WEBVTT - Elon Musk Visits China, Apple iPad Hit by EU Rules 0:00:02.920 --> 0:00:10.840 Bloomberg Audio Studios, podcasts, radio news. You're listening to the 0:00:10.840 --> 0:00:15.000 Bloomberg Intelligence Podcast. Catch us live weekdays at ten am 0:00:15.040 --> 0:00:15.680 Eastern on. 0:00:15.640 --> 0:00:18.720 Apple car Play and Android Auto with the Bloomberg Business App. 0:00:18.760 --> 0:00:22.000 Listen on demand wherever you get your podcasts, or watch 0:00:22.079 --> 0:00:23.360 us live on YouTube. 0:00:24.880 --> 0:00:26.680 All right, let's get back to Tesla for a second. 0:00:26.720 --> 0:00:30.160 Dig a little deeper here. Craig Tudel, Bloomberg Global Autos Editor, 0:00:30.320 --> 0:00:32.839 joins us, Now, so can you play this out over 0:00:32.880 --> 0:00:35.080 the last like three days? So elon, Musk jumps on 0:00:35.080 --> 0:00:38.000 a plane, he goes to China. Then what happens? 0:00:38.840 --> 0:00:42.280 Yeah, good morning. It has been a WorldWind a couple 0:00:42.280 --> 0:00:45.720 of days, a few weeks, I would say. Actually, so 0:00:46.080 --> 0:00:49.640 just to go back even slightly further. You know, Musk 0:00:49.720 --> 0:00:52.080 with the post to go to India a little more 0:00:52.120 --> 0:00:54.440 than a week ago and called off that trip said, 0:00:54.560 --> 0:00:57.440 you know, he had heavy obligations that Tesla is how 0:00:57.480 --> 0:01:02.480 he put it. You know, Tesla proceeds to release really 0:01:02.520 --> 0:01:05.760 crumby for quarter earnings. But Musk kind of pulls a 0:01:05.800 --> 0:01:09.000 rabbit out of a hat in you know, announcing the 0:01:09.080 --> 0:01:13.200 change in strategy to get deeper vehicles to market faster, 0:01:14.240 --> 0:01:16.520 how exactly is going to do that is a little fuzzy, 0:01:16.560 --> 0:01:21.120 but the gist of it is to use existing manufacturing 0:01:21.160 --> 0:01:25.240 lines to make these new vehicles that could be ready 0:01:25.319 --> 0:01:28.440 as soon as the late this year or early next year. 0:01:29.720 --> 0:01:33.360 In the process of making that pivot, he clearly needs 0:01:33.400 --> 0:01:37.200 to sort of, you know, get incremental revenue after you know, 0:01:37.240 --> 0:01:40.600 a first quarter where sales were really weak, they had 0:01:40.680 --> 0:01:46.720 the lowest revenue since early twenty twenty two levels. And 0:01:46.360 --> 0:01:49.160 in kind of one clear way that they could do 0:01:49.240 --> 0:01:53.240 that is by offering the system that they've marketed as 0:01:53.320 --> 0:01:56.400 full self driving in the US. Importantly, we should note 0:01:56.400 --> 0:02:00.680 it is not a self driving system, but they've market 0:02:00.760 --> 0:02:04.040 that hasn't stopped them for marketing it as for years now. 0:02:04.640 --> 0:02:07.720 All Right, So Craig, let's focus on this weekend, which 0:02:07.720 --> 0:02:09.880 seems to be moving the stock today. Am I to 0:02:09.960 --> 0:02:14.480 understand that the getting the Chinese approval for this driver 0:02:14.520 --> 0:02:17.120 assistance was up in the air, like there's a risk 0:02:17.160 --> 0:02:20.040 that they wouldn't get it, and then Elon hops on 0:02:20.080 --> 0:02:22.560 a jet, flies over and saves the day. 0:02:22.880 --> 0:02:23.960 Is that what happened? 0:02:24.840 --> 0:02:28.120 Yeah, it wasn't necessarily the case that this was you know, 0:02:28.200 --> 0:02:30.920 kind of an overnight thing. Actually the last time that 0:02:31.040 --> 0:02:34.080 Musk was in China, this was something that we reported 0:02:34.120 --> 0:02:36.519 at the time was on the agenda. It's been something 0:02:36.560 --> 0:02:39.600 that Tesla has been after for quite some time, and 0:02:39.639 --> 0:02:43.919 it's increasingly a way that you know, carmakers are competing 0:02:43.919 --> 0:02:47.240 in China is you know, how advanced is your driver 0:02:47.320 --> 0:02:50.920 assistant system? You know, that keeps you from crashing, that 0:02:51.000 --> 0:02:53.720 keeps you in your lane, that allows you in some 0:02:53.800 --> 0:02:57.080 cases to take your hands off the wheel. But in 0:02:57.120 --> 0:03:00.920 all cases you know you absolutely are responsible for or 0:03:00.919 --> 0:03:04.440 for you know, the car, and you know no companies 0:03:04.680 --> 0:03:08.959 are are taking responsibility legal responsibility if if you get 0:03:08.960 --> 0:03:12.840 into a craft UH. You know, with the exception of 0:03:12.840 --> 0:03:15.560 of some you know, very small sort of limited fleets 0:03:15.560 --> 0:03:19.480 and and contained areas, and you know there are quirks 0:03:19.720 --> 0:03:22.760 as you might imagine, you know, buy market for what 0:03:22.880 --> 0:03:25.640 is required to be able to offer these systems that 0:03:25.720 --> 0:03:28.600 really need to be safe and also need to have 0:03:28.680 --> 0:03:32.280 you know, controls for UH data collection and and you know, 0:03:32.360 --> 0:03:36.280 the cameras used to navigate UH the surroundings that these 0:03:36.320 --> 0:03:39.480 cars are going to need to to pilot around. And 0:03:39.760 --> 0:03:42.840 that's been a hang up for Tesla and other international 0:03:42.880 --> 0:03:46.920 companies that you know, they need to uh in you know, 0:03:47.720 --> 0:03:52.120 in all cases work with local Chinese companies for things 0:03:52.160 --> 0:03:55.040 like mapping and navigation. So one one of the key 0:03:55.120 --> 0:03:57.880 sort of you know takeaways from this trip was uh 0:03:58.080 --> 0:04:02.240 Tesla agreeing to do that with bay Do in China. 0:04:02.840 --> 0:04:04.760 So who owns the stuff. 0:04:06.560 --> 0:04:10.320 It is importantly you know, it's a matter of ownership 0:04:10.400 --> 0:04:13.040 and where it's kept. And so you know, this has 0:04:13.080 --> 0:04:18.440 come up years ago. Actually, you know, Tesla had had 0:04:18.480 --> 0:04:20.680 a bit of a hang up where their cars were 0:04:20.720 --> 0:04:24.080 banned from you know, being in the area of military 0:04:24.120 --> 0:04:27.479 compounds and other sort of sensitive parts of kinda out 0:04:27.520 --> 0:04:31.240 of concerns about you know, any information that cars were gathering, 0:04:31.720 --> 0:04:34.440 and you know, there were concerns about whether any data 0:04:34.640 --> 0:04:38.200 was going from Tesla's China operations back to the US, 0:04:38.600 --> 0:04:41.880 and so Tesla needed to sort of reassert kinda that 0:04:42.279 --> 0:04:45.800 you know, any data collected in China will stay in China. 0:04:45.880 --> 0:04:48.880 And so that has been you know, something that they've 0:04:48.920 --> 0:04:51.359 had to sort of acquiesce to as of you know, 0:04:51.440 --> 0:04:55.000 several years ago. But they they needed to still sort 0:04:55.040 --> 0:04:59.400 of you know, clear uh you know approval for for 0:04:59.640 --> 0:05:02.039 you know, making sure that their keys were crossed and 0:05:02.080 --> 0:05:04.440 eyes were dotted in that respect, and they needed this 0:05:04.520 --> 0:05:07.400 deal with BAYD. It does seem to be the case 0:05:07.440 --> 0:05:10.359 that they need other need to meet other conditions in 0:05:10.480 --> 0:05:14.880 order for FSD to be offered in China. It's still 0:05:14.880 --> 0:05:18.320 not a done deal, but what you know, sort of 0:05:18.320 --> 0:05:20.400 hoops they still have to jump through are a bit 0:05:20.480 --> 0:05:23.360 unclear at this point. That's not stopping the market from 0:05:23.400 --> 0:05:24.760 getting very excited about this. 0:05:25.200 --> 0:05:28.599 So how does this change, if at all, kind of 0:05:28.600 --> 0:05:31.679 the competitive landscape for Tesla in China? I know, you guys, 0:05:31.920 --> 0:05:33.720 you you guys have been reporting a lot of how 0:05:33.839 --> 0:05:37.640 some of the local EV makers have really become very 0:05:37.680 --> 0:05:39.040 good and very competitive. 0:05:40.279 --> 0:05:44.640 Yeah, I think it absolutely is something that's been missing 0:05:44.680 --> 0:05:48.840 for Tesla that, assuming all goes well here, you know, 0:05:49.120 --> 0:05:51.440 it will no longer be a sort of strike against 0:05:51.440 --> 0:05:54.680 them among consumers who really, you know, want the most 0:05:54.720 --> 0:05:59.200 cutting edge technology. It remains to be seen how big 0:05:59.200 --> 0:06:01.240 a deal it will be or Tesla from from a 0:06:01.279 --> 0:06:03.960 revenue standpoint, because we don't know at this point how 0:06:04.040 --> 0:06:06.880 much Tesla will be willing, uh will be looking to 0:06:06.960 --> 0:06:09.520 charge for it. We don't know, uh, you know, to 0:06:09.560 --> 0:06:11.719 what extent they may have to share some revenue with 0:06:11.800 --> 0:06:13.800 some of their partners. It's not clear whether by Do 0:06:14.000 --> 0:06:18.160 maybe gets a cut. You know, in the US, Tesla 0:06:18.760 --> 0:06:21.080 and you know throughout the world, Tesla has made a 0:06:21.080 --> 0:06:24.320 point to really be you know, want to be vertically integrated. 0:06:24.839 --> 0:06:25.080 Uh. 0:06:25.160 --> 0:06:27.359 And that's you know, fancy talk for in control of 0:06:27.400 --> 0:06:30.240 its own destiny. Uh. They were willing to sort of 0:06:30.279 --> 0:06:34.120 acquiesce in this case. Uh, you know, I think because 0:06:34.160 --> 0:06:37.320 they they really could use this boost in China at 0:06:37.320 --> 0:06:39.640 a at a time when their their lineup is getting 0:06:39.640 --> 0:06:42.000 a bit tired and they're losing a lot of market 0:06:42.000 --> 0:06:44.400 share to companies like byd Well. 0:06:44.400 --> 0:06:46.320 This also raises the question too, it doesn't take a 0:06:46.400 --> 0:06:49.839 lot of news to get Tesla stock moving. Not that 0:06:49.880 --> 0:06:51.680 a trip to China wasn't a big deal, but like 0:06:51.720 --> 0:06:53.880 you said, there's so many questions as to the actual 0:06:53.920 --> 0:06:56.560 revenue driver and what it's going to mean. I mean, 0:06:56.560 --> 0:06:58.120 you have to wonder, you know, it's not going to 0:06:58.160 --> 0:07:01.080 take a lot for any kind of shorts Craig to cover. 0:07:02.320 --> 0:07:05.000 I think that's right. And this is also a name 0:07:05.040 --> 0:07:09.520 that you know, options traders absolutely love. It's it's sort 0:07:09.560 --> 0:07:11.680 of like the meme stock that has lasted as a 0:07:11.720 --> 0:07:14.960 meme stock as that craze has sort of faded away, 0:07:15.400 --> 0:07:18.960 and so you know, anytime to your point, you know, 0:07:19.080 --> 0:07:22.080 Musk is able to sort of get the momentum with 0:07:22.240 --> 0:07:25.760 you know, the narrative, it tends to lead to big swings. 0:07:25.800 --> 0:07:28.000 So you know, earlier this year, I think he lost 0:07:28.200 --> 0:07:32.480 control of that narrative. And you know it's not it's 0:07:32.520 --> 0:07:34.440 not at all a mystery as to why that is, 0:07:34.480 --> 0:07:37.120 you know, looking at last week's earnings, but I think 0:07:37.120 --> 0:07:39.320 he was really able to sort of change what people 0:07:39.360 --> 0:07:42.360 were talking about last week. If it, I guess, you know, 0:07:42.800 --> 0:07:45.080 it will see whether or not you know, this is 0:07:45.360 --> 0:07:49.200 uh mostly talk as opposed to you know, going to 0:07:49.440 --> 0:07:52.880 to lead to real, sort of meaningful change in Tesla's 0:07:52.880 --> 0:07:55.679 earnings trajectory, which has not been trending in the right direction. 0:07:56.200 --> 0:07:57.760 All right, Craig, thanks so much. We appreciate it. 0:07:57.800 --> 0:08:00.480 Craig Tudell, Global autos editor for Bloomberg News, joining us 0:08:00.520 --> 0:08:01.280 from London. 0:08:01.600 --> 0:08:02.240 You know, I follow it. 0:08:02.440 --> 0:08:05.160 Bloomberg's own ed Ludlow on social media, and of course 0:08:05.200 --> 0:08:07.440 he just got a new testa and I think he 0:08:07.560 --> 0:08:10.880 uses that autonomous driving features that it has, so he's 0:08:10.920 --> 0:08:14.280 been reporting today for example, our boy Ed, who lives 0:08:14.320 --> 0:08:17.000 in San Francisco. His full commute about twenty five miles, 0:08:17.880 --> 0:08:21.239 three disengagements, but ninety percent of the drive was under 0:08:21.360 --> 0:08:25.240 their FSD in all smooth. His FSD made it all 0:08:25.280 --> 0:08:28.120 the way to the Golden Gate Bridge, but then had 0:08:28.160 --> 0:08:31.080 some problems about deciding which lane it wanted to choose, 0:08:31.120 --> 0:08:31.680 so Ed had. 0:08:31.560 --> 0:08:32.200 To step in there. 0:08:32.240 --> 0:08:35.080 But by and large, that's reporting this on a daily basis. 0:08:35.080 --> 0:08:38.079 He's putting his life on the line for his primary 0:08:38.160 --> 0:08:39.280 reporting duties. 0:08:39.480 --> 0:08:40.720 He's the best. 0:08:40.840 --> 0:08:41.840 It looks like it's working. 0:08:42.080 --> 0:08:44.319 I guess is the question just becomes like how much 0:08:44.360 --> 0:08:46.400 you want to pay for it? Like, I mean, sure 0:08:46.440 --> 0:08:49.920 it'd be great, but is the average person, not just 0:08:49.960 --> 0:08:52.040 the tech reporter in San Francisco who are also anchors 0:08:52.080 --> 0:08:54.600 in tech show, like well, the average person spend eight 0:08:54.640 --> 0:08:56.680 grand a year for it or one hundred bucks a month. 0:08:56.920 --> 0:08:58.720 I don't know. I mean that kind of goes to 0:08:58.720 --> 0:09:00.560 the bigger issue of car here. 0:09:00.600 --> 0:09:03.280 I mean, you know, it remains to be seen for 0:09:03.480 --> 0:09:06.360 Tesla investors, you know, is it tough to make? Can 0:09:06.400 --> 0:09:09.959 they make a profit at a thirty thousand the price limit? 0:09:10.000 --> 0:09:11.640 There's a lot of concern that. 0:09:11.600 --> 0:09:12.480 They won't be able to do that. 0:09:12.559 --> 0:09:16.440 But again Elon put out some good talk on the 0:09:16.480 --> 0:09:18.800 earnings call, trying to masking over what was a week 0:09:18.920 --> 0:09:21.000 quarter and then of course going over and had this 0:09:21.040 --> 0:09:23.000 great successful event here in China. 0:09:23.080 --> 0:09:24.679 The last forty eight hours. 0:09:26.120 --> 0:09:30.040 You're listening to the Bloomberg Intelligence Podcast. Catch us live 0:09:30.120 --> 0:09:32.960 weekdays at ten am Eastern on applecar. 0:09:32.640 --> 0:09:35.160 Play and androyd Otto with the Bloomberg Business. 0:09:35.520 --> 0:09:38.360 You can also listen live on Amazon Alexa from our 0:09:38.400 --> 0:09:42.760 flagship New York station, Just say Alexa playing Bloomberg eleven thirty. 0:09:44.280 --> 0:09:46.880 You got the SMP up about four tenths of one percent. 0:09:46.880 --> 0:09:49.400 But it's a really busy week between Eco, jobs data, 0:09:49.440 --> 0:09:51.800 the FED and then earnings as well. So you want 0:09:51.800 --> 0:09:54.720 to break down what is going to actually move the markets. 0:09:54.720 --> 0:09:58.719 Margie Pateel, senior portfolio manager at all Spring Global Investments 0:09:58.760 --> 0:10:00.880 that joins us now, So I know you're going to 0:10:00.960 --> 0:10:03.320 say all of the stuff, but let's just pin you down. 0:10:03.400 --> 0:10:05.160 So is it going to be Apple and Amazon and 0:10:05.200 --> 0:10:06.960 all the companies reporting. Is it going to be the 0:10:06.960 --> 0:10:08.400 FED or is it going to be the jobs data? 0:10:09.840 --> 0:10:12.640 Oh, I think the job will be more important because frankly, 0:10:12.720 --> 0:10:15.160 what the FED has done or not done, hasn't really 0:10:15.200 --> 0:10:17.880 had much of effect on the market either way. When 0:10:17.960 --> 0:10:22.199 they talked about three cups this year, the market was 0:10:22.240 --> 0:10:24.920 a little interested in. When the market is now saying, well, 0:10:24.920 --> 0:10:27.880 maybe they'll even race rates, it hasn't really affected the market. 0:10:27.920 --> 0:10:31.600 The market's been hooping at earnings. That's what's important. Inflation 0:10:31.760 --> 0:10:34.480 has not been a negative issue for companies, So I 0:10:34.480 --> 0:10:37.360 think it's more of the same at looking at data 0:10:37.400 --> 0:10:39.920 that shows the strength of the economy, like the jobs data. 0:10:40.440 --> 0:10:46.040 So are you concerned that this FED maybe maybe get 0:10:46.040 --> 0:10:49.200 a little bit reticent here about that FED pivot we 0:10:49.200 --> 0:10:50.760 had in December, and that maybe they went a little 0:10:50.760 --> 0:10:53.120 bit too far, and maybe they'll try to compensate here 0:10:53.360 --> 0:10:55.440 this week and may talk a little bit more hawkish 0:10:55.760 --> 0:10:57.120 than the market's discounting. 0:10:58.320 --> 0:11:01.240 Well, you know that they're seems to have swung a 0:11:01.240 --> 0:11:04.760 lot more than their actual actions, and the actions that 0:11:04.760 --> 0:11:07.920 they've made, even raising rates for the last two years, 0:11:08.280 --> 0:11:09.760 didn't really derail the market. 0:11:10.600 --> 0:11:12.439 The market really has proven to be not. 0:11:12.480 --> 0:11:16.720 So sensitive to short changes in short term interest rates 0:11:17.040 --> 0:11:18.560 as we've seen in past cycles. 0:11:18.960 --> 0:11:22.280 So I think the and particularly short rates, I think again. 0:11:22.160 --> 0:11:25.520 Corporate America is pretty much immune to the Fed's decisions. 0:11:25.679 --> 0:11:28.680 They're not overlevered. So really, I HDA doesn't matter, but 0:11:28.720 --> 0:11:31.800 it really doesn't matter. And I think inflation at say 0:11:32.080 --> 0:11:35.480 three and a half percent is really a benign backdrop 0:11:35.640 --> 0:11:38.640 for corporate earnings, allowing companies to have the ability to 0:11:38.720 --> 0:11:41.560 raise prices a little bit and keeping those high margins. 0:11:41.640 --> 0:11:43.959 I think that's what the market's looking at, rather than 0:11:43.960 --> 0:11:45.800 what the FED is doing or thinking about. 0:11:46.840 --> 0:11:48.439 In that case, what are we going to learn from 0:11:48.480 --> 0:11:51.199 earnings this week? In that you're at a date, you 0:11:51.320 --> 0:11:54.200 got energy and financials are number two in three in 0:11:54.280 --> 0:11:56.319 terms of sector is best performing on the S and 0:11:56.360 --> 0:11:59.000 P Communication services number one, But you could argue that 0:11:59.000 --> 0:12:01.520 it's a meta an alphabet thing and tech comes in 0:12:01.559 --> 0:12:05.079 at number four. Is it going to be cyclical leadership? 0:12:05.120 --> 0:12:07.400 Will that actually happen when their earnings deliver? 0:12:08.840 --> 0:12:10.920 Well, I think all those sectors that you said are 0:12:11.280 --> 0:12:14.120 economically sensitive, and so they have all. 0:12:14.040 --> 0:12:18.160 Reflected, frankly, a better economy. Last week's earnings were better. 0:12:17.920 --> 0:12:20.600 Than the market expected, and we'll see this week if 0:12:20.640 --> 0:12:23.760 again we have better than expected. I expect that we will, 0:12:24.559 --> 0:12:28.040 and so I think that that's really what the market's telegraphing. 0:12:28.440 --> 0:12:29.839 When you have those sectors that. 0:12:29.800 --> 0:12:34.360 Are sensitive, even financials energy, that says to me that 0:12:34.400 --> 0:12:36.600 the market is not worried about economic growth. 0:12:36.640 --> 0:12:39.040 It's looking at price and power or a little bit 0:12:39.080 --> 0:12:39.640 of inflation. 0:12:43.600 --> 0:12:46.000 Right now, we're speaking with margattele portfolio manager at all 0:12:46.040 --> 0:12:48.080 Spring a Global, and coming up in just a couple 0:12:48.120 --> 0:12:50.240 of moments, we're going to listen into a Bloomberg television 0:12:50.280 --> 0:12:54.280 interview with Lamborghini CEO Stefan Winkelman, and Matt Miller is 0:12:54.320 --> 0:12:56.720 not here to participate in that. 0:12:56.760 --> 0:12:57.720 I know who's going to miss that. 0:12:58.080 --> 0:13:00.439 So Markie, here, what are the sectors we should be 0:13:00.520 --> 0:13:03.920 looking at here as we think about the second half 0:13:04.000 --> 0:13:05.800 of this year, where are you guys most. 0:13:05.679 --> 0:13:06.199 Of these. 0:13:07.520 --> 0:13:10.680 Well, again, we think economically sensitive sectors are going to 0:13:10.720 --> 0:13:13.559 do better for the year, so that would be technology. 0:13:13.720 --> 0:13:15.920 Certainly, it's been a volable sector, but we still. 0:13:15.720 --> 0:13:19.760 Think there are plenty of very competitive companies who are 0:13:19.800 --> 0:13:22.960 not priced too high that will perform better than the market. 0:13:23.440 --> 0:13:26.040 We also like industrials because we do think there's a 0:13:26.080 --> 0:13:30.240 capital expenditure cycle and expansion of manufacturing and investment by 0:13:30.280 --> 0:13:34.160 companies that were very positive. Some of the materials in fact, 0:13:34.240 --> 0:13:38.840 we think will benefit and energy, which has rather been overlooked. 0:13:39.280 --> 0:13:43.920 Healthcare has been more a company come group of companies 0:13:43.920 --> 0:13:47.600 that's reacted to the down draft after COVID and the 0:13:47.720 --> 0:13:50.280 drawing up of money to be spent on tools and 0:13:50.320 --> 0:13:51.320 devices by log of. 0:13:51.320 --> 0:13:52.239 The new companies. 0:13:52.520 --> 0:13:56.199 So we think healthcare is attractive still, but very selective 0:13:56.280 --> 0:14:00.199 because some companies, say Lily for example. 0:13:59.840 --> 0:14:01.000 Have a wonderful product. 0:14:01.800 --> 0:14:04.760 Some of the tools and devices companies have had disappointing 0:14:04.800 --> 0:14:08.080 earnings because of destroyer and funding and also because of 0:14:08.360 --> 0:14:10.200 dramatic luring of China sales. 0:14:10.840 --> 0:14:13.960 Margie, you didn't mention tech, and so I assume that 0:14:13.960 --> 0:14:15.840 if you don't own tech right now, it's hard to 0:14:15.840 --> 0:14:18.560 buy it at these levels. But how big of a 0:14:18.600 --> 0:14:20.480 part should that be of your portfolio? 0:14:21.800 --> 0:14:25.360 Well, really, when you look at technology, there are first 0:14:25.400 --> 0:14:28.680 of all, many companies now pay competitive dividends, which I 0:14:28.760 --> 0:14:30.960 didn't used to do. And if you look at their 0:14:31.040 --> 0:14:35.080 price earnings ratio versus some sort of estimate of future growth, 0:14:35.400 --> 0:14:37.760 and then you look at other sectors price. 0:14:37.520 --> 0:14:40.760 Earnings ratio estimates of growth, it always. 0:14:40.480 --> 0:14:42.560 Seems to me that tech may be a little bit 0:14:42.600 --> 0:14:46.880 expensive on a price earnings ratio, but much higher sustainable 0:14:46.880 --> 0:14:49.840 prospects of growth. When you look at some sectors that 0:14:49.880 --> 0:14:55.840 are priced almost as high as tech, say consumered staples. Really, 0:14:55.880 --> 0:14:57.720 I just don't see the growth there. I don't see 0:14:57.760 --> 0:15:01.480 the pricing power there in an uncertain world. Just as 0:15:01.520 --> 0:15:05.400 to me, technology use is fairly valued and it will 0:15:05.440 --> 0:15:07.840 really depend on earnings, and so I think it'll continue 0:15:07.880 --> 0:15:08.440 to do better. 0:15:09.160 --> 0:15:11.040 Right, market Ptel, thank you so much. We appreciate that. 0:15:11.120 --> 0:15:14.720 Market Ptel's senior portfolio manager at all Spring Global Investments 0:15:15.280 --> 0:15:17.200 joining us via zoom Hearing. 0:15:19.560 --> 0:15:23.440 You're listening to the Bloomberg Intelligence podcast. Catch us live 0:15:23.520 --> 0:15:26.240 weekdays at ten am Eastern on Apple car Playing and 0:15:26.360 --> 0:15:29.240 broud Auto with the Bloomberg Business app. Listen on demand 0:15:29.280 --> 0:15:32.960 wherever you get your podcasts, or watch us live on YouTube. 0:15:34.200 --> 0:15:35.840 Let's go to Apple for a second. So that's not 0:15:36.040 --> 0:15:38.120 is actually up by about three percent to get an 0:15:38.200 --> 0:15:41.520 upgrade over at Bernstein. It sees Bernstein apparently sees China 0:15:41.560 --> 0:15:45.240 issues as cyclical, but the broader headline was that the 0:15:45.240 --> 0:15:48.960 European Union took aim at Apple's iPad. It's been hit 0:15:49.000 --> 0:15:51.880 by its digital dominance corrack down. I don't really know 0:15:51.920 --> 0:15:54.400 what that means, but luckily Anna Igrana does. He's Bloomberg 0:15:54.440 --> 0:15:57.000 Intelligence technology analyst. He joins us. Now on a rock, 0:15:57.560 --> 0:16:00.680 what does that mean that the EU's digital dominant crackdown 0:16:00.760 --> 0:16:01.720 hits the iPad. 0:16:02.840 --> 0:16:05.280 Yeah, it's to be very honest, it's not much, frankly, 0:16:07.320 --> 0:16:10.240 only because the EU wants to make sure that these 0:16:10.280 --> 0:16:13.640 ecosystems or the operating systems are open and allow third 0:16:13.640 --> 0:16:16.120 party apps and you know, the opening of the payment system, 0:16:16.120 --> 0:16:18.960 et cetera. Apple's already said they're going to do this 0:16:19.000 --> 0:16:21.880 for the iOS for the iPhone, so which is a 0:16:21.920 --> 0:16:24.480 bigger deal. And no, now they have to do this 0:16:24.560 --> 0:16:27.520 for the iPad operating system too, which they're going to 0:16:27.560 --> 0:16:29.000 do anyway. I mean, it's not going to be a 0:16:29.040 --> 0:16:33.120 big deal again mathematically because as you know, iPad revenues 0:16:33.160 --> 0:16:36.760 are tiny compared to what they generate from the iPhone. 0:16:36.840 --> 0:16:41.800 So the services associated with iOS iPhone is far bigger 0:16:41.840 --> 0:16:45.760 than the services associated with iPads. So in our view, 0:16:45.880 --> 0:16:48.280 not a big deal. But you know, we we we 0:16:48.360 --> 0:16:50.440 follow whatever the news stays, all. 0:16:50.440 --> 0:16:53.600 Right, an rag big big seven or eight days coming 0:16:53.680 --> 0:16:57.360 up here for Apple. Thursday they report their earnings and 0:16:57.440 --> 0:17:00.400 next Tuesday they have their I guess, so develop a 0:17:00.480 --> 0:17:04.720 developer conference on the seventh. Let's start with the earnings. 0:17:05.160 --> 0:17:08.600 What can they say or what does a market want 0:17:08.640 --> 0:17:11.320 to hear about China? About what type of headwinder it 0:17:11.320 --> 0:17:12.280 will be in for how long? 0:17:13.119 --> 0:17:16.440 So if you hear the word China stabilizing good, if 0:17:16.480 --> 0:17:19.639 you say China's still bad, not good, that's it. I mean, 0:17:19.680 --> 0:17:22.040 there's there's not a whole lot other than. 0:17:23.880 --> 0:17:23.960 That. 0:17:24.119 --> 0:17:26.320 Those are the only two things you'd be looking for, 0:17:26.600 --> 0:17:28.879 because the AI stuff's not going to happen for another 0:17:29.040 --> 0:17:31.760 month or so. When they're when they do the developer 0:17:31.800 --> 0:17:35.440 conference back next day in June, the main event is 0:17:35.480 --> 0:17:38.240 about the iPads, the new iPad's coming out, which is 0:17:38.240 --> 0:17:41.520 again exciting, but again not a needle mover financially. 0:17:41.680 --> 0:17:44.719 Yeah, I was gonna say, I'm okay, fine, what did 0:17:44.760 --> 0:17:47.440 you make of this Bernstein upgrade? So they upgraded the 0:17:47.480 --> 0:17:50.199 Apple target to apperform for market perform. They have an 0:17:50.240 --> 0:17:53.040 unchanged price target of one ninety five. But the reason 0:17:53.080 --> 0:17:55.400 behind it I found interesting. They said the China weakness. 0:17:55.400 --> 0:17:59.440 They see it as more cyclical than structural, and they 0:17:59.440 --> 0:18:02.680 say that overall Apple's business in China has been more 0:18:02.760 --> 0:18:05.359 volatile than the wider company and everything's kind of already 0:18:05.400 --> 0:18:08.040 priced into that point. Do you agree with that based 0:18:08.080 --> 0:18:08.760 on your research? 0:18:09.640 --> 0:18:11.720 See one of the things I would agree is yes, 0:18:11.800 --> 0:18:14.359 it is cyclical. But one of the things I don't 0:18:14.359 --> 0:18:17.359 know is how far is the bottom for these you know, 0:18:17.840 --> 0:18:19.680 do you know we're going to see a double digit 0:18:19.720 --> 0:18:20.560 decline in China? 0:18:21.000 --> 0:18:22.160 That's going to happen now. 0:18:22.200 --> 0:18:23.080 I do not know. 0:18:23.160 --> 0:18:25.280 Whether next year we're going to see the same thing 0:18:25.359 --> 0:18:27.680 or not, because you know, what is going to drive 0:18:27.720 --> 0:18:30.880 that iPhone cycle in China if things are still weak, 0:18:30.880 --> 0:18:33.239 if consumers still weak, and Jami is still giving them 0:18:33.240 --> 0:18:35.600 a hard time. So I think it's tough to time 0:18:35.800 --> 0:18:38.400 when this thing is. But I do believe that Apple's 0:18:38.400 --> 0:18:41.000 a premiere brand and people are not getting rid of 0:18:41.040 --> 0:18:43.680 it to the sake of something else. The Jamie Phone 0:18:43.720 --> 0:18:47.879 just came out after a very very, very very long break, 0:18:47.880 --> 0:18:50.880 and which is what doing I apologize Jaweve phone, not 0:18:50.880 --> 0:18:51.760 not Jami. 0:18:52.520 --> 0:18:56.760 So we had Dan ives on earlier today on surveillance 0:18:56.800 --> 0:19:02.439 and those surprise books about AI and Apple's ability to 0:19:02.480 --> 0:19:05.800 capitalize on AI despite the fact that they really do 0:19:05.920 --> 0:19:08.240 not have any dedicated offering it. 0:19:08.240 --> 0:19:11.480 It appears to most investors. How do you think about 0:19:11.800 --> 0:19:12.800 Apple and AI? 0:19:13.040 --> 0:19:17.400 Will they at some point become an AI play for investors? 0:19:18.480 --> 0:19:21.320 So I think the most important thing is when they 0:19:21.520 --> 0:19:23.720 announce in June. Is it going to be a tie 0:19:23.800 --> 0:19:26.280 up between them and Google again or are they going 0:19:26.280 --> 0:19:29.280 to license some technology from open ai or are they 0:19:29.320 --> 0:19:31.399 going to build something in house. I think the in 0:19:31.480 --> 0:19:34.199 house is probably the weakest at this point, because you know, 0:19:34.240 --> 0:19:36.000 if they would have had something, they would have already 0:19:36.040 --> 0:19:38.679 talked about it. And the second thing is they're just 0:19:38.720 --> 0:19:41.080 pushing a lot of resources in the last six months 0:19:41.200 --> 0:19:43.200 and it's not easy to come up with those things. 0:19:43.480 --> 0:19:46.320 But I think I'll be I'll feel far more comfortable 0:19:46.480 --> 0:19:49.040 if they announced a deal with Google and say we're 0:19:49.040 --> 0:19:51.600 going to license some of Google's technology to build our 0:19:51.680 --> 0:19:55.280 own products or improve our products with that technology, because 0:19:55.400 --> 0:19:57.800 they already have a deal with them on the search 0:19:57.840 --> 0:20:00.639 side of things. So that would make me more comfortable 0:20:00.880 --> 0:20:03.280 than them trying to push out some of their own stuff. 0:20:04.119 --> 0:20:07.040 Would you categorize as Apple being behind AI or is 0:20:07.080 --> 0:20:09.480