WEBVTT - Instant Reaction: Intel and Amazon Earnings

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<v Speaker 1>Bloomberg Audio Studios, Podcasts, radio news. This is Bloomberg BusinessWeek

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<v Speaker 1>inside from the reporters and editors who bring you America's

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<v Speaker 1>most trusted business magazine, plus global business, finance and tech

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<v Speaker 1>news as it happens. Bloomberg Business Week with Carol Messer

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<v Speaker 1>and Tim Stenebek on Bloomberg Radio.

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<v Speaker 2>It is Bloomberg Business Week. Let's get a check on Intel, Carol,

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<v Speaker 2>because this is the stock to watch in the after

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<v Speaker 2>hours right now. Shares just absolutely creatoring the companies Wow

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<v Speaker 2>down eleven percent. A series of what we call red

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<v Speaker 2>stickies here, this company suspending its dibben end. The revenue

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<v Speaker 2>outlook missed. It's a third quarter revenue come in third

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<v Speaker 2>quarter revenue. The outlook goes from to twelve point five

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<v Speaker 2>billion to thirteen point five billion. Estimates were for fourteen

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<v Speaker 2>point three eight billion. They're implementing a more than fifteen

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<v Speaker 2>percent headcount reduction. They've announced a ten billion dollar cost

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<v Speaker 2>reduction plan, and they've suspended that dividends starting in the

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<v Speaker 2>fourth quarter of twenty twenty four.

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<v Speaker 3>Looking at our Ian King, who follows the sevenconductor space

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<v Speaker 3>out with his story on the Bloomberg about Intel. He

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<v Speaker 3>talks to us. It reminds us at CEO Pat Gelsinger,

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<v Speaker 3>despite a massive spending plan to restore Intel to industry prominence,

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<v Speaker 3>is struggling to improve the company's products and technology fast

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<v Speaker 3>enough to retain customers. And so this is part of

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<v Speaker 3>the problem. Right. They've been trying to do this turnaround,

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<v Speaker 3>and it's been imperative for Pat Gelsinger and the company

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<v Speaker 3>to show that they are having some progress on this.

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<v Speaker 3>This is not necessarily a quarter that shows any kind

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<v Speaker 3>of progress. If anything, that shows that they've got to

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<v Speaker 3>continue to kind of rein in costs and try and

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<v Speaker 3>figure this out.

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<v Speaker 2>Okay, well, let's see what James Chalkmok has to say

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<v Speaker 2>about this. He's a technology analyst over at Clockwise Capital. James,

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<v Speaker 2>good to have you with us. We love talking to

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<v Speaker 2>you around earnings. You guys have the ticker time is

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<v Speaker 2>your ETF. I don't see Intel in there. This is

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<v Speaker 2>a company though I know you followed in the past.

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<v Speaker 2>Tell us your reaction to this huge news out of

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<v Speaker 2>Intel with this cost reduction plan, suspend the dividend in

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<v Speaker 2>the fourth quarter of twenty twenty four and then also

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<v Speaker 2>these thousands of layoffs.

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<v Speaker 4>Yeah, I mean they have to do something right.

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<v Speaker 5>You know, they have to write the ship somehow because

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<v Speaker 5>the growth is just anemic. And one way to do

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<v Speaker 5>that is to find a way to grow, grow again,

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<v Speaker 5>or you can.

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<v Speaker 4>Fix things on the expense side.

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<v Speaker 5>And it looks like they're giving up on the former

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<v Speaker 5>and going toward the ladder, and you know, we're turning

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<v Speaker 5>slightly more cautious on standings. More broadly, we've been cutting

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<v Speaker 5>our exposure there across the board. We're basically just now

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<v Speaker 5>left with Navidia, a little bit of SMCI on the

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<v Speaker 5>data center side, and GeV on the utility side.

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<v Speaker 4>So you know, we're rotating the portfolio.

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<v Speaker 5>When we think that this rotation out of tech is

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<v Speaker 5>going to be more prolonged and not just kind of

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<v Speaker 5>the last two weeks that we.

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<v Speaker 3>Saw, why are you rotating out of Socks? We talked

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<v Speaker 3>about this with our Gina Martin Adams, who follows the

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<v Speaker 3>equity universe for US are you know, chief equity strategist

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<v Speaker 3>here in the US. I mean, the Socks is up

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<v Speaker 3>about sixteen percent this year, but we've had two volatile

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<v Speaker 3>days this week of a big sell off and then

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<v Speaker 3>a big rally or big rally and then a big

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<v Speaker 3>sell off if you will, it's seen that as a

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<v Speaker 3>leading indicator. You're saying that in terms of the semi cycle,

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<v Speaker 3>that you're seeing retrenchment, that there's we're going to see

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<v Speaker 3>a pullback.

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<v Speaker 5>Well, i'd say across large tech more broadly, we've been

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<v Speaker 5>really borrowing from twenty twenty five returns. You know, you am,

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<v Speaker 5>Apple and Microsoft are probably the poster childs of pulling

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<v Speaker 5>from twenty twenty five forward. A lot of hype obviously

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<v Speaker 5>around AI and chips and what that means for the industry,

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<v Speaker 5>but a lot of that is increasingly priced in. So

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<v Speaker 5>and on the backdrop, you have a weakening economy, you

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<v Speaker 5>have uncertainty as it related to the presidential election. You

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<v Speaker 5>have now fed swaps pricing in three rate cuts by

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<v Speaker 5>the end of the year, which to us is somewhat absurd.

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<v Speaker 4>You know, so the likelihood of the probability.

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<v Speaker 5>Of negative surprise is outpace the ones of positive surprise.

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<v Speaker 5>So I think you got to be more balanced, you know,

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<v Speaker 5>look more value names, small cap names.

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<v Speaker 4>So we've been diversifying out of large.

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<v Speaker 5>Cap tech and broadening out the portfolio to the sectors

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<v Speaker 5>quite frankly, really aren't part of the innovation tilt that

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<v Speaker 5>we have all.

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<v Speaker 2>Right, always You're always come on on days where Snap

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<v Speaker 2>reports earnings, and I know you don't own Snap. I

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<v Speaker 2>know you covered Snap from the beginning when at ICI

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<v Speaker 2>owed you and I spoke years ago, James, you changed

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<v Speaker 2>your tune on this company. Shares are down twenty two

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<v Speaker 2>percent right now. The company forecast to justin Ibada for

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<v Speaker 2>the third quarter of the guidance missed the average analyst estimate.

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<v Speaker 2>What is going on with Snap?

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<v Speaker 5>I mean, I'll say the same thing I tell you

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<v Speaker 5>every time. I mean, it's when I when I first started.

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<v Speaker 5>You know, they had Van Stiegel laid out the vision.

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<v Speaker 5>You know, it was a sound one, but they had

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<v Speaker 5>an identity crisis where they don't really know what they

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<v Speaker 5>need to be. You know, you can either be an

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<v Speaker 5>ad platform that serves everybody and go large, or you

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<v Speaker 5>can be super niche and drive engagement.

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<v Speaker 4>And monetization on a per user basis. They're doing neither

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<v Speaker 4>of those.

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<v Speaker 5>And I just think that there's just kind of lost

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<v Speaker 5>and uh, you know, we're you know, in this market

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<v Speaker 5>is one that's rewarding companies that have failed in recent

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<v Speaker 5>quarters because they've been beaten down too much.

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<v Speaker 4>Snap I definitely wouldn't put into that bucket.

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<v Speaker 3>Let's go to Amazon. Obviously, we've talked a lot about,

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<v Speaker 3>you know, the companies that are reporting today, Amazon and

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<v Speaker 3>Apple in particular, and how they can shape sentiment when

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<v Speaker 3>it comes to the Nasdaq one hundred. Amazon's down more

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<v Speaker 3>than four percent as we speak. A lot of it

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<v Speaker 3>has to do with the outlook. See three quarter operating

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<v Speaker 3>income of eleven and a half to fifteen billion. That

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<v Speaker 3>is shy the street estimate of fifteen point sixty six billion,

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<v Speaker 3>So the outlook not very upbeat. Second quarter or AWS

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<v Speaker 3>net sales always important in terms of profitability at this

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<v Speaker 3>company twenty six point twenty eight billion, So that was

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<v Speaker 3>actually better than the street estimate of twenty five point

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<v Speaker 3>ninety eight billion. Yeah.

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<v Speaker 2>I was just going to add in for James that

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<v Speaker 2>it's the sixth biggest holding in your clockwise Core Equity

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<v Speaker 2>and Innovation ETF. So it does make up about four

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<v Speaker 2>percent of your portfolio. What's your reaction to the numbers

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<v Speaker 2>that we just got.

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<v Speaker 5>Yeah, it's four percent now six percent a week ago.

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<v Speaker 5>So you know, we cut exposure into the print. Worried

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<v Speaker 5>about really the softening consumer and the implications for retail

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<v Speaker 5>revenue as we look forward into the second half of

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<v Speaker 5>the year. Obviously CAPEX was a big question, but I

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<v Speaker 5>think Microsoft kind of muted those fears. But you know,

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<v Speaker 5>a lot of the hype around the operating income leverage,

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<v Speaker 5>you know, there was a lot of hype around it,

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<v Speaker 5>quite frankly, and it's happening, which is good, but you know,

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<v Speaker 5>they need the revenue to keep up with it. On

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<v Speaker 5>a positive note, AWS is doing quite well.

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<v Speaker 4>That was slightly better than expected.

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<v Speaker 5>So all in all, I'd say it's a it's a

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<v Speaker 5>pretty good quarter, but you know it's it's one that

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<v Speaker 5>was certainly we'll see what they say on the call.

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<v Speaker 4>But I think this falls into my.

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<v Speaker 5>Comments earlier about big calf Tech just can't be overweight

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<v Speaker 5>these names to the same degree as you look into

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<v Speaker 5>the second half as we were in the first half.

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<v Speaker 3>So James, So the selling that we're seeing in the aftermarket,

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<v Speaker 3>I mean, this is Amazon is up twenty one percent

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<v Speaker 3>so far here in twenty twenty four, and you know,

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<v Speaker 3>I know there's a lot of metrics in how we

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<v Speaker 3>do it. I'm just going to go basic. You know,

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<v Speaker 3>your forward pe of about forty But is this just

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<v Speaker 3>a case of the fundamental story we're at Amazon, you

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<v Speaker 3>still like, but maybe valuation wise, maybe that is some

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<v Speaker 3>of what we're seeing in terms of the selling.

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<v Speaker 5>I think, I mean, they ultimately missed numbers, right, so

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<v Speaker 5>you Ago is coming yeah, and the ALOGO is coming

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<v Speaker 5>in exacerbating.

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<v Speaker 4>The pressure.

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<v Speaker 5>But you know, they could walk it back on the call,

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<v Speaker 5>provide more colored commentary.

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<v Speaker 4>I got to look at you see exactly where the

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<v Speaker 4>weaknesses were.

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<v Speaker 5>But that being said, you know, I think it's just

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<v Speaker 5>I think you got to take this into the context

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<v Speaker 5>of what happens the big tech from here, and.

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<v Speaker 4>You know, a lot of these have had remarkable runs.

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<v Speaker 5>Will they be able to perform in the second half

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<v Speaker 5>the same degree that they were in the first half?

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<v Speaker 4>We just don't think so.

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<v Speaker 2>Okay, So what does happen to big tech here? I mean,

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<v Speaker 2>in videos, you're top holding it's a five percent of

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<v Speaker 2>your portfolio.

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<v Speaker 5>Yeah, well it was four yesterday and then uh then

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<v Speaker 5>it went on it was like four point three and

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<v Speaker 5>then went up for five.

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<v Speaker 4>Yes today's movement. Yeah, we got to evaluate Navidia.

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<v Speaker 5>But that's the only one really that we have no

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<v Speaker 5>problem kind of.

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<v Speaker 4>Maintaining that more sizable weight.

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<v Speaker 5>It's really the other companies within the semi space that

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<v Speaker 5>we're we've shed from the portfolio and really we're just.

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<v Speaker 4>Limiting it to.

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<v Speaker 5>Navidia, SMCI and GeV as we think about the data center.

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<v Speaker 3>All right, well, there's a lot going on, and the

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<v Speaker 3>earnings continue to cross the Bloomberg termin looking at DraftKings

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<v Speaker 3>down about eight percent, us coming out with a little

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<v Speaker 3>bit of a forecast. We'll break down some more of

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<v Speaker 3>those numbers. James chock Mak, thank you so much. Busy

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<v Speaker 3>earnings day and you walked us through at he's tech

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<v Speaker 3>analyst ever at Clockwise Capital