November 3, 2025 • 43 mins
Bloomberg’s Caroline Hyde discusses Amazon’s $38 billion deal to supply OpenAI with Nvidia chips, as the AI investment boom continues. Plus, Xiaomi's pivot from smartphones to electric vehicles may have come at a human cost. And Palantir’s earnings are expected to show continued excitement for AI and defense tech.
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Speaker 1 (00:02):
Bloomberg Audio Studios, podcasts, radio news. Bloomberg Tech is live
from coast to coast with Caroline Hide in New York
and ed Lo Lolow in San Francisco.
Speaker 2 (00:21):
This is Bloomberg Tech coming up.
Speaker 3 (00:23):
Amazon's cloud unit signs a thirty eight billion dollar deal
to supply open Ai.
Speaker 2 (00:28):
With computing power.
Speaker 3 (00:29):
Plus how Shaomi's pivot from smartphones to electric vehicles may
have come at a human cost, And all eyes on
Paneteer posting its earnings results after the closing bell. This
is defense tech spending is ramping up. But first we
check on the markets.
Speaker 2 (00:44):
Also ramping up.
Speaker 3 (00:45):
Not quite at a record high for the Nasdaq one hundred,
but we are up some four tenths of percent for
the big Tech benchmark as we focus in once again
on earnings and.
Speaker 2 (00:54):
The never ending desire for AI compute.
Speaker 3 (00:56):
Let's go there, because the key points drivers on this
particular benchmark are two stocks. We shine a light on Amazon,
pushing on four point five percent higher after significant gains
on Friday after its earnings.
Speaker 2 (01:08):
This is a company that is of.
Speaker 3 (01:09):
Course shrinking its workforce but focusing in on AWS growth,
and it manages to sign open Ai as that new
client thirty eight billion dollar deal will dig into it
in video. Well, they're the GPUs that go inside all
these data centers. It too climbs in terms of a
market capitalization up another two point seven percent. I just
want to go to the top story that is Amazon
and open Ai as they sign a thirty eight billion
(01:30):
dollar deal for further cloud compute. And it's been likest
Seth Figeman that we turned to Seth in.
Speaker 2 (01:34):
The grand scheme of Things. Scheme of things.
Speaker 3 (01:36):
It's not three hundred billion dollars of Oracle Cloud that
we saw before, but it is notable that open Ai
turns to more and more cloud providers at this moment.
Speaker 4 (01:44):
That's right. It really is telling about this moment for
both companies. Open Ai just tapping every possible resource that
can to meet its cloud computing needs, and Amazon, which
had previously been investigating Anthropic, is also trying to have
a piece of open Ai and possibly other players down
the road. So it contributes to that incestuous where we
keep talk about everyone long is backing everyone else.
Speaker 3 (02:01):
And of course we've seen a deal to offer open
a eyes opens large language models into the.
Speaker 2 (02:09):
Overall bedrock offering of AWS. But this is different.
Speaker 3 (02:11):
This is a seven year deal, it goes out, but
actually by end of twenty twenty six, we're going to
see the amount of computer or any necessary for open
Ai to go on to a.
Speaker 4 (02:22):
A bit more near term than some other deals we've
see Opening Eye Broker and Opennie Eyes leaving the door
open to expanding with more investment down the road. I
do think it's telling though, that this is Amazon providing
in video chips, not Tramium not as so. On the
one hand, it's a testament to Amazon's ability to build
up cloud computing infrastructure at scale to meet Open Eyes needs.
But you have to wonder what that means about the
(02:42):
quality of Amazon's own chips.
Speaker 3 (02:43):
We go into that for us because they talk about
the tens of thousands of video chips that are going
to be used, but they then talk about the millions
of potential CPUs that they might eventually help using. Is
that where Aws's own vertical integration comes from.
Speaker 4 (02:58):
You know it's possible because I think the larger industr
is also thinking more about investments in inference as opposed
to training. So with training, you want those GPUs the
best possible, But with inference CPUs and some maybe second
tier GPU type chips could meet the needs. So maybe
that's where we see them play more.
Speaker 3 (03:13):
And then take us to how AWS continues to therefore
show this twenty percent growth that we saw on the Friday.
Speaker 2 (03:19):
Is it going to be more.
Speaker 3 (03:20):
Deals coming from open Ai? How much farther can they sprawl?
Or is it more about individual enterprises or sovereign AI
for example.
Speaker 4 (03:26):
I think it's a little bit of all those. And
I think what we're seeing with OpenAI in particular is
that now that the exclusivity arrangement with Microsoft is kind
of a done deal, they can tap everyone. They already
have Google as a partner, they have Amazon, They've been
video brought them everyone, and I think Amazon's ready to
play ball in that category.
Speaker 3 (03:41):
Well, Soethig, I've been playing ball with us this morning.
We really appreciate it. Meanwhile, in video, of course, as
we just talked about it, the GPU supply, it made
history last week with the first company to ever hit
a five trillion dollar market cap according to Luke Capital Markets,
so the company could add trillions more. As in video
leads the quote golden wave of Genai adoption. Let's get
out to really most round Plastelica, because all paths lead
(04:04):
back to in video when we talk about any of
these compute deals right now, Ryan.
Speaker 5 (04:08):
Yeah, absolutely, it certainly feels that way. This is the
latest in a series of street high price targets that
we've seen on in VideA. Before Loop, we had HSBC,
which forecasts I think seventy or eighty percent upside. Before
that we had an additional loop street high price targets.
People keep sort of outdoing each other trying to estimate
how high up this stock is going to go. So
(04:29):
right now, the latest s men points to about eight
point five trillion market capitalization. Like you said, it just
hit five trillions, so that points to still a lot
more potential upside from here. And the story hasn't really changed.
People continue to see a lot of long term demand
for all kinds of AI related hardware and infrastructure, and
(04:50):
certainly it will expand out a little bit. And Vidia
has a very important software business for example. But in general,
this is all about the GPUs that have been driving
the AI trade really for the past couple of years now.
Speaker 3 (05:01):
And look, their GPUs are also part of the Microsoft
Iron deal that we're talking of today. A nine point
seven billion dollar look for compute Microsoft using yet another neocloud,
this time in Australian one. We've also got in the
news how Alphabet's selling this huge amount of debt to
be able to finance the overall AI trade and compute purchase.
But Ryan, you've got a great story and just showing
(05:21):
how last week, if we reflect a bit, we started
to be discerning about which companies we're going to celebrate
AI investment and ones that we're not going to Yeah.
Speaker 5 (05:30):
Absolutely so. Really the poster child on the other end
of this trade is Meadow That stockfel quite sharply last
week after it came out, really talked about its expense growth,
it's campex growth, it's talking about taking write offs in
all of this. There, I think there is more skepticism.
People want to see that all of this spending is
being done in a diligent and disciplined kind of way,
(05:50):
and that this is really going to lead to some
kind of pronounced return on all this investment. Now, I
think there's still a lot of support for AI related
strategies overall, especially yet companies like Amazon and Alphabet, which
are showing a pretty direct link between all of this
spending and improved performance in their cloud computing businesses. But
for someone like Meta, which doesn't have an equivalent cloud
(06:12):
type business, the story is getting a little bit trickier
for them. People are getting a little bit more discerning,
and like you said, we did see this dot come
down last week, as I think people just are maybe
getting a little bit of cold feet.
Speaker 3 (06:24):
What's interesting, Ryan, is also you shine a light on
how we've had a bit of dispersion outside of the
key well, mag seven and then some names Brawd, Common
others thrown in. We've got some of the suppliers to
the data centers or suppliers to some of these compute
powers that are also winning. I mean, Micron's another key
winner on the day, but you shine light and other
companies that out performed.
Speaker 6 (06:44):
Yeah, certainly.
Speaker 5 (06:44):
I mean it's not purely an a or an mbidious
story anymore by any stretch of the imagination, anything that
is involved in any kind of components here. I mean,
we've certainly seen Broadcom another major winner, Micron, storage companies
like Steagate and Western Digital, these have been some of
the biggest performers of the year, and they're a little
bit less high profile, but They are certainly seeing very
(07:05):
strong growth inflections because they are just part of the
overall ecosystem that is required to build out all these
data centers, power all the data centers, do storage memory,
all the stuff that is involved with AI and having
it produce the you know, the material that people are using.
It's a much bigger trade than it was, you know,
a couple of years ago, for sure.
Speaker 2 (07:25):
Rand Vastelica always with the must reads. We thank you.
Speaker 3 (07:28):
Let's get more on this AI compute trend that's never ending.
Tony answer us tro Price Science and Technology from Portfolio Manager.
Your top holding is in video and all Parsley back,
but Microsoft's a big one, Broadcom, Alphabet really all of
the big winners. Is this playing out as you anticipated?
Speaker 6 (07:45):
Yeah?
Speaker 7 (07:46):
Well, I think that, you know, AI is a huge
productivity driver in my opinion, and I think that these
companies are really well positioned to essentially capture that and
would be the platforms for I think growth in the economy,
and you know I'm looking for and going forward is
like you know, the new use cases really come through,
like agentic AI for example.
Speaker 6 (08:07):
I think it's to fill this capacity.
Speaker 7 (08:09):
It can't just be you and me using chat to
et it's got to be you know, thousands of agents
for each company, like making decisions and executing and unlocking.
I think labor essentially is what I'm looking for, and
that's what's exciting going forward.
Speaker 3 (08:24):
It's exciting when you see in video's name reference in
about three of the compute deals just on this Monday alone.
But take us to perhaps the one that you don't
hone interestingly, you don't have exposure to Amazon and AWS,
but it signs it's deal with open AI.
Speaker 2 (08:37):
Hasn't been methodology.
Speaker 3 (08:38):
Around that about its own cloud prowess or perhaps worries
about the lack of growth that we've seen in previous quarters.
Bar from the previous numbers they just reported Friday.
Speaker 7 (08:48):
Hey, well, I think that they had a nice earnings report,
and I do think that there seems to be a
lot more momentum now, you know, you talk about the
deal that they just did today and just say like
rolling out a lot more compute and accelerating a w
S I think is really good for the business. I
think they they're well positioned to essentially leverage AI and
(09:11):
their e commerce business as well as being an infrastructure provider.
So I don't think you can count them out at all,
and uh, you know, it's good to see them, you know, outperforming.
Speaker 3 (09:20):
What's interesting is someone who got beaten up as in
the portfolio, which is Meta. And I'm interested on your
take of how we're deciding who we reward of capital
expenditure and who we don't.
Speaker 7 (09:31):
Yeah, well, I think that uh, you know, AI is
a long term investment for Meta, and I think that
the market is probably digesting the you know, high end
level of cappex and the depreciation that's coming through the
P and L. But I think that's a little bit
too short term to view it, and you look past that.
(09:52):
You know, the returns are there and these are going
to be great investments. And you know, Meta definitely has
the digital formats to leverage you know, AI and tremendous
scale across customers, and so I think it's exciting what
they're doing in the SMB segment as well.
Speaker 6 (10:10):
If it lost a lot of ability for.
Speaker 7 (10:12):
Companies to essentially like reach customers with just a credit
card and.
Speaker 6 (10:17):
Asking for the ROI from ad campaigns.
Speaker 3 (10:20):
I just want to go to what President and Microsoft
was telling our network a little bit earlier today about
the risks of underinvesting.
Speaker 2 (10:27):
Really here we spoke with Brad Smith. Just take are listen, Tony.
Speaker 8 (10:31):
Our biggest challenge is not a risk of getting ahead
of demand, it's actually keeping pace with demand. And what
we are finding is that our customers, you know, whether
they be enterprises across the economy or governments, are nonprofits,
they are looking to us to build out this capacity.
They want to use this computer. So for us, if
(10:55):
we build it, it will be put to use. As
it's put to use, there will be a return to
our shareholders.
Speaker 3 (11:02):
You, of course have exposure to Microsoft, Tony, Brad really
talking about how they're expanding more geographically as well and
investing over in the Middle East, not just taking money
from the Middle East. And I'm interested in what you
think about Microsoft's need to depend on neoclouds. We saw
them strike a deal with an Australian neocloud provider for
Texas data centers. Is that something you like to see,
(11:22):
that use of their money and capital expenditure on neocloud
as well as their own Yeah.
Speaker 6 (11:28):
I think it allows them to be flexible and nimble.
Speaker 7 (11:30):
I think that standing up these data centers is no
small feet and a lot of times, it requires various players,
it requires the data center capacity, the power, and so
I think it's encouragency Microsoft collaborating with the ecosystem and
plug in partners and so to.
Speaker 6 (11:49):
Me, I think it makes sense.
Speaker 7 (11:50):
I think it's also a testament to the demand signals
they're seeing and kind of the workloads.
Speaker 6 (11:55):
Really take off. And you know, I think AI is
really hard new.
Speaker 7 (11:58):
Not every company that is trying to do it is successful,
but I think the ones that are finding success are
you know, seeing tremendous promise, and so I think that's
what essentially it gives people confidence to invest.
Speaker 2 (12:10):
Here, confidence to keep adding.
Speaker 3 (12:12):
When we've seen runaway performance not just of Nvidio at
five trillion, but another one of our holdings, Micron for example,
I mean significant outperformance, when do you decide that you
want to cash in profit take.
Speaker 7 (12:26):
Yeah, we're all constantly managing position sizes in the portfolio.
But you know, in my opinion, I think that you
want to be invested in the areas where there is
essentially a bottleneck, there's scarcity, and that performance depends on it.
So I think that HPM memory, you know HGDS and
(12:46):
now you know nand there's there's becoming more of a
shortage and so to me, the industry is getting better
and it's a critical component. So you know, from my perspective,
there is opportunity for these companies to compound value over time.
Speaker 3 (13:03):
You are, of course equity focused, but when we have
ours bets selling debt in Europe and the US, any
of that financing of this AI spend give you pause.
Speaker 6 (13:15):
Yeah, well, I think it's novel.
Speaker 7 (13:17):
But you know, you look at the cash generation of
a lot of these companies. They're really blue chip and
you know, to me, I think that this investment is smart,
and to do some appropriate level of.
Speaker 6 (13:29):
Debt financing I think can make sense.
Speaker 7 (13:32):
In addition, I think that the infrastructure, you know, there's
a lot of debate of like the useful life of this.
I know that Invidia comes out with a new generation
every year, but I think that these are longer lived
assets than people appreciate potentially, and they're not just like
three years obsolescence, but probably more like five or six.
And so you know, in terms of the appetite to
(13:54):
leap against it, I think that in three or four years,
it's going to be more commonly accepted. I think we're
probably on the path there because these are really, like
I think, you know, revenue generating assets and there's a
lot of protivity coming off of them.
Speaker 3 (14:08):
And Tony that productivity, as you started the conversation is
about how we use deploy general to AI.
Speaker 2 (14:13):
Impalent is one.
Speaker 3 (14:14):
That really has but how do they fight also the
macroheadwinds the government shutdown? Do you have any concerns at
the valuations that some of these companies trade at.
Speaker 7 (14:24):
Hey, absolutely, I mean these are you know, very elevated multiples,
and so they need to keep delivering the growth here.
You know, Paltier is definitely I think at the tip
of the sphere in terms of implementing AI.
Speaker 6 (14:36):
I mean they started doing that and.
Speaker 7 (14:38):
The government and now the commercial businesses growing rapidly, and
so you know, I think the government's shutdown, like, I
think that's probably a temporary thing. They could get a
pass for that just because government's not going to be
shut down forever. And you know, you look forward and
I think what really matters is that they're driving significant
ROI for their customers and they're able to do it
(15:01):
in a way that connects their data and I think
that's like the change in it services is I think
that you need to come with a solution and the
engineers to help your customers instead of implementing like a
Saaspace off the shelf solution.
Speaker 6 (15:16):
So I think that's what's exciting. And yeah, we'll see
later on today.
Speaker 3 (15:20):
Tony Wang is always great catching up with you. Another
busy week with volunteer after the bowel. We so appreciate
your expertise. T ro Price, thank you. Coming up Shaomi's
pivot from smartphones to elexit vehicles when it may have
come at a very high human cost.
Speaker 2 (15:34):
We're on that next. This is Blue Mead Tech China Shawmi.
Speaker 3 (15:49):
It's set a relentless pace the pivot from smartphones to evs,
but it may.
Speaker 2 (15:53):
Have come at a human cost.
Speaker 3 (15:55):
Blumeag spotlight story this week follows the intense schedule of
one page as he transferred Shami's retail network before ultimately
collapsing of a heart attack in twenty twenty four. Brim
Boxspeter Altrastrom joins us Now it's a deeply reported story
through the bravery of a widow who is convinced that
it was his work schedule that in many ways contributed
(16:17):
to his death At the age of thirty four, Peter.
Speaker 9 (16:20):
That's right. So Wang was one of the key managers
as Shaomi, the company best known for its smartphones, decided
that they were going to push into electric vehicles. The
founder late June, said this was going to be one
of his last strategic plays for the company. He had
really earned a fantastic reputation for himself in the smartphone arena,
but he wanted to succeed in EV's too. Remember this
(16:42):
is something that Apple tried and wasn't able to pull off.
Shaomi has actually designed a very good car. They've been
able to succeed in the market. They've been able to
gain some traction in that space. But Wang was one
of the key employees who was responsible for redesigning stores
as they were shifting these us from really showcases for
smartphones to something that could show you an auto, full
(17:04):
size automobile that would have the infrastructure to be able
to show that off and demonstrate what kind of cars
they actually had. So at one point he was responsible
for two hundred and sixty seven stores. He was working
almost NonStop hours. His wife told our reporter that he
would he would frequently work until the wee hours of
the night. We also saw as we chat messages where
he was exchanging messages at two thirty in the morning
(17:26):
and working on and on and on, and as you mentioned, tragically,
at the age of thirty four, he died of a
heart attack. And so it's a story really about how
this extreme, these extreme hours can take a toll on managers,
especially in an area so competitive like technology.
Speaker 3 (17:42):
Shami has responded in part to our investigation and talking
about their sympathies that go to the family. But set
this in the context of nine ninety six of what
is very much a cultural focus on working extremely hard
in China and tech.
Speaker 9 (17:59):
Right, Yeah, you're referring to nine ninety six. In China,
they talk about working from nine am in the morning
until nine pm, six days a week, which is extremely
long hours. The World Health Organization defines over work as
working more than fifty five hours. Now in China they
work even harder than the United States. It's about forty
nine hours on average for full time workers, compared with
(18:20):
forty five in the United States. In the tech industry,
it's far beyond those kinds of hours. At Shaomi, the
workers in independent surveys showed that they were working eleven
and a half hours a day, so you're talking about
almost sixty hours a week that they were working, and
Wang seemed to be one of the workers who was
going even beyond that at this point. So, of course,
(18:41):
there's a lot at stake here. They're competing for leadership
in AI, in chips, in electric vehicles, et cetera. And
there's a lot of money at stake. When you look
at the most valuable, the wealthiest people in the world,
they're all tech entrepreneurs led by Elon Musk, of course,
but you've got Larry Ellison and Jeff Bezos in there too.
There's a lot of money at stake. There's also geopolitical advantage,
(19:01):
and Shami was pushing very hard to make this pivot
into electric vehicles.
Speaker 3 (19:05):
Peteilstrom, thank you so much. It is an emotive story
and I must read we appreciate it. Now, coming up,
we'll dig into Apple how it's set for a make
or break year on the regulatory front as it gears
up to start twenty twenty six with a one hundred
and forty billion dollar quarter.
Speaker 2 (19:21):
This is BLUEBG Tech.
Speaker 3 (19:31):
Apple when it's set to kick off it's fiftieth year
with what's expected to be a nearly one hundred and
forty billion dollar quarter. For more, Bloomberg's Consumer Tech Managing
editor Mark Gumman has the details on this week's Power
On newsletter, hotly read as always Mark and one hundred
and forty billion is what the math reads out us
of what their.
Speaker 2 (19:47):
Holiday quarter will look like.
Speaker 3 (19:48):
Important when April is a fiftieth anniversary.
Speaker 10 (19:52):
Yeah, it's quite interesting. They normally in the last half
a decade or so, since the beginning of COVID, haven't
really given guidance, but for this holiday quarter.
Speaker 6 (20:00):
They're back to that.
Speaker 10 (20:01):
So they said that the quarter would grow ten to
twelve percent. That's the current quarter of the holiday period,
and that comes in anywhere between around one hundred and
thirty five to one hundred and thirty nine billion. Typically,
when they've given guidance in the past, they've been conservative,
so they like to sort of smash through that, and
so you can imagine that internally they're aiming for something
(20:22):
north of one hundred and forty billion, which obviously would
be quite impressive given where they've been the last few years.
Speaker 3 (20:28):
And therefore take us where they're going in the next
year or so. Because Power on really outlines the myriad
of areas they're trying to leap forward on, not just
sory but real hardware and chip updates too.
Speaker 10 (20:40):
Yeah, there's a lot going on. You're going to see
a series of M five related updates to the Mac
things like the Macmini, the Mac Studio, the MacBook Air,
and the MacBook Pro across the first nine months or
so of twenty twenty six. You'll see a foldable iPhone
at the end of twenty twenty six, perhaps the introduction
(21:00):
of the smart glasses at the end of twenty twenty six.
The first three four or five months of twenty twenty
six are going to be chalk full of things push
into smart home devices, that home pod with a display,
the MacBook Pro, and MacBook Air. I mentioned a ton
of things on the software side related to Siri. So
it's going to be a pretty jam packed year for
twenty twenty six. Then you go into twenty twenty seven,
(21:23):
where you're going to see even more major leaps and
bounds when it comes to hardware and.
Speaker 2 (21:27):
Want to be the same people at the top.
Speaker 3 (21:29):
How do you see the talent and the focus and
reworking of Apple continuing a midutes fiftieth anniversary.
Speaker 10 (21:37):
You know, Apple's biggest challenge right now is retaining talent,
specifically for its AI division, its machine learning folks. They're
bleeding talent to places like Meta, to Nthropic to Xai.
It's been very difficult for them to hold on to
people because Siri, really it has a really bad reputation.
(21:59):
The big things they're going to be doing for Siri
to improve it is using a custom model developed by
Google's Gemini team. It's going to run on Apple servers,
but Apple's paying Google to develop it, and that's a
bit of a setback for Apple's internal models team, and
so they basically for now have split it. Whereas the
models that run on Apple devices themselves, the ones for
(22:22):
Apple Intelligence, those are those in house models, which have
been somewhat problematic depending on who you ask. And then
for the serie models, they're moving to Gemini to power
some of it. So it's an interesting dynamic they've created there.
Speaker 2 (22:35):
Our German is always it's a muster read. We so
appreciate it.
Speaker 3 (22:37):
Let's check in on these markets because well, we're close
to record highs and then ask that one hundred. We're
just up by about three tenths of a percent, as
the wall of warrior when it comes to geopolitics is
put to one side as we focus more on earnings
to come after the ball palanteer, of course, and more
on what the AI trend is. When it comes to compute,
let's focus in on that the two key points contributors.
Don't ask that one hundred are these two stocks.
Speaker 2 (22:58):
Amazon up four point six percent, a new record high.
Speaker 3 (23:00):
It's now worth two point seven trillion dollars, But that kind.
Speaker 2 (23:03):
Of pales into significance for me.
Speaker 3 (23:04):
Think with a five trillion that in video is now
worth and that's because all.
Speaker 2 (23:08):
Roads lead back to in video GPUs.
Speaker 3 (23:10):
This time Amazon striking a deal with open Ai to
offer many many GPUs in further data centers, a seven
year relationship with open Ai now as they turn ever
further into compute and data centers for various places.
Speaker 2 (23:24):
But look, it's not the only wall of news we
have on compute.
Speaker 3 (23:27):
And Microsoft is another one that's planning to spend more
than seven point nine billion dollars on data centers, on
cloud computing and employees all over in the United Arab Emirates.
And it's over the next four years capitalizing on a
US government clearance to ship AI chips to the Gulf nation.
Speaker 1 (23:42):
Now.
Speaker 2 (23:42):
Microsoft Vice chair Bradsmith explained.
Speaker 3 (23:44):
Why just during an interview with Bloomberg's Jomano Basecci in
Abadab earlier today.
Speaker 8 (23:50):
If you look at the UAE, the UAE now literally
leads the world in the percentage of the population using
AI fifty nine point four percent. One Singapore about a
point behind is number two. Well, but what we're seeing
here in the UAE is across the economy, whether it's
companies like ADNOC and the energy sector, or the financial
(24:11):
services or the healthcare sector, all of this is being
quick to.
Speaker 2 (24:15):
Work discuss all of this.
Speaker 3 (24:17):
Oubrimegs pready for who covers Microsoft for US, And this
was Brad trying to articulate, we expand in there. We've
got the ability and the permission. Why do they want
to be building out and expanding in the Middle East?
Speaker 11 (24:28):
Because they need power? Right, The Golf is a very
interesting market for data centers because in the US and
Europe in many ways they're kind of tapped for power.
Everyone is kind of scrounging for a megawatt here or there,
and the Golf, you know, they have oil power and
they are really keen to want to diversify their economies
and it seems like a pretty natural fit for data
(24:49):
center companies. So we've seen Microsoft, we've seen Oracle want
to expand their presence out there, and today is kind
of the latest example of Microsoft coming out to say,
look at all the money we're this is a serious
bet for.
Speaker 3 (25:02):
US and capal expenditure that they did articulate in their
earnings just last week. But Microsoft's been perhaps more upfront
than many as to how they're having to use other
offerings neoclouds in particular, they've been leaning on Nscale and
Nevia sover in Europe, but here in the US they're
going ever more into Texas, but with an Australian company.
Speaker 4 (25:21):
Correct.
Speaker 11 (25:21):
Yeah, we saw them make about a ten billion dollar
deal with an Australian company this morning, and it's funny
because ten billion sounds huge, but it's really like what
fifteen percent of what they've announced so far. I mean,
the spending quantities here are really getting hard to fab
and Microsoft has committed around sixty billion to a variety
of providers just to be able to rent these AI
chips quicker.
Speaker 3 (25:42):
And what's interesting is IRN is one of those sources
of power and compute that all used to be in
crypto and another one of those that now suddenly finds
itself the darling of an AI trade exactly.
Speaker 11 (25:55):
Yeah, Corey is the classic example this, you know, crypto
market crash and all of a sudden they said, hey,
wait a second, AI data centers is the way forward.
And Microsoft's been the most kind of prominent customer of
these neo clouds. But you know, we expect over time
that every major hyperscaler looking for capacity is going to turn.
Speaker 3 (26:12):
To these companies, And when we think about the scale
and the numbers, it can just become almost arbitrary. But
I think the three trillion dollar figure that Morvid Stanley's
wrapped its head around is an important one, right, that
three trillion of data centers are likely to be built
out by twenty twenty eight, But actually half of that's going.
Speaker 2 (26:29):
To come from their own money, and then maybe the
rest is.
Speaker 3 (26:31):
Coming from debt markets in the light, but Microsoft really
does seem to be talking up how it's leaning on
its own cash flows.
Speaker 11 (26:36):
Correct its own cash flows. But part of the neo
cloud stuff that's interesting is that they are leases right,
you are leasing. If you build a data center, you're
stuck with it for a good twenty years, right, you
lease for five years. If the demand environment changes at
the end, you say, well, thank you, nebis it's been beautiful. Right,
So it gives them a lot more financial flexibility. I
(26:56):
think we should see that within the context of hyperscalers
apping unique financing sources. Even like Google hitting the bond
market today, you lead.
Speaker 3 (27:04):
Us perfectly to unnecessarily already four we are as one.
Speaker 2 (27:07):
We so appreciate you as always. And meanwhile he said it.
Speaker 3 (27:10):
Alphabet looking to raise about fifteen billion dollars from a
dollar bond.
Speaker 2 (27:13):
Sale in the United States. According to sources, the dealer
is being.
Speaker 3 (27:16):
Offered in many as eight parts maturities ranging from three
to fifty years.
Speaker 2 (27:20):
But the company's also tapping the.
Speaker 3 (27:22):
European market seven and a half billion dollars of notes
in Europe too. And this all adds to a wave
of borrowing from tech companies. Remember METUS thirty billion one
last two week. And it's all about investing aggressively in AI.
And let's dig into the impact of all of this
AI financing a little bit further. Anna RATHMNS with us,
founder and CEO of Grenadilla Advisory. You think this is
(27:43):
smart the way in which that they're tapping debt markets
or depending on their own cash flow.
Speaker 12 (27:48):
Good morning.
Speaker 6 (27:49):
I did think it's smart.
Speaker 12 (27:50):
I mean, sometimes cash on hand is the most powerful thing,
and so it doesn't make sense to spend all of
your cash and put it into you know, the future
investment and AI. Sometimes it makes sense to borrow from
the debt market and to finance it and so that
you have some leeway and some flexibility in what you
want to do with the assets that you have.
Speaker 3 (28:11):
And what about even more creative financing such as these
private credit deals in the way in which we've seen
blue ol be Meta's partner of choice here, is that
what you're likely to see more of, not just ever
more debt being tapped, but just off balance sheet.
Speaker 12 (28:26):
Yeah, I think so. You know, private credit market is
constantly looking for ways to deploy their capital that they're
getting from the investors. And right now the investment that
seems the most exciting seems to be this data center
and AI play. And if we heard from Microsoft and
others last week during the earnings call, the demand is
(28:48):
just out of this world. And they're having a hard
time supplying that demand and therefore I think you're going
to see more of it. And by the way, people
are worried about this off balance sheet financing. In my opinion,
it's dangerous if you don't know about it. But everyone
knows about it, so you can definitely put that into
your calculation for the valuations of these companies.
Speaker 3 (29:10):
Okay, that's really interesting because in many ways Meta has
led the way in that creativity a messagal b not
last week because of their capital expenditure, and perhaps it's
becoming in a more rapid clip than the revenue growth
that we're seeing. And how do you make the discernment
that's currently happening among the AI players.
Speaker 12 (29:28):
Yeah, with regards to Meta, I think there are a
lot of things that were idiosyncratic. I mean, if we
were to think about the cat stack, if debt is issued,
equity investors don't like it, right, But if you look
at the debt market, a lot of investors in the
debt market actually liked it, and there was a lot
of demand for it. But there was also the deal
about Meta not being a hyperscaler, investors wondering where all
(29:51):
of the investments are going and they're going to invest
more of it, So that's meta. But everyone else, I
think there is a race here and there's a bit
of a fomo in all of the AI players, and
there's a higher risk to missing out than to spend
today and to see where we are tomorrow, because I
think the demand is still going to be high tomorrow.
Speaker 3 (30:12):
But is that fomo leaching into the investment community and
is that a good way in which to invest one's money?
Speaker 7 (30:21):
Right?
Speaker 12 (30:22):
So here here are a few things I think people
thinking about valuations, and that's myself included. It's very very
high compared to historical norms. It's nerve wracking, but it's
a short term sentiment driven play. Data is subject to
a lot of noise and it's going to happen. There
may be a correction or people are going to get nervous. However,
(30:42):
if you're a long term investor, like a lot of
our clients are, you're going to take a look at
the fundamental value add of these data center buildouts and
AI moves, and I do think that there is something there.
If you look at the S and P five hundred
index and the companies in there, how many can actually
do the AI play. How many have them have the expertise,
(31:04):
the vision, the balance sheet capacity to do all of this,
and they are just a few. And that's one of
the reasons why investors who want to put capital into
the AI play had no choice but to go into
it in the public markets.
Speaker 7 (31:15):
Right.
Speaker 12 (31:16):
So, I think the valuations, although they are high, they're
telling us something about the future growth of these companies
and AI in.
Speaker 3 (31:23):
General, and that can withstand what has been a torrid
time of geopolitics of angst of trade.
Speaker 2 (31:30):
And I think it's interesting that you said it's noisy.
Speaker 3 (31:32):
It's been really noisy in other players, like rare earth stocks,
for example, tumbling today because well maybe China will continue
to export and many had run up MP materials and
other players thinking that we would be cut off more
significantly from rare earth materials that were necessary for this
whole AI trade. What do you make of some of
the highs and the lows in ultimately a geopolitical war.
Speaker 12 (31:54):
Yeah, you know, if we think back to the sheet
Trump meeting from last week, in my mind, I think
saying that it's a one year truce is a little
bit misleading, right, So it might not be fully one year.
We might have a surprise even next month.
Speaker 6 (32:10):
Who knows.
Speaker 12 (32:10):
And the truth part is also misleading because what I
think is we just de escalated. We just went back
to where we were about two months ago. So it
means that we're going to continue to negotiate, but behind
the scenes, we're going to continue to push this forward
in terms of actually racing each other. What happened after
that meeting was that mister Trump came back to the
United States, but mister she stayed and talked about having
(32:34):
like an international body that governs AI. There is a
lot of push here to having more power in AI
and also in national security. This is just going to
get more heated as we turn into twenty twenty six.
Speaker 3 (32:50):
Wow, good place to leave it and a good food
for thought for the investor base and Rathman, we appreciate it.
Founder and CEO of going to did our advisory. The
final day is in a closely watched campaign here and
you know, perhaps not the local elections you're thinking of.
Speaker 2 (33:03):
We're talking about will.
Speaker 3 (33:04):
Shareholders vote to approve a trillion dollar package for Eno
Musk Well.
Speaker 2 (33:09):
Of course that decision is about more than just money.
Speaker 3 (33:11):
Control of the company shareholder value, corporate governance issues, they're
all at play here.
Speaker 2 (33:16):
Let's speak with the University of.
Speaker 3 (33:17):
Arkansas law professor Rob Anderson about all of this. You
are a retail investor in Tesla, and you're very active
within the ex community of teserati or tezl retail investors
more broadly, Professor Anderson, but just lay it out for
us as an active investor. Talk to us about the goals,
the milestones, how you interpret them as well as being
(33:37):
a professor in corporate governance, Are they that hard to
achieve for En Musk to get what could be up
to a trillion dollars in pay.
Speaker 13 (33:46):
Yeah, well, thank you for having me on. I mean,
there's been a lot of talk about how large potential
awards are here, but I think there hasn't been enough
talk about how ambitious this plan actually is. Requiring Elon
Musk to throw this company to eight point five trillion
in market capitalization and four hundred billion in ebit DA,
(34:09):
So I think, you know, this is ultimately a question
of what will this company be able to retain Elon Musk,
who I think it's fair to say his value has
been priced into the shares already quite significantly, And it's
more than just, in my opinion, more than just a
good idea to approve this pay package. It's actually essential
(34:31):
for this company to transition to that the next stage
that's contemplated by the award.
Speaker 3 (34:37):
You talk about the eight and a half trillion that
they need to reach in terms of market cap, but
there's also the milestones. Twenty million cars, how many in MFSD.
You've got to see what million robots out there?
Speaker 2 (34:46):
An army that he calls them.
Speaker 3 (34:48):
But Professor, what's interesting is Summer pointed out potential caveats here.
They've talked about the board potentially being able to award
him perhaps the first three tranches of the money promised
if perhacks. There's the milestones were interfered with in some way.
Maybe it's disaster's war, maybe it's inferenced by government, but
also just other unspecified circumstances.
Speaker 2 (35:08):
So does that give you any pause from a corporate
governance perspective.
Speaker 13 (35:13):
Well, I mean not not really. I mean it's normal
for force masure type consideration to be taken into account.
I mean, somewhat somewhat ironically, when ISS recommended a vote
against it, it you know, took into account that it
specified that there was a lack of precision in some
(35:34):
of the milestones, but also simultaneously said that the milestones
didn't give the board enough discretion in the future to
adjust it. So, you know, I think there's it's a
no win situation in terms of writing a plan like this,
because obviously unexpected events can occur that you can't fully
anticipate in writing the plan. So I don't think I
don't I don't think those are particularly problematic. I mean,
(35:57):
you know, I think probably the most common criticism I've
heard is that the initial the first step of a
milestone at two trillion dollar market cap, people would say
have said it's too easy to achieve. But I think
what that doesn't fails to appreciate is that the market
is already priced in the fact that it believes this
(36:18):
pay package will pass and that Elon will be retained
for at least some period of time. So it's priced
in his value already, and it's a situation where he's
kind of cursed by his own success of you know,
making the milestones easier to achieve because it's already priced
in the value of his contribution. So you know, I
sort of feel like some of the criticisms have been
(36:40):
a bit unfair in that regard.
Speaker 3 (36:42):
Well, some of the criticisms more broadly have been almost
reminiscent of what happened in twenty eighteen, and the idea
that basically corporate governance is lacking is a lot of
people on the border too close to him. How do
you think that this pay package in twenty twenty five
arenswered that?
Speaker 13 (36:56):
So, I mean the pay package now had the benefit,
if you want to call it, that of a completely
adjudicated Delaware opinion on that twenty eighteen pay package. So
they were able to address just about everything that the
Chancellor identified in that including a totally different having a
special committee this time with totally different composition, addressing all
(37:20):
the procedural aspects that the Chancellor took issue with in
the court opinion, as well as producing an extensive report
that is more extensive than anything that I recall seeing
in recent memory to try to address all those concerns.
In addition to of course the shareholder vote.
Speaker 3 (37:42):
You are, of course a shareholder. Musk himself is a
significant shareholder. He wants to be more of a significant one.
He's got about fifteen percent that he could put weight
behind he in Texas is allowed to vote for his
own pay package in this respect, So many say, actually,
this is just going to pass, but it's more idea
of the court of public opinion. They need to pass
with such a majority to prove that this is born
out right.
Speaker 2 (38:03):
What do you make of that role? Do you think
that it's it's will pass with.
Speaker 3 (38:07):
Flying colors in that respect and enough to stop the
criticism continuing.
Speaker 6 (38:12):
I think it will.
Speaker 13 (38:13):
Yeah, I think the I think the shareholders other than
Musk and Kimball will vote very substantially in favor of it. Frankly,
the main criticism I here are certainly not coming from
the retail shareholders, who overwhelmingly are not just supported, but
I think are are nervous that it won't pass by
(38:33):
by enough. And I think you know the value that
Musk brings this company. It's it's undeniable. If if if
he left tomorrow, you can imagine what would happen to
the stock price. And so I think it's unfair not
to give him the benefit of that of the fact
that the stock price has gone up. By looking at
(38:55):
it now at one hundred and thirty thirty dollars. Since
this pay package is even announced right, so the market
loves it. I don't see any criticism there. Really, it's
just the sort of rigid voting restrictions of the proxy
advisors that are going to be the obstacle here. It's
(39:16):
the cookie cutter approach they have to apply because they
have to try to treat Tesla like every other company
when it's it's not similar to a hired CEO who's
come in from the outside to manage a mature company.
This is a founder led company.
Speaker 3 (39:32):
Anwance approach from Professor Rob Anderson. We appreciate it from
the University of Arkansas. Thanks for joining us and a
retail investor in Tesla. Now coming up Palentier shoes there
are up ahead of companies earnings.
Speaker 2 (39:42):
Later today, we'll discuss what to expect next. It's a
brute BG Tech earning season.
Speaker 3 (39:54):
It rolls on an AI balls where they're going to
be watching Palenteer closely.
Speaker 2 (39:57):
It reports after the bell.
Speaker 3 (39:58):
The stock's already is you can see one hundred and
seventy percent let's call it on AI enthusiasm. But most
Lazett Chapman joins us now and there are high expectations
fifty percent increase in revenue. Just talk us through what's
going to fuel that growth, lizet right.
Speaker 14 (40:14):
So, like you said, there is a lot of built
in anticipation eagerness around this. We're going to be see
they've beat the last four consecutive quarters. We're going to
see if they're going to beat that again or maybe
they're going to fall short. What we're going to be
looking for is whether they're able to translate these small,
smaller customer deals, these one million dollar deals into ones
(40:34):
that expand into you know, ones that that really drive
the US commercial deals as well as international that's on
the commercial side. On the government side, we're going to
be looking at how things are going here domestically as
well as internationally with the boost that they've seen that
they've invested in the UK and a lot of NATO
expansion efforts as well. So we're going to be looking
(40:56):
to see whether they've been able to you know, continue
to to expand the sizes of those deals.
Speaker 3 (41:02):
I mean, government spending for them in defense in particular
has been such a tailwind. But we're also amid a
government shutdown. Is it is that any sort of headwind.
Speaker 14 (41:12):
The people that we've spoken to indicate that is unlikely
because of the lumpiness and long term nature of these contracts,
that doesn't seem to be a major factor that we
have anticipated so far. And what we will be looking
at going forward though, is again like, you know, will
they be and then where and how? And traditionally international
(41:33):
sales have been much softer than the US ones, and
you know, CEO Alex Karp has repeatedly said, you know,
it's US commercial growth driving this, So we'll see if
that continues to be the case or whether they've been
able to boost their strength abroad.
Speaker 3 (41:49):
I mean, really analyst calling out the uncharacteristically large beats
and raises that we've had prior quarters from Alex Carp
and team.
Speaker 2 (41:58):
Is that what he needs to do?
Speaker 3 (41:59):
The the narrative, because boy is he good at driving narratives.
Speaker 2 (42:03):
Yeah, I think that is.
Speaker 14 (42:04):
A great question, and I think the markets are going
to tell us right.
Speaker 2 (42:08):
You know, he has a.
Speaker 14 (42:09):
Famously very antagonistic relationship with Wall Street. He considers financial
results of vulgar and inadequate way to judge a company success,
and he's consistently married the financial results with what he
considers is a philosophical mandate to create AI software for
(42:36):
the use of the US defense forces and allies, and
so that's going to be what he's driving towards. So
there is not just the focus on profit, but also
there's there's some philosophical support that he may get or
may not.
Speaker 3 (42:51):
We'll get to that philosophy after the bows that Chapman,
it's always great to have you on.
Speaker 2 (42:56):
Thank you so much. That does it. But as addition
to bring the tech, don't forget to check out our podcast.
Speaker 3 (43:00):
You can find it on the terminal as well as
online on Apple, Spotify.
Speaker 2 (43:03):
An I heart from New York. It's a brittybag tech.
Speaker 3 (43:08):
Mm hmmm
Speaker 13 (43:11):
Hm
Bloomberg Audio Studios, podcasts, radio news. Bloomberg Tech is live
from coast to coast with Caroline Hide in New York
and ed Lo Lolow in San Francisco.
Speaker 2 (00:21):
This is Bloomberg Tech coming up.
Speaker 3 (00:23):
Amazon's cloud unit signs a thirty eight billion dollar deal
to supply open Ai.
Speaker 2 (00:28):
With computing power.
Speaker 3 (00:29):
Plus how Shaomi's pivot from smartphones to electric vehicles may
have come at a human cost, And all eyes on
Paneteer posting its earnings results after the closing bell. This
is defense tech spending is ramping up. But first we
check on the markets.
Speaker 2 (00:44):
Also ramping up.
Speaker 3 (00:45):
Not quite at a record high for the Nasdaq one hundred,
but we are up some four tenths of percent for
the big Tech benchmark as we focus in once again
on earnings and.
Speaker 2 (00:54):
The never ending desire for AI compute.
Speaker 3 (00:56):
Let's go there, because the key points drivers on this
particular benchmark are two stocks. We shine a light on Amazon,
pushing on four point five percent higher after significant gains
on Friday after its earnings.
Speaker 2 (01:08):
This is a company that is of.
Speaker 3 (01:09):
Course shrinking its workforce but focusing in on AWS growth,
and it manages to sign open Ai as that new
client thirty eight billion dollar deal will dig into it
in video. Well, they're the GPUs that go inside all
these data centers. It too climbs in terms of a
market capitalization up another two point seven percent. I just
want to go to the top story that is Amazon
and open Ai as they sign a thirty eight billion
(01:30):
dollar deal for further cloud compute. And it's been likest
Seth Figeman that we turned to Seth in.
Speaker 2 (01:34):
The grand scheme of Things. Scheme of things.
Speaker 3 (01:36):
It's not three hundred billion dollars of Oracle Cloud that
we saw before, but it is notable that open Ai
turns to more and more cloud providers at this moment.
Speaker 4 (01:44):
That's right. It really is telling about this moment for
both companies. Open Ai just tapping every possible resource that
can to meet its cloud computing needs, and Amazon, which
had previously been investigating Anthropic, is also trying to have
a piece of open Ai and possibly other players down
the road. So it contributes to that incestuous where we
keep talk about everyone long is backing everyone else.
Speaker 3 (02:01):
And of course we've seen a deal to offer open
a eyes opens large language models into the.
Speaker 2 (02:09):
Overall bedrock offering of AWS. But this is different.
Speaker 3 (02:11):
This is a seven year deal, it goes out, but
actually by end of twenty twenty six, we're going to
see the amount of computer or any necessary for open
Ai to go on to a.
Speaker 4 (02:22):
A bit more near term than some other deals we've
see Opening Eye Broker and Opennie Eyes leaving the door
open to expanding with more investment down the road. I
do think it's telling though, that this is Amazon providing
in video chips, not Tramium not as so. On the
one hand, it's a testament to Amazon's ability to build
up cloud computing infrastructure at scale to meet Open Eyes needs.
But you have to wonder what that means about the
(02:42):
quality of Amazon's own chips.
Speaker 3 (02:43):
We go into that for us because they talk about
the tens of thousands of video chips that are going
to be used, but they then talk about the millions
of potential CPUs that they might eventually help using. Is
that where Aws's own vertical integration comes from.
Speaker 4 (02:58):
You know it's possible because I think the larger industr
is also thinking more about investments in inference as opposed
to training. So with training, you want those GPUs the
best possible, But with inference CPUs and some maybe second
tier GPU type chips could meet the needs. So maybe
that's where we see them play more.
Speaker 3 (03:13):
And then take us to how AWS continues to therefore
show this twenty percent growth that we saw on the Friday.
Speaker 2 (03:19):
Is it going to be more.
Speaker 3 (03:20):
Deals coming from open Ai? How much farther can they sprawl?
Or is it more about individual enterprises or sovereign AI
for example.
Speaker 4 (03:26):
I think it's a little bit of all those. And
I think what we're seeing with OpenAI in particular is
that now that the exclusivity arrangement with Microsoft is kind
of a done deal, they can tap everyone. They already
have Google as a partner, they have Amazon, They've been
video brought them everyone, and I think Amazon's ready to
play ball in that category.
Speaker 3 (03:41):
Well, Soethig, I've been playing ball with us this morning.
We really appreciate it. Meanwhile, in video, of course, as
we just talked about it, the GPU supply, it made
history last week with the first company to ever hit
a five trillion dollar market cap according to Luke Capital Markets,
so the company could add trillions more. As in video
leads the quote golden wave of Genai adoption. Let's get
out to really most round Plastelica, because all paths lead
(04:04):
back to in video when we talk about any of
these compute deals right now, Ryan.
Speaker 5 (04:08):
Yeah, absolutely, it certainly feels that way. This is the
latest in a series of street high price targets that
we've seen on in VideA. Before Loop, we had HSBC,
which forecasts I think seventy or eighty percent upside. Before
that we had an additional loop street high price targets.
People keep sort of outdoing each other trying to estimate
how high up this stock is going to go. So
(04:29):
right now, the latest s men points to about eight
point five trillion market capitalization. Like you said, it just
hit five trillions, so that points to still a lot
more potential upside from here. And the story hasn't really changed.
People continue to see a lot of long term demand
for all kinds of AI related hardware and infrastructure, and
(04:50):
certainly it will expand out a little bit. And Vidia
has a very important software business for example. But in general,
this is all about the GPUs that have been driving
the AI trade really for the past couple of years now.
Speaker 3 (05:01):
And look, their GPUs are also part of the Microsoft
Iron deal that we're talking of today. A nine point
seven billion dollar look for compute Microsoft using yet another neocloud,
this time in Australian one. We've also got in the
news how Alphabet's selling this huge amount of debt to
be able to finance the overall AI trade and compute purchase.
But Ryan, you've got a great story and just showing
(05:21):
how last week, if we reflect a bit, we started
to be discerning about which companies we're going to celebrate
AI investment and ones that we're not going to Yeah.
Speaker 5 (05:30):
Absolutely so. Really the poster child on the other end
of this trade is Meadow That stockfel quite sharply last
week after it came out, really talked about its expense growth,
it's campex growth, it's talking about taking write offs in
all of this. There, I think there is more skepticism.
People want to see that all of this spending is
being done in a diligent and disciplined kind of way,
(05:50):
and that this is really going to lead to some
kind of pronounced return on all this investment. Now, I
think there's still a lot of support for AI related
strategies overall, especially yet companies like Amazon and Alphabet, which
are showing a pretty direct link between all of this
spending and improved performance in their cloud computing businesses. But
for someone like Meta, which doesn't have an equivalent cloud
(06:12):
type business, the story is getting a little bit trickier
for them. People are getting a little bit more discerning,
and like you said, we did see this dot come
down last week, as I think people just are maybe
getting a little bit of cold feet.
Speaker 3 (06:24):
What's interesting, Ryan, is also you shine a light on
how we've had a bit of dispersion outside of the
key well, mag seven and then some names Brawd, Common
others thrown in. We've got some of the suppliers to
the data centers or suppliers to some of these compute
powers that are also winning. I mean, Micron's another key
winner on the day, but you shine light and other
companies that out performed.
Speaker 6 (06:44):
Yeah, certainly.
Speaker 5 (06:44):
I mean it's not purely an a or an mbidious
story anymore by any stretch of the imagination, anything that
is involved in any kind of components here. I mean,
we've certainly seen Broadcom another major winner, Micron, storage companies
like Steagate and Western Digital, these have been some of
the biggest performers of the year, and they're a little
bit less high profile, but They are certainly seeing very
(07:05):
strong growth inflections because they are just part of the
overall ecosystem that is required to build out all these
data centers, power all the data centers, do storage memory,
all the stuff that is involved with AI and having
it produce the you know, the material that people are using.
It's a much bigger trade than it was, you know,
a couple of years ago, for sure.
Speaker 2 (07:25):
Rand Vastelica always with the must reads. We thank you.
Speaker 3 (07:28):
Let's get more on this AI compute trend that's never ending.
Tony answer us tro Price Science and Technology from Portfolio Manager.
Your top holding is in video and all Parsley back,
but Microsoft's a big one, Broadcom, Alphabet really all of
the big winners. Is this playing out as you anticipated?
Speaker 6 (07:45):
Yeah?
Speaker 7 (07:46):
Well, I think that, you know, AI is a huge
productivity driver in my opinion, and I think that these
companies are really well positioned to essentially capture that and
would be the platforms for I think growth in the economy,
and you know I'm looking for and going forward is
like you know, the new use cases really come through,
like agentic AI for example.
Speaker 6 (08:07):
I think it's to fill this capacity.
Speaker 7 (08:09):
It can't just be you and me using chat to
et it's got to be you know, thousands of agents
for each company, like making decisions and executing and unlocking.
I think labor essentially is what I'm looking for, and
that's what's exciting going forward.
Speaker 3 (08:24):
It's exciting when you see in video's name reference in
about three of the compute deals just on this Monday alone.
But take us to perhaps the one that you don't
hone interestingly, you don't have exposure to Amazon and AWS,
but it signs it's deal with open AI.
Speaker 2 (08:37):
Hasn't been methodology.
Speaker 3 (08:38):
Around that about its own cloud prowess or perhaps worries
about the lack of growth that we've seen in previous quarters.
Bar from the previous numbers they just reported Friday.
Speaker 7 (08:48):
Hey, well, I think that they had a nice earnings report,
and I do think that there seems to be a
lot more momentum now, you know, you talk about the
deal that they just did today and just say like
rolling out a lot more compute and accelerating a w
S I think is really good for the business. I
think they they're well positioned to essentially leverage AI and
(09:11):
their e commerce business as well as being an infrastructure provider.
So I don't think you can count them out at all,
and uh, you know, it's good to see them, you know, outperforming.
Speaker 3 (09:20):
What's interesting is someone who got beaten up as in
the portfolio, which is Meta. And I'm interested on your
take of how we're deciding who we reward of capital
expenditure and who we don't.
Speaker 7 (09:31):
Yeah, well, I think that uh, you know, AI is
a long term investment for Meta, and I think that
the market is probably digesting the you know, high end
level of cappex and the depreciation that's coming through the
P and L. But I think that's a little bit
too short term to view it, and you look past that.
(09:52):
You know, the returns are there and these are going
to be great investments. And you know, Meta definitely has
the digital formats to leverage you know, AI and tremendous
scale across customers, and so I think it's exciting what
they're doing in the SMB segment as well.
Speaker 6 (10:10):
If it lost a lot of ability for.
Speaker 7 (10:12):
Companies to essentially like reach customers with just a credit
card and.
Speaker 6 (10:17):
Asking for the ROI from ad campaigns.
Speaker 3 (10:20):
I just want to go to what President and Microsoft
was telling our network a little bit earlier today about
the risks of underinvesting.
Speaker 2 (10:27):
Really here we spoke with Brad Smith. Just take are listen, Tony.
Speaker 8 (10:31):
Our biggest challenge is not a risk of getting ahead
of demand, it's actually keeping pace with demand. And what
we are finding is that our customers, you know, whether
they be enterprises across the economy or governments, are nonprofits,
they are looking to us to build out this capacity.
They want to use this computer. So for us, if
(10:55):
we build it, it will be put to use. As
it's put to use, there will be a return to
our shareholders.
Speaker 3 (11:02):
You, of course have exposure to Microsoft, Tony, Brad really
talking about how they're expanding more geographically as well and
investing over in the Middle East, not just taking money
from the Middle East. And I'm interested in what you
think about Microsoft's need to depend on neoclouds. We saw
them strike a deal with an Australian neocloud provider for
Texas data centers. Is that something you like to see,
(11:22):
that use of their money and capital expenditure on neocloud
as well as their own Yeah.
Speaker 6 (11:28):
I think it allows them to be flexible and nimble.
Speaker 7 (11:30):
I think that standing up these data centers is no
small feet and a lot of times, it requires various players,
it requires the data center capacity, the power, and so
I think it's encouragency Microsoft collaborating with the ecosystem and
plug in partners and so to.
Speaker 6 (11:49):
Me, I think it makes sense.
Speaker 7 (11:50):
I think it's also a testament to the demand signals
they're seeing and kind of the workloads.
Speaker 6 (11:55):
Really take off. And you know, I think AI is
really hard new.
Speaker 7 (11:58):
Not every company that is trying to do it is successful,
but I think the ones that are finding success are
you know, seeing tremendous promise, and so I think that's
what essentially it gives people confidence to invest.
Speaker 2 (12:10):
Here, confidence to keep adding.
Speaker 3 (12:12):
When we've seen runaway performance not just of Nvidio at
five trillion, but another one of our holdings, Micron for example,
I mean significant outperformance, when do you decide that you
want to cash in profit take.
Speaker 7 (12:26):
Yeah, we're all constantly managing position sizes in the portfolio.
But you know, in my opinion, I think that you
want to be invested in the areas where there is
essentially a bottleneck, there's scarcity, and that performance depends on it.
So I think that HPM memory, you know HGDS and
(12:46):
now you know nand there's there's becoming more of a
shortage and so to me, the industry is getting better
and it's a critical component. So you know, from my perspective,
there is opportunity for these companies to compound value over time.
Speaker 3 (13:03):
You are, of course equity focused, but when we have
ours bets selling debt in Europe and the US, any
of that financing of this AI spend give you pause.
Speaker 6 (13:15):
Yeah, well, I think it's novel.
Speaker 7 (13:17):
But you know, you look at the cash generation of
a lot of these companies. They're really blue chip and
you know, to me, I think that this investment is smart,
and to do some appropriate level of.
Speaker 6 (13:29):
Debt financing I think can make sense.
Speaker 7 (13:32):
In addition, I think that the infrastructure, you know, there's
a lot of debate of like the useful life of this.
I know that Invidia comes out with a new generation
every year, but I think that these are longer lived
assets than people appreciate potentially, and they're not just like
three years obsolescence, but probably more like five or six.
And so you know, in terms of the appetite to
(13:54):
leap against it, I think that in three or four years,
it's going to be more commonly accepted. I think we're
probably on the path there because these are really, like
I think, you know, revenue generating assets and there's a
lot of protivity coming off of them.
Speaker 3 (14:08):
And Tony that productivity, as you started the conversation is
about how we use deploy general to AI.
Speaker 2 (14:13):
Impalent is one.
Speaker 3 (14:14):
That really has but how do they fight also the
macroheadwinds the government shutdown? Do you have any concerns at
the valuations that some of these companies trade at.
Speaker 7 (14:24):
Hey, absolutely, I mean these are you know, very elevated multiples,
and so they need to keep delivering the growth here.
You know, Paltier is definitely I think at the tip
of the sphere in terms of implementing AI.
Speaker 6 (14:36):
I mean they started doing that and.
Speaker 7 (14:38):
The government and now the commercial businesses growing rapidly, and
so you know, I think the government's shutdown, like, I
think that's probably a temporary thing. They could get a
pass for that just because government's not going to be
shut down forever. And you know, you look forward and
I think what really matters is that they're driving significant
ROI for their customers and they're able to do it
(15:01):
in a way that connects their data and I think
that's like the change in it services is I think
that you need to come with a solution and the
engineers to help your customers instead of implementing like a
Saaspace off the shelf solution.
Speaker 6 (15:16):
So I think that's what's exciting. And yeah, we'll see
later on today.
Speaker 3 (15:20):
Tony Wang is always great catching up with you. Another
busy week with volunteer after the bowel. We so appreciate
your expertise. T ro Price, thank you. Coming up Shaomi's
pivot from smartphones to elexit vehicles when it may have
come at a very high human cost.
Speaker 2 (15:34):
We're on that next. This is Blue Mead Tech China Shawmi.
Speaker 3 (15:49):
It's set a relentless pace the pivot from smartphones to evs,
but it may.
Speaker 2 (15:53):
Have come at a human cost.
Speaker 3 (15:55):
Blumeag spotlight story this week follows the intense schedule of
one page as he transferred Shami's retail network before ultimately
collapsing of a heart attack in twenty twenty four. Brim
Boxspeter Altrastrom joins us Now it's a deeply reported story
through the bravery of a widow who is convinced that
it was his work schedule that in many ways contributed
(16:17):
to his death At the age of thirty four, Peter.
Speaker 9 (16:20):
That's right. So Wang was one of the key managers
as Shaomi, the company best known for its smartphones, decided
that they were going to push into electric vehicles. The
founder late June, said this was going to be one
of his last strategic plays for the company. He had
really earned a fantastic reputation for himself in the smartphone arena,
but he wanted to succeed in EV's too. Remember this
(16:42):
is something that Apple tried and wasn't able to pull off.
Shaomi has actually designed a very good car. They've been
able to succeed in the market. They've been able to
gain some traction in that space. But Wang was one
of the key employees who was responsible for redesigning stores
as they were shifting these us from really showcases for
smartphones to something that could show you an auto, full
(17:04):
size automobile that would have the infrastructure to be able
to show that off and demonstrate what kind of cars
they actually had. So at one point he was responsible
for two hundred and sixty seven stores. He was working
almost NonStop hours. His wife told our reporter that he
would he would frequently work until the wee hours of
the night. We also saw as we chat messages where
he was exchanging messages at two thirty in the morning
(17:26):
and working on and on and on, and as you mentioned, tragically,
at the age of thirty four, he died of a
heart attack. And so it's a story really about how
this extreme, these extreme hours can take a toll on managers,
especially in an area so competitive like technology.
Speaker 3 (17:42):
Shami has responded in part to our investigation and talking
about their sympathies that go to the family. But set
this in the context of nine ninety six of what
is very much a cultural focus on working extremely hard
in China and tech.
Speaker 9 (17:59):
Right, Yeah, you're referring to nine ninety six. In China,
they talk about working from nine am in the morning
until nine pm, six days a week, which is extremely
long hours. The World Health Organization defines over work as
working more than fifty five hours. Now in China they
work even harder than the United States. It's about forty
nine hours on average for full time workers, compared with
(18:20):
forty five in the United States. In the tech industry,
it's far beyond those kinds of hours. At Shaomi, the
workers in independent surveys showed that they were working eleven
and a half hours a day, so you're talking about
almost sixty hours a week that they were working, and
Wang seemed to be one of the workers who was
going even beyond that at this point. So, of course,
(18:41):
there's a lot at stake here. They're competing for leadership
in AI, in chips, in electric vehicles, et cetera. And
there's a lot of money at stake. When you look
at the most valuable, the wealthiest people in the world,
they're all tech entrepreneurs led by Elon Musk, of course,
but you've got Larry Ellison and Jeff Bezos in there too.
There's a lot of money at stake. There's also geopolitical advantage,
(19:01):
and Shami was pushing very hard to make this pivot
into electric vehicles.
Speaker 3 (19:05):
Peteilstrom, thank you so much. It is an emotive story
and I must read we appreciate it. Now, coming up,
we'll dig into Apple how it's set for a make
or break year on the regulatory front as it gears
up to start twenty twenty six with a one hundred
and forty billion dollar quarter.
Speaker 2 (19:21):
This is BLUEBG Tech.
Speaker 3 (19:31):
Apple when it's set to kick off it's fiftieth year
with what's expected to be a nearly one hundred and
forty billion dollar quarter. For more, Bloomberg's Consumer Tech Managing
editor Mark Gumman has the details on this week's Power
On newsletter, hotly read as always Mark and one hundred
and forty billion is what the math reads out us
of what their.
Speaker 2 (19:47):
Holiday quarter will look like.
Speaker 3 (19:48):
Important when April is a fiftieth anniversary.
Speaker 10 (19:52):
Yeah, it's quite interesting. They normally in the last half
a decade or so, since the beginning of COVID, haven't
really given guidance, but for this holiday quarter.
Speaker 6 (20:00):
They're back to that.
Speaker 10 (20:01):
So they said that the quarter would grow ten to
twelve percent. That's the current quarter of the holiday period,
and that comes in anywhere between around one hundred and
thirty five to one hundred and thirty nine billion. Typically,
when they've given guidance in the past, they've been conservative,
so they like to sort of smash through that, and
so you can imagine that internally they're aiming for something
(20:22):
north of one hundred and forty billion, which obviously would
be quite impressive given where they've been the last few years.
Speaker 3 (20:28):
And therefore take us where they're going in the next
year or so. Because Power on really outlines the myriad
of areas they're trying to leap forward on, not just
sory but real hardware and chip updates too.
Speaker 10 (20:40):
Yeah, there's a lot going on. You're going to see
a series of M five related updates to the Mac
things like the Macmini, the Mac Studio, the MacBook Air,
and the MacBook Pro across the first nine months or
so of twenty twenty six. You'll see a foldable iPhone
at the end of twenty twenty six, perhaps the introduction
(21:00):
of the smart glasses at the end of twenty twenty six.
The first three four or five months of twenty twenty
six are going to be chalk full of things push
into smart home devices, that home pod with a display,
the MacBook Pro, and MacBook Air. I mentioned a ton
of things on the software side related to Siri. So
it's going to be a pretty jam packed year for
twenty twenty six. Then you go into twenty twenty seven,
(21:23):
where you're going to see even more major leaps and
bounds when it comes to hardware and.
Speaker 2 (21:27):
Want to be the same people at the top.
Speaker 3 (21:29):
How do you see the talent and the focus and
reworking of Apple continuing a midutes fiftieth anniversary.
Speaker 10 (21:37):
You know, Apple's biggest challenge right now is retaining talent,
specifically for its AI division, its machine learning folks. They're
bleeding talent to places like Meta, to Nthropic to Xai.
It's been very difficult for them to hold on to
people because Siri, really it has a really bad reputation.
(21:59):
The big things they're going to be doing for Siri
to improve it is using a custom model developed by
Google's Gemini team. It's going to run on Apple servers,
but Apple's paying Google to develop it, and that's a
bit of a setback for Apple's internal models team, and
so they basically for now have split it. Whereas the
models that run on Apple devices themselves, the ones for
(22:22):
Apple Intelligence, those are those in house models, which have
been somewhat problematic depending on who you ask. And then
for the serie models, they're moving to Gemini to power
some of it. So it's an interesting dynamic they've created there.
Speaker 2 (22:35):
Our German is always it's a muster read. We so
appreciate it.
Speaker 3 (22:37):
Let's check in on these markets because well, we're close
to record highs and then ask that one hundred. We're
just up by about three tenths of a percent, as
the wall of warrior when it comes to geopolitics is
put to one side as we focus more on earnings
to come after the ball palanteer, of course, and more
on what the AI trend is. When it comes to compute,
let's focus in on that the two key points contributors.
Don't ask that one hundred are these two stocks.
Speaker 2 (22:58):
Amazon up four point six percent, a new record high.
Speaker 3 (23:00):
It's now worth two point seven trillion dollars, But that kind.
Speaker 2 (23:03):
Of pales into significance for me.
Speaker 3 (23:04):
Think with a five trillion that in video is now
worth and that's because all.
Speaker 2 (23:08):
Roads lead back to in video GPUs.
Speaker 3 (23:10):
This time Amazon striking a deal with open Ai to
offer many many GPUs in further data centers, a seven
year relationship with open Ai now as they turn ever
further into compute and data centers for various places.
Speaker 2 (23:24):
But look, it's not the only wall of news we
have on compute.
Speaker 3 (23:27):
And Microsoft is another one that's planning to spend more
than seven point nine billion dollars on data centers, on
cloud computing and employees all over in the United Arab Emirates.
And it's over the next four years capitalizing on a
US government clearance to ship AI chips to the Gulf nation.
Speaker 1 (23:42):
Now.
Speaker 2 (23:42):
Microsoft Vice chair Bradsmith explained.
Speaker 3 (23:44):
Why just during an interview with Bloomberg's Jomano Basecci in
Abadab earlier today.
Speaker 8 (23:50):
If you look at the UAE, the UAE now literally
leads the world in the percentage of the population using
AI fifty nine point four percent. One Singapore about a
point behind is number two. Well, but what we're seeing
here in the UAE is across the economy, whether it's
companies like ADNOC and the energy sector, or the financial
(24:11):
services or the healthcare sector, all of this is being
quick to.
Speaker 2 (24:15):
Work discuss all of this.
Speaker 3 (24:17):
Oubrimegs pready for who covers Microsoft for US, And this
was Brad trying to articulate, we expand in there. We've
got the ability and the permission. Why do they want
to be building out and expanding in the Middle East?
Speaker 11 (24:28):
Because they need power? Right, The Golf is a very
interesting market for data centers because in the US and
Europe in many ways they're kind of tapped for power.
Everyone is kind of scrounging for a megawatt here or there,
and the Golf, you know, they have oil power and
they are really keen to want to diversify their economies
and it seems like a pretty natural fit for data
(24:49):
center companies. So we've seen Microsoft, we've seen Oracle want
to expand their presence out there, and today is kind
of the latest example of Microsoft coming out to say,
look at all the money we're this is a serious
bet for.
Speaker 3 (25:02):
US and capal expenditure that they did articulate in their
earnings just last week. But Microsoft's been perhaps more upfront
than many as to how they're having to use other
offerings neoclouds in particular, they've been leaning on Nscale and
Nevia sover in Europe, but here in the US they're
going ever more into Texas, but with an Australian company.
Speaker 4 (25:21):
Correct.
Speaker 11 (25:21):
Yeah, we saw them make about a ten billion dollar
deal with an Australian company this morning, and it's funny
because ten billion sounds huge, but it's really like what
fifteen percent of what they've announced so far. I mean,
the spending quantities here are really getting hard to fab
and Microsoft has committed around sixty billion to a variety
of providers just to be able to rent these AI
chips quicker.
Speaker 3 (25:42):
And what's interesting is IRN is one of those sources
of power and compute that all used to be in
crypto and another one of those that now suddenly finds
itself the darling of an AI trade exactly.
Speaker 11 (25:55):
Yeah, Corey is the classic example this, you know, crypto
market crash and all of a sudden they said, hey,
wait a second, AI data centers is the way forward.
And Microsoft's been the most kind of prominent customer of
these neo clouds. But you know, we expect over time
that every major hyperscaler looking for capacity is going to turn.
Speaker 3 (26:12):
To these companies, And when we think about the scale
and the numbers, it can just become almost arbitrary. But
I think the three trillion dollar figure that Morvid Stanley's
wrapped its head around is an important one, right, that
three trillion of data centers are likely to be built
out by twenty twenty eight, But actually half of that's going.
Speaker 2 (26:29):
To come from their own money, and then maybe the
rest is.
Speaker 3 (26:31):
Coming from debt markets in the light, but Microsoft really
does seem to be talking up how it's leaning on
its own cash flows.
Speaker 11 (26:36):
Correct its own cash flows. But part of the neo
cloud stuff that's interesting is that they are leases right,
you are leasing. If you build a data center, you're
stuck with it for a good twenty years, right, you
lease for five years. If the demand environment changes at
the end, you say, well, thank you, nebis it's been beautiful. Right,
So it gives them a lot more financial flexibility. I
(26:56):
think we should see that within the context of hyperscalers
apping unique financing sources. Even like Google hitting the bond
market today, you lead.
Speaker 3 (27:04):
Us perfectly to unnecessarily already four we are as one.
Speaker 2 (27:07):
We so appreciate you as always. And meanwhile he said it.
Speaker 3 (27:10):
Alphabet looking to raise about fifteen billion dollars from a
dollar bond.
Speaker 2 (27:13):
Sale in the United States. According to sources, the dealer
is being.
Speaker 3 (27:16):
Offered in many as eight parts maturities ranging from three
to fifty years.
Speaker 2 (27:20):
But the company's also tapping the.
Speaker 3 (27:22):
European market seven and a half billion dollars of notes
in Europe too. And this all adds to a wave
of borrowing from tech companies. Remember METUS thirty billion one
last two week. And it's all about investing aggressively in AI.
And let's dig into the impact of all of this
AI financing a little bit further. Anna RATHMNS with us,
founder and CEO of Grenadilla Advisory. You think this is
(27:43):
smart the way in which that they're tapping debt markets
or depending on their own cash flow.
Speaker 12 (27:48):
Good morning.
Speaker 6 (27:49):
I did think it's smart.
Speaker 12 (27:50):
I mean, sometimes cash on hand is the most powerful thing,
and so it doesn't make sense to spend all of
your cash and put it into you know, the future
investment and AI. Sometimes it makes sense to borrow from
the debt market and to finance it and so that
you have some leeway and some flexibility in what you
want to do with the assets that you have.
Speaker 3 (28:11):
And what about even more creative financing such as these
private credit deals in the way in which we've seen
blue ol be Meta's partner of choice here, is that
what you're likely to see more of, not just ever
more debt being tapped, but just off balance sheet.
Speaker 12 (28:26):
Yeah, I think so. You know, private credit market is
constantly looking for ways to deploy their capital that they're
getting from the investors. And right now the investment that
seems the most exciting seems to be this data center
and AI play. And if we heard from Microsoft and
others last week during the earnings call, the demand is
(28:48):
just out of this world. And they're having a hard
time supplying that demand and therefore I think you're going
to see more of it. And by the way, people
are worried about this off balance sheet financing. In my opinion,
it's dangerous if you don't know about it. But everyone
knows about it, so you can definitely put that into
your calculation for the valuations of these companies.
Speaker 3 (29:10):
Okay, that's really interesting because in many ways Meta has
led the way in that creativity a messagal b not
last week because of their capital expenditure, and perhaps it's
becoming in a more rapid clip than the revenue growth
that we're seeing. And how do you make the discernment
that's currently happening among the AI players.
Speaker 12 (29:28):
Yeah, with regards to Meta, I think there are a
lot of things that were idiosyncratic. I mean, if we
were to think about the cat stack, if debt is issued,
equity investors don't like it, right, But if you look
at the debt market, a lot of investors in the
debt market actually liked it, and there was a lot
of demand for it. But there was also the deal
about Meta not being a hyperscaler, investors wondering where all
(29:51):
of the investments are going and they're going to invest
more of it, So that's meta. But everyone else, I
think there is a race here and there's a bit
of a fomo in all of the AI players, and
there's a higher risk to missing out than to spend
today and to see where we are tomorrow, because I
think the demand is still going to be high tomorrow.
Speaker 3 (30:12):
But is that fomo leaching into the investment community and
is that a good way in which to invest one's money?
Speaker 7 (30:21):
Right?
Speaker 12 (30:22):
So here here are a few things I think people
thinking about valuations, and that's myself included. It's very very
high compared to historical norms. It's nerve wracking, but it's
a short term sentiment driven play. Data is subject to
a lot of noise and it's going to happen. There
may be a correction or people are going to get nervous. However,
(30:42):
if you're a long term investor, like a lot of
our clients are, you're going to take a look at
the fundamental value add of these data center buildouts and
AI moves, and I do think that there is something there.
If you look at the S and P five hundred
index and the companies in there, how many can actually
do the AI play. How many have them have the expertise,
(31:04):
the vision, the balance sheet capacity to do all of this,
and they are just a few. And that's one of
the reasons why investors who want to put capital into
the AI play had no choice but to go into
it in the public markets.
Speaker 7 (31:15):
Right.
Speaker 12 (31:16):
So, I think the valuations, although they are high, they're
telling us something about the future growth of these companies
and AI in.
Speaker 3 (31:23):
General, and that can withstand what has been a torrid
time of geopolitics of angst of trade.
Speaker 2 (31:30):
And I think it's interesting that you said it's noisy.
Speaker 3 (31:32):
It's been really noisy in other players, like rare earth stocks,
for example, tumbling today because well maybe China will continue
to export and many had run up MP materials and
other players thinking that we would be cut off more
significantly from rare earth materials that were necessary for this
whole AI trade. What do you make of some of
the highs and the lows in ultimately a geopolitical war.
Speaker 12 (31:54):
Yeah, you know, if we think back to the sheet
Trump meeting from last week, in my mind, I think
saying that it's a one year truce is a little
bit misleading, right, So it might not be fully one year.
We might have a surprise even next month.
Speaker 6 (32:10):
Who knows.
Speaker 12 (32:10):
And the truth part is also misleading because what I
think is we just de escalated. We just went back
to where we were about two months ago. So it
means that we're going to continue to negotiate, but behind
the scenes, we're going to continue to push this forward
in terms of actually racing each other. What happened after
that meeting was that mister Trump came back to the
United States, but mister she stayed and talked about having
(32:34):
like an international body that governs AI. There is a
lot of push here to having more power in AI
and also in national security. This is just going to
get more heated as we turn into twenty twenty six.
Speaker 3 (32:50):
Wow, good place to leave it and a good food
for thought for the investor base and Rathman, we appreciate it.
Founder and CEO of going to did our advisory. The
final day is in a closely watched campaign here and
you know, perhaps not the local elections you're thinking of.
Speaker 2 (33:03):
We're talking about will.
Speaker 3 (33:04):
Shareholders vote to approve a trillion dollar package for Eno
Musk Well.
Speaker 2 (33:09):
Of course that decision is about more than just money.
Speaker 3 (33:11):
Control of the company shareholder value, corporate governance issues, they're
all at play here.
Speaker 2 (33:16):
Let's speak with the University of.
Speaker 3 (33:17):
Arkansas law professor Rob Anderson about all of this. You
are a retail investor in Tesla, and you're very active
within the ex community of teserati or tezl retail investors
more broadly, Professor Anderson, but just lay it out for
us as an active investor. Talk to us about the goals,
the milestones, how you interpret them as well as being
(33:37):
a professor in corporate governance, Are they that hard to
achieve for En Musk to get what could be up
to a trillion dollars in pay.
Speaker 13 (33:46):
Yeah, well, thank you for having me on. I mean,
there's been a lot of talk about how large potential
awards are here, but I think there hasn't been enough
talk about how ambitious this plan actually is. Requiring Elon
Musk to throw this company to eight point five trillion
in market capitalization and four hundred billion in ebit DA,
(34:09):
So I think, you know, this is ultimately a question
of what will this company be able to retain Elon Musk,
who I think it's fair to say his value has
been priced into the shares already quite significantly, And it's
more than just, in my opinion, more than just a
good idea to approve this pay package. It's actually essential
(34:31):
for this company to transition to that the next stage
that's contemplated by the award.
Speaker 3 (34:37):
You talk about the eight and a half trillion that
they need to reach in terms of market cap, but
there's also the milestones. Twenty million cars, how many in MFSD.
You've got to see what million robots out there?
Speaker 2 (34:46):
An army that he calls them.
Speaker 3 (34:48):
But Professor, what's interesting is Summer pointed out potential caveats here.
They've talked about the board potentially being able to award
him perhaps the first three tranches of the money promised
if perhacks. There's the milestones were interfered with in some way.
Maybe it's disaster's war, maybe it's inferenced by government, but
also just other unspecified circumstances.
Speaker 2 (35:08):
So does that give you any pause from a corporate
governance perspective.
Speaker 13 (35:13):
Well, I mean not not really. I mean it's normal
for force masure type consideration to be taken into account.
I mean, somewhat somewhat ironically, when ISS recommended a vote
against it, it you know, took into account that it
specified that there was a lack of precision in some
(35:34):
of the milestones, but also simultaneously said that the milestones
didn't give the board enough discretion in the future to
adjust it. So, you know, I think there's it's a
no win situation in terms of writing a plan like this,
because obviously unexpected events can occur that you can't fully
anticipate in writing the plan. So I don't think I
don't I don't think those are particularly problematic. I mean,
(35:57):
you know, I think probably the most common criticism I've
heard is that the initial the first step of a
milestone at two trillion dollar market cap, people would say
have said it's too easy to achieve. But I think
what that doesn't fails to appreciate is that the market
is already priced in the fact that it believes this
(36:18):
pay package will pass and that Elon will be retained
for at least some period of time. So it's priced
in his value already, and it's a situation where he's
kind of cursed by his own success of you know,
making the milestones easier to achieve because it's already priced
in the value of his contribution. So you know, I
sort of feel like some of the criticisms have been
(36:40):
a bit unfair in that regard.
Speaker 3 (36:42):
Well, some of the criticisms more broadly have been almost
reminiscent of what happened in twenty eighteen, and the idea
that basically corporate governance is lacking is a lot of
people on the border too close to him. How do
you think that this pay package in twenty twenty five
arenswered that?
Speaker 13 (36:56):
So, I mean the pay package now had the benefit,
if you want to call it, that of a completely
adjudicated Delaware opinion on that twenty eighteen pay package. So
they were able to address just about everything that the
Chancellor identified in that including a totally different having a
special committee this time with totally different composition, addressing all
(37:20):
the procedural aspects that the Chancellor took issue with in
the court opinion, as well as producing an extensive report
that is more extensive than anything that I recall seeing
in recent memory to try to address all those concerns.
In addition to of course the shareholder vote.
Speaker 3 (37:42):
You are, of course a shareholder. Musk himself is a
significant shareholder. He wants to be more of a significant one.
He's got about fifteen percent that he could put weight
behind he in Texas is allowed to vote for his
own pay package in this respect, So many say, actually,
this is just going to pass, but it's more idea
of the court of public opinion. They need to pass
with such a majority to prove that this is born
out right.
Speaker 2 (38:03):
What do you make of that role? Do you think
that it's it's will pass with.
Speaker 3 (38:07):
Flying colors in that respect and enough to stop the
criticism continuing.
Speaker 6 (38:12):
I think it will.
Speaker 13 (38:13):
Yeah, I think the I think the shareholders other than
Musk and Kimball will vote very substantially in favor of it. Frankly,
the main criticism I here are certainly not coming from
the retail shareholders, who overwhelmingly are not just supported, but
I think are are nervous that it won't pass by
(38:33):
by enough. And I think you know the value that
Musk brings this company. It's it's undeniable. If if if
he left tomorrow, you can imagine what would happen to
the stock price. And so I think it's unfair not
to give him the benefit of that of the fact
that the stock price has gone up. By looking at
(38:55):
it now at one hundred and thirty thirty dollars. Since
this pay package is even announced right, so the market
loves it. I don't see any criticism there. Really, it's
just the sort of rigid voting restrictions of the proxy
advisors that are going to be the obstacle here. It's
(39:16):
the cookie cutter approach they have to apply because they
have to try to treat Tesla like every other company
when it's it's not similar to a hired CEO who's
come in from the outside to manage a mature company.
This is a founder led company.
Speaker 3 (39:32):
Anwance approach from Professor Rob Anderson. We appreciate it from
the University of Arkansas. Thanks for joining us and a
retail investor in Tesla. Now coming up Palentier shoes there
are up ahead of companies earnings.
Speaker 2 (39:42):
Later today, we'll discuss what to expect next. It's a
brute BG Tech earning season.
Speaker 3 (39:54):
It rolls on an AI balls where they're going to
be watching Palenteer closely.
Speaker 2 (39:57):
It reports after the bell.
Speaker 3 (39:58):
The stock's already is you can see one hundred and
seventy percent let's call it on AI enthusiasm. But most
Lazett Chapman joins us now and there are high expectations
fifty percent increase in revenue. Just talk us through what's
going to fuel that growth, lizet right.
Speaker 14 (40:14):
So, like you said, there is a lot of built
in anticipation eagerness around this. We're going to be see
they've beat the last four consecutive quarters. We're going to
see if they're going to beat that again or maybe
they're going to fall short. What we're going to be
looking for is whether they're able to translate these small,
smaller customer deals, these one million dollar deals into ones
(40:34):
that expand into you know, ones that that really drive
the US commercial deals as well as international that's on
the commercial side. On the government side, we're going to
be looking at how things are going here domestically as
well as internationally with the boost that they've seen that
they've invested in the UK and a lot of NATO
expansion efforts as well. So we're going to be looking
(40:56):
to see whether they've been able to you know, continue
to to expand the sizes of those deals.
Speaker 3 (41:02):
I mean, government spending for them in defense in particular
has been such a tailwind. But we're also amid a
government shutdown. Is it is that any sort of headwind.
Speaker 14 (41:12):
The people that we've spoken to indicate that is unlikely
because of the lumpiness and long term nature of these contracts,
that doesn't seem to be a major factor that we
have anticipated so far. And what we will be looking
at going forward though, is again like, you know, will
they be and then where and how? And traditionally international
(41:33):
sales have been much softer than the US ones, and
you know, CEO Alex Karp has repeatedly said, you know,
it's US commercial growth driving this, So we'll see if
that continues to be the case or whether they've been
able to boost their strength abroad.
Speaker 3 (41:49):
I mean, really analyst calling out the uncharacteristically large beats
and raises that we've had prior quarters from Alex Carp
and team.
Speaker 2 (41:58):
Is that what he needs to do?
Speaker 3 (41:59):
The the narrative, because boy is he good at driving narratives.
Speaker 2 (42:03):
Yeah, I think that is.
Speaker 14 (42:04):
A great question, and I think the markets are going
to tell us right.
Speaker 2 (42:08):
You know, he has a.
Speaker 14 (42:09):
Famously very antagonistic relationship with Wall Street. He considers financial
results of vulgar and inadequate way to judge a company success,
and he's consistently married the financial results with what he
considers is a philosophical mandate to create AI software for
(42:36):
the use of the US defense forces and allies, and
so that's going to be what he's driving towards. So
there is not just the focus on profit, but also
there's there's some philosophical support that he may get or
may not.
Speaker 3 (42:51):
We'll get to that philosophy after the bows that Chapman,
it's always great to have you on.
Speaker 2 (42:56):
Thank you so much. That does it. But as addition
to bring the tech, don't forget to check out our podcast.
Speaker 3 (43:00):
You can find it on the terminal as well as
online on Apple, Spotify.
Speaker 2 (43:03):
An I heart from New York. It's a brittybag tech.
Speaker 3 (43:08):
Mm hmmm
Speaker 13 (43:11):
Hm
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