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I, I, I think he'll find a way to cut costs. As mentioned, David said they fired a lot of people. He worked with an asset like Mattel, which was really brilliant. He, I insist, saved the company with this move. The company had too much debt and too much production capacity. Look, these guys, David and the others, just say: growth, growth, growth.
The sad thing is, what we know from our industry: this is not growth. Perhaps David Zaslav's portfolio really had more growth than others, and David built a pretty good company. He said it cost 28, they overpaid, but only by a few units. This is a debt. This is debt, and I do n't like that debt servicing is very expensive, and when you compare that debt to what they're investing in AI services...
Of course, we'll talk about that in a minute. Yes, he could just say, “Hey, listen, debt is debt, ” but that’s not true, because there’s a lot of belief that the amount of money raised in data centers will be much higher because Nvidia chips are much more expensive. We can talk about the Australian IPO, which may not be going very well, but what's important to me is what I don't see, and David seems to have been very accurate about that.
I don't see any way in the first few years to pay off the debt the way they want to, or even cover the interest, but David, you were very insightful about that being the real problem. They wanted to come back with growth. Great interview. They wanted to come back with growth, growth, and you came back with discipline, discipline, and maybe sometimes it intersected and sometimes it did n't.
No, I mean the key for them will be whether they can achieve the goals that they're talking about and whether they can realize those synergies, which is obviously going to be such a big part of it. But I'm talking about what we've already emphasized: they're starting out as a company with a very high level of debt.
They have aggressive schedules, as well as growth and debt reduction goals. Yes. And it'll be interesting to watch, and you know, listen to Ellison talk about the asset portfolio. It is quite impressive and wide. Uh, 12% of TV viewing, which was interesting during the regulatory approval process—you were like, "Oh, there's so much competition here." And now they say: " Look, look at our scale compared to YouTube." Next to YouTube.
But, of course, this also confirms the thesis. YouTube is a beast, it's a giant, and we've watched it happen over the last 5-10 years. And it continues to be that way, and the growth there is certainly something that anyone in media would like to see. I liked the concept of an old Hollywood, a little lazy, that allowed technology to come in and merge with the power of Silicon Valley.
And is this actually a new model that we know little about? But I think Ellis put it well, and in a way that, although I've heard him discuss it before, it was, um, ambitious and almost inspiring in a way. It made you say, "Hey, wait a second, you know?" He is operating from a different position, and those who support him have been saying this all along.
And now we'll have to wait and see. I wanted to say, when I went for the interview, that this traditional media model is obviously not liked by anyone. We are stuck in it ourselves. This is not where you want to be. You want to be where there is growth. You want to be in...I came back and said this is not traditional media.
They have a real chance here. However, I'm still skeptical because, after all, they still mention the CBS nighttime broadcast network. They were still talking about the NFL being expensive, and I don't want to depend on the NFL if I don't have cash flow. Yes, I didn't ask about the NFL in terms of whether they would actually have to...
You're already kicking yourself for this interview. I always do that. Every time. I can never get them to work properly or how to collaborate. Yes. Uh- huh. It seemed, Jim, that you were thinking more about the external environment, the competition for capital, than what was going on inside that building.
I mean, such companies correlate with the regular debt market. This correlates to what Michelle Gass is doing at Levi Strauss, although she would tell you, “ Look, I just didn’t have the right market and didn’t have the right stuff .” We'll talk about it. This correlates with the world Raymond Locardo is in.
Whereas the world of artificial intelligence is not correlated. That doesn't mean it can't become too expensive. People get this confused all the time. I'm saying it doesn't correlate with GDP. These guys entered the corporate bond market with a huge amount of money very recently, just like SpaceX, Broadcom and many others are doing, which stimulates a completely different non-correlated.
No, they, they, they, they don't correlate. You know, you mentioned the course. I mean, I do n't necessarily have to go to the movies. Yes, you mentioned Ellison talking about technological disruption. Listen to what he had to say. media and fundamentally undermined this business. Yes. Companies were unable to reorient themselves quickly enough.
We can say a lot about the entrepreneurial culture of Silicon Valley's owner- managers compared to the more cautious culture of Hollywood, which, frankly, has put businesses in this position. This transaction is a solution to those mistakes from a decade ago . Very interesting and very clearly stated.
And, of course, they are the controlling, he is the controlling shareholder. This is a very similar model to some of the giants we see in Silicon Valley, which, like Meta, have one person running them who is also the controlling shareholder. Did you find it remarkable how Enon switched from Mattel to this new company so quickly?
I mean, when we also see the points that we got from everyone in this value chain. They say it's one of the most conservative companies. They are monopolists in the type of machines that they produce to make the most advanced chips, and they have been very consistent over the last few years in saying, "Look, we're not going to produce as much as the market can consume at peak right now because we want to make sure we don't inflate a bubble ." And so when they say what they said today, "We're exceeding our expectations.
We're increasing our capacity next year. We're not going to be able to meet demand until 2028, and we're already getting orders for 2030." That's a very positive signal that comes after very positive signals from all the chip companies, from all the chip companies, including the labs. Anthropic is probably going to present very positive results today at its analyst day.
So that's another very positive data point in a long line of very positive data on the development of AI . And, Stephen, how do you look at the results that we've had? Do you rate them positively and why isn't the market rewarding this forecast and the visibility that we've had? So, Molly, this is a classic " shovel-selling gold rush" strategy with ASML.
The company, how much was there? 55% growth in the quarter. I think if anyone else was looking at these numbers, they would take it as a certain market reaction. I think we're talking about a company that shipped 121 systems in a quarter. These lithography machines are huge, they cost hundreds of millions.
So I think even a couple of systems in one direction or the other is material to revenue. I think, in my opinion, that's what we call AI trading. These guys, as Gil mentioned, are pretty much monopolists for some of these semiconductor names. So I think where the market is going, ASML is mostly going.
I think if we had seen their earnings reports a few weeks ago, we might have seen a different story. So I would n't put too much weight on the intraday trading of this stock. I think Gil touched on that, and I agree, those are fundamentals. The company has a solid order book going out to 2030. They're giving us projections on that, and they're still outpacing supply.
So, from my perspective, there's a lot of reason to be optimistic about ASML. So, Gil, if one of the real drivers of this sluggish response to the decline, despite excellent numbers and a third guidance increase this year, is a deterioration in semiconductor sentiment, what does that mean for the companies that we'll be hearing from in the coming weeks?
Well, first of all, they just got unlucky today. Stocks are up, but the report comes on a day of high inflation, which means higher interest rates, which means data center financing will be more expensive. AI stocks are down significantly today. This is one of the worst days for semiconductors and cloud in recent memory.
So reporting on a day like this is just bad luck. I would say that on a normal day, stocks would have been up even more. And again , this is an indication of what's to come. We're likely to hear more positive news from semiconductor customers . These are the big hyperscalers: Microsoft, Google, and Amazon are all reporting in a few weeks, and they're going to tell us that their cloud business is accelerating, and then we'll see chip companies report accelerating growth.
So again , this is the latest in a very long line of positive reports that tell us that things are not just going well. We already knew they were doing very, very well, but in the last 3 months, things have gotten even better. All of these companies are saying not only that they are exceeding expectations, but that they are also raising their forecasts.
Our visibility into the future is getting clearer. And mind you, we are hearing a lot of negative headlines. Before we get started, subscribe to the channel for news and analysis on Nvidia, AI, and the stock market. There is a new problem with the AI boom. It's not just about how powerful the bigger question.
Who is going to pay for all of this? CoreWeave, SK Hynix, Micron, Dell, and Oracle have all faced intense selling pressure. CoreWeave alone reportedly lost about 13% in just six or seven trading days. And that fear here' is still high. Companies are still signing deals. Data centers are still being may come down to one thing.
The cost of capital. Let's take a look. money to continue growing . , cooling systems, and vast amounts of memory. And a large part of that cost depends on borrowed money. , financing such projects becomes harder. Even if demand is strong, the business model can become less attractive. It's this fear that's now has taken over the market.
big . The contract may guarantee years of revenue, but the company still needs money to build the infrastructure to deliver thould come under pressure. And if investors believe future borrowing will become more difficult, shares could fall even as the business continues to attract customers. That’s why this sell-off is not just about demand.
It’s also about whether the money needed to support demand will remain available at a reasonable price. And CoreWeave isn’t the only company grappling with this question. Oracle has also come under pressure over concerns about its capital needs and debt. The discussion involved about $15 billion in debt for Corel and about $167 billion for Oracle.
These numbers explain why investors are paying so much attention to value borrowing. Higher interest rates affect every company different needs to borrow heavily to finance its growth faces much greater challenges. But there ’s another side to the story. These loans are secured by Nvidia chips and are reportedly holding up better than some public debt related to AI infrastructure.
That’s important because lenders are trying to understand the value of the equipment underlying these loans. If the chips hold their value for years, they could potentially serve as useful collateral. That could help companies raise money against equipment they already own. But there’s a catch . AI chips don’t exist in a simple, standard market.
Where every piece of equipment has the same value. Different companies . The chips can be used under different contracts, and their value depends on how much useful work they can continue to do. There’s also the risk that new technology just whether Nvidia’s chip is worth anything. It’s how much value it will retain, how easily that value can be recovered, and whether lenders are willing to trust it as collateral.
If this financ could face more pressure. Now that brings us to a broader discussion. Is the AI boom drain ver weaker orders. What if demand remains strong while funding becomes more expensive? The pressure could fall more heavily on companies with weak balance sheets and high borrowing needs. This distinction is crucial because some of the companies caught in this sell-off are in different financial situations.
Qualcomm and Oracle have big needs in s and financial profiles. Their stocks can still fall during a broad es are equally at risk. Investors need to separate companies that can fund their growth from those that depend on constant access to outside capital. And right now, the market is trying to figure out where that line is.
Another major issue affecting sentiment is expectations for AI revenue. Much of the industry’s future spending depends on a relatively small group of companies, including OpenAI and Anthropic.
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