Latest / Bloomberg Intelligence / BI Weekend: FCC Policy, Citi Bonuses, US Earnings

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BI Weekend: FCC Policy, Citi Bonuses, US Earnings · Bloomberg Intelligence

0:02
Speaker 1: Bloomberg Audio Studios, podcasts, radio news. This is Bloomberg Intelligence
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Speaker 1: with Alex Steina and Paul'sweenye.
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Speaker 2: The real app performance has been the US corporate high yield.
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Speaker 2: On Today's Bloomberg Intelligence Show, we dig inside the big
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Speaker 2: business stories impacting Wall Street and the global markets.
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Speaker 3: Each and every week we provide in depth research and
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Speaker 3: data on some of the two thousand companies and one
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Speaker 3: hundred and thirty industries our analysts cover worldwide.
0:55
Speaker 2: Today, we'll look at how City Group is trying to
0:57
Speaker 2: prevent a departure of wealth.
0:58
Speaker 3: Bankers well as well look at why the tailor Best
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Speaker 3: Buy is warning of uneven demand for its electronics and appliances.
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Speaker 2: But first we begin with the tech media telecom space.
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Speaker 3: Recently, president like Donald Trump shows Brendan Carr as the
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Speaker 3: new chair of the Federal Communications Commission.
1:14
Speaker 2: As Chair, cars priorities include raining in big tech, ensuring
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Speaker 2: broadcasters operate in the public interest, and unleashing economic growth.
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Speaker 3: For more and what to expect, we were joined by
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Speaker 3: Matthew Shettenhelm, Bloomberg Intelligence media litigation analyst.
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Speaker 2: We first asked Matthew about the scrutiny a big tech
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Speaker 2: will face under the new Trump administration.
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Speaker 4: I think in one sense, I think you'll see Congress
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Speaker 4: a little less aggressive, it moving forward with data privacy
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Speaker 4: type legislation that Democrats tended to promote. But where you're
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Speaker 4: going to see the risk and where I think I'm
1:45
Speaker 4: prenominantly focused right off the bat is on big tech's
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Speaker 4: liability shield. This is a provision of law that's been
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Speaker 4: in place since nineteen ninety six that keeps Google and
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Speaker 4: Meta and other social media companies from being sued every
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Speaker 4: time someone posts something harmful on social media. What you're
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Speaker 4: seeing from the conservative side is increasing attacks on that,
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Speaker 4: and I think you could see a proceeding at the
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Speaker 4: FCC try to really focus and amplify those calls to
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Speaker 4: cut into the liability shield that's been so important for
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Speaker 4: those companies.
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Speaker 3: Does the FCD, FCC can they change it or can
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Speaker 3: they just sort of mold it on the sidelines.
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Speaker 5: Yeah, that's that's a great question.
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Speaker 4: The interesting thing is is this liability shield is tucked
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Speaker 4: into the Communications Act that the FCC administers. So during
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Speaker 4: the first Trump administration, the FCC took the position, hey,
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Speaker 4: we can make rules under this because it's it's.
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Speaker 5: In our law.
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Speaker 4: We can implement it, but they never got around to
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Speaker 4: doing it. I think the Trump administration this time is
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Speaker 4: going to try to move ahead with that and say, look,
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Speaker 4: we implement the Communications Act, the liability shield is tucked
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Speaker 4: in there.
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Speaker 5: We can make rules.
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Speaker 4: What's changed since then is that the Chevron doctrine has
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Speaker 4: been struck down, the Major Questions doctrine has arisen.
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Speaker 5: There's a real doubt.
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Speaker 4: I'm very skeptical that the FCC can bind the courts
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Speaker 4: in how to apply this liability shield. But in some
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Speaker 4: ways that's not the point. The point is sort of
3:14
Speaker 4: to amplify the idea that courts or that Congress should
3:20
Speaker 4: change the shield. And I think that's what you're going
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Speaker 4: to see a Brendan car Let FCC do is say, look,
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Speaker 4: even if we can't change the liability shield as an agency.
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Speaker 4: We're going to tell you how to do that and
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Speaker 4: amplify the momentum for Congress or the Supreme Court potentially
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Speaker 4: to do it itself.
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Speaker 2: So what do we know about the apparent FCC chair,
3:41
Speaker 2: Brendan Carr, and what should we expect from a Republican
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Speaker 2: controlled FCC. What do we know about that, mister Carr.
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Speaker 4: Yeah, so Brendan Carr is the most senior Republican at
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Speaker 4: the FCC who knows communications law inside and out. But
3:58
Speaker 4: he also knows how to play the politics around the
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Speaker 4: FCC better than anyone else there. And so he's going
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Speaker 4: to do his best to make sure that he's implementing
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Speaker 4: President Trump's agenda. And so while Brendan Carr is a
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Speaker 4: traditional sort of free market Republican, he's also very sympathetic
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Speaker 4: to the idea that there's sort of a bias against
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Speaker 4: conservatives among elite media, and he's very sympathetic to supporting
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Speaker 4: President Trump on that message. And so that's why you
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Speaker 4: see proceedings like this going after big tech companies, potentially
4:35
Speaker 4: going after broadcasters and threatening to take away their licenses.
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Speaker 4: So there's going to be a little bit of this
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Speaker 4: sort of Okay, let's deregulate the democrats of regulator too much.
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Speaker 4: But there's also this concern about bias against conservatives and
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Speaker 4: that it's gone too much in that direction, and Brendan
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Speaker 4: Carr is going to support both.
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Speaker 3: So if I take a look at the actual equities
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Speaker 3: that are involved, what does it mean for them? If
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Speaker 3: I'm an investor and I'm looking at this, how do
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Speaker 3: I price it, how do I model it? How do
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Speaker 3: I think about it?
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Speaker 5: To me?
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Speaker 4: The I mean the biggest risk is you think about
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Speaker 4: the liability shield falling away if it goes you know,
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Speaker 4: in the most extreme approach, you're you're you're thinking about
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Speaker 4: the big social media companies. You're thinking about Meta, you're
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Speaker 4: thinking about alphabet, and you're thinking about creating a whole
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Speaker 4: new field of litigation with those companies as the targets.
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Speaker 4: And so you've seen a couple big settlements from those companies.
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Speaker 4: With the liability shield in place, you can think about
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Speaker 4: that being amplified many times over with class actions and
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Speaker 4: other suits.
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Speaker 5: Anytime content that's.
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Speaker 4: Posted on the social on social media causes harm in
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Speaker 4: the real world, you can think of limitless examples of
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Speaker 4: the harm it causes anytime that that there's harm, you
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Speaker 4: potentially have a lawsuit. And so I think it sort
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Speaker 4: of changes the equation in terms of the cost those
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Speaker 4: companies could fail in terms of potential liability if if
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Speaker 4: the liability shield were wiped away?
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Speaker 2: Will there be looser ownership riggish regulations on media? David
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Speaker 2: Zasov from Warner Brothers Discoveries asking.
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Speaker 5: Yeah, so, I absolutely So.
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Speaker 4: The Republicans at the FCC have historically been, you know,
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Speaker 4: they're tired of this idea of media ownership of broadcasters
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Speaker 4: that they said, look, there's so much new competition for broadcasters.
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Speaker 4: The problem is that there's first this political angle from
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Speaker 4: President Trump saying, look they edited my sixty minutes interview wrong,
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Speaker 4: And so Brendan Carr at first is kind of latching
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Speaker 4: onto that political arguments. Let's go after that first. So
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Speaker 4: I think media ownership sort of lurking in the background.
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Speaker 4: I think they'll get there after this political noise sort
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Speaker 4: of dies down.
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Speaker 5: Right.
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Speaker 3: Thanks to Matthew Shettenhelm, Bloomberg Intelligence media litigation analyst.
6:50
Speaker 2: This week, we focused on a Bloomberg Big Take story
6:52
Speaker 2: entitled Amazon prepares to go toe to toe with Nvidia
6:55
Speaker 2: in AI hardware.
6:56
Speaker 3: You can find it on Bloomberg dot Com and the Terminal,
6:58
Speaker 3: and the story looks at how amaz On is loosening
7:00
Speaker 3: and Video's grip on the one hundred million dollar plus
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Speaker 3: market for AI chips.
7:04
Speaker 2: For more on this story, we are joined by Matt Day,
7:06
Speaker 2: Bloomberg Technology reporter.
7:08
Speaker 3: We first asked Matt for more context on the journey
7:10
Speaker 3: that Amazon has gone on when it comes to innovation
7:13
Speaker 3: and chips.
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Speaker 6: So Amazon gets a lot of credit for inventing the
7:16
Speaker 6: cloud computing market and basically rented computing power, data storage
7:19
Speaker 6: all over the Internet. What they don't get so much
7:21
Speaker 6: credit for is building a lot of the hardware behind it.
7:23
Speaker 6: So you go back fifteen years and they started building
7:26
Speaker 6: their own servers, their own networking switches. Eventually they got
7:28
Speaker 6: onto to silicon to chips themselves. That's where they find
7:32
Speaker 6: themselves today is you know, they didn't set out to
7:34
Speaker 6: necessarily try to upset in video, but because they've been
7:38
Speaker 6: working on machine learning chips for the past you know,
7:40
Speaker 6: call it five six years, they have a chip they
7:43
Speaker 6: think is arriving at the right time.
7:45
Speaker 2: Talk to us about what Amazon's folks in Austin, Texas
7:50
Speaker 2: are doing what's going on that down.
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Speaker 6: There, So Austin, it's a tech mecha, especially for hardware,
7:56
Speaker 6: dating back to IBM and Dell, and Amazon focuses there
8:00
Speaker 6: machine learning chip testing there. They're chip engineering down there.
8:03
Speaker 6: So myself a colleague paid a visit down there last
8:07
Speaker 6: month and there it's really a scrappy vibe. The place
8:11
Speaker 6: isn't isn't particularly pristine. There's just stuff strewn all over
8:14
Speaker 6: the place, as the story notes. But that's a little
8:17
Speaker 6: bit of the Amazon engineering ethos at work, right. They
8:19
Speaker 6: don't have to push the limits of performance, they don't
8:21
Speaker 6: have to make it real pretty. They just have to
8:23
Speaker 6: build a part that works, a part. They can build
8:25
Speaker 6: a whole lot of them in a pretty short period
8:27
Speaker 6: of time. And so that's what they're trying to do
8:28
Speaker 6: now is get those chips out to the data centers
8:30
Speaker 6: before the end.
8:30
Speaker 7: Of the year.
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Speaker 3: Now is the idea that, hey, in video, we don't
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Speaker 3: need you anymore at all? Or is it just sort
8:35
Speaker 3: of like we can also do this and there's room
8:37
Speaker 3: to everyone to play on different levels.
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Speaker 6: Yeah, no, not at all about replacing all of Nvidia.
8:42
Speaker 6: And if you get any Amazon exec talking about it,
8:44
Speaker 6: the first sentence out of their mouth is going to
8:45
Speaker 6: be you know, we recognize in video has got a
8:47
Speaker 6: great product and it's going to be around for a
8:48
Speaker 6: long long time, you know, I said, And I don't
8:50
Speaker 6: have any hard numbers in front of me, and Amazon
8:52
Speaker 6: folks wouldn't speculate, but I think they'd consider this a
8:54
Speaker 6: victory if they could just take some of that some
8:57
Speaker 6: of that portion of the Nvidia demand. They already are
8:59
Speaker 6: serving today with video chips in their data centers.
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Speaker 2: So in Vidia's biggest customers, they're big companies like Amazon,
9:05
Speaker 2: like Microsoft, like Alphabet, and all of those customers are
9:10
Speaker 2: trying to build their own chips. How is Amazon kind
9:13
Speaker 2: of positioned relative to all those players.
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Speaker 6: I think one thing Amazon definitely has an advantage over
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Speaker 6: its its nearest cloud rival, Microsoft, and that they started
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Speaker 6: a lot earlier. Microsoft only started building its chips a
9:24
Speaker 6: couple of years ago. Amazon's been doing this since twenty thirteen,
9:27
Speaker 6: twenty fourteen, and they all kind of came to the
9:29
Speaker 6: same realization, which is that you know, listen, ultimately, a
9:32
Speaker 6: data center is just a big computer, right Like we
9:35
Speaker 6: think of computers as laptops or maybe a single rack
9:37
Speaker 6: of servers. But one of the things that the cloud
9:40
Speaker 6: revolution has done is it's allowed these companies to say, Okay,
9:42
Speaker 6: wait a minute, how is this going to work if
9:44
Speaker 6: instead of one of them in a server, I have
9:47
Speaker 6: one hundred thousand of them spread over a data center
9:49
Speaker 6: or multiple buildings.
9:50
Speaker 7: Right?
9:50
Speaker 6: How does the computer work in that situation? And that's
9:53
Speaker 6: one of the things that Generative AI and all these
9:55
Speaker 6: real hard intensive training runs have kind of forced them
9:58
Speaker 6: to do is think about these you know it, sprawling
10:00
Speaker 6: data centers as computers in and of themselves.
10:02
Speaker 3: Now, you guys went to some of these places where
10:05
Speaker 3: they're trying to build these chips. Can you describe what
10:08
Speaker 3: it's like, because we're looking at a bazillion dollar company
10:11
Speaker 3: in Amazon, right, But the what you described is not that.
10:15
Speaker 6: Oh yeah, I looked a little bit like a popour
10:17
Speaker 6: rerac at a hardware store, right at a drill press
10:19
Speaker 6: in a corner, they had a vacuum sealer and under
10:21
Speaker 6: that was one of those slow ovens to kind of
10:24
Speaker 6: dry things out dehumidifier.
10:26
Speaker 7: Maybe that's not the right word.
10:27
Speaker 6: But there's a lot of hardware sitting around, and a
10:29
Speaker 6: lot of it's really high tech, a lot of it's
10:31
Speaker 6: really expensive, you know, but the Vibe again, was just
10:33
Speaker 6: an engineering crew trying to go as fast as they
10:35
Speaker 6: can to put chips in the hand of their customers,
10:38
Speaker 6: you know, an Amazon's case, that's their own data centers.
10:41
Speaker 6: But there's a funny moment while we were there. The
10:42
Speaker 6: guy who runs the lab, a guy called Romney Sino,
10:45
Speaker 6: was yelling over to a colleague of his basically, what's
10:47
Speaker 6: your job, and the job is to ship things to
10:49
Speaker 6: data centers.
10:49
Speaker 7: Right.
10:49
Speaker 6: They're not there to push the limits of engineering. They're
10:52
Speaker 6: there to reliably, you know, ship product out and get
10:54
Speaker 6: it in the hands of their business customers.
10:56
Speaker 2: What are the customers saying about the Amazon chips? How
10:58
Speaker 2: are these Amazon chips performing in the market place?
11:00
Speaker 6: And so the Amazon has only started just started rolling
11:03
Speaker 6: out its latest chip. You know what we know from
11:05
Speaker 6: the first version is you know, it's not as good
11:07
Speaker 6: as in Nvidia. And that's particularly clear on the software level, right,
11:11
Speaker 6: I mean, no matter how good a piece of hardware is,
11:12
Speaker 6: if you can't access it with ease, that's going to
11:16
Speaker 6: be a problem for you. And that's where Nvidia has
11:18
Speaker 6: just a huge advantage. You know, they've got the open
11:20
Speaker 6: source community behind them building libraries and tools so that
11:23
Speaker 6: almost any AI thing you want to do, you can
11:25
Speaker 6: accomplish it on an navidiate ship. And so that's what
11:28
Speaker 6: customers have told us is the big hurdle for Amazon.
11:31
Speaker 6: You know. Now, Amazon is offering it's early adopter some help.
11:33
Speaker 6: They will, you know, send you engineers and help customize
11:35
Speaker 6: your work for their chips, but that's not going to
11:37
Speaker 6: scale in the long term. They're hoping they can build
11:39
Speaker 6: a software package that makes it real easy to use
11:41
Speaker 6: their hardware, but they're not there yet.
11:43
Speaker 3: Who are the geniuses behind this in Amazon? Where the names?
11:47
Speaker 6: So the main one who gets a lot of credit
11:49
Speaker 6: for it, and probably doesn't get enough outside of tech
11:50
Speaker 6: circles is James Hamilton. He's a longtime engineer at IBM
11:54
Speaker 6: and at Microsoft who Amazon poached real early into their
11:57
Speaker 6: cloud competing experiment back in two thousand and nine, and
12:00
Speaker 6: it was partly his suggestion that the company should get
12:02
Speaker 6: into the hardware business. Right He was looking at their
12:04
Speaker 6: costs and saying, listen, why are we paying Dell HP
12:08
Speaker 6: for all of these servers with a bunch of high
12:09
Speaker 6: end functions we don't need. We could build a cheaper
12:11
Speaker 6: mousetrap and if it's just good enough for us, then
12:13
Speaker 6: we can pass those savings onto our customers. So it
12:16
Speaker 6: really started this snowball of just Amazon getting into more
12:18
Speaker 6: and more corners of hardware that previously, you know, they
12:21
Speaker 6: hadn't really had much interest in, and that's really paid
12:23
Speaker 6: off in terms of how profitable the cloud businesses for Amazon.
12:26
Speaker 2: Our thanks to Matt Dave, Bloomberg Technology.
12:28
Speaker 3: Reporter, coming up a conversation with the CEO of bloom Energy.
12:32
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13:05
Speaker 3: We moved next to the Banking Space and Citygroup.
13:08
Speaker 2: This week we looked at a story on the Bloomberg
13:09
Speaker 2: Terminal and at Bloomberg dot Com entitled City Bonuses by
13:13
Speaker 2: time for New Wealth boss rush to revamp.
13:15
Speaker 3: And looked at how Citygroup's new CEO, Andy sigg Green
13:18
Speaker 3: led special retention bonuses for dozens of personnel for more
13:22
Speaker 3: and all of this means. We were drawn by Katherine Doherty,
13:24
Speaker 3: Bloomberg Finance reporter.
13:26
Speaker 2: We first asked Catherine how things are going now for
13:28
Speaker 2: Citygroup and it's.
13:29
Speaker 8: New CEO, Andy is one year into his new role,
13:33
Speaker 8: and he came into it with a lot of difficulties.
13:38
Speaker 3: And the basic.
13:40
Speaker 8: Infrastructure that City was working with in their wealth division
13:45
Speaker 8: was something that had been lagging peers. It was way
13:50
Speaker 8: behind in terms of speed execution. And really that was
13:55
Speaker 8: something that Andy had focused on right when he came in.
14:00
Speaker 8: And upgrading the technology was one thing. Then bringing talent
14:04
Speaker 8: was kind of the second pillar to improving the wealth division.
14:08
Speaker 8: And keeping talent is the hardest part about building a
14:12
Speaker 8: wealth business across Wall Street because it's a very competitive business.
14:17
Speaker 8: The pay is oftentimes used as a way to lure
14:21
Speaker 8: experienced advisors to competitors, and so not only are you
14:26
Speaker 8: trying to focus on keeping that talent, the talent is
14:29
Speaker 8: tied to the assets that they're managing for their clients.
14:32
Speaker 8: So anytime you lose some big advisors with millions or
14:37
Speaker 8: even billions in assets. That's going to affect your business
14:40
Speaker 8: moving forward. So Andy had a very big agenda in
14:46
Speaker 8: front of him in terms of having to clean up,
14:48
Speaker 8: and not just clean up, but then improve cities wealth
14:52
Speaker 8: business so that it could truly compete with the big
14:55
Speaker 8: peers on Wall Street.
14:56
Speaker 2: Yeah, because like when I think of Morgan Stanley, I
14:59
Speaker 2: think of wealth management I use, and that's different. When
15:02
Speaker 2: I grew up in the business, I thought about them
15:03
Speaker 2: as sales and trading and investment banking City I don't
15:06
Speaker 2: necessarily think of wealth as part as a kind of
15:10
Speaker 2: a growth driver for them. But I know in their
15:12
Speaker 2: private bank, which generates two point three billion dollars in revenue,
15:16
Speaker 2: it is high touch service for the wealthiest clients, including
15:19
Speaker 2: a quarter of the world's billionaires minimum net worth twenty
15:23
Speaker 2: five million dollars. So is this a situation for City
15:26
Speaker 2: that Jane Fraser has to just put a flag in
15:28
Speaker 2: a ground say this is a core business for City
15:31
Speaker 2: and we will invest Accordingly.
15:33
Speaker 8: Private bank is definitely one of their money makers. You
15:36
Speaker 8: can see that in the numbers. But also if you
15:39
Speaker 8: think two tiers down, you have City Gold and this
15:43
Speaker 8: is clients with avery average monthly balances of at least
15:46
Speaker 8: two hundred thousand, So it's definitely not at the private
15:50
Speaker 8: bank tier. The private bank tier. Why they're trying to
15:53
Speaker 8: keep that part of the wealth business up is because
15:58
Speaker 8: that's where the biggest assets are. That's where the revenue
16:00
Speaker 8: really gets generated when you have the wealthiest and it's
16:04
Speaker 8: not just Americans, it's oftentimes billionaires in Asia. They're really
16:09
Speaker 8: focused on growing their business outside of the US, which
16:12
Speaker 8: is different from some of the other big Wall Street
16:16
Speaker 8: banks that are more US focused in terms of building
16:20
Speaker 8: up their own private bank assets. And so City, their
16:24
Speaker 8: private bank, I would say, was their strong suit and
16:27
Speaker 8: continues to be their strong suit, but it doesn't mean
16:30
Speaker 8: that that's going to stay that way. So they really
16:31
Speaker 8: have to remain competitive keep their advisors that are catering
16:35
Speaker 8: to the wealthiest individuals, not just in the US but
16:39
Speaker 8: across the globe.
16:39
Speaker 3: Did they lose advisors because they were posed or because
16:42
Speaker 3: they let them go because they were revamping it and
16:44
Speaker 3: it so it's a combination.
16:47
Speaker 8: Just last week we reported that two of City's former
16:51
Speaker 8: private bank advisors defected to go to Bank of America.
16:55
Speaker 8: Actually in their private bank, which is interesting because that's
16:58
Speaker 8: where Andy Sig had come. You worked in the Meryl division.
17:01
Speaker 8: But still it's under the Bank of America umbrella and
17:04
Speaker 8: those two advisors they brought seven billion of assets that
17:09
Speaker 8: they managed. So that was a big kick to City.
17:13
Speaker 8: And so when you see that, but it's not i
17:15
Speaker 8: would say unique just to City. There's stories like that
17:19
Speaker 8: all the time of some of these really big advisors
17:23
Speaker 8: bringing their team to a competitor and oftentimes they're just
17:26
Speaker 8: looking for it's opportunity and most of the time that
17:30
Speaker 8: opportunity is translated and in pay all.
17:33
Speaker 3: Right, our thanks to Catherine Doherty, Bloomberg Finance Reporter. We
17:37
Speaker 3: move next to the energy space. The fuel cell maker
17:39
Speaker 3: Bloom Energy recently signed a landmark supply agreement with American
17:43
Speaker 3: Electric Power for up to one gigawatt of fuel cells
17:46
Speaker 3: and this marks the latest commercial procurement of fuel cells globally.
17:51
Speaker 2: For more and all of this, we were joined by
17:52
Speaker 2: k R. Sweetheart, CEO of bloom Energy. We first asked
17:56
Speaker 2: k Are how this deal came about.
17:58
Speaker 7: So we have being more with data centers for a
18:01
Speaker 7: very long time. Now we have over three hundred megawarts
18:05
Speaker 7: in multiple data centers, across the country. These are the
18:08
Speaker 7: smaller data centers called the edge data centers that are
18:11
Speaker 7: located where customers are somewhere in the five to ten
18:15
Speaker 7: megawat range in a particular site. So we have transacted
18:18
Speaker 7: close to three hundred megawarts, so we are a known
18:21
Speaker 7: player to data centers. Now with the hyperscalers, what's the difference,
18:25
Speaker 7: it's a much larger data centers. These are now particularly
18:30
Speaker 7: more important in terms of growth because of AI and
18:33
Speaker 7: the amount of power they need. And currently these hyperscalers,
18:38
Speaker 7: as they're growing very fast, the transmission distribution is not
18:43
Speaker 7: able to keep up with providing those hundreds of megawarts
18:46
Speaker 7: of power right at the site where you need it
18:49
Speaker 7: within the time that you need it maybe five to
18:51
Speaker 7: six years. They may be able to provide the power,
18:54
Speaker 7: but the data center really wants it today, they want
18:56
Speaker 7: it now. So we are perfectly under those circumstances because
19:02
Speaker 7: our Bloom Energy servers can be deployed in a matter
19:05
Speaker 7: of months right where the customer is, thereby not worrying
19:10
Speaker 7: about the transmission distribution gridlock and providing that reliable, clean,
19:16
Speaker 7: always on power to the data center. So that's the
19:19
Speaker 7: reason this happened, and here what happened is the electricity
19:25
Speaker 7: provider AEP said, we don't make nuclear power plants, we
19:29
Speaker 7: don't make gas turbance, we don't make fuel cells. We're agnostic.
19:34
Speaker 7: We'll buy your systems and similar to us using those
19:38
Speaker 7: other power sources to provide power to the customer. Here
19:41
Speaker 7: we can take your fuel cells and take the power
19:43
Speaker 7: you produce and give it to the data center. However,
19:46
Speaker 7: the big advantage here is we can put these fuel
19:50
Speaker 7: cells right where the data center is, thereby avoiding the
19:53
Speaker 7: transmission distribution issue.
19:55
Speaker 2: So, Kerry, I mean, just you know, I didn't know
19:57
Speaker 2: much about your company before, so just reading up here,
19:59
Speaker 2: it's like right company, right place, at the right time,
20:03
Speaker 2: with the right technology, and boom. Talk to us about
20:07
Speaker 2: how good your fuel cells are. How would I know
20:10
Speaker 2: whether your fuel cell is better more productive than say
20:13
Speaker 2: a competitor.
20:15
Speaker 7: That's a great question. So let me go away from
20:19
Speaker 7: fuel cells, just into electricity for the customer. At the
20:22
Speaker 7: end of the day, we all provide a service or
20:25
Speaker 7: a product to our end customer. That electricity that a
20:29
Speaker 7: data center takes has to be clean, it has to
20:33
Speaker 7: be always on and reliable. Twenty four to seven. It
20:37
Speaker 7: needs to have a pay as you grow characteristic, and
20:40
Speaker 7: it needs to be future proofed in terms of sustainability.
20:44
Speaker 7: Bloom Energy is one of those solutions that offer all
20:48
Speaker 7: of the above no rs. It's the genius of end
20:52
Speaker 7: So we are the most efficient way of taking natural
20:56
Speaker 7: gas and making electricity out of it without combustone. Because
21:01
Speaker 7: we don't compassed, there is no knock socks particulates anything
21:04
Speaker 7: going into the atmosphere, so there is no local air pollution.
21:08
Speaker 7: And if you look at our system they're like lego blocks.
21:11
Speaker 7: You put many of these lego blocks, hundreds of them
21:14
Speaker 7: to be able to provide power to a data center.
21:16
Speaker 7: If any one of them has to be serviced, you
21:19
Speaker 7: can just hot swap them in and out. So the
21:21
Speaker 7: reliability and the resiliency of our systems are very high.
21:25
Speaker 7: And then you and you can pay as you grow
21:29
Speaker 7: data centers. Even though they build a big data center,
21:33
Speaker 7: don't start that entire data center on day one. They
21:36
Speaker 7: may do one third of the load, and then a
21:38
Speaker 7: few months later they may add additional load. As they
21:41
Speaker 7: are adding the load, they can add more and more
21:43
Speaker 7: of our fuel cells. You can't do that to the
21:45
Speaker 7: gas turbine. You can't do that to the nuclear power plant.
21:48
Speaker 7: So we bring all these attributes in so I would
21:51
Speaker 7: say we are ideally suited for this AI data center market.
21:56
Speaker 3: Now, the financial terms were not disclosed. I appreciate that.
22:00
Speaker 3: I'm gonna ask about the money a different way. How
22:02
Speaker 3: easy was it or difficult was it to come to
22:05
Speaker 3: an agreement on price.
22:06
Speaker 5: With AEP.
22:09
Speaker 7: In this particular case, it was fairly easy to come
22:11
Speaker 7: to that agreement. Nothing is easy, but relatively speaking, And
22:16
Speaker 7: here is why. There are three parties involved, actually four,
22:21
Speaker 7: the data center customer, AP, the public at large where
22:28
Speaker 7: this is being installed, and blow energy we were able
22:31
Speaker 7: to put together When when for all four of these stakeholders,
22:36
Speaker 7: why is.
22:37
Speaker 1: That number one?
22:38
Speaker 7: Let's start with the public at large with other kind
22:42
Speaker 7: of provisions that were being contemplated. The fear of the
22:47
Speaker 7: ratepayer was because the hyperscaler is going to get a
22:50
Speaker 7: large amount of power from the transmission distribution company, they
22:54
Speaker 7: will end up carrying the bill. In this construct, AEP
22:58
Speaker 7: made sure none of the costs associated with putting these
23:02
Speaker 7: fuel cells and providing that clean power to the data
23:06
Speaker 7: center will cost the rate payer any money. So that
23:09
Speaker 7: was a win for the ratepayer number two for the
23:12
Speaker 7: data center. For the data center, the price of not
23:16
Speaker 7: having power on time is significantly greater than the cost
23:19
Speaker 7: of power. If you just think about the race in
23:22
Speaker 7: AI and who has to get there competitively. So time
23:26
Speaker 7: to power was the key metric and they would pay
23:29
Speaker 7: a slight premium to be able to get that, and
23:32
Speaker 7: that penciled out for AEP. They were able to grow
23:37
Speaker 7: their customer base, give them their growth needs without dissenter
23:42
Speaker 7: mediating them and having them go to some other state,
23:45
Speaker 7: which is what has been happening in places like Virginia
23:48
Speaker 7: where data centers are moving away from there because there
23:51
Speaker 7: is not enough power. So it was a win for
23:53
Speaker 7: AEP in retaining their customer and taking care of their
23:56
Speaker 7: customer and making money for Bloom. Whether we in front
24:00
Speaker 7: of the meter or behind the meter, it is the
24:02
Speaker 7: same thing. Whether we sell it to AP who then
24:05
Speaker 7: provides the power for the data center, or we sell
24:08
Speaker 7: to the data center and they provide it and they
24:11
Speaker 7: take their own power. You know, for us we are
24:13
Speaker 7: agnostic because we get to make the sale and we
24:16
Speaker 7: get the gross margins on the product.
24:18
Speaker 3: All right. Thanks to k R. Shreedhar CEO Bloom Energy
24:21
Speaker 3: all right, coming up a look at what's new in
24:22
Speaker 3: the renewable fuels market in the US.
24:25
Speaker 2: You're listening to Bloomberg Intelligence on Bloomberg Radio, providing in
24:28
Speaker 2: research and data on two thousand companies one hundred and
24:31
Speaker 2: thirty industries. You can access Bloomberg Intelligence via p I
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24:34
Speaker 3: I'm Paul Sweeney and am Alex Steel.
24:36
Speaker 9: And this is Bloomberg.
24:42
Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live
24:46
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24:50
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24:52
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24:56
Speaker 1: Just say Alexa play Bloomberg eleven thirty.
25:00
Speaker 2: Each week we look at research from Bloomberg and EF
25:02
Speaker 2: previously known as New Energy Finance.
25:05
Speaker 3: They're the team at Bloomberg that tracks and analyzes the
25:07
Speaker 3: energy transition from commodities to power, transport, industries, buildings, and
25:11
Speaker 3: egg sectors.
25:12
Speaker 2: This week we took a look at renewable fuels, and
25:14
Speaker 2: we're joined by Anna Davies, bnef's head of renewable Fuels.
25:18
Speaker 3: We first asked Anna what types of renewable fuel projects
25:21
Speaker 3: now exist in the US, so there's.
25:23
Speaker 9: A good number of projects in the US nice to
25:25
Speaker 9: be here, and there's a wide range. The US is
25:28
Speaker 9: the biggest market at the moment, so a lot of
25:30
Speaker 9: the projects are based here. A lot of renewable fuels.
25:33
Speaker 9: When we talk about renewable fuels, we're really talking about
25:35
Speaker 9: basically biofuels at the moment, made from oils like soybean
25:39
Speaker 9: oil or even use cooking oil like the excess grease
25:42
Speaker 9: from your fryer. The key here is that unlike ethanol
25:46
Speaker 9: or biodiesel or biofuels you usually think about, renewable fuels
25:49
Speaker 9: are a special term for ones that are drop in ready,
25:52
Speaker 9: which means they produce a diesel molecule or jet fuel
25:55
Speaker 9: molecule that's basically the same as fossil dieseler jet fuel,
25:58
Speaker 9: So you could just blend it one for one into
26:00
Speaker 9: your dieseler jet fuel pool. There's no blending limit. It
26:04
Speaker 9: can just go in however much you have, So it's
26:06
Speaker 9: really cool in that regard. A lot of the projects
26:08
Speaker 9: in the US are based, especially out of California. You
26:11
Speaker 9: could take an old oil refinery and convert that to
26:14
Speaker 9: produce a biooil like a biofeedstock instead of a crude feedstock,
26:18
Speaker 9: so that's really common. There's also a lot of projects
26:21
Speaker 9: being developed to use other feedstocks, things like corn ethanol,
26:24
Speaker 9: because if you think about passenger vehicle fleet going electric,
26:28
Speaker 9: you're going to have less demand for gasoline or ethanol,
26:30
Speaker 9: so this could be another use for that ethanol in
26:33
Speaker 9: the world today.
26:34
Speaker 2: I gotta ask the question everybody wants to ask, how
26:36
Speaker 2: will the Trump administration impact renewable fuel business?
26:41
Speaker 9: That is the million dollar question probably for every clean
26:44
Speaker 9: energy sector. I'd say that renewable fuels, compared to a
26:48
Speaker 9: lot of the other sectors of clean energy, might be
26:50
Speaker 9: a bit better insulated than most because this is a
26:54
Speaker 9: sector where it really promotes the agriculture industry by using
26:57
Speaker 9: biofuels as a new demand source. It also is a
27:00
Speaker 9: way for the oil industry to get a second life
27:02
Speaker 9: because they can't take this old refinery and convert it
27:05
Speaker 9: into something new. So in that regard, I don't think
27:08
Speaker 9: it's going to be completely in the crosshairs. There are ways, though,
27:10
Speaker 9: that the Trump administration might have a big impact on
27:12
Speaker 9: this sector. One of the big ones is if he
27:14
Speaker 9: puts a tariff on used cooking oil from China.
27:17
Speaker 2: Or some of the feets used cooking oil from China.
27:19
Speaker 5: We do.
27:20
Speaker 9: China produces a lot of use cooking oil, a lot
27:22
Speaker 9: of fried food. They export the cooking oil to California
27:25
Speaker 9: which they can then blend into these refineries. Used cooking
27:28
Speaker 9: oil is a really popular feedstock for renewable fuels because
27:31
Speaker 9: it has a low carbon intensity. Otherwise it's just wasted,
27:34
Speaker 9: right you throw it out, it has to be collected.
27:38
Speaker 9: It was collected into it dumped in probably a dump.
27:41
Speaker 3: But so we don't have enough used cooking oil here
27:43
Speaker 3: in the US as supplement if everything.
27:47
Speaker 9: We have a lot. But if you think about replacing
27:50
Speaker 9: you know, the diesel or the jet fuel pool, you
27:51
Speaker 9: can always use more.
27:53
Speaker 3: See So to that point, what is the price spread
27:55
Speaker 3: between renewable fuels and traditional fuels? Right now?
27:58
Speaker 9: Tie renewable fuel their cheapest are probably two to four times,
28:03
Speaker 9: which is a big range, but cheaper than more expensive
28:05
Speaker 9: sorry than fossil like jet fuel. And if you talk
28:08
Speaker 9: about some of the novel technologies. So one of the
28:11
Speaker 9: ways to make these renewable fuels is to take carbon
28:14
Speaker 9: dioxide and green hydrogen, which is great because then you're
28:17
Speaker 9: not using any biofeedstock that could be up to like
28:20
Speaker 9: ten times as expensive as jet fuel. These are pricey
28:22
Speaker 9: fuels and they're probably not going to get too much
28:24
Speaker 9: cheaper because a lot of it is just the technology needed.
28:26
Speaker 2: So but if as an airline, am I mandated to
28:30
Speaker 2: use a certain percentage of clean fuel?
28:32
Speaker 9: Depends where you are in Europe starting next year, yes
28:35
Speaker 9: you are mandated to blend it in. In the US,
28:38
Speaker 9: we don't have mandates yet. The biggest is we're doing
28:40
Speaker 9: a lot of carrot incentives. So the Inflation Reduction Act
28:43
Speaker 9: has a tax credit for producing renewable sustainable aviation fuel
28:47
Speaker 9: that would give a discount of about a dollar dollar
28:50
Speaker 9: twenty five to these producers. It's not enough to cover
28:52
Speaker 9: that bridge that cost. It could bring it down closer.
28:54
Speaker 3: Pences, and then if that goes away, then it makes
28:56
Speaker 3: it even worse. So what's the best way to low
29:00
Speaker 3: or that gap? Is it we need better technology, we
29:03
Speaker 3: need scalable technology, or more sourcing.
29:06
Speaker 9: I don't think technology is gonna come down too much
29:08
Speaker 9: in cost because a lot of the cost technology is
29:10
Speaker 9: a big component. But the feedstock is a big component too,
29:13
Speaker 9: and it's hard to China exactly, so that could make
29:16
Speaker 9: it worse. A lot of it is probably gonna be
29:19
Speaker 9: a bit mix of mandates and subsidies. So if you
29:23
Speaker 9: have a mandate, sayn you just have to blend a
29:25
Speaker 9: certain amount, that's going to cause you know, maybe you
29:27
Speaker 9: put a premium on the cost of jet fuel, a
29:29
Speaker 9: tax on jet fuel that can cause that price gap
29:31
Speaker 9: to close, or if you offer an incentive to produce
29:36
Speaker 9: these fuels that can bring it down. There's a lot
29:38
Speaker 9: of research being done on new feedstocks, like something like
29:40
Speaker 9: cover crops. If you haven't a fueled you could just
29:42
Speaker 9: plant a new oil crop in the off season that
29:44
Speaker 9: can help retain the soil. You can use the same land.
29:47
Speaker 9: You don't have to have this issue of food versus
29:49
Speaker 9: fuel land use. But yeah, that's the question is how
29:53
Speaker 9: cheap can you get it?
29:54
Speaker 2: Our thanks to Annadavis, b n EFS, head of Renewable Fuels, we.
29:57
Speaker 3: Move next to the retail space. This week we got
29:59
Speaker 3: our from Best Buy and Dick Spoorting Goods.
30:02
Speaker 2: Best Buy cut it's full year guidance on sluggish demand
30:04
Speaker 2: for electronics and appliances. However, Dickboarding Goods increased its annual
30:08
Speaker 2: projections for comparable sales and growth.
30:10
Speaker 3: For more on all of this, we are joined by
30:12
Speaker 3: Lindsay Dutch, Bloomberg Intelligence Consumer Hardline Senior Analyst.
30:15
Speaker 2: We first asked Lindsay for her take on this week's
30:18
Speaker 2: results from Dickboarding Goods.
30:19
Speaker 10: I think Dick's had a strong quarter, you know, again
30:23
Speaker 10: stronger than expected, sort of continuing the trend that we've
30:26
Speaker 10: seen earlier this year. You know, they have you know,
30:29
Speaker 10: the items that kids these days want in footwear, athletic apparel,
30:35
Speaker 10: and their exclusive sort of vertical brands are also doing very,
30:39
Speaker 10: very well and that really supported that back to school
30:43
Speaker 10: and it gives a lot of optimism when we think
30:45
Speaker 10: about holiday and the fourth quarter coming out.
30:47
Speaker 3: So I realized that Best Buy and Dick's are different stores,
30:49
Speaker 3: but the way you describe dick spoorting goods, it feels
30:52
Speaker 3: like it should have been the same for Best Buy
30:54
Speaker 3: right back to school. They do have some exclusive items,
30:57
Speaker 3: et cetera.
30:58
Speaker 6: Why not.
31:00
Speaker 10: Yeah, So I think that's a great question, Alex. I think,
31:03
Speaker 10: you know, when we think back three months ago, best
31:05
Speaker 10: Buy had a great quarter and it was on back
31:09
Speaker 10: to school for them. Back to school is a little
31:11
Speaker 10: bit more college bias. It does hit a little bit
31:14
Speaker 10: earlier in the year then Dix might benefit from and
31:19
Speaker 10: the demand for laptops was very strong in the second quarter,
31:23
Speaker 10: and you know, best Buy raised their guidance. There was
31:26
Speaker 10: strong optimism that we were going to get back to
31:28
Speaker 10: growth mode. I still think, you know, there's a possibility
31:31
Speaker 10: for a strong holiday for Best Buy laptops did. They
31:35
Speaker 10: were up comp sales seven percent in the third quarter,
31:39
Speaker 10: but that was overridden by weakness in some of the
31:42
Speaker 10: other categories, appliances, home theater being key ones. It sounds
31:49
Speaker 10: like they're really leaning into promotions for the fourth quarter
31:53
Speaker 10: and really looking to get aggressive with promotion, especially for
31:56
Speaker 10: their premium product and things that are exclusive two best
32:00
Speaker 10: Buy to really.
32:02
Speaker 2: Draw that shopper in. How's it when you talk to
32:05
Speaker 2: your retailer companies that you covered, lindsay, what are they
32:08
Speaker 2: saying about just this whole holiday season when all is
32:11
Speaker 2: said and done, how's it gonna? Are we gonna have
32:13
Speaker 2: growth this year? So better than last year? How are
32:15
Speaker 2: thy shaking out?
32:17
Speaker 1: Really?
32:17
Speaker 6: Yeah?
32:17
Speaker 10: So growth looks pretty weak. I also think it's divergent
32:22
Speaker 10: sort of like last year. So there's some categories that
32:25
Speaker 10: are just in a better position. You know, beauty would
32:28
Speaker 10: be one of those sports where you know, where Dix
32:31
Speaker 10: is playing is also one of those where just demand
32:34
Speaker 10: generally is a little bit stronger. And then we have
32:37
Speaker 10: other categories that are still on the weaker side, home appliances,
32:42
Speaker 10: and some of that still you know, obviously affects best Buy,
32:45
Speaker 10: it also affects companies like william Sonoma RH. We also
32:49
Speaker 10: have a bifurcation. I think in the consumer, you know,
32:52
Speaker 10: a higher in consumer still seems to be holding up
32:55
Speaker 10: pretty well. Dix is another benefactor there. You know, their
32:59
Speaker 10: customer base is on the higher income side, whereas best
33:03
Speaker 10: Buy is probably a little bit more like the average
33:06
Speaker 10: of the overall country. So I think, you know, the
33:09
Speaker 10: deal days that these companies are rolling out, you know,
33:13
Speaker 10: they each have their own strategies on how they want
33:16
Speaker 10: to manage that. But as I said, best Buy is
33:19
Speaker 10: going to get very aggressive with those deals. The consumer
33:22
Speaker 10: high or low income is very value focused, and we
33:26
Speaker 10: may have seen a pause, you know, people holding back
33:29
Speaker 10: waiting for those deals in the third quarter results.
33:32
Speaker 3: Yeah, it's like she's describing me exactly.
33:35
Speaker 2: Hey, lindsay, how about from an industry perspective, when I
33:38
Speaker 2: if I ever find myself going into store which I
33:41
Speaker 2: hope that doesn't happen. Am I going to find the
33:43
Speaker 2: stuff I'm looking for?
33:44
Speaker 9: Like?
33:44
Speaker 2: Has everybody got the inventory they need?
33:47
Speaker 9: Here?
33:47
Speaker 2: I don't hear too many you know, supply chain stories anymore.
33:52
Speaker 10: Yeah, So supply chain, the supply chain woes of COVID
33:57
Speaker 10: have sort of gone away, you know. I think you know,
33:59
Speaker 10: retailers you maybe a little over a year ago or
34:02
Speaker 10: probably over inventoried. I think inventory is in a healthier
34:06
Speaker 10: position this year, you know, for the retailer themselves, but
34:09
Speaker 10: also for the shopper. And I think that the retailers
34:12
Speaker 10: are working really hard to make that in store experience
34:16
Speaker 10: a positive one for those that.
34:18
Speaker 2: Go in store.
34:18
Speaker 10: But there's also a lot of focus online, so that
34:21
Speaker 10: online shopper, you know, best Buy is doing doorbusters again
34:25
Speaker 10: this year, but it's it's for that in store shopper,
34:27
Speaker 10: but also if you are a member and have the app,
34:29
Speaker 10: you could also take advantage of that. So they're really
34:33
Speaker 10: looking to you know, capitalize on that experience.
34:37
Speaker 3: What about tariffs? What was the impact? How do they
34:40
Speaker 3: manage it?
34:42
Speaker 10: Yes, so best Buy they have talked about, you know,
34:46
Speaker 10: as a big picture, as a percent of cogs, about
34:50
Speaker 10: sixty percent of their inventory, you know, is manufactured in China.
34:56
Speaker 10: That's about the same as where it was in eighteen
34:59
Speaker 10: and nineteen. For the products that they have direct control over.
35:05
Speaker 10: The exposure is low, and they've sort of managed that down,
35:09
Speaker 10: and they discussed on the call that, you know, the
35:11
Speaker 10: burden of that cost is really going to be shared
35:14
Speaker 10: between the manufacturer, supplier, the retailer, and the possibly the
35:19
Speaker 10: consumer if it comes to that. Dick's exposure is pretty low.
35:25
Speaker 10: When I look across my coverage, you know, elf Beauty
35:28
Speaker 10: stands out. They have eighty percent of their supply chain
35:31
Speaker 10: is manufactured in China, very highly exposed. A company like
35:36
Speaker 10: that is looking to lean on price increases to sort
35:39
Speaker 10: of manage that type of cost.
35:41
Speaker 3: All right. Thanks to Lindsay Dutch, Bloomberg Intelligence Consumer Hardline
35:44
Speaker 3: Senior Analyst.
35:45
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