WEBVTT - Apple’s $2,000 iPhone Duon Debuts With Limited Supply 0:00:02.730 --> 0:00:10.590 Bloomberg audio studios, podcasts, radio news. You're listening to the 0:00:10.630 --> 0:00:14.570 Bloomberg intelligence podcast. Catch us live weekdays at 10 a.m. 0:00:14.630 --> 0:00:17.239 Eastern on Apple car play and Android auto with the 0:00:17.320 --> 0:00:20.400 Bloomberg business app. Listen on demand, wherever you get your 0:00:20.420 --> 0:00:23.040 podcasts or watch us live on YouTube. 0:00:24.280 --> 0:00:26.780 And again, one of the cool stories out there is 0:00:26.860 --> 0:00:29.320 Apple's out with a new phone, the foldable phone. It's, 0:00:29.500 --> 0:00:32.120 it's a first for Apple, uh, Of course, there are 0:00:32.159 --> 0:00:34.460 other foldable phones in the marketplace, but like a lot 0:00:34.479 --> 0:00:35.820 of things, Apple takes its sweet time. 0:00:35.840 --> 0:00:37.659 And it looks better, usually. 0:00:37.700 --> 0:00:38.400 Yeah, it looks. 0:00:38.540 --> 0:00:39.300 It's more expensive. 0:00:39.380 --> 0:00:42.440 Yeah, $ 2, 000. What's it mean to Apple and to the 0:00:42.580 --> 0:00:44.560 P & L at Apple and to the stock of Apple? 0:00:44.880 --> 0:00:47.409 Maybe the investment psyche around Apple. Let's check it out 0:00:47.450 --> 0:00:51.750 with Anurag Rana, Senior Tech Analyst for Bloomberg Intelligence. Anurag, 0:00:51.790 --> 0:00:54.690 frame out for us what this new iPhone kind of 0:00:54.770 --> 0:00:57.950 means for the company and for the phone business at Apple. 0:00:59.790 --> 0:01:01.330 I think the biggest thing is going to be, you're 0:01:01.350 --> 0:01:04.710 going to see a shift from customers that are used 0:01:04.750 --> 0:01:06.710 to the Pro or the Pro Max models, which is 0:01:06.750 --> 0:01:09.280 the most expensive models that they have. And they are 0:01:09.300 --> 0:01:11.160 the ones who are going to migrate towards this duo. 0:01:11.520 --> 0:01:13.500 And we think it's only going to be a small 0:01:13.580 --> 0:01:14.300 portion of that. 0:01:14.840 --> 0:01:17.740 At any given time and any given year, Apple sells 0:01:17.780 --> 0:01:22.610 somewhere between 225 to 250 million units globally. We think 0:01:23.069 --> 0:01:25.410 going into the next first 12 months of the launch, 0:01:25.810 --> 0:01:29.390 they will do somewhere between 10 to 14 million units. 0:01:29.410 --> 0:01:31.950 So that's about, you could say, 7% of the base 0:01:31.990 --> 0:01:34.429 and not too much. But that's really where we are 0:01:34.510 --> 0:01:38.910 right now. Given what we have heard on the demand 0:01:38.950 --> 0:01:41.630 side of it, given the orders, we think it's going 0:01:41.670 --> 0:01:44.270 to be perhaps towards the top end of this bucket. 0:01:44.470 --> 0:01:46.690 And it could be even a little higher if they 0:01:46.730 --> 0:01:47.750 are able to meet the demand. 0:01:48.250 --> 0:01:50.290 Scarlett, just looking at the stock, I've been reading a lot. 0:01:50.790 --> 0:01:52.780 seeing a lot recently that maybe Apple's kind of the 0:01:53.020 --> 0:01:57.720 anti-AI stock within the tech space that has much less exposure, 0:01:57.760 --> 0:02:01.180 not really spending the money. Stock's up 27% year-to-date, hitting 0:02:01.240 --> 0:02:03.440 a 52-week and an all-time high today. 0:02:03.820 --> 0:02:06.340 Well, it's kind of like the safe haven play among 0:02:06.360 --> 0:02:10.010 the big tech names. Anurag, talk about the Duo and 0:02:10.050 --> 0:02:13.230 how it fits in with Apple's strategy to lease the iPhone, 0:02:13.310 --> 0:02:17.389 to make the iPhones more accessible to people who may 0:02:17.430 --> 0:02:19.530 not be able to afford the price tag to buy 0:02:19.560 --> 0:02:19.970 it outright. 0:02:21.310 --> 0:02:22.970 Yeah, I think this is one of the most important 0:02:23.320 --> 0:02:26.220 factors about Apple. We've always said that, you know, think 0:02:26.280 --> 0:02:30.080 of Apple or these products as a subscription-based business, because 0:02:30.120 --> 0:02:32.880 it's very rare if you get into the Apple ecosystem, 0:02:33.160 --> 0:02:35.200 and for that matter, you know, Samsung as well on 0:02:35.220 --> 0:02:37.760 the higher end, you're not going to leave the ecosystem. 0:02:37.820 --> 0:02:40.960 So each individual has their own refresh cycle. You know, 0:02:40.980 --> 0:02:42.920 some people keep it for three years, four years, and 0:02:42.960 --> 0:02:46.120 five years. So when you look at Duo, This is 0:02:46.160 --> 0:02:48.520 a very expensive phone. But if you think about the 0:02:48.560 --> 0:02:54.420 leasing plan, even on the base model, it starts at $ 55, $ 60. 0:02:53.770 --> 0:02:55.870 Now, for me, it's a little bit higher. 0:02:55.930 --> 0:02:58.049 But for a lot of people who use Uber, Lyft, 0:02:58.169 --> 0:03:02.049 and Uber Eats, this is probably not that large amount 0:03:02.090 --> 0:03:04.730 of money. But I think that's going to be one 0:03:04.790 --> 0:03:07.250 big factor that drives the adoption of this particular phone. 0:03:08.280 --> 0:03:11.300 So give us a sense of just kind of how 0:03:11.440 --> 0:03:15.830 Cupertino is today in terms of product launches. I mean, 0:03:15.930 --> 0:03:18.870 is there still the same feeling on Wall Street, on Arag, 0:03:18.889 --> 0:03:23.450 that this company can continue to deliver really, really good 0:03:23.889 --> 0:03:25.510 products that customers want? 0:03:27.060 --> 0:03:29.260 In all fairness, that has not been the case for 0:03:29.340 --> 0:03:32.010 Apple for many, many years. This is the first time, 0:03:32.070 --> 0:03:34.170 I would say, within a 10-year period, you're seeing a 0:03:34.270 --> 0:03:37.210 new form factor that has some coolness factor to it. 0:03:37.730 --> 0:03:39.550 And from what we have heard from Mark Gurman. 0:03:39.620 --> 0:03:42.740 And nobody writes better than him in the space about Apple, 0:03:43.360 --> 0:03:46.060 The new CEO is very focused on design and products, 0:03:46.360 --> 0:03:48.540 not so much about supply chain, not so much about 0:03:48.580 --> 0:03:51.420 tariffs and other things. And if that's the case, then 0:03:51.480 --> 0:03:54.390 we should anticipate a lot more new products showing up. 0:03:54.710 --> 0:03:56.550 Whether they are hit in the market, to be honest, 0:03:56.570 --> 0:03:59.670 it doesn't matter, but at least shows that these guys 0:03:59.810 --> 0:04:03.490 are trying their best to actively play a part in 0:04:03.750 --> 0:04:07.450 our daily life. For example, this new segment around home, really, 0:04:07.470 --> 0:04:09.270 that's not going to drive a lot of revenue. But 0:04:09.330 --> 0:04:12.730 frankly speaking, Right now, a lot of people don't talk 0:04:12.770 --> 0:04:15.550 to Siri in their house. Everybody talks to Alexa. It's 0:04:15.590 --> 0:04:19.650 a small instrument, but that's where you have the mindshare 0:04:19.790 --> 0:04:22.740 of the consumer because you're talking to Alexa about what's 0:04:22.760 --> 0:04:24.460 the weather, order something for me. 0:04:24.880 --> 0:04:26.039 Why shouldn't be that Siri? 0:04:26.080 --> 0:04:29.640 Because Apple controls your biggest ecosystem when it comes to 0:04:29.720 --> 0:04:32.350 phones and also laptops. 0:04:32.570 --> 0:04:33.530 Why not the home then? 0:04:33.980 --> 0:04:36.480 Right. It feels very insidious, but once you hook someone in, 0:04:36.540 --> 0:04:39.659 you hook them in. So does that mean with this 0:04:39.720 --> 0:04:42.480 new CEO, Anurag, that we're going to see less innovation 0:04:42.540 --> 0:04:45.659 in Apple services and just more products thrown out there, 0:04:45.760 --> 0:04:47.750 even if it's kind of spaghetti on the wall? You 0:04:47.790 --> 0:04:49.150 don't know if it's going to work, but at least 0:04:49.170 --> 0:04:53.030 they're keeping everyone on their toes with new products all 0:04:53.050 --> 0:04:53.310 the time? 0:04:54.940 --> 0:04:57.910 I actually don't think that, only because from what we 0:04:57.930 --> 0:05:00.849 have read, he's very focused on design. So they are 0:05:00.870 --> 0:05:03.609 going to experiment a lot, but they're only going to 0:05:03.650 --> 0:05:06.950 release stuff, in my view, that is going to be design-centric, 0:05:07.010 --> 0:05:09.770 that is going to have some cool feature around it, 0:05:10.130 --> 0:05:12.200 which is It's going to wow the consumer. I think 0:05:12.220 --> 0:05:14.400 that is the most important part. I think a lot 0:05:14.420 --> 0:05:17.440 of people feel that the innovation has left Apple and 0:05:17.500 --> 0:05:19.360 it's not the same what we used to see from 0:05:19.400 --> 0:05:21.900 the Steve Jobs era. And I'm hoping for the sake 0:05:21.920 --> 0:05:24.860 of the company, frankly, that that comes back because that 0:05:24.900 --> 0:05:26.900 really is completely needed for them at this point. 0:05:27.880 --> 0:05:30.760 Anurag, what's the AI call today when you talk to clients? 0:05:30.800 --> 0:05:32.540 Where are we today? Because it seems like it's a 0:05:32.580 --> 0:05:35.640 very fluid situation about how people think about the AI trade. 0:05:37.060 --> 0:05:40.330 Yeah, the AI trade is absolutely in shambles right now 0:05:40.430 --> 0:05:43.710 because the big question is, where are the frontier models 0:05:43.730 --> 0:05:44.330 going with it? 0:05:44.510 --> 0:05:46.029 What would be the adoption rate? 0:05:46.800 --> 0:05:50.200 There's a lot of angst about the open models coming 0:05:50.320 --> 0:05:53.540 out and having an impact on it. We recently published 0:05:53.580 --> 0:05:56.870 a few notes around this topic, and the core of 0:05:57.050 --> 0:05:59.990 the things is this. We have a very massive backlog 0:06:00.029 --> 0:06:02.909 on everybody's balance sheet. So when it comes to growth 0:06:02.950 --> 0:06:05.390 rates over the next one year or two years, I 0:06:05.430 --> 0:06:07.070 think we are going to be okay with that. 0:06:07.150 --> 0:06:08.049 That's not the issue. 0:06:08.410 --> 0:06:10.670 The big issue that's showing up or the cracks that 0:06:10.690 --> 0:06:13.990 they are showing up are what would happen if we 0:06:14.029 --> 0:06:16.430 are not able to get some data center capacity online? 0:06:16.770 --> 0:06:19.560 What could happen after the midterms if there is even 0:06:19.620 --> 0:06:22.020 more opposition of new data centers being built up? 0:06:22.520 --> 0:06:24.120 What would happen if the capital. 0:06:24.860 --> 0:06:27.080 Funding costs have gone up, and that's probably the biggest 0:06:27.140 --> 0:06:29.419 reason now is the increase in funding costs. 0:06:30.440 --> 0:06:33.640 Stay with us. More from Bloomberg Intelligence coming up after this. 0:06:37.520 --> 0:06:41.230 You're listening to the Bloomberg Intelligence podcast. Catch us live 0:06:41.310 --> 0:06:44.349 weekdays at 10 a.m. Eastern on Apple CarPlay and Android 0:06:44.410 --> 0:06:47.710 Auto with the Bloomberg Business app. Listen on demand wherever 0:06:47.750 --> 0:06:50.830 you get your podcasts or watch us live on YouTube. 0:06:52.480 --> 0:06:52.940 I don't know. 0:06:53.000 --> 0:06:56.380 I mean, let's talk valuation in the AI space here. 0:06:57.580 --> 0:07:00.120 Go back to what Anurag said when we asked him 0:07:00.190 --> 0:07:01.330 how the AI trade is doing. 0:07:01.430 --> 0:07:01.870 Yeah. 0:07:02.630 --> 0:07:03.409 Oh, your colleague. 0:07:03.430 --> 0:07:05.370 Oh, this is Mandeep Singh. He covers tech technology for 0:07:05.390 --> 0:07:09.230 Bloomberg Intelligence. Your colleague, Anurag, we asked, how's the AI 0:07:09.290 --> 0:07:10.330 trade out there in the marketplace? 0:07:10.650 --> 0:07:12.250 It's in shambles. 0:07:12.490 --> 0:07:12.940 Really? 0:07:13.040 --> 0:07:13.710 Okay. 0:07:15.520 --> 0:07:17.500 Talk to us about open AI because that doesn't look 0:07:17.520 --> 0:07:20.640 like shambles. I'm seeing maybe going to get a valuation 0:07:20.680 --> 0:07:20.920 of $ 1. 0:07:20.720 --> 0:07:21.120 25 trillion. 0:07:22.770 --> 0:07:23.710 What's going on with OpenAI? 0:07:23.830 --> 0:07:28.390 Yeah, I mean, they're trying to do another round. And 0:07:28.450 --> 0:07:32.470 all these companies need a lot of money because of 0:07:32.650 --> 0:07:35.910 all the compute commitments they have. We know Anthropic has 0:07:35.990 --> 0:07:41.110 close to $ 750 billion in compute commitments for the next 0:07:41.170 --> 0:07:45.330 few years. So... You know, $ 30 billion is a small amount, 0:07:45.370 --> 0:07:48.350 but they need to raise because how else are you 0:07:48.390 --> 0:07:51.170 going to be able to pay for all the compute 0:07:51.210 --> 0:07:54.270 that you need to grow the revenue? So this is 0:07:54.330 --> 0:07:59.140 a high variable cost business. There is no leverage, inherent 0:07:59.180 --> 0:08:02.360 leverage in the business like software companies have typically. 0:08:02.520 --> 0:08:03.920 And I don't know why. 0:08:05.120 --> 0:08:07.900 What is the economic model for these companies? I mean, 0:08:09.230 --> 0:08:10.730 Is it just a top line growth story? 0:08:10.890 --> 0:08:15.520 For every dollar of incremental revenue, you need to spend 0:08:15.820 --> 0:08:18.890 right now about 50 cents on compute. 0:08:19.790 --> 0:08:23.030 Plus all the other overheads. Just the compute costs. 0:08:23.550 --> 0:08:25.870 How long do you spend on compute? Is this like 0:08:26.890 --> 0:08:29.890 a recurring cost, constant cost? Or is this, you know, 0:08:29.920 --> 0:08:31.680 you invest in it now and then later on you 0:08:31.700 --> 0:08:33.660 just kind of maintain and upgrade every once in a while? 0:08:33.920 --> 0:08:37.819 No, so software used to be, you develop the software 0:08:37.980 --> 0:08:41.660 and then the incremental costs were like negligible. Because we 0:08:41.679 --> 0:08:44.640 started off with, you know, disks. You used to ship 0:08:44.679 --> 0:08:48.470 the software and then it was like 100% margins, incremental margins. 0:08:48.809 --> 0:08:49.729 Then it was cloud. 0:08:50.210 --> 0:08:54.510 And now with AI, you're spending, like I said, 50 0:08:54.510 --> 0:08:58.439 cents on every dollar you generate. And that's just compute cost. 0:08:58.460 --> 0:09:03.620 That's your GPU consumption and all the... uh overheads that 0:09:03.700 --> 0:09:06.480 come the power you need to run those gpus you 0:09:06.520 --> 0:09:09.280 need that there is no shortcut in terms of ai 0:09:09.320 --> 0:09:10.280 compute so do we. 0:09:10.240 --> 0:09:13.100 Have any sense of what the net income margin is 0:09:13.160 --> 0:09:16.120 for these companies vis-a-vis a traditional software company like a. 0:09:16.110 --> 0:09:19.630 Good question yeah so look uh what these companies will 0:09:19.670 --> 0:09:22.189 tell you and we are waiting for anthropic uh s1 0:09:23.070 --> 0:09:26.510 is they will say, we are spending still half of 0:09:26.590 --> 0:09:30.970 our compute on training the next model. So Anthropic, it 0:09:31.030 --> 0:09:37.610 already has Opus 5.5 and Mythos 5.1. It's training the 0:09:37.870 --> 0:09:42.100 Mythos 5.5, the next version, whatever they want to call it, 0:09:42.520 --> 0:09:46.180 and spending almost 40% to 50% of their compute on 0:09:46.260 --> 0:09:50.179 training the model. That's a big upfront investment they have 0:09:50.580 --> 0:09:53.210 to train that next frontier model because you want to 0:09:53.250 --> 0:09:56.709 stay ahead. Open rate models are catching up and that's 0:09:56.809 --> 0:10:01.020 why your net income margin is most likely going to 0:10:01.059 --> 0:10:03.819 be negative on a gap basis because you're spending so 0:10:03.860 --> 0:10:06.740 much on keeping up with the frontier. 0:10:07.460 --> 0:10:09.600 Is that an ongoing thing to Scarlett's question or is 0:10:09.660 --> 0:10:11.679 it some point we're going to get to a mature. 0:10:11.250 --> 0:10:11.309 P & L? 0:10:13.240 --> 0:10:17.610 And that's the thing with every tech company, a new 0:10:17.640 --> 0:10:21.330 technology that comes about, you spend a lot upfront, but 0:10:21.390 --> 0:10:23.590 you know there is a mature state where you will 0:10:23.630 --> 0:10:25.090 generate tons of free cash flow. 0:10:25.550 --> 0:10:27.010 That's the hope here because. 0:10:27.030 --> 0:10:28.770 I was going to say, how confident are we in that? 0:10:29.309 --> 0:10:33.030 But these companies are already $ 100 billion in revenue. 0:10:33.200 --> 0:10:35.200 I've heard the revenue number. I'm asking about the profits. 0:10:35.820 --> 0:10:36.280 They will. 0:10:36.940 --> 0:10:40.939 Look, if you look at my 35% to 40% R & 0:10:40.600 --> 0:10:44.640 D on training the next model, if tomorrow they decide 0:10:45.050 --> 0:10:47.570 everyone is facing the frontier, which they have talked about 0:10:47.610 --> 0:10:50.510 facing the frontier, what does that mean? Don't spend any 0:10:50.550 --> 0:10:54.690 more on training costs. So now suddenly you start to generate, 0:10:54.730 --> 0:10:59.520 you know, 30 cents on every dollar you generate as revenue. 0:10:59.660 --> 0:11:02.920 And that could be your free cash flow. You don't 0:11:02.980 --> 0:11:04.840 spend on training the next version of the model. 0:11:04.860 --> 0:11:08.630 Two days ago, I thought I had cocktail party knowledge 0:11:08.650 --> 0:11:11.550 of AI that I can hold my own. blown it's 0:11:11.730 --> 0:11:14.550 blown to smithereens yeah i got nothing i got nothing and. 0:11:14.490 --> 0:11:17.400 Now that everyone's kind of questioning the ai trade you 0:11:17.420 --> 0:11:19.859 know i feel things that felt certain before that were 0:11:19.900 --> 0:11:22.660 like just assumed maybe you can't assume them anymore all. 0:11:22.520 --> 0:11:24.380 Right i don't know well i'll try again on monday 0:11:24.520 --> 0:11:28.690 i'll try again stay with us more from bloomberg intelligence 0:11:28.710 --> 0:11:29.770 coming up after. 0:11:29.570 --> 0:11:37.130 This You're listening to the Bloomberg Intelligence Podcast. Catch us 0:11:37.250 --> 0:11:40.290 live weekdays at 10 a.m. Eastern on Apple CarPlay and 0:11:40.330 --> 0:11:43.580 Android Auto with the Bloomberg Business App. Listen on demand 0:11:43.670 --> 0:11:47.140 wherever you get your podcasts or watch us live on YouTube. 0:11:48.640 --> 0:11:50.849 We are in the thick of earnings season and most 0:11:50.870 --> 0:11:53.429 of the banks have reported. So now it's time for 0:11:53.470 --> 0:11:57.470 the non-bank lenders. American Express being an example of one 0:11:57.510 --> 0:12:00.150 of those. It means a credit card company, credit card issuer. 0:12:00.610 --> 0:12:03.540 And Ben Stein is our consumer finance analyst who covers 0:12:03.940 --> 0:12:09.860 American Express. And Ben, American Express under pressure to keep, retain, 0:12:10.179 --> 0:12:13.020 add to its premium card members. How's it been doing 0:12:13.040 --> 0:12:13.520 in that effort? 0:12:15.280 --> 0:12:19.440 Look, Amex is doing great, right? They're running at a 10% 0:12:19.440 --> 0:12:24.310 top line revenue growth and a 15% bottom line EPS growth. 0:12:24.470 --> 0:12:26.770 You know, Warren Buffett is still one of the largest 0:12:26.790 --> 0:12:30.070 shareholders in Amex or the largest shareholder. And that's for 0:12:30.090 --> 0:12:32.810 a reason. I mean, it's got an incredible growth algorithm. 0:12:33.170 --> 0:12:36.750 It's built on the wealthiest, most resilient customers. And, you know, 0:12:36.770 --> 0:12:39.420 spending growth is strong and credit is pristine. 0:12:40.100 --> 0:12:42.160 You know, Ben, just give us a sense. I just 0:12:42.179 --> 0:12:45.870 have to refresh my memory. How global is Amex? What's 0:12:45.890 --> 0:12:47.960 their business kind of U.S. versus rest of the world? 0:12:48.000 --> 0:12:50.900 And are there growth opportunities geographically for them? 0:12:52.260 --> 0:12:55.040 So they're predominantly in the U.S. They have a couple 0:12:55.059 --> 0:12:58.400 different international markets that are pretty important to them, including 0:12:58.820 --> 0:12:59.160 the U.K. 0:12:59.220 --> 0:12:59.900 And Japan. 0:13:00.760 --> 0:13:04.250 And anecdotally, Paul, I don't know if you ever tried 0:13:04.270 --> 0:13:07.520 to swipe your Amex card in Europe, but can be 0:13:07.580 --> 0:13:10.780 quite challenging, even though they're, they've spent years trying to 0:13:10.800 --> 0:13:14.570 work on parity of acceptance over there. Um, but, but importantly, 0:13:14.590 --> 0:13:17.329 international is growing faster than the U S it's growing 0:13:17.350 --> 0:13:20.050 at like a mid teens rate. Um, so it's a 0:13:20.070 --> 0:13:21.939 big part of their strategy in the future, but right 0:13:21.960 --> 0:13:24.320 now it's still predominantly a U S business. 0:13:25.000 --> 0:13:27.240 And my apologies, Ben Elliott, not Ben Stein. 0:13:28.780 --> 0:13:29.300 My fault there. 0:13:29.620 --> 0:13:32.280 Ben, when we go back and talk about American Express 0:13:32.520 --> 0:13:35.179 for a moment here, not popular in Europe, even though 0:13:35.200 --> 0:13:38.660 they tout the benefits of this card when you're traveling, 0:13:38.860 --> 0:13:42.360 presumably sometimes overseas. Also in the US, you now start 0:13:42.380 --> 0:13:45.500 to see companies saying, if you charge by credit card, 0:13:45.540 --> 0:13:47.679 we're going to charge you that extra 2% or 3% fee. 0:13:47.700 --> 0:13:50.880 A lot of those stores won't even accept American Express 0:13:50.920 --> 0:13:53.500 because the interchange fee is even higher than for Visa 0:13:53.520 --> 0:13:56.860 and MasterCard. How is that showing up for American Express? 0:13:56.920 --> 0:13:59.020 I mean, do you see that making a dent in 0:13:59.120 --> 0:14:00.720 its revenue and its bottom line? 0:14:02.260 --> 0:14:06.120 So it's not showing up yet. You know, the bulk 0:14:06.140 --> 0:14:10.390 of the spending is things like airlines and hotels, places 0:14:10.450 --> 0:14:13.170 that are sort of always going to accept American Express. 0:14:13.910 --> 0:14:17.130 But I think looking forward, the value proposition of the 0:14:17.590 --> 0:14:21.290 Amex Platte in particular is really core to earnings growth. 0:14:22.000 --> 0:14:24.760 And as they sort of increasingly kind of try to 0:14:24.800 --> 0:14:29.560 pull in the cost of the Amex plat and you see, 0:14:30.320 --> 0:14:34.590 you know, the sort of like reduced acceptance at certain 0:14:34.620 --> 0:14:36.950 smaller merchants, I think it does sort of wear on 0:14:36.990 --> 0:14:40.350 the sheen of the brand and it affects how loyal 0:14:40.430 --> 0:14:42.750 customers might be in the future. But obviously right now, 0:14:42.790 --> 0:14:46.600 you know, they're having, they have like a 99% retention 0:14:46.630 --> 0:14:48.700 rate on their Amex plat. So it's really not. 0:14:48.620 --> 0:14:49.040 An issue yet. 0:14:49.590 --> 0:14:51.270 I like the way that he calls it the Amex plaque. 0:14:51.310 --> 0:14:52.470 I know. It's for people in the know. 0:14:52.550 --> 0:14:53.220 What do you do? 0:14:53.230 --> 0:14:54.730 You're one of those crazy people with cars, right? 0:14:54.750 --> 0:14:56.130 Yes, I did sign up for it because I got 0:14:56.150 --> 0:14:58.890 this massive sign-up bonus. And whether I keep it or 0:14:58.930 --> 0:15:01.390 not depends on what the perks are, although they did 0:15:01.470 --> 0:15:05.170 add Airbnb to one of the perks where you can 0:15:05.210 --> 0:15:07.210 get a certain amount of credit and apply it towards that. 0:15:07.650 --> 0:15:08.720 So that might be worthwhile. 0:15:09.150 --> 0:15:09.820 Let's go there, Ben. 0:15:09.900 --> 0:15:11.020 I mean, I'm old school. 0:15:11.040 --> 0:15:12.720 I got the green card, dude, that I got back 0:15:12.780 --> 0:15:13.140 in like 1986. 0:15:13.140 --> 0:15:16.880 OK, you're one of those members since 1986. 0:15:16.880 --> 0:15:17.500 Yeah. 0:15:17.660 --> 0:15:20.380 You know, but talk to me about like these affinity 0:15:20.400 --> 0:15:24.460 programs like like my daughter and Scarlett. They're all into, 0:15:24.560 --> 0:15:26.970 you know, comparing the cards and arbitraging the cards and 0:15:26.990 --> 0:15:29.770 doing all this and maximizing the points. How big of 0:15:29.790 --> 0:15:31.910 the part of the business is that kind of stuff become? 0:15:34.180 --> 0:15:36.430 It's a really big part because MX is leaning into 0:15:36.530 --> 0:15:40.910 growth in millennials and Gen Z in particular. And they 0:15:41.230 --> 0:15:43.650 tend to be lower spenders today, but in the future, 0:15:43.710 --> 0:15:46.190 they're sort of the future high spenders. And a lot 0:15:46.210 --> 0:15:49.190 of that lifestyle sort of coupon book stuff is focused 0:15:49.210 --> 0:15:51.930 on millennial and Gen Z customers. And so that's where 0:15:51.950 --> 0:15:55.330 they're getting their new account growth. But the risk you 0:15:55.350 --> 0:15:58.220 see there is the fatigue and sort of the existing 0:15:58.520 --> 0:16:03.300 Gen X, Boomer Plus spenders who, you know, they don't 0:16:03.320 --> 0:16:05.790 want to spend... oh, they're free time gaming out a 0:16:05.830 --> 0:16:08.960 coupon book and then they just want a core value proposition. 0:16:09.760 --> 0:16:13.180 But by and large, it's working and it's driving their 0:16:13.480 --> 0:16:16.000 growth algorithm. And so I think we'll continue to lean 0:16:16.020 --> 0:16:16.360 into that. 0:16:16.820 --> 0:16:19.520 It's tiresome when you have to consult an Excel spreadsheet 0:16:19.580 --> 0:16:21.920 first before you decide how to pay for something. 0:16:22.520 --> 0:16:23.970 You know, I'll get phone calls. 0:16:24.000 --> 0:16:26.210 I'm like, and she'll get these crazy deals. 0:16:26.690 --> 0:16:28.370 You know, I'm like, why are you in Barcelona? 0:16:28.630 --> 0:16:30.830 Oh, because I got a special tip from my. 0:16:30.990 --> 0:16:32.370 X and Y and Z card. I was like, all right, 0:16:32.530 --> 0:16:32.730 all right. 0:16:33.840 --> 0:16:34.710 And they wanted to. 0:16:34.630 --> 0:16:35.200 Go to Barcelona. 0:16:35.360 --> 0:16:40.100 Yeah. And I think Amex's response to that is they've 0:16:40.140 --> 0:16:42.880 just recently introduced a new business card, the Graphite card, 0:16:42.920 --> 0:16:45.980 which is a pure 2% cash back card. So I 0:16:46.020 --> 0:16:48.860 think they understand the fatigue there. And I would imagine 0:16:48.880 --> 0:16:51.720 that in the future, if it becomes an issue, you'll 0:16:51.740 --> 0:16:54.360 start to see a return to sort of more traditional 0:16:54.420 --> 0:16:59.040 rewards and less coupon book. But so far, it's working. 0:16:59.080 --> 0:16:59.530 Why fix it? 0:17:01.250 --> 0:17:04.450 Stay with us. More from Bloomberg Intelligence coming up after this. 0:17:08.310 --> 0:17:12.010 You're listening to the Bloomberg Intelligence podcast. Catch us live 0:17:12.090 --> 0:17:15.129 weekdays at 10 a.m. Eastern on Apple CarPlay and Android 0:17:15.170 --> 0:17:18.490 Auto with the Bloomberg Business app. Listen on demand wherever 0:17:18.540 --> 0:17:21.600 you get your podcasts or watch us live on YouTube. 0:17:23.109 --> 0:17:24.750 We talk about tech spending. It just seems like the 0:17:24.790 --> 0:17:27.010 numbers are going up, up, up, up, up with no 0:17:27.150 --> 0:17:29.830 end in sight. That's true for the AI stuff. But 0:17:29.869 --> 0:17:31.250 for the rest of the tech stack, it seems like 0:17:31.270 --> 0:17:33.830 those folks have to fight for the crumbs here. One 0:17:33.869 --> 0:17:37.330 of those companies is Infosys. Tamlin Basin joins us here, 0:17:37.690 --> 0:17:39.570 tech analyst for Bloomberg Intelligence. 0:17:39.590 --> 0:17:43.260 He's based in London. So Tamlin, talk to us about Infosys. 0:17:43.520 --> 0:17:46.900 What is Infosys and what are they telling you about 0:17:47.140 --> 0:17:48.460 their results and their guidance here? 0:17:49.880 --> 0:17:53.380 Yeah, sure. So Infosys is an IT services company. Now, 0:17:53.420 --> 0:17:55.500 so this is a company that's not in the software space. 0:17:55.540 --> 0:17:57.920 What they do really is a lot of the implementation 0:17:58.400 --> 0:18:01.100 for enterprises. They make sure that that tech stop is 0:18:01.850 --> 0:18:06.070 operating from top to bottom. So they reported earnings earlier 0:18:06.109 --> 0:18:11.090 this morning. They reduced their fiscal year 2027 sales guidance. 0:18:11.210 --> 0:18:13.290 Now they've lowered that range both at the top end 0:18:13.770 --> 0:18:16.850 and the lower end. And this is the second consecutive year. 0:18:17.440 --> 0:18:21.939 cut to their fiscal guidance following 1Q results. So what 0:18:21.980 --> 0:18:27.080 they're pointing at is a continued muted discretionary spending backdrop. 0:18:27.520 --> 0:18:29.960 All of this money, as you said, is going to AI. 0:18:30.520 --> 0:18:33.380 And a lot of that is putting pressure on spending elsewhere. 0:18:33.640 --> 0:18:35.889 And this is a company that's definitely feeling it. And 0:18:36.130 --> 0:18:39.280 so they're reducing their near-term guidance. They do see AI 0:18:39.320 --> 0:18:43.980 as a tailwind. Their AI revenues accelerated 29% from last quarter. 0:18:44.359 --> 0:18:47.020 But that's just so far not enough to really lift 0:18:47.160 --> 0:18:48.060 revenues overall. 0:18:48.600 --> 0:18:51.040 So, you know, there's a lot of uncertainty out there. 0:18:51.080 --> 0:18:53.139 And if I'm spending money on my tech budget, I mean, 0:18:53.160 --> 0:18:56.070 I got geopolitical issues. I got surging energy prices. I 0:18:56.109 --> 0:18:59.909 got overall inflation. So what does it mean for, like, 0:18:59.930 --> 0:19:02.629 IT services? That used to be such a steady, steady 0:19:02.690 --> 0:19:05.310 growth business there. But, you know, I guess they're not 0:19:05.350 --> 0:19:07.950 immune to just uncertainty in general, plus the AI industry. 0:19:08.850 --> 0:19:09.230 Crowd out. 0:19:10.230 --> 0:19:12.030 Yeah, and I think it is a lot of that 0:19:12.090 --> 0:19:16.010 AI crowd out coupled with those macro pressures that you 0:19:16.050 --> 0:19:19.530 just pointed at. So growth is not going negative necessarily, 0:19:19.570 --> 0:19:22.690 but we're looking at very low single digits rather than 0:19:22.730 --> 0:19:24.880 sort of the mid single digit growth that we were 0:19:24.910 --> 0:19:29.680 seeing sort of pre-COVID. Through COVID, it expanded, accelerated faster 0:19:29.700 --> 0:19:32.920 than that. But really, the industry is used to that 0:19:33.000 --> 0:19:35.180 mid single digit growth, but it is a lot of 0:19:35.220 --> 0:19:38.679 that AI crowd out. You know, decision makers want to 0:19:38.720 --> 0:19:41.200 invest heavily in AI. They don't want to miss the 0:19:41.200 --> 0:19:43.270 boat there. And what that does mean is going back 0:19:43.270 --> 0:19:45.660 to their services providers and saying, you know, what, we're 0:19:45.680 --> 0:19:48.000