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Speaker 1: Good morning. It's Wenesday, the thirty first of January here

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Speaker 1: in London. This is the Bloomberg Daybreak at podcast. I'm

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Speaker 1: Caroline Hepkare and.

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Speaker 2: I'm Stephen Carroll. Coming up today.

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Speaker 3: Microsoft and Alphabet beat expectations with their earnings, but fail

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Speaker 3: to excite investors with their AI offerings.

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Speaker 1: A US judge strikes down Elon Musk's fifty five billion

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Speaker 1: dollar Tesla pay package and the.

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Speaker 3: Two point six billion dollar experiment to cover up Europe's

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Speaker 3: dirty habit. We look at the plan in Norway to

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Speaker 3: bury industrial pollution under the sea.

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Speaker 1: Let's start with a roundup of our top stories. Despite

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Speaker 1: posting results that beat expectations, shares in Microsoft and Google

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Speaker 1: parent Alphabet dropped after market. The tech chance are struggling

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Speaker 1: to meet investor expectations on what AI advances can deliver

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Speaker 1: in the short term. At Microsoft, revenue increased at the

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Speaker 1: fastest rates it is twenty twenty two. Our tech reporter

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Speaker 1: Jackie Davilos says that AI products helped to drive cloud

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Speaker 1: computing growth, but traders wanted more.

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Speaker 4: Azure growth has seen some sluggish quarters in previous periods.

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Speaker 4: It looks like it's starting to recover in part due

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Speaker 4: to that AI related growth. But investors are looking for

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Speaker 4: a little bit more of a boost. When you think

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Speaker 4: about just how much excitement has been baked into AI,

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Speaker 4: they're looking for a little bit more. We were seeing

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Speaker 4: fifty to sixty percent growth in the heyday during that

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Speaker 4: post pandemic period in cloud computing was really on a tear,

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Speaker 4: and that's come down quite.

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Speaker 1: A bit, Bloomberg's Jackie Davelos, speaking there as Microsoft reported

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Speaker 1: a twenty four percent rise in revenue for its commercial

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Speaker 1: cloud computing business.

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Speaker 3: At Alphabet, quarterly results also raised investor concerns, even as

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Speaker 3: earning's beat estimates. Sales excluding partner payouts jumped by fifteen percent,

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Speaker 3: but a narrow revenue miss for the core Google search

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Speaker 3: business drove shares lower in after hours trading. Co host

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Speaker 3: of Bloomberg Technology Ed Ludlow says the rise of generative

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Speaker 3: AI has enabled companies to challenge Alphabet's market dominance in

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Speaker 3: the space.

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Speaker 5: One thesis or idea is that maybe the streets concern

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Speaker 5: about weakness in the search business is they don't yet

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Speaker 5: see tangible evidence that all of the R and D

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Speaker 5: and work in generative AI and all of the product

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Speaker 5: released is actually doing anything supportive to Google's core business.

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Speaker 5: Compare and contrast that with Microsoft, where you see the

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Speaker 5: contribution of AI across its kind of legacy and newer

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Speaker 5: offerings and software suites. It's clearly seeing a top and

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Speaker 5: bottom line effect ed.

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Speaker 3: Louvelow's analysis comes after higher expectations for Alphabet's AI efforts

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Speaker 3: push the stock up by almost sixty percent over the

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Speaker 3: past year to a near two trillion dollar valuation.

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Speaker 1: European banking giant Santander has reported better than expected results

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Speaker 1: for the fourth quarter. Net income at the Spanish lender

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Speaker 1: came in at two point nine billion euros. That's three

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Speaker 1: hundred and seventy million euros more than what analysts were expecting,

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Speaker 1: whilst net interesting income also beat expectations at over eleven

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Speaker 1: point one billion euros. The bank says that it is

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Speaker 1: now targeting single digit revenue growth for this year and

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Speaker 1: a return on tangible equity of sixteen percent.

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Speaker 3: UBS has cut a group of senior bankers, according to

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Speaker 3: people familiar with the matter. Senior figures departing the Swiss

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Speaker 3: firm include the global head of technology and two vice chairman.

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Speaker 3: Bloomberg's Charlie Palace has the details.

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Speaker 6: It comes as the financial giant reduces its headcount following

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Speaker 6: last year's takeover of form Arrival Credit Sueese. The sources

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Speaker 6: say the zurip based firm made several of the cuts

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Speaker 6: last week. UBS's workforce jumped to about one hundred and

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Speaker 6: twenty thousand when the Credit Sweese deal closed in June,

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Speaker 6: and the bank has said it aims to save around

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Speaker 6: six billion dollars in staff costs incoming years. In New York,

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Speaker 6: Charlie Pellett Bloomberg Radio.

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Speaker 1: Elon Musk's fifty five billion dollar Tesla pay package has

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Speaker 1: been voided by a court following a shareholder challenge. If

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Speaker 1: the decision survives appeal, it could threaten the entrepreneur's fortune

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Speaker 1: and throw the fate of his companies into question. Mask's

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Speaker 1: twenty eighteen award was the largest compensation package in history,

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Speaker 1: helping him occupy the number one spot on Bloomberg's Billionaires

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Speaker 1: Index for most of the last two years. Tesla's board

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Speaker 1: will now need to agree on new payment terms for

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Speaker 1: their CEO.

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Speaker 3: The Federal Reserve meets today as markets asked when the

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Speaker 3: central bank will declare its fight against inflation over investors

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Speaker 3: expector on Pale to hold rate steady for a fourth

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Speaker 3: straight meeting. Bloomberg's Fed editor Kate Davidson sums up what

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Speaker 3: we've heard from the FOMC.

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Speaker 7: The sense is that from what we've heard and probably

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Speaker 7: what we'll hear, they're just not in a huge rush.

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Speaker 7: They're not seeing anything concerning any big reason to compel

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Speaker 7: them to go earlier.

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Speaker 3: For Davidson, the key question is how the FED chair

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Speaker 3: is thinking about where rates will go in Spring. Investors

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Speaker 3: see he roughly forty percent chance the Central Bank will

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Speaker 3: lower rates for the first time in March.

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Speaker 1: The International Monetary Fund is warning Chancellor Jeremy Hunts that

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Speaker 1: cutting taxes would be bad for the UK economy. The

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Speaker 1: Fund sees Britain's economy growing at zero point six percent

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Speaker 1: this year and one point six percent in twenty twenty five,

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Speaker 1: but chief economist Pierre Olivia Garinchi says that Britain's high

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Speaker 1: public debt is a problem.

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Speaker 8: There is a need to put in place medium term

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Speaker 8: fiscal plans that will accommodate a very significant increasing spending pressures.

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Speaker 8: We would advise against further discretionary tax cuts as envisioned

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Speaker 8: will discuss now.

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Speaker 1: An IMF spokesperson went one further than Garincha, saying that

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Speaker 1: the UK should actually be raising taxes. The US based

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Speaker 1: institution last intervened in the UK in terms of government

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Speaker 1: policy see in twenty twenty two when it openly criticized

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Speaker 1: then Prime Minister Liz truss is disastrous mini budget. Now,

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Speaker 1: in a moment, we'll discuss the latest tech earnings and

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Speaker 1: why investors seem to have been so disappointed. Plus will

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Speaker 1: bring you details of a multi billion euro project to

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Speaker 1: store a captured carbon off the Norwegian coast. But another

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Speaker 1: story caught our eye this morning. Maybe winter but already

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Speaker 1: thinking about another heat wave for the summer.

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Speaker 2: Rating of thinking about advance.

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Speaker 3: This is a report from the Environmental Audit Committee here

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Speaker 3: in the UK, saying the government's doing little to prepare

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Speaker 3: for hotter summers and the consequences of more frequent heat waves.

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Speaker 2: Last year, of.

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Speaker 3: Course the warmest on record in the UK. The Met

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Speaker 3: Office already expects twenty twenty four to be even hotter.

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Speaker 3: The report saying that more than four point six million

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Speaker 3: English homes experience summertime overheating, and around ninety percent of

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Speaker 3: the existing homes will get too hot on a scenario

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Speaker 3: where global temperatures rise by two degrees.

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Speaker 6: Yeah.

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Speaker 1: The issue though with this, and it has been for

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Speaker 1: a long time, is who pays for upgrading the UK's

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Speaker 1: rather ancient housing stock. I mean some of the solutions

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Speaker 1: put forward installing shutters as almost unheard of in the UK,

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Speaker 1: really increasing the size of green spaces, also using things

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Speaker 1: like reflective paint on roofs, but little of these have

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Speaker 1: been rolled out at any scale. This pointed out by

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Speaker 1: the Committee chairman Philip Dunn.

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Speaker 3: Yeah, something definitely to watch as we think about warmer

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Speaker 3: times ahead to come this year. Let's get more now though,

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Speaker 3: on their aft of tech earnings that we've had out.

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Speaker 3: Investors not impressed with some of what they heard from Microsoft,

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Speaker 3: to Alphabet and AMD, despite them reporting strong numbers and

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Speaker 3: further embracing of artificial intelligence. Bloomberg TV anchor Critty coopters

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Speaker 3: with us for more on this. What is going on here?

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Speaker 3: Microsoft posted beats across the board, Alphabet's highest quarterly revenue

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Speaker 3: and profits in its history. AMD sales forecasts quarter. Okay,

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Speaker 3: it was after than expected, but still strong growth prospects

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Speaker 3: and that's just just want.

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Speaker 9: These are very different companies. Let's start with Microsoft. Microsoft's

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Speaker 9: their main kind of growth driver is their cloud business,

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Speaker 9: it's their Asia business. They posted about a thirty percent growth,

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Speaker 9: twenty eight percent was the estimate there. But the problem

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Speaker 9: here is for a lot of this artificial intelligence kind

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Speaker 9: of pick up and this boost, you have to look

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Speaker 9: at what company is most positioned to take big most

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Speaker 9: advantage of it. So it's not just a story about

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Speaker 9: are we investing in AI or in Microsoft's case, how

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Speaker 9: much of their investments going in too Open AI in particular,

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Speaker 9: Remember they have a forty nine percent stake in that company,

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Speaker 9: backing Sam Altman there. But it's also a question of

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Speaker 9: what kind of products do they offer that actually can

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Speaker 9: make AI become a bit more commercial, and that's where

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Speaker 9: Microsoft really has the edge here. The problem is a

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Speaker 9: lot of that is priced in, and that's why you

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Speaker 9: only actually saw despite the numbers, they weren't blowout numbers.

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Speaker 9: They just kind of came in line with expectations, Asia

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Speaker 9: coming in hotter than expected, but not as hot as

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Speaker 9: perhaps to your point investors wanted. Alphabet is a similar

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Speaker 9: story in that same out was really good quarterly revenue,

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Speaker 9: Their cloud numbers were really strong as well, but at

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Speaker 9: the end of the day, you need to look at

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Speaker 9: their advertising revenue. Google in particular that our YouTube business.

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Speaker 9: It's very exposed to the cyclicality of the US economy.

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Speaker 9: So if you start to see a slowdown in business investment,

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Speaker 9: slowdown in marketing or ad spend for example, that's directly

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Speaker 9: going to hit Alphabet more than it does any of

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Speaker 9: the other Magnificent seven companies as well. And AMD is well,

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Speaker 9: this one's really simple. That's a simple forecast story where

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Speaker 9: you do see them really just get punished right off

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Speaker 9: the bat. But again, three different stories. But I think

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Speaker 9: the takeaway here is that there's been so much optimism already.

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Speaker 9: These are the stocks that have driven the S and

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Speaker 9: P five hundred to a record high. To me, this

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Speaker 9: looks more like positioning than fundamentals driven.

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Speaker 1: Okay, that's interesting. On the businesses though, Is there a

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Speaker 1: risk if Alphabet Microsoft has taken the lead on AI.

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Speaker 1: I see lots of headlines about you know, Microsoft being back.

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Speaker 1: Is it some softness in its cool search out business?

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Speaker 9: There is, there is, there's a little bit, it's not

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Speaker 9: as expected. So basically the way you have to look

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Speaker 9: at tech earnings is and this is almost kind of

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Speaker 9: a nuanced approach, but basically you say, not only did

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Speaker 9: they meet their earnings, did they forecast something even better?

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Speaker 9: Did they surprise you in some way? The problem is

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Speaker 9: the market's gotten so used to those expectations. So I

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Speaker 9: think one of the big takeaways here for Alphabet in

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Speaker 9: particular is there was a lot of scrutiny on their

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Speaker 9: cloud business because if you'll remember, Microsoft is the leader

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Speaker 9: in cloud right next to Amazon Amazon Web Services so AWS.

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Speaker 9: And if you think about what products actually position these

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Speaker 9: companies really well for this kind of take up of AI,

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Speaker 9: it's the cloud businesses in particular. So that's why Microsoft

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Speaker 9: and Amazon kind of had that edge, and you can

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Speaker 9: see that in the share price that even though Microsoft

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Speaker 9: didn't impress, the shrif didn't drop that substantially after hours,

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Speaker 9: they're only down three tons of one percent by the

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Speaker 9: end of US after hours.

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Speaker 7: Training.

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Speaker 9: To talk about a little bit more about Alphabet in particular,

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Speaker 9: it's that their cloud business is still developing. They are

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Speaker 9: not the leadership in cloud. They're trying to get there,

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Speaker 9: but they're competing with likes of Oracle, for example, for

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Speaker 9: market share because this is a really really hard market

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Speaker 9: to actually break into and that's where Microsoft has edge.

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Speaker 3: Can I ask you to about another story that we're

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Speaker 3: following this morning, right, Elon Musk, this course ruling in

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Speaker 3: Delaware striking down his Tesla pay package after a shareholder challenge.

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Speaker 2: What happened?

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Speaker 9: So a couple of things here that our international audience

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Speaker 9: needs to know is, first off, most companies are incorporated

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Speaker 9: in Delaware simply because it is a tax friendly state

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Speaker 9: and because they are known for speedy decisions like this one.

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Speaker 9: Elon Musk basically had a fifty five billion dollar pay package.

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Speaker 9: A lot of that was tied to stock options, and

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Speaker 9: that makes sense. He's building a company, Tesla stock is

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Speaker 9: going through the roof. He has historically sold stock to

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Speaker 9: famously by Twitter now named x. So one of the

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Speaker 9: big questions was is the fifty five billion dollars really

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Speaker 9: justified for that? And a shareholder had brought this up

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Speaker 9: and filed a petition saying that this is not justified

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Speaker 9: given he hasn't fully disclosed his conflicts of interest and

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Speaker 9: that the pay negotiations weren't fully a negotiation, and that

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Speaker 9: was something that came up in this court order as well.

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Speaker 9: So now it looks like he will not be getting

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Speaker 9: the full fifty five billion dollars because a Delaware judge, who,

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Speaker 9: by the way, is the same judge that basically made

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Speaker 9: him by Twitter when he tried to say that Twitter

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Speaker 9: was not being honest about some of the numbers, basically

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Speaker 9: now is saying that we have to go right back

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Speaker 9: and renegotiate that pay package.

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Speaker 3: Okay, well, Critic Guta, we will watch the developments in

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Speaker 3: that story with interest and what legal challenges may follow

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Speaker 3: as well. Critic Gup to Bloomberg TV anchor there for

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Speaker 3: joining us, Thank you. Let's go to Norway for our

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Speaker 3: next story and a two point six billion dollar project

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Speaker 3: for a network of carbon storage tanks buried under the

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Speaker 3: north Sea. It's a plan that's won the backing of

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Speaker 3: Germany's government could pave the way for a new international

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Speaker 3: trade in industrial emissions. Joining us now, as Carrie Langren,

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Speaker 3: who covers oil, gas and renewables for Bloomberg. Carrie, great

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Speaker 3: to have you with us. What made you? First of all,

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Speaker 3: I want to write about carbon capture and storage in Norway?

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Speaker 10: Well, you know it's about a little over a year

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Speaker 10: ago now, last January, I was the German Vice chancellor

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Speaker 10: Robert Habock came to Norway and was visiting, and he

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Speaker 10: and the energy minister went to visit the cement plant

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Speaker 10: south of Osso, and I was with this whole group

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Speaker 10: of reporters that went along on this press trip, and

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Speaker 10: I was surrounded by the German press and we were

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Speaker 10: there and Robert Habeck was talking about this cement plant

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Speaker 10: which was going to have carbon capture sort of built

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Speaker 10: on a facility built onto the side so that they

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Speaker 10: could capture the carbon from that facility, and the German

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Speaker 10: press was just really fascinated by what was going on,

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Speaker 10: and they were talking about how Robert Habeck had sort

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Speaker 10: of shifted, how it used to be anti carbon capture

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Speaker 10: but was now in favor of it, and it was

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Speaker 10: just really you know, they were just discussing this and

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Speaker 10: it was so fascinating to see how controversial it was

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Speaker 10: in Germany, while in Norway it's actually something that's quite accepted.

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Speaker 10: So that really got me interested in the subject. And

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Speaker 10: so I decided that it was going to be something

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Speaker 10: that was going to follow through the rest of the year,

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Speaker 10: and and I have done that, and then at this

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Speaker 10: point it was it felt like it was about time

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Speaker 10: to write a.

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Speaker 3: Story Okay, well, I mean carbon cuts showing stories long

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Speaker 3: associated with the oil and gas industry, but the projects

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Speaker 3: that you and your colleague Pretosorgo have been rising about

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Speaker 3: are slightly different.

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Speaker 2: How so well, and that.

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Speaker 10: Was what was sort of caught my attention because I

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Speaker 10: say it has been closely associated with oil and gas,

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Speaker 10: but in this case it was a cement factory, and

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Speaker 10: that's what we started writing about. And what's sort of

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Speaker 10: a little bit more acceptable in Germany is having these

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Speaker 10: sectors that are hard to abate. So we're talking steel,

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Speaker 10: we're talking fertilizer, we're talking cement. With these are sorts

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Speaker 10: of industries where the actual production of the product itself

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Speaker 10: creates emission. So it's not you can't just plug in

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Speaker 10: a wind farm and you know, cut the emissions from

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Speaker 10: the facility. And those sectors are really struggling with the

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Speaker 10: challenge of how to address carbon emissions and climate change

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Speaker 10: and meet the targets that we set across Europe and

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Speaker 10: the world. And so for those sectors, carbon capture is

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Speaker 10: looking like one of the best options. And then you

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Speaker 10: have a country like Germany which is coming around to

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Speaker 10: the idea of using carbon capture but doesn't really necessarily

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Speaker 10: like the idea of having carbon capture underground under their

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Speaker 10: own feet in Germany, and so then that begs the question, well,

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Speaker 10: where are we going to put this carbon? Well, you

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Speaker 10: have a country like Norway that is quite happy to

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Speaker 10: say how about under the north Sea? How about shipping

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Speaker 10: it to us? And so that is that sort of

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Speaker 10: introduced this idea of developing a carbon network across Europe.

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Speaker 3: What are the biggest hurdles from making these kind of

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Speaker 3: hubs work? Is there a unified approach around this?

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Speaker 10: Well, I mean I think probably when I spoke to

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Speaker 10: Ecuinor about this sort of initially early in my reporting,

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Speaker 10: one of the things they were saying is, you know,

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Speaker 10: the technology for the actual storage and transport is something

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Speaker 10: that we're they that the oil and gas sector is

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Speaker 10: quite familiar with. Equinor has actually been doing it since

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Speaker 10: the nineties and it's actually sort of about twenty seven

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Speaker 10: million tons of carbon under the north Sea already at

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Speaker 10: two of their different oil fields. But it's the actual

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Speaker 10: capturing of the of the carbon at the different facilities

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Speaker 10: that is something that needs that needs to be sort

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Speaker 10: of worked through. Its complicated. It involves often separating the

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Speaker 10: carbon out from the flu gas, and again it depends

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Speaker 10: on the facility heating it, cooling it, liquefying it, So

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Speaker 10: that's one aspect of it. Then you actually have the

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Speaker 10: whole transport network, and at this point, transporting carbon dioxidic

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Speaker 10: cross international borders, it's considered a waste product when in

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Speaker 10: this case it's not in food. Sometimes it's transported for food,

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Speaker 10: but in this case it's a waste product, and so

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Speaker 10: the legality of that is still not entirely clear. So

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Speaker 10: that's one of the hurdles, the legal hurdles to actually

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Speaker 10: allow it to be sent across borders. And then of

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Speaker 10: course the all the issues of actually laying the pipe

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Speaker 10: and you know who's going to pay for that, and

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Speaker 10: costs associated with inflation, all those sort of things that

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Speaker 10: all come into play.

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Speaker 3: Yeah, it talk to us about you visited one of

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Speaker 3: these disease, the Northern Lights CO two terminal.

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Speaker 10: What's it like, Yeah, no, it was, and this is

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Speaker 10: the first, I mean, this is a global first. That's

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Speaker 10: why I really felt it was important to write this

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Speaker 10: story at this time because it's going to actually become

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Speaker 10: operational next year. You know this facility you arrived there,

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Speaker 10: there's a visitors center. It's apparently already had two thousand

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Speaker 10: and six hundred some visitors. These are people, a lot

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Speaker 10: of visitors apparently from Asia. This is not your sort

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Speaker 10: of tourist stop, not your Norwegian tourist destination. Go see

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Speaker 10: the Fjords, don't go to this place. But it was.

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Speaker 10: It's the facility that people are really interested in because

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Speaker 10: of you know, if it worked, you know, it could

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Speaker 10: be quite interesting. But you have a you have a

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Speaker 10: basically a dock where the ship will come in. It's

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Speaker 10: going to be a big one hundred and thirty meters ship.

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Speaker 10: The facility, there's four of them being built in China

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Speaker 10: right now, so that will dock there. It has it

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Speaker 10: will have tanks on board, It will have come from

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Speaker 10: a facility either the cement plant or a waste facility

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Speaker 10: with a liquidfied carbon on board. That will then get

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Speaker 10: put into a pipe. It goes to these different these

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Speaker 10: twelve different containers and then slowly but surely gets pumped

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Speaker 10: through one hundred kilometer pipeline out into a reservoir under

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Speaker 10: the northeast. So that's about two point six kilometers under

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Speaker 10: the north Sea. So and that's how sort of process

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Speaker 10: happens very slowly, so it's actually quite like a tidy

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Speaker 10: neat small little facility they have. They're doing phase one

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Speaker 10: now and then have phase two planned. But yeah, and

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Speaker 10: then it was under snow when I was there a

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Speaker 10: couple of weeks ago, but normally normally would be in

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Speaker 10: Bergen's wet, so it probably wouldn't have so much snow.

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Speaker 3: Okay, yeah, I mean it sounds absolutely fascinating. There are

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Speaker 3: critics of this technology though, that say that it's expensive,

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Speaker 3: extends the life of fossil fuels. How are those who

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Speaker 3: are supporting projects like this responding to those concerns?

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Speaker 10: Well, I think, I mean the biggest at this point.

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Speaker 10: I mean, I think the people who are proponents of CCSA,

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Speaker 10: we've let the climate change come go too far and

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Speaker 10: at this point you have to, Yeah, you know, you

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Speaker 10: have to. You have to take measures, even if you're

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Speaker 10: not necessarily ones that you even if it would be

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Speaker 10: better maybe to have abated it in the first place.

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Speaker 10: And there's I mean, there are the proponents would also

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Speaker 10: say that we know this works, I mean, or at

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Speaker 10: least if you look at what Equanor has done in

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Speaker 10: the in the North Sea, I mean, the carbon dox

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Speaker 10: that is sitting under under the seabed, and they have

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Speaker 10: seismic they have sort of a pretty good idea of it,

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Speaker 10: of how it happens, of how it behaves under the seabed.

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Speaker 10: Then there also would be critics around the actual cost

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Speaker 10: of it and whether this is the best way to

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Speaker 10: be using sort of scant resources. So and also maybe

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Speaker 10: there's other options for different for different sectors. I spoke

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Speaker 10: to a to a cement factory and they were talking

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Speaker 10: about sort of recycling cement and verious different options there.

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Speaker 10: But that's that's what the critics would probably pull out

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Speaker 10: as being the challenges.

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