Admin's Mixed Messages on Iran Stoke More Volatility

Summary

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Bloomberg Businessweek

Episode: "Admin's Mixed Messages on Iran Stoke More Volatility"

Date: March 10, 2026
Hosts: Carol Massar, Tim Stenovec
Featured Guests: Kevin Gordon (Schwab), Joe Matthew (Balance of Power), Mark Gurman (Bloomberg), Anurag Rana (Bloomberg Intelligence), Nora (Bloomberg Correspondent)

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Episode Overview

This episode examines the heightened market volatility triggered by the U.S. administration’s inconsistent messaging around the ongoing war with Iran. Through interviews with strategists, reporters, and analysts, the hosts break down the global economic, political, and technological implications—from energy markets and investor sentiment to inside perspectives from Washington and Apple’s consumer tech strategy.

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Key Discussion Points & Insights

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1. Market Impact & Investment Strategy Amid Iran War

Guest: Kevin Gordon, Head of Macro Research and Strategy, Schwab

[02:22–09:16]

• Market Response to Geopolitical Shocks

  • U.S. appears insulated compared to Europe regarding the energy shock, as seen in natural gas futures pricing.
    "You could see the more sharp decline in Europe versus what was happening on the upside...the US being a little bit more insulated relative to the rest of the world." — Kevin Gordon (02:32)
  • Despite oil prices not spiking dramatically, even modest increases significantly impact headline inflation.

• On Stagflation

  • Gordon cautions against labeling current conditions as true “stagflation” in the 1970s/80s sense but notes:
    "There's certainly been an impulse of that. There's been sort of a hint of it...but it's not capital S stagflation." — Kevin Gordon (04:31)

• Investment Recommendations

  • Schwab’s strategy has not changed materially due to the conflict.
  • Investors should differentiate between “front page risk” (headlines) and “bottom line risk” (tangible impacts on earnings).
  • If conflict remains short and supply chains hold, markets may "look through" the volatility.

• Energy Prices & Consumer Impact

  • Any sustained Brent crude price in the $80–90 range would “put a pinch on the consumer,” especially as energy makes up a higher share of spending for lower-income households.
  • Stimulus effects may be diminished by higher energy costs.

• Broader Trends to Watch

  • AI diffusion: The benefits of AI are spreading beyond just tech and communication services.
  • Market breadth: Improved, but performance of the cap-weighted S&P 500 may lag if AI benefits more sectors with smaller weightings.
  • "Breadth looks relatively solid...but those other parts of the market are just not as big to power your traditional, you know, cap weighted S&P 500 higher." — Kevin Gordon (08:14)

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2. White House Messaging & Volatility in Oil Markets

Reporting: Carol Massar, Nora, Joe Matthew

[12:05–20:25]

• Confusion Over U.S. Naval Actions

  • A White House post indicated a U.S. Navy vessel escorted an oil tanker through the Strait of Hormuz—a claim that was later retracted, causing oil prices to plummet and then partially rebound.
  • Press Secretary Caroline Levitt clarified “the US Navy has not escorted a tanker or a vessel at this time...though of course that's an option the President has said he will absolutely utilize if and when necessary.” (12:47)
  • The rapid market reaction underscores investor hunger for clear signals.

• Ongoing Mixed Messaging

  • Contradictory statements from top officials—Defense Secretary, Energy Secretary, and President—exacerbate uncertainty.
  • Intelligence leaks suggest Iran may be mining the Strait; this raises the stakes for energy markets.

• Political Timing

  • With midterms looming, the political narrative is shifting, especially as Republicans hope to focus on domestic affordability versus spiraling global risks.
  • “They're talking about messaging for the midterms and how to strike home the issue of affordability, which is the last thing anyone's talking about right now.” — Nora (16:41)

• Internal White House Tensions

  • Disagreement among advisers about the war’s duration and cost; some MAGA figures, such as J.D. Vance and Steve Bannon, are at odds but are giving President Trump the benefit of the doubt—at least for now.

• Strategic Ambiguity

  • Trump’s administration keeps “all options on the table,” including possible ground troops—departing from usual dismissals of escalation.
  • “It’s not very often you ask a politician how they think about ground troops, and it’s usually immediately ruled out. This White House...said, no, we're keeping that option on the table.” — Nora (18:45)
  • Iran’s hard line, insisting they are “not interested in a ceasefire.”

• Voter & Constituent Pressure

  • Lawmakers, home in their districts, are fielding tough questions about war impact on affordability—higher gas and food prices due to disruptions in the Strait, which also affects fertilizer shipments.

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3. Apple’s New MacBook Neo: Strategy and Market Dynamics

Guest: Mark Gurman, Bloomberg Managing Editor for Global Consumer Tech

[20:57–28:54]

• Neo Laptop Launch

  • Aggressively priced under $600 (education discount), targeting students and basic computing use.
  • Uses an older iPhone chip but delivers on essential tasks; limited features compared to Air/Pro.
  • “This is going to be a gateway drug, so to speak, to the Apple ecosystem.” — Mark Gurman (23:44)

• Strategic Implications

  • Designed to bring new consumers into Apple’s product ecosystem—especially those who may then buy iPhones, iPads, or upgrade to higher-end Macs.
  • Expansion of Apple's addressable market and stickiness.

• Hardware Innovations

  • First time offering a range of colors (Citrus, Indigo blue, Silver, Blush pink).
  • Lower manufacturing costs achieved through ARM silicon, recycled aluminum processes.

• Roadmap for High-End Devices

  • Apple remains focused on “ultra” devices—upcoming MacBook Pro with a touchscreen, foldable iPad, and advanced AirPods—while populating lower price points.

• On Siri and AI Struggles

  • Persistent difficulties in developing robust AI and a competitive Siri, compounded by underestimating the importance of AI early in the industry race.
  • “They were completely caught off guard by ChatGPT. They had management issues. They didn't get enough GPUs…Just a string of different problems that led to Apple Intelligence not being that compelling of a solution.” — Mark Gurman (28:13)

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4. Oracle, AI, and Cloud Infrastructure: Post-Earnings Takeaways

Guest: Anurag Rana, Senior Technology Analyst, Bloomberg Intelligence

[32:09–39:11]

• Oracle’s Financial Update

  • Strong quarterly print: revenue better than expectations, capex flat (a relief to investors), growing backlog.
  • Oracle’s fate increasingly tied to massive OpenAI infrastructure deals.

• Questions Over AI Spending

  • Contracts with OpenAI and Microsoft are worth hundreds of billions, raising questions about OpenAI’s ability to sustain such scale relative to its own revenue run rate (~$20–25B).
  • “How can they spend that much?...that’s the biggest question of them all.” — Anurag Rana (35:43)

• Job Cuts and Cost Optimization

  • Job cuts at Oracle seen as way to rationalize costs amid thinner margins on AI/cloud revenue, not as a sign of company distress.

• Long-Term View

  • Oracle, once a minor player in cloud, is now competitive with AWS, Microsoft, and Google, thanks to OpenAI’s business.
  • Key Risks: If OpenAI (or other major clients) pull back, Oracle’s growth and future investments, especially capex, could be impacted.

• Investor Watch Points

  • Three major investor questions: OpenAI contract evolution, rate of return on signed contracts, how future capex will be funded.

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Memorable Quotes

• On Geopolitics and Markets:
  “If it [the conflict] is ultimately not going to be a growth hit to the economy and just a little bit more of an inflation shock, I think that the market ultimately looks through that, as uncomfortable as it may be.”
  — Kevin Gordon (05:51)

• On White House Confusion:
  “This kind of confusion is making and losing money for people today.”
  — Nora (13:51)

• On Mixed Political Messaging:
  “There is a real cross current here with what Republicans would like to be talking about and what the administration is prosecuting in terms of this war.”
  — Nora (16:41)

• On Apple’s Student Laptop Strategy:
  “This is going to be a gateway drug, so to speak, to the Apple ecosystem.”
  — Mark Gurman (23:44)

• On Siri’s Shortcomings:
  “They were completely caught off guard by ChatGPT. They had management issues. They didn’t get enough of the GPUs necessary for training…”
  — Mark Gurman (28:13)

• On Oracle’s Leap in Cloud:
  “Four or five years ago, they were not in the game at all when it comes to AI infrastructure. It was basically Amazon number one, Microsoft number two…because of OpenAI, these guys are going up quite a bit.”
  — Anurag Rana (38:29)

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Important Timestamps

• 02:22 — Kevin Gordon on market insulation and the energy shock
• 03:49 — Debate on stagflation
• 04:52 — Investment strategy amid uncertainty
• 06:09 — Assessing conflict duration and oil's consumer impact
• 12:05 — Missed signals and volatility: oil market whipsaws after White House post
• 13:51 — Political confusion over war conduct and market effects
• 18:45 — Strategic ambiguity: keeping military options open
• 20:57 — Apple’s new Neo laptop—a turning point for mainstream affordability
• 23:44 — Neo as the "gateway" to Apple’s larger ecosystem
• 28:13 — Inside Apple’s struggle to compete in AI
• 32:09 — Oracle’s strong quarter and OpenAI dependency
• 35:43 — Risks of AI contract concentration; questions about sustainability
• 38:29 — Oracle’s emergence as a true AI infrastructure contender

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Tone & Language

Direct, analytic, with moments of candid humor and in-the-trenches reporting—insightful without sensationalism, focused on nuance and actionable takeaways for engaged business listeners.

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Summary Takeaway

This episode sheds light on how the U.S. administration’s inconsistent messaging on Iran is fostering heightened volatility—spilling over not just in global energy markets but also into political narratives, investor behavior, and broader economic trends. Meanwhile, major corporate players like Apple and Oracle maneuver to exploit technological and market shifts, navigating their own sets of strategic risks and opportunities.

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Transcript

[Carol Massar]

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[Carol Massar]

I do want to dig a little bit deeper into the markets, the US Warner on the trade, talk of stagflation and more. That's coming out. Investors a great voice. Kevin Gordon is with us. He's head of macro research and strategy at Schwab. He's right here in studio.

[Kevin Gordon]

Hi.

[Carol Massar]

It's a shame nothing's going on.

[Kevin Gordon]

Just a few, just a few things.

[Carol Massar]

So tell us how you and the team are like thinking about everything, what really matters? What are you waiting to see if it matters longer term?

[Kevin Gordon]

I mean similar to, you know, a lot of people are waiting to see the sort of scale and the persistence of this and I think especially in market terms and you know, these are always uncomfortable situations because you never want to have to think only in market and economic terms. There's always the humanity right but to some extent they're actually tied together in terms of the economy, you know, angle. So I do think that, you know, from our standpoint, you know, the, the ultimate impact to the US Economy because that's ultimately, you know, we mainly focus on. But of course the global economy, I think that you could sort of see it in market pricing, both when we were going through the more aggressive risk off scenario, but also even today something like European natural gas futures versus us. I mean, you could see the more sharp decline in Europe versus what was happening on the upside. That to me sort of explains and kind of hints at the US being a little bit more insulated relative to the rest of the world. But I do think we have to keep in mind even if oil were to not move much from here, it would still mark a pretty big increase over where we were just a couple

[Carol Massar]

of weeks ago, 60% year to date or something.

[Kevin Gordon]

Absolutely. So the shock is still there, it's just obviously not as severe. So this is sort of where the emotional and psychological part of it comes in. It's not 120, it's down to 80, but up from 60 is still pretty tough, especially for headline inflation.

[Carol Massar]

Do you think stagflation?

[Anurag Rana]

Do you even.

[Kevin Gordon]

Well, to me it depends on what definition of stagflation you want to assign. Because if you were around in the 70s and the 80s and you use the unemployment rate plus the CPI rate as your definition of stagflation, we're still pretty far from that because unemployment is still quite low relative to history.

[Carol Massar]

Right.

[Kevin Gordon]

If you're going to use a time frame over the past, say six months and you're going to look directionally. Where is inflation been trending? Where is the labor market been trending? Then you could say there has been a little bit of a stagflationary impulse because the unemployment rate has been grinding higher. Inflation's also been grinding higher, closer to 3%, you know, a full percentage point above the Fed's target. So I think it just depends on number one, the timeframe you want to use and then number two, also sort of the background.

[Carol Massar]

Which one do you use? So do you say yes or no?

[Kevin Gordon]

I say, I say there's certainly been an impulse of that. I think there's been sort of a hint of it in a tinge, but I don't think that it's anything to be, you know, alarm. It's not capital S stagflation in terms of the 70s or the 80s.

[Joe Matthew]

So how do you play this market given that we've been dealing with so many bouts of uncertainty. I mean, this is not the first chapter of uncertainty that we've been seeing recently.

[Kevin Gordon]

You know, for us, we haven't really adjusted anything and we don't suggest that clients do the same, especially in these kinds.

[Carol Massar]

Nothing since the start of the year?

[Kevin Gordon]

No, I mean we sort of came into the year relatively constructive on, you know, outside of the U.S. from a stock market perspective. Not against the U.S. but we just felt that, you know, given some of the growth impulses you're seeing around the world prior to this, especially in Europe and parts of Asia. The weak dollar story last year of course was, was a really huge support to ex US stocks but we sort of felt that that was transitioning a little bit to the growth side of things. So you started to see a little bit of a broader base of support, still feel that way today. So we haven't really changed any of that. I think that from a broad perspective, somebody who's looking at a lot of this geopolitical instability, the framework that I've used for myself and I think that most people, hopefully it's helpful over the past year has been this distinction between what is the front page risk and what is the bottom line risk. Because at the end of the day, as uncomfortable as it may seem, if you're looking at this in a dispassionate way, like markets are, they're really only caring about how much of the hit to earnings is actually going to manifest, if at all. If this is a short term conflict, which yes, if we do get some energy spikes, not to be dismissed, but if it's ultimately not going to be a growth hit to the economy and just a little bit more of an inflation shock, I think that the market ultimately looks through that, as uncomfortable as it may be.

[Carol Massar]

So how long does this war have to go on? Like when do you guys start to

[Kevin Gordon]

say, okay, yeah, I mean it's hard to. I think that a scenario of, you know, Brent crude eventually creeping back up towards, I don't know, in the 80 to 90 range, but hovering there, I do think that puts more of a pinch on the consumer. And especially, you know, I was actually just going through some great analysis from the Bloomberg economics team right before this looking at sort of that break even price for Brent and the tax refunds coming from the big beautiful bill and we're essentially right here at these levels at that break even point. So I do think that it starts to eat into some of that stimulus that's coming to the consumer, especially a consumer Base that is devoting much a much higher share of their spending and their income on energy versus, you know, the wealthier share.

[Joe Matthew]

So based on that potential bear case scenario, how would you strategically realign your where you put your money, where you invest capital?

[Kevin Gordon]

Well, I don't think that there needs to be some sort of major realignment. I think that the realignment would come if there was a big shift in the growth trajectory of the US because coming into this, you know, as weak as the labor market has been and as fragile it's been, there were a lot of signs of some stabilization.

[Carol Massar]

Right.

[Kevin Gordon]

Even if you take January and February combined for U.S. payrolls, for both of those reports, I think you could make the case that, you know, January was probably overstated in terms of the strength. February was overstated in terms of the weakness. So you add both of those together, you're probably close to that break even rate for payrolls around 50,000. Considering what the unemployment rate did for both, you have seen a little bit of a stabilization in private payrolls. Not to say that everything is totally fine, but I think some of that fragility was sort of easing by last fall. So as long as this shock doesn't affect that scenario and that picture for labor, which of course it could, but we haven't seen the signs yet because it hasn't been long enough for us to see. As long as that doesn't happen, then I don't think there needs to be some sort of major realignment for a portfolio.

[Carol Massar]

What's more interesting to you? I mean, obviously we just talked about the war in Iran on and again taking out the humanity and the cost of people and lives impacted as a result. But there's the AI trait, there's the worries about private credit. What is it that you think is something investors should pay more attention to? Just get about a minute or so.

[Kevin Gordon]

You know, I think from the standpoint of how it's, it's starting to move through the economy and move through the market. One of the distinctions and sort of points of emphasis we've been making has been, you know, if you do believe that it's starting to diffuse throughout the economy, you're starting to see a lot of the benefits of this, of this technology in this capture. It may not be the best from a cap weighted index perspective, because if you thought that tech and communication services were sort of the big drivers and the big players at the outset, not to say that they don't participate, but if they're taking a little bit more of a backseat, giving way to the rest of the market. So breadth looks relatively solid. Those other parts of the market are just not as big to power your traditional, you know, cap weighted S&P 500 higher, at least to the degree that we've been used to over the past couple of years. So not to say that the market does poorly, but I think that's an aspect to consider if you're a believer that this continues to move throughout the economy and benefit the rest of the market.

[Carol Massar]

I agree with you. I feel like the conversation is changing in a big way. And I've had conversations about vertical AI and the large language models. Maybe, you know, we could be moving off of that in a big way. Kevin Gordon, thank you so much.

[Kevin Gordon]

Good to see you.

[Carol Massar]

Yes, thank you for having me in

[Kevin Gordon]

your new home too. I love it.

[Carol Massar]

You like what we've done?

[Kevin Gordon]

I love it.

[Nora]

I love it.

[Carol Massar]

He is head of macro research and strategy at Schwab, always a favorite when he joins us.

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[Carol Massar]

Press Secretary Caroline Levitt at the daily press briefing. A lot of things she commented on, including a lot of questions about the war and a post specifically that had to do with the escorting of a oil tanker by a US Naval vessel through the Strait of Hormuz. Here's what she had to say. I was made aware of this post. I haven't had a chance to talk to the Energy Secretary about it directly. However, I know the post was taken down pretty quickly, and I can confirm that the US Navy has not escorted a tanker or a vessel at this time, though of course that's an option the President has said he will absolutely utilize if and when necessary, at the appropriate time. All right, that of course is White House Press Secretary Caroline Levitt just moments ago at the White House with the daily press briefing. We care about this because we did see oil actually dip to its lows on that headline of a US Naval vessel escorting an oil tanker. We saw oil down as much as 19%. WTI crude down below $80 a barrel. We are still down on day, but we're not down as much. Still a decline of about 11% at 8416 a barrel. So we certainly have seen some reaction in the oil markets and safe to say energy investors, global investors looking for some clarity about this war, especially when it comes to energy markets that have really seen a lot of volatility, but really for markets overall. I want to stay on this for a moment and stay in D.C. and let's get to Joe Matthew. He is the co host of Balance of Power. Joe, it does feel like we continue to see mixed messaging on the war, whether it's from Defense Secretary Pete Hegseth, from the president last night, Chris Wright, Energy secretary, a post up, a post down. Caroline Levitt then trying to clarify everything feels a little bit messy at the White House right now.

[Nora]

I think that's fair to say. And I'll just remind everybody if you go back to that post that was deleted, Carol, Chris Wright said a large oil tanker passed through about 36 hours ago. So for some reason the energy secretary thought this took place yesterday, that this was almost old news at the time that he was announcing it to a group of people in this video. All of that has been deleted. And I'll give some credit to Bloomberg's own Hadriana Loincron, who asked that question of the press secretary. Kind of interesting how little she had to say about this, basically referring further questions to the Energy Department. But you're right. As soon as that post hit, Carol, crude oil down to a seven handle and then jumped back above $80 a barrel when it was deleted. So this kind of confusion is making and losing money for people today. And there are a lot of questions about exactly where the president is himself, having suggested the war effort yesterday was very complete, to use his words. And now Pete Hegseth, the defense secretary, says this is now the most intense day of bombing yet and they are threatening much heavier strikes if the Strait of Hormuz remains closed. There is a report out there by CNN that Iran is considering, if not already beginning the process of mining the strait, which would really change the dynamic here. And the White House will certainly need to have a concerted communications effort at that point.

[Chase Business Advertiser]

Yeah.

[Carol Massar]

I have to say, to be fair, Noor, you actually sent me a headline too, or somebody, a terminal user who sent you some information about a report that the US Intelligence indicates, as you just said, Joe, Iran is preparing to deploy naval mines in the Strait of Hormuz. I mean, again, information coming, we were looking for confirmation, but to me, it doesn't say that there's any war and any end to this war, at least at this, at this moment in time.

[Nora]

Well, that's true. And even Republican lawmakers we were talking with on the early edition of Balance of Power, Congressman Stutzman, for instance, did have to acknowledge that this is going to be a longer effort. And you know, we're likely not talking about days. The president was asked yesterday and pressed in a news conference, how, how soon could this end if we are very complete? And he said not this week. That was a redhead on the terminal that goes to show how close investors are watching this. But it's really something, Carol, you're watching the markets every day, and it seems like investors are really looking through a lot of the rhetoric here to try to bring us back to where we were before that, that kind of panic selling that we saw on Monday morning. So this is a really fascinating moment that we're in.

[Carol Massar]

And you know, I think it's safe to say we just talked with Kevin Gordon over at Schwab. This whole idea that despite everything, Nora, that's happened since the beginning of the year, as Joe mentioned, investors seem to be kind of sitting tight. And he said they really haven't changed much in terms of portfolios.

[Joe Matthew]

Right. And as we're kind of looking at how this is all trickling in the market, I'm curious, Joe, what is the strategy? What is the thinking here, especially given the fact that we are coming up on midterm elections? What do you take away from this?

[Nora]

Well, it's really interesting timing in that the Republican House conference is in Miami right now for a retreat. That's why the president was down there last evening at Doral. And they're talking about messaging for the midterms and how to strike home the issue of affordability, which is the last thing anyone's talking about right now. In fact, we're talking about three and a half dollar gas. So there is a real cross current here with what Republicans would like to be talking about in many cases and what the administration is prosecuting in terms of this war, this conflict with Iran. At some point when we get further into primary season, this will become a more urgent matter because that is the issue that will be making voters decisions at the polls.

[Carol Massar]

Joe, what do we know about tensions within the White House and what we're hearing from President Trump's team? There was a great story on the Bloomberg about kind of how this is playing out among the MAGA faithful and not necessarily playing out well at all, but that within the White House, some of the president's chief advisers aren't so keen on him continuing this war. And I just wonder what we are hearing in terms of conflict there internally.

[Nora]

You don't hear a lot. I mean, this is really sort of the backroom conversation, Right. And sometimes leaks come through Capitol Hill. And back to us here in our Bloomberg newsroom. Look no further than J.D. vance. I mean, he's kind of the face of this, having been, of course, an America first politician who and a veteran himself who had made the case against going to war with Iran repeatedly during his time in the Senate and on the campaign trail. And now he finds himself having to support the president, but also try not to bog himself down as somebody who wants to be a serious contender, if not the frontrunner for president in 2028. But this is causing great confusion more broadly throughout all of maga. Steve Bannon is going to have a very different thought about this if you start talking about America first and longer entanglements. But it's fascinating to see even that part of the MAGA community give the president the benefit of the doubt, much like this market tries to on a daily basis in the hopes that this will be done sooner than later.

[Joe Matthew]

So is the administration intentionally leaving room for strategic ambiguity?

[Nora]

That's a great question, and I think that's always a yes for Donald Trump, which is why he's leaving all options on the table. It's not very often you ask a politician how they think about ground troops, and it's usually immediately ruled out. This White House has said, no, we're keeping that option on the table in case there is a need for more directed action by, say, special forces to go find enriched uranium. And they're not saying that out loud, by the way. Or maybe even to deal with the matter of Kharg Island. All of this stuff has yet to be seen. We have to find out exactly what Iran's intentions are, having heard from the speaker of the Iranian parliament, Nora, earlier today, who said Iran is not interested in a ceasefire right now, even if the president thinks this thing is over. The enemy, as they say, also gets a vote.

[Carol Massar]

Hey, listen, if President Trump isn't thinking about midterms, but perhaps what about the members of Congress who are, of course, not in session at this moment, but.

[Nora]

That's right.

[Carol Massar]

I'm just curious about what kind of pressure they might be feeling from their constituents when it comes to this war.

[Nora]

Yeah, it's a lot. They're getting a lot of questions about this, as many of them are home. And as I just mentioned, Carol, they're at that retreat in Miami right now and they're huddling, talking about this very issue and how do we message around the war? Because at some point, if you're running for a primary election here and you're trying to resonate with voters at home, you got to talk about affordability. And with Triple A showing over three and a half dollars for a gallon of gas, that conversation just got a lot more difficult. And as you've been exploring here on Bloomberg businessweek daily, it's not just oil that's going through the strait. It's also fertilizer. And you put them both together and you've got the feedstock that goes right to the grocery store, right to the food aisle. And that's a big problem for anybody who's running for elected office in the majority, which is looking smaller by the moment here in Washington.

[Carol Massar]

All right, great stuff as always, Joe. Thank you so much. Looking forward to Balance of Power coming back at 5pm Wall street time. Joe Matthew, of course, co host of Balance of Power. Catch it on Bloomberg Television and Bloomberg Radio.

[Bloomberg Businessweek Daily Host]

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[Carol Massar]

All right. From the global macro market to one of the largest market cap companies in the world. We are talking about one that actually turns 50 years old on April 1st. And according to our team, Apple, its new Neo laptop is a game changer for the industry. So we want to get into that and just take a look at all things Apple. And with us to do that is our Bloomberg News managing editor for Global Global. Let's try that again. For global consumer tech, he is Mark Gurman and he joins us in the Bloomberg News LA bureau. Mark, good to have you here. Tell us about you guys. Took a test drive when it comes to the new Neo. You guys liked it?

[Mark Gurman]

Yeah. We've been testing out this new MacBook Neo $600, $500 at the education discount. It's a great machine. Uses an iPhone chip from two years ago which is able to power you through some light 4K video editing, some light AI apps. But most importantly, this is for students. This is for people who don't need all the power of a MacBook Air or a MacBook Pro. They're basically doing web browsing, they're doing Facebook, they're doing Instagram, they're doing imessage, they're doing email, they're doing documents, they're using Google Docs, they're using Gmail, all the basic apps that you're using on your phone, but you want that keyboard trackpad and bigger display. And the price point is quite aggressive for Apple. Traditionally they've not done sub thousand dollar machines. This is sub $600. So this is a pretty big deal for them.

[Joe Matthew]

I mean I would imagine this is something that many people have been waiting for. I just think back to my college days and you're going to find a laptop and you know, the MacBook Pros are always 1000 plus and I felt like an investment. So I'm curious, you know, as you got to do this test drive, what's different about this device as opposed to some of their main devices that we know very well?

[Mark Gurman]

Yeah, I mean it has a slightly smaller screen than the MacBook Air. So a 13 inch screen versus a 13.6 inch screen. There's also the 15 inch model of the Air. The speakers are a bit weaker, the processor is clearly not as fast. It doesn't have a backlit keyboard. The display quality is not as good, but it will do pretty much everything you need it to do. If you're a student or someone who can considers computer work going on Facebook and doing email instead of web browsing. Right. I mean there are 90% of the world, I would say uses computers for very basic tasks. All things considered, when you compare that to all the things you can do with AI and video editing and what have you. So this is going to meet the needs of a lot of people and I think this is going to put the Windows PC laptop market and the Google Chromebook market both in precarious positions.

[Carol Massar]

Hey, is it all about though being a big revenue generator for Apple, Mark? And I also do wonder how it is, you know, in terms of kind of starting to bring a different part of the consumer base into the Apple universe. So they maybe buy this and then they buy something else.

[Mark Gurman]

Yeah, it's both. So it's going to accelerate Mac revenue for sure because it's going to bring new people into buying the Mac. But more importantly, this is going to be a gateway drug, so to speak, to the Apple ecosystem. You'll buy this Mac and then maybe you'll buy an iPhone, then maybe you'll buy an iPad, then maybe one day you'll buy a higher end Mac, maybe an apple watch, maybe AirPods. And you know, once you get into the Apple ecosystem, how hard it is to leave the Apple ecosystem. So it'll make them revenue in the short term, but more importantly for them, it's going to make the ecosystem even stickier. Because now in many cases maybe a person's first computer won't be a PC or Chromebook, maybe it'll be a MacBook Neo.

[Joe Matthew]

Well, what other colors do they have? I'm looking at the article that we have on the Bloomberg terminal and I didn't even realize that they had a variety of colors for a laptop.

[Mark Gurman]

Yeah, so that's a first for them having sort of these, these more fun colors. So you have that flagship color which is, they call it citrus. It's a combination of yellow and green. There's also a indigo blue. So it's sort of like a dark blue. That's, that's my favorite one. You have your plain silver, which of course you need, and then you have your blush pink. To me it doesn't really look too different than silver, but they swear it's pink, so that's an offering there too.

[Joe Matthew]

Mark, what pushed them to do this? I think that this is something that people have really been pounding the table for, for years. Over a decade even. I'm curious what made them finally do it.

[Mark Gurman]

I think it was that a bunch of moving parts and pieces came together for them to be able to do this. It wasn't that they were pushed to do it is that they finally had the pieces to be able to do it. Having the ability to run macOS on arm silicon. So non intel chips, that was the big innovation of 2020. Apple moving to its own chips for the Mac which meant rewriting macOS to work on its own in house silicon, which is based on the iPhone processors. So the software story, the second piece, having those chips from the iPhone 16 Pro from two years ago being manufactured for the last couple years. The longer you manufacture, the more chips you're able to create, the more efficient you're able to get the production process and the cheaper you're able to build those processors for. So it's the software story coming together and the chip story coming together. And then the third thing is they've long been developing this new aluminum manufacturing process that's more efficient and cheaper, allowing them to save some of aluminum scraps and reuse it. So all these cost efficiencies and efficiencies was what was able to align for Apple to release this product.

[Carol Massar]

Hey, so they've got this going on, Mark. And so tapping into another, you know, piece of the consumer market, if you will. But you write in your power on newsletter over the weekend that the company still plans to push deeper into the higher end with more ultra devices. So they're not giving up on that.

[Mark Gurman]

Oh no, this is a, I would say this is a blip on the radar here. Obviously they'll continue to invest heavily in this NEO line. I think eventually they'll expand the NEO line with, with new versions obviously of the iPhone 17e. So that's a mid tier phone that. This is a low cost phone. New ultra products, so not necessarily named Ultra but in that higher tier. So you'll see A very high end MacBook Pro with a touchscreen and OLED display tech. In the fall you'll see new AirPods as early as this year or next year with built in cameras. Those will be a higher end version of the AirPods Pro that exists today. They're working on a large foldable iPad. So Apple is trying to hit all price points now, but certainly the premium is the focus.

[Carol Massar]

I just am waiting. Nora and Mark knows this because I've talked about this a lot with and Tim, like I'm just waiting for them to get Siri straight.

[Joe Matthew]

Oh please, that would be wonderful. I was just yelling at my Siri this morning.

[Carol Massar]

You know, I don't know. I don't even know where to go with this. Hey, you have another story out there on the smart home display. Another delay or like what do we need to read? Is this trouble or is it just.

[Mark Gurman]

It's exactly what you said it was, that the new Siri needs to be functional, it needs to be released, it needs to work before this hardware product can come out. Because if you release the hardware product before the new CRE is ready, it's just not going to work properly. It's not going to function as intended. And in addition to having a lot of criticism around their AI, you're going to have criticism now around their hardware products as well. And so that's the last thing they want.

[Joe Matthew]

So why have they been struggling so much with Siri? I just want to dig a little bit deeper into that. I'm curious, like are how much time do you have? You know, which phone do I have?

[Carol Massar]

How much time do you know?

[Mark Gurman]

How much time do you have?

[Joe Matthew]

Well, tell me what you know.

[Mark Gurman]

Well, you know, this is a fundamental thing for Apple. They've struggled with Siri and AI development for many years. They didn't believe in AI being a core component of devices and device operating systems. Even when companies were moving in that direction three or four years ago, they were completely caught off guard by ChatGPT. They had management issues. They had issues where they didn't get enough of the GPUs necessary for training. They overbuilt on their own processors for the Apple Intelligence cloud. So just a string of different problems that all led to Apple Intelligence not being that compelling of a solution.

[Carol Massar]

Always love checking in with you. Hey Mark, thank you so much. Of course, that is our Bloomberg News Managing editor for Global Consumer Tech, Mark Gurman.

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[Carol Massar]

Let's get to our Anurag Rana. He's Bloomberg Intelligence Senior Technology Analyst. He's here in our Bloomberg Interactive Broker Studio. Good to have you here and great to have you here in house. Yeah.

[Chase Business Advertiser]

Good report.

[Anurag Rana]

Yeah, it's actually very clean numbers. I think the things that sticks out most is capital expenditure is not going to go up. I think people are worried about a lot of these cloud providers adding to capex. So that's a good thing. Which revenue slightly higher. Capex remaining flat. The backlog is growing. So I think this is a good print from, you know, multiple facets.

[Joe Matthew]

So I mean we look at a stock that's down what, about 23% so far this year. Many would say that maybe the company needed some good news. The bar seemed like it was pretty low heading into this report.

[Anurag Rana]

I think the big thing for us on the call is that just now OpenAI did a very big deal with us is investing in OpenAI. How does that change the relationship between OpenAI and Oracle? Because that is the mega deal of all kinds is the stargate project between OpenAI and Oracle. I think that is one thing that I would want to know more. When we got on the conference call,

[Carol Massar]

do you think it does change or has to change or no?

[Anurag Rana]

Well, the thing is OpenAI has made very large commitments of spending across everybody now we'll see how that shapes up over the next few years. So it's possible that none of that changes, but we want to make sure that the Oracle management comes out and says it categorically that there is no change in that arrangement. There are some reports, Brody reported that there is some issue with the Abilene Texas data center expansion.

[Joe Matthew]

Right.

[Anurag Rana]

The question is what happens there? So that's going to be another thing we want to learn on the conference.

[Carol Massar]

Well, I'm glad you went there because I felt like there was a bunch of stories from Brody, Ford and team about Oracle and OpenAI. OpenAI ending that plan to expand that flagship data center. Then you had Oracle planning thousands of job cuts in the face of an AI cash crunch. How do you put Those together with this see the thousands of jobs Oracle in trouble.

[Anurag Rana]

No, no, no, no, no, not at all. See thousands of jobs job cuts is just the cash in of, you know, concept of rationalizing of the cost structure. It's, it happens a lot in software frankly when you are growing top line this much, you may not need that same amount of, you know, salespeople, marketing people, R and D people like it's a, I get that. And especially when AI revenue comes with a lower margin right now, over time the margin improves. So when you have a company like Oracle with very high margin revenue base, you mix high growth revenue with lower margin, the net effect is the overall margin gets impacted. One way to offset is you take care of tight your operating expenses. Microsoft has been doing it for many, many years as well. So this is no different in our case.

[Joe Matthew]

So it sounds like there's not as much of a fundamentals issue. I'm curious, you know, how much of its fundamentals versus how much of it is people being a bit sour on the artificial intelligence software space this year.

[Anurag Rana]

Yeah, this is on more on the infrastructure side, very different than the SaaS issue that we are facing. But for Oracle and all the others, whether that's Microsoft, Amazon, the question is for how long will that big demand for AI infrastructure remain? Right now for everything that we are seeing, the demand is very high and in the case of Oracle it is, you know, a little more specific tied to OpenAI than it is for some of the other vendors. So the big question is whether OpenAI can afford, afford to spend at that rate. So they have had made arrangements of over $300 billion just with Oracle alone, which is tremendous, $250 billion with Microsoft and then a new contract with us. So for a company that size where the revenue run rate is let's say 20, 25 billion or somewhere in that range, how can they spend that much? And that's I think the biggest question of them all when it relates to

[Carol Massar]

all these companies does the jump in those. So stocks again up about seven and a half percent. That makes sense in terms of coming off of these numbers.

[Anurag Rana]

Yeah, because Capex is not going up. Yeah, they're saying whatever the next raise of RPO increase that they're seeing of the backlog, they're going to fund it from either prepayments or some of the another way. So they're not going to raise their Capex numbers. I think that's the big difference here.

[Carol Massar]

You know I think it's fascinating though to anurag that I feel like some of the conversation is evolving, thinking beyond the large language models and the build out of these. Is it right? Are you seeing that too? And I do wonder what it means for the spend. Does that have to continue still at the pace that we've seen?

[Anurag Rana]

So when you look at these 3, 4 vendors, whether it's core, we've Oracle, Amazon, Microsoft, Google, they are providing the token factory or the base infrastructure for people to build applications. And each one has its own story that goes in tandem with what their long term strategy is. For Oracle. The open air contract is a big piece of it frankly. And I think that's where we want to focus on and say how is that relationship going to evolve over the next few years?

[Joe Matthew]

So I mean it's not uncommon that sometimes we'll see this post market rally and then in the morning you come in and for some reason we're declining. Right. What do you think investors will really be looking at that you think will be consequential as we kind of think about sentiment heading into tomorrow, Is there anything that stands out to you maybe from this report or areas that investors may be really critiquing?

[Anurag Rana]

Yeah, I talked about the first one, the open air.

[Joe Matthew]

Yeah, right.

[Anurag Rana]

The second one is what is the internal rate of return for a lot of the contracts that they're signing right now? Is it something that is going to be accretive in the near term or it going to be multiple years out? So that's the second piece of the equation. And the third is funding as far as this year is concerned, calendar 2026, they've already talked about funding in the tune of 45 to 50 billion dollars, both from debt and equity. The question is what happens next year when you're going to realize the next big backlog next year, how much of that capex is going to go up and how are you going to fund that CapEx? So those are the three things that I think is going to stand out on the call today which will dictate the stock tomorrow morning.

[Carol Massar]

I mean the OpenAI is just fascinating.

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[Carol Massar]

Great to be kind of have that exposure and that relationship. But it also puts you at risk. Right. You're vulnerable if that customer backs off at all.

[Anurag Rana]

Yeah, but Microsoft, I mean Oracle can say the same thing. Well, Microsoft has the same situation frankly because they're dependent on. Microsoft is dependent on OpenAI's technology for their products. It is highly dependent on the flow through of the hosting of the app and so forth. So I think OpenAI is an important part of the overall ecosystem. But the question is, can they afford to spend at that same rate for multiple years to come?

[Joe Matthew]

How are you thinking about Oracle as it stacks up against some of its peers right now?

[Anurag Rana]

So four or five years ago, they were not in the game at all when it comes to AI infrastructure. It was basically Amazon number one, Microsoft number two, then Google and then, you know, fighters is there, but because of OpenAI, I mean, these guys are going up quite a bit and you know, they're going to, they're going to have hundreds of billions of revenue just on cloud in the next several years if nothing goes wrong. And that puts them actually, you know, some, you know, it could be very close to Google or even above Google, depending on where they are.

[Carol Massar]

All right, so going back to the call, if they say something about open air, that would be troublesome. What else?

[Anurag Rana]

Well, the thing is, it's a question of whether they say, well, we're going to raise our capex quite a bit next year, not this year because they've already disclosed that. I think those are the, the things that we will be looking for.

[Carol Massar]

All right, great stuff. And we're going to be looking for your report. Anurag, thank you so much. So great to have you here in our studio. Yes, thank you so much. Bloomberg Intelligence senior technology analyst Ana Agrana here in our Bloomberg Interactive Broker studio.

[Bloomberg Businessweek Daily Host]

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