00:00Let's talk about those tech earnings.
00:01Mandeep Singh of Bloomberg Intelligence joins us now with a preview of this week's results
00:05and a sneak peek in next week as well with Alphabet and Amazon on deck in early February.
00:10Mandeep, welcome to the program.
00:12What are you focused on when these guys report later this week?
00:16Look, I mean, for me, it's always about cloud growth when it comes to the hyperscalers.
00:22And last quarter, we saw Microsoft hit 40% growth for their Azure business.
00:28And it was aided by AI.
00:32That's where all the CapEx dollars are going.
00:34So you want to see that cloud momentum carry on.
00:38Even Alphabet saw 35% growth in their cloud segment.
00:42So that, to me, is the real sort of ROI indicator when it comes to these CapEx investments.
00:49The other thing to keep an eye is there was a pushback last quarter on Oracle in terms of
00:55their debt really reaching a point where a market felt it was reaching a limit.
01:01It exceeded their operational cash flow.
01:04So would there be any other company that would be put in that sort of basket this quarter?
01:10And especially someone like Meta, which plans to spend over $100 billion in CapEx with no cloud business.
01:17I would be curious to see how market reacts to them raising CapEx.
01:21I mean, obviously, their top line growth has been super strong, but that would be of interest
01:26for me in terms of the pushback that market may have on companies really spending more
01:31on CapEx.
01:32Mandeep, I'm right there with you.
01:34I think that's got to be an important one to look for, particularly given what we saw
01:37in the final few months of last year.
01:40And what we saw from these guys, the amount they're spending.
01:42Mandeep, I saw an estimate, a number that came from JP Morgan Asset Management.
01:46Michael Semblis put this out, that 40% plus of the GDP growth that came in the first three
01:50quarters of last year came from the spending of tech companies boosting CapEx.
01:55Mandeep, ridiculous numbers.
01:57Do you think with Meta alone, they're an isolated case of weakness or are you seeing other examples
02:02of that in the space?
02:05Look, I mean, all the new cloud guys, they're much smaller than a Meta.
02:09But at the end of the day, you are spending so much upfront with the hope that it's going
02:14to translate into recurring cloud revenues down the line, Amazon as well.
02:19Any company that is now spending in excess of their operational cash flow.
02:24I think it's a fair question to be asked in terms of how long will this last?
02:29And then what is the recurring revenue down the line that investors can hope for?
02:34And if you don't have that visibility, which was the case with Oracle, that's where you
02:39start to see pushback.
02:40So I do think the new clouds would also face that kind of scrutiny.
02:44And that's why this CoreWeave NVIDIA partnership is of significance, because now you have that
02:49NVIDIA buffer in terms of, OK, you have some cash that you're getting from NVIDIA to spend
02:54on.
02:55Mandeep, appreciate your take as always, sir.
02:57More from Mandeep through the week.
02:59Mandeep Singh there of Bloomberg Intelligence.
03:01To build on this conversation, Mama Q of PSP Growth joins us now for more.
03:05Mama, welcome back to the program.
03:06I'm sure you heard some of the comments from Mandeep Singh just moments ago.
03:09Do you believe this could be the year of investor pushback?
03:13I think it depends on where you sit.
03:15First of all, good morning.
03:16It's great to be back on the show.
03:18Big week for tech earnings.
03:20Investors are focused on who is at the center of the AI workload.
03:25We're shifting now from AI in terms of building and training a model to inference, which is actually
03:30using it in practice.
03:31So if you're sitting at the core of AI infrastructure, like we saw with CoreWeave this morning, then
03:36you're in a great spot.
03:38We're even seeing this not just in the public markets, but in the private markets.
03:41There are a lot of inference market leaders out there, like Together, FOW, Firework Space
03:4510, that are seeing record revenue growth.
03:48So the companies that are positioned at the center of the AI wave in terms of running and
03:53execution will be well positioned.
03:55If your strategy is not necessarily at the core of those, if you're still figuring out
04:00your AI strategy, then investors are going to have scrutiny over you in terms of where
04:05all that investment is going.
Comments