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Is big tech done carrying markets on their backs? · The Financial Exchange Show

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Veterans Development Corporation. This is the Financial Exchange with Chuck
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Zada and Mike Armstrong.
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Speaker 2: Chuck, Michael Tucker with you here.
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Speaker 3: We got a couple of days left in the week
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and what is arguably the busiest week of the year
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from an economic data and earnings perspective, And as we
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look at what we are getting, we're gonna start by
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talking about the economic data that we received this morning.
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Couple reports that came out, most notably the PCE Personal
1:37
Consumption Expenditures Price Index. Michael, what did we see and
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what were your thoughts?
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Speaker 4: Perfectly matched what we got from CPI earlier this month, actually,
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which doesn't actually happen all that frequently, it does occasionally,
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but month over month, we saw prices up another zero
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point two percent for the month zero point three percent
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if you want to strip out the food and energy,
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which helped in the month of September and brings us
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back to an overall narrative of dramatically slowing inflation year
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over year. Now you're looking at you know, two and
2:14
a half to three ish on the high end, depending
2:18
on which measure of inflation you're looking at. And these
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six and three month averages continue to come down. And
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so this was a bit of a spike as we
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saw across the board in prices compared to maybe the
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last three June, July, and August, but not a substantial
2:34
one enough, I think to get much of anybody spooked,
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and was anticipated by you know, most economists who would
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polled about this PC price index.
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Speaker 3: Yeah, and it's something where look, if you look at
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the inflation data and what we're seeing specifically on core inflation,
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it is suggesting that we're probably going to end up
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settling into a range if nothing else changes. If this
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is you know, kind of the status quo, which is,
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again this is not where things typically go with the economy.
3:05
It's always evolving, but hey, at this point, it's suggesting
3:08
that inflation is likely to stabilize, probably in the two
3:11
and a half to three percent range, rather than that
3:13
two percent target that the Fed is aiming for. The
3:17
big thing on this is we've we've talked about this
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an awful lot. Inflation basically never gets to that two
3:23
percent target for the long run, but you want to see,
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you know, some stability at least in the twos and
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so I think that you're you're getting there at this point,
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and ultimately we've talked about this quite a lot over
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the last three to six months that when it comes
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to this idea of a soft landing for the economy,
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it's going to alternate between periods of oh no, the
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economy is falling apart, which is what we had in June, July,
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even even into August, and oh no, the economy might
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be you know, too hot again, which is what we've
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had for you know, kind of the last three weeks.
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I would say the September data was okay, this is
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just right, and now the last few weeks you have
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people saying, well, this might be a little bit too
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warm again. And this is why I caution people to
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reading too much into any one particular data point, is
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because if all you're doing is saying, well, this month
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it's too hot and next month it's too cold. Look,
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you're gonna be like Goldilocks, who ends up getting eaten
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by the bear in the original story. You know, she
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doesn't run away like people don't remember that in the
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original Goldilocks and the Three Bears, like you go way back,
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dead children. Yeah, she actually gets eaten. That's not great,
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you know, it's not so I think that you have
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to remember, hey, trying to find a time when the
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economy's perfect. It's kind of a fool's Errand I've been
4:43
doing this for fifteen years, which is not forever, but
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I mean a couple things, and the.
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Speaker 2: I've never had.
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Speaker 4: A Chuck's having some technical difficulties here, so we're gonna
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mute him for a moment. But to his point, the
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economy never just settles in and everything is perfect. There
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are always areas of concern. There are always periods where
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things are evolving, where things are developing and changing, and
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that is the perfect norm of the economy. The other
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piece that I would caution to is the statement of
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the soft landing. And I was asked about that just
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the other day from one of the other one of
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the other radio morning show hosts that we talked to regularly,
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and you know, it is do we have one?
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Speaker 2: Did we achieve one?
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Speaker 4: And Golden Sacks came out a few weeks and said
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that we did. And my problem with this from the
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very beginning, other than just the term in general, which
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implies that the economy stops at some point and achieves
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some equilibrium that stays there forever. Aside from my complaint
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about that piece. Nobody's actually defined what the heck of
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soft landing means. Goldman Sacks certainly never did. JP Morgan did,
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The Federal Reserve never did to say, oh, yeah, this
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is what we mean by soft land on the economy.
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So you know, we, Chuck and I, came up with
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our own definition. I don't know that it's any better
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than any others. But to the point, you're not going
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to know whether or not we've achieved that until somewhere
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around January of next year, and it won't prevent us
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from seeing a nonsoft landing or recession by March of
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twenty twenty five. And so it whenever we get a
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look at these types of data points, I think it
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is important to contextualize them. But yeah, this PCE inflation
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reading that we got this morning, overall, not the thing
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that is going to scare markets away, not the thing
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that it's going to scare investors away, and frankly, not
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anything that is likely to change Drome Powell in the
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Fed's view on where they go at the next two meetings,
6:48
which won the day after election day and another on
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December eighteenth of this year, Chuck sounds like I might
6:54
have you back here? Yeah, who cares about what we do?
6:59
Speaker 2: I know my job? Okay, I was joking that, like,
7:02
no one cares that I'm back. Oh oh okay, good, Yeah,
7:05
it's fine, don't worry about it. Yeah.
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Speaker 3: So I think that in terms of where the economy
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sits right now, it's it's fine with a chance of concerns,
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like that's which it always is.
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Speaker 4: Well, this is this is important point, like the I
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don't know what. Yeah, okay, we'll talk to Chuck tomorrow.
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I think, well that's what we'll do, Tucker. Do you
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want to take a quick break here before we Yeah,
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that's where we go on. Let's take a quick break here.
7:37
We're gonna work on our technical difficulties and maybe you'll
7:39
see Chuck today. Maybe I won't. It's a spooky Halloween.
7:42
We'll let you know. Quick break, we'll be right back
7:44
on the Financial Exchange.
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Speaker 2: Are you sure yes? Monday? Good? Uh?
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Speaker 4: Chuck mentioned it's a slightly busy week this week in
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terms of stuff going on. So to recap, we got
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Jolts job opening Labor Turnover Survey on Tuesday. Yesterday, we
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received data on GDP this morning on the PCE Price Index.
9:04
We also got weekly jobless claims, which will cover tomorrow.
9:07
We're going to see the end All, be All Jobs report, which,
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by the way, you know, expect it to be messy
9:14
just in terms of what we have been seeing recently,
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we've been seeing a couple hundred thousand jobs created per month.
9:21
This specific jobs report is measuring the unemployment rate in
9:25
the month of October, right in the middle of all
9:28
these hurricanes, and so expectations for this one are for
9:32
one hundred and ten thousand jobs.
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Speaker 2: To be created.
9:34
Speaker 4: I wouldn't be shocked if you had net job loss
9:37
on this report, given everything that's been going on in
9:39
the southeastern United States over the last month. But that
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will be the data point four tomorrow. Yesterday, after the bell,
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you heard reports from a number of large companies, including
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some of the two biggest in the world. Microsoft and
9:53
Meta both reported earnings yesterday, but so did Eli Lilly,
9:57
add the Caterpillar, Mgen, Booking Holding ADP, Starbucks. Tomorrow, we
10:03
are going sorry today rather after the bell, we're gonna
10:06
hear from Apple and Amazon. We've already heard from MasterCard,
10:10
Mirk and others, and so continues a tremendously busy week
10:15
here as things have been heating up in terms of earnings.
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But if you're tuning in just now, markets are off slightly,
10:22
and part of that is due to earnings from a
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couple of those massive companies So first off, Microsoft shares
10:28
are slipping on forecasts that are beginning to spark some
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concern about how much money they're pouring into artificial intelligence
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and the results that they are just now starting to realize.
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So in terms of what we saw from the company,
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they're projecting cloud revenue growth of between thirty one and
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thirty two percent. That's there Azure cloud business. The way
10:54
that the way that companies interact with Microsoft on the
10:57
artificial intelligence side is kind of.
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Speaker 2: One of two ways.
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Speaker 4: One they might buy computing power and cloud storage from Microsoft,
11:06
and others they might actually subscribe to Microsoft's own artificial
11:10
intelligence tools such as you know chat GPT like functionality
11:16
within the Microsoft Office suite of tools.
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Speaker 2: Chuck, I hear that.
11:20
Speaker 4: I have you back here and just starting to get
11:23
into Microsoft earnings. Who stock, by the way, in early
11:26
market trading so far today is off nearly wow, over
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five percent now in early trading. So investors particularly disappointed
11:36
in what they saw in terms of Microsoft's report.
11:38
Speaker 3: I think, yeah, and I think that when when we
11:42
look at Microsoft here, it's not a case that it's
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a bad report by any means. I mean, it's it's
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not I don't think you would look at and be like, oh,
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this is terrible. I think it's something where ultimately they're
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really high expectations here for Microsoft, and in order to
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fulfill those expectations, you can't just have a good quarter. Look,
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this is already a company that makes ninety billion dollars
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a year in profits, not in revenue. In profits. The
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expectations are, Hey, if you are trading at you know,
12:18
thirty one times forward profits meaning next year's profit projections. Man, Like,
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you've got to grow into that because otherwise, ultimately this
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boils down to a question of hey, what is you know,
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if things go wrong for this company at some point,
12:37
then it's okay if they need to Ever, if they're
12:40
ever threatened for whatever reason, you know, like you mentioned, hey,
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their core business is still not AI related. Sure, let's
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say that core business gets threatened by someone else's AI.
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Speaker 2: You know.
12:51
Speaker 3: Let's say that Google or Meta or someone else you
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know comes up with a suite of you know, word process.
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I mean, Google already has like Google shit, and let's
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say that, you know, for whatever reason, that becomes the
13:03
way that everyone does things rather than excel. If if
13:08
if the core business of Microsoft ends up being threatened, Well,
13:13
then how does that valuation that they're currently at make
13:16
any sense? And so it's not that they're going to
13:18
go out of business tomorrow, but who knows what can
13:21
happen over the next ten years in tech? This is
13:23
potentially one of the most explosive periods of change that
13:27
we could ever see in technology. And I don't think
13:31
anyone is inherently completely safe because we don't have any
13:34
idea what it's going to look like ten years from now.
13:36
Speaker 4: That's fair, Yeah, I think whether you and I are
13:40
convinced of it or not, I think investors are likely
13:42
willing to give Microsoft a little bit more leeway because
13:45
they're one of the few companies that have dominated now.
13:47
Speaker 2: For a generation of workers. Right.
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Speaker 4: Just realistically here, the same threats were brought up throughout
13:54
the nineties and two thousands of who's going to replace
13:57
Microsoft as the dominant I don't know business technology provider,
14:03
and there are new business technology providers, but Microsoft still
14:08
is the dominant player in a lot of areas, and
14:12
so I'm willing to defer to Microsoft and give them
14:15
more benefit of the doubts.
14:16
Speaker 2: Totally.
14:16
Speaker 4: The motes that you have built over the decades are
14:20
so deep that, yeah, anyone's going to face challenges when
14:23
coming with you. I think the more serious risk though, is,
14:26
you know they've poured fourteen billion dollars into chat GPT,
14:30
they continue to invest a lot of their own money
14:32
on Capex related to AI.
14:35
Speaker 2: And.
14:37
Speaker 4: Is it going to work out the way you think
14:39
or is it going to be a little bit more
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like I don't know Mark Zuckerberg's spending on the metaverse.
14:46
Where are those customers going to come from? And when
14:50
are the actual products that you are trying to develop
14:53
going to become useful? Chuck, You've utilized some of Microsoft's
14:57
artificial intelligence tools on your own to test out and
15:01
correct me.
15:01
Speaker 2: If I'm wrong.
15:02
Speaker 4: Your overall review was nothing that I can't get elsewhere
15:06
for the moment, right.
15:07
Speaker 3: I think it's something where it's at this point it's
15:12
a productivity enhancer rather than a productivity replacer. And what
15:17
I mean by that is, as an example, I took
15:21
a document yesterday. I was just playing around with it
15:23
just to see what I could get. I had a
15:25
document that was about ten pages long. It was a
15:28
bulleted outline about you know, three thousand words something in
15:31
that ballpark, and I took it into PowerPoint and I said,
15:35
using Microsoft's AI tools, I said, hey, make me a
15:39
fifteen slide PowerPoint you know, presentation based on these slides.
15:46
What it gave me was thirty six slides of PowerPoint
15:49
that basically took the bullet points and like put them
15:51
in and added some you know, nice pictures and this
15:53
and that and formatted it nicely. So like that was fine,
15:56
but it was It was thirty six slides, and I
15:59
type back into the prophet is said, no, do this again,
16:01
but make it fifteen slides, and it responds, I can't
16:04
do this. It literally said, like I'm not built to
16:08
do this. And so it's something where hey, there is
16:12
value in me being able to take an entire like written,
16:16
you know, whatever it might be, and I think they
16:18
can do like up to seventy five thousand words. Now, okay, great,
16:22
I can take a long, you know, word document and
16:25
have it summarized easily in you know, a quick power point.
16:29
There's value in that, Like let's let's let's not pretend
16:31
that there isn't, because to do that manually is way
16:34
more than two seconds, and this was literally a minute
16:37
at the most. But it also didn't produce exactly what
16:42
I wanted, and so then I would have to go
16:44
in and modify it. And so maybe instead of you know,
16:47
this cutting my time from you know, reading the whole
16:50
thing and then making it myself from you know, maybe
16:53
instead of cutting it from three hours to one minute,
16:55
it cut it from three hours to half an hour
16:58
to forty five minutes. And that's what I mean by
17:00
productivity enhancer rather than replacer. It can't replace me or
17:04
that work right now, but it can sure make me
17:07
do a lot more with the time I have.
17:08
Speaker 4: Yeah, it seems like it. And I've said from the
17:11
beginning of this excitement around AI that Microsoft seems to
17:15
have the lowest hanging fruit, if you will, in terms
17:19
of adaptation and adoption of these resources to their existing
17:24
suite of tools. If I can explain to an artificial
17:27
intelligence the result that I want in Microsoft Excel or
17:31
PowerPoint and have them make something pretty that's more beneficial
17:37
to me than just about any of the other tools
17:38
that are out there so far, I don't need a
17:40
whold lot from image generation or other tools, and so
17:43
I've frequently thought of Microsoft as, hey, this would be
17:47
the easiest place for this stuff to go into place
17:51
and be effective immediately, and it sounds like to an
17:53
extent it already is, but still in its infancy, and
17:58
I think, frankly, not enough take for investors to be
18:01
excited about it yet.
18:02
Speaker 3: And the other piece, if you look at where Microsoft
18:05
breaks off their AI revenue, the bulk of it is
18:09
in their asserre cloud business. That's that's where they house it.
18:12
And the current quarter, I'm sorry, the previous quarter that
18:16
they just reported saw their cloud business show thirty three
18:19
percent year over year revenue growth, which is nothing to
18:22
sneeze at, like that's cooking. But for the current quarter
18:28
they expect that growth to be between thirty one and
18:30
thirty two percent.
18:31
Speaker 2: It's slowing.
18:32
Speaker 3: The problem with this is that if you look at
18:34
Microsoft's projections for CAPEX, they are showing more CAPEX, specifically
18:39
going into cloud. If you are spending more and your
18:44
revenue growth is slowing, that's kind of a problem. If
18:49
your spending growth is faster than where your revenue growth
18:51
is projected. And that's kind of where we're heading over
18:54
the next year or two. So eventually where you need
18:57
to get to for Microsoft, Hey, that revenue growth from
19:01
a zour has to start dramatically outpacing your spending growth.
19:05
Otherwise you kind of run into a margin problem. And
19:08
so it's, hey, how can you generate the revenue and
19:11
ultimately where they're trying to go based on the announcements
19:14
they've made recently or these things called AI agents, which
19:17
the premise of it is, Hey, it can interface with
19:20
a whole bunch of different software, pull data from different places,
19:23
split it to different places, and maybe then you get
19:26
more of that productivity replacement instead of just enhancement.
19:30
Speaker 2: Quick break here. Wall Street Watch is next.
19:42
Speaker 1: Like us on Facebook and follow us on Twitter at
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TFE show. Breaking business news is always first right here
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on the Financial Exchange Radio Network. Time now for Wall
19:54
Street Watch. A complete look at what's moving market so
19:57
far today right here on the Financial Exchange Change Radio Network.
20:01
Speaker 5: After yesterday's pullback, markets today are selling off as traders
20:05
react to a flurry of significant third quarter earnings and
20:08
a fresh look at inflation and the core PCE index
20:11
this morning that came in line with expectations. Wall Street
20:15
is also ready for tomorrow morning's job support. At the moment,
20:18
the Dow is off by two hundred and sixty five
20:20
points SMP five hundreds down one and a quarter percent,
20:24
or seventy four points. The Nasdaq is down over two
20:27
percent now or three hundred and eighty three points. Russell
20:30
two thousand is off nearly half a percent. Ten year
20:33
treasure Reeled is up by five basis points at four
20:36
point three one percent, and crude oil is up one
20:39
on a third percent, trading at sixty nine dollars and
20:42
fifty three cents a barrel. Meta shares down by two
20:45
percent after the social media and tech giant posted mixed
20:48
third quarter results. The Facebook parent company said it expects
20:52
significant growth in capital expenditures next year as it continues
20:56
to prioritize its AI investment. Microsoft also posted mixed quarterly results,
21:00
where the company said it anticipates slower growth for its
21:04
cloud business this quarter. Microsoft Microsoft shares down nearly six
21:08
percent meanwhile after It's thirty two percent plunged yesterday's shares,
21:13
and super Microcomputer down to another fifteen percent today after
21:17
auditor Ernst and Young resigned after raising concerns over the
21:21
board's independence and accounting practices. Elsewhere, Uber handily beat third
21:25
quarter expectations, However, bookings came in slightly lower than expected,
21:30
sending that stock down by nine percent. Comcast up by
21:34
two percent after the media company beat earnings and revenue
21:37
forecast for its third quarter. President Mike Kevanaugh also said
21:40
this morning that the company is exploring a separation of
21:43
its cable network's business es. Stay Lauder shares sinking by nineteen
21:48
percent after the beauty giant slashed its dividend by nearly
21:51
half and pulled its financial targets for the current fiscal year.
21:55
After reporting another quarter of falling sales, Peloton announced that
21:59
four executive Peter Stern, will take over as the company's
22:02
next CEO. Belaton also posted better than expected quarterly results
22:07
in hiked its profit forecast for the year, sending that
22:10
stock up by twenty four percent. And we'll have more
22:13
significant third quarter earnings due out after today's closing bell Well,
22:17
where Amazon, Apple, and Intel will all report. I'm Tucker
22:22
Silvan that's Wall Street watch, Mike.
22:26
Speaker 3: Before we talk about Meta and their earnings, we need
22:30
to take a quick trip across the pond actually, just
22:34
to talk about what's going on in the UK right now,
22:37
do you mind please? So, first of all, yesterday or
22:41
maybe it was Monday, I can't remember when I misspoke
22:44
when I said that it was Teresa May's government that
22:47
passed the budget or proposed the budget a few years
22:49
back that cost her to last long shorter than a
22:53
head of letus.
22:53
Speaker 2: It was actually Liz Truss. I got the mixed up. Teresa.
22:57
Speaker 3: I actually spent three years as the Prime minister. It
22:59
was Liz trust who spent twelve days or whatever it was,
23:02
you know, one half of Scaramucci, I think somewhere in
23:04
that ballpark. And so in terms of what we're seeing
23:09
right now, so overnight the British government announced their proposal
23:15
for their new budget and Rachel Reeves, who is the
23:19
Chancellor of the Exchequer there basically Secretary of the Treasury.
23:22
Speaker 2: It's the equivalent position for the UK.
23:25
Speaker 3: They proposed fifty one point eight billion dollars in tax
23:30
increases on an annual basis and about eighty billion dollars
23:36
in spending on an annual basis that they would undertaking
23:40
in order to get the UK to where they want
23:42
to get it to. So this now has this flashing
23:47
back to the fall really to October of twenty twenty two,
23:50
because the yield on the ten year UK treasury known
23:54
as the guilt they call them guilts for they're not guilty,
23:58
but gilt is the spelling. The yields on those have
24:02
blown out fifteen basis points today, So it's it's kind
24:07
of a similar situation to what we saw two years
24:09
ago in that hey, new UK government comes in says
24:13
here's what the budget's going to be. UK creditors are like, ew, no,
24:18
we're not gonna do that, and you're getting the exact
24:21
same response today. And this is part of the reason
24:25
why if you look at what's going on worldwide now,
24:28
whether you're looking at US bonds today, whether you're looking
24:31
at German bonds, Italian bonds, French bonds, Japanese actually no
24:34
Japanese bonds basically never move. But basically anywhere like Australia, Canada,
24:39
you look anywhere other than the UK that is a
24:42
developed economy, and bonds are selling off today on this news.
24:45
Speaker 2: It's kind of everything is.
24:46
Speaker 3: Moving in in sympathy here, and so I think you
24:52
look at this and it's it's a question for the UK,
24:56
but also for bond markets as a whole. In that look,
24:59
there are a lot of countries that have similar fiscal
25:01
situations to the UK. The US is one of them.
25:05
How the heck do we you know, kind of dig
25:07
out of this because the UK is now facing its
25:09
second moment of reckoning in two years in terms of, hey,
25:13
you've proposed all this stuff, but ultimately you're talking about
25:16
expanding spending. How are you going to pay for that?
25:19
And granted, the UK is not the US. You know,
25:21
no one that the pound is not the most widely
25:24
used means of international currency settlement. But this is something
25:30
where again it's not a problem in the UK until
25:32
it is, and now it's been a problem twice in
25:35
two years.
25:35
Speaker 2: Yeah.
25:36
Speaker 4: Particularly they're talking about public spending increases of about seventy
25:39
billion pounds a year over the next five years. Yeah,
25:42
only half of which is going to be paid for
25:44
by higher taxes, which is why you have yields blowing
25:46
out in part. So we'll see see the government there.
25:50
Speaker 3: So yeah, so this is something where I think, you know,
25:55
if we look at you know, if we're gonna be
25:58
you know, honest about all this right now and say, hey,
26:01
like what do we need to be doing? Well, I
26:04
really think that we need to get new head to
26:06
let us out there to see if Starmer is going
26:09
to you know, be able to last longer.
26:11
Speaker 2: But this is this is where.
26:13
Speaker 3: We are right now, slightly different, you know situation that
26:16
the election I think it was held. It was July fourth,
26:20
I believe. I think they held it on US Independence Day,
26:22
which I thought was funny at the time. But in
26:25
any case, this is something that is moving yields around
26:27
the globe right now as the UK tries to reckon
26:31
with the new budget proposals from the Labor government that
26:35
came into office a few months ago. With that, anything
26:39
else that we want to say there, but I thought
26:41
it was just important to touch on because it's it's
26:42
been moving markets all morning.
26:44
Speaker 2: Yeah.
26:44
Speaker 4: Hey, look, US markets and bond markets don't move in
26:48
the same way typically, but we are on the brink
26:52
of an election with both parties talking about dramatic increases
26:56
to net spending from you know, tax cuts and or
27:00
increase spending. So we'll see what that all looks like
27:03
come spring of twenty twenty five.
27:06
Speaker 3: Let's talk a little bit about the company formerly known
27:08
as Facebook, now known as Meta. Revenue came in about
27:12
forty billion dollars in change for the quarter. That was
27:16
revenue growth of nineteen percent, and that was slower than
27:20
the twenty two percent revenue growth that they saw in
27:23
the prior quarter. So again, revenue slowing down right now.
27:27
And Mark Zuckerberg on the Meta conference call kind of
27:32
came off as being like, Yeah, we're doing all of
27:35
this AI investment, but gosh, it sure is expensive and
27:39
it's not really generating anything for us right now in revenue.
27:41
Speaker 4: The commentary that I heard was like, kind of surprise,
27:44
how much money we spend? Like you should probably know, Mark,
27:49
now go ahead.
27:51
Speaker 3: The thing that's funny about this is Zuckerberg and Meta
27:54
have burnt through about fifty billion dollars on the metaverse,
27:57
which also is generating basically no money. It generated like
28:00
three hundred no sorry, two hundred and seventy million dollars
28:03
in revenue for the quarter and lost four point four billion.
28:07
So Mark is happy to burn money there, but doesn't
28:10
seem as happy to burn money on AI despite everyone
28:13
else being more interested in AI.
28:15
Speaker 2: Yeah.
28:15
Speaker 4: In particular, he pointed to what he's calling meaningful gains here,
28:19
and I'll summarize a few of them. AI driven feed
28:22
and video recommendations have led to an eight percent increase
28:25
in time spent on Facebook, six percent increase on Instagram,
28:29
more than one million advertisers used Metas generative AI tools
28:33
to create more than fifteen million ads in the past month,
28:37
and that businesses using image generation are now seeing a
28:41
seven percent increase in conversions. This is, of course, it's
28:46
difficult to tie out which part of this is just
28:49
what I would refer to as AI washing, saying, Hey,
28:52
better business is because of the AI spend that we're making.
28:55
But certainly the CEO does not come out in their
29:00
public earnings call and claim that a whole bunch of
29:02
stuff is directly due and attributable to artificial intelligence without
29:06
at least some of it being attributable to it. And
29:08
so I do believe that, yeah, a million advertisers are
29:12
using genera AI tools on Metas platforms to reach new people.
29:15
I do believe some of these stats. It's just tough
29:18
to pair out. Hey, how much more would people have
29:23
been spending on Facebook? How much more time would people
29:25
have been spending on Facebook without the investment in artificial intelligence?
29:30
Just because hey, it's election season, people spend time on
29:33
social media platforms. So it's not quite the same as Microsoft.
29:37
Different business models and tougher I think to really tease
29:40
out what is the return on investment when it comes
29:43
to these artificial intelligence pieces? Unlike the metaverse, where you
29:46
can measure it how many people first week?
29:49
Speaker 3: Right the metaverse, we can say, hey, you spent four
29:53
point seven billion dollars, you made three hundred million. That's
29:57
a net loss of four point four Like you can
30:00
see what's going on there, and the answer is ultimately
30:02
not a lot, very little.
30:03
Speaker 2: Like no, do you know.
30:05
Speaker 4: Anyone who even talks about it anymore? I haven't seen
30:08
ads for it anymore. I didn't see the silly ad
30:10
of somebody fishing with their uncle who lives in the
30:12
other part of the country. Like no, I haven't seen
30:15
anything talked about I haven't seen advertisements for it. I
30:17
don't know how artificial intelligence is going to, you know,
30:20
make it better. I do know though that you know,
30:24
in terms of big tech companies who are using AI
30:29
rather than creating the infrastructure for it, few have been
30:33
greeted so warmly then more warmly than meta on this subject, right,
30:38
Like if you have been looked at by investors as saying, hey,
30:41
we see you benefiting from artificial intelligence, whether I buy
30:45
it or not, that seems to be the narrative from
30:47
Wall Street.
30:48
Speaker 2: The other piece that.
30:50
Speaker 3: Is interesting to me on this just like looking at
30:53
AI in general, remember that in videos new Blackwell chips
30:57
only have started shipping in small quantities this quarter. The
31:00
stuff that's actually going to be running on them isn't
31:04
gonna be out for a year to a year and
31:06
a half, and so I think we also need to
31:08
take that with, you know, kind of like take this
31:10
all with a grain of salt and that Hey, the
31:13
stuff that we're seeing that is out there for AI today,
31:17
it's built using the last generation of technology as far
31:20
as the chips and stuff, and the new ones are
31:22
promised to be like multiple times faster, better, stronger, you know,
31:25
like every adjective that you can use to say that
31:27
they're gonna, you know.
31:28
Speaker 2: Do more.
31:30
Speaker 3: And so I think that we do need to realize, Hey,
31:32
what we're seeing for artificial intelligence today might look really
31:37
different twelve to eighteen months from now, once all of
31:39
the orders that Nvidia has gotten for its next generation
31:42
chips actually end up in the hands of these companies
31:46
and maybe they can execute.
31:47
Speaker 2: On some of the plans that they're talking about. Right.
31:50
Speaker 3: It's you have to think of it that way too,
31:52
because of the just the scale that they're talking about
31:55
with these these new purchases. Let's take a quick break here.
31:59
When we come back, we've recapped a couple of the
32:01
big tech earnings that we've seen so far this week.
32:04
This afternoon, though, we got Apple and Amazon reporting, so
32:08
we'll preview them right after this.
32:11
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Speaker 4: I just checked out the live stream and am surprised
32:41
to see that you are not in your Halloween costume. Hi,
32:45
are you ready to go this afternoon?
32:47
Speaker 2: I'm all set. I'm in a great spot for it. Excellent.
32:50
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34:26
Speaker 3: Talk a little bit about Apple and Amazon, both scheduled
34:28
to report earnings after the bell today, and you know,
34:34
two companies that they both Everyone still thinks of these
34:37
as tech companies and Apple is, but look, Amazon is
34:41
a retailer. They just happen to sell stuff online like
34:44
every retailer these days. I think the interesting thing on
34:48
both of these companies is going to be Look, Apple
34:52
has been not really conforming to how everyone else in
34:56
big tech is approaching AI. They're not spending you know,
35:00
billions of dollars trying to build out these clusters of
35:03
computing power, but instead they're trying to say, no, we're
35:07
gonna give you, you know, device based AI, what's known
35:11
as Edge AI on their devices in the form of
35:15
Apple Intelligence for new phones and things like that. And
35:20
it's something that I think they just rolled out last
35:22
week finally with the new iOS update for I think
35:24
was eighteen point one or whatever it's called. And I
35:28
think it's gonna be interesting to see, Hey, is this
35:30
actually something that is driving people to you know, a faster,
35:35
you know, replacement cycle for their phones or is it
35:39
not really doing anything there because the rest of the company,
35:42
again is just in great shape, but it's it still
35:46
has gotten caught up in a little bit of AI
35:48
hype and that Hey, the expectation is that this is
35:51
going to help them sell more devices, will it, especially
35:54
given some of the potential weakness in China, which is
35:57
a key market for them, which has just been seeing
35:59
very tepid and sumer demand for anything lately.
36:01
Speaker 4: Yeah, I think they have China issues. But when I
36:05
think about Apple and their approach to artificial intelligence, I
36:08
just think it makes so much sense for their business.
36:12
Speaker 2: Do you know anyone out.
36:13
Speaker 4: There who would switch from the Apple universe to the
36:17
Android universe if Samsung came out with a really early
36:22
adaptation of artificial intelligence and it was quite good, because
36:26
I can't think of a single person that would do so.
36:28
Speaker 2: Other than like massive computer nerds. No, So you know
36:32
Apple's approaches.
36:33
Speaker 4: Rather, let's just see what floats to the top here
36:36
in terms of best products that we can go grab
36:39
and implement on our devices, and we'll do that, because
36:43
that's what they do best is they take products that
36:45
have already been perfected. They either copy them or they
36:49
buy them and leverage them and contract with them, and
36:52
then they make them exclusive to the Apple product once
36:55
it's already been perfected. And I think that is the
36:57
best approach for the dominant seller of hardware in the
37:02
United States for smartphones. I think that is an absolutely
37:05
smart approach because unlike, if you know, Google is not
37:09
first to market with some new artificial intelligence tool, or
37:12
if Metas not on the advertising front, somebody else, will
37:15
you know, move in there quickly, Nobody's going to be
37:19
able to budge Apple out of that dominant space in
37:22
the short term.
37:23
Speaker 3: With Amazon, it's gonna be two questions, Hey, what's the
37:26
AWS cloud growth look like? Is it's strong, like we've seen,
37:29
you know, from Google Cloud earlier this week. And the
37:31
second one is going to be, hey, there's been you know,
37:34
all these reports of you know, upticks in consumer spending
37:37
in the last couple of months, specifically on goods. Are
37:40
you picking up any of that through your your core
37:44
retail business? And I mean, look again, this is a
37:48
business that it's it's hard to say that it's it's
37:50
threatened in.
37:50
Speaker 2: Any meaningful way.
37:51
Speaker 3: But again, when you look at how it's priced, it's
37:53
it's one where hey, they're gonna have to deliver some
37:56
good results otherwise you could see something similar to a
37:59
Microsoft or Meta with some kind of modest selloff after
38:01
the report. Let's take a quick break here. We are
38:06
heading into hour two in just a little bit. Still
38:09
a ton of stories to get through in one of
38:11
the busiest weeks of the year. We'll have all that
38:13
coming up in hour two.