บทถอดความฉบับเต็มของ Apple's Happy Holiday Forecast Overshadowed by Shrinking Margin

little difficult to tell because the price increases did give Apple some air cover. Even if demand actually shrank, even if unit sales actually shrank, that $ 100 price increase and higher price increases and the higher storage capacities makes up for some of that potential shortfall. So it is a little bit too challenging to tell. But at the same time, the iPhone came in north of 57 billion. Wall Street was looking for something around 56 and a half billion. So clearly they did stronger than anticipated, which does show that Apple's strategy to push everything out a bit, other than the 18 Pro and Pro Max for that fourth quarter, it did work. And what you're going to see now is revenue smooth out over the course of Q2, Q3, even Q4, because of a combination of a few things. One, the iPhone Duo supply shortages, meaning that that phone will go into Apple's financial results in future quarters. rather than the current quarters, given that many people aren't going to be able to get their hands on this until February, March, April, May, and then no iPhone Air or regular iPhone 18 in this year's cycle. 00:06:32 Speaker 2: Bloomberg's Mark Gurman. 00:06:33 Speaker 6: And remember, the Power On newsletter is now also the Power On podcast Thursday. So you've got to tune in for that when it drops. Lots to review. 00:06:40 Speaker 2: Thank you very much indeed. I want to stay on Apple earnings. 00:06:43 Speaker 6: Joining us now, Carolina Milanese, President, Principal Analyst at Creative Strategies. And the dynamic that I thought was so interesting, Nicole, I'd love your perspective on, is the imbalance of demand for the iPhone Duo against Apple's ability to supply. Because lots of analysts ask, for how long is that going to last? Didn't really get an answer there. 00:07:01 Speaker 2: What are you seeing? 00:07:03 Speaker 9: I do think that some of the negativity after the call was exactly to the point about not giving an answer. That uncertainty of when supply can catch up with demand is still there. I do think that you'll see an uptick in the quarter to come because people were maybe waiting to see the duo in real life, decided between the duo and the 18th. 00:07:28 Speaker 10: And they might make a choice there. 00:07:30 Speaker 9: And so I think from the mix perspective, next quarter is going to be interesting. The other part that was interesting to me is how much Apple talked about Mac and then how much Apple talked about international markets as well as the U.S. 00:07:45 Speaker 2: I mean, Mac is a big story for Apple. 00:07:48 Speaker 6: If you move beyond the financials, what is it that you thought was good about how they presented their success with Mac in that quarter gone or their outlook going forward? 00:07:58 Speaker 9: 24% growth for the Mac is outstanding. If you still think that compute for AI will, yes, be important in your pocket, but more so at your desk, that is where you want to be. And Ternus made it very clear. He actually said, we want all AI to run on Apple devices. So it wasn't specifically talking about Siri AI, but it was talking about everybody else from ChatGPT to Cloud actually having access to AI on the Mac. And the deal that they did earlier in the quarter with Meta spoke to that on-device AI. 00:08:39 Speaker 6: I remember when NVIDIA came to market with DGX Spark, the supercomputer that sits on your desk. At the time, people were saying, well, hold on, I already got a little cluster of Mac minis going together. 00:08:50 Speaker 2: Is that kind of what you're talking about in the culture? 00:08:52 Speaker 6: Developers, people working in AI, having an Apple product as their workstation? 00:08:58 Speaker 8: Absolutely. 00:08:59 Speaker 10: I'm talking about developers, data scientists. 00:09:02 Speaker 9: I'm talking about people thinking about agents and how agents will supplement their work on the day to day, turning to the Mac, whichever form they prefer to get that work done. 00:09:15 Speaker 6: The last thing that we haven't spoken about yet is China. So in greater China, revenue missed expectations by about a billion dollars. 00:09:21 Speaker 2: But like what John Turner. 00:09:22 Speaker 6: Said, super positive, you know, third party data that they have the top three handsets. They're super proud of the results there. What does creative strategy see is going on in that in that Chinese smartphone market right now? 00:09:35 Speaker 9: I think that Apple is delivering on some of the requirements, if you like, that the market has had for a long time on the foldable side. So it'll be interesting to see as we get into Q1 for Chinese. 00:09:48 Speaker 10: New Year, how much maybe Apple. 00:09:50 Speaker 9: Is going to prioritize demand in China versus other markets. I think that is going to be critical for them, competition on the foldable side in China. 00:10:00 Speaker 10: Is extremely hot right now. 00:10:02 Speaker 9: And so coming with a product and delivering on that promise is absolutely critical for Apple. 00:10:08 Speaker 2: There is just so much we do not know. 00:10:09 Speaker 6: And Apple's down 2% now, but had been down almost 4% in the session on track for its biggest drop since July. You know, everyone's kind of eased their concern a little bit a couple hours in. Carolina Milanese, President, Principal Analyst at Creative Strategies. Great to have you back on the show. Thank you very much. Coming up, Greg Moskowitz of Mizuho is going to break down Palantir's earnings. The stock also under pressure, decelerating growth. 00:10:32 Speaker 2: This is Bloomberg Tech. 00:10:35 Speaker 10: We'll be right back. 00:10:47 Speaker 6: Shares of Palantir are off the session low now, still down 3%, but at one point on track for the biggest drop since February. The story, Palantir's commercial business overtook its government business in the quarter, both in the US and globally for the first time. AI is driving revenue up 96% overall, but there are signs of

slowing growth and investors are basically looking at historic growth and saying this can't last. Let's bring in Greg Moskowitz, Managing Director, Senior Enterprise Software Analyst. 00:11:13 Speaker 2: At Mizzou, $ 245 price target on Palantir. 00:11:17 Speaker 6: My summary, is that kind of the psychology of investors towards Palantir this morning? 00:11:24 Speaker 11: Well, first off, it's great to be back here. Nice to see you again, as always. Your summary, I think, is accurate in the sense that we have another quarter of acceleration. They grew 93% in June, 96% in September. As you rightly pointed out, commercial has overtaken government in terms of the contribution to the overall business. 00:11:45 Speaker 12: That is no small feat. no small feed. 00:11:47 Speaker 11: If you go back five years ago, commercial was about 40% of the business. 00:11:52 Speaker 12: So now again, it's a little bit over 50. 00:11:54 Speaker 11: That may not sound like that big of a change, but if you look at government, that business has grown 80%. 00:11:59 Speaker 12: Plus this year. 00:12:00 Speaker 11: So to actually overtake something that's growing 80% is really difficult to do it in practice, but that's what happens when you have a U.S. commercial business growing 140 to 150%. 00:12:11 Speaker 12: So that's very impressive. 00:12:12 Speaker 11: Now, the one thing which you alluded to that is holding back the stock, you mentioned slowing growth specifically, just to drill down on that, we are talking about PCB or total contract value bookings. However, it's important to note that that there was a big shift in shorter duration contracts. Customers that were signing very big eight-figure deals over $ 10 million worth, but for, say, a six-month period instead of perhaps three or four or five years. And that is going to affect that metric quite a bit. 00:12:45 Speaker 6: The TCB growth was 11% year-on-year, but the revenue growth... in the US commercial business is running at 148%. That Q4 sequential revenue growth is 15% quarter on quarter, but last quarter it was 20%. 00:13:00 Speaker 2: Who's Palantir's competitors? 00:13:01 Speaker 6: Is there any evidence that someone else is coming in and impacting market share for them? 00:13:08 Speaker 12: It's a great question. We really don't believe so. 00:13:09 Speaker 11: We do a lot of work around this space. We continue to hear that Palantir is viewed really in a category of one, which is the way that we see them as well. We're not hearing about competitive bake-offs, about customers in any significant way exploring alternatives. There are cheaper solutions, cheaper alternatives. certain use cases that can be acceptable for. However, if you're an enterprise that really is looking to transform the way that you are operating, we don't believe there's anyone that can do it quite like Palantir can today. 00:13:48 Speaker 6: The story that we've got to discuss is still America dominating this, right, on the US commercial side. And like Palantir is pretty forthright about the pace in Europe and other jurisdictions just being way off. 00:14:01 Speaker 2: Any evidence that changes? 00:14:05 Speaker 11: It does feel like that's a working process, very much so. And I would say that's true outside of the U.S., both for government as well as commercial customers. There certainly is not anywhere near the momentum, the spectacular momentum that they have here in the U.S. 00:14:25 Speaker 12: It's a far cry from that overseas. 00:14:29 Speaker 11: There are some, we've seen some issues of government agency pushback and then just a lot of commercial customers that are moving a lot more slowly. So it does feel like that's going to take some time in our view. 00:14:41 Speaker 6: Greg Moskowitz, Managing Director of Missouri. It's been great to have you back on the program. Thank you very much. Rideshare delivery and financial services app Grab posted a profitable quarter across all three of its core businesses and is raising its full-year outlook. US-listed shares up 11%. Joining us is Grab's CFO, Peter Uwe. And look, you just posted record EBITDA. I remember back with Uber, the days of being focused on EBITDA and raised the guidance. I guess to start with the financials, what changed? What improved in the quarter that allowed you to do that? 00:15:14 Speaker 8: Yeah, we had an awesome quarter. 00:15:16 Speaker 13: And if you look at the backdrop of Southeast Asia, it was a tough, challenging environment. Field prices were high. Weather was not favorable. But yet, 21% of year over year. We have more users on the platform, 57 million monthly transacting users. And all the products that we've been releasing, it's all working together. And that's what you see in the results, both in the top as well as in the bottom line and the free cash flow generation in the business. 00:15:43 Speaker 6: Let's look at the real terms AI story in the financials. Grab saying that drivers that use an AI assistant, your AI assistant, are earning more than 10% more per hour, merchants that rely on your AI assistant are earning 20% more, then how does Grab benefit from that? 00:16:01 Speaker 8: Definitely. It's a win-win for everyone. 00:16:03 Speaker 13: If you look at the driver's side, the fact that we're able to help them use, through the AI, be able to be more productive, they're earning more on the platform. And the fact they're earning more on the platform, we benefit also as we take a commission for all those rides that we do. The same on the restaurant side, plus also the drivers or the couriers that deliver those food also benefit. The more jobs, the higher basket size that the restaurants are seeing also, we're benefiting. So it's an ecosystem play and all those AI features that we've released are actually helping each other out. 00:16:38 Speaker 6: It's the marriage of an AI economic story with just P & L. Like, you're the CFO, right? So the cost of AI is changing. On an

interaction basis, it's down 42% on quarter. 00:16:52 Speaker 9: How? 00:16:53 Speaker 2: This is a contract issue. 00:16:55 Speaker 5: What? 00:16:56 Speaker 13: We've been continuing to optimize, and we've been very, very careful in terms of which models we deploy to which use cases. 00:17:04 Speaker 8: And it's been a journey for us. 00:17:06 Speaker 13: It's taken us three, four quarters to really continue to fine-tune that. We've also been educating our employee base, our engineers also, as to which model– also they're using at the same time. And it's like when you go into a restaurant, you've got to buffer your menus. You've got to be careful what you eat as you watch your calories at the same time. 00:17:25 Speaker 8: So we kind of take the same approach of that. 00:17:28 Speaker 6: Token spend, the CFO's nightmare maybe. So you've lowered the cost base, but now you're in investment mode. Just 30 seconds, what that looks like going forward? 00:17:38 Speaker 13: Yeah, we're continuing to be leaning into AI. Look, I think we're seeing the productivity. If you look at what you said, 42% down on the token costs on a per transaction, but yet actually the AI interaction was up 60% for us. And yet we delivered those margins and the profitability in the business. So we've got the levers in the business. We're just going to continue to fine tune and really drill the top line, but also grow the bottom line. 00:18:04 Speaker 6: Peter Uwe, CFO of Grappler. It's been great to have you back on the show. Strong quarter, investment in AI going forward. Thank you very much. Coming up, voters head to the polls. What can tech expect from today's US midterms? 00:18:16 Speaker 2: That's next. This is Bloomberg Tech. 00:18:31 Speaker 6: Okay, it's the final day of voting in America's midterm elections, and polls show Democrats in a strong position. The outcome of the vote could change the environment for tech companies, particularly in Washington. Let's discuss with Bloomberg's Balance of Power host, Joe Matthew. And Joe, help me here. Set the scene politically, I think, to start. Where we stand going into midterms, what the scenarios are on the table. 00:18:52 Speaker 14: Well, I'll tell you, the superlatives are remarkable going into this midterm election. The most expensive midterm election campaign ever with about, my gosh, I mean, hundreds of millions of dollars. It looks like a CapEx announcement from a high-tech company. You've got 57 million Americans who have already voted. Remarkable number for a midterm election. And check this out, the highest ever national average for gasoline and diesel ever on election day. That's the recipe for a pretty explosive dish here. 00:19:18 Speaker 2: And You're right. 00:19:18 Speaker 14: Analysts seem to think this will play in the direction of Democrats. The conventional wisdom is the House will fall to Democrats tonight. Question is the Senate. And I will tell you that Democrats have multiple paths to take control.

If you want to lean into the polls and the prediction markets, you can make the argument very clearly that the upper chamber will flip. And in that world, yes, Democrats will have their hands on the wheel, even though Donald Trump says he'll veto anything that comes his way. The anti-data center sentiment? And the reach for regulations for AI will become much more significant. 00:19:49 Speaker 2: If that happens. 00:19:50 Speaker 6: So on this show, people pose the question about a blue wave, how it impacts defense tech budgets, how the data center issue, AI policymaking. Are there races where that plays out at the candidate level, or there are other measures on the ballot that we're zeroed in on in the newsroom? 00:20:05 Speaker 14: No, I think it really depends on the candidate you're talking about here. I mean, my goodness, the governor's race in Texas, for instance, even the Republican Greg Abbott is talking about a review as opposed to a moratorium here in New York where I am, that's a big deal. Moratorium for data center and a lot of candidates on the Republican side are trying to distance themselves from this issue. John Husted, the Republican incumbent in Ohio, the man who took the seat from JD Vance when he became vice president, has become known as the face of the data center. That alone could mean a lose for him tonight against Sherrod Brown, who wants to get back to the Senate. So when you start looking at these, you're right, on a race, a candidate level, campaign level, or just broadly, this is a national election. These are trends that are going through all 50 states. 00:20:47 Speaker 6: Bloomberg's Joe Matthews, thank you very much. And don't forget, tune in tonight. So we have Bloomberg special coverage of the election starting 7 p.m. Eastern time. Joe Matthews, Katie Lyons. and special coverage. The midterms could have big implications for the defense sector, with military spending, security policy in focus. In Europe, German startup Stark Defense is expanding beyond drones with a new uncrewed boat. It's designed to protect undersea cables and monitor ship traffic. And the company's CEO told Bloomberg Tech in London that the big advantage is speed and scale. 00:21:25 Speaker 4: Those are systems that cost a thousandth of the price of a manned frigate, which takes years to produce. And those are systems that can be deployed within months. So there is, of course, a big speed element. We need to create mass right now as Europeans. And this is definitely a contribution to that big push towards software-defined, AI-driven mass for the battlefields. 00:21:49 Speaker 6: Okay, coming up on Bloomberg Tech, we've got more earnings coverage ahead. The story of Apple iPhone demand did lift Apple sales. Rising costs are squeezing its outlook on the bottom line. Then next up, you've got AMD reporting its third quarter earnings after the bell today. 00:22:04 Speaker 2: That's a big one. 00:22:05 Speaker 6: A lot of you are waiting for that. Can it deliver on Wall Street's AI expectations? Does it close the gap to NVIDIA, some of the specialist and specialized inference platforms? that we've seen so many of this year alone. In terms of markets, like the NASDAQ 100 is higher, up 0.8%. Semiconductors outperforming, markedly higher, 3.4%. Bitcoin now kind of stable. Remember, Bitcoin has been rocked in the last couple of days by the ongoing Binance hack, which we may have some more details on for you. It's halftime here in the city of San Francisco. It is midterms day here in the United States of America. There's so much more to come in the program. 00:22:43 Speaker 2: Be right back. This is Bloomberg Tech. Welcome back to Bloomberg Tech. 00:23:01 Speaker 6: Let's get back to Apple's fiscal fourth quarter earnings report and its outlook for the fiscal first quarter. 00:23:06 Speaker 2: Apple's sales are growing, but so is the pressure on profits. 00:23:09 Speaker 6: Joining us now, Bloomberg Intelligence Senior Analyst Anurag Rana, who sees that margin squeeze lasting through March of next year. 00:23:17 Speaker 2: Right, Anurag? 00:23:17 Speaker 6: And the reasons why memory, but the bit I'm trying to understand is like Apple actually spending some money on developing Siri AI here. 00:23:27 Speaker 2: Is that a factor at all? 00:23:29 Speaker 8: I think so. 00:23:30 Speaker 3: I mean, to be honest, that doesn't move the needle as much because, you know, even if I spend a billion or two billion extra, that really doesn't move the profitability figure. But when you look at the size of the revenue that they have, the overall money that goes into making these products, the cost of memory is probably the most important thing right now that's causing that product margin to decline. And that's really where I think you could say is the only negative. And frankly speaking, they've managed it so well in the last several quarters. I was expecting this margin hit to come in like two quarters ago, frankly, but it hasn't happened. 00:24:07 Speaker 2: So it's product margin pressure. 00:24:09 Speaker 6: I mean, what the analysts on the call tried to do was get John Ternus to explain when this imbalance changes. In other words, there's great demand, particularly for the iPhone Duo, and they are supply constrained. And in truth, John Ternus didn't really answer the question, at least for me. 00:24:27 Speaker 2: Did he for you? 00:24:29 Speaker 3: No, but because he can't do it at this point. I mean, frankly speaking, think about it this way. When so much memory is going in the AI trade with everybody fighting for it, it is very difficult to figure out capacity. I mean, look at the hyperscalers. They can't figure out how much of capacity will come online over the next two years. You can perhaps guess for the next six months, but that's where your estimates are going to be as good as. In the case of Duo, you mean this demand has been far better than what people were expecting, especially with such a high

cost of the product and being the first generation product, which usually doesn't happen. So, I mean, there are so many elements of it. The question is, can they go out and fulfill that demand? 00:25:09 Speaker 6: So I want to go to part two of your React, part two of your thesis, which is Apple's low capex stands out from rivals who are spending big. 00:25:18 Speaker 2: Go into that. 00:25:19 Speaker 6: I mean, Apple's never spent big, so it does stand out. 00:25:24 Speaker 3: So, So we had put that thesis out last November saying one simple thing. When you look at capital expenditure that's going into the AI trade, sooner or later we'll get to a point where these numbers become so big and people won't know how funding will happen. That happened actually just in the last several months. And then what happens is Then you look at somebody like an Apple that's continuing to generate, what, $ 125 billion plus or something like that. And you're going to save a similar number next year when your CapEx is just so low, even if after I account for new data center spending and stuff. So that's the kind of the safety trade people are looking for. If you look at valuation disparity right now, Look at where Apple is trading versus Nvidia, Google, Microsoft, Amazon. You could see that showing up in valuations with investors saying, you know, we know what we're getting here. We may not have an idea when the payoff is coming back for some of the others. 00:26:22 Speaker 6: Could you just explain the last line of that react to me? Apple's limited Middle East exposure, about 5% of new phone sales, underscores China as the primary risk given its central role in manufacturing and growth. 00:26:33 Speaker 2: What are we getting at there? 00:26:35 Speaker 3: It's a supply chain risk. It's always the case when it comes to Apple, because majority of their products are assembled and not just assembled, but the parts that they guessed are from China. Now, we are not in that tariff war right now. We are not in a situation where things are getting murky with China and Taiwan. But maybe down the road, if that happens, how is Apple going to go out and fulfill its promises of selling 250 million phones a year, at least on an annual basis? 00:27:05 Speaker 6: Anurag Rana of Bloomberg Intelligence bringing us the double react. 00:27:08 Speaker 2: Really appreciate it. Thank you very much. 00:27:11 Speaker 6: Next, can AMD chip away at NVIDIA's lead? The company reports earnings after the bell with investors looking for signs its AI ambitions are translating into sales. Joining us with the preview is Bloomberg's Ryan Blaselica. I put a post out on the socials that I'm going on vacation and everyone was like, well, what about AMD earnings? This is really big. Set the scene for us. I think there's high expectation in the market. Yeah, I think there's a lot of expectation. There's a lot of sort of caution going into this report. We had very negative. 00:27:42 Speaker 15: Results out of Intel last week. It spurred a historic sell-off in the stock. We've also seen the weakness in the big hyperscalers, which are the primary chip customers. So there's a lot of anxiety about the state of the AI trade, and AMD is sort of well-positioned to sort of Give us the next clue as to what visibility is going to be like going forward. There's a lot of optimism about at least near-term results. Meta is one of AMD's biggest customers, and there's a lot of expectation that maybe Muse and AI agents in general are really going to be an accelerator for growth going forward. But, you know, AMD is a fairly expensive chip maker, especially relative to Nvidia. I think it's more than twice as expensive in terms of its estimated earnings. So expectations seem pretty high right now. The stock is a big outperformer this year, even though it has been falling lately. So that's sort of the setup you have here. High expectations, high valuation. a well-performing stock, certainly some positives you can point to, but at the same time, there's so much skepticism and investors have seemed very quick to sell on any kind of disappointment, any hint that maybe the AI boom is not quite as strong as it used to be. 00:28:55 Speaker 6: I want to get to that sketch. Amazingly, AMD is up 4% in the moment. I would say this period of time in the year, the Helios rack scale compute platform is ramping and people will look for evidence of that. 00:29:05 Speaker 2: But AMD up 4%, right? 00:29:07 Speaker 6: It's also sold off in solidarity with or in line with Intel over the last week. 00:29:12 Speaker 15: What was going on there? So Intel, as I'm sure you know, had a disappointing forecast. And Intel, like AMD, is very much focused on CPU chips, which are used not only with PCs, which was a big part of the Intel story, but they're also being used in the functioning of these AI agents. And that's expected to be a real growth area going forward. I think there's growing appreciation about how CPUs, in addition to GPUs, which is a form of chip, that NVIDIA makes, how CPUs are a very critical part of overall infrastructure for AI. 00:29:46 Speaker 2: So that was sort of the bull case for AMD. 00:29:48 Speaker 15: And I think a lot of people remain optimistic that that remains in place. Their growth expectations are pretty robust. Like I said, Muse could represent a real catalyst for additional growth from here. The question is, has the stock come down enough lately to sort of temper expectations that could allow it to outperform or decline? Is the stock's overall strength this year and the higher valuation, does that mean it really needs to blow things out of the water, have a very strong forecast in order to justify additional gains from here? 00:30:18 Speaker 2: Then there's Ryan Vlaselica with the big preview on AMD. Thank you very much. 00:30:22 Speaker 6: So coming up in the show, Disney is planning sweeping layoffs. Where could the cuts fall and what is driving them? We

have the details when we return. This is Bloomberg Tech. The House of Mouse is making cuts. Disney planning thousands of layoffs as it looks to bring down costs. Joining us from L.A. with the details, Bloomberg's Chris Palmieri. This is Bloomberg reporting, citing sources. I think the questions are obvious where the cuts will be made, whether it's layoffs or it's other things. 00:31:02 Speaker 9: Right. 00:31:02 Speaker 16: I mean, there were reports last month that there was going to be a big reorganization of the TV division. And we believe that is still in the works, including some high level executive shuffling. But what we reported really was this is broader than that. It's going to be across businesses, film, theme parks. Managers are being asked to cut as much as 20 percent of their costs, whether through job reductions or other things. And this will impact thousands of jobs. 00:31:29 Speaker 6: This is in the context of what Disney is trying to convince investors of of the future. Like, what has Disney said about how it thinks it will grow? 00:31:36 Speaker 2: And I guess how those cuts get it there. 00:31:39 Speaker 16: Well, one of the ways the company has changed in the last few years, Hugh Johnson, the chief financial officer, introduced guidance, forward guidance, which the company historically hadn't done. And he said that the business will grow earnings per share in double digits. And that's hard to do considering the sales are kind of growing. 00:31:58 Speaker 2: In mid-single digits. 00:32:00 Speaker 16: So it does raise questions about where they see these businesses going. Streaming looks a little mature, slowing down across the industry. Obviously, traditional TV is struggling. Theme parks, they've had to discount a lot in Orlando. So that's probably what he's looking ahead at. 00:32:17 Speaker 6: Just very quick, this isn't in isolation, right? You mentioned industry. Others are making cuts. 00:32:23 Speaker 2: Huge cuts. I mean, Netflix, historically large cuts. 00:32:26 Speaker 16: We know that Skydance and the Wakeland Warner Brothers acquisition is going to make big cuts. We reported earlier that Comcast is on the verge of really historically large cuts. So, yeah, this is a problem industry-wide, particularly for the legacy media. 00:32:40 Speaker 6: Bloomberg's Chris Palmieri on our screen time team, entertainment editor. 00:32:44 Speaker 2: Appreciate it. Thank you very much. 00:32:45 Speaker 6: Let's get out to New York where Bloomberg's Isabel Lee has the other news headlines. 00:32:48 Speaker 17: Isabel. 00:32:49 Speaker 2: Thanks, Ed. 00:32:50 Speaker 1: Let's time out for talking tech. 00:32:51 Speaker 17: And first up, we're learning that NVIDIA CEO Jensen Huang gave his blessing to the heads of Marvell and Lumentum before they struck their $ 103 billion tie-up. A person familiar telling Bloomberg that the respective CEOs asked Huang his opinion over the phone. And that was before the deal was announced. NVIDIA having invested... in both companies, so the move underscores Huang's support for the consolidation of AI suppliers. Plus, Baidu's planned IPO of its AI chip unit may slip to next year. The company warned, waiting for approval from the Chinese regulators, securities, the unit known as Kailun Sin filed confidentially for a $ 2 billion Hong Kong IPO in January and was expected to get approved to launch a deal over the summer. But a representative from Baidu says the company rejects what it says are, quote, market rumors. And shares of Shopify plunging after its revenue missed expectations for the first time in four years. Sales were just shy of the $ 3. 75 billion estimate. Results were hurt by weaker-than-expected sub-Christian solutions revenue and others. 00:33:52 Speaker 5: Ed? 00:33:53 Speaker 2: Thank you very much, Isabel. 00:33:54 Speaker 6: Now coming up, AI and affordability are top issues for many Americans heading to the polls today. What's that likely to mean for tech markets? We're going to take a look at that next. This is Bloomberg Tech. AI is on the ballot in the midterm elections, not just figuratively, but in candidate stances, but in actual ballot measures like data center moratoriums. And that's across the entire country. Bloomberg senior tech editor Mike Shepard joins us. And Shep, go into some of the ballot measures or races that we as a tech newsroom are most focused on over the next 24 hours. 00:34:39 Speaker 18: Well, let's start with the ballot measures, because those are the ones who could have the most immediate impact on the prospects for developing data centers that are so critical to powering development of this technology. 00:34:50 Speaker 2: We're seeing more than 40. 00:34:51 Speaker 18: On the ballot across the country, according to a survey by Ballotopedia, which actually tracks these things publicly. We've done an analysis of it, and there are a number of different ways voters will have a chance to get their say in when it comes to construction of these new facilities. Some of it comes down to changes in zoning ordinances, Others come down to outright bans, at least temporarily, on construction of these new facilities. Others still are recall elections of officials who would make the decisions involved in approving those kinds of projects. Now, we're going to have to wait to see, but some of the key places will be in Ohio, where there are 11 data center ban measures on the ballot for various communities across the state. And we see that in a number of other jurisdictions as well, including Virginia. So we're going to be watching this closely. But, Ed, there's so much more on the ballot, too, when it comes to Congress as well. And we're going to be watching that as well. 00:35:52 Speaker 6: Shep, this is a difficult question to answer. But, you know, in the scenarios modeled for where there is a blue wave, how is tech preparing for things to change fundamentally? You know, either from a congressional oversight

point of view. 00:36:06 Speaker 5: Please. 00:36:08 Speaker 18: Yeah, we have actually taken a closer look at this to see how the companies are going to start reacting. We've noticed some hiring of more Democratic officials, former Democratic officials, by some of these companies, including NVIDIA, to name one. That is a signal that they are bracing for tougher oversight. Of course, when it comes to NVIDIA, we know that Democratic Senator Elizabeth Warren is has been on the company's case all year long, trying to get Chief Executive Officer Jensen Wang to appear before the banking committee to talk about the company's handling of export controls, in particular those that apply to China. So far, they have refused those invitations, but those invitations that are going to turn into subpoenas are, Once Democrats take control of one or both chambers. So we'll have to watch to see how those results pan out. Likewise, we're going to be watching to see whether a blue wave or even just a change in personnel in Congress might embolden lawmakers to actually find consensus enough. to advance some of the AI safety measures and also some of the chip export control proposals that have been kicking around really since the start of this first Congress almost two years ago. And those could have significant implications for the companies, not only NVIDIA, but OpenAI, Anthropic, which are weighing IPOs right now. Anthropic has already filed for its offering and we're waiting to see OpenAI perhaps take the stage sometime next year. all of this could have implications for them, including on the safety side. 00:37:43 Speaker 2: Thanks, Mike Sheppard. Thank you very much. 00:37:45 Speaker 6: Let's get more on how these issues are playing out in specific elections and then how that could impact markets. Ellen Hazen, Chief Market Strategist at F.L. Putnam joins us. Okay, let's go with the blue wave scenario. The Democrats get both the House and the Senate. How do you see that impacting the technology sector, if at all? 00:38:04 Speaker 9: Thanks, Ed. 00:38:04 Speaker 19: I think the biggest impact if the Dems get the House and the Senate is firstly going to be a lot of investigations. I don't think that's a surprise to anybody. But secondly, I think it's quite likely that the deficit will widen. Because they are likely to use that newfound power to extract concessions. 00:38:24 Speaker 1: In order to raise the debt ceiling next year. 00:38:25 Speaker 19: And what that means is that they will likely ask to get Medicaid cuts pushed forward another year. That's going to increase the deficit. And you're saying, what does this have to do with tech? What happens is that is going to increase longer term rates. And that is going to put the neal clouds under more pressure than they already are. 00:38:45 Speaker 2: It's funding pressure in that environment. 00:38:47 Speaker 6: You know, neoclouds, I think, you know, the more immediate societal or political issue in front of the electorate is data centers. And what I'm trying to work out this morning and have been for some time is whether data centers are a bipartisan issue. 00:39:05 Speaker 1: We think that data centers are a bipartisan issue. 00:39:08 Speaker 19: Morgan Stanley did a survey a few weeks ago that suggested that 70% of Republicans and 74% of Democrats believe data centers are important or very important. Rainey Center also did a poll suggesting that actually the divide for pro or con data centers is actually not political affiliation. 00:39:27 Speaker 1: It's not gender. It's not age. It's AI usage. 00:39:29 Speaker 19: So people who use AIs are much more positive on AI data centers than people who don't. So I think a lot of people are concerned about this. And as you were mentioning a few moments ago with your other guests, You have a lot of referendums and a lot of votes on the ballot in Ohio, in Wisconsin, in Kansas, in Illinois, in Maine, even in Pennsylvania. There are a lot of things, but it's very, very local and it's very heterogeneous. It depends on whether or not you're looking at a total ban, a six-month pause. Do we want to have them pay for their own electricity and their own water, et cetera? So it's a lot of different things that are going to happen jurisdiction by jurisdiction. 00:40:12 Speaker 6: The paying for their own way, paying their own way is kind of what is playing out in Pennsylvania. We're grateful to have you, Ellen, because we're trying to work out what happens in financial markets in various scenarios that are possible in this midterm election. And, you know, the broad question is, does it drive a material regime change in equity and in debt markets? 00:40:35 Speaker 2: Have you reached a conclusion yet on that? 00:40:37 Speaker 19: So we looked at the last 50 years worth of data, starting after the day after the first Tuesday in November. 00:40:45 Speaker 1: So looking at wave years and non-wave years. 00:40:48 Speaker 19: And the wave years are those defined as when the House changes hands against the. 00:40:54 Speaker 1: Party that has the presidency. And we find very little difference. 00:40:58 Speaker 19: For equities, they do a little bit better in non-wave years. For bonds, they do a little bit better in wave years. But the difference is pretty minor. It's 12.5% to 13%. in equities, and it's 3.1% versus 4% in bonds. 00:41:12 Speaker 1: So it's really not that different. 00:41:14 Speaker 19: I don't think that is going to make a huge difference to financial markets. I think the devil is in the details. We need to look at those individual data center bans and moratoriums, and we need to look at what's going to happen on the fiscal situation. And the last thing I would say is that regardless of the election, hyperscalers spending is. 00:41:32 Speaker 1: Slowing next year. 00:41:34 Speaker 2: You can look at the estimates. 00:41:35 Speaker 1: You can look at the numbers. 00:41:37 Speaker 19: If rates go higher, then that's going to be exacerbated even more. And that's a danger no matter what happens with the midterms. 00:41:44 Speaker 6: But before we end the program, I do want to go back to Apple, which was our top story. Just your overall read on what you heard last night. 00:41:51 Speaker 19: Well, iPhones did great. Services, on the other hand, decelerated revenue for the third quarter in a row. And services is arguably why Apple has the multiple it does. Services are typically a higher multiple business than a hardware business. And so that's concerning. Moreover, the guidance for December, although the overall revenue guidance was ahead, some of that's just driven by memory pricing pass-through. And the services revenue guidance was slower. So we're concerned about that. If you look at the last 10 years of forward PE multiples on Apple... We're two standard deviations above that even after today's decline. So I think it makes sense to wait and see how this plays out over the coming quarters. There's no question, as everybody and you have already discussed, that the gross margin is going to be hurt by. 00:42:32 Speaker 1: The memory prices. 00:42:34 Speaker 6: And just to bring it back to politics and policy, I'd note that Apple did get a tariff refunds boost to its 4Q gross margin of about a percentage point, but not much political in there apart from that. Ellen Hazen, Chief Market Strategist at FL Putnam, thank you. Don't forget, tune in tonight, special election coverage, 7 p.m. 00:42:49 Speaker 2: Eastern. 00:42:50 Speaker 6: And for even more election coverage, you can access Bloomberg.com and the Bloomberg News app for free right through to Thursday night. Well, that does it for this edition of Bloomberg Tech. There is the earnings story, the US midterm elections, and a lot happening in financial markets. All of those things continue from here on in. Recap the show on the podcast. You can find it on the Bloomberg Terminal, as well as online on Apple, Spotify, and on iHeart. From San Francisco, thank you for being with us in. 00:43:19 Speaker 2: The world of technology. This is Bloomberg Tech. 00:43:31 Speaker 8: Thank you.