Speaker 1: Bloomberg Audio Studios, podcasts, radio news. Bloomberg Tech is alive
Speaker 1: from coast to coast with Caroline Hyde in New York
Speaker 1: and ever low in sentrances, go.
Speaker 2: This is Bloomberg Tech coming up. Amazon shares drop after
Speaker 2: announcing plans to spend two hundred billion dollars this year
Speaker 2: on data centers, chips and other equipment.
Speaker 3: Mean while Bitcoin rebounds, having plummeted on Thursday when it
Speaker 3: neared the sixty thousand.
Speaker 2: Dollars level, and we break down more tech earnings of
Speaker 2: the CEOs of Roadblocks, a firm, and the Warner Music Group.
Speaker 3: First, we check in on what is a tentative bounce
Speaker 3: back after what has been a punishing week. Remember the
Speaker 3: Nasdaq is on track for its worst week ed in
Speaker 3: three months since the beginning of November. But now we
Speaker 3: see a little bit of a reprieve, a little bit
Speaker 3: of dip by We're up percentage point if you're looking
Speaker 3: at the big indexes, and.
Speaker 4: I know you're going to drill into the individual movers
Speaker 4: that push and pull.
Speaker 3: But Crypto up almost nine percent, but only about eradicating
Speaker 3: half of yesterday's losses. We're still only at sixty eight
Speaker 3: thousand what are remarkable beginning to the year for this
Speaker 3: asset class that in many ways people feel is not
Speaker 3: a store of value.
Speaker 4: But what are you looking at?
Speaker 2: The analyst are calling it sticker shock. Amazon pledging to
Speaker 2: spend two hundred billion dollars capital expenditures on AI infrastructure.
Speaker 2: The stock down more than eight percent right now, on
Speaker 2: track for its biggest drop since April of last year.
Speaker 2: Operating income in the current period twenty one billion dollars
Speaker 2: at the high end below consensus. So the concern is
Speaker 2: is the trade off worfit here? There is a big
Speaker 2: backlog for AWS and AI business. By the way, it's
Speaker 2: one of the few names on the NAZAQ one hundred
Speaker 2: that's down because in reaction to that capital expenditures pledge,
Speaker 2: you see everyone from the GPU providers and videos now
Speaker 2: up more than six percent in response. Memory names, infrastructure names,
Speaker 2: energy names all higher because the capital expenditures for all
Speaker 2: of the hyperscalers in aggregate plus meta is growing. We're
Speaker 2: going to get to that with ananilyst just a few
Speaker 2: minutes time, and the water cryptocurrencies traders are buying the
Speaker 2: dip carry outlined it. Bitcoin's rebounding after plummeting on Thursday,
Speaker 2: raising all the gains since Donald Trump's twenty twenty four election,
Speaker 2: falling close to sixty thousand US dollars, popping back up again.
Speaker 2: Blueberg Distal financial reporter Emily Nicole joins us with the
Speaker 2: latest difficult Emily, what's going on?
Speaker 5: And your guests as good as mine. To be honest,
Speaker 5: We've been watching bitcoin over the last twenty four hours
Speaker 5: and it's really been a roller coaster. As you said,
Speaker 5: it dipped about thirteen percent yesterday. Now I think we're
Speaker 5: up about ten percent, so we're recovering some of that,
Speaker 5: but it's really just been a roller coaster week. It's
Speaker 5: been hard to kind of guess at why that's been happening.
Speaker 5: There's been a lot of instability over the last few
Speaker 5: months with geopolitical tensions, and bitcoins really struggled to perhatch
Speaker 5: onto any narrative within that, whether or not it's a
Speaker 5: safe haven, a saw of value if it can latch
Speaker 5: onto stocks as it used to trade pretty in line
Speaker 5: with tech stocks back in the day. None of that
Speaker 5: seems to be sticking, and it's just kind of doing
Speaker 5: its own thing right now.
Speaker 4: Fud some would call it in the market.
Speaker 3: Fear, uncertainty, doubt just consumed the asset class as a whole,
Speaker 3: and it's consumed companies that have written so high on
Speaker 3: the back of the climb in crypto. I think of
Speaker 3: Strategy in some of these other digital asset treasury companies.
Speaker 3: That's how have you seen, particularly on the back of
Speaker 3: Michael Sailor's earnings yesterday, have you seen people still questioning
Speaker 3: how long they can ride this?
Speaker 6: Boy?
Speaker 5: If we look at Strategy, for example, that has also
Speaker 5: had a similarly up down two days, So yesterday it
Speaker 5: was down about seventeen percent of the close before the earnings,
Speaker 5: Investors were really bracing for some bad news coming from that,
Speaker 5: particularly with bitcoin having such a bad day, and then
Speaker 5: today we're seeing it up more than sixteen percent. Because
Speaker 5: of that kind of whipsawing effect, the earnings weren't as
Speaker 5: bad as people expected. Losses were in line with what
Speaker 5: we thought was happening. No new debt was being created,
Speaker 5: and so people trying to stretch for you know, where
Speaker 5: can we see some some like staying power within this rally?
Speaker 5: Where is there a bottom? Where is their stability? And
Speaker 5: that might be where we're now starting to see a
Speaker 5: sort of bottom. Maybe that sixty thousand mark was it,
Speaker 5: and for strategy as well, maybe it's kind of starting
Speaker 5: to see a way out of that.
Speaker 3: It's interesting, even with the headlines coming from China as
Speaker 3: they tighten curbs on crypto and stable coin issuance, still
Speaker 3: managing to catch some buying of the dick today.
Speaker 4: Emily Nicole, what a busy week. Thanks for joining us.
Speaker 3: Meanwhile, let's talk Waymo now using DeepMind's Genie three AI
Speaker 3: model to create realistic worlds for a new Waymo world models,
Speaker 3: according to the company.
Speaker 4: In a blog post today, the self.
Speaker 3: Driving tech developer argues this collaboration with another segment of
Speaker 3: Google's tech ecosystem is going to help the expansion of
Speaker 3: Waymos's self driving services across many more markets.
Speaker 2: Ed, let's get back to Amazon, big mover, big stories
Speaker 2: stock lower is. The company announced it's set to spend
Speaker 2: two hundred billion dollars this year data centers, chips and equipment,
Speaker 2: supercharging its bets on AI roll. Hit Ko carne Is
Speaker 2: Managing directors see the analyst for Internet and Capital markets
Speaker 2: research at Rough Capital Partners. They call it sticker shock right.
Speaker 2: The reaction to the big capital expenditures number, But there
Speaker 2: was a time where a big capital expenditures number was
Speaker 2: what you wanted to see. Why the negative reaction, I.
Speaker 7: Think the negative reaction is just because outside of the
Speaker 7: caps people expected spotless earnings. I thinks Sticker Shop was
Speaker 7: expected given what Google, Meta Microsoft did last ten days.
Speaker 7: But what was not expected was slight yellow flags and
Speaker 7: operating margins, and certainly people realizing that Amazon has to
Speaker 7: spend a lot more given they are launching satellites to space, right,
Speaker 7: they are building new whole foods and so on and
Speaker 7: so forth.
Speaker 2: You have a buy on Core, on the stock, and
Speaker 2: I believe let me just check here on my Bloomberg terminal. Yeah,
Speaker 2: two hundred and eighty five dollars price target. Right. There
Speaker 2: are lots of pieces of data in there. Some people
Speaker 2: looked at the operating income forecast for the current period
Speaker 2: and thought that's a little worrying, bearing in mind AWS
Speaker 2: is the majority of operating income. Some looked at the backlog.
Speaker 2: Some looked at the AWS growth twenty four percent, fastest
Speaker 2: pace of growth in almost three years. Where would you
Speaker 2: look all of the above.
Speaker 7: There are many positives in the report and in the outlook,
Speaker 7: and the various moving parts in Amazon accident aws, improving
Speaker 7: retail margins, better advertising growth as well as better efficiency
Speaker 7: in the retail. Overall, I think what is spooking the
Speaker 7: market here is there are more investments beyond AI that
Speaker 7: this company is doing, unlike many other peers that are
Speaker 7: just doubling down on simple, simply one thing. So the
Speaker 7: wordy hear is next two to three years. How high
Speaker 7: of an investment curve are we looking at for Amazon
Speaker 7: and what level of ROI do they get beyond the
Speaker 7: core AI investments. I think that's the worry here. But
Speaker 7: all in we think this is a GENEAI winner, very
Speaker 7: underappreciated and over time time retell.
Speaker 3: What's diggins why it's a GENAI winner? Is it trainium, graviton?
Speaker 3: Just seeing the triple digit percentage growth, the fact that
Speaker 3: they've got that vertical integration, making their own chips, using
Speaker 3: that for the compute that they offer in the efficiency
Speaker 3: theres it gains. Then is it more that their own models,
Speaker 3: Like we don't talk much about the own models that
Speaker 3: they're producing. We talk so much about Google's, for example,
Speaker 3: but not so much Amazons.
Speaker 7: I know, I think Amazon is with all of the
Speaker 7: ambo okay, they are vertically integrating in a way that
Speaker 7: absolutely know the company on Earth is trying to replicate
Speaker 7: at the scale at which Amazon is trying to do,
Speaker 7: Vertically integrating cloud, vertically integrating retail, and having the diversity
Speaker 7: of advertising. So I feel when all three pillars of
Speaker 7: Amazon start to crank up higher operating margins, which we
Speaker 7: will we will see over the next college six to
Speaker 7: nine months, that's when the real potential of profitability of
Speaker 7: this company will will manifest in the numbers. And that's
Speaker 7: when That's why I believe the surface area of investments
Speaker 7: as well as surface area of ROI on those investments
Speaker 7: is so much wider at Amazon that is being underappreciated,
Speaker 7: and that's that's where we feel this is a Jenny
Speaker 7: I winner across the board.
Speaker 3: It's interesting we have such short term memory loss sometimes
Speaker 3: this was always a company that focused more on investing
Speaker 3: in itself rather than producing profitability.
Speaker 4: But push us forward.
Speaker 3: As to how Annie Jasse continues to manage the cost basis,
Speaker 3: because that was the headline that stole the show previous
Speaker 3: to earning season was the amount of job cuts they're making.
Speaker 4: Is that still what you need to be seeing from
Speaker 4: Mandy Jesse.
Speaker 7: I think there is room probably the company needs to
Speaker 7: make after the over hiring of almost two and a
Speaker 7: half years after the COVID, I think there is still
Speaker 7: digesi period, but which probably one would argue that has
Speaker 7: been a little bit more prolonged than what would have
Speaker 7: one would have preferred to see. So I think they're
Speaker 7: finally getting there, and I think a little bit of
Speaker 7: extra cost cuts would be much more appreciated to make
Speaker 7: room for more CAPEX.
Speaker 2: CAPEX across the Hyperscals plus Meta is now at six
Speaker 2: hundred and fifty billion dollars for the year for Microsoft.
Speaker 2: That's based on consensus. The difference with Amazon is that
Speaker 2: they might tip into negative free cash flow. We have
Speaker 2: thirty seconds. How worried are you about that?
Speaker 7: Not worried at all. This company has gone through negative
Speaker 7: free cash flow cycles in the past and delivered ROI
Speaker 7: unlike many other become and easier for the first time
Speaker 7: going through this cycle. If you look at fifteen years,
Speaker 7: Amazon has delivered r I C probably in a besting
Speaker 7: class manner.
Speaker 3: O Kakarni of Growth Capital Partners, thank you very much,
Speaker 3: indeed for joining us today and coming up with all
Speaker 3: more earning.
Speaker 4: We're speaking of the Roadblocks CEO Dave Bazuki. As a
Speaker 4: company season one hundred.
Speaker 3: And forty four million daily active users. You don't even
Speaker 3: want to hear how many hours people are spending on
Speaker 3: this platform.
Speaker 4: We'll break it down. This is Blue meg Tech.
Speaker 3: Chackap Chairs of Roadblocks company on fire up ten percent
Speaker 3: after they reported fourth quarter users and bookings at topped expectations.
Speaker 4: Daily active users.
Speaker 3: Jumped sixty nine percent to one hundred and forty four million.
Speaker 3: It beat alas forecasts and pleased to say we're now
Speaker 3: joined on the results by Dave Bazuki, CEO of Roadblocks.
Speaker 3: Your engagement levels was jumping to a similar degree. I
Speaker 3: think it was like sixty eight per What is is
Speaker 3: this the games that are driving this day?
Speaker 8: It's really the games, the platform and the creator. You know,
Speaker 8: we are on a mission to get ten percent of
Speaker 8: all global gaming content running on Roadblocks, and we're well
Speaker 8: on our way. We had a banner year, as you
Speaker 8: mentioned in twenty twenty five, we had fifty five percent
Speaker 8: year on year bookings growth. And in addition, as we
Speaker 8: started rolling out what we call the gold standard for safety,
Speaker 8: we're age checking our users and we now have accurate
Speaker 8: you know data on the eighteen and up segment, which
Speaker 8: is growing at over fifty percent year on year. In addition,
Speaker 8: around the world, countries like Japan are growing one hundred
Speaker 8: and sixty percent year on year. Really, people are creating
Speaker 8: new genres and types of games, whether it was dressed
Speaker 8: to Impress a year ago or grow a garden. So
Speaker 8: we're powered by both platform and an amazing creator community.
Speaker 3: Yeah, you call Bruno Mars singing live on brain rot,
Speaker 3: I mean tolve million people all using and.
Speaker 4: Coming to watch that at the same time. The records
Speaker 4: are interesting.
Speaker 3: Given as you say, these safety measures have been put
Speaker 3: in place, how has that impacted? Has that created any
Speaker 3: friction or indeed, it seems as though you're leaning into
Speaker 3: the opportunity of these safety measures.
Speaker 8: I think leaning in is a good way to mention it.
Speaker 8: I believe the last time we chatted we mentioned our
Speaker 8: vision for the gold standard for safety. In addition to
Speaker 8: filtering and monitoring all chat for critical harms and not
Speaker 8: allowing image or video sharing, we have now are full
Speaker 8: into our roleout of age estimation, which is understanding the
Speaker 8: age of everyone on our platform and using that to
Speaker 8: allow people to communicate with people of similar age. We
Speaker 8: gave our teams an ambitious goal to have no friction
Speaker 8: for this, and when you lean into something like this,
Speaker 8: a lot of innovations pop up. On the side, our
Speaker 8: matchmaking has gotten better. We continue to refine the way
Speaker 8: we filter text and make trusted connections, so we're optimistic
Speaker 8: we're going to go through this and ultimately come out
Speaker 8: with minimal friction from this.
Speaker 2: Dave. I fired up my new gaming PC last night,
Speaker 2: Asa Nitro V fifteen, Intel I five and Video g
Speaker 2: fours ID X forty fifty and I thought to myself,
Speaker 2: what am I going to play? And for you guys
Speaker 2: and everyone else, it's about pipeline, right. You rely on
Speaker 2: these third parties to keep the pipeline going, but you
Speaker 2: also have like the you know, the ambition on these
Speaker 2: higher fidelity games. How do you guarantee the pipeline and
Speaker 2: how are you going to manage the pipeline going forward?
Speaker 2: So I have some more things to play.
Speaker 8: The pipeline on Roadblocks is very, very healthy. We watched
Speaker 8: the distribution, the variety, the diversity of the experiences that
Speaker 8: our creators are growing, and over the last year we've
Speaker 8: made amazing really advances, not just our technology platform, but
Speaker 8: in search and discovery, so that the pipeline is robust.
Speaker 8: Right now, we have a unique vision with our platform,
Speaker 8: especially for eighteen and up expansion, that when a creator
Speaker 8: makes an experience on roadblocks, it works at good performance
Speaker 8: on a low end to gigabyte Android phone, for example,
Speaker 8: but also can scale up and look beautiful on your
Speaker 8: brand new gaming PC. This is a unique technology. It
Speaker 8: requires a vertical stack going from cloud to game engine,
Speaker 8: to discovery to the apps on everyone's desktop. It's why
Speaker 8: we're optimistic that that fifty percent growth in eighteen and
Speaker 8: up can get more and more of that part of
Speaker 8: the global gaming market. I'll highlight in the US our
Speaker 8: ambitions are more than ten percent, and in the US
Speaker 8: a big majority of that fifty billion approximate gaming market
Speaker 8: is eighteen and up. So what we see really good
Speaker 8: trajectory in that direction.
Speaker 2: Dave Advertising, we check with you regularly on it, and
Speaker 2: you're consistent that it's not yet a meaningful contributor. Right
Speaker 2: when will it be? Will it be? Or do investors
Speaker 2: now start to change how they factor in ads?
Speaker 1: For you?
Speaker 2: Going forward?
Speaker 8: I want to highlight the big picture, you know, in
Speaker 8: twenty twenty five, I believe we gave guidance in the
Speaker 8: load twenties and we ended up with fifty five percent
Speaker 8: bookings growth. So I want to highlight the big picture
Speaker 8: is we continue to exceed guidance and expectation on how
Speaker 8: we grow. We're seeing great progress both on rewarded video
Speaker 8: advertising and also developer sponsor tile advertising, which is creators
Speaker 8: on roadblocks who are monetizing really well accelerating their own
Speaker 8: growth by purchasing advertising. We do believe it'll be a
Speaker 8: big segment. It will ultimately as we roll out Roadblocks moments,
Speaker 8: which is I'm really used for discovery of video capture
Speaker 8: of roadblocks, that'll be a part of it. So we're
Speaker 8: continuously bullish, but not ready to really split it out yet.
Speaker 3: Dave, briefly, how going to show you on the AI
Speaker 3: platform and indeed the model that you have We've got
Speaker 3: Cube foundation model that you've just unfailed, but Google's also
Speaker 3: got Project Genie. How are you seeing that changing the
Speaker 3: development of games and how do you stick to your
Speaker 3: sort of more blocky esthetic that people love.
Speaker 9: Well.
Speaker 8: What we believe we will see over time as we
Speaker 8: advance AI, our avatar system and our technology platform a
Speaker 8: much bigger diversity of the types of experiences you see
Speaker 8: on the platform. We've shared our notion of novel games,
Speaker 8: which is games you'd never expected to see on Roadblocks
Speaker 8: and genres like RPG or in sports, and really with AI,
Speaker 8: we see that as an acceleration technology for both creation
Speaker 8: for the way games look. We shared some video on
Speaker 8: X this week around three D in the cloud up
Speaker 8: sampling and also how models will be used for driving creation.
Speaker 8: I'll highlight one key thing about Roadblocks. We are a
Speaker 8: connection and a communication platform. We're a multiplayer platform where
Speaker 8: you know, in sci fi terms, we're building the hollow
Speaker 8: deck where people go together. Some of the technologies out
Speaker 8: there that we're building as well, like world models, are
Speaker 8: currently video single player technologies. We think the big long
Speaker 8: term opportunity for us is synchronizing thousands of players in
Speaker 8: the cloud, which is much different technology and stuff were
Speaker 8: you know is actively part of how we build Roadblocks.
Speaker 2: Dave Bazuki of Roadblocks, thank you very much. Coming up
Speaker 2: on boom bag Tech, Affirm CEO Max Lefchin joins us
Speaker 2: talk about his company's results. Stick Around It's next Spinbag Tech.
Speaker 2: Shares of Affirm down about six percent. The buy Now
Speaker 2: pay later. Company reported results that beat analyst estimates, though
Speaker 2: some on the street say that the outlook part is
Speaker 2: a little bit conservative. Fortunately, we can talk through it
Speaker 2: with a firm CEO, Max left Chin. Actually, there's been
Speaker 2: a lot this morning about the outlook the financial Strong
Speaker 2: couarter gone. I actually just want to talk about what
Speaker 2: you're doing, and I'd like to start, if I may,
Speaker 2: with the affirm card, how's that coming along? And Max
Speaker 2: with you? If if I may, what's the end game
Speaker 2: with the affirm card?
Speaker 10: You know, there is no endgame for there's so much
Speaker 10: to do. I have a hard time saying we'll be
Speaker 10: done when this feature. Ships are from card rocketed once again.
Speaker 2: Yeah.
Speaker 10: For a long time, I think it looked like a
Speaker 10: gently super linear growth curve, and in our latest letter,
Speaker 10: we finally showed.
Speaker 2: That it's that's kind of what I mean, you know,
Speaker 2: the trajectory's changed.
Speaker 10: It's you know, we didn't do anything very specific to
Speaker 10: make it go obviously exponential, but it is accelerating. And
Speaker 10: it's just the great work of our product teams that
Speaker 10: have been putting in new features, integrating all of our
Speaker 10: zero percent deals into the card. The card grew, you know,
Speaker 10: something like four times the rest of the business, or
Speaker 10: you know, it's just a rocket ship that we built
Speaker 10: a few years ago and it just keeps going. The
Speaker 10: endgame is to get you to put away your credit
Speaker 10: card forever and use a deviit card powered by a firm.
Speaker 2: The other growth part of the story, because it is
Speaker 2: a growth story, and whatever you feel about the end
Speaker 2: list saying you're being conservative. Is international expansion a bit
Speaker 2: so in my home country, in Caroline's home country, the UK,
Speaker 2: it's a really interesting case study. How is that going?
Speaker 2: But then what comes next after that?
Speaker 10: Well, we just announced some exciting brands. We're live with Shopify,
Speaker 10: our great partner in the US. Now in the UK
Speaker 10: it's a real business now. So for a couple of quarters,
Speaker 10: we said, look, we're we've crossed upon We're in London,
Speaker 10: we're hiring where we're building. It's now a business, it's
Speaker 10: making real revenue, it's generating some very significant sales lifts
Speaker 10: for emerging partners. We have a whole slew of new
Speaker 10: partnerships to go live with soon, so feeling great about
Speaker 10: it and eyeing continental Europe next of course, and so
Speaker 10: we're definitely not going to be a North American phenomenon only,
Speaker 10: but we're still very, very committed and very focused on
Speaker 10: our North American stronghold.
Speaker 3: So as Ted Securities is truest is Bloomberg Intelligence Analysis right,
Speaker 3: that you do guide conservatively and you just feel that
Speaker 3: that's the right thing to do in this consumer context.
Speaker 10: I think the guide is the guide, As our CFO
Speaker 10: always reminds me to say, you know, I encourage folks
Speaker 10: that hold our stock or eyeing our stock to see
Speaker 10: how we've done in the past. Quarter after quarter. We
Speaker 10: make promises and we deliver on them. So we take
Speaker 10: our guidance very seriously. We intend to always do well
Speaker 10: relative to what we said will do and better and
Speaker 10: that's what it is. I mean, ultimately, the results speak
Speaker 10: for themselves, and we are in it for a very
Speaker 10: long term. So at some point people will figure out
Speaker 10: exactly just how much more growth there is in this business.
Speaker 3: Credit quality holding up clearly, and that's the litmus test
Speaker 3: in many ways to success within delinquencies.
Speaker 4: Are they on the rise? How are you seeing a
Speaker 4: consumer right now?
Speaker 6: Max?
Speaker 10: You know, we have underwritten tens of millions of American
Speaker 10: households in the order of seventy million twenty six million
Speaker 10: actives just last twelve months alone, we reported we see
Speaker 10: a pretty big swath of America. Our consumer is healthy.
Speaker 10: They are paying us back their shopping. They had a
Speaker 10: great holiday season. A lot of outside observers underestimated our
Speaker 10: growth over the holidays. We proved them wrong yesterday. Once again,
Speaker 10: American consumer as we see her, is doing just fine.
Speaker 2: Max, I think this is the first opportunity we've had
Speaker 2: to speak since the President's initiative to cap credit card
Speaker 2: interest rates. You know, we start this conversation by you saying, well,
Speaker 2: we want people's their credit card away. That you obviously
Speaker 2: have some some bias in that narrative, but just your
Speaker 2: viewpoint on it, please, and what's happened in the weeks
Speaker 2: that followed. We just have thirty seconds. Sorry.
Speaker 10: I think the most important thing in this conversation about
Speaker 10: affordability is transparency. Like raide caps are a conversation for
Speaker 10: the legislators, but the most important thing is people understand
Speaker 10: what they're getting into. The reason affirm has been successful
Speaker 10: is because of upfront pricing. If you know what you'll pay,
Speaker 10: you'll be just fine.
Speaker 3: Max slash Joan always great to have your transparency on
Speaker 3: the show.
Speaker 4: See you over firm. Thank you. Coming up, we.
Speaker 3: Dive on this week's market moves, the lay shoe of
Speaker 3: Alliance Bernstein.
Speaker 4: That's next. This has been bad tech.
Speaker 2: Welcome back to Bloomberg Tech. We're looking at the NASAK
Speaker 2: one hundred right. It's kind of the go to index.
Speaker 2: It has the mag seven, the kind of broadest and
Speaker 2: diversified list to tech companies. And on the week, we're
Speaker 2: headed for our biggest weekly drop since November. Carol pointed
Speaker 2: that out earlier, actually a percentage point more, and then
Speaker 2: as that one hundred beyond track for its biggest weekly
Speaker 2: drop since April. In the moment, we're actually a little
Speaker 2: bit higher in the session, and that's the reaction of
Speaker 2: the supply chain to Amazon and Amazon's projection of spending
Speaker 2: two hundred billion dollars capital expenditures in twenty twenty six.
Speaker 2: Of course, the big beneficiary when you're spending hundreds of
Speaker 2: billions of dollars on AI infrastructure and data center is
Speaker 2: in video, and that is one of the best performers
Speaker 2: right now in this session. If we move super fast,
Speaker 2: we might be able to change the chart and show
Speaker 2: you what that looks like. Boom and Video up seven percent,
Speaker 2: Amazon down eight percent, actually way way more widespread than
Speaker 2: that across memory chip equipment makers, Nuclear names, the whole lot, charrac.
Speaker 3: Names, bloom its numbers extraordinary. Let's dissect this a bit
Speaker 3: more ed because you've just been talking us through the
Speaker 3: sheer scale of the Hyperscaler's plans. If you add in matter,
Speaker 3: it's six hundred and fifty billion dollars. It really underscores
Speaker 3: just how quickly the AI race is accelerating.
Speaker 4: Let's talk more on what this wave of investment means
Speaker 4: for markets.
Speaker 3: For disruption across industries, the actual use of the models
Speaker 3: that this compute brings. Hey, shoot is with us Ann Spensteen,
Speaker 3: CIO of Thematic Innovation Equities.
Speaker 4: You own the whole array.
Speaker 3: You own the hyperscalers plus the infrastructure layer.
Speaker 4: What from this week did you think?
Speaker 3: Do you agree that six hundred and fifty billion is
Speaker 3: what we should be seeing from these sorts of names.
Speaker 9: I think what we're seeing, and we've been saying this
Speaker 9: is this is the third year into if you think
Speaker 9: about from the start of CHRAGYBTM where we are today,
Speaker 9: this is a third year into the build, and I
Speaker 9: would say this is the year that we should start
Speaker 9: to see adoptions, and in fact, I think that's what's
Speaker 9: causing a lot of disruption in the marketplace.
Speaker 4: We're seeing rapid.
Speaker 9: Model drafts and largers and new model, new versions of it,
Speaker 9: and the speed of that is accelerating, and that is
Speaker 9: something that we should be expecting to see at this point.
Speaker 9: But what's also interesting is that what it also means,
Speaker 9: and we said this, this is an interesting time the
Speaker 9: large cap themselves. They're spending a lot of money because
Speaker 9: it's as defensive as it is offensive. Right, it's for growth,
Speaker 9: but it's also to defend your competitive mode. AI has
Speaker 9: the ability to disrupt many models, and this time it's
Speaker 9: interesting is AI has holds the potential to disrupt tech.
Speaker 9: How we think about the way that the infrastructure layer
Speaker 9: is and how we think about enterprise software, how the
Speaker 9: traditional business model with high competitive mode, how that could
Speaker 9: be changing going forward. And that's exactly what we're seeing.
Speaker 9: So it's kind of hard for us to judge. Is
Speaker 9: six hundred and fifty the right number or is it
Speaker 9: a different number?
Speaker 2: Yes? Can I jump in and ask where do you
Speaker 2: look for the evidence? Then? So, for example, Amazon talked
Speaker 2: up its backlog, which is very different from our pa
Speaker 2: right in the world of software because it's not invoiced.
Speaker 2: They talked about, you know, the operating income. A backlog
Speaker 2: would suggest, oh my goodness, they've got hundreds of billions
Speaker 2: of dollars of revenues waiting in the wings from their
Speaker 2: AI offering. The market doesn't seem to believe that. Do
Speaker 2: you believe that metric?
Speaker 9: I think it's less about whether or not that is
Speaker 9: indeed just that one metric that we focus on.
Speaker 4: But rather, if you think about all.
Speaker 9: These this is basically a rebuild of the digital infrastructural layer.
Speaker 9: And that's why I said, what is six hundred and
Speaker 9: fifty billion? Is that precisely the right number we should
Speaker 9: be anchoring on, but just the fact that how it
Speaker 9: could unlock the future of workload and when we think
Speaker 9: about it, it's not just the hyper skelets per se,
Speaker 9: but also what does it mean for the rest of
Speaker 9: the economy. What could it unlock in terms of the
Speaker 9: potential in productivity And you're actually seeing the early evidence
Speaker 9: of that. You can see in the traditional retail industry.
Speaker 9: What does the future hold for shopping and what does
Speaker 9: agent mean for future of shopping? Or if you think
Speaker 9: about the traditional manufacturing industry. We are in fact seeing
Speaker 9: real productivity gain from using AI, and that's only the beginning.
Speaker 9: And time and time again, I think if we look
Speaker 9: at look back in history, when you have such disruptive
Speaker 9: technology changes, what happens in a near term the way
Speaker 9: that we do things gets disrupted, But then new business
Speaker 9: model productivity gain actually do emerge. And that is the
Speaker 9: power of innovation. It requires little imagination. So if you
Speaker 9: look at this point in time, yes, it's a huge
Speaker 9: number that we're spending, but you probably could look back
Speaker 9: and back then when electricity was first invented, that probably
Speaker 9: was a tremendous amount of money to be spent on
Speaker 9: the grid.
Speaker 3: What if this is the future of the grid, Well,
Speaker 3: let's talk about that for the innovation that we're seeing
Speaker 3: at the moment.
Speaker 4: And I just want to bring to our viewers.
Speaker 3: Of course, the latest that happened about midday yesterday Whenanthropic
Speaker 3: released a new version of its AI model, claud Opens
Speaker 3: four point six. It's designed, we know, to carry out
Speaker 3: financial research other work related functions. The company says it
Speaker 3: can scrutinize company data, regulatory filings, market information to come
Speaker 3: up with really detailed financial analysis that would normally take
Speaker 3: a person days to complete. This is after the market
Speaker 3: kind of fell out of bed following their legal plug
Speaker 3: in to Cowork. So how are you seeing these models
Speaker 3: becoming an entry point into software? What did you think
Speaker 3: about just the gargantuan selloff across data services and software names.
Speaker 9: You know, it's in the time of such disruption, it's
Speaker 9: very it's too early to call what's cheap?
Speaker 4: Who is going to be the future.
Speaker 9: Winner because this is only the beginning, And ultimately it
Speaker 9: comes back to what is the real long term competitive mode?
Speaker 9: And that's what the question really is at this point,
Speaker 9: because you know, it's if you talk to the private companies,
Speaker 9: you probably are seeing some of the private companies this
Speaker 9: is the fastest way for a company to get to
Speaker 9: one hundred million doll revenue. But my question would be,
Speaker 9: what is the real way to look at it? Who
Speaker 9: can hold on to that one hundred million dollar revenue
Speaker 9: for a long period yees? And what we are seeing
Speaker 9: right now, what's interesting is it's not in the near
Speaker 9: term numbers that's going down. But the question that we're asking,
Speaker 9: and I think all the mesters are asking, is well,
Speaker 9: it brings in the probability of what is the terminal
Speaker 9: revenue we should be paying, what's the terminal multiple we
Speaker 9: should be paying for the revenue because the probability of
Speaker 9: holding on to that revenue and the profit is probably
Speaker 9: changing really fast, and that's why we're seeing the terminal multiple.
Speaker 9: Actually it is coming down pretty fast, and that's the
Speaker 9: disruption that we're seeing in the market today.
Speaker 4: But with disruption and chaos, there's.
Speaker 9: Always opportunities because on the other side of it is
Speaker 9: while we are really concerned about I feel like six
Speaker 9: months ago everyone is concerned about the ROI, and now
Speaker 9: we're seeing models being dropped, and then in the meantime
Speaker 9: there's a massive seale off in the market. So I
Speaker 9: would say think there's also an opportunity as well, because
Speaker 9: now we're probably a little more comfortable with the ROI.
Speaker 9: And then the six hundred and fifty billion dollar question
Speaker 9: for everybody is we're building a road to nowhere, And
Speaker 9: I would say, well, maybe there's hope that we're building
Speaker 9: a road to somewhere. So it actually creates huge opportunities
Speaker 9: if you have long term horizon, and because there's dislocation
Speaker 9: in the market.
Speaker 2: Lay two of Alliance Bernstein, deeply pensive on what's happening
Speaker 2: in the markets long term and short term. Thank you
Speaker 2: so much. Like coming up, we're joined by Warner Music
Speaker 2: Group CEO Robert Kinsel to break down the company's earnings
Speaker 2: that conversation. Next, don't miss it. This is Bloomberg Tech.
Speaker 4: He the upbeat music.
Speaker 3: After record quarterly revenue in fiscal fourth quarter, Warner Music
Speaker 3: Group rose another ten percent in its first quarter thanks
Speaker 3: to increases in digital in artist services and expanding rights
Speaker 3: and licensing revenue and leaning into AI. The shares are
Speaker 3: up five percent on the day, as you can see.
Speaker 3: Let's talk it through with the CEO, Robert Kensal.
Speaker 4: Thank you very much.
Speaker 3: Indeed for joining us today. Robert, and you talk about
Speaker 3: the creative wins here. So is it the fourth factors
Speaker 3: of Alex Warren, of Cardi b of ed sharing that
Speaker 3: drive these sorts of revenues or where else are you
Speaker 3: managing to pull the leavers?
Speaker 11: First of all, thank you for having me. It's really
Speaker 11: great to be here to talk about the success that
Speaker 11: we're seeing with our strategy working. You're leading them with
Speaker 11: the right way, which is artist development. Is that the
Speaker 11: core of what we do and finding artists like the
Speaker 11: ones you mentioned is how we succeed. But it is
Speaker 11: not just that Our market share growth has been broad
Speaker 11: based across regents, across business units. So both our catalog
Speaker 11: division as well as our frontline divisions North America, America
Speaker 11: Europe have been growing and gaining share, and that is
Speaker 11: what underpinned our consistent results over the past three quarters
Speaker 11: of driving sustained, sustained growth and toleration while we're cutting.
Speaker 4: Costs, cutting costs.
Speaker 3: How much you were able to cut cost with AI,
Speaker 3: because Robert, here in lies your background, the fact that
Speaker 3: you've worked always with a focus on digital, the intersection
Speaker 3: of music with technology, and the fact that you have
Speaker 3: led the charge striking deals with Suno, for example, putting
Speaker 3: out blog posts as to why this can be a
Speaker 3: win for the.
Speaker 4: Artists you develop.
Speaker 3: How much is that actually helping cut costs at this moment.
Speaker 11: Yeah, So it's good to step back on AI because
Speaker 11: the way we approach it is that it has to
Speaker 11: deliver against our three core priorities. Probably number one is
Speaker 11: growing our share. We just spoke about that and their
Speaker 11: activities that we do within that using AI that help
Speaker 11: us automate our marketing across our entire catalog of over
Speaker 11: a million songs. It is humanly impossible to touch all
Speaker 11: of those songs and promote them. With AI, we can
Speaker 11: do that and we're well underway to delivering on that.
Speaker 11: So it's a major major accomplishment for a large IP
Speaker 11: owners such as Cells two. We have to increase we
Speaker 11: have to increase the value of music, and AI is
Speaker 11: helping us to do that by introducing new pricing tiers
Speaker 11: on existing DSPs digital service providers, but also by having
Speaker 11: new entrants such as Suno and Udio, And that is
Speaker 11: where we focused initially, and we want to make sure
Speaker 11: that now we're not only getting paid from consumption from
Speaker 11: the spotifyes and youtubes of the world, but also from
Speaker 11: creation from the SunOS and audios of the world, and
Speaker 11: those two worlds over time will merge as well. And
Speaker 11: then third is growing our efficiency. And on the efficiency front,
Speaker 11: we're deploying AI across finance, across legal, across HR. These
Speaker 11: are the three departments that we started with obviously, in
Speaker 11: addition to market that I mentioned before, and all of
Speaker 11: that is helping us be more effective handle more copyrights
Speaker 11: and more artists at the same or lower employee base.
Speaker 11: And at the same time grow revenues and profit.
Speaker 2: Robert, we got some early insight into what your strategy
Speaker 2: is when you joined us at Bloomberg screen Time right
Speaker 2: in October, and you know, my interpretation of your time
Speaker 2: on stage was that this was pretty early. Like Sono
Speaker 2: is a case study now that there were a few
Speaker 2: months on. Are there any examples of work you've deployed,
Speaker 2: either internally or work you've done with Sono and the
Speaker 2: four or five other companies that you've done deals with
Speaker 2: that's new, you know, that's tangibly made an impact in
Speaker 2: the core to gone.
Speaker 9: Yeah.
Speaker 11: So actually when I was with you guys, you know,
Speaker 11: at your conference in October, we were actually heads down
Speaker 11: on deals with those companies, so those were not even close,
Speaker 11: so it was super early. I've published principles that we
Speaker 11: as a company uphold to doing these deals, which is
Speaker 11: the partners have to commit to licensed models. They have
Speaker 11: to probably reflect the value of music, which means the
Speaker 11: right commercial terms that we're really happy with. And three
Speaker 11: that artists have to have the right to opt in
Speaker 11: for the use of their name and likeness in uh,
Speaker 11: you know, in derivative works. And we're in the process
Speaker 11: of transitioning these partners to licensed models. So the answer
Speaker 11: to your question is not yet, because we're extremely early
Speaker 11: in that. But they're well underway. They're signing more partners
Speaker 11: and they're working on their new models, and as soon
Speaker 11: as they transition to license model, which is our condition
Speaker 11: number one, then we will be able to start cooperating
Speaker 11: much more deeply.
Speaker 2: We just had the Grammys, right, let me just you know,
Speaker 2: we just had the Grammys, and that puts the focus
Speaker 2: back on the artists, the songwriters other side of the table.
Speaker 2: How have they responded to your strategy and the work
Speaker 2: you want to do with the AI companies.
Speaker 11: It's been it's been fantastic. You know, We as a
Speaker 11: company h take our role of guiding the development of
Speaker 11: AI and music very seriously because we've learned from the past,
Speaker 11: where where the music industry waited for far too long
Speaker 11: during the file sharing era twenty five years ago. So
Speaker 11: we believe in being early, you know, taking the reins
Speaker 11: together with our partners and defining the future of music.
Speaker 11: So it's and there are a lot of artists who
Speaker 11: want to be part of that. They also have learned,
Speaker 11: they studied the past, and they want to be part
Speaker 11: of it. So we are having conversations both with our artists,
Speaker 11: their lawyers, their managers, and there are many artists who
Speaker 11: are reaching out and they just want to be part
Speaker 11: of experimentation with us. So it's been a surprisingly positive response.
Speaker 3: I mean, it was a positive day few with the
Speaker 3: Grammys as well as some of your R and B wins.
Speaker 4: For example, I'm.
Speaker 3: Interested about the joint approach briefly that you're doing with
Speaker 3: Bain because it feels as though you think the value
Speaker 3: of music is going up if you're wanting to be
Speaker 3: buying these back catalogs even more so.
Speaker 11: Yeah, So we firmly believe that music is undervalued. It's undervalue.
Speaker 11: It's roughly fifty cents of value of a video, and
Speaker 11: it shouldn't be based on its consumption. It's just for
Speaker 11: historical reasons.
Speaker 9: So there's a.
Speaker 11: Tremendous opportunity for value appreciation in the future. And we
Speaker 11: believe that the industry is finally moving from just volume
Speaker 11: based subscover based growth to volume based and price based growth,
Speaker 11: and that's really important. We started on the strategy over
Speaker 11: a year ago where we started to retool our partnerships
Speaker 11: with our distribution partners to have certainty around our wholesoli
Speaker 11: rate increases rather than hope and wait and welcome price increases,
Speaker 11: which we always do welcome, but we're really focused on
Speaker 11: creating certainty around rate increases. So in a phase of
Speaker 11: that and with the added step change of value caused
Speaker 11: by AI and additional tiers, companies experience investors like Bain
Speaker 11: see this as something that has potential to really unlock
Speaker 11: a lot of value in the industry, under putting their
Speaker 11: money where their mouth is.
Speaker 2: Robert Kinson, CEO of one of Music Group. Great to
Speaker 2: have you back with us on Bloomberg Tech. Really appreciate it.
Speaker 2: Thank you. Let's turn back to the earning story elsewhere.
Speaker 2: Shares have Reddit actually now softer four tens percent, basically flat.
Speaker 2: One point in the session have been up eight percent,
Speaker 2: So we kind of fizzed out a little bit. The
Speaker 2: company projected current quarters sales that did surpassable streets expectations
Speaker 2: thanks to growing ads its advertising business. Get out to
Speaker 2: bloombs Kirt Wagner, what's going on with the Reddit story here?
Speaker 2: I just got an analyst note my inbox saying that Reddit's
Speaker 2: on a roll, but the stock would suggest otherwise.
Speaker 12: Yeah, when it started up this morning. That made sense
Speaker 12: to me because, as you pointed out, the projections for
Speaker 12: the current quarter were good, there was a big beat
Speaker 12: in the holiday quarter. It feels like there's a lot
Speaker 12: of momentum for this advertising business. I think they have
Speaker 12: an AI story to tell too. They're obviously not building
Speaker 12: these massive data centers like we're seeing from these hyperscalers.
Speaker 12: They're not, I mean this massive Capex, but they have
Speaker 12: this called Reddit Answers, which is basically an AI search
Speaker 12: engine built into Reddit and years and years and years
Speaker 12: of forums of people discussing things, and they are also
Speaker 12: licensing that data, as you know, to some of these
Speaker 12: AI players, So they have a bit of an AI
Speaker 12: story that isn't quite as capital intensive as a lot
Speaker 12: of these other big tech players coming down.
Speaker 4: It's interesting, Analys said.
Speaker 3: Many had reiterated that overweight some neutral, but pypasanla counter Fitzgerald.
Speaker 3: We're also seeing bed cut their price targets, so maybe
Speaker 3: there's a little bit of a view on how much
Speaker 3: the what's already priced incut. What was really interesting I
Speaker 3: thought was the international growth here and is that so
Speaker 3: much to do with AI and the translation capability?
Speaker 12: Now, yeah, I think they've been working to make sure
Speaker 12: that it's accessible to people who don't just speak English.
Speaker 12: This is a lot of these consumer products, as you
Speaker 12: both know, know as they grow, they have to build
Speaker 12: their product for all of these various markets, and that
Speaker 12: does take time. I think that's part of it. One
Speaker 12: of the things that's interesting in you'll see in some
Speaker 12: of these analysts notes of this debate around logged in
Speaker 12: versus logged out users. If you guys remember Twitter back
Speaker 12: in the this was the big debate, you know, could
Speaker 12: you show ads to someone showing up to Twitter who
Speaker 12: doesn't have an account. I think Reddit's in a better
Speaker 12: position because of the focus of these forums and being
Speaker 12: topic based, and.
Speaker 3: Gus kat Wagner all over social media is always we
Speaker 3: thank you ed what we got.
Speaker 2: Coming up, We've got the Boring company going full speed
Speaker 2: on a tunneling project in Nashville, but there could be
Speaker 2: some headwinds along the way. Bloomberg big take coming up.
Speaker 2: This is Bloomberg Tech.
Speaker 3: Tesler's evaluating multiple sites across the US to.
Speaker 4: Manufacture solar cells.
Speaker 3: It's part of Elion Musk's one hundred giga whatsolar ambition.
Speaker 3: Its sort according to sources and the company is considering
Speaker 3: expanding production at its Buffalo, New York factory, with Arizona
Speaker 3: and Idaho also under consideration. That longer term, another scenario
Speaker 3: would involve building a second facility in New York State
Speaker 3: once source set. China currently dominates output of solar cells.
Speaker 3: And on the back of your scoop, you've seen some
Speaker 3: big share price moves.
Speaker 2: Yeah, and his other companies are busy too. The Boring
Speaker 2: Company is about to embark on its most ambitious tunneling
Speaker 2: project yet, its first full fledge transit corridor underneath Nashville,
Speaker 2: but critics worry the company is winging it. Bloombst Kyle
Speaker 2: Porter is here with the details in this week's Bloomberg
Speaker 2: Big Take. It is the most ambitious project that Boring
Speaker 2: has undertaken, but people are worried. So balance those two things.
Speaker 2: Why is it the most ambitious and what's the concern?
Speaker 6: Well, it's the most ambitious on several levels. They are Boring,
Speaker 6: that is, are looking to build two tenmile tunnels between
Speaker 6: the airport and downtown Nashville, and they're looking to do
Speaker 6: it through limestone, which is compared to other projects such
Speaker 6: as the Las Vegas one. They're running through sandstone predominately
Speaker 6: at that point, getting through limestone is very tricky and
Speaker 6: you have the risk of things like sinkholes. It's also
Speaker 6: it's a very heavy wet rock, Like actually transporting it
Speaker 6: through out is going to be incredibly difficult.
Speaker 4: That's some of the technical difficulty.
Speaker 3: I mean, your big take was so eye catching simply
Speaker 3: because of the headline, must Sporing Tunnel in Nashville has
Speaker 3: mayor hoping? Now one dies just how realistic are they
Speaker 3: worried that that's some sort of opportunity.
Speaker 6: Costing Well, if you read the story, the city have
Speaker 6: largely been cut out of this entire process. Having been
Speaker 6: involved at the start, they felt that it wasn't the
Speaker 6: right time. Depending on who you talk to, and people
Speaker 6: around Boring say they just weren't interested. So they went
Speaker 6: and it's the entire route now has been designed to
Speaker 6: go on state land. So until you get to things
Speaker 6: like fire safety and like really into the construction process
Speaker 6: and looking at things like egress points where you know
Speaker 6: emergency services could get in if there's a problem in
Speaker 6: the tunnel, the city don't have much say. So you know,
Speaker 6: the mayor, depending on your point of view, is either
Speaker 6: being alarmist or is just expressing concern on behalf of
Speaker 6: this constituents.
Speaker 2: You've been reporting on Boring Deeply for a little while now,
Speaker 2: and the timing of the big takes are interesting because
Speaker 2: also the company is looking to the golf right. What
Speaker 2: can you tell us about Dubai and their international expansion.
Speaker 6: Dubai is the first successful contract signed for an international expansion.
Speaker 6: They're looking at putting multiple exit points in to that network.
Speaker 6: Our understanding is that they may have already sent a
Speaker 6: test vehicle out there that we've not been able to
Speaker 6: confirm that yet. Again, it's a very aggressive timeline for
Speaker 6: getting these things done. If you look at the Las
Speaker 6: Vegas project, I believe they started tunneling their pre COVID
Speaker 6: that was supposed to be you know, sixty eight miles
Speaker 6: worth of tunnel's doug by. Now I think they've got
Speaker 6: five miles operational. So either they've dramatically improved the machine
Speaker 6: and their processors, or it's not going to go as
Speaker 6: quickly as they're saying.
Speaker 3: In mex Car Porter Deeply research story, we urge people
Speaker 3: to go and read it.
Speaker 4: Meanwhile, that does it for this edition of Bloomberg Tech.
Speaker 2: What Week ed Yeah, you know, it's like the mic
Speaker 2: drop week for capital expenditures undred and eighty five billion Alphabet,
Speaker 2: two hundred billion Amazon, the repercussions next week recap on
Speaker 2: the pod. You know where to find it. It's there
Speaker 2: on the screen. And this is Bloomberg Tech