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Speaker 1: Bloomberg Audio Studios, Podcasts, radio News.

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Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along

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Speaker 2: with Lisa Bromwitz and am Marie Hordern. Join us each

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Speaker 2: Bloomberg Terminal and the Bloomberg Business App. With us around

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Speaker 2: the Table, City's Rob Sokin Michael Clart of f UBS. Michael,

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Speaker 2: to you first, your reaction to these numbers this morning.

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Speaker 3: Yeah, not much of a signifiant change, So you know,

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Speaker 3: there has been a little bit of slow down and

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Speaker 3: growth from the really hot numbers last year. Still solid composition,

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Speaker 3: still pretty good right now, but do think that we're

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Speaker 3: going to continue to get some slowing as we go forward.

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Speaker 3: I think one of the issues for the raids for

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Speaker 3: out there is everyone's been mesmerized by this rise in

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Speaker 3: the equity market, thinking that strong equities mean strong economy,

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Speaker 3: therefore high rates. The problem with that is, you know,

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Speaker 3: earnings were solid, but an awful lot of this rally

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Speaker 3: has been AI and other non economic, noncyclical factors.

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Speaker 4: So I think that, you know, as we go.

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Speaker 3: Forward a little bit, we will see some slowing. We've

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Speaker 3: taken out most of the downside risk in rates after

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Speaker 3: a long time, we're respecting lots of easing, you know,

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Speaker 3: decent recession probability. We priced most of that out, and

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Speaker 3: so I think the market's cheap right here.

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Speaker 2: Rub you're looking for some slowing, some big time slum

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Speaker 2: because you've got a right cut call for July. I'm

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Speaker 2: trying to work out what the data needs to look

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Speaker 2: like from here come against July for that to take place.

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Speaker 2: And let's start with payrolls next Friday. How bad does

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Speaker 2: that Friday number need to be to keep your right

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Speaker 2: cut col im plight.

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Speaker 5: Yeah, absolutely, And to really get there, as you said,

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Speaker 5: you need some type of nonlinear slowing in the labor market.

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Speaker 5: And right now, these jobles figures, which are some of

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Speaker 5: the best indicators of the labor market, are not really

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Speaker 5: pointing to that. They're still quite quite low, quite stable,

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Speaker 5: point to a fairly robust labor market right now. Our

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Speaker 5: US team is looking for just a shade below one

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Speaker 5: pin fifty on payrolls, you probably have to see an

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Speaker 5: larger slowing in other labor market indicators and in the

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Speaker 5: labor market more broadly after that to really get that

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Speaker 5: July cut on the table. So I think if their

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Speaker 5: call is right on payrolls, you're still not quite in

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Speaker 5: that danger zone yet where the FED would really be

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Speaker 5: worried about that nonlinear slowing, but it would be a

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Speaker 5: pretty notable slow down from where we've been. That said,

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Speaker 5: there's a lot of uncertainty around the report. For example,

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Speaker 5: bad weather in April likely depressed April payrolls. It's possible

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Speaker 5: you get some payback in May, so there is some

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Speaker 5: upside risk to that figure.

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Speaker 6: It doesn't sound like Robert, you have as much conviction

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Speaker 6: about the July rate cut as maybe a month ago.

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Speaker 4: Is that true?

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Speaker 6: I mean, are you basically thinking how far before or

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Speaker 6: we have to backpedal on this one.

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Speaker 5: It's a tough call, as you said, and you're seeing

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Speaker 5: that obviously reflected in markets. I think to get to

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Speaker 5: that July cut you would need probably some combination of

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Speaker 5: soft enough labor market data and enough decline in the

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Speaker 5: run rate for inflation, that the Fed is seeing progress

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Speaker 5: on the inflation side of its mandate and gets worried

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Speaker 5: about activity. So the bar for that to happen both

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Speaker 5: of those things is pretty is pretty high. We're still

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Speaker 5: holding on to as I said, we see a lot

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Speaker 5: of softness in a lot of more minor labor market

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Speaker 5: indicators like surveys of small businesses hiring within the PMI reports,

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Speaker 5: But even still, as you said, the bar is pretty

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Speaker 5: high to get there, and I think over the last

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Speaker 5: month it's become a bit more challenged, Michael, from.

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Speaker 6: That standpoint, this is something people have been grappling with,

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Speaker 6: and suddenly Bill Dudley is talking about the fact that

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Speaker 6: maybe if you hold rates higher for longer, it isn't

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Speaker 6: going to be restrictive in any way, shape or form,

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Speaker 6: And then in fact we should be talking about holding

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Speaker 6: rates here indefinitely. In Robert's view of things, and I

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Speaker 6: believe you're sympathetic with this, it's actually not the case,

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Speaker 6: and that if the Fed doesn't lower rates soon, it

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Speaker 6: could actually tip the economy over into a hard landing.

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Speaker 6: How much more are you thinking about that type of

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Speaker 6: scenario at a time where the data isn't cooperating with

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Speaker 6: the FED cuts as quickly, right.

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Speaker 3: I think that's more an issue for later in the year,

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Speaker 3: but it is. It does seem to be restrictive right now.

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Speaker 3: We're certainly seeing it in housing numbers starting to soften

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Speaker 3: a little more right there. So some of these most

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Speaker 3: you know, interest rates sensitive sex to the economy.

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Speaker 4: You are seeing a bite so you know, does have

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Speaker 4: some effects.

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Speaker 3: It's been a little bit offset by the fact that

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Speaker 3: credit spreads are extraordinarily tight and you're getting these other

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Speaker 3: loosening and financial conditions offsetting it. But you know, generally,

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Speaker 3: I think you know it is biting. If you stay here,

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Speaker 3: eventually you'll you'll feel a squeeze.

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Speaker 2: My McKay, we wanted to come back to you for

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Speaker 2: a final word on this role looking ahead to John

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Speaker 2: Williams of the Neo F a little bit later on

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Speaker 2: this afternoon. This pace that Lacy just mentioned from built

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Speaker 2: out lay getting everyone's attention the FED things is finding inflation.

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Speaker 2: Think again, even a more than five point five percent

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Speaker 2: the Central Bank's short term interest rates target might not

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Speaker 2: be high enough to call the economy. Mike, first of all,

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Speaker 2: what's your reaction to that, and what would you look

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Speaker 2: for from mister Arstar himself a little bit like to

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Speaker 2: this afternoon.

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Speaker 7: Well, it's something that a number of FED officials have

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Speaker 7: been talking about, including John Williams, who spoke to me

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Speaker 7: about a month ago here on Bloomberg Television and said

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Speaker 7: that he was beginning to think that our star the

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Speaker 7: neutral rate is higher than the FED basic consensus is

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Speaker 7: about six tens of eight percent. And if that's the case,

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Speaker 7: it would have implications for how much the FED funds

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Speaker 7: rate is holding back the economy, and it raises that

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Speaker 7: question that you've heard a number of people talk about

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Speaker 7: of whether they might have to raise rates. The other

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Speaker 7: option is that we still see lags at work, and

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Speaker 7: we're going to be seeing them hit the economy and

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Speaker 7: bring growth down and bring inflation down at the same time.

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Speaker 7: So the interesting thing I think from Williams would be

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Speaker 7: if he speaks about that, because we sort of know

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Speaker 7: what he thinks, it's going to be like everyone else,

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Speaker 7: that it will take higher for longer to get inflation down,

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Speaker 7: and we're committed to that. But what does he say

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Speaker 7: beyond that that might make news that could be it.

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Speaker 6: Well, Robert and I know that neither of the people

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Speaker 6: who are around the table, Michael Robert, both of you

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Speaker 6: are not sympathetic with that view.

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Speaker 4: You believe that there is a.

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Speaker 6: Restrictiveness and that we are seeing that come through.

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Speaker 8: Rob What would you have to see to.

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Speaker 6: Actually go around to the Bill Dudley school of thought?

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Speaker 5: Well, you know, as you know, we are seeing interest

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Speaker 5: rates by different parts of the economy at varying speeds.

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Speaker 5: We're seeing ongoing tightening credit conditions, weakening credit demand stresses,

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Speaker 5: and lower income consumers.

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Speaker 4: But that being.

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Speaker 5: Said, if you look at the data, growth continue overall

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Speaker 5: to hold up quite well, even at rates at a

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Speaker 5: fairly high level, or rate that I would think is

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Speaker 5: fairly is fairly restrictive. So I would say, if we're

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Speaker 5: going into the second half of this year, and it

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Speaker 5: was mentioned earlier the Atlanta Fed NowCast is running a

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Speaker 5: pretty strong growth or second quarter, if we keep running

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Speaker 5: at numbers that look like that, it would lead me

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Speaker 5: to believe that either rates would have to stay at

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Speaker 5: these levels for a much stronger, longer period because maybe

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Speaker 5: short term our star has risen more significantly than expected,

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Speaker 5: or maybe even rates could have to go higher from here.

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Speaker 5: So I basically would have to look at the data.

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Speaker 5: If we don't get that type of moderation or cooling

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Speaker 5: in activity. I think I would move more into that camp.

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Speaker 9: If you move into that camp, what does that do

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Speaker 9: to your July call? Is that just totally the back

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Speaker 9: end of the year you push it to twenty twenty five.

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Speaker 5: I think, depending on how well the economy continues to

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Speaker 5: hold up, we would have to probably push out that

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Speaker 5: call even further.

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Speaker 8: That may raise the risk of.

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Speaker 5: Some type of harder landing ahead if the economy has

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Speaker 5: to face elevated rates for an extended period. Normally we

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Speaker 5: don't have to face rates at these levels for such

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Speaker 5: an extended period. So basically I would think it would

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Speaker 5: get pushed out towards later this year, and depending on

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Speaker 5: the resilience, you could get pushed out even further.

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Speaker 4: Michael, do you agree with that?

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Speaker 6: That is just a matter of just if you do

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Speaker 6: see this kind of ongoing strength in the economy, you

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Speaker 6: might have to reset and kind of come around to

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Speaker 6: this idea that maybe rates are not that restrictive at all.

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Speaker 3: So even if our star is fifty basis points higher,

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Speaker 3: we're still much tighter than that currently, so you know

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Speaker 3: you're still tight. Anyway, you come up with that In

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Speaker 3: addition for some of this, you know, high FED funds

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Speaker 3: rates forever. I think one of the challenges to that

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Speaker 3: is our star is really just shorthand for broad financial conditions.

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Speaker 3: It says, you know, at a different funds rate over time,

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Speaker 3: everything will average out a certain way if the consensus

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Speaker 3: is right, and we're going to see steepening in the

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Speaker 3: yield curve due to all this supply. You know, if

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Speaker 3: you have a two and a half funds rate with

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Speaker 3: no term premium, that's very different financial conditions than you

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Speaker 3: know two and a half funds rate one hundred basis

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Speaker 3: point term premium.

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Speaker 4: In that case, the.

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Speaker 3: Fed needs to have funds rate lower rather than higher

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Speaker 3: to offset that higher rates out the curve. So I think,

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Speaker 3: you know, the hurdle to get right. Heikes from here

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Speaker 3: very very high. Does feel like inflation is going to

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Speaker 3: slow too?

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Speaker 2: You and the team SAMD buy bones. Is that the

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Speaker 2: cool hit?

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Speaker 4: Yeah?

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Speaker 3: I think I think at this level, at the curve,

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Speaker 3: so I think we're more sort of out in the

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Speaker 3: tenure sector. I think that you know, at these levels

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Speaker 3: you've got real yields, you know, at two and a

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Speaker 3: quarter to value there well, just to sort.

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Speaker 6: Of building this In other words, you believe that one

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Speaker 6: way or another, inflation is going to come down, the

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Speaker 6: Fed's going to cut rates. What about the other component,

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Speaker 6: the idea of what we've been talking about, the term

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Speaker 6: premium and all of these questions around just the fiscal

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Speaker 6: profile of the country.

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Speaker 3: Yeah, over long term supply has a has a huge effect.

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Speaker 3: You know, every time my teenage daughters give me a

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Speaker 3: hard time, I just roll with it because they should

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Speaker 3: be angry.

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Speaker 4: You know, all this debt, they're going to herod from us.

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Speaker 4: So you're a better human than I. Carry on.

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Speaker 3: But you know the problem is in the short term,

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Speaker 3: the swings in demand, they're so much larger than the

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Speaker 3: swings in supply. If you look back, the biggest supply

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Speaker 3: shock in history was US ran a budget surplus from.

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Speaker 4: Ninety eight to one.

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Speaker 3: For the first two and a half years of that,

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Speaker 3: the term premium went the wrong way, you know.

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Speaker 4: So it's really the demand shifts overwhelmed the supply shifts.

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Speaker 3: So if you do these supply trades, they'll probably work eventually,

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Speaker 3: but it's going to be awfully mumpy ride on the way.

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Speaker 3: Very few people will be able to hold that trade

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Speaker 3: to the maturity.

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Speaker 9: UBS has pulled Donovan overnight after the auctions said trusting

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Speaker 9: up treasuries. Obviously immediately thought of Lisa, are you saying

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Speaker 9: this is basically something that it's not immediate in the

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Speaker 9: back burner. This is a problem that the market should

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Speaker 9: care about it.

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Speaker 3: It's the issue is we just don't know where the

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Speaker 3: breaking point is. And the trouble is it feels like

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Speaker 3: Congress because they haven't you know, they've been hearing about

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Speaker 3: this tree branch breaking for a long time, and so

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Speaker 3: they're sprinting as fast as they can out the tree

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Speaker 3: branch right now. So you know, it's it's we don't know.

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Speaker 3: We're in new territory here. But I think it's really

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Speaker 3: one of those things where the supply you don't trade

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Speaker 3: based off of that, you size your trades based off

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Speaker 3: of that.

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Speaker 4: So if the.

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Speaker 3: Supply works for your idea, you upsize your risk a

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Speaker 3: little bit. If it works against your trade, you downsize

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Speaker 3: a little bit.

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Speaker 4: So it's really more of a tail risk.

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Speaker 2: Tends the volume up and down just a little bit.

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Speaker 2: It's an interesting way of thinking about it. When I

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Speaker 2: hear about doom, read about Doom, I think of Bramo too.

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Speaker 2: First thing just Lisa Liz trus Bramo the first Place Psycho,

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Speaker 2: First Place Psycho. We're all thinking about the supposed inflation

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Speaker 2: re outcomes of November, whether it's going to be tariffs,

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Speaker 2: what it might mean, additional supply, fiscal easing coming from

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Speaker 2: whichever administration we might get. Is it's still too early

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Speaker 2: to think about those things from your perspective, because we're

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Speaker 2: getting guests coming on already at the end of May.

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Speaker 2: Thinking about them.

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Speaker 3: No, I think those are real, and I think they're

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Speaker 3: you know, whichever party wins, you're going to see tightening

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Speaker 3: on that side. It's a scale difference, but same direction

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Speaker 3: on those things.

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Speaker 4: That said, the reason we're kind.

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Speaker 3: Of optimistic about inflation in the near term is if

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Speaker 3: you look at, you know, all of these rental surveys,

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Speaker 3: those peaked and rolled over a while ago, and so

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Speaker 3: we all thought that that meant that OERE, the biggest

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Speaker 3: piece of inflation, was going to roll over to the

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Speaker 3: problem is that those surveys had run well ahead of

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Speaker 3: OER for a long time, and it turned out OER had.

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Speaker 4: To fill the gap between those.

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Speaker 3: At this stage, it's filled a gap for all the

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Speaker 3: surveys except one, So it does feel like we're finally

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Speaker 3: going to start to see you know, some of this

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Speaker 3: oer start to slow. You know, we can't be one

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Speaker 3: hundred percenture because there's still is one survey that there's

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Speaker 3: some gap to fill, but the preponderance of data says

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Speaker 3: it'll slow.

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Speaker 9: Rob to John's point, how are you thinking about twenty

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Speaker 9: twenty five.

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Speaker 5: Well, I think for the election and looking at the

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Speaker 5: domestic implications. I know there's a lot of debate about this,

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Speaker 5: but we still think deficits are going to stay pretty

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Speaker 5: large no matter who comes to power. You know, the

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Speaker 5: CBOs projecting five and a half percent or something around

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Speaker 5: those levels for deficits per year as a percent GDP

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Speaker 5: over next decade. I would probably look at that as

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Speaker 5: sort of a floor estimate of whe where things could go.

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Speaker 5: I think it's interesting when Trump and the Republicans were

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Speaker 5: in power, they cut taxes and boosted deficits, and when

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Speaker 5: Democrats and Biden were in power, they boosted spending and

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Speaker 5: boosted deficits. So I think until the market really tells

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Speaker 5: them this is a huge problem, and it would have

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Speaker 5: to be a lot of market pressure, I think we're

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Speaker 5: going to get large deficits for the foreseeable future, and

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Speaker 5: then thinking about some of these international components. As you mentioned,

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Speaker 5: I think both parties are going to be very tough

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Speaker 5: on China. I think we saw that recently with the

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Speaker 5: Biden administration's new tariffs on China, and in terms of

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Speaker 5: tariff policy, Trump is probably going to be even more

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Speaker 5: aggressive than Biden. I don't think you would go as

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Speaker 5: far as sixty percent tariff, but I think is ten

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Speaker 5: percent across the board is something we have to take seriously.

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Speaker 5: But the buy administration is not going to shy away

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Speaker 5: from using them. And then a minimum keeping what's what's

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Speaker 5: there now in place.

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Speaker 4: So I think.

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Speaker 5: Tariff policy is going to be used or in place

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Speaker 5: pretty extensively. And I think deficit spending is here to

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Speaker 5: stay until markets tell them otherwise.

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Speaker 2: Hi, Rob, it's going to say thank you, sir. Roughstock

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Speaker 2: in there city a loveside Michael Clotti of ubs. You

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Speaker 2: know in some of the games of stocks we've seen

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Speaker 2: this year, this one right here, I don't think it's

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Speaker 2: been talked about nearly enough a year today, move of

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Speaker 2: one hundred and thirty four percent. Announcing a partnership with

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Speaker 2: Nvidia won't hurt to expand this AI services. Let's have

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Speaker 2: this conversation with Bank of America's Wamzi Mohn lifting his

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Speaker 2: price target on down to one eighty and writing this,

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Speaker 2: we expect strong momentum into twenty five given upside from

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Speaker 2: AI service, high end storage, and PC refresh with optionality

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Speaker 2: from AI. Wemnesday, Good morning's here Morne John. What is

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Speaker 2: behind that months to move in Dell? And have you

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Speaker 2: ever been busier?

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Speaker 4: It's incredible.

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Speaker 1: I I would kind of pose this as almost a

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Speaker 1: hardware renaissance, right, Like, we've not been in a period

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Speaker 1: where these hardware value stocks typically have performed as growth stocks,

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Speaker 1: and it's been a real change in perception in rerating

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Speaker 1: of valuations. And this is happening all because AI at

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Speaker 1: its core is really going to be driven ultimately on

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Speaker 1: physical servers, and physical servers, as we all know from

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Speaker 1: Nvidia's perspective, are in big demand. And who are the suppliers?

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Speaker 1: Who are the arms dealers for that? Right? So you

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Speaker 1: look at the hyperscaler market, you got the Taiwani sodms.

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Speaker 1: But as you think about AI adoption more broadly at

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Speaker 1: tier two cloud service providers or in the enterprise, that

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Speaker 1: is where Dell really shines, and so Dell's really being

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Speaker 1: able to come up with a great story putting this

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Speaker 1: technology together. And if you remember at GtC, he was

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Speaker 1: the one exact Michael Dell was one of the executives

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Speaker 1: who was called out multiple times by Jensen. I think

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Speaker 1: that added a lot of street cred sort of to

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Speaker 1: Dell's AI initiatives and the capability of those servers.

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Speaker 2: You've listed a bunch of reasons to be constructive AI servers,

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Speaker 2: high end storage, PC refresh. Where does PC refresh rank

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Speaker 2: for you? I'm trying to work out we're about to

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Speaker 2: see this big upgrade cycle. Everyone just saying the desktop's

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Speaker 2: interesting again, let's upgrade the PC.

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Speaker 1: Yeah, John, Look, I think PCs are probably just in

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Speaker 1: the order that you described, right, the third order of

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Speaker 1: sort of like the key drivers, because servers as a

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Speaker 1: magnitude of the opportunity is just much larger dollar wise.

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Speaker 1: When you think about storage, they are tied to the

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Speaker 1: high end storage and ibms coming up with a mainframe

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Speaker 1: refresh next year, and Dell is very well positioned.

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Speaker 8: And these are the.

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Speaker 1: High margins sixty percent plus gross margin opportunity that Dell has.

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Speaker 8: When you think about PCs.

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Speaker 1: So refreshes, not so much about AIPCS per se. In

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Speaker 1: our opinion, I think that'll take a little bit longer.

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Speaker 1: But we do see the echo of the boom of

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Speaker 1: the demand that came up during COVID. So you had

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Speaker 1: about one hundred and fifty million extra PCs sold in

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Speaker 1: the COVID couple of years, and off that we'd say

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Speaker 1: a third of dot Chromebooks and maybe about forty percent

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Speaker 1: of the remainder were commercial pieces. Those commercial pieces are

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Speaker 1: coming up for a refresh.

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Speaker 8: And that's material.

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Speaker 1: So when you think about that, coupled with the commercial

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Speaker 1: refresh that's going to be driven by Windows ten end

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Speaker 1: of life, those are two big catalysts that can drive

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Speaker 1: PC units much higher than sort of the flatish that

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Speaker 1: we've seen year today.

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Speaker 6: I wish I could go back a couple of years

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Speaker 6: and all the people who are saying the personal computer

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Speaker 6: is dead and really sort of highlights some of these earnings.

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Speaker 4: It's not just Dell.

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Speaker 6: HP came out yesterday after the bell also beating expectations,

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Speaker 6: is said about ten percent of shipments in the second

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Speaker 6: half of this year are going to be AI equipped.

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Speaker 6: How do you understand who the winners are going to

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Speaker 6: be in thissance of the PC and who the losers are.

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Speaker 6: I'm thinking maybe Apple who haven't maybe adapted as quickly.

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Speaker 1: Yeah. I would say that our view on AI at

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Speaker 1: the edge, more broadly speakingly says that when you think

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Speaker 1: about the devices that hold most of the content and

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Speaker 1: the information that consumers want to use and on a

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Speaker 1: daily basis, it's really going to be the smartphone, and

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Speaker 1: we're talking about the smartphone actually becoming dumb more like

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Speaker 1: a feature phone, and the next wave of phones that

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Speaker 1: are coming, which we're calling the intellphones, are really where

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Speaker 1: the intelligence is embedded. You've got AI agents at the

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Speaker 1: back that are pushing information back to your apps or

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Speaker 1: forward facing phone users.

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Speaker 8: And so we think that that adoption cycle.

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Speaker 1: Is going to overtake the AI adoption at PCs on.

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Speaker 8: The winners and losers on the PC side.

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Speaker 1: Right, PC markets consolidated around the large OEMs of Dell, HP,

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Speaker 1: Lenoo and so on. I think that remains it's pretty

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Speaker 1: much status quo. On the Apple front, we think that

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Speaker 1: you know, AI is going to be all across all devices, right,

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Speaker 1: so this is something that Apple is going to do

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Speaker 1: from the back end. They will do partnerships as opposed

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Speaker 1: to just kind of driving more capability at the edge,

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Speaker 1: and these partnerships are going to be server based. So

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Speaker 1: this is part of the reason why we think that

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Speaker 1: the AIPC story itself is marginal in the near term,

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Speaker 1: because there are not a lot of apps that require

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Speaker 1: that heavy compute power right.

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Speaker 8: On the device. And Apple's got you know, it's M

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Speaker 8: four chip.

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Speaker 1: And when you think about the way that most people

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Speaker 1: are classifying this AI capability at about forty tops performance,

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Speaker 1: Apple's right there.

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Speaker 8: They can handle it.

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Speaker 1: But I think that the consumers are going to use

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Speaker 1: much more so on the smartphone side.

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Speaker 6: It strikes me that the quicker adopters and the winners

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Speaker 6: in the short term have been the hardware side, whether

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Speaker 6: it's the chips, whether it's the PCs. They can just

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Speaker 6: use what's out there to quickly bring in the capabilities.

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Speaker 6: How long do you think it's going to take before

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Speaker 6: becomes a software story. We sell salesforce fall out of

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Speaker 6: bed after not being able to monetize AI. We've seen

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Speaker 6: that consistently. When does this shift to benefit some of

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Speaker 6: the other players.

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Speaker 8: Yeah, it's a great question.

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Speaker 1: Look, I think the wave of AI really has started

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Speaker 1: sort of first, I.

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Speaker 8: Think in the chip centric.

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Speaker 1: World moved on to sort of physical devices servers PCs.

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Speaker 1: I think the next leg is really services because there

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Speaker 1: are I mean, we've spoke about machine learning five years

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Speaker 1: ago and what happened to it. No one talks about

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Speaker 1: machine learning, it's all Jenny I today and no one

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Speaker 1: really adopted machine learning per se in a big way,

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Speaker 1: and there was a lot of help that enterprises needed

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Speaker 1: to even get there.

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Speaker 8: It's the same story. Enterprises are going to need a

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Speaker 8: ton of.

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Speaker 1: Help to say, you go and procure a black Will

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Speaker 1: server for three million dollars, what are you going to

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Speaker 1: do with it?

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Speaker 4: Right?

443
00:20:51,880 --> 00:20:54,520
Speaker 1: As an enterprise, you have to have a strategy, a plan.

444
00:20:54,800 --> 00:20:56,840
Speaker 1: What is the data that's going to run on it,

445
00:20:56,880 --> 00:20:58,680
Speaker 1: is the data clean, is the data good?

446
00:20:58,880 --> 00:21:00,600
Speaker 8: What is the training software?

447
00:21:00,720 --> 00:21:03,479
Speaker 1: And what sort of architecture you're going to use. So

448
00:21:03,520 --> 00:21:05,639
Speaker 1: there are a lot of open questions for which I

449
00:21:05,680 --> 00:21:09,359
Speaker 1: think the services companies will step in and really help

450
00:21:09,480 --> 00:21:13,359
Speaker 1: map out that strategy as SI partners or or working

451
00:21:13,400 --> 00:21:16,200
Speaker 1: with working with the various players in the industry.

452
00:21:16,600 --> 00:21:18,880
Speaker 8: Beyond that, we think the next leg would.

453
00:21:18,720 --> 00:21:21,560
Speaker 1: Be really software and software I think is kind of

454
00:21:21,640 --> 00:21:24,000
Speaker 1: like you know, plus and minus. I think when you've

455
00:21:24,040 --> 00:21:27,879
Speaker 1: got very points solutions of software that are you know,

456
00:21:27,960 --> 00:21:31,200
Speaker 1: deeply seated in with one vertical I think a lot

457
00:21:31,240 --> 00:21:35,680
Speaker 1: of that expertise is where AI puts that at risk, right,

458
00:21:35,760 --> 00:21:38,239
Speaker 1: And when you think about that, even in terms of

459
00:21:38,520 --> 00:21:40,480
Speaker 1: in consulting, even that's been.

460
00:21:40,400 --> 00:21:43,680
Speaker 8: Proved to be true. So the more vertical, like smaller

461
00:21:43,720 --> 00:21:44,359
Speaker 8: sleeves of.

462
00:21:46,400 --> 00:21:52,160
Speaker 1: Productivity improvements that can come from small places of let's say,

463
00:21:52,240 --> 00:21:55,080
Speaker 1: like technology knowledge, those are the ones where you can

464
00:21:55,119 --> 00:22:01,919
Speaker 1: see real disruption, whereas adopting AI within software is a

465
00:22:02,000 --> 00:22:03,679
Speaker 1: long term story where.

466
00:22:03,920 --> 00:22:06,080
Speaker 8: Companies that are successfully.

467
00:22:05,560 --> 00:22:09,040
Speaker 1: Able to blend that and be much more platform based

468
00:22:09,080 --> 00:22:09,959
Speaker 1: are going to be the winners.

469
00:22:10,000 --> 00:22:12,200
Speaker 2: There is the word in telephone catching on.

470
00:22:13,040 --> 00:22:15,040
Speaker 8: We certainly hope it will look.

471
00:22:16,880 --> 00:22:19,240
Speaker 1: We've thought about this and coined that it was kind

472
00:22:19,280 --> 00:22:22,680
Speaker 1: of a fun, fun play on words. But the way

473
00:22:22,720 --> 00:22:29,560
Speaker 1: we thought about really the concept, right, and it's appropriate

474
00:22:29,600 --> 00:22:32,439
Speaker 1: to say this here on Bloomberg is context is everything,

475
00:22:32,560 --> 00:22:34,520
Speaker 1: right and AI phones.

476
00:22:34,840 --> 00:22:37,440
Speaker 8: That is the difference. It is about the context.

477
00:22:37,520 --> 00:22:40,360
Speaker 1: You can go back and have a conversation with an

478
00:22:40,359 --> 00:22:43,359
Speaker 1: AI agent because it already knows the context of your

479
00:22:43,440 --> 00:22:47,119
Speaker 1: last conversation. Right, So if you're doing replacing a travel

480
00:22:47,160 --> 00:22:50,359
Speaker 1: agent with your AI agent. You need the context. You

481
00:22:50,400 --> 00:22:52,560
Speaker 1: want to come back with more information. It's not usually

482
00:22:52,640 --> 00:22:55,960
Speaker 1: just hey, book me this and it's done. Give me options,

483
00:22:56,040 --> 00:22:58,040
Speaker 1: let me look at that, let me come back and

484
00:22:58,080 --> 00:23:00,879
Speaker 1: give you some more information. Right back and forth of

485
00:23:00,960 --> 00:23:04,359
Speaker 1: a conversational agent. We think will be handled by the intelephone.

486
00:23:04,600 --> 00:23:07,840
Speaker 2: You're welcome back anytime. Thank you, sir. Moha Banks of

487
00:23:07,840 --> 00:23:19,959
Speaker 2: America appreciate it. Thank you. The US is leading global

488
00:23:19,960 --> 00:23:23,320
Speaker 2: oil production for the sixth straight year, according to data

489
00:23:23,320 --> 00:23:27,320
Speaker 2: from the EIA. Record cash piles by energy giants also

490
00:23:27,359 --> 00:23:31,760
Speaker 2: fueling consolidation in the space Exceon, Chefron, Coloco, Phillips all

491
00:23:31,800 --> 00:23:34,199
Speaker 2: announcing new deals this year and pleased to say that

492
00:23:34,240 --> 00:23:37,040
Speaker 2: with this around the table, it's Lorenzo. Similarly, the CEO

493
00:23:37,440 --> 00:23:39,440
Speaker 2: of Baker Hughes, Lorenzo, good morning to you, sir.

494
00:23:39,640 --> 00:23:40,439
Speaker 10: Great to be with you.

495
00:23:40,720 --> 00:23:44,400
Speaker 2: Massive consolidation, Chefron, Exon, all the big players in a mix.

496
00:23:44,480 --> 00:23:47,000
Speaker 2: What does it mean for your world? For services? How

497
00:23:47,040 --> 00:23:48,080
Speaker 2: are thing it's going to change?

498
00:23:48,800 --> 00:23:52,720
Speaker 10: You know, we've seen these times before as consolidations taken place.

499
00:23:52,960 --> 00:23:55,320
Speaker 10: What it means for us is, obviously we work with

500
00:23:55,359 --> 00:23:58,639
Speaker 10: our customers. We get stronger with them as well. And

501
00:23:58,680 --> 00:24:01,400
Speaker 10: as we see the bigger players get together, we see

502
00:24:01,440 --> 00:24:04,800
Speaker 10: our opportunities to partner with them on the technology forefront.

503
00:24:05,200 --> 00:24:09,280
Speaker 10: They're looking for efficiency, productivity, they're looking for ways in

504
00:24:09,320 --> 00:24:13,400
Speaker 10: which they can also reduce emissions, and as consolidation happens,

505
00:24:13,600 --> 00:24:16,440
Speaker 10: we actually see it as an opportunity to really grow

506
00:24:16,560 --> 00:24:20,400
Speaker 10: larger with them from a shared perspective and introduce new technologies.

507
00:24:20,440 --> 00:24:22,560
Speaker 2: You've talked about this new spending cycle. When you think

508
00:24:22,600 --> 00:24:25,760
Speaker 2: about new technologies, you're thinking about how to develop existing

509
00:24:25,800 --> 00:24:27,919
Speaker 2: fields even more or discover new ones.

510
00:24:28,359 --> 00:24:31,840
Speaker 10: It's definitely about existing fields. And as you look at

511
00:24:32,119 --> 00:24:38,440
Speaker 10: mature assets, solutions, chemicals, ESPs, electrical submissible pumps, doing more

512
00:24:38,440 --> 00:24:41,880
Speaker 10: with what we have. We know that today seventy five

513
00:24:41,920 --> 00:24:45,320
Speaker 10: percent of the production is from mature assets, and we've

514
00:24:45,320 --> 00:24:48,320
Speaker 10: got to do more with those mature assets. Green fields

515
00:24:48,359 --> 00:24:50,080
Speaker 10: costs a lot of money, and so how do you

516
00:24:50,160 --> 00:24:54,000
Speaker 10: drive efficiencies productivity with the reservoirs we have today.

517
00:24:54,080 --> 00:24:56,520
Speaker 6: There's been a lot of question around Okay, thirteen million

518
00:24:56,560 --> 00:24:59,000
Speaker 6: barrels a day in the United States being produced, is

519
00:24:59,000 --> 00:25:01,399
Speaker 6: that the cap? How much higher could it potentially go?

520
00:25:01,480 --> 00:25:03,800
Speaker 6: And how quickly could it go? Higher in response to

521
00:25:03,880 --> 00:25:06,800
Speaker 6: some sort of geopolitical pressure. Given the technology that you're

522
00:25:06,800 --> 00:25:09,240
Speaker 6: talking about, how quickly could you ramp that up well

523
00:25:09,280 --> 00:25:10,840
Speaker 6: beyond thirteen million barrels a day?

524
00:25:11,560 --> 00:25:13,800
Speaker 10: You know, I think we've always been surprised. We've been

525
00:25:13,840 --> 00:25:17,720
Speaker 10: surprised by the shell revolution. We've always seen technology come in,

526
00:25:17,960 --> 00:25:20,120
Speaker 10: and I think it's hard to predict how much high

527
00:25:20,200 --> 00:25:23,040
Speaker 10: you could go. We've obviously got to recover depletion rates.

528
00:25:23,480 --> 00:25:27,600
Speaker 10: Technology is going to be the advantage for the producers.

529
00:25:28,000 --> 00:25:31,000
Speaker 10: How much more that's a question mark. I think Right now,

530
00:25:31,080 --> 00:25:34,640
Speaker 10: our focus is on driving efficiencies and also making sure

531
00:25:34,680 --> 00:25:37,680
Speaker 10: that we're meeting the demand, and the demand is there.

532
00:25:37,920 --> 00:25:40,119
Speaker 10: We know that demand is growing globally.

533
00:25:40,440 --> 00:25:42,480
Speaker 6: Has there been more of an emphasis in developing some

534
00:25:42,560 --> 00:25:45,520
Speaker 6: of the mature acids in the fossil fuel industry and

535
00:25:45,560 --> 00:25:48,040
Speaker 6: maybe less so on some of the new energies that

536
00:25:48,080 --> 00:25:50,120
Speaker 6: aren't being rewarded as much by shareholders.

537
00:25:50,600 --> 00:25:54,119
Speaker 10: We're seeing both, and you know, there's definitely a focus

538
00:25:54,240 --> 00:25:58,120
Speaker 10: across the globe on being able to meet the energy demand,

539
00:25:58,560 --> 00:26:02,560
Speaker 10: both from a standpoint of of the aspect of providing

540
00:26:02,600 --> 00:26:06,280
Speaker 10: the energy but also lowering emissions. And so we're seeing

541
00:26:06,640 --> 00:26:10,720
Speaker 10: both sides grow at the same time. In fact, last year,

542
00:26:10,880 --> 00:26:13,399
Speaker 10: if we look at our new energy within Baker Hughes,

543
00:26:13,800 --> 00:26:16,959
Speaker 10: we achieved over seven hundred and fifty million dollars new orders.

544
00:26:17,200 --> 00:26:19,720
Speaker 10: This year, we've got a guidance for eight hundred to

545
00:26:19,840 --> 00:26:22,480
Speaker 10: a billion dollars of new energy orders and we're set

546
00:26:22,520 --> 00:26:25,280
Speaker 10: for twenty thirty to have six to seven billion dollars.

547
00:26:25,600 --> 00:26:28,520
Speaker 10: So we're seeing the growth there as well as continuing

548
00:26:28,560 --> 00:26:32,560
Speaker 10: to see an increase in the aspect of energy demand

549
00:26:32,920 --> 00:26:36,840
Speaker 10: from the fossil fuels, which requires also lower emissions.

550
00:26:36,920 --> 00:26:38,280
Speaker 6: You said the demand is there. A lot of people

551
00:26:38,320 --> 00:26:41,760
Speaker 6: talking about artificial intelligence, is some of the chip centers

552
00:26:41,760 --> 00:26:43,760
Speaker 6: and the kind of energy that that's going to require.

553
00:26:44,080 --> 00:26:46,840
Speaker 6: I am curious as you talk about new technologies to

554
00:26:46,960 --> 00:26:49,240
Speaker 6: produce more energy how much of this is going to

555
00:26:49,240 --> 00:26:52,560
Speaker 6: be through acquisitions versus just sort of organic growth.

556
00:26:53,680 --> 00:26:56,560
Speaker 10: Going to be a combination. There's a lot that's being

557
00:26:56,640 --> 00:27:01,360
Speaker 10: done with regards to incubator technologies, around direct air capture,

558
00:27:01,800 --> 00:27:08,680
Speaker 10: around CCUS, also around the micro turbines and net power.

559
00:27:08,800 --> 00:27:12,359
Speaker 10: When you're looking at clean integrated power solutions. We have

560
00:27:12,480 --> 00:27:16,600
Speaker 10: a partnership with netpower, which again is the oxycombustion process

561
00:27:16,960 --> 00:27:20,679
Speaker 10: which allows us to provide three hundred megawatts of clean

562
00:27:20,800 --> 00:27:23,840
Speaker 10: integrated power, which is a great solution. So I think

563
00:27:23,920 --> 00:27:26,320
Speaker 10: it's going to be a combination of both. I know

564
00:27:26,400 --> 00:27:28,480
Speaker 10: one thing is for sure. We're going to need a

565
00:27:28,480 --> 00:27:31,560
Speaker 10: lot of technology, a lot of investment, and it's going

566
00:27:31,640 --> 00:27:35,200
Speaker 10: to be both inorganic as well as organic development.

567
00:27:35,320 --> 00:27:38,200
Speaker 9: There's a lot of consolidation in the industry, but when

568
00:27:38,240 --> 00:27:41,199
Speaker 9: Baker Hughes comes up, people talk about potentially speculation that

569
00:27:41,200 --> 00:27:43,919
Speaker 9: you would actually split into two. Is that something you

570
00:27:43,960 --> 00:27:45,680
Speaker 9: think about as you reorganize the business?

571
00:27:46,480 --> 00:27:50,080
Speaker 10: Now, we've often looked at it, and we actually have

572
00:27:50,160 --> 00:27:54,680
Speaker 10: a clear strategy with regards to sustainable energy development and

573
00:27:54,920 --> 00:27:57,680
Speaker 10: helping our customers. And as we look across our two

574
00:27:57,720 --> 00:28:02,200
Speaker 10: segments or field services and equipment and industrial energy technology,

575
00:28:02,440 --> 00:28:06,280
Speaker 10: they really go hand in hand with enabling our customers

576
00:28:06,520 --> 00:28:11,040
Speaker 10: to being able to improve their efficiency, drive incremental production

577
00:28:11,600 --> 00:28:12,760
Speaker 10: and lower emissions.

578
00:28:13,040 --> 00:28:13,800
Speaker 4: And as we look.

579
00:28:13,640 --> 00:28:18,720
Speaker 10: At increasing energy demand, you need both sides of the house.

580
00:28:19,280 --> 00:28:22,240
Speaker 10: And I look at a kingdom such as Saudi Arabia

581
00:28:22,920 --> 00:28:25,639
Speaker 10: and being in the Middle East last week, they're growing

582
00:28:25,680 --> 00:28:29,600
Speaker 10: their gas infrastructure. So we're there with regards to our

583
00:28:29,640 --> 00:28:32,840
Speaker 10: old field services being able to help them with the

584
00:28:32,960 --> 00:28:37,480
Speaker 10: gas reservoirs, but we're there also with the industrial energy technology,

585
00:28:37,640 --> 00:28:40,200
Speaker 10: with the master gas system, being able to help them

586
00:28:40,560 --> 00:28:44,000
Speaker 10: with the development of that pipeline network, being able to

587
00:28:44,040 --> 00:28:47,360
Speaker 10: help them with the power generation, and so hand in hand.

588
00:28:47,400 --> 00:28:52,480
Speaker 10: Baker Hughes provides a portfolio that actually provides the full suite.

589
00:28:52,280 --> 00:28:53,560
Speaker 4: So better together for now.

590
00:28:53,720 --> 00:28:56,000
Speaker 9: Yes, I know you have a lot to say as

591
00:28:56,000 --> 00:28:58,480
Speaker 9: well on LERG and the boom we've seen from LERG.

592
00:28:58,680 --> 00:29:01,600
Speaker 9: What do you make of this administry putting a pause

593
00:29:01,680 --> 00:29:04,720
Speaker 9: on permits given the fact that it basically had a

594
00:29:04,720 --> 00:29:06,640
Speaker 9: promise to Europe that it would be a supplier.

595
00:29:07,800 --> 00:29:11,920
Speaker 10: You know, we're disappointed. We're disappointed with the decision. Obviously,

596
00:29:12,240 --> 00:29:15,840
Speaker 10: the administration has to make its decisions as it does,

597
00:29:15,880 --> 00:29:19,840
Speaker 10: and we think that global demand for LNG is still

598
00:29:19,960 --> 00:29:22,920
Speaker 10: strong and robust. We think that by twenty thirty there

599
00:29:22,960 --> 00:29:25,840
Speaker 10: needs to be an installed capacity of eight hundred million

600
00:29:25,880 --> 00:29:28,680
Speaker 10: tons per annum, and we believe that's going to be

601
00:29:28,720 --> 00:29:31,400
Speaker 10: coming and it's either going to be international projects or

602
00:29:31,440 --> 00:29:34,040
Speaker 10: it's going to be US projects that take place. We're

603
00:29:34,040 --> 00:29:37,240
Speaker 10: still seeing a lot of activity. You've seen the announcements

604
00:29:37,280 --> 00:29:40,600
Speaker 10: being made in Gitar, You've seen announcements being made by

605
00:29:40,880 --> 00:29:44,600
Speaker 10: add notquid investments they're making also in Mozambique. So projects

606
00:29:44,600 --> 00:29:47,960
Speaker 10: are moving forward and we hope the administration releases the

607
00:29:47,960 --> 00:29:50,719
Speaker 10: pause and moves forward. There's a lot of natural gas

608
00:29:50,960 --> 00:29:53,560
Speaker 10: within the United States. There's a lot of good projects,

609
00:29:53,800 --> 00:29:56,480
Speaker 10: and we think it's an opportunity to be able to

610
00:29:56,760 --> 00:30:00,600
Speaker 10: again provide energy security to the world.

611
00:30:00,840 --> 00:30:02,800
Speaker 2: Do you think some of the aspirations to move away

612
00:30:02,800 --> 00:30:05,560
Speaker 2: from fossil fuels are realistic? What do you say back

613
00:30:05,560 --> 00:30:06,760
Speaker 2: to some government officials.

614
00:30:08,400 --> 00:30:11,200
Speaker 10: I think you need to be pragmatic and again, you

615
00:30:11,280 --> 00:30:14,640
Speaker 10: need a sustainable energy development. There is no doubt that

616
00:30:14,680 --> 00:30:18,400
Speaker 10: you need to move towards energy abundance as well as

617
00:30:18,480 --> 00:30:21,200
Speaker 10: lower emissions, and you need to do it in a

618
00:30:21,240 --> 00:30:26,160
Speaker 10: way that is affordable, secure, and sustainable. And so you

619
00:30:26,240 --> 00:30:30,320
Speaker 10: need to marry a roadmap that introduces an aspect of

620
00:30:30,800 --> 00:30:36,120
Speaker 10: let's stop talking about the fuel types. Let's focus on emissions, abating,

621
00:30:36,520 --> 00:30:40,760
Speaker 10: reducing emissions. And I think that's the discussions that we're having,

622
00:30:40,960 --> 00:30:44,680
Speaker 10: and that's why we're focused on the solutions around CCUS,

623
00:30:44,720 --> 00:30:51,640
Speaker 10: carbon capture, utilization, storage, direct air capture, geofermal hydrogen. That's

624
00:30:51,680 --> 00:30:55,239
Speaker 10: why we're looking at natural gas as being not just

625
00:30:55,440 --> 00:31:01,240
Speaker 10: a transition but a destination fuel LNG because it's available today.

626
00:31:01,640 --> 00:31:06,000
Speaker 10: So let's have a pragmatic sustainable energy development discussion and

627
00:31:06,120 --> 00:31:08,040
Speaker 10: let's go towards lower emissions.

628
00:31:08,080 --> 00:31:10,040
Speaker 2: At least we're alluded to this. She talked about AI.

629
00:31:10,080 --> 00:31:12,120
Speaker 2: We talk about in video every single day that stock

630
00:31:12,160 --> 00:31:14,880
Speaker 2: has had a phenomenal run. The energy demands of some

631
00:31:14,920 --> 00:31:16,680
Speaker 2: of this are going to be absolutely massive. If you

632
00:31:16,720 --> 00:31:18,600
Speaker 2: and the team put some numbers on it, what are

633
00:31:18,600 --> 00:31:20,560
Speaker 2: the additional energy demands over the next few years is

634
00:31:20,600 --> 00:31:22,800
Speaker 2: going to be from some of these major tech firms.

635
00:31:23,400 --> 00:31:26,480
Speaker 10: Oh, they are staggering. I won't give any specific numbers

636
00:31:26,520 --> 00:31:29,600
Speaker 10: because they can be so vast, but you look at

637
00:31:29,640 --> 00:31:34,080
Speaker 10: some of the numbers that you get out there, for example,

638
00:31:34,080 --> 00:31:39,760
Speaker 10: cryptocurrencies today, you know, cryptocurrencies use as much energy as

639
00:31:39,760 --> 00:31:43,440
Speaker 10: the country of Poland. As you look at the AI

640
00:31:43,480 --> 00:31:48,800
Speaker 10: and Generative AI, they're saying twenty percent increase in US

641
00:31:48,840 --> 00:31:52,800
Speaker 10: demands for energy just from new data centers. It's going

642
00:31:52,880 --> 00:31:57,120
Speaker 10: to require a lot of installations of distributed power generation,

643
00:31:57,640 --> 00:32:01,120
Speaker 10: it's going to require incremental natural gas, it's going to

644
00:32:01,160 --> 00:32:05,360
Speaker 10: require clean energy. So it's an all of the above strategy.

645
00:32:05,840 --> 00:32:10,280
Speaker 10: And it's also the use of AI to drive efficiencies

646
00:32:10,320 --> 00:32:14,520
Speaker 10: as well. So there's the aspect of also us benefiting

647
00:32:14,960 --> 00:32:18,960
Speaker 10: from the inclusion of AI into the way in which

648
00:32:19,000 --> 00:32:20,600
Speaker 10: we operate for efficiencies.

649
00:32:20,800 --> 00:32:22,760
Speaker 6: How long do you think it's going to take to

650
00:32:22,840 --> 00:32:26,720
Speaker 6: build out the infrastructure to support the outgrowth of energy

651
00:32:26,760 --> 00:32:29,280
Speaker 6: demand by AI that so many people are talking about.

652
00:32:30,680 --> 00:32:34,480
Speaker 10: You're looking at a number of years. And also it's

653
00:32:34,520 --> 00:32:38,160
Speaker 10: going to require the right policies and the right permitting

654
00:32:38,240 --> 00:32:41,240
Speaker 10: to be in place, and in particularly in the United States,

655
00:32:41,600 --> 00:32:44,200
Speaker 10: that's one of the aspects that needs to be resolved

656
00:32:44,480 --> 00:32:47,600
Speaker 10: is from a permitting perspective, how do you get that

657
00:32:48,360 --> 00:32:52,320
Speaker 10: resolved and how do you move forward? Also internationally, as

658
00:32:52,320 --> 00:32:54,920
Speaker 10: you look at Europe, how do you make sure that

659
00:32:55,000 --> 00:32:57,960
Speaker 10: the regulations are in place. So that's something that they're

660
00:32:58,000 --> 00:33:00,600
Speaker 10: working for and they're working through Lorenzo.

661
00:33:00,680 --> 00:33:02,920
Speaker 2: You're in an exciting space and it's going to catch

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Speaker 2: up with you. Thank you, sir, Thank you very much.

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Speaker 2: Thank you, Lorenzo. Similarly, there of Baker Hughes. This is

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Speaker 2: the Bloomberg Surveillance podcast, bringing you the best in markets, economics,

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Speaker 2: angiot politics. You can watch the show live on Bloomberg

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Speaker 2: Subscribe to the podcast on Apple, Spotify, or anywhere else

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