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Speaker 2: Boy, the tech news continues to come fast and hear us.
Speaker 2: Let's get the latest with Ed Ludlow, be tech co host.
Speaker 3: He's out there somewhere in California getting into trouble in
Speaker 3: Silicon Valley. And I want to start with the meta
Speaker 3: platforms paying twenty as much as twenty seven billion dollars
Speaker 3: for cutting edge artificial intelligence infrastructure from Nebuas Group. Nebbus
Speaker 3: Group stocks up thirteen percent today, all right, not bad?
Speaker 2: Up fifty two percent. You're to date, okay, better up.
Speaker 3: Three hundred and forty five percent on a trailing twelve
Speaker 3: month basis.
Speaker 2: Ed, let's just start with the basics. What is Nebbius Group.
Speaker 3: What's going on over there?
Speaker 4: Yeah, it's what we call a neo cloud. It's a
Speaker 4: fancy way of saying it's a data set that just
Speaker 4: runs AI workloads. Because prior to this point, lots of
Speaker 4: data centers have done all kinds of software and storage,
Speaker 4: and you know, Meta is pursuing this kind of everything strategy.
Speaker 4: Meta is not a cloud computing company, but it has
Speaker 4: a lot of compute demand, and so it's buying loads
Speaker 4: of chips from in Video and AMD for its own
Speaker 4: data centers. It's working on its own chips in house
Speaker 4: that go into its own data centers, and then it's
Speaker 4: basically leasing or renting capacity from a number of other players.
Speaker 4: The difference with this Nebyis deal is like it's really big.
Speaker 4: You know, it's twenty seven billion dollars over five years,
Speaker 4: but upfront twelve billion dollars next year for dedicated capacity.
Speaker 4: And that tells you that they've moved very quickly, and
Speaker 4: it's a very serious arrangement.
Speaker 5: And it adds to it's three billion dollar deal with
Speaker 5: Nebus last year as well. You talk about Meta really
Speaker 5: diversifying and not betting on just any one company, right,
Speaker 5: I mean, it's kind of spread its chips everywhere.
Speaker 1: Yeah.
Speaker 4: The idea is that in an environment where you are
Speaker 4: supply constrained, in other words, the demand that a company
Speaker 4: has for compute power is greater than what exists in
Speaker 4: the real world. They have found that diversifying is the
Speaker 4: best way to get the compute needed for different workloads.
Speaker 4: Meta is a very big and serious buyer of video chips.
Speaker 4: You know, it's in the top five easily. But there
Speaker 4: is benefit to designing at scale, Like the economics of
Speaker 4: designing your own chips makes sense, particularly when it's for
Speaker 4: running internal workloads. Right when I visited Meta's chip lab
Speaker 4: last week, one of the chips they've come up with,
Speaker 4: for example, trains the algorithm that does ranking and recommendations.
Speaker 4: In other words, how ads show up in your timeline.
Speaker 4: That's like very specific to them, and so it's paid
Speaker 4: off the investment so far.
Speaker 2: I'm just looking at the graph of this chart from DEBS.
Speaker 3: I mean, when public in twenty eleven, kind of bouncing
Speaker 3: around not doing anything, and then around the February of
Speaker 3: twenty twenty two, at the price of twenty dollars a share,
Speaker 3: people said, oh, this is an AI play, so we
Speaker 3: go from twenty to one hundred and twenty eight dollars.
Speaker 2: Where was that call ed Ludlow.
Speaker 4: Well, there's also a history part of it, which is
Speaker 4: that it was previously associated with the or, a property
Speaker 4: of Yandex, which is a Russian cloud computing company. And
Speaker 4: so you know, just simply due to what's the word
Speaker 4: and I'm looking for, I guess sanctions. You know, it
Speaker 4: changed itself. It is now an Amsterdam based company, so
Speaker 4: that's a part of it, but it's completely I'm visualizing
Speaker 4: the chart for our audio audience. But you know that
Speaker 4: it completely coincides with the birth of the neo cloud
Speaker 4: and demand specifically the data since that just run ai.
Speaker 3: All right, here's another story that just recently crossed the
Speaker 3: Bloomberg trouble again. Big numbers open ai and talks for
Speaker 3: ten billion dollars joint venture with Pe firms. What's up
Speaker 3: at that?
Speaker 4: Yeah, so we've just moved our own version of this story.
Speaker 4: And what I'm told by sources is that basically it
Speaker 4: helps a lot for open ai to have some money
Speaker 4: that's off the back sheet to go out there and
Speaker 4: find a vehicle a mechanism to sell its software. And
Speaker 4: so what these guys are doing is they've set up
Speaker 4: an entity where those private equity companies in the first instance,
Speaker 4: can go to all of the different kinds of companies
Speaker 4: that they own and are trying to make better in
Speaker 4: the classic pees style and say, you know what, why
Speaker 4: don't you guys use open ai stuff. It's pretty good.
Speaker 4: And so that gives like open ai a way of
Speaker 4: going to market, and it gives these private equity firms
Speaker 4: some exposure to open ai and a mechanism to do
Speaker 4: business with them that also benefits all of their existing
Speaker 4: portfolio of investment.
Speaker 5: Do we think that this is going to be the
Speaker 5: template that it starts to use more of these off
Speaker 5: balance sheet adventures.
Speaker 2: Yeah.
Speaker 4: I think this is very interesting because like what I
Speaker 4: hear from time to time across Silicon Valley for all
Speaker 4: sorts of things is that there is benefit in having
Speaker 4: multiple entities, be that a geographic split or be it
Speaker 4: a business line split. And in part because you at
Speaker 4: scale with enterprises, the open ai Private X story is
Speaker 4: about selling open AI's platform to different enterprise companies. It's
Speaker 4: just a sort of old archaic world where it seems
Speaker 4: like going back to that model is what is in favor.
Speaker 4: But this news that broke this morning is the first
Speaker 4: real example I've seen of it. The idea has been
Speaker 4: spoken about in the corridors for a little while. Stay
Speaker 4: with us.
Speaker 5: More from Bloomberg Intelligence coming up after this.
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Speaker 5: One of the big movers was Dollar Tree, and the
Speaker 5: outlook here from Dollar Tree was kind of mixed because
Speaker 5: even though adjusted earnings per share is going to meet
Speaker 5: the average channelist estimate, the outlook for revenue came in
Speaker 5: a little bit light. So let's bring in Jen Bartashis.
Speaker 5: She is our senior analyst covering retail staples and packaged foods,
Speaker 5: and Jen, we've seen these value retailers do pretty well
Speaker 5: in this current environment with a lot of higher income
Speaker 5: consumers trading down. Yet this sales view did miss the
Speaker 5: average analyssessment. Is that because analysts investors have gotten a
Speaker 5: little bit ahead of themselves when it comes to the outlook.
Speaker 6: Here, Well, it's a it's a good question, Scarlett, you know,
Speaker 6: with regards to the overall revenue growth for Dollar Tree,
Speaker 6: you know, last year was a real transition year for them.
Speaker 6: They shed the family dollar unit, they're refocusing, they've been
Speaker 6: you know, investing in the business, but that trade down
Speaker 6: customer doesn't come all that often into stores. And so
Speaker 6: while they bring a much higher basket and they're taking
Speaker 6: their big, their big adopters of that higher price point
Speaker 6: of three to five dollars, they're just not coming in
Speaker 6: as frequently as kind of the core low income consumer.
Speaker 6: And so I think the conservative view on the top
Speaker 6: line is that there are a lot of things going
Speaker 6: on right now. You've got, you know, fuel prices are
Speaker 6: on the rise, You've got consumers who are her stretched,
Speaker 6: and you've got a mixed behavior with regards to the
Speaker 6: types of households that are coming into Dollar Tree.
Speaker 2: So what's what's Dollar Tree and the other dollar stores?
Speaker 3: How are they adjusting their strategies at all?
Speaker 6: So with regards to strategy, they're you know, one of
Speaker 6: the things that they really ran into trouble with and
Speaker 6: this is why they went beyond that one dollar price
Speaker 6: point back in twenty twenty two, was being able to
Speaker 6: have a compelling variety of merchandise in the stores. So
Speaker 6: the multi purchase, the multi price point strategy that Dollar
Speaker 6: Tree is rolling out has been really effective for them
Speaker 6: because it gives people, you know, slightly more choice of
Speaker 6: what's in the store, and they can offer more compelling value,
Speaker 6: So that's been a tactic that's really paying off. It's
Speaker 6: just a question of you know, they're still in the
Speaker 6: process of rolling that out to all of their stores,
Speaker 6: so it's not everywhere yet, and so they're getting that
Speaker 6: bump as stores are adopting these these these higher price points.
Speaker 6: But once they're in all the stores, the question is
Speaker 6: how sustainable will it be, So that's one of the
Speaker 6: things that everyone is looking for.
Speaker 5: And jen one thing we know about Dollar Tree is
Speaker 5: that it has done better in terms of operations and
Speaker 5: of performance because of this decision to divest its family
Speaker 5: dollar chain, which was begun last year. How far long
Speaker 5: that process is dollar Tree is it? You know, halfway done,
Speaker 5: two thirds done, one hundred percent done.
Speaker 6: So the divestitures is done. The question is the refocusing
Speaker 6: on their own internal operations. So you know, with regards
Speaker 6: to last year, they started to pay a little bit
Speaker 6: more attention. They're really working at improving their supply chain efficiency.
Speaker 6: They're working at improving store level productivity. They've invested in
Speaker 6: wages in the stores to help have more employees there
Speaker 6: at the right times and to provide the right amount
Speaker 6: of customer service. But it's still early days. For their
Speaker 6: overall transformation of the company now that it's back to
Speaker 6: being just a single bit, and so it will probably
Speaker 6: extend through this year that we see more of those
Speaker 6: tactics start to take hold and to have a real
Speaker 6: material impact on the business overall.
Speaker 2: Let just Target, What is Walmart? What are they doing
Speaker 2: in response here?
Speaker 6: What's really interesting it, Paul, is that Dollar General as
Speaker 6: a direct competitor in the dollar store space. They talk
Speaker 6: about having over five hundred items that are at the
Speaker 6: one dollar price point or below, so they're actually undercutting
Speaker 6: Dollar Tree on some of that value play. If you
Speaker 6: go into a Walmart or a Target, when you first
Speaker 6: walk in, they have kind of those value alleys where
Speaker 6: they have low priced items right at the front where
Speaker 6: you can see them. So everybody has a strategy to
Speaker 6: try to show value through some variety that's at very
Speaker 6: low price points. But then when you get to the
Speaker 6: big box guys there a competitive advantage really is in
Speaker 6: the breadth of assortment that they carry, and if they
Speaker 6: can be compelling on value across the store, that puts
Speaker 6: them in a good position.
Speaker 5: Stay with us. More from Bloomberg Intelligence coming up after this.
Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live
Speaker 1: weekdays at ten am Eastern on Apple, Cocklay and Android
Speaker 1: Auto with the Bloomberg Business App. Listen on demand wherever
Speaker 1: you get your podcasts, or watch us live on YouTube.
Speaker 3: We have a great guest here, Michelle coursmo Joins, the
Speaker 3: CEO of the National Restaurant Association.
Speaker 2: Michelle, thanks so much for joining us here.
Speaker 3: You know, one of the industries that was thought to
Speaker 3: be impacted or could be impacted severely by some of
Speaker 3: the change in immigration policy from this administration was the
Speaker 3: restaurant business.
Speaker 2: Has that in fact happened.
Speaker 7: Well, it's interesting, Paul, when you look at last year,
Speaker 7: we had some growth, but not really strong growth. It
Speaker 7: was four point six percent nominal growth in less than
Speaker 7: one percent full time growth. And we know that that
Speaker 7: has a lot to do with the fact that consumers
Speaker 7: were a lit little bit more weary. The immigration policies
Speaker 7: and the immigration disruption definitely made a difference in restaurant business,
Speaker 7: particularly people coming to sit down in family dining. You know,
Speaker 7: it's interesting when you think about immigration, because one out
Speaker 7: of every five people that work in restaurants was born
Speaker 7: outside the US. Many of those are citizens, many of
Speaker 7: those obviously are fully documented and able to work. But
Speaker 7: in terms of an immigrant population, the restaurant industry very
Speaker 7: much represents that.
Speaker 3: So what are your operators telling you about, Maybe just
Speaker 3: their access to the ability to attract and retain labors
Speaker 3: have been a challenge for them.
Speaker 7: Yeah, it's always tough to find and retain the best labor.
Speaker 7: We're thinking about the value of working in restaurants as
Speaker 7: people are considering do they go and work in healthcare?
Speaker 7: Do they go and work in education? And people need
Speaker 7: to know that you can find a great career in restaurants.
Speaker 7: In fact, there's a lot of opportunity that this eight
Speaker 7: out of every ten restaurant managers started an entry level
Speaker 7: and so we know, I'm sorry, nine out of ten
Speaker 7: started an entry level and eight out of ten owners
Speaker 7: started in entry levels. So we know that there's a
Speaker 7: lot of upward mobility. So finding people to come in
Speaker 7: and then building that upward mobility is always a priority
Speaker 7: for restaurant operators.
Speaker 2: Michelle, talk to us about tariffs.
Speaker 3: We're going into year two of this uncertain tariff regime
Speaker 3: or situation. How is that impacting the restaurant industry. As
Speaker 3: the industry figured out a way to kind of just
Speaker 3: deal with it.
Speaker 7: Yeah, it's interesting you talk about figuring out a way.
Speaker 7: It has a little bit normalized that we have some
Speaker 7: disrupted prices. Food and beverage tariffs have been pretty stable
Speaker 7: for at least the last six months, and so that's
Speaker 7: provided some more continuity in terms of pricing. But food
Speaker 7: price is tough, right. Food prices have been steadily increasing
Speaker 7: since before the pandemic, and that's something we're watching. So
Speaker 7: it's often more now about availability. We know we don't
Speaker 7: have enough cattle herd that exists today to meet the
Speaker 7: beef demand in the United States, so that has an
Speaker 7: impact on pricing. So we're seeing those types of activities
Speaker 7: impact food prices almost more than terriff activity.
Speaker 3: Today, I noticed going to restaurants more and more and
Speaker 3: more signed saying we're going to charge you three percent
Speaker 3: more if you use a credit card versus cash.
Speaker 2: And that's a big, big issue.
Speaker 3: Not for me because I walk around with a lot
Speaker 3: of cash, but for most people, the younger folks, they
Speaker 3: would know a fifty dollars both.
Speaker 2: They tripped over it.
Speaker 3: So I mean, talk to us about these swipe fees
Speaker 3: and all that type of stuff.
Speaker 7: Well, you are one of a quarter of restaurant patrons
Speaker 7: who uses cash, but the vast majority three quarters are
Speaker 7: using credit cards. And the US is the last country
Speaker 7: nation really to have any kind of competition that exists
Speaker 7: between our credit card carriers, and so without that competition,
Speaker 7: it allows those carriers to charge what we see is
Speaker 7: really high swipe fees, costing the average American at least
Speaker 7: twelve hundred dollars a year because of the swipe fees
Speaker 7: being higher in the US than say they are in
Speaker 7: Europe or in Asia. And so that's something that restaurant
Speaker 7: operators need to figure out how to account for, is
Speaker 7: how do you manage three, sometimes four or five percent
Speaker 7: depending on a credit card swipe fees. And so those
Speaker 7: extra charges are helping people understand what a difference it
Speaker 7: makes when you're using a credit card as supposed to
Speaker 7: paying cash.
Speaker 3: So what's the longer term trend, Michelle, just in terms
Speaker 3: of people eating home versus eating out? I know that
Speaker 3: pandemic upended a lot of people's kind of how.
Speaker 2: They do things. What's the longer term outlook?
Speaker 7: Well, long term outlook for restaurants is always great. In fact,
Speaker 7: even today we talk about the numbers in our State
Speaker 7: of the Industry survey that shows that seven out of
Speaker 7: ten Americans are saying they'd spend more money in restaurants
Speaker 7: if they had more disposable income. So you know that
Speaker 7: the demand is there. There's always a pent up demand,
Speaker 7: and people really like the taste and the flavor profile
Speaker 7: for restaurants. The convenience, the speed, with lives getting faster
Speaker 7: and busier, restaurants are definitely a win. The other thing
Speaker 7: that's great about restaurants is that it's a pretty competitive industry,
Speaker 7: and that competition causes each restaurant to figure out how
Speaker 7: they can do better to get those customers in the door,
Speaker 7: So the quality of the food is going up. Pricing
Speaker 7: a stain competitive restaurant industry is a great business.
Speaker 6: To be in.
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