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All right, you hit eco, go on your Bloomberg terminal, and you see a lot of economic data coming out today.
I don't know.
One of the ones that kind of jumped out of me is is GDP annualized quarter to quarter?
The forecast was.
For a decline of zero point two percent, came in a decline of zero point three percent. That's versus a gain of two point four percent last period. That kind of gets my attention. So we said, hey, let's ask Michael McKee. Does this stuff for a living international economics and policy correspondent for Bloomberg Newsy joints us here in our studio, Mike, is that a big deal that number that print?
Yes, it's a big deal, but not for the reasons you might think. And I'm going to say something you've never heard me say that. Matt Miller just accused me of He said, I sound like Peter Navarro.
Today. Yeah, I see. Did you see Alex's face when?
Because I agreed with what Navarro's sentiment was on television a few minutes ago where he said.
That this was not a bad report.
I'm summarizing because the three tenths decline doesn't tell.
The whole story.
I mean, the story underneath GDP today is all tariffs. What happened. We saw tariffs bring in tariffs, get people to import a lot of stuff to try to get ahead of the tariff price increases, and that has totally distorted the numbers here. What we've seen is that imports subtracted five percent from GDP, A record inventories added to it a quarter percent because the jump in inventories was a record during the month and they didn't quite offset.
But we did see all of this distortion in the numbers. That doesn't tell you the real story. If you look at consumer spending, it was up one point eight percent, which was a little more than expected. And business spending distorted by tariffs up nine point eight percent, well twenty two point five percent gain in imports of equipment. So it's really hard to tell. So what you do if you're an economists as you look at real final sales to domestic purchasers which takes out inventory and trade, and
that was up by two point three percent. It's a little lower that it was in prior quarters, but that is still showing growth in the overall consumption economy.
Well to that point. If we are seeing consumption okay and now you have incomes being okay, is consumption also being driven by pre buying tariffs or is this real underlying straight.
No doubt, because people bought a lot of cars, and they've bought at least they've.
Bought other things that we didn't see a big increase in durable goods spending, but there was a big increase in services spending, a relatively big increase, So Americans were out spending money. Now the question is where do they go from here? And for that you're what you're looking at is the other data we just got at ten o'clock, which is the PCEE data.
Is this the one we care about?
Is this the one get? This is the one we care about?
This this is the monthly This is the monthly number, so it's the most recent data. This is if you're following the trend, which is what the Fed wants to do. We were up seven tents of eight percent, which is up from half a percent in February. So Americans spent more in March. The numbers were weighed down by what we got in January. In February, in the quarterly numbers and incomes were relatively strong. They're still up half a
percent after a seven tenths rise the month before. If you look at the wages and salaries in that report, which is the most important thing because people spend what they make, they were up half a percent, which was up from February's four tenths and January's two tenths. So as the month went on, people got more money, they spent more money, and so it doesn't suggest we go into the second quarter with a real problem in terms of consumer momentum.
That's my read.
It seems like the consumer mic is still pretty good.
When you're when you're looking at the consumer confidence numbers, it looks really terrible. But the numbers that we're seeing from consumers in terms of what they do, rather, that's a treasure.
Secretary Bestin's been saying, I mean, you can look at all the survey numbers you want something.
Like best into along with Navarro.
Yes, exactly, but I mean that's what he's been saying and say, you can look at all the sentiment data you want, but people are still out there spending money.
Well, the question now still backward looking.
I mean, this is still from March. April was when we saw the tariff headlines and the volatility in the market.
Right.
Yeah, the PCE numbers are March that I'm talking about, and the rest of it is first quarter through the end of March. So what's happened in April that we don't know yet, We're going to have We're going to have to see. We have the sentiment indicators, and March was really the first month when there were.
Any tariffs, and they weren't really tariffs on you and me.
They were tariffs on the steel companies and things like that. So if people are paying more from for what they're getting, if they can get anything from China, now, maybe that does affect what they're going to be spending on. So somebody said to me this morning, this makes the fence job easy harder because you had higher inflation and lower growth.
But I think it makes it easier. It just cements the case for doing nothing because this report is so distorted by the tariff stuff that it's impossible to say what it's going to mean going forward.
Such a good point. He's so smart.
That's when we get them on talking about a this time. So just like Peter Navarro.
Yeah, Samesy, certainly the same. Michael McKee, Bloomberg International Economics and Policy correspondent, joining us in studio.
Thank you so very much.
You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at ten am Eastern on Apple, Coarclay, and Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts, or watch us live on YouTube.
Alex still here alongside Paul Sweeney. This is Bloomberg Intelligence Radio. We bring you all the top news in business, economics, and finance through our lens of our Bloomberg Intelligence folks. They cover two thousand companies in one hundred and thirty industries all around the world. Want to get an update here on super Micro. The stock gets hammered here after preliminary earnings results that fell well short of analyst estimates.
Remember this was a darling that went into the mid cap stocks and had lots of issues with kind of revamping its accounting, etc. And they were trying to really find their footing. Bou Jinho is Bloomberg Intelligence and your technology analyst joins us now trying to find their footing then maybe pushed back a bit. What happened in their prilminary announcement.
Yeah, hey, Alex, thanks for having me on. It looks like, you know, when you go big whale hunting and you miss those whales, you're going to miss results. Right, They essentially miss sales by about one billion dollars versus the midpoint of their guidance. And the fact of the matter is these AI deals are monster deals. That's why I'm saying it's big whale hunting. One hundred thousand GPU cluster that XAI or open Ai. Those are three point five
billion dollar deals. So if you miss on you know, one or two of these, that accounts for easily a billion dollars.
So is this a super micro computer specific issue or is this big tech spending kind of slung down here?
Well, it's a product transition issue, right, So if we look at the Nvidia GPUs, they transitioned over from the last generation Hopper series to the next generation. Uh, the the Blackwell series and given the greater capacity and the more the stronger, the better computational power. The customers were actually waiting for this for quite some time now, and now they're clamoring for it. So essentially what customers appear to be doing is canceling their Hopper orders and moving
over to Blackwell. Now, I will tell you they weren't the only one that had this issue. HPE a couple of months ago. Uh, they missed their expectations primarily because of this product transition as well. And it's biting super Micro now.
So based on that, the chip cycles moving really fast for AI. So what's next after Blackwell? This is just going to keep happening and kind of rolling it downhill.
Yeah, I mean, it's still probably a couple of years before we start seeing the new the newer series of chips really ramping up, So we probably have a two year product cycle before we get to that, Alex, I mean, let's see how the cloud Capex holds up in twenty six and twenty seven. But for now, you know, right now we have a neartim product cycle issue for at least super Micro and HPE.
Which what are your companies kind of the tech hardware companies, what are they saying about this whole tariff climate, what is it going to be an issue for them?
Yes, well, we published an update to our tariff note and surprisingly they've actually done a good job navigating the tariff issues. So far, I've had three companies report related that's hardware related. There's a couple of things we need to take into consideration. One, a lot of them are outside of China in terms of the manufacturing scope, so the tariff impact is fairly minimal. Two, there's a lot
of manufacturing that comes out of Mexico. So you know, because of the US Mexico and Canadian Trader agreementt U S m c A, they're exempt for tariffs. So if you have anything that's built out of Mexico or Canada, whatever it's assembled there, you're except for tariffs. A lot of my company, the companies that have reported, uh, they're they're using your U S m c A to their advantage to win deals. And three and this is this
was somewhat interesting to me. I thought there would have been some pull in deals because of tariff concerns in the second quarter. Uh, the guidance thus far, Uh, Yeah, Western Digital as well as Seagate, which manufactured hard drives. They don't see any pull in in deals. So the second half of the year, which was a concern of mine, we don't. We don't see a you know, we see actually smooth demand going into the second half in.
Terms of spending from super Micro's customers. I know we're in the product cycle part, but are we seeing any change in customer spend, Like maybe they're spending the same amount, they're spending in different areas or are they holding spend all together or pulling back.
Yeah.
So, and let me let me clarify who super Micro sells to.
They don't.
They don't sell to the Metas or the Googles or the Amazon or the Microsofts of the world. I mean, there's some of that, but the bulk of their spend goes to Tesla, musks x AI or the core weaves of the world. This classification of neo clouds and for all intented purposes, it seems as if they're spending, they're maintaining their level of spend. They're not spending more. The one overhang or one concern that I do have is because of the tariff issue. So far, if they're not
going to spend more. Are they going to buy less? Right because of the increase in taps. Now, if I'm right, we shouldn't see that much of a price increase from the server vendors or the GPU vendors because of some of the ways that they can avoid the tariffs. And you know, spending should be okay to the second half, and if the black wall cycle works out for them, super Micro should get back some of the law sales.
So prior to three months ago, all we were talking about in the marketplace broadly defined was AI. Now I've gone three months really without really talking about AI because it's all about Terriss. Have your clients kind of are they still as enthusiastic about the real opportunities for a transformation in technology coming from AI? Is that still on the front burner?
Well, so again, I'm gonna I'm gonna, I'm gonna bifurcate that from the cloud guys and as well as the enterprise guys. From the cloud perspective, they're continuing to spend.
Right.
If anything, there's a lot more excitement to spend, primarily because of some of these smaller language models like a deep seek.
Up we have a blackout like a deep seek.
Right, the studio light went out just for those of you be on radio, so your light went out on mujin Hell, there is no broad blackout space go ahead.
Yes, like a deep seek. Or they are looking for dinner models. If anything, there's going to be higher demand for some of the products itself altogether, so there actually is a lot of excitement now on the enterprise side. If anything, there might be a pause on the enterprise
side because of the high cost of acquisition. So the cycles for AI adoption may be more on twenty twenty later in twenty twenty six and into twenty twenty seven versus the second half of this year and into twenty twenty six on the enterprise side.
All Right, Weich thanks a lot usenhel Bloomberg Intelligence senior technology analyst in the dark, but helping us illuminate what we're seeing when it comes to some tech names like super micro.
You're listening to the Bloomberg Intelligence Pod. Catch us live weekdays at ten am Eastern on Apple Coarcklay and Android Auto with the Blueberg Business App. Listen on demand wherever you get your podcasts, or watch us live on YouTube.
Your Caterpillar down by about half of percent, looking at slightly lower sales this year if Trump administration tear US remain in place. That's including an economy that dips into a recession in the second half. Chris Chiolino, Bloomberg Intelligence senior US machinery analyst joins US. Now, Chris, how do you look at this company then when there's like a huge variable, I'll throw off its earnings for the rest of the year.
Yeah. So, I think the release really isn't as bad as initially feared, and there's actually a number of positive takeaways here. The quarter was weak, and we knew that going in, volumes were going to be down, pricing was gonna be under pressure, But the outlook is actually better than I think many had anticipated. Their two Q sales guide was actually above the street. We saw backlog improved to a record thirty five billion dollars, Orders were up
double digits both year over year and sequentially. And really, if you look at their outlook X tariffs, it was really better than what they had expected prior so, and the tariff impact as of now at least the peers manageable. So I think the release, you know, should at least help delay some of those concerns over a more pronounced slowdown this year.
Christa's kind of pillar build their equipment in the US. Is that where the manufacturing is?
How do they do that?
Short answer, they build everywhere. They are a net exporter out of the US. But you have to remember this is a large global manufacturer. They have manufacturing footprint and and supply base that really spans the globe. But if we're thinking about net exports, yes, they export more out of the US than they do import from a From a revenue perspective, you know, the US is you know, almost half their revenue today.
What about for its peers?
What does this mean for some of its peers and the trading environment that they were previously in.
Yes, so, at least for some of the domestic US based manufacturers, I think this is maybe a little bit of a sigh of relief. By no means or we have the woods yet, but it certainly seems that the tariffs, as at least how they stand right now, are somewhat manageable. You know, cats expecting a net cost headwind of about two hundred and fifty is three hundred and fifty million
dollars next quarter. If you kind of extrapolate that out over the balance of the year, you're talking you know, maybe somewhere in the one hundred hundred and fifty basis point headwinded margins. But that may even prove, you know, overly pessimistic, because you know, cats still evaluate and get implement, implement implementing some of these mitigation actions, so we could even see that come down from here.
I was kind of surprised, I guess positively, Chris, that their backlog looks pretty darn good. It's not like their customers are saying are canceling orders or anything.
Now, and it's it's a record backlog, right, So you know, we have coverage. You know, if you look at consensus revenue, you know, whether we call it flatter down slightly this year, they've got coverage for you know, nearly seventy percent of the year already. So I think that does help provide
some kind of buffer. You know, there was a concern out there that do we see this pre buy you know, ahead of some of the tariff implementation, and KAT really kind of downplay that in conversations they're having with their dealers and with their customers. They're really not seeing any
evidence of that. So yeah, these do seem like, you know, true orders and really a really healthy backlog, which you know, I think helps support you know, that flatish type revenue outlook that they're putting out there.
All right, thanks a lot, Chris, really appreciate appreciate it, Chris Chile. You know, Bloomberg Intelligence Senior US machinery analyst.
You're listening to the Bloomberg Intelligence podcast. Catch us Live weekdays at ten am Eastern on Applecarplay and Android Auto with the Bloomberg Business app. Listen on demand wherever you get your podcasts, or watch US live on to just get.
Back to these markets we have as all offware. You're off the lows of the morning. The S and p's off eighty two points, that's one and a half percent. And Malletti joins us here, old buddy of mine. We've been into business a long time. She's head of equity investments in all Spring Global Investments. Dude, you're grinding it.
Still working hard.
And Malletti joins us here in studio and you and your colleagues at all Spring, I mean a lot of folks that have been in the market for a while. You've seen, you know, lots of different markets, whether it's the you know, the dot com bust or the you know, the financial crisis or the pandemic, A little bit of uncertain to hear this year in the market. How are you guys thinking about some of the very I guess the volatility we're seeing in a lot of these markets.
Yeah, I mean, I think, Paul, you're right. There's when you when you have moments like this, you kind of always look back and you look at what rhymes to the past, and you know, even during COVID, that was something we never lived through before. So while history does kind of rhyme, it never perfectly repeats itself. And here we are again in something we've never lived through before. But there are lessons from the past that you definitely
take forward. And some of those lessons really are like, look in the moment, it feels awful and uncomfortable, but history does suggest that equity market returns for those who stay invested and really think about bottom up fundamentals and companies that really can control their own destiny, those investors do well over a cycle. And so that's what our investment teams are focused on looking at trying to take advantage of emotion and take advantage of uncertainty and volatility.
So is that on a sector level, an index level, or a stock specific level.
It's more on you from a bottom up stock selection basis. And there certainly are, depending on the environment, different industries that might fare better than others. But I would say even within almost any industry, there are going to be companies that do better than others.
How do your portfolio managers, how do your analysts, you know, assess a company when a lot of times these companies are coming on their conference calls and saying we're withdrawing guidance or we can't give guidance because we don't know what's happening in our business, or if they don't know how our investors supposed to know.
Yeah, I mean, Paul, this is something you spent a lot of your career doing and our teams too too. So while the calls are critically important, as you know, kind of during reporting season, most of the past is the past. We're not focused on that. We're focused on going forward. And on the calls, they may not be able to give guidance, But if you know that company really well, and our teams do have deep expertise and
fundamental research. They understand the model and they can kind of walk through with the management teams where do they have levers to pull if things get worse or if things get better? And how quickly can those levelers be pull and then asking them the same question you asked me, how do you look at this environment versus other environments?
How can you manage through those? And understanding where they have control of their own versus where macro can kind of push them is really really important, and you will see some companies actually do have more control in this environment than others.
What do you do about finding safety in the middle of that? Right, Like in other cycles, you can make an argument that maybe the dollar a treasury market, it's okay to hide out there a little bit.
Is that still the case?
Do you guys see that Mark Mobius is like all his funds are like ninety five percent in cash? Wow?
Yeah, yeah. Look, I think we tend to be and think about being invested for the long term. And you know, look I manage our equity business, our fixed income team, you know, they believe it's a it's a good time for fixed income to focusing on the income component of that. But on the equity side, you know, you gotta be right twice if you're going to sell and then predict
when is the right timing to come back. And again history would suggest that if you just wait out these periods and stay invested, you're going to do better in the long run.
I never thought i'd be talking to you about this topic because usually and and I talk about radio stocks, TV stocks, billboard companies.
That's kind of back in the day, billboard companies. What's that great business?
By the way, you can't fast forward through a billboard. Just remember that your second traffic exactly emerging markets. How do you guys approach emerging markets?
You know, I think you know we We're lucky. We have two great emerging markets teams. One that has a focus on providing equity i'm sorry, income along with the equity returns, so equity and income focused, and the other one that's a little bit more kind of focused on, you know, more growth at a reasonable price and a little bit more emerging market like with real growth behind it. And so in this environment, you are seeing a natural lyft to EM and I think it's because obviously the weakness,
and the dollar has propelled those markets. Again. We kind of predicted that in our outlook piece in October that whether we saw a dollar weakness, we might see the strength of other current currencies happen, and investors have been long under allocated in emerging markets, so you're seeing kind of a natural lift in some of those areas with real opportunity. The other thing I would say, Paul is it's pretty apparent that we're kind of tapped out on
the fiscal spend here in the US. There's a lot of other countries that have the ability to really spend.
So do you guys like hang out all the time and like talk about stocks, Like like in the.
Day when conferences you get the cool kids will go to the table.
You know, oh okay, and if they're not cool, you're like, no thanks, yeah.
You take your stocks.
And group of former media analysts on Wall Street fun and all these Drew Marcus says high Rich Rosen says high go name dropping dropping. I mean, they're all just they all know Ann Meletti. So that's in my studio on my shape.
How cool is that?
That's really cool?
They were the all stars back in the day. I was the little kid on the block.
Now don't say that please, all right, and thanks a lot. Well you can tag her out. Yeah.
And Malletti, head of an equity Is this a new role for you.
About five years?
Oh?
Okay, all right, yeah, she's always like the media analyst. It's strong. And Malletti, head of equity Investments Offspring Global Investments, joining us live here in our Bloomberg Interactive Brokers. We appreciate getting a few minutes of your time.
This is the Bloomberg Intelligence Podcast, available on Apple, Spotify, and anywhere else you get your podcasts. Listen live each weekday ten am to noon Eastern on Bloomberg dot com, the iHeartRadio app, tune In, and the Bloomberg Business app. You can also watch us live every weekday on YouTube and always on the Bloomberg terminal.