WEBVTT - BI Weekend: GM, Starbucks, UPS Earnings (Podcast) 0:00:01.560 --> 0:00:05.680 This is Bloomberg Intelligence with Scarletfoo and Paul Sweeney. 0:00:05.760 --> 0:00:07.880 How do you think the FED is looking at tariffs? 0:00:08.000 --> 0:00:09.200 The uncertainty of terriffs. 0:00:09.320 --> 0:00:12.160 Let's take a look at the sectors and how they performed. 0:00:11.800 --> 0:00:14.360 A lot of investors getting whip saled every day by news. 0:00:14.160 --> 0:00:18.280 Events, breaking market headlines, and corporate news from across the globe. 0:00:18.320 --> 0:00:20.919 Could we see a market disruption of market events? 0:00:21.000 --> 0:00:23.000 So people just too exuberant out there? 0:00:23.160 --> 0:00:25.680 You see some so called low quality stocks driving this 0:00:25.800 --> 0:00:26.560 short term rally. 0:00:26.600 --> 0:00:31.400 Bloomberg Intelligence with Scarletfoo and Paul Sweeney on Bloomberg Radio, 0:00:31.560 --> 0:00:33.480 YouTube and Bloomberg Originals. 0:00:34.600 --> 0:00:36.839 On today's Bloomberg Intelligence Show, we dig inside the big 0:00:36.880 --> 0:00:39.159 business story is impacting Wall Street and the global markets. 0:00:39.400 --> 0:00:41.640 Each and every week we provide in depth research and 0:00:41.720 --> 0:00:43.559 data on some of the two thousand companies and one 0:00:43.640 --> 0:00:46.120 hundred and thirty industries are analysts covered worldwide. 0:00:46.159 --> 0:00:48.680 Today, we'll look at why the chip giant Envidia invested 0:00:48.720 --> 0:00:51.600 two billion dollars more in the AI cloud computing startup 0:00:51.680 --> 0:00:52.320 Core Week. 0:00:52.240 --> 0:00:54.400 Plus a look at why a turnaround planet the coffee 0:00:54.440 --> 0:00:56.120 giant Starbucks is starting to take hold. 0:00:56.480 --> 0:00:58.560 But first we begin in the auto sector this week, 0:00:58.640 --> 0:01:01.240 General Motors release earnings that eat analysts expectations. 0:01:01.280 --> 0:01:03.600 The company also said it expects profits to grow as 0:01:03.680 --> 0:01:06.200 much as two billion dollars this year and plans to 0:01:06.240 --> 0:01:08.520 return more of that money to shareholders with a higher 0:01:08.520 --> 0:01:09.880 dividend and buybacks for. 0:01:09.920 --> 0:01:12.240 More We were joined by Steve Man Bloomerg Intelligence, Global 0:01:12.240 --> 0:01:13.720 Autos and Industrials analyst. 0:01:14.080 --> 0:01:16.640 We began by asking Steve to break down GM's EV 0:01:16.880 --> 0:01:18.520 versus gas engine portfolio. 0:01:19.000 --> 0:01:22.160 Oh, it's actually ice engine is much greater. I know 0:01:22.240 --> 0:01:25.560 they have a full portfolio of EV's, but you're talking 0:01:25.600 --> 0:01:30.039 about like eighty five ninety percent ICE versus ten fifteen 0:01:30.120 --> 0:01:33.600 percent evs. So you know they do have a big portfolio, 0:01:33.959 --> 0:01:36.280 but it was just at the beginning of rolling them out. 0:01:36.840 --> 0:01:39.080 You know, they do have still they do still have 0:01:39.160 --> 0:01:42.039 one more major rollout coming out, which is the Chevy 0:01:42.080 --> 0:01:45.760 Bolt of smaller vehicles, which the industry and GM thinks 0:01:45.800 --> 0:01:49.120 that that's where the market is going, a cheaper, more 0:01:49.200 --> 0:01:51.760 convenient ev Steve. 0:01:51.800 --> 0:01:54.680 It's almost to the point where the street rewards these 0:01:54.680 --> 0:01:58.400 companies if they not just not fully back away, but 0:01:58.400 --> 0:02:02.480 at least slow down the evolution to evs and just 0:02:02.520 --> 0:02:05.320 focus on what's making money today? Is that kind of 0:02:05.320 --> 0:02:06.960 what where the industry is today? 0:02:07.680 --> 0:02:11.560 Yeah, exactly, like Trump actually did the auto industry a 0:02:11.639 --> 0:02:17.359 major favor by relaxing the miles per gallon the mandate. 0:02:17.800 --> 0:02:22.839 So basically every vehicle in the Big Three's portfolio are 0:02:22.880 --> 0:02:27.640 currently meeting those mandates. And what it means is less 0:02:27.639 --> 0:02:31.920 penalties right and no need to buy EV credits going forward, 0:02:32.440 --> 0:02:36.240 huge savings. And what that means is it could translate 0:02:36.320 --> 0:02:41.520 into a slower increase in car prices for consumers, especially 0:02:41.560 --> 0:02:44.120 for big trucks. Makes the big trucks a lot more 0:02:44.200 --> 0:02:47.840 attractive to sell for the Big Three, So they're going 0:02:47.960 --> 0:02:52.320 to sell as many as possible given this opportunity. I 0:02:52.320 --> 0:02:55.840 know we talked about hybrid for GM, it's going to 0:02:55.880 --> 0:02:59.160 be a huge a sinkhold for them if they invest 0:02:59.160 --> 0:03:02.200 in that technology today. So let's let's not do that. 0:03:02.480 --> 0:03:06.520 Maintain whatever they can do with evs and really push 0:03:07.040 --> 0:03:08.040 the ice vehicles. 0:03:08.639 --> 0:03:11.400 Maintain what they can with ev so that you know, 0:03:11.480 --> 0:03:14.600 small ten to fifteen percent of their overall portfolio. Forget 0:03:14.600 --> 0:03:19.239 about hybrids and just focus on the mammoth gas guzzling vehicles. 0:03:19.480 --> 0:03:23.839 What happens then if gas prices do turn up higher unexpectedly, 0:03:23.880 --> 0:03:25.720 and I know that the administration is doing all it 0:03:25.760 --> 0:03:28.720 can to prevent that from happening. But I'm looking at 0:03:28.720 --> 0:03:32.040 triple A gas prices and they bottomed at around two 0:03:32.120 --> 0:03:34.800 seventy nine and have now made their way back up 0:03:34.840 --> 0:03:35.840 towards two ninety. 0:03:36.040 --> 0:03:36.280 Yeah. 0:03:36.760 --> 0:03:39.800 I mean historically, when gas prices go up, it does 0:03:39.880 --> 0:03:43.040 impact ice sales, and you know, it may it may 0:03:43.120 --> 0:03:46.000 push some buyers into evs, you know, depending on how 0:03:46.240 --> 0:03:50.240 how where the expansion of the EV charging network is at. 0:03:50.400 --> 0:03:52.520 But I think at the end of the day, if 0:03:52.840 --> 0:03:56.520 gas prices do go up, actually benefits the Japanese companies 0:03:56.520 --> 0:03:59.440 like Toyota and Honda, where they have a full suite 0:03:59.480 --> 0:04:02.000 of hybrid vehicles that actually consumer love. 0:04:02.880 --> 0:04:03.160 Yeah. 0:04:03.200 --> 0:04:08.080 I just leased the Honda CRV hybrid. Uh huh, my son, 0:04:08.120 --> 0:04:10.000 your drives in California all the time where the gas is. 0:04:10.000 --> 0:04:12.400 Really expert Yes, that's right. He probably wanted it. And 0:04:12.400 --> 0:04:13.720 how often does he have to fill up? 0:04:14.440 --> 0:04:16.760 Not that often? I mean, just not that often. It's great, 0:04:16.800 --> 0:04:18.120 it's a great tech technology. 0:04:18.400 --> 0:04:18.679 Steve. 0:04:18.760 --> 0:04:21.640 Let's just while we got you here, what's the call 0:04:21.760 --> 0:04:26.679 these days on Tesla as we talk about this EV business? 0:04:26.680 --> 0:04:29.000 But really, for Tesla, we're talking about so so much more. 0:04:30.080 --> 0:04:35.000 Yeah, looking at GM as a as a backdrop, you 0:04:35.000 --> 0:04:38.640 know GM's earnings for twenty twenty six is probably a 0:04:38.680 --> 0:04:41.840 little bit light. There's probably some more upside on the 0:04:41.880 --> 0:04:45.599 shift mix for more ice. So what means for Tesla 0:04:45.880 --> 0:04:50.000 it's an uphill battle for them. I know the stock 0:04:50.240 --> 0:04:55.120 is trading, you know, at an astronomical valuation at the moment. 0:04:55.839 --> 0:05:00.720 Investors are very focused on their robo taxi, this vehicle 0:05:00.839 --> 0:05:04.680 build out. Uh. They people feel that, you know, they 0:05:04.680 --> 0:05:09.120 can actually outcompete the likes of Uber and Lyft. So 0:05:09.520 --> 0:05:12.040 you know, sales will be weak in the fourth quarter 0:05:12.279 --> 0:05:15.919 for Tesla, but I believe the you know, the investors 0:05:15.920 --> 0:05:20.479 are actually looking over past that into you know, what 0:05:20.600 --> 0:05:23.280 is the what is the catalyst or what is what 0:05:23.360 --> 0:05:26.040 is Elon Musk going to talk about in their next 0:05:26.040 --> 0:05:27.960 earning calls on the Robotaxi. 0:05:28.040 --> 0:05:31.480 Yeah, it's always about the Elon Musk narrative, his vision 0:05:31.640 --> 0:05:33.520 going forward of what this company is going to be. 0:05:34.320 --> 0:05:37.160 I wonder, you know, my Mary Barrow talked about the 0:05:37.240 --> 0:05:40.320 charging infrastructure in the network and how we're not there 0:05:40.360 --> 0:05:44.359 in the United States. Tesla is offering the supercharger and 0:05:44.400 --> 0:05:46.320 that's part of its business model to be able to 0:05:46.320 --> 0:05:50.640 make that charger available to other automakers. How big a 0:05:50.680 --> 0:05:54.760 contributor is that to its revenue, to its profitability when 0:05:54.800 --> 0:05:55.320 it's prob. 0:05:56.240 --> 0:05:59.880 Yeah, it's still it's still a small amount. It is. Uh. 0:06:00.200 --> 0:06:02.919 What they do is they want to expand that business. 0:06:03.839 --> 0:06:07.919 So they are talking to you know, gas stations like 0:06:07.920 --> 0:06:11.920 wah wah out in Pennsylvania are actually you know, buying superchargers, 0:06:11.960 --> 0:06:16.080 installing it into next to the gas pumps and next 0:06:16.080 --> 0:06:18.760 to the stations. So they are trying to expand it 0:06:19.880 --> 0:06:25.160 in terms of charging, selling these supercharging business and in 0:06:25.279 --> 0:06:28.560 the in the revenues from the charging, it's still really 0:06:28.760 --> 0:06:31.880 really small. I would say around ten percent, maybe less. 0:06:32.279 --> 0:06:36.040 Hey, what do we know about how important are incentives here? 0:06:36.040 --> 0:06:38.200 I look at other countries around the world and they 0:06:38.200 --> 0:06:42.320 have got these huge EVY percentages of China sales China, 0:06:43.160 --> 0:06:47.760 the Nordic countries. How important are government incentives to get there? 0:06:48.040 --> 0:06:49.440 It is very important. 0:06:49.480 --> 0:06:52.400 I think the Germans are actually putting back the incentives 0:06:52.600 --> 0:06:57.919 and it has lifted ev sales in Europe, in Germany. 0:06:58.160 --> 0:07:01.359 But at the end of the day, you really want 0:07:01.400 --> 0:07:06.400 to build a sustainable growth environment for these cars, and 0:07:06.520 --> 0:07:08.880 Mary Barr is right. You know, we actually publish a 0:07:09.080 --> 0:07:12.840 very extensive report on ev charging, comparing charging network in 0:07:12.880 --> 0:07:17.400 the US versus China night and day, right, So you know, 0:07:17.480 --> 0:07:21.000 it's about convenience, it's about costs for the US consumer. 0:07:21.880 --> 0:07:25.080 It's great to have it's great for consumer to have 0:07:25.160 --> 0:07:28.880 some subsidy, you know, help pay for the for the 0:07:28.920 --> 0:07:34.160 cars that they're buying. But I think long term, you know, 0:07:34.400 --> 0:07:39.720 it really needs the consumer to really buy into the product. 0:07:40.320 --> 0:07:43.160 Thanks to Steve Man, Bloomberg Intelligence Global Autos and Industrials 0:07:43.160 --> 0:07:46.360 analyst return next to some news in the aerospace industry 0:07:46.440 --> 0:07:46.760 this week. 0:07:46.840 --> 0:07:49.720 American Airlines projected revenue growth for twenty twenty six, but 0:07:50.040 --> 0:07:52.280 said that the winter storm that raged across the US 0:07:52.320 --> 0:07:54.239 this week will clip revenue this quarter. 0:07:54.520 --> 0:07:57.560 We also heard from jetbou Airways, who reported a wider 0:07:57.640 --> 0:08:01.240 loss than expected last quarter, highlighting challenges a strategy to 0:08:01.360 --> 0:08:03.280 win over higher paying customers. 0:08:03.320 --> 0:08:05.080 For all of this, as well as other news in 0:08:05.080 --> 0:08:07.400 the aerospace industry, we were joined by Sid Phillip. He 0:08:07.400 --> 0:08:11.000 has Bloomberg's chief correspondent for Global Aviation. We began by 0:08:11.040 --> 0:08:13.280 asking Sid for his take on American and Jet Blue's 0:08:13.280 --> 0:08:14.000 recent results. 0:08:14.440 --> 0:08:16.800 So the airline industry is actually in a sort of 0:08:17.040 --> 0:08:19.640 bit of a flux at the moment. I mean, you've 0:08:19.840 --> 0:08:22.280 obviously had the impact of all these storms, you've had 0:08:22.320 --> 0:08:26.720 the impact of the government shutdown, and you've got the 0:08:26.800 --> 0:08:29.520 uncertainty about the year ahead. And so American Airlines is 0:08:29.560 --> 0:08:32.080 taking a more bullish view of the year ahead. They're 0:08:32.080 --> 0:08:35.480 sort of following their peers United and Delta in targeting 0:08:35.559 --> 0:08:38.520 the most premium end of the spectrum, and they're sort 0:08:38.520 --> 0:08:42.760 of hoping that by aiming their product at the premium 0:08:42.840 --> 0:08:45.760 end of the market, they can sort of offset the 0:08:45.440 --> 0:08:48.280 sort downturn that's happened in the bottom end of the market. 0:08:48.840 --> 0:08:52.120 Jet Blue also talking about how at the moment things 0:08:52.160 --> 0:08:55.719 look a bit shaky, but they're talking about how they 0:08:55.720 --> 0:08:58.920 see a road to profitability and a free cash flow 0:08:58.920 --> 0:09:01.320 by the end of twenty twenty seven, and so slightly 0:09:01.360 --> 0:09:04.319 more long term view of when the recovery might happen. 0:09:04.720 --> 0:09:08.559 And that sort of explains the dichotomy in the earnings 0:09:08.600 --> 0:09:10.120 forecast for both these companies. 0:09:10.320 --> 0:09:12.280 And of course Jeblue is also doing what it can 0:09:12.400 --> 0:09:16.240 to premium premiumize if that's a verb, it's experience for 0:09:16.320 --> 0:09:19.320 customers to with absolutely opening up that new lounge and JFK. 0:09:20.400 --> 0:09:22.640 So that is the story with airlines, and it's been 0:09:22.679 --> 0:09:25.800 fairly consistent too with what we heard from Delta and United. 0:09:26.240 --> 0:09:30.360 Where does that leave the smaller carriers that need to 0:09:30.400 --> 0:09:34.160 either team up or fade into oblivion. I'm thinking Spirit, 0:09:34.200 --> 0:09:37.680 I'm thinking Frontier. Is there still a market for these 0:09:37.679 --> 0:09:38.839 discount carriers? 0:09:39.840 --> 0:09:41.800 So the market at the moment is very tough for 0:09:41.840 --> 0:09:44.960 the discount carriers. So essentially what's happening is that the 0:09:45.000 --> 0:09:47.240 top end of the market is going to Delta and 0:09:47.320 --> 0:09:50.440 United for their premium products like first class in business class, 0:09:50.600 --> 0:09:52.160 and on the other end of the market you have 0:09:52.240 --> 0:09:54.920 sort of everyone else competing to get the lowest cost 0:09:55.320 --> 0:09:57.400 tickets into the hands of the passengers, and that sort 0:09:57.400 --> 0:10:01.199 of eroding margins, especially as costs for both pilots and 0:10:01.280 --> 0:10:04.520 Cavin Krue are hurting the ultralo cost carriers and the 0:10:04.520 --> 0:10:07.079 low cost carriers, and sort of that's sort of been 0:10:07.120 --> 0:10:10.640 explained by this gay shaped recovery that airline executives are 0:10:10.640 --> 0:10:13.200 talking about, and so Jet Blue and the others are 0:10:13.200 --> 0:10:15.200 sort of trying to get the premium end of it. 0:10:15.240 --> 0:10:18.160 I mean, we've seen even Spirit Airlines talking about how 0:10:18.200 --> 0:10:21.000 they're adding a so called business class product. They've added 0:10:21.040 --> 0:10:23.319 Wi Fi, They've added all sorts of things to keep 0:10:23.360 --> 0:10:25.920 people coming back to them, and so they're hoping that 0:10:26.240 --> 0:10:30.640 by slightly differentiating themselves from just very commoditized ultra low 0:10:30.679 --> 0:10:33.719 cost carriers, they can be able to get in those customers. 0:10:34.240 --> 0:10:36.520 Well, then it kind of goes back to the point, 0:10:37.120 --> 0:10:39.920 is there a need for her real true low cost 0:10:39.960 --> 0:10:43.240 carrier out there? Are some of these supposed ones are 0:10:43.240 --> 0:10:45.520 going kind of mid market higher market. Is there a 0:10:45.679 --> 0:10:47.560 market demand for that or is everybody just willing to 0:10:47.559 --> 0:10:48.360 pay up for travel? 0:10:49.640 --> 0:10:51.800 At the moment, it looks the people who are willing 0:10:51.840 --> 0:10:54.079 to pay up for travel are the people willing to 0:10:54.080 --> 0:10:56.280 pay up for travel, and so at the bottom end 0:10:56.280 --> 0:10:58.120 of the market. I mean, everyone talks about how there 0:10:58.160 --> 0:11:00.320 will be a recovery of the ultralocost carrier years and 0:11:00.360 --> 0:11:03.840 that once people are more certain about the economy, and 0:11:03.920 --> 0:11:06.920 once people at the bottom end of that k start 0:11:06.960 --> 0:11:10.120 to see some stability in the economy, people will travel 0:11:10.160 --> 0:11:13.079 because I mean, remember during the pandemic, there was after 0:11:13.679 --> 0:11:15.880 as we exited the pandemic, there was this boom in 0:11:15.920 --> 0:11:18.840 travel for across the board and that sort of has 0:11:19.000 --> 0:11:21.840 further split up, and so we will see that demand 0:11:22.080 --> 0:11:25.080 coming back, we just don't know when and what sort 0:11:25.080 --> 0:11:26.000 of shape that will be. 0:11:27.440 --> 0:11:30.360 So sid you also cover Boeing, and it came out 0:11:30.360 --> 0:11:32.760 with its results and in terms of the numbers for 0:11:32.800 --> 0:11:35.600 the fourth quarter free cash flow topping estimates, it generated 0:11:35.640 --> 0:11:37.760 cash for a second straight quarter. That sounds like it's 0:11:37.800 --> 0:11:41.600 good news. How far along this recovery, this long awaited 0:11:41.640 --> 0:11:43.880 covery is Boeing Actually. 0:11:44.600 --> 0:11:46.840 So Boeing is on the road to recovery. They're still 0:11:46.920 --> 0:11:49.720 not they yet, but they are recover They are recovering. 0:11:49.720 --> 0:11:52.680 I mean their fourth quarter results and their Follio results 0:11:52.760 --> 0:11:56.600 were boosted by the sale of their Jefferson Digital Aviation 0:11:56.720 --> 0:11:59.600 subsidiary and that sort of gave them a nine point 0:11:59.640 --> 0:12:02.440 six pl in the dollar boost. And at the same time, 0:12:02.520 --> 0:12:06.000 the Boeing is sort of ramping up production. They are 0:12:06.520 --> 0:12:09.120 ramping up sales. I mean they've seen a surgeon sales. 0:12:09.160 --> 0:12:13.439 I mean in the last ever since the Trump administration 0:12:13.480 --> 0:12:16.040 came in, we've seen a surgeon Boeing sales. And so 0:12:16.720 --> 0:12:20.160 Kelly Ottberg, the new CEO, is sort of pushing Boeing 0:12:20.200 --> 0:12:23.360 to improve production, ramp up production at a steady base. 0:12:23.400 --> 0:12:26.040 I mean they've gone to about forty two seven three 0:12:26.080 --> 0:12:29.040 seven max jets a month, and they are sort of 0:12:29.080 --> 0:12:32.240 further boosting those production numbers and that will get them 0:12:32.280 --> 0:12:34.600 on at the sort of where they want to be 0:12:34.640 --> 0:12:37.280 in the Kelly Outberg's talked about how ten billion in 0:12:37.320 --> 0:12:39.400 free cash flow is his target and the company's on 0:12:39.440 --> 0:12:39.959 its way there. 0:12:40.679 --> 0:12:43.720 Thanks to Sid Phillip Bloomberg Intelligence senior Aerospace, Defense and 0:12:43.760 --> 0:12:45.360 Airlines analysts coming up a. 0:12:45.280 --> 0:12:47.520 Look at why the wireless provider AT and T posted 0:12:47.559 --> 0:12:50.319 fourth quarter profit and revenue do beat Wall Street estimates. 0:12:50.440 --> 0:12:53.280 You're listening to Bloomberg Intelligence on Bloomberg Radio, providing in 0:12:53.320 --> 0:12:55.480 depth research and data on two thousand companies and one 0:12:55.559 --> 0:12:56.600 hundred and thirty industries. 0:12:56.720 --> 0:12:59.760 You can access Bloomberg Intelligence via bi go on the terminal. 0:13:00.120 --> 0:13:02.960 Scarlet Foo and I'm Paul Sweeney, and this is Bloomberg. 0:13:07.480 --> 0:13:12.000 This is Bloomberg Intelligence with Scarlet Foo and Paul Sweeney 0:13:12.320 --> 0:13:13.800 on Bloomberg Radio. 0:13:14.320 --> 0:13:16.880 We moved to some news in that tech space this week. 0:13:16.880 --> 0:13:19.439 We heard that the CHIPDRII and Vidia invested an additional 0:13:19.480 --> 0:13:22.400 two billion dollars in the a cloud computing startup core Weave. 0:13:22.480 --> 0:13:24.880 As part of the collaboration, core Weef will be among 0:13:25.000 --> 0:13:27.760 the first to deploy forthcoming Nvidia products. 0:13:27.880 --> 0:13:30.480 We brought in on our Granda Bloomberg Intelligence tech analysts 0:13:30.480 --> 0:13:31.080 to tell us more. 0:13:31.200 --> 0:13:33.200 We first asked an A Rock for his reaction to 0:13:33.240 --> 0:13:33.680 this deal. 0:13:33.920 --> 0:13:36.000 If you go back in history and see when Cordeviev 0:13:36.120 --> 0:13:38.600 was going public, it was having a hard time getting 0:13:38.600 --> 0:13:40.800 a good pricing, and then Nvidia kicked in and said, 0:13:41.000 --> 0:13:42.360 you know, we're going to be a part of this 0:13:42.400 --> 0:13:45.360 particular IPO. And I think what's happening here is this 0:13:45.520 --> 0:13:48.600 and Vidia is creating the chips, and Codeviev is helping 0:13:48.640 --> 0:13:52.880 them sell the computing using those chips. Two different public 0:13:52.920 --> 0:13:56.840 that's out there now. At this time, Codeviev has a 0:13:56.880 --> 0:14:00.720 massive backlog of ordos, but it needs to get funding 0:14:00.800 --> 0:14:03.559 done in order to convert that into data centers and 0:14:03.600 --> 0:14:06.360 then capacity. Now you know, in Vidia isn't giving them 0:14:06.360 --> 0:14:08.480 money straight away, but it's basically saying, you know, we 0:14:08.559 --> 0:14:12.160 have confidence in this in this company, and it would help. 0:14:12.640 --> 0:14:15.200 Then code We've go out and raise capital from outside. 0:14:15.280 --> 0:14:18.000 So I think it's a little bit more like spreading 0:14:18.040 --> 0:14:20.800 the Nvidia ecosystem is what that's happening right now. 0:14:21.080 --> 0:14:25.200 Looking at your research note, note that Coreweve has fifty 0:14:25.320 --> 0:14:29.960 billion dollars in remaining performance obligations. What does that mean? 0:14:30.680 --> 0:14:33.000 Yeah, basically it says this is kind of the contracted 0:14:33.080 --> 0:14:35.680 revenue they have on hand, which means, you know, Microsoft 0:14:35.680 --> 0:14:38.040 has said, you know what, I'm good for ten out 0:14:38.080 --> 0:14:40.640 of that. For example, Meta has a deal with them, 0:14:40.680 --> 0:14:43.280 so they have this backlog of all these orders. But 0:14:43.600 --> 0:14:46.000 you know, unlike other companies, you just can't go out 0:14:46.040 --> 0:14:48.480 and fulfill the demand. You have to create a very 0:14:48.520 --> 0:14:52.120 large data centers using in Vidia chips. It then starts 0:14:52.120 --> 0:14:54.760 to work out or runs, and then you realize that 0:14:54.840 --> 0:14:57.840 fifty billion into revenue over the next several years. 0:14:58.080 --> 0:15:01.520 So what's the gating issue here for or Corewave? Is 0:15:01.520 --> 0:15:04.680 it more access to more data centers? What's kind of 0:15:04.680 --> 0:15:07.680 the gating issue for them to fulfill that revenue? 0:15:08.840 --> 0:15:12.280 Multiple gating factors. One is actually the data center itself. 0:15:12.280 --> 0:15:15.000 For that, you need land, you need power. You know, 0:15:15.040 --> 0:15:16.920 the chip side is okay at this point because in 0:15:17.040 --> 0:15:19.680 radio is there, but then also you need capital. I mean, 0:15:19.680 --> 0:15:22.440 code Weave is not a company like Microsoft or Amazon 0:15:22.680 --> 0:15:25.560 that has unlimited capital to create these data centers, it 0:15:25.600 --> 0:15:28.320 has to go in the market and raise capital. Before 0:15:28.320 --> 0:15:30.560 they went public, I mean their cost of capital was 0:15:30.640 --> 0:15:33.840 north of ten percent. Right now after they went public, 0:15:33.880 --> 0:15:35.560 I mean the cost of capital has gone down to 0:15:35.600 --> 0:15:38.760 about eight percent. But the entire neo clouds are in, 0:15:38.920 --> 0:15:41.440 whether it is code Weave or whether it is nebus, 0:15:41.880 --> 0:15:45.720 really depends on private credit lending or lending by other 0:15:46.400 --> 0:15:49.560 banks to really come up with the funding to create 0:15:49.560 --> 0:15:50.640 these data centers. 0:15:51.280 --> 0:15:55.400 So I also see that Microsoft unveil's latest AI chip 0:15:55.480 --> 0:15:58.360 to reduce reliance on in video. What's going on there? 0:15:58.800 --> 0:16:01.000 So this is something that's going on with all hyper 0:16:01.000 --> 0:16:04.000 scale cloud providers, you know, whether that's Google with its CPUs, 0:16:04.360 --> 0:16:07.760 Amazon with its chip, and now Microsoft launching I mean 0:16:07.800 --> 0:16:10.200 they have one chip, but the first generation was not 0:16:10.840 --> 0:16:13.160 you could say, did not do that well in terms 0:16:13.280 --> 0:16:16.760 of you know, reception from customers. What Microsoft is hoping 0:16:16.800 --> 0:16:19.160 here right now is, you know, for training, they'll still 0:16:19.280 --> 0:16:22.600 use the more powerful and video chips, but for you know, 0:16:22.720 --> 0:16:25.120 running let's say a co pilot, they could get around 0:16:25.160 --> 0:16:28.560 and use less powerful chips and big and if they 0:16:28.600 --> 0:16:31.320 do that, they actually save a lot of money. You know, 0:16:31.520 --> 0:16:33.960 in our math, we think if if Microsoft is going 0:16:34.000 --> 0:16:36.320 to spend you know, somewhere north of one hundred and 0:16:36.320 --> 0:16:38.880 forty billion dollars this year, more than fifty of that 0:16:39.040 --> 0:16:41.400 is going to go just buying chips, and so you know, 0:16:41.480 --> 0:16:43.760 it's it's a very big ticket for them, and they 0:16:43.800 --> 0:16:46.520 everybody needs to be doing this, frankly in house. 0:16:46.600 --> 0:16:49.880 Our thanks to Honor A. Grannap Bloomberg Intelligence Technology analyst. 0:16:49.800 --> 0:16:51.680 Move next to earnings from the coffee Chaine. 0:16:51.520 --> 0:16:54.480 Starbucks, and this week the company reported global sales at 0:16:54.600 --> 0:16:57.440 established locations whereas four percent in the most recent quarter 0:16:57.640 --> 0:16:59.040 that top to analyst estimates. 0:16:59.200 --> 0:17:02.120 For more I was joined Michael Halen, Bloomberg Intelligence Senior 0:17:02.120 --> 0:17:04.520 Restaurant and Food service analysts. At first they asked Michael 0:17:04.520 --> 0:17:07.800 to break down how CEO Brian Nichols turnaround plan is 0:17:07.840 --> 0:17:08.720 going at Starbucks. 0:17:09.119 --> 0:17:14.040 The turnaround plans are starting to really take a hold 0:17:14.119 --> 0:17:18.040 right now, and results really improved, rising, you know, four 0:17:18.080 --> 0:17:22.200 percent system wide same Star sales US as well. China 0:17:22.280 --> 0:17:24.679 was up seven percent. You know here in the US, 0:17:24.720 --> 0:17:28.680 it's you know, mainly about better operations, right They rolled 0:17:28.720 --> 0:17:33.760 out new operating standards late last year and that They 0:17:33.840 --> 0:17:37.760 seem to be really boosting the speed of service, which 0:17:37.840 --> 0:17:41.320 is creating happier customers that come back more frequently. 0:17:41.480 --> 0:17:41.680 Right. 0:17:42.560 --> 0:17:46.960 Some food innovation including protein cold foam seems to be 0:17:47.040 --> 0:17:50.040 hitting the mark right. And they're doing a better job 0:17:50.080 --> 0:17:53.760 on the marketing side. So all those are driving drove 0:17:53.960 --> 0:17:55.480 better Same Star sales than expected. 0:17:55.680 --> 0:17:57.880 Yeah, I don't know the one. I go to the 0:17:57.920 --> 0:18:00.560 Starbucks thirty five Wall Township, New Jery. They do a 0:18:00.560 --> 0:18:04.320 great job for me, and I've noticed the change. I mean, 0:18:04.320 --> 0:18:06.560 you know, little things like you know, writing your name 0:18:06.600 --> 0:18:08.080 back on the coup like they used to back in 0:18:08.080 --> 0:18:10.920 the early days. As in addition to that sticker which 0:18:10.960 --> 0:18:13.280 was a little antiseptic. I guess talk to us about 0:18:13.280 --> 0:18:16.080 costs there. Are they looking at their costs as well? 0:18:16.640 --> 0:18:20.280 Yeah, they they've identified two billion dollars in annual costs 0:18:20.280 --> 0:18:22.120 that they want to get after over the next one 0:18:22.160 --> 0:18:25.959 to two years. You know, Right now, margins have been impacted. 0:18:26.000 --> 0:18:28.920 They've gotten those same Star sales and traffic numbers up 0:18:29.000 --> 0:18:32.160 by adding labor to the stores, right, and so they're 0:18:32.160 --> 0:18:35.480 seeing margin compression still. So now that they got people 0:18:35.520 --> 0:18:38.520 coming back to the stores, now that the operations are 0:18:38.560 --> 0:18:41.440 more dialed in, you know, CEO Brian Nichol said, they're 0:18:41.440 --> 0:18:43.480 not quite where they need to be throughout the day. 0:18:43.480 --> 0:18:46.080 They're great at peak, but they have some improvement still 0:18:46.119 --> 0:18:48.760 to do. But you know, now that people are coming 0:18:48.800 --> 0:18:51.399 back to the stores, they're gonna you know, focus a 0:18:51.440 --> 0:18:54.760 little bit more on where where they can save some money, 0:18:54.840 --> 0:18:57.880 because you know, it was a smart move, real reallocating 0:18:57.920 --> 0:18:58.840 labor into the stores. 0:18:58.840 --> 0:19:02.240 But Costley talk to about the competitive environment because you 0:19:02.240 --> 0:19:04.960 go to like, I don't know, small towns, seems like 0:19:04.960 --> 0:19:08.240 there's a coffee joint on every corner of these days. 0:19:08.280 --> 0:19:11.000 What's the competitive landscape for Starbucks these days. 0:19:10.800 --> 0:19:13.280 Well, you know, it's as it's as competitive as it's 0:19:13.280 --> 0:19:16.159 ever been. You know, you have some of these younger 0:19:17.200 --> 0:19:19.960 chains that seem to do really well with gen Z, 0:19:20.280 --> 0:19:24.000 like Dutch Bros. And UH seven Brew, and they're they're 0:19:24.040 --> 0:19:28.560 opening up these drive through cans, you know, throughout the 0:19:28.600 --> 0:19:32.359 suburbs across America, you know, in the cities. You know, 0:19:32.400 --> 0:19:35.280 there's a lot of competition with these you know, very 0:19:35.400 --> 0:19:39.080 high end coffee shops that are you know, using very 0:19:39.320 --> 0:19:42.920 you know, very high quality coffee and offering an elevated 0:19:43.359 --> 0:19:46.520 food experience. So competition is tough, and that's why you 0:19:46.560 --> 0:19:49.600 know Starbucks is is making some changes. You know, they're 0:19:49.640 --> 0:19:52.159 focusing on on health and wellness, right They're looking to 0:19:52.200 --> 0:19:55.159 improve the food in the bake case there, looking to 0:19:55.200 --> 0:19:57.920 improve the food or throughout the day they're looking into 0:19:58.000 --> 0:20:02.159 some new innovative drink off rings to boost that afternoon 0:20:02.240 --> 0:20:05.919 day part. And so you know, this is just the 0:20:05.960 --> 0:20:09.080 beginning of what Starbucks, you know, things they need to 0:20:09.119 --> 0:20:12.600 do for long term continued same Star sales growth. 0:20:13.000 --> 0:20:15.960 Our thanks to Michael Halen, Bloomberg Intelligence Senior Restaurant and 0:20:16.000 --> 0:20:17.240 Food Service analyst, we. 0:20:17.320 --> 0:20:19.199