WEBVTT - Bloomberg Surveillance TV: January 28, 2025 0:00:00.080 --> 0:00:06.760 Bloomberg Audio Studios, Podcasts, radio News. 0:00:11.600 --> 0:00:15.440 This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 0:00:15.440 --> 0:00:18.680 with Lisa Bromwitz and Amrie Hordern. Join us each day 0:00:18.720 --> 0:00:22.239 for insight from the best in markets, economics, and geopolitics 0:00:22.400 --> 0:00:24.880 from our global headquarters in New York City. We are 0:00:24.920 --> 0:00:27.640 live on Bloomberg Television weekday mornings from six to nine 0:00:27.680 --> 0:00:31.280 am Eastern. Subscribe to the podcast on Apple, Spotify or 0:00:31.280 --> 0:00:33.919 anywhere else you listen, and as always on the Bloomberg 0:00:34.000 --> 0:00:37.960 Terminal and the Bloomberg Business Apple's turned back to Deep 0:00:38.000 --> 0:00:40.800 Seek's market impact of the last twenty four hours, losses 0:00:40.840 --> 0:00:44.640 extending beyond AI and ship giants as global investors reassess 0:00:44.720 --> 0:00:47.680 the sustainability of seeming the endless spending in the sector 0:00:47.960 --> 0:00:51.960 AI infrastructure companies including Constellation Energy and Vistra taking a 0:00:52.040 --> 0:00:54.320 hit during yesterday's market term or for more on there. 0:00:54.520 --> 0:00:58.480 We're joined by Sharp Pureza of Guggenheimshah. Welcome to the program, sir, 0:00:58.560 --> 0:01:00.520 I just want to understand from your perspect if Hagen 0:01:00.600 --> 0:01:03.080 reacted to the news of not just yesterday, but of 0:01:03.080 --> 0:01:05.280 the past week or so, and whether it upends your 0:01:05.319 --> 0:01:07.080 thesis for twenty twenty five. 0:01:08.360 --> 0:01:11.040 No thanks for having me on, but to be honest, 0:01:11.319 --> 0:01:14.560 we believe yesterday's reaction in the news over the weekend 0:01:15.000 --> 0:01:17.640 with certainly a knee jerk reaction in the utility and 0:01:17.680 --> 0:01:20.440 power space. One of the things we've been highlighting to 0:01:20.800 --> 0:01:23.440 investors and clients is that this is some of the 0:01:23.520 --> 0:01:27.080 strongest power demand environment we have seen in over twenty years. 0:01:26.840 --> 0:01:27.759 Of covering the space. 0:01:28.080 --> 0:01:31.920 The US is essentially decoupling from China. In our view, 0:01:31.959 --> 0:01:35.160 and we don't quite agree with our competitors. Ten to 0:01:35.240 --> 0:01:38.600 thirteen percent of power demand today is coming. 0:01:38.360 --> 0:01:39.959 From AI on average. 0:01:40.040 --> 0:01:43.600 That's nationally, So everywhere you look, the demands for energy 0:01:43.640 --> 0:01:45.039 and power continue to grow. 0:01:45.360 --> 0:01:47.400 It's a supercycle. It's structural. 0:01:47.720 --> 0:01:51.160 So whether you're looking at the domestic manufacturing space, whether 0:01:51.200 --> 0:01:55.279 you're looking at the onshoring and reshoring of the manufacturing sector, 0:01:55.400 --> 0:01:58.880 the electrification of the system. Trump's big focus is on 0:01:59.080 --> 0:02:04.120 energy policy, LNG, peture chemicals, chloralkali. Anywhere you look this, 0:02:04.280 --> 0:02:07.080 even this energy revival is going to push power demand 0:02:07.200 --> 0:02:11.600 maturely higher. Industrial growth is extremely healthy and that's the 0:02:11.680 --> 0:02:15.600 key driver of infrastructure needs. So we believe yesterday's sell 0:02:15.639 --> 0:02:17.880 off was well overdone Sorr. 0:02:17.960 --> 0:02:21.040 Within your points there, I think there is an interesting nugget, 0:02:21.240 --> 0:02:23.760 which something is something that people have been talking about, 0:02:23.760 --> 0:02:26.520 which if you had the build out and the pace 0:02:26.560 --> 0:02:30.280 of the buildout of AI with the current capacity for 0:02:30.320 --> 0:02:32.920 the next five years, there is no way that the 0:02:33.040 --> 0:02:36.320 energy infrastructure, even with additions, could support that. Can you 0:02:36.360 --> 0:02:38.639 give us a sense of just even if you did 0:02:38.680 --> 0:02:43.000 reduce the energy demands significantly going forward of AI adoption, 0:02:43.080 --> 0:02:45.600 how you still would have to increase dramatically some of 0:02:45.639 --> 0:02:47.919 the energy production in the United States and globally. 0:02:49.000 --> 0:02:50.800 Yeah, I mean, I think that's a very fair point 0:02:51.120 --> 0:02:53.880 you're bringing up. US infrastructure has not kept up with 0:02:53.919 --> 0:02:56.720 the demand. When you sort of think about electricity consumption 0:02:57.120 --> 0:02:59.960 for the past fifteen years, it's been a decelerating command 0:03:00.360 --> 0:03:03.359 with energy efficiency and demand side management, and then that 0:03:03.480 --> 0:03:06.880 of nowhere, there's this energy revival, there's this industrial revival, 0:03:07.160 --> 0:03:09.560 and the infrastructure in the US is not kept up 0:03:09.639 --> 0:03:12.840 with the demand needs. And this is why many of 0:03:12.880 --> 0:03:15.680 the utilities, the power companies, the ones that we cover, 0:03:16.200 --> 0:03:19.840 are building a massive amount of transmission system, They're building generation. 0:03:20.280 --> 0:03:24.120 We've seen the retirement of coal assets get delayed because 0:03:24.160 --> 0:03:24.880 of this very. 0:03:25.080 --> 0:03:26.919 Type power supply demand environment. 0:03:27.000 --> 0:03:29.880 So long and short of it is, infrastructure has not 0:03:29.960 --> 0:03:32.639 kept up with the demands, and we do not believe 0:03:32.680 --> 0:03:35.360 the news around deep seek is going to impact any 0:03:35.400 --> 0:03:36.320 of those fundamentals. 0:03:36.440 --> 0:03:38.760 That said s aar I guess one of the potential 0:03:38.800 --> 0:03:41.760 headwinds to the entire energy sector has just said. Commodities 0:03:41.760 --> 0:03:43.920 are actually getting cheaper. When it comes to oil prices, 0:03:43.920 --> 0:03:46.200 Sa've been going down. People are getting more efficient at 0:03:46.200 --> 0:03:49.160 producing a lot of energy. How do you dovetail that 0:03:49.400 --> 0:03:52.120 into your optimism at a time where we see the 0:03:52.160 --> 0:03:54.520 actual commodity price is coming down for a whole host 0:03:54.520 --> 0:03:55.360 of different reasons. 0:03:56.600 --> 0:03:59.280 Well, the commodity coming down is necessarily not a bad 0:03:59.320 --> 0:04:01.520 thing for the construms, correct, So, like you know, one 0:04:01.520 --> 0:04:05.280 of the arguments is to meet the needs of US infrastructure, 0:04:05.760 --> 0:04:09.480 small modular reactors likely not a viable option, large scale 0:04:09.600 --> 0:04:12.760 nuclear likely not a viable option. You're not building any 0:04:12.760 --> 0:04:15.880 more coal plants, offshore winds having a lot of hinderances. 0:04:16.279 --> 0:04:18.800 So really, what's going to satisfy the needs in the. 0:04:18.760 --> 0:04:22.720 Near term as a gridge to another technology is natural gas. 0:04:23.000 --> 0:04:25.880 So the more the commodity curves come down, the more 0:04:25.920 --> 0:04:29.039 it becomes economical to build the infrastructure that's needed to 0:04:29.080 --> 0:04:32.320 meet the power demands. So in our viewpoint, the drop 0:04:32.360 --> 0:04:35.280 in the commodity, the drop in natural gas, which is 0:04:35.320 --> 0:04:39.240 deconsolidated from utility spending to begin with, is a very 0:04:39.279 --> 0:04:42.880 big driver for spending needs and it's very pro consumer friendly. 0:04:43.320 --> 0:04:45.599 Is there a line in the stand though, where it's 0:04:45.640 --> 0:04:48.600 good for the consumer, but it still makes sense for 0:04:48.680 --> 0:04:52.040 companies to go out create new utilities to make sure 0:04:52.080 --> 0:04:56.039 that they can drill and get these products to market 0:04:56.560 --> 0:04:57.480 without losing money. 0:05:00.000 --> 0:05:03.200 I think you know the barriers to entry to get 0:05:03.240 --> 0:05:04.440 into the utility industry. 0:05:04.440 --> 0:05:06.560 It's one of the most capital intensive. 0:05:06.080 --> 0:05:08.880 Industries there is, so there is a barrier to entry 0:05:08.960 --> 0:05:11.240 to get in there. I think the point we're just 0:05:11.279 --> 0:05:13.760 trying to bring up is talking to many of these 0:05:13.839 --> 0:05:17.640 hyperscalers that you kind of mentioned talking to the utilities, 0:05:18.240 --> 0:05:21.760 there's a need for speed to market, right because, as 0:05:21.800 --> 0:05:25.240 Microsoft told us specifically on a client call, we're in 0:05:25.240 --> 0:05:27.359 a race to beat China, We're in a race to 0:05:27.360 --> 0:05:29.960 beat the three to four hyperscalers. We are not going 0:05:30.040 --> 0:05:31.400 to pull back spending, right. 0:05:31.520 --> 0:05:34.440 So the point is, is the amount of spending that is. 0:05:34.360 --> 0:05:37.880 Happening on US infrastructure, whether it's AI, whether it's on 0:05:37.920 --> 0:05:43.159 the energy space, whether it's industrial manufacturing, et cetera, has 0:05:43.200 --> 0:05:45.960 to be met with a generation source, right, and so 0:05:46.400 --> 0:05:49.080 there's a lot of money being put into it. I 0:05:49.080 --> 0:05:52.680 think natural gas is clearly the fuel, the bridge fuel 0:05:52.760 --> 0:05:55.360 to meet those needs, which is why there's so much 0:05:55.360 --> 0:05:58.400 investment going into the natural gas space. This is why 0:05:58.440 --> 0:06:01.120 one of the largest renewable develop lupers in the country, 0:06:01.160 --> 0:06:05.239 next to our Energy is now did a ge ge 0:06:05.360 --> 0:06:09.160 deal to build gas. This is why Constellation Energy, the 0:06:09.160 --> 0:06:13.960 biggest nuclear operator, acquired Colpine, the biggest gas operator. 0:06:13.440 --> 0:06:14.160 In the country. 0:06:14.400 --> 0:06:18.360 I think the shifts from decarbonization to resiliency and reliability 0:06:18.640 --> 0:06:21.040 are starting to take shape because I agree with you 0:06:21.080 --> 0:06:24.560 that as you're looking at the demand outlook, the infrastructure 0:06:24.560 --> 0:06:26.040 has not been able to keep up with it. 0:06:26.160 --> 0:06:28.800 Sure how much excitement is driven by politics, because of 0:06:28.839 --> 0:06:32.080 course Trump just last week lifted the permitting freeze that 0:06:32.120 --> 0:06:34.760 we had on LNG applications that were put under the 0:06:34.760 --> 0:06:35.600 Biden administration. 0:06:37.200 --> 0:06:39.480 Yeah, politics is certainly part of it. 0:06:39.520 --> 0:06:42.240 I think under the Trump administration, we have a viewpoint 0:06:42.279 --> 0:06:44.400 that it's really good for energy, right, so when you're 0:06:44.440 --> 0:06:47.880 thinking about carbon rules for natural gas, when you're thinking 0:06:47.920 --> 0:06:51.800 about pipelines, when you're thinking about the LNG markets. This 0:06:52.000 --> 0:06:54.280 clearly going to be a push to drill, drill, driu 0:06:54.640 --> 0:06:58.840 and the focus is becoming energy sort of independent and 0:06:58.880 --> 0:07:01.440 so part of this is but to be honest, like 0:07:01.520 --> 0:07:05.279 even before the Trump administration took the HELM, our viewpoint 0:07:05.360 --> 0:07:07.000 is the demand. 0:07:06.680 --> 0:07:09.360 Picture wasn't going away. There's such a big focus on. 0:07:09.640 --> 0:07:13.240 Shifting manufacturing back to the US, There's such a big 0:07:13.280 --> 0:07:17.200 focus around electrified electrification of the system. 0:07:17.640 --> 0:07:20.760 All that is very much pulls on demand. And that 0:07:20.880 --> 0:07:23.760 is before even the Trump administration took the HELM. 0:07:23.920 --> 0:07:26.680 Now, post Trump, it sort of adds a lot of 0:07:26.680 --> 0:07:29.400 additional drivers to it, which is like what you've highlighted, 0:07:30.600 --> 0:07:34.320 there's going to be a major ease around the energy infrastructure, business, permitting, 0:07:34.400 --> 0:07:37.480 et cetera. Again, all this that you're highlighting is going 0:07:37.520 --> 0:07:39.679 to push power demand growth higher. 0:07:39.680 --> 0:07:40.720 It's going to prompt. 0:07:40.520 --> 0:07:43.720 These utilities to build the infrastructure to meet the needs. 0:07:43.920 --> 0:07:46.600 I shall I appreciate your input and your opinion. Thank you, 0:07:46.640 --> 0:08:00.000 sir Champe, Resident of Gegenheim. So here's the lightest investors 0:08:00.080 --> 0:08:04.840 assessing USAI dominance after Chinese startup Deep Seeks newest AI model, 0:08:04.920 --> 0:08:07.760 triggered a sell off in global equities. Max Ketner of 0:08:07.960 --> 0:08:11.200 HSBC saying yesterday was not a game changer, writing when 0:08:11.240 --> 0:08:13.080 we look at the S and P five hundred breadth, 0:08:13.360 --> 0:08:15.760 it has been quite positive. The equal weighted index went 0:08:15.880 --> 0:08:18.640 up yesterday, not down. We might also see more broadening 0:08:18.640 --> 0:08:21.000 of the market, not only of the index, but also 0:08:21.080 --> 0:08:24.960 of the AI theme to enable us and users. Max 0:08:25.040 --> 0:08:27.360 joined us now for more Max, Welcome to the show, sir. 0:08:27.360 --> 0:08:29.240 I want to pick up on that last point. We've 0:08:29.440 --> 0:08:32.240 talked a lot over the last year about chips, about 0:08:32.320 --> 0:08:35.400 data centers, about energy providers. Do we need to talk 0:08:35.440 --> 0:08:38.000 a little bit more about who will benefit the adopters? 0:08:38.080 --> 0:08:39.560 Is that where you see the trade guming now? 0:08:40.480 --> 0:08:40.720 Yeah? 0:08:40.760 --> 0:08:41.120 I think so. 0:08:41.240 --> 0:08:43.320 I think when we look at the last year, or 0:08:43.360 --> 0:08:44.880 really a year and a half, there was a lot 0:08:44.880 --> 0:08:47.760 of questions, mark question marks on the AI theme, and 0:08:47.800 --> 0:08:51.560 we talked to clients, for example, around the monetization of AI. 0:08:51.760 --> 0:08:53.360 Who can really make money of that? 0:08:53.640 --> 0:08:53.800 Well? 0:08:53.880 --> 0:08:56.319 Number one we have already and we are already seeing, 0:08:56.400 --> 0:08:59.040 even on an index level, we're already starting to see 0:08:59.200 --> 0:09:01.959 I think some product activity gains, some efficiency gains. When 0:09:01.960 --> 0:09:03.520 we look at cross sectors in the S and P, 0:09:04.360 --> 0:09:07.640 there's a bunch of sectors already you know, very very 0:09:07.679 --> 0:09:12.520 clearly deploying AI and clearly having some beneficial sort of 0:09:12.760 --> 0:09:16.080 beneficial factors from that. But most importantly, I think we've 0:09:16.080 --> 0:09:18.120 always had sort of this feeling, Okay, it's really in 0:09:18.240 --> 0:09:21.600 video or maybe two three behemoth that really make money 0:09:21.600 --> 0:09:23.840 off this, but how we're going to make money with 0:09:23.920 --> 0:09:26.440 this on a broader scale. So I don't quite get 0:09:26.480 --> 0:09:29.440 the reaction from yesterday when people say, oh my goodness, 0:09:29.440 --> 0:09:33.680 it puts the whole years exceptionalism case really under threat 0:09:33.760 --> 0:09:36.720 because we've been moaning about it for really more than 0:09:36.720 --> 0:09:38.600 a year that you know, this is not a broad 0:09:38.640 --> 0:09:42.559 based story, and actually across all the names, it's highly 0:09:42.679 --> 0:09:45.600 questionable whether anyone can make money of that. Whereas what 0:09:45.640 --> 0:09:48.360 you're saying now is with that if that really comes 0:09:48.360 --> 0:09:52.240 to fruition that it is much much cheaper, which again 0:09:52.400 --> 0:09:55.240 is actually still remains a heavy, heavy question mark behind that. 0:09:55.320 --> 0:09:58.559 But if that's a theme, then this is a game 0:09:58.679 --> 0:10:02.120 changer actually all sort of the broader sectors to put 0:10:02.160 --> 0:10:05.480 AI to a test into practice and really really get 0:10:05.559 --> 0:10:08.360 some some gains from that, so it should then shift 0:10:08.559 --> 0:10:11.280 more to the AI and ablus that clearly have been 0:10:11.360 --> 0:10:13.480 lagging the trade over the last twelve to fifteen months. 0:10:13.600 --> 0:10:16.040 MAXI sound very optimistic, which is as I would expect 0:10:16.080 --> 0:10:18.880 considering that you've been taking a good dose of Goldilocks 0:10:18.920 --> 0:10:21.800 on steroids. I am wondering, though you talk about it 0:10:21.880 --> 0:10:24.319 might be a game changer, but it's not the game changer, 0:10:24.360 --> 0:10:26.520 and certainly not in a negative way with respect to tech. 0:10:26.679 --> 0:10:30.240 Tariff's not a game changer immigration. The real game changer 0:10:30.280 --> 0:10:33.840 is disinflation. How do you separate out this idea of 0:10:33.880 --> 0:10:36.960 disinflation with growth from these other ideas that are whip 0:10:37.040 --> 0:10:40.440 swing markets, whether it's tech advancement or whether it's tariffs. 0:10:41.480 --> 0:10:43.720 Look, I think on the tech side it really remains 0:10:44.000 --> 0:10:46.600 or on the AI side specifically, I think it really 0:10:46.640 --> 0:10:49.280 remains to be seen whether that is that big game changer. 0:10:49.480 --> 0:10:52.120 If anything, I think that's probably going to be something 0:10:52.160 --> 0:10:54.880 that we will see panning out in the next few years, 0:10:55.000 --> 0:10:58.000 not instantaneously in the next three six months. The same 0:10:58.000 --> 0:11:00.240 thing is on tariffs. We don't know how that will 0:11:00.280 --> 0:11:03.880 pan out, if it comes, how it may come. The 0:11:03.920 --> 0:11:07.120 same thing on immigration on any kind of really big, 0:11:07.160 --> 0:11:10.720 big immigration flows. Well, number one, we've already seen a 0:11:10.760 --> 0:11:14.240 peak in immigration flows in the second quarter last year, 0:11:14.280 --> 0:11:17.760 and ever since it's clearly gone down. So that and 0:11:18.040 --> 0:11:21.080 the inflationary impact on that, whether that's inflationary, and how 0:11:21.160 --> 0:11:23.080 much that's going to be, I think that is much 0:11:23.120 --> 0:11:27.079 more a story for age two, possibly only for age 0:11:27.080 --> 0:11:30.120 one twenty twenty six, but certainly not for the next 0:11:30.120 --> 0:11:32.000 three to six months, because, Lisa, what you were saying, 0:11:32.240 --> 0:11:36.200 the story now is the disinflationary impact from things like 0:11:36.280 --> 0:11:39.800 super co inflation, from the underlying inflation measure from the FED, 0:11:40.040 --> 0:11:42.840 and some of those insurance components that were sort of 0:11:42.960 --> 0:11:48.400 artificially inflating those inflation baskets at the beginning of last 0:11:48.440 --> 0:11:51.800 year that now perhaps not repeating at least to the 0:11:51.840 --> 0:11:54.640 same magnitude like we've had it in the first quarter 0:11:54.720 --> 0:11:57.280 twenty twenty four and first quarter twenty twenty three. I 0:11:57.280 --> 0:12:01.240 think that's the much bigger story, particularly from a timing perspective. 0:12:01.280 --> 0:12:03.560 So to your question, how do you separate them? I 0:12:03.600 --> 0:12:06.400 think people are sort of confusing the timelines a bit. 0:12:06.480 --> 0:12:12.079 What we're discussing about Tariff's immigration, you know, possibly life. 0:12:12.600 --> 0:12:15.000 The President is talking about potentially tariffs as soon as 0:12:15.000 --> 0:12:17.320 this Saturday, and if not a review by April first, 0:12:17.320 --> 0:12:19.240 do not take him seriously or literally. 0:12:20.480 --> 0:12:20.520 No. 0:12:20.679 --> 0:12:22.960 I think a lot of it might be tactics, right. 0:12:23.040 --> 0:12:27.079 We've seen that possibly also last Sunday with Columbia, for example, 0:12:27.160 --> 0:12:30.120 So I don't think it. I think that all let's 0:12:30.120 --> 0:12:32.800 put it away. I think the number one mistake that 0:12:32.840 --> 0:12:35.640 we can make, both on a portfolio basis, but or 0:12:35.679 --> 0:12:38.440 even on a just a trade by trade basis, is 0:12:38.480 --> 0:12:42.320 to trade off every single headline, day by day. Right. Otherwise, 0:12:42.360 --> 0:12:44.800 you know, Sunday evening we would have said, oh, really 0:12:44.800 --> 0:12:47.400 bad on em EM currency is really bad latam, and 0:12:47.400 --> 0:12:49.920 then twelve hours later you would have said, actually, scrap that, 0:12:50.040 --> 0:12:53.560 Let's go the entirely opposite direction. I think you're really 0:12:53.679 --> 0:12:57.040 risking then flip flopping around in terms of your views 0:12:57.080 --> 0:13:00.680 and really trade off every single headline rav then really 0:13:01.240 --> 0:13:05.680 and trade the bigger picture, the underlying inflation and growth picture, 0:13:05.720 --> 0:13:09.760 which again to me really really is sort of outweighing 0:13:09.880 --> 0:13:12.000 those kind of headline risks that we're facing in the 0:13:12.000 --> 0:13:12.839 next three four months. 0:13:12.880 --> 0:13:15.040 A Max got to hear from your Max Canda of 0:13:15.200 --> 0:13:27.120 HSBC the one stop to watch and video recovering after 0:13:27.160 --> 0:13:30.200 its worst day since March twenty twenty. The stop wiping 0:13:30.240 --> 0:13:33.160 out almost six hundred billion dollars in market cap, the 0:13:33.240 --> 0:13:36.520 biggest single day drop ever for a US company. The 0:13:36.559 --> 0:13:39.760 move coming after Deep Sik's cheap AI model fueled concern 0:13:40.200 --> 0:13:41.400 of a US tach dominance. 0:13:41.440 --> 0:13:44.280 So Jim read Over at Deutsche Bank compared the drop 0:13:44.360 --> 0:13:48.000 in market value as being more than the total market 0:13:48.000 --> 0:13:51.240 cap of Exxonmobile and Master Cards. You can basically put 0:13:51.360 --> 0:13:54.079 most companies into that bucket that the one day drop 0:13:54.080 --> 0:13:58.839 in valuation is a commensurate or superior surpassing in some capacity. 0:13:59.080 --> 0:14:01.680 What does this say? Number one, it says how high elevation, 0:14:01.840 --> 0:14:05.440 how high valuations had gotten. And b it talks about 0:14:05.520 --> 0:14:07.600 consensus trades, which is the reason why you're hearing a 0:14:07.600 --> 0:14:10.040 lot about bubbles in two thousand like behavior and all 0:14:10.040 --> 0:14:12.600 sorts of studies. I expect the history onics to maybe 0:14:12.640 --> 0:14:15.600 die down, but there has been a mentality shift and 0:14:15.640 --> 0:14:17.400 it seems like it may not go away so quickly. 0:14:17.559 --> 0:14:19.960 The President wank in yesterday as wow. Donald Trump, addressing 0:14:19.960 --> 0:14:23.280 concerns about Deep Sak killing the Chinese startups progress in AI, 0:14:23.480 --> 0:14:26.680 a positive Trump posts are delivering a warning send the companies. 0:14:26.720 --> 0:14:29.920 Apparent breakthrough should be a wake up call for US companies. 0:14:30.040 --> 0:14:32.360 He basically wants US companies to be laser focused on this. 0:14:32.480 --> 0:14:35.160 He says we should be out in front of China. 0:14:35.200 --> 0:14:37.880 He even said Chinese officials have told him himself that 0:14:37.920 --> 0:14:40.920 the US has the best scientist. Also weighing in on 0:14:40.960 --> 0:14:44.280 this was the new AI cryptos are within the administration. 0:14:44.360 --> 0:14:46.960 That's David Sachs. He went on Twitter and he was 0:14:47.000 --> 0:14:50.320 talking about how Trump was right to rescind the Biden 0:14:50.360 --> 0:14:54.080 executive order, which he says hamstrung American AI companies. Without 0:14:54.120 --> 0:14:57.680 asking whether China would do the same, He said, obviously not. 0:14:57.800 --> 0:15:00.280 And I'm confident the US and in the US and 0:15:00.360 --> 0:15:03.720 we cannot be complacent. This goes back to Trump's push 0:15:04.080 --> 0:15:06.160 last week ahead of all this with stargate. But how 0:15:06.200 --> 0:15:07.800 much more money and how much more effort is really 0:15:07.840 --> 0:15:08.440 going to go towards it. 0:15:08.560 --> 0:15:10.400 We'll catch up with Bernstein later. They put out a 0:15:10.400 --> 0:15:13.240 great note yesterday. They said we believe that one deep 0:15:13.280 --> 0:15:15.800 Seak did not build Open Ai for five million dollars. 0:15:16.000 --> 0:15:18.440 Two the models look fantastic, but we don't think they 0:15:18.440 --> 0:15:21.440 are miracles. And three the resulting Twitter verse panic over 0:15:21.480 --> 0:15:23.160 the weekend seems overblown. 0:15:23.320 --> 0:15:25.720 Basically, it doesn't change the whole model, and that's the 0:15:25.720 --> 0:15:29.000 reason why you see the little bit of a balance today. Nonetheless, 0:15:29.280 --> 0:15:31.920 there has been a sort of denial of the shift 0:15:32.000 --> 0:15:34.080 away from just investing in a lot of chips to 0:15:34.160 --> 0:15:37.040 the broadening out. This may open up that discussion a 0:15:37.080 --> 0:15:37.640 little bit more. 0:15:37.760 --> 0:15:39.640 You'll notice how towhere some dollar strength just want to 0:15:39.640 --> 0:15:42.040 squeeze in this story. Here's the why. President Trump also 0:15:42.120 --> 0:15:44.280 saying he wants to enact across the board tariffs that 0:15:44.320 --> 0:15:47.120 are quote much bigger than two point five percent. His 0:15:47.200 --> 0:15:50.400 comment's coming after The Financial Times reported Treasury Secretary scomp 0:15:50.440 --> 0:15:53.120 Person is backing universal tariffs on US imports starting at 0:15:53.160 --> 0:15:56.400 two point five percent and then maybe rising over time. 0:15:56.600 --> 0:15:58.920 The main event, though stocks are raising some of yesterday's 0:15:58.920 --> 0:16:01.760 losses after China, these AI startup deep Seak sparked a 0:16:01.800 --> 0:16:05.200 one trillion dollar routing the US tech stocks. Matt Bryson 0:16:05.240 --> 0:16:08.160 of Webbush writing, the AI race is still more about 0:16:08.480 --> 0:16:11.880 being the first to create models that realize greater value 0:16:11.880 --> 0:16:16.480 from AI versus lowering cost and software efficiency yields historically 0:16:16.480 --> 0:16:19.720 have led to more hardware spending and not less because 0:16:19.720 --> 0:16:24.080 the ROI of investing in hardware only increases. Madam pleased 0:16:24.080 --> 0:16:26.320 to say, join us right now for more. Matt, Welcome 0:16:26.360 --> 0:16:28.400 to the program. I shared a quote from Nvidia a 0:16:28.440 --> 0:16:30.280 little bit earlier this morning. I'd like to read it 0:16:30.320 --> 0:16:32.040 again and get your thoughts on it. When they say 0:16:32.040 --> 0:16:34.680 that deep Seek's work illustrates how new models can be 0:16:34.760 --> 0:16:38.640 created leveraging widely available models and compute that is fully 0:16:38.720 --> 0:16:41.760 export control compliant. Do you believe what you have seen 0:16:42.000 --> 0:16:44.120 is fully export control compliant? 0:16:45.480 --> 0:16:48.200 I mean, it's really hard for me sitting here in 0:16:48.240 --> 0:16:55.320 Boston to say what resources Deep Seek used. Obviously, we've 0:16:55.360 --> 0:17:00.160 all seen the speculation that they had process there is 0:17:00.200 --> 0:17:03.880 the were an expert compliant, that they were using processors 0:17:03.920 --> 0:17:07.800 that they had before the export restrictions went into place, 0:17:08.440 --> 0:17:10.640 and that the cost of their model was a whole 0:17:10.640 --> 0:17:12.159 lot more than five million dollars. 0:17:12.600 --> 0:17:14.960 That's said mattter. Is there sort of a takeaway here 0:17:15.520 --> 0:17:18.160 that we really have changed the mentality and maybe companies 0:17:18.200 --> 0:17:22.000 won't be as investing as much in capital expenditures to 0:17:22.000 --> 0:17:24.800 build out AI because there is an example of how 0:17:24.840 --> 0:17:26.879 things could be done more efficiently going forward. 0:17:27.920 --> 0:17:33.320 So I still stick by what I wrote, which is 0:17:33.400 --> 0:17:37.159 the question is or the thought process is AI changes 0:17:37.760 --> 0:17:42.359 how technology works. And so if you think AI is 0:17:42.400 --> 0:17:46.199 going to enable a great new technology like autonomous driving, 0:17:47.240 --> 0:17:51.480 it's not that it's too expensive right now, that it 0:17:51.480 --> 0:17:55.439 doesn't have the capabilities. And so the investment you're putting 0:17:55.480 --> 0:17:58.959 into your data centers is to enable that technology. And 0:17:59.000 --> 0:18:01.120 you want to be first thatechnology because we've seen time 0:18:01.119 --> 0:18:05.000 and time again when you have leaders in technology, they 0:18:05.040 --> 0:18:09.199 tend to stay leaders. Microsoft, Google, Amazon, you can go 0:18:09.280 --> 0:18:11.000 down the list that said. 0:18:11.200 --> 0:18:14.200 Mark Bennioff of Salesforce had a great quote, this is 0:18:14.280 --> 0:18:17.159 kind of classic in our industry. The pioneers are not 0:18:17.280 --> 0:18:20.199 the ones who end up being the victors. Matt, how 0:18:20.280 --> 0:18:22.360 much are we learning that some of the biggest gainers 0:18:22.359 --> 0:18:25.280 so far on the AI craze are not necessarily going 0:18:25.320 --> 0:18:27.320 to be the big gainers? Was this the Cisco moment 0:18:27.600 --> 0:18:28.919 for the likes of Nvidia? 0:18:30.720 --> 0:18:34.840 So the question then, I think is did we overbuild? 0:18:35.400 --> 0:18:36.600 So you look back to two. 0:18:36.560 --> 0:18:40.639 Thousand, did we simply build too much infrastructure like we 0:18:40.680 --> 0:18:42.879 did back in two thousand and we'll never use it? 0:18:44.400 --> 0:18:47.040 I guess I would be surprised I think that the 0:18:47.200 --> 0:18:51.800 differences in two thousand we created the backbone. Nineteen nine nine, 0:18:51.840 --> 0:18:54.280 nineteen ninety eight, we've created the backbone the internet. The 0:18:54.280 --> 0:18:57.239 Internet was working at that point. Again, with AI, we 0:18:57.320 --> 0:19:01.960 still haven't really realized what the benefits of AI are. 0:19:02.480 --> 0:19:06.040 So I think until we see, you know, here's a 0:19:06.080 --> 0:19:09.560 great new chatbot, or here's a great new personal assistant, 0:19:09.680 --> 0:19:12.439 and I'm buying a new iPhone because it's changing my 0:19:12.520 --> 0:19:15.440 life with this personal assistant, I think until then, it's 0:19:15.440 --> 0:19:17.160 really hard to say that we've invested enough. 0:19:17.440 --> 0:19:19.200 Well, where do you think we are now in the cycle? 0:19:19.320 --> 0:19:21.720 Is there a chance that it's over invested. 0:19:23.320 --> 0:19:27.880 I think there's a chance that that next technology takes 0:19:27.920 --> 0:19:30.600 longer to show up. So we get to the end 0:19:30.640 --> 0:19:34.359 of this year and there isn't a breakthrough in autonomous driving, 0:19:34.359 --> 0:19:37.000 There isn't a breakthrough and a personal assistant, and so 0:19:37.119 --> 0:19:40.080 companies look and say, it is that goal that we've 0:19:40.080 --> 0:19:44.919 been shooting for, is it really achievable the way that 0:19:44.920 --> 0:19:47.480 we're going about it? And people rethink that. And that's 0:19:47.520 --> 0:19:51.480 been the concern with Nvidio last year heading into this year, 0:19:52.200 --> 0:19:54.840 that at some point you can't justify the investment. But 0:19:54.960 --> 0:19:58.040 I don't think this changes that goal or the amount 0:19:58.080 --> 0:20:00.000 that people are willing to invest get to that goal, 0:20:00.920 --> 0:20:05.760 because again, if you create a tonments driving the returns 0:20:05.760 --> 0:20:10.960 are amazing. It's kind of if you became dominant search 0:20:11.040 --> 0:20:13.359 market back in the early two thousand and two thousand 0:20:13.400 --> 0:20:14.080 and one time frame. 0:20:14.480 --> 0:20:18.120 Well, you talk about the fact that in this intermediate term, 0:20:18.359 --> 0:20:20.760 if it is more efficient AI, like we're seeing from 0:20:20.880 --> 0:20:24.640 deep Seek that on the margins we could see increase adoption. 0:20:25.000 --> 0:20:26.560 What does that mean? What does that look like? 0:20:27.840 --> 0:20:33.040 Yeah, so if you think about AI right, part of 0:20:33.040 --> 0:20:35.720 it is part of the question is the expense. So 0:20:35.720 --> 0:20:37.960 I think about it in search for for instance, I 0:20:38.000 --> 0:20:41.160 think people have said a search on using AI something 0:20:41.240 --> 0:20:44.879 like ten x a traditional Google search. So if all 0:20:44.920 --> 0:20:48.200