Bonus Episode: Tesla, Meta and Microsoft Earnings

This is Bloomberg Business Week with Carol Masser and Tim 0:00:04.880 --> 0:00:06.920 Stenevek on Bloomberg Radio. 0:00:08.160 --> 0:00:12.560 It is Bloomberg BusinessWeek. I'm Tim Stenevek. That is Carol Masser, 0:00:12.840 --> 0:00:15.080 and we are following what's going on with all the 0:00:15.080 --> 0:00:17.840 companies that are reporting right now so far. In terms 0:00:17.880 --> 0:00:20.160 of the big companies that we're following this afternoon, Carol, 0:00:20.239 --> 0:00:23.000 we're looking at shares of Tesla, which are lower in 0:00:23.040 --> 0:00:26.040 the after hours. In addition to that, we're also looking 0:00:26.040 --> 0:00:28.840 at shares of Microsoft, which are following after their report. 0:00:29.040 --> 0:00:32.760 Yeah. Absolutely, we've got Microsoft down almost four percent here 0:00:32.800 --> 0:00:36.000 in the aftermarket. As we said, some disappointment over maybe 0:00:36.040 --> 0:00:39.920 some of the numbers in the second quarter revenue sixty 0:00:40.000 --> 0:00:43.720 nine point sixty three billion estimate, estimate was sixty eight 0:00:43.720 --> 0:00:44.279 point nine two. 0:00:44.320 --> 0:00:45.040 That's actually better. 0:00:45.080 --> 0:00:48.280 Second quarter Azure revenue was at thirty one percent. The 0:00:48.400 --> 0:00:50.800 estimate was for gain of thirty one point eight percent. 0:00:51.760 --> 0:00:55.400 But the second quarter cloud revenue that missed estimate, and 0:00:55.440 --> 0:00:59.360 so that second quarter intelligent cloud revenue twenty five point 0:00:59.440 --> 0:01:02.600 fifty four billion dollars, the estimate was just a tad 0:01:03.000 --> 0:01:06.400 above that at twenty five point eighty nine billion. So again, 0:01:06.440 --> 0:01:09.920 maybe some concerns over that and expectations are high right now. 0:01:10.040 --> 0:01:13.640 Okay, he doesn't ignore it, but he doesn't cover it 0:01:13.920 --> 0:01:15.960 like some of his colleagues. Man keep seeing his Bloomberg 0:01:15.959 --> 0:01:20.360 Intelligence senior technology analyst as we await meta earnings to cross. 0:01:20.600 --> 0:01:22.000 We're going to make him go a little out of 0:01:22.000 --> 0:01:25.520 his element and speak to Microsoft, because you can't ignore 0:01:25.680 --> 0:01:29.320 what's going on with Microsoft. Man, deep, give us an 0:01:29.360 --> 0:01:31.480 idea of what sticks out to you from this company. 0:01:31.800 --> 0:01:35.280 I mean, look, the Intelligent Cloud number missed. Probably that 0:01:35.400 --> 0:01:37.920 has to do with, you know, a lower adoption of 0:01:38.600 --> 0:01:42.080 three sixty five co pilots. They've been touting that and 0:01:42.680 --> 0:01:45.680 the expectations had gone up. And look, it's one of 0:01:45.720 --> 0:01:50.680 those products where the ROI so far hasn't been there. 0:01:50.800 --> 0:01:54.320 The promise is there, and that's why they are emphasizing 0:01:54.360 --> 0:01:57.000 the Azure number. The thirteen billion dollar rund rate, one 0:01:57.040 --> 0:02:00.360 hundred and seventy five percent growth. Look, it's stellar by 0:02:00.520 --> 0:02:05.240 any comparisons. And from that perspective, the infrastructure side looks 0:02:05.240 --> 0:02:09.480 solid right now. It's the copilots and the application side 0:02:09.720 --> 0:02:14.240 where you're seeing some hesitation. And look, I think the 0:02:14.320 --> 0:02:18.120 native integration with open AI as long as it's there, 0:02:18.160 --> 0:02:21.079 it should help all their products. But there's more competition. 0:02:21.120 --> 0:02:24.519 I mean, Salesforce has been launching their agent so there 0:02:24.639 --> 0:02:27.520 is more competition in the application there now than there 0:02:27.520 --> 0:02:27.919 was before. 0:02:28.000 --> 0:02:29.600 And the point is you will build it, but will 0:02:29.600 --> 0:02:31.560 they come? And that's what it's kind of like what 0:02:31.600 --> 0:02:32.320 they're waiting for. 0:02:32.400 --> 0:02:37.120 Correct, Well, if you're asking enterprises to pay thirty dollars 0:02:37.200 --> 0:02:40.800 extra per user for that copilot feature, it better be good. 0:02:41.320 --> 0:02:44.120 I mean, that's the you know, the key takeaway is like, 0:02:44.200 --> 0:02:47.119 if you want to upsell such an expensive product has 0:02:47.160 --> 0:02:48.720 to have some level of productivity. 0:02:48.840 --> 0:02:54.040 So remind everybody where Microsoft stands in terms of the lms, 0:02:54.680 --> 0:02:56.800 because you mentioned a company like Salesforce. Is a company 0:02:56.840 --> 0:02:59.640 like Salesforce building its own LLLM or they building an 0:02:59.639 --> 0:03:02.880 agent on top now an existing LLLM, maybe from Microsoft, 0:03:02.919 --> 0:03:06.240 maybe Lama from Meta, maybe chat GPT from open Ai 0:03:06.440 --> 0:03:07.320 or claud from. 0:03:07.200 --> 0:03:10.040 mPire exactly, So they are not building their own LLLM. 0:03:10.160 --> 0:03:12.880 At the same time, they have gone big in their 0:03:13.000 --> 0:03:16.560 agent force concepts and they're saying AI agency is where 0:03:16.960 --> 0:03:19.640 they are doubling down on and they don't need to 0:03:19.639 --> 0:03:22.040 own an LLLM. So that's where I think with the 0:03:22.120 --> 0:03:24.560 open source saying, you know of deep seek and the 0:03:24.639 --> 0:03:28.280 fact that pricing is coming down, all that is positive 0:03:28.320 --> 0:03:31.839 for every application software provider, not just Salesforce, even word 0:03:31.919 --> 0:03:36.320 Day or SAP. They can integrate LLLM functionality now and we. 0:03:36.320 --> 0:03:39.120 Saw software names certainly rally this week. Having said that, 0:03:39.200 --> 0:03:42.760 Microsoft has a specially unique exposure to open AI and 0:03:42.840 --> 0:03:45.440 chat Gypt in terms of the what thirteen fourteen. 0:03:45.160 --> 0:03:47.920 Billion dollars or so that they have invested. 0:03:48.000 --> 0:03:50.360 So does that put them on a certain level of 0:03:50.440 --> 0:03:52.080 vulnerability Perhaps, No. 0:03:52.240 --> 0:03:56.360 Because they are benefiting from the infrastructure revenue that thirteen 0:03:56.400 --> 0:04:00.320 billion dollar rund rate. It's all Azure cloud consumption, nothing 0:04:00.360 --> 0:04:03.280 to do with the co pilots, just companies that are 0:04:03.360 --> 0:04:08.440 leveraging their infrastructure to run their cloud operations or deploy 0:04:08.480 --> 0:04:12.440 their applications. So that meter is still running, and it's 0:04:12.520 --> 0:04:14.520 running very fast. I mean, one hundred and seventy five 0:04:14.560 --> 0:04:17.880 percent growth just on infrastructure is very impressive. It's just 0:04:17.960 --> 0:04:20.480 the application side, the lift from copilot. 0:04:20.920 --> 0:04:21.880 I think that's. 0:04:21.800 --> 0:04:26.040 Where they'll probably see more competition and probably expectations were 0:04:26.040 --> 0:04:26.400 too high. 0:04:26.520 --> 0:04:29.880 Well, speaking of expectations, we're expecting Meta platform shares with 0:04:30.000 --> 0:04:32.800 platforms earnings across very soon. We have no idea what 0:04:32.800 --> 0:04:34.480 those shares are going to do in the after hours 0:04:35.080 --> 0:04:38.160 revenue estimate coming in at close to forty seven billion dollars, 0:04:38.480 --> 0:04:41.719 what's the most important line item that you're looking at here? 0:04:42.120 --> 0:04:45.800 So big Meta raised its capex right before we had 0:04:45.839 --> 0:04:47.880 this deep sixty five billion dollars. 0:04:48.279 --> 0:04:50.560 Okay, was that before? Because that had to be on 0:04:50.560 --> 0:04:51.640 Mark Zuckerberger's radar. 0:04:51.760 --> 0:04:54.560 It was, but still they chose to do it. Now 0:04:54.839 --> 0:04:57.960 the fact that this is really a positive development for 0:04:58.120 --> 0:05:01.760 open source, everyone is thinking Meta won't have to spend 0:05:01.800 --> 0:05:04.119 sixty to sixty five and they will take it back. 0:05:04.680 --> 0:05:07.520 So that capex number is still the key for me 0:05:07.640 --> 0:05:11.039 because Meta has been known for spending spending big on 0:05:11.120 --> 0:05:14.440 reality labs and now you know, building data centers. 0:05:14.560 --> 0:05:16.479 Are you saying that there's a chance we could hear 0:05:16.800 --> 0:05:19.480 a pullback in that capex number and investors might cheer 0:05:19.480 --> 0:05:22.560 that Investors cheered the investment number on Friday. I was 0:05:22.560 --> 0:05:23.480 surprised to see that. 0:05:23.880 --> 0:05:27.200 Not so soon, I think with the deep seek, the 0:05:27.279 --> 0:05:30.159 fact that you know, everyone is very excited about open 0:05:30.200 --> 0:05:34.480 source Meta coming out and saying we can monetize lama 0:05:34.600 --> 0:05:37.080 our model, which really no one will sure how are 0:05:37.080 --> 0:05:40.039 they going to monetize it? Suddenly, I think that's that 0:05:40.200 --> 0:05:44.560 becomes a very valuable proposition. And I think just his 0:05:44.800 --> 0:05:48.920 plans around how do they plan to monetize AI and 0:05:49.000 --> 0:05:52.520 really not going above sixty five billion, that's the other 0:05:52.600 --> 0:05:55.080 rest because you know, you could revise it further upward. 0:05:55.440 --> 0:05:58.279 At least, I think those fears have gone away, that 0:05:58.320 --> 0:05:59.919 they're sixty five is a cap. 0:06:00.839 --> 0:06:02.200 We talk so much about AI. 0:06:02.640 --> 0:06:07.240 I mean for Meta, it's still though, advertising, like something. 0:06:06.960 --> 0:06:10.320 As simple as that is still such an important indicator. 0:06:10.440 --> 0:06:11.120 That's their business. 0:06:11.200 --> 0:06:13.920 I mean, forty five point six of the forty seven 0:06:14.000 --> 0:06:17.520 billion dollars Carrol that's expected to be reported advertising, And. 0:06:17.520 --> 0:06:20.320 I understand it all plays together, but still that's the metric. 0:06:20.360 --> 0:06:23.320 Yeah, And the best way to compare is compare Google 0:06:23.440 --> 0:06:28.800 search revenue growth with Meta's you know, social media ad 0:06:28.839 --> 0:06:32.799 revenue growth. So Google Search is a two hundred billion 0:06:32.839 --> 0:06:36.000 dollar business growing at high single they did at best. 0:06:36.560 --> 0:06:39.679 Meta is close to one hundred and sixty billion, growing 0:06:39.720 --> 0:06:40.480 eighteen percent. 0:06:41.000 --> 0:06:45.400 How does reality Labs how do Reality Labs products help 0:06:46.839 --> 0:06:50.640 meta platforms sell advertising better? Well? 0:06:50.680 --> 0:06:53.680 So their bed is on that Meta AI, which for 0:06:53.760 --> 0:06:56.280 which they have six hundred million users now. And the 0:06:56.320 --> 0:06:59.520 form factor, their own form factor is the glasses that 0:06:59.560 --> 0:07:02.479 you can distill a model. And everyone is talking about 0:07:02.480 --> 0:07:05.800 distillation right now because that's what deep Seek showed us. 0:07:05.800 --> 0:07:08.719 That you can distill a larger model into a smaller model. 0:07:09.000 --> 0:07:10.960 Maybe that model can run on your glasses. 0:07:11.040 --> 0:07:13.480 Okay, how does that help me sell it more ads? 0:07:13.520 --> 0:07:16.680 Well, they will learn so much more about you as 0:07:16.720 --> 0:07:19.320 a person that they can show you a more personalized 0:07:19.360 --> 0:07:22.200 ad when you go to Instagram or Facebook. And that's 0:07:22.200 --> 0:07:24.680 where you know. Meta strength has always been the quality 0:07:24.720 --> 0:07:25.240 of their ads. 0:07:25.320 --> 0:07:26.480 So still, at the end of the day, that's what 0:07:26.520 --> 0:07:27.080 it's all about. 0:07:27.280 --> 0:07:28.520 Yeah, at least for now. 0:07:28.360 --> 0:07:30.000 I just want to remind everybody. I'm looking at our 0:07:30.040 --> 0:07:33.000 live blog, which is waiting for Meta's fourth quarter earnings. 0:07:33.440 --> 0:07:35.720 Our Kurt Wagner says they usually drop a few minutes 0:07:35.760 --> 0:07:37.920 after the market close at four pm New York time. 0:07:38.560 --> 0:07:41.080 Still waiting on them, they say, He says, it's a 0:07:41.120 --> 0:07:43.760 bit of a rare delay. We usually have them, like 0:07:43.800 --> 0:07:47.400 we said, right after the market close, so we're waiting them. 0:07:47.520 --> 0:07:49.000 As soon as they come across. We're going to have 0:07:49.000 --> 0:07:51.520 men deep break them down. Also in studio is our 0:07:51.560 --> 0:07:54.120 own Caroline Hyde, who's co host of Bloomberg Technology on 0:07:54.120 --> 0:07:57.440 Bloomberg Television. And Caroline, we've also had Tesla earnings. We've 0:07:57.440 --> 0:07:59.720 been talking with Man Deep about Microsoft as we await 0:07:59.760 --> 0:08:02.920 Meta go where you are because it just feels like 0:08:02.960 --> 0:08:04.920 both Microsoft and Tests I've seen some pressure here in 0:08:04.960 --> 0:08:05.240 the act. 0:08:05.360 --> 0:08:07.760 And also I don't know if you've broken down Service Now, 0:08:07.840 --> 0:08:11.760 but suddenly software became quite the thing of this week 0:08:11.840 --> 0:08:14.960 because we all suddenly freaked out about AI infrastructure and hardware. 0:08:14.960 --> 0:08:17.120 But with software going to be gaining from these Deep 0:08:17.160 --> 0:08:20.640 Seek revelations, Service now actually looking pretty lackluster. Outlook on 0:08:20.640 --> 0:08:23.360 the slower than have been anticipated. We were thinking AI 0:08:23.480 --> 0:08:25.680 was going to give it this massive bump. Overall fiscal 0:08:25.760 --> 0:08:29.560 year sales outlook fell short of those expectations. Subscription revenue 0:08:29.640 --> 0:08:31.880 going to be twelve point seven billion dollars twenty twenty five. 0:08:32.080 --> 0:08:34.480 Market want to see more, so their shares are dropping hard, 0:08:34.760 --> 0:08:36.040 and I think this is where we're going to have 0:08:36.080 --> 0:08:38.920 to hear more from Microsoft as well. Is the Open 0:08:38.960 --> 0:08:42.040 AI integrated offering not selling at the pace that they 0:08:42.120 --> 0:08:44.960 previoubly expected. I've heard from experts out there saying it's 0:08:44.960 --> 0:08:48.240 priced too high. Ultimately, at the moment, will Deep seek 0:08:48.480 --> 0:08:52.480 force open AI's own offering to get cheaper, Microsoft's offering 0:08:52.520 --> 0:08:54.800 to get cheaper, and therefore it becomes more ubiquitous. 0:08:54.800 --> 0:08:56.880 We will start using it more. But ultimately they get 0:08:56.880 --> 0:08:58.040 more bang for the back in the long term. 0:08:58.040 --> 0:09:00.120 Doesn't mean that these companies could potentially pull back some 0:09:00.200 --> 0:09:01.800 of the capeck they've already announced this year. 0:09:02.480 --> 0:09:04.640 I think that was interesting in the and we talked 0:09:04.679 --> 0:09:08.199 about it when the numbers dropped. Amy Hoard the CFOs 0:09:08.320 --> 0:09:09.719 talking about the discipline. 0:09:09.960 --> 0:09:12.400 Now, last year we were not talking about discipline. We 0:09:12.400 --> 0:09:13.079 were talking like. 0:09:13.120 --> 0:09:15.480 Let's throw eighty billion dollars at this. We just heard 0:09:15.520 --> 0:09:18.160 another half a trillion being thrown at it from Oracle 0:09:18.240 --> 0:09:20.600 Soft Bank and open Ai. I think you'll start to 0:09:20.600 --> 0:09:22.920 hear this. This is why spending. This is return on 0:09:22.960 --> 0:09:23.640 AI spending. 0:09:23.880 --> 0:09:25.880 Not quite a year of efficiency like we saw in 0:09:25.920 --> 0:09:28.800 you know, twenty twenty three, but now discipline spending. 0:09:29.000 --> 0:09:30.760 When it comes to com we're just spending wisely on 0:09:30.800 --> 0:09:31.160 your data. 0:09:31.280 --> 0:09:32.640 Just because you say it doesn't mean you're going to 0:09:32.640 --> 0:09:33.560 spend it ultimately too. 0:09:33.640 --> 0:09:35.280 I do want to point out service now reports an 0:09:35.320 --> 0:09:38.160 additional three billion dollars for share a buyback with the stuff. 0:09:38.360 --> 0:09:40.120 Yeah, but it's still down about nine percent here in 0:09:40.120 --> 0:09:41.880 the aftermarket. But men Deep come. 0:09:41.800 --> 0:09:44.400 Back in because we were talking about, you know, the 0:09:44.440 --> 0:09:46.439 news we got this week from deep seek that the 0:09:46.480 --> 0:09:50.240 beneficiary seemed to be the software software providers. Not every 0:09:50.240 --> 0:09:52.760 software provider though, is the same, correct. 0:09:52.600 --> 0:09:55.720 Well, I mean a company like Service now in theory, 0:09:55.840 --> 0:09:59.440 should benefit from lower LLM costs. I mean, all the 0:09:59.520 --> 0:10:03.800 software companies could arbitrage against the LM providers and say, 0:10:04.040 --> 0:10:06.560 if I have a cheaper open source option, I'm going 0:10:06.600 --> 0:10:08.960 to go with that because the quality of responses are 0:10:09.040 --> 0:10:11.839 very similar. So from that perspective, I mean, the news 0:10:11.920 --> 0:10:15.520 just came out, so obviously they didn't embrace open source before. 0:10:15.880 --> 0:10:17.880 And now a lot will change in the next three 0:10:17.920 --> 0:10:20.840 to six months, But for now, I think expectator to 0:10:20.880 --> 0:10:25.600 Caroline's point, expectations are high this quarter and a lot 0:10:25.640 --> 0:10:29.120 of these companies have touted AI agents in a big way, 0:10:29.520 --> 0:10:32.080 so the street wants to see their revenue and probably 0:10:32.120 --> 0:10:33.920 it's not showing up right now. 0:10:34.000 --> 0:10:36.160 And I had a really interesting conversation with that expert 0:10:36.160 --> 0:10:40.480 who's helping integrate generative AI into enterprise offerings. 0:10:40.840 --> 0:10:42.040 And here's the gap. 0:10:42.200 --> 0:10:42.360 Right. 0:10:42.400 --> 0:10:43.559 We've been talking. 0:10:43.440 --> 0:10:46.520 Deeply, exuberantly about how it's going to make our productivity 0:10:46.600 --> 0:10:49.040 so much better. Ultimately, enterprises need to know that their 0:10:49.080 --> 0:10:51.600 models work and they need to stress test them. They 0:10:51.600 --> 0:10:54.040 need to have the right companies in there ensuring that well, 0:10:54.080 --> 0:10:55.640 when you're saying it's going to get you a better 0:10:55.640 --> 0:10:58.520 mortgage outcome, when you're looking at insurance inquiries, you're actually 0:10:58.520 --> 0:10:59.320 getting the right output. 0:10:59.559 --> 0:11:00.800 Companies are trying. 0:11:00.520 --> 0:11:02.200 To integrate it, but they've got to do this with 0:11:02.280 --> 0:11:03.719 some rules of the road, so it actually takes a 0:11:03.720 --> 0:11:04.160 bit of time. 0:11:04.280 --> 0:11:05.959 Okay, speaking of rules to the road, perhaps a good 0:11:05.960 --> 0:11:08.480 segue to get to Tesla because shares are down about 0:11:08.480 --> 0:11:12.560 two point seven percent right now. It seems, Caroline like 0:11:12.760 --> 0:11:16.120 it was the adjusted EPs that came in shy of 0:11:16.240 --> 0:11:18.800 estimates seventy three cents per share versus estimates of seventy 0:11:18.800 --> 0:11:21.120 five cents per share. Is it about a lack of 0:11:21.160 --> 0:11:24.080 efficiency on the supply chain, on the product line? What 0:11:24.200 --> 0:11:24.400 is it? 0:11:24.440 --> 0:11:26.800 Am they're saying they're not getting the manufacturing savings that 0:11:26.840 --> 0:11:29.120 they wanted to see efficiency. 0:11:29.240 --> 0:11:30.319 Have they tried the blockchain? 0:11:30.559 --> 0:11:30.760 Yeah? 0:11:30.760 --> 0:11:31.680 Have they tried a blockchain. 0:11:32.440 --> 0:11:35.760 Have they tried just making everyone have to come back 0:11:35.760 --> 0:11:39.000 into the office, but more I mean, you know it's 0:11:39.040 --> 0:11:40.040 been on that for a long time. 0:11:40.040 --> 0:11:42.120 But more affordable models is where it's at. 0:11:42.200 --> 0:11:44.240 This is a company that is having to compete from 0:11:44.280 --> 0:11:47.120 a price perspective in China in a big way. And look, 0:11:47.160 --> 0:11:50.160 we saw deliveries did not live up to expectations. So 0:11:50.240 --> 0:11:52.440 already they're not selling as money, they're having to reduce 0:11:52.480 --> 0:11:55.200 the costs. It's interesting they're seeing the automotive gross margin 0:11:55.240 --> 0:11:57.679 ex regulatory credits still at thirteen point six percent. This 0:11:57.720 --> 0:11:59.360 is a company that basically makes an awful lot of 0:11:59.400 --> 0:12:03.520 money that because other car manufacturers can't get the climate 0:12:03.559 --> 0:12:04.920 initiatives out there quickly enough. 0:12:04.920 --> 0:12:06.240 I wonder if that'll dial back. 0:12:06.559 --> 0:12:09.520 But ultimately they did say they achieved record deliveries in 0:12:09.600 --> 0:12:12.040 China in fourth quarter. I wonder how they manage to 0:12:12.080 --> 0:12:14.280 be able to just keep on competing there. 0:12:14.600 --> 0:12:17.040 And no mention of robot taxis. I mean, the big 0:12:17.080 --> 0:12:21.520 bet was this administration should help expedite the rollout of 0:12:21.559 --> 0:12:24.040 Tesla robot taxis that's what investors are betting. 0:12:24.200 --> 0:12:25.760 The letter they did say this is going to be 0:12:25.840 --> 0:12:29.400 the year of supervised fully self driving, but we're still 0:12:29.400 --> 0:12:31.679 waiting to see what the guidances from the federal government. 0:12:31.720 --> 0:12:35.400 The cybercab is on track for twenty twenty six, so 0:12:36.240 --> 0:12:39.120 ultimately they're talking about still being wanting to. 0:12:39.040 --> 0:12:43.000 Get that cybercab out there. In the meanwhile, we're having 0:12:43.000 --> 0:12:43.480 to see. 0:12:43.360 --> 0:12:46.880 Whether or that cheaper price point new vehicle will happen. 0:12:46.920 --> 0:12:49.439 He's saying, new vehicles remain on track for the output 0:12:49.480 --> 0:12:50.600 start in the first half. 0:12:51.160 --> 0:12:52.600 When where how I. 0:12:52.600 --> 0:12:53.400 Just want to update. 0:12:53.720 --> 0:12:55.960 Meta shares are just down about five tenths in the 0:12:56.440 --> 0:12:58.000 after hours, five tens of one percent. 0:12:58.040 --> 0:12:58.800 Our Kurt Wagner and. 0:12:58.800 --> 0:13:01.920 Our live blog says, the latest Meta or Facebook they 0:13:02.000 --> 0:13:04.439 ever posted earnings is for sixteen pm. We have now 0:13:04.440 --> 0:13:07.120 a new record because it's for twenty pm here on 0:13:07.320 --> 0:13:10.400 this Wednesday. He says, in all seriousness, this is definitely unusual. 0:13:10.440 --> 0:13:12.680 I've asked the company what is going on? Will report 0:13:12.720 --> 0:13:14.839 back if I get any news. I was trying to 0:13:14.840 --> 0:13:16.720 see if there was any interesting activity here in the 0:13:16.760 --> 0:13:20.360 aftermarket ahead of the actual results. But again it's just 0:13:20.400 --> 0:13:22.280 down a hair down about four tens of a percent, 0:13:22.320 --> 0:13:24.280 but still waiting on Meta's results. 0:13:24.320 --> 0:13:26.400 I don't know manty if you follow them, right, they're 0:13:26.480 --> 0:13:27.840 usually up by now. 0:13:28.120 --> 0:13:30.920 I mean it reminds me on when Nvidia, I think 0:13:30.960 --> 0:13:33.560 it was a few quarters back they were delayed and 0:13:33.600 --> 0:13:36.920 everyone was like, what's going on? And sometimes I think 0:13:37.480 --> 0:13:41.200 it's one of those situations where yeah, there isn't much 0:13:41.240 --> 0:13:41.559 to it. 0:13:41.559 --> 0:13:44.760 It's just there is a delay and you just wait 0:13:44.840 --> 0:13:45.160 it out. 0:13:45.160 --> 0:13:48.400 But look, I think in the case of Meta, I mean, 0:13:48.840 --> 0:13:52.800 there's so many things that I think investors are looking 0:13:52.840 --> 0:13:56.480 forward to. Especially there was a number around Reality Laps 0:13:56.520 --> 0:13:59.319 growing forty percent for twenty twenty four, right, I mean 0:13:59.320 --> 0:14:02.720 you look at the census expectations for this quarter, it's 0:14:02.760 --> 0:14:05.320 like three percent growth. Yeah, so I don't know how 0:14:05.360 --> 0:14:07.240 they grew forty percent for the full year. 0:14:08.559 --> 0:14:10.800 Caroline, come on in here. Is that? Is that because 0:14:10.920 --> 0:14:14.679 the I don't know, the glasses exceeded expectations. Again, we're 0:14:14.679 --> 0:14:17.720 still waiting for these numbers across Reality Lads a tiny, 0:14:17.880 --> 0:14:21.320 tiny portion of the company's full revenue. I mean of 0:14:21.400 --> 0:14:24.680 tiny fraction, but an area where they're investing a lot 0:14:24.720 --> 0:14:26.440 and where they think there's a real future. 0:14:26.120 --> 0:14:27.880 And people got very excited about the product. Did you 0:14:27.920 --> 0:14:30.720 see how often Ed Ludlow has been wearing hiss. I've 0:14:30.760 --> 0:14:33.240 heard they really did. 0:14:33.120 --> 0:14:35.760 Blow people's minds as to how exciting the future could 0:14:35.800 --> 0:14:38.840 be of just the integration within your everyday where suddenly, 0:14:38.880 --> 0:14:41.640 you know, smart glasses became cool and thanks Raybound and 0:14:41.680 --> 0:14:42.440 a large part of that. 0:14:42.480 --> 0:14:45.520 But Google glasses calling. They're saying, hey, we had this 0:14:45.600 --> 0:14:48.680 ten years ago, but it didn't stick, and what you want. 0:14:48.560 --> 0:14:49.680 Is the zeitgeist. 0:14:49.800 --> 0:14:52.240 Right, Sure, people might not buy that iteration, what about 0:14:52.240 --> 0:14:54.160 the next iteration. What about the fact that this is 0:14:54.200 --> 0:14:56.520 going to in some way be infused within your work 0:14:56.560 --> 0:14:59.040 life environment as well, and suddenly you'll be able to 0:14:59.080 --> 0:15:02.920 have forced meanes wherever you are, not just to I 0:15:02.960 --> 0:15:06.040 think it suddenly just showed the power more than anything 0:15:06.120 --> 0:15:09.120 of Mark Zuckerberg to interlace General to Bai everywhere. For me, 0:15:09.200 --> 0:15:11.320 the big standout has been the fact that I do 0:15:11.480 --> 0:15:13.560 use General to Bai within my Instagram. 0:15:14.240 --> 0:15:16.600 What you do just out of curiosity my metter. 0:15:16.400 --> 0:15:19.160 Ai psidekick and I ask it questions. I get it 0:15:19.200 --> 0:15:21.760 to like design what one should wear for an event. 0:15:21.880 --> 0:15:23.600 I give it pictures of my fridge and get it 0:15:23.640 --> 0:15:24.840 to recommend what I should be. 0:15:25.240 --> 0:15:25.960 Do you follow it? 0:15:26.040 --> 0:15:27.600 Do you use it? I mean, do you like, take 0:15:27.640 --> 0:15:28.720 these things and actually do something. 0:15:28.800 --> 0:15:32.240 Yeah, yeah, yeah, definitely what they should cook sometimes the 0:15:32.240 --> 0:15:33.920 fashion sense, I like, take a little. 0:15:33.800 --> 0:15:35.960 But to be clear, you could also use chat gpt 0:15:36.080 --> 0:15:39.080 from open Ai to do that or that. 0:15:40.640 --> 0:15:43.320 I use what'sapp every day of my life to talk 0:15:43.360 --> 0:15:44.080 with my family. 0:15:43.840 --> 0:15:46.720 So I don't subscribe to the expensive versions of I 0:15:46.920 --> 0:15:50.560 take the free version of not not for my personal 0:15:50.640 --> 0:15:53.280 agent to you know, to get me a flight to wherever, 0:15:53.920 --> 0:15:55.560 which I think is a really cool idea. And I 0:15:55.560 --> 0:15:57.640 think that shows the promise of agents. And you know, 0:15:57.680 --> 0:15:59.640 we hear salesforce talking about the promise of agents and 0:15:59.640 --> 0:16:03.960 stuff like that. But are you able to do for 0:16:04.000 --> 0:16:07.280 free with Lama what you could pay chat gpt to do? 0:16:07.400 --> 0:16:08.200 Is that an issue? 0:16:08.320 --> 0:16:10.320 I have to say personally, I'm not running the two 0:16:10.320 --> 0:16:14.000 against each other, and I use chatchipt for other things. 0:16:14.040 --> 0:16:18.120 I'm using chatchipt to articulate what my O pair because 0:16:18.120 --> 0:16:20.320 we will have to rely while I'm at work on 0:16:20.600 --> 0:16:23.360 wonderful people looking after your children, how her weak should look, and. 0:16:23.320 --> 0:16:24.600 I just speak into it dictated. 0:16:24.640 --> 0:16:26.760 So I'm using different things at different points, but for me, 0:16:26.800 --> 0:16:28.760 I actually end up going towards the metal offerings A 0:16:28.800 --> 0:16:29.280 bit more. 0:16:29.160 --> 0:16:30.200 Just because they are here. 0:16:30.280 --> 0:16:34.000 We're seeing interesting an agreement from the Wall Street Journal 0:16:34.040 --> 0:16:36.520 talking about some Trump signing an agreement calling for Meta 0:16:36.560 --> 0:16:38.520 to pay some element to settle a suit. 0:16:38.600 --> 0:16:40.400 So maybe there's some breaking. 0:16:40.080 --> 0:16:43.520 News there, But I am I am using Meta AI 0:16:43.680 --> 0:16:46.240 just because it's already an app that I'm using when it's. 0:16:45.920 --> 0:16:47.720 I just want to mention Microsoft is not down as 0:16:47.800 --> 0:16:50.480 much as it was earlier. It's now down about three 0:16:50.560 --> 0:16:53.240 quarters of one percentage point. Tesla is now down only 0:16:53.280 --> 0:16:55.320 about nine tens of a percentage point. I want to 0:16:55.320 --> 0:16:58.560 mention IBM because we are seeing this one rally in 0:16:58.600 --> 0:17:01.640 the aftermarket following its earnings. This one's up about eight 0:17:01.720 --> 0:17:04.960 percent here. IBM coming out with results kind of older tech, 0:17:04.960 --> 0:17:07.320 if you will, but jumping after fiscal year revenue growth 0:17:07.359 --> 0:17:11.520 outlook tops estimates. We mentioned service now, and we are 0:17:11.600 --> 0:17:14.120 seeing that one move in a big way. We've seen 0:17:14.119 --> 0:17:17.399 that move to the downside. Some concerns there. We do have, 0:17:17.560 --> 0:17:21.160 as you said, that headline crossing from the Wall Street Journal, 0:17:21.200 --> 0:17:23.280 Trump signs of settlement for Meta to pay twenty five 0:17:23.320 --> 0:17:26.359 million dollars to settle a suit. So perhaps that is 0:17:26.480 --> 0:17:30.280 why we might be waiting ultimately for Meta's results. Meta 0:17:30.359 --> 0:17:32.800 in the aftermarket right now is just down about one 0:17:32.840 --> 0:17:35.520 quarter of one percent. And I've been also looking at 0:17:35.520 --> 0:17:38.320 the Nasdaq E Mini one hundred, Nasdaq one hundred E 0:17:38.359 --> 0:17:41.199 mini futures pretty flat in the after market, and S 0:17:41.280 --> 0:17:43.800 and P five hundred e mini futures they're down about 0:17:43.800 --> 0:17:46.280 four tens of a percent, So just kind of rolling 0:17:46.320 --> 0:17:48.560 everything together to see kind of market reaction. 0:17:48.680 --> 0:17:50.919 In Tesla though, hire now by about one percent. 0:17:50.920 --> 0:17:52.920 That's why I'm saying, it's like kind of fascinating to 0:17:52.960 --> 0:17:55.119 see the bump up. You're right now up about one percent. 0:17:55.200 --> 0:17:57.160 And I think what's interesting is remember in video you're 0:17:57.160 --> 0:18:00.159 talking tim earlier about the hit and video took the 0:18:00.200 --> 0:18:02.800 chairs a climbing now after hours because of Microsoft's long 0:18:02.880 --> 0:18:05.960 term CAPEX commitment. So maybe even though we don't get 0:18:05.960 --> 0:18:08.960 in video numbers until February the twenty sixth, Microsoft's already 0:18:09.000 --> 0:18:11.879 coming out standing by its capital expenditure commitment. If we 0:18:11.920 --> 0:18:14.440 get Meta committing to that sixty five billion dollars once 0:18:14.440 --> 0:18:16.520 and again, maybe we do start to see in video 0:18:17.080 --> 0:18:18.800 clowing back some of the loss that we've seen. 0:18:18.960 --> 0:18:20.520 And a good reminder too that we still have a 0:18:20.560 --> 0:18:23.080 lot of details that we're waiting on about deep Seek 0:18:23.160 --> 0:18:24.919 and what exactly they were able to do with what. 0:18:25.920 --> 0:18:27.439 So some investigations going on. 0:18:27.440 --> 0:18:28.000 The investigation. 0:18:28.119 --> 0:18:30.240 Microsoft got their ownings out on time and we're doing 0:18:30.480 --> 0:18:31.600 an investigation. 0:18:32.119 --> 0:18:34.720 Room of engineers reportedly, so I want to bring you 0:18:34.760 --> 0:18:35.200 back in there. 0:18:35.240 --> 0:18:37.359 Could it possibly be that there's a delay because of 0:18:37.400 --> 0:18:40.240 this settlement and they want to kind of like roll 0:18:40.280 --> 0:18:40.919 it all together. 0:18:41.200 --> 0:18:43.119 That mountain looks too small to matter. 0:18:43.240 --> 0:18:44.080 It doesn't matter. 0:18:45.480 --> 0:18:47.560 Five million for Meta, it's like. 0:18:47.640 --> 0:18:50.520 And that was under the over the Trump suspension to 0:18:50.800 --> 0:18:53.639 the use of Facebook and its family of apps. 0:18:53.960 --> 0:18:55.879 Yeah, I just think about the stories we've been putting out. 0:18:56.040 --> 0:18:58.639 They're paying billion dollar fines in the EU, so this 0:18:58.840 --> 0:18:59.680 is like a drop. 0:19:00.080 --> 0:19:00.720 This is nothing. 0:19:01.119 --> 0:19:04.159 I mean, it's kind of fascinating that to see that 0:19:04.200 --> 0:19:05.119 we're just kind of waiting for. 0:19:05.440 --> 0:19:09.080 Tesla's on time, on time, better is late what a 0:19:09.119 --> 0:19:11.000 turnaround for and Test is now up. 0:19:10.920 --> 0:19:13.480 About two point six percent in the aftermarket, So quite 0:19:13.520 --> 0:19:15.439 a turn around here, wow. 0:19:15.720 --> 0:19:19.119 I Yeah, it is notable metas delay and we have 0:19:19.240 --> 0:19:22.919 got requests out for comment on what might be holding 0:19:22.920 --> 0:19:25.560 them up. But this is I feel there's going to 0:19:25.600 --> 0:19:29.280 be a lot of redrafting of messaging going on since Monday, 0:19:29.359 --> 0:19:31.439 And look what of very difficult the week to have 0:19:31.720 --> 0:19:34.320 your earnings on when you're trying to understand the competitive 0:19:34.359 --> 0:19:36.920 threat of deep Seek to Alarma model, which are both 0:19:36.960 --> 0:19:38.520 open source, but at the same time the way in 0:19:38.520 --> 0:19:41.400 which it could enhance their products. Everyone read deep Seek 0:19:41.480 --> 0:19:44.359 as a good thing for LLM, for Lama and open 0:19:44.359 --> 0:19:47.080 source lms, but maybe there is a question of ultimately, 0:19:47.080 --> 0:19:50.360 why should you be backing AI homegrown, open source versus 0:19:51.080 --> 0:19:52.120 competing versus China. 0:19:52.119 --> 0:19:54.080 I mean, men, Deep do you think that the narrative 0:19:54.240 --> 0:19:57.160 like substantially should be different because of what we got 0:19:57.200 --> 0:19:59.760 on Monday from deep Seek, Like the conversation that we 0:19:59.840 --> 0:20:02.320 are having around AI in terms of the spend. Was 0:20:02.320 --> 0:20:03.639 it smart for us to kind of all of a 0:20:03.680 --> 0:20:06.120 sudden shift It felt like the narrative or time will 0:20:06.160 --> 0:20:08.840 tell whether again with there's so many questions still about 0:20:08.840 --> 0:20:10.040 the reality of what they did. 0:20:10.320 --> 0:20:12.800 Yeah, I mean, look, last six months you've been talking 0:20:12.840 --> 0:20:16.639 about scaling laws non stop. It's like everything is how 0:20:17.080 --> 0:20:19.200 big are the data center is going to get? How 0:20:19.240 --> 0:20:23.040 long will the scaling laws hold? So from that perspective, 0:20:23.119 --> 0:20:26.760 I think this does put a question mark around the 0:20:26.800 --> 0:20:29.880 scaling laws. You know, how big does the LLM need 0:20:29.920 --> 0:20:33.600 to get to improve its reasoning? Well, a smaller LLM 0:20:33.680 --> 0:20:38.320 can give you a similar reasoning as open AIE latest model. 0:20:38.400 --> 0:20:43.160 And look, I think with llms, because it's so hard 0:20:43.200 --> 0:20:47.399 to understand everything about how these llms are trained, the 0:20:47.520 --> 0:20:52.399 data sources, the algorithmic improvements, it's still a black box. 0:20:52.440 --> 0:20:55.399 I mean, things are getting better in terms of the transparency, 0:20:55.800 --> 0:20:59.640 but in the end common people cannot interpret what's going 0:20:59.680 --> 0:21:02.879 on in terms of building these llms, and it's really 0:21:02.960 --> 0:21:06.920 hard to explain it to someone why an llm's quality 0:21:07.119 --> 0:21:11.080 is better than the competing LLM. It's just almost impossible 0:21:11.119 --> 0:21:13.080 because it's all vectorized map. 0:21:13.160 --> 0:21:15.840 At the end of the day, do they become commodities? 0:21:15.880 --> 0:21:19.240 Caroline, I think that has been the question for a while. 0:21:19.359 --> 0:21:24.600 That will ultimately just move toggle between CHATCHBT, your meta offering, 0:21:24.640 --> 0:21:27.040 what Anthropic has been up to. That doesn't mean that 0:21:27.080 --> 0:21:30.040 you can't still see an awful lot of money having 0:21:30.080 --> 0:21:33.400 to be invested in these latest and greatest underlying foundational models. 0:21:33.640 --> 0:21:37.560 Whether eventually the money will accrue to the application layers, 0:21:37.600 --> 0:21:38.840 to the software layer. 0:21:38.720 --> 0:21:40.520 Well, I do think there's a compelling case for Google 0:21:40.520 --> 0:21:43.120 to make that behind the scenes. If you're using an 0:21:43.119 --> 0:21:45.520 AI agent and you ask it to do something complicated, 0:21:45.840 --> 0:21:48.800 Google and actually Microsoft too with being has that search 0:21:48.880 --> 0:21:52.479 engine built in that can actually do that stuff, and 0:21:52.600 --> 0:21:54.240 perhaps they make money more. 0:21:54.160 --> 0:21:56.760 Of integrated offering as well. 0:21:56.760 --> 0:21:58.760 They have to have the foundational layer to then sell 0:21:58.800 --> 0:22:01.560 you the software application as well. But would you rather 0:22:01.640 --> 0:22:04.280 be a service now that just has the software margins 0:22:04.440 --> 0:22:07.080 rather than having to do the underlying investment. What's been 0:22:07.080 --> 0:22:09.200 so interesting has been that shift as well from investment 0:22:09.520 --> 0:22:11.440 coming ultimately from private sources. 0:22:11.520 --> 0:22:14.080 What we've seen with the announcement. 0:22:13.600 --> 0:22:16.760 Of AI infrastructure money coming to the US is high 0:22:16.800 --> 0:22:20.240 soft bank Oh thanks Ale, and the chips at like 0:22:20.240 --> 0:22:22.640 nowhere to be seen for the last few weeks of late. 0:22:23.080 --> 0:22:25.879 Now what happens to projects targeate, I mean the whole 0:22:26.000 --> 0:22:30.240 timing of it, Meta raising their CAPEX projects target announcement 0:22:30.640 --> 0:22:32.679 and then deep Sea coming out. Just think of the 0:22:32.720 --> 0:22:36.480 sequence of events and they're not in sync with each other. 0:22:36.640 --> 0:22:39.760 So that's where you know, if you're trying to follow 0:22:39.800 --> 0:22:42.320 the big trend, it's not very clear what the big 0:22:42.320 --> 0:22:45.680 trend is right now in terms of scaling versus you know, 0:22:45.800 --> 0:22:49.600 how do you go about data center investments medium to 0:22:49.640 --> 0:22:50.240 long term? 0:22:50.280 --> 0:22:54.560 And do you buy the inference argument though that was 0:22:54.600 --> 0:22:56.920 the argument of videos. You're still going to need all 0:22:56.920 --> 0:22:59.920 of our very expensive GPUs for inference, and we're still 0:23:00.320 --> 0:23:04.480 all ubiquitously using gender to AI more and more and more. Well, 0:23:04.560 --> 0:23:07.080 that's when the Jevins paradox comes in that Satia wants 0:23:07.080 --> 0:23:09.560 to learn to you more than the data centers with cloud. 0:23:09.400 --> 0:23:13.119 Yeah, more than that. I think compute inherently is fungible. 0:23:13.400 --> 0:23:16.920 So if I'm using you know, certain chips for training 0:23:16.960 --> 0:23:19.800 now and I don't need to build a you know, 0:23:19.920 --> 0:23:23.520 million chip cluster, then I can use some of that 0:23:23.600 --> 0:23:27.399 compute for inferencing because it's the same GPU. So from 0:23:27.440 --> 0:23:30.679 that perspective, I do buy that argument that if AI 0:23:30.880 --> 0:23:34.240 is more pervasive and accessible, then I'll use more of 0:23:34.280 --> 0:23:37.679 that chip capacity for inferencing because everyone realizes there is 0:23:37.880 --> 0:23:40.760 ROI and you know, deploying the generator of AI. 0:23:40.880 --> 0:23:42.960 I mean, this is the technological cycle at work, right, 0:23:43.000 --> 0:23:44.720 I mean, stuff comes out of the gate initially, it 0:23:44.760 --> 0:23:47.160 catches all of our tension. We've been obsessed with really 0:23:47.240 --> 0:23:49.600 kind of a very few companies over the last couple 0:23:49.640 --> 0:23:51.560 of years here. We are more than two years in 0:23:51.640 --> 0:23:55.040 on this right, it makes sense, you guys, Caroline Mande, 0:23:55.160 --> 0:23:57.840 that we're going to start seeing other companies come to 0:23:57.880 --> 0:23:58.400 the forefront. 0:23:58.440 --> 0:24:00.439 There's going to be some competition. The model might be 0:24:01.040 --> 0:24:02.200 tweaked a little bit here. 0:24:02.280 --> 0:24:05.880 Yeah, I mean, and look the commoditization. I do think 0:24:05.960 --> 0:24:10.119 you know the modes around, Oh, you've used this LLLM 0:24:10.160 --> 0:24:13.680 and you can never get out of that. It's so sticky. 0:24:14.280 --> 0:24:16.680 I think that is going away because now you can 0:24:16.840 --> 0:24:20.760 swap you know, API from one LLLM to another, and 0:24:20.840 --> 0:24:24.480 that should be doable. And companies will arbitrage, you know, 0:24:24.600 --> 0:24:28.400 against which is the cheapest model provider because it impacts 0:24:28.400 --> 0:24:30.600 your margins. I mean, look at the scale of some 0:24:30.640 --> 0:24:34.320 of these LM deployments. We're talking about billion users, so 0:24:34.440 --> 0:24:38.200 billion users are using a generative AI query. That's all 0:24:38.280 --> 0:24:40.840 API revenue that these companies are getting. And if I'm 0:24:40.840 --> 0:24:44.080 paying the highest price per API, that's going to hurt 0:24:44.080 --> 0:24:45.960 my margins. So I'm going to go with the cheapest 0:24:45.960 --> 0:24:46.960 option that's out there. 0:24:47.400 --> 0:24:49.480 I mean, Caroline, when you think about like the conversations 0:24:49.480 --> 0:24:51.680 you have over and over, what changed so dramatically this week? 0:24:51.840 --> 0:24:53.680 Is it just kind of a rethink of these long 0:24:54.000 --> 0:24:55.359 held beliefs about AI. 0:24:55.280 --> 0:24:57.719 And I think for lots of people it was felt 0:24:57.760 --> 0:25:01.640 that people acted before or they really knew, so it's 0:25:01.800 --> 0:25:02.359 just sell. 0:25:02.720 --> 0:25:03.840 I've seen this headline. 0:25:03.920 --> 0:25:06.280 I'm worried about the valuations of these companies anyway, and 0:25:06.359 --> 0:25:08.919 video was trading at forty one times. We see generally 0:25:08.960 --> 0:25:12.479 everyone elevated versus the Nasdaq get out then ask our questions. 0:25:12.600 --> 0:25:14.640 People started to come back to software after they asked 0:25:14.680 --> 0:25:16.919 those questions, and I thought, oh, maybe this could actually 0:25:17.200 --> 0:25:19.840 change the game and make things even more margin rich 0:25:19.920 --> 0:25:22.320 for these types of companies. But I think the question 0:25:22.440 --> 0:25:25.040 is still out of ultimately, what access did they have 0:25:25.119 --> 0:25:28.879 to end? In video, GPUs were ultimately they say that 0:25:28.880 --> 0:25:32.000 they got them totally legitimately, and in video would say 0:25:32.000 --> 0:25:35.560 the same. How much it is ultimately spark inferences the 0:25:35.640 --> 0:25:38.200 use and what does it mean in terms of ultimate 0:25:38.240 --> 0:25:40.840 and infrastructure investment. I think people for the short term, 0:25:40.880 --> 0:25:43.160 most analysts I speak to say, we're misticking by it, 0:25:43.280 --> 0:25:44.760 like we're not going to see a cap it's pulled 0:25:44.800 --> 0:25:45.760 back anytime soon. 0:25:46.320 --> 0:25:48.160 Interesting stuff. We're gonna have to wait also to hear 0:25:48.240 --> 0:25:51.639 what David Sachs the ais are for the Trump administration 0:25:51.720 --> 0:25:52.680 has to say, all. 0:25:52.640 --> 0:25:53.840 Right, I think we're going to let you go. 0:25:54.000 --> 0:25:56.040 I'm really fearful to do that in both of you, 0:25:56.160 --> 0:25:57.919 because I know the minute you get out of your 0:25:58.000 --> 0:26:01.840 chair and walk it out in our studio. All right, 0:26:01.840 --> 0:26:03.680 But Mandy, we're going to let you go, and hopefully 0:26:03.720 --> 0:26:05.480 we'll maybe even bring you back a little bit later on. 0:26:05.520 --> 0:26:09.240 Mandy Seeing, of course, a key member of our technology 0:26:09.280 --> 0:26:11.680 team at our Bloomberg Intelligence unit we. 0:26:11.680 --> 0:26:14.040 Are waiting Meta results. 0:26:14.600 --> 0:26:16.399 Also a key member of our technology team here at 0:26:16.400 --> 0:26:18.720 Bloomberg News, of course, Caroline High So lucky for us, 0:26:18.960 --> 0:26:20.639 she's going to stick around. One of the co hosts 0:26:20.920 --> 0:26:23.119 of Bloomberg Technology. We do have another guest so that 0:26:23.119 --> 0:26:25.679 we want to bring into the conversation who really follows 0:26:25.680 --> 0:26:27.720 the tech sector very closely and invests in it. 0:26:27.920 --> 0:26:30.000 Yeah, I want to bring in James Chalkmack. He's technology 0:26:30.000 --> 0:26:33.920 analyst at Clockwise Capital. Clockwise Capital is the Core Equity 0:26:33.960 --> 0:26:37.320 and Innovation ETF. The ticker is time. Biggest holdings are 0:26:37.320 --> 0:26:41.000 the companies we're talking about Meta, Amazon, Microsoft, and Apple, 0:26:41.200 --> 0:26:44.480 along with smaller companies including Palanteer, Spotify, and Netflix. The 0:26:44.520 --> 0:26:47.520 ETF up about thirty five percent over the last year, 0:26:47.560 --> 0:26:49.879 four percent year to date. So let's go through it 0:26:50.080 --> 0:26:53.240 and bring in James. He joins us from Miami this afternoon. James, 0:26:53.320 --> 0:26:55.360 good to have you as always with us. I want 0:26:55.359 --> 0:26:58.480 to start with your impression of Microsoft shares following after 0:26:58.520 --> 0:27:01.280 reporting slow in growth in the cloud unit. What sticks 0:27:01.320 --> 0:27:01.760 out to you? 0:27:03.480 --> 0:27:05.560 Yeah, the big thing there with Microsoft is that the 0:27:05.640 --> 0:27:07.800 bogie was a couple of points higher than where they 0:27:07.840 --> 0:27:11.359 reported on Azure. The street was looking for around thirty 0:27:11.359 --> 0:27:13.800 three thirty four percent growth to keep the momentum in 0:27:13.800 --> 0:27:16.680 the stock going. They posted around thirty one thirty two, 0:27:17.359 --> 0:27:19.480 so it was a couple of points light. But the 0:27:19.520 --> 0:27:22.600 main thing is that the undercurrent the trends that you're 0:27:22.600 --> 0:27:25.879 seeing in productivity and the shift to the cloud and 0:27:25.920 --> 0:27:30.240 AI offerings continues. You know, you're still talking about three 0:27:30.280 --> 0:27:33.639 handle on that growth rate. So we'll see what they 0:27:33.680 --> 0:27:36.000 say on the call. As far as Capex is concerned, 0:27:36.040 --> 0:27:37.960 we do think that's going to start to come down 0:27:37.960 --> 0:27:42.040 here as we look into twenty twenty five. So I 0:27:42.119 --> 0:27:44.159 think I think it's gonna be all right. You know, 0:27:44.200 --> 0:27:47.080 we hold a position in it. We are underweight relative 0:27:47.080 --> 0:27:50.560 to the index for this very reason because though the 0:27:50.720 --> 0:27:54.160 run up, but overall, I think everything's okay with Microsoft. 0:27:54.240 --> 0:27:56.080 I'm going to jump in because we are getting Amy 0:27:56.080 --> 0:27:58.760 Hood the CFO giving an interview with our own Bloomberg 0:27:58.800 --> 0:28:00.639 reporters saying that they. 0:28:00.240 --> 0:28:02.360 Constrained in cloud capacity. 0:28:02.480 --> 0:28:05.359 Remember we got that sort of shop move that open 0:28:05.400 --> 0:28:08.040 ai is going to be building out AI infrastructure with Oracle. 0:28:08.080 --> 0:28:09.720 Of course, they signed a deal with Oracle in the 0:28:09.760 --> 0:28:13.120 summer because Microsoft just can't build them quickly enough. Talking 0:28:13.160 --> 0:28:16.280 about the bookings rising sixty seven percent partly due to 0:28:16.320 --> 0:28:19.439 the open Ai commitments and commercial bookings were better than 0:28:19.440 --> 0:28:21.480 they forecast, they're still trying to talk about how much 0:28:21.680 --> 0:28:24.640 more percentage point add ai is giving. 0:28:24.400 --> 0:28:26.520 Them to as you're more broadly. 0:28:26.280 --> 0:28:29.639 All right, so James so remains constrained in cloud capacity 0:28:29.720 --> 0:28:31.320 from the Microsoft CEO. 0:28:31.520 --> 0:28:32.359 What's your read on that? 0:28:34.480 --> 0:28:36.280 Yeah, I mean they're going to have to keep building. 0:28:36.560 --> 0:28:40.080 I'm not suggesting that capex needs to stop. It's more 0:28:40.240 --> 0:28:42.880 just what is the growth rate of that spent. You know, 0:28:42.920 --> 0:28:45.960 you saw a massive investment tiers in twenty twenty three, 0:28:46.080 --> 0:28:49.920 twenty twenty four, and we think that that sprend will 0:28:49.960 --> 0:28:51.800 be growing at a slower clip. 0:28:52.160 --> 0:28:55.040 Do you change in turn will help. Sorry, James, do 0:28:55.400 --> 0:28:58.200 you change your your holdings? Do you sell Microsoft? 0:29:00.040 --> 0:29:04.400 Actually trimmed Microsoft into the quarter today. You know, we're 0:29:04.440 --> 0:29:06.800 now at three percent weight. It's around eight percent in 0:29:06.840 --> 0:29:11.000 the in the NAVASDAK, so we are underweight there. But 0:29:11.440 --> 0:29:13.560 I would say, you know, we. 0:29:13.600 --> 0:29:14.480 Still want to hold it. 0:29:14.520 --> 0:29:16.240 You know, you still want to be there. The company 0:29:16.320 --> 0:29:19.240 is incredibly important, but at the same time, we think 0:29:19.240 --> 0:29:22.600 that there's better opportunity elsewhere with companies that offer and 0:29:22.640 --> 0:29:24.080 stocks that offer better convexity. 0:29:24.160 --> 0:29:25.920 Okay, so where does that money go? You trimmed your 0:29:25.920 --> 0:29:28.080 holding in Microsoft, where are you spending it? What are 0:29:28.080 --> 0:29:29.480 you buying? 0:29:30.400 --> 0:29:33.120 So we're looking at a lot of software names right now. 0:29:33.240 --> 0:29:35.800 You know, with the disruption in the market that was 0:29:35.840 --> 0:29:37.600 caused by deep Seek, I don't think you can take 0:29:37.640 --> 0:29:40.800 that lightly. I think that you have to re examine 0:29:41.280 --> 0:29:45.560 kind of all of your assumptions top down. You know, 0:29:45.680 --> 0:29:48.760 from that, we we did cut Nividia before the market 0:29:48.800 --> 0:29:52.480 opened on Monday and cut that exposure, and we've been 0:29:52.560 --> 0:29:56.720 rotating to software names. We picked up Data Dog for example. 0:29:57.840 --> 0:30:00.480 You know, we think that race will continue to uh 0:30:00.760 --> 0:30:01.440 trend lower. 0:30:02.640 --> 0:30:02.800 Uh. 0:30:02.920 --> 0:30:05.640 You know this year obviously two estimates baked in, but 0:30:05.760 --> 0:30:08.160 I think that that trend will help a company like 0:30:08.560 --> 0:30:12.360 an I'll start, you know, we continue to like Spotify. 0:30:13.080 --> 0:30:16.000 We actually grossed up our metaposition heading into the quarter, 0:30:17.080 --> 0:30:18.680 so we'll see how that plays out. I don't know 0:30:18.680 --> 0:30:19.880 if the numbers are out yet. 0:30:20.080 --> 0:30:22.240 No, we're still we're still awaiting meta. 0:30:22.280 --> 0:30:25.520 I want to ask you something though, from our BI team, 0:30:25.560 --> 0:30:29.000 our Ana Agrana writing about Microsoft and says Microsoft's close 0:30:29.040 --> 0:30:32.520 relationship with open AI makes it better position than most 0:30:32.560 --> 0:30:36.360 of its software arrivals to capitalize that increased generative AI spending. 0:30:37.320 --> 0:30:38.040 You agree with that. 0:30:38.200 --> 0:30:39.680 I mean they're you know, they know a little bit 0:30:40.080 --> 0:30:41.880 about software certainly Microsoft. 0:30:42.080 --> 0:30:45.760 Yeah, I'm not sure about the health of that relationship. 0:30:45.840 --> 0:30:46.640 To be honest with you. 0:30:47.280 --> 0:30:48.240 Why so. 0:30:50.280 --> 0:30:53.920 Well, I think that you know, deep seek certainly changes 0:30:53.920 --> 0:30:56.280 the game a little bit. I think that they'll increasingly 0:30:56.320 --> 0:31:01.360 have less reliance on on open AI and and as 0:31:01.400 --> 0:31:03.600 their costs come down, they'll continue to be able to 0:31:04.360 --> 0:31:08.160 you know, drive the inference and all the AI tools 0:31:08.200 --> 0:31:14.040 for their customers. So I'm not sure exactly how healthy 0:31:14.080 --> 0:31:17.120 that relationship is or how it will lay out. But 0:31:17.240 --> 0:31:20.280 at the end of the day, you know, Microsoft continues 0:31:20.320 --> 0:31:24.160 to be well positioned exsllically, I would say following Deep Seek, 0:31:24.160 --> 0:31:29.560 we came away in incrementally positive on meta on Microsoft 0:31:30.360 --> 0:31:34.520 and Amazon. So those are the three that we like 0:31:34.720 --> 0:31:38.000 following that news, and then we became incrementally negative on Nividia. 0:31:38.040 --> 0:31:39.000 All right, hang on for a second. 0:31:39.000 --> 0:31:41.320 We're talking with James CHOCKMOG partner and tech analyst Everrett 0:31:41.360 --> 0:31:44.480 clockwise Capital Caroline Hyde, co host of Bloomberg Technology, also 0:31:44.480 --> 0:31:47.160 in studio with us and just walking in our own 0:31:47.000 --> 0:31:49.719 anarag Rana. He is with our technology team with our 0:31:49.720 --> 0:31:54.360 Bloomberg Intelligence unit. He's a senior industry analyst writing. I 0:31:54.400 --> 0:31:57.480 am reading from the research he just put out on Microsoft. 0:31:58.120 --> 0:32:00.680 Microsoft now on AROG just down that eight tons of 0:32:00.680 --> 0:32:02.760 a percent, so it's definitely come off the lows that 0:32:02.800 --> 0:32:04.360 we saw earlier in the aftermarket. 0:32:04.440 --> 0:32:06.440 So far tell us what we need to know. 0:32:06.960 --> 0:32:09.240 Yeah, it's all the guidance on the conference call. We 0:32:09.280 --> 0:32:12.239 want to hear that that AZ your growth is going 0:32:12.280 --> 0:32:14.800 to pick up over the next twelve months. And I 0:32:14.800 --> 0:32:17.520 think that's really the biggest thing that we see now, 0:32:17.520 --> 0:32:20.400 that's assuming all the investments they have made in the 0:32:20.920 --> 0:32:23.960 data center side. Is picking up because I just saw 0:32:23.960 --> 0:32:26.280 the news go by what the CFO is saying that 0:32:26.320 --> 0:32:30.040 they're still supply constrained. Now, the supply constraint doesn't mean 0:32:30.080 --> 0:32:32.920 it had an impact on the current quarter growth, which is, 0:32:33.160 --> 0:32:35.320 you know, which was below the thirty one thirty two 0:32:35.360 --> 0:32:37.800 that they gave, or will it impact in the next quarter. 0:32:37.840 --> 0:32:39.680 I think that's the single biggest question right now. 0:32:39.760 --> 0:32:43.280 So is it fair to say this is totally supply side. 0:32:43.000 --> 0:32:46.560 And japin because we do have meta finalite please, And 0:32:46.600 --> 0:32:49.480 the fourth quarter revenue is beating expectations. Forty eight point 0:32:49.520 --> 0:32:52.440 three to nine billion is coming for fourth quarter, it 0:32:52.480 --> 0:32:54.760 was expected to be forty six point nine to eight billion, 0:32:54.760 --> 0:32:56.400 and they're pushing us forward to a guide of the 0:32:56.400 --> 0:32:58.120 first quarter to be thirty nine and a half to 0:32:58.160 --> 0:33:01.800 forty one point eight billion. That slightly shy of the 0:33:01.840 --> 0:33:05.080 midpoint where the expectations were for forty one point six billion. 0:33:05.160 --> 0:33:06.600 So forecast a little bit light. 0:33:06.920 --> 0:33:09.680 Fourth quarter at beats on Family of App revenue doing well. 0:33:09.800 --> 0:33:13.920 They're seeing Reality Labs operating loss of almost five billion, 0:33:13.960 --> 0:33:16.080 but the estimate was free for more than that, so 0:33:16.120 --> 0:33:18.480 I think you are seeing perhaps a slightly shy forecast, 0:33:18.480 --> 0:33:20.880 but they're seeing first quarter revenue of thirty nine and 0:33:20.920 --> 0:33:22.680 a half to forty one point eight billion, and the 0:33:22.720 --> 0:33:24.760 market wanted forty one point seven billion. 0:33:24.800 --> 0:33:25.680 Stack bouncing around. 0:33:25.720 --> 0:33:27.840 It was down five percent, it's now down about three 0:33:27.880 --> 0:33:29.960 point eight percent. Now it's down about five percent. It 0:33:30.000 --> 0:33:33.520 is bouncing around. Also some commentary in terms of the capex. 0:33:33.560 --> 0:33:36.800 We anticipate our full year twenty twenty five capital expenditures 0:33:36.800 --> 0:33:39.120 will be in the range of sixty to sixty five 0:33:39.160 --> 0:33:42.000 billion dollars, So a little bit more about that, which 0:33:42.000 --> 0:33:43.560 we just got news last week. 0:33:43.680 --> 0:33:45.800 The company also says we're not providing a full year 0:33:45.800 --> 0:33:49.040 twenty twenty five revenue outlook. Is that a surprise to you, Caroline. 0:33:49.120 --> 0:33:51.360 Yeah, Usually they are able to give clarity, And it's 0:33:51.400 --> 0:33:54.480 interesting that they're giving so much clarity on their capital expenditure, 0:33:54.760 --> 0:33:58.120 perhaps not clarity on forward revenue at the moment. Is 0:33:58.160 --> 0:33:59.640 that because they think it's just going to go through 0:33:59.680 --> 0:34:02.680 the room. Is that because they do feel that they 0:34:02.720 --> 0:34:06.520 can't give as much forward looking guidance at the moment. 0:34:06.960 --> 0:34:08.200 But whether it's an. 0:34:08.160 --> 0:34:11.120 FX perspective, cost and expenses, they're still dictating. But I'm 0:34:11.200 --> 0:34:13.920 just scrolling through the CFO and they expect first call 0:34:13.960 --> 0:34:17.040 to twenty five total revenue to be in that range, 0:34:17.120 --> 0:34:20.360 which reflects eight to fifteen percent year over year growth 0:34:20.600 --> 0:34:23.480 or eleven to eighteen percent on a constant currency basis. 0:34:23.480 --> 0:34:25.759 But we are not providing fully a twenty twenty five 0:34:25.840 --> 0:34:28.359 revenue outlook. We expect the investments we are making in 0:34:28.400 --> 0:34:31.080 our core business this year will give us an opportunity 0:34:31.120 --> 0:34:34.640 to continue delivering strong revenue growth through twenty twenty five. 0:34:34.600 --> 0:34:37.520 Also saying the regulatory landscape in the European Union the 0:34:37.600 --> 0:34:39.960 United States could impact business. We do see the stock 0:34:40.320 --> 0:34:43.160 now just down about one percent. Again, the key that 0:34:43.200 --> 0:34:45.680 everybody seems to be focusing on is that first quarter 0:34:45.680 --> 0:34:49.040 sales forecast trailing at the midpoint, also saying fiscal year 0:34:49.080 --> 0:34:53.120 depreciation expends about two point nine billion dollars less than before, 0:34:53.360 --> 0:34:55.719 again bouncing around big time in the aftermark. 0:34:55.840 --> 0:34:57.640 Yeah, I want to draw your attention to what's going 0:34:57.680 --> 0:35:01.000 on with Reality Labs, the company, saying that revenue coming 0:35:01.040 --> 0:35:03.160 in at one point oh eight billion dollars, shy of 0:35:03.239 --> 0:35:06.000 estimates of one point one to one billion dollars. I 0:35:06.040 --> 0:35:07.719 don't want to say there was a whisper number ahead 0:35:07.719 --> 0:35:11.080 of this Caroline, but folks were bullish on Reality Labs 0:35:11.120 --> 0:35:13.040 going into this. There was that report from Insider that 0:35:13.080 --> 0:35:15.960 came out earlier this week that talked about growth at 0:35:15.960 --> 0:35:18.439 growth in that unit. How are you, again, a very 0:35:18.480 --> 0:35:21.640 small portion but a very important part of the company, 0:35:21.880 --> 0:35:23.120 How are you looking into that number? 0:35:23.560 --> 0:35:27.280 Yeah, I do think that overall the losses are big. 0:35:28.160 --> 0:35:29.440 So you think the losses should be more of a 0:35:29.440 --> 0:35:30.480 focus than the revenue. 0:35:30.680 --> 0:35:34.160 Well, I think revenue one point zero eight is slightly 0:35:34.239 --> 0:35:36.759 less than anticipated, but at least their operating loss is 0:35:36.760 --> 0:35:39.120 slightly less than expected. But I think there's going to 0:35:39.120 --> 0:35:41.960 be a lot of digestion of restructuring that's currently going 0:35:42.000 --> 0:35:43.760 on in that business, and the fact that they're shifting 0:35:44.000 --> 0:35:46.160 over to the overall unit COO and they're putting up 0:35:46.200 --> 0:35:49.520 some operational changes at play. But how much is Mark 0:35:49.680 --> 0:35:52.000 Zuckerberg going to speak to his commitment to this part 0:35:52.040 --> 0:35:54.000 of the business, how much he wants to invest in 0:35:54.040 --> 0:35:57.279 Reality Labs, how much of that sixty five billion dollar 0:35:57.400 --> 0:36:00.319 up to capex in AI is ultimately going to today 0:36:00.400 --> 0:36:01.359 it's a products. 0:36:01.000 --> 0:36:03.480 All right, We're going to keep watching and reporting on Meta. 0:36:03.520 --> 0:36:06.960 As we mentioned, stock is bopping around here in the aftermarkets, 0:36:07.680 --> 0:36:10.600 really a focus on the outlook. But it's right now 0:36:10.640 --> 0:36:13.000 we're looking at just a slight move to the upside 0:36:13.040 --> 0:36:14.920 of about one quarter one percent. I want to go 0:36:15.000 --> 0:36:17.799 back to Microsoft for just a moment because we have 0:36:17.800 --> 0:36:20.319 Anna rag Rana in here, another big one after the 0:36:20.360 --> 0:36:22.560 close which has been bouncing around to you, it's now 0:36:22.560 --> 0:36:23.560 only down about eight. 0:36:23.400 --> 0:36:24.600 Tens of one percent. 0:36:24.880 --> 0:36:28.080 The Bloomberg audience thinking about these earnings, the crazy week 0:36:28.120 --> 0:36:30.439 that's been in the tech community around AI. 0:36:31.480 --> 0:36:33.319 What to be top of mind was top of mind 0:36:33.320 --> 0:36:33.640 for you? 0:36:34.200 --> 0:36:36.960 I think the biggest question is, you know, they have 0:36:37.000 --> 0:36:40.040 a commercial booking number that just you know, was absolutely 0:36:40.080 --> 0:36:44.000 spectacular and it was driven by Azure commitments and the 0:36:44.040 --> 0:36:46.320 opening eye work that they are getting. But the question 0:36:46.440 --> 0:36:48.359 is do you can you fulfill that demand or you're 0:36:48.360 --> 0:36:50.640 going to go to third party providers to take care 0:36:50.680 --> 0:36:53.080 of it? And that's really what it is. I mean, frankly, 0:36:53.160 --> 0:36:56.200 at this point, more color in that, you know, the 0:36:56.200 --> 0:36:59.680 big commercial booking number would be helpful. And also about 0:36:59.760 --> 0:37:03.440 what what does Microsoft CEO think about all the things 0:37:03.440 --> 0:37:06.600 that are happening with deep seek, because he did tweet 0:37:06.680 --> 0:37:09.120 something very interesting that you know, if the costco goes down, 0:37:09.160 --> 0:37:12.000 the adoption rate improves, which is good. But at the 0:37:12.040 --> 0:37:15.600 same time, you know he has a very strong partnership 0:37:15.600 --> 0:37:18.719 with Opening Eye right another, So there's a lot. I 0:37:18.760 --> 0:37:23.000 think we will learn about the tech landscape in general 0:37:23.040 --> 0:37:26.920 from him, not just about Microsoft's clouds numbers. Now, frankly speaking, 0:37:27.160 --> 0:37:29.440 let's say, for the sake of argument, that they do 0:37:29.560 --> 0:37:32.640 misguidance for three Q. I think people will still give 0:37:32.680 --> 0:37:34.560 them a pass over the next several days. May not 0:37:34.560 --> 0:37:37.120 give them a pass tomorrow because the bookings number is 0:37:37.160 --> 0:37:37.640 so strong. 0:37:37.920 --> 0:37:40.960 Another headline of Microsoft to add jobs and infrastructure, jen 0:37:41.000 --> 0:37:42.320 Ai and reality labs. 0:37:42.360 --> 0:37:43.480 So that's matter right. 0:37:43.560 --> 0:37:47.719 Oh did I say, oh Microsoft, they must have made 0:37:47.719 --> 0:37:48.200 a mistake. 0:37:48.400 --> 0:37:49.920 Okay, so there is a headline. 0:37:50.040 --> 0:37:53.319 We will we are going to keep covering that this 0:37:53.400 --> 0:37:56.480 is coming fast and furious. I do want to do 0:37:56.560 --> 0:37:58.759 a big thank you to Anna rog Rana for joining us. 0:37:58.880 --> 0:38:01.239 He is going to go off and listen to more 0:38:01.280 --> 0:38:03.879 of the call and as well as have more notes 0:38:03.880 --> 0:38:06.600 out for Bloomberg Intelligence. I'm putting pressure on you, unfortunately, 0:38:06.640 --> 0:38:09.320 I'm sorry. Thank you for stopping by usually in Chicago 0:38:09.560 --> 0:38:10.960 joining us here. I do want to get back to 0:38:11.000 --> 0:38:13.360 James Chockmack he's technology correction. 0:38:13.040 --> 0:38:14.960 META, which makes sense because of Reality Lab. 0:38:14.880 --> 0:38:18.400 Technology analyst at Clockwise Capital. We gave you a little break, James, 0:38:18.400 --> 0:38:21.839 to jump in and look at those META numbers as 0:38:21.840 --> 0:38:25.240 they were breaking just past four thirty five. What sticks 0:38:25.239 --> 0:38:25.640 out to you? 0:38:27.280 --> 0:38:28.799 Yeah, I mean the big thing is the first quarter 0:38:28.920 --> 0:38:31.560 guide coming in a touch light. But the fourth quarter 0:38:31.600 --> 0:38:35.839 itself was solid pretty much across the board. So we'll 0:38:35.840 --> 0:38:39.520 have to decipher what exactly is going on in the 0:38:39.560 --> 0:38:44.400 first quarter guide on the call. But as it stands, 0:38:44.440 --> 0:38:46.640 if you look at four Q in a vacuum, you know, 0:38:46.680 --> 0:38:50.520 it seems like it's all systems go. But I just 0:38:50.520 --> 0:38:51.239 got to drill down. 0:38:51.120 --> 0:38:53.040 A little bit more, all right, we want to get. 0:38:53.080 --> 0:38:55.200 Why I think this stock is bouncing around so much. 0:38:55.320 --> 0:38:56.680 Down five to three. 0:38:56.840 --> 0:38:57.759 Everything's bouncing around. 0:38:57.840 --> 0:38:59.600 Meta is now down about two tents of a verse. 0:38:59.640 --> 0:39:01.839 That man keep saying, who follows metaphor us here at 0:39:01.840 --> 0:39:02.720 our Bloomberg. 0:39:02.280 --> 0:39:03.800 Intelligence giving them a workout today. 0:39:04.719 --> 0:39:07.359 Get your steps in, buddy, get your steps in. What's 0:39:07.400 --> 0:39:08.840 your reaction to the results? 0:39:08.960 --> 0:39:11.920 Well, so one is obviously the guide for one Q 0:39:12.680 --> 0:39:16.000 is lower than consensus. The big number that sticks out 0:39:16.040 --> 0:39:19.000 to me is the total expense guide of one hundred 0:39:19.080 --> 0:39:22.760 and fourteen two hundred and nineteen billion. That is almost 0:39:22.920 --> 0:39:27.439 you know, eight billion higher than the consensus. So what 0:39:27.480 --> 0:39:30.759 that tells you is the gross margins are going down 0:39:31.560 --> 0:39:35.880 and plus the depreciation costs, the costs that they are 0:39:35.920 --> 0:39:39.279 spending on data centers, they have to depreciate those servers, right, 0:39:39.719 --> 0:39:41.719 that's going to eat into the margins. So we are 0:39:41.760 --> 0:39:45.360 talking about at least a four to five percent margin 0:39:45.480 --> 0:39:50.040 impact for twenty twenty five just from the data center costs, 0:39:50.120 --> 0:39:53.280 the depreciation costs, and so clearly there is a gross 0:39:53.320 --> 0:39:59.360 margin degradation happening here and the revenue growth is decelerating, 0:39:59.560 --> 0:40:01.800 which is what we are seeing in one queue. The 0:40:01.880 --> 0:40:04.840 Kapex guide is what they gave you know, on Friday, 0:40:05.000 --> 0:40:08.000 so no change in that, but clearly the data center 0:40:08.040 --> 0:40:09.719 expenses are eating into the. 0:40:09.680 --> 0:40:12.000 Margins, which is something Gina Martin Adams has said, watch 0:40:12.040 --> 0:40:14.160 with all of the companies reporting, but the tech guys 0:40:14.880 --> 0:40:17.560 as well in terms of margins and seeing some pressure 0:40:17.600 --> 0:40:18.000 on margins. 0:40:18.280 --> 0:40:20.759 We seem to be the case with Microsoft there. So 0:40:20.880 --> 0:40:25.040 that's the surprise here that Microsoft didn't call out, you know, 0:40:25.200 --> 0:40:29.040 that kind of a margin impact from depreciation expenses in 0:40:29.080 --> 0:40:31.720 their quarter, at least from the print that I saw, 0:40:32.360 --> 0:40:34.640 But clearly it is having an impact on matter. 0:40:34.680 --> 0:40:38.120 When you dig into what the CFO has been saying 0:40:38.200 --> 0:40:41.640 as well, and ultimately she's talking about how the single 0:40:41.719 --> 0:40:43.960 largest driver of their expense growth that you speak to 0:40:44.080 --> 0:40:46.760 is going to be infrastructure costs. They say, hire operating 0:40:46.800 --> 0:40:50.040 expenses depreciation as well of those assets or those data 0:40:50.040 --> 0:40:51.879 centers more broadly, of the chips they have to keep 0:40:51.880 --> 0:40:54.920 buying again. But then they say, employee conversations with the 0:40:54.960 --> 0:40:58.360 second largest factor, as we add technical talent. 0:40:58.520 --> 0:41:01.759 It's a good time priority that technical talent, right it. 0:41:01.719 --> 0:41:03.239 Is you can go in charge a pretty penny if 0:41:03.280 --> 0:41:04.040 you've got a nice computer. 0:41:04.320 --> 0:41:05.520 So what is that? How do you read into that? 0:41:05.560 --> 0:41:08.120 Does that mean that the folks who are the engineers 0:41:08.400 --> 0:41:13.120 doing the AI stuff? Yeah, say the helpful demand, who. 0:41:13.120 --> 0:41:18.200 Is that areas of infrastructure monetization, So interestingly obviously monetizing 0:41:18.200 --> 0:41:21.960 their referable business reality labs, generative artificial intelligence as well 0:41:22.000 --> 0:41:26.720 as regulation and compliance. They are the hr GO gets 0:41:26.880 --> 0:41:29.560 for this particular year, and they are actually overall saying 0:41:29.600 --> 0:41:32.840 that headcount has ticked high at ten percent year of 0:41:32.840 --> 0:41:35.200 a year. Despite this efficiency mode they've been in. 0:41:35.400 --> 0:41:37.919 There's also this note the majority of twenty twenty five 0:41:37.960 --> 0:41:41.560 capex to be directed to core business. What's the definition 0:41:41.600 --> 0:41:44.320 of metas core business? Is it the family of apps? 0:41:44.920 --> 0:41:47.399 The Instagrams and the WhatsApp And to say, okay, we're 0:41:47.400 --> 0:41:51.399 going to invest in that, so don't worry investors, We're 0:41:51.440 --> 0:41:53.359 spending money on the company, on the parts of our 0:41:53.400 --> 0:41:55.319 business that make money. Is that the message there? 0:41:55.560 --> 0:41:57.880 I mean, Mandeep is your man to ask what's a 0:41:57.920 --> 0:41:58.440 core business? 0:41:58.480 --> 0:42:01.520 But I'd say Reality Labs isn't it even though their 0:42:01.560 --> 0:42:02.720 company name is Meta. 0:42:03.360 --> 0:42:06.480 Yeah. Look, I think overall they will be prudent when 0:42:06.520 --> 0:42:09.120 it comes to headcom growth. They may have to pay 0:42:09.160 --> 0:42:11.920 more for the AI talent, that's what they are alluding to. 0:42:12.400 --> 0:42:15.200 But at the same time they are continuing to lose 0:42:15.239 --> 0:42:18.160 money on Reality Labs. I would have expected, you know, 0:42:18.239 --> 0:42:21.680 that will be your offset. If you see margin degradation, 0:42:22.360 --> 0:42:24.920 you offset it in terms of Reality Labs losses. 0:42:25.000 --> 0:42:27.120 You're not seeing that, So James chalk mark, this is 0:42:27.160 --> 0:42:32.080 still a company that you know to The message to 0:42:32.120 --> 0:42:34.120 investors is this is this is a company that makes 0:42:34.160 --> 0:42:38.800 money because we're opening Instagram and we're using reels and 0:42:38.920 --> 0:42:41.919 we're using the family of apps the core business. Right, 0:42:42.520 --> 0:42:44.680 that's their message. They don't want people to get worried 0:42:44.719 --> 0:42:48.279 that this is another you know, meta a foray into 0:42:48.280 --> 0:42:48.840 the metaverse. 0:42:50.719 --> 0:42:53.560 No, I mean, I think the metaverse continues to be 0:42:53.920 --> 0:42:56.200 a long term vision for the company. But you know, 0:42:56.640 --> 0:42:59.440 in this kind of market, you can't be looking at things, 0:43:00.120 --> 0:43:03.680 you know, on a moonshots. Yeah, you have to be 0:43:03.719 --> 0:43:06.759 able to just focus on the quarter and focus on 0:43:06.800 --> 0:43:09.200 the year, and then most of some cases, you know, 0:43:09.239 --> 0:43:13.239 even just focus on the week. So you know, the 0:43:13.320 --> 0:43:15.920 duration that you evaluate these companies is becoming a lot 0:43:15.960 --> 0:43:19.640 shorter and shorter, so as a volatility increase is given 0:43:19.680 --> 0:43:23.520 the increase in uncertainty. So that being said, you know, 0:43:23.560 --> 0:43:26.480 for a company like Meta, yeah, that's exactly how I 0:43:26.760 --> 0:43:30.759 describe it and think about it. And those moonshots you 0:43:30.800 --> 0:43:33.759 know as a TVD but not part of the calculus 0:43:33.800 --> 0:43:34.560 as it stands today. 0:43:34.600 --> 0:43:36.920 Hey, for those who care, and videos up about two 0:43:36.960 --> 0:43:39.160 point one percent here in the aftermarket, so we're seeing 0:43:39.160 --> 0:43:39.879 some movement there. 0:43:40.960 --> 0:43:43.880 Meta not giving a full year. 0:43:43.760 --> 0:43:46.560 Twenty twenty five revenue outlook mandep is that significant? 0:43:47.520 --> 0:43:50.120 No, I think based on the one Q guide you 0:43:50.160 --> 0:43:52.480 can see currency as a headmin In fact, it's a 0:43:52.520 --> 0:43:55.640 three percent headmind, so quite significant. And the other thing 0:43:55.680 --> 0:43:59.520 I can point out in the print is six percent 0:43:59.600 --> 0:44:02.839 in pressure growth. That's the weakest they have had. So 0:44:02.880 --> 0:44:06.320 fourteen percent pricing growth that's a result of AI, so 0:44:06.400 --> 0:44:10.120 it's paying off in ad pricing, but six percent impressions growth. 0:44:10.400 --> 0:44:14.160 There are two reasons why it's decelerating. One is they're 0:44:14.200 --> 0:44:17.320 showing you less ads and to make a better experience. 0:44:17.400 --> 0:44:20.120 Other is people are spending less time. I mean, it's 0:44:20.160 --> 0:44:23.600 still the you know, they have three billion family users 0:44:23.600 --> 0:44:27.600 across their family of apps, but incrementally there that engagement 0:44:27.640 --> 0:44:30.880 growth is slowing down because they're not showing those ads 0:44:30.880 --> 0:44:32.200 on elections over election. 0:44:32.280 --> 0:44:33.000 No, I'm just kidding. 0:44:33.640 --> 0:44:36.280 It could very well be, you know, a slew of factors, 0:44:36.320 --> 0:44:40.239 but engagement growth is how impressions grow, and so six 0:44:40.280 --> 0:44:42.440 percent is the weakest they've had for a while. 0:44:42.600 --> 0:44:45.360 Well, Caroline, our own Kurt Wagner pointing out that Meta's 0:44:45.400 --> 0:44:48.960 average price per ad increased by fourteen percent year over year. 0:44:49.000 --> 0:44:50.879 It increased ten percent year over year for the full 0:44:50.920 --> 0:44:54.320 year of twenty twenty four. Is it because the AI 0:44:54.840 --> 0:44:57.839 that they've the AA investments they've made are making those 0:44:57.920 --> 0:45:01.440 ads so much more targeted, better targeted, or. 0:45:01.400 --> 0:45:04.080 Whether people just know that if you're going to be 0:45:04.120 --> 0:45:06.759 committing any capital anywhere in terms of marketing, it's a 0:45:06.840 --> 0:45:08.920 very good bet to be doing it on the Family 0:45:08.920 --> 0:45:11.359 of Apps. That met her off as it's interesting, We've 0:45:11.360 --> 0:45:14.680 had Mick Mac on the show, which is a company 0:45:14.719 --> 0:45:18.480 the tracks digital spend in particular and efficacy, and she 0:45:18.600 --> 0:45:19.080 came on and. 0:45:19.000 --> 0:45:20.280 Said ash biograph. 0:45:20.640 --> 0:45:22.840 Rachel came on and said, the beginning of this year, 0:45:23.440 --> 0:45:25.400 we have seen a big dive in the amount of 0:45:25.440 --> 0:45:28.920 money and marketing being committed to the likes of metas 0:45:29.040 --> 0:45:31.399 Family of Apps was her take, and the data which 0:45:31.440 --> 0:45:33.439 she was seeing in her theory was on the back 0:45:33.480 --> 0:45:36.879 of some of the politicization of Mark Zuckerberg of late, 0:45:37.160 --> 0:45:41.719 and indeed, therefore, without the assessment of some of the 0:45:41.760 --> 0:45:44.680 content and some of the fact checkers that are there anymore, 0:45:44.800 --> 0:45:48.120 people have started to shy away from committing their brands. 0:45:47.760 --> 0:45:48.440 Onto that company. 0:45:48.520 --> 0:45:50.759 Now that is Mick Mac's perspective, and we'll have to 0:45:50.760 --> 0:45:52.480 see whether it's be indicated through what is said on 0:45:52.480 --> 0:45:54.239 this particular part of the business. But as you say, 0:45:54.280 --> 0:45:56.360 if there's a slight pulling back in impressions, but the 0:45:56.400 --> 0:45:58.719 average prices are managing to go up. They're managing to 0:45:58.760 --> 0:46:01.600 remain incredibly important to the brands that do remain committed 0:46:01.640 --> 0:46:02.600 and charge more for it. 0:46:02.719 --> 0:46:04.719 Going back to Meta and the business, and I think 0:46:04.760 --> 0:46:08.080 it's interesting coming off of a FED meeting today where 0:46:08.760 --> 0:46:11.080 certainly the FED chair was asked about policies coming out 0:46:11.120 --> 0:46:14.960 of the administration, regulatory or others. A little warning from 0:46:15.360 --> 0:46:19.120 our live blog when it comes to Meta metas CFO 0:46:19.320 --> 0:46:21.720 in the release, saying, in addition, we continue to monitor 0:46:22.120 --> 0:46:25.719 an active regulatory landscape, including legal and regulatory headwinds in 0:46:25.760 --> 0:46:28.400 the EEU and the US that could significantly impact our 0:46:28.440 --> 0:46:31.560 business and our financial results. James Chacmat, come on back in. 0:46:31.640 --> 0:46:34.040 I mean, let's not forget there are things that are 0:46:34.080 --> 0:46:36.400 overhanging some of these big tech companies like a Meta. 0:46:38.760 --> 0:46:41.920 Yes, that's true, but that's the case always. You know, 0:46:42.520 --> 0:46:45.719 all of these companies constantly face regular stories scrutiny both 0:46:45.800 --> 0:46:48.879 here and abroad. But I think with the change in administration, 0:46:49.120 --> 0:46:53.680 some of that may alleviate here at least the state side. 0:46:53.920 --> 0:46:57.480 We'll see what happens overseas, but overall, I mean that's 0:46:57.480 --> 0:46:59.920 an overhang I think you constantly have to grapple with, 0:47:01.200 --> 0:47:04.239 so you know, it's it's something that kind of been 0:47:04.280 --> 0:47:04.959 meal into at. 0:47:04.840 --> 0:47:07.440 This point, Caroline. Is the regulatory landscape in the US 0:47:07.719 --> 0:47:11.239 less worrisome for meta platforms now than it was a 0:47:11.280 --> 0:47:15.640 year ago? Given Mark Zuckerberg's relationship with Donald Trump, his 0:47:15.760 --> 0:47:18.279 visit Tomorrow Lago, his trip to Washington, d C. What 0:47:18.440 --> 0:47:21.160 he's saign the Joe Rogues podcast, great point, Dana White 0:47:21.160 --> 0:47:21.640 on the board. 0:47:22.320 --> 0:47:24.400 I mean, they've just settled twenty five million dollars for 0:47:24.600 --> 0:47:27.879 kicking Trump off their family of apps previously, So maybe 0:47:27.880 --> 0:47:31.480 we'll see some culmination of what that previously no love 0:47:31.520 --> 0:47:34.440 lost will currently end up being. I think people had 0:47:34.440 --> 0:47:38.840 felt actually the realignment of Zuckerberg, whether that's from a 0:47:38.840 --> 0:47:42.000 fiduciary duty perspective or whether that's just actually where he 0:47:42.080 --> 0:47:46.719 feels in terms of personal persuasion, have ultimately will bear 0:47:46.760 --> 0:47:48.719 fruit when it comes to doing business. Look, we've seen 0:47:49.120 --> 0:47:53.080 from Oracle, from open Ai, from SoftBank, from you name it, Dubai, 0:47:53.520 --> 0:47:57.319 wealth magnates and real estate billionaires. 0:47:57.480 --> 0:48:00.120 How do you do business in America? Now? 0:48:00.640 --> 0:48:03.200 You go visit mar A Lago, you pay some money 0:48:03.200 --> 0:48:06.720 to attend ultimately the inauguration, and you see what deals 0:48:06.719 --> 0:48:08.480 can be done. And I think many would say that 0:48:08.520 --> 0:48:10.759 what Zuckoworg's been doing is in line with that. 0:48:10.880 --> 0:48:13.200 I think the regulatory landscape from an M and. 0:48:13.160 --> 0:48:17.080 A perspective becomes different with a new FTC, new ultimate 0:48:17.800 --> 0:48:19.640 overseeing of what happens with the SEC. 0:48:20.200 --> 0:48:23.000 But I'm sure there's still some. 0:48:22.920 --> 0:48:24.640 He's got some way to go to make up for 0:48:25.160 --> 0:48:26.840 some of the lines that were said last year of 0:48:26.840 --> 0:48:30.000 maybe he'll end up in jail because of Trump's irritation 0:48:30.280 --> 0:48:32.000 with past misdemeanors. 0:48:32.080 --> 0:48:34.359 I'm only going to mention some of them because there's 0:48:34.400 --> 0:48:36.080 a ton of earnings out here after the close, But 0:48:36.200 --> 0:48:38.800 just to rehash, Microsoft down about one point six percently 0:48:38.840 --> 0:48:42.200 after markets, certainly off its loads of the earlier trade 0:48:42.239 --> 0:48:45.560 right after earnings. Tusla now up about three point four percent. 0:48:45.600 --> 0:48:48.240 It had been down about four or five percent. 0:48:48.320 --> 0:48:48.480 Here. 0:48:48.600 --> 0:48:52.279 IBM has rallied about eight percent after its earnings. We've 0:48:52.280 --> 0:48:54.520 been talking about Meta, it is up about one percent, 0:48:54.520 --> 0:48:58.160 and Nvidia, which doesn't report until late February, is up 0:48:58.200 --> 0:49:01.879 almost two percent in today's trade here in the aftermarket. 0:49:02.160 --> 0:49:03.640 James CHOCKMK it's been. 0:49:03.520 --> 0:49:04.160 Quite a week. 0:49:04.880 --> 0:49:05.080 You know. 0:49:05.120 --> 0:49:06.799 One of the things when I think about big tech 0:49:06.840 --> 0:49:10.759 in particular is the environment for rates. And we had 0:49:10.760 --> 0:49:13.520 a FED decision, right and it seems like FED rate 0:49:14.080 --> 0:49:17.120 moves to the downside cuts seem to be putting off 0:49:17.600 --> 0:49:20.080 more and more this year here in twenty twenty five. 0:49:20.400 --> 0:49:23.920 How are you thinking about valuations and the rate environment 0:49:23.960 --> 0:49:26.080 and what that potentially needs for some of these names 0:49:26.160 --> 0:49:28.879 or is that not as important versus maybe hearing about 0:49:28.920 --> 0:49:31.280 their AI spend or other things. 0:49:32.360 --> 0:49:35.640 Valuation is certainly a factor, you know, when it comes 0:49:35.680 --> 0:49:37.920 to rates. Now it's a big picture. When it comes 0:49:38.000 --> 0:49:40.640 to rates, we do think, you know, we perhaps have 0:49:40.680 --> 0:49:45.399 a more slightly more dobbish stance than some of the market. Well, 0:49:45.440 --> 0:49:48.359 we do kind of agree with Powell that the rates 0:49:48.400 --> 0:49:52.880 are likely trending towards zero, not zero, towards two percent 0:49:53.640 --> 0:49:57.720 inflation rates. So you know, we think that the market's 0:49:57.719 --> 0:50:00.920 currently expecting two rate cuts this year June and December. 0:50:00.960 --> 0:50:04.200 That's pretty probable scenario. 0:50:04.800 --> 0:50:05.479 So that's good. 0:50:06.600 --> 0:50:10.040 That being said, the stocks that were primarily focused on 0:50:10.160 --> 0:50:13.680 and weigh leaning into are the ones that have not 0:50:13.719 --> 0:50:17.840 only upside to estimates but also upside to their valuation. 0:50:18.000 --> 0:50:22.400 Multiple now across the big tax tech space, there's not 0:50:22.440 --> 0:50:25.000 that many of those, I'd say, with the exception of 0:50:25.440 --> 0:50:28.719 Meta really and to a certain extent Google or Alphabet. 0:50:29.400 --> 0:50:33.480 The other ones are pretty much in. Apple's up there, 0:50:33.520 --> 0:50:38.759 Microsoft's up there. You know, Tesla's certainly not cheap. So yeah, 0:50:39.280 --> 0:50:41.200 it's something that we have to be mindful of. We're 0:50:41.239 --> 0:50:44.080 there because you know, you have to benchmark yourself to 0:50:44.120 --> 0:50:47.360 a certain extent on the top ten names in the Nasdaq. 0:50:47.440 --> 0:50:50.080 But that's certainly not our oversize and we've. 0:50:49.920 --> 0:50:51.400 Only got about a minute left here. 0:50:51.920 --> 0:50:54.920 Does TikTok matter to the revenue guide for the future 0:50:54.920 --> 0:50:57.040 of Meta and just quickly. 0:50:57.600 --> 0:50:59.320 Yeah, I mean I think TikTok matters to all of 0:50:59.360 --> 0:51:04.240 these companies. We'll see what happens, but it's certainly something 0:51:04.280 --> 0:51:08.440 to be mindful of, cognizant and follow extremely closely. You know, 0:51:08.480 --> 0:51:11.680 if it does come in two domestic hands, you know, 0:51:11.719 --> 0:51:14.200 that could change the calculus to a certain extent. So 0:51:14.960 --> 0:51:17.240 I think Meta will be fine regardless. You know, TikTok 0:51:17.280 --> 0:51:20.719 is obviously already here, but you know, what does that 0:51:20.719 --> 0:51:24.759 mean for the valuations and and whatnot? So my mind 0:51:24.760 --> 0:51:27.840 full of it, not worried about it right now, but 0:51:28.280 --> 0:51:29.600 definitely keeping an eye all. 0:51:29.560 --> 0:51:31.359 Right, Well, we are keeping an eye on a lot 0:51:31.360 --> 0:51:33.160 of stuff, and we ain't done yet because it's still 0:51:33.200 --> 0:51:35.359 got We've got more stuff to come this week. Our 0:51:35.400 --> 0:51:38.520 thanks to our external guests and also of course our 0:51:38.560 --> 0:51:41.880 incredible in house team James Chackmok, thank you, first partner 0:51:41.920 --> 0:51:43.800 and technology Analystic Clockwise Capital. 0:51:44.280 --> 0:51:45.040 They're in Miami. 0:51:45.120 --> 0:51:50.200 Caroline Hyde, you rock covering so much about the tech community, 0:51:50.280 --> 0:51:52.759 and be sure to check her out on Bloomberg Technology 0:51:52.760 --> 0:51:55.200 on Bloomberg TV at eleven am Wall Street Time. She 0:51:55.360 --> 0:51:57.480 is one of the co hosts of Bloomberg Technology. 0:51:58.520 --> 0:52:01.000 Yeah, just a big thank you to our Bloomberg Intelligence 0:52:01.000 --> 0:52:03.479 team too, both here in the studio today, Man Deep 0:52:03.520 --> 0:52:06.920 Saying covering all things Meta and Moran anurad Rana on Microsoft. 0:52:07.040 --> 0:52:10.120 Check out their notes. They're out now on the Bloomberg. 0:52:09.680 --> 0:52:11.600 Terminal, and be sure to check out all of the 0:52:11.880 --> 0:52:14.640 write throughs on the stories and on the names that 0:52:14.680 --> 0:52:17.160 have been reporting here because they are moving in the aftermarket. 0:52:17.160 --> 0:52:18.279 That's going to do it for Tim And we have 0:52:18.320 --> 0:52:19.240 a good and safe evening.