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Speaker 1: Bloomberg Audio Studios, podcasts, radio news. You're listening to the

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Speaker 1: Bloomberg Intelligence podcast. Catch us live weekdays at ten am

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Speaker 1: Eastern on Apple, Cocklay and Android Auto with the Bloomberg

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Speaker 1: Business app. Listen on demand wherever you get your podcasts,

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Speaker 1: or watch us live on YouTube.

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Speaker 2: It feels like this week we've seen a lot as

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Speaker 2: it released to Chinese tug as.

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Speaker 3: Well a lot based on that, and overnight there's a

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Speaker 3: Chinese AI startup called Moonshot, which I thought the name

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Speaker 3: was kind of app It sent jitters across markets, and

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Speaker 3: this is why partly we're seeing or largely rather we're

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Speaker 3: seeing an SNP and an ASDAC that's down on the day,

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Speaker 3: and that's why you're seeing the socks on a bear market.

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Speaker 3: Because of that, and for that, we have no one

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Speaker 3: else better to talk to than Men Deep seeing he's

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Speaker 3: with Bloomberg Intelligence. Men Deep, do you think this is

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Speaker 3: another Deep Seek moment or do you think that this

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Speaker 3: is something bigger changing maybe in the AI race.

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Speaker 4: I would say there, I'm off the view that you know,

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Speaker 4: every time there is a new model release, every model

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Speaker 4: provider would highlight, you know, what is unique about this release,

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Speaker 4: and in this case, they talk about, you know, token efficiency,

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Speaker 4: the fact that they have caught up in terms of

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Speaker 4: certain types of functionality that the model can provide. And look,

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Speaker 4: we were in an environment where everyone is talking about

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Speaker 4: how expensive it is to deploy these technologies, the llms,

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Speaker 4: and this model seems to be good enough at a

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Speaker 4: low price, which is what is catching attention. But that

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Speaker 4: doesn't mean, you know, they've caught up to the frontier

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Speaker 4: models that Anthropic and Open Eye have released, and so

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Speaker 4: it's really a function of pricing. And to my mind,

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Speaker 4: you can create news, but the actual adoption will have

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Speaker 4: to wait and see.

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Speaker 2: And it speaks to the nervousness that consumers and investors

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Speaker 2: have over who is prevailing in this AI race, and

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Speaker 2: very much feels like an AI race. Mandy, Why have

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Speaker 2: we gotten to the point where, even though the cutting

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Speaker 2: edge development and technology is happening in the US, it

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Speaker 2: feels increasingly like Asian markets are dictating where things go

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Speaker 2: in terms of price action.

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Speaker 4: Yes, I think you bring up a very good point

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Speaker 4: that you know, what's going on in Korea right now

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Speaker 4: seems to be affecting you know, the indices here and

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Speaker 4: how stocks are trading, and that's part of the nervousness

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Speaker 4: that you alluded to that you know, when things go

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Speaker 4: parabolic as they did with some of the stocks, you know,

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Speaker 4: for no reason whatsoever. Yes, the fundamentals have been great,

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Speaker 4: but that doesn't mean, you know, things have to go

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Speaker 4: up in that fashion, and that's what creates nervousness around valuations.

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Speaker 4: I mean, we are seeing even news like Apple asking,

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Speaker 4: you know, China for qualification of or sorry, the US

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Speaker 4: government for qualification of a Chinese mena rename is creating

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Speaker 4: a lot of downside for the US memory names and

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Speaker 4: you know your Micron and even ske Heinex. So that's

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Speaker 4: the kind of environment we are in where any sort

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Speaker 4: of news creates that sort of action where you know,

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Speaker 4: if socks were trading at a high valuation, they it's

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Speaker 4: going to have an impact. And I think the fundamentals

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Speaker 4: haven't really changed in a big way, which I think

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Speaker 4: will be validated when these companies report their earnings and

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Speaker 4: guide for CAPEX, which I expect numbers to go up.

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Speaker 4: But we are in an environment where news will have

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Speaker 4: an impact on day to day volativity.

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Speaker 3: Mandy, do you think that this is a sign that

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Speaker 3: investors should see this as a threat to USAI leadership

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Speaker 3: or is it just simply more competition, which is what

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Speaker 3: we should expect anyway.

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Speaker 4: I think the overall message here is you can't have

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Speaker 4: two companies dominate the LLM race. It's never going to

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Speaker 4: be good from, you know, an ecosystem perspective. They will

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Speaker 4: have very high margins, which is definitely not something that

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Speaker 4: all the other companies want in the ecosystem. So there

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Speaker 4: is a desire to have more llms and cheaper pricing

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Speaker 4: for these llms. And that's why if the option is

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Speaker 4: available through open source Chinese models, people are looking into

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Speaker 4: it now and it's across the board, and it's not

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Speaker 4: different from any other technology trend. You want to see

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Speaker 4: the costs come down as adoption goes up. That wasn't

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Speaker 4: happening here, and I think that's why you are seeing

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Speaker 4: so much interest in open source lms right now.

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Speaker 2: Okay, so China with deep Sneak and now Moonshot, these

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Speaker 2: developments when we hear about it kind of feels like

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Speaker 2: it comes fromund nowhere, mainly because we haven't been following

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Speaker 2: the incremental news on it. Are there other places or

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Speaker 2: other companies that could surprise us in the same way

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Speaker 2: where suddenly they come out with a fully formed AI

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Speaker 2: model LM that we didn't know about.

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Speaker 4: Yeah, I mean look at Meta announcing the Muse models

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Speaker 4: and you know, trying to become a cloud provider and

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Speaker 4: selling their APIs externally. We've heard about Grock, you know

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Speaker 4: SpaceX Grock, and now with the merger with Cursor, they

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Speaker 4: have released a new model. So all these could be

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Speaker 4: viable options in terms of using llms at a lower

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Speaker 4: token pricing than what the frontier models are currently giving.

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Speaker 4: And so that's where the competition is going to increase.

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Speaker 4: But I go back to that functionality point. All these

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Speaker 4: lms are still trailing in terms of the functionality that

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Speaker 4: pable or you know, the open AI models have, so

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Speaker 4: that gap needs to close and then people will route

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Speaker 4: the query to the LM that's most appropriate for that

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Speaker 4: task and you don't need the frontier lms for every query.

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Speaker 4: And I think that's the direction we're headed.

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Speaker 1: Stay with us.

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Speaker 2: More from Boomberg Intelligence coming up after this.

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Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live

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Speaker 1: weekdays at ten am Eastern on Apple Cocklay and Android

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Speaker 1: Auto with the Bloomberg Business app. Listen on demand. Wherever

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Speaker 1: you get your podcasts or watch us live on YouTube.

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Speaker 3: I'm Isabelle sitting in for Scarlettfoo and Paul Sweeney. Both

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Speaker 3: are away at the moment. Paul is at the beach,

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Speaker 3: I think, and Scarlettfoo is with her TV duties. But

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Speaker 3: beside me is a legendary Charlie Pellett. So I am

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Speaker 3: in fantastic company.

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Speaker 5: I'm very glad to be here. We shut just a

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Speaker 5: few minutes together, but we are going to make the

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Speaker 5: most of it. And let us talk about one of

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Speaker 5: the most popular stocks to cover, and that is Apple, Apple.

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Speaker 3: Apple, And we have no other than markom and Bloomberg

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Speaker 3: News Managing editor for Global Consumer Tech on Apple and

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Speaker 3: all things Apple. Here is what I call in my

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Speaker 3: old scoop machine, because anything anytime I see on Apple headline,

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Speaker 3: I know it has to be Mark. So Mark, first

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Speaker 3: of all, we have to talk about Apple briefly or

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Speaker 3: at one point they're passing in video as a most

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Speaker 3: valuable company in the world. Maybe talk to us about

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Speaker 3: significance of that. What is Apple doing right because the

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Speaker 3: rest of the big tech is kind of languishing.

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Speaker 6: Apple stock's been on a tear lately. I think investors

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Speaker 6: might finally be reading my articles where I talk about

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Speaker 6: that we're about to enter a tremendous new period for

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Speaker 6: the company, with so many new products home devices, foldable iPhones,

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Speaker 6: AI wearables, integrating AI deep into the hardware. Apple's a

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Speaker 6: hardware company. They make basically all their money from hardware sales.

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Speaker 6: If you're an Apple investor, it's a good time because

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Speaker 6: they're about to make a boatload of more money, and

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Speaker 6: so you'll probably have some success there on the on

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Speaker 6: the days they announced.

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Speaker 5: Their all right, I go to the Bloomberg. I look

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Speaker 5: at Apple shares up twenty two point five percent year

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Speaker 5: to date. I look at in video by Comparison up

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Speaker 5: nine point nine percent. When a story like this saying

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Speaker 5: Apple is now number one in terms of market cap

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Speaker 5: clears the Bloomberg. What is the reaction, respectively, in either

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Speaker 5: Coopertino or Santa Clara. Are the folks that Nvidia looking going,

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Speaker 5: oh my god, what a terrible day this is? Folks

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Speaker 5: in Coopertino are they going woohoo? Or is it really

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Speaker 5: a case of nobody cares other than the folks who

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Speaker 5: own those stocks.

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Speaker 6: I think it's the ladder. But if you're in Vidia,

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Speaker 6: right this might be a little bit of a wake

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Speaker 6: up call. I mean, they were the hard charging company

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Speaker 6: making all the money with the insane revenue growth over

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Speaker 6: the past couple of years, and now investors are beginning

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Speaker 6: to become a little bit more skeptical over AI and

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Speaker 6: how AI is being driven. I think there's a little

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Speaker 6: bit more optimism for what Apple's doing because of their

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Speaker 6: decision to go more on device for AI processing, and

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Speaker 6: so their capex is slim compared to the competition, and

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Speaker 6: I think that the lower spending that Apple is doing,

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Speaker 6: I think it makes investors actually pretty excited. But again,

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Speaker 6: the quality of the AI that you're getting from the

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Speaker 6: cloud versus on device are still a big, you know,

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Speaker 6: deviation there. But the gap will close at some point,

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Speaker 6: I think.

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Speaker 3: And then you said that Apple is set to make

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Speaker 3: a boatload of money. Where will that come from? We

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Speaker 3: do know that they're raising their prices across devices. Is

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Speaker 3: that coming from there?

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Speaker 6: Well, the revenue will go up because of the price increases.

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Speaker 6: I don't think the price increases are enough to slow

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Speaker 6: unit sales to any significant degree. Profit not going to

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Speaker 6: change much because the offset the price increases are designed

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Speaker 6: to simply offset the memory they're not making additional profit

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Speaker 6: on that. We're talking about new iPads. There'll be a

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Speaker 6: new ole at iPad, so a better screen like the

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Speaker 6: iPhone and iPad pro.

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Speaker 5: This fall.

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Speaker 6: The foldable iPhone is going to be about twenty five

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Speaker 6: hundred bucks. I'm super pumped.

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Speaker 3: I want to see that in real life.

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Speaker 6: I can't wait. Yeah, it's going to be the biggest

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Speaker 6: change to the iPhone in the product's history. So it's

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Speaker 6: a really really big deal full time.

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Speaker 5: I'm not necessarily a skeptic with things like this, but

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Speaker 5: why do I need a folding phone? Thank you? As well?

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Speaker 5: Regardless of whether it's Apple, regardless of whether it's sound

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Speaker 5: well gen Z influced, well.

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Speaker 6: I would say you need a foldable phone like you

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Speaker 6: need a hole in your head, because it doesn't really

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Speaker 6: make you know, it's not really uh that necessary. It's

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Speaker 6: sort of a technology showcase, right, It's over the top.

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Speaker 5: It's very cool. I mean when I've seen these foldable phones,

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Speaker 5: I'm always looking for the line and I don't see it.

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Speaker 5: I don't see the line between the two screens.

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Speaker 6: We've gotten better and Apple is going to be pretty

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Speaker 6: much industry leading in how you know invisible that line

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Speaker 6: is going to be. One of the problems you've had

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Speaker 6: with foldable phones over the past several years is durability.

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Speaker 6: Apples is not going to be as durable as you

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Speaker 6: know the slab phone, right, I mean the Promax, the

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Speaker 6: seventeen Promacs. This thing is built like a tank. You

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Speaker 6: can throw it across wherever, you can throw it in

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Speaker 6: the pool. This thing is not going to break.

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Speaker 5: It's a tank.

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Speaker 6: At the same time, what you really need to understand

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Speaker 6: is that Apples hold the phone is going to be

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Speaker 6: more durable than the competitive devices.

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Speaker 3: Yeah, okay, so we have around one minute left, and

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Speaker 3: as Apple invests more in AI and new devices, do

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Speaker 3: you think it can maintain its premium position because we

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Speaker 3: also know that smartphone growth is slowing a little.

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Speaker 6: I think that Apple, if you look at it as

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Speaker 6: a complete package, you look at the hardware, software services,

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Speaker 6: they still think they have the most competitive phone on

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Speaker 6: the market on a global scale. I think it's the

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Speaker 6: best combination of user accessibility, interface services, things like my Message.

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Speaker 6: So I think it remains an elite product and I

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Speaker 6: don't think the phone is going away as quickly as

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Speaker 6: some people do.

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Speaker 5: Mark very briefly, Isabelle asked about revenue. Whenever Apple earnings

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Speaker 5: hit the Bloomberg one of the first things I look

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Speaker 5: at is China revenue. Speak to us about what is

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Speaker 5: happening in terms of Apple and China. I know there

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Speaker 5: was some news announced about the iPhone in China. What's

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Speaker 5: going on there?

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Speaker 6: So Apple will finally be able to roll out its

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Speaker 6: AI in China. This is the first generation version of

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Speaker 6: its new AI, so the Apple intelligence that got the

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Speaker 6: head of AI fired. So I don't think this is

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Speaker 6: a needle mover. I don't think people in China are

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Speaker 6: going to want it. But the second generation, the new

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Speaker 6: SERIAI and the new Apple Intelligence is pretty good, so

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Speaker 6: we'll see how long it takes for that to get approved.

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Speaker 2: Stay with us more from Bloomberg Intelligence coming up after this.

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Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live

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Speaker 1: weekdays at ten am Eastern on Apple, Cocklay and Android

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Speaker 3: I myself, I am a binge watcher when it comes

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Speaker 3: to Netflix. But you made a point earlier, Scarlette. There

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Speaker 3: are already many people in Netflix account and where do

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Speaker 3: they take their growth.

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Speaker 2: Yeah, well, aside from making sure that your brother or

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Speaker 2: your husband is not using your.

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Speaker 3: Account, that is true, and that's why you're seeing this

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Speaker 3: stock down as alexis eluded more than nine percent. It's

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Speaker 3: the biggest inter dated client since April twenty twenty two.

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Speaker 3: And joining us now to help us make sense of this,

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Speaker 3: it's Githa Aganathan, Bloomberg Intelligence Analysts on US Media. Githa,

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Speaker 3: thank you so much for joining us. Do you think

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Speaker 3: that this is that this slow and growth is the

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Speaker 3: short term issue or do you think it's a sign

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Speaker 3: that Netflix maybe is becoming a more mature market.

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Speaker 7: Definitely, Isabelle. You know, we are seeing signs of maturity

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Speaker 7: across the entire landscape and definitely for Netflix as well.

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Speaker 7: So you know, moderating revenue growth is definitely a big

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Speaker 7: red flag here, and we've seen the revenue growth actually

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Speaker 7: come down pretty substantially, which is what I think is

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Speaker 7: really spooking investors, right because in the first quarter you

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Speaker 7: had about sixteen percent revenue growth, almost fourteen percent for

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Speaker 7: the second quarter, and now when you look at their

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Speaker 7: guidance for the third quarter, it's eleven point seven percent,

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Speaker 7: which was well below what consensus was expecting. So this,

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Speaker 7: this really I think feeds into that whole investor anxiety

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Speaker 7: about you know, what the catalysts are going.

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Speaker 2: Forward for this name, and this is not something that

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Speaker 2: can be solved with more spending on content and making

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Speaker 2: sure you have the latest hot show or the latest franchise.

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Speaker 7: Is it well, they actually scarlett to that point. They're

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Speaker 7: actually boosting content spending pretty significant this year, almost ten

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Speaker 7: percent to twenty billion dollars. That's the highest ever that

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Speaker 7: they would be spending on content. But you know, if

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Speaker 7: you look at the Engagement Report which they published yesterday,

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Speaker 7: yes they do have, you know, this very broad swath

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Speaker 7: of content, and but at the end of the day,

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Speaker 7: we're not necessarily seeing that resonate into what, you know,

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Speaker 7: the metric that all investors are focused on, which is engagement,

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Speaker 7: because while the total number of hours viewed did grow

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Speaker 7: slightly two percent from last year, the viewing hours per

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Speaker 7: subscriber is actually declining. And the big worry I think

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Speaker 7: for investors is that as we get disruption from short

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Speaker 7: form video, from YouTube, from you know, Instagram, TikTok and

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Speaker 7: all of these other social media platforms, can Netflix actually

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Speaker 7: retain that you know, engagement metric and is it only

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Speaker 7: going to slip further.

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Speaker 3: So, Githa, do you think we're heading towards a more

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Speaker 3: consolidation in streaming maybe as companies chase scale and profits.

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Speaker 7: I think we already saw that, right. So Netflix actually

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Speaker 7: did go after Warner Brothers Discovery streaming and studio business

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Speaker 7: last year pretty aggressively until they finally lost to Paramount Skuidance.

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Speaker 7: I think you know at this point, yes, Netflix is

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Speaker 7: doing little little things, you know, whether it's adding you know,

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Speaker 7: short form content, whether it's going into live events, whether

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Speaker 7: it's you know, doing a little bit more in gaming,

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Speaker 7: but none of these are transformative enough. You know, we

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Speaker 7: need some kind of a step change catalyst here and

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Speaker 7: we're really not seeing anything. So maybe M and A,

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Speaker 7: maybe some kind of a transformative partnership, maybe some kind

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Speaker 7: of a big acquisition will finally move the needle for Netflix,

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Speaker 7: but we have to wait and watch.

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Speaker 2: That's so interesting, and I know this is something you've

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Speaker 2: written about, Gita, this idea that Netflix now has M

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Speaker 2: and A ambitions when it had kind of denied that

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Speaker 2: it was looking to do that. It's always prioritize organic

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Speaker 2: growth and reinvesting in its own business. What does that

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Speaker 2: say about the state of the streaming wars overall? That

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Speaker 2: Netflix needs to buy to consolidate its grip on the market.

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Speaker 7: Yeah, I mean, we're really seeing competition kind of intensifying,

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Speaker 7: and we're going to see that only intensified further, Scarlett

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Speaker 7: once Paramount closes on its acquisition of you know, Warner

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Speaker 7: Brothers and HBO, and Netflix really needs to kind of

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Speaker 7: beef up the content because obviously it's the lack of

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Speaker 7: those breakout hits. Yes, they did have great content, they

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Speaker 7: did have a great pipeline. Yes we did see good

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Speaker 7: growth in viewing hours, but that's just not enough as

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Speaker 7: we have more and more of you know, it's not

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Speaker 7: just competition and streaming though, that's that's the problem. It's

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Speaker 7: competition from all kinds of platforms. You know, we talked

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Speaker 7: about the social media platforms, and that's really what Netflix

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Speaker 7: has to kind of defend its surf against. And for that,

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Speaker 7: they have to come up with bigger, better, more engaging

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Speaker 7: content and they might very well need to buy a

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Speaker 7: studio for that.

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Speaker 3: What about the live sports podcast and ads initiatives? How

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Speaker 3: meaningful are those when it comes to driving growth. Are

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Speaker 3: you bullish on them?

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Speaker 4: Do you?

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Speaker 3: I feel like Scarlett and I were talking about it,

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Speaker 3: and almost everyone has a podcast these days.

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Speaker 7: Yeah, So on the margin, I think it definitely helps

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Speaker 7: because you know, at the end of the day, Netflix is,

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Speaker 7: you know, something you go home to in the evening

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Speaker 7: and then you're watching it. But I think with podcasts,

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Speaker 7: it's something that they're trying to build on through the day, right,

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Speaker 7: They're trying to build on engagement. You know, anytime you

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Speaker 7: pick up your phone, you have some content that you

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Speaker 7: can kind of listen to or look at, and that

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Speaker 7: is really what they were trying to go after. But

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Speaker 7: at the you know, again it's on the margin. Yes,

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Speaker 7: it helps, but doesn't move the needle.

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