 9: to displace. Once your data is in a like particular products,
Speaker 9: database I cuturally migrated. I mean, there's no way out.
Speaker 9: Technology will come, they will be AI. What do you
Speaker 9: train AI on? It's your data, right, So your custom
Speaker 9: data is still in that product, and that's why mainframes
Speaker 9: are still around. So from that standpoint, I think database
Speaker 9: when you look at their gross retention, their net retention,
Speaker 9: their metrics are always better than application software. You can
Speaker 9: replace your application software with a chat GPT product that
Speaker 9: can automate the whole thing.
Speaker 4: I see.
Speaker 9: But that's where the stickiness comes from. And you know,
Speaker 9: the pendulum keeps swinging. I mean, the market was very
Speaker 9: bearish on these companies for a while, but now they're realizing,
Speaker 9: oh guess what they will participate in this AI deployment,
Speaker 9: and I think Snowflake is definitely one open.
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