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Oracle will deploy a large batch of AMD's forthcoming m I four fifty chips next year.
It's kind of like our AI story of the day.
It seems like every day we've got one of these stories of these tech companies doing business with one another and maybe even involving some investments in each other.
Honorag Rana, it's his job to.
Keep it all straight here. He's a technology aneist to Bloomberg Intelligence. Honurag If you're Oracle, if you're AMD, is this just business as usual?
Why? Or is this something new and unusual?
The slight and usual part is that the AMD chip seems to be doing at parity at what and video chips are for this particular case. Now, I do not know what kind of workloads Oracle will put on it, so you really can't do an apples to apples comparison. But the story at this point is Oracle has a massive backlock of orders and it needs to invest money to get them converted into revenue. They need to open
more data centers or rent out more data centers. They need to buy more chips, buy more hardware, and combine all that together and eventually then they're going to get paid for all that stuff. So they're going anywhere they can find chips right now, and you know, it seems that AMD is their next stop.
So there are a couple of threads to pull on there.
It feels like AMD is increasingly the number one alternative to invidious chips.
We can talk about that a little bit.
But what struck me is that there's no dollar amount disclosed in this deal or partnership or promise. The previous deal that AMD struck with open Ai just said tens of billions of dollars in new revenue.
Why are firms keeping it so vague, Well.
Because they do not know how many chips they would need at what point, at whatcity. This is a you know, it's not you know, it's it's more so signaling that we are not just truly dependent on in video, we have other options as well. It helps them with navigating in terms of pricing from in video. Also, you know, we know in video chips are getting expensive over the last few years, so there is there could be one reason. The other thing we don't know is what kind of
workloads there are. Because we know, for the absolute best of the best, you you have to use in video chips. That's what we know as of today. Whether all of that changes in twelve to eighteen months, we don't know. But there are other workloads that may not require that amount of you know, firepower or horse power you could say. For that you may use you know, AMD chips or something even more inferior.
And even yet another announcement in your space today on rock Salesforce, a company you've been talking to us about for many, many years, Salesforce and open Ai today announced an expanded strategic partnership.
What's going on there?
Yeah, So for me, this is actually a bar bigger news and has more ramifications in the long run. If you see what's been happening in the software landscape over the past two years, the threat is that Opening I will come and it will take away you know, basically the businesses of all the application software vendors, you know,
whether that's Adobe workday, Salesforce, HubSpot, you name it. Because open ai has shown capabilities that their model can help out in functions such as finance, human resources, sales automations, et cetera. This integration between the world's biggest CRM software vendor, which is Salesforce, and open Ai shows that both of them will be working together and you know, it'll be easier for enterprises to go inside open Ai chargpt ask for what they want that gets connected to the data
that resides in Salesforce. Makes it very easy for the enterprise customers to do their work as well rather than just going into you know, Salesforce. So I think this is a bigger news in the law run, but you know we are all talking about Oracle as well.
Yeah.
Open Ai announces a new deal with someone every day, Paul, This is kind of what you're you're getting back to. And this really both of these announcements are the latest, uh in this string of big tech building more computing infrastructure and meeting this demand, this and satual demand. I've really lost track of the permutations, Anra. What worries you about these back and forth announcements and partnerships and you know, the billions of dollars that may or may not change hands.
Do do we think that these are just announcements that may not come to fruition if circumstances change, for instance, in the next six months.
See from a salesforce point of view, and which is what I was. You know, you would say most of us are worried about also legacy software names. It's a good thing because Opening Eye is a new channel of communication with you know, the rest of the world. If you can integrate your product with them, it kind of saves you from getting disrupted. The question is in the long run and then we'll find out what happens is will Opening I have that much level of funding to
keep up with all the promises that they have. They have given very high revenue estimates for the next few years. But at the same time, I mean, the rest of the bigger you know, tech vendors are not you know, just sleeping. At that point, I would say, we'll find out whether Opening I will be able to gain market share from the likes of you know, Microsoft, Apple, Google and Meta or Amazon, or this is going to be just an expansion of the overall market.
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Speaking of an industry that's kind of I don't know, in transition, that's probably the polite way to say it is the auto industry. And saw General Motors today incurring a one point six billion dollars in charges related to pairing back electric vehicle productions plans due to flagging federal support for plug in vehicle.
Steve Man joins us.
He covers the global autos and industrials industry for Bloomberg Intelligence. Steve tell us what's in this charge? Why is GM doing this? And why is it and why is GM doing this now?
Look, Paul, I used to work at GM prior to being an analyst on the South Side, And look, I think what GM is doing today is a little bit unprecedented because they're actually changing shifting that changing the direction of that ship around fairly quickly. You know, once you know, when they in the seventy five hundred dollars subsidy expire. You know, they knew they had a portfolio that was not congruent with with what they think sales is going to be, So they're going to have to rationalize that
that that portfolio. They've been the most aggressive, if not globally, but amongst the top you know, the big three in Detroit in rolling out new evs. So you know they're gonna have to review that portfolio, maybe even ween out some of the lower sales not less profitable EV's going going forward.
Yeah, what surprised me about this action? Like you said, they've been pretty aggressive on the EV front. Is Ford has delayed or scrapped some plug in models and definitely moved money away.
From the EV business, which it's been losing money on.
And it seemed like General Motors was taking the stance of like, no, that's not us, we are going forward with this. Is GM simply catching up to the economic realities that Ford has already acknowledged, or is there a different strategy at play here.
I think it's really hard to foresee. These policies are changing so fast. You know, with Biden in the administration, there was a huge push you know, not just GM, but a lot of autumn, Makers was pushing evs. You had new startupsbian like Lucid pushing evs. But you know, things have changed, and look GM is reacting to it. It's interesting you brought up Ford and now actually Ford, Chris Farley looks actually pretty good, right, he looks like
he made the right call. But I think you know, if you look at the bigger picture, what GM is doing today is probably just the beginning. We'll probably hear more, not just from GM, but from the other makers in terms of their ev plans going forward.
Has this changed the way you're viewing the evolution to evs that hey, maybe it's not going to be as far as we thought or as quick as we thought.
How should we think about that? Because it seems to have lost steam.
And I'm not sure if it's just tied to this administration and it's policies and names, or is it more market driven.
Well, I think it's it's up in the air. You know, personally, I still think there is a market for EV's, not necessarily in the US. You know, the Chinese are still pushing evs. The Europeans the certain extents are a certain extent are also pushing ev I think, you know, with the current policies of no subsidies, no penalties for you know, selling gas guzzlers. Uh and and you know us consumer still loving the gasoline engine. I think it's just going to take a little bit more time to shift to
a greater penetration EV. Look, there is demand, right because if you look just before the expiration of the seventy five hundred dollars subsidy, we did see a spike in EV sales, be EV sales. So there is a certain segment of the consumer that is looking for evs and I think a lot of people who have driven EV's love them. So, look, it's just going to take time, right,
It's going to take time to get there. There's there's still other hurdles that the EV industry has to has to overcome, for example, the charging the structure, you know that that needs to be built out.
Yeah, no, no kidding.
Which legacy automaker, not just in the US, but around the world has figured out, you know, the best approach to EV's, you know, gotten the balance correctly.
Yeah, I just take a step back. I think GM is probably the best because they actually have even with this about face, yes, because they're reacting to reality fairly quickly. Look, they're they're cutting back on the US UH EV capacity potentially EV product offering, but they're actually doing fairly well in China. They do have plug in hybrids, they do have extended range evs, which I think we talked about
it here before. And uh they also have battery electric vehicles in China, and you know, sales have been improving over the past few quarters over there.
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I think back in the pandemic, we all became, whether we wanted to or not, we became experts on the global supply chain and how fragile that is. And that is no more evident than in the airline business and aircraft manufacturing business. Apparently, it's not an easy thing to build a jet aircraft here, and you need specialized skills
and people with those skills. That's still rippling through the aviation and aerospace industries Boeing and Airbus are suffering quote unprecedented delays and certifying delivering aircraft, stiffing airlines growth and plans to decarbonized.
Customers are saying George Ferguson joints us here.
He's a senior aerospace, Defense and airlines anamals for Bloomberg Intelligence.
George, it's we're well passed the pandemic here.
I know you've educated us and explaining to us how just how intense these supply chains are and how complicated they are. Give us an update on the ability of Airbus and Boeing to deliver aircraft to their customers.
Yeah, so, I think the update would be that Boeing is converging, I think on air Bus as far as delivery numbers. You know, Airbus sort of came out of the pandemic with supply chains I think, in relatively better shape, and they were doing better at deliveries because of that. But recently things have stagnated, and so Airbus has been having problems getting engines from specifically ge which is making hard for them to deliver their bread and butter aircraft,
the A three twenty. During the month of they delivered fifty nine a three twenties not bad, but they want to be at seventy five a month by twenty twenty seven, and they have months where they're in the forties and so very sporadic. Again, I think a lot of it has to do with that g supply chain. So it was an okay month, I think for Airbus in an okay quarter, they have a lot of work to do to get to their targets. For the end of the year.
Boeing just reported deliveries. They're in the fifties. Most importantly, seven thirty seven's are around forty I think it was for the month, which is a pretty good number. It's been it's a little bit less than August, but has been improving. That's how they're going to drive cash flow
and profitability, better cash flow and profitability. So it looks like Boeing really starting to get there through poo in the factory sort of in hand and working well and starting to deliver some of that inventory aircraft, which will reduce some of the drag of on their earnings.
So at a recent investor or industry conference, Ben Smith of Air France KALM said, for some long haul airplanes, we've been waiting for certification for seven or eight years, which is unprecedented.
What's going on with with some of those wide body jets.
Yeah, I mean the Triple seven is I think he's referring to Triple seven right. Boeing has been trying to get the Triple seven X, their latest version of the Triple seven certified, and it just keeps pushing, and recently it pushed from a twenty twenty six initial delivery to
a twenty twenty seven. I think you know a lot of these airlines, you know, they're looking for this airplane because it's going to be it's going to be the biggest in the sky, right since the seven forty seven and the A three eighty have been retired, this is going to be the sort of the biggest seat count you can get. So it's really good for driving sea cost efficiencies at airlines. It's still though a small portion of Boeing's business. I mean the backlogs I think around
four hundred, so it's not huge. The biggest backlogs are to the Middle East, to Emirates and to Katar And my guess is that as Boeing manages challenges in the engineering workforce, Unfortunately. I think Triple seven sometimes maybe get some short shrift, and so certification sort of keeps getting pushed on.
That one US government shutdown can't be helping this industry in terms of getting a certification and things like that. Are any of the companies calling that out as a challenge.
Not Yeah, I mean we're about to go in an earning season, right, so they're all in quiet period. I think we'll hear. But I think you're right. The FAA, i'm sure is not working at you sort of full gallop at this point given the government shutdown. There's some folks I'm sure that still have to work, but it's not gonna help certification. We'll see how much longer it lasts. Again, Triple seven we'd like to see certified and delivered. We think Boeing still can keep that line open well into
twenty twenty seven. They have a lot of orders for the freighter still. But you know, companies like Emirates Air France KLM cut to our chomping at the bit to get that airplane in the portfolio. Leftons too.
What's the labor situation in the aerospace business. You explained to us that the.
Industry lost a lot of talented skilled people during the pandemic, and it's kind of hard to retrain find these people and retrain them.
Yeah, it's getting better, and I think you could sort of look at some of those those labor indicators, like the you know these surveys that show jobs, jobs open, and people looking for jobs. During the pandemic, there were a lot more jobs open than people looking for jobs that sense crisscrossed. So that will improve stability in the air space supply chain. I guess it's not as an exciting career as it maybe it was back when I was a boy, I guess for a long time ago.
And so you know, there's people that would love to be able to work at home. You can't really do that when you're manufacturing airplanes. So they've had a hard time sort of backfilling a lot of the baby boomers that left, and the new workforce just isn't as I would say, I don't know if it's fair adept with their hands maybe as the boomers. And so they're bringing people in that haven't worked manufacturing and trying to teach them how to do that kind of business, which makes
it even harder to train up. But it is improving again, We're seeing it. I think in the throughput we're getting out of Boeing. The delivery numbers today are indicator of it. And as we see the you know, the uh what we call it, the employment situation, get back and balance it all out.
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There's a million important things we can talk about, but I have to lead off with this. Keleanova offering a version of pop Tarts with higher protein content starting in early November. This follows Pepsi's plans for higher protein version of do Ritos. How do you know what protein is and how you added into something? Jen, what's going on here?
Yeah, hi, Paul. So really what we're seeing is a lot of these package free companies are tapping into this protein trend. It's something that consumers are really looking for. And at the end of the day, when it comes to PepsiCo or it comes to Kelenova, This is really about making people feel marginally better about eating food that is bad for them. Right, Let's let's just be honest
about it, right. So you know, when you put protein on the package, people feel like, even if they're making a bad choice, it's not as bad as it could have been. And that's really what's behind this.
It's like the equivalent of vanity sizing at retailers. Right, you know, you're actually size six, but we're going to tell you you're a size two so you feel better and buy more clothes. Is this as simple, jen as just adding protein powder on top of the Kellogg's pop tarts?
Excuse me, Kelenova pop arts.
Yes, so what they've done is they've they've added protein into the pastry part of the pop tarts and that changes the texture and the taste just a little bit. But what's really interesting is the consumer trend behind it. You know, we ran a proprietary protein study back in the middle of the summer, and what we saw was that almost forty percent of consumers eat something with protein enhanced, whether it's a snack or a beverage, on a weekly basis.
And you know, at least thirty eight percent said that they're eating more protein enhanced products in the last three months. So clearly there's a consumer uptake, there's interest in this, and that's what these companies are really tapping into.
Do I want more protein? Do I need more protein?
I'm eating more egg whites, but that's because it's available at work.
What are you doing?
I don't know the same thing of your goldfish?
Do not have extra protein.
On the goldfish? Have extra protein?
Neither of you are on GLP one drugs, right, But protein is a big solution for people who are on those drugs because you tend to lose muscle mass as a side effect of those drugs, and so as the uptake of GLP one goes up, there's more and more demand for these protein and Harry products.
That's what I needed.
Okay, now I'm at a cocktail party and I need to sound smart on proteins.
Now I got my line.
But apparently fiber is the new protein and jen Is. Didn't the PepsiCo CEO say something about this?
Yeah, you know, whether it's anything that helps kind of enhance the product. So when you're talking about Dorito's that they have additional milk protein being added you know, higher fiber products. All of these things are things that people, the average consumer perceives as having a health or wellness benefit, and people are trying, in small steps to be a little bit better about their health.
All right, let's get to another story I thought was really interesting. Walmart partners with open Ai to offer shopping on chat GPT.
This sounds like a natural what's going on here?
Jen, Yeah, this is an interesting move, but I think it really illustrates sort of that trend of what's happening across retail in general. Walmart's really been very good about doing it experimentation and kind of checking out what the opportunities are whether it comes to social media and social commerce particularly, and this lad us to partnership with with
Opening Eye. This really does tap into that as well. Now, social spending is still very small in terms of the overall percentage of what retailers are achieving, but it's important to be present and I think that's what's most notable about this announcement.
What is social spending and how do the numbers differ from from normal shopping through Walmart's website or going into Walmart's actual stores.
Yeah, so social commerce is when you're on a platform, whether it's on Chat, gpt now, or whether it's on TikTok, or whether it's on Facebook or you know, any of the social media platforms, and you have the ability to add to cart and buy now. That's that's social commerce. But it's still a tiny, tiny fraction of the overall
e commerce that happens for these companies. So while it's important in terms of their showing that they're present and that they're aware of new technologies, it's not going to move the needle with regards to their overall e commerce sales or their overall business mix.
At this point, Jen, we've got a little bit more data, a little bit more time, And as it relates to teriffs, what's your best guess as to what your package food companies, your retailers, how are they kind of segmenting the terraffs before maybe passing along something to the consumer.
Yeah, it's a complicated situation, Paul, And really what's happening is you know where they can find alternative sourcing. A lot of companies have been trying to do that. There are some companies in package food where that's not as easy. So I would take McCormick as an example, where a lot of spices you can't produce domestically or you can't source domestically, and then it becomes a question of how do you negotiate with partners? Do you find alternative countries
of origin that maybe have slightly lower tariff levels? And it's also a lot of effort right now is going into finding efficiencies that can help offset those costs so that they can absorb some of that cost and not have to pass it on to consumers. Ultimately, most of the companies we're talking to are saying that where needed, they will very strategically pass price through, but they're trying to avoid a uniform, unilateral price increase just due to tariffs.
How much of this work has been done what you just described, and I guess I wonder how much of it will be covered in the earnings calls this quarter.
I think it will be definitely a topic of the earnings calls this quarter. But when we had tariffs back in twenty eighteen, a lot of companies started the process of identifying other options for sourcing. So there's probably been more progress made than people would recognize because it didn't
just start this year. And so it's been sort of a gradual shift, and once they have those plans in place, they can sort of accelerate that and then the focus really is on efficiencies, and that's where the technology comes back into play, where it helps them be better with regards to their sourcing, their negotiations, and really in terms of understanding what products they actually need to carry and which products they could perhaps suspend or discontinue.
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