1 00:00:02,480 --> 00:00:07,000 Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. 2 00:00:09,160 --> 00:00:13,800 Speaker 2: This is a breaking news update from Bloomberg, instant reaction 3 00:00:14,080 --> 00:00:17,919 Speaker 2: and analysis from our three thousand journalists and analysts around 4 00:00:17,960 --> 00:00:18,439 Speaker 2: the world. 5 00:00:20,000 --> 00:00:22,400 Speaker 3: Carol Masser along with Tim Stanovik live in our Bloomberg 6 00:00:22,480 --> 00:00:26,479 Speaker 3: Interactive Brokers studio. As we mentioned, those big three of 7 00:00:26,480 --> 00:00:29,400 Speaker 3: the MAGS seven reporting right now, Meta is up about 8 00:00:29,400 --> 00:00:32,360 Speaker 3: four and a quarter percent. Microsoft down about five percent 9 00:00:32,400 --> 00:00:36,400 Speaker 3: off its after market lows. Tesla has also bounced back here. 10 00:00:36,440 --> 00:00:39,120 Speaker 2: I want to bring in Bloomberg Intelligence Senior technology analyst 11 00:00:39,159 --> 00:00:42,960 Speaker 2: on orog Rana. He joins us in Bloomberg's Chicago bureau. 12 00:00:43,120 --> 00:00:47,080 Speaker 2: Microsoft down five percent right now. Taking a look at 13 00:00:47,440 --> 00:00:50,040 Speaker 2: some of the headlines on arog dot crossed, I know 14 00:00:50,080 --> 00:00:53,040 Speaker 2: you've only had a few minutes to actually look at these. 15 00:00:53,240 --> 00:00:56,760 Speaker 2: Second quarter Azure and other cloud revenue XFX was up 16 00:00:56,880 --> 00:00:59,880 Speaker 2: thirty eight percent, meeting estimates. Second quarter revenue for the 17 00:00:59,880 --> 00:01:04,440 Speaker 2: company beat estimates at eighty one point two seven billion dollars. 18 00:01:05,040 --> 00:01:09,160 Speaker 2: Second quarter intelligent cloud revenue beat estimates. We also saw 19 00:01:09,240 --> 00:01:12,440 Speaker 2: forty three hundred Microsoft three sixty five commercial seats grew 20 00:01:12,520 --> 00:01:15,520 Speaker 2: six percent. Forty five percent of commercial RPO was driven 21 00:01:15,520 --> 00:01:19,640 Speaker 2: by Open Ai commitments Commercial Remaining Performance Obligation six hundred 22 00:01:19,640 --> 00:01:23,400 Speaker 2: and twenty five billion dollars. What's not to love here? 23 00:01:23,560 --> 00:01:24,560 Speaker 2: Is it all about capex? 24 00:01:25,680 --> 00:01:28,400 Speaker 4: No? I think it's usually high expectations, and you know 25 00:01:28,440 --> 00:01:31,600 Speaker 4: the fact that they only met Azure growth rates, which 26 00:01:31,680 --> 00:01:34,040 Speaker 4: was thirty eight percent. I think that's probably weighing on 27 00:01:34,080 --> 00:01:36,600 Speaker 4: the stock because you know, one would have expected them 28 00:01:36,640 --> 00:01:39,039 Speaker 4: to blow out that number. It has been around thirty 29 00:01:39,080 --> 00:01:41,280 Speaker 4: nine percent the last couple of quotos, so I think 30 00:01:41,280 --> 00:01:43,840 Speaker 4: that's where a little disappointment could be. But that could 31 00:01:43,840 --> 00:01:46,080 Speaker 4: also be because of supply constraints. That's something we have 32 00:01:46,160 --> 00:01:49,160 Speaker 4: highlighted in our research before. But you know, if you 33 00:01:49,160 --> 00:01:50,920 Speaker 4: look at some of the other numbers, such as our 34 00:01:50,960 --> 00:01:53,800 Speaker 4: PO you mentioned above, six hundred billion, that's very impressive, 35 00:01:54,120 --> 00:01:56,280 Speaker 4: and we already know the capex was going to go up, 36 00:01:56,320 --> 00:01:58,800 Speaker 4: So I think in tandem, that's the only number that 37 00:01:58,840 --> 00:02:01,880 Speaker 4: sticks out that they didn't beat by a decent amount. 38 00:02:02,040 --> 00:02:03,720 Speaker 3: All right, So then I don't know, what do we 39 00:02:03,760 --> 00:02:06,600 Speaker 3: want to dig into a little bit more deeper? It 40 00:02:06,640 --> 00:02:10,000 Speaker 3: does Microsoft's quarter includes net gains from investments. 41 00:02:09,560 --> 00:02:10,200 Speaker 5: In open Ai. 42 00:02:10,680 --> 00:02:11,840 Speaker 3: Are we going to get a little bit more of 43 00:02:12,320 --> 00:02:15,000 Speaker 3: a picture about that and what's going on there? 44 00:02:16,000 --> 00:02:17,799 Speaker 4: I think the question I have is, you know, there's 45 00:02:17,840 --> 00:02:19,959 Speaker 4: a big number that you know, that six hundred and 46 00:02:20,000 --> 00:02:23,600 Speaker 4: ninety six hundred plus billion RQO you mentioned, there is 47 00:02:23,760 --> 00:02:26,480 Speaker 4: a large portion of that comes from OPENINGI. So the 48 00:02:26,520 --> 00:02:28,480 Speaker 4: big question is, you know, how is Opening I going 49 00:02:28,520 --> 00:02:30,680 Speaker 4: to fund this thing? Do they have the capital to 50 00:02:31,000 --> 00:02:33,560 Speaker 4: actually fund let's say two hundred plus billion dollar commitment. 51 00:02:33,960 --> 00:02:36,680 Speaker 4: But other than that, what are other clients spending that 52 00:02:36,720 --> 00:02:39,079 Speaker 4: are not Open EI? And you know, how is that 53 00:02:39,120 --> 00:02:42,400 Speaker 4: business going? And if that wasn't the case, how should 54 00:02:42,400 --> 00:02:44,720 Speaker 4: we look at as your growth in the coming quarters. 55 00:02:44,880 --> 00:02:46,560 Speaker 4: I think those are the big questions that we need 56 00:02:46,600 --> 00:02:47,240 Speaker 4: answered right now. 57 00:02:47,280 --> 00:02:49,520 Speaker 2: I don't remember where I saw this. I don't remember 58 00:02:49,520 --> 00:02:53,160 Speaker 2: if it was on a program yesterday. I think I might. 59 00:02:53,240 --> 00:02:56,760 Speaker 2: My brain is mush. I'm sorry on rock, but was it? 60 00:02:56,760 --> 00:02:57,440 Speaker 6: It was all. 61 00:02:57,320 --> 00:03:03,640 Speaker 2: About Claude from Anthropic competing with Copilot and Claude offering 62 00:03:04,400 --> 00:03:08,880 Speaker 2: products and services at a fraction of the cost or 63 00:03:08,880 --> 00:03:13,080 Speaker 2: even free versus what companies are paying for. When it 64 00:03:13,120 --> 00:03:16,400 Speaker 2: comes to Microsoft Copilot, how big of a threat is that? 65 00:03:17,200 --> 00:03:17,359 Speaker 7: Oh? 66 00:03:17,440 --> 00:03:19,920 Speaker 4: Actually, I mean to be very honest, right now, the 67 00:03:20,080 --> 00:03:24,360 Speaker 4: entire software sector has been absolute under threat because of 68 00:03:24,440 --> 00:03:26,720 Speaker 4: a lot of what you are mentioning, whether it's claud 69 00:03:26,840 --> 00:03:29,400 Speaker 4: or whether it's opening Eye tools, or whether it's open source. 70 00:03:29,400 --> 00:03:32,280 Speaker 4: I mean, look at the valuations of software companies. They've 71 00:03:32,280 --> 00:03:35,640 Speaker 4: been completely destroyed over the last six to nine months, 72 00:03:35,800 --> 00:03:37,800 Speaker 4: and a large portion of that is driven by what 73 00:03:37,840 --> 00:03:38,440 Speaker 4: you just said. 74 00:03:40,360 --> 00:03:43,000 Speaker 3: So interesting, Well, you know, yeah, I mean, so is 75 00:03:43,040 --> 00:03:46,080 Speaker 3: it in flux still safe to say, Ana Rag in 76 00:03:46,160 --> 00:03:49,880 Speaker 3: terms of who ultimately are going to be the leaders 77 00:03:50,320 --> 00:03:53,760 Speaker 3: when it comes to this AI world or will there 78 00:03:53,800 --> 00:03:55,320 Speaker 3: be multiple big players. 79 00:03:56,400 --> 00:03:58,640 Speaker 4: So we are absolutely influx right now as to who 80 00:03:58,680 --> 00:04:01,480 Speaker 4: will own the final product, and that's partially the reason 81 00:04:01,560 --> 00:04:04,280 Speaker 4: when you have these valuations go all over the place. 82 00:04:04,440 --> 00:04:06,960 Speaker 4: But I would you know, comfortably say, when it comes 83 00:04:07,000 --> 00:04:10,560 Speaker 4: to somebody like a Microsoft's cloud portfolio or Amazon's cloud 84 00:04:10,600 --> 00:04:14,240 Speaker 4: portfolio or Google's cloud revenue, I think these three companies 85 00:04:14,320 --> 00:04:17,120 Speaker 4: will dictate a large portion of that market share just 86 00:04:17,160 --> 00:04:19,160 Speaker 4: because they have the capital to do it, they have 87 00:04:19,279 --> 00:04:22,160 Speaker 4: massive market shares, and they have also the distribution. So 88 00:04:22,400 --> 00:04:24,400 Speaker 4: these three I think will remain the way it is, 89 00:04:24,640 --> 00:04:27,720 Speaker 4: the rest of the industry will shift around. We still 90 00:04:27,760 --> 00:04:30,520 Speaker 4: think software has a place in this world and you know, 91 00:04:30,839 --> 00:04:32,800 Speaker 4: there will be some damage, but it's not going to 92 00:04:32,839 --> 00:04:36,360 Speaker 4: get completely blown up. And let's see how that shapes up. 93 00:04:36,400 --> 00:04:38,520 Speaker 2: What's the damage That will say in your view, what's 94 00:04:38,520 --> 00:04:38,960 Speaker 2: your production. 95 00:04:39,920 --> 00:04:42,080 Speaker 4: So if you are just selling a tool out there 96 00:04:42,080 --> 00:04:45,760 Speaker 4: in the public to an enterprise or a small business, 97 00:04:45,960 --> 00:04:48,039 Speaker 4: you may not get the same kind of premium that 98 00:04:48,080 --> 00:04:51,600 Speaker 4: you were before. Remember software a business with eighteen ninety 99 00:04:51,640 --> 00:04:54,240 Speaker 4: percent gross margin business. But if you can spin some 100 00:04:54,360 --> 00:04:57,680 Speaker 4: of that coded up, you know, using wipe coding or internally, 101 00:04:57,880 --> 00:05:00,560 Speaker 4: you may not need some of those tools out there. Now. 102 00:05:00,560 --> 00:05:04,280 Speaker 4: We think, at least on the enterprise side, having a 103 00:05:04,320 --> 00:05:06,880 Speaker 4: core system of record something like you know, the one 104 00:05:06,880 --> 00:05:10,120 Speaker 4: that's sold by SAP or a workday they're far more 105 00:05:10,120 --> 00:05:12,320 Speaker 4: important and people are not going to rip them apart 106 00:05:12,480 --> 00:05:15,280 Speaker 4: and use white boarding tools internally out there. But if 107 00:05:15,320 --> 00:05:17,960 Speaker 4: you are a visualization software or some kind of connected 108 00:05:18,000 --> 00:05:20,679 Speaker 4: in between, you may not need to have that software. 109 00:05:20,680 --> 00:05:22,880 Speaker 4: So there is a lot that's going to happen over 110 00:05:22,920 --> 00:05:24,280 Speaker 4: the next three to five years. 111 00:05:24,120 --> 00:05:24,279 Speaker 7: You know. 112 00:05:24,400 --> 00:05:27,760 Speaker 3: Interestingly, you know, looking at Microsoft Meta this year and 113 00:05:27,880 --> 00:05:30,280 Speaker 3: last year, how the stock the stocks have done. They 114 00:05:30,320 --> 00:05:33,400 Speaker 3: definitely underperformed some of the other mags seven names and 115 00:05:33,440 --> 00:05:35,520 Speaker 3: certainly some of the other large. 116 00:05:35,200 --> 00:05:37,360 Speaker 5: Cap tech names. But I'm just curious. 117 00:05:37,720 --> 00:05:40,440 Speaker 3: You know, the concerns have been about the AI spend 118 00:05:40,520 --> 00:05:42,640 Speaker 3: and whether it's going to pay off signs here for 119 00:05:42,800 --> 00:05:46,200 Speaker 3: Microsoft analog that you're seeing that it does make sense 120 00:05:46,360 --> 00:05:48,200 Speaker 3: this spend that Microsoft is doing. 121 00:05:48,600 --> 00:05:50,159 Speaker 5: The ROI is there. 122 00:05:51,120 --> 00:05:53,600 Speaker 4: Yeah, well, Microsoft, it's definitely there. I Mean. The only 123 00:05:53,680 --> 00:05:55,800 Speaker 4: I would say, the long term hangarp is you know 124 00:05:55,880 --> 00:05:59,240 Speaker 4: what happens when the opening air relationship breaks through? I mean, 125 00:05:59,320 --> 00:06:01,720 Speaker 4: all goes up way. That's the only big risk for 126 00:06:01,800 --> 00:06:03,960 Speaker 4: Microsoft in the long run. They'll have to figure out 127 00:06:03,960 --> 00:06:06,560 Speaker 4: their own LLM by then. But other than that, I mean, 128 00:06:06,560 --> 00:06:09,599 Speaker 4: their cloud infrastructure product is pretty good and you know, 129 00:06:09,640 --> 00:06:12,640 Speaker 4: it's gaining market share and according to our calculations, it 130 00:06:12,720 --> 00:06:15,560 Speaker 4: will overtake Amazon in the next you know, let's say 131 00:06:15,560 --> 00:06:16,680 Speaker 4: three audios or so. 132 00:06:16,839 --> 00:06:18,840 Speaker 2: On a rock. Do they really have to figure out 133 00:06:18,839 --> 00:06:21,000 Speaker 2: their own LLM? I mean, how much of open ai 134 00:06:21,080 --> 00:06:21,560 Speaker 2: do they own? 135 00:06:22,880 --> 00:06:24,719 Speaker 4: But it just doesn't matter if they own or not, 136 00:06:24,800 --> 00:06:27,240 Speaker 4: because they have the IP rights only until I think 137 00:06:27,279 --> 00:06:30,119 Speaker 4: it's twenty thirty two, one of those years, and after 138 00:06:30,160 --> 00:06:32,720 Speaker 4: that they can't use those models after that, So remember 139 00:06:32,760 --> 00:06:34,880 Speaker 4: that part of it as well, not the financial part 140 00:06:34,920 --> 00:06:38,640 Speaker 4: will stay. But it's the actual engine that is driving copilot, 141 00:06:38,920 --> 00:06:42,120 Speaker 4: that's driving GitHub copilot or the Microsoft three sixty five 142 00:06:42,160 --> 00:06:44,640 Speaker 4: copilot that you talk about. You know, that's the intelligence 143 00:06:44,720 --> 00:06:45,760 Speaker 4: that goes into that model. 144 00:06:45,800 --> 00:06:47,200 Speaker 2: How do you do that? How do you do that? 145 00:06:47,240 --> 00:06:50,000 Speaker 2: From just a resources perspective, if you have if you 146 00:06:50,040 --> 00:06:54,040 Speaker 2: have spent so many billions of dollars supporting open ai 147 00:06:54,760 --> 00:06:56,800 Speaker 2: and chat GPT, well. 148 00:06:56,720 --> 00:06:58,480 Speaker 4: They have their own models that are going on. It's 149 00:06:58,560 --> 00:07:00,480 Speaker 4: just not as good as whether it's opening a lot 150 00:07:00,520 --> 00:07:02,400 Speaker 4: at this point, but they are putting a lot of 151 00:07:02,440 --> 00:07:04,800 Speaker 4: effort behind it, and most of our leads that and 152 00:07:04,839 --> 00:07:07,000 Speaker 4: that's where we need to see what kind of ROI 153 00:07:07,080 --> 00:07:09,560 Speaker 4: do we see there and do they actually get their 154 00:07:09,600 --> 00:07:11,360 Speaker 4: act together over the next few years. 155 00:07:11,400 --> 00:07:13,120 Speaker 3: All right, I want to go over to IBM, which 156 00:07:13,240 --> 00:07:16,960 Speaker 3: actually outperformed Microsoft last year. It was up about thirty 157 00:07:17,000 --> 00:07:20,520 Speaker 3: five percent, and we are seeing this stock up about 158 00:07:20,560 --> 00:07:24,960 Speaker 3: eight point four percent following its earnings release. Here they 159 00:07:25,000 --> 00:07:29,520 Speaker 3: post revenue that topped estimates. They talked about software gains, 160 00:07:29,560 --> 00:07:33,440 Speaker 3: specifically at software unit revenue up twelve percent to nineteen 161 00:07:33,480 --> 00:07:36,040 Speaker 3: point seven billion in the fourth quarter, software business jumping 162 00:07:36,080 --> 00:07:39,280 Speaker 3: fourteen percent to just over nine billion dollars and the 163 00:07:39,320 --> 00:07:42,520 Speaker 3: company projecting that revenue will grow more than five percent 164 00:07:42,640 --> 00:07:45,760 Speaker 3: this year, and the company's CEO saying, quote, we enter 165 00:07:45,840 --> 00:07:49,080 Speaker 3: twenty twenty six with momentum and in a position of strength. 166 00:07:49,120 --> 00:07:50,360 Speaker 3: I don't know if you've had a chance to look 167 00:07:50,400 --> 00:07:54,040 Speaker 3: at IBM an a rag walk us through what we're 168 00:07:54,040 --> 00:07:55,040 Speaker 3: seeing with this company. 169 00:07:56,120 --> 00:07:58,360 Speaker 4: Yeah, I was a bit surprised. Actually, the nine percent 170 00:07:58,440 --> 00:08:01,040 Speaker 4: number on the software side is a witch shocking. I mean, 171 00:08:01,080 --> 00:08:03,080 Speaker 4: for them to be, you know, total growth rate of 172 00:08:03,160 --> 00:08:05,560 Speaker 4: nine percent and software in double digits, I mean, we 173 00:08:05,560 --> 00:08:07,960 Speaker 4: were not expecting that. So there's a lot to feel 174 00:08:07,960 --> 00:08:10,120 Speaker 4: in that particular one and go back and see, you know, 175 00:08:10,120 --> 00:08:13,360 Speaker 4: which segments outperformed. Now there's a tiny bit of MNA there, 176 00:08:13,480 --> 00:08:16,240 Speaker 4: but even without that, I mean, I think this is 177 00:08:16,360 --> 00:08:18,920 Speaker 4: very good. And the big number for one us is 178 00:08:19,320 --> 00:08:20,640 Speaker 4: that the cash flow is going to go up by 179 00:08:20,640 --> 00:08:23,600 Speaker 4: a billion dollars next year. So I think IBM's turned 180 00:08:23,600 --> 00:08:26,880 Speaker 4: them around very well. I think the strategy is executing 181 00:08:26,920 --> 00:08:28,840 Speaker 4: well and Urvan's done a good job in this case. 182 00:08:29,120 --> 00:08:33,320 Speaker 2: The acquisitions red Hat Hashi Corp, Confluent. That's a big 183 00:08:33,360 --> 00:08:36,440 Speaker 2: part of the spend is that like looking to sort 184 00:08:36,440 --> 00:08:38,920 Speaker 2: of what Salesforce has done in recent years growing through 185 00:08:38,960 --> 00:08:39,760 Speaker 2: these acquisitions. 186 00:08:40,760 --> 00:08:43,160 Speaker 4: I think there's nothing wrong in growing through acquisitions if 187 00:08:43,200 --> 00:08:45,160 Speaker 4: you don't pay enough for them. If you pay the 188 00:08:45,240 --> 00:08:47,880 Speaker 4: right amount, and in this case for IBM, every two 189 00:08:47,920 --> 00:08:50,320 Speaker 4: years they'd go out and buy something that would help 190 00:08:50,320 --> 00:08:53,600 Speaker 4: their gross margins, that would help their adjusted EBITA, that 191 00:08:53,640 --> 00:08:55,560 Speaker 4: would help their free cash flow, and they use that 192 00:08:55,600 --> 00:08:58,400 Speaker 4: cash flow to buy more. But they're already concentrated in 193 00:08:58,440 --> 00:09:02,240 Speaker 4: certain areas such as hybrid cloud or the ability to 194 00:09:02,280 --> 00:09:05,920 Speaker 4: make sure that the internal IEA infrastructure of a company 195 00:09:06,280 --> 00:09:08,760 Speaker 4: or the enterprises is something that they have a good 196 00:09:08,800 --> 00:09:11,880 Speaker 4: handle on and I think they're doing executing it very well. 197 00:09:11,920 --> 00:09:15,679 Speaker 3: Listen, there are bookings for their AI business at IBM 198 00:09:15,800 --> 00:09:17,800 Speaker 3: exceeded twelve point five billion. 199 00:09:19,240 --> 00:09:21,440 Speaker 5: Since mid twenty twenty three. 200 00:09:21,840 --> 00:09:24,280 Speaker 3: That's an increase from the nine and a half billion 201 00:09:24,360 --> 00:09:27,079 Speaker 3: disclosed during its prior earnings report. A bit more than 202 00:09:27,120 --> 00:09:29,960 Speaker 3: eighty percent of the bookings come from the consulting unit, 203 00:09:30,000 --> 00:09:32,360 Speaker 3: with the rest in software. According to the CFO in 204 00:09:32,400 --> 00:09:37,160 Speaker 3: an interview, their AI exposure, I mean this is something 205 00:09:37,200 --> 00:09:40,920 Speaker 3: that has been I think helping the struggling along struggling 206 00:09:40,960 --> 00:09:41,840 Speaker 3: consulting division. 207 00:09:41,960 --> 00:09:43,800 Speaker 5: So are we seeing improvement. 208 00:09:44,360 --> 00:09:46,840 Speaker 4: But the consulting division only grew up one percent, So 209 00:09:46,960 --> 00:09:48,520 Speaker 4: even though they are getting a lot of that, as 210 00:09:48,520 --> 00:09:51,920 Speaker 4: you said, eighty percent of those bookings from consulting, it's 211 00:09:51,920 --> 00:09:55,120 Speaker 4: not driving the entire division up because, as we know 212 00:09:55,240 --> 00:09:57,439 Speaker 4: from some of the other vendors and we'll find out 213 00:09:57,440 --> 00:10:01,319 Speaker 4: today also, the non AI spending is pretty bad right 214 00:10:01,360 --> 00:10:04,600 Speaker 4: now throughout the ecosystem, so people are cutting back on 215 00:10:04,640 --> 00:10:08,559 Speaker 4: that and deploying those funds into AI related services, and 216 00:10:08,640 --> 00:10:11,839 Speaker 4: that's something that's hurting IBM as well. But imagine, even 217 00:10:11,880 --> 00:10:15,320 Speaker 4: with consulting growing only one percent, the total compan growth 218 00:10:15,400 --> 00:10:17,600 Speaker 4: rate was nine percent, and I think that's something to 219 00:10:18,120 --> 00:10:18,680 Speaker 4: be proud of. 220 00:10:19,240 --> 00:10:23,360 Speaker 3: All Right, Bloomberg Intelligence Senior technology analyst Anna Ragrana, just 221 00:10:23,400 --> 00:10:24,840 Speaker 3: stay with us for a moment, because we do want 222 00:10:24,880 --> 00:10:27,480 Speaker 3: to bring in James chockmac partner and chief investment officer 223 00:10:27,520 --> 00:10:31,200 Speaker 3: at Clockwise Capital with about seventy million in assets under 224 00:10:31,200 --> 00:10:34,480 Speaker 3: management of fund that we often talk about owns and 225 00:10:34,559 --> 00:10:36,720 Speaker 3: invest in a lot of these big cap names. I 226 00:10:36,760 --> 00:10:41,520 Speaker 3: want to go back to Microsoft, Jim, James, tell us 227 00:10:41,840 --> 00:10:43,920 Speaker 3: your take on what we got from Microsoft the stock 228 00:10:44,000 --> 00:10:44,440 Speaker 3: right now? 229 00:10:44,679 --> 00:10:46,040 Speaker 5: Data about four and a quarter percent. 230 00:10:48,200 --> 00:10:49,040 Speaker 2: Yeah, it's interesting. 231 00:10:49,360 --> 00:10:51,760 Speaker 1: Right before earnings came out, I was getting the latest 232 00:10:51,760 --> 00:10:54,840 Speaker 1: Bogie numbers for the Azure number, and you know, it 233 00:10:55,000 --> 00:10:57,679 Speaker 1: remained in the high thirties, around thirty nine percent, and 234 00:10:57,720 --> 00:11:00,320 Speaker 1: that's kind of where the numbers landed right around there. 235 00:11:00,360 --> 00:11:02,719 Speaker 1: And uh, I was saying, I'm telling our team that, 236 00:11:02,880 --> 00:11:06,440 Speaker 1: you know, this is a pretty lofty expectation, especially the 237 00:11:06,480 --> 00:11:09,640 Speaker 1: fact that you know it's retraced somewhat heading into the quarter. 238 00:11:09,760 --> 00:11:13,120 Speaker 1: So you know, a lot of I expectations on all 239 00:11:13,200 --> 00:11:16,720 Speaker 1: these companies, Microsoft right on up there with all of them, 240 00:11:16,840 --> 00:11:19,360 Speaker 1: and the valuation it is where it is, with that 241 00:11:19,480 --> 00:11:22,760 Speaker 1: double digit times sales, you know you want it. It's 242 00:11:22,800 --> 00:11:26,280 Speaker 1: great that it's a subscription asset, it's a recurring revenue business. 243 00:11:27,160 --> 00:11:29,280 Speaker 1: But at the end of the day, you know, you've 244 00:11:29,280 --> 00:11:31,679 Speaker 1: got to deliver the growth and it's all about the 245 00:11:31,720 --> 00:11:35,040 Speaker 1: growth relative to expectations. And in this case, it was 246 00:11:35,120 --> 00:11:36,840 Speaker 1: just inline on Microsoft. 247 00:11:37,320 --> 00:11:42,040 Speaker 2: James, you own Microsoft in your clockwise US core equity 248 00:11:42,120 --> 00:11:45,160 Speaker 2: TF ticker time it's the sixth biggest holding, about four 249 00:11:45,160 --> 00:11:47,800 Speaker 2: point six percent of the fun It's down three point 250 00:11:48,040 --> 00:11:51,520 Speaker 2: six percent after hours four sixty four roughly would you 251 00:11:51,520 --> 00:11:53,040 Speaker 2: buy at these levels out to your position. 252 00:11:54,679 --> 00:11:57,240 Speaker 1: No, No, I think what we're maintaining it. The way 253 00:11:57,280 --> 00:12:00,800 Speaker 1: we're looking at it is, you know, we're about half 254 00:12:00,840 --> 00:12:03,600 Speaker 1: the weight of where it is in the Nasdaq. You know, 255 00:12:03,640 --> 00:12:06,920 Speaker 1: we feel comfortable being underweight that, and that's on a 256 00:12:06,960 --> 00:12:09,880 Speaker 1: growth basis. We actually have hedges within the ETF as 257 00:12:09,880 --> 00:12:14,520 Speaker 1: well where we're short the NASDAC and the SMP, so 258 00:12:14,559 --> 00:12:17,319 Speaker 1: the net weight is actually closer to four percent, So 259 00:12:17,720 --> 00:12:20,160 Speaker 1: you know, it is a top top ten weight within 260 00:12:20,200 --> 00:12:22,800 Speaker 1: the fund. But you know, we think that you know, 261 00:12:22,880 --> 00:12:26,200 Speaker 1: where you want to be overweight is outside of big cap. 262 00:12:26,280 --> 00:12:28,440 Speaker 1: You know, we're looking at small cap, We're looking at 263 00:12:28,600 --> 00:12:30,959 Speaker 1: continue to look at commodities. We think that's where the 264 00:12:31,000 --> 00:12:31,599 Speaker 1: money is going to go. 265 00:12:31,800 --> 00:12:33,560 Speaker 3: James, We're going to broaden out. But safe to say 266 00:12:33,559 --> 00:12:35,040 Speaker 3: you're not that impressed with Microsoft. 267 00:12:35,040 --> 00:12:37,320 Speaker 5: It sounds it was. 268 00:12:37,480 --> 00:12:39,600 Speaker 1: It was a whole hump. You know, it's kind of 269 00:12:39,679 --> 00:12:44,480 Speaker 1: what we expected. It just didn't surpassed expectations. But does 270 00:12:44,640 --> 00:12:48,320 Speaker 1: the results do not warrant to change in our view? 271 00:12:48,480 --> 00:12:49,480 Speaker 5: All Right, We're going to broad out. 272 00:12:49,480 --> 00:12:51,040 Speaker 3: In just a moment, I want to bring in anorog 273 00:12:51,120 --> 00:12:54,400 Speaker 3: Rana back from our Bloomberg Intelligence team. He's senior tech analyst. 274 00:12:54,800 --> 00:12:58,240 Speaker 3: Just a final thought, James isn't impressed? 275 00:12:58,600 --> 00:12:59,160 Speaker 5: Should he be? 276 00:13:00,520 --> 00:13:02,720 Speaker 4: Well, the thing is, think about it this way. The 277 00:13:02,760 --> 00:13:05,800 Speaker 4: backlog is up and the capexis up, then why is 278 00:13:05,840 --> 00:13:08,280 Speaker 4: in growth accelerating? And I think that's the biggest question 279 00:13:08,320 --> 00:13:11,320 Speaker 4: for all of us. I personally think it's a supply problem. 280 00:13:11,400 --> 00:13:13,880 Speaker 4: But it's a temporary problem. But as you know, we 281 00:13:14,080 --> 00:13:17,760 Speaker 4: know right now people the trade is to sell software 282 00:13:17,800 --> 00:13:19,920 Speaker 4: and buy semis and I think you know, I don't 283 00:13:19,920 --> 00:13:21,280 Speaker 4: see that changing tomorrow morning. 284 00:13:21,720 --> 00:13:23,120 Speaker 3: All right, we're going to leave it there. Hey, listen, 285 00:13:23,120 --> 00:13:25,120 Speaker 3: we'll be checking out your research an ourang, Thank you 286 00:13:25,120 --> 00:13:28,120 Speaker 3: so much. Bloomberg Intelligence Senior technology analyst Anna rog Rana. 287 00:13:28,320 --> 00:13:30,680 Speaker 3: James Schachmak though still with us right now. We want 288 00:13:30,679 --> 00:13:34,160 Speaker 3: to get more meta platforms. Bloomberg New Senior Technology reporter 289 00:13:34,280 --> 00:13:36,360 Speaker 3: Kurt Wagner with us. He is author of Battle for 290 00:13:36,440 --> 00:13:38,840 Speaker 3: the Bird, Jack Dorsey, Elon Musk and the forty four 291 00:13:38,840 --> 00:13:41,160 Speaker 3: billion dollar Fight for Twitter. So he's out there in 292 00:13:41,160 --> 00:13:42,840 Speaker 3: the Bloomberg San Francisco bureau. 293 00:13:43,240 --> 00:13:44,400 Speaker 5: Take it away, meta. 294 00:13:44,200 --> 00:13:46,040 Speaker 3: What jumps out for you, because right now we're looking 295 00:13:46,040 --> 00:13:47,880 Speaker 3: at a stock that's up here in the aftermarket. 296 00:13:48,240 --> 00:13:51,199 Speaker 8: Yeah, I mean it's it's pretty much all good news, 297 00:13:51,520 --> 00:13:54,720 Speaker 8: especially if you believe in this AI vision that Mark 298 00:13:54,760 --> 00:13:58,000 Speaker 8: Zuckerberg has the Q four holiday quarter sales where it 299 00:13:58,000 --> 00:14:02,600 Speaker 8: beats the Q one projection, We're beat. The real, maybe 300 00:14:02,640 --> 00:14:06,160 Speaker 8: surprising thing was just how high the capital expenditures are 301 00:14:06,200 --> 00:14:08,160 Speaker 8: supposed to be in twenty twenty six. I think the 302 00:14:08,280 --> 00:14:12,280 Speaker 8: estimate was around one hundred and eleven billion metas forecasting 303 00:14:12,320 --> 00:14:15,839 Speaker 8: in between one fifteen and one thirty five billion. But again, 304 00:14:15,880 --> 00:14:18,360 Speaker 8: if you are a believer in this sort of AI 305 00:14:18,760 --> 00:14:22,240 Speaker 8: world that we're living in right now, that's an exciting thing. 306 00:14:22,280 --> 00:14:24,960 Speaker 8: I mean, this is a company that is going absolutely 307 00:14:25,080 --> 00:14:29,160 Speaker 8: full steam ahead into AI, and you know, I think 308 00:14:29,200 --> 00:14:30,320 Speaker 8: those numbers reflect that. 309 00:14:30,440 --> 00:14:32,840 Speaker 2: Not into the metaverse. We should note that meta shares extend. 310 00:14:32,840 --> 00:14:34,800 Speaker 2: They're getting to more than five percent right now. So 311 00:14:34,800 --> 00:14:36,880 Speaker 2: there are a lot of people out there, Kurt, who 312 00:14:37,320 --> 00:14:40,360 Speaker 2: who are believing this story. It's not like this though 313 00:14:40,400 --> 00:14:46,880 Speaker 2: every quarter. There have been quarters of late where meta platforms, 314 00:14:46,960 --> 00:14:49,960 Speaker 2: almost at Facebook comes out and says we're spending more 315 00:14:50,000 --> 00:14:53,320 Speaker 2: money than you want us to spend and you and 316 00:14:53,400 --> 00:14:55,880 Speaker 2: then investors do not reward them for it. What is 317 00:14:55,920 --> 00:14:57,080 Speaker 2: different this time. 318 00:14:57,160 --> 00:15:00,680 Speaker 8: Well, not just quarters of late, how about just last order? Right, 319 00:15:01,080 --> 00:15:03,800 Speaker 8: this is exactly what we talked about in Q three. 320 00:15:04,080 --> 00:15:07,160 Speaker 8: They didn't have these specific numbers, but they basically said, hey, 321 00:15:07,800 --> 00:15:11,040 Speaker 8: our capex is going to increase meaningfully. In twenty twenty six, 322 00:15:11,280 --> 00:15:14,680 Speaker 8: the stock went down fourteen percent. Everyone was very concerned 323 00:15:14,720 --> 00:15:18,520 Speaker 8: with this added spending. And yet today when the numbers 324 00:15:18,520 --> 00:15:21,920 Speaker 8: come out and they're they're higher than estimate, sessimate's presumably 325 00:15:21,960 --> 00:15:25,200 Speaker 8: built in that commentary from last quarter, it doesn't seem 326 00:15:25,280 --> 00:15:27,680 Speaker 8: to be as much of a problem. My guess is 327 00:15:27,720 --> 00:15:30,680 Speaker 8: that they are seeing, you know, this Q one revenue, 328 00:15:30,720 --> 00:15:33,560 Speaker 8: for example, which is going to come in two three 329 00:15:33,720 --> 00:15:37,800 Speaker 8: four billion dollars higher than expected. They're just seeing this 330 00:15:38,000 --> 00:15:42,520 Speaker 8: ads business that is completely churning money out. And so 331 00:15:43,000 --> 00:15:45,520 Speaker 8: if you feel that you have the money coming in, 332 00:15:45,880 --> 00:15:49,800 Speaker 8: maybe you stomach those higher numbers than you would have expected. 333 00:15:50,120 --> 00:15:52,600 Speaker 3: Yeah, I mean on the live blog, you guys, I 334 00:15:52,640 --> 00:15:55,920 Speaker 3: think you put this out Kurt Family daily active people 335 00:15:56,160 --> 00:15:58,560 Speaker 3: three point fifty eight billion, an increase of seven percent 336 00:15:58,640 --> 00:16:00,760 Speaker 3: year over year, and then the average price per AD 337 00:16:01,160 --> 00:16:03,320 Speaker 3: increase by six to nine percent year over year for 338 00:16:03,360 --> 00:16:06,360 Speaker 3: the fourth quarter and full year twenty twenty five, respectively. 339 00:16:06,480 --> 00:16:10,200 Speaker 3: So I mean this is showing that they're investing in AI. 340 00:16:10,720 --> 00:16:12,440 Speaker 3: We're seeing it on the platform, we're seeing it in 341 00:16:12,520 --> 00:16:13,360 Speaker 3: the ad dollars. 342 00:16:13,760 --> 00:16:13,960 Speaker 6: Yeah. 343 00:16:14,000 --> 00:16:16,120 Speaker 8: I mean my guess is that we're going to jump 344 00:16:16,120 --> 00:16:18,200 Speaker 8: on this earnings call here in a minute or two, 345 00:16:18,800 --> 00:16:20,920 Speaker 8: and you're going to hear the company talk a lot 346 00:16:20,920 --> 00:16:23,680 Speaker 8: about how AI is impacting the ads business, because that's 347 00:16:23,680 --> 00:16:25,320 Speaker 8: what they need to do to sell this right now. 348 00:16:25,400 --> 00:16:27,400 Speaker 6: Right, it's hard to say are they right? 349 00:16:27,680 --> 00:16:28,720 Speaker 5: But current is it? 350 00:16:28,800 --> 00:16:28,880 Speaker 4: Like? 351 00:16:28,960 --> 00:16:30,240 Speaker 5: Are we seeing it in the numbers? 352 00:16:31,520 --> 00:16:34,600 Speaker 8: It is in part because you see that that rise 353 00:16:34,960 --> 00:16:37,560 Speaker 8: in average cost per AD, that's because people are getting 354 00:16:37,600 --> 00:16:41,960 Speaker 8: more granular, more targeted. They're spending less to create some 355 00:16:42,040 --> 00:16:44,440 Speaker 8: of this ad copy because AI can do it for them. 356 00:16:44,600 --> 00:16:48,680 Speaker 8: There's a bunch of ways that AI can truly improve 357 00:16:48,920 --> 00:16:49,680 Speaker 8: the ads business. 358 00:16:49,720 --> 00:16:50,200 Speaker 6: You just don't. 359 00:16:50,480 --> 00:16:52,720 Speaker 8: It's not as sexy, right, It's not as obvious, maybe 360 00:16:52,720 --> 00:16:55,400 Speaker 8: because a lot of it's happening incrementally behind the scenes. 361 00:16:56,360 --> 00:16:58,960 Speaker 8: That is a story in a narrative that this company 362 00:16:59,000 --> 00:17:01,280 Speaker 8: needs to sell. Because if you're just simply saying trust 363 00:17:01,360 --> 00:17:04,000 Speaker 8: us for building a fifty billion dollars data center in Louisiana, 364 00:17:04,240 --> 00:17:06,520 Speaker 8: and you'll see the returns of that in seven years. 365 00:17:06,880 --> 00:17:07,919 Speaker 8: That's the hard pitch. 366 00:17:08,119 --> 00:17:09,680 Speaker 6: But if you say, hey, look, check it out. 367 00:17:09,760 --> 00:17:12,879 Speaker 8: The ads business is growing quarter after quarter because of 368 00:17:12,920 --> 00:17:16,480 Speaker 8: these AD improvements, these AI improvements we're making. That's the 369 00:17:16,560 --> 00:17:18,600 Speaker 8: narrative that they're going to want to sell to people today. 370 00:17:18,720 --> 00:17:20,680 Speaker 2: Kirk Wagner, you got to go. You got some work 371 00:17:20,720 --> 00:17:23,000 Speaker 2: to do. I want you to I want to let 372 00:17:23,000 --> 00:17:24,560 Speaker 2: you get back to that work. Thanks so much for 373 00:17:24,840 --> 00:17:27,359 Speaker 2: joining us. That's Kurt Wagner, senior technology reporter who covers 374 00:17:27,359 --> 00:17:29,959 Speaker 2: social media. He's the author of Battle for the Bird Jackdoor, 375 00:17:30,040 --> 00:17:32,240 Speaker 2: c Elon Musk in the forty four billion dollar Fight 376 00:17:32,600 --> 00:17:33,560 Speaker 2: for Twitter's soul. 377 00:17:33,760 --> 00:17:35,720 Speaker 3: All right, right now, we're looking at Meta shares. They're 378 00:17:35,760 --> 00:17:38,560 Speaker 3: up about six point two percent as we speak. We've 379 00:17:38,560 --> 00:17:42,240 Speaker 3: got Microsoft down about three point six percent. Tesla is 380 00:17:42,320 --> 00:17:44,720 Speaker 3: up three and a quarter percent. And then check this out. 381 00:17:44,960 --> 00:17:47,480 Speaker 3: IBM been around for a while. It's up about eight 382 00:17:47,480 --> 00:17:49,000 Speaker 3: percent here in the aftermarket. 383 00:17:49,000 --> 00:17:49,280 Speaker 4: All right. 384 00:17:49,400 --> 00:17:52,080 Speaker 3: James Chokmak, we're talking with him, partner and chief investment 385 00:17:52,080 --> 00:17:54,199 Speaker 3: officer at Clockwise Capital with us from Miami. 386 00:17:54,240 --> 00:17:55,600 Speaker 5: He is not going anywhere. 387 00:17:55,760 --> 00:17:58,440 Speaker 3: Ed Lulow also with as Bloomberg Tech a co host 388 00:17:58,440 --> 00:18:00,479 Speaker 3: on Bloomberg Television. He's out there in the bog San 389 00:18:00,480 --> 00:18:03,320 Speaker 3: Francisco bureau. He has been glued to his phone and 390 00:18:03,400 --> 00:18:06,399 Speaker 3: computer watching all of the results since he did his 391 00:18:06,440 --> 00:18:10,879 Speaker 3: broadcast earlier on BTV. Hey, ed, what's jumping out? You know, 392 00:18:10,920 --> 00:18:12,760 Speaker 3: I don't know where do you think we should start with? 393 00:18:12,800 --> 00:18:15,120 Speaker 3: Whether it's Meta, Microsoft or Tesla. 394 00:18:15,920 --> 00:18:18,159 Speaker 9: I would start with Tesla, but only because you know, 395 00:18:19,000 --> 00:18:21,239 Speaker 9: the story that jumped out wasn't the story we were 396 00:18:21,280 --> 00:18:24,119 Speaker 9: prepared for, and I think that it's important to be 397 00:18:24,119 --> 00:18:26,920 Speaker 9: honest about that. And that is Tesla pulling the trigger 398 00:18:27,320 --> 00:18:30,399 Speaker 9: on a two billion dollar investment in Xai. If you 399 00:18:30,440 --> 00:18:34,080 Speaker 9: guys remember, this was a non binding shareholder resolution in 400 00:18:34,119 --> 00:18:37,840 Speaker 9: November as part of the annual shareholder meeting, and the 401 00:18:37,920 --> 00:18:40,480 Speaker 9: outcome was kind of weird because a lot of shareholders 402 00:18:40,560 --> 00:18:44,240 Speaker 9: abstained from voting. That told us that that even though 403 00:18:44,280 --> 00:18:46,560 Speaker 9: the board wasn't bound to the outcome, a lot of 404 00:18:46,600 --> 00:18:48,639 Speaker 9: shareholders were like, h do we really want to go 405 00:18:48,680 --> 00:18:49,320 Speaker 9: down that route? 406 00:18:49,359 --> 00:18:50,560 Speaker 6: Well, Tesla's done it. 407 00:18:50,920 --> 00:18:53,639 Speaker 9: Not only are they investing two billion dollars into Xai 408 00:18:53,720 --> 00:18:56,760 Speaker 9: through Xai's recent Series E round, but they now have 409 00:18:56,800 --> 00:18:59,560 Speaker 9: an agreement in prace what they call a framework to 410 00:18:59,680 --> 00:19:02,840 Speaker 9: work on technology and product together. Okay, and it's this 411 00:19:03,000 --> 00:19:05,040 Speaker 9: like closer inter mesh of Elon Inc. 412 00:19:05,200 --> 00:19:09,560 Speaker 2: Right, So, what's the sales pitch to investors in Tesla 413 00:19:09,640 --> 00:19:13,280 Speaker 2: as a car company, in Tesla as a robotaxi company, 414 00:19:13,280 --> 00:19:16,840 Speaker 2: in Tesla as a robot company that says, you know, 415 00:19:16,880 --> 00:19:19,239 Speaker 2: this is in the best interests of shareholders to make 416 00:19:19,280 --> 00:19:22,360 Speaker 2: an investment in Elon's ai company XAI. 417 00:19:23,240 --> 00:19:24,800 Speaker 6: There are like ten different answers to that. 418 00:19:24,840 --> 00:19:26,760 Speaker 9: I mean, the first thing to state is that this 419 00:19:26,960 --> 00:19:29,000 Speaker 9: was believe it or not a double check the Bloomberg 420 00:19:29,320 --> 00:19:33,119 Speaker 9: the first annual revenue decline that Tesla's ever had, so 421 00:19:33,280 --> 00:19:36,679 Speaker 9: revenues overall revenues from all its divisions drop three percent, 422 00:19:37,160 --> 00:19:40,280 Speaker 9: and they blame that on lower vehicle deliveries and sales 423 00:19:40,680 --> 00:19:44,000 Speaker 9: and lower regulatory tax credits. So that's kind of interesting. 424 00:19:44,640 --> 00:19:47,840 Speaker 9: But this shareholder deck is about the future where Tesla 425 00:19:47,920 --> 00:19:51,439 Speaker 9: doesn't sell vehicles as its principal line of business. It 426 00:19:51,520 --> 00:19:56,800 Speaker 9: does physical AI through robotics and through robotaxi, and as 427 00:19:56,800 --> 00:20:00,160 Speaker 9: it relates to XAI. There were definitely two schools of thought. 428 00:20:00,600 --> 00:20:03,439 Speaker 9: There are the Tesla bulls that basically said if they 429 00:20:03,480 --> 00:20:05,919 Speaker 9: invest in Xai, all of this stuff will happen quicker 430 00:20:06,040 --> 00:20:09,280 Speaker 9: because Xai is so good at the software side of AI. 431 00:20:10,160 --> 00:20:13,679 Speaker 9: They're very bullish Tesla shareholders that were like, whoa this, 432 00:20:13,960 --> 00:20:16,879 Speaker 9: Xai is a company that burns billions of dollars a quarter. 433 00:20:17,720 --> 00:20:20,320 Speaker 9: Do you want Tesla to be the entity that's propping 434 00:20:20,359 --> 00:20:23,240 Speaker 9: that up? If Tesla's already doing work internally on software. 435 00:20:23,359 --> 00:20:27,320 Speaker 9: So this was a really interesting deck. The quarter's numbers gone, 436 00:20:27,359 --> 00:20:30,359 Speaker 9: the quarter gone, I mean, it doesn't really mean anything 437 00:20:30,400 --> 00:20:31,160 Speaker 9: at this point. 438 00:20:31,520 --> 00:20:35,639 Speaker 3: James Chakmark come on in and you know, highlighting that 439 00:20:35,720 --> 00:20:38,600 Speaker 3: Tesla greet to invest about two billion in Elon Musk's 440 00:20:38,800 --> 00:20:42,040 Speaker 3: Xai startup. We talked with you a little bit about 441 00:20:42,040 --> 00:20:48,400 Speaker 3: Tesla before, a small position in your fund. What's how 442 00:20:48,440 --> 00:20:51,479 Speaker 3: significant do you think that is? Does it make it 443 00:20:51,520 --> 00:20:54,000 Speaker 3: more interesting the Tesla story here? 444 00:20:54,880 --> 00:20:59,240 Speaker 1: Yeah, I mean it'd add another element to the story. 445 00:20:59,359 --> 00:21:02,840 Speaker 1: But you know that's not why we're investors in it. 446 00:21:03,880 --> 00:21:07,199 Speaker 1: I don't think that that's going to be something that's 447 00:21:07,280 --> 00:21:11,280 Speaker 1: you know, factored in in a material way one way 448 00:21:11,359 --> 00:21:14,960 Speaker 1: or another at the at the current time. So you know, 449 00:21:15,000 --> 00:21:17,720 Speaker 1: we're looking at it from a long term standpoint. The 450 00:21:17,800 --> 00:21:21,879 Speaker 1: optionality on all those areas that you listed, from robotics 451 00:21:22,440 --> 00:21:26,400 Speaker 1: to self driving, autonomous driving, and you know that's where 452 00:21:26,400 --> 00:21:28,679 Speaker 1: the opportunities lie, and that's why we're invested in it. 453 00:21:28,720 --> 00:21:31,680 Speaker 1: But at the valuations that it's at, and you know, 454 00:21:31,800 --> 00:21:34,760 Speaker 1: question marks around you know, the demand side, and give 455 00:21:34,800 --> 00:21:38,240 Speaker 1: it a macro backdrop. You know, we just think, you know, 456 00:21:38,280 --> 00:21:42,440 Speaker 1: it's prudent to be cautious with it, but still maintain 457 00:21:42,800 --> 00:21:44,359 Speaker 1: a small position in the portfolio. 458 00:21:45,480 --> 00:21:48,520 Speaker 2: Uh, but keep that small position and not get not 459 00:21:48,600 --> 00:21:49,879 Speaker 2: make it any bigger. 460 00:21:51,440 --> 00:21:53,600 Speaker 1: At this time, I got to listen to the calls, 461 00:21:53,640 --> 00:21:54,800 Speaker 1: see see what happens. 462 00:21:54,840 --> 00:21:57,200 Speaker 2: I mean, but you could hear you could hear something today. 463 00:21:57,400 --> 00:21:59,160 Speaker 2: You could hear something today that would make you change 464 00:21:59,160 --> 00:21:59,760 Speaker 2: your mind. 465 00:22:01,280 --> 00:22:05,480 Speaker 1: If and only if it provides a change in my estimates. 466 00:22:05,560 --> 00:22:07,880 Speaker 1: Because really one of the things that I focus on, 467 00:22:09,000 --> 00:22:12,000 Speaker 1: I prioritize is what is the degree of the change 468 00:22:12,000 --> 00:22:14,840 Speaker 1: in the estimates and absolute terms, and also what is 469 00:22:14,880 --> 00:22:18,680 Speaker 1: the percentage change and estimates and what is the percentage 470 00:22:18,880 --> 00:22:23,119 Speaker 1: change in the rate of growth Because these companies with 471 00:22:23,160 --> 00:22:26,120 Speaker 1: these valuations, you have to be able to show the 472 00:22:26,160 --> 00:22:30,640 Speaker 1: sustainability of those growth curves. Without that sustainability then you 473 00:22:30,680 --> 00:22:34,240 Speaker 1: come into questions about the sustainability of the valuations. And 474 00:22:34,320 --> 00:22:36,960 Speaker 1: with these valuations being where they are, not only from 475 00:22:37,000 --> 00:22:39,840 Speaker 1: a stock perspective, but the market perspective. You know, one 476 00:22:39,880 --> 00:22:41,960 Speaker 1: little thing can cause things to break. I mean, you 477 00:22:42,000 --> 00:22:44,760 Speaker 1: saw what happened with Intel last week, down seventeen percent 478 00:22:45,160 --> 00:22:47,880 Speaker 1: on that quarter. And you know this is a company 479 00:22:47,920 --> 00:22:53,720 Speaker 1: that the White House is backing. So you know what, 480 00:22:53,840 --> 00:22:56,960 Speaker 1: it doesn't take. It takes an instant, you know, to 481 00:22:57,080 --> 00:23:00,160 Speaker 1: break the valuation. Even though it takes a long time 482 00:23:00,200 --> 00:23:01,439 Speaker 1: for that value, we should to expand. 483 00:23:01,520 --> 00:23:04,000 Speaker 6: So you gotta be careful, all right, We got to run. 484 00:23:04,040 --> 00:23:06,600 Speaker 3: Hey, James, thank you so much hanging around with us 485 00:23:06,640 --> 00:23:09,840 Speaker 3: for about forty five minutes. Really appreciate going through all 486 00:23:09,840 --> 00:23:12,440 Speaker 3: these earnings with you. James chock Mak, partner and chief 487 00:23:12,480 --> 00:23:16,040 Speaker 3: investment officer at Clockwise Capital, joining us from Miami. Still 488 00:23:16,040 --> 00:23:19,040 Speaker 3: with us, of course, our own Ed Ludlow, Bloomberg Tech 489 00:23:19,040 --> 00:23:23,000 Speaker 3: co host on Bloomberg TV. You know, Ed, I was 490 00:23:23,040 --> 00:23:25,360 Speaker 3: thinking about what you were talking about with Xia. 491 00:23:25,880 --> 00:23:28,040 Speaker 5: What would you want to ask? What do you hope 492 00:23:28,119 --> 00:23:30,320 Speaker 5: is asked on the call with the company here? 493 00:23:30,720 --> 00:23:33,440 Speaker 9: Oh, just the why they decided to go ahead? What 494 00:23:33,560 --> 00:23:36,040 Speaker 9: like the more specific rationale was so you know, the 495 00:23:36,119 --> 00:23:39,479 Speaker 9: concerns were well stated, the worry that Tesla would be 496 00:23:39,560 --> 00:23:42,240 Speaker 9: kind of the cash cow to fund the loss making business. 497 00:23:42,720 --> 00:23:45,440 Speaker 9: But they have explained in detail, you know that there's 498 00:23:45,440 --> 00:23:47,840 Speaker 9: a plan for them to work both on products and 499 00:23:47,880 --> 00:23:50,760 Speaker 9: technology sharing and that and that was you know, those 500 00:23:50,840 --> 00:23:53,960 Speaker 9: that were more sorry, guys, Chelsea have just taken the 501 00:23:54,040 --> 00:23:55,080 Speaker 9: lead in the eighty four. 502 00:23:55,640 --> 00:23:58,720 Speaker 2: The only thing and the only thing, the only sorry, 503 00:23:59,000 --> 00:23:59,920 Speaker 2: your attention away. 504 00:24:00,200 --> 00:24:03,960 Speaker 9: That's if the boss if the bosses are watching, I'm 505 00:24:03,960 --> 00:24:06,280 Speaker 9: really sorry. My phone's going ballistic because it means we 506 00:24:06,400 --> 00:24:10,359 Speaker 9: qualify for the next phase automatically. Anyway, you know what 507 00:24:10,400 --> 00:24:12,560 Speaker 9: your guest was just talking about, though, Like the thing 508 00:24:12,600 --> 00:24:14,600 Speaker 9: that Tesla's done in the shareholder deck in a lot 509 00:24:14,600 --> 00:24:17,640 Speaker 9: more detail than it's done before, is talk about how 510 00:24:17,720 --> 00:24:22,439 Speaker 9: these future products are currently contributing to top and bottom line. 511 00:24:22,640 --> 00:24:25,800 Speaker 9: Tesla has always done the plus and minus columns of 512 00:24:26,320 --> 00:24:29,400 Speaker 9: revenue and profit, but actually they started giving a bit 513 00:24:29,400 --> 00:24:32,119 Speaker 9: more data. So for example, as of the fourth quarter, 514 00:24:32,520 --> 00:24:37,240 Speaker 9: there will one point one million FC paid subscribers active subscribers. Okay, 515 00:24:37,600 --> 00:24:39,840 Speaker 9: and in the profit column they are saying that our 516 00:24:39,920 --> 00:24:44,120 Speaker 9: profit has been boosted by those revenues, by those software 517 00:24:44,160 --> 00:24:47,560 Speaker 9: revenue sales, and so like extrapolate out to XAI. 518 00:24:48,200 --> 00:24:50,159 Speaker 6: You can just envisage your world like I drive every 519 00:24:50,240 --> 00:24:51,040 Speaker 6: day using. 520 00:24:50,880 --> 00:24:53,960 Speaker 9: FSD to work, and in the cockpit of the car, 521 00:24:54,320 --> 00:24:58,200 Speaker 9: I use the Grock voice assistant to communicate like how 522 00:24:58,200 --> 00:25:00,800 Speaker 9: do they monetize that you'd expect and to talk about 523 00:25:00,800 --> 00:25:02,520 Speaker 9: that kind of stuff on the cool I think. 524 00:25:03,160 --> 00:25:06,520 Speaker 2: This is this is okay, this is what I'm interested in. 525 00:25:06,720 --> 00:25:09,119 Speaker 3: Well, so let's wait. You know what, we want to 526 00:25:09,119 --> 00:25:11,320 Speaker 3: throw another voice into this. Do not go, Do not 527 00:25:11,400 --> 00:25:13,439 Speaker 3: leave us at Ludlow. We want you still here. I 528 00:25:13,480 --> 00:25:17,560 Speaker 3: think our own Steve Man, a Bloomberg Intelligence Global Autos 529 00:25:17,560 --> 00:25:21,160 Speaker 3: and Industrials research manager, is here with us as well. 530 00:25:21,200 --> 00:25:22,560 Speaker 5: Steve, come on in too. 531 00:25:23,280 --> 00:25:26,480 Speaker 3: Hopefully you've been listening to what Ed has to say. 532 00:25:26,600 --> 00:25:29,520 Speaker 3: What what jumps out for you in this Tesla results? 533 00:25:30,440 --> 00:25:34,400 Speaker 7: Well, I think on the car side, nothing nothing of surprise, 534 00:25:34,880 --> 00:25:39,320 Speaker 7: uh with you know, margins a lot better than we expected, 535 00:25:39,400 --> 00:25:43,200 Speaker 7: but that's only from higher production. But what's really interesting 536 00:25:43,320 --> 00:25:46,680 Speaker 7: for us is really now you know, Elon must have 537 00:25:46,680 --> 00:25:49,879 Speaker 7: been talking a lot about rolling out Groobo Taxi. It 538 00:25:50,000 --> 00:25:53,600 Speaker 7: was just top but now it's kind of codified in 539 00:25:53,680 --> 00:25:56,040 Speaker 7: the in the presentation now that they're going to roll 540 00:25:56,040 --> 00:25:59,920 Speaker 7: out in nine cities beyond Austin. So I think a 541 00:26:00,080 --> 00:26:03,959 Speaker 7: lot of the investors are expecting, you know, the timeline 542 00:26:04,040 --> 00:26:07,200 Speaker 7: of that scaling up on robo taxi, and I think 543 00:26:07,240 --> 00:26:07,840 Speaker 7: we're seeing that. 544 00:26:08,040 --> 00:26:09,560 Speaker 3: But the only thing is like, I'm going to go 545 00:26:09,560 --> 00:26:11,640 Speaker 3: to our live blog and Ed, come on back in here. 546 00:26:12,680 --> 00:26:14,400 Speaker 3: I'm looking for it on the live blog. But how 547 00:26:14,400 --> 00:26:17,960 Speaker 3: that they have made promises before to kind of roll out, and. 548 00:26:18,000 --> 00:26:21,080 Speaker 2: I mean, it's like it just hasn't happened. That's part 549 00:26:21,119 --> 00:26:22,080 Speaker 2: for the course for Elon. 550 00:26:22,359 --> 00:26:24,720 Speaker 3: No, I know, and we used to have a clock thing, 551 00:26:24,760 --> 00:26:27,520 Speaker 3: I think on the Bloomberg like tracking, you know, Elon 552 00:26:28,119 --> 00:26:29,359 Speaker 3: and his promises. 553 00:26:29,480 --> 00:26:32,040 Speaker 9: We did an episode of Wall Street Week last month 554 00:26:32,280 --> 00:26:34,679 Speaker 9: on robotaxi, right, and the opening line was, you know, 555 00:26:34,800 --> 00:26:37,359 Speaker 9: five years ago, Elon Musk promised that there would be 556 00:26:37,400 --> 00:26:40,240 Speaker 9: robotaxis all over public roads by the end of that year. 557 00:26:40,320 --> 00:26:42,359 Speaker 9: And here we are at the beginning of twenty twenty 558 00:26:42,400 --> 00:26:46,920 Speaker 9: six and in a very limited ten vehicle pilot. Tesla 559 00:26:46,960 --> 00:26:51,679 Speaker 9: has just removed the safety monitor from those vehicles that 560 00:26:51,720 --> 00:26:55,400 Speaker 9: are in Austin, Texas for ROBOTAXI WEAIMO, by comparison, has 561 00:26:55,440 --> 00:26:58,639 Speaker 9: many hundreds more than that on public roads, charging a 562 00:26:58,720 --> 00:27:02,159 Speaker 9: fair no human in in operation. The thing is that 563 00:27:02,200 --> 00:27:05,080 Speaker 9: your last guest deluded to this. You're like pressing him 564 00:27:05,400 --> 00:27:08,800 Speaker 9: on why he had the conviction in this this thesis. 565 00:27:08,840 --> 00:27:11,840 Speaker 9: But for lots of people, it's the idea that Elon 566 00:27:11,920 --> 00:27:14,800 Speaker 9: Musk makes many projections and gives many timelines, and even 567 00:27:14,840 --> 00:27:17,560 Speaker 9: though he misses those dates, he often gets there in 568 00:27:17,600 --> 00:27:19,800 Speaker 9: the end. And I suspect that I've said that sentence 569 00:27:19,840 --> 00:27:23,080 Speaker 9: toe debatam many hundreds of times before. 570 00:27:23,200 --> 00:27:24,920 Speaker 2: So Steve Man, come on back here? Does he? Does 571 00:27:24,920 --> 00:27:28,400 Speaker 2: he get there this time? With the ROBOTAXI rollout? 572 00:27:28,640 --> 00:27:28,680 Speaker 3: Is? 573 00:27:29,160 --> 00:27:31,240 Speaker 2: Are we going to be riding in robotaxis when we 574 00:27:31,280 --> 00:27:33,960 Speaker 2: go to visit places apart from Austin anytime soon? 575 00:27:34,880 --> 00:27:35,120 Speaker 4: Yeah? 576 00:27:35,200 --> 00:27:38,439 Speaker 7: I mean, I think the fact that he's, you know, 577 00:27:38,480 --> 00:27:42,840 Speaker 7: putting the plan on paper says a lot. You know, 578 00:27:42,920 --> 00:27:46,520 Speaker 7: from my perspective, it's not just talking anymore. He's making 579 00:27:46,840 --> 00:27:49,560 Speaker 7: a big commitment to the investors, and that's what the 580 00:27:49,680 --> 00:27:54,240 Speaker 7: investor are expecting. So yeah, nine cities, mostly down south. 581 00:27:55,040 --> 00:27:58,600 Speaker 7: I think it. Look, I think the rollout will continue 582 00:27:58,640 --> 00:28:01,320 Speaker 7: to be slow. I mean, and Tesla is a big name. 583 00:28:01,760 --> 00:28:05,200 Speaker 7: They don't have much room to make a mistake, so 584 00:28:05,359 --> 00:28:08,119 Speaker 7: they're going to take it slow. They're probably going to 585 00:28:08,240 --> 00:28:12,119 Speaker 7: have safety drivers in those cities initially, similar to what 586 00:28:12,160 --> 00:28:16,320 Speaker 7: Weimo has done, and then startly removing those safety drivers 587 00:28:16,640 --> 00:28:20,800 Speaker 7: in once they gain confidence. But at the end of 588 00:28:20,840 --> 00:28:25,960 Speaker 7: the day, the point is we're expecting scaling up of 589 00:28:26,000 --> 00:28:29,439 Speaker 7: that business and to drive a new revenue stream for 590 00:28:29,480 --> 00:28:32,880 Speaker 7: the company, and looks like it's happening sooner than later. 591 00:28:32,960 --> 00:28:33,160 Speaker 4: Now. 592 00:28:33,359 --> 00:28:36,760 Speaker 3: It's fascinating. I feel a little managed Edla Low come 593 00:28:36,800 --> 00:28:39,320 Speaker 3: on in here. I mean, it's just amazing that we're 594 00:28:39,360 --> 00:28:44,560 Speaker 3: talking about Tesla and really not focusing on a less expensive. 595 00:28:44,040 --> 00:28:46,800 Speaker 2: Callay, focusing on Chelsea versus Napoli. 596 00:28:47,000 --> 00:28:47,760 Speaker 5: No no, no, no no. 597 00:28:47,800 --> 00:28:51,160 Speaker 3: But I just know it's fine. It's part of what 598 00:28:51,200 --> 00:28:53,920 Speaker 3: we love about you. But I mean, it's just interesting 599 00:28:53,960 --> 00:28:58,920 Speaker 3: that we're like, Okay, it's these taxis and it's robots 600 00:28:58,960 --> 00:29:00,200 Speaker 3: and it may take a. 601 00:29:00,240 --> 00:29:01,920 Speaker 5: While, but we're in. We're in. 602 00:29:02,000 --> 00:29:04,520 Speaker 3: And we talked to Kathy Wooden. She's like, this is 603 00:29:04,560 --> 00:29:05,800 Speaker 3: the company going forward? 604 00:29:06,600 --> 00:29:06,840 Speaker 6: Yeah. 605 00:29:07,200 --> 00:29:08,640 Speaker 9: I mean, you know, I don't want to speak on 606 00:29:08,640 --> 00:29:11,960 Speaker 9: his behalf, but Steve's point is echoed by by many 607 00:29:12,120 --> 00:29:16,160 Speaker 9: that either are bullish or bearish on Tesla. They've put 608 00:29:16,160 --> 00:29:19,400 Speaker 9: this in the shareholder deck. It's in writing the explanation 609 00:29:19,480 --> 00:29:22,479 Speaker 9: of what they plan to do, plus some timeline in it, 610 00:29:22,520 --> 00:29:25,160 Speaker 9: plus the impact to top and bottom line that you 611 00:29:25,160 --> 00:29:29,800 Speaker 9: know it's in there. Steve wrote in his January twelfth 612 00:29:30,480 --> 00:29:33,400 Speaker 9: research without putting him on the spot, that twenty six 613 00:29:33,520 --> 00:29:36,840 Speaker 9: is the year that Tesla pivots to physical AI for 614 00:29:36,920 --> 00:29:39,360 Speaker 9: many people, that that is something that started in twenty 615 00:29:39,400 --> 00:29:43,240 Speaker 9: twenty five. But there is still an element with Tesla 616 00:29:43,320 --> 00:29:45,560 Speaker 9: right the stocks up less than three percent in after 617 00:29:45,640 --> 00:29:49,240 Speaker 9: hours that Elon Musk will likely say something on the 618 00:29:49,240 --> 00:29:51,560 Speaker 9: call that will move the needle, and it's about, you know, 619 00:29:51,600 --> 00:29:55,320 Speaker 9: whether investors do or don't believe him. The one little 620 00:29:55,360 --> 00:29:57,280 Speaker 9: teaser that I will leave with you is there's a 621 00:29:57,320 --> 00:30:01,640 Speaker 9: line on the deck that talks about deeper vertical integration. 622 00:30:02,440 --> 00:30:04,840 Speaker 9: And you know, Dana Hole, you know, messaged me right 623 00:30:04,880 --> 00:30:06,200 Speaker 9: away saying did you see that? 624 00:30:06,600 --> 00:30:09,160 Speaker 6: What do you think? That means? Don't know? 625 00:30:09,280 --> 00:30:11,400 Speaker 9: But Elon's talks about all kinds of things, building its 626 00:30:11,440 --> 00:30:15,160 Speaker 9: own chip fab. Where does SpaceX factor into this? One 627 00:30:15,200 --> 00:30:18,840 Speaker 9: of the most voted up retail questions because you know, 628 00:30:18,880 --> 00:30:22,160 Speaker 9: test of fields questions from retail investors is will Tesla 629 00:30:22,600 --> 00:30:25,600 Speaker 9: A shareholders get priority access to a SpaceX ipo. 630 00:30:26,080 --> 00:30:28,440 Speaker 6: All of these things keep people looking to the horizon. 631 00:30:28,600 --> 00:30:31,160 Speaker 2: It depends on where the planets are aligned, I think 632 00:30:31,280 --> 00:30:31,520 Speaker 2: is the. 633 00:30:31,760 --> 00:30:34,680 Speaker 3: It's great, this is on our live blog. We will 634 00:30:34,720 --> 00:30:37,960 Speaker 3: manage the businesses such that we ensure a strong balance sheet, 635 00:30:37,960 --> 00:30:41,280 Speaker 3: maintaining sufficient liquidity to fund our product roadmap, long term 636 00:30:41,320 --> 00:30:45,080 Speaker 3: capacity expansion plans, including further vertical integration, and other expenses. 637 00:30:45,120 --> 00:30:49,560 Speaker 3: And as you said, Dana writes, would love more details, 638 00:30:49,560 --> 00:30:51,360 Speaker 3: and it sounds like you would would too. 639 00:30:52,080 --> 00:30:54,200 Speaker 2: You didn't even mention you didn't even hear my planetary 640 00:30:54,200 --> 00:30:54,840 Speaker 2: alignment joke. 641 00:30:55,000 --> 00:31:00,520 Speaker 3: Oh sorry, okay, ed laugh Johnnie Steve Mann final thoughts 642 00:31:00,520 --> 00:31:02,719 Speaker 3: from you thirty seconds here when it comes to Tesla. 643 00:31:03,680 --> 00:31:06,080 Speaker 7: Yeah, you guys talked about a little bit about the 644 00:31:06,080 --> 00:31:10,120 Speaker 7: two billion dollar investment in Xai. It totally makes sense 645 00:31:10,160 --> 00:31:14,000 Speaker 7: for me because, look, Grock is starting to be integrated 646 00:31:14,040 --> 00:31:17,920 Speaker 7: into Tesla vehicles. You know, especially in the navigational you 647 00:31:17,920 --> 00:31:20,520 Speaker 7: can tell groc basically, you know, I want to go home, 648 00:31:20,560 --> 00:31:22,880 Speaker 7: but in between I want to stop at Starbucks or 649 00:31:22,920 --> 00:31:25,840 Speaker 7: stop at the grocery store and actually will help you 650 00:31:25,960 --> 00:31:31,560 Speaker 7: navigate to those different points. And look that that you 651 00:31:31,600 --> 00:31:34,640 Speaker 7: know they're testing it out now, that system won't be 652 00:31:34,760 --> 00:31:37,640 Speaker 7: on the robotaxi because you know there's no driver there. 653 00:31:38,120 --> 00:31:40,680 Speaker 7: So it's if you take a step back and look 654 00:31:40,720 --> 00:31:45,800 Speaker 7: at this thing, this whole elon must AI thing. I 655 00:31:45,840 --> 00:31:48,920 Speaker 7: wouldn't be surprised if there's going to be more kind 656 00:31:48,920 --> 00:31:53,000 Speaker 7: of cross investments between the companies that are all going 657 00:31:53,080 --> 00:31:55,480 Speaker 7: to be tied together on this AI endeavor. 658 00:31:55,520 --> 00:31:58,080 Speaker 5: Wait, did I hear circular financing again? I don't know. 659 00:31:58,120 --> 00:32:01,280 Speaker 3: I don't know anyway, fascinating faster, Steve Man, thank you 660 00:32:01,360 --> 00:32:05,040 Speaker 3: so much. Bloomer Intelligence Global autos and Industrial's research manager 661 00:32:05,840 --> 00:32:09,360 Speaker 3: joining us here. Hey real quickly ed thirty seconds for 662 00:32:09,440 --> 00:32:13,120 Speaker 3: you go anywhere. Whether it's Meta which is rowling about 663 00:32:13,200 --> 00:32:16,680 Speaker 3: nine percent in the aftermarket, Microsoft down five percent, Tesselas 664 00:32:16,720 --> 00:32:17,880 Speaker 3: up three percent, where do you want to go? 665 00:32:18,480 --> 00:32:19,920 Speaker 6: The stories are really straightforward. 666 00:32:20,080 --> 00:32:24,080 Speaker 9: Meta said that revenue growth strong, and then they boosted 667 00:32:24,120 --> 00:32:26,520 Speaker 9: the capex range for the year beyond consensus. 668 00:32:26,640 --> 00:32:28,480 Speaker 6: It's a simple formula. We're repeating. 669 00:32:28,760 --> 00:32:32,560 Speaker 9: Microsoft's Azure cloud unit growth thirty eight percent, in line 670 00:32:32,600 --> 00:32:35,440 Speaker 9: with estimate consensus, but at the top end, people were like, 671 00:32:35,440 --> 00:32:38,680 Speaker 9: where's my forty percent growth? And they told us about 672 00:32:38,680 --> 00:32:42,000 Speaker 9: their capital expenditures and those kind of exceeded, and still 673 00:32:42,000 --> 00:32:44,560 Speaker 9: the market was disappointed. It's a very high bar on 674 00:32:44,600 --> 00:32:47,680 Speaker 9: a simple formula that we've discussed. Endlessly spend more on 675 00:32:47,760 --> 00:32:51,120 Speaker 9: AI investment in infrastructure, but show us very strong top 676 00:32:51,160 --> 00:32:52,760 Speaker 9: line growth as a direct result of it. 677 00:32:53,400 --> 00:32:58,360 Speaker 3: You rock, go back to the match, all right. Of course, 678 00:32:58,400 --> 00:33:01,840 Speaker 3: that's Ed Lovelow as OA is. He is co host 679 00:33:01,920 --> 00:33:05,360 Speaker 3: of Bloomberg Tech on Bloomberg TV. Catch him at eleven 680 00:33:05,400 --> 00:33:07,200 Speaker 3: am Wall Street Time Monday through Friday. 681 00:33:08,600 --> 00:33:12,680 Speaker 7: H m hmm.