Markets Brace for Microsoft and Meta Earnings

Summary

Bloomberg Tech Podcast Summary

Episode Title: Markets Brace for Microsoft and Meta Earnings
Date: July 29, 2026
Host: Ed Ludlow

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Episode Overview

This episode dives deep into the high-stakes moment for global technology markets as investors await the earnings reports from Microsoft and Meta, set against a backdrop of a Federal Reserve decision, the ongoing AI spending race, recent security incidents, and shifting tech industry dynamics. Ed Ludlow and a stellar lineup of Bloomberg journalists and industry guests unpack what’s driving market sentiment in tech, with special emphasis on capital expenditure, investor skepticism around AI, and the dramatic rise of players like Moonshot AI.

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Key Discussion Points & Insights

1. SK Hynix, AI Spending, and Memory Market Dynamics ([01:52]–[05:30])

• SK Hynix reported a sixfold jump in profits and record $31 billion capex amid strong AI-driven demand for high bandwidth memory (HBM).
• Paradoxically, its shares dropped nearly 7% as investors grew anxious about the sustainability of this spending, reflecting broader skepticism towards the “AI spending paradox” in chip stocks.
• Jake Silverman (Bloomberg Intelligence):
  • "Investors are focusing on pricing…SK Hynix kind of missed these lofty expectations, that's been building just because demand has been so strong." ([03:19])
  • New market behavior: customers moving from short-term to long-term contracts for memory supply, reflecting surging data center and AI needs.
  • Memory makers now face a “give and take”: they must expand capacity rapidly, but can’t keep up with surging demand.
• Market Note: Broader chip sector is facing valuation pressure, with Kyocera’s target cut and questions looming on payback from elevated investments.

2. Moonshot AI’s Meteoric Rise & IPO Dynamics ([05:30]–[08:42])

• Moonshot AI closed a massive $3.5B funding round at a $35B valuation—already seeking $50B next, ahead of a planned Hong Kong IPO.
• Bailey Lipschultz (Bloomberg):
  • “It's crazy how fast some of these deals are coming together... talking going from $35 to $50 billion pre-money, before IPO at year end.” ([06:33])
  • Unlike typical staggered funding/IPO timelines, Moonshot’s rapid rounds are unique to the current exuberant AI market.
  • Raises questions about sustainable investor demand and whether high private valuations will translate to public success.

3. AI Security Incidents: Hugging Face & Modal ([08:42]–[11:30])

• Recent hacks involving OpenAI models gained unauthorized access to Hugging Face and a sandbox environment on cloud platform Modal, fueling anxiety over “AI agents going beyond what they're asked to do.”
• Sarah Fry (Bloomberg Tech Managing Editor):
  • “This is leading to an increase in fears over AI agents going beyond what they’re asked to do.” ([09:35])
  • Despite containment, full details and lessons remain unclear, highlighting urgent need for regulatory and technical vigilance.
  • AI can also bolster security by uncovering vulnerabilities, but execution and governance are still catching up.

4. Industry Petition: Pacing AI Development ([11:30]–[15:28])

• 1,000+ workers from prominent AI firms (incl. CEOs and chief scientists from Anthropic, OpenAI, Meta Superintelligence Lab) petitioned for a framework to “deliberately pace AI development.”
• Seth Figgman (Bloomberg Editor):
  • “They’re not specifically calling to slow it down, though that seems to be the implication…growing awareness that AI might one day be able to automate itself.“ ([12:39])
  • Movements build on calls from AI leaders (e.g., Anthropic’s Jack Clark, Demis Hassabis) for potential pause mechanisms or international governance frameworks.

5. SoFi: Record Results, Guidance, AI in Fintech ([19:03]–[25:44])

• SoFi reported record revenue ($1.2B) and raised its outlook, but shares tumbled 8.4% as earnings guidance stayed flat.
• Anthony Noto (SoFi CEO):
  • “The quarter was incredibly strong…we want to keep investing in the business to maintain these high levels of revenue growth for a longer period of time...we're not going to take earnings up in the near-term to try to drive market favorability.” ([19:46])
  • Assumes increased Fed rates—"If the Fed is raising rates, that means we have a strong economy and we're trying to maintain stable inflation…we’ll perform very well on the revenue line." ([21:42])
  • AI Impact: Cost and productivity gains (engineering squads reduced in size, customer service automation, fraud detection, launch of “SoFi Coach” AI bot), but not used for direct credit underwriting.

6. Market Set-Up: Microsoft & Meta Earnings ([27:18]–[29:26])

• Broader equity market in a holding pattern, with Nasdaq 100 on its longest losing streak since 2022.
• Ryan For Celica (Bloomberg Equities):
  • “What is the spending outlook? What is it doing to cash flows? What kind of growth are they seeing because of this spending?... There is a high bar for these companies to convince investors that this spending strategy remains the right one.” ([27:18], [28:32])
  • Alphabet’s recent strong cloud/A.I. results weren’t enough to dispel investor skepticism; Microsoft and Meta face pressure to clarify return on AI investment.

7. Logitech: Supply Chain Risks & Resilience ([29:47]–[31:53])

• Logitech CEO Hanukkah Faber:
  • Addressed semiconductor supplier disruptions—impact deemed “temporary and ring fenced to Q2 and Q3,” helped by healthy inventory and strong balance sheet.
  • "We have more than a billion and a half in cash, no debt…despite the closure, we think the impact in Q2 will not be very large." ([31:30])
  • Highlighted resilience through years of external shocks and continued top- and bottom-line growth.

8. Warner Bros/Paramount Merger: $10B Risk ([31:53]–[34:17])

• Oracle’s Larry Ellison may be on the hook for $9.8B in fees if the Paramount-Warner Bros. merger collapses, due to deal structure and breakup fees.
• Chris Palmeri (Bloomberg):
  • "If they have to cough up that kind of money, it's going to be a painful check to write.” ([32:28])
  • Legal and regulatory hurdles have “put the deal on hold as they work through this litigation.”

9. Moonshot Kimi K3: AI Ecosystem Impact ([37:20]–[42:31])

• Karen McCormick (Chief Investment Officer, Beringia):
  • The arrival of open-weight models like Moonshot’s Kimi K3 is “helpful” for the market, making advanced AI “cheaper to use and more widely available.”
  • “It puts pressure on keeping the cost of the US frontier models down.” ([37:59])
  • Emphasized how capital-efficient growth startups—especially in Europe—benefit from commoditized, cost-effective AI.
  • On the AI “messy middle”: “We're still trying to figure out how this works…what was revolutionary two or three years ago is now a bit dated…determining what your moat is and how long that's sustainable for is tricky.” ([40:46])

10. Earnings Preview: Meta, Microsoft, Qualcomm, ARM ([43:21]–[49:09])

• Meta:
  • Still struggling to convince markets about ROI on “massive spending”; may pivot to cloud infrastructure, selling compute capacity.
• Microsoft:
  • Azure growth >40%, but Capex set to rise >50%.
  • Debate over investing in internal product innovation (e.g., Copilot) vs. maximizing near-term Azure revenues.
  • Brody Ford (Bloomberg):
    • “As long as Copilot adoption and monetization figures don't look that impressive, you're going to hear analysts ask them to just sell the computer to customers directly.” ([45:15])
    • SaaS “apocalypse” fears: will core Microsoft businesses come under threat from AI and open models?
• ARM:
  • Relying on smartphone royalties, but pivoting to data centers as a future growth area.
  • Near-term headwinds from smartphone market weakness.
• Qualcomm:
  • Attempts to diversify (data center, automotive), but remains exposed to the slumping Android smartphone market, especially in China.
  • Automotive is “a great business,” but still too small to offset core handset risks.

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Notable Quotes & Memorable Moments

• “Investors are focusing on pricing…SK Hynix kind of missed these lofty expectations, that's been building just because demand has been so strong.” — Jake Silverman ([03:19])
• “It's crazy how fast some of these deals are coming together... But we are not in a normal market environment.” — Bailey Lipschultz on Moonshot AI ([06:33])
• “This is leading to an increase in fears over AI agents going beyond what they're asked to do.” — Sarah Fry ([09:35])
• “They're calling for…a technical and policy framework…to, quote, deliberately pace AI development.” — Seth Figgman ([12:39])
• “...we want to keep investing in the business to maintain these high levels of revenue growth for a longer period of time.” — Anthony Noto, SoFi ([19:46])
• “What is the spending outlook? What is it doing to cash flows? What kind of growth are they seeing because of this spending?” — Ryan For Celica ([27:18])
• “If they have to cough up that kind of money, it's going to be a painful check to write.” — Chris Palmeri, on Larry Ellison’s risk ([32:28])
• “As frontier models become…cheaper to use, it's very helpful to our portfolio.” — Karen McCormick ([37:59])
• “What was revolutionary two or three years ago is now a bit dated…determining what your moat is…is tricky.” — Karen McCormick ([40:46])
• “As long as Copilot adoption and monetization figures don't look that impressive, you're going to hear analysts ask them to just sell the compute to customers directly.” — Brody Ford ([45:15])

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Key Timestamps Reference

• SK Hynix Analysis: [01:52]–[05:30]
• Moonshot AI Funding/IPO: [05:30]–[08:42]
• OpenAI Security/Hugging Face: [08:42]–[11:30]
• AI Regulation Petition: [11:30]–[15:28]
• SoFi Results & AI Use: [19:03]–[25:44]
• Microsoft & Meta Earnings Outlook: [27:18]–[29:26], [43:21]–[49:09]
• Logitech Supply Chain: [29:47]–[31:53]
• Paramount/Warner Bros. Merger Risks: [31:53]–[34:17]
• Moonshot Kimi K3 Venture Impact: [37:20]–[42:31]
• Qualcomm, ARM, Semiconductor Focus: [46:39]–[49:09]

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Episode Tone

• Tense, analytical, high-stakes — Reflecting investor anxiety, palpable anticipation for major tech earnings, and the fast-evolving landscape across AI, semiconductors, and digital finance.
• Candid and questioning — Guests and hosts frequently scrutinize industry narratives, challenging company guidance and hype (especially around AI return on investment).
• Global perspective — From Silicon Valley to China and Europe, highlighting both the interconnectedness and regional contrasts in tech funding and governance.

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This episode provides a comprehensive, real-time pulse check on the delicate equilibrium of tech optimism, financial scrutiny, and innovation risk that defines mid-2026.

Transcript

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[IBM Representative]

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Bloomberg Audio Studios Podcasts, Radio news.

[Ed Ludlow]

Bloomberg Tech is live from the heart

[Narrator/Advertiser]

of Silicon Valley with Ed Ludlow in San Francisco.

[Ed Ludlow]

This is Bloomberg Tech. Coming up, SK Hynix reports a six fold jump in profit and raised capital spending to a record 31 billion, but its Korean shares slow lumps, we'll tell you why. Plus we're joined by so far CEO Anthony Noto following the company's earnings, topping Wall street estimates but showing high expenses and big tech. Big earnings, big spending. Next up, Microsoft matter and a Fed decision. We'll break it all down. There's an AI spending paradox. Korea's SK Hynix just reported a six fold jump in profit and raised capital spending to a record 31 billion. Now under normal circumstances that would be a positive for the memory chip maker. Instead, investors sent Korean shares of the market leader high bandwidth memory for AI, down nearly 7%. Its US listed ADR is basically flat right now. The concerns over spending, whether it will ultimately pay off overshadowed another blockbuster quarter. That skepticism weighing on chip stocks more broadly. Look at the Nasdaq 100 and the stocks. The Nasdaq 100 is down for a six straight session, longest streak of decline since October 2022, the stock's down for a fifth day, matching the run of losses that it saw in December. Up next in earnings, Microsoft and Matter. But for now, let's kick it off with memory. Bloomberg Intelligence analyst Jake Silverman here on SK Hynix. What was the takeaway for you? I mean, as I said, in any other quarter, this would have been a big blockbuster blowout for sk.

[Jake Silverman]

Yeah, I think part of what investors are focusing on right now is just pricing, price increases quarter over quarter. And overall SK Hynix kind of missed these lofty expectations and that's been building just because demand has been so strong. It's really been crowding out demand for other products. So a lot of the capacity that SK Hynix has is allocated towards AI. And so that's just created an environment of a lot of exuberance around that. And that's really ultimately the main takeaway. But another important couple of things just to keep in mind is one is just there seems to have been some idiosyncratic issues in the quarter round. Timing of product mix and then also the long term contracts, which is really what investors are focusing on. They want a little bit more visibility. Visibility in terms of demand long term.

[Ed Ludlow]

That's so interesting because, you know, SK would say there's been a change in customer behavior. You know, historically memory is highly cyclical, boom and bust. But customers have said we're willing to commit. Just talk a little bit more about that, Jake. The change in how the market works, but also why it's not a big positive signal right now.

[Jake Silverman]

Yeah, so typically in the past what we've seen is customers signing monthly, but typically more like quarterly contracts. And a lot of that was because the demand was mostly coming from smart smartphones, PCs, consumer devices, and increasingly over the last several years, cloud and now more AI demand. And so because AI demand is really, it's growing at a pace that's really unprecedented. And a lot of this is just because memory is far more, sorry, AI is far more memory intensive relative to other applications that we've seen in the past. And so because of this, as you're building out these massive data centers and there's so many of them, you just, the customers need assurances that they can get the supply because there's been an underinvestment in the past in terms of memory capacity. So, so now that's chart. There's kind of a, you know, a give and take in terms of supply and demand. The memory makers need to add more capacity, but they can't add it fast enough to meet the demand.

[Ed Ludlow]

Jake Silverman of Bloomberg Intelligence covering memory thank you very much. The sell off is taking a toll on Kyosha. The Japanese memory maker has received its first analyst price target cut in nearly a year, with Philips securities slashing its target by roughly 40%. The firm cited lower valuations across memory chip peers, but maintained its buy rating. Sankyoshi's long term growth story remains intact as demand for AI storage and NAND flash memory continues to build. The money keeps pouring into China's AI race. Moonshot AI has raised $3.5 billion at a $35 billion valuation, according to sources, far surpassing its original fundraising target after the breakout success of its Kimmy K3 model. They're not stopping that. Bailey Lipschultz on the IPO and capital markets beat. We've been reporting about this for some time now, but it's confusing because Moonshot is basically doing this round seems like it's done and then doing a quick follow on, give us all the details we need.

[Bailey Lipschultz]

And it's crazy how fast some of these deals are coming together. So as you mentioned, three and a half billion at a $35 billion val above what Moonshot was targeting. But it has been out to investors looking to raise another private round at about a $50 billion valuation. So you're already talking going from 35 to 50 billion pre money and that's all ahead of an IPO in Hong Kong as soon as the end of this year. So you're looking at a company that was worth closer to 10, $11 billion end of last year earlier this year and targeting again $50 billion pre money in a private round followed by an IPO as soon as the end of this year. The momentum very much alive and well on the other side of the world.

[Ed Ludlow]

We've covered in great detail the release of Kimik 3, the repercussions of that open weight model on markets. You're the IPO guy, you're my IPO guy. And I think what's really interesting here, this seems very close proximity. So you have the $35 billion valuation round, $50 billion valuation round, and you just told us an IPO waiting in the wings. Does that how it normally works in any jurisdiction to have those things so close together?

[Bailey Lipschultz]

Not normally. And normally we would look at a market that you kind of stagger out these fundraisers and they'd be formal and you'd say series A through C or D and then go public. But we are not a normal market environment. When you look at how Closely tied these deals are. The big question comes back to what is Moonshot targeting? What are these companies who are raising money actually targeting? What are they? What are their capital needs? Are they raising, you know, three and a half billion dollars now to maybe make a bit of a sweetheart deal and try to kind of bridge to the next round? Or is the question really scaling valuation, bringing in the right investors privately who then can make off pretty darn well in an IPO later on this year? We've seen how quickly some of these IPO windows can open and shut. So the big question coming back to Moonshot or even when we talk here in the US about an anthropic, is there going to be steady investor demand through the end of this year and into next year? What are those valuation expectations look like? And really at the end of the day, what are the numbers look like? Because these are companies that have high watermarks in the private market and they need to deliver in the public markets.

[Ed Ludlow]

Boom. Does Betty Lipschultz on one of the most read stories in the private markets, a precursor to something in the public markets maybe. Thank you very much. Coming up, before the Hugging Face attack and hack, OpenAI's models access the customer account on a different cloud platform. We have the details next. This is Bloomberg Tech. The open air models that hacked the startup Hugging Face earlier this month also gained access to a customer account on the cloud platform Modal. Bloomberg Tech managing editor Sarah Fry joins us for the details. Really tricky to follow along, but I suppose let's start with the basics. This is different to Hugging Face. This was a sandbox environment, not the modal platform itself. What do we need to know?

[Sarah Fry]

Well, I think what we need to understand here is that this is leading to an increase in the fears over AI agents going beyond what they're, what they're asked to do. And this was a big concern with Anthropic earlier this year. And these recent incidents are both with OpenAI. I imagine there's a lot more than this hugging face incident, this modal incident that we need to learn about and we need to understand a lot more. We have a lot of more questions, honestly about how exactly this happened, why modal didn't notice, how do we prevent it from happening again and what might happen if anything in Washington is a

[Ed Ludlow]

response model saying that this was a sandbox, the environment. So even though the models were able to access, didn't act outside the bands of that testing environment, we still don't really have a conclusion on the open air hugging Face. Right There was an investigation that was ongoing. I don't know that they've released any sort of conclusive report on that. But just go back to what you mentioned about government. There's something needs to happen next, right?

[Sarah Fry]

Right. I mean, I think that this is, this is one of the things that these, the leaders in AI have been, have been talking about for years now. The idea that, you know, an AI may act beyond what a human has intended for it to do and do it in a way that can be harmful to, to a company, to its customers. On the flip side, you know, AI has become very adept at finding security vulnerabilities. So it can be help for cybersecurity in that sense. But this is exactly the kind of thing that we're going to need to understand a lot more about because we just can't create a solution for these problems unless we understand exactly how they happened.

[Ed Ludlow]

Bloomberg, Sarah Fryer, who manages the team covering all things tech out of New York, thank you very much. Nvidia CEO Jensen Wong is defending open weight AI systems as US lawmakers weigh the challenge posed by Chinese startup Moonshot AI, whose model rivals those from Anthropic and Open Air, its open weighted model. Huang met with politicians in Washington on Tuesday, saying afterwards the open weight systems are, quote, really important for the vibrancy of the whole industry. Meanwhile, more than 1,000 workers from top AI firms have signed a petition calling on the U.S. government to help, quote, deliberately pace AI development. The signatories of the letter include the CEO of Anthropic and the chief scientists from OpenAI and Matter Superintelligence Lab. Let's get more Bloomberg's editor Seth Figgman's with us. This has been playing out on social media too, as more high profile names become literal signatories to it. Let's start with the idea, like, what is it that this group of those in industry researchers working on AI are trying to affect? What is the result that they're looking for?

[Seth Figgman]

Yeah, you know, it's really a moment to step back and take stock of. They're calling for basically a technical and policy framework that governments or international group could use at some point if necessary to, quote, deliberately pace AI development. They're not specifically calling to slow it down though. That seems to be the implication and, you know, the backstory seems to be both a growing awareness that I might one day be able to kind of automate itself, that they're building technology that can kind of conduct its own research and development and start to kind of supercharge and accelerate that development in ways that could potentially create runaway progress that we may not be there at the moment. And then as you were just talking about it comes days after the first of now two different but related breaches from OpenAI's technology that have raised heightened concerns.

[Ed Ludlow]

Let's use Anthropic as a case study. They made a social post on Tuesday, yesterday explaining their people's participation. You know, they are one of the leading frontier labs working on advancing AI and they're saying we're okay with we've joined this effort to let's call it slow it down.

[Seth Figgman]

You're right. I mean, in some ways I think it's actually borrowing from some of Anthropic's earlier rhetoric. I mean, you might recall that Jack Clark, one of Anthropic co founders, you know, had put out a lengthy post weeks or maybe a couple of months ago calling for the idea that maybe we would want a pause button or a mechanism to pause AI development. Stopping short of saying we need it now or it's definitive, but kind of introducing that idea. And I think that thought has been percolating a lot now in recent weeks. Whether it's Demis, Hassab is kind of calling for some sort of international framework or a FINRA type organization to vet and review models or a more explicit call to slow or pause development. Again, there's a lot of ifs, ands or buts here, but it seems like the industry is increasingly captivated by this thought that there needs to be some mechanism to slow, pause or rethink the

[Ed Ludlow]

pace of development to end. The petition is urging the US Government to do something, to take some kind of action in conjunction with something that's happening around the world any way in different jurisdictions. Do we have a sense of what that would look like from the US Government? Are we talking about Congress taking action in executive order? What's the mechanism?

[Seth Figgman]

Certainly in that petition they're not spelling it out, but coming weeks after Demis and Sam Altman have kind of been advocating for more of an international coalition, I would think of it in that mold. You know, I don't know if that's just the Trump administration lending its support or particular piece of legislation from Congress. But I think it's the idea of the US Working with part of an international body to begin to rethink how we govern this technology.

[Ed Ludlow]

Bloomberg Seth Fakeman, who is our editor here at Bloomberg News, on a really critical, important read story. Read it. Rachel met Shereen Ghafari reporting on the terminal and online okay. Coming up so far reported its second quarter earnings earlier this morning. CEO Anthony Noto is back with us on the show. Next, there's lots of questions around growth. The outlook Neo banks, tech in finance and the Fed. That's next. This is Bloomberg Tech.

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[IBM Representative]

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[Karen McCormick]

It's time now for talking tech. I'm your hi Rana and first up. Executives and investors tied to the supply chain were among the biggest insider sellers in the second quarter, benefiting from the sharp and volatile rally of tech stocks. Those include executives of companies like Nvidia, core Wealth and Twilio. Plus the largest US power utility, NextEra Energy is joining forces with Brookfield to build a $100 billion data center campus in Kentucky. The privately funded efforts will transform a cold war uranium enrichment facility into a data center campus with a generating plant, adding to growing efforts to add new electric capacity And Canada is scrapping attack plan that would have forced entertainment companies like Netflix and Disney to pay more. After receiving pushback from US Officials and Hollywood studios, streaming platforms above a certain size will still need to reinvest a percentage of their revenues into Canadian and indigenous content.

[Ed Ludlow]

Ed, thank you. Yahir. So far reporting second quarter results before the opening bell, the company posted record revenue, $1.2 billion dollars, but also raised its full year revenue outlook. The bit that's unchanged is the earnings guidance. Look at shares down 8.4% right now on track as it stands for its biggest drop since late April. There had been a deeper decline earlier in the session. Joining us now is so far CEO Anthony Noto. Record revenue and the outlook for the balance of this year. It's really interesting, like projects a lot of confidence. Let's just address the stock move and the story of the quarter. You know, maybe the street felt like you needed to take the bottom line with you in your confidence.

[Anthony Noto]

Yeah, I think you're right. The quarter was incredibly strong. It was our 19th consecutive quarter of more than a rule of 40. It was actually a rule of 70 with 40% revenue growth to $1.2 billion and over $1 billion of cash revenue. And our EBITDA margin was 30% and we had really strong net income margin. I think the street likes the trend in the business today. Credits performed well. Our new products are getting great adoption. We're seeing the flywheel of being a one stop shop driving success and increased products per member. So really positive story fundamentally in Q2, in Q3, we expect that fundamental story to remain intact and continued strong member growth, product growth and product per member growth with good profit profitability. We did raise our revenue expectations for the year and the back half of the year, but we left earnings unchanged primarily because we want to make sure that we keep investing in the business to maintain these high levels of revenue growth for a longer period of time. And in addition to that, we're also now anticipating two rate increases as opposed to the beginning of the year when we anticipate two rate decreases and that creates some uncertainty and so we don't decide to have a little bit of a cushion as it relates to earnings if something like that unfolds. But we couldn't be more confident in the business and the long term profitability of the business. It's just we're not going to take earnings up in the near term to try to drive, you know, market favorability. That will be short, short term beneficial but not long term prudent.

[Seth Figgman]

Right.

[Ed Ludlow]

Let's talk about the Fed. Why not? It's, it's Fed day. No one wants to talk to the tech guy on Fed Day, Anthony, to be honest with you. And I just want to partake in it like everyone else. So you explained it. Your assumption reflects one to two hikes rather than cuts. You know, put the sort of the numbers and monetary policy jargon to one side. How does that change how you think about the world, about how the economy grows, about the consumer in the back half of this year?

[Anthony Noto]

Yeah. I mean if the Fed is raising rates, that means we have a strong economy and we're trying to maintain stable inflation in an environment which rates going up 1 to 2% will perform very well on the revenue line, which is why we're still forecasting strong revenue and I think ultimately will perform really well on the bottom line. We're already in our guidance in providing guidance of a net income margin on an incremental basis of 30%, which is our long term profile where we can get to. So it doesn't really change that much. It just eliminates some of the upside that one may have called today compared to a different environment. I think a stable economy with unemployment below 5%, inflation around 2 to 3% is a great backdrop for our business. And even better backdrop for our business is if rates were declining.

[Ed Ludlow]

Final question on the economic side, you know, what is the health of your customer look like? And not just the health, but like what are the behaviors of your customers? Customers in this environment we've gone over in the past, you and I, the demographics and who you're serving. So, so how are they behaving?

[Anthony Noto]

The customers behavior is very strong. We see very strong levels of spending. We annualize that about $30 billion of debit spending a year. We're seeing very strong trends in credit which we reported continuing. We're seeing good inflows into our invest business assets under management management standpoint and we're seeing people take out more products. There definitely is a desire to reduce the cost of debt. And we saw record levels of origination across our unsecured personal loans, our student loan refinancing and our home equity lines of credit and home equity loans. And that's a secured loan that has a lower interest rate. So. And we recently launched small medium business and we see a lot of demand for small medium business loans as well. So from our vantage point the economy looks very strong. Inflation isn't causing consumers to hold back. We're not seeing an uptick in unemployment. We're not seeing any deviation on the

[Ed Ludlow]

credit side, let's talk about when we went through the big bank earnings. There's debate right, on how much AI is really reshaping financial services and the investment that's required for so far today. Where is AI having an impact across the underwriting, customer service fraud detection, something that's real right now?

[Anthony Noto]

Yeah. The first thing where it's having an impact is actually on code production. We have a unit of work within our engineering group called a squad. And historically a squad consists of seven people. Today a squad is going to consist of four people that can produce the same amount of code as seven people. So that's a huge productivity savings from AI capabilities. It also helps with testing. On the cost side of the equation, we're using it to automate fraud investigations, we're using it to automate dispute resolutions, we're using it to help with customer service. On the underwriting side, we're not really using it to predict the ability for people to pay because we underwrite to their actual cash flow based on their actual income and their expenses. I do think that AI is helpful in verify identifying some potential outliers or finding them that could be fraudulent activity. First party fraud where an individual has no intent to repay their obligations. And then on the overall value prop of SoFi side of the equation, we've launched something called SoFi Coach which is a chat bot that's driven all by AI. You can ask any question about your financial life and it will help you get your money right. You can ask if you refinance your mortgage, where you should invest, how do you lower your costs and your expenses, should you be investing more? And it's a super powerful engine based on the data that we uniquely have because we're a one stop shop. We have data across checking and savings accounts, across loans, across mortgages, across investing, across credit cards and across insurance. So we have not just a great engine of information that can drive great AI solutions, but the data is a huge differential differentiator and we're seeing really positive effects of that so far.

[Ed Ludlow]

CEO Anthony, not a great picture on digital finance in the real world. Appreciate that a lot. Thank you very much. Coming up, Oracle's Larry Edison could possibly shell out almost $10 billion in fees if the Paramount Warner Brothers merger falls through completely. Go more on that next. This is what markets look like, right? We're kind of treading water to Microsoft and matter after the bell. There is a Fed decision this afternoon, but there is downward pressure and that's that 100 down for a sixth day. This is Bloomberg Tech. Welcome back to Bloomberg Tech. Microsoft and better have earnings after the bell. There's a Fed decision this afternoon where most economists expect them to hold rates. Those are all factors. So is SK Hynix is raising capital expenditures for this year and it's6.4 world profit. The Nasdaq 100 is down for a sixth straight session, the longest streak of declines since October 2022. The Sox is down 3.7%, down for a fifth day, matching the losing streak that it saw in December. There's pressure under this market, but the earnings story after the bell today, it's a big focus. The market's bracing. For a host of information. Let's discuss what what to expect. Bloomberg equities reporter Ryan for Celica I'm trying my best. There is so many catalysts in the market, Ryan, we're looking at them now. Fed decision today, Microsoft today, matter today. I think we focus on Microsoft and matter and capital expenditures. Is that what you're hearing is the focus of this market?

[Ryan for Celica]

Yeah, I'd say that is very much the focus of this market. I think especially after Alphabet reported last week and really underlined how much skepticism there is out there, how much growing skepticism there is towards all of the spinning that's going on with AI. It's a real question mark for people right now. What is the spending outlook? What is it doing to cash flows? What kind of growth are they seeing because of this spending? What is the roi? Are these stocks finally getting cheap enough that people are feeling more optimistic about jumping in? These are all going to be very important questions and these are two of the biggest and most influential company. So I don't know, maybe I'm best biased, but I do feel like that's going to be the real takeaway from today, more so than the Fed.

[Ed Ludlow]

I said to Anti Noto the so far CEO a moment ago, you know, on Fed days, typically people want to don't want to speak to me, the Bloomberg Tech guy, but it's a factor. You know, just as an illustrative example with Microsoft, right. Azure growth 40%. But if you look at expectations for Capex into the next fiscal year, Capex is going to grow more than 50%. Like that's the kind of trade off. This morning when you got to your desk, what was the impact of SK Hynix, his commentary on Capex? What else were you looking at on the equities desk that might be a factor in this market?

[Ryan for Celica]

Well, I would go back to Alphabet last week, Alphabet was Alphabet Report was very strong on a lot of metrics. Cloud growth there grew more than 80% and Alphabet is really seen as the leader in AI right now. But between Gemini, between its chips, between Cloud, Waymo, YouTube, so on and so forth, Microsoft and Meta don't really have those same kind of leadership qualities. So if Alphabet wasn't able to convince investors that all of the spending it's doing is really paying off, it's going to be a harder hurdle for Microsoft and Meta. Now we are seeing, like you said, ongoing chip weakness. We are seeing open source models coming out. Maybe that's a cheaper way of doing AI. What kind of influence that's going to have on capex outlooks really remains to be seen. So that's certainly playing a factor in here. But I do really think there is a high bar for these companies to convince investors that this spending strategy remains the right one, at least for the

[Ed Ludlow]

stocks run for Celica. Busy week for you. Thank you very much indeed. US listed shares of Logitech were down post earnings. The Swiss computer peripheral maker warned a serious incident and one of its suppliers will impact its ability to meet future demand. Logitech CEO Hannah Favor spoke with Bloomberg earlier.

[Hanukkah Faber]

We're pleased with the quarter we just delivered and we can talk about that. But let me talk a little bit about the incident at one of our semiconductor suppliers that happened at the end of June. A lot is still unclear. We do believe it's absolutely temporary and ring fence to Q2 and Q3, but it is an important supplier. They remain closed and we don't have a definitive reopening date. We obviously have a crack team working on mitigation plans at the moment, leveraging existing inventory, leveraging secondary suppliers, which we do have. But as you will well know, the general supply situation for semiconductors at the moment is unusually tight and we need a lot of them and we need them right now. Hence the uncertainty in the outlook. But all that said, we're super pleased with our results. Our 10th quarter of growth, also growing market shares and really great operating income growth, up 44% in the quarter versus last year and even without the tariff refund, up 14%. So this is a company that has taken a lot of blows between tariffs, geopolitics, component shortages, and yet we continue to deliver quarter after quarter, growing the top line, growing the bottom line, growing gross margins.

[Ed Ludlow]

Yeah, it's maybe one of the most,

[Karen McCormick]

shall we call it, interesting times to be a CEO at a company like yours.

[Sarah Fry]

Hanukkah.

[Karen McCormick]

So it's always so interesting to talk to you. And I know that you had mentioned earlier, kind of when all of this was brewing, the concerns over chip supply, that you would stockpile chips.

[Narrator/Advertiser]

What was that case?

[Karen McCormick]

Did you end up up stockpiling chips? And do you have any left in the reserve that you can kind of tap on when you have these types of disruptions?

[Hanukkah Faber]

Absolutely. So that's the beauty of a great balance sheet. So we have more than a billion and a half in cash, no debt. So we have been. I wouldn't call it stockpiling, but we have really healthy levels of inventory. And Therefore, again, in Q2, despite the closure, temporary closure of this supplier, we think the impact in Q2 will not be very large. About 20 million.

[Ed Ludlow]

Logitech CEO Hanukkah Faber there. Let's turn to entertainment. The highly anticipated Warner Brothers and Paramount merger was put on pause. But if the deal falls through completely, it would have Oracle's co founder, Larry Ellison on the hook for coughing up $9.8 billion in fees. Joining us is Bloomberg's Chris Palmeri, the entertainment editor that had the in enviable task of doing the math. I mean, this was a part of the structure of that bid. Right. You know, it's no joke. $10 billion even to Larry Ellison. Just explain the reporting on this one.

[Chris Palmeri]

Yeah, I had to really dig and read the fine print. I mean, we all knew these fees were out there. $7 billion breakup fee to Warner Brothers if this deal falls apart. And 2.8 billion that Paramount already paid to Netflix to go away, essentially, potentially. But we want to know who was really on the hook for this. Paramount doesn't have a lot of money. It's got a lot of debt. And one of the reasons it's trying to merge is so it could get bigger. And of course, there are these wealthy, these sovereign wealth funds of Saudi Arabia that are involved, but they're not actually the ones. It's really Larry Ellison and, and his family trust that are going to have to pay this money if this deal collapses. And here's a really wild part is they're going to do this by paying essentially $10 billion to Paramount to buy new shares of Paramount at $16 a share, stocks about $8 now. So if they have to, if they have to cough up that kind of money, it's going to be a painful check to write.

[Ed Ludlow]

And Chris, just quickly explain where we're at with this. Right. You know, the deal is on pause because of the intervention of a US Judge. They were also lawsuits. Just where do we stand?

[Chris Palmeri]

Yeah, I mean, for, for quite a few weeks now, we've all thought that this deal was going to go through, particularly after the Department of Justice gave it the blessing and we saw the EU regulators as well. But the lawsuit this month from 12 state attorney generals, also from the Writers Guild, really puts that into question, forced Paramount to, to put the deal on hold as they work through this litigation. It could be as late as June. It could be never. If, if, if this, if the cases are successful in thwarting this. So it's, it's much a bigger risk now of this deal going through than it was just a couple of weeks ago.

[Ed Ludlow]

The most. Chris Palm, Area Screen Time Editor really appreciate it. Thank you very much. Okay. Coming up, Karen McCormick, chief investment officer of Beringer, joins us to Discuss the impact moonshot's Kimi K3 could have on venture capital on the ecosystem of other AI startups on open weight. We'll discuss it all. This is Bloomberg Tech.

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[Ed Ludlow]

MoonShot's Kimi K3 model has sent ripples through Silicon Valley and Washington. But the significance according to our next guest isn't about Chinese versus USAI's supremacy. It's about credible, cheaper alternatives that drive adoption. Karen McCormick is the chief Investment Officer at Beringia firm investing in early to growth stages across the US and Europe. Very interesting perspective. Just bring me your ideas on this. You know the impact of Kimmy K3 being open weight, how the economics of it add up. It's been constantly discuss for a week now.

[Karen McCormick]

Yeah, I guess it's worth framing a little bit of what we do and thank you for the introduction but as you said we do early growth capital so we aren't necessarily looking for shoot the lights out $10 billion type return businesses. We're looking for growth businesses that get to real profitability and that's what we focus on. So for us the capital efficiency of the businesses matter quite a bit and that that feeds into our European, European and US thesis which I can come on to. But I guess the net result for us is that as frontier models become more commoditized or more widely available and cheaper to use, it's very helpful to our portfolio companies whole because it means that it's more capital efficient to be able to launch those businesses. And to be blunt, it also puts pressure on keeping the cost of the US frontier models down.

[Ed Ludlow]

So this ties together your strategy with everything in the news cycle. The conclusion when chemical 3 hit is that it was the frontier labs that were at risk. But net net this was good for AI. Now in Europe the capital environment is completely different and those founders run leaner businesses respond to all of that. You Know why we're seeing a Chinese startup like Moonshot make some progress? It gets backing of course from national funds. But that has been the sort of debate.

[Karen McCormick]

It is an interesting one and in part it does feed into kind of our European thesis because we do see often European businesses, or even US businesses that aren't specifically valley based have to start to grow and thrive on less available capital. So if you don't have the huge amounts of capital rounds that a lot of the valley companies are raising, you have to do more with less. And so the thesis in total is that the, the more these frontier businesses are becoming commoditized or cheaper or more widely available or open sourced, the better it is for the businesses. And it helps a lot, especially with our European portfolio where capital isn't as freely available as it might be in the US and we've genuinely seen higher growth, lower costs as a result of using models and different models are right for different types of activities. So we might still be looking at using a cloud or a Fable 5 where it's really important and deep tech work that we need to be doing. Whereas Deep Seek or Moonshot might do more than a perfectly adequate job for some of the day to day tasks. So we have really seen the cost of launching these businesses start to decline and even where the businesses are already established. So we have one business called Edited which is in the traditionally the SaaS space. They've rebuilt their entire software using AI and the development cost has been so much lower and the launch has been so much faster investor with the reception from the market being so much better.

[Ed Ludlow]

Karen, you're in the camp that, that agrees. I will be transformational. You just gave the SAS example. But you say that we're in the messy, you say we're in the messy middle.

[Karen McCormick]

Yeah.

[Ed Ludlow]

What do you mean by that?

[Karen McCormick]

So I mean we've been through so many different market cycles and Bering as an entity has been around for 30 years. I've been doing this for 20 years and in the corporate world for 30 we see technology cycles. This isn't new for us. I mean mobile revolution moved to cloud, now we're in AI. We're still trying to figure out how things are going to work. So there are going to be pain points and I feel, I mean my own children for example, are going to find the job market may be difficult. There are going to be pain points as we figure out how this works. But I do think it's a net positive all around. And I also would say I feel like the whole idea of like SAS apocalypse, like SaaS businesses are all going to suffer and not be in existence, existence anymore. It really doesn't hold water because what we're seeing is a lot of SaaS businesses are just becoming. They're really just software businesses. And whatever they're using, whether it's cloud computing or AI tools, they will continue to thrive as long as they move with the market. If you're standing still, then you probably have a problem. But I think most of the software businesses are adopting AI very quickly. One of the things I think we are seeing is that AI is moving so fast that what was revolutionary two or three years years ago is actually now a bit dated. So you might have had a moat, so to speak, two or three years ago based on your use of AI. But for the CEOs and for the small companies, they're having to move so fast to make sure that that moat is sustainable. And we even see that in the large public markets. I mean, if we think about the constitution of the top 10 holdings in the public markets in the last couple of weeks, those have been churning. And they've been churning because we're looking at businesses on a reactionary basis where we thought they had a solid moat. And then something happens over here and we question whether that moat is really there. And then something happens over here. And the guy who took the top 10 spot is now moving down again. So I think a lot about a lot of it is this market is moving so fast. Trying to determine what your moat is and how long that's sustainable for is tricky.

[Ed Ludlow]

Karen McCormick, chief investment officer, Bering, we will have you back. And I think next time there's a conversation to be had about European defense tech as well.

[Karen McCormick]

Absolutely.

[Ed Ludlow]

First appearance on the show. Thank you so much. Coming up, Big Tech Faces is next. AI test. We're going to break down what to watch from Metta and Microsoft and the chip makers. That's next. This is Bloomberg Tech. To Blockbuster day for big tech earnings. Matter, Microsoft, Qualcomm and ARM will report after the closing bell. Let's start with Matter. Bloomberg's Riley Griffin here. Let's start with the basics. You know this is going to be about capital expenditures versus growth.

[Narrator/Advertiser]

Absolutely. If you remember, last quarter, we saw Matter raise guidance to $145 billion up to that amount and the market didn't react to well to that. Metta is struggling to explain to the street how it's going to get a return on its massive spending. And so we're looking for Steer today on that very question.

[Ed Ludlow]

I've been reading your reporting and the team's reporting and one other question is like return on investment or return on the infrastructure?

[Hanukkah Faber]

Absolutely.

[Ed Ludlow]

The idea that Matter becomes a cloud computing company. Any chance Zuckerberg says something about that?

[Narrator/Advertiser]

I think that's what we're all waiting to see today. Earlier this month we had replacement reported that Metta was already developing plans to create a cloud infrastructure business, sell some of that computing capacity to other companies and so forth. We also have reported that Anthropic is in early talks with Metta for some of that capacity. So if Mark Zuckerberg during the call later today confirms some of those details or expands on them, we could see the stock react quickly.

[Ed Ludlow]

That would move the needle. Bloomberg's Riley Griffin, thank you very much indeed. Now to the other tech heavyweight reporting after the bell, Microsoft. Bloomberg's Brody Ford on deck. Azure growth, more than 40%. Capital expenditures probably going to go up as well. Do the math for me on that one.

[Brody Ford]

The big difference with Microsoft is it's around what are they doing with the compute, right? Microsoft has defended an approach of we need the compute to shore up our internal products, which are better in the long run. In many cases, the street kind of wants them just to see them juicing Azure revenue, right? Allocating compute to customers, getting more near term revenue. I expect that to be a topic that's hit quite a bit on tonight's call.

[Ed Ludlow]

You know, I find that so interesting if you compare to last week with Alphabet, there was so much emphasis on Gemini, the different forms of Gemini and the traction they're getting with Microsoft. Is it as simple as Copilot, like how's Copilot doing?

[Brody Ford]

I think you're underlining what the anxiety is and that maybe Copilot actually isn't doing that well. They keep releasing seat numbers that sound impressive, 15, 20 million. But then you're a member of the Microsoft install base that's not that big. And so as long as the Copilot adoption and monetization figures don't look that impressive, you're going to hear analysts ask them to just sell the computer to customers directly.

[Ed Ludlow]

Microsoft's down 18% year to date. One of the laggards in the Mag 7. What else? What else will they say? What else do we look to?

[Brody Ford]

It's all about that spending, right? It's all about the return on capital. And a lot of it too is the SaaS apocalypse fears, right? Microsoft's traditional businesses, are they under threat from AI replacing it? Whether that's companies Building their own alternatives or startups. We reported that some Starbucks wants to replace some of its Microsoft software. Maybe we see that theme asked about tonight.

[Ed Ludlow]

The investor's Brady Ford bring in his bingo card with the SAS apocalypse. Love it.

[Brody Ford]

Thank you.

[Ed Ludlow]

Busy day for you. It's not just software chip makers. Also in the spotlight we have aam, we have Qualcomm. Reporting after the bell Bloomberg intelligence is semiconductor analyst Kunjan Sobhani with us. Let's start with arm. You know the ARM story has shifted for me so rapidly and so differently. You know it used to be about design and blueprint. Now fabulous chip maker. What's the watch for you on?

[Kunjan Sobhani]

Well unfortunately look there's majority of the revenue royalty revenue still is coming from smartphones and we know those markets are not doing that well. Most of the downside is priced in. But we have our channel tech suggest that intra quarter Androids have been doing worsening. However the good news for them is because their chips are going through worshipping up, they're not going to see a lot of impact. And as you rightly said, the focus for AAM is all about data center now. So as long as the licensing numbers look good and the data center numbers keep looking up and right, I think they'll be mostly immune from the negativity from the handsets.

[Ed Ludlow]

Data center is the story that Qualcomm wants to talk about as well. To be fair, like there's been evidence across Asics and the products that they make themselves, they have had some traction. Cristiano Amon wants to diversify that business. But for you, does it still come down to smartphone?

[Kunjan Sobhani]

Well, it's not a mix of near term, long term investors are believing the story about Datacenter and that show is showing in the sentiment of the stock. However, there's nothing Datacenter can do for this quarter and next quarter guide. Right. They will be highly, highly exposed to that Android weakness I just talked about. Remember September quarter which is the next quarter guide is usually high strong because of Apple. Apple is going away mostly this coming quarter and if Android is not able to pick up that slack, it's not looking very good for the near term. For the handset perspective, could it go

[Ed Ludlow]

back to basics here? So you know for Qualcomm, the Android market, particularly in China is so important. The CEO Christian Amon wanted to sort of diversify so they pushed into automotive. They've had some success there and data center, but looking at the data, the smartphone market, particularly Android and particularly China, you know it's not a good year basically not at all.

[Kunjan Sobhani]

As I said, every single month those indicators keep on worsening. We have seen a lower sell through, not just in the mid tier but now bleeding into the high tier. This is where Qualcomm really makes this business out of that. So again, the guide doesn't look like there's not a lot of catalysts for upside there.

[Ed Ludlow]

Final bit. Qualcomm, the automotive business, does that interest us at Bloomberg Intelligence?

[Kunjan Sobhani]

Look, it's a great business. It's running ahead of its peers, the growth. They keep on getting ahead of the targets that they have been laying out. But again, the question comes to it's still a small size of the total revenue, right when the majority of the revenue today is still handsets, which is going to decline in near term, those pains will exist.

[Ed Ludlow]

Conjurenza Barney, who leads U.S. semiconductor coverage at Bloomberg Intelligence. Thank you very much. That does it for this edition of Bloomberg Tech. This is what we have on deck today and tomorrow it's busy because you put it mildly. The Fed decision Today, most economists expect the Fed to hold rates Microsoft and better after the bell tomorrow, Thursday, Apple and Amazon. There's a lot in the world of technology that's happening right now and this is what markets are doing in advance of that. The NASDAQ 100 down for a six straight session, its longest losing streak since October 2022. The pressure is really in the chips. Recap on the pod. We're having fun. There's a lot to discuss. Have a great day. This is Bloomberg Tech.

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