ASML Outlook Weighs on Global Tech | Bloomberg Technology Full Show 10/16/2024

ASML Earnings Miss and Market Impact

• The Philadelphia Semiconductor Index is higher by 0.4%, but European trading shares of ASML are still under pressure, down 5%, continuing from the previous day's selloff (1m25s).
• ASML, a chip equipment maker, buys chip-making equipment, while Intel has a foundry business, making Intel's lower stock price in the context of ASML's situation understandable (1m43s).
• ASML published its earnings early by mistake, blaming a technical error, and the CEO apologized for the mistake in an analyst call, stating the results were unfortunate (2m21s).
• ASML's orders were less than estimated by analysts in the third quarter, and the company cut guidance for next year, resulting in an unpleasant surprise for analysts (2m36s).
• The market reaction was amplified by the early release of the results, and the company's shares are still sinking despite the CEO's explanation (2m52s).
• ASML's weakness in orders often signals struggles for the wider chip sector, as the company is the market leader for lithography machines in the world (3m6s).
• The CEO explained the cut to guidance, citing delays in construction around the world, weakening growth in China for older machines, and potential future export controls from Washington (3m26s).
• Intel, ASML's biggest customer in the US, is cutting expenses and restructuring, affecting demand for ASML machines, along with delayed factories in Germany and Poland (3m41s).
• Memory chip makers such as Samsung are being cautious with their spending, also affecting demand for ASML machines (3m58s).
• ASML's earnings and guidance were ugly, with a 16% decline in Amsterdam yesterday and a 5% decline today, causing anxiety around the world (4m26s).
• The company's investment cycle is a concern, with ASML telling investors that the chip industry's weakness is set to continue well into 2025 (4m51s).
• ASML will slow its short-term investment plans to match the market, as stated in the analyst call (5m4s).

Chip Industry Trends and Qualcomm's Potential Intel Acquisition

• The chip industry is experiencing uneven times, with areas like artificial intelligence accelerators seeing high demand, while sectors such as automotive and industrial are experiencing a prolonged slump, with customers cutting back orders (5m27s).
• The demand for artificial intelligence accelerators is high, with companies like NVIDIA struggling to keep up, and the market would be "very sad" without AI (5m37s).
• Qualcomm is reportedly planning to wait until after the US elections to make an offer for Intel, according to sources, and the deal would be complicated due to antitrust and geopolitical implications (5m56s).
• The deal would require clarity on the antitrust landscape and geopolitical implications, particularly US-China relations, which are crucial in the semiconductor industry (6m18s).
• Qualcomm has informally sounded out regulators in China, but China has not yet weighed in on the potential deal, and its approval would be crucial (6m40s).
• The US has invested efforts to become a national player in chip making and reduce its reliance on China, and China's approval would be necessary for the deal to go through (7m2s).
• Both Qualcomm and Intel declined to comment on the reporting, and the deal's outcome is uncertain (7m23s).
• TSMC will report its earnings, and investor focus on chips will continue, with the timing of the report coinciding with ASML's news, which is a continuation of the story on investment in AI and chip equipment making (7m31s).
• TSMC's results are expected to be solid, led by AI, and the ASML news is more about China, particularly the pull-forward of equipment ahead of increasingly severe regulations (8m4s).
• ASML's business is heavily reliant on China, with 40% of its business coming from the country, and the company's acknowledgement of strong AI demand but weaker demand elsewhere could reflect various factors, including Intel's plans to delay or cancel overseas projects (8m27s).
• Analog chip makers like Texas Instruments have reported weakening demand, but it's unclear how soft the market will become, and inventories have cleared in other markets, leading to a pickup in demand (8m53s).
• ASML's comments on orders are difficult to read, but companies like analog and microcontrollers provide insight into the broader economy, which is showing signs of recovery in the US and industrial sectors (9m23s).
• The ASML outlook has a significant impact on the global tech industry, but its effects are not straightforward and involve various factors, including China and Intel's plans (9m46s).

Nvidia, Semiconductor Sector, and Joanne's Investment Views

• The recent news about potential limitations on exports from the US and around the world to China, including NVIDIA chips, has led to concerns about the importance of China-US relations to some valuations (10m5s).
• NVIDIA's stock sold off due to its presence in many ETFs, which led to a significant outflow of money, causing the stock to decline (10m38s).
• Some investors might consider diversifying their portfolios by reducing their exposure to the semiconductor space, which has rallied significantly (10m49s).
• Joanne does not like ASML and Intel due to its significant challenges, but she likes NVIDIA and other players in the AI space, including Broadcom (11m2s).
• Intel faces huge challenges in catching up in manufacturing and lacks the expertise to do foundry work, making it a big challenge for the company to build a library and manufacture other types of chips (11m35s).
• A potential acquisition of Qualcomm's design side could give Intel a massive cash infusion to support its manufacturing side and make necessary investments (11m50s).
• However, this is considered a long way off and uncertain, making Intel not a favorable investment option (12m3s).
• Texas Instruments is considered a good place to be due to its exposure to the strong US economy and the recovery in industrials (11m23s).

Trump's Tech Regulation Views and Market Impact

• Former President Donald Trump discussed tech regulation in a recent interview, expressing his views on the potential breakup of Google, which he believes has too much power and is "rigged" (13m21s).
• Trump stated that he would "do something" about Google's power, but did not specify what actions he would take (13m55s).
• Trump Media Technology (DJT) stock is being watched, which is up almost 10% due to the interview and other factors, including inflation and the dollar rates (12m21s).
• Former President Donald Trump discussed his views on Chinese technology and its threat to the US, stating that everything is a threat, but sometimes you have to fight through the threats (15m27s).
• Trump mentioned that he initially wanted to ban TikTok, but now seems to have a different stance, possibly due to Facebook, and a decision is coming up on January 19 regarding whether the Chinese parent company would have to sell it (14m37s).
• Trump expressed that he is not a fan of Google, but instead of breaking up the company, he would focus on making sure it's more fair (15m46s).
• Trump stopped short of suggesting a breakup of Google, but was firmer on TikTok, and is trying to maintain flexibility in his potential policy platform going forward in tech (16m15s).
• Trump's running mate, J.D. Vance, has previously expressed a favorable view of vigorous antitrust enforcement, which could be a signal of their potential policy direction (16m56s).
• There are concerns about the potential impact of an anti-competitive perspective on MMA, and Trump's stance on TikTok is unclear, as he did not commit to enforcing the new law that President Joe Biden signed (17m16s).
• Companies like Qualcomm have reservations about making any moves before the election, as the regulatory environment could become very different depending on the outcome (17m56s).

Bloomberg CityLab Summit and Kyiv's Use of AI

• Bloomberg's CityLab Summit is being held in Mexico City, with over 500 mayors and policymakers in attendance, including those from Kyiv, Ukraine, and Bloomberg Philanthropies is providing $4 million for digital projects in Ukraine (18m49s).
• Kyiv, Ukraine is utilizing A.I. for urban planning, safety, and security, and the city's advisor to the mayor and head of digitalization, Oleg Polovynko, is working to implement technological innovations despite the challenges of war (19m28s).
• Kyiv has a super app with 3.9 million users, which provides information on bomb shelters, heating, and other essential services, and is used by residents and refugees to navigate the city during times of war (20m8s).
• The city is facing challenges such as electricity outages, and the app helps citizens know how to survive in the city, with future investment planned for mental health support using generative A.I. (20m40s).
• Bloomberg Philanthropies is developing a project to help residents test their mental health and provide additional recommendations and services, using A.I. technology to make services more efficient (21m41s).
• The area of the city that needs to be modernized the most is civil defense, transportation, and self-testing and self-improvement of residents (22m31s).

Market Updates and AST Space Mobile

• ASML's recent announcements have had a significant impact on the chip sector, with the company's A.D.R.s under pressure in the United States, despite the CEO's explanation of the numbers (23m44s).
• The chip sector is bouncing back, with NVIDIA in the green, but the consumer tech sector, including Apple, is under pressure due to declining P.C. and smartphone volumes (23m54s).
• Airbus is joining Boeing in cost-cutting measures, planning to cut up to 2,500 jobs in the defense and space division, equivalent to about 7% of the workforce, due to an increasingly difficult space market (24m18s).
• AST Space Mobile is building the first cellular broadband network from space, working with giants like AT&T, Google, Verizon, and more, making it the biggest competitor to SpaceX in the direct-to-sell business (24m43s).
• AST Space Mobile's President Scott Wisniewski stated that the company has been working on this project for seven years and has been working with many operators for over five years (25m9s).
• The company's goal is to launch 45 to 60 satellites in the US to provide 24/7 commercial service to phones with no modification, with the first five commercial satellites set to launch in Q1 2025 (25m32s).
• AST Space Mobile's low Earth orbit network means it is global, but it requires many satellites to be operational, which is why the company has put together a network of 45-plus partnerships globally with mobile network operators (26m4s).
• These partnerships cover collectively over 2.8 billion subscribers, and the company plans to start doing bait-and-switch service with the first five satellites, providing 30-plus minutes of service a day (26m19s).
• AST Space Mobile is vertically integrated, based in Texas, and has its key hubs in the United States, with a capacity to produce up to six satellites a month (26m41s).
• The company's limiting factor is not its ability to build satellites, but rather the launch providers, although it has had success in raising capital and controls most of the inputs to the supply chain and manufacturing (27m33s).
• AST Space Mobile is potentially going to sell more stock, having been the best-performing Russell 2000 name, with a 300% increase year-to-date and a record high of 1,300% up from the previous low (28m9s).
• A company is addressing concerns from shorts about its ability to make its technology a reality, stating that it has highly differentiated technology and is useful to operators who have partnered with it, providing a service that is important to consumers (28m27s).
• The company's stock has performed well on the back of its success this year, and it has announced the success of the U.S. government as a customer, as well as prepayments with many of its top providers (28m59s).
• The company is official in 2025 and 2024 and plans to stick with that, and it is pushing as fast as it can to produce for its shareholders and customers (29m26s).
• The company's revenue model is based on a revenue share with its partners, providing a unique and supplemental service to the coverage that its partners provide (29m52s).
• The company wants to drive new revenue and growth, help its customers reduce churn, and make their service more valuable, and it will share the revenue with its customers (30m18s).

Gaming Industry Overview and Child Safety Concerns

• ASML has lost its place as Europe's top tech company to Software S.A.F., with its shares plunging and losing about $65 billion in market capitalization (30m34s).
• ASML only booked about half the orders that analysts were expecting in Q3 (30m53s).
• Airbnb has announced a new feature to manage rentals, allowing hosts to resource and coordinate guests' logistics, hoping to boost listings (31m3s).
• Paramount's three co-CEOs will receive their annual cash bonuses even if they are replaced, as the company is in the process of merging (31m17s).
• The gaming market is estimated to have reached $188 billion this year, with V.C. funding in games reaching $517 million so far (32m23s).
• The gaming industry is the most significant portion of the entertainment market, larger than linear TV, and its size is important due to its impact on the overall industry (32m46s).
• The gaming industry has continued to grow and has proven to be recession-resilient, with funding normalized over the last six quarters, seeing roughly $500 billion to $600 billion invested quarterly into games (33m22s).
• The industry is expected to remain bullish, especially with interest rates driving down and opening up the IPO markets, making 2025 a promising year for games (33m31s).
• The gaming industry receives a significant portion of venture investments, with around $500 million to $1 billion invested quarterly, compared to $50 million to $60 million in larger ventures (33m57s).
• The industry is more stable, with less flash in the pan, and is seeing continued interest in AI gaming (34m8s).
• Despite the growth, the industry is experiencing layoffs, with around 13,000 jobs lost in the games industry, which is likely higher if private companies are included (35m46s).
• The layoffs are seen as a healthy right-sizing of the industry after overhiring during the boom era (36m0s).
• The industry continues to thrive and grow, with people wanting to spend time in active environments, especially younger generations who are spending less time watching TV (35m18s).
• The crunch in the gaming industry is due to demanding users who expect high-quality content, which can be challenging for developers (35m32s).
• Child safety is a concern, with parents needing to take precautions to ensure their children's safety online, especially with popular games like Roblox and Minecraft (36m26s).
• As a parent, Jason emphasizes the importance of taking child safety seriously, especially as kids spend more time online (36m42s).
• The importance of protecting kids in the gaming industry is emphasized, with companies needing to take responsibility and ensure compliance with different regulations across the globe (36m48s).
• A company called K.I.D. is working to promote and ensure that companies are compliant with regulations, and an investment has been made in this space to address the issue of child safety (37m1s).
• The challenges faced by game companies in releasing games in over 100 countries and ensuring every kid is safe according to the laws are acknowledged (37m19s).
• The Hindenburg report's allegations against Roadblocks, a gaming company, are mentioned, with a focus on child safety and financial metrics (37m30s).
• Roadblocks is considered a best-in-class digital property, and it is hoped that they can handle the issues head-on (37m56s).

Google and Amazon's Investments in Nuclear Energy

• Amazon is teaming up with finance year Ken Griffin to make a $500 million investment in small nuclear reactors, highlighting the growing energy needs of A.I. (38m31s).
• Nuclear power is seen as an important part of reaching a carbon zero goal, with Google also investing in the development of several nuclear power reactors across the United States (39m5s).
• Google's investment in nuclear power is part of its 15-year journey to reduce carbon emissions, with a goal of being 24/7 carbon free everywhere it operates by 2030 (39m44s).
• The use of small modular reactors (SMRs) is seen as a way to meaningfully change the trajectory of meeting power needs and climate targets (39m28s).
• Google's focus is on eliminating carbon emissions by 2030, and the investment in nuclear power is part of this effort (40m35s).
• The company's goal is to be 24/7 carbon free everywhere it operates, every location, every hour of the day, which is considered a huge challenge (40m42s).
• Google is one of the largest corporate purchasers of wind and solar energy globally, having signed over 100 deals, but acknowledges that more technologies are needed to achieve 24/7 carbon-free energy, as wind and solar are not always available (41m1s).
• Advanced nuclear technology is seen as a crucial part of Google's path to 24/7 carbon-free energy, providing a more always-on resource (41m16s).
• Google is making big bets on nuclear energy, in addition to continuing investments in wind, solar, and storage, having signed over 34 gigawatts of deals last year (41m40s).
• The company is inking new agreements with utilities to develop a portfolio of technologies that can meet its 24/7 carbon-free needs, betting both short-term and long-term (41m55s).
• Google expects small modular reactors (SMRs) to be competitive and valuable compared to solar and wind, due to their always-on nature and ability to be placed anywhere (42m21s).
• The company has a clear sense of its energy needs over a five to ten-year horizon, having been working on this for 15 years, and is making decisions that make sense for the business and its growth (42m49s).
• Google sees a growing number of start-ups and companies building the necessary technologies to partner with, similar to the early days of wind and solar, and welcomes more players in the field (43m22s).
• In addition to nuclear, Google is also looking at long-duration storage and geothermal energy, having already completed a geothermal project in Nevada in 2021 (43m52s).
• The company's Senior Director of Energy and Climate, Michael, believes that a diverse portfolio of technologies will be necessary to achieve 24/7 carbon-free energy (44m3s).

Bloomberg Technology Show Sign-Off

• The current location is San Francisco, and the show is Bloomberg "Technology." (44m35s)