TRANSCRIPTIE 🔗
00:00:02
Speaker 1: Bloomberg Audio Studios, podcasts, radio news. You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at ten am Eastern on Apple, Cocklay and Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts, or watch us live on YouTube.
00:00:23
Speaker 2: All right, there's this company actor core Weave.
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Speaker 3: I don't really know what they do with their infrastructure software company.
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Speaker 2: I hear it a bunch.
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Speaker 3: They offer cloud infrastructure platform that manages the complexity of engineering, assembling, running, and monitoring state of the art infrastructure. So it's a big tech company and it's called infrastructure software. The company name is core Weave. The stocks up big time. They reported some big time numbers last night. People look at this company because it's one of the ways to get a sense of where this AI spending is going.
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Speaker 2: And I guess.
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Speaker 3: The direction is up here. An rog Rana, he knows what's going on here. He's a senior techanels for Bloomberg Intelligence.
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Speaker 2: An Rock do it better.
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Speaker 3: Job of explaining to our listeners and viewers what Core We've done and why it's important in the text thatack and and kind of what we learned on the earnings.
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Speaker 4: Yeah, it's a think about it as somebody who's just renting out in Nvidia GPUs too end customers. So if Nvidia makes the products, these guys are installing it in big data centers and letting people rent it out. Now, this is part of a massive boom of a kind of companies called neo clouds. So when you look at the core cloud infrastructure, you know, you have your Amazon's, your Microsofts, and your Googles. They do all sorts of things, and then these guys specialize only in renting out you know, I would say in most cases Nvidia GPU chips.
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Speaker 5: Is this a really exciting growing space or how does this compare to other parts of AI?
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Speaker 4: This is arguably the most exciting place to grow for all cloud infrastructure because this is really what people are using to train their models. After the training, they would need to install their applications and so forth. So, you know, Corvid doing well is not a surprise to us, because as we talked about just a few weeks ago, we saw really good numbers from Google AWS and Microsoft. This is just a continuation of that trade with Coveve and ABS. Both of them actually they are both very close to each other in terms of what they do, and one would expect when Oracle reports next month it would be very similar with them as well as to their cloud infrastructure doing well as also.
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Speaker 3: All right, so, Honra, we got this stock up twenty percent today, a fifty percent year today.
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Speaker 2: So what did we learn with their earnings and what do we hear from.
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Speaker 3: Management on the call that's got investors all fired up today?
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Speaker 4: I think the biggest thing for to hear from the call is that there is no shortage of demand right now. It's all about AI compute constraints. What is the bottleneck all about that? It's just a matter of how soon can they get more data centers up and running. But from a demand side, there is no issue, which is actually what we have heard from all the others as well. So the big question is you know who does it help? This is part of what I call is the Invidia ecosystem. This is really directly involved with all the GPUs and what Invidia does. And now that in media is talking about taking care of some of the financing issues out there, I think the Invidia ecosystem becomes even stronger with this particular print.
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Speaker 5: You mentioned data centers and some of the tension around there and some of the choke points is that at all a concern with companies like Corewave.
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Speaker 4: So this is why this is kind of a very seasonal stock in that sense. You know, one quarter you see it go up quite a bit, and neck quarter it goes down a little bit. And then the volatility is truly driven by this massive expansion of data center. So if you hear out there that there is a delay in data center build up, the stock's going to get impacted. If you go out and see that in media is you know, having some issue raising or not not themselves raising, but their ecosystem is having issue raising some kind of capital, They're going to have an impact. And the third factor could be if companies or big cloud cloud companies have started to use chips that are different than Invidia, that also impacts them. So it's a very volatile stock, but so is the entire space of what we call new clouds or GPU as a service.
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Speaker 3: So I'm talking to your colleague Kujhon, we are Stacey and I in a matter of moments about the semis. Give me one good question I can askkon John sounds smart.
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Speaker 4: Tell them that how dependent is everybody just on Nvidia. What can they do to get off the Invidia chips and use their own chips to drive some of these AI infrastructure demand because that is really the crux of all the economics. So if you look at a big data center, majority of that money goes to Invidia to buy their chips. What can what can a hyperscaler or for that Matteres somebody else do to de risk themselves from Invidia chips.
00:04:52
Speaker 2: Stay with us more from Bloomberg Intelligence coming up after this.
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Speaker 1: You're listening to the Blue Bloomberg Intelligence podcast. Catch us live weekdays at ten am Eastern on Applecarplay and Android Auto with the Bloomberg Business app. Listen on demand wherever you get your podcasts, or watch us live on YouTube.
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Speaker 3: On the earnings front, as Alexi was just reporting super Micro, the storage company, that hardware company.
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Speaker 2: They reported some really strong results last night.
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Speaker 3: In stock is
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up fourteen percent on the news today up twenty three percent year to day. Let's check in with Ujino. He is senior Technology channels for Bloomberg Intelligence, which talked to us about super Micro computer.
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Speaker 2: Here. What did you learn with the results?
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Speaker 6: Yeah, hey, hey Paul, So look the vogue for me at least was sixty billion dollars in the guidance for physical twenty twenty seven. They blew that away. They got it to sixty five to seventy two billion dollars. And just me is that the AI infrastructure buildout is really going well and super Micro is a big beneficiary of it.
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Speaker 5: What about Cisco, I know we're all expecting Cisco earnings I believe come out after the bell today. They are expected to be a huge market mover. I think the stock is up more than sixty percent this year. What are we expecting to see from them?
00:06:07
Speaker 6: Yeah, hey, hey, Stacy, So I don't know how if it's going to be a huge market mover, quite frankly, because it's actually made a seller. Move over your date. There's a couple of things they are going to lay off fiscal twenty seven guidance this tonight, you know, streets, I think at around sixty eight sixty nine billion dollars. The hope is is that they're going to beat that's seventy billion dollar. You know, can come in around seventy billion dollars on the sales side, and a lot of it is going to be AI driven quite frankly, six billion dollars in AI revenues that they guide it to last quarter. I'm not quite sure if they'll raise the guidance there because of some supply constraints. But look, all the AI momentum is behind Cisco right now.
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Speaker 3: So Booje with your networking storage all that kind of those companies you follow, what's the feeling amongst them about how much longer this AI spending keepex can continue, should continue?
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Speaker 6: Yeah, Look, you know we have to put this into two buckets, Paul. One, you got the hyperscale cloud as well as the I guess the neo cloud bucket, and then the second bucket is the enterprise AI spending. Right so on the hyperscale, on the neo cloud side, I only have visibility up until twenty twenty eight. I think that there's gonna be good runway of growth in twenty seven and into the early parts of twenty eight, and you're gonna have larger deals and you know, lower margins quite quite frankly, so you have good sales momentum there and then the earning sale ones will follow over there. The enterprise AI really hasn't started to ramp up, ye quite frankly, Paul. And this is where Cisco and the Dells and the hpees really start coming along, and it is a better margin business. And you could start seeing a second cycle starting to begin later this year and in twenty seven.
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Speaker 5: What are the parts of AI? Because I know now it's it's we're looking at different parts of the industry and which parts of the industry are doing well or seem to be doing well and have the brightest future. What do you see right now when you look at the different parts within the AI industry.
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Speaker 6: Yeah, so if you know, from my vantage point, we've got the if we call the picks and shovels.
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Speaker 5: Play that's data centers.
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Speaker 6: Well, it's it's more more GPUs. Let's let's just okay, right, that's that's powering the AI. But more more so than than GPUs, the the optical names have actually been one of the better performing areas if we look at you know, momentum. You know what my colleague Jake Silverman covers that name. Uh they reported last night and they reported some stellar numbers and stellar growth expectations, and that whole optical layer that's trying to be the data across Uh, you know, data centers as well as across the country that that whole segment is going to actually blossom over through the end of the decade. Companies are Corning, Siana, even Nokia are going to be beneficiaries of that.
00:09:11
Speaker 3: So I don't know about you Wich, When I buy a PC stay shaped, I don't know.
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Speaker 2: I went buy a PC at last I don't know. Five years, I don't know most maybe you can't.
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Speaker 5: Do anything on it by the end of the five years.
00:09:22
Speaker 4: I don't know.
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Speaker 3: But I'm thinking, which I mean on these AI Capex, I mean, if I buy a chip, or I buy a GPU or TP or whatever it is, how long does that last? I mean, are these companies can continue to invest at these much higher levels for I guess going forward?
00:09:40
Speaker 6: Yeah, so if we well, look we're talking about, you know, the raising of equity, the raising of capital to help fund fund this, right, and when is the ROI and I believe Neby's reported today, And they expect to get the return on capital or invested a relative to the data center investments that they're making in the span of one point three years, right, which is down from two years. And the longevity or the asset life is supposed to be a five year depreciation cycle, so you know, just like your computer, Paul, five year depreciation cycle for the AI. And if you think about it this way, right, even though you have the next generation in video chips coming online, those older genera you know, the H series of the A series, they're not obsolete. They can actually be you know, sold to other people who just don't need the higher power models out there. And the rental prices and you can look at the the Bloomberg sd B two hundred and the H one hundred index, right, they're actually rising primarily because of the demand for these rentals are just so high.
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Speaker 5: There do seem to be some potential snags or obstacles in the way of AI growth, one of them being Data Center's political pressure. Is there anything that you think could derail this or anything you're watching out for, or is this train just to going too fast?
00:11:10
Speaker 6: Yeah, I wouldn't say the train is going too fast, but I do think that there are some regulatory risks
out there, Stacey. You know, look, nothing is going to go up into the right to perpetuity. Nothing has. If it did, i'd be a very yet. But the fact of the matter, but the fact of the matter is is that you are going to see bumps in the road, whether it's going to be regulatory, whether it's going to be supply chain, and that is going to be you know, intermediate terms risk to numbers.
00:11:39
Speaker 2: So for the companies you cover, what's the China risk slash opportunity? How do we think about that?
00:11:46
Speaker 6: Well, for the companies that I cover, the China opportunities zero, right, because the China sales exposures relatively slim to none and China has their own providers there. From a risk perspective, at the end of the day, it's going to be supply chain, Paul, Right, we still source quite a bit from China, whether it's going to be components and subcomponents, and I'm not talking about chips per se. I'm actually thinking more along the lines of substrates and even the low lowly uh PCBs right, the the the green cards or green boards where the chips are you know, soldered onto right, So that that that is a risk for me going not only to the AI related hardware names, but also to the PC vendors.
00:12:34
Speaker 2: Stay with us or from Bloomberg Intelligence coming up after.
00:12:37
Speaker 1: This, you're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at ten a m. Eastern on Apple, Cocklay and Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts, or watch us live on YouTube.
00:12:55
Speaker 2: All right, one place I haven't eaten? My kids tell me I have to Cava. They reported some numbers. What you learn. Cova does a nice job.
00:13:05
Speaker 7: You know.
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Speaker 8: You should get over there.
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Speaker 9: I get there once in a while. Over there in Wayne, New Jersey, we have a Chick fil A and a shake shack next to Wava. So I'll go to coma competitive and my son will do the Chick fil A or the shake shaft, you know.
00:13:18
Speaker 2: But they do a great job and they've crushed it in the first half of this year.
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Speaker 9: Sam Star sales over nine percent, traffic over five percent here in the first half of the year, mainly being driven by new pomegranate glaze, salmon.
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Speaker 5: And this it does not sound am I wrong? Have you tried this?
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Speaker 9: I have not tried their salmon. I tried their shrimp, which was excellent. It was intest but I have not tried the salmon. But they do a nice job with quality A and B. Not a lot of their competitors sell seafood, right, and so we've actually last year was the year of steak. We've actually seeing a much bigger impact from their salmon sales than steak.
00:14:05
Speaker 5: What is their trick here? Because from what I understand, this is a really tough time in the restaurant industry, especially in kind of the middle class restaurant section. I know, it's gotten really really really competitive, and there's cyclospora, and there are a lot of challenges right now, tariffs, all of it. What is Kava doing? What is its secret other than the salmon.
00:14:26
Speaker 4: Of course?
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Speaker 9: Well, Number one, I'd say healthy Mediterranean cuisine, right, that's people more and more people are eating healthy, especially with glp's.
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Speaker 5: Healthy fast food, right.
00:14:37
Speaker 9: Yeah, And so that's a big part of it. And really the equation in restaurants is the value equations about what you get for what you pay. And people are coming away from the Kava experience happy, right. They had a good, tasty meal, right in a nice environment, you know, good service with a smile, and people come back. We're just seeing a massive divergence between winners and losers and the restaurants. And it's been this way now for a few years. Because of the inflation. People are becoming more discerning. When they have a good experience, they go back if they don't see you.
00:15:11
Speaker 3: Red headline crossing the terminal writers. We speak Mike try and Fund Management assembling co investors for Wendy's bid. This according to the Financial Times. So what's going on with Wendy's.
00:15:24
Speaker 9: Well, try On has been trying to like, you know, pitch their book here. They've been involved in Wendy's for quite some time. There were some rumors earlier this year about them becoming involved, so you know, since they already have a stake in it, we kind of take this with a grain of salt. What I can say about Wendy's is we're a big fan of their new CEO. Bob Wright had worked at Wendy's for a very long time, so you know, he knew the business very very well. When he left Wendy's, he was previously head of International, Chief operating Officer I think was his last position. He became CEO of Pop Belly and he, you know, he orchestrated a very impressive turnaround. Stock went from two dollars in change and was bought out at like sixteen seventeen bucks, right, and so you know, in terms of myself, I'm a lot more optimistic about Wendy's going forward. I would think that the franchise e base is probably very energized because they know him intimately, right, and he's got a great plan to turn things around. So in general, I think, you know, things are looking up at.
00:16:34
Speaker 2: Ten percent on this news today, so maybe people are thinking this might be the real thing. I don't know. Brinker reported some salts. Remind us who Brinker is and the brands they have and.
00:16:45
Speaker 9: What they're Yeah, they own Chili's and Magiano's. Chili's has been.
00:16:50
Speaker 8: On a tear.
00:16:50
Speaker 9: I think Seamstar sales are up accumulatively about seventy percent over the last five years. You know, this is We've never seen this out of a brand that's been around.
00:17:00
Speaker 2: Are they just a rector too?
00:17:01
Speaker 4: Yeah?
00:17:02
Speaker 2: Are they just the right price point value points for folks?
00:17:04
Speaker 5: Well, no, this was a brand that was kind of you know, have you read Lobster's been struggling like a lot of their competitors really well, so you.
00:17:14
Speaker 9: Know, there's a few things that are boosting casual dining, but a lot of this is really based around what they've done. Chili's was always a great brand and it was mismatched for a very long time, and so they got back to the core of what Chili's was. They also, you know, started with really improving the operations. Then from there they started improving the marketing. And they have a best in class marketing team. So the CEO and the chief marketing officer, they did the old spice mell like a man.
00:17:45
Speaker 7: Man.
00:17:45
Speaker 9: They turned around KFC with the rotating colonels when they had all the famous comedians, right, So they're phenomenal in marketing.
00:17:53
Speaker 5: So that's been a big part.
00:17:55
Speaker 9: And now late more recently they've been continuing to work on the operation and continue to spend more on marketing. But now they can continue continually or upgrading the ingredients and the products on the menu, and you know, people are going they're trying it and they're coming back. They've they've had tremendous results.
00:18:14
Speaker 3: The more I talk to you about your companies and your industry, the more I learned that it's management is really important, so important man.
00:18:22
Speaker 5: So yeah, I mean I think more than with other companies.
00:18:25
Speaker 2: It just feels like operationally, there's more things they can.
00:18:27
Speaker 9: Do and yeah, and you know what it is. I think, in my opinion is you have tens of thousands of frontline workers that you have to get to buy in.
00:18:37
Speaker 6: Right.
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Speaker 9: It's not just a small management if you're a tech company, a small management team that has to drink the kool aid. I mean, you have to get tens of thousands of every day regular people to buy in on your plan. And so if you're not a if you're not a good person with hospitality in your veins, they sniff that out real quick, and they're not They're not going to move mountains for you.
00:18:57
Speaker 5: Stay with us.
00:18:58
Speaker 2: More from Bloomberg Intelligence coming up after this.
00:19:04
Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live weekdays at ten am Eastern on Applecarplay and Android Auto with the Bloomberg Business app. Listen on demand wherever you get your podcasts, or watch us live on YouTube.
00:19:19
Speaker 3: Lest we forget, there is a one hundred and ten billion dollar merger out there waiting to get approved in the media space. Paramount and Warner Brothers Discover Discovery's going to reshape global Hollywood.
00:19:31
Speaker 2: Everybody's approved it.
00:19:33
Speaker 3: Everybody you think of, except twelve US states and that's a problem. So we got a chick in with Jenniferries. She's Bloomberg Intelligence Senior Litigation alll she's like the only voice that matters.
00:19:44
Speaker 7: Now.
00:19:44
Speaker 2: Nobody's talking to the bankers, nobody's talking to the consultants.
00:19:47
Speaker 3: It's all up to the lawyers. Jen, can you frame out this legal case where we are now and how it may play out?
00:19:55
Speaker 7: Yeah, Paul, thanks for having me. I mean, we're really at a stalemate here. I think it's off and forgotten that the States can step in just as the FTC and DOJ do and enforce federal antitrust laws in every way, including to try to block mergers, which is exactly what's happened here.
00:20:11
Speaker 8: So they did sue.
00:20:13
Speaker 7: They have alleged harm in three separate markets, two that have to do with a theatrical distribution and one that has to do with the licensing of basic cable channels. They are in California before what looks like a pretty good judge for them, and right now have a trial date set for March. Based on news reports, it's pretty apparent that Paramount would like to settle this case. They've been talking about settling, and apparently they made an offer on May twelfth to settle the case with the States, but the States are just not talking right now. And I think what we're seeing now is a pr campaign on both sides where they're playing chicken. You have the States talking about we're not going to settle, we want to break up the deal, We're going to go to trial. And you have Paramount now talking about pulling their businesses out of California and moving them entirely to another state. I will tell you, Paul, I do still think, even though they're so far apart, that down the road this case, this matter could settle, and with a settlement, the deal could close.
00:21:11
Speaker 5: It's interesting the threat to leave the state. How big of a deal is that. I know the Attorney General of California compared it to blackmail.
00:21:19
Speaker 2: Is that fair?
00:21:22
Speaker 8: Again?
00:21:22
Speaker 7: You know, I don't know that blackmail is fair. What I think of with that threat is gaining leverage. Right now, Paramount has very little leverage. Time is not on their side. They have a ticking fee that's going to kick in as of October first if this deal doesn't close, as well as additional financing fees that kick in if it's not closed by the spring.
00:21:42
Speaker 8: And they have really no leverage.
00:21:44
Speaker 7: So far, all the judges pre trial decisions have gone in favor of the States. They would really like to settle with just what we call behavioral commitments. These are just promises to conduct the combined business in a certain way, whereas it's pretty understood that the States are looking for something structural like a sale of basic cable channels, maybe even the sale of a movie studio. And so they're very far apart in that respect, and I think Paramount is doing what they can to try to get leverage.
00:22:12
Speaker 8: Now I'm not saying that their threats aren't real.
00:22:15
Speaker 7: You know,
that's up to what the executives in the board are doing and talking about it very well. Maybe they've said that it's been approved, and it very well may be that this is something they're really realistically thinking about. But in terms of what's going on with the lawsuit, I see it as an effort to gain some leverage and settlement discussions.
00:22:34
Speaker 3: You know, I don't know who the attorneys were for Warner Brothers Discovery and crafting this merger deal, but they deserve a big pat on the back. Seven billion dollar breakup fee plus a ticking fee that could add one point six billion dollars. That's real money even to the Ellisons. Yes, boy, the numbers that are just huge legally on the legal fundamentals, do you think one side has an advantage over the other if it were to go to trial, Well, let me first.
00:22:59
Speaker 7: Address all those Remember that they were fighting with Netflix for these assets really viciously. Apparently they've had to fight for these assets the whole way through, so I think they had to sweeten the pot by adding that taking fee, in that big breakup fee, in order to win over from Netflix.
00:23:14
Speaker 8: Now on the case, Paul, here's how I see it.
00:23:17
Speaker 7: I think ultimately the companies probably have the better legal argument once all the evidence is fleshed out, once you have economic analyses, and once you've really dug into the markets that have been promoted by the States and what they say the market shares are in those markets, I think prob. Again, it depends on the evidence, which we haven't seen yet, but I still would lean toward the company's winning. But the bigger problem they have right now is this timing issue, because it's not just about the expense, but the longer a deals that's been signed can't close the risk.
00:23:50
Speaker 8: Earites is for the deal, the more likely it is to fall apart.
00:23:53
Speaker 7: And they also have a June fourth drop dead date, So as of June fourth, if this is not closed, Warner Brothers can walk away and collect that seven billion dollar fee.
00:24:02
Speaker 5: So is this level of drama in trouble typical in a merger of this size or is this extraordinary?
00:24:11
Speaker 7: I would call this extraordinary. I think to me, you can have a lot of drama with a lot of these kinds of deals. I think here the irritation and the drama is added to the fact that you have sixty five or sixty six global jurisdictions that have cleared it, and the only thing that's standing in their way are twelve states.
00:24:28
Speaker 8: And I think that's got to be very frustrating.
00:24:30
Speaker 7: And I also think that these companies probably didn't worn't quite realistic about what was going to happen with this deal when they thought through their legal strategy. You know, the most interesting thing is Stacy, when I think about the last time that I think of this much drama was also dealing with CNN and also dealing with Time Warner assets, and that was when AT and T tried to buy Time Warner At that time, Macon del Raheem was the Assistant Attorney General in charge of Anti Trust at the Department of Justice.
00:24:57
Speaker 8: He is now General counsel for Paramount.
00:25:00
Speaker 7: We went to court to try to block that deal, to try to force the divestiture of sand And when I think of the drama, I think it involved the same assets and jen.
00:25:08
Speaker 3: You know, having covered these companies for almost forty years, I know a lot of the players on both sides. I don't think any of them want to go through discovery and have their emails and texts and stuff look that.
00:25:19
Speaker 7: You know, Paul, I completely agree, and that's why I think right now they're very far apart on settlement, that they're both out there with very aggressive stances. But the closer and closer we get to that October date for Paramount, the more incentive they have to settle, And the closer and the more we get into discovery, I think the more both sides have an incentive to settle.
00:25:39
Speaker 8: So we just may see the temperature change as we go forward.
00:25:42
Speaker 3: Here.
00:25:45
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