All Eyes on Big Tech Earnings | Bloomberg: The Close 07/23/2024
ANNOUNCER: THE COUNTDOWN IS ON. EVERYTHING YOU NEED TO GET THE AND AT THE END OF THE MARKET DAY. THIS IS "THE CLOSE." ♪ ROMAINE: FINALLY TIME FOR BIG-TECH TO PUT ITS EARNINGS CARDS ON THE TABLE. LIVE FROM STUDIO 2 HERE IN BLOOMBERG HEADQUARTERS IN NEW YORK, I AM ROMAINE BOSTICK. ALEX: AND I AM ALIX STEEL. REALLY PUMPED. TEXAS INSTRUMENTS COULD BE
INTERESTING. S&P IS GOING NOWHERE FAST. WE DID GET -- WE WILL GET ALMOST $6 TRILLION OF MARKET CAP REPORTING TODAY. YOU HAVE GOOGLE AND TESLA. THE RUSSELL 2000 AND CONTINUES TO OUTPERFORM. IN THE LAST FEW DAYS IT HAS BEEN UP ABOUT 10%, 8%? SOLID MOVE.
2-YEAR YIELD GETTING A NICE BID AFTER AN AUCTION. THE NYMEX CRUDE IS DOWN ANOTHER 0.5 PERCENT. THIS IS THE CHINA WEAKNESS. COPPER AND IRON ORE WEAKER,
ALUMINUM AND NICKEL. THAT CHINA WEAKNESS, THROUGH, WE WILL TALK ABOUT THAT LATER. ROMAINE: DEFINITELY SEEING BIFURCATION BETWEEN THE TECH ECONOMY AND THAT "REAL ECONOMY." THE SEVEN STOCKS RESPONSIBLE FOR 60% OF THE GAINS IN THE S&P THIS YEAR, BUT WITH VALUATIONS SO HIGH, THE FUNDAMENTAL CASE FOR FURTHER GAINS IS IN QUESTION. ALPHABET AND TESLA, HOPEFULLY,
COULD PROVIDE AN ANSWER WHEN THEY REPORT EARNINGS AFTER THE BELL. ALSO THAT IS EXPECTED TO REPORT A SLOWDOWN. TESLA IS THE ONLY STOCK IN THE MAG SEVEN THAT HAS FAILED TO DELIVER A RETURN FOR INVESTORS THIS YEAR. MEANWHILE, WE WILL LOOK AT THE NON-TECH ECONOMY. WE GOT EARNINGS THIS MORNING
FROM KIMBERLY-CLARK. UNTIL FREEPORT. AND FROM UPS WHICH IS SHIPPING MORE PACKAGES, ALBEIT SMALLER AND LESS PROFITABLE ONES. WE WILL GET MORE INSIGHT INTO THE SO-CALLED REAL ECONOMY POST-MARKET AS WELL BUT MET WITH REPORTS OUT OF MATTEL, VISA, CHUBB AND ENPHASE. AND POLITICS IS STILL IN FOCUS. AS KAMALA HARRIS SECURES THE ENDORSEMENT OF ALMOST EVERY MAJOR DEMOCRAT AND POSTING RECORD-BREAKING FUND-RAISING OF OVER ONE HUNDRED MILLION DOLLARS AND KICKING OFF HER CAMPAIGN WITH A RALLY IN MILWAUKEE. V.P. HARRIS: I AM SO VERY HONORED AND I PLEDGE TO YOU, I WILL SPEND THE COMING WEEKS CONTINUING TO UNITE OUR PARTY, SO THAT WE ARE READY TO WIN IN NOVEMBER. [CHEERS AND
APPLAUSE] ROMAINE: THATROMAINE: WAS KAMALA HARRIS UP OVERLY WITH SOME COMMENTARY BY ALIX. YOU ARE JUST ITCHING TO GET BACK TO EARNINGS. THAT IS WHERE WE WANT TO START THE SHOW. ALIX: I AM. IT IS INTERESTING AND REALLY INSPIRATIONAL WHAT IS HAPPENING RIGHT NOW IN THE POLITICAL MARKET. OK. THIS CHART SHOWS WHAT HAPPENS FROM 1993 TO 2023. IT SHOWS THAT YOU HAVE STOPPED
GOING A LOT OF NOWHERE FROM JULY THROUGH SEPTEMBER. IT IS SOMETHING THAT HAS ONE OF OUR GUESTS FROM GOLDMAN SACHS TALKING A BIT. THE S&P IN A STALL PERIOD. DEFINITELY NOT STARTING OUT NOW. THE QUESTION BECOMES, DO WE WIND UP HAVING EARNINGS GOOD ENOUGH FROM SMALL CAPS AND FROM BIG TECH AND FROM THE OTHER 490 THREE COMPANIES IN THE S&P TO PREVENT THIS SIDEWAYS TRADING ACTIONS WE CONTINUE THIS ELECTION YEAR? ROMAINE: ABSOLUTELY. LET'S KICK THINGS OFF WITH GEORGE MARIS, CHIEF INVESTMENT OFFICER GLOBAL HEAD OF GLOBAL HEAD OF EQUITIES AT PRINCIPAL ASSET MANAGEMENT. RIGHT NOW I THINK EVERYBODY IS LOOKING AHEAD TO THE BIG TECH FOR EARNINGS TO FIND OUT WHETHER THAT FUNDAMENTAL CASE HAS LISTED THE STOCKS OFF THE LOWS FROM OCTOBER. ARE YOU SEEING IT? GEORGE:
I THINK THE ALPHABET NUMBERS WILL BE CRITICAL HERE. WE NEED TO SEE WHETHER OR NOT THE MAG SEVEN AND BIG TECH CONTINUED TO DRIVE THE MARKET. THEY HAVE CLEARLY BEEN THE DRIVER IN THE LAST YEAR AND A HALF AND IF WE WILL CONTINUE TO SEE THE INDEX FAR AHEAD THEY NEED TO CONTINUE TO PRODUCE. CLEARLY THERE IS A LOT OF ENTHUSIASM BEHIND THOSE NAMES AND THEY NEED TO DELIVER. ROMAINE:
WE HAVE SEEN A ROTATION IN THE PAST SEVEN OR EIGHT SESSIONS WHERE THE RUSTLE UP PERFORMED AND IN A MUCH MORE MEANINGFUL AND CONSISTENT WAY THAT SEEMS TO GET PEOPLE TALKING ABOUT THE BIG ROTATION OUT OF TECH INTO MORE SMALL MID-CAP NAMES. SOMETHING THAT WAS STINKY. DO YOU SEE THE MOMENTUM FOR THAT TO CONTINUE BEING THERE? GEORGE: IT'S ALWAYS HARD TO PREDICT THE FUTURE, BUT I THINK IT WILL BE LASTING POWER TO THIS ROTATION.
PART OF IT IS WHERE WE HAVE COME FROM. WE HAVE HAD TO HISTORIC LEVEL OF LARGE-CAP VERSUS SMALL-CAP THOUGHTFUL PERFORMANCE OVER THE LAST 30 YEARS. WE HAVE ONLY HAD LARGE-CAP OUTPERFORM SMALL TO THIS EXTENT TWICE BEFORE. ONCE DURING COVID, THE OTHER DOING THIS TMT BUBBLE OF 2000. THOSE WERE HISTORIC LEVELS THAT WE ARE THERE CURRENTLY. THIS ROTATION I THINK HAS
STAYING POWER BECAUSE EVERYBODY IS OFFSITE. PLUS, IF WE SEE EARNINGS BROUGHT IN AND OUT OF THE COVER, YOU WILL SEE GREATER ENTHUSIASM BEHIND THE SMALL-CAP NAMES. ALIX: SO WHAT KIND OF ART IS GROWTH DO YOU EXPECT FOR SMALL CAPS VERSUS THE BROADER S&P? GEORGE: BOTTOM-UP ESTIMATES RIGHT NOW, YOU ARE LOOKING AT LOW DOUBLE DIGIT, 11% TO 14% IN SMALL CAPS. WE ARE SEEING THE CONVERGENCE BETWEEN SMALLER CAP EARNINGS AND MAG SEVEN EARNINGS. MAG SEVEN EARNINGS NUMBERS THE LAST YEAR AND HAS DRIVEN BY TREMENDOUS GROWTH IN THE MAG SEVEN EARNINGS AS WELL AS MULTIPLE. NOW WE ARE SEEING IT CONVERGENCE AND THAT SHOULD KICK IT WAS STARTING TO THINK MORE CAREFULLY ABOUT SMALL CAPS AND MORE ENTHUSIASTICALLY. ALIX:
DO YOU WANT TO SELL THE MAG SEVEN TEST BY SMALL CAPS OR NO, YOU WERE TO HOLD ONTO THE MAG SEVEN AND JUST ADD TO THE SMALL CAPS? GEORGE: IT MAKES SMALL CAPS RELATIVELY MORE ATTRACTIVE. THE MARKET AS A WHOLE ISN'T PARTICULARLY CHEAP IF WE LOOK AT AGGREGATE MULTIPLES, BUT THE MARKET OUTSIDE OF THE MAG SEVEN LOOKS OVER TO THE NORMAL LONG-TERM, AND, IN FACT, IN SMALL CAPS, IT LOOKS DOGGONE INTERESTING. IF IT IS BUFFETED BY RATE CUTS, IT WILL HELP SMALL BUSINESS, AND I THINK IT IS A VERY OPTIMISTIC CASE FOR GOING LONG ALL CAPS. ROMAINE:
HOW MUCH OF THAT IS CREATED SO FAR AND WILL CONTINUE TO BE AIDED, BY THE SHIFT IN RATES TO THE DOWNSIDE? GEORGE: I THINK CLEARLY RATES ARE A CATALYST FOR WHAT HAS HAPPENED. WE HAVE SEEN IT AFTER THE JULY 11 WEEK CPI PRINT. BIGGEST ROTATION IN SMALL CAPS IN DECADES. I THINK THAT PERSISTS AND WE ARE SEEING IT TODAY. I THINK THAT IS JUST A REVERSAL FROM WHAT WE HAVE SEEN BEFORE, A CATALYST TOWARDS MOVING YOUR MONEY TO WHERE WE THINK THERE WILL BE EARNINGS RECOVERY. REMEMBER, SMALL CAPS TENDS TO
HAVE BLUER LEVERAGE, THEY BENEFIT FROM LOWER RATES OF, BUT THEY BENEFIT FROM CUTTING THE ROOTS AND TRY TO ENGINEER A SOFT LANDING. ROMAINE: DO YOU HAVE CONFIDENCE WE WILL STICK THE SOFT LANDING? BECAUSE FOR ALL THE TALK ABOUT THE ROTATION IN SMALL CAPS A LOT OF ECONOMIC DATA POINTS DOES SUGGEST A SIGNIFICANT SELF TUNING OUT THERE? GEORGE: I AGREE WITH YOU. WE HAVE SEEN BOTH THE LOWER INCOME CONSUMERS STARTING TO SUFFER, WE ARE SEEING COMMENTS FROM DOLLAR STORE MANAGEMENT TEAMS INDICATING THE CONSUMER UNDER STRESS, AND WE ARE SEEING CREDIT CARD DELINQUENCY STARTING TO DISPLAY PLACE. SO THERE IS PRESSURE THERE AND
PRESSURE ON SMALL BUSINESS OPTIMISM NUMBERS DECLINING. THERE IS PRESSURE. WITHIN THE SAID CAN STICK THE SOFT LANDING, I DON'T KNOW, BUT I KNOW THAT THE SITE THAT WE ARE GOING THROUGH A MIDCYCLE ADJUSTMENT, CUTTING RATES WILL BE SUPPORTED IN THE MARKET WILL TAKE THIS AS A SIGN THAT DOESN'T WANT A HEAVY RECESSION. ALIX: IN TERMS OF EARNINGS, WHAT IS ALREADY PRICED? WE WILL TALK ABOUT UPS IN THE MOMENT, BUT THE MAGNITUDE OF THE DECLINE BASED ON THE EARNINGS DISAPPOINTMENTS MAKES ME WONDER, IF WE HAVE NOT REPRICED IT INTO EARNINGS, THE BEAT OF THE DOWNSIDE WILL BE EXTREME VERSUS THE BEAT ON THE UPSIDE. HOW ARE YOU LOOKING AT THAT? GEORGE: IT'S TOUGH FOR ME TO BRIGHTEN OUT NEAR-TERM MOVES ARE CHALLENGING BECAUSE WE HAVE SO MUCH VOLATILITY ON A DAILY BASIS , THERE CAN BE OVERREACTION ON THE GOOD AND BAD SIDE IN RESPONSE TO EARNINGS. SO I THINK THE BIGGER PICTURE
HERE IS, WHAT DO EARNINGS TRAJECTORIES LOOK LIKE IN THE SECOND HALF OF THIS YEAR? ONE OF THE THINGS CONCERNING ME RIGHT NOW IS YOU ARE SEEING A RESURGENCE IN THE MIDST OF COST PRESSURES. WE HAVE NOT SEEN THAT IN A WHILE, THEY HAVE BEEN SUBDUED AND THAT IS COMING BACK. IT DEFINITELY BEARS WATCHING. MARGINS COULD CONTINUE TO INCREASE AND WE COULD HAVE A GOOD MARKET FOR THE REST OF THIS YEAR. ROMAINE: GEORGE MARIS, ALWAYS GOOD TO TALK TO YOU, CHIEF INVESTMENT OFFICER AND GLOBAL HEAD OF EQUITIES AT PRINCIPAL ASSET MANAGEMENT, HELPING KICK YOU OFF TO THE CLOSE . ONE OF THE BIGGEST DECLINE IS TODAY, UPS HAVING IT'S WORTH TODAY SINCE GOING PUBLIC IN 1999. WE WILL BREAK DOWN WHAT IS
FUELING THAT FALL. ALIX: PLUS, WE HAVE AN EXCLUSIVE INTERVIEW WITH MARK ZUCKERBERG. ROMAINE: AND APPARENTLY, PEOPLE AREN'T POPPING CHAMPAGNE THE WAY THEY USED TO? INTERESTING COMMENTARY BY THE CFO AT LVMH SAYING THAT DEMAND FOR CHAMPAGNE IS IN THE DOLDRUMS? IF THE CONVERSATION COMING UP IN JUST A BIT AND SO MUCH MORE. THIS IS "THE CLOSE" ON BLOOMBERG. ♪ ROMAINE: WELCOME BACK. TIME FOR OUR STOCK OF THE HOUR.
LOOKING AT UPS, THE BIGGEST DECLINE OR IN THE S&P WITH A 13% PLUNGE, WAS TODAY FOR THE STOCK SINCE IT WENT PUBLIC IN 1999. THE CEO SAYING THEY ARE OFF TO A SLOW START ON THE TURNAROUND PLANS. OUR GUEST JOINS US WITH MORE. ABIGAIL, WHAT JUMPED OUT AT ME WAS THE DISCUSSION THEY HAD ON THE CONFERENCE CALL THAT VOLUMES WERE STILL ELEVATED, BUT CUSTOMERS WERE OPTING FOR THE SLOWER AND CHEAPER DELIVERY OPTIONS, AND THAT SEEMS TO BE THE CONCERN. ABIGAIL: THAT POINT GOT BURIED BENEATH
THE SURFACE. LET'S START WITH THE SURFACE MISSES. COMING INTO THIS QUARTER, INVESTORS AND ANALYSTS WERE EXPECTING A DISASTER, BUT IT TURNED OUT TO BE WORSE.
THEY WERE EXPECTING RISING COSTS -- FURTHER FROM THE NEW UNION AGREEMENT PUT IN PLACE LOOKED AUGUST 1. ON TOP OF IT, IT WASN'T FROM THE DEMAND, TO YOUR POINT, BUT BECAUSE OF CUSTOMERS OPTING FOR THE CHEAPER VERSION, GROUND SHIPPING VERSUS AIR. IT WAS A LUER-SHAPED MIXING THEM UP FROM A HUMAN STANDPOINT AND IT HIT BOTH SALES AND EARNINGS. SALES WERE HIT BY THE LOWER YIELD AND SHIFT. THAT WAS THE BIGGEST SURPRISE. PROFITS WERE HIT BY 10% ON THE
BOTTOM LINE. IT REALLY A MESS FOR THE COMPANY. ALIX: SO IS THIS GOING TO BE A VOLUME GAME? AS MUCH VOLUME AS YOU CAN TO MAKE UP FOR THE LACK AND PROFITABILITY? ABIGAIL: THAT IS THAT GREAT QUESTION BECAUSE IN SOME WAY YOU COULD MAKE THE CASE THAT BECAUSE VOLUMES IMPROVED FOR THE FIRST TIME IN ABOUT 10 QUARTERS, THAT MAYBE THIS IS THE WORST-CASE SCENARIO. IF THEY CAN CONTINUE TO
INCREASE VOLUME -- IT PROBABLY WILL COME DOWN TO THE QUESTIONS WERE ASKING ABOUT THE ECONOMY, THE STATE OF THE CONSUMER, INFLATION COMING OUT OF THE PANDEMIC, AS TO WHETHER OR NOT WE WILL SEE CONSUMERS START TO GO TOWARDS THE MORE EXPENSIVE PRODUCT N THE OTHER HAND,. THEY ARE SEEING AN IMPRESSIVE SCIENCE. I HAVE TRILLION DOLLAR BUYBACK IN THE BACK HALF OF THIS YEAR -- A HALF $1 BILLION BUYBACK IN THE SECOND HALF OF THIS YEAR, ONE BILLION DOLLAR BUYBACK NEXT YEAR. THEIR NEW CONTRACT WITH USPS. SO THERE IS A POSSIBILITY THAT THE WORST IS OVER ALTHOUGH I WOULD SAY THE STOCK HAS A LITTLE BIT TO GO. IT'S AMAZING THAT NONE OF THIS WAS PRICED IN, EVEN WITH SUCH LOW EXPECTATIONS. ROMAINE: YOU SEE A BIT OF A DRAG TODAY ON FEDEX, I WONDER ABOUT THE ROUTE THROUGH INTO THE CONSUMER, ALTHOUGH IT WILL BE A COUPLE OF WEEKS BEFORE WE GET THE PURE PLAY OF CONSUMER STOCKS REPORTING EARNINGS, BUT WHETHER WE CAN NEXT SOMETHING FROM THESE EARNINGS INTO WHAT WE WILL HEAR FROM THE APPAREL AND OTHER RETAILERS. ABIGAIL:
IT'S AN INTERESTING QUESTION. IT SIGNALS THE POINT OF VOLUME BEING ON THE UPSWING, THAT CONSUMERS ARE WILLING TO SPEND, BUT THEY ARE GOING FOR THE CHEAPER PRODUCTS. YOU MAY SEE THAT GOING MORE TOWARDS WALMART AND COSTCO AS OPPOSED TO TARGET THE MORE EXPENSIVE PRODUCT FROM TARGET.
BUT I THINK YOU WILL SEE SOME OF THAT COST SAVING. I DON'T THINK WE WILL SEE A BLACK HOLE IN TERMS OF CONSUMER SPENDING. AND THERE ARE CERTAIN NICHE PRODUCTS LIKE THE ADIDAS SNEAKERS THAT WE BOTH DISCOVERED ON THE RADIO A FEW WEEKS AGO, THE ONES WITH THE STRIPES THAT EVERYBODY SEES IN NEW YORK. ROMAINE:
YOU TALKING ABOUT THE SAMBAS? ABIGAIL: YEAH. ROMAINE: DO YOU HAVE A PAIR? ABIGAIL: NO, I ONLY HAVE JORDAN'S. I AM A NAKED PERSON. ALIX:
DO YOU HAVE SOAMBAS? [LAUGHTER] ALIX: THANKS A LOT, ABIGAIL DOOLITTLE. LVMH, THE CFO SAYING TODAY THAT CHAMPAGNE IS FACING, QUOTE, "SEVERE DEMAND ISSUES." THIS, AS THE COMPANY REPORTED THAT SALES GROWTH SLOWED LAST QUARTER. I KNOW YOU'RE JOKING ABOUT THE CHAMPAGNE THING, BUT IN GENERAL, SALES WERE GRIM ON THE LEATHER SIDE. ROMAINE: YOU CAN SEE THE PULLBACK, AND ONE THING THAT JUMPED OUT AT ME IS THAT IN THE PAST OF THE CHINA STORY. IT'S MUCH BROADER THAN JUST
CHINA AND THIS IS A BIGGER ISSUE. AND WE SHOULD POINT OUT THAT WHEN THE HEADLINE WENT BY ON THE BLOOMBERG TERMINAL ABOUT CHAMPAGNE, THAT READ SPIKED A LITTLE -- IMMEDIATELY. IT HITS HOME. WE GO THROUGH OUR FAIR SHARE OF BUBBLY. ALIX: IT IS MY FAULT. ROMAINE:
BUT WE GO FOR THE FINEST, CHEAPEST CHAMPAGNE OUT THERE. ALIX: I REALLY CUT BACK AFTER I CAUGHT LONG COVID. [LAUGHTER] BUT APPARENTLY, CHINESE CONSUMERS ARE GOING TO JAPAN TO BUY STUFF, BUT OVERALL, CHINA WAS WEAKER. THAT WAS A BIT CONFUSING. ROMAINE:
YEAH, INTERESTING TIME FOR A CONGLOMERATE THAT IS VERY INDEPENDENT ON INTERNATIONAL SPEND. AND INTERESTING, FROM THE CFO ON THE LIMITED DEMAND. COMING UP, OUR TOP CALLS AS WE GET A VIEW FROM THE SOUTH SIDE ON HOW ALPHABET COULD SET THE TONE FOR BIG TECH. THIS IS "THE CLOSE" ON BLOOMBERG. ♪ ROMAINE: LET'S GET A VIEW FROM THE SELL-SIDE WITH OUR TOP CALLS, SOME OF THE BIG MOVERS OFF THE BACK OF ANALYST RECOMMENDATIONS. WE START OFF WITH COINBASE,
UPGRADED AT CITI. THE ANALYST SAYING COINBASE CAN CAPITALIZE ON THE MORE CONDUCIVE REGULATORY ENVIRONMENT IN THE CRYPTO SPACE GIVEN THE CHANGES IN THE U.S., ELECTION DYNAMICS AS WELL AS THE RECENT SUPREME COURT RULING.
SHARES THOUGH DOWN 2% ON THE DAY. NEXT UP, A FRESH BUY READING FOR KRISPY KREME, AT HSBC THE ANALYST SAYING THEIR OPERATING OUTLOOK IS LOOKING UP THANKS TO THE NEW PARTNERSHIP WITH MCDONALD'S. THE ANALYST ALSO SAYING THAT KRISPY KREME'S SALE OF A STAKE IN INSIDE COOKIES WILL HELP CHIP AWAY AT THE DEBT FASTER. THE STOCK IS UP ABOUT 3%.
FINALLY, SNAP, UPGRADED TO OVERWEIGHT. THE ANALYST ENCOURAGED BY THE BUSINESS BUT HE IS NOT READY JUST YET TO JUMP TO AN OVERWEIGHT MEETING, SAYING THAT THE SOCIAL MEDIA COMPANY'S MIXED ENGAGEMENT TRENDS ARE STILL GIVING HIM PAUSE. THOSE ARE SOME OF OUR TOP CALLS. WE WANT TO STICK WITH TECHNOLOGY. LESS THAN ONE HOUR AWAY FROM ALPHABET REPORTING ITS SECOND-QUARTER RESULTS. COULD SET A TONE FOR HOW THE REST OF THE MEGACAP TECH COMPANIES WILL PERFORM AND UTILIZE SPENDING FOR CLOUT AND GENERATIVE AI.
LET'S GET SOME INSIGHTS WITH OUR GUEST FROM WOLFE RESEARCH, SHWETA KHAJURIA JOINING US NOW. LET'S GET SOME INSIGHT INTO WHAT WILL BE THE MOST CRITICAL THING. LAST QUARTER THERE WAS LESS OF A FOCUS ON ADS AND REVENUE GENERATION AND MORE ON LAND AND THE COMPANY POSTAL INVESTMENTS IN AI. IS THAT STILL A FOCUS? IT SHWETA: IS CERTAINLY IN ONE OF THE BIGGEST FOCUS AREAS. IN TERMS OF THE DAY FOCUSED TOPIC, IT'S NOT JUST, BUT ALSO ANY COMMENTARY ABOUT MONETIZATION OF THE INVESTMENTS THEY ARE MAKING, I.E. THE RETURN ON INVESTMENT SPEND
WHETHER IT IS TOWARDS CLOUD, THEIR AD PLATFORM OR COST SAVINGS ACROSS THE COMPANY. THAT IS A TOP INVESTOR TOPIC THAT MOST EXPECT THEM TO REITERATE THEIR SPEND LEVELS FOR 2024 WHICH THEY HAVE SAID WILL PROBABLY BE CLOSE TO AROUND $50 BILLION, SEQUENTIALLY INCREASING EACH QUARTER THROUGH THE YEAR. AND THEN THE OTHER AREAS OF FOCUS WILL ALSO INCLUDE ANY COMMENTARY ON OUR PICKS, GIVEN THE RISE -- INCLUDE ANY PERSONAL EXPENSES, GIVEN THE RISE IN CAPEX EXPAND, WHERE THEY WILL GET INCREASINGLY EFFICIENT. THE OTHER THINGS IN OUR CAPITAL ALLOCATION, MORE DIVIDENDS, MORE BUYBACKS OR JUST MORE GENERATING ADVERTISING SENTIMENT GIVEN THAT CONSUMER IS STARTING TO GO BACK ON SPENDING. ROMAINE: THE LAST BIG CYCLE WE WENT THROUGH WITH THESE BIG TECH NAMES, THERE WAS A TALK ABOUT EFFICIENCY. DO YOU THINK WE WILL SEE MORE
ANNOUNCEMENTS ON COST CUTTING FROM ALPHABET TONIGHT? SHWETA: PURE SPECULATION. BUT I THINK HEADCOUNT REDUCTION WILL REMAIN AN OPTION. THEY ALSO HAVE A NEW CFO COMING IN WHO STARTS AT THE END OF THIS MONTH. I WOULD BE SURPRISED IF IN HER EARLY TENURE AT GOOGLE, SHE STARTED MAKING COST CUTS OR HEADCOUNT REDUCTIONS RIGHT AWAY. MY BEST GUESS IS PERHAPS THEY WILL CONTINUE WITH OPERATING EFFICIENCY GAINS WITH HEADCOUNT REDUCTIONS AS A VALUE INTO 2025. . ALIX: WE HAVE AN M&A CHART THAT HAPPENED FOR ALPHABET. CLEARLY, THIS BOOK WAS, LIKE,
THANKS, GUYS, NO IPO. ALSO BUT ALSO DROPPED HUBSPOT. WHAT DO NOW? SHWETA: FIRST OF ALL, THE WIZ CALCULATION -- ACQUISITION WAS THAT A REALLY RICH MULTIPLE. THE EXHIBITION WAS MEANINGFULLY HIGHER REVENUE FOR THIS YEAR, A REALLY RICH MULTIPLE. IT WAS AN EXPENSIVE TAKE-OUT. I THINK -- OUR VIEW REMAINS
THAT FOR AI-DRIVEN A C CLOUD, IT WILL LIKELY REMAIN ON THE LOOKOUT FOR ACQUISITIONS, WHETHER IT IS AROUND SECURITY, WHETHER IT IS AROUND FEATURES THAT HELP STARTUPS ON BOARD QUICKER, WHATEVER THE TARGET AREA IS, IN ORDER TO COMPETE BETTER WITH AZURE . THEY WILL LIKELY TRY TO MAKE MORE ACQUISITIONS BOTH IN AWS AS WELL AS GOOGLE. ALIX: DRILL DOWN A LITTLE BIT IN SOME OF THE SPECIFICS FOR TODAY, CAN WE TALK ABOUT GROSS MARGINS FOR A MOMENT, BECAUSE AS WE WIND UP SEEING HOW YOUR COSTS FOR CHIPS, THEY ARE LIKELY TO PASS THAT ON TO GEMINI USERS. HOW DO YOU THINK WE WILL SEE THAT TODAY? SHWETA: WE EXPECT A BIT OF A BEAT ACROSS BOTH TOPLINE AS WELL AS BOTTOM-LINE. BECAUSE THE ADVERTISING ENVIRONMENT HAS REMAINED POSITIVE GENERALLY SPEAKING IN TERMS OF THE DEMAND TRENDS FROM ADVERTISERS, WE EXPECT A BEAT ON YOUTUBE. . THE DEMAND TRENDS FOR YOUTUBE SHORTS CONTINUE TO RISE, AS WELL AS ON SEARCH, AND THAT SHOULD ALLOW THAT TO FLOW THROUGH TO THE BOTTOM LINE AND STEADILY TO THE OPERATING MARGINS, WHICH IS ALSO AN AREA OF FOCUS FOR ALPHABET. ALIX: THANK YOU VERY MUCH, WE
APPRECIATE IT, SHWETA KHAJURIA, FROM WOLFE RESEARCH. THANKS A LOT. REALLY LOOKING FORWARD TO THE DEMAND FOR CLOUD AND HOW THAT MEASURES UP TO AMAZON. THE GROSS MARGIN PART WILL BE
REALLY INTERESTING. AND, YOU KNOW, YOUTUBE IS SO MASSIVE. AND REMEMBER THERE WAS ALL THE TALK A WHILE AGO THAT THAT MAYBE THEY WOULD SPIN OFF YOUTUBE? ROMAINE: IT IS GETTING TO THAT POINT WHERE YOU WILL START TO HEAR THAT DRUMBEAT AGAIN HERE, BECAUSE THERE IS A LOT OF VALUE HERE.
WE TALKED ABOUT THIS WHEN WE GOT NETFLIX RESULTS LAST TIME. IT'S THE ONE STREAMING PLATFORM THAT DOES BETTER THAN NETFLIX ON A STANDALONE BASIS, YOUTUBE. ALIX: YES, A BEAT NETFLIX. PRETTY STAGGERING. COMING UP, DEMOCRATS CENTERING AROUND VICE PRESIDENT HARRIS TODAY: ON DONALD TRUMP. OUR CONVERSATION WITH BRIAN GARDNER, CHIEF WASHINGTON POLICY STRATEGIST OVER AT STIFEL, WILL BE JOINING US.
THIS IS "THE CLOSE" ON BLOOMBERG. ♪ V.P. HARRIS: AND I AM SO VERY HONORED, AND I PLEDGE TO YOU, I WILL SPEND THE COMING WEEKS CONTINUING TO UNITE OUR PARTY SO THAT WE ARE READY TO WIN IN NOVEMBER. SO, FRIENDS, WE HAVE 105 DAYS UNTIL ELECTION DAY.
AND IN THAT TIME, WE HAVE SOME WORK TO DO. [APPLAUSE] ROMAINE: JUST ABOUT 3:30 P.M. IN NEW YORK. THIS IS THE COUNTDOWN TO THE CLOSE.
ROMAINE BOSTICK ALONGSIDE ALIX STEEL. ALIX: WE JUST HEARD FROM VICE PRESIDENT HARRIS HITTING THE GROUND RUNNING AFTER SOME ENDORSEMENTS FROM SENATE MAJORITY LEADER CHUCK SCHUMER AND HOUSE SPEAKER NESSIE PELOSI MINORITY LEADER HAKEEM JEFFRIES. JOINING US IN BRIAN GARDNER, CHIEF WASHINGTON POLICY STRATEGIST FROM STIFEL.
TO LISTEN TO THAT SPEECH? BYRON: I DID. IT WAS A RELIEF RALLY. IT WAS A SPEECH TO ENERGIZE THAT THEM -- THE DEMOCRATIC PARTY. SHE WILL HAVE TO SHIFT NOW IN SUBSEQUENT SPEECHES TO REACH OUT TO SWING VOTERS, BUT I THINK IT WAS A PRETTY GOOD START FOR HER CAMPAIGN. ALIX: SHE IS GALVANIZING THE BASE, IT HASN'T BEEN GALVANIZED AND A BIT OF TIME. SO WHAT IS NEXT? BRIAN: THAT PART WILL GO ON FOR THE NEXT COUPLE OF WEEKS THROUGH THE CAMPAIGN -- -- TO THE CONVENTION, THEN SHE WILL HAVE TO PIVOT AND START TO TALK TO NON-DEMOCRATS, SWING VOTERS, GETTABLE REPUBLICANS IF THEY ARE ALREADY.
OUT THERE THAT IS AN UPHILL FIGHT FOR HER. IT WILL BE A TOUGH CHALLENGE FOR HER, BECAUSE SHE HAS NEGATIVE NUMBERS. SHE WILL HAVE TO CONVINCE SWING VOTERS, GETTABLE REPUBLICANS THAT SHE IS UP FOR THE JOB THAT SHE IS NOT TOO FAR TO THE LEFT, NOT BEHOLDEN TO THE LEFT. .
THAT IS GOING TO BE VERY CHALLENGING FOR HER. ROMAINE: I AM CURIOUS THOUGH ABOUT THE STRATEGIST THE -- STRATEGY THE TICKET CAN TAKE, ALTHOUGH WE WILL HAVE TO FIND OUT WHO THE VP WILL BE. BUT THERE IS TALK THAT THE SELECTION WILL NOT BE DECIDED ON TRADITIONAL ISSUES THAT PAST ELECTIONS HAVE BEEN DECIDED ON. THAT THIS IS MORE ABOUT THE PERSONALITIES AND THE PERCEPTION OF CHARISMA AND THINGS LIKE THAT. I AM WONDERING HOW YOU THINK
THE TICKET STACKS UP AGAINST SOMEONE LIKE DONALD TRUMP, WHO IS OBVIOUSLY VERY CHARISMATIC FOR, BETTER OR FOR WORSE, OR SOMEONE LIKE J.D. VANCE WHO HAS MOMENTUM WHEN IT COMES TO HIS PERSONALITY AS WELL? BRIAN: VANCE BEING A LOWER KEY INDIVIDUAL THAN THE TOP OF THE TICKET ON BOTH SIDES, HE IS MORE SUBDUED, I I'M NOT SURE IT IS AS MUCH A CHARISMA AND PERSONALITY-DRIVEN ELECTION AS YOU SUGGESTED. I STILL THINK IT IS A REFERENDUM ON THE STATE OF THE ECONOMY AND WHAT PEOPLE EXPECT FOR THE FUTURE OF THE ECONOMY AND THE FUTURE OF THE COUNTRY. AND THAT KIND OF WORKS INTO ANOTHER CHALLENGE FOR HARRIS, SHE IS GOING TO BE TIED TO BIDEN. THEY BOTH HAVE LOW JOB APPROVAL RATINGS, CONSUMER CONFIDENCE HAS GAINED A LITTLE STEAM BUT MAY HAVE STALLED OUT. PEOPLE THINK THE COUNTRIES ON
THE WRONG TRACK -- RIGHT TRACK, WRONG TRACK. POLLING IN THE COUNTRY IS NOT GOOD. SHE HAS TO CONVINCE PEOPLE THAT THE APPREHENSION THEY FEEL ABOUT THE ECONOMY AND INFLATION ISN'T REAL.
THAT IS A VERY DIFFICULT TASK TO PULL OFF. PEOPLE HAVE MADE UP THEIR MIND ABOUT HOW THEY FEEL. SHE IS TIED TO THAT. HOW DOES SHE GET BEYOND THAT AND SAY IT WILL BE BETTER THAN ME THAT IT WAS UNDER JOE BIDEN. ROMAINE: CAN SHE DO THAT IN SUCH A SHORT
AMOUNT OF TIME? THEY USED TO TALK ABOUT WHEN COVERING THESE THE RACIST, ABOUT HOW THE PERCEPTION OF THE ECONOMY DURING AN ELECTION YEAR, THAT THOSE PERCEPTIONS ARE LARGELY SHAPED IN, THE SUMMERTIME THAT BASICALLY VOTERS GO INTO THE VOTING BOOTH IN NOVEMBER WITH A PERCEPTION THAT WAS LARGELY FORMED IN JULY AND AUGUST. BRIAN: VERY TOUGH FOR HER. BUT SHE HAS A BETTER CHANCE THAN JOE BIDEN. SHE BRINGS A FRESH PERSPECTIVE
AND MORE ENERGY. VOTERS HAD DECIDED ON BIDEN. KEEP IN MIND, IN A BIDEN AND TRUMP MATCH UP, THE ELECTION WAS CLOSE TO OVER. PEOPLE HAD MADE UP THEIR MINDS. HE HAD TWO CANDIDATES DONALD TRUMP AT HIS THIRD ELECTION, JOE BIDEN WOULD HAVE BEEN ON THE NATIONAL TICKET FOR THE FOURTH TIME IN THE LAST SIX ELECTIONS.
THAT DYNAMIC HAS CHANGED WITH HARRIS COMING IN. SHE HAS A CHANCE BIDEN WOULD HAVE NEVER HAD TO CONVINCE PEOPLE TO GO WITH HER BECAUSE SHE IS A LITTLE DIFFERENT, A LITTLE FRESHER. BIDEN NEVER WOULD'VE HAD THE CHANCE. SO SHE HAS OPPORTUNITIES THAT JOE BIDEN WOULD NEVER HAVE HAD. ALIX: ON THE ISSUES, WHERE IS KAMALA HARRIS? MORE LEFT OR MORE MODERATE? BRIAN: IN TERMS OF OVERALL? I THINK SHE IS ON THE LEFT FOR THE MOST PART, REMEMBER SHE WAS SENATOR OF CALIFORNIA. HER PRIMARY UPBRINGING IN
CALIFORNIA IS POLITICS MORE OF THE LEFT THAN THE CENTER. ONE AREA THAT I THINK IS KIND OF INTERESTING IS CRYPTO. BECAUSE THERE IS A GENERATIONAL DIVIDE AMONG DEMOCRATS. OLDER DEMOCRATS LIKE AN ELIZABETH WARREN, LIKE JOE BIDEN, THEY ARE CRYPTO-SKEPTIC. YOUNGER DEMOCRATS IN CONGRESS AND THROUGHOUT THE COUNTRY ARE MORE CRYPTO FRIENDLY. HARRIS BEING A YOUNGER
DEMOCRAT, ALSO LOOKING AT HOW CRYPTO CAMPAIGN DONATIONS HAVE MOVED TOWARDS REPUBLICANS AND REPUBLICANS SEEM TO BE CO-OPTING DEMOCRATS ON CRYPTO, I THINK SHE MAY SHIFT A LITTLE BIT. THAT IS ONE OF THE AREAS WHERE SHE MAY SHOW UP MOVEMENT BETWEEN HER AND THE BIDEN ADMINISTRATION. ROMAINE: I AM CURIOUS WHETHER THAT TRANSLATES ALSO INTO THE BROADER PERCEPTIONS ABOUT HER STANCE ON BIG TECH, THIS HAS ALSO BEEN SOMEWHAT OF A CAMPAIGN ISSUE, THE ATTEMPTED CRACKDOWN WE SAW IN THE BIDEN ADMINISTRATION ON BIG TECH.
DO YOU THINK TICKET CHANGES THOSE PERCEPTIONS? BRIAN: SINCE SHE WAS CLOSE TO THE INDUSTRY WHEN SHE WAS SENATOR FROM CALIFORNIA, HE WOULD EXPECT THAT SHE WOULD REPRESENT SILICON VALLEY. SHE CAN THINK IN TERMS OF CALIFORNIA, SHE HAS TO THINK NATIONALLY. BIG TECH IS NOT BELOVED AROUND THE COUNTRY, SO I SUSPECT AI TO -- THERE WILL BE A REGULATION. I EXPECT MORE OF THE CONTINUATION OF THE BIDEN ADMINISTRATION AND LES HARRIS AND THE SENATE WHEN IT COMES TO POLICY. ROMAINE: ALRIGHT,, BRIAN, WE WILL CATCH
UP WITH YOU IN THE NEXT HUNDRED DAYS AS WE COUNTDOWN TO THE U.S. ELECTION HERE, AN ELECTION THAT HAS BEEN COMPLETELY UPENDED BY BIDEN DROPPING OUT. UNPRECEDENTED MOVE FOR A MAJOR PARTY TO BASICALLY ABANDON THEIR PRESUMPTIVE NOMINEE. MAY BE HARRIS BRINGS SOMETHING TO THE TABLE WHICH IS THAT MAY BE PEOPLE KNOW LESS ABOUT HER THAN THEY KNOW ABOUT JOE BIDEN AND IN THIS POLITICAL CLIMATE, IT. ALIX: REALLY WORKS OUT AND IN THIS CLIMATE, IT BRINGS UP A LOT OF ENERGY. ROMAINE: I WOULD RATHER FORGET THIS ALL.
HIT ME WITH SOMETHING, LET ME GO TO SLEEP FOR THREE MONTHS, WE CAN MEET IN NOVEMBER. [LAUGHTER] BUT I DON'T THINK WE CAN DO THAT. WE HAVE TO CONTINUE THAT SHOW AS WE COUNT YOU DOWN TO THE CLOSING BELLS. 23 MINUTES LEFT TO GO HERE. A CONVERSATION UP AHEAD WITH THE CEO OF META , MARK ZUCKERBERG. EMILY CHANG SAT WITH HIM AND
EVEN HAD A CHANCE TO GO WINDSURFING WITH HIM. WE WILL HEAR FROM HER AFTER THE BREAK. THIS IS "THE CLOSE" ON BLOOMBERG. ♪ ROMAINE: WELCOME BACK. THE FOCUS, ON BIG TECH TODAY
WITH ALPHABET AND TESLA EARNINGS AFTER THE BELL. WE HAVE TO WAIT ONE MORE WEEK BEFORE WE HEAR FROM META-. BUT EMILY CHANG HAD A CHANCE TO CATCH UP WITH MARK ZUCKERBERG. SHE TALKED ABOUT LLAMA 3 .1 AND UPDATING ITS AI SERVICE BILLED AS A RIVAL TO CHATGPT. AS PART OF THAT AND NEW SHOW "THE CIRCUIT SHE HAD A CHANCE TO CATCH UP WITH MARK ZUCKERBERG. TAKE A LISTEN.
GEN. MILLEY: YOU ARE RELEASING LLAMA 3 .1, WHICH INCLUDES THE BIGGEST OPEN-SOURCE MODEL EVER. WHAT DOES THAT UNLOCK? MARK: I THINK PEOPLE WILL USE THAT AS A TEACHER TO TREATING SMALLER MODELS THAT THEY USE IN DIFFERENT APPLICATIONS. THINK OF ALL THE STARTUPS, FAULTY ENTERPRISES OR EVEN GOVERNMENTS THAT ARE TRYING TO DO DIFFERENT THINGS, THEY PROBABLY NEED TO BUILD CUSTOM MODELS AND IT IS HARD TO DO THAT WITH CLOSED SYSTEMS, WHETHER IT IS OPENAI OR GEMINI. IT GETS TO A PRETTY CORE PART OF OUR PHILOSOPHY. WE DON'T BELIEVE THERE WILL BE ONE AI THAT WILL RULE THEM ALL. WE THINK THERE WILL BE MILLIONS
OR BILLIONS OF DIFFERENT MODELS OUT THERE. EMILY: IS NOT ONE GOD, BUT MANY? MARK: I DON'T THINK THERE WILL BE GODS. [LAUGHTER] IF YOU THINK THAT YOU WILL CREATE A SUPER INTELLIGENCE, IT HAS THE SEAL OF PEOPLE TRYING TO CREATE A GOD. AND I FIND THAT BOTH THE WRONG WAY TO LOOK AT IT, BUT ALSO VERY UNAPPEALING. THERE ARE ALMOST 200 MILLION CREATORS ON ALL PLATFORMS. THEY ARE TRYING TO BUILD THEIR
COMMUNITY, THERE AREN'T ENOUGH HOURS IN THE DAY. I WANT TO MAKE IT SO THAT EVERY SINGLE ONE OF THEM CAN EASILY TRAIN AND AI VERSION OF THEMSELVES THAT THEY CAN MAKE IT WHAT THEY WANT. SO IT IS ALMOST LIKE AN ARTISTIC ARTIFACT THAT THEY ARE PUTTING OUT THERE FOR THEIR COMMUNITY AND THAT ALLOWS THEIR COMMUNITY TO INTERACT WITH THEM BUT'S ALSO GIVES THEM CONTROL OVER HOW THAT INTERACTION HAPPENS. EMILY: FACEBOOK AND YOU HAVE BEEN BLAMED FOR A LOT OF THINGS, WITH YOU AGREE OR NOT. WHY SHOULD WE TRUST YOU WITH AI? MARK: THAT IS A LOADED QUESTION. [LAUGHS] WE HAVE GOTTEN BLAMED FOR A LOT OF THINGS. I TAKE OUR ROLE IN ALL THIS
SERIOUSLY AND I THINK WE HAVE TRIED TO HANDLE IT AS WELL AS POSSIBLE. NOT SURE IT HAS ALL BEEN FAIR. I THINK THIS QUESTION HE IS GENERALLY HEALTHY. ONE OF THE DEFINING THINGS AROUND OPEN IS THAT ANYONE COULD SCRUTINIZE THE WORK. BECAUSE OF THAT STOCK I THINK IT PUTS A LOT OF PRESSURE TO MAKE SURE THE QUALITY OF THE WORK THAT YOU ARE DOING GETS BETTER QUICKLY. ALIX:
EMILY CHANG, HOST OF "THE CIRCUIT" JOINS US NOW. HE JOINS US FROM BEHIND WITH CHATGPT AND GEMINI. HOW DOES HE CATCH UP? EMILY: HE ACKNOWLEDGES THESE MODELS HAVE NOT TOTALLY CLOSE THE GAPS ON CHATGPT AND GEMINI. BUT HE SAYS HE IS ALREADY WORKING ON LLAMA 4. IF YOU LOOK ACROSS FACEBOOK'S PRODUCTS, THEY HAVE SO MUCH
SCALE. THIS IS SOMETHING HE CAN SCALABILITY QUICKLY. HE SAYS THEIR CHATBOT IS BUILT INTO ALL OF THEIR PRODUCTS AND IS ALSO A STANDALONE CHATBOT AND WILL BE THE MOST USED CHATBOT BY THE END OF THE YEAR. IT ALREADY HAS MILLIONS OF USERS BECAUSE THEY CAN INSTANTLY FEEL THINGS LIKE THIS SO FAST. OBVIOUSLY, THE MODELS HAVE TO GET SMARTER, BUT THEY WILL HAVE THIS INCREDIBLE REACH THAT HE BELIEVES WILL GIVE THEM THE LEG UP IN THE FUTURE. ROMAINE: AND REALLY, I KNOW YOU TALKED TO HIM ABOUT A LOT OF IMPORTANT AND CRITICAL STUFF, BUT I HAVE TO POINT OUT, FIRST OF ALL, WE ARE LOOKING AT PICTURES OF HIM, HE CLEARLY HAS GOTTEN COOLER WITH THAT GOLD CHAIN AND TOUSLED HAIR. HE [LAUGHTER] ALSO HAD A CHANCE TO VISIT ONE OF HIS HOMES IN LAKE TAHOE, I WATCHED THE EPISODE, YOU ACTUALLY DID WHAT I AM TOLD IS CALLED THE WAKEBOARDING, NOT WHATEVER I SAID BEFORE. [LAUGHTER]
BUT YOU GOT OUT THERE WITH HIM. THIS SEEMS TO BE A FAVORITE PASTIME FOR HIM? EMILY: IT IS ONE OF HIS SIDE QUESTS, SOMETHING HE HAS LEARNED HOW TO DO AND IS INCREDIBLY GOOD AT IT. PRISCILLA, HIS WIFE, JOINED US, AND HE TAUGHT ME. I GOT TO SEE WHAT HE IS LIKE AS A TEACHER. HE WAS ACTUALLY SUPER PATIENT AND GAVE ME A LOT OF TRIES. I BARELY ESCAPED WITH A SHRED OF DIGNITY, BUT I DID IT.
[LAUGHTER] YOU WILL HAVE TO WATCH THE FULL EPISODE TO SEE. BUT GENERALLY HIS LEADERSHIP, I LEARNED THAT HE HAS A TON OF ENERGY AND ALL OF THESE ACTIVITIES HELP HIM BURN OFF ENERGY AND FOCUS. BUT HE SAYS HE IS FOCUSED ON BUILDING AND HE'S NOT GOING ANYWHERE . ROMAINE: I ENCOURAGE EVERYONE TO CATCH
THIS WIDE-RANGING INTERVIEW SHE HAD WITH MARK ZUCKERBERG INCLUDING THAT OUTING TO THE RETREAT IN LAKE TAHOE. "THE CIRCUIT" AIRS ON BLOOMBERG TELEVISION AT 6:30 P.M. AND 8:30 P.M. EASTERN TIME. THIS IS BLOOMBERG. ♪ >> I THINK SOUTH OF THE NUMBERS ARE GOING TO BE CRITICAL. WE NEED TO SEE WHETHER BIG TECH CONTINUES TO DRIVE THE MARKET.
THEY HAVE CLEARLY BEEN THE DRIVER -- ALPHABET -- FOR THE LAST YEAR AND A HALF AND THEY NEED TO CONTINUE TO PRODUCE AN CLEARLY, A LOT OF ENTHUSIASM BEHIND THOSE NAMES, THEY NEED TO DELIVER. ROMAINE: GEORGE MARIST, CIO AT PRINCIPAL ASSET MANAGEMENT, HELPING KICK US OFF TO THE CLOSE WITH A PUSH TO WHEN WE GET THE RESULTS OF ALPHABET. ALIX: YOU KNOW WHAT ELSE IS EXCITING, THE RUSSELL CONTINUES TO OUTPERFORM. IT IS UP OVER 1% AGAIN. ON THE DOWNSIDE THOUGH, ENERGY STOCKS ARE DOWN AND UPS CONTINUES TO GETS SMOKED. ROMAINE: IT'S THE DICHOTOMY WE ARE SEEING, YOU MENTIONED THIS ON THE ENERGY SITE, CONCERNS ABOUT THE INDUSTRIAL ECONOMY IN CHINA, AND I GUESS UPS IS MORE OF THE U.S. ECONOMY STORY.
WHY SO EXCITED ABOUT SMALL CAPS? ALIX: IT'S AN INTERESTING POINT. IT GOES TOWARDS FED CUTS. ARE YOU CUTTING BECAUSE THE ECONOMY IS WEAK IN WHICH CASE, IS THAT GOOD FOR SMALL CAPS? IT'S A BIT OF A HEAD SCRATCHER. ROMAINE: UPS IS A BIG DECLINER ON THE DAY, DOWN ABOUT 13%. WE WILL SEE IF THAT CHANGES IN THE NEXT FEW MINUTES.
IN ADDITION TO ALPHABET, WE WILL GET TEXAS EARNINGS -- TEXAS INSTRUMENTS. LET'S TALK WITH STEPHEN SUTTMEIER, DIRECTOR AND CHIEF EQUITY TECHNICAL STRATEGISTS AT BANK OF AMERICA. LET'S TALK ABOUT THE ROTATION AND WHAT DROVE THAT.
SOME OF IT IS BASED ON INTEREST RATES, THE MACRO FUNDAMENTALS. BUT THERE ARE SOME TECHNICAL TAILWINDS THAT APPEAR TO HAVE SPARKED THE RALLY? STEPHEN: DEFINITELY. WE HAVE SEEN SOME BROADENING OUT AT THE SMALL CAPS AND RUSSELL 2000, WE HAD INVESTORS DOUBTING THE BREAKOUT BUT WE JUST NOTICED A SURGE IN NEW 52-WEEK HIGHS AS THE INDEX HAS BROKEN OUT FROM ITS BASE. WE THINK SMALL CAPS DO HAVE LEGS IN AN ABSOLUTE BASIS AND EVEN MORE FLEXIBILITY THAN THE S&P, LOOKING REALLY GOOD. ROMAINE:
THE MOMENTUM BEHIND THAT TRADE, IS THERE EVIDENCE IN THE DATA THAT SHOWS THAT THIS IS BROAD-BASED, BROAD-BASED IN TERMS OF THE TYPES OF INVESTORS GET INTO IT? STEPHEN: LOOKING AT THE TYPES OF INVESTORS, WE HAVE FAST-MANY INVESTORS CHASING THE RALLY. BUT I THINK WHEN YOU LOOK AT POSITIONING FROM ASSET MANAGERS AND LEVERAGED FUNDS, THERE IS STILL ROOM FOR THE BROADER EQUITY MARKET RALLIED TO MOVE HIGHER. IF YOU LOOK AT THE DATA OF THE S&P IN PARTICULAR, THEY HAVE CONFIRMED THE RALLY.
UCSF MANAGERS BY AS THE MARKET HAS GONE UP WHICH THEY TEND TO BE MORE OF THIS CORRECT SIDE. THEY HAVE BEEN INCREASING THEIR SHORTS. SO THERE IS MORE TO GO. ALIX: IF YOU LOOK AT THE RUSSELL 2000 AND MOVING INDICES, THERE IS A BIG GAP. DO YOU THINK WE CAN FILL OR DO WE CONTINUE FROM HERE? STEPHEN: THERE IS A CHANCE IT WILL BE A BREAKAWAY GAP WHICH IS A BULLISH TECHNICAL PATTERN FROM THE A FEW SALES, IT SHOULD ACT AS SUPPORT FOR THE MARKET.
AROUND THAT GAP, AROUND 213220 100, THE JUST BELOW THAT. AND INSTANCES IS UNKNOWN. I THINK IT WOULD SEEM 2620 ON THE MUSCLE BASED ON THE PATTERN WE JUST BROKE OUT -- 2620 ON THE RUSSELLM. ALIX:. ALIX:
WHEN? STEPHEN: IN THE NEXT 12 MONTHS. IF THERE IS MORE MONEY BEING FORCED INTO THE SMALLER NAMES, IT COULD HAPPEN QUICKER. ALIX: WHAT ABOUT FOR THE BROADER S&P? STEPHEN: IT HAS TAKEN A BACK STEP. WE HAD THE TARGET AT 5600.
WE ARE HAPPY TO SEE THAT. BUT WE HIT A WALL IN THAT RANGE JUST AS EVERYBODY GOT WHAT THEY WANTED, BROADENING OUT, ALL OF THAT. SO OBVIOUSLY, IT IS DRIVEN MORE BY THE TECH SELLOFF AND WE WILL GET MORE ANSWERS ON THE MEGACAP GROWTH STUFF IN A FEW MINUTES, THAT IS ONE MAIN DRIVER OF IT.
BUT IT IS ALSO ENCOURAGING TO SEE OTHER STOCKS, AND START TO TAKE ON LEADERSHIP, LIKE THE FINANCIALS, INDUSTRIALS AND A FEW OTHER NAMES. IT'S IMPORTANT NOT FOR TECH TO JUST ROLL OVER AND DIE. IT HAS TO PARTICIPATE. ROMAINE: THE POTENTIAL FOR BIG TECH TO PROVIDE A LIFT TO THE MARKET, WHAT DO THE SINGLE STOCK CORRELATIONS LOOK LIKE RIGHT NOW? THERE IS TALK THAT THIS HAS BECOME MORE OF A IDIOSYNCRATIC MARKET. BUT ARE THOSE CORRELATIONS STILL STRONG ON THE SINGLE STOCK BASIS? STEPHEN: I WOULD SAY THERE WAS A LOT OF DISPERSION. EVERY SECTOR HAS STRONGER STOCKS AND WEAKER STOCKS. . DOESN'T MATTER WHETHER A SECTOR HAS BEEN LAGGING LIKE MATERIALS, FOR INSTANCE, THERE ARE STOCKS THAT LOOK REALLY GOOD THERE AND SOME THAT LOOK BAD. EVEN IN THE EVERY STACK STOCK
IS GOING UP. BUT IT IS VIDEO -- EVEN IN TECH. NOT EVERY TECH STOCK IS GOING UP. BUT WE ARE BELIEVERS IN THE BULL MARKET. WE LIKE THE SECULAR AND CYCLICAL TREND. SO THE NEXT PART OF THIS RALLY COULD VERY WELL SEE -- IT MAY NOT BE JUST ABOUT MEGACAP GROWTH IN TECH, YOU MAY SEE OTHER GROUPS AND SECTORS STARTING TO DO BETTER AND WE ARE SEEING SIGNS IN THE LAST FEW MONTHS OR SO. ROMAINE: I KNOW EVERYBODY IS FOCUSED IN THEIR HEAD IN EARNINGS SEASON, BUT AS WE LOOK AHEAD TO THE ELECTION CYCLE, WHEN WE START TO SEE VOLUMES AND PRICE ACTION DROP OFF, WHAT DO YOU ANTICIPATE IN TERMS OF NOT SO MUCH WHETHER MARKETS GO UP OR DOWN, BUT THE VOLATILITY THAT WE MIGHT SEE IN THE NEXT FEW MONTHS? STEPHEN: I THINK YOU GET DOWNSIDE VOLATILITY AROUND THE ELECTION. WE ARE IN THE MIDDLE OF A
SUMMER RALLY. ELECTION YEAR, THE SUMMER IS THE STRONGEST PART OF THE YEAR THEN PEOPLE START TO THINK AFTER THE SUMMER, OH MY GOD, WE HAVE THIS ELECTION COMING UP. AS CERTAINTY, INVESTORS DON'T LIKE THAT. TYPICALLY DOWNSIDE VOLATILITY INCREASES.
WHAT YOU NORMALLY GET IS A POST-ELECTION RELIEF RALLY. WE RAN THE DATA. IT DOESN'T MATTER WHO WINS OR WHO LOSES, IT IS JUST THE FACT THAT, OH, IT IS OVER. PEOPLE ARE RELIEVED. I THINK IN THE SUMMER, IN THE
MIDDLE TO LATE STAGES, A SUMMER RALLY NOW, THEN A DEEP IN SEPTEMBER OR OCTOBER TYPICALLY IS WHAT HAPPENS. ROMAINE: GREAT TO HAVE YOU HERE AT BILL BURCK HEADQUARTERS, STEPHEN SUTTMEIER, CHIEF EQUITY TECHNICAL STRATEGIST AT BANK OF AMERICA SECURITIES. TECH IS ON THE BACK FOOT ONCE AGAIN. THE LONE BRIGHT SPOT IS THE RUSSELL 2000. ALIX:
AND THE MOVIE COULD POTENTIALLY SEE IN THE BREAKOUT, OVER 26, THAT WOULD BE THE REAL CONFIRMING ROTATION WOULD HAVE BEEN WAITING FOR YEARS, IT FEELS. ROMAINE: I WONDER IF IT IS GIVEN BY THE BROADER MACRO STORY, THE IDEA THAT IF INTEREST RATES DROPPED, IT PROVIDES RELIEF FOR SOME OF THE STOCKS THAT ARE OVERLEVERAGED. ALIX: EARNINGS ARE COMING THROUGH. YOU HAVE NOT A LOT OF DEBT MATURITY WALL THAT IS, AND YOU WILL HAVE CUTS AND ARE.
WE ARE EXPECTING THE CUTS. THE OTHER TWO, WE HAVE TO SUSS OUT. ROMAINE: ALL RIGHT, WE ARE EXPECTING TO ALPHABET, VISA, CHILD -- TRYING TO REMEMBER WHAT THEY ALL ARE. [LAUGHTER] ALIX: ALIX: TO YOUR POINT, THERE IS A LOT.
ROMAINE: ROMAINE: OUR FULL COVERAGE OF ALL THE DAY'S MARKET ACTION AND EARNINGS AFTER THE BELL STARTS RIGHT NOW. AD "THE CLOSING BELL," BLOOMBERG'S COMPREHENSIVE CROSS-PLATFORM COVERAGE OF THE U.S. MARKET CLOSE STARTS RIGHT NOW. ROMAINE: RIGHT NOW WE ARE TWO MINUTES AWAY FROM THE END OF THE TRADING DAY.
ROMAINE BOSTICK ALONGSIDE ALIX STEEL. TAKING YOU THROUGH THE CLOSING BELL. IT'S A GLOBAL SIMULCAST STARTING WITH SCARLET FU JOINING US IN THE TV STUDIO, CAROL MASSAR AND TIM STENOVEC IN THE RADIO BOOTH, AS WE BRING OUR AUDIENCES ACROSS ALL OUR PLATFORMS INCLUDING OUR PARTNERSHIP WITH THOSE FOLKS ON YOUTUBE. CAROL MASSAR, ANOTHER INTERESTING DAY HERE. YOU CAN BACK GAINS ON THE TECH SIDE, BUT ON THE SMALL-CAP SIDE, THE RALLY CONTINUES.
CAROL: CAROL: WE JUST TALKED WITH OUR LAST GUEST ABOUT THE ROTATION. LIKE 70% OF THE NAMES IN THE RUSSELL 2000 ABOUT THEIR 200 AND , JUST SHOWING THE MOMENTUM IN THE SPACE. TIM: IT WAS THAT FOUNDER AND CEO OVER WEALTH CONSULTING GROUP. EARNINGS SEASON IS IN FULL
SWING. WE ARE AWAITING NUMBERS FROM ALPHABET, TESLA, CAPITAL ONE AND VISA IN THE NEXT FEW MINUTES. SCARLET: YES, THIS IS WHEN WE START TO GET A NARRATIVE OF WHAT IS GOING ON WITH EQUITIES. I DON'T KNOW IF WE WILL HAVE
TIME TO GET TO IT, BUT EVEN THOUGH WE ARE LOOKING AT MODEST LOSSES IN THE S&P 500, BY AND LARGE, MOST OF THE SECTORS IN THE S&P ARE DOWN. THE ONLY GROUPS BUCKING THE DECLINE IN MATERIALS AND FINANCIALS. ALIX: AND ENERGY LOOK LIKE IT'S HAVING A HARD TIME CATCHING THE FLOOR TODAY. ALMOST $6 TRILLION WORTH OF MARKET CAP COMES DOWN WITH EARNINGS TODAY. WE HAD A BUDGET IN THE MORNING AND NOW WE ARE AWAITING THE AFTERNOON. ROMAINE: AND ON ACROSS ASSET BASIS, WE ARE DOWN ON THE SHORT END OF THE CURVE. A DROP IN BITCOIN.
WEAKNESS IN THE DOLLAR ON SOME LEVELS PARTICULARLY THE MORE DEVELOPED MARKET COUNTRIES. AT A DROP IN OIL AS WELL. [CLOSING BELL RINGING AND CHEERS] AS FOR EQUITIES, YOU ARE SEEING RED ACROSS THE SCREEN. FRACTIONAL LOSSES ON THE DAY FOR THE S&P 500. 0.1% DO DOWN ON THE DOW. THE OUTPERFORMER BELONGS TO THE
S&P FOUR HUNDRED, MID-CAPS, AND THE RUSSELL 2000 SMALL CAPS, UP ONE PERCENT. CAROL: ALL RIGHT, THE S&P ENDING THE DAY LITTLE CHANGED. MOST NAMES AND MOST GROUPS ARE LOWER. 350 NAMES IN THE S&P TRADING LOWER. 186 TO THE UPSIDE. SCARLET: I MENTIONED TWO GROUPS BUCKING THE DECLINE, IT'S ACTUALLY TURNED TO THREE, CONSUMER DISCRETIONARY UNCHANGED, BUT JUST IN THE GREEN COLUMN.
AND AS ALIX MENTIONED, ENERGY IS DOWN 1.6% ON THE DAY. CAROL: A QUICK CHECK ON THE INDIVIDUAL GAINERS. GE IS UP 6%. THE SECOND QUARTER PROFIT WAS A
JUMP, RAISING ITS GUIDANCE FOR THE YEAR. WE DID SEE OUTPERFORMERS THERE. IN THIS COMPANY IS UP 9%, TOP GATOR IN THE S&P 500. THIS COMPANY REPORTED SECOND-QUARTER SALES THAT TOPPED EXPECTATIONS. TEXAS INSTRUMENTS IS OUT.
SEMICONDUCTOR SPACE. SECOND-QUARTER REVENUE IS SMACK ON, 3.82 BILLION. SECOND-QUARTER EPS, 1.2 TO DOLLARS A SHARE. LET'S GET TO THE OUTLOOK. FOURTH REVENUE, 3.9 4 BILLION TO 4.26 BILLION DOLLARS.
THE ESTIMATE WAS 4.1 $4 BILLION. IT IS UP 2% IN POST-MARKET TRADE. INVESTORS LIKE IN THE OUTLOOK. MAY BE A SURPRISE TO THE UPSIDE THERE. TIM: WE ARE GETTING MORE NUMBERS IN THE PRESS RELEASE TALKING ABOUT THE SPEND IN THE LAST 12 MONTHS. INVESTING $3.7 BILLION IN R&D AND SGNA. RETURNING $4.9 BILLION TO SHAREHOLDERS. IT REVENUE DECREASED 15% FROM THE SECOND QUARTER A YEAR AGO AND INCREASED SEQUENTIALLY. INDUSTRIAL AUTOMOTIVE CONTINUED
TO DECLINE SEQUENTIALLY, WHILE ALL OTHER END MARKETS GROUP. SCARLET: 3.9 4 BILLION TO $4.26 MILLION GUIDANCE. IT'S A WIDE RANGE. THE MIDPOINT IS 4.1 BILLION. THE CONSENSUS ESTIMATE WAS 4.1 4 BILLION. . IF YOU WANT TO SPLIT HAIRS, IT IS A TOUCH LIGHTER THAN WHAT ANALYSTS WERE EXPECTING. EPS WAS 1.24 TO $1.48. WE HAVE ALSO BEEN CROSSING AS WELL.
LET'S GET TO SECOND-QUARTER REVENUE NUMBERS. 84.74 BILLION DOLLARS, HIGHER THAN WHAT WAS ANTICIPATED WHICH WAS 84 POINT 37 BILLION. EARNINGS-PER-SHARE OF ONE POINT
$89 TOPPED ESTIMATES FROM 1.8 FOUR DOLLARS. ADD REVENUE, THE LION'S SHARE OF THE COMPANY, $64.6 BILLION. ANALYSTS WERE EXPECTING $64.5
BILLION, SO BETTER THAN ITS CORE BUSINESS. ALIX: YOUTUBE AD REVENUE IS COMING IN AT $8.66 BILLION, THAT IS LIGHTER THAN ESTIMATES.
BUT CLOUD REVENUE REALLY DELIVERING, COMING IN AT $10.35 BILLION. JUST AS A BROAD STROKE FOR THAT. I AM WAITING TO SEE ABOUT THE GROSS MARGINS, I DON'T SEE THEM YET, BUT WE HAVE TO GET TO THEM. ROMAINE:
TESLA EARNINGS ALSO CROSSING THE LAWYER NOW. SECOND-QUARTER REVENUE COMING IN AT 25 POINT $5 BILLION, BEATING THE AVERAGE OF ESTIMATES OF ROUGHLY $24.6 MILLION. ADJUSTED EPS COMING IN AT $.52 A SHARE. THE STREET WAS LOOKING FOR $.60 A SHARE. OPERATING INCOME COMING IN LIGHT, 1.61. THE STREET WAS LOOKING FOR
$1.81 BILLION. GUIDANCE ABOUT COST REDUCTION EFFORTS, THEY SAY THEIR FOCUS REMAINS ON COMPANYWIDE COST REDUCTIONS. AND PLANS FOR NEW VEHICLES REMAIN ON TRACK. OF COURSE THAT WILL BE THE CONVERSATION WHEN WE GET TO THE CONFERENCE CALL.
LESS ABOUT THE NUMBERS AND MORE ABOUT THE MODEL LINEUP AND WHAT CHANGES IF ALI ELON MUSK HAS IN STORE. TIM: YES, INVESTORS WANT TO KNOW WHAT NEW CARS ARE COMING. SHARES OF TESLA UNCHANGED. THEY WERE DOWN 1.4% IN THE AFTER HOURS. WHICH IS WHAT WE'RE SEEING NOW, ABOUT 2%. THE FOCUS REMAINS ON COST
REDUCTIONS. PLANS FOR NEW VEHICLES REMAIN, ON TRACK THE SOONER THE BETTER, FOR INVESTORS. GROSS MARGIN COMING IN BELOW ESTIMATES, 18 PERCENT VERSUS ESTIMATES OF 17.4%. CAROL: LET'S GO BACK TO ALPHABET. ONE THAT WILL POSSIBLY BE AN INDICATOR OF WHAT WE WILL SEE SOME OTHER NAMES. ESPECIALLY ADVERTISING. AMONG THE HEADLINES, SECOND-QUARTER REVENUE WAS UP. GOOGLE CLOUD REVENUE. KEEP IN MIND, THEY ARE BEHIND
WHAT WE ARE SEEING WITH THE OTHER BIG PLAYERS, MICROSOFT AND AMAZON. BUT THEIR CLOUD REVENUE WAS A BEAT. WE CONTINUE TO SEE ALPHABET UP. SECOND-QUARTER REVENUE OVERALL, 71.3 $6 BILLION. THAT IS A BEAT. THE ESTIMATE WAS 70.7 BILLION DOLLARS.
ALPHABET IN THE APP MARKET, IS UP 1.2%. ALIX: TOTAL DEPOSITS OF THE SECOND-QUARTER BEAT ESTIMATES. CAPITAL ONE. BEATEN BY ABOUT $6 MILLION. ADJUSTED EARNINGS COMING IN SLIGHTLY BETTER. NET REVENUE COMING IN A LITTLE WEAKER THAN ESTIMATED BUT STILL AROUND 9.51 MILLION DOLLARS. THOSE SHARES ARE UNCHANGED. SCARLET: LISA ALSO REPORTING.
THE QUARTER ADJUSTED EPS, 2.51 DOLLARS IT. IT TOPS THE CONSENSUS ESTIMATE OF $2.43. THE STOCK IS MOVING HIGHER IN AFTER-HOURS TRADE AS WE WAIT FOR MORE DETAILS. ROMAINE:
I WOULD BE INTERESTED TO GET A BETTER READ ON CONSUMER SPENDING. THEY TALKED IN A CONFERENCE CALL ABOUT WHERE THE COMPLEXION OF THOSE TRANSACTIONS ARE MADE. INTERESTING TO SEE THE CONCERNS RAISED BY THE EARNINGS FROM NAMES LIKE KIMBERLY-CLARK AND UPS EARLIER TODAY WHETHER THAT IS INDICATIVE OF A SLOWDOWN IN CONSUMER SPENDING. TIM: STILL INTERESTED IN TESLA. THE ROBOTAXI UPDATE IS ALSO
WHAT INVESTORS ARE LOOKING FOR. THE TIMING OF ITS DEPLOYMENT, ACCORDING TO BE A COMPANY, DEPENDS ON TECHNOLOGICAL ADVANCEMENT AND REGULATORY APPROVAL. THEY ARE WORKING VIGOROUSLY ON THIS OPPORTUNITY. ED LUDLOW POINTS OUT IN THE LIVE BLOG, THEY DON'T SEE A DATE OR TIMELINE FOR THE ROLLOUT. BUT IF YOU RECALL A FEW WEEKS AGO ARE WE REPORTED THE COMPANY HAS PUSHED THE ROLLOUT UP BY A COUPLE OF MONTHS. CAROL: SO TESLA IS DOWN 2.7% IN THE AFTERMARKET. ANOTHER HEADLINE FROM THE TESLA
RELEASE, THEY EXPECT IT A SEQUENTIAL INCREASE IN PRODUCTION IN THE THIRD QUARTER. KEEP IN MIND, THE BIG HEADLINE, MAY BE WHY INVESTORS ARE DISAPPOINTED, SECOND-QUARTER ADJUSTED EPS OF $.52 A SHARE, IT IS 8 CENTS LIGHT. ALIX: EPS FOR METALLIC BEAT. THE ESTIMATE WAS SEVEN CENTS PER SHARE.
NET SALES BY JUST OVER $1 BILLION. THAT IS DOWN 0.7% YEAR-OVER-YEAR. CAROL: WE WILL BE TALKING WITH THE MATTEL CEO TOMORROW ON OUR SHOW. I WANT TO MENTION THE NASDAQ 100, LITTLE LOWER, JUST WATCHING HOW THIS ULTIMATELY, ESPECIALLY ALPHABET'S RESULTS, MIGHT IMPACT.
TEXAS INSTRUMENT IS UP 4%. INTERESTING TO WATCH THE SEMICONDUCTOR AREA. ALL RIGHT, GUYS, LOTS OF EARNINGS NEWS AFTER THE CLOSE. THAT'S A WRAP UP OF OUR CROSS-PLATFORM COVERAGE ON RADIO, TV, YOUTUBE AND BLOOMBERG ORIGINALS. WE WILL SEE YOU AGAIN SAME
TIME, SAME PLACE TOMORROW. ALIX, SHE WILL BE BACK WITH US TOMORROW AS WELL. ALRIGHT EVERYBODY. THAT'S A WRAP. ROMAINE: FURNACE COVERAGE WILL CONTINUE
HERE ON BLOOMBERG TELEVISION, SOME OF THE BIGGEST AGAIN WITH AN -- IN AFTER-HOURS TRADING, TEXAS INSTRUMENTS. MORE COVERAGE COMING UP. SCARLET: WELCOME BACK TO "THE CLOSE ABIGAIL: I AM SCARLET FU. ROMAINE: AND I AM ROMAINE BOSTICK. THERE WAS A LOT OF VOLATILITY UNDER THE LEASE THE SURFACE. THE RESULT OF IT ALL WAS THE DOWN, THE S&P AND NASDAQ DOWN FRACTIONALLY ON THE DAY. BUT LOOK AT THE OUTPERFORMERS
OF THE RUSSELL 2000. IT CONTINUES THE STREAK OF OUTPACING THE BROADER MARKET. MAYBE IT IS THE BET ON ECONOMIC CONDITIONS OR MAY BE A ON THE DROP IN INTEREST RATES.
BUT WE HAD EARNINGS FROM FAKE CONSUMER NAMES LIKE UPS THAT SEEMS TO PUSH BACK AGAINST THAT NARRATIVE. SCARLET: LET'S START WITH EPS, FOLLOWING THE MOST EVER AT ONE POINT AFTER LOWER THAN PROFIT DUE TO WAGE INFLATION AS WELL AS WE COULD DEMAND FROM CONSUMERS -- UPS. EVEN THOUGH VOLUME FELL, VOLUME GROUP. IT MAY BE THOUGHT OF TURNING POINT? NOT CLEAR YET. SPOTIFY IS UP 12% OF THE DAY. THE AUDIO STREAM I REPORTED QUARTERLY SUBSCRIBER GROWTH OF 12%. IT TOPPED ANALYST ESTIMATES. THAT THE BEAT FOLLOWS MOST
MOVES TO CUT COSTS DRAMATICALLY, IT REDUCED WORKFORCE AND PULLED BACK ON PODCAST PRODUCTION. THERE WAS A LITTLE RUNNING TO THE LAST 10 MINUTES. WE HEARD FROM ALPHABET, TESLA AND TEXAS. ALPHABET IS LOWERED BY THE 1%. REVENUE DID BEAT ESTIMATES.
ADD REVENUE -- AD REVENUE AND SORT REVENUE TOPPED ESTIMATES, BUT YOUTUBE REVENUE TRAILED ANALYST ESTIMATES. TESLA WAS BUMP AROUND A LOT. TESLA SAYS IT SEES A SEQUENTIAL INCREASE IN PRODUCTION. IT HAD PREANNOUNCED DELIVERIES WERE DECLINING.
IT SAYS ITS PLANS FOR NEW VEHICLES REMAIN ON TRACK. WE WILL GET MORE DETAILS FROM THE CEO ELON MUSK DURING OUR NEXT CALL. TEXAS INSTRUMENT HAS BEEN UP SINCE IT REPORTED RESULTS AND IS UP BY 4%.
IT GAVE AN IN-LINE FORECAST FOR THIS QUARTER. IT CALM CONCERNS OF A DOWNTURN. TESLA ROMAINE: ROMAINE: SHARES DOWN 0.7%.
THE HEADLINE NUMBER WITH REVENUE COMING IN AT $84.7 BILLION. THE MARGIN IMPROVEMENT SEEMS TO BE ONE OF THE BRIGHT SPOTS OUT THERE FOR THE COMPANY AT LEAST IN THIS PARTICULAR QUARTER FOR ALPHABET. MELISSA OTTO JOINS US, SHE IS HEAD OF TMT RESEARCH AT GLOBAL VISIBLE ALPHA. WHAT JUMPED OUT AT YOU? MELISSA: S&P GLOBAL WAS LOOKING FOR 84 .3 BILLION IN TOTAL REVENUES DRIVEN BY 47.6. SEARCH, $7.8 BILLION IN GLOBAL NETWORK.
AND 9 BILLION IN YOUTUBE REVENUES. AND THAT A CLOUD, $10.2 BILLION. SO YOU CAN SEE A MIXED RESULTS THERE. CLOUD COMING IN IT 10 POINT 4 BILLION. A LITTLE BIT BETTER. BUT YOUTUBE AT $8.66 BILLION, A LITTLE SOFTER. AND THEN THE OTHER BUSINESSES BROADLY IN LINE WITH EXPECTATIONS. REMAIN:
ON THE AD FRONT, WHAT ACCOUNTED FOR THE TOUGHNESS? IT IS VERY RELATIVE, THE USE OF THE PHRASE. [LAUGHTER] >> IT'S A TOUGH ENVIRONMENT AT THE MOMENT. ONE OF THE TAKEAWAYS WE HEARD FROM THE TELECOM SUMMIT LAST WEEK IS THAT OVERALL, AD SPEND IT TRAILING A BIT ON THE SOUTH SIDE. WHEN YOU WILL SEE MORE OF THAT COMING INTO THE BROADER MARKET AND IMPACTING THEIR BUSINESS A BIT. I WILL BE KEEN TO HEAR WHAT MANAGEMENT HAS TO SAY ABOUT THE OUTLOOK AND HOW WE SHOULD BE THINKING ABOUT THE GRANULARITY OF THAT FOR BOTH THE QUARTER AND THE REST OF THE YEAR.
SCARLET: I AM WONDERING ALSO, HOW MUCH DO THE TOUGH COMPARISONS FROM LAST YEAR PLAY A ROLE IN TERMS OF CLUDING INVESTOR EXPECTATIONS FOR WHAT THEY CAN ACTUALLY GET THIS QUARTER? MELISSA: THE COMPANY HAS DONE QUITE WELL IN THE FIRST HALF OF THIS YEAR ON THE BACK OF THOSE ROBUST EXPECTATIONS FROM THE SECOND HALF OF LAST YEAR. SO I THINK AS WE LOOK INTO THE SECOND HALF OF THIS YEAR AND INTO 2025, INVESTORS MAY BE, SAYING WE WANT TO SEE COMPANIES THAT ARE BOTH BEATING IN THE QUARTER AND BEATING IN TERMS OF WHAT THE OUTLOOK IS BEING EXPECTED. FOR Q3 RIGHT NOW, THAT CONSENSUS IS EXPECTING 1.85 DOLLARS A SHARE. FOR THE FULL YEAR, SEVEN $.63. THOSE ARE BROADLY WHERE THE MARKET IS PRICING AT THE MOMENT. SCARLET: WE SHOULD MENTION AS WELL, THIS WILL BE RUTH PORAT'S LAST QUARTER AS CFO. HER SUCCESSOR WILL TAKE THE JOB AT THE END OF JULY.
SHE WILL MOVE ONTO A FIGURE IN ENGLISH AND ALPHABET. PART OF THAT, WHETHER THIS IS UNDER HER DIRECT JURISDICTION ARE NOT, IS LOOKING INTO HOW ALPHABET CAN CONTINUE EXPANDING. ALPHABET HAS TRIED TO MAKE SOME PURCHASES OF LATE, HASN'T MADE ANY HEADWAY. IS THIS BECAUSE OF ANTITRUST CONCERNS, OR IS IT JUST A TOUGHER ENVIRONMENT TO GET DEALS DONE BECAUSE OTHER COMPANIES HAVE MORE ABILITY TO GO PUBLIC NOW BECAUSE THE FESTIVAL IS THAT? MELISSA: IT'S HARD TO SAY. IT'S A TOUGH ENVIRONMENT FOR
M&A. ONE OF THE AREAS I WOULD POINT TO THAT WOULD BE COMPELLING FOR INVESTORS WOULD BE LOOKING AT OTHER BETS, LINE ITEMS. THAT BUSINESS IS EXPECTED TO GENERATE LOSSES OF $2.5 BILLION THIS QUARTER AND IT IS INTERESTING TO SEE HOW THAT SHAKES OUT FOR THE SECOND HALF. THAT IS ONE AREA OF GOOGLE'S BUSINESS MODEL THAT I THINK INVESTORS ARE TRYING TO GET THERE -- TO GET THEIR HEADS AROUND, AND THAT IS HOW THOSE BUSINESS PLANS COULD BECOME A MORE EFFICIENT AND ULTIMATELY DRIVE BETTER EARNINGS-PER-SHARE. ROMAINE:
WE TALK ABOUT THE AI STORY AND, FROM RUTH PORAT, A CONFERENCE CALL SHE IS DOING RIGHT NOW WITH OUR REPORTERS, TALKING ABOUT HOW CLOUD REVENUE WAS BOOSTED BY THE DEMAND IN AI. WHEN YOU LOOK AT THE AI LANDSCAPE, NOT JUST ALPHABET, BUT BEYOND THAT, ALL THE MOMENTUM AND THE HYPE, ARE WE GOING TO START TO SEE THAT SHOW UP IN THESE EARNINGS CALLS? MELISSA: THAT'S THE MILLION-DOLLAR QUESTION. [LAUGHS] WE ARE SEEING A MEETING UPWARD REVISION'S. WE HAVE SEEN NVIDIA, JUST SKY IS THE LIMIT WITH THAT STOCK. SO MUCH DEMAND FOR THEIR SOLUTIONS ARE LOOK FOR LIMITED COMPUTING FOR GENERATIVE AI. QUESTION NOW IS, WHAT IS GOING TO CREATE BROAD ADOPTION? HOW WILL CONSUMERS AND ENTERPRISES INTEGRATE AI, GENERATIVE AI INTO TUKEY WORKFLOWS AND DAY-TO-DAY LIVES IN WAYS THAT MAKE THEM MORE PRODUCTIVE AND MORE SATISFIED USERS? SCARLET: AND PART OF THE WHOLE AI STORY, THE NARRATIVE, THE UNFORTUNATE REALITY IS THERE IS A LOT OF SPENDING THAT HAS TO HAPPEN FOR THEM TO DELIVER ON THAT. IN THE FIRST QUARTER WAS $12
BILLION, A BIG JUMP AND ALPHABET HAD PREANNOUNCED THEY WOULD STAY AT THOSE LEVELS. SECOND QUARTER WAS $1 BILLION MORE THAN WHAT ANALYSTS HAD BEEN ANTICIPATING. IS THAT THE KIND OF TRAJECTORY THAT INVESTORS ARE WILLING TO TOLERATE? MELISSA: THAT IF THE QUESTION. , ULTIMATELY, WHAT THE INVESTMENT COMMUNITY HAS BEEN WILLING TO ABSORB THE HIGHER NUMBERS WITH THE IDEA THAT REVENUES ARE GOING TO COME.
I THINK WHAT WE WOULD LIKE TO SEE IN THE EARNINGS CALL AND THEN GOING FORWARD, IS A LOT MORE SPECIFICS AROUND WHAT IS ULTIMATELY GOING TO DRIVE THAT REVENUE GROWTH AND HOW IT IS GOOD TO COME TO FRUITION . SCARLET: ABSOLUTELY. MELISSA OTTO IS HEAD OF TMT RESEARCH AT S&P GLOBAL VISIBLE ALPHA. REMAINS LED BLOCK, CONTINUING TO LOOK AT ALPHABET'S NUMBERS, I REALLY LIKE THE ITEMIZATION OF WHAT IS IN THE OTHER BETS THE . ROMAINE: CATEGORY I DON'T. I AM OVER A. REMEMBER WHEN THEY SAID WE
WOULD DEFINITELY SEE THE BIG MUGSHOTS? AND THEY DIDN'T TELL US ANYTHING OTHER THAN IT WAS LOSING MONEY IN THE SECOND QUARTER? IT WOULD BE INTERESTING TO SEE WITHOUT MOVING MORE INTO A MORE INVESTMENT TYPE OF ROLE? A TEACHER ROLE? INTERESTING TO SEE WHAT THE NEW PERSON COMING IN, WHICH IS ABLE TO DO AND HOW THAT BALANCES OUT. YOU CAN ONLY PUT SO MUCH MONEY INTO THIS WITHOUT SHOWING A RETURN AT SOME POINT. SCARLET: AND TO THAT END, OTHER BETS' OPERATING LOSS. ROMAINE: ARE THEY BUILDING A CAR? FOLDABLE PHONE? I HEAR THAT IS ALL THE RAGE. [LAUGHTER] SCARLET:
I AM NOT LOOKING FOR ONE. ARE YOU ROMAINE: ? EVERY PHONE IS FOLDABLE IF YOU TRY. SCARLET: COMING UP, WE WILL TALK ABOUT TESLA, CAPITAL ONE AND TEXAS INSTRUMENTS. ALL ARE DOWN EXCEPT FOR TEXAS INSTRUMENTS. THIS IS "THE CLOSE" ON BLOOMBERG. ♪
SCARLET: WE HAVE BEEN HIT WITH A TENTATIVE EARNINGS AT THE TOP OF THE OVER. SO LET'S GET YOU AROUND UP AND BRING IN BLOOMBERG'S BAILEY LIPSCHULTZ, ABIGAIL, AND EMILY GRAFFEO. LET'S START WITH BAILEY, ON TESLA DUTY. BAILEY: THE STOCK IS DOWN AFTER ANOTHER QUARTER OF PROFITABILITY, FALLING SHORT OF WHAT ANALYSTS WERE LOOKING FOR. ONE THING THAT STOOD OUT IN A COMMENTARY, THE COMPANY STILL SEES A LOWER VOLUME GROWTH RATE FOR 2024. MAKING THIS CARD IS HITTING THE
BOTTOM LINE. WHAT STANDS OUT IS THE ABILITY TO TIGHTEN US TO SPEND CAPITAL EXPENDITURE IS BELOW ESTIMATES OF TWO POINT 5 BILLION. I EPS, 52 CENTS. ESTIMATES FOR $.60. THE STOCK IS DOWN 3%. MAYBE SOME INVESTORS ARE TAKING GAINS. THAT IS WHY TESLA IS DOWN. ABIGAIL? ABIGAIL: FINANCIALS. BOTH VISA AND CAPITAL ONE REPORTED.
VERY INTERESTING THE OPTIONS GOING INTO THE QUARTER, THEY SUGGESTED WE WOULD SEE A 3% MOVE UP OR TO THE DOWNSIDE. THE MIST REVENUE AND BEAT EARNINGS. THAT IS 9% GROWTH. ALSO ON THE STRONG CONSUMER
SPENDING. BUT INVESTORS ARE NOT LIKELY THAT REVENUE MISS. ALSO THE IMMENSE VOLUMES, WE NEED TO CHECK INTO THOSE A BIT. TO THE DEMS THAT CAPITAL ONE.
ANOTHER MIXED QUARTER. MIXED EARNINGS. THEY MISSED ESTIMATES LATELY. SALES LOOK BETTER. THE TOTAL DEPOSITS MEET ON THE YEAR, UP 11%, SIMILAR TO WHAT BAILEY WAS TALKING ABOUT, A LITTLE PROFIT-TAKING FROM BOTH VISA AND CAPITAL ONE. EMILY: I AM LOOKING AT TEXAS INSTRUMENTS.
THE CHIPMAKER IS UP ALMOST 4% AFTER EARNINGS. REVENUE CAME IN LINE WITH ESTIMATES ALTHOUGH IT IS DOWN 16% YEAR ON YEAR, MARKING THE SEVENTH CONSECUTIVE CONTRACTION AFTER THE COMPANY SAID ITS INDUSTRIAL AND AUTOMOTIVE SEGMENTS DECLINED SEQUENTIALLY WHILE OTHER END MARKETS GREW. THE OUTLOOK WAS IN LINE WITH ESTIMATES, PERHAPS ADDING TO THE POPULAR STOCK. THEY SAID SALES WOULD BE 3.94-4 .90 6 BILLION IN THE THIRD QUARTER, REALLY PROVING THAT CHIPMAKERS ARE BACK ON THE PATH TO GROWTH AFTER DEALING WITH AUTOMOTIVE AND INDUSTRIAL SEGMENTS SAW A BIG INVENTORY GLUT AND THE SLOWDOWN. ZOOMING OUT, THE STOCK IS HIGHER TODAY.
BUT THE STORY IS THAT NOT ALL CHIP STOCKS ARE ALIKE. THE STOCK WILL 3% IN THE PAST YEAR COMPARED TO NVIDIA'S 175 PERCENT RISE. ROMAINE: A CLOSER LOOK AT HER AND A FEW OTHERS TO STAY IN THE COMPUTER SPACE, SEAGATE TECHNOLOGIES THIS OUT WITH RESULTS, THE BIG MAKER OF STORAGE DRIVES. 5%. AN 18% JUMP IN REVENUE. DO YOU LIKE ECZEMA, SCARLETT? SCARLET: I LOVE EGGS.
ROMAINE: NET SALES FOR THIS COMPANY, DOWN 7%. SCARLET: MAYBE EVERYONE IS GOING ORGANIC? ROMAINE: I DON'T KNOW, NEVER THOUGHT ABOUT THAT. ANYWAY, THOSE SHARES ARE DOWN 2%. A LESS CONSEQUENTIAL COMPANY. IT'S A GOOD READ ON THE QUOTE UNQUOTE REAL ECONOMY. SCARLET: ALPHABET IS NOT A REAL ECONOMY, I SEE A LOT OF TESLA STATE.
BIG QUESTION IS WHETHER ELON MUSK CHANGES THE NARRATIVE WHEN HE STARTS SPEAKING ON THE CONFERENCE CALL. THAT TENDS TO HAPPEN. ROMAINE: THIS IS AN ARTIST OFF. IT HAS NEVER BEEN ABOUT THE FUNDAMENTALS SO MUCH AS IT IS ABOUT THIS LONGER-TERM STORY, THE MOONSHOT, IF YOU WILL, AND ELON MUSK IS ON THE MASTER AT MAPPING OUT A FUTUREM HE KEEPS MOVING THE GOALPOSTS. ROMAINE: THE GOALPOSTS TO MOVE. WE WILL TALK ABOUT TESLA AND ALPHABET, AS WELL THIS YEAR'S OSCILLATING BETWEEN GAINS AND LOSSES. SCARLET: NOW HIGHER. ROMAINE: TESLA AT ONE POINT WAS DOWN ALMOST 7%, SO IT IS. YOU LOSSES. A FULL BREAKDOWN ON WHAT IS
GOING ON WITH THOSE COMPANIES AND ALSO WHAT THE CHIEF FINANCIAL OFFICER, RUTH PORAT, BOTH OF US THEM HAS TO SAY. THIS IS BLOOMBERG. ♪ SCARLET: ALPHABET SHARES BOUNCING AROUND IN THE AFTER-HOURS TRADE, CURRENTLY HIGHER RIGHT NOW. LET'S BLING IN BLOOMBERG TECHNOLOGY COHOST ED LUDLOW, WHO HAD BEEN LISTENING INTO THE EARNINGS CALL WHERE THE CFO RUTH PORAT SPOKE IN WHAT WOULD BE HER LAST CALL BEFORE SHE HANDS THE REINS TO SOMEONE ELSE. ONE THING THAT IS TOP OF MIND IS WHAT IS HAPPENING WITH ALPHABET AND ITS M&A AMBITIONS.
ED: WE ASKED RUTH PORAT ABOUT WAYS, AND SHE SAID I WILL NOT COMMENT ON SPECULATION. SHE AND I GOT INTO THE IDEA IF YOU ARE OPEN-MINDED TO M&A, WHY WOULD YOU BE? THIS IS THE CONTEXT OF CLOUD, SO WHILE SHE DID NOT ENGAGE ON WHIZ, I THINK IT IS PRETTY CLEAR THAT THE GOOGLE CLOUD PLATFORM WILL CONTINUE TO LOOK AT M&A BECAUSE THEY ARE A NUMBER THREE PLAYER IN THE MARKET. WHILE THIS WAS THE FIRST QUARTER THEY EXCEEDED $10 BILLION OF REVENUE FOR CLOUD, THEY ARE STILL TRAILING AWS AND MICROSOFT AZURE, SO M&A SEEMS TO BE AN OPTION. ROMAINE:
NOT TO COMPLETELY BEAT THIS HORSE, BUT THE BLOOMBERG REPORTING SEEMED TO MAKE IT CLEAR WHIZ M SAID IT WAS BETTER FOR THEM TO WALK AWAY. EVERYONE WANTS TO SEE WHAT OTHER CYBERSECURITY COMPANIES COULD BE VALUABLE. WAS THERE ANY CREDENCE TO THAT? ED: THEY DID. PART OF THE REPORTING FROM BLOOMBERG WAS THAT THE RATIONALE FOR WHIZ WALK AWAY WAS FROM AN ANTITRUST PERSPECTIVE. THERE IS AN ARGUMENT THAT MAY BE IT IS THE THIRD-PLACE PLAYER IN THAT MARKET, THEY MIGHT HAVE AN EASIER TIME OF IT, BUT PORTA'S RESPONSE WAS -- BUT PORAT'S RESPONSE WAS WHOEVER ENDS UP IN OFFICE, WE WILL BE WORKING WITH GOVERNMENT.
CROWDSTRIKE DID NOT RESPOND. SCARLET: LET'S TALK ABOUT SEARCH, BECAUSE THAT IS ALPHABET BREAD-AND-BUTTER. THE INCHES PATIENT IS ALL THAT SPENDING ON AI IS GOING TO DRIVE REVENUE GROWTH IN ADVERTISING. DID WE GET THAT? ED: YEAH, SO OVERALL WHAT WE KNOW EXPLICITLY IS THE BIGGEST DRIVER OF TOP LINE GROWTH WAS THE CORE SEARCH PRODUCT. WE ASKED RUTH PORAT IF THEY WERE TALKING ABOUT THE NEW GENERATIVE AI VERSION OF SEARCH OR JUST SEARCH BROADLY, AND SHE WOULD NOT ENGAGE ON THAT. I THINK SHE'S GOING TO SPEAK MORE ABOUT IT ON THE CALL THAT STARTS IN A LITTLE WHILE, BUT SHE DID SAY THE INVESTMENT THEY MADE IN AI IS PAYING OFF.
NOW THAT MANIFESTS ITSELF ALSO IN THE CLOUD BUSINESS BECAUSE YOU NEED THE DATA CAPACITY FROM A STORAGE PERSPECTIVE. THEY ARE OFFERING GENERATIVE AI TOOLS AT THE ENTERPRISE LEVEL. URC ANY COMBINATION OF BOTH. NOTHING EXCITING TO WRITE HOME ABOUT. I ASKED IF THEY WOULD DO WHAT
AWS DID LAST QUARTER, GIVE US A REVENUE RUN RATE NUMBER. HER RESPONSE WAS, I WILL GIVE YOU ANOTHER QUESTION, BECAUSE AM GOING TO ANSWER THAT LATER ON THE CALL, SO MAYBE WATCH OUT FOR THAT. ROMAINE: ED LUDLOW, A CLOSER LOOK THERE BY COMMENTS OUT OF THE CFO OF ALPHABET, RUTH PORAT, THE OUTGOING CEO. STILL SITTING WITH THE COMPANY. LET'S TURN OUR ATTENTION TO ANOTHER ONE OF THE MAGNIFICENT SEVEN THAT HAS NOT BEEN SO MAGNIFICENT THIS YEAR, TESLA. THE ONLY DECLINE
2024-07-25 22:40
