Bloomberg Audio Studios, podcasts, radio news. You're listening to the Bloomberg Intelligence podcast. Catch us live weekdays at ten am. He's done on Apple, Cocklay and Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts, or watch us live on YouTube.
Getting back to earnings, Intel, our good friends out there in southern California and out in the valley. They reported some pretty darn good numbers in the stocks rallying, and I was just looking at Intel as a stock, and I guess when the government invests in you and Nvidia invests in you, that's a pretty good sign of support. And stock is up about seven tens to one percent today, but it's up ninety two percent year to date. Punjohn Sobani,
he follows Intel. He's a senior analys he covers the Semis for Bloomberg Intelligence.
He's based out there in our San Francisco office. Have you been to our San Francisco office?
I have.
It is awesome. P You're six, I think or Peer three.
I can't remember which one it is, but it's awesome out there right out into the bay.
It's very cool. Kunjan talk to us about Intel here, what's happening with their business?
Yeah, I mean the results yesterday sort of seemed start of a turnaround for US. Fundamentally, the stock rally you mentioned over the last few months has not been driven by any fundamental improvements. It was all purely driven by the deals that the three deals, the US government in media and the soft bank deal, which all together brought in somewhere between sixteen to eighteen billion dollars to them.
That brings in long term secular tail winds or not secular but strategic tail winds, but doesn't do anything to improve the near term fundamental businesses and address the challenges. However, the results yesterday showed a step in the right direction where improving their demand for their AIPC and the server CPU products improved, which we have been wanting to see
for a while. There were some structural changes that they're doing which will help with gross profit improvement gross profit dollars improvement going forward, even though the gross margin will still have headwinds next year. But we like the structural changes they are doing, bringing more wafers into Intel, you know, ramping up the Arizona foundry with their newest Intel eighteen A node, which is which just has better cost structure
than any other sites that they have. So they're doing many steps in the right direction, improving op X discipline as well. So all of that seems to be start of a good turnaround. And you know, there's still a long way to go. Yeahcution still needs to be done for many quarters, but this is a good news.
I'm so glad you brought up the investments from the US government. Nvidian softwarek is something that helps certainly short the balance sheet, But how does it translate into operational gains? I mean, do customers decide to buy Intel's chips in meaningful volumes as a result.
I mean not directly, not implicitly, the deals don't come with that, but you know there is some indirect influence, right, or you might want to call it a validity that now you know the risk of liquidity risk with Intel, which was there until a few quarters ago, the risk of sort of failing the foundry business failing or not investing goes away. So customers, big customers would gain some trust, right that when you have backing of such such key players in the industry, they must believe in you.
So Kunjun about competitive environment here.
So Intel's made you know, some nice inroads here, but there's a lot of competition out there in their inner chip fab business.
Talk to us about the competitive landscape, Yeah.
I mean the competition for them, both on the foundry side and the product side is intense. Frankly speaking, they've really missed out on the AI accelerator and the really AI in the data center ramp, which which all of their peers, like in Media AMD are enjoying. So they're playing catch up when it comes to most areas. The second issue in competition has been that they've been losing share significantly in the data center side. Again, this is
the most profitable, highest spend side. This is where you really don't want to lose share. But you know, slowly we have seen the share loss pace reduce almost coming
sort of staying share lost heady quarter over quarter. So now they need to work on improving which the changes that they're doing going forward, which is moving the capacity to serve the data center customers at the expense of low end PC customers, we think is the right step to you know, not you don't want to lose share in that market anymore.
Right, So how different is Libputan the CEO strategy versus Pat Goelsing or his predecessor who was let Go.
Is there a meaningful difference as a.
Huge difference, I think from a personality, communication strategy perspective, it's the two opposite ends, you know. Lib Boo seems to be more practical come you know, sort of under promising and over delivering, which which usually the street likes. You know, Pat on the other hand, was visionary, but was you know, trying to get to the stars before
focusing on the moon. So very different styles. You know, lib bu is focused, has done a lot of cultural changes, significant restructure in middle management, you know, getting everyone back to the office, which he really believes will bring significant culture and working changes. So a lot of different opinions, different styles. It's too soon to say which style is going to win, but at least we're seeing some good proof points of the new culture ship.
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Let's talk about the auto business here forward. Can They had some good numbers, and I think the auto maker sured kind of saying, we're focusing on the on the units, the models that make us a lot of money.
And they're not evs, No, they're not.
They're kind of dialing back that rhetoric a little bit in response to I guess what they're seeing in the market. Craig Chudell, he's a Bloomberg Global Autos editor. Craig talked to us about Ford. They had some some some good numbers, but I'm also seeing some layoff discussion out there.
Talk to us about Detroit. What's happening.
Yeah, it's been quite a week. It's hard to parse because you're seeing GM and Ford have these, you know, strong earnings reports, huge moves in the stock. President Trump is taking victory laps over this on true Social and yet this morning our colleague David Welchin in Detroit had the scoop that GM is laying off hundreds of workers.
So you have this this situation where as you say the amount of sales these companies are are pulling off with full size SUVs, you know, the the Ford expeditions, the Chevy Tahos, those sorts of vehicles are really hot and in some cases, you know, as as good as these companies have seen in something on the order of two decades. And and yet also with that, you know,
real costs issues in terms of tariffs. I think maybe not the worst case scenario that they were concerned about months ago, but absolutely those were still still had wins. I think there is a concerted effort on the part of these two companies, however, to sort of, you know, really thank Trump for these sort of incremental bits of relief that he's taken off from of the measures that that were put in place earlier this year.
Is that part of it done? Is that part of the story over.
Are they still working to kind of continue to whittle weigh at some of the costs imposed by the President's policies.
I think it's still very much a live issue. And interestingly, you know, some of the the attempts to sort of curry favor with the White House seems to be around actually sort of a plot his move to put new tariffs in place on medium and heavy trucks. And the reason that they are appreciating that is because their rival, Stalantis makes RAM big RAM pickups down in Mexico. So it's a case of actually two players in Detroit kind of ganging up on the third and sort of you know,
praising Trump. And I think that was one of the interesting storylines out of last night's earnings that Ford sees, you know, sort of some incremental opportunity to take advantage of the fact that one of their big competitors now faces much more of a tariff bill on those larger pickups that are made down in Mexico.
Craig reading between the lines from the GM release and then the Ford results, it feels like that these companies are stepping back on the margin from EV's and EV investments, and that seems to be one of the things that the street is applauding here.
How do you read it?
Yeah, I think it's a little different across these these two companies where you have GM has is much further along, I would say, and standing up battery capacity, standing up EV capacity as well. So they, I would say, on the other hand, have you know, kind of on one hand, have more more EV potential and more battery potential to work with and haven't quite sort of cut to the bone in terms of you know, what the they have
to offer. And yet I would say, you know, it's also been the case that you know, it's it's fair to look at sort of what they've managed in terms of how many evs they're they're selling, and and fair to say that it's been a real disappointment.
It has.
We've not seen the ramp up in demand that that was hoped for, you know, even in the times when we were able to take advantage of seventy five hundred dollars federal tax credits. As we know that those days are now gone, and so you're seeing you know, GM
cut back. I think Ford's cutting back sort of pre dated some of these policy changes, and it's more to do with the fact that they've just been losing so much money on that side of the business and have a little bit less to work with in terms of progress in scaling up the business and bringing down costs thanks to that scale.
Craig, did we learn anything from GM or Ford's financing divisions about consumers and how much they're able to how much debt they're able to take on? And I ask, because of course we had the subprime lender Prima Lend enter bankruptcy this week. That followed Treecolor entering bankruptcy a few weeks ago. So there are a lot of questions about credit quality, particularly for low end consumers or low income consumers.
Excuse me, this absolutely came up, you know, with Ford in particular, because Ford mortor credit is a pretty you know, big, big part of that company's business. They did emphasize just sort of how small sort of amount of exposure they have from a subprime perspective. I think that's not necessarily a shock where you have a situation where there's a lot of subprime let lenders willing to sort of you know, go after that business, and the captive lenders at Ford
and GM tend not to play in that necessarily. I think there was a lot of concern years ago when GM, around the time that they were coming back from bankruptcy, acquired a subprime lender and everybody said, hey, wait a minute, here, didn't isn't this kind of what you know, put GM in the ditch back in two thousand and eight, two
thousand and nine. But really they've they've also turned a GM Financial into you know, a captive lender that does a lot of you know, sort of higher, higher credit scores and not necessarily targeting that that subprime segment that everybody rightfully is concerned about given the events of the last couple of months.
Stay with us. More from Bloomberg Intelligence coming up after this.
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Back in the US, in the stock market, company news, Target cutting some people here, us cutting some headcount in the corporate levels, in the salaried levels, in corporate HQ. Let's see what's happening with Target and with the broader retail space in general. We can go to Jen Bartasha's senior retail staples and package food analysts for Bloomberg Intelligence. So, Jen, so it looks like Target is announcing some corporate job cuts.
What do you make of it here?
Yeah, Hi, Paul, So when we look at Target, these are corporate jobs. As you said, it's about eighteen hundred in total from one thousand existing and eight hundred postings that haven't been filled. And really this is to us, signals that they're finally really looking at how to streamline the organization, tighten things up and hopefully in shape change a little bit faster than they have to kind of get things back on track.
So this is this an issue for the company, I e. Maybe they are a little bloated, maybe their profit margins aren't up to snuff.
Is that something that's been identified?
You know, I think that the bloat is something that has been identified by the company, and they're not alone. If you think about as we came out of the pandemic, you know, a lot of companies introduced a lot more redundancy in their processes, in their things like that, just in order to make sure that they would have enough supply of goods for everybody. And as the overall supply chain is stabilized, now it's time to go back and trim that fat that they put on just after the pandemic.
And you know, again Target's not alone. Walmart, you know, earlier this year has also announced corporate headcuts and so I think this is a normal course of business. But it's a good time for Target to do so.
So let's all right, assuming that's as a due course of business, here, let's step back and take a look at their core fundamentals of the business, whether it's Target or Walmart. Here, as we go into this, you know, holiday shopping season, what's the what are the key drivers or the key levers that you're looking at to gauge success or you know, maybe some challenges.
Yeah, I think one of the things that needs to be kind of reiterated about Target's decision is that it doesn't impact the client facing part of the business, and so that won't affect their seasonal hires, it won't affect
their number of employees and stores. And when you're looking at broader retail coming into that holiday season, success is really going to hinge on making sure they have enough of the inventory in stock, that they've made good calls on what the items are that they're carrying, but also that customer support and experience and so you know, those those are the things that we're going to be looking
for as we get closer to the holiday season. And we had Mattel and we had Hasbro report earlier this week and they didn't have great results, and you know, part of that is reading into toy demand for the holidays and the orders that weren't at actually the dinection materialized, So we'll be watching that very carefully when it comes to these retailers that really specialize in those kind of products for consumers around the holidays.
So what is Walmart, what is Target?
What are they saying about the upcoming holiday season, which is such an.
Important part for you know, the overall retail chain.
Yeah, it is the the most important part of the year for these companies. And both of you know, both of these companies as well as others like Costco, they all say that they're well positioned for the holidays. You know, if you think about the procurement process, most of the orders for holiday goods were placed back in January or February. A lot of the goods started to arrive in July and August, so they should have their goods, you know
here in the US kind of ready to go. And so I think, but with the state of the consumer spending patterns in the US, although people are still spending money, they're still looking for value. So when we're looking forward to the holiday season, we think we're going to see much more spread out deals and people spending you know, on a on a spread out basis. So that they don't get hit hard by big credit card bills in January, So watch for lots of small deals that kind of lead up into the holidays.
And will prices that we pay at the retail at the target level, at the Walmart level, are they going to be influenced by tariffs?
Do we think?
I think there will be certain categories that will be that will be influenced by tariffs. And so, you know, all the retailers are saying they're they're they're using price
increases as the last possible resort. And I think actually one of the interesting things is that when they talk about pushing back on suppliers or sharing the cost of suppliers, some of the commentary that we heard this week from Mattel and Hasbro sort of illustrate that, you know, you know, there were lower orders, there's you know, less expectation for
for quick refills. So it'll be interesting to see, you know, where that you know, how effective those companies are negotiating other ways to to to to manage tariffs before they put price increases in. But in some areas it's going to be impossible not to pass something through.
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