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Chip Stocks Sink Into Bear Market Territory as AI Rally Fizzles · Bloomberg Intelligence

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  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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  Speaker 2: It feels like this week we've seen a lot as
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  Speaker 2: it released to Chinese tug as.
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  Speaker 3: Well a lot based on that, and overnight there's a
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  Speaker 3: Chinese AI startup called Moonshot, which I thought the name
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  Speaker 3: was kind of app It sent jitters across markets, and
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  Speaker 3: this is why partly we're seeing or largely rather we're
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  Speaker 3: seeing an SNP and an ASDAC that's down on the day,
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  Speaker 3: and that's why you're seeing the socks on a bear market.
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  Speaker 3: Because of that, and for that, we have no one
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  Speaker 3: else better to talk to than Men Deep seeing he's
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  Speaker 3: with Bloomberg Intelligence. Men Deep, do you think this is
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  Speaker 3: another Deep Seek moment or do you think that this
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  Speaker 3: is something bigger changing maybe in the AI race.
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  Speaker 4: I would say there, I'm off the view that you know,
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  Speaker 4: every time there is a new model release, every model
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  Speaker 4: provider would highlight, you know, what is unique about this release,
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  Speaker 4: and in this case, they talk about, you know, token efficiency,
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  Speaker 4: the fact that they have caught up in terms of
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  Speaker 4: certain types of functionality that the model can provide. And look,
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  Speaker 4: we were in an environment where everyone is talking about
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  Speaker 4: how expensive it is to deploy these technologies, the llms,
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  Speaker 4: and this model seems to be good enough at a
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  Speaker 4: low price, which is what is catching attention. But that
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  Speaker 4: doesn't mean, you know, they've caught up to the frontier
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  Speaker 4: models that Anthropic and Open Eye have released, and so
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  Speaker 4: it's really a function of pricing. And to my mind,
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  Speaker 4: you can create news, but the actual adoption will have
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  Speaker 4: to wait and see.
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  Speaker 2: And it speaks to the nervousness that consumers and investors
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  Speaker 2: have over who is prevailing in this AI race, and
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  Speaker 2: very much feels like an AI race. Mandy, Why have
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  Speaker 2: we gotten to the point where, even though the cutting
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  Speaker 2: edge development and technology is happening in the US, it
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  Speaker 2: feels increasingly like Asian markets are dictating where things go
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  Speaker 2: in terms of price action.
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  Speaker 4: Yes, I think you bring up a very good point
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  Speaker 4: that you know, what's going on in Korea right now
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  Speaker 4: seems to be affecting you know, the indices here and
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  Speaker 4: how stocks are trading, and that's part of the nervousness
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  Speaker 4: that you alluded to that you know, when things go
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  Speaker 4: parabolic as they did with some of the stocks, you know,
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  Speaker 4: for no reason whatsoever. Yes, the fundamentals have been great,
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  Speaker 4: but that doesn't mean, you know, things have to go
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  Speaker 4: up in that fashion, and that's what creates nervousness around valuations.
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  Speaker 4: I mean, we are seeing even news like Apple asking,
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  Speaker 4: you know, China for qualification of or sorry, the US
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  Speaker 4: government for qualification of a Chinese mena rename is creating
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  Speaker 4: a lot of downside for the US memory names and
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  Speaker 4: you know your Micron and even ske Heinex. So that's
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  Speaker 4: the kind of environment we are in where any sort
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  Speaker 4: of news creates that sort of action where you know,
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  Speaker 4: if socks were trading at a high valuation, they it's
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  Speaker 4: going to have an impact. And I think the fundamentals
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  Speaker 4: haven't really changed in a big way, which I think
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  Speaker 4: will be validated when these companies report their earnings and
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  Speaker 4: guide for CAPEX, which I expect numbers to go up.
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  Speaker 4: But we are in an environment where news will have
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  Speaker 4: an impact on day to day volativity.
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  Speaker 3: Mandy, do you think that this is a sign that
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  Speaker 3: investors should see this as a threat to USAI leadership
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  Speaker 3: or is it just simply more competition, which is what
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  Speaker 3: we should expect anyway.
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  Speaker 4: I think the overall message here is you can't have
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  Speaker 4: two companies dominate the LLM race. It's never going to
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  Speaker 4: be good from, you know, an ecosystem perspective. They will
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  Speaker 4: have very high margins, which is definitely not something that
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  Speaker 4: all the other companies want in the ecosystem. So there
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  Speaker 4: is a desire to have more llms and cheaper pricing
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  Speaker 4: for these llms. And that's why if the option is
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  Speaker 4: available through open source Chinese models, people are looking into
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  Speaker 4: it now and it's across the board, and it's not
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  Speaker 4: different from any other technology trend. You want to see
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  Speaker 4: the costs come down as adoption goes up. That wasn't
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  Speaker 4: happening here, and I think that's why you are seeing
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  Speaker 4: so much interest in open source lms right now.
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  Speaker 2: Okay, so China with deep Sneak and now Moonshot, these
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  Speaker 2: developments when we hear about it kind of feels like
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  Speaker 2: it comes fromund nowhere, mainly because we haven't been following
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  Speaker 2: the incremental news on it. Are there other places or
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  Speaker 2: other companies that could surprise us in the same way
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  Speaker 2: where suddenly they come out with a fully formed AI
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  Speaker 2: model LM that we didn't know about.
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  Speaker 4: Yeah, I mean look at Meta announcing the Muse models
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  Speaker 4: and you know, trying to become a cloud provider and
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  Speaker 4: selling their APIs externally. We've heard about Grock, you know
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  Speaker 4: SpaceX Grock, and now with the merger with Cursor, they
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  Speaker 4: have released a new model. So all these could be
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  Speaker 4: viable options in terms of using llms at a lower
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  Speaker 4: token pricing than what the frontier models are currently giving.
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  Speaker 4: And so that's where the competition is going to increase.
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  Speaker 4: But I go back to that functionality point. All these
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  Speaker 4: lms are still trailing in terms of the functionality that
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  Speaker 4: pable or you know, the open AI models have, so
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  Speaker 4: that gap needs to close and then people will route
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  Speaker 4: the query to the LM that's most appropriate for that
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  Speaker 4: task and you don't need the frontier lms for every query.
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  Speaker 4: And I think that's the direction we're headed.
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  Speaker 1: Stay with us.
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  Speaker 2: More from Boomberg Intelligence coming up after this.
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  Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live
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  Speaker 3: I'm Isabelle sitting in for Scarlettfoo and Paul Sweeney. Both
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  Speaker 3: are away at the moment. Paul is at the beach,
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  Speaker 3: I think, and Scarlettfoo is with her TV duties. But
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  Speaker 3: beside me is a legendary Charlie Pellett. So I am
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  Speaker 3: in fantastic company.
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  Speaker 5: I'm very glad to be here. We shut just a
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  Speaker 5: few minutes together, but we are going to make the
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  Speaker 5: most of it. And let us talk about one of
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  Speaker 5: the most popular stocks to cover, and that is Apple, Apple.
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  Speaker 3: Apple, And we have no other than markom and Bloomberg
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  Speaker 3: News Managing editor for Global Consumer Tech on Apple and
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  Speaker 3: all things Apple. Here is what I call in my
• 6:46
  Speaker 3: old scoop machine, because anything anytime I see on Apple headline,
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  Speaker 3: I know it has to be Mark. So Mark, first
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  Speaker 3: of all, we have to talk about Apple briefly or
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  Speaker 3: at one point they're passing in video as a most
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  Speaker 3: valuable company in the world. Maybe talk to us about
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  Speaker 3: significance of that. What is Apple doing right because the
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  Speaker 3: rest of the big tech is kind of languishing.
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  Speaker 6: Apple stock's been on a tear lately. I think investors
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  Speaker 6: might finally be reading my articles where I talk about
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  Speaker 6: that we're about to enter a tremendous new period for
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  Speaker 6: the company, with so many new products home devices, foldable iPhones,
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  Speaker 6: AI wearables, integrating AI deep into the hardware. Apple's a
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  Speaker 6: hardware company. They make basically all their money from hardware sales.
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  Speaker 6: If you're an Apple investor, it's a good time because
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  Speaker 6: they're about to make a boatload of more money, and
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  Speaker 6: so you'll probably have some success there on the on
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  Speaker 6: the days they announced.
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  Speaker 5: Their all right, I go to the Bloomberg. I look
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  Speaker 5: at Apple shares up twenty two point five percent year
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  Speaker 5: to date. I look at in video by Comparison up
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  Speaker 5: nine point nine percent. When a story like this saying
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  Speaker 5: Apple is now number one in terms of market cap
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  Speaker 5: clears the Bloomberg. What is the reaction, respectively, in either
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  Speaker 5: Coopertino or Santa Clara. Are the folks that Nvidia looking going,
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  Speaker 5: oh my god, what a terrible day this is? Folks
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  Speaker 5: in Coopertino are they going woohoo? Or is it really
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  Speaker 5: a case of nobody cares other than the folks who
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  Speaker 5: own those stocks.
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  Speaker 6: I think it's the ladder. But if you're in Vidia,
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  Speaker 6: right this might be a little bit of a wake
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  Speaker 6: up call. I mean, they were the hard charging company
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  Speaker 6: making all the money with the insane revenue growth over
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  Speaker 6: the past couple of years, and now investors are beginning
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  Speaker 6: to become a little bit more skeptical over AI and
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  Speaker 6: how AI is being driven. I think there's a little
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  Speaker 6: bit more optimism for what Apple's doing because of their
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  Speaker 6: decision to go more on device for AI processing, and
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  Speaker 6: so their capex is slim compared to the competition, and
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  Speaker 6: I think that the lower spending that Apple is doing,
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  Speaker 6: I think it makes investors actually pretty excited. But again,
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  Speaker 6: the quality of the AI that you're getting from the
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  Speaker 6: cloud versus on device are still a big, you know,
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  Speaker 6: deviation there. But the gap will close at some point,
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  Speaker 6: I think.
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  Speaker 3: And then you said that Apple is set to make
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  Speaker 3: a boatload of money. Where will that come from? We
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  Speaker 3: do know that they're raising their prices across devices. Is
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  Speaker 3: that coming from there?
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  Speaker 6: Well, the revenue will go up because of the price increases.
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  Speaker 6: I don't think the price increases are enough to slow
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  Speaker 6: unit sales to any significant degree. Profit not going to
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  Speaker 6: change much because the offset the price increases are designed
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  Speaker 6: to simply offset the memory they're not making additional profit
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  Speaker 6: on that. We're talking about new iPads. There'll be a
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  Speaker 6: new ole at iPad, so a better screen like the
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  Speaker 6: iPhone and iPad pro.
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  Speaker 5: This fall.
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  Speaker 6: The foldable iPhone is going to be about twenty five
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  Speaker 6: hundred bucks. I'm super pumped.
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  Speaker 3: I want to see that in real life.
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  Speaker 6: I can't wait. Yeah, it's going to be the biggest
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  Speaker 6: change to the iPhone in the product's history. So it's
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  Speaker 6: a really really big deal full time.
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  Speaker 5: I'm not necessarily a skeptic with things like this, but
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  Speaker 5: why do I need a folding phone? Thank you? As well?
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  Speaker 5: Regardless of whether it's Apple, regardless of whether it's sound
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  Speaker 5: well gen Z influced, well.
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  Speaker 6: I would say you need a foldable phone like you
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  Speaker 6: need a hole in your head, because it doesn't really
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  Speaker 6: make you know, it's not really uh that necessary. It's
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  Speaker 6: sort of a technology showcase, right, It's over the top.
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  Speaker 5: It's very cool. I mean when I've seen these foldable phones,
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  Speaker 5: I'm always looking for the line and I don't see it.
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  Speaker 5: I don't see the line between the two screens.
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  Speaker 6: We've gotten better and Apple is going to be pretty
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  Speaker 6: much industry leading in how you know invisible that line
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  Speaker 6: is going to be. One of the problems you've had
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  Speaker 6: with foldable phones over the past several years is durability.
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  Speaker 6: Apples is not going to be as durable as you
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  Speaker 6: know the slab phone, right, I mean the Promax, the
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  Speaker 6: seventeen Promacs. This thing is built like a tank. You
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  Speaker 6: can throw it across wherever, you can throw it in
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  Speaker 6: the pool. This thing is not going to break.
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  Speaker 5: It's a tank.
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  Speaker 6: At the same time, what you really need to understand
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  Speaker 6: is that Apples hold the phone is going to be
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  Speaker 6: more durable than the competitive devices.
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  Speaker 3: Yeah, okay, so we have around one minute left, and
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  Speaker 3: as Apple invests more in AI and new devices, do
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  Speaker 3: you think it can maintain its premium position because we
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  Speaker 3: also know that smartphone growth is slowing a little.
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  Speaker 6: I think that Apple, if you look at it as
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  Speaker 6: a complete package, you look at the hardware, software services,
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  Speaker 6: they still think they have the most competitive phone on
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  Speaker 6: the market on a global scale. I think it's the
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  Speaker 6: best combination of user accessibility, interface services, things like my Message.
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  Speaker 6: So I think it remains an elite product and I
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  Speaker 6: don't think the phone is going away as quickly as
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  Speaker 6: some people do.
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  Speaker 5: Mark very briefly, Isabelle asked about revenue. Whenever Apple earnings
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  Speaker 5: hit the Bloomberg one of the first things I look
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  Speaker 5: at is China revenue. Speak to us about what is
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  Speaker 5: happening in terms of Apple and China. I know there
• 11:41
  Speaker 5: was some news announced about the iPhone in China. What's
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  Speaker 5: going on there?
• 11:44
  Speaker 6: So Apple will finally be able to roll out its
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  Speaker 6: AI in China. This is the first generation version of
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  Speaker 6: its new AI, so the Apple intelligence that got the
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  Speaker 6: head of AI fired. So I don't think this is
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  Speaker 6: a needle mover. I don't think people in China are
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  Speaker 6: going to want it. But the second generation, the new
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  Speaker 6: SERIAI and the new Apple Intelligence is pretty good, so
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  Speaker 6: we'll see how long it takes for that to get approved.
• 12:03
  Speaker 2: Stay with us more from Bloomberg Intelligence coming up after this.
• 12:09
  Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live
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  Speaker 1: weekdays at ten am Eastern on Apple, Cocklay and Android
• 12:16
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• 12:20
  Speaker 1: you get your podcasts, or watch us live on YouTube.
• 12:24
  Speaker 3: I myself, I am a binge watcher when it comes
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  Speaker 3: to Netflix. But you made a point earlier, Scarlette. There
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  Speaker 3: are already many people in Netflix account and where do
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  Speaker 3: they take their growth.
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  Speaker 2: Yeah, well, aside from making sure that your brother or
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  Speaker 2: your husband is not using your.
• 12:38
  Speaker 3: Account, that is true, and that's why you're seeing this
• 12:40
  Speaker 3: stock down as alexis eluded more than nine percent. It's
• 12:44
  Speaker 3: the biggest inter dated client since April twenty twenty two.
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  Speaker 3: And joining us now to help us make sense of this,
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  Speaker 3: it's Githa Aganathan, Bloomberg Intelligence Analysts on US Media. Githa,
• 12:53
  Speaker 3: thank you so much for joining us. Do you think
• 12:55
  Speaker 3: that this is that this slow and growth is the
• 12:58
  Speaker 3: short term issue or do you think it's a sign
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  Speaker 3: that Netflix maybe is becoming a more mature market.
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  Speaker 7: Definitely, Isabelle. You know, we are seeing signs of maturity
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  Speaker 7: across the entire landscape and definitely for Netflix as well.
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  Speaker 7: So you know, moderating revenue growth is definitely a big
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  Speaker 7: red flag here, and we've seen the revenue growth actually
• 13:19
  Speaker 7: come down pretty substantially, which is what I think is
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  Speaker 7: really spooking investors, right because in the first quarter you
• 13:24
  Speaker 7: had about sixteen percent revenue growth, almost fourteen percent for
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  Speaker 7: the second quarter, and now when you look at their
• 13:29
  Speaker 7: guidance for the third quarter, it's eleven point seven percent,
• 13:32
  Speaker 7: which was well below what consensus was expecting. So this,
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  Speaker 7: this really I think feeds into that whole investor anxiety
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  Speaker 7: about you know, what the catalysts are going.
• 13:43
  Speaker 2: Forward for this name, and this is not something that
• 13:46
  Speaker 2: can be solved with more spending on content and making
• 13:49
  Speaker 2: sure you have the latest hot show or the latest franchise.
• 13:52
  Speaker 7: Is it well, they actually scarlett to that point. They're
• 13:57
  Speaker 7: actually boosting content spending pretty significant this year, almost ten
• 14:01
  Speaker 7: percent to twenty billion dollars. That's the highest ever that
• 14:04
  Speaker 7: they would be spending on content. But you know, if
• 14:06
  Speaker 7: you look at the Engagement Report which they published yesterday,
• 14:10
  Speaker 7: yes they do have, you know, this very broad swath
• 14:13
  Speaker 7: of content, and but at the end of the day,
• 14:17
  Speaker 7: we're not necessarily seeing that resonate into what, you know,
• 14:22
  Speaker 7: the metric that all investors are focused on, which is engagement,
• 14:25
  Speaker 7: because while the total number of hours viewed did grow
• 14:29
  Speaker 7: slightly two percent from last year, the viewing hours per
• 14:33
  Speaker 7: subscriber is actually declining. And the big worry I think
• 14:37
  Speaker 7: for investors is that as we get disruption from short
• 14:41
  Speaker 7: form video, from YouTube, from you know, Instagram, TikTok and
• 14:44
  Speaker 7: all of these other social media platforms, can Netflix actually
• 14:48
  Speaker 7: retain that you know, engagement metric and is it only
• 14:51
  Speaker 7: going to slip further.
• 14:54
  Speaker 3: So, Githa, do you think we're heading towards a more
• 14:56
  Speaker 3: consolidation in streaming maybe as companies chase scale and profits.
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  Speaker 7: I think we already saw that, right. So Netflix actually
• 15:05
  Speaker 7: did go after Warner Brothers Discovery streaming and studio business
• 15:10
  Speaker 7: last year pretty aggressively until they finally lost to Paramount Skuidance.
• 15:14
  Speaker 7: I think you know at this point, yes, Netflix is
• 15:17
  Speaker 7: doing little little things, you know, whether it's adding you know,
• 15:21
  Speaker 7: short form content, whether it's going into live events, whether
• 15:24
  Speaker 7: it's you know, doing a little bit more in gaming,
• 15:27
  Speaker 7: but none of these are transformative enough. You know, we
• 15:30
  Speaker 7: need some kind of a step change catalyst here and
• 15:33
  Speaker 7: we're really not seeing anything. So maybe M and A,
• 15:36
  Speaker 7: maybe some kind of a transformative partnership, maybe some kind
• 15:39
  Speaker 7: of a big acquisition will finally move the needle for Netflix,
• 15:43
  Speaker 7: but we have to wait and watch.
• 15:45
  Speaker 2: That's so interesting, and I know this is something you've
• 15:47
  Speaker 2: written about, Gita, this idea that Netflix now has M
• 15:49
  Speaker 2: and A ambitions when it had kind of denied that
• 15:53
  Speaker 2: it was looking to do that. It's always prioritize organic
• 15:56
  Speaker 2: growth and reinvesting in its own business. What does that
• 15:59
  Speaker 2: say about the state of the streaming wars overall? That
• 16:03
  Speaker 2: Netflix needs to buy to consolidate its grip on the market.
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  Speaker 7: Yeah, I mean, we're really seeing competition kind of intensifying,
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  Speaker 7: and we're going to see that only intensified further, Scarlett
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  Speaker 7: once Paramount closes on its acquisition of you know, Warner
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  Speaker 7: Brothers and HBO, and Netflix really needs to kind of
• 16:21
  Speaker 7: beef up the content because obviously it's the lack of
• 16:24
  Speaker 7: those breakout hits. Yes, they did have great content, they
• 16:27
  Speaker 7: did have a great pipeline. Yes we did see good
• 16:30
  Speaker 7: growth in viewing hours, but that's just not enough as
• 16:33
  Speaker 7: we have more and more of you know, it's not
• 16:37
  Speaker 7: just competition and streaming though, that's that's the problem. It's
• 16:39
  Speaker 7: competition from all kinds of platforms. You know, we talked
• 16:42
  Speaker 7: about the social media platforms, and that's really what Netflix
• 16:46
  Speaker 7: has to kind of defend its surf against. And for that,
• 16:49
  Speaker 7: they have to come up with bigger, better, more engaging
• 16:53
  Speaker 7: content and they might very well need to buy a
• 16:56
  Speaker 7: studio for that.
• 16:58
  Speaker 3: What about the live sports podcast and ads initiatives? How
• 17:02
  Speaker 3: meaningful are those when it comes to driving growth. Are
• 17:04
  Speaker 3: you bullish on them?
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  Speaker 4: Do you?
• 17:06
  Speaker 3: I feel like Scarlett and I were talking about it,
• 17:08
  Speaker 3: and almost everyone has a podcast these days.
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  Speaker 7: Yeah, So on the margin, I think it definitely helps
• 17:14
  Speaker 7: because you know, at the end of the day, Netflix is,
• 17:16
  Speaker 7: you know, something you go home to in the evening
• 17:18
  Speaker 7: and then you're watching it. But I think with podcasts,
• 17:21
  Speaker 7: it's something that they're trying to build on through the day, right,
• 17:24
  Speaker 7: They're trying to build on engagement. You know, anytime you
• 17:28
  Speaker 7: pick up your phone, you have some content that you
• 17:30
  Speaker 7: can kind of listen to or look at, and that
• 17:33
  Speaker 7: is really what they were trying to go after. But
• 17:36
  Speaker 7: at the you know, again it's on the margin. Yes,
• 17:39
  Speaker 7: it helps, but doesn't move the needle.
• 17:43
  Speaker 1: This is the Bloomberg Intelligence Podcast, available on Apple, Spotify,
• 17:48
  Speaker 1: and anywhere else you get your podcasts. Listen live each
• 17:52
  Speaker 1: weekday ten am to noon Eastern on Bloomberg dot Com,
• 17:56
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• 18:00
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• 18:03
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