1 00:00:00,280 --> 00:00:07,760 Speaker 1: Bloomberg Audio Studios, Podcasts, radio news. 2 00:00:10,280 --> 00:00:12,639 Speaker 2: This is Bloomberg day Break Weekend, our global look at 3 00:00:12,640 --> 00:00:15,000 Speaker 2: the top stories in the coming week from our Daybreak 4 00:00:15,040 --> 00:00:17,759 Speaker 2: anchors all around the world. Straight Ahead on the program, 5 00:00:17,840 --> 00:00:20,599 Speaker 2: we'll look ahead to some key home sales data in 6 00:00:20,640 --> 00:00:23,160 Speaker 2: the US during the heart of the spring home buying rush. 7 00:00:23,360 --> 00:00:26,759 Speaker 2: Also the latest earnings from retail giant Target. I'm Tom 8 00:00:26,800 --> 00:00:27,840 Speaker 2: Busby in New York. 9 00:00:28,040 --> 00:00:30,639 Speaker 3: I'm Caroline Hedger in London, where we're looking ahead to 10 00:00:30,680 --> 00:00:32,720 Speaker 3: be Cutaw Economic Forum. 11 00:00:32,760 --> 00:00:36,080 Speaker 4: I'm Doug Chrisner looking ahead to earnings from Chinese Answer 12 00:00:36,200 --> 00:00:37,280 Speaker 4: to Google by DO. 13 00:00:38,360 --> 00:00:42,440 Speaker 1: That's all straight ahead on Bloomberg Daybreak Weekend on Bloomberg 14 00:00:42,440 --> 00:00:46,160 Speaker 1: eleven three Yeero, New York, Bloomberg ninety nine to one, Washington, DC, 15 00:00:46,640 --> 00:00:50,920 Speaker 1: Bloomberg ninety two to nine, Boston, DAB Digital Radio, London, 16 00:00:51,320 --> 00:00:54,520 Speaker 1: Sirius XM one twenty one, and around the world on 17 00:00:54,600 --> 00:00:57,760 Speaker 1: Bloomberg Radio, dot Com and the Bloomberg Business app. 18 00:01:02,920 --> 00:01:05,480 Speaker 2: Good day to you. I'm Tom Busby. We begin today's 19 00:01:05,480 --> 00:01:08,959 Speaker 2: program with reads on existing and new home sales for 20 00:01:09,040 --> 00:01:12,120 Speaker 2: the month of April, the obstacles the housing industry is 21 00:01:12,120 --> 00:01:14,840 Speaker 2: facing right now, and what this week's earnings from the 22 00:01:14,920 --> 00:01:18,280 Speaker 2: nation's big home improvement retailers can tell us about the 23 00:01:18,319 --> 00:01:21,360 Speaker 2: housing market. For more on all of that, we're joined 24 00:01:21,360 --> 00:01:26,240 Speaker 2: by Drew Reading, Bloomberg Intelligence, US home building analyst. Well, Drew, 25 00:01:26,280 --> 00:01:28,720 Speaker 2: thank you so much for being here, and well, why 26 00:01:28,760 --> 00:01:30,440 Speaker 2: don't we start with what are you expecting to see 27 00:01:30,440 --> 00:01:33,679 Speaker 2: in these April home sales reports coming out this week? 28 00:01:34,160 --> 00:01:37,559 Speaker 5: So, look, the spring selling season has been a dud. 29 00:01:37,680 --> 00:01:40,679 Speaker 5: To put it simply. The latest housing data that we 30 00:01:40,760 --> 00:01:44,160 Speaker 5: have from Redfincho's pending home sales down about three percent, 31 00:01:44,200 --> 00:01:46,720 Speaker 5: which is the lowest on record for this time of year. 32 00:01:47,240 --> 00:01:49,600 Speaker 5: You have home sitting on the market longer, and for 33 00:01:49,800 --> 00:01:53,400 Speaker 5: sale inventory is rising up about fourteen percent last year. 34 00:01:53,680 --> 00:01:55,240 Speaker 5: On the new home side, we just got data on 35 00:01:55,240 --> 00:01:58,840 Speaker 5: purchase applications from the builders which show sales down five percent, 36 00:02:00,200 --> 00:02:01,320 Speaker 5: and if you look at some of the names that 37 00:02:01,360 --> 00:02:04,840 Speaker 5: we cover, orders in one Q we're down about ten percent. 38 00:02:04,920 --> 00:02:08,440 Speaker 5: So it's certainly been a challenging market. You know, some 39 00:02:08,480 --> 00:02:11,919 Speaker 5: of the builder conbinants data that we look at is 40 00:02:12,200 --> 00:02:15,359 Speaker 5: the lowest going back to late twenty twenty two, and 41 00:02:15,760 --> 00:02:19,320 Speaker 5: the measure of present sales expectations is near the lowest 42 00:02:19,360 --> 00:02:23,000 Speaker 5: since twenty twelve, So the outlook for sales isn't all 43 00:02:23,040 --> 00:02:24,040 Speaker 5: that strong right now? 44 00:02:24,160 --> 00:02:24,400 Speaker 6: Wow? 45 00:02:24,680 --> 00:02:27,600 Speaker 2: Is this just a perfect storm of sky high prices, 46 00:02:27,639 --> 00:02:30,960 Speaker 2: elevated mortgage rates, and a lot of economic uncertainty. 47 00:02:32,160 --> 00:02:33,919 Speaker 5: I think you hit the nail on the head. It's 48 00:02:34,000 --> 00:02:36,720 Speaker 5: really those two things. First, affordability. You know, this piece 49 00:02:36,760 --> 00:02:39,079 Speaker 5: isn't new, but it's not improving. You know, we came 50 00:02:39,120 --> 00:02:41,760 Speaker 5: into the year thinking that we might get some relief 51 00:02:41,800 --> 00:02:43,280 Speaker 5: on rates, and earlier in the year it looked like 52 00:02:43,360 --> 00:02:45,040 Speaker 5: mortgage rates did come down a little bit, but now 53 00:02:45,040 --> 00:02:47,640 Speaker 5: we're headed back up towards seven percent, and you know, 54 00:02:47,680 --> 00:02:51,320 Speaker 5: with home prices continuing to climb, affordability remains near the 55 00:02:51,360 --> 00:02:53,880 Speaker 5: worst level on record. And then the second piece is 56 00:02:54,200 --> 00:02:56,640 Speaker 5: what you mentioned, it's uncertainty, which is leading to a 57 00:02:56,720 --> 00:02:59,320 Speaker 5: lack of urgency among buyers. You know, there's been a 58 00:02:59,360 --> 00:03:01,560 Speaker 5: lot of discussion out there about, you know, the soft 59 00:03:01,600 --> 00:03:03,880 Speaker 5: data versus the hard data, and when does the weakening 60 00:03:03,880 --> 00:03:06,720 Speaker 5: and the soft data translate, if ever, into what we're 61 00:03:06,720 --> 00:03:08,200 Speaker 5: seeing into the numbers. And I can tell you that, 62 00:03:08,320 --> 00:03:10,440 Speaker 5: at least from a housing perspective, it is having an 63 00:03:10,480 --> 00:03:14,600 Speaker 5: impact when you're thinking about big ticket purchases like buying 64 00:03:14,600 --> 00:03:16,919 Speaker 5: a home, or you know, in the home improvement space 65 00:03:16,960 --> 00:03:19,600 Speaker 5: taking on a large remodeling project. You want to have 66 00:03:19,600 --> 00:03:21,600 Speaker 5: confidence in the economy in your job, and we've seen 67 00:03:21,639 --> 00:03:24,799 Speaker 5: those numbers start to come down. We've heard from almost 68 00:03:24,840 --> 00:03:27,720 Speaker 5: every builder out there that there's just a lack of 69 00:03:27,840 --> 00:03:30,160 Speaker 5: urgency as buyers wait to see what happens with prices, 70 00:03:30,280 --> 00:03:33,800 Speaker 5: what happens with rates. So for us, it's certainly having 71 00:03:33,880 --> 00:03:35,040 Speaker 5: an impact at this point. 72 00:03:35,480 --> 00:03:38,240 Speaker 2: Wow, well the only good news I've seen. And you 73 00:03:38,280 --> 00:03:40,560 Speaker 2: tell me how this could change things. The number of 74 00:03:40,600 --> 00:03:43,400 Speaker 2: homes that are listed seems to be rising. I mean, 75 00:03:43,440 --> 00:03:46,400 Speaker 2: are sellers giving up any hope for lower mortgage rates 76 00:03:46,480 --> 00:03:48,520 Speaker 2: right now? Just saying we've got to pull this trigger now. 77 00:03:49,840 --> 00:03:52,280 Speaker 5: Well, I think it could be good or bad, depending 78 00:03:52,280 --> 00:03:55,200 Speaker 5: on who you ask. I mean, we think that more 79 00:03:55,240 --> 00:03:59,360 Speaker 5: inventory coming to the market could support modestly improve volumes 80 00:03:59,680 --> 00:04:02,320 Speaker 5: in the existing home market as a whole. But I 81 00:04:02,320 --> 00:04:04,800 Speaker 5: do think that over time that will come with more 82 00:04:04,840 --> 00:04:09,000 Speaker 5: moderate price increases in a lot of markets outright price declines, 83 00:04:09,000 --> 00:04:12,320 Speaker 5: and we're already seeing that in some markets, predominantly in 84 00:04:12,360 --> 00:04:15,600 Speaker 5: the South and the Southwest. When you think about it 85 00:04:15,600 --> 00:04:18,960 Speaker 5: from a builder's perspective. You know, one of the key 86 00:04:19,040 --> 00:04:21,159 Speaker 5: drivers over the last several years have been a lack 87 00:04:21,200 --> 00:04:24,520 Speaker 5: of listings, which have forest fires into the new home market. 88 00:04:25,040 --> 00:04:27,240 Speaker 5: Now and some of the biggest markets that the builders 89 00:04:27,279 --> 00:04:30,039 Speaker 5: are in Florida and Texas, you have inventory levels which 90 00:04:30,040 --> 00:04:33,080 Speaker 5: are back above twenty nineteen. So what we're seeing is 91 00:04:33,120 --> 00:04:35,239 Speaker 5: that in order for the builders to compete in these markets, 92 00:04:35,279 --> 00:04:37,960 Speaker 5: they're having them more heavily discount So, you know, they're 93 00:04:37,960 --> 00:04:40,920 Speaker 5: having to increase these sales incentives. Maybe in some cases 94 00:04:40,960 --> 00:04:44,119 Speaker 5: they're lowering base prices, but it's becoming harder and harder 95 00:04:44,160 --> 00:04:46,279 Speaker 5: to get each sale for the builders. 96 00:04:46,520 --> 00:04:50,400 Speaker 2: Wow, so they're changing their tactics. Are I know that 97 00:04:50,440 --> 00:04:52,719 Speaker 2: there are some things they can do as far as 98 00:04:53,360 --> 00:04:57,200 Speaker 2: economic incentives. Are they building smaller homes? Are they putting 99 00:04:57,240 --> 00:05:01,440 Speaker 2: in you know, maybe not a Bosch dishwasher, but a whirlpool? 100 00:05:01,520 --> 00:05:05,320 Speaker 2: You know what I mean? Are are are they struggling. 101 00:05:05,720 --> 00:05:08,560 Speaker 5: With Yeah, builders have done a handful of things to 102 00:05:08,640 --> 00:05:12,600 Speaker 5: try to get that affordability equation back in better check one. 103 00:05:12,640 --> 00:05:15,520 Speaker 5: They are building smaller square footage homes. It's we've seen 104 00:05:15,520 --> 00:05:18,120 Speaker 5: over the last several years, you're not seeing as highly 105 00:05:18,200 --> 00:05:22,000 Speaker 5: amenditized offerings, particularly for builders at the lower end of 106 00:05:22,040 --> 00:05:24,080 Speaker 5: the market who are catering to the entry level buyer 107 00:05:24,120 --> 00:05:27,640 Speaker 5: who are more looking for shelter in the first place. 108 00:05:28,279 --> 00:05:31,920 Speaker 5: So you're seeing less less amenities in those offerings. You're seeing, 109 00:05:32,040 --> 00:05:35,320 Speaker 5: you know, higher density options, so maybe more talent home 110 00:05:35,360 --> 00:05:36,960 Speaker 5: construction than things of those nature. 111 00:05:37,560 --> 00:05:40,720 Speaker 2: Now, another thing I'm hearing about is possibly the administration's 112 00:05:40,720 --> 00:05:44,760 Speaker 2: tough immigration policies. Has that impacted builders in a big 113 00:05:44,760 --> 00:05:47,240 Speaker 2: way yet or is that still being flushed out that 114 00:05:47,279 --> 00:05:51,279 Speaker 2: they're just don't have the workers availability that they did before. 115 00:05:52,680 --> 00:05:56,400 Speaker 5: Yeah, So, the lack of lyabor supply in the residential 116 00:05:56,400 --> 00:05:59,159 Speaker 5: construction industry has been an issue for you know, a 117 00:05:59,200 --> 00:06:01,720 Speaker 5: handful of years really since the bottom of the last cycle. 118 00:06:02,920 --> 00:06:05,560 Speaker 5: We've seen things start to improve more recently, and that's 119 00:06:05,600 --> 00:06:08,599 Speaker 5: because volumes in the industry have come down, so there's 120 00:06:08,640 --> 00:06:11,080 Speaker 5: not as much a need. But that being said, you know, 121 00:06:11,160 --> 00:06:14,279 Speaker 5: the immigration policies and all that discussion is certainly a 122 00:06:14,320 --> 00:06:16,520 Speaker 5: headline risk for the group. To this point, the builders 123 00:06:16,600 --> 00:06:19,400 Speaker 5: we talked to haven't really seen an impact from that, 124 00:06:19,440 --> 00:06:21,040 Speaker 5: but it's certainly something that we're going to keep our 125 00:06:21,040 --> 00:06:24,039 Speaker 5: eye on because to the extent that you know, maybe 126 00:06:24,080 --> 00:06:26,040 Speaker 5: housing does start to come back a little bit. If 127 00:06:26,120 --> 00:06:29,480 Speaker 5: rates are able to fall, then you have more builders 128 00:06:29,520 --> 00:06:32,280 Speaker 5: competing for less supply, which would raise labor costs. 129 00:06:32,720 --> 00:06:34,160 Speaker 2: Got it, got it now? 130 00:06:34,240 --> 00:06:34,440 Speaker 5: Drew. 131 00:06:34,800 --> 00:06:37,400 Speaker 2: This coming week we get first quarter earnings from the 132 00:06:37,480 --> 00:06:39,920 Speaker 2: Nation's Too big as do it Yourself, home improvement chains, 133 00:06:39,920 --> 00:06:43,400 Speaker 2: Home Depot and Lows. Now, what do you think those 134 00:06:43,480 --> 00:06:45,400 Speaker 2: results are going to tell us about the housing market 135 00:06:45,480 --> 00:06:48,680 Speaker 2: right now and about what people are doing to their homes. 136 00:06:50,320 --> 00:06:51,840 Speaker 5: Yeah, good question. I think this is going to be 137 00:06:51,880 --> 00:06:54,960 Speaker 5: an interesting quarter for home improvement retail. It seemed like 138 00:06:55,000 --> 00:06:56,800 Speaker 5: coming out of last quarter the industry was starting to 139 00:06:56,800 --> 00:06:59,159 Speaker 5: get a little bit of momentum. We had the first 140 00:06:59,160 --> 00:07:02,479 Speaker 5: same store sales growth in about two years, you know, 141 00:07:02,520 --> 00:07:05,719 Speaker 5: certainly not going gangbusters, but perhaps indicating that the worst 142 00:07:05,760 --> 00:07:07,719 Speaker 5: was behind it. As we gotten through the first few 143 00:07:07,720 --> 00:07:10,600 Speaker 5: months of this year, we've had some volatility in the weather, 144 00:07:11,600 --> 00:07:14,320 Speaker 5: We've had an increased amount of certainty given the commentary 145 00:07:14,360 --> 00:07:17,400 Speaker 5: around economic growth and political developments, and we think that 146 00:07:17,440 --> 00:07:20,600 Speaker 5: will probably be reflected in both results and guidance. And 147 00:07:20,640 --> 00:07:22,880 Speaker 5: when you think about, you know, how they're being impacted 148 00:07:22,880 --> 00:07:25,800 Speaker 5: by housing and what it means is is we're really 149 00:07:25,800 --> 00:07:29,000 Speaker 5: seeing it on the big ticket side of the business, 150 00:07:29,040 --> 00:07:32,560 Speaker 5: so think of things like kitchen and bathroom models, flooring projects, 151 00:07:32,600 --> 00:07:35,160 Speaker 5: and things along those lines. It's the discretionary side of 152 00:07:35,160 --> 00:07:38,559 Speaker 5: the business is certainly softer, and part of the reason 153 00:07:38,640 --> 00:07:40,760 Speaker 5: for that is because rates are so high and these 154 00:07:40,760 --> 00:07:44,400 Speaker 5: are projects that are typically financed, So we're seeing relative 155 00:07:44,400 --> 00:07:47,360 Speaker 5: softness on that side of the business. If we look 156 00:07:47,360 --> 00:07:49,360 Speaker 5: at some of the more race recent data we have 157 00:07:49,520 --> 00:07:52,840 Speaker 5: on traffic, you know, it shows that February was week, 158 00:07:53,920 --> 00:07:57,240 Speaker 5: March improved a little bit and it was mixed in April. 159 00:07:57,520 --> 00:07:59,640 Speaker 5: On a relative basis, it looks like home depots maybe 160 00:07:59,680 --> 00:08:02,520 Speaker 5: doing a little bit better from a traffic perspective, and 161 00:08:02,560 --> 00:08:04,440 Speaker 5: I think we're going to see that in performance at 162 00:08:04,440 --> 00:08:07,920 Speaker 5: the same store sales because Loews has that higher exposure 163 00:08:07,920 --> 00:08:10,200 Speaker 5: to the DIY customer, which is a little bit weaker 164 00:08:10,200 --> 00:08:10,840 Speaker 5: at this point. 165 00:08:11,120 --> 00:08:13,480 Speaker 2: Well a lot to look forward to existing home sales. 166 00:08:13,480 --> 00:08:15,880 Speaker 2: That's the biggie for April that's out on Thursday. New 167 00:08:15,920 --> 00:08:18,520 Speaker 2: home sales for that same month out on Friday. Our 168 00:08:18,600 --> 00:08:22,239 Speaker 2: thanks to Drew Redding, Bloomberg Intelligence US home building analyst. 169 00:08:22,880 --> 00:08:25,080 Speaker 2: We move next to earnings and this week we get 170 00:08:25,080 --> 00:08:28,080 Speaker 2: first quarter results from the retail giant Target, which has 171 00:08:28,120 --> 00:08:31,160 Speaker 2: faced some real struggles lately, and not just because of 172 00:08:31,280 --> 00:08:34,440 Speaker 2: US consumers pulling back on their spending. For more on 173 00:08:34,480 --> 00:08:38,400 Speaker 2: what to expect, we're joined by Jennifer bartashis Bloomberg Intelligence 174 00:08:38,400 --> 00:08:42,000 Speaker 2: Senior Analysts Retail, Staples and packaged Foods. Well, Jen, thank 175 00:08:42,040 --> 00:08:44,000 Speaker 2: you for being here. You know, just this past week, 176 00:08:44,480 --> 00:08:47,560 Speaker 2: Walmart reported strong earnings for last quarter, but warrened, it'll 177 00:08:47,559 --> 00:08:51,080 Speaker 2: have to start raising prices talking about the Trump tariffs 178 00:08:51,200 --> 00:08:54,640 Speaker 2: the economic turbulence that they've caused. Are you expecting to 179 00:08:54,640 --> 00:08:56,880 Speaker 2: see something pretty similar from Target? 180 00:08:57,920 --> 00:09:00,720 Speaker 7: Yeah? It was interesting when you've we've got a company 181 00:09:00,760 --> 00:09:03,360 Speaker 7: as big as Walmart saying that they're not going to 182 00:09:03,400 --> 00:09:06,680 Speaker 7: be able to offset the full cost of tariffs. That 183 00:09:06,840 --> 00:09:10,040 Speaker 7: really means that for every other retailer out there, they're 184 00:09:10,040 --> 00:09:12,640 Speaker 7: in the same boat, or maybe even slightly worse off. 185 00:09:12,720 --> 00:09:16,480 Speaker 7: And so we definitely expect Target to be hit a 186 00:09:16,520 --> 00:09:19,560 Speaker 7: little bit harder than Walmart, even just because of the 187 00:09:19,679 --> 00:09:24,480 Speaker 7: mix of products that Target sells, and we expect to 188 00:09:24,480 --> 00:09:26,600 Speaker 7: hear a lot of similar commentary coming out of the 189 00:09:26,640 --> 00:09:27,600 Speaker 7: retailer this week. 190 00:09:28,160 --> 00:09:30,960 Speaker 2: Now, some of those problems or some of those challenges 191 00:09:31,040 --> 00:09:35,520 Speaker 2: for Walmart, where Walmart makes about half its money from groceries, 192 00:09:35,559 --> 00:09:38,360 Speaker 2: Target maybe about a quarter percent. Is that part of 193 00:09:38,400 --> 00:09:39,280 Speaker 2: the equation there? 194 00:09:40,600 --> 00:09:43,840 Speaker 7: That is definitely part of the equation because food is 195 00:09:44,000 --> 00:09:47,079 Speaker 7: generally for the most part produced and made in the 196 00:09:47,160 --> 00:09:49,960 Speaker 7: United States, so it's not subject to tariffs. And a 197 00:09:50,000 --> 00:09:52,600 Speaker 7: lot of food that is imported is coming from Mexico 198 00:09:52,679 --> 00:09:56,160 Speaker 7: or Canada, which is also currently free from tariffs based 199 00:09:56,160 --> 00:10:01,600 Speaker 7: off of the North America. Mexico wedded a Mexico US 200 00:10:01,640 --> 00:10:05,439 Speaker 7: trade agreement, and so there's limited exposure to tariffs in 201 00:10:05,480 --> 00:10:08,200 Speaker 7: a food business. So the bigger your food business, the 202 00:10:08,200 --> 00:10:12,480 Speaker 7: better you offer are in this tariff situation. So for Target, 203 00:10:12,640 --> 00:10:16,520 Speaker 7: their food business is a lot smaller, and so it 204 00:10:16,559 --> 00:10:18,680 Speaker 7: doesn't give them as much of a cushion as it 205 00:10:18,720 --> 00:10:19,600 Speaker 7: does for Walmart. 206 00:10:20,360 --> 00:10:24,120 Speaker 2: And let's talk about the consumer, because I know that's 207 00:10:24,160 --> 00:10:26,880 Speaker 2: why a lot of them go to Walmart and also 208 00:10:27,000 --> 00:10:29,760 Speaker 2: to Target. But we saw some just this past week 209 00:10:30,160 --> 00:10:33,160 Speaker 2: retail sales for April that was the month those Trump 210 00:10:33,200 --> 00:10:36,440 Speaker 2: tariffs were announced, and yet they edged a little bit 211 00:10:36,480 --> 00:10:39,360 Speaker 2: higher unexpectedly, only one tenth of a percent, but it 212 00:10:39,400 --> 00:10:42,559 Speaker 2: was an increase. What is the consumer doing right now? 213 00:10:43,240 --> 00:10:44,120 Speaker 2: How are they acting. 214 00:10:44,840 --> 00:10:45,040 Speaker 6: Well. 215 00:10:45,080 --> 00:10:47,880 Speaker 7: What was interesting I think about those numbers is that 216 00:10:48,200 --> 00:10:52,559 Speaker 7: there were consumers who cautiously pulled forward some of their 217 00:10:52,600 --> 00:10:56,360 Speaker 7: spending because they weren't sure when price hikes related to 218 00:10:56,400 --> 00:10:59,000 Speaker 7: tariffs were going to take effect. And so although we 219 00:10:59,040 --> 00:11:03,600 Speaker 7: didn't see a run on stores where inventory just disappeared 220 00:11:03,679 --> 00:11:07,200 Speaker 7: and things were in shortage, there was some pull forward 221 00:11:07,280 --> 00:11:09,680 Speaker 7: and spending where people were planning and they said, you know, 222 00:11:09,800 --> 00:11:12,080 Speaker 7: I usually buy this, I'm just going to buy a 223 00:11:12,080 --> 00:11:14,440 Speaker 7: little bit extra because I don't know what's going to happen. 224 00:11:14,880 --> 00:11:18,520 Speaker 7: So now that we have a little bit more clarity, 225 00:11:18,640 --> 00:11:22,120 Speaker 7: people haven't seen prices move too quickly. I think that 226 00:11:22,240 --> 00:11:26,200 Speaker 7: the consumer is just staying very cautious. You know, they're 227 00:11:26,240 --> 00:11:29,880 Speaker 7: looking for value. Now. Value applies in different ways to 228 00:11:29,920 --> 00:11:33,360 Speaker 7: different people. It could be just price, it could be convenience, 229 00:11:33,440 --> 00:11:37,079 Speaker 7: it could be quality. So what's really important for retailers 230 00:11:37,240 --> 00:11:41,520 Speaker 7: is to figure out how to translate that value message 231 00:11:41,960 --> 00:11:45,280 Speaker 7: appropriately even in the with the backdrop of the economic 232 00:11:45,360 --> 00:11:46,440 Speaker 7: environment in tariffs. 233 00:11:46,720 --> 00:11:49,840 Speaker 2: Yeah, it's a fine line, a tricky line to pull 234 00:11:49,880 --> 00:11:50,360 Speaker 2: this off. 235 00:11:50,679 --> 00:11:53,600 Speaker 7: Oh no, it definitely is a tricky balance, just because 236 00:11:54,000 --> 00:11:56,959 Speaker 7: you don't want to risk the loyalty of your consumers, 237 00:11:57,000 --> 00:11:58,880 Speaker 7: but at the same time you still have to make 238 00:11:59,040 --> 00:12:01,920 Speaker 7: a profit, and so it's going to be interesting to 239 00:12:01,960 --> 00:12:05,960 Speaker 7: see which retailers are best able to navigate that situation. 240 00:12:06,440 --> 00:12:08,959 Speaker 2: There will Target's earnings are out this Wednesday, and our 241 00:12:09,000 --> 00:12:13,640 Speaker 2: thanks to Jennifer Bartashes Bloomberg Intelligence senior analysts retail staples 242 00:12:13,640 --> 00:12:17,200 Speaker 2: and packaged foods. Coming up on Bloomberg Daybreak weekend, world 243 00:12:17,280 --> 00:12:21,600 Speaker 2: and business leaders head to the Cutter Economic Forum. I'm 244 00:12:21,600 --> 00:12:35,480 Speaker 2: Tom Busby and this is Bloomberg. This is Bloomberg day 245 00:12:35,520 --> 00:12:37,720 Speaker 2: Break weekend, our global look ahead at the top stories 246 00:12:37,720 --> 00:12:40,319 Speaker 2: for investors in the coming week. I'm Tom Busby in 247 00:12:40,400 --> 00:12:43,120 Speaker 2: New York. Up later in our program and look ahead 248 00:12:43,120 --> 00:12:46,320 Speaker 2: to earnings from the Chinese tech giant Bad but first. 249 00:12:46,679 --> 00:12:49,000 Speaker 2: In the wake of President Trump's visit to the Middle East, 250 00:12:49,360 --> 00:12:51,880 Speaker 2: the region will be in the spotlight again this week 251 00:12:51,920 --> 00:12:56,480 Speaker 2: as world and business leaders touchdown for the Qatar Economic Forum. 252 00:12:57,000 --> 00:13:00,440 Speaker 2: Amidst growing global instability. Could twenty twenty five herald a 253 00:13:00,480 --> 00:13:03,640 Speaker 2: new era of dominance for golf nations. For more, Let's 254 00:13:03,640 --> 00:13:05,520 Speaker 2: get to London and bring in Bloomberg day Break euro 255 00:13:05,640 --> 00:13:07,240 Speaker 2: banker Caroline Hepgar. 256 00:13:07,679 --> 00:13:08,000 Speaker 1: Tom. 257 00:13:08,120 --> 00:13:11,839 Speaker 3: It's the fifth edition of the Cutar Economic Forum, an 258 00:13:11,840 --> 00:13:15,640 Speaker 3: event underwritten by the State of Katar and powered by Bloomberg. 259 00:13:16,040 --> 00:13:19,760 Speaker 3: This year, the theme is transforming the global economy. It's 260 00:13:19,760 --> 00:13:22,680 Speaker 3: an apt topic at a time when the world's trade 261 00:13:22,679 --> 00:13:27,680 Speaker 3: and capital flows, economies, investment, and energy industry are all 262 00:13:27,720 --> 00:13:32,520 Speaker 3: in flux. There's also the question of geopolitical uncertainty, a 263 00:13:32,600 --> 00:13:37,200 Speaker 3: phenomenon the region has battled with in Gaza, Lebanon, Iran, 264 00:13:37,400 --> 00:13:41,600 Speaker 3: and elsewhere. But residents and investors are keen to showcase 265 00:13:41,880 --> 00:13:45,760 Speaker 3: the Middle East potential as an emerging global player and 266 00:13:45,960 --> 00:13:49,840 Speaker 3: investment partner. It's a factor President Donald Trump emphasized during 267 00:13:49,840 --> 00:13:54,559 Speaker 3: his recent visit to Saudi Arabia. Despite acknowledging current barriers 268 00:13:54,600 --> 00:13:56,040 Speaker 3: to progress. 269 00:13:55,840 --> 00:14:00,000 Speaker 8: The Golf Nations are at the forefront of creating a stable, peaceful, 270 00:14:00,120 --> 00:14:04,440 Speaker 8: and prosperous Middle East. And I have to say that 271 00:14:05,080 --> 00:14:09,480 Speaker 8: I've seen such progress. It's really incredible. I've also seen 272 00:14:09,520 --> 00:14:12,760 Speaker 8: great unity and friendships. I've spent a little time with 273 00:14:12,840 --> 00:14:16,840 Speaker 8: you just before this, and I've seen tremendous unity, tremendous friendship. 274 00:14:16,920 --> 00:14:19,720 Speaker 8: And the whole world is watching the Middle East, and 275 00:14:19,800 --> 00:14:23,160 Speaker 8: many are watching with envy. You have something very special 276 00:14:23,200 --> 00:14:27,680 Speaker 8: going on. Incredible opportunities are within reach for this region 277 00:14:28,520 --> 00:14:31,200 Speaker 8: if we can simply stop the aggression from a small 278 00:14:31,240 --> 00:14:33,040 Speaker 8: group of pretty bad actors. 279 00:14:33,600 --> 00:14:36,840 Speaker 3: That was President Trump speaking during his time in Riad, 280 00:14:36,920 --> 00:14:40,520 Speaker 3: Saudi Arabia as part of his Middle East tour. The 281 00:14:40,560 --> 00:14:44,240 Speaker 3: praise and the deals that President Trump lavished on Cuta, 282 00:14:44,440 --> 00:14:47,760 Speaker 3: saying that the friendship between the US and Cutter has 283 00:14:47,800 --> 00:14:51,040 Speaker 3: never been stronger, will surely be on the minds of 284 00:14:51,080 --> 00:14:55,560 Speaker 3: participants at the upcoming Cutter Economic Forum. So what should 285 00:14:55,560 --> 00:14:58,920 Speaker 3: we expect. I've been speaking to Blueberg's managing editor for 286 00:14:58,960 --> 00:15:01,880 Speaker 3: the Middle East and North Africa on and to get 287 00:15:01,880 --> 00:15:04,800 Speaker 3: a sense of what the main themes at the forum 288 00:15:04,880 --> 00:15:05,640 Speaker 3: are likely to be. 289 00:15:06,120 --> 00:15:10,400 Speaker 6: The overarching theme these officially will be that will shape 290 00:15:10,400 --> 00:15:14,120 Speaker 6: the discussions that the Cutar Economic Forum will be the 291 00:15:14,200 --> 00:15:18,240 Speaker 6: transforming transformation of the global economy on the road to 292 00:15:18,480 --> 00:15:22,840 Speaker 6: twenty thirty. And that's especially relevant to the region to 293 00:15:22,960 --> 00:15:27,040 Speaker 6: the Middle East Gulf, where oil producers are at the 294 00:15:27,080 --> 00:15:31,760 Speaker 6: forefront of that transformation as they are trying to diversify 295 00:15:32,200 --> 00:15:36,960 Speaker 6: their sources of income and their economy more broadly away 296 00:15:37,000 --> 00:15:40,600 Speaker 6: from hydrocarbons. And that is an effort led by the 297 00:15:40,800 --> 00:15:43,040 Speaker 6: likes of cutter, as well as Saudi Arabia and of 298 00:15:43,040 --> 00:15:46,960 Speaker 6: course the United Arab Emirates where Abu Dhabi is the 299 00:15:47,040 --> 00:15:50,520 Speaker 6: capital and Dubai is the commercial heartland. 300 00:15:52,040 --> 00:15:55,200 Speaker 3: I talked about the praise, but there are also lots 301 00:15:55,200 --> 00:15:57,880 Speaker 3: of questions and there are certainly plenty of tensions. The 302 00:15:58,040 --> 00:16:04,760 Speaker 3: backdrop of global trade, disruption of geopolitical instability will that 303 00:16:04,840 --> 00:16:08,040 Speaker 3: surely play into the discussions definitely. 304 00:16:08,080 --> 00:16:12,160 Speaker 6: So the forces unleashed by the global trade war, if 305 00:16:12,200 --> 00:16:14,640 Speaker 6: we can call it that at this point, or maybe 306 00:16:14,680 --> 00:16:18,680 Speaker 6: more cautiously, disruptions to the global trade are weighing down 307 00:16:18,680 --> 00:16:22,080 Speaker 6: on economies across the world, but the impact is likely 308 00:16:22,160 --> 00:16:26,320 Speaker 6: to be more profound in the region than elsewhere, especially 309 00:16:26,360 --> 00:16:32,400 Speaker 6: taking into account taking into account the effect on oil 310 00:16:32,480 --> 00:16:38,160 Speaker 6: prices as well as sources of geopolitical instability that you 311 00:16:38,240 --> 00:16:46,240 Speaker 6: have already mentioned. Trade disruptions amplified by other factor other 312 00:16:46,320 --> 00:16:50,360 Speaker 6: factors such as Ope's own decision to bring forward some 313 00:16:50,520 --> 00:16:56,080 Speaker 6: of the planned production boosts already is having a great 314 00:16:56,720 --> 00:17:00,800 Speaker 6: impact on oil prices and they're pushing them down and 315 00:17:00,880 --> 00:17:05,560 Speaker 6: those revenues, the revenues from oil in general makes up 316 00:17:05,560 --> 00:17:08,320 Speaker 6: the backbone of common revenues, so that is definitely going 317 00:17:08,400 --> 00:17:11,480 Speaker 6: to be a part of the discussion at the Katar 318 00:17:11,600 --> 00:17:16,199 Speaker 6: Economic Forum. And obviously we should add to that the 319 00:17:16,400 --> 00:17:20,200 Speaker 6: violent conflicts, including the war in Gaza between Israel and Hamas, 320 00:17:20,560 --> 00:17:23,600 Speaker 6: which now has been raging for more than a year 321 00:17:24,200 --> 00:17:28,720 Speaker 6: and a half, and it's something that forum participants will 322 00:17:28,760 --> 00:17:32,359 Speaker 6: definitely discuss as it does affect everything from the capital 323 00:17:32,440 --> 00:17:35,320 Speaker 6: flows to a perception of risk, which has obviously a 324 00:17:35,400 --> 00:17:40,320 Speaker 6: huge impact on investors' propensity to increase exposure to the region. 325 00:17:41,080 --> 00:17:44,520 Speaker 3: And the conflicts in Gaza, the war in Yemen, you know, 326 00:17:44,800 --> 00:17:48,959 Speaker 3: whether the sanctions against Syria may be lifted by the US, 327 00:17:49,080 --> 00:17:53,560 Speaker 3: you know, the whole issue of security. But just tell 328 00:17:53,640 --> 00:17:56,080 Speaker 3: us about the people who are going to be there, 329 00:17:56,119 --> 00:17:58,760 Speaker 3: Who are going to be attending. I mean you've got 330 00:17:58,800 --> 00:18:01,720 Speaker 3: speakers from you know, the likes of the TESTA CEO 331 00:18:01,760 --> 00:18:06,560 Speaker 3: Elon Musk, to central bankers, even to you know, former 332 00:18:06,560 --> 00:18:09,359 Speaker 3: British politician Dominic rab is going to be there. So 333 00:18:10,160 --> 00:18:13,000 Speaker 3: who are you going to be thinking about and listening 334 00:18:13,000 --> 00:18:13,720 Speaker 3: to the event. 335 00:18:15,440 --> 00:18:19,040 Speaker 6: That's true, a wide range of speakers. The highlight is 336 00:18:19,040 --> 00:18:24,800 Speaker 6: definitely Elon Musk with everything he has to say about 337 00:18:25,080 --> 00:18:28,359 Speaker 6: his efforts to increase government efficiency in the US to 338 00:18:28,600 --> 00:18:32,400 Speaker 6: Tesla and the competition that he is facing from manufacturers 339 00:18:32,440 --> 00:18:36,000 Speaker 6: elsewhere in the world, including in China. But besides that, 340 00:18:36,200 --> 00:18:41,240 Speaker 6: we will see finance ministers, global investors and venture capitalists 341 00:18:41,760 --> 00:18:44,320 Speaker 6: who will be coming together during the Cutar Economic Form 342 00:18:44,359 --> 00:18:47,679 Speaker 6: to discuss everything from transformation of the global economy, the 343 00:18:47,720 --> 00:18:52,440 Speaker 6: regional economies, trade disputes, energy prices, and of course geopolitics 344 00:18:52,440 --> 00:18:54,960 Speaker 6: of the Middle East. And I think that's where Dominic 345 00:18:55,000 --> 00:18:58,960 Speaker 6: rabb among a few others such as David Petris, the 346 00:18:59,080 --> 00:19:03,720 Speaker 6: former general, former American General, will be coming to the 347 00:19:03,720 --> 00:19:06,879 Speaker 6: fort to discuss your politics and conflicts in the region. 348 00:19:07,280 --> 00:19:12,360 Speaker 3: Yeah, David Patres, Yes, indeed. But you mentioned investment opportunities 349 00:19:12,600 --> 00:19:17,159 Speaker 3: and the idea of diversifying away from hydrocarbons, obviously a 350 00:19:17,320 --> 00:19:20,880 Speaker 3: huge undertaking in the Middle East. Do you think that 351 00:19:21,119 --> 00:19:24,919 Speaker 3: GCC countries and others are going to try to hedge 352 00:19:24,960 --> 00:19:29,320 Speaker 3: their dependence on the kind of US led global financial order. 353 00:19:29,560 --> 00:19:33,359 Speaker 3: Obviously it comes on the back of President Trump's major tour, 354 00:19:33,480 --> 00:19:38,119 Speaker 3: his first sort of big overseas tour other than the 355 00:19:38,200 --> 00:19:41,359 Speaker 3: visit to the Vatican. Do you think that there's going 356 00:19:41,440 --> 00:19:45,479 Speaker 3: to be discussion of that, of that balance of power 357 00:19:45,600 --> 00:19:48,440 Speaker 3: and kind of investment relationships. 358 00:19:49,920 --> 00:19:56,240 Speaker 6: This is a very tricky balance for golf oil producers, 359 00:19:56,400 --> 00:20:01,680 Speaker 6: and if anything, since Donald Trump's to be the second 360 00:20:02,040 --> 00:20:04,920 Speaker 6: to be the president of the US for a second time, 361 00:20:05,680 --> 00:20:08,919 Speaker 6: the nature of the relationship between the US and this 362 00:20:09,040 --> 00:20:13,840 Speaker 6: region is becoming more transactional, and it's affecting the narrative 363 00:20:15,040 --> 00:20:20,800 Speaker 6: that's dominating, that's dominating the discussions and the ties between 364 00:20:21,240 --> 00:20:24,920 Speaker 6: the US and the region. So because of the fact 365 00:20:25,000 --> 00:20:27,800 Speaker 6: that the US relationship with the region is but becoming 366 00:20:27,840 --> 00:20:31,720 Speaker 6: more trans is actional than it used to be, we 367 00:20:31,960 --> 00:20:37,560 Speaker 6: are going to see an increasing pressure or increasing tendency 368 00:20:37,600 --> 00:20:41,679 Speaker 6: by the US to force the countries in the region 369 00:20:42,160 --> 00:20:46,119 Speaker 6: to make a clear choice in terms of their preferred 370 00:20:46,200 --> 00:20:50,560 Speaker 6: partners for trade, especially in sensitive areas such as AI, 371 00:20:51,080 --> 00:20:56,719 Speaker 6: high technology, defense equipment, and aviation. One of the things 372 00:20:56,800 --> 00:21:01,119 Speaker 6: that the US administration has been trying to think the 373 00:21:01,160 --> 00:21:04,240 Speaker 6: purchases of such sensitive and high technology coming from the 374 00:21:04,400 --> 00:21:08,080 Speaker 6: US for countries in the region is that they should 375 00:21:08,119 --> 00:21:13,200 Speaker 6: not be doing trade in such sssive areas with sort 376 00:21:13,200 --> 00:21:17,360 Speaker 6: of the other pole in the global financial and economic order, 377 00:21:17,440 --> 00:21:20,399 Speaker 6: and that is China. So we are going to see 378 00:21:20,560 --> 00:21:24,880 Speaker 6: I think a tendency by the region by members of 379 00:21:24,920 --> 00:21:28,440 Speaker 6: the GCC, especially these top three producers of oil and gas, 380 00:21:29,320 --> 00:21:34,200 Speaker 6: to prioritize the US as a trading partner, as it 381 00:21:34,320 --> 00:21:37,040 Speaker 6: was evident during Trump's trip to the Gulf, as you 382 00:21:37,119 --> 00:21:40,800 Speaker 6: mentioned over their relationship with the rest of the world 383 00:21:40,880 --> 00:21:41,879 Speaker 6: and possibly China. 384 00:21:42,200 --> 00:21:45,879 Speaker 3: That was Bloomberg's Managing editor for Middle East and North Africa, honor, 385 00:21:45,960 --> 00:21:48,960 Speaker 3: and my thanks to him for joining me ahead of 386 00:21:49,000 --> 00:21:53,040 Speaker 3: the fifth Cutter Economic Forum underwritten by the State of Cutter, 387 00:21:53,200 --> 00:21:56,960 Speaker 3: empowered by Bloomberg. I'm Caroline Hepge here in London where 388 00:21:57,000 --> 00:22:00,000 Speaker 3: you can catch us every weekday morning for Bloomberg Daybreak. 389 00:22:00,000 --> 00:22:02,400 Speaker 3: Thank you at beginning at six am in London. That's 390 00:22:02,480 --> 00:22:03,639 Speaker 3: one am on Wall Street. 391 00:22:03,720 --> 00:22:07,280 Speaker 2: Tom, Thanks Caroline, and coming up on Bloomberg day Break weekend, 392 00:22:07,320 --> 00:22:09,760 Speaker 2: we look ahead to earnings from China's answer to Google 393 00:22:10,240 --> 00:22:24,600 Speaker 2: by DO. I'm Tom Busby and this is Bloomberg. This 394 00:22:24,680 --> 00:22:26,879 Speaker 2: is Bloomberg day Break weekend, our global look ahead of 395 00:22:26,920 --> 00:22:29,400 Speaker 2: the top stories for investors in the coming week. I'm 396 00:22:29,480 --> 00:22:33,200 Speaker 2: Tom Busby in New York. BYD's early lead in AI 397 00:22:33,359 --> 00:22:36,520 Speaker 2: is being eroded by fast moving competitors and its core 398 00:22:36,600 --> 00:22:40,280 Speaker 2: search business continues to lose ground to short form video apps. 399 00:22:40,680 --> 00:22:42,639 Speaker 2: For more on what's going on, let's get to the 400 00:22:42,640 --> 00:22:45,400 Speaker 2: host of the Daybreak Asia podcast, Doug Krisner. 401 00:22:45,800 --> 00:22:49,480 Speaker 4: Tom Beayching sees it as one of its national champions. 402 00:22:49,520 --> 00:22:52,520 Speaker 4: This is by Do and the company will report earnings 403 00:22:52,520 --> 00:22:56,240 Speaker 4: in the coming week. Now, Bloomberg Intelligence says Bydu's outlook 404 00:22:56,320 --> 00:23:01,479 Speaker 4: remains highly challenged. It's AI ventures to remain unprofitable for 405 00:23:01,520 --> 00:23:04,760 Speaker 4: the next three years as competitors like ten Cent, by 406 00:23:04,920 --> 00:23:08,320 Speaker 4: Dance and Ali Baba narrow the gap. For a closer look, 407 00:23:08,359 --> 00:23:11,560 Speaker 4: I'm joined by Bloomberg's Robert Lee. He is senior software 408 00:23:11,600 --> 00:23:15,919 Speaker 4: analyst for Bloomberg Intelligence, joining from our studios in Hong Kong. Robert, 409 00:23:15,960 --> 00:23:17,960 Speaker 4: thank you so much for making time to chat with me. 410 00:23:18,520 --> 00:23:22,200 Speaker 4: Let's begin by remembering where we were when Baydu reported 411 00:23:22,320 --> 00:23:27,159 Speaker 4: its fourth quarter numbers. Aiicloud revenue grew twenty six percent 412 00:23:27,280 --> 00:23:31,679 Speaker 4: year on year, advertising revenue continued to decline. So to 413 00:23:31,760 --> 00:23:35,600 Speaker 4: what extent will the upcoming results kind of mirror what 414 00:23:35,640 --> 00:23:36,920 Speaker 4: we had in the prior quarter. 415 00:23:37,480 --> 00:23:40,280 Speaker 9: I think probably is most likely to be a mirror, 416 00:23:40,400 --> 00:23:43,040 Speaker 9: as you say, of what we saw before, because taking 417 00:23:43,040 --> 00:23:46,080 Speaker 9: a step back, Bydo is often referred to as the 418 00:23:46,119 --> 00:23:49,360 Speaker 9: Google of China. It's the dominant search engine. So that's 419 00:23:49,400 --> 00:23:53,760 Speaker 9: the cash cow, but relatively low growth business which underpins 420 00:23:53,800 --> 00:23:57,720 Speaker 9: their cash generation and helps fund their investments in AI 421 00:23:58,280 --> 00:24:00,600 Speaker 9: and on the AI side. As you mentioned, I think 422 00:24:00,640 --> 00:24:03,280 Speaker 9: it's well recognized over the last two to three years 423 00:24:04,200 --> 00:24:06,040 Speaker 9: that they were seen as a national champion. As you 424 00:24:06,080 --> 00:24:09,960 Speaker 9: said in your intro, they had a quite a large 425 00:24:10,920 --> 00:24:15,000 Speaker 9: lead on the competition, but progressively we've seen that lead 426 00:24:15,200 --> 00:24:19,360 Speaker 9: eroad and why is that ultimately well, a number of reasons, 427 00:24:19,359 --> 00:24:22,760 Speaker 9: but by dou is a medium sized company, and you've 428 00:24:22,760 --> 00:24:27,919 Speaker 9: got China's tech goliaths, not just ten Cent and Eli Barba, 429 00:24:28,000 --> 00:24:32,000 Speaker 9: but the likes of Huawei, Byte Dance, the national telco companies, 430 00:24:32,280 --> 00:24:36,399 Speaker 9: the list goes on. These are substantial companies with huge 431 00:24:36,400 --> 00:24:41,280 Speaker 9: cash flow and huge balance sheets behind them, a considerable 432 00:24:41,320 --> 00:24:45,280 Speaker 9: depth of R and D resource and developers and engineers. 433 00:24:45,760 --> 00:24:49,240 Speaker 9: So it's very difficult for a relatively thinly spread company 434 00:24:49,280 --> 00:24:52,360 Speaker 9: like Baidu to compete against the vast resources of these 435 00:24:52,880 --> 00:24:56,399 Speaker 9: these big tech platforms. So that's one issue, and then 436 00:24:56,440 --> 00:24:58,760 Speaker 9: the second issue for them, going back to the search 437 00:24:58,760 --> 00:25:02,280 Speaker 9: engine business, No, we all access search don't we it's 438 00:25:02,760 --> 00:25:05,840 Speaker 9: a free service, so how do these companies monetize They 439 00:25:05,880 --> 00:25:09,400 Speaker 9: do it through advertising. So unfortunately for by Do, their 440 00:25:09,440 --> 00:25:14,280 Speaker 9: core search business has come under increasing competitive threat which 441 00:25:14,280 --> 00:25:18,200 Speaker 9: has had a negative impact on their advertising revenue. So 442 00:25:18,920 --> 00:25:22,800 Speaker 9: that core cash cow business that underpins everything is not 443 00:25:22,840 --> 00:25:26,000 Speaker 9: in a calamitous decline, but it's in a slow and 444 00:25:26,080 --> 00:25:28,880 Speaker 9: steady decline. And I think those are the two main 445 00:25:28,960 --> 00:25:32,680 Speaker 9: reasons why you've seen the stock price under perform and actually, 446 00:25:33,040 --> 00:25:36,840 Speaker 9: you know the financial performance of this company remain under 447 00:25:36,880 --> 00:25:37,880 Speaker 9: sustained pressure. 448 00:25:38,160 --> 00:25:41,479 Speaker 4: We can talk about the Chinese consumer and BYD's e 449 00:25:41,520 --> 00:25:44,200 Speaker 4: commerce business in a moment, but can we focus first 450 00:25:44,240 --> 00:25:47,639 Speaker 4: on the AI story. From what I understand, by Do 451 00:25:47,840 --> 00:25:51,480 Speaker 4: will no longer charge users for its AI model Ernie, 452 00:25:51,760 --> 00:25:56,119 Speaker 4: how well does that chatbot compete with other products in 453 00:25:56,160 --> 00:25:57,960 Speaker 4: the Chinese market. 454 00:25:57,600 --> 00:26:01,440 Speaker 9: So it was recognized as about of around eighteen months 455 00:26:01,480 --> 00:26:05,560 Speaker 9: ago is probably the leading chatbot, But since then we've 456 00:26:05,600 --> 00:26:11,080 Speaker 9: seen a company after company launch a relatively you know, 457 00:26:11,240 --> 00:26:14,680 Speaker 9: similar products. So I would say, in fact, if any 458 00:26:14,720 --> 00:26:17,760 Speaker 9: if you or your listeners want to understand anything about AI, 459 00:26:18,280 --> 00:26:21,560 Speaker 9: go back to basic economics. The market in China is 460 00:26:21,680 --> 00:26:25,119 Speaker 9: flooded with supply I'm choosing my wording carefully, and that 461 00:26:25,240 --> 00:26:30,040 Speaker 9: is not an exaggeration. You know, in December of last year, 462 00:26:30,200 --> 00:26:32,720 Speaker 9: so that's already you know, four or five months out 463 00:26:32,720 --> 00:26:35,399 Speaker 9: of date. There were more than five hundred large language 464 00:26:35,400 --> 00:26:38,560 Speaker 9: models in China and they're you know, a dozens and 465 00:26:38,640 --> 00:26:42,400 Speaker 9: dozens of chatbots, most of which are available for free. 466 00:26:42,680 --> 00:26:46,600 Speaker 9: The level of product differentiation is low, the switching cost 467 00:26:46,680 --> 00:26:50,639 Speaker 9: to the user is low. It's a commoditized sector. So 468 00:26:50,960 --> 00:26:54,000 Speaker 9: that's a very very difficult environment for the likes of 469 00:26:54,040 --> 00:26:57,720 Speaker 9: by Do or even ten Cent to monetize because you know, 470 00:26:57,800 --> 00:27:00,840 Speaker 9: I have Deep Seek downloaded to my mobile. If they 471 00:27:00,880 --> 00:27:03,720 Speaker 9: started charging, I would most likely delete it and just 472 00:27:03,760 --> 00:27:06,720 Speaker 9: switch to another free service. That's the issue at the moment. 473 00:27:06,760 --> 00:27:08,880 Speaker 9: So we need to see a consolidation in the sector. 474 00:27:09,359 --> 00:27:11,320 Speaker 9: And also at the end of the day, what are 475 00:27:11,320 --> 00:27:14,600 Speaker 9: these chatbots et cetera for or why companies investing billions 476 00:27:14,640 --> 00:27:19,520 Speaker 9: and billions in model development. Well, it's ultimately to help 477 00:27:19,560 --> 00:27:24,280 Speaker 9: develop the next generation of killer AI apps, but nobody 478 00:27:24,320 --> 00:27:27,800 Speaker 9: has real visibility on what they are at the moment. Sure, 479 00:27:28,160 --> 00:27:30,920 Speaker 9: if you look in you know, like Adobe in the States, 480 00:27:31,119 --> 00:27:34,719 Speaker 9: they've added AI functionality to Photoshop. I mean, that's a 481 00:27:34,760 --> 00:27:37,919 Speaker 9: decent enhancement, but it hasn't allowed them to raise their 482 00:27:37,960 --> 00:27:42,680 Speaker 9: ASP and I'm not aware that it's driven their substantial 483 00:27:42,760 --> 00:27:45,640 Speaker 9: change in their market share. So it's maybe it makes 484 00:27:45,680 --> 00:27:48,480 Speaker 9: their product more sticky and gives more value add but 485 00:27:48,560 --> 00:27:52,720 Speaker 9: it's not really transformational in any way to their financial outlook. 486 00:27:53,000 --> 00:27:56,040 Speaker 4: What about partnering with a company like Huawei. Is there 487 00:27:56,080 --> 00:27:59,720 Speaker 4: any sense for a company like buy Do to adopt 488 00:27:59,720 --> 00:28:00,879 Speaker 4: that sort of strategy? 489 00:28:01,400 --> 00:28:05,080 Speaker 9: Yeah, I mean, Huawei's strength is really on the hardware 490 00:28:05,119 --> 00:28:07,880 Speaker 9: and semiconductor side. They do have software interests, but that's 491 00:28:08,080 --> 00:28:11,480 Speaker 9: a lesser focus for them, So I guess there's something 492 00:28:11,520 --> 00:28:14,719 Speaker 9: like that could be a strategic option for them. By 493 00:28:14,760 --> 00:28:16,800 Speaker 9: the end of the day, you have to be delivering 494 00:28:16,880 --> 00:28:21,360 Speaker 9: a differentiated products that either consumers or enterprise clients are 495 00:28:21,359 --> 00:28:23,560 Speaker 9: going to pay for. And as I said, going back 496 00:28:23,560 --> 00:28:28,280 Speaker 9: to basic economics, in a market, in a highly fragmented 497 00:28:28,320 --> 00:28:31,960 Speaker 9: market that is flooded with supply, with very low switching costs, 498 00:28:31,960 --> 00:28:35,159 Speaker 9: with very low barriers to entry, it's very difficult to 499 00:28:35,520 --> 00:28:37,720 Speaker 9: charge in that environment. In fact, it's not difficult, it's 500 00:28:37,720 --> 00:28:41,560 Speaker 9: almost impossible. That's the challenge. And yet you have to 501 00:28:41,600 --> 00:28:43,840 Speaker 9: maintain a very high level of R and D investment 502 00:28:44,120 --> 00:28:46,120 Speaker 9: to keep up with a competition, and it's sort of 503 00:28:46,160 --> 00:28:48,680 Speaker 9: fear of missing out FOMO, which is driving a lot 504 00:28:48,720 --> 00:28:50,640 Speaker 9: of the decision making in the sector at the moment. 505 00:28:51,600 --> 00:28:53,680 Speaker 9: So I think, you know, there is good evidence that 506 00:28:53,720 --> 00:28:57,320 Speaker 9: AI within certain user cases, you know, obviously can add value. 507 00:28:57,360 --> 00:29:00,520 Speaker 9: It's a good efficiency tool, it can help drive activity 508 00:29:00,560 --> 00:29:02,880 Speaker 9: in certain settings. Certainly if you look at something like 509 00:29:03,080 --> 00:29:08,000 Speaker 9: drug development, yeah, there's great opportunities there. But again I 510 00:29:08,040 --> 00:29:11,719 Speaker 9: go back to my central point. The Chinese large language 511 00:29:11,760 --> 00:29:14,719 Speaker 9: model sector is commoditized. So we need to see an 512 00:29:14,720 --> 00:29:17,200 Speaker 9: industry shakeout, and we need to see the development of 513 00:29:17,240 --> 00:29:22,000 Speaker 9: these next generation killer apps that consumers and corporate clients 514 00:29:22,040 --> 00:29:24,760 Speaker 9: are willing to pay for. We don't have visibility on 515 00:29:24,800 --> 00:29:25,760 Speaker 9: that at the moment. 516 00:29:25,720 --> 00:29:28,520 Speaker 4: And the market is glutted. We get that too, and 517 00:29:28,560 --> 00:29:32,040 Speaker 4: we've discussed kind of the AI cloud story as it 518 00:29:32,080 --> 00:29:36,040 Speaker 4: relates to buy do. I'm curious about revenue from ads 519 00:29:36,320 --> 00:29:39,680 Speaker 4: that the company may offer on its various platforms. What's 520 00:29:39,680 --> 00:29:42,000 Speaker 4: happening there, I mean in terms of ad revenue. 521 00:29:42,240 --> 00:29:45,680 Speaker 9: Okay, so the ads revenue they generate is really derived 522 00:29:45,720 --> 00:29:48,600 Speaker 9: from their search engine. But as you've seen again this 523 00:29:48,680 --> 00:29:51,240 Speaker 9: is where you know double edged sword. As we say 524 00:29:51,240 --> 00:29:55,040 Speaker 9: in the UK, there are opportunities in AI and also 525 00:29:55,080 --> 00:29:57,920 Speaker 9: a threat and in this case, actually AI is probably 526 00:29:57,920 --> 00:30:01,040 Speaker 9: a threat to their traditional search business because if you 527 00:30:01,120 --> 00:30:04,680 Speaker 9: have been on Chat, GBT, by Do, whatever it may be, 528 00:30:05,240 --> 00:30:09,040 Speaker 9: actually they're really good at doing enhanced search. So again 529 00:30:09,080 --> 00:30:11,720 Speaker 9: that poses a major question mark not just to buy Do, 530 00:30:11,880 --> 00:30:15,320 Speaker 9: but the likes of Google and others, and allows non 531 00:30:15,400 --> 00:30:18,680 Speaker 9: search specialists to enter the market. And there are many 532 00:30:18,720 --> 00:30:21,920 Speaker 9: ways in which you can search these days. So again, 533 00:30:21,960 --> 00:30:25,000 Speaker 9: if you look at WeChat, which is the main app 534 00:30:25,080 --> 00:30:28,680 Speaker 9: provided by ten Cent, you know, a ubiquitous part of 535 00:30:28,760 --> 00:30:32,120 Speaker 9: life in China, it's got a great search function on it, 536 00:30:32,200 --> 00:30:33,560 Speaker 9: So why do you need to go on to buy 537 00:30:33,640 --> 00:30:36,400 Speaker 9: Do's website to search? So there are many ways to 538 00:30:36,440 --> 00:30:39,760 Speaker 9: search at a moment, and obviously advertisers are only going 539 00:30:39,800 --> 00:30:42,440 Speaker 9: to put their place the ads where the consumer eyeballs 540 00:30:42,480 --> 00:30:45,080 Speaker 9: are there more likely to gain a return on that. 541 00:30:45,640 --> 00:30:49,920 Speaker 9: So that's the issue. There is a proliferation of search 542 00:30:50,000 --> 00:30:53,200 Speaker 9: options at the moment, which is diluting that market and 543 00:30:53,240 --> 00:30:57,480 Speaker 9: making it more difficult for traditional search engines like by 544 00:30:57,520 --> 00:31:01,720 Speaker 9: Do to monetize. So again this is not calamitous decline 545 00:31:01,760 --> 00:31:04,840 Speaker 9: in the business. It's a slow attrition, I think is 546 00:31:04,880 --> 00:31:05,959 Speaker 9: the best way to look at it. 547 00:31:06,160 --> 00:31:11,720 Speaker 4: What about consolidation in these marketplaces? Is that even a possibility? 548 00:31:11,880 --> 00:31:15,320 Speaker 4: And I'm wondering if by Do were to be acquisitive, 549 00:31:15,720 --> 00:31:18,280 Speaker 4: where would they spend money and if it weren't on 550 00:31:18,360 --> 00:31:21,719 Speaker 4: the R and D side, Let's say in AI especially, 551 00:31:22,360 --> 00:31:25,400 Speaker 4: is there an area of weakness that they could fortify 552 00:31:25,520 --> 00:31:27,760 Speaker 4: by acquiring a competitor. 553 00:31:28,480 --> 00:31:33,360 Speaker 9: Again, consolidation has to be the root forward to put 554 00:31:33,400 --> 00:31:38,360 Speaker 9: the industry on a firmer foot to monetization and profit. Again, 555 00:31:38,640 --> 00:31:42,720 Speaker 9: go back to economic textbooks. As I've mentioned, Would by 556 00:31:42,800 --> 00:31:47,080 Speaker 9: Do be a consolidator? I think again, because as a 557 00:31:47,080 --> 00:31:50,440 Speaker 9: medium sized company that maybe lacks the financial resources of 558 00:31:50,480 --> 00:31:55,040 Speaker 9: Ali Baba and Tencent, that's probably less likely. But far 559 00:31:55,120 --> 00:31:58,000 Speaker 9: bit from me to offer advice to bodies management. But 560 00:31:58,040 --> 00:32:00,560 Speaker 9: if I was asked, what I would say suggest is 561 00:32:00,600 --> 00:32:02,760 Speaker 9: that the business is quite thinly stretched at the moment. 562 00:32:03,080 --> 00:32:05,440 Speaker 9: They've got their core search business, as we've talked about, 563 00:32:05,520 --> 00:32:08,560 Speaker 9: they've got their chatbot business. They're also pursuing investments in 564 00:32:08,640 --> 00:32:11,760 Speaker 9: larger language model development. One thing we haven't talked about 565 00:32:11,880 --> 00:32:15,360 Speaker 9: is their investments in the autonomous vehicle space, which I think, 566 00:32:15,400 --> 00:32:17,600 Speaker 9: you know, it's got great promise on a longer term view, 567 00:32:17,600 --> 00:32:21,520 Speaker 9: but it's a highly competitive space. They're competing against the 568 00:32:21,960 --> 00:32:26,000 Speaker 9: you know, the likes of BYD established automotive companies and 569 00:32:26,120 --> 00:32:29,680 Speaker 9: other specialist companies like pony Ai, which is a Chinese 570 00:32:29,680 --> 00:32:32,920 Speaker 9: company that listed on Nasdak I think at the tail 571 00:32:33,000 --> 00:32:35,920 Speaker 9: end of last Yeah. So again, you know, maybe they 572 00:32:35,960 --> 00:32:39,360 Speaker 9: have some interesting intellectual property, but do they really have 573 00:32:39,440 --> 00:32:42,680 Speaker 9: a strong competitive edge in any of these markets? And 574 00:32:42,720 --> 00:32:45,360 Speaker 9: as I've said, ultimately they're a medium sized company, which 575 00:32:45,360 --> 00:32:48,720 Speaker 9: I would argue is quite thinly stretched. So I would say, 576 00:32:49,080 --> 00:32:54,080 Speaker 9: you know, they're better off focusing more narrowly on segments 577 00:32:54,120 --> 00:32:56,440 Speaker 9: where they have again more of an edge and are 578 00:32:56,440 --> 00:32:59,520 Speaker 9: more likely to drive you know, meaningful cash flow and 579 00:32:59,520 --> 00:33:02,320 Speaker 9: profit that I think that's what they should do. 580 00:33:02,320 --> 00:33:05,360 Speaker 4: Does that include short form video? Is that even a 581 00:33:05,400 --> 00:33:06,880 Speaker 4: possibility for this company? 582 00:33:07,080 --> 00:33:11,200 Speaker 9: There have been talks I suppose going into two short videos. 583 00:33:11,280 --> 00:33:13,920 Speaker 9: You know, most of us are I would say, even addicted, 584 00:33:14,200 --> 00:33:17,000 Speaker 9: certainly our kids are to short videos. The whole Tikton 585 00:33:17,040 --> 00:33:20,880 Speaker 9: phenomenon or whatever, which has overtaken the world in recent years. 586 00:33:21,560 --> 00:33:25,080 Speaker 9: So again, going back to my point, and advertising dollars. Clearly, 587 00:33:25,640 --> 00:33:28,880 Speaker 9: if consumer iables are going on short videos, there's potential 588 00:33:28,920 --> 00:33:32,600 Speaker 9: for advertising revenue to be generated. But it's a very 589 00:33:32,640 --> 00:33:35,800 Speaker 9: competitive market. So again I'll come back to a more 590 00:33:35,840 --> 00:33:40,680 Speaker 9: fundamental question. You know, what would BYD's competitive edge be there? 591 00:33:41,200 --> 00:33:43,560 Speaker 9: But I think you know, strategically, they need to do something. 592 00:33:43,680 --> 00:33:47,840 Speaker 9: The status quot can't continue because otherwise it's a slow 593 00:33:48,000 --> 00:33:49,280 Speaker 9: drip of attrition. 594 00:33:49,960 --> 00:33:52,560 Speaker 4: So that's kind of a bleak outlook. I mean, what's 595 00:33:52,560 --> 00:33:54,000 Speaker 4: the worst case scenario here? 596 00:33:54,400 --> 00:33:57,920 Speaker 9: Just keeping things balanced? Here they are you know, they've 597 00:33:57,920 --> 00:34:01,840 Speaker 9: got a net cash position, their cash general they still 598 00:34:01,880 --> 00:34:05,360 Speaker 9: have a substantial share in the China search market, even 599 00:34:05,400 --> 00:34:08,799 Speaker 9: though that is under slow and steady pressure. So by 600 00:34:08,840 --> 00:34:12,720 Speaker 9: no means is this you know, a doomsday calamitous outlook 601 00:34:12,760 --> 00:34:18,200 Speaker 9: for them. But their core businesses are under slow drip 602 00:34:18,239 --> 00:34:22,200 Speaker 9: of you know, the degrading over time, and what they 603 00:34:22,320 --> 00:34:26,080 Speaker 9: lack is really a you know, a strong growth opportunity 604 00:34:26,120 --> 00:34:29,520 Speaker 9: in growth market that can help drive cash flow and profit. 605 00:34:30,040 --> 00:34:33,120 Speaker 9: So they're sort of stuck in this no man's land, 606 00:34:33,160 --> 00:34:33,520 Speaker 9: if you like. 607 00:34:33,600 --> 00:34:34,719 Speaker 2: For the moment, we're going. 608 00:34:34,719 --> 00:34:38,160 Speaker 9: To see this slow, ongoing drip and attrition of their 609 00:34:38,200 --> 00:34:42,839 Speaker 9: core business whilst they struggle to you know, monetize, let 610 00:34:42,840 --> 00:34:46,319 Speaker 9: alone profit from some of these potential growth markets. So 611 00:34:46,360 --> 00:34:48,960 Speaker 9: I think we need to see a more radical overhaul 612 00:34:49,000 --> 00:34:49,680 Speaker 9: of their business. 613 00:34:49,760 --> 00:34:52,480 Speaker 4: Really, Robert, thank you for joining us. He is Robert Lee, 614 00:34:52,880 --> 00:34:56,600 Speaker 4: Senior Software Analyst for Bloomberg Intelligence, and I'm Doug Chrisner. 615 00:34:56,719 --> 00:35:00,160 Speaker 4: You can catch us weekdays for the Daybreak Asia podcast. 616 00:35:00,200 --> 00:35:02,560 Speaker 4: It's available wherever you get your podcast. 617 00:35:03,000 --> 00:35:05,600 Speaker 2: Tom, thank you, Doug. And that does it for this 618 00:35:05,760 --> 00:35:08,520 Speaker 2: edition of Bloomberg day Break Weekend. Join us again Monday 619 00:35:08,520 --> 00:35:10,920 Speaker 2: morning at five am Wall Street Time for the latest 620 00:35:11,000 --> 00:35:13,319 Speaker 2: on markets overseas and the news you need to start 621 00:35:13,360 --> 00:35:16,720 Speaker 2: your day. I'm Tom Busby. Stay with us. Top stories 622 00:35:16,719 --> 00:35:19,280 Speaker 2: and global business headlines are coming up right now.