Instant Reaction: Microsoft, Meta, Qualcomm Earnings Results
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We've got a lot of companies that are reporting right now. Meta Platform shares up by 3.6%. The company posted first quarter sales that beat Wall Street estimates. Sign that the company's advertising business is so far weathering the Trump administration's ongoing trade war. We got with us Mandeep Singh. He's Bloomberg Intelligence Senior Tech Industry Analyst. He joins us here in the Bloomberg Interactive Brokers Studio. Mandeep, I want to start with, look, I want to start with Meta Platforms. I think there was a little bit of concern yesterday with the snap earnings.

not really like for like when we think about the companies, but if there's concerns about advertising and pullback, then naturally the response is, wait, is this going to hit meta platforms? Did it? No, it did not. And look, we knew one queue would be solid.

But the fact that they gave us a 2Q guide and that too was in line with, almost in line with consensus, tells you they have more visibility about the impact of the pullback from Chinese advertisers, their de minimis rule that everyone has been talking about. And they think it would have a very limited impact on the business. Obviously, there'll be more details on the earnings call. You mean a pullback from like a Xi'an...

TYLER NEVILLE: That's right. And so look, even though they have almost a 10% revenue exposure, the fact that it's an auction model meant that they would have more of an impact on the ad pricing.

And this guidance suggests that ad pricing impact is fairly negligible. What does this tell you about-- it's just interesting that we go into this earnings season, right? And you have companies maybe in the traditional kind of economy, whether it's airlines and others, who are giving a couple of different scenarios. And then bam, you have something like a Meta-- and we'll talk maybe Microsoft in just a moment-- these are strong numbers. These are very strong numbers. So how can they do-- like, how do we make sense of that?

I think one, these are the highest ROI ad platforms. So if you are an online business, you don't have a choice but to spend your ad dollars on Google and on meta platforms. Even if you're worried about the

- Even if you're worried. - The economy or recession, this is where you're gonna go. - This is where you are going to go to engage with your customers, to show and add to your customers because every company is an online business and this is the highest ROI. Now you're absolutely right that Snap last night

didn't sound very confident about 2Q, and that was the reason why they didn't guide for the second quarter. So I am surprised by the fact that they did guide, and it was really a very healthy guide given the macro backdrop

And it sounds like they are much more confident about their advertiser base, which is predominantly small businesses. So when you think about meta platforms, they have over 10 million small businesses that advertise on the platform. So explain like.

Like that's what I don't understand. - So is it a meta platform story? I mean, you told us last week that Google is a very efficient way to advertise. So you weren't surprised to see the numbers that we saw from Alphabet last week. Is it the same thing when it comes to meta platforms? Like this is just such a good way to advertise that even if small businesses see a pullback, they still see value when it comes to spending money on this platform? - Yeah, so in terms of the pecking order,

you are probably still going to spend on Meta, but you may pull back on Reddit, on Pinterest, on Snapchat. And we don't know. We know Snap didn't do very well. We don't know about the other two. But in terms of pecking order, Meta is the highest priority ad spend for any advertiser. And I'm surprised SMBs are still continuing because I would have guessed... Small and medium-sized businesses. Small and medium-sized businesses because the tariffs...

would have caused a lot of uncertainty. And look, that's why I'm asking you. I'm trying to understand an environment where so many companies are like, we're not even going to give you an outlook or we're going to give you two scenarios. And then you've got a company like this.

that's willing to commit but also plays to the small business community i'm just trying to understand it does and look uh the advantage of having such a fragmented advertiser base is even if a few advertisers do pull back yeah you have a majority of the other advertisers that

may double down given they have favorable conditions. So it sounds like in this case some retail advertisers may have pulled back but then you know you have other pockets within the economy like financial services that may actually have doubled down thinking the ad slots are much cheaper right now compared to where they were 90 days back and so that

is a phenomenon that's always there with digital ad platforms that somebody else may step up because ads are much cheaper right now. You know, I'm looking at the press release and one thing that I saw that kind of surprised me a little bit was Mark Zuckerberg at the top said we're making good progress on AI glasses and Meta AI, which now has almost a billion monthly actives. We'll get to the number in a second, but

That's what he chose to highlight at the top. He didn't choose to highlight the strength of the advertising business. Make no mistake, this is a company that makes... Because he's raising the CapEx. So the CapEx guide went from 60 to 65. So what does that tell you? Well, it tells me that they are really going big in terms of setting up this AI data center infrastructure. Yeah.

for rolling out more AI on their family of apps and they'd see a lot of ROI when it comes to the AI spend. - What does it mean that it has a billion, almost a billion monthly actives? What's he talking about there? - Well, so Meta Platforms has 3.5 billion monthly actives across their family of apps. - So that includes WhatsApp, Instagram, Facebook, Messenger and the like. - And so one billion of those predominantly through WhatsApp.

are using Meta AI. I don't think there is a lot of Meta AI on Instagram or the Blue app yet, which I was surprised by given how much they tout Meta AI, but it's predominantly on WhatsApp right now. - What are they using it for on WhatsApp? Are they using it like an LLM? Are they using it like a chat GPT? - Yeah, it is a form of search

on WhatsApp where you can sift through your messages. You can actually do a lot of group kind of correspondences using Meta AI. So it's basically an assistant for the app.

That's right. But still, I would say I see it more on WhatsApp than on their Instagram and Blue app. Yeah. All right. So Meta is still up about 3.4%. Should we talk Microsoft? Let's talk a bit about Microsoft because this one was just kind of off and running in a big way in the aftermarket. The stock is up about 5.6% here. Again, some strong numbers. Let me just pull it up here. The company...

in terms of it posted strong revenue growth, cloud unit expansion. This one also seemed really strong. Yeah. I mean...

Azure, 33% when everyone was thinking, oh, Google had a slightly lower number on the cloud side. I mean, 33% is a very impressive number. For cloud revenue, right? For cloud revenue. And again, this is the one company that has benefited the most when it comes to AI infrastructure and actually monetizing it. In the case of Meta, you still don't see the monetization on AI. Meaning what specifically?

Well, the AI inferencing revenue. So that is what shows up in the Azure growth number. And in that 33%, your AI contribution is north of 15% right now. So 15% of that 33% growth is all AI revenue. Hold on. Do we care about these numbers if we don't have the guidance yet?

Investors certainly do after hours sending shares higher, but we're not going to get guidance until the call. This is recurring revenue. So when you think about... As long as people keep paying. Yeah. And enterprises don't really pull back. Like on the ad side... I will say if they have fewer employees, they would pull back. If they lay off employees, wouldn't they?

still you need your AI infrastructure. - You have to pay for it. - Oh, okay. - So think of what they are doing with the AI infrastructure. They are rolling out chatbots, AI agents. So even if they are retrenching in terms of headcount, you still need more AI agents because-- - So everything is awesome, Carol. - One last question. So same thing, my question to Meta. Like when I'm trying to understand what is going on in a lot of other companies, obviously they're not these big tech companies,

Is this telling us a different story in terms of what's going on in the economy?

and the impact of some of the White House policies? Well, so companies are clearly prioritizing AI initiatives right now, regardless of what is going on in the macro economy and the tariff situation. Everyone is concerned, but no one has pulled back on AI-related projects. And clearly, this is an illustration of that. We'll wait for the guide. I mean, these are 1Q numbers, so we don't know how they guide to 4QQ. Right. But 1Q numbers are strong from both companies.

Okay, Mandeep, you got to go. We appreciate you sticking around and hanging with us. Thank you. Do appreciate it. Not just Microsoft and Meta Platforms reporting, Qualcomm in the after hours shares are bouncing around a little bit. The company did give a tepid revenue prediction for the current quarter. It underscored concerns about tariffs that will hurt demand for its products. As soon as these numbers crossed,

We did see shares in the after hours move lower, down about 4.8% as we speak right now. Kunjan Sabani is Bloomberg Intelligence Senior Semiconductor Analyst. He joins us once again from our San Francisco bureau. Kunjan, your reaction to the numbers, tepid?

Not surprising to us. In fact, the results and the outlook turned out exactly how we had called in our preview. We thought the actual reported quarter might see a beat, likely due to strength in China Android. And from the results, we are also seeing some better than expected IoT, which is really a positive sign. But that sort of in-line outlook with the comment that they're taking a conservative approach, that's what we had expected. So not really surprising anything what we have seen so far.

They're also saying, the CEO, Cristiano Amon, saying, as we navigate the current macroeconomic and trade environment, we remain focused on the critical factors we can control, our leading technology roadmap, best-in-class product portfolio, strong customer relationships, and operational efficiencies. It sounds a little bit like C-suite speak, but they are,

saying that there's some navigating through this macroeconomic environment is that and trade environment that's just all the stuff coming out of dc

Well, yeah, and remember this smartphone market is sort of the most susceptible to any uncertainty or recessionary scenario or a tariff impact given totally consumer-based. And both the key regions where they sell, right, U.S. and China, both are sort of directly or indirectly getting impacted by tariff. The second thing to remember is this is the year starting with even the spring iPhone launch where Apple started sourcing their internal modem.

swapping out Qualcomm, you're going to expect to see this more in the upcoming iPhone launch in fall. So they're already, even if you take out the tariffs and uncertainty, they already had these headwinds of loss of revenue in significant billions of dollars, not maybe this year, but starting to happen this year. They really needed an offsetting positive catalyst. And when you put in

an uncertain macro on top of it, maybe impacting smartphone growth overall. That's sort of not the best situation they want to be in right now. We'll hear from Apple tomorrow after the bell, but shares in the after hours down about two tenths of 1%. Can we get any sort of preview from these numbers, given that Qualcomm does get 22% of its revenue from Apple?

Not these specific numbers, right? The spring phone launch, that's a very small volume, so we can't expect or predict anything. The real indication will come from the fall launch. Again, the numbers there are very difficult to predict at this point. The other point I want to add is right there in this weird situation where if because of tariff situations and if because of

significant tariff on China, if Apple loses share, whether in China or in the US, that indirectly can be actually good for Qualcomm at the same time that they're swapping Qualcomm out, you know, that share if picked up by Android, that could be actually better for Qualcomm, not just on the revenue side, but also on the margin side because Android is a higher margin business for them.

Okay, that's good to know. Anything else, Kunjan, that you can glean from this? Oh, go ahead, Carol. Well, and I'm thinking, what's the number one question? I know I always like to throw this out, but what do you want to hear on the call or what would you be asking? I'd be asking a very difficult question is that, look, we know that the Apple share loss is coming. Estimates have inbuilt some of the loss. Like, what is the offsetting catalyst here? Where can you grow or minimize this loss, especially in this current environment?

All right, going to leave it there. Love it, love it. Kunjan Sabani, he is Bloomberg Intelligence Senior Semiconductor Analyst joining us from our bureau in San Francisco. Kunjan, thank you so much. We'll look forward to his research hitting the Bloomberg a little bit later on. We've got to get to our Ed Ludlow. Yeah, let's bring in Ed Ludlow. He's actually here in New York City. He's the co-host of Bloomberg Technology with more on the tech earnings that just crossed. Microsoft posted strong revenue growth on cloud unit expansion. Meta revenue beat estimates on advertising stability. Microsoft

Meta coming out and giving a guide that pleases investors. Microsoft, we don't know what they're guiding yet. We'll find out on the call. Where do you want to start? Let's go with Meta, you know, just because it's actually an easier story to understand. Meta makes money from advertising. Anyone that's been on Instagram or Facebook,

uh increasingly other apps will know that and so the outlook for the current period shows that in everything that's going on right now they're holding our own they're holding up the ad market is basically conviction driven so if there is economic uncertainty advertisers are usually a little bit cautious and tepid so that's really interesting meta always gives a guidance or an outlook for the current period last night i think you've covered it right snap yeah did not and

What happens when you don't? Your stock falls 15%. So that was interesting. But I think there is something to understand in the capital expenditures because people misunderstand what it is Meta does with that money. So maybe we go there next. - Well, where do, yeah, go there. - So Meta is not a cloud computing company.

it is a social media company that's working on AI and AI is product generative AI and AI to drive the value of its ads. But it does own and operate its own data centers. They've dramatically raised the CapEx guidance for this year. 64 to 72 billion. Sorry, I'm not hooked on the term. 64 to 72. They have seen 60 to 65 billion. The estimate was just below 60 billion. So what does that mean? They're going to put more

money than they said they were into data centers more data centers cutting edge chips in those data centers more likely they'll drive development in ai but the single line in the statement that is so critically important is the majority will go into the core business they will invest in the things that support ads well that's okay that's exactly where i wanted to go because mark zuckerberg called out meta ai he called out the hardware in the top of the press release

Mandeep smartly pointing out, well, that's because they raised CapEx. So he wants to draw attention to the strength there.

look look this is an advertising business no question yeah what what is going to go toward developing new products like products that we can wear products that we walk around with versus making the ads more effective to sell us things which is metas core business yeah it's a real quick we're making the distinction between hardware which is a consumer electronic one wears on their person and infrastructure which is exactly that's really important so right now um

Meta AI is a generative AI function that you can use through a standalone app as of this week. Yeah, that's brand new. Or you can use it through Facebook, WhatsApp, and Instagram. I use it a lot through Instagram for whatever reason. Yeah. More so than you'd use ChatGPT or something? No, I use ChatGPT more than any of the others, but it's analogous, right? Okay, so before...

I just want to pause you just so everybody understands. What are you using AI on Instagram for that you're not using on ChatGP2? I find it analogous, right? Because one of the strengths of meta AI is you can say, meta AI, please take this photograph of me and turn it into an animated image where I am depicted amongst the team of my favorite football team.

Something like that, right? And it's analogous with Instagram, but it does much of the same things that ChatGP does. It answers questions up until the date on which the data was trained. Now, the hardware component is that Meta does not make a smartphone. It has dabbled in some other home devices, but the principal way that you engage with the AI is through Ray-Ban Metas, glasses you wear on your face that have the computer electronics integrated with cameras. And I use them all the time. And you basically say, hey, Meta, and then it goes, woo.

and then you ask it questions and with audio it responds back and

This has been a massive surprise to Meta. It started as a gimmick, frankly. And tying this to earnings, I think what Zuckerberg's saying in the statement is, hint, hint, I'm going to talk a bit about this on the call, because the sales of that product have been better than expected, but they also have to tell a story of, well, what's your thing? How are we going to interact with you in the future if people aren't using smartphone applications as much? I mean, as you have used them, I mean, is it a product that could be mass adopted in your view?

Yes, in so far as the sales have been surprising, they don't break out clear data, right? They don't say, oh, well, they might actually. Maybe they'll surprise us. But they don't say, like, we have sold 10 million of these, and that would be helpful if they did. But as you play around with it, are you like, I could see X? Yes, but the sales, we know the sales have been better than expected. Now, here's the investor Wall Street bit. For a really long time, the unit that was responsible for us as humans, our integration,

our engagement with the first, the metaverse and now AI is Facebook reality labs. And for many quarters, it would lose billions of dollars and investors would say, stop losing billions of dollars. And then they just stopped. They started looking past it. And part of that was that the hardware started getting out there and people could see the distant future where we all wear these devices and

um the metaverse is still a thing i mean if we can go there if you want but at the end of the day it's a story of massive investment to develop ai the software and then catching up with the company's self to say this is how we think all of our billions of users around the world of our apps will interact with that ai in the future okay so let's stick on that ai theme here on the

So let's say I'm an analyst. I want to know, great, it's all well and good that you're spending this money. It's all well and good that you've made these developments when it comes to hardware. Let's get back to ads. How does that make the ads better that are targeted to Ed on Instagram when he's using AI on Instagram? So some of the metrics that... Certainly it's more engaging. You're spending more time on the platform. So that's a positive. So people will look at Meta's...

Meta's core data like the daily active users and ad impressions, that gives us a sense of how healthy and competitive that ad market is. Listen out on the call, I would wager that Mark Zuckerberg gives some different data to try and justify why Meta's ads are better in a tough economic environment because of the investments in AI. Go back to the earnings statement, we will invest the majority of CapEx into core business, in other words,

We're putting a lot into AI because we think it will grow the value of our ads. That's what I think will happen. This is what I feel like we talked with Mandeep Singh about this whole idea. Well, he knows. He's a smart guy. Well, this idea of like if you're going to spend money, you're going to go to where you get the biggest ROI, right? Yes, or eyeballs. Think of it as sheer competition for eyeballs. Absolutely. Hey, two things we want to get to before you have to run. Let's just talk Microsoft real quickly. Oh, wow. Yeah.

- Ugh, off the charts, still up about 6% here. - So analogous with Meta and Google is that if your core business performs and you are committing to spending on AI, investors will reward you. And that's very much the story here. 33% top line growth for cloud. And that's what it comes down to, right?

I always have this line, Microsoft, which I've had a relationship with since I was a child and I learned to use a computer, was always good at getting people to pay for software that others will give away for free. That's a true story, but they're showing that their core businesses, cloud computing and Azure, where they're the market number two,

Again, it's the same as meta. Does your core business justify your rights to spend on AI development through hardware or infrastructure data centers? The Microsoft numbers tell that story very clearly. It did Mandip say that actually it's showing the monetization of AI that I think in that 33 percent, almost half of it or close to half of it is the result of of AI.

- And AI impact. - And I didn't mean to be flippant, the criticism was they released Microsoft Co-Pilot and many people thought that was prematurely. If you're an everyday tech worker, what am I gonna use this for? Nonetheless, the numbers show that people are paying for it and that's impressive. - Hey Ed, we're gonna hear from Microsoft on the call. We'll get some guidance there. Obviously that will help people get informed about how the company's thinking about the current quarter and the future.

Apple tomorrow. Oh, gosh, yeah. Mark Gurman said, I don't care about the numbers for the most recent quarter. I just want to hear the Q&A. I want to hear about tariffs. I want to hear about the supply chain. I want to hear Tim Cook's comments there. You agree? Yeah. Tim Cook famously says, periodically, I am not an economist, but... And then we'll give us something about... He's not an economist, but he's a supply chain expert. Yeah, like stories about hardware companies, people that make tangible physical stuff.

they're built from components that move from A to B all over the world and there are cost implications and there is no better microcosm of what's happening right now in global trade than Apple. And I get what German's saying, but remember that Apple is the master of managing the bottom line. So if you are a value long-term investor, whatever you want to call it, people do pay attention to that because Apple is brilliant at

boosting profit. You know, Apple has, Mark Gurman has reported over and over again that Apple has struggled with AI. And we see that with what has happened with Siri. Do you think they should buy or would buy one of these standalone AI companies? For those listening already, I was smirking and nodding going, yeah. Yeah, I mean, Siri, you know, has been a bit of a flop.

Oh, I mean, Muckerman would say a bit of a flop, a huge flop. Yeah. And, you know, I've covered so many stories today I lose track. But I think that there was some discussion by Alphabet about working with Apple and Gemini, their model going forward. Apple's looking at third parties to provide the underlying model that powers all of this.

And as Mark has reported, the consequence of the poor rollout is they've now restructured that company at the top. Leadership changes, organizational changes to get back on track. I still love my iPhone, but I do not use Siri ever. Yeah.

Yeah. Yeah, same. Hey, before you go, we did talk Apple and Trump and tariffs. You've got a scoop when it comes to Rivian and what they've been up to. Yeah, so prior to the US election in November, Rivian arranged with a Chinese battery supplier called Goshen to move a supply of LFP batteries from outside of the United States into the United States. And they paid for it up front, which is unusual for an automaker to do. You know,

You don't sort of say, "Okay, I'm not gonna use these for a while, but I'll pay for them anyway." And it did that to have a strategic stockpile as a hedge and insurance against the election. Then more recently, I found out Samsung SDI, it's Korean supplier, they said, "Samsung, before these tariffs hit, we need you to move a very large inventory of battery cells from Korea to the US." Samsung did. So they have this hedge against potential tariff impact, but it's not really about money. It's an anxiety that at borders,

Right. Goods get stopped and then you're left short. This is why when we look through some of the economic numbers, kind of the pull through in advance of tariffs, you've got to keep that in mind in terms of economic activity. Hey, real quick. It's been a while since we've gotten to talk to you and since you've been here in New York. On Rivian, on everything happening in the administration, given Elon Musk's close proximity to the president, has Rivian been

a net gainer or a net loser given... In the story we just reported at, and read the details, I put a lot of detail in the report, they made a shrewd move. The question that every auto CEO, I know this, every CEO is asking is, is the net result that Elon Musk secures something that is specifically good and beneficial to Tesla, a carved out exemption, or...

In so doing, does Elon Musk get an exemption for Tesla or some kind of benefit that has a wider positive impact on those that make EVs? And I think the latter is where people are hanging their hat. Yeah, kind of a fascinating day where I think everybody's speculating. It did feel like a little bit of the president saying not necessarily goodbye to Elon, but kind of him wrapping up certainly his tenure.

- Which Dana Hall reminded us, we all knew was coming given his status as a special government employee. - Exactly, right? It was just a matter of time. - Shouldn't surprise anyone. - It was just a matter of time. Yeah, pretty wild. Any top questions, top of mind in terms of the earnings that we've seen this dump that we've gotten today? - Oh yeah, you know, like Alphabet, Google, they don't give guidance. They don't give detail. They don't tell you about anything in the economy. I would think that Meta and Microsoft would go a lot further, specifically like industries, geographies, and we would learn a lot about what they see in the world.

And so not just Apple, those other names will give us value, I think, in the economic context. All right. Good stuff, as always. Ed Ludlow, thank you so much. So appreciate it. Ed Ludlow, of course, is co-host of Bloomberg Technology. Catch him and Caroline Hyde. They are on Bloomberg Television at 11 a.m. Wall Street time, Monday through Friday. So I'm assuming this coverage will continue into tomorrow.

In the meantime, I do want to bring in James Chokmok. He's partner and chief investment officer at Clockwise Capital. He joins us from Miami. He's got the Clockwise Core Equity and Innovation ETF. It's down about 8% so far this year. It does include Apple, Microsoft, Amazon, and Nvidia among its top holdings. And that's exactly, James, where I want to start. Given what we just heard from Microsoft, we got the numbers there from Ed. Investors happy in the after hours. The company will give guidance on that call. What are your thoughts?

Yeah, I think from a big picture standpoint, you know, we went into tonight kind of ranking the mega cap earnings remaining as Microsoft as the least risky moving to meta. And then finally to Amazon is the riskiest of the three. And I think so far it's playing out as such. Microsoft,

You know, the big number there that the bogey one you wanted to see was north of 30% Azure revenue. You know, we're looking like the momentum continues to be there. I think, you know, when you look at the mega cap earnings, mega cap companies, you know, really what we try to focus on, which ones are the most immune to tariffs, which ones have the most resiliency, and which ones have a valuation that supports some level of support.

So I think Microscope underscores all three of those. And, you know, we liked what we saw. And, you know, Meta,

um that was a um you know not the best of outlooks but expectations had come down substantially particularly following snaps results last night so the fact that they're even giving an outlook uh is a net positive and um and that one has come in a lot from a valuation standpoint so i think listen to the standards like listen to like the fact that they even give an outlook is a net positive

it's well that's the environment we're in this is what we're trying to get our head around i mean james i'm looking at uh shares of microsoft still up about 6.2 percent if i look at meta it's up just shy of six percent and i pulled up amazon which in 24 hours we're going to be all over amazon's earnings it's up about 2.8 here in the aftermarket but i'm trying to get my head around what these companies are saying and doing versus kind of it feels like so much uncertainty

in the rest of the public universe, or so much uncertainty, or companies not giving an outlook, or companies giving two outlooks. So do we set these companies apart, or does this say something more strongly about what's going on in the U.S. economy and the global economy?

We're not going to be too quick to judge how these companies are doing over the very short term about the broader macro implications. We still see us at a 50-50 market at best. Yes, the results have been largely coming in on par, maybe slightly better than expectations, but we're not out of the woods by any means. You still have

reinflation risk, recession risk. The behavioral changes haven't even really hit the consumer yet. You saw that from Visa's results this morning. So you're seeing some repositioning from a business standpoint. The businesses try to adapt as best as possible, but it hasn't hit the consumer. There's a lot of unknowns. The only thing I'd say that is a net positive is that

You've been seeing the FOMC members start to posture their rhetoric to a more dubbish posture as we have the May meeting coming up.

So that could help provide some level of support to the broader market, but it doesn't help in any way, shape or form provide that much incremental confidence as it relates to the earnings outlook for the balance of the year. James, one of the reasons we like talking to you is not just because you are an analyst or have an analyst background covering all of these companies, but also because you put your money where your mouth is with the portfolio management of the ETF, the Clockwise Core Equity and Innovation ETF.

Apple's your top holding. Dollar General is your second biggest holding. Explain that. Are you essentially trying to grab every type of consumer out there? You've got the high-end consumer with Apple, then you've got everybody at Dollar General?

Well, the way we look at it is, you know, periods of maximum uncertainty require maximum adaptability. So what we're trying to do is in a 50-50 market, play things down the middle. What that means is we're taking a barbell approach where for every dollar of beta, of higher beta, you know, we're adding a dollar of much lower beta.

And that's where the Apple and Dollar General kind of equal weightings come into play. But a more extreme example that I'd point out is, you know, we have an equal weight with MicroStrategy or Strategy now as we do with Dollar General. So I wouldn't read that much into Apple. I mean, that has something to do with the fact that it's such a big weight in the index. But I think MicroStrategy is a better example of, you know, how we're how we're

polarized, you know, the barbell is that we're playing. Which to remind everybody is a levered play on Bitcoin. Yes. I mean, we think that crypto single handedly, it's the number one asset class that I have confidence in for 2025. I think it's Bitcoin is going to be the single largest contributor to returns in 2025. I can't say that the same about any other sector. What? Partial to. Really? Why? Yes. Yes.

Institutional adoption, building awareness. There's going to be crypto related services. You had the Fed remove barriers as to what banks can do as it relates to crypto. So I think that as the regulations come off, awareness builds, institutions build awareness.

BlackRock says that it should be 2% of portfolios across the board. We completely agree with that. All our client portfolios have at least a 2% position in Bitcoin. And as we look to the balance of the year, we just don't have confidence in really any other sector to the same degree. We like tech, the cheaper tech. We like commodities.

You know, we like utilities and we like staples, you know, where the valuation makes sense. But crypto, no hesitation and it's full steam ahead. Interesting. So so it sounds like you have been putting money to work over the last month or two amid the volatility. Yes. Yes. And then. Yeah. Yeah. Yeah.

Yeah, we're putting money to work when and where we can. You know, we've been selling a lot of the mega cap names into any opportunity we have into strength. You know, just to give you a sense, you know, the top 10 weights of the NASDAQ are about 50% of the total index.

We're about 40% of that. You know, we're at about 20%. So, you know, we are underexposed on mega cap. So selling it to strength, utilizing that cash to diversify into more value names like Dollar General, which you pointed out, Tim, and keeping the pressure on the crypto front as best as possible on any pullback that we see.

But you did like, I'm just looking, you've owned MicroStrategy. Are you out completely?

Oh, no. We've been grossing it up every single time it pulls back. Oh, I'm sorry. So that one you've been moving it. Yeah. Yeah. Yeah. It's the mega cap names, you know, the Microsoft's, Amazon's, that is, you know, those are all significantly underweight relative to the index. And we think it's prudent to stay there until we have better clarity on business spending and the consumer. We just don't know exactly where we are. Amazon's going to be a big tell tomorrow. Now, you can argue that the cloud services industry

Google was better than expected, Microsoft better than expected, so business spending is there, but it's certainly not seeing, you know, SMCI's results would tell you a completely different story last night. So...

too much uncertainty. So just going back, meta reporting today, it's up about 6% here in the aftermarket. We just talked about it. So revenue beating estimates on advertising stability. I'm looking at Microsoft up about 6% here in the after hours. Again, third quarter revenue topping estimates. Amazon has moved up ahead of its earnings tomorrow after the close up about 3.5%.

And Qualcomm's down about 9% here in the aftermarket following its numbers. It gave a soft revenue forecast in the face of all the trade turmoil. So we're seeing anything here that's of interest, or this is, again, not the way you want to play it right now?

Yeah, I mean, we we we increase our Microsoft position the moment the numbers came out. So we haven't we you know, we de risked it into the quarter. Now that the numbers are out, we got we got it up a couple of percent. So does that story change potentially when we hear from the company on its earnings call and they talk about guidance or are you confident and confident in guidance?

Microsoft was the only one of that group that we liked into the quarter, which is why it was weighted slightly more than both Meta and Amazon. But we decided to take it back to where it was prior to the quarter just because we believe it's the most insulated from all of the noise, geopolitical and otherwise.

While Meta and Amazon, you know, we wouldn't wait for the exact commentary on the call to be able to make that decision. Okay. Hey, how do you just big picture? How do you think the economy is doing? How do you think the consumer is doing? How do you think they're going to weather these tariffs?

I don't know. I mean, I can give you anecdotes. You know, like I went to go get my haircut yesterday and my barber was telling me that business has been slowing dramatically. You know, you hear from companies like Visa and they'll tell you otherwise. But companies like Amazon come out and say, Andy Jassik was saying that, you know, you're seeing trade down of purchases.

to lower ticket items. So it's a mixed message. And the thing about it is that we're really not going to get a sense of from an economic data standpoint, nor from a company standpoint on the exact repercussions on the consumer for another 30 to 45 days.

So, you know, it's a lot of question marks out there, but I think that the bottom hasn't fallen out of the consumer yet. The behavior has kept up, but how long will it last? You know, we don't want to wait around to see and find out. We'd rather, you know, just be proactive and be balanced in the areas that we have conviction in with the value areas that we think can withstand a

a downturn and increase hedges where we can, because right now it's impossible to say or lean in in either direction. We're just getting incremental data points. Well, you know, they'll build up to a full more formulated story in the next couple of weeks. Yeah, it's fascinating. Bloomberg and I know other people talk about it, but it's something like the beauty salon index. But basically, Peter Atwater sent me a message on Twitter about this today on X. It's

Peter Atwater of William and Mary. I love that he wrote that because it's kind of people, salons have been talking about how people are trading down on services. They're not doing as much. They're cutting back. And so it's just kind of one of those unofficial indicators of maybe what people are doing, kind of conserving their spending because maybe they want to or maybe because they have to in anticipation of what's to come. Top.

question for regardless of the economy i had to i had to get my hair cut because i'm going to the grand prix this weekend so that's the that's uh well so things are good necessity yeah that's a necessity is that a discretionary expense change or is that a business expense how do you look at that i i'm incredibly passionate about formula one actually we own formula one uh in the fund uh f wonk

We think that that is a resilient business that's going to continue to grow. But it's discretionary, but it's also something I'm incredibly passionate about, passionate enough to actually own the underlying stock. Love it. Pretty cool stuff. Hey, just going back to the companies that have reported after the close, as we mentioned, Microsoft, you know, rallying, soaring in the aftermarket. Meta is higher. Yeah.

We did talk Qualcomm taking a big hit down about 9% in the aftermarket. Pick a CEO, pick a company. What might you want to ask them? Go anywhere you want.

I mean, the biggest question mark we have is on the consumer front. So I'd go straight to Amazon, to Andy Jassy, and basically ask him to try to give us more color than what we got from Visa. What is the degree of trade down in purchases? How have the patterns changed from day to day over the course of April?

Um, you know, just, we need, we just need more color on what's happening underneath the hood and we're just not sure about it, but you know, business spending, you know, it seems to be there for the most part, but the consumer drives the, the economy, you know, or a spending economy. And, uh,

Any clarity you can provide on that would help us ascertain exactly what we need to do going forward. So I'd point my questions to Andy. One of my questions to you, James, before you go is, you know, you answered my question about the economy. What about when it comes to a long term trade war, a standoff with China, sort of a stalemate here, 145 percent tariffs? Yes.

We've heard about factory activity possibly slowing down there. I know that some of the big box CEOs here are concerned about what happens if we start to see empty shelves. How do you look at that specifically?

Yeah, I mean, the empty shelves thing is a big deal. In about two weeks' time, we may come to a situation where people can't get their goods. So that's a real risk. When we think about the broader tariff risks and the consequences of that, we do think that the tail risks in the market are much more prevalent today than in many, many years. We're looking at

issues with our national debt, issues with credit risk, credit downgrades. The yields have continued to rise. You hear from the administration that foreign investment continues to stay strong. But if you look under the hood at the actual auctions, you see foreign purchases of U.S. Treasury bonds falling as a percentage of the total with much more coming from direct

buyers who are based here in the U.S. So foreign demand is falling. The dollar is falling. In the meantime, you really have to watch Japan because Japan, you have a strengthening yen. You have rising interest rates there. And you could totally have a Japanese carry trade 2.0

as well. So tail risks in the market are more prevalent now than ever. And it's certainly something that we're monitoring constantly. So both short-term risks with the recession and long-term. Great perspective on the specifics of these companies and so much more. James Chokmok, thank you so much. Partner and Chief Investment Officer at Clockwise Capital, joining us here to break down some of the earnings.

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