WEBVTT - Nvidia Earnings and Looming US Default 0:00:01.520 --> 0:00:05.840 From Mahard where Innovation, Money and power Collie in Silicon 0:00:05.920 --> 0:00:06.760 Vallet Nbon. 0:00:07.160 --> 0:00:11.200 This is Bloomberg Technology with Caroline Hyde and Ed Lovelove. 0:00:25.040 --> 0:00:28.160 I'm scarlettfu in for Caroline Hide at Bloomberg's world headquarters 0:00:28.240 --> 0:00:29.440 in New York, and. 0:00:29.400 --> 0:00:31.480 I'm Alex Franka in for Ed Ludlow in San Francisco. 0:00:31.640 --> 0:00:33.919 This is Bloomberg Technology coming up. 0:00:34.000 --> 0:00:36.920 In video's blowout forecast sparks a two hundred and sixty 0:00:37.080 --> 0:00:39.680 billion dollar AI rally. We'll break down the results in 0:00:39.840 --> 0:00:42.280 how to trade the red hot technology. 0:00:42.600 --> 0:00:45.479 And as a catastrophic US default. Looms will speak to 0:00:45.520 --> 0:00:48.519 one tech industry veteran who joined CEOs in signing an 0:00:48.520 --> 0:00:51.560 open letter to the President and Congress over their extreme 0:00:51.760 --> 0:00:52.920 concerns on the matter. 0:00:53.360 --> 0:00:55.960 Plus a one point eight billion dollar deal in a 0:00:56.000 --> 0:00:59.600 three D printing space. We'll discuss why Stratusists is acquiring 0:00:59.680 --> 0:01:00.840 desk Metal. 0:01:00.560 --> 0:01:02.840 With its CEO. All that and a lot. 0:01:02.680 --> 0:01:06.280 More coming up, But first we want to get your 0:01:06.360 --> 0:01:09.280 check on the markets. Here at midday on this Thursday, 0:01:09.360 --> 0:01:11.040 and you have the S and P five hundred moving 0:01:11.120 --> 0:01:14.240 higher by half of one percent, all thanks to technology. 0:01:14.240 --> 0:01:17.760 Look at the Philadelphia Semiconductor Index hired by almost six 0:01:17.840 --> 0:01:21.360 percent thanks to video is better than expected sales forecast. 0:01:21.600 --> 0:01:23.280 Alex will get into that a little bit later, but 0:01:23.319 --> 0:01:25.319 it's not as if all chip makers are rising. You 0:01:25.360 --> 0:01:29.160 actually have weakness in Intel and analog devices as well. 0:01:29.560 --> 0:01:31.640 There's a lot of anks to over the debt ceiling 0:01:31.640 --> 0:01:34.760 and how little progress seems to be there seems to 0:01:34.760 --> 0:01:36.639 be right now as we get closer to June. 0:01:36.680 --> 0:01:38.600 First, you can see the yield on the two. 0:01:38.640 --> 0:01:41.360 You're moving up by seven basis points to four point 0:01:41.360 --> 0:01:43.720 four or five percent. This is actually the tenth straight 0:01:43.800 --> 0:01:47.199 day that yields have been moving up, reflecting a persistent 0:01:47.960 --> 0:01:51.200 decline in demand for that security. Fitch actually put the 0:01:51.320 --> 0:01:54.280 US on credit watch for a possible downgrade, even as 0:01:54.320 --> 0:01:56.920 it says it does expect some kind of deal at 0:01:56.920 --> 0:02:00.240 the last minute. Markets are also pricing in increase odds 0:02:00.280 --> 0:02:03.240 that the Federal Reserve will possibly raise interest rates at 0:02:03.280 --> 0:02:06.320 one of its next two meetings. Data is showing inflation 0:02:06.440 --> 0:02:10.560 remains fairly sticky, and in fact, the GDP report showed 0:02:10.600 --> 0:02:14.560 a faster rate of growth than what had been previously estimated. 0:02:14.639 --> 0:02:17.160 So with the US dollar strength thing, let's change up 0:02:17.160 --> 0:02:19.720 the boards here. What you'll see is that commodities are lower, 0:02:19.840 --> 0:02:22.360 especially those price in US dollars like New York crud 0:02:22.600 --> 0:02:25.520 WTI off by four percent at the moment, snapping a 0:02:25.600 --> 0:02:28.959 three day advance. Saudi Arabia this week saying that people 0:02:29.040 --> 0:02:31.920 shorting the oil market should watch out, although that was 0:02:31.919 --> 0:02:34.680 follow up by Russia saying that it's unlikely OPEK and 0:02:34.720 --> 0:02:38.080 its partners, including Russia, will be cutting production in the 0:02:38.120 --> 0:02:40.480 near term. Gold future is also down by nine tens 0:02:40.520 --> 0:02:43.240 of one percent. I bring this up only because I 0:02:43.400 --> 0:02:47.760 was reading somewhere Alex that one analyst said institutional messters, 0:02:47.760 --> 0:02:49.959 when they are looking for someplace to hide out, they 0:02:50.200 --> 0:02:52.640 hide out in gold. When individual mesters are looking for 0:02:52.720 --> 0:02:55.000 somewhere to hide out, they go to bitcoin. Right now, 0:02:55.080 --> 0:02:57.240 neither of these safe havens is catching a bid, but 0:02:57.240 --> 0:03:00.880 it's an interesting explanation of gold versus coin, Alex. 0:03:01.840 --> 0:03:04.160 I'll get to some of those safe havens Scarlet, but 0:03:04.280 --> 0:03:06.160 first I want to bring you to some of the red. 0:03:06.200 --> 0:03:08.880 On the day Snowflake is taking its biggest plunge in 0:03:08.960 --> 0:03:11.880 over a year, it reported disappointing sales outlook for the 0:03:11.880 --> 0:03:15.520 current quarter. That software company is known for charging customers 0:03:15.560 --> 0:03:17.799 on a pay as you go model, but it told 0:03:17.840 --> 0:03:21.640 investors that the uncertain economic conditions have clients slowing down 0:03:21.760 --> 0:03:22.880 on using their products. 0:03:23.160 --> 0:03:24.720 Now let's move into some of that grain. 0:03:24.800 --> 0:03:26.520 Dish is surging the most in six months on a 0:03:26.520 --> 0:03:28.880 Wall Street Journal report that it's in talks to sell 0:03:28.919 --> 0:03:31.160 its new mobile phone service through Amazon. 0:03:31.480 --> 0:03:31.639 Now. 0:03:31.680 --> 0:03:34.640 Dish already uses Amazon's cloud to run core elements of 0:03:34.639 --> 0:03:37.640 the FIG network it's developing, but this move would give 0:03:37.640 --> 0:03:41.920 the company access to Amazon's millions of customers. Now into 0:03:41.960 --> 0:03:43.960 some of our bigger movers of the day, Microsoft is 0:03:43.960 --> 0:03:46.880 trading at a sixteen month high. Investors are really on 0:03:46.920 --> 0:03:48.720 the hunt for the next AI trade. 0:03:48.760 --> 0:03:49.720 We've been talking about. 0:03:49.600 --> 0:03:52.720 Save Haven's and this company has been out front on 0:03:52.880 --> 0:03:56.120 that AI trade. It's not new news that Microsoft has 0:03:56.160 --> 0:03:58.480 been out front in AI. It's the biggest stakeholder in 0:03:58.520 --> 0:04:01.920 open AI and brand and is already bringing artificial intelligence 0:04:01.920 --> 0:04:05.040 to its cloud offerings and its software. What is giving 0:04:05.040 --> 0:04:06.800 it a little bit of a lift today is perhaps 0:04:06.840 --> 0:04:10.120 a bit of the halo effect from the top stock 0:04:10.240 --> 0:04:12.480 I'm watching today, which I will take us to. Now, 0:04:12.800 --> 0:04:15.400 let's go to Nvidia. I told you everyone's looking for 0:04:15.440 --> 0:04:17.560 the next AI trade. This is why in Video's up 0:04:17.600 --> 0:04:20.640 a whopping twenty seven percent at record high levels and 0:04:20.680 --> 0:04:25.080 flirting with that big sticker one trillion dollar valuation. The 0:04:25.200 --> 0:04:28.440 chip maker reported a revenue forecast that surprised even the 0:04:28.440 --> 0:04:31.720 most bullish of analysts on sales of its processors used 0:04:31.720 --> 0:04:35.039 in you guessed it AI technology, It sells to customers 0:04:35.080 --> 0:04:38.440 like Microsoft, like Alphabet and others. Analysts at Susquehanna even 0:04:38.480 --> 0:04:42.160 called this the greatest beat of all time of any. 0:04:41.960 --> 0:04:43.160 Earnings report they've seen. 0:04:43.480 --> 0:04:46.640 This stock also could be benefiting from that safe haven 0:04:46.680 --> 0:04:49.560 effect we've seen in tech stocks lately. We'll dig in 0:04:49.600 --> 0:04:52.479 to that shortly, but first I want to get more 0:04:52.960 --> 0:04:56.480 on in Vidia and that AI demand that's been booming. 0:04:56.520 --> 0:05:01.000 So let's bring in Bloomberg's Ian King and big report 0:05:01.080 --> 0:05:05.200 out of in Vidia yesterday. Lots of excitement on the forecast. 0:05:05.560 --> 0:05:06.760 Dig into the numbers here for. 0:05:06.720 --> 0:05:11.000 Us, Yeah, I mean the embarrassed Wall Street. The prediction 0:05:11.160 --> 0:05:14.360 of eleven billion, which would be their biggest quarter ever 0:05:14.400 --> 0:05:17.640 for the current period, fifty three percent higher than where 0:05:17.680 --> 0:05:21.120 the average expectation was, and the numbers on the quarter 0:05:21.200 --> 0:05:25.560 were similarly a lot stronger. Even the poultry long forgotten 0:05:25.680 --> 0:05:29.120 nobody cares about PC businesses looking better for them as well. 0:05:29.560 --> 0:05:33.599 It really just you know, wildly surprised everybody on the 0:05:33.680 --> 0:05:36.600 upside and gave investors exactly what they were looking for, 0:05:36.640 --> 0:05:39.799 which is like, show me the company that's actually making 0:05:39.839 --> 0:05:41.200 money out of this AI thing. 0:05:41.960 --> 0:05:44.200 Yeah, it seems like it's hitting on all cylinders. Ian 0:05:44.600 --> 0:05:46.560 how is it when you zoom out a little bit here, 0:05:46.600 --> 0:05:48.440 that in video always seems to be on the front 0:05:48.480 --> 0:05:50.600 lines of whatever the new hot thing in tech is. 0:05:50.680 --> 0:05:53.719 I remember super high in video games in videos there, 0:05:54.080 --> 0:05:57.480 Bitcoin mining in videos there, and now AI in videos there. 0:05:58.640 --> 0:06:01.479 Yeah, I mean it's you know, to hear it on 0:06:01.520 --> 0:06:05.080 a fundamental level from their CEO, we're talking about what 0:06:05.120 --> 0:06:09.280 he calls a shift in computing to accelerated computing. That's 0:06:09.320 --> 0:06:12.200 the idea that instead of using a type of chip 0:06:12.240 --> 0:06:14.480 that kind of does everything quite well, which would be 0:06:14.520 --> 0:06:17.560 an Intel CPU, you're using a chip for a very 0:06:17.600 --> 0:06:21.760 specific purpose that's really good at doing things in a 0:06:21.839 --> 0:06:25.760 very simple things relatively, but in a very parallelized way. 0:06:25.839 --> 0:06:28.120 So it's going to give a huge rush to say 0:06:28.160 --> 0:06:32.120 training AI software or actually taking that software and doing 0:06:32.520 --> 0:06:35.920 the implementation of it, recognizing you know, cats in videos 0:06:36.279 --> 0:06:38.760 or what you're saying to your Alexa speaker and making 0:06:38.800 --> 0:06:41.760 that much more efficient and much better now. 0:06:41.839 --> 0:06:43.560 And I don't want to damper on the day for 0:06:43.640 --> 0:06:45.000 in Video they're having a big one. 0:06:45.080 --> 0:06:47.599 But this does make me wonder when. 0:06:47.480 --> 0:06:49.320 You think about the hyperscalers that it sells to. When 0:06:49.320 --> 0:06:51.280 you think about folks like Meta, a lot of those 0:06:51.320 --> 0:06:54.480 companies are known for wanting to vertically integrate their entire 0:06:54.560 --> 0:06:59.000 infrastructure stack. How long are invidious processors kind of the 0:06:59.040 --> 0:07:01.159 bell of the ball. At what point do you see 0:07:01.200 --> 0:07:04.440 some of the customers actually pushing into creating their own silicon. 0:07:05.320 --> 0:07:07.600 I mean you nailed it. I mean you wrote about 0:07:07.600 --> 0:07:10.920 it recently. This is absolutely the question that's hanging over them, 0:07:10.920 --> 0:07:13.240 and in Video has two answers to that. One is 0:07:13.880 --> 0:07:16.320 we're going to run faster than they can because we've 0:07:16.320 --> 0:07:18.120 got a head start on this. We're good at it. 0:07:18.640 --> 0:07:22.440 And the second answer to this is if AI is 0:07:22.520 --> 0:07:26.600 only the preserve of Microsoft, of Meta, of Amazon Notable US, 0:07:26.920 --> 0:07:29.120 then that's not good enough. It needs to be a 0:07:29.160 --> 0:07:32.640 type of technology that every company that doesn't have these 0:07:32.920 --> 0:07:35.480 these abilities can just walk into. So what they've been 0:07:35.520 --> 0:07:38.920 doing is making devices, is making cloud services, and their 0:07:38.920 --> 0:07:44.080 own software that would help pharmaceutical companies, robots companies, automotive 0:07:44.080 --> 0:07:46.760 companies get into this. So they're kind of trying to 0:07:47.240 --> 0:07:49.480 hedge their bets there and stay ahead of the game. 0:07:49.880 --> 0:07:51.520 Yeah, they've done a great job as seeing ahead of 0:07:51.520 --> 0:07:51.880 the game. 0:07:52.240 --> 0:07:54.680 You know, we've been talking about how Wall Street strategists 0:07:54.720 --> 0:07:57.040 like Michael Hartnet of Bank of America have talked about 0:07:57.040 --> 0:07:59.520 how there is this mini bubble in AI and a 0:07:59.560 --> 0:08:03.320 bubble technology. Is there any acknowledgment of this in San Francisco, 0:08:03.440 --> 0:08:05.720 ground zero of all this technology that perhaps things are 0:08:05.720 --> 0:08:06.960 getting a bit frothy. 0:08:08.200 --> 0:08:11.880 Well, if you look at the the inbox of any journalist, 0:08:11.880 --> 0:08:14.120 it's going to be full of pitches with the words 0:08:14.160 --> 0:08:16.440 AI in it. So what does that tell you? I mean, 0:08:16.440 --> 0:08:19.600 we've been through this before, obviously, but no, I think, 0:08:19.680 --> 0:08:21.880 you know, in Vidia is a real good case in point, 0:08:22.000 --> 0:08:24.200 and the way the market has reacted is also a 0:08:24.200 --> 0:08:27.760 good case in point. Not every chip stock is up today. 0:08:28.080 --> 0:08:31.240 Intel is down right, and some of the others aren't 0:08:31.560 --> 0:08:34.080 sling out. So I think there's a little bit more sobriety, 0:08:34.120 --> 0:08:36.760 at least in my sector. In terms of other areas, 0:08:36.760 --> 0:08:38.400 who knows, there's a lot of talk. 0:08:38.800 --> 0:08:41.520 Yeah, well in videos delivering and it is profitable compared 0:08:41.520 --> 0:08:44.800 to some of the companies in past moments of excesses. 0:08:45.000 --> 0:08:46.360 Ian Hiking. Thank you so much. 0:08:46.400 --> 0:08:49.640 Ian, with his decades of experience covering semiconductors. 0:08:48.960 --> 0:08:50.360 In Asia and the US. 0:08:50.840 --> 0:08:53.560 Let's get more on the markets and bring in Mona Mahajan. 0:08:53.640 --> 0:08:56.920 She is Edward Jones's senior investment strategist. Mona, I know 0:08:56.960 --> 0:08:59.679 that you were listening to us talk to Ian just now. 0:08:59.760 --> 0:09:02.520 I'm curious with the S and P five hundred six 0:09:02.559 --> 0:09:05.280 tens of one percent, clearly powered by Nvidia in these 0:09:05.320 --> 0:09:08.240 big tech names, but the now losing ground by four 0:09:08.280 --> 0:09:11.640 tenths of one percent because it doesn't have that AI exposure. 0:09:12.200 --> 0:09:14.920 Is this overall a strong stock market or a fragile 0:09:15.360 --> 0:09:17.800 stock market given how narrow the winners are. 0:09:18.640 --> 0:09:19.640 Yeah, it's a great question. 0:09:19.640 --> 0:09:22.480 Stcarlett, and look this year the SMP broadly is up 0:09:22.520 --> 0:09:26.200 about seven percent plus, but it has been very narrow leadership. 0:09:26.240 --> 0:09:29.439 In fact, only three sectors are outperforming the broader market. 0:09:29.480 --> 0:09:32.920 Those are of course, technology, comm services, and consumer discretionary. 0:09:33.120 --> 0:09:35.360 So those growth parts of the market, quality growth parts 0:09:35.360 --> 0:09:37.720 of the market. Some of those sectors are up twenty 0:09:37.800 --> 0:09:41.240 percent plus, so back in bull market territory. And meanwhile, 0:09:41.480 --> 0:09:44.320 the cyclical and more defensive parts of the market are lagging. 0:09:44.679 --> 0:09:47.079 So you know, as long term investors, we would certainly 0:09:47.200 --> 0:09:50.840 like to see a broader participation in a market rally 0:09:50.880 --> 0:09:53.880 that to us is a more healthy sign that the 0:09:53.920 --> 0:09:57.680 economy of the underlying fundamentals and the market broadly has. 0:09:57.880 --> 0:09:59.000 More room to run. 0:09:59.240 --> 0:10:01.840 Now, this narrow leadership not only driven by a few 0:10:01.880 --> 0:10:05.520 sectors and a few names. We're also seeing valuation expansion 0:10:05.559 --> 0:10:07.120 creep back into the marketplace as well. 0:10:07.200 --> 0:10:08.200 Keep in mind earnings. 0:10:08.800 --> 0:10:12.280 Although earnings growth this past quarter did exceed expectations, we're 0:10:12.280 --> 0:10:15.360 still looking at negative earnings growth and really now three 0:10:15.480 --> 0:10:18.920 back to back negative earnings quarters, So valuation is expanding. 0:10:19.200 --> 0:10:20.360 Breath has been narrow. 0:10:20.960 --> 0:10:23.480 But what we will say broadly is that some of 0:10:23.480 --> 0:10:26.199 the reasons that investors have gotten back into the market 0:10:26.440 --> 0:10:28.880 they do have this alternative sitting in cash and cash 0:10:29.000 --> 0:10:32.640 like instruments, is because some of these technology players have 0:10:32.840 --> 0:10:35.280 provided a compelling reason to get involved. 0:10:35.760 --> 0:10:37.800 Let me broaden out our conversation a little bit here, 0:10:37.840 --> 0:10:41.200 because obviously the excitement over Nvidia and any company that 0:10:41.240 --> 0:10:45.360 has ties to AI is papering over some weak spots 0:10:45.360 --> 0:10:47.800 in the overall market and the economy. Fitch, for instance, 0:10:47.840 --> 0:10:50.120 put US on watch for a possible downgrade of its 0:10:50.120 --> 0:10:54.000 credit rating. Does it matter that it's Fitch versus SMP 0:10:54.120 --> 0:10:56.680 or Moody's, or is any one of the three big 0:10:56.760 --> 0:11:01.440 ratings companies downgrading the US potentially enough for investors to 0:11:01.480 --> 0:11:03.360 have to sell. I'm just trying to get ahead of 0:11:03.360 --> 0:11:06.000 what we could see if the worst happens. 0:11:06.720 --> 0:11:09.120 Yeah, you know, it's an interesting question. And look, I 0:11:09.120 --> 0:11:12.600 think our base case continues to be that the US 0:11:12.800 --> 0:11:14.720 does not default on its debt, and in fact, both 0:11:14.760 --> 0:11:17.920 sides of Congress come together in a negotiated resolution. 0:11:18.520 --> 0:11:20.440 We've seen some historic precedent for that. 0:11:20.520 --> 0:11:23.320 In fact, seventy eight times has Congress come together to 0:11:23.400 --> 0:11:26.280 raise the debt ceiling since nineteen sixty. Twenty of those 0:11:26.280 --> 0:11:29.160 times have been since twenty eleven, and six of those 0:11:29.200 --> 0:11:33.079 have been in using extraordinary measures. So there is precedent 0:11:33.160 --> 0:11:35.200 for this, and we do think that will be the 0:11:35.240 --> 0:11:38.520 most likely path forward. But in the meanwhile, we will 0:11:38.559 --> 0:11:41.960 certainly get consternation, and the Fitch warning is certainly one 0:11:42.000 --> 0:11:44.920 signal of that. We would say, if you know, in 0:11:44.960 --> 0:11:48.679 that tail risk scenario that the US does default, any 0:11:48.760 --> 0:11:52.240 of the rating agency downgrades will be meaningful, and not 0:11:52.280 --> 0:11:55.200 only that we will have broader impacts and equity bond markets, 0:11:55.240 --> 0:11:58.800 but also things like payments to you know, key areas 0:11:58.800 --> 0:12:02.360 of the economy, social, secure, medicare, defense, etc. So there 0:12:02.360 --> 0:12:05.000 are real meaningful impacts of not only the downgrade but 0:12:05.040 --> 0:12:06.040 the default itself. 0:12:06.679 --> 0:12:08.040 But we're still hopeful. 0:12:07.720 --> 0:12:10.440 That, you know, as we approach the X state, really 0:12:10.480 --> 0:12:13.400 both sides can come together, and both sides will probably 0:12:13.440 --> 0:12:16.640 have to concede to some extent, but we'll get that 0:12:16.679 --> 0:12:18.200 negotiated resolution. 0:12:18.720 --> 0:12:20.880 Mana, if we do have that, as you say, kind 0:12:20.880 --> 0:12:23.440 of outside case of default. Even if we don't, some 0:12:23.559 --> 0:12:27.160 economists are saying that this whole back and forth could 0:12:27.200 --> 0:12:29.679 push us into something of a mild recession. If that 0:12:29.760 --> 0:12:33.120 does happen, here, where do you rotate your investments? 0:12:33.200 --> 0:12:34.920 Is it back to cash? What are you looking at? 0:12:35.160 --> 0:12:37.080 If that is kind of the scenario we see over 0:12:37.120 --> 0:12:38.679 the next twelve eighteen months. 0:12:38.880 --> 0:12:42.240 Yeah, you know, look, I think certainly the mild recession 0:12:42.280 --> 0:12:45.880 scenario is one that is now somewhat baked into markets. 0:12:45.880 --> 0:12:48.200 In fact, if you look at the Bloomberg Consensus estimate's 0:12:48.440 --> 0:12:51.040 Q three and Q four two back to back quarters. 0:12:51.280 --> 0:12:53.720 They are looking for negative or calling for negative GDP. 0:12:53.920 --> 0:12:57.480 It's minor negative point five percent, but still sub zero 0:12:57.600 --> 0:13:01.040 GDP for two quarters, and that is now probably the 0:13:01.080 --> 0:13:04.079 most well advertised mild recession on the horizon. 0:13:04.720 --> 0:13:06.400 If we do get more. 0:13:06.600 --> 0:13:11.400 Meaningful volatility around the debt ceiling, that could create just 0:13:11.440 --> 0:13:15.360 feedback loops around the consumer pulls back. There's hesitation to invest, 0:13:15.440 --> 0:13:18.360 even in safe haven assets, and that does have an 0:13:18.360 --> 0:13:21.440 impact and a ripple effect through equity and bond markets. 0:13:21.440 --> 0:13:23.840 We'd say, in that scenario, you certainly want to be 0:13:23.880 --> 0:13:27.520 more defensive, and in that scenario defensive probably still means 0:13:28.240 --> 0:13:31.840 areas of the market like staples, health care utilities, but 0:13:31.960 --> 0:13:35.559 also still overweight some of those cash and cash like instruments. 0:13:35.640 --> 0:13:38.440 So that kind of bar belle between the equity and 0:13:38.720 --> 0:13:41.840 the bond market on the defense side. Now, as we do, 0:13:42.080 --> 0:13:43.560 you know, if that does not occur, and as we 0:13:43.559 --> 0:13:46.200 do get through a resolution and the economy goes through 0:13:46.200 --> 0:13:49.560 a mild recession and looks towards recovery, that's when really 0:13:49.600 --> 0:13:52.240 we think about a more broadening participation. As we talked 0:13:52.240 --> 0:13:56.000 about earlier, that recovery playbook should include leadership from areas 0:13:56.040 --> 0:14:01.000 like small cap stocks like international em equities, and also 0:14:01.080 --> 0:14:03.760 of course longer duration bonds and cyclical parts of the market. 0:14:03.840 --> 0:14:05.520 So not just tech leading the way. 0:14:05.760 --> 0:14:07.680 We do think as we look towards the back half 0:14:07.720 --> 0:14:10.640 of the year and towards potential recovery, we'll have a 0:14:10.640 --> 0:14:14.200 more sustainable, broader leadership in the market as well. 0:14:14.360 --> 0:14:16.280 I have to ask one last one on tech. We 0:14:16.320 --> 0:14:20.720 did see during the pandemic era era, the tech, particularly 0:14:20.800 --> 0:14:23.920 big tech was really gaining, particularly on digital advertising strength 0:14:24.000 --> 0:14:24.600 e commerce. 0:14:25.040 --> 0:14:27.320 But when that kind of time. 0:14:27.080 --> 0:14:30.800 Period ended, investors turned back to the fundamentals. Cost structure 0:14:30.840 --> 0:14:32.920 was in play, fundamentals of these companies were in play. 0:14:33.240 --> 0:14:35.360 Is there a risk here for these big tech names 0:14:35.360 --> 0:14:37.240 that are really getting a lot of love these days 0:14:37.240 --> 0:14:40.720 from the equity markets that if we have a quarter 0:14:41.000 --> 0:14:43.800 of maybe shakeier fundamentals, that you could see a big 0:14:43.840 --> 0:14:45.320 sell off in that sector in particular. 0:14:45.680 --> 0:14:47.960 Yeah, you know, look, there's certainly a case to be made, 0:14:48.000 --> 0:14:50.960 an a credible case that we're getting into overbought territories 0:14:51.000 --> 0:14:54.160 and a pullback and period of consolidation we think probably 0:14:54.960 --> 0:14:58.600 would be normal healthy in some cases, given the excess 0:14:58.640 --> 0:15:01.280 moves that we've seen. That being said, you know, in 0:15:01.320 --> 0:15:04.040 an era of low growth, the low economic growth, investors 0:15:04.080 --> 0:15:06.760 do tend to gravitate towards higher growth parts of the market, 0:15:07.160 --> 0:15:10.960 especially those with defenseable business models, strong free cash flow, 0:15:11.320 --> 0:15:14.560 and those that are returning value to shareholders through buybacks. 0:15:14.640 --> 0:15:17.680 So there is you know, perhaps a little bit of 0:15:17.720 --> 0:15:20.960 consolidation volatility ahead, but the long term picture we think 0:15:21.040 --> 0:15:23.800 looks a little bit more balanced and still healthy for technology. 0:15:24.080 --> 0:15:26.720 Mona Mahazan, thank you for taking us through today and 0:15:26.840 --> 0:15:27.400 in the future. 0:15:27.800 --> 0:15:29.400 That's Mona Mahazan and Edward Jones. 0:15:29.520 --> 0:15:39.160 I appreciate you joining us all right. 0:15:39.200 --> 0:15:42.280 In the three D printing world, Stratasists agree to acquire 0:15:42.480 --> 0:15:45.560 Desktop Metal. It is an all stock deal that'll create 0:15:45.600 --> 0:15:48.920 a leading company in the industry at about one point 0:15:48.920 --> 0:15:53.400 eight billion dollars. Joining us now is yav zeif STRATUSUS CEO, 0:15:53.840 --> 0:15:56.320 Yov thank you so much for joining us. Your company 0:15:56.440 --> 0:16:00.760 recently rejected a takeover offer from rival. I know Dimension, 0:16:00.840 --> 0:16:04.840 yet here you are getting ready to buy just top Metal. 0:16:04.920 --> 0:16:07.880 Why does this particular combination make sense. 0:16:09.040 --> 0:16:12.360 Because it will reshape the industry, the three D printing 0:16:12.360 --> 0:16:15.840 industry or auditive manufacturing for years is failing to deliver 0:16:16.520 --> 0:16:20.240 what manufacturing really needs. But with the combination, we'll create 0:16:20.280 --> 0:16:21.480 the scale to deliver. 0:16:22.040 --> 0:16:25.320 And with that scale, are there certain clients or certain 0:16:25.360 --> 0:16:27.640 slices of industry that you think you can really sell 0:16:27.680 --> 0:16:30.800 into now that you're pulling in this additional functionality with 0:16:30.840 --> 0:16:31.480 this acquisition. 0:16:32.360 --> 0:16:36.680 Definitely, we are leading in the aerospace and automotive markets, 0:16:37.120 --> 0:16:40.520 and we're also leading in dental and medical, but we 0:16:40.560 --> 0:16:44.160 didn't have the metal paths we are focusing on polymer 0:16:44.560 --> 0:16:47.600 Now together there we are setting to the same customer 0:16:48.040 --> 0:16:53.160 through the same channels, a much bigger portfolio, broader portfolio, 0:16:53.680 --> 0:16:56.280 and will be very profitable to leverage our scale. 0:16:56.680 --> 0:16:59.040 Yeah, if you say profitability, talk to us day one. 0:16:59.280 --> 0:17:02.680 What is the financial impact on Stratasis from bringing this 0:17:02.760 --> 0:17:05.560 company in the fold? Are we talking in immediate revenue boost? 0:17:05.640 --> 0:17:07.600 Is there a margin accretion? Kind of talk us through 0:17:07.640 --> 0:17:09.000 the financial side of this acquisition. 0:17:09.119 --> 0:17:11.680 Great question. We are the only profitable strategies. 0:17:12.280 --> 0:17:15.080 Is the only profitable business in the three D printing arena? 0:17:15.480 --> 0:17:19.440 Desktop Metal announced that there will be profitable by the 0:17:19.520 --> 0:17:22.360 end of the year. When we combine us together, we'll 0:17:22.400 --> 0:17:25.560 be the first above one billion dollar company in this industry, 0:17:25.600 --> 0:17:28.240 this is huge. In twenty twenty five will sell one 0:17:28.240 --> 0:17:31.119 point one billion with even the imagin of ten to 0:17:31.280 --> 0:17:35.760 twelve percent. This is something that does not exist today 0:17:36.240 --> 0:17:39.879 in editing manufacturing because we are not mature enough yet. 0:17:40.200 --> 0:17:42.720 And I appreciate your pointing out that you are profitable 0:17:42.720 --> 0:17:44.959 and you're a leader in that space. Three D printing 0:17:44.960 --> 0:17:48.600 seems to be a pretty fragmented space right now. Give 0:17:48.680 --> 0:17:52.760 us a sense of who wants you combine with desktop, 0:17:52.800 --> 0:17:55.040 you'll be able to better compete with. Now, even beyond 0:17:55.160 --> 0:17:57.520 the three D printing ecosystem. 0:17:57.440 --> 0:18:01.040 We will be better equipped to comp with the entire 0:18:01.880 --> 0:18:05.920 you know, second tiered for fifth because we are number one, 0:18:06.600 --> 0:18:12.879 and the main reason is the broadest portfolio, unmixed material portfolio, 0:18:12.920 --> 0:18:16.080 material and software is key in our industry and those 0:18:16.320 --> 0:18:19.680 are also the one that generate the profit. So when 0:18:19.680 --> 0:18:23.920 we are coming to customers, we have two huge advantages. 0:18:24.160 --> 0:18:26.639 One is that we are selling in whatever it needs, 0:18:26.840 --> 0:18:29.040 not we have what we have because we are covering 0:18:29.080 --> 0:18:32.720 the whole technological space, so we are not selling what 0:18:32.760 --> 0:18:33.120 he needs. 0:18:33.400 --> 0:18:34.560 We sell what he needs. 0:18:34.720 --> 0:18:36.920 The second thing is that we have a full solution, 0:18:37.240 --> 0:18:40.400 including the material and the software, so the customer does. 0:18:40.240 --> 0:18:43.959 Not need to look outside our platforms. 0:18:44.359 --> 0:18:47.080 Another advantage you could have or you could tap into 0:18:47.520 --> 0:18:51.320 is the shareholders of desktop Desktop Metal went public in 0:18:51.359 --> 0:18:54.720 twenty twenty through respect and one of it's biggest shareholders 0:18:54.760 --> 0:18:57.600 is Alphabet with about a three percent stake in the company. 0:18:57.880 --> 0:19:01.040 Do you anticipate working more closely with Alphabet as a 0:19:01.080 --> 0:19:02.800 result of this transaction. 0:19:03.680 --> 0:19:08.040 No doubt that we can benefit and cooperate with the 0:19:08.160 --> 0:19:13.399 great shareholder base of desktop Metal. It's a group of 0:19:13.440 --> 0:19:17.480 people that believe in innovation. Desktop Metal is bringing the 0:19:17.520 --> 0:19:20.000 innovation to the table, but we are bringing the establishment, 0:19:20.040 --> 0:19:23.400 the go to market, the infrastructure to make this innovation 0:19:23.680 --> 0:19:27.320 a real product, the deliver values to the best mankey 0:19:27.400 --> 0:19:28.440 customers in the world. 0:19:29.400 --> 0:19:31.800 You say you look at them for help on innovation 0:19:31.880 --> 0:19:33.159 and bring in that innovative spirit. 0:19:33.240 --> 0:19:35.000 What specifically are we talking about. 0:19:34.800 --> 0:19:37.240 When you think about the alphabets of the world and 0:19:37.280 --> 0:19:39.520 how they can kind of lend some of that innovative 0:19:39.560 --> 0:19:40.440 spirit to you as well. 0:19:42.080 --> 0:19:44.320 The stop Meta located in Boston. 0:19:44.640 --> 0:19:51.240 They are highly linked to MIT and that tells the 0:19:51.359 --> 0:19:54.600 entire story. It's so hard to find talent in our 0:19:54.640 --> 0:19:59.840 industry and the ability to have great links in the academia, 0:20:00.280 --> 0:20:03.320 great shareholder that are interested. 0:20:03.359 --> 0:20:07.560 In breakthrough technologies. I think it's a great way to 0:20:07.680 --> 0:20:08.520 stick forward. 0:20:09.840 --> 0:20:13.520 Well, thanks for walking us through this acquisition today. Stratasi's CEO, 0:20:13.680 --> 0:20:18.520 yov Ziff, appreciate you joining us. More coming up, Microsoft 0:20:18.760 --> 0:20:21.640