This Week in Tech Earnings and the US Election | Bloomberg Technology

Market Overview and Tech Earnings

• The US markets ended on a higher note, but were down for the week, with the NASDAQ off 1.2%, following a selloff the previous day, the biggest since September 6, largely due to tech companies' ability to show up in terms of earnings (1m1s).
• Amazon's growth in its cloud unit, tied to AI, is a key area of focus, with a strong signal expected for the final three months of the year (1m24s).
• Apple grew in every geography except Greater China, with iPhone revenue beating expectations, but the company's guidance for the final three months of the year is for low single-digit growth (1m36s).
• Gene Munster, managing partner at Loup Ventures, believes the key takeaway from Apple's earnings is that the company's features will accelerate revenue growth, but notes that the guidance poured cold water on hopes for better acceleration in the December quarter (2m7s).
• Munster expects analysts to shake out with growth rates between 5% to 6% for the final three months of the year, similar to the September quarter, and believes the street was right that it will take some time for Apple to see acceleration in growth (2m33s).
• Apple's growth in China was fractional, up 0.5%, despite easy comparisons, leading Munster to suggest that there may be something else going on in China (3m8s).
• Munster is modeling Apple's future growth, including the potential for the company's platform to be available in China, and notes that the geographic piece is important, with additional English countries expected to be added this year (3m46s).
• For Apple's platform to be a super cycle, Munster believes that geopolitical things need to fall into place, including a potential partnership with Baidu in China, but ultimately believes that Apple has the clout to make those things happen (4m31s).
• Apple's services side is currently performing well, with 12% growth, but faces potential regulatory risks, particularly regarding the App Store, and a possible change in the relationship between Google and Apple on the search placement deal with Safari, which could have unintended consequences (5m12s).
• Sundar Pichai mentioned that regulatory oversight will have unintended consequences, and there is a low probability, around 10-15%, of something happening between Google and Apple on the search placement deal (6m0s).

Amazon's Performance and Cloud Growth

• Amazon's earnings showed healthy revenue trends, with AWS growing at 19%, driven by incremental growth from AI-related services, estimated to be around 600 basis points, and strong demand for custom silicon, which could potentially lower costs for customers (6m22s).
• Amazon's share in the hyperscalers space is still significant, but Azure is growing faster, with Amazon annualizing revenue of around $10 billion, compared to Azure's $67 billion, and Google is a distant third (7m15s).
• Amazon's e-commerce business is facing challenges, with consumers demanding more daily essentials, leading to higher costs to serve and lower margins, but the company has been able to offset this by consolidating packages and leveraging regional distribution centers (8m45s).
• Ramiz Chelat, portfolio manager of Vontobel, believes that Amazon is doing the right things in terms of custom silicon, which is in high demand, and is well-positioned to cater to customers who want lower-cost options (7m51s).
• The market share of Amazon's cloud business is fine, and the company is structurally growing at an attractive rate, along with Azure, which is also growing fast (7m43s).
• Andy Jassy has made cuts and scaled back spending in certain areas of the e-commerce business, which has helped to offset the challenges faced by the company (8m32s).
• Amazon's investments in its business have led to improved customer satisfaction and operating efficiencies, with margins beating expectations on the core economy side, indicating good visibility for margin expansion over the next year (9m33s).
• Amazon's capital expenditure (CAPEX) for 2024 is expected to be $75 billion, a significant step up, but future investments are expected to be more moderate, with a focus on AI-related services and general cloud infrastructure (9m54s).
• Despite the increased investment, Amazon Web Services (AWS) was still able to produce a 38% operating margin, which is expected to come down but remain higher than expected (10m48s).

Intel's Restructuring and Outlook

• Intel's shares are up almost 7% after the company reported painful cuts, impairment charges, and a big miss on the bottom line, but an outlook that suggests the company may be turning the corner (11m15s).
• Intel's CEO, Pat Gelsinger, will be interviewed later in the show to discuss the company's performance and outlook (11m31s).

US Election and Crypto Regulation

• The US presidential election is expected to have an impact on crypto regulation, regardless of the winner, with the Blockchain Association's CEO, Kristin Smith, to discuss the issue (11m49s).
• Vice President Kamala Harris has received major donations from tech industry leaders, including Mark Cuban and Reid Hoffman, as she re-embraces the tech industry and seeks funding and support for her campaign (12m19s).
• Harris has been holding nearly weekly roundtables with tech leaders and investors, and has had to work to bring in donations from the tech industry, which has been a significant source of funding for her campaign (13m43s).
• The tech industry is seeking a stable environment, good global relations, and a rule of law, which is why some leaders, including Mark Cuban and Reid Hoffman, are supporting Vice President Harris (12m30s).
• Ryan Nelson and 20 West are envoys from the Harris campaign to tech leaders, holding roundtables to show that the campaign will be listening to the tech industry and addressing the trust gap that has developed, particularly after feeling neglected by the Biden administration (13m57s).
• The roundtables have been successful in stemming the tide of support for Trump in the tech industry, which has been significant, with big names like Marc Andreessen and Ben Horowitz supporting Trump (14m49s).
• The Trump campaign has been seen as more supportive of the tech industry, particularly in regards to crypto adoption and growth, with Trump wanting to make the US a key area for cryptocurrency growth (15m12s).
• Bitcoin has been affected by the market's prediction of a Trump win, with the price increasing by 4.8% over the course of five trading days, and other cryptocurrencies like Doge also seeing significant gains (15m29s).
• The election cycle has seen major money being funneled to candidates who support crypto, which could have an impact on regulation and oversight of the industry (16m15s).
• Kristin Smith, CEO of the Blockchain Association, has partnered with the Harris campaign and is working to stop regulation by enforcement and get a new law in place, while also acknowledging Trump's change of heart on crypto and his clear priorities for the industry (16m50s).
• Smith believes that Gary Gensler, the current SEC chair, needs to go, and that there is an opportunity for change with a new administration, with Trump having made it clear that he would fire Gensler on day one (17m39s).
• The Harris campaign is also talking to the tech community, with Nelson and West holding roundtables to show that the campaign is listening and willing to work with the industry (18m2s).
• The crypto industry is optimistic about the potential for change at the top if a certain administration wins, citing open-mindedness and positive statements about crypto, despite a lack of precision in policies (18m5s).
• The Trump campaign's policies on crypto are not nuanced, with a focus on making the US the number one place for crypto, but lacking specifics on how to achieve this from a regulatory perspective (18m27s).
• President Trump has given a speech outlining the need to stop regulation by enforcement and for Congress to pass an appropriate regulatory framework, which is seen as a positive step for the crypto industry (18m43s).
• A survey found that two-thirds of voters agree that Congress should act first before the SEC takes action, indicating that taking a pro-crypto posture can be helpful for candidates running for Congress (19m9s).
• The crypto industry is hopeful that a change in administration will bring new leadership to regulatory agencies and the executive branch, which can work with Congress to create a more favorable environment for crypto (19m31s).
• Many crypto companies have been making layoffs, and the ecosystem as a whole has not been thriving, with some companies choosing to work overseas due to the risks and uncertainty of creating a new blockchain and launching a token in the US (19m49s).
• The US has seen over 100 enforcement actions and $400 million in legal fees spent, which has had a negative impact on the industry and led to companies taking their business overseas (20m32s).
• The outcome of the upcoming election is uncertain, but the crypto industry is watching the signals and is hopeful that regardless of the result, there will be a productive Congress and a new administration that is more open to working with the crypto industry (20m48s).

Tech News and Market Updates

• Waymo has been valued at over $45 billion, including its latest round of financing, and has raised $5.6 billion in new capital (21m45s).
• Croissant has hired one of Facebook's former engineering chiefs, J Parikh, who will join the leadership team and report to Satya Nadella (22m14s).
• Alibaba has picked banks to work on the planned Hong Kong IPO of its semiconductor unit, which could happen as soon as next year and raise at least $300 million (22m21s).
• The Nasdaq experienced a 1% decline over the course of the week, which is the biggest disruption since the first of September, influenced by earnings, economic data, and the upcoming US election (23m17s).
• Amazon's stock pushed higher after its earnings report, with strength in AWS, marking its biggest jump since February of this year (23m44s).
• Apple's stock was down, with growth everywhere in the world apart from China (23m56s).
• Intel's stock pushed higher despite a difficult quarter, with some hope in the outlook for the quarters to come, although the company is still behind in the key market of AI accelerators (23m59s).
• Five of the "Magnificent Seven" tech companies reported their earnings this week, with investors navigating the results and economic data, including a hiring rise at the slowest pace since 2022 (24m25s).
• Wall Street estimates that 73% of the reports beat expectations, which is the lowest since the start of 2023, indicating some fizzling in the market (24m48s).
• Risk factors rose to their highest in 18 months, showing investors are jittery and resulting in volatile trading across asset classes (25m9s).
• The upcoming US election is contributing to investor anxiety, with tech investors specifically concerned about the impact of the election on the AI rally and the promise of AI (25m44s).
• The CAPEX of the four largest internet companies is set to total well over $200 billion this year, a record, with investors still investing in AI (25m56s).
• The market is expected to remain messy, with investors bracing for a potential hard landing, and next week's events, including the FOMC and eco-data, will be closely watched (26m22s).

US Election Impact on Tech and AI

• The US election is nearing, with the gap between Republican nominee Donald Trump and President Kamala Harris narrowing in prediction markets, although Trump has held a lead (27m29s).
• Vivek Ramaswamy, a supporter of Donald Trump and former Republican presidential candidate, believes Trump is the best candidate for the technology industry and venture capital due to his stance against nasty regulation and mass reform of the administrative state (28m12s).
• Ramaswamy thinks the administrative state and regulatory straightjacket are the single greatest competitive threats, with three-letter agencies making most rules governing businesses in the country without being elected (28m21s).
• The current Supreme Court, composed in part by Trump, has declared many of these regulations unconstitutional, and Trump wants to shake down the regulatory state to its core (28m52s).
• Ramaswamy argues that Trump's stance would benefit entrepreneurs and the technology industry by reducing regulatory burdens (29m6s).
• When asked about specific areas of focus for Trump, Ramaswamy mentions an overall American revival, with energy being a big priority, including all forms of energy where America can be the leader, such as drilling and fracking (29m31s).
• Trump's pro-energy policies are seen as good for bringing down prices and fueling future AI-based technology revolutions (30m13s).
• In response to concerns about retribution from Trump, Ramaswamy denies that there will be any penalization of those who have opposed him, citing the prosecution of opponents by the opposing party as a greater concern (31m8s).
• Kamala Harris has reversed her position on central questions, including foundational questions about energy policy, in a matter of months, which raises concerns about her being a steady hand (31m32s).
• Harris supports a tax on unrealized capital gains, which could negatively impact biotech entrepreneurs and potentially lead to a stock market crash and great depression (32m8s).
• The tax on unrealized capital gains could be a significant issue for a market-focused audience, and some may consider it a single-issue voting point (32m39s).
• The CHIPS Act, which provides billions of dollars for manufacturing in states like Ohio, has been opposed by Donald Trump, but some argue that the act has baggage, including hiring impediments and regulatory burdens (32m59s).
• The CHIPS Act also includes changes to the way the NSF makes grants, which some see as diluting the original purpose of the act (33m37s).
• An alternative approach to fostering semiconductor production could be mass deregulation in the United States, which could lower the cost of capital for semiconductor companies (34m0s).
• NVIDIA's success is attributed to booming demand led by the advent of AI, rather than the CHIPS Act, and the company's growth is not isolated, but many chip companies have had their access to the China market impacted by export controls (34m10s).
• China is the biggest end market for consumer electronics and critically important for cloud computing, and some question former President Trump's position on key American companies being able to do business in that market (34m40s).
• A key principle is that the US should not depend on its adversary, China, for national security, including the supply of semiconductors, which is currently a concern with 4% of semiconductors feeding the Department of Defense coming from China (35m4s).
• A sensible policy is for sectors critical to national security not to be dependent on the United States' chief adversary (35m39s).
• Donald Trump is a pragmatist when it comes to foreign policy dealings, which puts the U.S. in a stronger position in negotiations (35m47s).
• Vivek Ramaswamy spent over $30 million of his own money on his presidential campaign, which is a matter of public record (36m26s).
• Ramaswamy views the return on investment (ROI) from his campaign as related to the impact on the country, rather than personal gain (36m35s).
• As the youngest person to run for U.S. President as a Republican, Ramaswamy was proud to bring disengaged citizens, especially young people, back into politics (36m45s).
• Ramaswamy's campaign started with 0.0% in the polls but eventually beat a Vice President and former Senator, proving what is possible in the United States (37m19s).
• Ramaswamy believes his best days as a country and his ability to have an impact are still ahead (37m32s).
• One of Ramaswamy's companies, Strive, is going to start buying Bitcoin for the first time, and he is proud of the team's accomplishments (37m53s).
• Ramaswamy thinks the crypto policies under Trump will be less about helping one sector and more about reviving the principles of unbridled innovation and competition (38m14s).
• Ramaswamy emphasizes the need for regulatory clarity in the crypto industry, rather than unbridled innovation, to avoid a situation where people are guessing what the rules are (38m29s).

Intel's Restructuring and AI Accelerator

• Intel gave a fourth-quarter revenue forecast that is sparking optimism about the company's ability to reclaim some lost market share (39m26s).
• Pat Gelsinger expressed pride in his team's ability to deliver better-than-expected results while undergoing significant restructuring, including the elimination of one-time charges and taking guidance up for Q4 (39m55s).
• The restructuring charges were largely finished in the quarter, with some of the most difficult charges since the microprocessor decision 40 years ago (40m7s).
• Pat Gelsinger attributed the lack of traction for their AI accelerator to two factors: enthusiasm for the next-generation product, Gaudi 3, and the software use cases, which have moved rapidly and innovating quickly, making optimizations more difficult (40m41s).
• OpenAI is challenging Google by adding a new set of search features to ChatGPT, allowing users to search for timely information, which is accessible to paying users (41m33s).
• Shirin Ghaffary believes that ChatGPT's new search features could be a potentially very big long-term competitor and threat to search as a whole, with the possibility of users shifting towards chatbots for searching (41m57s).
• The new search feature in ChatGPT is more integrated into the app, providing a more Google-like experience with preview cards, images, and maps, and is currently available to paid users or team users within the 4.0 model (42m50s).
• The development of a complete GPU capability is underway, which will address some of the software problems and make optimizations easier (41m20s).

ChatGPT's New Search Features and Google's Response

• OpenAI is challenging Google by adding a new set of search features to ChatGPT, allowing users to search for timely information, which is accessible to paying users (41m33s).
• Shirin Ghaffary believes that ChatGPT's new search features could be a potentially very big long-term competitor and threat to search as a whole, with the possibility of users shifting towards chatbots for searching (41m57s).
• The new search feature in ChatGPT is more integrated into the app, providing a more Google-like experience with preview cards, images, and maps, and is currently available to paid users or team users within the 4.0 model (42m50s).
• The development of a complete GPU capability is underway, which will address some of the software problems and make optimizations easier (41m20s).
• Alphabet's shares fell to a session low after the story about ChatGPT's new search features was released, indicating the seriousness of the battle for search (43m30s).

Show Closing

• The segment is a closing part of a show, where viewers are directed to find a recap on a podcast. (43m51s)
• The show is called "Bloomberg Technology" and it's a Friday episode. (43m56s)