Uber Earnings and Chegg's AI Scare with Deirdre Bosa | Okay, Computer Podcast - video Dailymotion

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Dan and Deirdre Bosa discuss Uber earnings (1:00), Chegg crashing after its ChatGPT warning (14:00), and Amazon’s AWS guide spooking investors (20:00)  About: Each week our tricked-out team of tech investors and former operators breakdown the biggest headlines and themes in both public and private markets, with a specific focus on the intersection of web2 and web3. We will be joined by some of the most influential voices in tech, media, and crypto leaving listeners with fresh perspectives on increasingly complicated topics impacting their lives and investment portfolios. Okay, Computer. Podcast is hosted by Dan Nathan, Katie Stanton, Rick Heitzmann & Packy McCormick with contributors Jarrod Dicker, Meltem Demirors, Cleo Abram, and Sally Shin. RiskReversal's resident luddite, Guy Adami stops in occasionally for Okay, Boomer segments. Follow OkayComputerPod on Twitter.  ---  View our show notes at RiskReversal.com  ---  Email us at contact@riskreversal.com with any feedback, suggestions, or questions for us to answer on the pod and follow us @OkayComputerPod  We’re on social:  Follow Dan Nathan @RiskReversal on Twitter  Follow @GuyAdami on Twitter  Subscribe to our YouTube Channel: https://www.youtube.com/channel/UCRAOycPjsSgcEyQcuJD_ENA

Transcript

00:00 (upbeat music)

00:01 - All right, welcome to OK Computer.

00:02 I am Dan Nathan.

00:03 I am joined with Deirdre Bosa.

00:05 She's the host of CNBC's Tech Check.

00:06 Welcome back Debo.

00:08 - Always happy to be here.

00:09 Whirlwind trip to see you in New York

00:11 and Miami last week and back in the saddle.

00:14 - Yes, you actually, you probably got a lot of intel.

00:17 You spent some time in New York.

00:18 You were on the public tech beat.

00:20 You spent a little time in South Beach

00:22 on the private tech beat here.

00:24 We're gonna cover all of those Q1 earnings

00:27 that we saw last week since we were last with you.

00:29 Also, some very interesting names

00:31 that I know you're very focused on.

00:33 You've been reporting all day here on Uber's results

00:36 and their bang up results.

00:37 And I wanna kind of drill down on some of the metrics

00:39 you often push back at me and some other folks

00:42 who are on your programming who refer to profitability,

00:45 but in the terms of adjusted and really feels like Uber

00:49 is crossing a little bit of a Rubicon

00:51 as it relates to gap profitability.

00:53 So I wanna hit that.

00:54 We also have a great interview coming up.

00:56 Dan Niles, the founder and portfolio manager

00:58 of Satori Fund.

00:59 Dan's a guy that I have known for an awful lot of time.

01:02 D, I go all the way back when he was a tech analyst

01:05 at Roberts and Stevens in the late 90s

01:08 covering semis and hardware.

01:11 And he was like poster child

01:13 for big tech analysts back in the day.

01:17 And now he runs this fund that is a long, short, large cap,

01:21 primarily tech focused on.

01:23 He's also a guy that you've had on Tech Check for years.

01:26 Talk to me a little bit about Dan

01:28 and your relationship with him.

01:30 - Oh, let me first say that danniles.com is a legend.

01:33 He is a wonderful person also I should add,

01:36 who we found out he was coming on Tech Check.

01:39 And then one time we were gonna do the CNBC Pro Talk

01:42 and figured out that we lived a block away from each other.

01:45 So that led to us and his wonderful wife

01:48 and my husband playing cards sometime.

01:51 If he's listening to this, I just wanna say

01:53 that if we had finished that last game,

01:55 we would have beat him and I'll leave it there.

01:57 His market predictions and market analysis

02:00 much better than his card game.

02:01 - Well, you know, it's funny,

02:03 he was literally, he was one of the first minted

02:06 like dot com era tech analysts.

02:10 What I always found interesting about Dan

02:11 is that he wasn't covering the internet,

02:14 he was covering the nuts and bolts of the internet

02:17 when you think about semis and components.

02:19 And then you think about his ability

02:20 to also cover hardware as it related.

02:23 He covered Apple and Dell and he made some huge calls

02:25 back in the day and he moved stocks

02:27 like you wouldn't believe.

02:28 And he had a huge term because he went to Lehman

02:31 and he was just a monster at Newberger Berman.

02:33 So I'm really psyched to reconnect with Dan

02:36 and thanks for the send off from Tech Check

02:39 as I've gotten to see him on your programming

02:41 a lot over the last few years.

02:42 And he is often prescient, he is ahead of the curve

02:45 when it comes to tech trends.

02:46 - And he's not afraid to disagree with the majority.

02:49 And for as long as I've been interviewing him on Tech Check,

02:52 he has been dead right.

02:54 He takes short and long positions,

02:56 but he watches things and he sees things so, so closely.

02:59 And he's been truly one of the most rational voices

03:02 that we've had, I think on our air over the last few years.

03:05 - No doubt about that.

03:06 And he's also been really transparent

03:08 when he comes on and he gets something wrong,

03:09 he's happy to come back and say why he got it wrong.

03:12 But he's also, like you said,

03:14 really willing and able to make predictions.

03:16 All right, let's talk about Uber here

03:17 'cause this is one that we're recording

03:19 this Tuesday afternoon.

03:20 The stock's up 11% as we speak.

03:22 They just reported their quarter.

03:24 Dara Karashary, he's out there talking to the press

03:27 and he sounds fairly bullish.

03:29 And some of the things that he's been saying

03:30 about just consumer trends that they're seeing,

03:32 it kind of flies in the face of some other things

03:35 that we've seen.

03:36 D, what's your take on this one?

03:37 Because coming into the print,

03:39 the stock has acted fairly well this year.

03:42 Analysts universally love this stock, 42 buys,

03:45 as Burr-Fack said, only four holds and two sells here.

03:49 And to see a stock up 11% with that much support already

03:53 from the sell side,

03:54 it means that the buy side was a little bit behind this one.

03:58 And so coming into the print here,

03:59 I mean, they had set targets as it related to EBITDA,

04:03 profitability as it related to free cashflow,

04:05 they had hit those.

04:06 Now Dara is saying they are gonna be gap profitable

04:10 this year.

04:10 The market is taking that to heart.

04:13 - Music to my ears.

04:14 As you know, Dan, for a long time,

04:15 I've pounded the table and said adjusted EBITDA

04:18 is not real profitability.

04:20 And I say that to investors,

04:21 and I say that to Dara Khosrowshahi himself.

04:23 We've had a lot of really good conversations,

04:25 but what markets are looking for,

04:27 what Silicon Valley might be looking for.

04:29 And I applaud his transparency.

04:31 And he's been saying this for a long time,

04:33 even when he was talking about adjusted EBITDA,

04:35 he reached that target sooner than he had predicted.

04:39 And instead of kind of basking in that,

04:42 he's looking ahead to gap profitability.

04:45 There was also a few lines in the earnings release

04:48 about stock-based compensation,

04:49 because I even took issue with their free cashflow.

04:52 Yes, you achieved it,

04:53 but look at how much of that is stock-based compensation.

04:56 So I think that slowly but surely, they're delivering.

05:01 He is delivering.

05:02 He is a Wall Street operator.

05:04 And I think that that has been fine.

05:07 And I wonder what your opinion is, Dan,

05:09 because this is still a stock,

05:11 even with the big jump up today,

05:13 it's trading at around 36 bucks and change.

05:15 That is still almost $10 below its IPO price.

05:18 So what do you look for in an investment?

05:20 Do you want something that's profitable?

05:21 Do you want something that's profitable and innovative?

05:24 Is Uber both or only one or none?

05:26 Yeah, no, that's a great point.

05:27 I mean, I think that their ability

05:29 to kind of squash the competition as it relates to Lyft,

05:31 and we know what's going on there.

05:32 I mean, Lyft is literally like a rounding error on them

05:35 from a standpoint of revenue,

05:37 but also from just market share.

05:39 And then when you think of market cap,

05:41 I mean, this thing literally has

05:42 like a $3 billion enterprise value.

05:44 Think about that. Right today,

05:46 I mean, Uber has gained $6 billion in enterprise value

05:50 just on the ability to guide towards that gap profitability,

05:53 which you have been all over, Debo.

05:55 So I got to give you a lot of credit.

05:57 One of the first times you came on here,

05:58 I made the mistake of quoting a company

06:01 that was about to be profitable.

06:03 You said, hold on a second, that adjusted profits.

06:05 The other thing I'd say about Uber is that,

06:08 it appears that their margins have troughed a little bit.

06:10 So this was a company that was doing

06:12 50% plus gross margins in the couple of years after

06:16 they had IPO'd.

06:17 And so I think that's also something

06:19 that investors like to see.

06:20 And then obviously what he had to say

06:22 about delivery and Uber Eats.

06:24 And when you just think of just how well

06:27 they are doing in that department,

06:28 I know that obviously it kept them a bit afloat

06:31 during the pandemic when people weren't taking the rides,

06:34 but their ability to kind of maintain share

06:36 and kind of move towards further profitability there.

06:39 I think that is part of this story

06:40 and the global part of it.

06:41 I know that a lot of investors, at least folks like me,

06:44 and just talking about it a couple of years ago back

06:46 on Fast Money, they really, you know,

06:49 I kind of said, well Lyft,

06:50 I really like this kind of domestic,

06:52 singly focused on ride share here.

06:54 And that's just been dead wrong.

06:55 I mean, I've just been really wrong on that.

06:57 The last thing I'll just say is that,

06:59 Lyft might start looking kind of interesting here

07:02 just on the enterprise value and what we know,

07:05 the data that they have as it relates to ride share,

07:08 as some of these other big platform companies think about

07:11 move towards like robo-taxis and the like here,

07:14 autonomous fleets.

07:15 I mean, this could be kind of interesting.

07:17 So just curious, like, does this cause you to like,

07:20 take another look at Lyft?

07:21 'Cause we know that that quarter was disastrous.

07:23 We know that there's new management in there

07:25 and it really feels like maybe this is just kind of

07:27 so bad that it's good at some point.

07:29 - Let me quickly go back to something you said.

07:31 You said Uber beat Lyft.

07:32 I think that Lyft killed Lyft.

07:35 I think that Uber benefited because Lyft

07:38 just took its eye off the ball

07:40 and you see this management change now.

07:42 I interviewed the new CEO who was,

07:44 still finding his feet.

07:46 I don't know, I'm not really sure what to expect from him.

07:50 We'll have to see, they're gonna report soon.

07:52 But he talked about pricing competitively with Uber.

07:56 And again, it just goes back to this industry

07:58 that is so asset light in a weird way,

08:01 but so deeply unprofitable because of,

08:05 the way that it counts its drivers and insurance costs

08:09 and all those different things.

08:10 So I think Dan, were you saying that Lyft

08:13 might be interesting as a target?

08:14 Is that what you were implying?

08:15 - As like a strategic target, just because again,

08:18 we don't likely see a lot of this sort of M&A,

08:20 strategic M&A, especially in this regulatory environment

08:23 when things are at their lows,

08:25 but it just seems to me kind of interesting

08:27 for a whole host of reasons when you talk about

08:29 what Elon Musk has promised as far as robo taxis

08:32 and the like here.

08:33 We know that some of the OEMs in Detroit

08:35 have had interest in self-driving sort of issues.

08:38 I know that Lyft had a partnership with Ford for a while.

08:41 So, listen, sometimes when things are down and out,

08:44 I tend to be a bit contrarian and this one to me,

08:46 I feel like there's very little downside,

08:48 especially with new management in there.

08:51 - Have you seen the videos coming out of San Francisco?

08:53 I think it's GM's cruise.

08:54 People are taking rides, totally driverless rides.

08:57 And I think Lyft has an investment from them in the past.

09:00 So that could be an interesting tie up,

09:03 given as you said, all the data that Lyft has.

09:05 But remember, this is a company

09:06 that's still controlled by its founders.

09:08 Even though there's a new CEO, I asked him directly,

09:10 does anything about the dual class share structure change?

09:12 Is that gonna sunset?

09:14 No, so how much can he really do?

09:16 Are the founders willing to sell?

09:17 They were able to step back?

09:19 I don't know, maybe.

09:21 - You asked all the tough questions.

09:22 That interview was on Fast Money and I was loving it

09:25 because I knew that you just had this opportunity.

09:27 And listen, I give him a lot of credit.

09:29 I mean, he just kind of stuck in,

09:31 you kind of hung in there and he took the questions here.

09:34 Just going back to Uber really quickly.

09:35 I mean, this thing, when I look at it

09:37 bottoming out at some point,

09:39 it has a lot of characteristics that we saw in Netflix

09:42 in meta last year that it bottomed out

09:45 well before the NASDAQ bottomed out in 2022.

09:47 So mid last year.

09:48 And so I think some of the things that Dara was saying

09:51 to investors and the street was kind of resonating

09:54 and about cost cuts and what he's saying now

09:56 about headcount reduction and what they're seeing

09:58 as far as with this expected consumer slowdown.

10:02 To me, this remains like a sort of fluid situation.

10:05 I look at the series of higher lows

10:07 that the stock has put in over the last,

10:10 call it six to nine months,

10:11 and it's definitely very constructive.

10:13 And to see the reaction to what they had to say today,

10:16 I think is pretty good.

10:17 I'm not chasing the stock up 15% in a week,

10:20 but this is one that I think I would look to buy

10:22 on pullbacks because if you look at that top line

10:26 growth that they have,

10:27 I think the multiple of earnings

10:29 is looking pretty interesting to me,

10:31 especially if we're going to see increased profitability.

10:33 - Well, let me ask you something then.

10:34 When you say that it's looking constructive,

10:36 do you think that Uber could ultimately be worth

10:39 more than $100 billion?

10:41 Is this a tech company?

10:42 Is it disruptive or does it settle out

10:44 somewhere below that as a utility?

10:47 You know, and a really good one for calling taxis.

10:50 - Yeah, well, I look at just kind of also

10:52 on a multiple of sales at about two times here

10:54 and look at some of these kind of mega cap tech stocks,

10:57 which have not had a hard time growing,

10:59 you know, into like mid to high single digits,

11:01 multiples of sales, you know,

11:03 and then on the flip side of that, you know,

11:04 we have an Nvidia that crossed $700 billion

11:07 in market cap yesterday for the first time

11:10 in a little more than a year, trading at 23 times sales.

11:12 So I guess to your point is if the, you know,

11:15 the service that they're providing

11:16 is deemed to be a commodity,

11:17 it will never grow into a mid single digit

11:19 sort of multiple of sales,

11:21 but if that profitability really starts to kick up

11:24 and they're able to kind of grow their margins

11:26 back towards 50%,

11:27 this will easily be over $100 billion market cap company.

11:30 So to me, I do find this a very unique story

11:33 and there's plenty of stories in mega cap tech

11:36 that I do not find is interesting

11:37 because of their ability to kind of maintain

11:39 certain valuations at this interest rate environment.

11:42 And especially as you're listening to this,

11:44 the Fed is going to be coming out

11:46 with their, you know, kind of rate decision here.

11:48 And listen, if we hear higher for longer,

11:50 and you and I talked about this a little bit last week,

11:53 I just think that this is the sort of thing

11:54 that may cause some investors

11:56 in a slower growth environment

11:58 to rethink some of the multiples

11:59 that we've seen off the lows from last year

12:01 and some of these names.

12:02 - One more question for you.

12:04 Did you see the Wall Street Journal article

12:06 about Dara Khosrowshahi driving Ubers under David Kaye?

12:10 - Yes.

12:11 Yeah, pretty fascinating stuff.

12:13 - It was okay, that's cool.

12:15 But it was five years there,

12:16 or whatever, how many years into his tenure as CEO.

12:19 And I also, I just want to say,

12:20 because I don't think enough people know this,

12:22 because they don't seek publicity for this,

12:24 the Lyft co-founders drive every year for years

12:28 since the inception of the company on New Year's Eve.

12:30 And they don't ask a reporter to come along with it.

12:33 They just do that because they want to know.

12:35 And I think that that is something,

12:38 like they are innovators, but they lost the plot.

12:41 But they have done things like that all along,

12:44 which is why I think you liked Lyft at one point too,

12:46 that focus, unfortunately.

12:48 Unfortunately, they kind of,

12:50 they didn't keep up in terms of running the company,

12:54 the operations that Dara Khosrowshahi does have.

12:56 But I just wanted to mention that.

12:57 - Yeah, no, and I like those guys.

12:59 I like Logan and John.

13:00 I think those guys are really great founders.

13:02 And again, you gotta apply to any,

13:05 like listen, they were always number two,

13:07 and they just became a more distant number two.

13:09 They tried to hang in there,

13:10 and their ability to kind of hang it up a little bit.

13:12 I'm sure they're supportive behind the scenes.

13:14 So again, that Lyft is one that I just think,

13:17 from a strategic standpoint, could be very unique.

13:19 Not because the business is humming

13:21 in any way, shape, or form,

13:22 but because what they've built over the last 10 years,

13:25 and even though being a very distant number two,

13:27 I think there's probably strategic M&A in their future.

13:30 All right, let's hit another one.

13:31 This is a really interesting story.

13:32 So as we're speaking right now, Chegg, okay,

13:34 the online education company that was clearly a darling

13:38 during the pandemic, right?

13:39 Anything, work from home, school from home,

13:41 work out from home, order from home,

13:44 whatever the hell it is, right?

13:45 So this stock has absolutely gotten killed.

13:47 It's down 40% today.

13:48 They come out, and they say that

13:50 ChatGPT is destroying their business.

13:52 And what's interesting to me about this thing,

13:54 it's down 65% on the year.

13:56 It's got a billion dollar market cap.

13:58 That's not why we're talking about it,

13:59 because it's interesting.

14:00 But when we think about some of these FinTech models,

14:02 we're definitely all the rage in 2020 and 2021.

14:05 And the information in an article on a bunch of these,

14:07 the Upstarts and the Carvanhas,

14:08 and some of these other buy now, pay later names,

14:12 they were typing their use of AI tools, right,

14:15 back in the day to make better lending decisions.

14:18 And that was just an embedded premium in those names.

14:21 And people didn't give a shit what they were trading

14:23 at multiples to anything back then.

14:25 This is a year and a half ago, maybe two years or so,

14:28 and they've all come crashing down.

14:30 So I think it's interesting on the flip side of this,

14:33 that you have companies now like Chegg

14:35 blaming AI tools, right, for their demise here.

14:38 And this one's kind of, and Dan Rosenzweig,

14:41 who's the CEO of this company,

14:43 he's been around a long time.

14:44 He's a smart guy, and he knows a lot about tech.

14:46 How does this story kind of sit with you a little bit?

14:49 Because it looks like two sides of a coin.

14:52 - But it's so illustrative of the threat

14:55 and the opportunity of artificial intelligence, right?

14:58 I mean, you talk to anyone here in the Bay Area,

15:00 they'll say, "Oh, we've been using it for decades already."

15:03 But this is a unique moment.

15:05 This is when it captures the consumer's imagination.

15:07 It's like, sure, there were smartphones before the iPhone,

15:10 but the iPhone changed absolutely everything

15:12 about how we work and how we even conduct our lives.

15:16 And that's essentially what generative AI is doing now.

15:19 Yes, earlier forms that all the tech companies

15:22 have already been using, the algorithms we see on Netflix,

15:25 on Facebook, et cetera, et cetera,

15:27 that certainly changed it,

15:28 but it was kind of a slow change

15:30 that we didn't even really notice.

15:32 It was like boiling in a pot.

15:34 Now with ChatGPT and BARD,

15:37 it's such a huge platform shift that we're gonna,

15:40 it's amazing to me too, to see Chegg,

15:42 but we're gonna find out that entire business models

15:44 are gonna be eviscerated by this platform shift

15:47 and how quickly it's happening.

15:48 And on the Chegg side,

15:50 it's because their users are using ChatGPT

15:53 to do their homework.

15:54 They're no longer going to Chegg,

15:55 and I really think this is just the start of it.

15:58 And Chegg could be totally fine.

16:00 Dan Rosenzweig says that they're gonna use ChatGPT

16:03 to battle ChatGPT, which is basically what anyone

16:06 under threat from generative AI says.

16:08 We're gonna use it against.

16:09 It's smart if you just harness it in the right way.

16:12 We'll see though.

16:13 This is very, very early.

16:16 - Yeah, no doubt.

16:17 I mean, listen, it's kind of hard to see,

16:18 and this kind of brings me back to about 20 years ago,

16:21 kind of in the throes of the kind of post.com bear market

16:25 that we had is like some of these names

16:27 that were so well-loved, you know,

16:29 on their way to really zero.

16:31 And, you know, when you see stocks down 90 some percent,

16:34 and we're starting to see that more,

16:35 I think a lot of investors are kind of new to the market.

16:38 That's not something that they really have seen

16:40 a whole heck of a lot.

16:41 We've seen it in some of these regional banks

16:43 that, you know, like felt pretty secure, right?

16:45 And we've seen them go to zero.

16:47 We've seen some of these FinTech models

16:49 that we talked about lose 90 some percent.

16:51 And, you know, it's not just the little ones.

16:53 When I think of, you know, I'm looking at Square right now.

16:56 Square is down, you know, more than seven,

16:58 eight percent on the year.

16:59 You know, that stock has lost 80 some percent

17:02 from its all-time highs.

17:03 I mean, there's a lot of names that are starting to flash

17:06 from big gains in the first couple months of the year

17:08 after getting destroyed in 2022

17:11 to now being down on the year.

17:12 And that, to me, when I look at the NASDAQ,

17:15 T-Boat, you know, still up 15 percent.

17:18 The NASDAQ 100, which we know the top seven names

17:20 make up 45 percent of the way.

17:22 But I'm seeing a lot of stocks,

17:24 whether it be in cybersecurity,

17:25 whether it be some of these kind of SaaS darlings,

17:28 you know, kind of go down on the year like a snowflake.

17:31 This was one of the poster children, right,

17:32 for this kind of pandemic sort of like rally

17:35 that we had in big tech names.

17:37 And this was a recent IPO, and it's run by a guy

17:40 that everybody in the Valley just absolutely reveres.

17:43 And it can't get out of its own way in 2023.

17:45 So I just find, I think I see some kind of weakening

17:48 under the hood, and I see a further concentration

17:52 in some of the mega cap names here,

17:53 which seems unhealthy to me right here.

17:55 - It seems a little risky, right?

17:57 Because if any of these names,

17:58 like Apple still has to report this week,

18:00 if it kind of blows its quarter,

18:02 that has huge ramifications.

18:04 But I also wonder, Dan, if on the flip side,

18:05 maybe that's a healthy sign

18:07 or an endorsement of this rally so far.

18:09 Because if the NASDAQ's keeping its gains,

18:12 but we were wondering a few months ago

18:13 why all of these names were up with low profitability,

18:17 the momentum stocks that reach valuation highs

18:20 during the pandemic.

18:21 I also wonder, something I covered this week

18:23 was the ARM IPO and the J&J spinoff.

18:26 I mean, the fact that companies

18:29 are testing out the IPO waters,

18:31 again, that could also be a healthy sign, right?

18:33 You have new issuances.

18:35 - Yeah, no doubt.

18:35 I mean, listen, I will tell you this though,

18:37 that in an environment like this,

18:39 you could see portfolio managers have to make room

18:41 for some big names and that doesn't always,

18:43 it might bode well for the kind of new kid on the block,

18:46 but it may not bode well for some of the stories

18:48 that people have just been hanging on to.

18:50 So, again, it'll be interesting to see

18:52 when that first IPO comes in 2023,

18:55 a meaningful IPO here in the US and how it's marketed,

18:58 because we have not had a proper marketing process, right,

19:01 since the start of the pandemic.

19:03 And it will also be interesting to see

19:04 how that process has changed a little bit.

19:06 All right, we got to hit this one before we get out of here,

19:09 before I get to Dan Niles here.

19:10 Amazon reported Thursday after the close,

19:13 the stock was trading north of 120, it was like 123.

19:16 It was trading at the highest levels,

19:18 I think since September, okay?

19:20 And so it bottomed out somewhere about 81

19:23 in late December, early January.

19:25 And then when they gave their Q2 guidance for AWS,

19:29 the stock reversed, gave it all back.

19:30 Here we are trading at about 103 or so.

19:34 What was your takeaway about that?

19:35 'Cause we've talked, you had this great preview

19:37 on all the hyperscalers as we were talking about

19:40 what Microsoft Cloud was gonna do,

19:41 what Google Cloud was gonna do,

19:43 what Amazon was gonna do here.

19:44 And when you think about their guidance for Q2,

19:46 and you actually made a really great point,

19:49 that Amazon is very exposed to small

19:51 and medium sort of businesses.

19:52 So that Q2 guide really spooked tech investors.

19:56 And I think, to your point about Apple,

19:58 I mean, I think what we saw out of Microsoft,

20:01 out of Meta, out of Google,

20:02 might've been as good as it gets

20:04 for this kind of Q1 reporting period.

20:06 So I'm just curious, did you think that was overdone,

20:09 at least the pop to the upside,

20:11 and then the reversal and its inability

20:13 to kind of get back on its horse?

20:15 >> I think that pop was on relief, right?

20:17 We just wanted to get all of these big tech reports

20:20 out of the way.

20:21 And if they managed to hold somewhat steady, stabilize,

20:24 that was good enough for the market.

20:25 But we've talked about this,

20:26 how critical cloud is to the whole Amazon ecosystem.

20:30 It has been the profit engine.

20:31 So when the CFO came on the call and said,

20:35 we're expecting it to decline a further 5%,

20:38 that brings AWS growth into, right, the early,

20:41 the low teens, and it's never been there.

20:45 It was that 40%, I think,

20:47 just last year or a year and a half ago.

20:49 So that is also a reflection of that profit engine of Amazon,

20:54 but also perhaps the enterprise spending,

20:56 the economy at large,

20:58 how other companies feel about the economy

21:00 and their spending plans.

21:02 Was it overblown?

21:04 I might be willing to say yes.

21:06 What do you think, Dan?

21:07 Because Amazon is more than AWS at the same time,

21:10 and there's another profit engine in advertising,

21:12 which is proving to be more resilient,

21:14 and even online sales are looking better.

21:16 - Yeah, I know, it's interesting.

21:17 And you have that tough job.

21:19 Oh, your job is much tougher than mine

21:21 at that 515, 520 mark, as those results are coming out,

21:24 and you have to parse through them live on TV,

21:26 and you're asked for your take,

21:28 and you have what is expected.

21:29 We don't always know what the buy side is expecting.

21:32 And we know that a lot of these stocks

21:34 trade in the post-market.

21:35 Based on those sorts of expectations,

21:37 I was looking at the quarter,

21:39 I was looking at most of the metrics,

21:40 and it looked pretty good,

21:41 especially relative to what people were worried about,

21:44 some of the macro trends in Q2,

21:46 or excuse me, in Q1.

21:48 And then when they gave the guidance,

21:49 I mean, it seemed really clear to me.

21:51 We were talking about it in the break.

21:52 I was like, that's it.

21:53 I looked at Melissa.

21:54 I was like, that's it.

21:55 I think we're gonna look back in two, three, four months

21:58 and say, that was the canary in the coal mine.

22:01 And when you think about Microsoft,

22:02 and you think about Google,

22:03 and what they were able to do in cloud,

22:05 what I'm curious is like,

22:06 they're clearly taking some share.

22:08 They're also exposed to some different customer bases,

22:11 as we just mentioned,

22:12 and their businesses, their revenues,

22:14 are just kind of, you know,

22:15 they're much more intertied now

22:17 with all the cloud sort of stuff,

22:19 and the productivity tools, and everything like that.

22:20 So, you know, they might have been masking

22:22 some of the sort of weakness that Amazon was speaking to,

22:25 or Amazon is probably trying to take them all down

22:28 because they're taking share too.

22:30 Curious, like, your thoughts on that,

22:32 because I know that you know this,

22:33 most investors are really focused on that number in AWS,

22:37 where that growth has decelerated meaningfully, right,

22:40 from that 40 plus pound,

22:41 to somewhere in the teens that could look like low teens.

22:44 - Low teens.

22:45 You know, I actually, I get on a media call

22:48 right after the earnings break.

22:49 I've got like five phones in my hand,

22:51 when a company like Amazon or Alphabet,

22:54 one of the big tech companies are reporting,

22:56 and I got on the phone with the CFO, Brian Olsowski,

22:58 and this was before he said that AWS growth

23:00 was going to decelerate further.

23:02 And I asked him, you know,

23:04 what are you seeing in terms of competitive pressure wise?

23:07 Is it the macro economy or is it competitive pressure,

23:09 what you're seeing from the other hyperscalers?

23:11 And he answered pretty directly.

23:12 He said, it's the macro.

23:14 But then he went on to say, you know,

23:16 later on the analyst call,

23:17 that AWS revenue growth will be down 500 basis points.

23:21 So I didn't really buy it when he said that.

23:23 And I thought it was interesting

23:24 that they don't want to allow for that.

23:27 Why would they?

23:29 They're the number one position by far, of course,

23:31 but Microsoft is coming for them.

23:33 And I think there was a Morgan Stanley note that says,

23:36 you know, it's actually,

23:36 Microsoft could be the bigger player a few years from now.

23:40 So that is a serious problem for Amazon.

23:43 And also going back to our generative AI discussion,

23:46 you know, Microsoft putting chat, GBT and AI tools

23:51 into a lot of what they do could give them the edge

23:53 over Amazon that isn't talking a whole lot

23:56 or nearly as much about those tools.

23:58 >> Yeah, all right, last thing, just a little,

24:01 you just mentioned, you know, like IBM

24:02 and some of these other like large cap tech names,

24:05 old school tech names, you know, Cisco was down a lot.

24:07 It's been about down about 15% since CDW

24:10 pre-announced a pretty dire quarter.

24:13 And they're going to report May 3rd before the opening.

24:16 So CDW, that'll be interesting to see

24:18 what they have to say on the guidance,

24:19 'cause it really did take down Cisco

24:21 and a whole host of other kind of some hardware names.

24:23 They're a computer reseller and they serve,

24:26 you know, they service businesses, governments,

24:28 a big geographic kind of footprint too.

24:31 So that's something I'm focused on this week.

24:33 Other than Apple, all right, Debo,

24:36 we covered a lot of ground here.

24:37 I really appreciate you being back here with us.

24:40 So everybody stick around for my conversation

24:42 with Dan Niles, he's the portfolio manager

24:44 and founder of Sotori Funds.

24:46 (upbeat music)

24:49 you

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