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Broadcom Slides by Most in More Than a Year on AI Outlook Miss · Bloomberg Intelligence

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  Speaker 2: Let's bring in Man deep Seeing, our global tech research
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  Speaker 2: head here at Bloomberg Intelligence to talk more about what
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  Speaker 2: we're hearing from a company like Broadcom, who sticker, by
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  Speaker 2: the way, is Abygo, So it always gets confusing.
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  Speaker 3: It does Aago.
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  Speaker 2: That's what it used to be before it was renamed Broadcam.
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  Speaker 2: I didn't know that hok Ten runs Broadcom formerly Avago.
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  Speaker 2: Is he someone who tends to be conservative in his outlook?
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  Speaker 2: I mean this was a disappointing outlook for investors who
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  Speaker 2: wanted more. But is he by nature conservative? Could that
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  Speaker 2: be part of it?
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  Speaker 4: I would characterize it slightly differently. He's not like Jensen,
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  Speaker 4: who really would always you know, go big in terms
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  Speaker 4: of his numbers, and he will always talk trillions hopped in.
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  Speaker 4: On the other hand, is more I would say grounded
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  Speaker 4: in the sense like yes, he would talk in terms
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  Speaker 4: of gigawatts and you know how he has got more
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  Speaker 4: customers now, but he won't make any bold bets around
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  Speaker 4: you know, four trillion, five trillions, So we didn't hear
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  Speaker 4: those sort of numbers. But look, overall, I thought the
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  Speaker 4: print was solid. Whenever you see, you know, valuations really
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  Speaker 4: go up so much in anticipation of good earnings. You
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  Speaker 4: could say that Byside Bogie was higher and they didn't
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  Speaker 4: live up to their estimates. But to me, this is
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  Speaker 4: a company that's growing top line over sixty percent and
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  Speaker 4: it's going to do that at least for the next
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  Speaker 4: two to three years. That's very solid.
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  Speaker 2: So is this a company that is setting the bar low?
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  Speaker 2: And is that the way that perhaps some of these
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  Speaker 2: hardware companies need to be going into earnings announcements setting
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  Speaker 2: the bar low so that they can easily top it
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  Speaker 2: and then kind of wow people at the end of
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  Speaker 2: the day.
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  Speaker 4: Yes. And also everyone is trying to triangulate here. If
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  Speaker 4: Google is doing more business with Entropic, and Entropics backlog
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  Speaker 4: is two hundred billion, should Broadcom be getting a piece
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  Speaker 4: of that pie because that's definitely not going to Nvidia.
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  Speaker 4: Or if it's going to Nvidia, then is it coming
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  Speaker 4: at the expense of broad comment. So you know that
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  Speaker 4: two hundred billion dollar number was so big coming from
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  Speaker 4: Entropic that everyone was modeling. You know, Broadcom should be
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  Speaker 4: the obvious beneficiary because they make most of Google TPUs.
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  Speaker 4: That wasn't evident in the guidance last night where they
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  Speaker 4: said they have six XPU customers now and you know
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  Speaker 4: they will do up to ten gigawats in twenty twenty seven,
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  Speaker 4: and it's going to ramp up very nicely. But there
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  Speaker 4: wasn't that sort of lift, that two hundred billion dollar
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  Speaker 4: backlock converting to probably a bigger estimate than what they
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  Speaker 4: had guided to previously.
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  Speaker 3: It's Broadcom, then they make good chips. I mean, look,
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  Speaker 3: if it's a good chip maker, I'm binding on the
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  Speaker 3: back today.
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  Speaker 4: Look at the entire Google TPU ecosystem is all made
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  Speaker 4: by Broadcom chips. Like Google doesn't make it sound chips,
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  Speaker 4: so it does it in partnership with Broadcom and now Entropic,
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  Speaker 4: which is the leading frontier model that was all trained
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  Speaker 4: on Google TPUs, and Entropic gave a two hundred billion
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  Speaker 4: dollar contract for Google TPUs that's going to go through
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  Speaker 4: twenty thirty. So in theory, Broadcom should be a major
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  Speaker 4: beneficiary of that vist. Well, they didn't erase their guidance.
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  Speaker 4: Everyone is saying, you already got you told me this
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  Speaker 4: ninety days back in the last ninety days, this entropic
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  Speaker 4: contract came into the scene. Why are you not lifting
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  Speaker 4: your guidance more? And it happens all the time.
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  Speaker 2: Okay, So that's story with Broadcom, and it sounds like
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  Speaker 2: it is specific to Broadcom rather than applicable to the
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  Speaker 2: rest of the AI world because of that anthropic announcement.
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  Speaker 2: What about CrowdStrike The shares are down about six point
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  Speaker 2: seven percent, modest sales guidance again something that didn't live
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  Speaker 2: up to investor expectations.
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  Speaker 4: Yeah, again a case of valuations front running a lot
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  Speaker 4: of the good news. And they conceded, you know, clearly
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  Speaker 4: coding agents is the big driver when it comes to
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  Speaker 4: AI use and for a company like CrowdStrike that does cybersecurity,
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  Speaker 4: they don't have as much exposure to coding agents being
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  Speaker 4: used more and more in terms of the data security
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  Speaker 4: or you know, providing cybersecurity around coding agents. They said
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  Speaker 4: they are ramping up AI products, but then they were
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  Speaker 4: more focusing on general AI use case, whereas right now,
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  Speaker 4: you know, eighty percent of incremental spend is going towards
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  Speaker 4: coding agent, and they didn't really all out that as
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  Speaker 4: being a driver of their revenue. So you know, the
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  Speaker 4: market picks these little things where they would measure the
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  Speaker 4: bullishness of a company in terms of how much they're
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  Speaker 4: raising estimates as well as what is it that market
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  Speaker 4: is fixated on right now? It's coding agents and entropic. Well,
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  Speaker 4: if you're not telling me that story and that's not
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  Speaker 4: your key focus on their earnings call, then people may
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  Speaker 4: be disappointed when the valuation is so rich.
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  Speaker 1: Stay with us.
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  Speaker 3: Boy, it's just all about equity markets, new issuance with
• 5:52
  Speaker 3: that monster monster issuance of secondaries or not secondary stuck,
• 5:56
  Speaker 3: but I fall on offering from Google Market to stop
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  Speaker 3: that up. No problem. SpaceX hitting the road today for
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  Speaker 3: their IPO, looking the price arguably ideally a week from
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  Speaker 3: today and then trade next Friday, So let's see what's
• 6:09
  Speaker 3: happening at their new issue marketing exit. Then we have
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  Speaker 3: the AI trades coming after that. Those IPOs are going
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  Speaker 3: to be monsters. Well, Billy lipsholds, he's busy these days,
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  Speaker 3: senior equities reporter for Bloomberg News, trying to make head
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  Speaker 3: and shoulders out of this whole thing. Billy talk to
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  Speaker 3: those first about SpaceX. I mean, there's so many aspects
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  Speaker 3: to which are fascinating. A. It's space be it's elon.
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  Speaker 3: See the total magnitude of the underwriting seventy five large
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  Speaker 3: on a maybe a one point eight trillion market capitalization.
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  Speaker 3: One of the where are we did they start the roadshow?
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  Speaker 3: Are they starting the road show today?
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  Speaker 5: Meetings started today, Calls and first rea interactions with investors
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  Speaker 5: formally started today. It's kind of weird. They went a
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  Speaker 5: bit ahead of schedule. Normally you need fifteen days from
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  Speaker 5: the public flip to the start of marketing. They went
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  Speaker 5: yesterday setting a fixed price range. Our understanding is that
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  Speaker 5: teed them up to start engaging with folks in Australia
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  Speaker 5: and Asia this morning, as opposed to them being kind
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  Speaker 5: of stuck on a one day delay because the deal
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  Speaker 5: is again a bit truncated, expected to price next Thursday.
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  Speaker 5: So they are talking to investors. This has been the
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  Speaker 5: i'd call it, worst kept secret in capital market's history.
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  Speaker 5: So they've had one on one meetings, they've had ttw's,
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  Speaker 5: they've been meeting with investors, they've hosted meetings at Starbase,
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  Speaker 5: they've hosted meetings out in California. So it's one of
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  Speaker 5: those circumstances where if you are surprised by anything you're
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  Speaker 5: hearing right now, you haven't been doing your work.
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  Speaker 3: So are we. I guess the issue is Elon part
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  Speaker 3: of the sales pitch, because if I'm a portfolio manager,
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  Speaker 3: in my mind, it's one hundred percent a bet on Elon,
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  Speaker 3: that's it. And if I don't hear and see and
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  Speaker 3: feel the vision from him, I'm not trying write that
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  Speaker 3: pick of check. What do we know?
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  Speaker 5: We haven't heard if Elon is or isn't part of
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  Speaker 5: these individual meetings. Now, what we do know is the
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  Speaker 5: seventeen minute video that kind of road show was just
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  Speaker 5: CFO Brett Johnson. We do know that Johnson and Gwen
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  Speaker 5: Shotwell will be meeting with Jamie Diamond for interactions around
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  Speaker 5: retail later this evening. Bank of America also hosting an
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  Speaker 5: event with those two. Again, our understanding is Elon is
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  Speaker 5: not part of those conversations. When we look back to
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  Speaker 5: the trip that SpaceX put together where they run it
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  Speaker 5: out I believe a seven forty seven and took a
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  Speaker 5: few hundred of the biggest money managers down to Star Bas.
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  Speaker 5: Elon did make an appearance. He spoke from my understanding,
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  Speaker 5: for about thirty minutes. But for all intents and purposes,
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  Speaker 5: what we've heard from bankers is it's very much CFO
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  Speaker 5: Brent Johnson's show. Does that change, how does that ev
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  Speaker 5: all over? The coming week will be interesting interesting.
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  Speaker 3: Do we know whether they're going again you're talking about
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  Speaker 3: Asia and Australia. Do we know whether they're going to London?
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  Speaker 3: That's kind of another financial global hub.
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  Speaker 5: The terms we've seen center on the US. The one
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  Speaker 5: thing to keep in mind is that again we know
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  Speaker 5: investors from around the world trip to Starbas. We know
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  Speaker 5: that Elon has had interactions so the road show again,
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  Speaker 5: they have a fixed price, have a fixed valuation. From
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  Speaker 5: our understanding from bankers, it's really kind of the line
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  Speaker 5: is set, drawn to the sand, the stage is set.
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  Speaker 5: It's a question of how much you're in for or
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  Speaker 5: not in for at this point as opposed to a
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  Speaker 5: more traditional IPO where you know, the CEOCFO management team
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  Speaker 5: is kind of jet setting.
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  Speaker 3: Around the world. Interesting one of the there's so many
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  Speaker 3: interesting aspects to this transaction obviously, but one of them
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  Speaker 3: is kind of governance. If you're a public shareholder, you're
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  Speaker 3: basically handing over the keys completely to Elon Musk. Super
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  Speaker 3: voting stock gives them complete control of this company. I
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  Speaker 3: think he's probably learned a few things from Tesla in
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  Speaker 3: terms of that. Is there any pushback on that? Do
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  Speaker 3: we hear in any of that from investors?
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  Speaker 5: We've seen pushback from you know, third party entities. We've
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  Speaker 5: seen pushback and heard from different kind of groups that
• 9:46
  Speaker 5: are you know, upset about things like the fast track
• 9:49
  Speaker 5: entry rule for the NASDAQ one hundred, the S and
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  Speaker 5: P five hundred changing their rules. When I talk to
• 9:54
  Speaker 5: investors again, if you invested in Tesla, you believe in
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  Speaker 5: Elon musks vision for robots and autonomous vehicles. If you're
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  Speaker 5: investing in SpaceX to your point, you're investing in Elon's vision.
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  Speaker 5: Is it a bit scary from some investors perspective that
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  Speaker 5: you're kind of all in on a guy who is
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  Speaker 5: the only person who can remove himself. Yes, but if
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  Speaker 5: you've made millions of dollars on Tesla, it's hard to
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  Speaker 5: say you want to take your money and go home now.
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  Speaker 1: Yeah.
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  Speaker 3: And one of the things again, if fire or portfolio mansion.
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  Speaker 3: One of the millions of questions I've had for Elon
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  Speaker 3: Musk is where's your tension, because it's it's wandered in
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  Speaker 3: the past, you know, going into government with those and
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  Speaker 3: how do you allocate your time between Tesla and and
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  Speaker 3: all your other things. I would like to think that
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  Speaker 3: this is the priority for Elon Musk is that's something
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  Speaker 3: that we've heard from investors.
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  Speaker 5: Investors have pointed to that, And the inevitable next point is, well,
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  Speaker 5: he now has super voting on SpaceX. This whole notion
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  Speaker 5: of merging SpaceX with Tesla. Some point down the road,
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  Speaker 5: Elon seemingly has endorsed it. What does that look like?
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  Speaker 5: Is that something that really comes to fruition Again, the
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  Speaker 5: big question around SpaceX is not only the governance issue,
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  Speaker 5: but truly the capex needed for AI for data centers
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  Speaker 5: in space. For this notion that they're going to mine
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  Speaker 5: asteroids is tens, if not hundreds of billions of dollars.
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  Speaker 5: How do you actually finance that? And what does it
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  Speaker 5: look like in the next year and even the next decade.
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  Speaker 3: And what's the lockup again? Is unique lockup?
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  Speaker 5: There's a unique lockup. Basically more shares can be unlocked
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  Speaker 5: just after earnings and then Elon is locked up for
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  Speaker 5: a full year. One of the things that was interesting
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  Speaker 5: talking to folks on the byside is this whole kind
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  Speaker 5: of deal has come together, was well, Elon never really
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  Speaker 5: sold Tesla, and if his whole vision is to merge
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  Speaker 5: the two together, he's not going to sell a year
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  Speaker 5: or twenty years from now. But they have had some
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  Speaker 5: unique structures where it's tied to performance, it's tied to
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  Speaker 5: kind of expedite and getting more shares available for trading.
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  Speaker 5: Stay with us.
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  Speaker 2: More from Bloomberg Intelligence coming up after this.
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  Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live
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• 12:08
  Speaker 3: We want to continue the tech discussion, we can do
• 12:10
  Speaker 3: that with Gene Monster managing partner at a deep order
• 12:12
  Speaker 3: asset management. Gene got to start with the big one here, SpaceX.
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  Speaker 3: What's your call to your clients.
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  Speaker 6: This is a fundamental company to own for the long term,
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  Speaker 6: and let's just skip all the noise around what's happening
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  Speaker 6: with the IPO, the trading over the next month. There's
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  Speaker 6: a lot of dynamics in that. My sense is that
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  Speaker 6: it probably moves up and then might move off a
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  Speaker 6: little bit as some of those lockups get released. But
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  Speaker 6: I think what's most important is where this company is going.
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  Speaker 6: And like him or not, Elon is a generational founder
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  Speaker 6: and what he's put together in terms of building a
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  Speaker 6: sovereign AI company that's everything from chips to energy distribution,
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  Speaker 6: that piece is unique. And if we take the approach
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  Speaker 6: that having vertical or sovereign AI is a competitive advantage
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  Speaker 6: because you can innovate faster and distribute faster. If that
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  Speaker 6: is true and you believe that AI is going to
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  Speaker 6: ultimately be foundational to humanity, I think this really sets
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  Speaker 6: up as one of those generational companies to own, and
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  Speaker 6: so you kind of got to look at the conversation
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  Speaker 6: in two pieces. But this company really does stand alone
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  Speaker 6: when it comes to its unique set of assets, and
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  Speaker 6: it's I think, just a very exciting time in tech.
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  Speaker 3: You know, I was talking to some cell side shops
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  Speaker 3: and it appears like the aerospace annals are going to
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  Speaker 3: cover this name. I'm wondering how the company, how the
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  Speaker 3: unwriters are going to position it. You kind of gave
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  Speaker 3: us at the AI angle here, it's a space company.
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  Speaker 3: I don't know what this thing is. We're talking about
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  Speaker 3: putting people on Mars. It's tough to position, don't you think.
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  Speaker 6: I think that it's tough to position if you kind
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  Speaker 6: of look at where they have been, I think over
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  Speaker 6: the long haul, thinking about kind of their rocket business,
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  Speaker 6: and I think that if you look at what they've
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  Speaker 6: done over the last one and three years, I think
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  Speaker 6: it's easier and easy to position. Also, if you think
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  Speaker 6: about what is at the core of Elon's most passion,
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  Speaker 6: which is AI. And he's had electrification, he's had other businesses,
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  Speaker 6: but really AI is kind of his violin concerto. And
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  Speaker 6: so when you think about this one trillion dollar revenue
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  Speaker 6: target that they have for twenty thirty, they're going to
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  Speaker 6: do what's it forty billion this year. I mean, that's
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  Speaker 6: a meaningful step up as an understatement. But when you
• 14:33
  Speaker 6: think about that that trillion, they didn't break out in
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  Speaker 6: the S one where the contribution comes from. But my
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  Speaker 6: sense is the majority of that is going to be
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  Speaker 6: somehow AI related, whether it's connectivity, subscription services, third parties
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  Speaker 6: like Anthropic using some of their capacity. So I think
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  Speaker 6: that the AI piece is going to be what this
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  Speaker 6: company is all about. So I want to go back
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  Speaker 6: to your earlier comment, which is this company is going
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  Speaker 6: to be covered by space analysts and and kind of
• 15:04
  Speaker 6: you know that that side of it. I think it's
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  Speaker 6: a miss and it reminds me back in in uh,
• 15:09
  Speaker 6: you know, two thousand and four, two thousand and five,
• 15:11
  Speaker 6: I was an analyst that was covering consumer tech and
• 15:16
  Speaker 6: it was the first to pick up Apple as a
• 15:18
  Speaker 6: kind of a device company at the time, just on
• 15:20
  Speaker 6: the heels of the iPod and the entire coverage universe.
• 15:25
  Speaker 6: Now keep in mind, Apple is a like a four
• 15:27
  Speaker 6: billion dollar market cap at the time, but the entire
• 15:31
  Speaker 6: coverage was based on them being competitors with HP and Compact,
• 15:35
  Speaker 6: and it just missed the point. So I think what
• 15:37
  Speaker 6: we will see here is this narrative around specifically, is
• 15:42
  Speaker 6: that their biggest revenue opportunity is in AI, and I
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  Speaker 6: think that that's that's where it's going to be positioned.
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  Speaker 6: I would just say this is you know, I mentioned
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  Speaker 6: all the you know, the you know, this breathtaking growth
• 15:53
  Speaker 6: that's expected, and how unique these assets are. I think
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  Speaker 6: the biggest challenge for SpaceX is this is a company
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  Speaker 6: that a lot of the employees are passionate about space.
• 16:03
  Speaker 6: I mean, if you look at Starbase, I mean this
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  Speaker 6: whole concept that was down for the one of the
• 16:07
  Speaker 6: Scrubb launches recently, and the concept of Starbase I think
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  Speaker 6: is just really surprised me. I think it's underappreciated. The
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  Speaker 6: city that they have built and will continue to expand.
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  Speaker 6: But I think one of the challenges is just in
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  Speaker 6: terms of culture. You know, imagine being an engineer and
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  Speaker 6: you've moved your family into the middle of nowhere in Texas.
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  Speaker 6: You're living on a city that essentially tests that SpaceX
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  Speaker 6: has made, and you've had this passion around going to Mars,
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  Speaker 6: and then you go a public on this inspiration of
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  Speaker 6: being an AI first company. There's that piece to it,
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  Speaker 6: But beyond that, I think that AI is really core
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  Speaker 6: to that, and I think that's where the followship from
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  Speaker 6: investors is going to lead to in the months to come.
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  Speaker 2: SpaceX is in the portion of its process where it
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  Speaker 2: is holding its roadshow for investors, and what we know
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  Speaker 2: of it so far is that it has a seventeen
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  Speaker 2: minute video presentation in which the CFO, Brett Johnson appears.
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  Speaker 2: What do you hope to learn from this roadshow or
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  Speaker 2: do you have all the information that you need in
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  Speaker 2: order to move forward with how you believe this company's positioned?
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  Speaker 6: Well, I think I mean I've been studying the company
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  Speaker 6: for a long time. I think I've got a good
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  Speaker 6: sense of Undoubtedly, I'm going to watch the presentation. What
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  Speaker 6: I do hope to learn is more about how they're
• 17:23
  Speaker 6: communicating this kind of acceleration and growth, because that ultimately
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  Speaker 6: comes down to how you know the value is going
• 17:31
  Speaker 6: to be created over the long term. And they don't
• 17:33
  Speaker 6: have to, of course hit those numbers, but that's the specifics.
• 17:36
  Speaker 6: Is this trillion dollar number? I think they talked about
• 17:38
  Speaker 6: a forty two trillion dollar market opportunity, but just some
• 17:41
  Speaker 6: more specifics around that. Undoubtedly he will be asked around that,
• 17:45
  Speaker 6: you know, give us pockets, is you know of that
• 17:48
  Speaker 6: trillion dollars is a two hundred billion and cloud getting
• 17:51
  Speaker 6: served served to third parties?
• 17:54
  Speaker 4: Is it?
• 17:54
  Speaker 6: You know, their their launch business. Some of the kind
• 17:57
  Speaker 6: of the details around how to get there right whatever
• 17:59
  Speaker 6: has answer is the street is going to run it
• 18:03
  Speaker 6: through the Elon filter and he will undoubtedly stand up
• 18:07
  Speaker 6: and see these are the real numbers. These are numbers.
• 18:09
  Speaker 6: Will feel confident and when you think about putting the
• 18:13
  Speaker 6: filter on those numbers, we have to do some of that.
• 18:16
  Speaker 6: When we think about it, just think about what they've
• 18:18
  Speaker 6: done over the past month and a half. I mean,
• 18:20
  Speaker 6: they've done this anthropic the O, they're launching rockets, they're
• 18:23
  Speaker 6: preparing for an IPO. This company, i can say, is
• 18:26
  Speaker 6: just an intensity level that can do things that are
• 18:29
  Speaker 6: very hard to do. So what I'm telling, what I'm
• 18:32
  Speaker 6: saying is don't put it through too much of a filter.
• 18:35
  Speaker 4: Jillion number.
• 18:37
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