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Certainly, the news of the day from a company perspective is Intel. We saw early this morning, we saw a pretty cool story in Nvidia deciding to buy or invest five billion dollars into Intel vis a vis a stock purchase, a straight up purchase of common stock there. And that's alongside the earlier investment by the US government of a ten percent stake in Intel. On the stock reacting favorably here today, shares of Intel up about twenty six percent today.
That sets a new fifty two week high. Stock's up fifty seven percent here to date.
The stock was.
Really hurting as recently six months ago, but boy, it's gotten a couple big shots in the arm as it relates to their AI outlook. Let's check in with Man Deep Singing. He's a senior tech analyst for Bloomberg Intelligence. Mandy Wet, how surprised were you in Silicon Valley when we woke up this morning and saw that a competitor was going to take a make a five billion dollar investment.
Yeah, I was expecting something to happen in terms of an investment in Intel after the administration took a ten percent stake, but an investment from Nvidia that was the last thing that I anticipated. So I was more in the camp that one of the hyperscalers, whether It's and Amazon, did have a partnership with Intel. It was announced back in twenty twenty four, so I thought it would be
one of the hyperscalers that would make an investment. So clearly the surprise element was the fact that the partnership or the investment wasn't for foundry, but it was more chip code design. And look, that's where Nvidia has taken share from Intel over the past two years, is Intel was a dominant force in data centers with their x eighty six architecture. Nvidia with the shift to AI, really
took share from Intel. And so it is a big surprise the fact that they are investing five billion dollars and the plan is to develop a co design chip for you know, PCs as well as data centers.
Them better compete against a MD which we see a little under pressure today.
My mind, Nvidia is almost a monopoly in AI chips.
So the fact that got into trust regulators. Yeah, but you know, I when I heard about this deal, I just thought irony, right, this tie up between two Silicon Valley rivals. But I think it also really underlines the power shift. When you think about it, you would have thought years ago, well, Intel would be the aggressor here, right, But the sort of the tables have turned.
They have, and look, that's just a function of where Intel is at right now, both in terms of their foundry positioning as well as you know, the data center market share that they have lost. Where they still have a dominant share is in PCs and desktops, and that's where everyone was anticipating a big refers cycle because of AI. At the end of the day, you know, if AI was to become pervasive, you know, we'll have to upgrade
our devices, whether it's PCs or smartphones. And to my mind, Intel does have a good chance of being part of that refer cycle. So what Nvidia has done is really kind of put a stake in that refer cycle where if they can develop a code design chip for the PCs and laptops. Then that's where it could create another line of business similar to gaming. So right now gaming
is about high single digital percentage of Nvidia's revenue. This could be another line of business that they could add if this partnership was to result in a product or a chip that everyone would want to use.
All right, Mandy, I'm gonna put my cynical Wall Street hat on this is simply I agree with a political move by Jensen Wang, the cozy up to the Trump administration by co investing alongside the US government and Intel. Whether it's a good investment.
Or not, if five billion dollars is like change for a company like in Vidia that's almost generating one hundred billion dollars in free cash flow every year right now.
So there are the clients you talked to, the investage you talked to, but they think there is some you know, some soft upside to in Nvidia by investing alongside the government.
I mean, in Vidia right now is taking stakes in a lot of companies Corvieve and a lot of neo clouds because they want to make big bets. With that kind of balance sheet that Nvidia has, they can afford to do it. And so this is another one of those minority stakes that they took. I don't think they have any high expectations here, but still it does help them politically.
I mean, these the numbers are blow me away. With the tech companies that Man deep sings that follows this year call it, you know the calendar of twenty five fiscal year twenty six, one hundred billion dollars of free cash flow. Next year one hundred and forty billion dollars of free cash flow, free cash This is the stuff like literally, we don't know what to do with it.
So we're either going to give it lders, we're gonna I don't know, or we're gonna make or we make investments in So there you go.
But Paul was talking earlier about how he thinks the pie is big enough right for for all these players, and that not to worry too much about AMD. Is this tie up a threat to them? Do you think it is?
If they come up with a product. So, if they come up with a chip that can drive a PC refresh cycle, it's gonna hurt AMD. But look, these design wins take time to result in a product, and strategically, yeah, they will develop something. That's why I go back to what Amazon and Intel data year back. Did anything change after that?
No good point?
Is there anybody out there that maybe AMD now should start to cozy up to.
Probably one of the hyperscalers because the hyperscalers are doing a lot of their custom chips and if MD is part of that ecosystem, that certainly will help drive up their order. So I expect them to partner with one of the hyperscalers.
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Want to talk supply chain now, and who better to do that with than Jeene Soroca, CEO the busiest port in the US, the Port of Los Angeles. And guess what, he's here on the East coast, right here in our New York studios. So Gene, thanks so much for joining us.
Great to see you, alexis great.
To see you. I know the LA Port handles a lot of international cargo, especially from Asia. I know that trade volumes in August were near all time records. Here we are mid September. Where do things stand now.
It's been a roller coaster of a year. When hard trade policy comes out, you see a real slowdown in cargo flows. Then when that policy is softened and deadlines extended, cargo picks up for that window of opportunity, and that's what we've seen. But July and August combined are our busiest two months in the one hundred and seventeen year
history of the court. Folks are bringing in inventory before the next policy statement may come out, trying to protect themselves from the all important year end holiday season for retailers, and the parts for American factories are keeping a lower but very steady flow.
So Gene, A lot of people are unsure how tariffs work, But the reality is, I believe they occur your port. The actual collection of the tariff occurs at.
On your turf, right That's right, Paul, and a cargo container cannot leave the port without that tariff being paid by the importer of records to US Customs.
There's customs office at your port, and what they do is collect whatever tariffs may be on any particular good and that's how that happens all the time.
I guess that's exactly right. And LA is the largest customs district in the nation. Director Africa Bell runs that shop for US Customs and her rank and final members are working around the clock just trying to keep up with what the tariffs are, how to apply them to the shipments and keep the commerce moving.
It's got to be really confusing for them because I just feel like they believe constantly. How many companies, though, are really able to pull forward their inventory. Are you still seeing that in a big way as we move closer to the holiday shopping site?
Yeah, Alexis, here's the interesting fact. You've got about one hundred and twenty five thousand companies that call Los Angeles home to import their goods. Over the course of a year, no one company has more than a five percent share. So we're made up mainly of small to middle sized businesses, some of whom are telling me now they're dipping into savings to pay these tariffs.
So our is our customs office in fact keeping up with the collection of tariffs on all these additional goods. I mean, did they have the manpower to do it all? Do they have the facilities to do all, the technology to do it all.
They truly have risen to the occasion, Paul and doing a great job. I look at those vital statistics of the port through the Port Optimizer every morning, a ninety second flash report. Our numbers on velocity are better than they were before COVID.
Wow, you know, I was.
I think we also those dramatic photos of the cargo falling off in Long Beach, not your report, but at the Port of Long Beach. I think it highlights also what a dangerous job this can be for those workers. But I'm just curious, did that have any impact, knockoff effect on your report?
That's right, Alexis.
You know.
The first thing is, thank goodness, no one got hurt. The men and women of the International Longshore and Warehouse Union are on the ground moving all this cargo, and thankfully no one was in harm's way. The investigation will continue. I was talking to some folks last night at a big industry event back in Long Beach. I've been able to get their cargo out yet, So the US Coast Guard, National Transportation Safety Board are going to take a deep look at this. See what the causals are and how
we can make sure it doesn't get repeated again. But effectively, that particular terminal in the port of Long Beach is an investigation site, So shipping lines are having a maneuver around that as best they can, but no real slowdowns because of it.
Amazing.
So the economic data seem to suggest that in terms of Tariff's questions who pays for it? We know that it gets collected at your port by the US Customers Office, and then it's a question from that perspective, how much gets passed along down the line to the wholesaler, to the distributor, to the retailer, and then ultimately to the consumer. What's from your view at the port, do you have any understanding how that's happening, how that's playing it?
Yeah, Paul, Three real areas that importers have been focusing on. Can I go back to my manufacturer and negotiate a little bit on the price and see if we can mitigate some mixed effect there? Do I just absorb it and try to find efficiencies in my own company. We've seen the results from the big auto companies in Detroit
that hasn't gone well either. Mary Barro announcing big, big tariff hits on cost, same thing with Jim Farley over at Ford, and then others are saying that they're trying to pass on to their customers if they're in the factory business manufacturing, or to consumers, and we have seen that as well. So it's just kind of a spread across those three categories, and I think we'll start seeing even more of that hit towards the fourth quarter of this year.
I know that in just a few weeks, if benefit holes, we're supposed to be collecting tariffs on Chinese ships that call it ports at US ports. I know that President Trump's going to be speaking with Jijinping and a phone call Friday tomorrow. So how do you guys at the port sort of prepare for something like this?
This is another cost that probably will be passed on as well, according to the shipping lines to their importers. So right now early days the new penalty fee goes into place on October fourteenth, be phased up, but right now we are estimating that it could be anywhere from about one hundred and twenty five to over three hundred dollars per container. The shipping line will pass that to the importer of record on these fees. About thirty percent of all vessels they call Los Angeles today are built
or managed from China. There's going to have to be some movement around this. Some companies may try to absorb, others will shift different vessels into the rotation to avoid this penalty as a whole.
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It's been a busy day for the restaurant companies reporting earnings. We had Cracker Barer, we had Darted earnings. Check in with our expert on the restaurant business, because not only is it a view just kind of what's happening out there in the restaurant business, but I always view the restaurant companies it's a pretty good gauge at how people are feeling, consumers are feeling, and how they're spending their money. Michael Hallin joins US Senior Restaurant and Food Service analysts
for Bloomberg Intelligence. Hey, Mike, let's start with maybe some some good stuff Darted. What's going on with our friends at Darted?
Yeah, you know Darting. It was an interesting quarter.
Sales were fantastic, but slightly below, you know, very high expectations, and the most interesting part of their report was that their margins contracted, largely due to beef costs and Uber fees because they did this one million free delivery promotions supported by you know, Uber eats marketing dollars, right, and so it actually made up five percent of sales, and that's very impressive for something that's been instituted, you.
Know, within a year.
So, yeah, the margins, you know this, this company has best in class margins.
They've always protected their margins.
And so seeing a same story of sales gain that you know, a very strong same star sales gain without the margin expansion, I think shocked some investors today.
So what are they planning to do to widen those margins? I heard the portions might not be as big? Are they looking at possibly raising prices.
On the menu.
Well, they're going to raise prices, but not too aggressively. So they're very careful about increasing their prices. A big reason why we think they're outperforming is that they've increased their prices a lot less than competitors since the pandemic, right, and so they don't want to lose that advantage. So they are going to raise prices this year, but it's going to be modest and less than peers.
You know, you mentioned the smaller entrees. That's really a move to boost traffic.
So what they're doing is they're taking seven of their popular entrees. They're making an additional a lighter menu with those seven items. They're shrinking the portion and they're lowering the price, and they're hoping that actually brings in greater traffic with low income consumers. So shrinking the size of the entrees isn't isn't a major plan in terms of
saving the margins. With the margins, it's going to be you know, executing, right, That's that's what they're known for, you know, consistently becoming more productive in their restaurants.
That's how they're going to try to fund this.
You know, there will be some slight price increases, and they mentioned they could be a little bit more aggressive. If you know, the higher beef prices remain stubborn.
All right, let's move on to my favorite cracker barrel. They're still paying the price for some of that rebranding issues. What's going on there?
Yeah, that one, Oh man, it was.
It's the timing of this, of everything that happened to them, is such a shame, because.
They were recorded a great quarter.
You know, Same Star sales were up five point four percent in the rest truants, a couple hundred basis points ahead of the street. But you know, sales have decelerated pretty significantly here, you know, since August nineteenth and the logo controversy. So you know, the stock is down a little bit today. It opened much lower. You know, we think Paul was a good one. I thought Julie Messino did a great job in the call. I don't think there was any panic in her voice. You know. I
think she's running a steady ship right now. And you know, they're focusing on the things that they've been focused on from the beginning, which is providing better service and higher quality food at a good price point. I would say it seems like they may have sandbag guidance as well. I think that's a big part of the reason why the stock's not down more right, is that they basically are extrapolating current traffic trends throughout the rest of the quarter.
You know when second data.
That that Bloomberg owns, that that we follow is showing that traffic may be stabilizing here over the last over last week.
So I guess we'll see.
Yeah.
I mean, the latest CPI report showed that food away from home so at restaurants actually outpaced what we're paying for food at the supermarket. But I mean, if you look at these two reports from Cracker Barrel and Darden restaurants, are people eating out less or is that really not holding true? When you look at the numbers, they both reported five You know, Olive Garden was over five percent, Longhorns over five percent, Cracker Barrels over five percent.
You know, a lot of these stories about the death of the consumer I think are overstated. You know, we've been saying it all year. Restaurants sales are going to continue to be better than they were last year. Second half is going to be better than first half. It's not an issue to me. The bigger issue is what we heard out of Darden. It's inflation.
Right.
The Fed just cut rates in an inflationary period, right while we're seeing inflation go up, while we're seeing CPI and PPI go up, right, and so beef prices are stubbornly high. I mean, I look across my Bloomberg monitor and MADI prices are up across the board today and they've been up for basically this whole year. So you know, I think through year end, margins are going to be the bigger concern for restaurants.
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