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I want to start John with the AMD. That stock.
That story really got my attentions down sixteen and a half percent today. I mean, this was one of the Darling tech stocks, the chip names that we're really writing the AI wave here, and it's at its worst day since twenty seventeen. Stocks up seventy percent over the trailing twelve months, but taking a.
Big hit today.
So let's figure out what's going on in that part of the world. Kun John Sabanni joins US senior analyst covering the semiconductor companies Bloomberg Intelligency's based on our Los Angeles OFFICEO John, is this an Norman reaction for AMD? Is there something fundamentally problematic there?
There was nothing fundamentally wrong in this report.
There were a lot of good things to take away, but it comes down to you know, when you become an ar Darling, you set up really, really high expectations, and when you take out the China revenue, which was not included in the guidance and the expectations, the beat came out pretty modest, which I guess people didn't like, and then was not at power against the really high expectations that you have now every quarter from these companies.
Like they used to ask in the old Westerns, you know, is there room enough for the two of us in this town?
Is there room enough for them? And in Nvidia there is right now. I mean, look, all the tide is lifting all boats. There is so much demand for accelator chips that there's room for AMD as a GPU provider. There's even room for other folks like Broadcommon Marvell as an AC provider.
So there's a plenty of demand right now. You know.
I used to work for a portfolio manager and you know, one of our native I was recommending AMD and it had a day like today. He would just pop ahead and said, do we like management? Do we still like management? And if the answer was yes, oftentimes you'd go out and buy more on days like today?
Do we like management?
At least?
As Sue, I think is just when I just see your interviews, it seems super on top of it.
Yeah, I mean, like I said, fundamentally, nothing changed from yesterday. Right Their CPU story continues to become stronger. Nobody's paying attention to do it right now because all the focuses on GPU and competing with Nvidia, But people are forgetting inherently I when you look at two years back, this was really a CPU company. Their GPU storyline remains intact. We didn't expect any fireworks coming into this earnings. We don't expect it until really four Q twenty twenty six,
so the market is aware of this. We really have to wait until the four Q twenty twenty six. This is when they will be really put to tests if they can really execute their first server level.
Solution or not.
So there's nothing changed overnight yesterday that we saw should really concern us.
How important is China in all this? I thought the expert restrictions were lifted. I mean, what's what's taking some on?
Well, so the expert restrictions are different for each chip. So the MI three to eight which they were able to ship, had already licenses approved prior, so that's a different chip. The newer chips that now is in the news when it comes to in media, is that aged two hundreds and equivalent, it will be the MI three twenty five licenses for those have not.
Been granted yet.
Even though the White House has said that yes, these companies can start shipping these products, yet the formal licenses have not been granted.
Cou John some M and A in your space today, Texas Instruments has reach an agreement to buy Silicon Laboratories for about seven point five billion dollars. Here what's going on here with TI.
Yeah, so just to give some context, this is sort of this size of the deal they have not done in the past. The last time they did a deal like this was buying National for about seven billion dollars in twenty eleven. So this is not their typical nature, so a bit of a surprise. Strategically, it fits well their industrial segment, which is their largest segment, and that's where they want to be focused as a missing piece when it comes to wireless connectivity in IoT, so Silicon
Lab gives them that portfolio. Financially, however, it's a lot more important. They have retreated that this has not changed their pre cash foot trajectory. This has not changed their dividend path and this does not increase. The most important thing is the capex, so all those things we really like, if they're able to execute to that yet the cost energies,
then this will be a really good deal for them. Also, remember TI has been on a spending spree for the last three to five years building up a lot of capacity, so this will help bring more loading to their internal factories, bring more manufacturing internal to own TI, and help with utilization.
You know, one of the things we saw in the cell off today and yesterday was this capex spending when it's all going to be paying off investors getting a little impatient with everything. Is it all paying off immediately or in the near future for all these firms?
Well, so there's two preci of CAPEC spending, right, The one I think you're referring to is.
The high AI for everybody.
Yeah, yeah, it's it's the jury is not out yet, right, We still need to see monetization. The capex spending is not done yet, so we still need to see a lot more proof points of monetization from all of this AI hyperscale infrastructure spending that's been going on.
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Let's bring in Sam Fazzelli. Bring back Sam Fazzelli. Really, he's our Bloomberg Intelligence drug boss. That's the jacket he wore yesterday. Actually he's the director of research for Global Industries and our senior pharmaceuticals analyst. But Sam here a drug boss.
Let's face it.
Let's talk a little bit about Eli Lilly and its upbeat guidance in contrast to Novo Nordisk. Why is there such a stark difference between what Lily is seeing and what Novo Nordisk is seeing?
Right, So, Scarlett, I've always maintained, based on data and based on factual comparisons of the drugs that they have, that Eli Lily's drug does better the weight loss over a serious past a period of time. Then we go they didn't head to a trial, so that I think is helping them. They are both in the same camp in terms of price pressure as Novo, as Lily has said,
they have several areas where there's price pressure on them. Right. Nevertheless, they seem to be at this forecasting a meaningful volume gain in twenty twenty six, which you would want to see if you've got a price drop. That's the whole idea, and we've talked about this right from the beginning of this obesity run. That is, if prices come down, volume should go up. Nobo seems to be not doing that.
And there's two ways to explain that. One is Loah's thinking and is worried about losing market share so not gaining as much volume. Two is that Novah's being over pessimistic to deliver. I have a tough time choosing between those two. Those two decisions tells you whether you buy the stock or not.
Right Sam, you know, Lily Novo, they're kind of in strong positions in this weight loss area. Here talk to us about the competitive threat from some of these telehealth companies selling cheaper copycat versions.
Where where is that right now?
Yeah? But that shouldn't be It should be nowhere in the right now because that's illegal. Right at the end of the day, this is a patented product and there should be no compounding going on. I then buying the active ingredient and mashing it up and put it in a capsule or whatever and their injector and doing it themselves. That should be not allowed, although there's clearly some of that's still going on, and I don't know where the FDA's teeth is on this because they were allowed to
do it well. There was a volume, a shortage of supply, but there's no more shortage of supply, So what is still happening that is not I think what people are particularly worried about, or exercising people's mind, is what will happen in the longer run between the oral drugs that then soon in Q two Lily is going to bring versus the well launched nice start to the launch of
the we go vi oral pill. And then the next question is what about other people who are coming with other GLP ones and slightly different here once monthly from fivez era et cetera, et cetera. And I think that we will see how those guys are going to be able to compete. It's going to be tough. Is a machine that's run by both Lily particularly and Novo two.
Yeah, you're talking about this weight loss pedal that Lily wants to launch. It could happen or the approval, I should say, could happen as early as April. Lily did just get approval from the FDA SAM to sell zet bound in a multi dose pen. Why is this format important? Is it because it's more lucrative? Does it make it more accessible?
Like?
What does that multi dose pen allow Lily to do?
Here? Well, let's although I know we don't talk about sustainable stuff anymore, this is more sustainable rather throwing out the pen every time, right, So that's that's nice. And number two is therefore that should mean depending on how complicated it is to have a multi dose pen, the origin is a bit better because you're not throwing out the pen every time and they don't have to keep making a pen. So all of these are our elements. And you know, it's not rocket science that they've done it.
It's just that you have to also be careful. This is an active drug. You need to make sure that it's well stored, so it's not sitting in the sunshine or frozen outside. That's the sort of thing you have to think about when you have a molted those device. But I think this would be helpful to both people users and the karma companies.
Sam.
We all know that President Trump has made cutting drug costs a key priority, and a lot of drugmakers have cut deals with this administration. Has it resulted in profits reductions out there for a lot of these companies are annalys taking their numbers down.
Well, if you go with Noble ICs announcement today that specifically calls this out price pressure, then yes, the only thing is that they need that price pressure to exist. Really, so how come they're not covering? So I think the Novo story is more than just the price pressure. It's also that they're potentially, as we talked about earlier, losing
volume going forward, or that they're being over pessimistic. There's a couple of other companies like today no artists mentioned MFN pricing for some of theirs that will be it, I don't think it's as think it hits as Novo's talking about. If you look at the share price too for twenty twenty six, it sounds like they're going to pretty much manage it. But they have pulled it out until these companies that don't pulled it out at all stay with us.
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All right, let's talk about some technology earnings. Here, we get super Micro delivers I guess better than expected sales forecast in the quarter we had HP. They maintained their guidance.
Here their CEO left. I don't know what's going on there. Let's talk to Wujinho. He doesn't know what's going on.
There, Senior technology anels from Bloomerg Intelligence. Hey, well, let's talk about Hewlett Packer here HP. I guess they kept their guidance. But the CEO departure was Is that unexpected?
Yeah, hey Paul, Yeah, that was highly unexpected. You know, Enrique, the CEO was a lifer, started there as an intern, and jumping over to PayPal was a surprise to us. And he's leaving me at a precarious time because he was tasked to navigate the PC business when dram prices are spiking, which and then quite frankly, I did find it positive that they did maintain their guidance for the year.
Yeah, let's talk a little bit more about those DRAM prices spiking, because this is something that people really zer it in on when it came to Apple's results as well. How big a cost is these rising prices of memory chips for a PC company like HP.
Yeah, so if we think about the total build up of materials d RAM as well as the storage that goes in there, it's roughly it went from about ten to fifteen percent of the cost, and now it's spiking up to about twenty to thirty percent of the cost. Right,
So what's going to happen. They're not going to give it away a gross margin, that's for sure, because we're talking about very thin margins for the PC business, and we've already we're already hearing about PC pricing going up around twenty to thirty percent going into the later twenty twenty six. So, Scarl, if we think about it as a very elastic, elastic demand for PCs, it is going to hit possibly on the demand side, and then keep PCs. People keep keeping PCs longer.
How about the print supply business. Just as a consumer.
That's where I feel like I pay a lot of money when I get the print supply stuff for the HP PRI inter talk to us about that business, yeah.
You know, I will tell you though. I think what's being overlooked by investors here is that the print supply business is going to be the cushion, you know, the inks that you and I pay for. That that's a nineteen percent EBIT margin business.
So more than that, trust.
Me in my wallet's all I light as well. I'm glad my kids are out of school so they don't print as much, but it is going to provide a cushion. Even though it is the hardware isn't secular decline, there are making some move either by subscription UH to UH to supply to provide some of that downside risk and earnings.
What is the long term trend line for that print supply business, because I mean, every office is trying to go digital and not have printers available to everyone, and I know there are some parts of government that can't do without actual physical printouts of documents. But I would imagine that this shift to you know, everything being virtual and digital means that this overall is in a long term structural decline.
Easy answer or the simple answer minus two percent on a year one year basis, on a long term basis, right, there's always that. Yeah, well there's always that one guy who's going to print the ten case and ten qures right and in color.
So you know we're a dying Breed's that's the thing, right, I mean, the young people aren't going to do that.
Yeah, I don't do that.
Really, you don't pretend anything. Oh that's true, got.
It on my phone.
I think the kids are the kids are going back to the old school ways of old elder folk of printing more and having more photo keepsake. So, uh, you know, I don't think it's We're talking about a structural decline of ten percent on a year on year basis, but there's enough print from a documentation, uh standpoint that is going to hold the business.
How about super Micro? Here, I see the stock of fourteen percent here today. Talk to us about their earnings.
I will tell you. Look, I've talked about this, you know at nausea about super Micro. The AI server business is a double edged sword.
Right.
Where they won out in the last quarter print was that the AI servers demand came out a lot better than expected, roughly one point five billion beat in in sales, and that's primarily because the Blackwell ramp up is or to wrap up now, I will tell you I think one customer really helped them out. Sixty two percent of
their sales was from I think from Xai. But look, the offset has always been the margin side, four point five percent in operating margin, and I think their guidance implies is going to be roughly around the same my next quarter.
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Let's stay with some earnings news here rights back in the middle of a busy, busy week for earnings young brands. I think restaurants fourth quarter just at EPs misses estimates here, So yeah, hit or missing the restaurant business is kind of what we've been seeing more recently.
Jody Lori joints us here. She is a Bloomberg Intelligence credit analyst.
She covers all things kind of the consumer things, cruise lines, theme parks, casinos, parts of the restaurant industry.
So anywhere you.
See the consumer spending money, that's where you'll find her. So let's check in with Jodi Jody. Let's start with young brands there. What are they saying about their business and the consumer.
So it's very clear that they're focused on Taco Bell as well as the international component of KFC because those are what is driving revenue at the moment. They're also looking into strategic alternatives for pizza, which they announced last quarter, and they got a little bit more clarity around that in terms of closing some stores, really sort of reassessing the pizza hut business because it's not necessarily where they're
seeing growth. I think what was most interesting for me is they highlighted the strength of the high income consumer as well as the young consumer and the family consumer, particularly as it went to Taco Bell. And I mean, for me personally, I like to consider myself young, but I do fit the family category and I fit the you know, higher income category, I would say, and that
definitely checks out. You know, I think there is an appeal to a company like that particularly as you're looking at alternatives.
Yeah, during the snowstorm when I was kind of socked in here, I found the Taco bell on Third Avenue. I'm sorry, Lexington Avenue. Very good finded. Did not did not know it was there. So I'm in good shape there. From the credit perspective, Jody, to credit investors, like when they look at these restaurant companies that they want to see, I guess a diversification of brands, you know, through the income level.
How do they how did they look at it?
So you do want to see some diversification. You want to see some geographic diversication. Something that young It benefits from is because they have the franchise model so heavily in their business, it's almost all of their their restaurants. It helps them from a cash flow and from margin perspective, particularly as compared to companies that have more owned brands such as Darden. Right, Darden is going into franchise, but they're primarily owned brands, and so it's a little bit
different structure and it does help Young Now. I think what's so interesting interesting about youm is if you look back ten years ago, they were investment grade rated. Then they spun off on China, and then they decided to give themselves hefty dividends and share buybacks and stayed high yield. Since management is very clear that they're happy with the four times debt leverage, they're keeping within that range and
I don't really see them moving beyond that. But if they wanted to be investment grade, I think they could. They just don't care too because they'd rather spend their money on shareholders and on KPEX.
Hey, Drea, I thought of you earlier this week when we saw the news that Josh Tomorrow has been appointed chief executive officer of the Walt Disney Company, and of course he runs the experiences businesses for Disney.
I think the theme parks, the cruise.
Ships kind of the businesses.
That you tend to follow here.
But boy, they seem to be all in on theme parks, on cruise ships, that scene. I kind of took it as a vote conference for that part of the industry.
Absolutely.
I mean, you know, we're seeing in our data that experience spending is still very very strong. I've joked many times with Steve Flynn, who covers Disney from a credit perspective, that really it should be under my coverage because they're much more of an experienced company, and I think this lands right. But all that aside, you know, Steve's fantastic analyst,
and you all should read and stuff. But all that aside, I would say that that what's so interesting, and something that I've said many times when people talk to me about the cruise lines, for example, they say, Okay, you know, I see that occupancy levels are you know, one O eight or one o nine? What does that mean? One hundred and nine percent, right, And that means that the average room occupies two people per room, and if you have more than that, then that is obviously above one
hundred percent. That's how you get that weird one O nine one o eight number. But when you look at Disney, obviously they don't give that detail. And I've made comments to the effect that I do I am curious what their occupancy level is because if you've ever been on a Disney cruise, I don't think there's any room that is fewer than three people in it. I'd be very shocked to see so their occupancy rates are so much higher. It makes sense why they're expanding their ship presence in
the water. You know, increasing the number of ships in the water. It also makes sense why they're expanding in terms of travel beyond the US, because I think that with the trend we're seeing is that international travel demand is there, and it also helps to sort of diversify them away from any sort of pressures in Florida or California, where we've seen quite a lot of weird patterns that
SeaWorld has commented on. Six Flig has commented on so that that geographic diversification could be helpful.
Well, I booked my first cruise ever for next I guess October Viking cruise, going river cruise.
That's the one cuds right, that's so I'll no kids.
In big print on the shampoo is.
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