WEBVTT - Retailers Manage Shrinkage Following Earnings 0:00:01.360 --> 0:00:05.680 This is Bloomberg Business Wait Inside from the reporters and 0:00:05.880 --> 0:00:09.479 editors who bring you America's most trusted business magazine, plus 0:00:09.520 --> 0:00:13.680 global business finance and tech news. The Bloomberg Business Week 0:00:13.720 --> 0:00:19.000 Podcast with Carol Messer and Tim Stenebeck from Bloomberg Radio. 0:00:20.440 --> 0:00:22.759 The retail sector, which continues to come out with earnings. 0:00:22.760 --> 0:00:25.799 Macy's lows and Dick's Sporting Goods all reporting shares of 0:00:25.880 --> 0:00:29.760 Macy's getting slammed. COMP sales beat, but a significant drop 0:00:29.760 --> 0:00:32.000 from a yoga shows that department store customers are pulling 0:00:32.000 --> 0:00:36.120 back on purchases. CEO of Macy's pointing to ongoing macroeconomic 0:00:36.280 --> 0:00:40.640 uncertainty and talking about promotions quote surgically implemented. 0:00:40.159 --> 0:00:41.199 Sons Lake Precision. 0:00:41.360 --> 0:00:44.559 This cannot be good to clear out seasonable seasonal items. 0:00:44.920 --> 0:00:48.440 Dix plummeting lows, though rallying after second quarter com sales 0:00:48.440 --> 0:00:50.879 and corely profit beat. Average annalistestaments a lot going on. 0:00:50.920 --> 0:00:52.839 Tim, Yeah, with us, we got a great group. Bloomberg 0:00:52.880 --> 0:00:55.680 Intelligence Senior retail analyst Mary Ross Gilbert joins us on 0:00:55.760 --> 0:00:59.360 zoom In La and Bloomberg News reporter Simon Foxman here 0:00:59.400 --> 0:01:02.880 in our Bloomberg Interactive Brokers Studio Simone. I want to 0:01:02.920 --> 0:01:06.119 start with Dix and talk a little bit about this 0:01:06.920 --> 0:01:10.160 issue that we heard from Target last week, not just 0:01:10.200 --> 0:01:14.160 about the consumer pulling back, but about shrinkage, the industry 0:01:14.240 --> 0:01:19.160 term that's used for theft, employees stealing or damaged goods. 0:01:19.240 --> 0:01:19.920 What's going on. 0:01:20.560 --> 0:01:25.080 I mean, it seems like a very large contributor to 0:01:25.200 --> 0:01:28.880 their earnings this quarter, and we had this with Target 0:01:29.000 --> 0:01:32.560 last quarter. Back in May. Target said it was cutting 0:01:32.560 --> 0:01:35.720 its overall estimate for profits by five hundred million dollars 0:01:35.760 --> 0:01:38.560 because of shrink and what Dix was saying here on 0:01:38.600 --> 0:01:40.800 the earnings call today was simply that they had not 0:01:41.040 --> 0:01:45.240 planned for this level of shrinkage. They normally get a 0:01:45.240 --> 0:01:48.640 bit more shrink and account for it around the back 0:01:48.680 --> 0:01:51.000 to school season, but this is more. They said, it's 0:01:51.040 --> 0:01:53.760 a really big problem and that they're doing everything they 0:01:53.800 --> 0:01:55.800 can to kind of combat it. But I think this 0:01:55.920 --> 0:01:58.800 echoes some of the other concerns that we've heard from retailers. 0:01:59.560 --> 0:02:01.760 I think one thing that maybe this is what we're 0:02:01.760 --> 0:02:04.560 seeing in some of the trading today. It was just 0:02:04.600 --> 0:02:06.960 such a large issue, and last time when we heard 0:02:07.000 --> 0:02:10.680 Target talk about the impact overall, it was just such 0:02:10.680 --> 0:02:13.320 a surprise to people. I think that it was way 0:02:13.560 --> 0:02:16.200 larger than considered, and maybe that's why we're looking at shears. 0:02:16.200 --> 0:02:18.160 Maybe they should put some security tags and things. 0:02:18.280 --> 0:02:21.120 No, but that's so that's actually a perfect segue for 0:02:21.200 --> 0:02:22.960 Mary Ross Gilbert. It's what I brought up on the 0:02:22.960 --> 0:02:25.560 simulcast a little earlier, Carol, And not to step on 0:02:25.600 --> 0:02:29.160 your feet, but I mean, the fact is is, if 0:02:29.160 --> 0:02:33.560 you make the changes within a store to prevent theft, 0:02:33.680 --> 0:02:36.240 there's a certain point where there creates so much friction 0:02:36.760 --> 0:02:39.320 between the consumer experience and consumer actually trying to buy 0:02:39.360 --> 0:02:41.760 something that it's not even worth going to the store anymore, 0:02:42.040 --> 0:02:45.040 like trying to get deodorant in shampoo and toothpaste from 0:02:45.080 --> 0:02:48.720 a CVS behind plastic. So Mary, weigh in on this. 0:02:49.000 --> 0:02:50.400 What do you think of this, Mary Ross Gilbert, with 0:02:50.440 --> 0:02:52.360 the idea that you know, I said, the big winner 0:02:52.400 --> 0:02:55.760 with shrinkage is is e commerce because there is so 0:02:55.840 --> 0:02:58.160 much friction now with actually going into a store. 0:02:59.280 --> 0:03:02.480 I would agree with you there, but on the digital side, 0:03:02.520 --> 0:03:06.320 Macy's was down, and actually Macy's called out shrink They 0:03:06.400 --> 0:03:09.760 just didn't call it shrink, they called it shortage. It 0:03:09.840 --> 0:03:12.520 kind of confused investors at first on the call, but 0:03:12.840 --> 0:03:15.440 they quickly caught on, Oh yeah, they're talking about theft, 0:03:15.480 --> 0:03:18.280 and that's exactly what it is. And look, we've been 0:03:18.320 --> 0:03:21.840 hearing about it in the news every week. We're hearing 0:03:22.040 --> 0:03:26.080 a group of grab and go theft going on, and 0:03:26.160 --> 0:03:30.079 it tends to be along the luxury line. So Bloomingdale's, 0:03:30.080 --> 0:03:33.320 in fact, are Bloomingdale's right next to our building here. 0:03:34.240 --> 0:03:37.840 The Gucci boutique there was robbed I think about three 0:03:37.880 --> 0:03:41.680 weeks ago, so there's definitely a lot of that activity 0:03:41.720 --> 0:03:45.840 going on, and Macy's called that out also on their call. 0:03:46.440 --> 0:03:52.040 It didn't affect their margins this quarter. They have sort 0:03:52.080 --> 0:03:56.839 of budgeted for the shrink issue, but it's definitely it's 0:03:56.840 --> 0:03:59.560 something that they guided to for their third quarter as 0:03:59.600 --> 0:04:01.960 one of the factors as well as you know, the 0:04:01.960 --> 0:04:04.560 weakness and the consumer and the fact that they saw 0:04:04.960 --> 0:04:09.920 higher debt expense and that's associated with higher delinquencies. They 0:04:09.920 --> 0:04:13.240 were planning for it, but it's it's much higher than 0:04:13.320 --> 0:04:14.480 they planned for. 0:04:14.640 --> 0:04:15.920 You know, it feels like we're all of a sudden 0:04:15.920 --> 0:04:17.680 talking about shrink ange a lot. But I went back 0:04:17.680 --> 0:04:19.400 and just kind of did a quick Google search, and 0:04:19.440 --> 0:04:22.320 back in twenty fifteen, Bloomberg did a whole big story 0:04:22.920 --> 0:04:27.760 about shrinkage at everything from Dollar General, AutoZone, Whole Foods, 0:04:27.839 --> 0:04:30.720 Bed Meth and beyond, and then you know Walmart. So 0:04:31.200 --> 0:04:33.120 it's been an issue that's out there. It sounds like 0:04:33.160 --> 0:04:33.880 you want to jump in. 0:04:34.080 --> 0:04:36.680 Yeah, it's hard to. I think one of the challenges 0:04:36.720 --> 0:04:40.000 we've had, and certainly the challenge the printing has had 0:04:40.040 --> 0:04:44.400 as well, is determining how large this impact actually is, 0:04:44.440 --> 0:04:47.320 because yes, people are blaming shrink for things, and certainly 0:04:47.360 --> 0:04:51.520 in California, the laws have changed that in a way 0:04:51.839 --> 0:04:55.279 where the law doesn't punish theft up to a certain level, 0:04:55.279 --> 0:04:59.200 and that seems to encourage some degree of shrink overall, 0:04:59.279 --> 0:05:01.720 theft overall, but no one can kind of tell. I 0:05:01.760 --> 0:05:05.400 mean one thing, you know, Timmy were talking about how 0:05:06.560 --> 0:05:09.760 creating this atmosphere where people are worried about safety in 0:05:09.920 --> 0:05:13.919 stores pushes people to online. It's interesting because at the 0:05:13.920 --> 0:05:18.719 same time we're seeing Macy's, we're seeing Dix really invest 0:05:18.760 --> 0:05:21.800 in trying to get people back into stores, whether it's 0:05:21.839 --> 0:05:25.040 with Dixon House of Sport or Macy's with its smaller, 0:05:25.440 --> 0:05:27.240 more boutique elements. 0:05:27.360 --> 0:05:29.280 We talk about that a little bit because Dix has 0:05:29.279 --> 0:05:31.719 actually just crushed it since the pandemic. I mean, the 0:05:31.720 --> 0:05:33.800 stock is up six hundred and fifty percent even with 0:05:33.839 --> 0:05:35.880 today's decline since March of twenty twenty, and a big 0:05:35.880 --> 0:05:37.920 part of that is because of the huge investments that 0:05:37.960 --> 0:05:40.800 the company has made in this experiential element. So what 0:05:40.839 --> 0:05:42.840 can people do in Dick's stores that you know they 0:05:42.880 --> 0:05:43.720 can't do online? 0:05:43.760 --> 0:05:46.840 I think they're like rock climbing walls. You get special 0:05:46.880 --> 0:05:52.120 customer service, you know, especially engaging with the customer in 0:05:52.160 --> 0:05:55.240 a way that is not possible online. Right, there's already 0:05:55.240 --> 0:05:58.039 an incentive to try and go to stores. If you 0:05:58.120 --> 0:06:00.480 need a specific size, you don't know what tui as 0:06:00.480 --> 0:06:03.800 you are, you really have to go to figure it out. Instead, 0:06:03.800 --> 0:06:05.440 you're going to order multiple shoes and then you got 0:06:05.720 --> 0:06:07.920 the pain of sending them back and stuff. It's trying 0:06:07.960 --> 0:06:09.960 to create an incentive for people to be in stores, 0:06:10.000 --> 0:06:12.520 and one of the things we've seen across retailers is 0:06:12.760 --> 0:06:17.640 this investment into these smaller scale stores as well to 0:06:17.680 --> 0:06:18.680 try and get people in. 0:06:18.920 --> 0:06:20.800 So I want to go back to those that reported. 0:06:20.839 --> 0:06:22.839 So let's go back to Macy's for a moment, Mary, 0:06:22.880 --> 0:06:26.520 because what I thought was interesting, is what the CEO said. 0:06:26.520 --> 0:06:27.080 And I know. 0:06:28.520 --> 0:06:31.839 Our team also talked with the CEO earlier on Bloomberg 0:06:31.880 --> 0:06:35.040 Television or at least for Bloomberg Television. But these surgical 0:06:35.839 --> 0:06:40.160 surgically implemented talking about promotions surgically implemented to clear out 0:06:40.200 --> 0:06:43.800 seasonal items. That says to me some like over inventory. 0:06:44.160 --> 0:06:46.440 So is that just bad purchasing and bad decisions? Like 0:06:46.480 --> 0:06:48.280 how is Macy's doing generally? 0:06:49.360 --> 0:06:52.120 Yeah, so I think just to clarify the point on surgical, 0:06:52.520 --> 0:06:56.000 that's actually a good thing. So what he was trying 0:06:56.040 --> 0:07:01.320 to say is because they have invested in data technology 0:07:01.360 --> 0:07:06.159 and analytics, they are able to target their promotions more pointedly, 0:07:06.560 --> 0:07:10.080 and as a result, they're able to move out merchandise 0:07:10.520 --> 0:07:13.200 more quickly and not take as much of a hit 0:07:13.280 --> 0:07:17.520 as they would normally have done without that capability. So, 0:07:17.600 --> 0:07:20.400 if anything, that's actually a good thing. And they were 0:07:20.440 --> 0:07:24.080 able to, you know, clear out that merchandise well in 0:07:24.120 --> 0:07:27.080 advance of you know, what they were planning to do, 0:07:27.520 --> 0:07:30.720 So that is the good news. Yeah, going into the 0:07:30.760 --> 0:07:33.920 first quarter, they were seeing strength. I think everyone was. 0:07:34.040 --> 0:07:36.200 We you know, we had a good January, and then 0:07:36.200 --> 0:07:38.960 all of a sudden, the world changed and we started 0:07:38.960 --> 0:07:42.440 to see the declines you know, since then, and they've continued, 0:07:42.440 --> 0:07:45.320 and I think, as Gannett pointed out, I mean the 0:07:45.360 --> 0:07:50.320 consumer is also spending on experiences and travel, and then 0:07:50.400 --> 0:07:53.680 with their fifty percent of their customers earning seventy five 0:07:53.720 --> 0:07:57.440 thousand in under, they're strapped when you think about living 0:07:57.480 --> 0:08:01.480 expenses being so high, and look golf prices picking up 0:08:01.520 --> 0:08:04.360 some share possibly as we've seen, you know, strength in 0:08:04.400 --> 0:08:05.080 their figures. 0:08:05.160 --> 0:08:08.000 I did think it was interesting that the MACCFO saying 0:08:08.000 --> 0:08:10.840 credit card delinquities accelerated in the second quarter, particularly in 0:08:10.880 --> 0:08:14.560 June and July, which negatively impacted results. We've just got 0:08:14.600 --> 0:08:16.640 about twenty five seconds left for Lows. What do we 0:08:16.680 --> 0:08:17.080 need to know? 0:08:18.280 --> 0:08:22.280 Housing a little bit stronger than everyone anticipated, and contractor 0:08:22.760 --> 0:08:24.760 division especially kind of strong. 0:08:25.000 --> 0:08:26.600 Is that because people don't want to move and they 0:08:26.600 --> 0:08:28.440 don't want to they want to spend. 0:08:28.040 --> 0:08:31.360 The question, right, It's a little unclear at this point. 0:08:31.400 --> 0:08:35.079 You know, contractor was stronger for home depot as well, 0:08:35.200 --> 0:08:35.640 which is. 0:08:35.600 --> 0:08:38.439 More important to the home depots business. Isn't exactly, Yeah. 0:08:38.440 --> 0:08:41.680 Home depot split is fifty five forty five, whereas Lows 0:08:41.720 --> 0:08:46.120 is seventy five. DIY to twenty five typically. But this 0:08:46.200 --> 0:08:49.560 is interesting, right, Maybe people are stuck, maybe they're spending more. 0:08:50.120 --> 0:08:52.000 It's hard to get a sense whether this is a 0:08:52.000 --> 0:08:55.320 long term trend yet because the dynamics are moving so quickly, 0:08:55.320 --> 0:08:57.120 but there is an under supply of homes. 0:08:57.160 --> 0:08:59.000 I will say Low's is up three point six percent, 0:08:59.080 --> 0:09:00.080 so definitely an app. 0:09:00.040 --> 0:09:01.040 For the one good one. 0:09:01.200 --> 0:09:04.720 Yeah, I know exactly. There's not a lot. Simon Foxman 0:09:04.760 --> 0:09:07.280 here in our interactive broker studio. Reporter at Bloomberg News, 0:09:07.280 --> 0:09:09.560 thank you, Thank you, Mary Ross Gilbert are thanks to 0:09:09.600 --> 0:09:12.520 you as well, Senior retail analyst at Bloomberg Intelligence. On 0:09:12.720 --> 0:09:16.520 zoom from Los Angeles, you're listening. 0:09:16.160 --> 0:09:19.800 To the Bloomberg Business Week podcast. Catch us live weekday 0:09:19.840 --> 0:09:23.680 afternoons from three to six Eastern Listen on Bloomberg dot com, 0:09:23.720 --> 0:09:27.120 the iHeartRadio app, and the Bloomberg Business app, or watch 0:09:27.200 --> 0:09:29.080 us live on YouTube. 0:09:29.760 --> 0:09:31.920 One of my favorite moments of our broadcast was Iri 0:09:32.080 --> 0:09:35.520 Jersey our interest rate strategies here at Bloomberg Intelligence talking 0:09:35.520 --> 0:09:38.000 about was it on the live blog right? And he, 0:09:38.160 --> 0:09:40.200 you know, I said, what's more important to you? You know, 0:09:40.280 --> 0:09:42.240 in video or Jackson Hall? And I'm assuming he's going 0:09:42.280 --> 0:09:44.320 to be like Oliver Jackson Hall and he talked about 0:09:44.720 --> 0:09:47.520 on the blog saying, how people though we're talking about 0:09:47.559 --> 0:09:49.319 the importance of Nvidia this week. 0:09:49.440 --> 0:09:50.240 Yeah, you know it's funny. 0:09:50.320 --> 0:09:53.200 Ben Emmons, Van Emmon's over at newl New Edge Wealth, 0:09:53.200 --> 0:09:55.560 who listens to us. He has, sends a newsletter, he 0:09:55.600 --> 0:09:58.040 watches us. He just sent me that story. How in 0:09:58.120 --> 0:10:01.400 vidious Jensen Wong maybe driving fed rate hike expectations. 0:10:01.559 --> 0:10:05.320 I just think it's interesting that you know that that 0:10:05.440 --> 0:10:07.280 focal point. So anyway, this is why we wanted to 0:10:07.280 --> 0:10:09.480 talk about it. We I don't always love to do previews, 0:10:09.520 --> 0:10:11.600 but I felt like this was really important, and especially 0:10:11.640 --> 0:10:14.720 when you've got somebody like our own Bloomberg News US 0:10:14.720 --> 0:10:18.480 Semiconductor networking reporter Ian King, who knows this space so well. 0:10:18.920 --> 0:10:21.200 And Ian is of course joining us on zoom from 0:10:21.240 --> 0:10:24.640 San Francisco. Ian, we did see Nvidia, which has been 0:10:24.760 --> 0:10:28.160 on a tear certainly this year. I just want to 0:10:28.160 --> 0:10:29.719 pull it up to see how it closed today. It 0:10:29.800 --> 0:10:31.400 was down about two point eight percent, but it did 0:10:31.440 --> 0:10:35.760 hit another intra day record today on expectations that things 0:10:35.800 --> 0:10:37.440 are going to be pretty good when it reports after 0:10:37.480 --> 0:10:40.839 the close tomorrow remind us why this is such an 0:10:40.840 --> 0:10:42.640 important focal point. 0:10:43.200 --> 0:10:46.800 Well, if you believe in AI, if you believe that 0:10:46.840 --> 0:10:49.040 this is the future of computing and that it's going 0:10:49.080 --> 0:10:53.160 to revolutionize so much of the economy, then obviously, well. 0:10:52.960 --> 0:10:54.800 Who's going to profit from that? First of all? 0:10:54.880 --> 0:10:57.960 And you know, the company arguably the only company that's 0:10:58.080 --> 0:11:02.080 really shown I've done instable impact from it already is 0:11:02.120 --> 0:11:05.120 in video because the chips that they provide are absolutely 0:11:05.160 --> 0:11:08.439 central to the training of all of that software that's 0:11:08.480 --> 0:11:10.520 going to do all of these magical things. 0:11:10.800 --> 0:11:13.040 So we're told, do you believe the hype. 0:11:14.000 --> 0:11:18.720 And I believe the numbers the company? The company this 0:11:18.840 --> 0:11:23.920 quarter is on course to report quarterly revenue that just 0:11:24.120 --> 0:11:29.079 twenty twenty was annual revenue, So clearly there's been a 0:11:29.240 --> 0:11:33.360 rapid acceleration there. It was a company that was a niche. 0:11:33.400 --> 0:11:38.440 Now this data center business is absolutely huge and the 0:11:38.640 --> 0:11:42.079 majority of its business, whether that's sustainable or not, we'll 0:11:42.120 --> 0:11:47.000 get a window into tomorrow obviously, but in terms of proving, hey, 0:11:47.040 --> 0:11:51.360 look here's some real numbers, we've done something. It's absolutely there. 0:11:52.360 --> 0:11:54.320 Ask me about AI in general, and I might have 0:11:54.360 --> 0:11:55.080 a different answer. 0:11:55.280 --> 0:11:58.640 Well, we may get there yet, later in the program, 0:11:58.960 --> 0:12:00.960 we did just show chart of in video stock up 0:12:01.000 --> 0:12:03.839 more than two hundred percent. So far, you're to dating 0:12:03.920 --> 0:12:06.920 in what is it that makes in video different? What's 0:12:07.000 --> 0:12:10.040 the company's moat and does it have any true competitors? 0:12:11.400 --> 0:12:15.240 They have competitors who are wildly chasing them to try 0:12:15.240 --> 0:12:18.400 and catch up. The company's moat is that they saw 0:12:18.440 --> 0:12:21.080 this coming. I mean, a few years ago, a company 0:12:21.120 --> 0:12:25.840 that was making gaming chips started talking about accelerated computing, 0:12:25.920 --> 0:12:29.319 started talking about this being a thing, and everybody was like, really, 0:12:29.640 --> 0:12:33.880 are you sure. The CEO was talking about how many 0:12:33.960 --> 0:12:37.360 people were at universities were training on his software every 0:12:37.360 --> 0:12:40.520 eing quarter. We're like, yeah, we've got this many universities 0:12:40.600 --> 0:12:42.440 now teaching people this Kuda program. 0:12:42.440 --> 0:12:45.200 And again, well she was like, what's going on here? 0:12:45.240 --> 0:12:48.080 Why do we care? Now? Fast forward to where we are. 0:12:48.160 --> 0:12:52.280 Right now, everybody's using their chips, everybody's using their software 0:12:52.320 --> 0:12:56.120 because that software allows a form of computing to happen 0:12:56.160 --> 0:12:59.120 that was previously very very difficult, very time consuming, and 0:12:59.200 --> 0:13:02.400 very expensive. Still expensive, but now it's possible. 0:13:02.720 --> 0:13:05.000 I mean, at this point, considering all the conversations and 0:13:05.040 --> 0:13:07.920 all the reporting that you know, you and just kind 0:13:07.960 --> 0:13:10.840 of our overall team have done about the excitement of 0:13:12.720 --> 0:13:17.000 AI in general, one would assume that their numbers have 0:13:17.080 --> 0:13:21.040 to be blockbuster, right, or is there something in the 0:13:21.080 --> 0:13:24.160 cycle that companies will buy some chips and then they'll 0:13:24.200 --> 0:13:25.320 be a little bit of a lag and then they'll 0:13:25.320 --> 0:13:27.520 buy some more. Help me out and help me understand 0:13:27.559 --> 0:13:31.200 so that I'm hopefully somewhat smart when they report tomorrow. 0:13:31.800 --> 0:13:33.160 No, you've You've nailed it. 0:13:33.200 --> 0:13:35.960 That's the perfect question to be asking ahead of tomorrow, 0:13:36.000 --> 0:13:37.840 because then if you read the analyst reports, they're all 0:13:37.880 --> 0:13:38.400 over the place. 0:13:38.440 --> 0:13:39.559 Why are they all over the place? 0:13:40.160 --> 0:13:43.880 Well, three months ago Wall Street got embarrassed, right, fifty 0:13:43.920 --> 0:13:47.719 two percent ahead of what the consensus number was, Right, 0:13:47.840 --> 0:13:50.679 was the projection that in Video gave wow? 0:13:50.840 --> 0:13:51.080 Right? 0:13:51.160 --> 0:13:53.319 So what's happening this quarter is all of the analysts 0:13:53.320 --> 0:13:55.560 that are struggling, well, is it going to be that strong? 0:13:55.600 --> 0:13:58.680 Is it going to be stronger? Is the is the 0:13:58.679 --> 0:14:01.040 projected range going to be even stronger than that? And 0:14:01.920 --> 0:14:04.520 the answer is they don't really know, because you could 0:14:04.559 --> 0:14:07.119 actually explain how strong. 0:14:06.880 --> 0:14:07.840 In Video's numbers are. 0:14:07.880 --> 0:14:10.120 And this is, according to Bittenstein, by just looking at 0:14:10.120 --> 0:14:12.840 the spending of just four of these big hyperscalers of 0:14:12.880 --> 0:14:15.480 the Microsoft's, of the Google's you factor in all of 0:14:15.520 --> 0:14:18.680 the others, it could be even bigger. The gating factor 0:14:19.120 --> 0:14:22.560 on the flip side is back to supply did in 0:14:22.680 --> 0:14:26.320 video order enough chips did in video were in video 0:14:26.480 --> 0:14:29.120 as ambitious as they could have been to capture this 0:14:29.120 --> 0:14:33.360 because you remember, you get chips about four months after 0:14:33.400 --> 0:14:36.760 you order them, and they outsourced production, so their estimates 0:14:36.760 --> 0:14:39.600 of what they could do are going to be the 0:14:39.640 --> 0:14:40.640 gating factor here. 0:14:40.720 --> 0:14:42.480 So when I think about like, I love our supply 0:14:42.640 --> 0:14:45.680 chain function or supply like right, who's who are the customers? 0:14:45.720 --> 0:14:47.640 Who are the Bloomberg? 0:14:48.600 --> 0:14:52.200 I love it? I love it, But the supply chain management, 0:14:52.480 --> 0:14:54.360 I mean, and video's got to be on top of it, 0:14:54.440 --> 0:14:57.120 right to make sure that they can actually meet all 0:14:57.120 --> 0:14:58.120 the demand that's out there. 0:14:58.680 --> 0:15:00.680 Yeah, I mean that The good news on that on 0:15:00.720 --> 0:15:04.600 that end is that the PC market still isn't great 0:15:04.800 --> 0:15:10.200 and the smartphone market still sucks, so TSMC isn't devoting 0:15:10.200 --> 0:15:13.240 as much silicon to those customers, so that in theory 0:15:13.600 --> 0:15:18.240 frees up this extra capacity for in videos what it 0:15:18.320 --> 0:15:22.720 calls accelerators, which everybody's buying right now. As I said, 0:15:22.760 --> 0:15:26.480 the gating factor is how well did in Video see 0:15:26.520 --> 0:15:28.680 this coming the orders that they put in three months 0:15:28.720 --> 0:15:31.360 ago that they're going to get chips for now, you know, 0:15:31.440 --> 0:15:33.240 just how much of the order is in enough? 0:15:33.520 --> 0:15:37.240 So what can Invidia tell us? What can company executives 0:15:37.280 --> 0:15:38.840 on the call tell us about demand? 0:15:40.160 --> 0:15:42.360 Yeah, I mean, you know, there's a lot of mixed 0:15:42.400 --> 0:15:44.840 signals right now, general data center demand. It's not great 0:15:44.840 --> 0:15:49.160 because everybody's spending on AI PC demand, which is another 0:15:49.240 --> 0:15:50.040 huge market for them. 0:15:50.160 --> 0:15:50.800 That's not great. 0:15:50.840 --> 0:15:53.880 We don't have that many strong expectations for that part 0:15:53.920 --> 0:15:57.040 of their business. What will be interesting, I think, and 0:15:57.160 --> 0:15:59.080 this is what in Video has been very careful and 0:15:59.120 --> 0:16:01.440 I think very sort of perceptive in what they've done, 0:16:01.560 --> 0:16:04.480 is to try to spread the use of AI beyond 0:16:04.640 --> 0:16:08.120 these so called hyperscalers, beyond the Microsoft, beyond the Googles, 0:16:08.120 --> 0:16:11.560 beyond the facebooks, and they're trying to basically embed the 0:16:11.720 --> 0:16:13.360 use of this technology into the. 0:16:13.360 --> 0:16:14.440 Economy at large. 0:16:14.640 --> 0:16:17.880 Still early days there, people will be looking for signs 0:16:17.920 --> 0:16:20.120 of that kind of spread, of this becoming a more 0:16:20.200 --> 0:16:23.640 sort of baked in part of the economy. And that's 0:16:23.680 --> 0:16:25.840 back to your earlier comments. I think if they can 0:16:25.840 --> 0:16:28.640 show progress there, then the excitement can continue and it 0:16:28.680 --> 0:16:31.720 won't just be a factor of what Google is spending 0:16:31.760 --> 0:16:32.320 every quarter. 0:16:32.560 --> 0:16:34.800 So what does that look like when we actually see 0:16:34.920 --> 0:16:38.440 AI spread throughout the economy beyond these hyperscalers. 0:16:39.120 --> 0:16:43.880 I mean, initially for in video, it looks like companies 0:16:44.520 --> 0:16:47.840 that you wouldn't expect to be direct users of invidious 0:16:47.880 --> 0:16:53.560 technology becoming exactly that. So you have maybe pharmaceutical companies 0:16:53.680 --> 0:16:57.600 using accelerated computing for drug discovery instead of using the 0:16:57.640 --> 0:17:01.760 traditional methods to get the approval that they would go 0:17:01.800 --> 0:17:04.280 through the experimentation progress, Maybe we do it all on 0:17:04.320 --> 0:17:06.600 a computer. If they start ordering in a big way, 0:17:07.160 --> 0:17:10.080 it's spread into that side. This is an affirmation of 0:17:10.119 --> 0:17:12.160 in video, this isn't just a one hit wonder. This, 0:17:12.160 --> 0:17:15.320 this isn't a one use thing. So we need that 0:17:15.400 --> 0:17:18.520 kind of use a case to emerge and to become 0:17:18.520 --> 0:17:21.240 embedded and for that to become a significant part of 0:17:21.280 --> 0:17:21.800 the spending. 0:17:22.040 --> 0:17:24.360 I mean that goes into the euphoria side of it, right, 0:17:24.400 --> 0:17:26.840 Like if this just premeates in terms of the AI, 0:17:27.000 --> 0:17:30.600 the generative AI impacting everything that we do, I mean, 0:17:30.720 --> 0:17:33.520 man often running right, I. 0:17:33.520 --> 0:17:36.960 Mean it's it's you've seen the stories we've written them ourselves, 0:17:37.119 --> 0:17:40.840 and you've had these conversations. Are we at the beginnings 0:17:40.880 --> 0:17:43.640 of the internet here where pets dot com and everybody 0:17:43.680 --> 0:17:46.959 else got a wild voluation that was based upon nothing, 0:17:47.440 --> 0:17:49.960 or are we at the beginning of something which is 0:17:50.040 --> 0:17:55.280 more profound and more going to be much deeper embedded 0:17:55.280 --> 0:17:59.480 in economic activity. Obviously in Video is arguing that that's 0:17:59.520 --> 0:18:02.600 the case. Some people who are concerned that the valuations 0:18:02.600 --> 0:18:03.960 are saying, maybe this is a fad. 0:18:04.359 --> 0:18:06.440 You and I asked you earlier about you know, who 0:18:06.560 --> 0:18:09.480 competes with in video? You said, competitors are chasing them 0:18:09.480 --> 0:18:12.119 and the difference within videos that in video start coming. 0:18:12.640 --> 0:18:14.560 But who are as close as competitors right now? 0:18:14.560 --> 0:18:15.720 I mean, is there anyone? 0:18:17.320 --> 0:18:21.280 Two companies AMD obviously another graphics maker. They have a 0:18:21.400 --> 0:18:25.760 directly comparable product to in video that's coming in the 0:18:25.800 --> 0:18:29.120 fourth quarter of this year. We'll see just how quick 0:18:29.160 --> 0:18:31.679 the uptake is on that. They've given strong projection, so 0:18:32.200 --> 0:18:35.120 we'll see. And the other one is obviously Intel. They 0:18:35.200 --> 0:18:39.200 already are in this market. But again software how easy 0:18:39.280 --> 0:18:42.480 it is to use what they're going to provide, because 0:18:42.480 --> 0:18:46.480 in Video has made what they provide very easy to use, 0:18:46.720 --> 0:18:48.119 very just plug and play. 0:18:48.440 --> 0:18:50.400 As far as the industry is concerned. 0:18:50.040 --> 0:18:54.000 You're incredible as always. Ian King, Bloomberg News US semiconductor 0:18:54.000 --> 0:18:55.760 and networking reporter, just knows everything. 0:18:55.840 --> 0:18:57.000 YEA, what are you doing tomorrow? 0:18:58.680 --> 0:19:00.520 Get some sleep, buddy. 0:19:00.760 --> 0:19:04.320 You're listening to the Bloomberg Business Week podcast. Catch us 0:19:04.359 --> 0:19:08.359 live weekday afternoons from three to six Eastern on Bloomberg Radio, 0:19:08.560 --> 0:19:11.840 the Bloomberg Business App, and YouTube. You can also listen 0:19:11.960 --> 0:19:15.040 live on Amazon Alexa from our flagship New York station, 0:19:15.480 --> 0:19:18.280 Just say Alexa Play Bloomberg eleven thirty. 0:19:20.440 --> 0:19:23.280 Perhaps you're like me and in your wallet you've got 0:19:23.280 --> 0:19:25.280 a couple of different health insurance cards. One is for 0:19:25.320 --> 0:19:27.320 your medical insurance. It's the one you give to your 0:19:27.320 --> 0:19:29.920 doctor's office. The other one is for your prescriptions, which 0:19:29.960 --> 0:19:32.040 you present to the pharmacy when you pick up a medication. 0:19:32.520 --> 0:19:33.120 That prescription. 0:19:33.160 --> 0:19:35.560 One could be for a pharmacy benefit manager, also known 0:19:35.960 --> 0:19:37.040 as a PBM. 0:19:37.280 --> 0:19:39.359 Yeah, PBMs, Come on, you know what they are? 0:19:39.359 --> 0:19:40.639 They do you? Well? 0:19:40.720 --> 0:19:43.440 This is why you and do you know what they are? 0:19:43.480 --> 0:19:45.760 We haven't talked about this so much off air. They 0:19:45.800 --> 0:19:49.159 negotiate cheaper prices for employers in health plans. They also 0:19:49.280 --> 0:19:52.600 pocket drug makers cash, which you maybe didn't know about. 0:19:52.800 --> 0:19:55.000 They're under fire from all directions right now. Blue Shield 0:19:55.040 --> 0:19:58.560 of California last week say replaced some drug procurement services 0:19:58.560 --> 0:20:03.320 from CBS Health's Care PBM with an amalgam of rival offerings. 0:20:03.359 --> 0:20:05.400 In that sent shares of CBS sliding. We all kind 0:20:05.400 --> 0:20:07.919 of like stood up a little straighter when that headline crossed. 0:20:07.960 --> 0:20:08.679 Yeah, that was a big one. 0:20:08.680 --> 0:20:11.720 And then officials is divers as FTC Commission Chair Lina 0:20:11.800 --> 0:20:14.040