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Speaker 1: Good morning, and welcome to the Bloomberg Daybreak Asia podcast.

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Speaker 1: I'm Doug Prisner. Here are the stories we're following today.

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Speaker 1: I'm Charlie Peloton for Doug Prisoner. This week Stateside, we

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Speaker 1: got a number of big tech earnings from the likes

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Speaker 1: of Apple, Amazon, and Intel. We'll hear from Intel CEO

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Speaker 1: Pat Gelsinger later in the program, but first up reaction

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Speaker 1: from ALFREDA Jonker, client portfolio manager at Alfinity Investment Management.

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Speaker 1: She spoke with Bloomberg's Sherry On and Annabelle Droolers at.

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Speaker 2: A time when we got those more disappointing outlooks when

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Speaker 2: it came to Meta and Microsoft as well. Yet when

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Speaker 2: it comes to your top picks, Apple is one of

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Speaker 2: them for you.

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Speaker 3: Yes. If you look at the results from the start

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Speaker 3: of the reporting season up to now, it has really

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Speaker 3: been a bit of a mixed reporting season overall for

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Speaker 3: all the tech stocks. If you think back at the start,

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Speaker 3: we had a few misses, something like a Kitence with

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Speaker 3: a good result this morning, Microsoft as well as Apple,

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Speaker 3: probably a little bit below what the market was hoping for.

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Speaker 3: You've discussed China, but also I think it's all about

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Speaker 3: the outlook statements. I think the key point to make

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Speaker 3: here is that these step giants are still coming through

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Speaker 3: with really really strong earnings growth and strong revenue growth.

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Speaker 3: The shock and awe of the AI trade is just

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Speaker 3: probably over now. They are not surprised about thirty forty

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Speaker 3: percent anymore as they did before. So yes, they've done

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Speaker 3: a great job, and yes, some of the areas are

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Speaker 3: still doing very well, particularly some of the businesses like

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Speaker 3: Microsoft has got a range of different businesses that they

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Speaker 3: can generate revenue from an AI, but we have started

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Speaker 3: to see a little bit of capacity constraint and also

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Speaker 3: impacting particularly on the cloud business side. But taking that

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Speaker 3: all into account, majority of what the market is focused

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Speaker 3: on is really the outlook statement, and that is where

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Speaker 3: Amazon as well as Alphabet has come out probably better

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Speaker 3: than expected guidance for the next quarter. And then Apple,

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Speaker 3: where they generally generate thirty five percent of total financial

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Speaker 3: hairs sales in the fourth quarter, that was a little

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Speaker 3: bit softer, and if you take that into account with

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Speaker 3: just releasing their Apple Intelligence, there are a number of

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Speaker 3: questions that we need to work through and understand how

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Speaker 3: long there's sort of short is it the shorter term

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Speaker 3: problem or is there a little bit more in this

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Speaker 3: later on? So yes, we will be taking it into account.

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Speaker 3: We have been taking profits in this area over the

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Speaker 3: last sort of year to date, we've taken a lot

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Speaker 3: of profit out of Nvidia, Microsoft, Alphabet, so it's not

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Speaker 3: the huge position that it used to be, but we

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Speaker 3: still believe there is space work in that portfolio.

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Speaker 4: So then how are you thinking about your framing around this.

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Speaker 4: Are you still looking at sort of the picks and shovels.

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Speaker 4: I notice you say capacity constraint and that makes me

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Speaker 4: think of Microsoft for instance this week. Are you still

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Speaker 4: in that part of it or are you going more

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Speaker 4: into the application side instead.

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Speaker 3: Yes, I think if you take a look back at

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Speaker 3: what we saw during the Internet phase, it was very

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Speaker 3: much semiconductors first, then infrastructure, then you have the software

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Speaker 3: and services at the top. So we definitely have been

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Speaker 3: exposed to sort of all through those different stages. But

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Speaker 3: now we do believe that you know, it's probably worthwhile

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Speaker 3: having a player in each of those games, but not

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Speaker 3: have two or three players in each of those different stages.

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Speaker 3: So we at is probably more adding to the infrastructure side. So,

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Speaker 3: as I mentioned, Apple sits right there in the middle

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Speaker 3: with their devices, but also something like Microsoft can still

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Speaker 3: play in the sort of software and services that sits

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Speaker 3: on top, as well as Amazon and Alphabet. So that

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Speaker 3: is what we are currently looking for. We're looking for

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Speaker 3: companies that can generate revenues out of each of those

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Speaker 3: different phases. And in video the reason why we keep

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Speaker 3: on holding it and we have been cutting back quite

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Speaker 3: a bit given the valuation expansion. But if you look

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Speaker 3: at the capital that these big mega hyperscalis of spending.

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Speaker 3: We've heard earlier that they will just continue to spend

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Speaker 3: even more next year. That's very positive for in VideA.

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Speaker 3: We just need to understand exactly what's going on with capacity.

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Speaker 3: So far, all the news that we've heard from Gensen

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Speaker 3: has been that there is a massive demand for their

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Speaker 3: new Blackbell trips. We will be doing a lot of work.

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Speaker 3: Our analysts have been on the ground doing trips understanding

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Speaker 3: that sort of back end to get a better sense

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Speaker 3: of the capacity. For now, we don't think it is

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Speaker 3: a huge problem, but we could potentially see not just

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Speaker 3: in video but also for the likes of Microsoft, that

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Speaker 3: some of those revenues could be postponed a little bit

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Speaker 3: into next year rather than into the fourth quarter this year,

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Speaker 3: so a bit of a delayed potentially for some of

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Speaker 3: these revenue gen rating companies.

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Speaker 2: I'm a little bit concerned about the savings rate because

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Speaker 2: when we talked about the broader markets, we always thought

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Speaker 2: there was a little bit of buffer despite the downside

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Speaker 2: and the pressure that we could see from uncertainty in

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Speaker 2: politics to your politics and so forth. Is this going

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Speaker 2: to be an issue going forward for the US markets is?

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Speaker 3: I think what you have seen currently clearly the data

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Speaker 3: points coming through, like the GDP growth rate, even just

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Speaker 3: the consumer numbers are tested. I consumer spending, even housing

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Speaker 3: started to come through actually a little bit better than expected.

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Speaker 3: So what we are seeing overall for the economy is

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Speaker 3: probably an economy that's doing okay. And that's why we

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Speaker 3: are not expecting that a hard landing or recession, but

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Speaker 3: a software landing. I think the important thing to point

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Speaker 3: out here is that the interest rate market is clearly

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Speaker 3: not necessarily believing the indust rate cutting cycle with the

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Speaker 3: market is sort of forecasting at the moment, and that

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Speaker 3: could be a very important point to look out for.

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Speaker 3: So on the consumer and the saving rate, yes, that

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Speaker 3: is something that we do watch. I think the saving

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Speaker 3: rate relative to where we've come from and relative to

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Speaker 3: other countries, and the US is actually still relatively okay.

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Speaker 5: But from a.

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Speaker 3: Consumer's spending perspective, we have been pretty cautious on the

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Speaker 3: consumer overall, and even the current reporting season, what you

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Speaker 3: are seeing is quite a bifacated market where the lower

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Speaker 3: end is definitely still struggling. Dollar stores not necessarily doing well.

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Speaker 3: You stop, continue to see the down training happening, you know,

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Speaker 3: eating at home, those sort of things. But then on

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Speaker 3: the upper end you have segments that is doing quite well,

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Speaker 3: so that sort of higher end consumer. But on the

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Speaker 3: other hand, you also have luxury really struggling on the

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Speaker 3: back of a week of China. So for the US

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Speaker 3: economy itself, for us, the important thing really to understand

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Speaker 3: here is what is happening to inflation and what's happening

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Speaker 3: to the interest train outlook statement an interstate outlook in general,

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Speaker 3: because if we do get a Trump win, for example,

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Speaker 3: huge tariffs necessarily doesn't mean a positive outlook for the

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Speaker 3: economy or for the interest rate outlook. So there's a

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Speaker 3: lot that's that you currently need to bear in mind

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Speaker 3: when you think about the.

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Speaker 4: Macro outlook and Alfred, I mean, I think to your

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Speaker 4: point around around the luxury end, and that China risk

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Speaker 4: essay Lauder was a perfect example of that overnight, the

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Speaker 4: biggest drop ever really for the company after they withdrew

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Speaker 4: their China guidance. But you speak about sort of that

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Speaker 4: that rally perhaps broadening out, how are you thinking about

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Speaker 4: positioning then, given we do have that risk of rate

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Speaker 4: staying elevator going into twenty twenty five if Trump does

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Speaker 4: indeed return to the White House.

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Speaker 3: Yes, So what we have been seeing of late is

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Speaker 3: definitely sort of a resurgence of some of the sectors

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Speaker 3: that's actually been in a deep position over the last

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Speaker 3: two years. So if you think back over the last

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Speaker 3: two years, we've actually been in an earnings upgrade cycle

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Speaker 3: for the overall mark. We've had consecutive months of the

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Speaker 3: market running more so than what we've had for many,

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Speaker 3: many years. But you have actually seen that sort of

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Speaker 3: underlying earnings trajectory. It's been eighteen months of positive earnings.

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Speaker 3: But what we have seen of late is that sort

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Speaker 3: of starting to falter. It's still positive, but not nearly

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Speaker 3: as good as we want to see. And you have

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Speaker 3: seen the broadening out from just tech stocks driving performance

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Speaker 3: and earnings and where we are focusing on those sticktors,

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Speaker 3: for example financials, it's starting to see earning growth come through,

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Speaker 3: particularly capital markets opening up.

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Speaker 4: Unfortunately, got to leave it there, but that was our

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Speaker 4: Freddie Younger, client portfolio manager at Alffinity Investment Management.

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Speaker 5: Coming up a conversation with Intel CEO Pat Gelsinger. I'm

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Speaker 5: Charlie Palatan. This is Bloomberg. I'm Charlie Palette. Doug Prisoner

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Speaker 5: is off. This week we go next to Intel, which

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Speaker 5: surged in late US trading on optimism about a turnaround

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Speaker 5: and for more we hear from CEO Pat Gelsinger. Here

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Speaker 5: he is in conversation with Bloomberg's Ed Ludlow.

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Speaker 6: Pat, thank you for your time in the quarter gone.

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Speaker 6: We were just talking about how you made painful decisions

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Speaker 6: and those showed up as impairment charges and were reflected

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Speaker 6: on the bottom line. To start, Could I ask if

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Speaker 6: that's it now that those actions are taken and you

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Speaker 6: now have line of sight on what you want to do,

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Speaker 6: or if there will be more sort of restructure to come.

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Speaker 7: Yeah, we worked very hard this quarter to get this

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Speaker 7: done and the people actions, the restructuring charges you'll largely

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Speaker 7: finished this quarter, so it was a challenging quarter that way,

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Speaker 7: but to also deliver better than expect the results if

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Speaker 7: we eliminate those one time charges and to take our

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Speaker 7: guidance up for Q four. I'm very proud of our

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Speaker 7: team being able to do both of those this quarter.

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Speaker 7: Some of the most difficult restructuring charges maybe in the

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Speaker 7: history of Intel since our memory microprocessor decision almost forty

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Speaker 7: years ago. Getting that done and still beating results and

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Speaker 7: taking the guide up, this was a very significant quarter

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Speaker 7: for our team to execute. Very proud of their discipline results.

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Speaker 6: Pat the investor base of cheering you. I'm going on

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Speaker 6: the reaction of your stock in after hours, but a

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Speaker 6: lot of that does seem to be a focus on

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Speaker 6: what you were guiding to in the final three months

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Speaker 6: of this year, away from sort of the financials and numbers.

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Speaker 6: Could you talk a little bit about the product business

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Speaker 6: and the foundry business that gave you some confidence in

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Speaker 6: that guide.

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Speaker 7: Yeah, and if we take it apart a little bit,

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Speaker 7: the client business. We've launched our lunar Lake product, the

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Speaker 7: second generation of our AIPC, and the AIPC category very solid.

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Speaker 7: We'll be launching the commercial version of that into a

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Speaker 7: good market. We believe next year for a Windows refresh,

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Speaker 7: a corporate refresh cycle, and we start to see more

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Speaker 7: strength in the AIPC category overall, with strong set of

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Speaker 7: use cases and ISVs bringing new software into the marketplace.

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Speaker 7: So we feel good about the client business Data center

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Speaker 7: quarter on quarter a little bit better than people forecast

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Speaker 7: for that business, and a stronger product line with our

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Speaker 7: Xeon six products now starting to ram, you know. And

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Speaker 7: finally on the Intel foundry quarter and quarter growth in

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Speaker 7: that area, and a strong pipeline of external customers. We

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Speaker 7: announced Amazon and two other AT and A customers, some

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Speaker 7: additional advanced packaging customers. So we're starting to see that

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Speaker 7: business come to life. And that's a long term business

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Speaker 7: because when people move designs, it takes several years for

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Speaker 7: major designs to move into our foundry. So we've been

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Speaker 7: at it now a couple of years, and we're starting

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Speaker 7: to see the results of those hard work and getting

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Speaker 7: back to competitive process technology with AT and A. So

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Speaker 7: a very good quarter of operational results.

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Speaker 6: Pat We have a question from our audience, and that

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Speaker 6: question comes from Clem DeLong, who's the CEO and founder

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Speaker 6: of hugging face, and he makes the point that on

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Speaker 6: his platform there are many more smaller models now available,

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Speaker 6: and it's leading him to have a question for you

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Speaker 6: about Intel's place in the on device trend we're seeing

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Speaker 6: with AI and how you're going to enable more on

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Speaker 6: device AI use.

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Speaker 7: Well, thank you, clem, A great question and a hugging face.

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Speaker 7: A great company, and you know, as you think about

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Speaker 7: these models, you know, we do see it moving from

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Speaker 7: the training phase of you know, trillions of parameters to

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Speaker 7: the inferencing phase. And exactly like the question says, in

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Speaker 7: that inferencing phase, more of that will happen on prem

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Speaker 7: for data center customers, and many of those smaller models

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Speaker 7: will be retrained with enterprise's own data. A lot of

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Speaker 7: those will just run on Zeon. We don't need a

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Speaker 7: special accelerator, or it'll be Zeon plus an accelerator. But

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Speaker 7: also then the edge use cases and AIPC use cases.

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Speaker 8: Ed.

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Speaker 7: I call it the three laws of the edge. Right,

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Speaker 7: the laws of physics, right, the speed of light. If

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Speaker 7: I have to go to the cloud, I had time.

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Speaker 7: Your second law is the law of economics, right, it's

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Speaker 7: cheaper to run on my device. And finally, the laws

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Speaker 7: of the land, my data on my device in my

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Speaker 7: data center. So we see it moving from a cloud

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Speaker 7: training world to an edge and on prem world for

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Speaker 7: inferencing for the future.

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Speaker 6: I therefore have to ask you about Goudi. Your AI

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Speaker 6: accelerator did not get the traction that you'd hoped, and

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Speaker 6: you won't be making the outline target of five hundred

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Speaker 6: million dollars in sales for this fiscal year or calendar year.

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Speaker 6: Why is it a use case issue that the data

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Speaker 6: center operators aren't looking at it or something else.

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Speaker 7: Yeah, two factors that we pointed out. One is is

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Speaker 7: that now we have Goudi three coming out, so there's

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Speaker 7: more enthusiasm for the next generation product that we're just

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Speaker 7: starting to ramp now. The second one is the software

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Speaker 7: and the software use cases. The AI world has moved

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Speaker 7: very rapidly and innovating very quickly, and the robustness and

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Speaker 7: the completeness of the Gaudy software stack hasn't been as great.

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Speaker 7: And it's an accelerator, not a full reprogrammable GPU, so

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Speaker 7: that makes some of the software porting and optimizations a

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Speaker 7: bit more difficult. Obviously, as we get more of that

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Speaker 7: running on Gaudy, we solve the software products. But secondly

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Speaker 7: then it's also to move to a complete GPU capability,

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Speaker 7: which we'll be doing out in time, and that development

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Speaker 7: effort is also well underway. So we feel we have

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Speaker 7: a solid position. The world is coming to more on

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Speaker 7: prem and enterprise use cases. Like the last question ask

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Speaker 7: and GOUTI three good early indications from the marketplace and

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Speaker 7: its success as we ramp it.

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Speaker 6: In twenty five, Pat Bloomberg's reported that on and Qualcom,

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Speaker 6: two of your peers are interested in buying some or

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Speaker 6: part of in Intel. Can you confirm whether or not

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Speaker 6: you received a formal offer from them or anyone else,

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Speaker 6: and what Intel's consideration of them would be.

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Speaker 7: Yeah, And obviously there's been rumors and churn in the industry,

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Speaker 7: and I think all of that just indicates how important

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Speaker 7: Intel is to the Intel into the industry structure and semiconductors,

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Speaker 7: and how important those supply chains are for the world.

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Speaker 7: We don't view any of these rumors as particularly emeritus.

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Speaker 7: We laid out a strategy, we reaffirmed that with our

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Speaker 7: board of directors, and obviously as we've taken these steps

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Speaker 7: this quarter and restructuring and getting our costs where they

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Speaker 7: need to be we have the capacity to go on

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Speaker 7: the journey that we've laid out to produce sustainable profitability

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Speaker 7: and results to shareholder return. So with that, you know,

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Speaker 7: I'm committed, the team's committed, We have the board support

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Speaker 7: for the strategy that we've laid out, and Q three

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Speaker 7: shows that's exactly what we're going to do.

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Speaker 6: Trying to help our audience understand Intel's historic and current

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Speaker 6: business right the products, but also foundry. And what you

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Speaker 6: said was that twenty twenty six is when those third

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Speaker 6: party customers start to show up. But could you just

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Speaker 6: outline the path to that what you want to hold

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Speaker 6: yourself to for next year in developing that business as

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Speaker 6: a sort of standalone unit.

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Speaker 7: Yeah, and it's a great question ed, and clearly we've

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Speaker 7: started to see that already emerge. And even this quarter

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Speaker 7: we saw quarter and quarter growth of the external foundry business,

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Speaker 7: largely driven by some of those early packaging design wins.

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Speaker 7: So these advanced packages are sort of a faster on ramp,

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Speaker 7: but ultimately it's becoming a wafer foundry for the industry.

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Speaker 7: And as we said, you three major design wins this quarter,

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Speaker 7: you know, one with Amazon and two other compute use cases,

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Speaker 7: so we'll be updating, you know, the market as we

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Speaker 7: win more of those customers and describing the lifetime deal

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Speaker 7: value of those to the marketplace as well, give some

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Speaker 7: of those breadcrumbs along the way. But it takes a

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Speaker 7: couple of years for people to move these designs, a

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Speaker 7: year to design it, a year to bring it into

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Speaker 7: production until it starts to ramp in the marketplace. So

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Speaker 7: key milestones for eighteen A that customers are now beginning

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Speaker 7: those design cycles, the design tools, the design libraries are

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Speaker 7: being moved over to eighteen A, but it really isn't

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Speaker 7: until twenty six that those results start to really help

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Speaker 7: Intel's products, and then twenty six twenty seven until we

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Speaker 7: start to see meaningful volumes externally.

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Speaker 6: That were just days away from an election in this country.

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Speaker 6: And I'm particularly interested in your assessment and planning for

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Speaker 6: what might happen to the CHIPSAC programs. Of course, I

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Speaker 6: don't expect you to know what will happen in the election.

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Speaker 6: You do not have a crystal ball. But former President

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Speaker 6: Trump has kind of made disparaging remarks about President Biden's

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Speaker 6: economic agenda. How are you planning for that?

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Speaker 3: Please?

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Speaker 7: Yeah, And I'd say maybe three different perspectives. Number One,

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Speaker 7: the Chips Act was a bipartisan act and with that

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Speaker 7: strong support from both sides of the aisle, you know,

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Speaker 7: and with that, we believe the importance of that in

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Speaker 7: terms of industrial policy. The semiconductor industry is well supported

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Speaker 7: by Congress and both parties. Second, we are disappointed by

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Speaker 7: how long and how slow the dispensing of funds has

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Speaker 7: been and well over two years at this point. I've

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Speaker 7: invested thirty billion in capital and we've seen zero dollars

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Speaker 7: of the Chips grants at this point. So we do

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Speaker 7: believe that that has been too slow, and we're somewhat

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Speaker 7: frustrated by that, and we've taken that out of our

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Speaker 7: financials for this year. That said, there's also the investment

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Speaker 7: tax credit that we are seeing, and it is much

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Speaker 7: larger than the grant portion of the Chips Act, and

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Speaker 7: that is now law, and that will be beneficial. But clearly,

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Speaker 7: I think whoever wins the election, the importance of this industry,

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Speaker 7: the importance of rebuilding this supply chain of manufacturing is

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Speaker 7: well supported. And Intel as a designer, R and D

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Speaker 7: and manufacturer is unique in the United States and in

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Speaker 7: the overall structure of the industry, and we expect the

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Speaker 7: broad support rate of the administration regardless which party wins.

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Speaker 6: As a result, Pat two quarters ago, your CFO told

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Speaker 6: me you were two over indexed to CPU, and we

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Speaker 6: know what happened with Goudi. You made painful decisions in

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Speaker 6: the court to gone reduce headcount by sixteen five hundred.

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Speaker 6: Do you now have the plan in place and are

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Speaker 6: you confident from here?

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Speaker 7: Yeah. We laid out a clean sheet program that we

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Speaker 7: went through to really benchmark the business. We took a

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Speaker 7: conservative view of the funding plan, as we call it internally,

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Speaker 7: saying you know, we're taking a modest growth outlook and

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Speaker 7: we're building our cost structure to that very modest outlook.

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Speaker 7: But we've also built now a lot of optionality to

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Speaker 7: scale up into the business. We have a shell ahead,

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Speaker 7: we have capacity that we can scale into if necessary,

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Speaker 7: and we've made a smaller, more efficient Nimbore company that

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Speaker 7: is able to execute with more agility and speed as well.

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Speaker 7: So we feel like we're now well set up for

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Speaker 7: the future. This was a challenging quarter for me for

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Speaker 7: the company, but we feel like we're well set up

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Speaker 7: for the future and the good operational results that exceeded

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Speaker 7: the markets expectations and the increased guidance for Q four.

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Speaker 7: We feel like we're now in a very solid position.

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Speaker 6: Intel CEO Pat Gelsinger, thank you for joining us here.

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Speaker 5: For more on the Intel story, we turned to Marabelle Lopez,

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Speaker 5: founder and principal analyst at Lopez Research. She spoke with Bloomberg,

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Speaker 5: Sherryon and Annabelle Droolers.

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Speaker 4: I'm curious for your reaction on the share price today

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Speaker 4: because is it telling you that investors are really believing

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Speaker 4: that that turnaround plan is taking shape or is it

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Speaker 4: more just relief and a relief rally that's coming through

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Speaker 4: that the numbers weren't as bad as what we'd seen

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Speaker 4: in last quarters.

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Speaker 8: I think the turnaround plan was quite clear from the start.

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Speaker 8: There was obviously a significant issue with the turnaround plan

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Speaker 8: last quarter that really put into question the ability for

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Speaker 8: them to execute. This quarter, we actually saw some really

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Speaker 8: strong guidance around what's going to happen with the AIPT,

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Speaker 8: which is really important for them in a very competitive

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Speaker 8: market for Intel. We also saw wonderful news from AWS

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Speaker 8: on the foundry bid, and if you look at a

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Speaker 8: company like AWS investing in Intel from the foundry business

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Speaker 8: that actually says that they've done some testing and they

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Speaker 8: have confidence that that foundry business.

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Speaker 3: Could work for them.

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Speaker 8: But I think if you put those two things together,

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Speaker 8: you're starting to see a path where there could be

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Speaker 8: a return of Intel into the market in a more

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Speaker 8: meaningful way, so less distressing news, more optimism about the

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Speaker 8: future opportunities Intel has over the come in three years.

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Speaker 4: And which party is sort of more optimistic about, because

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Speaker 4: we just heard there about the outlook for Gaudi three

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Speaker 4: for instance, that side or is it more on the

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Speaker 4: foundry side.

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Speaker 3: Do you think so?

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Speaker 8: I think the foundry side is actually incredibly important for

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Speaker 8: Intel because it's really a new revenue stream. I think

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Speaker 8: what we're seeing in the GPU market is that's a

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Speaker 8: very difficult market to wrestle away from Nvidia. The opportunity there,

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Speaker 8: of course, is if we look at the longer gain,

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Speaker 8: which is in say at least a year or more,

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Speaker 8: what we're seeing is that enterprise buyers don't necessarily need.

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Speaker 3: GPUs for everything.

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Speaker 8: They need a mix of CPUs and GPUs, and this

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Speaker 8: is where Intel has the opportunity to enter into the

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Speaker 8: market strong when the buying actually starts to happen we're

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Speaker 8: all discussing the AI market is if it is here today,

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Speaker 8: and we're really at the very beginning of it. We

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Speaker 8: have product, we have use cases, but enterprise buyers have

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Speaker 8: been flow to adopt. We've seen a lot of activity

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Speaker 8: in the data center, but the data center is only

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Speaker 8: part of the market. So what we're expecting, what we're

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Speaker 8: optimistic about, is that incol can come in on the

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Speaker 8: back half and grab some of that enterprise buying that

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Speaker 8: we'll be coming up in the next fave year.

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Speaker 6: A Maravell.

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Speaker 2: Apple, of course also very much focused on Apple Intelligence,

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Speaker 2: but we thought that perhaps a slow rollout of that

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Speaker 2: feature would actually not lead to a lot of boost

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Speaker 2: for the iPhone space. But were you surprised on what

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Speaker 2: you saw in that the summer quarter.

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Speaker 8: I think in a lot of ways, Apple continually pulls

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Speaker 8: a rabbit out of the hat. Just when you think

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Speaker 8: iPhone sales are going to be fundamentally down and uninteresting,

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Speaker 8: they come back and they show growth. We did see

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Speaker 8: a bit more weakness in the Chinese market than we

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Speaker 8: thought we would. I think there was an expectation that

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Speaker 8: there would be a big pushback to growth. I actually

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Speaker 8: think the Apple Intelligence side people overplay that in terms

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Speaker 8: of when the features come out. The things that people

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Speaker 8: really care about with Apple are that they're going to

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Speaker 8: have a better user experience, that they're going to have

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Speaker 8: great cameras, great battery life, you know, all the things

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Speaker 8: that typically sell smartphones, and to continue to have, you know,

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Speaker 8: in the higher digit growth in the smartphone market is

438
00:23:53,760 --> 00:23:56,680
Speaker 8: actually quite a feat to continue to maintain. So I

439
00:23:56,680 --> 00:23:59,840
Speaker 8: think we're all very surprised and optimistic about where that was.

440
00:24:00,240 --> 00:24:03,320
Speaker 8: And the services business is actually quite interesting for Apple

441
00:24:03,359 --> 00:24:05,560
Speaker 8: as well, and that seems to be progressing at a

442
00:24:05,560 --> 00:24:06,120
Speaker 8: good rate.

443
00:24:07,200 --> 00:24:09,800
Speaker 4: Mara Bell, what do you think about the China market

444
00:24:09,840 --> 00:24:12,200
Speaker 4: in particular, because it was really clear, as you said,

445
00:24:12,200 --> 00:24:15,240
Speaker 4: that they're facing weaker demand there. Do you think that

446
00:24:15,280 --> 00:24:17,960
Speaker 4: Apple needs to make a product that's specific for the

447
00:24:18,000 --> 00:24:20,800
Speaker 4: mainland market and if so, how would that look to you?

448
00:24:21,480 --> 00:24:25,080
Speaker 8: I think that's absolutely not the cards for Apple. Apple

449
00:24:25,160 --> 00:24:29,040
Speaker 8: tends to try to make a more ubiquitous high end,

450
00:24:29,560 --> 00:24:32,320
Speaker 8: mid range, potentially low end. You could see that over

451
00:24:32,400 --> 00:24:36,480
Speaker 8: time they've played those three tiers, but fundamentally different products

452
00:24:36,560 --> 00:24:39,680
Speaker 8: aren't extremely scalable for Apple. If anything, I think they

453
00:24:39,720 --> 00:24:42,159
Speaker 8: try to lean in and do more in India it

454
00:24:42,280 --> 00:24:44,720
Speaker 8: is going to be an extremely competitive market in China.

455
00:24:44,720 --> 00:24:48,760
Speaker 8: We expect that to continue, but over the course of time,

456
00:24:48,800 --> 00:24:51,720
Speaker 8: I think Apple will have a very solid showing in

457
00:24:51,760 --> 00:24:55,560
Speaker 8: the Chinese market. I think everybody is very interested in

458
00:24:55,640 --> 00:25:00,359
Speaker 8: seeing how well hiawais high end flagship products perform, but

459
00:25:00,400 --> 00:25:02,639
Speaker 8: they're very expensive products, and if you look at a

460
00:25:02,640 --> 00:25:06,000
Speaker 8: mass market appeal, we see the opportunity for Apple to

461
00:25:06,240 --> 00:25:08,480
Speaker 8: actually go head to head and do fairly well in

462
00:25:08,480 --> 00:25:09,880
Speaker 8: the space moving forward.

463
00:25:10,160 --> 00:25:12,439
Speaker 2: And Iraville, of course, we've been getting a lot of

464
00:25:12,480 --> 00:25:15,479
Speaker 2: tech earnings, including Microsoft Meta also sort of disappointing when

465
00:25:15,520 --> 00:25:17,760
Speaker 2: it comes to the outlook, what do you make of

466
00:25:17,800 --> 00:25:20,359
Speaker 2: the broader trend right now when it comes to AI

467
00:25:20,600 --> 00:25:24,800
Speaker 2: really impacting these tech companies caps, future earnings and just

468
00:25:25,000 --> 00:25:26,760
Speaker 2: business performance going forward.

469
00:25:27,400 --> 00:25:30,480
Speaker 8: So there's a bit of a disconnect and disillusionment between

470
00:25:31,119 --> 00:25:33,280
Speaker 8: what people expected to happen with the AI market and

471
00:25:33,320 --> 00:25:35,840
Speaker 8: where we actually are in the AI market. So one

472
00:25:35,880 --> 00:25:38,040
Speaker 8: of the things that we see happening is there has

473
00:25:38,160 --> 00:25:41,760
Speaker 8: been a strong revenue, but there continues to be heavy,

474
00:25:41,880 --> 00:25:44,960
Speaker 8: heavy capital investment that has to happen in this market

475
00:25:45,119 --> 00:25:47,320
Speaker 8: and will continue because we're not even at the point

476
00:25:47,320 --> 00:25:51,080
Speaker 8: where we're seeing significant AI demand from enterprise customers. Once

477
00:25:51,119 --> 00:25:53,720
Speaker 8: that happens and we see more workloads going to the cloud,

478
00:25:53,880 --> 00:25:56,960
Speaker 8: that actually does continue to equal more expense. So I

479
00:25:57,000 --> 00:26:00,680
Speaker 8: think what the cloud computing providers are trying to say is, hey,

480
00:26:01,080 --> 00:26:05,440
Speaker 8: we continue to put out double digit in the twenty

481
00:26:06,200 --> 00:26:10,000
Speaker 8: thirty percent growth, which is phenomenal when you consider the run.

482
00:26:10,160 --> 00:26:13,200
Speaker 8: All of that growth is being driven by AI right now,

483
00:26:13,440 --> 00:26:15,320
Speaker 8: but there's a cost that's associated with that, and they

484
00:26:15,320 --> 00:26:18,920
Speaker 8: want to try to temper expectations of what the earnings

485
00:26:19,000 --> 00:26:21,520
Speaker 8: might look like or what the capital portfolio might look

486
00:26:21,560 --> 00:26:25,280
Speaker 8: like moving forward, because that train is still continuing on

487
00:26:25,680 --> 00:26:28,320
Speaker 8: and the revenue is not going to pace equally with

488
00:26:28,400 --> 00:26:31,600
Speaker 8: the expense, probably for several quarters.

489
00:26:32,080 --> 00:26:34,479
Speaker 2: Marvel Lopez always good to have you with us, founder

490
00:26:34,520 --> 00:26:37,120
Speaker 2: and principal and list at Lopez Research.

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00:26:40,000 --> 00:26:42,600
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492
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