Micron Warns of Heavy Spending Amid Memory Crunch

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1:36Bloomberg 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. Micron warns of heavy spending on production to meet demand for its memory chips. We'll break down the company's results. Plus Alibaba says it's aiming to generate$100 billion in cloud and AI revenue within the next five years. Even its earnings come under pressure. And Uber and Rivian, they team up with Uber set to invest up to$1.25 billion in Rivian's robo-taxi fleet. We have the details on the deal. But first we have the details on the macro picture. Once again, stocks are under pressure today.

2:14This is because oil pushes high. The conflict intensifying in the Middle East and energy infrastructure under fire. We're currently seeing up 3 % on Brent, but boy, had it spiraled higher earlier. Huge moves in the bond market start to dial down. We've seen 18 basis points on the two-year. Extraordinary moves in the UK on its guilts. Look, we are worried about inflationary pressure and the ability of central banks to make a move. We saw the ECB, the BOE, and of course the Fed yesterday and the Japanese overnight all keep rates on hold, but all of them eyeing whether or not policy moves will be needed in the near term.

2:44move on to individual stocks because Micron, down 2.6 % when the chip maker posted a quadrupling in its revenue, it saw 600 % increase in its earnings per share. However, it is spending big. And we want to get the details with Dina Bass because the stock has run up because of, well, the pricing pressure in memory chips in particular that aids the revenue and the profitability of Micron, but it's going to have to spend to keep up with demand.

3:18Yeah, I mean, you would think that the numbers they posted yesterday would cause the stock to go up. But as you mentioned, there's a bit of an issue here that the reason the stock is going up, as you said, is because we are seeing an almost unprecedented increase in the price of memory. What's gone on is that there's a thing called high bandwidth memory, which is really critical for all of the AI chips that NVIDIA has been talking about this week at its GTC conference. And, you know, while that demand has accelerated, the three makers of that memory, that's Micron, Samsung, and SK Hynix, have been focusing on that product, which is in, you know, short supply.

3:58And they have focused less on other memory products, things like DRAM. So the people that use DRAM, we're talking about PC makers, phone makers, car makers, are paying dramatically higher prices for that. That's good for Micron, and you saw that in those numbers. but Micron and Samsung has also announced extra spending. So they're trying to expand their capital expenditures, build more facilities, make more of this memory, both kinds. And so you're seeing a forecast for higher CapEx this year for a continued increase in CapEx next year. And so investors are trying to wrangle with what all of that means.

4:36Was there a risk when we go to HBM4 in particular and just the desire for more these high bandwidth memory chips in AI accelerators. Is there any risk that NVIDIA uses SK Hynix or Samsung more than Micron? So there have been some reports, you know, the semi-analysis had something out a couple of weeks ago, raising concerns about whether Micron will be, you know, as important to NVIDIA's next Veriruban chips as some of its competitors. in uh micron has said this week that they are now um shipping that hbm4 in volume and they have said that it is designed for verorubin i think we are you know we're waiting to see what that means what exactly nvidia is going to use who and how much but that has been a concern and that has been weighing on the stock at various points even though the stock has been over overall has been up yeah i mean maybe just a bit of profit taking on the day dina bass who has been incredibly busy this week at GTC and now on Micron.

5:37We so appreciate you joining this morning. Let's turn our attention to the Fed chair, Jay Powell, who says that, look, while AI holds long-term promise, its near-term impact may actually be adding to inflation, such as with these chips, as companies ramp up investment. Just take a listen. In the short term, what's happening is we're building data centers everywhere. And that's actually putting pressure on all kinds of goods and services that go into building these things. So that's actually probably pushing inflation up at the margin. That perspective comes as investors continue to pass the real world payoff or not from AI.

6:13For more, Marta Norton in Power, Chief Investment Strategist, joins us. Look, Micron speaks to this inflationary pressure that we see coming from AI, Marta. Just dig in there as to what Fed Chair Powell was saying. How much are we likely to see just bottlenecks being the issue? Well, it is the question or one of the questions of the hour when we think about AI in 2026 and 2027. We know the timeline for the AI build is quite long. We know it's quite expensive and we know that it is creating bottlenecks, not just for memory chips, but also for energy. So there's all these kind of hot pockets that are related to the build.

6:52I don't know if we're looking at a Fed chair or a committee that's saying that this is going to excessively move core inflation. But I think it's coming at an inopportune time when, of course, we also have an oil shock and we have an inflation picture that continues to linger. So I think it's more the sum total of all the different questions from AI, from energy, from lingering inflation that puts us in the position we're in today. Go to the oil shock, Marta. Go to the conflict with the Middle East and what that means for investor demand right now. Well, it's so interesting right now because Powell couched his comments yesterday around inflation uncertainty by also noting that typically wisdom would suggest that you look through an oil price shock because it's not a permanent change in inflation.

7:41And in fact, when you look at the summary of economic projections yesterday, yes, the committee moved inflation expectations higher for this year. But then the expectation, and of course, these have a wide range of outcomes around them, but the expectations for next year weren't really that much higher than they already were. And so that would reflect this idea that we're looking at a near-term disruption, but not necessarily longer term. But of course, the jury's out. We're seeing destruction of energy infrastructure in real time. And that's one of those tipping variables that could put us in a much more difficult position from an energy and oil price shock perspective.

8:20I mean, boy, does it put a difficult position on Asia and Europe, far more so than the U.S. in particular. It's interesting that we have a meeting between the Japanese leader and the United States today. And we are expecting actually nuclear deals to be announced from that. But how are you seeing, in particular, a long-term change in geopolitics and what that means more ultimately for investor risk-on attitude? Well, I mean, the observation that this is a very different scenario for the U.S. versus the rest of the world is spot on because, of course, the U.S. is the world's largest producer of natural gas and of oil.

8:57That doesn't necessarily shelter it from all shocks on the oil front. It certainly provides protection on the natural gas front. And Asia and Europe are in very different positions. And we're seeing them kind of thread the needle on the geopolitics front. They're not necessarily putting pressure on the U.S. to stop its attacks, but they're certainly not joining in it. And of course, we also have all the new dynamics that were released last year around tariffs. So there does seem to be a shifting of how countries are interrelating to one another. I think one of the things we'll want to watch longer term is what kind of regionalization does this create from how economies operate versus how they've been operating on a much more global scale.

9:36But I don't think we want to jump to conclusions there. There's still a lot to understand about how things are unfolding. Look, I'm going to thread a difficult needle here of how it impacts technology. because there have been stark warnings that if infrastructure is decimated in the Middle East, those pools of capital that have been very important to some of the big foundational modules here in the United States, the AI growth story, has been dependent on Middle Eastern money and that might be diverted to far more immediate concerns, Marta. Is that something you're hearing about? That's a great observation.

10:07It isn't something that I've heard about, but I think it's a very astute topic to raise. I've also heard folks talk a little bit more about the supply chain disruption that could come from AI. If we're looking at places like Taiwan and we're looking at manufacturing capabilities and there's an energy import element there, what can we expect in terms of what that disruption looks like and how does that ultimately play through to AI cost? Again, a lot of the jury is still out, so I don't want to assume too much. But right now we're seeing tech, MAG7, software. We're seeing strength in a lot of those areas.

10:42at least relative to the sell-offs that we're seeing elsewhere. But should we start to see some disruption, both from a funding perspective and from the perspective of the AI supply chain, I think that's something that could at least be a headwind for some of those areas that have been holding up well. Does it, and it might not be your area of expertise, but does it mean anything for the IPO pipeline and the idea that we were set to be having some of the biggest companies, private companies, coming to the market? Well, IPO and M &A, those were areas that people were looking at as being a real source of excitement for 2026 with a lot of momentum building.

11:18Again, I don't want to assume too much on what this geopolitical event means for the broad economy and whether it unhinges it altogether. My base case at the moment, even though we're seeing energy infrastructure getting destroyed in real time, is that this does have a near term end point. We're not necessarily looking at the most severe scenario. So a lot of the trends that were in play, my estimation is that they remain in play, but we're on a pause for the moment. Of course, we have to keep our options open on that front. We do. Martin Norton, a time of uncertainty, and we so appreciate you joining us on it from Empower.

11:52Coming up, Alibaba sets an ambitious$100 billion target for cloud and AI revenue, even as earnings come under pressure. That's next. This is Bloomberg Tech.

12:10Alibaba says it's aiming to generate$100 billion in cloud and AI revenue within the next five years. This is CEO Eddie Wu, really laid out the ambitious target after the company reported a 67 % drop in quarterly earnings alongside some pretty sluggish revenue growth. For more, Bloomberg's Asia Stocks reporter, who's here in New York for us, Hyukyung Lee. Hyukyung, why the pressure on the profitability in particular? Yeah, I think that's a really good question that all the investors are asking. And I think the 67 % drop in net income pretty much shows how much investment in the quick commerce or the AI are eating into the profitability of the company.

12:47I mean, the 68 % drop, it was a huge miss. And it was the smallest net income since early 2024. So it was a big disappointment to investors. That being a big disappointment, even with these big, bold ambitions to drive up the revenue side, the profitability side by charging more for cloud, charging more for what is their AI agentic offering. How are we seeing sort of investors pay attention to this in the stock? Because at the moment, it's having its worst day since October of last year, at one point of April of last year. Yeah, the stock was down almost like 10 percent earlier this morning and investors are apparently very unhappy.

13:22And I think especially under this macro environment, investors tend to punish these statements unless they're accompanied by some clear profitability path or the monetization plan. And especially the competition, the AI is getting heated in China. Alibaba is facing steeper competition from Tencent. And if you look at the share price in March, Tencent has been performing a lot better than Alibaba in the month of March. So you can see there how investors are more hopeful and more optimistic about one company's AI plan than the other. So how it's going to profit rather than how much revenue it's going to be making in the coming years might be the bigger focus for investors going forward if you want to guess about its future share price.

14:04Yookung Lee, I'm very pleased to say with us when it matters on All Things Asia, thank you very much indeed. Look, let's stick with the Alibaba story. And Jacob Cook is with us, WPIC CEO joining us. And your expertise really has been in e-commerce and marketing areas within Asian businesses and companies looking to penetrate Asia. But you're also looking much more on AI adoption as well. First, with Alibaba's just general numbers, how worrying is it that their profitability is being so hit by competition? It's not that worrying. I think this was very well announced. They were telling us about the investments in 2025 that were going into AI.

14:37And they've also announced that that's going to double in 2026. So that probably holds in terms of pressure on income. Some of the numbers were pretty optimistic, and certainly in terms of the AI announcements and what they're doing with their token hub, we see pretty good potential. And again, I think this has been part of a well-announced plan that's in a couple of years of execution right now and seems to be relatively on schedule. OK, let's talk about what's on schedule when it comes to AI adoption and competing against, say, like a Tencent. We were just hearing from Yuckelung about why Tencent's higher.

15:08are many people feeling that the WeChat optionality that it gives you, particularly with OpenClaw and agentic AI penetration, is just far clearer. How is Alibaba going to make sure that its AI tech stack works? Well, I think there's two things. One, Quentin's open source model is incredible. I've got it running on my new M5 laptop right now, and it actually is one of the best models that you can get running locally. So they've got incredible adoption there. And you talk about OpenClaw. And then again, what are these agents and the agentic AI going to be doing? They're going to be buying tokens.

15:40So opening up that token hub is great. And let's not forget, I mean, this was their 10th quarter of triple digit AI revenue. So when they're talking about these massive ambitious goals of$100 billion in revenue, you know, I think there's a real clear path for them to get there. And, you know, another thing that we notice in China as well is, you know, they may not be dealing with the top models or winning the contest there, but the adoption rates among users, even OpenClaw, you know, a little later adoption there, but now is having more uses installations inside China than the U.S. So I think all of those adoption rates in China in general with the way the AI market looks like and the willingness of employers now to spend on tokens to enhance the productivity of their offices, I think, is very positive and should lend to more triple digit growth throughout 2026.

16:27I mean, Jacob, you've always been this great read on the consumer over in Asia and China in particular. What's it like on the streets, the sort of fanfare, the hype around OpenClaw? it's not just on the streets it's all over social media it's pretty amazing and the levels of innovation that are coming out you know they're using different models it's running so much more locally than the installations did but it's basically allowed on premise to come back to being an option they don't need to uh you know have a very uh tech background to open up you know aws or allian equivalents they can actually just go buy older mac hardware that's readily available on the market and get some of these systems running up in their apartments or houses or offices.

17:09So that's really allowed it to go from being a maybe having a very technical background to, you know, general acceptance among the masses. Why Mac minis are flying off the shelves, why Raspberry Pi in the UK share prices spiraled higher. Jacob, what though of the pushback from a regulatory perspective? If you own Alibaba, if you own Tencent or any of the Chinese giants, you know about regulatory risk. Well, we're starting to see regulators and state governments slightly push back against Open Claw just running rife in state-backed businesses? Well, I would say that that would be the case. But the government, in terms of where we operate in, you know, Jiangsu and Zhejiang, just outside of Shanghai, there's been very supportive.

17:47There's even been local government classes, you know, for getting people to set these up. So we've never seen adoption from the governments like that. So I don't think that there's – there might be some security with Open Claw, but let's not also forget Moonshot launched Kimmy Claw too. So there's going to be alternatives that do roughly the same thing that might be just a little bit more suited to the Chinese market, too, as well. A little bit more firewall compatible as well. Let's just, therefore, put this all in context, Jacob. As the brands that you work with are looking to access an Asian buyer, as people are looking to take on the various ways of getting to consumers via chatbots, how does that landscape look for you right now?

18:28yeah well i think in terms of ai in general it's made accessing asia way more easy the chatbots are probably not the best way to interact with your customers at that point but being able to use you know generative so you know you're maybe taking model shots for china and being able to adjust them for japan and korea not having to do three shoots for example being able to change your languages being able to interact with your customers in multiple languages throughout asia has really kind of laid economies of scale to being able to get access to the entire region and not looking at this like, you know, maybe 12 different markets and more looking at it like just a couple.

19:01AI is going to make that easier and easier. And inventory projections, you know, we're looking at social media now to see, you know, what, you know, might be selling really well in the summer. All these things are really helping, you know, brands get access to the market at cheaper, you know, or a less barrier, a smaller barrier to entry than they were doing pre-AI. Who else should a potential marketeer be wanting to access Asia, be looking at? Look, we talked Alibaba, Tencent, but there are plenty of other options. Well, Kimi K is one of the best on-premise models that exists out there, too, and that's by Moonshot.

19:37So there's just a ton. I mean, we have an office in Hangzhou, too, and there's just AI companies all around us. I mean, DeepSeek's not too far from Alibaba. Douyin's sandwiched in between them. RedNote's in that neighborhood. So there's just a whole environment of innovation, very similar to what's been going on in Silicon Valley. So, you know, we don't know all of the total winners, but the barrier to entry, again, with AI, it's smaller and smaller. DeepSeek was launching their models with only 125 people. So we would expect a lot more innovation and, you know, it's going to be an exciting year.

20:08That's for sure. Jacob Cook, WPIC CEO. It's always great to catch up with you. Thank you. Thank you. Now coming up, the pressure on social media ramps up here in the U.S. California joining the chorus of localities calling for bans. More on that next. This is Bloomberg Tech.

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21:34if anybody is not using AI to make their developers who write software 30 % more productive today with the goal of being 70 % more productive. Yeah, wow. So we are not asking our clients to be the first experiment on it. We say, you can leverage what we did. We are happy to bring out all our learnings, including what needs to change in the process, because the biggest change is not technology. It's getting people to accept that there's a different way to do things. To listen to the full conversation, visit ibm.com slash smarttalks.

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22:51Open AI, when it's expanding its push into coding, with plans to acquire Astral. Now that's a startup that makes Python tools for developers. The deal hasn't yet closed, but the companies say that it will bring Astral's team into OpenAI's codex effort and broaden its suite of developer services. OpenAI, of course, has been racing with competitors like Anthropic, Microsoft, and startups like Cursor to appeal to corporate customers using AI as coding assistants. Meanwhile, social media companies, well, they're facing increasing pressure from mounting lawsuits and laws dictating age limits on their platforms.

23:22In a particular blow to the industry, California, home to Meta. Of course, TikTok operates there too, but it's home to Google, Snap. app. It's joined the list of U.S. states and countries globally proposing a ban on social media for children. Let's get the latest from Lumos, Kurt Wagner, who's covering the industry, who's put out a tech in depth about this all today. And really, home turf, could this be a reality? I think it could be a reality. We're definitely seeing a snowball effect here. And Caroline, to the point you just made, the fact that California is getting in on the mix here, I think is pretty significant.

23:56It's certainly symbolic of how big this issue has become and how strong this conversation has happened. Now, I want to be clear, a lot still has to happen for these sort of proposals, these bills to become laws. But we are talking about a thing that has really been a little bit on the periphery for the last several years. And now we're seeing California, several countries in Europe, of course, Australia, start to float and push for these social media bans. So I think that's pretty significant. As you say, a lot has to happen for the bans to come into force. And look, we've been waiting decades for any sort of talk to become a walk in terms of law on social media.