Speaker 1: Bloomberg Audio Studios, podcasts, radio news.
Speaker 2: This is a breaking news updated from Bloomberg instant reaction
Speaker 2: and analysis from our three thousand journalists and analysts around
Speaker 2: the world. We got a lot of companies that are
Speaker 2: reporting right now. Meta platform shares up by three point
Speaker 2: six percent. The company posted first quarter sales that beat
Speaker 2: Wall Street estimates. Signed the company's advertising businesses so far
Speaker 2: weathering the Trump Administration's ongoing trade war. We got with
Speaker 2: us Amandeep Singh's Bloomberg Intelligence senior tech industry analysts. He
Speaker 2: joins us here in the Bloomberg Interactive Brokers studio, Mandy,
Speaker 2: But I want to start with Look, I want to
Speaker 2: start with meta platforms. I think there was a little
Speaker 2: bit of concern yesterday with the Snap earnings, not really
Speaker 2: like for like when we think about the companies, but
Speaker 2: if there's concerns about advertising and pullback, then naturally the
Speaker 2: response is, wait, is this going to hit meta platforms?
Speaker 1: Did it? No?
Speaker 3: It did not end. Look, we knew one Q would
Speaker 3: be solid, but the fact that they gave us a
Speaker 3: two Q guide and that too was in line with
Speaker 3: almost in line with consensus, tells you they have more
Speaker 3: visibility about the impact of the pullback from Chinese advertisers
Speaker 3: their deminimus rule that everyone has been talking about, and
Speaker 3: they think it would have a very limited impact on
Speaker 3: the business. Obviously there'll be more details.
Speaker 2: On their own. I mean, I'll pull back from like
Speaker 2: a Sian, that's right.
Speaker 3: And so look, even though they have almost a ten
Speaker 3: percent revenue exposure, the fact that you know it's an
Speaker 3: auction model meant that they would have more of an
Speaker 3: impact on the ad pricing, and this guidance suggests that
Speaker 3: that ad pricing impact is fairly negligible.
Speaker 4: What does this tell you about?
Speaker 5: It's just interesting that we go into this earning season, right,
Speaker 5: and you have companies maybe in the traditional kind of economy,
Speaker 5: whether it's airlines and others, who are giving a couple
Speaker 5: of different scenarios, and then bam, you have something like
Speaker 5: a meta and we'll talk maybe Microsoft in just a moment.
Speaker 4: These are strong numbers.
Speaker 3: These are very strong.
Speaker 4: Can they do?
Speaker 1: Like?
Speaker 4: How do we make sense of that?
Speaker 3: Well? I think one these are the highest ROI ad platforms.
Speaker 3: So if you are an online business, you don't have
Speaker 3: a choice but to spend your ad dollars on Google
Speaker 3: and on meta platforms.
Speaker 5: And if you're worried about the your economy or recession,
Speaker 5: this is where you're going to do.
Speaker 3: This is where you are going to go to engage
Speaker 3: with your customers, to show and add to your customers,
Speaker 3: because every company is an online business and this is
Speaker 3: the highest ROI now, you're absolutely right that Snap last
Speaker 3: night didn't sound very confident about how to Q and
Speaker 3: that that was the reason why they didn't guide for
Speaker 3: the second quarter. So I am surprised by the fact
Speaker 3: that they did guide, and it was really a very
Speaker 3: healthy guide given the macro backdrop, and it sounds like
Speaker 3: they are much more confident about their advertiser base, which
Speaker 3: is predominantly small businesses. So when you think about meta platforms,
Speaker 3: they have over ten million small businesses that advertise on
Speaker 3: the platform.
Speaker 5: So explain that's what they don't.
Speaker 2: Is it a meta platform story? I mean, you told
Speaker 2: us last week that Google is a very efficient way
Speaker 2: to advertise, so you weren't surprised to see the numbers
Speaker 2: that we saw from Alphabet last week. Is it the
Speaker 2: same thing when it comes to meta platforms, like this
Speaker 2: is just such a good way to advertise that even
Speaker 2: if small businesses see a pullback they still see value
Speaker 2: when it comes to spending money on this platform.
Speaker 3: Yeah, so in terms of the pecking order, you are
Speaker 3: probably still gonna spend on Meta, but you may pull
Speaker 3: back on Reddit, on Pinterest, on Snapchat, and we don't know.
Speaker 3: We know snap didn't do very well. We don't know
Speaker 3: about the other two. But in terms of pecking order,
Speaker 3: Meta is the highest priority ad spend for any advertiser.
Speaker 3: And I'm surprised SMBs are still continuing because I would have.
Speaker 4: Small and medium sized business.
Speaker 3: Small and medium sized businesses because the tariffs would have
Speaker 3: caused a lot of uncertainty.
Speaker 5: And look, that's why I'm asking you. I'm trying to
Speaker 5: understand an environment where so many companies are like, we're
Speaker 5: not even going to give you an outlok or we're
Speaker 5: going to give you two scenarios. And then you've got
Speaker 5: a company like this that's willing to commit but also
Speaker 5: plays to the small business community.
Speaker 4: I'm just trying to understand it does.
Speaker 3: And look, the advantage of having such a fragmented advertiser basis,
Speaker 3: even if a few advertisers do pull back, you have
Speaker 3: a majority of the other advertisers that may double down
Speaker 3: given they have favorable conditions. So it sounds like in
Speaker 3: this case, some retail advertisers may have pulled back, but
Speaker 3: then you know, you have other pockets within the economy,
Speaker 3: like financial services that may actually have double down. Thinking
Speaker 3: the aslots are much cheaper right now compared to where
Speaker 3: they were ninety days back, and so that is a
Speaker 3: phenomenon that's always there with digitalized platforms that somebody else
Speaker 3: may step up because as a much cheaper right now.
Speaker 4: You know.
Speaker 2: I'm looking at the press release and one thing that
Speaker 2: I saw that kind of surprised me a little bit
Speaker 2: was Mark Zuckerberg at the top said we're making good
Speaker 2: progress on AI glasses and meta AI, which now has
Speaker 2: almost a billion monthly actives. We'll get to the number
Speaker 2: in a second, but that's what he chose to highlight
Speaker 2: at the top. He didn't choose to highlight the strength
Speaker 2: of the advertising business making a mistake. This is a
Speaker 2: company because he's raising the Kapex.
Speaker 3: So the Capex guide ran from sixty to sixty five.
Speaker 4: So what does that tell you.
Speaker 3: Well, it tells me that they are really going big
Speaker 3: in terms of setting up this AI data center infrastructure
Speaker 3: for rolling out more AI on their family of apps,
Speaker 3: and they see a lot of ROI when it comes
Speaker 3: to the AI span.
Speaker 2: What does it mean that it has a billion, almost
Speaker 2: a billion monthly actives? What's he talking about there?
Speaker 3: Well, so Meta Platforms has three point five billion monthly
Speaker 3: actives across their family.
Speaker 2: WhatsApp, Instagram, Facebook, Message.
Speaker 3: So one billion of those, predominantly through WhatsApp, are using
Speaker 3: meta AI. I don't think there is a lot of
Speaker 3: Meta AI on Instagram or the Blue app yet, which
Speaker 3: I was surprised by given how much they tout Meta AI.
Speaker 3: But it's predominantly on WhatsApp.
Speaker 2: Right now, what are they using it for? On WhatsApp?
Speaker 2: Are they using it like an LLM? Are they using
Speaker 2: it like a chat GPT?
Speaker 3: Yeah, it is a form of search on WhatsApp where
Speaker 3: you can sift through your messages. You can actually do
Speaker 3: a lot of group kind of correspondences using METAA.
Speaker 2: So it's basically an assistant for the app.
Speaker 6: That's right.
Speaker 3: But still I would say I see it more on
Speaker 3: WhatsApp than on their Instagram and Blue App.
Speaker 5: Yeah, all right, so metas still up about three point
Speaker 5: four percent.
Speaker 2: Should we talk Microsoft?
Speaker 4: Let's talk at bit.
Speaker 5: About Microsoft, because this one was just kind of off
Speaker 5: and running in a big way in the aftermarket. The
Speaker 5: stock is up about five point six percent. Here again
Speaker 5: some strong numbers.
Speaker 4: Let me just pull it up.
Speaker 5: Here, the company in terms of it posted strong revenue
Speaker 5: growth Cloud United expansion. This one also seemed really strong.
Speaker 1: Yeah, so.
Speaker 3: Azure thirty three percent when everyone was thinking, oh, Google
Speaker 3: had a slightly lower number on the cloud side, I mean,
Speaker 3: thirty three percent is a very impressive number cloud revenue right,
Speaker 3: cloud revenue. And again, this is the one company that
Speaker 3: has benefited the most when it comes to AI infrastructure
Speaker 3: and actually monetizing it. In the case of Meta, you
Speaker 3: still don't see the monetization on AI.
Speaker 4: Meaning what specifically, so.
Speaker 3: The AI inferencing revenue. So that is what shows up
Speaker 3: in the Azure growth number. And in that thirty three percent,
Speaker 3: your AI contribution is north of fifteen percent right now,
Speaker 3: So fifteen percent of that thirty three percent growth is
Speaker 3: all AI revenue.
Speaker 2: Hold on, do we care about these numbers if we
Speaker 2: don't have the guidance yet? Oh, Vester certainly do after
Speaker 2: hours sending shares higher, but we're not going to get
Speaker 2: guidance until the call.
Speaker 3: This is recurring revenue.
Speaker 2: So when you think about as long as people keep paying.
Speaker 3: Yeah, and enterprises don't really pull back, like.
Speaker 2: If they had side I will say if they have
Speaker 2: fewer employees, they would pull back if they lay off employees, wouldn't.
Speaker 3: They Still you need AI infrastructure, you do, Okay? I
Speaker 3: think of what they are doing with the AI infrastructure.
Speaker 3: They're rolling out chat bots, AI agents. So even if
Speaker 3: they are retrenching in terms of headcount, you still need
Speaker 3: more AI agents because.
Speaker 2: Everything is awesome.
Speaker 5: One last question, so same thing my question to Meta,
Speaker 5: like when I'm trying to understand what is going on
Speaker 5: in a lot of other companies, obviously they're not these
Speaker 5: big tech companies, Like, is this telling us a different
Speaker 5: story in terms of what's going on in the economy
Speaker 5: and the impact of some of the White House policies.
Speaker 3: Well, so companies are clearly prioritizing AI initiatives right now,
Speaker 3: regardless of what is going on in the macroeconomy and
Speaker 3: the tariff situation. Everyone is concerned, but no one has
Speaker 3: pulled back on AI related projects, and clearly this is
Speaker 3: an illustration of that. We will wait for the guide.
Speaker 3: I mean these are one Q numbers, so we don't
Speaker 3: know how they guide to for two Q, but one
Speaker 3: QU numbers are strong from both companies.
Speaker 2: Okay, Man, Deep, you got to go. We appreciate you
Speaker 2: sticking around and hang it with us. You appreciate it.
Speaker 2: Not just Microsoft and meta platforms reporting Qualcom. In the
Speaker 2: after hours, shares are bouncing around a little bit. The
Speaker 2: company did give a tepid revenue prediction for the current quarter.
Speaker 2: It underscored concerns about tariffs that will hurt demand for
Speaker 2: its products. As soon as these numbers crossed, we did
Speaker 2: see shares in the after hours move lower, down about
Speaker 2: four point eight percent as we speak right now. Kunjohn
Speaker 2: Sabani is Bloomberg Intelligence senior semiconductor analysts. He joins us
Speaker 2: once again from San Francisco Bureau. John, your reaction to
Speaker 2: the numbers tepid.
Speaker 6: Not surprising to us. In fact, the results and the
Speaker 6: outlook turned out exactly how we had called in our preview.
Speaker 6: We thought that actual reported quarter might see a beat,
Speaker 6: likely due to strength in China Android and from the
Speaker 6: results VRC also seeing some better than expected IoT, which
Speaker 6: is really a positive sign. But that sort of inline
Speaker 6: outlook with the comment that you know they're taking a
Speaker 6: conservative approach, that's what we had expected, so not really
Speaker 6: surprising anything what we have seen so far.
Speaker 5: They're also saying, the CEO, Christiano Aman, saying, as we
Speaker 5: navigate the current macroeconomic and trade environment, we remain focused
Speaker 5: on the critical factors we can control.
Speaker 4: Our leading technology.
Speaker 5: Roadmap, best in class product portfolio, strong customer relationships, and
Speaker 5: operational efficiencies. It sounds a little bit like c spe
Speaker 5: C sweet speak. But what you know they are saying
Speaker 5: that there's some navigating through this macroeconomic andronment is that
Speaker 5: in trade environment that's just all the stuff coming out
Speaker 5: of DC.
Speaker 6: Well, yeah, and remember this smartphone market is sort of
Speaker 6: the most susceptible to any uncertainty or a recessionary scenario
Speaker 6: or a tariff impact given a totally consumer based and
Speaker 6: both the key regions where they sell right, US and
Speaker 6: China both are sort of directly or indirectly getting impacted
Speaker 6: by tariff. The second thing you remember is this is
Speaker 6: the year starting with even the spring iPhone launch, where
Speaker 6: Apple started sourcing their internal modem and swapping out Qualcom.
Speaker 6: You're going to expect to see this more in the
Speaker 6: upcoming iPhone launch in fall. So they're already even if
Speaker 6: you take out the tariffs and uncertainty. They already had
Speaker 6: these headwinds of loss of revenue. It's significant billions of dollars,
Speaker 6: not maybe this year, but starting to happen this year.
Speaker 6: They really needed an offsetting positive catalyst. And when you
Speaker 6: put in uncertain macron top of it, maybe impacting smartphone
Speaker 6: growth overall, that's sort of not the best situation they
Speaker 6: want to be in. Right now.
Speaker 2: We'll hear from Apple tomorrow after the bell, but shares
Speaker 2: in the after hours down about two tenths of one percent.
Speaker 2: Can we get any sort of preview from these numbers?
Speaker 2: Given that Qualcomm does get twenty two percent of its
Speaker 2: revenue from Apple, not.
Speaker 6: These specific numbers right the spring of phone launch. That's
Speaker 6: a very small volume, so we can't expect or predict anything.
Speaker 6: The real indication will come from the fall launch. Again,
Speaker 6: the numbers there are very difficult to predict at this point.
Speaker 6: The other point I want to add ad is right
Speaker 6: there in this weird situation where if because of tariff's situations,
Speaker 6: and if because of significant tariff on China, if Apple
Speaker 6: loses share whether in China on US, that indirectly can
Speaker 6: be actually good for Qualcom at the same time that
Speaker 6: they're swapping qual Comb out. You know that share if
Speaker 6: picked up by Android, that could be actually better for Qualcom,
Speaker 6: not just on those revenue side, but also on the
Speaker 6: margin side, because Android is a higher margin business for them.
Speaker 2: Okay, that's good to know. Anything else, Coonjohn, that you
Speaker 2: can glean from this?
Speaker 5: Oh, go ahead, And I'm thinking, what's the number one question?
Speaker 5: I know I always like to throw this out, but
Speaker 5: what do you want to hear on the call? Or
Speaker 5: what would you be asking?
Speaker 6: I'd be asking a very difficult question, is that. Look,
Speaker 6: we know that the Apple share loss is coming. Estimates
Speaker 6: have in build some of the loss, Like what is
Speaker 6: the offsetting catalyst here? Where can you grow or minimize
Speaker 6: this loss, especially in this current environment?
Speaker 5: All right, got to leave it there, Love it, Love
Speaker 5: it Kunjohn Sabani. He is Bloomberg Intelligence Senior Semiconductor analys
Speaker 5: joining us from our bureau in San Francisco. Couonjohn, thank
Speaker 5: you so much. We'll look forward to his research hitting
Speaker 5: the Bloomberg a little bit later on.
Speaker 4: We got to get to our other love.
Speaker 2: Yeah, let's bring an ed Love though he's actually here
Speaker 2: in New York City. He's the co host of Bloomberg
Speaker 2: Technology with more on the tech earnings that just crossed.
Speaker 2: Microsoft posted strong revenue growth on cloud unit expansion, Meta
Speaker 2: revenue beat estimates on advertising stability. Meta coming out and
Speaker 2: giving a guide that please investors. Microsoft. We don't know
Speaker 2: what they're guiding yet. We'll find out on the call.
Speaker 2: Where do you want to start?
Speaker 7: Let's go and Meta, you know, just because it's actually
Speaker 7: an easier story to understand. Meta makes money from advertising.
Speaker 7: Anyone that's been on Instagram or Facebook increasingly other apps
Speaker 7: will know that. And so the outlook for the current
Speaker 7: period shows that in everything that's going on right now,
Speaker 7: they're holding our own they're holding up. The ad market
Speaker 7: is basically conviction driven, so if there is economic uncertainty,
Speaker 7: advertisers are usually a little bit cautious and tepid. So
Speaker 7: that's really interesting. Meta always gives a guidance or an
Speaker 7: outlook for the current period. Last night, I think you
Speaker 7: covered it right, Snapah did not, And what happens when
Speaker 7: you don't. Your stock fall's fifteen percent. So that was interesting.
Speaker 7: But I think there is something to understand in the
Speaker 7: capital expenditures because people misunderstand what it is META does
Speaker 7: with that money. So maybe we go there next, Well,
Speaker 7: where do Yeah? So, Meta is not a cloud computing company.
Speaker 7: It is a social media company that's working on AI
Speaker 7: and AIS, product generative AI and AI to drive the
Speaker 7: value of its ADS. But it does own and operate
Speaker 7: its own data centers. They've dramatically raised the capex guidance
Speaker 7: for this year. Yeah, sixty four to seventy two billion. Sorry,
Speaker 7: I'm not look on.
Speaker 5: The sixty four to seventy two If they had seen
Speaker 5: sixty to sixty five billion, the estimate was just below
Speaker 5: sixty billion.
Speaker 7: So what does that mean? They're going to put more
Speaker 7: money than they said they were into data centers, more
Speaker 7: data centers, cutting edge chips in those data centers. More
Speaker 7: likely they'll drive development in AI. But the single line
Speaker 7: in the statement that is so critically important is the
Speaker 7: majority will go into the core business. They will invest
Speaker 7: in the things that support ADS.
Speaker 2: Well, that's okay, that's exactly where I wanted to go.
Speaker 2: Because Mark Zuckerberg called out Meta AI, he called out
Speaker 2: the hardware in the top of the press release, Mandy
Speaker 2: smartly pointing out, well, that's because there raise capex, so
Speaker 2: he wants to draw attention to the strength there look, look,
Speaker 2: this is an advertising business, no question, yea. What is
Speaker 2: going to go toward developing new products like products that
Speaker 2: we can wear, products that we walk around with, versus
Speaker 2: making the ads more effective to sell us things, which
Speaker 2: is met core business.
Speaker 7: Yeah, it's a real quick We're making the distinction between hardware,
Speaker 7: which is a consumer electronic one wears on their person,
Speaker 7: and infrastructure, which is data status. And that's really important.
Speaker 7: So right now, Meta AI is a generative AI function
Speaker 7: that you can use through a standalone app as of
Speaker 7: this week.
Speaker 2: Yeah, that's brand now, or you can use it.
Speaker 7: Through Facebook, WhatsApp, and Instagram. I use it a lot
Speaker 7: through Instagram for whatever reason.
Speaker 2: Yeah, more so than you'd use chat GPT.
Speaker 7: But no, I use chat EPT more than any of
Speaker 7: the others. But it's ane.
Speaker 2: So before I just want to pause you just to
Speaker 2: see so everybody understands, what are you using AI on
Speaker 2: Instagram for that you're not using ONGP.
Speaker 7: I find it analogous, right, because one of the strengths
Speaker 7: of meta AI is you can say, meta AI, please
Speaker 7: take this photograph of me and turn it into an
Speaker 7: animated image where I am depicted amongst the team of
Speaker 7: my favorite football team. Something like that, right, And it's
Speaker 7: analogous with Instagram, but it does much of the same
Speaker 7: things that chat GPT does. It answers questions up until
Speaker 7: the date on which the data was trained. Now the
Speaker 7: hardware component is that Meta doesn't make a smartphone. It
Speaker 7: has dabbled in some other home devices, but the principal
Speaker 7: way that you engage with the AI is through ray
Speaker 7: ban metas, glasses you wear on your face that have
Speaker 7: the computer electronics integrated with cameras and I use them
Speaker 7: all the time. And you basically say hey, Meta, and
Speaker 7: then it goes whoa, and then you ask it questions
Speaker 7: and with audio it responds back. And this has been
Speaker 7: a massive surprise to Meta. It started as a gimmick. Frankly,
Speaker 7: and tying this to earnings, I think what Zucker saying
Speaker 7: in the statement is hint, hint. I'm going to talk
Speaker 7: a bit about this on the call because the sales
Speaker 7: of that product have been better than expected. But they
Speaker 7: also have to tell a story of well, what's your thing?
Speaker 7: How are we going to interact with you in the future.
Speaker 7: If people aren't using smartphone applications.
Speaker 5: As much I mean as you have used them, I mean,
Speaker 5: is it a product that could be mass adopted.
Speaker 7: In your view, yes, in so far as the sales
Speaker 7: have been surprising. They don't break out clear data, right,
Speaker 7: they don't say, oh, well they might actually maybe they're
Speaker 7: surprised uspect. They don't say, like, we have sold ten
Speaker 7: million of these, and that would be helpful if they did.
Speaker 5: But as you play around with it, are you like
Speaker 5: I could see a.
Speaker 7: Yes, but the sales, we know, the sales have invested
Speaker 7: and expected. Now here's the investor Wall Street bit. For
Speaker 7: a really long time, the unit that was responsible for
Speaker 7: us as humans, our engagement with the first the metaverse
Speaker 7: and our AI is Facebook Reality Labs. And for many
Speaker 7: quarters it would lose billions of dollars and investors would say,
Speaker 7: stop losing billions of dollars. And then they just stopped.
Speaker 7: They started looking past it. And part of that was
Speaker 7: that the hardware started getting out there and people could
Speaker 7: see the distant future where we all wear these devices.
Speaker 7: The metaverse is still a thing. I mean, if we
Speaker 7: can go there, if you want. But at the end
Speaker 7: of the day, it's a story of massive investment to
Speaker 7: develop AI the software, and then catching up with the
Speaker 7: company's self to say this is how we think all
Speaker 7: of our billions of users around the world of our
Speaker 7: apps will interact with that AI in the future.
Speaker 2: Okay, so let's stick on that AI theme here on
Speaker 2: the Let's say I'm an analyst. I want to know great,
Speaker 2: well and good that you're spending this money. It's all
Speaker 2: well and good that you've made these developments when it
Speaker 2: comes to hardware. Let's get back to ads. How does
Speaker 2: that make the ads better that are targeted ed on
Speaker 2: Instagram when he's using AI.
Speaker 7: So some of the some of the metrics.
Speaker 2: Certainly it's more engaging. You're spending more time on the platform,
Speaker 2: so that's a positive.
Speaker 7: So people will look at metas mesas core data like
Speaker 7: the daily active users and add impressions that gives us
Speaker 7: a sense of how healthy and competitive that market is.
Speaker 7: Listen out on the call. I would wager that Mark
Speaker 7: Zuckerberg gives some different data to try and justify why
Speaker 7: metas ads are better in a tough economic environment because
Speaker 7: of the investments in AI. Go back to the earning statement,
Speaker 7: we will invest the majority of capex into core business.
Speaker 7: In other words, we're putting a lot into AI because
Speaker 7: we think it will grow the value of our ads.
Speaker 7: That's what I think will happen.
Speaker 4: This is what I feel like. We talked with man
Speaker 4: Deep about this.
Speaker 5: What I do like, if you're going to spend money,
Speaker 5: you're going to go to where you get the biggest
Speaker 5: ROI right.
Speaker 7: In terms of think of it as a sheer competition
Speaker 7: for eyeballs.
Speaker 5: Hey, two things we want to get to before you
Speaker 5: have to run. Let's just talk Microsoft real quickly. I mean,
Speaker 5: off the chart still up about six percent here.
Speaker 7: So analogous with Meta and Google is that if your
Speaker 7: core business performs and you are committing to spending on AI,
Speaker 7: investors will reward you. And that's very much the story here.
Speaker 7: Thirty three percent top line growth for cloud and that's
Speaker 7: what it comes down to, right Yep. I always have
Speaker 7: this line. Microsoft, which I've had a relationship with since
Speaker 7: I was a child and I learned to use a computer,
Speaker 7: was always good at getting people to pay for software
Speaker 7: that others will give away for free. That's a true story.
Speaker 7: But they're showing that their core business is cloud computing
Speaker 7: and Azure whether they the market number two again, it's
Speaker 7: the same as Meta. Does your core business justify your
Speaker 7: rights to spend on AI development through hardware or infrastructure
Speaker 7: data centers. The Microsoft numbers tell that story very clearly.
Speaker 5: It did Mandy say that, actually, it's showing the monetization
Speaker 5: of AI that I think in that thirty three percent,
Speaker 5: almost half of it are close to half of it
Speaker 5: was the result of yeah, red.
Speaker 7: Flip, and the criticism was they released Microsoft co Pilot,
Speaker 7: and many people thought that was prematurely. If you're in
Speaker 7: everyday tech worker, what am I going to use this for? Nonetheless,
Speaker 7: the numbers show that people are paying for it, and
Speaker 7: that's impressive.
Speaker 2: Hey, Ed, we're going to hear from Microsoft on the call.
Speaker 2: We'll get some guidance there obviously, that will help people
Speaker 2: get informed about how the company is thinking about the
Speaker 2: current quarter, in the future, Apple tomorrow, Oh gosh.
Speaker 7: Yeah.
Speaker 2: Mark German said, I don't care about the numbers for
Speaker 2: the most recent quarter. I just want to hear the
Speaker 2: Q and A. I want to hear about tariffs. I
Speaker 2: want to hear about the supply chain. I want to
Speaker 2: hear Tim Cook's comments there you agree, Yeah.
Speaker 7: Tim Cook famously says periodically I'm not an economist, but
Speaker 7: and then we'll give us something about.
Speaker 2: He's not an economist, but he's a supply chain expert.
Speaker 7: Yeah, like story is about totally the hardware companies can
Speaker 7: think people that make tangible physical stuff. They're built from
Speaker 7: components that move from A to B all over the world,
Speaker 7: and there are cost indications. And there is no better
Speaker 7: microcosm of what's happening right now in global trade than Apple.
Speaker 7: And I get what German saying, but remember that Apple
Speaker 7: is the master of managing the bottom line. So if
Speaker 7: you are a value long term whatever you want to
Speaker 7: call it, people do pay attention to that because Apple
Speaker 7: is brilliant at boosting profit.
Speaker 2: You know, Apple has Markerman has reported over and over
Speaker 2: again that Apple has struggled with AI, and we see
Speaker 2: that with what has happened with Siri. Do you think
Speaker 2: they should buy or would buy? Oh my goodness, standalone AI?
Speaker 7: Come for those listening are radio only. I was smirking
Speaker 7: and nodding, going yeah, yeah, I mean Siri, you know
Speaker 7: has been a bit of a flop.
Speaker 2: Oh say a bit of a flop, a huge flop.
Speaker 7: Yeah, And you know I have covered some of his
Speaker 7: stories there. I lose track, but I think that there
Speaker 7: was some discussion by Alphabet about working with Apple and
Speaker 7: Gemini their model going forward, Apple's looking at third parties
Speaker 7: to provide the underlying model that powers all of this.
Speaker 7: And as Mark has reported, the consequence of the poor
Speaker 7: rollout is they've now restructured that company at the top,
Speaker 7: leadership changes, organizational changes to get back on track. I
Speaker 7: still love my iPhone, but I do not use Siri ever.
Speaker 2: Yeah.
Speaker 1: Same.
Speaker 5: Hey, before you go, we did talk Apple and Trump
Speaker 5: and tariffs. You've got a scoop when it comes to
Speaker 5: Vian and.
Speaker 4: What they've been up to.
Speaker 7: Yes, So, prior to the US election in November, Rivian
Speaker 7: arranged with a Chinese battery supply called Goshen to move
Speaker 7: a supply of LFP batteries from outside of the United
Speaker 7: States into the United States. And they paid for it upfront,
Speaker 7: which is unusual for an automaker to do. You know,
Speaker 7: you don't sort of say okay, I'm not going to
Speaker 7: use these for a while, but I'll pay for them anyway.
Speaker 7: And it did that to have a strategic stockpile as
Speaker 7: a hedge, an insurance against the election. Then more recently
Speaker 7: I found out Samsung SDI it's Korean supplier. They said, Samsung,
Speaker 7: before these tariffs hit, we need you to move a
Speaker 7: very large inventory of battery sales from Korea to the US.
Speaker 7: Samsung did so they have this hedge against potential tariff impact.
Speaker 7: But it's it's not really about money. It's anxiety that
Speaker 7: at borders goods get stopped and then you're left short.
Speaker 5: This is why when we look through some of the
Speaker 5: economic numbers, kind of the pull through in advance of tariffs,
Speaker 5: you got to keep that in mind. Note in terms
Speaker 5: of economic activity.
Speaker 2: Hey, yeah, real quick, we have it's been a while
Speaker 2: since we've gotten to talk to you and since you've
Speaker 2: been here in New York. On Rivian on everything happening
Speaker 2: in the administration. Given Elon Musk's close proximity to the president,
Speaker 2: has Rivian been a net gainer or a net loser?
Speaker 2: Given in the.
Speaker 7: Story we just reported at and read the details, I
Speaker 7: put a lot of detail in the report, they made
Speaker 7: a shrewd move. The question that every AUTO CEO, I
Speaker 7: know this, every CEO is asking is is the net
Speaker 7: result that Elon must secure something that is specifically good
Speaker 7: and beneficial to Tesla, a carved out exemption, or in
Speaker 7: so doing, does Elon must get an exemption for Tesla
Speaker 7: or some kind of benefit that has a wider positive
Speaker 7: impact on those that make evs, and I think the
Speaker 7: latter is where people are hanging their hat.
Speaker 5: Yeah, kind of a fascinating da where I think everybody's speculating.
Speaker 5: It did feel like a little bit of the present
Speaker 5: saying not necessarily goodbye to Elon, but kind of him
Speaker 5: wrapping up certainly his tenure.
Speaker 2: Which data will reminded us. We all knew was coming,
Speaker 2: given his status as a special government employee.
Speaker 4: Exactly right.
Speaker 2: It was just a surprise time.
Speaker 4: It was just a matter of time.
Speaker 5: Yeah, pretty wild and tough questions top of mind in
Speaker 5: terms of the earnings that we've seen this dump.
Speaker 2: Oh yeah today.
Speaker 7: You know, like Alphabet, Google, they don't give guidance, they
Speaker 7: don't give detail, they don't tell you about anything in
Speaker 7: the economy. I would think that Meta and Microsoft would
Speaker 7: go a lot further, specifically like industries, geographies, and we
Speaker 7: would learn a lot about what they see in the world,
Speaker 7: and so not just Apple. Those other names will give
Speaker 7: us value, I think in the economic context.
Speaker 5: All right, good stuff, as always, Ed Ludlow, thank you
Speaker 5: so much, so appreciated. Ed Ludlo, of course, his co
Speaker 5: host of Bloomberg Technology catch him and Caroline Hyde. They
Speaker 5: are on Bloomberg Television at eleven am Wall Street time
Speaker 5: Monday through Friday. So am I assuming this coverage will
Speaker 5: continue into tomorrow.
Speaker 2: In the meantime, I do want to bring in James Chockmack.
Speaker 2: He's partner and chief investment officer at Clockwise Capital. He
Speaker 2: joins us from Miami. He's got the Clockwise Core Equity
Speaker 2: and Innovation ETF. It's down about eight percent so far
Speaker 2: this year. It does include Apple, Microsoft, Amazon, and Nvidia
Speaker 2: among its top holdings. And that's exactly James where I
Speaker 2: want to start. Given what we just heard from Microsoft.
Speaker 2: We got the numbers there from ed investors happy in
Speaker 2: the after hours, the company will give guidance on that call.
Speaker 2: What are your thoughts?
Speaker 1: Yeah, I think from a big pictures standpoint, you know,
Speaker 1: we went into tonight kind of ranking the mega cap
Speaker 1: earnings remaining as Microsoft as the least risky, moving to
Speaker 1: Meta and then finally to Amazon is the riskiest of
Speaker 1: the three, and I think so far as playing out
Speaker 1: as such, Microsoft, you know, the big number there that
Speaker 1: the Bogie wing he wanted to see was north of
Speaker 1: thirty percent Azure revenue. You know, we were looking like
Speaker 1: the momentum continues to be there. I think, you know,
Speaker 1: when you look at the megacap earnings megacap companies, you know,
Speaker 1: really what we try to focus on, which ones are
Speaker 1: the most immune to tariffs, which ones have the most resiliency,
Speaker 1: and which ones have evaluation that supports some level of support.
Speaker 1: So I think microscot underscores all three of those. And
Speaker 1: you know, we liked what we saw, and you know,
Speaker 1: Meta that was a you know, not the best of outlooks,
Speaker 1: but expectations had come down substantially, particularly following SNAPS results
Speaker 1: last night. So the fact that they're even giving an
Speaker 1: outlook isn't that positive? And that one has come in
Speaker 1: a lot from evaluation standpoint. So I think.
Speaker 2: Standards like listen to like the fact that they even
Speaker 2: give an outlook, isn't that positive. That's the environment we're in.
Speaker 4: This is what we're trying to get our head around.
Speaker 5: I mean, James, I'm looking at shares of Microsoft still
Speaker 5: up about six point two percent. If I look at Meta,
Speaker 5: it's up just shy of six percent. And I pulled
Speaker 5: up Amazon, which in twenty four hours we're going to
Speaker 5: be all over Amazon's earnings. It's up about two point
Speaker 5: eight percent here in the aftermarket.
Speaker 4: But I'm trying to get my head around what these
Speaker 4: companies are.
Speaker 5: Saying and doing versus kind of it feels like so
Speaker 5: much uncertainty in the rest of the you know, public universe,
Speaker 5: or so much uncertainty our companies not giving an outlook
Speaker 5: or companies giving two outlooks. So do we set these
Speaker 5: companies apart or does this say something more strongly about
Speaker 5: what's going on in the US economy and the global economy.
Speaker 1: Yeah, we're not going to be too quick to judge,
Speaker 1: you know, how these companies are doing over the very
Speaker 1: short term about the broader macro implications. We still see
Speaker 1: US as at a fifty to fifty market at best.
Speaker 1: You know, yes, the results have been largely coming in
Speaker 1: on par maybe slightly better than expectations, but you know,
Speaker 1: we're not out of the woods by any means. You know,
Speaker 1: you still have reinflation risk, recession risk. The behavioral changes
Speaker 1: haven't even really hit the consumer yet. Yeah, that from
Speaker 1: VISAS results this morning. So you know, you're seeing some
Speaker 1: repositioning from a business standpoint. The businesses adapt, try to
Speaker 1: adapt as best as possible, but it hasn't hit the consumer.
Speaker 1: There's a lot of unknowns. The only thing I'd say
Speaker 1: that isn't net positive is that you've been seeing the
Speaker 1: FOMC members start to posture their rhetoric to a more
Speaker 1: dubbish posture as we have the main meeting coming up.
Speaker 1: So that could help provide some level of support to
Speaker 1: the broader market, but it doesn't help in any way,
Speaker 1: shape or form provide that much incremental confidence as it
Speaker 1: relates to the earnings outlook for the balance of the year.
Speaker 2: James, one of the reasons we like talking to you
Speaker 2: is not just because you are an analyst or have
Speaker 2: an analyst background covering all of these companies, but also
Speaker 2: because you put your money where your mouth is. With
Speaker 2: the portfolio management of the ETF the clockwise core equity
Speaker 2: and innovation, Apple's your top holding. Dollar General is your
Speaker 2: second biggest holding. Explain that are you essentially trying to
Speaker 2: grab every type of consumer out there. You've got the
Speaker 2: high end consumer with Apple and then you've got everybody
Speaker 2: at Dollar General.
Speaker 1: Well, the way we look at it is, you know,
Speaker 1: a periods of maximum uncertainty require maximum adaptability. So what
Speaker 1: we're trying to do is in a fifty to fifty
Speaker 1: market play things down the middle. But that means is
Speaker 1: we're taking a Barbelle approach where for every dollar of
Speaker 1: beta of higher beta, you know, we're adding a dollar
Speaker 1: of much lower beta. And that's where the Apple and
Speaker 1: Dollar General kind of equal weightings come into play. But
Speaker 1: a more extreme example that I'd point out is, you know,
Speaker 1: we have the equal weight with micro strategy or Strategy
Speaker 1: now as we do with Dollar General. So I wouldn't
Speaker 1: read that much into Apple. I mean that has something
Speaker 1: to do with the fact that it's such a big
Speaker 1: weight in the index. But I think micro strategy is
Speaker 1: a better example of you know, how we're how polarized.
Speaker 1: You know, the bar bell is that we're playing.
Speaker 2: Wish to remind everybody is a levered play on bitcoin.
Speaker 1: Yes, I mean I we think that crypto single handle.
Speaker 1: It's the number one asset class that I have confidence
Speaker 1: and for twenty twenty five, I think it's Bitcoin is
Speaker 1: going to be the single largest contributor to returns in
Speaker 1: twenty twenty five. I can't say that the same about
Speaker 1: any other sector.
Speaker 4: Is partial to really why.
Speaker 1: Yes, institutional adoption, building awareness, there's going to be crypto
Speaker 1: related services. You had the fed, you know, remove barriers
Speaker 1: as to what banks can do as it relates to crypto.
Speaker 1: So I think that as the regulations come off, awareness builds,
Speaker 1: institutions build. You know, Black Croc says that it should
Speaker 1: be two percent of portfolios, you know, across the board.
Speaker 1: You know, we completely we agree with that. All our
Speaker 1: client portfolios have at least a two percent position in bitcoin.
Speaker 1: And you know, as we look to the balance of
Speaker 1: the year, and we just don't have confidence in really
Speaker 1: any other sector to the same degree. You know, we're
Speaker 1: we're we like tech, the cheaper tech, We like commodities,
Speaker 1: you know, we like utilities, and we like staples. You know,
Speaker 1: where the valuation makes sense. But crypto no hesitation and
Speaker 1: its full steam ahead.
Speaker 4: Interesting.
Speaker 5: So so it sounds like you have been putting money
Speaker 5: to work over the last month or two amid the volatility.
Speaker 4: Yes, yes, and then yeah.
Speaker 1: Yeah, yeah, we're putting money to work where when and
Speaker 1: where we can. You know, we've been selling a lot
Speaker 1: of the megacap names into any opportunity we have into strength,
Speaker 1: you know, just to give you a sense. You know,
Speaker 1: the top ten weights of the Nasdaq are about fifty
Speaker 1: percent of the total index. We're about forty percent of that.
Speaker 1: You know, we're at about twenty percent, so you know,
Speaker 1: we are under exposed on megacap, so selling it to strength,
Speaker 1: utilizing that cash to diversify into more value names like
Speaker 1: Dollar General, which you pointed out to Tim and and
Speaker 1: uh and keeping the pressure on on the crypto front
Speaker 1: as as best as possible on any pullback that we see.
Speaker 5: But you did like I'm just looking. You've owned micro strategy,
Speaker 5: Are you out completely?
Speaker 1: Oh no, we've been grossing it up every single time
Speaker 1: it pulls back.
Speaker 4: Oh I'm sorry, so that one you've been moving it?
Speaker 1: Yeah, yeah, yeah, it's the it's the megacap names, you know,
Speaker 1: the Microsoft's, Amazon's that as you know, those are all
Speaker 1: significantly underweight relative to the index. And we think it's
Speaker 1: proven to stay there until we have better clarity on
Speaker 1: business spending and the consumer. We just don't know exactly
Speaker 1: where we Amazon's going to be a big tail tomorrow.
Speaker 1: You know, you can argue that the cloud services Google
Speaker 1: was better than expected, Microsoft better than expected, So business
Speaker 1: spending is there, but it certainly you're not seeing you know,
Speaker 1: Sincis results would tell you a completely different story last night.
Speaker 1: So so much uncertainty.
Speaker 5: So just going back meta reporting today, it's up about
Speaker 5: six percent here in the after market. We just talked
Speaker 5: about it. So revenue beating estimates on advertising stability. I'm
Speaker 5: looking at Microsoft up about six percent here in the
Speaker 5: after hours again, third quarter revenue topping estimates. Amazon has
Speaker 5: moved up ahead of its earnings tomorrow after the close,
Speaker 5: up about three and a half percent. Qual calms down
Speaker 5: about nine percent here in the after market following its numbers.
Speaker 5: It gave a soft revenue forecast in the face of
Speaker 5: all the trade turmoils. So we're seeing anything here that's
Speaker 5: of interest or this is again not the way you
Speaker 5: want to play it right now?
Speaker 1: Yeah, I mean we we increase our Microsoft position the
Speaker 1: moment the numbers came out, we haven't we you know,
Speaker 1: we derisked it into the quarter. Now that the numbers
Speaker 1: are out, we got we've got it up a couple percent.
Speaker 2: But does that story change potentially when we hear from
Speaker 2: the company on its earnings call and they talk about
Speaker 2: guidance or are you confidence and confident and guidance.
Speaker 1: Microsoft was the only one of that group that you know,
Speaker 1: we liked into the quarter, which is why it was
Speaker 1: weighted slightly more than both Meta and Amazon, but we
Speaker 1: decided to take it back to where it was prior
Speaker 1: to the quarter, just because we believe it's the most
Speaker 1: insulated from all of the noise geopolitical and otherwise. While
Speaker 1: Meta and Amazon, you know, we would wait for the
Speaker 1: exact commentary on the call to be able to make
Speaker 1: that decision.
Speaker 2: Okay, hey, how do you just a big picture? How
Speaker 2: do you think the economy is doing, how do you
Speaker 2: think the consumer is doing? How do you think they're
Speaker 2: going to weather these tariffs?
Speaker 1: I don't know. I mean I can give you anecdotes,
Speaker 1: you know, like I went to you know, get my
Speaker 1: haircut yesterday and my barber was telling me that business
Speaker 1: has been slowing dramatically.
Speaker 3: You know.
Speaker 1: You know, you hear from companies like Visa and they'll
Speaker 1: tell you otherwise. But companies like Amazon come out and say,
Speaker 1: you know, Amazon Andy Jassical was saying that, you know,
Speaker 1: you're seeing trade down of purchases to lower ticket items.
Speaker 1: So it's a mixed message. And the thing about it
Speaker 1: is that we're really not going to get a sense
Speaker 1: of from the from an economic data standpoint, nor from
Speaker 1: a company standpoint. On the exact uh repercussions on the
Speaker 1: on the consumer for another thirty to forty five days. So,
Speaker 1: you know, it's a lot of question marks out there.
Speaker 1: But I think that the bottom hasn't fallen out of
Speaker 1: the consumer yet. The behavior has kept up, but how
Speaker 1: long will it last? You know, we don't want to
Speaker 1: wait around to see and find out. We rather, you know,
Speaker 1: just be proactive and be balanced in the areas that
Speaker 1: we have conviction in with the value areas that we
Speaker 1: think can withstand a downturn, and increase hedges where we can,
Speaker 1: because right now it's impossible to say or lean in
Speaker 1: in either direction. We're just getting incremental data points. You know,
Speaker 1: they'll build up to a full, more formulated story in
Speaker 1: the next couple of weeks.
Speaker 5: Yeah, it's fascinating Bloomberg and I know other people talk
Speaker 5: about it, but it's something like the beauty salon index,
Speaker 5: but basically there Atwater.
Speaker 2: Sent me a message on Twitter about this today on
Speaker 2: x It's William and Mary.
Speaker 5: I love that you wrote that because it's it's kind
Speaker 5: of people's salons have been talking about how people are
Speaker 5: trading down on services, they're not doing as much, they're
Speaker 5: cutting back and so It's just kind of one of
Speaker 5: those unofficial indicators of maybe what people are doing, kind
Speaker 5: of conserving their spending because maybe they want to or
Speaker 5: maybe because they have to, uh and in anticipation of
Speaker 5: what's to come.
Speaker 4: Top question for any.
Speaker 1: Regardless of the economy. I had to I had to
Speaker 1: get on my haircut because I'm going to the Grand
Speaker 1: Prix this week.
Speaker 2: So that's that's uh, well, yeah, that's a necessity. Is
Speaker 2: that a discretionary expense changer? Is that a business expense?
Speaker 2: How do you look at that.
Speaker 1: I'm incredibly passionate about Formula one. Actually we own Formula
Speaker 1: one uh in the fund f wank. We think that
Speaker 1: that is a resilient business that's going to continue to grow.
Speaker 1: But it's discretionary. But it's also something I'm incredibly passionate about,
Speaker 1: passionate enough to actually own the underlying stock.
Speaker 4: Love it pretty cool stuff.
Speaker 5: Hey, just going back to the companies that have reported
Speaker 5: after the close, as we mentioned Microsoft, you know rallying
Speaker 5: soaring in the aftermarket, Meta is higher. We did talk
Speaker 5: Qualcom taking a big hit down about nine percent in
Speaker 5: the aftermarket. Pick a CEO, pick a company, what might
Speaker 5: you want to ask them? Go anywhere you want.
Speaker 1: I mean, the biggest question mark we have is on
Speaker 1: the consumer. So I go straight to Amazon, to Andy
Speaker 1: Jesse and basically give us ask him to try to
Speaker 1: give us more color than what we got from Visa.
Speaker 1: You know, you know, what is the degree of trade
Speaker 1: down and purchases? You know what, how has the patterns
Speaker 1: changed from day to day, you know, over the course
Speaker 1: of airpril you know, just we need we just need
Speaker 1: more color on what's happening underneath the hood. And we're
Speaker 1: just not sure about it. But you know, business spending,
Speaker 1: you know, seems to be there for the most part,
Speaker 1: but the consumer drives the economy, you know, or spending economy,
Speaker 1: And any clarity you can provide on that would help
Speaker 1: us ascertain exactly what we need to do going forward.
Speaker 2: So one of my questions, and one of my questions
Speaker 2: to you James before you go, is you know, you
Speaker 2: answered my question about the economy. What about when it
Speaker 2: comes to a long term trade war standoff with China
Speaker 2: sort of a stalemate here one ands, we've heard about
Speaker 2: factory activity possibly slowing down there. I know that some
Speaker 2: of the big box CEOs here are concerned about what
Speaker 2: happens if we start to see empty shelves, how do
Speaker 2: you look at that specifically?
Speaker 1: Yeah, I mean the empty shelves thing is a big deal,
Speaker 1: you know. You know, in about two weeks time, you know,
Speaker 1: we may come to a situation where people can't get
Speaker 1: their goods. So that's a real risk, you know, when
Speaker 1: we think about the broader tariff risks and whatnot and
Speaker 1: the consequences of that. You know, we do think that
Speaker 1: the tail risks in the market are much more prevalent
Speaker 1: today than in many, many years. You know, we're looking at,
Speaker 1: you know, issues with our national debt, you know, issues
Speaker 1: with credit risk, credit downgrades. You know, the yields have
Speaker 1: continued to rise. You know, you hear from the administration
Speaker 1: that foreign investment continues to stay strong. But if you
Speaker 1: look under the hood at the actual auctions, you see
Speaker 1: foreign purchases of US treasury bonds falling as a percentage
Speaker 1: of the total, with much more coming from direct buyers
Speaker 1: who are based here in the US. So foreign demand
Speaker 1: is following the dollar is falling. In the meantime, you
Speaker 1: really have to watch Japan because Japan you have strengthening again,
Speaker 1: you have rising interest rates there, and you could totally
Speaker 1: have a Japanese carriage Try two point zero as well.
Speaker 1: So tail risks in the market are more prevalent now
Speaker 1: than ever, and it's certainly something that we're monitoring constantly.
Speaker 1: So you're both short term risks with the recession and
Speaker 1: long term months.
Speaker 5: Great perspective on the specifics of these companies and so
Speaker 5: much more. James Chochmak, thank you so much, partner and
Speaker 5: chief investment officer at Clockwise Capital, joining us here to
Speaker 5: break down some of the earnings