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DOJ Sues Apple, Reddit IPO · Bloomberg Intelligence

• 0:02
  Speaker 1: Bloomberg Audio Studios, podcasts, radio news. You're listening to the
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  Speaker 1: Bloomberg Intelligence podcast. Catch us live weekdays at ten am
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• 0:25
  Speaker 2: The other big story here in the world of technology
• 0:27
  Speaker 2: is Apple. The US Justice Department and sixteen Attorneys General
• 0:32
  Speaker 2: sued Apple, accusing the iphonemaker violating antitrust laws by blocking
• 0:37
  Speaker 2: rivals from accessing hardware and software features on its popular devices.
• 0:41
  Speaker 2: The stocks trading off about three and a half percent
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  Speaker 2: here today. It's certainly been an underperformer versus some of
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  Speaker 2: the other big tech names that are really riding in
• 0:48
  Speaker 2: the wave of AI. There's concern here about Apple, not
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  Speaker 2: just with these legal issues, but also with China as
• 0:54
  Speaker 2: well in terms of demand and supply chain. So let's
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  Speaker 2: check it out with anarag Rana along with man Deepca.
• 1:00
  Speaker 2: He's our leader of our technology coverage at Bloomberg Intelligence.
• 1:03
  Speaker 2: An Rock, what do you make of this latest legal
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  Speaker 2: challenge from the US Justice Department against Apple.
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  Speaker 3: So it's been long time coming. There's been, you know,
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  Speaker 3: so much pressure, legal pressure on them from all over
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  Speaker 3: the world. Apple is a closed system. Everybody knew that,
• 1:18
  Speaker 3: so but you know, it's going to be fun to
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  Speaker 3: see how these things get proof that they were anti competitive.
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  Speaker 3: But having said that, big overhang on the stock headline risk,
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  Speaker 3: nothing good going on for them right now, iPhone saying
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  Speaker 3: is blowing down, So there's this is going to be
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  Speaker 3: a tough year for Apple.
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  Speaker 4: What paulm I were talking about earlier is that what
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  Speaker 4: problem is this trying to solve for me as a consumer?
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  Speaker 3: Basically saying, you know, we have a closed system and
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  Speaker 3: you can't transact outside the system. But Apple would argue
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  Speaker 3: that that's what makes the iPhone and the Apple ecosystem
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  Speaker 3: far safer than the open source or the open ecosystems.
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  Speaker 3: And that's really what a lot of the fight is about.
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  Speaker 4: Frankly, And it's also like it's easier, Like it makes
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  Speaker 4: our life, it's easier.
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  Speaker 5: Don't we want that one click?
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  Speaker 2: Just just back on the redis story indication a little
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  Speaker 2: bit higher here. They raised the indication.
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  Speaker 5: Forty four to forty eight. It was forty two to
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  Speaker 5: forty six.
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  Speaker 2: So pushing that indication up a little bit will stay
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  Speaker 2: on top of that. So we've seen this play before,
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  Speaker 2: and I know you have ANURAG with your research coverage
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  Speaker 2: of Microsoft. Is this something where Apple, you know, over
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  Speaker 2: the next several five ten years, pay some fines, write
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  Speaker 2: some checks, maybe put some workarounds in their business. How
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  Speaker 2: do you think this plays out for the company?
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  Speaker 3: I think you called it right. That's exactly what's going
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  Speaker 3: to happen. And it could even pressure their services revenue
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  Speaker 3: a little bit, their app store fee. They'll have to
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  Speaker 3: figure out to reduce that in certain areas. But I
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  Speaker 3: would argue that they have the capacity to do make
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  Speaker 3: it from you know, advertising revenue that they really don't
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  Speaker 3: generate that much at this point. So you know, the
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  Speaker 3: ecosystem is there. I don't think you can shake that.
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  Speaker 3: But it's going to be, as I said, a headline
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  Speaker 3: risk for the stock for for a long time.
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  Speaker 4: Now, what do you think resolves it? Like if they
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  Speaker 4: fix this issue is or something else? What else is
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  Speaker 4: going to happen? How when is the bottom for this?
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  Speaker 3: Yeah, I think it's going to be a mix of
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  Speaker 3: a little bit of fines plus some compression in the
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  Speaker 3: feast that they charge. But I don't think any structural
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  Speaker 3: change is going to come out of how Apple does it.
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  Speaker 4: I mean, that doesn't sound good though, does it? Like
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  Speaker 4: that's that feels like a big overhang to have to reevaluate.
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  Speaker 2: Now, this is something that and Honor I've remember is this.
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  Speaker 2: I mean, this is something that I think the market
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  Speaker 2: learned from the Microsoft See situation, which was a twenty
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  Speaker 2: twenty five year issue that at some point and even
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  Speaker 2: to the tobacco industry, you just kind of power through
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  Speaker 2: this this overhang. What's the company saying on I mean
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  Speaker 2: when when they talk about these issues.
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  Speaker 3: Yeah, they're going to find that. And you know, it
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  Speaker 3: would have been a different story if iPhone sales were
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  Speaker 3: really good. But the problem is iPhone sales are also
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  Speaker 3: not good. The product sales are not there, so there
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  Speaker 3: isn't much to hangle your hat on. If you're an investor,
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  Speaker 3: you're looking at, you know, two percent growth in terms
• 3:54
  Speaker 3: of top line, maybe five percent bottom or EPs. So
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  Speaker 3: it's not that exciting right now. Now that may change
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  Speaker 3: if by summer roared by the end of this year,
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  Speaker 3: we find out they've done to deal with Google and
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  Speaker 3: they are able to use Google's large language model on
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  Speaker 3: their phones, and that leads to foster refresh cycle of
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  Speaker 3: the iPhone so there is some hope, but you know,
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  Speaker 3: there is a lot of different butts in between.
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  Speaker 4: So if I'm looking at this valuation real quick, is
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  Speaker 4: it worth twenty six times estimated price to earnings?
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  Speaker 3: There I try not to look at estimated earnings. I
• 4:25
  Speaker 3: try to look at free cash flow one hundred plus
• 4:28
  Speaker 3: billion growing at three to five percent for a long
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  Speaker 3: period of time. You know, there isn't a company that
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  Speaker 3: has better financials than this one. So I you know,
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  Speaker 3: if I was to look at from that point, you know,
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  Speaker 3: the yardstick is a bit different.
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  Speaker 5: Yeah, it's interesting.
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  Speaker 2: I think this June Developer conference is going to be
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  Speaker 2: key for Apple. They need to try to get an
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  Speaker 2: AI narrative.
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  Speaker 5: Out there for the company.
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  Speaker 2: On rag Rana, thanks so much for joining us on
• 4:51
  Speaker 2: a rag Ruana Senior Technology annels for Bloomberg Intelligence. Just
• 4:55
  Speaker 2: talking about the Justice Department suing Apple. They got some
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  Speaker 2: issues that they're gonna have to work Workaround's going to
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  Speaker 2: be a long drawn out process, as they typically are.
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  Speaker 2: The question is, you know, how does the stock perform
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  Speaker 2: with that overhang.
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  Speaker 1: Just say Alexa play Bloomberg eleven thirty.
• 5:28
  Speaker 2: All right, now we all turn to Reddit. Here Man
• 5:31
  Speaker 2: deep sing joints and sees a senior technology anels for
• 5:33
  Speaker 2: Bloomberg Intelligence.
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  Speaker 5: Reddit.
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  Speaker 2: Is this just another social media company, like a Pinterest,
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  Speaker 2: like a I don't know what, like a smaller meta.
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  Speaker 5: What is Reddit?
• 5:46
  Speaker 6: Yeah?
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  Speaker 7: I think the best way to think about Reddit is
• 5:50
  Speaker 7: it's very similar to Twitter in the sense that it
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  Speaker 7: is a community interest based platform. But the difference is
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  Speaker 7: obviously if you've heard about Wall Street bets and you
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  Speaker 7: know how meme stocks really originated and the whole trend
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  Speaker 7: originated on Reddit. So it's got a different type of
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  Speaker 7: community aspect to it. And in terms of user base,
• 6:13
  Speaker 7: it's very similar to Twitter or pinterest or Snapchat, so
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  Speaker 7: it's of the same size. The one big difference is
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  Speaker 7: reddits engagement when it comes to DAUS to MAUS, which.
• 6:25
  Speaker 5: Is daily active users to monthly after users.
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  Speaker 8: You want them to be more active, right exactly, And
• 6:30
  Speaker 8: so that's where they have struggled over the course of
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  Speaker 8: their fifteen to Eighteen years is years, folks, not months.
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  Speaker 4: Yeah, it's been like I mean, haven't they been around
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  Speaker 4: for like twenty years?
• 6:41
  Speaker 7: They have been around for eighteen years.
• 6:43
  Speaker 4: I mean something.
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  Speaker 5: I'm still still not making money, I know, that's the thing.
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  Speaker 4: So I'm just wondering, like what they want to get
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  Speaker 4: out of this. What would success look like for this
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  Speaker 4: IPO based in the fact that they're an unprofitable social
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  Speaker 4: media company. That's not like a popular sentence to say, yeah, and.
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  Speaker 7: Social media companies, I mean, the ones that have done
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  Speaker 7: well are the ones with scale and notably meta other
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  Speaker 7: ones snap Pinterest, Stock hasn't gone anywhere if you look
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  Speaker 7: at you know, long term eight to ten years, these
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  Speaker 7: stocks haven't. Yes, they had their way up during the pandemic,
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  Speaker 7: but then they came down sharply. So clearly profitability is
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  Speaker 7: a concern for a lot of the smaller social media names,
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  Speaker 7: and Reddit is no exception. The thing that excites me
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  Speaker 7: the most is their data licensing part. I think that's
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  Speaker 7: the part. The timing of it is quite good with
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  Speaker 7: the Genai wave and everyone focusing on these large language models.
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  Speaker 7: I mean, at the end of the day, these llms
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  Speaker 7: have to be trained and retrained every two three months.
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  Speaker 7: And the way you can retrain these algorithms is through
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  Speaker 7: the corpus of data like Reddit possesses or like Twitter possesses,
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  Speaker 7: And that to me is something that every company will
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  Speaker 7: license from them. We know Google already has a two
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  Speaker 7: hundred million dollar license. I wouldn't be surprised if Apple
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  Speaker 7: or Microsoft or others start doing the same, and there
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  Speaker 7: will be a gold rush for training data at some point,
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  Speaker 7: like there is for semis.
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  Speaker 5: So a couple of.
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  Speaker 2: Hours ago, right an hour ago, we had Men Deep
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  Speaker 2: in here talking about Reddit to Bailey and I and
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  Speaker 2: I Billy, and I asked them to pitch us, like
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  Speaker 2: we're a couple of head fund man and why we
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  Speaker 2: should buy this thing.
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  Speaker 5: And I did put in ten percent orders. So we'll
• 8:19
  Speaker 5: see how I do today.
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  Speaker 2: Say, but it is all about that data aspect, is
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  Speaker 2: Men Deep was highlighting. And so if you're an investor,
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  Speaker 2: I think you if you're buying stock this morning, I
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  Speaker 2: think you have to buy off that this is a
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  Speaker 2: viable aspect to the investment story, that in fact they
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  Speaker 2: can monetize their data to people that need you know,
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  Speaker 2: that are running these larger language models.
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  Speaker 4: So this would be like a third derivative of AI. Yeah,
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  Speaker 4: is that a fair thing to say?
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  Speaker 7: And right now everyone is too fixated on semis and
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  Speaker 7: getting the chips. In the end, it comes down to
• 8:50
  Speaker 7: how does AI solve your problem? Whether it's a chatbot
• 8:53
  Speaker 7: or a copilot. What does a copilot need to be intelligent?
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  Speaker 7: It needs data?
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  Speaker 4: See this is so interesting because I feel like AI
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  Speaker 4: conversation is now broadening out to different sectors. Paul and
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  Speaker 4: I talked yesterday. I was just in Houston, and all
• 9:04
  Speaker 4: the energy companies are talking about is power demand for
• 9:07
  Speaker 4: the data centers for AI? And there just isn't enough
• 9:10
  Speaker 4: and like how to solve for that? So now you
• 9:12
  Speaker 4: have the AI craze going to social media, and you
• 9:14
  Speaker 4: have it going to energy and then chips and then software.
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  Speaker 4: It's it's kind of.
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  Speaker 5: Cool, it is, And that's why I.
• 9:21
  Speaker 4: Kind of cool. AI is kind of cool. There we
• 9:24
  Speaker 4: go drop the mind.
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  Speaker 5: I think this Internet thing is it's just it's just
• 9:26
  Speaker 5: gonna pass.
• 9:27
  Speaker 2: Actually, I actually gave that advice once to an analyst
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  Speaker 2: colleague mind who was following the newspaper industry and they
• 9:32
  Speaker 2: asked him and he's a highly ranked analist, and there's
• 9:35
  Speaker 2: this little thing called America Online out there and some
• 9:37
  Speaker 2: stuff that was coming along Netscape and things like that,
• 9:40
  Speaker 2: and they wanted him to drop his coverage where he
• 9:42
  Speaker 2: had a franchise and go do this internet thing. You
• 9:45
  Speaker 2: know what, I told him, stick with newspapers, baby, to be.
• 9:49
  Speaker 4: Fair, to be fair. Where's Netscape?
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  Speaker 5: Yeah, but I mean aol.
• 9:55
  Speaker 2: He Fortunately he ignored me and went on to great
• 9:58
  Speaker 2: fame and fortune. So good for landing. Okay, So what's
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  Speaker 2: the feeling out there about digital advertising in general, because
• 10:06
  Speaker 2: that still is, at least in the near term, the
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  Speaker 2: big driver for Reddit.
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  Speaker 7: It is, and I think when it comes to ads, clearly,
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  Speaker 7: Meta has a clear dominance when it comes to showing
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  Speaker 7: the users the most targeted ads. That's where Twitter struggle.
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  Speaker 7: That's where I think Reddit struggles to an extent as well,
• 10:26
  Speaker 7: is that ad targeting and advertisers go to platforms with
• 10:30
  Speaker 7: scale and the best at targeting. So overall environment seems
• 10:34
  Speaker 7: to be getting better. But what Meta has going for
• 10:37
  Speaker 7: them right now is they're actually applying large angrod models
• 10:41
  Speaker 7: for improving their ad targeting. It's not possible for a
• 10:45
  Speaker 7: company of Reddit scale or Twitter scale or Snap scale
• 10:48
  Speaker 7: to do that because they just don't have that kapex
• 10:51
  Speaker 7: investment going in terms of applying large angroid models. So
• 10:55
  Speaker 7: that's what it comes down to, scale of investments.
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  Speaker 4: Okay, before we let you go, they also put like
• 11:01
  Speaker 4: what eight percent aside to like regular Reddit users. Are
• 11:04
  Speaker 4: they gonna buy it? Are they gonna short? What are
• 11:05
  Speaker 4: they gonna do?
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  Speaker 7: I think, Given again, Wall Street Bets is such a big,
• 11:10
  Speaker 7: powerful community on Reddit, I wouldn't be surprised if they
• 11:12
  Speaker 7: are interested in buying their own stock. And that's where
• 11:15
  Speaker 7: I feel the IPO was priced relatively attractively when it
• 11:19
  Speaker 7: comes to, you know, a first dapop up, I wouldn't
• 11:22
  Speaker 7: be surprised if if you do end up seeing that
• 11:24
  Speaker 7: kind of pop and the eight percent allocation goes to
• 11:27
  Speaker 7: moderators and the advanced using way.
• 11:28
  Speaker 5: I'm glad I don't.
• 11:29
  Speaker 2: I don't have to like moderate the trading this the
• 11:31
  Speaker 2: first few days, like as the bookmaker, because I don't
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  Speaker 2: know what these redditors are gonna do. I don't know
• 11:35
  Speaker 2: if they're gonna go crazy like they do for some
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  Speaker 2: of these other Why would they.
• 11:38
  Speaker 7: Shot their own stocks? Give me one good reason.
• 11:40
  Speaker 2: I agree.
• 11:41
  Speaker 4: They've been talking about like not buying, they've been talking
• 11:43
  Speaker 4: about it though, haven't they.
• 11:45
  Speaker 2: I don't know this scene could it could be one
• 11:48
  Speaker 2: of those things where the you know, the marketmakers like,
• 11:50
  Speaker 2: I don't know where these buyers are coming from, but
• 11:51
  Speaker 2: they're flooding me in with these one hundred chair orders
• 11:53
  Speaker 2: left and right. All right, men Deep saying thank you
• 11:55
  Speaker 2: so much for joining us. Man Deep saying he's a
• 11:57
  Speaker 2: senior tech industry analyst for Bloomberg Intelligence. He doesn't melod in, folks.
• 12:01
  Speaker 2: He comes into the studio just like John Tucker, coming
• 12:04
  Speaker 2: and showing up every day.
• 12:05
  Speaker 5: A big part of life.
• 12:06
  Speaker 9: Is just showing up every day.
• 12:08
  Speaker 4: Ain't that the truth? A big part of life is
• 12:10
  Speaker 4: showing It's just showing up every day.
• 12:14
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• 12:24
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• 12:29
  Speaker 4: Well, we get that economic data that came out about
• 12:31
  Speaker 4: fifteen minutes ago, that was the pmis over at SMP Global.
• 12:35
  Speaker 4: That they came in a little light. So what we
• 12:37
  Speaker 4: like to do with you here is get the guy
• 12:39
  Speaker 4: who did the data right after they dropped Chris Williamson,
• 12:42
  Speaker 4: his chief business economist over at SMP Global Market Intelligence,
• 12:45
  Speaker 4: and he joins us Now, what is my read from
• 12:49
  Speaker 4: the uspmis right now?
• 12:52
  Speaker 10: The April read is one of further solid growth in
• 12:54
  Speaker 10: March ends quite a good first quarter. So we're running
• 12:58
  Speaker 10: at levels that are realy indicted of GDP rising and
• 13:01
  Speaker 10: annualized rate around two percent, which I think matches a
• 13:04
  Speaker 10: lot of other sort of NowCast models. So quite a
• 13:09
  Speaker 10: good quarter. What's interesting is I think the split of data,
• 13:14
  Speaker 10: because we've got signs of demand shifting back towards manufacturing now,
• 13:19
  Speaker 10: which is really doing quite well again. Services growth slipping slightly.
• 13:24
  Speaker 10: It looks like we're seeing some demand shift come back
• 13:26
  Speaker 10: from services towards goods.
• 13:29
  Speaker 2: So on the manufacturing side again, it came into fifty
• 13:32
  Speaker 2: two point five. The consensus was fifty two I'm sorry,
• 13:35
  Speaker 2: fifty one point eight, so well above consensus for this
• 13:38
  Speaker 2: month and a little bit higher than last month as well.
• 13:40
  Speaker 2: So is that simply manufacturer saying, hey, we've taken our
• 13:44
  Speaker 2: inventories down, it's time to start refilling and start making
• 13:46
  Speaker 2: stuff again.
• 13:48
  Speaker 10: No, it's not just that, it's it's overall demand levels
• 13:51
  Speaker 10: as well starting to rise, So the inventory cycle is
• 13:53
  Speaker 10: playing a part in that, but it's also final demand
• 13:57
  Speaker 10: sharing signs of picking up nice So it's a more
• 14:01
  Speaker 10: broad based picture than just turn in the stocking cycle.
• 14:05
  Speaker 10: And if you look beyond that headline PMI, if you
• 14:07
  Speaker 10: look at something like the output index, I mean that
• 14:09
  Speaker 10: was up fifty four point nine.
• 14:11
  Speaker 9: That's really quite a respectable reading. That's the highest since
• 14:13
  Speaker 9: May twenty twenty two.
• 14:15
  Speaker 10: So it really does thing look like production is starting
• 14:17
  Speaker 10: to turn around quite quite nicely.
• 14:19
  Speaker 4: Now, so here's my question then, I mean, let's get
• 14:22
  Speaker 4: to the raid cut situation in the second, but what
• 14:25
  Speaker 4: are prices when it comes to manufacturing and also services?
• 14:29
  Speaker 4: And that really does lead to the FED, right, because
• 14:30
  Speaker 4: if we get cuts, is it just sort of jumpstart
• 14:33
  Speaker 4: demand even more and then jumpstart infletion.
• 14:36
  Speaker 10: Well that's the kicker, yeah, because the price gauges are
• 14:40
  Speaker 10: on the rise again the manufacturing. So we've got two
• 14:43
  Speaker 10: lots of price gauges. They one is input costs and
• 14:45
  Speaker 10: one is their prices that they charge to customers for
• 14:48
  Speaker 10: manufacturing series. All those gauges rose in March coming and
• 14:52
  Speaker 10: say they're costs a rising because of increasing wages as
• 14:55
  Speaker 10: well as the oil and gas prices starting to come
• 14:58
  Speaker 10: through hitting costs is well, so they're passed these on
• 15:02
  Speaker 10: to their customers. So rates the selling price inflation they
• 15:05
  Speaker 10: accelerated really quite sharply, in manufacturing at a thirteen month
• 15:08
  Speaker 10: high now and services at an eight month high now.
• 15:12
  Speaker 10: The peer this overall gauge of selling price inflation is
• 15:16
  Speaker 10: around the highest for a year now. It's done a
• 15:18
  Speaker 10: good job of anticipating where CPI is going to go,
• 15:22
  Speaker 10: and it tracked the upturning the downturn through the pandemic
• 15:25
  Speaker 10: really quite nicely. And this latest reading means that having
• 15:28
  Speaker 10: come down to sort of closed store maybe even passing
• 15:31
  Speaker 10: two percent target, you're climbing back up to a sort
• 15:34
  Speaker 10: of four percent rate again with these numbers.
• 15:37
  Speaker 2: Hey, Chris, based upon the data that you guys see,
• 15:39
  Speaker 2: do you feel like this recent I guess pick up
• 15:42
  Speaker 2: an inflation?
• 15:43
  Speaker 5: Is it short term? Is it just a blip?
• 15:46
  Speaker 2: Or is it maybe something a little bit more longer term?
• 15:49
  Speaker 10: But there's a lot of speculation, isn't there that there
• 15:51
  Speaker 10: might be some seasonality creeping into inflation numbers. At the moment,
• 15:56
  Speaker 10: it's too early to say, is the honest answer. We've
• 16:01
  Speaker 10: seen gas prices come up and the oil price come up.
• 16:04
  Speaker 10: That's feeding through. So it's fairly obvious where that's coming from.
• 16:08
  Speaker 10: The wage growth. I mean that that's still being passed
• 16:12
  Speaker 10: through now that The hope is, of course, and this
• 16:14
  Speaker 10: applies to the other central backs as well as the FED,
• 16:17
  Speaker 10: is that as you get your headline inflation numbers come down,
• 16:21
  Speaker 10: then that feed through to wake away weaker wage negotiations.
• 16:25
  Speaker 10: So there's always going to be a bit of a
• 16:26
  Speaker 10: lag there. So what's hoped is that this little up
• 16:29
  Speaker 10: to him we've got is still a bit of that
• 16:30
  Speaker 10: lag feeding through and as the year goes on, this,
• 16:34
  Speaker 10: as we move into the summer, hopefully you'll see those
• 16:38
  Speaker 10: wage day to come down.
• 16:39
  Speaker 6: Yep.
• 16:39
  Speaker 5: Excellent, Chris, thanks so much for jumping on with us.
• 16:41
  Speaker 5: Really appreciated.
• 16:42
  Speaker 2: Chris Williamson, chief business economist at SMP Global Market Intelligence,
• 16:46
  Speaker 2: joining us from London via zoom.
• 16:48
  Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live
• 16:52
  Speaker 1: weekdays at ten am Eastern on Affle Card, playing Enroud
• 16:56
  Speaker 1: Otto with the Bloomberg Business app. Listen on demand wherever
• 16:59
  Speaker 1: you get your podcast, or watch just Live on you too.
• 17:04
  Speaker 4: I want to get more insight here and sort of
• 17:05
  Speaker 4: how you manage the momentum, how you manage the market.
• 17:08
  Speaker 4: Nicole Web the senior vice president financial advisor at Wealth
• 17:11
  Speaker 4: Enhancement Group, and she joins us, now, okay, you can't
• 17:14
  Speaker 4: get in the way of this momentum, right, No, can't
• 17:17
  Speaker 4: do You buy into it? You do even at these levels.
• 17:20
  Speaker 6: I'm sorry, but you do. And I think this is
• 17:23
  Speaker 6: where it's really It's an interesting moment and it's supported
• 17:27
  Speaker 6: by the breath we're seeing in the rustle, It's supported
• 17:29
  Speaker 6: by credit spreads, it is supported by earnings. You take
• 17:32
  Speaker 6: fed off the table, you still can look at earnings
• 17:35
  Speaker 6: and profitability. And then you look at the forefront of digitization,
• 17:39
  Speaker 6: and you mentioned Micron, and here we see just so
• 17:43
  Speaker 6: clearly the thirst, the hunger for the next leg of AI.
• 17:47
  Speaker 6: And it's interesting so storage speed all of these things.
• 17:53
  Speaker 2: And then we and then we had, you know, for
• 17:54
  Speaker 2: a lot of people. Was another confirming piece of data.
• 17:57
  Speaker 2: Astera Labs comes out public yesterday. The stock just Rips
• 18:01
  Speaker 2: was up seventy percent yesterday on's first day of trading.
• 18:04
  Speaker 2: It's some of the nineteen percent today. Again, I guess
• 18:06
  Speaker 2: you could say, well, it's a cour like one of
• 18:10
  Speaker 2: our reporters sources said, well, of course this sing ripped.
• 18:13
  Speaker 5: My mother could have taken this public, that's how good
• 18:16
  Speaker 5: a story it was.
• 18:17
  Speaker 2: But still it's a great performance. We're going to see
• 18:19
  Speaker 2: with Reddit see how that trades today. But the IPO
• 18:22
  Speaker 2: market is maybe a little bit of a confirming factor here.
• 18:25
  Speaker 6: Yeah, I think the IPO market is really interesting, and
• 18:27
  Speaker 6: I think there's going to be differences in the names
• 18:31
  Speaker 6: that are brought forward. You know, the one thing I
• 18:33
  Speaker 6: want to go back to when we think about going
• 18:35
  Speaker 6: down the cap spectrum, when we think about investors taking
• 18:38
  Speaker 6: bets maybe on names that they don't know at the
• 18:41
  Speaker 6: headline level. In the same way, what we also know
• 18:44
  Speaker 6: intrinsically is that there's been trimming of positions. If you
• 18:47
  Speaker 6: had a META in your portfolio and it was three percent,
• 18:50
  Speaker 6: it's now nine percent, you trimmed that back to five.
• 18:53
  Speaker 6: And so you're hearing some of these mega tech names
• 18:55
  Speaker 6: likened to being atm machines for reinvestment, and so you
• 18:59
  Speaker 6: know the amount of cash that was on the sidelines,
• 19:01
  Speaker 6: and then the trimming of positions, and so you're seeing
• 19:04
  Speaker 6: some of this down the cap weighting momentum trade and
• 19:07
  Speaker 6: even that little bit of fade out that we're seeing
• 19:09
  Speaker 6: in momentum around semis and so when we look to
• 19:12
  Speaker 6: the IPO market, you know, redd, it's going to be
• 19:15
  Speaker 6: a really interesting test case and that it's not profitable.
• 19:18
  Speaker 6: It's been a round for a long time. What is
• 19:20
  Speaker 6: that narrative though? About the deep language that they own,
• 19:24
  Speaker 6: what kind of learning? What can you translate that into?
• 19:27
  Speaker 6: And I think that story is yet to unfold, but
• 19:28
  Speaker 6: we have to see kind of what enthusiasm comes from that.
• 19:31
  Speaker 5: Now we're just.
• 19:32
  Speaker 4: Talking about like Reddit being a third derivative AI play
• 19:35
  Speaker 4: because of the language models needed, So that sort of
• 19:38
  Speaker 4: is different than just hey, your unprofitable social media company
• 19:40
  Speaker 4: at the end of the day. Okay, so help me
• 19:43
  Speaker 4: understand what the next catalyst is going to be. Deutsche
• 19:47
  Speaker 4: Bank was talking over the weekend that you know, maybe
• 19:50
  Speaker 4: we priced in sort of higher growth and higher inflation,
• 19:52
  Speaker 4: higher for longer rates now, so it's really going to
• 19:54
  Speaker 4: be the growth narrative that leads. Others are saying no,
• 19:57
  Speaker 4: straight up fundamental, straight up profit, like what is going
• 19:59
  Speaker 4: to be the now?
• 20:00
  Speaker 6: Yeah, I think that those two things are intrinsically true.
• 20:04
  Speaker 6: We went from a FED pivot. I mean it was
• 20:08
  Speaker 6: called a pivot. I don't know if it was really
• 20:10
  Speaker 6: the pivot, but back in December a little bit, the
• 20:13
  Speaker 6: wording's a little strong for me. Then we went into
• 20:16
  Speaker 6: the momentum of AI and then all of that was
• 20:19
  Speaker 6: supported by earnings, by GDP revisions to the upside above
• 20:23
  Speaker 6: trend growth expectation. You have Viisa who just continues to say,
• 20:27
  Speaker 6: the consumer actually looks pretty good. When we put all
• 20:30
  Speaker 6: of that together, what you get is just this fundamental
• 20:34
  Speaker 6: belief that companies will continue to be profitable, that earnings
• 20:39
  Speaker 6: will be there. We were so unsure of the ten
• 20:42
  Speaker 6: percent earnings per share growth that was baked into the
• 20:45
  Speaker 6: SMP at the beginning of the year, and now that
• 20:46
  Speaker 6: sounds likely, and so you have kind of all of
• 20:50
  Speaker 6: this momentum. The more interesting thing, I think is what
• 20:53
  Speaker 6: is that catalyst to the first pullback here? And then
• 20:55
  Speaker 6: is the pullback of a self fulfilling prophecy for everybody
• 20:58
  Speaker 6: who's been sitting on the side lines feeling like they
• 21:01
  Speaker 6: missed the opportunity, and so it's short lived, And you know,
• 21:04
  Speaker 6: I think that's where I continue to say the same thing.
• 21:07
  Speaker 6: I'm grateful to not be a trader in this market.
• 21:09
  Speaker 6: I am grateful to be an investor in this market.
• 21:11
  Speaker 6: This market has a lot of opportunity for investors.
• 21:15
  Speaker 2: One of the names is really missing out, arguably on
• 21:19
  Speaker 2: the AI plays Apple, Yes, and that's one of the
• 21:22
  Speaker 2: big issues. I know they're having a developer conference in June,
• 21:25
  Speaker 2: but what's your take on Apple?
• 21:28
  Speaker 1: Here?
• 21:28
  Speaker 5: Have they missed AI? I can't imagine, but they're certainly
• 21:33
  Speaker 5: late to it. I guess.
• 21:33
  Speaker 6: Okay, So I'm not everybody's favorite in our investment committee
• 21:37
  Speaker 6: meetings right now because I am a bullish on Apple.
• 21:40
  Speaker 6: I mean I find a lot. I think they're playing
• 21:43
  Speaker 6: chessnut checkers. I mean not to use that analogy, but
• 21:46
  Speaker 6: when you step away from the production of cars, but
• 21:49
  Speaker 6: you know, below the surface, there's a lot coming with
• 21:52
  Speaker 6: Apple car play that's interesting to me. What if it
• 21:55
  Speaker 6: is more of a technology development and watching the likes
• 21:58
  Speaker 6: of Tesla being there's just nothing positive that's coming out
• 22:03
  Speaker 6: of right now. The narrative around Tesla is, oh, should
• 22:05
  Speaker 6: we price them like a car company? Right because you know,
• 22:08
  Speaker 6: what if you spin off robotics. When I think about
• 22:11
  Speaker 6: the Apple just saying we're going to use Gemini, well
• 22:14
  Speaker 6: that's natural. You were using chrome already. I already think
• 22:17
  Speaker 6: it's interesting that with Gmail we have so much deep
• 22:20
  Speaker 6: language learning accessible to Google. So you know, for me,
• 22:25
  Speaker 6: I think the next leg of AI has the potential
• 22:28
  Speaker 6: to really be the ISO operating platform, the hardware sales,
• 22:32
  Speaker 6: and the services infrastructure that goes hand in hand, because
• 22:35
  Speaker 6: if you continue to be the platform for application based technology,
• 22:40
  Speaker 6: then you're going to need the systems behind it to operate.
• 22:43
  Speaker 4: And the thing with Apple is, as we know, the
• 22:46
  Speaker 4: car thing aside is that they get into all of
• 22:48
  Speaker 4: this stuff, they just get in late. They want to
• 22:50
  Speaker 4: see what everyone else is doing, they want to see
• 22:52
  Speaker 4: the best model, and then they're going to spend money
• 22:54
  Speaker 4: to do it. So would you be buying Apple as
• 22:57
  Speaker 4: a valuation play looking ahead to them, or it is
• 23:00
  Speaker 4: by Apple because you know why not?
• 23:02
  Speaker 6: We all have iPhones you got to keep it. I
• 23:04
  Speaker 6: think you can buy Apple for both of those reasons.
• 23:06
  Speaker 6: Where it sits today. It's not historically cheap and it's
• 23:08
  Speaker 6: not historically expensive. And I don't think that the last
• 23:13
  Speaker 6: launch of the iPhone. And I say this as an
• 23:15
  Speaker 6: eye statement because again there's a lot of people out
• 23:16
  Speaker 6: there who wouldn't be of consensus with this, but they
• 23:19
  Speaker 6: launched the last iPhone to buy themselves time. I believe
• 23:22
  Speaker 6: that the next iterations of iPhone are meaningful and they
• 23:25
  Speaker 6: drive sales, and they drive sales globally because there will
• 23:28
  Speaker 6: need to be a platform. When we look at some
• 23:30
  Speaker 6: of these analyst reports out of Meadow, or we hear
• 23:33
  Speaker 6: what they have in store when they build upon the
• 23:36
  Speaker 6: meta platforms, they want to bring in applications that generate revenue,
• 23:40
  Speaker 6: where people can buy add ons to lay over AI.
• 23:44
  Speaker 6: All of that has to be supported speed, memory, battery life.
• 23:48
  Speaker 6: I mean, you can go on and on, and Apple
• 23:50
  Speaker 6: is the products platform for that.
• 23:53
  Speaker 4: Are you worried about the China exposure though?
• 23:56
  Speaker 6: I think the China exposure continues to be incredibly opaque
• 23:59
  Speaker 6: and slightly confusing. And I believe that that the read
• 24:03
  Speaker 6: through from China affects businesses across the board always. But
• 24:07
  Speaker 6: I wouldn't say that's a reason to not invest in Apple.
• 24:11
  Speaker 5: Interesting.
• 24:11
  Speaker 2: How about Intel. Let's talk about you know tech one point,
• 24:15
  Speaker 2: oh if you will.
• 24:16
  Speaker 6: Yeah, Intel and on shoring production of chips is also
• 24:22
  Speaker 6: feels innately necessary, and government support to bring us up
• 24:26
  Speaker 6: to speed to you know, propel that forward quickly seems
• 24:31
  Speaker 6: also necessary. You had the CEO of Navidia a few
• 24:34
  Speaker 6: weeks ago, what was it three weeks ago, now already
• 24:36
  Speaker 6: sitting in Dubai saying we all countries need to be producer,
• 24:40
  Speaker 6: sovereign producers of chips. I mean, it is just going
• 24:43
  Speaker 6: to be that necessary, you know. I think there was
• 24:46
  Speaker 6: some confusion over some money going to Taiwan Semi, some
• 24:49
  Speaker 6: money going to Samsung, But at the end of the day,
• 24:52
  Speaker 6: to onshore that piece of supply, it's going to take
• 24:56
  Speaker 6: three to four years, and so we also need to
• 24:58
  Speaker 6: continue to have access to the production today.
• 25:02
  Speaker 2: I mean, just on Apple, it's news crossing tape. US
• 25:05
  Speaker 2: Justice Apartment sues Apple an antitrust case over iPhone thirty seconds.
• 25:09
  Speaker 5: How do you kind of factor that in?
• 25:11
  Speaker 6: I think that it's like it's it's a constant. I mean,
• 25:15
  Speaker 6: the anti trust is a constant, especially with all of
• 25:17
  Speaker 6: these big technology names. How you think about that. You
• 25:22
  Speaker 6: don't want the big to get so big that they
• 25:24
  Speaker 6: can own everything. You also don't want to over respond
• 25:27
  Speaker 6: to any of these issues because they will continue to
• 25:30
  Speaker 6: forge forward, and so in that way, I think, you know,
• 25:35
  Speaker 6: to an over response, one looks at it as again
• 25:38
  Speaker 6: not a trader, but an investor, perhaps an opportunity to
• 25:42
  Speaker 6: think about an.
• 25:42
  Speaker 4: Entry point great stuff. Really appreciate that, Nicole Webb, Senior
• 25:46
  Speaker 4: vice president, Financial advisor at Wealth Enhancement Group. And to
• 25:49
  Speaker 4: the point of like say, for example, TikTok, right, like
• 25:51
  Speaker 4: if you have to divest it, who's buying it?
• 25:54
  Speaker 5: Exactly?
• 25:55
  Speaker 4: I mean aside from anution, it's going to be a
• 25:57
  Speaker 4: tech company, So you're gonna let that go through. And
• 25:59
  Speaker 4: then how does that make? So there you know, sometimes
• 26:01
  Speaker 4: one plus one does ant equal five?
• 26:02
  Speaker 2: Yep, and interesting to see. I mean, Applestock is trading
• 26:05
  Speaker 2: off a little bit here. It's been under pressure all
• 26:07
  Speaker 2: year for a variety of reasons. As Nicole was, youre
• 26:09
  Speaker 2: just mentioning here, but it's Apple, I.
• 26:11
  Speaker 4: Don't know exactly.
• 26:12
  Speaker 1: Example, you're listening to the Bloomberg Intelligence Podcast. Catch us
• 26:19
  Speaker 1: live weekdays at ten am Eastern on Apple car Play
• 26:22
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• 26:25
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• 26:28
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• 26:34
  Speaker 4: Let's go to the ag space. So if you eat food,
• 26:36
  Speaker 4: you want to know about this company. This company is Agco.
• 26:39
  Speaker 4: It's trading up by about four tenths of one percent.
• 26:41
  Speaker 4: It's about one hundred and eighteen dollars a share. So
• 26:44
  Speaker 4: it's an American agricultural machinery manufactured company. So it's basically,
• 26:49
  Speaker 4: if you're a farmer and you need stuff, you're going
• 26:51
  Speaker 4: to go to the companies like AGCO, Deer that kind
• 26:55
  Speaker 4: of thing. It's a huge EG equipment industry, and farmers
• 26:59
  Speaker 4: are it's so important, particularly as we grow the population
• 27:03
  Speaker 4: by billions. Everyone's going to need to eat. So let's
• 27:05
  Speaker 4: talk to the CEO of ag CO joining US now,
• 27:08
  Speaker 4: Eric han Sotia. He joins us. Eric, it's great to
• 27:10
  Speaker 4: get your perspective and everything. So I just want to
• 27:13
  Speaker 4: start macro. Usually, higher rates are not good for farmers.
• 27:17
  Speaker 4: Plus it's been a tough year if you've been a
• 27:19
  Speaker 4: farmer house business.
• 27:22
  Speaker 11: Well, we've had two or three extremely strong years over
• 27:25
  Speaker 11: the last three years. It's cooling a little bit in
• 27:27
  Speaker 11: twenty twenty four. You know, an ag is not so
• 27:30
  Speaker 11: much tied to general GDP or interest rates. It's more
• 27:33
  Speaker 11: tied to how much grain is in the world and
• 27:35
  Speaker 11: grain prices, and that's cooled off a little bit. Interest
• 27:39
  Speaker 11: higher interest rates is a bit of a headwind because
• 27:42
  Speaker 11: most of these farmers finance their equipment and that costs
• 27:45
  Speaker 11: a little bit more to when they want to finance.
• 27:46
  Speaker 9: So it's a little bit of a hitd wind, but
• 27:48
  Speaker 9: not the biggest issue.
• 27:49
  Speaker 2: All right, Eric, I know you guys are involved right
• 27:51
  Speaker 2: now and in acquiring an eighty five percent interest in Trimble.
• 27:54
  Speaker 2: Tell us what Trimble is, tell us what this deal is.
• 27:57
  Speaker 5: Why are you doing it?
• 27:59
  Speaker 3: Yeah?
• 28:00
  Speaker 11: Yeah, Well you know, if you start with our vision
• 28:01
  Speaker 11: of our company, it's to become the trusted partner for
• 28:04
  Speaker 11: industry leading smart farming solutions. And essentially what that means
• 28:08
  Speaker 11: is machines that have sensors on them that can understand
• 28:11
  Speaker 11: their environment, see changes in the soil or the crop,
• 28:14
  Speaker 11: and then make onboard calculations, often using AI engines, to
• 28:18
  Speaker 11: be able to optimize their own performance. We invest in
• 28:21
  Speaker 11: six tech companies over the last several years, increased our
• 28:24
  Speaker 11: engineering budget for by sixty percent since I've been leading
• 28:27
  Speaker 11: the company, and so we've been gaining a lot of momentum.
• 28:30
  Speaker 11: But then Rob Painter, the CEO of Trimble, and I
• 28:33
  Speaker 11: had this notion of.
• 28:34
  Speaker 9: We could be better together.
• 28:36
  Speaker 11: He's got the very best egg tech team that we
• 28:39
  Speaker 11: would be able to add to our team. And so
• 28:42
  Speaker 11: the combination of that group coming together with our ECO
• 28:46
  Speaker 11: group is going to rapidly accelerate our ability to deliver
• 28:49
  Speaker 11: solutions for farmers. Machines can do more for themselves, increase
• 28:55
  Speaker 11: yields and reduce costs.
• 28:56
  Speaker 4: Eric, So, okay, Eric, are you still an Egg company?
• 28:59
  Speaker 4: Are you a tech? Egg? A tech company? And I
• 29:00
  Speaker 4: know you're going to say you're an agg tech company,
• 29:02
  Speaker 4: but like seriously, like where should the valuation be?
• 29:07
  Speaker 11: Absolutely for this this type of our work, We're absolutely
• 29:10
  Speaker 11: a tech company.
• 29:11
  Speaker 9: Uh, there's no question about that.
• 29:13
  Speaker 11: That's where all of our investment is, That's where our
• 29:15
  Speaker 11: new hiring is, that's where our focus is. Probably two
• 29:18
  Speaker 11: thirds of our engineering budget is now on either smart
• 29:20
  Speaker 11: machines or clean energy solutions.
• 29:23
  Speaker 2: That's interesting, Eric, do you actually manufacture this the equipment
• 29:28
  Speaker 2: or is this your a technology that you licensed out
• 29:30
  Speaker 2: to other manufacturers?
• 29:31
  Speaker 5: How does that work?
• 29:34
  Speaker 9: So this is an interesting point.
• 29:35
  Speaker 11: We build our own machines, so tractors, combines, sprayers, planters,
• 29:39
  Speaker 11: and those types of things. So we provide all the
• 29:41
  Speaker 11: machines the farmer needs to do their farming all the
• 29:44
  Speaker 11: way through the cropping cycle.
• 29:45
  Speaker 9: That's what you would expect.
• 29:46
  Speaker 11: The thing that's unique about ag CO is we've also
• 29:49
  Speaker 11: got this whole tech division that sells retrofit technology modules
• 29:54
  Speaker 11: onto an existing machine, maybe a five year old planter,
• 29:58
  Speaker 11: and it brings that capability of that pl sprayer or
• 30:01
  Speaker 11: combine from where it was from a dumb machine up
• 30:04
  Speaker 11: to a smart machine. And the other unique thing about
• 30:06
  Speaker 11: that is that we do it on all brands of equipment,
• 30:09
  Speaker 11: So we don't just do it on customers that bought
• 30:11
  Speaker 11: from us in the past. We'll do it on John
• 30:13
  Speaker 11: to the equipment case, new Holid equipment, others.
• 30:15
  Speaker 9: You know, we do it for every farmer.
• 30:17
  Speaker 11: We want to be the most farmer focused company in
• 30:19
  Speaker 11: the industry, so we want to serve all farmers either
• 30:22
  Speaker 11: with buying new from us or upgrading their existing machines
• 30:24
  Speaker 11: with technology from us.
• 30:26
  Speaker 4: Interesting, so it's like a different way of being a
• 30:28
  Speaker 4: services company in essence to farmers. So straight up, so
• 30:33
  Speaker 4: what's demand like, Like, what's your backlog look like, how's demand,
• 30:37
  Speaker 4: what's your visibility?
• 30:40
  Speaker 11: And the general machinery business demand is cooling. We had
• 30:44
  Speaker 11: incredible demand over these last two or three years. We've
• 30:46
  Speaker 11: been running to try and catch up to it had
• 30:48
  Speaker 11: actually unhealthy long back orders for the last.
• 30:52
  Speaker 9: Couple of years.
• 30:52
  Speaker 11: It's still higher than we would target, but it's coming
• 30:55
  Speaker 11: back down to normal back order levels. You know, it's
• 30:59
  Speaker 11: the frothiness is is coming out. So you know, in
• 31:01
  Speaker 11: that regard on the machinery business, it's cooling and getting
• 31:05
  Speaker 11: back to a more normal backlog level. On the technology business, though,
• 31:09
  Speaker 11: because of this retrofit opportunity, there's a lot of farmers
• 31:12
  Speaker 11: that in this kind of a year where they're not
• 31:14
  Speaker 11: going to buy a big machine, they may say, you
• 31:16
  Speaker 11: know what, I'll upgrade my existing machine with new technology
• 31:18
  Speaker 11: to have that capability. So our retrofit business continues to grow,
• 31:22
  Speaker 11: We're going to have a growing ear even though the
• 31:23
  Speaker 11: industry is cooling.
• 31:25
  Speaker 2: Give us a sense just kind of how receptive are
• 31:29
  Speaker 2: your customers, the farmer out there, how receptive are they
• 31:32
  Speaker 2: to technology.
• 31:35
  Speaker 11: Well, the whole thing they don't want to go out
• 31:38
  Speaker 11: and buy a technology, but they want to do is
• 31:39
  Speaker 11: buy an easier solution. So like, for example, on our planter,
• 31:43
  Speaker 11: we've got this thing called smart Firmer. It's a sensor
• 31:45
  Speaker 11: that runs on the planter through the soil. It uses
• 31:47
  Speaker 11: AI measures soil properties and it can automatically for the farmer. Then,
• 31:52
  Speaker 11: since when the planter is running through higher organic matter,
• 31:54
  Speaker 11: which means more higher fertility, and I'll tell the planter
• 31:57
  Speaker 11: plant more here or adjust the depthomatically to plant into moisture.
• 32:01
  Speaker 11: We're the only one that has that kind of capability.
• 32:04
  Speaker 11: And essentially that's what the farmer's buying. If buying a
• 32:06
  Speaker 11: new capability that does something automatically that improves their yield
• 32:09
  Speaker 11: and uses less inputs like seed, chemical, fertilizer, things like that.
• 32:15
  Speaker 11: Got a sprayer that uses vision systems they can see
• 32:17
  Speaker 11: the difference between a weed and the plant automatically only
• 32:20
  Speaker 11: spray the weed, not the plant, save seventy percent of
• 32:22
  Speaker 11: the chemical going across the field. That's what they're buying
• 32:25
  Speaker 11: and they're really excited about.
• 32:27
  Speaker 4: So Eric. In my day as a reporter, I have
• 32:30
  Speaker 4: definitely been on some farms, pig farms. I've done the
• 32:33
  Speaker 4: thing I have. I feel like if I asked any
• 32:36
  Speaker 4: of your peers, they would say something similar about, yes,
• 32:39
  Speaker 4: we provide this kind of technology to farmers now too.
• 32:41
  Speaker 4: It's much more of a tech industry than an egg industry.
• 32:45
  Speaker 4: Where do you differentiate.
• 32:48
  Speaker 11: This whole area of retrofit is where we differentiate on product.
• 32:52
  Speaker 11: So we have our machines. Fent is our brand that's
• 32:55
  Speaker 11: the best of the best. It's that the premium end
• 32:57
  Speaker 11: of the market. So we really feel like we're growing
• 33:00
  Speaker 11: that segment very fast in North America and South America
• 33:02
  Speaker 11: as we globalize it. But where we big time differentiate
• 33:05
  Speaker 11: is this retrofit upgradating existing people's machine of any brand
• 33:10
  Speaker 11: to have more capability. And then the second thing is
• 33:13
  Speaker 11: how we think about going to market. We just launched
• 33:14
  Speaker 11: what we call Farmer Core and we're shifting from Instead
• 33:18
  Speaker 11: of the farmer having to come into a brick and
• 33:19
  Speaker 11: mortar store all the time, we want to be able
• 33:22
  Speaker 11: to flip it on its ear one hundred and eighty
• 33:24
  Speaker 11: degrees and do everything on farm using digital tools remotely
• 33:28
  Speaker 11: monitoring the machines. We want to take all of the service, maintenance, repair,
• 33:32
  Speaker 11: all that attack activity out to the farm so the
• 33:35
  Speaker 11: farm can engage, farmer can engage digitally, or we can
• 33:38
  Speaker 11: remotely monitor and do things. Essentially, it's moving from the
• 33:42
  Speaker 11: mall to Amazon. Instead of the customer going to the store,
• 33:45
  Speaker 11: the store comes to the customer.
• 33:47
  Speaker 4: Smart pitch the Amazon of ag. There you go. You
• 33:51
  Speaker 4: just did it all right, Eric, thanks a lot, Eric
• 33:53
  Speaker 4: Hanzodia ag co CEO. We appreciate the time. Today.
• 33:57
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