Dan Gallagher
Appearances
WSJ What’s News
President Trump Threatens New Tariffs on the EU and Smartphones
I don't think there's a business right now that's more politicized than chips, especially AI chips. These AI chips are front and center in the trade war with China between the US and China. The Trump administration and the Biden administration before that really wanted to make sure China did not get its hands on the latest AI chips to get more competitive with the US.
WSJ What’s News
President Trump Threatens New Tariffs on the EU and Smartphones
And so that governs everything Nvidia can do in terms of how it can sell its chips into other countries. And it's been a back and forth. The Trump administration did recently kill a rule that the Biden administration had set up where it was going to be a lot harder for Nvidia to sell chips into other countries, even like friendly ones to the U.S. There's going to be all these different rules.
WSJ What’s News
President Trump Threatens New Tariffs on the EU and Smartphones
Those were scrapped. But the signs now are that NVIDIA's ability to sell into other countries might hinge on bigger picture stuff. Are these countries striking trade deals with us? Is there concern that chips sold to one country could eventually find their way to China?
WSJ What’s News
President Trump Threatens New Tariffs on the EU and Smartphones
So it's just going to be a much more complicated business than NVIDIA just getting the country to sign on the dotted line and make some sales. There's going to be a lot of politics involved.
WSJ What’s News
U.S. Could Pause Ukraine Talks If Progress Isn’t Made Soon
It was a really strong report. Companies like Netflix and Spotify, they're not exposed to these tariffs directly, obviously, because there's not going to be tariffs on a digital subscription service. And they're also historically pretty resilient in recessions, which we're obviously not in a recession yet, but that's obviously a big fear now with what's going on with trades and tariffs.
WSJ What’s News
U.S. Could Pause Ukraine Talks If Progress Isn’t Made Soon
And so what Netflix showed today is like they're in a really strong position. Even if the world economy gets tighter, they're probably going to still do well.
WSJ What’s News
U.S. Could Pause Ukraine Talks If Progress Isn’t Made Soon
It has. And one interesting thing about the subscribers, this is actually the first quarter that Netflix has actually not reported any subscriber metrics at all. And they've prepared investors for that over the last few years. Their last report had just a little over 300 million. And they did say today that Membership growth did help fuel the revenue growth they reported.
WSJ What’s News
U.S. Could Pause Ukraine Talks If Progress Isn’t Made Soon
So we know it came up some. We don't know exactly how much. But they're trying to go into this new phase where they get investors to focus on revenue and earnings growth. The earnings is a really interesting story because Netflix now makes over $3.5 billion in operating earnings every quarter.
WSJ What’s News
U.S. Could Pause Ukraine Talks If Progress Isn’t Made Soon
And Disney, which is probably their strongest competitor amongst traditional media companies, they're still working to get to a billion in streaming profits for a full year. That's an idea of how much the rest of the market is trying to catch up to Netflix in where they've come in their business.
WSJ What’s News
U.S. Could Pause Ukraine Talks If Progress Isn’t Made Soon
So they're in a good position for a few reasons. Obviously, they've been around a long time. They have a huge library of shows that people are now accustomed to watching. The average streaming subscriber now has, you know, about three to four streaming subscriptions if they have to turn back because of budgets. Netflix is probably going to be the last one to cut.
WSJ What’s News
U.S. Could Pause Ukraine Talks If Progress Isn’t Made Soon
And worst case for Netflix is that if its customers get really pinched, they can trade down. They have several tiers. They can trade down amongst the premium tiers. They could trade down to the ad tier, which is like half the price. of the standard. So they have a lot of options that they can use. And this is where Netflix shares like a similarity with Spotify.
WSJ What’s News
U.S. Could Pause Ukraine Talks If Progress Isn’t Made Soon
Obviously Spotify does music, but they're both in this position where they have such a strong lead over their competitors and with services that are deemed for the customers important and kind of cost-effective. If you think about it, you know, 15 bucks a month for Netflix on the standard plan, you can watch all these shows as much as you want.
WSJ What’s News
U.S. Could Pause Ukraine Talks If Progress Isn’t Made Soon
Spotify has various tiers of plans where you can just listen to all the music ever made as much as you want. Those are things that are pretty resilient. Those are the things that people are not going to cut easily. You'd cut going out to dinner once a month, I think, before you would cut back on your music or shows.
WSJ What’s News
U.S. Could Pause Ukraine Talks If Progress Isn’t Made Soon
It would take a lot. Those are ambitious targets that our colleagues reported earlier this week. It's not implausible. But getting to a trillion dollar valuation, for instance, that's a little over double what Netflix is commanding right now. So there needs to be a lot of revenue growth, a lot of earnings growth there.
WSJ What’s News
U.S. Could Pause Ukraine Talks If Progress Isn’t Made Soon
One thing interesting is on the conference call that discussed their earnings report is that they tried to not really walk that back, but to kind of make the distinction that These are internal discussions they have about internal goals. Those are not a forecast, so investors shouldn't kind of treat it as like, oh, this is definitely where they're going to get to.
WSJ What’s News
U.S. Could Pause Ukraine Talks If Progress Isn’t Made Soon
But I do think it's worth looking at Netflix and their history. They've had a strong history of execution and getting some pretty ambitious targets, so it's not implausible that they might hit those as well.
WSJ What’s News
Grocers Try to Hold Prices Steady as Tariffs Threaten Produce
His initial email to employees suggests he's going to keep going down the two tracks of trying to build out a manufacturing business that makes chips for other companies, as well as improving Intel's own products that they design, making those more competitive against AMD and NVIDIA. So for the time, it looks like he's going to still do things the way they've been doing them.
WSJ What’s News
Grocers Try to Hold Prices Steady as Tariffs Threaten Produce
But I would expect there's going to be some major changes, possibly a lot of restructuring going on. There were reports that when he left the board last year, it was out of frustration that he thought Intel was moving too slow. It was too bloated, too many employees. So there might be some major changes on that front. But beyond that, we don't really know what he'll do.
WSJ What’s News
Grocers Try to Hold Prices Steady as Tariffs Threaten Produce
Ultimately, is he going to do partnerships, sell one end of the business or the other? That all remains to be seen.