SK Hynix Shares Plunge Most on Record in Deepening Korea Selloff

0:00Scarlet Fu:I don't love the word retirement because I think it has negative baggage. I like the word financial independence. If you were to be financial independent, like how would you spend your time? I think that's a better way to think about the end of life stage versus quote unquote retirement.

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1:27Scarlet Fu:Bloomberg 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. Switch gears to technology. Why not? Mandeep Singh joins us here, global head of tech research for Bloomberg Intelligence. Lots of ways to go here, Mandeep. Let's start with SK Hynix. What did you make of their U.S. listing on Friday? Maybe how the stock's trading off today, you know, 5%, but then traded off pretty, I think, was it 15 % in Korea?

2:11Scarlet Fu:Yeah, and the cost would be down about 9 % on the day. What do you make of all that? I mean, I think the day-to-day volatility will be there. And we're kind of going through a phase where everyone is trying to figure out the next leg of this AI infrastructure build out and how the companies would be reporting, especially the hyperscalers. I mean, at the end of the day, everything comes down to the CapEx numbers for 2027 and 2028. And we'll learn about that when they report earnings, the hyperscalers. And, you know, there is some profit taking right now. But overall, I thought the IPO was well received in terms of, you know, the first day bump that we saw in terms of a close.

3:00And everyone, the long term investors do think this is a multi-year cycle for memory names. And even though they are cyclical and there is a fear around peak earnings, I think on the whole, everyone buys into this multi-year build out for AI.

3:19Scarlet Fu:It feels increasingly like everyone's taking their cue from the KOSPI, from what happens in Korea, and that the tail is wagging the dog here. Is that the case, Mandeep? I mean, when you come in in the morning, do you look at what's happening in Korea and say, OK, now I have a better picture of what's going to happen globally because that sets the tone every day? No, I mean, for me, it's just another data point where, yeah, I look at the futures, I look at how the markets have reacted. But at the end of the day, there are some data points that weigh a lot more for me. And the hyperscale CapEx guide is one of them.

3:55And if I know that all these companies are, you know, raising their CapEx for next year and we are into a third year of a 70 % increase in CapEx, And if next year is going to be another 50 percent, then there is not much to worry about, at least for the next 12 to 18 months.

4:13Scarlet Fu:OK, it looks like some of those hyperscalers really don't report earnings until the end of this month. Tomorrow we're going to get the big banks reporting. We're also going to hear from TSMC and ASML, two big, big chip names globally. How do you see that kind of filling the vacuum between now and when the hyperscalers do report and give us a better picture of their CapEx plans for 2027 and beyond? Yeah, I mean, TSMC reported their monthly number today. And, you know, we are easily tracking over a 40 percent increase year over year and the seasonality was better than expected. So when you look at TSMC's results, which hasn't really used their pricing power like the memory guys have.

4:56So in the case of memory top line, you see a lot of pricing growth. TSMC, on the other hand, has been a lot more balanced in terms of volume versus pricing. And it's just a question like the durability of TSMC's growth, ASML's growth. And all of these memory guys, whether it's SK Hynix or Micron, have talked about raising their own CapEx. So that means ASML is a beneficiary of memory CapEx. And right now, everyone buys into this thesis that you have to keep investing to keep raising their capex just to increase the supply by 15, 20 percent. And even that would not be sufficient. That's what the SK Hynix chairman said is we will double our supply through 2030 at a CAGR of 15 percent, but we'll still be undersupplied.

5:48So the demand growth will outpace 15 to 20 percent supply growth that these companies are investing in. OK, again, the numbers just blow me away, dude. But I'm going to take what you're saying face value. If I'm a meta or Google or Amazon, what do I do? I want to put up a big CapEx forecast or not. Where are we in that play there? Does the market want to see these guys keep spending or we kind of pass that? I think the market wants to see them spending at the same time show some revenue lift to their top line. So in the case of Meta and Microsoft and Google, they want to see that cloud business get a bump.

6:32The core ads business get a bump from AI and the AI contribution has to be very clear. So like Google cloud growth, for example, has surpassed 50 percent now expectations. expectations why they were growing traditionally cloud was growing 20 to 25 percent that additional 25 plus growth is coming from ai so similarly you want to see that reflected in all the hyperscalers that are reporting that this is the ai portion and hence we are raising our capex and i think

7:05Scarlet Fu:the market will cheer for that stay with us more from bloomberg intelligence coming up after this I don't love the word retirement because I think it has negative baggage. I like the word financial independence. If you were to be financial independent, like how would you spend your time? And that's exactly what a lot of my clients talk about. And the term they'll use is a work optional lifestyle. I agree, like the next gen, millennials and below are not thinking about retirement. We're thinking about let's find something that we enjoy, that we can have financial independence. I think that's a better way to think about the end of life stage versus quote unquote retirement.

7:43Support for the show comes from public.com. If you're actively involved in your portfolio, you probably catch yourself repeating the same actions. Buying the dip, manually sweeping idle cash, putting on a hedge. On public, you can now create AI agents that handle all these tasks on your behalf. Just describe what you want to do in plain English. Like, if the VIX hits 25, buy a put option on the S &P 500. or if my cash balance goes above$20 ,000, move the excess into my direct index. You approve the workflow and your agent handles the rest. Monitoring the market, watching for your conditions and executing your strategies exactly as defined.

8:21An investing platform driven by your intent, not just your clicks. You can also get full read and write access to your account via the public API. Go to public.com slash market and fund your account in five minutes or less. That's public.com slash market.

8:38Scarlet Fu:Paid for by Public Investing. Brokered services by Open to the Public Investing, Inc., member FINRA and SIPC. Advisory services by Public Advisors, LLC, SEC Registered Advisor. Complete disclosures available at public.com slash disclosures. So there's a lot of noise about AI, but time's too tight for more promises. So let's talk about results. At IBM, we work with our employees to integrate technology right into the systems they need. Now, a global workforce of 300 ,000 can use AI to fill their HR questions, resolving 94 % of common questions. Not noise, proof of how we can help companies get smarter by putting AI where it actually pays off, deep in the work that moves the business.

9:19Scarlet Fu:Let's create smarter business, IBM. 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. Right now, we want to talk about Apple. They're in the courts fighting open AI regarding intellectual property. It's I don't know. It's legal stuff, folks. But let's get to an expert because I'm not really sure what's going on here. Townland Basin joins us here. Tech litigation analyst for Bloomberg Intelligence. He's based in London.

9:57So Talon, summarize what's going on here with OpenAI and our good friends at Apple. Yeah, sure, Paul. Yeah, so this is a intellectual property case, and specifically it's on trade secrets. Now trade secrets are sort of the most cloak and dagger form of intellectual property disputes. And sort of reading the complaint over the weekend, there's no exception here. So Apple is accusing OpenAI of a coordinated orchestrated attempt to gain some of its proprietary know-how relating to making devices for the next iteration of AI rollouts. So this started about a year and a half ago when OpenAI spent about$6.5 billion to acquire a company called I.O.

10:43This had been founded by some former Apple executives. One of those executives is now the head of software development at OpenAI. And what this lawsuit lays out is various stages where even engineers at Apple were recruited, were asked to bring Apple devices to OpenAI interviews and to share proprietary information. So what Apple is doing is they have sued. They want an injunction. They want to put a stop to what they see as an attempt to shortcut open eyes, attempt to shortcut its way into devices.

11:19Scarlet Fu:Okay, so lawsuits typically take a long time to get resolved. And of course, technology and technological change happens very, very quickly. What are you thinking about in terms of timeline for any kind of landmark, not even decisions, but landmark events in this lawsuit to affect the technology that both sides are working on? Yeah, and that's an excellent point. These cases often do have long tails to them. However, I think what we're expecting over the next two to three weeks is Apple to follow up with a request for a preliminary injunction. Really, what it's going to ask the court to do is put some guardrails around what it says or its trade secrets, preservations of evidence.

12:01So it's going to be probably looking for something in 3Q, if not in 4Q, for an early ruling on that preliminary injunction request. And we do think Apple has a pretty strong argument here. courts are, you know, it's so difficult to pull those trade secrets out of a product if it goes to market. So I think now no products have shipped yet. I think Apple's going to have a fairly strong chance to get that temporary preliminary injunction probably in the next few months. After that, we're going to have to see, you know, that there's potentially going to be settlement talks as they go forward. But I do think Apple's eyes right now are on getting some near-term relief in this.

12:40Scarlet Fu:How do you think about the employees that have left Apple and gone over to OpenAI? What kind of risks do they face now? Yeah, a few of them have been named in this lawsuit. And for those named defendants, the risks are very high. So we've seen these litigations play out. Some other high-tech instances are Waymo, which is Google's self-driving car division. about five years ago, it sued Uber over sort of self-driving car technology. The executive there ended up going to jail. This was somebody who left Waymo and went to Uber. So the stakes can be pretty high. Right now, there's no criminal component to this case.

13:20However, for trade secrets disputes, that can sort of escalate quickly. So I think everybody is going to be a little bit on edge. And it's also interesting because there's such a talent war right now, not just between these companies, for all companies trying to gain as much AI talent as possible. So I think we're going to have to see if this has sort of a dampening impact on how much poaching we're seeing in the industry. On Wall Street, there's something called garden leave. When you leave one firm for another, you can't go start work at that new firm for at least six months, sometimes longer to try to preserve some of the corporate intellectual property from the firm you're leaving.

13:59Is there anything like that in technology? technology is generally pushed back on that just because sort of again as scarlett pointed out a lot of the development in this is so fast paced that having an executive having a star engineer sort of sit on the sidelines for six months can be really a disadvantage so sort of we've seen across the entire tech space is resistance to that sort of garden leave type scenario um we'll see if going forward if firms are more open to implementing that but so far we've seen a lot of reluctance

14:31Scarlet Fu:What does this mean for OpenAI's ability to recruit, you know, tech folks from other firms in Silicon Valley? Yeah, I do think it's a bit of a reputational risk right now. I think until there's more clarity on what's going to happen with this lawsuit. And again, this is this is not the first time OpenAI has been sued. So I think there's been a lot of litigation that's attached to it. So I think it probably does over the near term until there's more clarity. it probably does put a bit of a dampening impact on its ability to go out there and recruit some of the biggest names that it may want. Stay with us.

15:05Scarlet Fu:More from Bloomberg Intelligence coming up after this. Support for the show comes from Public.com. If you're actively involved in your portfolio, you probably catch yourself repeating the same actions. Buying the dip, manually sweeping idle cash, putting on a hedge. On Public, you can now create AI agents that handle all these tasks on your behalf. Just describe what you want to do in plain English, like if the VIX hits 25, buy a put option on the S &P 500. Or if my cash balance goes above$20 ,000, move the excess into my direct index. You approve the workflow and your agent handles the rest. Monitoring the market, watching for your conditions and executing your strategies exactly as defined.

15:48An investing platform driven by your intent, not just your clicks. You can also get full read and write access to your account via the public API. Go to public.com slash market and fund your account in five minutes or less. That's public.com slash market.

16:05Scarlet Fu:Paid for by Public Investing. Brokered services by Open to the Public Investing, Inc., member FINRA and SIPC. Advisory services by Public Advisors, LLC, SEC Registered Advisor. Complete disclosures available at public.com slash disclosures. The thing about AI for business, it may not automatically fit the way your business works. At IBM, we've seen this firsthand. But by embedding AI across HR, IT, and procurement processes, we've reduced costs by millions, slash repetitive tasks, and freed thousands of hours for strategic work. Now we're helping companies get smarter by putting AI where it actually pays off, deep in the work that moves the business.

16:46Scarlet Fu:Let's create smarter business. IBM. When you own your own business, you own every decision. Now own the card that rewards you for it. The Chase Sapphire Reserve for Business card brings the best Sapphire Reserve benefits to business owners who expect hardworking rewards. Designed to meet the needs of business owners at scale, this pay-in-full card elevates your travel experience and offers premium benefits and value toward business services that will take your business to the next level. Fuel your business and maximize rewards with 8x points on all purchases through Chase Travel, 3x points on social media and search engine advertising, annual partnership credits, and more.

17:24Scarlet Fu:Make every journey more rewarding with a$300 annual travel credit and access to a network of airport lounges, whether you're looking for pre-flight productivity or time to rest and recharge. Chase Sapphire Reserve for Business. It's the card that gives back all you put in. Learn more at chase.com forward slash reserve business. Chase for business. Make more of what's yours. Accounts subject to credit approval. Restrictions and limitations apply. Cards are issued by JPMorgan Chase Bank N.A., member FDIC. 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.

18:05Scarlet Fu:Listen on demand wherever you get your podcasts or watch us live on YouTube. When you think about the charging of the EV business, I think of it as still an industry that's in its infancy, still growing, trying to add capacity. So when I read this, it kind of surprised me. There has been an increasing number of charging network acquisitions in Europe. Again, I wasn't expecting to see that from this industry at this stage of its life cycle. Ryan Fisher, EV charging team leader for Bloomberg BNEF, joins us from London. So, So, Ryan, we're seeing some consolidation in Europe of the charging business.

18:40What's going on there? Yeah, so thanks, Paul. What we've started to see is a numerous amount of acquisitions that you've kind of got well-funded players. And then you've got a lot of smaller businesses who are trying to stay afloat. And they're starting to be acquired. You've also seen some mergers. There's a merger just happened last week between a couple of the biggest providers, Mer and Avini in largely Scandinavia. people that got some German assets, I think, that are also going to be transferred in that deal, which makes them the biggest company. So more and more of them thinking about scale as an opportunity.

19:12And obviously, you said kind of a surprise, maybe a difference between what you're seeing in Europe and what you're seeing in the US within these markets as well. So give us a sense of kind of where the charging network in Europe, I don't know if you can call it Europe writ large, or if it's country by country. But again, I would say here in the US, I mean, just barely a blip on the screen. Talk to us about in your world over in Europe. Yeah, yeah. So there's hundreds of thousands of these things been installed. And often the question is like, oh, I can't buy an EV. There's no chargers. Well, actually, they've been installed at such a pace that utilization has been a bit of a problem for some of these companies and then the revenues because there's just so many chargers for people to choose.

19:50So then it becomes like if you're buying a network, like what's actually considered a good network? And some of them have more chargers at the site. Some of them have these really fast power chargers. And that makes a big difference to whether you want to buy it as well as fundamentally, do they actually own the land? And what's the right to expand? And have you got good grid connections? And all of this is coming into play when somebody is fundamentally assessing, like, do I want to buy this company or not? When you think about the U.S., it's just so heavily dominated by Tesla. And I think then you've also got all of the policy environment, which has affected people's confidence to roll things out.

20:26They've got rid of the Nevi grants. Obviously, they've got rid of the grants for the actual buying of the vehicles as well. But we are seeing pockets of companies raising money and rolling out and having a bit more interest in preparation for what obviously is a growing fleet. Like sales might be consistent, but the actual fleet of electric vehicles is therefore still growing and it's somewhat monopolistic. I alluded to a point about Tesla and I'll just remake that one. So on market share, they own a big portion of the market. If you want to go through a fast charging, you're probably going to turn up at a Tesla in the U.S.

20:58But weirdly, that actually is having some consequences for the market because a lot of the cars are changing to new 800-volt platforms. And this means that you can get super fast charging rates that can get you like 5, 10 minutes and you're on the move. Whereas the Tesla chargers don't have that higher voltage availability. They've sort of announced it with these V4 kind of boxes. But actually, they've only installed like 10 sites with them. So in a weird way, if you're buying one of these fancy EVs in the US, the kind of new platforms, the BMWs and things like that, you can't actually turn up at the Tesla site and get the advertised charging power that they were saying.

21:36So Tesla has been the leader. But in some ways, having such market share and not having the latest technology is a bit of a problem. Yeah, I mean, that's there's one of many here in the US, as you were mentioning here. But how about in Europe? I've heard that or I've seen that some of the fuel distribution centers, the gas stations, the BPs, the shells of the world, how are they adapting to EVs and charging? Yeah, they were both pretty big, as they were in everything energy transition. And I'd say they pulled back. You've seen that across all energy transition things from any of these oil majors.

22:10I'd say they still have activities, though. Total is doing a lot in the energy transition at large, but also pretty active. The same as BP and Shell. And they're more focused on forecourts. But these companies have quite a big set of offerings for people in the fleet sector. So they want to keep that so you can, I don't know, fill up your company's vehicles with petrol and diesel, but you can fill them up with electricity as well. So they've been involved in the sector pretty heavily. but it can be a little bit difficult. Quite a lot of sites might be franchised across the network. So how do you convert them?

22:45And then fundamentally, there's just quite a lot of competition. Before, you could only fill up your vehicle at a fuel station. Now you can fill up your vehicle if you've got an electric one at home. So that cuts the market. Then you've got all of these supermarkets and stuff coming in. So in the US, I think Walmart has rolled out pretty heavily. A good example in the UK is Sainsbury's, which is a pretty big supermarket over here. And what they've managed to do is say, OK, something like 25 percent of EVs that turn up are now actually charging on the Sainsbury sites and they offer pretty cheap charging.