February 5, 2025 • 41 mins
Bloomberg's Caroline Hyde and Jackie Davalos discuss Apple's geopolitical battles as China weighs a probe into its app store fees. And, Alphabet shares slump as its cloud business growth slows. Plus, AMD disappoints investors with its AI growth outlook.
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Speaker 1 (00:02):
Bloomberg Audio Studios, Podcasts, radio news from the heart of
where innovation, money and power collide in Silicon Valley and beyond.
This is Bloomberg Technology with Caroline Hyde.
Speaker 2 (00:19):
And Ed Lovelow live from New York on Caroline Hyde.
Speaker 3 (00:36):
And Aunt Jackie Devalos in San Francisco. This is Bloomberg
Technology coming up.
Speaker 2 (00:40):
Apple in the geopolitical cross has as.
Speaker 4 (00:42):
China weighs a potential antitrust pope into the app store practices,
plus Alphabet shares tumble after posting slower growth in its
cloud business and a seventy five billion dollar capital expenditure commitment,
and AMD falls on a disappointing outlook for its AI
chip growth. That and so many more earnings coming up
and Apple off by one point three percent. A key
(01:03):
issue here is China and the US and a potential
antitrust probe coming from China all regarding its app store.
Let's get to it, Bloomberg's Peter Alstrom, because the timing
here is of course amid this tip for Tap from
US and China in Taris.
Speaker 2 (01:16):
But this started before Trump came to office.
Speaker 5 (01:19):
Yeah, that's exactly right.
Speaker 6 (01:20):
So what we've heard from sources is that Beijing regulators
are looking at Apple and specifically the policies around its
app store.
Speaker 5 (01:29):
It takes a thirty percent.
Speaker 6 (01:31):
Of cut of app revenue, like it does in other
countries too, and also it kind of walks down payment
systems because it wants you to make those payments through
the Apple Store in particular. So we've heard that SAMR,
the regulator there, is taking.
Speaker 5 (01:44):
A close look at Apple.
Speaker 6 (01:45):
They've called in executives from the company and some other
executives too to find out more information. Now the balls
and Apple's court to respond to some sort of in
some sort of way and see whether they're able to
address this or whether regulators are going to have to
take more action to be fair. Though this is the
same kind of action that Apple has faced in other
countries too, where there are concerns about the app store,
(02:05):
how much money it takes away from developers, and whether
that's actually a level playing field for other companies.
Speaker 3 (02:12):
Peter, one of the outstanding questions is is this just
a bit more bark than bite and what is the
time horizon here? Because a lot of these probes take
time to play out. Do you have a sense of
how long it'll take before companies actually see a hit
from some of these probes.
Speaker 6 (02:27):
Yeah, that's a very good question. This is coming, of course,
in the middle of this kind of geopolitical tit for
tap between the United States and China. So the US
levied the ten percent tariffs on Chinese imports, and China
has responded with some more careful targeted things, including an
investigation into Google, which has a similar kind of app
store issue. Doesn't have that many operations in the country
(02:50):
beyond that, so I think.
Speaker 5 (02:51):
Politics are going to play a role here.
Speaker 6 (02:53):
We're going to see how that plays into the negotiations
with these companies. Visiing has a very forceful regulatory arm.
If they do decide to go ahead and take action
against Apple, Google, we know they're investigating in Nvidia too,
it could be very putitive for those countries, but at companies,
but it may have to do with the dynamics between
the two countries in fact, rather than the companies themselves.
Speaker 3 (03:16):
Bloomberg's Peter Alstrom, we thank you. Alphabet's share is dropping
after fourth quarter earnings missed expectations yesterday. Investors were disappointed
by a slowdown in sales and Google's cloud unit. For
more on this, we're joined by Brent phil from Jeffries. Brent, I,
you know when we look at Google, Alphabet's cloud sales
lagged by two percent. This was, you know, behind estimates.
(03:38):
It's the second hike per scaler to lag on this
front in the last week. Microsoft last week posted disappointed
cloud numbers. What's driving the decline for Google specifically because
the Microsoft story was a little bit different there.
Speaker 7 (03:52):
Yeah, I mean the common thread is Google and Microsoft
are indicating, you know, slower growth.
Speaker 8 (03:59):
Now.
Speaker 7 (04:00):
Want to be clear, last quarter was an anomaly for Google,
so growth went to thirty five and then went to
thirty this last quarter, So I think everyone is concerned
about the magnitude that they did say there were some
one time items. Growth in Q four is still up
from the front half of the year, so it's not
like things are falling out of the sky.
Speaker 8 (04:18):
And even for Microsoft, right.
Speaker 7 (04:19):
They had low thirty percent growth, they wanted to see
mid thirties and they didn't see that acceleration.
Speaker 2 (04:24):
They took up the table.
Speaker 7 (04:25):
So we're still talking, you know, thirty percent growth across
both companies, and we were at the beginning of the
AI changed, So I wouldn't I'd be careful to look
at just one quarter and say it's a massive trend.
The trend has actually been pretty healthy. And then I
think the other thing is you kind of have this
bug zopper light as we call it with AI. Everyone
(04:47):
gets attracted to this light over here and says.
Speaker 1 (04:50):
AI AI AI, and then.
Speaker 7 (04:52):
They forget about the core workloads, right, And so Microsoft
highlighted that their aipiece was strong, the non aipiece was
a little weaker. So again I think part of this
is we're on a journey, or at the beginning of
the journey, there are going to be some rocks and
pebbles and you know, barking dogs across the path on
the way that you got to navigate. And it's not
(05:12):
like a straight line up. But ultimately I think it's
pretty good.
Speaker 2 (05:16):
Now that but Brent, just on the pretty good thing.
Speaker 4 (05:18):
Can I just ask about the seventy five billion dollar
capex though, because we are trying to understand whether you
should be committing such significant investment at this time. If
the return on AI is still questioned.
Speaker 7 (05:28):
One hundred percent, you should be committing the question that
everyone's asking in every company when you ask the companies
of this question, and Microsoft will say do you want
us to get five percent market share fifty We're at
one of the big biggest tectonic shifts, the CM medtronic
every board in America. Globally, we're talking about China taking
down a trillion dollars in market cap last Monday. Do
(05:49):
you you want to be involved or not? And there's
a price to admission. And so this is very clear
that the time to spend is now, and the time
to spend is now in four or five six quarters.
Speaker 4 (06:02):
And so to your point, what happened last Monday, the
takedown was born by Deep Sea And actually we did
hear from soopitch I talking about Deep Seak. Just take
a listen.
Speaker 9 (06:13):
Run There's been a lot of observations on deep Seek.
First of all, you know, I think tremendous team. I
think they've done very very good work. I would say
both are two point zero flash models or two point
zero flash thinking models. You know, they are some of
the most efficient models out there, including comparing to Deep Seeks.
Speaker 4 (06:35):
From your perspective, does Alphabet able to compete when it
comes to cheaper models?
Speaker 7 (06:41):
Yeah, I mean, look, the China training thing is nonsense. Okay, dude,
Sacks from the White house came nonsense. Nonsense, Okay, so
we got to get that off the table. The technology
is there, but the training run costant six million is nonsense.
So I think, yeah, look they're going to be We
have software companies using twenty five lll ms and lasting
(07:03):
twenty five into it using ten. These are all going
to commoditize and they're all going to have a place,
and deepseq will have a place.
Speaker 8 (07:10):
But it's not this.
Speaker 7 (07:12):
You open your garage s dooor with one button and
you open your iPhone with another button. There's getting me
multiple multiple buttons. Okay, it's not just one.
Speaker 8 (07:19):
And so we think.
Speaker 7 (07:21):
Ultimately the big platforms with the users, with the capital
and the data win and Google has a lot of data,
they have a lot of great technology. So again this
is why Meta is doing so well. Meta is going
to perform very well with LAMA. So we are o
a believer that look, yeah, better AI efficiency will come,
(07:43):
but it's not coming at the pace that the market
thinks with deep seak.
Speaker 8 (07:46):
It's just not.
Speaker 7 (07:46):
And look at all the capics numbers between the last
Meta and Google. They've raised capis by twenty five billion.
If it was that efficient, these are pretty smart companies.
They don't want to waste shareholder money. They don't want
to waste They have a lot of loyees that work
there because they get paid in stock, Like they wouldn't
do this if they felt like, oh, yeah, it's so efficient,
(08:07):
Like why would you jack up the numbers as much
as they have. So again, I think everyone's being misled
by one comment from a Chinese comment firm that you
can validate the spend and the bring.
Speaker 3 (08:21):
I'm curious if you can kind of speak to maybe
you know, shifting back to Google's bread and butter search
YouTube and bring in the artificial intelligence picture here, because
while we're steeing seeing some of this still kind of
come out on the cloud side, what sort of benefit
are investors pricing in on the YouTube and search side.
(08:43):
What AI boost are you expecting there in the next
couple quarters.
Speaker 7 (08:48):
Well, no one's pricing anything today, so obviously stocks off
big on this kind of you know, minor miss if
you will. But ultimately, we think AI is going to
have a huge role. Like you look at Gemini. I've
and using it every day and over time, Gemini is
going to get smarter and I think there's a role
of core Search. I'm looking for a restaurant. I'm looking
(09:11):
for hours of the local small business. I need to
visit too. I need to get the answer of what's
the population of Iceland, And I want to ask Gemini
or I want a quick quick response in Gemini. These
things are going to effectively I think searching, what's happening
with AI and these AI agents are going to are
going to effectively melt together, and so it will be
(09:32):
a seamless experience. I think Google can do this, So
there'll be chance, there'll be times where you've seen it
at and sometimes you don't. Is that going to force
advertisers to run away?
Speaker 8 (09:41):
I don't think so.
Speaker 7 (09:42):
Look at YouTube great numbers, Look at core search good numbers.
The issue in Google's quarter has nothing to do with
the core business, has to do with the smallest business
at Cloud and Capex is up massively. Guess what Meta Microsoft,
everyone else is doing the same thing.
Speaker 3 (09:57):
Yeah, and you've got to.
Speaker 8 (09:59):
Do it right now.
Speaker 7 (10:00):
So and look, we've said at this AI journey is
going to take time. It's going to be a long journey,
and we're at the beginning of it.
Speaker 2 (10:06):
Well said.
Speaker 4 (10:07):
And Alphabet just coming down from some record hires of
yesterday as well. Jeffrey's Analystprent phil is so good to
catch up with you, Thank you very much. Coming up,
we're going to talk more earnings, AMD disappointing with its
AI outlook. More of the chip maker's earnings and other
in the silicon sector next. But as AMD fall, so
tutors snap quick check on those earnings after a mixed outlook,
basically sparing a load of downgrades on the street. Wills Fargo,
(10:28):
for example, cutting it to an equal weight, saying solid
revenue trends, but not enough to outweigh the period of reinvestment.
Speaker 2 (10:34):
This is BlueBag Technology.
Speaker 4 (10:47):
Shares of AMD tumbling today after the chipmaker left investors
with a disappointing outlook for its AI data center business,
saying they see strong double digit growth for more. Joanne Feoenie,
Advisor's capital management partner joins us in investors, they don't
just want double digit glows. They want a doubling of
AI business, right.
Speaker 10 (11:06):
They want a lot line, that's for sure. And what
they overlook is what's going on with the rest of
the business. I mean, you know, look at how much
share that AMD has taken from Intel. A data center
business has nearly doubled twenty twenty four or twenty twenty three.
It's PC client business up more than.
Speaker 8 (11:24):
Fifty percent for the whole year. They've done a tremendous.
Speaker 10 (11:27):
Job of really taking advantage of Intel's problems. But I've
been doing it by being able to develop superior chips
of its own.
Speaker 3 (11:37):
You're right, you know, Joanne, They're not getting a ton
of credit for that revenue beat doubling their other unit.
I'm curious if you can kind of speak to what
they said about that estimate miss on the data center
unit and what does it say about AMD's standing in
the AI ecosystem broadly.
Speaker 10 (11:56):
Yeah, so, you know, the problem they had with their
report was that the their entry into the AI side
of data center is something that's a little bit slower
to roll out than people were hoping, and expectations were
high heading into the quarter. And so this new chip
that is expected to you know, really push AMD into
this business, you know, more securely, and they've only just
(12:18):
started rolling out this whole line of chips. That new chip,
the mi I three point fifty, is now expected to
ramp until the second half of this year, and so
consequently their guidance was softer than expected for the data center.
That doesn't take anything away from the core datata center.
Speaker 8 (12:33):
Business, which continues to grow.
Speaker 10 (12:35):
But we are in a seasonally weaker quarter for PCs
and for data center, and with a little bit less
of a ramp on those new chaps, the gross margin
takes a bit of a hit. And so you know,
in the semiconductor world, gross margin is everything. And so
whenever you see a decline in the gross margin expectations
relative to or you know, outlook relative to expectations, typically
(12:56):
stocks go down. But you know, more importantly, their second
half for this ramp remains intact. It's just become a
little bit of a wait.
Speaker 8 (13:04):
And see game.
Speaker 10 (13:05):
And some shorter term investors don't tolerate that well and
they get out of the stock and they say, okay,
we'll get back in later. You know, for long term investors,
you know, it becomes a ride this out moment. You
don't know when sentiment is going to change. People could say, okay,
it's coming in the second half.
Speaker 8 (13:20):
Well that's July. Oh maybe I should.
Speaker 10 (13:21):
Start buying it, you know, in March, or you know,
maybe I had better get ahead of that buying spurt
and buy it, you know, later this month now that
it's come down. So it's really hard to time this
kind of thing. What you have to rely on is
that the fundamentals are good.
Speaker 3 (13:35):
Speaking of the short term disruptions, Deep Seek also came
up on the earnings call, and I was surprised to
hear that the CEO projected a tone of confidence that
they could actually benefit from some of these algorithmic breakthroughs.
I'm curious if you can explain how does AMD and
you know, perhaps even Qualcom's foothold and edge devices like
phones make it better position perhaps to handle some of
(13:58):
you know, the disruptions coming from a deep Seek or
models like it, as opposed to an Invidia that really
saw it shares tank in the wake of that.
Speaker 10 (14:07):
Yeah, so the deep Seek innovation, the news was surprising
because they were able to achieve efficiency potentially more quickly
than folksould imagine. But efficiency is always something that comes
to this space. Right, Chips get smaller, faster, cheaper over time,
but that never led folks to buy fewer chips. Same
thing here, Right, the models become cheaper and more efficient
(14:30):
over time, but that doesn't mean that folks are going
to step away from buying the best ships they can
now AMD Qualcom you have more of a focus on
the inference side of this, that is the use of
the models, and that's where greater efficiency will mean more use,
and I think that's what they're focused on. More use
is good for them. It's going to mean more chips
(14:50):
are going to be needed to roll out those applications,
and so hey, if the market shifts from the training chips,
where you absolutely have to have the highest quality, most
powerful and vid chips over to the inference side where
there are different components like memory and speed, that plays
into their strengths and on benefits.
Speaker 2 (15:08):
You go amine Qualcom off to the bell today.
Speaker 8 (15:11):
Yeah. Absolutely.
Speaker 10 (15:12):
You know, ARM is more diversified, I say, in a
more diffuse in their exposure.
Speaker 8 (15:17):
I mean, yes, they.
Speaker 10 (15:18):
Certainly play a role in a lot of the chips
that go into the AI infrastructure, but they also are
more heavily tilted towards smartphones and in a very broad way,
Qualcom obviously more smartphone oriented. But fortunately for them, the
smartphones they go into tend to go to the higher
end consumer and that is an area that continues to
be strong. So we actually We do own Qualcom. We've
(15:40):
owned it for a long time for clients. We like
their growth potential. We also like the income with their
pretty solid dividend.
Speaker 3 (15:48):
Lots to see today after the bell, Joey un Feenie
of Advisor's Capital Management, Thank you. Electronic Arts cut its
full year revenue outlook yesterday. That follows a decline in
the company's third quarter sales. For more on what we
learned from the video game publisher, were joined by Bloomberg's
(16:10):
Jason Schreyer. Jason, This stirred concerns among investors that EA
Games can continue to squeeze growth from its Tent Bowl
soccer franchise games that counts for a big slice of
its overall revenues. What did you learn from the earnings
call about how the company plans to turn this around?
Speaker 11 (16:31):
Yeah, so it was an interesting call last night. EA
had already reported preliminary results a couple of weeks ago
and taking a bath in the sock as a result.
I believe they're down about twenty percent.
Speaker 8 (16:43):
They had a.
Speaker 11 (16:44):
Slight gain overnight, partially because they said they were buying
back a billion dollars in the stock.
Speaker 8 (16:52):
And yeah, I mean.
Speaker 11 (16:53):
They are looking at the Soccer franchise that is their
big money maker. I believe it's something like seventy four
seventy five percent of revenue, and their business is now
from live service, meaning not just selling a game on
a store shelf, but also recurring revenue getting players to
buy stuff within the game after it launches, and the
soccer game is a big part of that. This recent
(17:16):
kind of disappointing quarter as a result of this new
soccer game not having the same kind of long term revenues.
Speaker 5 (17:22):
That they hoped for.
Speaker 4 (17:24):
Anice in augustanding for example, calling out lower user acquisition
software engagement with FC. They also then turn their attention
to Battlefield and basically a slipping calendar date there too
a bit.
Speaker 11 (17:33):
Jason, Yeah, it looks like they are planning on releasing
the new Battlefield at some point this coming fiscal year,
so before April of next year. And yeah, this one
has been a little while in the making. It's been
a while since Thea's recent Battlefield A most recent battlefield game,
Battlefield has never been able to keep up with the
biggest rival, Call of Duty from Activision Blizzards, so it'll
(17:57):
be interesting to see how they perform this time they
for I believe the first time.
Speaker 8 (18:02):
They have four different.
Speaker 11 (18:04):
Studios within the EA organization just working on this single
battlefield game, so it is a humongous bet for them.
Speaker 3 (18:11):
Jason, one of the company's challenges right now is getting
users to play the updated version of the game, but
they're still pretty interested in playing the older version of
the game. How does the company typically deal with something
like that?
Speaker 11 (18:23):
This is the eternal video game industry problem right now,
which is that you have so many people who just
don't feel compelled to keep buying new games every single
year when they can still have a great time playing
their older games, playing Fortnite, or playing a previous iteration
of the sports game. In the sports it's been interesting
Traditionally a company like EA has been able to get
(18:44):
people to keep buying new releases because of roster updates
and kind of slight feature enhancements. In the case of
the soccer games formerly called FIFA now called EA Sports FC,
one of their biggest in restences is kind of like
this Ultimate Team mode where basically players have to buy
(19:05):
these kind of loop boxes or card packs that give
them randomly generated players and stats, and it's this whole
big ecosystem that a lot of people have criticized for
filling a whole lot like gambling, and EA's hope is
that EA has said that the most recent entry is
a little bit unbalanced, players didn't like a lot of
things about it, and they're hoping that a big update
(19:26):
they just released a couple of weeks ago will fix
things and kept people back on track.
Speaker 4 (19:30):
Jason, Sure, thanks so much for the update on EA.
Now on to more earnings. Uber shares falling on wheat
gross booking guidance, bloomag In challenges analyst Man it's seeing
is in the house, and look they're blaming weather. You're
actually more worried about broader deceleration from ultimately months of
music with Yeah.
Speaker 12 (19:45):
Look, I think when you look at their three year
target of mid to high teens, what could kind of
get them there? It has to be the mobility segment
that is the core business. The delivery side isn't that
profitable still, then you compare them to DoorDash and on
the mobility side, everyone is so worried about Wemo rolling
out to ten more cities. Now, granted, the number of
(20:07):
rides that Wemo is doing is a fraction of.
Speaker 2 (20:10):
What Aniba has a relationship but only in two cities.
Speaker 5 (20:13):
So that's the catch here.
Speaker 12 (20:15):
It's not, you know, a relationship that spreads across all
the cities. And that's what I think investors are worried about.
If testa robotaxis were to come this year, and that's
a big if, and they get all the regulatory approvals
they need, then you could make the case that mobility,
you know, growth will slow down. And DoorDash has partnered
(20:35):
with Lyft now, so I would say lift should benefit
from Doordasher's distribution. So all those factors kind of weigh
on the user growth, and then it's very hard to
make a case that the right frequency will grow given
Wemo is expanding in all these new cities.
Speaker 3 (20:52):
Man Deep in thirty seconds. Uber sid it's self driving business. Car,
It's self driving car business years ago. What's it's strategy today?
Has the company said anything about how plans to go
about that?
Speaker 12 (21:03):
Yeah, they mentioned that they will be looking for the
right acquisitions and you know, they don't want to spend
too much in terms of making an acquisition, but it's
pretty obvious that they will be looking for tokens and
you know, adding their own technology to avoid being disintermediated.
Speaker 3 (21:19):
Here wull bring intelligence analysts man deeps in me.
Speaker 2 (21:23):
Thank you, Welcome back to Blue meg Tenology. I'm Caroline
Hid in New York.
Speaker 3 (21:34):
And I'm Jackie Devalas in San Francisco.
Speaker 4 (21:36):
Quick check on these markets. First, Disney off by a
one percent. Interesting is they managed to do particularly well
in streaming in terms of profitability. They're still seeing the
more honor to effect really bullying up. What's happening in
terms of their movie making business. Entertainment was flat. Let's
have a little look at what the CFO was talking
about in terms of the Disney numbers, which did.
Speaker 2 (21:54):
Beat on a profit basis.
Speaker 4 (21:55):
Jonathan Pharaoh and Lisa ramo It sat down with the CFO,
Hugh Johnston earlier this morning.
Speaker 2 (21:59):
Here's what he said about streaming strengths.
Speaker 13 (22:02):
The streaming business is doing extremely well. This is a
business we invested pretty heavily in a couple of years ago,
and what you're seeing now is the benefit of those investments.
Our expectation is will continue to grow, subs, will improve margins.
We should make more than a billion dollars in that
business this year and next year we're looking at double
digit margins in that business. So certainly a ton of
(22:25):
positive momentum. Now you get into the question of why.
A lot of it is the great content that's coming
from the studio side of the house, both on the
TV and the movie side of our entertainment business. We
wanta to Inside Out to Deadpool, all terrific hits, and
on the TV side, the combination of Abbot, Elementary, Showgun
(22:45):
and high potential causing viewership to grow. We're seeing higher engagement,
We're seeing churn ultimately coming down over the course of
this year. So we feel like the streaming business is
going to be one of the big drivers for our
company going going forward.
Speaker 9 (23:00):
Here.
Speaker 14 (23:01):
You know how much I love Showgun and Les so
I can say love Mowana two as well. So the
content slen is looking pretty good so far. I did
want to talk about the cost issue though, and clearly
not an issue from you, so I appreciate the explanation.
Conversation we've had over the last few days or so,
is if we get tariffs, can companies pass on the costs?
I'd like to know from your perspective and for the
company the additional tariffs that have gone onto China, how
(23:23):
that could impact your business.
Speaker 2 (23:24):
How are you thinking about things?
Speaker 13 (23:26):
Yeah, right, right now, based on what's been proposed. And
obviously this is a rapidly evolving environment, so we're going
to react as we learn things. The impact would be
in material to us. So from that perspective, really, the
Walt Disney Company will be fine based on what's on
the table right now.
Speaker 3 (23:44):
That was Disney CFO Hugh Johnston, and we stay with
Disney earnings. Joining us now is Ross Gerbert, CEO of
Gerbert Kawasaki. Ross. One of the things that stood out
to me in this report is not just that quarterly profits,
but that positive performance might have a few drivers here,
And the thing that stood out to me is that
price hike from the fall. I want to know how
(24:05):
much of that profit came from that price hike or
versus you know, organic customer growth.
Speaker 15 (24:12):
What are you saying, Well, we didn't see a huge
amount of organic growth in customers and that was part
of the strategy in making streaming profitable by charging the
right amount for the content. But what they proved is
that they could jam a pretty you know, big price
hike into the system and not lose subscribers by any
meaningful amount. And therefore increased profitability. And when you look
(24:34):
at exactly what the CFO said, the enormous amount of
money they've invested in streaming to now see it becoming
a very profitable business, which double digit margins.
Speaker 8 (24:43):
That was always our hope for Disney.
Speaker 15 (24:45):
Disney's the top holding in my fund GK, and I
think the stock is just wildly undervalued when you compare
it to Netflix, which is actually the top holding in
my fund.
Speaker 8 (24:54):
And Netflix is killing it on all corners.
Speaker 15 (24:57):
But it's really a two horse streaming between you know,
Disney and Netflix.
Speaker 4 (25:02):
Barbigo is talking on the conference call with investors such
as yourself, talking about how he's so pleased with the
subs numbers, the fact that you didn't see more churn,
But what about the growth story back to the likes
of entertainment. Yes, you want to see streaming being a
real pillar for Disney going forward, but we've got broader entertainment.
We've got TV and cable being difficult for them not
to mention people getting onto the latest boat or into
(25:23):
the latest park.
Speaker 15 (25:25):
Well, the big thing about you know, linear TV is
dying and that's not going to change. But what it
really is about is good content, and that's the Iigre
effect is real, and we're seeing the benefits of having
Aigre back at the Helm because the content has improved
dramatically from the Japek era and that drives results. It
drived in in in the theaters with Moana too, and
(25:45):
then it drives it onto the streamer because I'm just
waiting for Maana two to drop on Disney Plus. And
you know, and subscriber numbers will soar because people want
to watch these really successful movies that they'll pay in
the theaters, but then they'll watch it again on the streamers,
probably for the next ten years, you know. So you
know Disney's Experiences division, you know, the parks, and they
(26:06):
made a lot of investments, and then they had the
storm that kind of hurt earnings a little bit. But
with the new cruise ships coming out too, this business
is is a goal mine. So if you look at
Disney's cash flow, it's just a wonderful business at a
really decent price. So, you know, we're very bullish on
Disney's future.
Speaker 2 (26:22):
What about the future of the CEO.
Speaker 15 (26:25):
Well, you know, Iiger is a young you know, seventy
or whatever, and you know, I hope he stays forever.
And Disney has a long history of having CEOs. They
keep saying they're going to retire and don't retire, but
I think ultimately they should drive the industry towards the
digital part of their business, or maybe a co CEO
situation where you have experience and a digital you know,
kind of like what Netflix has done, because the businesses
(26:47):
are huge and quite different. But we need somebody who
can really drive creativity because that's what drives Disney's earnings.
Speaker 3 (26:55):
Ross let's pivot shift years to another game or another
name that you cover Tesla No pun intended there, gerber
Kowas hockey holdings peaked in twenty eighteen and they've come
down quite a bit. And what do you make of
Elon Musk's growing side project with Doge and his role
in government? At what point do you think you'll really
(27:18):
start to pair back more or if not completely, if
his attention continues to be diverted there.
Speaker 8 (27:25):
Well, there's a lot of things so i'd pack with Tesla.
Speaker 15 (27:27):
First of all, his full time job is at the
government right now, so we all know he doesn't really
work at Tesla, and that's not so bad. Because many
of the people at Tesla are actually fine with that
because it's he's quite disruptive. That said, the goals for
Tesla are quite immense, and you know, they have very
little time to achieve them based off the timelines that.
Speaker 8 (27:47):
They've set out.
Speaker 15 (27:48):
Tesla you know, has a lot of issues that they
have to deal with, especially from a marketing perspective as well,
because like the numbers in Europe. So you know, we've
been a seller of Tesla over the years because we
had such an overweight position because we made so much
money in Tesla from twenty eighteen to let's say today,
and so you know, we still owned Tesla because it's
(28:09):
the most impactful company for climate change in the world,
and that's a theme that we very much believe in.
Speaker 8 (28:14):
They make the best evs and if.
Speaker 15 (28:17):
They just focused on their core business and really stopped
all the political noise, I think Tesla would be fine.
So you know, it's a really difficult stock to own,
and we still own it, and you know it's not
a big position, but then it you know, doubled in valued,
so we've been taking profits.
Speaker 8 (28:33):
Again.
Speaker 3 (28:34):
Ross to your point about the climate change opportunity, does
that still exist? In a Trump administration where perhaps that's
not as prioritized as it was previously.
Speaker 8 (28:45):
Well, I can tell.
Speaker 15 (28:46):
You because I just fought the fires myself and the Palisades,
that when you're looking at seventy foot flames burning up
an entire city in one night, or hurricanes in Florida,
or ridiculously cold weather in the North, or whatever you
want to look at, climate change is not a political issue,
real issue that all of us in the world are facing,
whether we like it or not. I've seen her firsthand.
Mother Nature does not want us here anymore. So we
(29:08):
need solutions real badly, and Tesla is the best solution
for climate change between battery storage charging and the ev business.
So people are going to buy evs because they're better
cars than gas cars.
Speaker 8 (29:19):
They're a better.
Speaker 15 (29:20):
Value for consumers, and it's good for the environment. And
this business is growing globally and every car maker is
making grad evs now and that was the goal of
Tesla originally. So we've been successful, but this trend towards
evs is not going away because of politics.
Speaker 4 (29:37):
Thoughts with you with your neighbors for what you've been
fighting over the course of the month in La ross
I want to go back to what you said about Europe, because,
as I mentioned earlier, the numbers out of Germany are
pretty astonishing, down sixty percent in terms of sales, France
down sixty percent. Is Europe feeling the impact of Elon
and the marketing impact more than the US or is
(29:57):
this just a lack of a lineup.
Speaker 8 (30:00):
No, no, no, this is one hundred percent politics.
Speaker 15 (30:02):
I mean, when you go into Germany and you start
supporting the right wing almost like Nazi Party of Germany,
you're going to get a lot of Germans not buying
your vehicles. Remember, Europeans are very conscious people and they
pay a lot of attention to things that are important,
whether it be you know, the quality of their food
or water, and also they.
Speaker 8 (30:20):
Care about climate.
Speaker 15 (30:22):
But when push comes to shove, Elon's agenda is a
direct affront to the direction of Europe and Europeans are
you know, voting with their dollars and they're not going
to buy Tesla's because they know they can buy other
evs that are just as good. So you know, we're
just starting to see this. It's happening in California as well.
This is a big problem for Tesla long term and
(30:42):
I'm really concerned they're going to be unable to grow
sales moving forward with the current I would say anti
marketing campaign of YEW.
Speaker 4 (30:51):
You mentioned, of course, the IFD, which is that the
far right party in Germany which in many ways Elon
Musk has has led to support to us. Bringing it
back to therefore, what the company needs to do fundamentally, Look,
it doesn't matter the numbers didn't live up to expectations.
We've got ultimately following Weimo in terms of robotaxes on
the ground. But that's right the market, the market still
(31:11):
posts the stock higher. So is it completely disassociated with
fundamentals at this point, Well, we.
Speaker 15 (31:18):
Look at it as the fundamentals of the business are
worth about two hundred dollars and then the rest of
the stock price is hoe premium based off Robotaxi and
robotics in AI, which you know are legitimate, you know,
opportunities for Tesla.
Speaker 8 (31:31):
So I don't want to poop poo them. But I
live in Santa Monica.
Speaker 15 (31:33):
And every day I drive there's Weaimo's everywhere really doing well.
They're driving perfectly, they're taking rides from Uber. We sell
that and we're going to see this in Uber's numbers,
which we now don't own Uber, because I think Weimo
is a wonderful opportunity for investors for robotaxi and it's
way better than driving than Tesla. So I would say
(31:54):
with the decline in Google today, boy, that's an opportunity
for investors because that's a reasonably priced stock with thing
like Weimo that could be worth a ton of money
in the future. So now they're launching in Austin, right
in Tesla's backyard, and it's almost like spitting an elon
space now as he's pitching a robotaxi that basically doesn't work,
and Weimo is really successfully, you know, rolling out robotaxi.
Speaker 8 (32:17):
So this is a real competitor.
Speaker 4 (32:19):
And certainly we're getting outlines from Alphabet overnight of how
many rides are being done by Weimo at the moment.
Ross Gerba of Gerber Kawasaki. Great to catch up with you,
Thank you. Coming up, we're going to be joined by
Sarah Glow of Conviction. We're going to be discussing the
state of AI investing. That's coming up next. This is
BLUEBG Technology Time now for Talking Tech and first up
(32:50):
work Day says it's cussing about eight and a half
percent of its workforce. In the note to employee, CEO
Carl Escherbucht says about one seven hundred and fifty workers
will be let go as the company focuses on quote
durable growth.
Speaker 2 (33:01):
He goes on to.
Speaker 4 (33:02):
Say that the company intends to hire for areas such
as AI and plans to take on more people overseas. Plus,
Oklahoma set to become the first Republican state to challenge
Corporate America's DEI policies as an investor, Oklahoma Treasurer Todd
Russ plans to submit share holder proxy proposals to six companies,
including Alphabet and Amazon, in an effort to promote quote
(33:22):
political neutrality and challenge corporate donations to organiations organizations that
advocate for LGBTQ rights, for example, and Open A CEO
Sam Altman called India the most important international market for
the startup after it saw a tripling in users last year.
Speaker 13 (33:37):
Now.
Speaker 4 (33:37):
The comments come as Altman makes a stop in New
Delhi meeting with Indian government officials and entrepreneurs. It's the
latest picture course on Altman's worldwide tour, which also included Japan,
South Korea, Germany's next Jackie.
Speaker 3 (33:49):
Let's keep talking about the global AI race on today's
VC Spotlight with Sarah guaB, which is the founder of Conviction,
a venture firm focused on AI native companies. Sarah, it's
been over two years since you've founded Conviction, just a
month before Chad GPT really took the world by Storman
You've wasted no time in getting to the cap table
and some of the most promising AI startups from Estrall
(34:12):
to Harvey. But I want to know what's changed in
the AI landscape from your perspective as a venture capital
investor since you launched, because AI has come a long way.
Speaker 8 (34:22):
Yeah.
Speaker 16 (34:23):
When we launched, we had this very strong belief that
AI would be a a decade plus shift, the most
important shift in technology we were likely to see in
our lifetimes. And then we made some early bets that
application companies and companies that sort of invested vertically up
and down the stack would create a lot of value.
I think that is even more true now and the
(34:45):
myth of the GPT rapper has been brushed away.
Speaker 2 (34:49):
One of the major.
Speaker 16 (34:52):
Developments over the last few weeks that everyone has been
paying attention to is of course a more and more
competitive foundation model landscape.
Speaker 3 (35:00):
That's right. I mean you were tweeting about deep seek
in December before the world freaked out just last month.
But we also had another venture capital investor on the
show last week who called it a grave national security threat.
And I would love to get your thoughts on the
strength of that model, what it means for AI startups
(35:21):
competing in this space, and do you agree with that
statement is it a national security threat?
Speaker 16 (35:28):
Let's take the first part first. So it's an incredibly
useful model and considered on many capability tests a state
of the art. And I think what was really interesting
about it is that deep Seek as a company released
a base model, which you can think of as just
pre training than a instruction tuned model, which is a
(35:49):
set of work that allows the model to be more
helpful to respond in a sort of chat interface, and
then a reasoning model, which is parallel to for example,
opening eyes model. And so right at the frontier, now
you have an open option. I'll be at one from
a Chinese hedge fund. I think that was quite surprising
to the world and quite democratizing two application developers to
(36:13):
have this force of open source, from meta, from mistral,
from deep seek. Now, whether it serves as a push
for the US to get more competitive on this incredibly
important industry front of you know, being first in the
race to AI a technology, stronger AI technologies or remains
(36:33):
to be seen. But I think it's very clear that
export controls are not leak proof and no country has
a monopoly on AI talent.
Speaker 4 (36:41):
Sarah, Let's go into how it changes the game in
terms of the valuation stack because you are in at
the large language model layer with a smallcasion towards a mistral,
but you're also in the application layer of these large
language models. When I think a cognition, for example, how
do you think the money's going to flow?
Speaker 2 (36:58):
Ultimately?
Speaker 16 (36:59):
Yeah, one of our core beliefs is that AI makes
the pie bigger, and you can think about it as
the stack as you describe right, infrastructure tooling model companies,
application companies, and those that are verticalized. But we're much
more interested in application companies and verticalized companies to date,
(37:20):
and part of it is seeing the LM landscape play out.
It's been a very expensive game to play, despite Deep
Seeks claims around a six million dollars single training run
that vastly under prices the cost of experimentation and all
of the infrastructure that was used in for example, post
training and inference as well, and so it's still a
(37:42):
very expensive game to play. I think in terms of
economic opportunity of sort of you know, the traditional venture
capital game being capital efficient growth, we think that is
going to be most concentrated in the application layer.
Speaker 4 (37:58):
And it was at our age Sarah for that, and
Sierra you're in rettailor leading that business, and that of
course taking on a sales force of example, is a
gent ki where the real value.
Speaker 2 (38:07):
Is going to come in the next year or so.
Speaker 16 (38:09):
Yeah, agentic is a really hard thing to define. But
I think one thing that we're really excited about with
companies like Sierra and others is the more, like very simply,
the more that AI does for you, the more people
will be willing to pay for it, right, And so
something like Sierra improves the customer experience, especially for people
with very high value customers. So think of finance, subscription, travel,
(38:33):
et cetera. And I think as we see AA models
get more capable beyond answering simple questions to completing tasks,
which is something that will take a lot of vertical,
specific and last mile work. We should expect these companies
to be able to capture a lot of that value too.
Speaker 2 (38:50):
Always great to have you on Seragua.
Speaker 17 (38:53):
We love it from Conviction, Thank you.
Speaker 3 (39:03):
Amazon's efforts to cut out middle management bloat is sending
ripples throughout the company, with many employees fearing uncertainty and
a lack of promotions. For more Bloomberg, Spenser Soaper joins
us now Spenser. Amazon veterans are used to periods of
bell tightening. What did you glean from employees about how
Jase's tactics this time around are different?
Speaker 18 (39:24):
Well, a lot of it is a sign of the times.
You know, employees historically within Amazon, when Jeff Bezos was
CEO would maybe try to figure out what he was
excited about because they figured that was going to get
a lot of money and investment and that would be
a nice career path for them. And the big difference
with Jase's CEO, he's a lot more disciplined. He doesn't
chase as many moonshot projects. The money's a little less
(39:45):
free flowing, So those career paths paths for advancement are narrower.
And then you layer on top of that that Amazon's
trying to kind of out with the old in with
the new in terms of a reduction in management, you know,
replace more senior workers with lower level employees. And it's
just kind of rippling through through.
Speaker 4 (40:07):
A morale, particularly the time where other giants and tech
a laying off salesforce.
Speaker 2 (40:13):
We see that with work day to day as well. Spencer.
Speaker 4 (40:15):
It's a difficult market, but investors want to see this
sort of belt tightening. We look at it the earnings
for share expectations for Thursday.
Speaker 18 (40:23):
Yeah, so they've had the past six quarters I believe,
of increasing profits and they're expecting the same when they
report tomorrow. And that's the thing he's been. He's been
pleasing Wall Street, but making the workforce unhappy. And that's
a calculated move, right, Like you mentioned with the layoffs,
you can work your workforce a little higher, make promotions
(40:44):
a little more scant when they have fewer opportunities with
other companies elsewhere. And so that's the calculator gamble they
have right now is you know, we can lean on
folks a little harder just for the sake that they
have they have less opportunities.
Speaker 2 (40:55):
To leave us.
Speaker 4 (40:57):
We meg Spencer, SOPA as we build into these earning
later in the week.
Speaker 17 (41:00):
Thank you.
Speaker 4 (41:01):
Meanwhile, that does it for this edition of Bloomberg Technology.
Don't forget to check out our podcast you can find
on the terminal as well as online on Apple, Spotify,
and iHeart. And don't forget about the earnings coming after
the bell arm qualcomm The of course shows will be
across it throughout the afternoon, but from New York from
San Francisco where it's a little rainy. This is Bloomberg Technology.
Bloomberg Audio Studios, Podcasts, radio news from the heart of
where innovation, money and power collide in Silicon Valley and beyond.
This is Bloomberg Technology with Caroline Hyde.
Speaker 2 (00:19):
And Ed Lovelow live from New York on Caroline Hyde.
Speaker 3 (00:36):
And Aunt Jackie Devalos in San Francisco. This is Bloomberg
Technology coming up.
Speaker 2 (00:40):
Apple in the geopolitical cross has as.
Speaker 4 (00:42):
China weighs a potential antitrust pope into the app store practices,
plus Alphabet shares tumble after posting slower growth in its
cloud business and a seventy five billion dollar capital expenditure commitment,
and AMD falls on a disappointing outlook for its AI
chip growth. That and so many more earnings coming up
and Apple off by one point three percent. A key
(01:03):
issue here is China and the US and a potential
antitrust probe coming from China all regarding its app store.
Let's get to it, Bloomberg's Peter Alstrom, because the timing
here is of course amid this tip for Tap from
US and China in Taris.
Speaker 2 (01:16):
But this started before Trump came to office.
Speaker 5 (01:19):
Yeah, that's exactly right.
Speaker 6 (01:20):
So what we've heard from sources is that Beijing regulators
are looking at Apple and specifically the policies around its
app store.
Speaker 5 (01:29):
It takes a thirty percent.
Speaker 6 (01:31):
Of cut of app revenue, like it does in other
countries too, and also it kind of walks down payment
systems because it wants you to make those payments through
the Apple Store in particular. So we've heard that SAMR,
the regulator there, is taking.
Speaker 5 (01:44):
A close look at Apple.
Speaker 6 (01:45):
They've called in executives from the company and some other
executives too to find out more information. Now the balls
and Apple's court to respond to some sort of in
some sort of way and see whether they're able to
address this or whether regulators are going to have to
take more action to be fair. Though this is the
same kind of action that Apple has faced in other
countries too, where there are concerns about the app store,
(02:05):
how much money it takes away from developers, and whether
that's actually a level playing field for other companies.
Speaker 3 (02:12):
Peter, one of the outstanding questions is is this just
a bit more bark than bite and what is the
time horizon here? Because a lot of these probes take
time to play out. Do you have a sense of
how long it'll take before companies actually see a hit
from some of these probes.
Speaker 6 (02:27):
Yeah, that's a very good question. This is coming, of course,
in the middle of this kind of geopolitical tit for
tap between the United States and China. So the US
levied the ten percent tariffs on Chinese imports, and China
has responded with some more careful targeted things, including an
investigation into Google, which has a similar kind of app
store issue. Doesn't have that many operations in the country
(02:50):
beyond that, so I think.
Speaker 5 (02:51):
Politics are going to play a role here.
Speaker 6 (02:53):
We're going to see how that plays into the negotiations
with these companies. Visiing has a very forceful regulatory arm.
If they do decide to go ahead and take action
against Apple, Google, we know they're investigating in Nvidia too,
it could be very putitive for those countries, but at companies,
but it may have to do with the dynamics between
the two countries in fact, rather than the companies themselves.
Speaker 3 (03:16):
Bloomberg's Peter Alstrom, we thank you. Alphabet's share is dropping
after fourth quarter earnings missed expectations yesterday. Investors were disappointed
by a slowdown in sales and Google's cloud unit. For
more on this, we're joined by Brent phil from Jeffries. Brent, I,
you know when we look at Google, Alphabet's cloud sales
lagged by two percent. This was, you know, behind estimates.
(03:38):
It's the second hike per scaler to lag on this
front in the last week. Microsoft last week posted disappointed
cloud numbers. What's driving the decline for Google specifically because
the Microsoft story was a little bit different there.
Speaker 7 (03:52):
Yeah, I mean the common thread is Google and Microsoft
are indicating, you know, slower growth.
Speaker 8 (03:59):
Now.
Speaker 7 (04:00):
Want to be clear, last quarter was an anomaly for Google,
so growth went to thirty five and then went to
thirty this last quarter, So I think everyone is concerned
about the magnitude that they did say there were some
one time items. Growth in Q four is still up
from the front half of the year, so it's not
like things are falling out of the sky.
Speaker 8 (04:18):
And even for Microsoft, right.
Speaker 7 (04:19):
They had low thirty percent growth, they wanted to see
mid thirties and they didn't see that acceleration.
Speaker 2 (04:24):
They took up the table.
Speaker 7 (04:25):
So we're still talking, you know, thirty percent growth across
both companies, and we were at the beginning of the
AI changed, So I wouldn't I'd be careful to look
at just one quarter and say it's a massive trend.
The trend has actually been pretty healthy. And then I
think the other thing is you kind of have this
bug zopper light as we call it with AI. Everyone
(04:47):
gets attracted to this light over here and says.
Speaker 1 (04:50):
AI AI AI, and then.
Speaker 7 (04:52):
They forget about the core workloads, right, And so Microsoft
highlighted that their aipiece was strong, the non aipiece was
a little weaker. So again I think part of this
is we're on a journey, or at the beginning of
the journey, there are going to be some rocks and
pebbles and you know, barking dogs across the path on
the way that you got to navigate. And it's not
(05:12):
like a straight line up. But ultimately I think it's
pretty good.
Speaker 2 (05:16):
Now that but Brent, just on the pretty good thing.
Speaker 4 (05:18):
Can I just ask about the seventy five billion dollar
capex though, because we are trying to understand whether you
should be committing such significant investment at this time. If
the return on AI is still questioned.
Speaker 7 (05:28):
One hundred percent, you should be committing the question that
everyone's asking in every company when you ask the companies
of this question, and Microsoft will say do you want
us to get five percent market share fifty We're at
one of the big biggest tectonic shifts, the CM medtronic
every board in America. Globally, we're talking about China taking
down a trillion dollars in market cap last Monday. Do
(05:49):
you you want to be involved or not? And there's
a price to admission. And so this is very clear
that the time to spend is now, and the time
to spend is now in four or five six quarters.
Speaker 4 (06:02):
And so to your point, what happened last Monday, the
takedown was born by Deep Sea And actually we did
hear from soopitch I talking about Deep Seak. Just take
a listen.
Speaker 9 (06:13):
Run There's been a lot of observations on deep Seek.
First of all, you know, I think tremendous team. I
think they've done very very good work. I would say
both are two point zero flash models or two point
zero flash thinking models. You know, they are some of
the most efficient models out there, including comparing to Deep Seeks.
Speaker 4 (06:35):
From your perspective, does Alphabet able to compete when it
comes to cheaper models?
Speaker 7 (06:41):
Yeah, I mean, look, the China training thing is nonsense. Okay, dude,
Sacks from the White house came nonsense. Nonsense, Okay, so
we got to get that off the table. The technology
is there, but the training run costant six million is nonsense.
So I think, yeah, look they're going to be We
have software companies using twenty five lll ms and lasting
(07:03):
twenty five into it using ten. These are all going
to commoditize and they're all going to have a place,
and deepseq will have a place.
Speaker 8 (07:10):
But it's not this.
Speaker 7 (07:12):
You open your garage s dooor with one button and
you open your iPhone with another button. There's getting me
multiple multiple buttons. Okay, it's not just one.
Speaker 8 (07:19):
And so we think.
Speaker 7 (07:21):
Ultimately the big platforms with the users, with the capital
and the data win and Google has a lot of data,
they have a lot of great technology. So again this
is why Meta is doing so well. Meta is going
to perform very well with LAMA. So we are o
a believer that look, yeah, better AI efficiency will come,
(07:43):
but it's not coming at the pace that the market
thinks with deep seak.
Speaker 8 (07:46):
It's just not.
Speaker 7 (07:46):
And look at all the capics numbers between the last
Meta and Google. They've raised capis by twenty five billion.
If it was that efficient, these are pretty smart companies.
They don't want to waste shareholder money. They don't want
to waste They have a lot of loyees that work
there because they get paid in stock, Like they wouldn't
do this if they felt like, oh, yeah, it's so efficient,
(08:07):
Like why would you jack up the numbers as much
as they have. So again, I think everyone's being misled
by one comment from a Chinese comment firm that you
can validate the spend and the bring.
Speaker 3 (08:21):
I'm curious if you can kind of speak to maybe
you know, shifting back to Google's bread and butter search
YouTube and bring in the artificial intelligence picture here, because
while we're steeing seeing some of this still kind of
come out on the cloud side, what sort of benefit
are investors pricing in on the YouTube and search side.
(08:43):
What AI boost are you expecting there in the next
couple quarters.
Speaker 7 (08:48):
Well, no one's pricing anything today, so obviously stocks off
big on this kind of you know, minor miss if
you will. But ultimately, we think AI is going to
have a huge role. Like you look at Gemini. I've
and using it every day and over time, Gemini is
going to get smarter and I think there's a role
of core Search. I'm looking for a restaurant. I'm looking
(09:11):
for hours of the local small business. I need to
visit too. I need to get the answer of what's
the population of Iceland, And I want to ask Gemini
or I want a quick quick response in Gemini. These
things are going to effectively I think searching, what's happening
with AI and these AI agents are going to are
going to effectively melt together, and so it will be
(09:32):
a seamless experience. I think Google can do this, So
there'll be chance, there'll be times where you've seen it
at and sometimes you don't. Is that going to force
advertisers to run away?
Speaker 8 (09:41):
I don't think so.
Speaker 7 (09:42):
Look at YouTube great numbers, Look at core search good numbers.
The issue in Google's quarter has nothing to do with
the core business, has to do with the smallest business
at Cloud and Capex is up massively. Guess what Meta Microsoft,
everyone else is doing the same thing.
Speaker 3 (09:57):
Yeah, and you've got to.
Speaker 8 (09:59):
Do it right now.
Speaker 7 (10:00):
So and look, we've said at this AI journey is
going to take time. It's going to be a long journey,
and we're at the beginning of it.
Speaker 2 (10:06):
Well said.
Speaker 4 (10:07):
And Alphabet just coming down from some record hires of
yesterday as well. Jeffrey's Analystprent phil is so good to
catch up with you, Thank you very much. Coming up,
we're going to talk more earnings, AMD disappointing with its
AI outlook. More of the chip maker's earnings and other
in the silicon sector next. But as AMD fall, so
tutors snap quick check on those earnings after a mixed outlook,
basically sparing a load of downgrades on the street. Wills Fargo,
(10:28):
for example, cutting it to an equal weight, saying solid
revenue trends, but not enough to outweigh the period of reinvestment.
Speaker 2 (10:34):
This is BlueBag Technology.
Speaker 4 (10:47):
Shares of AMD tumbling today after the chipmaker left investors
with a disappointing outlook for its AI data center business,
saying they see strong double digit growth for more. Joanne Feoenie,
Advisor's capital management partner joins us in investors, they don't
just want double digit glows. They want a doubling of
AI business, right.
Speaker 10 (11:06):
They want a lot line, that's for sure. And what
they overlook is what's going on with the rest of
the business. I mean, you know, look at how much
share that AMD has taken from Intel. A data center
business has nearly doubled twenty twenty four or twenty twenty three.
It's PC client business up more than.
Speaker 8 (11:24):
Fifty percent for the whole year. They've done a tremendous.
Speaker 10 (11:27):
Job of really taking advantage of Intel's problems. But I've
been doing it by being able to develop superior chips
of its own.
Speaker 3 (11:37):
You're right, you know, Joanne, They're not getting a ton
of credit for that revenue beat doubling their other unit.
I'm curious if you can kind of speak to what
they said about that estimate miss on the data center
unit and what does it say about AMD's standing in
the AI ecosystem broadly.
Speaker 10 (11:56):
Yeah, so, you know, the problem they had with their
report was that the their entry into the AI side
of data center is something that's a little bit slower
to roll out than people were hoping, and expectations were
high heading into the quarter. And so this new chip
that is expected to you know, really push AMD into
this business, you know, more securely, and they've only just
(12:18):
started rolling out this whole line of chips. That new chip,
the mi I three point fifty, is now expected to
ramp until the second half of this year, and so
consequently their guidance was softer than expected for the data center.
That doesn't take anything away from the core datata center.
Speaker 8 (12:33):
Business, which continues to grow.
Speaker 10 (12:35):
But we are in a seasonally weaker quarter for PCs
and for data center, and with a little bit less
of a ramp on those new chaps, the gross margin
takes a bit of a hit. And so you know,
in the semiconductor world, gross margin is everything. And so
whenever you see a decline in the gross margin expectations
relative to or you know, outlook relative to expectations, typically
(12:56):
stocks go down. But you know, more importantly, their second
half for this ramp remains intact. It's just become a
little bit of a wait.
Speaker 8 (13:04):
And see game.
Speaker 10 (13:05):
And some shorter term investors don't tolerate that well and
they get out of the stock and they say, okay,
we'll get back in later. You know, for long term investors,
you know, it becomes a ride this out moment. You
don't know when sentiment is going to change. People could say, okay,
it's coming in the second half.
Speaker 8 (13:20):
Well that's July. Oh maybe I should.
Speaker 10 (13:21):
Start buying it, you know, in March, or you know,
maybe I had better get ahead of that buying spurt
and buy it, you know, later this month now that
it's come down. So it's really hard to time this
kind of thing. What you have to rely on is
that the fundamentals are good.
Speaker 3 (13:35):
Speaking of the short term disruptions, Deep Seek also came
up on the earnings call, and I was surprised to
hear that the CEO projected a tone of confidence that
they could actually benefit from some of these algorithmic breakthroughs.
I'm curious if you can explain how does AMD and
you know, perhaps even Qualcom's foothold and edge devices like
phones make it better position perhaps to handle some of
(13:58):
you know, the disruptions coming from a deep Seek or
models like it, as opposed to an Invidia that really
saw it shares tank in the wake of that.
Speaker 10 (14:07):
Yeah, so the deep Seek innovation, the news was surprising
because they were able to achieve efficiency potentially more quickly
than folksould imagine. But efficiency is always something that comes
to this space. Right, Chips get smaller, faster, cheaper over time,
but that never led folks to buy fewer chips. Same
thing here, Right, the models become cheaper and more efficient
(14:30):
over time, but that doesn't mean that folks are going
to step away from buying the best ships they can
now AMD Qualcom you have more of a focus on
the inference side of this, that is the use of
the models, and that's where greater efficiency will mean more use,
and I think that's what they're focused on. More use
is good for them. It's going to mean more chips
(14:50):
are going to be needed to roll out those applications,
and so hey, if the market shifts from the training chips,
where you absolutely have to have the highest quality, most
powerful and vid chips over to the inference side where
there are different components like memory and speed, that plays
into their strengths and on benefits.
Speaker 2 (15:08):
You go amine Qualcom off to the bell today.
Speaker 8 (15:11):
Yeah. Absolutely.
Speaker 10 (15:12):
You know, ARM is more diversified, I say, in a
more diffuse in their exposure.
Speaker 8 (15:17):
I mean, yes, they.
Speaker 10 (15:18):
Certainly play a role in a lot of the chips
that go into the AI infrastructure, but they also are
more heavily tilted towards smartphones and in a very broad way,
Qualcom obviously more smartphone oriented. But fortunately for them, the
smartphones they go into tend to go to the higher
end consumer and that is an area that continues to
be strong. So we actually We do own Qualcom. We've
(15:40):
owned it for a long time for clients. We like
their growth potential. We also like the income with their
pretty solid dividend.
Speaker 3 (15:48):
Lots to see today after the bell, Joey un Feenie
of Advisor's Capital Management, Thank you. Electronic Arts cut its
full year revenue outlook yesterday. That follows a decline in
the company's third quarter sales. For more on what we
learned from the video game publisher, were joined by Bloomberg's
(16:10):
Jason Schreyer. Jason, This stirred concerns among investors that EA
Games can continue to squeeze growth from its Tent Bowl
soccer franchise games that counts for a big slice of
its overall revenues. What did you learn from the earnings
call about how the company plans to turn this around?
Speaker 11 (16:31):
Yeah, so it was an interesting call last night. EA
had already reported preliminary results a couple of weeks ago
and taking a bath in the sock as a result.
I believe they're down about twenty percent.
Speaker 8 (16:43):
They had a.
Speaker 11 (16:44):
Slight gain overnight, partially because they said they were buying
back a billion dollars in the stock.
Speaker 8 (16:52):
And yeah, I mean.
Speaker 11 (16:53):
They are looking at the Soccer franchise that is their
big money maker. I believe it's something like seventy four
seventy five percent of revenue, and their business is now
from live service, meaning not just selling a game on
a store shelf, but also recurring revenue getting players to
buy stuff within the game after it launches, and the
soccer game is a big part of that. This recent
(17:16):
kind of disappointing quarter as a result of this new
soccer game not having the same kind of long term revenues.
Speaker 5 (17:22):
That they hoped for.
Speaker 4 (17:24):
Anice in augustanding for example, calling out lower user acquisition
software engagement with FC. They also then turn their attention
to Battlefield and basically a slipping calendar date there too
a bit.
Speaker 11 (17:33):
Jason, Yeah, it looks like they are planning on releasing
the new Battlefield at some point this coming fiscal year,
so before April of next year. And yeah, this one
has been a little while in the making. It's been
a while since Thea's recent Battlefield A most recent battlefield game,
Battlefield has never been able to keep up with the
biggest rival, Call of Duty from Activision Blizzards, so it'll
(17:57):
be interesting to see how they perform this time they
for I believe the first time.
Speaker 8 (18:02):
They have four different.
Speaker 11 (18:04):
Studios within the EA organization just working on this single
battlefield game, so it is a humongous bet for them.
Speaker 3 (18:11):
Jason, one of the company's challenges right now is getting
users to play the updated version of the game, but
they're still pretty interested in playing the older version of
the game. How does the company typically deal with something
like that?
Speaker 11 (18:23):
This is the eternal video game industry problem right now,
which is that you have so many people who just
don't feel compelled to keep buying new games every single
year when they can still have a great time playing
their older games, playing Fortnite, or playing a previous iteration
of the sports game. In the sports it's been interesting
Traditionally a company like EA has been able to get
(18:44):
people to keep buying new releases because of roster updates
and kind of slight feature enhancements. In the case of
the soccer games formerly called FIFA now called EA Sports FC,
one of their biggest in restences is kind of like
this Ultimate Team mode where basically players have to buy
(19:05):
these kind of loop boxes or card packs that give
them randomly generated players and stats, and it's this whole
big ecosystem that a lot of people have criticized for
filling a whole lot like gambling, and EA's hope is
that EA has said that the most recent entry is
a little bit unbalanced, players didn't like a lot of
things about it, and they're hoping that a big update
(19:26):
they just released a couple of weeks ago will fix
things and kept people back on track.
Speaker 4 (19:30):
Jason, Sure, thanks so much for the update on EA.
Now on to more earnings. Uber shares falling on wheat
gross booking guidance, bloomag In challenges analyst Man it's seeing
is in the house, and look they're blaming weather. You're
actually more worried about broader deceleration from ultimately months of
music with Yeah.
Speaker 12 (19:45):
Look, I think when you look at their three year
target of mid to high teens, what could kind of
get them there? It has to be the mobility segment
that is the core business. The delivery side isn't that
profitable still, then you compare them to DoorDash and on
the mobility side, everyone is so worried about Wemo rolling
out to ten more cities. Now, granted, the number of
(20:07):
rides that Wemo is doing is a fraction of.
Speaker 2 (20:10):
What Aniba has a relationship but only in two cities.
Speaker 5 (20:13):
So that's the catch here.
Speaker 12 (20:15):
It's not, you know, a relationship that spreads across all
the cities. And that's what I think investors are worried about.
If testa robotaxis were to come this year, and that's
a big if, and they get all the regulatory approvals
they need, then you could make the case that mobility,
you know, growth will slow down. And DoorDash has partnered
(20:35):
with Lyft now, so I would say lift should benefit
from Doordasher's distribution. So all those factors kind of weigh
on the user growth, and then it's very hard to
make a case that the right frequency will grow given
Wemo is expanding in all these new cities.
Speaker 3 (20:52):
Man Deep in thirty seconds. Uber sid it's self driving business. Car,
It's self driving car business years ago. What's it's strategy today?
Has the company said anything about how plans to go
about that?
Speaker 12 (21:03):
Yeah, they mentioned that they will be looking for the
right acquisitions and you know, they don't want to spend
too much in terms of making an acquisition, but it's
pretty obvious that they will be looking for tokens and
you know, adding their own technology to avoid being disintermediated.
Speaker 3 (21:19):
Here wull bring intelligence analysts man deeps in me.
Speaker 2 (21:23):
Thank you, Welcome back to Blue meg Tenology. I'm Caroline
Hid in New York.
Speaker 3 (21:34):
And I'm Jackie Devalas in San Francisco.
Speaker 4 (21:36):
Quick check on these markets. First, Disney off by a
one percent. Interesting is they managed to do particularly well
in streaming in terms of profitability. They're still seeing the
more honor to effect really bullying up. What's happening in
terms of their movie making business. Entertainment was flat. Let's
have a little look at what the CFO was talking
about in terms of the Disney numbers, which did.
Speaker 2 (21:54):
Beat on a profit basis.
Speaker 4 (21:55):
Jonathan Pharaoh and Lisa ramo It sat down with the CFO,
Hugh Johnston earlier this morning.
Speaker 2 (21:59):
Here's what he said about streaming strengths.
Speaker 13 (22:02):
The streaming business is doing extremely well. This is a
business we invested pretty heavily in a couple of years ago,
and what you're seeing now is the benefit of those investments.
Our expectation is will continue to grow, subs, will improve margins.
We should make more than a billion dollars in that
business this year and next year we're looking at double
digit margins in that business. So certainly a ton of
(22:25):
positive momentum. Now you get into the question of why.
A lot of it is the great content that's coming
from the studio side of the house, both on the
TV and the movie side of our entertainment business. We
wanta to Inside Out to Deadpool, all terrific hits, and
on the TV side, the combination of Abbot, Elementary, Showgun
(22:45):
and high potential causing viewership to grow. We're seeing higher engagement,
We're seeing churn ultimately coming down over the course of
this year. So we feel like the streaming business is
going to be one of the big drivers for our
company going going forward.
Speaker 9 (23:00):
Here.
Speaker 14 (23:01):
You know how much I love Showgun and Les so
I can say love Mowana two as well. So the
content slen is looking pretty good so far. I did
want to talk about the cost issue though, and clearly
not an issue from you, so I appreciate the explanation.
Conversation we've had over the last few days or so,
is if we get tariffs, can companies pass on the costs?
I'd like to know from your perspective and for the
company the additional tariffs that have gone onto China, how
(23:23):
that could impact your business.
Speaker 2 (23:24):
How are you thinking about things?
Speaker 13 (23:26):
Yeah, right, right now, based on what's been proposed. And
obviously this is a rapidly evolving environment, so we're going
to react as we learn things. The impact would be
in material to us. So from that perspective, really, the
Walt Disney Company will be fine based on what's on
the table right now.
Speaker 3 (23:44):
That was Disney CFO Hugh Johnston, and we stay with
Disney earnings. Joining us now is Ross Gerbert, CEO of
Gerbert Kawasaki. Ross. One of the things that stood out
to me in this report is not just that quarterly profits,
but that positive performance might have a few drivers here,
And the thing that stood out to me is that
price hike from the fall. I want to know how
(24:05):
much of that profit came from that price hike or
versus you know, organic customer growth.
Speaker 15 (24:12):
What are you saying, Well, we didn't see a huge
amount of organic growth in customers and that was part
of the strategy in making streaming profitable by charging the
right amount for the content. But what they proved is
that they could jam a pretty you know, big price
hike into the system and not lose subscribers by any
meaningful amount. And therefore increased profitability. And when you look
(24:34):
at exactly what the CFO said, the enormous amount of
money they've invested in streaming to now see it becoming
a very profitable business, which double digit margins.
Speaker 8 (24:43):
That was always our hope for Disney.
Speaker 15 (24:45):
Disney's the top holding in my fund GK, and I
think the stock is just wildly undervalued when you compare
it to Netflix, which is actually the top holding in
my fund.
Speaker 8 (24:54):
And Netflix is killing it on all corners.
Speaker 15 (24:57):
But it's really a two horse streaming between you know,
Disney and Netflix.
Speaker 4 (25:02):
Barbigo is talking on the conference call with investors such
as yourself, talking about how he's so pleased with the
subs numbers, the fact that you didn't see more churn,
But what about the growth story back to the likes
of entertainment. Yes, you want to see streaming being a
real pillar for Disney going forward, but we've got broader entertainment.
We've got TV and cable being difficult for them not
to mention people getting onto the latest boat or into
(25:23):
the latest park.
Speaker 15 (25:25):
Well, the big thing about you know, linear TV is
dying and that's not going to change. But what it
really is about is good content, and that's the Iigre
effect is real, and we're seeing the benefits of having
Aigre back at the Helm because the content has improved
dramatically from the Japek era and that drives results. It
drived in in in the theaters with Moana too, and
(25:45):
then it drives it onto the streamer because I'm just
waiting for Maana two to drop on Disney Plus. And
you know, and subscriber numbers will soar because people want
to watch these really successful movies that they'll pay in
the theaters, but then they'll watch it again on the streamers,
probably for the next ten years, you know. So you
know Disney's Experiences division, you know, the parks, and they
(26:06):
made a lot of investments, and then they had the
storm that kind of hurt earnings a little bit. But
with the new cruise ships coming out too, this business
is is a goal mine. So if you look at
Disney's cash flow, it's just a wonderful business at a
really decent price. So, you know, we're very bullish on
Disney's future.
Speaker 2 (26:22):
What about the future of the CEO.
Speaker 15 (26:25):
Well, you know, Iiger is a young you know, seventy
or whatever, and you know, I hope he stays forever.
And Disney has a long history of having CEOs. They
keep saying they're going to retire and don't retire, but
I think ultimately they should drive the industry towards the
digital part of their business, or maybe a co CEO
situation where you have experience and a digital you know,
kind of like what Netflix has done, because the businesses
(26:47):
are huge and quite different. But we need somebody who
can really drive creativity because that's what drives Disney's earnings.
Speaker 3 (26:55):
Ross let's pivot shift years to another game or another
name that you cover Tesla No pun intended there, gerber
Kowas hockey holdings peaked in twenty eighteen and they've come
down quite a bit. And what do you make of
Elon Musk's growing side project with Doge and his role
in government? At what point do you think you'll really
(27:18):
start to pair back more or if not completely, if
his attention continues to be diverted there.
Speaker 8 (27:25):
Well, there's a lot of things so i'd pack with Tesla.
Speaker 15 (27:27):
First of all, his full time job is at the
government right now, so we all know he doesn't really
work at Tesla, and that's not so bad. Because many
of the people at Tesla are actually fine with that
because it's he's quite disruptive. That said, the goals for
Tesla are quite immense, and you know, they have very
little time to achieve them based off the timelines that.
Speaker 8 (27:47):
They've set out.
Speaker 15 (27:48):
Tesla you know, has a lot of issues that they
have to deal with, especially from a marketing perspective as well,
because like the numbers in Europe. So you know, we've
been a seller of Tesla over the years because we
had such an overweight position because we made so much
money in Tesla from twenty eighteen to let's say today,
and so you know, we still owned Tesla because it's
(28:09):
the most impactful company for climate change in the world,
and that's a theme that we very much believe in.
Speaker 8 (28:14):
They make the best evs and if.
Speaker 15 (28:17):
They just focused on their core business and really stopped
all the political noise, I think Tesla would be fine.
So you know, it's a really difficult stock to own,
and we still own it, and you know it's not
a big position, but then it you know, doubled in valued,
so we've been taking profits.
Speaker 8 (28:33):
Again.
Speaker 3 (28:34):
Ross to your point about the climate change opportunity, does
that still exist? In a Trump administration where perhaps that's
not as prioritized as it was previously.
Speaker 8 (28:45):
Well, I can tell.
Speaker 15 (28:46):
You because I just fought the fires myself and the Palisades,
that when you're looking at seventy foot flames burning up
an entire city in one night, or hurricanes in Florida,
or ridiculously cold weather in the North, or whatever you
want to look at, climate change is not a political issue,
real issue that all of us in the world are facing,
whether we like it or not. I've seen her firsthand.
Mother Nature does not want us here anymore. So we
(29:08):
need solutions real badly, and Tesla is the best solution
for climate change between battery storage charging and the ev business.
So people are going to buy evs because they're better
cars than gas cars.
Speaker 8 (29:19):
They're a better.
Speaker 15 (29:20):
Value for consumers, and it's good for the environment. And
this business is growing globally and every car maker is
making grad evs now and that was the goal of
Tesla originally. So we've been successful, but this trend towards
evs is not going away because of politics.
Speaker 4 (29:37):
Thoughts with you with your neighbors for what you've been
fighting over the course of the month in La ross
I want to go back to what you said about Europe, because,
as I mentioned earlier, the numbers out of Germany are
pretty astonishing, down sixty percent in terms of sales, France
down sixty percent. Is Europe feeling the impact of Elon
and the marketing impact more than the US or is
(29:57):
this just a lack of a lineup.
Speaker 8 (30:00):
No, no, no, this is one hundred percent politics.
Speaker 15 (30:02):
I mean, when you go into Germany and you start
supporting the right wing almost like Nazi Party of Germany,
you're going to get a lot of Germans not buying
your vehicles. Remember, Europeans are very conscious people and they
pay a lot of attention to things that are important,
whether it be you know, the quality of their food
or water, and also they.
Speaker 8 (30:20):
Care about climate.
Speaker 15 (30:22):
But when push comes to shove, Elon's agenda is a
direct affront to the direction of Europe and Europeans are
you know, voting with their dollars and they're not going
to buy Tesla's because they know they can buy other
evs that are just as good. So you know, we're
just starting to see this. It's happening in California as well.
This is a big problem for Tesla long term and
(30:42):
I'm really concerned they're going to be unable to grow
sales moving forward with the current I would say anti
marketing campaign of YEW.
Speaker 4 (30:51):
You mentioned, of course, the IFD, which is that the
far right party in Germany which in many ways Elon
Musk has has led to support to us. Bringing it
back to therefore, what the company needs to do fundamentally, Look,
it doesn't matter the numbers didn't live up to expectations.
We've got ultimately following Weimo in terms of robotaxes on
the ground. But that's right the market, the market still
(31:11):
posts the stock higher. So is it completely disassociated with
fundamentals at this point, Well, we.
Speaker 15 (31:18):
Look at it as the fundamentals of the business are
worth about two hundred dollars and then the rest of
the stock price is hoe premium based off Robotaxi and
robotics in AI, which you know are legitimate, you know,
opportunities for Tesla.
Speaker 8 (31:31):
So I don't want to poop poo them. But I
live in Santa Monica.
Speaker 15 (31:33):
And every day I drive there's Weaimo's everywhere really doing well.
They're driving perfectly, they're taking rides from Uber. We sell
that and we're going to see this in Uber's numbers,
which we now don't own Uber, because I think Weimo
is a wonderful opportunity for investors for robotaxi and it's
way better than driving than Tesla. So I would say
(31:54):
with the decline in Google today, boy, that's an opportunity
for investors because that's a reasonably priced stock with thing
like Weimo that could be worth a ton of money
in the future. So now they're launching in Austin, right
in Tesla's backyard, and it's almost like spitting an elon
space now as he's pitching a robotaxi that basically doesn't work,
and Weimo is really successfully, you know, rolling out robotaxi.
Speaker 8 (32:17):
So this is a real competitor.
Speaker 4 (32:19):
And certainly we're getting outlines from Alphabet overnight of how
many rides are being done by Weimo at the moment.
Ross Gerba of Gerber Kawasaki. Great to catch up with you,
Thank you. Coming up, we're going to be joined by
Sarah Glow of Conviction. We're going to be discussing the
state of AI investing. That's coming up next. This is
BLUEBG Technology Time now for Talking Tech and first up
(32:50):
work Day says it's cussing about eight and a half
percent of its workforce. In the note to employee, CEO
Carl Escherbucht says about one seven hundred and fifty workers
will be let go as the company focuses on quote
durable growth.
Speaker 2 (33:01):
He goes on to.
Speaker 4 (33:02):
Say that the company intends to hire for areas such
as AI and plans to take on more people overseas. Plus,
Oklahoma set to become the first Republican state to challenge
Corporate America's DEI policies as an investor, Oklahoma Treasurer Todd
Russ plans to submit share holder proxy proposals to six companies,
including Alphabet and Amazon, in an effort to promote quote
(33:22):
political neutrality and challenge corporate donations to organiations organizations that
advocate for LGBTQ rights, for example, and Open A CEO
Sam Altman called India the most important international market for
the startup after it saw a tripling in users last year.
Speaker 13 (33:37):
Now.
Speaker 4 (33:37):
The comments come as Altman makes a stop in New
Delhi meeting with Indian government officials and entrepreneurs. It's the
latest picture course on Altman's worldwide tour, which also included Japan,
South Korea, Germany's next Jackie.
Speaker 3 (33:49):
Let's keep talking about the global AI race on today's
VC Spotlight with Sarah guaB, which is the founder of Conviction,
a venture firm focused on AI native companies. Sarah, it's
been over two years since you've founded Conviction, just a
month before Chad GPT really took the world by Storman
You've wasted no time in getting to the cap table
and some of the most promising AI startups from Estrall
(34:12):
to Harvey. But I want to know what's changed in
the AI landscape from your perspective as a venture capital
investor since you launched, because AI has come a long way.
Speaker 8 (34:22):
Yeah.
Speaker 16 (34:23):
When we launched, we had this very strong belief that
AI would be a a decade plus shift, the most
important shift in technology we were likely to see in
our lifetimes. And then we made some early bets that
application companies and companies that sort of invested vertically up
and down the stack would create a lot of value.
I think that is even more true now and the
(34:45):
myth of the GPT rapper has been brushed away.
Speaker 2 (34:49):
One of the major.
Speaker 16 (34:52):
Developments over the last few weeks that everyone has been
paying attention to is of course a more and more
competitive foundation model landscape.
Speaker 3 (35:00):
That's right. I mean you were tweeting about deep seek
in December before the world freaked out just last month.
But we also had another venture capital investor on the
show last week who called it a grave national security threat.
And I would love to get your thoughts on the
strength of that model, what it means for AI startups
(35:21):
competing in this space, and do you agree with that
statement is it a national security threat?
Speaker 16 (35:28):
Let's take the first part first. So it's an incredibly
useful model and considered on many capability tests a state
of the art. And I think what was really interesting
about it is that deep Seek as a company released
a base model, which you can think of as just
pre training than a instruction tuned model, which is a
(35:49):
set of work that allows the model to be more
helpful to respond in a sort of chat interface, and
then a reasoning model, which is parallel to for example,
opening eyes model. And so right at the frontier, now
you have an open option. I'll be at one from
a Chinese hedge fund. I think that was quite surprising
to the world and quite democratizing two application developers to
(36:13):
have this force of open source, from meta, from mistral,
from deep seek. Now, whether it serves as a push
for the US to get more competitive on this incredibly
important industry front of you know, being first in the
race to AI a technology, stronger AI technologies or remains
(36:33):
to be seen. But I think it's very clear that
export controls are not leak proof and no country has
a monopoly on AI talent.
Speaker 4 (36:41):
Sarah, Let's go into how it changes the game in
terms of the valuation stack because you are in at
the large language model layer with a smallcasion towards a mistral,
but you're also in the application layer of these large
language models. When I think a cognition, for example, how
do you think the money's going to flow?
Speaker 2 (36:58):
Ultimately?
Speaker 16 (36:59):
Yeah, one of our core beliefs is that AI makes
the pie bigger, and you can think about it as
the stack as you describe right, infrastructure tooling model companies,
application companies, and those that are verticalized. But we're much
more interested in application companies and verticalized companies to date,
(37:20):
and part of it is seeing the LM landscape play out.
It's been a very expensive game to play, despite Deep
Seeks claims around a six million dollars single training run
that vastly under prices the cost of experimentation and all
of the infrastructure that was used in for example, post
training and inference as well, and so it's still a
(37:42):
very expensive game to play. I think in terms of
economic opportunity of sort of you know, the traditional venture
capital game being capital efficient growth, we think that is
going to be most concentrated in the application layer.
Speaker 4 (37:58):
And it was at our age Sarah for that, and
Sierra you're in rettailor leading that business, and that of
course taking on a sales force of example, is a
gent ki where the real value.
Speaker 2 (38:07):
Is going to come in the next year or so.
Speaker 16 (38:09):
Yeah, agentic is a really hard thing to define. But
I think one thing that we're really excited about with
companies like Sierra and others is the more, like very simply,
the more that AI does for you, the more people
will be willing to pay for it, right, And so
something like Sierra improves the customer experience, especially for people
with very high value customers. So think of finance, subscription, travel,
(38:33):
et cetera. And I think as we see AA models
get more capable beyond answering simple questions to completing tasks,
which is something that will take a lot of vertical,
specific and last mile work. We should expect these companies
to be able to capture a lot of that value too.
Speaker 2 (38:50):
Always great to have you on Seragua.
Speaker 17 (38:53):
We love it from Conviction, Thank you.
Speaker 3 (39:03):
Amazon's efforts to cut out middle management bloat is sending
ripples throughout the company, with many employees fearing uncertainty and
a lack of promotions. For more Bloomberg, Spenser Soaper joins
us now Spenser. Amazon veterans are used to periods of
bell tightening. What did you glean from employees about how
Jase's tactics this time around are different?
Speaker 18 (39:24):
Well, a lot of it is a sign of the times.
You know, employees historically within Amazon, when Jeff Bezos was
CEO would maybe try to figure out what he was
excited about because they figured that was going to get
a lot of money and investment and that would be
a nice career path for them. And the big difference
with Jase's CEO, he's a lot more disciplined. He doesn't
chase as many moonshot projects. The money's a little less
(39:45):
free flowing, So those career paths paths for advancement are narrower.
And then you layer on top of that that Amazon's
trying to kind of out with the old in with
the new in terms of a reduction in management, you know,
replace more senior workers with lower level employees. And it's
just kind of rippling through through.
Speaker 4 (40:07):
A morale, particularly the time where other giants and tech
a laying off salesforce.
Speaker 2 (40:13):
We see that with work day to day as well. Spencer.
Speaker 4 (40:15):
It's a difficult market, but investors want to see this
sort of belt tightening. We look at it the earnings
for share expectations for Thursday.
Speaker 18 (40:23):
Yeah, so they've had the past six quarters I believe,
of increasing profits and they're expecting the same when they
report tomorrow. And that's the thing he's been. He's been
pleasing Wall Street, but making the workforce unhappy. And that's
a calculated move, right, Like you mentioned with the layoffs,
you can work your workforce a little higher, make promotions
(40:44):
a little more scant when they have fewer opportunities with
other companies elsewhere. And so that's the calculator gamble they
have right now is you know, we can lean on
folks a little harder just for the sake that they
have they have less opportunities.
Speaker 2 (40:55):
To leave us.
Speaker 4 (40:57):
We meg Spencer, SOPA as we build into these earning
later in the week.
Speaker 17 (41:00):
Thank you.
Speaker 4 (41:01):
Meanwhile, that does it for this edition of Bloomberg Technology.
Don't forget to check out our podcast you can find
on the terminal as well as online on Apple, Spotify,
and iHeart. And don't forget about the earnings coming after
the bell arm qualcomm The of course shows will be
across it throughout the afternoon, but from New York from
San Francisco where it's a little rainy. This is Bloomberg Technology.
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