Amazon Plans to Cut Corporate Jobs Across Core Departments

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2:52She joins us from the Bloomberg San Francisco News Bureau. So much going on, Sarah, but let's talk about Amazon. That feels like a pretty big number, 10 % of the company's roughly 350 ,000 corporate employees. It's a report from Reuters citing unidentified people. We haven't yet confirmed it, but what's your initial thought on this? Well, first of all, we are chasing it. But this is something that the companies all across the board have been doing since the pandemic era, what they call overhiring. A lot of these companies saw the growth and how people were relying on tech during the pandemic when they were home.

3:32They were obviously ordering a lot more from Amazon because they didn't want to go to the grocery store if they were at home workers. and the company hired to accommodate that. And now they don't need as many people. But I heard your earlier point, Carol, about AI. I think that's part of it. But I also think that part of it is when these companies go through periods of opportunity where they see a lot of growth, they're seeing that trend line and they're hiring for the future. We're seeing it right now with AI. People are building out, these companies are building out data centers. They don't know if they're actually gonna need all that capacity long-term, but they better make that deal today or else they might not have it when they need it.

4:14So we do see a lot of anticipatory investment from these tech companies over time that sometimes they need to pull back on. In big tech, we haven't seen as big a pullback as we have in the past few years since the pandemic. It's really been a change in the culture, this drive for efficiency, for reducing, you know, bureaucratic bloat. And it's not just, you know, a line they're throwing out there. We are seeing, my colleague Matt Day wrote a really interesting story I encourage everyone to read about AWS and how AWS was at the forefront of cloud really inventing the market. And in the era of AI, they have fallen back in preference for startups.

5:06They had that big outage we talked about last time on this show. And some of the employees are attributing that to bloat, to this bureaucratic culture. Too many people working on the same things and things not getting done fast enough. So I think, you know, although I hate to see people lose their jobs, I think that that is where a lot of this is coming from. The idea that we need these companies in the age of AI to be working faster to try to catch their competitors. You know, I see a headline like this, Sarah, and I immediately think back to the prominent other headlines that I saw in the last week about big layoffs or midsize layoffs.

5:46A tech company, Meta Platforms, laying off 600 people who work in AI. And then Target retail, not necessarily tech, but Amazon straddles that. Right. And we don't know the details of these layoffs yet. But Target to cut eighteen hundred rolls, eight percent of its headquarters team taken together. Is there a story with these three headlines? Well, I think that that the meta headline and the Amazon headline are certainly related because they're all attributed to this idea of trying to to move faster to cut a lot of the, you know, maybe unnecessary workforce, maybe workforce that they do expect one day will be augmented by AI tools or are already starting to be augmented by AI tools.

6:31But like we've said before, we don't know if the AI tools are actually making people more efficient. Right now, it's more of a hope that that will be the case. Certainly, encoding has had a big role. I'm not sure, because we haven't been able to confirm the report just yet. I'm not sure if these are roles in coding. When it comes to meta and AI, it's really interesting because they are still shuffling around the leadership and therefore the direction of this very expensive super intelligence team that they pulled together over the course of a few months earlier this year. And it seems like that is, you know, something that could give the potential of a slowdown for that company.

7:18But a lot is riding on Meta's AI efforts. Both companies, Amazon and Meta, I think we are going to have a lot to learn from this week in their earnings, which are coming, Meta on Wednesday, Amazon Thursday. So I think that that is going to be very key. Yeah, totally agree with you that I feel like the earnings this week are a big deal to see that those AI investments are paying off. Hey, in the meantime, we're watching very closely what's going on with Qualcomm. They don't report until November 5th, but I'm looking at a stock, Sarah, that is up 12 % at its highs, was up nearly 22 % today. And this is after unveiling some chips and computers for the AI data center market.

8:03We You know, this is something that has made NVIDIA just on fire and at the center of the AI universe. What do we know about Qualcomm? Well, they already have a major customer for these chips in the form of Humane, the Saudi company. And so I think that that is giving investors a lot of hope that this can not only give them a very strong position in the AI growth as an alternative to NVIDIA, but also help make up for some of the revenue lost by Apple, who was a major customer, going to in-house chips. So I think they see it as very positive for Qualcomm. Of course, this chip is also getting a lot of buzz for its ability to hold quite a lot of DRAM memory.

8:53So I think, you know, anytime that someone can make inroads in chips versus NVIDIA, the stock market is going to reward it. But we'll have to see if they're able to take on some of those big tech customers over time or what their customer base is going to evolve into if this becomes a big part of their portfolio. Yeah, I mean, time will tell. I mean, I was looking at our BI analyst in the Ian King story basically saying, you know, it's too soon to call this a serious challenge, right, to NVIDIA's dominance. Even modest share gains, though, in the over$500 billion AI accelerator market could translate into billions in incremental revenue.

9:35I mean, right, even this pie is so big and it just seems to grow at this point, Sarah, that even a piece of it or a decent piece of it, it could be a lot for Qualcomm if it all plays out. No, absolutely. There's so much data center build-out happening right now and happening over the course of the next few years. I think we're going to continue to see these multibillion dollar deals across the U.S. and around the world. So I think that, you know, any player that can get in on on that build out is it's really significant. And I think that the time is is really now. Chips don't last very long once they are unveiled.

10:20You know, they maybe last three to five years before they're obsolete. So I think, you know, for those deals that are in the making in the moment, we're very interested to see what Qualcomm is going to cook up. Sarah Fryer, thank you, as always. She is Bloomberg News Big Tech team leader. She's out there in our San Francisco bureau. Sarah Fryer, also the author of No Filter, the inside story of Instagram. Stay with us. More from Bloomberg Businessweek Daily coming up after this.

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12:49Plus one conversation on the day's biggest developments, all in just 15 minutes. Subscribe to Bloomberg Daybreak for a precise, thoughtful take on the stories that matter. Listen to Bloomberg Daybreak each morning on Apple, Spotify, or anywhere you listen. You're listening to the Bloomberg Business Week Daily Podcast. Catch us live weekday afternoons from 2 to 5 p.m. Eastern. Listen on Apple CarPlay and Android Auto with the Bloomberg Business app. Or watch us live on YouTube. Great to have back with us Jan Van Eck. He is Chief Executive Officer of Van Eck. It has about$133 billion under management, AUM.

13:26And he joins us back here in our Bloomberg studio. Jan, great to have you back with us. There is a lot coming at investors. There is this laundry list. What's most important to you when you think about the investment environment and what shapes your strategy right now? Well, just keying off of this monetary policy discussion, I just have to say that the big piano hanging over our heads to me is the federal budget deficit. And since I saw you last, we actually got some pretty good news for fiscal 25 that as a percent of GDP, the budget deficit had fallen from six and a half percent to 5.9 percent.

14:05I've been focusing very much on the year that we just started on October 1st, because I think, you know, that's the big risk, right? The Fed, you know, the federal government has to borrow or pay a trillion dollars a year. And sure, the Fed governor, you know, affects that, but what the markets think matters a lot, too. And if we can reduce that pressure by having better finances, That's really good news for the market, I think. But that's not an argument for having not an independent Fed, right? You still want a Fed that does monetary policy according to inflationary pressures and labor pressures.

14:40Right. But what the wonky economists on Wall Street don't want is to have so much debt that you basically are forcing the Fed to use something like Japan did yield curve control for some really extraordinary measures. That would really be unwelcome. So, you know, we can talk about the personalities and everything. But right now, the direction of movement is good compared to coming into the year where we had a lot of fiscal concerns. And the Fed chair would have had a lot more on his plate. You know, Jan, when you were on with us last, it was about a month ago, it was just before the government shutdown.

15:14And we asked you about whether or not a government shutdown actually matters to markets. Well, here we are a month later. And it's amazing. It is amazing. I mean, it's the second longest shutdown in history entering, you know, it's remarkable to see. You said it didn't matter. Right. Do you stand by it? Yeah. I mean, I don't think there's any evidence that it has mattered. I think what's really worrisome, though, is the fact that - But it's a dysfunctional government. You have a whole branch of the government that isn't working. That they don't care, right? Neither party really cares if something bad is happening, if they feel like the other party can get the blame.

15:50And again, I don't mean to only talk about the debt problem, but that's really what we all worry about at the end. Will we never solve Social Security? Will we cut Social Security payments in 2033 like we're scheduled to? I mean, those are the longer-term concerns. When you look at this market environment, the other things that are coming, and these are obviously the ones that we just talked about, are super, super big. But I do think about our focus on these MAG-7 earnings. We get a big drop this week, and we'll learn once again whether these AI investments are paying off. Last time around, we saw it with Meta and some of the other big hyperscalers that these investments seem to make sense at this point.

16:30The AI trade, where are you on that? We have a compute shortage that's very visible to the whole world. And what's really interesting, I did some research on this since we last talked, And OpenAI is really emerging as the giant in this area. So they have 800 million monthly active users. The next biggest, Gemini, has 450, but much more interesting. So your average website is now getting basically traffic coming from the AI chats somewhere between, let's call it 1 % at the low end and 17 % at the high end. of the traffic that's going to your average website, like the Bloomberg website or the VanEck website.

17:14We're not average, just so you know. Sorry. I'm sorry. But go ahead. I can't believe I said that. But of that traffic, OpenAI is generating over 90 % of that traffic. They are completely dominating the other Mag7 companies when it comes to that. Now, Now, on the flip side, they are trying to build out a ton of this compute and they don't have the money. Right. All the other hyperscalers have a lot of revenue. Not public. Right. And the revenue is only 40 to 50 billion. So and they want to spend hundreds of billions on compute. So that's the one thing that I look at as a potential weakness in this AI trade.

17:53But otherwise, we've got at least two calendar years of demand to deal with. So you're not seeing ghosts of the late 90s tech crash here? As I said, the only vulnerability I see isn't this sort of systemic thing. It's one company that's spending a ton of money. And so far, they've been able to raise it. Everyone else has got the revenue to cover their spend, right? I mean, they've got the cash flow. And I'm sure in OpenAI, I can keep raising money. It seems like there's plenty of demand or maybe even do. Are you doing chat GPT right now, Carol? No, no, no. I was actually, no, no, no, no. She did just grab her phone.

18:28I did just grab my phone, which is such a no-no when you're on air. Lisa Bromowitz, who we all, she's incredible on surveillance on the TV side. And she said the MAG7 stocks have accounted for almost half of the S &P 500's 15 % gain this year. Microsoft, Alphabet, Amazon, and Meta are expected to post a combined$360 billion in CapEx in their current fiscal years and nearly$420 billion next year. So what I'm just wondering is the market, we've talked about that we feel like in the earning season, we're seeing breadth expand. But again, these companies are still so important, right, to the trade.

19:06Yeah, they're really, I mean, we want to ask ourselves, why do they have such a high percent of the S &P 500? And we have an answer, because they're profit dynamos. Not only is their revenue going up, but their employee bases are flat, if not shrinking. So rising revenue, flat costs, because one of the big beneficiaries, obviously, are software companies. We have 30 seconds on gold. This is where I want to go. You are going to go there. Yeah. Is that where you were going to go? I was going to go Qualcomm. Go ahead. So down 8 % from its peak. Further to go? Yeah. 20 % correction in the bull market would be my base case.

19:41That's your call? $3 ,500? Yes. Okay. Still not a bad year, right? Great year. I think the question is, you know, everyone's impatient. They're already looking at their phones. And during interviews, the question is, how long does gold consolidate? It was for the goodness of the show. A whole 12 months of consolidation would bore the market. So we may have one of those situations, but still, we'd like it long term for the next decade. Jan Van Eck, he is, of course, Chief Executive Officer of Van Eck, joining us here in studio. This is the Bloomberg Business Week Daily Podcast. Listen live each weekday starting at 2 p.m.

20:18Eastern on Apple CarPlay and Android Auto with the Bloomberg Business app. You can also listen live on Amazon Alexa from our flagship New York station. Just say, Alexa, play Bloomberg 1130. I want to know how Sarah Hunt is looking at all this. She's partnering at Chief Market Strategist at Alpine Saxon Woods. The firm has about$850 million in assets under management. She's here in the Bloomberg Interactive Brokers Studio. I guess we should probably start with trade because that is what is pushing this market higher today. dare I say or ask you is it getting ahead of itself given that we don't know if this deal will happen I think that that's been one of the biggest questions all year because when you had the meltdown earlier in the year in April and then you started to see those deadlines move around and all those things change and markets got really we're much happier with that right because they didn't want to hear that draconian those draconian numbers they didn't want to see that happen immediately.

21:15So you've seen things continuously move around. So I'm sort of surprised that there's enough surprise in the headlines every time we get one that it does do that. But in the end, if we can get things sorted out so that you don't have pecuniary tariffs anywhere, or at least not as bad as we thought they were, there is a relief to that. And I think that that's part of what you're seeing. And I do think that there's a de-escalation of tensions because the rare earths thing has really been an issue ongoing for the last several months. So I think that all those things together and the low CPI print on Friday really helped.

21:48But we still have, as we mentioned earlier, Sarah, China still faces effective U.S. tariffs of around 40 percent, about 25 percentage points above the global average. I mean, we are in a different tariff environment. So I agree that I think, you know, flooding the zone, we're all exhausted. So we just want things to land and we almost don't care where they land, which is kind of crazy because they're landing at different marks that are going to impact profitability, it sounds, of companies. So that's going to have an impact. And I'm not quite sure when it starts to really, really show. And I think that that's also the million dollar question, because that has been the issue going forwards.

22:28What's going to happen to margins? What's going to happen to pricing? What can consumers absorb? What can companies absorb? And the truth of the matter is, we haven't really seen the effects of a lot of those tariffs, because a lot of them came and went and or they get suspended or you get carve outs or you get different pieces. It's very difficult to pinpoint exactly who's paying that 40 % right this minute. And right until you start to see it come through earnings and until companies start to talk about it, it becomes more and more difficult for people to put in their numbers. So right now, numbers look very good.

22:56And I think the third quarter is going to be pretty good. This week is going to be a very big week because we have a lot of people reporting and that's going to be very important how that comes out. But where we go with those and what that does to margins, I think is the biggest question that we still don't have an answer to. Is that when, not if, these companies start to see the effect of these tariffs? It is definitely a when and not an if, but the when keeps moving around. And that's why it's hard to take a victory lap, which some have done and said, well, there's no real effect of this because you've seen the earnings still be very strong.

23:22When in reality, we don't really know what the effects are going to be because you keep pushing things around and inventories have been pulled in. So then how do you position for that? You try to find places where you think you are not in as much risk as you would be if the inventory picture is not good enough and or changes and you don't get a chance to reduce that or to put that inventory back in. So a lot of the places are going to be obvious. The technology stocks are part of that, although you have seen Nvidia have issues with being able to sell and then not sell chips and everything else.

23:50It's the cash generative areas, the places where you know that there might be some pain. It's almost more to avoid it. I mean, I wasn't thinking about Mattel when I started this, but if you think about something like Mattel, that was a very bad situation for them. And that you are seeing that now and you will see that in other areas. But it's not like we're going to see Barbies built here in the U.S. No, that's one of those things where you'd almost think that like certain things are going to need a car back because you're not going to bring them back. Whether or not toys are going to end up getting that, it doesn't look like it right now.

24:22But no, there are certain things that it doesn't make any sense to do that. Well, maybe where was a good example, because what did the president say about barbie earlier this year maybe if we only get one barbie at christmas kids girls something like that whoever don't need two barbies instead of 30 i don't know when i was growing up that was what he said the more barbies thank you are the merrier um he's got our chief i was gonna say he's chief barbie buyer in his house well he's got a daughter he's got a daughter um what i'm wondering is are we though moving towards an environment where we're not gonna have companies that are as profitable as they were before which is kind of mind-blowing because we just saw the banks being really profitable.

24:59The earnings season, we're seeing it broaden out that a lot more companies seem to be coming in with some strong profit numbers, revenue numbers too. It's one of the biggest conundrums because in the end, to maintain that profitability, if you do start to have things like tariff spite, what do companies do? They get rid of costs. How do you get rid of costs? You get rid of people. So what do we not have right now? We don't have any employment stats, right? We don't have any statistics on what's going on. Although Amazon is cutting what, 10%, 12 % of its corporate? 10 % workforce. We just got that today.

25:28I saw that note before I came in here, and I thought this is one of those issues because you end up with having unemployment problems, and that is going to be fine potentially for margins for some period of time, but they can't do that forever. Right, because we're the people who spend, right? And if we're not working, we're not spending. You know, it's interesting, Drew Mattis, Chief Market Strategist over at MetLife Services and Solutions was on with us last week. And he talked how looking at the K-shaped economy, but just saying it's not okay. And he was really talking about the upper rung of the K, that even upper income consumers, like maybe these corporate folks at Amazon who have had good salaries and good benefits, but if they're being let go, then we've got a problem, right?