Speaker 1: Good morning, and welcome to the Bloomberg Daybreak Asia podcast.
Speaker 1: I'm Doug Prisner. Here are the stories we're following today.
Speaker 1: I'm Charlie Peloton for Doug Prisoner. This week Stateside, we
Speaker 1: got a number of big tech earnings from the likes
Speaker 1: of Apple, Amazon, and Intel. We'll hear from Intel CEO
Speaker 1: Pat Gelsinger later in the program, but first up reaction
Speaker 1: from ALFREDA Jonker, client portfolio manager at Alfinity Investment Management.
Speaker 1: She spoke with Bloomberg's Sherry On and Annabelle Droolers at.
Speaker 2: A time when we got those more disappointing outlooks when
Speaker 2: it came to Meta and Microsoft as well. Yet when
Speaker 2: it comes to your top picks, Apple is one of
Speaker 2: them for you.
Speaker 3: Yes. If you look at the results from the start
Speaker 3: of the reporting season up to now, it has really
Speaker 3: been a bit of a mixed reporting season overall for
Speaker 3: all the tech stocks. If you think back at the start,
Speaker 3: we had a few misses, something like a Kitence with
Speaker 3: a good result this morning, Microsoft as well as Apple,
Speaker 3: probably a little bit below what the market was hoping for.
Speaker 3: You've discussed China, but also I think it's all about
Speaker 3: the outlook statements. I think the key point to make
Speaker 3: here is that these step giants are still coming through
Speaker 3: with really really strong earnings growth and strong revenue growth.
Speaker 3: The shock and awe of the AI trade is just
Speaker 3: probably over now. They are not surprised about thirty forty
Speaker 3: percent anymore as they did before. So yes, they've done
Speaker 3: a great job, and yes, some of the areas are
Speaker 3: still doing very well, particularly some of the businesses like
Speaker 3: Microsoft has got a range of different businesses that they
Speaker 3: can generate revenue from an AI, but we have started
Speaker 3: to see a little bit of capacity constraint and also
Speaker 3: impacting particularly on the cloud business side. But taking that
Speaker 3: all into account, majority of what the market is focused
Speaker 3: on is really the outlook statement, and that is where
Speaker 3: Amazon as well as Alphabet has come out probably better
Speaker 3: than expected guidance for the next quarter. And then Apple,
Speaker 3: where they generally generate thirty five percent of total financial
Speaker 3: hairs sales in the fourth quarter, that was a little
Speaker 3: bit softer, and if you take that into account with
Speaker 3: just releasing their Apple Intelligence, there are a number of
Speaker 3: questions that we need to work through and understand how
Speaker 3: long there's sort of short is it the shorter term
Speaker 3: problem or is there a little bit more in this
Speaker 3: later on? So yes, we will be taking it into account.
Speaker 3: We have been taking profits in this area over the
Speaker 3: last sort of year to date, we've taken a lot
Speaker 3: of profit out of Nvidia, Microsoft, Alphabet, so it's not
Speaker 3: the huge position that it used to be, but we
Speaker 3: still believe there is space work in that portfolio.
Speaker 4: So then how are you thinking about your framing around this.
Speaker 4: Are you still looking at sort of the picks and shovels.
Speaker 4: I notice you say capacity constraint and that makes me
Speaker 4: think of Microsoft for instance this week. Are you still
Speaker 4: in that part of it or are you going more
Speaker 4: into the application side instead.
Speaker 3: Yes, I think if you take a look back at
Speaker 3: what we saw during the Internet phase, it was very
Speaker 3: much semiconductors first, then infrastructure, then you have the software
Speaker 3: and services at the top. So we definitely have been
Speaker 3: exposed to sort of all through those different stages. But
Speaker 3: now we do believe that you know, it's probably worthwhile
Speaker 3: having a player in each of those games, but not
Speaker 3: have two or three players in each of those different stages.
Speaker 3: So we at is probably more adding to the infrastructure side. So,
Speaker 3: as I mentioned, Apple sits right there in the middle
Speaker 3: with their devices, but also something like Microsoft can still
Speaker 3: play in the sort of software and services that sits
Speaker 3: on top, as well as Amazon and Alphabet. So that
Speaker 3: is what we are currently looking for. We're looking for
Speaker 3: companies that can generate revenues out of each of those
Speaker 3: different phases. And in video the reason why we keep
Speaker 3: on holding it and we have been cutting back quite
Speaker 3: a bit given the valuation expansion. But if you look
Speaker 3: at the capital that these big mega hyperscalis of spending.
Speaker 3: We've heard earlier that they will just continue to spend
Speaker 3: even more next year. That's very positive for in VideA.
Speaker 3: We just need to understand exactly what's going on with capacity.
Speaker 3: So far, all the news that we've heard from Gensen
Speaker 3: has been that there is a massive demand for their
Speaker 3: new Blackbell trips. We will be doing a lot of work.
Speaker 3: Our analysts have been on the ground doing trips understanding
Speaker 3: that sort of back end to get a better sense
Speaker 3: of the capacity. For now, we don't think it is
Speaker 3: a huge problem, but we could potentially see not just
Speaker 3: in video but also for the likes of Microsoft, that
Speaker 3: some of those revenues could be postponed a little bit
Speaker 3: into next year rather than into the fourth quarter this year,
Speaker 3: so a bit of a delayed potentially for some of
Speaker 3: these revenue gen rating companies.
Speaker 2: I'm a little bit concerned about the savings rate because
Speaker 2: when we talked about the broader markets, we always thought
Speaker 2: there was a little bit of buffer despite the downside
Speaker 2: and the pressure that we could see from uncertainty in
Speaker 2: politics to your politics and so forth. Is this going
Speaker 2: to be an issue going forward for the US markets is?
Speaker 3: I think what you have seen currently clearly the data
Speaker 3: points coming through, like the GDP growth rate, even just
Speaker 3: the consumer numbers are tested. I consumer spending, even housing
Speaker 3: started to come through actually a little bit better than expected.
Speaker 3: So what we are seeing overall for the economy is
Speaker 3: probably an economy that's doing okay. And that's why we
Speaker 3: are not expecting that a hard landing or recession, but
Speaker 3: a software landing. I think the important thing to point
Speaker 3: out here is that the interest rate market is clearly
Speaker 3: not necessarily believing the indust rate cutting cycle with the
Speaker 3: market is sort of forecasting at the moment, and that
Speaker 3: could be a very important point to look out for.
Speaker 3: So on the consumer and the saving rate, yes, that
Speaker 3: is something that we do watch. I think the saving
Speaker 3: rate relative to where we've come from and relative to
Speaker 3: other countries, and the US is actually still relatively okay.
Speaker 5: But from a.
Speaker 3: Consumer's spending perspective, we have been pretty cautious on the
Speaker 3: consumer overall, and even the current reporting season, what you
Speaker 3: are seeing is quite a bifacated market where the lower
Speaker 3: end is definitely still struggling. Dollar stores not necessarily doing well.
Speaker 3: You stop, continue to see the down training happening, you know,
Speaker 3: eating at home, those sort of things. But then on
Speaker 3: the upper end you have segments that is doing quite well,
Speaker 3: so that sort of higher end consumer. But on the
Speaker 3: other hand, you also have luxury really struggling on the
Speaker 3: back of a week of China. So for the US
Speaker 3: economy itself, for us, the important thing really to understand
Speaker 3: here is what is happening to inflation and what's happening
Speaker 3: to the interest train outlook statement an interstate outlook in general,
Speaker 3: because if we do get a Trump win, for example,
Speaker 3: huge tariffs necessarily doesn't mean a positive outlook for the
Speaker 3: economy or for the interest rate outlook. So there's a
Speaker 3: lot that's that you currently need to bear in mind
Speaker 3: when you think about the.
Speaker 4: Macro outlook and Alfred, I mean, I think to your
Speaker 4: point around around the luxury end, and that China risk
Speaker 4: essay Lauder was a perfect example of that overnight, the
Speaker 4: biggest drop ever really for the company after they withdrew
Speaker 4: their China guidance. But you speak about sort of that
Speaker 4: that rally perhaps broadening out, how are you thinking about
Speaker 4: positioning then, given we do have that risk of rate
Speaker 4: staying elevator going into twenty twenty five if Trump does
Speaker 4: indeed return to the White House.
Speaker 3: Yes, So what we have been seeing of late is
Speaker 3: definitely sort of a resurgence of some of the sectors
Speaker 3: that's actually been in a deep position over the last
Speaker 3: two years. So if you think back over the last
Speaker 3: two years, we've actually been in an earnings upgrade cycle
Speaker 3: for the overall mark. We've had consecutive months of the
Speaker 3: market running more so than what we've had for many,
Speaker 3: many years. But you have actually seen that sort of
Speaker 3: underlying earnings trajectory. It's been eighteen months of positive earnings.
Speaker 3: But what we have seen of late is that sort
Speaker 3: of starting to falter. It's still positive, but not nearly
Speaker 3: as good as we want to see. And you have
Speaker 3: seen the broadening out from just tech stocks driving performance
Speaker 3: and earnings and where we are focusing on those sticktors,
Speaker 3: for example financials, it's starting to see earning growth come through,
Speaker 3: particularly capital markets opening up.
Speaker 4: Unfortunately, got to leave it there, but that was our
Speaker 4: Freddie Younger, client portfolio manager at Alffinity Investment Management.
Speaker 5: Coming up a conversation with Intel CEO Pat Gelsinger. I'm
Speaker 5: Charlie Palatan. This is Bloomberg. I'm Charlie Palette. Doug Prisoner
Speaker 5: is off. This week we go next to Intel, which
Speaker 5: surged in late US trading on optimism about a turnaround
Speaker 5: and for more we hear from CEO Pat Gelsinger. Here
Speaker 5: he is in conversation with Bloomberg's Ed Ludlow.
Speaker 6: Pat, thank you for your time in the quarter gone.
Speaker 6: We were just talking about how you made painful decisions
Speaker 6: and those showed up as impairment charges and were reflected
Speaker 6: on the bottom line. To start, Could I ask if
Speaker 6: that's it now that those actions are taken and you
Speaker 6: now have line of sight on what you want to do,
Speaker 6: or if there will be more sort of restructure to come.
Speaker 7: Yeah, we worked very hard this quarter to get this
Speaker 7: done and the people actions, the restructuring charges you'll largely
Speaker 7: finished this quarter, so it was a challenging quarter that way,
Speaker 7: but to also deliver better than expect the results if
Speaker 7: we eliminate those one time charges and to take our
Speaker 7: guidance up for Q four. I'm very proud of our
Speaker 7: team being able to do both of those this quarter.
Speaker 7: Some of the most difficult restructuring charges maybe in the
Speaker 7: history of Intel since our memory microprocessor decision almost forty
Speaker 7: years ago. Getting that done and still beating results and
Speaker 7: taking the guide up, this was a very significant quarter
Speaker 7: for our team to execute. Very proud of their discipline results.
Speaker 6: Pat the investor base of cheering you. I'm going on
Speaker 6: the reaction of your stock in after hours, but a
Speaker 6: lot of that does seem to be a focus on
Speaker 6: what you were guiding to in the final three months
Speaker 6: of this year, away from sort of the financials and numbers.
Speaker 6: Could you talk a little bit about the product business
Speaker 6: and the foundry business that gave you some confidence in
Speaker 6: that guide.
Speaker 7: Yeah, and if we take it apart a little bit,
Speaker 7: the client business. We've launched our lunar Lake product, the
Speaker 7: second generation of our AIPC, and the AIPC category very solid.
Speaker 7: We'll be launching the commercial version of that into a
Speaker 7: good market. We believe next year for a Windows refresh,
Speaker 7: a corporate refresh cycle, and we start to see more
Speaker 7: strength in the AIPC category overall, with strong set of
Speaker 7: use cases and ISVs bringing new software into the marketplace.
Speaker 7: So we feel good about the client business Data center
Speaker 7: quarter on quarter a little bit better than people forecast
Speaker 7: for that business, and a stronger product line with our
Speaker 7: Xeon six products now starting to ram, you know. And
Speaker 7: finally on the Intel foundry quarter and quarter growth in
Speaker 7: that area, and a strong pipeline of external customers. We
Speaker 7: announced Amazon and two other AT and A customers, some
Speaker 7: additional advanced packaging customers. So we're starting to see that
Speaker 7: business come to life. And that's a long term business
Speaker 7: because when people move designs, it takes several years for
Speaker 7: major designs to move into our foundry. So we've been
Speaker 7: at it now a couple of years, and we're starting
Speaker 7: to see the results of those hard work and getting
Speaker 7: back to competitive process technology with AT and A. So
Speaker 7: a very good quarter of operational results.
Speaker 6: Pat We have a question from our audience, and that
Speaker 6: question comes from Clem DeLong, who's the CEO and founder
Speaker 6: of hugging face, and he makes the point that on
Speaker 6: his platform there are many more smaller models now available,
Speaker 6: and it's leading him to have a question for you
Speaker 6: about Intel's place in the on device trend we're seeing
Speaker 6: with AI and how you're going to enable more on
Speaker 6: device AI use.
Speaker 7: Well, thank you, clem, A great question and a hugging face.
Speaker 7: A great company, and you know, as you think about
Speaker 7: these models, you know, we do see it moving from
Speaker 7: the training phase of you know, trillions of parameters to
Speaker 7: the inferencing phase. And exactly like the question says, in
Speaker 7: that inferencing phase, more of that will happen on prem
Speaker 7: for data center customers, and many of those smaller models
Speaker 7: will be retrained with enterprise's own data. A lot of
Speaker 7: those will just run on Zeon. We don't need a
Speaker 7: special accelerator, or it'll be Zeon plus an accelerator. But
Speaker 7: also then the edge use cases and AIPC use cases.
Speaker 8: Ed.
Speaker 7: I call it the three laws of the edge. Right,
Speaker 7: the laws of physics, right, the speed of light. If
Speaker 7: I have to go to the cloud, I had time.
Speaker 7: Your second law is the law of economics, right, it's
Speaker 7: cheaper to run on my device. And finally, the laws
Speaker 7: of the land, my data on my device in my
Speaker 7: data center. So we see it moving from a cloud
Speaker 7: training world to an edge and on prem world for
Speaker 7: inferencing for the future.
Speaker 6: I therefore have to ask you about Goudi. Your AI
Speaker 6: accelerator did not get the traction that you'd hoped, and
Speaker 6: you won't be making the outline target of five hundred
Speaker 6: million dollars in sales for this fiscal year or calendar year.
Speaker 6: Why is it a use case issue that the data
Speaker 6: center operators aren't looking at it or something else.
Speaker 7: Yeah, two factors that we pointed out. One is is
Speaker 7: that now we have Goudi three coming out, so there's
Speaker 7: more enthusiasm for the next generation product that we're just
Speaker 7: starting to ramp now. The second one is the software
Speaker 7: and the software use cases. The AI world has moved
Speaker 7: very rapidly and innovating very quickly, and the robustness and
Speaker 7: the completeness of the Gaudy software stack hasn't been as great.
Speaker 7: And it's an accelerator, not a full reprogrammable GPU, so
Speaker 7: that makes some of the software porting and optimizations a
Speaker 7: bit more difficult. Obviously, as we get more of that
Speaker 7: running on Gaudy, we solve the software products. But secondly
Speaker 7: then it's also to move to a complete GPU capability,
Speaker 7: which we'll be doing out in time, and that development
Speaker 7: effort is also well underway. So we feel we have
Speaker 7: a solid position. The world is coming to more on
Speaker 7: prem and enterprise use cases. Like the last question ask
Speaker 7: and GOUTI three good early indications from the marketplace and
Speaker 7: its success as we ramp it.
Speaker 6: In twenty five, Pat Bloomberg's reported that on and Qualcom,
Speaker 6: two of your peers are interested in buying some or
Speaker 6: part of in Intel. Can you confirm whether or not
Speaker 6: you received a formal offer from them or anyone else,
Speaker 6: and what Intel's consideration of them would be.
Speaker 7: Yeah, And obviously there's been rumors and churn in the industry,
Speaker 7: and I think all of that just indicates how important
Speaker 7: Intel is to the Intel into the industry structure and semiconductors,
Speaker 7: and how important those supply chains are for the world.
Speaker 7: We don't view any of these rumors as particularly emeritus.
Speaker 7: We laid out a strategy, we reaffirmed that with our
Speaker 7: board of directors, and obviously as we've taken these steps
Speaker 7: this quarter and restructuring and getting our costs where they
Speaker 7: need to be we have the capacity to go on
Speaker 7: the journey that we've laid out to produce sustainable profitability
Speaker 7: and results to shareholder return. So with that, you know,
Speaker 7: I'm committed, the team's committed, We have the board support
Speaker 7: for the strategy that we've laid out, and Q three
Speaker 7: shows that's exactly what we're going to do.
Speaker 6: Trying to help our audience understand Intel's historic and current
Speaker 6: business right the products, but also foundry. And what you
Speaker 6: said was that twenty twenty six is when those third
Speaker 6: party customers start to show up. But could you just
Speaker 6: outline the path to that what you want to hold
Speaker 6: yourself to for next year in developing that business as
Speaker 6: a sort of standalone unit.
Speaker 7: Yeah, and it's a great question ed, and clearly we've
Speaker 7: started to see that already emerge. And even this quarter
Speaker 7: we saw quarter and quarter growth of the external foundry business,
Speaker 7: largely driven by some of those early packaging design wins.
Speaker 7: So these advanced packages are sort of a faster on ramp,
Speaker 7: but ultimately it's becoming a wafer foundry for the industry.
Speaker 7: And as we said, you three major design wins this quarter,
Speaker 7: you know, one with Amazon and two other compute use cases,
Speaker 7: so we'll be updating, you know, the market as we
Speaker 7: win more of those customers and describing the lifetime deal
Speaker 7: value of those to the marketplace as well, give some
Speaker 7: of those breadcrumbs along the way. But it takes a
Speaker 7: couple of years for people to move these designs, a
Speaker 7: year to design it, a year to bring it into
Speaker 7: production until it starts to ramp in the marketplace. So
Speaker 7: key milestones for eighteen A that customers are now beginning
Speaker 7: those design cycles, the design tools, the design libraries are
Speaker 7: being moved over to eighteen A, but it really isn't
Speaker 7: until twenty six that those results start to really help
Speaker 7: Intel's products, and then twenty six twenty seven until we
Speaker 7: start to see meaningful volumes externally.
Speaker 6: That were just days away from an election in this country.
Speaker 6: And I'm particularly interested in your assessment and planning for
Speaker 6: what might happen to the CHIPSAC programs. Of course, I
Speaker 6: don't expect you to know what will happen in the election.
Speaker 6: You do not have a crystal ball. But former President
Speaker 6: Trump has kind of made disparaging remarks about President Biden's
Speaker 6: economic agenda. How are you planning for that?
Speaker 3: Please?
Speaker 7: Yeah, And I'd say maybe three different perspectives. Number One,
Speaker 7: the Chips Act was a bipartisan act and with that
Speaker 7: strong support from both sides of the aisle, you know,
Speaker 7: and with that, we believe the importance of that in
Speaker 7: terms of industrial policy. The semiconductor industry is well supported
Speaker 7: by Congress and both parties. Second, we are disappointed by
Speaker 7: how long and how slow the dispensing of funds has
Speaker 7: been and well over two years at this point. I've
Speaker 7: invested thirty billion in capital and we've seen zero dollars
Speaker 7: of the Chips grants at this point. So we do
Speaker 7: believe that that has been too slow, and we're somewhat
Speaker 7: frustrated by that, and we've taken that out of our
Speaker 7: financials for this year. That said, there's also the investment
Speaker 7: tax credit that we are seeing, and it is much
Speaker 7: larger than the grant portion of the Chips Act, and
Speaker 7: that is now law, and that will be beneficial. But clearly,
Speaker 7: I think whoever wins the election, the importance of this industry,
Speaker 7: the importance of rebuilding this supply chain of manufacturing is
Speaker 7: well supported. And Intel as a designer, R and D
Speaker 7: and manufacturer is unique in the United States and in
Speaker 7: the overall structure of the industry, and we expect the
Speaker 7: broad support rate of the administration regardless which party wins.
Speaker 6: As a result, Pat two quarters ago, your CFO told
Speaker 6: me you were two over indexed to CPU, and we
Speaker 6: know what happened with Goudi. You made painful decisions in
Speaker 6: the court to gone reduce headcount by sixteen five hundred.
Speaker 6: Do you now have the plan in place and are
Speaker 6: you confident from here?
Speaker 7: Yeah. We laid out a clean sheet program that we
Speaker 7: went through to really benchmark the business. We took a
Speaker 7: conservative view of the funding plan, as we call it internally,
Speaker 7: saying you know, we're taking a modest growth outlook and
Speaker 7: we're building our cost structure to that very modest outlook.
Speaker 7: But we've also built now a lot of optionality to
Speaker 7: scale up into the business. We have a shell ahead,
Speaker 7: we have capacity that we can scale into if necessary,
Speaker 7: and we've made a smaller, more efficient Nimbore company that
Speaker 7: is able to execute with more agility and speed as well.
Speaker 7: So we feel like we're now well set up for
Speaker 7: the future. This was a challenging quarter for me for
Speaker 7: the company, but we feel like we're well set up
Speaker 7: for the future and the good operational results that exceeded
Speaker 7: the markets expectations and the increased guidance for Q four.
Speaker 7: We feel like we're now in a very solid position.
Speaker 6: Intel CEO Pat Gelsinger, thank you for joining us here.
Speaker 5: For more on the Intel story, we turned to Marabelle Lopez,
Speaker 5: founder and principal analyst at Lopez Research. She spoke with Bloomberg,
Speaker 5: Sherryon and Annabelle Droolers.
Speaker 4: I'm curious for your reaction on the share price today
Speaker 4: because is it telling you that investors are really believing
Speaker 4: that that turnaround plan is taking shape or is it
Speaker 4: more just relief and a relief rally that's coming through
Speaker 4: that the numbers weren't as bad as what we'd seen
Speaker 4: in last quarters.
Speaker 8: I think the turnaround plan was quite clear from the start.
Speaker 8: There was obviously a significant issue with the turnaround plan
Speaker 8: last quarter that really put into question the ability for
Speaker 8: them to execute. This quarter, we actually saw some really
Speaker 8: strong guidance around what's going to happen with the AIPT,
Speaker 8: which is really important for them in a very competitive
Speaker 8: market for Intel. We also saw wonderful news from AWS
Speaker 8: on the foundry bid, and if you look at a
Speaker 8: company like AWS investing in Intel from the foundry business
Speaker 8: that actually says that they've done some testing and they
Speaker 8: have confidence that that foundry business.
Speaker 3: Could work for them.
Speaker 8: But I think if you put those two things together,
Speaker 8: you're starting to see a path where there could be
Speaker 8: a return of Intel into the market in a more
Speaker 8: meaningful way, so less distressing news, more optimism about the
Speaker 8: future opportunities Intel has over the come in three years.
Speaker 4: And which party is sort of more optimistic about, because
Speaker 4: we just heard there about the outlook for Gaudi three
Speaker 4: for instance, that side or is it more on the
Speaker 4: foundry side.
Speaker 3: Do you think so?
Speaker 8: I think the foundry side is actually incredibly important for
Speaker 8: Intel because it's really a new revenue stream. I think
Speaker 8: what we're seeing in the GPU market is that's a
Speaker 8: very difficult market to wrestle away from Nvidia. The opportunity there,
Speaker 8: of course, is if we look at the longer gain,
Speaker 8: which is in say at least a year or more,
Speaker 8: what we're seeing is that enterprise buyers don't necessarily need.
Speaker 3: GPUs for everything.
Speaker 8: They need a mix of CPUs and GPUs, and this
Speaker 8: is where Intel has the opportunity to enter into the
Speaker 8: market strong when the buying actually starts to happen we're
Speaker 8: all discussing the AI market is if it is here today,
Speaker 8: and we're really at the very beginning of it. We
Speaker 8: have product, we have use cases, but enterprise buyers have
Speaker 8: been flow to adopt. We've seen a lot of activity
Speaker 8: in the data center, but the data center is only
Speaker 8: part of the market. So what we're expecting, what we're
Speaker 8: optimistic about, is that incol can come in on the
Speaker 8: back half and grab some of that enterprise buying that
Speaker 8: we'll be coming up in the next fave year.
Speaker 6: A Maravell.
Speaker 2: Apple, of course also very much focused on Apple Intelligence,
Speaker 2: but we thought that perhaps a slow rollout of that
Speaker 2: feature would actually not lead to a lot of boost
Speaker 2: for the iPhone space. But were you surprised on what
Speaker 2: you saw in that the summer quarter.
Speaker 8: I think in a lot of ways, Apple continually pulls
Speaker 8: a rabbit out of the hat. Just when you think
Speaker 8: iPhone sales are going to be fundamentally down and uninteresting,
Speaker 8: they come back and they show growth. We did see
Speaker 8: a bit more weakness in the Chinese market than we
Speaker 8: thought we would. I think there was an expectation that
Speaker 8: there would be a big pushback to growth. I actually
Speaker 8: think the Apple Intelligence side people overplay that in terms
Speaker 8: of when the features come out. The things that people
Speaker 8: really care about with Apple are that they're going to
Speaker 8: have a better user experience, that they're going to have
Speaker 8: great cameras, great battery life, you know, all the things
Speaker 8: that typically sell smartphones, and to continue to have, you know,
Speaker 8: in the higher digit growth in the smartphone market is
Speaker 8: actually quite a feat to continue to maintain. So I
Speaker 8: think we're all very surprised and optimistic about where that was.
Speaker 8: And the services business is actually quite interesting for Apple
Speaker 8: as well, and that seems to be progressing at a
Speaker 8: good rate.
Speaker 4: Mara Bell, what do you think about the China market
Speaker 4: in particular, because it was really clear, as you said,
Speaker 4: that they're facing weaker demand there. Do you think that
Speaker 4: Apple needs to make a product that's specific for the
Speaker 4: mainland market and if so, how would that look to you?
Speaker 8: I think that's absolutely not the cards for Apple. Apple
Speaker 8: tends to try to make a more ubiquitous high end,
Speaker 8: mid range, potentially low end. You could see that over
Speaker 8: time they've played those three tiers, but fundamentally different products
Speaker 8: aren't extremely scalable for Apple. If anything, I think they
Speaker 8: try to lean in and do more in India it
Speaker 8: is going to be an extremely competitive market in China.
Speaker 8: We expect that to continue, but over the course of time,
Speaker 8: I think Apple will have a very solid showing in
Speaker 8: the Chinese market. I think everybody is very interested in
Speaker 8: seeing how well hiawais high end flagship products perform, but
Speaker 8: they're very expensive products, and if you look at a
Speaker 8: mass market appeal, we see the opportunity for Apple to
Speaker 8: actually go head to head and do fairly well in
Speaker 8: the space moving forward.
Speaker 2: And Iraville, of course, we've been getting a lot of
Speaker 2: tech earnings, including Microsoft Meta also sort of disappointing when
Speaker 2: it comes to the outlook, what do you make of
Speaker 2: the broader trend right now when it comes to AI
Speaker 2: really impacting these tech companies caps, future earnings and just
Speaker 2: business performance going forward.
Speaker 8: So there's a bit of a disconnect and disillusionment between
Speaker 8: what people expected to happen with the AI market and
Speaker 8: where we actually are in the AI market. So one
Speaker 8: of the things that we see happening is there has
Speaker 8: been a strong revenue, but there continues to be heavy,
Speaker 8: heavy capital investment that has to happen in this market
Speaker 8: and will continue because we're not even at the point
Speaker 8: where we're seeing significant AI demand from enterprise customers. Once
Speaker 8: that happens and we see more workloads going to the cloud,
Speaker 8: that actually does continue to equal more expense. So I
Speaker 8: think what the cloud computing providers are trying to say is, hey,
Speaker 8: we continue to put out double digit in the twenty
Speaker 8: thirty percent growth, which is phenomenal when you consider the run.
Speaker 8: All of that growth is being driven by AI right now,
Speaker 8: but there's a cost that's associated with that, and they
Speaker 8: want to try to temper expectations of what the earnings
Speaker 8: might look like or what the capital portfolio might look
Speaker 8: like moving forward, because that train is still continuing on
Speaker 8: and the revenue is not going to pace equally with
Speaker 8: the expense, probably for several quarters.
Speaker 2: Marvel Lopez always good to have you with us, founder
Speaker 2: and principal and list at Lopez Research.
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