WEBVTT - Bloomberg Surveillance TV: December 4th, 2025 0:00:02.400 --> 0:00:06.760 Bloomberg Audio Studios, Podcasts, radio news. 0:00:11.680 --> 0:00:15.480 This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 0:00:15.520 --> 0:00:18.720 with Lisa Bromwitz and Amerie Hordern. Join us each day 0:00:18.760 --> 0:00:22.280 for insight from the best in markets, economics, and geopolitics 0:00:22.440 --> 0:00:24.880 from our global headquarters in New York City. We are 0:00:24.960 --> 0:00:27.680 live on Bloomberg Television weekday mornings from six to nine 0:00:27.720 --> 0:00:31.319 am Eastern. Subscribe to the podcast on Apple, Spotify or 0:00:31.320 --> 0:00:33.960 anywhere else you listen, and as always on the Bloomberg 0:00:34.040 --> 0:00:35.880 Terminal and the Bloomberg Business app. 0:00:37.000 --> 0:00:40.880 Sanal Desiah, Franklin Templeton writing another FED rate cut next 0:00:40.880 --> 0:00:44.319 week seems to have been fully discounted. This FED has 0:00:44.400 --> 0:00:49.240 proven to be very reluctant to disappoint markets, Sanal joins us. Now, Sanal, 0:00:49.400 --> 0:00:51.200 you've been saying, and thank you so much for being 0:00:51.200 --> 0:00:51.880 here this morning. 0:00:52.320 --> 0:00:53.040 Great to be here. 0:00:53.240 --> 0:00:55.400 You've been saying that you think it's a mistake that 0:00:55.440 --> 0:00:58.280 you don't think this is an economy that requires another 0:00:58.360 --> 0:01:01.600 rate cut. Why do you think the market hasn't responded 0:01:01.640 --> 0:01:04.800 more negatively to the likelihood that isn't just what they're 0:01:04.840 --> 0:01:05.440 going to get. 0:01:06.120 --> 0:01:08.840 I don't think you're going to get a look, we're 0:01:08.880 --> 0:01:12.840 on the borderline of what isn't isn't acceptable. I think 0:01:12.920 --> 0:01:15.959 as far as the market's concerned in particular, remember we're 0:01:16.000 --> 0:01:19.679 still dealing and we're just coming out of a data vacuum, 0:01:19.800 --> 0:01:22.640 right we're just emerging from that. I think we get 0:01:22.640 --> 0:01:25.280 into the first half of next year and the Fed 0:01:25.280 --> 0:01:27.720 would have cut fifty basis points this year. I think 0:01:27.720 --> 0:01:29.880 the market's assumption that we're going to get three four 0:01:30.120 --> 0:01:35.120 more rate cuts next year, that's I think completely unclear 0:01:35.120 --> 0:01:35.319 to me. 0:01:35.400 --> 0:01:35.720 Right now. 0:01:35.720 --> 0:01:37.240 The first half of next year I think is going 0:01:37.280 --> 0:01:41.240 to be really strong from a growth perspective, and potentially 0:01:41.360 --> 0:01:45.400 if we actually get those two thousand dollars fifteen hundred 0:01:45.440 --> 0:01:50.560 dollars tariff rebait checks going around, that means you're you're 0:01:50.560 --> 0:01:52.720 going to have tailwinds not just a growth but also 0:01:52.800 --> 0:01:53.320 to inflation. 0:01:53.560 --> 0:01:55.840 So where is the inflationary pressure going to come from? 0:01:55.880 --> 0:01:57.640 Because right now it's not coming as much from the 0:01:57.640 --> 0:02:00.920 housing sector. We've seen rents actually decline in number of places, 0:02:01.320 --> 0:02:03.840 huge push to bring down energy costs, maybe not on 0:02:03.880 --> 0:02:07.400 the electricity side. What's the biggest inflationary impulse here? 0:02:07.640 --> 0:02:10.480 Can I Can I turn that on its head? Wait, Lisa, 0:02:10.760 --> 0:02:13.679 where has the disinflation been? Do you know since the 0:02:13.720 --> 0:02:16.160 middle of twenty twenty three, we've been bouncing along at 0:02:16.160 --> 0:02:19.440 basically three percent, We've dropped by a few tenths, we've 0:02:19.440 --> 0:02:22.160 gone up by a few tenths. We're running at a 0:02:22.240 --> 0:02:26.000 headline of basically three percent. Disinflation stopped two and a 0:02:26.040 --> 0:02:29.160 half years ago. Now it's against that background that I'm 0:02:29.200 --> 0:02:34.440 looking at expansionary physical policy, potentially a boom coming from 0:02:34.560 --> 0:02:39.280 CAPEX and AI, and we're going to get I firmly 0:02:39.320 --> 0:02:42.880 believe that one of the main drivers of that regional 0:02:43.000 --> 0:02:46.040 spike that we saw a few years ago in inflation 0:02:46.840 --> 0:02:49.799 was those fourteen hundred dollars checks which got sent out. 0:02:49.880 --> 0:02:52.519 And now we're talking about checks again, and where is 0:02:52.560 --> 0:02:54.280 the inflation going to come from? I think it's demand 0:02:54.360 --> 0:02:55.160 side pressures. 0:02:55.480 --> 0:02:58.760 Do you agree with what Lisa Shalatte told us last hour, 0:02:58.840 --> 0:03:01.160 which is basically, if we get a new FED chair, 0:03:01.240 --> 0:03:03.360 actually earlier this hour, if we get a new FED chair, 0:03:04.000 --> 0:03:05.560 potentially one of the first things we're going to do 0:03:05.680 --> 0:03:09.760 is in the policy towards three percent inflation target instead 0:03:09.760 --> 0:03:11.839 of two, basically accepting three as the new two. 0:03:12.240 --> 0:03:15.600 Haven't we already. I'm just asking you seriously. It's two 0:03:15.600 --> 0:03:18.320 and a half years and the FED. The FED has 0:03:18.360 --> 0:03:21.400 cut by next week it will be one hundred and 0:03:21.480 --> 0:03:25.160 fifty basis points while being fifty percent above it above 0:03:25.160 --> 0:03:27.600 its target. So if I think about one hundred basis 0:03:27.600 --> 0:03:31.920 points we got last year, it was against the background 0:03:31.960 --> 0:03:34.760 of higher inflation than we are at today. So I 0:03:34.800 --> 0:03:38.320 guess where I'm coming from. Is all this focus on 0:03:38.360 --> 0:03:40.960 whether the new FED chair is going to drive this 0:03:41.120 --> 0:03:42.360 Fed dubvish. 0:03:42.560 --> 0:03:43.880 It's moot we have. 0:03:43.880 --> 0:03:44.640 A Dubvish FED. 0:03:44.720 --> 0:03:45.560 I've said it before. 0:03:46.320 --> 0:03:50.120 Last Talkish FED governor we had was Paul Vulco, and 0:03:50.480 --> 0:03:53.200 that's maybe okay. But I'm just saying that if we 0:03:53.240 --> 0:03:57.360 are running around, you know, bouncing along three and then 0:03:57.440 --> 0:03:59.800 you get some drive, you could get a pickup not 0:03:59.840 --> 0:04:03.120 to six seven, but maybe to three and a half four. 0:04:03.480 --> 0:04:05.960 I don't know, and I just don't know that it 0:04:06.000 --> 0:04:08.680 will be the type of backdrop against which we can 0:04:08.720 --> 0:04:12.440 get the aggressive kind of rate cuts that there's a. 0:04:12.480 --> 0:04:15.000 Bar next year. As long as they cut next week, 0:04:15.040 --> 0:04:16.839 the bar next year is going to be much higher. 0:04:17.680 --> 0:04:20.080 I think it is higher if we are correct in 0:04:20.200 --> 0:04:24.920 terms of those tailwinds to growth. Now, you know, many 0:04:25.000 --> 0:04:29.040 things can go completely wrong. Nobody anticipated COVID, for example. 0:04:29.040 --> 0:04:30.960 There are many things which can go wrong. But if 0:04:31.000 --> 0:04:33.240 I look at what we have right now, if I 0:04:33.360 --> 0:04:36.320 look at the kapex plans, which four hundred and fifteen 0:04:36.800 --> 0:04:40.040 billion this year, five hundred odds next year. I mean, 0:04:40.120 --> 0:04:42.919 just to put this into perspective, Germany is going to 0:04:42.920 --> 0:04:46.480 do one trillion euros over ten years. The private sector 0:04:46.480 --> 0:04:48.800 in the US is doing a delta of about a 0:04:48.839 --> 0:04:51.440 trillion in two. Of course it's going to have a 0:04:51.440 --> 0:04:52.160 growth impact. 0:04:52.480 --> 0:04:55.840 So why not just go wholeheartedly into risk assets and 0:04:55.880 --> 0:04:59.880 to go into speculative grade bonds because ultimately it's either 0:05:00.080 --> 0:05:03.000 fed put if things deteriorate, or it's an acceleration of growth, 0:05:03.120 --> 0:05:05.200 or make these companies more able to repay their debts. 0:05:05.279 --> 0:05:08.560 I think valuations valuations, there is a certain question of 0:05:08.680 --> 0:05:11.560 absolute risk. I don't think you buy the entire market. 0:05:11.800 --> 0:05:14.640 I still believe in being aggressively neutral. I think the 0:05:14.680 --> 0:05:17.760 curve is going to sleep without a doubt. In terms 0:05:17.960 --> 0:05:20.640 of the risks to the scenario, I don't think the 0:05:20.720 --> 0:05:23.080 risks are going to be coming mass from a massive 0:05:23.200 --> 0:05:26.960 uptake in defaults until the bottom drops out of the economy. 0:05:26.960 --> 0:05:28.800 That's what I'd be looking for, maybe not even the 0:05:28.839 --> 0:05:32.120 bottom dropping out, but significant weakness, which we are not 0:05:32.160 --> 0:05:37.480 currently anticipating. But do you go whole hog in, No, 0:05:37.720 --> 0:05:42.279 because spreads are tight, right, so the valuations for fixed 0:05:42.279 --> 0:05:44.200 income as a whole. As I'm looking into next year, 0:05:44.440 --> 0:05:47.479 I'm going to get clipping coupon, taking income cliping coupon, 0:05:47.640 --> 0:05:51.440 But you know, not anticipating a massive rally from where 0:05:51.440 --> 0:05:52.159 we are right now. 0:05:52.560 --> 0:05:53.200 Stay with us. 0:05:53.520 --> 0:05:56.080 More Bloomberg surveillance coming up after this. 0:06:05.839 --> 0:06:09.360 Rolling in Binkie Chada of Deutsche Bank with the most 0:06:09.440 --> 0:06:11.680 bullish take out there, calling for the S and P 0:06:11.800 --> 0:06:14.839 five hundred to reach eight thousand by the end of 0:06:14.920 --> 0:06:17.840 next year. Writing this in twenty twenty six, we see 0:06:17.920 --> 0:06:22.880 robust earnings growth and equity valuations remaining elevated. Banky joins us. Now, Banky, 0:06:22.920 --> 0:06:24.919 good morning, thank you for being with us. Good morning, 0:06:25.160 --> 0:06:28.760 so having me what makes you so incredibly bullish given 0:06:29.000 --> 0:06:31.920 what we're seeing right now, which is that winners don't 0:06:31.920 --> 0:06:33.760 take all, or they might take all, but there still 0:06:33.760 --> 0:06:36.279 are a lot of losers in the AI space that 0:06:36.400 --> 0:06:37.760 has been driving a lot of the games. 0:06:37.800 --> 0:06:40.680 So far sure, So you know, I'm not sure that 0:06:40.720 --> 0:06:45.279 I would characterize my outlook as being so bullish. We 0:06:45.400 --> 0:06:48.920 have fourteen percent earnings growth for next year. We had 0:06:49.000 --> 0:06:51.840 fourteen percent earnings growth in the third quarter. We're looking 0:06:51.839 --> 0:06:53.400 for about fourteen percent. 0:06:53.120 --> 0:06:54.160 In the fourth quarter. 0:06:54.600 --> 0:06:57.200 So from an earnings point of view, you know, it's 0:06:57.520 --> 0:07:01.400 not unreasonable. I would say if you think about what 0:07:01.520 --> 0:07:03.960 average earnings growth for the S and P five hundred 0:07:04.240 --> 0:07:07.760 is outside of recessions, it's eleven percent. So we've been 0:07:07.760 --> 0:07:10.560 bobbing up and down basically around that level for the 0:07:10.640 --> 0:07:13.840 last two two and a half years. So moving up 0:07:13.920 --> 0:07:16.040 just a little bit, we were just a little bit lower, 0:07:16.080 --> 0:07:18.760 So I would argue it's just a little bit higher. 0:07:21.080 --> 0:07:24.440 We you know, in terms of the price outlook or 0:07:24.440 --> 0:07:26.600 the S and P five hundred target, we don't do 0:07:26.680 --> 0:07:30.200 earnings and valuation. We think valuation is more a result. 0:07:30.440 --> 0:07:32.520 We do our price target on the basis of our 0:07:32.560 --> 0:07:37.000 demand supply framework has three elements. Basically, what is existing 0:07:37.080 --> 0:07:40.280 equity money doing, is there new money coming in, and 0:07:40.400 --> 0:07:43.360 what's happening on the supply side, which is the buy back. 0:07:43.520 --> 0:07:45.960 So the buybacks are tied to earnings, so you're can 0:07:46.000 --> 0:07:49.800 have forty percent earnings growth. We're talking about gross buybacks 0:07:49.800 --> 0:07:53.360 of about one point four trillion dollars next year, and 0:07:53.440 --> 0:07:57.680 that's with holding the buy back payout ratio flat. If 0:07:57.680 --> 0:08:00.840 we go to where I began, which is what is 0:08:00.960 --> 0:08:07.960 existing equity money doing, a discretionary or fundamentals based investors 0:08:08.080 --> 0:08:11.320 positioning is neutral to slightly underweight. 0:08:11.920 --> 0:08:14.320 So in terms of the risks that everybody. 0:08:14.040 --> 0:08:17.360 Is talking about, I would say the fundamentals based equity 0:08:17.360 --> 0:08:22.800 investors are actually focused and positioned for those risks. So 0:08:22.800 --> 0:08:25.920 I would say that the wall of worry is really high. 0:08:25.680 --> 0:08:27.840 Yeah, you haven't mentioned the US economy or the growth 0:08:27.840 --> 0:08:28.640 backdrop once. 0:08:30.960 --> 0:08:35.960 Our outlook is for growth actually to pick up a 0:08:36.000 --> 0:08:39.120 little bit, and that has to do with some of 0:08:39.160 --> 0:08:43.280 the modalities basically of the OBBA and if you believe that, 0:08:43.760 --> 0:08:45.800 you know, people don't respond to the tax rate and 0:08:45.840 --> 0:08:47.440 until it's refund time. 0:08:47.240 --> 0:08:49.880 And they see their checks. But that's sort of just 0:08:49.920 --> 0:08:51.040 sort of the distribution. 0:08:52.120 --> 0:08:54.280 I would say, you know, if I look at the 0:08:54.360 --> 0:08:58.200 last two and a half years, we're talking about median 0:08:58.520 --> 0:09:02.679 GDP growth of two point nine percent, so let's call 0:09:02.760 --> 0:09:05.360 it three percent, So that's pretty robust. 0:09:06.360 --> 0:09:07.960 But I would say even bigger picture. 0:09:08.160 --> 0:09:10.720 You know, keep in mind that for the last two years, 0:09:11.160 --> 0:09:18.840 the macro consensus has very systematically underestimated macro growth, and 0:09:18.880 --> 0:09:21.440 it's you know, we're talking about trend growth of two 0:09:21.440 --> 0:09:24.400 two and a half percent. If you underestimate by one 0:09:24.440 --> 0:09:27.560 percent for two and a half years, that's kind of 0:09:27.559 --> 0:09:29.720 a big number, is the way I would put it. 0:09:29.800 --> 0:09:34.640 So I would say the market, the macro consensus, our 0:09:34.720 --> 0:09:38.040 economists a little bit less, so you know, are still 0:09:38.160 --> 0:09:39.600 very much focused on the risks. 0:09:39.760 --> 0:09:42.760 So the equity market has to climb basically. 0:09:42.720 --> 0:09:46.360 You know, the traditional wall of worry, and I think 0:09:46.400 --> 0:09:50.880 it's actually positioned for that. And so I mean, you know, 0:09:50.880 --> 0:09:53.040 if you look at our positioning measures, we are sort 0:09:53.040 --> 0:09:55.200 of in the middle just going to the top, and 0:09:55.200 --> 0:09:58.600 the market actually getting bullish from and positioning in a 0:09:58.600 --> 0:10:01.040 bullish way. I mean, it's nine percent just from here 0:10:01.080 --> 0:10:03.280 to the top. I mean, if I look at basically 0:10:03.760 --> 0:10:06.120 the buybacks, you know they're going to give you around 0:10:06.200 --> 0:10:08.120 ten or eleven percent by themselves. 0:10:08.160 --> 0:10:09.960 So you put those two things together. 0:10:10.000 --> 0:10:13.000 At the world where the new money, basically all asset 0:10:13.080 --> 0:10:17.200 classes are benefiting from this big boom that has its 0:10:17.240 --> 0:10:20.840 basically roots back in the pandemic when households ended up 0:10:20.880 --> 0:10:24.040 with basically way too much cash, about two and a 0:10:24.040 --> 0:10:27.520 half trillion dollars in excess of trend holdings. And so 0:10:28.000 --> 0:10:32.000 the new you know, from new income and new savings, 0:10:32.480 --> 0:10:36.680 if you're already to overweight cash, it is going to 0:10:36.679 --> 0:10:39.680 go into financial assets as long as the economy is okay. 0:10:40.440 --> 0:10:43.040 And that's exactly what's been happening. But it's been happening 0:10:43.080 --> 0:10:45.320 for two years. And so the question is, you know, 0:10:45.360 --> 0:10:48.280 you can look at a chart of household cash holdings 0:10:48.320 --> 0:10:52.959 relative to the trend line and it's sort of at 0:10:53.400 --> 0:10:57.439 twenty twenty eight levels already, So it's got some room. 0:10:57.240 --> 0:10:59.040 To really feel like you're trying to convince us, even 0:10:59.040 --> 0:11:01.440 though you're a very high price target compared to your peers, 0:11:01.440 --> 0:11:03.520 that you're actually not that bullish. You keep talking about 0:11:03.520 --> 0:11:06.680 this wall of worries. What's top of mind for risks 0:11:06.679 --> 0:11:07.520 of twenty twenty six. 0:11:07.559 --> 0:11:09.880 So you know, like I said, eleven percent earnings growth 0:11:09.920 --> 0:11:13.120 is typical, I would say S and P five hundred. 0:11:13.880 --> 0:11:18.680 You know, price returns on average historically or eleven percent, 0:11:18.760 --> 0:11:21.480 So forty percent is more much higher than eleven percent. 0:11:22.360 --> 0:11:23.319 Is the first point that. 0:11:23.240 --> 0:11:26.640 I would make and I think that you know, one 0:11:26.640 --> 0:11:30.559 of the things about that average sort of eleven percent return, This. 0:11:30.559 --> 0:11:31.440 Is not where you do it. 0:11:31.480 --> 0:11:33.920 I'm just talking about, you know, a few aspects of 0:11:34.040 --> 0:11:38.760 historical returns. I think the thing to note is that basically, 0:11:39.720 --> 0:11:47.880 if you take the years of positive returns, and you say, 0:11:48.000 --> 0:11:51.800 you know, I'm going to take the years where the 0:11:51.840 --> 0:11:54.959 market was really positive, not sort of point one or 0:11:55.040 --> 0:11:58.600 one percent, so we have a cutoff of two percent. 0:11:59.240 --> 0:12:00.640 If you break the two percent. 0:12:00.480 --> 0:12:04.280 Threshold, the average price in return is actually twenty percent. 0:12:04.360 --> 0:12:08.760 So you could argue, you know that, I'm rather very okay. 0:12:08.960 --> 0:12:10.240 And what I would say is. 0:12:10.480 --> 0:12:14.959 In terms of thinking about next year, the first known 0:12:15.120 --> 0:12:17.320 catalyst is Q four earnings. 0:12:17.320 --> 0:12:19.440 They start in the middle of January. 0:12:19.559 --> 0:12:22.880 So I think Q four earnings are extremely important and 0:12:22.920 --> 0:12:26.199 we should focus on it for a second. Because Q 0:12:26.280 --> 0:12:30.960 three earnings came in well better than expected, and it's 0:12:31.080 --> 0:12:36.040 left actual Q three earnings above what the consensus is 0:12:36.080 --> 0:12:40.360 for Q four. I think the consensus is simply stale 0:12:40.400 --> 0:12:44.120 because it implies we're going to have a severe sequential 0:12:44.280 --> 0:12:47.400 contraction in earnings, so we're going to get either buybacks 0:12:47.559 --> 0:12:48.320 or big seeds. 0:12:48.480 --> 0:12:51.400 Here's the issue that I'm having right now. The argument 0:12:51.440 --> 0:12:54.079 that you're making is liquidity one, and it's that this 0:12:54.200 --> 0:12:56.560 is a market with a lot of liquidity still in 0:12:56.640 --> 0:13:00.000 it and looking to go to work, and that ultimately 0:13:00.360 --> 0:13:03.400 companies have a lot of liquidity, the investor has a 0:13:03.440 --> 0:13:05.480 lot of liquidity, and money market funds just hit eight 0:13:05.480 --> 0:13:08.600 trillion dollars for the first time ever. Is this essentially 0:13:09.080 --> 0:13:12.960 a central bank that has held policy relatively loose to 0:13:13.400 --> 0:13:15.839 the growth and isn't going to take the punch bowl away, 0:13:15.880 --> 0:13:16.880 so keep on playing. 0:13:18.440 --> 0:13:21.600 I don't attribute much of it basically to the FED 0:13:21.960 --> 0:13:23.559 or central bank policies. 0:13:23.640 --> 0:13:24.840 I would say it's really. 0:13:24.600 --> 0:13:27.760 Been about, you know, the resilience of the US economy, 0:13:28.240 --> 0:13:32.920 which owes its roots back basically to the global financial 0:13:32.960 --> 0:13:37.840 crisis and the great de leveraging that happen then, and 0:13:37.880 --> 0:13:40.439 then of course the pandemic. So you know, we're dealing 0:13:40.480 --> 0:13:43.920 with the world where balance sheets are just much much stronger, 0:13:43.960 --> 0:13:47.520 so the capacity is much stronger, so the ability to 0:13:48.000 --> 0:13:54.000 you know, absorb and withstand shocks is just much better. 0:13:54.800 --> 0:13:58.319 I think we overemphasize interest rates. I mean, you know, 0:13:58.679 --> 0:14:01.040 after the global financial crime, since we had interest rates 0:14:01.080 --> 0:14:01.880 at zero. 0:14:01.760 --> 0:14:04.200 For a very prolonged period, and. 0:14:04.520 --> 0:14:08.800 You know, the textbook logic or the narrative would be therefore, 0:14:09.040 --> 0:14:11.839 you know, everybody was spending or things sort have been 0:14:11.920 --> 0:14:13.840 much worse. But the fact of the matter is that 0:14:14.600 --> 0:14:16.640 you know, for the entire duration of that period of 0:14:16.679 --> 0:14:21.040 low interest rates, the household sector was de leveraging and 0:14:21.120 --> 0:14:22.080 continue to do so. 0:14:22.280 --> 0:14:25.360 And in fact, it didn't stop on the story raising rates. 0:14:25.400 --> 0:14:28.320 Okay, so the sign is exactly wrong here at the 0:14:28.320 --> 0:14:32.280 simple point I'm making is other things matter besides interest rates. 0:14:32.320 --> 0:14:34.880 We listened to you know, a number of banks in 0:14:34.920 --> 0:14:37.040 the last quarter that you know, is the housing market 0:14:37.160 --> 0:14:39.680 going to come back? And and and and you know, 0:14:39.720 --> 0:14:41.840 as some banks say, you don't think it's really about 0:14:41.920 --> 0:14:44.320 interest rates because the twenty five basis points here or there, 0:14:44.360 --> 0:14:45.640 and of course it's the ten year and not the 0:14:45.640 --> 0:14:49.440 short rate that matters. But it's it's really been about 0:14:49.480 --> 0:14:55.920 the uncertainty. The uncertainty not just about you know, macro policies, 0:14:55.960 --> 0:14:58.200 but also about the labor market and sort of where 0:14:58.240 --> 0:14:59.920 we are in the cycle and all of the risks 0:15:00.120 --> 0:15:01.680 that be all focused on. 0:15:01.960 --> 0:15:04.680 Stay with us, multiple INPEX dividance coming. 0:15:04.440 --> 0:15:05.480 Up off to this. 0:15:14.840 --> 0:15:17.160 Joining us now Angela Zino of c f R A. 0:15:17.160 --> 0:15:19.640 Angelo just sort of building the discussion of the new 0:15:19.680 --> 0:15:22.160 phase of the AI build out. Do you think that 0:15:22.200 --> 0:15:23.720 we're going to start to see a period if not 0:15:23.800 --> 0:15:27.720 only winners, but also true losers, both when it comes 0:15:27.760 --> 0:15:30.000 to prospects as well as stop valuation. 0:15:32.120 --> 0:15:34.400 I think when you when you look at how this 0:15:34.520 --> 0:15:37.120 market is reacting right now, and it's one where you know, 0:15:37.280 --> 0:15:42.120 it's really it's really interesting because you've got these narratives 0:15:42.160 --> 0:15:45.000 that continue to change where everyone's looking to see who 0:15:45.040 --> 0:15:48.280 that winner is. And I do think ultimately you're going 0:15:48.320 --> 0:15:50.640 to see, you know, a list of winners and a 0:15:50.680 --> 0:15:55.480 list of non winners potentially losers within the overall tech 0:15:55.520 --> 0:15:59.240 space and AI ecosystem, and I think we're still trying 0:15:59.280 --> 0:16:01.800 to sort of who that, you know, who those winners 0:16:01.800 --> 0:16:03.920 and losers are. We've got a really good understanding of 0:16:04.480 --> 0:16:08.040 what that looks like on the infrastructure side, and I 0:16:08.040 --> 0:16:10.400 think we've got less of an understanding of what that 0:16:10.440 --> 0:16:13.320 looks like still on the software side of things. But 0:16:13.560 --> 0:16:15.360 as far as kind of this next phase that we're 0:16:15.400 --> 0:16:17.400 building out, I mean, we do think we're kind of 0:16:17.440 --> 0:16:20.760 moving from a phase over the last three years where 0:16:20.960 --> 0:16:23.520 it was one where listen, all you had to do 0:16:23.680 --> 0:16:27.520 was announce maybe some some large you know partnership or 0:16:27.600 --> 0:16:30.000 deal with an open AI or in a video or 0:16:30.080 --> 0:16:32.080 what have you, and your stock kind of you know, 0:16:32.120 --> 0:16:34.880 really just popped. Whereas we're moving to this new phase 0:16:34.880 --> 0:16:38.400 where it is more based on execution. On the infrastructure side, 0:16:38.440 --> 0:16:40.800 it is you know, who can build you know, those 0:16:40.880 --> 0:16:44.280 data centers out and actually execute. On the devices side, 0:16:44.320 --> 0:16:46.520 it's who's going to come out with the best devices 0:16:46.520 --> 0:16:48.440 and on the software side of things, and who's going 0:16:48.520 --> 0:16:51.800 to come out with those best capabilities that the enterprise 0:16:51.840 --> 0:16:53.680 space is actually going to want and it can actually 0:16:53.680 --> 0:16:54.360 be monetized. 0:16:54.680 --> 0:16:57.640 Angel though, was the appetite there? I'm thinking about the 0:16:57.640 --> 0:17:01.400 Information report yesterday on Microsoft talking out now there's lower 0:17:01.480 --> 0:17:03.920 expectation for getting businesses to sign up for some of 0:17:03.960 --> 0:17:05.800 these AI tools and things like agents. 0:17:08.520 --> 0:17:11.640 I think there's an appetite. I think the way we're 0:17:11.680 --> 0:17:14.880 looking at things right now is, listen, the consumer has 0:17:14.920 --> 0:17:18.000 really adopted AI at this point in time. You look 0:17:18.040 --> 0:17:21.520 at numbers from the alphabets of the world, and then 0:17:21.600 --> 0:17:24.400 probably the best indication of how much the consumer has 0:17:24.440 --> 0:17:28.359 really adopted AI, and you're talking about you know, toting 0:17:28.440 --> 0:17:31.640 generated at one point three quirtrillion, you know, the most 0:17:31.640 --> 0:17:34.160 recent numbers out there in October, and it's really been 0:17:34.320 --> 0:17:37.199 kind of this hockey stick parabolic movement in terms of 0:17:37.320 --> 0:17:40.920 tokens generated. On the consumer side, it's been really a 0:17:40.960 --> 0:17:44.200 slog on the enterprise side of things, and not necessarily 0:17:44.280 --> 0:17:47.879 a surprise because when we see these new technology inflections, 0:17:48.240 --> 0:17:51.480 the consumer overs adopts first, and on the enterprise side 0:17:51.480 --> 0:17:53.680 of things, it really takes a while. When you look at, 0:17:53.720 --> 0:17:56.840 for instance, Salesforce's results last night, I thought they were 0:17:56.840 --> 0:17:59.600 actually really good, and I think the momentum we saw 0:17:59.680 --> 0:18:02.920 on Agent Force just on a sequential basis was phenomenal. 0:18:03.440 --> 0:18:05.960 But you know, the issue is that you can win 0:18:06.040 --> 0:18:08.760 these bookings, but by the time you know, these actual 0:18:08.880 --> 0:18:12.280 enterprises go into pilot production and then actually start ramping 0:18:12.320 --> 0:18:16.359 and adoption adopting these AI agents, it can take several 0:18:16.359 --> 0:18:18.240 more quarters that we may not see that till you know, 0:18:18.320 --> 0:18:20.240 later in twenty twenty six into twenty seven. 0:18:21.280 --> 0:18:23.280 And Delan, I'd like to go back to the consumer 0:18:23.359 --> 0:18:27.320 because I'm always struck with the adoption rate with the consumer. 0:18:27.400 --> 0:18:30.080 But there is a difference between what the consumer will 0:18:30.200 --> 0:18:32.840 use and what the consumer will pay for. Do you 0:18:32.920 --> 0:18:35.639 see that difference showing up in terms of what the 0:18:35.680 --> 0:18:38.439 next steps are in terms of the digital adoption versus 0:18:38.520 --> 0:18:39.080 the hardware. 0:18:39.880 --> 0:18:42.359 Yeah, I mean, listen, I think that's a great point. 0:18:42.440 --> 0:18:45.159 And again, when we start thinking about the whole monetization 0:18:45.200 --> 0:18:47.840 debate and what have you, I mean, the reason consumers 0:18:47.840 --> 0:18:51.600 adopt this stuff, you know, early on is because it's free, right, 0:18:51.680 --> 0:18:53.320 I mean, they're willing to kind of go out there, 0:18:53.880 --> 0:18:57.000 try these new offerings, these AI tools because it is 0:18:57.040 --> 0:19:00.000 free to them. As far as paid services is concerned, 0:19:00.480 --> 0:19:02.560 you know, again, we're not seeing a type of monetization 0:19:02.680 --> 0:19:04.920 level that maybe I think some on the street would 0:19:04.960 --> 0:19:08.840 hope to have seen. There are definitely power users on 0:19:08.920 --> 0:19:11.560 the you know, on the consumer front, but you know, 0:19:12.000 --> 0:19:15.280 in terms of scaling and actually monetizing the AI services 0:19:15.359 --> 0:19:18.560 on the consumer front, we're still not quite there at. 0:19:18.440 --> 0:19:19.280 This point, right. 0:19:19.359 --> 0:19:22.240 So, so what would be the pricing model that gets 0:19:22.240 --> 0:19:26.240 the consumer engage with their pocketbooks, especially a consumer that's 0:19:26.320 --> 0:19:28.439 used to getting digital goods for free. How do you 0:19:28.880 --> 0:19:30.280 change that monetize that. 0:19:31.440 --> 0:19:33.639 You know, I think that's a great question, and you know, 0:19:33.760 --> 0:19:37.240 I think it depends on the actual platform we're talking 0:19:37.280 --> 0:19:40.560 about and and you know, and how this all adopts. 0:19:40.600 --> 0:19:43.000 I think right now, when you look at the monetization 0:19:43.080 --> 0:19:45.359 at least on the consumer side of things, and maybe 0:19:45.400 --> 0:19:48.600 how you know, maybe not the consumer itself, but how 0:19:48.640 --> 0:19:52.720 the consumer we're actually monetizing. The consumer is still in 0:19:52.800 --> 0:19:55.879 terms of digital advertising, right and that's how you know, 0:19:55.880 --> 0:19:58.399 the alphabets and meatas of the world are really benefiting 0:19:58.400 --> 0:20:01.600 from all of this. But as far the consumer themselves 0:20:01.640 --> 0:20:03.840 and shelling out the dollars, at this point in time, 0:20:04.000 --> 0:20:06.600 I think it's all about continuing to find new use 0:20:06.640 --> 0:20:09.600 cases for AI and finding something that really is game 0:20:09.680 --> 0:20:11.639 changing for them where they're willing to pay for it. 0:20:11.680 --> 0:20:15.800 But at this point in time, again it becomes difficult, 0:20:15.840 --> 0:20:19.120 especially in a more challenging macro outlook, to really get 0:20:19.119 --> 0:20:21.800 the consumer to really pay up for these services. I 0:20:21.800 --> 0:20:24.600 think it gets interesting as we start thinking about new devices, 0:20:25.080 --> 0:20:28.480 especially as Apple starts rolling out on their you know, 0:20:28.720 --> 0:20:31.280 in terms of their AI mbitions, what some of these 0:20:31.320 --> 0:20:33.280 developers are going to be able to do with kind 0:20:33.320 --> 0:20:36.240 of AI capabilities in their hands in some of those 0:20:36.800 --> 0:20:38.760 powered apps that we're going to be able to see 0:20:39.160 --> 0:20:41.600 go out to the consumer, potentially late next year into 0:20:41.640 --> 0:20:42.440