Stocks Waver as Tech Earnings Take Center Stage — Open Interest 7/22/2026

[00:00:00] Dani Berger: And so it begins. Big tech earnings kick off today as we decline in the future session. 30 minutes to go until the start of your cash equity trade. I'm Dani Berger. [00:00:08] Isabelle Lee: And I'm Isabelle Lee. Bloomberg Open Interest starts right now. [00:00:24] Dani Berger: Coming up, Alphabet, Tesla and IBM kick off big tech earnings with AI spending under scrutiny. [00:00:30] Isabelle Lee: Meanwhile, Iran tensions simmer as President Trump presses ahead with tariffs on generic drugs. [00:00:36] Dani Berger: And Wells Fargo CEO Charlie Scharf will be joining the program for an exclusive conversation in just a few moments. [00:00:42] Isabelle Lee: We're looking at some stocks, Dani, but Wednesday is going to be a busy day. I think big tech is going to kick off in earnest. But our thoughts to watch surprisingly isn't big tech because we're looking at, I guess, mobile carriers. So when you chat to their friends, this is the companies behind them responsible. We have AT&T beating subscriber growth estimates by more than 100,000 in the second quarter. The company has rolled out aggressive perks and incentives over in the past year, and that's amid a price war with their peers. Their shares climbing as a result, AT&T up by 4%. Verizon and T-Mobile up just ever so slightly. [00:01:14] Dani Berger: I'm sorry, we can't get too far away from big tech because that's who I'm watching before the market open, as you might have suspected. Listen, we're going to hear from three tech players and the heavyweights. And the main one is going to be Alphabet. And to learn about what their CapEx spending plans look like, whether they've had any tangible return on investment from those AI efforts, we'll also hear from Tesla and IBM. Not too much action. Tesla down about 1%. So that's the biggest mover among them, pre-market as well. And for more on tech earnings, we have Bloomberg's [00:01:42] Isabelle Lee: tech Ed Ludlow joining us from San Francisco. Ed, it's such a busy day today. I mean, big tech is going to be reporting earnings. Is there anything you're looking at? We have investors becoming even more demanding. Even beats are being punished. I mean, what do you think [00:01:55] Ed Ludlow: investors are going to be on the lookout for? Well, I'd also point out that like buy side expectations have just been very high for a really long time. But the common theme across all of the companies, which are very different, is spending. They all have a different relationship to the spending story. You know, like in Alphabet's case, the CapEx guide for this year is $190 billion at the top end. And if they were to move the needle on that, you know, the great expectation is that in the short term, that would be significant for markets. But, you know, in Alphabet's case, more so, it's what are the returns now. You know, overall top line growth of 20 percent, the catalyst being the 65 percent growth in Google Cloud as the main vehicle for how they get AI specifically across to a broadest base of customers while it still sort of adds to the search business. You know, Tesla comparing a trust so different, you know, the world is desperate for Tesla to start spending some money, more money than they've ever spent before. And so, maybe that's the next part of the story. [00:02:56] Dani Berger: And elsewhere, I mean, the circular financing continues in this time, AMD investing $5 billion in Anthropic, according to the journal, to help give Anthropic a wider access to its chips. It feels like a lot is going on here. I mean, we also learned yesterday from TSMC that it was going to get more expensive for the TSMC's and the NVIDIA's of the world. Just how much of a crunch is there for these types of companies to get their hands on chips from AMD and NVIDIA, and thus, we continue to see these deals? Yeah, I mean, it's not unprecedented. [00:03:26] Ed Ludlow: When AMD did its sort of big compute deal with open AI, there was also a financial transaction involved, which basically, you know, gave AMD a seat at the table. You know, at the time we asked Lisa Sue, why is it that you and NVIDIA, like, need to take equity stakes? And this was also, remember, it's also through the mechanism of warrants. But in the companies that you're providing compute to, and, you know, the answer they always give is supporting the ecosystem. You know, basically greasing the wheels, like letting all of this stuff happen. But, you know, the other thing to remember is that all of those frontier labs and the next layer down, everyone that's working on AI is compute constrained. And one way that they've tried to combat that is just through a diversity of computing sources. On Anthropic's side, they're very big on TPU with Google, but they rely heavily on NVIDIA, the latest NVIDIA systems, and AMD, too, and having those different options in part offsets the overall [00:04:27] Dani Berger: lack in supply. I appreciate it. Looking forward to Bloomberg Tech in about two hours time. Ed Ludlow, host of Bloomberg Tech. Elsewhere, AT&T added far more wireless subscribers than expected last quarter. They beat Wall Street estimates by roughly 100,000 customers. CEO John Stanky discussed the company's [00:04:44] Speaker 4: growth on Bloomberg surveillance. We can provide world-class networks in both wireless and fixed networks that tackle 98% of what a customer needs to do on the Internet. Occasionally, they walk off one of our networks. And as you look at our partnerships that we're working with the satellite industry, by this time next year, we'll be able to solve that problem. And so we're the natural place for people to come and meet their needs on the Internet and do it easily on one bill with one set of services and one support infrastructure. We think we're in a great position as a result of that. [00:05:18] Dani Berger: Let's get more context from Bloomberg markets correspondent Nora Melinda. Nora, this is an incredibly saturated market. Is the only way that the AT&Ts of the world are winning and having results like this just being really aggressive on pricing? Well, competition is very stiff. [00:05:33] Speaker 5: You're seeing a lot of the major carriers. If you think about T-Mobile, you think about AT&T and Verizon, they're all offering any sort of incentive to get on new customers and also intrigue their customers to stay. We've been seeing these companies really branching out into different ventures. We've been seeing them going into fixed wireless access, which is essentially like home Internet, but it uses some of the cell towers for that. We've also been seeing them branch out into fiber, which we see to be a really competitive space when you think about Wi-Fi access at home and it being stronger than the traditional broadband that we're used to. They're trying to figure out how they can get any sort of leg up in this environment, given the fact that competition is still really stiff. [00:06:10] Isabelle Lee: And the company is leaning hard into bundling all of these, just like we talked about yesterday, even streaming companies that you just bundle everything and it's like we're back to my mother's era where, I mean, is this the biggest competitive advantage then? [00:06:22] Speaker 5: We've been seeing a lot of analysts talking about this idea of convergence. We see AT&T in this report calling out the fact that about 42.5 percent of their customers that are actually there for the mobile phone service are also there for broadband Internet. So you do see these discounts. I can attest to this just talking to T-Mobile just last week about the fact that I was interested in maybe getting some home Internet and they're offering discounts for people who are doing that. And essentially for analysts and investors, they think that these are the type of [00:06:50] Dani Berger: customers that will stay. It's fine. At some point, SpaceX is going to be providing everything. [00:06:54] Isabelle Lee: We'll be getting our Internet from the stars. You know, my friends in Manila, they do use SpaceX. [00:06:58] Dani Berger: They love it. It's super fascinating. There were reports that they were going to do something with, I think, Charter, maybe. Right. Exactly. So could be the fee. Definitely not your mother's [00:07:07] Isabelle Lee: broadband. In New York, you just go with whatever the building tells you. Exactly. Exactly. That's right. I just follow orders. But thank you so much Bloomberg's Nora Melinda for all things AT&T. Now, President Trump making new threats to Iran posting on social moments ago. From this point forward, anytime the Islamic Republic of Iran shoots at a ship in the Strait of Hormuz, whether it is by missile, rocket, drone or any other device or weapon, the United States will bomb and destroy one bridge or power plant, including those located next to or in the capital city of Tehran. Joining us now from Washington is Bloomberg's Tyler Scandal. Tyler, that is quite the statement from President Trump. What do we know more about that? And do we know if this threat or the intention is serious? Right. I mean, [00:07:53] Speaker 6: Isabel, at this point, despite efforts by mediators to try to prevent further escalation, the tensions appear to be pointed there. Just to reiterate this new threat from President Trump, saying that if Iran continues to target commercial vessels in the Strait of Hormuz, we could see the U.S. in turn targeting a bridge or power plant in Iran, giving us a little bit more insight into how the U.S. may be going about its strategy in terms of targeting Iranian infrastructure. And it comes as the U.S. continues to expand the scope of its targets. Just overnight, we saw the 11th consecutive night of attacks, which included bombing in some areas that hadn't previously been, as President Trump yesterday said that the U.S. would soon heavily hit what's known as Pickaxe Mountain, a site believed to be a nuclear site by the U.S. and Israel. President Trump has repeatedly said that he thinks Iran wants to make a deal, but now that the U.S. doesn't want to come to the negotiating table, unless Iran does in what he said would be a meaningful way. But so far, we've gotten very little indication that the country is willing to let up its leverage when it comes to the Strait of Hormuz and disrupting global energy supplies even beyond just that waterway. Because Danny and Isabel knew overnight, we got in the satellite imagery, which shows that at least two tankers loaded up with Saudi oil made U-turns as they headed toward the Red Sea. Amid that heightened threat from the Iranian proxy group, the Houthis, to institute a maritime blockade there. [00:09:24] Dani Berger: Tyler, elsewhere, this feels like a common theme from this morning, talking both about physical wars and trade wars. We are back in this environment with the president saying he will pose an 100 percent tariff on generic drug makers. How will this work? Because the time frame is this gets implemented in two years when it will be the twilight of Trump's presidency. [00:09:44] Speaker 6: That's a really good point, Danny. The administration has billed this as essentially trying to give some more time to these drug makers to onshore their manufacturing, saying that a 100 percent levy will go into effect next August and then double in its rate by the following August. It is raising questions both about the timeline for these drug makers to actually build up these facilities and whether or not it's going to be worth the costs if it ends up getting passed down to consumers, keeping in mind that the generic drug market makes up about 90 percent of prescriptions in this country. If this all sounds familiar, it should, because back in April, the U.S. Commerce Department announced the results of that Section 232 investigation into the national security implications of making pharmaceuticals abroad. And at the time, that's when we got that 100 percent levy on brand name pharmaceuticals that are actually expected to go into effect at the end of this month. But this was the first time that it happened that or that we got an update related to generics. But, Danny, we're going to have to watch to see how this actually plays out, because many companies have gotten carve outs when it comes to pharmaceuticals. And I'm [00:10:54] Dani Berger: sure this is not the last of announcements on tariffs given Section 122 expires on Friday. Tyler, looking forward to speaking with you throughout the week, Bloomberg's Tyler Kendall in Washington, D.C. Let's get a check on your equity markets. 20 minutes to go until your trading day. Things could look very different in this market, both by the end of the session and post-market session, because we're still awaiting alphabet earnings. That feels less like just any sort of say on how alphabet is doing, but more just on the entire CapEx ecosystem tech declining this morning. Ten-year yields up one basis point. Isabel, we've seen a huge surge in yields over the past 24 hours, given that oil is doing that up to $94 a barrel. [00:11:33] Isabelle Lee: Tesla also reports today, and I think investors are going to ask why isn't it spending more on AI. I think it's the reverse question for Tesla. But honestly, I'm just excited to hear what the CEO say. We have Max Kettner earlier today saying that it's not the earnings he will look out for, but the reactions to the earnings. I think that's important, because even if you could be given a [00:11:50] Dani Berger: crystal ball or do weird insider trading, as seems to be in vogue right now, even if you knew exactly what the numbers were, you might not know what the direction of the stock is. I want the crystal ball here, in the middle of us. I think we would be doing something different if we had that. Coming up, an exclusive conversation with the Wells Fargo chairman and CEO, Charlie Sharp, that's coming up next. This is Bloomberg Open Interest. Good Wednesday morning. Let's head over to Bloomberg's Romain Bostic, who is sitting down for an exclusive interview with the Wells Fargo CEO. [00:12:28] Speaker 7: Romain. Thank you, Danny, and thank you to our audiences across all of our Bloomberg platforms, television, radio and YouTube. I'm here in our New York studio with the CEO of Wells Fargo, Charlie Sharp, of course, the fourth largest U.S. bank out there, a bank that is now actually growing after roughly, what, six years or so of regulatory constraints. You've been there for more than six years navigating through those constraints. I think a lot of people have seen the fix that you've done over that time. And now the big question is, what are the next six years look like? Is that a growth story? [00:13:03] Speaker 8: It certainly is for us. I mean, we're incredibly proud of the progress that we've made. We're a very different company than we were when I got to the company. I guess it'll be seven years in November. And what you've seen since the asset cap has come off is that we're able to compete on a level playing field with everyone. And we're growing our consumer bank. We're growing our commercial bank. We're going the wealth business. We're growing our court investment bank. And we're doing it in a way with very, very highly focused on sustainable growth and higher returns. And we think we've got huge opportunity in front of us. [00:13:36] Speaker 7: When you say sustainable growth, some investors want to see aggressive growth. Can you be aggressive and be disciplined and sustainable? [00:13:43] Speaker 8: I think, listen, in this business, you've got to be very, very careful about what aggressive means. And we also have to be very, very careful about distinguishing between what the markets are adding to our performance or any other financial services providers' performance and what we're doing. We're not looking for quick wins. We're not looking to take outsized risks in the short term to drive stronger results. We're looking at building the underlying franchise, building customer relationships, building flow of things that will go up and down based upon how the markets are doing. But that's what I mean when I say sustainable over a period of time. [00:14:18] Speaker 7: Well, talk about this transition, then, because over the past few years, I mean, people will look at what you've done over the last few years and call that a turnaround story. Although we should point out, Wells was in relatively good shape, even when that asset cap was placed back in 2018. Was that a turnaround story or was that just kind of regulatory rehab? [00:14:37] Speaker 8: Well, I think I wouldn't call it. I think you're right. It's not a turnaround story. The company was always very strong. We always had a great franchise, but we had to fix things that needed to get fixed inside the company. But from our customer standpoint, we were serving them every day. We were making loans. We were taking deposits. We were constrained on growth, but we were there providing what we did day in and day out. And financially, we were still doing OK. And when we looked at what we were able to deliver, we were not able to grow our balance sheet. We've been focused a lot on efficiency inside the company. We've been focused a lot on growing our fees inside the business. So our corporate investment bank has grown very nicely. Our credit card business and credit card spend is growing very, very nicely focused on building treasury services. And now we can grow the balance sheet so we can more holistically serve customers. And that's what you see when you look at the results of this past quarter with earnings per share up 25 percent, revenue growth, double digits, growth across every one of our businesses in terms of revenue. We're certainly in a different place. And our goal is to be viewed as the best financial services provider [00:15:42] Speaker 7: in these businesses in the country. How much of that is because of Charlie Scharf and the executive team? And how much of that is because of market conditions and economic conditions? Well, I think [00:15:52] Speaker 8: it's predominantly because of the quality of the franchise and the broad group of people that work at the company. Listen, what I and the new management team have been able to do is get people focused, create a different set of priorities. But a lot of people execute day in and day out. And the fact is the markets do help. So there's no question that I mean, these times are really good for banks. And so if you're not doing really well as a bank today, there's something not quite right with either how you're executing what your strategy is. And that's not lost on us. But again, we look at the underlying metrics of each business. Are we growing? We're growing our consumer checking accounts. We're growing commercial banking customers. We're growing the kinds of loans that we want to grow. We're taking the risks that we want to take that we think will provide strong returns over cycles and not get over our skis and not pretend that it's all us. Some of it is the markets for sure. [00:16:42] Speaker 7: You just reported earnings and the number that I think jumped out for a lot of folks was the growth in the investment banking business. You've been on a hiring spree there. Does that continue that build out? [00:16:52] Speaker 8: Yeah. So we've been on a quality disciplined path to growth in our corporate investment bank. We're a huge lender to corporates of all sizes in this country, large corporates down to middle market companies. We provide treasury services. And what we're doing is building on those relationships with a stronger set of products and services, coverage groups, M&A, underwriting capabilities. And so we've been very disciplined about adding resources in a sequential way, seeing that they're paying off, and we're seeing the results. And so, yeah, we can expect that to continue as we move towards our ambition of being top five as well. The ambition of being top five. [00:17:28] Speaker 7: I am curious. You and your executive team are based here in New York. Obviously, the bank headquartered in San Francisco, your largest employee base down in North Carolina in Charlotte, I believe. As you build out an investment banking business, can you do that in Charlotte, San Francisco, or is that a New York [00:17:48] Speaker 8: story? It's a combination of all of the above. I mean, when you -- so we are -- so we do have more resources in New York than we used to have, for sure. But as you point out, we have more people in North Carolina and in Charlotte than any other specific location. And that goes back to the merger of Wachovie and Wells Fargo. Half of our corporate investment bank is down in Charlotte. The other half is here. We also -- I mean, I should say, we do have offices around the country and other parts of the world. And so, you know, we would expect to see growth in both locations and closer to serving customers [00:18:20] Speaker 7: across the country. How committed is Wells Fargo to its footprint here in New York City? [00:18:28] Speaker 8: We're -- listen, we have -- I think we have about between 4,000 and 5,000 in New York. That number at this point will probably in total stay roughly what it is. And, you know, the question for us is going to be, you know, where's the best talent? Where do they want to live? Where do they find the most attractive place for them to want to live and do business? You know, it's very hard for us to get people to move from North Carolina to New York, even when we try. Sometimes it's hard to get people to move people from New York down there. There are people that self-select and, you know, over a period of time, you know, how New York does and how North Carolina does and how California does, does matter to where people want to live. And that will be an important driver. I am curious about that, though. [00:19:07] Speaker 7: I mean, at your bank and basically with all the different business lines, you have a very keen insight into the economy across all the geographies here. When you look at sort of the rebound that we've seen post-pandemic, whether it's in New York or even some of the down south and some of those markets here, I mean, what are you actually hearing from your clients, the people that you're talking to about where they're doing business and, more importantly, are they comfortable right now being able to do business? [00:19:33] Speaker 8: So I would say what you hear from them and what they're doing aren't the same things. People are nervous. They read the newspapers. They watch TV. They see what's going on in other parts of the world. They're concerned about AI. And so those are things that are very much on their mind. But when you look at what they're doing, when you look at consumers, they're spending more year over year. Their delinquencies are down. They're saving more. They're doing really, really well. When you talk to smaller companies across the country, again, they're nervous. They're concerned about how they should be planning for the future. But they're in really great financial condition. Are you surprised by that? [00:20:13] Speaker 7: I mean, given how persistent inflation has been and just over the last three weeks, you've seen oil prices spike back up 30 percent, gasoline prices for $4 a gallon, mortgage rates 6.5 percent. So does it surprise you to see that economic resiliency? [00:20:27] Speaker 8: Yes and no. I mean, if you would have laid those things out, you would have said, well, would you have a strong environment today? You'd say probably not. But the fact is, employment is still strong. Wages, at least for our clients, are growing faster than inflation. And that's going to be the most important driver of how the consumer performs. Now, that's not to say that that's going to last forever, but we do continue to see that. [00:20:51] Speaker 7: And so that's what's going to drive the results. Well, as you sort of continue this growth story for Wells Fargo, do you feel like the economic conditions will be supportive, as supportive as they have been over the last couple of years? [00:21:04] Speaker 8: So I would separate into what I know versus, you know, what we would guess. What we know is that the strength continues. When we look at the stats day in and day out, the strength of the consumer, the strength of businesses hasn't changed from what we reported just a couple of weeks ago. Are we nervous about what the future holds sure? The fact is, things are really, really good. Markets are really strong. Things are, you know, there's certainly volatility, but things are priced quite well in the credit markets and in the equity markets. There's a huge amount of liquidity out there. There's a huge amount of financing take place. And at some point, then that doesn't go on forever. So we're trying to be very thoughtful about recognizing that good times don't last forever. But, but, but, but things don't look like they're breaking quite yet. [00:21:48] Speaker 7: Is your expansion or the growth in this business going to be primarily in the U.S.? There's been talk that you may be looking to expand some of your investment banking business over in Europe. [00:21:57] Speaker 8: So, but predominant, so we're 95% of our revenues come from the U.S. We're thrilled about that. So goes the U.S., so goes us. And we're big time bullish on the U.S. And so we're going to continue to invest in all of our business here in the U.S. And believe that there's significant opportunities for us to grow with the economy and to take share. The business that you mentioned, the investment bank does have to grow outside the U.S. For us to serve large companies and middle market companies as they want to expand outside the U.S. properly, we need to have a presence. We need to have distribution capabilities. We need to have advisory capabilities. But it's there primarily to serve the customers that we do business with here in the U.S. [00:22:38] Speaker 7: With regards to the private markets and your role at Wells Fargo, you've obviously been involved in some deals. I believe you're an advisor on Apollo's deal for that Broadcom AI Center and a couple of others here. You don't see any real credit concerns in terms of credit quality concerns in that space. [00:22:59] Speaker 8: Well, in the private markets, you know, we want to say this, you know, it's private markets are a very, very broad group of people. There are some that do it really, really well, that have the experience, that have been through cycles, that have the analytics, that have the rigor. Those are the ones that we try and do business with. And those are the ones that we focus our attention on. And we feel really good about the credit support that we're providing for them. There are others out there that, you know, people, you know, potentially should be more concerned about. But we don't have broad exposure to that. But when we see certain transactions, there are that are willing to take a lot more risk than others that do seem to have different levels of discipline and different levels of analytics. So, you know, if if credit does turn down, it's just like in the banking universe. Some do it really well. Others do it less well. Some will do quite well. We believe those are the ones that we bank. Others not as well. And that's and that'll be shown up away from us. With the structure of some of these AI data [00:23:58] Speaker 7: center financing deals, is Wells Fargo still interested in doing more? We are. Listen, I mean, [00:24:04] Speaker 8: the fact is, this is a it's, you know, it's a necessary bill that needs to take place to support what AI can do. But here, too, just like we talked about private credit, not every transaction is the same. Not every piece of risk is the same. Who you finance, who the guarantor is, who's got the revenue model to support it really does matter. And so we very much are in active dialogue, not just with the things that we've done in the past, but the things that we want to do in the future. But you've got to be selective about who you're financing, what the structures are. [00:24:34] Speaker 7: Your board recently reorganized your compensation to effectively structure it to keep you around for what, another six years, basically through 2031. There's been a lot of talk as to whether you will be there through 2031 or whether you would have ambitions maybe to take the seat of another CEO job. [00:24:54] Speaker 8: I have no ambition to do anything other than stay at Wells Fargo, build Wells Fargo and retire from Wells Fargo. That's what I that's what I intend to do. And that's what I'm going to do. By the way, I think it's what I think it's the great seat. I mean, when you look at if someone could give you the opportunity to run a company like Wells Fargo with the quality of the business that's been so constrained for so long, that's has picked and chosen the businesses to be in. We have amazing opportunities to continue to do a better job for our clients to grow and increase returns. And I think we can make a difference in this country. And that's incredibly appealing. Do you ever look at your old employers [00:25:33] Speaker 7: and get envious? BNY, JP Morgan, the others? No, I don't get envious. I look at them and listen, [00:25:39] Speaker 8: you can learn a lot from people. A lot of companies out there do really, really well. They've done really well. Yeah. And hopefully over time, they'll look at us and feel the same way. Do you ever talk to Jamie Diamond? I talk to Jamie. I talk to all the other leaders in the business. Yeah, there are things we've got common interests on and and we talk about those things, but we compete hard day in and day [00:25:58] Speaker 7: out. I do have to ask you about the Wall Street Journal story from the other day that allege that the head of the IRS and the Social Security Administration, who used to work at JP Morgan, allegedly spied on some of his rivals within the organization, including you when you were running the commercial business there at JP Morgan. Is there any truth to that? Were you aware of anything [00:26:20] Speaker 8: potentially going on? I have no idea. You know, I actually I Frank and I have known each other for I think maybe 30, 35 years and spoke to me the other night. He says it's not true. By the way, I don't know what I would have that anyone would have any interest in. And so I honestly don't think [00:26:34] Speaker 7: about it that much. All right, Charlie, a final question here. And this is really about the next six years. I mean, when that next six years is wrapped up, whether you're there past 2031 or beyond, what exactly do you want to make sure gets done over the next six years? I think we've got the [00:26:50] Speaker 8: opportunity not just to have Wells be a better performing company, but be back to what we should be, which is the best performing financial institution in this country, which means real sustainable growth with the highest returns adjusted for our business mix. And ultimately, that should drive us to be the most respected bank in this country. And it's it's we compete with great people out there. So it's not going to be easy to do. But that's our goal. All right, Charlie, really appreciate you. [00:27:16] Speaker 7: Thanks for me. All right. Thank you, Danny. Back to you in New York. [00:27:22] Dani Berger: Romaine, thank you so much for that fantastic conversation. That was Bloomberg's Romaine Bostic with Wells Fargo CEO Charlie Sharp. And we are just here entering your opening bell. Let's get this trading day started. We're starting on the back foot this morning, down nearly a quarter of one percent. NASDAQ underperforms. We are awaiting alphabet earnings. The opening bells. It's nice to see faces you maybe usually aren't used to on Bloomberg. Down at the New York Stock Exchange, celebrating a 30-year partnership with CNBC. You got Sarah Eisen, Jim Cramer, some other executives and friends of CNBC, I suppose. I don't know. Kind of cool. Very meta to currently see them on Bloomberg TV. Down at the NASDAQ, you have Churchill Capital Corp. It's a SPAC, Michael Klein SPAC. You can see there up front and center. They are about to complete a merger with Agility, which is a robotics company. So SPACs are back. Nothing to see here. Be worried about, Isabel. We are looking at some of the biggest [00:28:14] Isabelle Lee: movers today. And of course, they are the carriers and the broadband. I should stop saying they're carriers because I just know them as the carrier on my phone, but they also provide broadband services, among others. So we have AT&T beating subscriber growth estimates by more than 100,000 in the second quarter. AT&T has rolled out aggressive perks and incentives over the past year, and that's amid a price war with its peers, who are all climbing. On the result, AT&T popping their 3%, Verizon and T-Mobile up [00:28:40] Dani Berger: by just more than 1%. Isabel, I'm looking at some of the tech heavyweights that we're going to be hearing from after the bell about their AI spending plans, namely Alphabet, to see whether there's any tangible return on investments from AI. IBM will also be interesting, has been incredibly volatile at one point, falling more than 20% on a negative pre-announcement in Tesla. We're also going to hear from them as well. Joining us now is UBS Global Wealth Head of Global Equity Strategy, Nadia Lavelle. Nadia, great to see you this morning. And it's like the time to take a deep breath before all of these earnings start. With Alphabet specifically, I wonder how much you're looking at this company and saying this is less of a referendum on Google and Alphabet as a company versus the entirety of the AI CapEx cycle. [00:29:24] Speaker 9: Do you know, I think it's an important thing to watch for today. You're seeing a bit of positioning ahead of that and sort of event driven positioning. But I think that even if when you look under the surface, we've had this positioning going on for a couple of weeks when the pullback and semis. When I think about what looking forward to what Alphabet's report, I would kind of put it not entirely of all about the AI trade. Remember last quarter, the experience around Alphabet was quite different where they saw cloud revenue growth over 60 percent. They rallied after that. They increased CapEx. Their their peers not did not get the same benefit of the doubt. So I think what the market really wants to see is that you are seeing a path to monetization. So cloud revenues will be watched very closely. Search and so forth will be watched very closely because the market is less focused on is CapEx going to increase. We know that the AI spending is well supported. We've seen capital raises, whether it's in a debt market or the equity market. But now what is that return on invested capital, as you talked about. And you know, are we seeing it in products? Are we seeing it in cloud and other areas of of of the entire [00:30:32] Isabelle Lee: ecosystem. And you don't expect CapEx cuts. But investors are increasingly looking for whether or when they will see the return on investments. At what point do you think monetization will become like a thing that they will really be holding on to. And I think [00:30:45] Speaker 9: on the market. Yeah. I think we're starting to see that, you know, in terms of how some of these stocks are traded. The market will reward if you increase CapEx. But you also see monetization. The market will reward that. But if you're just increasing CapEx and and you're pointing to that you're spending just to spend because your peers are spending and there isn't a clear path to monetization. Investors want to see that line of sight. Then you are going to be punished. And I think that what you're going to be watching very closely is really the cloud revenues because that is the best indication right now. And are you seeing it coming through in terms of better traction around advertising better traction around search or any sort of other product launches that are A.I. related and a path to monetization. It's not just tech. [00:31:26] Dani Berger: It is earnings writ large that expectations are so high. I was reading through some of the data or looking through some of it. If you'll stick with me. So the ratio of companies upgrading their outlook versus cutting or keeping it is the highest since Bloomberg's data going back to 2011. The team reporting that profits are expected to rise 26 percent in the second quarter something that has never happened outside of a recessionary period. And at the same time earnings in the first half of this year are expected to reach 28 percent the most since 2004 if you exclude the rebounds excluding the rebounds from the pandemic and the GFC. I mean what [00:32:00] Speaker 9: that's because it's crazy. Is that a bar that we can meet and be. Yes. You know I mean our expectations for the second quarter just the second quarter alone is actually 28 percent. And that might even prove to be conservative. And I think it's not just the A.I. story. We know that semiconductors are contributing a big portion of that about 40 percent or so of that. But you're also seeing a broadening out. I mean you talked about the AT&T is a world that you're seeing rallying that you're seeing a broadening out of the profit because the economy itself is doing well. You're seeing a pickup in manufacturing activity. Look what the banks also put up last week in terms of loan growth. And so that is a healthier scenario for the markets. You don't want a market that continues to be overly concentrated in the AI or in semis. You want a market where you're seeing a broadening out. And we have seen that in financials industrials. We've seen that in health care in recent week. And we think that's important for the durability of this overall bull market and the earnings are coming through. We're looking for sort of a medium company outside of that to be about 12 percent earnings growth for this second quarter. So you talk about the [00:33:02] Isabelle Lee: broadening of the market. But what if the magnificent seven in the next two weeks disappoints. Can the market carry themselves higher in [00:33:08] Speaker 9: the next weeks. The S&P will it reach new highs. And you have seen that the last few weeks you know to turn under the hood. So the the index level has been quite resilient because these other areas of the market has been able to deliver the earnings growth and has been holding up. Now do you need participation from the max seven. Reality is when you look at the max seven performance year to date it's not all that rosy compared to the other parts. I think the question is more do you need the AI ecosystem to deliver. Absolutely you do just because mathematically the overall weight you know do you need semis to continue to perform at a max seven. Because if you don't have semis performance and max seven is still lagging that has brought an implication for just the index because the S&P 500 is is a market cap weighted index. But but I do think that the rest of the market also seems to be that the laggers also seems to be catching a bit recently. I just wonder one of the things things that I'm trying to [00:34:09] Dani Berger: understand about the AI trade that we're seeing right now is this divergence that's happened or this negative correlation that's presented itself. It seems like every day that you have the hyperscalers rallying the chip stocks are doing poorly when the chip stocks are doing well the hyperscalers are doing poorly. We've been describing it as the check writers versus the check takers. I wonder if you expect that relationship to continue that inverse [00:34:29] Speaker 9: relationship. Look we think that they both can work not necessarily always at the same time and for the same reasons. We know what is driving the semiconductor trade. It's really that demand for compute. We know that the hyperscalers you know the biases to continue to spend and so the beneficiaries are are are are are are benefited from that. You know at the same time what needs to happen for the hyperscale is they need to show that monetization that return on investment that needs to come through. And if we start to see more indications of that in this earnings season or the next earnings season you can start to see a rereading again of the hyperscales reality. We already know that investors concerns around hyperscale spending has somewhat been priced in. You know they they they they lack earlier this year they're starting to get a bit a bit a bit again. And so our view is that maybe from the risk reward standpoint the hyperscalers could look a little bit better in their term. You know we have actually closed our underweight exposure in our transformation innovation opportunity AI portfolio to the hyperscalers before because of us. So we're now neutral on the hyperscales. But we don't think that this is a you know a zero sum game. We think over the longer term as long as you see a adoption continue to accelerate then you can see both perform well. But in the short term you could see [00:35:42] Isabelle Lee: some rotation between the two. You are a little you are a bit more selective now I think on your notes when it comes to semiconductor. Is that evaluation call or are you worried that the AI enthusiasm has run ahead of fundamentals. On evaluation calls because the earners are [00:35:55] Speaker 9: growing. I mean when you look at semiconductors for this year in S&P they're expected to EPS growth is expected to be over 100 percent. And again not to surprise to the upside. I think it's more that they've had a very strong while. So tactically we've taken some all the off of the table but we're still overweight in our portfolios to semiconductors. We don't think that we think that the the spend it has like. And what we've heard from you know some of the Asian suppliers you know there's visibility out for a couple of years. And so that just gives you some comfort in the ability for the earnings to continue to grow you know into 2027. I think the question mark comes around more around 2028. And what happened to CapEx. We expect CapEx to grow 7 percent 70 percent this year next year. Probably 25 30 percent or so. But then what happens in 2028. Do you see a pause. And we need that monetization to come through to continue to [00:36:44] Dani Berger: encourage your spending. Now it is such a pleasure to have you on. Thank you so much for joining. That's UBS global wealth Nadia level. Let's get a check on your equity markets about 10 minutes into your trading day. And again it was an update yesterday turns into a downturn today. But are we just treading water ahead of the earnings. We'll get after the bell which include alphabet and Tesla. The biggest gainer so far in this morning session. Philip Morris reporting earnings. They actually trimmed their outlook because of the currency hit and things like the war in Iran. But within that they say the consumer is really resilient. We're really positive on ours in products since the FDA says we can market that is healthier than cigarettes. That's you get a rally of nearly 5 percent. Dell is doing well. HPE is also rallying trying to see if I see it on this board. I don't. Supermicro reported earnings. They are AI servers. Prelim earnings I should say. And Dell rallying and sympathy. AT&T also very strong earnings. So earnings helping the top pile at the moment. To the downside you have Microsoft that's down 1.3 percent. A lot of the hyperscalers having a bad day today. Amazon meta that falling. GE vernova also reporting earnings which disappointed. So you can see those shares sinking 6.6 percent. Let's get a look at your sectors this morning on your GE. You can see our screen. Only three are declining. But that just shows you how important tech is in this index to the point that Isabel was asking. If the mag 7 disappoints can everything else hold us up today. The answer is no. Infotech falling 0.7 percent. Materials, energies, utilities. Those doing well. Energy specifically doing well. As there continues to be disruptions. Not just in the Strait of Hormuz but the Red Sea as well. That sent the price of oil higher. Isabel. [00:38:21] Isabelle Lee: That's such a great point. We have options markets signaling hyperscaler earnings matter more than the Fed. And it really is a signal of just how important this week is. Coming up a trio of big tech earnings as we just talked about. After the bell today. We take a closer look next. This is Bloomberg Open Interest. Time now for a top call. Some of the analyst action and focus this morning. First up. JP Morgan raising its price target to Capital One to $246. Highlighting the company's strong credit and sales growth. You see the stock there down by nearly 2.5 percent. And next up. Barclays cutting its price target on Alaska Air to $65. Citing a weaker third quarter outlook compared with competitors Delta and United. That's why you see the stock there down by nearly 5 percent. And finally Baird initiating coverage of IBM with a neutral rating pointing to growth and durability concerns following the week's preliminary earnings released last week. You see the stock there just up by around three tenths of 1 percent. [00:39:33] Dani Berger: Staying with tech because IBM is going to be joining Alphabet and Tesla and reporting earnings today after the bell. Joining us now is Mandeep Singh Bloomberg intelligence head of global tech coverage. I love when the south side comes around like maybe a week or two late after like IBM has already seen this like huge blockbuster catalyst of itself. Anyway. Earnings today. I'm guessing it's just really Alphabet in their CapEx numbers. How much are you looking at this. I was trying to turn to Nadia level about this earlier. Are you looking at it and saying OK this is a referendum on Alphabet versus the entirety of the CapEx cycle. [00:40:04] Speaker 10: I mean in my mind the cloud segment has to show a big sequential acceleration partly because of what has transpired in the quarter which includes trends like token Max saying and you know everyone really running out of their credits to run these LLM. So who does it benefit. It's your cloud providers and Alphabet. Alphabet cloud segment has been the fastest growing out of all the hyperscalers. In fact they were already growing 63 percent last quarter. So you want to see a big sequential acceleration and that will be the justification to raise the CapEx because they already did an equity raise. And now we are talking about you know I mean our numbers are 300 billion dollars in CapEx for 2027. It's much higher than consensus. But I think you will see a big beat on the cloud side today from Alphabet. What about in Tesla. It seems like it's the opposite story because investors [00:40:58] Isabelle Lee: actually want to see AI spending anything you're going to be on the lookout for when it comes to maybe the AI roadmap or capital spending. [00:41:04] Speaker 10: I mean with Tesla now things have become murky with what we'll go to SpaceX versus what Tesla will end up spending on their CapEx. But look when it comes to SpaceX we already know how big of a benefit they are getting from you know the data centers that they have set up already and how it's translating into real revenue. So to my mind I think Elon Musk does believe in AI in a big way and I wouldn't be surprised if he plans to raise CapEx even for Tesla. [00:41:33] Dani Berger: What are these two companies going to merge. Right. It's inevitable that Tesla and SpaceX become one. Right. I mean there are so many [00:41:40] Speaker 10: regulatory aspects to this that it's hard to. I thought regulators were super chill with everything right now though man deep. Well I mean even with the LLM's we are finding things are changing you know with how much open sources caught up and what kind of adoption we are going to see at the enterprise level. I bet you at some point that there will be more. Can I just quickly ask a question there because we've talked a lot about [00:42:02] Dani Berger: Chinese open source models and they're catching up. What's the state of U.S. open source LLM's. Are those finding success and might you even see anthropic offer their own or one of the foundational LLM's offer their own open source because they realize they need it to compete. Like how likely is it that a U.S. open source ecosystem is just as robust. I mean you do have Gemini offering their model with an open source [00:42:24] Speaker 10: option and open AI as well. The problem is there's a big gap between the key me three of open source versus what Gemini and open AI offer right now. And that's where enterprises are worried about token costs. So you know at the end of the day it's your total cost of ownership that determines which model you're going to adopt. And you care about the future. You don't want that model to be banned. You know two months from now. So that's the commitment you're looking at in terms of is it something that I can build my application on top of. And I think [00:42:58] Isabelle Lee: there are a lot of considerations at play here. What about Google is a key question now is whether AI spending will finally translate into [00:43:04] Speaker 10: faster cloud growth. Is that what investors will be looking out for. Yes. And look search will always be dominant on a Google earnings call. So [00:43:13] Isabelle Lee: that's. Even with chat GPT now because I've gone to search less. I go to chat GPT sometimes. But look at how fast Google has been [00:43:20] Speaker 10: growing. Last quarter they grew 19 percent. Even this quarter consensus is around you know 16 percent. So the problem with these LLMs is right now they're still consumption or subscription based models. They don't have ads. So until and unless you know chat GPT starts showing ads and they're able to monetize that freemium model Google search continues to be dominant. But I would agree with your question that from a volume perspective volume for Google searches probably has taken a hit and it'll be [00:43:56] Dani Berger: how it impacts. It's not like one of anthropics big advertising campaigns. That's like you go to chat GPT and you're getting ads and we won't have it. Like [00:44:03] Speaker 10: wasn't that. Yeah. Wasn't that one of their big selling points. It was. But look at the end of the day. We know ads is a very dominant model for all of the Internet players. And I'll be very surprised that if that changes you know with LLMs even though they're very expensive to deploy right now. Which is why these companies don't have a choice but to use a consumption model. But over time all these platforms have an ads component. And I expect that to be the case with anthropic and opening. I'm cheap Danny. I sit through the ads. [00:44:34] Isabelle Lee: I'm just like hypnotized by the ads. Oh no. I will pay up. You will. That's where we are. Convenience is what I pay for. Thank you. Mandeep. We love that we can ask you anything tech. Mandeep Singh of Bloomberg Intelligence. Coming up AT&T subscription growth accelerates much faster than anticipated as perks lure customers. That's next. This is Bloomberg Open Interest. [00:44:59] Speaker 4: marketing. I do believe that the market will eventually understand that what we have built is indispensable for the kind of workloads we're going to see in this AI environment working forward and that AT&T is uniquely positioned in the investments we've made over the last five years to serve more of those workloads. more effectively than anybody else. And eventually the market will figure that out. And when the cash shows up valuation will ultimately correct itself. [00:45:29] Isabelle Lee: That's AT&T CEO John Stanky after reporting huge subscriber growth in the second quarter. Bloomberg's Kelsey Griffith joins us for the sector coverage now. Thank you so much Kelsey for joining us. What have we learned for AT&T. It's such a competitive landscape but they seem to be beating their peers. [00:45:53] Speaker 11: That's right. AT&T had a little bit of a rough go in the first quarter. They came up short on some estimates and they were hoping to sort of turn things around this quarter and that's exactly what we've seen. We've seen some pretty early analyst reports saying basically AT&T beat on everything that matters to investors this quarter. Their subscribers were up for mobile services. They did really well on adding these fiber customers. And we've generally just seen that the company is doing a really good job of pulling share when they combine those mobile customers with home internet customers. [00:46:29] Dani Berger: How much is that competition just going to get even worse. Kelsey with news or at least reporting around SpaceX joining forces with other providers getting into this business. Is the price war about to just accelerate. [00:46:44] Speaker 11: That's something that John Stanky was asked about on the investor call that just wrapped up a few minutes ago. He was very measured in what he is saying about satellite. He is mostly saying right now that look satellite is a compliment to our network. We are looking at satellite as a way to fill in gaps and to maybe retire some expensive infrastructure and to cut cost savings there. On the customer side he has been kind of at the helm of introducing some new pricing plans that are giving customers a bit more choice in how those plans look. AT&T has also introduced some price increases in the last quarter. So we might be seeing that show up in the results a little bit. You know it's sort of hard to say right now whether that's going to hurt customers or whether it's going to help AT&T's revenue. But so far it was a pretty good quarter. [00:47:31] Isabelle Lee: And because they're on 45 seconds here. The company is also leaning hard into bundling broadband and wireless. Is this becoming the biggest competitive advantage in the industry right now. [00:47:39] Speaker 11: That's what AT&T thinks. They have leaned into this convergent strategy for a really long time. And at least in this quarter they've said that has paid off. They've seen somewhere around 42 percent of customers who take AT&T home internet also take AT&T wireless service. So that's a model that they're really invested in. [00:48:00] Dani Berger: Hey Kelsey we really appreciate your coverage this morning. Those AT&T shares up nearly 4 percent with the rest of the industry rallying to. That's Bloomberg's Kelsey Griffiths on the latest earnings. Coming up in our two of Bloomberg open interest will speak with JP Morgan's Jordan Jackson and how Wall Street will react to AI CapEx changes as a reminder in case you haven't heard it enough. We will get alphabet earnings after the bell. Then we'll speak with Mark Rosen of Catalyst Brands on the state of retail. They own companies like JCPenney's and Brooks Brothers but not a lot of the IPO that belongs to authentic brands. And we'll speak with Itain McKellie from TD Cowan will join us ahead of Tesla earnings. What will they bring? All of that happening in just a few minutes after this commercial break. You're watching Bloomberg Open Interest. 30 minutes into your trading day. Welcome back to Bloomberg Open Interest. I'm Danny Berger alongside Isabel Lee. Matt Miller still on paternity leave and it's a market that is just awaiting earnings from Alphabet. But in the meantime, higher yields and higher oil prices may be potentially weighing on this market. But coming up, Alphabet kicks off big tech earnings with AI spending under scrutiny. [00:49:24] Isabelle Lee: And Tesla joins that earnings parade as investors question the Cybertruck's staying power. [00:49:29] Dani Berger: Plus the view from Wells Fargo. CEO Charlie Scharf tells Bloomberg he's big time bullish on America and you'd hope he would be because his business depends on the U.S. doing well. Well, we begin, though, with big tech Alphabet. Tesla and IBM are all set to report after the bell. Bloomberg text. Ed Ludlow joins us from San Francisco. Ed, all numbers on what Alphabet, all eyes on what Alphabet says for their CapEx numbers. [00:49:51] Ed Ludlow: What are expectations there? Yeah, CapEx in the short term, right? So the current guidance is $190 billion for the year at the top end. And, you know, I don't think there'd be any surprise if that number went up. It's in line with the direction of travel for CapEx, in part because the cost environment's higher. But also that they would argue it meets the demand. You know, the spending is for a reason for compute capacity. With Alphabet and, you know, Google in particular, there's a lot of focus on the core search business, how it's made better by AI, but how more dollars yield from it because of AI. But in reality, overall growth of top line growth of 20 percent, it's really in Google Cloud where there's momentum, 65 percent top line growth and where it will be a mainstay focus of the street to, like, just answer the question. What has been the result of all of this spending to date? And then there's Tesla. [00:50:41] Isabelle Lee: And the story almost flips. Investors actually want to see more AI spending. Why do you think that investors are judging Tesla to a different standard? And you are the perfect person to answer this because you have broken nearly all Tesla scoops. [00:50:53] Ed Ludlow: You know, right now, the stock prices in the AI future for Tesla, the future of a robot taxi service, a proprietary ride-hailing service for robotaxis and the potential of humanoid robotics. And this counts the value of the car business selling EVs to consumers. So right now, Tesla has told us capital expenditures will be $25 billion, which for Tesla is unprecedented. So the data point you track as we go is, are they tracking to spend that on a quarterly basis and then on the year overall? And actually, if they exceeded it, the market would cheer it because it shows that they are acting to put those future business lines in place, make them reality. We would also point out, right, the first Tesla earnings call since Elon Musk became the CEO of two public companies because of SpaceX's IPO. I find that very interesting. And I'd also note, I think this is important. Last time, Elon Musk talked a lot about the TerraFab project, but specifically made pretty substantive disclosures about his intentions to use Intel's technology process. That moved the needle. It moved Intel shares in the moment. Maybe we'll hear more about the TerraFab plan and who they're working with. [00:52:02] Dani Berger: Hey, Ed, elsewhere, there was this story that open AI accidentally hacked, I guess accidentally, but basically unleashed their systems. And in the process, hacked hugging faces technology or hugging face itself and something that was called unprecedented. This is kind of the fear with the most advanced models, isn't it? And it feels like we have a real world example of what happens when you unleash the stuff. And I mean, it's much more threatening if this were to fall in the wrong hands of someone that actually wanted to hack this company. [00:52:32] Ed Ludlow: I've been up all night reading, phoning people on both sides of the table of this, trying to understand it. Open AIR was testing GPT 5.6 Sol, that generational model, in combination with a more powerful but unreleased model. And what happened was, instead of simply conducting the test or solving for a benchmark, the models found a way out of a sandbox testing environment, were able to obtain Internet access, and then basically cheat, look for answers outside of the sandbox on how to beat the evaluation, beat the benchmark. And what both companies are telling me is like, this is very early. The investigation is still ongoing, but it absolutely is an important moment in AI. It absolutely raises big questions about the capabilities of frontier models. And, you know, I'm really looking forward to Bloomberg Tech, selfishly. We have the HackerOne CEO, Kyra Sprague, probably the best objective voice we could get at this moment in time to explain how this was handled by those two leading companies in AI. [00:53:34] Isabelle Lee: We are also looking into Bloomberg Tech Ed. Based on your reporting, was there any way that this could have been prevented? Did your sources disclose any of that with you? [00:53:43] Ed Ludlow: No. I mean, you know, the initial reaction privately from those involved was that this was handled completely appropriately. And indeed, like how it was communicated by open AI in part, they could, they say, in partnership with hugging face. It is hugging face production environment, hugging face system that was compromised. So, you know, the short answer is we don't, you know, we just don't have enough detail yet. And, you know, when they publish the full report of it, the answer to that will be could this have been prevented? We just don't know. We really just don't know. But we will tune in to Bloomberg Tech after the show. [00:54:19] Isabelle Lee: Thank you so much, Ed Lolo, host of that show. Let's now bring in Jordan Jackson, global market strategist at JP Morgan Asset Management, joining us live here on set. Such a pleasure to have you with us, Jordan. So, everyone agrees AI is transformational, but I guess the question is whether it's transformational for profits. [00:54:35] Speaker 12: Do you think that this week will be the test of that? I think so. As we know, all these capex numbers can continue to increase. We're penciling in over a trillion dollars worth of hyperscaler capex spend next year. That's up from expected about $760 billion for this year. And again, to your point, it's really eating into profitability. For the second quarter alone, we're expecting about 95 percent of earnings to go towards capex. And by the end of the year, they're a company spending more on capex than they are earning in profits. And so that means net negative free cash flow. Right. And what do you pay your bondholders from free cash flow? What do you distribute back to your equity holders free cash flow? And so there's a real challenge there. And, you know, we don't expect that to turn back towards positive free cash flow, perhaps into the second half of 2027. And so, you know, I really do think that the markets, you know, want to see continued earnings. If you are not raising your earnings forecast commensurate with your capex spend, you're really getting punished here. [00:55:30] Dani Berger: And maybe that's why you've started to see basically all of the bonds that these hyperscalers have issued this year start to trade under par. But elsewhere in the world of bonds, Treasuries have started to move a lot higher. We, for example, saw yesterday 10-year yields move up commensurate with the price of oil to a two-year high. Two-year yields close at the highest since 2024. 30-year yields reaching a post-2008 high of just under 3%. At what point does this impact risk markets or do earnings save us regardless of what yields are doing? [00:56:03] Speaker 12: Yeah, it's interesting to see the market kind of -- it's been trading sideways. Whenever we see the 10-year hit above 4.5%, maybe we're sort of back in that environment. There's a couple of dynamics that are at play here. You know, obviously, we've seen a big move in Fed pricing. We've gone from the beginning of the year, rate cuts, to now the market's pricing in about 38 basis points worth of rate hikes through the end of this year. You also have term premium now at its highest level in over a decade. And then I think you've got this floor reset in global yields where, you know, you've got, you know, JGBs, you know, trading at 275 on the 10-year, close to 4% on the 30-year. That is raising the floor, I think, on global bond yields and I think helping to lift yields here in the U.S. as well. So you've got a nasty kind of confluence of factors that are impacting rates. I do think at some level, at some point, the valuation story relative to where we are with risk-free rates is going to come a real challenge for the market to continue to move higher. [00:56:57] Isabelle Lee: Let's stick with that world because one of your most interesting calls is in credit. So if AI drives hundreds of billion dollars in new issuance, does that fundamentally change with a new safe investment grade tech looks like? [00:57:07] Speaker 12: Well, so far, even just this year alone, first off, hyperscalers have issued more debt than they did in all of last year. The second piece is, if you look at overall issuance, over about 50% of issuance in the investment grade credit market this year, net issuance has been within the hyperscalers data centers and the semis. So we think this dynamic could continue over the next several years. I mean, we're projecting that this bill that is going to cost a little bit over $5 trillion. Two trillion of that is going to come in investment grade issuance in order to finance this build out. If that dynamic continues and we see kind of consistent issuance trends across the rest of investment grade credit markets, this cohort could come to be, in a matter of a few years, 20 to 25% of the investment grade credit market. What this means is that not only are your equities very concentrated in this is this theme, it's all your bonds as well. [00:57:59] Dani Berger: So what it's just less of a hedge. It's less attractive to be holding both credit and equities in the same portfolio because they're giving you the same exposure if you're doing kind of an index waiting for both of them. [00:58:08] Speaker 12: Well, from a portfolio construction perspective, you've got to be more intentional about your diversification. Right. What is true diversification look like when now perhaps you're introducing structurally higher levels of correlation [00:58:19] Dani Berger: between both your stocks and your bonds. Can I just ask also because I was thinking about this too. So many sectors in this world are just increasingly tied to the AI capex buildups. I think about financials. Obviously, they've done really well because a lot of market volatility. A lot of market volatility also happens to be in AI stocks. Bond trading desks and just bond offering and different financing has gone so well for Wall Street, too, because of the AI build out. So are there just more sectors that are becoming increasingly correlated to AI? Is it harder and harder to find diversification? [00:58:48] Speaker 12: It very much is. We think you've got to look towards alternative assets, perhaps even explicit exposure towards commodities and international markets as well. Now, EM is still very much a tech story, as we all know, but you're still getting true kind of real economy diversification in markets like Europe and Japan where you can actually kind of diversify that growth story. But you're absolutely right. This AI story is permeating financial earnings. When you think about the IPO pipeline, it is permeating into industrials, materials, the build out story. All layers of the AI value chain are impacting a myriad of aspects of the market. And so, you know, it's we just have to be a lot more [00:59:24] Isabelle Lee: intentional about what diversification truly looks like. And that makes a great point because if big tech Amazon, Microsoft or Alphabet disappoints on AI monetization in the next two weeks, is that just a stock story or will it force investors to rethink the whole AI [00:59:37] Speaker 12: investment cycle? I don't think it'll force investors to rethink the whole cycle. I think we all are comfortable that this is a multi-year build out. This is, you know, these deals are throughout, you know, 2028, 2029, 2030. And so I think what this does introduces, you know, bouts of volatility. I'm also a little bit worried about the amount of leverage that's in the system right now. Margin debt that may be chasing, you know, some of these returns. So as soon as things go the opposite direction, it'll exacerbate some of these moves in the market. So that just kind of structurally increases volatility of the market. It's a really interesting point because obviously South Korea, the structure of their [01:00:11] Dani Berger: market is very different than ours. But you've seen a lot of that, especially around the ETFs. But here, to your point, I mean, the cost of leverage has been just climbing quite remarkably suggesting that a lot of leverage is being used. What specifically are you looking at? Is it things like leveraged ETFs? And what could be the actual damage if that leverage continues to grow and you see a sell-off amidst all of that [01:00:32] Speaker 12: borrowing? Yeah, we are worried about the leverage. I think, you know, also just there's there's more U.S. listed exchange traded funds, ETFs than there are stocks. You can trade the market more than actually stocks to trade, which is remarkable. When you look at the leverage universe as well, you've got about 200 billion AUM and these leverage ETFs, 500 billion in notional. These are big numbers. And it doesn't it doesn't necessarily lead to a market correction, but it exacerbates one when it ultimately does happen. And I worry that you've got a lot of these retail investors that may be caught up caught offside. I say is it made worse that it feels like we've [01:01:06] Dani Berger: casino fight everything that you can make like bets on Couchy literally about everything right now is just that environment made people enter the equity market in more of a way that looks like gambling. I feel like I can make a gamble if I want Dunkin Donuts coffee or [01:01:18] Speaker 12: Starbucks coffee this morning. I mean, you can really do it do a lot. But, you know, I do think, again, it exposes some of the vulnerabilities in the market. And I think we're just looking at a market that may have kind of structurally higher levels of volatility, bigger China days where you've got big swings in trading volumes. Open interest is also something that we're looking at. Not a pun in terms of the title of the show. My heart stopped for a bit. I was like, nice, Danny. But I think this does just expose, you know, vulnerabilities to the market. [01:01:47] Dani Berger: Hey, Jordan, we really appreciate your time this morning. Thank you so much for stopping by. Jordan Jackson of JP Morgan Asset Management ahead of the next spat of couple days that are going to be hugely important for this market. And we're treading water in the meantime, about 40 minutes into your trading day. And we are looking at an S&P that is just marginally higher, not by much. The Nasdaq off the lows down two tenths of 1% as tenure yields continue to climb. Again, we're talking about it with Jordan. We are seeing yields move higher and Brent crude trading at exactly $94 a barrel. Some of the single stocks that we're looking at this hour, AT&T added 432,000 monthly wireless phone subscribers. That was in the second quarter. The estimate was more than $100,000. That was rather more than $100,000 over the average analyst estimate. So shares rally off the back of that. We're also looking at [01:02:34] Isabelle Lee: Supermicrocomputer issuing preliminary results, saying its backlog hit a record of the new orders in the quarter of more than $80 billion. Shares are up popping, Danny, more than 20%. And HPE, Dell also rallying off the back of those results from the AI [01:02:48] Dani Berger: server. Meanwhile, Intel confirmed plans to cut more jobs at its data center group, as the company looks to reduce costs around a turnaround strategy thanks to its new CEO. But I will just mention that this story largely happened yesterday, the reporting of it. So we saw Intel rally yesterday, up 8.6%, currently going a whole lot of nowhere. And coming up, American snack maker Utz is going private in a $2.9 billion deal with [01:03:11] Isabelle Lee: Intersnack. We'll get the details next. This is Bloomberg Open Interest. Now to high interest, a look at what's making headlines around the world. The Wall Street Journal reporting that President Trump has approved an agreement with Saudi Arabia to develop a civilian nuclear program. The deal could open the door to uranium enrichment in the kingdom. So the 30 year agreement is estimated to be worth tens of billions of dollars. And a record number of Americans tuned in to watch Spain's defeat of Argentina in the 2026 FIFA World Cup Final. The championship scored a U.S. TV [01:04:03] Speaker ?: audience of more than 62 million viewers. That includes 38.9 million fans who watch on Fox's Eagle language broadcast. That's more than double the [01:04:03] Isabelle Lee: viewership for the last for the last World Cup. And Utz Brands has agreed to go private in a $2.9 billion deal with Intersnack. The deal is expected to close in the fourth quarter and will be financed by cash from Intersnack as well as the term loan and asset-backed lending facilities. It's the latest example of European snack makers looking to the U.S. for gross and packaged [01:04:35] Dani Berger: food. Danny. Let's get more on that U.S. deal. Joining us now is Bloomberg Senior Deals reporter Michelle Davis. Isabel mentioned some of it there, Michelle. But what really was the impetus to have this German company come in and buy an American brand? So if you [01:04:48] Speaker 13: remember, Utz was one of those SPACs from the SPAC boom of the pandemic. It went public in 2020 by going by merging with a SPAC founded by some Blackstone former Blackstone investors. And since then, the stock hasn't done very well at all. This year, just this year, it was down 20, 30 percent. Part of that is because snacking generally in the U.S. hasn't been great. Consumers aren't eating as many snacks. Blame that on Waco or just like wellness trends in general. But also the fact that after the pandemic, snack makers like Utz raised their prices a lot with inflation. And now they don't really have room to raise them anymore. So they're not able to camouflage this lack of demand. And so the idea is by going private, you know, they won't be in the public eye anymore. They'll be able to focus on maybe innovating to better compete with some of these brands that you see on Instagram or Tik Tok. [01:05:40] Isabelle Lee: I still love snacking. But I'm a snacker all day. Maybe. See, you're part of the problem. So are still part of the problem, Isabella. How does disagreement help each company in the international market, maybe. So inter snack is a [01:05:53] Speaker 13: German private company that got its start making potato chips. And this feels kind of interesting because they're partnering with the founding families of UTS to buy UTS. So they're each going to hold 50 percent. And the executive chairman of Inter snack in the press release that was issued announcing the deal said he's really excited about the opportunity in the U.S. for snacking and really excited to kind of transform the future of snacking in North America. So they have some ideas up their sleeves to innovate and use some of their resources to help turn the company around. [01:06:27] Dani Berger: Michelle, you've been writing a lot about and reporting on the somewhat complicated regulatory environment that we currently find ourselves in. So on one hand, you have the federal government seems to be approving more things. On the other hand, you have states coming in kind of like we've seen with Paramount. What about cross-border M&A? How have regulators been treating this? Because obviously a German company coming in and buying an iconic American name. So far, the [01:06:54] Speaker 13: regulators have been okay with a lot of this cross-border M&A that we've seen. And I'm glad you brought up that cross-border theme because it is something we've been seeing a lot more of recently. It kind of took a pause after tariffs and liberation day last year. But this year, it feels like every every week we're hearing about or seeing a deal announced that has this cross-border angle. And it's especially true with European companies buying assets in the U.S. because they see the U.S. as a big growth area for them. And yeah, so far, I mean, U.S. regulars have been okay with it, especially when it's, you know, helping seen as helping the companies here. [01:07:27] Isabelle Lee: In general, how do when deals like this happen or if they happen, how do they balance some collaboration and maintaining their brand independence? I mean, Danny said, I'm part of the problem. But like, you know, I mean, will they try to maybe shed that for a more popular look or image? [01:07:44] Speaker 13: I'm going to stop talking. A lot of what the stock companies are grappling with right now, especially these legacy players that have been around for like 100 years, is that they haven't really changed their lineup that much other than maybe changing ingredients. But, you know, think about its pretzels like they probably taste the same as they did 50 years ago. But at the same time, there are these players that are cropping up every single day and, you know, consumers are a bit fickle these days. Like, we always want the next best thing. And so to really compete with that, they have to really try to go back to the drawing board and innovate. But so far, we haven't really seen them do that. So it'll be interesting to see what InterSnack does to kind of help turn this company around. [01:08:27] Dani Berger: I was about to say, I'm going to lose my mind if one of the innovations they do is do, like, a protein pretzel. Oh, my gosh. You would like that. They have one. I would not like that. You would not like that? Get your protein from, like, chicken and things. They have an Utz protein pretzel. Apparently, 10 grams of protein per -- I'm sorry. Get your protein from -- We will all eat it after. Sure. Okay. Michelle, thank you so much for joining. Such a pleasure to see you. And Michelle, of course, is going to be joining me later in the day, too. Please catch Bloomberg Deals today, every Wednesday, 12:00 p.m., New York time. Today's guests include Thomas Lee, co-CEO, Scott Sperling, and Paul Weiss' partner, Carmen Liu. Still ahead, we're going to be speaking with Mark Rosen, CEO of JCPenney, owner Catalyst Brands as back-to-school shopping approaches. This is Bloomberg Open Interest. Welcome back to Bloomberg Open Interest. Let's get a check on your equity market nearly an hour into your trading day. And we continue to log losses. Again, we're mostly just treading water until alphabet earnings. But the thing that does seem to be dragging us down is what's happening in yields. They continue to spike along with the price of oil. Brent crude now above $94 a barrel. Two-year yields at 429, up three basis points. That is the highest since 2025. AMD Wall Street Journal reporting that they've made a pact with Anthropic to supply them with chips and they will also invest in them. Supermicrocomputer preliminarily releasing earnings, showing really strong sales. We're going to get Tesla after the bell alongside alphabet. AT&T, Philip Morris also out with their earnings. Really strong figures from the both of them. Philip Morris actually missed a little bit, but they said that consumer demand remains resilient even with all the macro headwinds. Coming up, we're going to speak with another company, the CEO of Catalyst Brands, Mark Rosen, on what back-to-school shopping is telling retailers about today's consumer. That's after this commercial break. You're watching "Bloomberg Open Interest." Back-to-school shopping season is getting underway, offering a fresh read on consumer spending. One company that follows it very closely is Catalyst Brands. It's the parent company of JCPenney's, Brooks Brothers, Aero Postel, Eddie Bauer, Lucky Brand, and Nautica. A little bit of blast from the past. Some nostalgia in there for you, too. CEO Mark Rosen joins us now. Mark, really great to see you. And obviously, a brand like JCPenney, known maybe for deals with back-to-school shopping. And I know you've got a few in those, too, like a price lock guarantee. So maybe setting aside Brooks Brothers, most of these brands are catering towards not the high end. Maybe every day to lower consumer. How has their behavior been at this moment, where we continue to see inflation woes, especially ones growth in inflation that outpace the growth in wages? [01:11:23] Speaker 14: Yeah, I think good morning, first of all, and thank you for having me. As we're going into back-to-school, what we're seeing is that the consumer is actually committed to their family, and they're going to make sure that their kids go back to school with the items that they want and the brands that they want and the right things to make sure they have a really successful school year. And that's really important to families. And we see consumers shopping for that. Like you said, we're prepared for that because we know that value, deals, and quality are going to be really, really important to them. And we have thousands of items at JCPenney that are under $10, really important for the consumer. That's shorts, T-shirts, leggings, our uniform polos. We have Aeropostale offering buy one, get free denim. And we're also, for the first time this year, offering a price lock guarantee, which means from August 2nd to August 27th, almost the full month of August, that core back-to-school season, consumers can shop anytime they want, and they're going to get the lowest prices of the season. And on those key items, those prices are at or below last year's prices. [01:12:27] Isabelle Lee: The buy one, get free denim is pretty cool. You held prices despite the tariff pressures last year. Can you keep doing that or should consumers maybe expect higher prices ahead? [01:12:39] Speaker 14: Really, as we go into the season, our merchants are focused on the key items that really matter to consumers in this season, which at the back-to-school time is denim, it's T-shirts, it's fleece, it's polo uniform shirts, it's backpacks. We're making sure that those key items are at the best possible price that we can get for the consumer. And I think it's one of the powers of what has become catalyst is bringing our brands together. We now source over 30 million units of denim over the year. And so we can work with our suppliers to make sure we're getting the best and the lowest price for our supplier. But I think what we're also seeing with consumers is the quality is really important. And so we're making sure the quality and durability is there and the product that they could buy is going to last [01:13:21] Dani Berger: for the entire school season. We do have some alternative data sources here at Bloomberg. And one of them does track specifically catalyst brand stores. What it has shown, though, are some really tough numbers. And to be clear, the industry as a whole has had tough numbers. But it shows your sales declining over the past three months to a degree, which are worse than the benchmark. Mark, I wonder what you are seeing on the ground and what you're doing to address some of those slowing sales. [01:13:47] Speaker 14: What we're seeing is that in some cases, consumers are making fewer trips. And I think a lot of that may be driven by gas prices. But what we're also seeing is that when they do come into the store, they're buying more units when they come into the store. In other words, they're consolidating trips. And really putting more items into the cart when they do come into our stores. And so we're focused on making sure, like I said, during the back to school season that they can come any time during that season and they're going to find the best value. We're also making sure that they can shop across our brands and get value there, too. And one of the things that we've done is introduce a joint loyalty program between Aero Postal and JCPenney. We know that about half of our customers shop between those two brands. And now when you sign up for that loyalty program, and we had about a million signups in the last month since we introduced the program, you're going to get a cash pass instantly on your first purchase. So I think it's making sure that that value is clear, that they can consolidate the trips, and they can shop when they want to. [01:14:43] Isabelle Lee: And you've also announced workforce reductions while also increasing automation. So how do you balance cutting costs with also investing in [01:14:51] Speaker 14: growth? And what does that strategy look like moving forward? We are focused on growing the business and serving the customer and offering the customer the lowest price. We have certainly put there are places where we have introduced AI into our business in our distribution centers and throughout our replenishment systems and inventory management and all of those things. But in most cases, those are actually freeing up our team so that they can work on some of the more complex problems that are facing our business. I do just wonder in this environment. [01:15:19] Dani Berger: So you have apparel demand softening. You're trying to do some things to address that. You're trying to protect margins, for example, using technology versus people you would have otherwise employed. I know some of your brands like Arrow Pastel, Brooks Brothers, Authentic Brands owns the IP for it. So how does that work when you need to pay royalties and at the same time try to protect your margins? [01:15:42] Speaker 14: Right. So in those cases, as you said, Authentic Brand owns the IP and we operate the business and we buy the merchandise and source the merchandise and really sell that product to the customer. And our job is to work that out across the business so that we can both invest in the marketing, pay the royalty and make the margin that we need to drive and grow our business. [01:16:04] Isabelle Lee: And then last year, JC Penney explored selling 119 or so properties, but the deal ultimately didn't happen. What's the latest thinking on your real estate strategy and are the assets still on the table? Right. So I think that first of all, to just clarify, the [01:16:18] Speaker 14: the deal that was reported was somebody who owned our property selling that to another owner. It was not a JC Penney transaction. So there was really no change for the core JC Penney business. And we have a portfolio now across catalysts of about 1400 stores. About 640 of those stores are JC Penney stores. And over the next year, we're actually we will be opening stores. So we're opening Brooks Brothers stores, Arrow Postal stores. We have about 35 store openings. And that includes one JC Penney store. The reality is that there have been a very small number of store closings, fewer than 10. And most of those are just unique situations with with landlords in [01:16:55] Dani Berger: specific markets. How are you then just thinking? I know you have a specific like JC Penney spark merger that involves Brookfield, a couple of other brands too. How are you just thinking not necessarily the stores themselves, but about that real estate footprint? [01:17:12] Speaker 14: Yes. So as we as we think about our footprint, we are we are owned, as you said, by Simon properties, by Brookfield and by authentic brands. And some of our stores fall with those landlords. Others of those stores we own. And many of the stores are owned by a set of independent landlords. And we continue to manage that across that group. And like I said, we're continuing to invest in and grow our portfolio of stores. I think physical stores have become more important than ever to the consumer, especially if you think about younger consumers coming back to the mall. That physical experience is really important to that. [01:17:47] Dani Berger: Mark, are they coming back to the mall? Because I was just thinking my childhood mall where I had one of my first jobs. I went there the other day. It's a ghost town. There's no one there. They're shutting stores. Only mall that's doing well is like the high end one that has all [01:17:57] Speaker 14: the designers at it. Are people coming back to the mall? People are coming back to the mall. I think that younger consumer wants that physical experience of a first of all, social shopping with their friends. They want to try on product. I think one of the unique things about our stores is that they can also get experiences. So if you think about beauty in our J.C. Penney stores or one of the things that we're offering for back to school is $10 haircuts. And we're planning on giving for both students and teachers this season over 100,000 $12 haircuts for our for our customers. And about two thirds of those customers also buy product when they come into the store. So I think it's a combination. All right, Mark, really wonderful to have you on. [01:18:39] Dani Berger: Thank you for joining us. Thank you for joining us today. Thank you for joining us today. Thank you for joining us. Thank you for joining us today. Thank you for joining us today. Let's get a check on your markets this morning over an hour into your trading day. Higher yields continue to weigh on this market. Ten-year yields now up nearly three basis points. The front end of the curve at its highest since 2025. Real yields are also reaching a post-2008 peak. Brent crude now just under $24 a barrel, up about 3% this morning. We'll see you next week. [01:19:09] Speaker ?: We'll see you next week. We'll see you next week. [01:19:09] Dani Berger: We'll see you next week. We'll see you next week. We'll see you next week. And the Wall Street Journal reporting that we'll see you next week. We'll see you next week. We'll see you next week. We'll see you next week. [01:19:19] Isabelle Lee: Philip Morris reporting better than expected earnings, but trimming its profit forecast. You see the stock there up by nearly 2%. [01:19:25] Dani Berger: And the Wall Street Journal reporting that Reddit has discussed cutting off Google's access to its content for AI use. Reddit shares falling off the back of that story. [01:19:36] Isabelle Lee: Coming up, we gear up for Tesla earnings after the bell with analyst Itay Mikhail of TD Cowan. He joins us next. This is Bloomberg Open Interest. As big tech pours money into AI investors, they're getting concerned about one titan, especially falling behind. Up to $25 billion Tesla forecasted to spend this year on AI. It has spent only $2.5 billion. So the slow pace, raising questions if Tesla can deliver the progress investors want to see. Joining us now is Itay Mikhaili, senior autos analyst at TD Cowan. He has a buy rating on Tesla with a $490 price target. So it's interesting actually, Itay, that big tech is getting punished for a lot of AI while Tesla is criticized for not spending enough. Why do you think Tesla is being held to a different standard? [01:20:34] Speaker 15: Well, Tesla, and thank you for having me, has a lot of deliverables coming up in the deployment of physical AI, whether it's autonomous vehicles via the robo-taxi expansion, which is proceeding fairly well. I think now out in seven markets. Also, FSD, Eyes Off, and of course, Optimus. We'll look for those updates tonight. The CapEx will, of course, be a focus. But what we really care about more in terms of the AI-related updates is really the timing and milestones to expect in the second half. The year and beyond on these very critical deployments in both autonomous vehicles as well as robotics. [01:21:06] Dani Berger: Itay, a viewer wrote in just pointing out that ahead of the XAI-SpaceX merger, Tesla had made an investment, about $2 billion into XAI. So essentially, it has that investment in SpaceX now. Is that something that Tesla will include in its results, any gains from that equity position in SpaceX? [01:21:26] Speaker 15: Yeah, it's unclear if we'll see that. I think ultimately what will matter most in terms of the results tonight is actually going to be how the vehicle business sort of progressed and what the outlook is in the second half of the year. You know, we do believe we're in the early stages of a U.S. EV comeback. You did see Tesla beat Q2 EV deliveries and post very strong production. So I think that the initial focus tonight with the actual numbers will be on the state of the EV business itself because we believe a stronger EV business foundationally does create a better setup to drive future growth and whether it's autonomous vehicles, AI, and of course robotics as well. So the key will be, you know, the revenue growth acceleration that we expect this quarter. We think revenue can grow over 20% in Q2, which will be an improvement from 16% growth in Q1. And we think the company can actually beat consistent expectations tonight as our gross margin estimate right now is probably above the street. What we expect will be a better flow through of those stronger deliveries and production in the quarter. [01:22:24] Dani Berger: Okay, so if the SpaceX investment itself is not something you're looking at, not something you're concentrating on, what about SpaceX buying Tesla vehicles, things like Cybertrucks? We saw that broken out when they went public. I mean, I'm guessing we likely won't see it in this earnings. I'm breaking it out. But how big, how additive do you think that will be to Tesla having the business from SpaceX? [01:22:44] Speaker 15: Overall, from a vehicle perspective, that's very small. I think the strength we saw in Q2 deliveries from Tesla seems to be very broad-based around the world. China was pretty solid, which is impressive given the competitive dynamics there. Europe, we think, had a very strong quarter. In the U.S., we've seen this comeback that we've begun to articulate back in March in a large report we published of the U.S. market for EVs. We saw some good progress, not only from Tesla there in Q2, but also Rivian. I think going forward, one of the key for vehicle demand is to the extent of which FSD is already boosting demand, which we think is probably starting to already. And therefore, as we think about the rollout of additional FSD features, including the introduction of eyes-off features from Tesla, to kind of really assess on the earnings call and beyond what that does, both the FSD numbers going forward, but also in driving even more incremental demand for Tesla vehicles going forward. We think that's starting to happen already and showing through in some of the numbers. [01:23:45] Isabelle Lee: We have to ask about Cybertruck, because that was supposed to be the game-changer, but sales have disappointed. Does that matter anymore, or has the investment thesis maybe moved to Optimus or RoboTaxis? [01:23:54] Speaker 15: Yeah, on the vehicle side, it doesn't matter so much anymore. The one vehicle we've been more focused on recently is actually the Model YL, which is kind of the full three-row variant that Tesla just introduced into the U.S. Our work has shown that at full scale, the Model YL variant could potentially contribute another 100,000 units of sales to Tesla in the U.S. That would be about 30% incremental growth to the Model Y. So you're right, the Cybertruck volume has been fairly low. We never really expected it to be a major driver of overall vehicle deliveries in the out years. But there is an exciting new product pipeline, even away from, of course, from Cybercap being deployed in the RoboTaxi fleet, in the form of the Model YL, which is launching later this year in the U.S. [01:24:38] Dani Berger: The RoboTaxi fleet, though, has been quite disappointing, I think one could say. At one point, they registered as many as 84 vehicles. Now, their active fleet of unmanned ones has shrunk to something around 20 or 21. How much longer will shareholders put up with a delayed timeline of a more aggressive RoboTaxi strategy, especially as Waymo and others really enforce, start to roll out in various cities? [01:25:02] Speaker 15: Sure. We think it makes sense for Tesla to approach it in a measured way, prioritizing safety, because we think Cybercap gives Tesla a significant cost advantage given what we estimate is the cost of the vehicle itself. And, of course, the ability to scale very rapidly. And so, you know, we think the sort of gradual deployment. And now we do see RoboTaxi kind of deployed and right here, of course, within that in seven markets. So we are seeing slow and steady progress there. You're right that one of the focal areas tonight on the conference call will be what we should expect for Cybercap deployment in the second half of the year. You know, how big could the fleet be? All those questions I'm sure will come up. But ultimately, just given the Tesla's competitive positioning in this industry and, of course, the massive size of the RoboTaxi industry itself, we do think it makes sense for them to kind of approach it in a measured way, prioritizing safety, execution, of course, customer experience as well, because we have seen in the past, right, examples of companies like when they've rushed this technology out, they've run into sort of major issues along the way. So I'm sure we'll get some incremental updates on that as well tonight. [01:26:06] Dani Berger: All right, we'll see what those earnings bring. Thank you very much for joining us, ETA McKellie of TD Cowan. Coming up, banks are booming. And Wells Fargo says it's still staying disciplined. For more on our exclusive interview, with CEO Charlie Sharf. Come back with us after this break. That's coming up next. You're watching Open Interest. Wells Fargo's CEO says that the bank has moved beyond fixing the business and is now focused on growth. He sat down with Bloomberg's Romain Bostic for an exclusive conversation. [01:26:46] Speaker 8: We're a very different company than we were when I got to the company. I guess it'll be seven years in November. And what you've seen since the asset cap has come off is that we're able to compete on a level playing field with everyone. And we're growing our consumer bank. We're growing our commercial bank. We're going the wealth business. We're growing our core investment bank. And we're doing it in a way with very, very highly focused on sustainable growth and higher returns. [01:27:12] Speaker 7: And we think we've got huge opportunity in front of us. When you say sustainable growth, some investors want to see aggressive growth. Yeah. Can you be aggressive and be disciplined and sustainable? [01:27:22] Speaker 8: I think, listen, in this business, you've got to be very, very careful about what aggressive means. And we also have to be very, very careful about distinguishing between what the markets are adding to our performance or any other financial services provider's performance and what we're doing. We're not looking for quick wins. We're not looking to take outsized risks in the short term to drive stronger results. We're looking at building the underlying franchise, building customer relationships, building flow of things that will go up and down based upon how the markets are doing. [01:27:54] Speaker 7: But that's what I mean when I say sustainable over a period of time. Well, talk about this transition then because over the past few years, I mean, people will look at what you've done over the last few years and call that a turn around story. Although we should point out, Wells was in relatively good shape even when that asset cap was placed back in 2018. Was that a turn around story or was that just kind of regulatory rehab? [01:28:16] Speaker 8: Well, I think I wouldn't call it. I think you're right. It's not a turnaround story. The company was always very strong. We always had a great franchise, but we had to fix things that needed to get fixed inside the company. But from our customer standpoint, we were serving them every day. We were making loans. We were taking deposits. We were constrained on growth, but we were there providing what we did day in and day out. And financially, we were still doing OK. And when we looked at what we were able to deliver, we're in a we're not able to go our balance sheet. We've been focused a lot on efficiency inside the company. We've been focused a lot on growing our fees inside the business. So our corporate investment bank has grown very nicely. Our credit card business and credit card spend is growing very, very nicely focused on building Treasury services. And now we can grow the balance sheet so we can more holistically serve customers. And that's what you see when you look at the results of this past quarter with earnings per share up 25 percent revenue growth, double digits growth across every one of our businesses in terms of revenue. We're certainly in a different place. And our goal is to be viewed as the best financial services provider in these businesses in the country. [01:29:23] Speaker 7: How much of that is because of Charlie Scharf and the executive team? And how much of that is because of market conditions and economic conditions? [01:29:30] Speaker 8: Well, I think it's predominantly because of the quality of the franchise and the broad group of people that work at the company. Listen, what I and the new management team been able to do is get people focused, create a different set of priorities. But a lot of people execute day in and day out. And the fact is, the markets do help. So there's no question that I mean, these times are really good for banks. And so if you're not doing really well as a bank today, there's something not quite right with either how you're executing what your strategy is. And that's not lost on us. But again, we look at the underlying metrics of each business. Are we growing? We're growing our consumer checking accounts. We're growing commercial banking customers. We're growing the kinds of loans that we want to grow. We're taking the risks that we want to take that we think will provide strong returns over cycles and not get over our skis and not pretend that it's all us. [01:30:20] Speaker 7: Some of it is the markets for sure. You just reported earnings. And the number that I think jumped out for a lot of folks was the growth in the investment banking business. [01:30:28] Speaker 8: You've been on a hiring spree there. Does that continue that build out? Yeah. So we've been on a quality disciplined path to growth in our corporate investment bank. We're a huge lender to corporates of all sizes in this country. Large corporates down to middle market companies. We provide treasury services. And what we're doing is building on those relationships with a stronger set of products and services, coverage groups, M&A, underwriting capabilities. And so we've been very disciplined about adding resources in a sequential way, seeing that they're paying off, and we're seeing the results. And so, yeah, we can expect that to continue as we move towards our ambition of being top five. Is your expansion or the growth in this business [01:31:08] Speaker 7: going to be primarily in the U.S.? There's been talk that you may be looking to expand some of your investment banking business over in Europe. [01:31:15] Speaker 8: So, but predominant. So we're not 95 percent of our revenues come from the U.S. We're thrilled about that. So goes the U.S., so goes us. And we're big time bullish on the U.S. And so we're going to continue to invest in all of our business here in the U.S. And believe that there's significant opportunities for us to grow with the economy and to take share. The business that you mentioned, the investment bank does have to grow outside the U.S. For us to serve large companies and middle market companies as they want to expand outside the U.S. properly, we need to have a presence. We need to have distribution capabilities. We need to have advisory capabilities. But it's there primarily to serve the customers that we do business with here in the U.S. [01:31:56] Dani Berger: That was Bloomberg's Romain Bostic alongside the Wells Fargo CEO Charlie Sharpe. Catch me on Bloomberg deals today every Wednesday. That will be in just about one hour's time. 12 p.m. New York time. We'll have a conversation about private equity and activist investors on today's show and on Open Interest tomorrow. Seema Shaw and Brent Therill and Anne Berry. All of that to come. This is Bloomberg.