CoreWeave Shares Soar After Booming AI Demand Boosts Outlook

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1:17Bloomberg Audio Studios. Podcasts, radio, news. You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10 a.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts or watch us live on YouTube. All right. There's this company at their core weave. I don't really know what they do with their infrastructure software company. I hear a bunch. They offer cloud infrastructure platform that manages the complexity of engineering, assembling, running, and monitoring state-of-the-art infrastructure. So it's a big tech company, and it's called Infrastructure Software.

1:57The company name is CoreWeave. The stock's up big time. They reported some big time numbers last night. People look at this company because it's one of the ways to get a sense of where this AI spending is going, and I guess the direction is up here. Anurag Rana, he knows what's going on here. He's a senior tech analyst for Bloomberg Intelligence. Anurag, do a better job of explaining to our listeners and viewers what CoreWeave does and why it's important in a tech stack and kind of what we learned on the earnings. Yeah, it's a, it's a, think about it as somebody who's just renting out NVIDIA GPUs to end customers.

2:29So if NVIDIA makes the products, these guys are installing it in big data centers and letting people rent it out. Now, this is part of a massive boom of a kind of companies called NeoClouds. So when you look at the core cloud infrastructure, you know, you have your Amazons, your Microsofts and your Googles, they do all sorts of things. And these guys specialize only in renting out, I would say in most cases, NVIDIA GPU chips. Is this a really exciting growing space or how does this compare to other parts of AI? This is arguably the most exciting place to grow for all cloud infrastructure, because this is really what people are using to train their models.

3:11After the training, they would need to install their applications and so forth. So, you know, CoreV doing well is not a surprise to us because as we talked about just a few weeks ago, we saw really good numbers from Google, AWS and Microsoft. This is just a continuation of that trade with CoreV and AWS, both of them. Actually, they are both very close to each other in terms of what they do. And one would expect when Oracle reports next month, it would be very similar with them as well as to their cloud infrastructure doing well as also. All right. So, Anwar, we got this stock up 20 percent today, up 50 percent year to date.

3:47So what did we learn with their earnings and what do we hear from management on the call that's got investors all fired up today? I think the biggest thing to hear from the call is that there is no shortage of demand right now. It's all about AI compute constraints. What is the bottleneck? All about that. It's just a matter of how soon can they get more data centers up and running. But from a demand side, there is no issue, which is actually what we have heard from all the others as well. So the big question is, you know, who does it help? This is part of what I call is the NVIDIA ecosystem. This is really directly involved with all the GPUs and what NVIDIA does.

4:25And now that NVIDIA is talking about taking care of some of the financing issues out there, I think the NVIDIA ecosystem becomes even stronger with this particular print. You mentioned data centers and some of the tension around there and some of the choke points. Is that at all a concern with companies like CoreWeave? So this is why this is kind of a very seasonal stock in that sense. You know, once one quarter you see it go up quite a bit and next quarter it goes down a little bit. And then the volatility is truly driven by this massive expansion of data centers. So if you hear out there that there is a delay in data center buildup, the stock's going to get impacted.

5:00If you go out and see that NVIDIA is having some issue raising, or not themselves raising, but their ecosystem is having issue raising some kind of capital, they're going to have an impact. And the third factor could be if companies or big cloud companies have started to use chips that are different than NVIDIA, that also impacts them. So it's a very volatile stock, but so is the entire space of what we call new clouds or GPU as a service. So I'm talking to your colleague, Kujan. We are, Stacey and I, in a matter of moments about the semis. Give me one good question I can ask, Kujan. Sounds smart.

5:39Tell them that how dependent is everybody just on NVIDIA? What can they do to get off the NVIDIA chips and use their own chips to drive some of these AI infrastructure demand? Because that is really the crux of all the economics. So if you look at a big data center, majority of that money goes to NVIDIA to buy their chips, what can a hyperscaler or, for that matter, somebody else do to de-risk themselves from NVIDIA chips?

6:28sponsored by Ridwell. Ever tossed something into your recycling bin and just hoped it would get recycled? That's wish cycling. And most of the time, those items don't actually get recycled. Ridwell makes it simple to get it right. Ridwell helps you recycle the things your curbside bin doesn't take, like plastic bags, snack wrappers, pill bottles, and bottle caps. Getting started is easy. Just order a starter kit, fill the bags, send them back for free, and Ridwell takes care of the rest. Start today at ridwell.com. You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10 a.m.

7:04Eastern on Apple CarPlay and Android Auto with the Bloomberg Business app. Listen on demand wherever you get your podcasts or watch us live on YouTube. On the earnings front, as Alexis was just reporting, Supermicro, the storage company, the hardware company, they reported some really strong results last night. The stock is up 14 percent on the news today, up 23 percent year to date. Let's check in with Woo Jin-ho. He is Senior Technology Analyst for Bloomberg Intelligence. Boog, talk to us about Supermicro Computer here. What did you learn with the results? Yeah. Hey, Paul. So, look, the bogey for me, at least, was$60 billion in the guidance for fiscal 2027.

7:42They blew that away. They got it to$65 to$72 billion. And it just means that the AI infrastructure build-out is really going well. And Supermicro is a big beneficiary of it. What about Cisco? I know we're all expecting Cisco earnings, I believe, come out after the bell today. They are expected to be a huge market mover. I think the stock is up more than 60 percent this year. What are we expecting to see from them? Yeah. Hey, Stacey. So I don't know how if it's going to be a huge market mover, quite frankly, because it's actually made a seller move over the year to date. There's a couple of things.

8:17They are going to lay out fiscal 27 guidance this tonight. You know, streets, I think, at around 68, 69 billion dollars. The hope is that they're going to beat that$70 billion, come in around$70 billion on the sales side. And a lot of it is going to be AI-driven, quite frankly. $6 billion in AI revenues that they guided to last quarter. I'm not quite sure if they'll raise the guidance there because of some supply constraints. But look, all the AI momentum is behind Cisco right now. So, Wooj, with your networking, storage, all that kind of those companies you follow, what's the feeling amongst them about how much longer this AI spending CapEx can continue, should continue?

9:01Yeah, look, you know, we have to put this into two buckets, Paul. One, you've got the hyperscale cloud as well as the, I guess, the neocloud bucket. And then the second bucket is the enterprise AI spending, right? So on the hyperscale and the NeoCloud side, I only have visibility up until 2028. I think that there's going to be good runway of growth in 27 and into the early parts of 28. And you're going to have larger deals and lower margins, quite frankly. So you have good sales momentum there. And then the earnings tailwinds will fall over there. The enterprise AI really hasn't started to ramp up yet, quite frankly, Paul.

9:43And this is where Cisco and the Dells and the HPEs really start coming along. And it is a better margin business. And you could start seeing a second cycle starting to begin later this year in 27. What are the parts of AI? Because I know now we're looking at different parts of the industry and which parts of the industry are doing well or seem to be doing well and have the brightest future. What do you see right now when you look at the different parts within the AI industry? Yeah, so from my vantage point, we've got the, if we call the picks and shovels play. That's data centers? Well, it's more GPUs, let's just say, that's powering the AI.

10:31But more so than GPUs, the optical names have actually been one of the better performing areas. If we look at, you know, Lumentum, you know, my colleague Jake Silverman covers that name. They reported last night and they reported some stellar numbers and stellar growth expectations. And that whole optical layer that's trying to speed the data across, you know, data centers as well as across the country, that whole segment is going to actually blossom through the end of the decade. Companies like Corning, Sienna, even Nokia are going to be beneficiaries of that. So I don't know about you, Roach, but when I buy a PC, Stacia, I don't know, I buy a PC last, I don't know, five years.

11:19At the most. Maybe. You can't do anything on it by the end of the five years. Yeah, I don't know. But I'm thinking, which, I mean, on these AI CapEx, I mean, if I buy a chip or I buy a GPU or TPU or whatever it is, how long does that last? I mean, are these companies going to continue to invest at these much higher levels for, I guess, going forward? Yeah. So if we look, we're talking about, you know, the raising of equity, the raising of capital to to help fund this. right and when is the ROI and I believe Nebius reported today and they expect to get the return on capital or invested relative to the data center investments that they're making in a span of 1.3 years right which is down from two years and the longevity or the asset life is supposed to be a five-year depreciation cycle.

12:17So, you know, just like your computer, Paul, five-year depreciation cycle for the AI. And if you think about it this way, right, even though you have the next generation NVIDIA chips coming online, those older, you know, the H series or the A series, they're not obsolete. They can actually be, you know, sold to other people who just don't need the higher power models out there. And the rental prices, and you can look at the Bloomberg SdB200 and the H100 index, right? They're actually rising primarily because the demand for these rentals are just so high. There do seem to be some potential snags or obstacles in the way of AI growth, one of them being data centers, political pressure.

13:02Is there anything that you think could derail this or anything you're watching out for? Or is this train just going too fast? Yeah, I wouldn't say the train is going too fast, but I do think that there are some regulatory risks out there, Stacey. You know, look, nothing is going to go up into the right to perpetuity. Nothing has. If it did, I'd be a very rich man. But the fact of the matter is that you are going to see bumps in the road, whether it's going to be regulatory, whether it's going to be supply chain. And that is going to be, you know, intermediate term risk to numbers. So for the companies you cover, what's the China risk slash opportunity?

13:44How do we think about that? Well, for the companies that I cover, the China opportunity is zero, right? Yeah. Because the China sales exposure is relatively slim to none, and China has their own providers there. From a risk perspective, at the end of the day, it's going to be supply chain, Paul, right? We still source quite a bit from China, whether it's going to be components and subcomponents. And I'm not talking about chips per se. I'm actually thinking more along the lines of substrates and even the lowly PCBs, right? The green cards or green boards where the chips are soldered onto, right?

14:25So that is a risk for me going not only to the AI-related hardware names, but also to the PC vendors. Stay with us. More from Bloomberg Intelligence coming up after this.

14:41you're listening to the bloomberg intelligence podcast catch us live weekdays at 10 a.m eastern on apple carplay and android auto with the bloomberg business app listen on demand wherever you get your podcasts or watch us live on youtube all right one place i haven't eaten my kids tell me i have to is kava they reported some numbers what'd you learn kava does a nice job you know You should get over there. I get there once in a while. Over there in Wayne, New Jersey, we have a Chick-fil-A and a Shake Shack next to Cava. So I'll go to Cava. That's very competitive. And my son will do the Chick-fil-A or the Shake Shack.

15:18Nice. But they do a great job, and they've crushed it in the first half of this year. Same-star sales over 9%. Traffic over 5 % here in the first half of the year. Mainly being driven by new pomegranate glazed salmon. That's what Alexis has been reporting all morning. Am I wrong? Have you tried this? I have not tried their salmon. I tried their shrimp, which was excellent. It was in test, but I have not tried the salmon, but they do a nice job with quality, A, and B, not a lot of their competitors sell seafood, right? And so we've actually, last year was the year of steak. We've actually seen a much bigger impact from their salmon sales than steak.

16:05What is their trick here? Because from what I understand, this is a really tough time in the restaurant industry, especially in kind of the middle-class restaurant section. I know it's gotten really, really, really competitive and there's cyclospora and there are a lot of challenges right now, tariffs, all of it. What is Kava doing? What is its secret other than the salmon, of course? Well, number one, I'd say healthy Mediterranean cuisine, right? That's people, more and more people are eating healthy, especially with glp it's like healthy fast food right um yeah and so that's a big part of it and really the equation in restaurants is the value equations about what you get for what you pay and people are coming away from the kava experience happy right they they had a good um tasty meal right in in a nice environment you know good service with a smile and and people come back So we're just seeing a massive divergence between winners and losers in the restaurants.

17:03And it's been this way now for a few years because of the inflation. People are becoming more discerning. When they have a good experience, they go back. If they don't, see ya. Red headline crossing the terminal right as we speak, Mike. Tryon Fund Management assembling co-investors for a Wendy's bid. This is according to the Financial Times. So what's going on with Wendy's? Well, Tryon has been trying to, like, you know, pitch their book here. They've been involved in Wendy's for quite some time. There were some rumors earlier this year about them becoming involved. So, you know, since they already have a stake in it, we kind of take this with a grain of salt.

17:42What I can say about Wendy's is we're a big fan of their new CEO. Bob Wright had worked at Wendy's for a very long time. So, you know, he knew the business very, very well. When he left Wendy's, he was previously head of international, chief operating officer, I think was his last position. He became CEO of Potbelly. And he orchestrated a very impressive turnaround. Stock went from$2 and change and was bought out at like$16,$17. And so in terms of myself, I'm a lot more optimistic about Wendy's going forward. I would think that the franchisee base is probably very energized because they know him intimately.

18:27Right. And he's got a great plan to turn things around. So in general, I think, you know, things are looking up. It's up 10 percent on this news today. So maybe people are thinking this might be the real thing. I don't know. Brinker reported some results. Remind us who Brinker is and the brands they have and what they're seeing. Yeah, they own Chili's and Maggiano's. Chili's has been on a tear. I think Samesha sales are up cumulatively about 70 % over the last five years. We've never seen this out of a brand that's been around. That's a top sector too, yeah. Are they just the right price point, value point for folks?

19:05Well, no, this was a brand that was kind of, you know. I mean, Red Lobster's been struggling. A lot of their competitors have really. Well, so there's a few things that are boosting casual dining, But a lot of this is really based around what they've done. Chili's was always a great brand and it was mismatched for a very long time. And so they got back to the core of what Chili's was. They also started with really improving the operations. Then from there, they started improving the marketing and they have a best in class marketing team. So the CEO and the chief marketing officer, they did the Old Spice smell like a man, man.

19:45They turned around KFC with the rotating kernels when they had all the famous comedians. So they're phenomenal in marketing. So that's been a big part. And now, more recently, they've been continuing to work on the operations and continue to spend more on marketing. But now they continually are upgrading the ingredients and the products on the menu. And people are going, they're trying it, and they're coming back. They've had tremendous results. The more I talk to you about your companies and your industry, the more I learn that management's really important. So important, man. So important. More than with other companies?

20:25It just feels like operationally, there's more things they can do. Yeah, and you know what it is? My opinion is you have tens of thousands of frontline workers that you have to get to buy in. It's not just a small management. If you're a tech company, a small management team that has to drink the Kool-Aid. I mean, you have to get tens of thousands of everyday regular people to buy in on your plan. So if you're not a good person with hospitality in your veins, they sniff that out real quick and they're not going to move mountains for you. Stay with us. More from Bloomberg Intelligence coming up after this.

21:04You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10 a.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business app. Listen on demand wherever you get your podcasts or watch us live on YouTube. Lest we forget, there is a$110 billion merger out there waiting to get approved in the media space. Paramount and Warner Brothers Discover. Discover it's going to reshape global Hollywood. Everybody's approved it. everybody you think of except 12 U.S. states. And that's a problem. So we got to check in with Jennifer Rhee. She's Bloomberg Intelligence Senior Litigation.

21:42She's like the only voice that matters now. Nobody's talking to the bankers. Nobody's talking to the consultants. It's all up to the lawyers. Jen, can you frame out this legal case where we are now and how it may play out? Yeah, Paul, thanks for having me. I mean, we're really at a stalemate here. I think it's often forgotten that the states can step in just as the FTC and DOJ do and enforce federal antitrust laws in every way, including to try to block mergers, which is exactly what's happened here. So they did sue. They have alleged harm in three separate markets, two that have to do with a theatrical distribution and one that has to do with the licensing of basic cable channels.

22:22They are in California before what looks like a pretty good judge for them, and right now have a trial date set for March. Based on news reports, it's pretty apparent that Paramount would like to settle this case. They've been talking about settling, and apparently they made an offer on May 12th to settle the case with the states, but the states are just not talking right now. And I think what we're seeing now is a PR campaign on both sides where they're playing chicken. You have the states talking about, we're not going to settle, we want to break up the deal, we're going to go to trial. And you have Paramount now talking about pulling their businesses out of California and moving them entirely to another state.

23:00I will tell you, Paul, I do still think, even though they're so far apart, that down the road this matter could settle. And with a settlement, the deal could close. It's interesting, the threat to leave the state. How big of a deal is that? I know the attorney general of California compared to two blackmail. Is that fair? Again, you know, I don't know that blackmail is fair. What I think of with that threat is gaining leverage. Right now, Paramount has very little leverage. Time is not on their side. They have a ticking fee that's going to kick in as of October 1st if this deal doesn't close as well as additional financing fees that kick in if it's not closed by the spring.

23:42And they have really no leverage. So far, all the judges' pre-trial decisions have gone in favor of the states. they would really like to settle with just what we call behavioral commitments. These are just promises to conduct the combined business in a certain way, whereas it's pretty understood that the states are looking for something structural, like a sale of basic cable channels, maybe even the sale of a movie studio. And so they're very far apart in that respect. And I think Paramount is doing what they can to try to get leverage. Now, I'm not saying that their threats aren't real. You know, that's up to what the executives and the board are doing and talking about.

24:19It very well may be. They've said that it's been approved and it very well may be that this is something they're realistically thinking about. But in terms of what's going on with the lawsuit, I see it as as an effort to gain some leverage in settlement discussions. You know, I don't know who the attorneys were for Warner Brothers Discovery crafting this merger deal, but they deserve a big pat on the back. Seven billion dollar breakup fee, plus a ticking fee that could add one point six billion dollars. that's real money even to the Ellisons. Boy, the numbers there are just huge. Legally, on the legal fundamentals, do you think one side has an advantage over the other if it were to go to trial?

24:58Well, let me first address all those fees. Remember that they were fighting with Netflix for these assets really viciously. Apparently, they've had to fight for these assets the whole way through. So I think they had to sweeten the pot by adding that taking fee and that big breakup fee in order to win over on net from Netflix now on the case Paul here's how I see it I think ultimately the companies probably have the better legal argument once all the evidence is fleshed out once you have economic analyses and once you've really dug into the markets that have been promoted by the states and what they say the market shares are in those markets I think probably now again it depends on the evidence which we haven't seen yet but I still would lean toward the company's winning.

25:41But the bigger problem they have right now is this timing issue, because it's not just about the expense, but the longer a deal that's been signed can't close. The riskier it is for the deal, the more likely it is to fall apart. And they also have a June 4th drop dead date. So as of June 4th, if this is not closed, Warner Brothers can walk away and collect that$7 billion fee. So is this level of drama and trouble typical in a merger this size, or is this extraordinary? I would call this extraordinary. I think to me, you can have a lot of drama with a lot of these kinds of deals. I think here the irritation and the drama is added to the fact that you have 65 or 66 global jurisdictions that have cleared it.

26:25And the only thing that's standing in their way are 12 states. And I think that's got to be very frustrating. And I also think that these companies probably didn't work quite realistic about what was gonna happen with this deal when they thought through their legal strategy. You know, the most interesting thing is, Stacey, when I think about the last time that I think of this much drama was also dealing with CNN and also dealing with Time Warner assets. And that was when AT &T tried to buy Time Warner. At that time, Macon Delrahim was the assistant attorney general in charge of antitrust at the Department of Justice.