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Chapter 1: What is the main topic discussed in this episode?
Public.com presents The Rundown, your daily market update in 10 minutes. My name is Zaid Admani, and today is Thursday, June 4th. In today's episode, we'll break down why Broadcom's record quarter wasn't enough for Wall Street.
and what it means for the AI trade. We'll also tell you about Amazon's massive new cloud deal with Pinterest. Then stick around to the end of the show to find out why some of the biggest companies in the world are quietly cutting back on AI spending. We got a great show for you today. Let's go. Well, stocks finally took a breather on Wednesday.
The S&P 500 fell 0.7%, snapping a nine-day win streak, and the Nasdaq did even worse, dropping 0.9%. But you know, after the run the stock market has been on, a pullback was probably overdue. Now, there were two main factors that led to a market decline yesterday. The first was the Iran war, and the second one, I can't believe I'm saying this, was tariffs. Let's start with Iran first.
Oil prices jumped about 2% yesterday after reports of an Iranian drone strike in Kuwait, followed by US military strikes near the Strait of Hormuz. So the fighting in the Middle East hasn't stopped and the market decided to care about that, at least for yesterday. But I think the bigger news though was that the tariff drama is coming back for season two.
The Trump administration proposed a new set of tariffs on imports from 60 countries over forced labor concerns. This new proposal would slap a 10% tariff on countries like Canada, Indonesia, and the European Union countries, along with a 12.5% tariff on roughly 45 other countries, including China, India, Japan, and South Korea. These tariffs will go into effect on July 7th after a public hearing.
So this new proposal is essentially the Trump administration trying to revive parts of its tariff agenda after the Supreme Court struck down their universal IEPA tariffs earlier this
year and i'm sure these new tariffs will face some legal challenges as well so yeah it seems like tariff uncertainty is back now speaking of uncertainty my god bitcoin just keeps sliding this week bitcoin fell for the fourth straight day yesterday and it's now trading under sixty three thousand dollars here's the interesting stat that i came across yesterday
Bitcoin ETFs are on a 12-day outflow streak with about $4 billion pulled out during that time. My takeaway from that is that there just aren't enough buyers stepping up to buy the Bitcoin dip. I think that traders have moved on from crypto into AI stocks, and it's hard to blame them with the way that some of these AI names are moving these days.
So we'll continue to keep an eye on Bitcoin along with oil prices and now tariffs again. And don't forget tomorrow, the May jobs report drops. So that'll tell us how the labor market is holding up. We'll recap that report on tomorrow's show along with everything else happening in the market. So make sure you guys are subscribed to the podcast and tuning in every day to stay in the loop.
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Chapter 2: Why is the stock market taking a breather this week?
Revenues jumped 48% from last year to $22.2 billion. Net income nearly doubled to $9.3 billion and free cashflow was more than $10 billion. And the growth has been driven by AI. Broadcom's AI semiconductor revenue hit $10.8 billion, which is up 143% from last year.
And the company expects that number to jump to $16 billion in the current quarter, which would be triple what it was in the same quarter last year. See, Broadcom has seen a huge surge in demand for helping design custom AI chips for some of the biggest names in tech. We're talking Google, Meta, Anthropic, and OpenAI.
These tech companies want their own custom chips to not be so reliant on NVIDIA, so they turned to Broadcom to help with the design. But despite the record quarter and insane growth, Wall Street was not impressed. And I think it's because CEO Hawk Tan did not raise Broadcom's long-term AI chip sales forecast. The company says they're still targeting $100 billion in AI chip revenue in 2027.
And I think Wall Street wanted to see that number come in higher, especially since Broadcom stock has gone up 40% this year. The other red flag from the earnings was what Hawk Tan said on the earnings call. He mentioned that Google, which is Broadcom's biggest and longest standing customer, is likely going to diversify its supply chain.
In other words, Google might start buying custom chips from other suppliers too, which could impact Broadcom's business long term. So that's why despite a record-breaking quarter, Broadcom stock is selling off hard today, down around 15% at the time of this recording. And that sell-off is dragging down other chip stocks, Marvell, Intel, Micron, are all down around 4% to 5% this morning.
Now, I think this is a great example of how expectations from investors are getting really high for these chip companies. And if they don't meet them, the sell-off can be pretty brutal. Let's stick with the AI infrastructure theme and talk about Amazon. Amazon's AWS just signed a $4 billion cloud deal with Pinterest that runs through 2031.
This is Pinterest's largest ever infrastructure investment, and it's gonna power AI-driven discovery on their platform. See, Pinterest has more than 600 million monthly users, so they have a ton of data on people's personal styles and preferences, and they wanna use AI to help people find and buy things they would like on the internet.
So that's gonna take a ton of compute, so they're turning to AWS for those computing needs. And a key part of this deal is that Pinterest will be using Amazon's custom Traineon chips to train and run their AI models, and they're gonna use Amazon's Graviton chips to handle the broader computing workload. And that's why this deal matters,
For Pinterest, this is about scaling their AI discovery, but for Amazon, this is about defending AWS and proving that their own chips can power major AI workloads. AWS is still the biggest player when it comes to cloud computing, but it's now the slowest growing of the top three.
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Chapter 3: What factors led to Bitcoin's recent decline?
Shout out to Mike for all the work behind the scenes. And we'll see you guys back here tomorrow.