May 1, 2025 • 9 mins
Gene Munster, Deepwater Asset Management co-founder and managing partner, discusses his expectations for both sets of earnings and offers his outlook for the two tech giants. Gene speaks with Tom Keene and Paul Sweeney on Bloomberg Radio.
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Episode Transcript
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Speaker 1 (00:02):
Bloomberg Audio Studios, podcasts, radio news.
Speaker 2 (00:06):
Gene Monster. There seems to be a reaffirmation of free
cash flow and profit belief among MAG seven this morning
over at Looke Capital. You know them well, Genio invented it.
Young Kim goes out to a five point fifty price
target on Microsoft. Is it real now? Where there's a
new persistency of belief in MAG seven free cash flow.
Speaker 3 (00:30):
That's a good way to put it, And maybe another
way to put it is that we knew that these
businesses had great free cash flow, typically generate between eighty
and one hundred billion per year. But what we saw
last night from Microsoft to Meta is that their businesses
are resilient. Resilience in the face of these tariffs. Is
that Meta raised their revenue by three percent. That was
(00:53):
in the midst of this is for the June quarter,
a headwind that's coming from China e commerce. They probably
would have raised it by three three or or four
or five percent if not for that headwind. And so
to that resiliency of cash flow, Yes, as part of
the story, there was this period of doubt that started
with deep Seek at the end of January that I
think there's this kind of realignment now we're seeing today
(01:16):
with investors understanding that these companies are just this incredible
cash machine and most likely that benefit is going to
continue in the future.
Speaker 4 (01:27):
Gene, you know, before I guess the last three or
four months, when we've all just been focused on tariffs,
we actually were talking about growth stories such as the cloud,
such as AI. Given what you saw from Microsoft, given
what you saw from Meta talk to us about where
tech spend is today, is that still a growth story
that investors should be focused on.
Speaker 2 (01:50):
Definitely.
Speaker 3 (01:50):
There are two kind of forces in play last night.
One was in terms of what the tech spend is,
and what we heard from Microsoft was that their numbers
were actually down sequentially on that CAPEX number. Some of
that this is for the March quarter. Someone was related
to timing to some of these data centers, but they
did also say that they expect next year that apecks
(02:11):
to grow kind of in line with revenue. And then
of course Meta cranked it up by nine percent. That
was a big That was a big surprise. But there's
a story here kind of below the fold that I
think is really important, especially when it comes to Meta,
and last week we had our AI some we had
a representative from open Ai as one of the fireside
(02:32):
chats and asked the question about, like, what is the
substance behind AI from a return on investment perspective, and
his answer was that they have seen it in the
coding side and also customers service. And that's, from my perspective,
a pretty disappointing answer relative to all this anticipation. But
when I saw the Meta results last night, saw this
increase in revenue and also what's happening with their daily
(02:54):
active users. It grew six percent year every year. This
is three point four billion people, sixty plus percent of
the world's Internet population on a daily basis. Part of
the reason why this is happening is AI is actually
impacting their business. In other words, I think Meta is
the best example of how AI can have a real
impact on an investment at scale.
Speaker 2 (03:17):
Gene Monster with US Leland Miller to come on China,
but right now gene Monster with deep Water thrilled to
have him on this morning. Migrate in the Cloud, Hey,
you U stay in the cloud? Gen Monster talk about
Amazon today and after seeing Microsoft, you're not counting cardboard
boxes at Amazon, You're looking at their cloud.
Speaker 3 (03:36):
Business right Definitely I mean, we've seen good cloud numbers
from Google and as you're last night, and it better
be good at this point for Amazon, and it probably
will be good. And part of the reason why it
probably will be good is we're seeing this surge in
demand from Generator AI. It's increasing usage at a bigger rate.
(03:56):
So I think that AWS number is going to be
a great number tonight for Amazon.
Speaker 2 (04:00):
Gene Munsters spending time by mister Bezos Yatchett. Yesterday, Joe
Matthew Balance of Power in conversation with the Senator from
the Commonwealth of Massachusetts. Here is Elizabeth Laurn with mister Matthew.
Speaker 1 (04:15):
What Donald Trump is saying is if the American people
can see clearly what his tariffs are costing them, that
creates a real problem for Donald Trump and for the
Republicans in Congress. So his solution is not to do
something more sensible on tariffs. His solution is to try
(04:39):
to end access to the information and to persuade Jeff
Bezos that he needs to erase that information. And yes,
I want to hear about that conversation. In fact, I
want to hear about all of the conversations.
Speaker 2 (04:53):
Senator Warren, the Commonwealth of Massachusetts. Gen Monster, I know
you're going up in the rocket the next time the
Bezos term rocket. Let me just cut to the chase,
Geem Monster, is Jeffrey Bezos? Is he running Amazon?
Speaker 3 (05:06):
Still? Simple answer is yes, as as chairman and as founder.
I think he has an outside has influenced much more
than Jasse and so I think the answer is that
the buck does stop with him, Jamie.
Speaker 2 (05:23):
That's short answer there. He really doesn't want to talk
about it, that's right.
Speaker 4 (05:26):
Yeah, Hey, g we're going to hear from our good
friends in Cooper Tino and their results. What do you expect?
What do you need to hear from Apple and Tim Cook?
As a again, try to navigate what is a suddenly
a very you know, I guess uncertain global economic outlook.
Speaker 3 (05:46):
So the numbers, I've been watching this company for twenty
plus years, and these numbers are less important tonight as
far as the actual reported numbers. It's more about the
structure that they're going to lay for how they're going
to navigate what's happening with tariffs and production, and how
they're building out their AI and so very unique setup
where if the iPhone number is good, that would be
(06:07):
a positive impact on the stock if it's bad, a
slight negative, But for the most part, investors are looking
much further down the road, and this is a pivotal
moment around the company. I would say this related to
what's going on on the globalization side, how that impacts Apple,
and separately in terms of what's going on tariffs. Those
are forces that are hard for Apple to control. There
(06:28):
is one piece that and they will likely sort themselves out.
My sense is this year. But there's one piece that
I think investors have been penalizing Apple for that will
come up. This will be an a topic tonight that
I think there is generally a misunderstanding from investors, and
that piece is Apple behind an AI. The answers yes,
and how much are they being damaged by that? And
(06:50):
I think that the answer is currently almost not at all.
And part of the reason is that they really have
three years to sort this out. When it comes to
Apple Intelligence, when I say sort of out, I mean
provide the features that give it punch and so their
customers aren't going anywhere. And so when I think, Paul,
when I think about these results tonight, I'm more cute
into how they're going to fix Apple intelligence over the
(07:13):
next two three years versus the next two or three quarters.
Speaker 2 (07:16):
Okay, Gene, what I want to do here is I
got a seguity and the Leland Miller on the Beige
Book and all the brilliance of China in that. So
we're going to do this with Gene Monster right now.
Gene Monster. I don't think this is in the zeitgeist.
Tim Cook, based on my amateur take, is the number
one supply chain expert in American business out of Douke
(07:38):
All that this is the guy is more knowledgeable about
Pacific rim get the stuff from there to here? Is
there a lack of confidence in Tim Cook's ability to
stick to survive these supply chain disruptions.
Speaker 3 (07:57):
There is one hundred percent confidence in Tim Cook's ability
to make the best out of an extremely difficult situation.
But even his magical ability to increase gross margins by
using better manufacturing over the last decade, even that power
is small relative to the forces of what these tariffs
(08:18):
could mean. And I'll just kind of put some briefly
into context. Is my sense is that these tariffs, when
it comes to Apple, there's still mixed messages coming out
of the White House in terms of how Apple's going
to be impacted by that, My sense is that they're
probably going to shake out somewhere between a ten and
twenty percent tariff. And if that in fact ends up
being the case, even with Cook's masterful use of the
(08:41):
supply chain, They're probably going to see some diminishing of
gross margins and it probably goes from call it forty
percent forty one percent. They're probably going to lose a
couple percent on that, call it thirty nine, and so
that is a step back. But I just want to
put some context when we hear about all this, the
versus the Tim Cook, the levers that he can pull,
(09:02):
there are some limitations to it, and that's why I
think that I just like applaud dan Ives and him
standing up and saying like, we got to get this
thing figured out. And what figured it out means is
just some clarity. And ultimately I think that that clarity
is going to be twenty percent, and it's going to
be a little bit of an impact. Again, doesn't change
the long term trajectory of the business, but it's something
(09:23):
that investors are focused
Speaker 2 (09:25):
She monster, thank you so much, Managing partner Seatporter Asset management,
Bloomberg Audio Studios, podcasts, radio news.
Speaker 2 (00:06):
Gene Monster. There seems to be a reaffirmation of free
cash flow and profit belief among MAG seven this morning
over at Looke Capital. You know them well, Genio invented it.
Young Kim goes out to a five point fifty price
target on Microsoft. Is it real now? Where there's a
new persistency of belief in MAG seven free cash flow.
Speaker 3 (00:30):
That's a good way to put it, And maybe another
way to put it is that we knew that these
businesses had great free cash flow, typically generate between eighty
and one hundred billion per year. But what we saw
last night from Microsoft to Meta is that their businesses
are resilient. Resilience in the face of these tariffs. Is
that Meta raised their revenue by three percent. That was
(00:53):
in the midst of this is for the June quarter,
a headwind that's coming from China e commerce. They probably
would have raised it by three three or or four
or five percent if not for that headwind. And so
to that resiliency of cash flow, Yes, as part of
the story, there was this period of doubt that started
with deep Seek at the end of January that I
think there's this kind of realignment now we're seeing today
(01:16):
with investors understanding that these companies are just this incredible
cash machine and most likely that benefit is going to
continue in the future.
Speaker 4 (01:27):
Gene, you know, before I guess the last three or
four months, when we've all just been focused on tariffs,
we actually were talking about growth stories such as the cloud,
such as AI. Given what you saw from Microsoft, given
what you saw from Meta talk to us about where
tech spend is today, is that still a growth story
that investors should be focused on.
Speaker 2 (01:50):
Definitely.
Speaker 3 (01:50):
There are two kind of forces in play last night.
One was in terms of what the tech spend is,
and what we heard from Microsoft was that their numbers
were actually down sequentially on that CAPEX number. Some of
that this is for the March quarter. Someone was related
to timing to some of these data centers, but they
did also say that they expect next year that apecks
(02:11):
to grow kind of in line with revenue. And then
of course Meta cranked it up by nine percent. That
was a big That was a big surprise. But there's
a story here kind of below the fold that I
think is really important, especially when it comes to Meta,
and last week we had our AI some we had
a representative from open Ai as one of the fireside
(02:32):
chats and asked the question about, like, what is the
substance behind AI from a return on investment perspective, and
his answer was that they have seen it in the
coding side and also customers service. And that's, from my perspective,
a pretty disappointing answer relative to all this anticipation. But
when I saw the Meta results last night, saw this
increase in revenue and also what's happening with their daily
(02:54):
active users. It grew six percent year every year. This
is three point four billion people, sixty plus percent of
the world's Internet population on a daily basis. Part of
the reason why this is happening is AI is actually
impacting their business. In other words, I think Meta is
the best example of how AI can have a real
impact on an investment at scale.
Speaker 2 (03:17):
Gene Monster with US Leland Miller to come on China,
but right now gene Monster with deep Water thrilled to
have him on this morning. Migrate in the Cloud, Hey,
you U stay in the cloud? Gen Monster talk about
Amazon today and after seeing Microsoft, you're not counting cardboard
boxes at Amazon, You're looking at their cloud.
Speaker 3 (03:36):
Business right Definitely I mean, we've seen good cloud numbers
from Google and as you're last night, and it better
be good at this point for Amazon, and it probably
will be good. And part of the reason why it
probably will be good is we're seeing this surge in
demand from Generator AI. It's increasing usage at a bigger rate.
(03:56):
So I think that AWS number is going to be
a great number tonight for Amazon.
Speaker 2 (04:00):
Gene Munsters spending time by mister Bezos Yatchett. Yesterday, Joe
Matthew Balance of Power in conversation with the Senator from
the Commonwealth of Massachusetts. Here is Elizabeth Laurn with mister Matthew.
Speaker 1 (04:15):
What Donald Trump is saying is if the American people
can see clearly what his tariffs are costing them, that
creates a real problem for Donald Trump and for the
Republicans in Congress. So his solution is not to do
something more sensible on tariffs. His solution is to try
(04:39):
to end access to the information and to persuade Jeff
Bezos that he needs to erase that information. And yes,
I want to hear about that conversation. In fact, I
want to hear about all of the conversations.
Speaker 2 (04:53):
Senator Warren, the Commonwealth of Massachusetts. Gen Monster, I know
you're going up in the rocket the next time the
Bezos term rocket. Let me just cut to the chase,
Geem Monster, is Jeffrey Bezos? Is he running Amazon?
Speaker 3 (05:06):
Still? Simple answer is yes, as as chairman and as founder.
I think he has an outside has influenced much more
than Jasse and so I think the answer is that
the buck does stop with him, Jamie.
Speaker 2 (05:23):
That's short answer there. He really doesn't want to talk
about it, that's right.
Speaker 4 (05:26):
Yeah, Hey, g we're going to hear from our good
friends in Cooper Tino and their results. What do you expect?
What do you need to hear from Apple and Tim Cook?
As a again, try to navigate what is a suddenly
a very you know, I guess uncertain global economic outlook.
Speaker 3 (05:46):
So the numbers, I've been watching this company for twenty
plus years, and these numbers are less important tonight as
far as the actual reported numbers. It's more about the
structure that they're going to lay for how they're going
to navigate what's happening with tariffs and production, and how
they're building out their AI and so very unique setup
where if the iPhone number is good, that would be
(06:07):
a positive impact on the stock if it's bad, a
slight negative, But for the most part, investors are looking
much further down the road, and this is a pivotal
moment around the company. I would say this related to
what's going on on the globalization side, how that impacts Apple,
and separately in terms of what's going on tariffs. Those
are forces that are hard for Apple to control. There
(06:28):
is one piece that and they will likely sort themselves out.
My sense is this year. But there's one piece that
I think investors have been penalizing Apple for that will
come up. This will be an a topic tonight that
I think there is generally a misunderstanding from investors, and
that piece is Apple behind an AI. The answers yes,
and how much are they being damaged by that? And
(06:50):
I think that the answer is currently almost not at all.
And part of the reason is that they really have
three years to sort this out. When it comes to
Apple Intelligence, when I say sort of out, I mean
provide the features that give it punch and so their
customers aren't going anywhere. And so when I think, Paul,
when I think about these results tonight, I'm more cute
into how they're going to fix Apple intelligence over the
(07:13):
next two three years versus the next two or three quarters.
Speaker 2 (07:16):
Okay, Gene, what I want to do here is I
got a seguity and the Leland Miller on the Beige
Book and all the brilliance of China in that. So
we're going to do this with Gene Monster right now.
Gene Monster. I don't think this is in the zeitgeist.
Tim Cook, based on my amateur take, is the number
one supply chain expert in American business out of Douke
(07:38):
All that this is the guy is more knowledgeable about
Pacific rim get the stuff from there to here? Is
there a lack of confidence in Tim Cook's ability to
stick to survive these supply chain disruptions.
Speaker 3 (07:57):
There is one hundred percent confidence in Tim Cook's ability
to make the best out of an extremely difficult situation.
But even his magical ability to increase gross margins by
using better manufacturing over the last decade, even that power
is small relative to the forces of what these tariffs
(08:18):
could mean. And I'll just kind of put some briefly
into context. Is my sense is that these tariffs, when
it comes to Apple, there's still mixed messages coming out
of the White House in terms of how Apple's going
to be impacted by that, My sense is that they're
probably going to shake out somewhere between a ten and
twenty percent tariff. And if that in fact ends up
being the case, even with Cook's masterful use of the
(08:41):
supply chain, They're probably going to see some diminishing of
gross margins and it probably goes from call it forty
percent forty one percent. They're probably going to lose a
couple percent on that, call it thirty nine, and so
that is a step back. But I just want to
put some context when we hear about all this, the
versus the Tim Cook, the levers that he can pull,
(09:02):
there are some limitations to it, and that's why I
think that I just like applaud dan Ives and him
standing up and saying like, we got to get this
thing figured out. And what figured it out means is
just some clarity. And ultimately I think that that clarity
is going to be twenty percent, and it's going to
be a little bit of an impact. Again, doesn't change
the long term trajectory of the business, but it's something
(09:23):
that investors are focused
Speaker 2 (09:25):
She monster, thank you so much, Managing partner Seatporter Asset management,
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