Apple’s New iPhones and Oracle’s AI Bounce

0:05Travis Hoium:The iPhone 17 is coming and Oracle is the new hot name in artificial intelligence. Motley Fool Money starts now.

0:19Travis Hoium:Welcome to Motley Fool Money. I'm Travis Hoium, joined today by Lou Whiteman and Rachel Warren. And we're going to get to the big news of the day. That is Apple announcing new iPhone 17, new watches, new AirPods that can do translation in line. That's a pretty cool new feature if you're traveling. Tim Kluck used a lot of superlatives that you would have thought this was a 2009, 2010 iPhone launch. But are these products ultimately a needle mover for Apple, Lou? Because Apple's kind of in an interesting spot where they have reached maturity. The I believe it was 2021. Some of these products are not really spurring that upgrade cycle that they would like.

0:58Travis Hoium:So does this do anything to help them?

1:00Lou Whiteman:So the definition of needle mover, the stock is down today. So I would say, no, it's not right. So at least not for one day. And look, this is a mature business, Travis. It struck me when you said the iPhone 17, because gosh, we've done 17s. It's almost getting like Super Bowls. It's like, are we still going to do this at some point?

1:16Travis Hoium:I think they're still counting those at least almost in order.

1:19Lou Whiteman:Yeah, order-ish, right. But look, it's a mature business. The design and engineering is impressive. I'm curious, guys. I don't know if I'd want that slim iPhone. I don't know if you would, but that just looks like something that would snap in your pocket.

1:30Travis Hoium:But if it didn't have the bump, the massive camera bump, I would be totally interested in. But I think what you said is interesting is that presentation was an engineering presentation. Yeah. That was not really a product presentation. And that is just a huge change from 15 years ago when these were kind of must-see TV.

1:48Lou Whiteman:And we've moved past the days where people are going to see just shiny new bells and whistles and say, yeah, I need to spend another$800 or a lot more every year. The design days are over until they get some next big thing. It's all about software. And again, we knew this going in, but it's all about AI is the next big thing in terms of to drive a refresh cycle until Apple can deliver on that and really gets people saying, now I need a new one. the way they did back in the old days when they went from the size of a full brick to just a half brick and stuff like that, when there was real innovation happening, I don't think it does move the needle.

2:28Lou Whiteman:It's almost like when Chevrolet announces the new version of their Silverado every year. Does that matter? Does that drive? I mean, kind of, but no.

2:42Travis Hoium:Yeah, unless there's a big change in the design. and we're not really at the point where any of these phones are all that earth-shattering from a design point. We've gone to 3G, 4G, 5G. I don't know. We're not adding any Gs anymore either. So Rachel, what was your kind of takeaway from this overall presentation? It seems like a lot of cool products, but I frankly, as I look at, do I want to upgrade any of my devices? I just can't get there. Yeah. Well, and I think that's also a question that a lot of consumers are asking themselves right now in a tight economic environment. You know, I do agree with Lou in the sense I don't necessarily think this presentation was a needle mover for the business.

3:19But it's certainly an event that both investors and consumers look at annually to see what's happening with Apple. I mean, this is a company that's largest revenue source is still the iPhone. That accounts for 50 percent or more of Apple's total revenue in a given year. This is primarily a hardware business. And they announced four new iPhone models, and that includes their newest model, the iPhone 17 Air. it's thinner, it's lighter than Apple's other devices. It's based on a new titanium body. Their entry-level phone, which is the iPhone 17, as you mentioned, that got an improved display with a higher refresh rate and camera.

3:54There were some slight price bumps to some of their products like the iPhone Pro. And they released three new Apple Watch models. They added a new health feature to the devices that uses machine learning to determine if the user is at risk for high blood pressure. One thing that was pretty interesting was the new chip in the iPhone Air and Pro models. It's called the A19 Pro. It does have some AI-related improvements, and it's powering those iPhone 17 Pro models. It has a neural accelerator in each of the GPU's cores, and that really performs much more intensive mathematical computations. Apple's chief marketer said at the event that the chip will enable its devices to run on local large language models.

4:37So there were some exciting bits and pieces. I don't think anything that is a major needle mover for the business right now. I think one of the biggest things, if you're an investor looking at Apple, like I am right now, is this is still a company that's falling very far behind in the AI race. And those integrations into their phones are far behind what we're seeing, for example, from Alphabet with their Google Pixel products. And I think that's something that some investors are worried about right now.

5:03Travis Hoium:Yeah, the Pixel is great. And the new Pixel is really built for AI. They've given up, they've sort of sacrificed some of their other features and compute for AI compute. Lou, I wanted to get your thoughts on one final thing with Apple. The iPhone business is actually doing okay. In the trailing 12 months, it was actually the best revenue that they've had for the iPhone in the company's history. But if you look at everything else, the Mac, the iPad, and then a segment that they call wearables, home and accessories. So that's going to include the home pods, but it's also going to include AirPods.

5:34Travis Hoium:That was really the big driver of that business through kind of 2021 or so. That segment, the wearables home and accessories is down 13 % from its peak in 2022. All three of those segments, including the Mac and the iPad are all in decline. Like does this do anything to juice those businesses? I know we didn't get Macs or iPads, but I'm just, it sort of seems like Apple's core business is kind of stagnant at this point. And the upside for investors is services and services to me is just kind of how much can you squeeze out of consumers who are using your devices?

6:11Lou Whiteman:Yeah. You know, it's interesting with the AirPods because I don't even know if I mean this as a compliment or as a red flag, but I think it's just, it's what it is. We talk a lot about the cult of Apple. We talk a lot about the cost of switching over if you have to, the walled garden. The AirPods are an area where if you have a Bluetooth device, you can just, you do not have to stay within the walled garden, right? And the net net is fewer people use the Apple product. I think that speaks to the fact that to some extent, Apple's consumer advantages is because you have to, not because just every product is superior or consumers just want to buy.

6:49Lou Whiteman:There's this, the cult of Apple is, is that knowledgeable, sophisticated consumers want to buy Apple because it's so much better. And the AirPod story, you know, look, they still make a good product. And it might speak to the have to on the phone side that, you know, you know, so I mean, that's great for investors, but I do think it tells a story of, you know, if you give consumers a choice, maybe Apple engineering, isn't just end of story better than anything else. The only, the only game in town period. Yeah.

7:20Travis Hoium:The AirPods are really compelling, but that's a couple hundred dollar device. And I'm probably more likely to upgrade that device more than I am my iPhone. So the net net for Apple.

7:30Lou Whiteman:Easier to lose too.

7:32Travis Hoium:Far easier to lose. I have lost a handful of those. And over the last five years, I've gone through a handful of AirPod devices too. And happy to, because I use them all the time. But yeah, it'll be interesting to see if this moves anything for Apple in the future. I think they're talking a lot about artificial intelligence, but doesn't clear. They have a great story there from a product refresh cycle. When we come back, we're going to talk about the latest economic data. Get a feel of where the jobs market is going. You're listening to Motley Fool Money.

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8:33Travis Hoium:Welcome back to Motley Fool Money. The big news earlier this week is that the BLS, Bureau of Labor Statistics, came out with their full year job numbers ending March 2025. So these are a little bit delayed, but they're hopefully at least a little bit more accurate than the monthly survey numbers that we get. That usually happens on the first Friday of every month. But the big number was that we lost 911 ,000 jobs that we previously thought we had. This is all a little bit confusing, but Lou, what should we actually take away from this big revision number? It doesn't mean that the economy was any different than it actually was, but the measurement is now kind of coming in and this is hopefully more accurate than we had previously.

9:12Lou Whiteman:Right, exactly. And it is important you said it, but this is through March 2025, so this is not real time. But it does sort of take, I think real time matters here because it takes some of the wind out of people like me who were saying of the latest jobs reports, this could be transitory. This could be like a one-time thing. It makes it seem like that we have a longer trend towards a cooling economy. And if so, I think it actually makes the Fed's job easier, right? Because if it's transitory, arguably you act or you don't act. If there's a long-term trend towards slowing, then there's more reason to act.

9:49Lou Whiteman:Travis, we also got an inflation number, the PPI number, which was much cooler than expected. And I do think, like for real time for investors, we could, I think, make the case that we should be less worried about the S word, stagflation, which I think is, most would agree, that's the biggest.

10:06Travis Hoium:And what exactly is stagflation?

10:08Lou Whiteman:Stagflation is an environment where inflation is going up, but the economy is not going up. The economy is under pressure. So there's no really good tool. Things are getting more expensive and you have less, the consumer has less purchasing power and the economy has less -

10:23Travis Hoium:Because you don't want to lower rates, which is going to make inflation worse.

10:26Lou Whiteman:Right, right. You don't, the Fed only has one tool and it's a very, very poor tool in this environment because the two sides of the dual mandate would suggest different directions for rates. So what do you do? Um, look, the interesting thing about this is a year ago, we were all sort of expecting, we were talking hard landing or soft landing, right? And the economy was unexpectedly strong. And so in a way, I think what we're seeing here is that, okay, maybe what we were sensing was more accurate than we thought, you know, like things weren't as rosy. Uh, you know, we can get into it. I think there's either like for an investor from here, there's, you could take glass half full, you can take glass half empty, but at least now we know where things have been.

11:06Travis Hoium:What did you take away from all this data, Rachel? Well, it is interesting. I mean, most of the time span for this report of case, of course, came before the current administration. So we know that the jobs picture was deteriorating before there was the levying of these tariffs against U.S. trading partners. But we've also been seeing recent months data that has pointed to a softening labor market. The summer months of June, July, and August, for example, saw average payroll growth of just 29 ,000 per month. That's below the break-even level for keeping the unemployment rate steady. And a lot of the largest markdowns came in areas like leisure and hospitality, retail, trades.

11:46This could lead to a firmer push for rate cuts. We're hearing there could be multiple in coming months. And that remains a complicated issue, as Lou alluded to, with sort of the dual sides of the mandate. For example, the antidote to inflation can exacerbate employment issues. So it will be interesting to see what happens in the coming months. We are certainly coming from a place, from the employment perspective, that seems to be weaker than we imagine. That may not bode well in the near term if tariffs and other policy measures cause additional uncertainty for companies. But it still seems to be too early to tell.

12:22I mean, that PPI report did provide good news on inflation fundamentals. the services sector, that drives about 80 % of GDP. The services sector saw deflation falling about 0.2%, and even goods prices rose just 0.1%. So we're still very much, I think, in a wait and see place, and I think that's important to note.

12:43Travis Hoium:The one thing that I want to add, too, is the PPI inflation number was really hot in July, and it came back in August. So, you know, Lou, I'll give you the final word here. This data should always be taken with a little bit of a grain of salt. And we want to look at kind of the long-term trends. I think that's what you're pointing to with maybe the Fed's decision is easier if the labor market was weaker than we thought in March. And it's been pretty weak over the past three or four months. Maybe we do need a little bit of a rate cut.

13:13Lou Whiteman:Yeah. So as an investor, I'm always trying to, who cares about the past? What are we looking to the future? The glass half full, the Goldilocks here is, is that maybe we are just in a run-of-the-mill slowdown. These things aren't fun, but they happen. We know how to deal with them, that it's not exotic shocks like tariffs, that we are just in this part of the business cycle and we'll get through it. And hey, I'd rather everything go up, but we can handle that. That's not bad. The more worrying spin is, is that say we were already in a downward cycle push and then we do get exotic events and tariffs really are slow to show themselves and we are gonna feel the strain of tariffs in the months to come.

13:55Lou Whiteman:There's a world there, then we might be caught really off guard with stuff that we don't know how to handle. I don't think any of us know that. I think we just have to watch and see how it plays out.

14:05Travis Hoium:I think the holiday season will be very interesting when it comes to inflation, to those of us who are buying gifts, maybe for kids, or is there a little sticker shock or not? We will have to see over the next few months. When we come back, we're going to talk about Oracle, the hot stock of the day. Larry Ellison, I think maybe the richest person in the world after this recent move in Oracle shares. You're listening to Motley Full Money.

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15:22Travis Hoium:Welcome back to Motley Fool Money. Oracle reported earnings after the market closed on Tuesday. Stock is up 40 % today. Actually, their numbers weren't all that great. They missed on both, I think, the top and the bottom line. But the big thing was they have remaining performance obligations, you may be seeing the term RPO floating around, is now$455 billion. I want to read this quote from the conference call. We now expect Oracle Cloud Infrastructure to grow 77 % to$18 billion this fiscal year, then 32%, then$32 billion,$73 billion,$114 billion, and$144 billion over the following four years. Rachel, these numbers are enormous.

16:11Travis Hoium:The stock move is crazy. Oracle could be the next trillion dollar company if they aren't already there by the time this actually hits people's feeds. What in the world should we be taking from this earnings report and in particular the market's reaction? Yeah, I mean, the stock is on pace for its best day since the early 90s. Another kind of key number from this report was their incredible growth in their multi-cloud database revenue. That was up 1 ,500 % year over year. And that's largely attributable to partnerships with Amazon, Alphabets, Google, and Microsoft. I think that when you look at this, I mean, this is a business with fundamentally solid financials.

16:49They have become a major destination for AI companies that are building large-scale data centers to train and run their AI models. Their OCI provides really that high performance computing and critical GPUs and networking needed for demanding AI workloads. And they have tried to really position themselves as the faster and more cost efficient option for AI model training compared to other hyperscalers. And I think that's where a lot of the excitement comes from. I mean, something that Larry Ellison also noted was that they are about to introduce their new cloud infrastructure service called the Oracle AI Database.