TSMC Slides, Saronic Invests in Texas, GameStop Makes Its Move

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Bloomberg Tech is live from the heart of Silicon Valley with Ed Ludlow in San Francisco. This is Bloomberg Tech. Coming up, U.S. equity markets drop after TSMC's results, topping expectations but also spending more to meet AI-related demand, including a bigger commitment to its U.S. build-out. Aseronic makes a $3.2 billion bet on Texas. We speak with the CEO of the Autonomous Maritime Drone Company and Texas Governor Greg Abbott. And later this hour, Ryan Cohen, CEO of GameStop, joins us to discuss the company's bid for eBay, the future of gaming, and a lot more. Chip makers are weighing on technology stocks, stocks broadly. The concern is AI spending. The catalyst, TSMC's quarterly results, they actually raised the sales outlook, beat across the board, and then said capital expenditures would be higher, not just this year, but for three years. Now the market's kind of recalculating and saying, are we worried about how much higher spending is going to get and how is it justifying current valuations? These are what the markets look like right now under performance in chip stocks. For what it's worth, TSMC's US listed shares, the ADRs, they're kind of off session lows, but we are markedly lower. That takes us to today's big number, $265 billion. That's the total value of TSMC's planned U.S. investment after the chipmaker added another $100 billion for just four new semiconductor fabs. Bloomberg Senior Tech Editor Mike Shepard has more. $100 billion is a lot more, but it's for just four fabs. That's the reality of the economics of building out infrastructure. What do we need to know about this? Well, Ed, this is a number that has been in circulation since the beginning of the year when TSMC indicated to the U.S. that it would be building those four additional plants, bringing the total plan for Arizona to 10 fabs plus two packaging plants over an indetermined amount of time. It takes a long time to construct these facilities and really an even longer time to actually start production and delivering. They began production at the four-nanometer process level. back in 2024, and the three-nanometer process level at a second fab outside Phoenix is only to be ready next year. So we are talking, Ed, in more geological terms in terms of time than something immediate and around the corner. But it is a huge commitment, and it was driven in part, by the Trump administration's pressure on Taiwan with tariffs. At the beginning of last year, TSMC had pledged to increase a $65 billion investment agreed to under President Joe Biden to $165 billion soon after Trump took office. But that clearly wasn't enough. And we saw them step forward with this commitment under the pressure of tariffs to add another $100 billion to it. That's the bit I'm kind of interested in, right? There's a lot of focus on bigger numbers. Sometimes numbers get bigger because the environment is more expensive, right? Inflation on the labor, construction materials side. Did TSMC tell us anything more about why they're bullish on America? Well, in part because if you look back at CEO CC Way's comments back in June, he is saying that it will take years to meet all the demand for chips that his company makes from U.S. customers. And that's really true across the board. You also heard that in your conversations with the CEO of SK Hynek saying that, look, the memory shortage is real and it will be here through 2030. And that is because of the unprecedented demand created by the AI boom. There is so much need for chips and processors to go into all those AI data centers being built across the U.S. and elsewhere in the world. And that's on top of already existing demand for other consumer devices and products, and all of those chips need to be made someplace. TSMC is looking to diversify geographically out of Taiwan, where it principally makes most of its products, and it wants to put more of it here in the U.S., in part as a hedge geopolitically, in part also because, yes, it does need to serve the U.S. customer base more, and also recognize that the political pressure here in Washington to expand and invest, not only in Taiwan, but other major economies, is very strong at. Bloomberg's Mike Shepard, thank you very much. Let's get more on TSMC's results and bring in Tammy Chu, Berenberg's Head of Tech Equity Research. TSMC hiked its sales outlook, but also boosted its spending plans. For you, Tammy, which was the more important metric? So, from a semi-equipment company perspective, in my view, both are important because reason being is normally a good idea to say semi-equipment companies will benefit from the strong capex of TSMC. where they raised already twice in this year. But at the same time, we do want to see that TSMC is doing well for their own business to be able to support the higher capex spending level for longer. TSMC called today that the AI industry is new and demand will go all the way into 2029, 2030, which is a positive sign, in my view, for the semi-equalment industry. Tammy, we're going to get to ASML in just a moment, pretty much the critical key. chip equipment name. But the reaction of US equity markets to TSMC saying not just this year spending will be higher, but over a number of years, it's kind of raised the expectation for the CapEx environment overall. In the near term, stocks are down because of that. Why is that a negative in the first instance? In our view, the semi-equipment and also TSMC share price has been down after that massive announcement despite the revenue upgrade, et cetera, because they all did well over the past two months, and the investor expectation has been increasing dramatically. So, in our view, it's just to take a brief. And also, at the same time, the news flow from the memory sector has been a bit volatile from a share price perspective, which is also adding pressure to the very popular AI trade. So in our view, it would just be a short-term profit taking sort of anything fundamentally went wrong. Let's go to ASML. We didn't have a show on Tuesday and Wednesday of this week because of Fed Chair Walsh's testimony, but ASML also lifted its annual sales forecast for the second time this year and said it is going to expand its own capacity. And how that manifests is a greater number of units on the low NA and high NA side. Just your overall reaction to what ASML said. ASML's earning yesterday has been amazing in terms of how they revised up the full year guidance for the second time this year, as you suggested. Besides the revenue, I would point out ASML also revised up the gross margin expectation for this year from midpoint 52% to midpoint 55%, which all suggesting that ASML is seeing incremental demand coming from their customers and customers just need more capacity over time. So therefore, from my perspective, I believe that ASML has been showing based on their numbers that the whole AI investment, CapEx expansion, capacity addition is not coming to an end at any time. And the share price move of yesterday from ASML side is very similar to the logic of TSMC. The share price has done really well over the past three months. Expectation has been high. So we are taking a little pause. But we do believe that the results yesterday of ASML has been very strong and showing the level of customer spending is only going up. ASML is in a position where there's essentially a backlog, right? Orders are queued up all the way to 2028. We've spent a lot of time recently on the show thinking in the context of memory chips about the historic boom and bust cycles, the cyclical nature of those. How does ASML manage that on its critical machines across logic and memory, right? It has a backlog. It wants to increase capacity. but in the end what happens if the demand tapers off or falls away? So from ASML perspective, they are normally very, very cautious when they are adding capacity or committing to adding more capacity because none of the equipment company want to drag on those empty capacity through the downturn as you suggested. So we believe that ASML has been talking with customers on the very frequent basis to understand what's the real demand of the customers and try to understand what's the end market driver for those before they build capacity. And of course, they have to balance the demand from both logic and memory customers. And we do believe that at this point of time, they are treating both of the sector as super growthy part of the cycle. Therefore, they have been building for both of them instead of, you know, try to select which customer they want to serve first. We are in the environment that every every component in this AI supply chain is under shortage. So therefore, we believe that ASML has been speaking to customers, understand the real requirements, and building for both of the sectors in order to fulfill more incremental demand in the coming years. We were just showing ASML's top customers, unsurprisingly, TSMC, Samsung, Intel. But I was looking at the 2Q net system sales by region as well, right? Most of this equipment is going to South Korea, then Taiwan, 30% to Taiwan, but only 9% to the US. We started this show talking about TSMC's increased commitment to the United States. Do you expect over time more ASML equipment to come here to America? Yes, because their regional sales on a quarterly basis can be lumpy, depending on which customer will receive more shipment in this year. with Samsung further expanding their fabs in the U.S., with TSMC expanding further in the U.S. with incremental commitment, we do believe that U.S. sales will increase on a quarterly basis going forward. But the pattern can be lumpy, which doesn't really suggest that TSMC or other players is pausing their investment in the U.S. It's just lumpiness of the factor of the equipment, given that ASML's equipment is sold for more than $200 million per equipment. So therefore, who receives what? really moved the quarterly trend. Tammy Chu, Berenberg's head of tech research. Great to have you back on Bloomberg Tech. Thank you very much. As the AI world gears up for a big earnings season, one of the industry's key figures was spotted enjoying pork skewers in Tokyo. NVIDIA CEO Jensen Wang enjoyed the finger food alongside Japanese suppliers to court their support for the AI supply chain. Those present included executives of companies like Kyokusha and Tokyo Electron, both of which supply essential components for NVIDIA's AI systems. Not only that Japan is planning to purchase 27 next Rubin chips to build an AI for robots Okay coming up Saronic makes a billion bet on Texas We speak with Dino Mavrucas, Saronic CEO and Texas Governor Greg Abbott. This is Bloomberg Tech. Texas is quickly becoming the epicenter of America's next industrial build-out. From AI data centers and semiconductor fabs to defense technology. Now, autonomous shipbuilder Sironic is making its own major bet on the state. The company's announced a $3.2 billion investment building a next-gen shipyard at the port of Brownsville, manufacturing medium-to-large-class autonomous surface vessels. Joining us now for an exclusive conversation are Saronic CEO Dino Mavrucas and Texas Governor Greg Abbott alongside our Bloomberg Texas Bureau Chief Julie Fine. Governor Abbott, good morning to you from San Francisco. If we could, I'd like to start with a sort of operational update, please, on the flooding situation in your state. I know it's something that you want to communicate on. Sure. Listen, well, thank you for offering that up. We've been following all day. Yesterday, all last night, and today, the massive flooding going on in central and south Texas. It's the same area where we had the massive 4th of July flooding last year. The difference this year is we're actually getting more rain over the past 20 hours and over the next 24 hours than we got last year. Overnight, there was one life lost. We are continuing to surge resources. We've made almost 80 rescues already. I will be leaving here after this interview to go focus on our current response in regions ranging from the Kerrville area all the way down to Uvalde, to Del Rio, to Laredo, where we expect continued flooding. I just want to make sure that all Texans know that we have more than 1,300 Texas personnel, the National Guard, Texas Department of Public Safety. We have all resources, boats, helicopters available to make sure we will be doing everything possible to save human life. Governor Abbott, I just want to follow on that briefly. As you remember, just a horrible time last year when there was that flooding in the same area. Your advice to anybody in the area that sees this water, that is concerned, what should they do and where should they go? So great, great question. And you all are one of the best communicators to the general public that we can have out there with the news media sharing this, what I'm about to tell you. And that is there are rapidly rising rivers that will continue to rise to the remainder of today and tomorrow. If you do not need to be out, don't go out. We have one leading reason why people may lose their life in rising waters like this is because people drive into waterways and get swept away. There's an old saying, turn around, don't drown. And that applies here. Second, because rivers are rising so rapidly, if you are near a river, try to get away from that river so you can protect your own life. each individual in the state of Texas has the full capability of protecting and saving their own life right now by staying away from the rising rivers and not driving into it. Governor Abbott, thank you very much for that. As a reminder to the Bloomberg Tech audience, Saronic, a defense tech startup focused on autonomous maritime drones, investing $3.2 billion in the state of Texas, a facility at the Port of Brownsville. Dino Mavrucas, Saronic CEO, welcome back to Bloomberg Tech. The question we get most often is often the simple one. Why Texas? What did Texas do to win your business? Before I even talk about that, I just want to say our thoughts and prayers go out to everybody involved in the flooding. Saronic keeps that very, very front of mind. And we're very proud to call Texas home and invest in the community here. So, Governor, if there's anything that we can do to support, please let us know. Sure. Thank you. Texas is a great state. I mean, the leadership and the partnership with the governor, look, we're building a next generation shipyard. We're going to go and build the most advanced, most efficient, highest throughput shipyard, not only in the country, but in the world. So when you're doing that, you're looking for land availability. You're looking for deep water access. Those things are kind of binary. You either have them or you don't. What really tipped the scales was the workforce, the people, down in Brownsville that we're going to build this company and this project around. And then the partnership with the state and local government. It's the governor's leadership and support, the partnership with the state, Cameron County and the city and the port of Brownsville that help bring this generational project to life. Dino, Brownsville, close proximity to SpaceX. So that was interesting that the workforce was the tipping point. How competitive is it in your industry right now in hiring the best people across lots of different disciplines? I think what you're seeing, it's actually more collaborative than it's competitive. You're building up industry. You're building up infrastructure. You're investing in the community. When you look at what we're going to do in Brownsville, we're going to invest billions of dollars, not just into infrastructure, but into the local region. We're going to create 10,000 jobs and we're going to create one hundred and sixty billion dollars of economic impact in the region. And that's just over the next 10 years. Right. With companies like SpaceX and others doing that, it creates an entire ecosystem, not only in that part of the state, but in the entire state. Governor Abbott, we just heard Dino talk about the workforce again. and that's 10,000 jobs. So I'd like to hear about the plans on how you plan to develop that workforce to make sure there are enough people available. I'll tell you this, Texas ranks number one in the United States for having the best workforce. Texas ranks number one for adding more new jobs than any other state. And there's reasons for that, and that is because we work more than any other state to make sure we have the best trained and qualified workforce. We have these massive education programs across the state. One is through the Texas State Technical College. Two is through our two-year colleges. But three is through our universities. And we focus our education in Texas on real-life job skills that will ensure that when a student graduates or completes the course study there, they're going to be ready to go straight into the workforce. And we talked to Dino, we talked to Saronic about what our capabilities are to make sure that we would be able to develop the workforce they need. It's exactly what Elon Musk found with regard to SpaceX. It's what other companies that are coming to the state of Texas are realizing. I talk to these CEOs all the time that are coming to the state of Texas, and they tell me the leading reason why they're coming to the state is because we do have that pipeline of well-trained workforce, and we will be able to deliver it for Cerronic, just like we have been for all these other companies, where Texas now is home to more Fortune 500 company headquarters than any other state, because, in part, of the workforce and supply that we have. Governor Abbott, when you look down the road five years, what does the Rio Grande Valley look like with this addition? So it has changed dramatically. You're familiar with it. Maybe many Americans watching this show may not be familiar with it. But listen, the Rio Grande Valley has historically been an agricultural region and things like that. But when you look at some changes taking place, you know, you mentioned one, obviously, with Starbase down there and Cameron County, which is near the Brownsville area, with Saronic, which is going to be near the Brownsville area. It's a massive explosion of economic activity. And because of that, kind of going back to the education component, what our universities are doing, our universities are establishing campuses and expanding campuses in those regions to make sure that we will be educating students, not just to be able to go to work for Saronic, but also to fill the other education needs in the entire area. But going back, now the Cameron County area where this project is going to be located is going to be one of the fastest growing regions in the entire state. So we're building out transportation facilities, other facilities to make sure this is going to be a thriving community. But it also shows how Texas is the most diversified economy in the United States, not just with regard to different business sectors, but geographically in the state. Obviously, we have the booming Dallas and Austin and Houston areas, but now we have the booming Rio Grande area. And so our state is absolutely booming. We cannot be more proud to have Saronic down there and the jobs they're providing. So, again, there's a real quick number. Over the course of the coming years, Saronic is going to be adding more than or up to at least 10,000 new jobs. at $75,000 per job at least. When you put it all together, they're going to be injecting $750 million in paychecks for our fellow Texans. That's going to make a massive difference in our state. Dino, we're going to put up... Dino, let me just jump in because there's another big moment this week for you. CENTCOM sharing this video. The first combat use of autonomous surface vessels by the U.S. military. your technology. What was the biggest lesson from that operation? I mean, it's delivering the capabilities to our warfighters at speed and scale. That's what Saronic has been based around since the day we founded the company. We looked around and we said, what is the capability that our Navy is missing? And how do we build that fast and get that to our warfighters to deliver real combat power? And that's actually exactly what we're doing in Brownsville as well. There's a shipbuilding crisis in this country right now. China outbuilds us 230 to 1. Our naval fleet is actually shrinking. We have 0.1% of global shipbuilding capacity. Port Alpha is going to turn all of that around. On day one, our initial phase of the project, this will be the largest shipyard in the country. We will have 150,000 gross tons of shipbuilding capacity, which means we will 1.5x the commercial shipbuilding capacity in the United States. And that's just phase one. We're going to take that all the way up to 2 million gross tons of capacity, 20xing the current capacity in this country. And that's what we need. And in Brownsville, what you're going to see is the development of, with SpaceX already being there, it's just going to become a critical corridor, not just for business and commerce, but for national security. Dino, we just have about 60 seconds left in the program. You said this is phase one. Would you just give us a look into the future in phase two? Absolutely. So basing the initial phase of the project on 835 acres, we talked about massive land availability. We have the ability to expand up to and over 4,000 acres. We're going to continue to invest, continue to build out infrastructure. and keep in mind, we are building a brand new shipyard. This is built from the ground up to be the most advanced, to be the most efficient, but most importantly, add net new capacity, brand new shipbuilding capabilities to this country in a way that we haven't seen since World War II. Texas Governor Greg Abbott, Saronic CEO, Dina Mavrucas, of course, our Texas Bureau Chief, Julie Fine. Really appreciate all of your time this morning. Again, Saronic, a $3.2 billion commitment to South Texas. Coming up here on Bloomberg Tech, Ryan Cohen, the GameStop CEO, joins us to discuss his and GameStop's bid for eBay. We're going to talk about the future of gaming. We're going to talk about the future of a lot of things. This is what markets look like right now. We are down. And it is chip stocks, semiconductors really weighing on the technology sector. TSMC, the world's biggest chip manufacturer, raised its sales outlook. It beat across the board but it also said spending will be higher not just this year by the billion but in aggregate over a number of years So the market taking that commentary on the higher spending environment and is now a little worried about it The higher spending does it justify the valuations of some of these companies We're halfway through the program. We have a very big conversation coming up next. Do not go far. From San Francisco, this is Bloomberg Tech. www.ideaireland.com Extraordinary. podcast on Apple, Spotify, or anywhere you listen. Welcome back to Bloomberg Tech. Chip stocks are dragging the market lower. TSMC's US-listed shares are off-session lows, but lower. The world's biggest contract manufacturer for chips raised its sales outlook, beat across the board, but said spending this year and over the next few years will be higher. So now the market's like looking at that and saying, okay, even higher spending expectations across AI. How does that relate to valuations right now? That's kind of the story. We also have a deal confirmation. Uber has agreed to buy Delivery Hero, $14.8 billion US dollars in euro terms, 41 euros, 50 cents a share. It gets Uber into 50 markets outside of the United States that it's not in. Private equity is taking a role and buying Delivery Heroes business in some markets that Uber is not taking on. One of the most read stories on Bloomberg this morning, but it's a packed show. So I wanted to bring you just the basic details. Here's the big one. One of the biggest potential deals in technology is GameStop's attempt to buy eBay. In May, the video game retailer and its CEO, Ryan Cohen, launched an unsolicited $56 billion bid for the e-commerce platform. eBay rejected the offer, calling it neither credible nor attractive. Since then, Cohen has scrapped a controversial multi-billion dollar pay package and GameStop shareholders have approved increasing the company's authorized share count, giving it more flexibility to pursue strategic transactions. So where does the deal stand now? Ryan Cohen joins us on Bloomberg Television and Radio. Ryan, thank you for your time and good morning. Welcome to Bloomberg Tech. on the long list of things that have happened since may our audience just has a very simple question for you which is what's changed what's developed in that period of time there has been a uh a complete failure by the media to explain why this transaction makes sense And so number one, my track record. Chewy and GameStop, it speaks for themselves. My alignment with shareholders, I'm putting $500 million of my own money into this transaction. The high margin growth opportunities for this business within live commerce, which the company has not been doing well, and using GameStop stores as nodes for both the marketplace and live commerce is huge because the business today in live commerce is tiny. Then building out a digital marketplace for in-game items, those are just like some of the high growth opportunities within the business. And then there is the cost takeout opportunity. I've committed to taking out $2 billion within the first year, and that's just the beginning. So this whole narrative that the business is going to be too leveraged is a fantasy invented by the media, and it's just simply not true. On the banking side, let's go there. you lined up some banking support right and i think that one of the concerns that moody's put out there as an example was the credit rating and the credit worthiness of the combined entity so again another question from the audience is explain the banking support that you've you've secured since may but also that concern that the debt component of it what the the credit negative outlook would be for a combined entity based on the plan that you've just outlined? We have a highly confident letter from our bankers. We have a lot of parties that are interested in this transaction. And the most important thing, ultimately, if we can't get the debt, then it means that eBay can't get the debt and eBay can get the debt. So this entire narrative is simply not true. I didn't explain that question very well, Ryan, if I'm self-reflective, honest about it. So I'm just going to go back to it. Your financing letter is from TD, right? And it was widely reported to depend on the combined company maintaining investment grade credit rating. And then Moody's came out and said that this deal would be credit negative for the combined company. Have you taken steps to address that? Nobody has reached out to us, including the credit agencies, but the pro forma company is going to be investment grade. We talked at the beginning of the conversation about shareholders improving, increasing, sorry, the company's authorized share count. Does that allow you to do something new that you couldn't have otherwise done in the context of the eBay deal? yeah i mean we yes it does and what would that be buy the business buy ebay i posted on x that you were coming on the show and and you know in the context of of what you've done with financial mechanics of late you know the question that existing gamestop shareholders sent to me over and over again is, you know, you're asking them to accept pretty significant dilution. And they're basically asking, like, what's the payoff for them in accepting that dilution? There's different forms of dilution. Most dilution is dilutive to shareholders. When you're buying a business and I've committed to pulling $2 billion of costs out, So if you do the math and buying a business for $56 billion and the business is forecasted to make over $3.5 billion, that's the consensus for 2026. Plus what I would be pulling out in cost. So you're at over $5.5 billion of EBITDA. And then the ability to take this platform and build a much, much larger business. The upside is huge. So I wouldn't go and buy a business if I didn't think I can take it from 56 billion and turn it into multiples larger. So it's accretive to shareholders. But most of the time when companies are issuing shares, it's dilutive and earnings per share goes down. In this case, it's a different story. But most of the time you have management teams. A good example is this company that collect tons of risk-free compensation and they're not aligned with shareholders. In this case, that's not the case. You have the letter from TD. You said earlier you were going to put $500 million of your own money into this transaction. Outside of that, is there any other financing support, any other parties that since mid-May you've pulled into it? We've had a lot of parties come to us, and there's been a lot of interest from the capital markets. We're live on Bloomberg Television and Bloomberg Radio with Ryan Cohen, the CEO of GameStop. We're talking about Ryan and GameStop's bid to buy eBay. Really simple question. Has anyone from eBay, the management team or the board, reached back out to you or responded to you in this interim period? No, I hope they do. But they're entrenched and they're hiding behind their advisors. If I go to teddy.com on any browser, I'm diverted back to gamestop.com. Why? I'm focused on GameStop. The root of the question is, let's say that you proceed with this. There's a very wide range of opinion, speculation, basically. Why does Ryan Cohen want to buy eBay? At one extreme is the idea that you just want to be the CEO of eBay rather than GameStop. At the other end is the idea that you have a bigger plan, a master plan. You kind of talked about it a little bit earlier. But what's the reality here? What is the bigger picture for a combined entity? Or referencing Teddy.com, there's some history there, but a sort of conglomerate, a holding company. eBay is a platform that I can build into something much more profitable and much larger. The ability to take GameStop stores and our experience in gaming and refurbish tech and collectibles combined with eBay and be a leader in live commerce, build out an in-game digital marketplace, use the stores for same-day authentication, and ultimately pull down, pull out significant costs. and none of these things come at the expense of growth. It's actually the opposite. The more efficient you get, the easier it is to grow. It makes too much sense. So that's why I want to buy it. It's not that complicated. There is such overlap between the businesses. And my experience is in e-commerce. Right. Are you prepared to improve the offer, Ryan? i'm not going to negotiate against myself but that might be what it takes we'll see what happens ed you've talked about this a little bit recently a lot of people point out to me you've done a number of interviews in quick succession right what happens if ebay just keeps saying no ultimately it's going to be the owners of the business that are going to decide who is more competent, who's more aligned with shareholders, and who is more capable of building a much, much larger business. So the management team can only hide for so long. And I would love for this to be a collaborative process and a consensual process. That's my preference. That's number one. But if that doesn't happen, then it's going to be shareholders decision because they're the owners of the business. Right. I do want to talk a lot more about the GameStop business, a lot more about eBay, and we're going to take a break and come back and do that. Talk about what's really happening. I have a final question from the audience that I promised I would put to you, and it from GameStop shareholders A lot of GameStop shareholders have asked about the warrants that expire in October Another recent or relatively recent financial transaction from the company What should they expect happens with those warrants between now and October of this year I don't have a crystal ball. I can't answer that question. OK, their expectation is that when they expire, I think the date's October 26th, that's the outcome. Ed, people that have invested alongside me when it comes to Chewy or GameStop and me committing $500 million into eBay, they've done very, very well. So I don't have a crystal ball. I can't predict the future, nor can anyone that I've ever met. but GameStop is a business that was on the brink of bankruptcy and everybody was betting against it for good reason and now the company is making more money than it's ever made in its history. Ryan Cohen, CEO of GameStop, you're sticking around. We're going to take a break and then we're going to talk about that business, GameStop, and what it's doing. We'll be right back. This is Bloomberg Tech. Gain insight on the innovators, disruptors, and tech-driven trends shaping today's complex economy. I'm Carol Masser. And I'm Tim Stenevec. Wrap up your workday with the Bloomberg Business Week Daily Podcast. We bring you deeper dives into the story shaping your world, from the evolution of AI to the shifting priorities of global business. Plus, Silicon Valley power players and the latest tech trends. Catch up on the conversations you miss during the day. Subscribe to the Bloomberg Business Week Daily Podcast on Apple, Spotify, or anywhere you listen. Okay, we're live on Bloomberg Tech with GameStop CEO, Ryan Cohen. Let's put the eBay deal, potential deal, aside for a moment. Whatever happens with eBay, GameStop's still one of the biggest names in gaming. I get a lot of questions about that. And Ryan, if you're up for it, let's start with Grand Theft Auto 6. You know, it's expected to be one of the biggest entertainment launches ever. you go to GameStop.com, pre-orders are available. What are you seeing? What are customers telling you? Ed, I want to go back and talk about eBay. Let's do it. If you wanted to build the trillion-dollar business and you had the existing management team, the guy running the company makes $30 million a year, hasn't bought a single share in the open market, and then you have someone that's committed $500 million, Me. We don't have to talk in hypotheticals. Who's more competent and capable of building a larger business? I want you to look your viewers in the eyes and tell them, are you going to bet on an entrenched management team running the business or me? Someone that went head-to-head against Amazon, selling 30-pound bags of dog food, turned around a very tough situation at GameStop, and now the company's making lots of money. I really want to know your opinion. Ryan, I'm not here to answer the question. The audience doesn't care what I think about this deal. They're here for you. But the link to Grand Theft Auto 6, for what it's worth, GameStop has 2,200 stores across the jurisdictions it operates in, right? It sells hardware, video games, consoles, that are going diskless at some point. you need to hire people for those stores people are looking at what they know about the proposed structure of this deal that's on the table and trying to understand in part what you talked about earlier right taking the costs out of the combined business to understand what the plan is here what the master plan is for the combined entity so so let's go with that like what is this synergistic play here between eBay, the e-commerce business, and GameStop, which right now is a brick and mortar business selling video games, consoles, collectibles. We are going to unlock live commerce. We're going to use the stores for same-day authentication. I'll give you an example. Let's just talk about trading cards right now. The biggest issue on eBay is fraud. So they've done really well on authenticity guarantee. Because you know, when you buy an item now and it's got the AG certification, it's legit. It's going through a centralized model right now. So the sellers shipping it cost a lot of money. There's a few fulfillment centers, take some time, and then it goes to the buyer. Can ultimately go, once these businesses are together, we've got 1,600 nodes. They're within a 15-minute drive of 80% of the population, and you can authenticate the item same day for cheaper. So that's just one item. Live commerce, the business is getting smoked. Live commerce is a trillion-dollar addressable market. It's really, really big in Asia. There's some competitors in the U.S. that are doing very, very well. eBay is not doing very well. So the ability to go and use our nodes as studios and as fulfillment and logistics for content creators is huge. And then we have a bit of experience in gaming when it comes to the buy, sell, and trade model. So the ability for us to use eBay's Rails to build out an in-game digital marketplace is huge. So those are just some of the opportunities to take this business and build it into something that the existing management team on a standalone basis can never do. So the situation is collectibles are clearly a central part of the plan, right? If this deal goes through the combined entity. on gaming it sounds like you are preparing for a world where gaming is diskless there will be a trade in secondhand trade-in but that this is the umbrella point right like if the hardware makers sony xbox are reportedly moving to diskless on the console side future game launches are digital only where does that fit in for your business plan and the combined entity it doesn't matter It doesn't matter at all. Software, it mattered in the past. Software today makes up less than 12% of the business and collectibles makes up over half the business. So it's totally, totally irrelevant. is there anything that you learned from the nft marketplace uh experiment at gamestop that that you you think you can put into practice if the deal goes through in this combined entity what was the takeaway for you from that what does that mean gamestop has looked at digital business lines outside of the physical world what did you learn from GameStop looking at those markets. Do you know how much money GameStop is making today? Please. 143 million in Q1, highest operating earnings in the company's history. There was surprise at the strength of earnings recently. But again, you know, the audience... Because everybody in the media wants GameStop to fail. Explain that to me, Ed. Why everybody in the media, in the mainstream media, wants GameStop to fail. You've got, there's nothing more American than GameStop committing its balance sheet. And this company, which is a great American company, eBay, being aligned with shareholders, that's how this country was built, is risking your own capital. And if the business succeeds, you make money. And if the business fails, you'll lose a lot of money. And what I want to understand is why everybody wants GameStop to fail. Both its core business and in this transaction. What world do we live in where we're betting against, we're rooting for an entrenched management team that has no skin in the game and someone that's risking their own capital and there's nothing more American than that? you want us to fail. I want to understand that. Ryan, I'm a technology journalist. I host the tech show on Bloomberg. When this deal broke in May, I and my team invited you onto the show and it took a number of months. You're now here on the show. And in advance of you coming on the show, I posted on social media that you were coming on the show. I always give our audience the opportunity to ask their questions. That's what we're doing here, giving you an opportunity to present. I think the one outstanding thing is people asking, when will they see a sort of codified plan from you, a business plan presented for this combined entity on paper? You've explained a bit of it in the course of this conversation, but that's why the audience is here to listen to you, to explain the future of a business that is a combination of GameStop and eBay? Well, I'm going to bring that plan directly to shareholders. It's not going to be through a TV show. You can count on it. It's going to be directly to shareholders. And do you have a timeline for that, Ryan? We've had an influx of parties that have come to ask, and they're interested. And in due course, the plan is going to be made public. but in the short term, I'm going to ask you... The plan involves building a much larger business. I mean, you know, what is the goal of business? What is my goal? I own a lot of stock and I don't have any perverse incentives. So it's to make the business a lot more profitable and to maximize shareholder value. So that's the plan. It's not that complicated. And I've spoken about huge growth areas within cutting costs. That's just short term. But live commerce and building out an in-game digital marketplace. So I've shared that with you. But everyone in the past has said, well, what's the business plan? What's the business plan? But they only do that with GameStop for whatever reason. Well, you know what the business plan is? It's to make money. GameStop just reported its highest earnings in the company's history with a fraction of the stores. And everybody in the media said GameStop was going to fail. So the plan is to make more money. The plan is to maximize shareholder value. Am I going to go and share my proprietary plan and every single detail and give it out to my competitors? That'd be a pretty stupid thing to do. Ryan, we have literally 30 seconds left in the show. Again, are you prepared to raise your offer for eBay? You set out your vision, but the action you're willing to take to do it. I'm not going to call my shots, but we're coming for eBay one way or another. Ryan Cohen, CEO of GameStop, an extended conversation on Bloomberg Tech. Thank you for your time. So that does it for this edition of Bloomberg Tech. Recap that conversation with GameStop CEO Ryan Coe and the others in the program. There was a lot of technology news. You know where to find the podcast on the Bloomberg Terminal and online from San Francisco. This is Bloomberg Tech. Thank you.