1
00:00:00,080 --> 00:00:06,760
Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.

2
00:00:11,600 --> 00:00:15,440
Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along

3
00:00:15,440 --> 00:00:18,680
Speaker 2: with Lisa Bromwitz and Amrie Hordern. Join us each day

4
00:00:18,720 --> 00:00:22,239
Speaker 2: for insight from the best in markets, economics, and geopolitics

5
00:00:22,400 --> 00:00:24,880
Speaker 2: from our global headquarters in New York City. We are

6
00:00:24,920 --> 00:00:27,640
Speaker 2: live on Bloomberg Television weekday mornings from six to nine

7
00:00:27,680 --> 00:00:31,280
Speaker 2: am Eastern. Subscribe to the podcast on Apple, Spotify or

8
00:00:31,280 --> 00:00:33,919
Speaker 2: anywhere else you listen, and as always on the Bloomberg

9
00:00:34,000 --> 00:00:37,960
Speaker 2: Terminal and the Bloomberg Business Apple's turned back to Deep

10
00:00:38,000 --> 00:00:40,800
Speaker 2: Seek's market impact of the last twenty four hours, losses

11
00:00:40,840 --> 00:00:44,640
Speaker 2: extending beyond AI and ship giants as global investors reassess

12
00:00:44,720 --> 00:00:47,680
Speaker 2: the sustainability of seeming the endless spending in the sector

13
00:00:47,960 --> 00:00:51,960
Speaker 2: AI infrastructure companies including Constellation Energy and Vistra taking a

14
00:00:52,040 --> 00:00:54,320
Speaker 2: hit during yesterday's market term or for more on there.

15
00:00:54,520 --> 00:00:58,480
Speaker 2: We're joined by Sharp Pureza of Guggenheimshah. Welcome to the program, sir,

16
00:00:58,560 --> 00:01:00,520
Speaker 2: I just want to understand from your perspect if Hagen

17
00:01:00,600 --> 00:01:03,080
Speaker 2: reacted to the news of not just yesterday, but of

18
00:01:03,080 --> 00:01:05,280
Speaker 2: the past week or so, and whether it upends your

19
00:01:05,319 --> 00:01:07,080
Speaker 2: thesis for twenty twenty five.

20
00:01:08,360 --> 00:01:11,040
Speaker 3: No thanks for having me on, but to be honest,

21
00:01:11,319 --> 00:01:14,560
Speaker 3: we believe yesterday's reaction in the news over the weekend

22
00:01:15,000 --> 00:01:17,640
Speaker 3: with certainly a knee jerk reaction in the utility and

23
00:01:17,680 --> 00:01:20,440
Speaker 3: power space. One of the things we've been highlighting to

24
00:01:20,800 --> 00:01:23,440
Speaker 3: investors and clients is that this is some of the

25
00:01:23,520 --> 00:01:27,080
Speaker 3: strongest power demand environment we have seen in over twenty years.

26
00:01:26,840 --> 00:01:27,759
Speaker 4: Of covering the space.

27
00:01:28,080 --> 00:01:31,920
Speaker 3: The US is essentially decoupling from China. In our view,

28
00:01:31,959 --> 00:01:35,160
Speaker 3: and we don't quite agree with our competitors. Ten to

29
00:01:35,240 --> 00:01:38,600
Speaker 3: thirteen percent of power demand today is coming.

30
00:01:38,360 --> 00:01:39,959
Speaker 4: From AI on average.

31
00:01:40,040 --> 00:01:43,600
Speaker 3: That's nationally, So everywhere you look, the demands for energy

32
00:01:43,640 --> 00:01:45,039
Speaker 3: and power continue to grow.

33
00:01:45,360 --> 00:01:47,400
Speaker 4: It's a supercycle. It's structural.

34
00:01:47,720 --> 00:01:51,160
Speaker 3: So whether you're looking at the domestic manufacturing space, whether

35
00:01:51,200 --> 00:01:55,279
Speaker 3: you're looking at the onshoring and reshoring of the manufacturing sector,

36
00:01:55,400 --> 00:01:58,880
Speaker 3: the electrification of the system. Trump's big focus is on

37
00:01:59,080 --> 00:02:04,120
Speaker 3: energy policy, LNG, peture chemicals, chloralkali. Anywhere you look this,

38
00:02:04,280 --> 00:02:07,080
Speaker 3: even this energy revival is going to push power demand

39
00:02:07,200 --> 00:02:11,600
Speaker 3: maturely higher. Industrial growth is extremely healthy and that's the

40
00:02:11,680 --> 00:02:15,600
Speaker 3: key driver of infrastructure needs. So we believe yesterday's sell

41
00:02:15,639 --> 00:02:17,880
Speaker 3: off was well overdone Sorr.

42
00:02:17,960 --> 00:02:21,040
Speaker 5: Within your points there, I think there is an interesting nugget,

43
00:02:21,240 --> 00:02:23,760
Speaker 5: which something is something that people have been talking about,

44
00:02:23,760 --> 00:02:26,520
Speaker 5: which if you had the build out and the pace

45
00:02:26,560 --> 00:02:30,280
Speaker 5: of the buildout of AI with the current capacity for

46
00:02:30,320 --> 00:02:32,920
Speaker 5: the next five years, there is no way that the

47
00:02:33,040 --> 00:02:36,320
Speaker 5: energy infrastructure, even with additions, could support that. Can you

48
00:02:36,360 --> 00:02:38,639
Speaker 5: give us a sense of just even if you did

49
00:02:38,680 --> 00:02:43,000
Speaker 5: reduce the energy demands significantly going forward of AI adoption,

50
00:02:43,080 --> 00:02:45,600
Speaker 5: how you still would have to increase dramatically some of

51
00:02:45,639 --> 00:02:47,919
Speaker 5: the energy production in the United States and globally.

52
00:02:49,000 --> 00:02:50,800
Speaker 3: Yeah, I mean, I think that's a very fair point

53
00:02:51,120 --> 00:02:53,880
Speaker 3: you're bringing up. US infrastructure has not kept up with

54
00:02:53,919 --> 00:02:56,720
Speaker 3: the demand. When you sort of think about electricity consumption

55
00:02:57,120 --> 00:02:59,960
Speaker 3: for the past fifteen years, it's been a decelerating command

56
00:03:00,360 --> 00:03:03,359
Speaker 3: with energy efficiency and demand side management, and then that

57
00:03:03,480 --> 00:03:06,880
Speaker 3: of nowhere, there's this energy revival, there's this industrial revival,

58
00:03:07,160 --> 00:03:09,560
Speaker 3: and the infrastructure in the US is not kept up

59
00:03:09,639 --> 00:03:12,840
Speaker 3: with the demand needs. And this is why many of

60
00:03:12,880 --> 00:03:15,680
Speaker 3: the utilities, the power companies, the ones that we cover,

61
00:03:16,200 --> 00:03:19,840
Speaker 3: are building a massive amount of transmission system, They're building generation.

62
00:03:20,280 --> 00:03:24,120
Speaker 3: We've seen the retirement of coal assets get delayed because

63
00:03:24,160 --> 00:03:24,880
Speaker 3: of this very.

64
00:03:25,080 --> 00:03:26,919
Speaker 4: Type power supply demand environment.

65
00:03:27,000 --> 00:03:29,880
Speaker 3: So long and short of it is, infrastructure has not

66
00:03:29,960 --> 00:03:32,639
Speaker 3: kept up with the demands, and we do not believe

67
00:03:32,680 --> 00:03:35,360
Speaker 3: the news around deep seek is going to impact any

68
00:03:35,400 --> 00:03:36,320
Speaker 3: of those fundamentals.

69
00:03:36,440 --> 00:03:38,760
Speaker 5: That said s aar I guess one of the potential

70
00:03:38,800 --> 00:03:41,760
Speaker 5: headwinds to the entire energy sector has just said. Commodities

71
00:03:41,760 --> 00:03:43,920
Speaker 5: are actually getting cheaper. When it comes to oil prices,

72
00:03:43,920 --> 00:03:46,200
Speaker 5: Sa've been going down. People are getting more efficient at

73
00:03:46,200 --> 00:03:49,160
Speaker 5: producing a lot of energy. How do you dovetail that

74
00:03:49,400 --> 00:03:52,120
Speaker 5: into your optimism at a time where we see the

75
00:03:52,160 --> 00:03:54,520
Speaker 5: actual commodity price is coming down for a whole host

76
00:03:54,520 --> 00:03:55,360
Speaker 5: of different reasons.

77
00:03:56,600 --> 00:03:59,280
Speaker 3: Well, the commodity coming down is necessarily not a bad

78
00:03:59,320 --> 00:04:01,520
Speaker 3: thing for the construms, correct, So, like you know, one

79
00:04:01,520 --> 00:04:05,280
Speaker 3: of the arguments is to meet the needs of US infrastructure,

80
00:04:05,760 --> 00:04:09,480
Speaker 3: small modular reactors likely not a viable option, large scale

81
00:04:09,600 --> 00:04:12,760
Speaker 3: nuclear likely not a viable option. You're not building any

82
00:04:12,760 --> 00:04:15,880
Speaker 3: more coal plants, offshore winds having a lot of hinderances.

83
00:04:16,279 --> 00:04:18,800
Speaker 4: So really, what's going to satisfy the needs in the.

84
00:04:18,760 --> 00:04:22,720
Speaker 3: Near term as a gridge to another technology is natural gas.

85
00:04:23,000 --> 00:04:25,880
Speaker 3: So the more the commodity curves come down, the more

86
00:04:25,920 --> 00:04:29,039
Speaker 3: it becomes economical to build the infrastructure that's needed to

87
00:04:29,080 --> 00:04:32,320
Speaker 3: meet the power demands. So in our viewpoint, the drop

88
00:04:32,360 --> 00:04:35,280
Speaker 3: in the commodity, the drop in natural gas, which is

89
00:04:35,320 --> 00:04:39,240
Speaker 3: deconsolidated from utility spending to begin with, is a very

90
00:04:39,279 --> 00:04:42,880
Speaker 3: big driver for spending needs and it's very pro consumer friendly.

91
00:04:43,320 --> 00:04:45,599
Speaker 6: Is there a line in the stand though, where it's

92
00:04:45,640 --> 00:04:48,600
Speaker 6: good for the consumer, but it still makes sense for

93
00:04:48,680 --> 00:04:52,040
Speaker 6: companies to go out create new utilities to make sure

94
00:04:52,080 --> 00:04:56,039
Speaker 6: that they can drill and get these products to market

95
00:04:56,560 --> 00:04:57,480
Speaker 6: without losing money.

96
00:05:00,000 --> 00:05:03,200
Speaker 3: I think you know the barriers to entry to get

97
00:05:03,240 --> 00:05:04,440
Speaker 3: into the utility industry.

98
00:05:04,440 --> 00:05:06,560
Speaker 4: It's one of the most capital intensive.

99
00:05:06,080 --> 00:05:08,880
Speaker 3: Industries there is, so there is a barrier to entry

100
00:05:08,960 --> 00:05:11,240
Speaker 3: to get in there. I think the point we're just

101
00:05:11,279 --> 00:05:13,760
Speaker 3: trying to bring up is talking to many of these

102
00:05:13,839 --> 00:05:17,640
Speaker 3: hyperscalers that you kind of mentioned talking to the utilities,

103
00:05:18,240 --> 00:05:21,760
Speaker 3: there's a need for speed to market, right because, as

104
00:05:21,800 --> 00:05:25,240
Speaker 3: Microsoft told us specifically on a client call, we're in

105
00:05:25,240 --> 00:05:27,359
Speaker 3: a race to beat China, We're in a race to

106
00:05:27,360 --> 00:05:29,960
Speaker 3: beat the three to four hyperscalers. We are not going

107
00:05:30,040 --> 00:05:31,400
Speaker 3: to pull back spending, right.

108
00:05:31,520 --> 00:05:34,440
Speaker 4: So the point is, is the amount of spending that is.

109
00:05:34,360 --> 00:05:37,880
Speaker 3: Happening on US infrastructure, whether it's AI, whether it's on

110
00:05:37,920 --> 00:05:43,159
Speaker 3: the energy space, whether it's industrial manufacturing, et cetera, has

111
00:05:43,200 --> 00:05:45,960
Speaker 3: to be met with a generation source, right, and so

112
00:05:46,400 --> 00:05:49,080
Speaker 3: there's a lot of money being put into it. I

113
00:05:49,080 --> 00:05:52,680
Speaker 3: think natural gas is clearly the fuel, the bridge fuel

114
00:05:52,760 --> 00:05:55,360
Speaker 3: to meet those needs, which is why there's so much

115
00:05:55,360 --> 00:05:58,400
Speaker 3: investment going into the natural gas space. This is why

116
00:05:58,440 --> 00:06:01,120
Speaker 3: one of the largest renewable develop lupers in the country,

117
00:06:01,160 --> 00:06:05,239
Speaker 3: next to our Energy is now did a ge ge

118
00:06:05,360 --> 00:06:09,160
Speaker 3: deal to build gas. This is why Constellation Energy, the

119
00:06:09,160 --> 00:06:13,960
Speaker 3: biggest nuclear operator, acquired Colpine, the biggest gas operator.

120
00:06:13,440 --> 00:06:14,160
Speaker 4: In the country.

121
00:06:14,400 --> 00:06:18,360
Speaker 3: I think the shifts from decarbonization to resiliency and reliability

122
00:06:18,640 --> 00:06:21,040
Speaker 3: are starting to take shape because I agree with you

123
00:06:21,080 --> 00:06:24,560
Speaker 3: that as you're looking at the demand outlook, the infrastructure

124
00:06:24,560 --> 00:06:26,040
Speaker 3: has not been able to keep up with it.

125
00:06:26,160 --> 00:06:28,800
Speaker 6: Sure how much excitement is driven by politics, because of

126
00:06:28,839 --> 00:06:32,080
Speaker 6: course Trump just last week lifted the permitting freeze that

127
00:06:32,120 --> 00:06:34,760
Speaker 6: we had on LNG applications that were put under the

128
00:06:34,760 --> 00:06:35,600
Speaker 6: Biden administration.

129
00:06:37,200 --> 00:06:39,480
Speaker 4: Yeah, politics is certainly part of it.

130
00:06:39,520 --> 00:06:42,240
Speaker 3: I think under the Trump administration, we have a viewpoint

131
00:06:42,279 --> 00:06:44,400
Speaker 3: that it's really good for energy, right, so when you're

132
00:06:44,440 --> 00:06:47,880
Speaker 3: thinking about carbon rules for natural gas, when you're thinking

133
00:06:47,920 --> 00:06:51,800
Speaker 3: about pipelines, when you're thinking about the LNG markets. This

134
00:06:52,000 --> 00:06:54,280
Speaker 3: clearly going to be a push to drill, drill, driu

135
00:06:54,640 --> 00:06:58,840
Speaker 3: and the focus is becoming energy sort of independent and

136
00:06:58,880 --> 00:07:01,440
Speaker 3: so part of this is but to be honest, like

137
00:07:01,520 --> 00:07:05,279
Speaker 3: even before the Trump administration took the HELM, our viewpoint

138
00:07:05,360 --> 00:07:07,000
Speaker 3: is the demand.

139
00:07:06,680 --> 00:07:09,360
Speaker 4: Picture wasn't going away. There's such a big focus on.

140
00:07:09,640 --> 00:07:13,240
Speaker 3: Shifting manufacturing back to the US, There's such a big

141
00:07:13,280 --> 00:07:17,200
Speaker 3: focus around electrified electrification of the system.

142
00:07:17,640 --> 00:07:20,760
Speaker 4: All that is very much pulls on demand. And that

143
00:07:20,880 --> 00:07:23,760
Speaker 4: is before even the Trump administration took the HELM.

144
00:07:23,920 --> 00:07:26,680
Speaker 3: Now, post Trump, it sort of adds a lot of

145
00:07:26,680 --> 00:07:29,400
Speaker 3: additional drivers to it, which is like what you've highlighted,

146
00:07:30,600 --> 00:07:34,320
Speaker 3: there's going to be a major ease around the energy infrastructure, business, permitting,

147
00:07:34,400 --> 00:07:37,480
Speaker 3: et cetera. Again, all this that you're highlighting is going

148
00:07:37,520 --> 00:07:39,679
Speaker 3: to push power demand growth higher.

149
00:07:39,680 --> 00:07:40,720
Speaker 4: It's going to prompt.

150
00:07:40,520 --> 00:07:43,720
Speaker 3: These utilities to build the infrastructure to meet the needs.

151
00:07:43,920 --> 00:07:46,600
Speaker 2: I shall I appreciate your input and your opinion. Thank you,

152
00:07:46,640 --> 00:08:00,000
Speaker 2: sir Champe, Resident of Gegenheim. So here's the lightest investors

153
00:08:00,080 --> 00:08:04,840
Speaker 2: assessing USAI dominance after Chinese startup Deep Seeks newest AI model,

154
00:08:04,920 --> 00:08:07,760
Speaker 2: triggered a sell off in global equities. Max Ketner of

155
00:08:07,960 --> 00:08:11,200
Speaker 2: HSBC saying yesterday was not a game changer, writing when

156
00:08:11,240 --> 00:08:13,080
Speaker 2: we look at the S and P five hundred breadth,

157
00:08:13,360 --> 00:08:15,760
Speaker 2: it has been quite positive. The equal weighted index went

158
00:08:15,880 --> 00:08:18,640
Speaker 2: up yesterday, not down. We might also see more broadening

159
00:08:18,640 --> 00:08:21,000
Speaker 2: of the market, not only of the index, but also

160
00:08:21,080 --> 00:08:24,960
Speaker 2: of the AI theme to enable us and users. Max

161
00:08:25,040 --> 00:08:27,360
Speaker 2: joined us now for more Max, Welcome to the show, sir.

162
00:08:27,360 --> 00:08:29,240
Speaker 2: I want to pick up on that last point. We've

163
00:08:29,440 --> 00:08:32,240
Speaker 2: talked a lot over the last year about chips, about

164
00:08:32,320 --> 00:08:35,400
Speaker 2: data centers, about energy providers. Do we need to talk

165
00:08:35,440 --> 00:08:38,000
Speaker 2: a little bit more about who will benefit the adopters?

166
00:08:38,080 --> 00:08:39,560
Speaker 2: Is that where you see the trade guming now?

167
00:08:40,480 --> 00:08:40,720
Speaker 3: Yeah?

168
00:08:40,760 --> 00:08:41,120
Speaker 4: I think so.

169
00:08:41,240 --> 00:08:43,320
Speaker 7: I think when we look at the last year, or

170
00:08:43,360 --> 00:08:44,880
Speaker 7: really a year and a half, there was a lot

171
00:08:44,880 --> 00:08:47,760
Speaker 7: of questions, mark question marks on the AI theme, and

172
00:08:47,800 --> 00:08:51,560
Speaker 7: we talked to clients, for example, around the monetization of AI.

173
00:08:51,760 --> 00:08:53,360
Speaker 7: Who can really make money of that?

174
00:08:53,640 --> 00:08:53,800
Speaker 1: Well?

175
00:08:53,880 --> 00:08:56,319
Speaker 7: Number one we have already and we are already seeing,

176
00:08:56,400 --> 00:08:59,040
Speaker 7: even on an index level, we're already starting to see

177
00:08:59,200 --> 00:09:01,959
Speaker 7: I think some product activity gains, some efficiency gains. When

178
00:09:01,960 --> 00:09:03,520
Speaker 7: we look at cross sectors in the S and P,

179
00:09:04,360 --> 00:09:07,640
Speaker 7: there's a bunch of sectors already you know, very very

180
00:09:07,679 --> 00:09:12,520
Speaker 7: clearly deploying AI and clearly having some beneficial sort of

181
00:09:12,760 --> 00:09:16,080
Speaker 7: beneficial factors from that. But most importantly, I think we've

182
00:09:16,080 --> 00:09:18,120
Speaker 7: always had sort of this feeling, Okay, it's really in

183
00:09:18,240 --> 00:09:21,600
Speaker 7: video or maybe two three behemoth that really make money

184
00:09:21,600 --> 00:09:23,840
Speaker 7: off this, but how we're going to make money with

185
00:09:23,920 --> 00:09:26,440
Speaker 7: this on a broader scale. So I don't quite get

186
00:09:26,480 --> 00:09:29,440
Speaker 7: the reaction from yesterday when people say, oh my goodness,

187
00:09:29,440 --> 00:09:33,680
Speaker 7: it puts the whole years exceptionalism case really under threat

188
00:09:33,760 --> 00:09:36,720
Speaker 7: because we've been moaning about it for really more than

189
00:09:36,720 --> 00:09:38,600
Speaker 7: a year that you know, this is not a broad

190
00:09:38,640 --> 00:09:42,559
Speaker 7: based story, and actually across all the names, it's highly

191
00:09:42,679 --> 00:09:45,600
Speaker 7: questionable whether anyone can make money of that. Whereas what

192
00:09:45,640 --> 00:09:48,360
Speaker 7: you're saying now is with that if that really comes

193
00:09:48,360 --> 00:09:52,240
Speaker 7: to fruition that it is much much cheaper, which again

194
00:09:52,400 --> 00:09:55,240
Speaker 7: is actually still remains a heavy, heavy question mark behind that.

195
00:09:55,320 --> 00:09:58,559
Speaker 7: But if that's a theme, then this is a game

196
00:09:58,679 --> 00:10:02,120
Speaker 7: changer actually all sort of the broader sectors to put

197
00:10:02,160 --> 00:10:05,480
Speaker 7: AI to a test into practice and really really get

198
00:10:05,559 --> 00:10:08,360
Speaker 7: some some gains from that, so it should then shift

199
00:10:08,559 --> 00:10:11,280
Speaker 7: more to the AI and ablus that clearly have been

200
00:10:11,360 --> 00:10:13,480
Speaker 7: lagging the trade over the last twelve to fifteen months.

201
00:10:13,600 --> 00:10:16,040
Speaker 5: MAXI sound very optimistic, which is as I would expect

202
00:10:16,080 --> 00:10:18,880
Speaker 5: considering that you've been taking a good dose of Goldilocks

203
00:10:18,920 --> 00:10:21,800
Speaker 5: on steroids. I am wondering, though you talk about it

204
00:10:21,880 --> 00:10:24,319
Speaker 5: might be a game changer, but it's not the game changer,

205
00:10:24,360 --> 00:10:26,520
Speaker 5: and certainly not in a negative way with respect to tech.

206
00:10:26,679 --> 00:10:30,240
Speaker 5: Tariff's not a game changer immigration. The real game changer

207
00:10:30,280 --> 00:10:33,840
Speaker 5: is disinflation. How do you separate out this idea of

208
00:10:33,880 --> 00:10:36,960
Speaker 5: disinflation with growth from these other ideas that are whip

209
00:10:37,040 --> 00:10:40,440
Speaker 5: swing markets, whether it's tech advancement or whether it's tariffs.

210
00:10:41,480 --> 00:10:43,720
Speaker 7: Look, I think on the tech side it really remains

211
00:10:44,000 --> 00:10:46,600
Speaker 7: or on the AI side specifically, I think it really

212
00:10:46,640 --> 00:10:49,280
Speaker 7: remains to be seen whether that is that big game changer.

213
00:10:49,480 --> 00:10:52,120
Speaker 7: If anything, I think that's probably going to be something

214
00:10:52,160 --> 00:10:54,880
Speaker 7: that we will see panning out in the next few years,

215
00:10:55,000 --> 00:10:58,000
Speaker 7: not instantaneously in the next three six months. The same

216
00:10:58,000 --> 00:11:00,240
Speaker 7: thing is on tariffs. We don't know how that will

217
00:11:00,280 --> 00:11:03,880
Speaker 7: pan out, if it comes, how it may come. The

218
00:11:03,920 --> 00:11:07,120
Speaker 7: same thing on immigration on any kind of really big,

219
00:11:07,160 --> 00:11:10,720
Speaker 7: big immigration flows. Well, number one, we've already seen a

220
00:11:10,760 --> 00:11:14,240
Speaker 7: peak in immigration flows in the second quarter last year,

221
00:11:14,280 --> 00:11:17,760
Speaker 7: and ever since it's clearly gone down. So that and

222
00:11:18,040 --> 00:11:21,080
Speaker 7: the inflationary impact on that, whether that's inflationary, and how

223
00:11:21,160 --> 00:11:23,080
Speaker 7: much that's going to be, I think that is much

224
00:11:23,120 --> 00:11:27,079
Speaker 7: more a story for age two, possibly only for age

225
00:11:27,080 --> 00:11:30,120
Speaker 7: one twenty twenty six, but certainly not for the next

226
00:11:30,120 --> 00:11:32,000
Speaker 7: three to six months, because, Lisa, what you were saying,

227
00:11:32,240 --> 00:11:36,200
Speaker 7: the story now is the disinflationary impact from things like

228
00:11:36,280 --> 00:11:39,800
Speaker 7: super co inflation, from the underlying inflation measure from the FED,

229
00:11:40,040 --> 00:11:42,840
Speaker 7: and some of those insurance components that were sort of

230
00:11:42,960 --> 00:11:48,400
Speaker 7: artificially inflating those inflation baskets at the beginning of last

231
00:11:48,440 --> 00:11:51,800
Speaker 7: year that now perhaps not repeating at least to the

232
00:11:51,840 --> 00:11:54,640
Speaker 7: same magnitude like we've had it in the first quarter

233
00:11:54,720 --> 00:11:57,280
Speaker 7: twenty twenty four and first quarter twenty twenty three. I

234
00:11:57,280 --> 00:12:01,240
Speaker 7: think that's the much bigger story, particularly from a timing perspective.

235
00:12:01,280 --> 00:12:03,560
Speaker 7: So to your question, how do you separate them? I

236
00:12:03,600 --> 00:12:06,400
Speaker 7: think people are sort of confusing the timelines a bit.

237
00:12:06,480 --> 00:12:12,079
Speaker 7: What we're discussing about Tariff's immigration, you know, possibly life.

238
00:12:12,600 --> 00:12:15,000
Speaker 6: The President is talking about potentially tariffs as soon as

239
00:12:15,000 --> 00:12:17,320
Speaker 6: this Saturday, and if not a review by April first,

240
00:12:17,320 --> 00:12:19,240
Speaker 6: do not take him seriously or literally.

241
00:12:20,480 --> 00:12:20,520
Speaker 4: No.

242
00:12:20,679 --> 00:12:22,960
Speaker 7: I think a lot of it might be tactics, right.

243
00:12:23,040 --> 00:12:27,079
Speaker 7: We've seen that possibly also last Sunday with Columbia, for example,

244
00:12:27,160 --> 00:12:30,120
Speaker 7: So I don't think it. I think that all let's

245
00:12:30,120 --> 00:12:32,800
Speaker 7: put it away. I think the number one mistake that

246
00:12:32,840 --> 00:12:35,640
Speaker 7: we can make, both on a portfolio basis, but or

247
00:12:35,679 --> 00:12:38,440
Speaker 7: even on a just a trade by trade basis, is

248
00:12:38,480 --> 00:12:42,320
Speaker 7: to trade off every single headline, day by day. Right. Otherwise,

249
00:12:42,360 --> 00:12:44,800
Speaker 7: you know, Sunday evening we would have said, oh, really

250
00:12:44,800 --> 00:12:47,400
Speaker 7: bad on em EM currency is really bad latam, and

251
00:12:47,400 --> 00:12:49,920
Speaker 7: then twelve hours later you would have said, actually, scrap that,

252
00:12:50,040 --> 00:12:53,560
Speaker 7: Let's go the entirely opposite direction. I think you're really

253
00:12:53,679 --> 00:12:57,040
Speaker 7: risking then flip flopping around in terms of your views

254
00:12:57,080 --> 00:13:00,680
Speaker 7: and really trade off every single headline rav then really

255
00:13:01,240 --> 00:13:05,680
Speaker 7: and trade the bigger picture, the underlying inflation and growth picture,

256
00:13:05,720 --> 00:13:09,760
Speaker 7: which again to me really really is sort of outweighing

257
00:13:09,880 --> 00:13:12,000
Speaker 7: those kind of headline risks that we're facing in the

258
00:13:12,000 --> 00:13:12,839
Speaker 7: next three four months.

259
00:13:12,880 --> 00:13:15,040
Speaker 2: A Max got to hear from your Max Canda of

260
00:13:15,200 --> 00:13:27,120
Speaker 2: HSBC the one stop to watch and video recovering after

261
00:13:27,160 --> 00:13:30,200
Speaker 2: its worst day since March twenty twenty. The stop wiping

262
00:13:30,240 --> 00:13:33,160
Speaker 2: out almost six hundred billion dollars in market cap, the

263
00:13:33,240 --> 00:13:36,520
Speaker 2: biggest single day drop ever for a US company. The

264
00:13:36,559 --> 00:13:39,760
Speaker 2: move coming after Deep Sik's cheap AI model fueled concern

265
00:13:40,200 --> 00:13:41,400
Speaker 2: of a US tach dominance.

266
00:13:41,440 --> 00:13:44,280
Speaker 5: So Jim read Over at Deutsche Bank compared the drop

267
00:13:44,360 --> 00:13:48,000
Speaker 5: in market value as being more than the total market

268
00:13:48,000 --> 00:13:51,240
Speaker 5: cap of Exxonmobile and Master Cards. You can basically put

269
00:13:51,360 --> 00:13:54,079
Speaker 5: most companies into that bucket that the one day drop

270
00:13:54,080 --> 00:13:58,839
Speaker 5: in valuation is a commensurate or superior surpassing in some capacity.

271
00:13:59,080 --> 00:14:01,680
Speaker 5: What does this say? Number one, it says how high elevation,

272
00:14:01,840 --> 00:14:05,440
Speaker 5: how high valuations had gotten. And b it talks about

273
00:14:05,520 --> 00:14:07,600
Speaker 5: consensus trades, which is the reason why you're hearing a

274
00:14:07,600 --> 00:14:10,040
Speaker 5: lot about bubbles in two thousand like behavior and all

275
00:14:10,040 --> 00:14:12,600
Speaker 5: sorts of studies. I expect the history onics to maybe

276
00:14:12,640 --> 00:14:15,600
Speaker 5: die down, but there has been a mentality shift and

277
00:14:15,640 --> 00:14:17,400
Speaker 5: it seems like it may not go away so quickly.

278
00:14:17,559 --> 00:14:19,960
Speaker 2: The President wank in yesterday as wow. Donald Trump, addressing

279
00:14:19,960 --> 00:14:23,280
Speaker 2: concerns about Deep Sak killing the Chinese startups progress in AI,

280
00:14:23,480 --> 00:14:26,680
Speaker 2: a positive Trump posts are delivering a warning send the companies.

281
00:14:26,720 --> 00:14:29,920
Speaker 2: Apparent breakthrough should be a wake up call for US companies.

282
00:14:30,040 --> 00:14:32,360
Speaker 6: He basically wants US companies to be laser focused on this.

283
00:14:32,480 --> 00:14:35,160
Speaker 6: He says we should be out in front of China.

284
00:14:35,200 --> 00:14:37,880
Speaker 6: He even said Chinese officials have told him himself that

285
00:14:37,920 --> 00:14:40,920
Speaker 6: the US has the best scientist. Also weighing in on

286
00:14:40,960 --> 00:14:44,280
Speaker 6: this was the new AI cryptos are within the administration.

287
00:14:44,360 --> 00:14:46,960
Speaker 6: That's David Sachs. He went on Twitter and he was

288
00:14:47,000 --> 00:14:50,320
Speaker 6: talking about how Trump was right to rescind the Biden

289
00:14:50,360 --> 00:14:54,080
Speaker 6: executive order, which he says hamstrung American AI companies. Without

290
00:14:54,120 --> 00:14:57,680
Speaker 6: asking whether China would do the same, He said, obviously not.

291
00:14:57,800 --> 00:15:00,280
Speaker 6: And I'm confident the US and in the US and

292
00:15:00,360 --> 00:15:03,720
Speaker 6: we cannot be complacent. This goes back to Trump's push

293
00:15:04,080 --> 00:15:06,160
Speaker 6: last week ahead of all this with stargate. But how

294
00:15:06,200 --> 00:15:07,800
Speaker 6: much more money and how much more effort is really

295
00:15:07,840 --> 00:15:08,440
Speaker 6: going to go towards it.

296
00:15:08,560 --> 00:15:10,400
Speaker 2: We'll catch up with Bernstein later. They put out a

297
00:15:10,400 --> 00:15:13,240
Speaker 2: great note yesterday. They said we believe that one deep

298
00:15:13,280 --> 00:15:15,800
Speaker 2: Seak did not build Open Ai for five million dollars.

299
00:15:16,000 --> 00:15:18,440
Speaker 2: Two the models look fantastic, but we don't think they

300
00:15:18,440 --> 00:15:21,440
Speaker 2: are miracles. And three the resulting Twitter verse panic over

301
00:15:21,480 --> 00:15:23,160
Speaker 2: the weekend seems overblown.

302
00:15:23,320 --> 00:15:25,720
Speaker 5: Basically, it doesn't change the whole model, and that's the

303
00:15:25,720 --> 00:15:29,000
Speaker 5: reason why you see the little bit of a balance today. Nonetheless,

304
00:15:29,280 --> 00:15:31,920
Speaker 5: there has been a sort of denial of the shift

305
00:15:32,000 --> 00:15:34,080
Speaker 5: away from just investing in a lot of chips to

306
00:15:34,160 --> 00:15:37,040
Speaker 5: the broadening out. This may open up that discussion a

307
00:15:37,080 --> 00:15:37,640
Speaker 5: little bit more.

308
00:15:37,760 --> 00:15:39,640
Speaker 2: You'll notice how towhere some dollar strength just want to

309
00:15:39,640 --> 00:15:42,040
Speaker 2: squeeze in this story. Here's the why. President Trump also

310
00:15:42,120 --> 00:15:44,280
Speaker 2: saying he wants to enact across the board tariffs that

311
00:15:44,320 --> 00:15:47,120
Speaker 2: are quote much bigger than two point five percent. His

312
00:15:47,200 --> 00:15:50,400
Speaker 2: comment's coming after The Financial Times reported Treasury Secretary scomp

313
00:15:50,440 --> 00:15:53,120
Speaker 2: Person is backing universal tariffs on US imports starting at

314
00:15:53,160 --> 00:15:56,400
Speaker 2: two point five percent and then maybe rising over time.

315
00:15:56,600 --> 00:15:58,920
Speaker 2: The main event, though stocks are raising some of yesterday's

316
00:15:58,920 --> 00:16:01,760
Speaker 2: losses after China, these AI startup deep Seak sparked a

317
00:16:01,800 --> 00:16:05,200
Speaker 2: one trillion dollar routing the US tech stocks. Matt Bryson

318
00:16:05,240 --> 00:16:08,160
Speaker 2: of Webbush writing, the AI race is still more about

319
00:16:08,480 --> 00:16:11,880
Speaker 2: being the first to create models that realize greater value

320
00:16:11,880 --> 00:16:16,480
Speaker 2: from AI versus lowering cost and software efficiency yields historically

321
00:16:16,480 --> 00:16:19,720
Speaker 2: have led to more hardware spending and not less because

322
00:16:19,720 --> 00:16:24,080
Speaker 2: the ROI of investing in hardware only increases. Madam pleased

323
00:16:24,080 --> 00:16:26,320
Speaker 2: to say, join us right now for more. Matt, Welcome

324
00:16:26,360 --> 00:16:28,400
Speaker 2: to the program. I shared a quote from Nvidia a

325
00:16:28,440 --> 00:16:30,280
Speaker 2: little bit earlier this morning. I'd like to read it

326
00:16:30,320 --> 00:16:32,040
Speaker 2: again and get your thoughts on it. When they say

327
00:16:32,040 --> 00:16:34,680
Speaker 2: that deep Seek's work illustrates how new models can be

328
00:16:34,760 --> 00:16:38,640
Speaker 2: created leveraging widely available models and compute that is fully

329
00:16:38,720 --> 00:16:41,760
Speaker 2: export control compliant. Do you believe what you have seen

330
00:16:42,000 --> 00:16:44,120
Speaker 2: is fully export control compliant?

331
00:16:45,480 --> 00:16:48,200
Speaker 1: I mean, it's really hard for me sitting here in

332
00:16:48,240 --> 00:16:55,320
Speaker 1: Boston to say what resources Deep Seek used. Obviously, we've

333
00:16:55,360 --> 00:17:00,160
Speaker 1: all seen the speculation that they had process there is

334
00:17:00,200 --> 00:17:03,880
Speaker 1: the were an expert compliant, that they were using processors

335
00:17:03,920 --> 00:17:07,800
Speaker 1: that they had before the export restrictions went into place,

336
00:17:08,440 --> 00:17:10,640
Speaker 1: and that the cost of their model was a whole

337
00:17:10,640 --> 00:17:12,159
Speaker 1: lot more than five million dollars.

338
00:17:12,600 --> 00:17:14,960
Speaker 5: That's said mattter. Is there sort of a takeaway here

339
00:17:15,520 --> 00:17:18,160
Speaker 5: that we really have changed the mentality and maybe companies

340
00:17:18,200 --> 00:17:22,000
Speaker 5: won't be as investing as much in capital expenditures to

341
00:17:22,000 --> 00:17:24,800
Speaker 5: build out AI because there is an example of how

342
00:17:24,840 --> 00:17:26,879
Speaker 5: things could be done more efficiently going forward.

343
00:17:27,920 --> 00:17:33,320
Speaker 1: So I still stick by what I wrote, which is

344
00:17:33,400 --> 00:17:37,159
Speaker 1: the question is or the thought process is AI changes

345
00:17:37,760 --> 00:17:42,359
Speaker 1: how technology works. And so if you think AI is

346
00:17:42,400 --> 00:17:46,199
Speaker 1: going to enable a great new technology like autonomous driving,

347
00:17:47,240 --> 00:17:51,480
Speaker 1: it's not that it's too expensive right now, that it

348
00:17:51,480 --> 00:17:55,439
Speaker 1: doesn't have the capabilities. And so the investment you're putting

349
00:17:55,480 --> 00:17:58,959
Speaker 1: into your data centers is to enable that technology. And

350
00:17:59,000 --> 00:18:01,120
Speaker 1: you want to be first thatechnology because we've seen time

351
00:18:01,119 --> 00:18:05,000
Speaker 1: and time again when you have leaders in technology, they

352
00:18:05,040 --> 00:18:09,199
Speaker 1: tend to stay leaders. Microsoft, Google, Amazon, you can go

353
00:18:09,280 --> 00:18:11,000
Speaker 1: down the list that said.

354
00:18:11,200 --> 00:18:14,200
Speaker 5: Mark Bennioff of Salesforce had a great quote, this is

355
00:18:14,280 --> 00:18:17,159
Speaker 5: kind of classic in our industry. The pioneers are not

356
00:18:17,280 --> 00:18:20,199
Speaker 5: the ones who end up being the victors. Matt, how

357
00:18:20,280 --> 00:18:22,360
Speaker 5: much are we learning that some of the biggest gainers

358
00:18:22,359 --> 00:18:25,280
Speaker 5: so far on the AI craze are not necessarily going

359
00:18:25,320 --> 00:18:27,320
Speaker 5: to be the big gainers? Was this the Cisco moment

360
00:18:27,600 --> 00:18:28,919
Speaker 5: for the likes of Nvidia?

361
00:18:30,720 --> 00:18:34,840
Speaker 1: So the question then, I think is did we overbuild?

362
00:18:35,400 --> 00:18:36,600
Speaker 4: So you look back to two.

363
00:18:36,560 --> 00:18:40,639
Speaker 1: Thousand, did we simply build too much infrastructure like we

364
00:18:40,680 --> 00:18:42,879
Speaker 1: did back in two thousand and we'll never use it?

365
00:18:44,400 --> 00:18:47,040
Speaker 1: I guess I would be surprised I think that the

366
00:18:47,200 --> 00:18:51,800
Speaker 1: differences in two thousand we created the backbone. Nineteen nine nine,

367
00:18:51,840 --> 00:18:54,280
Speaker 1: nineteen ninety eight, we've created the backbone the internet. The

368
00:18:54,280 --> 00:18:57,239
Speaker 1: Internet was working at that point. Again, with AI, we

369
00:18:57,320 --> 00:19:01,960
Speaker 1: still haven't really realized what the benefits of AI are.

370
00:19:02,480 --> 00:19:06,040
Speaker 1: So I think until we see, you know, here's a

371
00:19:06,080 --> 00:19:09,560
Speaker 1: great new chatbot, or here's a great new personal assistant,

372
00:19:09,680 --> 00:19:12,439
Speaker 1: and I'm buying a new iPhone because it's changing my

373
00:19:12,520 --> 00:19:15,440
Speaker 1: life with this personal assistant, I think until then, it's

374
00:19:15,440 --> 00:19:17,160
Speaker 1: really hard to say that we've invested enough.

375
00:19:17,440 --> 00:19:19,200
Speaker 6: Well, where do you think we are now in the cycle?

376
00:19:19,320 --> 00:19:21,720
Speaker 6: Is there a chance that it's over invested.

377
00:19:23,320 --> 00:19:27,880
Speaker 1: I think there's a chance that that next technology takes

378
00:19:27,920 --> 00:19:30,600
Speaker 1: longer to show up. So we get to the end

379
00:19:30,640 --> 00:19:34,359
Speaker 1: of this year and there isn't a breakthrough in autonomous driving,

380
00:19:34,359 --> 00:19:37,000
Speaker 1: There isn't a breakthrough and a personal assistant, and so

381
00:19:37,119 --> 00:19:40,080
Speaker 1: companies look and say, it is that goal that we've

382
00:19:40,080 --> 00:19:44,919
Speaker 1: been shooting for, is it really achievable the way that

383
00:19:44,920 --> 00:19:47,480
Speaker 1: we're going about it? And people rethink that. And that's

384
00:19:47,520 --> 00:19:51,480
Speaker 1: been the concern with Nvidio last year heading into this year,

385
00:19:52,200 --> 00:19:54,840
Speaker 1: that at some point you can't justify the investment. But

386
00:19:54,960 --> 00:19:58,040
Speaker 1: I don't think this changes that goal or the amount

387
00:19:58,080 --> 00:20:00,000
Speaker 1: that people are willing to invest get to that goal,

388
00:20:00,920 --> 00:20:05,760
Speaker 1: because again, if you create a tonments driving the returns

389
00:20:05,760 --> 00:20:10,960
Speaker 1: are amazing. It's kind of if you became dominant search

390
00:20:11,040 --> 00:20:13,359
Speaker 1: market back in the early two thousand and two thousand

391
00:20:13,400 --> 00:20:14,080
Speaker 1: and one time frame.

392
00:20:14,480 --> 00:20:18,120
Speaker 6: Well, you talk about the fact that in this intermediate term,

393
00:20:18,359 --> 00:20:20,760
Speaker 6: if it is more efficient AI, like we're seeing from

394
00:20:20,880 --> 00:20:24,640
Speaker 6: deep Seek that on the margins we could see increase adoption.

395
00:20:25,000 --> 00:20:26,560
Speaker 6: What does that mean? What does that look like?

396
00:20:27,840 --> 00:20:33,040
Speaker 1: Yeah, so if you think about AI right, part of

397
00:20:33,040 --> 00:20:35,720
Speaker 1: it is part of the question is the expense. So

398
00:20:35,720 --> 00:20:37,960
Speaker 1: I think about it in search for for instance, I

399
00:20:38,000 --> 00:20:41,160
Speaker 1: think people have said a search on using AI something

400
00:20:41,240 --> 00:20:44,879
Speaker 1: like ten x a traditional Google search. So if all

401
00:20:44,920 --> 00:20:48,200
Speaker 1: of a sudden I can bring the pricing down by

402
00:20:49,320 --> 00:20:52,840
Speaker 1: ninety percent, then you know, maybe I moved my infrastructure

403
00:20:52,960 --> 00:20:57,639
Speaker 1: from traditional search to two AI search and then moving

404
00:20:57,680 --> 00:21:02,879
Speaker 1: forward beyond that. So I create this this this new app.

405
00:21:02,960 --> 00:21:06,439
Speaker 1: Lets let's say it's again a personal assistant on my phone.

406
00:21:07,040 --> 00:21:11,680
Speaker 1: If if it's easier, if it costs less to UH

407
00:21:11,760 --> 00:21:14,320
Speaker 1: support that app from a hardware perspective on my phone,

408
00:21:14,800 --> 00:21:18,719
Speaker 1: then they'll be quicker adoption internal leads to you know,

409
00:21:19,000 --> 00:21:22,200
Speaker 1: a faster refresh cycle. More seven conductor is getting sold.

410
00:21:23,080 --> 00:21:25,040
Speaker 1: And so that's why I'd say in the intermediate term

411
00:21:25,280 --> 00:21:29,000
Speaker 1: lowering costs. We've seen it again and again server virtualization

412
00:21:29,119 --> 00:21:32,399
Speaker 1: for instance, it leads to faster adoption.

413
00:21:33,040 --> 00:21:35,080
Speaker 2: I just want to squeeze this in. This does not

414
00:21:35,160 --> 00:21:37,440
Speaker 2: raise questions about valuations as some of these firms though,

415
00:21:38,040 --> 00:21:39,680
Speaker 2: do we have to sort of readdress that just a

416
00:21:39,720 --> 00:21:42,520
Speaker 2: little bit, even if you can be optimistic about the future.

417
00:21:44,280 --> 00:21:47,840
Speaker 1: I mean, I think the valuation question it is always

418
00:21:48,000 --> 00:21:52,680
Speaker 1: is always a fair question, and certainly markets have particularly

419
00:21:52,720 --> 00:21:58,840
Speaker 1: recently fluctuted wildly. But no, again, I think the value

420
00:21:59,000 --> 00:22:01,280
Speaker 1: the value of these firm is what we might be

421
00:22:01,320 --> 00:22:03,240
Speaker 1: able to change in the future dot not how much

422
00:22:03,240 --> 00:22:04,040
Speaker 1: it costs to get there.

423
00:22:04,320 --> 00:22:06,520
Speaker 2: Matt, I appreciate your time and your impus, sir. Thank you,

424
00:22:06,560 --> 00:22:10,040
Speaker 2: Matt Brice and there of webbers. This is the Bloomberg

425
00:22:10,080 --> 00:22:14,720
Speaker 2: Surveillance podcast, bringing you the best in markets, economics, and geopolitics.

426
00:22:15,040 --> 00:22:17,520
Speaker 2: You can watch the show live on Bloomberg TV weekday

427
00:22:17,560 --> 00:22:20,800
Speaker 2: mornings from six am to nine am Eastern. Subscribe to

428
00:22:20,800 --> 00:22:24,399
Speaker 2: the podcast on Apple, Spotify, or anywhere else you listen, and,

429
00:22:24,440 --> 00:22:27,560
Speaker 2: as always on the Bloomberg Terminal and the Bloomberg Business app.