Verizon's Frontier Deal and Nvidia Pushes Back | Bloomberg Technology
ANNOUNCER: THIS IS BLOOMBERG TECHNOLOGY WITH CAROLINE HYDE AND ED LUDLOW. CAROLINE: COMING UP, VERIZON AGREES TO BUY FRONTIER COMMUNICATIONS. WE SPEAK WITH THE CEO. ED: VIDEO PUSHES BACK SAYING -- NVIDIA PUSHES BACK SAYING IT HAS NOT RECEIVED A SUBPOENA. CAROLINE: ANOTHER CHIEF EXEC ON THE SHOW. THE FIRST, NASDAQ 100 OUTPERFORMS. NVIDIA AND TESLA
DO THE WORK. ED: VERIZON TO BUY FRONTIER. BOTH STOCKS LOWER. 37% PREMIUM VERSUS TUESDAY. REPORTS STARTED SURFACING TUESDAY. THAT IS TUESDAY'S CLOSING PRICE. STORY IS ABOUT BEING MORE COMPETITIVE IN THE HIGH-SPEED INTERNET BUSINESS.
CAROLINE: SHARE PRICE REACTION. WHY IS FRONTIER TRADING BELOW THE CURRENT AGREED PRICE? WE WELCOME OUR AUDIENCES, VERIZON AGREES AND TO BUY THEM FOR CASH. THE NEW YORK PHONE GIANT LOOKS TO EXPAND ITS HIGH-SPEED INTERNET BUSINESS.
IT WASN'T LONG AGO YOU OWNED THESE ASSETS. WHY GO BACK INTO THIS? >> THANK YOU FOR HAVING ME. THIS IS OUR CORE STRATEGY. WE SERVE ALL TYPES OF CUSTOMERS. THIS IS EXTENDING THE OFFERINGS CUSTOMERS WILL HAVE. THIS IS A GOOD DECISION. WE OWNED THESE ASSETS BEFORE BUT THEY WERE A TOTALLY DIFFERENT TYPE. NOWADAYS FRONTIER MORE THAN 50% OF THE REVENUE IS FIBER.
A LARGE TRANSFORMATION HAVE BEEN DONE. ED: GOOD MORNING. FRONTIER'S TRADING AT $35 PER SHARE, BELOW THE OFFER. WHAT DOES THAT TELL YOU ABOUT THE REACTION AND WHAT MIGHT HAPPEN NEXT? HANS: IT IS EARLY.
WE FEEL GOOD ABOUT THIS DEAL. FROM CLOSING IT, WE BELIEVE IT WILL TAKE 18 MONTHS, ALL THE REGULATORY BODIES WILL DO A THOROUGH JOB. CUSTOMERS WILL GET MORE CHOICE. WE BRING MOBILITY BROADBAND TO CUSTOMERS. WE ALSO HAVE OFFERS ON STREAMING SERVICES, OTHER SERVICES, ETC.
WE WANT TO BRING NEW OPPORTUNITIES FOR THE CUSTOMER BASE. I'M POSITIVE ON THE ACQUISITION. CAROLINE: THE SHORT-TERM IS THE CONVERGENCE TRADE. WIRELESS, WIRELINE CONTENT. THEN AI AND THE INTERNET OF THINGS -- WHERE DOES THAT COME IN? HANS: WE EXPECT THIS TO TAKE 18 MONTHS. WE HAVE A AI PREPARED NETWORK. WE'VE DONE A LOT OF COMPUTER AND STORAGE.
WE FIBERIZED ALL OUR TRANSPORTS. THE FRONT TIER ASSET IS COMING IN AS AN EXTENSION TO THAT TO MEET MORE CUSTOMERS TO HAVE A PROCESSING STORAGE. THIS IS ANOTHER ADVANTAGE WITH MORE ASSETS ON THE GROUND AND SERVING CONSUMERS WITH HOME BROADBAND, IS A STRENGTH IN THE OVERALL ACQUISITION. ED: A QUESTION FROM AN AUDIENCE MEMBER WHO NOTES THE 2015 SALE OF WIRELINE ASSETS. WHAT HAS CHANGED AROUND THE ECONOMICS? YOU SAID THE ECONOMICS WORK. GIVE ME SPECIFICS ON WHAT IS DIFFERENT FOR FIBER IN 2024? HANS: AT CLOSING, WE BELIEVE IT WILL BE A BEAT ON DAY ONE.
THAT WILL TAKE 12 MONTHS. THE REASON IS THERE ARE INTEGRATION COSTS AT THE BEGINNING. VERY ECONOMICAL FOR US. THE ASSETS WE SOLD PREVIOUSLY WAS IN A DIFFERENT STANDARD. THE FRONTIER TEAM HAS PUT IN BILLIONS OF DOLLARS TO FIBERIZE THE NETWORK. MANY OF THE METRICS ARE FAIRLY SIMILAR TO FIOS, THE BEST FIBER NETWORK IN THE STATE.
THERE'S A LOT OF SIMILARITIES ON THAT. CAROLINE: SOME ANALYSTS WERE SURPRISED BY THE TIMING, A BOLD STEP SOME CALL IT, BECAUSE OF YOUR LEVERAGE AND COMMITMENT TO REDUCING YOUR DEBT. ARE YOU WORRIED ABOUT LEVERAGE? HANS: WE HAVE A STRONG BALANCE SHEET. CLOSING THIS WILL MAYBE BE 0.2 ON LEVERAGE, WHICH IS LOW. WE ARE COMMITTED TO CAPITAL ALLOCATION.
NUMBER ONE INVEST IN THE BUSINESS. TWO, COMMIT TO A DIVIDEND. YESTERDAY WE CAME OUT WITH HER DIVIDEND, FOR THE 18TH CONSECUTIVE YEAR WE INCREASED OUR DIVIDEND. THEN TO PAY DOWN OUR DEBT. SINCE WE BOUGHT THE C BAND, WE WILL CONTINUE TO PAY DOWN THE DEBT. WE WILL BE IN A GOOD POSITION
WHEN THE DEAL COMES TO FRUITION. ED: WHAT OPPORTUNITY IS THERE IN DATACENTER INTERCONNECT? HANS: THE DIFFERENCE IS WE HAVE SO MANY ASSETS ON THE GROUND WHEN IT COMES TO FIBER AND CENTRAL OFFICES. MANY ARE COMPUTE, STORAGE, POWER.
MANY AI SOLUTIONS NEED TO BE CLOSER TO THE USERS, THE CORPORATIONS, ETC. BECAUSE THE TRANSPORT COST AND MANY OTHER THINGS, IT WILL BE AT THE EDGE OF THE NETWORK. THAT IS HOW WE BUILT THE NETWORK IN 2018 WE STARTED THE JOURNEY. NOW WE ARE JUST ADDING FRONTIER TO IT. I SEE A GREAT OPPORTUNITY FOR
US ON THE B2B SIDE. CAROLINE: YOU ARE ANNOUNCING ONE DEAL. WE ALWAYS LOVE TO PUSH FORWARD. ARE YOU GOING TO BE ACQUISITIVE? HANS: WE ARE HAPPY WITH ASSETS WE HAVE. I DON'T THINK WE NEED MUCH MORE. WE ARE GOING TO BE BIG.
CLEARLY THE ONES WITH THE LARGEST BROADBAND OFFERING. WE HAVE THE LARGEST DISTRIBUTION. WE WILL BE IN A GOOD POSITION TO EXECUTE FOR CUSTOMERS AND SHAREHOLDERS. I'M HAPPY WITH ASSETS TODAY.
WHEN IT COMES TO CONVERGENCE, WE WILL HAVE THE SCALE OF ECONOMY FOR BOTH, THE OWNERSHIP FOR THE WIRELESS NETWORK AND THE FIBER NETWORKS. IF CUSTOMER WANTS TO MAKE THE CONVERGENCE, WE HAVE THE ECONOMICS FOR DOING IT. I DON'T THINK YOU DISCOUNT ONE PRODUCT FOR CUSTOMER TAKING BOTH. IT IS W TWO GREAT PRODUCTS. EVERYONE NEEDS BROADBAND.
A CORPORATION OR A PRIVATE PERSON, YOU NEED THESE SERVICES. THEY ARE MORE IMPORTANT TODAY THAN THEY WERE FIVE YEARS AGO. THIS IS FORTIFYING IT. WE WILL SEE CONVERGENCE BUT IT IS NOT LIKE WE ARE GOING TO DISCOUNT. IF CUSTOMERS WANT TO JOIN, WE HAVE IMPROVEMENTS.
WE ARE GOING TO SEE HOW THIS PLAYS OUT IN THE MARKET. WE ARE GOING TO BE BEST POSITIONED ON CONVERGENCE. ED: THANK YOU VERY MUCH. NVIDIA SAID IT HAS NOT RECEIVED A SUBPOENA FROM THE U.S. DOJ. THE COMPANY SAID IT INQUIRED BUT IS HAPPY TO ANSWER REGULATOR QUESTIONS. BLOOMBERG REPORT CITING A SOURCE NVIDIA RECEIVED A REQUEST FOR INFO, A CIVIL INVESTIGATIVE DEMAND. IT IS ALSO COMMONLY REFERRED TO
AS A SUBPOENA BUT IS OFTEN ISSUED BEFORE ANY LEGAL PROCEEDINGS ABROAD. THE REQUEST FOR INFORMATION ISSUED FOCUSES ON ITS ACQUISITION OF RUN AI AND ASPECTS OF THE CHIP BUSINESS. BLOOMBERG FIRST REPORTED THIS IN JUNE. CAROLINE: WE WILL BE JOINED BY THE CEO OF C3AI.
CAROLINE: C3AI REPORTING SUBSCRIPTION REVENUE FOR THE THIRD QUARTER SEEMS BELOW EXPECTATIONS. LET'S DIG IN. THE CEO IS WITH US. IT'S A PAINFUL SELLOFF. WHAT IS IT THAT WAS NOT ENOUGH IN THE NUMBERS TODAY? TOM: IT WAS A GREAT QUARTER.
YEAR-OVER-YEAR GROWTH 21%, THAT MAKES US ONE OF THE 10 FASTEST-GROWING COMPANIES IN THE PUBLIC SOFTWARE UNIVERSE. PILOT VOLUME UP 115%. IT WAS A SOLID QUARTER. SOMETIMES MARKETS REACT IN FUNNY WAYS. NVIDIA GROWING WELL OVER 100%. WHAT'S NOT TO LIKE? THE MARKET REACTS BY TAKING 270 BILLION DOLLARS OFF THEIR STOCK PRICE THE NEXT DAY. IT WILL ALL SORT ITSELF OUT IN THE LONG RUN. ED: I'M TRYING TO UNDERSTAND THE
BUSINESS MODEL. THE SUBSCRIPTION PART AND THEN SERVICES. WHAT'S THE STORY BEHIND SOFTWARE? TOM: IT'S A LITTLE CONFUSING. 70% OF THE SERVICE IS REVENUE. SOFTWARE DELIVERED TO THE CUSTOMERS PART OF OUR CORE PRODUCT THAT THEY PAY FOR OVER A LONG TIME. IT'S CORE PRODUCT FUNCTIONALITY.
ORDER OF $10 MILLION. DUE TO NEW ACCOUNTING REGULATIONS, WE HAVE TO TREAT THESE AS PROFESSIONAL SERVICES. IT LOOKS LIKE SOFTWARE, IT SMELLS LIKE SOFTWARE. IT'S COMPILED. IT'S SOFTWARE. UNDER THE CURRENT REGULATIONS, WHICH WE COMPLY WITH, IT GETS RECORDED AS PROFESSIONAL SERVICES. CAROLINE: STRIPPING AWAY ACCOUNTING, PEOPLE ARE TRYING TO PEEL BACK PROFITABILITY AND HOW LONG THEY HAVE TO WAIT.
YOU HAVE TO INVEST TO SCALE. ARE YOU TELLING INVESTORS TO BE PATIENT? TOM: OUR PROFIT MARGINS ON THE PROFESSIONAL SERVICES, 93% GROSS MARGIN. IT'S GOOD WORK IF YOU CAN GET IT. OUR REVENUE GROWTH RATES ARE
SUBSTANTIALLY GREATER THAN OUR EXPENSE GROWTH RATES EXPONENTIALLY. THEY WILL CONTINUE TO BE GREATER. OUR GROSS PROFIT MARGINS ARE GREATER THAN OUR COST OF SALES. NON-GAP PROFITABILITY IS A MATTER OF SCALE. THIS HAPPENS WITH TIME. ED: I'VE BEEN READING THROUGH YOUR REGULATORY FILINGS.
THE DISCLOSURES AND THE LAWSUIT AGAINST NL SEEMS TO CENTER AROUND A TRADE SECRET ISSUE. CAN YOU HELP US UNDERSTAND? TOM: THIS IS AN UNFORTUNATE SITUATION. NL WAS A VALUED CUSTOMER THAT ACCESSED A LOT OF OUR TECH. APPEARS THEY MAY HAVE COPIED THOUSANDS OF LINES OF OUR SOURCE CODE INTO A COPY OF, BASICALLY COPIED OUR PRODUCT. IT APPEARS TO BE A SIGNIFICANT IP THEFT. WE ARE PURSUING THAT IN CIVIL COURT IN ITALY. IT IS SAD.
THIS IS THE FIRST TIME I HAVE SEEN THIS IN MY PROFESSIONAL CAREER, THAT A COMPANY WOULD DO SUCH A THING. WE HAVE TO PROTECT OUR IP RIGHTS TO BENEFIT OUR SHAREHOLDERS AND WE ARE DOING THAT. CAROLINE: WE WILL SEE COMMENT FROM NL. GOING BACK TO THE WINNING OF CLIENTS -- HOW IS MARKET SHARE? HOW ARE YOU ABLE TO COMPETE WITH THE BIGS? TOM: THE COMPANY'S PERCEIVED AS COMPETING WOULD BE MICROSOFT, AWS AND GOOGLE. 71% OF OUR TRANSACTIONS LAST QUARTER WE CLOSED WITH ONE OF GOOGLE CLOUD, AWS OR AZURE. THESE ARE GREAT MARKETING PARTNERS. THEY ARE PERCEIVED BY SOME AS
COMPETITORS BUT THEY LOOKED TO ME LIKE PARTNERS, AND THEY LOOK TO OUR CUSTOMERS LIKE PARTNERS. WE APPRECIATE THE PARTNERSHIP. CAROLINE: WE APPRECIATE YOU COMING ON AFTER EARNINGS. SHARES OFF ON THE DAY. APPRECIATE THE TIME AND EXPERTISE.
COMING UP, ANTONIO JOINS US. THAT IS COMING UP NEXT. ED: THESE ARE LIVE PICTURES FROM THE POWER PLAYERS CONFERENCE, NEW YORK CITY. HAPPENING RIGHT NOW A PANEL FOCUSING ON THE FUTURE OF WOMEN'S SOCCER WITH JESSICA BERMAN. YOU CAN TUNE IN.
CAROLINE: HP COMING OUT WITH EARNINGS. SUGGESTING LOWER MARGINS, CERTAINLY ANTICIPATED. SEEM TO BE HOLDING NOW. ANTONIO, LET'S DWELL ON THE MARGINS. SOME CALL IT LOW CALORIE NATURE OF AI SYSTEMS REVENUE. ANTONIO: GOOD MORNING.
WE HAD A STRONG QUARTER. DOUBLE-DIGIT YEAR-OVER-YEAR REVENUE GROWTH. ALL ON THE BACK OF CONVERTING AI. WE CONTINUE TO ADD TO THAT BOOK. IT IS ALSO FAIR TO SAY WE IMPROVED OPERATING MARGINS QUARTER OVER QUARTER BY 50 BASIS POINTS. THE REASON WHY THE GROSS MARGIN IS YEAR-OVER-YEAR DOWN IS BECAUSE WE HAVE LESS CONTRIBUTION FROM THE NETWORKING BUSINESS WHICH IS GOING THROUGH A MARKET TRANSITION TOWARD THE CYCLICALITY WE NORMALLY SEE.
THE MAIN DRIVER WAS NOT AI. OUR AI AND SERVER BUSINESS GREW OPERATING MARGINS YEAR-OVER-YEAR BY 70 BASIS POINTS. ED: THAT IS AN INDUSTRYWIDE ISSUE. THE DIFFERENCE WITH YOU IS THE CUSTOMER BASE IS MUCH MORE ENTERPRISE CENTRIC. YOU TALKED ABOUT IMPROVEMENT IN MARGINS RELATING TO THAT. CAN YOU TALK MORE HOW THE
ENTERPRISE CUSTOMER WILL PUSH YOU FORWARD? ANTONIO: WE INTRODUCED AN HPE PRIVATE CLOUD OFFERING, I CALL IT AI IN THE BOX, WHICH IS A TOKEN SOLUTION FOR ENTERPRISES OF ALL SIZES TO TRAIN AND DEPLOY INFERENCE FOR SPECIFIC APPLICATIONS. THAT OFFER IS TARGETED FOR ENTERPRISES INCLUDING SPECIFIC SOLUTIONS ON TOP. WE MADE THAT OFFER AVAILABLE TO DOES AGO. IT'S NOW AVAILABLE FOR GLOBAL AVAILABILITY, WE ARE EXCITED ABOUT THAT.
IN THE OTHER BOOK, WE HAD $1.6 BILLION OF NEW ORDERS. CAROLINE: LET'S TALK ABOUT MACRO CHALLENGES TO THOSE ENTERPRISES YOU SELL TO. ARE WE SEEING A PULLBACK IN CONFIDENCE IN SPENDING? ANTONIO: I HAVE NOT SEEN IT. WE SAW ORDERS GROWTH IN ALL BUSINESSES ON A SEQUENTIAL BASIS WHICH TELLS ME WE ARE ON RECOVERY. OUR TRADITIONAL SERVER BUSINESS HAD DOUBLE-DIGIT YEAR-OVER-YEAR AND SEQUENTIAL GROWTH IN ORDERS WHICH TELLS ME, IT IS NOT THE AI SERVERS INTO TRADITIONAL. IT MAKES SENSE. WHEN YOU THINK ABOUT LEGACY WORKLOADS, IT MAKES NO SENSE TO PUT IT ON A MORE EXPENSIVE STRUCTURE WHICH SHOULD BE FOCUSED ON TRAINING MODELS WITH DATA SO THEY CAN GET VALUE THROUGH THE BUSINESS PROCESS. ON THE WORKING SIDE, WHICH HAS
BEEN A MORE NEGATIVE STORY, IN LINE WITH PEERS, WE SAW SEQUENTIAL ORDER GROWTH ACROSS ALL GEOGRAPHIES, WORK BEING DRIVEN BY THE WIRELESS, THE SAAS E DEPLOYMENT AND DATA CENTERS WORKING. ED: YOU TALKED YOUR FIDUCIARY DUTY IN PURSUING DAMAGES IN THE INCIDENT AROUND MR. LYNCH. THIS IS THE FIRST TIME OUR AUDIENCE IS HEARING FROM YOU. EXPLAIN THAT DUTY AND WHAT YOUR END GOAL IS IN THAT LITIGATION? ANTONIO: DR. LYNCH'S DEATH IS A TRAGEDY
AS WELL AS OTHERS ON THE SHIP. IT WAS A SAD MOMENT. IT DOES NOT CHANGE WHAT HAPPENED. U.K. JUDGE RULED THE COMPANY IS A VICTIM OF FRAUD. AS A FIDUCIARY DUTY, WE NEED TO SEE THE FINALIZATION OF THE PROCEEDINGS AND RECORD THE DAMAGES.
WE HAVE TO SEE IT THROUGH. THAT'S WHERE WE ARE. WE HOPE TO HEAR SOON THE NEXT STEPS. CAROLINE: WE APPRECIATE YOU TACKLING A SENSITIVE SUBJECT AND YOUR EARNINGS.
COMING UP, TECH STOCKS ARE REBOUNDING. CONVERSATION ON THE MARKETS NEXT. ♪ CAROLINE: WELCOME BACK. WHIPSAW ONCE AGAIN. YESTERDAY WE SAW A RECOVERY ON THE CHIP SECTOR BUT TODAY IN THE RED.
IT WILL BE VOLATILE LOOKING AHEAD TO TOMORROW REPORTING LABOR DATA. THE CHIP STOCKS DOWN A PERCENTAGE POINT. CRYPTO IS A RISK-AVERSE DAY. MOVING ON, AMID A VOLATILE TIME ON THE MARKETS, COMPANIES STILL HAVE THE ABILITY TO SPLASH CASH. WE JUST SPOKE TO VERIZON.
NVIDIA MANAGING TO BE ABOVE WATER. THIS IS WHAT HAS DRIVEN SOME OF THE SELLOFF. THE MAGNIFICENT SEVEN NOT DOING ENOUGH TO STABILIZE THE BENCHMARKS. TESLA UP, ALL EYES ON THE ROBOTAXI.
WE HAVE TO STICK WITH OVERALL OUTLOOK FOR CHIPS. ED: TSMC'S SUPPLIERS SAY AI DEMAND IS HERE TO SAY, DISMISSING CONCERNS OVER FATIGUE. >> FROM MY PERSONAL PERSPECTIVE, THIS BOOMING OF THE AI INDUSTRY JUST BEGIN. THERE'S A LOT OF APPLICATION. ED: FOR MORE ON THE MARKETS, KRISTINA HOOPER, WE ARE LEARNING ONE SINGLE SESSION A MARKET DOES NOT MAKE, BUT WHERE DO YOU GO? WE HAVE IMPORTANT DATA AND WE ARE THINKING ABOUT THE FED. WHAT DO YOU FIRST THINK OF WHEN YOU WAKE UP? KRISTINA: IT'S IMPORTANT FOR INVESTORS TO RECOGNIZE THEY HAVE A LONG TIME HORIZON. IT'S IMPORTANT NOT TO BE TOO
REACTIVE. VALUATIONS ARE HIGH. WHEN STOCKS ARE PRICED NEAR PERFECTION, WE ARE LIKELY TO SEE JITTERS. ONE OF THE OVERARCHING CONCERNS NOW IS FEAR IT CANNOT CONTINUE. THAT WE WON'T SEE COMPANIES
CONTINUE TO SPEND/INVEST ON AI. THAT'S PROBABLY MORE FEAR THAN REALITY. INVESTMENT IN PRODUCTIVITY, ENHANCING AREAS HAS IMPROVED PRODUCTIVITY GROWTH. COMPANIES RECOGNIZE.
I BELIEVE THE RISK OF NOT INVESTING IS GREATER THAN THE RISK OF INVESTING. THAT MIGHT NOT CALM INVESTORS TODAY. DIVERSIFICATION HELPS. WE ARE LIKELY TO SEE VOLATILITY BUT THAT DOES NOT MEAN WE WON'T SEE GAINS OVER THE YEAR, TWO YEARS AND LONGER. CAROLINE: NVIDIA BACK IN THE RED AGAIN. THERE HAS BEEN ANXIETY WE HAVE PUT TOO MUCH INTO TOO FEW COMPANIES. WHEN YOU SAY DIVERSIFY, WHAT
INTO? KRISTINA: OTHER TYPES OF COMPANIES. IF ALL GOES WELL, THE THESIS FOR A SOFT LANDING HOLDS AND WE SEE THE FED START TO CUT, THAT COULD CREATE A SUPPORTIVE ENVIRONMENT FOR RISK ASSETS. THAT DOES NOT MEAN TECH WILL OUTPERFORM. IT WILL KEEP UP OR FOLLOW
CLOSELY BEHIND. CYCLICALS, SMALLER CAPS ARE MORE SENSITIVE TO THE ECONOMY. THIS COULD BE A POSITIVE ENVIRONMENT. I THINK ONE INVESTORS WILL APPRECIATE EVEN IF WE SEE SPASMS OF FEAR AND LACK OF CONFIDENCE. ED: YOU TALKED ABOUT DURATIONS.
IN THE CONTEXT OF NVIDIA, INVESTORS AFTER EARNINGS WERE LONG-TERM INVESTORS WHO SAY WE ACCEPT SHORT-TERM VOLATILITY BUT WE ARE HOLDING BECAUSE WE UNDERSTAND THE DATA CENTER BUILDOUT. IS IT IMPORTANT TO BE DIVERSIFIED EVEN IF YOU TAKE THAT MINDSET? KRISTINA: IT IS CRITICAL TO RECOGNIZE THERE ARE COMPANIES THAT WILL BENEFIT FROM AI. IF YOU ARE FEELING CONFIDENT ABOUT THE STORY, THAT WILL HELP COMPANIES IN A VARIETY OF SECTORS/INDUSTRIES. WE HAVE HEARD ON EARNINGS CALLS IN THE LAST QUARTER COMPANIES HAVE BEEN USING AI ALREADY, SEEING SIGNIFICANT RESULTS IN TERMS OF SALES. PERHAPS TAKING THAT AI THEME AND LOOKING TO OTHER SECTORS/ INDUSTRIES ESPECIALLY SERVICE AREAS TO FIND OPPORTUNITIES. THERE CAN BE A DIVERSIFICATION BY DOING THAT. ED:
HOW IMPORTANT IS TOMORROW'S JOB REPORT? KRISTINA: SORRY? ED: HOW IMPORTANT IS FRIDAY'S JOBS REPORT? KRISTINA: WE ARE LIKELY TO SEE JOB GAINS AROUND 150 IN LINE WITH EXPECTATIONS. THAT'S APPROPRIATE GIVEN WHERE WE ARE IN THE CYCLE. THE FED WILL BE SATISFIED. IT SAID IT DOES NOT WANT TO SEE DETERIORATION IN JOBS FROM HERE. I DON'T THINK WE SEE THAT. THAT'S A PRE-PANDEMIC TREND LEVEL, TO GET ABOUT 170. I DON'T THINK THERE'S ANYTHING THAT WILL COME OUT OF FRIDAY THAT CHANGES THE FED'S DECISION IN SEPTEMBER. I THINK WE GET A 25 CUT.
IF WE GET A WEEK JOBS REPORT, I DON'T THINK THAT WILL CHANGE THAT. I DON'T THINK WE GET 50. THE FED REALLY BELIEVES IT'S DOING THE RIGHT THING, IT'S ON COURSE. A 50 CUT WOULD BE AN ADMISSION OF GUILT, EVEN WHEN IT WAS BEHIND THE CURVE IN MARCH, 2022, THEY ONLY HIKED 25. THAT SHOULD BE POSITIVE FOR
MARKETS. IF WE GOT 50, WE MIGHT SEE MORE VOLATILITY AND SOME KIND OF SELLOFF, SUGGESTING THERE IS WEAKNESS IN THE ECONOMY. CAROLINE: DEJA VU, NOW VERSUS BEGINNING OF AUGUST. ARE WE GOING TO GET BOUTS OF VOLATILITY AS AGGRESSIVE AS WE SEE? KRISTINA: I SUSPECT.
THERE'S A LOT HAPPENING. THE FED MEETING. PRESIDENTIAL ELECTION. CENTRAL BANKS CUTTING AT THE SAME TIME. THAT CREATES ENVIRONMENT WHERE THERE IS CONCERN/UNCERTAINTY. WE HAVE A DUELING CONCERN AMONG
INVESTORS LOOKING TO THE CUTS AND THE OPPORTUNITIES PRESENTED BUT THEY ARE STILL WORRIED. THERE IS A CONCERN WE COULD STILL GO INTO RECESSION. THAT COMES TOGETHER IN TERMS OF OUTSIZED REACTIONS TO ECONOMIC DATA RELEASES. CAROLINE: SO GREAT TO GET THE MACRO. COMING UP, OPENAI CROSSES ONE MILLION CUSTOMER MILESTONE.
MORE DETAILS NEXT. ♪ FIND THE BLOOMBERG TECHNOLOGY PODCAST ON APPLE, SPOTIFY AND I HEART. THIS IS BLOOMBERG. ED: POWER PLAYERS IS UNDERWAY IN NEW YORK AS JASON KELLY SITS DOWN TODAY WITH PROMINENT PEOPLE IN THE SPORTS INDUSTRY DISCUSSING THE GLOBAL SPORTS BOOM. >> PROBABLY SHOULD. MANY BUSINESSES AND INDUSTRIES, LEAGUES AND TEAMS HAVE GONE THROUGH THIS EVOLUTION.
IT TAKES A LONG TIME FOR LEAGUES AND FRANCHISES TO MAKE MONEY TO SHOW THE EVALUATION THE MARKET IS SEEING. THIS IS AN ASSET CLASS, $3 TRILLION ASSET CLASS, HAVE PEOPLE TAKE A STEP BACK. WHAT ARE YOU EVEN SAYING? THE NFL. 32 FRANCHISES. AVERAGE FRANCHISE, $6 BILLION. $180 BILLION VALUE IN
FRANCHISES. EACH OF THOSE HAS ALL SORTS OF ANCILLARY BUSINESSES. STADIUMS, REAL ESTATE DEVELOPMENT, TECHNOLOGY RELATED BUSINESSES, RETAIL, FOOD AND BEVERAGE.
WHEN PEOPLE SAY WHAT IS THE SIZE OF THIS INDUSTRY? I WOULD ARGUE MOST FOLKS LOOKING ARE WOEFULLY UNDERESTIMATING THE VALUE GLOBALLY. THIS IS A MEANINGFUL ASSET CLASS THAT IS NOT JUST FOR RICH PEOPLE. IT IS FOR INVESTORS. INVESTORS THAT HOPEFULLY DO WORK AND UNDERSTAND THE DIFFERENCE. SOME LEAGUES ARE NASCENT. SOME ARE COMFORTABLY SEEING FRANCHISES MAKE CASH FLOW. THERE IS AN ANALYSIS REQUIRED. THE SIZE, SCOPE AND EXCITEMENT OF THE INDUSTRY IS GREATER THAN MOST ANTICIPATE. JASON:
THERE IS SO MUCH TO UNPACK. I WANT TO PUT A POLL UP. WE WANT TO ASK THE AUDIENCE WHAT THEY THINK ABOUT U.S. SPORTS TEAMS VALUATIONS. GOLDILOCKS QUESTION. I MIGHT WAIT TO SEE WHAT THE AUDIENCE SAYS BEFORE I ASK YOU. IT IS NOT QUITE A HOCKEY STICK BUT IT IS CLOSE WHEN YOU LOOK AT NBA VALUATIONS, YOUR FRIENDS IN L.A.
JUST BOUGHT THAT TEAM, ANGEL CITY FOR $250 MILLION VALUATION. THAT IS REAL MONEY FOR WOMEN'S SOCCER. HERE'S WHAT THE AUDIENCE AS. IT SEEMS LIKE THE AUDIENCE AGREES WITH YOU.
HOW DOES THIS PLAY OUT IN THE NEAR AND MIDTERM AND HOW DO YOU THINK ABOUT IT? >> IT IS HARD TO ANSWER A QUESTION LIKE THAT. EACH LEAGUE AND FRANCHISE HAVE IN NORMA'S DIFFERENCES. -- ENORMOUS DIFFERENCES. TEAMS THAT HAVE THE ABILITY TO HAVE A GLOBAL FOLLOWING, THOSE SPORTS THAT EXPECT TO INCORPORATE BETTING, THEREFORE INCREASING THE OBSESSION OF YOUNG PEOPLE INTO THEIR SPORT HAVE ADVANTAGES. THOSE THAT HAVE HUGE AMOUNTS OF CASH A AND STARS THAT CAN ATTRACT GLOBAL MEDIA RIGHTS, THESE DISTINGUISH THE LONG-TERM WINNERS. THERE MAY NOT BE AS MANY LOSERS AS PEOPLE ARGUE. THERE WILL BE SOME.
THERE WILL BE SOME THAT ARE NOT EXTRAORDINARY. I GO BY SPORT. I BELIEVE THAT THE END OF THE DAY GLOBAL MEDIA RIGHTS IS SOMETHING YOU HAVE TO ASPIRE TO. I'M BEING PARTIAL TO THE NBA. THERE ARE ADDITIONAL ANCILLARY VALUES THAT COME FROM A GLOBAL FOLLOWING. SPORTS ARE NOT A SINGLE ENTITY. WE WOULD ARGUE UNDERSTANDING THE BENEFITS AND DETRIMENTS OF NOT JUST THE SPORT BUT THE MARKET AND THE LEAGUE THEY OPERATE IN -- I DON'T WANT TO DISPARAGE A CERTAIN CITY VERSUS ANOTHER. IF YOU ARE THE 30TH LARGEST METRO IN AMERICA VERSUS THE FIRST, SECOND OR EVEN THE TOP 10, DRAMATIC DIFFERENCE. THAT IS RELEVANT.
JASON: LET'S TALK ABOUT THAT. CAROLINE: TONY RESSLER, CHAIRMAN OF ARES. TUNE INTO THE REST OF POWER PLAYERS LATER TODAY IN NEW YORK WITH STEPH CURRY AND SO MANY MORE. ED: OPENAI HIT A NEW MILESTONE REACHING ONE MILLION PAID USERS FOR THE CORPORATE VERSION OF CHATGPT UP FROM 600,000 IN APRIL. RACHEL, ONE MILLION ENTERPRISE. THAT'S WHERE THE MONEY IS AT?
>> ABSOLUTELY. THIS GROWTH IN A SHORT TIME INDICATES DESPITE COMPETITORS AND BUSINESSES HAVING TO THINK MORE ABOUT RETURN ON INVESTMENT IN AI, THEY ARE STILL BRINGING USERS. IT'S A LOT OF GROWTH, 67% OVER THAT TIME. THEY STARTED SELLING THE ENTERPRISE VERSION ONE YEAR AGO. CAROLINE: IT'S LOOKING TO RAISE FUNDS AT A HEADY VALUATION. OTHER COMPETITORS ARE ROLLING OUT ENTERPRISE.
HOW FIERCE IS IT? RACHEL: PRETTY FIERCE. COMPANIES ARE INTERESTED IN SPENDING. THERE'S MORE PRESSURE TO SHOW WHAT YOU ARE GETTING. COMPANIES -- OPENAI HAS DONE CUSTOMER SERVICE THAT SHOW CUSTOMERS ARE LIKING THIS STUFF AND GETTING PRODUCTIVITY GAINS.
FOR A LOT OF BUSINESSES, IT IS HARD TO TELL WHAT CAN YOU USE IT FOR? WE KNOW THESE THINGS MAY MAKE THINGS UP. IF YOU HAVE TO CHECK RESULTS, IS IT THAT HELPFUL? PAPER MEANS TO BE SEEN FOR A LOT OF BUSINESSES. CAROLINE: WE THANK YOU. ALL THINGS CHATBOTS. WE PREVIEW BROADCOM, SET TO RELEASE EARNINGS AFTER THE BELL TODAY. THEY ARE POISED FOR ANOTHER STRONG QUARTER. YOU AUTHORED THIS NOTE. THE TAILWINDS CAN OUTSTRIP
LAGGING SOFT AREAS IN THE MARKET? >> THE AI IN SEMIS IS LIKELY TO OFFSET THE CYCLICAL HEADWINDS IN THE LEGACY BUSINESS. WE THINK THE ENTERPRISE WIRELESS AND SERVER STORAGE, THE RECOVERIES WOULD BE MORE MARKETED BUT THE KEY NUMBER THIS QUARTER WILL COME FROM SOFTWARE. ED: BROADCOM'S BECOME A BIG CHIP COMPANY. IT'S IMPORTANT IN DATA CENTERS. TWO PRONGS.
NETWORKING STUFF, EXPLAIN THE CUSTOM STUFF. KUNJAN: NVIDIA HAS CUSTOMER DESIGNING ITS OWN CHIPS. THEY NEED A DESIGN PARTNER WHICH HAS EXPERIENCED TO BUILD TIPS. THAT'S WHERE BROADCOM COMES IN. THE LARGEST SHARE WHEN IT COMES TO DESIGNING IN LIEU OF THE GPU'S.
DO INVESTORS ANNOUNCE A NEW INVESTOR WHICH IS LIKELY TO BE OPENAI? IF THE UPSIDE FROM FULL-YEAR, WHICH WE THINK THEY WILL, THE ANXIETY.RIGHT CAROLINE: STRONG -- CAROLINE: RIGHT NOW THE REVENUE GROWTH IS STRONG. HOW COMMITTED IS THIS AI SPEND? KUNJAN: IF YOU LOOK AT THEIR CONNECTIVITY, BOTH OF THESE MARKETS HAVE JUST STARTED THEIR BEGINNING RAMP.
BOTH HAVE FORECASTED TO GROW SIGNIFICANTLY FOR THE NEXT THREE TO FIVE YEARS. BROADCOM BEING THE DOMINANT IN BOTH AREAS, WE EXPECT THESE SOURCES OF REVENUE FOR BROADCOM TO CONTINUE. AT THIS POINT BROADCOM IS LIKE A CONGLOMERATE. IT HAS A LOT OF LEGACY SEMICONDUCTOR BUSINESSES AND SOFTWARE BUSINESSES. ED:
WE USED TO TALK ABOUT BROADCOM IN THE CONTEXT OF SMARTPHONES, NAMING THE APPLE. I WILL GO TO APPLE PARK ON MONDAY. WHAT ARE THEY DOING? KUNJAN: IT IS RELEVANT, SIZABLE. WE DON'T EXPECT HIGH-GROWTH CATALYSTS. THEIR BUSINESS HAS BEEN STICKY WITH APPLE. THEY INCREASE THEIR MARGINS SLOWLY EVERY YEAR. THERE MIGHT BE SMALL CONTENT
GAINS. NOTHING SEXY. STILL A HIGH CASH FLOW GENERATING BUSINESS. CAROLINE: WE THINK ABOUT HOW CHIPS PERFORM AFTER SMASHING EXPECTATIONS. YOU ARE A FUNDAMENTALS GUIDE. HOW ARE WE POSITIONED? KUNJAN: BROADCOM IS NOT KNOWN FOR MASSIVE RAISES.
IF THEY ADDRESS A COUPLE POINTS, A NEW CUSTOMER ANNOUNCEMENT, UPSIDE TO AI REVENUES AND VM UPDATES, THAT WOULD BE A SIGNIFICANT POSITIVE. CAROLINE: SO GREAT TO HAVE YOU. THANK YOU. THAT DOES IT FOR THIS EDITION. ED: TOMORROW, INTERESTING INTERVIEW. THE WAYMO CEO, EXCLUSIVE. A LOT OF NEWS AROUND WAYMO OF LATE. IT WAS A SHORT WEEK WITH A LOT IN IT. YOU KNOW EXACTLY WHERE TO FIND
2024-09-07 07:19
