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Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.

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Speaker 2: This is Bloomberg business Week Daily, reporting from the magazine

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Speaker 2: that helps global leaders stay ahead with insight on the people, companies,

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Speaker 2: and trends shaping today's complex economy. Plus global business finance

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Speaker 2: and tech news as it happens. The Bloomberg Business Week

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Speaker 2: Daily Podcast with Carol Masser and Tim Steneveek on Bloomberg Radio.

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Speaker 1: All right, everybody, Yes, indeed you are listening to Bloomberg

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Speaker 1: BusinessWeek Daily, and this is Carol Master along with Tim Stenovik.

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Speaker 1: We've got Meta and Microsoft crossing the Bloomberg terminal.

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Speaker 3: I am going to Meta platforms for shares are lower.

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Speaker 3: The company did miss estimates in second quarter earnings per share.

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Speaker 3: The company also raising the lower end of its expense outlook.

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Speaker 3: The company sees third quarter revenue coming in at sixty

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Speaker 3: one to sixty four billion dollars. The estimate was for

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Speaker 3: sixty three point one seven billion dollars. The company also

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Speaker 3: expects third quarter total revenue to be in the range

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Speaker 3: of sixty one to sixty four billion. As I mentioned,

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Speaker 3: second quarter revenue did come in just above estimates at

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Speaker 3: sixty point eight billion. Second quarter AD revenue coming in

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Speaker 3: above estimates at fifty nine point three six billion. Second

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Speaker 3: quarter earnings per share coming in below estimates at six

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Speaker 3: dollars and eighteen cents. Family of Apps operating income came

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Speaker 3: in significantly below estimates. Second quarter Reality Labs operating loss

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Speaker 3: coming in above estimates at four point six two billion dollars.

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Speaker 3: Second quarter Family of Apps revenue coming in again. Second

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Speaker 3: quarter rather Family Apps revenue coming in at sixty billion dollars,

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Speaker 3: the estimus for fifty nine billion dollars.

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Speaker 1: All right, as you mentioned though, shares of Meta Platforms,

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Speaker 1: we're looking at that stock trading down about five percent

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Speaker 1: in the after ours. We're going to be looking for

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Speaker 1: some commentary about the company looking to build out a

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Speaker 1: cloud business. Let's go over to Microsoft, that stock up

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Speaker 1: about three percent here in the after appurs.

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Speaker 3: Yeah, we're actually getting that redhead. The company sees fiscal

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Speaker 3: year capex one thirty to one forty five. It saw

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Speaker 3: one twenty five to one forty five. Is Meta Platforms

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Speaker 3: in terms of fiscal year capex one thirty to one

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Speaker 3: forty five, it saw one twenty five to one forty five.

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Speaker 1: Let's keep in mind that Meta did raiz It's spending

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Speaker 1: out look for the year. Last time it reported back

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Speaker 1: in April and the stock sold off the next day.

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Speaker 4: So we're going to keep an eye on that one.

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Speaker 1: Meta continuing to trade down about seven percent. It's other

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Speaker 1: Max seven Brethren up about three point eight percent here

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Speaker 1: in the aftermarket. Let's go through the numbers, folks. You've

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Speaker 1: got fourth quarter cloud revenue always important. Fifty nine point

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Speaker 1: three billion, that is a beat. Street estimate was for

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Speaker 1: fifty eight point seven Azure another cloud revenue x currency

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Speaker 1: ff XFX up forty three percent. The estimate was for

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Speaker 1: a gain of about thirty nine point six percent adjusted

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Speaker 1: EPs for the fourth quarter four dollars seventy four cents

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Speaker 1: a share, That is almost fifty cents higher forty nine

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Speaker 1: to be exact, than what the street was expecting. Intelligent

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Speaker 1: Cloud revenue for the fourth quarter thirty nine point three

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Speaker 1: one billion, that was a beat. Thirty at one point

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Speaker 1: thirty eight point seventeen was the street estimate. Let me

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Speaker 1: go to also the fourth quarter revenue, as I mentioned,

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Speaker 1: ninety point zero one billion for the fourth quarter, beating

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Speaker 1: the street estimate of eighty seven.

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Speaker 4: Point seventy two billion.

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Speaker 1: The company with some commentary, Microsoft saying that It's three

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Speaker 1: sixty five copilot reached over thirty million paid seats. It

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Speaker 1: said the fourth quarter three to sixty five consumer cloud

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Speaker 1: revenue increased twenty four percent, Azure revenue surpassing one hundred

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Speaker 1: billion dollars for the first time. And so it also

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Speaker 1: said three point two billion dollar gain from its investment

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Speaker 1: in Anthropic in the fourth quarter. So again we're seeing

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Speaker 1: some optimism in the aftermarket when it comes to Microsoft again,

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Speaker 1: that stock, as I pull it up for you, it

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Speaker 1: is up about three point three percent here again, pressure

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Speaker 1: on Meta Qualcom also out.

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Speaker 5: Yeah, Qualcomb.

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Speaker 3: Pressure on Qualcom as well, down about six percent in

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Speaker 3: the after hours. The profit forecast missed estimate, a sign

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Speaker 3: of those woes of smartphones earnings coming in two dollars

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Speaker 3: in five to two twenty five a share revenue will

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Speaker 3: be nine point seven billion to ten point five billion.

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Speaker 3: That would miss the average analyst estimate. The company's losing

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Speaker 3: business from Apple more rapidly than anticipated. It's being forced

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Speaker 3: to raise prices due to supply shortages. I want to

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Speaker 3: note that Ed Ludlow is going to be speaking with

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Speaker 3: Christiano Aman, the company CEO, on Bloomberg Tech tomorrow, so

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Speaker 3: be sure to tune in for that.

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Speaker 1: One more I've got to bring to you because we've

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Speaker 1: got ARM holdings also out in the aftermarket.

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Speaker 4: We'll take a look at the share price there.

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Speaker 1: But the company sees second quarter revenue, so this is

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Speaker 1: an outlook. See second quarter revenue one point thirty three

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Speaker 1: billion to one point forty three billion. The estimate is

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Speaker 1: one point thirty five billion, So it looks like in

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Speaker 1: terms of the upper end of the range, there's some

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Speaker 1: potential for upside. See second quarter adjusted operating expenses of

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Speaker 1: about seven hundred and eighty million. That's less than what

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Speaker 1: the street was expecting. Seven hundred and ninety three million.

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Speaker 1: First quarter adjusted gross margins looking back at the last

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Speaker 1: quarter ninety eight point one percent, that's exactly what the

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Speaker 1: street was looking for.

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Speaker 4: First quarter total.

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Speaker 1: Revenue that came in a little bit better, stronger than

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Speaker 1: the street expectation. One point two to nine billion was

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Speaker 1: the actuality. The street estimate was for one point twenty

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Speaker 1: six billion first quarter just ADPs forty five cents I share.

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Speaker 4: That's a nickel better than what the street was expecting.

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Speaker 1: And just taking a look at ARM just slightly lower

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Speaker 1: here in the aftermarket. Keep in mind, though, I think

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Speaker 1: this one. Let me just pull it up on my Bloomberg.

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Speaker 1: It's up about one hundred and five percent a year

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Speaker 1: to date. So there are always you know, when you've

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Speaker 1: had quite a run, maybe investors looking for even more.

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Speaker 3: Okay, this is one, and that it is important to

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Speaker 3: many of our clients. So I'm going to mention it,

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Speaker 3: but we're not going to talk about it much in

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Speaker 3: the next few minutes. Starbucks shares surging in the after hours.

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Speaker 3: It's up about five percent. Third quarter comp sales came

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Speaker 3: in way above estimates, up seven point nine percent, the

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Speaker 3: estimus for five point seven three percent. The company sees

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Speaker 3: global comp sales growth nearing six percent.

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Speaker 1: Yeah, our headline on the story showing its turnaround bid

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Speaker 1: is gaining momentum. We know that they've been working on

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Speaker 1: things under their new CEO. Of course, we're talking about

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Speaker 1: Brian nicol So coming over from Chipotle.

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Speaker 4: But it's been a little bit of a struggle, all right, folks,

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Speaker 4: let's get to it though.

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Speaker 1: Big tech earnings Microsoft rallying three and a half percent

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Speaker 1: in the aftermarket.

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Speaker 4: You've got meta under pressure.

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Speaker 1: Ed Ludlow is host of Bloomberg Tech on Bloomberg Television.

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Speaker 1: Eleven am Wall Street time Monday through Friday, ed pick

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Speaker 1: where you want to start.

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Speaker 5: True start on Microsoft.

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Speaker 6: I feel like it's probably the most tangible, right, so

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Speaker 6: everything is in the cloud growth better than expectations. And

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Speaker 6: you know, the math was really simple going into this.

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Speaker 6: They've just closed the book on their fiscal financial year,

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Speaker 6: and the question still remains when we get to the call,

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Speaker 6: what does Microsoft tell us about the capital expenditure growth

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Speaker 6: into next year? Because the street sees CAPEX growing beyond

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Speaker 6: fifty percent. Top line growth on Azure is forty three percent,

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Speaker 6: give or take xtach. All the street really wants to

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Speaker 6: see is that pace of growth being near to CAPEX growth. Right,

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Speaker 6: It's a really simple equation. But going back to alphabet,

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Speaker 6: which is highly analogous, there's so much commentary here from

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Speaker 6: Microsoft about traction with copilot, like more data points that

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Speaker 6: are just easy tangible to understand about how Microsoft's AI

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Speaker 6: efforts are going, right, And then that's the stock reflecting that.

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Speaker 3: And after ours, is the thirty million paid seats a

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Speaker 3: big deal for three sixty five copilot for Microsoft?

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Speaker 6: Yes, because it's versus twenty million at the end of March.

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Speaker 6: Exactly what I'm pointing to the other one is I

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Speaker 6: think you guys mentioned this, but like Nadella was talking about,

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Speaker 6: as you're generating more than one hundred billion dollars in

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Speaker 6: annualized revenue. You know, remember Amazon went to that figure

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Speaker 6: very early, you know, in its in its kind of

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Speaker 6: like growth of AWS. Then what Amazon did they report

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Speaker 6: tomorrow but was to say this is the AI specific

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Speaker 6: annualized revenues. So just saying more, you know, giving newer

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Speaker 6: data points which take us beyond the simple are the

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Speaker 6: top line numbers growing beyond the capex growth, which you.

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Speaker 1: Kind of want to get right when a company is

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Speaker 1: spending and building and doing all of this. The more information,

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Speaker 1: the more transparency, that's helpful big time.

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Speaker 5: Yeah.

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Speaker 6: I mean again, from the press release alone, Microsoft's not

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Speaker 6: saying anything about fiscal year twenty seven capex.

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Speaker 4: Yeah.

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Speaker 6: So that there's this period of time where everyone's like, okay, reading,

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Speaker 6: digesting the statement and the release, and then on the

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Speaker 6: call everything could change. That is the jeopardy of big

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Speaker 6: tech earnings. And that's what's fun.

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Speaker 3: Well, let's do a little bit with meta platforms and

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Speaker 3: then we'll get back to some of these other names.

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Speaker 3: Here's a meta shre's a Meta down about six point

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Speaker 3: three percent. Let's go ahead and say six percent. Some

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Speaker 3: numbers here. Third quarter revenue sixty one to sixty four billion,

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Speaker 3: the estimus for sixty three point one seven billion. Second

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Speaker 3: quarter revenue came in above estimates. Second quarter EPs came

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Speaker 3: in ever so shy of estimates. What is the thing

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Speaker 3: that is moving the stock with Meta today?

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Speaker 5: It's so hard.

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Speaker 6: I mean, revenues up twenty eight percent ahead of expectations, right,

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Speaker 6: ad impressions have improved, Pricing has improved. Meta's core business.

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Speaker 6: It's bread and butter, is still advertising. The story was

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Speaker 6: how has AI made that better? More monetizable?

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Speaker 5: So revenue should be higher than estimates? Right, it is,

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Speaker 5: It is ahead of vespers. I think it's twenty right.

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Speaker 5: Sorry for the third outlook, I'm sorry, yeah for the outlook. Right, Yeah.

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Speaker 6: The one thing that my brain is going to is

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Speaker 6: that the operating margins didn't just come in significantly below

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Speaker 6: a consensus by about four percentage points, but costs are

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Speaker 6: up fifty five percent, So the operating margin has fallen

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Speaker 6: from forty three to thirty one. Costs are higher, and

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Speaker 6: free cash flow has basically disappeared.

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Speaker 5: I'm reading the statement.

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Speaker 3: Sorry, And is that because they're investing so much in talent?

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Speaker 3: Is it because the tokens cost so much? Like this,

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Speaker 3: these companies are spending a time of money. We looked

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Speaker 3: at last week what Alphabet said about going you know,

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Speaker 3: cash flow negative. Meta Platforms is feeling it. Meta is

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Speaker 3: feeling it when it comes to its earnings because it's

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Speaker 3: spending more money.

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Speaker 6: Maybe they're disclosing that there was a one time legal

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Speaker 6: charge of two point four billion dollars and then severance

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Speaker 6: costs super interesting one point two billion dollar charges. We

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Speaker 6: knew about the story right about the waves of Meta layoffs,

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Speaker 6: so that could excluding those the underlying operating performance was

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Speaker 6: kind of much nearest expectations. Maybe they're a big factor,

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Speaker 6: but also goes the idea that the free cash flow

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Speaker 6: is basically gone, which is such a common story across

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Speaker 6: the mag seven.

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Speaker 1: Right right, And I want to just throw one other

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Speaker 1: headline across the Bloomberg Meta saying some youth related trials

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Speaker 1: may result in material loss like we have done here

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Speaker 1: are Olivia Carvel and I believe others on the team

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Speaker 1: have done a lot about social media and the impact

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Speaker 1: on youth, and we know Meta has certainly been one

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Speaker 1: of the targets, so interesting to get some of that

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Speaker 1: clarity again. Just a quick headline, Meta boosting the low

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Speaker 1: end of its annual capital spending outlook. And I'm looking

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Speaker 1: at the live blog too, and I think, at this

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Speaker 1: is something that you were going to and this was

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Speaker 1: our Lindawan, our tech editor.

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Speaker 4: One thing traders might be reacting to.

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Speaker 1: Second quarter operating margin thirty one percent versus forty three

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Speaker 1: percent a year earlier. The companies expecting that total expenses

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Speaker 1: of one hundred and sixty five billion, one hundred and

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Speaker 1: sixty nine billion, raising the low end from one hundred

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Speaker 1: and sixty two billion previously. I want to bring into

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Speaker 1: the conversation to our man deep seeing Bloomberg Intelligence, globalhead

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Speaker 1: of Technology Research, making his way from TV into our

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Speaker 1: radio studio. We're talking about Meta. What investors don't like it?

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Speaker 7: I mean, look, there wasn't much of an upside when

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Speaker 7: it comes to the top line, both this quarter and

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Speaker 7: the guide, and when it comes to Capex. Even though

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Speaker 7: they didn't raise Capex. The one line that caught my

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Speaker 7: attention was that first line from Mark Zuckerberg that HEAP

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Speaker 7: expects things to improve across enterprises and that's new because

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Speaker 7: all of Meta's generated revenue is generated from the consumer side.

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Speaker 7: So the fact that he has that in the first

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Speaker 7: line shows that they are leaning towards enterprise.

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Speaker 8: Usage, the cloud builder, cloud.

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Speaker 7: Built API usage by enterprises, and that's what they are

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Speaker 7: betting on when it comes to this kind.

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Speaker 3: I mean silly question, but does Meta actually have an

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Speaker 3: LM that can be licensed by some of these enterprises

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Speaker 3: in a way that would be different than an enterprise

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Speaker 3: using a platform from Microsoft, or from open ai or

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Speaker 3: from Anthropic.

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Speaker 7: So it's getting more competitive when it comes to royal

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Speaker 7: LM usage. And the reason I say that is because

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Speaker 7: of Kimmy k three and all these open source models

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Speaker 7: that have really taken off and are being used for

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Speaker 7: use cases besides the frontier where Anthropic is being used.

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Speaker 8: So I think if.

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Speaker 7: Meta has to compete with open source, it's going to

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Speaker 7: be interesting how they position themselves, whether it's in terms

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Speaker 7: of lower token pricing or they have another strategy because

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Speaker 7: they're building a business from scratch and.

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Speaker 8: It's not easy.

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Speaker 7: They're late to that cloud game, they are late to

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Speaker 7: that API game. So how they go about it, Who

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Speaker 7: those anchor customers are going to be that's a million

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Speaker 7: dollar question. Who are they going to partner with in

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Speaker 7: terms of that enterprise usage. Is it going to be

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Speaker 7: Microsoft or Anthropic? We don't know that well Ed, Come

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Speaker 7: on back in here. What do you think you're going

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Speaker 7: through all of these releases right now? You point out

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Speaker 7: that Mark Zuckerberg what Mandeep was referring to Mark Zuckerberg

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Speaker 7: writing quote, AI is accelerating our core business today, powering

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Speaker 7: our next generation of products, and opening the door to

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Speaker 7: entirely new enterprise opportunities.

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Speaker 5: What are those opportunities?

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Speaker 6: Yeah, So Bloomberg's reported that Meta has explored a literal

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Speaker 6: oud computing business. Charlie called Meta a hyperscaler. It operates

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Speaker 6: data centers at hyper scale for its own business, for

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Speaker 6: its internal workloads. That's very different to renting out compute

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Speaker 6: capacity to third parties. But Bloomberg's reported metas looking at

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Speaker 6: that more recently. Kurt Wagner got on the phone with

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Speaker 6: Mark Zuckerberg, right and he said, yeah, you know, that

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Speaker 6: is something an idea of something we might do. That

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Speaker 6: quote around enterprise opportunities is pretty much the sort of

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Speaker 6: clearest example we've had, and I think going into this,

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Speaker 6: i'd wager that for the call. That is something that

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Speaker 6: analysts will focus questions on. It's not about it's not

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Speaker 6: about ROI on the AI investment. It's about ROI on

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Speaker 6: the infrastructure they're building. How can you basically make new

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Speaker 6: revenue streams and more money on all the infrastructure you've built?

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Speaker 6: And so interesting. I think Mandib's very smart to get

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Speaker 6: to that so quick. And interesting, by the way, because

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Speaker 6: how many quarters on the show do we say, here's

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Speaker 6: the quote from the CEO at the top of the reason,

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Speaker 6: and we kind of move on, and how much work

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Speaker 6: is this one doing?

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Speaker 5: I find that fascinating.

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Speaker 1: I want to ask both of you because here we

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Speaker 1: have Meta under pressure. You've got Microsoft, though rallying in

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Speaker 1: the aftermarket, not up as much as it was earlier,

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Speaker 1: but still up about one point four percent.

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Speaker 4: Mindev, let me bring you back in here.

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Speaker 1: What does a better tell on the AI spend the

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Speaker 1: AI narrative like? Is it Microsoft? In terms of it

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Speaker 1: is the enthusiasm and the expected momentum to continue.

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Speaker 7: I mean, just look at the margin degradation for Meta here.

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Speaker 7: They went from forty three percent to thirty one percent

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Speaker 7: operating margin.

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Speaker 4: Massive drop.

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Speaker 7: It is a massive and that's where a Microsoft with

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Speaker 7: its cloud business is able to cushion you know, some

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Speaker 7: of the headwinds it is facing from all these l

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Speaker 7: lamps and still do very well in terms of the

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Speaker 7: holding up the margin side of the equation.

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Speaker 3: Apart from capex. Where's that money going? Why are margins

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Speaker 3: under pressure?

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Speaker 7: I mean in in the case, So with all these companies, now,

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Speaker 7: once you raise your capex, you have to show the

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Speaker 7: capex in the depreciation line, so your cost of revenue

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Speaker 7: will keep going up. So in the case of Meta,

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Speaker 7: it's not as if they're hiring a lot more people.

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Speaker 7: They did hire a lot of people and paid millions

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Speaker 7: of dollars.

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Speaker 8: But I don't think that.

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Speaker 5: You don't think that's what it is.

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Speaker 7: No, it's that cost of revenue line going up because

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Speaker 7: now those depreciation expenses would kick in.

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Speaker 5: So it's just capex.

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Speaker 8: You think it will be capeck.

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Speaker 3: But can't they make up for that with the investments

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Speaker 3: that they've made in making advertising more targeted and getting

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Speaker 3: us to click or at least getting marketers in front

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Speaker 3: of eyeballs and even more efficient.

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Speaker 7: What the ad pricing growth was it was around fourteen percent,

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Speaker 7: and you know.

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Speaker 5: That's pretty solid.

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Speaker 8: That's been the case for the last few quarters.

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Speaker 7: So the problem now they have is all those levers,

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Speaker 7: which once we're there to protect the margins, are not

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Speaker 7: good enough when your capex is growing up like this

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Speaker 7: and you know your cost of revenue will keep growing.

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Speaker 7: So that's a hard part in managing margins here for Meta.

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Speaker 1: So Microsoft's like, sorry, Mata, but we're having a pretty

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Speaker 1: good day. Microsoft share is still up in the aftermarket. So,

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Speaker 1: Ed Ludlow, you've been going through and reading more from

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Speaker 1: the company.

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Speaker 4: What's jumping out at you?

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Speaker 6: Well, going into this, I think we knew that it

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Speaker 6: was the case. Maybe Mandeep can clear it up. I

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Speaker 6: think there is some kind of accounting or disclosure change

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Speaker 6: for Microsoft where the CAPEX number and they're accounting for

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Speaker 6: leases specifically makes the CAPEX number look smaller. But again,

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Speaker 6: like we're in this period now where the call comes

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Speaker 6: very important because we know what the Azure growth number

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Speaker 6: is for the quarter gone and the period this closed

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Speaker 6: the door on the financial year twenty six, financial year

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Speaker 6: twenty seven starts, and you know, the very simple math is,

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Speaker 6: in an environment where everyone thinks CAPEX goes up, what

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Speaker 6: is the percentage growth in capex that is foreseen relative

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Speaker 6: to the growth in azure. And that's why they're putting

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Speaker 6: so much emphasis on all these other metrics, the like

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Speaker 6: maybe non financial nature to get some evidence that their

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Speaker 6: AI investments are getting traction.

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Speaker 5: What I don't know, I mean, I think, go go ahead.

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Speaker 7: I mean, the one thing I had in mind before

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Speaker 7: coming into earnings is if a company doesn't raise their

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Speaker 7: capex in an environment where memory prices are up twenty

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Speaker 7: thirty percent, to me, they are cutting back somewhere else.

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Speaker 7: And that would be my interpretation for Meta is because

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Speaker 7: they didn't raise capex, they certainly are offsetting it with

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Speaker 7: something else.

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Speaker 8: We just don't know what.

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Speaker 5: So where are they doing that?

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Speaker 7: I mean, they don't want to raise capex because the

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Speaker 7: stock would have been down even more.

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Speaker 8: Yeah, they raised the capex, so they didn't have a choice.

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Speaker 7: I mean they're being forced to be disciplined here in

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Speaker 7: terms of capex because the market doesn't have a tolerance

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Speaker 7: for higher metas capex for this year and possibly for

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Speaker 7: twenty twenty.

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Speaker 5: Seven some context.

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Speaker 3: The word discipline now, Carol, discipline for Meta platforms means

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Speaker 3: one hundred andion to one hundred and forty five billion

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Speaker 3: dollars in capex this year.

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Speaker 4: Well ed, come on back anyo though?

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Speaker 1: For Meta moving into cloud though this business and maybe

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Speaker 1: we'll get more on the call about their intentions and

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Speaker 1: their plans.

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Speaker 4: I mean, is it still the right move for Meta?

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Speaker 6: I mean I feel like, just going off past action

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Speaker 6: and precedent that we're going to get to the call.

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Speaker 6: And you know, like the way I think about it is,

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Speaker 6: if you're listening or watching BusinessWeek right now, you're asking

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Speaker 6: yourself what's still to come. We've gone through the numbers,

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Speaker 6: We've gone through the headlines. Everyone with Meta knows about

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Speaker 6: Mark Zuckerberg, Susan Lee. The CFO is very important and

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Speaker 6: often does the heavy lifting of communicating the financial strategy.

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Speaker 6: And I'll just see a world in which we get

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Speaker 6: to the call and she's like, yeah, here's our commentary

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Speaker 6: on Capex. I've Mandy's point is so important because it's

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Speaker 6: not new, and I mean that with massive respect. The

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Speaker 6: CAPEX doesn't just go up because you need to spend

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Speaker 6: more to build more to meet to MO. CAPEX can

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Speaker 6: also go up because the cost of building those things

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Speaker 6: is higher. You know, you have labor and construction inflation,

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Speaker 6: materials inflation. Memory is a massive macro factor. You know,

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Speaker 6: IBM basically tried to blame ten days ago the lack

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Speaker 6: of spending on their technology mainframes, in particular because their

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Speaker 6: customers face higher capex, largely relating to high memory prices.

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Speaker 6: So you know, all of these factors are common to

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Speaker 6: all of these capital expenditure deployers who want to build

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Speaker 6: AI infrastructure.

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Speaker 5: Stay with us.

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Speaker 3: More from Bloomberg Business Week Daily coming up after this.

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Speaker 2: You're listening to the Bloomberg Business Weekdaily podcast. Catch us

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Speaker 2: live weekday afternoons from two to five pm Eastern. Listen

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Speaker 2: on Apple CarPlay and Android Auto with the Bloomberg Business app,

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Speaker 2: or watch us live on YouTube.

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Speaker 1: All right, so we're tracking Meta and Microsoft here in

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Speaker 1: the after hours. Microsoft up about two percent, a little

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Speaker 1: bit more so just following earnings. If I go on

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Speaker 1: over to Meta, it is still down about five point

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Speaker 1: six percent. Let's just also throw into the mix. We've

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Speaker 1: got Qualcomm. That one also came out with its results

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Speaker 1: and the stock right now in the aftermarket as I

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Speaker 1: bring it up on my Bloomberg it is down about

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Speaker 1: three point five percent.

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Speaker 4: And then we have Armholding.

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Speaker 5: We have arm Holdings as well.

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Speaker 3: I want to go to Qualcom Real quick to Ed

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Speaker 3: because Ed is interviewing Christiano Aman tomorrow on Bloomberg Tech.

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Speaker 5: Be sure to tune in for that.

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Speaker 3: The CEO of Qualcomm ed the company give a week

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Speaker 3: forecast for the current quarter. It's cited component shortages and

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Speaker 3: rising costs. That's not a new story, but by any means,

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Speaker 3: I mean, you've known this about.

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Speaker 5: So it's not new. I would say.

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Speaker 6: In the smartphone market, it seems worse for Qualcomm than

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Speaker 6: we thought. You know, they are the main processor makeup

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Speaker 6: for smartphones. They are getting hit on all sides because

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Speaker 6: of en market demand, being hit by memory for example.

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Speaker 6: They've tried to diversify the business away from that reliance

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Speaker 6: on smartphone, but within smartphone they're also kind of it

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Speaker 6: seems like losing business from Apple faster than was modeled for.

441
00:22:06,280 --> 00:22:07,920
Speaker 4: And then like they.

442
00:22:07,760 --> 00:22:14,880
Speaker 6: Are super super entrenched or exposed to Android in China, right,

443
00:22:14,920 --> 00:22:17,760
Speaker 6: and so like in aggregate all of the forecast for

444
00:22:17,800 --> 00:22:20,240
Speaker 6: that handset market, they aren't.

445
00:22:20,240 --> 00:22:21,040
Speaker 5: They weren't. Rosie.

446
00:22:21,080 --> 00:22:23,400
Speaker 6: To begin with, the thing that I will ask Christiano

447
00:22:23,560 --> 00:22:26,800
Speaker 6: is for him to give me his latest assessment of

448
00:22:26,840 --> 00:22:29,840
Speaker 6: the smartphone market for this year and whether it is

449
00:22:29,920 --> 00:22:32,119
Speaker 6: better or worse than he had told me last quarter.

450
00:22:32,359 --> 00:22:35,879
Speaker 6: So simple, But it is possible that the things deteriorate,

451
00:22:36,200 --> 00:22:39,399
Speaker 6: you know, quarters a quarter, and reading in King's report

452
00:22:39,440 --> 00:22:41,200
Speaker 6: on the earnings, that seems to be the case.

453
00:22:41,680 --> 00:22:44,200
Speaker 1: Hey, so Quad come down about four point three percent.

454
00:22:44,240 --> 00:22:46,600
Speaker 1: Here in the aftermarket, ARM holdings just down by eight

455
00:22:46,640 --> 00:22:49,000
Speaker 1: tents of a percon ARM delivering a sales forecast of

456
00:22:49,000 --> 00:22:51,720
Speaker 1: about one point thirty eight billion in the fiscal second quarter,

457
00:22:53,040 --> 00:22:56,280
Speaker 1: and we did see the stock under some pressure here, Mandy,

458
00:22:56,280 --> 00:22:58,480
Speaker 1: you've come on back in anything in terms of ARM

459
00:22:58,680 --> 00:22:59,439
Speaker 1: or Qualcom.

460
00:22:59,440 --> 00:23:01,200
Speaker 4: That's that's a note for you.

461
00:23:01,680 --> 00:23:03,560
Speaker 8: I mean just exposures.

462
00:23:03,600 --> 00:23:07,679
Speaker 7: I think ARM, because of the data center exposure, continues

463
00:23:07,720 --> 00:23:10,800
Speaker 7: to do better, even though ARM does have smartphone exposure.

464
00:23:10,920 --> 00:23:15,840
Speaker 7: But because their data center exposure has been much higher

465
00:23:16,040 --> 00:23:19,720
Speaker 7: in the past few quarters, they seem to be beating numbers,

466
00:23:19,760 --> 00:23:22,720
Speaker 7: whereas in the case of Qualcomm, I mean they are

467
00:23:22,880 --> 00:23:26,720
Speaker 7: talking about a twenty twenty nine guide and how the

468
00:23:26,920 --> 00:23:30,359
Speaker 7: business would be more diversified by then. But in the

469
00:23:30,440 --> 00:23:34,000
Speaker 7: near term this business is declining. The handset business is

470
00:23:34,040 --> 00:23:36,120
Speaker 7: still under pressure, yeah, because of.

471
00:23:36,119 --> 00:23:39,240
Speaker 8: The consumer smartphone and the memory pricing.

472
00:23:38,960 --> 00:23:42,520
Speaker 1: Impact all right through on Armed noting royalties from those products.

473
00:23:42,640 --> 00:23:45,440
Speaker 1: Data Center specifically more than doubling from a year earlier,

474
00:23:45,480 --> 00:23:47,399
Speaker 1: and the appetite for a new chip lineup is greater

475
00:23:47,520 --> 00:23:51,360
Speaker 1: than anticipate. This is coming from the company's CEO Armholdings.

476
00:23:51,520 --> 00:23:54,359
Speaker 3: We are doing something cool and exciting and new here

477
00:23:54,480 --> 00:23:58,080
Speaker 3: on Bloomberg BusinessWeek Daily. Thank you to send for sending

478
00:23:58,119 --> 00:24:00,520
Speaker 3: in your questions. You might have heard yesterday we're taking

479
00:24:00,520 --> 00:24:03,440
Speaker 3: your questions. It's a new feature exclusively for Bloomberg dot

480
00:24:03,480 --> 00:24:05,960
Speaker 3: com subscribers and for terminal subscribers.

481
00:24:06,000 --> 00:24:06,600
Speaker 5: It's easy to do.

482
00:24:06,640 --> 00:24:09,120
Speaker 3: You submit questions for a team to answer live on air.

483
00:24:09,440 --> 00:24:11,840
Speaker 3: You go to Bloomberg dot com slash ask Radio to

484
00:24:11,920 --> 00:24:15,679
Speaker 3: send in your question Bloomberg dot com slash ask Radio,

485
00:24:16,119 --> 00:24:18,080
Speaker 3: and we've already got some good questions coming in.

486
00:24:18,200 --> 00:24:20,040
Speaker 1: We do, indeed, and of course with us right now

487
00:24:20,040 --> 00:24:23,520
Speaker 1: our experts at Ludlow Bloomberg Tech host out there in

488
00:24:23,520 --> 00:24:26,680
Speaker 1: our San Francisco bureau Mandeep seeing Bloomberg Intelligence Global Head

489
00:24:26,680 --> 00:24:29,560
Speaker 1: of Technology Research Man Deeep. Some questions that came in

490
00:24:29,600 --> 00:24:32,920
Speaker 1: for you specifically, and this is kind of a little

491
00:24:32,920 --> 00:24:36,120
Speaker 1: bit more broader. What is happening with spinning disk storage sales?

492
00:24:36,200 --> 00:24:38,240
Speaker 1: Due to the price increases for solid state.

493
00:24:38,240 --> 00:24:42,000
Speaker 7: I mean, look, all of these markets, whether it's memory

494
00:24:42,240 --> 00:24:47,560
Speaker 7: or storage right now, they continue to have very positive fundamentals,

495
00:24:47,560 --> 00:24:53,119
Speaker 7: simply because when you look at how inferencing workloads are run,

496
00:24:53,400 --> 00:24:56,199
Speaker 7: and there is this concept called kb cash, which is

497
00:24:56,320 --> 00:25:00,040
Speaker 7: essentially storing all the weights of the models and the

498
00:25:00,080 --> 00:25:03,800
Speaker 7: context of the models and then moving it across whether

499
00:25:03,880 --> 00:25:08,840
Speaker 7: it's storage to memory or vice versa, and that continues

500
00:25:08,880 --> 00:25:12,000
Speaker 7: to increase in terms of volume because of the high

501
00:25:12,080 --> 00:25:16,119
Speaker 7: usage these llms have. So I think the fundamentals are

502
00:25:16,280 --> 00:25:19,840
Speaker 7: very strong, and that's why when I see market reaction

503
00:25:20,040 --> 00:25:21,720
Speaker 7: like we have seen over the past one week for

504
00:25:21,920 --> 00:25:25,280
Speaker 7: memory stocks, it's not justified by fundamentals.

505
00:25:25,280 --> 00:25:26,840
Speaker 8: That's just market positioning.

506
00:25:27,160 --> 00:25:30,000
Speaker 7: Because the fundamentals for all of these companies on the

507
00:25:30,080 --> 00:25:34,000
Speaker 7: memory and storage side, like it's volume driven, price driven,

508
00:25:34,119 --> 00:25:36,720
Speaker 7: and there is nothing that suggests a clip in the

509
00:25:36,800 --> 00:25:37,200
Speaker 7: near trip.

510
00:25:37,280 --> 00:25:38,960
Speaker 1: We just want to say that question came from Joel

511
00:25:39,000 --> 00:25:41,320
Speaker 1: in Albany, New York, and that was for you, Mandy.

512
00:25:41,160 --> 00:25:42,520
Speaker 3: And it's such a good question I want to post.

513
00:25:42,560 --> 00:25:44,280
Speaker 3: I'm going to post the same question to Ed Ludlow

514
00:25:44,280 --> 00:25:46,159
Speaker 3: because we also have had Ludlow here and I know

515
00:25:46,240 --> 00:25:47,840
Speaker 3: he wants to jump in on this again. Joel and

516
00:25:47,880 --> 00:25:50,439
Speaker 3: Albany setting this question into us, what is happening with

517
00:25:50,480 --> 00:25:53,560
Speaker 3: spinning disk storage sales due to the price increases for

518
00:25:53,640 --> 00:25:54,920
Speaker 3: solid state go ahead ed.

519
00:25:55,359 --> 00:25:58,960
Speaker 6: Yeah, I mean Mandy put it completely sickly. But basically,

520
00:25:59,240 --> 00:26:05,400
Speaker 6: AI has tightened supply across nand flash memory memory prices SSDs,

521
00:26:05,440 --> 00:26:07,800
Speaker 6: and as a result of that type supply, because the

522
00:26:07,880 --> 00:26:10,320
Speaker 6: demand is new, it comes from newer areas. In some

523
00:26:10,400 --> 00:26:14,240
Speaker 6: cases it makes things much more expensive. It is slowed

524
00:26:14,359 --> 00:26:18,720
Speaker 6: some migration from different technologies like hardest drives to flash.

525
00:26:19,040 --> 00:26:22,440
Speaker 6: The thing that the industry on the storage side is confronting,

526
00:26:22,800 --> 00:26:25,280
Speaker 6: just as they are on the memory side, is looking

527
00:26:25,320 --> 00:26:30,080
Speaker 6: at their history and aggressively expanding capacity on a permanent

528
00:26:30,160 --> 00:26:33,919
Speaker 6: basis and saying like, we will invest into this in

529
00:26:34,000 --> 00:26:36,919
Speaker 6: the belief that the capacity the demand will still be

530
00:26:36,960 --> 00:26:39,520
Speaker 6: there in whatever number of years time. It's the same

531
00:26:39,600 --> 00:26:42,520
Speaker 6: formula for them, and it's been really interesting to speak

532
00:26:42,520 --> 00:26:44,280
Speaker 6: with the CEOs of those companies over a number of

533
00:26:44,359 --> 00:26:46,480
Speaker 6: quarters and say like, why don't you guys just build

534
00:26:46,480 --> 00:26:48,680
Speaker 6: more capacity like the same way the memory guys are doing,

535
00:26:48,920 --> 00:26:52,040
Speaker 6: And they'll say, oh, you know, because we're a little conservative,

536
00:26:52,040 --> 00:26:54,320
Speaker 6: and we're worried about us being wrong, you know, and

537
00:26:54,720 --> 00:26:57,240
Speaker 6: that is what a lot of the supply chain of

538
00:26:57,920 --> 00:27:00,760
Speaker 6: call it Ai is confronting. The one thing I point

539
00:27:00,760 --> 00:27:03,320
Speaker 6: out is Qualcomm. You know, earlier I talked about Qualcom's

540
00:27:03,400 --> 00:27:04,960
Speaker 6: end marketing the smartphone. It's a little bit of a

541
00:27:05,000 --> 00:27:09,160
Speaker 6: tangent being you know, memory prices do put off consumers

542
00:27:09,200 --> 00:27:11,840
Speaker 6: when handset prices are higher. But the point that Qualcom's

543
00:27:11,840 --> 00:27:15,080
Speaker 6: making is also that production's being impacted due to literally

544
00:27:15,119 --> 00:27:18,280
Speaker 6: limited supply of components, and that makes it difficult on

545
00:27:18,280 --> 00:27:20,119
Speaker 6: the supply side for them too. You leave money on

546
00:27:20,160 --> 00:27:20,560
Speaker 6: the table.

547
00:27:20,760 --> 00:27:23,280
Speaker 5: It's hitting everyone, It's hitting everyone, consumers.

548
00:27:23,359 --> 00:27:25,320
Speaker 1: I just want to point out, speaking of consumers, we're

549
00:27:25,359 --> 00:27:26,920
Speaker 1: just also not tech related.

550
00:27:27,200 --> 00:27:29,080
Speaker 5: Although they do use they might, they might, They might

551
00:27:29,200 --> 00:27:29,960
Speaker 5: argue with you about that.

552
00:27:30,200 --> 00:27:33,400
Speaker 1: Starbucks does use technology, but their shares are jumping about

553
00:27:33,400 --> 00:27:36,439
Speaker 1: eleven percent after boosting fiscally year adjusted EPs Outlook, we

554
00:27:36,480 --> 00:27:38,160
Speaker 1: just want to throw that into the mix as well.

555
00:27:38,200 --> 00:27:40,359
Speaker 1: Everybody might need some Starbucks tonight to write up their

556
00:27:40,400 --> 00:27:43,600
Speaker 1: research on all of this earnings. After the clothes Mandy

557
00:27:43,600 --> 00:27:45,280
Speaker 1: bum want to layer on top of this too. S

558
00:27:45,359 --> 00:27:49,879
Speaker 1: K Heinex profit disappointing. They're spending on capex storing to

559
00:27:49,960 --> 00:27:53,080
Speaker 1: thirty one billion dollars. They did report a six fold

560
00:27:53,160 --> 00:27:56,440
Speaker 1: surge and quarterly profit. You know, I feel like, can

561
00:27:56,480 --> 00:27:59,560
Speaker 1: you take one of these reports, which is a great

562
00:27:59,600 --> 00:28:02,920
Speaker 1: read on AI on its own, or do you have

563
00:28:03,000 --> 00:28:05,840
Speaker 1: to do it against kind of the broader stories.

564
00:28:06,400 --> 00:28:07,840
Speaker 8: I mean, it's great that we have.

565
00:28:07,960 --> 00:28:12,720
Speaker 7: You know, all the customers of these companies also report

566
00:28:12,760 --> 00:28:16,359
Speaker 7: the same day as Skhinex, so you will read the

567
00:28:16,400 --> 00:28:20,560
Speaker 7: commentary to connect the dots. But in terms of fundamentals, again,

568
00:28:21,760 --> 00:28:25,480
Speaker 7: I know, the quarter was given by price increases thirty

569
00:28:25,560 --> 00:28:29,959
Speaker 7: percent esp growth for Skhinex, and they talked about some

570
00:28:30,040 --> 00:28:33,720
Speaker 7: long term agreements with ten of their customers, so that

571
00:28:33,800 --> 00:28:37,320
Speaker 7: may cap price increases going forward, which is probably the

572
00:28:37,359 --> 00:28:38,160
Speaker 7: reason why.

573
00:28:37,920 --> 00:28:39,480
Speaker 8: The stock reacted negatively.

574
00:28:39,720 --> 00:28:43,880
Speaker 7: Okay, but look, I mean right now, these companies are

575
00:28:44,840 --> 00:28:48,760
Speaker 7: showing very good fundamentals in terms of what they are making,

576
00:28:49,040 --> 00:28:52,000
Speaker 7: how they are dealing with the customers, and they want

577
00:28:52,040 --> 00:28:55,760
Speaker 7: to avoid a situation where the spot pricing really goes

578
00:28:55,800 --> 00:28:59,320
Speaker 7: down and that effects lapses, right yeah, and so that's

579
00:28:59,360 --> 00:29:01,920
Speaker 7: why these l he is actually are a positive. If

580
00:29:01,920 --> 00:29:04,480
Speaker 7: you asked me, whether it was Micron before and now,

581
00:29:04,520 --> 00:29:07,160
Speaker 7: as k heinis, they want to make sure they have

582
00:29:07,280 --> 00:29:09,880
Speaker 7: visibility and things don't co up.

583
00:29:10,000 --> 00:29:11,600
Speaker 4: You've talked to us about this, I will, says.

584
00:29:11,680 --> 00:29:13,960
Speaker 1: Kahnig said they expect a man to outpay supply till

585
00:29:13,960 --> 00:29:16,120
Speaker 1: at least twenty thirty. That twenty thirty seems to be

586
00:29:16,240 --> 00:29:18,120
Speaker 1: that magic date that everybody talks about.

587
00:29:18,160 --> 00:29:20,280
Speaker 3: I wish I could see that far into the future.

588
00:29:20,760 --> 00:29:22,480
Speaker 3: I want to talk a little bit about Microsoft and

589
00:29:22,720 --> 00:29:25,719
Speaker 3: go back to Microsoft. The company shares or hire right

590
00:29:25,720 --> 00:29:27,400
Speaker 3: now by just about two percent. They were as much

591
00:29:27,400 --> 00:29:30,400
Speaker 3: as three percent higher. The company reported fourth quarter results.

592
00:29:30,440 --> 00:29:34,920
Speaker 3: They beat expectations on key metrics, including cloud revenue, some

593
00:29:35,080 --> 00:29:40,080
Speaker 3: other commentary that was really important here. Fourth quarter three

594
00:29:40,080 --> 00:29:44,120
Speaker 3: sixty five commercial cloud revenue increased sixteen percent, Azure revenues

595
00:29:44,120 --> 00:29:47,360
Speaker 3: surpassed one hundred billion dollars for the first time. And

596
00:29:47,360 --> 00:29:49,800
Speaker 3: then this one's really important. Microsoft three to sixty five

597
00:29:49,880 --> 00:29:54,000
Speaker 3: copilot reached over thirty million paid seats once again. Shares

598
00:29:54,040 --> 00:29:55,840
Speaker 3: a Microsoft in the after hours up two percent, but

599
00:29:55,920 --> 00:29:58,320
Speaker 3: going into this print Carrol down twenty percent this year.

600
00:29:58,440 --> 00:30:00,600
Speaker 1: Yeah, I want to go into this exact We know

601
00:30:00,680 --> 00:30:02,760
Speaker 1: Microsoft shares have been under pressure. That brings us to

602
00:30:02,800 --> 00:30:06,360
Speaker 1: another question. Thank you Anna in New Jersey who sent

603
00:30:06,400 --> 00:30:08,880
Speaker 1: a question too Bloomberg dot com slash ask Radio. We

604
00:30:08,960 --> 00:30:11,440
Speaker 1: are bringing our listeners into this conversation.

605
00:30:12,040 --> 00:30:12,600
Speaker 4: She says.

606
00:30:12,760 --> 00:30:16,080
Speaker 1: All right, I'm a senior, a longtime investor in Microsoft.

607
00:30:16,120 --> 00:30:18,320
Speaker 1: I've been so worried about my over twenty percent drop

608
00:30:18,360 --> 00:30:21,440
Speaker 1: in Microsoft stock price this year. I understand the stock

609
00:30:21,480 --> 00:30:23,880
Speaker 1: decline has been due to investor sentiment about the company's

610
00:30:23,920 --> 00:30:25,440
Speaker 1: AI strategy or lack thereof.

611
00:30:25,600 --> 00:30:26,720
Speaker 4: Is it a valid concern?

612
00:30:27,440 --> 00:30:29,920
Speaker 1: If so, is the company making changes to its business

613
00:30:29,960 --> 00:30:32,120
Speaker 1: strategy as or it relates to AI? More importantly, should

614
00:30:32,160 --> 00:30:35,120
Speaker 1: I stick with Microsoft going forward? We don't give advice

615
00:30:35,160 --> 00:30:37,719
Speaker 1: about whether you should need is man Deep there does

616
00:30:37,840 --> 00:30:42,840
Speaker 1: man Deep, but her concerns about the investor sentiment about

617
00:30:42,840 --> 00:30:45,120
Speaker 1: the company's AI strategy or lack theroughm is it a

618
00:30:45,200 --> 00:30:45,920
Speaker 1: valid concern?

619
00:30:46,520 --> 00:30:49,480
Speaker 7: It is a valid concern because of what happened between

620
00:30:49,600 --> 00:30:53,520
Speaker 7: Microsoft and open Ai. Remember, Microsoft was way ahead of

621
00:30:53,640 --> 00:30:57,400
Speaker 7: everyone else because of their open Ai partnership, and they

622
00:30:57,600 --> 00:31:00,840
Speaker 7: seem to have slowed down for them because now it's

623
00:31:00,920 --> 00:31:04,480
Speaker 7: not an exclusive agreement anymore with open Ai. And even

624
00:31:04,560 --> 00:31:08,640
Speaker 7: though that agreement does last through twenty thirty one. It's

625
00:31:08,680 --> 00:31:11,720
Speaker 7: still the fact that it's not an exclusive agreement is

626
00:31:11,840 --> 00:31:15,400
Speaker 7: what has raised concerns. And all these companies are competing

627
00:31:15,480 --> 00:31:17,280
Speaker 7: with Microsoft at the end of the day, you know,

628
00:31:17,360 --> 00:31:18,360
Speaker 7: whether it's open ai.

629
00:31:18,480 --> 00:31:22,840
Speaker 1: Or anthropic they Microsoft did say the fourth quarter open

630
00:31:22,880 --> 00:31:26,320
Speaker 1: Ai investment impact ANPs was a negative seven CENSU share.

631
00:31:26,360 --> 00:31:28,440
Speaker 4: I don't know, is that significant or is that to

632
00:31:28,480 --> 00:31:29,480
Speaker 4: be expected or what is that?

633
00:31:30,560 --> 00:31:35,040
Speaker 8: I think for me that really wasn't a surprise.

634
00:31:35,320 --> 00:31:38,400
Speaker 7: It's just the backlog number that they gave, six hundred

635
00:31:38,440 --> 00:31:42,360
Speaker 7: and eighty four billion. Just think about how much pipeline

636
00:31:42,600 --> 00:31:45,800
Speaker 7: does this company have, and even if twenty five percent

637
00:31:45,920 --> 00:31:49,160
Speaker 7: of that backlog gets converted to revenue, that's huge.

638
00:31:49,560 --> 00:31:51,320
Speaker 8: So from you know, a long.

639
00:31:51,200 --> 00:31:55,040
Speaker 7: Term perspective, it feels like if a company has up

640
00:31:55,120 --> 00:31:59,040
Speaker 7: to seven hundred billion dollars in revenue visibility, they're in

641
00:31:59,200 --> 00:32:02,760
Speaker 7: good shape. The problem for Microsoft is a lot of

642
00:32:02,840 --> 00:32:05,760
Speaker 7: this backlog. In fact, forty percent of that is tied

643
00:32:05,800 --> 00:32:07,600
Speaker 7: to open ai one company.

644
00:32:07,720 --> 00:32:07,920
Speaker 1: Wow.

645
00:32:08,040 --> 00:32:12,520
Speaker 7: So the concentration is immense and that's where because things

646
00:32:12,640 --> 00:32:15,600
Speaker 7: haven't gone really well with open Ai in terms of

647
00:32:15,680 --> 00:32:19,200
Speaker 7: the partnership that they had, the exclusivity and open AI

648
00:32:19,400 --> 00:32:22,480
Speaker 7: has also fallen behind when it comes to the LM

649
00:32:22,600 --> 00:32:26,520
Speaker 7: raised to anthropic. So those two fronts are where I

650
00:32:26,680 --> 00:32:28,080
Speaker 7: have my concerns.

651
00:32:27,760 --> 00:32:29,960
Speaker 3: And I know you have some thoughts on this question too. Again,

652
00:32:30,000 --> 00:32:32,480
Speaker 3: this is from Anna in New Jersey. She asked this question.

653
00:32:32,640 --> 00:32:34,640
Speaker 3: All she did was go to Bloomberg dot com slash

654
00:32:34,720 --> 00:32:39,800
Speaker 3: ask Radio. She's wondering about the company's AI strategy or

655
00:32:39,920 --> 00:32:40,480
Speaker 3: lack thereof.

656
00:32:40,640 --> 00:32:45,040
Speaker 5: Is it a valid concern? So it's not new right.

657
00:32:45,640 --> 00:32:48,040
Speaker 6: Imagine if they phoned in and like actually pose those

658
00:32:48,120 --> 00:32:49,920
Speaker 6: questions over the phone, I'll be terrifying.

659
00:32:51,120 --> 00:32:54,160
Speaker 5: Jeane was the worst. Don't give our managers any ideas, okay.

660
00:32:55,400 --> 00:32:57,560
Speaker 6: June was the worst month for the stock since two

661
00:32:57,600 --> 00:33:02,440
Speaker 6: thousand going back to March, the worst quarter for the

662
00:33:02,480 --> 00:33:05,800
Speaker 6: stock since two thousand and eight, and basically Bloomberg has

663
00:33:05,800 --> 00:33:09,320
Speaker 6: written about this endlessly. The stock did rise yes last year,

664
00:33:10,960 --> 00:33:15,280
Speaker 6: about fourteen percent or fifteen percent, and over the last

665
00:33:15,320 --> 00:33:18,400
Speaker 6: twelve months has underperformed the tech sector essentially. You know,

666
00:33:18,480 --> 00:33:20,240
Speaker 6: if you just take it, I don't know, whatever gage

667
00:33:20,240 --> 00:33:22,840
Speaker 6: of the sm P five hundred you want. The ROI

668
00:33:23,000 --> 00:33:25,680
Speaker 6: debate is still there. You guys played a SoundBite with

669
00:33:25,880 --> 00:33:28,640
Speaker 6: Charlie earlier from one of the analysts who basically said,

670
00:33:28,960 --> 00:33:30,640
Speaker 6: and forgive me on blankt who it is. I remember

671
00:33:30,680 --> 00:33:34,320
Speaker 6: in a second that Microsoft should get credit for its

672
00:33:34,400 --> 00:33:37,800
Speaker 6: discipline on capex. There's a section of the street that

673
00:33:37,880 --> 00:33:41,360
Speaker 6: believes that that they've been the most disciplined. But at

674
00:33:41,400 --> 00:33:44,520
Speaker 6: the other extreme there's a massive ROI debate, which Mandeeps

675
00:33:44,560 --> 00:33:46,280
Speaker 6: kind of outlined a little bit. But at the end

676
00:33:46,320 --> 00:33:48,320
Speaker 6: of the day, Microsoft spending well over one hundred billion

677
00:33:48,320 --> 00:33:51,760
Speaker 6: dollars a year on AI infrastructure, and the CAPEX number,

678
00:33:52,280 --> 00:33:56,120
Speaker 6: to the point, has grown much faster than the metrics

679
00:33:56,160 --> 00:33:58,720
Speaker 6: we have available to us to judge the ROI, which

680
00:33:58,760 --> 00:34:01,400
Speaker 6: is Azure in this case, Again, what happens next. We

681
00:34:01,520 --> 00:34:03,440
Speaker 6: know that Asure grew forty three percent in the court

682
00:34:03,440 --> 00:34:07,600
Speaker 6: of Gone, and if they raise capex by the amount

683
00:34:07,680 --> 00:34:10,560
Speaker 6: that the street forecasts, that will be CAPEX growth in

684
00:34:10,640 --> 00:34:15,160
Speaker 6: excess of fifty percent. CAPEX growing faster than than top

685
00:34:15,239 --> 00:34:17,640
Speaker 6: line growth on Azure. It's key cloud unit. And that's

686
00:34:17,719 --> 00:34:20,279
Speaker 6: the calculus that's been in place with quite some time.

687
00:34:21,440 --> 00:34:22,960
Speaker 6: As it relates to this stop.

688
00:34:23,800 --> 00:34:26,759
Speaker 1: Well on that and this idea, you know we're you know,

689
00:34:26,800 --> 00:34:29,560
Speaker 1: I've got listeners and viewers you're sending in questions, I mean,

690
00:34:29,840 --> 00:34:34,439
Speaker 1: men deep when you look at Microsoft Meta, I'll throw

691
00:34:34,560 --> 00:34:37,560
Speaker 1: in ARM and Qualcom, but I think Microsoft and Meta

692
00:34:37,800 --> 00:34:41,400
Speaker 1: obviously are really key stories here. I mean, as an investor,

693
00:34:42,480 --> 00:34:45,560
Speaker 1: what should what should you be thinking about? That needs

694
00:34:45,600 --> 00:34:48,040
Speaker 1: to be asked of these companies right now? It's what

695
00:34:48,239 --> 00:34:49,520
Speaker 1: clarity do you still need?

696
00:34:49,840 --> 00:34:53,359
Speaker 7: I'm parsing through that Azure number to figure out how

697
00:34:53,480 --> 00:34:57,600
Speaker 7: much of it is AI versus the non AI, the

698
00:34:57,719 --> 00:35:01,399
Speaker 7: traditional cloud, and to my mind, based on the disclosures

699
00:35:01,480 --> 00:35:05,960
Speaker 7: that they have shared, AI makes up at least twenty

700
00:35:06,040 --> 00:35:08,920
Speaker 7: to twenty five percent of that forty three percent growth.

701
00:35:09,480 --> 00:35:12,200
Speaker 7: So from that perspective, if you have a business that

702
00:35:12,400 --> 00:35:14,640
Speaker 7: is close to one hundred and twenty five hundred and

703
00:35:14,719 --> 00:35:19,680
Speaker 7: thirty billion dollars where twenty five percent growth is coming

704
00:35:19,840 --> 00:35:24,400
Speaker 7: from AI, that's pretty sizable. Close to thirty billion dollars

705
00:35:24,880 --> 00:35:28,760
Speaker 7: in revenue that's AI generated on an investment of around

706
00:35:28,760 --> 00:35:32,200
Speaker 7: one hundred and eighty billion in CAPEX. To my mind,

707
00:35:32,280 --> 00:35:36,440
Speaker 7: that's a pretty decent ROI for Microsoft with Meta. I

708
00:35:36,560 --> 00:35:40,320
Speaker 7: can't do that math, yeah, because there is no you know,

709
00:35:40,440 --> 00:35:43,399
Speaker 7: AI number in that top line. So to my mind, yes,

710
00:35:43,480 --> 00:35:46,279
Speaker 7: it could be in ad pricing. But it's a guessing game.

711
00:35:46,680 --> 00:35:48,360
Speaker 8: So it's just easier to.

712
00:35:48,560 --> 00:35:52,240
Speaker 7: Parse out that AI contribution for all these cloud companies.

713
00:35:52,280 --> 00:35:55,279
Speaker 7: Same thing with alphabet, same thing with Amazon Awls.

714
00:35:56,000 --> 00:35:58,359
Speaker 8: There is a math that you can do to back

715
00:35:58,440 --> 00:35:59,680
Speaker 8: out that AI contribution.

716
00:36:00,000 --> 00:36:03,040
Speaker 4: So what could metas say on a call? Can they

717
00:36:03,160 --> 00:36:03,440
Speaker 4: do that?

718
00:36:03,880 --> 00:36:06,480
Speaker 7: I mean that first line where they say they are

719
00:36:06,560 --> 00:36:10,840
Speaker 7: looking to develop enterprise businesses, to me, that's the AI

720
00:36:11,040 --> 00:36:14,600
Speaker 7: contribution once they start reporting that enterprise line.

721
00:36:14,719 --> 00:36:16,280
Speaker 8: Yeah, there is your AI number.

722
00:36:16,320 --> 00:36:16,680
Speaker 5: All right.

723
00:36:17,040 --> 00:36:20,960
Speaker 3: We continue to get questions, this one coming from Grand Rapids, Michigan.

724
00:36:21,080 --> 00:36:24,839
Speaker 3: Brian listening and watching in Grand Rapids, Michigan. Rights, can

725
00:36:24,880 --> 00:36:27,760
Speaker 3: you comment on whether or not end users of memory

726
00:36:27,840 --> 00:36:31,040
Speaker 3: and other chips are ordering from multiple suppliers in order

727
00:36:31,120 --> 00:36:32,760
Speaker 3: to expedite delivery.

728
00:36:32,560 --> 00:36:33,400
Speaker 5: Of those products?

729
00:36:33,480 --> 00:36:36,880
Speaker 3: Meaning are they over ordering and does that overstate the

730
00:36:36,960 --> 00:36:39,000
Speaker 3: actual order backlog of memory chips?

731
00:36:39,360 --> 00:36:41,480
Speaker 6: And you want to come in on that first, Yeah,

732
00:36:41,520 --> 00:36:43,920
Speaker 6: I mean on the compute side, that's the whole story

733
00:36:44,400 --> 00:36:48,520
Speaker 6: that overall, in the compute environment, the hyperscalers and other

734
00:36:49,960 --> 00:36:53,360
Speaker 6: owners and operators of infrastructure of AI workloads have chosen

735
00:36:53,480 --> 00:36:58,480
Speaker 6: to diversify multiple sources of compute GPUs from Nvidia and AMD,

736
00:36:58,719 --> 00:37:01,680
Speaker 6: or TPUs from Google or some of the custom inference

737
00:37:02,680 --> 00:37:07,600
Speaker 6: server designs, because diversifying somewhat mitigates the supply risk. And

738
00:37:07,719 --> 00:37:09,480
Speaker 6: on the memory side, you know, when I was with

739
00:37:09,600 --> 00:37:12,680
Speaker 6: Jensen on Friday, Jensen one the Nvidia CEO, I think

740
00:37:12,800 --> 00:37:17,080
Speaker 6: his point quite consistently has been, you know, they several

741
00:37:17,200 --> 00:37:20,239
Speaker 6: years ago went to sk Heinez, Micron and Samsung and said,

742
00:37:20,320 --> 00:37:22,040
Speaker 6: this is the world as we see it in the future.

743
00:37:22,400 --> 00:37:24,000
Speaker 6: There's going to be a really great need for high

744
00:37:24,040 --> 00:37:26,680
Speaker 6: bandwidth memory chips, which are just layers of d RAM,

745
00:37:26,800 --> 00:37:30,439
Speaker 6: the same DRAM that goes into consumer electronics, and tried

746
00:37:30,480 --> 00:37:33,000
Speaker 6: to get them on board to plan for that future.

747
00:37:33,680 --> 00:37:36,640
Speaker 6: But Nvidia, you know, has a very deep relationship with

748
00:37:36,800 --> 00:37:39,600
Speaker 6: sk It's sourcing for wherever it can get. And the

749
00:37:39,680 --> 00:37:41,520
Speaker 6: main point that you know, the last one before I

750
00:37:41,600 --> 00:37:44,600
Speaker 6: kick it over to Mandy, that Brian I've been thinking about,

751
00:37:45,239 --> 00:37:49,520
Speaker 6: is again, what happened was the consumer electronics industry was

752
00:37:49,560 --> 00:37:52,040
Speaker 6: getting DRAM and then suddenly there was a whole new

753
00:37:52,080 --> 00:37:56,719
Speaker 6: industry data centers that wanted at its core the same thing.

754
00:37:57,280 --> 00:37:59,800
Speaker 6: And who went, right, where's that DRAM actually going in

755
00:37:59,840 --> 00:38:01,320
Speaker 6: the and that's super interesting.

756
00:38:02,640 --> 00:38:06,279
Speaker 7: I mean, look, when your demand if you listen to

757
00:38:07,040 --> 00:38:09,959
Speaker 7: Jensen and the leaders of these.

758
00:38:09,920 --> 00:38:11,960
Speaker 4: Elements, it's been at the White House by the way,

759
00:38:12,400 --> 00:38:13,399
Speaker 4: with the President.

760
00:38:13,120 --> 00:38:16,960
Speaker 7: Yes exactly, and he would tell you demand is five

761
00:38:17,120 --> 00:38:20,279
Speaker 7: to ten times more than what we can supply. So

762
00:38:20,400 --> 00:38:22,680
Speaker 7: when you are in that sort of situation, the risk

763
00:38:22,800 --> 00:38:26,000
Speaker 7: of double ordering, to my mind, is very low because

764
00:38:26,080 --> 00:38:30,040
Speaker 7: we're talking you know, oh, are they oversupplying by two

765
00:38:30,160 --> 00:38:33,920
Speaker 7: percent of five percent when everyone is saying demand is

766
00:38:34,600 --> 00:38:35,839
Speaker 7: five to ten times more.

767
00:38:36,000 --> 00:38:38,520
Speaker 8: So I think at least in the near term.

768
00:38:38,600 --> 00:38:42,440
Speaker 7: Again, things could change if somebody pulls back on Capex

769
00:38:42,520 --> 00:38:43,040
Speaker 7: like a Meta.

770
00:38:43,560 --> 00:38:44,200
Speaker 8: We don't know that.

771
00:38:44,400 --> 00:38:47,440
Speaker 7: They have kept it intact, but maybe tomorrow they want

772
00:38:47,480 --> 00:38:49,960
Speaker 7: to pull back, then we will have a different conversation.

773
00:38:50,080 --> 00:38:52,280
Speaker 1: Well, that leads us to another question. Thank you folks

774
00:38:52,360 --> 00:38:56,200
Speaker 1: who are sending us questions. I just send to Bloomberg

775
00:38:56,239 --> 00:38:59,080
Speaker 1: dot com slash ask rata. This is a new functionality

776
00:38:59,160 --> 00:39:00,840
Speaker 1: that we just added, and let's like this.

777
00:39:00,960 --> 00:39:01,680
Speaker 5: I'm having fun.

778
00:39:01,680 --> 00:39:03,520
Speaker 4: Making you all a part of our conversation.

779
00:39:04,280 --> 00:39:07,520
Speaker 1: But speaking about what could happen, this is Mattessha in

780
00:39:07,600 --> 00:39:10,560
Speaker 1: Houston saying, what can Meta or Microsoft say that would

781
00:39:10,600 --> 00:39:13,239
Speaker 1: drop significantly after hours. We saw the same thing with

782
00:39:13,320 --> 00:39:15,520
Speaker 1: Google Alphabet on their earnings call.

783
00:39:16,400 --> 00:39:19,880
Speaker 7: I mean, if Meta even remotely mentions about an equity

784
00:39:20,000 --> 00:39:25,640
Speaker 7: raise coming, the stock would really take a beating beta. Yes,

785
00:39:25,920 --> 00:39:29,880
Speaker 7: equity didn't they do that last so it was alphabets

786
00:39:30,160 --> 00:39:33,120
Speaker 7: an equity raise. There were rumors about Meta doing an

787
00:39:33,200 --> 00:39:36,520
Speaker 7: equity raise, and these companies have been issuing bonds, but

788
00:39:36,680 --> 00:39:38,520
Speaker 7: imagine doing an equity raise.

789
00:39:39,120 --> 00:39:41,440
Speaker 8: I don't think it will go very well with the investors,

790
00:39:41,600 --> 00:39:42,360
Speaker 8: ed what about for you?

791
00:39:42,600 --> 00:39:46,120
Speaker 1: Mattesha asking Mattessha in Houston where it feels like it's

792
00:39:46,160 --> 00:39:48,200
Speaker 1: Houston here because it's hot and steamy in New York City,

793
00:39:48,800 --> 00:39:51,160
Speaker 1: But he asked, what can Meta or Microsoft say that

794
00:39:51,200 --> 00:39:52,279
Speaker 1: would drop significantly?

795
00:39:52,360 --> 00:39:54,560
Speaker 4: After hours? We saw the same thing with Google on

796
00:39:54,600 --> 00:39:55,399
Speaker 4: their earnings call.

797
00:39:56,200 --> 00:39:59,400
Speaker 6: Yeah, I mean you know, Alphabet gave the Fuia Capex

798
00:39:59,560 --> 00:40:02,080
Speaker 6: update on the call, right, not in the earning statement,

799
00:40:02,160 --> 00:40:06,600
Speaker 6: So that's possible. The only score also represents a chance

800
00:40:06,719 --> 00:40:10,279
Speaker 6: to explain things. So forgive me, guys, I got not

801
00:40:10,440 --> 00:40:13,279
Speaker 6: enough screen real estate. But I think Meta is still lower, right,

802
00:40:14,640 --> 00:40:17,120
Speaker 6: I'm looking here. Okay, we're down more than six percent,

803
00:40:17,880 --> 00:40:20,240
Speaker 6: and like, if you think about one of the concerns

804
00:40:20,280 --> 00:40:23,960
Speaker 6: would matter. It was the miss on margin margins and

805
00:40:24,040 --> 00:40:27,600
Speaker 6: the growth in expenses. But they would also say, you know,

806
00:40:28,000 --> 00:40:31,120
Speaker 6: look at the one time severance charge and the one

807
00:40:31,200 --> 00:40:35,880
Speaker 6: time legal charge. Maybe they'll get to explain that, you

808
00:40:36,000 --> 00:40:39,000
Speaker 6: know that these are just not issues right now. If

809
00:40:39,040 --> 00:40:41,160
Speaker 6: it is indeed margins that are concerned, what I'd say

810
00:40:41,840 --> 00:40:43,759
Speaker 6: is the same thing I say to my wife. If

811
00:40:43,800 --> 00:40:46,040
Speaker 6: I didn't have to pay daycare, i'd buy a sports car.

812
00:40:46,520 --> 00:40:50,880
Speaker 6: But I do have to pay daycare, so you know,

813
00:40:51,160 --> 00:40:52,680
Speaker 6: I won't be buying the spots Carver, but that you know,

814
00:40:52,719 --> 00:40:56,640
Speaker 6: look at the EPs myss basically the relatives consensus, and

815
00:40:56,800 --> 00:40:59,960
Speaker 6: maybe you know, maybe with an explanation, the street will

816
00:41:00,080 --> 00:41:01,759
Speaker 6: feel different about it.

817
00:41:01,880 --> 00:41:03,640
Speaker 3: And to clarified, you'd buy a sports car for her,

818
00:41:03,800 --> 00:41:06,759
Speaker 3: right exactly, Sorry, Okay, I know the one she wants

819
00:41:06,800 --> 00:41:08,080
Speaker 3: to Okay, just making sure.

820
00:41:08,040 --> 00:41:11,600
Speaker 4: Ah, what a good husband. Um yeah, all right, So

821
00:41:11,800 --> 00:41:15,520
Speaker 4: just to real you never know what's going to happen here.

822
00:41:15,880 --> 00:41:19,279
Speaker 1: Microsoft up about three point four percent here in the afters,

823
00:41:19,760 --> 00:41:22,600
Speaker 1: continuing to see Meta under pressure down about six and

824
00:41:22,680 --> 00:41:25,080
Speaker 1: a quarter percent. We've got another question coming in from

825
00:41:25,320 --> 00:41:26,560
Speaker 1: Kellyan in Maryland.

826
00:41:26,760 --> 00:41:30,680
Speaker 3: Yeah, Kaylan writing in Microsoft just guided next year's capex

827
00:41:30,719 --> 00:41:32,680
Speaker 3: two twenty five to two hundred and sixty billion. The

828
00:41:32,719 --> 00:41:35,800
Speaker 3: stock went up Alphabets at two hundred billion, but the

829
00:41:35,880 --> 00:41:39,880
Speaker 3: companies actually cash those checks. The optical and interconnect suppliers

830
00:41:39,960 --> 00:41:43,879
Speaker 3: like Credo and Lumentum are down twenty five to forty

831
00:41:43,920 --> 00:41:47,360
Speaker 3: percent from their highs this month. Chinese competition explains the

832
00:41:47,400 --> 00:41:51,040
Speaker 3: memory sell off. This person writes, these names don't compete

833
00:41:51,080 --> 00:41:55,160
Speaker 3: with CXMT. So who's wrong here, man, Deep I'm gonna

834
00:41:55,160 --> 00:41:57,479
Speaker 3: put this one to you. The hyperscaler's writing record checks

835
00:41:57,920 --> 00:42:00,320
Speaker 3: or the market selling the companies that cash them, and

836
00:42:00,400 --> 00:42:03,239
Speaker 3: what reconnects these stocks to their fundamentals?

837
00:42:03,480 --> 00:42:05,200
Speaker 4: And Kelly and you can come work here, because that's

838
00:42:05,239 --> 00:42:05,800
Speaker 4: a great question.

839
00:42:07,080 --> 00:42:10,160
Speaker 7: I mean, with a lot of these component stocks, I

840
00:42:10,320 --> 00:42:14,320
Speaker 7: feel like everyone has cars from how they have traded

841
00:42:14,360 --> 00:42:14,960
Speaker 7: in the past.

842
00:42:15,200 --> 00:42:16,799
Speaker 8: Yeah, and there is some profit.

843
00:42:16,600 --> 00:42:19,680
Speaker 7: Taking going on, and I know I'm generalizing this, but

844
00:42:20,160 --> 00:42:22,360
Speaker 7: at the end of the day, nothing has changed in

845
00:42:22,520 --> 00:42:25,879
Speaker 7: terms of the demand side that you need fewer components,

846
00:42:25,960 --> 00:42:28,440
Speaker 7: whether it's on the memory side or optical side.

847
00:42:29,000 --> 00:42:29,320
Speaker 8: Nothing.

848
00:42:29,480 --> 00:42:32,200
Speaker 7: Really, all these companies have been telling us is their

849
00:42:32,239 --> 00:42:36,640
Speaker 7: supply constrained. They are going to make bigger chips that

850
00:42:36,880 --> 00:42:40,279
Speaker 7: can do more compute. And that's what Nvidia has been

851
00:42:40,360 --> 00:42:43,880
Speaker 7: touting that the next version will require five times more power,

852
00:42:44,680 --> 00:42:46,000
Speaker 7: it can do a lot faster.

853
00:42:46,120 --> 00:42:47,640
Speaker 8: In princing, that's a trend.

854
00:42:48,320 --> 00:42:50,880
Speaker 7: I mean, if these stocks are getting sold off, there

855
00:42:51,000 --> 00:42:54,080
Speaker 7: is some profit taking, and you know, the people are

856
00:42:54,239 --> 00:42:55,240
Speaker 7: just going by history.

857
00:42:56,480 --> 00:42:59,040
Speaker 1: And Mandy brings up a good point because anytime, like

858
00:42:59,200 --> 00:43:01,680
Speaker 1: Tim and I are talking about, you know, a sell

859
00:43:01,719 --> 00:43:03,320
Speaker 1: off in some of the chip names, you know you

860
00:43:03,400 --> 00:43:05,600
Speaker 1: have to sometimes not all of them, but you have

861
00:43:05,719 --> 00:43:08,680
Speaker 1: to pull out in perspective because the socks overall is

862
00:43:08,800 --> 00:43:10,680
Speaker 1: still up a lot this year.

863
00:43:11,560 --> 00:43:13,399
Speaker 4: It was up a lot more earlier in the year.

864
00:43:13,440 --> 00:43:15,480
Speaker 1: But nonetheless there's got to be a little bit of

865
00:43:15,520 --> 00:43:18,440
Speaker 1: a smart perspective on the run that some of these

866
00:43:18,520 --> 00:43:19,080
Speaker 1: names have had.

867
00:43:20,000 --> 00:43:24,680
Speaker 6: Yeah, I mean, but also there's no sense in saying, okay,

868
00:43:24,800 --> 00:43:27,440
Speaker 6: year to date, they're still up markedly. You know, look

869
00:43:27,480 --> 00:43:29,440
Speaker 6: at the growth for the whole of the full year

870
00:43:29,520 --> 00:43:32,960
Speaker 6: twenty five and like in videos an easy example, right

871
00:43:33,040 --> 00:43:36,280
Speaker 6: because it is the case study of the AI trade.

872
00:43:37,120 --> 00:43:39,319
Speaker 6: Look at where they are relative to twenty twenty two,

873
00:43:39,520 --> 00:43:42,719
Speaker 6: or to twenty nineteen, or when they started as a

874
00:43:42,760 --> 00:43:46,960
Speaker 6: public company, like the gains are astronomical where people now

875
00:43:48,120 --> 00:43:49,920
Speaker 6: and like I spend a lot of time in FA go,

876
00:43:50,080 --> 00:43:53,040
Speaker 6: which is on the terminal. You just it's on all

877
00:43:53,120 --> 00:43:55,279
Speaker 6: of the financial analysis data. Look at some of the

878
00:43:55,480 --> 00:43:59,160
Speaker 6: estimates for free cash flow, for example, for Nvidia next year,

879
00:43:59,440 --> 00:44:00,560
Speaker 6: like this kind of crazy.

880
00:44:01,120 --> 00:44:03,480
Speaker 4: But we are in a bear market.

881
00:44:03,239 --> 00:44:06,520
Speaker 6: Tech on a technical basis, right, We've not come out

882
00:44:06,560 --> 00:44:08,919
Speaker 6: of the bear market to a ball market on chip

883
00:44:08,960 --> 00:44:12,440
Speaker 6: stocks because in a sense, nothing's really changed. And Nvidia

884
00:44:12,480 --> 00:44:15,320
Speaker 6: doesn't report anyway till very late in this month, August.

885
00:44:15,360 --> 00:44:17,960
Speaker 6: We're not even in August yet.

886
00:44:18,160 --> 00:44:22,360
Speaker 4: Almost there, almost there, No, but we're getting closer.

887
00:44:22,440 --> 00:44:24,680
Speaker 1: We're not there yet a couple of days, all right,

888
00:44:24,760 --> 00:44:27,880
Speaker 1: and we know you've got to run super appreciate it, No, no, no,

889
00:44:28,360 --> 00:44:29,160
Speaker 1: really appreciate it.

890
00:44:29,680 --> 00:44:31,600
Speaker 4: Ed of course, I Ludlow. He is the host of

891
00:44:31,600 --> 00:44:32,319
Speaker 4: Bloomberg Tech.

892
00:44:32,760 --> 00:44:34,640
Speaker 3: I do want to go back to something. We read

893
00:44:34,719 --> 00:44:38,080
Speaker 3: a question from klin out in Maryland, who wrote about

894
00:44:38,360 --> 00:44:41,520
Speaker 3: Microsoft guiding next year's CAPEX. We should note that Microsoft

895
00:44:41,560 --> 00:44:45,560
Speaker 3: has not yet guided given an update for next year's CAPEX. Man, Deep,

896
00:44:45,600 --> 00:44:49,600
Speaker 3: you have the most recent numbers for CAPEX for fiscal

897
00:44:49,680 --> 00:44:52,040
Speaker 3: year twenty twenty seven. For Microsoft, remind us where they are.

898
00:44:52,200 --> 00:44:55,680
Speaker 7: Yeah, they just reported their four Q twenty fiscal year

899
00:44:55,920 --> 00:44:56,839
Speaker 7: twenty twenty six.

900
00:44:56,960 --> 00:44:59,520
Speaker 8: So for the twenty twenty seven, I mean.

901
00:44:59,480 --> 00:45:02,600
Speaker 7: Consensu this is slightly lower around two hundred twenty to

902
00:45:02,760 --> 00:45:06,600
Speaker 7: two thirty billion, but we think it'll be higher around

903
00:45:06,640 --> 00:45:09,839
Speaker 7: two hundred forty to two fifty billion, So that will

904
00:45:09,920 --> 00:45:11,600
Speaker 7: be at least.

905
00:45:12,280 --> 00:45:15,160
Speaker 3: Sixty three percent increase versus twenty twenty six fiscal year.

906
00:45:16,000 --> 00:45:19,680
Speaker 7: Well, I mean if you capture the twenty twenty sixth

907
00:45:19,800 --> 00:45:22,319
Speaker 7: number at around and again we don't know all these

908
00:45:22,440 --> 00:45:25,400
Speaker 7: numbers they have to give guidance on, but twenty twenty

909
00:45:25,600 --> 00:45:28,200
Speaker 7: seven would be slightly lower in terms of growth pocasts.

910
00:45:28,280 --> 00:45:30,320
Speaker 4: Yeah, you know what's interesting.

911
00:45:30,480 --> 00:45:33,600
Speaker 1: I I was just doing a search man deep about

912
00:45:34,480 --> 00:45:37,919
Speaker 1: Microsoft and one story that just came up here after

913
00:45:38,000 --> 00:45:41,640
Speaker 1: the close about Goldman gauging investor appetite for potential five

914
00:45:41,680 --> 00:45:43,719
Speaker 1: point four billion dollar debt offering to help fund a

915
00:45:43,840 --> 00:45:47,080
Speaker 1: Blackstone back QTS data center tied to Microsoft. I guess

916
00:45:47,160 --> 00:45:50,800
Speaker 1: my point is there's so much money going after this

917
00:45:50,960 --> 00:45:53,120
Speaker 1: AI trade and helping to do the build out, and

918
00:45:53,200 --> 00:45:55,560
Speaker 1: I get a little nervous when there's just so much

919
00:45:55,600 --> 00:45:59,279
Speaker 1: money floating around what for you? Again going to the

920
00:45:59,320 --> 00:46:02,000
Speaker 1: financial sect that's eager to get in on this, and

921
00:46:02,120 --> 00:46:04,160
Speaker 1: the backing is there. When does it become a little

922
00:46:04,160 --> 00:46:04,960
Speaker 1: bit worsome though?

923
00:46:05,760 --> 00:46:10,000
Speaker 7: I mean when somebody misses on, you know, their debt payments.

924
00:46:10,120 --> 00:46:13,400
Speaker 7: So remember all the private debt that is being raised

925
00:46:13,440 --> 00:46:18,000
Speaker 7: to finance this data center build out. Everyone has to

926
00:46:18,080 --> 00:46:20,920
Speaker 7: make their interest payments on that debt, right there is

927
00:46:21,000 --> 00:46:26,239
Speaker 7: a bond being sold, and when somebody defaults on that,

928
00:46:26,560 --> 00:46:29,759
Speaker 7: and that is likely to happen when there is like

929
00:46:30,080 --> 00:46:33,440
Speaker 7: lack of ROI on how much can you get by

930
00:46:33,800 --> 00:46:37,279
Speaker 7: renting that data center, whether it's the actual lease on

931
00:46:37,360 --> 00:46:40,400
Speaker 7: the building or you know, a full data center like

932
00:46:40,520 --> 00:46:44,600
Speaker 7: new clouds are doing. And when you see strains around that,

933
00:46:45,520 --> 00:46:48,560
Speaker 7: that's when you know you know things because then there

934
00:46:48,560 --> 00:46:51,279
Speaker 7: will be somebody who is holding that debt, right you know,

935
00:46:51,400 --> 00:46:54,520
Speaker 7: then they may get strained. So that's when things really cascade,

936
00:46:54,760 --> 00:46:56,680
Speaker 7: all right, So watching out for that stuff.

937
00:46:58,080 --> 00:46:58,759
Speaker 5: Stay with us.

938
00:46:58,880 --> 00:47:01,759
Speaker 3: More from Bloomberg Business Week Daily coming up after this.

939
00:47:05,520 --> 00:47:09,520
Speaker 2: You're listening to the Bloomberg Business Weekdaily podcast. Catch us

940
00:47:09,600 --> 00:47:13,000
Speaker 2: live weekday afternoons from two to five pm Eastern Listen

941
00:47:13,080 --> 00:47:16,520
Speaker 2: on Apple CarPlay and Android Auto with the Bloomberg Business app,

942
00:47:16,800 --> 00:47:18,560
Speaker 2: or watch us live on YouTube.

943
00:47:19,080 --> 00:47:21,000
Speaker 3: All right, we've been talking, of course with our man

944
00:47:21,040 --> 00:47:24,600
Speaker 3: Deep saying, let's talk meta platforms and meta and bring

945
00:47:24,680 --> 00:47:28,000
Speaker 3: in Kurt Wagner, who's been all over these numbers. He's

946
00:47:28,120 --> 00:47:30,759
Speaker 3: big tech team leader. He joins us out from our

947
00:47:30,880 --> 00:47:34,719
Speaker 3: West Coast bureau in San Francisco. Shares of Meta down

948
00:47:34,840 --> 00:47:37,359
Speaker 3: six point one percent. The company narrowed its full year

949
00:47:37,600 --> 00:47:39,960
Speaker 3: capital spending forecast. It boosted the lower end of the

950
00:47:40,400 --> 00:47:42,400
Speaker 3: two one hundred and thirty billion from one hundred and

951
00:47:42,440 --> 00:47:44,880
Speaker 3: twenty five billion dollars, but it was also the midpoint

952
00:47:44,920 --> 00:47:47,840
Speaker 3: of metas third quarter revenue forecast that miss analyst estimates.

953
00:47:48,160 --> 00:47:51,040
Speaker 3: Feeds into concern that Metas revenue isn't climbing fast enough

954
00:47:51,080 --> 00:47:53,759
Speaker 3: to keep up with its spending. Kurt, is that what

955
00:47:53,920 --> 00:47:55,400
Speaker 3: is moving the stock in the after hours?

956
00:47:55,440 --> 00:47:56,120
Speaker 5: Those two things?

957
00:47:57,800 --> 00:48:00,239
Speaker 9: Yeah, I think it's a combination of those things. It's

958
00:48:01,080 --> 00:48:04,080
Speaker 9: you know, with Metas, with all these companies, as long

959
00:48:04,120 --> 00:48:07,080
Speaker 9: as they're printing money and the core business is growing,

960
00:48:07,080 --> 00:48:10,359
Speaker 9: they can kind of get away with this aggressive AI

961
00:48:10,480 --> 00:48:13,239
Speaker 9: spending on all of these data centers. The minute you

962
00:48:13,400 --> 00:48:16,680
Speaker 9: start to worry, even if it's subtle or slight, that

963
00:48:16,760 --> 00:48:18,320
Speaker 9: there might be a little bit of a slowdown on

964
00:48:18,400 --> 00:48:21,439
Speaker 9: that core advertising business. Now suddenly you start to question, well,

965
00:48:21,680 --> 00:48:24,400
Speaker 9: you know, should you be spending so much on all

966
00:48:24,440 --> 00:48:26,319
Speaker 9: of the AI infrastructure.

967
00:48:26,560 --> 00:48:27,920
Speaker 4: So I think there's a combination of that.

968
00:48:28,160 --> 00:48:28,759
Speaker 5: There's also a.

969
00:48:28,800 --> 00:48:32,920
Speaker 9: Note in their release that they are raising their total

970
00:48:33,280 --> 00:48:35,320
Speaker 9: year expenses there are at least the floor of that

971
00:48:35,520 --> 00:48:38,360
Speaker 9: range as well, in part because of the legal fees

972
00:48:38,440 --> 00:48:40,480
Speaker 9: that they're having to incur. You may with all I

973
00:48:40,480 --> 00:48:43,160
Speaker 9: think we've talked about that they are fighting all these

974
00:48:43,239 --> 00:48:47,600
Speaker 9: legal battles around addiction and youth safety, and so they

975
00:48:47,640 --> 00:48:50,120
Speaker 9: said they're spending you know, two point four billion dollars

976
00:48:50,160 --> 00:48:53,400
Speaker 9: this year just on legal related expenses, and so obviously

977
00:48:53,520 --> 00:48:54,840
Speaker 9: that race and eyes brows.

978
00:48:55,080 --> 00:48:57,359
Speaker 1: Yeah, anytime they say it's material, right, Kurt, you got

979
00:48:57,440 --> 00:48:59,640
Speaker 1: to kind of sit up a little bit a straighter

980
00:49:00,400 --> 00:49:02,400
Speaker 1: because that means there's an impact and it may not

981
00:49:02,520 --> 00:49:04,239
Speaker 1: be over potentially.

982
00:49:05,360 --> 00:49:08,000
Speaker 9: No, and in fact, far from it. They have thousands

983
00:49:08,040 --> 00:49:10,600
Speaker 9: of lawsuits that are waiting in the wings. They've only

984
00:49:11,000 --> 00:49:13,080
Speaker 9: gone to trial for a few of them, they're settling

985
00:49:13,160 --> 00:49:15,840
Speaker 9: some of them. So you know, this has the potential

986
00:49:15,880 --> 00:49:19,520
Speaker 9: to be a very expensive legal dispute for them in.

987
00:49:19,560 --> 00:49:20,080
Speaker 5: The long run.

988
00:49:21,960 --> 00:49:23,280
Speaker 4: We're saying about our aman Deep.

989
00:49:23,280 --> 00:49:24,280
Speaker 5: He's got to go write some research.

990
00:49:24,320 --> 00:49:26,680
Speaker 1: He's got to write some research. But we so appreciate

991
00:49:26,800 --> 00:49:28,879
Speaker 1: him always always skirt.

992
00:49:28,920 --> 00:49:32,680
Speaker 3: What are the questions that Mark Zuckerberg needs to answer specifically?

993
00:49:32,719 --> 00:49:36,640
Speaker 3: I guess I'm wondering about the the enterprise side of this,

994
00:49:36,960 --> 00:49:39,000
Speaker 3: and like what the enterprise opportunities could be.

995
00:49:39,160 --> 00:49:42,800
Speaker 4: Yeah, give a specific book, Yeah, exactly.

996
00:49:42,880 --> 00:49:45,560
Speaker 9: I mean he flicked, he flipped in his opening remarks

997
00:49:45,920 --> 00:49:50,239
Speaker 9: that there's a potential for them to sell cloud computing capacity.

998
00:49:50,960 --> 00:49:53,719
Speaker 9: That's something that we've reported on that my colleague Ridley

999
00:49:53,760 --> 00:49:56,359
Speaker 9: Griffin and I broke some news about earlier this month.

1000
00:49:56,960 --> 00:49:59,520
Speaker 9: So he is sort of confirming that that's something they're

1001
00:49:59,520 --> 00:50:02,800
Speaker 9: thinking about, confirming that that's a plan in the works.

1002
00:50:03,160 --> 00:50:05,480
Speaker 9: But I imagine he'll get some questions about that once

1003
00:50:05,719 --> 00:50:07,719
Speaker 9: they open the call up to analysts. I think the

1004
00:50:07,800 --> 00:50:11,000
Speaker 9: other thing is just is there ultimately like a ceiling

1005
00:50:11,080 --> 00:50:13,400
Speaker 9: here on this spending. Obviously from twenty twenty six, we

1006
00:50:13,480 --> 00:50:16,239
Speaker 9: know their capex range, but beyond that, I mean, there

1007
00:50:16,280 --> 00:50:18,360
Speaker 9: are hundreds of billions of dollars that he's sort of

1008
00:50:18,680 --> 00:50:22,040
Speaker 9: earmarked for this project, Like, when do they start to

1009
00:50:22,120 --> 00:50:25,000
Speaker 9: see the real return on that investment? And is there

1010
00:50:25,040 --> 00:50:27,160
Speaker 9: a limit to how much he's willing to spend. I'm

1011
00:50:27,200 --> 00:50:29,160
Speaker 9: sure he's not going to put a number on it today,

1012
00:50:29,560 --> 00:50:32,000
Speaker 9: but I also think that's the type of thing that

1013
00:50:32,080 --> 00:50:33,200
Speaker 9: people want to know about.

1014
00:50:33,520 --> 00:50:37,920
Speaker 1: Well, we've got a listener and viewer in dubai us

1015
00:50:37,960 --> 00:50:40,480
Speaker 1: I is sending in and on that we've got this

1016
00:50:40,560 --> 00:50:41,359
Speaker 1: new feature.

1017
00:50:41,080 --> 00:50:41,879
Speaker 4: Cart It's really cool.

1018
00:50:41,960 --> 00:50:45,840
Speaker 1: It's exclusively for Bloomberg dot com subscribers and terminal clients,

1019
00:50:46,680 --> 00:50:48,800
Speaker 1: and they've been sending questions to Bloomberg dot Com slash

1020
00:50:48,840 --> 00:50:51,400
Speaker 1: Ask Radio. But it gets into kind of just the

1021
00:50:51,520 --> 00:50:55,680
Speaker 1: records amount of capex that folks are spending generally when

1022
00:50:55,719 --> 00:50:58,160
Speaker 1: it comes to AI. I don't think it's necessarily specific

1023
00:50:58,239 --> 00:51:02,080
Speaker 1: to META, and he's asking someone's going to get the money.

1024
00:51:02,160 --> 00:51:04,960
Speaker 4: So is the marketing missing something here? Like we keep

1025
00:51:05,040 --> 00:51:06,560
Speaker 4: going to this, certainly with.

1026
00:51:06,719 --> 00:51:11,000
Speaker 1: Man Deep, it's like, are we missing something the circular financing,

1027
00:51:11,239 --> 00:51:14,279
Speaker 1: the spend, the ROI when you look at.

1028
00:51:14,320 --> 00:51:17,840
Speaker 4: Meta, you know, and just generally what's going on in

1029
00:51:17,920 --> 00:51:19,680
Speaker 4: this AI spend? How do you see it? When you

1030
00:51:20,080 --> 00:51:21,640
Speaker 4: continue to report all this stuff out.

1031
00:51:23,480 --> 00:51:26,520
Speaker 9: I mean, the best I can kind of maybe think

1032
00:51:26,560 --> 00:51:29,680
Speaker 9: about it is, you know sometimes when people want to

1033
00:51:29,719 --> 00:51:31,880
Speaker 9: buy a house in a market and they think, gosh,

1034
00:51:31,920 --> 00:51:36,640
Speaker 9: this feels really expensive, and you know, the rationale is perhaps, hey,

1035
00:51:36,680 --> 00:51:38,880
Speaker 9: maybe five years down the line, I'll look back and

1036
00:51:39,000 --> 00:51:41,680
Speaker 9: be very happy that I bought my house when I did,

1037
00:51:41,800 --> 00:51:46,160
Speaker 9: because everything is going up. And perhaps that's the feeling here, right,

1038
00:51:46,360 --> 00:51:49,879
Speaker 9: is that eventually everybody is going to be using these

1039
00:51:49,960 --> 00:51:53,160
Speaker 9: AI tools and services and needing to power these things,

1040
00:51:53,600 --> 00:51:56,200
Speaker 9: and it feels expensive today to go build these data centers,

1041
00:51:56,280 --> 00:51:59,080
Speaker 9: but in five years they will be very happy they did,

1042
00:51:59,239 --> 00:52:02,040
Speaker 9: because the and is going to be so high that

1043
00:52:02,400 --> 00:52:04,680
Speaker 9: it will look like a cheap investment for them. That's

1044
00:52:04,719 --> 00:52:06,640
Speaker 9: got to be the rationale at this point. Now, the

1045
00:52:06,760 --> 00:52:08,680
Speaker 9: question is do you get to that point in five

1046
00:52:08,800 --> 00:52:11,759
Speaker 9: years or not. We obviously don't know the answer to that,

1047
00:52:11,960 --> 00:52:15,200
Speaker 9: but I have to think that when you're saying we're

1048
00:52:15,200 --> 00:52:17,400
Speaker 9: going to spend two hudred and fifty billion dollars, for example,

1049
00:52:17,480 --> 00:52:21,000
Speaker 9: on a single data center in Louisiana, you obviously feel

1050
00:52:21,000 --> 00:52:23,239
Speaker 9: that that's going to be recouped at some point, and

1051
00:52:23,320 --> 00:52:26,359
Speaker 9: that's only going to be possible if people adopt AI

1052
00:52:26,480 --> 00:52:29,360
Speaker 9: products in the way that someone like Mark Zuckerberg believes

1053
00:52:29,400 --> 00:52:29,839
Speaker 9: that they will.

1054
00:52:30,040 --> 00:52:32,279
Speaker 1: Can I just say, though, this is the tough thing

1055
00:52:32,360 --> 00:52:34,200
Speaker 1: for all of these companies. It's like a little bit

1056
00:52:34,239 --> 00:52:36,359
Speaker 1: of fomo, like what if you miss it? What if

1057
00:52:36,440 --> 00:52:39,759
Speaker 1: this is what everybody kind of markets it as and

1058
00:52:39,960 --> 00:52:43,200
Speaker 1: sells it as, and it is this life changing thing

1059
00:52:43,280 --> 00:52:44,960
Speaker 1: that everybody's going to be easy.

1060
00:52:45,080 --> 00:52:47,200
Speaker 3: That makes sense for a company like open Ai and

1061
00:52:47,239 --> 00:52:50,040
Speaker 3: a company like Anthropic, But Kurt, it doesn't make sense

1062
00:52:50,080 --> 00:52:53,799
Speaker 3: for a company like Meta because the product that they

1063
00:52:53,960 --> 00:52:55,440
Speaker 3: have that uses AI is.

1064
00:52:55,440 --> 00:52:57,160
Speaker 5: The one that just keeps us glude to the screens

1065
00:52:57,200 --> 00:52:58,040
Speaker 5: and serves us ads.

1066
00:52:58,160 --> 00:52:58,279
Speaker 6: Right.

1067
00:53:00,000 --> 00:53:02,480
Speaker 9: Well, Mark Zuckerberg would probably disagree. He actually I was

1068
00:53:02,560 --> 00:53:04,800
Speaker 9: in the room when he's had to sit down interview

1069
00:53:04,880 --> 00:53:07,560
Speaker 9: with our very own Emily Chang a few summers ago,

1070
00:53:08,160 --> 00:53:10,719
Speaker 9: and he actually said, you know, I would much rather

1071
00:53:10,920 --> 00:53:15,880
Speaker 9: overspend and be wrong betting on this than wake up

1072
00:53:15,960 --> 00:53:18,600
Speaker 9: in a few years and realize we underinvested. And so

1073
00:53:18,840 --> 00:53:22,000
Speaker 9: he's willing to lose a little money to make sure

1074
00:53:22,000 --> 00:53:24,280
Speaker 9: they're in position. Now, you have to remember what's driving

1075
00:53:24,360 --> 00:53:26,799
Speaker 9: this a little bit from our Zuckerberg is that He's

1076
00:53:26,840 --> 00:53:30,600
Speaker 9: someone who has built his entire business on the backs

1077
00:53:30,800 --> 00:53:35,160
Speaker 9: of other platforms for distributions. So what I mean by

1078
00:53:35,239 --> 00:53:38,000
Speaker 9: that is, you know, you can't access Facebook and Instagram

1079
00:53:38,120 --> 00:53:40,680
Speaker 9: unless you got an iPhone or an Android phone. He's

1080
00:53:40,760 --> 00:53:42,920
Speaker 9: very reliant on Apple and Google in that way. I

1081
00:53:43,000 --> 00:53:45,320
Speaker 9: think he believes that AI is this next, you know,

1082
00:53:45,520 --> 00:53:50,279
Speaker 9: computing platform, whether it's physical hardware or not, and he

1083
00:53:50,440 --> 00:53:52,360
Speaker 9: does not want to have to rely on open aies

1084
00:53:52,400 --> 00:53:55,279
Speaker 9: models or anthropics models to get his products out there.

1085
00:53:55,440 --> 00:53:57,359
Speaker 1: Got to make sure the eyeballs are still coming his way,

1086
00:53:57,480 --> 00:54:00,680
Speaker 1: I mean essentially right and not going somewhere else. Kurt

1087
00:54:00,719 --> 00:54:04,960
Speaker 1: Wagner looking forward to all your reporting ongoing on meta platforms.

1088
00:54:05,120 --> 00:54:10,280
Speaker 1: Super appreciate it. Kurt Wagner is Bloomberg News senior tech reporter.

1089
00:54:10,400 --> 00:54:11,680
Speaker 4: I actually think did you get in a title.

1090
00:54:11,760 --> 00:54:13,200
Speaker 5: Oh he's big tech team leader, You.

1091
00:54:13,320 --> 00:54:15,640
Speaker 4: Are big tech team leader. All right, good stuff.

1092
00:54:16,239 --> 00:54:21,560
Speaker 2: This is the Bloomberg Business Week Daily podcast, available on Apple, Spotify,

1093
00:54:21,719 --> 00:54:25,440
Speaker 2: and anywhere else you get your podcasts. Listen live weekday

1094
00:54:25,480 --> 00:54:29,200
Speaker 2: afternoons from two to five pm Eastern on Bloomberg dot com,

1095
00:54:29,560 --> 00:54:33,399
Speaker 2: the iHeartRadio app, tune In, and the Bloomberg Business app.

1096
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Speaker 2: You can also watch US live every weekday on YouTube

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Speaker 2: and always on the Bloomberg terminal