AMD Forecast Fails to Impress Investors

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1:11Bloomberg Tech is live from coast to coast with Caroline Hyde in New York and Ed Ludlow in San Francisco. This is Bloomberg Tech coming up. AMD shares sink after a sales forecast that underwhelms investors. The chipmaker perhaps not making the AI inroads some on Wall Street had hoped for. Plus, the sell-off continues across tech markets as fears of AI disruption take hold, following Anthropik's new automation model. And Bloomberg reports NVIDIA is nearing a deal to invest$20 billion in OpenAI, with the AI company looking to raise up to$100 billion in its new funding round. AMD is ugly. Right now, the stock down 15%.

1:56It is on track for its biggest drop since October of 2018. That is how severe this sell-off is. Let's get to the numbers. It's projecting sales in the period roughly$9.8 billion plus or minus$300 billion. That was above consensus estimates. But go into your Bloomberg terminal and you'll see at the high end of the range's forecast, many expected sales to be$10 billion anyway. Then there's the China issue. They had China revenues, but it weighed on margins. AMD's results, let's react. Kunjan Sabani of Bloomberg Intelligence, who in his React piece, in his research, you talk about the impact of China.

2:35Good. We recognize some revenues. It impacted margins. You talk about the CPU, GPU ramp. That's not coming until the second half of the year. Take it from there. Yeah, I mean, fundamentally, there was nothing wrong in this report. is just when you take out the China revenues, the 390 million and the 100 million for the guide, the beat magnitude was really modest and that didn't hit at par with the lofty expectations. Again, most of this was known. So I'm very surprised to see a stock reaction that we're seeing today. So the surprise, what in terms of what enthusiasm had been baked in that shouldn't have been, Kunjan?

3:11How far had the market moved past already the bullish tone that we get time and time again from Lisa Su? Yeah, it's about now waiting about the next GPU inflection point, which we knew is not going to happen in this quarter or next quarter. It is for second half 26. Remember, there has also been that noise in the market around delays with their ramp of the 450 series. None of this was shown in this report. I mean, we don't expect significant upside right now because most of their customers are really waiting to pick up that server-level Helios rack solution. Right. Also, just on dollar terms, right?

3:46Sequential decline in revenues, maybe. And no one wants to hear that, right? And we'll wait until the rest of the year. Second half of the year can mean June. It can mean December. Who knows? A big piece of M &A in your industry, Texas Instruments, buying Silicon Labs,$7.5 billion. What do we need to know about this in the analog space? Yeah, this is surprising. The last time they did a deal like this was in 2011. Strategically, this fits well. They add a missing piece, which was wireless connectivity in TI's portfolio. But more important, the implications are financially. The key thing you remember here, Texas Instruments trades on free cash deliverability.

4:20So this management has said will not impact that free cash flow, will not impact their dividend, and they'll be able to absorb the capacity in the capex that they've spent over the last three to five years. Kunjan Sfani, Bloomberg Intelligence and all things chip. We have breaking news on Cerebrass. Cerebrass Systems raising a$1 billion Series H at a$23 billion valuation. This is a company that we've been tracking closely. Will they, won't they IPO? Well, right now they're raising around a billion dollars at a premium valuation of$23 billion. We'll get more, Caro, as we get that throughout this day and this week.

4:56There is plenty more news. Hit me with it. There is, because those fears around AI disruption, they're continuing. to ripple through the markets at the moment, Ed. Anthropic, it accelerated the sell-off in software stocks after it rolled out that new AI automation tool. Remember, Gequities reporter Carmen Reinecke has been following this story. I mean, the numbers are gargantuan. I think it's something like$2 trillion has been wiped off that Goldman Sachs software index more broadly since its highs. But what can stop the rot right now? Because this has gone global. You know, that's such a great question.

5:26And we're really seeing such a broad sort of reaction to the software sell-up. I mean, we know that software has been beaten down. We're seeing more, you know, sort of stocks kind of join in the fray off of this latest anthropic tool, but it's also kind of spreading into the hardware stocks. We're seeing NVIDIA down, you know, Google down. Interestingly, Microsoft is up a little bit today, sort of rebounding, I think, from a sell-off from its earnings report. But it has spread even into the European markets and others as well. So it looks a little bit like a washout. I think I have heard investors start to say that maybe this is a place to start nibbling.

6:00You know, there could be really a rally if software sells off too much. You know, many stocks in the index are in oversold territory. So we could see, you know, some rebound, some reinvigoration in that trade. I think investors are really just sort of thinking, is it worth trying to catch a falling knife? Carmen, bring us some of the action of today, Wednesday's session, right? Because to be fair to our audience, this is a conversation we had yesterday. It is a multi-day story that's playing out. What's new in the market this morning and what are we looking for next? Yeah, I think that there are multiple things going on here.

6:34So we're not only seeing this pressure on software, but we've had a couple of few earnings reports that have stumbled that I think are adding. So Microsoft up a little bit today, but that report injected some jitters into the market and also AMD as well. You know, it really showed that even if you have a pretty solid guidance, it might just not be enough for investors to continue to buy your stock. So we're seeing that as well. And, you know, coming up, we have Google Alphabet reporting tonight. We have Amazon tomorrow. So there are just a lot of catalysts that are coming into the market right now that are shaking investors' confidence in the sector.

7:09Of course, many pinpointed Anthropics legal offering, but we saw Google out with its gaming offering that had seen a lot of hit to some of the gaming software names. But I'm also interested in we're a public market identifying show right now, but private markets, in particular, the debt markets, we're seeing them roiled as well. And it's impacting certain PE houses. Exactly. Yeah. So there's just been a major sell out there as well. This I mean, this idea of contagion, I think, is huge. Right. And the pain here from software spreading into all these other parts, not just equities, is really prescient right now.

7:45So until there's sort of this idea that there can be a rebound, I think it's likely that we see that continue to spread and investors sort of continue to question what's next for this sector, especially if AI is going to eat the lunch of these companies. And by the way, guys, brace. Earnings is still happening, right? So, like, there's all this news flow and there's market moves on a sort of macro concern about AI labs eating the lunch of software companies. Alphabet's going to come out and it's going to tell us about how it's doing. I mean, how does that function into your week, fit into your week, sorry, Carmen, the earnings story?

8:18I mean, they're going to be huge. I think the thing that we're looking at the most for Alphabet and Amazon are these cloud numbers. And that's going to be really important because that's where we saw Microsoft stumble. So, that's what I'm going to be really laser focused on to see. I mean, obviously, all of these businesses are different. there are other components at play with both Alphabet and Amazon. But the cloud figure is going to be absolutely the most important thing and could really move these stocks in either direction going forward. Bloomberg has come, Reinecke, all over the software space.

8:50Thank you very much. Earnings again, shares of Uber. This is so interesting. We're down 3 % now. In the pre-market, we kind of swung to a gain. We've been down like 9 % in the pre-market. I'd call this a mixed bag. The company posted a weak profit outlook and announced a new CFO with a focus on a robo-taxi future and new markets for robo-taxi. Bloomberg's Natalie Lung covers consumer apps, the gig economy, and increasingly robo-taxi. Where do you want to start? Let's go with the financials, the earnings. They gave this adjusted EPS forecast, EBITDA forecast that appeared light. But actually, management had explained some of that already.

9:28Just explain. Yes. So the APS outlook for first quarter came in a bit light. That could be a result of a lot of their new product initiatives. Let's say the low-cost shuttle product at airports and even the high-end premium reserved rides at airports. Sort of these new products not yet yielding the return that they're hoping to see. But they're still hoping that would sort of expand towards this year. That said, like the fundamentals, the demand, underlying demand, especially in the U.S., where they have some of their most profitable markets, is very healthy. They think growth will accelerate there as some of the risks we saw last year, like high insurance costs, they think that will sort of abate this year.

10:18Yeah, gross bookings could be up to$53.5 billion for the current fiscal quarter, Natalie. Dara Cosmoshahi merely trying to talk up some of the healthier pricing. What about this new CFO? What about the focus on RoboTaxi from him? It's interesting. They promoted Pallaji Krishnamurti to the role of CFO. He's one of the more outspoken autonomous bulls. Among the leadership, he's always on X, defending Uber's AV strategy. And so we'll definitely see Uber double down on that sort of narrative, trying to combat what it calls misconceptions among Wall Street bears on how it's going to facilitate and support the EV ecosystem rather than completely be disrupted by rivals like Tesla or Waymo.

11:06And Waymo they partner with often as well. Natalie Leung, we appreciate the breakdown and talking of EVs. The Senate Committee on Commerce, Science and Transportation is holding a hearing on the future of self-driving cars right now to assess existing autonomous vehicle regulations. Of course, this is as the race with China to lead the future of transportation technology heats up. witnesses are from Tesla, from Waymo and others. They're participating. If you want to follow along, just go to LiveGo on the Bloomberg Terminal. Ed. That's Tesla's Lars Moravi on the screen right there. We'll track the headlines.

11:36Coming up, Jessica Malujan from the Competitive Enterprise Institute joins us to talk about antitrust concerns from a Netflix Warner Brothers tie-up. We have more on that in a moment. AMD sell-off accelerated in the last few minutes at one point down 16 percent, already on track for its biggest declined since October of 2018. A forecast for sales in the current period that at the high end of estimates was disappointing, but also a sequential drop in revenues. And we are waiting on this big GPU and server design moment that isn't coming until the second half of this year. It's one we're going to watch for the hour.

12:10This is Bloomberg Tech.

12:21This deal keeps one of the most iconic Hollywood studios healthy and competitive. Warner and Netflix together will create value for consumers, more opportunities for the creative community, and more American jobs. Netflix co-CEO Ted Sarandos there testifying before lawmakers about the company's plan to buy Warner Brothers streaming and studio divisions. Sarandos also said yesterday that the deal would give streaming consumers more for less, noting that 80 % of Netflix subscribers also pay for HBO Max, currently owned by Warner Brothers. Let's talk through the antitrust concerns with Jessica Malugian, Director of the Center of Technology and Innovation at the Competitive Enterprise Institute.

12:59Jessica, you've actually testified before Congress about streaming competition in previous times. So what did you make of Ted Sarandos and his argument that this is going to give more consumers more to them for less? You know, I think you can buy it. There's so much overlap in people who maintain a Netflix subscription and also an HBO subscription. The companies have talked about how they would be willing to combine those and offer those at a lower price. I think he said as much in the hearing yesterday. So there are competitive concerns that remain for some people. But I think certainly there are efficiencies and overlap because most of this merger is a vertical merger.

13:38There's pieces that one company doesn't have that the other one does. They're going to fit them together. And that could be substantial cost savings that one hopes get passed along to consumers. What was interesting amid the politicking that goes on on Capitol Hill in these sorts of hearings, the time and time again iteration we hear from our guests is it all depends on how the market is defined. Now, how are you defining this market? Is, for example, YouTube the competitor or is it just other streaming companies? You know, I tend to come at it from how do consumers actually use these technologies?

14:10What would they reach for as a substitute if Netflix weren't there or Warner Brothers streaming services weren't there? How do we actually behave, I think, is the most common sense way to approach that. And I think in the way that we see users sit down, they plop on their couch, they go to the TV, what do they put on? And it's very difficult to exclude YouTube, YouTube TV from that because that's how people use it. That's the way we're living now. So I think if regulators are trying to get to the closest version of what the real competitive effects are, you have to say, how is this actually happening with consumers and in the market?

14:45And I think it means a more broader definition of the market, which puts them more at a 10 percent market share, roughly, if these companies combined. If you exclude things like YouTube and you want things that look just exactly like Netflix does, that's how you get to your 30 percent market share mark with triggers, a bunch of stuff in antitrust litigation that would make it more difficult for this merger. Jessica, in antitrust, there is political theater and then there is actual process. What we showed on the screen a few moments ago and are showing now, that's political theater. Doesn't it matter really whether the DOJ takes an action here and that actually regulators are paying attention beyond the senators that pose questions in that room?

15:34No, that's exactly right. There was a lot of political hay made. And I will point out that the Senate doesn't actually have any direct jurisdiction over this merger. That's all happening at the DOJ. And if they follow traditional U.S. antitrust laws, they're going to look at how do we define what the market is so we can think about what the market shares involved are here. And then once you get past all of that, the question becomes on net, generally on balance, what we can predict into the future. Are there potential consumer benefits here to these two companies merging that might outweigh some of the competitive concerns that we heard mentioned yesterday in the hearing?

16:12We've been asking this question consistently. And in a process, it's probably right to ask the same question consistently, which is, is there any past precedent that we can look to that would suggest the outcome of this proposed merger? In the regulatory sense, I don't know. It's, you know, Washington these days is setting precedent every day. But I think in the market, you could look at something like the T-Mobile Sprint merger and say, you know, that took two competitors into being one. But that one bigger, better, stronger competitor was able to make it three big guys on the scene alongside Verizon and AT &T instead of two, which those two individual companies at three and four wouldn't have been able to challenge the big two.

17:00So I think there's precedent in how things actually work in the real world that say a lot of times mergers can be very productive, very good for the economy, for stockholders and for consumers. I think that's probably one of the more recent examples. Consumers are the focus, though, right, in America at least. How are you looking at how other jurisdictions are going to analyze this deal? Because these are global companies. Yeah, they're going to have to go within the U.S. They're going to have to talk to some state attorney generals and they'll have to deal with the DOJ's assessment. But you're absolutely right.

17:34Internationally, the standards are different here in U.S. antitrust law. You know, it's all still the consumer harm standards. So even if there might be some concerns with labor, that's part of the discussion. But really, the lodestar is do consumers benefit from this in terms of maybe lower prices, more innovation, more output? There's lots of things to look at there. But that's not the case, for example, in the EU, where the focus for regulators is much more concerned with the effect on competitors to these companies and not so much just consumers. Now, someone turned down going for the political theater, and it was David Ellison over at Paramount Skydance.

18:12He wasn't there. I'm sure he was tuned in. What do you think it states in terms of him not wanting to go and address his own concerns or indeed whether he'll have his time to be able to discuss what a potential merger looks like with his business rather than that of Netflix? I don't know. He's probably smart to take the opportunity to not have to testify in front of Congress whenever he can. We watched those two executives yesterday earn their paychecks. But, you know, the paramount stuff lingering on the sideline is sort of like a whole different bag of raccoons waiting in the wings to see how that interacts with all of this.

18:46Maybe not at all. If the board doesn't approve this, then that pretty much goes away. But hopefully it doesn't have any effect on what the board decides that they want to sell and they want to do. And hopefully also it doesn't have any impact on the regulatory structure. There's economics to be applied to this. there's consumers to be looked out for. And that should be a very dry, boring story that I hope we'll see sooner rather than later. Jessica Malujan, Director of the Center for Technology and Innovation at the Competitive Enterprise Institute. Thank you very much.

19:29NVIDIA is close to investing$20 billion in OpenAI. That's according to sources. The deal if completed, would be the chip maker's single biggest investment in the chat GPT developer. Both companies declined to comment on Bloomberg's reporting. Let's get the details with AI reporter Shireen Ghaffari. So Jensen Wong has walked in front of a camera quite often recently. Sam Altman has taken to social media and also been on stage. You and I, our best understanding and reporting from sources is that actually for all the noise, this transaction's almost done. What do we need to know? Yes, well, the key part is the$20 billion potential investment in OpenAI's current funding round is almost done.

20:11Now, the bigger question is, what about the overall up to$100 billion commitment that NVIDIA and OpenAI were supposed to agree on? They're still finalizing that agreement. That is still yet to be determined. Shereen, did everything just get very confused? because at no point did it feel like in what was originally$100 billion up to agreement on paper that was going to be in exchange for gigawatts coming online was in any way sort of also bounded around the actual funding round of OpenAI. Can you just make a clear line of what we expected NVIDIA and OpenAI's relationship to be like from that September announcement?

20:52Look, I think what we're seeing in these larger and larger mega funding rounds that both OpenAI, Anthropic, and others are doing, is that strategic investors are increasingly getting involved, right? So we are, you know, it's expected that it's not just going to be VCs, it's also going to be these large tech companies like NVIDIA who are investing in rounds. $20 billion is a lot for NVIDIA, but obviously up to$100 billion is a lot more. When they made that announcement of up to$100 billion, they didn't say over what time period. They said it was a tentative agreement that has yet to be finalized.

21:24And they also said that it would be contingent upon certain milestones around how OpenAI deploys its chips, its compute power. So there's still details to be sorted out. I think what's sort of confusing is when, you know, there's reporting out that the deal has yet to be finalized, that there may be tension. And then at the same time, we see NVIDIA in talks and as we've reported finalizing this very large sum in the current round. And, you know, it can be true that two things are happening at once, right? So there can be a big investment in this current round, and there can be uncertainty about how much more NVIDIA might give in the future and, you know, what milestones OpenAI may or may not hit tied to that larger investment.

22:05Well, excited for the rest of your reporting on the current round and who else is involved. Shereen Ghafari, we thank you very much indeed.

22:18Welcome back to Bloomberg Tech. If you're just joining us, the technology picture in equities, public markets, it's pretty ugly. The earning story is a big part of that. AMD is now on track for its biggest drop since 2017. But there are other stories out there, right, Cara? There are. The software sell-off is a key one. It's continuing with the sector already trailing the S &P 500 as its investors reassess valuations and business models in the face of this rapid advance in AI. Look, the move has been accelerated, of course, by Anthropic, introducing a new AI automation tool, fueling disruption fears across industries.

22:53Now, here to discuss the tech market impact in both software, but also in hardware, is Halen Loven and Portfolio Manager Uday Chiruvu. And Uday, in fact, a lot of the software names that you analyze are bouncing today. I'm looking at Adobe, for example, Microsoft, which is all things to all men. We've also got the likes of SAP that just managed to push up a little bit today. But this software pain, what do you make of it? Look, I think there's a narrative out there that AI is going to eat up software, that AI is going to replace software. And that's dominating right now in the sense that investors are putting high probability to do that.