Meta Delivers Lackluster Forecast & Microsoft's Cloud Unit Grows

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24:56Carol Massar:All right, so we're tracking Meta and Microsoft here in the after hours. Microsoft up about 2%, a little bit more so, just following earnings. If I go on over to Meta, it is still down about 5.6%. Let's just also throw into the mix. We've got Qualcomm. That one also came out with its results. And the stock right now in the aftermarket, as I bring it up on my Bloomberg, it is down about 3.5%. And then we have Arm Holdings. We have Arm Holdings as well. I want to go to Qualcomm real quick to Ed because Ed is interviewing Cristiano Amon tomorrow on Bloomberg Tech. Be sure to tune in for that, the CEO of Qualcomm.

25:31Ed, the company gave a weak forecast for the current quarter. It cited component shortages and rising costs. That's not a new story by any means. I mean, we've known this about Qualcomm. So it's not new. I would say in the smartphone market, it seems worse for Qualcomm than we thought. They are the main processor maker for smartphones. They are getting hit on all sides because of end market demand being hit by memory, for example. They have tried to diversify the business away from that reliance on smartphone. But within smartphone, they're also kind of, it seems like losing business from Apple faster than it was modeled for.

26:06And then they are super, super entrenched or exposed to Android in China. And so in aggregate, all of the forecasts for that handset market, they weren't rosy to begin with. The thing that I will ask Cristiano is for him to give me his latest assessment of the smartphone market for this year and whether it is better or worse than he had told me last quarter. So simple. But it is possible that things deteriorate quarter to quarter. And reading Ian King's report on the earnings, that seems to be the case.

26:41Carol Massar:Hey, so Qualcomm down about 4.3 % here in the aftermarket. Arm Holdings just down about 0.8%. percent. Arm delivering a sales forecast of about$1.38 billion in the fiscal second quarter. And we did see the stock under some pressure here. Mandeep, come on back in. Anything in terms of Arm or Qualcomm that's of note for you? I mean, just exposures. I think Arm, because of the data center exposure, continues to do better, even though Arm does have smartphone exposure, but because their data center exposure has been much higher in the past few quarters, they seem to be beating numbers. Whereas in the case of Qualcomm, I mean, they are talking about a 2029 guide and how the business would be more diversified by then.

27:29Carol Massar:But in the near term, this business is declining. The handset business is still under pressure because of the consumer smartphone and the memory pricing impact. Our right through on Arm noting royalties from those products, data centers specifically more than doubling from a year earlier. And the appetite for a new chip lineup is greater than anticipated. This is coming from the company's CEO, Arm Holdings. We are doing something cool and exciting and new here on Bloomberg Business Week Daily. Thank you for sending in your questions. You might have heard yesterday that we're taking your questions.

28:01It's a new feature exclusively for Bloomberg.com subscribers and for terminal subscribers. It's easy to do. You submit questions for our team to answer live on air. You go to bloomberg.com slash ask radio to send in your question, bloomberg.com slash ask radio. And we've already got some good questions coming in.

28:18Carol Massar:We do indeed. And of course, with us right now, our experts, uh, Ed Ludlow, Bloomberg tech host, uh, out there in our San Francisco bureau, Mandeep Singh, Bloomberg intelligence, global head of technology research, Mandeep, some questions that came in for you specifically. Um, and this is kind of a little bit more broader, what is happening with spinning disk storage sales due to the price increases for solid state? I mean, look, all of these markets, whether it's memory or storage right now, they continue to have very positive fundamentals simply because when you look at how inferencing workloads are run, and there is this concept called KVCash, which is essentially storing all the weights of the models and the context of the models, and then moving it across, whether it's storage to memory or vice versa.

29:07Carol Massar:And that continues to increase in terms of volume because of the high usage these LLMs have. So I think the fundamentals are very strong. And that's why when I see market reaction like we have seen over the past one week for memory stocks, it's not justified by fundamentals, that's just market positioning because the fundamentals for all of these companies on the memory and storage side, it's volume driven, price driven, and there is nothing that suggests a cliff in the near term. We just want to say that question came from Joel in Albany, New York, and that was for you, Mandy. And it's such a good question.

29:42I'm going to pose the same question to Ed Ludlow because we also have Ed Ludlow here. And I know he wants to jump in on this. Again, Joel in Albany sending this question into us. what is happening with spinning disk storage sales due to the price increases for solid state? Go ahead, Ed. Yeah, I mean, Mandy put it completely succinctly, but basically AI has tightened supply across NAND flash memory, memory prices, SSDs. And as a result of that tight supply, because the demand is new, it comes from newer areas in some cases, it makes things much more expensive. It has slowed some migration from different technologies like hard disk drives to flash.

30:18The thing that the industry on the storage side is confronting, just as they are on the memory side, is looking at their history and aggressively expanding capacity on a permanent basis and saying, like, we will invest into this in the belief that the demand will still be there in whatever number of years' time. It's the same formula for them. And it's been really interesting to speak with the CEOs of those companies over a number of quarters and say, like, why don't you guys just build more capacity like the same way the memory guys are doing and they'll say well you know because we're a little conservative and we're worried about us being wrong you know and and that is what a lot of the supply chain of uh call it ai is confronting um the one thing i point out is qualcomm you know earlier i talked about qualcomm's end market in the smartphone it's a little bit of a tangent being you know memory prices do put off consumers when handset prices are higher but the point that qualcomm's making is also that production's being impacted due to literally limited supply of components.

31:17And that makes it difficult on the supply side for them too. You leave money on the table. It's hitting everyone.

31:22Carol Massar:It's hitting everyone. Including consumers. I just want to point out, speaking of consumers, we're just also not tech related, although they do use technology. They might argue with you about that. Starbucks does use technology, but their shares are jumping about 11 % after boosting fiscal year adjusted EPS outlook. We just want to throw that into the mix as well. Everybody might need some Starbucks tonight to write up their research on all of this earnings after the close. Mandip, I want to layer on top of this, too, SK Hynix, profit disappointing. They're spending on CapEx soaring to$31 billion.

31:51Carol Massar:They did report a six-fold surge in quarterly profit. You know, I feel like, can you take one of these reports, which is a great read on AI, on its own? Or do you have to do it against kind of the broader stories? I mean, it's great that we have all the customers of these companies also report the same day as SK Hynix. So we'll read the commentary to connect the dots. But in terms of fundamentals, again, I know the quarter was driven by price increases, 30 % ASP growth for SK Hynix. They talked about some long-term agreements with 10 of their customers. So that may cap price increases going forward, which is probably the reason why the stock reacted negatively.

32:40Carol Massar:OK. But look, I mean, right now, these companies are showing very good fundamentals in terms of what they are making, how they are dealing with the customers. And they want to avoid a situation where the spot pricing really goes down and that affects it. Collapses, right? Yeah. And so that's why these LTAs actually are a positive, if you ask me. Whether it was Micron before and now SK Hynix, they want to make sure they have visibility and things don't collapse. You've talked to us about this. I will say SK Hynix said they expect demand to outpace supply until at least 2030. That 2030 seems to be that magic date that everybody talks about.

33:18I wish I could see that far into the future. I want to talk a little bit about Microsoft and go back to Microsoft. The company shares are higher right now by just about 2%. They were as much as 3 % higher. The company reported fourth quarter results. They beat expectations on key metrics, including cloud revenue. Some other commentary that was really important here. Fourth quarter, 365 commercial cloud revenue increased 16%. Azure revenue surpassed$100 billion for the first time. And then this one's really important. Microsoft 365 Copilot reached over 30 million paid seats. Once again, shares of Microsoft in the after hours up 2%, but going into this print, Carol, down 20 % this year.

33:58Carol Massar:Yeah, I want to go into this. Exactly. We know Microsoft shares have been under pressure. That brings us to another question. Thank you, Anna in New Jersey, who sent a question to Bloomberg.com slash Ask Radio. We are bringing our listeners into this conversation. She says, all right, I'm a senior, a long-time investor in Microsoft. I've been so worried about my over 20 % drop in Microsoft stock price this year. I understand the stock decline has been due to investor sentiment about the company's AI strategy or lack thereof. Is it a valid concern? If so, is the company making changes to its business strategy as it relates to AI?

34:31Carol Massar:More importantly, should I stick with Microsoft going forward? We don't give advice about whether you should buy or sell. And neither does Mandeep. And neither does Mandeep. But her concerns about the investor sentiment about the company's AI strategy or lack of a, is it a valid concern? It is a valid concern because of what happened between Microsoft and OpenAI. Remember, Microsoft was way ahead of everyone else because of their OpenAI partnership. And they seem to have slowed down for them because now it's not an exclusive agreement anymore with OpenAI. And even though that agreement does last through 2031, it's still the fact that it's not an exclusive agreement is what has raised concerns.

35:13Carol Massar:And all these companies are competing with Microsoft at the end of the day, you know, whether it's OpenAI or Anthropic. Microsoft did say the fourth quarter OpenAI investment impact on EPS was a negative seven cents a share. I don't know. Is that significant or is that to be expected or what does that mean? I think for me, that really wasn't a surprise. It's just the backlog number that they gave,$684 billion. Just think about how much pipeline does this company have. And even if 25 % of that backlog gets converted to revenue, that's huge. So from a long-term perspective, it feels like if a company has up to$700 billion in revenue visibility, they're in good shape.

36:00Carol Massar:The problem for Microsoft is a lot of this backlog, in fact, 40 % of that is tied to OpenAI, one company. Wow. So the concentration is immense. And that's where, because things haven't gone really well with OpenAI in terms of the partnership that they had, the exclusivity. And OpenAI has also fallen behind when it comes to the LLM race to Anthropic. So those two fronts are where I have my concerns. Ed, I know you have some thoughts on this question too. Again, this is from Anna in New Jersey. She asked this question. All she did was go to Bloomberg.com slash ask radio. She's wondering about the company's AI strategy or lack thereof.

36:40Is it a valid concern? So it's not new, right? Imagine if they phoned in and actually posed those questions over the phone. That would be terrifying. June was the worst. Don't give our managers any ideas, okay? June was the worst month for the stock since 2000. Go back to March, the worst quarter for the stock since 2008. And basically, Bloomberg has written about this endlessly. The stock did rise last year, about 14 % or 15%. and over the last 12 months has underperformed the tech sector, essentially. You know, if you just take, I don't know, whatever gauge of the S &P 500 you want. The ROI debate is still there.

37:24You guys played a soundbite with Charlie earlier from one of the analysts who basically said, and forgive me, I'm blanking who it is, I'll remember in a second, that Microsoft should get credit for its discipline on CapEx. There's a section of the street that believes that, that they've been the most disciplined. But at the other extreme, there's a massive ROI debate, which Mandeep's kind of outlined a little bit. But at the end of the day, Microsoft's spending well over$100 billion a year on AI infrastructure. And the CapEx number, to this point, has grown much faster than the metrics we have available to us to judge the ROI, which is Azure in this case.

38:00So again, what happens next? We know that Azure grew 43 % in the quarter gone. And if they raise CapEx by the amount that the street forecasts, that will be capex growth in excess of 50%. Capex growing faster than top-line growth on Azure, its key cloud unit. And that's the calculus that's been in place for quite some time as it relates to this stock.

38:23Carol Massar:Well, on that and this idea, we've got listeners and viewers who are sending in questions. I mean, Mandeep, when you look at Microsoft, Meta, I'll throw in Arm and Qualcomm, but I think Microsoft and Meta are obviously are really key stories here. I mean, as an investor, what should you be thinking about that needs to be asked of these companies right now? What clarity do you still need? I'm parsing through that Azure number to figure out how much of it is AI versus the non-AI, the traditional cloud. And to my mind, based on the disclosures that they have shared, AI makes up at least 20 to 25 percent of that 43 percent growth.

39:09Carol Massar:So from that perspective if you have a business that is close to 125 130 billion dollars where 25 percent growth is coming from AI that's pretty sizable close to 30 billion dollars in revenue that's AI generated on an investment of around$180 billion in CapEx. To my mind, that's a pretty decent ROI for Microsoft. With Meta, I can't do that math because there is no AI number in that top line. So to my mind, yes, it could be an ad pricing, but it's a guessing game. So it's just easier to parse out that AI contribution for all these cloud companies. Same thing with Alphabet, same thing with Amazon AWS.

39:55Carol Massar:there is a math that you can do to back out that AI contribution. So what can Meta say on a call? Can they do that? I mean, that first line where they say they are looking to develop enterprise businesses, to me, that's the AI contribution. Once they start reporting that enterprise line, there is your AI number. All right. We continue to get questions. This one coming from Grand Rapids, Michigan. Brian, listening and watching in Grand Rapids, Michigan, writes, Can you comment on whether or not end users of memory and other chips are ordering from multiple suppliers in order to expedite delivery of those products?

40:33Meaning, are they overordering and does that overstate the actual order backlog of memory chips?

40:39Carol Massar:Ed, you want to come in on that first? Yeah, I mean, on the compute side, that's the whole story. that overall in the compute environment, the hyperscalers and other owners and operators of infrastructure of AI workloads have chosen to diversify multiple sources of compute, GPUs from NVIDIA and AMD or TPUs from Google or some of the custom inference server designs because diversifying somewhat mitigates the supply risk. And on the memory side, when I was with Jensen on Friday, Jensen won the NVIDIA CEO. I think his point quite consistently has been, you know, they several years ago went to SK Hynix, Micron and Samsung and said, this is the world as we see it in the future.

41:22There's going to be a really great need for high bandwidth memory chips, which are just layers of DRAM, the same DRAM that goes into consumer electronics and tried to get them on board to plan for that future. But NVIDIA, you know, has a very deep relationship with SK. It's sourcing for wherever it can get. And the main point that I, you know, the last before I kick it over to Mandeep, that Brian, I've been thinking about is, again, what happened was the consumer electronics industry was getting DRAM. And then suddenly there was a whole new industry, data centers, that wanted at its core the same thing.

41:57And who wins, right? Where's that DRAM actually going in the end? And that's super interesting.

42:02Carol Massar:I mean, look, when your demand, if you listen to Jensen and the leaders of these. Jensen's been at the White House, by the way, with the president. And he would tell you demand is five to ten times more than what we can supply. So when you are in that sort of situation, the risk of double ordering, to my mind, is very low because we're talking, you know, Oh, are they oversupplying by 2 % or 5 % when everyone is saying demand is 5 to 10 times more? So I think at least in the near term, again, things could change if somebody pulls back on CapEx like a meta. We don't know that. They have kept it intact, but maybe tomorrow they want to pull back.

42:48Carol Massar:Then we will have a different conversation. Well, that leads us to another question. Thank you, folks, who are sending us questions. You just send to Bloomberg.com slash Ask Radio. This is a new functionality that we just added. I like this. I'm having fun. Making you all a part of our conversation. But speaking about what could happen, this is Mitesh in Houston saying, what can Meta or Microsoft say that would drop significantly after hours? We saw the same thing with Google Alphabet on their earnings call. I mean, if Meta even remotely mentions about an equity raise coming, the stock would really take a beating.

43:24Carol Massar:Meta. Meta, yes. Didn't they do that last? No. So it was Alphabet and it did an equity raise. There were rumors about Meta doing an equity raise. And these companies have been issuing bonds. But imagine doing an equity raise. I don't think it will go very well with the investors. Ed, what about for you? Mitesh asking, Mitesh in Houston, where it feels like it's Houston here because it's hot and steamy in New York City. But he asked, what can Meta or Microsoft say that would drop significantly after ours? We saw the same thing with Google on their earnings call. Yeah, I mean, you know, Alphabet gave the full-year CapEx update on the call, right?

44:01Not in the earnings statement, so that's possible. The earnings call also represents a chance to explain things. So, forgive me, guys, I've got not enough screen real estate, but I think Meta's still lower, right?

44:14Carol Massar:Hang on a second. Where am I looking here? Okay, we're down more than 6%. Yeah. And like, if you think about one of the concerns with matter, it was the miss on margins and the growth in expenses. But they would also say, you know, look at the one-time severance charge and the one-time legal charge. Maybe they'll get to explain that, you know, that these are just not issues right now, if it is indeed margins that are concerned. What I'd say is the same thing I say to my wife. If I didn't have to pay daycare, I'd buy a sports car. but I do have to pay daycare. So, you know, I won't be buying the sports car, but that, you know, look at the EPS miss basically.

44:54That's a t-shirt. Relatives consensus. And maybe, you know, the, maybe with an explanation, the street will feel different about it. And to clarify, you'd buy a sports car for her, right? Exactly so. Okay. I know the one she wants to. Okay. Just making sure.

45:08Carol Massar:Oh, what a good husband. Yeah. All right. So just to refresh, you never know what's going to happen here. Microsoft up about 3.4 % here in the afters, continuing to see Meta under pressure down about 6.25%. We've got another question coming in from Kellyanne in Maryland. Yeah, Kellyanne writing in, Microsoft just guided next year's CapEx$225 to$260 billion. The stock went up. Alphabet's at$200 billion, but the companies actually cashed those checks. The optical and interconnect suppliers like Credo and Lumentum are down 25 % to 40 % from their highs this month. Chinese competition explains the memory sell-off, this person writes.

45:49These names don't compete with CXMT. So who's wrong here? Mandip, I'm going to put this one to you. The hyperscalers writing record checks or the market selling the companies that cash them and what reconnects these stocks to their fundamentals?

46:03Carol Massar:And Kellyanne, you can come work here because that's a great question. I mean, with a lot of these component stocks, I feel like everyone has cars from how they have traded in the past. And there is some profit taking going on. And I know I'm generalizing this, but at the end of the day, nothing has changed in terms of the demand side that you need fewer components, whether it's on the memory side or optical side, nothing really. All these companies have been telling us is they're supply constrained. They are going to make bigger chips that can do more compute. And that's what NVIDIA has been touting, that the next version will require five times more power.

46:44Carol Massar:It can do a lot faster inferencing. That's a trend. I mean, if these stocks are getting sold off, there is some profit taking and, you know, people are just going by history. Mandeep, Ed, Mandeep brings up a good point because anytime like Tim and I are talking about, you know, a sell off in some of the chip names, you know, you have to sometimes, not all of them, but you have to pull out in perspective because the stocks overall is still up a lot this year. It was up a lot more earlier in the year, but nonetheless, there's got to be a little bit of a smart perspective on the run that some of these names have had.

47:20Yeah. I mean, but also there's no sense in saying, okay, year to date, they're still up markedly. You know, look at the growth for the whole of the full year 25. And like NVIDIA is an easy example, right because it is the case study of the ai trade look at where they are relative to 2022 or to 2019 or when they started as a public company like the gains are astronomical um where people now uh and like i spend a lot of time in fa go which is on the terminal you just it's all of the financial analysis data look at some of the estimates uh for free cash flow for example, for NVIDIA next year. Like, it's kind of crazy.

48:01But we are in a bear market on a technical basis, right? We've not come out of the bear market to a bull market on chip stocks. Because in a sense, nothing has really changed. And NVIDIA doesn't report anyway till very late in this month or August. We're not even in August. Not yet.

48:18Carol Massar:Almost there. Almost there. No, but we're getting closer. We're not there yet. A couple of days. All right, Ed, we know you've got to run. Super I never appreciate it. No, no, no. I really appreciate it. And of course, Ed Ludlow, he is the host of Bloomberg Tech. I do want to go back to something. We read a question from Kaylin out in Maryland who wrote about Microsoft guiding next year's CapEx. We should note that Microsoft has not yet guided, given an update for next year's CapEx. Mandeep, you have the most recent numbers for CapEx for fiscal year 2027 for Microsoft. Remind us where they are.

48:52Carol Massar:Yeah, they just reported their 4Q fiscal year 2026. So for the 2027, I mean, consensus is slightly lower, around$220 to$230 billion. But we think it'll be higher around$240 to$250 billion. So that will be at least... 63 % increase versus 2026 fiscal year? Well, I mean, if you capture the 2026 number at around, and again, we don't know all these numbers, they have to give guidance on, but 2027 would be slightly lower in terms of growth. You know what's interesting? I was just doing a search, Mandeep, about Microsoft. And one story that just came up here after the close about Goldman gauging investor appetite for a potential$5.4 billion debt offering to help fund a Blackstone-backed QTS data center tied to Microsoft.

49:46Carol Massar:I guess my point is there's so much money going after this AI trade and helping to do the build-out. And I get a little nervous when there's just so much money floating around. What for you, again, going to the financial sector that's eager to get in on this and the backing is there, when does it become a little bit worrisome, though? I mean, when somebody misses on, you know, their debt payments. So remember, all the private debt that is being raised to finance this data center build out, everyone has to make their interest payments on that debt. Right. There is a bond being sold. And when somebody defaults on that, and that is likely to happen when there is like lack of ROI on how much can you get by renting that data center, whether it's the actual lease on the building or, you know, a full data center like NeoClouds are doing.

50:42Carol Massar:And when you see strains around that, that's when you know, you know, things because then there will be somebody who is holding that debt. Right. you know, then they may get strained. So that's when things really cascade. All right. So watching out for that stuff. Stay with us. More from Bloomberg Businessweek Daily coming up after this.

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53:51Carol Massar:All right, we have been talking, of course, with our Mandeep Singh. Let's talk meta platforms and meta and bring in Kurt Wagner, who's been all over these numbers. He's big tech team leader. He joins us out from our West Coast Bureau in San Francisco. go. Shares of Meta down 6.1%. The company narrowed its full year capital spending forecast. It boosted the lower end of the$130 billion from$125 billion. But it was also the midpoint of Meta's third quarter revenue forecast that missed analyst estimates. Feeds into concern that Meta's revenue isn't climbing fast enough to keep up with its spending.

54:25Kurt, is that what is moving the stock in the after hours, those two things? Yeah, I think it's a combination of those things. with Meta as with all these companies as long as they're printing money and the core business is growing they can kind of get away with this aggressive AI spending on all these data centers the minute you start to worry even if it's subtle or slight that there might be a little bit of a slowdown on that core advertising business now suddenly you start to question should you be spending so much on all the AI infrastructure so I think there's a combination of that There was also a note in their release that they are raising their total year expenses.

55:06They're at least the floor of that range as well, in part because of the legal fees that they're having to incur. You may recall, I think we've talked about that they are fighting all these legal battles around addiction and youth safety. And so they said they're spending$2.4 billion this year just on legal related expenses. And so obviously that raised some eyes for us. Yeah.

55:28Carol Massar:Anytime they say it's material, right, Kurt, you got to kind of sit up a little bit straighter because that means there's an impact and it may not be over potentially. No. And in fact, far from it. They have thousands of lawsuits that are waiting in the wings. They've only gone to trial for a few of them. They're settling some of them. So, you know, this has the potential to be a very expensive legal dispute for them in the long run. We're saying goodbye to our man. He's got to go write some research. He's got to write some research, but we so appreciate him. Always, always. Kurt, what are the questions that Mark Zuckerberg needs to answer?

56:05Specifically, I guess I'm wondering about the enterprise side of this and what the enterprise opportunities could be.

56:12Carol Massar:Yeah. Give us specifics, Mark. Yeah, exactly. I mean, he flicked in his opening remarks that there's potential for them to sell cloud computing capacity. That's something that we've reported on that my colleague Riley Griffin and I broke some news about earlier this month. So he is sort of confirming that that's something they're thinking about, confirming that that's a plan in the works. But I imagine he'll get some questions about that once they open the call up to analysts. I think the other thing is just, is there ultimately like a ceiling here on this spending? Obviously, for 2026, we know their CapEx range.

56:47But beyond that, I mean, there are hundreds of billions of dollars that he's sort of earmarked for this project. Like, when do they start to see the real return on that investment? And is there a limit to how much he's willing to spend? I'm sure he's not going to put a number on it today. But I also think that's the type of thing that people want to know about.

57:06Carol Massar:Well, we've got a listener and viewer in Dubai. Asif is sending in and on that. We've got this new feature, Kurt. It's really cool. It's exclusively for Bloomberg.com. subscribers and terminal clients. And they've been sending questions to bloomberg.com slash ask radio, but it gets into kind of just the records amount of capex that folks are spending generally when it comes to AI. I don't think it's necessarily specific to meta. And he's asking someone who's going to get the money. So is the marketing missing something here? Like we keep going to this certainly with Mandeep. It's like, are we missing something?

57:42Carol Massar:The circular financing, the spend, the ROI, when you look at meta, you know, and just generally what's going on in this AI spend, how do you see it when you continue to report all this stuff out? I mean, the best I can kind of maybe think about it is, you know, sometimes when people want to buy a house in a market and they think, gosh, this feels really expensive. And, you know, the rationale is perhaps, hey, maybe five years down the line, I'll look back and be very happy that I bought my house when I did because everything is going up. And perhaps that's the feeling here, right? Is that eventually everybody is going to be using these AI tools and services and needing to power these things.

58:26And it feels expensive today to go build these data centers. But in five years, they will be very happy they did because the demand is going to be so high that it will look like a cheap investment for them. That's got to be the rationale at this point. Now, the question is, do you get to that point in five years or not? We obviously don't know the answer to that. But I have to think that when you're saying we're going to spend$250 billion, for example, on a single data center in Louisiana, you obviously feel that that's going to be recouped at some point. And that's only going to be possible if people adopt AI products in the way that someone like Mark Zuckerberg believes that they will.

59:03Carol Massar:Can I just say, though, this is the tough thing for all of these companies. It's like a little bit of FOMO. Like, what if you miss it? What if this is what everybody kind of markets it as and sells it as, and it is this life-changing thing that everybody's going to be using? Yeah, that makes sense for a company like OpenAI and a company like Anthropic. But Kurt, it doesn't make sense for a company like Meta because the product that they have that uses AI is the one that just keeps us glued to the screens and serves us ads, right? Well, Mark Zuckerberg would probably disagree. I was in the room when he had a sit-down interview with our very own Emily Chang a few summers ago.

59:40And he actually said, I would much rather overspend and be wrong betting on this than wake up in a few years and realize we underinvested. And so he's willing to lose a little money to make sure they're in position. Now, you have to remember what's driving this a little bit from Mark Zuckerberg is that he's someone who has built his entire business on the backs of other platforms for distribution. So what I mean by that is, you know, you can't access Facebook and Instagram unless you've got an iPhone or an Android phone. He's very reliant on Apple and Google in that way. I think he believes that AI is this next, you know, computing platform, whether it's physical hardware or not.

1:00:22and he does not want to have to rely on open AI's models or anthropics models to get his products out there.

1:00:28Carol Massar:Got to make sure the eyeballs are still coming his way. I mean, essentially, right? And not going somewhere else. Kurt Wagner, looking forward to all your reporting ongoing on Meta Platforms. Super appreciate it. Kurt Wagner is Bloomberg News senior tech reporter. I actually think, did he get a title? Oh, he's big tech team leader. You are big tech team leader. All right, good stuff. This is the Bloomberg Business Week Daily Podcast. available on Apple, Spotify, and anywhere else you get your podcasts. Listen live weekday afternoons from 2 to 5 p.m. Eastern on Bloomberg.com, the iHeartRadio app, TuneIn, and the Bloomberg Business app.

1:01:06You can also watch us live every weekday on YouTube and always on the Bloomberg Terminal.

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