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- [00:00]
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- [01:58]
Intuit Enterprise Suite Advertiser
How do you think the Fed is looking at tariffs? The uncertainty of tariffs?
- [02:01]
Scarlet Fu
Let's take a look at the sectors and how they perform.
- [02:04]
Intuit Enterprise Suite Advertiser
A lot of investors getting whipsawed every.
- [02:06]
Scarlet Fu
Day by news events, breaking market headlines.
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Baja Mar Advertiser
And corporate news from across the globe.
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Scarlet Fu
Could we see a market disruption? A market event?
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Intuit Enterprise Suite Advertiser
People just too exuberant out there.
- [02:15]
Scarlet Fu
You see some so called low quality stocks driving this short term rally.
- [02:19]
Baja Mar Advertiser
Bloomberg Intelligence with Scarlet Fu and Paul Sweeney on Bloomberg Radio, YouTube and Bloomberg Originals.
- [02:26]
Scarlet Fu
I'm Scarlet Fu.
- [02:27]
Alexandra Semenova
And I'm Alexandra Semenova filling in for Paul Sweeney.
- [02:30]
Scarlet Fu
On today's Bloomberg Intelligence show, we dig inside the big business stories impacting Wall street and the global markets.
- [02:36]
Alexandra Semenova
Each and every week we provide in depth research and data on some of the 2000 companies and 130 industries our analysts cover worldwide.
- [02:43]
Scarlet Fu
Today we'll look at why the athletic apparel company Lululemon sees signs of a.
- [02:47]
Alexandra Semenova
Rebound in the fourth quarter plus a look at why the tech giant Meta is beginning to cut more jobs at its Reality Labs division.
- [02:54]
Scarlet Fu
But first, we begin with the aerospace industry.
- [02:57]
Alexandra Semenova
This week, Delta Airlines reported fourth quarter earnings that missed Wall Street's expectations. The company also said it will be taking a more cautious view for 2026.
- [03:07]
Scarlet Fu
For more, Alex and I were joined by George Ferguson, Bloomberg Intelligence senior aerospace, defense and airlines analyst.
- [03:13]
Alexandra Semenova
We first asked George for his take on Delta's recent earnings.
- [03:17]
George Ferguson
Really what we saw here from Delta was a continuation of the, you know, the premium and the loyalty revenue are rolling in, strongly rolling in, I think sort of 5 to 7% if I recall correctly, you know, above sort of GDP growth rates. But the, the back of the airplane, you know, the. They call it the main cabin or basic economy. That's. There was that revenue was down 7% in a quarter where Delta was growing a couple percent. And so we still see this premium trend. And I think we're going to see a lot of growth in premium seats this year. We've got Southwest converting to some, you know, to more of a full service carrier premium. Delta plans to go premium. United plans to go Premium. Alaska, JetBlue, everyone wants to go premium. So I think there's probably some concern in the marketplace that maybe premium gets crowded and pushes closer to that main cabin kind of. Kind of fare rather than main cabin.
- [04:16]
Alexandra Semenova
Coming up, Delta said they're bracing for risk to their forecast, noting the geopolitical environment, whether it's international or domestic policy. Say, George, is this unusual for them to issue this kind of warning?
- [04:30]
George Ferguson
I mean, again, I think we're at the beginning of the year and management teams like to caveat things. Right. And so I guess what I would say is we had plenty of geopolitical challenges in 2025. You know, we were watching transatlantic demand closely because you've got a war raging in Ukraine. It's been doing that for a bunch of years now. Didn't seem to slow down that demand. That demand seemed to do okay. Some days. I wonder if there maybe there's more risk domestically.
- [04:59]
Intuit Enterprise Suite Advertiser
Right.
- [05:00]
George Ferguson
One of the other things we're watching is the president wants to cap interest rates for the credit card companies at 10%. Loyalty through the Amex program brings a lot of money in for Delta. Definitely a source of their competitive advantage. And I think if you're capping interest rates, I think some of those credit card programs have to change and that would hurt some of those loyalty programs. So there's, I mean, there's risk all over the place, all the time again, the geopolitical didn't seem to hurt demand as much as we would expect it in 2025.
- [05:29]
Scarlet Fu
Right. It kind of always threatens to hurt demand, but in the end people still prioritize traveling and paying for traveling. One of the comments from Delta was that the airline industry could see consolidation in 2026. Where. Which players would that most likely involve?
- [05:45]
George Ferguson
Yes, so we're already starting to see some of that. Right. We had an announcement the other day that Allegiant and Sun country are going to put themselves together. They're two smaller, low cost airlines. Some of them pretty quickly growing. They're quickly growing, so they'll consolidate. You know, we've heard discussion about Frontier potentially buying Spirit Airlines. We still have to see the ultimate outcome for Spirit. They're in chapter 11. We're trying to figure out what the restructuring looks like the second time they've been there. So you can see on the edges, especially where in that low cost marketplace you can see consolidation beginning. It takes a long time and that's the challenge. But you could see some of that consolidation already begin. We don't see the big players getting consolidated. But you know, you got to put together. I think you're not going to see sort of a United, a Delta, an American, a Southwest. They're not going to. We're not going to put any of those together. I think that's too much. But I think a lot of other stuff is potentially in play.
- [06:50]
Alexandra Semenova
George, we also got news that Delta is ordering 30 Boeing 787 Dreamliner jets, aiming to boost the company. How much do you expect this purchase to impact its bottom line?
- [07:03]
George Ferguson
Yeah, so they're not going to see these airplanes until 2030. So it's a bit of a ways away. They're replacing 767s which are old airplanes. We have an average age of them about 27 years right now. The 78 is going to be a lot more efficient. Delta gave some numbers, 15ish plus percent more efficient. So I think that really helps the bottom line. Also very interesting to us is that Delta is traditionally more of an Airbus shop. They buy a lot of Airbus product. The recent widebodies they've bought are Airbus A350 and Airbus A330. Again, the Boeing wide bodies. I just told you, 28ish years old. Interesting to see them come in for the 787. That's really, I think been a category leader in that small narrow body world. Boeing has over 1,000 orders for that airplane. We see rates continue to rise, which will improve profitability of Boeing as they put more throughput in that 7 8. I thought it was a bit of an endorsement for 7 8, even though Delta's not going to say that, probably.
- [08:10]
Scarlet Fu
Our thanks to George Ferguson, our senior aerospace, defense and airlines analyst.
- [08:15]
Alexandra Semenova
This week we focused on a Bloomberg Big Take story titled the CEO Playbook to Navigating Trump. You can find it on bloomberg.com and the Terminal.
- [08:24]
Scarlet Fu
So the story looks at how public feuds and protectionist threats have turned CEOs dealings with the White House into a high stakes game of loyalty and leverage.
- [08:32]
Alexandra Semenova
And for the story, Bloomberg News recently spoke to experts and business leaders on how CEOs should navigate Trump's second term.
- [08:39]
Scarlet Fu
For more on all of this, we were joined by one of the Big Take's authors, Matthew Boyle, Bloomberg's senior management reporter.
- [08:45]
Alexandra Semenova
We first asked Matt to break down some of the challenges faced while interviewing CEOs for the story.
- [08:51]
Matthew Boyle
I mean, the usual sort of voices of corporate America, the Chamber of Commerce, the Business Roundtable were just like, you know, we're gonna take a pass on this one. And just about every CEO under the sun, you know, just, they just don't want to go there. It's like the third rail. So it was challenging to report, but we had a lot of great conversations, let's say on background, with those who are advising CEOs, and that led to our playbook here, the five rules for dealing with the Trump Madness.
- [09:19]
Alexandra Semenova
Matt, we've seen a growing number of business leaders recently kind of push back more than usual on some of President Trump's policy proposals. We had Citi CFO this morning pushing back on the credit card cap. ExxonMobil CEO calling Venezuela uninvestable. Is this unusual and what might be the consequences for them?
- [09:36]
Matthew Boyle
Yeah, it takes a certain CEO to push back. It takes a Jamie Dimon or The CEO of ExxonMobil, who have the clout and the authority and the industry backing to say, no, you know, this is actually not perhaps a good idea. But most of the time, as we saw with tariffs, it was happening behind the scenes. You know, remember, this is going back a ways, but when Trump told the Walmart CEO Doug McMillan to eat the tariffs, Walmart said nothing. And that was probably pretty wise. There was no reason to get into a public spat on Truth Social with Trump. So. But now maybe it's because Trump is in a different position 12 months later, or it's the issues involved. You know, banking CEOs are very happy to go out against interest rate caps. But we are seeing in certain cases some CEOs push back. Yes.
- [10:21]
Scarlet Fu
And direct engagement does seem to pay off if you can find your way to the President's mobile phone, which apparently he hands out the number pretty willingly to certain top CEOs. You talk about Nvidia's Jensen Huang having a direct line to the President also. Lip and Tam. Lip and Tam of Intel being able to do that as well.
- [10:41]
Matthew Boyle
Exactly. I mean, Jensen Nvidia CEO went on Joe Rogan in December and said, you know, Trump is extraordinarily accessible. The United Airlines CEO said the same thing to us. I mean, you can call this man up. He does answer his cell phone, as we've seen. Sometimes at 4:30 in the morning, he will pick up his cell phone. But not everybody has Trump on speed dials. So a point of our story was that you have to find a way in whether that's Susie Wiles, the chief of staff, whether it's Scott Besant, treasury or Commerce, Howard Lutnick or one of the sort of lower level aides. Also, I mean, we found that, you know, the director of the White House Office of Public Liaison is somebody you can, you can go to also. So the point is to find a way in, no matter how you do it.
- [11:23]
Alexandra Semenova
Matt, what are some of the differences in how President Trump deals with business leaders in his second term from his first term?
- [11:30]
Matthew Boyle
Well, the second term he's a little bit more unshackled. Let's say in the first term you had a few more traditional Republican voices. You know, you had Rex Tillerson in there and other folks who, you know, were able to maybe play a little defense. They were able to slow walk some of Trump's more outrageous policy proposals. Now it's just all true believers. So he's sort of unfettered, he's unshackled and there's really not many checks. So what this means for CEOs is, yeah, they really can't hide. They can't just say, well, we'll let our industry association take care of this or don't worry. I mean, look at just the past week what's been going on. CEOs really need to be on watch.
- [12:09]
Alexandra Semenova
Yeah, shackles is a fantastic word.
- [12:11]
Scarlet Fu
Free range Trump.
- [12:12]
Intuit Enterprise Suite Advertiser
Right, we go. There we go.
- [12:14]
Scarlet Fu
The other thing that you could do if you're trying to get his attention or curry favor is to give him a made up award.
- [12:20]
Matthew Boyle
Yes, he does respond to these types of trinkets and trophies. As we've seen with the Apple CEO Tim Cook was able to give them this sort of glass trophy with a 24 karat gold base or something with the Apple logo on it. And guess what, it was over tariffs. And Cook and Apple were looking for some relief on foreign microchip tariffs and that helped. It also helped though that Cook had really put in the work, though, talking to Trump for years now, going back to the first administration. So you can't just sort of throw a trophy at him. But it does take some groundwork as well. But look at the Swiss business executives also giving him a, you know, a gold Rolex. And, you know, so these things do tend to have an impact. As we say, everything is a transaction with this president.
- [13:06]
Alexandra Semenova
Matt, you mentioned it's been difficult getting people to speak to you for this story. Did any of the business leaders you spoke to give you reasoning for why they might be afraid to talk or did they kind of just brush you off?
- [13:17]
Matthew Boyle
It's, I mean, many brushed us off through their gatekeepers. They just, the thing is they just don't see much upside. They don't want to be the one CEO talking to any reporter on the record. But as we've seen now, maybe we might see some more come out of the woodwork now that Dimon and others are talking about the interest rates. The defense companies also might have something to say about Trump pressuring them to up their game. So we'll see. But it's that CEOs, again, they might be speaking out on certain issues, but when it comes to Trump again, they just fail to see the upside. But at this point, as we say, or it was a Yale School of Management person wrote in Bloomberg Opinion, the chaos is not just no longer in the background. The chaos is baked in. It's in the system. It's coming for them. So they might want us talk.
- [14:04]
Scarlet Fu
And yeah, it's front and center. And it feels in many ways like those who know how to navigate governments and emerging markets might be better positioned.
- [14:12]
Matthew Boyle
Yeah, we have that experience. Exactly. You know, of that sort of slightly more chaotic, slightly more freewheeling environments. And many of these big multinationals, of course, do operate in those areas.
- [14:22]
Scarlet Fu
Our thanks to Matthew Boyle, Bloomberg senior management reporter.
- [14:25]
Alexandra Semenova
Coming up, a look at why the tech giant Nvidia and the pharmaceutical company Eli Lilly are partnering up.
- [14:30]
Scarlet Fu
You're listening to Bloomberg Intelligence on Bloomberg Radio, providing in depth research and data on 2000 companies and 130 industries.
- [14:37]
Alexandra Semenova
You can access Bloomberg Intelligence via BI Go on the terminal. I'm Alexandra Semenova.
- [14:43]
Scarlet Fu
And I'm Scarlet Fu. This is Bloomberg.
- [14:47]
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Scarlet Fu
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Matthew Boyle
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Scarlet Fu
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- [17:16]
Baja Mar Advertiser
This is Bloomberg Intelligence with Scarlet Fu and Paul Sweeney on Bloomberg Radio.
- [17:23]
Scarlet Fu
I'm Scarlet Fu.
- [17:24]
Alexandra Semenova
And I'm Alexandra Semenova filling in for Paul Sweeney.
- [17:27]
Scarlet Fu
We move to some news and big.
- [17:28]
Alexandra Semenova
Tech this week Alphabet's Google confirmed that it has entered a multi year deal with Apple.
- [17:33]
Scarlet Fu
This will allow Alphabet to power the iPhone makers artificial intelligence technology including the Siri voice assistant.
- [17:39]
Alexandra Semenova
We reported late last year that the two companies were finalizing such a deal with Apple planning to pay about $1 billion a year.
- [17:46]
Scarlet Fu
For more on this we're joined by Anurag Rana, Bloomberg intelligence technology analyst.
- [17:50]
Alexandra Semenova
We first asked Anurag about the specific advantages Google brings to Apple with its Gemini models.
- [17:56]
Odoo Advertiser
Now we go back in history, you know, Apple doesn't have that big of their own foundational model on which it's running or it's supposed to run some of these technologies. But Apple and Google go back a long way. They have a very good agreement on search which pays Apple billions of dollars. So you know, there was some legal issue around it. So we always knew that once that legal issue goes away, Apple may be working closely with Google to basically outsource a lot of their foundational models into the technology that they have now. It's possible that the next CD upgrade, which is most likely going to be in the March, April timeframe, could be that one big moment that we are all looking for Apple to finally come out and say that okay, you know, we are not laggard in AI, that they also have a product that's pretty good.
- [18:46]
Alexandra Semenova
Anurag I saw a tweet actually from the official Google account announcing this deal and Elon Musk replied. He said that this seems like an unreasonable concentration of power for Google. Obviously he has a vested interest here given, you know, his participation in X AI. But does he have a point? What are the regulatory risks around this deal?
- [19:09]
Odoo Advertiser
Yeah, I mean he won't have a point if his model was being used at that point. So I mean, everybody's trying to pitch Apple to use that model. But you know, at the end of the day, Apple actually for the first time, if you go back a year and a half ago, they used OpenAI. I mean you can still use OpenAI when you go to Siri and ask a question and it can take you out of there. But for Apple it has to be integrated within the iOS within the software, but they won't do it to an outside vendor where they don't control the data. So what Apple's going to do here, they're going to use the foundational models from Google but they're going to run a lot of that either on the device or their own private, private cloud data centers, which means they will still protect the privacy of that question and not Let it have, you know, access to other players as well.
- [19:56]
Scarlet Fu
Yeah, the privacy angle is really big for Apple. It's kind of its mark of distinction here among the big tech players. Anurag Apple has seen this exodus of talent, AI talent going to other big tech companies in recent months. Does this multi deal with Alphabet, with Google change any of that? Does that stanch the bleeding at all?
- [20:18]
Odoo Advertiser
Yeah, for me it does, only because I am now buying the model outright from somebody who's doing all the hard work. So I'm not in the business of model development. If I can use the best model that's out there into my product and I pay them some money and you know, the human amount is about $1 billion a year, which is, to be honest, nothing compared to how many billions these companies are spending to come up with their own large language model. And that's what actually Apple said in the search case and says, I'm not in the search business. If Google has the best search, I will outsource that technology into my products from them.
- [20:51]
Scarlet Fu
Our thanks to Anuragrana bi's technology analyst.
- [20:55]
Alexandra Semenova
We move next to news from the athletic apparel company Lululemon Athletica.
- [20:59]
Scarlet Fu
This week, Lululemon said its fourth quarter sales would land at the higher end of its 2025 guidance.
- [21:04]
Alexandra Semenova
It's a sign that the yogawear company is regaining some momentum following a series of disappointing results.
- [21:10]
Scarlet Fu
For more, Alex and I were joined by Poonam Goyal, senior US E commerce and retail analyst.
- [21:15]
Alexandra Semenova
We first asked Poonam to break down how the company's turnaround is going.
- [21:19]
Poonam Goyal
So the loyalty program is not something that Lululemon has had for a long, long time. But it does help. Just like with any other loyalty program. You know, it gives you perks, you have access to Lululemon merchandise, you have access to Lululemon events, etc. And it does bring the member who enjoys the Lululemon experience to keep coming back. It's an added reward for those who have been loyal to the company but make no mistakes. That is not what's going to drive the turnaround. Their turnaround needs a lot more than that.
- [21:53]
Scarlet Fu
Yeah, I mean, loyalty programs are something that most brands have and Lululemon has some more structural issues when it comes to Lululemon. Separate from the loyalty program, Lulu has preannounced fourth quarter sales and it comes in at the higher end of its guidance. This is kind of surprising because Lululemon has struggled to connect with shoppers the last couple of quarters.
- [22:14]
Poonam Goyal
Yes, you can say that it's surprising but at the end of the day, the sales are still down. The estimate was for sales to be down -1 to 3%. So maybe you're close to -1. That's still not where we expect Lululemon to be. This doesn't tell me that the turnaround is, you know, has started and is underway and things will begin to improve quarter after quarter. I think it's good, but I need a lot more to be confident that the turnaround will begin to take place.
- [22:43]
Alexandra Semenova
What are the some of the macroeconomic trends that are driving Lululemon's customer base? Is it inflation? Is it just an overall change in discretionary spending patterns? What is it?
- [22:54]
Poonam Goyal
Yeah, so the macro economy has been, you know, good and bad. The luxury consumer has been doing well. Lululemon, you could argue, sits in the affluent space of activewear. But that said, it's not that the customer is pressured and that's why their sales have fallen. It is that they have lacked innovation and execution has been weak. So the key here is a company specific issue that they need to resolve and they are working towards it. We will be getting a new CEO hopefully at some point in 2026, and it'll really be then where we can see who comes in, what's the strategy and how does Lululemon re engage its core customer that probably still loves the brand, but just hasn't found enough new to keep going back and back?
- [23:41]
Scarlet Fu
Yeah, absolutely. I think about the competitors that Lululemon faces in this space. It ranges from dory to all the other big names out there, including Nike, perhaps similar Athleisure Wear, but at a lower price point too when it comes to this new CEO. Calvin McDonald, the current CEO is set to step down. And I know Elliott has been a big player in pushing for Jane Nielsen, the former CFO at Ralph Lauren, to replace him. What's the latest on that? Do we presume that Jane Nielsen is going to be the next CEO?
- [24:12]
Poonam Goyal
I mean, we don't know yet. Right. So it's definitely one of the contenders and could be. And I think as long as they get a product led executive, which he is, Lululemon could be in good hands to continue this turnaround.
- [24:25]
Scarlet Fu
Founder Chip Wilson is also kind of involved here. That's another name that we haven't heard from in a while. He founded the company. He no longer sits on the board, but he still owns about 9% of the stock. How much do you pay attention to what he says?
- [24:39]
Poonam Goyal
We definitely look at it. Look what he says is important. He founded the company. The company was grounded on innovation, on product. And I think he makes fair points that the company needs to kind of really re engage the customer and go back to its roots, which is are you still ahead of the competition? Like, you know, you mentioned earlier, competition has increased and it has, but competition was always there. But where is Lululemon ahead of it? Can you get similar athleisure pants or leggings at Viori or at Aloe or Athleta? How does Lululemon stand out today? And, and that's the big question that they need to answer.
- [25:17]
Scarlet Fu
Our thanks to Poonam Goyal, senior US E Commerce and Retail Analyst at Bloomberg Intelligence.
- [25:21]
Alexandra Semenova
We move next to the biotech space.
- [25:23]
Scarlet Fu
And this week tech giant Nvidia announced plans to invest $1 billion over five years in a new AI lab. And that's with the pharmaceutical company Eli Lilly.
- [25:32]
Alexandra Semenova
For more on this, we were joined by Sam Fazeli, Bloomberg Intelligence Director of Research for Global Industries and senior Pharmaceuticals analyst.
- [25:40]
Scarlet Fu
We started off by asking Sam to break down the latest news at Eli Lilly.
- [25:44]
Odoo Advertiser
Well, look, I think these are the trillion dollar club getting together. A billion dollars is probably a drop in the ocean for both of them. It's over five years. And what I think the aim of this at the end of the day is to try and automate and speed up as much of the partly the drudgery of doing lab work, because lab work, just like as if you were a doctor in a clinic clinical setting, you need to take a lot of notes, a lot of details. But at the same time, I think they're investing in what appears to automating 24, 7 experiments, things that human beings just can't do. And, and I know having been a scientist that sometimes your life is on hold because you have to go back and deal with your experiments, your cells or whatever it is that you're running. And so a lot of these things I think could speed up and also make the life of the scientist a little bit easier. At the end of the day, though, I think the aim here is to try and get scientific discoveries, translate it to drugs quicker and get them to market quicker.
- [26:45]
Alexandra Semenova
Sam, what does this mean for Eli Lilly's rivals? Do you expect that we'll see some of its competitors also ramp up their AI endeavors given its partnership with the company, like Nvidia, pretty much all pharma companies.
- [26:57]
Odoo Advertiser
And I just want to point you to a recent survey that AI Bloomberg Intelligence has done that looked at 10 different industries, one of which being the pharmaceutical industry, asked executives, what are you doing with this? What are you trying to get to? What is the aim at the end? Everybody is at this. This is not something specific to Lilly. And you know, Google, for example, has, has, through DeepMind, has created an agentic AI called Google Scientist. It's like I think four agents or five agents who interact with each other and check each other's hypothesis. So a lot of this is going on in all companies. But of course here we have Lilly, one of the richest pharma companies around in terms of the amount of cash flow that is gone, really being able to spend the money without really impacting its, its balance sheet and cash flow. And I'm pretty sure everybody's at this. But clearly this is the news du jour, if you like.
- [27:52]
Scarlet Fu
Absolutely. Like you said, it's a drop in the bucket for both of these companies. But when you have a number like $1 billion and these big brand names, it gets people's attention. What also gets my attention, Sam, is Moderna. Moderna, obviously one of the vaccine makers during the pandemic. But it's had a rough go at it recently because it's so dependent on these vaccines. And we have an administration that is kind of anti vaccine right now. Yet Moderna preannounced at the J.P. morgan Health Care Conference that its U.S. covid business did better than expected. Is Moderna starting to stabilize?
- [28:27]
Odoo Advertiser
Well, one would hope so. They've stuck with their aim of growing 2026 by 10%. But you know, if you look back at the beginning of the year, where the company in 2025 started with guidance and where we ended up, we are a good five, $600 million short of what the hope was at the beginning of the year. So everybody I think knows that this is a very difficult market to call for exactly the reasons you just highlighted. There is a constant change in the way that the administration in the US and not just the US elsewhere is also dealing with vaccination, particularly in the COVID side of things. Other vaccinations are still pretty much well settled, at least outside the US the problem also that Moderna is going to face or has been facing is that there are lots of people. There's, I think my patent colleagues say there are at least 20 various directions of legal cases or trials going on. Different groups saying you're infringing my patents or you infringe my patents and you need to. Because there was billions and billions of dollars that revenues. So some of that is coming potentially in the March time frame for Eli Lee against a trial coming up against Arbutus, another company that's listed in the US So some of that is, I think, something that might keep people from getting too excited.
- [29:47]
Alexandra Semenova
Our thanks to Sam Fazeli, Bloomberg Intelligence Director of Research for Global Industries and Senior Pharmaceuticals Analyst. Coming up, a look at how artificial intelligence is changing shopping.
- [29:57]
Scarlet Fu
You're listening to Bloomberg Intelligence on Bloomberg Radio, providing in depth research and data on 2000 companies and 130 industries.
- [30:05]
Alexandra Semenova
You can access Bloomberg Intelligence via BI. Go on the terminal. I'm Alexandra Semenova.
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Scarlet Fu
And I'm Scarlet Fu. This is Bloomberg.
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Scarlet Fu
I'm Scarlet Fu.
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Alexandra Semenova
And I'm Alexandra Simonova filling in for Paul Sweeney.
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Scarlet Fu
We move now to some news in the tech space.
- [33:28]
Alexandra Semenova
This week we heard that the tech giant Meta Platforms is beginning to cut more than a thousand jobs from its Reality Labs division.
- [33:35]
Scarlet Fu
It's part of a plan to redirect resources from virtual reality and Metaverse products towards AI wearables and phone features.
- [33:42]
Alexandra Semenova
For more on this and the latest tech news, we were joined by Mandeep Singh, global tech research head at Bloomberg Intelligence.
- [33:48]
Scarlet Fu
We first asked Mandeep what these job cuts mean for Meta's bottom line.
- [33:52]
Mandeep Singh
I mean, Reality Lab segment is almost losing $20 billion a year and cumulatively they've lost about $70 billion over the past three years. So a lot of investors questioned, you know, how long they were expected to remain patient on those kind of losses. And I think the initial rumors were about a 30% cut in that unit. So this is somewhat below expectations in terms of 10% job cut. But it just goes to show that right now the company is obviously focused more on the AI side in terms of building the infrastructure, building their own large language model. And it may take a while to really bring it, bring that LLM concept in that variables or the, whether it's a VR headsets or the glasses and I mean when you compare VR headsets or the glasses that they are selling to, let's say AirPods, the number of units pale in comparison. We're talking you know, 10 million, maybe if they do 20 million. Apple does more than 100 million AirPods a year.
- [35:03]
Odoo Advertiser
Year.
- [35:04]
Mandeep Singh
So what's the opportunity here? And I think that's where you probably will see more cuts in that business.
- [35:11]
Scarlet Fu
That is a really, really important contrast to make there in terms of what matters trying to do, because they want to be part of the mass market here, but it's not quite there yet. Mandy, as Metta pivots away from VR in the Metaverse to AI, what does that mean for spending? I mean, they obviously had to spend a lot to build out the metaverse, to build out their VR offerings, and now they're going to shift everything to building out the AI offerings. The large language models, these AI glasses. What do you think that the pace of spending will just kind of continue? It won't really shift all that much.
- [35:45]
Mandeep Singh
Yes. On the AI side, the opportunity is huge. What everyone is chasing right now is an AI agent that can book your travel, your Uber trip, order food, food, you know, do shopping for you. That's the vision Google is chasing. That's what Amazon Alexa launch was all about. So Meta has that surface area with, you know, Instagram and WhatsApp, and you could argue they could in theory develop such an agent, but the hard part is integration and getting the AI to where it's, you know, reliable and predictable. And that's where, I mean, it's anybody's guess who is best positioned. I think the Apple Google partnership that we saw this week is probably a negative for Meta in the sense, like if Apple is setting up defaults in their phone, then that makes it hard for an external kind of agent to do these kind of things. So from that perspective, distribution really matters and operating system control really matters. So Meta is somewhat at a disadvantage when it comes to their distribution on, on Apple and Android devices.
- [36:57]
Alexandra Semenova
Mandeep, we also got news. Airbnb hired Meta's head of generative AI, which is really interesting because wasn't it not too long ago that they declined to work with OpenAI? What does this all mean for its artificial intelligence endeavors?
- [37:10]
Mandeep Singh
Yeah, I think Brian Chesky has been quite vocal about using open source LLMs as opposed to, you know, proprietary LLMs like OpenAI and, and Gemini. And so his thing is, I've got direct customer traffic coming to my website. If I give away my bookings interface to these LLMs, then I'm losing that customer, direct customer touch. And he doesn't want to do that. He instead wants to build his own LLM based on an open source model that's already out there and that's where Meta has open sourced their model in the past. So it makes sense to have somebody from Meta come in and do something along those lines. Airbnb has been open to using Chinese open source models and building on top of that. So from that perspective, it's an interesting strategy that they are going ahead with in terms of using all kinds of open source and not just the US based model.
- [38:08]
Scarlet Fu
Who in the tech world is winning the talent war? Because it felt like for a long time OpenAI anthropic, they were picking up a lot of talent. Is that still the case?
- [38:19]
Mandeep Singh
I mean right now the talent is going to where the compute is. If you don't have the compute, you just cannot attract the talent because these models need a lot of compute for training and you may be the smartest person, but if you don't have the compute, you can't test your idea. So from that perspective, infrastructure build really matters, which is why Nvidia, even though they are the chip provider now, they launched their own foundational model in autos self driving. That just goes to show what compute can do, you know, and Nvidia is definitely moving up the stack, so it'll be interesting to see how many areas where they compete in with their own foundational model.
- [38:58]
Alexandra Semenova
Mandeep we're early into the earnings season, but big tech results will be here before we know it and obviously the bar is really high when it comes to what these companies are saying about how they're monetizing their heavy AI investments. Do you think that they'll live up to the expectations?
- [39:12]
Mandeep Singh
I think right now you have to focus on where you will see positive earnings revisions. And given the capex investments are going up for this year, it's going to be hard to show, you know, positive revisions when it comes to earnings. Except for someone like Alphabet, that really has seen a big shift in sentiment because one, everyone realizes that their models have caught up and they also are the most efficient when it comes to their stack, the use of TPUs and low cost inferencing. So from that perspective, I think Alphabet clearly is best positioned to deliver positive surprises. But for someone like Meta, I mean if you're hearing job cuts, then you know, probably it's going to be hard for them to, you know, show positive revisions this year.
- [39:57]
Alexandra Semenova
Our thanks to Mandeep Singh, global tech research head at Bloomberg Intelligence.
- [40:02]
Scarlet Fu
This week we also looked at the E Commerce platform Commerce, which provides AI driven tools for brands and retailers. This company trades on the NASDAQ under the ticker cmrc.
- [40:12]
Alexandra Semenova
We were joined by the company's CEO, Travis Hess, who discussed how AI is changing shopping. And this came on the heels of Google launching its Universal Commerce Protocol, or ucp.
- [40:23]
Scarlet Fu
Commerce is an active partner in ucp, which enables buying directly across Google's AI surfaces. We first asked Travis to break down Google's UCP and just how exactly this is. This makes shopping easier.
- [40:36]
Intuit Enterprise Suite Advertiser
Given the extent to which Google Google plays in all of our lives and how people think of them, it's essentially setting the foundation and the standard for brands and retailers and other organizations to be able to scale agent E commerce across all of the surfaces that Google AI would hit. So think of the contextualized conversations everyone's having through answer engines today. Those conversations are then dynamically recommending not only experiences and facts, but certainly shopping and brands based on the enrichment of data against those services. And Google is enabling a standard by which consumers would be able to buy in a standardized, safe, secure way. As it serves up discovery, you'll be able to buy seamlessly across those services.
- [41:18]
Alexandra Semenova
Travis, can you walk us through how AI will change the shopping experience? In practical terms, let's say I'm looking for a bag. How do I go about using your platform?
- [41:27]
Intuit Enterprise Suite Advertiser
The consumer behavior has changed more than anything. So the amount of eyeballs and behavior going to the answer engines is probably the fastest adopting technology we've seen. So because the consumers are going there and they're having these conversations, brands and retailers are having to respond in kind. And they tend to have a fair amount of brand ethos. So they, they're very concerned about where they show up, how they show up, and who they show up next to. So trust is at the cornerstone of this. So a lot of the foundational stuff, stuff you're hearing about now, is to set up that trust. So when you're shopping for that bag, it's giving you a response that you can objectively trust. It's not serving up who paid the most to be listed or injected in that conversation. The thesis behind this is based on your own behavior within those answer engines and of course other behavior within Google, whether that's through Chrome or through other Google products. They have a unique advantage there because of the amount of surfaces an individual might use to synthesize that in a hyper personalized way. So think of it as, I don't like shopping either, but think of a going in your favorite store and someone as you walk in can scan a code and immediately knows what you own, what you like, where you're going what you're looking for so they could curate something for you immediately where that, that friction is removed through the process. Think of that virtually in this particular capacity. That's the future state.
- [42:40]
Scarlet Fu
So all the information that Google has on me, they are also selling. Who are they selling it to?
- [42:45]
Intuit Enterprise Suite Advertiser
That's not from, that's not for me to opine on.
- [42:48]
Scarlet Fu
I mean, the reason I ask is because it depends on me logging in to Google for them to give me those personalized recommendations. If I don't choose to log in, then I end up with the equivalent of a Google search on a public computer.
- [42:59]
George Ferguson
You do.
- [42:59]
Intuit Enterprise Suite Advertiser
I think the models are changing. Certainly the old model was you're searching for terms and certainly organizations are optimizing through SEO to be listed organically at the top or they're through paid search. There you go. That still exists today, certainly. And there's behavior that drives that. But where this is evolving to is called geo. So generative optimization, which is really going to be a combination of structured data, which is like product catalog data, skew color size, all those dynamics, dimensions, coupled with unstructured data, which are brand guidelines, call center transcripts, blogs, articles, all the things that would contextualize that brand and that product, if you will. That's being enriched oftentimes by us on the Feedonomics side, which is part of our portfolio, and then syndicated across these different services, be that Google or OpenAI or Microsoft or whomever. And it's going to continue to expand as the channels have expanded over the last several years.
- [43:52]
Alexandra Semenova
What kind of AI trends and retail trends have you been monitoring?
- [43:56]
Intuit Enterprise Suite Advertiser
It's all about AI this year. That's the, that's what's hot. Exactly this, right? I think there's a lot, there's two sides of the spectrum. There's a lot of buzz, which is exciting, but at the same time it's confusing a lot of people because everyone is doing everything and it's hard to kind of reconcile like what's meaningful to the business. I think for larger organizations that we work with, brand manufacturers and retailers, trust, brand ethos and security are top of mind. So for them it's less about the sizzle, it's more about the stake and the foundational elements. I think the importance of the Google announcement is they are taking a very pragmatic approach to this, to lay the tracks so this can scale and scale properly with trust, with security, and most importantly with a frictionless experience for customers. Because the brands don't want to lose that customer data. They still want to maintain that experience even though they're not fully controlling the surface by which they're showing up against. It's not like they're showing up against their own website. So they're in a surface they don't completely control. They're controlling part of it through the data enrichment and syndication, but they're not controlling all of it. So they're very, very concerned that that experience is a positive one and a frictionless one. Otherwise it has ramifications. It drives, it drives cost up in call centers. It drives maybe a negative customer experience.
- [45:05]
Scarlet Fu
It drives up returns.
- [45:06]
Intuit Enterprise Suite Advertiser
Exactly. Returns bad things on the back end. So that, that's the reconciliation people are trying to have. But yes, that I have sucked all the, all the oxygen out of the room at Javits and it's a big one.
- [45:16]
Scarlet Fu
What, what will I not change for shoppers?
- [45:21]
Intuit Enterprise Suite Advertiser
What will it not change for shoppers? I think the behavior and the surfaces by which they're going to, they're still going to go to. Right. I think new ones are showing up. I think the expectation, personalization has been promised for a long time.
- [45:37]
Odoo Advertiser
Yep.
- [45:37]
Intuit Enterprise Suite Advertiser
I think there's some hesitancy there around the trust. So I think overcoming the trust aspect of this and having that reinforced through continued behavior. The shopping is very new. There was a big rush to do this in holiday and the experiences weren't great. So I think there's a little bit of hesitation. I think you'll see a much more robust offering this holiday season.
- [45:56]
Alexandra Semenova
Our thanks to Commerce CEO Travis Hess.
- [45:59]
Scarlet Fu
That is this week's edition of Bloomberg Intelligence on Bloomberg Radio providing in depth research and data on 2,000 companies and 130 industries.
- [46:07]
Alexandra Semenova
And remember, you can access Bloomberg Intelligence via BI. Go on the terminal. I'm Alexandra Simonova.
- [46:12]
Scarlet Fu
And I'm Scarlet Fu. Stay with us. Today's top stories and global business headlines are coming up. Right now.
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