Chapter 1: What is the main topic discussed in this episode?
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This is Bloomberg Tech. Coming up, Amazon cuts 16,000 corporate jobs to remove layers of bureaucracy and, quote, increase ownership. Plus, ASML also announcing job cuts to boost efficiency and posting strong fourth quarter orders. And sources tell Bloomberg that SoftBank is in talks to invest as much as $30 billion more into open AI.
Let's check in on these markets, though, because there's been some interesting whipsawing, ASML among them, but we go more macro right now. At one point, we saw the S&P 500 above that $7,000 level. We have never seen that before. And that is as we see the momentum in AI continuing. But we have a crucial Fed meeting.
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Chapter 2: What are the implications of Amazon cutting 16,000 jobs?
And these players are actually growing much, much faster than that. They are growing, like if you take for instance TSMC, it's probably going to grow like between 30 and 35% this year. So we already see that semi-cap equipment starts lagging a bit their clients in terms of growth. And that's a very natural thing because they sell equipment to add capacity.
And when you look at the trajectory of growth of AI, we are actually just passing the inflection point. Going forward, growth is going to continue to be very strong. But it is going to slow. And so it's going to translate into slower growth at semi-cap equipment manufacturers. And I really think this is the way the street is digesting the news today and overnight. Initially, the stock was up.
And now the street is realizing, OK, but if 2026 is a peak spending year, maybe it's time to actually take profits on ASML as a stock.
So you think this is peak? I mean, that's not what one would hear from Jensen Wang, who thinks we still got trillions to go. We are still in this mode of trying to question whether we're in an AI bubble or not. Do you think that we got any clarity on that from ASML after we, of course, got TSMC, after SK Hynix showed such strength in memory?
Yeah, so we're definitely not at peak on AI. And you look at the TSMC guide to 2029, growth between 55% and 60%. So we are still in a very high growth environment in AI. The peak I refer to, Caroline, is a peak in actually capacity increase. Because if in 2027 you still grow very fast, but a bit slower than 2026, You will not need more equipment than you needed in 2026. So this is this idea that
Semicap players are driven by incremental capacity, not by growth directly. It's a first order derivative of the growth of their clients. And that's the reason why the market is right to be a bit nervous, specifically on Semicap. Now when it comes to their clients, like the growth outlook of 426 is amazing. It's already very strong for 2027. And it looks really, really good for 2028 and 2029.
So we are still in a very, very, very strong growth environment in AI.
Yeah, if the stock's down and 2026 is the peak, the market doesn't believe Mr. Fouquet. He thinks it's about sustainability. Listen to this real quick.
I think we have all been surprised by the magnitude of AI, and we all saw it coming a bit. But at the same time, we see those investments coming out, and it's pretty big. And I think that all of us are continuing to watch, basically, for the sustainability of those investments. I think sustainability is a key word. I think the question is always, is this going to last?
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Chapter 3: Why are markets reacting to the Fed's decisions today?
And he's saying that the signals from his customers are that it is going to last. And you're saying the market isn't showing us that.
Well, the market is being careful about it. Because this is going to last for the CEO of ASML might mean we still have very good level of spending in 2027. But if 2027 is as good as 2026, how is the stock going to work on that? It's probably not going to work well.
I have a question for you. What is the leading indicator in the world of tech, right? I can give you a chart right now. It shows you expected capital expenditures for the hyperscalers and other associated names like Meta and Oracle, right? Is that the leading indicator?
Or Bloomberg's Ian King is going to come on next and tell us that Texas Instruments is a leading indicator for the health of the economy? Or ASML and EUV demand is a leading indicator? Which data set is most critically important to you right now, Pierre?
So what's most critically important, Ed, is to connect these data sets rightfully. I love the chart you just showed. This is like CapEx. And you see that we expect CapEx to grow a lot this year, a lot next year. And as we are not too sure, we don't model much beyond that. This is a leading indicator.
Now, what is going to drive the business of ASML is how much incremental capex you add every year. And what you see very clearly is that this incremental capex is now plateauing and coming down. And that's the reason why in semi-cap equipment, you have to be careful and expect a significant slowdown in revenue growth. For the rest of the industry, CapEx growth is a very, very good indicator.
And then Texas Instruments is actually a very interesting indicator. That is the most important indicator today outside of AI. Because it's quite important to understand what is the global economy doing outside of AI. And we've been into like...
A very, very painful, lengthy down cycle in automatives, in industrials, and what TSMC said, it confirmed signals that we've had already for a few weeks that we are at the bottom and things are improving.
I'm just trying to answer the question, is this going to last? Pierre Ferragou from New Street Research. Thank you very much. I alluded to it just then. Shares of Texas Instruments soaring after the company gave a surprisingly robust forecast for the first quarter, signaling that customers have worked through inventory and are returning for chips, analog chips.
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Chapter 4: How is ASML responding to AI demand with record bookings?
Bloomberg's Ian King is here. Analog chips, simple translation of a touch of a button into a signal, but We always write in our story, in our summary of earnings, this is like the bellwether, the crystal ball for the economy. What do we learn through their earnings proof?
Yeah, I mean, they've got tens of thousands of products, tens of thousands of customers. So they are literally everywhere. Everything that's got an on and off switch, that's where they are. What they said was, again, you were very careful and they're incrementally better. They had been talking about... A recovery being kind of off pace, not as kind of robust as we would normally get.
Now they're saying, actually, orders are improving and are continuing to improve. The signs are now better.
How much are they able to harness any of the AI vibes rather than autos, industrials, the bellwether part?
Yeah, that's a very good question. The answer is they confirmed the AI vibe is good for them. It's now a significant business, but really it's not the main business. The main business for them remains industrial and automotive. The things that are a broader, I mean, we know that data centers are big, right? And they confirmed that.
What they told us was that industrial is getting better as well, which is what we want to hear.
We're really focused right now on how global these companies are, like currency impacts, like China, what's going on with China. Is there anything kind of extra that Texas Instruments can tell us about different geographies, other industries, like industrial good? Is there anything that's pretty bad?
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Chapter 5: What are the challenges facing ASML despite strong earnings?
Yeah, I mean, they talked about consumer electronics not being fantastic, and that's because consumer electronics actually recovered earlier than there are other markets, and now it's kind of slowing down a little bit. Some of the consumer electronics devices, home theater, maybe PCs a little bit, memory dependent. We talked about memory. The price of memory is going up.
That's no secret, and that has a knock-on impact.
Ian King, as always, breaking it down. And you mentioned memory. We're going to go there. Check out SK Hynix shares. They have really rocketed on the back of their earnings. And there's this relentless appetite for AI memory, which SK Hynix serves. They're also, in fact, going to be establishing an AI data center solutions firm here in the U.S., Ed. How much is that to do with South Korea-U.S.
relationships going forward and the need to invest in the United States? It's going to be backed by $10 billion of capital to pursue partnerships and investments in the sector.
so keep an eye on that stock and that was its trading in south korea today okay coming up trade tensions rise between the us and south korea more on the why next this is bloomberg tech every day millions of customers engage with ai agents like me we work around the clock and have the facts at our fingertips
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Chapter 6: What does SoftBank's potential $30 billion investment in OpenAI mean?
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