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Bonus Episode: Tesla, Meta and Microsoft Earnings
Update: 2025-01-29
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Bloomberg's Carol Massar and Tim Stenovec discuss the latest Big Tech earnings featuring Tesla, Meta and Microsoft. They speak with:
- Bloomberg Intelligence Senior Technology Analyst Mandeep Singh
- Bloomberg Technology Co-Host Caroline Hyde
- James Cakmak, Technology Analyst at Clockwise Capital
- Bloomberg Intelligence Senior Technology Analyst Anurag Rana
See omnystudio.com/listener for privacy information.
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Transcript
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00:01:10
This is Bloomberg Business Week with Carol Maser and Tim Stenevek on Bloomberg Radio.
00:01:18
It is Bloomberg Business Week.
00:01:20
I'm Tim Stenevek, that is Carol Maser.
00:01:23
We are following what's going on with all the companies that are reporting right now.
00:01:27
So far, in terms of the big companies that were following this afternoon, Carol, we're looking at shares of Tesla, which are lower in the after hours.
00:01:34
In addition to that, we're also looking at shares of Microsoft, which are following after their report.
00:01:39
Absolutely.
00:01:40
We've got Microsoft down almost 4% here in the aftermarket.
00:01:44
As we said, some disappointment over maybe some of the numbers in the second quarter revenue.
00:01:50
$69.63 billion estimate with, estimate with $68.90.
00:01:54
That's actually better.
00:01:55
Second quarter Azure revenue was up 31%.
00:01:58
The estimate was for gain of 31.8%, but the second quarter cloud revenue, that missed estimate.
00:02:05
And so that second quarter intelligent cloud revenue, $25.54 billion, the estimate was just a tad above that at $25.89 billion.
00:02:15
So again, maybe some concerns over that.
00:02:18
And expectations are high right now.
00:02:20
Okay.
00:02:21
He doesn't ignore it, but he doesn't cover it like some of his colleagues.
00:02:25
Maddie is saying his Bloomberg intelligence, senior technology analyst.
00:02:28
As we await meta earnings to cross, we're going to make him go a little out of his element and speak to Microsoft because you can't ignore what's going on with Microsoft,
00:02:38
Mandy.
00:02:39
Give us an idea of what sticks out to you from this company.
00:02:42
I mean, look, the intelligent cloud number miss probably that has to do with, you know, lower adoption of 365 co-pilots, they've been touting that and the expectations had gone up.
00:02:55
And look, it's one of those products where the ROI so far hasn't been there.
00:03:01
The promise is there.
00:03:03
And that's why they are emphasizing the Azure number.
00:03:05
The $13 billion run rate, the 175% growth, look, it's stellar by any comparisons.
00:03:12
And from that perspective, the infrastructure side looks solid right now.
00:03:17
It's the co-pilots and the application side where you're seeing some hesitation.
00:03:22
And look, I think the native integration with open AI as long as it's there.
00:03:28
It should help all their products, but there's more competition.
00:03:31
I mean, Salesforce has been launching their agents.
00:03:34
So there is more competition in the application there now than there was before.
00:03:38
And the point is you will build it, but will they come?
00:03:40
And that's what it's kind of like what they're waiting for, correct?
00:03:43
Well, if you're asking enterprises to pay $30 extra per user for that co-pilot feature, it better be good.
00:03:51
I mean, that's the key takeaway.
00:03:54
It's like, if you want to upsell such an expensive product, it has to have some level of productivity.
00:03:59
So remind everybody where Microsoft stands in terms of the LLMs, because you mentioned a company like Salesforce.
00:04:06
Is a company like Salesforce building its own LLM?
00:04:09
Are they building an agent on top of an existing LLM?
00:04:12
Maybe from Microsoft, maybe Lama from Meta, maybe ChatGPT from OpenAI or Cloud from Anthem.
00:04:17
Exactly.
00:04:18
So they are not building their own LLM at the same time.
00:04:21
They have gone big in their agent-forced concepts.
00:04:24
And they are saying AI agents is where they are doubling down on.
00:04:29
And they don't need to own an LLM.
00:04:31
So that's where I think with the open source saying, you know, of DeepSeek and the fact that pricing is coming down, all that is positive for every application software provider, not just Salesforce,
00:04:42
even Word Day or SAP.
00:04:44
They can integrate LLM functionality now.
00:04:46
And we saw software names, certainly Rally this week.
00:04:48
Having said that, Microsoft has a special unique exposure to OpenAI and ChatGPT in terms of the what, $13, $14 billion or so that they have invested.
00:04:58
So does that put them on a certain level of vulnerability, perhaps?
00:05:02
No, because they are benefiting from the infrastructure revenue, that $13 billion run rate.
00:05:08
It's all Azure cloud consumption, nothing to do with the co-pilots.
00:05:12
Just companies that are leveraging their infrastructure to run their cloud operations or deploy their applications.
00:05:20
So that meter is still running.
00:05:22
And it's running very fast, I mean, 175% growth just on infrastructure is very impressive.
00:05:28
It's just the application side, the lift from co-pilot.
00:05:31
I think that's where they'll probably see more competition and probably expectations were too high.
00:05:37
Well, speaking of expectations, we're expecting Meta platform shares with platforms earnings across very soon.
00:05:42
We have no idea what those shares are going to do in the after hours.
00:05:45
Revenue estimate coming in at close to $47 billion.
00:05:49
What's the most important line item that you're looking at here?
00:05:52
So Meta raised its CapEx right before we had this deep $65 billion.
00:05:58
Okay, what's that before because that had to be on Mark Zuckerberg's radar?
00:06:02
It was, but still they chose to do it.
00:06:04
Now the fact that this is really a positive development for open source, everyone is thinking Meta won't have to spend 60 to 65 and they will take it back.
00:06:15
So that CapEx number is still the key for me because Meta has been known for spending, being big on reality labs and now building data centers.
00:06:24
Are you saying that there's a chance we could hear a pullback in that CapEx number and investors might cheer that?
00:06:30
Investors cheer the investment number on Friday.
00:06:32
I was surprised to see that.
00:06:34
Not so soon.
00:06:35
I think with the deep seek, the fact that everyone is very excited about open source, Meta coming out and saying, "We can monetize Lama," our model,
00:06:45
which really no one was sure.
00:06:47
How are they going to monetize it?
00:06:49
Not only, I think that becomes a very valuable proposition and I think just his plans around how do they plan to monetize AI and really not going above 65 billion.
00:07:02
That's the other risk because you could revise it further upward.
00:07:05
At least I think those fears have gone away that 65 is a cap.
00:07:11
We talk so much about AI.
00:07:13
For Meta, it's still the advertising, something as simple as that is still such an important indicator.
00:07:20
That's their business.
00:07:21
I mean, $45.6 of the $47 billion Carol that's expected to be reported is advertising.
00:07:27
And I understand it all plays together, but still, that's the metric.
00:07:30
And the best way to compare is compare Google search revenue growth with Meta's social media ad revenue growth.
00:07:40
So Google search is a $200 billion business growing at high single digit ad best.
00:07:47
Meta is close to $160 billion, growing 18%.
00:07:51
How do reality labs, products help Meta platforms sell advertising better?
00:08:00
Well, so their bet is on that Meta AI, which for which they have 600 million users now, and the form factor, their own form factor is the glasses that you can distil a model and everyone is talking about distillation right now because that's what DeepSeek showed us that you can distil a larger model into smaller model.
00:08:19
Maybe that model can run on your glasses.
00:08:21
Okay.
00:08:22
How does that help you sell it?
00:08:23
More ads.
00:08:24
Well, they will learn so much more about you as a person that they can show you a more personalized ad when you go to Instagram or Facebook.
00:08:32
And that's where you know, Meta strength has always been the quality of their ads.
00:08:35
So still at the end of the day.
00:08:36
That's what it's all about.
00:08:37
Yeah.
00:08:38
I just want to remind everybody I'm looking at our live blog, which is waiting for Meta's fourth quarter earnings.
00:08:43
Our Kurt Wagner says they usually drop a few minutes after the market close at 4 p.m.
00:08:47
New York time.
00:08:49
Still waiting on them.
00:08:50
They say he says it's a bit of a rare delay.
00:08:52
We usually have them like we said right after the market closed.
00:08:56
So we're waiting them as soon as they come across, we're going to have men deep break them down.
00:09:01
Also in studio is our own Caroline Hyde, who's co-host of Bloomberg Technology and Bloomberg Television.
00:09:05
And Caroline, we've also had Tesla earnings.
00:09:07
We've been talking with Mandy about Microsoft as we await Meta.
00:09:11
Go where you want because it just feels like both Microsoft and Tesla have seen some pressure here in the afternoon.
00:09:16
And also, I don't know if you've broken down service now, but suddenly software became quite the thing of this week because we all suddenly freaked out about AI infrastructure and hardware, but with software going to be gaining from these deep-seek revelations.
00:09:28
Service now actually looking pretty lackluster, outlook on slower than happened anticipated.
00:09:32
We were thinking AI was going to give it this massive bump, but overall fiscal year sales outlook fell shorter.
00:09:37
Those expectations, subscription revenue, going to be $12.7 billion 2025, market want to see more.
00:09:43
So their shares are dropping hard.
00:09:45
And I think this is where we're going to have to hear more from Microsoft as well is, is the open AI integrated offering, not selling at the pace that they're probably expected?
00:09:53
I've heard from experts out there saying, it's priced too high, ultimately at the moment.
00:09:57
Still deep-seek force, open AI's own offering to get cheaper, Microsoft's offering to get cheaper, and therefore it becomes more ubiquitous, we will start using it more, but ultimately they get more bang for the back in the long term.
00:10:08
Does it mean that these companies could potentially pull back on some of the cat-becks they've already announced this year?
00:10:12
I think that was interesting in the, and we talked about it when the numbers dropped.
00:10:17
Amy heard the CFO's talking about discipline.
00:10:20
Now last year we were not talking about discipline, we were talking like, let's throw $80 billion at this, we just heard another half a trillion being thrown at it from Oracle, Softbank, and open AI.
00:10:30
I think you'll start to hear this.
00:10:31
This is why spending.
00:10:32
This is return on AI spending.
00:10:33
So not quite year of efficiency, like we saw in, you know, 2023, but now discipline's spending.
00:10:39
Yeah.
00:10:40
When it comes to cash.
00:10:41
Yeah.
00:10:42
We're just spending wisely on your data.
00:10:43
Just because you say it doesn't mean you're going to spend it ultimately too.
00:10:44
I do want to point out ServiceNow reports in additional $3 billion for a share of buyback with the stock.
00:10:48
Yeah.
00:10:49
But it's still down about 9% here in the aftermarket.
00:10:51
But then deep come back in because we were talking about, you know, the news we got this week from DeepSeek that the beneficiaries seem to be the software providers.
00:11:00
Not every software provider, though, is the same, correct?
00:11:02
Well, I mean, a company like ServiceNow in theory should benefit from lower LLM costs.
00:11:09
I mean, all the software companies could arbitrage against the LLM providers and say, if I have a cheaper open source option, I'm going to go with that because the quality of responses are very similar.
00:11:20
So from that perspective, I mean, the news just came out.
00:11:22
So obviously they didn't embrace open source before.
00:11:26
Yeah.
00:11:27
And now a lot will change in the next three to six months.
00:11:29
But for now, I think expected to Caroline's point, expectations are high this quarter.
00:11:35
And a lot of these companies have touted AI agents in a big way.
00:11:40
So the street wants to see their revenue and probably it's not showing up right now.
00:11:44
And I had a really interesting conversation with an expert who's helping integrate generative AI into enterprise offerings.
00:11:51
And here's the gap, right?
00:11:52
We've been talking deeply exuberantly about how it's going to make our productivity so much better.
00:11:58
But ultimately, enterprises need to know that their models work and they need to stress test them.
00:12:02
They need to have the right companies in there ensuring that, well, when you're saying it's going to get you a better mortgage outcome, when you're looking at insurance inquiries, you're actually getting the right output.
00:12:10
Companies are trying to integrate it, but they've got to do this with some rules of the road.
00:12:14
So it actually takes a bit of time.
00:12:15
Okay.
00:12:16
Speaking of rules to the road, perhaps a good segue to get to Tesla, because shares are down about 2.7 percent right now.
00:12:21
It seems Caroline, like it was the adjusted EPS that came in shy of estimates, 73 cents per share versus estimates of 75 cents per share.
00:12:30
Is it about a lack of efficiency on the supply chain on the product line?
00:12:34
What is it?
00:12:35
They're saying they're not getting the manufacturing savings that they wanted to see efficiency.
00:12:39
Have they tried the blockchain?
00:12:40
Have they tried the blockchain?
00:12:42
Have they tried just making everyone have to come back into the office?
00:12:47
I mean, it's been on that for a long time, but more affordable models is where it's at.
00:12:52
This is a company that is having to compete from a price perspective in China in a big way, and look, we saw deliveries did not live up to expectation.
00:13:00
So already they're not selling as many.
00:13:01
They're having to reduce the costs.
00:13:03
It's interesting they're seeing the automotive growth margin, X regulatory credits still at 13.6 percent.
00:13:08
This is a company that basically makes an awful lot of money because other car manufacturers can't get the climate initiatives out there quickly enough.
00:13:15
I wonder if that'll dial back.
00:13:17
But ultimately they did say they achieved record deliveries in China in fourth quarter.
00:13:20
I wonder how they managed to be able to just keep on competing there.
00:13:25
And no mention of robot taxis.
00:13:26
I mean, the big bet was this administration should help expedite the rollout of Tesla robot taxis.
00:13:33
That's what investors are betting on.
00:13:34
The letter they did say this is going to be the year of supervised fully self-driving.
00:13:38
But we're still waiting to see what the guidance is from the federal government.
00:13:42
The CyberCab is on track for 2026, so ultimately they're talking about still being wanting to get that CyberCab out there.
00:13:52
And the meanwhile we're having to see whether that cheaper price point new vehicle will happen.
00:13:57
He's saying new vehicles remain on track for the output start in the first half.
00:14:01
When?
00:14:02
Where?
00:14:03
How?
00:14:04
I just want to update.
00:14:05
Meta shares are just down about 5/10 in the after hours.
00:14:07
5/10 of 1 percent.
00:14:08
Kurt Wagner on our live blog says the latest meta or Facebook has ever posted earnings is 4/16 PM.
00:14:14
We have now a new record because it's 4/20 PM here on this Wednesday.
00:14:18
He says in all seriousness, this is definitely unusual.
00:14:20
I've asked the company what is going on and will report back if I get any news.
00:14:24
I was trying to see if there was any interesting activity here in the aftermarket ahead of the actual results.
00:14:30
But again, it's just down a hair down about 4/10 of a percent, but still waiting on Meta's results.
00:14:35
I don't know.
00:14:36
I mean, it reminds me on when in video, I think it was a few quarters back.
00:14:43
They were delayed and everyone was like, what's going on?
00:14:46
And sometimes I think it's one of those situations where yeah, there isn't much to it.
00:14:51
It's just there is a delay and you just wait it out.
00:14:55
But look, I think in the case of Meta, I mean, there's so many things that I think investors are looking forward to, especially there was a number around reality laps growing 40% for 2024.
00:15:09
Right.
00:15:10
And when you look at the consensus expectations for this quarter, it's like 3% growth.
00:15:14
Yeah.
00:15:15
So I don't know how they grew 40% for the full year.
00:15:18
It's a great question.
00:15:19
Sure.
00:15:20
And come on in here.
00:15:21
Is that because the, I don't know, the glasses exceeded expectations.
00:15:24
Again, we're still waiting for these numbers to cross.
00:15:27
Reality lads, a tiny, tiny portion of the company's full revenue.
00:15:31
I mean, a tiny fraction, but an area where they're investing a lot and where they think there's a real future.
00:15:36
And people got very excited about the product.
00:15:38
Did you see how often Ed Ludlow has been wearing his makeup?
00:15:41
I heard it.
00:15:42
I heard it.
00:15:43
I heard it.
00:15:44
Great.
00:15:45
They really did blow people's minds as to how exciting the future could be of just the integration within your everyday work.
00:15:49
Suddenly, you know, smart glasses became cool and thanks Rayban and a large part of that.
00:15:52
Yeah.
00:15:53
Google Glass is calling.
00:15:54
They're saying, hey, we had this 10 years ago, but it didn't stick.
00:15:57
Now, and what you want is the zeitgeist, right?
00:16:00
Sure, people might not buy that iteration.
00:16:02
What about the next iteration?
00:16:03
What about the fact that this is going to in some way be infused within your work life environment as well?
00:16:08
And suddenly you'll be able to have four screens wherever you are.
00:16:11
Not just two.
00:16:12
I think it's suddenly just showed the power more than anything of Mark Zuckerberg to Interlace Generative AI everywhere.
00:16:18
For me, the big sound now has been the fact that I do use Generative AI within my Instagram video.
00:16:24
Talk about what I do.
00:16:25
Just out of curiosity.
00:16:26
And I ask questions.
00:16:27
I get it to like design what one should wear for an event, I give it pictures of my fridge and get it to recommend what I should be cooking.
00:16:35
Do you follow it?
00:16:36
Do you use it?
00:16:37
I mean, do you like take these things and actually do something?
00:16:38
Yeah.
00:16:39
Yeah.
00:16:40
Yeah.
00:16:41
I've definitely said what they should cook.
00:16:42
Sometimes a fashion sense.
00:16:43
I like take a little.
00:16:44
But to be clear, you could also use chat GPT from open AI to do that.
00:16:47
But I didn't have to download that.
00:16:49
But I didn't have to download that.
00:16:50
And you know what to pay?
00:16:51
I use WhatsApp every day of my life to talk with my family.
00:16:54
I don't subscribe to the expensive versions of I take the free version of chat GPT.
00:16:58
You do have $100 a month.
00:16:59
Not for my personal agent to, you know, to get me a flight to wherever, which I think is a really cool idea.
00:17:05
And I think that shows the promise of agents.
00:17:07
And we know we hear Salesforce talking about the promise of agents and stuff like that.
00:17:11
But are you able to do for free with Lama what you pay chat GPT to do?
00:17:17
Is that an issue?
00:17:18
I have to say personally, I'm not running the two against each other.
00:17:21
And I use chat GPT for other things.
00:17:24
I'm using chat GPT to articulate what my own pair, because we will have to rely while I'm at work on wonderful people looking after your children.
00:17:32
How her week should look.
00:17:33
And I just speak into it.
00:17:34
Dictate it.
00:17:35
So I'm using different things to different points.
00:17:36
But for me, I actually end up going towards the meta offerings a bit more, just because they are here.
00:17:40
We're seeing an agreement from the Wall Street Journal talking about some Trump signing and agreement calling for me to pay some element to settle a suit.
00:17:49
So maybe there's some breaking news there.
00:17:51
But I am, yeah, I am using Metro AI just because it's already an app that I'm using when it's what I just want to mention Microsoft is not down as much as it was earlier.
00:17:59
It's now down about three quarters of one percentage point.
00:18:02
Tesla is now down only about nine tens of a percentage point.
00:18:05
I want to mention IBM because we are seeing this one rallying the after market following its earnings.
00:18:11
This one's up about eight percent here.
00:18:12
IBM coming out with results kind of older tech, if you will, but jumping after fiscal year revenue growth, outlook tops estimates.
00:18:19
We mentioned service now, and we are seeing that one move in a big way.
00:18:24
We've seen that move to the downside, some concerns there.
00:18:27
We do have, as you said, that headline crossing from the Wall Street Journal, Trump signs a settlement for meta to pay $25 million to settle a suit.
00:18:35
So perhaps that is why we might be waiting ultimately for meta's results.
00:18:40
Meta in the after market right now is just down about one quarter of one percent.
00:18:45
And I've been also looking at the Nasdaq e-mini, 100 Nasdaq, 100 e-mini futures pretty flat in the after market and S&P 500 e-mini futures, they're down about four tens of a percent.
00:18:55
So just kind of rolling everything together to see kind of market reaction.
00:18:59
Tesla though, higher now by about one percent.
00:19:01
That's what I'm saying.
00:19:02
It's like kind of fascinating to see the bump up right now up about one percent.
00:19:05
And I think what's interesting is remember in video you were talking to him earlier about the hit and video took the chance of climbing now after ours because of Microsoft's long-term capitalist commitment.
00:19:14
So maybe even though we don't get in video numbers until February the 26th, Microsoft's already coming out standing by its capital expenditure commitment.
00:19:22
If we get meta committing to that $65 billion once and again, maybe we do start to see Nvidia clawing back some of the loss that we've seen.
00:19:29
And a good reminder too that we still have a lot of details that we're waiting on about DeepSeek and what exactly they were able to do with what.
00:19:35
So some investigations going on, Microsoft got their ownings out on time and would do an investigation the same time we had the whole room of engineers reportedly.
00:19:44
So I want to bring you back in now.
00:19:45
Could it possibly be that there's a delay because of this settlement and they want to kind of like roll it all together?
00:19:51
The amount looks too small to matter.
00:19:53
It doesn't matter.
00:19:55
We're only $5 million for meta.
00:19:57
It's like.
00:19:58
And that is under the over the Trump suspension to the use of Facebook and its family of apps.
00:20:04
Yeah, I just think about the stories we've been putting out about.
00:20:06
They're paying billion dollar fines in the EU.
00:20:08
So this is like a drop.
00:20:10
This is nothing.
00:20:11
I mean, it's kind of fascinating that to see that we're just kind of waiting.
00:20:15
The Tesla's on time.
00:20:16
I know.
00:20:17
Tesla's on time.
00:20:18
The meta is late.
00:20:19
What a turnaround for.
00:20:20
A Tesla's now up about 2.6 percent in the aftermarket.
00:20:23
So quite a turnaround here.
00:20:24
Wow.
00:20:25
I, yeah, it is notable meta's delay.
00:20:28
And we have got requests out for comment on what might be holding them up.
00:20:33
But this is, I feel there's going to be a lot of redrafting of messaging going on since Monday.
00:20:39
And look, what a very difficult week to have your earnings on when you're trying to understand the competitive threat of deep seek to alarm a model which are both open source.
00:20:47
But at the same time, the way in which it could enhance their products.
00:20:50
Everyone read deep seek as a good thing for LLM, for LLM and open source LLMs.
00:20:55
But maybe there is a question of ultimately, why should you be backing AI homegrown open source versus competing versus China?
00:21:02
I mean, man, deep, do you think that the narrative, like substantially should be different because of what we got on Monday from deep seek?
00:21:08
Like the conversation that we are having around AI in terms of the spend was it's smart for us to kind of all of a sudden shift it felt like the narrative or time will tell whether, again, we, there are so many questions still about the reality of what they did.
00:21:20
Yeah, I mean, look, last six months, you've been talking about scaling laws.
00:21:24
Not stop.
00:21:25
It's like, everything is how, how big are the data centers going to get?
00:21:29
How long will this still, the scaling laws hold?
00:21:31
So from that perspective, I think this does put a question mark around the scaling laws, you know, how big does the LLM need to get to improve its reasoning?
00:21:42
Well, a smaller LLM can give you a similar reasoning as an open AI latest model.
00:21:48
And look, I think with LLMs, because it's so hard to understand everything about how these LLMs are trained, the data sources,
00:21:58
the algorithmic improvements, it's still a black box.
00:22:02
I mean, things are getting better in terms of the transparency.
00:22:06
But in the end, common people cannot interpret what's going on in terms of building these LLMs.
00:22:11
and it's really hard to explain it to someone why an LLM quality is better than the competing LLM.
00:22:19
It's just almost impossible because it's all vectorized Matt at the end of the day.
00:22:24
Do they become commodities, Caroline?
00:22:26
I think that has been the question for a while that will ultimately just move, yeah, toggle between chat, UBT, your meta-offering or anthropic has been up to.
00:22:36
That doesn't mean that you can't still see an awful lot of money having to be invested in these latest and greatest underlying foundational models, whether eventually the money will accrue to the application layers,
00:22:47
to the software layer.
00:22:49
Well, I do think there's a compelling case for Google to make that behind the scenes, if you're using an AI agent and you ask it to do something complicated, Google and actually Microsoft too with Bing has that search engine built in,
00:22:59
that can actually do that stuff and perhaps they make money the old fashioned way.
00:23:05
More of a relatively integrated offering as well.
00:23:07
They have to have the foundational layer to then sell you the software applications as well.
00:23:11
But would you rather be a service now that just has the software margins, rather than having to do the underlying investment?
00:23:17
What's been so interesting has been that shift as well from investment coming ultimately from private sources, what we've seen with the announcement of AI infrastructure money coming to the US is high soft bank or banks or awful.
00:23:29
The chips act like nowhere to be seen for the last few weeks of late.
00:23:32
What happens to Project Stargate?
00:23:35
I mean, the whole timing of it, meta-raising their capex, Project Stargate announcement, and then deep-sea coming out, just think of the sequence of events.
00:23:44
And they're not in sync with each other.
00:23:46
So that's where, you know, if you're trying to follow the big trend, it's not very clear what the big trend is right now in terms of scaling versus, you know, how do you go about data center investments,
00:23:58
medium to long-term and...
00:24:01
Do you buy the inference argument?
00:24:03
Though, that was the argument of Nvidia, as you're still going to need all of our very expensive GPUs for inference.
00:24:09
And we're still, if we're all ubiquitously using generative AI more and more and more, well, that's when the Jevons Paradox comes in that Satya wants to lead to.
00:24:17
More than the Accentus for Cloud.
00:24:19
Yeah, more than that, I think Compute inherently is fungible.
00:24:23
So if I'm using, you know, certain chips for training now, and I don't need to build a, you know, million chip cluster, then I can use some of that Compute for inferencing,
00:24:35
because it's the same GPU.
00:24:36
So from that perspective, I do buy that argument that if AI is more pervasive and accessible, then I'll use more of that chip capacity for inferencing, because everyone realizes there is ROI and,
00:24:49
you know, deploying the generative AI.
00:24:51
I mean, this is the technological cycle at work, right?
00:24:53
I mean, stuff comes out of the gate initially, it catches all of our attention.
00:24:55
We've been obsessed with really kind of a very few companies over the last couple of years.
00:25:00
Here we are more than two years in on this, right?
00:25:02
It makes sense, you guys.
00:25:03
Caroline Mandip, that we're going to start seeing other companies come to the forefront.
00:25:08
There's going to be some competition.
00:25:09
The model might be tweaked a little bit here.
00:25:12
Yeah.
00:25:12
I mean, and look, the commoditization, I do think, you know, the modes around, oh, you've used this LLM and you can never get out of that.
00:25:23
It's so sticky.
00:25:24
I think that is going away, because now you can swap, you know, API from one LLM to another, and that should be doable.
00:25:32
And companies will arbitrage, you know, against, which is the cheapest model provider, because it impacts your margins.
00:25:39
I mean, look at the scale of some of these LLM deployments.
00:25:42
We're talking about billion users.
00:25:44
So billion users are using a generative AI query.
00:25:47
That's all API revenue that these companies are getting.
00:25:50
And if I'm paying the highest price per API, that's going to hurt my margins.
00:25:54
So I'm going to go with the cheapest option that's out there.
00:25:57
I mean, Caroline, when you think about like the conversations you have over and over, what changed so dramatically this week?
00:26:01
Is it just kind of a rethink of these long held beliefs about AI?
00:26:05
And I think for a lot of people, it was felt that people acted before they really knew.
00:26:11
So it's just sell.
00:26:13
I've seen this headline.
00:26:14
I'm worried about the valuations of these companies anyway, and video was trading at 41 times.
00:26:18
We see generally everyone elevated versus the NASDAQ, get out, then ask our questions.
00:26:22
People started to come back to software after they asked those questions.
00:26:25
I thought, oh, maybe this could actually change the game and make things even more margin rich for these types of companies.
00:26:31
But I think the question is still out of ultimately, what access did they have to end in video GPUs?
00:26:36
Well, ultimately, they say that they got them totally legitimately and in video would say the same, how much it is ultimately in Spark, inference as the use.
00:26:46
And what does it mean in terms of ultimate infrastructure investment?
00:26:49
I think people for the short term, most analysts I speak to say, we're sticking by it.
00:26:53
Like, we're not going to see a Capix pulled back anytime soon.
00:26:55
Interesting stuff.
00:26:56
We're going to have to wait also to hear what David Sacks, the AI's are for the Trump administration has to say.
00:27:02
All right.
00:27:03
I think we're going to let you go.
00:27:04
I'm really fearful to do that.
00:27:05
Yes, because I know the minute you get out of your chair and walk out of our studio.
00:27:09
All right.
00:27:10
But Mandy, we're going to let you go.
00:27:13
And hopefully, well, maybe even bring you back a little bit later on.
00:27:16
Mandy's seeing, of course, a key member of our technology team at our Bloomberg Intelligence Unit.
00:27:22
We are awaiting meta results.
00:27:23
Also, a key member of our technology team here at Bloomberg News.
00:27:27
Of course, Caroline Hi.
00:27:28
So lucky for us, she's going to stick around with the co-hosts of Bloomberg technology.
00:27:31
We do have another guest, so that we want to bring into the conversation who really follows the tech sector very closely and invests in it.
00:27:38
Yeah, I want to bring in James Chalkmock.
00:27:39
He's technology analyst at clockwise capital.
00:27:42
Clockwise capital is the core equity and innovation ETF.
00:27:45
The ticker is time.
00:27:46
Biggest holdings are the companies we're talking about.
00:27:49
Meta, Amazon, Microsoft and Apple, along with smaller companies, including Palantir Spotify and Netflix, the ETF up about 35% over the last year, 4% year to date.
00:27:59
So let's go through it.
00:28:00
And bring in James.
00:28:01
He joins us from Miami this afternoon.
00:28:03
James, good to have you as always with us.
00:28:05
I want to start with your impression of Microsoft shares falling after reporting slowing growth in the cloud unit.
00:28:11
What sticks out to you?
00:28:12
Yeah, the big thing there was Microsoft is that the Bogey was a couple of points higher than where they reported on Azure.
00:28:19
The street was looking for around 33, 34% growth to keep the momentum in the stock going.
00:28:25
They posted around 31, 32.
00:28:27
So it was a couple of points light, but the main thing is that the the undercurrent, the trends that you're seeing in productivity and the shift to the cloud and AI offerings continues.
00:28:38
You know, you're still talking about three handle on that growth rate.
00:28:41
So we'll see what they say on the call as far as CapEx is concerned.
00:28:46
We do think that's going to start to come down here as we look into 2025.
00:28:50
So I think it's going to be all right.
00:28:53
We hold a position in it.
00:28:56
We are underweight relative to the index for this very reason, because they'll run up.
00:29:01
But overall, I think everything's okay with Microsoft.
00:29:04
I'm going to jump in because we are getting Amy heard the CFO giving an interview with our own Bloomberg reporters saying that they remain constrained in cloud capacity.
00:29:12
Remember, we got that sort of shock move that OpenAI was going to be building our AI infrastructure with Orangal.
00:29:18
Of course, they signed a deal with Oracle in the summer because Microsoft just can't build them up quickly enough talking about the bookings rising 67% partly due to the OpenAI commitments and commercial bookings were better than they forecast.
00:29:30
They're still trying to talk about how much more percentage point ad AI is giving them to do as you're more broadly.
00:29:36
All right.
00:29:37
So James, it remains constrained in cloud capacity from the Microsoft CEO.
00:29:41
What's your read on that?
00:29:42
Yeah, I mean, they're going to have to keep building.
00:29:46
I'm not suggesting that CapEx needs to stop.
00:29:49
It's more just what does the growth rate of that spent?
00:29:52
You saw massive investments years in 2023, 2024.
00:29:58
And we think that that sprint will be growing at a slower clip.
00:30:02
Do you change?
00:30:02
In turn, we'll help you.
00:30:03
All right.
00:30:05
James, do you change your holdings?
00:30:07
Do you sell Microsoft?
00:30:08
Well, we actually trimmed Microsoft into the quarter today.
00:30:13
We're now at 3% weight.
00:30:15
It's around 8% in the NASDAQ.
00:30:19
So we are underweight there.
00:30:21
But I would say, we still want to hold it.
00:30:25
You still want to be there.
00:30:26
The company is incredibly important.
00:30:28
But at the same time, we think that there's better opportunity elsewhere with companies that offer and stocks that offer better convexity.
00:30:34
Okay.
00:30:34
So where does that money go?
00:30:35
You trimmed your holding in Microsoft where you're spending it.
00:30:37
What are you buying?
00:30:38
So we're looking at a lot of software names right now, you know, with the disruption in the market that was caused by deep seek.
00:30:47
I don't think you can take that lightly.
00:30:48
I think that you have to re-examine all of your assumptions topped out.
00:30:54
From that, we did cut NVIDIA before the market opened on Monday and cut that exposure.
00:31:02
We've been rotating to software names.
00:31:04
We picked up data dog, for example.
00:31:07
We think that race will continue to trend lower.
00:31:11
This year, obviously, two estimates baked in.
00:31:15
But I think that trend will help a company like an upstart.
00:31:20
We continue to Spotify.
00:31:22
We actually gross up our meta position heading into the quarter.
00:31:26
So we'll see how that plays out.
00:31:28
I don't know if the numbers are out yet.
00:31:30
No, we're still awaiting the meta.
00:31:32
I want to ask you something though.
00:31:34
From our BIT, our Anorag Rana writing about Microsoft and says Microsoft's close relationship with OpenAI makes it better positioned than most of its software rivals to capitalize on increased generative AI spending.
00:31:46
You agree with that.
00:31:48
I mean, they know a little bit about software.
00:31:51
Certainly, Microsoft.
00:31:52
Yeah.
00:31:53
I'm not sure about the health of that relationship, to be honest with you.
00:31:56
Well, I think that deep seek certainly changes the game a little bit.
00:32:05
I think that they'll increasingly have less reliance on OpenAI.
00:32:10
As their costs come down, they'll continue to be able to drive the inference and all the AI tools for their customers.
00:32:20
So I'm not sure exactly how healthy that relationship is or how it will play out.
00:32:26
But at the end of the day, Microsoft continues to be well positioned.
00:32:32
I would say following deep seek, we came away incrementally positive on meta, on Microsoft, and Amazon.
00:32:42
So those are the three that we like following that news.
00:32:45
And then we became incrementally negative on the video.
00:32:48
All right, hang on for a second.
00:32:49
We'll talk with James Chalkmock, partner and tech analyst over at Clockwise Capital, Caroline Hyde, co-host of Bloomberg Technology, also in studio with us.
00:32:56
And just walking in our own and Anorag Rana, he is with our technology team with our Bloomberg Intelligence Unit.
00:33:02
He's a senior industry analyst writing, I am reading from the research he just put out on Microsoft.
00:33:07
Microsoft now, Anorag, just down about eight tons of a percent.
00:33:11
So it's definitely come off the lows that we saw earlier in the aftermarket so far.
00:33:15
Tell us what we need to know.
00:33:17
Yeah, it's all the guidance on the conference call.
00:33:19
We want to hear that that Azure growth is going to pick up over the next 12 months.
00:33:24
And I think that's really the biggest thing that we see.
00:33:27
Now, that's assuming all the investments they have made in the data center side is speaking up because I just saw the news go by where the CFO is saying that they're still supply constraint.
00:33:38
Now, the supply constraint doesn't mean it had an impact on the current quarter growth, which is, you know, which was below the 31-32 that they gave.
00:33:46
Or will it impact on the next quarter?
00:33:48
I think that's the single biggest question right now.
00:33:50
So is it fair to say this is totally supply side, because we do have metafine.
00:33:55
Please.
00:33:56
And the fourth quarter revenue is beating expectations.
00:33:59
48.39 billion is coming for fourth quarter.
00:34:02
It was expected to be 46.98 billion and they're pushing us forward to a guide of the first quarter to be 39.5 to 41.8 billion.
00:34:10
That's slightly shy of the midpoint where the expectations were for 41.6 billion.
00:34:15
So forecast a little bit like fourth quarter it beats on family about revenue doing well.
00:34:20
They're seeing reality labs operating loss.
00:34:22
I'm almost 5 billion, but the estimate was even more than that.
00:34:26
So I think you are seeing perhaps a slightly shy forecast, but they're seeing first quarter revenue of 39.5 to 41.8 billion and the market wanted 41.7 billion.
00:34:35
Stock bouncing around.
00:34:36
It was down 5%.
00:34:37
It's now down about 3.8%.
00:34:38
Now it's down about 5%.
00:34:39
It is bouncing around.
00:34:41
Also some commentary in terms of the CAPEX.
00:34:43
We anticipate our full year 2025 CAPEX spenders will be in the range of 60 to 65 billion dollars.
00:34:50
So a little bit more about that, which we just got news last week.
00:34:54
The company also says we're not providing a full year 2025 revenue outlook.
00:34:57
Is that a surprise to you, Caroline?
00:34:59
Yeah, usually they are able to give clarity.
00:35:01
And it's interesting that they're giving so much clarity on their capital expenditure, perhaps not clarity on forward revenue at the moment.
00:35:08
Is that because they think it's just going to go through the roof?
00:35:11
Is that because they do feel that they can't give us as much forward looking guidance at the moment, but whether it's an FX perspective, cost and expenses they're still dictating, but I'm just scrolling through the CFO and they expect first quarter 25 total revenue to be in that range,
00:35:27
which reflects 8 to 15% a year over year growth, or 11 to 18% on a constant currency basis.
00:35:33
But we are not providing full year 2025 revenue outlook.
00:35:36
We expect the investments we are making in our core business this year will give us an opportunity to continue delivering strong revenue growth through 2025.
00:35:44
Also saying the regulatory landscape in the European Union, the United States could impact business.
00:35:49
We do see the stock now just down about 1%.
00:35:51
Again, the key that everybody seems to be focusing on is that first quarter sales forecast trailing at the midpoint.
00:35:58
Also saying fiscal year depreciation expense about $2.9 billion less than before.
00:36:03
Again, bouncing around big time in the aftermath.
00:36:06
Yeah, I want to draw your attention to what's going on with reality labs.
00:36:09
The company saying that revenue coming in at $1.08 billion, shy of estimates of $1.11 billion.
00:36:15
I don't want to say there was a whisper number ahead of this Caroline, but folks were bullish on reality labs going into this.
00:36:21
There was that report from inside or that came out earlier this week that talked about growth in that unit.
00:36:27
Again, a very small portion, but a very important part of the company.
00:36:31
How are you looking into that number?
00:36:33
Yeah, I do think that overall the losses are big.
00:36:38
So you think the losses should be more of a focus than the revenue?
00:36:40
Well, I think revenue 1.08 is slightly less than anticipated, but at least their operating loss is slightly less than expected.
00:36:48
But I think there's going to be a lot of digestion of restructuring that's currently going on in that business and the fact that they're shifting over to the overall unit COO and they're putting up some operational changes at play.
00:36:58
But how much is Mark Zuckerberg going to speak to his commitment to this part of the business?
00:37:03
How much he wants to invest in reality labs?
00:37:05
How much of that $65 billion up to CapEx in AI is ultimately going towards those sorts of products?
00:37:11
All right, we're going to keep watching and reporting on meta.
00:37:13
As we mentioned, stock is bopping around here in the aftermarket.
00:37:17
Really a focus on the outlook, but it's right now we're looking at just a slight move to the upside of about one quarter of one percent.
00:37:24
I want to go back to Microsoft for just a moment, because we have Anorag Rana in here, another big one after the close, which has been bouncing around to.
00:37:32
It's now only down about 8 tens of 1 percent.
00:37:35
The Bloomberg audience thinking about these earnings, the crazy week that's been in the tech community around AI.
00:37:41
What should be top of mind?
00:37:42
What's top of mind for you?
00:37:44
I think the biggest question is they have a commercial booking number that just was absolutely spectacular and it was driven by Azure commitments and the opening I work that they are getting.
00:37:56
But the question is, can you fulfill that demand or you're going to go to third party providers to take care of it?
00:38:01
That's really what it is.
00:38:02
Frankly, at this point, more color in the big commercial booking number would be helpful.
00:38:09
Also about what does Microsoft CEO think about all the things that are happening with DeepSeek?
00:38:15
Because he did tweet something very interesting that if the Costco goes down, the adoption rate improves, which is good.
00:38:22
But at the same time, he has a very strong partnership with OpenAI and others.
00:38:28
There's a lot I think we will learn about the tech landscape in general from him, not just about Microsoft's cloud numbers.
00:38:36
Now, frankly speaking, let's say for the sake of argument that they do misguidance for 3Q.
00:38:41
I think people will still give them a pass over the next several days, may not give them a pass tomorrow, because the booking number is so strong.
00:38:48
Another headline on Microsoft to add jobs in infrastructure, Gen AI and reality labs.
00:38:52
That's meta, right?
00:38:53
Oh, did I say?
00:38:54
Oh, Microsoft.
00:38:56
They must have made a mistake.
00:38:58
Okay, so there is a headline.
00:39:00
We are going to keep covering this is coming fast and furious.
00:39:05
I do want to do a big thank you to honor Arana for joining us.
00:39:09
He is going to go off and listen to more of the call and as well as have more notes out for Bloomberg Intelligence.
00:39:15
I'm putting pressure on you.
00:39:16
Unfortunately, I'm sorry.
00:39:17
Thank you for stopping by.
00:39:18
Usually in Chicago, joining us here.
00:39:20
I do want to get back to James Chalkmock.
00:39:22
He's technology analyst, which makes sense because of reality.
00:39:25
Technology analyst at clockwise capital.
00:39:27
We gave you a little break James to jump in and look at those meta numbers as they were breaking just past 435.
00:39:34
What sticks out to you?
00:39:35
Yeah, I mean, the big thing is the first quarter guide coming in a touch light, but the fourth quarter itself was solid pretty much across the board.
00:39:45
So we'll have to decipher what exactly is going on in the first quarter guide on the call, but as it stands, if you look at 4Q and a vacuum,
00:39:56
you know, it seems like it's all systems go, but just got to drill down a little bit more.
00:40:02
All right, we want to get out.
00:40:03
That's why I think this stock is bouncing around so much down five to up three.
00:40:06
Everything's bouncing around.
00:40:07
meta is now down about two tens of a percent.
00:40:10
Man deep saying who follows meta for us here at our Bloomberg intelligence.
00:40:13
We're giving them a workout today.
00:40:14
Get your steps in buddy.
00:40:15
Get your steps in.
00:40:17
What's your reaction to the results?
00:40:19
Well, so one is obviously the guide for 1Q is lower than consensus.
00:40:24
The big number that sticks out to me is the total expense guide of 114 to 119 billion.
00:40:31
That is almost, you know, 8 billion higher than the consensus.
00:40:36
So what that tells you is the gross margins are going down and plus the depreciation costs, the costs that they are spending on data centers,
00:40:47
they have to depreciate those servers, right?
00:40:49
That's going to eat into the margins.
00:40:51
So we are talking about at least a four to five percent margin impact for 2025 just from the data center cost, the depreciation costs and so clearly there is a gross margin degradation happening here and the revenue growth is decelerating,
00:41:09
which is what we are seeing in 1Q.
00:41:12
The capex guide is what they gave, you know, on Fridays and no change in that.
00:41:16
But clearly the data center expenses are eating into the margins.
00:41:20
Which is something Gina Martin Adams has said, watch with all of the companies reporting, but the tech guys as well in terms of margins and seeing some pressure on margins.
00:41:28
This seems to be the case with Microsoft now.
00:41:31
So that's the surprise here that Microsoft didn't call out, you know, that kind of a margin impact from depreciation expenses in their quarter, at least from the print that I saw.
00:41:41
But clearly it is having an impact on that.
00:41:45
When you dig into what the CFO has been saying as well and ultimately she's talking about how the single largest driver of their expense growth that you speak to is going to be infrastructure costs.
00:41:56
They say higher operating expenses depreciation as well of those assets of those data centers more broadly of the chips you have to keep drying again.
00:42:03
But then they say employee commensation with the second largest factor as we add technical talent.
00:42:08
It's a good time to be that technical talent, right?
00:42:11
It is.
00:42:11
You can go and charge a pretty penny if you've got a nice computer.
00:42:14
So what is that?
00:42:14
How do you read into that?
00:42:15
Does that mean that the folks who are the engineers doing the AI stuff?
00:42:21
Yeah, they say how full demand, who is that?
00:42:24
Areas of infrastructure monetization.
00:42:26
So interesting, they obviously monetizing their overall business, reality labs, generative artificial intelligence as well as regulation and compliance.
00:42:34
Okay.
00:42:34
They are the HR go gets for this particular year.
00:42:38
They are actually overall saying that headcount is has ticked higher 10% year over year despite this efficiency mode they've been in.
00:42:45
There's also this note, the majority of 2025 cap X to be directed to core business.
00:42:50
What's the definition of meta's core business?
00:42:53
Is it the family of apps, the Instagrams and the WhatsApp, and to say, okay, we're going to invest in that.
00:42:59
So don't worry investors.
00:43:01
We're spending money on the company on the parts of our business that make money.
00:43:04
Is that the message there?
00:43:05
I mean, Mandi is your man to ask what's the core business, but I'd say reality labs, isn't it?
00:43:11
Even though their company name is meta.
00:43:13
Yeah, look, I think overall they will be prudent when it comes to headcount growth.
00:43:18
They may have to pay more for the AI talent.
00:43:20
That's what they're alluding to, but at the same time, they are continuing to lose money on reality labs.
00:43:27
I would have expected, you know, that would be your offset.
00:43:30
If you see margin degradation, you offset it in terms of reality labs losses.
00:43:35
We're not seeing that.
00:43:36
So James Chalkmock, this is still a company that, you know, the message to investors is this is a company that makes money because we're opening Instagram and we're using Reels and we're using the family of apps,
00:43:50
the core business, right?
00:43:52
That's their message.
00:43:53
They don't want people to get worried that this is another, you know, meta, foray into the metaverse.
00:43:59
No, I mean, I think the metaverse continues to be a long-term vision for the company, but, you know, in this kind of market, you can't be looking at things,
00:44:09
you know, on moon shots, you have to be able to just focus on the quarter and focus on the year, and most of some cases, you know, even just focus on the week.
00:44:20
So, you know, the duration that you evaluate these companies is becoming a lot shorter and shorter, so as a volatility increases, given the increase in uncertainty.
00:44:31
So that being said, you know, for a company like meta, yeah, that's exactly how I describe it and think about it, and those moon shots, you know, as a TBD,
00:44:41
but not part of the calculus, as it stands to.
00:44:44
Hey, for those who care, Nvidia is up about 2.1% here in the aftermarket, so we're seeing some movement there.
00:44:50
Meta, not giving a full-year 2025 revenue outlook, man, deep, is that significant?
00:44:58
No, I think based on the one-q guide, you can see currency is a headwind, in fact, it's a 3% headwind, so quite significant, and the other thing I can point out in the print is 6% impressions growth.
00:45:10
That's the weakest they have had.
00:45:13
So 14% pricing growth, that's a result of AI, so it's paying off in ad pricing, but 6% impressions growth.
00:45:20
There are two reasons why it's decelerating.
00:45:23
One is, they're showing you less ads, and to make a better experience, other is, people are spending less time.
00:45:30
I mean, they have 3 billion users across their family of apps, but incrementally, that engagement growth is slowing down, because they're not showing those ads on the other side.
00:45:41
Elections over, no, I'm just kidding.
00:45:43
It could very well be a slew of factors, but engagement growth is how impressions grow, and so 6% is the weakest they've had for a while.
00:45:52
Well, Caroline, our own Kurt Wagner pointing out that Metta's average price per ad increased by 14% year over year.
00:45:59
It increased 10% year over year for the full year of 2024.
00:46:02
Is it because the AI, that the AI investments they've made are making those ads so much more targeted, better targeted?
00:46:11
Or whether people just know that if you're going to be committing any capital anywhere in terms of marketing, it's a very good bet to be doing it on the family of apps that Metta offers.
00:46:20
It's interesting.
00:46:21
We've had MicMac on the show, which is a company that tracks digital spend in particular and efficacy, and she came on and said, actually, in the beginning.
00:46:29
Rachel came on and said the beginning of this year, we've seen a big dive in the amount of money and marketing being committed to the likes of Metta's family of apps.
00:46:39
Was her take, and the data which she was seeing, and her theory was on the back of some of the politicisation of Mark Zuckerberg of late, and indeed, therefore, without the assessment of some of the content and some of the fact checkers that are there anymore,
00:46:55
people had started to shy away from committing their brands onto that company.
00:46:58
Now that is MicMac's perspective, and we'll have to see whether it's vindicated through what is said on this particular part of the business.
00:47:03
But as you say, if there's a slight pulling back in impressions, but the average price is managing to go up, they're managing to remain incredibly important to the brands that do remain committed and charge more for it.
00:47:13
Going back to Metta and the business, and I think it's interesting coming off of a Fed meeting today where certainly the Fed chair was asked about policies coming out of the administration, regulatory or others,
00:47:24
a little warning from our live blog when it comes to Metta, Metta's CFO, in the release saying, in addition, we continue to monitor an active regulatory landscape, including legal and regulatory headwinds in the EU and the US that could significantly impact our business and our financial results.
00:47:40
James Chalkmak, come on back in.
00:47:41
I mean, let's not forget.
00:47:43
There are things that are overhanging some of these big tech companies like a Metta.
00:47:47
Yes, that's true, but that's the case always.
00:47:51
All of these companies constantly face regulatory stories, scrutiny of both, here and abroad.
00:47:57
But I think with the change in administration, some of that may alleviate here.
00:48:01
At least the states side, we'll see what happens overseas.
00:48:05
But overall, I mean, that's an overhanging, I think you constantly have to grapple with.
00:48:10
So, you know, it's something that we're kind of in need to do at this point.
00:48:15
Caroline is the regulatory landscape in the US.
00:48:18
Less worry some for Metta platforms now than it was a year ago, given Mark Zuckerberg's relationship with Donald Trump, his visit to Mar-a-Lago, his trip to Washington DC,
00:48:28
what he said on the Joe Rogue in five times, great point, day and away on the board.
00:48:31
I mean, they've just settled $25 million for kicking Trump off their family of apps previously.
00:48:37
So maybe we'll see some culmination of what that previously no love lost will currently end up being.
00:48:44
I think people had felt actually the re-alignment of Zuckerberg, whether that's from a fiduciary duty perspective or whether that's just actually where he feels, in terms of personal persuasion,
00:48:55
have ultimately will bear fruit when it comes to doing business.
00:48:58
Look, we've seen from Oracle, from OpenAI, from Softbank, from you name it, Dubai, wealth, magnates and real estate billionaires.
00:49:07
How do you do business in America now?
00:49:10
Well, you go visit Mar-a-Lago.
00:49:12
You pay some money to it and ultimately the inauguration and you see what deals can be done.
00:49:17
And I think many would say that what Zuckerberg's been doing is in line with that.
00:49:21
I think the regulatory landscape from an M&A perspective becomes different with a new FTC, a new ultimate overseeing of what happens with the SEC.
00:49:30
But I'm sure there's still some, he's got some way to go to make up for some of the lines that were said last year, or maybe he'll end up in jail because of Trump's irritation with past misdemeanors.
00:49:42
I'm only going to mention some of them because there's a ton of earnings out here after the close, but just to rehash, Microsoft down about 1.6 percent in the aftermarket, certainly off its lows of the earlier trade right after earnings.
00:49:53
Tesla now up about 3.4 percent.
00:49:55
It had been down about 4-5 percent here.
00:49:59
IBM has rallied about 8 percent after its earnings.
00:50:02
We've been talking about meta.
00:50:03
It is up about 1 percent in Nvidia, which doesn't report until late February, is up almost 2 percent in today's trade here in the aftermarket.
00:50:11
James Chalkmock, it's been quite a week.
00:50:14
One of the things when I think about big tech in particular is the environment for rates, and we had a Fed decision, right?
00:50:22
And it seems like Fed rate moves to the downside.
00:50:25
Cuts seem to be putting off more and more this year here in 2025.
00:50:30
How are you thinking about valuations and the rate environment and what that potentially means for some of these names?
00:50:36
Or is that not as important versus maybe hearing about their AI spend or other things?
00:50:40
A valuation is certainly a factor when it comes to rates.
00:50:46
Now, I'd say a big picture when it comes to rates.
00:50:49
We do think we perhaps have a slightly more dovish stance than some of the market.
00:50:55
Well, we do agree with Powell that the rates are likely trending or zero.
00:51:01
Not zero, it's toward 2 percent inflation rates.
00:51:04
So we think that the market is currently expecting two rate cuts this year, June and December.
00:51:11
That's pretty probable scenario.
00:51:14
So that's good.
00:51:15
That being said, the stocks that we're primarily focused on and we leaning into are the ones that have not only upside to estimates,
00:51:25
but also upside to their valuation multiple.
00:51:29
Now, across the big tech space, there's not that many of those.
00:51:33
I'd say with the exception of meta, really, into a certain extent Google or alphabet.
00:51:39
The other ones are pretty much in apples up there, Microsoft's up there, Tesla's certainly not cheap.
00:51:47
It's something that we have to be mindful of.
00:51:51
We're there because you have to benchmark yourself to a certain extent on the top 10 names in the NASDAQ, but that's certainly not our oversized.
00:51:59
And we've only got about a minute left here.
00:52:02
Just TikTok matter to the revenue guide for the future of meta.
00:52:05
And just quickly.
00:52:06
Yeah, I mean, I think TikTok matters to all of these companies.
00:52:10
We'll see what happens, but it's certainly something to be mindful of cognizant and follow extremely closely.
00:52:18
If it does come in to domestic hands, that could change the calculus to a certain extent.
00:52:24
So I think meta will be fine, regardless.
00:52:26
TikTok is obviously already here.
00:52:28
But what does that mean for the valuations and whatnot?
00:52:33
So my eye in full of it, not worried about it right now, but definitely keeping an eye.
00:52:39
All right, well, we are keeping an eye on a lot of stuff and we ain't done yet because it's still got we've got more stuff to come this week.
00:52:45
Our thanks to our external guests and also, of course, our incredible in-house team.
00:52:50
James Chalkmock, thank you first partner and technology analyst at Clockwise Capital there in Miami.
00:52:55
Caroline Hyde, you rock.
00:52:56
Covering so much about the tech community and be sure to check her out on Bloomberg Technology.
00:53:03
I'm Bloomberg TV at 11 a.m.
00:53:04
Wall Street Times.
00:53:05
She is one of the co-hosts of Bloomberg Technology.
00:53:07
Yeah.
00:53:09
I just a big thank you to our Bloomberg intelligence team, too.
00:53:11
Both here in the studio today.
00:53:13
Mandeep Singh covering all things meta and more and Anurag Rana on Microsoft.
00:53:17
Check out their notes.
00:53:18
They're out now on the Bloomberg terminal and be sure to check out all of the right throughs on the stories and on the names that have been reporting here because they are moving in the aftermarket.
00:53:27
That's going to do it for Tim and me.
00:53:28
Have a good and safe evening.
00:53:29
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