Dell Raises AI Server Sales Outlook While HP Cuts Jobs

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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.

1:22This is Bloomberg Tech. Coming up, we zero in on tech earnings with Dell raising its AI server shipment outlook. while HP announces job cuts. Plus, Warner Brothers Discovery asking bidders for sweetened offers by December 1st as it explores options for a sale. And NVIDIA in focus as doubts over the company's AI chip dominance are growing. I'm Jim Senevic in New York, in for Caroline Hyde and Ed Ludlow. Let's get a check on markets right now. U.S. stocks advancing as expectations for an interest rate cut at the Fed's next meeting are helping to fuel gains before the Thanksgiving break. NASDAQ 100 up right now And look at the last three days, up 4%.

2:01This after both the S &P 500 and NASDAQ 100 moved away from their last record highs in late October. The NASDAQ 100 down about, let's say, 3.6 % from that all-time high. The S &P 500, though, down just a little over 1%. We're also looking at tech earnings with Dell and HP. Dell raising its annual projections for the AI server market thanks to sustained demand for machines needed in the current data boom. Meanwhile, HP stock under pressure, down 2.2 % right now. The company announced 4 ,000 to 6 ,000 job cuts over the next couple of years by using more AI tools. For more on HP and Dell, let's bring in Bloomberg's Dina Bass.

2:39Dina joins us here in New York. I want to start with HP. 4 ,000 to 6 ,000 jobs sounds like a lot. And indeed, if we go to the 6 ,000, it's like 10 % of the company's workforce. But that's through 2028 fiscal year. So we're a few years away from that. And if it's AI that they're going to replace these people with, AI can change a lot between now and then. Sure. And to be clear, HP did a similar magnitude job cut over the last three years. They just finished it. They have these kind of periodic efficiency plans, I guess. What's new about this one is the idea is that they are going to use AI tools and models to do things like product development, customer service, sales.

3:18And that's where you're getting these job cuts. And at the same time, even though they're going to be saving money that way, they said, they actually came in below on their guide for next year for fiscal year profit. And that was because of a completely different issue around memory price increases. So you had both. You had these job cuts. And it's not making the bottom line look where people expected it would come in. Well, speaking of those price increases, that also hitting Dell. So let's talk a little bit about Dell. Dell is contending with, despite strong demand, how is it going to make its AI server business more profitable?

3:55So the AI server business, and it's basically, I know you're going to be talking about GPUs in a minute, those are the servers that have GPUs that go into these AI data centers, and the demand for them has been very high for Dell and other makers of them. The problem is that in order to get some of these deals and in order to deploy some of those servers, Dell is basically incurring more significant costs. What they're trying to do now is pull back from that a little bit to widen the profit margin in that business. They succeeded in the last quarter, they told me, because they were able to serve a more diverse group of customers.

4:29So some of those were a better, more profitable sets of deals. Yeah, I think these rising costs are going to be a theme throughout the next year as well. Dina, always good to see you. Welcome back to New York. Happy Thanksgiving. As well. Well, let's bring in now and talk NVIDIA because NVIDIA shares over the last five days taken a hit down more than 3%. The stock facing pressures as AI chip rivals gain ground, leaving investors wondering if its dominance can be sustained. Bloomberg's Ryan Vestelica joins us for more. So, Ryan, I think the big question that investors have after seeing what happened with Alphabet and this report in the information earlier this week is, can Google's TPUs actually compete with the GPUs from NVIDIA?

5:09What are you hearing? Hey, good morning. Thanks for having me. So I would say that while there are a lot of differences between NVIDIA's chips and Alphabets, Alphabets are designed for one specific purpose, which is working with AI workloads in the cloud, which is really the dominant use case for a lot of the AI infrastructure that's being done right now. So there is certainly a very big market for the TPU chips, as we saw with the Anthropic deal that was announced a couple of weeks ago and with this report with Meta. So that opens up potentially a huge new market for Alphabet, and it does put NVIDIA's market share under a little bit of pressure.

5:51Now, this is still very early days, and it's not like Alphabet is out there selling chips to people in the same way that NVIDIA is. But certainly people are reassessing what our market share is going to look like over the coming years. And if NVIDIA's is a lot smaller than previously expected, what does that mean for the stock? What does that mean for the valuation? What does that mean for its expected growth rates going forward? Yeah, I mean, the analyst community, though, at this point, even investors may be a little concerned. But the analyst community, they've still got buys on this stock.

6:24I mean, there's only one analyst who's tracked by Bloomberg, Jay Goldberg over at Seaport, who has a sell on NVIDIA. Is he changing his tune? Are these analysts changing their tune? No. In fact, I spoke with him yesterday and he said he is more negative on NVIDIA now than he was a couple of weeks ago. I would say that the new concerns about custom silicon and new rising competition for NVIDIA, this comes at a time when people are increasingly questioning the AI trade. There is a lot of debate right now about the amount of spending going on. How durable is this going to be? How sustainable? What kind of returns are companies seeing on this?

7:00And if they're not seeing big returns on this investment, are they going to pull back on their AI spending going forward? NVIDIA is really at the heart of a lot of AI debates right now. And then you add in this new one where what does their market share look like? What about competition? That is just another reason for people to be skeptical. Although analysts so far are holding firm and remain pretty positive. Yeah, NVIDIA shares up 32 % over the last year. Bloomberg's Ryan Vestelica. Happy Thanksgiving, Ryan. Thanks for joining us. Well, let's get more on the wider tech markets. Nancy Tangler, CEO and CIO of Laffer Tangler Investments.

7:35And she says there's more room to run for AI stocks, writing, quote, since we are in the early stages of the AI adoption and investment cycle, we believe the providers of the technology, the picks and shovels, will continue to produce enviable earnings growth. Nancy joins us now. What's a more promising pick and or shovel? Is it Alphabet or is it NVIDIA, Nancy? Thanks for having me, Tim. You know, I'm actually going to go. We own them both. and I'm going to go with NVIDIA. And the reason for that is I think analysts are forgetting or investors are not focusing on CUDA, which is the software system that developers use around the NVIDIA chips, Blackwell, and then soon to be Rubin.

8:20And I think it's analogous to Apple and the App Store. So, you know, it was just a handset company when we were buying it. I was told that every time I talked about it on the air, but it was really the App Store and services that we were buying. And this, I think, is analogous to that. If they lose, you know, if they go from 80 percent to 79 percent market share, I can live with that because I think the earnings growth is going to continue. And let's not forget AMD is in the wings. And we also own that and Broadcom, which is developing the TPUs. So I think there's a lot of ways to make money in this trade.

8:55At what point do we move beyond the so-called picks and shovels of the AI trade and start to see the increase in, I don't know, efficiency, the increase in productivity in non-technology companies? So we listen to the companies, Tim, and let me give you one great example. We've talked about it before, but Walmart is our poster child of our investing theme, which is an old economy company that has pivoted to the new technologies and is now going to be listed on the NASDAQ, let's remember. So they had 6 % revenue growth, pretty good for Walmart, but 27 % in e-commerce. That was also interesting to me.

9:32But what really got my attention was that delivery speeds were up 35 % of digital orders arriving in under three hours. They're also using automation in the fulfillment center. So 50 % of their orders are fulfilled automatically via robot. We own the company that did all that for them, Symbotic. So that's a second or maybe even third derivative player in AI. So I think it's broadening out. We're hearing it from all across. Raytheon talked about how they were utilizing AI in order to improve supply log jams. That's a stock we own in TGLR. All of these we own there, actually. So I think it's important to start listening to the The company's paying attention to who's seeing margin expansion.

10:22And we're definitely seeing it at the company level. Nancy, if we were talking a week ago, I think we'd have started our conversation focused on the idea of a bubble, maybe concerns about CapEx spending, the hand-wringing that we saw last week over some of these valuations that has seemed to recede just a little bit this week. But you've been through multiple cycles. And I'm wondering how you view the whole AI bubble talk right now. compared to, let's say, the tech boom of the late 90s and bust as well? Well, I wish I was as clever as Ed Yardini because he coined this phrase, too. But I wrote a piece called The Bubble and Bubble Talk.

10:59And I think it's important to note a couple of things. In the 90s, from 96 to 2000, the growth stocks whose valuations were skyrocketing were actually experiencing contracting earnings. We're not seeing that now. The growth stocks in this particular technological revolution are experiencing about 20 % growth on average. CapEx was also something that was healthy and then accelerated through the entire decade. We're just now starting to see that ramp up in the last couple of years. So I think it's important. And then these companies have fortress balance sheets and all this, I don't want to say, I am going to say nonsense around Oracle.

11:41I think it's important to remember that this is a company that's always had a ton of debt. Debt to equity was 427 % at the end of the quarter. That's down from 780 % year over year. This is all before they issued the$18 billion in debt for the open AI data center build out. This company has a history of using debt, but the PPE is up 130 % year over year, while debt is only up nine. So debt to equity will decline. So you're not concerned at all about the price of five-year CDSs for Oracle rising to the highest going back to October 2022? That's not concerning you? It is. It's a pair trade, though.

12:25What concerns me more is the concentration in the market around open AI. And I think that has to sort itself out. Now, Satya Nadella would tell you that data centers are fungible. If we don't use it for this, we'll use it for that. And I think that's certainly true. But I am concerned about the spend. I mean, that's a company with a burn rate, right? Open AI. Yeah. Ten billion in revenues and trillions in spend. Oracle has other businesses. They can change, shift directions, use data centers for cloud computing. I don't like the pair trade, but I think we were added to it a couple of days ago.

13:01And I think from here, we're going to be talking about fundamentals instead of, it became the narrative stock for this bubble is overdone. We're not in a bubble. Yeah, those September highs that we saw for Oracle. I mean, we're down significantly from those, but still up 7.8 % over the last year and about 20 % so far this year. Nancy Tangler of Laffer Tangler Investments, always good to see you. Happy Thanksgiving. Well, Uber's going to begin offering driverless trips in WeRide vehicles around parts of Abu Dhabi. The new milestone follows the two companies first launching a ride service with safety operators behind the wheel almost a year ago.

13:37They intend to expand their driverless vehicle operating territory in Abu Dhabi and extend their partnership to Dubai soon. Well, coming up, holiday shopping season is here, and with it, new online scams. We're going to discuss what to look out for and how to protect yourself next. This is Bloomberg Tech.

14:07Holiday shopping sales seem to start earlier and earlier, but this year's Black Friday and Cyber Monday deals might not be as steep. Bloomberg Opinion columnist Andrea Feldstedt has a piece out, and she writes that tariffs will cause retailers to offer smaller discounts. In the quest for deals, shoppers may be tempted to turn to new websites or click ads for deals that turn out to be scams. Teresa Payton is former White House CIO and current CEO of the cybersecurity firm Fortilus Solutions. She joins us for more. Good to have you on the program. You know, I'm always thinking that we're, in this day and age, we can easily become victims of fraud or victims of scams, but why does it happen with increased frequency during heavy shopping seasons like Black Friday?

14:49Well, we're all busy, and many of us are looking for extra deals and extra bargains this year, like you mentioned earlier, because of the tariffs. And with that, we're getting bombarded on social media with things that look really cool and hot. And we want to make sure we get the deal. We get it quickly before they run out. And don't forget, criminals and fraudsters now have AI as a tool at their fingertips. And so it's making it very cost effective for them to target you and me while we do our holiday shopping. Okay, so I want to get to what we can do to protect ourselves. But before we do that, Teresa, how are they using AI to target us?

15:27What does that look like and how could that look differently than the scams that we're used to? Yeah, so they're basically reverse engineering websites that you or I might go to that are legitimate websites. And then they're doing things like a play on the name and then setting up imposter social media accounts. And basically jumping into your feed, then you follow this great deal. And then the next thing you know, you're buying from a scammer or a fraudster and not from the actual website that you think you're visiting. They're also spitting up businesses, using bots to actually give themselves great reviews.

16:01So it all looks like it's on the up and up. But just a little bit of diligence and a little bit of research, you'll be able to figure out and spot the scam sites and the fraud sites pretty easily. OK, you mentioned diligence and research. You shared with our team reputation checkers for websites. I'd never actually even heard of these or used them before. Should these be part of our diet when it comes to healthy shopping? Yeah, I love the fact that you brought this up because I personally use these websites, especially if I'm going to a site I've never ordered from before, even if I have a friend or a relative tell me they've used this site.

16:36So things like Scam Advisor, URL Void, Trustpilot, and I will post these on my social media accounts. These websites will actually tell you how old the domain name is. It could be legitimately a brand new business, or it might be a scammer fraudster taking advantage of holidays. So it'll also tell you whether or not security companies or consumers have reported issues with these sites. And of course, old school still rules. The Better Business Bureau is a great place to check on a domain name as well. Okay, so I think that, you know, for me at least, one area that I always think of as a backstop is the way I pay.

17:16And I'm only using credit cards on these websites because I feel like if I have an issue, then I can just call my credit card company and they can protect me. Are people using other payment solutions that might not have that same level of protection? Yeah, this is the tough part. And I agree with you. I only use a credit card when I am shopping online. I do not use my debit card. I don't use gift cards to shop online. What's happening is a lot of these scam sites and fraud sites will say things like, we only accept Venmo or Zelle. We only accept gift cards. We only accept wire transfers. So they might say, well, for this to work, we're international.

18:00We have to have a wire transfer. These are red flags. When a merchant tells you they will only accept those forms of payment and they won't accept credit card, chances are you're dealing with a fraudster because they know the credit card companies will actually come after them and shut them down. So they want you to use these other forms of payment. Other red flags. Maybe a price is too good to be true. Yeah. So if you see things like 70 to 90 % off during the holiday season, that is typically a red flag. Now, unless you're on sort of a household name website that you navigated to on your own, you didn't follow a link in social media, you didn't follow a link in an email or a text.

18:42So if it's too good to be true, also look at that domain name. When in doubt, there's a website called Virustotal.com. You can use it for free. copy and paste that website in there, and it'll actually evaluate the URL and tell you whether or not you might be dealing with a scam site. Okay, Teresa, before we let you go, if you do somehow become a victim of not necessarily a cyber attack, but maybe an attack on your identity or some sort of scam, what should be the first thing you do? Yeah, the first thing you do is you want to call your bank. So whatever payment method you use, you need to lock down your life.

19:17The next thing to think about is actually you can report it at the FBI at IC3.gov and the FTC at FTC.gov. But also there is a nonprofit resource that is free to use called the Identity Resource Theft Center. It's a great nonprofit. I've referred people there and they will actually give you a checklist. You can talk to a real human being and work on getting your peace of mind and your identity back. Teresa Payton, CEO of Fortalist Solutions. Thank you so much for joining us. Coming up, the U.S. faces a potential electricity crisis due to a surge in demand to power AI data centers. We've got the details next.

19:56This is Bloomberg Tech.

20:11Well, today we take a look at America's power system. It was already under stress even before the AI boom. Now with AI data centers coming online, a new Schneider Electric Analysis foresees the U.S. facing a potential electricity crisis. This is the surge in demand comes at odds with the reality of aged and vulnerable grids. Bloomberg's ESG reporter Alistair Marsh joins us from No More. Alistair, how does electricity crisis manifest in the United States? Certainly higher bills is part of that, but are we talking rolling blackouts here for many Americans? Well, essentially, the Schneider Electric data shows that the massive amount of power demand, so power demand in the US has basically been flat for about two decades.

20:55And all of a sudden, with the advent of AI or the kind of the vast AI acceleration that we're seeing in the US, with the billions of dollars of Capex being put to work and the mass build out of data centers, you suddenly have this surge in demand. Add to that increased electrification, add to that on-shoring of manufacturing, and you suddenly have this sort of crisis moment where the energy infrastructure in the US has not been invested in and not been built out particularly aggressively for a period meets a very aggressive build out of AI. And so we're going to reach, according to the Schneider data, we're going to reach a crunch point in about three years, in 2028.

21:33That's the moment they say that the supply available on the system will no longer be able to meet demand unless we start eating into emergency reserves of power, which are saved for moments of extreme weather or cyber attacks and so forth, all of which means that the grid is basically going to become under increased strain and going to be increasingly vulnerable. You cover ESG for Bloomberg News. You're joining us from London. I'm not going to make your way in on the politics of infrastructure spending here in the United States, but it's very political. So much spending is. Is there foreseeably a way that even if the U.S.

22:06had the money, they could reliably upgrade the grid's weak points in enough time to be ready for this surge? The short answer is no. I mean, you're kind to let me not weigh into U.S. politics, but there is both a political issue here. I mean, you see it with recently power prices are on the ballot in New Jersey, and they'll be increasingly on the ballot, and that could turn against the AI build-out if there's a sort of political groundswell against that. But also there's a geopolitical element here where the US is in a race with China to be kind of the AI superpower. And China has, while you could argue that the US has the advantage in terms of tech and chips, actually China has a structural advantage with cheaper, abundant power.

22:54And that might be, according to some analysts, something that wins out in the long run. And so what Schneider is saying here, to go back to actually answer your question, is that, no, you can't fix this in the three-year period because you can't build enough generation and enough transmission in that period because most of those projects would take 10 years to build. Therefore, you need to find ways at the margin, what are sometimes called grid-enhancing technologies, battery storage, microgrids, other things that can build out extra capacity that don't require those large, long infrastructure build-outs that just won't be ready in time.

23:30Bloomberg's Alistair Marsh joining us from London. And Alistair mentioned the political implications of this. Do check out Bloomberg Opinion. And Conor Sen had an interesting story just in the last few days about what happened in Georgia. Hey, coming up next, we're going to speak with CFRA senior equity analyst Angela Zeno as investors begin to question longevity of the AI trade. This is Bloomberg Tech.