October 10, 2025 • 37 mins
Watch Paul LIVE every day on YouTube: http://bit.ly/3vTiACF.
Hosts: Paul Sweeney and Scarlet Fu
On this podcast:
- Herman Chan, Bloomberg Intelligence Senior Analyst for US Regional Banks, discusses news that Fifth Third will purchase Comerica for $10.9 Billion in Stock.
- John Butler, Bloomberg Intelligence Senior Telecom Analyst, discusses Verizon naming Dan Schulman CEO. He’ll replace Hans Vestberg.
- Ed Ludlow, BTech Co-Anchor, discusses OpenAI inking an AMD chips deal worth tens of billions of dollars.
- Anurag Rana, Bloomberg Intelligence Technology Analyst, discusses IBM shares jumping on an AI software pact with Anthropic Enterprise.
- Woo Jin Ho, Bloomberg Intelligence Senior Technology Analyst, discusses highlights from Dell’s investor day.
- Kenneth Shea, Bloomberg Intelligence Senior Consumer Products Analyst, discusses Constellation Brands earnings.
- Katherine Doherty, Bloomberg Finance Reporter, discusses news that ICE will invest $2 billion in the betting platform ‘Polymarket.’
Bloomberg Intelligence, the research arm of Bloomberg L.P., has more than 400 professionals who provide in-depth analysis on more than 2,000 companies and 135 industries while considering strategic, equity and credit perspectives. BI also provides interactive data from over 500 independent contributors. It is available exclusively for Bloomberg Terminal subscribers.
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
Bloomberg Audio, Studios, podcasts, radio news. This is Bloomberg Intelligence
with Scarletfoo and Paul Sweeney.
Speaker 2 (00:13):
How do you think the FED is looking at tariffs?
The uncertainty of terriffs.
Speaker 3 (00:17):
Let's take a look at the sectors and how.
Speaker 2 (00:19):
They performed a lot of investors getting whip saled every
day by news.
Speaker 1 (00:22):
Events, breaking market headlines, and corporate news from across the globe.
Speaker 3 (00:26):
Could we see a market disruption of market event?
Speaker 2 (00:28):
So people just too exuberant out there?
Speaker 3 (00:31):
You see some so called low quality stocks driving this
short term rally.
Speaker 1 (00:34):
Bloomberg Intelligence with Scarletfoo and Paul Sweeney on Bloomberg Radio,
YouTube and Bloomberg Originals.
Speaker 2 (00:42):
On today's Bloomberg Intelligence Show, we dig inside the big
business stories impacting Wall Street and global markets.
Speaker 3 (00:47):
Each and every week, we provide in depth research and
data on some of the two thousand companies and one
hundred and thirty industries are analysts cover worldwide.
Speaker 2 (00:54):
Today, we'll look at how AMD landed a deal with
open Ai to build AI infrastructure.
Speaker 3 (00:59):
Plus why Dell Technologies is roughly doubling its growth estimates
for sales and profit for the next two years.
Speaker 2 (01:04):
First, we begin with a big deal in the banking sector.
Speaker 3 (01:07):
This week, Fifth Third agreed to buy Coo America for
about ten point nine billion dollars in stock. It is
the largest US bank deal this year.
Speaker 2 (01:15):
The deal will create the ninth largest bank in the
country with about two hundred and eighty eight billion dollars
in assets, according to the two companies.
Speaker 3 (01:21):
So we called in Herman Chan Bloomberg Intelligence, senior analysts
for US regional banks, and we began by asking Herman
for his take on the deal.
Speaker 4 (01:28):
Yeah, I think it's a win win for both. Comerica
has been sort of in the doldrums over the past
couple of years after the SBB debacle. It's taken some
long time to get it under its own footing, and
they've gotten a lot of agitated investors and activists pushing
for a sale, and this was a great outcome. On
(01:48):
the other hand, for Fifth Third, it's a great deal.
It moves them into growth growth yer markets in Texas
and California, supplements their Michigan presence and really build out
there their branching presence across the southeast and southwest.
Speaker 3 (02:04):
So within the regional banking space, what does this deal
put pressure on? Who does this deal put pressure on
to make a move of their own.
Speaker 4 (02:11):
Yeah, so that's a question. The follow on question like
who's next. So there are other banks that are operating
within the size of a fifth third that have also
done deals like a PNC and Huntington, and the others
that are still on the sidelines are banks like Regions
in the southeast, Key Corp in Ohio as well, and
(02:32):
M and T and Citizens in the northeast. So those
are the ones that probably are going to get asked.
A lot of questions on the three two earnings go
about M and A.
Speaker 2 (02:40):
So what do we know about the Trumpet administration and
its view towards bank consolidation. Are they a pined on
this at all?
Speaker 5 (02:46):
Yeah?
Speaker 4 (02:46):
So we can see that these bank deals are getting
approved at much faster clips. So I mentioned Huntington earlier.
They're buying a bank in Texas named Vera tex and
it's going to take them about ninety eight days from
deal closed for merger announcements. And that contrasts with under
Biden administration, it's taken four hundred to six hundred days
(03:08):
for a large bank made deals. So these deals under
Trump are being fast tracked and it's really encouraging the
management teams to really go out there and search for deals.
Speaker 3 (03:18):
So for so long, a lot of people had commented
that the US is overbanked. By one count there's almost
forty five hundred FDI and C insured banking institutions here.
Are we still overbanked?
Speaker 2 (03:29):
Herman I would.
Speaker 4 (03:30):
Say, so, there's a lot of competition these and that's
the reason why COO America is looking to sell because
they were lacking in the retail branch presence. They mostly
bank middle market commercial customers that are grades, but it
doesn't create the diversity that they needed during times of
(03:52):
stress like the SVB environments. And so that was a
lesson learned for a lot of the banking industry that
you need to diversify your deposit base. And one way
to diversify the cell to a larger organization.
Speaker 3 (04:05):
Which segment of the banking industry is bloated, needs to
streamline the most.
Speaker 4 (04:10):
Yeah, so there you mentioned forty five hundred banks, Like
does there need to be that many banks within the
United States? Probably not. They don't have the scale to
operate a retail branch presidence. They don't have the capabilities
on the fee side and the advisory side to really
help their customers on the commercial side. And you see
(04:31):
so much competition from not only larger banks, but also
the FinTechs that are just you know, biding at the
heels on the consumer side. So it's a really tough
operating environment and we expect more consolidation over the next
several years.
Speaker 2 (04:46):
All right, riod of me this year. Why do banks
even have branches? I hep adding branches. I've been into
a branch.
Speaker 3 (04:53):
In years across the street from Bloomberg headquarters.
Speaker 5 (04:56):
City Groups City branch right across.
Speaker 4 (04:59):
A lot of it marketing because and a lot of
it is scale. So for a bank like Fifth Third,
they're growing organically in the Southeast and that's been a
major growth driver for them. If you need a branch,
you don't need a branch, but you need the branch
for a marketing aspect, so you need.
Speaker 2 (05:17):
To do big ability, right.
Speaker 3 (05:19):
It's a big billboard, expensive billboard in markets.
Speaker 4 (05:22):
Where you have a lot of foot traffic and higher
growth markets. So it's a big billboard and it's been
a proven growth driver for banks. But on the other hand,
branches are declining. So if you have critical mass and
scale in your existing markets, you can trim your branch
presence and not affect your depositors. But if you're entering
(05:43):
new markets, then opening new branches.
Speaker 1 (05:45):
Is the way.
Speaker 2 (05:45):
Do you think I could find my checkbook?
Speaker 3 (05:48):
That raises a question, does a fintech that wants to
be a bank need to therefore have a retail presence?
Do they need to open up a branch also across
the street from our office?
Speaker 4 (05:56):
So that's that's the beauty of the fintech models that
they're issueing the branches. It's not a requirement. It's a
lower cost to serve because you don't have the physical
retail presence, and it's one way to really compete effectively
with these with these legacy banks where you have a
(06:16):
really easy to use app and you you aren't burden
by this cost basis of owning the physical presence.
Speaker 2 (06:24):
All right, So when we had a couple of little
blow ups in your world a couple of years ago,
I did I found this k r E the spider
S and P Regional banking ETF.
Speaker 6 (06:32):
That's right.
Speaker 2 (06:33):
How are you? How are the regional banks trading these days? Yeah?
Speaker 4 (06:36):
So they're really doing all right. We're talking about price
the tangibles around one point five to one points times.
Is during the height of the weakest point during the
SBB debacle, it was less than one time. So they've
rebounded really nicely despite some of the uncertainty on the
economy and with tariffs and and so we've seen some
(06:58):
growth from them, especially on the commercial lending side that's
really helped grow their top line.
Speaker 2 (07:04):
Our thanks to Hermit Chan Bloomberg Intelligence senior analysts for
US regional banks.
Speaker 3 (07:08):
We move next to some news in the telecom space.
Speaker 2 (07:10):
This week, for Rizon Communications named Dan Schulman as chief
executive officer, replacing Hans Vesperg. The goal was to boost
mobile subscriber growth and shares.
Speaker 3 (07:18):
Schulman is the previous CEO of PayPal and brings financial
and operational leadership experience, as well as expertise in telecoms,
technology and finance. Vessberg will stay on for a year
to help insure a smooth transition for more.
Speaker 2 (07:30):
I was joined by John Butler, Bloomberg Intelligence Senior telecom analysts.
First asked John if this change was expected at Verizon.
Speaker 7 (07:37):
Not at all, Paul, I mean, you know, when you
think merger Monday. I've had a lot of busy Mondays lately.
But the last piece of news I expected was this
change in leadership at Verizon. The company had really been
sort of I guess prepping the head of the consumer business,
or grooming is a better word, Orian Sampath, who is
(08:02):
just a phenomenal talent in my opinion, and he's been
sort of pushed out there doing a lot of investor
conferences and giving the investment community the impression that he
was the next in line. So when the news broke
that Dan is taking over as CEO, it really surprised
a lot of people, including me.
Speaker 2 (08:22):
So what's the company saying here? Why do you think
they chose this outsider versus somebody that, again an insider
that maybe the street thought was going to be the
next in line?
Speaker 7 (08:32):
You know, I think for telecoms, all three of the majors,
the wireless business is slowing very rapidly on them. We're
seeing subscriber growth down a lot this year. There's a
lot of pressure on pricing, and I think the thought
is Dan Shulman used to be CEO of PayPal. He's
got experience at Amex in the consumer finance business, so
(08:56):
they're thinking in terms of how to monetize the hundred
and fifty million consumer relationships they have to move into adjacencies.
The naming of Shulman in my mind tells me they're
looking to tap the consumer finance market. You know, they've
already got a credit card business. I think it's probably
doing pretty well, but they're not actually in the loan
(09:19):
business there, but they're doing a lot of device financing,
and so I think the hope, maybe this is my speculation,
maybe that they can take that perhaps a step deeper
into the consumer finance market and maybe other adjacencies to
be able to monetize that base a little bit more
(09:39):
and diversify away from the slowdown and wireless.
Speaker 2 (09:42):
I know Verizon they've kind of dabbled over the years,
and other businesses, purchasing AOL and Yahoo. So what's the
focus going forward here? Is it to try to just
manage the wireless business as you know, the decline in
the wireless business as best they can.
Speaker 7 (10:01):
So again it's the strategy here, Paul, I think, is
to sort of build off that base that they have.
The wireless business is stable, it's not going anywhere. It's
typically a GDP plus business. Again, we're seeing a slowdown now,
so it could move down to a GDP like growth rate.
(10:22):
But again it's all about extensions. So all three of
the majors here are pushing hard into consumer broadband. They're
doing very well there, both in the fiber and the
fixed wireless access business, but even that business is starting
to mature a bit as it saturates here in the US.
So the question becomes what's next, And maybe the what's
(10:44):
next could be consumer finance. If you look at T Mobile,
they've tapped the outdoor advertising market, which actually is growing
double digit. I never would have guessed, but the thought is, hey,
is people carry around these phones, we know where they are.
Perhaps we can leverage that and come up with very
(11:06):
innovative ways of increasing eyeballs on our outdoor advertising. So
I think they're looking for that type of creative thinking
to come up with new ways of generating growth. And
again you're trying to leverage that huge core base of
wireless subs that you have just.
Speaker 2 (11:25):
Been at their balance sheet, John, this is a this
is company. Verizon's got one hundred and seventy billion dollars
of total debt there, how's the How does the market
feel about their balance sheet.
Speaker 7 (11:36):
So I think of the Big three, Verizon is probably
at a point where they want to be in terms
of financing the business. Can they load on a bunch
more debt? It's it's hard to say. I'm going to
defer to our credit at les for that, Steve Flynn,
But I don't view their ability to finance new ventures
(12:00):
as an issue here at all. It's a very cash
rich business wireless that is, and you know, I think
that will allow Verizon to bankroll any of the new
ventures they plan to push into from here.
Speaker 2 (12:15):
Certainly pro shareholders. Is six point six percent dividend yield?
Is that safe?
Speaker 7 (12:19):
I think it is safe. That's a good question. I
think Verizon, of the Big three, really sort of gets
it when it comes to the importance of the dividend
to the investment community. There's a lot of telecoms out
there at and T included that have cut the dividend
in the past and learned the hard way that that
really I call it the third rail of telecom. I mean,
(12:42):
you do not want to cut the dividend yep. So
my call here is that I think the dividend is safe.
Speaker 3 (12:49):
Yes, are Thanks to John Butler, Bloomberg Intelligence senior telecom
analyst coming up a look at how IBM is planning
to integrate AI tech.
Speaker 2 (12:57):
Listening to Bloomberg Intelligence on Bloomberg Radio, providing in depth
research and data on two thousand companies and one hundred
and thirty industries.
Speaker 3 (13:03):
You can access Bloomberg Intelligence via big on the terminal.
I'm Scarlet Foo.
Speaker 2 (13:07):
And I'm Paul Sweeney. This is Bloomberg.
Speaker 1 (13:13):
This is Bloomberg Intelligence with Scarlet Foo and Paul Sweeney
on Bloomberg Radio.
Speaker 2 (13:20):
We moved to some news in the tech space.
Speaker 3 (13:22):
This week. Advanced micro Devices landed a deal with open
Ai to build AI infrastructure, and this gives the chip
maker AMD a chance to challenge in VideA in the
AI computing industry.
Speaker 2 (13:32):
Open Ai will deploy AMD graphics processing units over multiple years.
The deal also sets the stage for open ai to
acquire a large steak in the chip maker, with the
ability to buy as many as one hundred and sixty
million shares of AMD.
Speaker 3 (13:44):
So we asked for contacts from Ed Ludlow, b Tech
co anchor. We first asked ed what he makes of
this week's deal.
Speaker 8 (13:49):
The specifics of the deal a really important. What is
open ai going to use AMD's technology for it's going
to use it for inference, in other words, running the
models that already exist, not training them. It is six
gigawatts of capacity. The reason that that figure is critical
is that it equates to the peak electricity demand of
(14:10):
most major US cities. Like these are huge numbers, as
you say, but it just speaks to what's happening to
the mind of the participants in the industry, which is
they will need this capacity. You guys are using words
like top and bubble, and I think that's completely fair.
Maybe you saw my column on the debt role that
(14:32):
in what's happening. But I would say that AMD has
done something interesting here which is different to what Nvidia did,
which is they will issue stock two open Ai AMD
shares going to open Ai, but only once open Ai
is spent some money and actually built some stuff. So
(14:53):
where's open Ai going to get the money?
Speaker 3 (14:56):
Well, that's why Sam Allman has been traveling the world
meeting with all kinds of investors trying to get some funding.
You said the specifics matter, ed, but we don't know
how much this partnership, this deal is worth beyond the
very generic tens of billions of dollars, right, that could
be ten billion dollars, that could be ninety nine billion dollars.
Speaker 8 (15:15):
Yes, that's correct. I mean AMDCFO framed it as being
tens of billion dollars of revenue opportunity. But that's why
I think the specifics of the terms I've made a
careful examination of them are really important understand versus what
Nvidia did with open Ai. So Nvidia said it was
going to invest one hundred billion dollars into open Ai.
(15:36):
We don't even know if that was cash or chips
in lieu of cash, but basically in Nvidia would get
some equity in open Ai in return. In this instance
AMD and open Ai. Open ai is getting AMD shares,
but they are deliverable in tranches against s milestones, which
relate to literally building the data centers. So for each
(15:57):
gig of wat of capacity that comes online, am you
would then say, here is this tranch of stock. And
that's why I'm saying focus on the open ai obligation here.
They need actual money to dig up the dirt, to
put the foundations in, get the data center up, and
put the servers in before any of this stock comes
into play.
Speaker 2 (16:16):
Our thanks to ed Lovelow be Tech co anchor Staying
with tech.
Speaker 3 (16:19):
This week, the tech company IBM announced a plan to
integrate anthropics AI technologies into its software solutions.
Speaker 2 (16:26):
IBM said it will make the startups claud family of
large language models accessible for its clients. Shares the IBM
jump after the news.
Speaker 3 (16:32):
So for more, we were joined by Ana ag Rana,
Bloomberg Intelligence technology analyst. We began by asking anag how
he evaluates this latest partnership.
Speaker 9 (16:40):
See, when you come to a company like IBM, I
think they have done a very good job of being
open and partnering with other vendors. I think the acquisition
of red Hat was the first such example a few
years ago, and frankly speaking, the company has turned around
quite a bit. Now it's more of a software company
than it is a service order hardware company. IBM still
has a lot of footprint in legacy companies and their
(17:02):
internal infrastructure, whether that's a regulated entity, whether that's you know,
an on premise software. What they're basically saying is for
these companies who want to add more AI capabilities into
their infrastructure, we're going to use one of the best
models that's out there, and that's anthropic. They're not, you know,
just solely dependent on IBM's own internal models. But you know,
(17:23):
we see more and more of that happening that companies
like IBM and other services companies will go out and
partner with you know, anthropic with open ai which M
and I and give more enterprise capabilities to to vendors,
to companies.
Speaker 2 (17:37):
Basically, how does anthropic differ from open ai if at all?
Speaker 9 (17:41):
That's a very good question, Pauland right now what we're
seeing is entropy is pushing more and more stuff on
the corporate side or the enterprise side, on open Ai side.
You know, their core businesses still chat GPT, which is
the app, and that's more of a consumer app right now.
And the question is, you know which one of the
models will somebody use, Whether if you are let's say,
a JP Morgan or a City Corp, you know, would
(18:03):
you be going to be using one of their models
or an open source model. I think they're going to
be using all of the models. What anthropic relationship with
IBM does. It actually helps them to spread the word
out across their entire customer base. So if you are
trying to get more coding done, for example, in an
IT department and you have all the legacy products that
they're now you can use you know, an AI model
(18:26):
from Anthropic rather than using you know, whatever tools you
had before.
Speaker 3 (18:29):
Okay, so it makes sense why Anthropic is a good
fit for IBM or how it's going to incorporate Anthropic
into IT software. But what does IBM specifically offer Anthropic?
What access does IBM have that Anthropic wants and needs.
Speaker 9 (18:45):
That's another excellent question. And in this case you're looking
at IBM's entire customer base. IBM has a very large
services business or IBM consulting. These consultant will go out
and sell Anthropic software into the enterprises and say, hey, bank,
let me help you to you know, automate this particular
process and you can use it with this software. It
drives their consulting business and it also helps out their
(19:07):
software business, which is fairly popular.
Speaker 2 (19:10):
Right now, IBM hitting all time high on a rug.
This stock has found that a new life has.
Speaker 9 (19:15):
It absolutely and this is something that we've been saying
it for almost five years now that you know, the
acquisition of red Hat completely changed it. You know, if
you go back and look at some of the comments
we've made on TV about IBM. Prior to red Hat,
it was a very closed company. It only wanted to
sell their own products to people and was not very
keen on embracing you know, what I would say is
(19:36):
open source. With the acquisition of red Hat and the
company saying, you know what, red Hat can work with
any cloud provider, I think that was the biggest difference
to me was it allowed red Hat to work with
companies but based on Amazon Web Services or Microsoft, so
they were not just pushing their own cloud products, and
I think that really made a difference. Their software business
(19:58):
has been doing so well competitively to the rest of
the world, and I think that's where you see the
market validation that this is the right strategy for them.
Speaker 2 (20:06):
Our thanks to Ana rog Rana Bloomberg Intelligence technology analysts.
Speaker 3 (20:10):
We moved to some more news in the IT hardware
space this week and it's investor day.
Speaker 2 (20:13):
Dell Technologies roughly doubled its growth estimates for sales and
profit for the next two years.
Speaker 3 (20:18):
Dell also said demand for artificial intelligence products will extend
those higher projections at least through twenty thirty.
Speaker 2 (20:24):
Separately, Cisco system says it is releasing a new chip
networking system to connect AIDATA centers across hundreds of miles.
Speaker 3 (20:31):
So for more on both of these companies, we were
joined by Woujin Hoo Bloomberg Intelligence senior technology analysts. We
began by asking Woods should break down what we heard
from Dell.
Speaker 5 (20:40):
This is a very seasoned management team. They have a
tendency to give out three to four year guidance plans.
I think the surprise here is what's driving that seventy
nine percent growth outlook for from twenty twenty six to
twenty twenty of twenty thirty, and it's going to be
AI servers, right, And one of the things that they
said at the Animal day that AI servers are going
(21:01):
to grow at a twenty to twenty five percent compounded rate.
I think there was some skepticism there heading into the
print in terms of is there an AI bubble? And
by laying out a twenty to twenty five percent AI
server growth going through twenty thirty off of already high numbers,
shows that there is some durability the aiserver demand.
Speaker 2 (21:21):
So when you get an analyst meaning together, it's a
big day for a company. They put a lot of
time and effort in putting getting their senior management together,
putting together presentations, presenting a vision here. What were some
of the two or three takeaways from you from this
investor date.
Speaker 5 (21:35):
Yeah, so, so the one highlight here is the a
server demand, the durability of a server demand. But more importantly,
and we talk about this all the time, you know, Paul,
It's about earnings and cash flow, right And at the
end of the day, we're talking about EPs growth about
fifteen percent, and how do we get to that fifteen percent?
(21:56):
We're talking about eight percent of the sales growth dropping
down to the bottom line. But given all that cash generation,
there's going to be a fair amount of capital returns
through buybacks, so you're going to get a lift on
EPs there. So share holders are going to be happy
from an EPs standpoint. We're already seeing that from evaluation standpoint,
because it is lifting from an eight to ten times
(22:20):
PE to about fifteen times growth, which makes it into
a one times peg oo gien.
Speaker 3 (22:25):
Another story that we're tracking here and that I've been
fascinated by, is this idea of legacy tech companies finding
their feed in this AI wave, whether it's Oracle, whether
it's Dell, and now Cisco as well. Cisco is releasing
a new chip and networking system to connect AI data centers,
and this is a move that pretty much puts it
(22:45):
in more direct competition with Broadcom. How big of an
opportunity is this for Cisco? And should Broadcome be worried?
Speaker 5 (22:53):
Yeah, so we published and react, and essentially I don't
think Broadcom should be fully worried. There's a couple of
thing that I'll say, right, Cisco is actually one of
the biggest chip networking chip manufacturers globally, but more for
their legacy enterprise IT chips. Right, they produce their own
chips that powers their own networking gear. They're fairly newer
(23:15):
to the game in the networking chip side. From a
revenue standpoint, it's really not a big driver, but it
may be able to push more boxes. A couple of
things that I'll say, They did about one billion dollars
in AI back end revenue, but to put that into context,
you know they're doing about fifty five to fifty six
(23:37):
billion dollars in total sales. So you know, from an
overall percentage of AI as an overall percentage of sales,
it's still about two to three percent of total sales.
Are they going to challenge Broadcom? I doubt it, but
I do think there'll be a second source to the
cloud providers versus Broadcom.
Speaker 2 (23:57):
Which in your coverage area? What's your best I play?
Because I'm sure you get that call from clients all
the time.
Speaker 5 (24:04):
You know, I mean I have a handful. Dell was one.
You know. Hp is another one to take a look
out for. They have an analyst day next week. But
from from a networking standpoint, Arista has actually been one
of the high flyers from from the from from a
networking standpoint, so I will look at Arista and people
(24:26):
have been taking the AI networking angle and using Arista
as one of the tools.
Speaker 3 (24:33):
I like that Arista. I haven't heard that one come
up yet. You know, HPE or HPQ Just to clarify.
Speaker 5 (24:38):
Oh, HPE. So think think of it as a mini
Dell and a mini Cisco.
Speaker 2 (24:44):
In one our thanks to Will Jino Bloomberg Intelligence senior
technology analysts.
Speaker 3 (24:48):
Coming up, we'll look at why the owner of the
Corona and Wdella, especially ol brands reported positive quarrely results.
Speaker 2 (24:53):
You're listening to Bloomberg Intelligence on Bloomberg Radio, but riding
in depth research and data on two thousand companies and
one hundred and thirty industries.
Speaker 3 (25:00):
You can access Bloomberg Intelligence through Bigo on the terminal.
I'm Scarlettfoo and.
Speaker 2 (25:04):
I'm Paul Sweeney. This is Bloomberg.
Speaker 1 (25:14):
This is Bloomberg Intelligence with Scarletfoo and Paul Sweeney on
Bloomberg Radio.
Speaker 2 (25:21):
Move next to some news in the consumer product space.
Speaker 3 (25:23):
This week, Constellation Brands, which owns Corona and Wdella especial
brands in the US, reported better than expected results for
its fiscal second quarter. The company cited robust beer and
wine sales.
Speaker 2 (25:33):
This comes despite the company stock falling more than thirty
percent this year. Beer an alcoholic beverages in general have
broadly struggled as younger consumers and women drink less.
Speaker 3 (25:42):
So for more on this and other news in the
consumer space, we were joined by Ken Sha, Bloomberg Intelligence
senior consumer products analyst.
Speaker 2 (25:48):
First, ask Ken more about why Constellation Brands had been
struggling this year.
Speaker 10 (25:52):
It's definitely a slow beer market. Tariffs are playing a role,
and also some of the crackdown you know, the ice
has had in inner community is hurting the Hispanic community
and their socialization trends. All these things have been a
factor for the last couple of quarters. The company said
that their beer volumes were not quite as poor as
(26:16):
a lot of street analysts expected. But the pressures are
still on and they're very real for this company. And
that's because they're suite of products. As you mentioned Corona Medello,
these command high price points about twice the level of
a popular beer, so in times where consumers are pulling
back a little cautious about expenditures, got to remember, you know,
(26:37):
you've had high inflationary pricing in this category for the
last few years. These brands aren't doing so well right now,
and then compounding that with some of the factors that
I mentioned and some longer term issues like cannabis substitution
things we talked about GLP one user not drinking as much,
moderation among gen Z. All these things are weighing of
(26:58):
a company right now.
Speaker 3 (27:00):
Yeah, I'm super interested in what you said about the
last part, Like the structural changes in consumer tastes, especially
from gen Z younger people overall, beers just not where
people want to be spending their money necessarily.
Speaker 10 (27:14):
That seems to be the case. You know, it's it's
been around a long time. It's one hundred and fifteen
billion dollar market that is growing very slowly. It's especially flat.
In fact, volumes are expected to be down low single
digit this year. So clearly it's a very mature category.
And what we've seen in over the last few years
is consumers just want different tastes. You know, you have
a proliferation of the ray to drink cocktails, you know,
(27:37):
like truly and white clothes and more sophisticate you know,
Margarita's in a can and so on. That's where a
lot of the consumers who wants tastes experimentation are going.
And then you have other more mundane factors like just
you know, calorie more conscientious, calorie counts, and all these
things are just weighing on this very very mature industry.
Speaker 2 (27:58):
So somebody like Constellation Brands, did they go out and
look to maybe buy some of these brands or verticals
that within the spirit's business may be growing.
Speaker 10 (28:08):
Well, they've had kind of a mixed history of M
and A over the last few years. I'll put it
up me kind say that way, not really, you know,
they're downsizing their wine and spirit segment and try to
shift it to more of a high end mix, which
I think they're having success with. But what that does
is it makes their beer business even that much more important.
(28:30):
It's now about eighty five percent of their sales. So
as beer goes, I mean, the company has really good
brands and a lot of brand loyalty there. But again
there's not a lot of wiggle room.
Speaker 3 (28:42):
So with beer becoming less popular, and you mentioned other
big trends like ozebic, weight loss, drugs and greater cannabis use,
what is Constlation doing about non alcoholic beverages.
Speaker 10 (28:57):
So they've rolled out a non alcoholic Corona. They've come
out a couple of years ago. They came out with
a low calorie brand called Medello ro Corona no alcohol
I mentioned. So those two brands, while they're relatively small,
they see, you know, a lot of opportunity that's on
trend with what you said, so you know they're doing that.
(29:21):
They're also modifying some of their portfolio for more taste.
There's the consumers that want a lot of taste. They're
coming out with, you know, a fruity surveysa and so
they're doing as much as they can to stay on
trend with consumers.
Speaker 3 (29:37):
I love myself a great fruit beer. Yeah, there's a
German great fruit beer that I really like. Yeah, tastes good.
Speaker 2 (29:43):
Talk to us about this legal cannabis and obesity drugs
and the impact that's having on kind of the beer business,
the spirits business overall. Ken, is that something that a
lot of your companies are calling out.
Speaker 10 (29:54):
Bi came out of their fourth annual consumer survey on
beverage preferences, and again we see that consumers are substituting
cannabis for alcohol. Of consumers that do partake in cannabis,
now more than half have substituted for alcohol at least
once a week, and that's up from forty six percent
(30:16):
last year. So that's a trend that just keeps moving.
Now you're seeing a lot of these cannabis companies coming
out with hemp THC products beverages that are sold in
mainstream liquor stores. You know, traditional cannabis, legal cannabis sold
in dispensaries. It was not really a big hit, but
now that some of these federally legal hemp based THC
(30:38):
products beverages are sold in liquor stores right next to
the beer rile. In about half the states of the country,
that's really chipping away also at beer consumption.
Speaker 3 (30:49):
Final question to you, Ken, what about return of cash
to shareholders. I'm looking at the dividend yield about two
point nine percent if you're being generous. Is Constellation Brands
still able to make good on its dividends continue buying
back its shares?
Speaker 10 (31:03):
Yeah, that's an important point, Scarlett. Yes, they can despite
the pressure on sales. Believe it or not, the operating
margins and Constellation generates are best in class. They're about
twice that of other alcoholic beverage companies in general, so
they have strong cash flows. As a matter of fact,
they're winding down construction of a brewery right now. Over
(31:24):
the next couple of years, you're going to see free
cash flow likely rising. So it's high in rising and
that's enabling them to continue to meet their commitments to
share buybacks and dividends.
Speaker 3 (31:35):
Our thanks to Kenneth Shae Bloomberg Intelligence, a senior consumer
products analyst.
Speaker 2 (31:39):
We move next to some news on Intercontinental Exchange or ICE.
Speaker 3 (31:42):
This week we heard the company plans to invest as
much as two billion dollars in cash in polymarket, which
is a crypto based betting platform.
Speaker 2 (31:49):
The transaction values poly market at roughly eight billion dollars,
and ICE will become a global distributor of poly markets
event driven data.
Speaker 3 (31:56):
We are joined by Catherine Doherty, Bloomberg Finance Reporter. We
first Catherine for some more background on ICE.
Speaker 6 (32:02):
It runs on the blockchain. So you have this storied institution,
ICE that owns the New York Stock Exchange, as you mentioned,
and they're putting their money where their mouth is. It
really is an indication of where the market is headed.
So you have these institutional players that are teaming up
with either crypto native firms or in this case it's
(32:23):
also the prediction market based players. And we have seen
this recently with also CME, the derivatives exchange based in Chicago.
They're partnering with FanDuel, and most people associate FanDuel with
sports betting, but they are big in prediction markets as well.
And with CME and FanDuel, they're doing a markets based
(32:47):
prediction of yes or no will for example, gold Bee
above a certain benchmark. And this announcement also shows a
storied institution kind of getting behind the newer incumbents and
showing where they see the next phase of the market headed.
Speaker 2 (33:07):
What does polymarket really do? I see them quoted around
in the press and things like that.
Speaker 6 (33:11):
So you've probably seen polymarket around the time of the election.
They were one of the platforms that users were placing
bets on who was going to win the presidential election.
They at a time were also in the news around
twenty twenty two because they were prohibited from actually operating
in the US, and more recently in the last few
(33:34):
months in twenty twenty five, they've re entered the US market,
and they've done so through two avenues. One, it's a
changing regulatory environment, it's a crypto friendly regulatory regime. And
number two, they bought their own regulated derivatives platform that
(33:55):
essentially allowed them it was a pathway back into the
United States market.
Speaker 3 (34:01):
So with this deal, which values Polymarket at about eight
billion dollars, cee ICE becomes the global distributor of Polymarket's
event driven data. What does that mean to have that
data now in its hands? What can it do with
that information? Because exchanges don't just they're not just a
platform for collecting commissions on trades. They're also huge source
(34:22):
of information data that they then sell.
Speaker 6 (34:24):
That's right, it's a huge part of their business, and
you have these big institutions that are paying millions of
dollars for access to this data. And as the market
becomes a mix of institutional client base and retail clients
that data these companies, you have ICE, you have polymarket.
(34:47):
This combination is giving ICE access to retail clients that
they otherwise wouldn't necessarily have access to, and vice versa.
Polymarket gets now all of their data displayed through ICE
channels that institutional clients have been set up and working
with ICE for years. So it's a fast entry way
(35:11):
for both companies to increase their user base, increase their access,
and how they market themselves to an entirely new client.
Speaker 2 (35:22):
So it just feels like some of these traditional exchanges,
if you will, I think, are they saying, basically, if
we want to grow in the future, we have to
embrace some of these new asset classes, whether it's crypto
or whether it's predictive markets and things like. Is that
kind of what they're telling us.
Speaker 6 (35:39):
I think that it's very much where they see their
clients headed. There's a blurring line between you have hedge
funds and traditional institutional firms, and then you have retail
investors that at a time, there was so much news
during the memestock era around who these users were that
(36:02):
were in their basements, But now these are really sophisticated
investors that are playing in the options market prediction markets.
Many of the leaders of these exchanges are saying there
is no difference between what we've been running and at
least a binary yes or no. Is this index going
(36:25):
to be above or below a certain threshold. They're combining
to what was presumably two different worlds into one now.
Speaker 3 (36:34):
And competitors at polymarket include Calshi Andcrypto dot Com. Are
you anticipating, Catherine, There's going to be similar tie ups
for those companies as well.
Speaker 6 (36:43):
There is a race too. I believe that this is
just the start, or really the CME partnership with FanDuel
was kind of the first indication. This is just another
and I think that it's going to be off to
the races in terms of who partners up next, because
you to build something for scratch is hard, and when
you partner with a existing client base too, it is
(37:06):
an easy way in to an entirely new market.
Speaker 2 (37:10):
It wasn't cheap. I'm reading Bloomberg Intelligence research react from
Paul Goldberg. This acquisition applies fifty times revenue.
Speaker 9 (37:18):
Is the purchase price there.
Speaker 2 (37:20):
That's not cheap and it's an all cash deal.
Speaker 3 (37:21):
They're just saying we're in our Thanks to Catherine Doherty,
Bloomberg News Finance Reporter.
Speaker 2 (37:26):
It's this week's edition of Bloomberg Intelligence on Bloomberg Radio,
providing in depth research and data on two thousand companies
and one hundred and thirty industries.
Speaker 3 (37:33):
And remember you can access Bloomberg Intelligence via bi Go
on the terminal. I'm Scarlet Foo.
Speaker 2 (37:38):
And I'm Paul Sweeney. Stay with us. Today's top stories
and global business headlines are coming up right now
Bloomberg Audio, Studios, podcasts, radio news. This is Bloomberg Intelligence
with Scarletfoo and Paul Sweeney.
Speaker 2 (00:13):
How do you think the FED is looking at tariffs?
The uncertainty of terriffs.
Speaker 3 (00:17):
Let's take a look at the sectors and how.
Speaker 2 (00:19):
They performed a lot of investors getting whip saled every
day by news.
Speaker 1 (00:22):
Events, breaking market headlines, and corporate news from across the globe.
Speaker 3 (00:26):
Could we see a market disruption of market event?
Speaker 2 (00:28):
So people just too exuberant out there?
Speaker 3 (00:31):
You see some so called low quality stocks driving this
short term rally.
Speaker 1 (00:34):
Bloomberg Intelligence with Scarletfoo and Paul Sweeney on Bloomberg Radio,
YouTube and Bloomberg Originals.
Speaker 2 (00:42):
On today's Bloomberg Intelligence Show, we dig inside the big
business stories impacting Wall Street and global markets.
Speaker 3 (00:47):
Each and every week, we provide in depth research and
data on some of the two thousand companies and one
hundred and thirty industries are analysts cover worldwide.
Speaker 2 (00:54):
Today, we'll look at how AMD landed a deal with
open Ai to build AI infrastructure.
Speaker 3 (00:59):
Plus why Dell Technologies is roughly doubling its growth estimates
for sales and profit for the next two years.
Speaker 2 (01:04):
First, we begin with a big deal in the banking sector.
Speaker 3 (01:07):
This week, Fifth Third agreed to buy Coo America for
about ten point nine billion dollars in stock. It is
the largest US bank deal this year.
Speaker 2 (01:15):
The deal will create the ninth largest bank in the
country with about two hundred and eighty eight billion dollars
in assets, according to the two companies.
Speaker 3 (01:21):
So we called in Herman Chan Bloomberg Intelligence, senior analysts
for US regional banks, and we began by asking Herman
for his take on the deal.
Speaker 4 (01:28):
Yeah, I think it's a win win for both. Comerica
has been sort of in the doldrums over the past
couple of years after the SBB debacle. It's taken some
long time to get it under its own footing, and
they've gotten a lot of agitated investors and activists pushing
for a sale, and this was a great outcome. On
(01:48):
the other hand, for Fifth Third, it's a great deal.
It moves them into growth growth yer markets in Texas
and California, supplements their Michigan presence and really build out
there their branching presence across the southeast and southwest.
Speaker 3 (02:04):
So within the regional banking space, what does this deal
put pressure on? Who does this deal put pressure on
to make a move of their own.
Speaker 4 (02:11):
Yeah, so that's a question. The follow on question like
who's next. So there are other banks that are operating
within the size of a fifth third that have also
done deals like a PNC and Huntington, and the others
that are still on the sidelines are banks like Regions
in the southeast, Key Corp in Ohio as well, and
(02:32):
M and T and Citizens in the northeast. So those
are the ones that probably are going to get asked.
A lot of questions on the three two earnings go
about M and A.
Speaker 2 (02:40):
So what do we know about the Trumpet administration and
its view towards bank consolidation. Are they a pined on
this at all?
Speaker 5 (02:46):
Yeah?
Speaker 4 (02:46):
So we can see that these bank deals are getting
approved at much faster clips. So I mentioned Huntington earlier.
They're buying a bank in Texas named Vera tex and
it's going to take them about ninety eight days from
deal closed for merger announcements. And that contrasts with under
Biden administration, it's taken four hundred to six hundred days
(03:08):
for a large bank made deals. So these deals under
Trump are being fast tracked and it's really encouraging the
management teams to really go out there and search for deals.
Speaker 3 (03:18):
So for so long, a lot of people had commented
that the US is overbanked. By one count there's almost
forty five hundred FDI and C insured banking institutions here.
Are we still overbanked?
Speaker 2 (03:29):
Herman I would.
Speaker 4 (03:30):
Say, so, there's a lot of competition these and that's
the reason why COO America is looking to sell because
they were lacking in the retail branch presence. They mostly
bank middle market commercial customers that are grades, but it
doesn't create the diversity that they needed during times of
(03:52):
stress like the SVB environments. And so that was a
lesson learned for a lot of the banking industry that
you need to diversify your deposit base. And one way
to diversify the cell to a larger organization.
Speaker 3 (04:05):
Which segment of the banking industry is bloated, needs to
streamline the most.
Speaker 4 (04:10):
Yeah, so there you mentioned forty five hundred banks, Like
does there need to be that many banks within the
United States? Probably not. They don't have the scale to
operate a retail branch presidence. They don't have the capabilities
on the fee side and the advisory side to really
help their customers on the commercial side. And you see
(04:31):
so much competition from not only larger banks, but also
the FinTechs that are just you know, biding at the
heels on the consumer side. So it's a really tough
operating environment and we expect more consolidation over the next
several years.
Speaker 2 (04:46):
All right, riod of me this year. Why do banks
even have branches? I hep adding branches. I've been into
a branch.
Speaker 3 (04:53):
In years across the street from Bloomberg headquarters.
Speaker 5 (04:56):
City Groups City branch right across.
Speaker 4 (04:59):
A lot of it marketing because and a lot of
it is scale. So for a bank like Fifth Third,
they're growing organically in the Southeast and that's been a
major growth driver for them. If you need a branch,
you don't need a branch, but you need the branch
for a marketing aspect, so you need.
Speaker 2 (05:17):
To do big ability, right.
Speaker 3 (05:19):
It's a big billboard, expensive billboard in markets.
Speaker 4 (05:22):
Where you have a lot of foot traffic and higher
growth markets. So it's a big billboard and it's been
a proven growth driver for banks. But on the other hand,
branches are declining. So if you have critical mass and
scale in your existing markets, you can trim your branch
presence and not affect your depositors. But if you're entering
(05:43):
new markets, then opening new branches.
Speaker 1 (05:45):
Is the way.
Speaker 2 (05:45):
Do you think I could find my checkbook?
Speaker 3 (05:48):
That raises a question, does a fintech that wants to
be a bank need to therefore have a retail presence?
Do they need to open up a branch also across
the street from our office?
Speaker 4 (05:56):
So that's that's the beauty of the fintech models that
they're issueing the branches. It's not a requirement. It's a
lower cost to serve because you don't have the physical
retail presence, and it's one way to really compete effectively
with these with these legacy banks where you have a
(06:16):
really easy to use app and you you aren't burden
by this cost basis of owning the physical presence.
Speaker 2 (06:24):
All right, So when we had a couple of little
blow ups in your world a couple of years ago,
I did I found this k r E the spider
S and P Regional banking ETF.
Speaker 6 (06:32):
That's right.
Speaker 2 (06:33):
How are you? How are the regional banks trading these days? Yeah?
Speaker 4 (06:36):
So they're really doing all right. We're talking about price
the tangibles around one point five to one points times.
Is during the height of the weakest point during the
SBB debacle, it was less than one time. So they've
rebounded really nicely despite some of the uncertainty on the
economy and with tariffs and and so we've seen some
(06:58):
growth from them, especially on the commercial lending side that's
really helped grow their top line.
Speaker 2 (07:04):
Our thanks to Hermit Chan Bloomberg Intelligence senior analysts for
US regional banks.
Speaker 3 (07:08):
We move next to some news in the telecom space.
Speaker 2 (07:10):
This week, for Rizon Communications named Dan Schulman as chief
executive officer, replacing Hans Vesperg. The goal was to boost
mobile subscriber growth and shares.
Speaker 3 (07:18):
Schulman is the previous CEO of PayPal and brings financial
and operational leadership experience, as well as expertise in telecoms,
technology and finance. Vessberg will stay on for a year
to help insure a smooth transition for more.
Speaker 2 (07:30):
I was joined by John Butler, Bloomberg Intelligence Senior telecom analysts.
First asked John if this change was expected at Verizon.
Speaker 7 (07:37):
Not at all, Paul, I mean, you know, when you
think merger Monday. I've had a lot of busy Mondays lately.
But the last piece of news I expected was this
change in leadership at Verizon. The company had really been
sort of I guess prepping the head of the consumer business,
or grooming is a better word, Orian Sampath, who is
(08:02):
just a phenomenal talent in my opinion, and he's been
sort of pushed out there doing a lot of investor
conferences and giving the investment community the impression that he
was the next in line. So when the news broke
that Dan is taking over as CEO, it really surprised
a lot of people, including me.
Speaker 2 (08:22):
So what's the company saying here? Why do you think
they chose this outsider versus somebody that, again an insider
that maybe the street thought was going to be the
next in line?
Speaker 7 (08:32):
You know, I think for telecoms, all three of the majors,
the wireless business is slowing very rapidly on them. We're
seeing subscriber growth down a lot this year. There's a
lot of pressure on pricing, and I think the thought
is Dan Shulman used to be CEO of PayPal. He's
got experience at Amex in the consumer finance business, so
(08:56):
they're thinking in terms of how to monetize the hundred
and fifty million consumer relationships they have to move into adjacencies.
The naming of Shulman in my mind tells me they're
looking to tap the consumer finance market. You know, they've
already got a credit card business. I think it's probably
doing pretty well, but they're not actually in the loan
(09:19):
business there, but they're doing a lot of device financing,
and so I think the hope, maybe this is my speculation,
maybe that they can take that perhaps a step deeper
into the consumer finance market and maybe other adjacencies to
be able to monetize that base a little bit more
(09:39):
and diversify away from the slowdown and wireless.
Speaker 2 (09:42):
I know Verizon they've kind of dabbled over the years,
and other businesses, purchasing AOL and Yahoo. So what's the
focus going forward here? Is it to try to just
manage the wireless business as you know, the decline in
the wireless business as best they can.
Speaker 7 (10:01):
So again it's the strategy here, Paul, I think, is
to sort of build off that base that they have.
The wireless business is stable, it's not going anywhere. It's
typically a GDP plus business. Again, we're seeing a slowdown now,
so it could move down to a GDP like growth rate.
(10:22):
But again it's all about extensions. So all three of
the majors here are pushing hard into consumer broadband. They're
doing very well there, both in the fiber and the
fixed wireless access business, but even that business is starting
to mature a bit as it saturates here in the US.
So the question becomes what's next, And maybe the what's
(10:44):
next could be consumer finance. If you look at T Mobile,
they've tapped the outdoor advertising market, which actually is growing
double digit. I never would have guessed, but the thought is, hey,
is people carry around these phones, we know where they are.
Perhaps we can leverage that and come up with very
(11:06):
innovative ways of increasing eyeballs on our outdoor advertising. So
I think they're looking for that type of creative thinking
to come up with new ways of generating growth. And
again you're trying to leverage that huge core base of
wireless subs that you have just.
Speaker 2 (11:25):
Been at their balance sheet, John, this is a this
is company. Verizon's got one hundred and seventy billion dollars
of total debt there, how's the How does the market
feel about their balance sheet.
Speaker 7 (11:36):
So I think of the Big three, Verizon is probably
at a point where they want to be in terms
of financing the business. Can they load on a bunch
more debt? It's it's hard to say. I'm going to
defer to our credit at les for that, Steve Flynn,
But I don't view their ability to finance new ventures
(12:00):
as an issue here at all. It's a very cash
rich business wireless that is, and you know, I think
that will allow Verizon to bankroll any of the new
ventures they plan to push into from here.
Speaker 2 (12:15):
Certainly pro shareholders. Is six point six percent dividend yield?
Is that safe?
Speaker 7 (12:19):
I think it is safe. That's a good question. I
think Verizon, of the Big three, really sort of gets
it when it comes to the importance of the dividend
to the investment community. There's a lot of telecoms out
there at and T included that have cut the dividend
in the past and learned the hard way that that
really I call it the third rail of telecom. I mean,
(12:42):
you do not want to cut the dividend yep. So
my call here is that I think the dividend is safe.
Speaker 3 (12:49):
Yes, are Thanks to John Butler, Bloomberg Intelligence senior telecom
analyst coming up a look at how IBM is planning
to integrate AI tech.
Speaker 2 (12:57):
Listening to Bloomberg Intelligence on Bloomberg Radio, providing in depth
research and data on two thousand companies and one hundred
and thirty industries.
Speaker 3 (13:03):
You can access Bloomberg Intelligence via big on the terminal.
I'm Scarlet Foo.
Speaker 2 (13:07):
And I'm Paul Sweeney. This is Bloomberg.
Speaker 1 (13:13):
This is Bloomberg Intelligence with Scarlet Foo and Paul Sweeney
on Bloomberg Radio.
Speaker 2 (13:20):
We moved to some news in the tech space.
Speaker 3 (13:22):
This week. Advanced micro Devices landed a deal with open
Ai to build AI infrastructure, and this gives the chip
maker AMD a chance to challenge in VideA in the
AI computing industry.
Speaker 2 (13:32):
Open Ai will deploy AMD graphics processing units over multiple years.
The deal also sets the stage for open ai to
acquire a large steak in the chip maker, with the
ability to buy as many as one hundred and sixty
million shares of AMD.
Speaker 3 (13:44):
So we asked for contacts from Ed Ludlow, b Tech
co anchor. We first asked ed what he makes of
this week's deal.
Speaker 8 (13:49):
The specifics of the deal a really important. What is
open ai going to use AMD's technology for it's going
to use it for inference, in other words, running the
models that already exist, not training them. It is six
gigawatts of capacity. The reason that that figure is critical
is that it equates to the peak electricity demand of
(14:10):
most major US cities. Like these are huge numbers, as
you say, but it just speaks to what's happening to
the mind of the participants in the industry, which is
they will need this capacity. You guys are using words
like top and bubble, and I think that's completely fair.
Maybe you saw my column on the debt role that
(14:32):
in what's happening. But I would say that AMD has
done something interesting here which is different to what Nvidia did,
which is they will issue stock two open Ai AMD
shares going to open Ai, but only once open Ai
is spent some money and actually built some stuff. So
(14:53):
where's open Ai going to get the money?
Speaker 3 (14:56):
Well, that's why Sam Allman has been traveling the world
meeting with all kinds of investors trying to get some funding.
You said the specifics matter, ed, but we don't know
how much this partnership, this deal is worth beyond the
very generic tens of billions of dollars, right, that could
be ten billion dollars, that could be ninety nine billion dollars.
Speaker 8 (15:15):
Yes, that's correct. I mean AMDCFO framed it as being
tens of billion dollars of revenue opportunity. But that's why
I think the specifics of the terms I've made a
careful examination of them are really important understand versus what
Nvidia did with open Ai. So Nvidia said it was
going to invest one hundred billion dollars into open Ai.
(15:36):
We don't even know if that was cash or chips
in lieu of cash, but basically in Nvidia would get
some equity in open Ai in return. In this instance
AMD and open Ai. Open ai is getting AMD shares,
but they are deliverable in tranches against s milestones, which
relate to literally building the data centers. So for each
(15:57):
gig of wat of capacity that comes online, am you
would then say, here is this tranch of stock. And
that's why I'm saying focus on the open ai obligation here.
They need actual money to dig up the dirt, to
put the foundations in, get the data center up, and
put the servers in before any of this stock comes
into play.
Speaker 2 (16:16):
Our thanks to ed Lovelow be Tech co anchor Staying
with tech.
Speaker 3 (16:19):
This week, the tech company IBM announced a plan to
integrate anthropics AI technologies into its software solutions.
Speaker 2 (16:26):
IBM said it will make the startups claud family of
large language models accessible for its clients. Shares the IBM
jump after the news.
Speaker 3 (16:32):
So for more, we were joined by Ana ag Rana,
Bloomberg Intelligence technology analyst. We began by asking anag how
he evaluates this latest partnership.
Speaker 9 (16:40):
See, when you come to a company like IBM, I
think they have done a very good job of being
open and partnering with other vendors. I think the acquisition
of red Hat was the first such example a few
years ago, and frankly speaking, the company has turned around
quite a bit. Now it's more of a software company
than it is a service order hardware company. IBM still
has a lot of footprint in legacy companies and their
(17:02):
internal infrastructure, whether that's a regulated entity, whether that's you know,
an on premise software. What they're basically saying is for
these companies who want to add more AI capabilities into
their infrastructure, we're going to use one of the best
models that's out there, and that's anthropic. They're not, you know,
just solely dependent on IBM's own internal models. But you know,
(17:23):
we see more and more of that happening that companies
like IBM and other services companies will go out and
partner with you know, anthropic with open ai which M
and I and give more enterprise capabilities to to vendors,
to companies.
Speaker 2 (17:37):
Basically, how does anthropic differ from open ai if at all?
Speaker 9 (17:41):
That's a very good question, Pauland right now what we're
seeing is entropy is pushing more and more stuff on
the corporate side or the enterprise side, on open Ai side.
You know, their core businesses still chat GPT, which is
the app, and that's more of a consumer app right now.
And the question is, you know which one of the
models will somebody use, Whether if you are let's say,
a JP Morgan or a City Corp, you know, would
(18:03):
you be going to be using one of their models
or an open source model. I think they're going to
be using all of the models. What anthropic relationship with
IBM does. It actually helps them to spread the word
out across their entire customer base. So if you are
trying to get more coding done, for example, in an
IT department and you have all the legacy products that
they're now you can use you know, an AI model
(18:26):
from Anthropic rather than using you know, whatever tools you
had before.
Speaker 3 (18:29):
Okay, so it makes sense why Anthropic is a good
fit for IBM or how it's going to incorporate Anthropic
into IT software. But what does IBM specifically offer Anthropic?
What access does IBM have that Anthropic wants and needs.
Speaker 9 (18:45):
That's another excellent question. And in this case you're looking
at IBM's entire customer base. IBM has a very large
services business or IBM consulting. These consultant will go out
and sell Anthropic software into the enterprises and say, hey, bank,
let me help you to you know, automate this particular
process and you can use it with this software. It
drives their consulting business and it also helps out their
(19:07):
software business, which is fairly popular.
Speaker 2 (19:10):
Right now, IBM hitting all time high on a rug.
This stock has found that a new life has.
Speaker 9 (19:15):
It absolutely and this is something that we've been saying
it for almost five years now that you know, the
acquisition of red Hat completely changed it. You know, if
you go back and look at some of the comments
we've made on TV about IBM. Prior to red Hat,
it was a very closed company. It only wanted to
sell their own products to people and was not very
keen on embracing you know, what I would say is
(19:36):
open source. With the acquisition of red Hat and the
company saying, you know what, red Hat can work with
any cloud provider, I think that was the biggest difference
to me was it allowed red Hat to work with
companies but based on Amazon Web Services or Microsoft, so
they were not just pushing their own cloud products, and
I think that really made a difference. Their software business
(19:58):
has been doing so well competitively to the rest of
the world, and I think that's where you see the
market validation that this is the right strategy for them.
Speaker 2 (20:06):
Our thanks to Ana rog Rana Bloomberg Intelligence technology analysts.
Speaker 3 (20:10):
We moved to some more news in the IT hardware
space this week and it's investor day.
Speaker 2 (20:13):
Dell Technologies roughly doubled its growth estimates for sales and
profit for the next two years.
Speaker 3 (20:18):
Dell also said demand for artificial intelligence products will extend
those higher projections at least through twenty thirty.
Speaker 2 (20:24):
Separately, Cisco system says it is releasing a new chip
networking system to connect AIDATA centers across hundreds of miles.
Speaker 3 (20:31):
So for more on both of these companies, we were
joined by Woujin Hoo Bloomberg Intelligence senior technology analysts. We
began by asking Woods should break down what we heard
from Dell.
Speaker 5 (20:40):
This is a very seasoned management team. They have a
tendency to give out three to four year guidance plans.
I think the surprise here is what's driving that seventy
nine percent growth outlook for from twenty twenty six to
twenty twenty of twenty thirty, and it's going to be
AI servers, right, And one of the things that they
said at the Animal day that AI servers are going
(21:01):
to grow at a twenty to twenty five percent compounded rate.
I think there was some skepticism there heading into the
print in terms of is there an AI bubble? And
by laying out a twenty to twenty five percent AI
server growth going through twenty thirty off of already high numbers,
shows that there is some durability the aiserver demand.
Speaker 2 (21:21):
So when you get an analyst meaning together, it's a
big day for a company. They put a lot of
time and effort in putting getting their senior management together,
putting together presentations, presenting a vision here. What were some
of the two or three takeaways from you from this
investor date.
Speaker 5 (21:35):
Yeah, so, so the one highlight here is the a
server demand, the durability of a server demand. But more importantly,
and we talk about this all the time, you know, Paul,
It's about earnings and cash flow, right And at the
end of the day, we're talking about EPs growth about
fifteen percent, and how do we get to that fifteen percent?
(21:56):
We're talking about eight percent of the sales growth dropping
down to the bottom line. But given all that cash generation,
there's going to be a fair amount of capital returns
through buybacks, so you're going to get a lift on
EPs there. So share holders are going to be happy
from an EPs standpoint. We're already seeing that from evaluation standpoint,
because it is lifting from an eight to ten times
(22:20):
PE to about fifteen times growth, which makes it into
a one times peg oo gien.
Speaker 3 (22:25):
Another story that we're tracking here and that I've been
fascinated by, is this idea of legacy tech companies finding
their feed in this AI wave, whether it's Oracle, whether
it's Dell, and now Cisco as well. Cisco is releasing
a new chip and networking system to connect AI data centers,
and this is a move that pretty much puts it
(22:45):
in more direct competition with Broadcom. How big of an
opportunity is this for Cisco? And should Broadcome be worried?
Speaker 5 (22:53):
Yeah, so we published and react, and essentially I don't
think Broadcom should be fully worried. There's a couple of
thing that I'll say, right, Cisco is actually one of
the biggest chip networking chip manufacturers globally, but more for
their legacy enterprise IT chips. Right, they produce their own
chips that powers their own networking gear. They're fairly newer
(23:15):
to the game in the networking chip side. From a
revenue standpoint, it's really not a big driver, but it
may be able to push more boxes. A couple of
things that I'll say, They did about one billion dollars
in AI back end revenue, but to put that into context,
you know they're doing about fifty five to fifty six
(23:37):
billion dollars in total sales. So you know, from an
overall percentage of AI as an overall percentage of sales,
it's still about two to three percent of total sales.
Are they going to challenge Broadcom? I doubt it, but
I do think there'll be a second source to the
cloud providers versus Broadcom.
Speaker 2 (23:57):
Which in your coverage area? What's your best I play?
Because I'm sure you get that call from clients all
the time.
Speaker 5 (24:04):
You know, I mean I have a handful. Dell was one.
You know. Hp is another one to take a look
out for. They have an analyst day next week. But
from from a networking standpoint, Arista has actually been one
of the high flyers from from the from from a
networking standpoint, so I will look at Arista and people
(24:26):
have been taking the AI networking angle and using Arista
as one of the tools.
Speaker 3 (24:33):
I like that Arista. I haven't heard that one come
up yet. You know, HPE or HPQ Just to clarify.
Speaker 5 (24:38):
Oh, HPE. So think think of it as a mini
Dell and a mini Cisco.
Speaker 2 (24:44):
In one our thanks to Will Jino Bloomberg Intelligence senior
technology analysts.
Speaker 3 (24:48):
Coming up, we'll look at why the owner of the
Corona and Wdella, especially ol brands reported positive quarrely results.
Speaker 2 (24:53):
You're listening to Bloomberg Intelligence on Bloomberg Radio, but riding
in depth research and data on two thousand companies and
one hundred and thirty industries.
Speaker 3 (25:00):
You can access Bloomberg Intelligence through Bigo on the terminal.
I'm Scarlettfoo and.
Speaker 2 (25:04):
I'm Paul Sweeney. This is Bloomberg.
Speaker 1 (25:14):
This is Bloomberg Intelligence with Scarletfoo and Paul Sweeney on
Bloomberg Radio.
Speaker 2 (25:21):
Move next to some news in the consumer product space.
Speaker 3 (25:23):
This week, Constellation Brands, which owns Corona and Wdella especial
brands in the US, reported better than expected results for
its fiscal second quarter. The company cited robust beer and
wine sales.
Speaker 2 (25:33):
This comes despite the company stock falling more than thirty
percent this year. Beer an alcoholic beverages in general have
broadly struggled as younger consumers and women drink less.
Speaker 3 (25:42):
So for more on this and other news in the
consumer space, we were joined by Ken Sha, Bloomberg Intelligence
senior consumer products analyst.
Speaker 2 (25:48):
First, ask Ken more about why Constellation Brands had been
struggling this year.
Speaker 10 (25:52):
It's definitely a slow beer market. Tariffs are playing a role,
and also some of the crackdown you know, the ice
has had in inner community is hurting the Hispanic community
and their socialization trends. All these things have been a
factor for the last couple of quarters. The company said
that their beer volumes were not quite as poor as
(26:16):
a lot of street analysts expected. But the pressures are
still on and they're very real for this company. And
that's because they're suite of products. As you mentioned Corona Medello,
these command high price points about twice the level of
a popular beer, so in times where consumers are pulling
back a little cautious about expenditures, got to remember, you know,
(26:37):
you've had high inflationary pricing in this category for the
last few years. These brands aren't doing so well right now,
and then compounding that with some of the factors that
I mentioned and some longer term issues like cannabis substitution
things we talked about GLP one user not drinking as much,
moderation among gen Z. All these things are weighing of
(26:58):
a company right now.
Speaker 3 (27:00):
Yeah, I'm super interested in what you said about the
last part, Like the structural changes in consumer tastes, especially
from gen Z younger people overall, beers just not where
people want to be spending their money necessarily.
Speaker 10 (27:14):
That seems to be the case. You know, it's it's
been around a long time. It's one hundred and fifteen
billion dollar market that is growing very slowly. It's especially flat.
In fact, volumes are expected to be down low single
digit this year. So clearly it's a very mature category.
And what we've seen in over the last few years
is consumers just want different tastes. You know, you have
a proliferation of the ray to drink cocktails, you know,
(27:37):
like truly and white clothes and more sophisticate you know,
Margarita's in a can and so on. That's where a
lot of the consumers who wants tastes experimentation are going.
And then you have other more mundane factors like just
you know, calorie more conscientious, calorie counts, and all these
things are just weighing on this very very mature industry.
Speaker 2 (27:58):
So somebody like Constellation Brands, did they go out and
look to maybe buy some of these brands or verticals
that within the spirit's business may be growing.
Speaker 10 (28:08):
Well, they've had kind of a mixed history of M
and A over the last few years. I'll put it
up me kind say that way, not really, you know,
they're downsizing their wine and spirit segment and try to
shift it to more of a high end mix, which
I think they're having success with. But what that does
is it makes their beer business even that much more important.
(28:30):
It's now about eighty five percent of their sales. So
as beer goes, I mean, the company has really good
brands and a lot of brand loyalty there. But again
there's not a lot of wiggle room.
Speaker 3 (28:42):
So with beer becoming less popular, and you mentioned other
big trends like ozebic, weight loss, drugs and greater cannabis use,
what is Constlation doing about non alcoholic beverages.
Speaker 10 (28:57):
So they've rolled out a non alcoholic Corona. They've come
out a couple of years ago. They came out with
a low calorie brand called Medello ro Corona no alcohol
I mentioned. So those two brands, while they're relatively small,
they see, you know, a lot of opportunity that's on
trend with what you said, so you know they're doing that.
(29:21):
They're also modifying some of their portfolio for more taste.
There's the consumers that want a lot of taste. They're
coming out with, you know, a fruity surveysa and so
they're doing as much as they can to stay on
trend with consumers.
Speaker 3 (29:37):
I love myself a great fruit beer. Yeah, there's a
German great fruit beer that I really like. Yeah, tastes good.
Speaker 2 (29:43):
Talk to us about this legal cannabis and obesity drugs
and the impact that's having on kind of the beer business,
the spirits business overall. Ken, is that something that a
lot of your companies are calling out.
Speaker 10 (29:54):
Bi came out of their fourth annual consumer survey on
beverage preferences, and again we see that consumers are substituting
cannabis for alcohol. Of consumers that do partake in cannabis,
now more than half have substituted for alcohol at least
once a week, and that's up from forty six percent
(30:16):
last year. So that's a trend that just keeps moving.
Now you're seeing a lot of these cannabis companies coming
out with hemp THC products beverages that are sold in
mainstream liquor stores. You know, traditional cannabis, legal cannabis sold
in dispensaries. It was not really a big hit, but
now that some of these federally legal hemp based THC
(30:38):
products beverages are sold in liquor stores right next to
the beer rile. In about half the states of the country,
that's really chipping away also at beer consumption.
Speaker 3 (30:49):
Final question to you, Ken, what about return of cash
to shareholders. I'm looking at the dividend yield about two
point nine percent if you're being generous. Is Constellation Brands
still able to make good on its dividends continue buying
back its shares?
Speaker 10 (31:03):
Yeah, that's an important point, Scarlett. Yes, they can despite
the pressure on sales. Believe it or not, the operating
margins and Constellation generates are best in class. They're about
twice that of other alcoholic beverage companies in general, so
they have strong cash flows. As a matter of fact,
they're winding down construction of a brewery right now. Over
(31:24):
the next couple of years, you're going to see free
cash flow likely rising. So it's high in rising and
that's enabling them to continue to meet their commitments to
share buybacks and dividends.
Speaker 3 (31:35):
Our thanks to Kenneth Shae Bloomberg Intelligence, a senior consumer
products analyst.
Speaker 2 (31:39):
We move next to some news on Intercontinental Exchange or ICE.
Speaker 3 (31:42):
This week we heard the company plans to invest as
much as two billion dollars in cash in polymarket, which
is a crypto based betting platform.
Speaker 2 (31:49):
The transaction values poly market at roughly eight billion dollars,
and ICE will become a global distributor of poly markets
event driven data.
Speaker 3 (31:56):
We are joined by Catherine Doherty, Bloomberg Finance Reporter. We
first Catherine for some more background on ICE.
Speaker 6 (32:02):
It runs on the blockchain. So you have this storied institution,
ICE that owns the New York Stock Exchange, as you mentioned,
and they're putting their money where their mouth is. It
really is an indication of where the market is headed.
So you have these institutional players that are teaming up
with either crypto native firms or in this case it's
(32:23):
also the prediction market based players. And we have seen
this recently with also CME, the derivatives exchange based in Chicago.
They're partnering with FanDuel, and most people associate FanDuel with
sports betting, but they are big in prediction markets as well.
And with CME and FanDuel, they're doing a markets based
(32:47):
prediction of yes or no will for example, gold Bee
above a certain benchmark. And this announcement also shows a
storied institution kind of getting behind the newer incumbents and
showing where they see the next phase of the market headed.
Speaker 2 (33:07):
What does polymarket really do? I see them quoted around
in the press and things like that.
Speaker 6 (33:11):
So you've probably seen polymarket around the time of the election.
They were one of the platforms that users were placing
bets on who was going to win the presidential election.
They at a time were also in the news around
twenty twenty two because they were prohibited from actually operating
in the US, and more recently in the last few
(33:34):
months in twenty twenty five, they've re entered the US market,
and they've done so through two avenues. One, it's a
changing regulatory environment, it's a crypto friendly regulatory regime. And
number two, they bought their own regulated derivatives platform that
(33:55):
essentially allowed them it was a pathway back into the
United States market.
Speaker 3 (34:01):
So with this deal, which values Polymarket at about eight
billion dollars, cee ICE becomes the global distributor of Polymarket's
event driven data. What does that mean to have that
data now in its hands? What can it do with
that information? Because exchanges don't just they're not just a
platform for collecting commissions on trades. They're also huge source
(34:22):
of information data that they then sell.
Speaker 6 (34:24):
That's right, it's a huge part of their business, and
you have these big institutions that are paying millions of
dollars for access to this data. And as the market
becomes a mix of institutional client base and retail clients
that data these companies, you have ICE, you have polymarket.
(34:47):
This combination is giving ICE access to retail clients that
they otherwise wouldn't necessarily have access to, and vice versa.
Polymarket gets now all of their data displayed through ICE
channels that institutional clients have been set up and working
with ICE for years. So it's a fast entry way
(35:11):
for both companies to increase their user base, increase their access,
and how they market themselves to an entirely new client.
Speaker 2 (35:22):
So it just feels like some of these traditional exchanges,
if you will, I think, are they saying, basically, if
we want to grow in the future, we have to
embrace some of these new asset classes, whether it's crypto
or whether it's predictive markets and things like. Is that
kind of what they're telling us.
Speaker 6 (35:39):
I think that it's very much where they see their
clients headed. There's a blurring line between you have hedge
funds and traditional institutional firms, and then you have retail
investors that at a time, there was so much news
during the memestock era around who these users were that
(36:02):
were in their basements, But now these are really sophisticated
investors that are playing in the options market prediction markets.
Many of the leaders of these exchanges are saying there
is no difference between what we've been running and at
least a binary yes or no. Is this index going
(36:25):
to be above or below a certain threshold. They're combining
to what was presumably two different worlds into one now.
Speaker 3 (36:34):
And competitors at polymarket include Calshi Andcrypto dot Com. Are
you anticipating, Catherine, There's going to be similar tie ups
for those companies as well.
Speaker 6 (36:43):
There is a race too. I believe that this is
just the start, or really the CME partnership with FanDuel
was kind of the first indication. This is just another
and I think that it's going to be off to
the races in terms of who partners up next, because
you to build something for scratch is hard, and when
you partner with a existing client base too, it is
(37:06):
an easy way in to an entirely new market.
Speaker 2 (37:10):
It wasn't cheap. I'm reading Bloomberg Intelligence research react from
Paul Goldberg. This acquisition applies fifty times revenue.
Speaker 9 (37:18):
Is the purchase price there.
Speaker 2 (37:20):
That's not cheap and it's an all cash deal.
Speaker 3 (37:21):
They're just saying we're in our Thanks to Catherine Doherty,
Bloomberg News Finance Reporter.
Speaker 2 (37:26):
It's this week's edition of Bloomberg Intelligence on Bloomberg Radio,
providing in depth research and data on two thousand companies
and one hundred and thirty industries.
Speaker 3 (37:33):
And remember you can access Bloomberg Intelligence via bi Go
on the terminal. I'm Scarlet Foo.
Speaker 2 (37:38):
And I'm Paul Sweeney. Stay with us. Today's top stories
and global business headlines are coming up right now
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