Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
Speaker 2: From the Heart where Innovation, money and power. Collie in
Speaker 2: Silicon Valley NBN. This is Bloomberg Technology with Caroline Hyde
Speaker 2: and Ed Ludlow.
Speaker 3: I met Ludlow in San Francisco. Caroline hides on assignment.
Speaker 3: This is Bloomberg Technology coming up. Meta says it will
Speaker 3: be the world's leading AI company, But investors don't like
Speaker 3: the roadmap to get their team coverage of a massive
Speaker 3: drop in Zuckerberg's stock and from earnings to IPOs.
Speaker 4: We speak to the.
Speaker 3: CEO of Service Now on their quarterly numbers, and Rubric's
Speaker 3: chief on listing day, and fourteen billion dollars goes to
Speaker 3: Micron from the Chips Act to boost America's.
Speaker 4: Memory chip prowess.
Speaker 3: But first, there is only one story that matters right now,
Speaker 3: and it is Meta. You see the share reaction. Zuckerberg
Speaker 3: outlining billions and billions of dollars are going to go
Speaker 3: into building out AI infrastructure. They're in investment mode, expenses
Speaker 3: range raised, capex raised. But the focus of the calls
Speaker 3: on the product cycle. How many years is it going
Speaker 3: to take for this investment in AI at Meta to materialize?
Speaker 4: In sales growth, that's the question.
Speaker 3: The stock on track for its biggest drop since October
Speaker 3: twenty twenty two. And given Meta's scale, remember how well
Speaker 3: it's performed year to date. It was up more than
Speaker 3: forty percent pre earnings. Look at the market cap. Look
Speaker 3: at the scale of this company, but also the market
Speaker 3: cap lost in this morning session alone. Let's get team coverage,
Speaker 3: the reporting from Bloomberg's Kirk Wagner and the analysis from
Speaker 3: Bloomberg Intelligence analysts man Deep sink kerk.
Speaker 4: I'm going to start with you.
Speaker 3: Mark Zuckerberg was on this call, but what he tried
Speaker 3: to do was say, trust me and bear with me.
Speaker 3: I've got a plan for AI to have an impact
Speaker 3: on the existing business.
Speaker 4: Explain what we learned. Yeah, that's exactly right.
Speaker 5: He was basically saying, Look, this is going to be
Speaker 5: a multi year investment. This is not the kind of
Speaker 5: thing that's going to return, you know, to shareholders very quickly.
Speaker 5: But be patient, right, he said, smart investors will see
Speaker 5: the benefits of this long term plan, right, sort of
Speaker 5: suggesting that hey, you know, anyone who's savvy, anyone who
Speaker 5: that sees the future like I do, they're going to
Speaker 5: be in this stock. Even though it's taken a little
Speaker 5: bit of a short term hit, and so you know,
Speaker 5: it was a little bit, as you say, combative. It
Speaker 5: was one of those things that we don't necessarily always
Speaker 5: hear from him, which is sort of you know, pleading investors, Hey,
Speaker 5: be patient, hang tight, We're gonna get there eventually. But
Speaker 5: you got to weather a little bit of a turbulence
Speaker 5: in the meantime.
Speaker 3: Mandy, when you look at the fundamentals of this company,
Speaker 3: you and I were discussing before the earnings print, where
Speaker 3: do we look to see if there is already avidence
Speaker 3: the AI is impacting the top or bottom line. I
Speaker 3: looked at the impressions growth. I looked at the pricing
Speaker 3: growth of ads, because this is an advertising based business.
Speaker 4: What did you see in those numbers?
Speaker 6: Yeah, I mean the impressions growth continues to be very impressive,
Speaker 6: you know, twenty percent, and that's driven by better feed recommendations.
Speaker 6: At targeting is better and at pricing. It was much
Speaker 6: better in the Europe region. If you part through the numbers,
Speaker 6: North America was lighter. Part of that could be explained
Speaker 6: from the pullback. You know that everyone is expecting from
Speaker 6: Chinese advertisers like Timu and Shane, but they didn't call
Speaker 6: that out. So clearly that's a risk, and that's why
Speaker 6: that guidance that top line guide was wide when you
Speaker 6: look for two Q but look at the end of
Speaker 6: the day, when you look at the cost growth, the
Speaker 6: cost of revenue growth, that will be in double digits.
Speaker 6: So if that mid to high teens revenue doesn't pan
Speaker 6: out for some reason, and look, advertising is cyclic, that's
Speaker 6: when you will see margin compression. I mean, so for
Speaker 6: the story has been cost control and revenue grold. They're accelerating.
Speaker 6: Now that story could change because the cost will grow
Speaker 6: double DIY did and if the revenue world doesn't match,
Speaker 6: that's when there is a risk.
Speaker 3: We're showing you the markets right now. Meta is down
Speaker 3: twelve percent, but on a points basis, clearly it's dragging
Speaker 3: down the NAS that one hundred s and P five hundred,
Speaker 3: the Philadelphia Semiconductor Index or socks. I put that on
Speaker 3: there because there was knee jerk reaction in particular in
Speaker 3: video last night that fell.
Speaker 4: It is now up three.
Speaker 3: Percent, and I think the logic is Zuckerberg said three
Speaker 3: hundred and fifty thousand, h one hundred GPUs will come
Speaker 3: online this year as Meta trains its AI model and Kurt.
Speaker 4: The other area of interest.
Speaker 3: Is Zuckerberg's kind of fired up about things that surprised me.
Speaker 4: Glasses.
Speaker 3: He spent a lot of time talking about glasses. But
Speaker 3: there are still lots of confusion. Well, okay, wait, is
Speaker 3: the metaverse still a strategy?
Speaker 4: Also? The Year of Efficiency? Is that still a thing?
Speaker 3: Just try and clear up the muddy waters for us
Speaker 3: on what Zuckerberg's trying to do.
Speaker 5: Yeah, I mean, there's so many things that they're working
Speaker 5: on at one time, it's understandable that someone might be
Speaker 5: a little bit confused. But he did bring up the
Speaker 5: glasses a lot, and what he basically said was these
Speaker 5: are progressing much faster than I anticipated. Right, So the glasses,
Speaker 5: for those who aren't familiar, this is the idea of
Speaker 5: wearing a pair of specs that look like maybe reading
Speaker 5: glasses or sunglasses, but that have all kinds of AI
Speaker 5: or AR features packed into them. They're working with ray
Speaker 5: Band to produce these right now. And I think what
Speaker 5: Mark Zuckerberg was saying was that these have gotten so
Speaker 5: good so fast that it's encouraged me to continue to
Speaker 5: invest in AI, to continue to put money into Reality Labs,
Speaker 5: the group that's building this, and so you know, I
Speaker 5: think this has always been his long term vision. He
Speaker 5: thought that the glasses would sort of be the next
Speaker 5: iteration of a phone, you would wear it on your face.
Speaker 5: But now he's saying he thinks they're getting their faster
Speaker 5: than he anticipated, which is why we're seeing this increase in.
Speaker 4: Spand Okay, gentlemen, bear with me.
Speaker 3: We've actually had a sort of breaking news headline since
Speaker 3: we've come on the air, and it relates to TikTok.
Speaker 3: Byte Dance has published on its Chinese website a statement
Speaker 3: basically saying it has no plan to sell TikTok. BikeE
Speaker 3: Dance has no plan to sell TikTok. I think we
Speaker 3: need to dig a bit deeper in the coming days
Speaker 3: to understand what they specifically.
Speaker 4: Mean by that. Mandeep.
Speaker 3: You've also published research your latest thinking on TikTok just
Speaker 3: this morning on the Bloomberg terminal.
Speaker 4: Just explain the basics of it to us, please, Yeah.
Speaker 6: I mean, look at TikTok has a lot of original
Speaker 6: content that goes to you know, snap, that goes through Instagram, YouTube,
Speaker 6: and so if TikTok has been a lot of those
Speaker 6: creators have to go to some other platform. Now, whether
Speaker 6: it's going to be YouTube shorts or Instagram reels, we
Speaker 6: don't know, but you can see that a lot of
Speaker 6: the original content creation happens on TikTok, and that's where
Speaker 6: I think you will see Meta being a beneficiary. But
Speaker 6: I'm excited to look at, you know, the YouTube numbers
Speaker 6: tonight because to me, YouTube should be the fifteen percent
Speaker 6: consensus numbers handedly given the kind of you know, viewership
Speaker 6: gains that you have already seen, you know, with YouTube,
Speaker 6: and so I think that's the one aspect that people
Speaker 6: need to think about is the creators aren't going to
Speaker 6: wait for nine months to move. They're already gonna start
Speaker 6: thinking about what's the alternative platform where they can move
Speaker 6: their followers. And I think that's going to determine gains
Speaker 6: for snap, YouTube and Meta in the coming months.
Speaker 3: I think it's important we note that on the Earning
Speaker 3: School for Meta and analyst asked Mark Zuckerberg for reaction
Speaker 3: to TikTok. Susan Lee, the CFO, jumped in and said
Speaker 3: that they're monitoring that situation closely, but it was too
Speaker 3: early to tell the impact of a TikTok dive or
Speaker 3: ban on Meta's business. We're going to dig much deeper
Speaker 3: into Meta throughout the hour, but big thanks to the
Speaker 3: Bloomberg Kirk Wagner of Bloomberg News and man Deep Singh
Speaker 3: of Bloomberg Intelligence coming up on the program.
Speaker 4: Service now is.
Speaker 3: Sales forecast full short of all street expectations, but there
Speaker 3: is some positive outlook.
Speaker 4: It's AI related.
Speaker 3: We're going to speak to the CEO, Bill McDermott. There
Speaker 3: is a lot happening at once in the markets as well.
Speaker 3: Microsoft and Google our alphabet the parent at Google report
Speaker 3: after the bell. Those are pretty significant declines and the
Speaker 3: idea here is that we're worried on the back of
Speaker 3: Meta's earnings. We're worried that all of this spend on
Speaker 3: AI infrastructure is not bringing some big boom in generative
Speaker 3: AI driven sales growth, actual software products that people use
Speaker 3: and those companies make money from. It's going to be
Speaker 3: such an interesting afternoon. This is Bloomberg Technology Service now
Speaker 3: out with first quarter results, but it's the outlook where
Speaker 3: the focus is projecting subscription sales will increase about twenty
Speaker 3: two two and a half billion dollars in the current
Speaker 3: period that was a little bit below what the street
Speaker 3: was expecting. But those are street expectations. What about the
Speaker 3: big expectations of the company's CEO. Bill McDermott, CEO of
Speaker 3: Service Now, joins us. Now a Bill, good morning to you.
Speaker 3: Let's cover off the classic earning stuff. You have a
Speaker 3: strong quarter and then you give an outlook which, relative
Speaker 3: to consensus estimates, was a bit disappointing. What would your
Speaker 3: pushback to that market reaction be.
Speaker 7: Well, first, I think you have to look at the
Speaker 7: triple play that we just pulled off ed. We had
Speaker 7: a beat on the top line, a beat on the
Speaker 7: bottom line, and we raised the full year guidance. So
Speaker 7: if the high class problem was solving for is we
Speaker 7: didn't raise the guidance enough. Everyone can really relax because
Speaker 7: over the last five years that I've been here, we
Speaker 7: always beat and we have every expectation of doing so again.
Speaker 3: Bill, I actually want to invite you to give the
Speaker 3: basics of what Service Now does. I think a big
Speaker 3: portion of the audience know the name, they might appreciate,
Speaker 3: just an explanation of what it is you're out there
Speaker 3: in the world doing. And my summary basically is you're
Speaker 3: trying to capture it spend, you know, the budget for
Speaker 3: it spend from all kinds of companies.
Speaker 1: Yeah.
Speaker 7: I think the best way to sum it up is
Speaker 7: think of Service now as the AI platform for business transformation.
Speaker 7: If you look at companies today, they need a platform
Speaker 7: on an end to end basis, from it to the
Speaker 7: employee experience, the way they run their customer relationships, and
Speaker 7: the way they build new products. They need one place
Speaker 7: that can do all of that. And what's unique about
Speaker 7: ours We built it organically. There's no tech dead in it,
Speaker 7: and it's pristine. It's a sheet of glass that lies
Speaker 7: above the mess that's been created for the last half century.
Speaker 7: And the big movement today is now, what is the
Speaker 7: new frontier. The new frontier is Jeni And people say, Jeni,
Speaker 7: what does that mean. It means the companies and the
Speaker 7: CEOs that are watching this program need to optimize their processes.
Speaker 7: Every business workflow in every enterprise will be engineered with Jeni.
Speaker 7: We are the first mover and the market leader in
Speaker 7: that category in the enterprise. So the future glide path
Speaker 7: could not be brighter.
Speaker 3: Build The stock is down almost six percent. I note
Speaker 3: that there is some pressure in the market this morning.
Speaker 3: Because of metas earned and we'll get to that in
Speaker 3: a bit, but let's talk about RPO because I think
Speaker 3: that gives some evidence of the backlog. RPO meaning remaining
Speaker 3: performance obligations. That's basically SAS speak for backlog. You've got
Speaker 3: a backlog. Why should the investor base be more positive
Speaker 3: about that backlog?
Speaker 7: Well, they should feel really good that we have nearly
Speaker 7: eighteen billion dollars and remaining performance obligations. So that is
Speaker 7: business we have in the backlog that has yet to
Speaker 7: be fully recognized. So the backlog is there. We're beating
Speaker 7: on the revenue. Just think about this. We beat on
Speaker 7: the revenue by one hundred basis points, we beat on
Speaker 7: the margin by one hundred and fifty basis points. Our
Speaker 7: free cash flow is up forty seven percent, and our
Speaker 7: gross profit was up eighty three percent. And we're talking
Speaker 7: about was the increase in the guide enough and you
Speaker 7: just mentioned it ed perfectly. There's eighteen billion in backlog.
Speaker 7: So the company is really on a tear. And one
Speaker 7: of the reasons it's on a taar is you have
Speaker 7: great companies like Microsoft and IBM as an example, that
Speaker 7: are transforming their employee experience with a digital first support model,
Speaker 7: freeing up all kinds of resources and fueling innovations on
Speaker 7: Service now is Genai. Novartis is delivering new drugs and
Speaker 7: increasing operational efficiency by streamlining clinical trials, research and financial
Speaker 7: management with our Genai and countless other examples. So Jenai
Speaker 7: right now is a.
Speaker 4: Small part of the overall total.
Speaker 7: You know, we're a ten billion run recloud company. But
Speaker 7: the uptick in future sales and generative AI when companies
Speaker 7: re engineer the way they run on our platform, is
Speaker 7: that believable because there'll be half a trillion spent on
Speaker 7: it in twenty twenty seven alone. So this is a
Speaker 7: really big market. We're the leader, and we're teaming up
Speaker 7: with the best in the business like in Nvidio, Microsoft,
Speaker 7: IBM and others to create a bright future.
Speaker 3: No that again, build The stock is down six percent,
Speaker 3: and there are reasons why for that in the short term.
Speaker 3: One of them is probably Meta. I know that you're
Speaker 3: the CEO of Service Now, but to extrapolate from Meta,
Speaker 3: part of the concern last night was all this investment
Speaker 3: is going into the underlying infrastructure that supports generative AI.
Speaker 4: But Meta is a case study.
Speaker 3: They're not yet seeing that investment in the infrastructure translate
Speaker 3: to top line growth in the form of software. Right,
Speaker 3: tangible evidence that they're selling AI as a product as
Speaker 3: a platform. In your case, you are only selling it
Speaker 3: as a software layer.
Speaker 4: Just just explain that thesis.
Speaker 3: Should we be as concerned that Corporate America has not
Speaker 3: yet worked out how to sell ai?
Speaker 7: Absolutely, So let's differentiate. First of all, metas great company.
Speaker 7: They had very good results and their guide might have
Speaker 7: been a little muted in terms of the return on Genai.
Speaker 7: They're running large language models and that's very important for
Speaker 7: the future of the world, and they're doing a great job.
Speaker 7: We're running small language models, which basically means we run
Speaker 7: our platform with the customer's data in mind. So it's
Speaker 7: rocket fast, zero latency because we're using the customer's own data.
Speaker 7: There is total accuracy and it is very inexpensive, and
Speaker 7: that's why customers are buying our Genai now because it's secure,
Speaker 7: it's inexpensive to run, and it's one hundred percent accurate
Speaker 7: based on the customer's data. So that is what they're
Speaker 7: buying right now. We also have an open platform where
Speaker 7: we integrate with Meta and we integrate with Google and
Speaker 7: Microsoft and all the other market leading companies out there,
Speaker 7: should the customer want to reach into large language models,
Speaker 7: and we've teamed up with Nvidia where Nvidia probably our
Speaker 7: greatest partner in this category is running small language models
Speaker 7: for US and large language models with their compute power.
Speaker 7: Let me give you an example of it. Let's think
Speaker 7: about employees and customers. Think about GENAI deflecting all the
Speaker 7: soul crushing work that people don't want to do anymore.
Speaker 7: So think of employee and customer deflection where virtual agents
Speaker 7: can actually do the work that people used to have
Speaker 7: to do. Think about software engineers increasing their productivity or
Speaker 7: their speed of innovation by nearly fifty percent by texting
Speaker 7: something in natural language and turning that into software codes.
Speaker 7: And there's several other examples. But the point is small
Speaker 7: language models are selling today when a lot of money
Speaker 7: at it, and large language models are also available on
Speaker 7: our platform. But our customers are really teaming up with
Speaker 7: Microsoft for example on Copilot and service now on our
Speaker 7: virtual assist AI platform, and we got it together. Is
Speaker 7: better solution for the marketplace, and that's what's selling today.
Speaker 4: Bill, I appreciate the debt for the answer. Bill McDermott,
Speaker 4: CEO of Service.
Speaker 3: Now, thank you so much coming out Microsoft back, Rubik
Speaker 3: goes public mid arizing demand for data security. We do
Speaker 3: speak to the CEO people sing you next. This is
Speaker 3: Bloomberg Technology. Rubric, which focuses on data management, recovery from
Speaker 3: ransomware attacks, and accelerates cloud mobility, is officially going public.
Speaker 4: And joining us.
Speaker 3: Now is Rubrics CEO people Senior. The shares are indicated
Speaker 3: to open at thirty eight dollars a share. You price
Speaker 3: this IPO at thirty two. Just tell me what that
Speaker 3: means to you today.
Speaker 8: Thank you Ed for this opportunity to speak with you.
Speaker 8: It's a very exciting day for Rubric employees, our customers,
Speaker 8: our partners, and everybody in our ecosystem around the world. Look,
Speaker 8: I will leave this stock price to the experts and
Speaker 8: the traders. Ultimately, we are a different kind of cybersecurity company,
Speaker 8: and we are helping our customers continue to run their
Speaker 8: business even in presence of cyber attacks and breaches, so
Speaker 8: that hospitals are open, kids are going to school. When
Speaker 8: people swipe credit card, they get money out, irrespective of
Speaker 8: whether there's a successful cyber attack or not.
Speaker 3: People, did you really need to go public for the visibility.
Speaker 3: Like your business seems to be doing quite well. Do
Speaker 3: you think this actually tangibly improves your sales?
Speaker 8: Look, we are working with a number of customers around
Speaker 8: the world, having more visibility, having more brand name recognition,
Speaker 8: and more importantly, when you are as a public company,
Speaker 8: everybody can see your numbers and they understand the resilience
Speaker 8: of the business. That's actually good for our customers, that's
Speaker 8: actually good for our ecosystem, and it also helps us
Speaker 8: be in front of more innovative companies, talk to them
Speaker 8: about our story and essentially help them against the ransomware
Speaker 8: attack and another cyber attack, to deliver cyber recovery and
Speaker 8: cyber resilience.
Speaker 4: People.
Speaker 3: I spent two years asking you if you'd go public.
Speaker 3: You finally and eventually are doing it. But I think
Speaker 3: there's a feeling that there's a hell of a premium
Speaker 3: on this IPO. A lot of people want to see
Speaker 3: evidence of revenue and profit that comes from this. But
Speaker 3: you resisted the temptation to talk endlessly about AI. You're
Speaker 3: saying you don't have a core AI story.
Speaker 8: We do have a core AI story. Rubric has been
Speaker 8: building AI for last ten year, In fact, our data
Speaker 8: threat Engine is built on AI platform that delivers security
Speaker 8: intelligence directly from the data. And more recently, we announced
Speaker 8: a product Ruby, which is a generative AI based AI
Speaker 8: data defense and recovery that helps cyber defender fight fire
Speaker 8: with fire. Because you know attackers are applying AI in
Speaker 8: terms of how they are increasing the volume, variability and
Speaker 8: velocity of attacks. We are allowing the defenders use AI
Speaker 8: in terms of rule Break and Ruby so that they
Speaker 8: can deliver cyber resilience and cyber recovery.
Speaker 4: People very quickly.
Speaker 3: Microsoft remains an important financial and technology partner to you.
Speaker 3: How will that relationship work now going forward?
Speaker 8: We have a very strong relationship with Microsoft. In fact,
Speaker 8: we were Microsoft Partner of the Year in twenty twenty three,
Speaker 8: both both for US and UK. We continue to coinovate together,
Speaker 8: continue to help our joint customers get cyber resilience, make
Speaker 8: sure that they can withstand cyber attacks and continue to
Speaker 8: run their business, because, after all, digital trust starts with
Speaker 8: keeping the services up and running when you are attacked,
Speaker 8: even if the cyber beach has happened to you.
Speaker 3: Rubric CEO people signor after two years of asking if
Speaker 3: you go public, you did thank you. Okay, Welcome back
Speaker 3: to Bloomberg Technology, Ed Ludlow here in San Francisco.
Speaker 4: Let's talk about TikTok.
Speaker 3: The clock is ticking for TikTok to avoid its behan
Speaker 3: in the US should it be unable to divest. Joining
Speaker 3: US now from DC is Bloomberg's Mike Shepard, and Mike
Speaker 3: basically leads our coverage of the intersection of politics and tech.
Speaker 3: We had that breaking news headline at the top of
Speaker 3: the am mic that Bite Dance saying through its Chinese
Speaker 3: website that it has no plan to divest or no
Speaker 3: plan to sell TikTok. That was the wording or translation.
Speaker 3: I don't really feel like I understand what they mean
Speaker 3: by that they're digging in.
Speaker 9: Basically, they are digging in, and the statement in a
Speaker 9: way is not that much of a surprise. They've made
Speaker 9: clear through this process. As the legislation started to take
Speaker 9: shape last month, that really started to look real, look
Speaker 9: like it was going to happen, that they had no
Speaker 9: intention of playing ball, and that in fact, they would
Speaker 9: try to fight it with every arrow in their quiver.
Speaker 9: They really want to make sure that they are able
Speaker 9: to hold on to this valuable asset and resist what
Speaker 9: they see as and the Chinese government also sees as
Speaker 9: interference in valuable media property.
Speaker 3: So there's a lot that's happening quite quickly. We'd reported
Speaker 3: that by Dance was thinking about a solution where it
Speaker 3: sold TikTok but without its sacred algorithm, and on the
Speaker 3: show yesterday we talked about why that algorithm is so
Speaker 3: important for content creators. The President signed this law, signed
Speaker 3: this into lawy yesterday, but as far as I'm aware,
Speaker 3: the President hasn't actually commented or specifically talked about his
Speaker 3: view on TikTok. Just update us on the politics, I
Speaker 3: guess of the last twenty four hours.
Speaker 9: This is a great question need because politics has really
Speaker 9: surrounded this, not only the geopolitics between the US and China,
Speaker 9: but even the domestic politics. And when it surfaced back
Speaker 9: in March, President Joe Biden said he would sign it.
Speaker 9: He would sign the measure, but he hasn't really expounded
Speaker 9: much more on it now. To be clear, the TikTok
Speaker 9: bill was attached to a much larger foreign aid package,
Speaker 9: which was a far greater priority for the President and
Speaker 9: his administration. They wanted to see a to Ukraine get
Speaker 9: through above anything else, and in his remarks yesterday, he
Speaker 9: really devoted the lion's share of his commentary to that.
Speaker 9: At the same time, his spokesperson made clear yesterday after
Speaker 9: the President spoke that selling TikTok a full divestiture was
Speaker 9: something that they wanted. At the same time, they do
Speaker 9: not want to see the apps shut down. They respect
Speaker 9: that many US users derive great enjoyment from it, and
Speaker 9: also for many it is also a source of business,
Speaker 9: and that is something that the administration does not want
Speaker 9: to see shut down.
Speaker 3: Bloomberg's Mike Shepherd out of DC really appreciate the coverage
Speaker 3: and I think we're going to be talking about this
Speaker 3: quite a lot for at least two hundred and seventy days.
Speaker 4: Thank you.
Speaker 3: I'm going to keep a conversation going and get some
Speaker 3: kind of the market analysis. Jasmin Enberg is principal analysts
Speaker 3: at Insider Intelligence. We're wading through a lot of unknowns.
Speaker 3: But where is your head at, Jasmine? You look at
Speaker 3: TikTok from the point of view, well, this is a
Speaker 3: platform that almost fifty percent of Americans are using.
Speaker 4: What do you think will happen?
Speaker 1: Well, I think the announcement from Bytown today that they
Speaker 1: weren't going to sell was to be expected. I mean,
Speaker 1: TikTok has already said it's going to wage an intense
Speaker 1: legal battle. I think the question for me is what
Speaker 1: how weapons now with all of this uncertainty. I mean,
Speaker 1: TikTok obviously has a lot of loyal users. Many of
Speaker 1: them have already come out in full force to defend
Speaker 1: the app, and I expect they'll do so again. I
Speaker 1: don't expect many of them to leave, And advertisers aren't
Speaker 1: going to leave as long as there's audiences to reach
Speaker 1: and content creators of courts, which are a really important
Speaker 1: part of the app, aren't going to leave if there
Speaker 1: is money to be made. But if there's one thing
Speaker 1: that advertisers don't like, it's uncertainty. And if this uncertainty
Speaker 1: surrounding the legal battle and what happens to Tiktoks sends
Speaker 1: enough of them running for higher ground, that could eventually
Speaker 1: lead to creators starting to leave, and users will follow
Speaker 1: creators wherever they go, and that could end to or
Speaker 1: end up doing in an undoing of TikTok even before
Speaker 1: this matter is resolved in courts, or if it binds
Speaker 1: the buyer in wittance changes its mind.
Speaker 3: So Jasmine coming into the show today before the head
Speaker 3: line crossed about Byte Dance having no plan to sell TikTok,
Speaker 3: what was your thesis before that moment on TikTok?
Speaker 1: My thesis in terms of whether it was going to
Speaker 1: be sold or not.
Speaker 4: I mean, what I was.
Speaker 1: Thinking about mostly was in terms of the algorithm and
Speaker 1: how important a part of that would be in terms
Speaker 1: of whatever sale could potentially take place. I mean, the
Speaker 1: algorithm is part, a big part of.
Speaker 4: What makes TikTok tick.
Speaker 1: And not having it as part of the sale, but
Speaker 1: of course lessen the valuation potentially expand the potential list
Speaker 1: of buyers. But it still wouldn't be an easy task
Speaker 1: to find a buyer for TikTok, even if by Dance
Speaker 1: were willing to sell that app.
Speaker 3: Okay, So last night during Meta's Earning School, an analyst
Speaker 3: asked Mark Zuckerberg for basically reaction to the TikTok situation.
Speaker 3: Susan Lee, who's the CFO, jumped in and answered the
Speaker 3: question and said, you know, we're monitoring it, looking at
Speaker 3: it closely, too early.
Speaker 4: To tell what it means our business.
Speaker 3: Do you have a clear winner in any scenario of
Speaker 3: who the main beneficiary of a TikTok divest or a
Speaker 3: TikTok ban might be in the meat social media landscape.
Speaker 1: Yeah, well, Meta has been pretty silent on this issue,
Speaker 1: and for good reason. I mean, there could be ramifications
Speaker 1: and in other countries where Meta does business. Meta would
Speaker 1: be a clear winner if TikTok were to disappear from
Speaker 1: the US, mainly because of Instagram reels. It is one
Speaker 1: of the most natural fits for a displaced TikTok users.
Speaker 1: It's not exactly the same as TikTok, but I imagine
Speaker 1: that a large number of TikTok users would move there
Speaker 1: or to YouTube shorts, and it would also be a
Speaker 1: winner in terms of AD dollars. Now, Meta is a
Speaker 1: massive player in the digital ad landscape. We're expecting it
Speaker 1: to bring in about sixty four billion dollars in US
Speaker 1: AD revenues this year. TikTok's AD business is smaller by
Speaker 1: no means small. It's about ten billion AD dollars to
Speaker 1: ten billion dollars in AD revenues, and so of course
Speaker 1: some of those dollars. A big chunk of those dollars
Speaker 1: would likely go to Meta as well.
Speaker 3: Jasmine will Meta be the world's leading AI company.
Speaker 1: It's a great question, and Meta certainly is in the
Speaker 1: AI race to win it. I do think it could
Speaker 1: be a dark horse in the race to AI if
Speaker 1: you think about the distribution potential alone. It has a
Speaker 1: built in audience through Facebook, through Instagram, through What's Up.
Speaker 1: I was doing some calculations after it released Meta Ai
Speaker 1: into the search bars and Facebook Feed just last week,
Speaker 1: and Meta only needs forty three percent of US Facebook
Speaker 1: users to use Meta Ai on a monthly basis for
Speaker 1: its audience to be as big as chat GPT is
Speaker 1: here in the US, and that isn't unthinkable if you
Speaker 1: consider how prominently and permanently Meta Ai is displayed across
Speaker 1: the apps, and then in terms of monetization, you know
Speaker 1: that is going to be a big factor in determining
Speaker 1: who wins the AI race, and Meta has a competitive
Speaker 1: advantage there. We don't really know how jenai is going
Speaker 1: to be monetized, but like pretty much everything Meta does,
Speaker 1: it's likely to be an ad play and this would
Speaker 1: be connected to its powerful ad ecosystem, and so I
Speaker 1: could see it emerging as an unexpected winner, though of
Speaker 1: course there is a lot of competition and the crowded
Speaker 1: market still to face.
Speaker 3: Meta shares off session lows, but we're still down more
Speaker 3: than twelve percent. Jasmin Emberg of Insider Intelligence is always
Speaker 3: great to have you on the program.
Speaker 4: Thank you.
Speaker 3: I just broke this story with Bloomberg's Kurt Wagner. We
Speaker 3: just published it on the Bloomberg terminal. Elon Musk is
Speaker 3: going to be deposed on Monday as part of the
Speaker 3: first arbitration hearings in the legal process where former Twitter
Speaker 3: employees have basically brought a class action against Elon Musk.
Speaker 3: The former Twitter employees say they were cheated out of
Speaker 3: severance pay when Musk bought the social media company in
Speaker 3: October of twenty twenty two. Law firm Lichten and Listen
Speaker 3: Order and will be representing almost two thousand former Twitter
Speaker 3: staff in individual arbitrations as well as more than a
Speaker 3: dozen class action lawsuits overall in the courts. That story
Speaker 3: just out on Bloomberg. I'm sure it will be online
Speaker 3: soon as well.
Speaker 4: Stay with us.
Speaker 3: We have so much more ahead on the program. This
Speaker 3: is Bloomberg Technology. Okay, it's time for talking tech and
Speaker 3: first up in the news Abudabi's startup G forty two
Speaker 3: is choosing sides. The company, known for a sprawling product
Speaker 3: portfolio in AI, is teaming up with American companies like Amazon, OpenAI,
Speaker 3: and Microsoft and divesting from its Chinese partners. The move
Speaker 3: comes mid worries from US officials of open back doors
Speaker 3: from the Chinese government, with some members considering an intelligence
Speaker 3: briefing to discuss g latest partnership with Microsoft that is
Speaker 3: the Bloomberg Reporting, plus Chinese online tutoring platforms. Xiongbang has
Speaker 3: filed confidentially for a US IPO. That's according to sources.
Speaker 3: The filing adds to signs that Beijing's looking to boost
Speaker 3: funds for its tech industry. The company is said to
Speaker 3: be working with advisors on the potential listing that could
Speaker 3: take place as early as this year. And semiconductor maker
Speaker 3: Skhinix says it expects a full recovery in the memory
Speaker 3: chip market, led by AI related demand. The company posting
Speaker 3: first quarter results that exceeded expectations, forecasting its fastest pace
Speaker 3: of revenue growth since twenty tenesk Heinix says it's entering
Speaker 3: a rebound phase and is preparing to expand capacity for
Speaker 3: its leading edge chips. Okay Let's stick with chips that
Speaker 3: stick with memory. Micron is expected to receive nearly fourteen
Speaker 3: billion dollars in US grants and loans to help the
Speaker 3: company build new American babs or factories. We're also expecting
Speaker 3: Intel results after the bell. There is a lot happening
Speaker 3: in real time with the semiconductor industry joining us to
Speaker 3: discuss it bloombergsy and King, who leads our coverage of
Speaker 3: semis Let's start with Micron. They are the number three
Speaker 3: maker of memory chips, the US leader of memory chips.
Speaker 3: Almost fourteen billion dollars in grants and loans crucially seems
Speaker 3: like a lot of money.
Speaker 4: It's not really, is it.
Speaker 10: Well, I mean for somebody like you or Micron, it
Speaker 10: really isn't. For me, it would be a lot of money.
Speaker 10: I mean six point one is guaranteed, right, But when
Speaker 10: you put that in context of the one hundred and
Speaker 10: twenty five billion that they're looking to put into a
Speaker 10: factory network that's going to be built over the next
Speaker 10: few years, clearly that's not. I mean, it will help
Speaker 10: even the cost base between building here versus building in
Speaker 10: Asia where they have most of their facilities right now.
Speaker 2: But it's not a free v by any stretch.
Speaker 3: The memory market's really interesting historically commoditized boom and bus
Speaker 3: site cause we're talking about principally d ram A nand
Speaker 3: or flash memory. The next generation of memory goes into
Speaker 3: data centers for AI and Micron is competing against those
Speaker 3: big names Samsung, sk Heinix. Why are they wanting to
Speaker 3: enshore this basically in America?
Speaker 4: What's their kind of play here?
Speaker 2: Yeah, I mean there are a number of things.
Speaker 10: We had a conference call with the political leadership behind
Speaker 10: this bid and they're basically like, look, we can't afford
Speaker 10: to have all our eggs in one basket.
Speaker 2: Look what happened during the pandemic.
Speaker 10: We need production of this increasingly important technology in the
Speaker 10: United States. And as you just indicated, it isn't just
Speaker 10: a commodity or won't be just the commodity that it
Speaker 10: has been in the past. So we need this key
Speaker 10: technology in this country. Is the argument that is being made.
Speaker 3: We're talking about HBM three or high bandwidth memory, and
Speaker 3: we've done a lot on the program. Our audience will
Speaker 3: know and we will continue I'm sure to talk about
Speaker 3: it in the moment. Intel. It is the next kind
Speaker 3: of big chip name to report after the bell. What
Speaker 3: are we expecting?
Speaker 10: Yeah, expectations are very low. I mean this is a
Speaker 10: Stargglus down thirty percent this year, way below what you know,
Speaker 10: the socks index, the key semiconductrient done. We already know
Speaker 10: that their operations are struggling. We know that their manufacturing
Speaker 10: is poor. The key question that we're going to see
Speaker 10: answer today is our PC is getting a little bit better.
Speaker 10: Our companies and hyperscal as starting to spend on server chips.
Speaker 2: Again, that's really what people want the answer to.
Speaker 3: It's the same story every quarter, and we wonder if
Speaker 3: the story changes when it comes to earnings. We're looking
Speaker 3: forward to that one Ian King the Bloomberg Yes, thank you.
Speaker 3: Let's talk again about Meta. The stock is back down
Speaker 3: thirteen percent. It's off session lows. But there's a lot
Speaker 3: of anxiety in technology more broad based on what we
Speaker 3: had in metas earnings and basically the commentary on the
Speaker 3: AI infrastructure spend that's going to happen. Jeffreys, Brent Till
Speaker 3: joins us now on Meta specifically, because I think we
Speaker 3: need to have a sort of bigger picture conversation. You
Speaker 3: cut your price target to five hundred and forty dollars
Speaker 3: I think from five hundred and eighty five. But are
Speaker 3: you actually anxious or worried about what you heard last
Speaker 3: night from from Zuckerberg?
Speaker 2: Not at all.
Speaker 11: I think this is a gift for investors. You know what,
Speaker 11: I think we've learned in AI you need three things.
Speaker 11: You need users, you need data, and you need money.
Speaker 11: And the list of vendors that are going to survive
Speaker 11: is very small, and Meta is going to be one
Speaker 11: of them. And so for long term shareholders, this is
Speaker 11: a great opportunity. They're going to do twenty five dollars
Speaker 11: of earnings power. You can put a low twenty multiple,
Speaker 11: you know, to mid twenties, and you're going to get
Speaker 11: anywhere between you know, five hundred plus to six hundred
Speaker 11: plus in the stock. And so when you look at
Speaker 11: just back in the envelope on earnings, it has huge
Speaker 11: support with the stock training at sixteen seventeen times right now.
Speaker 11: I think in terms of the worry, I don't worry
Speaker 11: because I think they're doing the right thing.
Speaker 4: These investments are.
Speaker 11: Not going into the metaverse, they're going into AI. They're
Speaker 11: going back into the core platform where there are billions
Speaker 11: of users that are trying to have better engagement. It
Speaker 11: helps advertisers create campaigns faster. It's going to send more
Speaker 11: ad dollars into the platform because it's going to be
Speaker 11: so easy to create a pain and find a new user.
Speaker 11: For your travel company, for your apparel company, for your
Speaker 11: beauty company. They'll be able to find more users in
Speaker 11: a more relevant way. So we think it pays off.
Speaker 11: So I'm not worried.
Speaker 3: So let's push ahead to Alphabet and Microsoft. And if
Speaker 3: I draw a commonality and there is an anxiet anxiety
Speaker 3: of what happened with Meta, I guess it's the idea
Speaker 3: that for all the billions of dollars in data centers
Speaker 3: around the world that are being built, it doesn't yet
Speaker 3: translate tangibly to revenue growth. That is selling an AI
Speaker 3: product directly. Is that a thesis you share.
Speaker 11: We are in the age of AI hype, we are
Speaker 11: not in the revenue cycle yet. At our private Internet
Speaker 11: conference last week we had many of the top AI
Speaker 11: leaders and everyone said that AI is in infrastructure, right,
Speaker 11: It's in in VideA, as you were talking about before
Speaker 11: the break, and you're dead right about this. It's in
Speaker 11: in Vidia and d Dell. You look at all the
Speaker 11: enabling infrastructure. It's there, it hasn't gotten to the application layer.
Speaker 11: And for all of our companies in software, it's a
Speaker 11: single digital percent of revenue. Ninety five percent of these
Speaker 11: AI deployments are proofd for concept, less than five percent
Speaker 11: of them are live. I mean, how do you monetize
Speaker 11: when you're improved of concept? And so I think what
Speaker 11: we're seeing is this building interests. IBM talked about you know,
Speaker 11: a billion dollar backlog number last night on their call
Speaker 11: that was you know, a few hundred million just a
Speaker 11: few quarters ago. Right, the interest is building, but in
Speaker 11: terms of the overall impact for the software ecosystem, it's
Speaker 11: still not there yet and it will be. Microsoft remains
Speaker 11: in the best position because they are the furthest ahead,
Speaker 11: They have the most vision, and they have the best
Speaker 11: management team of anyone in software with no questions asked.
Speaker 11: So they're going to be in a great spot. But
Speaker 11: it's even for Microsoft, it's going to take time. And
Speaker 11: again we've said this, the AI revenue reality is kicking
Speaker 11: in later this year into twenty five, and that's why
Speaker 11: investors want to be overweight SEMIS or the SMH is
Speaker 11: massively outperforming that's where our clients are and that's why
Speaker 11: these stocks are all green today and all my stocks
Speaker 11: are red.
Speaker 3: Hey, Brent, I'm not asking you to do my job
Speaker 3: for me, but I'm going to speak to Ruth Parat
Speaker 3: after the numbers hit this afternoon. What do you think
Speaker 3: I should ask her?
Speaker 11: The number one question for Ruth is there's two. One
Speaker 11: is when is the new CFO coming on board?
Speaker 4: It's been nine months and you haven't effectively.
Speaker 11: Updated this do if you did simple things with investors,
Speaker 11: your stock would go up fifteen percent or your multiple
Speaker 11: go up fifteen percent. Google is the least shareholder friendly
Speaker 11: company of anyone. Attack and there's just simple blocking attacking
Speaker 11: they can do to get the stock. Hire, have an
Speaker 11: analyst day, bring people in, talk about what they're doing
Speaker 11: in AI, put a financial framework. They're the only company
Speaker 11: intact that doesn't guide Meta, Amazon, Microsoft, go through the list,
Speaker 11: they all give some color.
Speaker 4: There's no color.
Speaker 11: So with no color and no inside and no handholding,
Speaker 11: arc lines are like I want to I want to
Speaker 11: be able to do the work, and I can.
Speaker 4: I can do the work on these other.
Speaker 11: Companies, and right now, I think investors are frustrated. They're
Speaker 11: frustrated with that, So one you know CFO and two
Speaker 11: would be you know. Do you realize how easy it
Speaker 11: is to get your sock hire if you follow the
Speaker 11: simple playbook.
Speaker 4: Brent Thale, Jeffries. I appreciate the help. Thank you. Wow,
Speaker 4: I was not a nonswer. I was expecting I have
Speaker 4: to be honest.
Speaker 3: That does it for a pretty packed edition of Bloomberg Technollogy.
Speaker 3: It was a big morning in market, but technology stories
Speaker 3: were at the heart of it. So recap Listen to
Speaker 3: the podcast on Apple, Spotify, iHeart and we're also posting
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Speaker 3: the Bloomberg platforms again. Buckle up Earnings is the story
Speaker 3: to come from San Francisco.
Speaker 4: This is Bloomberg Technology