# Walmart Slides After Slowest US Sales Growth in Six Years

An episode of [Bloomberg Intelligence](https://invisiblenetwork.ai/podcast/326301337), 20 Aug 2026, 25 min.

Audio: https://podtrac.com/pts/redirect.mp3/tracking.swap.fm/track/UVBrz8bN8aM2Xe47PEPu/traffic.omny.fm/d/clips/e73c998e-6e60-432f-8610-ae210140c5b1/7f534b8c-9e91-429a-b102-ae3c00090c6d/33d39b80-a5e3-4b4b-8f4a-b4ac011ccb91/audio.mp3?utm_source=Podcast&in_playlist=0ad812bf-fd15-4012-a18c-ae3c00090c76

Watch Paul and Scarlet LIVE every day on YouTube: http://bit.ly/3vTiACF. Bloomberg Intelligence hosted by Paul Sweeney and Scarlet Fu -Redd Brown, Bloomberg Consumer Reporter, discusses Walmart earnings. Walmart Inc.’s quarterly sales fell short of expectations, with sales at US stores open at least a year, excluding fuel, rising 2.6% in the second quarter. The company's pharmacy business was hindered by federal negotiations that led to lower drug prices, and shoppers spent less per trip during the quarter. Despite difficulties, Walmart raised its full-year guidance for sales and adjusted operating income, and the company's e-commerce sales rose, with executives saying they will continue to lower prices. -Christopher Ciolino, Bloomberg Intelligence Senior US Machinery Analyst, recaps Deere earnings. Deere & Co. shares jumped after the company said it's seeing a boost in orders for its machinery, raising hopes that the agriculture sector is poised for recovery. The company raised the lower end of its annual profit forecast, citing improvement in early-order program trends, inventories for used equipment, and adoption of its advanced technologies. -Mandeep Singh, Global Head of Tech Research for Bloomberg Intelligence, discusses the latest on Meta. Meta Platforms Inc. is spending hundreds of millions of dollars a year to access artificial intelligence models through Microsoft’s Azure cloud service. Separately, Meta Platforms Inc. is being sued by a bipartisan coalition of states on allegations of deceiving the public and designing its social media platforms to encourage compulsive use among young users. -Adam Minter, Bloomberg Opinion Columnist, discusses his Opinion column: “Walter Is and Owner Leagues Want. Here’s the Catch.” Mark Walter is selling the Los Angeles Lakers at a $12.5 billion valuation less than a year after taking control of the team. Walter's handling of the Lakers and the Los Angeles Dodgers captures the dilemma of owners who are investors, prioritizing returns over long-term stewardship of a franchise. The influx of institutional money into sports has made investors like Walter valuable, but it also creates risks, including leadership transitions and financial pressures that can impact a team's stability. See omnystudio.com/listener for privacy information.

## Transcript

[0:02] Speaker 1: Bloomberg Audio Studios, Podcasts, radio News. You're listening to the
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[0:24] Speaker 2: Walmart, I mean, man, the stock's down nine point two percent.
[0:27] Speaker 2: That's the biggest decline since like May of twenty twenty two.
[0:30] Speaker 2: I mean, this is a big day for Walmart.
[0:33] Speaker 3: Walmart stock does not move up or down by that
[0:36] Speaker 3: kind of by that kind of size. I mean, it
[0:38] Speaker 3: just doesn't. It's it's a blue trip stock. I mean
[0:40] Speaker 3: it moves up or down half of one percent on
[0:43] Speaker 3: those days.
[0:43] Speaker 2: Eight hundred and twenty five billion dollars in market caps,
[0:45] Speaker 2: So some real money's being traded here today. Red Brown
[0:48] Speaker 2: joins us here. He's a consumer reporter for Bloomberg News,
[0:50] Speaker 2: joining us live here in our Bloomberg INTERACTI Brookers Studio.
[0:53] Speaker 2: Read what happened with Walmart and the results. Why it's
[0:57] Speaker 2: the street so down and out on this name today?
[0:59] Speaker 4: Yeah, I mean the size of the move also kind
[1:02] Speaker 4: of took me and made me pause as well, because
[1:04] Speaker 4: it is it's extreme, especially I mean for Walmart of
[1:07] Speaker 4: all people. So I think the reaction really is coming
[1:10] Speaker 4: from this top line miss. So Walmart's US source the
[1:13] Speaker 4: same sort of sales missed, even the sort of most
[1:16] Speaker 4: pessimistic outlook for among analysts. So I think that's probably
[1:20] Speaker 4: kind of leading to some of the move that we're seeing.
[1:23] Speaker 4: A big piece of the companies calling out is lower
[1:26] Speaker 4: drug pricing was kind of a factor in that. But
[1:27] Speaker 4: even when you strip that out, sales only grew three
[1:30] Speaker 4: point four percent, which still would have been a slight miss,
[1:32] Speaker 4: which is still kind of a rare happening for Walmart.
[1:36] Speaker 4: So I think that the conversation sort of sort of
[1:38] Speaker 4: shifts to like kind of what can they do now
[1:40] Speaker 4: and what does this sort of mean for the wider economy.
[1:43] Speaker 3: Yeah, the fact that within the earnings that got my
[1:47] Speaker 3: attention was shopper spending less per trip during the quarter.
[1:50] Speaker 3: You would think that in this kind of environment, with
[1:53] Speaker 3: inflation being so persistent, gas prices staying high, that people
[1:56] Speaker 3: would double down on a place like Walmart. What is
[1:59] Speaker 3: the company staying and what did it reveal on the
[2:01] Speaker 3: earnings call about how it's going to move forward?
[2:02] Speaker 2: Then?
[2:03] Speaker 4: Yeah, I think the most interesting thing that came out
[2:06] Speaker 4: in an interview my colleague did and also during the call,
[2:08] Speaker 4: was that they cut prices on eleven thousand items.
[2:11] Speaker 5: That's almost double what they usually do at this time
[2:13] Speaker 5: of the year.
[2:14] Speaker 4: So I think that sort of speaks to how Walmart
[2:17] Speaker 4: is going to be moving forward. This strategy has been
[2:19] Speaker 4: to continue to prioritize market share. You'll hear this kind
[2:22] Speaker 4: of across consumer companies P ANDNG sort of similar sort
[2:25] Speaker 4: of economic barometer saying very similar things, And I think
[2:29] Speaker 4: that is the sort of path forward here is we
[2:32] Speaker 4: have to cut prices to keep people coming in. You know,
[2:34] Speaker 4: we saw foot traffic. Even though ticket was down, foot
[2:37] Speaker 4: traffic was also misresults. So it's not down so up slightly.
[2:40] Speaker 4: But yeah, people are cutting back in terms of the
[2:44] Speaker 4: number of times of shopping and when they go, they're
[2:46] Speaker 4: also probably putting less things in their basket as well.
[2:48] Speaker 4: So the way forward seems to be kind of continue
[2:51] Speaker 4: to cut prices. But at the same time, there's prices
[2:53] Speaker 4: that are outside of their control, right, so fuel and inflation,
[2:56] Speaker 4: I mean it's not food inflation, sorry, interest rates. All
[2:58] Speaker 4: these things that are out side of Walmart's control are
[3:01] Speaker 4: are weighing on the business as well.
[3:04] Speaker 2: Fifty one analysts cover the stock, which just shows you
[3:07] Speaker 2: the terrible economics of cell side research. Who needs fifty
[3:10] Speaker 2: one annals covering one stock? Forty five buys five holds
[3:14] Speaker 2: one sell. The streets still bullish on Walmart? Is there
[3:17] Speaker 2: any reason to believe their sales softness was a Walmart
[3:20] Speaker 2: issue versus more of a kind of a macro consumer issue.
[3:23] Speaker 4: That's a that's a good question. I guess I could
[3:26] Speaker 4: probably make an argument for both. Look, some of the
[3:29] Speaker 4: strategies they're making are gonna kind of are doing are
[3:31] Speaker 4: going to contribute to lower sales, right Like, if you're
[3:34] Speaker 4: cutting the price of a lot of items, you're gonna
[3:37] Speaker 4: that's gonna lead to kind of a slow down of
[3:39] Speaker 4: the top line. But at the same time, if you're
[3:41] Speaker 4: also seeing that less people are coming in than expected
[3:44] Speaker 4: even with these these lower, lower price items, you know,
[3:48] Speaker 4: there's probably some sort of read that you could you
[3:50] Speaker 4: can make about kind of the health.
[3:52] Speaker 5: Of the consumer in general.
[3:53] Speaker 4: Obviously, we've seen consumer sentiment come down as well.
[3:57] Speaker 5: I think some some of the lower levels we've.
[3:58] Speaker 4: Seen in kind of recent hiss so that also sort
[4:01] Speaker 4: of kind of leads me to believe that this is
[4:03] Speaker 4: a wider issue. I just we're all feeling it, right,
[4:05] Speaker 4: Like we all see every single day the things that
[4:07] Speaker 4: we're doing. We have to cut back, we have to
[4:09] Speaker 4: make decisions about maybe stretching for a higher priced item.
[4:13] Speaker 4: I don't think that there was a ton of discussion
[4:15] Speaker 4: around sort of those items is more discretionary pieces, But
[4:19] Speaker 4: that would also be sort of an issue that would
[4:22] Speaker 4: probably make us, make us conclude that people are just
[4:26] Speaker 4: needing to trim and it's immacting even someone like Walmart.
[4:30] Speaker 3: Within within the earnings, recent food borne illnesses also weighing
[4:35] Speaker 3: on demand for things like package lettuce and strawberries, because
[4:37] Speaker 3: groceries is a huge part of Walmart's business. I know
[4:40] Speaker 3: you also cover the restaurant companies. Is there anything new
[4:43] Speaker 3: in that how lettuce tainted lettuce or tainted vegetables issue?
[4:48] Speaker 2: Right now?
[4:51] Speaker 4: Nothing new off the top of my head that I
[4:53] Speaker 4: could say in terms of like maybe where the outbreak
[4:54] Speaker 4: is going. But what is interesting to me is sort
[4:57] Speaker 4: of the sort of like secondary effects of that. So
[4:59] Speaker 4: it's like, you know, you have to think about like
[5:01] Speaker 4: things like croutons, right like if people aren't eating.
[5:03] Speaker 5: As much salad, like, oh, do I need croutons? Do
[5:06] Speaker 5: I need salad dressing?
[5:07] Speaker 6: Right?
[5:07] Speaker 5: So there are these sort of like knock on secondary.
[5:10] Speaker 3: Effects that do I need my cherry tomatoes?
[5:12] Speaker 5: Exactly right?
[5:13] Speaker 4: There's all there's so many things that it's just like,
[5:14] Speaker 4: you know, nuts, whatever you're throwing on the salads, right,
[5:16] Speaker 4: It's just like it does have sort of a ripple
[5:18] Speaker 4: effect to other parts of the economy.
[5:21] Speaker 5: So I guess that would be.
[5:22] Speaker 4: Sort of the newest thing that I guess we're going
[5:24] Speaker 4: to keep watching. It's just like who else sort of
[5:26] Speaker 4: has to deal with some of this fallout?
[5:28] Speaker 2: Today is salad day for me. By the way, are
[5:30] Speaker 2: you still going to get a salad?
[5:32] Speaker 6: Yeah?
[5:32] Speaker 3: Really, you're not deterred by this at all. Please, you've
[5:34] Speaker 3: been no adjustments. None is a solid place, less crowded
[5:38] Speaker 3: than it used to be.
[5:39] Speaker 2: I'll tell you what. The salad line is less crowded
[5:41] Speaker 2: than and the sandwich line is very crowded. The solid
[5:44] Speaker 2: line I breezed right through. So I mean again, born
[5:47] Speaker 2: and raised in New Jersey, I consume every carcent egenen
[5:49] Speaker 2: there is that known to man, and I'm doing just fine.
[5:52] Speaker 2: I'm immune to all this stuff. How about the supermarket
[5:54] Speaker 2: side of Walmart. Again, that is a that drives traffic.
[5:58] Speaker 2: They're not how'sapp is, they're not cutting prices there are
[6:01] Speaker 2: they on the supermarket.
[6:02] Speaker 4: Or I believe So it's if you're cutting you know,
[6:05] Speaker 4: eleven thousand items, you know, like it's obviously going to
[6:09] Speaker 4: be there displayed on the e commerce. But the stores,
[6:11] Speaker 4: the company said, like, the stores are still obviously an
[6:13] Speaker 4: incredibly important part of our business.
[6:15] Speaker 5: So and that you know, oftentimes, you know, if.
[6:18] Speaker 4: You're going to cut back too, there's all these prices
[6:20] Speaker 4: that come with e commerce as well, right, Like there's
[6:22] Speaker 4: delivery fees, maybe not less so for someone like Walmart,
[6:24] Speaker 4: you can kind of minimize some of those.
[6:25] Speaker 5: But like, you know, if.
[6:26] Speaker 4: I'm going to be going to get gas, I'm going
[6:28] Speaker 4: to be making all of my sort of grocery and
[6:31] Speaker 4: errands in one trip, right, I don't want to be
[6:33] Speaker 4: driving as much as I need to be. Yeah, Right,
[6:35] Speaker 4: so you know it does matter kind of what's going
[6:37] Speaker 4: on with the stores, and yeah, they're having to make
[6:40] Speaker 4: adjustments even at the sort of a keystone.
[6:42] Speaker 5: Of the business.
[6:44] Speaker 3: Before we let you go, was there anything said about
[6:47] Speaker 3: spending on AI. I know they spent a lot on
[6:49] Speaker 3: the e commerce business. But did they mention AI at
[6:51] Speaker 3: all on the earnings call.
[6:53] Speaker 5: Off the top of my head, I'm not.
[6:55] Speaker 4: I think they did say something that it's still kind
[6:57] Speaker 4: of driving traffic and things like that. Still investing there obviously,
[7:01] Speaker 4: like you know, big big push on e commerce and
[7:04] Speaker 4: trying to get people to you know, surface new things
[7:06] Speaker 4: or trying to sort of predict what people might need,
[7:09] Speaker 4: making sure the ads are in the right place. So
[7:11] Speaker 4: I'm definitely still part of the the sort of tech drive,
[7:14] Speaker 4: especially with the new CEO who has been kind of
[7:16] Speaker 4: heavily involved in that with the business. So I don't
[7:19] Speaker 4: imagine that that that investment will probably be going anywhere
[7:22] Speaker 4: anytime soon.
[7:23] Speaker 2: Stay with us. More from Bloomberg Intelligence coming up after this.
[7:30] Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live
[7:33] Speaker 1: weekdays at ten am Eastern on Applecarplay and Android Auto
[7:37] Speaker 1: with the Bloomberg Business app. Listen on demand wherever you
[7:40] Speaker 1: get your podcasts, or watch us live on YouTube.
[7:44] Speaker 2: Get reported some numbers, pretty darn good numbers, and they're
[7:46] Speaker 2: calling maybe the end of the cycle here, that we
[7:48] Speaker 2: could have an upcycle coming and stocks up seven percent today,
[7:51] Speaker 2: up thirty four percent you're to date. When we want
[7:53] Speaker 2: to talk about all those tractors and machinery stuff, we
[7:56] Speaker 2: talked to Chris Gielino. He does all that stuff for
[7:58] Speaker 2: Bloomberg Intelligence. Chris, youbin, you're locked in on deer. What
[8:02] Speaker 2: do we hear from them with their most recent earnings.
[8:06] Speaker 7: Yeah, it was a really solid quarter in good execution
[8:09] Speaker 7: and what is still a really challenging AG market. As
[8:12] Speaker 7: we kind of you know, just bounce along the trough
[8:14] Speaker 7: of the cycle here, they put up better than expected
[8:17] Speaker 7: sales and margins across all three businesses, with notable strength
[8:22] Speaker 7: in some of the smaller AG equipment as well as construction.
[8:26] Speaker 7: They did also benefit from a tire free refund in
[8:29] Speaker 7: the quarter, which was a meaningful contributor to the beat.
[8:32] Speaker 2: But I really think one.
[8:33] Speaker 7: Of the most important takeaways from this quarter was that
[8:37] Speaker 7: management noted, you know, particular strength in their early order
[8:41] Speaker 7: programs for next year. So their early order programs were
[8:44] Speaker 7: up mid single digits, which was much better than we
[8:47] Speaker 7: were expecting. We were looking at something more of like
[8:49] Speaker 7: a flat retail market next year. So I think this
[8:52] Speaker 7: certainly provides some optimism as we move into twenty twenty seven.
[8:56] Speaker 3: And just a red headline here crossing the Bloomberg terminal.
[8:58] Speaker 3: Scott Bess and the Treasury Secretary says he or they
[9:02] Speaker 3: someone at the White House will be holding a press
[9:04] Speaker 3: conference on Monday on Iran plans. So of course we
[9:08] Speaker 3: will keep you posted when that happens. But again, the
[9:11] Speaker 3: White House or Scott Besson will be holding a press
[9:13] Speaker 3: conference on Monday on Iran plans. All right, let's get
[9:16] Speaker 3: back to Christopher Cillino on Deer's latest results. Chris, what
[9:20] Speaker 3: can we What have we learned about the US agg
[9:23] Speaker 3: cycle farm cycle versus those outside of the US.
[9:28] Speaker 7: Yeah, so, I think one of the takeaways from this
[9:30] Speaker 7: quarter is that in North America, demand is still soft
[9:35] Speaker 7: but relatively stable. We haven't seen further deterioration. You're starting
[9:39] Speaker 7: to see a little bit of an improvement in terms
[9:41] Speaker 7: of crop prices. You still have elevated input costs. Net,
[9:46] Speaker 7: things haven't really changed much. We're kind of bouncing along
[9:49] Speaker 7: the bottom. The two regions that we're watching that you
[9:51] Speaker 7: saw some deterioration during the quarter were one Europe and
[9:55] Speaker 7: two South America. Europe obviously has some hot, dry condition
[10:00] Speaker 7: and then a little bit more of an impact there
[10:02] Speaker 7: in terms of input costs in the Iran conflict, and
[10:04] Speaker 7: then down in South America, you continue to have credit constraints,
[10:09] Speaker 7: Financing remains a challenge, and you have an upcoming presidential
[10:12] Speaker 7: election in October. So i'd expect demand in that market
[10:15] Speaker 7: to remain really challenged until we get to the to
[10:18] Speaker 7: the fourth quarter, at least from a calendar year perspective.
[10:21] Speaker 2: So the US farmer still challenged? Is that what we're hearing,
[10:26] Speaker 2: Chris from the deers of the world.
[10:30] Speaker 7: Yeah, you know, there really hasn't been a lot of movement,
[10:33] Speaker 7: and i'd say, like the improvement we have seen in
[10:35] Speaker 7: crop prices, while it's encouraging, we're still you know, at
[10:38] Speaker 7: historically low levels. There's just still a lot of uncertainty
[10:42] Speaker 7: around input costs. The input cost hit is going to
[10:45] Speaker 7: come a little bit later in North America then compared
[10:48] Speaker 7: to what you'll see in South America because of the
[10:50] Speaker 7: double cropping, and then obviously in Europe. But really sentiment
[10:54] Speaker 7: has hasn't really changed a lot. You're starting to see
[10:57] Speaker 7: a little bit of signs of optimism, but I think
[11:00] Speaker 7: the biggest read across in terms of health of the
[11:03] Speaker 7: farmer and their appetite to go out and spend on
[11:05] Speaker 7: equipment next year was the early order programs that Deer
[11:09] Speaker 7: mentioned in that mid single digit increase. So again we're
[11:12] Speaker 7: coming off a low base, but it is certainly encouraging
[11:15] Speaker 7: to say that we're, you know, have really kind of
[11:17] Speaker 7: solidified that twenty six will be the bottom.
[11:20] Speaker 3: Chris, is there any kind of tariff story here with Deer,
[11:23] Speaker 3: whether their goods are being tarffed when they're exported to
[11:26] Speaker 3: other countries, or whether parts for their equipment aren't being tarffed.
[11:31] Speaker 7: Yeah, so the tariff impact certainly played a part in
[11:34] Speaker 7: their three key results. It was roughly one hundred and
[11:36] Speaker 7: ten million dollars refund benefit in the quarter, so we
[11:41] Speaker 7: estimated contributed about twenty nine cents of the of the
[11:44] Speaker 7: thirty nine cent beat, so certainly meaningful. It doesn't sound
[11:48] Speaker 7: like Deer anticipates further refunds moving forward. They did have
[11:52] Speaker 7: a bigger refund than their fiscal two Q net for
[11:57] Speaker 7: the entire year, we're looking at a gross tariff head
[12:00] Speaker 7: win of somewhere in the neighborhood of one point one
[12:02] Speaker 7: billion dollars. That's slightly better than they anticipated in the
[12:05] Speaker 7: prior quarter of about one point two billion, and We're
[12:08] Speaker 7: looking at twenty twenty seven run rate kind of in
[12:10] Speaker 7: that billion dollar range, so still ahead wind as we
[12:12] Speaker 7: move into next year on a growth spasis.
[12:15] Speaker 5: Stay with us.
[12:16] Speaker 2: More from Bloomberg Intelligence coming up after this.
[12:22] Speaker 1: You're listening to the Bloomberg Intelligence Podcast. Catch us live
[12:26] Speaker 1: weekdays at ten am Eastern on Applecarclay, and Android Auto
[12:30] Speaker 1: with the Bloomberg Business App. Listen on demand wherever you
[12:33] Speaker 1: get your podcasts, or watch us live on YouTube.
[12:37] Speaker 2: A lot of stuff going on in the tech space.
[12:38] Speaker 2: I want to focus a little bit on Meta here
[12:40] Speaker 2: a couple things It struck me here, and we're going
[12:43] Speaker 2: to check in with man Deep Se, global tech research
[12:45] Speaker 2: head for Bloomberg Intelligence. Meta Platforms is spending hundreds of
[12:49] Speaker 2: millions of dollars a year to access artificial intelligence models
[12:53] Speaker 2: through Microsoft's as Your Cloud service. That surprised me. Should
[12:57] Speaker 2: it surprise me?
[13:00] Speaker 8: Because Meta is one of the biggest spenders on Capex
[13:04] Speaker 8: to build these data centers. So the natural question anyone
[13:07] Speaker 8: would ask is why do they have to use someone
[13:10] Speaker 8: else's cloud as coming from you know, so much capacity?
[13:14] Speaker 8: And I think in this case, theory are trying to
[13:17] Speaker 8: develop a model that's kind of neck and neck with
[13:20] Speaker 8: the frontier labs like Anthropic and open Ai.
[13:23] Speaker 6: But they are still trailing.
[13:25] Speaker 8: So the purpose of using Microsoft Cloud could be just
[13:29] Speaker 8: to benchmark against open Ai. So open AI's models are
[13:34] Speaker 8: available on Azure, and if Meta really wants to benchmark
[13:38] Speaker 8: the performance, then they can't do it on their own infrastructure.
[13:40] Speaker 8: They have to use a cloud infrastructure, and in this case,
[13:44] Speaker 8: I would say they have selected the one where they
[13:47] Speaker 8: are least competitive with. You know, I can't imagine Meta
[13:50] Speaker 8: using Google Cloud or Amazon. So it's more like Microsoft
[13:56] Speaker 8: is friendly to everyone, and it doesn't surprise me that
[14:00] Speaker 8: Meta is one of their customers.
[14:02] Speaker 2: MetaStock is off seventeen percent ish year to date. Is
[14:07] Speaker 2: that because the streets questioning their AI spend? Is it
[14:12] Speaker 2: concerned about this the court trial they're in? What's kind
[14:16] Speaker 2: of behind this year? Because I'm actually concerned about this trial,
[14:20] Speaker 2: although met Cheltenhilm yesterday from Bloomberg Intelligences, I don't have
[14:23] Speaker 2: to worry too much. Yeah, but what do you think
[14:25] Speaker 2: is impacting the stock from it?
[14:27] Speaker 8: I think it's more to do with the lack of
[14:29] Speaker 8: monetization on this AI spend. So with Microsoft, with Amazon,
[14:34] Speaker 8: with Google, they have a cloud business to show the
[14:37] Speaker 8: monetization tied to this infrastructure build out with Meta, Yes,
[14:42] Speaker 8: their top line is great, but they don't have that
[14:44] Speaker 8: cloud line. So and Mark Zuckerberg did talk about renting
[14:49] Speaker 8: compute the first time, but that's a lower margin business
[14:52] Speaker 8: for a company like Meta, which is incremental margins of
[14:55] Speaker 8: over fifty percent. So from that perspective, they would rather
[14:58] Speaker 8: be in that model business where they are having other
[15:02] Speaker 8: companies use their model that they're training. And that's where
[15:06] Speaker 8: because the model has been behind the frontier labs, no
[15:09] Speaker 8: one is using their models right now, so they want
[15:12] Speaker 8: to get up to speed, and you really kind of
[15:15] Speaker 8: get up that frontier where the hope is they will
[15:18] Speaker 8: eventually figure out like open weight models have caught up
[15:21] Speaker 8: to the frontier models and all these open right models
[15:25] Speaker 8: like Kimi and deep Seek they are challenging now the
[15:27] Speaker 8: frontier labs. Why can't Meta catch up? And that's the
[15:31] Speaker 8: part that as has been the biggest drag on the
[15:33] Speaker 8: stock in my opinion.
[15:34] Speaker 2: Does a company offer a timeline when they think they
[15:37] Speaker 2: will have a competitive model.
[15:39] Speaker 8: I think they will have a harder time raising twenty
[15:41] Speaker 8: twenty seven capex if they are not able to figure
[15:44] Speaker 8: that out, which is why the fallback option is to
[15:47] Speaker 8: rent compute like SpaceX did to Google and Entropic. Okay, look,
[15:52] Speaker 8: we can't make revenue on anything else. We can make
[15:55] Speaker 8: revenue on renting our data center to Google or Entropic.
[15:59] Speaker 8: So same thing Meta could do as well. They could
[16:01] Speaker 8: start renting their data center capacity to you know, a
[16:05] Speaker 8: Microsoft or someone who who can make better use of
[16:08] Speaker 8: it at the model there and so that's the fallback.
[16:11] Speaker 6: But Mark said that's his.
[16:13] Speaker 8: Least favorable option, so he would rather not go in
[16:17] Speaker 8: that direction.
[16:17] Speaker 2: Yeah, I mean Capex in twenty twenty four to thirty
[16:20] Speaker 2: seven bill eighty nine billion, I guess in twenty twenty
[16:25] Speaker 2: six one hundred and thirty nine billion, going to two
[16:27] Speaker 2: hundred billion next year.
[16:29] Speaker 6: Yes?
[16:30] Speaker 2: Is that all so that they can have an AI model.
[16:34] Speaker 6: And they use a lot of AI internally.
[16:38] Speaker 8: But look if a Google is running its Google Search
[16:42] Speaker 8: and all YouTube and still able to generate one hundred
[16:46] Speaker 8: billion dollars in Google Cloud revenue, that you have to
[16:48] Speaker 8: ask yourself why can't Meta do the same?
[16:50] Speaker 6: I mean Meta has family of apps?
[16:52] Speaker 2: Is that the strategy for Meta to have a cloud business.
[16:56] Speaker 8: They have to have some form of cloud whether it's
[16:59] Speaker 8: renting compute or renting APIs use of their models via APIs,
[17:04] Speaker 8: they need to have some external monetization. You can't just
[17:07] Speaker 8: say I'm using entire two hundred billion dollars worth of
[17:10] Speaker 8: infrastructure for my internal consumption.
[17:13] Speaker 6: That is not going to fly.
[17:14] Speaker 8: You need to have an external customer facing element. And
[17:17] Speaker 8: that's what they need to show.
[17:18] Speaker 2: Are they again, are they given a timeline when they
[17:20] Speaker 2: will have that?
[17:22] Speaker 8: I mean, they keep saying their models are getting better,
[17:24] Speaker 8: but the proof will be when they start monetizing it
[17:28] Speaker 8: through APIs.
[17:29] Speaker 6: The way Google is doing it, it.
[17:31] Speaker 2: Sounds like what some companies will call in a transition
[17:34] Speaker 2: period on this whole spending. And that's what this market
[17:37] Speaker 2: typically doesn't like.
[17:38] Speaker 8: Transition periods, and especially if it turns if there's a
[17:41] Speaker 8: risk like metaworks where you just blow through fifty billion
[17:44] Speaker 8: plus off capex and then say we didn't get anything
[17:48] Speaker 8: out of it. That's what I think the stock is
[17:50] Speaker 8: reflecting right now.
[17:51] Speaker 2: The fat was in hindsight, how do they talk about
[17:54] Speaker 2: the metaverse these days?
[17:56] Speaker 8: That we still believe in it, but we have pivoted
[17:58] Speaker 8: towards AI.
[18:00] Speaker 2: Wow, So now it's another it's another bet on zuck
[18:04] Speaker 2: Zuckerberg two coming.
[18:05] Speaker 6: The difference is all the other hyperscalers believe in this too.
[18:09] Speaker 6: With Meadowers, they were the only ones. No one else
[18:12] Speaker 6: kind of was investing the same way as Meta was.
[18:15] Speaker 2: In this case.
[18:16] Speaker 6: Everyone is bigger than you know, Meta in terms of
[18:19] Speaker 6: their span.
[18:21] Speaker 2: Stay with us. More from Bloomberg Intelligence coming up after this.
[18:28] Speaker 1: You're listening to the Bloomberg Intelligence podcast. Catch us live
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[18:42] Speaker 2: Well, well, owning, you know, a big league sports franchise, NFL, NBA,
[18:46] Speaker 2: major League Baseball, whatever, used to be the game for millionaires,
[18:50] Speaker 2: and then it became the game for billionaires, and now
[18:53] Speaker 2: you can make the argument it is the game for
[18:55] Speaker 2: institutional investor types. Think Mark Walter, the owner of the Dodgers,
[19:01] Speaker 2: the owner of the Los Angeles Lakers, Well, he sold
[19:03] Speaker 2: the Los Angeles Lakers announced the last week twelve and
[19:06] Speaker 2: a half billion dollars, less than a year after taking
[19:08] Speaker 2: it control of the team for like ten billion dollars,
[19:10] Speaker 2: So he's got some pressures on him.
[19:13] Speaker 5: Here.
[19:13] Speaker 2: Adam Minner joins us here. He's an opinion calmness for
[19:16] Speaker 2: Bloomberg News. Adam, I mean Mark Walter is arguably the
[19:21] Speaker 2: kind of owner the NBA or the NFL would like
[19:25] Speaker 2: to see. I mean, he's part of It's got institutional
[19:28] Speaker 2: investor money behind him.
[19:29] Speaker 5: What's been wrong here?
[19:30] Speaker 2: What's going on?
[19:32] Speaker 9: Well, what went wrong is what happens when you get
[19:34] Speaker 9: these really big investors. We're not talking about families owning
[19:38] Speaker 9: these things anymore. You're talking about guys and gals who
[19:41] Speaker 9: owned financial empires. And when something goes wrong in one
[19:44] Speaker 9: part of a financial empire, it usually infects the rest
[19:47] Speaker 9: of the financial empire. And that's what's happened with Mark Walter.
[19:50] Speaker 9: There's an investigation into how he's managed money with his
[19:54] Speaker 9: insurance companies. The federal government's looking into him, and as
[19:58] Speaker 9: a result, he needs to get cash quickly, so he
[20:01] Speaker 9: owns all these sports franchises, and he did what an
[20:04] Speaker 9: investor does. He looked to liquidate something so he has cash.
[20:08] Speaker 9: That's what an investor does. It's not necessarily what we
[20:11] Speaker 9: as fans or leagues who look at teams as something
[20:14] Speaker 9: that need to be stewarded. That's not what they necessarily want.
[20:18] Speaker 9: So we're sort of seeing this conflict here between you know,
[20:20] Speaker 9: a high risk investor and what it usually means, traditionally,
[20:26] Speaker 9: historically means to be an owner in a league like
[20:29] Speaker 9: the NBA or the NFL.
[20:30] Speaker 3: Or MLB, and Adam, it feels like every entity is
[20:35] Speaker 3: now investigating him. The DJ included did the sellers of
[20:39] Speaker 3: the various teams that sold to Mark Walter ever do
[20:42] Speaker 3: their due diligence? I mean, what level of due diligence
[20:45] Speaker 3: is thereby the seller or by the league as a whole.
[20:48] Speaker 3: And we're talking across different leads here because of his
[20:51] Speaker 3: exposure to all these different teams.
[20:53] Speaker 9: Yeah, it's a great question. I mean, certainly they do
[20:56] Speaker 9: their due diligence. The first thing they want to know,
[20:58] Speaker 9: the most important thing they want to know is does
[20:59] Speaker 9: he have the money?
[21:01] Speaker 2: And Mark Walter clearly had the money.
[21:03] Speaker 9: I mean he could he could write the check if
[21:05] Speaker 9: you will, for the Lakers. They also want to make
[21:07] Speaker 9: sure that there's nothing you know untoward about the money,
[21:10] Speaker 9: if there is investments, if there's sources of revenues that
[21:15] Speaker 9: you know, contradict a league's you know, image, adult oriented
[21:19] Speaker 9: enterprises that kind of thing. They don't want that kind
[21:21] Speaker 9: of owner there. But the leagues are not generally going
[21:24] Speaker 9: to get into the mechanics of you know, if he's
[21:27] Speaker 9: taking money from just speaking, you know, theoretically here taking
[21:31] Speaker 9: money from one part of his empire and putting it
[21:33] Speaker 9: into another. You know, it's interesting when he purchased the
[21:36] Speaker 9: Dodgers over a decade ago, there were concerns about where
[21:40] Speaker 9: the money was coming from, not that there were untoward places,
[21:43] Speaker 9: but that again he was making deals where he was
[21:46] Speaker 9: using insurance money, money from his insurance companies to finance
[21:50] Speaker 9: the Dodgers. This was looked into, and it was it
[21:53] Speaker 9: was ultimately at the time decided that he hadn't done
[21:55] Speaker 9: anything wrong. But again this issue has now come up
[21:59] Speaker 9: again and it raises question about whether the leagues NBA,
[22:02] Speaker 9: you know, NFL in particular, because they're the ones with
[22:05] Speaker 9: the most expensive franchises, should be taking a more careful
[22:08] Speaker 9: look at how these complicated deals are being financed by
[22:11] Speaker 9: these financiers, by these investors.
[22:13] Speaker 2: Adam, We've seen a trend over the list decade or
[22:17] Speaker 2: so of leagues like the NFL and the NBA permitting
[22:20] Speaker 2: private equity money to take a stake here at limited stakes.
[22:26] Speaker 2: Has that been deemed successful? A good thing? It certainly
[22:29] Speaker 2: pushed up valuations.
[22:30] Speaker 9: I would think, well, yes, from the point of view
[22:33] Speaker 9: of the leagues, it's successful because it's pushed up valuations.
[22:37] Speaker 9: And on top of pushing up valuations, it's it's given
[22:40] Speaker 9: a lot of teams, you know, a quick source of
[22:43] Speaker 9: cash if they want it. You know, if you're a
[22:46] Speaker 9: team owner who's looking to build a stadium, why not
[22:50] Speaker 9: sell off ten percent of your R franchise to a
[22:54] Speaker 9: private equity firm who has a non voting interest in
[22:57] Speaker 9: your team and you can use that cash then to
[22:59] Speaker 9: build the infrastructure you want further build out your team.
[23:02] Speaker 9: So so far it's been successful. You know, I think
[23:05] Speaker 9: it's important to note, you know, Mark Walter is not
[23:07] Speaker 9: private equity, but he comes from that world of institutional
[23:10] Speaker 9: investors where you have, you know, sort of different motivations.
[23:14] Speaker 9: You are willing to take risks and you are willing
[23:16] Speaker 9: to maximize your return. You know, a guy like Walter
[23:19] Speaker 9: is accustomed to when the when the price is.
[23:21] Speaker 2: Right, you sell and you know, let the chips fall.
[23:25] Speaker 9: Where they may. You know, with the Lakers, you know
[23:28] Speaker 9: they're falling in some uncomfortable ways. I mean, since Walter
[23:31] Speaker 9: bought the team less than a year ago, they've had
[23:33] Speaker 9: two rounds of layoffs. You have players who have you know,
[23:36] Speaker 9: said we're going to commit to this franchise. You know,
[23:38] Speaker 9: now they have to wonder what's this new ownership group? Mean,
[23:41] Speaker 9: you have the Bus family who owned them before Walter
[23:45] Speaker 9: came in. They're now in a few because they still
[23:47] Speaker 9: own less than twenty percent of the team. But Genie Buss,
[23:50] Speaker 9: one of the six siblings, was the acting governor. What's
[23:54] Speaker 9: going to happen to her? So it's you know, this
[23:56] Speaker 9: sell quick Ethos has really turned things on their.
[23:59] Speaker 3: Ears, gotten messy very quickly. Adam, we have about thirty
[24:02] Speaker 3: seconds left. What will you be watching for as this
[24:06] Speaker 3: Mark Walter's saga continues, it feels like we're always ready
[24:10] Speaker 3: for another shoe to drop.
[24:12] Speaker 9: Yeah, well, I think the shoe that I'm watching and
[24:14] Speaker 9: a lot of people are watching is what is he
[24:15] Speaker 9: going to sell next? It's been reported, including by Bloomberg,
[24:20] Speaker 9: that he is looking to sell his steak in Chelsea,
[24:22] Speaker 9: the Premier League football club. He has other assets as well.
[24:26] Speaker 9: Will we start seeing rumors that he's looking at selling
[24:29] Speaker 9: the Dodgers, which are sort of the crown jewel that
[24:32] Speaker 9: he has remaining. So he has a lot of other
[24:34] Speaker 9: sports assets to sell, and so that's what I'm watching.
[24:38] Speaker 1: This is the Bloomberg Intelligence Podcast, available on Apple, Spotify,
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