Bloomberg Audio Studios, podcasts, radio news. Bloomberg Tech is alive from coast to coast with Caroline Hyde in New York and Ed Lovelow in San Francisco.
This is Bloomberg Tech coming up.
Belon Musk rejects another Wall Street convention, sets a fixed price for his space xipo ahead of the marketing phase of the deal. The plan offer shares at one hundred and thirty five dollars a piece.
Plus Palo Alto Networks falls after the company reported its results failing to meet really elevated by side expectations. This following a more than six percent run to date.
And candidates backed by tech billionaires and founders fell short in California's primary elections. Yesterday. We break down the results and what it means for Silicon Valley.
But let's check in on what current geopolitics means for this market.
We take a breather.
We have been at record high after record high, have been on a nine day tair. The NASDAG have been up for four straight training days. Today we pause rob By just a tenth percent. Of course, Front and Center is maybe conflict rumpting once more, A little bit that sees far under pressure between the US and Iran. All those higher bonialds they go higher. Stocks just pull back a little bit ed.
But what are you.
Watching, skit today's big number eighty four point seventy five billion. Alphabet is upsizing It's equity raised to that level, up from the previously announced rays of eighty billion dollars. All this to fund its AI infrastructure expansion. Interesting like this is a multi day story. The stock's basically flat, but is an element of dilution, the main point being parts of the equity offering really oversubscribe to Alphabet's saying okay,
we'll do a little bit more. Google's lay is fundraising. There's a race happening here, guys. Highlights this scramble for capital in the Aire, and now SpaceX is taking things a step further. Elon Musk company is planning a seventy five billion dollar IPO and has already set a fixed share price ahead of the traditional roadso process. Another sign Musk is willing to rewrite Wall Street's playbook. That's all according to sources. Bloomberg's caffriin dollarities here with more.
It's been.
Well, a bit of a well in few days, So we report it's one hundred and thirty five dollars a share, five hundred and fifty six point five million shares. Do the math, they'll raise seventy five billion dollars. That's not how this typically works in an IPO process.
Why No, Typically a company that's looking to list in the US markets is going to look at a range. They're not going with a firm number like this one hundred and thirty five that you're referencing. And that's because in the next week or so there's a lot of things that could change. This is supposed to be a marketing process, but locking in a price of one hundred and thirty five dollars a share is giving some sort of certainty. It's giving a signal to the market of
what to expect. We're expecting that next week, by around the eleventh is when we could see these SpaceX shares come to market, But even leading up to it, it's just another indication of the difference in the approach that SpaceX and Musk's team are taking at this time.
I mean, there is some precedent for doing it this way, Catherine, just not of.
This size, right, absolutely so, smaller companies can take this route that SpaceX is looking like it will, but it is not typical for a company, especially given that this is supposed to be the largest listing on record. So it's taking just some unconventional roots. But you're absolutely right, it's not the first time or likely the last, especially for companies of smaller sizes.
I mean, and you've been at the forefront of reporting each tick by tick when it comes to what's happening with en On Musk and SpaceX more broadly. But isn't there there are a lot of cooks in the kitchen right now. How we understanding is to what this price point means and what it means for all of those friends, family, those are about to potentially becomes well.
The price point is interesting. So one hundred and thirty five dollars to share is a twenty eight percent premium from when they did a stock split on May the fifteen, So basically SpaceX's shares were above five hundred dollars in the private market, so it did a five for one took it down to one hundred and five at the valuation of one point twenty five trillion. So this is like math, it's kind of you know, a little bit dry.
But the point is is that the share price at one thirty five is not keeping up with the jump in valuation. There's dilution there, but the friends and family that'll get an allocation, all of the mechanics are still in place, like traditional IPO stuff. The roadshow will happen, it will price in the normal way. You're just saying, like, here's the number. It's a very very unusual situation, by the way, Bloomerskaarn dotty, thank you very much. Top recording.
As always, some news crossing the terminal as well. Elon Musk's ai company Xai has paused hiring for professionals to train its groc chatbot on a range of specialized skills. That's according to sources, who say the decision is at least partly to concerns that the company's HR department is overwhelmed and often unable to process new candidates. Read that one on the Bloomberg.
Carat we always will.
Meanwhile, read on the Bloomberg just how these markets are performing? Look, you know the S and P five hundred had been writing a really powerful winning streak.
It was up for nine straight days.
Maybe it's nine straight weeks stocks a record hires as of yesterday. Next guest saying, look, we are just actually at the infancy of this AI industrial revolution. Joining us now with her outlook Rebecca Wels CEO, Chief Investment Officer, whilst the wealth management and look we take a breather today, it's more about geopolitics, Rebecca. But how when we have five trillion dollar companies and we have Alphabet tapping the
market for eighty five billion dollars let's call it. How is that not some sort of sign that we're kind of nearer the end than the beginning here.
No, I don't think so, Caroly.
I think this is the very very beginning stages of monetization. Now we I've seen some financing changes. I think Alphabet Google is just trying to get ahead of the three huge IPOs. Obviously just talked about SpaceX, the largest IPO in history, will be the largest company valuation and the entire world.
So that in and of itself is just crazy.
Then you follow that with opening AI and anthropic googlegle once to get more money. If you look at the hyperscalers, they're usually writing about a little under thirty billion of bonds a year and last year in twenty twenty five, they wrote one hundred and twenty one billion. So we're starting to see we can't get enough capital to do all of the investments the capex that we want, and so I think if we get the capex, we're going to keep seeing this market go up.
It's the beginning stages.
So, Rebecca, you are the capital or you're a part of the capital. Right, you have the alphabet equity raise SpaceX, IPO and tropics filed confidentially, a lot of debt financing, and then there's the Nvidia bit. Is this the fomo trade where you just have to have exposure to everything or do you pick a hole in the race and say, actually, in the end, why there are five lanes, but I only think three of them will will succeed.
Yeah, that's a great question.
It's so hard to pick the winners at the beginning stages of monetization because we don't know who what technologies are actually gonna win out or what methodologies. So I do think you have to sprinkle some capital kind of everywhere.
But that's and you have to hold.
You have to be willing, Like if you look at the monetization of Nasdak in the nineties we had you know, thirty thirty three percent overall, but we had fifteen pullbacks. So people need to understand that monetization is volatile and get the steal the band of steel to stay the course and to be in for at least the long haul. Most of our IPOs usually are you know, coming down in the first twelve months, so I think there's gonna
be a lot of emotion. Possibly wait till the at least the insider lockups expire in six months, and then go in. But I do think if you're going to participate in the emotion of it, you're going to I want to feel the pressure pulling back. So I would wait, and I would buy in strategically, and I would keep my investment broad I.
Mean, in many ways people come what may well have exposure to these names just by the very weight within certain benchmarks.
But Rebecca, how much exposure do.
You want outside of the US that the IPO frenzy is stealing the thunder when it comes to big US giants. But still we've seen significant outperformance over an Asian training for example.
Yes, I definitely think that you've got things in Korea Obviously, you've got markets outside of the US that are going to be a part of AI, and I look really to the legislative policies. I'm really concerned about the Secure Act. If the banking lobby is successful and really pulling weight and teeth out of the stable corn in the United States, it will route elsewhere and that is going to be part of this whole AI monetization. We're changing our payment system to digital that's coming.
So the United States.
Seem to be a part of that and facilitating that and not trying to stop it and keep legacy systems in place because they are on their out. It's going to take time, but they are legacy, and we need to keep making sure the United States is the focal point of everything. But certainly I would pick up some international as well.
Just what you said a minute ago, By the way, love that participate in the emotion of it. I'm not participating in the markets right for obvious reasons. Certainly participating in the motion and the emotion of what's going on. So now you've given me something to think about. There's
statement as well, right. Jensen Mung's on stage again last night for the seventh time in five days saying that you would be insane if you didn't see the return on investment that is now real out in the world from AI, and that you would be foolish, you know, not to keep investing in the space. Do you see it as clearly as he does.
Well, I was just.
Excited that he was on stage saying here's the first laptop for an agentic AI agent Like I was like, yay, Now we're buying laptops for agents AI agents, not people.
This is really interesting.
Listen, this is the largest technological change and the history of human time. You can't be more hyperbolic and parabolic. With these equity prices going up, there is going to be volatility.
It is going to pull back.
But this is the largest opportunity for wealth creation and for people, average people to get in on it.
Take only to.
The risk that you can tolerate, but definitely participate in this and just know that you're going to have a volatility. Stay the course, that's the theme. Stay the course and you will be a winner in the long run. Financially. Anyways, we don't know about all the other bad side of AI, but the financial side positive.
Wow.
On debut, Rebecca Walsa, CEO and Chief investment officer of so Wealth Management on Bloomberg Tech. Hit every single story that we had to offer today, Thank you very much. Now coming up Palato Networks fools after the company failed to meet very elevated by side expectations. We got the earning story and a little chat about a pay package that's coming up next.
This is Bloomberg Tech.
Let's check in on Palo Alto Network shares down. They're actually having their worst day and let's call it a couple of months. April the tenth, we're off five to five percent, but that's such a cybersecurity firm.
Actually reported really strong revenue growth.
They've again been fueled by AI spending in the fiscal third quarter. It was up though against the Hima paralle Alto network shares. Look, they're up fifty three percent so far year today they were up sixty percent going into this release. Let's talk more with Bloomberg's editor covering cybersecurity, Linduan, and we've got plenty to talk about in the exec chair as well. But first talk about these numbers, because there was a lot of anticipation they raised, but it wasn't good.
Enough, Karlin.
It feels baffling at first, right, But as you noted just now, there was a huge run up in this dark ahead of the earnings. They have done amazingly since the beginning of the year. I think there was a lot of anticipation. I'm just going to call this like the Nvidia effect. From here on out right, you can beat on every single key metric, and that's what Palo Alto did. Every beat on revenue, earnings, outlook was solid.
And yet your stock can still come down because of that run up, because analysts aren't really honest about what they want to see in those earnings, and because of the macro review, right. I mean, I'm sure that it doesn't help that the entire stock market is down on usc run news on top of all that bad timing for Palo Alto.
Of course, one of the issues that shareholders have with the company, or as we put it, the recurring beef, is with the pay package of the CEO and other senior leaders. We ran this big feature twenty four hours ago explaining it.
Explain it to us.
You know, that's a really interesting issue, as I said, that's going on in the background.
Isn't it.
Now, This is an analysis that we did based on proxy data that is available on the Bloomberg terminal, and we went back several years to twenty fifteen, and what that revealed to us in a surprising way. We didn't expect to see this that Palo Alto Networks has seen more rejections on its say on pay votes, which cover executive compensation for that past year, than any other company
in the SMP five hundred. They have seen seven total rejections by investors on those SAM pay votes since twenty fifteen. No other company in the EDIX comes close to that.
The last vote I think was in December, and at that point I think more than half of shareholder has pushed back on the one hundred million dollars potentially coming Nick kesh Aora's way. But to be fair to the guy, the stock has added a market cap of one hundred billion. Is that sort of how they tend to say, Like, yes, he's paid more, actually more than some of the biggest CEOs in the world, like a Tim Cook, but a lot more is actually linked to the performance of the stock.
You're raising.
Such a good point, Caroline, and we actually hit that in the story because the story itself isn't even just about Palo Alto. It's about the effectiveness of these say on pay votes. And in fact, there have been reports done that suggest that investors like it and they like to compensate CEOs when the returns on their investments are strong. So in that way, Palo Alto and its CEO are a bit of an anomaly because Palo Alto has soared, as we just talked about, in the past year. In fact,
they've soared in the past like six years. They've been on the rise since Aurora took over. I think they've added well over one hundred billion dollars in market cap, right, So you would think that their shareholders would vote supporting that compensation, but they are an exception to that rule. They have voted against it.
Nikesha ROR's package is valued at like nearly one hundred million dollars, and one of the things you do in the story is compare it with some of the titans of corporate America. Right, So it's not just tech. You know, you've outlined the performance of the stock. Why is it that the shareholders think that number is too big relative to Nikesh's peers?
Well ed?
If you are comparing Nikesh and his pay packages to his peers, ISS would say, and Glass Lewis for that matter, both proxy advisory firms would say that it is not aligned. He is consistently paid well above his peers in the cybersecurity industry. What Nikesh would say, and what he did say in our story is that that's because he's been
capable of delivering outsize returns. And in fact, if you look at Palo Alto Networks performance this year, it has performed well, far and above the rallies that you've seen from other major cybersecurity stocks in the US.
Being mostly into bringing that story to life, thank you very much. Indeed, CEOs and a ings are also top of mind for Adobe investors. The creative software giant is under pressure from AI native rivals and is in the process of finding a new CEO to replace shantan In Iran, who's led the company for nearly two decades. Being the software reporter, Brody Ford joins us with reporting that there are two internal candidates in the running, but the company, Brody is also looking elsewhere.
What do we know, Yeah, well, we know that Adobe needs a new CEO. They decide they stop nice. They you know, they are kind of one of the air examples of the saaspocalypse. Or investors have decided that AI might disrupt some of these leading software companies that enjoyed some of the best growth rates and margins for decades. And so Adobe announced back in March that they're going
to do a whole search for a CEO. And what we have today is that they've zeroed in on two internal leaders, and they've also brought in one of tech's best known search firms to look for folks who might have a little more experience with cutting EDGI development.
I mean talk to us about the internal leaders and where they were they stood to lead before in the business units. Because this is a company that probably, rather like Salesforce, a lot of the general revenue.
Drivers are just flowing down.
There's like a little bit of macro overhang.
Companies aren't spending so.
Much on software as much unless it is sort of directly AI related.
The most obvious choice is somebody named David Wadwani. I mean, he's been the main deputy for quite a while for the largest chunk of the business. I think a lot of folks within Adobe assumed that he would just be the next CEO, and so the fact that they announced this big public search made some folks say, hmm, oh, well, maybe David isn't going to get it right. Our understanding is David certainly still could get it.
You need to have an evident race, you know, you need to prove yourself that you are the right person for their job.
Having at Disney as well, right like you know that you go in internal candidate, but you put a little pressure by saying, well, we're also looking at You said search for them, but you mean executive search, right, headhunters or that case.
Do we know if there's anyone out there headhunters? Yeah, they're looking quite widely. One name that we have in the story is Microsoft's Charles Lamana. I mean, he's an ascendent executive at Microsoft. He helped some talks with Adobe, ultimately backed out of those, but it's an illustrative example of the kind of folks that Adobe's probably looking at, those who are seen as being able to kind of develop and monetize AI at the scale that you need to at a company like Adobe.
What about Shantanou right now and how he guides it in this interim period where everyone's.
Kind of just what kind of just holding all breath and to find out more.
He's the chair of the board, so it's got to be a little awkward for him, right. I mean you have these two deputies. The other one Neil Chakravarti, he runs the other big part of the business. He's done very well that part of the business. While it's not what we think of as Adobe. It's marketing software, marketing and analytics software, which is you know, it's not Photoshop, but it's still a big money maker and it's grown
quite a bit. You know, he has a Neil, and he has David Likely saying hey, pick me.
I should be your next CEO.
Soare going back spaces right? You know people will know Adobe because of Photoshop or PDF or some video editing equip software platforms. But the basic story is that a lot of that tool can be found free from some kind of generated AI platform.
Right.
So Adobe, you know, you and I've worked on this together. Right when we've we've sat down with Chantono in the last twelve months, is to say what are you good at here? Like are you using AI? Have they sort of dispelled those fears with investors? Where are people still saying oh, you know, the AI companies are coming for you.
The big concern with Adobe is that their software is expensive when it's complicated hosting. If you're a professional who needs all the knobs, you're not leaving. But if you're somebody who wants to make a stupid meme and show your friend and photoshop them doing something silly, you might have bought Photoshop in the past, and you're probably not going to today. That's the big concern the verse.
Brady Ford, thank you the real, really important read on what's going on with the Adobe CEO.
Sir.
Let's go out to the Bloomberg Global Credit Forum while Bloomberg savanas co host Elisa and Bromowitz is sitting down with Steve Tannenbaum's Golden Dry Asset Management founder and Cia take a listen.
Yes, and it also is very competitive. There's hundreds of different managers out there. I remember when I started at Makay Shields, we were eighty nine out of ninety one, and within three years I was very proud we got to be number one.
But that's a.
Lot of people to compete against and so and you get your scoreboard every day. But more importantly, strategically, there was the mindset of why do people buy, why do they sell?
And can you front run that?
Can you predict if the premise if you're thinking of investments as maybe as short movies, and how's a movie going to end? And if your premise is that this happens, and this happens, can I sell?
Who am I going to sell it to? And why are they going to buy it?
And so, you know, part of that could be liquidity, part of it can be the stats. Why isn't somebody going to buy the four times levered software company that's growing at eleven percent? Sure they're going to be upset that they didn't buy it a twenty percent, but it was five and a quarter or five and a half
times leverage back then, and the mindset was different. So I think that and if that looks attractive, for instance, just using an example to what else is in the market that's yielding ten percent or nine percent, there's going to be enough takers in that. So that so having that mindset's always been attractive and helpful. There's also the you know, you look at something like COVID and okay, how are people going to going to behave there was usually.
I remember in mutual funds that when people got redeemed, they would sell what they could sell quickest, or what was most liquid. I always tried to sell my semi liquid product because I know I could never sell it in another week at this continued. So there's just different strategies to think about.
So if you fast forward to now at Golden Tree Asset Management, how do you perceive the mentality right now in the masses or in the funds that you go up against?
Sure, so there was a bigger question.
We were talking just a few moments ago about the perspective on credit, particularly total return credit, and there's probably frustration because some other assets equities are participating significantly. In credit broadly speaking is in the low single digits, So there's frustration and anxiousness. How do I capture returns against that backdrop You have great current yields and still value when you subtract out versus the faults that justify being in credit.
Just to have everybody participate, this is a great time to bring in our question, which is how you're positioned in credit for the remainder of this year. And I would love for you all to weigh in defensive, neutral or risk on. From your perspective, how are you positioned? I mean, right now, do you want to take more risk? Are you looking for yields or are you looking for defense ahead of greater opportunities.
So when we spoke in January at Davos, I mentioned how the setup was poor for credit and good for equities. Historically, when you've had stretch valuations in a mid cycle, where the economy is expected to grow at two percent or better, your returns in credit or less than the coupon, and that's exactly what's happened so far. In contrast, usually that's
a great environment for equities, and that's what's happened. And even if you look at the equal weight to S and P is certainly beginning to catch on.
So it's been a.
More broader rally, particularly the last few weeks. Even in the face of a run on again off again conversations, credit has still been is still linguished, and we expect that to continue. Now that's not to say that it can't have a better second half, but I do think there's some pockets of opportunity. But this is historically a tough time to be in credit in terms of in the cycle.
Because of inflation and growth. That doesn't really benefit the instruments.
It's just how it's priced its price as if defaults are going to be low, and and that the corporate earnings are going to and that they're more likely to disappoint. You're getting you're not getting paid to increase corporate earnings or for earnings to surprise on the upside, and you're being heavily penalized at the surprise on the downside. In the equity market, there's still some acceptance or excitement if you're taking up numbers.
There are some opportunities. Like you said, where's the distress and where are you finding them right now?
So it's very situational.
There's the expected distress, which is in software where the business model is getting called into question. Then there is also in telecom another business model that's getting called into question. And there's an interesting relationship between the public equity. As you look at a Comcast, I think that's hitting a new low as we speak, a fifty two week low.
If not, it's certainly close to that. Charters probably in the same camp, Cable one in the same camp, but yet some of the debt isn't, so I think that's kind of an interesting relationship the debt and what happened I guess recently with lts with threatening a transaction. I think it's all a ploy for negotiation, but it probably
brings people to the table sooner if it works. It's the same team that brought you Ballish and we respect them an awful lot, but it kind of went nowhere when there was a bunch of of I guess potential transactions being contemplated that didn't get to the finish line from the equity.
So playing the debt equity structure in creative ways is why you're playing.
With it right.
And within industries, I think the equity in cable is much easier. It's hard to see that the equities don't work, workers don't work, and the debt works. So I think that relationships kind of is kind of interesting. I'd say the same thing in healthcare, which seems like it's been a source of funding for technology stocks, and there's certain companies like Tenant which strike.
Me as very reasonable value.
Sure there has been some volume issues, but the valuations seem very credible.
Top match management team, and.
I think the equity market exhues me the credit markets would finance the entire market cap.
More broadly, you started by talking about the frustration felt by a number of credit fund managers because right now, this isn't an assa class that tends to work that well or give that many that give outsize returns, given the narrow we're in, and yet people are pouring trillions of dollars into AI infrastructure. Does that worry you, excite you for the potential down the line?
Well, when you look at the devils in the details in terms of what the terms are, but when you look at who's backstopping it, they seem like good credits. And people tend to think of two and three years out, not five or ten years out, and it looks like for two to three years out you're getting overcompensated for the risk. On the other hand, you're dealing with terrible technicals.
They don't seem to run out of product. And I think even this Google financing is suggesting that they want to make sure to be out in front of the financing in terms of the equity, and there's almost not almost, there is an arms race going on, and the issue is will the infrastructure investment be justified or will this be more like underwater cable, which was a good thing until it wasn't.
Do you have a take on that.
Are you imbedding a sort of thesis into your investments.
I'm somewhat agnostic, but history would have a bad record in terms of overinvestment for industries that have very high payouts, whether it's riverboat gambling to something like undersea cable. So you know, it's not a great precedent, but there's not a great precedent, But there's an argument that you know, I understand the arguments now, and I think our view is to be very deliberate to have additional assurances by the users that they're committed to these projects.
Would you rather invest in the high yield part of the investment grade part with the all in back drop the idea that it tends to be lower duration, shorter maturity in the high yield but higher risk investment grade longer duration but tied to.
Very So my guess is at different points in this funding you're going to get high yel type of spreads in the investment grade market. So the issue is, you know what you do in between them. So I think it depends you know, on the pricing, but I think you'll get at least every other stretched or over financed industry I've been part of, you usually have been able to get excellent protection with below investment grade pricing at some point.
So now what do you do in between? There? You know is the issue, But it's going to get there at some point.
So just dance and cable and and and some pick up some distressed software where and wait to invest in this area until it falls out A.
Bit no, no, because if it's two or three years, it's a lot of return to give up. But to be deliberate about what you're getting versus the opportunity of what you might be getting. And you know, at I'm incredibly fickle on these topics. So I could you know in a month or two, could just have a different perspective with more evidence.
How do you remain nimble at a time when you're going in and out of sometimes less liquid instruments.
First is you've got to assume you can't be nimble and less liquid instruments and lower prices brings in illiquidity, higher prices brings in confidence. So that's kind of the way the credit markets work. Just trying to ask as many questions and focus on what we think are the key variables, and something like AI. You can be overwhelmed by so much, so to try and look at some of the larger issues and just focus on that and be deliberate, you know, because there's so much supply.
The idea of.
You're going to run out of opportunities isn't a real Yeah, that's not realistic. There's going to be something to do in this space, particularly as it continues to be successful.
Right now?
Would you rather be in public securities or private securities? Just as a rule, I mean in terms of the interests that demand.
So when we look at asset classes, probably the asset back to asset class we find the best value, which is a private asset class. So we're finding good value there. In private credit, there's some of the more anxious capital the open end of private credit funds are out of the market, so that leaves the funds and other players in private credit who are more deliberate being the main buyers of private credit. So we're seeing good good value there.
We're seeing good of value in some of the out of favor sectors, which is always the case by definition, out of favorite sectors or.
At discounts, but so I'd say it's eclectic.
But we certainly are seeing better value in private credit today than we've seen in the last twenty four to.
Thirty six months.
Are you getting paid for the illiquidity premium?
That's always after the fact comment, but it seems like you're getting better paid in the absolute. When I think of things, I think it's far to say out of ten, maybe a six, you know, six and a half, So it's above average, but not by much.
Right now, we're looking out for a year where a lot of people keep talking about inflation inflationary risks, and this is one of the reasons why credit hasn't been as much of a sweet spot.
How do you.
Price it in?
I mean, at what point do you just start to increase the sleeve of equities and create some protection on the downside And I kind of hope for the best with a couple of security selections.
At least.
It's probably the biggest risk in the market, and it's impacted because it's impacted rates much more credit than it has equities, which I'm surprised at, but just as what it is, and if you look in the seventies there were better equities did better than credit. So you know, if if the if you're looking at a bad environment, at least that's one example where equity outperform credit. It's it's very much data dependent. It's also what's going to
happen with the war. You know, if you look at one of the big surprises so far this year is oil has been relatively calm in a relative to what expectations. Most people thought if you got past Memorial Day, it would be one twenty five, one thirty five.
But yet we're in the mid nineties. So I think it's.
You know, that's a factor that seems to you know, be developing.
So it's hard to do. It's hard to.
You have a line, you know, to draw a line in the sand, you know on that you know.
This is a cognitive dissonance. Every single morning. We talked to a lot of people, and we were speaking with Mike Worth of Chevron the other day and he said, we're going to end up with shortages. If this keeps going in the next couple of weeks, we could start seeing shortages. In the United States, diesel inventories are the lowest levels since two thousand and three, and then you get an equity strategist on a credit strategist on we're
not looking at that. That doesn't matter. How do you think about that?
So I've kind of processed a little different is how are equities pricing this? And equities seem to not be pricing the future's curve. So on the strip curve, it's just so on oil service. Sure, Helliburton's having an excellent year, But when I look at some of the mid caps, very much pricing in i'd say seventy seventy five dollars oil.
And when we see the M and A market in oil services, and we have a company that we or more than half of that looks at the M and A market and has bought a few companies in the past twelve months, that market hasn't changed that much so in terms of levels and pricings and multiples and expectations. So we see the regardless of what people are saying, how they're voting with their feet, they're still very cynical
of how long this will last. And that's probably it seems like a better opportunity that it's going to be higher for longer than what's in the market.
So in other words, by MidCap oil names.
Yeah, and suppliers, but also when you're thinking about oil as an input to your companies, and I'm thinking as a portfolio manager, Okay, what should we be assuming in terms of whether it's in building material products and which oil can be an important input? You know, what does it mean for inflation, etc. My guess is going to be higher for longer.
I want to pull up the results to the pole, and unfortunately we didn't have an answer to the pole of just frustrating.
What the answer was, how are.
You positioning credit for the rest of twenty twenty six? Not for ultimate frustration but neutral forty two percent, defensive, thirty one percent, risk on twenty seven percent?
Does that surprise you?
So I look at it as almost seventy five percent seventy three percent of people who are like yeah, what else did you say?
Yeah? And so you know, it's it seems about about fair.
What's being What's a strategy that's been very popular this year in terms of inflows is opportunistic credit having a long playbook and instead of a distress manager a private credit manager, how about a manager who can look for the best opportunities with a long playbook, So that strategy has been gaining a lot of traction.
I think the.
Positioning and credit credit in terms of getting alpha and dispersion is that's not surprising with the results here.
You've been in the business for decades. You've seen a lot of cycles. You were talking earlier about the seventies. I hope that's not the aut analog. But is there an analog to the moment that we're in right now that you can think of in terms of investing, in terms of the macroeconomic backdrop.
So we're mid cycle in a stretched environment where it's very narrow for what the opportunities are. That's like most markets I've been in.
I mean, that's like just in.
Feeling most markets for most people.
So if you were to go back and count, yeah, stretch valuations, very little dispersion except for a certain percentage of the market, call it less than twenty percent of the market, that's kind of most markets.
I bet, I haven't.
I bet it's three quarters of the market, is what that? It's certainly more than half.
So you think that the analog is almost every time except for the big extremes, Well.
I think that what's different this time because every cycle has something that's different.
And what's different this time is.
The AI expense and what the ramifications of who the winners and losers are. And you could have said that with media with the Internet, and who's going to be when I think of software and try and conceptualize who the winners and losers are. I look at legacy media, and there was TV which went from call it nominal growth to lesser noomenal growth, but still growth. You look at cable programmers who still had above nominal growth for
about fifteen years, so those were healthy businesses. You had radio that call it by two thousand and eight or nine, seem to really be a more marginal product, and then by the late teens really in trouble. And then you had newspapers which really peaked about I'm trying to think of the tribune transaction of two thousand and six, two thousand and seven, I think two thousand and five. So after two thousand and five really began to be disintermediated.
So where does some of these industries fall with that methodology?
Fascinating and everyone wants to be not radio, although radio is coming back with podcasts, so there's.
That though it's not though it's not only on the band, right, So when you're thinking about radio, as I grew up with it, it was AMFM and really FM for the most part, though I think I remember being invested the largest credit in MS, which was w FAN on the AM band, But it was but that's a different it's a different medium for radio.
Yeah, different distribution mechanisms. Stephen Tannebaum, always a clinic, Always wonderful to speak with you. Steven Tannabaum of Golden Tree Asset Management, Thank you, it's so good here.
That was Steve Tannenbaum, Golden Tree Asset Management founder and CIO, speaking with our own Lisa Abromowitz. Hello, Welcome back to Bloomberg Tech. This is what financial markets look like, zeroed in on the tech sector. There is a lot in the market to do with the move in oil. There is some concern about the current state of affairs in the relationship between the US and Iran and what that
means for peace talks. Broadly, we're a little softer to flat on the Nasdaq one hundred, you know, that's our go to tech heavy index. But continued out performance in chip stocks and we've given you that story throughout the hour. We're going to get a lot more on it in just a moment's time. Bitcoin at sixty six thousand US dollars per token, down two percent, but you know, kind of risk off. And then there was that big number alphabet boosting its equity offering to eighty four point seventy
five billion dollars. A little bit of dilution going on, maybe down six ten to one percent. Okay, markets are fun? What else is going on current?
Maybe politics is fun in certain places. Right here in California, several tech favored candidates they delivered actually a poor showing in California's primary elections just yesterday. The results are still being tallied, but so far, the big buck spent by Silicon Valley billionaires and founders they haven't resulted in wide ranging wins for their favorite candidates. But in most California reporter Aniahou Commission is here with us and an iaho.
Why why has money not worked?
That's a good question. I think we're seeing that a lot of this frustration in Silicon Valley has been concentrated amongst a very small group of tech elite, and it didn't really translate to the voter base.
So they spent a lot of money on Matt Mayhon.
The moderate San Jose mayor, and they there's a lot of enthusiasm on X for him. A lot of venture capitalists, big names like Mike Morritz, Sergey Brinn came in behind him.
But he promising like no billionaire attacks.
Basically that was one of his promises. He was against the billionaire tax. He wanted to kind of do a more back to basics, smaller government, you know, kind of less taxation and little less regulation, a little more friendly to tech. And I think, you know, we've seen that there's a lot of actually fresh with Silicon Valley in California and these leaders who are making a lot of money in the tech boom, and they're feeling very confident. It's actually not translating.
To the ballot box right now if you're watching Bloomberg Tech from outside of California, we're talking about the gubernatorial primary, the race for governor, and the first instance of that has been gone. The top two will go to the general election in November. Just where do we stand? You know, who is likely to go through on that? And always on this show, give us the tech angle of whoever does go through?
Yeah, so there's three candidates that are at the top. Is Javier Bessera, Joe Baden's former health secretary, Steve Hilton, who is a Republican former Fox News commentator, and then Tom Steyer, who is a liberal former hedge fund billionaire. And right now it looks like Javier and Hilton are going to go to the runoff, although ballots are still being counted and Tom could make a late run. The
ending on, you know, to be determined. I think what the tech angle is Javier has kind of started to coalesce some of the establishment democratic interests and also a little bit of.
The tech money.
So when he started surging as a late stage favorite, you saw Meta and you saw Airbnb come in for him. And interesting, they're kind of they laid in the stage. They acknowledge that he's going to be the front runner, and they're trying to kind of put pick a winning horse.
Bimbogs Ellie Camrashow on tech and politics. What's happening in a selection cycle here in California? GitHub is beending big on ai agents, launching a new GitHub co pilot desktop app, or racing to keep up with surging demand. I sat down with Microsoft's EVP of Core Ai, Jay Prie, to discuss GitHub's growth, its efforts to improve reliability, and what comes next.
Listen to this.
For us, it is one where GitHub continues to get lots of help from the rest of Microsoft. Right, So, we have even in just the year and a half I've been at Microsoft, we have brought in really great talent from other parts of the company to help us build products, to help us scale, to help get Hub be more secure, to build those enterprise backstory.
Was the outage security issues, and then there was a change or departure of leadership. So you're describing what's happened since.
So you know, we should start with the fact that beginning since the beginning of the year, the amount of traffic that has come to Getthub has gone up significantly. Right, So last year we had about a billion commits that we processed in all of twenty twenty five. Now we process about three hundred million commits each each week, So traffic has gone up pretty significantly, and we're very committed
to improve the availability the performance of the platform. We're getting help from more of the Microsoft engineers and the top talent that we have. We're attracting new talent to the team, We're bringing in more capacity to scale well, and we're re architecting these systems. But you know, I feel really good about the path that we're on.
Could you just give us a real time view of how much work is being done, real work by an agent and where you see that going over the next twelve months and beyond.
And I think we're just at the start as this is right because it's early, but it is amazing to see how people are translating these ideas into these use cases and building these platforms right, and lots of use cases even internally where teams are building agents to continually improve their product even when they're sleeping, you know, on the weekends, these agents are running and then analyzing all sorts of different telemetry to find ways to then make
suggestions for the engineers for the product folks when they wake up in the morning to how to improve the systems right. And this is technology that works today. You need that observability, as you keyed on earlier. You need that human in the loop to make sure the thing stay on track and that it is doing what you expected to and prioritizing it correctly. It's early, but it is going to be I think a really really quick
ramp and it's exciting that we're seeing this. And you know, the team's super energized to be working closely with our customers to be iterating on these platforms, on these technologies.
Microsoft's EVP of Core ai j perk there with ed coming up, all eyes and Broadcom as they get set to report off of the closing bell. What I need is you tell us about the AI trade chess Hi, this is blue.
Bag Tex.
The next trillion dollar company.
Ladies and gentlemen, WHOA that would be exciting.
Let's do it together.
Let's do it.
Together A CEO Jason Wong alongside Marvel CEO Matt Murphy over in Taiwan at computext that was yesterday and share some of continuing to run high and look at that move over three training days that we are getting c set potential one trillion dollars as Jensen was just talking about for more who most Denavas joins us. Now, it's the power of the five trillion dollar giant in the room to anoint the next one trillion. But is there real fundamentals behind it?
Dina, It's we're i think waiting to see you know what Broadcom reports today Marvel's made competitor. But also Marvel, you know, and Broadcom are basically competing for the business around custom AI accelerators that aren't in video. Now, Jensen is not objective when he and you know so to speak,
annoints Marvel in that manner. Marvel is the horse that Invidia has backed in that space, They've invested, and you know, he wants to set them up as an even stronger competitor to Broadcom because Broadcom itself has you know, been positioned and has positioned itself as a the alternative to in video if you don't want to use in videos GPUs.
Right, and Broadcom is now a two point three trillion dollar company as a result. This is an important earning. Sprint explain why it's important, but also why Broadcom is a genuine competitor to Nvidia.
So the vast majority of the AI chips that are used are in video's GPUs. The alternatives increasingly are coming from, you know, some of the hyper scalers and the large frontier labs that are making their own custom chips, and Broadcom has several of those. The biggest customers there. We talk a lot on this show in the past few
months about Google's TPU that's made with Broadcom. Anthropic is buying a bunch of those and paying Broadcom for them, Metal Works with Broadcom, and those three companies have signed extended, you know, long term deals with Broadcom in the last few months. They already had deals and they expanded them. And so what we're seeing from Broadcom is, you know, according to Bloomberg Intelligence analysts, a better visibility of what
the long term picture looks like for that pipeline. That's been something I think investors have been a little bit concerned about. You know, what is the long term pipeline. When do these contracts come online? And if they're a multi year contract, what is the amount of revenue the Broadcam is going to be able to get from each of them in you know, in each quarter. How does that kind of play out? But there is now greater visibility.
Bloomberg's Dina Bass with the broadc on preview and stay with Bloomberg Tech tomorrow. We're live from the Bloomberg Tech Conference. Hock Tan, Broadcom president and CEO, joins us. This is just pure timing Caro and the linings after the Bell conversation tomorrow.
What a phenomenal executive discussion to be having. Tom Giles, our executive editor, is going to be leading that conversation. What an array of people we're going to speak into throughout the day. I mean, you're going to be speaking with Andrell's chair and of.
Course big Player over it found us fun.
I'm going to be talking to San Francisco Fed President.
We have a lot to digest tomorrow and it's a big show.
It was a good show today, So recap it you know where on the podcast and you can find it online Spotify, iHeart and on Apple and then of course and all the Bloomberg platforms. This is Bloomberg Tech