Apple Soars Post-Earnings and Jobs Data Disappoints | Bloomberg Technology
>> THE HEART OF WHERE MONEY, INNOVATION, AND POWER COLLIDE IN SILICON VALLEY AND BEYOND, THIS IS "BLOOMBERG TECHNOLOGY" WITH ED LUDLOW AND CAROLINE HYDE. ED: I'M ED LUDLOW IN SAN FRANCISCO. CAROLINE HYDE IS OFF TODAY. THIS IS "BLOOMBERG TECHNOLOGY." FULL COVERAGE THROUGHOUT THE HOUR.
PLUS, TECH JUMPS AND MARKET TRADERS WE UP THE RATE CUT BATS AS U.S. JOB DATA DISAPPOINTS TO THE DOWNSIDE. WE SIT DOWN WITH THE CFO OF COINBASE TO BREAK DOWN THE COMPANY'S FIRST-QUARTER RESULTS. IT'S GOOD TO OUR TOP STORY. THAT TOP STORY IS APPLE.
SHARES ARE ON TRACK IN THE MOMENT FOR THE BIGGEST JUMP SINCE NOVEMBER 2022. THE BIGGEST-ANNOUNCED BUYBACK IN COMPANY HISTORY PROBABLY HAS SOME PART TO PLAY IN THAT, BUT THEN THERE IS THE STORY THAT IS SIMPLE. THINGS WERE NOT AS BAD FOR THE IPHONE IN THE CALENDAR QUARTER AS WE THOUGHT THEY MIGHT BE. AND THEN THERE IS THE QUESTION, WHAT ON EARTH IS APPLE DOING IN THE ROUND OF GENERATIVE AI CHECKUP LET'S GET TO MARK GURMAN. LONG DAY FOR YOU YESTERDAY. I THINK THAT SUMS IT UP. NOT AS BAD AS WE HAD FEARED. BUT WE STILL HAVE QUESTIONS
ABOUT THE PATH FORWARD. WHAT DID EXECUTIVES TELL US LAST NIGHT? MARK: I THINK YOU ARE EXACTLY RIGHT, AS ALWAYS. THINGS WERE NOT AS BAD AS WE ANTICIPATED. WALL STREET ANTICIPATED, WITH THEIR ESTIMATES. BUT THINGS WERE NOT GREAT. THEY STILL HAD ABOUT A $5 BILLION DECLINE ON OVERALL REVENUE. THEY STILL HAD A PRETTY BIG DECLINE ON THE IPHONE. THE MAC AND SERVICES WERE
BRIGHT SPOTS. PEOPLE KNEW THAT NEW MODELS WERE COMING OUT NEXT WEEK, AND WEARABLES, HOME, AND ACCESSORIES, THAT WAS QUITE DISAPPOINTING, COMING IN AT 7.9 BILLION -- $7.9 BILLION. DESPITE THE FACT THAT THE VISION PRO LAUNCHED ON FEBRUARY 2. LOOKING AHEAD, THE BIG THING, ARTIFICIAL INTELLIGENCE.
IT FELT LIKE EVERY OTHER QUESTION LOW CALL -- QUESTION ON THE CALL WAS ABOUT AI. THEY DID NOT MOVE AN INCH ON THAT FRONT. YOU WILL HEAR MORE ABOUT THAT AT THE WORLDWIDE DEVELOPER CONFERENCE. ED: YOU HAVE ALREADY SET OUT THE CHRONOLOGY OF WHAT IS GOING TO HAPPEN. CHINA IS A STORY IN AND OF ITSELF. THERE ARE SOME IDIOSYNCRATIC
THINGS ABOUT PRODUCT LINES THAT DO WELL AND DON'T. I THINK IPHONE WAS PROBABLY BRIGHTER THAN EXPECTED. BUT I THINK WHAT STUCK OUT TO ME IS A CONCESSION, MAY, FROM TIM COOK THAT CHINA IS BECOMING A MORE COMPETITIVE MARKETPLACE FOR THEM. MARK: WE CERTAINLY MENTIONED SEVERAL TIMES THAT CHINA IS THE MOST COMPETITIVE MARKET IN THE WORLD.
THE MOST INTERESTING THING THAT HAPPENED WITH THE CHINA NUMBERS YESTERDAY IS CHINA CAME IN ABOUT $1 BILLION BETTER-THAN-EXPECTED. BUT WHAT TIM COOK SAID IS, THE IPHONE GREW IN MAINLAND CHINA. THIS IS INTERESTING, BECAUSE COUNTERPART INTELLIGENCE, IDC, SOME OTHER ANALYST FIRMS CAME OUT AND SAID THE IPHONE WAS CRATERING DURING THE QUARTER.
THE DISCREPANCY THERE WAS THAT SOME OF YOU TALKING ABOUT UNIT SALES. AND TIM COOK IS PROBABLY TALKING ABOUT REVENUE. IF THE ASPS WENT OUT, THERE IS A CHANCE UNIT SALES WERE DOWN, BUT REVENUE ACTUALLY WAS UP, AND THEY PROBABLY GREW A LITTLE BIT IN MAINLAND CHINA. EITHER WAY WE STILL ARE FACING CONCERNS IN CHINA FOR APPLE. THERE IS NEWFOUND COMPETITION FROM HUAWEI. THERE ARE THOSE GOVERNMENT BANDS, BUT CERTAINLY TIM COOK, THEY SEEM OPTIMISTIC ABOUT CHINA WHEN IT CAME TO THE IPHONE. WHERE COKE SEEMED LESS OPTIMISTIC WAS OTHER PRODUCTS.
HE DIDN'T EXPLAIN WHAT WAS DOING SO POORLY FOR APPLE IN CHINA, WHY REVENUE WAS DOWN IN CHINA, BUT HE SAID APPLE DOES HAVE WORK TO DO. NOW, ONE OTHER THING. APPLE COULD HAVE GROWN QUARTER OVER QUARTER. HE DID NOT SPECIFY WHEN THAT GROWTH OCCURRED. THEY MAY BE DOWN ON AN ANNUAL BASIS. EVERYDAY GREW OVER THE LAST QUARTER.
MAYBE THEY GREW AT SOME PERIOD DURING THE QUARTER. THERE IS A LITTLE MORE EXPLANATION TO DO FROM COKE, BUT THEY ARE NOT GOING TO GIVE THOSE DETAILS. ED: THE BIG AREA WHERE EXPLANATION IS NEEDED IS THE ROADMAP FOR GENERATIVE AI. CHECK OUT MARC'S LATEST
REPORTING NEXT WEEK WITH THE LET LOOSE. THE FOCUS IS IPAD. YOU SHOULD FIND OUT SOME MORE ABOUT GENERATIVE AI. LET'S STICK WITH APPLE. JOINING US IS JEAN MUNSTER, DEEPWATER ASSET MANAGEMENT. YOU WERE CLEAR ON YOUR POSTS LAST NIGHT, HOW YOU READ THE EARNINGS CALL. WHAT IS THE STANDOUT STORY FOR YOU? JUST ONE THING YOU LEARNED FROM APPLE LAST NIGHT? >> THE ONE PIECE I LEARNED IS THAT THE CORE BUSINESS IS NOT DOING GREAT, BUT IT IS HOLDING TOGETHER.
THERE IS THIS FEAR THAT ESTIMATES WOULD BE REVISED DOWN FOR THE JUNE QUARTER. THEY BASICALLY MAINTAINED THEM. THAT IS TESTIMONY TO THE STRENGTH OF THEIR BRAND ACROSS THE PRODUCT LINES, WHETHER IT BE THE SOFTWARE AND SERVICES, OR TO EVEN THE IPHONE BEING DOWN, IT HAS HELD TOGETHER. WHAT I TAKE AWAY IS IN THE JUNE QUARTER WE ARE GOING TO SEE REVENUE GROWTH FOR THE FIRST TIME IN TWO YEARS, OVER THE LAST TWO YEARS APPLE'S REVENUE GROWTH HAS AVERAGED DOWN .3%. IT IS GOING TO BE UP A COUPLE OF PERCENT IN JUNE, AND A PERCENT IN DECEMBER. THAT TURNED AROUND, THAT RE-ACCELERATION IS THE ONE THING THAT STEPPED OUT TODAY.
ED: I'M SHOWING OUR AUDIENCE AND YOU A TABLE, AND THE TABLE SHOWS THE LIST OF LARGEST-ANNOUNCED COMPANY SHARE BUYBACKS IN HISTORY. LESS YOU HAVE BEEN LIVING UNDER A ROCK YOU WILL SEE THERE IS ONLY ONE NAME ON THAT LIST. IT IS APPLE. WHAT IS THE POINT IN A $110 BILLION BUYBACK? GENE: THERE IS TWO POINTS. NUMBER ONE IS, THEY ARE SENDING A MESSAGE TO INVESTORS THAT THEY ARE GOING TO CONTINUE TO RETURN CAPITAL, DESPITE GOING INTO AN INVESTMENT FEES RELATED TO AI -- PHASE ELATED TO AI. COOK SAID IT IS GOING TO IMPACT MOST OF THEIR PRODUCTS. NOT JUST SOFTWARE, BUT HARDWARE.
THE FACT THAT THEY ARE INCREASING THIS BUYBACK DURING THAT PERIOD, THAT IS ONE PIECE. THE SECOND IS, THEIR CADENCE TO GETTING TO NET CASH NEUTRAL. THIS HAS BEEN A GOAL FOR THEM FOR THE PAST FIVE YEARS. RIGHT NOW IT IS AT $57 BILLION. THEY WANT TO BRING THAT DOWN TO ZERO.
THAT MEANS THEY HAVE THE SAME AMOUNT OF CASH AS THEY HAVE IN DEBT. WHAT I SEE, THAT STEP UP IN THE BUYBACK, IS AN INDICATION THEY WANT TO QUICKEN THE PACE. CFO LUCA DID MENTION ON THE CALL THEY THINK THEY WILL NOT GET TO NET CASH NEUTRAL ANYTIME SOON, SO THAT SHOWS THE STRENGTH OF THE OVERALL BUSINESS IS REALLY POWERING THIS BUYBACK.
I THINK INVESTORS SHOULD REMAIN CONFIDENT THAT ULTIMATELY THIS BUSINESS IS PRODUCING AN INCREDIBLE AMOUNT OF CASH. ALMOST $90 BILLION A YEAR IN FREE CASH FLOW. DESPITE THE REVENUE BEING DOWN 5% YEAR-OVER-YEAR. ED: WE ARE SPEAKING WITH JEAN MUNSTER OF DEEPWATER ASSET MANAGEMENT. YOU DO RESEARCH INTO APPLE.
YOU YOURSELF HOLD APPLE SHARES. THE FIRM DOES NOT. ARGUE ME ON THIS ONE. THERE IS A FRUSTRATION FROM PEOPLE AROUND THE WORLD, THEY MIGHT NOT BE INVESTORS, THEY MIGHT BE CONSUMERS THAT HAVE AN IPHONE AND THEY SAY, COME ON, MAN, THIS IS APPLE. STOP MESSING AROUND WITH BUYBACKS AND ACTUALLY DO SOMETHING ON THE INNOVATION SIDE.
GIVE US THE GENERATIVE AI OR A SERIOUS HARDWARE UPGRADE. DO YOU HAVE ANY SYMPATHY WITH THAT? GENE: ABSOLUTELY. I MEAN, APPLE HAS BEEN PAINFULLY SILENT ON THE TOPIC IN 2023. OF COURSE, AS MARK MENTIONED, ABOUT EVERY OTHER QUESTION ON THE CALL WAS RELATED TO AI. THEY ARE LATE, THERE IS NO QUESTION ABOUT IT.
ANOTHER PIECE SYMPATHIZING WITH THAT VIEW, IS THAT THEY GOT ASKED A QUESTION ABOUT CAPEX, BASICALLY GOING BACK TO WHAT HAPPENED WITH META, AND GOOGLE AND MICROSOFT, INCREASING CAPEX IN 2024. THE EXPECTATION IS THAT IF APPLE IS SERIOUS ABOUT AI THEY GOING TO BE PUSHING THEIR CAP BACKS AT A SIMILAR RATE. LUCA SIDESTEPPED THE QUESTION. HE OUTLINED HOW THEY APPROACH, AND THEY WORK WITH THIRD PARTIES. BUT THEY DIDN'T GIVE ANY INDICATION THAT WOULD BE STEPPING UP MEANINGFULLY. THEY MAINTAINED THEIR MARGIN GUIDANCE.
I THINK INVESTORS CAN SHOW SOME, I THINK, SOME FRUSTRATION RELATED TO, AGAIN, THE PACE. WE ARE GOING TO KNOW MORE IN JUNE. I WOULD HAVE WELCOMED THEM TO SAY THEY WERE SPENDING A BOATLOAD ON CAPEX. I DON'T THINK THEY'RE GOING TO BUILD A FOUNDATION MODEL TO THE LEVEL THAT MICROSOFT, GOOGLE, AND META ARE DOING.
SOME OF THAT FRUSTRATION IS TO BE UNDERSTOOD. ANOTHER PIECE IS THEY ARE ON BOARD AND THEY ARE GOING TO SHOW SOME EXCITING THINGS IN JUNE AND BEYOND RELATED TO AI. ED: LET'S SCRATCH DEEPER. AS OFTEN IS THE CASE WITH LUCA, IT IS READING BETWEEN THE LINES. I THINK THAT IS A LITTLE BIT KIND.
WE HAVE VERY EXCITING THINGS TO TALK ABOUT SOON, BUT OBVIOUSLY WE THINK IT IS A GREAT OPPORTUNITY, IT IS A GREAT NEW TECHNOLOGY. WE THINK IT HAS A LOT OF POTENTIAL. WHAT DOES AN APPLE GENERATIVE AI TOOL OR PLATFORM LOOK LIKE, IN YOUR MIND, IF INDEED, READING BETWEEN THOSE LINES, APPLE IS WORKING ON SOMETHING TO THAT EFFECT? GENE: IT'S GOING TO BE IN TWO OR THREE PHASES. WHAT WE WILL SEE IN THE BACK HALF OF THIS YEAR IS NEW OPERATING SYSTEMS. IT IS GOING TO SIMPLY INTEGRATE GENERATIVE AI INTO IT. SIRI, MAYBE YOU WILL HAVE A
CONVERSATION INSTEAD OF A POINT ANSWER. I SUSPECT YOU WILL BE ABLE TO ASK YOUR PHONE TO BOOK YOU AN OVER TO THE AIRPORT. THEY WILL ALLOW DEVELOPERS TO START BUILDING AI INTO THEIR APPS, WITH A SMALL FOUNDATION MODEL THEY WILL COME OUT WITH. I WOULD SAY EARLY-STAGE I THINK THE IPHONE THIS FALL, THEY WILL TALK ABOUT HAVING AI SILICON IN IT. NOT VERY EXCITING, BUT AT LEAST A FIRST STEP. THE SECOND PIECE IS REALLY
EXCITING, WHICH IS RELATED TO AGENT OR PERSONALIZED AI. THIS IS THE IDEA THAT YOU ASKED THE DEVICE TO DO SOMETHING FOR YOU AND IT DOES -- IT HAS MULTIPLE STEPS TO IT AND IT GOES OUT AND DOESN'T ITSELF. -- DOES IT ITSELF. THIS IS SOMETHING APPLE HAS A UNIQUE OPPORTUNITY IN. ESPECIALLY AROUND PRIVACY. COOK TALKED ABOUT PRIVACY BEING A COMPETITIVE ADVANTAGE FOR APPLE WHEN IT COMES TO AI. WHAT HE IS HINTING TO IS THEIR BELIEF IN AGENT AI.
2025 WE WILL START TO SEE THIS BUILT MORE INTO THE HARDWARE, AND POTENTIALLY EVEN SUBSCRIPTION SERVICES THAT ALLOW YOU TO DO MORE THINGS BASED ON AI. THAT COMMENT TO ME, IS AN EXCITING PRODUCT. ED: IT HAS BEEN A WHILE SINCE YOU HAVE BEEN ON THE SHOW, SO LET ME KNOW, SOME VALUE FOR THE AUDIENCE BY WE HAVE YOU. DO YOU UNDERSTAND WHAT IS HAPPENING IN THE START -- THE SMARTPHONE MARKET IN CHINA? YOU UNDERSTAND THE TRAJECTORY OF WHERE THE IPHONE IS GOING IN RELATION TO DOMESTIC OEMS, LARGELY ANDROID-BASED, THAT APPEAR TO BE DOING WELL? GENE: IT IS SOMETHING WE PAY A LOT OF ATTENTION TO.
THE BIGGEST FORCE THERE IS THERE IS A GEOPOLITICAL ELEMENT TO IT. EVEN THOUGH THIS IS NOT ESPECIALLY SPOKEN ABOUT WITH CHINESE LEADERSHIP, I THINK THERE IS A RECOMMENDATION THAT ANY GOVERNMENT EMPLOYEE STARTS TO MOVE TO HOMEMADE PHONES, WHICH MAKES SENSE FROM THEIR PERSPECTIVE. THAT IS A BIG POOL. THERE IS A LARGE POPULATION, ABOUT 50 MILLION HIGH-END PHONE USERS THAT WORK WITH THE GOVERNMENT.
THAT CAN HAVE A BIG IMPACT WHEN APPLE IS SELLING 250 MILLION PHONES A YEAR. I THINK THAT HAS AN IMPACT. I THINK THE GOOD NEWS -- THAT IS NEGATIVE, THERE IS NO WAY TO LOOK AT IT ANY DIFFERENT. THE GOOD NEWS IS THE COMPS DO GET EASIER, AND THE COMPANY IS TALKING ABOUT DIVERSIFYING AWAY FROM CHINA. BUT TO ANSWER YOUR QUESTION, I THINK CHINA IS GOING TO REMAIN REALLY IMPORTANT AS A PERCENTAGE OF REVENUE. IT IS ABOUT 19% RIGHT NOW. I SUSPECT THAT IS GOING TO DRIFT DOWN TO 15%. ED: JEAN MUNSTER, GREAT TO CATCH UP.
COMING UP ON THE SHOW WE ARE GOING TO BE JOINED BY JIM NEJRA -- JOMAYRA HERRERA. BE RIGHT BACK. ED: LET'S TALK ABOUT FINANCIAL MARKETS. AND A ZERO IN ON THE TECHNOLOGY SECTOR. THIS IS WHAT IT LOOKS LIKE AT THE INDEX LEVEL AND MACRO LEVEL. THE NASDAQ IS UP 1.5%. SEMI CONDUCTORS OUTPERFORMING
1.8%. AND WE DID SEE A PULLBACK IN YIELDS AFTER THE JOBS NUMBER. THE THING THAT JOINS ALL OF THEM IS THE MARKET HAS CHANGED ITS MIND AGAIN. IT IS BASICALLY LIKE ROLLING HILLS AT THE MOMENT, BUT THE EXPECTATION FROM TRADERS IS THE FEDERAL RESERVE WILL CUT INTEREST RATES FOR THE FIRST TIME IN SEPTEMBER. THEY WERE THINKING NOVEMBER, HAVING EARLIER THOUGHT THE SUMMER, AND YOU GET WHERE I'M GOING WITH THAT. BUT WE FOCUS ON RATES BECAUSE HIGHER INTEREST RATES DISCOUNT THE PRESENT VALUE OF FUTURE CASH FLOWS FOR TECH.
IF YOU ARE A HIGH MULTIPLE TECH STOCK YOU ARE SENSITIVE IN A HIGH INTEREST-RATE ENVIRONMENT. BITCOIN INVESTING IS STUCK AT THIS $61,000 LEVEL, BUT IT IS SOMETHING THAT TRADES 24/7. IT IS UP ALMOST 5% IN WHAT IS RISK-ON MODE.
TECH IS HAVING A GOOD DAY, AND IT IS BECAUSE OF THOSE JOB NUMBERS. LET'S CRUNCH THE NUMBERS. THEY CAME IN SOFTER THAN EXPECTED. NONFARM PAYROLLS ADVANCING 175,000 LAST MONTH, WHICH IS THE SMALLEST GAIN IN SIX MONTHS. THE UNEMPLOYMENT RATE ALSO
TICKED UP TO 3.9%. THAT IS THE KIND OF DATED THE FED IS LOOKING AT. LET'S BREAK IT DOWN WITH JOMAYRA HERRERA, A PARTNER AT REACH CAPITAL. WHEN YOU TRACK THE DATA WHAT ARE YOU LOOKING FOR IN THESE JOB NUMBERS? JOMAYRA: YEAH, THANK YOU SO MUCH FOR HAVING ME. I'M GENERALLY LOOKING AT THE DATA, LOOKING AT, ONE, WHAT ARE THE SECTORS DRIVING THE GROWTH WE ARE SEEING? WE HAVE SEEN PRETTY CONSISTENTLY HEALTH CARE HAS BEEN A BIG DRIVER OF JOB GROWTH ACROSS THE U.S. ECONOMY IN THE -- ECONOMY.
IN THIS PAST MONTH WE SAW RETAIL, WAREHOUSE, AND TRANSPORTATION AS WELL CONTINUE TO BE A DRIVER IN JOB GROWTH. SOME OF THE THINGS WE CONSIDER AS WELL OUR WAGE INCREASES. WAGES INCREASED BY .2% OVER THE PAST MONTH, A LITTLE LOWER THAN WE ANTICIPATED. AND WE ALSO LOOK AT OTHER
NUMBERS, LIKE, WHAT ARE THE OPENINGS WE SEE? THE JOB OPENINGS? THE REPORT CAME OUT ON WEDNESDAY AND THOSE CONTINUE TO BE RELATIVELY HEALTHY AND STABLE. THOSE ARE SOME OF THE NUMBERS THAT WE ARE GENERALLY LOOKING AT WHEN WE ARE LOOKING DEEPLY INTO THESE LABOR MARKET REPORTS. ED: DID YOU LEARN ANYTHING ABOUT THE TECHNOLOGY SECTOR THIS MORNING? JOMAYRA: WHEN IT CAME TO THE TECHNOLOGY SECTOR, IT IS A TALE OF TWO CITIES. THERE IS A COGNITIVE DISSONANCE WHEN YOU LOOK AT THE LABOR MARKET REPORTS. AT A HIGH LEVEL YOU SEE UNEMPLOYMENT CONTINUES TO BE UNDER 4%, AND THAT IS FOR THE 27TH CONSECUTIVE MONTH. YOU CONTINUE TO SEE HIGH DEMAND
ACROSS SOME OF THESE KEY INDUSTRIES, LIKE I MENTIONED. NOW YOU LOOK AT THE TECHNOLOGY SECTOR MORE DEEPLY, JOB POSTINGS FOR MOST TECH JOBS ARE BELOW 25% FROM PRE-PANDEMIC. THERE IS A BIT OF A LAG IN THE TECH SECTOR IN TERMS OF SEEING THAT INCREASED DEMAND. YOU SEE FOLKS WHO HAVE BEEN
LAID OFF OVER THE PAST YEAR CONTINUE TO FIGHT -- CONTINUE TO STRUGGLE TO FIND ACCESS TO JOBS, PARTICULARLY IF THEY ARE IN NON-TECHNICAL ROLES. IT IS A HARD PILL TO SWALLOW, BECAUSE WHEN WE LOOK AT THE EARNING REPORTS FOR THE PAST QUARTER, WHETHER IT IS META, MICROSOFT, ALPHABET, THEY ARE QUITE STRONG. BUT THEY ARE ALSO SHOWING DISCIPLINE AROUND MAINTAINING OPERATIONAL EFFICIENCIES.
HAVE NOT YET SEEN THAT RESURGENCE IN THE SAME WAY WE SEE THE STRENGTH OF THE LABOR MARKET ACROSS THESE OTHER INDUSTRIES. ED: HOLD THAT THOUGHT. EARLIER TODAY WE SPOKE TO -- OR YESTERDAY, RATHER, BANK OF AMERICA. LISTEN TO HER THESIS. >> WHO IS GOING TO BENEFIT FROM ALL OF THESE CHIPS AND AI AND AUTOMATION CHECKUP IT IS OLD ECONOMY COMPANIES THAT GET MORE LABOR-LIGHT. THAT IS THE BENEFIT WE COULD
SEE OVER THE NEXT 12 TO 24 -- YOU KNOW, A FEW YEARS. THE AREAS ARE INDUSTRIES LIKE OURS, THE BANKS. BANKS ARE VERY LABOR-INTENSIVE. NEITHER IS THIS TOOL WE CAN USE TO REPLACE PEOPLE WITH BOT AND PROCESSES, ETC. ED:
TAKING YOUR READ OF THE TECHNOLOGY SECTOR, I THINK YOU AGREE WITH EACH OTHER. ABOUT THE DIRECTION OF TRAVEL RIGHT NOW, ABOUT WHAT IS HAPPENING IN JOBS IN THE TECHNOLOGY SECTOR, AND HOW TECHNOLOGY IS IMPACTING, BASICALLY, OLD-SCHOOL ECONOMY. JOMAYRA: COMPLETELY AND TOTALLY. I THINK WHAT IS INTERESTING, NEVER YOU HAVE A LARGE TECHNOLOGY SHIFT, OFTEN TIMES WE ARE VERY, VERY GOOD AT PREDICTING WHAT JOBS WE ARE GOING TO LOSE.
WE ARE VERY, VERY BAD AT PREDICTING WHICH JOBS ARE GOING TO BE CREATED. IN THIS SHORT-TERM PERIOD WHAT WE ARE GOING TO FEEL IS INCREASED AUTOMATION AROUND TASKS THAT RIGHT NOW PEOPLE ARE DOING. AND THAT WILL BE A NET PRODUCTIVITY GAIN FOR THE ECONOMY, BUT THERE IS GOING TO BE SOME REAL LABOR MARKET PAIN FELT BY EMPLOYEES IN THE SHORT TERM. BUT OVER TIME WHAT WE WILL SEE IS, EMPLOYEES WILL BE ABLE TO LEAN INTO HUMAN TASKS, AND THERE WILL BE NEW JOBS CREATED IN WAYS WE REALLY CANNOT ANTICIPATE RIGHT NOW. ED: JOMAYRA HERRERA, PARTNER AT
REACH CAPITAL, GREAT TO HAVE YOU ON THE PROGRAM. STAY WITH US. SO MUCH MORE TO COME. THIS IS "BLOOMBERG TECHNOLOGY." ED: U.S. PROSECUTORS MAKING THEIR
CLOSING REMARKS TO BE FAIR TO THE COMPANY, THEY ARE ARGUING THIS IS NOT A QUESTION OF ANTICOMPETITIVE BEHAVIOR. GOOGLE IS SAYING, WE MAKE A BETTER PRODUCT AND YOU SHOULD NOT PENALIZE US FOR THAT. BUT IT WILL TAKE THE JUDGE SEVERAL MONTHS TO DELIBERATE. BUT WE ARE EXPECTING A RULING BEFORE THE END OF THE YEAR. THIS IS A SIGNIFICANT CASE. THIS IS THE FIRST IN A SERIES OF ANTITRUST ACTIONS GOVERNMENT IS BRINGING AGAINST TECH COMPANIES. WE KNOW THE BIDEN ADMINISTRATION HAS MADE THE WHOLE QUESTION OF COMPETITION A FOCUS ACROSS A NUMBER OF INDUSTRIES.
BUT TECH IS REALLY DRAWING THE LIONS SHARE OF THAT ATTENTION. ED: BLOOMBERG'S MIKE SHEPPARD OUT OF D.C. WE ARE GOING TO SIT DOWN WITH THE CFO OF COINBASE TO BREAK DOWN THE COMPANY'S QUARTERLY RESULTS. FROM SAN FRANCISCO, AND IN A MOMENT NEW YORK CITY, THIS IS "BLOOMBERG TECHNOLOGY." ED: WELCOME BACK TO "BLOOMBERG TECHNOLOGY." ED LUDLOW HERE IN SAN FRANCISCO. LET'S GREET -- LET'S RECAP THE
MARKETS QUICKLY. JOBS DATA, SLOWING DOWN IN APRIL IN TERMS OF HIRING, AND THE MARKET IS REACTING, SAYING MAYBE THE FED WILL CUT RATES IN SEPTEMBER. THAT HAS BOOSTED EQUITIES, AND IN PARTICULAR WE ARE SEEING TECHNOLOGY TO PERFORM THE BROADER MARKET. I'M LOOKING AT NVIDIA MOVING HIGHER. BROADCOM ALSO MOVING HIGHER. ALL OF THEM ARE BASICALLY MOVING HIGHER. ON THE SINGLE-NAME FRONT APPLE
IS A BIG POINTS CONTRIBUTOR. IT IS ON TRACK FOR ITS BIGGEST GAIN SINCE NOVEMBER 2022, BECAUSE EVERYTHING IS ROSY IN THE WORLD OF THE IPHONE. YIELDS PULLING BACK IN LINE WITH THE RATE THAT STORY WE WERE JUST TALKING ABOUT. LET'S ALSO TALK ABOUT COINBASE. COINBASE DID PRETTY WELL. BEAT THE TOP AND BOTTOM LINE. THE STOCK IS DOWN 4.7 PERCENT. A HIGH BAR OFTEN GOING INTO THESE EARNINGS QUARTERS.
AND ALSO SOME QUESTIONS ABOUT CRYPTOCURRENCY TRADING, THE RETAIL TRADER, AND APP-BASED TRANSACTIONS. DELIGHTED TO SAY THAT ALESIA HAAS JOINTS ME, ALONG WITH SONALI BASAK OF BLOOMBERG. TAKE IT AWAY. SONALI: THANK YOU FOR JOINING. TO SPEAK TO WHAT ED WAS TALKING
ABOUT, ABOUT THIS HIGH BAR, EVEN THOUGH YOU BROUGHT IN MORE THAN $1 BILLION OF TRANSACTION REVENUE IN THE FIRST QUARTER, A LOT OF INVESTORS HAVE QUESTIONS ABOUT THAT FALLOFF OF BITCOIN PRICES IN APRIL. HOW DO YOU THINK ABOUT THE MORE RECENT DRAWDOWN AND WHAT IT MEANS FOR YOU? ALESIA: I THINK IT IS IMPORTANT TO ZOOM OUT WHEN YOU ARE TALKING ABOUT CRYPTO. WE SEE VOLATILITY WEEK TO WEEK, MONTH TO MONTH. WHEN YOU LOOK OVER THE PAST DECADE BITCOIN HAS BEEN THE TOP-PERFORMING ASSET. WE REALLY FOCUS ON LONG-TERM TRENDS. I THINK IT IS ALSO IMPORTANT TO NOTE, YOU LOOK AT ALL PAST PRIOR BULL RUNS THERE HAS BEEN INTRADAY, INTRA-MONTH CORRECTIONS. WE ARE PREPARED FOR THE
VOLATILITY. WE HAVE NAVIGATED THIS INCREDIBLY WELL OVER THE PAST 10 YEARS OF OUR HISTORY. AND IT IS JUST ANOTHER DAY IN CRYPTO. IT DOESN'T MEAN THE LONG-TERM DOESN'T CONTINUE TO BE AS ROSY AS IT WAS LAST WEEK. ED: GOOD MORNING.
JUST ANOTHER DAY IN CRYPTO DOES NOT CARRY WITH SONALI AND I, BECAUSE WE HAVE SLEEPLESS NIGHTS AND NEVER-ENDING DAYS OF CRYPTO. I GET THAT. THE VOLATILITY IS A DRIVER, RIGHT? WE UNDERSTAND THAT. PARTICULARLY WHEN YOU CONSIDER YOUR CUSTOMER BASE. BUT THERE MUST BE A PSYCHOLOGICAL ELEMENT OF THAT AS WELL. IF YOU TAKE THE NEWS FLOW OF LATE, SPOT BITCOIN ETF, DO YOU SEE EVIDENCE THAT THOSE HEADLINES DRIVE ACTIVITY FOR YOU ON THE PLATFORM? ALESIA: WE ABSOLUTELY SEE THAT CRYPTO VOLATILITY AND RISING PRICES DRIVE ACTIVITY ON OUR PLATFORM. WITH THE DEMAND OF BITCOIN ETFS, IT IS NATURAL TO SEE THE PRICE GO UP, NATURAL TO SEE ELEVATED ACTIVITY.
WHAT IS SO EXCITING TO US IS WE NOW HAVE A MATERIAL PART OF OUR REVENUE COMING FROM NON-TRADING ACTIVITY. WE HAVE BEEN SEEING GROWTH IN OUR SUBSCRIPTION AND SERVICES THROUGH THE DOWNTURN OF 2023, THROUGH Q1, WHERE IT WAS UP 36%. AND WE ARE REALLY EXCITED NOW FOR THIS NEXT WAVE OF CRYPTO ADOPTION A HUNCH HE. -- ADOPTION ON CHAIN. WE CAN DO FASTER AND CHEAPER TRANSACTIONS. IT GIVES THE FOUNDATION THAT WE MIGHT BE ABLE TO DRIVE INTO PAYMENTS. SO, YES, HISTORICALLY VERY HEADLINE DRIVEN, BUT THERE IS SO MUCH MORE TO CRYPTO THAN SPECULATIVE TRADING. SONALI:
I THINK A LOT OF PEOPLE STRUGGLE TO UNDERSTAND AND CONCEPTUALIZE HOW MUCH SPACE CAN REALLY TRANSLATE INTO FUTURE REVENUE -- HOW MUCH BASE CAN REALLY TRANSLATE INTO FUTURE REVENUE. WHAT DOES IT MEAN FOR THE FUTURE ECONOMICS OF COINBASE? ALESIA: THANK YOU FOR THE OPPORTUNITY TO TALK ABOUT BASE. BASE IS A LAYER TWO SOLUTION, WHICH MEANS IT IS BUILT ON TOP OF ETHEREUM AND ENABLES TRANSACTIONS TO MOVE MORE QUICKLY, FASTER. WE SAW IS, WE NOW HAVE EIGHT TIMES THE DEVELOPERS BUILDING ON BASE QUARTER OVER QUARTER.
WE ARE DRIVING A PLATFORM FOR DEVELOPERS TO BUILD APPLICATIONS. THEY ARE LOOKING FOR LESS FRICTION, LOWER COST, FASTER SPEEDS. THAT IS THE ENVIRONMENT WE ARE TRYING TO CREATE. WE HAD AN EXCITING UPGRADE IN THE QUARTER WHERE WE WERE ABLE TO REDUCE TRANSACTION COSTS BY 80%.
WITH THAT LEAD TO IN THE PAST 30 DAYS HE IS WE ARE SEEING TWO TIMES THE NUMBER OF TRANSACTIONS ON BASE THEN WE DO ON A THEORY IN. DRIVING DEVELOPER ACTIVITY LEADS TO DRIVING TRANSACTION POINT. TRANSACTION VOLUME LEADS TO REVENUE.
THE WHOLE PIPELINE IS TRYING TO CREATE THAT ACTIVITY FOR DEVELOPERS. WE BROKE OUT A NEW REVENUE STREAM CALLED OTHER TRANSACTION REVENUE. OTHER TRANSACTION REVENUE IS THE BASE SEQUENCER FEES AND OTHER PAYMENT-RELATED FEES. THIS SPEAKS TO OUR AMBITION TO GROW THESE PRODUCTS AND PLATFORMS. INVESTORS WILL HAVE THAT TRANSPARENCY NOW TO LOOK AT IT AS WE GO FORWARD. ED: SONALI, WE HAVE THIS ONE. I WOULD LIKE TO ASK ABOUT
EXPENSES. I WOULD LIKE TO ASK YOU ABOUT EXPENSES. THEY ARE CREEPING UP A LITTLE BIT. YOU WERE GOING TO TELL ME, DEMAND IS GOING UP. HOW ARE YOU MANAGING EXPENSES? YOU CAN SEE THE EYE ROLL FROM SONALI, BUT I THINK IT IS IMPORTANT FOR INVESTORS. ALESIA: IN Q1 EXPENSES WERE UP 5%. I'M GOING TO FOCUS ON THE FUTURE. WE ARE SEEING EXPENSE GROWTH IN
Q2. THE VAST MAJORITY OF THIS IS VARIABLE SPEND. WHEN WE SEE HIGH VOLUMES, WHICH WE SAW A SHARP TICK UP IN MARCH, WE HAVE A LIGHTING EFFECT TO OUR CUSTOMER SUPPORT COSTS. A LITTLE BIT OF THAT IS SPILLING INTO Q2. WE ALSO WILL SEE HIGHER INFRASTRUCTURE COSTS IN Q2. THE THIRD EXPENSE THAT IS GOING UP IS USTC REWARDS. WE DOUBLED THE USTC BALANCES IN THE QUARTER, AND THAT IS WHAT IS DRIVING THIS INCREASED EXPENSE.
ALL OF THESE CAN BE RATCHETED DOWN QUICKLY IF WE SEE A CHANGE IN ENVIRONMENT. BUT WE ARE EXCITED ABOUT THE GROWTH IN EXPENSES. WE LEARNED OUR LESSONS WHEN WE GREW TOO QUICKLY. WE WILL BE PRUDENTLY GROWING. WE ARE LOOKING FOR GOOD ROI INVESTMENTS AND HAVE A FOCUS ON THE FINANCIAL DISCIPLINE. SONALI: IF YOU THINK ABOUT THE CURRENCY MARKET, IT IS LIKE KING DOLLAR.
BUT WHEN IT COMES TO THE CRYPTO MARKET IT IS KING BITCOIN, AND IT IS STILL THE VAST MAJORITY OF WHAT YOU SEE IN TRADING. BUT WHEN IT COMES TO BASE AND THE ACTIVITY BEING BROUGHT INTO THE WORLD OF MEME COINS, HOW DO YOU THINK ABOUT WHETHER THAT IS GOING TO BE WHERE THE BULK OF ACTIVITY LIES FOR A WHILE? ALESIA: THERE IS SOME MEME COIN ACTIVITY ON BASE. WE ARE SEEING ACTIVITIES BEING BUILT ON BASE, AND THIS IS PART OF THE JOURNEY TO GET THERE. THE KEY I WANT TO FOCUS ON IS A PLATFORM THAT ENABLES QUICK, FAST TRANSACTIONS.
JUST LIKE WE MOVED FROM EMAIL TO TEXT, TEXT TO WHATSAPP, WHEN WE THINK ABOUT THE OPPORTUNITY NOW TO HAVE USTC ON-BASE, IT HAS ENABLED GLOBAL AND -- GLOBAL PAYMENTS NEARLY FREE. THAT IS A NEW INNOVATION THAT WE ARE REALLY EXCITED TO SEE HOW IT IS BUILT AND GROWN THROUGH OUR OWN PLATFORM, THROUGH OUR WALLET PLATFORM, THROUGH SEQUENCER FEES, IT ALSO FOR OTHER DEVELOPERS AND COMPANIES LOOKING TO ADOPT THESE LOWER-COST RAILS. ED: OUR THANKS TO ALESIA HAAS, COINBASE CFO, AND SONALI BASAK. SHOULD WE LOOK AT SOME OTHER NEWS HEADLINES? IT IS TIME FOR TALKING TECH. MICROSOFT IS ADDING SECURITY CHIEFS TO ITS PRODUCTS GROUP AFTER SEVERAL SERIOUS CYBER ATTACKS. THE SOFTWARE GIANT SAID IT IS ADDING DEPUTY CHIEF INFORMATION SECURITY OFFICERS WITHIN ITS PRODUCT GROUPS, WHILE DECLINING TO IDENTIFY WHO THOSE NEW OFFICIALS ARE.
PLUS, LIV GOLF CEO SPOKE ABOUT A POSSIBLE MERGER WITH THE PGA AND THE FUTURE OF THE SPORT AS STREAMING COMPETITION HEATS UP. LISTEN TO THIS. >> WHAT IS THE DEFINITION OF TURNING IN? TUNING IN TO CHANNEL 44 AND SAYING I'M GOING TO WATCH THE NEXT FOUR AND A HALF HOURS, THAT IS TUNING IN. BUT TO A 25 EURO TUNING IN MAYBE 12 SECONDS ON THE PHONE. LET ME SEE THIS, THEN I WILL COME BACK OVER HERE AND DO ANOTHER 14 SECONDS ON THIS.
THAT, TO ME, IS A MARKER THAT IS ENORMOUSLY WEALTHY. THAT IS ENORMOUSLY INFLUENTIAL. WE ARE TALKING TO CORPORATIONS. I'M NOT GOING TO GIVE YOU THE NAMES OF THOSE CORPORATIONS, OF COURSE, BUT WE JUST DID A GREAT PARTNERSHIP WITH GOOGLE. ED: HERE IS THE STORY I BROKE YESTERDAY AFTERNOON.
RIVIAN IS RECEIVING INCENTIVES, $827 MILLION TO EXPAND IN ILLINOIS. THE COMPANY HAS ALSO TAPPED THE FORMER COO OF VOLVO CARS TO BE ITS COO AS IT PREPARES TO ROLL OUT THAT LOWER-COST MODEL. COMING UP, WE ARE GOING TO BE JOINED BY CONBOY'S JASON CHAPMAN TO TALK ABOUT THE OUTLOOK FOR THE VIDEOGAMES LANDSCAPE. THIS IS "BLOOMBERG TECHNOLOGY."
OF THE DETAILS YOU NEED, AND JOIN US NEXT WEEK. THIS IS BLOOMBERG. AFTER A YEAR OF SPECULATION, IT IS FINALLY HERE. JP MORGAN'S INDEX GPT TOOL. INDEX GPT IS A NEW RANGE OF INVESTMENT BASKETS CREATED WITH THE HELP OF OPENAI'S GPT-4 MODEL. IT INCLUDES A LIST OF KEYWORDS ASSOCIATED WITH THE THEME THAT ARE SET INTO A SEPARATE NATURAL --NATURAL LANGUAGE PROCESSING MODEL WHICH SCANS ARTICLES TO IDENTIFY COMPANIES INVOLVED IN SPECIFIC SPACES.
IT HAS BEEN A HARD WEEK FOR THE VIDEOGAMES INDUSTRY. AMD TOLD US ON TUESDAY DEMAND FOR CHIPS POWERING GAME CONSOLES AND COMPUTERS IS DOWN A LOT. ON WEDNESDAY DENVER REPORTED THAT TAKE-TWO PLANS TO SHUT DOWN SUBSIDIARIES IN LONDON AND SEATTLE AMID MASS LAYOFFS, JOINING SONY, EA, AND MICROSOFT IN CUTTING BACK. IN MORE POSITIVE NEWS, TWITCH IS GOING TO LAUNCH A COMPETITOR TO TIKTOK. HERE TO DISCUSS ALL OF THAT IS
KONVOY MANAGING PARTNER JASON CHAPMAN. IT IS HARD TO KNOW WHERE TO START, BUT THE BROAD THEME IS THAT, FOR THOSE BIG PUBLICLY TRADED NAMES IT IS TOUGH BUT THEY'RE IN THE VIDEOGAMES INDUSTRY RIGHT NOW. YOUR REACTION TO THE WEEK? JASON: THANKS FOR HAVING ME. IT HAS BEEN A BIG WEEK.
THIS IS ON THE BACK OF THE BAN OF TIKTOK, WHICH 80% OF THE HOUSE JUST VOTED FOR. A MACRO THEME TO NOTE THAT IS A BIG THEME WE ARE PAYING ATTENTION TO TODAY IS, CLEARLY BYTEDANCE IS BEING FORCED TO DIVEST TIKTOK. BYTEDANCE IS BASED IN CHINA. BYTEDANCE IS ONE OF SIX FOREIGN ADVERSARIES LISTED BY THE UNITED STATES, AND A LOT OF PEOPLE ARE NOW QUESTIONING, INCLUDING A LOT OF THE COMPANIES YOU LISTED, WILL THIS FORCED DIVESTITURE CONTINUE TO OCCUR? AT KONVOY, WE HAVE TAKEN A PRINCIPAL THAT WE DO NOT INVEST IN FOREIGN ADVERSARIAL NATIONS, AND WE SUSPECT ANY OTHERS ABOUT CONTINUE TO PONDER WHETHER THIS IS THE RIGHT MOVE FOR THE INDUSTRY. ED: THIS GOING TO BE A LARGE
PORTION OF THE AUDIENCE THAT SAY, WAIT A MINUTE, WHY IS A VENTURE CAPITAL FIRM FOCUSED ON VIDEOGAMES WORRIED ABOUT TIKTOK? USTC IT IS IT -- JASON: IT IS A GREAT QUESTION. TIKTOK AS AN ENTITY IS ONE OF THE MOST-USED SOCIAL PLATFORMS IN THE WORLD. AFTER SOCIAL PLATFORMS YOU START TO LOOK AT, WHERE ELSE DO PEOPLE SPEND THEIR TIME IN DIGITAL FORMATS? NATURALLY YOU GO TO GAMES. ED: YOU ARE TALKING ABOUT THE BATTLE FOR EYEBALLS, BASICALLY? JASON: WE ALSO VIEW THIS AS THE PRECURSOR OF WHAT IS TO POTENTIALLY COME TO THE GAMES INDUSTRY. THIS FORCED DIVESTITURE OF TIKTOK COULD LEAD TO FORCED DIVESTITURES IN THE GAMES INDUSTRY. ED: SEE YOU EXTRAPOLATE THAT OUT. LET'S GET THE CASE STUDY OF
WHAT TWITCH IS DOING. I THOUGHT THAT WAS INTERESTING. IF IT IS THE BATTLE FOR EYEBALLS, THEY ARE PRINCIPALLY A LIVESTREAMING PLATFORM YOU CAN VIEW AND PARTICIPATE IN OTHERS PLAYING VIDEO GAMES. NOW THEY ARE THINKING OF DOING A TIKTOK COMPETITOR. WHAT ADVANTAGE MIGHT THEY HAVE IN PURSUING THAT BUSINESS MODEL? JASON: YEAH, IT IS DEFINITELY INTERESTING TO SEE AMAZON TRY TO MOVE HEAVILY INTO CONSUMER.
TWITCH IS THE BEACON AND NORTHSTAR FOR THEM, SUCCESSFULLY ENTERING INTO A CONSUMER-FIRST PRODUCT, WHICH IS TWITCH. AMAZON IS ONE OF THE RUMORED GROUPS THAT COULD POTENTIALLY BUY TIKTOK ITSELF. THERE IS REALLY THREE GROUPS THAT HAVE BEEN CONSIDERED.
IT IS PRIVATE EQUITY, STRATEGICS, AND DARK HORSE PICKS WOULD BE E-COMMERCE PLATFORMS. THEN ANNOUNCING THEY WOULD LIKE TO LAUNCH THEIR OWN COMPETITOR DIRECTLY, I THINK IT IS EITHER A PRECURSOR TO TEST THE WATERS IN THE NEXT YEAR, DO WE WANT TO CONSIDER BRINGING THIS AND HOUSE OURSELVES, OR IS THIS SOMETHING WE WANT TO LAUNCH DIRECTLY AND GROW IN-HOUSE? ED: AS YOU SAID, A RUMOR THAT AMAZON IS WAITING IN THE WINGS TO BUY TIKTOK. I DON'T THINK BLOOMBERG HAS REPORTED THEM AS A CANDIDATE, BUT I WILL LOOK INTO IT AND LET YOU KNOW. JASON: I KEEP YOU ON YOUR TOES, ADD. -- ED. ED: I KNOW. MORE STUDIO SHUTDOWNS.
WHAT COMES NEXT? MAYBE CONSOLIDATION. JASON: AS I HAVE SAID BEFORE, I BELIEVE WE ARE RIGHT-SIZING AS AN INDUSTRY. WE GOT VERY BLOATED WHEN MONEY WAS FREE IN THE EARLY PART OF 2022. HE HIRED 20 -- COMES OF INDIVIDUALS, WE GREW A LOT. GAMING CONTINUES TO GROW. IT GROWS ABOUT 150 MILLION PEOPLE YEAR.
WE ARE LOOKING AT A STRONG 2024 AND 2025. I BELIEVE WHAT YOU ARE SEEING IS RIGHTSIZING ACROSS NOT JUST GAMING, BUT ENTERTAINMENT AMTEK. -- ENTERTAINMENT AND TECH. ED: I HAVE BEEN PLAYING GHOSTS OF TSUSHIMA. REAL QUICKLY, WHAT IS THE NEXT BIG INNOVATION? JASON: I THINK OF -- I THINK A LOT OF THE NEXT BIG INNOVATIONS YOU ARE GOING TO SEE IS THE CREATION OF GAMES.
CREATION IS GETTING FASTER. WE ARE ABLE TO PRODUCE A TON MORE CONTENT QUICKLY, THANKFULLY NEW -- THANKFULLY DUE TO NEW DEVELOPMENT TOOLS POWERED BY ARTIFICIAL INTELLIGENCE. SECONDLY, THE WAY GAMES ARE DISTRIBUTED IS A MESS. HOW DO YOU FIND GAMES TODAY? THE VAST MAJORITY OF GAMERS FIND THEM EITHER IN FACEBOOK ADS OR WORD-OF-MOUTH. WITH THE SHEER AMOUNT OF
CONTENT COMING OUR WAY WE THINK THIS NEEDS TO BE RETHOUGHT. WE ARE REALLY EXCITED TO BACK ENTREPRENEURS PURSUING THESE PROBLEMS. ED: WE ALMOST SPEND AN ENTIRE SEVEN MINUTES WITHOUT TALKING ABOUT ARTIFICIAL INTELLIGENCE UNTIL YOUR ANSWER. THANKS. I KNOW. YOU HAVE DONE THE RESEARCH THERE, BUT WE'VE GOT TO GO. THANK YOU SO MUCH, JASON CHAPMAN.
WE ARE GOING TO TURN BACK TO APPLE. SHARES SOAR. AS WE HEAD TO BREAK, CLOSING THE GLOBAL DIGITAL DIVIDE IS TOP OF MIND FOR THE VERIZON CEO. HE SAT DOWN WITH CAROLINE HYDE AS PART OF THE GLOBAL CITIZEN NOW SUMMIT IN NEW YORK THIS WEEK TO DISCUSS THE ROADBLOCKS PREVENTING MORE THAN 2 BILLION PEOPLE GETTING ACCESS TO AFFORDABLE INTERNET AND WHAT THE GOVERNMENT IS DOING ABOUT IT. LISTEN TO THIS. >> HISTORICALLY, AND NOW WE ARE COMING INTO A LITTLE MORE COMPLICATED HISTORICALLY WE STILL HAVE AFFORDABLE CONNECTIVITY PLANS, MEANING FAMILIES CAN GET A SUBSIDY OR WIRELESS CONNECTIVITY. NOW THERE IS A DISCUSSION IN CONGRESS ABOUT WHETHER THEY ARE GOING TO VOTE ON IT AGAIN. I HAVE TALKED TO GOVERNMENTS. DOING SUBSIDY FOR LOW INCOME
FAMILIES TO GET CONNECTED IS IMPORTANT, BECAUSE THEY CAN APPLY FOR A JOB, THEY CAN WORK REMOTELY. CUSTOMER CARE, ETC. YOU CAN DO CONSULTANCY, ETC. HAVING ACCESS TO THAT MAKES IT YOU CAN GROW, BE PART OF OUR SOCIETY. ED: LET'S GET BACK TO APPLE.
AGAIN, SHARES UP 6.7%, ON TRACK FOR THEIR BIGGEST JUMP SINCE NOVEMBER 2022. A MIXED PICTURE, HONESTLY. REALLY TOUGH QUARTER, BUT THINGS IMPROVING, AND IN CHINA IPHONE SURPRISED EVERYONE. LET'S GET TO MANDEEP SINGH. HE LEADS OUR IN-HOUSE RESEARCH. YOUR RESPONSE WAS THAT THE BROAD ECOSYSTEM OF APPLE PRODUCTS OFFSET SPECIFIC PRODUCT LINE WE IS. JUST GO INTO THE SPECIFICS. MANDEEP: LOOK AT THE RESILIENCE OF THE SERVICES LINE, RIGHT? THE FACT THAT IT GREW ALMOST MID-TEENS SHOWS THAT THEY CAN PULL THE LEVERS WHEN IT COMES TO PRICING AND JUST, YOU KNOW, HOW THEY BUNDLE THINGS OUT. THAT IS WHY EVEN THOUGH THE
IPHONE REVENUE WAS DOWN 10%, THEY WERE ABLE TO SHOW 14% SERVICES GROWTH. I THINK EVERYONE GETS IT THAT APPLE CONTROLS THE DISTRIBUTION. AND IF YOU HAVE TO ROLLOUT AI, THEY WILL HAVE A PIECE OF THE TRANSACTIONS THAT TAKE PLACE IN THEIR ECOSYSTEM. THAT IS WHY THE SERVICES BUSINESS IS SO RESILIENT. ED: TIM COOK HAS US EXCITED.
BIG EVENT NEXT WEEK, ANOTHER IN JUNE. WHAT IS IT GOING TO TAKE TO KEEP THE STOCK GOING HIGHER AND ENGAGED, AND PEOPLE BELIEVING SOMETHING BIG REALLY IS COMING? MANDEEP: WITH APPLE, YOU NEED A LARGE ADDRESSABLE MARKET TO MOVE THE NEEDLE. LOOK, THEY SAW THAT WITH VISION PRO, AND OBVIOUSLY THEY ARE NOT PURSUING THE CAR ANYMORE, SO YOU NEED A LARGE, ADDRESSABLE MARKET TO MOVE A COMPANY OF APPLE'S SIZE.
IN THIS CASE AI ENTRENCHING IS THAT LARGE MARKET. THEY NEED TO SHOW, HOW ARE THEY CAVING TO AI? I THINK THEY WILL HAVE TO PARTNER WITH SOMEONE. IT'S LIKELY IT HAS TO BE GOOGLE, GIVEN THEIR ARRANGEMENT, BUT IT NEEDS TO BE ARTICULATE A LOT MORE CLEARLY FOR THE MARKET TO UNDERSTAND. ED: SUPERQUICK, WHICH PIECE OF HARDWARE WILL BE THE HOME OF THE AI INFERENCING? MANDEEP: APPLE CONTROLS THE CHIP. YOU CANNOT HAVE INFERENCING DONE THROUGH THE CLOUD.
YOU HAVE TO HAVE IN VIDEO GPU IS BECAUSE YOUR DATA CENTERS ARE PHYSICALLY LOCATED SOMEWHERE. HAVING INFERENCING IN APPLE'S CHIP IS WHAT IT NEEDS TO DO. I THINK THEY CAN DO THAT. ED:
MANDEEP SINGH, WHO LEADS OUR TECH COVERAGE AT BLOOMBERG INTELLIGENCE, HAPPY TO CATCH UP WITH YOU. THAT DOESN'T IT FOR THIS EDITION OF "BLOOMBERG TECHNOLOGY." WHAT A WEEK IT HAS BEEN. RECAP FRIDAY. THE STORY OF APPLE ON THE PODCAST. SO MANY OF YOU CHECKING OUT THE PODCAST ON
APPLE, SPOTIFY, IHEART, AND OF COURSE WE POSTED TO ALL THE BLOOMBERG -- POST IT TO ALL THE BLOOMBERG PLATFORMS. BUCKLE UP. THERE IS A LOT MORE TO COME NEXT WEEK IS WELL. FROM SAN FRANCISCO, THIS IS "BLOOMBERG TECHNOLOGY."
2024-05-04 21:05
