The Close 8/5/2026

THE COUNTDOWN IS ON, EVERYTHING YOU NEED TO GET THE EDGE AT THE END OF THE MARKET DAY, THIS IS "THE CLOSE." ROMAINE: IS THERE SUCH A THING AS A REBOUND RECORD RALLY? LIVE FROM STUDIO 2 AT BLOOMBERG HEADQUARTERS IN NEW YORK, ROMAINE BOSTICK KICKING YOU OFF AT THE CLOSE THIS WEDNESDAY AFTERNOON. THE S&P 500 TRYING TO PUSH FOR A FIFTH STRAIGHT DAY OF GAINS. UNLIKE YESTERDAY, YOU CAN SEE ON YOUR SCREEN, YESTERDAY WAS POWERED BY BIG TECH BY A FACTOR OF ABOUT TWO: ONE. ABSENT TODAY WITH A SOFTER PUSH HIGHER FROM MATERIALS, HEALTH CARE, AND INDUSTRIAL STOCKS. WE HAVE ELI LILLY AND SOME ENCOURAGING GUIDANCE OUT OF EMERSON ELECTRIC. A GLIMMER OF PROGRESS WITH REGARDS TO THE SITUATION IN IRAN IS HELPING LIFT A LOT OF THE PRECIOUS METALS. ALL OF THAT, THOUGH, BARELY ENOUGH TO BLUNT THE IMPACT THAT WE SEE FROM SOME OF THE BIG TECH NAMES ON THE DAY. LIKE AMD. LIKE SPACEX. THAT'S THE KICKOFF TO THE SHOW TODAY. FOR ALMOST TWO MONTHS NOW THE BULLS TRIED TO BREAK THE S&P OUT OF ITS NARROW TRADING PATTERN AND THEY FINALLY DID SUCCEED EARLIER THIS WEEK WITH THE S&P NOTCHING ITS FIRST RECORD HIGH IN 10 WEEKS. BUT AS THE ANCIENT ROMANS KNEW, ALL GLORY IS FLEETING. MOST STRATEGISTS SEE A LOW CEILING TO THIS RALLY AS THE WANTON RISK AND APPETITE WANES AND FUNDAMENTAL ANALYSIS ACTUALLY COMES BACK INTO VOGUE. THAT'S KIND OF AN AUSPICIOUS -- WELL, DEPENDING ON YOUR MOOD -- MAYBE OPPORTUNISTIC SET UP FOR SANDISK. BY THE COMPANY WAS SPUN OUT OF LAST YEAR, STORAGE DEVICE MAKER WESTERN DIGITAL. TWO OF THE BEST PERFORMING STOCKS IN THE FIRST SIX MONTHS OF THE ARE TAKING A BEATING IN JULY AS INVESTORS STARTED TO QUESTION VALUATION AND TRY TO TIME OUT JUST WHEN THIS ONCE-IN-A-LIFETIME BOTTLENECK IN COMPUTER CHIPS I MIGHT ACTUALLY FINALLY START TO EASE. >> WHERE ARE THE BOTTLENECKS, WHERE AREN'T THE BOTTLENECKS? WHAT THE MARKET IS GRAPPLING WITH IS BOTTLENECKS ONLY EXIST IN SUPPLY CONSTRAINT, BELOW THE LEVEL OF HYPERSCALERS AND CORE PLAYERS. ROMAINE: LAST MONTH 47% SELLOFF IN SANDISK AND 17 PERCENT MWD EXACERBATED BY CHAOS AT SITUATIONAL AWARENESS, WHICH LOST 67% THAT MONTH. HAD TO SELL THE BULK OF ITS PUBLIC STOCK PORTFOLIO TO THE CITADEL TO MEET THOSE MARGIN CALLS. TAKE A RELOOK YOU CAN SEE THEY ARE NOT ACTUALLY ALONE. A LOT BEING MADE OUT OF THE HIGH LEVERAGE THAT THE COMPANY HAD MADE. A LOT OF HAY BEING MADE OUT OF, WELL, THE YOUTH OF ITS LEADER. SOME OF THE MONTHLY NUMBERS FROM SOME OF THESE HEDGE FUNDS AS THEY START TO ROLL AND COME YOU SEE WHAT HAPPENED LAST MONTH WAS NOT A ONE-OFF WHEN IT COMES TO WHAT HAPPENED OUT THERE FOR SITUATIONAL AWARENESS. ONE OF THE BIG STOCKPICKING FUNDS DOWN SIGNIFICANTLY IN THE MOST RECENT MONTHS, .72. AS A WHOLE DOWN 3.3%. MILLENNIUM DROPPING ABOUT 2%. VERITION ALSO DOWN A PERCENT OR TWO IN THE MONTH. JOINING US IS MANAGING DIRECTOR AND GLOBAL HEAD OF FINANCING SALES AT SCOTIA BANK. IT IS GOOD TO SEE YOU AGAIN. I HAVE TO ASK WHAT YOU ARE SEEING BEHIND THE SCENES. WE HAD THIS BIG -- I DON'T KNOW IF YOU WOULD CALL IT A WASHOUT BUT A SHAKEUP LAST MONTH. A LOT OF DELEVERAGING, PARTICULARLY BY THE HEDGE FUNDS. THERE WERE MARGIN CALLS FOR SOME FOLKS THAT WE KNOW OF COMING OUT PUBLICLY. ARE YOU SEEING A LOT OF THOSE FOLKS NOW ON THE SIDELINES, OR WAS THIS WE WENT THROUGH A FEW WEEKS, THINGS GOT WASHED OUT, AND PEOPLE ARE COMING BACK? WHAT ARE YOU SEEING? >> THE HEADLINES LAST WEEK ON INDICATION OF THE SIGNIFICANCE OF THE AI TRADE AND THE DOMINANCE OF AI THE HEDGE FUND AND BROADER MARKET RETURNS BUT ALSO THE RISK OF CONCENTRATION AND VOLATILITY AND LEVERAGE. BROADER HEDGE FUND INDUSTRY, IT HAS BEEN IN GLOBAL PORTFOLIOS WITH LITTLE CORRELATION TO MARKETS. PAINTING LAST WEEK WITH A BROADER SWATH WITH THE OVERALL HEDGE FUND INDUSTRY IS NOT FAIR. WE'VE SEEN SOME RETURNS THAT THEY HAVE BEEN DOWN LAST MONTH, IT IS STILL OVERALL AN UP ON THE YEAR IS WHAT WE ARE SEEING AND IS MORE RETURNS COME IN WE THINK THAT WILL STABILIZE. ROMAINE: YOU THINK IT HAS BEEN A MISCHARACTERIZATION WITH REGARDS TO THE DOWNSIZE -- OUTSIZE NATURE OF WHAT THE AI TRADE IS. BASICALLY IT IS A LOT BROADER, MORE DIVERSIFIED THAN MAY BE WHAT WERE MAKING OF IT? MITHRA: YEAH, THE 5 TRILLION PLUS CONSISTS OF MULTI-STRATEGY FUNDS WHERE THEY ARE BY NATURE DIVERSIFIED ACROSS STRATEGIES, GEOGRAPHIES AND DIRECTIONALITY. YOU HAVE GLOBAL MACRO FUND, EVENT DRIVEN PLAYERS. DIRECTOR SECTOR SPECIALIST TEND TO DOMINATE THE HEADLINES IN SECTORS AND THINGS LIKE AI. ROMAINE: I'M CURIOUS WITH MULTI-STRAT FUNDS THAT ARE PUNCHING ABOVE THEIR WEIGHT, AT LEAST HISTORICALLY, WHEN IT COMES TO ASSETS UNDER MANAGEMENT AND TO A CERTAIN EXTENT PERFORMANCE. WE SHOWED THE MULTI-STRUCK FUNDS THAT WHILE SOME WERE DOWN THEY ARE STILL OUTPERFORMING SOME OF THE MORE CONCENTRATED STOCKPICKING FUNDS. WAS THERE A DELEVERAGING AND DEED GROSSING AT ALL THAT OCCURRED WITH SOME OF THE MULTI-STRAT'S? MITHRA: PART OF THE REASON THEY PRESENTED DIVERSIFICATION ALTERNATIVE FOR INVESTORS AND THEY ARE SO LIQUID IS THEY HAVE THE ABILITY TO D GROWTH. THEY CAN CUT RISK. RISK MANAGEMENT IS AT THE CORE AND ITS VALUE PROPOSITION TO HAVE FUN -- HEDGE FUNDS. THEY CAN REACT QUICKLY WHEN THERE ARE CORRECTIONS. ROMAINE: ARM PEOPLE MEANINGFULLY SHORT THIS MARKET AT ALL FROM WHAT YOU ARE SEEING ON YOUR SIDE? MITHRA: ON BOTH SIDES FRANKLY WE ARE SEEING IT. AI WILL CONTINUE TO BE A DOMINANT THEME IN WE WILL SEE SHORT INTEREST AND LONG POSITIONS ADDING TO THAT IS OBVIOUSLY THE IPO MARKET. WE ARE SEEING A VERY ACTIVE M&A ENVIRONMENT AS WELL. ALL OF THESE CONTRIBUTE TO A LOT OF FLOW AND ACTIVITY IN VOLUME THAT WE ARE CONTINUING TO SEE ON BOTH SIDES. ROMAINE: AND WITH REGARDS TO MARGIN RISK AND, OBVIOUSLY, MARGIN TERMS, AT SCOTIA BANK, ARE YOU TIGHTENING THOSE TERMS AT ALL? MITHRA: ACROSS THE MARKET, POST GFC RISK MANAGEMENT HAS CONTINUED TO EVOLVE. YOUR ABILITY TO MONITOR RISK MANAGEMENT AND REACT HAS GOTTEN FASTER. AS WE SAW LAST WEEK THERE WERE MARGIN CALLS BUT AT THE END OF THE DAY LIQUIDATION WAS STILL ORDERLY AND WE AVOIDED A MAJOR CALAMITY. I DO THINK AS AN ENVIRONMENT WITHIN THE HEDGE FUND SPACE WE FEEL THERE IS ADEQUATE RISK MANAGEMENT, THERE IS APPROPRIATE MONITORING, AND EVERYONE CONTINUES TO LEARN LESSONS FROM EACH INCIDENT THAT HAPPENS AND MAKES US ALL BETTER. ROMAINE: SPEAKING OF LESSONS I WANT TO GET YOUR THOUGHTS ON WHAT WE LEARNED FROM THE FED OVER THE LAST WEEK AND A HALF. LAST WEEK, A WEEK AGO TODAY, OBVIOUSLY, YOU HAD A PRETTY VISCERAL REACTION IN THE TREASURY MARKET AND SECONDARY MARKET WITH REGARDS TO THE COMMUNICATION ON THE FED'S FIGHT AGAINST INFLATION. THAT SUBSIDED A LITTLE BIT. THAT SEEMS TO BE MORE OF A FUNCTIONAL WHAT'S GOING ON IN THE STRAIT OF HORMUZ AND ELSEWHERE. IS THE YIELD STORY, THE TREASURY STORY, GOING TO BE A BIG PART OF THE STORY WITH REGARDS TO HOW PEOPLE ARE POSITIONED PROCESS THAT WISE? MITHRA: I THINK IT WILL SHOW UP CERTAINLY SECTORS ARE IMPACTED BY SECTOR RATES ARE GOING TO BE RELEVANT AND WE ARE GOING TO SEE FLOWS BOTH ON LONG AND SHORT SIDE, BUT THAT IS WHY GLOBAL MACRO HEDGE FUNDS ACTUALLY CONTINUE TO ATTRACT INVESTOR CAPITAL LAND CONTINUED TO DO WELL THIS YEAR BECAUSE THEIR ABILITY TO PLAY ACROSS YIELDS AND ACROSS MARKETS AND IN CURRENCY MARKETS IS BECOMING VERY RELEVANT. THERE IS ACTUALLY MORE OF A STORY BEYOND JUST THE AI TRADE, ALTHOUGH THAT'S THE DOMINANT THEME. YOU HAVE THE FED, THE IPO MARKET, AND CURRENCIES ALL IN PLAY. ROMAINE: THE IPO MARKET, WE OFTEN HAVE SPACEX A COUPLE MONTHS AGO, EVERYONE IS STILL WAITING TO SEE SOME OF THE OTHER ONES, BUT WANT TO GET PAST THE BIG, MEGA ONES, ANTHROPIC, SPACEX, OTHERS WHO MIGHT COME OUT, THERE IS A WHOLE PIPELINE OUT THERE FOLKS THAT MOST PEOPLE THINK ARE GOING TO COME TO THE MARKET WILL GET BACK FROM THEIR SUMMER BREAKS. HOW DOES THAT CHANGE THE COMPLEXION OF THE MARKET? MITHRA: WHAT YOU'RE SEEING FOR THE FIRST TIME IN A LONG TIME IS YOU'RE SEEING THE IPO MARKET AND SECONDARY FOLLOW ONES AND M&A MARKET CONTINUED TO BE ACTIVE. EVENT DRIVEN FUNDS ARE HAVING A VERY BUSY TIME. WE ARE SEEING THAT'S ANOTHER AREA OF THE HEDGE FUND ECOSYSTEM WHERE WE ARE SEEING HEDGE FUND IN ELLICOTT OR INTEREST FLOW AND WE THINK THAT WILL CONTINUE. ROMAINE: VOLATILITY. WE TALKED A LOT ABOUT HOW HEDGE FUNDS OF COME BACK AT VOGUE AS OF LATE BECAUSE PARTLY OF THE VOLATILITY AND A DEMAND FOR, YOU KNOW, I GUESS MORE SELECTIVE AND IS IN PICKING THINGS. DO YOU ANTICIPATE THIS VOLATILITY THAT WE'VE SEEN TO REMAIN IN THE MARKET? IS THAT A TAILWIND? YOU HAVE THE TAILWIND AND ASSETS TO HEDGE FUNDS? MITHRA: TO BE UNCORRELATED TO WHATEVER VOLATILITY IS HAPPENING IN THE MARKETPLACE. SO IN AN ENVIRONMENT WHERE THERE IS VOLATILITY, THE DIFFERENTIATION AMONG THE FUNDS WILL BE THEIR ABILITY TO TAKE ADVANTAGE OF IT, TRADE AROUND IT, AND RISK MANAGE THROUGH IT. REGARDLESS OF WHAT VOLATILITY IS IN THE ENVIRONMENT A HEDGE FUND ALLOCATION AS A DIVERSIFIER FROM YOUR CORE AND A FIXED INCOME PORTFOLIO. ROMAINE: GREAT TO SEE YOU AGAIN. MITHRA WARRIER AT A SCOTIA BANK KICKING US OFF TO THE CLOSE ON THIS WEDNESDAY AFTERNOON. WHEN WE COME BACK A CLOSER LOOK AT THE STREAMING BUSINESS OVER AT DISNEY. IT WAS THE START OF THE SHOW. WE WILL CATCH UP WITH THE FORMER NBC UNIVERSAL LAND AT EVAN SCHAPIRO TO GET HIS TALK ON WHAT WILL COME NEXT. THE AI ECONOMY AND BEYOND. RISING SCRUTINY AROUND THE TRADE AND WHAT IS NEXT FOR QUANTUM COMPUTING. VICTOR PENG JOINS US IN JUST A SECOND. OF COURSE WE DO GET MORE EARNINGS AFTER THE BELL FROM SANDISK AND WESTERN DIGITAL. WE WILL HAVE A FULL BREAKDOWN OF EVERYTHING THEY REPORT AS SOON AS THEY SAY IT RIGHT HERE ON "THE CLOSE" RIGHT HERE ON BLOOMBERG. ROMAINE: KEEPING AN EYE ON SHARES OF DISNEY RIGHT NOW UP ABOUT 3.5 PERCENT. THIS AFTER A STRONG QUARTER FUELED IN LARGE PART BY THE COMPANY'S STREAMING BUSINESS. DISNEY SAYS IT IS ON TRACK TO SPEND 24 BILLION DOLLARS ON CONTENT THIS YEAR AND ON INKING A DEAL WITH TIKTOK. JOINING US TO TALK ABOUT THIS IS AN ADVENTURE PYRO THE FORMER HEAD OF NBC UNIVERSAL'S STREAMING SERVICE AND FORMER HEAD OF THE SUNDANCE CHANNEL. THE ENTERTAINMENT DIVISION DID WELL. 64% JUMP IN PROFIT IN THE MOST RECENT QUARTER AND A LOT OF TALK ABOUT NOT ONLY THE AMOUNT THAT IT ADDED WITH REGARD TO THE NUMBER OF SUBSCRIBERS BUT IT'S ABILITY, EVAN, TO CONTINUE TO MONETIZE IT. HE SAID ON THE CALL HE WANTS TO PUT DISNEY PLUS AS THE FACE OF THIS COMPANY OVERALL. YOU THINK THAT'S THE RIGHT DECISION? EVAN: I THINK THAT MAKES A LOT OF SENSE. YOU ARE SEEING A LOT OF COMPANIES, NOT JUST IN MEDIA BUT IN TECH, GOING TO THE SUPER APP CONCEPT. DISNEY HAS MORE INTELLECTUAL PROPERTY THAN ANY OTHER COMPANY ON THE FACE OF THE EARTH AND PROBABLY THE BEST LIBRARY. IT MAKES SENSE TO MAKE DISNEY PLUS THE FACE. WHAT'S INTERESTING IS THERE STREAMING PROFITS DOUBLED. THAT'S REALLY WHY THEIR STOCK IS GOING UP RIGHT NOW. IT'S WHY THE ENTERTAINMENT DIVISION WAS SO -- THE GROWTH WAS SO SPECTACULAR IN THIS LAST QUARTER. SO I THINK THERE IS GOOD REASON NOW THAT THEY HAVE HULU HOOLEY IN THERE, THEY HAVE THE FOOD DEAL IN PLACE, AND WITH THIS TIKTOK DEAL, AS WE DISCUSSED LAST TIME WHEN WE TALKED ABOUT NETFLIX, THE VERTICALIZATION OF THESE PLATFORMS ALLOWS THEM TO COMPETE DIRECTLY WITH SOME SOCIAL MEDIA PLATFORMS AS WELL. ROMAINE: TALK TO ME ABOUT THE TIKTOK DEAL. I ADMIT I THOUGHT, IS THIS GOING TO BE ONE WHERE THE OLD MAN GOES INTO THE ROOM FULL OF TEENAGERS AND SAYS "HELLO, FELLOW KIDS"? WILL THERE BE SYMBIOSIS IN THE WAY THEY ARE SHARING CONTENT ON TIKTOK AND THE WAY THE USERS WILL ENGAGE WITH IT ON TIKTOK? DOES THAT ACTUALLY TRANSLATE INTO NEW SUBSCRIBERS AND NEW VIEWERS AND ENGAGEMENT WITH DISNEY ITSELF? EVAN: CRUCIALLY THIS IS AN INTEGRATION OF TIKTOK INTO DISNEY PLUS CALLED VERTS. IT IS NOT NECESSARILY A TIKTOK PLAY AS MUCH AS A TIKTOK COMING INTO AND BEING INTEGRATED INTO THE DISNEY PLUS ENVIRONMENT, AND CURATING PARTICULAR CREATORS REACTING VERY OFTEN TO DISNEY CONTENT. WHEN YOU GO ON TIKTOK AND INSTAGRAM SHORTS YOU WILL SEE SOME OF THE MOST POPULAR CONTENT ON THERE ARE CREATORS REACTING TO, FRANKLY, -- IN THIS RECENT TOY STORY IS A GOOD EXAMPLE OF THAT. MOST IMPORTANTLY, IT ALLOWS THEM TO COMPETE OUTSIDE OF THE HOME. WITH TIKTOK AND INSTAGRAM AND SHORTS IN VERTICAL WHERE MOST VIDEO CONSUMPTION TAKES PLACE. SECONDARILY, IT LEADS INTO DISNEY'S STRENGTHS IN AD SALES BECAUSE THEY WILL PACKAGE THIS INVENTORY, THIS CURATED CREATOR BASED INVENTORY ACROSS TIKTOK AND DISNEY PLUS. YOU WILL BE ABLE TO BUY THE WHOLE PACKAGE. THEY GET TO BE ASSOCIATED WITH DISNEY, SOMETHING A LOT OF THEM WOULD LIKE. AND THE ADVERTISERS IN PARTICULAR WHO WANT THAT YOUTH CULTURE. IT GIVES THEM THE BEST OF BOTH WORLDS. CURATED FEED AND DISNEY PLUS AND TIKTOK. ROMAIN: DO YOU THINK THAT DISNEY WILL STAND BY THIS? ONCE YOU START ALLOWING CREATORS IN THE DOOR, THERE WILL ALWAYS BE THE RISK THAT SOMEBODY CREATES SOMETHING THAT IS NOT SAFE FOR WORK OR DOES NOT FIT THE FAMILY-FRIENDLY STANDARD THAT DISNEY TRIES TO CONVEY. WE HAVE SEEN THEM GO DOWN THE ROAD BEFORE AND PULL CONTENT BECAUSE THEY GOT SPOOKED THAT SOMEBODY GOT A LITTLE TOO CREATIVE WITH SOME OF THEIR PROPERTIES. >> I DON'T THINK THAT IS A REAL RISK. THEY ARE MITIGATING THE RISK BY CURATING THE FEED WITH TIKTOK TO MAKE SURE EVERYTHING IS SAFE FOR WORK AND KIDS. A KIDS ENVIRONMENT IN LARGE PART. I THINK THERE IS PROTECTION. IT IS ALSO A DIFFERENT AGE. YOU SEE MR. BEAST ON AMAZON, MISS RACHEL ON NETFLIX CRUSHING IT. AND THEY SEE THE CREATOR CROSSOVER WORKING INCREDIBLY WELL ON OTHER PLATFORMS. CRUSHING IT WITH THEIR CREATOR STRATEGY. DISNEY HAS BEEN LINKED TO THE GAME. BECAUSE THEY ARE DISNEY AS THEY DID WITH STREAMING, THEY HAVE THE CAPABILITY OF COMING INTO A MARKET AND A SEGMENT AND BEING DOMINANT. I THINK THIS IS NOT JUST FOR DISNEY, BUT ALL MAINSTREAM MEDIA AS THE CREATOR ECONOMY REALLY EMERGED INTO SOMETHING NEW. ROMAIN: I'M CURIOUS ABOUT THE AD SALES. I KNOW THEY DON'T DISCLOSE ACTUAL SUBSCRIBER FIGURES, BUT REVENUE WAS STILL UP 15%. THEN I SAW AD SALES WERE UP 3%. THAT IS AN INTERESTING DISPARITY. AM I MAKING TOO MUCH OF THAT? >> KNOW YOU ARE NOT. THAT IS A VERY GOOD THING. THEY ARE ALSO BREAKING OUT OF A LOT OF THE PARTICULAR'S IN THE BUSINESS. LINEAR BUSINESSES IS SUNSETTING QUICKLY. IT IS DECLINING MUCH QUICKER THAN THE STREAMING BUSINESS CAN CATCH UP. THEY ARE REALLY DOING QUITE WELL IN ADVERTISING, CONSIDERING HOW MANY SUBSCRIBERS ARE BEING SHED FROM THE PAY-TV ECOSYSTEM WEEK AFTER WEEK, MONTH AFTER MONTH, AND HOW BROADCASTS CONTINUE TO FALL LIKE A HOT KNIFE THROUGH BUTTER. THEY ARE DOING QUITE WELL, PROBABLY THE BEST PERFORMING STREAMING AD SALES PLATFORM, HULU, AND THEY ARE BEGINNING TO SEE THAT SUCCESS ON DISNEY PLUS. BUT THEY NEED TO RAMP THAT UP ON STREAMING IF THEY ARE GOING TO OVERTAKE THE DECLINE ON LINEAR. A COUPLE OF QUICK POINTS, SPORTS IS REALLY THE BIG BLEED HERE. SPORTS HAD A NEGATIVE OPERATING INCOME GROWTH OF 17%, REVENUE GROWTH OF JUST FOUR PERCENT. THE RIGHTS COSTS HAVE SKYROCKETED. BUT THEY HAVE RECORD YEARS WITH THE BASKETBALL COVERAGE AND HOCKEY COVERAGE. THE QUESTION IS CAN THEY CONVERT ESPN INTO A STREAMING BUSINESS QUICKLY ENOUGH TO MAKE UP FOR THE LOSS THEY ARE GETTING IN SUBSCRIBER REVENUE AND ADVERTISING REVENUE FROM THE LINEAR AND TRADITIONAL TELEVISION ECOSYSTEM? ROMAIN: GOT TO LEAVE IT THERE. THEY TALK A LOT ABOUT THAT ON THE CALL. THE IDEA THAT THEY ARE SAYING IT IS A TIMING ISSUE WHEN IT COMES TO THE SPORTS BUSINESS. BUT THAT REMAINS TO BE SEEN. EVAN CHAVIRA, A FANTASTIC BLOG TRACKING THE MEDIA ECOSYSTEM. WHEN WE COME BACK, A CLOSER LOOK AT SHARES OF SPACEX, DOWN AFTER ITS EARNINGS, COMING UP NEXT ON THE CLOSE ON BLOOMBERG. ROMAIN: TIME FOR OUR TOP CALLS. THE BIG MOVERS ON THE BACK OF ANALYST RECOMMENDATIONS. BEST BUY A DOWNGRADE AT JEFFERIES ON THE BACK OF DIFFICULT COMPS IN THE UPCOMING QUARTERS. ANALYSTS TRIMMING THE PRICE TARGET A BIT, SAYING RISING LAPTOP PRICES FROM THE MEMORY SHORTAGE WILL MAKE IT HARD TO MAINTAIN ITS EPS GROWTH ABOVE 5%. BARRON SEEN UPGRADING THE COSMETICS COMPANY OUTPERFORMING AHEAD OF ITS EARNINGS AFTER THE BELL. THE FIRM NEARLY DOUBLING ITS PRICE TARGET TO 113. SHARES DOWN ABOUT .5%. LET'S TAKE A LOOK AT CREDOS, THE DEFENSE CONTRACTOR. OVERWEIGHT AFTER THE COMPANY BEAT EARNINGS YESTERDAY. THE FIRM SAYING IT HAS MORE COMFORT IN THE COMPANY'S NEAR TERM GROWTH PROSPECTS. SHARES UP 7.5 PERCENT. THOSE ARE OUR TOP CALLS, WE WANT TO SAY IN THE DEFENSE AND AEROSPACE AND BRING IN SHEILA OVER AT JEFFERIES TO TALK MORE ABOUT WHAT SHE HAS BEEN KEEPING HER EYE ON. I BRING UP CREDOS, DEFENSE TECH HAS BEEN HOT. LOOK AT IT AND ITS PEERS, ARE YOU BULLISH AND WHAT YOU ARE SEEING? >> IN SELECT AREAS. WE UPGRADED IT A FEW MONTHS AGO. IT'S STILL TOO EARLY, BUT THE STOCK IS ESSENTIALLY HALF FROM 120 TO 50. FINALLY DISPLAYING SOME OPPORTUNITY IN TERMS OF GROWTH. WE ARE FORECASTING THE COMPANY TO GROW MIDTEENS AND THEY ARE PROFITABLE. THAT IS ONE THING STANDING OUT WITH ALL OF THE SPACE MANIA AND THE SPACE HYPE. AS THEY COME INTO MARKET IN THE DEFENSE TECH ARENA, COMPANIES ARE TRYING TO SAY WE ARE GROWING MIDTEENS, WE ARE PROFITABLE, SO YOU DON'T HAVE TO WAIT FOR US TO GET PROFITABLE. THAT IS A DISTINCTION AS A LOT OF THE IPOS ARE DOWN 20% IN THE LAST MONTH OFF OF THE HYPE THAT HAS HAPPENED IN THE DEFENSE TECH SECTOR. ROMAIN: I'M CURIOUS HOW YOU LOOK AT THE NEWER DEFENSE COMPANIES RELATIVE TO THE OLD GUARD, THE STANDARDS RTX NORTHRUP, LOCKHEED. IS THERE ROOM FOR EVERYBODY? >> I THINK SO. I GOT POSITIVE FOR THE FIRST TIME EVER THAT I COVERED THIS SPACE IN JUNE ON THE LARGER -- LARGER DEFENSE PRIME. FIRST TIME I HAVE ESSENTIALLY HAD BUYS ON THOSE NAMES FOR A LONG TIME. THE POINT WAS I THINK DEFENSE PRIME GROWTH IS FINALLY GOING TO RE-ACCELERATE. THESE THINGS HAVE GROWN AT 5%, NO OPERATING LEVERAGE WHATSOEVER. AND FREE CASH FLOW HAS NOT REALLY BEING USED PRODUCTIVELY. I THINK THAT IS CHANGING. LOOK AT RAYTHEON DEFENSE, IT GREW 18% THIS QUARTER. AMAZING RESULTS. MARGINS HIT ALL-TIME HIGHS. SAME WITH GENERAL DYNAMICS. YOU ARE SEEING THESE NAMES GROW AND BENEFIT FROM WHAT WE HAVE SEEN IN THE BUDGET. ALL PLAYERS ARE GROWING. SMALL PLAYERS GROWING MIDTEENS TO 30%, 40 PERCENT. A LOT OF DEFENSE GROWTH NOT ONLY DRIVEN BY THE U.S. BUDGET, BUT BY THE INTERNATIONAL BUDGETS AND NATO AS WELL. A BIG THEME, TRYING TO FOCUS ON THE NAMES THAT HAVE THE NEAR-TERM UPSIDE IN TERMS OF REVENUE AND PROFITABILITY FOCUS. ROMAIN: LET'S TALK ABOUT THE COMMERCIAL SIDE OF THE AEROSPACE SPACE. WE HEARD FROM BOEING, THEY FINALLY GOT A CERTIFICATION FOR THE 737 MAX. THAT CAME OUT BEFORE GTA. GIVE ME A SENSE OF HOW CREATIVE THIS IS GOING TO BE. I KNOW THERE ARE LONG-TERM CONTRACTS, IT IS NOT LIKE THEY GET WINDFALL ALL AT ONCE. IT HAS TO BE A PRETTY BIG SIGH OF RELIEF FOR INVESTORS. >> YES, THE MAX SEVEN IS SMALL. THEY WILL USE IT ON MORE NICHE ROUTES LIKE HAWAIIAN ISLANDS. BUT IT IS A GREAT STEP IN TERMS OF WHAT THE FAA AND BOEING ARE WORKING TOWARDS. BOEING HAS BEEN PLAGUED BY THEIR ISSUES WITH THE FAA. SO WE SEE THE MAX SEVEN, SLATED TO BE IN AUGUST A FEW MONTHS AGO. IT IS GREAT TO SEE IT APPROVED ON SCHEDULE. THE MAX 10, A BIGGER VARIANT OF THE EIGHT AND NINE, WHICH IS BASICALLY WHAT THEY ARE DELIVERING NOW, PROBABLY AT THE END OF THE YEAR. THEY WILL BOTH ENTER SERVICE IN 2020 SEVEN. THE 777X IS THEIR BIG WIDE-BODY AIRCRAFT SLATED TO ENTER SERVICE NEXT YEAR. THAT IS VERY IMPORTANT BECAUSE IT IS MORE BILLION DOLLARS OF CASH FOR THEM. IT IS A CASH BURN. THEY NEED TO GET THAT CERTIFIED. ROMAIN: WHAT ARE YOUR THOUGHTS ON THE COMPETITION BETWEEN THE PLAYMAKERS, BOEING AND AIRBUS? THERE HAS BEEN HEAT ABOUT THE EUROPEAN INVESTMENT BANK, THAT LINE OF CREDIT THAT THEY GOT, WHETHER WE ARE GOING BACK TO WHAT WE SAW A COUPLE OF DECADES AGO, WHAT IS A SUBSIDY, WHAT IS NOT. EVERYTHING ELSE, DOES IT BECOME AN ISSUE, OR IS IT SOMETHING INVESTORS CAN LOOK THROUGH? >> I MAY GO OFF ON A TANGENT BECAUSE I WAS IN CHINA AND I THOUGHT ABOUT HOW GREAT THE U.S. AEROSPACE INDUSTRY IS, IT DOES NOT NECESSARILY NEED PROTECTIONISM. IT IS MOSTLY AIRBUS AND BOEING MANUFACTURING AIRCRAFT. THEY HAVE SUCH A GREAT GLOBAL DUOPOLY THEY CAN TAKE ADVANTAGE OF AND SHOULD TAKE ADVANTAGE OF GIVEN THE BACKLOGS ARE SEVEN YEARS LONG. AIRBUS IS NOT A GREAT PLAYER WHEN IT COMES TO WIDE-BODY'S. THEY DISCOUNT THE A 350. IT TAKES AWAY SOME OF THEIR UPSIDE. A GREAT DUOPOLY TO BE PART OF. NO NEW PLANS ARE TECHNOLOGY UNTIL 2040. I THINK THESE MANUFACTURERS HAVE A LOT OF EARNINGS RUNWAY THAT THEY SHOULD BOTH BE RATIONAL PLAYERS IN. ROMAIN: ALWAYS GREAT TO HAVE YOU, ONE OF THE BEST IN THE BUSINESS, JEFFERIES SENIOR AEROSPACE AND DEFENSE EQUITY RESEARCH ANALYST. WE WILL BE BACK IN A MOMENT. THIS IS BLOOMBERG. ROMAINE: TWO YEARS AGO, YOU LEARNED THAT -- YOU LAID OUT A RELATIVELY AMBITIOUS TARGET THAT WE WOULD SEE QUANTUM ADVANTAGE USING IBM HARDWARE BY THE END OF 2026. WE ARE HALFWAY THROUGH THE YEAR. WILL WE GET THAT? >> ABSOLUTELY. IF I LOOK AT OUR PARTNERS, WHAT THE NATIONAL LABS LIKE OAK RIDGE ARE GETTING DONE, I CAN ALREADY SEE THE EARLY SIGNS OF THE PROGRESS THEY'VE MADE. ROMAINE: NOW WITH THE CEO OF IBM TELLING ME ABOUT THE OPPORTUNITY OF WHAT A LOT OF PEOPLE THINK MIGHT BE THE NEXT BIG BREAKTHROUGH IN TECHNOLOGY, QUANTUM COMPUTING. FOR NOW NEXT TO JEN QUANTUM COMPANIES ARE LARGELY IN THE PRIVATE SPACE WITH THE NEXT GUEST'S FIRM BUILDING WHAT IT CALLS THE FIRST USEFUL QUANTUM COMPUTER SAID TO BE COMPLETED AS SOON AS 2020 SEVEN. JOINING US IS THE CEO OF -- QUANTUM. IT IS GREAT TO HAVE YOU HERE, VICTOR. I AM ABSOLUTELY FASCINATED. I FEEL LIKE IT WAS DECADES AGO WHEN I WAS IN COLLEGE. I CAN REMEMBER PROFESSORS THEORIZING ABOUT ALL OF THESE MINDBENDING MECHANICS ABOUT WHAT QUANTUM PHYSICS COULD ACTUALLY BE. THEN WHEN YOU TALK TO PEOPLE LIKE KRISHNA AND YOU, A LOT OF OTHER COMPANIES, THEY ARE BASICALLY SAYING THE FUTURE IS NOW. IS IT REALLY NOW? ARE WE ALMOST THERE, VICTOR? VICTOR: THANKS FOR HAVING ME, IT'S GREAT TO BE HERE. I AM IN MY FOR THE DECADE OF COMPUTING AND SEMICONDUCTORS AND IT IS A TREMENDOUSLY EXCITING TIME BECAUSE WE ARE REALLY CLOSE TO THE FIRST GENUINE, UNIQUE FORM OF COMPUTING THAT WE'VE SEEN. YES, I THINK THE ANSWER IS WE ARE VERY CLOSE TO THAT. WE ARE BUILDING A UTILITY SCALE QUANTA COMPUTER WHICH AS YOU SAY WHAT THAT MEANS IS WE CAN SOLVE REAL-WORLD PROBLEMS. I THINK WE ARE VERY CLOSE TO THAT AND IT SUPER EXCITING TO BE PART OF THAT. ROMAINE: EXPLAIN WHAT THAT MEANS. I MENTIONED D WAVE. I KNOW IBM, ALPHABET, GOOGLE, ALPHABET, BUNCH OF OTHER PLACES HAVE ALREADY CREATED SOMETHING TO A CERTAIN DEGREE. WHAT DOES USEFUL MEAN IN LAYMAN'S TERMS? VICTOR: WHAT IT FUNDAMENTALLY MEANS IS YOU CAN SOLVE REAL PROBLEMS THAT HAVE IMPACT, THAT SOLVES PROBLEMS IN PHARMACEUTICALS, MATERIAL SCIENCE, ENERGY, SO FORTH. YOU NEED A CERTAIN LEVEL OF SCALE IN ORDER TO SOLVE THOSE REAL-WORLD PROBLEMS. NOT JUST AT A SMALL SCALE SOLVE A PROBLEM THAT YOU CAN POINT TO IN ONE CASE, BUT REALLY SOLVE MULTIPLE OF THESE IMPORTANT APPLICATIONS THAT HAVE REAL ECONOMIC AND SOCIETAL VALUE. I THINK MAY BE UNIQUE THING ABOUT PSIQUANTUM'S SINCE OUR FOUNDING 10 YEARS AGO WE HAVE BEEN LASER FOCUSED ON THAT. NOT BUILDING THESE EARLIER DEMOS THAT DON'T SCALE, BUT OUR FOUNDERS HAD THE VISION AND WE ARE EXECUTING ON THE VISION FROM THE VERY BEGINNING. DEVELOPING THINGS THAT SOLVE REAL-WORLD PROBLEMS, WHICH MEANS HAVING A COMPUTER THAT IS SCALED OUT AND LEVERAGING TECHNOLOGIES AND TREMENDOUS -- TRILLIONS OF DOLLARS OF INVESTMENT AND MASS MANUFACTURING OF SILICON, AS WELL AS USING THINGS LIKE FIBEROPTICS SO YOU CAN NETWORK THESE THINGS. WE'VE HAD THE VISION FROM THE VERY BEGINNING AND I THINK THE REST HAS STARTED TO COME AROUND THAT THIS, BUT I THINK THAT'S WHAT MAKES THIS A LITTLE BIT UNIQUE. ROMAINE: WE TALK ABOUT YOUR FOUNDERS, THEY BROUGHT YOU IN THE KIND OF TAKE THIS FROM BEING SORT OF A RESEARCH I'VE BEEN LED COMPANIES ACTUALLY BEING -- SORRY. I DON'T WANT THIS SHORTCHANGE ANYONE. BUT TO MAKE THIS INTO AN INDUSTRIAL SCALE COMPUTING BUSINESS. I KNOW FROM NEWS REPORTS YOU WERE TRYING TO GET YOUR SITE UP IN AUSTRALIA OPERATIONAL BY 2027. I KNOW YOU ARE ALSO WORKING ON SOMETHING, IF I REMEMBER CORRECTLY, IN CHICAGO AS WELL. HOW CLOSE ARE THESE FACILITIES THE COMING ONLINE? VICTOR: THAT IS THE OTHER THING. IF YOU HAVE TO BUILD SOMETHING AT SCALE YOU HAVE TO BUILD THE INFRASTRUCTURE AND THE SITES YOU MENTIONED. IN AUSTRALIA WE ARE BUILDING A SITE AND WE JUST HAD A GROUNDBREAKING LAST MONTH. IN CHICAGO WE HAD A GROUNDBREAKING IN THE FALL AND THEY HAVE BEEN DOING A FANTASTIC JOB. WE ARE THE ANCHOR TENANT AT THE ILLINOIS MODERN COMPUTING IN MICROELECTRONICS PARK. WE ARE BUILDING A SYSTEM SCALED OUT THERE. THE DATES YOU'RE TALKING ABOUT IS WHEN THOSE SITES ARE DEVELOPED. WE HAVE DEVELOPED WHAT IS CALLED CRYO INFRASTRUCTURE. A COOLING TECHNOLOGY TO ENABLE YOU TO HAVE YOUR QUANTUM COMPUTER AND THEN WE WILL BE POPULATING THAT WITH A MACHINE THAT WILL BE ON SUCH A SCALE TO REALLY SOLVE REAL-WORLD PROBLEMS. ROMAINE: CAN YOU GIVE ME ANY SENSE OF WHICH ONE OF THOSE SITES GETS UP AND RUNNING FIRST? VICTOR: I THINK WE WILL HAVE, YOU KNOW, SIMILAR MACHINES RUNNING IN ILLINOIS IQMP, AND SHORTLY AFTER THAT THE BRISBANE SITE WILL BE UP AND OPERATIONAL. THAT'S WHEN YOU'LL SEE US SOLVING THOSE PROBLEMS THAT ARE DIVERSE FROM EVERYTHING FROM DRUG DISCOVERY, HEALTH CARE, MATERIALS, NEW BATTERY TECHNOLOGY, SOLVANG UPTON -- OPTIMIZATION PROBLEMS FOR THINGS LIKE LOGISTICS. ALSO OPTIMIZATION PROBLEMS LIKE PORTFOLIO MANAGEMENT. A VERY BROAD SET OF APPLICATIONS AND THAT WHAT IT MEANS TO BE AT SCALE TO SOLVE REAL-WORLD PROBLEMS. ROMAINE: HOW MUCH MORE MONEY DO YOU NEED TO GET THIS DONE? I KNOW YOU'VE RAISED A BUNCH OF MONEY UPLOADED FROM THE U.S. GOVERNMENT, PRIVATE INVESTORS, THE AUSTRALIAN GOVERNMENT AS WELL, WHAT ARE WE TALKING? EVERY DAY ON THIS PROGRAM WE ARE TALKING ABOUT HYPERSCALER TRYING TO BUILD A BASIC DATA CENTER THAT IS SPLASHING TENS OF BILLIONS OF DOLLARS TOWARDS IT. VICTOR: YEAH, I THINK YOU HAVE TO BE CAREFUL NOT TO, YOU KNOW, CONFUSE US WITH AI DATA CENTERS. IT IS A FACILITY THAT DOES NEED COOLING, WHICH IS UNIQUE, BUT IT IS A MUCH MORE SCALED-DOWN CAPABILITY. WE DO NEED CAPITAL BECAUSE WE ARE BUILDING ON SITES AND WE HAVE BEEN LASER FOCUSED ON BEING ABLE TO SCALE UP SO WE CAN SOLVE REAL PROBLEMS THAT PEOPLE CAN GET VALUE FROM, BUT IT'S NOT TO THE LEVEL OF WHAT YOU SEE WITH AI DATA CENTERS. I THINK ANOTHER THING THAT'S REALLY IMPORTANT THAT DIFFERENTIATES US IS THE CAPABILITIES THAT WE HAVE DEVELOPED ON THE WAY TO BUILDING THE COMPUTER THAT CAN ALSO DELEVERAGE TO OTHER PARTS OF TRADITIONAL COMPUTING. OUR MODALITY, WHICH IS WHAT IS OUR FORM OF QUBITS, IS BASED ON PHOTONS, LIKE PARTICLES OF LIGHT. AS YOU MAY KNOW FROM SOME OF YOUR OTHER GUESTS AND INTERVIEWS IN TECHNOLOGIES, THE TRADITIONAL DATA CENTERS WILL MOVE FROM COPPER INTERCONNECT TO OPTICS. WE ARE DEEPLY EXPERT IN PHOTONICS. I MENTION THAT AS THAT'S ANOTHER OUTCOME OF BOTH THE TYPE OF MODALITY WE'VE SELECTED AND THE EXPERTISE THAT WE'VE GOT BUILDING THINGS AT SCALE. ROMAINE: VERY QUICKLY, SPEAK TO ME IN LAYMAN'S TERMS FIX I'M OBVIOUSLY NOT A SMART AS HE WON THIS, BUT WHEN IT COMES TO THE ISSUE OF PHOTON LOSS, THERE HAS BEEN A LOT OF TALK ABOUT THIS YEAR. WHEN I WAS LOOKING AT YOUR PUBLISHED FIGURES I CANNOT ACTUALLY FIND ANY REAL MENTION OF THEM. I THOUGHT THIS WAS ONE OF THE HARDEST PROBLEMS TO CRACK IN, SORT OF, DEVELOPMENT AND THE QUANTUM SPACE RIGHT NOW. VICTOR: YOU ARE MENTIONING PHOTON LOSS. I THINK PEOPLE MAY BE FAMILIAR WITH IN DIGITAL ELECTRONICS AND EVEN TRADITIONAL COMPUTING YOU CAN HAVE DATA BITS THAT JUST FLIP IN VALUE SO YOU HAVE TO HAVE SOME LEVEL OF ERROR CORRECTION TO HANDLE THAT AND STILL HAVE YOUR QUALITY CALCULATIONS HAPPEN. IN TERMS OF THE REASON WHY WE'VE SAID FROM THE GET-GO THAT WE NEED FULL TOLERANCE AND NOW THE INDUSTRY HAS COME AROUND TO THAT IS EXACTLY BECAUSE YOU HAVE THINGS LIKE FLIPS AND PHOTONS, A RATIO OF KIND OF THINGS WHERE THEY DISAPPEAR. THAT'S BUILT INTO THE ARCHITECTURE. THAT'S NOT ANYTHING NEW AND THAT IS SOMETHING THAT IS INTO THE ARCHITECTURE. SO WE'VE DEVELOPED THAT. WE ALSO FOCUSED ON SCALE, SO THAT IS SOMETHING WE'VE BEEN WORKING ON, MAKING TREMENDOUS PROGRESS ON, QUITE FRANKLY. BACK TO THE QUESTION OF, ARE WE CLOSE? YES, WE ARE CLOSE. ROMAINE: THE BROADER NATION OF WHAT'S GOING ON IN AI, TEXT, THE AR BUILD OUTCOME OF THE SHORTAGE OF COMPONENTS OR AT LEAST THE HIGH COST OF GETTING YOUR HANDS ON THEM, ARE YOU DEALING WITH ANY BOTTLENECKS NOW, PHOTON SOURCES, OPTICAL SWITCHES, WHATEVER, CHIPS, ANYTHING ELSE YOU NEED? VICTOR: NO, ACTUALLY, IN A SENSE WE ACTUALLY ARE VERY FOCUSED ON SUPPLY CHAIN. BY THE WAY, IT IS HEAVILY U.S.-BASED. WE'VE SPENT HUNDREDS OF MILLION DOLLARS -- HUNDREDS OF MILLIONS OF DOLLARS OF THE PAST YEARS WITH SUPPLIES IN THE U.S.. YOU'VE INCLUDED SOME OF OUR CLOSE ALLIES, WE ARE 90 PLUS PERCENT U.S. SUPPLY CHAIN. WE MANAGED THAT CAREFULLY AND WE DON'T SEE ANY BOTTLENECKS. ACTUALLY SAY BACK AGAIN, SOME OF THE TECHNOLOGY THAT WE CREATE ON THE WAY TO BUILD OUR MACHINE CAN BE LEVERAGED A WILL BE IMPORTANT FOR EVEN TRADITIONAL COMPUTING. WE SEE OPPORTUNITIES WHERE SOME OF OUR GREAT TECHNOLOGY CAN BE PART OF THE SUPPLY CHAIN FOR NON-QUANTUM APPLICATIONS AS WELL. ROMAINE: REALLY APPRECIATE YOU JOINING US, FASCINATING SUBJECT. WE WILL CATCH UP WITH YOU SOON I'M SURE. THAT IS THE CEO OF PSIQUANTUM VICTOR PENG, ALSO THE FORMER PRESIDENT OF AMD WHERE HE LED THE GPUS. EMILY FEEL JOINS US AFTER THE BREAK. THIS IS "THE CLOSE" ON BLOOMBERG. ♪ ROMAINE: IT IS TIME NOW FOR OUR STOCK OF THE HOUR, LOOKING AT SHARES OF ELI LILLY OF 4.5% AFTER THE COMPANY RAISED ITS FULL YEAR REVENUE FORECAST AND BEATING SALES ESTIMATES PRETTY MUCH ACROSS THE BOARD. OMUNJARO BEATING ESTIMATES, AND THERE IS A BIG FOCUS NOW ON ITS OBESITY BILL WHICH GOT OFF TO A STRONG START. EMILY FEEL THE HEAD OF U.S. BIOPHARMACEUTICALS EQUITY RESEARCH AT BARCLAYS JOINS US NOW. YOU BEEN BUSY ALL DAY LONG. INVESTORS LIKE WHAT THEY'VE HEARD. LET'S GO BACK IN TIME AND TALK ABOUT THE PERFORMANCE, THE PERFORMANCE OF ZEPBOUND, WERE YOU SURPRISED? EMILY: ABSOLUTELY. IN THE U.S. WE HAVE PRESCRIPTION DATA AND WE CAN KIND OF TRACK VOLUME TO A DEGREE BUT THE BIG SURPRISE FOR ELI LILLY THIS YEAR HAS BEEN THE PERFORMANCE OF MOUNJARO, WHAT THEY CALL IT ZEPBOUND OUTSIDE THE U.S., FOR EVERYTHING. WE WERE EXPECTING ANOTHER STRONG QUARTER HERE IN THE SECOND QUARTER BUT IT BEAT AGAIN. ALSO THE U.S. BUSINESS BEAT AHEAD OF EXPECTATIONS. SOME ARE TRYING TO PRICE, BUT I THINK TAKING IT HOLISTICALLY THE RESULTS TODAY ARE JUST ENIGMATIC OF A VERY, VERY STRONG MARKET ACROSS DIABETES -- ROMAIN: THERE WAS A LOT OF CONCERN HEADING INTO THE LAST FEW PRINTS AS TO WHETHER THIS CRAZE WAS INDEED A CRAZE THAT WOULD DIE DOWN. DID YOU GET A SENSE FROM TALKING TO THE EXECUTIVES THAT THERE IS A LONG TERM STRUCTURAL STORY HERE WITH THEM NOT ONLY ON THE REVENUE SIDE, BUT IN TERMS OF BEING ABLE TO MAINTAIN MARGINS? >> ABSOLUTELY. THEY SAID THEY WERE SEEING EXPECTED GRAPHS TO SLOW DOWN IN UTILIZATION. I THINK THAT SPOOKED PEOPLE GOING INTO THE RESULTS. WE JUST GOT OFF THE PHONE WITH THE COMPANY. IT SEEMS ACROSS THE BOARD, PENETRATION IN ALL OF THEIR ADDRESSABLE MARKETS, DOES NOT INCLUDE ONLY OBESITY, BUT LIKE SNAPE -- SLEEP APNEA, THAT THEY ARE EXPLORING WITH PIPELINE DRUGS THAT THERE IS SUCH A GROWING MARKET FOR THESE DRUGS AND PENETRATION PROBABLY REMAINS IN THE LOW SINGLE DIGITS GLOBALLY. IT STILL SEEMS EVEN AFTER THE HYPE OVER THE LAST FEW YEARS, WE ARE AT THE BEGINNING OF THIS STORY. ROMAIN: TALK ABOUT THE PILL. APPARENTLY IT WAS NOT QUITE THE HIT, AT LEAST NOT OUT OF THE GATE. -- IT SEEMS TO BE DOING A BIT BETTER. WHAT IS THE DISCREPANCY? >> NOVA LAUNCHED THEIR PILL FIRST. AND SO THEY LAUNCHED AROUND THE TIME OF THE NEW YEAR, NEW YEARS RESOLUTION, MAYBE THERE WAS PENT-UP DEMAND FOR THE PRESCRIPTION DATA GOT OFF TO A SLOW START RELATIVE TO WALL STREET EXPECTATIONS. ON BOTH THE CALL BACK IN THE FIRST QUARTER RESULTS, THE COMPANY MADE A POINT THAT THEIR PROMOTIONAL EFFORTS ABOUT THE NEW MEDICINE, IT IS REALLY THE FIRST NEW MEDICINE BECAUSE WILL GO HE IS ACTUALLY THE ONE WE'VE HAD IN A FEW YEARS IN THE OBESITY MARKET. THEY ARE TRYING TO BE DELIBERATE AND SLOW IN HOW THEY TARGET PHYSICIANS BECAUSE IT IS A NEW MEDICINE. AT LEAST THE MESSAGE FROM THE COMPANY'S IT IS NOT SLOW, WE WILL SEE DEFLECTION IN THE PRESCRIPTION DATA. THINGS TO CONTINUE TO CHECK UP AS THE WEEKS GO ALONG. ROMAIN: JUST OVERALL, I'M CURIOUS ABOUT COVERAGE GOING FORWARD. IS IT STILL A BIG CONCERN FOR YOU? >> IT CERTAINLY IS BECAUSE WE SAW A LITTLE BIT OF A PRICING WITH NOVO AND LILY ANNOUNCING THEIR AGREEMENTS WITH THE TRUMP ADMINISTRATION LAST YEAR. THIS ELEMENT OF A DRUG CLASS HAVING SUCH A HEAVY ELEMENT OF CONSUMER CASH PAY, WHICH WE HAVE NOT SEEN ACROSS OTHER CLASSES. IT HAS CONTRIBUTED TO A CONCERN THAT IT WILL BE EXTREMELY DEFLATIONARY, HOWEVER AT LEAST AS WE ARE GOING INTO 2020 SEVEN, IT WILL BE THE TWO COMPETITORS, ELI LILLY AND NOVO. WHILE WE WILL SEE PRICING DEFLATIONARY HIGHER RELATIVE TO OTHER DRUG CLASSES THAT ARE MORE CONGRESSIONALLY COVERED, IT STILL SEEMS FROM ELI LILLY'S PERSPECTIVE, WHAT THEY SAY IS EVERY TIME THERE IS A STEP DOWN IN PRICE, UPTICK IN DEMAND FOR THEM, REVENUE CONTINUES TO GROW. ROMAIN: A REAL PLEASURE TO HAVE YOU. THE HEAD OF U.S. BIOPHARMACEUTICALS AT BARCLAYS, A CLOSER LOOK AT SHARES WHICH ARE MOVING HIGHER ON THE DAY. AND SO ARE SHARES OF SHAKE SHACK. THE STAR BOARD CEO JEFF SMITH SAYS HE'S TAKING A NEW POSITION IN THE COMPANY. >> WE ARE ECONOMICALLY ONE OF THE LARGER SHAREHOLDERS, THE LARGEST ACTIVE SHAREHOLDER, $700 MILLION. WE ARE REALLY EXCITED. IT IS JUST TOO CHEAP. ROMAIN: THAT REVELATION COMING A COUPLE OF HOURS AGO ON THE DEAL SHOW ON BLOOMBERG. DANI BURGER JOINS US TO TALK MORE ABOUT THIS. IT OPENED THE DAY SOFT. HEADING FOR WHAT IS GOING TO BE ITS STRONGEST CLOSE IN MORE THAN A YEAR. WHAT IS GOING ON? >> JEFF SMITH, BASICALLY SAYING THIS THING IS JUST TOO CHEAP. DIFFERENT THAN WHAT YOU WOULD USUALLY HEAR FROM ACTIVISTS, THING I WANT TO COME IN AND MAKE HUGE PLANS TO TURN THINGS AROUND. STAR BOARD HAS HISTORICALLY DONE THAT. HERE HE SAYS IT IS CHEAP. I KIND OF ONE TO TINKER AROUND THE EDGES, DO MORE FRANCHISES, BUT DON'T WANT TO MAKE HUGE SWEEPING CHANGES. >> WHAT IS THE PLAN? JUST OVER THE LAST THREE MONTHS, 30% PRIOR TO TODAY. EVEN PRIOR TO THAT, A BIT OF A DOG, WHICH IS KIND OF SURPRISING THAT GIVEN FOR A WHILE, SORT OF THE FAST CASUAL FAST FOOD SPACE. IT IS KIND OF THE HARDEST THING OUT THERE. >> IF YOU LOOK AT THE COMPARABLE COMPANIES, CHIPOTLE IS ALSO DOWN. DOWN 8% VERSUS 18. I THINK SHAKE SHACK SPECIFICALLY BUT JEFF SMITH WOULD ARGUE IT IS COMPARABLE, GROWTH RATE TO CHIPOTLE, YET IT TRADES MUCH MORE CHEAPLY. THE PLAN IS LET EVERYBODY KNOW THIS IS CHEAP AND THERE IS A CLEAR GROWTH STORY FOR THEM. BUT HE THINKS HE CAN EXPAND THEIR STORE PRESENTS MORE FORCEFULLY THAN THEY ALREADY PLAN. MORE STORES. HE SAID IN ORDER FOR THEM TO DO THAT, THEY NEED TO FRANCHISE. OPENING UP JUST A SHAKE SHACK OWNED STORES WILL TAKE TOO LONG IF THEY WANT TO PUSH MORE INTERNATIONALLY. IN THE U.S., THEY DON'T REALLY DO FRANCHISES, THEY DO AIRPORTS AND OTHER SPORTING VENUES. ROMAIN: THAT HAS BEEN A DELIBERATE STRATEGY. THE WHOLE IDEA IS YOU HAVE MORE CONTROL BY OWNING YOUR SORES RATHER THAN ONCE YOU FRANCHISE, A LOT OF ISSUES COME UP, QUALITY CONTROL AND EVERYTHING ELSE. >> THAT IS WHY CHIPOTLE DOESN'T FRANCHISE. SAME EXACT STRATEGY, HAVE QUALITY CONTROL. THEY CONTEND THEY HAVE DONE IT, THEY CAN CHOOSE FRANCHISEES AND PROTECT THE BRAND. IT IS SOMETHING THEY CAN GO DOWN. HE SAID SO FAR THEY HAVE BEEN RECEPTIVE, AT LEAST IN CONVERSATIONS. THE CEO IS A CEO JEFF SMITH PUT IN PLACE AT PAPA JOHN'S AT A PREVIOUS ACTIVIST CAMPAIGN, SO THEY KNOW EACH OTHER. THERE MAY BE SOME FRIENDLY ATTITUDES THERE. BUT THEY HAVEN'T FRANCHISE FOR A REASON. WE WILL SEE IF THEY TAKE HIS WORD FOR IT. ROMAIN: I HAVE NOT BEEN TO SHAKE SHACK IN A WHILE, I MIGHT GO TONIGHT. >> I WAS THINKING ABOUT IT BECAUSE YOU HAD THE FANTASTIC INTERVIEW WITH THE STARBUCKS CEO WHERE HE TALKS ABOUT THE MOST IMPORTANT THING HAS BEEN PRODUCT INNOVATION FUELING THEM. SHAKE SHACK IS TRYING TO DO THAT, THEY HAVE A WHOLE WEST COAST MENU, SO YOU CAN EAT BASICALLY AT IN AND OUT, BUT SHAKE SHACK. I DON'T THINK THEY CALL IT THAT. THEY ARE TRYING TO DO THE THING THE STARBUCKS CEO SAID THEY WERE DOING. BUT THAT IS NOT ENOUGH. ROMAIN: SHARES OF ABOUT 11%. THE FACT YOU MENTIONED THAT ON AIR, ENOUGH TO GIVE THE STOCK ITS BEST CLOSE SINCE APRIL OF 2025. DANI BURGER, CHECK HER OUT AT 9:00 A.M. TOMORROW MORNING ON BLOOMBERG TELEVISION FOR THE OPEN. MEANWHILE, MARCHING TOWARDS THE CLOSE. THE S&P 500 HANGING UP BY A THREAD. UP TO POINTS, THAT WOULD BE A RECORD HIGH. THAT IS HOW RECORD HIGHS WORK. WHEN YOU HIT ONE THE DAY BEFORE, ALL YOU NEED TO DO IS BE IN THE GREEN TODAY TO HIT IT AGAIN. WHO KNOWS IF WE WILL GET IT AGAIN. -- THE SENIOR CLIENT ADVISOR AND HEAD OF THE NEW YORK OFFICE OVER AT JIM TRUSTY JOINS US. I WANT TO ASK FOR YOUR PREDICTION ON TODAY'S MARKET, BUT I WANT YOU TO LOOK A BIT LONGER TERM. WE HAVE GOTTEN THROUGH THIS EARNINGS SEASON. MOST OF IT. THERE WAS A LOT OF CONCERN. WE KNEW THE NUMBERS WERE GOING TO BE GOOD, BUT HOW DID THE MARKET REACT? WASN'T IT ENOUGH TO JUSTIFY THE MULTIPLES AND VALUATIONS? NOW THAT WE'VE SEEN THE BIGGER PLAYERS, ARE YOU ENCOURAGED? >> I THINK THIS EARNINGS SEASON IS TREMENDOUSLY ENCOURAGING. WE HAD JUST OVER 60% ANNOUNCING, A 47% RETURN EARNINGS GROWTH YEAR-OVER-YEAR. PHENOMENAL NUMBER. BUT SOME OF THE SPECIAL NUMBERS, THE SPECIAL ONE OFFS, WE ARE STILL IN THE HIGH 20'S IN TERMS OF REVENUE GROWTH YEAR-OVER-YEAR. REALLY STRONG, AND A LOT OF DIVERSIFICATION ACROSS SECTORS. IT IS A BROAD EARNINGS BEAT. ROMAIN: I'M GLAD YOU BROUGHT THAT UP. THAT WAS THE CONSENSUS INTO THIS QUARTER, IT WOULD NOT JUST BE BIG TECH AND AI, IT WOULD BE THE OPPOSITE, BIG TECH AND AI WOULD DO THEIR THING, BUT IT WOULD BE EVERYONE ELSE FINALLY SAYING WE CAN PARTICIPATE. I NEED YOU TO DRAW A LINK TO THE ECONOMY. IS IT AN ECONOMIC STORY, OR AN EXECUTION STORY FOR THESE INDIVIDUAL COMPANIES? >> YOU HAVE TO SAY IT IS AN ECONOMIC STORY. THE UNEMPLOYMENT RATE IS 4.2%. GDP IS RUNNING -- CALL IT AROUND 2% ANNUALLY. ADD THAT TO INFLATION, YOU HAVE SOME REAL NOMINAL GROWTH. IT IS A BIG ECONOMIC STORY AS WELL. ROMAIN: ARE YOU CONFIDENT IN ECONOMIC CONDITIONS? ANOTHER JOBS REPORT THIS FRIDAY SEEMS TO SUGGEST THINGS MORE OR LESS IN LINE WITH THE LAST FEW MONTHS. THE GDP REPORT WE JUST GOT. NO ONE SEEMS TO THINK WE ARE GOING MUCH LOWER THAN WHERE WE ARE RIGHT NOW. >> THE FORWARD-LOOKING GDP ESTIMATES ARE HIGH, GDP IS BACKWARD LOOKING, HEAVILY REVISED. THE PAYROLL PRINT, WE HAVE BEEN RUNNING AT 100 THOUSAND DOLLARS AVERAGE OVER THE LAST SIX MONTHS. IT IS REALLY GOOD. WE'VE HAD THIS WALL OF WORRY. IF WE ARE REALLY LOOKING AT THE DATA, IT HAS BEEN GOOD. ROMAIN: IT YIELDS, WE SAW WHAT HAPPENED A WEEK AGO AFTER KEVIN WARSH OPENED HIS MOUTH. THERE WAS A VISCERAL REACTION IN THE BOND MARKET WHICH SUBSIDED, BOND MARKETS COMING BACK ON THIS WEDNESDAY. DOES IT BECOME MORE OF A STORY GOING FORWARD, HIGHER YIELDS? >> I JUST WANT TO PAINT A BROADER PICTURE. IN MANY WAYS, THE BOND MARKET IS A NOTHING BURGER FOR THIS YEAR. HEAR ME OUT. 10 YEAR YIELDS ARE UP CLOSE TO 50 BIBS, DEPENDING ON WHAT TIME OF DAY YOU ARE LOOKING. FRONT END, HIGHER. THE AGGREGATE INDEX IS FLAT ON THE YEAR. SO YIELDS HAVE REPRICED, BUT WE CAME INTO THIS YEAR THINKING WE WERE GOING TO GET RATE CUTS, THAT WE WOULD HAVE SOME ECONOMIC STUMBLING. INSTEAD, WE ARE PRICING IN ONE HIKE. WE'VE GOT BETTER DATA. ONE HIKE THIS YEAR, MAYBE SOME ODDS NEXT YEAR. IT IS KIND OF THE WAY THE MARKET HAS DEVELOPED IN THE ECONOMY HAS PLAYED OUT. YOU WOULD ARGUE FOR HIGHER YIELDS IN THAT SORT OF SITUATION WITH INFLATION WHERE IT IS AT. ROMAIN: LOOKING THE NEXT FEW MONTHS, IS THERE A BIG RISK YOU ARE KEEPING AN EYE ON? GOING TO MAKE SURE THAT YOU ARE WATCHING? >> SO MANY. WE HAVE HEDGED, AND WE CONTINUE TO LOOK FOR BROADENING OUT. WE HAVE HEDGED THE MAG 7 NAMES. WE THINK IT IS A STORY OF EVERYBODY ELSE WINNING AND GAINING. AND THUS FAR, THE RETURNS SHOW THAT. MID-CAPS, SMALL-CAP, NON-US, EQUAL WEIGHT, THEY HAVE ALL BEATEN THE MAG 7 THIS YEAR BY HEALTHY MARGINS. WE THINK THAT ROTATION WILL CONTINUE. >> REAL QUICKLY BEFORE WE LET YOU GO, TALK ABOUT THIS ROTATION AND WHAT IS DEPENDENT ON, ULTIMATELY ON EARNINGS AS EVERYTHING IN THE STOCK MARKET IS. IS THERE ANY CONCERN THAT IF RATES ARE HIGH, COST OF CAPITAL IS HIGH -- COST OF CAPITAL REMAINS HIGH, AND IT KNOCKS DOWN THE AI TRADE? DOES IT DRAG EVERYTHING WITH IT OR CAN IT BE ITS OWN SECTOR SPECIFIC THING? >> I THINK THE HIGH RATES ARE PLAYING MORE INTO THE HOUSING MARKET AND CONSUMERS. COST OF BORROWING IS A PROBLEM. ON THE AI SIDE, SINCE YOU BROUGHT THAT UP, THE TOP AI COMPANIES USED TO BE REALLY CASH RICH, NOW THEY ARE SPENDING SO MUCH ON CAPEX THAT THAT DYNAMIC IS FLIPPING. SO WE ARE GOING IN THE BROADER EQUITY MARKET FROM NET NEGATIVE SUPPLY TO A NET SMALL POSITIVE OR MUCH MORE EQUAL, GIVEN THAT THEY WILL SLOW SHARE BUYBACKS. AND THEY WILL BE ISSUING DEBT. SO IT WILL BE A BIT MORE COSTLY FOR THEM. I WORRY ABOUT THE HOUSING SECTOR AND OTHER CONSUMER SECTORS WITH HIGHER RATES. ROMAIN: ALWAYS GREAT TO HAVE YOU, MIMI DUFF, HEAD OF THE NEW YORK OFFICE. COUNTING US DOWN TO THE CLOSING BELLS. JUST ABOUT THREE MINUTES. S&P 500 SLIPPING INTO THE RED. THE NASDAQ AND THE RED FOR THE LAST HOUR OR SO. THE RUSSELL DOWN. TRANSPORTS DOWN. DOW INDUSTRIAL AVERAGE FOR SOME REASON UP .60%. THAT WILL BE ENOUGH FOR A RECORD HIGH, DESPITE THE RED ON THE SCREEN, IT IS STILL A PRETTY MUCH UP DAY WITH THE MAJORITY OF STOCKS IN THE GREEN, INCLUDING NAMES LIKE NVIDIA, APPLE, AND THE TRAVEL STOCKS. WE WILL BREAK DOWN ALL OF TODAY'S MARKET ACTION AND HAVE FULL COVERAGE OF THOSE RESULTS FROM SANDISK AND WESTERN DIGITAL WITH OUR GLOBAL SIMULCAST WHICH STARTS RIGHT NOW. >> THE CLOSING BELL, BLOOMBERG'S COMPREHENSIVE CROSS-PLATFORM COVERAGE OF THE U.S. MARKET CLOSE STARTS RIGHT NOW. ROMAIN: WE ARE TWO MINUTES AWAY FROM THE END OF THE TRADING DAY. ROMAINE BOSTICK TAKING YOU THROUGH TO THE CLOSING BELL. A GLOBAL SIMULCAST, CAROL MASSAR AND TIM STENOVEC JOIN US NOW. ACROSS ALL OF OUR BLOOMBERG PLATFORMS, TELEVISION, RADIO. OUR PARTNERSHIP WITH YOUTUBE. A LITTLE BIT OF A SENTIMENT SHIFT ON THE DAY. COMING OFF OF THE RECORD HIGHS YESTERDAY. MODESTLY LOWER FOR MOST OF THE MAJOR INDICES THAT WE SHOWED FOR OUR VIEWERS AND LISTENERS. WE WILL GET SOME MAJOR EARNINGS COMING DOWN IN A MATTER OF MINUTES. INCLUDING FROM THE BEST PERFORMING STOCK OF THE YEAR, SANDISK. CAROL: I'M LOOKING FORWARD TO THAT. WESTERN DIGITAL COMING OUT WITH EARNINGS. EXPEDIA EBAY DUOLINGO, HONEYWELL AEROSPACE DOORDASH. ROMAIN: YOU DID NOT SAY APPLOVIN -- I LEFT THAT FOR YOU. CAROL: THAT IS BECAUSE I'M LOVING YOU. TIM: SEE, ROMAINE? >> YOU ARE ACTUALLY IN A ROOM. I GOT YOU. WE GET THIS IDEA OF EARNINGS SEASON. SO MUCH HAS BEEN MADE OF THE AI TRADE. YOU WERE SITTING HERE WHEN AMD AND SPACEX CROSSED THE WIRE. WE WILL HEAR FROM SANDISK, A STOCK THAT TOOK A BEATING LAST MONTH, 50% IN THE MONTH OF JULY. 400 PLUS PERCENT ON A YEAR-TO-DATE BASIS. IT GETS TO THE IDEA HOW MUCH RISK APPETITE IS STILL THERE FOR THESE HIGH MULTIPLE NAMES. CAROL: AGREED. WE JUST GOT 20 SECONDS, AND WILL IT BE A RECORD ON THE S&P? DOESN’T LOOK LIKE IT’S GOING TO BE THAT WAY. ROMAINE: YEAH, IT LOOKS LIKE THEY’RE GOING INTO THE CLOSE HERE, AND IT’S BEEN RIGHT AROUND THE WATER LINE FOR MOST OF THE SESSION HERE, BUT NOW DOWN ALMOST 14 POINTS. IT LOOKS LIKE THAT’S WHERE IT’S GOING TO SPELL, DOWN ABOUT .3% ON THE DAY. THE DOW JONES INDUSTRIAL AVERAGE HAS CLOSED AT A RECORD HIGH TODAY, ADDING 250-PLUS POINTS, OR HALF A PERCENT TODAY. THE NASDAQ COMPOSITE AND NASDAQ 100 EACH DOWN ABOUT .8%. AND THE RUSSELL 2000, CAROL, LOSING ABOUT 18 POINTS, OR .6%. TIM: ALMOST AN EVEN SPLIT IN THE S&P 500. IN THE S&P, WE HAD 245 NAMES MOVE HIGHER, 256 NAMES MOVE LOWER TODAY. ROMAINE: YEAH, AND WE TALK ABOUT WHAT’S BEEN LEADING THE MARKET. YESTERDAY, IT WAS ON THE SECTOR BASIS, IT WAS ALL TECH. TODAY, IT WAS MATERIALS. HEALTHCARE UP A PERCENT ON THE DAY. FINANCIALS UP .2%. AND THEN EVERYTHING ELSE JUST FADED. TECHNOLOGY STOCKS AS A GROUP BASICALLY UNCHANGED. COMMUNICATION SERVICES DOWN 2%. A BIG PART OF THAT WAS THE DOWN DRAFT THAT WE SAW IN ALPHABET. CAROL: GUYS, LET’S GET TO SOME OF THE INDIVIDUAL GAINERS AS WE AWAIT SOME EARNINGS. NVIDIA UP 3.4%, OFF ITS HIGHS, BUT NONETHELESS A GAINER ON THIS WEDNESDAY. THAT COMPANY, AS I MENTIONED, UP MORE THAN 3%. STOCK GAINING AFTER SPACEX SAID IT WOULD EXCLUSIVELY USE NVIDIA A.I. CHIPS. SPACEX EXPECTS TO HAVE APPROXIMATELY TWO GIGAWATTS OF COMPUTING CAPACITY BY THE END OF THIS YEAR, COULD RISE TO AS MUCH AS 10 GIGAWATTS NEXT YEAR. THAT’S ITS PROJECTIONS. NONETHELESS, IT GAVE, ROMAINE, A BOOST TO NVIDIA. THE STOCK UP YEAR TO DATE. ROMAINE: EARLIER, WE GOT EARNINGS OF BOOKING. THEY RALLIED ON THE DAY. WE’RE NOW HEARING FROM ONE OF ITS COMPETITORS, EXPEDIA. THE COMPANY SAID GROWTH IN THE QUARTER DID COME IN SLIGHTLY ABOVE ESTIMATES AT 33.93 BILLIONS. REVENUE, $4.32 BILLION. THAT’S ADJUSTED E.P.S. HERE’S YOUR GUIDANCE FOR THE FULL YEAR. THE COMPANY SAYS EXPECT REVENUE OF $16.05 BILLION TO $IS 16.22 BILLION, A RAISING OF THEIR GUIDANCE. THE PREVIOUS GUIDANCE WAS $16.6 BILLION TO $16 BILLION. BASICALLY A BEAT AND RAISE QUARTER FOR THE COMPANY, AS SHARES SLIGHTLY HIGHER, UP 1.5%. CAROL: THE STOCK IS UP 12% YEAR TO DATE. LOOKS LIKE IT MIGHT BE IN THE REGULAR SESSION CLOSING AT A RECORD HIGH. BUT NONETHELESS, IT HIT A 52-WEEK HIGH. INVESTORS LIKING WHAT THEY HEARD FROM THE COMPANY, UP ABOUT 5% HERE NOW IN THE AFTER MARKET. SECOND QUARTER ADJUSTED EBITDA, $1.12 BILLION. IN TERMS OF THE OUTLOOK, JUST TO GO BACK THERE, THIRD QUARTER REVENUE, 4.65 TO 4.75. TIM, THAT IS A BOOST. ESTIMATE ON THE STREET WAS 4.66 BILLION. TIM: EXPEDIA UP RIGHT NOW. THE C.E.O. OF THE COMPANY SAID, "WE CONTINUE TO STRENGTHEN OUR MARKETPLACE THROUGH MORE PERSONALIZED CONSUMER PRODUCT EXPERIENCES AND EXPANDED SUPPLY ACROSS OUR BUSINESS, WHILE LEVERAGING A.I. AS A FORCE MULTIPLIER, OPERATE MORE EFFICIENTLY." I GUESS I WANT TO KNOW MORE DETAILS ABOUT HOW THEY’RE USING A.I. AND HOW IT MADE THEM MORE EFFICIENT. I THINK PEOPLE COULD SAY, WELL, OK, THE CONVERSATION IS STARTING TO SHIFT FROM THESE COMPANIES NOW ADOPTING THIS TECHNOLOGY AND MAKING THEM MORE EFFICIENT. WHERE DOES THAT SHOW UP ON THE BOTTOM LINE? CAROL: I WANT TO GO BACK TO GAINERS. SHOP I PIE UP 25% TODAY, FINISHING WITH A GAIN OF ABOUT 17%. NUMBER ONE GAINER IN THE NASDAQ 100 TODAY. THE HIGHEST LEVEL SINCE JANUARY. THE E-COMMERCE GIANT REPORTED THIRD QUARTER REVENUE OUTLOOK BEATING EXPECTATIONS, STRENGTHSENNING THE VIEW THAT IT FACES LIMITED DISRUPTION FROM ARTIFICIAL INTELLIGENCE. REVENUE IS SEEN GROWING AT A LOW 30’S PERCENTAGE RATE AHEAD OF WALL STREET EXPECTATION OF A 27% JUMP. IT WOULD MARK THE SIXTH CONSECUTIVE QUARTER REVENUE GROWTH EXCEEDING 30%. KEEP IN MIND, THE STOCK IS DEFINITELY UNDER PRESSURE. IT HAD FALLEN 23% THIS YEAR THROUGH TUESDAY’S CLOSE. STOCK NOW STILL DOWN ABOUT 10%, AMID CONCERNS ABOUT A.I. DISRUPTION. MAYBE EASING SOME OF THE INVESTOR CONCERNS, ROMAINE. ROMAINE: JACK DORSEY’S COMPANY OUT WITH ITS EARNINGS, SECOND QUARTER REVENUE DOES APPEAR TO BE A BEAT, PARTICULARLY WITH ITS SQUARE SEGMENT REVENUE. BUT THE RED HEAD HAS TO DO WITH THE THIRD QUARTER FORECAST. THE COMPANY SAYS OPERATING INCOME FOR THE CURRENT QUARTER WILL BE $875 MILLION, ROUGHLY ABOUT $866 MILLION. THE COMPANY ALSO SAYS THE BET FOR THE QUARTER IT EXPECTS GROWTH PROFIT OF ABOUT $3.13 BILLION, JUST A NUDGE HIGHER THAN WHAT THE STREET WAS LOOKING FOR FOR THIS PARTICULAR QUARTER. THE COMPANY ALSO PROVIDING FULL-YEAR GUIDANCE THAT’S ALSO JUST A SMIDGE ABOVE ANALYSTS’ ESTIMATES. CAROL: ABSOLUTELY. JUST GOING THROUGH THE SNAPSHOT HERE. YOU MENTIONED SOME OF THE HIGHLIGHTS. JUST LOOKING FOR SOME COMMENTARY HERE. SO AGAIN, ADJUSTED OPERATING INCOME FOR THE THIRD QUARTER, $875 MILLION. THE ESTIMATE WAS $865.7 MILLION. AND AGAIN, SEEING ADJUSTED OPERATING MARGIN OF ABOUT 28%. THE STOCK BOUNCING AROUND IN THE AFTER MARKET. WE DID SEE IT HIGHER EARLIER ON. TIM: IT SHOCKED THE MARKET BY MASSIVE LAYOFFS. A LOT OF PEOPLE SAID IT WAS BECAUSE OF OVERHIRING DURING THE PANDEMIC. BUT AGAIN, GOING BACK TO WHAT EVERYBODY IS LOOKING FOR, OK, DID A.I. REPLACE THESE EMPLOYEES? IS A.I. MAKING THE COMPANY MORE EFFICIENT? SHARES OF BLOCK, INITIAL REACTION NOW UP MORE THAN 4% IN THE AFTER HOUR. ROMAINE: WE’RE STARTING TO GET SOME NUMBERS RIGHT NOW FOR WESTERN DIGITAL, THE COMPANY THAT NOW WANTS TO BE REFERRED TO AS W.D., ONE OF THE BIG MEMORY STORAGE DEVICE MAKERS. THE COMPANY SAYS NET REVENUE FOR THE QUARTER DID COME IN AT ABOUT $3.7 BILLION. THE STREET ON AVERAGE WAS LOOKING FOR $3.68 BILLION. SO THAT IS A BEAT. ADJUSTED E.P.S. COMING IN AT $3.56 A SHARE. THE STREET WAS LOOKING FOR $3.31. THIS IS A BIT OF A BEAT TO PARSE THROUGH. THE SHARES ARE DOWN 12%. THE NUMBERS FOR THE MOST RECENT QUARTER DID BEAT, BUT CLEARLY, SOMETHING ELSE IN HERE THAT INVESTORS ARE FOCUSING ON. IT MIGHT HAVE TO DO WITH THE FORECAST. THE COMPANY SAYS IF IT WERE THE CURRENT QUARTER, WHICH IS THE FISCAL FIRST QUARTER, IT EXPECTS REVENUE OF $4 BILLION TO $4.2 BILLION. THE STREET WAS LOOKING FOR $4 BILLION ON AVERAGE. THE LOW END OF THE RANGE PRETTY MUCH ON THE NOSE OF WHAT THE STREET WAS LOOKING FOR. THE COMPANY SAYS GROSS MARGIN IN THE QUARTER WILL BE 56%. THE STREET WAS LOOKING FOR 53.8%. THE COMPANY SAID OPERATING EXPENSES IN THE QUARTER WILL BE LOWER THAN WHAT THE STREET WAS LOOKING FOR. TIM: WHAT’S THE PROBLEM? ROMAINE: AND ADJUSTED HE WANTS INEPT QUARTER WILL BE 385 TO 415. THE LOW END OF THAT RANGE, ABOVE THE AVERAGE OF 385. TIM: WHAT’S THE PROBLEM? ROMAINE: HIGH EXPECTATIONS. CAROL: THE STOCK IS UP YEAR TO DATE, SO I WOULD DEFINITELY GO INTO THAT. I MEAN, AGAIN GOING TO SOME OF THE OUTLOOK HERE, THE COMPANY SEES FIRST QUARTER ADJUSTED GROSS MARGIN, 55% TO 56. THE ESTIMATE WAS 53.8. THAT’S, I WOULD SAY, A BEAT THERE. THE COMPANY SEES FIRST QUARTER OPERATING EXPENSES, LOOKS LIKE THEY’RE REINING THEM IN A LITTLE BIT, 395 MILLION. THE ESTIMATE WAS FOR 475.3 MILLION. AND THEN DIGITAL, WESTERN DIGITAL SEES FIRST QUARTER ADJUSTED E.P.S. 385 TO 415 A SHARE. THE ESTIMATE ON THE STREET WAS 383. SO THIS IS A LITTLE, A LITTLE HEAD SCRATCHING HERE. TIM: BUT THE COMMENTARY FROM THE COMPANY’S C.E.O. NOW, AS ROMAINE MENTIONED, W.D. IS HOW THE COMPANY WANTS TO BE REFERRED TO, IRVING TAN, SAYS THAT DEMAND, THAT THEY HAVE CONFIDENCE THIS DEMAND. HE SAYS, "AS GLOBAL DATA CREATION CONTINUES TO ACCELERATE WE ENTER 2027 WITH CONTINUED CONFIDENCE IN THE DURABILITY OF DEMAND AND WITH INCREASING VISIBILITY IN OUR BUSINESS WITH OUR SCALE TECHNOLOGY LEADERSHIP AND OPERATIONAL DISCIPLINE. W.D. IS WELL POSITIONED TO CAPITALIZE ON THE SECULAR DATA GROWTH OPPORTUNITY AND DELIVER LONG-TERM SHAREHOLDER VALUE." ROMAINE: I WANT TO POINT OUT, WE ARE STILL WAITING FOR SANDISK. THERE’S A TON OF TRADING ACTIVITY GOING ON IN IT RIGHT NOW. THOSE SHARES ARE ALSO DOWN ABOUT 8%. THE RELEASE HAS BEEN POSTED ON THE COMPANY’S WEBSITE. WE HAVE NOT YET GOTTEN IT ON THE BLOOMBERG TERMINAL. THE FILES ON THE COMPANY’S WEBSITE RIGHT NOW NOT ACTUALLY COMING UP HERE. SO IT’S NOT CLEAR THAT PEOPLE HAVE SEEN THE NUMBERS AND ARE REACTING TO THAT, OR WHAT THEY HEARD FROM WESTERN DIGITAL. WESTERN DIGITAL, THE COMPANY THAT SPUN OFF SANDISK LAST YEAR. CAROL: WE’VE GOT IT ON THE TERMINAL NOW. SANDISK, FISCAL FOURTH QUARTER REVENUE WAS 8.97 BILLION, UP 51% SEQUENTIALLY. INCOME REPORTED AT 6.9 BILLION. SEQUENTIAL RENEW WAS HIGHER VOLUME AND 2/3 FROM HIGHER PRICING. WHICH IS ALWAYS GREAT FOR MARGINS, BUT IT’S SOMETHING TO KEEP IN MIND IN TERMS OF WHEN WE LOOK THROUGH THE NUMBERS. FOURTH QUARTER PER SHARE WAS 39.25 A SHARE. SO WE’RE JUST STARTING TO GET SOME STUFF HERE, ROMAINE. ROMAINE: I’M GOING TO HOLD OFF JUST A LITTLE BIT HERE. I’M NOT GETTING ALL OF THOSE ON MY TERMINAL AS WELL. BUT YOU SEE THE REACTION. IT GETS BACK TO THIS IDEA THAT YOU WERE GETTING AT, HIGH EXPECTATIONS. WESTERN DIGITAL HAD BEEN ON A TEAR, BUT SANDISK HAS BEEN ON AN EVEN GREATER TEAR. IT RAISES QUESTIONS AS TO WHAT EXACTLY WHAT CONSTITUTES A REAL BEAT IN THIS DAY AND AGE. TIM: YEAH, WE GOT JAKE SILVERMAN COMING UP FOR BLOOMBERG INTELLIGENCE. HE’S GOING TO JOIN US. BUT LOOK, THE BACK DROP IS THAT DEMAND IS HIGH FOR THIS STUFF. LOOK AT WHAT THE STOCKS HAVE DONE SO FAR THIS YEAR. LOOK AT APPLE HAS HAD TO DO AS A RESULT OF HIGHER INPUT COSTS, RAISING PRICES FOR CERTAIN ITEMS. THE QUESTION IS HOW LONG DOES THAT DEMAND GO ON, AND IS THERE ACTUAL COMPETITION FROM CHINA THAT U.S. COMPANIES CAN HAVE ACCESS TO? CAROL: JUST GOING THROUGH SANDISK MORE. EXPANDING SHARE, REPURCHASE AUTHORIZATION, AN ADDITIONAL $14 BILLION BUY BACK, BRINGING IT TO $15.5 BILLION. WE’RE LOOKING FOR SOME COMPARISONS HERE. BUT I’M ALWAYS A LITTLE SUSPECT, TOO, GOING BACK TO WHO ARE WE TALKING ABOUT, WESTERN DIGITAL, CUTTING THEIR CAP EX AND WHY. IT IS REINED IN, WHY IS THAT HAPPENING? SANDISK DOWN, JUST DOWN 5% IN THE AFTER MARKET. WHAT IS A WRAP ON CROSS PLATFORM. WE DO CALL IT THE CLOSING BELL. ROMAINE CONTINUING ON "THE CLOSE" ON BLOOMBERG TV. TIM AND I BACK HERE ON RADIO. WE’LL SEE YOU AGAIN TOMORROW. ROMAINE: STICK WITH US. WE’RE GOING TO GET YOU MORE CLARITY ON THOSE EARNINGS, JUST FRESH OFF THE WIRE FROM SANDISK AND W.D. STICK WITH US. THIS IS BLOOMBERG. ♪ ROMAINE: WELCOME BACK TO "THE CLOSE." WE JUST GOT THE CLOSING BELL. THE S&P 500, WHICH HAD BEEN HOLDING THE WATER LINE FOR MOST OF THE DAY, COMING OFF OF YESTERDAY’S RECORD HIGH, NOW DOWN ABOUT .2% TO CLOSE OUT THE DAY. DOW JONES INDUSTRIAL AVERAGE IS GOING TO FINISH THE DAY AT A RECORD HIGH. THE BIG LIFT TODAY COMING FROM MATERIALS AND HEALTHCARE STOCKS. YOU ALSO SAW SOME INTERESTING INDIVIDUAL STORIES, INCLUDING FROM SHAKE SHACK HAVING ITS BEST DAY SINCE APRIL OF LAST YEAR. THAT WAS LARGELY ON THE BACK OF SOME COMMENTS THAT THE C.E.O. MADE ABOUT TAKING A STAKE IN THE COMPANY, TRYING TO UNLOCK SOME VALUE. SHOPIFY ALSO HAVING ITS BEST DAY SINCE AUGUST OF LAST YEAR, UP ABOUT 17% ON THE BACK OF AN INCREDIBLY IMPRESSIVE EARNINGS REPORT. MEANWHILE, YOU SAW ALPHABET DOWN ABOUT 4%, AS YOU HAD A KEY DEPARTURE FROM ONE OF THEIR EXECUTIVE IN THE A.I. SPACE, AS WELL AS A SHAKEUP OVER AT DEEP MINE, RAISING QUESTIONS HERE ABOUT WHAT’S GOING ON BEHIND THE SCENES. A.M.D., WHICH REPORTED EARNINGS YESTERDAY, CLOSING OUT TODAY DOWN 7%. THAT DOES BRING US TO OUR TOP STORY. THE NEXT CATALYST FOR THIS MARKET IS HAPPENING AS WE SPEAK. EARNINGS FOR MEMORY CHIPMAKER SANDISK, THE BEST PERFORMING STOCK OF THE YEAR, PLUNGED 47% IN JULY. SOME PEOPLE, THEY’RE EYEING A BUYING OPPORTUNITY HERE. THE BROADER TECH SELLOFF THAT PUSHED THE NASDAQ 100 INTO A TECHNICAL CORRECTION LAST MONTH ACTUALLY HELPED SHED THE EXCESS OUT THERE AND CLEAR THE STAGE FOR A REBOUND. THE NASDAQ 100 TRADING AT 22 TIMES EXPECTED 12-MONTH PROFIT, ONE OF THE LOWEST VALUATION PREMIUMS HE SAYS TO THE BROADER MARKET SINCE 2017. HE ALSO CITES CITADEL, SNAPPING UP ASSETS IN LEOPOLD’S HIGHED LEVERAGED SITUATIONAL AWARENESS HEDGE FUND LAST WEEK. REMEMBER, WHEN IT COMES TO WHEN IT COMES TO A ONCE IN A GENERATION MARKET EVENT, FORTUNES, AT LEAST DURABLE FORTUNES ARE NOT MADE ON THE UPSWINGS, BUT DOWN SWINGS. FINDING BARGAINS IN THE WRECKAGE, BEING GREEDY WHEN OTHERS ARE FEARFUL. BUT YOU ALSO HAVE TO HAVE CONVICTION IN THE FUNDAMENTALS. RIGHT NOW FOR SOME OF THESE AI STOCKS, THE FUNDAMENTALS SHALL PRICE MULTIPLES AT A SIGNIFICANT DISCOUNT TO THE MARKET ON THE FORWARD PRICE TO EARNINGS BASIS. LET'S TALK ABOUT THOSE FUNDAMENTALS. WE GOT EARNINGS OUT OF WESTERN DIGITAL. IT APPEARED ALL OF THEIR KEY METRICS FOR THE THIRD QUARTER AND THE PREVIOUS QUARTER DID MEET STREET EXPECTATIONS. THOSE SHARES DOWN ABOUT 9% HERE IN THE AFTER HOURS TRADE. SANDISK, THE BEST PERFORMING STOCK, NOW COMING OUT WITH THIS RESULT. THE COMPANY SAID THE FOURTH QUARTER NUMBERS, FISCAL FOURTH-QUARTER NUMBERS DID BEAT, INCLUDING ADJUSTED EPS NUMBER OF $39 25 CENTS PER SHARE. THE STREET WAS LOOKING FOR 34.3 SEVEN. THEY ARE PROVIDING GUIDANCE FOR THE CURRENT QUARTER, AND THAT DID APPEAR TO COME IN A LITTLE BIT LIGHT. ADJUSTED EPS FOR THE CURRENT QUARTER, 44 DOLLARS TO $46 A SHARE. THE STREET ON AVERAGE WAS LOOKING FOR 45.58. THE TOP END OF THAT RANGE AROUND AVERAGE STREET ESTIMATES. AS FOR REVENUE, THE COMPANY EXPECTS 10.8 BILLION DOLLARS. THAT IS WELL BELOW THE AVERAGE OF STREET ESTIMATES. THE STREET WAS LOOKING FOR ONE Q REVENUE OF 11.1 6 BILLION DOLLARS. MARK NEWMAN JOINS US, SENIOR ANALYST AT BERNSTEIN TO TALK ABOUT WHAT WE HAVE LEARNED. LET'S TALK ABOUT THE SANDISK NUMBERS. THE REVENUE FORECAST, STILL EARNING $10 BILLION TO $11 BILLION IN REVENUE FOR A QUARTER OF A COMPANY MAKING A FRACTION OF THAT A COUPLE OF YEARS AGO WAS STILL IMPRESSIVE. IS THE GROWTH STORY STILL THERE? >> THE GROWTH STORY IS STILL THERE. A $5 BILLION MARKET CAP ABOUT A YEAR AGO. BUT THAT IN PERSPECTIVE, THE STOCK HAS BEEN A FLYER. THE PROBLEM OF COURSE WITH MEMORY STOCKS IS PRICED IS EXTREMELY VOLATILE. REASONABLY HIGH EXPECTATIONS THAT THE PRICE IS GOING TO CONTINUE TO BE STRONG. YOU LOOK AT THE NUMBERS, IT SEEMS THE ACTUAL QUARTER WAS WAY ABOVE EXPECTATIONS, WAY ABOVE CONSENSUS. THEY HAD BEEN PRETTY CONSERVATIVE ON GUIDANCE RECENTLY, IN THE LAST QUARTER AND HOW THEY SMASHED IT OUT OF THE PARK AGAIN AND HOW THEY GUIDED FOR IT. IT SEEMS LIKE A QUITE CONSERVATIVE GUIDANCE. I'M NOT TOO SURPRISED BY THAT. WE WILL FIND OUT MORE IN ABOUT 15 MINUTES, I WOULD ASSUME THERE IS A REDUCTION IN THE VOLUME GROWTH OF EXPECTATIONS. >>>> JUST TO PUT A FINER POINT, IN REGARDS WITH THE QUARTER THAT JUST PAST, ANY 4.6%, IT MAKES ME CHUCKLE TO EVEN SAY THAT. THE ESTIMATE WAS FOR 81.5%. FREE CASH FLOW, $7 BILLION. I WANT YOU TO TALK ABOUT THE BALANCE SHEET. CASH AND CASH EQUIVALENTS DID DROP, THEY ARE NOW AT 4.7 6 BILLION DOLLARS, HALF OF WHAT THE STREET WAS LOOKING FOR. LOOKING FOR A $.5 BILLION. IS IT SOMETHING INVESTORS SHOULD BE WORRIED ABOUT, OR THE NATURAL CYCLE AS THEY TRY TO REINVEST IN THE BUSINESS, BUILD OUT CAPACITY, WE WILL SEE THESE FLUCTUATIONS ON THE BALANCE SHEET? >> HAVE WE SEEN THE DETAILS, BUT THEY ANNOUNCED A $10 BILLION BUYBACK. I THINK THEY ARE ANNOUNCING ANOTHER BUYBACK TODAY. IN THOSE NUMBERS, PERHAPS SOME BUYBACKS, I AM ASSUMING. I THINK THIS IS GREAT. SHARE BUYBACKS RETURNING MONEY TO SHAREHOLDERS. I DON'T KNOW THE DETAILS BECAUSE THESE NUMBERS ARE JUST HITTING. RETURNING CASH SHAREHOLDERS, BUYBACK SHARES, THAT IS A HUGE POSITIVE. FREE CASH FLOW IS MASSIVE, SIGNIFICANT, MORE THAN WHAT THE MARKET CAP WAS. SO I THINK ALL OF THESE ARE EXTRAORDINARILY POSITIVE TRENDS. SHARES ARE UP 3000 OR 4000% IN THE LAST 12 MONTHS. THERE HAS BEEN A BIT OF PROFIT-TAKING RECENTLY. ROMAINE: THAT BUYBACK PROGRAM NOW APPROVED AT $14 BILLION. OVERALL HAS REMAINING AUTHORIZATIONS OF ABOUT $15.5 BILLION IN THE BUYBACK AUTHORIZATION, SO THAT COULD BE SOME SUPPORT FOR THE STOCK. THERE IS STILL THIS IDEA OF THE GROWTH RATE. I STARTED OFF ASKING YOU ABOUT REVENUE GROWTH. ON A FULL-YEAR BASIS SOMETHING LIKE 200%, 100 $75, 80 PERCENT ON A YEAR-TO-YEAR BASIS. IT GETS TO THE IDEA THAT MOST PEOPLE KNOW ONE WAY OR ANOTHER THAT IS NOT SUSTAINABLE. WHAT IS THE GLIDE PATH FOR THIS COMPANY TO FIND SOME EQUILIBRIUM THAT WILL KEEP INVESTORS HAPPY, BUT ALSO MAKE SURE THERE IS STILL SOME SORT OF FAITH IN REALISM TO WHAT THE GROWTH RATE SHOULD BE FOR A COMPANY OF THIS SIZE? >> WE ARE COMING FROM A PERIOD WHERE THEY'VE GOT INSANE LEVELS OF PRICE INCREASE LAST QUARTER. IT WAS 140%. 140% QUARTER ON QUARTER PRICE GROWTH. INSANITY LEVELS OF PRICING AND GROWTH. I HAVE NOT FIGURED OUT WITH THE PRICE GROWTH IS, BUT IT IS A LOT LOWER THAN THAT. ANYTHING THAT IS POSITIVE IN PRICING IS GREAT BECAUSE VOLUME CONTINUES TO GROW, YOU ARE GETTING MORE GIGABYTES. COST GOES DOWN PER GIGABYTE AS WELL. I THINK FOR THE STOCK TO WORK A MORE NORMALIZED SINGLE-DIGIT TO 10% MORE TEENS ASP GROWTH, PRICING GROWTH IS VERY POSITIVE. ROMAINE: I THINK WE LOST MARK. MARK NEWMAN, MANAGING DIRECTOR AND SENIOR ANALYST, THE SHARES OF SANDISK DOWN ABOUT 5% RIGHT NOW IN THE AFTER HOURS TRADE. WESTERN DIGITAL SHARES ALSO UNDER PRESSURE. KICKING OFF AT THE BOTTOM OF THE HOUR. IN JUST ABOUT NINE MINUTES TIME. WE WILL GET MORE FROM THOSE CEOS. NOT JUST ABOUT THE NUMBERS THEMSELVES, BUT ABOUT THIS BIG BOTTLENECK GOING ON IN THE MEMORY CHIP SPACE. A TAILWIND TO THEIR BUSINESSES, BUT A HEADWIND FOR ALL OF THE CONSUMER ELECTRONIC BRANDS. -- COVERS THE SECTOR BETTER THAN ANYONE. A RESEARCHER OVER AT COUNTERPOINT. I DO WANT TO GET YOUR SENSE ABOUT HOW TIGHT THINGS ARE RIGHT NOW. IN THE PERSPECTIVE FOR A COMPANY LIKE SANDISK OR WESTERN DIGITAL, WHETHER THERE WILL BE ANY RELIEF FOR THE BUYERS, THE CONSUMER ELECTRONICS COMPANIES THAT ARE HAVING TO PAY UP IN ORDER TO GET THESE COMPONENTS? >> YES, EXACTLY ONE YEAR AGO, EVERY INVESTOR IS ASKING ME THE SAME QUESTION, HOW LONG WILL THE SUPPLY SHORTAGE LAST? THAT MEANS EVERYBODY DID NOT REALLY PUT THEIR PORTFOLIO INTO IT FULL-FLEDGED. RECENTLY, WE GOT SOME CASES IN HEDGE SITUATIONAL AWARENESS. BUT NOW I'M HERE IN SANTA CLARA AT THE FLASH MEMORY SUMMIT, EVERY SUPPLY CHAIN COMPANY IS ASKING ME THE EXACT SAME QUESTION, HOW LONG? THAT MEANS EVERYBODY HAS A HOPE THAT THE SUPPLY SHORTAGE WILL USE SOME TYPE -- SOMETIME IN THE FUTURE, ONE OR TWO YEARS. UP UNTIL THEN, THE HYPERSCALERS ARE NOT GOING TO STOP BUYING, AND PEOPLE WHO ARE CONTINUING TO BUY. SO THERE WILL BE SOME MECHANICAL ADJUSTMENT. GETTING DIFFICULTY TO FIND THESE COMPONENTS. BUT FUNDAMENTALLY, WE ARE ALL LOOKING FOR LARGER AND FASTER MEMORY FOR AI, THAT DOESN'T CHANGE. ROMAINE: IF DEMAND DOESN'T CHANGE OR SUBSIDE, I KNOW SANDISK, ALL OF THESE MAJOR CHIP COMPANIES HAVE SAID THEY ARE GOING TO INCREASE CAPACITY, SOME HAVE ALREADY BROKEN GROUND ON NEW FACILITIES. HOW LONG DOES IT TAKE BEFORE WE START TO SEE A MEANINGFUL INCREASE IN SUPPLY ON THE MARKET? >> GOOD POINT. THE SUPPLY HAS BEEN ACCELERATING IN TERMS OF THE MAGNITUDE OF NEW BUILDUPS. AND THE TIME WE CAN GET WITH OUTPUT IS GOING TO BE QUARTER THREE, QUARTER 4, 2020 SEVEN. MOST OF THE IMPACT OF THE SUPPLY GROWTH WILL START FROM 2028. UP UNTIL THEN, SUPPLY AND DEMAND WILL REMAIN VERY TIGHT, AND WE ARE GOING TO SEE PRICING APPRECIATION, AND THESE COMPANIES ARE GOING TO REPORT UNPRECEDENTED HIGH LEVELS OF EARNINGS GOING FORWARD. ROMAINE: WHEN YOU LOOK AT THE CONSUMER ELECTRONICS COMPANIES, NOT JUST CONSUMERS, BUT ACROSS THE BOARD, THE COMPANIES THAT MEET THESE COMPONENTS, WHO IS SUFFERING MOST RIGHT NOW? >> OBVIOUSLY IT IS THE BUSINESS MODEL. EXACTLY MOST PRIORITY IN TERMS OF ALLOCATION FROM A SUPPLIER PERSPECTIVE. THE FIRST PRIORITY IS AI INFRASTRUCTURE, WHICH IS CSP'S IN THE U.S., THEN WE CAN GO DOWN TO -- OEMS IN THE SERVER MARKET. AND SMARTPHONE COMPANIES. AND THEN IT GOES ON. SO THE BIGGEST HURT IS ON THE CONSUMER SIDE, ESPECIALLY SMARTPHONE, PCS, AND GAME MACHINES. AUTOMOTIVE AND NETWORKING ARE MORE OR LESS INFRASTRUCTURE COMPANIES, SO THEY CAN BE SOME SAVED AREA. BUT SMARTPHONES, ESPECIALLY IN CHINA, IS BEING HURT THE MOST. AND WE WILL SEE SOME MEANINGFUL MARKET SHARE SHIFT TO THE LEADING GROUPS, SUCH AS APPLE AND SAMSUNG GOING FORWARD. ROMAINE: WITH REGARDS TO THE ISSUES WITH REGARDS TO SUPPLY, AND NEW PLAYERS, NEW ENTRANTS INTO THIS MARKET, THERE HAS BEEN TALK ABOUT WHAT CHINA CAN DO, WHAT IT MIGHT ALREADY BE CAPABLE OF DOING. WHEN DO YOU FACTOR THAT INTO YOUR TIMELINE WHERE THEY MIGHT ACTUALLY BE A BIG FACTOR WITH REGARDS TO SUPPLY? >> CHINA COMPANIES ARE AMAZING, GROWING MUCH FASTER THAN EXPECTED. AND CXMT IS CAPABLE OF DELIVERING MOST OF THE COMMODITY DEREG'S. WITHOUT HBM, IT IS A BIG ISSUE. A.I. IS THE FIRST PRIORITY IN CHINA. SO IF THEY FOCUS ON HBM MANUFACTURING, WE ARE GOING TO SEE A SIMILAR LEVEL OF DISRUPTION IN COMMODITY MANUFACTURING IN CHINA AS WELL. EVERYTHING IS SOLD OUT IN CHINA, AND WE ARE GOING TO SEE SIMILAR SUPPLY SHORTAGE HAPPENING IN CHINA. IN THE LONG, THESE COMPANIES ARE GOING TO CONTINUE TO GROW. SO THE MEANING OF THE CHINA COMPANY IS NOT JUST A NUMBER. WHENEVER THEY CAN MAKE SOMETHING THEY REQUIRE THE ENTRY BARRIER OF THE CHINESE MARKET IS GOING TO BE A LOT HIGHER. THAT IS THE REAL THREAT TO THE REST OF THE WORLD. ROMAINE: WE SEE REPORTS FROM BLOOMBERG AND OTHER OUTLETS THAT AT LEAST THEY DO APPEAR TO HAVE PRODUCED THE SMARTPHONE MEMORY CHIPS ARE ALMOST ON PAR OF THE INDUSTRY STANDARD. IS IT YOUR BELIEF AS WELL? >> YES, SMARTPHONES, PCS. SO WE ARE RECENTLY HEARING THE GLOBAL SERVER COMPANY WITH CHIPS, THE ONLY PART THAT CHINA IS NOT CAPABLE OF DELIVERING THE RIGHT PRODUCT IS HBM. AND INITIALLY, WE ARE EXPECTING THAT MAY HAPPEN AT THE END OF THIS YEAR. ROMAINE: WE APPRECIATE YOU TAKING THIS TIME FOR US. ONE OF THE BEST RESEARCHERS WHEN IT COMES TO THAT SPACE OVER AT COUNTERPOINT. WHEN WE COME BACK, WE WILL PIVOT TO THE ENTERTAINMENT AND ADVERTISING SPACE. THIS IS BLOOMBERG. ROMAINE: SHARES OF AD TECH FIRM MOUNTAIN FINISHING IN THE GREEN AFTER AN EARNINGS REPORT YESTERDAY SHOWED REVENUE UP 20% ON A YEAR-OVER-YEAR BASIS. A BUSY STRETCH FOR MEDIA COMPANIES. WE GOT DISNEY THIS MORNING. WE GOT PARAMOUNT AS WELL. WE ARE GOING TO GET WARNER BROS. TOMORROW. THERE IS A LOT OF TALK OVERALL ABOUT THE STREAMING SPACE, THE CONNECTED TV SPACE, AND THE ADS THAT FEED INTO IT. MARK DOUGLAS IS THE CEO OVER AT MOUNTAIN. TALK TO ME ABOUT WHERE WE STAND RIGHT NOW IN THE CONNECTED TV SPACE. I'M GOING TO START WITH DISNEY EARNINGS. ONE THING THAT JUMPED OUT WHEN I SAW THEM -- OBVIOUSLY, THE STREAMING BUSINESS IS DOING BETTER THAN ANALYSTS EXPECTED. 64% PROFIT GROWTH IN THAT BUSINESS. THE REVENUE GROWTH WAS LIKE 14%. THE AD SALES -- THAT MIXES STREAMING WITH THE LINEAR SIDE OF THEIR BUSINESS. THAT WAS ONLY UP 3%. IS THAT A DISPARITY WE SHOULD BE PAYING MORE ATTENTION TO? WHAT IS GOING ON? >> DISNEY HAS LOST STRENGTH IN AD SALES. ESSENTIALLY, THEY ARE THE LARGEST. IT IS HARD TO GROW WHEN YOU ARE ALREADY NUMBER ONE. BUT THE YEAR ITSELF, I THINK A BIG THING FOR THIS YEAR IS BRINGING LIVE SPORTS TO STREAMING. WE HAVE HAD SO MANY BIG EVENTS WITH THE WORLD CUP TENTPOLE. THE SUPER BOWL, THINGS LIKE THAT. THAT HAS BEEN GOING EXTREMELY WELL FOR EVERY MEDIA COMPANY INVOLVED IN THAT, AND I THINK YOU ARE GOING TO CONTINUE IN THE FUTURE TO SEE LIVE SPORTS ON STREAMING AND ON STREAMING PLATFORMS BE A BIG DRIVER OF FUTURE GROWTH. ROMAINE: I KNOW THIS HAS BEEN THE HOLY GRAIL. THE SPORTS BUSINESS WAS KIND OF A DRAG FOR DISNEY BECAUSE OF HOW MUCH IT COSTS. I GUESS MY QUESTION IS, HOW DOES IT BALANCE OUT IN TERMS OF WHAT THEY HAVE TO SPEND FOR THE RIGHTS TO AIR THESE SPORTS, WITH REGARDS TO WHAT THEY END UP COLLECTING THROUGH ADS, SPONSORSHIPS, OR SUBSCRIPTION FEES? ASK I THINK FOR DISNEY IN PARTICULAR, ESPN HAS BEEN CONSIDERED SOMEWHAT UNDER MONETIZED BECAUSE IT WAS PRIMARILY AVAILABLE ON STREAMING. AND OF COURSE NEWS AND SPORTS CENTER. THAT IS CONSIDERED POTENTIALLY A BIG BRIGHT SPOT FOR GROWTH FOR THE AD SALES. AND IN PARTICULAR FOR SPORTS ON STREAMING. I THINK THAT IS A THING TO LOOK FOR AS DISNEY MOVES FORWARD. ROMAINE: I WANT TO GET YOUR THOUGHTS ON WHAT YOU DO AT MOUNTAIN BECAUSE YOU DEAL WITH A LOT OF SMALLER BUSINESSES LOOKING TO GET EXPOSURE AT THESE SPORTING EVENTS OR ON CONNECTED TV'S OVERALL. HAVE YOU SEEN ANY SORT OF PULLBACK RELATIVE TO THE GIGANTIC PLAYERS LIKE COCA-COLA OR WHOEVER? NOT AT ALL. I WOULD SEE THE INDUSTRY AS A WHOLE, THERE IS NOT ANY PULLING BACK OCCURRING. YOU ARE SEEING THAT THE BIGGEST ADVERTISERS ARE VERY CONSISTENT IN HOW MUCH THEY ARE SPENDING. I SEE NO REASON THAT IS NOT GOING TO CONTINUE IN THE SECOND HALF OF THE YEAR. AND THEN YOU HAVE SMALL AND MIDSIZE ADVERTISERS AS KIND OF THE GROWTH -- GROWTH DRIVER FOR THE INDUSTRY. THE TIP OF THE SPEAR. THEY ESSENTIALLY CREATED THAT CONCEPT, THAT CATEGORY. IT IS A VERY, VERY HEALTHY ENVIRONMENT. IN TERMS OF LIVE SPORTS, MORE PEOPLE LOOKING TO STREAMING IS JUST KIND OF THE BASE THAT EVERYONE IS GROWING ON. ONE OTHER THING I WILL MENTION IS THAT I THINK FOR A WHILE IT WAS NETFLIX AND THEN DISNEY. AND YOU ARE SEEING ALL THE STREAMING NETWORKS GETTING BETTER AT PRODUCING BETTER CONTENT. THEY ARE GETTING BETTER AT BRINGING MORE SUBSCRIBERS. I EXPECT THE SECTOR TO DO WELL OVER THE NEXT THREE QUARTERS. ROMAINE: IT IS SHIFTING AS WELL. I EVEN LOOK AT MY OWN TV AT HOME. I HAVE NOTICED BIG CHANGES IN THE PERIOD, IF YOU WILL. WE COULD TALK ABOUT ROKU, AMAZON FIRE, SAMSUNG, VIZIO. ARE THESE COMPANIES TRYING TO SORT OF BECOME THE TOLLROAD? OR ARE YOU STILL GOING TO BE ABLE TO CIRCUMVENT THEM? >> THINGS HAVE BEEN TRANSITIONING BECAUSE FOR A WHILE IT WAS THAT YOU NEEDED HULU OR A ROKU TO GIVE YOU THE LIVE CONTENT, AND THEN YOU HAD ALL THE EPISODIC CONTENT AND THE FAVORITE SHOWS. BUT WHAT HAS HAPPENED IS ALL THE LIVE CONTENT IS NOW AVAILABLE STREAMING ALSO. I THINK THAT GATEKEEPER ROLE, IF ANYTHING, IS DECLINING IN IMPORTANCE. THERE IS LESS IMPORTANCE TO HAVE A GATE KEEPER. IF YOU WANT TO WATCH WORLD CUP, YOU CAN JUST GO DIRECTLY AND IT IS AVAILABLE ON PEACOCK AND OTHERS. YOU DID NOT NEED THAT THE EQUIPMENT TO LAYER ANYMORE. IF ANYTHING, IT IS GOING THE OPPOSITE DIRECTION. YOU HAVE YOUR FAVORITE NETWORKS. THE NETWORKS ARE PUTTING OUT ALL FORMS OF CONTENT. THEY ARE EVEN PARTNERING WITH EACH OTHER TO MAKE SURE THEY GET THE MAXIMUM REACH. IF SOMEONE DOES NOT HAVE IT, THEY WILL PARTNER TO MAKE IT AVAILABLE. ROMAINE: WE HAVE HEARD BRANDS TALK ABOUT WANTING BETTER ENGAGEMENT. NOT JUST THE EYEBALLS, SOMEONE CLICKING THROUGH TO BUY, BUT THE IDEA OF FEELING A CONNECTION. HOW DO YOU ADJUST, FOR ALL THE OTHER PLAYERS OUT THERE, TO MAKE SURE IT IS NOT JUST A BILLBOARD IN FRONT OF MY FACE? IT IS SOMETHING THAT WILL DRAW ME INTO ENGAGE WITH THE BRAND. HOW DOES THAT TRANSLATE TO SALES? ASK IT COMES DOWN TO THAT VERY OLD AD -- IN TELEVISION ADVERTISING. YOU DON'T NEED TO WAIT FOR ANYTHING ANYMORE BECAUSE YOU CAN TARGET EVERYTHING. I THINK EVEN THE BIGGEST BRANDS ARE NOW EXPECTING VERY, VERY TARGETED CAMPAIGNS THAT ARE ALIGNED WITH THE CONSUMER THEY WANT TO REACH. AND THEN WITH OUR PLATFORM, YOU GET TO THE SMALL, MIDSIZE BUSINESSES THAT DON'T HAVE THE BIGGEST BUDGETS. REALLY ALIGNING WITH WHO IS THE PERFECT CONSUMER TO GET THAT CONTENT, THAT AD. IT IS JUST BEFORE VALUE PROPOSITION. ALL THE BRANDS ARE ESSENTIALLY SEEING PERFORMANCE AS KEY ON ALL SECTORS. THEY ALL BOUGHT INTO THAT. ROMAINE: MARK DOUGLAS, THE CEO OVER AT MOUNTAIN. WE WANT TO CHECK IN ON THE AFTER HOURS TRADE. CONFERENCE CALLS WITH SANDISK AND THE COMPANY FORMERLY KNOWN AS WESTERN DIGITAL UNDERWAY. SHEARS STILL UNDER PRESSURE, DOWN ABOUT THREE PERCENT. BEATING ON SOME OF THE KEY METRICS. WESTERN DIGITAL GUIDING HIGHER. BEATING IN THE RECENT QUARTER, BUT THOSE SHARES STILL TAKING A BEATING, DOWN ABOUT 9%. HEALTH BEAUTY IS ONE OF THE FEW BRIGHT SPOTS OUT THERE -- IS DROPPING. IN ONE OF THE BRIGHT SPOTS IS EXPEDIA IN THE TRAVEL SPACE. ROMAINE: THE NY ANNOUNCING A NEW PARTNERSHIP WITH GALAXY DIGITAL TO BUILD OUT ITS DIGITAL INFRASTRUCTURE. THE OVERSEAS ASSETS CONTINUE TO MOVE INTO THE DIGITAL ASSET BUSINESS. WE ARE JOINED BY THE GLOBAL HEAD OF BNY'S ASSET SERVICING BUSINESS. YOU HAVE A LOT TO DO THESE DAYS. I WANT TO START WITH THE DIGITAL ASSET SIDE. THIS STRUCK ME WHEN I SAW IT. WE HAVE HEARD THE CEO AND CFO TALKING ABOUT THIS SPACE. IF YOU WANT TO BE A CUSTODIAN, YOU ARE A CUSTODIAN FOR ALL ASSETS. HOW DOES THIS EXPAND WHAT YOU DO? ASK THE ANNOUNCEMENT WITH GALAXY IS ONE OF MANY PARTNERSHIPS WE HAVE GONE TO MARKET WITH. IT ALLOWS US TO DO STAKING FOR DIGITAL ASSETS THAT ARE UNDER CUSTODY. IF YOU STEP BACK FOR A MOMENT ON DIGITAL ASSETS MORE BROADLY, THERE IS NOT A CLIENT CONVERSATION TODAY WHERE DIGITAL ASSETS OR TOKENIZATION DOES NOT COME UP. WHETHER MANAGERS WANT TO LAUNCH A PROGRAM IN SIX WEEKS OR SIX MONTHS, THEY WANT TO KNOW WHAT IS GOING ON IN THIS SPACE, SO THE CONVERSATION HAS BECOME MAINSTREAM. AND WE ANNOUNCED A NEW CAPABILITY CALLED DIGITAL ASSET TRANSFER AGENCY. I DON'T KNOW IF YOU KNOW ANYTHING ABOUT TRANSFER AGENTS. YOU PROBABLY DON'T. THIS CREATES THE SHARES OF FUNDS. WE NOW DO THAT ON A CHAIN OF. THE REASON WHY THAT IS IMPORTANT THAT THE BOOKS AND RECORDS OF A MONEY MARKET FOR A FUND IS ON A CHAIN IS BECAUSE SUDDENLY THAT MAKES THE MONEY MARKET AVAILABLE FOR 24/7 SETTLEMENT. ALSO, YOU CAN USE A MONEY MARKET FUND FOR FINANCING A TRANSACTION ON THE WEEKEND, FOR EXAMPLE. ROMAINE: AS YOU EXPAND -- SOME OF THIS COMES WITH THE DYNAMICS OF THE BROADER INDUSTRY. YOU HAVE BEEN DOING THIS FOR A GAZILLION YEARS. I AM CURIOUS ABOUT THE FEE PRESSURE. THERE ARE A LOT OF COMPETITORS IN THIS SPACE. HOW DO YOU MAINTAIN THAT GROWTH BUT AT THE SAME TIME MAINTAIN SOME SEMBLANCE OF PROFITABILITY? >> AT BNY, WE HAVE HAD A LOT OF SUCCESS OVER THE LAST SEVERAL QUARTERS. ORGANIC GROWTH -- I THINK WE HAVE HAD 10 CONSECUTIVE QUARTERS OF ORGANIC GROWTH. FEE PRESSURE IS JUST PART OF THE BUSINESS. BUT IF YOU SERVICE CLIENTS WELL AND YOU ARE COMPETITIVE AND DIFFERENTIATED IN YOUR OFFERING, WHICH IS WHAT WE ARE DOING, DIGITAL ASSETS AS WELL AS MANY OTHER INNOVATIONS, CLIENTS ARE WILLING TO PAY FOR SERVICE AND PAY FOR PERFORMANCE. ROMAINE: THE SERVICE AND INFRASTRUCTURE IN THE REALM OF ALTERNATIVE ASSETS -- YOU ARE STARTING TO SEE MORE INVESTORS GRAVITATE TO ALTERNATIVE PRODUCTS. HOW MUCH HAS THAT BUSINESS GROWN? HAVE YOU HAD TO MAKE SIGNIFICANT CHANGES TO YOUR STRUCTURE TO ACCOMMODATE THIS? EMILY: PRIVATE MARKETS MORE SPECIFICALLY IS A GROWING SEGMENT OF THE MARKET. IT IS JUST BECOMING ULTIMATELY A STAPLE OF AN INVESTMENT PORTFOLIO. WHETHER IT IS FOR ENHANCED YIELD, FOR FURTHER DIVERSIFICATION, IT IS AN IMPORTANT COMPONENT OF ANY INVESTMENT PORTFOLIO. IF YOU ARE AN ASSET MANAGER THINKING DO I HAVE THOSE PRODUCTS IN MY PORTFOLIO, IN MY REPERTOIRE -- IF NOT, WE HAVE SEEN TIEUPS OF SOME DIFFERENT ASSET MANAGERS WITH ALTERNATIVE ASSET MANAGERS. THERE IS A QUESTION TO HOW YOU ACCESS THAT SPACE. THE DISTRIBUTION CHANNELS ARE OFTEN DIFFERENT FOR ALTERNATIVES. THERE IS A GROWING ATTRACTION OF MARKET EXPOSURE FOR RETAIL INVESTORS IN DIFFERENT WRAPPERS. THE LAST THING I WOULD SAY IS IF YOU ARE ON THE INVESTOR SIDE, THERE IS A BIG PUSH TO WANT TO SEE YOUR PUBLIC AND PRIVATE MARKET PORTFOLIO TOGETHER IN ONE SINGLE PANE OF GLASS, SO YOU CAN LOOK AT YOUR EXPOSURE AND ATTRIBUTION ACROSS BOTH. SO AS THE MARKET IS GETTING MORE COMPLICATED, IT IS PARTNERS LIKE OURSELVES THAT CAN HELP TO DEVELOP AND DELIVER THOSE INVESTMENT SOLUTIONS. ROMAINE: WITH REGARDS TO WHERE YOU SEE GROWTH GOING FORWARD, IS IT GOING TO BE IN THAT SPACE WITH REGARDS TO PRIVATE ASSETS AND THE BROADENING OF THAT MARKET? EMILY: CERTAINLY, PRIVATE MARKETS WILL CONTINUE TO BE AN IMPORTANT KEY GROWTH AREA. ETF'S CONTINUE TO BE A VERY IMPORTANT GROWTH AREA, ESPECIALLY ACTIVE ETF'S. LIKEWISE, THE WEALTH SEGMENT. AND DIGITAL ASSETS. ROMAINE: I KNOW ROBIN PENCE HAS TALKED ABOUT INTERNALLY THE USE OF AI AND THIS NEWFANGLED TECHNOLOGY. I ASSUME IN YOUR BUSINESS YOU HAVE TO BE ALL IN ON THAT. EMILY: ABSOLUTELY. WE WERE AN EARLY ADOPTER OF AI. FRANKLY, RAHMAN IS EVANGELISTIC ABOUT IT. HE USED TO COME TO OUR MEETINGS AND TALK ABOUT VIBE COATINGS ON THE WEEKENDS. AND LOOK -- IT IS ABOUT CREATING MORE CAPACITY. IT IS ABOUT REDUCING RISK. IT IS ABOUT SERVICING OUR CLIENTS BETTER. WE DO HAVE DIGITAL EMPLOYEES NOW, ABOUT 180 OF THEM. THEY HAVE FUNNY NAMES, EMAIL ADDRESSES, ACCESS TO OUR SYSTEMS. THEY ARE LISTED IN OUR PHONE BOOK. THEY DO THINGS LIKE PAYMENT REPAIR, ANSWER CUSTODY QUERIES, HELP WITH CLIENT ON BOARDING. OF COURSE, THEY ARE SUPERVISED BY HUMANS. IT IS ALL ABOUT BEING FASTER AND MORE EFFICIENT IN SERVING OUR CLIENTS. ROMAINE: DO YOU THINK IN A YEAR IT WILL BE MORE THAN THAT? EMILY: PROBABLY. WE WILL SCALE UP AS APPROPRIATE. ROMAINE: WE WERE TALKING ABOUT PRIVATE MARKETS. WE WANT TO STICK IN THAT SPACE AND TALK ABOUT RIDGEPOST CAPITAL POSTING EARNINGS. WE WILL TALK ABOUT THAT AFTER HIS ASSETS COST $50 MILLION IN THE SECOND QUARTER. >> WE ARE FOCUSED ON EXPANDING THE PLATFORM AND SERVING OUR CLIENTS. ROMAINE: YOU ARE MORE FOCUSED ON THE INSTITUTIONAL SIDE. AND THIRD PARTY RETAIL. BUT THESE ARE KIND OF A HODGEPODGE OF BUSINESSES, KIND OF MELDED INTO ONE COHESIVE COMPANY HERE. GIVE ME A SENSE AS TO WHO YOU ARE GOING AFTER MOST. >> WE HAVE A BUNCH OF SPECIALIZED TARGETED OFFERINGS ACROSS PART OF HER -- PRIVATE MARKETS. VENTURE CAPITAL, PRIVATE DEBTS. WE CAN BE A FULL SOLUTION PROVIDER. THERE ARE A LOT OF INTERESTING DYNAMICS. THERE ARE CLIENTS ACROSS ONE OR SEVERAL PARTS OF THE PORTFOLIO. AND THERE ARE CLIENTS WHO WANT TO ENGAGE WITH US MORE HOLISTICALLY. INSTITUTIONAL CLIENTS, LARGE ALLOCATORS INSURANCE COMPANIES PENSIONS SOVEREIGN WEALTH FUNDS ARE GOING TO BE MORE INTERESTED IN THAT FULL SPECTRUM OF OFFERING. OUR ABILITY TO DO THAT I THINK DIFFERENTIATES US. ROMAINE: LET'S TALK ABOUT THAT A LITTLE MORE. YESTERDAY, WE HAD SOMEONE CONVEYING THE DRUM ON THE RELATIVE ATTRACTIVENESS AND SAFETY IN THE MARKET. IS THAT BECAUSE IT IS AI PROOF OR MORE ECONOMICALLY RESILIENT? >> I THINK SOMETIMES THE RISK IS PEOPLE THINK THE MIDDLE MARKET IS SMALLER AND RISKIER. THE OPPOSITE IS TRUE. IT IS MORE STABLE AND MORE RESILIENT. FIRST OF ALL, A LOT LESS CAPITAL MEANS MUCH MORE OPPORTUNITIES. WE HAVE 10 TIMES THE COMPANIES THAT WE ARE ABLE TO INVEST IN IT. WE CAN BE MUCH MORE TARGETED, MUCH MORE SELECTIVE. AND WE CAN BUY THE COMPANIES IN THE RIGHT WAY. IN THE UPPER MARKET, THEY DO MULTIPLES THAT ARE DOUBLE DIGIT. YOU ARE BUYING THINGS AT 7, 8, NINE TIMES EBITA. THE NET EFFECT OF THE LEVERAGE IS WE ARE GETTING GREAT ASSETS. WE ARE GETTING THEM AT THE RIGHT PRICE. TO YOUR POINT ON AI, WE CAN BRING AI AND WE CAN BRING A LOT OF OPERATIONAL EXCELLENCE TO BEAR TO MAKE THEM MORE RESILIENT, TO MAKE THEM GROW FASTER. AND ULTIMATELY, IT IS ALL THE LARGE FOLKS WE TALKED ABOUT. ROMAINE: I KNOW YOU ARE SEEING A LOT MORE COMPETITION. >> OBVIOUSLY, IT IS UNATTRACTIVE PART OF THE MARKET. AND WHEN THERE IS AN OPPORTUNITY, PEOPLE COME TO IT. BUT THERE ARE TWO THINGS WE HAVE THAT I THINK ARE REALLY POWERFUL. ONE IS THE BENEFIT OF INCUMBENCY. EVEN AFTER 25 YEARS, OUR LARGEST STRATEGY -- 25 YEAR ANNIVERSARY. THEY HAVE BEEN DOING THIS AN INCREDIBLY LONG TIME. THE FORMULA THEY HAVE IN THE MIDDLE-MARKET IS SOMETHING NOBODY ELSE CAN REPLICATE. WE HAVE CAPTURED DATA, VOLUMINOUS DATA, LONGITUDINALLY, OVER 25 YEARS, AND LOTS OF DIFFERENT WAYS. THE POWER OF THE INSIGHT WE CAN DERIVE FROM THAT DATA -- IT IS MASSIVELY POSITIVELY DIFFERENTIATING. ROMAINE: ON VENTURE DEBT, THAT IS TOTALLY DIFFERENT. >> BUT IT IS VENTURE DEBT. ROMAINE: BUT IT IS A DIFFERENT TYPE OF COMPANY. >> I WOULD SAY SO. WESTERN TECHNOLOGY IS OUR VENTURE DEBT STRATEGY. THEY WERE FOUNDED IN 1980, SO THEY HAVE BEEN AT IT ON AWFULLY LONG TIME. DURABILITY OF A FRANCHISE. BUT WE ARE NOT FOCUSED ON THE HOUSEHOLD NAMES IN TECHNOLOGY THAT YOU ARE HEARING EVERY DAY. ROMAINE: BUT BACK IN THE DAY, YOU INVESTED IN WHAT ARE NOW HOUSEHOLD NAMES. IS IT HARDER TO DO SOMETHING LIKE THAT WHERE YOU ARE LOOKING FOR THE NEXT FACEBOOK OR GOOGLE OR WHATEVER? >> THE REALITY IS THEY HAVE BEEN DOING IT A LONG TIME. THEY HAVE A GREAT NETWORK OF RELATIONSHIPS. THEY ARE A TRUSTED PARTNER. THEY OFFER AN INCREDIBLE FINANCING SOLUTION PACKAGE ENTREPRENEURS. THEY HAVE BEEN INCREDIBLY SUCCESSFUL AND I THINK THEY CONTINUE TO GROW AND SCALE THE BUSINESS. ROMAINE: I FEEL LIKE IN THE MIDDLE-MARKET, YOU HAVE SMALL PLAYERS HAVE THE BALL TO THEMSELVES. YOU ARE NOW BIG. YOU HAVE BEEN GOING FOR A BAZILLION YEARS. DOES IT WORRY YOU THAT MAY BE THE APOLLO'S AND MAYBE GOLDEN WILL SAY WE REALLY WANT A PIECE OF THIS AND WE ARE GOING TO TAKE IT? >> I WOULD -- I'M SURE THEY WOULD LIKE A PIECE OF IT. THEY ARE INCREDIBLE AT WHAT THEY DO. WE ARE GOOD AT WHAT WE DO. THOSE ARE DIFFERENT THINGS. THERE IS A DIFFERENCE BETWEEN BEING A LOCAL AND A TOURIST. I THINK THEY ARE -- WE ARE THE LOCALS. ROMAINE: HERE ON THIS WEDNESDAY, WE HAVE A BIT OF A PULLBACK FROM THE RECORD HIGHS WE HAD ON TUESDAY. A BIT OF A DRAG FROM SOME OF THOSE BIG TECH NAMES, COMING OUT OF EARNINGS YESTERDAY, INCLUDING FROM AMD AND SPACEX. WE ARE GOING TO GET MORE EARNINGS TOMORROW THAT COULD POTENTIALLY MOVE THE MARKET. IN THE MORNING, WE DO GET WARNER BROS. DISCOVERY. THERE WILL BE A BIG FOCUS, ESPECIALLY WILL THEY/WON'T THEY WHEN IT COMES TO PARAMOUNT SKY DANCE. MORE UPDATE ON WHAT IS GOING ON IN THE TECH SPACE. AND HEALTH CARE IS ONE OF THE BEST PERFORMING SECTORS WE HAD TODAY. AFTER THE CLOSE, WE ARE GOING TO HEAR FROM SWEET GREEN. A LOT OF FOCUS ON THE CYCLOSPORA OUTBREAK AND HOW IT MIGHT AFFECT FOOT TRAFFIC INTO THE SALAD CHAIN. WE WILL ALSO HEAR FROM CLOUDFLARE, MICROCHIP TECHNOLOGY, AND OTHERS. THAT ROUNDS OUT MOST OF THE EARNINGS WE WILL BE FOCUSED ON. WE ARE GOING TO THEN TURN OUR ATTENTION TO THE MACRO. FRIDAY'S JOB REPORTS. THEN THURSDAY. WE HAVE THE CHALLENGER JOB DATA IN THE MORNING ALONG WITH THE WEEKLY JOBLESS CLAIMS. AND WE ARE GOING TO LOOK CLOSELY AT INVENTORIES AS WELL. AND STILL A BIG FOCUS ON SPACE. A MILESTONE POTENTIALLY. NASA ASTRONAUTS ARE SET TO CONDUCT A SPACEWALK, THE FIRST OF THREE PLANNED FOR AUGUST, AS NASA PLANS TO PROVIDE FOR ITS NEXT LEG PAST THE MOON. WE HAD SEVERAL PRIMARIES LAST NIGHT. WE GET ANOTHER ONE TONIGHT. THIS ONE COMING FROM TENNESSEE. IT COULD HAVE SOME IMPLICATIONS FOR THE FULL GENERAL ELECTIONS WE HAVE IN NOVEMBER. STICK WITH US. JOE MATHIEU AND KAILEY LEINZ ARE UP AT THE TOP OF THE HOUR WITH MORE OF A BREAKDOWN ON THE WORLD OF POLITICS.