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Is Amazon falling behind rivals in its cloud business? · The Financial Exchange Show

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Speaker 1: making a donation today. This is the Financial Exchange with
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Speaker 1: Chuck Zada and Mike Armstrong.
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Speaker 2: Chuck, Mike and Tucker with you. And market's not in
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Speaker 2: a great spot today. The Dow is off five hundred
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Speaker 2: and eighty two points, SMP's down one hundred, Nasdaq is
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Speaker 2: down four hundred and thirty five, so about a one
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Speaker 2: and a third to a two percent decline in markets
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Speaker 2: today so far.
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Speaker 3: Things that can be causing it.
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Speaker 2: We had a job report this morning that was weaker
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Speaker 2: than expected, some new tariff announcements last night, and some earnings.
1:36
Speaker 2: And Mike sam Totlly is going to be joining us
1:40
Speaker 2: from CNBC in about ten to fifteen minutes, so he'll
1:43
Speaker 2: get us caught up on a decent chunk of what's
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Speaker 2: going on in markets. But I wanted to kick things
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Speaker 2: off by talking about earnings from yesterday. For are the
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Speaker 2: two big tech companies that were reporting, Amazon and Apple,
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Speaker 2: And I'd like to start with Amazon. Michael, if that's okay,
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Speaker 2: just because it's a good country to what we got yesterday. Well, look,
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Speaker 2: it's it's just sexier. Whenever a stock moves seven percent,
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Speaker 2: it's more interesting to talk about than the one that
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Speaker 2: is moving one percent. So let's start with the big one,
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Speaker 2: the unfortunate thing for Amazon is that that seven percent
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Speaker 2: is down, not up. So why is Amazon off seven
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Speaker 2: and a half percent today?
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Speaker 3: What gives? I'm gonna quote Luke.
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Speaker 2: Kawa here from Sherwood News, who, by the way, Tucker
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Speaker 2: just I'll say this publicly. Luke is a great guy
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Speaker 2: that we should reach out to to try to talk
2:30
Speaker 2: about some of this stuff in the future. So put
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Speaker 2: his name on whatever list you keep for interviews, because
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Speaker 2: he's he's awesome. So this is he wrote a piece
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Speaker 2: about Andy Jasse's earnings call, and I think it all
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Speaker 2: boils down to this. This is This is a quote
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Speaker 2: from Amazon CEO Andy Jasse. No one really knows his name.
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Speaker 2: Everyone still thinks Bezos runs the place. But it's it's not,
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Speaker 2: Jesse said, when asked about AWS Amazon Web Services, and
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Speaker 2: you know what kind of AI growth they were seeing.
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Speaker 2: Quote Regardless, these are all just moments in time. The
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Speaker 2: last week is a moment in time too, where the
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Speaker 2: reality of what really matters is what customer's experiences are
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Speaker 2: in operating these platforms. What here's Cow's response. I'm reminded
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Speaker 2: of the moment in Blow when Johnny Depp's character Wax
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Speaker 2: is philosophical on the nature of his alleged crime and
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Speaker 2: the judicial system. While offering his plea, the judges retort,
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Speaker 2: Unfortunately for you, the line you crossed was real and
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Speaker 2: the plants you brought with you were illegal. So your
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Speaker 2: bail's twenty thousand dollars. And this is the whole thing
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Speaker 2: is Amazon did two things yesterday. They had a good
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Speaker 2: quarter and then they gave weak guidance and couldn't answer
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Speaker 2: any questions about AI and any constructive fashion.
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Speaker 4: Not great.
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Speaker 3: Not great.
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Speaker 2: Since stocks down seven and a half percent, there's not
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Speaker 2: much more to it than that.
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Speaker 5: It's easy to contract, compare and contrast, too, because you
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Speaker 5: had Google and Microsoft, who have both already reported earnings
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Speaker 5: to this point, telling us that they saw pretty tremendous
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Speaker 5: artificial intelligence growth on that side. So it's easy to
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Speaker 5: look at this and say, here you are, here's your competition,
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Speaker 5: how you're going to improve it? And the CEO seemingly
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Speaker 5: had no response.
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Speaker 2: I did have, and that no response, by the way,
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Speaker 2: during the time that he uttered that, the stock went
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Speaker 2: from two twenty six to two twenty.
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Speaker 4: Yeah, like they have.
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Speaker 2: Like Luke has the minute by minute chart of the
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Speaker 2: earnings call and showing exactly when he said that, and
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Speaker 2: when the stock went down and that was it.
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Speaker 5: So we were talking a bit yesterday Chuck about you know,
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Speaker 5: why are certain companies benefiting from AI so much? Microsoft
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Speaker 5: in particular, and I had someone in an interview that
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Speaker 5: I listened to explain it pretty concisely, which is both
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Speaker 5: Microsoft and Google who do this, have retail facing AI
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Speaker 5: platforms that are being used on their servers. In Microsoft's case,
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Speaker 5: they are mainly hosting chat GPT, in Google's they have Gemini,
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Speaker 5: and so they're seeing that tremendous growth. Amazon Web Services
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Speaker 5: does have some of this largely their artificial intelligence platforms,
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Speaker 5: though are those that are being hosted by big major corporations.
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Speaker 5: They are not retail facing, they are private sector, and frankly,
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Speaker 5: the uptake there has been slow.
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Speaker 4: It has been really slow.
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Speaker 5: And I'm disappointed that we heard nothing from the CEO
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Speaker 5: on this because the analyst opinion was, Look, if Amazon
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Speaker 5: is going to succeed here, it's going to come from
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Speaker 5: that private sector piece of this. Companies like JP Morgan,
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Speaker 5: if you will, who are pushing AI internally, developing their
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Speaker 5: own models and intend to expand them, but are doing
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Speaker 5: so cautiously and intentionally. And Amazon web services would benefit
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Speaker 5: from that. Does that actually come true? Will it materialize?
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Speaker 5: How long does that take? Are all questions that Indy
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Speaker 5: Jase is going to need to answer in pretty short order.
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Speaker 2: Yeah, so, I think ultimately when it comes to Amazon,
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Speaker 2: it's hey, the core retail business is retailing along. There's
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Speaker 2: no huge shift and trend there. AWS is growing, but
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Speaker 2: the other guys in the cloud space are growing fat
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Speaker 2: and they don't have a great answer on AI. So
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Speaker 2: how can you slap an AI multiple on Amazon if
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Speaker 2: they're not aiing? Is the fancy way of saying it.
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Speaker 2: I think, yeah, sure, let's take a quick break here,
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Speaker 2: but when we return, we're gonna be joined by Michael
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Speaker 2: Santoli from CNBC. We're talking about what is going on
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Speaker 2: in markets, and also we still have Apple earnings to
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Speaker 2: get to as well, and so we're gonna make sure
6:28
Speaker 2: that we cover those when we're back.
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Speaker 5: Joining us now is CNBC's Michael Santollly And Michael, We've
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Speaker 5: been describing this week as the busiest week of the
7:21
Speaker 5: year for economic data, market data and everything else, and
7:26
Speaker 5: it is certainly delivering.
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Speaker 4: I want to start off with you one. Thank you
7:29
Speaker 4: for joining too.
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Speaker 5: I was hoping we could start off on the most
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Speaker 5: recent data, which would be this morning's jobs report. And
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Speaker 5: on the surface, you know, seventy something thousand jobs created,
7:38
Speaker 5: slight uptick and unemployment rate. But you dig in here
7:41
Speaker 5: and it was a pretty weak jobs report. How are
7:44
Speaker 5: you looking at that this morning, and how do you
7:46
Speaker 5: think the Fed is?
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Speaker 7: Yeah, it's pretty hard to escape the conclusion that it
7:50
Speaker 7: is pretty weak and it shows a labor market kind
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Speaker 7: of that stall speed, really no net job creation at
7:58
Speaker 7: least after those are visions for the last few months,
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Speaker 7: we can stay. We can basically take that. As you know,
8:04
Speaker 7: businesses are kind of in watching weight mode, waiting for
8:07
Speaker 7: things to crystallize in terms of tariffs, in terms of
8:11
Speaker 7: tax policy, whatever it might be. Alongside you know, what's
8:15
Speaker 7: been a little bit of a general descellation and a
8:17
Speaker 7: demographic shift. You know, we get two hundred thousand boomers
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Speaker 7: retiring every month, so it's kind of sluggish in the
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Speaker 7: in the backdrop anyway, and it definitely does skew the
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Speaker 7: perception of risks slightly to the downside for the economy.
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Speaker 7: One of the reasons I think markets have been able
8:34
Speaker 7: to perform so well up to this point this summer
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Speaker 7: is you were able to say we have an economy
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Speaker 7: that's resilient enough to withstand a fed that wants to
8:43
Speaker 7: watch and wait for a while longer. And this kind
8:46
Speaker 7: of you know, brings it into question just slightly. I mean, look,
8:49
Speaker 7: we we're up a lot, markets are due for a break.
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Speaker 7: We have weeks, seasonal patterns starting in August, all the
8:56
Speaker 7: rest of it. But it does seem as if we
8:58
Speaker 7: got ourselves priced for or you know, a kind of
9:01
Speaker 7: a goldilocks back drop along with this real enthusiasm on
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Speaker 7: the AI front. And right now we're having some.
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Speaker 4: Indigestion on that, Mike, on that front.
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Speaker 5: I mean, it's pretty clear from this report that second
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Speaker 5: quarter labor demand was relatively weak. I'm still having a
9:16
Speaker 5: really tough time understanding the supply of labor equation. You
9:19
Speaker 5: hinted ATA, but that unemployment rate barely climbed back up
9:22
Speaker 5: to four point two percent, and that's what seemingly what J.
9:26
Speaker 5: Powell is concerned about right now. And so how do
9:29
Speaker 5: we I guess, how do we measure the the competing
9:33
Speaker 5: risks here for the FED of higher unemployment or higher
9:37
Speaker 5: inflation when you have a kind of confusing report like.
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Speaker 7: This, Yeah, it's tricky because, well, for one thing, obviously
9:44
Speaker 7: the immigration restrictions and crackdowns is restricting labor supply. Along
9:49
Speaker 7: one front, you do have a slight down tick in
9:51
Speaker 7: labor force participation. So if you look at prime age
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Speaker 7: employment as a percent of the overall population, that's ages
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Speaker 7: twenty five to fift before, it's really had a pretty
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Speaker 7: significant decline in recent months. So that tells you what's
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Speaker 7: happening on the supply side of the labor market is
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Speaker 7: basically either people seeing it's tougher to get hired and
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Speaker 7: they're not looking, or you have just fewer people out
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Speaker 7: there looking. You know, Powell has characterized this as they
10:17
Speaker 7: leading market in balance, right, and as you say, they're
10:20
Speaker 7: keying off the unemployment rate, which is not necessarily comforting
10:24
Speaker 7: in the sense that it can often be lagging. And
10:26
Speaker 7: even this week, this month, I think it came in
10:29
Speaker 7: unrounded at four point two four eight, So in other words,
10:33
Speaker 7: it was a tiny bit from being rounded up to
10:35
Speaker 7: four point three. I mean, you know, it's kind of
10:37
Speaker 7: slicing it pretty thin there, but I do think that's
10:41
Speaker 7: why it's a little bit tough to get a clear
10:43
Speaker 7: read on the trajectory.
10:45
Speaker 5: So let's shift over then to White House tariff policy.
10:48
Speaker 5: Slew of announcements from tariff increases suspensions over the last
10:53
Speaker 5: couple of days. Obviously, Yale Budget lab has been front
10:57
Speaker 5: and center on all this, but as an investor, you
11:00
Speaker 5: given the lessons sense, let's call it April second, how
11:05
Speaker 5: do we navigate these announcements when it comes to tariffs
11:09
Speaker 5: that are seemingly going into effect mostly a week from now, Yeah,
11:14
Speaker 5: I mean.
11:15
Speaker 7: If then right, I mean, apparently the White House has
11:17
Speaker 7: been telling our folks like, oh, don't put too much
11:19
Speaker 7: focus on that August seventh deadline. That's just to get
11:22
Speaker 7: the paperwork petty and case it happens. My point is,
11:26
Speaker 7: I think from an investor's perspective, I think we had
11:29
Speaker 7: worked ourselves into a position where we say, well, it's
11:32
Speaker 7: absoutely not going to be close to the worst case
11:34
Speaker 7: scenarios as detailed on April second, and maybe we're settling
11:38
Speaker 7: out around fifteen percent. If that's the case. On a
11:40
Speaker 7: blended basis, we can kind of absorb that. I mean, honestly,
11:44
Speaker 7: it's a huge economy. We're not that trade dependent. It's
11:46
Speaker 7: going to hurt certain companies and sectors, it's not going
11:49
Speaker 7: to sink the olverall economy, and at least we'll have certainty. Well,
11:52
Speaker 7: now we get this extra volley of Focker's trade policies,
11:56
Speaker 7: to theraphrase last night, and it's like, both, we're not
11:59
Speaker 7: going to get resolved in a hurry, and maybe it's
12:02
Speaker 7: going to have to be higher. So I just think
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Speaker 7: it's an extra It just kicks up dust in the
12:06
Speaker 7: eyes of people trying to make decisions about their business
12:10
Speaker 7: and about the economy and what to spend. And I
12:13
Speaker 7: think that the market was sort of hopeful that we
12:16
Speaker 7: would be moving toward a moment of clarity. We got
12:18
Speaker 7: the tax and budget bill in place and all the rest,
12:21
Speaker 7: and that twenty twenty six is going to be a
12:22
Speaker 7: little bit of a clean read on things. Maybe it's
12:25
Speaker 7: so will be, but I think this causes questions. And
12:27
Speaker 7: again I always say, the initial conditions of where the
12:30
Speaker 7: market was when all this happened matters a lot. And
12:33
Speaker 7: the market was calm and strong and expensive, and people
12:37
Speaker 7: were complacent, and so therefore, you know, a little bit
12:40
Speaker 7: of a wobble here and a reset of expectations makes.
12:44
Speaker 5: Sense speaking of a strong and healthy but expensive market.
12:51
Speaker 5: We had earnings from four major players in the US market, Apple, Amazon, Microsoft,
12:58
Speaker 5: and Meta. What are your general takeaways here? Obviously Amazon
13:03
Speaker 5: getting punished today, Apple a little bit as well. That
13:06
Speaker 5: seems to be just down with markets. What are your
13:08
Speaker 5: take from the big earnings this week?
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Speaker 7: I mean, the big takeaway is that there is no
13:14
Speaker 7: diminishment of the appetite for these companies to spend heavily
13:17
Speaker 7: on cafex for AI build out and in general, the
13:21
Speaker 7: market is approving of that, especially in the instances where
13:26
Speaker 7: they see a direct line to business results, and that's
13:30
Speaker 7: most clear with Meta. Meta has a very good story
13:32
Speaker 7: to tell. Yep, they're betting the company on this stuff,
13:35
Speaker 7: but they're also earning money hand over fist, and they
13:38
Speaker 7: insist that AI is basically just making the products stickier
13:41
Speaker 7: and helping advertising revenue. And there you go. So if
13:43
Speaker 7: you're an investor, you see it kind of falling to
13:45
Speaker 7: the bottom line. Might just off similar They can point
13:48
Speaker 7: to the subscriptions through their copilot products and things like that.
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Speaker 7: It's a little bit squishier obviously Apple that I think
13:56
Speaker 7: that there's a high burden of proof that they've figured
13:58
Speaker 7: it out what AI means for them. But on the
13:59
Speaker 7: other hand, not spending a ton whether the market wants
14:02
Speaker 7: and to spend more or not. As a question, Amazon I
14:04
Speaker 7: think is suffering just from you know, the stocks had
14:07
Speaker 7: to run a relative to Microsoft's cloud results wasn't the best.
14:12
Speaker 7: There is some care static around the retail business, and
14:16
Speaker 7: I think that it was just sort of you know,
14:18
Speaker 7: enough for now. In general, I've been surprised that the
14:22
Speaker 7: market is willing to pay premium valuations both for the
14:25
Speaker 7: company's spending all this money and the company's getting all
14:28
Speaker 7: this money like a video an oracle. So for now
14:32
Speaker 7: kind of everybody wins. Do you know that this ultimately
14:34
Speaker 7: leads to an overbuild or basically, you know, money wasted
14:38
Speaker 7: on some front, but the market doesn't think we're close
14:41
Speaker 7: to that yet.
14:42
Speaker 5: One thing that confused us here a little bit yesterday.
14:44
Speaker 5: I mean, you had this big move from Meta, You
14:46
Speaker 5: had an explosion of spending across many of these firms,
14:50
Speaker 5: and yet those companies that should benefit from that increase
14:54
Speaker 5: in spending, in Vidia other semiconductor players, took a hit
14:58
Speaker 5: in trading Thursday A. I mean, obviously there's an argument
15:01
Speaker 5: that maybe it's already baked in, But I'm just wondering
15:04
Speaker 5: if we're missing something here. If Microsoft and Meta and
15:07
Speaker 5: every other tech company out there is saying they're planning
15:09
Speaker 5: on expanding their spending in twenty twenty six, and yet
15:12
Speaker 5: those suppliers of where that spend should go are not
15:15
Speaker 5: seeing their stocks improve on the news. What are we
15:18
Speaker 5: looking at here? Is it just a shortage of what
15:21
Speaker 5: they're going to be trying to spend money on.
15:23
Speaker 7: I think, to be honest, I think it's mostly just
15:26
Speaker 7: kind of noise around the trend. I mean, the video
15:28
Speaker 7: has been nearly a double since the low and eight
15:31
Speaker 7: right stop right. I mean it's added two trillion dollars
15:34
Speaker 7: in market cap in four or five months, So you know,
15:37
Speaker 7: I think you have to kind of give it a
15:38
Speaker 7: little room to back off to some degree. And I
15:42
Speaker 7: would that's mainly would be my read. You know, there
15:45
Speaker 7: is a there is some question out there. I mean,
15:47
Speaker 7: they're kind of they're constructing buildings right with all this stuff,
15:50
Speaker 7: and it's it's kind of almost stealing a lot of
15:53
Speaker 7: physical resources from the rest of the economy. There's a
15:56
Speaker 7: lot of stuff that basically tech capex is so almost
15:59
Speaker 7: floating the whole the GDP growth as consumers kind of
16:03
Speaker 7: take a bit of a break. So it's pretty weird
16:06
Speaker 7: and unbalanced to have this be the thrust of this
16:09
Speaker 7: phase of economic growth. So I think that is the
16:12
Speaker 7: way I read it.
16:13
Speaker 1: There is some.
16:13
Speaker 7: Fatigue in the AI, you know, tret just because of
16:16
Speaker 7: where evaluations have gotten. You know, the Nasdaq one hundred
16:19
Speaker 7: you want to call it, that it's basically as high
16:21
Speaker 7: as it gets in terms of forward pe outside of
16:24
Speaker 7: the pandemic in the last twenty five years. Now those
16:26
Speaker 7: earnings are still growing a lot, and in videos like
16:29
Speaker 7: making Money Handle the fistem Back. At some point the
16:31
Speaker 7: question would be like, what does the VIDIA do with
16:33
Speaker 7: all the money?
16:33
Speaker 3: Right?
16:34
Speaker 7: Is they're gonna have tens of billions of free cast
16:35
Speaker 7: flow without any direct purpose for it. Though.
16:39
Speaker 5: It's a good problem to have Michael Santoni from CNBC
16:42
Speaker 5: joining us here this week.
16:43
Speaker 4: Michael really appreciate having here.
16:44
Speaker 5: Havn't you here this week on a crazy busy week
16:48
Speaker 5: for data?
16:48
Speaker 4: Thanks so much for joining us, and we'll talk to
16:50
Speaker 4: you again soon.
16:51
Speaker 7: You got it, Thanks very much.
16:53
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17:42
Speaker 2: Mike, anything else to add on Amazon earnings.
17:47
Speaker 4: I don't think so.
17:48
Speaker 5: I mean, again, this is a company that's getting treated
17:53
Speaker 5: like another cloud company in their cloud data was pretty bad.
17:56
Speaker 5: So regardless of what's happening in the retail side of
17:58
Speaker 5: the business, which is how all of us interact with
18:01
Speaker 5: Amazon and think about Amazon, is not quite as relevant
18:04
Speaker 5: as where the AI spend is going, and recently it's
18:08
Speaker 5: not towards Amazon.
18:09
Speaker 2: Taking a look at markets, as we head towards the
18:12
Speaker 2: bottom of the hour, we've still got the Dial off
18:16
Speaker 2: about six hundred and forty points now, the S and
18:18
Speaker 2: P's off about one hundred and four, Nasdaq off four
18:20
Speaker 2: fifty two, so anywhere from about a one and a
18:22
Speaker 2: half to two and a quarter percent sell off happening there.
18:25
Speaker 2: The Russell two thousand, for those of you who observe,
18:28
Speaker 2: is down two and a half percent. Fifty six points.
18:32
Speaker 2: Is the first time I've ever quoted the Russell in points.
18:34
Speaker 2: I honestly don't know why I just did that, but
18:37
Speaker 2: I'm sorry.
18:38
Speaker 3: Uh.
18:39
Speaker 2: And we've got the ten year treasury down at four
18:42
Speaker 2: point two four to one percent, down about twelve basis points.
18:46
Speaker 2: The good news is for the housing market that should
18:50
Speaker 2: seep through into rates, which should get them into the
18:52
Speaker 2: six six and a half, like six point sixty five
18:55
Speaker 2: range before the weekend. Not really enough to help housing,
19:00
Speaker 2: you know, with with that kind of movement, maybe we
19:02
Speaker 2: get some follow through next week and there's some some
19:04
Speaker 2: beef there. Quick break here, we got Trivia Answer, we
19:07
Speaker 2: got Wall Street Watch, and then Apple Earnings.
19:14
Speaker 1: Bringing the latest financial news straight to your radio. Every day,
19:18
Speaker 1: It's the Financial Exchange on the Financial Exchange Radio Network.
19:24
Speaker 1: Time now for Wall Street Watch. A complete look at
19:27
Speaker 1: what's moving markets so far today right here on the
19:31
Speaker 1: Financial Exchange Radio Network.
19:34
Speaker 6: Markets in sell off mode after President Trump modified terrat
19:38
Speaker 6: sign several countries ranging from ten to forty one percent
19:41
Speaker 6: late last night that will begin on August seventh. On
19:44
Speaker 6: top of that, Wall Street also sifting through the July
19:47
Speaker 6: jobs report, where seventy three thousand jobs were added last month,
19:51
Speaker 6: weaker than estimates of one hundred and four thousand. The
19:54
Speaker 6: softer than expected jobs data is sending treasury yields lower
19:58
Speaker 6: on the day as trader's reass as the chances of
20:01
Speaker 6: a rate cut in the fall. Right now, the Dow
20:04
Speaker 6: is down by one point four percent or six hundred
20:06
Speaker 6: and eighteen points, SMP five hundred down one point six
20:10
Speaker 6: percent or one hundred and two points, Nasdaq down now
20:14
Speaker 6: over two percent lower four hundred and forty four points,
20:17
Speaker 6: Russell two thousand down two point four percent, Tenure Treasure
20:21
Speaker 6: Reel down twelve basis points now at four point two
20:24
Speaker 6: three seven percent, and crude oil down two point seven percent,
20:28
Speaker 6: rating at sixty seven dollars and thirty eight cents a barrel.
20:32
Speaker 6: It what would normally be a top news story on
20:35
Speaker 6: the day. Amazon and Apple reported earnings after the bell yesterday,
20:38
Speaker 6: Amazon down by eight percent after the e commerce in
20:42
Speaker 6: tech giant offered a disappointing forecast where its cloud business
20:46
Speaker 6: wasn't growing as fast as its competitors. Amazon did, however,
20:50
Speaker 6: see a sharp increase in sales and profit for the
20:53
Speaker 6: previous quarter. As for Apple, the iphonemaker handily beat street
20:57
Speaker 6: expectations for the second quarter, driven by consumers rushing to
21:01
Speaker 6: buy devices before potential price increases from tariffs. Overall sales
21:06
Speaker 6: were up about ten percent higher on the year. Apple
21:09
Speaker 6: shares down by two percent, and after its IPO yesterday
21:13
Speaker 6: where shares more than tripled in its debut, FIGMA up
21:17
Speaker 6: another five percent.
21:18
Speaker 1: Today.
21:19
Speaker 6: Paul Amonica of Barons will join us in the next
21:22
Speaker 6: segment for his analysis on the design software vendor. I'm
21:26
Speaker 6: Tucker Silva and that is Wall Street Watch. And in
21:28
Speaker 6: the previous segment we asked you the trivia question what
21:31
Speaker 6: was the first music video played on MTV that would
21:35
Speaker 6: be Video Killed the Radio Star by the Buggles. Dean
21:40
Speaker 6: from Manchester is our winner today taking home my Financial
21:43
Speaker 6: eks Change Show t shirt. Congrats to Dean. We played
21:46
Speaker 6: trivia every day here in the Financial looks Shane. See
21:48
Speaker 6: complete contest rules at Financial eks Change show dot com.
21:53
Speaker 2: Apple reported earnings after the bellis Tucker noted and a
21:55
Speaker 2: big thing.
21:56
Speaker 3: So l had a good quarter.
21:58
Speaker 2: Their sales came in ten percent up year over year,
22:01
Speaker 2: ninety four billion dollars. So it's always nice when you
22:03
Speaker 2: can sell a billion dollars worth of stuff a day.
22:06
Speaker 2: Should all be so lucky, they indicated, I'll quote here.
22:10
Speaker 2: Apple's financial chief Kevin Perrek said in an interview that
22:14
Speaker 2: the company saw some quote obvious signs of pull ahead
22:17
Speaker 2: demand related to tariffs earlier in the quarter, and attributed
22:20
Speaker 2: about one sixth of iPhone sales growth to such purchases
22:23
Speaker 2: and the rest due to very strong upgrade performance in general.
22:26
Speaker 2: Another bright spot was a four percent increase in China
22:29
Speaker 2: sales after declines in recent years. So this did have
22:32
Speaker 2: shares up about three percent after hours, they can't hold
22:35
Speaker 2: the gains. They're down one point nine percent, which is
22:38
Speaker 2: more than the broad SMP five hundred today. So this
22:42
Speaker 2: continues a trend that we've been seeing that honestly kind
22:45
Speaker 2: of reminiscent of what we saw in Q one earnings,
22:48
Speaker 2: where companies are reporting good earnings and they're just getting
22:51
Speaker 2: bopped on the head because good isn't good enough. You
22:54
Speaker 2: gotta do what Meta did and blow people away with
22:58
Speaker 2: what's you know, what you've done or what's coming next.
23:00
Speaker 2: And Apple doesn't give guidance anymore, so they can't blow
23:04
Speaker 2: people away with what's coming next.
23:05
Speaker 5: Yeah, there is nothing that there was nothing new there, right.
23:09
Speaker 5: The sales beat expectations, but yeah, some of them was
23:12
Speaker 5: terriff related at people playing purchases forward, and you have
23:15
Speaker 5: no new announcements about artificial intelligence, so I don't think.
23:18
Speaker 4: I don't think that this market cares about you. In
23:20
Speaker 4: that case, I.
23:21
Speaker 3: Want to talk about this piece from the Bloomingberg.
23:23
Speaker 6: Here.
23:24
Speaker 2: It's titled Here's a better plan for retirement than Social Security,
23:27
Speaker 2: and it's by someone by the name of near Kassar,
23:31
Speaker 2: and i'll quote here.
23:33
Speaker 3: You know what he said.
23:34
Speaker 2: He said two years ago, I proposed the federal government
23:36
Speaker 2: put away ten thousand dollars for each baby born in
23:38
Speaker 2: the US in a tax re account, invest in the
23:40
Speaker 2: US stocks, and accessible only retirement. If it grows seven
23:43
Speaker 2: point five percent a year after inflation, which is roughly
23:45
Speaker 2: what the S and P five hundred index has done
23:47
Speaker 2: over the last hundred years, it'll blossom into a roughly
23:50
Speaker 2: one point eight million in today's dollars when that baby
23:52
Speaker 2: turns seventy.
23:53
Speaker 4: That's also true. By the way math works.
23:56
Speaker 2: I'm actually not I did the math am on my
23:58
Speaker 2: own and I got one point five million, But I'm
24:00
Speaker 2: not gonna let three hundred thousand.
24:01
Speaker 4: Yeah, I guess it depends when you're compounding.
24:03
Speaker 3: Fair enough, I'm compounding, yeah, whatever it is.
24:06
Speaker 2: Anyways, it's a richer retirement that social Security can provide
24:10
Speaker 2: by that math, a one point eight million dollar per
24:12
Speaker 2: portfolio using the four percent rule will generate seventy two
24:14
Speaker 2: thousand dollars of income, triple what the average retiree receives
24:18
Speaker 2: from Social Security. So this is where we become very
24:21
Speaker 2: problematic in the math. And if you're listening, sorry for
24:24
Speaker 2: the math on the radio. But here's the deal. You
24:27
Speaker 2: can't compare seventy two thousand dollars.
24:30
Speaker 5: Seventy years from now, because that's the math that he's doing.
24:34
Speaker 2: Like, you can't compare that to what someone is earning today.
24:42
Speaker 3: From Social Security now.
24:45
Speaker 5: Especially well, we have this thing that has existed since
24:50
Speaker 5: the beginning of humanity for most societies called inflation.
24:55
Speaker 2: Now he's saying that if the investment grows seven and
24:57
Speaker 2: a half after inflation, it'll be one point eight million
24:59
Speaker 2: in today's dollars. So I guess he's trying to adjust
25:03
Speaker 2: for it, but he's assuming that you see the exact
25:06
Speaker 2: same return and that like inflation doesn't eat into any
25:08
Speaker 2: of it. It doesn't make sense to me. I'm not
25:11
Speaker 2: getting there it.
25:14
Speaker 5: Really here's the dangerous parties. I think we're gonna see
25:17
Speaker 5: a lot of these types of proposals out there for
25:20
Speaker 5: how we can fix social security really cheaply. And the
25:24
Speaker 5: problem that I'm seeing here is, let's assume that you
25:27
Speaker 5: take the current average social security benefit, which he did here.
25:30
Speaker 5: It's twenty four thousand dish dollars, and you need to
25:35
Speaker 5: compare that to what it would be with some modest
25:38
Speaker 5: colas over the next seventy years. We're talking about a
25:41
Speaker 5: social security benefit seventy years from now that's one hundred
25:43
Speaker 5: and thirty two thousand dollars. So that ten thousand dollars
25:47
Speaker 5: investment that you made is not I don't think quite
25:50
Speaker 5: getting us to where we need to be to fix
25:53
Speaker 5: social Security. I bring this up because I think we're
25:58
Speaker 5: gonna get hammered with these ideas that don't what if
26:02
Speaker 5: the growth isn't there, right, I mean, before we even
26:05
Speaker 5: get to what if the growth isn't there because of demographics,
26:09
Speaker 5: are like, why do we assume that the last hundred
26:12
Speaker 5: years is what the US is going to do for
26:14
Speaker 5: the next hundred I think there could be an intelligent
26:18
Speaker 5: debate to be had about how these social securities trust
26:21
Speaker 5: funds are invested. There are plenty of countries that do
26:24
Speaker 5: not do what we do with the social Scurity trust fund,
26:26
Speaker 5: they go in toptfully, they go and invest funds elsewhere
26:30
Speaker 5: and see their their trust funds grow faster. That's that's
26:33
Speaker 5: a debate that I'm on board with having this funky
26:36
Speaker 5: math that doesn't actually work. It's it's just irresponsible, quite honestly,
26:42
Speaker 5: because it's going to convince people that, oh, yeah, we can,
26:44
Speaker 5: we can fix our security by this quick fix of
26:47
Speaker 5: just tossing ten thousand dollars into an account, and it
26:50
Speaker 5: actually just wouldn't do it.
26:53
Speaker 2: When and just as an example, let's say that this
26:55
Speaker 2: grows by six and a half percent instead of seven.
26:58
Speaker 2: You say, okay, like that's a you know, easily one
27:00
Speaker 2: percent a year. What's the difference if you add it
27:03
Speaker 2: up by the end. Again, because you're compounding for seventy years,
27:07
Speaker 2: the amount that you earn over that time is cut
27:09
Speaker 2: in half. It doesn't go down by one percent, it
27:12
Speaker 2: gets cut in half. If instead of earning six and
27:15
Speaker 2: a half percent, you earn five and a half percent,
27:19
Speaker 2: the amount that you earn't doesn't just get cut in
27:21
Speaker 2: a half, it gets cut in a quarter.
27:24
Speaker 5: So again, I think all of this to be said,
27:27
Speaker 5: Americans don't want their social Security to be replaced by
27:30
Speaker 5: some privatized for a one K.
27:31
Speaker 3: Maybe they do.
27:32
Speaker 2: I'm not here to speak for what every American wants.
27:36
Speaker 2: I don't know what Americans want for social Security. I'm
27:39
Speaker 2: just telling you that the math on this assumes things
27:41
Speaker 2: that I don't think you can assume to be true
27:43
Speaker 2: over seventy years.
27:44
Speaker 5: Yeah, I would tend to agree. I bring this piece
27:48
Speaker 5: up because I think people are pretty aware of the
27:51
Speaker 5: state of the Social Security Trust Fund. Certainly if they
27:54
Speaker 5: listen to this show, they are aware of that Social
27:55
Speaker 5: Security Trust Fund and it's soon to be demise. If
27:59
Speaker 5: you are wondering about how that affects you, how to
28:02
Speaker 5: model out the potential impact of Social Security. I personally
28:05
Speaker 5: don't think social Security is gonna get cut the way
28:07
Speaker 5: that they law state today, but I do think it's
28:09
Speaker 5: going to be changed in some way, shape or form.
28:11
Speaker 5: And so if you're on the cusp of retirement and
28:13
Speaker 5: planning on that benefit, or already receiving it and potentially
28:16
Speaker 5: planning out for the future, it's important to consider where
28:19
Speaker 5: that social Security benefit could land. Give us call it
28:22
Speaker 5: eight hundred and three to nine three four zero zero one,
28:25
Speaker 5: and build a plan that works for your financial future. Again,
28:28
Speaker 5: that's the Armstrong Advisory Group at eight hundred three nine
28:31
Speaker 5: three four zero zero one.
28:33
Speaker 1: The proceeding was paid for by Armstrong Advisory Group, a
28:36
Speaker 1: registered investment advisor. Nothing in the ad or in any
28:38
Speaker 1: Armstrong guide a specific financial, legal, or tax advice. Consult
28:41
Speaker 1: your own financial tax into state planning advisors before making
28:44
Speaker 1: any investment decisions. Armstrong may contact you to offer investment
28:47
Speaker 1: advisory services.
28:49
Speaker 2: Mike, there's a piece of the New York Times that
28:51
Speaker 2: want to touch on quickly. AI researchers are negotiating two
28:53
Speaker 2: hundred and fifty million dollars pay packages, just like NBA
28:56
Speaker 2: stars and good get paid right, Like, I don't see this.
29:02
Speaker 2: If you're like the one person in the world who
29:05
Speaker 2: can do what you do, go get it. The risk
29:10
Speaker 2: that these companies have. Hey, once you've paid someone two
29:13
Speaker 2: hundred and fifty million dollars, what if they decide they
29:15
Speaker 2: don't like working for you anymore? Yeah, you know, like,
29:20
Speaker 2: once you got the money, what.
29:21
Speaker 3: If you just like, I don't want more? You know,
29:24
Speaker 3: like I.
29:25
Speaker 2: Really don't you know what if you just like I
29:27
Speaker 2: don't enjoy doing this? You put all your eggs in.
29:29
Speaker 5: That basket Chuck, I just would hope that uh Meta's
29:34
Speaker 5: lawyers are better at uh negotiating pay packages and structuring
29:37
Speaker 5: pay agreements to account for somebody just saying, hey, I
29:40
Speaker 5: got my two fifty. I'll see you later, even if
29:43
Speaker 5: it's not two fifty. I mean, Mike, Like, what's a
29:45
Speaker 5: life changing amount of money.
29:47
Speaker 4: For a person? Uh, for the average person?
29:50
Speaker 2: I mean, look, if if you're if you're in AI,
29:52
Speaker 2: you probably already have like you've probably already gotten paid
29:55
Speaker 2: pretty well.
29:56
Speaker 3: Yeah, but honestly, let's say that out.
29:57
Speaker 2: Of that two hundred and fifty million, you can keep
29:59
Speaker 2: twenty Okay, bye, sorry, Mark, I'm out. Yeah, I don't know,
30:06
Speaker 2: you know, like you don't have to keep all of it.
30:08
Speaker 2: What if you only keep ten percent of it? It's fine,
30:11
Speaker 2: you can just fine on.
30:12
Speaker 4: Twenty million dollars, Yes you can.
30:14
Speaker 3: You know you could.
30:15
Speaker 2: You could have boats and private jet trips and stuff
30:19
Speaker 2: like that. It's like, so, I don't know this. This
30:22
Speaker 2: seems risky because at a certain point, if it's all
30:26
Speaker 2: about the money, then once you have the money, why
30:29
Speaker 2: do you need to stay there.
30:31
Speaker 4: Because of American greed?
30:32
Speaker 5: Chuck, There is no dollar amount that is not that
30:36
Speaker 5: is enough it's the like hole, the hold the way
30:40
Speaker 5: that I are.
30:40
Speaker 2: Like.
30:41
Speaker 5: I know, if money in this country come to exist,
30:43
Speaker 5: is the guy that goes from making fifty to one
30:45
Speaker 5: hundred suddenly feels like everybody that makes two fifty's not
30:48
Speaker 5: just money.
30:49
Speaker 3: Michael.
30:49
Speaker 2: I still remember in Cool Runnings, you know, de Reese
30:53
Speaker 2: is talking to John Candy and he goes, how will
30:57
Speaker 2: I know if I have enough? If I'm enough? And
30:59
Speaker 2: John Candy goes, when you cross that line, you'll know.
31:03
Speaker 2: And apparently none of us know when we've got enough.
31:06
Speaker 2: Let's take a quick break and when we come back,
31:09
Speaker 2: not when we cool back. When we come back. Paul
31:12
Speaker 2: and Monica from Barons joins us. We're talking figma. Is
31:16
Speaker 2: it just a pigma of your imagination? Who knows? We'll
31:19
Speaker 2: discuss when we return.
31:21
Speaker 1: The Financial Exchange Show podcast drops every day on Apple, Spotify,
31:25
Speaker 1: and iHeartRadio. Hit that subscribe button then leave us a
31:28
Speaker 1: five star review. You're listening to the Financial Exchange Radio Network.
31:33
Speaker 7: Ladies and gentlemen the weekend.
31:41
Speaker 3: All right?
31:42
Speaker 2: Paul Monica from Barons joins us now and we're talking
31:47
Speaker 2: pigma with Paul.
31:49
Speaker 3: Paul. How you doing good?
31:51
Speaker 1: Thanks?
31:51
Speaker 7: How do you guys?
31:51
Speaker 3: Going, we're doing well, what is Figma? What do they do?
31:56
Speaker 8: Yes, yep, Figma is a design software company. So if
32:02
Speaker 8: you look at websites and apps like Google, Maps, Uber,
32:09
Speaker 8: jet Blue, Duo, Lingo, Airbnb, these are some of the
32:14
Speaker 8: companies that Figma says are customers that they work with
32:19
Speaker 8: to help design you know, the look and feel of
32:25
Speaker 8: some of their sites. You know, they compete with Adobe,
32:29
Speaker 8: which interestingly enough, tried to buy Figma a.
32:33
Speaker 3: Few years ago.
32:34
Speaker 8: There was a deal for twenty billion dollars, but there
32:38
Speaker 8: were regulatory concerns in the UK and Europe, so Adobe
32:41
Speaker 8: and Figma had to walk away from the deal. Figma
32:44
Speaker 8: recommitted itself to being an independent private company and now
32:48
Speaker 8: they're public. And would you look at what the SoC
32:50
Speaker 8: is doing. It's trading you know, more than three times
32:53
Speaker 8: that twenty billion dollar valuation that Adobe offered for just
32:57
Speaker 8: a few years ago.
32:59
Speaker 2: So how was what's the deal with this company? And
33:04
Speaker 2: how heavily its value? Because if I'm looking at this
33:06
Speaker 2: correct correctly, rather yep, it's got a market cap of
33:10
Speaker 2: almost sixty billion dollars. They have yet to do a
33:13
Speaker 2: billion dollars in revenue in a year. So is this
33:16
Speaker 2: company growing like a weed, Like, what, what's the deal here?
33:20
Speaker 8: Yeah, they are growing rapidly. You know, revenue growth is
33:23
Speaker 8: north of forty five percent, so obviously very solid sales growth.
33:29
Speaker 8: But you're right, they still haven't reached that critical mass
33:31
Speaker 8: of a billion dollars in revenue, and they also have
33:36
Speaker 8: been inconsistent with regards to profitability. They lost money last
33:40
Speaker 8: year twenty twenty three. They made a profit, but that
33:43
Speaker 8: was only because Adobe had to pay them a billion
33:47
Speaker 8: dollar merger termination fee. You back that out, and they
33:51
Speaker 8: lost money. The you know, the the good news is
33:55
Speaker 8: that profits were there this first quarter.
33:59
Speaker 7: They wore profitable in.
34:01
Speaker 8: The first quarter, and revenue growth continues, you know, very
34:05
Speaker 8: you know, aggressively. So I think there are hopes that
34:08
Speaker 8: they're on that proverbial path to consistent profitability. But that's
34:12
Speaker 8: something I think investors are going to need to see
34:14
Speaker 8: to justify this type of valuation. You know, Figma, you know,
34:19
Speaker 8: it had a two hundred and you know, fifty percent
34:22
Speaker 8: pop yesterday. It's up again today, a little bit on
34:25
Speaker 8: a down day for the market. So there's clearly a
34:28
Speaker 8: lot of enthusiasms.
34:30
Speaker 2: How do people think Why would people think that Figma
34:33
Speaker 2: has staying power in a world where technology seems to
34:35
Speaker 2: be evolving so quickly.
34:37
Speaker 3: With AI and what it can do.
34:40
Speaker 8: Yeah, it's a great question. I mean, Figma has talked
34:43
Speaker 8: about integrating AI in to their own software offerings. I
34:49
Speaker 8: think it remains to be seen whether or not they
34:51
Speaker 8: will face more competition from generative AI and cheaper solutions.
34:57
Speaker 8: There are plenty of other companies out there. There's a
34:59
Speaker 8: no other private company called Canva that competes with them
35:03
Speaker 8: that could potentially be an IPO candidate as well. Then
35:06
Speaker 8: you shouldn't, you know, totally discount Adobe either, which is
35:10
Speaker 8: trying to step up it's AI offerings and so far
35:14
Speaker 8: I think the market has been skeptical of Adobe. That
35:17
Speaker 8: stock is down this year. Makes you wonder what they
35:20
Speaker 8: would be doing if they had actually been able to
35:23
Speaker 8: buy Figma and had that as part of their business
35:25
Speaker 8: for the past year and a half. But you know
35:28
Speaker 8: that obviously wasn't the case. So, I mean, there is
35:32
Speaker 8: a lot of optimism about IPOs. Once again, We've seen
35:36
Speaker 8: it with Circle in the stable coin business. We saw
35:39
Speaker 8: it with core Weave, even though they stumbled when they
35:42
Speaker 8: first went public in March because it was right around
35:44
Speaker 8: Liberation Day, but they've wore back since then that stock
35:47
Speaker 8: has more than doubled. So you know, the good news
35:51
Speaker 8: is that I think the stories are good from any
35:53
Speaker 8: of these companies and the growth is there. But again,
35:56
Speaker 8: it all comes down to valuation and profitability. I think
36:00
Speaker 8: a lot of these IPOs are stretched and some of
36:02
Speaker 8: them aren't yet profitable. Need to start posting consistent earnings
36:07
Speaker 8: to justify these valuations.
36:10
Speaker 2: Very good, Paul, appreciate you joining us today. Have a
36:12
Speaker 2: fantastic weekend and we'll catch up with you soon.
36:16
Speaker 3: Great.
36:16
Speaker 2: Thanks a lot of guys. Paul Monica from Baron's talking
36:20
Speaker 2: about Big Mom. Mike, what do you have that we
36:22
Speaker 2: haven't caught up with yet?
36:24
Speaker 5: A listener question, quote, does the FED have access to
36:28
Speaker 5: these numbers before they are released? So we've talked about
36:32
Speaker 5: a lot of numbers today, so I'm guessing though what
36:34
Speaker 5: we're talking about are economic data releases like jobs numbers
36:39
Speaker 5: and things like that, And the answer is, I believe
36:42
Speaker 5: with many of these statistics, but not all. The Federal Reserve,
36:46
Speaker 5: key members of the White House, and a few other
36:48
Speaker 5: central people do receive these releases about a day before
36:52
Speaker 5: the general public, not a week before. But one day
36:56
Speaker 5: prior to the general public. The Federal Reserve chair, for example,
36:59
Speaker 5: probably had access to the jobs numbers yesterday afternoon, but
37:03
Speaker 5: not prior to the Federal Reserve's meeting where they discussed
37:07
Speaker 5: interest rate policy.
37:08
Speaker 3: Yeah.
37:08
Speaker 2: I don't know the specifics on exactly what reports they
37:11
Speaker 2: receive at exactly what time, but I do believe they
37:14
Speaker 2: do get a little bit of advanced notice on these
37:17
Speaker 2: markets remain broadly in sell off mode. The Dows off
37:21
Speaker 2: about one point s and p off one point three,
37:23
Speaker 2: Nasdaq off one point eight percent. We're done for the day,
37:27
Speaker 2: done for the week. It was a it was a
37:30
Speaker 2: busy one, but we got the whole weekend to rest up.
37:33
Speaker 2: Hope you all get some time and to enjoy, and
37:36
Speaker 2: then we're back at it on Monday.