Microsoft’s Cloud Miss, Boeing’s New Chief, AMD & T-Mobile CEOs 7/31/24

David Faber (0:00)

Market Insight and Analysis. You're listening to the opening bell of CNBC's Squawk on the Street.

Carl Quintanilla (0:06)

Good Wednesday morning. Welcome to Squawk on the Street. I'm Carl Quintanilla with Jim Cramer, David Faber at Post 9 of the New York Stock Exchange. NASDAQ 100 looks to open higher by about 2% on the back of AMD's strong guidance. Got a Fed decision today, the BOJ hikes, and some dovish macro data has the 10 year, just 12 basis points from a three handle. Our roadmap begins with a flood of corporate results, including Microsoft, new CEO at Boeing, Starbucks with a cautious consumer, and Pinterest tumbling on weak guidance.

David Faber (0:34)

Plus, we of course are awaiting the Fed. Futures are rallying on this last trading day of July as investors seek new clues for the rate cut path ahead. And this hour, we're going to be joined by the CEOs of AMD and T-Mobile. Of course, we're going to break down the quarters with both. We'll talk about the AI boom, the state of the consumer, oh, a lot of other things as well, Carl.

Carl Quintanilla (0:55)

Let's begin with Microsoft this morning, beating earnings and revenue estimates, but this miss on Cloud a bit, pressuring the stock in the pre-market, certainly on the call last night, Sachin Adela did discuss Azure AI growth and CapEx.

Satya Nadella (1:09)

Now, we see the Azure AI growth. That's the first place we look at. That then drives bulk of the CapEx spend. Basically, that's the demand signal. Because you got to remember even in the capital spend, there is land and there is data center built, but 60 plus percent is the kit. That only will be bought for inferencing and everything else if there is demand signal. That's, I think, the key way to think about capital cycle.

Carl Quintanilla (1:38)

Jim, you excoriated investors who sold last night too soon.

Jim Cramer (1:42)

Yeah. Well, they're a bunch of clowns. You have to wait for Amy Hood. Amy Hood is a CFO. She's been an unbelievable CFO. Why would you sell this thing down 30 without listening to the person who actually is the keeper of the numbers? It would not surprise me if the stock actually finished up because frankly even the so-called Azure slowdown is chimerical. Amy Hood makes it very clear that you just had a couple of European geographies, you really shouldn't let that be the case. Look, what's the real line about this one? We'll talk to Lisa Su about it. I'm going to use an analogy because I'm sick of talking about tech and people hating me and not knowing what I'm talking about. There's a thing called depletions when it comes to liquor. What that is, is that everyone trials a liquor, they trial one, and then the question is, do they reorder? Because everyone kind of thinks right now, oh yeah, order AI, and who knows if it does anything for you? Sacha, who completely always buries the lead because he's completely calm, said that, look, the depletions are good, so to speak. People are reordering, which is the idea that if it were not any good and no ROI, they wouldn't reorder. Now David, when I listened to this call, the big issue was there's not enough compute power right now. Now, that means that it's not, if you go back to the Google call, which I think was very ill-advised, you did not have anyone saying, we get a good demand. What you heard was, well, we better build it because we're going to be beat by everybody else. Well, they're getting their ass kicked by Microsoft. This must be the case. Because, man, these guys cannot meet demand. They cannot meet demand.

And I think that that was the tail of the tape. But, you know, sell it before AB. How many times do we have to have people who don't know what they're doing running big money?

David Faber (3:24)

Right. Well, all right. So we'll keep an eye on what it actually does when it opens. That said, there did seem to be this disappointment. I don't know if you want to call it that concern that somehow the growth rate at Azure at 30% was not as high as many analysts had anticipated. And therefore, that is somehow indicative of, I don't, we could call it a slowdown, but a concern.

Jim Cramer (3:47)

Well, we know Hugging Face. How about Two-Face? The analysts were all Two-Face. They were praising and congratulat- Look, can we listen to Amy Hood? Who knows more than anybody? How about we play Amy Hood?

Amy Hood (3:59)

To meet the growing demand signal for AI and cloud products, we will scale our infrastructure investments with FY25 capital expenditures expected to be higher than FY24. We are constrained on AI capacity, and you do see us investing quite a bit, as we've talked about, in builds, so that we can get back in a more balanced place.