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Bloomberg Audio Studios Podcasts Radio news. You're listening to the Bloomberg Intelligence podcast. Catch us live weekdays at 10am Eastern on Apple CarPlay and Android Auto with the Bloomberg Business app. Listen on demand wherever you get your podcasts or watch us live on YouTube.
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All right, let's get back to Amazon. There's a stock that's working and it's working because the cloud business for them and the AI play and that's been the story behind Amazon and its stock for, you know, a better part of 10, 15 years here. It's not so much the retail, the stuff that we interact with Amazon with getting the packages at the door. It's all about their cloud business. Anuragrana, he's a technology analyst for Bloomberg Intelligence. The technology analyst for Bloomberg Intelligence, Anrak, talk to us about the, the Amazon Web services. How did they do last quarter?
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F
Yeah, I think this is the one that really changed the tone or the narrative of aws, because when you look at over the last six months or so, there is a, there is, you know, you could say a fear out there that AWS is losing market share to the likes of Oracle to likes of, you know, Google and Microsoft because the other three are showing momentum for their workloads. But it wasn't, it was absent for aws. In fact, their capex went down a little bit last quarter or, you know, when they reported last time stock was down, you know when, when they had reported their second quarter results. But finally they came out yesterday. AWS acceleration. They were very confident about how it's going to do next year. Capex is going up, their chip business is doing well. So I think from that point of view that's a big overhang away from the stock. People should be happy with this.
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A
And when it comes to us, I feel like that's the OG of the cloud computing. I mean whenever we talk about cloud, it's really Amazon leading the way. And then of course Alphabet, Microsoft. But their growth rates were much faster than Amazon because Amazon had a bigger base overall. Where does this put this latest quarter? Put us versus Azure versus Alphabet?
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F
See, that's what I was saying. These are the other cloud providers are so good at marketing that they have been beating up on us for I would say almost two years. And last night they came out, I think with guns blazing, explaining their entire strategy in a far better way. And I think that's what you resonate when you look at the market share. You're absolutely right. Just on the infrastructure side, AWS is so much bigger than everybody else, so, so much wider, much more entrenched with enterprises than any of the others. But you know what's happening is the first part or the first growth phase of AI has been through ChatGPT and that product is hosted on Microsoft Azure. AWS doesn't have a consumer product like that which is hosted on them. They're all about enterprising, adding more AI capabilities. And that growth cycle is only beginning. So I think this really puts us very confident that growth rate is going to continue in this good trajectory not just for next year, but the year after that also.
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A
And Anurag, I know that this is something that happened more recently, but of course there was a big outage of us that seemed to affect everyone across the nation. Schools and students couldn't get online, businesses couldn't do things and they couldn't log into the websites that they needed to. Did Amazon talk about that at all and give any reassurances?
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F
See, I think this is one of the biggest risks for all cloud providers, not just Amazon, but Microsoft also. Microsoft also had a similar breakdown. Now think of these cloud providers as electricity providers and it can happen to anybody. One of our big thesis is that we know AI is a big growth story for cloud. I think one of the bigger stories later on is going to be a multi cloud strategy. Every company, every enterprise is going to go out and have a backup cloud provider similar to what they do in electricity. And I think that is going to add far more to the total addressable market of this important service.
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E
I know you guys at Bloomberg Intelligence wrote, I think the definitive research report on AI. So folks, if you want to learn about what this whole AI thing is, go to bi. Go on your terminal and that's where you'll find it. If you don't have it, call your salesperson. But it's. What's the bear case? Is there a bear case for AI here, Anurag? Because they're certainly spending a ton of money.
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F
Yeah, the bear case is spending a lot of money. And I think that is something to be extremely careful about. Because see, one of the things you have to see is will enterprise suddenly say, you know what, I like this thing. It is good to summarize a handful of emails. It will give me so much of productivity. But that's where it ends. It's not going to lead to massive layoffs. It's like another tool you and I have. We have Excel now we have ChatGPT on the side that I think is the bear case on it is how much productivity somebody can get out of it. And at the same time, when you're spending, let's say 500 plus billion dollars a year in adding more capacity, a lot of people are borrowing that money. Private credit is involved. You have a lot of that coming from one customer. That's OpenAI. What if something happens and somebody else comes up with a better model and OpenAI is no longer able to see that kind of growth momentum? So there are enough bear cases out there. That's why almost, to be very frank, almost on a weekly basis you have to track these things very carefully.
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A
Yeah, that circular financing you just referenced raises a lot of concerns because so much of the economic growth that we're seeing now is tied to investment in spending on AI. So if anyone stops spending for just a moment or maybe slows things down, that could have huge ramifications. Anurag, always appreciate your joining us. Anuragrana is one of our Bloomberg Intelligence senior technology analysts giving us the lowdown here on Amazon. Amazon Web Services. Fastest cloud growth in years for Amazon Web Services, providing some relief to those investors.
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Stay with us. More from Bloomberg Intelligence coming up after this.
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The FIFA World Cup 26 is coming to North America next summer. It's the ultimate celebration of sports and culture and an opportunity to elevate your company. Get closer to where business meets the beautiful game with a premium hospitality package. Build partnerships in the best seats and suites Achieve goals over world class food and beverage. Get closer to wins on and off the pitch. Register interest@hospitality.FIFA.com Interest.
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It is Halloween, so I think about haunted houses and there's a great story on the Bloomberg Paul about a real estate developer in Pennsylvania who wants to turn his haunted house attraction, which is actually a former Pennhurst Asylum, into what else? A data center, of course. I mean it's right in. Right in line with the times. Right is the only thing anyone cares about these days. Everyone's trying to make money off of it, profit off demand for it. But can the grid actually sustain all of this?
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C
It's not clear with the guy lives in an asylum.
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A
No, he owns the asylum and he's turned it into a haunted house. But now he wants to turn it into a data center.
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C
You think it's like really wired for that?
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F
There you go.
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A
All good questions. All right, let's bring in Ryan Mallory. He is president and CEO, CEO of Flex Central, which is a private company that is tied in to this idea of whether we have enough Power to power, all this AI that everyone wants. Ryan, thanks for joining us today.
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B
Good morning Scarlett and Paul, thanks for the opportunity to speak with you.
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A
So just give us a primer first on what Flex Central does and how it ties in with whether our grid can support all this demand for AI.
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B
Yeah, so Flex Central is a national data center operator. We've got a dynamic platform, 42 data centers across 18 markets. And so you know, we're right at the cornerstone of that AI on ramp to trend that's out there. So we're seeing some of these big deployments like you guys are talking about in Pennsylvania and other places. Flex Central is really that, that on ramp capability from that network ingress.
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E
So Ryan, you say power availability is the new real estate. What do you mean by that?
- [11:08]
B
Yeah, you know it used to be trying to find the land. So a piece of property that could support a data center was where everybody started. Now it's really where, where is the power at? You know, in 2023 there was 176 terawatts of power being, you know, generated out there for the data center marketplace. By 2028 there's going to be 580 terawatts. And so what we're seeing is this massive increase in power demand and you know, they're not making any more land close to, you know, the generation and transmission so being able to have access to that power. And is that really that that real estate mantra of location, location, location, so you've got to find the power first.
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E
I wouldn't know what a terawatt is if I tripped over what I do know.
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A
Sounds like a lot.
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E
580 terawatts by 2028, that's 12% of the national electricity demand is going to go for these things.
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Yeah, and sometimes we don't even have enough electricity just to do what we do right now. So that's the question, Ryan, which parts of the country have this power availability there ready for this new revolution and which have massive backlogs and can't afford to have anything more plugged into their grid?
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B
Yeah, you know we've really seen some, some shifting in the game board over the past several years where you know, the Northern Virginias and the California markets and even Georgia has become power constrained just because of this massive shift to those markets because of at that point in time power availability. Now we're starting to see it turn to net new markets. Oregon, Utah, Colorado, Texas, North Carolina. These are areas that from a legacy data center market had been overlooked because they didn't have a lot of the infrastructure, but they've caught up and those markets are really primed to take off. That's where flexential spending a lot of its focus right now. And we see a lot of others in the AI industry doing the same.
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E
All right, so I need power to power these things up, but I probably also need some water to cool them down. Talk to us about water.
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B
Yeah, you know, water is something that is a hot topic in the data center industry because you know, when you're talking about these high density compute workloads with AI, we've seen them, you know, the actual, you know, densities per rack go up, you know, 100, 200, 300% over the past several years. You have to have water from, from a heat rejection standpoint. And so a lot of companies historically had just used evaporative water cooling to, you know, to be able to cool and power these data centers. That's just not efficient. And so it's really about utilizing, you know, closed loop systems where you can, you know, put a liquid across the chip, you know, in the rack to be able to dissipate that heat or reject that heat that's out of there. There is a, you know, there is a little bit of a nuance out there. Companies that are looking at operating at a 0w u e or water use efficiency are really what's needed in today's environment so we don't become burdens on those local communities.
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A
Let me ask a dumb question. Here we have climate change, which is causing extreme weather here in the New York region. We just had flash floods that resulted in the death of two people and have really inundated the infrastructure. Does that matter when you're looking at water as a valuable resource in making sure that we can keep these data centers running?
- [14:38]
B
Yeah, I mean, climate change is a topic that's near and dear to everybody in the data centers data center world's heart because we have big footprint impacts in communities. But when you're looking at how we're building the data centers in today's environment with these closed loop systems, we're just not drawing off of those, off of those water sources that are out there because they're closed and contained. So it's not the same impact that historically was happening in the industry.
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E
I'm all about nuclear here, particularly small modular reactors. Smart. Talk to us about that technology and is that going to be a solution in any time in the near Future?
- [15:18]
B
You know, SMRs are the future of the data center world, as is nuclear in General, you know, we've got to be focused to the, you know, to the climate comment that Scarlett made just a second ago around how we're impacting the environment. Smart are small footprint reactors. We've been doing those for 30, 40 years, you know, for you know, government based use and you know, they're tried and true from a performance perspective. What we've really got to get through is just the, the permitting, you know, process and being able to deploy them. You know, you can deploy anywhere from a 50 megawatt to 300 megawatt reactor in a small form factor and that's going to really deliver that capability that's out there to be able to power these data centers in a more rapid fashion. You know, a 10 year permitting process is just not going to, going to help anybody in the industry whether it's you're the home consumer or the data center consumer.
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A
All right, good stuff. Ryan, thank you so much for joining us today, sharing your expertise with us. Ryan Mallory is CEO of Flex Central on the growing strain on power due to this AI boom. And he joins us from Denver, Colorado. So a lot to think about there as everyone, it feels like, wants to find some way in on AI.
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Stay with us. More from Bloomberg Intelligence coming up after this.
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I think I've done enough.
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And Shonda Rhimes.
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That's so cute.
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This will be a place where every weekend you you can count on one essential conversation to help make sense of the world. So please join me, listen and subscribe to the Michael Hussein show from Bloomberg Weekend. Wherever you get your podcasts, you certainly ask interesting questions. You're listening to the Bloomberg Intelligence podcast, catch us live weekdays at 10am Eastern on Apple CarPlay and Android Auto with the Bloomberg Business app, Listen on demand, wherever you get your podcasts or watch us live on YouTube.
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E
I think near and dear to my heart, we were just talking about the, you know, what are some of these companies in these industries that are kind of slowly decaying, like the cable television industry, what do they do? But it's also fine.
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A
But they're not dead and they're not going to be dead anytime soon, right?
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C
No.
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E
And I think the other one here is just kind of what some of these big legacy cable media companies do. And that's certainly, you know, true with, when you look at Warner Brothers Discovery, Paramount, all these companies, they're trying to figure out what to kind of do.
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A
And they're teaming up as a one solution. Right. Because maybe scale gets them somewhere that they can't get on their own.
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E
Exactly. Our next guest has got a really interesting opinion piece out on this. Paul Hardart. He's a distinguished clinical professor of marketing at New York University, Stern School of Business. By the way, I think Stern has basically half of global Wall street came out of the Stern School of Business. I'm convinced these people are everywhere. Paul, thanks for so much for joining us here. Talk to us about Warner Brothers. You know, it's a, it's a legacy media company now part of Warner Brothers Discovery. You know, the question is, should they be sold? Should they merge with another company? It's a proud company with a lot of just legacy media assets. What do you think they should do?
- [19:33]
C
That's great question. Thanks for having me, Paul and Scholar, nice to be with you. You know, it's a challenging. So from a business standpoint, it seems like they have a lot of debt. I think the plan was always to sell as, you know, know that, you know, they were originally Time Warner. Then there was a sort of disastrous AOL Time Warner merger. Then they were sold to AT&T, which didn't go well. AT&T then spun it off with Discovery, led by David Zaslaw. And now here we are just a few years later. Once again, they're for sale. So first of all, I feel very bad for the people that work there. It's been a really tumultuous history. But they have to optimize the assets, right? That's their job as it relates to the shareholders. So I think they're trying to figure out an exit. I think there was a period of time where a lot of people felt that ultimately they could wrap these up and sell it to a big tech firm. That was saying, I think that was the viewpoint of Shari Redstone, originally with Viacom and CBS and then ultimately Paramount. So I think they're trying to get the most value for what they have originally. Like you had just talked earlier about the cable assets, the plan was sort of reflecting exactly what Comcast is doing, is spinning off its cable assets into Versant. The plan had been for Warner Brothers Discovery to. To split the company with their CFO taking the cable assets and the other assets, the Warner Brothers Discovery, the studio and the HBO Max platform, the streaming platform, staying as one entity. So in that time, David Ellison has come out and made three successive offers. The value, the stock price has gone up, is effectively tripled since April. So, you know, their job is to do optimize the value for their shareholders. And so I think that's what they're trying to do right now.
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A
So what's a value here to a Skydance Paramount or to a Comcast or to a Netflix is the IP of Warner Brothers. You just go to the HBO app and you see Friends there, you see Game of Thrones, you see all kinds of assets that the company owns. That IP is valuable, but does it diminish over time? I mean, does it need to be folded into something bigger to maximize its value?
- [21:44]
C
Yeah, well, so, you know, anything in media, we sort of always talk about the content and the distribution, right? You sort of need both. You can't just have great content. It has to be to be able to be discovered. And as we all know from, you know, following the pandemic, our habits have changed. And a lot of us now we stream content. So scale is helpful in that. So one of the things, the value propositions for any of these buyers, whether it's Comcast, whether it's Netflix, whether it's possibly Apple or certainly Paramount is, you know, Paramount plus is struggled a little bit. So pairing that with HBO Max, you'd get a huge subscriber base, you'd get extra content. It's not that different than what Disney did by merging with Fox, realizing that to compete with Netflix, they need a huge amount of content. So I think it's sort of the same playbook of scaling up, having a large deep library that some people, when, you know, we all have credit card bills, we all. Everyone has to check and see how they are spending their money. And if we're all subscribers subscribing to 5 or 6 or 7 streaming services, it becomes uneconomic. So I think the idea is you want to be one of those two or three streaming services that, you know, the family needs.
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E
And Paul, what I think is one of the unique aspects of a potential deal with Warner Brothers Discover is you've got a CEO and a board that says, basically, hey, we're open to doing a deal, we're for sale, kind of. How does that play into it?
- [23:05]
C
Absolutely. Well, they've, they've basically said that, you know, they've turned down three offers. Again, the stock price is more than tripled. So at some point they are, you know, the board is also going to have to sort of base the music and say, you know, why they're not accepting this offer. So I think what they're looking for, right, they're trying to, you know, elevate, you know, having more parties interested is always good in any dynamic. So it's unclear exactly how interested Netflix or Comcast is, but some of those assets, just like, you know, if you go to a consignment shop, there's definitely something that would be interesting. And I think that the benefit to Comcast, Netflix, any other people, you know, giving access to the data room there is, first of all, you learn a lot about what your competitor is doing, so you get access to information to. There's, there is a deal, right? They may only want HBO Max, they may only want certain ip, but there's probably a deal worth looking at. And then lastly is sort of what Comcast did with Disney is you might also elevate the price for one of your competitors. So that's not a bad thing. It's you sort of, you know, you're sort of the skunk at the picnic a little bit. And so I think all of those factor into it in a way. But there's no reason, I think it would be, it would be an obligation of duty from these other companies not to look at it. You know, just kick the tires a little bit.
- [24:28]
A
Paul Hardart, distinguished Clinical professor at NYU Stern School of Business. He is a Bloomberg Opinion contributor as well. You can check out what he writes on the Bloomberg Terminal.
- [24:38]
D
This is the Bloomberg Intelligence Podcast, available on Apple, Spotify and anywhere else you get your podcasts. Listen live each weekday 10am to noon Eastern on Bloomberg.com, the iHeartRadio app, TuneIn, and the Bloomberg Business App. You can also watch us live Every weekday on YouTube and always on the Bloomberg Terminal.
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