Salesforce Jumps Most Since 2020 on Outlook, Anthropic Deal

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2:39I'm talking down 30%, 40%, 50 % for some of these names like CrowdStrike and some of these other names that were just rock solid for a long time. Well, they're bouncing back here today. One of them is Salesforce. It's up about 17%, 18 % today. This company gave an outlook for strong revenue expansion, and they reported they're deepening their partnership with Anthropic PBC. That's all it took for this stock to bounce back as I thought it would. Anurag Rana, Senior Technology Analyst for Bloomberg Intelligence, joins us here. So Anurag Ravni, Salesforce, I'm looking at CrowdStrike as well. A couple of these names that are up sharply today.

3:15Let's talk about Salesforce. What did they report?

3:18Kunjan Sobhani:So one of the things that we have talked about almost for, I mean, 18 months or so is that there is a bifurcation in enterprise tech spending with software and services being the casualty of it. And servers, hardware, and AI infrastructure is where all the funding is going. And that was going on for Salesforce for the longest period of time. you know, their bookings data or the forward-looking data was on the downward trajectory. For the first time yesterday, we saw organically there was a slight uptick in that. And that was only by one percentage point. So think about it that organically they were supposed to grow roughly around 9 % or so.

3:53Kunjan Sobhani:You know, they grew 10 and they guided for 11. I think that's what it took for the first time to see that U-turn and that, you know, drove the stock. The Antropic deal is another discussion. But frankly speaking, I think that's a little bit more marketing than reality. But it's the organic core growth is what I think is the most important thing to focus on. So what's kind of the market's discounting mechanism now, Anurag, as it relates to software and which software companies are maybe more vulnerable to AI than others? How has that thinking evolved? Yeah. So I would say for the longest period of time, I would say that all of this year and maybe the last few months of last year, there's only one trade in the market.

4:35Kunjan Sobhani:Buy semis, short software, or buy memory and short software. And to be very honest, over the last one month or so, we are seeing a bit of a reversal in that. And today also is, you know, today is probably one of the unique days where both NVIDIA is up and software is up. Usually you don't see that there. But a lot of people have been caught off guard on that, you know, short software trade, which is why the rebound, the scale of the rebound is so high. But when you look at the overall software space, what we have been saying for a while is there are a few large enterprise software companies that are critical systems of record.

5:09Kunjan Sobhani:You know, somebody like an SAP, somebody like a Salesforce, somebody like a ServiceNow or a Workday where you really need to store a lot of what the critical data is. So I think those are the ones that have a better positioning in the market compared to some of the smaller vendors that are only selling it to small and medium business market where the software itself is not that complicated. And perhaps somebody, you know, you can get more competition in that market. So is Salesforce with this Anthropic deal, are they trying to pitch it to the marketplace that, you know, AI is not a threat. In fact, we're partnering with Anthropic to make our service even more valuable.

5:47Is that the pitch? Yeah.

5:49Kunjan Sobhani:And, you know, another company called Figma showed this in their day-to-day operation. What it showed people was you open your Cloud app and you start working in it directly. And if you need to create something, you will do it right there. This is what Salesforce is saying to people that if you are a salesperson and you have your Cloud app, you can run your Salesforce app through it rather than opening another Salesforce app on the side, which means that Salesforce, think about it as would be more about the backend, the data, the security, the business rules, and the people will still use it to store the data or the logic, but you will use Cloud for the interface of it.

6:26And is that what's in fact happening out there? Are we seeing evidence that that's actually happening?

6:32Kunjan Sobhani:It's going to happen. I mean, they just announced the deal, so it's going to take some time for all this integration to happen. But one of the things that we have said is every company will have a different system of engagement. You and I will engage through these consumer apps to do whatever we are doing. I can see down the road, if I'm driving, I can ask Siri to make some changes and it will happen. But for large enterprises, they will create their own app, you know, like what Bloomberg has with Ask B. And that app will drive everything. But the background is still going to be some of these apps that store that critical system of record data.

7:05All right. Let's just before we let you go, I just want to get your latest thinking on Microsoft here. It's up about 3 % year to date. It was down 25 % year to date just several months ago. So it's had a nice rebound here. What's the current thinking on Microsoft?

7:18Kunjan Sobhani:So the rebound, I think, is dictated by two things. by them saying we'll be free cash flow positive next year and the CapEx is not going to be, I would say, as crazy as had been. However, the other thing is they're also making good progress on their custom chips. I think number one factor for every cloud provider now is what are they doing with their own chips? Amazon's done a very good job with it. Google's clearly the leader in that space. And I think if Amazon can, and if Microsoft can figure out their chip strategy, they'll be able to recognize their cloud backlogger much faster at the same time spend less on R &D or chip development or basically spending with NVIDIA.

7:58And is that 30 seconds left? How much of a threat is that to NVIDIA?

8:02Kunjan Sobhani:Well, right now the demand is so much it won't matter. You could say near term, for next three years it's not an issue. After that, NVIDIA will have to figure out a way to create a bigger ecosystem what they have. Stay with us. More from Bloomberg Intelligence coming up after this. Looking for more investing options? Meet SIBO, the exchange that pioneered options trading. With exclusive trading products like VIX and SPX options, SIBO can help you trade in any market environment. There are risks associated with SIBO company products. Review the disclosures and disclaimers at SIBO.com slash US underscore disclaimers.

8:35Some people treat ChachiPT like some kind of smart search engine, and some use it to get work done. ChachiPT Work is a new way of working in ChachiPT that can take action across your apps and files, stay with a project for hours if needed, and turn a goal into finished work. It's designed to help you move from a chaotic starting point to a reviewable first version. So all the source materials, briefs, and scattered information that you have to grind through to turn into something useful can just become something useful. Put ChatGPT to work on your most ambitious ideas and projects. Get started at ChatGPT.com by selecting Work Mode, available on Plus and Pro plans.

9:17everyone's talking about how ai is transforming work especially in sales while the landscape shifts one thing remains the same the thrill of closing a deal whether it's a gong or a confetti machine every team has its celebration rituals addio is designed for that moment it's the agentic crm that turns customer signals into actionable insights helping you close deals faster with revenue agents and automations working around the clock you'll have everything you need to scale your go-to market efforts. Elevate your wins with Adio. Start your free trial at adio.com slash iHeart. You're listening to the Bloomberg Intelligence Podcast.

9:53Catch 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. NVIDIA gave us a bullish sales outlook for fiscal 2028, easing concerns that AI spending is poised to, is not poised to lose any momentum. There's very strong growth. During the post-earnings conference call, Chief Financial Officer Chris said they expect growth revenue to surge in fiscal 2028. Let's take a listen. The surge in AI demand is driving a global infrastructure build out, supported by an expanding and diverse set of growth opportunities, spanning hyperscalers, AI labs, AI natives, enterprises, and sovereign customers.

10:42We expect to grow revenue by approximately 70 % in fiscal 2028. That was Colette Kress, the CFO of the NVIDIA, and they had a very bullish call last night. Again, 70 % revenue growth. And folks, just to put that in context, the trailing revenue for this company is like$300 billion, growing that number by 70%. These numbers are so massive, it's kind of hard to wrap your head around. Yeah, it's just extraordinary. Let's break down the details of the NVIDIA print. Kujan Sovani joins his senior analyst. He covers all the semiconductor companies for Bloomberg Intelligence. Kujan, thanks so much for joining us here.

11:2070%, where does that number come from?

11:24Kunjan Sobhani:Yeah, I mean, look, that's almost$100 billion about what the state thought. and it really speaks to a couple of things. One, of course, like you mentioned, the AI demand is there's no signs of stopping. But what was really surprising is like, how are they going to get the supply? Because what we hear everywhere is they are supply constrained. And I think this speaks, this validates that theory when, you know, for the last 12 months, they have been significantly increasing their purchase commitments to the level of now$250 billion, which was sort of a risk factor for a lot of people. There were concerns that they're putting too much into supply chain.

12:01Kunjan Sobhani:But this is the result you get, right? When you almost have a stake in every partner, a supply chain partner, you can lock in capacity. You can get priority. Frankly, you can get a much more discounted price than what you would get as a new customer today, whether it's for memory and wafer. So this really validates that the investment they have been doing, which we're seeing as risks, are finally paying dividends now where you can come and beat with such a high number in a supply-constrained environment. What did we learn from NVIDIA's results and the commentary from executives about NVIDIA's willingness to continue investing in other companies and its ecosystem?

12:38Kunjan Sobhani:Yeah, so this is for the first time, which they have not done in the past many quarters. They gave a lot more disclosures around the investments they're making, the different types of investments they're making. One thing it does, it sort of eases a little bit with the circular financing concerns. And what I mean is gives investors a little bit more transparency. Now, it's not completely takes away the risk, right? The fears or the risk of what happens in a downturn, but at least gives us a lot more transparency. The way they are going about investing in these companies, they're using sort of four different approaches.

13:13Kunjan Sobhani:One is, you know, backstopping the conglomerate of banks to the degree of$500 billion that they're going to support the frontier labs to do their build out. They're approaching a new business model with the AI clouds, again, helping them build out. And what this does is accelerate the build out of these private or non-investment grade public companies who are relegated by land, power, shell and available balance sheet. So, one of the competitive threats that seems reasonable to me is some of NVIDIA's key customers, whether it's Microsoft or I don't know who it is, developing their own chips. Flesh that risk out for us.

13:57Kunjan Sobhani:Yeah, look, that's a definite risk. You know, again, when we just started with 100 % market share of this market, right? I mean, there's only one way to go from 100. You just go down. There's nothing above. So there is a definite risk. However, again, where we are in the demand environment and the constraints and NVIDIA has shown like, look, they have locked in such great supply capacity. So we don't think this will hurt their ability to grow their own revenues. We definitely believe ASICs are going to take unit share away. But at this point, we think all of their customers are still going to have a multi-vendor solution where NVIDIA still will be a big part of a customer.

14:35Kunjan Sobhani:AWS, in fact, extended their deals with NVIDIA, which they had in the past. And AWS is also ramping up their own unit volume. So as long as the demand trend continues up, there's enough space for NVIDIA and its customers also to deploy their own chips. We know that NVIDIA has been trying to expand its customer base and not just relying on hyperscalers from Amazon to Google. How is it doing on that effort to become more dependent on a wider group of companies rather than just those tech giants? I think they are doing a great job. And this is something we have been calling out for a while in our research, that everyone is just focused on the top four or five hyperscaler spending.

15:18Kunjan Sobhani:But the result just showed you. So if you look at their fiscal 28, the 70 % growth they've said, they are actually going to grow faster than the top five hyperscale capex growth, which suggests a couple of things. One, they're not totally dependent on these top five spending. And even if the top five sort of slow the spending, they have other avenues in other customer bases, other geographies where they can really offset and continue going faster than the market. Second, with the new segmentation that they have done, which is the ACE segment, which includes the AI clouds, which includes Sovane, which includes enterprises and industries.

15:54Kunjan Sobhani:The company has started to give us a lot more color now, which they did last night as well, which shows that this market is actually growing faster, but expected to go faster than just the top five. So this really speaks to the strength of diversification. Kunjan, talk to us about some of their competitors in the chip business, advanced micro devices, the broad comms of the world. How are the competitors kind of responding to NVIDIA and seems to be continuing to set the bar higher and higher? Yeah, I mean, look, for the competitors, like, it's the tide that's lifting all boats. So everyone is really enjoying the stakes.

16:29Kunjan Sobhani:Even all of its competitors continue to beat and raise and keep raising the benchmark. But with this significant race for the next year, I think in terms of the share, NVIDIA might be actually increasing their share than what we had thought. But again, everyone wants a multi-render strategy. So the competitors are also enjoying where, you know, if you are a 1 % share taker of the market and you go to 1 % to 2%, you're significantly doubling your revenue still. Stay with us. More from Bloomberg Intelligence coming up after this. Some people treat ChatGPT like some kind of smart search engine, and some use it to get work done.

17:08ChatGPT Work is a new way of working in ChatGPT that can take action across your apps and files, stay with a project for hours if needed, and turn a goal into finished work. It's designed to help you move from a chaotic starting point to a reviewable first version. So all the source materials, briefs, and scattered information that you have to grind through to turn into something useful can just become something useful. Put ChatGPT to work on your most ambitious ideas and projects. Get started at ChatGPT.com by selecting Work Mode, available on Plus and Pro plans. Everyone's talking about how AI is transforming work, especially in sales.

17:47While the landscape shifts, one thing remains the same. The thrill of closing a deal. Whether it's a gong or a confetti machine, every team has its celebration rituals. Adio is designed for that moment. It's the agentic CRM that turns customer signals into actionable insights, helping you close deals faster with revenue agents and automations working around the clock. You'll have everything you need to scale your go-to market efforts. Elevate your wins with Adio. Start your free trial at adio.com slash iHeart. Hey, what's up, guys? It's Haley Bailey. Okay, I need to tell you about something. I just got YouTube Premium.

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19:16You'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. Getting back to the market here, specifically to Meta platforms. We're learning more and more about their agreement with the state's attorney general. Meta's teen safeguards on Facebook and Instagram apply only to the U.S. That was something new, I think, for the marketplace. Matt Schuttenholm joins us here, Bloomberg Intelligence Media Litigation Analyst.

19:50Matt, you've now gotten, I'm guessing, through most of this settlement agreement here. Let's just start with that U.S. issue. Is that surprising? How do you get this to be more of a global type situation? What's your read? Yeah, I mean, so the elephant in the room of this whole story, Paul, is that Congress has never been able to act with respect to regulating social media companies. Europe has taken a different approach and has been more aggressive in some respects. And so I do think you will see, you know, some movement potentially here. It's still hard to say that Congress is going to move significantly on this, but I do think you'll see individual states and you'll see countries in the EU make sure that at least some of these terms in this settlement, some of these limits on how meta serves teens are adopted there as well.

20:53Generally, though, in the EU, the approach has been different. They don't have the same limitations of the First Amendment and the Section 230 liability shield that really protect the social media companies there. So generally, the EU companies have been much more aggressive. They've been pursuing bans on allowing teens to use the service generally. And so it's sort of apples and oranges in terms of one directly applying to the other. And the settlement up to$17 billion, you and other analysts have noted this is something Meta can easily absorb, especially since it'll be termed out over 10 years.

21:29However, Meta still faces legal liabilities, right? I mean, there are still suits from school districts and individuals who claim harm. Would those, could those potentially be more damaging? That's right, Scarlett. So in my view, this was the big ticket item in this. The state AGs had a direct path to a recovery, and it's a bread-and-butter legal case. The company said one thing, but it was doing another, and it had a direct path to civil penalties. The school districts and the individual plaintiffs have a more difficult legal case in both respects. Individual teenagers suing have a hard time because it's hard to file a class action for individual damages.