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A lot of news in the tech space. I guess it's just every day. We have a lot of news in the tech space. I want to jump out of me. Is Amazon rush us out latest AI chip to take on in Vidia and Google?
When that gets my attention, let me check in with somebody who might know a thing or two about this stuff.
Man Deep Singh, senior tech industry analysts, Bloomberg Intelligence. He's out there in San Diego. I don't know what's going on in San Diego. I didn't get the invite, but Man Deep's out there doing the.
Zoom thing, Man Deep.
Amazon chips, where do they stack up a relative to say, an Nvidio or Google.
I mean, look, Amazon Reno is the largest cloud provide with almost fifty percent share. And when it comes to the GPUs, everyone so far except for Google has relied on it media, you know, for training and what Amazon is doing is really copying that Google playbook where they
want to use their own chips. It's just that they haven't had that kind of success that Google has had with TPUs, and they're trying to speed things up because in the end, all these hyperscalers don't want to spend you know, twenty to twenty five percent of their CAPEX on procuring in videos chips, and that is what the endgame is. I think Google so far is ahead in that, but clearly Amazon is trying to catch up when it comes to their own chips efforts.
Man deep, it feels like Amazon Google are becoming more formidable competitors to Nvidia in this space. In Vidia the AI darling. When you think about twenty twenty, who are some of the winners in these AI arms race.
I mean, look, when you're running a cloud business, you know you're trying to optimize things across the stack, and that's where you know, a META is very different from a Google or an Amazon, which have a big public cloud business. I think what you're going to see is focus more on capex efficiency. If Google can deliver you know, a lot more with their ninety billion dollars in capex in terms of training and printing and having a cloud business.
Everyone will be measured the same way, whether it's Amazon or Meta, and that's where CAPEX efficiency will be a much bigger focus in twenty twenty six than it was in the past two years, where you know, there was a gold rush going on in terms of getting these GPUs, making sure you have chips for training your models. I think we are moving into a phase where CAPEX efficiency will be front end center going forward.
Mandy, if I see a Bloomberg News story Apple AI head to leave.
This doesn't feel right to me. What's going on with Apple and AI? And should I?
Am I reading too much into this? Seems like there's a lot of turnover there.
I mean, look for a good reason, because Apple, when you think about the back seven players, has trailed in terms of having an AI strategy making those investments. And right now we are seeing even you know, just yesterday Deep Seek release their latest model by Dance is talking about a model that can be run on your operating system.
So there is so much going on at the hardware and at the operating system layer that you feel like Apple is missing out one because they don't have any AI models of their own and also in terms of their partnerships, they haven't been that upfront about, you know, whether it's Open AI or Google in terms of making changes to their operating system. So even so the hardware
sales haven't really suffered because of that. I mean, when you look two years out, if Apple doesn't have a good AI strategy, a good model that works natively on the operating system, I think you will start to see an impact on the hardware sales.
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Cyber Monday it's a thing, a lot of people spending a lot of money at the click of a button.
Let's get some of the data here.
Put him Goyle, senior US e commerce and retail analysts for Bloomberg Intelligence joints US here. Put them talk to us about cyber Monday. What were some of the trends you guys saw. There's more and more people if you need to shop online.
Yeah, so people definitely came online to shop. But the results came out this morning. According to Adobe, sales were fourteen point two five billion dollars. That's just slightly ahead of the fourteen point two billion estimated, so a seven point one percent gain. So I'd say, you know, overall, things were largely to me as expected, maybe slightly better.
We saw deals over Cyber Monday, which drew customers, but in all honesty, Paul, you know, we looked at eighty one brands online yesterday and what we found was that the majority of them, the deals were in line to last year. So we did see retailers pull back on discounting because there's just more costs that are built into this year from tariffs.
Consumers buying what were they buying up a Cyber Monday, and what is that telling you about the health of the consumer. Was it big ticket items? Were they trading down to private labels?
Yeah, what we saw. So we saw electronics still being very powerful this holiday season. The Apple air pods were cited to be among one of the top sellers. We also saw the PlayStation in high demand. People were shopping for fashion apparel, they were buying for the home across the news that we read, what we've seen sneakers, you know,
athletic where was probably a little lore than expected. But once again, that's not really an item that you often put under the tree as much as you buy for yourself, So we think that could pick up.
I'm thinking about some of the folks that really do a good job online, Walmart, Target, How are those guys, how are they performing?
Yeah, so Walmart and Target, we think both actually had a good holiday season, but in terms of promotional activity, we think they were largely in line with last year. That said, we were in the store on Black Friday.
We monitored their deals online over the weekend and say yesterday, and we think their deals were good, but they weren't aggressive or more aggressive i should say than last year, which is in a way a good thing because they'll help their margins or margins this holiday quarter won't suffer because retailers had to discount more aggressively than they did last year.
How are you thinking about the retail sector going into next year? Do you expect that the strength will continue?
I think it'll be tough. You know, we've seen shoppers come out to shop for events. Durven buying, whether that's back to school or holiday or birthdays or events they're coming out and their spending. But once we exit holiday, there is really no catalyst in January to shop. So we do think that you will kind of see the normal lull that you see after the holidays also creep into twenty twenty six. But next year it's really going
to be more about what happens with pricing. We've seen retailers be able to hold prices study or raise them just slightly into the back half from tariffs, But next year will they have to implement bigger price increases because all the inventory will likely be impacted by some sort of tariff into next year.
That's kind of where I want to go put on just lastly here, I mean, I don't know how to think about the tariff impact because it seems like we haven't really seen it too much at the consumer level, And maybe that means that, you know, the retailers the distributors that they've kind of taken it in their margin,
and the tariff is what it is. That doesn't look like there's gonna be a second round of teriffs next year, So the tariffs are what they are in the economy, but you're saying that maybe there still could be some impact next year.
Well, if you think about when the tariffs were implemented, it really affected the back half of this year, right, so when you go into the first half of next year, you're up against comparisons where there really wasn't a tariff impact. So that's one thing that you have to deal with. The second thing is is that prices are going up. I'm not you know, we did see select price increases. In fact, you know, Nike came out and said that
they're directly raising prices but un select goods. And I think that's the approach that most retailers have been taking is we'll raise prices where we can, and where we know we can't, will absorb it or we'll offset it otherwise through a fit season supplier kickbacks. So that's what we'll continue to see happen next year. But there is still some pressure. Now. We'll see what happens next week right where the court ruling could be that the tariffs
are just unwarranted and are unlawful. And if that happens, then I think we have some positive surprises and for us next year.
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We are waiting for a huge m and a trade to be announced Warner Brothers Discovery, with an enterprise value of about.
Ninety billion dollars. It's up for sale.
Second round bids for the company we're due yesterday. We understand that it's Netflix, it's Comcasts, and it's of course it's Paramount sky Dance and all that kind of stuff there. So Githa rang A Nathan. She is the senior media analysts for Bloomberg Intelligence. Keith, what's the latest there in Warner Brothers Discovery, because it seems like this is a company that wants to be sold and be sold quickly.
Yeah, absolutely, Paul. I mean, things seem to be definitely intensifying. So the second round bids were due yesterday. The reporting so far seems to suggest that Netflix has mostly a cash bid. That's a little bit of a surprise, given that you know, when you compare Netflix with both comcasts and paramounts guidance. Obviously that stock has the most value. You know, they're treating it almost thirty times forwardy, but compared to a Comcast, which trades it about five times.
So obviously, I mean, you know, it just goes to show that Netflix is very, very interested. There was obviously some you know, speculation earlier whether they were a serious bidder or not.
I think this kind of puts that to rest. The offers this time are.
Binding, means if the board likes something that it sees, they can absolutely go ahead and bring this whole process to a conclusion pretty quickly. So right now, just waiting to hear on the actual numbers. We haven't heard any any reporting on the actual bid numbers themselves. Warner Brothers, of course looking for thirty dollars a share.
Githa Bank of America has a note that calls the bidding war for Warner Brothers quote industry realignment. Is that a fair characterization? And how do you see this bidding war transforming the industry?
Absolutely agree with that.
I mean, you know, you have Warner Brothers, which is one of the most iconic studios in Hollywood. You know, you have a great streaming service in HBO Max. You just look at the Warner Studio this week at the I mean sorry, this year at.
The box office.
They've had an absolutely phenomenal run. So they're leading with about a twenty eight almost thirty percent share of domestic box office. So this is a huge studio that could obviously or a huge company even that could you know, completely reshaped the media landscape. And it is transform transformative in many, many ways. So if you think about you know, Paramount sky Dances streaming assets right now, with Paramount Plus, they have about seventy million subscribers. You add HBO Max,
you get over two hundred million. Same is true for Comcast. You know, these are this is kind of an existential deal, I would say for both those companies, and absolutely transformative. So you know, you take Warner Brothers and Paramount sky Dance for instance, if those two companies combine, that basically then becomes the second largest media company after Disney. So again, huge, huge things that stake here for all of these three bidders.
How about valuation here, The company has said in the past that they would like thirty dollars share. The stock is trading at just north of twenty four dollars to share. John Malone, the company's chair emeritus and of course one of the biggest deal makers and media and telecom over the last fifty years, he says that number is quote possible. How do you think valuations can shake here? What's the price that's going to clear? Do you think?
I think it's definitely going to be above twenty eight dollars. Part so we know that, you know, when all of this had started, Warner Brothers was trading at about twelve dollars a share. We're already up to twenty four dollars. We know that in the last bidding round, Paramount Guidance
offered close to about twenty four dollars, which was rejected. Now, if you just think about the two parts of the business for Warner Brothers Discovery, you have the TV network's business again throwing out a lot of cash, but not necessarily big interms of valuation. I mean, this is a melting ice cube. You know, the multiple that you would slap on this part of the business would be maximum about a four or five x. But then you think about the streaming and the studio assets. Now that is
where you have your scarcity asset. You have a lot of the IP sitting there. You have a streaming business that is that is turned profitable, that could become extremely profitable over the next few years, and so that's where most of the valuation is going to be. And you know, we ran some numbers. We think that just the streaming and the studio of the business alone could be worth
about twenty eight dollars. So when you think about that thirty dollars per share that you know, John Malone says, as possible, we absolutely think yes.
Etha, Can you please talk to us a little bit about what some of the long term strategic advantages will be for Warner Brothers when this deal closes. Whoever the you know, the final winner is.
I think for the final winner you know, off the Warner Brothers asset. One thing is that it obviously completely transforms the business in terms of you know, increasing revenue, increasing scale, increasing EBITDA. But I think the big thing that everybody is looking for really is the synergy number. And if you think about you know, paramounts guidance, which is really looking to acquire all of Warner Brothers, so not just the studio and streaming, but also the linear networks.
The synergies are going to be sizable.
We think it could be anything upwards of five to six billion dollars. And that's really where you know, a lot of this is going to kind of flow down to the bottom line. Of course, you know, there's always this question about how much of synergies can be extracted, but actually Warner Brothers Discovery themselves have kind of provided
us with an excellent template. They've done a fantastic job when it comes to extracting synergies both with the Scripts transaction as well as with the most recent Warner Brothers and Discovery merger. So we think if you know, they lay out a good plan, it can definitely be done. And so synergies really is the name of the game here, apart from, of course, monetizing all of the IP because they do have some of the best brands in the.
Business, Comcast. How credible are they?
I mean, we know the Roberts family, Brian Roberts loves to do deals, rarely goes more than five or six years without doing a big deal.
Here, how do you handicap them here?
You know, Paul so it you know, industry sources seem to suggest that Warner Brothers Discovery actually wants Comcasts to be the winner. And I think a lot of this has to do with the fact that, you know, David Zaslov obviously has this history with NBC. He used to work there. He obviously knows Brian Roberts extremely well. But I think they're all davids. Ozlav also kind of sees this as a path for him to ultimately run NBC.
He doesn't necessarily want to exit Hollywood just yet, which is what would happen if he's sold to either paramount S Guidance or to Netflix. So I think in many ways he does want to kind of sell to Comcast. Again, it's going to come down to whether Comcast can put up the money, because they are right now in a very very tricky, precarious situation. Their cable business is struggling.
They you know, the stock is trading at historical lows five times ebit, so really really in a tough spot, and they have to come up with a majority cash bid that you know, so we're looking at something like about sixty billion dollars. This has to be debt financed, and so you kind of think about all of that incremental interest expense for them, Paul, I mean this is going to be dilute up to free cash flow, and I don't think investors are going to like it.
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We have some news this week, big news for New York City, getting three casino licenses for the city, one in the Bronx.
Two in Queens.
This is to build like real casinos, not just the you know, some of the gaming stuff. This is real time stuff and it's big for the greater New York City metro area here. So we want to break it down with Briannegger, Senior Gaming and Launching analyst for Bloomberg Intelligence.
So let's step back.
Brian talk to us about kind of what the licenses represent and kind of where do we go from here.
Sure, so this is a fairly protractive process, involving ultimately di selection of three recipients. By the way, the only three left in the running after a few others were eliminated and dropped out, and really it authorized resort casinos for the downstate New York area, mostly in New York City. And as it turned out, as you mentioned, the three casino qualified casino applicants, if you will, really are are in New York City, but outside the Borough of Manhattan itself.
Brian, just looking at your note on these license approvals, you write that they face a narrow path to decent returns on investment. Can you please talk to us a little bit more about that idea?
Sure? So, what we assume for those resorts is they will get what I would call a gaming revenue premium and room rate premium of ten twenty percent to other kind of high end urban area resorts such as the Burgat and Atlantic City wins Encore in Boston. However, are concerned if in terms of the return prospects are that development costs are quite high and perhaps some of the targeted non gaming contribution elements might be a bit ambitious.
So for that reason, when we work the numbers, we came up with something like a ten percent return on investment, which is certainly a bit less than most operators would expect to attain in these regional markets.
So I'm thinking here, I mean again, I'm just thinking about Steve Cohen's I was looking at his plans yesterday for in conjunction with his city field.
He obviously he owns the Mets.
City field is out there, the national tennis centers out.
There the world.
You know that we had the world's fair situations, so there's a ton of opportunity out there.
It seems like these are going to be.
More retail hotel than casino. How do you think the mix of revenue is going to be there?
So there certainly is. I think when we work the numbers, we assume that with respect to either food and beverage or retail entertainment revenue, those will be fairly sizeable chunks of the overall revenue PI probably cumuatively close to half, which is true of many kind of gaming resorts in attractive environment where you get a lot of non gaming revenue.
I think the same will be true here. The question is will it be enough and will be margins which we take to be about thirty percent, be sufficient to get a good return. But certainly, you know the logic of having a nexas city field makes a lot of sense. You know, the other locations, valleys at a golf course in the Bronx, you know, the resorts world in Queen's pretty much expanding and existing facility all have their merit. The question is will be enough to get a decent return.
But certainly some of these locations have rational prospects.
What does this victory for these three companies mean for their competitors like Sands, MGM, When where do they go from here?
So it'd be queer. You know Sans exited this process back in April. When exited in May it's Hudson, York project because of community opposition at MGM in October because of the licensed terms. But bear in mind that they do have other prospects. You know, win is developing a UAE resort of its own, MGM is building in Osaka, Japan. They all can buy back in their own stock, So I think they're weighing this particular opportunity relative to other development prospects.
All right, so we're gonna get the licenses by year end. What's the timetame? Have anybody any of these three licensed winners lay out of timetable for getting a shovel in the ground.
And maybe even opening the doors.
So I think it'll vary by operator, but the expectations that these resorts will generally open by twenty thirty or so. It'll take a few years to develop. There's always the
possibility of construction challenges, but that's the target. And of course, our related to concerns since you mentioned MGM was MGM Bally's Caesars o operate casinos in Atlantic City, and you know, the proximity to Alantic City of resorts with casino elements at this caliber certainly presents a potential competitive challenge to Atlantic City itself.
ACI. That's tough, tough.
That is tough because I would see, you know, on the Parkway, Brian, I know you see it too. We have for years, for twenty thirty years, we've seen the limousines from New York City going down the Parkway to AC. That's going to get impacted, isn't.
It It will? I think you know, some operators, Forgata, for example, a hard rock may hold up better than others. But you know, there's always a challenge when you've got this much additional gaming capacity, with resort elements opening up in relative close proximity to a to a key Atlantic city feeder market.
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