During major earnings seasons, investors closely monitor technology companies' capital expenditure plans and AI monetization strategies, with Alphabet's $190 billion CAPEX and Google Cloud's 65% growth being key indicators of AI investment returns. Market volatility increases as investors demand clear paths to monetization rather than just increased spending, while broader market participation beyond AI and semiconductors becomes crucial for sustainable bull market conditions.
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Stocks Waver as Tech Earnings Take Center Stage | Open Interest 7/22/2026
Added:DANI: AND SO IT BEGINS. BIG TECH EARNINGS BEGIN TODAY.
>> BLOOMBERG OPEN INTEREST STARTS RIGHT NOW.
DANI: COMING UP, ALPHABET, TESLA, AND IBM KICK OFF EARNINGS WITH SPENDING UNDER SCRUTINY.
ISABELLE: MEANWHILE, IRAN TENSIONS SUMMER AS PRESIDENT TRUMP PUSHES AHEAD WITH TARIFFS. DANI: AND CHARLIE SCHARF WILL BE JOINING THE POGROM FOR AN EXCLUSIVE CONVERSATION. ISABELLE: WE ARE LOOKING AT SOME STOCKS BUT TODAY WILL BE A BUSY DAY.
TECH WILL KICK OFF IN EARNEST. BUT OUR STOCKS TO WATCH SURPRISINGLY IS NOT BIG TECH. WE ARE LOOKING AT MOBILE CARRIERS. WHEN YOU TEXT YOUR FRIENDS, THESE ARE THE COMPANIES BEHIND THAT.
THE COMPANY IS ROLLED OUT -- THIS IS AMID A PRICE WAR.
AT&T UP BY 4%. T-MOBILE UP EVER SO SLIGHTLY.
DANI: WE CANNOT GET TOO FAR AWAY FROM BIG TECH. THAT IS WHO I AM WATCHING.
WE WILL HEAR FROM THREE TECH PLAYERS AND THE HEAVY WEIGHTS.
THE MAIN ONE WILL BE ALPHABET. TO LEARN ABOUT WHAT THEY'RE SPENDING PLANS LOOK LIKE, WHETHER THEY HAVE HAD ANY TANGIBLE RETURN FROM THOSE AI EFFORTS.
WE WILL HEAR FROM TESLA AND IBM. TESLA DOWN ABOUT 1%, SO THAT IS THE BIGGEST MOVER AMONG THEM PREMARKET. ISABELLE: FOR MORE, WE HAVE ED LUDLOW JOINING US FROM SAN FRANCISCO.
IT IS SUCH A BUSY DAY TODAY. BIG TECH WILL BE REPORTING EARNINGS. IS THERE ANYTHING YOU ARE LOOKING AT? WE HAVE INVESTORS BECOMING EVEN MORE DEMANDING. WHAT DO YOU THINK INVESTORS WILL BE ON THE LOOKOUT FOR? ED: I WOULD ALSO POINT OUT THAT BUY SIDE EXPECTATIONS HAVE BEEN VERY SIDE FOR A LONG TIME.
BUT THE COMMON THEME ACROSS ALL THE COMPANIES WHICH ARE VERY DIFFERENT IS SPENDING. THEY ALL HAVE A DIFFERENT RELATIONSHIP TO THE SPENDING STORY.
LIKE IN ALPHABET'S CASE, THE CAPEX GUIDE FOR THIS YEAR IS $190 BILLION AT THE TOP END. IF THEY WERE TO MOVE THE NEEDLE ON THAT, THE GREAT EXPECTATION IS IN THE SHORT-TERM IT WOULD BE SIGNIFICANT TO MARKETS. IN ALPHABET'S CASE, IT IS WHAT ARE THE RETURNS NOW? OVERALL TOPLINE GROWTH OF 20%, THE CATALYST BEING THOSE 65% GROWTH IN GOOGLE CLOUD AS THE MAIN VEHICLE FOR HOW THEY GET AI SPECIFICALLY ACROSS TO A BROADER SPACE OF CUSTOMERS.
TESLA IS DIFFERENT. THE WORLD IS DESPERATE FOR TESLA TO START SPENDING SOME MONEY, MORE MONEY THAN THEY HAVE EVER SPENT BEFORE. MAYBE THAT IS THE NEXT PART OF THE STORY. DANI: THE CIRCULAR FINANCING CONTINUES. AMD INVESTING IN ANTHROPIC TO GIVE ANTHROPIC A WIDER ACCESS TO HIS CHIPS.
IT FEELS LIKE A LOT IS GOING ON HERE.
WE LEARNED YESTERDAY FROM TSMC IT WOULD GET MORE EXPENSIVE FOR THE TSMC'S AND NVIDIA'S OF THE WORLD.
HOW HARD IS IT FOR COMPANIES TO GET CHIPS FROM AMD AND NVIDIA AND WE GET THESE DEALS? ED: IT IS NOT UNPRECEDENTED WHEN AMD DID A BIG COMPUTE DEAL WITH OPENAI. THERE WAS ALSO A FINANCIAL TRANSACTION INVOLVED WHICH BASICALLY GAVE AMD A SEAT AT THE TABLE.
AT THE TIME, WE ASKED LISA TSU WHY YOU AND NVIDIA NEED TO TAKE EQUITY STAKES. THIS WAS ALSO THROUGH THE MECHANISM OF SPEND IN THE COMPANIES YOU ARE PROVIDING IT TO. THE ANSWER THEY GIVE IS GREASING THE WHEELS, LETTING ALL THIS STUFF HAPPEN. BUT THE OTHER THING TO REMEMBER IS ALL THOSE FRONTIER LABS AND THE NEXT LAYER DOWN, EVERYONE WORKING ON AI IS COMPUTE CONSTRAINTS.
ONE WAY THEY HAVE TRIED TO COMBAT THAT IS THROUGH A DIVERSITY OF COMPETING SOURCES. ON ON DROPBOX SIDE, THEY ARE VERY BIG ON GOOGLE BUT RELY HEAVILY ON NVIDIA AND AMD AND HAVING THOSE DIFFERENT OPTIONS IN PARTS OF SETS THEY OVERALL LACK IN SUPPLY. DANI: WE LOOK FORWARD TO "BLOOMBERG TECH" IN TWO HOURS TIME. ELSEWHERE, AT&T ADDED FAR MORE WIRELESS SUBSCRIBERS THEN EXPECT A LAST QUARTER.
IT BEAT ESTIMATES BY ROUGHLY 100,000 CUSTOMERS.
CEO DAN SANKEY DISCUSSED THE COMPANY'S GROWTH ON BLOOMBERG SURVEILLANCE.
>> WE CAN PROVIDE WORLD-CLASS NETWORKS ON WIRELESS AND FIXED THAT TACKLE 98% OF WHAT A CUSTOMER NEEDS TO DO ON THE INTERNET. OCCASIONALLY THEY WALK OFF ONE OF OUR NETWORKS AND AS WE LOOK AT OUR PARTNERSHIPS, WE ARE WORKING WITH THE SATELLITE INDUSTRY.
BY THIS TIME NEXT YEAR WE WILL BE ABLE TO SOLVE THAT PROBLEM.
WE ARE A NATURAL PLACE FOR PEOPLE TO COME AND MEET THEIR NEEDS ON THE INTERNET AND TO DO IT EASILY ON ONE BILL WITH ONE SET OF SERVICES AND ONE SUPPORT INFRASTRUCTURE.
WE THINK WE ARE IN A GREAT POSITION AS A RESULT OF THAT.
DANI: LET'S GET MORE CONTEXT FROM NORAH MULINDA. THIS IS AN INCREDIBLY SATURATED MARKET. IS THE ONLY WAY THE AT&T'S OF THE WORLD ARE WINNING AND GETTING RESULTS LIKE THIS BEING AGGRESSIVE ON PRICING? NORAH: COMPETITION IS VERY STIFF.
YOU ARE THINKING ABOUT T-MOBILE, AT&T, VERIZON, THEY ARE ALL OFFERING ANY SORT OF INCENTIVE TO GET ON NEW CUSTOMERS AND INTRIGUE THEIR CUSTOMERS TO STAY.
WE SEE THEM BRANCHING OUT TO DIFFERENT VENTURES.
WE HAVE SEEN THEM GOING INTO FIXED WIRELESS ACCESS, WHICH IS ESSENTIALLY HOME INTERNET. BUT IT USES SOME OF THE CELL TOWERS. WE SEE THEM BRANCH OUT INTO FIBER WHICH IS A COMPETITIVE SPACE WHEN YOU THINK ABOUT WI-FI ACCESS AT HOME AND IT BEING STRONGER THAN A TRADITIONAL BROADBAND. THEY ARE TRYING TO FIGURE OUT HOW TO GET ANY SORT OF LEG UP IN THIS ENVIRONMENT GIVEN THE FACT COMPETITION IS STILL RELEASED OF. ISABELLE: THE COMPANIES ARE LEANING HARD INTO BUNDLING ALL OF THESE LIKE WE TALKED ABOUT YESTERDAY. YOU BUNDLE EVERYTHING AND IT IS BACK TO MY MOTHER'S ERA. IS THIS A BIGGEST COMPETITIVE ADVANTAGE? NORAH: WE SEE THIS IDEA OF CONVERGENCE.
AT&T CALLING OUT THE FACT THAT 42.5% OF CUSTOMERS WHO ARE THERE FOR THE MOBILE HOME SERVICE ARE ALSO THERE FOR BROADBAND INTERNET. YOU DO SEE THESE DISCOUNTS.
JUST TALKING TO T-MOBILE ABOUT THE FACT I WAS INTERESTED IN MAYBE GETTING SOME HOME INTERNET AND THEY ARE OFFERING DISCOUNTS FOR PEOPLE WHO ARE DOING THAT AND ESSENTIALLY FOR ANALYSTS AND INVESTORS. THEY THINK THESE ARE THE TYPES OF CUSTOMERS THAT WILL STAY. DANI: AT SOME POINT, SPACEX WILL BE PROVIDING EVERYTHING. ISABELLE: MY FRIENDS IN MANILA DO USE SPACEX. THEY LOVE IT. NORAH: AND THERE ARE REPORTS THEY WERE GOING TO DO SOMETHING WITH CHARTER MAYBE. DANI: DEFINITELY NOT YOUR MOTHER'S BROADBAND. ISABELLE: IN NEW YORK, YOU GO WITH WHATEVER THE BUILDING TELLS YOU. [LAUGHTER] DANI: EXACTLY.
ISABELLE: I JUST FOLLOW ORDERS. THANK YOU, NORAH MULINDA.
PRESIDENT TRUMP MAKING NEW THREATS TO IRAN, POSTING MOMENTS AGO, FROM THIS POINT FORWARD ANY TIME THE ISLAMIC REPUBLIC OF IRAN SHOOTS AT A SHIP IN THE STRAIT OF HORMUZ, WHETHER IT IS BY MISSILE, ROCKET, DRONE, OR ANY OTHER DIVERSE OR WEAPON, THE UNITED STATES WILL BOMB OR DESTROY ONE BRIDGE OR POWER PLANT, INCLUDING THOSE LOCATED NEXT TO OR IN THE CAPITAL CITY OF TEHRAN.
JOINING US IS TYLER KENDALL. THAT IS QUITE THE STATEMENT FROM PRESIDENT TRUMP. WHAT DO WE KNOW MORE ABOUT THAT AND DO WE KNOW IF THE INTENTION IS SERIOUS? TYLER: RIGHT.
AT THIS POINT DESPITE EFFORTS FROM MEDIATORS TO TRY TO PREVENT FURTHER ESCALATION, THE TENSIONS APPEAR TO BE POINTED.
THIS NEW THREAT FROM PRESIDENT TRUMP SAYING IF IRAN CONTINUES TO TARGET COMMERCIAL VESSELS IN THE STRAIT OF HORMUZ, WE COULD SEE THE U.S. TARGETING A BRIDGE OR POWER PLANTS IN IRAN, GIVING US MORE INSIGHT INTO HOW THE WAR MAY BE GOING ABOUT IT STRATEGY IN TERMS OF TARGETING IRANIAN INFRASTRUCTURE. IT COMES AS THE U.S.
CONTINUES TO EXPAND THE SCOPE OF ITS TARGETS.
OVERNIGHT, WE SAW THE 11TH CONSECUTIVE NIGHT OF ATTACKS, WHICH INCLUDED BOMBING IN SOME AREAS THAT HADN'T PREVIOUSLY BEEN, AS PRESIDENT TRUMP YESTERDAY SAID THE U.S.
WOULD HEAVILY HIT WHAT IS KNOWN AS PICKAX, BELIEVED TO BE A NUCLEAR SITE BY THE U.S. AND ISRAEL.
PRESIDENT TRUMP HAS REPEATEDLY SAID HE THINKS IRAN WANTS TO MAKE A DEAL, BUT NOW THE U.S. DOESN'T WANT TO COME TO THE NEGOTIATING TABLE UNLESS HE DOES. WE'VE GOTTEN VERY LITTLE INDICATION THE COUNTRY IS WILLING TO LET UP ITS LEVERAGE WHEN IT COMES TO THE STRAIT OF HORMUZ AND DISRUPTING GLOBAL ENERGY SUPPLIES EVEN BEYOND JUST THAT WATERWAY.
NEW OVERNIGHT, WE GOT THE SATELLITE IMAGERY WHICH SHOWS AT LEAST TWO TANKERS LOADED UP WITH SAUDI OIL MADE U-TURNS AS THEY HEADED TOWARDS THE RED SEA AMID THAT HEIGHTENED THREAT FROM THE IRANIAN PROXY GROUP THE HOUTHIS TO INSTITUTE A MARITIME BLOCKADE. DANI: THIS FEELS LIKE A COMMON THEME FROM THIS MORNING, TALKING BOTH ABOUT PHYSICAL WARS AND TRADE WAR'S. WE ARE BACK IN THIS ENVIRONMENT WITH THE PRESIDENT SAYING HE WILL IMPOSE A 100% TARIFF ON GENERIC DRUG MAKERS. HOW WILL THIS WORK?
THE TIMEFRAME IS THIS GETS IMPLEMENTED IN TWO YEARS WHEN IT WILL BE THE TWILIGHT OF TRUMP PRESIDENCY. TYLER: THAT IS A REALLY GOOD POINT. THE ADMINISTRATION HAS BUILT THIS IS TRYING TO GIVE SOME MORE TIME TO THESE DRUGMAKERS ON SURE THEIR MANUFACTURING, SAYING A 100% LEVY WILL GO INTO EFFECT NEXT AUGUST AND DOUBLE IN ITS RATE BY THE FOLLOWING AUGUST. IT IS RAISING QUESTIONS BOTH ABOUT THE TIMELINE FOR THESE DRUGMAKERS TO ACTUALLY BUILD UP THESE FACILITIES AND WHETHER OR NOT IT IS GOING TO BE WORTH THE COSTS IF IT GETS PASSED DOWN TO CONSUMERS, KEEPING IN MIND THE GENERIC DRUG MARKET MAKES UP ABOUT 90% OF PRESCRIPTIONS IN THIS COUNTRY. IF THIS ALL SOUNDS FAMILIAR, IT SHOULD BECAUSE THE U.S. COMMERCE DEPARTMENT SHOWS THE RESULTS OF THE INVESTIGATION INTO THE NATIONAL SECURITY IMPLICATIONS FOR MAKING PHARMACEUTICALS ABROAD.
AT THE TIME, THAT IS WHEN WE GOT THE 100% LEVY ON BRAND NAME PHARMACEUTICALS THAT ARE EXPECTED TO GO INTO EFFECT AT THE END OF THIS MONTH. THIS IS THE FIRST TIME THAT WE GOT AN UPDATE RELATED TO GENERICS.
WE ARE GOING TO HAVE TO WATCH TO SEE HOW THIS PLAYS OUT.
MANY COMPANIES HAVE GOTTEN CARVEOUTS WHEN IT COMES TO PHARMACEUTICALS. DANI: I AM SURE THIS IS NOT THE LAST OF ANNOUNCEMENTS ON TARIFFS GIVEN SECTION 122 EXPIRES FRIDAY.
WE LOOK FORWARD TO SPEAKING WITH YOU THROUGHOUT THE WEEK.
TYLER KENDALL IN WASHINGTON. LET'S GET A CHECK IN YOUR EQUITY MARKETS. THINGS COULD LOOK VERY DIFFERENT IN THIS MARKET BY THE END OF THE SESSION AND POST MARKET SESSION BECAUSE WE ARE WAITING OUT THE BED EARNINGS.
THAT FEELS LESS LIKE ANY SORT OF SAY ON HOW I'LL THE BED IS DOING AND MORE ON THE ENTIRE CAPEX ECOSYSTEM.
TECH DECLINING THIS MORNING. 10 YEAR YIELDS UP ONE BASIS POINT WE HAVE SEEN A HUGE SURGE IN YIELDS OVER THE PAST 24 HOURS GIVEN THAT OIL IS UP TO $94 A BARREL. ISABELLE: TESLA ALSO REPORTS TODAY AND I THINK INVESTORS WILL ASK WHY ISN'T IT SPENDING MORE? I AM EXCITED TO HEAR WHAT THE CEO SAYS. EARLIER HE WAS SAYING IT IS NOT THE EARNINGS TO LOOK OUT FOR BUT THE REACTIONS TO THE EARNINGS. DANI: EVEN IF YOU COULD BE GIVEN A CRYSTAL BALL, OR DO INSIDER TRADING WHICH SEEMS TO BE EN VOGUE, IF YOU KNEW WHAT THE NUMBERS WERE, YOU MAY NOT KNOW WHAT THE DIRECTION OF THE STOCK WAS.
I WANT THE CRYSTAL BALL HERE IN THE MIDDLE OF US. DANI: I THINK WE WOULD BE DOING SOMETHING DIFFERENT IF WE HAD THAT. COMING UP, EXCLUSIVE CONVERSATION WITH CHARLIE SCHARF. THAT IS COMING UP NEXT. THIS IS "BLOOMBERG OPEN INTEREST." ♪ DANI: GOOD WEDNESDAY MORNING. LET'S HEAD OVER TO ROMAINE BOSTICK, WHO IS SITTING DOWN FOR AN EXCLUSIVE INTERVIEW WITH THE WELLS FARGO CEO. ROMAINE BOSTICK: THANK YOU TO ALL OF OUR AUDIENCES.
I AM HERE IN OUR NEW YORK STUDIO WITH THE CEO OF WELLS FARGO, CHARLIE SCHARF. THE FOURTH LARGEST U.S.
BANK OUT THERE, A BANK THAT IT IS GROWING AFTER SIX YEARS OF REGULATORY CONSTRAINTS. YOU HAVE BEEN THERE FOR SIX YEARS NAVIGATING THOSE CONSTRAINTS.
LIKE A LOT OF PEOPLE HAVE SEEN, THE VIX YOU HAVE DONE OVER THAT TIME, WHAT DO THE NEXT SIX YEARS LOOK LIKE?
IS IT A GROWTH STORY? CHARLIE: IT CERTAINLY IS.
WE ARE VERY PROUD OF OUR PROGRESS.
WE ARE A VERY DIFFERENT COMPANY SINCE I GOT THERE SEVEN YEARS AGO AND WE ARE ABLE TO COMPETE ON A LEVEL PLAYING FIELD WITH EVERYONE AND ARE GROWING OUR CONSUMER BANK, CORE INVESTMENT BANK, AND WE ARE DOING IT IN A WAY WITH VERY, VERY HIGHLY FOCUSED ON SUSTAINABLE GROWTH AND HIGH RETURNS.
WE THINK WE HAVE A HUGE OPPORTUNITY IN FRONT OF US.
ROMAINE: WHEN YOU SAY SUSTAINABLE, SOME INVESTORS WANT AGGRESSION. CAN YOU BE THAT?
BIKES IN THIS BUSINESS YOU HAVE TO BE CAREFUL ABOUT WHAT AGGRESSIVE MEANS AND IN DISTINGUISHING AROUND WHAT THE MARKETS ARE ADDING TO OUR PERFORMANCE OR ANY OTHER FINANCIAL SERVICE PROVIDER'S PERFORMANCE AND WHAT WE ARE DOING. WE ARE NOT LOOKING FOR A QUICK WIN OR LOOKING TO TAKE OUTSIZED RISKS IN THE SHORT TERM TO DRIVE STRONGER RESULTS. WE ARE LOOKING AT BUILDING THE UNDERLYING FRANCHISE, CUSTOMER RELATIONSHIPS, BUILDING FLOW OF THINGS THAT WILL GO UP AND DOWN BASED ON HOW THE MARKETS ARE DOING. THAT'S WHAT I MEAN BY SUSTAINABLE OVER TIME.
ROMAINE: TALK ABOUT THIS TRANSITION, THEN. OVER THE PAST TWO YEARS, PEOPLE WILL LOOK AT THAT AND CALL IT A TURNAROUND STORY THOUGH WE SHOULD POINT OUT THAT WELLS WAS IN RELATIVELY GOOD SHAPE EVEN WHEN THAT ASSET CAP WAS PLACED IN 2018.
WAS THAT A TURNAROUND STORY? CHARLIE: YOU ARE RIGHT, IT'S NOT A TURNAROUND STORY.
THE COMPANY WAS STRONG, WE HAD A GREAT FRANCHISE, BUT WE HAD TO FIX THINGS THAT NEEDED TO GET FIXED INSIDE THE COMPANY.
FROM THE CUSTOMER STANDPOINT WE WERE SERVING IT EVERY DAY, MAKING LOANS, TAKING DEPOSITS, CONSTRAINED ON GROWTH AND PROVIDING WHAT WE DID DAY IN AND DAY OUT IN FINANCIALLY WE WERE STILL DOING OK. WHEN WE LOOKED AT BUT WE WERE ABLE TO DELIVER WE WERE NOT ABLE TO GROW OUR BALANCE SHEET AND WERE FOCUSED A LOT ON EFFICIENCY AND THE COMPANY AND FOCUS ON GROWING OUR FEES INSIDE THE BUSINESS.
OUR CORE INVESTMENT BANK HAS GROWN NICELY AND OUR CREDIT CARD BUSINESS AND SPEND HAS GROWN NICELY, FOCUSED ON BUILDING TREASURY SERVICES IN THAT WE CAN MORE HOLISTICALLY SERVE CUSTOMERS AND THAT'S WHAT YOU SEE WHEN YOU LOOK AT THE RESULTS OF THIS PAST QUARTER. EARNINGS PER SHARE, REVENUE GROWTH, DOUBLE DIGITS, GROWTH ACROSS EACH BUSINESS IN TERMS OF REVENUE. WE ARE CERTAINLY IN A DIFFERENT PLACE. OUR GOAL IS TO BE VIEWED AS THE BEST FINANCIAL SERVICE PROVIDER IN THE COUNTRY. ROMAINE: HOW MUCH OF THAT IS BECAUSE OF CHARLIE SCHARF AND THE EXECUTIVE TEAM AND HOW MUCH OF IT IS MARKET CONDITIONS?
CHARLIE: IT'S PREDOMINANTLY ABOUT THE QUALITY AND THE BROAD GROUP OF PEOPLE WORKING AT THE COMPANY.
WHAT I'VE BEEN ABLE TO DO IS GET PEOPLE FOCUSED AND CREATE A DIFFERENT SET OF PRIORITIES, BUT A LOT OF PEOPLE EXECUTE DAY IN AND DAY OUT IN THE FACT IS THAT THE MARKETS DO HELP.
NO QUESTION, THESE TIMES ARE REALLY GOOD FOR BANKS.
IF YOU ARE NOT DOING WELL AS A BANK TODAY, THERE'S SOMETHING NOT RIGHT ABOUT YOUR STRATEGY AND IT ISN'T LOST ON US.
AGAIN, WE LOOK AT THE UNDERLYING METRICS OF EACH BUSINESS. ARE WE GROWING OUR CONSUMER CHECKING ACCOUNTS OR COMMERCIAL BANKING CUSTOMERS, GROWING THE KINDS OF LOANS WE WANT TO GROW AND TAKING THE RISKS WE WANT TO TAKE THAT WE THINK WILL PROVIDE STRONG RETURNS OVER CYCLES WITHOUT GETTING OVER OUR SKIS AND NOT PRETENDING IT'S ALL US, SOME OF IT IS THE MARKETS FOR SURE. ROMAINE: THE NUMBER THAT JUMPED OUT IN YOUR EARNINGS REPORT WAS THE GROWTH IN THE INVESTMENT BANKING BUSINESS.
YOU HAVE BEEN ON A HIRING SPREE THERE. DOES THAT CONTINUE?
CHARLIE: WE ARE HUGE LENDER TO CORPORATE'S, PROVIDING TREASURY SERVICES, WHAT WE ARE DOING IS BUILDING ON THOSE RELATIONSHIPS WITH A STRONGER SET OF PRODUCT SERVICES, COVERAGE GROUPS, M&A UNDERWRITING CAPABILITIES. WE HAVE BEEN VERY DISCIPLINED ABOUT ADDING RESOURCES SEQUENTIALLY, MAKING SURE THEY PAY OFF AND WE SEE THE RESULTS AND WE WOULD EXPECT THAT TO CONTINUE AS WE MOVE TOWARDS OUR AMBITION OF BEING TOP FIVE.
ROMAINE: THAT AMBITION, I'M CURIOUS IF YOU AND YOUR EXECUTIVE TEAM, BASED IN NEW YORK, OBVIOUSLY THE BANK IS HEADQUARTERED IN SAN FRANCISCO AND YOUR LARGEST EMPLOYEE BASE IS DOWN IN NORTH CAROLINA. CHARLOTTE, I BELIEVE.
AS YOU BUILD OUT THE INVESTMENT BANKING BUSINESS, CAN YOU DO THAT IN CHARLOTTE, SAN FRANCISCO, OR IS THAT A NEW YORK STORY? CHARLIE: IT'S A COMBINATION OF ALL OF THE ABOVE.
WE HAVE MORE RESOURCES IN NEW YORK, FOR SURE, BUT THERE ARE MORE IN NORTH CAROLINA AND CHARLOTTE AND ANY OTHER SPECIFIC LOCATION AND IT GOES BACK TO WACHOVIA AND WELLS FARGO. HALF OF OUR INVESTMENT BANK IS DOWN IN CHARLOTTE IN THE OTHER HALF IS HERE.
WOULD YOU HAVE OFFICES AROUND THE COUNTRY AND OTHER PARTS OF THE WORLD. SO, WE WOULD EXPECT TO SEE GROWTH IN BOTH LOCATIONS AND CLOSER TO SERVING CUSTOMERS ACROSS THE COUNTRY. ROMAINE: HOW COMMITTED IS WELLS FARGO TO ITS FOOTPRINT IN NEW YORK CITY?
CHARLIE: LISTEN, WE HAVE ABOUT 4000 OF 5000 IN NEW YORK AND THAT NUMBER AT THIS POINT WILL PROBABLY IN TOTAL STAY ROUGHLY WHAT IT IS.
YOU KNOW, THE QUESTION FOR US IS GOING TO BE WHERE IS THE BEST TALENT, WHERE DO THEY WANT TO LIVE, WHERE IS THE MOST ATTRACTIVE PLACE FOR THEM TO WANT TO LIVE AND DO BUSINESS.
VERY HARD TO GET PEOPLE TO MOVE FROM NORTH CAROLINA TO NEW YORK.
SOMETIMES IT'S HARD TO GET PEOPLE TO MOVE FROM NEW YORK DOWN THERE. THERE ARE PEOPLE THAT SELF SELECT IN OVERTIME, YOU KNOW, HOW NEW YORK DOES, HOW NORTH CAROLINA DOES, IT MATTERS TO WHERE PEOPLE WANT TO LIVE.
MATT: I AM CURIOUS ABOUT THAT. WITH YOUR BANK IN THE BUSINESS LINES YOU HAVE A KEEN INSIGHT TO THE GEOGRAPHIES AND WHEN YOU LOOK AT THE REBOUND POST-PANDEMIC, IN NEW YORK OR EVEN DOWN SOUTH, SOME OF THOSE MARKETS HERE, WHAT ARE YOU ACTUALLY HEARING FROM YOUR CLIENTS, THE PEOPLE YOU ARE ACTUALLY TALKING TO ABOUT WHERE THEY ARE DOING BUSINESS AND IF THEY ARE COMFORTABLE RIGHT NOW. CHARLIE: I WOULD SAY THAT WHAT YOU HEAR AND WHAT THEY SAY ARE DIFFERENT THINGS. PEOPLE ARE NERVOUS. THEY SEE WHAT'S GOING ON IN OTHER PARTS OF THE WORLD. THEY ARE CONCERNED ABOUT AI.
THOSE ARE THINGS THAT ARE VERY MUCH ON THEIR MIND.
WHEN YOU LOOK AT WHAT THEY ARE DOING, WHEN YOU LOOK AT CONSUMERS WHO ARE SPENDING MORE YEAR-OVER-YEAR WITH DELINQUENCIES THAT ARE DOWN AND THEY ARE SAVING MORE, THEY ARE DOING REALLY, REALLY WELL. WHEN YOU TALK TO SMALLER COMPANIES ACROSS COUNTRY, THEY ARE NERVOUS AND CONCERNED ABOUT HOW THEY SHOULD BE PLANNING FOR THE FUTURE BUT ARE IN GREAT FINANCIAL CONDITION. MATT: ARE YOU SURPRISED BY THAT GIVEN HOW PERSISTENT INFLATION HAS BEEN WITH OIL PRICES GOING UP AND GASOLINE AT FOUR DOLLARS PER GALLON, MORTGAGE RATES AT 6.5%? DOES THAT ECONOMIC RESILIENCY SURPRISE YOU? CHARLIE: YES AND NO.
LAYING THOSE THINGS OUT YOU WOULD HAVE ASKED, WOULD YOU HAVE HAD AS STRONG OF AN ENVIRONMENT TODAY? PROBABLY NOT.
BUT EMPLOYMENT IS STRONG IN WAGES FOR OUR CLIENTS ARE GROWING FASTER THAN INFLATION AND THAT IS GOING TO BE THE MOST IMPORTANT DRIVER ABOUT THE CONSUMER PERFORMS. THAT IS NOT TO SAY THAT IT WILL LAST FOREVER, BUT WE DO CONTINUE TO SEE THAT AND IT IS GOING TO DRIVE RESULTS.
ROMAINE: AS YOU CONTINUE THE GROWTH STORY FOR WELLS FARGO, DO YOU FEEL LIKE ECONOMIC CONDITIONS WILL BE AS SUPPORTIVE AS THEY HAVE BEEN OVER THE LAST COUPLE OF YEARS? CHARLIE: SEPARATING WHAT WE KNOW FROM WHAT WE WOULD GUESS, WE KNOW THAT STRENGTH CONTINUES.
LOOKING AT STATE -- STATS DAY IN AND DAY OUT, STRENGTHS OF CONSUMERS AND BUSINESSES HAVE NOT CHANGED.
ARE WE NERVOUS ABOUT WHAT THE FUTURE HOLDS? SURE.
THE FACT IS, THINGS ARE GOOD. MARKETS ARE STRONG.
THERE IS CERTAINLY VOLATILITY BUT THINGS ARE PRICED QUITE WELL IN THE CREDIT AND EQUITY MARKETS AND THERE IS A HUGE AMOUNT OF LIQUIDITY OUT THERE WITH FINANCING TAKING PLACE.
AND THAT DOESN'T GO ON FOREVER. WE ARE TRYING TO BE VERY THOUGHTFUL ABOUT RECOGNIZING THAT GOOD TIMES DON'T LAST FOREVER. BUT THINGS DON'T LOOK LIKE THEY ARE BREAKING QUITE YET. ROMAINE: IS YOUR EXPANSION OR GROWTH IN THIS BUSINESS GOING TO BE PRIMARILY IN THE U.S.?
THERE'S TALK THE YOU MIGHT BE LOOKING TO EXPAND YOUR BANKING INVESTMENT BUSINESS IN EUROPE.
CHARLIE: 95% OF OUR REVENUE COMES FROM THE U.S.. WE ARE THRILLED ABOUT THAT AND ARE BIG-TIME BULLISH ON THE U.S. WE WILL CONTINUE TO INVEST ALL OF OUR BUSINESS IN THE U.S. AND BELIEVE THAT THERE ARE SIGNIFICANT OPPORTUNITIES FOR US TO GROW WITH THE ECONOMY AND TAKE SHARE. THE INVESTMENT BANK DOES HAVE TO GROW OUTSIDE THE U.S.. FOR US TO SERVE LARGE COMPANIES AND MIDDLE-MARKET COMPANIES THAT WANT TO EXPAND PROPERLY, WE NEED TO HAVE A PRESENCE AND HAVE DISTRIBUTION CAPABILITIES AND ADVISORY CAPABILITIES. IT IS THERE PRIMARILY TO SERVE THE CUSTOMERS THAT WE DO BUSINESS WITH IN THE U.S.
ROMAINE: REGARDING THE PRIVATE MARKETS IN YOUR ROLE AT WELLS FARGO, YOU HAVE BEEN ADVISOR ON MULTIPLE DEALS, LIKE THE BROADCOM AI CENTER AND A COUPLE OF OTHERS HERE. YOU DON'T SEE ANY REAL CREDIT CONCERNS IN TERMS OF QUALITY IN THAT SPACE?
CHARLIE: PRIVATE MARKETS ARE A VERY BROAD GROUP OF PEOPLE. THERE ARE SOME THAT DO IT REALLY WELL THAT HAVE THE EXPERIENCE, THAT HAVE BEEN THROUGH CYCLES AND HAVE THE ANALYTICS AND THE RIGOR.
THOSE ARE THE ONES WE TRY TO DO BUSINESS WITH AND FOCUS OUR ATTENTION ON AND WE FEEL REALLY GOOD ABOUT THE CREDIT SUPPORT WE ARE PROVIDING FOR THEM. THERE ARE OTHERS OUT THERE WHERE PEOPLE SHOULD BE POTENTIALLY MORE CONCERNED, BUT WE DON'T HAVE BROAD EXPOSURE. WHEN WE SEE CERTAIN TRANSACTIONS, THERE ARE SOME ARE WILLING TO TAKE MORE RISK THAN OTHERS THAT SEEM TO HAVE DIFFERENT LEVELS OF DISCIPLINE AND ANALYTICS. SO, YOU KNOW, IF CREDIT TURNS DOWN, IT'S JUST LIKE IN THE BANKING UNIVERSE.
SOME DO IT WELL, OTHERS DO IT LESS WELL.
WE BELIEVE THE ONES WHO DO QUITE WELL ARE THE ONES THAT WE BANK. OTHERS NOT AS MUCH. THAT WILL BE SHOWING UP AWAY FROM US. ROMAINE: WITH THE STRUCTURE ON THESE AI DATA CENTER FINANCING DEALS, IS WELLS FARGO STILL WORRIED ABOUT DOING MORE? CHARLIE: WE ARE.
EVEN THOUGH IT'S A NECESSARY BUILD THAT NEEDS TO TAKE PLACE TO SUPPORT WHAT AI CAN DO, HERE LIKE WHEN WE TALKED ABOUT PRIVATE CREDIT, NOT EVERY TRANSACTION OR PIECE OF RISK IS THE SAME. WHO YOU FINANCE, WHO THE GUARANTOR IS, WHO HAS THE REVENUE MODEL, IT REALLY MATTERS. WE ARE VERY MUCH IN ACTIVE DIALOGUE AND NOT JUST WITH THE THINGS WE'VE DONE IN THE PAST, BUT WHAT WE WANT TO DO IN THE FUTURE AND YOU'VE GOT TO BE SELECTIVE ABOUT WHO YOU FINANCE AND WHAT THE STRUCTURES ARE.
ROMAINE: YOUR BOARD REORGANIZED YOUR COMPENSATION TO KEEP YOU AROUND FOR ANOTHER SIX YEARS, 2031.
THERE HAS BEEN A LOT OF TALK AS TO WHETHER YOU WILL BE THERE THROUGH 2031 OR IF YOU WOULD HAVE AMBITIONS MAY BE TO TAKE THE SEAT OF ANOTHER CEO JOB. CHARLIE: I HAVE NO AMBITION TO DO ANYTHING OTHER THAN STAY AT WELLS FARGO, BUILD WELLS FARGO, RETIRE AT WELLS FARGO.
THAT'S WHAT I INTEND TO DO AND WHAT I'M GOING TO DO.
BY THE WAY, I THINK IT'S A GREAT SEAT.
IF SOMEONE COULD GIVE YOU THE OPPORTUNITY TO RUN A COMPANY LIKE WELLS FARGO WITH THE QUALITY OF A BUSINESS THAT HAS BEEN SO CONSTRAINED FOR SO LONG AND HAS PICKED AND CHOSEN THE BUSINESSES TO BE IN? WE HAVE AMAZING OPPORTUNITIES TO CONTINUE TO DO BETTER JOBS FOR OUR CLIENTS TO GROW INCREASE RETURNS AND I THINK WE CAN MAKE A DIFFERENCE IN THIS COUNTRY AND THAT IS INCREDIBLY APPEALING. ROMAINE: DO YOU EVER FORGET YOUR OLD EMPLOYERS IN GET ENVIOUS?
CHARLIE: NO, I DON'T GET ENVIOUS.
YOU CAN LEARN A LOT FROM PEOPLE. A LOT OF COMPANIES OUT THERE DO WELL. THEY HAVE DONE WELL. HOPEFULLY OVER TIME THEY WILL LOOK AT US AND FEEL THE SAME WAY. MATT: YOU EVER TALK TO JAMIE DIMON? CHARLIE: I TALKED TO JAMIE, I TALK TO OTHER LEADERS IN THE BUSINESS.
WE HAVE THINGS WE AGREE ON BUT WE COMPETE HARD. ROMAINE: I HAVE TO ASK YOU ABOUT THE STORY FROM THE OTHER DAY THAT ALLEGED THE HEAD OF THE IRS AND SOCIAL SECURITY ADMINISTRATION WHO USED TO WORK AT J.P. MORGAN ALLEGEDLY SPIED ON SOME OF HIS RIVALS WITHIN THE ORGANIZATION, INCLUDING YOU WHEN YOU ARE RUNNING THE COMMERCIAL BUSINESS.
IS THERE ANY TRUTH TO THAT OR WERE YOU AWARE? CHARLIE: I HAVE NO IDEA. FRANK AND I HAVE KNOWN EACH OTHER FOR MAYBE 30, 35 YEARS. SPOKE TO HIM THE OTHER NIGHT.
HE SAYS IS NOT TRUE. BY THE WAY, I DON'T KNOW WHAT I WOULD HAVE THAT ANYONE WOULD BE INTERESTED IN. MATT: ROMAINE: -- ROMAINE: WHEN YOUR NEXT SIX YEARS ARE WRAPPED UP, WHAT EXACTLY DO YOU WANT TO MAKE SURE IT GETS DONE OVER THE NEXT SIX YEARS? I THINK WE HAVE GOT THE OPPORTUNITY NOT JUST TO HAVE WELLS BE A BETTER-PERFORMING COMPANY, BUT BE BACK TO WHAT WE SHOULD BE, WHICH IS THE BEST-PERFORMING FINANCIAL INSTITUTION IN THE COUNTRY.
EACH MEANS SUSTAINABLE GROWTH WITH THE HIGHEST RETURNS ADJUSTED FOR OUR BUSINESS MIX. THAT SHOULD DRIVE US TO BE THE MOST RESPECTED BANK IN THIS COUNTRY, AND WE COMPETE WITH GREAT PEOPLE OUT THERE, SO IT'S NOT GOING TO BE EASY TO DO.
THAT IS OUR GOAL. ROMAINE: THANK YOU.
DANI, BACK TO YOU IN NEW YORK. DANI: THANK YOU SO MUCH FOR THAT FANTASTIC CONVERSATION. THAT WAS BLOOMBERG'S ROMAINE BOSTICK WITH WELLS FARGO CEO CHARLIE SCHARF.
LET'S GET THIS TRADING DAY STARTED.
WE ARE STARTING ON THE BACK FOOT THIS MORNING, DOWN NEARLY.25%. WE ARE AWAITING ALPHABET EARNINGS.
THE OPENING BELL, IT IS NICE TO SEE FACES YOU ARE NOT USED TO ON BLOOMBERG. DOWN AT THE NEW YORK STOCK EXCHANGE CELEBRATING THEIR 30 YEAR PARTNERSHIP WITH CNBC.
YOU HAVE JIM CRAMER, SOME OTHER EXECUTIVES AND FRIENDS OF CNBC, I SUPPOSE. VERY META TO SEE THEM ON BLOOMBERG. AT THE NASDAQ YOU HAVE CHURCH HILL, A SPAC. THEY ARE ABOUT TO COMPLETE A MERGER WITH AGILITY, WHICH IS A ROBOTICS COMPANY.
SPACS ARE BACK. ISABELLE: WE ARE LOOKING AT SOME OF THE BIGGEST MOVERS TODAY, AND THEY ARE THE CARRIERS AND THE BROADBAND. I SHOULD STOP SAYING THEY ARE CARRIERS. WE HAVE AT&T BEATING SUBSCRIBER GROWTH ESTIMATES BY MORE THAN 100,000 IN THE SECOND QUARTER.
AT&T HAS ROLLED OUT INCENTIVES OVER THE PAST YEAR AMID A PRICE WAR WITH ITS PEERS, WHO ARE CLIMBING ON THE RESULT.
AT&T POPPING 3%. VERIZON AND T-MOBILE UP BY MORE THAN 1%. DANI: I'M LOOKING -- LOOKING AT SOME OF THE TECH HEAVY WEIGHTS WE ARE GOING TO BE HEARING FROM AFTER THE BELL. NAMELY, ALPHABET.
TO SEE IF THERE IS ANY TANGIBLE RETURN ON INVESTMENTS FROM A I.
IBM HAS BEEN INCREDIBLY VOLATILE.
AT ONE POINT FALLING 20% ON A NEGATIVE PRE-ANNOUNCEMENT.
TESLA, WE ARE ALSO GOING TO HEAR FROM THEM AS WELL.
JOINING US NOW IS UBS GLOBAL HEAD OF EQUITY STRATEGY, NADIA LOVELL. IT IS THE TIME TO TAKE A DEEP BREATH BEFORE ALL OF THESE EARNINGS START.
WITHOUT THE BIT SPECIFICALLY, I WONDER HOW MUCH YOU ARE LOOKING AT THIS COMPANY IN SAYING -- WITH ALPHABET SPECIFICALLY, I WONDER HOW MUCH YOU ARE LOOKING AT THE COMPANY VERSUS THE CYCLE?
NADIA: IT IS AN IMPORTANT THING TO WATCH FOR TODAY. FORCING POSITIONING AHEAD OF THAT AND A SORT OF EVENT-DRIVEN POSITIONING.
BUT I THINK UNDER THE SURFACE WE HAVE HAD THIS POSITIONING GOING ON FOR A COUPLE OF WEEKS.
WHEN I THINK ABOUT LOOKING FORWARD TO ALPHABET'S REPORT, I WOULD PUT IT NOT ENTIRELY ALL ABOUT THE AI TRADE.
LAST QUARTER THE EXPERIENCE ROUND OFF OF WAS DIFFERENT, WHERE THEY SAW CLOUD REVENUE GROW 60 PERCENT.
THE INCREASED CAPEX. THEIR PEERS DID NOT GET THE SAME BENEFIT OF THE DOUBT. I THINK WHAT THE MARKET REALLY WANTS TO SEE IS THAT YOU ARE SEEING A PATH TO MONETIZATION, SO CLOUD REVENUES WILL BE WATCHED CLOSELY.
SEARCH WILL BE WATCHED CLOSELY, BECAUSE THE MARKET IS LESS FOCUSED ON IF CAPEX IS GOING TO INCREASE.
WE KNOW THE AI SPENDING AS WELL-SUPPORTED.
HAVE SEEN CAPITAL RAISES, WHETHER IN THE DEBT MARKET OR EQUITY MARKET. NOW, WHAT IS THAT RETURN ON INVESTED CAPITAL? AND ARE WE SEEING IT IN PRODUCTS? ARE WE SEEING IT IN CLOUD AND OTHER AREAS OF THE ECOSYSTEM? ISABELLE: YOU DON'T EXPECT CAPEX CUTS, BUT INVESTORS ARE INCREASINGLY LOOKING FOR WHEN THEY WILL SEE THE RETURN ON INVESTMENTS.
AT WHAT POINT DO YOU THINK MONETIZATION WILL BECOME A THING THEY WILL REALLY BE HOLDING ONTO? NADIA: I THINK WE ARE STARTING TO SEE THAT.
IN TERMS OF HOW SOME OF THESE STOCKS ARE TRADED.
THE MARKET WILL REWARD IF YOU INCREASE, BUT YOU ARE ALSO SEEING MONETIZATION. IF YOU ARE JUST INCREASING CAPEX AND YOU ARE POINTING TO SPENDING JUST TO SPEND BECAUSE YOUR PEERS ARE SPENDING AND THERE IS NOT A CLEAR PATH TO MONETIZATION, INVESTORS WANT TO SEE THAT LINE OF SIGHT.
THEN YOU ARE GOING TO BE PUNISHED.
I THINK WHAT YOU ARE GOING TO BE WATCHING CLOSELY IS THE CLOUD REVENUES, BECAUSE THAT IS THE BEST INDICATION RIGHT NOW.
AND ARE YOU SEEING IT COMING THROUGH IN TERMS OF BETTER TRACTION AROUND ADVERTISING, BETTER TRACTION AROUND SEARCH OR ANY OTHER PRODUCT LAUNCHES THAT ARE AI-RELATED AND A PATH TO MONETIZATION? DANI: IT IS NOT JUST TECH, IT IS EARNINGS WRIT LARGE. EXPECTATIONS ARE HIGH.
I WAS READING THROUGH SOME OF THE DATA. THE RATIO OF COMPANIES UPGRADING THEIR OUTLOOK VERSUS CUTTING OR KEEPING IT IS THE HIGHEST SINCE BLOOMBERG STEADY GOING BACK TO 2011.
PROFITS ARE EXPECTED TO RISE 26% IN THE SECOND QUARTER.
SOMETHING THAT HAS NEVER HAPPENED OUTSIDE OF A RECESSIONARY PERIOD. EARNINGS IN THE FIRST HALF OF THIS YEAR ARE EXPECTED TO REACH 28%.
MOST SINCE 2004, IF YOU EXCLUDE THE REBOUNDS FROM THE PANDEMIC AND THE GFCI. WHAT -- GFC.
IS THAT A BAR WE CAN MEET OR BEAT? NADIA: OUR EXPECTATIONS FOR THE SECOND QUARTER IS 28%, AND THAT MIGHT BE CONSERVATIVE. IT IS NOT JUST THE AI STORY.
WE KNOW SEMICONDUCTORS HAVE CONTRIBUTED ABOUT 40% OF THAT.
WHAT YOU ARE ALSO SEEING A BROADENING OUT.
TALK ABOUT AT&T, AND THAT YOU ARE SEEING A BROADENING OUT OF PROFIT BECAUSE THE ECONOMY ITSELF IS DOING WELL.
YOU ARE SEEING A PICKUP IN MANUFACTURING ACTIVITY.
LOOK WHAT THE BANKS PUT UP IN TERMS OF LONG GROWTH.
THAT IS A HEALTHIER SCENARIO FOR THE MARKETS.
YOU DON'T WANT A MARKET THAT CONTINUES TO BE OVERLY-CONCENTRATED IN THE AI OR SEMI'S.
ONE A MARKET WHERE YOU ARE SEEING A BROADENING OUT, AND WE HAVE SEEN THAT IN FINANCIALS, INDUSTRIALS.
WE HAVE SEEN THAT IN HEALTH CARE. THAT IS IMPORTANT FOR THE DURABILITY OF THIS BULL MARKET, AND THE EARNINGS ARE COMING THROUGH.
WE ARE LOOKING AT 12% EARNINGS GROWTH FOR THE SECOND QUARTER.
ISABELLE: CAN THE MARKET CARRY THEMSELVES HIGHER? WILL THE S&P REACH NEW HIGHS?
NADIA: YOU HAVE SEEN THAT THE LAST FEW WEEKS. THE INDEX LEVEL HAS BEEN QUITE RESILIENT, BECAUSE THESE OTHER AREAS OF THE MARKET HAS BEEN ABLE TO DELIVER THE EARNINGS GROWTH AND HAS BEEN HOLDING UP.
DO YOU NEED PARTICIPATION FROM THE MAG 7?
WHEN YOU LOOK AT THE MAG 7 PERFORMANCE YEAR-TO-DATE IT IS NOT ALL THAT ROSIE COMPARED TO THE OTHER PARTS.
I THINK THE QUESTION IS MORE, DO YOU NEED THE AI ECOSYSTEM TO DELIVER? ABSOLUTELY, YOU DO. JUST BECAUSE MATHEMATICALLY THE OVERALL WEIGHT. DO YOU NEED SEMI'S TO CONTINUE TO PERFORM? AND MAG 7?
IF YOU DON'T HAVE SEMI'S PERFORMING AND MAG 7 IS LACKING THAT HAS BROADER IMPLICATIONS FOR THE INDEX, BECAUSE THE S&P IS A MARKET CAP-WEIGHTED INDEX. I THINK THE REST OF THE MARKET SEEMS TO BE -- THE LAGGARDS ALSO SEEM TO BE CATCHING A BID RECENTLY. DANI: ONE OF THE THINGS I'M TRYING TO UNDERSTAND ABOUT THE AI TRADE IS THIS DIVERGENT THAT HAS HAPPENED, OR NEGATIVE CORRELATION THAT HAS PRESENTED ITSELF.
IT SEEMS EVERYDAY YOU HAVE THE HYPERSCALERS RALLYING, THE CHIP STOCKS ARE DOING POORLY. IN THE CHIP STOCKS ARE DOING WELL THE HYPERSCALERS ARE DOING POORLY.
I WONDER IF YOU EXPECT THAT RELATIONSHIP TO CONTINUE? NADIA: WE THINK THEY BOTH CAN WORK. NOT NECESSARILY ALWAYS AT THE SAME TIME OR FOR THE SAME REASONS.
WE KNOW WHAT IS DRIVING THE SEMI CONDUCTOR TRADE.
IT IS THAT DEMAND FOR COMPUTE. YOU KNOW THE HYPERSCALERS, THE BIASES -- BIAS IS TO CONTINUE TO SPEND.
AT THE SAME TIME WHAT NEEDS TO HAPPEN FOR THE HYPERSCALERS?
THEY NEED TO SHOW THAT MONETIZATION, THAT RETURN ON INVESTMENT. THAT NEEDS TO COME THROUGH AND IF WE START TO SEE MORE INDICATIONS OF THAT IN THIS EARNINGS SEASON YOU CAN START TO SEE A REREAD OF THE HYPERSCALERS.
WE ALREADY KNOW INVESTORS CONCERNS -- INVESTORS' CONCERNS HAVE SOMEWHAT BEEN PRICED IN. THEY ARE STARTING TO GET A BID AGAIN. OUR VIEW IS THAT FROM THE RISK/REWARD STANDPOINT THE HYPERSCALERS COULD LOOK BETTER NEAR TERM.
WE HAVE CLOSED OUR UNDERWEIGHT EXPOSURE IN OUR INNOVATION OPPORTUNITY AI PORTFOLIO TO THE HYPERSCALERS.
WE ARE NOW NEUTRAL ON THE HYPERSCALERS, BUT WE DO NOT THINK THIS IS A ZERO-SUM GAME. THINK OVER THE LONGER TERM AS LONG AS YOU SEE AI ADOPTION CONTINUE TO ACCELERATE THEN YOU CAN SEE BOTH PERFORM WELL. BUT IN THE SHORT TERM YOU COULD SEE SOME ROTATION BETWEEN THE TWO. ISABELLE: YOU ARE MORE SELECTIVE ON YOUR NOTES WHEN IT COMES TO SEMI CONDUCTOR. IS THAT A VALUATION CALL OR HAS THE AI RUN AHEAD OF FUNDAMENTALS? NADIA: WHEN YOU LOOK AT SEMI CONDUCTORS IN THE S&P EPS ARE -- EPS GROWTH IS EXPECTED TO BE OVER 100%.
I THINK IT IS MORE THAT THEY HAVE HAD A VERY STRONG RALLY.
TACTICALLY WE HAVE TAKEN SOME OFF THE TABLE, BUT WE ARE STILL OVERWEIGHT SEMI CONDUCTOR'S. THINK THE SPREAD HAS LEGS AND WHAT WE HAVE HEARD FROM SOME OF THE ASIAN SUPPLIERS -- YOU KNOW, THERE IS VISIBILITY OUT FOR A COUPLE OF YEARS, SO THAT GIVES YOU SOME COMFORT IN THE ABILITY FOR EARNINGS TO CONTINUE TO GROW. YOU KNOW, INTO 2027.
A QUESTION MARK COMES AROUND 2028 AND WHAT HAPPENS TO?
WE EXPECT CAPEX TO GROW 70% THIS YEAR. NEXT YEAR, 30% OR SO.
WHAT HAPPENS IN 2028? WE NEED THAT MONETIZATION TO COME THROUGH TO CONTINUE TO ENCOURAGE SPENDING. DANI: SUCH A PLEASURE TO HAVE YOU ONE. THAT IS UBS GLOBAL WEALTH'S NADIA LOVELL. LET'S GET A CHECK ON YOUR EQUITY MARKETS. IT WAS AN UP DAY YESTERDAY.
TURNS INTO A DOWNTURN TODAY, BUT ARE WE JUST TREADING WATER AHEAD OF EARNINGS? THE BIGGEST GAIN OR SO FAR IN THIS MORNING'S SESSION, PHILLIP MORRIS REPORTING EARNINGS.
IT TRIMMED THEIR OUTLOOK BECAUSE OF THE CURRENCY HIT AND THINGS LIKE THE WAR IN IRAN. BUT THEY SAY THE CONSUMER IS RESILIENT. WE ARE POSITIVE ON OUR ZYN PRODUCTS. THUS, YOU GET A RALLY OF NEARLY 5%. DELL IS DOING WELL.
SUPER MICRO REPORTED EARNINGS. PRELIMINARY EARNINGS.
AND DELL RALLYING IN SYMPATHY. AT&T, ALSO VERY STRONG EARNINGS, OPEN THE TOP PILE. TO THE DOWNSIDE YOU HAVE MICROSOFT DOWN 1.3 PERCENT. A LOT OF THE HYPERSCALERS HAVING A BAD DAY TODAY. GE VERNOVA ALSO REPORTING EARNINGS THAT DISAPPOINTED. YOU CAN SEE THOSE SHARES SINKING 6.6%. IT'S GIVE A LOOK AT YOUR SECTORS THIS MORNING. ONLY THREE ARE DECLINING, BUT THAT SHOWS YOU HOW IMPORTANT TECH IS IN THIS INDEX.
IF THE MAG 7 DISAPPOINTS CAN EVERYTHING ELSE HOLD US UP TODAY? THE ANSWER IS NO. INFOTECH FALLING.7%.
CHEERIOS, UTILITIES DOING WELL. ENERGY SPECIFICALLY DOING WELL AS THERE CONTINUES TO BE DISRUPTIONS NOT JUST IN THE STREET OF HORMUZ, BUT THE RED SEA AS WELL. ISABELLE: THAT IS SUCH A GREAT POINT. WE HAVE OPTIONS MARKETS SIGNALING, AND IT REALLY IS A SIGNAL OF HOW IMPORTANT THIS WEEK IS. COMING UP, A TRIO OF BIG TECH EARNINGS. AFTER THE BELL TODAY WE TAKE A CLOSER LOOK NEXT. THIS IS BLOOMBERG "OPEN INTEREST." ♪ ISABELLE: TIME NOW FOR OUR TOP CALLS.
SOME OF THE ACTION IN FOCUS THIS MORNING'S. J.P.
MORGAN, RAISING ITS PRICE TARGET ON CAPITAL ONE, HIGHLIGHTING THE COMPANIES STRONG CREDIT AND SALES GROWTH.
THE STOCK IS DOWN BY NEARLY 2.5%.
NEXT UP, BARCLAYS CUTTING ITS PRICE TARGET ON ALASKA AIR, CITING A WEAKER THIRD-QUARTER OUTLOOK COMPARED WITH COMPETITORS DELTA AND UNITED. DOWN BY NEARLY 5%.
FINALLY, BAIRD INITIATING COVERAGE OF IBM WITH A NEUTRAL RATING, POINTING TO DURABILITY CONCERNS FOLLOWING EARNINGS RELEASE LAST WEEK. YOU SEE THE STOCK THERE UP BY AROUND.3%. DANI: STAYING WITH TECH, IBM IS GOING TO BE JOINING ALPHABET AND TESLA IN REPORTING EARNINGS AFTER THE BELL.
JOINING US NOW IS MANDEEP SINGH. I LOVE WHEN THE SELL SIDE COMES AROUND A WEEK OR TWO LATE AFTER IBM HAS SEEN THIS BLOCKBUSTER CATALYST. I'M GUESSING IT IS REALLY ALPHABET AND THEIR NUMBERS. HOW MUCH ARE YOU LOOKING AT THIS? ARE YOU LOOKING AT IT AND SAYING, OK, THIS IS A REFERENDUM ON OUR FOOT BIT VERSUS THE ENTIRETY OF THE CYCLE? MANDEEP: IN MY MIND THE CLOUD SEGMENT HAS TO SHOW A SEQUENTIAL ACCELERATION, PARTLY BECAUSE OF WHAT HAS TRANSPIRED IN THE QUARTER, WHICH INCLUDES TOKEN MAXING AND EVERYONE REALLY RUNNING OUT OF THEIR CREDITS TO RUN THESE LL M'S.
-- LOM'S. THE CLOUD SEGMENT HAS BEEN THE FASTEST GROWING OF ALL THE HYPERSCALERS.
THEY WERE GROWING 63% LAST QUARTER.
YOU WANT TO SEE A BIG SEQUENTIAL ACCELERATION.
THAT WOULD BE THE JUSTIFICATION TO RAISE.
THEY ALREADY DID AN EQUITY RAISE AND NOW OUR NUMBERS ARE 300 BILLION DOLLARS IN CAPEX FOR 2027. IT IS MUCH HIGHER THAN CONSENSUS BUT I THINK YOU WILL SEE A BIG BEAT ON THE CLOUDS SATURDAY FROM ALPHABET. ISABELLE: WHAT ABOUT TESLA?
IT SEEMS LIKE IT IS THE OPPOSITE STORY, BECAUSE INVESTORS WANT TO SEE A EYES SPENDING.
ANYTHING YOU ARE GOING TO BE ON THE LOOKOUT FOR? MANDEEP: WITH TESLA THINGS HAVE BECOME MURKY, WITH WHAT WILL GO TO SPACEX VERSUS WHAT TESLA WILL BE SPINNING ON THEIR CAPEX.
WHEN IT COMES TO SPACEX WE ALREADY KNOW HOW BIG OF A BENEFIT THEY ARE GETTING FROM THE DATA CENTERS THEY HAVE SET UP ALREADY AND HOW IT IS TRANSLATING INTO REAL REVENUE.
TO MY MIND I THINK ELON MUSK DOES BELIEVE IN AI IN A BIG WAY AND I WOULD NOT BE SURPRISED IF HE PLANS TO RAISE CAPEX EVEN FOR TESLA. DANI: WE NEED THESE TWO COMPANIES GOING TO MERGE? IT IS INEVITABLE, RIGHT?
MANDEEP: I MEAN, THERE ARE SO MANY REGULATORY ASPECTS TO THIS. DANI: I THOUGHT REGULATORS WERE SUPER CHILL WITH EVERYTHING RIGHT NOW?
MANDEEP: EVEN WITH THE LLM'S WE ARE FINDING THINGS CHANGING, AND IN TERMS OF WHAT ADOPTION WE ARE GOING TO SEE AT THE ENTERPRISE LEVEL. DANI: CAN I ASK A QUESTION THERE? WE HAVE TALKED ABOUT CHINESE OPEN SOURCE MODELS. WHAT IS THE STATE OF U.S.
OPEN SOURCE LOM -- LLM'S? MIGHT YOU SEE ANTHROPIC OFFER THEIR OWN OPEN SOURCE BECAUSE THEY REALIZE THEY NEEDED TO COMPETE CHECK ON HOW LIKELY IS IT THAT AN OPEN SOURCE ECOSYSTEM IS JUST AS ROBUST? MANDEEP: YOU DO HAVE GEMINI OFFERING THEIR MOTTO WITH AN OPEN-SOURCE OPTION, AND OPENAI AS WELL. THE PROBLEM IS THERE IS A BIG GAP BETWEEN THE OPEN SOURCE VERSUS WHAT GEMINI AND OPENAI OFFER RIGHT NOW. THAT IS WHERE ENTERPRISE IS WORRIED ABOUT TOKEN COSTS. AT THE END OF THE DAY IT IS YOUR TOTAL COST OF OWNERSHIP THAT DETERMINES WHICH MODEL YOU ARE GOING TO ADOPT, AND YOU CARE ABOUT THE FUTURE.
YOU DON'T WANT THAT MODEL TO BE BANNED TWO MONTHS FROM NOW.
THAT IS THE COMMITMENT YOU ARE LOOKING AT IN TERMS OF, IS IT SOMETHING I CAN BUILD MY APPLICATION ON TOP OF?
I THINK THERE ARE A LOT OF CONSIDERATIONS AT PLAY HERE.
ISABELLE: WHAT ABOUT GOOGLE? WILL AI SPENDING TRANSLATE INTO FASTER CLOUD GROWTH? IS THAT WHEN INVESTORS WILL BE LOOKING FOR? MANDEEP: YES. SEARCH WILL ALWAYS BE DOMINANT ON A GOOGLE EARNINGS CALL. ISABELLE: EVEN WITH CHATGPT?
I HAVE GONE TO SEARCH LESS. I HAVE GONE TO CHATGPT SOMETIMES. MANDEEP: LOOK AT HOW FAST GOOGLE HAS BEEN GROWING. LAST QUARTER THEY GREW 19%.
THIS QUARTER THE CONSENSUS IS AROUND 16%.
THE PROBLEMS WITH THESE LLM'S IS THEY ARE STILL CONSUMPTION-BASED MODELS. THEY DON'T HAVE ADS.
UNTIL ANALYSTS, YOU KNOW, CHATGPT START SHOWING ADS AND THEIR ABLE TO MONETIZE, GOOGLE SEARCH CONTINUES TO BE DOMINANT.
I WOULD AGREE WITH YOUR QUESTION THAT FROM A VOLUME PERSPECTIVE, VOLUME FOUR GOOGLE SEARCH PROBABLY HAS TAKEN A HIT AND IT WILL BE INTERESTING TO SEE HOW IT IMPACTS. DANI: ISN'T THAT ONE OF ANTHROPIC'S BIG ADVERTISING CAMPAIGNS?
YOU ARE GOING TO CHATGPT AND GETTING ADS AND WE WON'T HAVE IT? ISN'T THAT ONE OF THEIR SELLING POINTS? MANDEEP: AT THE END OF THE DAY WE KNOW ADS IS A VERY DOMINANT MODEL FOR ALL OF THE INTERNET PLAYERS.
AND I WOULD BE VERY SURPRISED IF THAT CHANGES WITH LLM'S.
EVEN THOUGH THEY ARE EXPENSIVE TO DEPLOY RIGHT NOW, WHICH IS WHY THOSE COMPANIES DON'T HAVE A CHOICE BUT TO USE A CONSUMPTION MODEL. OVER TIME ALL OF THESE PLATFORMS HAVE AN ADS COMPONENT, AND I EXPECT THAT TO BE THE CASE WENT ANTHROPIC AND OPENAI. ISABELLE: I AM CHEAP.
I SIT THROUGH THE ADS. DANI: NO, I WILL PAY UP. ISABELLE: THAT IS WHY WE ARE DIFFERENT. DANI: CONVENIENCES WHAT I PAY FOR. ISABELLE: THE LOVE THAT WE CAN ASK YOU ANYTHING TECH.
MANDEEP SINGH OF BLOOMBERG INTELLIGENCE.
AT&T EARNINGS, WITH PERKS FOR CUSTOMERS.
THIS IS BLOOMBERG "OPEN INTEREST." ♪ >> I DO BELIEVE THAT THE MARKET WILL EVENTUALLY UNDERSTAND THAT WHAT WE HAVE BUILT IS INDISPENSABLE FOR THE KIND OF WORKLOADS WE ARE GOING TO SEE IN THIS AI ENVIRONMENT AND THAT AT&T IS UNIQUELY POSITIONED IN THE INVESTMENTS WE HAVE MADE OVER THE LAST FIVE YEARS TO SERVE MORE OF THOSE WORKLOADS EFFECTIVELY. AND EVENTUALLY THE MARKET WILL FIGURE THAT OUT, AND WHEN THE CASH IT SHOWS UP VALUATION WILL ULTIMATELY CORRECT ITSELF. ISABELLE: THAT IS AT&T CEO JOHN STANKEY AFTER REPORTING HUGE SUBSCRIBER GROWTH.
WHAT HAVE WE LEARNED FROM AT&T? IT IS SUCH A COMPETITIVE LANDSCAPE, BUT THEY SEEM TO BE BEATING THEIR PEERS?
>> AT&T HAD A ROUGH GO IN THE FIRST QUARTER.
THEY CAME UP SHORT ON SOME ESTIMATES AND THEY WERE HOPING TO SORT OF TURN THINGS AROUND THIS QUARTER.
THAT IS EXACTLY WHAT WE HAVE SEEN.
WE HAVE SEEN SOME EARLY ANALYST REPORTS SAYING AT&T BE ON EVERYTHING THAT MATTERS TO INVESTORS THIS QUARTER.
THEIR SUBSCRIBERS WERE UP FOR MOBILE SERVICES, DATED REALLY WELL ON ADDING FIBER CUSTOMERS. WE HAVE GENERALLY SEEN THAT THE COMPANY IS DOING A REALLY GOOD JOB PULLING SHARE AND THEY COMBINE THOSE MOBILE CUSTOMERS WITH HOME INTERNET CUSTOMERS.
DANI: HOW MUCH IS THAT COMPETITION GOING TO GET EVEN WORSE, WITH NEWS OF SPACEX JOINING FORCES WITH OTHER PROVIDERS, GETTING INTO THIS BUSINESS?
IS THE PRICE WERE ABOUT TO ACCELERATE? KELCEE: THAT IS SOMETHING JOHN STANKEY WAS ASKED ABOUT.
HE WAS VERY MEASURED IN WHAT HE IS SAYING ABOUT SATELLITE.
HE IS MOSTLY SAYING THAT SATELLITE IS A COMPLEMENT TO OUR NETWORK. WE ARE LOOKING AT SATELLITE AS A WAY TO FILL IN GAPS AND MAY RETIRE SOME EXPENSIVE INFRASTRUCTURE. AND TO CUT COSTS SAVINGS.
ON THE CUSTOMER SIDE, HE HAS BEEN AT THE HELM OF INTRODUCING SOME NEW PRICING PLANS THAT ARE GIVING CUSTOMERS A BIT MORE CHOICE IN HOW THOSE PLANS LOOK. AT&T HAS ALSO INTRODUCED SOME PRICE INCREASES IN THE LAST QUARTER.
SO, WE MIGHT BE SEEING THAT SHOW UP IN THERE IS ALSO LITTLE BIT. IT IS HARD TO SAY RIGHT NOW WHETHER THAT IS GOING TO HER CUSTOMERS OR HELP AT&T'S REVENUE, BUT SO FAR IT WAS A PRETTY GOOD QUARTER. ISABELLE: THE COMPANY IS ALSO LEANING INTO BUNDLING BROADBAND AND WIRELESS.
IS THIS BECOMING THE GUEST COMPETITIVE ADVANTAGE IN THE INDUSTRY RIGHT NOW? KELCEE: THAT IS WHAT AT&T THINKS.
THEY HAVE LEANED INTO THIS CONVERGENCE STRATEGY, AND IN THIS QUARTER THEY HAVE SAID THAT PAID OFF.
THEY HAVE SEEN SOMEWHERE AROUND 42% OF CUSTOMERS WHO TAKE AT&T HOME INTERNET ALSO TAKE AT&T WIRELESS SERVICE.
THAT IS A MODEL THEY ARE REALLY INVESTED IN. DANI: WE REALLY APPRECIATE YOUR COVERAGE THIS MORNING.
DOES AT&T SHARES UP NEARLY 4%.
COMING UP, WE WILL SPEAK WITH J.P.
MORGAN'S JORDAN JACKSON AND HOW WALL STREET WILL REACT TO CHANGES.
IN CASE YOU HAVEN'T HEARD IT ENOUGH, WE WILL GET OUT FOR BETTER EARNINGS AFTER THE BELL. THEN WE WILL SPEAK WITH MARC ROSEN OF CATALYST BRANDS. THEY OWNED COMPANIES LIKE BROOKS BROTHERS, BUT NOT A LOT OF THE IPO THAT BELONGS TO AUTHENTIC BRANDS. HE WILL SPEAK TO ITAY MICHAELI AHEAD OF TESLA EARNINGS. WHAT WILL THEY BRING?
ALL OF THAT HAPPENING IN JUST A FEW MINUTES AFTER THIS COMMERCIAL BREAK. YOU ARE WATCHING BLOOMBERG "OPEN INTEREST." ♪ DANI: 30 MINUTES INTO YOUR TRADING DAY. WELCOME BACK. MATT MILLER STILL ON PATERNITY LEAVE. IT IS A MARKET THAT IS AWAITING EARNINGS FROM ALPHABET. HIGHER YIELDS AND HIGHER OIL PRICES MAY BE POTENTIALLY WEIGHING ON THE MARKET.
ALPHABET KICKS OFF BIG TECH EARNINGS WITH AI SPENDING UNDER SCRUTINY. ISABELLE: TESLA JOINS THE EARNINGS PARADE AS INVESTORS QUESTION CYBER TRUCK STAYING POWER. DANI: CHARLIE SCHARF'S BIG TIME BULLISH ON AMERICA.
WE BEGIN WITH BIG TECH. ALPHABET, TESLA AND IBM SET TO REPORT AFTER THE BELL.
ED LUDLOW JOINS US FROM SAN FRANCISCO.
ALL EYES AND WHAT ALPHABET SAYS FURTHER NUMBERS.
WHAT OUR EXPECTATIONS? ED: THE CURRENT GUIDANCE IS $190 BILLION FOR THE YEAR AT THE TOP END AND IT IS IN LINE WITH THE DIRECTION OF TRAVEL FOR IN PART BECAUSE OF THE COST ENVIRONMENT BUT ALSO THEY WOULD ARGUE IT MEETS THE DEMAND, THIS SPENDING FOR A REASON -- FOR COMPUTE CAPACITY.
WITH ALPHABET AND GOOGLE IN PARTICULAR, IS A LOT OF FOCUS ON THE CORE SEARCH BUSINESS. HOW IT IS MADE BETTER FROM AI.
IN REALITY, OVERALL GROWTH OF 20%, IT IS REALLY IN GOOGLE CLOUD WHERE THERE IS MOMENTUM. 65% TOPLINE GROWTH AND WHERE IT WILL BE A MAINSTAY FOCUS TO ANSWER THE QUESTION WHAT HAS BEEN THE RESULT OF ALL THIS SPENDING TO DATE? ISABELLE: AND THEN THERE IS TESLA AND THE STORY ALMOST SLIPS.
INVESTORS WANT TO SEE MORE AI SPENDING.
WHY ARE INVESTORS JUDGING TESLA TO A DIFFERENT STANDARD?
YOU ARE THE PERFECT PERSON TO ANSWER THIS. ED: RIGHT NOW, THE STOCK PRICE IS IN THE AI FUTURE FOR TESLA.
THE FUTURE OF THE ROBOTAXI SERVICE, PROPRIETARY RIDE-HAILING SERVICE, AND THE POTENTIAL OF HUMANOID ROBOTICS.
THIS COUNTS THE VALUE OF THE CAR BUSINESS.
RIGHT NOW, TESLA HAS TOLD US CAPITAL EXPENDITURES WILL BE $25 BILLION WHICH FOR TESLA IS UNPRECEDENTED.
THE DATA POINT YOU TRACK AS WE GO IS ARE THEY TRACKING TO SPEND THAT ON A QUARTERLY BASIS AND ON THE YEAR OVERALL?
IF THEY EXCEEDED IT, THE MARKET WOULD CHEER IT BECAUSE IT SHOWS THEY ARE ACTING TO PUT THOSE FUTURE BUSINESS LINES IN PLACE TO MAKE THEM REALITY, BUT ALSO POINT OUT THE FIRST TESLA EARNINGS CALL SINCE ELON MUSK BECAME THE CEO OF TWO PUBLIC COMPANIES. I FIND THAT VERY INTERESTING AND I WOULD ALSO NOTE I THINK THIS IS IMPORTANT.
LAST TIME ELON MUSK TALKED A LOT ABOUT THE TAERRAFAB PROJECT, MADE PRETTY SUBSTANTIVE DISCLOSURES ABOUT USING INTEL'S TECHNOLOGY PROCESS. THEN MOVED IN TILL SHARES IN THE MOMENT. MAYBE WE WILL HEAR MORE ABOUT THE PLAN AND WHO THEY ARE WORKING WITH. DANI: THERE WAS THIS STORY THAT OPENAI ACCIDENTALLY HACKED, I GUESS ACCIDENTALLY, BUT BASICALLY UNLEASHED THEIR SYSTEMS AND HACKED HUGGING FACE'S TECHNOLOGY IN SOMETHING THAT IS CALLED UNPRECEDENTED. THIS IS KIND OF THE FEAR FOR THE MOST ADVANCED MODELS AND IT FEELS LIKE WE HAVE A REAL WORLD EXAMPLE OF WHAT HAPPENS WHEN YOU RELEASE THIS STUFF.
IF IT IS -- IT IS MUCH MORE THREATENING IF IT FALLS INTO THE WRONG HANDS. ED: I'VE BEEN UP ALL NIGHT READING, FLOATING PEOPLE ON BOTH SIDES OF THE TABLE TRYING TO UNDERSTAND IT.
OPENAI WAS TESTING GPT 5.6, IN COMBINATION WITH THE MORE POWERFUL BUT UNRELEASED MODEL. WHAT HAPPENED WAS INSTEAD OF SIMPLY CONDUCTING THE TEST OR SOLVING FOR A BENCHMARK, THE MODELS FOUND A WAY OUT OF THE SANDBOX TEXTING ENVIRONMENT, WERE ABLE TO OBTAIN INTERNET ACCESS, AND THEN BASICALLY CHEAT, LOOK FOR ANSWERS OUTSIDE OF THE SANDBOX ON HOW TO BEAT THE EVALUATION, THE BENCHMARK. WHAT BOTH COMPANIES ARE TELLING ME IS THIS IS VERY EARLY. THE INVESTIGATION IS STILL ONGOING, BUT IT IS AN IMPORTANT MOMENT IN AI.
IT ABSOLUTELY RAISES BIG QUESTIONS ABOUT THE CAPABILITIES OF FRONTIER MODELS. AND I'M LOOKING FORWARD TO BLOOMBERG TECH, SELFISHLY.
WE HAVE THE HACKER ONE CEO, PROBABLY THE MOST OBJECTIVE VOICE WE CAN GET TO EXPLAIN HOW THIS WAS HANDLED. ISABELLE: WE ARE ALSO LOOKING FORWARD TO BLOOMBERG TECH.
WAS THERE ANY WAY THIS COULD HAVE BEEN PREVENTED, DID YOUR SOURCES DISCLOSE ANY OF THAT? ED: NO, THE INITIAL REACTION PRIVATELY FROM THOSE INVOLVED WAS THIS WAS HANDLED COMPLETELY APPROPRIATELY. INDEED, HOW IT WAS COMMUNICATED BY OPENAI. THEY SAY IN PARTNERSHIP WITH HUGGING FACE. IT IS HUGGING FACE PRODUCTION ENVIRONMENT. HUGGING FACE SYSTEM THAT WAS COMPROMISED. THE SHORT ANSWER IS WE DON'T HAVE ENOUGH DETAIL YET. WHEN THEY PUBLISH THE FULL REPORT OF IT, THE ANSWER TO THAT WILL BE COULD THIS HAVE BEEN PREVENTED? WE JUST DON'T KNOW. ISABELLE: WE WILL TUNE IN TO TECH AFTER THE SHOW.
THANK YOU SO MUCH, ED LUDLOW. LET'S BRING IN JORDAN JACKSON FROM J.P. MORGAN ASSET MANAGEMENT, JOINING US LIVE ON SET. SUCH A PLEASURE TO HAVE YOU WITH US.
EVERYONE AGREES AI IS TRANSFORMATIONAL, WITH THE QUESTION IS IS IT TRANSFORMATIONAL FOR PROFITS?
JORDAN: I THINK SO. ALL THESE NUMBERS CONTINUE TO INCREASE. WE ARE PENCILING OVER $1 TRILLION WORTH OF HYPERSCALER CAPEX SPEND.
TO YOUR POINT, IT IS EATING INTO PROFITABILITY FOR THE SECOND QUARTER ALONE, ABOUT 95% OF EARNINGS TO GO TOWARDS CAPEX.
BY THE END OF THE YEAR, COMPANY SPENDING MORE ON CAPEX THAN EARNINGS AND PROFITS. THAT MEANS NET NEGATIVE FREE CASH FLOW. WHAT DO YOU PAY YOUR BONDHOLDERS FROM FREE CASH FLOW.
THERE'S A REAL CHALLENGE AND WE DON'T EXPECT THAT TO TURN BACK TOWARDS POSITIVE FREE CASH FLOW UNTIL THE SECOND HALF OF 2027.
I DO THINK THAT THE MARKETS WANT TO SEE CONTINUED EARNINGS.
IF YOU ARE NOT RAISING EARNINGS FORECAST COMMENSURATE WITH YEAR CAPEX SPEND, YOU ARE GETTING PUNISHED. DANI: MAYBE THAT IS WHY YOU ARE STARTING TO SEE ALL THESE BONDS THAT HYPERSCALERS ISSUED THIS YEAR. ELSEWHERE IN THE WORLD OF BONDS, TREASURIES HAVE STARTED TO MOVE A LOT HIGHER.
WE SAW YESTERDAY 10 YEAR YIELDS MOVE UP COMMISERATE WITH THE PRICE OF OIL TO A TWO-YEAR HIGH, DO YOU AT THE HIGHEST SINCE 2024. 30 YEAR YIELDS REACHING A POST-2008 HEIGHT OF JUST UNDER 3%. AT WHAT POINT DOES THIS IMPACT RISK MARKETS OR DO EARNINGS WOULD SAVE US REGARDLESS OF WHAT YIELDS ARE DOING? JORDAN: IT IS INTERESTING TO SEE THE MARKET TRADING SIDEWAYS. MAY BE WE ARE BACK IN THAT ENVIRONMENT. AS A COUPLE OF DYNAMICS AT PLAY.
WE HAVE SEEN A BIG MOVE IN FED PRICING.
WE HAVE GONE FROM THE BEGINNING OF THE YEAR RATE CUTS TO ABOUT 38 BASIS POINTS WORTH OF RATE HIKES AT THE END OF THE YEAR.
YOU ALSO HAVE TERM PREMIUM AT THE TIES LEVEL IN OVER A DECADE.
YOU'VE GOT THIS FLOOR IN RESET IN GLOBAL YIELDS.
CLOSE TO 4% ON THE 30 YEAR. THAT IS RAISING THE FLOOR ON GLOBAL BOND YIELDS AND HELPING TO LIFT YIELDS IN THE U.S.
AS WELL. YOU HAVE A NASTY CONFLUENCE OF FACTORS THAT ARE IMPACTING RATES.
I THINK AT SOME LEVEL, AT SOME POINT, THE VALUATION STORY RELATIVE TO WE ARE -- WHERE WE ARE WILL BE A CHALLENGE FOR THE MARKETS TO MOVE HIGHER. ISABELLE: ONE OF YOUR MOST INTERESTING CALLS IS IN CREDIT.
IF AI DRIVES HUNDREDS OF BILLIONS OF DOLLARS IN NEW ISSUANCE, IS THAT CHANGE WHAT A SAFE INVESTMENT GRADE TECH LOOKS LIKE? JORDAN: THIS YEAR ALONE, HYPERSCALERS HAVE ISSUED MORE DEBT THAN ALL OF LAST YEAR.
THE SECOND PIECE IS IF YOU LOOK AT OVERALL ISSUANCE, OVER 50% OF ISSUANCE AND THE INVESTMENT GRADE CREDIT MARKET THIS YEAR HAS BEEN WITHIN THE HYPERSCALERS, DATA CENTERS AND THE SEMIS. WITH THINK THIS DYNAMIC AND CONTINUE OVER THE NEXT SEVERAL YEARS.
WE ARE PROJECTING THIS BILL THAT WILL COST $5 TRILLION, 2 TRILLION DOLLARS OF THAT WILL COME IN INVESTMENT GRADE ISSUANCE. IF THAT DYNAMIC CONTINUES AND WE SEE CONSISTED ISSUE AND TRENDS ACROSS THE REST OF THE INVESTMENT GRADE CREDIT MARKETS, THIS COHORT COULD COME TO BE IN A MATTER OF FEW YEARS 20% TO 25% OF THE INVESTMENT GRADE CREDIT MARKET. WHAT THIS MEANS IS NOT ONLY ARE EQUITIES VERY CONCENTRATED, SO ARE YOUR BONDS. DANI: IT IS JUST LESS OF A HEDGE, LESS ATTRACTIVE TO BE HOLDING BOTH CREDIT AND EQUITIES IN THE SAME PORTFOLIO BECAUSE THEY ARE GIVEN YOU THE SAME PORTFOLIO? JORDAN: FROM A PORTFOLIO CONSTRUCTION PERSPECTIVE, YOU HAVE TO BE MORE INTENTIONAL ABOUT YOUR DIVERSIFICATION.
WHAT IS TRUE DIVERSIFICATION LOOK LIKE WHEN YOU'RE INTRODUCING STRUCTURAL HIGHER LEVELS OF CORRELATION BETWEEN YOUR STOCKS AND BONDS? DANI: SO MANY SECTORS IN THIS WORLD ARE JUST INCREASINGLY TIED TO THE AI CAPEX BUILDUP.
FINANCIALS HAVE DONE REALLY WELL BECAUSE OF A LOT OF MARKET VOLATILITY, WHICH ALSO HAPPENS TO BE IN AI STOCKS.
BOND TRADING DESK AND BOUGHT OFFERING HAS GONE SO WELL FOR WALL STREET BECAUSE OF THE AI BUILDUP.
ARE THE MORE SECTORS THAT ARE BECOMING INCREASINGLY CORRELATED TO AI? IS IT HARDER AND HARDER TO FIND DIVERSIFICATION? JORDAN: THEY VERY MUCH IS.
WE THINK YOU HAVE TO LOOK TOWARDS ALTERNATIVE ASSETS, PERHAPS EXPLICIT EXPOSURE TOWARDS COMMODITIES AND INTERNATIONAL MARKETS. EM IS VERY MUCH A TECH STORY BUT YOU ARE STILL GETTING TROOP, REALLY CAN'T -- TRUE, REAL ECONOMY DIVERSIFICATION. YOU ARE ABSOLUTELY RIGHT, THIS AI STORY IS PERMEATING FINANCIAL EARNINGS WHEN YOU THINK ABOUT THE IPO PIPELINE. IT IS PERMEATING INTO INDUSTRIALS, THE BUILDOUT STORY. IMPACTING A MYRIAD OF ASPECTS OF THE MARKET. WE JUST HAVE TO BE A LOT MORE INTENTIONAL ABOUT WHAT DIVERSIFICATION LOOKS LIKE.
ISABELLE: DANI MAKES A BIG -- GOOD POINT BECAUSE OF BIG TECH DISAPPOINTS ON AI MONETIZATION THE NEXT TWO WEEKS, IS THAT JUST A STORY OR WILL INVESTORS RETHINK THE WHOLE CYCLE? JORDAN: I DON'T THINK IT WILL FORCE INVESTORS TO RETHINK THE WHOLE CYCLE.
WE ALL ALL COMFORTABLE IN THIS IS A MULTIYEAR BUILDUP.
THESE DEALS ARE THROUGHOUT 2028, 2029, 2030.
I THINK WHAT THIS DOES INTRODUCE IS BOUTS OF VOLATILITY. I'M A LITTLE WORRIED ABOUT THE AMOUNT OF LEVERAGE IN THE SYSTEM RIGHT NOW.
THAT MAY BE CHASING SOME OF THESE RETURNS.
AS SOON AS THINGS GO THE OPPOSITE DIRECTION, IT WILL EXACERBATE SOME OF THESE MOVES IN THE MARKET SO THAT INCREASES VOLATILITY. DANI: IT IS AN INTERESTING POINT BECAUSE OBVIOUSLY SOUTH KOREA'S STRUCTURE OF THE MARKET IS A LOT DIFFERENT. TO YOUR POINT, THE COST OF LEVERAGE HAS BEEN CLIMBING QUITE REMARKABLY, SUGGESTING A LOT OF LEVERAGE IS BEING USED. WHAT SPECIFICALLY ARE YOU LOOKING AT? THINGS LIKE LEVERAGED ETF'S?
AND WHAT COULD BE THE DAMAGE OF THAT LEVERAGE CONTINUES TO GROW AND YOU SEE A SELLOFF IN ALL THAT BORROWING? JORDAN: WE ARE WORRIED ABOUT THE LEVERAGE. THERE IS MORE U.S.
LISTED EXCHANGE TRADED FUNDS THEN THERE ARE STOCKS.
YOU CAN TRADE THE MARKET MORE THAN STOCKS ARE TRADED WHICH IS REMARKABLE. WE FEEL LIKE THE LEVERAGE UNIVERSE AS WELL. $200 BILLION AUM IN ETF'S.
THESE ARE BIG NUMBERS.
IT DOES NOT NECESSARILY LEAD TO A MARKET CORRECTION BUT IT EXACERBATES ONE IF IT DOES HAPPEN.
I AM WORRIED YOU HAVE A LOT OF RETAIL INVESTORS THAT MAY BE CAUGHT. DANI: IS IT WORSE THAT YOU CAN MAKE BETS ON KALSHI ABOUT LITERALLY EVERYTHING RIGHT NOW? THAT ENVIRONMENT MAY PEOPLE ENTER THE EQUITY MARKET AND MORE OF A WAY THAT FEELS LIKE GAMBLING? JORDAN: I FEEL LIKE I CAN GAMBLE IF I WANT DUNKIN' DONUTS COFFEE OR STARBUCKS COFFEE.
IT EXPOSES SOME OF THE VULNERABILITIES IN THE MARKET AND WE ARE LOOKING AT A MARKET THAT HAS HIGHER LEVELS OF VOLATILITY. FIGURE DAYS OF TRADING VOLUMES.
OPEN INTEREST IS SOMETHING WE ARE LOOKING AT -- NOT A PUN.
ISABELLE: MY HEART STOPPED FOR A MINUTE.
JORDAN: I THINK THIS DOES EXPOSE VULNERABILITIES TO THE MARKET.
DANI: WE REALLY APPRECIATE YOUR TIME THIS MORNING. THANK YOU FOR STOPPING BY, JORDAN JACKSON OF J.P. MORGAN ASSET MANAGEMENT, AHEAD OF THE NEXT SEVERAL DAYS THAT WILL BE HUGELY IMPORTANT FOR THE MARKET. ABOUT 40 MINUTES INTO YOUR TRADING DAY, WE ARE LOOKING AT AN S&P THAT IS MARGINALLY HIGHER.
THE NASDAQ BELOW.2% AS 10 YEAR YIELDS CLIMB.
WE ARE SEEING YIELDS MOVE HIGHER AND BRENT CRUDE TRADING AT EXACTLY $94 A BARREL. SOME OF THE SINGLE STOCKS WE ARE LOOKING AT -- AT&T ADDED 432,000 MONTHLY WIRELESS PHONE SUBSCRIBERS IN THE SECOND QUARTER.
THE ESTIMATE WAS MORE THAN 100,000 OVER THE AVERAGE ANALYST ESTIMATE. SHARES RALLIED OFF THE BACK OF THAT. ISABELLE: ISSUING PRELIMINARY RESULTS, SAYING THE BACKLOG HIT A RECORD IN THE NEW QUARTER OF MORE THAN $80 BILLION. SHARES ARE UP MORE THAN 20%.
DANI: HPE AND DELL RALLYING OFF THOSE RESULTS. INTEL CONFIRMED PLANS TO CUT JOBS AT THE DATA CENTER GROUP AS A LOOKS TO REDUCE COSTS AROUND A TURNAROUND STRATEGY THANKS TO ITS NEW CEO.
THIS STORY LARGELY HAPPENED YESTERDAY, SO WE SAW INTEL RALLY YESTERDAY, UP 8.6%. CURRENTLY GOING A WHOLE LOT OF NOWHERE. ISABELLE: COMING UP, UTZ IS GOING PRIVATE IN A $2.9 BILLION DEAL. WE WILL GET THE DETAILS NEXT.
THIS IS "BLOOMBERG OPEN INTEREST." ♪ ISABELLE: NOT A HIGH INTEREST, A LOOK AT WHAT IS MAKING HEADLINES AROUND THE WORLD.
THE WALL STREET JOURNAL REPORTING PRESIDENT TRUMP HAS APPROVED AN AGREEMENT WITH SAUDI ARABIA TO DEVELOP A CIVILIAN NUCLEAR PROGRAM. IT COULD OPEN THE DOOR TO URANIUM ENRICHMENT IN THE KINGDOM SO THE AGREEMENT IS ESTIMATED TO BE WORTH TENS OF BILLIONS OF DOLLARS.
A RECORD NUMBER OF AMERICANS TUNE IN TO WATCH SPAIN VERSUS ARGENTINA IN THE WORLD CUP FINAL.
THE CHAMPIONSHIP SCORED AN AUDIENCE OF MORE THAN 62 MILLION VIEWERS.
THAT INCLUDES 38.9 MILLION FANS'S WHO WATCHED ON FOX ENGLISH LANGUAGE BROADCAST, MORE THAN DOUBLED THE VIEWERSHIP FOR THE LAST WORLD CUP.
UTZ HAS AGREED TO GO PRIVATE IN A DEAL WITH INTERSNACK.
IT WILL BE FINANCED BY CASH AS WELL AS ASSET-BACKED LIMITED -- LENDING FACILITIES. IT IS THE LATEST EXAMPLE OF EUROPEAN SNACK MAKERS LOOKING TO THE U.S. FOR PACKAGED FOOD.
DANI: WHAT REALLY WAS THE IMPETUS TO HAVE THIS COMPANY COME IN AND BUY AN AMERICAN BRAND? MICHELLE: UTZ WAS FROM THE SPAC THAT WENT PUBLIC IN 2020 BY MERGING WITH ONE FOUNDED BY FORMER BLACKSTONE INVESTORS AND SINCE THEN THE STOCK HAS NOT DONE VERY WELL AT ALL.
THIS YEAR IT WAS DOWN 20, 30%. PART OF THAT IS BECAUSE SNACKING IN THE U.S. HAS NOT BEEN GREAT.
CONSUMERS ARE NOT EATING AS MANY SNACKS APPEAR AND BLAME THAT ON WELLNESS TRENDS IN GENERAL.
BUT ALSO AFTER THE PANDEMIC SNACK MAKERS LIKE UTZ RISE THEIR PRICES A LOT WITH INFLATION AND NOW THEY DO NOT HAVE ROOM TO RAISE THEM ANYMORE SO THEY ARE NOT ABLE TO CAMOUFLAGE THIS LACK OF DEMAND THE IDEA IS BY GOING PRIVATE THEY WILL NOT BE IN THE PUBLIC EYE ANYMORE AND THEY WILL BE ABLE TO FOCUS ON INNOVATING TO BETTER COMPETE WITH BRANDS THAT YOU SEE ON INSTAGRAM OR TIKTOK.
>> I STILL LOVE SNACKING. I AM A SNACK OR ALL DAY. DANI: YOU ARE PART OF THE PROBLEM STILL.
>> HOW DOES THIS HELP EACH COMPANY IN THE INTERNATIONAL MARKET?
>> INTERSNACK IS A GERMAN PRIVATE COMPANY THAT GOT ITS START MAKING POTATO CHIPS AND THIS IS INTERESTING BECAUSE THEY ARE PARTNERING WITH THE FOUNDING FAMILIES OF UTZ TO BUY UTZ.. THE EXECUTIVE CHAIRMAN ANNOUNCING THE DEAL SAID HE IS EXCITED ABOUT THE OPPORTUNITY IN THE WEST FOR SNACKING AND TO TRANSFORM THE FUTURE OF SNACKING IN NORTH AMERICA'S THEY HAVE IDEAS TO INNOVATE AND USE SOME RESOURCES. DANI: YOU HAVE BEEN WRITING REPORTING ON THE SOMEWHAT COMPLICATED REGULATORY ENVIRONMENT THAT WE FIND OURSELVES AND SO ON ONE HAND YOU HAVE THE FEDERAL GOVERNMENT SEEMS TO BE APPROVING MORE THINGS.
YOU HAVE STATES COMING IN LIKE WE HAVE SEEN WITH PARAMOUNT.
WHAT ABOUT CROSS-BORDER M&A? OBVIOUSLY A GERMAN COMPANY COMING IN AND BUYING AN ICONIC AMERICAN NAME.
>> THE REGULATORS HAVE BEEN OK AND IT IS SOMETHING WE HAVE BEEN SEEING MORE OF. IT TOOK A PAUSE AFTER TARIFFS AND LIBERATION DAY BUT IT FEELS LIKE EVERY WEEK WE ARE HEARING ABOUT OR SEEING A DEAL ANNOUNCED THAT HAS THIS CROSS-BORDER ANGLE ESPECIALLY WITH EUROPEAN COMPANIES BUYING ASSETS IN THE U.S. BECAUSE THEY SEE THE U.S.
AS A GROWTH AREA AND SO FAR U.S. REGULATORS HAVE BEEN OK WITH IT ESPECIALLY WHEN IT IS HELPING THE COMPANY'S HERE.
>> WHEN DEALS LIKE THIS HAPPEN OR IF THEY HAPPEN, HOW DO THEY BALANCE COLLABORATION AND INDEPENDENCE?
I MEAN, WILL THEY TRY TO SHED THAT FOR A MORE POPULAR LOOK OR IMAGE? I AM GOING TO STOP TALKING.
>> A LOT OF WHAT COMPANIES ARE GRAPPLING WITH, ESPECIALLY LEGACY PLAYERS THAT HAVE BEEN AROUND FOR 100 YEARS, IS THEY HAVEN'T REALLY CHANGED THEIR LINEUP MUCH OTHER THAN CHANGING INGREDIENTS BUT THINK ABOUT PRETZELS.
THEY PROBABLY TASTE THE SAME AS THEY DID 50 YEARS AGO BUT THERE ARE THESE PLAYERS THAT ARE POPPING UP EVERY DAY AND CONSUMERS ARE FICKLE THESE DAYS. WE ALWAYS WANT THE NEXT BIG THING SO TO COMPETE WITH THAT THEY HAVE TO TRY TO GO BACK TO THE DRAWING BOARD BUT SO FAR WE HAVE NOT SEEN THEM DO THAT.
IT WILL BE INTERESTING TO SEE WHAT INTERSNACK DOES TO TRY THIS COMPANY AROUND. DANI: I WILL LOSE MY MIND OF ONE OF THE INNOVATIONS IS A PROTEIN PRETZEL. I WOULD NOT LIKE THAT.
GET YOUR PROTEIN FROM CHICKEN AND THINGS APPEAR THEY HAVE AN UTZ PROTEIN PRETZEL. 10 GRAMS OF PROTEIN -- GET YOUR PROTEIN FROM -- >> WE WILL ALL EAT IT AFTER.
>> SUCH A PLEASURE TO SEE YOU. MICHELLE WILL JOIN ME LATER IN THE DAY. PLEASE CATCH BLOOMBERG DEALS EVERY WEDNESDAY. TODAY'S GUESTS INCLUDE SCOTT SPERLING.
WE ARE SPEAKING WITH THE CEO OF JCPENNEY AS BACK-TO-SCHOOL SHOPPING APPROACHES. THIS IS BLOOMBERG OPENINTEREST. ♪ DANI: LET'S GET A CHECK ON YOUR EQUITY MARKET NEARLY AN HOUR INTO HER TRADING DAY AND WE CONTINUE MOSTLY TREADING WATER INTO OFF OF THAT EARNINGS BUT THE THING THAT SEEMS TO BE DRAGGING US DOWN IS WHAT IS HAPPENING IN YIELDS.
THEY CONTINUE TO SPIKE WITH THE PRICE OF OIL.
BRENT CRUDE IS ABOVE $94 A BARREL, UP THREE BASIS POINTS, THE HIGHEST SINCE 2025. AMD WALL STREET JOURNAL REPORTING THEY MADE A PACT WITH ANTHROPIC TO SUPPLY THEM WITH CHIPS.
PRELIMINARILY RELEASING EARNINGS SHOWING STRONG SALES.
WE WILL GET TESLA AFTER THE BELL.
AT&T IS OUT THERE EARNINGS.
BUT THEY SAID CONSUMER DEMAND REMAINS RESILIENT.
WE WILL SPEAK WITH ANOTHER COMPANY, THE CEO OF CATALYST BRANDS. AFTER THIS COMMERCIAL BREAK.
YOU ARE WATCHING BLOOMBERG OPEN INTEREST. ♪ DANI: BACK-TO-SCHOOL SHOPPING SEASON IS GETTING UNDERWAY, OFFERING A FRESH READ ON CONSUMER SPENDING.
ONE COMPANY THAT FOLLOWS IT CLOSELY IS CAP, THE PARENT--CATALYST FRANCE, THE PARENT COMPANY OF JCPENNEY, BROOKS BROTHERS, A BLAST FROM THE PAST, NOSTALGIA FOR YOU, TOO.
JCPENNEY IS KNOWN FOR DEALS ON BACK TO SCHOOL SHOPPING AND I KNOW YOU HAVE DEALS ON THAT. SETTING ASIDE BROOKS BROTHERS, MOST OF THESE FANS ARE NOT GETTING TO THE HIGH ENDS.
HOW HAS THEIR BEHAVIOR BEEN AT THIS MOMENT WHEN WE CONTINUE TO SEE INFLATION WOES, ESPECIALLY GROWTH IN INFLATION THAT OUTPACED THE GROWTH IN WAGES? MARC: I THINK -- GOOD MORNING, FIRST OF ALL, THANK YOU FOR HAVING ME -- AS WE ARE GOING INTO BACK-TO-SCHOOL, THE CONSUMER IS COMMITTED TO THEIR FAMILY. THEY WILL MAKE SURE THAT THE KIDS GO BACK TO SCHOOL WITH THE ITEMS THAT THEY WANT AND THE BRANDS THEY WANT AND THE RIGHT THINGS TO MAKE SURE THEY HAVE A REALLY SUCCESSFUL SCHOOL YEAR. THAT IS REALLY IMPORTANT TO FAMILIES AND WE SEE CONSUMERS SHOPPING FOR THAT.
WE ARE PREPARED FOR THAT BECAUSE WE KNOW THAT VALUE DEALS, AND QUALITY ARE GOING TO BE IMPORTANT TO THEM.
WE HAVE THOUSANDS OF ITEMS AT JCPENNEY THAT ARE UNDER $10.
REALLY IMPORTANT FOR THE CONSUMER.
THAT IS SHORTS, T-SHIRTS, LEGGINGS, WE HAVE A EROPOSTALE OFFERING BUY ONE, GET ONE FREE DENIM. ALMOST A FULL MONTH OF AUGUST, THE CORE BACK-TO-SCHOOL SEASON, CONSUMERS CAN SHOP ANYTIME THEY WANT AND THEY WILL GET THE LOWEST PRICES OF THE SEASON AT OR BELOW LAST YEAR'S PRICES. ISABELLE: THE BUY ONE, GET ONE FREE DENIM IS PRETTY COOL.
SHOULD CONSUMERS MAYBE EXPECT HIGHER PRICES AHEAD? MARC: REALLY AS WE GO INTO THIS SEASON, OUR MERCHANTS ARE FOCUSED ON THE KEY ITEMS THAT MATTER TO CONSUMERS IN THE SEASON, WHICH AT BACK-TO-SCHOOL TIME IS DENIM, T-SHIRTS, FLEECE, POLO UNIFORM SHIRTS, BACKPACKS.
WE ARE MAKING SURE THAT THOSE KEY ITEMS ARE THE BEST POSSIBLE PRICE WE CAN GET FOR THE CONSUMER.
IT IS ONE OF THE POWERS OF WHAT HAS BECOME CATALYST, BRINGING OUR BRANDS TOGETHER. WE SOURCE OVER 30 MILLION UNITS OF DENIM OVER THE YEAR, SO WE CAN WORK WITH OUR SUPPLIERS TO GET THE BEST AND LOWEST PRICE FOR THE SUPPLY.
WHAT WE ARE SEEING WITH CONSUMERS IS THE QUALITY IS IMPORTANT. WE ARE MAKING SURE QUALITY AND THE PRODUCT THEY BUY WILL LAST THE ENTIRE SCHOOL SEASON. DANI: WE ALTERNATIVE DATA SOURCES AT BLOOMBERG AND ONE OF THEM TRACKED SPECIFICALLY CATALYST BRANDS STORES WHAT THEY SHOW IS TOUGH NUMBERS, AND TO BE CLEAR, THE INDUSTRY AS A WHOLE HAS HAD TOUGH NUMBERS, BUT YOUR CELLS ARE DECLINING THE PAST TWO TO THREE MONTHS WORSE THAN THE BENCHMARK.
I WONDER WHAT YOU ARE SEEING ON THE GROUND AND WHAT YOU ARE DOING TO ADDRESS SLOWING SALES. MARC: WHAT WE ARE SEEING IS THAT IN SOME CASES CONSUMERS ARE MAKING FEWER TRIPS, AND A LOT OF THAT MAY BE DRIVEN BY GAS PRICES.
WHAT WE ARE ALSO SEEING IS WHEN THEY DO COME INTO THE STORE, THEY ARE BUYING MORE UNITS WHEN THEY COME INTO THE STORE.
THEY ARE CONSOLIDATING TRIPS AND PUTTING MORE ITEMS INTO THE CART WHEN THEY COME INTO OUR STORES.
WE ARE FOCUSED ON MAKING SURE, LIKE I SAID, DURING BACK-TO-SCHOOL SEASON THEY CAN COME ANYTIME DURING THE SEASON AND FIND THE BEST VALUE. WE ARE MAKING SURE THEY CAN SHOP ACROSS OUR BRANDS AND GET VALUE THERE, TOO.
ONE OF THE THINGS WE HAVE DONE IS INTRODUCE A JOINT LOYALTY PROGRAM BETWEEN AEROPOSTALE AND JCPENNEY.
WHEN YOU SIGN UP FOR THE LOYALTY PROGRAM -- WE HAD A MILLION SIGN-UPS IN THE LAST MONTH SINCE WE INTRODUCED THE PROGRAM -- YOU WILL GET A CASH PASS INSTANTLY ON THE FIRST PURCHASE. IT IS MAKING SURE THAT THE VALUE IS CLEAR AND THEY CAN CONSOLIDATE TRIPS AND SHOP WHEN THEY WANT TO. ISABELLE: YOU ANNOUNCED WORKFORCE REDUCTIONS AN INCREASE IN AUTOMATION.
WHAT DOES THAT STRATEGY LOOK LIKE MOVING FORWARD? MARC: WE ARE FOCUSED ON GROWING THE BUSINESS AND SERVING THE CUSTOMER AND OFFERING THE CUSTOMER THE LOWEST PRICE.
WE HAVE CERTAINLY PUT PLACES WHERE WE HAVE INTRODUCED AI INTO OUR BUSINESS AND DISTRIBUTION CENTERS, AND THROUGHOUT OUR REPLENISHMENT SYSTEMS AND INVENTORY MANAGEMENT AND ALL OF THOSE THINGS.
BUT IN MOST CASES THOSE ARE FREEING UP OUR TEAMS SO THEY CAN WORK ON SOME OF THE MORE COMPLEX PROBLEMS THAT ARE FACING OUR BUSINESS. DANI: I DO WONDER IN THIS ENVIRONMENT, YOU HAVE APPAREL DEMAND SOFTENING, YOU'RE TRYING TO DO THINGS TO ADDRESS THAT, YOU ARE TRYING TO PREDICT MARGINS USING TECHNOLOGY VERSUS PEOPLE YOU MIGHT'VE OTHERWISE EMPLOYED. I KNOW THROUGH YOUR BRANDS LIKE AEROPOSTALE, BROOKS BROTHERS, AUTHENTIC BRANDS OWNS THE IP FOR IT. HOW DOES THAT WORK WHEN YOU PAY ROYALTIES AND AT THE SAME TIME TRY TO PROTECT YOUR MARGINS?
MARC: IN THOSE CASES AUTHENTIC BRAND OWNS THE IP AND WE OPERATE THE BUSINESS AND WE BUY THE MERCHANDISE AND SOURCE THE MERCHANDISE AND SELL THAT PRODUCT TO THE CUSTOMER, AND OUR JOB IS TO WORK THAT OUT ACROSS THE BUSINESS SO WE CAN INVEST IN THE MARKETING AND PAY THE ROYALTY AND MAKE THE MARGIN THAT WE NEED TO DRIVE AND GROW OUR BUSINESS. ISABELLE: JCPENNEY EXPLORED SELLING PROPERTIES BUT THE DEAL DIDN'T HAPPEN. WHAT IS THE LATEST THINKING ON YOUR REAL-ESTATE STRATEGY, AND THE ASSETS ON THE TABLE? MARC: FIRST OF ALL, TO CLARIFY, THE DEAL REPORTED WAS SOMEBODY WHO OWNED OUR PROPERTY SELLING INTO ANOTHER OWNER, NOT A JCPENNEY TRANSACTION. IT WAS REALLY NO CHANGE FOR THE CORE JCPENNEY BUSINESS. WE HAVE A PORTFOLIO ACROSS CATALYST OF ABOUT 1400 STORES, 640 OF THOSE ARE JCPENNEY STORES. OVER THE NEXT YEAR WE ARE ACTUALLY -- WE WILL BE OPENING STORES.
WE ARE OPENING BROOKS BROTHERS STORES, AÉROPOSTALE SOURCE, 35 STORE OPENINGS, INCLUDING ONE JCPENNEY STORE.
THERE HAVE BEEN A VERY SMALL NUMBER OF STORE CLOSINGS, FEWER THAN 10, AND MOST OF THOSE ARE UNIQUE SITUATIONS WITH LANDLORDS IN SPECIFIC MARKETS. DANI: HOW ARE YOU THINKING -- I KNOW YOU HAVE A SPECIFIC JCPENNEY-SPARK MERGER THAT INVOLVES BROOKFIELD.
ARE YOU THINKING NOT NECESSARILY THE STORES THEMSELVES, BUT ABOUT THAT REAL-ESTATE FOOTPRINT? MARC: AS WE THINK ABOUT OUR FOOTPRINT, WE ARE OWN TO COME AS YOU SAID, BY SIMON PROPERTY, BROOKFIELD, AND AUTHENTIC BRANDS. SOME OF OUR STORES FALL WITH THE LANDLORDS, OTHERS OF THOSE WE OWN.
MANY ARE OWNED BY A SET OF INDEPENDENT LANDLORDS COME AND WE CONTINUE TO MANAGE THAT ACROSS THE GROUP.
WE ARE CONTINUING TO INVEST IN AND GROW OUR PORTFOLIO STORES.
PHYSICAL STORES HAVE BECOME MORE IMPORTANT THAN EVER TO THE CONSUMER, ESPECIALLY IF YOU THINK ABOUT YOUNGER CONSUMERS COMING BACK TO THE MALL. THAT PHYSICAL EXPERIENCE IS REALLY IMPORTANT -- DANI: MARC, ARE THEY COMING BACK TO THE MALL? I WAS THINKING THAT MY CHILDHOOD MALL WHERE I HAD ONE OF MY FIRST JOBS, I WENT THERE THE OTHER DAY AND IT IS A GHOST TOWN. THE ONLY ONES ARE THE HIGH-END DESIGNERS. OUR PEOPLE COMING BACK TO THE MALL? MARC: PEOPLE ARE COMING BACK TO THE MALL. THEY WANT, A, SOCIAL SHOPPING WITH THEIR FRIENDS, THEY WANT TO TRY ON A PRODUCT.
THEY CAN ALSO GET EXPERIENCES. IF YOU THINK ABOUT BEAUTY IN OUR JCPENNEY STORES, OR ONE OF THE THINGS WE ARE OFFERING FOR BACK-TO-SCHOOL IS $10 HAIRCUTS, AND WE ARE PLANNING ON GIVING STUDENTS AND TEACHERS THIS SEASON OVER 100,000 $12 HAIRCUTS FOR OUR CUSTOMERS. ABOUT TWO THIRDS OF THOSE CUSTOMERS ALSO BUY PRODUCT WHEN THEY COME INTO THE STORE.
IT IS A COMBINATION. DANI: MARC, WONDERFUL TO HAVE YOU ON.
CATALYST BRANDS CEO MARC ROSEN WITH THE BUSY SEASON WITH BACK-TO-SCHOOL UNDERWAY. HIGHER YIELDS CONTINUE TO WEIGH ON THE MARKET, 10-YEAR YIELDS UP NEARLY THREE BASIS POINTS.
THE FRONT END OF THE CURVE HIGHEST SINCE 2025.
REAL YIELDS ARE REACHING A POST-2008 PEAK.
BRENT CRUDE UNDER $24 A BARREL, UP 3% THIS MORNING.
SOME OF THE SINGLE STOCKS WE ARE LOOKING AT -- NATURAL GAS TURBINE MANUFACTURER GE VERNOVA CLOSING A FULL-YEAR PROFIT REVENUE OUTLOOK THAT DISAPPOINTED AFTER SHARES HAD RALLIED IN RECENT MONTHS. THE SHARES FALLING NEARLY 7%.
ISABELLE: PHILIP MORRIS REPORTING BETTER-THAN-EXPECTED EARNINGS FOR TRIMMING ITS PROFIT FORECAST. DANI: "THE WALL STREET JOURNAL" REPORTING THAT REDDIT HAS DISCUSSED CUTTING OFF GOOGLE'S ACCESS TO ITS CONTENT FOR AI USE. ISABELLE: COMING UP, WE GEAR UP FOR TESLA EARNINGS AFTER THE BELL WITH AN ANALYST FROM TD COWEN. HE JOINS US NEXT.
THIS IS "BLOOMBERG OPEN INTEREST."
ISABELLE: AS BIG TECH POURS MONEY INTO AI INVESTORS, THEY ARE GETTING CONCERNED ABOUT ONE TITAN ESPECIALLY FALLING BEHIND, UP TO $25 BILLION TESLA FORECAST TO SPEND THIS YEAR ON AI HAS BEEN ONLY $2.5 BILLION.
THE LOPEZ RAISING QUESTIONS IF TESLA -- THIS LOPEZ RAISING QUESTIONS IF TESLA CAN DELIVER THE PROGRESS INVESTORS WANT TO SEE. JOINING US IS ITAY MICHAELI OF TD COWEN. HE HAS A BUY RATING ON TESLA.
IT IS INTERESTING THAT BIG TECH IS BEING PUNISHED AND TESLA'S CRITICIZED FOR NOT SPENDING. WHY DO YOU THINK TESLA IS BEING HELD TO A DIFFERENT STANDARD? ITAY: TESLA -- THANK YOU FOR HAVING ME -- HAS A LOT OF DELIVERABLES IN THE FORM OF PHYSICAL AI, AUTONOMOUS VEHICLES, THE ROBOTAXI, THE EXPANSION OF WHICH IS PROCEEDING WELL, OUT IN SEVEN MARKETS.
AND OF COURSE OPTIMIST. --OPTIMIUS.
CAPEX WILL BE A FOCUS, BUT WILL WE CARE MORE ABOUT WITH AI UPDATES IS THE TIMING AND MILESTONES TO EXPECT IN THE SECOND HALF OF THE YEAR AND BEYOND ON THESE CRITICAL DEPLOYMENTS IN AUTONOMOUS VEHICLES AS WELL AS ROBOTICS.
DANI: ITAY, A VIEWER WROTE IN POINTING OUT THAT AHEAD OF THE XAI-SPACEX MERGER, TESLA MADE AN INVESTMENT OF $2 BILLION INTO XAI.
IT HAS THAT INVESTMENT IN SPACEX NOW.
IS THAT SOMETHING THAT TESLA WILL INCLUDE IN ITS RESULTS, ANY GAINS FROM THE EQUITY POSITION IN SPACEX? ITAY: IT IS UNCLEAR IF WE WILL SEE THAT.
ULTIMATELY WHAT WILL MATTER MOST IN TERMS OF RESULTS IS GOING TO BE HOW THE VEHICLE BUSINESS PROGRESSES AND WHAT THE OUTLOOK IS IN THE SECOND HALF OF THE YEAR.
WE DO BELIEVE WE ARE IN THE EARLY STAGES OF THE NEW COMEBACK. WE DID SEE TESLA BEAT Q2 EV DELIVERIES AND POST STRONG PRODUCTION.
THE INITIAL FOCUS WITH THE ACTUAL NUMBERS WILL BE THE STATE OF THE EV BUSINESS ITSELF, BECAUSE WE BELIEVE A STRONGER EV BUSINESS FOUNDATIONAL HE DOES CREATE A BETTER SET UP TO DRIVE FUTURE GROWTH AND AUTONOMOUS VEHICLES, AI, AND OF COURSE ROBOTICS AS WELL.
THE KEY WILL BE THE REVENUE GROWTH ACCELERATION THAT WE EXPECTED THIS QUARTER. WE THINK REVENUE CAN GROW OVER 20% IN Q2, WHICH WILL BE AN IMPROVEMENT FROM 16% GROWTH IN WE THINK THE COMPANY COULD BEAT EXPECTATIONS AS OUR GROSS MARGIN ESTIMATE IS ABOVE THE STREET.
WE EXPECT IT WILL BE A BETTER FLOW THROUGH OF THE STRONGER DELIVERIES IN PLODUCTION IN THE QUARTER. DANI: IF THE SPACEX IS NOT SOMETHING YOU ARE CONCENTRATING ON WHAT ABOUT SPACEX BUYING TESLA VEHICLES, THINGS LIKE CYBERTRUCKS? I AM GUESSING WE LIKELY WON’T SEE IT IN THIS EARNINGS BUT HOW ADDITIVE DO YOU THINK THAT WILL BE TO TESLA HAVING THE BUSINESS FROM SPACEX? ITAY: OVERALL FROM A VEHICLE PERSPECTIVE THAT’S A VERY SMALL -- I THINK THE STRENGTH WE SAW IN Q2 DELIVERIES FROM TESLA SEEMS TO BE VERY BROAD BASED AROUND THE WORLD.
CHINA WAS PRETTY SOLID WHICH IS IMPRESSIVE GIVEN THE COMPETITIVE DYNAMICS THERE. EUROPE WE THINK HAD A VERY STRONG QUARTER AND IN THE U.S. WE HAVE SEEN THIS COMEBACK THAT WE HAVE BEGUN TO ARTICULATE BACK IN MARCH IN A LARGE REPORT PUBLISHED ON THE U.S. MARKET FOR E.V.’S AND WE SAW GOOD PROGRESS NOT ONLY FROM TESLA IN Q2 BUT RIVIAN.
GOING FORWARD ONE KEY FOR VEHICLE DEMAND IS THE EXTENT TO WHICH F.S.D. IS ALREADY BOOSTING DEMAND WHICH WE THINK IS PROBABLY STARTING TO ALREADY AND THEREFORE AS WE THINK ABOUT THE ROLLOUT OF ADDITIONAL F.S.D.
FEATURES INCLUDING THE INTRODUCTION OF EYES OFF FEATURES FROM TESLA, TO KIND OF REALLY ASSESS ON THE EARNINGS CALL AND BEYOND WHAT THAT DOES BOAT TO F.S.D.
NUMBERS GOING FORWARD BUT ALSO IN DRIVING EVEN MORE INCREMENTAL DEMAND FOR TESLA VEHICLES GOING FORWARD BECAUSE WE THINK THAT’S STARTING TO HAPPEN ALREADY AND SHOWING IN SOME OF THE NUMBERS. ISABELLE: WE HAVE TO ASK ABOUT CYBERTRUCK BECAUSE THAT WAS SUPPOSED TO BE A GAME CHANGER BUT SALES DISAPPOINTED. DOES THAT MATTER OR HAS INVESTMENT MOVED TO ROBOTAXIS? ITAY: THE VEHICLE SIDE IT DOESN’T MATTER SO MUCH ANYMORE.
THE ONE VEHICLE WE HAVE BEEN MORE FOCUSED ON IS THE MODEL YL, THE TESLA JUST INTRODUCED INTO THE U.S.
OUR WORK HAS SHOWN AT FULL SCALE THE MODEL YL VARIANT COULD POTENTIALLY CONTRIBUTE ANOTHER 100,000 UNITS OF SALES TO TES TESLA IN THE U.S., 30% INCREMENTAL GROWTH TO THE MODEL Y. THE CYBERTRUCK VOLUME HAS BEEN LOW. WE NEVER EXPECTED IT TO BE A MAJOR DRIVER OF OVERALL VEHICLE DELIVERIES IN THE OUT YEARS, BUT THERE IS AN EXCITING NEW PRODUCT PIPELINE EVEN AWAY FROM THE ROBOTAXI FLEET, THE FORM OF THE MODEL Y.L.
LAUNCHING LATER THIS YEAR IN THE U.S. DANI: THE ROBOTAXI FLEET HAS BEEN QUITE DISAPPOINTING I THINK ONE COULD SAY. AT ONE POINT THEY REGISTERED AS MANY AS 84 VEHICLES. NOW THEY’RE ACTIVE FLEET OF UNMANNED ONES HAS SHRUNK TO SOMETHING AROUND 20.
HOW MUCH LONGER WILL SHAREHOLDERS PUT UP WITH A DELAYED TIMELINE OF A MORE AGGRESSIVE ROBOTAXI STRATEGY ESPECIALLY AS WAYMO AND OTHERS REALLY ENFORCE START TO ROLL OUT IN VARIOUS CITIES? ITAY: WE THINK IT MAKES SENSE FOR TESLA TO APPROACH IT IN A MEASURED WAY PRIORITIZING SAFETY. WE THINK CYBERCAB GIVES TESLA A SIGNIFICANT COST ADVANTAGE GIVEN WHAT WE ESTIMATE IS THE COST OF THE VEHICLE ITSELF AND OF COURSE THE ABILITY TO SCALE VERY RAPIDLY, AND SO WE THINK THE GRADUAL DEPLOYMENT THAT NOW WE DO SEE ROBOTAXI DEPLOYED AND RIDE SHARE IN SEVEN MARKETS.
SO WE ARE SEEING STEADY PROGRESS THERE.
ONE OF THE FOCAL AREAS ON THE CONFERENCE CALL WILL BE WHAT WE SHOULD EXPECT FOR CYBERCAB DEPLOYMENTS IN THE SECONDS HALF OF THE YEAR. ALL THE QUESTIONS I AM SURE WILL COME UP BUT ULTIMATELY YOU GIVE TESLA COMPETITIVE POSITIONING IN THE INDUSTRY AND MASSIVE SIZE OF THE ROBOTAXI INDUSTRY ITSELF, WE DO THINK IT MAKES SENSE FOR THEM TO APPROACH IT IN A MEASURED WAY PRIORITIZING SAFETY, CUSTOMER EXPERIENCE AS WELL. WE HAVE SEEN IN THE PAST EXAMPLES OF COMPANIES WHEN THEY RUSH THIS TECHNOLOGY OUT, THEY’VE RUN INTO MAJOR ISSUES. SO I AM SURE WE WILL GET INCREMENTAL UPDATES ON THAT TONIGHT. DANI: ITAY, THANK YOU FOR JOINING US. ITAY MICHAELI OF T.D. COWEN.
COMING UP, BANKS ARE BOOMING AND WELLS FARGO SAYS IT’S STAYING DISCIPLINED. FOR MORE ON OUR EXCLUSIVE INTERVIEW WITH THE C.E.O. COME BACK WITH US AFTER THIS BREAK. THAT’S COMING UP NEXT. YOU ARE WATCHING "OPEN INTEREST." ♪ DANI: WELLS FARGO C.E.O. SAYS THE BANK HAS GONE BEYOND MOVING FIXING THE BUSINESS AND IS FOCUSED ON GROWTH.
HE SAT DOWN FOR AN EXEXCLUSIVIVE CONVERSATION.
CHARLIE: WE ARE A VERY DIFFERENT COMPANY THAN WE WERE WHEN I GOT THE COMPANY I GUESS IT WILL BE SEVEN YEARS IN NOVEMBER AND WHAT YOU’VE SEEN SINCE THE ASSET CAP HAS COME OFF IS WE ARE ABLE TO COMPETEN A LEVEL PLAYING FIELD WITH EVERYONE AND GROWING OUR CONSUMER BANK, OUR COMMERCIAL BANK, GROWING THE WEALTH BUSINESS, OUR INVESTMENT BANK AND DOING IT IN A WAY WITH VERY, VERY HIGHLY FOCUSED ON SUSTAINABLE GROWTH AND HIGH RETURNS. WE THINK WE HAVE A HUGE OPPORTUNITY IN FRONT OF US.
>> WHEN YOU SAY SUSTAINABLE GROWTH SOME INVESTORS WANT TO SEE AGGRESSIVE GROWTH. CAN YOU BE AGGRESSIVE AND BE DISCIPLINED?
>> IN THIS WHICH IS YOU -- BUSINESS YOU HAVE TO BE VERY CAREFUL WHAT AGGRESSIVE MEANS AND VERY CAREFUL ABOUT DISTINGUISHING BETWEEN WHAT THE MARKETS ARE ADDING TO OUR PERFORMANCE OR ANY OTHER FINANCIAL SERVICES PROVIDERS PERFORMANCE AND WHAT WE ARE DOING. WE ARE NOT LOOKING IT’S A TAKING RISKS. WE ARE LOOKING TO BUILD CUSTOMER RLINGSSHIPS, BUILDING FLOW OF THINGS THAT WILL GO UP AND DOWN BASED ON HOW THE MARKETS ARE DOING.
SUSTAIN NL EEFER PERIOD OF TIME. -- SUSTAINABLE OVER A PERIOD OF TIME. ROMAINE: PEOPLE WILL LOOK AT WHAT YOU HAVE DONE OVER THE LAST FEW YEARS AND CALL IT A TURNAROUND STORY. WELLS IS IN RELATIVELY GOOD SHAPE EVEN WHEN THE ASSET CAP WAS PLACED IN 2018.
WAS THAT A TURNAROUND STORY OR WAS THAT REGULATORY REHAB?
CHARLIE: I WOULDN’T CALL IT -- IT’S NOT A TURNAROUND STORY. THE COMPANY WAS ALWAYS STRONG.
WE ALWAYS HAD A GREAT FRANCHISE BUT WE HAD TO FIX THINGS THAT NEEDED TO GET FIXED INSIDE THE COMPANY BUT FROM OUR CUSTOMER STANDPOINT WE WERE SERVING THEM EVERY DAY, MAKING LOANS, TAKING DEPOSITS. WE WERE CON STRAINED ON GROWTH BUT WE WERE THERE PROVIDING WHAT WE DID DAY IN AND DAY OUT AND FINANCIALLY WE WERE STILL DOING OK.
AND WHEN WE LOOKED AT WHAT WE WERE ABLE TO DELIVER, WE WERE NOT ABLE TO GROW OUR BALANCE SHEET, FOCUS ON EFFICIENCY INSIDE THE COMPANY. WE HAVE BEEN FOCUSED ON GROWING OUR FEES INSIDE THE BUSINESS. SO OUR CORE INVESTMENT BANK HAS GROWN NICELY. OUR CREDIT CARD SPEND IS GROWING NICELY. FOCUSED ON BUILDING TREASURY SERVICES AND NOW WE GROW THE BALANCE SHEET TO MORE HOLISTICALLY SERVE CUSTOMERS. THAT’S WHAT YOU SEE WHEN YOU LOOK AT THE RESULTS OF THE PAST QUARTER, EARNINGS PER SHARE UP 25%. REVENUE GROWTH DOUBLE DIGITS, GROWTH ACROSS EVERY ONE OF OUR BUSINESSES IN TERMS OF REVENUE.
WE ARE CERTAINLY IN A DIFFERENT PLACE AND OUR GOAL IS TO BE VIEWED AS THE BEST FINANCIAL SERVICE PROVIDER IN THESE BUSINESSES IN THE COUNTRY. ROMAINE: HOW MUCH OF THAT IS BECAUSE OF CHARLIE SCHARF AND THE EXECUTIVE TEAM AND HOW MUCH OF THAT IS BECAUSE OF MARKET CONDITIONS AND ECONOMIC CONDITIONS? CHARLIE: I THINK IT’S PREDOMINANTLY BECAUSE OF THE QUALITY OF THE FRANCHISE AND THE BROAD GROUP OF PEOPLE THAT WORK AT THE COMPANY. LISTEN, WHAT I AND THE NEW MANAGEMENT TEAM HAVE BEEN ABLE TO DO IS GET PEOPLE FOCUSED, CREATE A DIFFERENT SET OF PRIORITIES BUT A LOT OF PEOPLE EXECUTE DAY IN AND DAY OUT AND THE FACT IS THE MARKETS DO HELP.
SO THERE IS NO QUESTION THAT THESE TIMES ARE REALLY GOOD FOR BANKS, AND SO IF YOU ARE NOT DOING REALLY WELL AS A BANK TODAY, THERE IS SOMETHING NOT QUITE RIGHT IN WHAT YOUR STRATEGY IS AND THAT’S NOT LOST ON US.
BUT WE LOOK AT THE UNDERLYING METRICS OF EACH BUSINESS.
WE ARE GROWING OUR CONSUMER CHECKING ACCOUNTS, WE ARE GROWING COMMERCIAL BANKING CUSTOMERS.
WE ARE GROWING THE KINDS OF LOANS THAT WE WANT TO GROW.
WE ARE TAKING THE RISKS THAT WE WANTS TO TAKE THAT WE THINK WILL PROVIDE STRONG RETURNS OVER CYCLES AND NOT GET OVER OUR SKIS AND NOT PRETEND THAT IT’S ALL US.
SOME OF IT IS THE MARKETS FOR SURE. ROMAINE: YOU JUST REPORTED EARNINGS AND THE NUMBER THAT I THINK JUMPED OUT FOR A LOT OF FOLKS WAS THE GROWTH IN THE INVESTMENT BANKING BUSINESS. YOU HAVE BEENEN A HIRING SPREE THERE -- BEEN ON A HIRING SPREE THERE. DOES THAT CONTINUE?
CHARLIE: WE HAVE BEEN ON I WILL CALL IT A DISCIPLINED PATH TO GROWTH IN OUR CORPORATE INVESTMENT BANK.
WE ARE A HUGE LENDER TO CORPORATES OF ALL SIZES.
LARGE CORPORATES TO MIDDLE MARKETS COMPANIES.
WE PROVIDE TREASURY SERVICES. WE ARE BUILDING ON THOSE RELATIONSHIPS WITH THE STRONGER SET OF PRODUCTS AND SERVICES, COVERAGE GROUPS, M&A, UNDERWRITING CAPABILITIES.
WE HAVE BEEN DISCIPLINED ABOUT ADDING RESOURCES IN A SEQUENTIAL WAY SEEING THAT THEY’RE PAYING OFF AND WE ARE SEEING THE RESULTS AND SO YEAH, WE CAN EXPECT THAT TO CONTINUE AS WE MOVE TOWARDS OUR AMBITION OF BEING TOP FIVE. ROMAINE: YOUR EXPANSION OR GROWTH IN THIS BUSINESS WILL BE PRIMARILY IN THE U.S.? THERE HAS BEEN TALK THAT YOU MAY BE LOOKING TO EXPAND SOME OF YOUR INVESTMENT BANKING BUSINESS IN EUROPE. CHARLIE: SO PREDOMINANT -- 95% OF OUR REVENUES COME FROM THE U.S. WE ARE THRILLED ABOUT THAT.
SO GOES THE U.S., SO GOES US AND WE ARE BIG-TIME BULLISH ON U.S. SO WE ARE GOING TO CONTINUE TO INVEST IN ALL OF OUR BUSINESS HERE IN THE U.S.
AND BELIEVE THAT THERE IS SIGNIFICANT OPPORTUNITIES FOR US TO GROW WITH THE ECONOMY AND TO TAKE SHARE.
THE BUSINESS THAT YOU MENTIONED THE INVESTMENT BANK DOES HAVE TO GROW OUTSIDE THE U.S. FOR US TO SERVE LARGE COMPANIES AND MIDDLE MARKET COMPANIES AS THEY WANT TO EBBS PANDZ -- EXPAND OUTSIDE THE U.S. PROPERLY WE NEED TO HAVE A PRESENCE, WE NEED TO HAVE DISTRIBUTION CAPABILITIES.
WE NEED ADVISORY CAPABILITIES BUT IT’S THERE PRIMARILY TO SEVER THE CUSTOMERS THAT WE DO BUSINESS WITH HERE IN THE U.S.
DANI: THAT WAS BLOOMBERG’S ROMAINE BOSTICK ALONGSIDE CHARLIE SCHARF.
CATCH ME ON "BLOOMBERG DEALS" EVERY WEDNESDAY.
THAT WILL BE IN JUST ABOUT ONE HOUR’S TIME, 12 P.M.
NEW YORK TIME. WE WILL HAVE A CONVERSATION ABOUT PRIVATE EQUITY AND ACTIVIST INVESTORS ON TODAY’S SHOW AND ON "OPEN INTEREST" TOMORROW SIMA SHAH.
ALL OF THAT TO COME. THIS IS BLOOMBERG. ♪
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