September 29, 2025 • 17 mins
Watch Scarlet and Paul LIVE every day on YouTube: http://bit.ly/3vTiACF.
Bloomberg Intelligence hosted by Paul Sweeney and Scarlet Fu
-Nathan Naidu, Bloomberg Intelligence Technology Research Analyst, discusses Electronic Arts agreeing to sell itself to Saudi Arabia's sovereign wealth fund and private equity firms in a deal that values the company at about $55 billion.
-Brian Egger, Bloomberg Intelligence Senior Gaming and Lodging Analyst, discusses Carnival earnings. Carnival raised its full-year earnings forecast for the third straight quarter, citing a record pace for forward bookings and improving net yields.
-Woo Jin Ho, Bloomberg Intelligence Senior Technology Analyst, discusses why Super Micro Computer is solidly positioned in a $312 billion AI-server market. He also discusses why robust cloud demand for higher-capacity hard-disk drives could fuel 17% sales growth for Western Digital in fiscal 2026.
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Episode Transcript
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Speaker 1 (00:02):
Bloomberg Audio Studios, podcasts, radio news. You're listening to the
Bloomberg Intelligence podcast. Catch us live weekdays at ten am
Eastern on Apple, Coarclay, and Android Auto with the Bloomberg
Business App. Listen on demand wherever you get your podcasts,
or watch us live on YouTube.
Speaker 2 (00:23):
Again.
Speaker 3 (00:24):
The big story on the MNA front Electronic Arts going
public via LBO. How about that kid's fifty five billion dollars.
JP Morgan advising Goldman Sachs. On the other side of
the deal, JP Morgan r in a twenty billion dollars
check to get this deal done.
Speaker 2 (00:39):
What's the mean for the gaming business?
Speaker 3 (00:41):
Nathan Nadu joins us here technology research channel for Bloomberg Intelligence.
He's based in London. Nathan, what's the how's this price
tag look for you? How's the evaluation here?
Speaker 4 (00:51):
The valuation is at a twenty to thirty percent premium
versus the last recorded market CAB before this deal was announced.
And it seems like, you know, is a premium deal,
but actually, you know, EA has a lot going for it.
It is actually launching a new battlefield game and there's
a strong prospect for this game. And actually the game
(01:13):
is now in prely release, and even then he has
already smashed all prior records set by the biggest game
in that genre, and that genre is first person should
and that game that's dominated that genre is called Duty
from Microsoft. So Betterview six is looking to be a
successful launch. And next year we have FIFA, and obviously
we know that EA has the biggest soccer game in
(01:35):
the industry, and that's FIFA. What was called FIFA but
now it's called EA Sports FC. And next year FIFA
World Cup will be a special one because it will
be hosted across three cities, including the US, and if
people don't know, US is actually the biggest market in
terms of revenue for all kinds of sports game. So
that's the second thing going for EA that I think
(01:56):
it's going to lead to at least two rounds circumstensus
be on EPs er share. So I think for e A,
this is a this this this is actually a good deal,
and we can talk about the common struggles faced by
you know, game publishers and how these deals would make
sense for e A as well as the investors in
this context.
Speaker 5 (02:17):
So yeah, let's do that.
Speaker 6 (02:18):
Because you mentioned a bunch of the titles and these
are you know, very valuable franchises. These this is a
top quality IP, whether it's E Sports, FC.
Speaker 5 (02:26):
Madden, NFL, the SIMS battlefield.
Speaker 6 (02:29):
What does ownership by private equity, by private investors allow
e A to do that it can't do as a
publicly traded company.
Speaker 4 (02:38):
I think it's all down to funds. So publishers. Game
publishers in general have been have been facing two struggles.
First one is gamers attention spend and playtime are increasingly
getting limited. The reason is people are sticking to brands
or franchises that they have played for a long time.
And in fact, New Zoom published data saying that eighty
(03:00):
percent of playtime tend to go back to the sixty
or so titles, leaving only eight percent of playtime for
brand new IP. And this is actually in favor of
EA because we mentioned those valuable IP. In fact, if
we look at global unit sales, EA has topped twenty
has four of those top twenty selling IP globally, he
(03:23):
has four out of the twenty. So that is actually
a pretty enticing deal thing for companies like private equity
because you know, profit generation is key. And what this
means is that EA has franchises that can bring in
recurring revenue. We talked about EA Sports FC, we talk
about MET and MFL and they actually revived a new franchise,
(03:43):
College Football, and you know, it was one of the
best selling titles in the US last year. So recurring
revenue is key here. And the second struggle that I
was going to go into is development cost is really high,
especially in the US, so that means that we publishers
actually have a cost disadvantage when compared to Eastern developers.
For example, you know, salaries for game engineers in China
(04:07):
is more than half the level in California, and personnel
cost game engineers is a huge part of developing a game.
So you know, tens and actually launched a new game
in the same genre as Better Few six and that
scaltalk course is doing really well. And what that costs
disadvantage is stopping EA from is continuously to push out
(04:30):
a strong salence of content to essentially extending the shelf
life of any game, and Eastern developers can do that
better because of that cost edge.
Speaker 2 (04:40):
Stay with us. More from Bloomberg Intelligence coming up after this.
Speaker 1 (04:47):
You're listening to the Bloomberg Intelligence podcast Catch US Live
weekdays at ten am Eastern on Applecarplay and Android Auto
with the Bloomberg Business App. Listen on demand wherever you
get your podcasts, or watch US Live one.
Speaker 3 (05:01):
Carnival Cruise Line raised its full year earnings forecast for
the third straight quarter, citing a record pace for forward
bookings and improving net yields.
Speaker 2 (05:10):
So what's the stock do it? Trades off three and
a half percent?
Speaker 7 (05:13):
Go figure?
Speaker 2 (05:13):
Maybe our next guest can help us out here. Brian Egger.
Speaker 3 (05:16):
He covers his gaming stuff, the lodging stuff, the crew stuff,
all the fun industries outter He's been doing on Wall
Street for a very long time. One of the top
folks in the street in his industry.
Speaker 2 (05:25):
He's Bloomberg Intelligence. Joining us live here in our Bloomberg
and Interactive broker studio. Brian Carnival. It seems like I
do know, pretty good quarter for them, what you hear?
Speaker 8 (05:33):
Yeah, very strong third quarter. You know the fifty percent
book for next year or so. On the surface, these
results are really good, and it was initially a bit
of a head scratcher to see the sell off. I
think there are two ways in which maybe they're being
perceived as conservative. The one is that their yield growth
guidance for the fourth quarter, while it's certainly very solid
in there in the mid fords, you know, with a
(05:54):
little bit below consensus, maybe the street got a little
bit heav itself. The second thing is for all of
their optimists about bookings and direction of yields, they are
very conservative and how they're deploying capital. They've only got
about one percent annual yield growth for this year in
the next two years, so they're growing very effectively, but
they are also very measured in how they deploy capacity.
(06:16):
So all this is really good, but they do mention that,
you know, they can afford to they can really be
judicious on expense growth because they're only growing capacity at
a very modest pace.
Speaker 6 (06:25):
Is that a bad thing to be conservative? How does
Carnival compare with Norwegian or Royal Caribbean.
Speaker 8 (06:30):
Yeah, so if you look at Norwegian Wild Caribbean, they're
anticipating or actually scheduling about a mid single digit, call
it five percent ish level of annual capacity growth for
twenty twenty six, twenty seven to twenty eight. You know,
it's closer to one percent for Carnival, maybe two percent
in twenty twenty eight. So they're just taking a more
conservative tack. And I think they're equally long term optimistic
(06:53):
about their ability to penetrate the vacation market, but they're
going about it in a much more measured way.
Speaker 7 (06:58):
And then that sense it could strike people's conservative.
Speaker 2 (07:01):
Talk to us about capacity.
Speaker 3 (07:02):
I mean, if they added a couple of ships, would
they sell them out?
Speaker 4 (07:05):
Yeah?
Speaker 7 (07:05):
I mean certainly.
Speaker 8 (07:06):
Their their auquancy is back to pre pandemic levels. Their
yield growth against that capacity increase is positive, and we
were looking at we've seen steadily increasing yield expectations throughout
twenty twenty five, and they've got the free cash let.
But I think they just want to build this out slowly,
you know, and maybe strike people some people as being
too slowly.
Speaker 3 (07:25):
Hey, not for nothing. You get paid a lot of
money here, Josh Weinstein. Fourteen million in cash compensation for county.
You're twenty four fourteen million in stock twenty eight million
to drive a cruise ship round.
Speaker 7 (07:36):
That's not too bad.
Speaker 5 (07:37):
Nice job if you can get it right.
Speaker 6 (07:39):
So here's my question to you, Brian, how do roil
Caribbean Norwegian Cruise and Carnival. How do they grow their
market are they stealing from each other or is there
still a big base from which to grow.
Speaker 8 (07:50):
There's definitely a penetration opportunity. Just back up for a
second on Carnival. Their goal is to become investment grade,
So part of the conservativism I think you're seeing, which
may be a head scratch. They want to get to
invest grade and I think that's probably priority one, shifting
some of the enterprise value from bondholders.
Speaker 7 (08:06):
To equity holders.
Speaker 8 (08:08):
That being said, yes, they see opportunity to grow a
relatively underpenetrated overall vacation market, but they're going about it
with kind of balance sheet being front center if that
helps it all.
Speaker 3 (08:20):
The only thing I know about the cruise business is
what I learned from Disney, who got into the business
fifteen twenty years ago and it's been a great business
for them.
Speaker 2 (08:27):
How do you stratify the cruise market?
Speaker 3 (08:30):
Now, I'm going to be the very very top mind you,
but how does the cruise industry kind of stratify itself?
Speaker 4 (08:35):
Yeah?
Speaker 8 (08:36):
I mean I think they, I think convincingly argue that
they are relatively affordable form of vacation. The package product,
the value is very good for the consumer, but it
runs across different tiers from luxury side you know, Seaborn,
Windstar Oceania Region seventies to the more mass market like
Carnival cruise line. So they run the gamup, but the
(08:58):
overall spectrum tends to be generally, you know, relatively affordable
and part of that package vacation product people buying cruises beforehand,
buying stuff on the cruise with a good share of
wallet left over.
Speaker 7 (09:10):
That works to their favor.
Speaker 5 (09:11):
How brand loyal are cruising fans?
Speaker 6 (09:14):
I mean, if you are a carnival person, are you
a Carnival person for life?
Speaker 8 (09:17):
Yeah, there's certainly some brand loyalty. And remember they've they've
got kind of as an industry, they've companies got two goals.
One is to drive bookings for their particular brand, and
they do that through new hardware with all the bells
and whistles. The other is to drive the overall awareness
of the value of cruising relative to other forms of vacationing.
And so you know, they've kind of got that dual mandate.
Speaker 2 (09:40):
So you're sitting on the Jersey Shore Sunday after in around.
Speaker 6 (09:43):
Five sweety's sitting on there. Okay, go ahead, all this.
Speaker 3 (09:47):
Every Sunday during the summer, you'd see this massive cruise
ship coming out of New York Harbor. I think it's
the Star of the Seas.
Speaker 7 (09:54):
Yeah, that's a new one. Yeah, I mean.
Speaker 2 (09:56):
Things massive, and they filled that thing up.
Speaker 8 (09:59):
Oh just and that's a that's a Royal Caribbean ship.
But I will point out that one of the things
Carnivals pointing to is, you know, they've reached the thirteen
percent return on invested capital this year, so they're kind
of getting to that double digit return pace that they targeted.
So there are their argument would be that they fill
it up, they get good pricing and relative that their
investments are getting, you know, solid low teens returns on
(10:21):
incremental invested capital with an opportunity to take that higher.
So as long as they can get that return, I
think they can convincingly say we're getting there. But obviously,
in the case of Carnival, through relatively conservative capital to
point I.
Speaker 3 (10:33):
Mean Star of the Sea, Icon of the Seas, they
have a massive passenger capacity with the ability to hold
over seventy six hundred passengers and a large group and
for somebody who doesn't like people like me, that would
be that's a tough.
Speaker 2 (10:46):
No, it's not.
Speaker 8 (10:47):
It's not the misanthropes favorite vacation activity. But you know
they do get good economies by they were those field
peoples and.
Speaker 2 (10:54):
You know how big those things.
Speaker 6 (10:55):
Well, I'm always talking with my friend who suggests that
instead of retiring to a nursing home or tournament community,
just go on.
Speaker 5 (11:01):
A cruise trip.
Speaker 2 (11:01):
I've heard that's heard that too.
Speaker 3 (11:03):
You know, you know it's a big cruisers Charlie Pellett,
and he doesn't like cruise the Caribbean.
Speaker 5 (11:07):
He was cruises like adventurous places.
Speaker 3 (11:10):
Yeah, like I'm going to I'm cruising to Turkey and
I don't know Antarctica, ger Yes, that's what Charlie.
Speaker 7 (11:16):
People pair a premium for those.
Speaker 5 (11:17):
Yeah, so's he's that kind of cruiser.
Speaker 8 (11:19):
Well, I'm just saying on average, the customer pays the premium.
Speaker 3 (11:22):
We talk about going investment grade again, day one or
day two of the pandemic. Who are the first companies
going to the bond market the cruise industry because those companies.
Speaker 2 (11:31):
Knew, oh boy, this is not gonna be good for its.
Speaker 8 (11:34):
Back from their break and therefore trying to run the
business in a measured way.
Speaker 2 (11:38):
Stay with us more from Bloomberg Intelligence coming up after this.
Speaker 1 (11:45):
You're listening to the Bloomberg Intelligence podcast. Catch us live
weekdays at ten am Eastern on Apple, Cocklay and Android
Auto with the Bloomberg Business app. Listen on demand wherever
you get your podcasts, or watch us live on YouTube.
Speaker 3 (12:00):
AI and we're talking to technology. You're talking AI, and
you know, people trying to figure out how do you
get exposure to it beyond you know, the chip manufacturers.
Speaker 2 (12:07):
I get Nvidia, maybe beyond some of.
Speaker 3 (12:09):
The software players like Microsoft, What how about computer hardware
and storage?
Speaker 2 (12:14):
Go figure, well, we get somebody here that can help
us out on this stuff.
Speaker 3 (12:16):
Wujino, Bloomberg Intelligence, Senior Technology Analysts. Which let's talk about
some of this hardware and storage companies that that you cover.
Super Micro is one of those companies that stock has
done really really well this year.
Speaker 2 (12:32):
Talk to us about that company. How do you approach
this company, super Micro Computer.
Speaker 9 (12:37):
Yeah, hey, Paul, So super Micro's actually been a very
controversial name throughout the year, but at the end of
the day, they're highly exposed to the three into twelve
billion dollar AI market. And you know the fact of
the matter is, even though they've had choppy execution. They
are one of the market leaders there and as these
(12:58):
deals come through, expect super Micro to continue to be
involved in those deals and possibly win their fair share.
Speaker 3 (13:05):
Just looking at your research, which you can do folks
going B I go on the Bloomberg terminal nets, reaccess
all the Bloomerg intelligence investment research, you write super Micro's
AI rack system expertise, and at short delivery times position
a company to boot sales seventy four twenty twenty six.
Speaker 2 (13:23):
That is extraordinary.
Speaker 7 (13:25):
Yeah.
Speaker 9 (13:25):
So look, if you think about some of these hyperscale
cloud providers as well as as neo clouds and the
neo clouds I define as these newer AI infrastructures and
service vendors like a core Weave or a LAMB, time
to market means a lot, right, and if you can't
deliver the equipment to their to their specs in a
(13:47):
timely manner, you're not going to win those deals. There
are actually two companies that have done that, super Micro
is one and Dell. So if you can ship the
AI servers, get the GPUs as quickly as possible, the
likelihood is you're going to win the deals. Now, keep
in mind these these guys were only generating roughly three
billion dollars in revenue about five years back, and now
(14:08):
we're talking about revenues closer to forty billion dollars in
fiscal twenty seven and thirty three billion dollars in fiscal
twenty six.
Speaker 3 (14:15):
Extraordinary and just super micro stock is a fifty five
to fifty two.
Speaker 2 (14:20):
Percent year to date, So it's just extraordinary, all right.
Speaker 3 (14:23):
When I think hard dis drive, I think the little
thing in my PC under my desk. But when we're
talking about the cloud, we're talking about something totally different.
Talk to us about kind of that the hard drive.
A company like Western Digital provides the stack.
Speaker 9 (14:38):
I will tell you know, we've been very bullish on
the hard disk drive market for a couple of years now,
and it's really starting to materialize, not only Western Digital
but also Seagate. If you think about the hard disk
drive market, we're talking about a forty billion dollar in revenues,
splitting roughly forty percent of it going to Western Digital,
(15:00):
forty percent going to Seagate. And at the end of
the day, a lot of the data that's generated by
AI needs to be stored somewhere, right, and it's going
into the Western Digital drives as well as the Seagate drives.
And if you see the last month, the AI story
has really started to materialize. Western Digital stock is up
(15:21):
about forty over over the past month and because of
the strong demand by the hyperscale cloud providers, these guys
have lead times of over eight weeks visibility going into
six quarters, and this is leading to price hikes. This
is a commodity market that tends to have five percent
(15:42):
annual pricing declines. Pricing stay stable. Not only stay stable,
it's probably gonna rise over the next six weeks.
Speaker 2 (15:50):
I mean, you've been bullish on Western Digital for a
couple of years. I missed that. Too bad for me.
Speaker 3 (15:55):
A year to date, Western Digital stock is up one
and fifty five percent. This isn't any stock, folks. This
is a company with a market cap of forty billion dollars.
So woods from your perspective on the hardware networking side
of the business, kind of where are we in this
AI play?
Speaker 2 (16:12):
What are your companies kind of telling you?
Speaker 9 (16:14):
Yeah, A lot of my companies are telling me it's
still in the early early days, right, but it's also
going through a lot of disruptions as well, and some
of the I guess legacy companies like Cisco, like an HPE,
it still considers a smaller fraction of the business to
really make any impact, but they're going to be involved
(16:37):
in some way or another.
Speaker 3 (16:38):
Now.
Speaker 9 (16:39):
In terms of the hyperscale cloud providers, there are a
small sub segment outside of the GPUs that are going
to benefit the optical names in particular because there is
this need for speed to traverse the data, to have
the data traverse through the networks. You know, my colleague
Jake Silverman, he covers those names. Companies like Coherent, companies
(17:03):
like Lumentum. They've actually benefited quite a bit from a
hardware perspective. Arista Networks. They have strong exposure to companies
like Meta and they have a very They've actually seen
their stock double over the past year or so. And
also another small company called Celestica based out of Canada.
(17:24):
They've been beneficiarias from from this AI span.
Speaker 1 (17:27):
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Bloomberg Audio Studios, podcasts, radio news. You're listening to the
Bloomberg Intelligence podcast. Catch us live weekdays at ten am
Eastern on Apple, Coarclay, and Android Auto with the Bloomberg
Business App. Listen on demand wherever you get your podcasts,
or watch us live on YouTube.
Speaker 2 (00:23):
Again.
Speaker 3 (00:24):
The big story on the MNA front Electronic Arts going
public via LBO. How about that kid's fifty five billion dollars.
JP Morgan advising Goldman Sachs. On the other side of
the deal, JP Morgan r in a twenty billion dollars
check to get this deal done.
Speaker 2 (00:39):
What's the mean for the gaming business?
Speaker 3 (00:41):
Nathan Nadu joins us here technology research channel for Bloomberg Intelligence.
He's based in London. Nathan, what's the how's this price
tag look for you? How's the evaluation here?
Speaker 4 (00:51):
The valuation is at a twenty to thirty percent premium
versus the last recorded market CAB before this deal was announced.
And it seems like, you know, is a premium deal,
but actually, you know, EA has a lot going for it.
It is actually launching a new battlefield game and there's
a strong prospect for this game. And actually the game
(01:13):
is now in prely release, and even then he has
already smashed all prior records set by the biggest game
in that genre, and that genre is first person should
and that game that's dominated that genre is called Duty
from Microsoft. So Betterview six is looking to be a
successful launch. And next year we have FIFA, and obviously
we know that EA has the biggest soccer game in
(01:35):
the industry, and that's FIFA. What was called FIFA but
now it's called EA Sports FC. And next year FIFA
World Cup will be a special one because it will
be hosted across three cities, including the US, and if
people don't know, US is actually the biggest market in
terms of revenue for all kinds of sports game. So
that's the second thing going for EA that I think
(01:56):
it's going to lead to at least two rounds circumstensus
be on EPs er share. So I think for e A,
this is a this this this is actually a good deal,
and we can talk about the common struggles faced by
you know, game publishers and how these deals would make
sense for e A as well as the investors in
this context.
Speaker 5 (02:17):
So yeah, let's do that.
Speaker 6 (02:18):
Because you mentioned a bunch of the titles and these
are you know, very valuable franchises. These this is a
top quality IP, whether it's E Sports, FC.
Speaker 5 (02:26):
Madden, NFL, the SIMS battlefield.
Speaker 6 (02:29):
What does ownership by private equity, by private investors allow
e A to do that it can't do as a
publicly traded company.
Speaker 4 (02:38):
I think it's all down to funds. So publishers. Game
publishers in general have been have been facing two struggles.
First one is gamers attention spend and playtime are increasingly
getting limited. The reason is people are sticking to brands
or franchises that they have played for a long time.
And in fact, New Zoom published data saying that eighty
(03:00):
percent of playtime tend to go back to the sixty
or so titles, leaving only eight percent of playtime for
brand new IP. And this is actually in favor of
EA because we mentioned those valuable IP. In fact, if
we look at global unit sales, EA has topped twenty
has four of those top twenty selling IP globally, he
(03:23):
has four out of the twenty. So that is actually
a pretty enticing deal thing for companies like private equity
because you know, profit generation is key. And what this
means is that EA has franchises that can bring in
recurring revenue. We talked about EA Sports FC, we talk
about MET and MFL and they actually revived a new franchise,
(03:43):
College Football, and you know, it was one of the
best selling titles in the US last year. So recurring
revenue is key here. And the second struggle that I
was going to go into is development cost is really high,
especially in the US, so that means that we publishers
actually have a cost disadvantage when compared to Eastern developers.
For example, you know, salaries for game engineers in China
(04:07):
is more than half the level in California, and personnel
cost game engineers is a huge part of developing a game.
So you know, tens and actually launched a new game
in the same genre as Better Few six and that
scaltalk course is doing really well. And what that costs
disadvantage is stopping EA from is continuously to push out
(04:30):
a strong salence of content to essentially extending the shelf
life of any game, and Eastern developers can do that
better because of that cost edge.
Speaker 2 (04:40):
Stay with us. More from Bloomberg Intelligence coming up after this.
Speaker 1 (04:47):
You're listening to the Bloomberg Intelligence podcast Catch US Live
weekdays at ten am Eastern on Applecarplay and Android Auto
with the Bloomberg Business App. Listen on demand wherever you
get your podcasts, or watch US Live one.
Speaker 3 (05:01):
Carnival Cruise Line raised its full year earnings forecast for
the third straight quarter, citing a record pace for forward
bookings and improving net yields.
Speaker 2 (05:10):
So what's the stock do it? Trades off three and
a half percent?
Speaker 7 (05:13):
Go figure?
Speaker 2 (05:13):
Maybe our next guest can help us out here. Brian Egger.
Speaker 3 (05:16):
He covers his gaming stuff, the lodging stuff, the crew stuff,
all the fun industries outter He's been doing on Wall
Street for a very long time. One of the top
folks in the street in his industry.
Speaker 2 (05:25):
He's Bloomberg Intelligence. Joining us live here in our Bloomberg
and Interactive broker studio. Brian Carnival. It seems like I
do know, pretty good quarter for them, what you hear?
Speaker 8 (05:33):
Yeah, very strong third quarter. You know the fifty percent
book for next year or so. On the surface, these
results are really good, and it was initially a bit
of a head scratcher to see the sell off. I
think there are two ways in which maybe they're being
perceived as conservative. The one is that their yield growth
guidance for the fourth quarter, while it's certainly very solid
in there in the mid fords, you know, with a
(05:54):
little bit below consensus, maybe the street got a little
bit heav itself. The second thing is for all of
their optimists about bookings and direction of yields, they are
very conservative and how they're deploying capital. They've only got
about one percent annual yield growth for this year in
the next two years, so they're growing very effectively, but
they are also very measured in how they deploy capacity.
(06:16):
So all this is really good, but they do mention that,
you know, they can afford to they can really be
judicious on expense growth because they're only growing capacity at
a very modest pace.
Speaker 6 (06:25):
Is that a bad thing to be conservative? How does
Carnival compare with Norwegian or Royal Caribbean.
Speaker 8 (06:30):
Yeah, so if you look at Norwegian Wild Caribbean, they're
anticipating or actually scheduling about a mid single digit, call
it five percent ish level of annual capacity growth for
twenty twenty six, twenty seven to twenty eight. You know,
it's closer to one percent for Carnival, maybe two percent
in twenty twenty eight. So they're just taking a more
conservative tack. And I think they're equally long term optimistic
(06:53):
about their ability to penetrate the vacation market, but they're
going about it in a much more measured way.
Speaker 7 (06:58):
And then that sense it could strike people's conservative.
Speaker 2 (07:01):
Talk to us about capacity.
Speaker 3 (07:02):
I mean, if they added a couple of ships, would
they sell them out?
Speaker 4 (07:05):
Yeah?
Speaker 7 (07:05):
I mean certainly.
Speaker 8 (07:06):
Their their auquancy is back to pre pandemic levels. Their
yield growth against that capacity increase is positive, and we
were looking at we've seen steadily increasing yield expectations throughout
twenty twenty five, and they've got the free cash let.
But I think they just want to build this out slowly,
you know, and maybe strike people some people as being
too slowly.
Speaker 3 (07:25):
Hey, not for nothing. You get paid a lot of
money here, Josh Weinstein. Fourteen million in cash compensation for county.
You're twenty four fourteen million in stock twenty eight million
to drive a cruise ship round.
Speaker 7 (07:36):
That's not too bad.
Speaker 5 (07:37):
Nice job if you can get it right.
Speaker 6 (07:39):
So here's my question to you, Brian, how do roil
Caribbean Norwegian Cruise and Carnival. How do they grow their
market are they stealing from each other or is there
still a big base from which to grow.
Speaker 8 (07:50):
There's definitely a penetration opportunity. Just back up for a
second on Carnival. Their goal is to become investment grade,
So part of the conservativism I think you're seeing, which
may be a head scratch. They want to get to
invest grade and I think that's probably priority one, shifting
some of the enterprise value from bondholders.
Speaker 7 (08:06):
To equity holders.
Speaker 8 (08:08):
That being said, yes, they see opportunity to grow a
relatively underpenetrated overall vacation market, but they're going about it
with kind of balance sheet being front center if that
helps it all.
Speaker 3 (08:20):
The only thing I know about the cruise business is
what I learned from Disney, who got into the business
fifteen twenty years ago and it's been a great business
for them.
Speaker 2 (08:27):
How do you stratify the cruise market?
Speaker 3 (08:30):
Now, I'm going to be the very very top mind you,
but how does the cruise industry kind of stratify itself?
Speaker 4 (08:35):
Yeah?
Speaker 8 (08:36):
I mean I think they, I think convincingly argue that
they are relatively affordable form of vacation. The package product,
the value is very good for the consumer, but it
runs across different tiers from luxury side you know, Seaborn,
Windstar Oceania Region seventies to the more mass market like
Carnival cruise line. So they run the gamup, but the
(08:58):
overall spectrum tends to be generally, you know, relatively affordable
and part of that package vacation product people buying cruises beforehand,
buying stuff on the cruise with a good share of
wallet left over.
Speaker 7 (09:10):
That works to their favor.
Speaker 5 (09:11):
How brand loyal are cruising fans?
Speaker 6 (09:14):
I mean, if you are a carnival person, are you
a Carnival person for life?
Speaker 8 (09:17):
Yeah, there's certainly some brand loyalty. And remember they've they've
got kind of as an industry, they've companies got two goals.
One is to drive bookings for their particular brand, and
they do that through new hardware with all the bells
and whistles. The other is to drive the overall awareness
of the value of cruising relative to other forms of vacationing.
And so you know, they've kind of got that dual mandate.
Speaker 2 (09:40):
So you're sitting on the Jersey Shore Sunday after in around.
Speaker 6 (09:43):
Five sweety's sitting on there. Okay, go ahead, all this.
Speaker 3 (09:47):
Every Sunday during the summer, you'd see this massive cruise
ship coming out of New York Harbor. I think it's
the Star of the Seas.
Speaker 7 (09:54):
Yeah, that's a new one. Yeah, I mean.
Speaker 2 (09:56):
Things massive, and they filled that thing up.
Speaker 8 (09:59):
Oh just and that's a that's a Royal Caribbean ship.
But I will point out that one of the things
Carnivals pointing to is, you know, they've reached the thirteen
percent return on invested capital this year, so they're kind
of getting to that double digit return pace that they targeted.
So there are their argument would be that they fill
it up, they get good pricing and relative that their
investments are getting, you know, solid low teens returns on
(10:21):
incremental invested capital with an opportunity to take that higher.
So as long as they can get that return, I
think they can convincingly say we're getting there. But obviously,
in the case of Carnival, through relatively conservative capital to
point I.
Speaker 3 (10:33):
Mean Star of the Sea, Icon of the Seas, they
have a massive passenger capacity with the ability to hold
over seventy six hundred passengers and a large group and
for somebody who doesn't like people like me, that would
be that's a tough.
Speaker 2 (10:46):
No, it's not.
Speaker 8 (10:47):
It's not the misanthropes favorite vacation activity. But you know
they do get good economies by they were those field
peoples and.
Speaker 2 (10:54):
You know how big those things.
Speaker 6 (10:55):
Well, I'm always talking with my friend who suggests that
instead of retiring to a nursing home or tournament community,
just go on.
Speaker 5 (11:01):
A cruise trip.
Speaker 2 (11:01):
I've heard that's heard that too.
Speaker 3 (11:03):
You know, you know it's a big cruisers Charlie Pellett,
and he doesn't like cruise the Caribbean.
Speaker 5 (11:07):
He was cruises like adventurous places.
Speaker 3 (11:10):
Yeah, like I'm going to I'm cruising to Turkey and
I don't know Antarctica, ger Yes, that's what Charlie.
Speaker 7 (11:16):
People pair a premium for those.
Speaker 5 (11:17):
Yeah, so's he's that kind of cruiser.
Speaker 8 (11:19):
Well, I'm just saying on average, the customer pays the premium.
Speaker 3 (11:22):
We talk about going investment grade again, day one or
day two of the pandemic. Who are the first companies
going to the bond market the cruise industry because those companies.
Speaker 2 (11:31):
Knew, oh boy, this is not gonna be good for its.
Speaker 8 (11:34):
Back from their break and therefore trying to run the
business in a measured way.
Speaker 2 (11:38):
Stay with us more from Bloomberg Intelligence coming up after this.
Speaker 1 (11:45):
You're listening to the Bloomberg Intelligence podcast. Catch us live
weekdays at ten am Eastern on Apple, Cocklay and Android
Auto with the Bloomberg Business app. Listen on demand wherever
you get your podcasts, or watch us live on YouTube.
Speaker 3 (12:00):
AI and we're talking to technology. You're talking AI, and
you know, people trying to figure out how do you
get exposure to it beyond you know, the chip manufacturers.
Speaker 2 (12:07):
I get Nvidia, maybe beyond some of.
Speaker 3 (12:09):
The software players like Microsoft, What how about computer hardware
and storage?
Speaker 2 (12:14):
Go figure, well, we get somebody here that can help
us out on this stuff.
Speaker 3 (12:16):
Wujino, Bloomberg Intelligence, Senior Technology Analysts. Which let's talk about
some of this hardware and storage companies that that you cover.
Super Micro is one of those companies that stock has
done really really well this year.
Speaker 2 (12:32):
Talk to us about that company. How do you approach
this company, super Micro Computer.
Speaker 9 (12:37):
Yeah, hey, Paul, So super Micro's actually been a very
controversial name throughout the year, but at the end of
the day, they're highly exposed to the three into twelve
billion dollar AI market. And you know the fact of
the matter is, even though they've had choppy execution. They
are one of the market leaders there and as these
(12:58):
deals come through, expect super Micro to continue to be
involved in those deals and possibly win their fair share.
Speaker 3 (13:05):
Just looking at your research, which you can do folks
going B I go on the Bloomberg terminal nets, reaccess
all the Bloomerg intelligence investment research, you write super Micro's
AI rack system expertise, and at short delivery times position
a company to boot sales seventy four twenty twenty six.
Speaker 2 (13:23):
That is extraordinary.
Speaker 7 (13:25):
Yeah.
Speaker 9 (13:25):
So look, if you think about some of these hyperscale
cloud providers as well as as neo clouds and the
neo clouds I define as these newer AI infrastructures and
service vendors like a core Weave or a LAMB, time
to market means a lot, right, and if you can't
deliver the equipment to their to their specs in a
(13:47):
timely manner, you're not going to win those deals. There
are actually two companies that have done that, super Micro
is one and Dell. So if you can ship the
AI servers, get the GPUs as quickly as possible, the
likelihood is you're going to win the deals. Now, keep
in mind these these guys were only generating roughly three
billion dollars in revenue about five years back, and now
(14:08):
we're talking about revenues closer to forty billion dollars in
fiscal twenty seven and thirty three billion dollars in fiscal
twenty six.
Speaker 3 (14:15):
Extraordinary and just super micro stock is a fifty five
to fifty two.
Speaker 2 (14:20):
Percent year to date, So it's just extraordinary, all right.
Speaker 3 (14:23):
When I think hard dis drive, I think the little
thing in my PC under my desk. But when we're
talking about the cloud, we're talking about something totally different.
Talk to us about kind of that the hard drive.
A company like Western Digital provides the stack.
Speaker 9 (14:38):
I will tell you know, we've been very bullish on
the hard disk drive market for a couple of years now,
and it's really starting to materialize, not only Western Digital
but also Seagate. If you think about the hard disk
drive market, we're talking about a forty billion dollar in revenues,
splitting roughly forty percent of it going to Western Digital,
(15:00):
forty percent going to Seagate. And at the end of
the day, a lot of the data that's generated by
AI needs to be stored somewhere, right, and it's going
into the Western Digital drives as well as the Seagate drives.
And if you see the last month, the AI story
has really started to materialize. Western Digital stock is up
(15:21):
about forty over over the past month and because of
the strong demand by the hyperscale cloud providers, these guys
have lead times of over eight weeks visibility going into
six quarters, and this is leading to price hikes. This
is a commodity market that tends to have five percent
(15:42):
annual pricing declines. Pricing stay stable. Not only stay stable,
it's probably gonna rise over the next six weeks.
Speaker 2 (15:50):
I mean, you've been bullish on Western Digital for a
couple of years. I missed that. Too bad for me.
Speaker 3 (15:55):
A year to date, Western Digital stock is up one
and fifty five percent. This isn't any stock, folks. This
is a company with a market cap of forty billion dollars.
So woods from your perspective on the hardware networking side
of the business, kind of where are we in this
AI play?
Speaker 2 (16:12):
What are your companies kind of telling you?
Speaker 9 (16:14):
Yeah, A lot of my companies are telling me it's
still in the early early days, right, but it's also
going through a lot of disruptions as well, and some
of the I guess legacy companies like Cisco, like an HPE,
it still considers a smaller fraction of the business to
really make any impact, but they're going to be involved
(16:37):
in some way or another.
Speaker 3 (16:38):
Now.
Speaker 9 (16:39):
In terms of the hyperscale cloud providers, there are a
small sub segment outside of the GPUs that are going
to benefit the optical names in particular because there is
this need for speed to traverse the data, to have
the data traverse through the networks. You know, my colleague
Jake Silverman, he covers those names. Companies like Coherent, companies
(17:03):
like Lumentum. They've actually benefited quite a bit from a
hardware perspective. Arista Networks. They have strong exposure to companies
like Meta and they have a very They've actually seen
their stock double over the past year or so. And
also another small company called Celestica based out of Canada.
(17:24):
They've been beneficiarias from from this AI span.
Speaker 1 (17:27):
This is the Bloomberg Intelligence podcast, available on Apple, Spotify,
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