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Speaker 2: Let's go now to talk about tech. Really focus in
Speaker 2: on core Weave. Corewave is one of those neocloud companies.
Speaker 2: The shares are a big time today a fourteen percent
Speaker 2: after it has secured a fourteen billion dollar deal with Meta.
Speaker 2: Let's bring in on rog Rana. He has Bloomberg Intelligence
Speaker 2: technology analyst on more of this deal.
Speaker 3: So on rag.
Speaker 2: This is a deal that will provide Meta access to
Speaker 2: Invidia's latest GB three hundred systems. What is that? Are
Speaker 2: those in video's most advanced chips or systems run by
Speaker 2: in Video's most advanced chips.
Speaker 4: Yeah, so you know corviv is basically is is a
Speaker 4: company that takes all these GPUs and rents it out
Speaker 4: to people for whatever they want to use. So they
Speaker 4: do get the dips on the most latest equipment that
Speaker 4: is sold by Nvidia, and then the clients can and
Speaker 4: now I did show that Meta is buying directly from
Speaker 4: Nvidia as well. But in this case, they're just going
Speaker 4: and outsourcing the entire infrastructure for an amount of fourteen
Speaker 4: billion dollars, which you know, may be a very small
Speaker 4: piece of it has overall capex for AI infrastructure, but
Speaker 4: it's still a start that they are now leasing capacity
Speaker 4: rather than building it in house.
Speaker 5: So how should we think about this in the overall
Speaker 5: growth of AI. I mean, this feels like incremental spending
Speaker 5: to me, but I'm not sure if it's just shifted
Speaker 5: somewhere else. Happy when you see announcements like this from
Speaker 5: Core we've had, do you kind of welded in or
Speaker 5: you know, kind of weave it into the larger picture.
Speaker 4: So every company, every hyperscale cloud provider right now, you know,
Speaker 4: whether that's Microsoft or whether that's Meta or any other
Speaker 4: company that's out there that is spending a lot on
Speaker 4: capital expenditures on expanding their AI capabilities. They have two options.
Speaker 4: They can either build it themselves and they can go
Speaker 4: to a specialized spended like Core Weave and rent it
Speaker 4: from them or lease it from them. Microsoft has said
Speaker 4: that they are really into expanding their leasing capacity or
Speaker 4: capabilities down the road, which is good for companies like
Speaker 4: core we've their job is to build this only this
Speaker 4: infrastructure and rent it out to whoever wants it.
Speaker 2: Okay, okay, got it. My other question when it comes
Speaker 2: to core Weave and you know all this, all these
Speaker 2: deals it's making with these cloud providers, is that they're
Speaker 2: also raising a lot of money. Core Weave is tapping
Speaker 2: the debt market, or there's there's there's expectations that it
Speaker 2: may tap the debt market. Is there going to be
Speaker 2: enough demand to meet, you know, what, what it wants
Speaker 2: to sell.
Speaker 4: So here is the case when it comes to a
Speaker 4: customer like Microsoft or Meta, which all of us know
Speaker 4: have a lot of cash flow come in. If they
Speaker 4: have signed let's say a five year deal, seventy eight deal,
Speaker 4: you kind of know that the money is good. It's
Speaker 4: much easier to raise capital then then let's say from
Speaker 4: a brand new company that may not have that amount
Speaker 4: of cash flow coming in. So I would say, I mean,
Speaker 4: you know, one should not be concerned that Meta is
Speaker 4: not good for that money. I don't think that's going
Speaker 4: to be you know a concern for anybody who's giving
Speaker 4: them the bonds of their debt for.
Speaker 5: That Yeah, Meta raised twenty nine billion dollars in a
Speaker 5: financing package for a massive data center in Louisiana. Last week,
Speaker 5: Oracle raised eighteen billion dollars in bonds as it builds
Speaker 5: infrastructure for open AI. So the markets are open for
Speaker 5: this kind of trade.
Speaker 2: It seems like, yeah, apparently they are. And the other
Speaker 2: thing with Corewave, of course, is that it has an
Speaker 2: increased commitment from open AI. It's got this big customer
Speaker 2: in Microsoft I think makes up seventy one percent of
Speaker 2: its revenue. How diversified is Coreweave's customer base right now?
Speaker 4: See when you see the core piece's first biggest customer
Speaker 4: was Microsoft. Microsoft didn't have the capacity to run a
Speaker 4: lot of there I workloads, so they went to core beef. So,
Speaker 4: you know, frankly speaking, I understand that seventy percent. But
Speaker 4: you know, this is an area where everybody needs capacity.
Speaker 4: So you know, for us it is an issue, but
Speaker 4: it's not like, you know, it's not a deal breaker
Speaker 4: when it comes to the quality or even you look
Speaker 4: at the fundamentals of somebody like a corevief. Now what's
Speaker 4: happening is other cloud providers are going to them and say,
Speaker 4: whatever access capacity that you have, you know we will
Speaker 4: take that as well.
Speaker 5: Are there other companies that are going to come public here,
Speaker 5: like core weave, these neo cloud companies.
Speaker 4: Yeah, I mean, I'm sure a lot of them are
Speaker 4: gearing up for it. Core Weef is probably the biggest
Speaker 4: one that's out there. You know, we saw Microsoft signing
Speaker 4: another deal recently with the Nebius, I believe, and you
Speaker 4: know that was a very similar arrangement where Microsoft is
Speaker 4: going to them and saying, Okay, for the next several years,
Speaker 4: this is the kind of money that I are the
Speaker 4: capacity that I want from you, and this is how
Speaker 4: I'm going to give you the money to fund it.
Speaker 2: Basically, So an rag when you look at these kinds
Speaker 2: of deals and you know, fourteen billion dollars here, ten
Speaker 2: billion dollars somewhere else, what gets your attention in terms of,
Speaker 2: you know, I need to look into this a little
Speaker 2: bit more versus this is just one in a long
Speaker 2: string of deals that these companies will continue to sign.
Speaker 4: The biggest thing you want to think about is what
Speaker 4: are these companies doing these deals for. So, say, somebody
Speaker 4: like a Microsoft, are they giving a lot of their
Speaker 4: inference workloads or the outcome of chart GPT running on
Speaker 4: Microsoft's cloud workloads or are they giving model training workloads
Speaker 4: because there is a there is a there is a
Speaker 4: narrative out there in the market that the long tail
Speaker 4: of the AI revenue comes from people using apps, which
Speaker 4: we you know, think of this as infrince revenue compared
Speaker 4: to the model training revenue, which make ups and down
Speaker 4: depending on what kind of technological advancement we see in
Speaker 4: you know, software development.
Speaker 5: Stay with us more from Bloomberg Intelligence coming up after this.
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Speaker 5: Looking at Exxon Mobil, say they're cutting about two thousand
Speaker 5: people from their headcount, the stocks off about one percent.
Speaker 5: This is a company that has almost sixty one thousand employees,
Speaker 5: so you know, a meaningful number there, and we've seen
Speaker 5: job cuts around other energy companies as well. When you
Speaker 5: get a sense of what's happening there, Vince Piazza joins
Speaker 5: us here. Vince's senior energy analysts for Bloomberg Intelligence. Vince
Speaker 5: talk to us about what this news from Exon Mobile means.
Speaker 5: How material is it to you and to investors.
Speaker 3: Well, I think it's part of managing through the cycle.
Speaker 3: Right in prior cycles the sector was exposed to more
Speaker 3: extreme volatility, higher highs, lower lows. The industry is trying
Speaker 3: to manage through what seems to be a rather clouded
Speaker 3: backdrop right now. So we're sitting here and you got
Speaker 3: neck gas somewhere around three point thirty Henry Hubb. You
Speaker 3: got WTI in the low sixties. You have OPEC bringing
Speaker 3: back on capacity and maybe even speeding up that the
Speaker 3: capacity ads. You have a more clouded, broader economic backdrop
Speaker 3: across the globe. You have geopolitical issues, so lots of uncertainty,
Speaker 3: and not only Exon. Exon's probably going to cut somewhere
Speaker 3: about two three four percent of its global workforce. It's
Speaker 3: Canadian affiliate a much more substantial cut, roughly about twenty
Speaker 3: percent over the next two years or so. You're seeing
Speaker 3: it at Conico Phillips, You're seeing it at Chevron, even BP,
Speaker 3: the major European energy conglomerate. You're seeing it across the
Speaker 3: board and so Paul, as you know, when you're not
Speaker 3: growing revenue, right, You're not getting the revenue increase on price,
Speaker 3: you're not growing production because your investor base does not
Speaker 3: want to see that production growth. You are looking at
Speaker 3: very steady revenue, maybe even declining revenue. You have to
Speaker 3: manage that netback from the cost perspective, and you have
Speaker 3: to support that cash flow stream, and so you're doing
Speaker 3: it via these cost cuts over a number of years too,
Speaker 3: maybe even three years, to sort of bring that cost
Speaker 3: structure in line with a new reality of uncertainty in
Speaker 3: the marketplace, to reduce that volatility.
Speaker 2: Well, there's cost cuts, and then there's Exon mobiles cost cuts.
Speaker 2: Since twenty nineteen, it's trimmed thirteen and a half billion
Speaker 2: dollars in annual cost That is more than all the
Speaker 2: other big oil companies combined. How much more room is
Speaker 2: there for Exon to slash expenses.
Speaker 3: Well, it bought Pioneer, so it has a relatively sizable workforce.
Speaker 3: In general, it doesn't necessarily mean that those cuts are
Speaker 3: going to come there, but there are ways you cut
Speaker 3: you gain efficiency. In this technological era where we have
Speaker 3: advancements across the energy value chain, you will consistently and
Speaker 3: continually seek out ways to get efficiency, to bring down
Speaker 3: that cost structure and to bring unit costs in line
Speaker 3: with a very anemic outlook for global energy prices in general,
Speaker 3: and also a very clouded outlook for the global economy too.
Speaker 5: So Vince kind of looking out, you know, one to
Speaker 5: two years, what is the view of the companies you
Speaker 5: talk to about energy prices, oil and gas. Is it
Speaker 5: still going to be a challenge market here?
Speaker 3: It looks like it. It looks like it's going to
Speaker 3: be a very challenge market, especially for the WTI side,
Speaker 3: for the oil side of the equation. On natural gas, Paul,
Speaker 3: I know you and I have talked about this numerous times.
Speaker 3: You have a contructural growth trajectory for natural gas here
Speaker 3: in the US via export LNG, whether it's seaborne energy
Speaker 3: or whether it's pipeline gas into Mexico to help fuel
Speaker 3: their economy. As well. You have the AI build out,
Speaker 3: which will be a which will digest significant amounts of energy,
Speaker 3: and that's beneficial for natural gas. But on the oil side,
Speaker 3: you have very anemic growth. You have your transportation fuels
Speaker 3: having to compete with alternative and renewable fuels, So there's
Speaker 3: a greater competition there. The growth trajectory and the outlook
Speaker 3: for the demand side on the liquids fuels seems to
Speaker 3: be very clouded and seems to be somewhat less secure
Speaker 3: relative to the natural gas side of the house. And
Speaker 3: that's why we much more favorably disposed to Henry Hub
Speaker 3: and natural gas relative to WTI, Brent and the various
Speaker 3: liquid fuels.
Speaker 2: And before we let you go, Vince, Opek Plus will
Speaker 2: be holding a meeting this weekend on Sunday, and there's
Speaker 2: talk that they will increase or fast tracked the return
Speaker 2: of halted production. There's a lot of concern that China,
Speaker 2: and it's a build up of its strategic oil reserve,
Speaker 2: might be distorting some numbers or distorting the demand picture.
Speaker 3: What's your take, So, in general, demand across the globe
Speaker 3: seems to be less than robust because of well, you
Speaker 3: have a global economy that's uncertain you have PARAFT policy
Speaker 3: that has injected more volatility and uncertainty across the globe.
Speaker 3: That so demand concerns are an issue. The supply side, well,
Speaker 3: we know where the supply is and opick is reasserting
Speaker 3: its market share dominance in the US. We don't want
Speaker 3: that production growth, and so it's really coming from the
Speaker 3: OPEC side of the house, and the demand side of
Speaker 3: the house is going to be somewhat in NEEMA. From here,
Speaker 3: stay with us.
Speaker 5: More from Bloomberg Intelligence coming up after this.
Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live
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Speaker 5: Spotify. You know, I'm not a Spotify user, so I
Speaker 5: don't pay that much attention to it.
Speaker 3: I should.
Speaker 5: One hundred and forty four billion dollars in market cap.
Speaker 5: The stock's up fifty percent this year to date. Just extraordinary.
Speaker 5: The Spotify founder Daniel Eck stepping down as CEO, stocks
Speaker 5: off about five percent on the news. He's forty two
Speaker 5: years old. I mean, I don't know.
Speaker 2: It's got a lifetop ahead of Oh.
Speaker 5: He's got ten billion dollars according to Rich, go is
Speaker 5: his net worth? Keith wrong Andathan joins as she's the
Speaker 5: US media analyst for Bloomberg Intelligence follows this company. H
Speaker 5: Keith to talk to us about Spotify, talk to us
Speaker 5: about Daniel Eck. What's going on here today?
Speaker 3: Yeah?
Speaker 6: Absolutely, pause, But this is you know, one of your
Speaker 6: classic cases of the founder finally kind of establishing a
Speaker 6: really good transition plan and handing it off to his
Speaker 6: you know, two lieutenants here. So we're having a co
Speaker 6: CEO structure. And really, I mean the first when I
Speaker 6: heard this, I mean, this really kind of harkens back
Speaker 6: to what Reed Hastings did with Netflix, you know, kind
Speaker 6: of left right at the peak, right when the companies,
Speaker 6: you know, everything was kind of you know, all cylinders
Speaker 6: were firing away and left it to Greg Peters and
Speaker 6: and Ted Surrandos to kind of take charge. And it
Speaker 6: seems like Spotify is in a very similar position. So
Speaker 6: they had a couple of things that had to get
Speaker 6: done this year, which was new contracts with all of
Speaker 6: the music labels. It looks like Daniel Eck has you know,
Speaker 6: accomplished all of that, and I think he's really kind
Speaker 6: of left the company in a good position for for
Speaker 6: its next phase of growth. And this is really you know,
Speaker 6: a huge story in the Internet space, the possibility to
Speaker 6: get to a billion users very very quickly. They already
Speaker 6: have about seven hundred million.
Speaker 2: Okay, so there are almost three quarters of the way there.
Speaker 2: He's leaving on top as George Costanzo wood in Seinfeld.
Speaker 2: But my question, Gita, is you talk about the new
Speaker 2: phase of growth, how much of that will rely on
Speaker 2: continued price increases. Unlike Paul, I do subscribe to Spotify,
Speaker 2: and it's alarming how frequently the price changes come.
Speaker 6: Yeah, and it is going to keep coming, Scarret, There's
Speaker 6: absolutely no doubt about it. I mean, this whole story
Speaker 6: is kind of predicated on those price increases. Remember though,
Speaker 6: that they never took up prices for the first ten
Speaker 6: to twelve years, and then it started coming fast and furious.
Speaker 5: Right.
Speaker 6: We had one price increase in twenty twenty three, another
Speaker 6: in twenty twenty four, We're going to have probably another
Speaker 6: one in twenty twenty six. But if you kind of
Speaker 6: look at all of the streaming services out there, you know,
Speaker 6: Spotify is, of course the leader in audio streaming. They
Speaker 6: have a thirty five percent global market share in terms
Speaker 6: of subscribers. You kind of look at their price, let's
Speaker 6: say in the US, it's twelve dollars for an individual plan.
Speaker 6: You compare that to let's say the video leader Netflix. Again,
Speaker 6: I go back to the Netflix example, they are priced
Speaker 6: at eighteen dollars, so I think Spotify still has quite
Speaker 6: a lot runway when you kind of compare it to
Speaker 6: the rest of the field. And the other thing that
Speaker 6: I like to point out here is when you're kind
Speaker 6: of subscribing to an audio service, it's typically only one
Speaker 6: service that you're subscribing to as opposed to a video service.
Speaker 6: So I think people really like their you know, if
Speaker 6: they like Spotify, they're absolutely going to hold on to
Speaker 6: it at any cost. And the other thing is, you know,
Speaker 6: Spotify is adding new features all the time, so they
Speaker 6: are like really getting down on you know, monetizing more
Speaker 6: and more, but it's not they are innovating also constantly,
Speaker 6: so I think I think people don't mind paying for it.
Speaker 5: What's the biggest challenge to them on the cost side
Speaker 5: of the business.
Speaker 3: KEITHA music royalty is all.
Speaker 6: I mean that, you know, for every dollar that they make,
Speaker 6: they're paying out about seventy cents in terms of musical
Speaker 6: royalties back to the labels. So it is definitely a
Speaker 6: very you know, from that perspective, the model is hard.
Speaker 6: But one of the things that they've done very well
Speaker 6: is you know, they've obviously renegotiated a lot of the
Speaker 6: deals kind of try to prove investors with a lot
Speaker 6: more visibility into the cost space. But more importantly for them,
Speaker 6: they're really trying to go away from you know, licensed
Speaker 6: content to more owned content, so kind of going into
Speaker 6: you know, podcasts, going into more non music content, where
Speaker 6: again they have a lot more leverage, you know, whether
Speaker 6: it's audiobooks, whether it's video podcasts, getting away from you know,
Speaker 6: just being a core music service to more of kind
Speaker 6: of a global kind of an audio service, and they're
Speaker 6: doing that really well, and that's going to help them
Speaker 6: with their margin expansion story as they get better unit economics.
Speaker 2: Right and introducing premium tiers on top of that, you
Speaker 2: have to unlock in order to unlock some of the
Speaker 2: more I don't know, high profile podcasts, you then have
Speaker 2: to pay extra. Keith talk a little bit about AI,
Speaker 2: because I keep reading about how AI generated music is
Speaker 2: a challenge, but in what way and could it actually
Speaker 2: become an opportunity as well for Spotify?
Speaker 6: I think so, I think it is going to become,
Speaker 6: you know, an opportunity as we go. They're already actually
Speaker 6: using you know a lot of AI features when it
Speaker 6: comes to curation, you know, when it comes to music discovery,
Speaker 6: when it comes to providing better features, and they're already
Speaker 6: and you just brought up the super Premium tier and
Speaker 6: a lot of that is actually going to be having
Speaker 6: like an AIDJ type of a feature there, you know,
Speaker 6: for both listeners as well as music creators. So I
Speaker 6: think it is definitely going to be, you know, a
Speaker 6: good opportunity for them to present a much better product.
Speaker 6: I mean, we've already seen AI being used by a
Speaker 6: lot of the other platforms. Again, I go back to
Speaker 6: Netflix because they've done this really well in terms of,
Speaker 6: you know, having a much better algorithm now to serve
Speaker 6: up better content. And I think that's exactly what Spotify
Speaker 6: is doing in terms of its playlists as well.
Speaker 5: CA you thinking about thirty seconds left, where's Apple in
Speaker 5: this audio game?
Speaker 6: So just in terms of subscribers share, Paul, I mean, Spotify,
Speaker 6: as I said, leads with about thirty five percent share
Speaker 6: of the market. Apple is really far behind. They have
Speaker 6: about a ten percent share, so very very hard for
Speaker 6: them to catch up in terms of subscribers.
Speaker 3: At least.
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