Micron's Chip Win, Omnicom and Interpublic Merge | Bloomberg Technology

Market Overview and Major Tech Companies

• The Nasdaq is up 3.7%, driven by Alphabet's performance, particularly in the areas of quantum computing and AI, with the company's head of quantum AI discussing the Willow chip on the show yesterday (1m1s).
• Oracle's quarterly revenues were lukewarm, with the company's shares down 7% despite an 80% ramp-up this year, as the forecast did not meet expectations and revenue growth was only 9% (1m24s).
• TSMC's shares are down 1.7% despite a 30% increase in November sales, with the company's 80% growth this year making it a key player in the chip space (1m42s).
• Micron is off by 2.2%, but the company has finally received certainty around its $6 billion grant from the US government to expand its memory offerings and manufacturing in the United States (1m48s).
• The grant is part of the Biden administration's efforts to rebuild the semiconductor industry in the US through the CHIPS Act, which was passed with bipartisan support despite criticism from the Trump administration (2m19s).
• Micron will use the grant to build out facilities in Idaho and New York, focusing on developing more advanced memory chips, including HBM memory chips used with AI to train AI models (2m52s).
• TSMC is a key player in the AI space, making the most advanced chips in the industry, including those used by NVIDIA to sell to companies like Microsoft, OpenAI, and Google (3m43s).
• TSMC's revenue is up 130%, providing an early indication of how demand for AI-related chips is holding up, but questions remain about whether companies can find a profitable way to deploy these models (3m39s).

US-China Relations and Investment Strategies

• China is promoting the development of relations with the U.S. and views human beings as a community of shared future, emphasizing solidarity, unity, cooperation, mutual benefit, and win-win progress (4m33s).
• Micron and NVIDIA have been under pressure due to rising tensions between the U.S. and China, affecting some U.S. chipmakers (5m18s).
• Janet Mui prefers U.S. stocks due to U.S. exceptionalism, but notes that Chinese stocks have depressed sentiment and cheap evaluations, making a case for investors to diversify (5m40s).
• Mui has a small overweight in Asia and believes that the daily reports on ramping up China-U.S. tensions, such as NVIDIA being investigated by regulators, are difficult to price in but may already be reflected in markets (6m40s).
• The trade tariffs are likely to be a tit-for-tat negotiation tactic, and it's doubtful that the full extent of the threat will be fully implemented (7m29s).
• NVIDIA's valuation is enormous, but its strong quality growth and high profit margins make it a great stock, and investors will likely continue to lean on the semiconductor sector and tech in general (8m12s).

AI and Software Focus in Investments

• Investors are rotating into more software-related stocks instead of just hardware, as AI moves forward from infrastructure buildout to applications (8m52s).
• C3.AI's focus on generative AI is driving revenue, and the company's CEO will discuss this further (9m24s).
• Alphabet had its best day since April 2024, and Google Quantum AI's founder reported steady progress on their new chips, which will form the basis for future developments (9m34s).

C3.AI's Growth and Partnerships

• C3.AI raised its sales forecast, with generative AI helping to raise sales, but analysts are concerned about the cost (10m19s).
• C3.ai's shares have increased by 60% in less than a month, driven by a great quarter with 29% year-over-year revenue growth and a massive strategic alliance with Microsoft (10m38s).
• The alliance allows Microsoft's salespeople to sell C3.ai's software solutions, significantly expanding C3.ai's sales force from 100 people to potentially tens of thousands (11m20s).
• C3.ai is prioritizing growth over profitability in the short term, investing in the Microsoft channel and leveraging its roughly three-quarters of a billion dollars in cash to drive market share and leadership (11m44s).
• The partnership with Microsoft is expected to be highly profitable for C3.ai, with virtually 100% of the revenue accruing to the company, while Microsoft benefits from selling its infrastructure and cloud services (12m36s).
• C3.ai's differentiation lies in its offering of over 100 turnkey enterprise AI applications for various industries, including utilities, oil and gas, and pharmaceuticals (13m34s).
• The company's federal strength, particularly in defense and intelligence, is expected to continue, with AI applications being a top priority for the government (14m7s).
• C3.ai's CEO, Tom Siebel, is optimistic about the company's prospects, citing the strategic partnership with Microsoft and the growing demand for AI applications in various industries (15m5s).

Micron's Performance and Cloud Infrastructure Growth

• Micron's revenue increased by 9% with strong infrastructure growth, but the expectations are high for the company, and the beat has to be material enough, with the demand still present, but the question remains whether the second-half growth rate will be in the high 50's or low 50's (15m35s).
• Micron's cloud infrastructure sales increased by 52%, and the real area of growth for the company is cloud infrastructure due to AI workloads, which is where the bulk of the interest lies at this point (16m7s).
• The company's software sales are generally in line with what is happening with Salesforce, but that space has been under pressure over the last 12 months (16m30s).
• There was no mention of TikTok on the call, but it is believed that if there is an impact next year, it will not be immediate and the company should be able to offset that risk with a quarter or two due to its backlog (16m54s).

Oracle, Apple, and Market Trends

• Oracle has managed to snag major clients, including Meta, and is getting work from Microsoft due to fulfilling the workloads coming from OpenAI, and the entire cloud space is going up, not just one or two vendors (17m33s).
• Apple's stock is up 9% since November, despite slow revenue growth and tariff risks, with investors optimistic about its ability to navigate that and its Apple Intelligence offering (18m32s).
• A DoorDash-funded study found that most of its gig workers preferred to remain independent contractors after the company began offering payments instead of benefits (19m5s).
• TikTok Shop is coming to Europe, reflecting the company's push to seek out alternative markets in the face of potential U.S. shutdown (19m12s).
• Talabat lost ground after an IPO in Dubai, adding to a slew of disappointing issues in the Middle East (19m31s).

Supply Chain Security and Sanctions

• Despite U.S. and allies' sanctions following Russia's invasion of Ukraine, Moscow has continued its ability to procure American tech, including chips from Intel, through a relatively simple supply chain path (19m52s).
• Companies like Texas Instruments have been inadvertently supplying chips to Russia for use in military equipment, despite the ongoing war in Ukraine, by having their catalogs available on Russian websites, allowing intermediaries to order and ship the goods through third countries (20m43s).
• The US has been warning suppliers to crack down on this practice, and Texas Instruments has stated its strong opposition to the use of their chips in Russian military equipment (21m13s).
• Companies are trying to stop these practices, but a Senate report earlier this year suggested they are not doing enough, and are instead intervening after issues are flagged rather than identifying bad actors early on (21m47s).

Omnicom and Interpublic Group Merger

• Omnicom has announced it will be buying Interpublic Group, with the CEOs of both companies, John Wren and Philippe Krakowsky, discussing the merger in an exclusive interview (22m41s).
• The merger is partly in response to technological disruption in the advertising industry, with both companies focusing on using technology to enable their talented people to service clients in the new era (23m9s).
• The barrier to entry in the industry has increased, requiring companies to have the best tech and data to properly service clients, and both Omnicom and Interpublic Group have been on a journey to achieve this (23m32s).
• Omnicom has made strides with the creation of OMNI and Flywheel, while Interpublic Group has a strong advantage with its consumer database, Acxiom, and is co-investing in generative AI to help clients navigate the tech-enabled world (24m17s).
• The merger aims to strip out costs, but the specifics of how this will be achieved were not discussed in the interview (25m35s).
• The discussion revolves around the merger between Omnicom and Interpublic Group, with a focus on cost savings and the expensive talent required for generative AI (25m39s).
• Philippe Krakowsky mentions that the company will enable its people who interact with clients by giving them more tools, and there are opportunities to put money against the future by investing in infrastructure and stripping out legacy costs (25m50s).
• John Wren notes that there is naturally a turn in everybody's business every year, and he has been in a similar situation before, but this time it is more thoughtful (26m44s).
• Wren references a past deal, the Publicist deal in 2014, but believes that the current merger is more focused on the clients and the capabilities developed between the companies (26m51s).
• The discussion touches on the concerns about the deal, with Caroline mentioning that some of the concern may be priced in at the moment, and Citi saying that there is dis-synergy (26m18s).
• Wren is not concerned about the naysayers, as he believes that the offerings they have in response to clients is at the core of what they have been discussing, and they are focused on what it means for clients and attracting talent (27m28s).
• The conversation also mentions the impact of OpenAI, with Wren noting that it has a positive impact as a tool available to their knowledge workers (28m19s).
• Philippe Krakowsky disagrees with the idea that the barriers for entry are low due to AI, stating that conductivity to a broad range of capabilities is necessary, and that content needs to be connected to a sophisticated platform with technology and data to be useful to clients (28m51s).
• The discussion concludes with John Wren's thoughts on the future of the market, stating that many players have been competitors for a while, and that larger marketers will need to consider brand safety and other factors when using new tools and capabilities (29m51s).

Merger Discussion and Regulatory Outlook

• The conversation revolves around the merger of Omnicom and Interpublic Group, with the discussion touching on the regulatory outlook and the confidence level of the deal getting through, amidst a dozen or more jurisdictions that need to clear the hurdle (31m25s).
• The macroeconomic perspective of clients is also discussed, with the acknowledgment of geopolitical uncertainty, but the clients are still running their businesses and factories, and the nature of advertising and reaching customers has changed (31m49s).
• The change in administration is seen as a positive thing, with the expectation that the new administration will be more business-friendly, and the focus is on flexibility and agility rather than size (32m39s).
• The importance of empowering employees with the best tools and cutting-edge technology is emphasized, to enable them to confidently tell large advertisers that they can adapt to the constantly changing environment (33m9s).
• The conversation also briefly touches on the topic of AI and its potential risks, with the acknowledgment that AI will be the most intelligent being on the planet in a few years, but the discussion is cut short (34m53s).
• The event also features a live conference on the inaugural Women, Money, and Power event, discussing the future of business, AI, and global finance (33m37s).
• John Wren of Omnicom and Philippe Krakowsky of Interpublic Group are the guests, discussing the merger and its implications (33m24s).

AI Risks and Control Mechanisms

• The conversation revolves around the risks associated with the increasing use of AI and the need to establish boundaries and controls to maintain human oversight and prevent loss of control (35m9s).
• One possible solution is to implement quality assurance and limitations on the level of delegation, such as having a human review AI-generated contracts (35m57s).
• Another approach is to ingrain rules of behavior into the AI model itself, which is an area of ongoing study (36m21s).

Technology Access and Regional Disparities

• The deployment of digital solutions and AI-powered technologies can be limited by the availability of expensive smartphones and internet access, excluding hundreds of millions of people from benefiting from these technologies (36m59s).
• However, in some communities, such as in Africa, mobile money and fintech solutions have been able to provide access to financial services using basic mobile phones, demonstrating the potential for technology to leapfrog traditional industry limitations (37m40s).
• The level of technological sophistication and data access varies greatly across different regions, and solutions must be adapted to accommodate these differences (38m27s).
• In South Africa, where mobile telephony is more advanced, AI-powered products can be made available to consumers using e-commerce platforms, payments platforms, and other services (38m51s).
• One of the challenges faced by entrepreneurs is developing technologies and innovations that cater to the needs of small businesses, such as those with less than 10 people (39m34s).

Market Fluctuations and Cybersecurity

• The NASDAQ has turned into the red, with Oracle being a key contributor to the downside in the S&P, as its forecast did not live up to expectations despite 9% growth in revenue (39m58s).
• Notable individual movers to the downside include DB, with markets worrying about it despite strong results, and MicroStrategy, which is off by 1.5%, while Palantir is up by 0.7% in a down market (40m31s).
• Palo Alto reported a more than 4% increase in ransomware victims in the first half of this year compared to the first half of 2023, making cybersecurity a hot sector for venture capitalists (41m9s).
• Enrique Salem, partner at Bain Capital, notes that no one is immune to ransomware attacks, which are prevalent across all industries, affecting one in 10 countries each year (41m40s).
• To combat ransomware, technology is changing to focus on preventing attacks from happening, understanding the activity or behavior of a ransomware attack, and being prepared to recover and decrypt data successfully (42m10s).
• Enrique Salem also sees opportunities in supply chain security, citing the attack on SolarWinds, which hit 18,000 companies, and the rise of companies providing solutions to protect businesses' supply chains (42m50s).

Venture Capital and Future Opportunities

• As a former CEO and member of President Obama's advisory board, Enrique Salem advises his portfolio companies to take advantage of AI, which is changing how businesses work, and to be prepared for new opportunities with the next administration in 2025 (43m31s).
• The new administration is expected to drive consolidation, M&A, and potentially bring back the IP market in 2025 (44m2s).

Huawei Restrictions and Tech Trade Tensions

• Huawei suppliers are facing limitations as lawmakers move to restrict the Pentagon's use of certain technologies (44m16s).
• The US is imposing more restrictions on American companies doing business with Huawei, a Chinese company considered a national champion in China but a pariah in the US, due to growing US sanctions and export controls (44m36s).
• Lawmakers on Capitol Hill want to bar any business with Huawei, and a new provision attached to a defense policy legislation is likely to become law, limiting American companies from doing business with Huawei (45m8s).
• The provision will take effect within a nine-month span, and there are very rare exemptions granted under the law that would allow companies to continue to do business with Huawei and the Pentagon at the same time (45m28s).
• The new restrictions are part of the growing tech trade tensions between the US and China, with the US imposing more restrictions on companies supplying to Huawei (44m32s).
• The restrictions are expected to have an impact on the tech sector, with the NASDAQ 100 being just underwater by about 12 points, and Oracle being a key drag across the sector (46m0s).
• However, some companies like Alphabet are shining, despite the overall decline in the tech sector (46m10s).
• The new provision is part of a larger defense policy legislation that will be acted upon in the coming weeks before lawmakers leave town for the holidays (45m17s).