Netflix Shares Fall Despite Earnings Beat | Bloomberg Tech 7/18/2025

Key Concepts

• Netflix earnings and stock performance
• AI in content creation
• Late-night television landscape
• Netflix's ad-supported tier
• Federal Reserve independence and monetary policy
• Venture capital investment strategies
• TSMC's expansion and challenges in the U.S.
• AI demand and its impact on TSMC
• Tariffs and their effect on the tech industry
• AI narrative and its impact on the market
• Mag 7 valuation
• AI adoption in the investment community
• Public/Private market convergence
• Re-industrialization of the U.S.
• AI-powered factories
• China's manufacturing prowess
• AI policy guidelines
• Antidumping duties on Chinese graphite
• EV battery supply chain

Netflix Earnings and Stock Performance

• Netflix beat expectations on key financial metrics but the stock is down 5%, the most since early April.
• The company boosted its outlook, citing a strong content slate and growth in the ad-supported tier, which is expected to double in 2025.
• Wall Street had set a high bar for Netflix, and even though the company performed well, the slight beat wasn't enough to excite investors.
• Netflix's market cap eclipses Disney and Warner Bros. Discovery.
• Engagement grew by only 1%, raising questions about why it isn't growing faster given the $18 billion content spend.
• Ad-supported tier now accounts for more than 50% of new sign-ups.
• Pricing is improving on ad monetization, which is expected to contribute to long-term growth.

AI in Content Creation

• Netflix believes AI represents an incredible opportunity to help creators make films and series better, not just cheaper.
• Ted Sarandos emphasized that AI is a tool for real people doing real work with better tools.
• Netflix creators are already seeing the benefits of AI in production.
• Netflix is using AI on a show, joining Amazon's showhouse as high-profile examples.

Late-Night Television Landscape

• "The Late Show" will end in May of next year, marking the end of an era in late-night television.
• CBS is positioning this as a financial decision, citing declining ratings and high costs.
• There is speculation about a political angle, but no hard reporting on it.

Netflix's Ad-Supported Tier

• Netflix's ad-supported tier is expected to double in revenue contribution by 2025.
• Retention remains strong for the ad-supported tier.

Federal Reserve Independence and Monetary Policy

• The most direct relationship between Fed policy and technology investing is the path of interest rates.
• Macroeconomics is a rules and principles-based profession, and the path of interest rates would not be significantly different regardless of who is driving policy.
• There are 11 other voting members in the FOMC.
• Rates are expected to come down, but the timing (July or September) won't significantly impact private market valuations.
• Staffers at the Fed don't pay much attention to politics because monetary policy is made on a set of rules.

Venture Capital Investment Strategies

• Investors expect certain returns based on risk.
• Lower risk-free rates encourage allocators to invest more in risk assets like tech stocks and venture capital, seeking 20% returns.

TSMC's Expansion and Challenges in the U.S.

• TSMC plans to remain prudent on spending as it builds out production capacity in the U.S.
• The company faces challenges such as cultural differences and higher costs in the U.S.
• TSMC is urging the government to solve issues related to permits, applications, and human resources for its suppliers.

AI Demand and its Impact on TSMC

• AI demand is super robust, driving strong demand for TSMC's key customers like Nvidia and Apple.

Tariffs and Their Effect on the Tech Industry

• TSMC is concerned about macro uncertainties related to tariffs, which is playing into its CAPEX story.
• The company is sticking with its CAPEX of $38 to $42 billion given these uncertainties.

AI Narrative and Its Impact on the Market

• The reinforcing narrative around AI has been appreciated by the market, with CAPEX continuing and nascent signs of demand and implementation.
• This has been a boon for the hyperscalers in particular.

Mag 7 Valuation

• The Mag 7 are not in extreme valuation territory compared to the broader technology sector.
• The DeepSeek questions and tariffs have made these companies a little more approachable in terms of valuation.
• The Mag 7 offer a margin of safety compared to some other tech-related names.

AI Adoption in the Investment Community

• ChatGPT is used to get a quick summary view of various topics.
• There is increasing focus on automating tasks, especially spreadsheet builds, to get to the heart of questions sooner and spend more time on analysis.

Public/Private Market Convergence

• Understanding the dynamics of the public market requires a better understanding of the private market.
• The convergence of public and private markets is important for the investment community.

Re-industrialization of the U.S.

• Hadrian views its job as re-industrializing the country through a system of software and a new American workforce.
• The factory system, combining people and technology, is the product.

AI-Powered Factories

• Hadrian is expanding into Arizona with a new factory that is four times the size of its existing facility.
• The company is shifting more manufacturing capabilities to its customers in aerospace, defense, commercial manufacturing, and the DOD.
• The goal is to have factories in every state and create manufacturing jobs along the way.

China's Manufacturing Prowess

• The U.S. needs to be the strongest industrial power again to prevent or meet the threat posed by China.
• The U.S. gave away the farm to the CCP by letting them have all of its manufacturing capability over the last three decades.

AI Policy Guidelines

• President Trump is expected to announce new AI policy guidelines, calling for an easing of regulation and an expansion of energy sources for data centers.
• The administration wants to ensure speed and adoption of AI technology while still setting a few rules of the road.

Antidumping Duties on Chinese Graphite

• The U.S. Commerce Department is set to impose preliminary antidumping duties of 93.5% on imports of Chinese graphite, a key component of battery manufacturing.
• These tariffs would increase the cost of making battery cells in the U.S.
• Tesla and other companies were lobbying against these tariffs.

EV Battery Supply Chain

• The biggest headwind for the EV battery supply chain is figuring out the supply chain and choosing suppliers to comply and qualify for tax credits.
• New restrictions around where many of these components can be sourced will be top of mind for many players in the U.S.
• The push to source and manufacture everything domestically may come with a cost to consumers.

Synthesis/Conclusion

The broadcast covers a wide range of topics impacting the technology and financial sectors. Netflix's earnings, while positive, highlight the high expectations and competitive landscape in streaming. AI continues to be a dominant theme, influencing content creation, investment strategies, and manufacturing. Geopolitical factors, such as tariffs and competition with China, are creating uncertainties and shaping policy decisions. The U.S. is focused on re-industrialization and building domestic supply chains, particularly in critical areas like battery manufacturing. The Federal Reserve's monetary policy and its impact on market valuations remain a key concern for investors.