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Big story in the tech space today Oracle with some news out there talking about maybe pushing back some of their rollout. It's been a little bit of a headwind for just the last several trading sessions for some of these AI names. Oracle stock off five point eight percent today. Joining us is Anna rog Ran, a senior techanist for Bloomberg Intelligence. Anrag what's the latest from our friends at Oracle.
Yeah, from what I just heard is that they're having some delay in getting the data centers online, and as we know, if the data centers don't come online, the servers are not let up, you really cannot transform that big back walk into sales, and I think that has been a big concern for everybody. This just shows that it's not going to be a linear line to go from funding to get the data centers lined up and then recognition. So I think that's a hiccup for them.
It you know, in our calculations, it does impact that FI twenty eight sales, but not the ones that you know in the next let's say twelve.
Months now, Anaag. You know, Paul and I were noting earlier that the delay seems to be incited to labor and material shortages, right, and so could you just break it down a little bit for a listener. So what actually is involved in this data center build out? Which and why is it so subject to you the potential for delay such as this.
See, it's no different than building any manufacturing, a factory or anything else. I mean, you'd have labor the biggest bartneck right now for everybody's power. So let's assume that these big vendors have figured out they've found like somewhere in Wisconsin or someone in Atlanta, they found a place where they haven't have power. Then you got to go
out and build a data center. Cooling, equipment, labored, all of that stuff that has nothing to do with technology is the one that need is needed for the next let's say two years to get the data centers up and running. Then you got to put the chips in there, and then finally realize that revenue.
Is there a backlog that they quote, give us a censor? Is that a good numbered thing? Representative?
Oh, it is absolutely spectacular. That number is five hundred billion dollars and out of that five billion, three hundred billion, over three hundred billion is from open Ai. So if you go back a few years, this backlog was to
be honest in material or not much. But what has happened is open Ai has this absolute need to go out and build capacity so that they can do both inferencing for a lot of the workloads that are coming in, but more importantly, they can train their models so that their next generation models are better than let's say, what Google has produced. So it's an important, you could say, strategy for them in order to get that data center
up and running. And for now they have been partnering more with Article than anybody else at this point.
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YouTube the tech story. There's a couple of tech stories here.
Oracle pushing out some of their plans, Broadcom putting out some numbers at the street a little bit disappointed, and so it's kind of contributed to himself in some of these broader tech names. Let's break it down with Ku Johan Subani. He is Bloomberg Intelligence Senior Semiconductor and I let's start with Broadcom. Can you break down what's going on over there?
Souper John Cunten, Yeah, I mean, look, fundamentally, it was one of the great and very strong AI semis report this quarter. I could not find a lot wrong in the numbers. I mean they upsided their AI revenue numbers by twenty percent above the street for next quarter. They even guided their backlog or provided their backlog, which as of today would imply an upside from street numbers for the next year, even the next eighteen months. So I don't know what more better they could have done.
This.
By the way, backlog is like the baseline that they could continue and building to that backlog and hence moving the numbers up as of this morning on the street, if we look at it, all the numbers up for the next year and the next two years have gone up, especially for the key area, which is their AI revenue. So nothing wrong fundamentally here. It just seems it's just that state in the market when it comes to AI valuations and AI sentiment that so sort of no good news is good enough right now?
Yeah, Well, Kunden, a lot of attention being paid to that seventy three billion dollar backlog that you're mentioning. It seems like the market isn't really rewarding Broadcome for that. But what does that actually tell us about the demand for these products across the semiconductor supply chain.
Yeah, a couple of things.
Look, one thing we are all aware of which every AI accelerator company, whether it's in media, IMD, Broadcom or Morble, is enjoying, is the rising capex from all the hyperscalers in the cloud guys, which is a very well covered story. But for specifically for someone like a Broadcom who does the A six custom accelerators for the likes of Google Meta. Amazon also has their own chip, but that's not what they work with Marvel on that the demand for these
chips is rising much faster. So even if there were some concerns that how long can the hyperscalers keep rising their capex spending that does not directly impact A six, which Broadcom supplies, because the hyperscalers are continuing to move their workload on A six. And this is a very small scale when you look at the entire like five hundred six billion dollars they are going to spend here,
I mean seventy billion over next eighteen months. Where they're going too close to spend trillion bucks is nothing, it's change.
John. You talk to institutional investors all over the world.
Has the conversation changed at all in the last two to three weeks, Perhaps a little less bullish or people concerned about some of these short term sell offs here we've seen recently.
I think the aura that there has been sort of a saturation, or you know, there's like how much can these numbers and guidances keep going up? I don't think the sentiment has changed towards bearish. I think there's much more cautious optimism now coming in, so like people are
trying to be very careful. Also, remember it's that time of the year where you've sort of captured the numbers for the year mostly right, so you're not going to get a significant upside in the remaining time, so people are just getting ready for the next year and sort of going back looking at where they can trim exposures and where they can sort of book profits.
Yeah.
Well, a lot of other news out there today related to Ai Kunjan. Let's talk about this Oracle news delays to some data center projects for open air to twenty twenty eight, and we're seeing the market roll over on this. What can you kind of tell us about, you know, the state of this industry On the one hand, a lot of promise there in the data center space, but also seems like a lot of kind of volatile sentiment related to it as well.
Yeah, I mean, look, there has been a lot of impact with the open air deals also for in media, also for Broadcom a similar thing maybe investors didn't like if you were trying to really find flaws Last night from Broadcoms Learning was they mentioned the open air revenues for them will now start in twenty seven, and some folks were expecting those revenues to start coming in late
twenty six. So a lot was driven by initial hype, which these programs take many years, so it's very difficult to pinpoint two years ahead in time, like this is the quarter when all the buildouts will start, and everyone is starting to get my DATO revenues. As we are getting closer to that time, we are getting more clarity on whether will it be at twenty seven with that
will be twenty eight. We don't see fundamental flags in this new time milestone movements is just we are getting more clarity, and initially it was just a lot of goodness being priced in, which is now being adjusted.
This is in my mind, a classic overpromise and now under deliver.
You're supposed to do the exact opposite.
Yeah, maybe we'll have these things around twenty thirty. Then you look like a hero if you come in at twenty twenty eight, because Oracle's saying that the delays are due largely to labor and material shortages, not like some technological you know, headwind that they can't get around.
So, Kujan, is this just.
Maybe a little bit of the market in general, your technology market investor base just kind of taking a little maybe money off the table, just stepping back a little bit and maybe waiting for the next catalyst.
There's definitely that, And like I said, is that time of the year where making some money over the table makes sense, right. I mean, look, if you're a portfolio manager right now, there's not again, You've already covered significant amount of good rewards and performance through the year. You don't want to lose that, right, even if you're underlying key fundamental convictions have not changed.
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Let's talk about the retail space. Here we heard from Lulu Lemon, the stock surgeons. We had the CEO changing and maybe suggesting some new strategy there Punham Goil. She is a senior US e commerce and retail analysts for Bloomberg Intelligence. She's based down there in Princeton. Pum What do you make of Lulu Lemon? What did you learn in the earnings and what do you expect to see from this change in the C suite.
Yeah, so there's a few things. So earnings for the quorder showed strength but the guidance was weaker and the strength really came from outside of the US. So we're not surprised that China is strong. China has been a strong point for them for quite some time. The issue is still the US domestic The domestic business is weak and continues to be weak, and we think it's a function of just lack of differentiation product innovation over the
last few years. And the biggest news yesterday, quite frankly, was the announcement of Callan MacDonald stepping down as CEO and the search for a new CEO for next year. So I think investors are excited to see new strategy, new vision, to see who can run this ship back to sale because lu Lemon has lost ground in recent.
Years, you know, put up.
Yeah, it's interesting that you mentioned a lot of games being ascribed to that leadership change at Lulu raight, But given all the other challenges of the company that you've just described, is this really going to be a material How much does this leadership change? How much will it do to write the ship?
As you say, It's going to matter, but it's going to depend on who takes the top role here.
Right.
We would like it to be a product led executive because we think product is key in retail. And the reason Lululemon has lacked behind and has lacked competition, especially the emerging upstart brands take some of its share, is because it hasn't stayed ahead as it once was in its product offerings. There's less differentiation and the price points are comparable.
That's where I wanted to go plun them because when I talk to people like in this studio about Lulu Lemon, I hear the same thing, good product, but boy it's expensive. Is that an issue for them in terms of product placement?
I don't think it's an issue for them based on where they sit because if you think about the Little Lemon product portfolio and you compare it to a vory or an aloe, they're quite similar. Now if you compare it to an Airy, which is a brand by American Eagle, yes the price points are higher, but I don't think the price point is the issue here. I think the
consumer wants to see more. Right, The aligning Lenkings have been around for so long and I love them, I truly do, but I also like alo and it's just like, what are you giving me to make me like little Lemon so much more. And are you giving me innovation constantly to make me try the next new thing? I think that's the big gap here. They need to put innovation back on track and they're trying, but it's just we won't really see much of that until next year.
And then when we do get a new CEO, it'll be interesting to see the vision that they set forward.
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Let's switch gears and go to the media space. We can do that with Keitha Ranganath, and she is the senior media analyst for Bloomberg Intelligence.
We've been talking a lot to.
Githa about this Warner Brothers Discovery deal. It can be close to a ninety billion dollar trade when it happens. Netflix is involved, Paramount is involved, and we'll get some talk there. But I'm going to start getha with Disney. Yesterday they made a big and it seems like a pretty big announcement, you know, making one billion dollar investment in open AI. What's the strategy here for the Walt Disney Company.
Seems to be, Paul, if you can't beat them, you join them, Right. Disney really is realizing that AI is here to stay. User generated content is obviously getting a lot of traction, and so they want to be able to, i think, create this blueprint so where you have you know, they can license their characters in a safe way. It's a brand safe way, It respects copyrights, and they also
get to monetize their characters. So rather than being you know, constantly reactive and defensive and fighting in court they are this is much more proactive a way for them to participate in eventual you know, monetization of all those licensing of all those characters. Yeah.
Well, geetha very interesting that you mentioned. I mean, that seems to be the key point here, right, that Disney is allowing sore access to its IP two hundred plus iconic characters. That's a big step. I mean there's a lot of kind of potential for the brand to be maybe a little diluted because of that. But what's your take on that? Is is it able to protect the integrity of its franchises here.
I think it's going to try its best to do that. I mean, what was interesting about you yesterday's deal was obviously they ink the deal with Sora and at the very same time sent a seasoned doses letter to Google. So they're really kind of trying to draw the line around you know, brand safety, around copyrights. You know, no violation of copyrights, so that's pretty clear. But you're absolutely right.
I mean, this is kind of a little bit of you know, letting the fox into the henhouse, if you will, because once you kind of allow open Ai and Sora to get access to all of your characters, who knows how it's going to be used. Disney of course is going to have you know a little bit of say, they are going to get a lot of those Sora content or those videos to come back to their Disney
Plus platform. And I think what it really helps Disney do is of course, get in on the moment, really kind of deepen their engagement with their younger fans, kind of build a big pipeline of new franchises hopefully and more importantly, really collect data in what kind of you know, what are fans actually looking for? Do they enjoy spending
time with, you know, all of thesecharacters creating videos? So it's really, you know, so many different things that I think Disney is hoping to kind of learn from this whole exercise.
All right, Keith, enough with that, Let's get back to the issue at hand.
Here, any news coming out of either, you know, the Warner camp, the Netflix clamp, the Paramount camp.
So it seems now, Paul, that the ball is really in Paramount score slash in Warner Brothers Discoveries code. So Paramount, as you know, has already sent that all cash bid. They are waiting to hear back from the Warner Brothers Discovery board. The deadline for that is December twenty second. But there was some reporting yesterday that suggested that Paramount is looking into potentially raising its bid by about ten percent.
So we know right now it's thirty dollars per share for all of Warner Brothers Discovery, potentially looking to raise that to as much as thirty three dollars per share. And remember they do have to pay Warner Brothers. They do have to compensate Warner Brothers Discovery for the three billion dollar termination fee that they that Warner Brothers would have to pay Netflix in case it walks away from a deal.
Geth, what do you think is going on in the Netflix c suite right now? Do you think they're sitting a little bit nervously or do you think they're still comfortable with their twenty seven dollars this year offer at this point, I.
Think they are also looking to potentially raise it, but they're not going to do anything before you know, we see. The first move has to be from Paramount, and I think Netflix is definitely comfortable in raising its offer. The thing that they really need to contend with is that the market is not happy with this deal. We definitely don't want to see Netflix get into this bidding war
at all. There are just too many concerns from a regulatory perspective, from an integration perspective, and it really kind of I think Muddy's what was a very very nice pure play streaming story with exposure now to legacy media, so obviously the market doesn't like it. Netflix, of course, things that they're playing the long game. They're kind of you know, positioning themselves here for the future, but getting involved in a very expensive bidding war. I don't think anybody really wants that.
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