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Deborah Lambie: Milford Asset Management analyst on Uber's shares going up by 11 percent · Best of Business

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  Speaker 2: Now.
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  Speaker 3: It's been a hell of a week. As you know.
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  Speaker 3: On Monday, the S and P five hundred was down
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  Speaker 3: three percent. That's its biggest pullback since September twenty two.
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  Speaker 3: Same day, Japan had its worst one day drop since
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  Speaker 3: nineteen eighty seven, selling off a mass of twelve point
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  Speaker 3: four percent, bringing the total fall from the peak to
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  Speaker 3: around about twenty five percent. To talk us more through this,
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  Speaker 3: Debora l Ambi of Milford Acid Management. Hey, Deborah, Hi,
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  Speaker 3: how are you very well? Thank you? So can you
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  Speaker 3: talk us through the market move? Since then? Has everybody?
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  Speaker 3: Has everyone just recovered?
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  Speaker 2: Yeah, So what we've seen is overnight market through the
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  Speaker 2: little bit as buyers waited for him to buy the
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  Speaker 2: dip and S and P was up around one percent,
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  Speaker 2: So that's after On Monday the SMP was down three
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  Speaker 2: as you've said, and Japan had worst day since nineteen
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  Speaker 2: eighty seven, and so this was reassuring to the sea.
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  Speaker 2: But the index is still down around seven and a
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  Speaker 2: half percent from its highs and invests have been worried
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  Speaker 2: about the ability of big tech company to generate a
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  Speaker 2: return on this huge artisantel spend. Plus they've been some
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  Speaker 2: concerned about US growth, which made worse by a week
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  Speaker 2: jobs report last week. And then what we've seen is
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  Speaker 2: overnight in Japan the neatly two to five closed up
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  Speaker 2: around ten percent, which signals that the worst of the
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  Speaker 2: panic might be over. So after having that worst day
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  Speaker 2: since nineteen eighty seven up as your reference on Monday,
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  Speaker 2: overnight was actually it's es day since two thousand and eight.
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  Speaker 2: So however, the total four from the peak in Japan
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  Speaker 2: is still around eighteen percent. As investors have been processing
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  Speaker 2: Japan's first interest rate height in seventeen years, and this
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  Speaker 2: caused an unwind of the yen carried trade, which effectively
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  Speaker 2: means that investors have produced some of their Japanese debt
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  Speaker 2: and funded that by selling global assets like US tech stops.
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  Speaker 2: So shot from what we've seen as markets have actually
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  Speaker 2: stabilized at these lower levels, and overnight what we saw
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  Speaker 2: was the Japan Central Bank intelligent made a coordinated announcement
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  Speaker 2: to try to show a united front and restore some
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  Speaker 2: calm to financial markets. But we do expect bollet slowly
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  Speaker 2: to stay high okay.
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  Speaker 3: Overnight, we also had Uber reported second quarter result and
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  Speaker 3: as a result, the shares were up about eleven percent.
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  Speaker 3: Why'd they go up?
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  Speaker 2: So? Uber reported high and expected profit and importantly return
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  Speaker 2: to profitability, so this isn't the first time it's posted
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  Speaker 2: a profit. It was profitable last year, but at the
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  Speaker 2: start of the sharp slipped back the losses on higher
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  Speaker 2: costs from equity investments and legal settlements. So in its
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  Speaker 2: results it's reaven without sixteen percent, and the CEO said
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  Speaker 2: it was well positioned to grow despite the unserved macroeconomic environment,
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  Speaker 2: and was very clear that they're not yet seeing any
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  Speaker 2: weakness and demand from consumers, which we do know has
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  Speaker 2: been slowing their spending in other areas of the economy,
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  Speaker 2: including places like restaurants, So for now Uber it doesn't
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  Speaker 2: seem to be impacted by this. And then finally, Uber's
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  Speaker 2: pushed into advertising continues and its new ad business exceeded
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  Speaker 2: one billion dollar revenue runway in the quarter. So that
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  Speaker 2: was all taken very well.
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  Speaker 3: Yeah, I can imagine we're about seventy five percent of
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  Speaker 3: the way now through the US earning seasons. Been quite
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  Speaker 3: a right, hasn't it. We've had Microsoft Meta Google, Amazon,
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  Speaker 3: those really big tech names reporting their results. What are
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  Speaker 3: you seeing here?
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  Speaker 2: Yeah, it has been a ride, all right, And so
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  Speaker 2: overall I'd say results from big tech have been quite mixed,
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  Speaker 2: and the key theme has been increased capital spending on
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  Speaker 2: artificial intelligence. So Amazon, it had a fantastic result in
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  Speaker 2: its cloud computing business, but its retail business this week,
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  Speaker 2: so its shares actually fell around nine percent. Metas digital
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  Speaker 2: AD revenue grew rapidly. It posted a strong revenue forecast
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  Speaker 2: and then talked to high capital spending on artificial intelligence,
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  Speaker 2: and it shares up around five percent. Google source strength
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  Speaker 2: and its cloud business, but its AD revenue actually came
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  Speaker 2: in loads and expected, so its shares sold off five percent.
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  Speaker 2: And then finally, Microsoft's cloud business actually missed expectations for
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  Speaker 2: the first time in two years, but because it was
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  Speaker 2: due to a lack of supply, not demand, its shares
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  Speaker 2: only traded down one percent. So the big common theme
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  Speaker 2: from all of those companies, so Microsoft, Amazon, Google, Meta
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  Speaker 2: was all big increases in capital spending to focus on
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  Speaker 2: building out their artificial intelligence infrastructure.
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  Speaker 3: Oh interesting stuff. That increase in the AI investment would
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  Speaker 3: that have been taken quite well by the likes of Nvidio.
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  Speaker 2: Yeah, and so we don't get in there's earning results
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  Speaker 2: until the end of the month, and thises have been
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  Speaker 2: really focused on what these big tech companies have been
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  Speaker 2: saying and what this means for in videot So while
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  Speaker 2: that sounds great this high level of spend currently and
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  Speaker 2: this is are increasingly concerned about how sustainable the level
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  Speaker 2: of tech capex is in the sustainability of demands for
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  Speaker 2: in videos chips. So these results show us that these
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  Speaker 2: companies are spending tens of billions of dollars now, but
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  Speaker 2: also that it's not yet translating to meaningful growth. So
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  Speaker 2: in this is a questioning if the companies can actually
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  Speaker 2: generate and accept your wile return on these artificial intelligence investments,
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  Speaker 2: and then how sustainable spenders And then on top of that,
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  Speaker 2: these have been both exacerbated by a room delay to
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  Speaker 2: the launch of the videos next generation AI chips and
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  Speaker 2: videos Shared actually down around twenty percent from its high
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  Speaker 2: earlier this year.
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  Speaker 3: Good stuff, Deborah, Thank you for talking to us through
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  Speaker 3: a Deborah Landy of Milford Asset Management.
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