WEBVTT - Broadcasting Live from Bloomberg Invest 0:00:02.520 --> 0:00:07.000 Bloomberg Audio Studios, Podcasts, radio News. 0:00:08.640 --> 0:00:12.680 This is Bloomberg business Week, Insight from the reporters and 0:00:12.800 --> 0:00:17.120 editors that bring you America's most trusted business magazine, plus. 0:00:17.000 --> 0:00:19.280 Global business, finance and tech news. 0:00:19.440 --> 0:00:23.360 The Bloomberg business Week Podcast with Carol Masser and Tim 0:00:23.400 --> 0:00:25.760 Stenovek on Bloomberg Radio. 0:00:26.480 --> 0:00:29.120 All Right, everybody, welcome to Bloomberg Business Week. You have 0:00:29.200 --> 0:00:32.840 been looking at BusinessWeek. We're live at the Bloomberg invest Summit. 0:00:33.000 --> 0:00:35.440 The idea of a cautious market moving forward is certainly 0:00:35.479 --> 0:00:37.559 something that is top of mind for us and for 0:00:37.600 --> 0:00:39.600 the guests here today on at Bloomberg business Week and 0:00:39.640 --> 0:00:41.960 at Bloomberg Invest. We're going to have a chat about 0:00:41.960 --> 0:00:44.239 the cautious path for ray cuts. A little later, we're 0:00:44.240 --> 0:00:46.120 going to hear from John Williams, President of the Federal 0:00:46.159 --> 0:00:47.400 Reserve Bank of New York. 0:00:47.440 --> 0:00:49.319 Well, it's going to talk about AI and tech. We're 0:00:49.360 --> 0:00:52.360 going to do that with the chief AI officer over 0:00:52.600 --> 0:00:55.640 at Dell Computer. So looking forward to what John Rose 0:00:55.680 --> 0:00:57.440 has to say. In the meantime, let's talk about the 0:00:57.440 --> 0:00:59.960 Marcus because it is top of mind in our invest conference. 0:01:00.120 --> 0:01:02.480 Year is very timely. Mina Flynn is with us co 0:01:02.560 --> 0:01:04.800 head of Global Private wealth Management at gold Min sax 0:01:04.840 --> 0:01:08.000 Here at Bloomberg invest Hello, Hello, You've been very patient. 0:01:09.080 --> 0:01:12.320 There's a lot coming out investors today. How do you 0:01:12.800 --> 0:01:14.240 make sense of this environment? 0:01:15.000 --> 0:01:17.760 I think the number one thing that we have to 0:01:17.840 --> 0:01:21.120 remember is that when it comes to individuals, the first 0:01:21.120 --> 0:01:26.200 thing you focus on is portfolio construction. Portfolio construction drives 0:01:26.400 --> 0:01:29.120 ninety percent of a client's returns and it's something that 0:01:29.160 --> 0:01:32.080 we talk about upfront and then on an ongoing basis 0:01:32.120 --> 0:01:34.679 with them. And the reason why this is so important 0:01:34.800 --> 0:01:37.280 is in times of volatility such as we've had this 0:01:37.319 --> 0:01:40.480 week that we've had today, and what you don't want 0:01:40.560 --> 0:01:42.960 is you don't want investors to be taking so much 0:01:43.080 --> 0:01:46.559 risk that they become uncomfortable and they sell, they crystallize 0:01:46.560 --> 0:01:49.400 a loss versus staying put or buying. But on the 0:01:49.440 --> 0:01:51.640 flip side, we want to make sure that we encourage 0:01:51.640 --> 0:01:54.560 clients to take enough risks so that they offset inflation 0:01:54.800 --> 0:01:58.960 on an after tax, after spending basis, so our portfolios 0:01:59.040 --> 0:02:03.000 are really constructed with investment, great high quality fixed income 0:02:03.560 --> 0:02:06.480 and then a good amount of equities and alternatives. 0:02:06.840 --> 0:02:09.680 Let's talk about the equities first in terms of geographic 0:02:09.760 --> 0:02:13.519 exposure for those equities. What has it traditionally been? And look, 0:02:13.720 --> 0:02:16.040 we know it's not a monolith. Every client is certainly different. 0:02:16.040 --> 0:02:18.320 But in general, how do you think about US equities 0:02:18.400 --> 0:02:20.120 versus equities outside of the US? 0:02:20.240 --> 0:02:22.880 Sure, so we prefer US equities, and we prefer that 0:02:22.919 --> 0:02:26.200 both in both public markets as well as private markets. 0:02:26.680 --> 0:02:29.560 Big picture, we have roughly about a forty percent allocation 0:02:29.880 --> 0:02:33.840 to public equities. The largest allocation of that is to 0:02:34.000 --> 0:02:38.160 US equities, and then outside of that developed international equities, 0:02:38.160 --> 0:02:41.200 we do have a small percentage to emerging markets. But 0:02:41.240 --> 0:02:44.400 then also I would say we have recently increased our 0:02:44.440 --> 0:02:49.000 allocation to private markets and to private equity, and specifically 0:02:49.040 --> 0:02:51.919 as it relates to buyout and growth. And the reason 0:02:51.960 --> 0:02:55.480 why is because these are two subsectors of alternatives where 0:02:55.480 --> 0:02:58.560 you see a significant amount of alpha relative to public 0:02:58.600 --> 0:03:02.720 market markets, and also the distributions of returns is much 0:03:02.720 --> 0:03:05.400 more narrow than other subasset classes within alternatives. 0:03:05.440 --> 0:03:08.119 In terms of private equity, are you upbeat about the 0:03:08.240 --> 0:03:11.280 ability exit to see start seeing exits which is something 0:03:11.280 --> 0:03:14.040 that has been really difficult over the last few years. 0:03:14.240 --> 0:03:17.120 It has been difficult as it relates to public markets. 0:03:17.600 --> 0:03:19.960 I'm upbeat as it relates to private equity on two things. 0:03:20.000 --> 0:03:21.840 One is, I do think to the extent that you 0:03:21.919 --> 0:03:25.240 have opportunities right now in public markets to be able 0:03:25.280 --> 0:03:28.600 to take companies private. I think that's an attractive opportunity 0:03:28.600 --> 0:03:32.360 for private equity companies. Second, I do think that there's 0:03:32.400 --> 0:03:35.480 a lot of opportunities for private equity companies in the 0:03:35.520 --> 0:03:38.440 private markets, so they don't necessarily have to only think 0:03:38.480 --> 0:03:41.000 about taking a company public or M and A as 0:03:41.000 --> 0:03:44.800 their only alternative to liquidity. So a lot of secondary 0:03:44.840 --> 0:03:48.120 private exits, a lot of continuation funds. The other thing 0:03:48.160 --> 0:03:50.560 I would note, although, is if you look at growth 0:03:50.680 --> 0:03:54.800 valuations and in private equity, what you have seen is 0:03:54.800 --> 0:03:58.080 you have seen a normalization of valuations between public and 0:03:58.120 --> 0:04:02.120 private markets. And the reason is because you've had really 0:04:02.160 --> 0:04:06.480 strong performance with these portfolio companies and it's allowed these 0:04:06.480 --> 0:04:09.800 companies to grow into the target exit valuations that these 0:04:09.840 --> 0:04:11.760 gps were looking for. So I do think once you 0:04:11.760 --> 0:04:14.360 have a little bit more stabilization in the markets, you're 0:04:14.400 --> 0:04:16.560 going to see more deal activity, both as relates to 0:04:16.600 --> 0:04:17.800 IPO as well as M and A. 0:04:17.960 --> 0:04:20.360 Okay, so let's talk about potential stabilization in the markets. 0:04:20.400 --> 0:04:22.719 Just in the last couple of weeks, we've certainly seen 0:04:22.880 --> 0:04:25.359 things change quite a bit. As Carol mentioned, at one 0:04:25.360 --> 0:04:27.039 point today the S and P five hundred had given 0:04:27.080 --> 0:04:30.960 up all its gains since that November fifth election. Tariff concerns, 0:04:31.000 --> 0:04:32.360 concerns about the economy. 0:04:32.760 --> 0:04:33.680 What's your outlook? 0:04:34.080 --> 0:04:36.320 So I would just say the thing that I'm really 0:04:36.400 --> 0:04:40.320 thinking about is the sequencing of policies. And so if 0:04:40.320 --> 0:04:42.520 you look at the Trump administration, it is a pro 0:04:42.640 --> 0:04:45.720 business administration. But what we're seeing right now is some 0:04:45.760 --> 0:04:48.680 of the negative hits to growth come first, whether that's 0:04:48.760 --> 0:04:51.760 immigration or whether that's tariffs. Before in the second half 0:04:51.800 --> 0:04:53.599 of the year we're probably going to see some sort 0:04:53.640 --> 0:04:56.919 of tax reform as well as deregulation, and so I 0:04:56.920 --> 0:04:58.520 think what we've got to be mindful of is a 0:04:58.520 --> 0:05:03.320 little bit of that curve. Generally, the number one driver 0:05:03.520 --> 0:05:07.039 of US equity returns is a growing economy. Even with 0:05:07.160 --> 0:05:09.200 the tariff rates that we're talking about right now, we 0:05:09.240 --> 0:05:11.919 still do anticipate that we're going to have positive GDP 0:05:12.120 --> 0:05:14.800 in the US, and so from here we still do 0:05:14.839 --> 0:05:16.640 see equity market upside in the US. 0:05:16.760 --> 0:05:18.640 So Meanie, you guys don't think about recession because it 0:05:18.680 --> 0:05:20.520 does feel like all of a sudden, the narratives change 0:05:20.520 --> 0:05:23.920 a little bit. We've seen weaker consumer spending numbers, consumer 0:05:24.000 --> 0:05:28.719 sentiment numbers, manufacturing data, so no concern GDP now data 0:05:28.760 --> 0:05:31.120 which we know from the land EFFED can be very volatile, 0:05:31.520 --> 0:05:34.800 but recession off the table completely. 0:05:34.480 --> 0:05:36.680 For this, It's definitely, it's definitely not off the table, 0:05:36.720 --> 0:05:39.920 and we absolutely are looking at the data, whether that's 0:05:39.960 --> 0:05:40.640 consumer spending. 0:05:40.680 --> 0:05:42.720 The jobs report this Friday is going to. 0:05:42.640 --> 0:05:46.599 Be important, but you're also looking at a growth of 0:05:46.720 --> 0:05:48.960 over two percent, you know, two and a half percent, 0:05:49.120 --> 0:05:51.360 and so we have the odds of a recession even 0:05:51.360 --> 0:05:55.200 with these tariffs relatively low, call it fifteen to twenty percent. 0:05:55.520 --> 0:05:57.440 I do think it's important to take a step back 0:05:58.040 --> 0:06:00.520 and just look at we've got an SMP that's down 0:06:00.640 --> 0:06:03.400 roughly one percent year to date. Right, We've had a 0:06:03.400 --> 0:06:05.240 lot of volatility, but we've got an sp that's down 0:06:05.279 --> 0:06:07.760 one percent year to date. Okay. Where you've really seen 0:06:07.800 --> 0:06:10.760 that underperformance is in the consumer to the macro points 0:06:10.800 --> 0:06:13.400 that you were talking about, as well as in technology, 0:06:13.520 --> 0:06:16.080 just because you've had some of the growth decrease in 0:06:16.160 --> 0:06:20.159 earnings outperformance versus called the rest of the four ninety 0:06:20.160 --> 0:06:23.000 three r but outside of consumer technology, all of the 0:06:23.040 --> 0:06:26.120 other sectors are positive. And so what I'm really focused 0:06:26.200 --> 0:06:29.320 on is the earnings path for the other four ninety three. 0:06:29.320 --> 0:06:30.640 I think the max seven is going to be fine, 0:06:31.000 --> 0:06:33.360 but what we're going to see versus twenty four is 0:06:33.440 --> 0:06:35.800 likely a lot more earnings growth. So call it three 0:06:35.839 --> 0:06:39.640 percent and twenty four roughly eight nine percent this year. 0:06:40.160 --> 0:06:44.360 And so, and just your point as it relates to tariffs, 0:06:44.800 --> 0:06:47.719 we anticipate that every one percent increase in the effective 0:06:47.760 --> 0:06:52.640 tear rate decreases growth by roughly ten bases points and 0:06:52.880 --> 0:06:55.560 increases inflation by ten bases points. 0:06:55.920 --> 0:06:58.080 So it is manageable. 0:06:58.160 --> 0:07:00.440 I mean, it's going to depend on what happens, how 0:07:00.480 --> 0:07:03.719 long those tariffs are in place, if they're rolling or not. 0:07:03.920 --> 0:07:05.360 I think if they're rolling, tariffs is going to be 0:07:05.440 --> 0:07:07.040 much more hard from an inflation perspective. 0:07:07.040 --> 0:07:10.440 Do you think that's up in the air based on 0:07:10.640 --> 0:07:13.880 just kind of the mood the mode that we've gotten 0:07:13.920 --> 0:07:15.320 from the White House in the last twenty four to 0:07:15.360 --> 0:07:18.400 forty eight hours, do you think that these are going 0:07:18.400 --> 0:07:21.120 to be lasting tariffs that stick around for a long time. 0:07:21.200 --> 0:07:24.120 Will there be more possibly or do you think that 0:07:24.160 --> 0:07:26.080 things could change in a week and a month. 0:07:26.240 --> 0:07:29.560 I think things could absolutely change overnight and a week 0:07:29.560 --> 0:07:31.360 and a month. And I do think that there's going 0:07:31.400 --> 0:07:33.800 to be incrementally more tariffs that we see on things 0:07:33.920 --> 0:07:37.720 like autos, and I do think that there's the opportunity 0:07:37.760 --> 0:07:41.960 to also make a deal with you know, Mexica Canada 0:07:42.840 --> 0:07:45.200 in the near term and actually, you know, have those 0:07:45.240 --> 0:07:47.640 tariffs reduced. And so I think the ultimate is we 0:07:47.680 --> 0:07:51.040 don't know what's going to happen, and we just the 0:07:51.120 --> 0:07:53.320 main thing we're focused on is that economic data. 0:07:53.880 --> 0:07:56.040 Do you think the tariffs on Mexico and Canada are 0:07:56.080 --> 0:07:58.480 more damaging than tariffs on China, because it does seem 0:07:58.560 --> 0:08:01.320 like the Mexico and Canada tear there is this off 0:08:01.400 --> 0:08:03.880 ramp when it comes to you know, what the President 0:08:03.880 --> 0:08:06.240 and his team have called essentially the border crisis and 0:08:06.280 --> 0:08:08.880 the drug war. Yeah, I mean, I think we don't 0:08:08.880 --> 0:08:10.120 necessarily see that off ramp. 0:08:10.320 --> 0:08:13.080 Yeah, when you look at twenty five percent tariffs that 0:08:13.120 --> 0:08:15.560 you're talking about with Canada and Mexico, it's much more 0:08:15.560 --> 0:08:19.400 substantial than the tariffs that you've actually seen on China. 0:08:19.440 --> 0:08:22.760 And so when you think about that effective tariff tariff 0:08:22.920 --> 0:08:25.480 rate right now, it's roughly about eight percent. If things 0:08:25.480 --> 0:08:29.560 stay as they have been announced, an eight percent tariff 0:08:29.640 --> 0:08:34.160 rate would actually hit growth by roughly call it, you know, 0:08:34.200 --> 0:08:37.920 eighty basis points, and would increase inflation by roughly eighty 0:08:37.960 --> 0:08:40.839 basis points. That being said, we already had inflation coming 0:08:40.920 --> 0:08:43.720 down from where it is right now, and so we 0:08:43.840 --> 0:08:46.800 probably get to roughly a three percent level if that's 0:08:46.880 --> 0:08:50.920 the case. Again, it's not our estimate or our perspective 0:08:50.920 --> 0:08:54.600 that tariffs stay at these levels, but if that's the case, 0:08:54.800 --> 0:08:57.560 you still have an opportunity for the FED to be 0:08:57.600 --> 0:09:00.440 able to react if you have inflation even at that 0:09:00.440 --> 0:09:03.160 three percent level. And so what we saw in twenty 0:09:03.320 --> 0:09:07.160 nineteen is the FED cut as an insurance cut. And 0:09:07.240 --> 0:09:09.760 could we see that again today or you know, call 0:09:09.800 --> 0:09:12.960 it May, June, December. Absolutely, and I think the market's 0:09:12.960 --> 0:09:15.560 pricing more of that today. That's exactly what traders are 0:09:15.600 --> 0:09:18.560 pricing in three rate cuts. What kind of blows my 0:09:18.600 --> 0:09:21.960 mind is though, as you say, things could change quickly overnight, 0:09:22.040 --> 0:09:24.040 in a week, in a day, and that's kind of 0:09:24.080 --> 0:09:25.839 the environment that we've seen and we've seen it play 0:09:25.880 --> 0:09:27.800 out in terms of the rate environment. One thing I 0:09:27.800 --> 0:09:29.160 want to ask you, because I think there's been an 0:09:29.160 --> 0:09:33.000 assumption when it comes to President Trump his tolerance of, 0:09:33.440 --> 0:09:36.560 you know, market volatility, that he was watching the equity markets. 0:09:36.559 --> 0:09:38.679 It was kind of interesting to see. I feel like 0:09:38.720 --> 0:09:41.400 over the last few days where the markets had certainly 0:09:41.440 --> 0:09:44.120 the equity markets had some problems, and we just had 0:09:44.120 --> 0:09:47.199 this assumption that President Trump would do something, say something. 0:09:47.520 --> 0:09:50.640 I'm curious, how like, what's the conversation you guys all 0:09:50.640 --> 0:09:51.160 have around that. 0:09:51.280 --> 0:09:54.360 I mean, definitely there, I'll put whatever you want to Yeah, 0:09:54.440 --> 0:09:56.920 I mean there's definitely their perspective that there was going 0:09:56.960 --> 0:10:00.240 to be a deal done, which is why you know, 0:10:00.280 --> 0:10:03.600 the markets are reacting like they are. And you do 0:10:03.679 --> 0:10:07.480 have a president that has really focused on pro business policies. 0:10:08.280 --> 0:10:10.480 But at the end of the day, he's very focused 0:10:10.520 --> 0:10:14.000 on bringing manufacturing and jobs back to the US. And 0:10:14.040 --> 0:10:16.960 the question is can we withstand that volatility? Can the 0:10:17.000 --> 0:10:21.120 consumer withstand that volatility? Can CEOs withstand that volatility and 0:10:21.160 --> 0:10:22.760 continue to invest in their businesses. 0:10:23.080 --> 0:10:24.760 One thing I want to ask you, John Williams is 0:10:24.760 --> 0:10:26.600 coming up. He's going to talk with our Michael McKee. 0:10:26.640 --> 0:10:28.400 If you're sitting down with him, I mean or what 0:10:28.440 --> 0:10:30.679 do you hope that Mike asks him? Because I'm curious. 0:10:30.720 --> 0:10:32.640 I think Mike probably a week ago had different set 0:10:32.679 --> 0:10:35.280 of questions, and he probably does today. But what would 0:10:35.320 --> 0:10:37.080 you want to hear from John Williams or what would 0:10:37.080 --> 0:10:38.080 you want to hear him talk about. 0:10:38.360 --> 0:10:40.679 I guess I would want to know as it relates 0:10:40.720 --> 0:10:45.240 to on the tenure, what's his thoughts as it relates 0:10:45.320 --> 0:10:48.240 to the tenure. We have a Treasury Secretary who's suggested 0:10:48.280 --> 0:10:51.200 that he's watching that right, and so what is the 0:10:51.240 --> 0:10:53.960 absolute level of the tenure, Why is it moving, how 0:10:53.960 --> 0:10:56.320 fast is it moving? And how does that play into 0:10:57.080 --> 0:10:59.720 their overall picture of kind of risk tolerance? And how 0:10:59.760 --> 0:11:02.880 does that then affect if they cut rates? They don't 0:11:02.920 --> 0:11:05.240 cut rates? And do they do that? Can they do 0:11:05.320 --> 0:11:08.040 that even with inflation? Call it three if inflation does 0:11:08.080 --> 0:11:10.000 tick up to call it three percent or so. 0:11:10.040 --> 0:11:11.520 We're going to be hearing from John Williams in just 0:11:11.559 --> 0:11:13.600 a minute, so we'll see what Mike asks him before 0:11:13.600 --> 0:11:16.959 we let you go. Mina crypto is it part of 0:11:17.000 --> 0:11:20.360 the alternatives in a portfolio for your ultra high networth clients? 0:11:20.760 --> 0:11:24.040 It's not part of our client's portfolios. And the main 0:11:24.080 --> 0:11:26.160 reason that is is because we don't see it as 0:11:26.200 --> 0:11:29.200 a store of value. It's very hard to actually value. 0:11:29.400 --> 0:11:32.760 Oh please for the crypto folks in the back. Yeah, 0:11:32.880 --> 0:11:35.160 so you don't see it as a store of value, 0:11:35.240 --> 0:11:35.839 is what you said. 0:11:35.880 --> 0:11:37.920 We don't see the store of value and Tiley volatile 0:11:37.960 --> 0:11:40.679 asset and it's hard under what valuation metrics do you 0:11:40.760 --> 0:11:42.920 actually value it? So no, we don't have it as 0:11:42.920 --> 0:11:44.520 a part of our core asset allocation. 0:11:44.600 --> 0:11:48.280 All right, don't throw anything at Miana crypto people when 0:11:48.320 --> 0:11:51.640 you see her around, because she said what a lot 0:11:51.640 --> 0:11:52.160 of people think. 0:11:52.200 --> 0:11:53.319 I think it's fair to say. 0:11:53.320 --> 0:11:55.880 Absolutely, thank you so much, so appreciate it of course. 0:11:56.000 --> 0:11:58.559 Mina Flin, co head of Global Private Wealth Management at GOLDMNSAX. 0:11:58.559 --> 0:12:00.079 Here at Bloomberg invest. 0:12:00.520 --> 0:12:04.080 You're listening to the Bloomberg Business Week podcast. Catch us 0:12:04.160 --> 0:12:07.600 live weekday afternoons from two to five pm Eastern Listen 0:12:07.640 --> 0:12:11.160 on Apple CarPlay and Android Auto with the Bloomberg Business app, 0:12:11.360 --> 0:12:13.160 or watch us live on YouTube. 0:12:14.440 --> 0:12:16.240 Safe to say, every day we are seeing tons of 0:12:16.280 --> 0:12:17.920 headlines on AI, so we just kind of want to 0:12:18.000 --> 0:12:19.240 jump in in top of our next guy. 0:12:19.400 --> 0:12:21.800 Yeah, we got with us Dell Technologies, Global CTO and 0:12:21.880 --> 0:12:24.880 chief AI officer John Rose here with us at Bloomberg 0:12:24.960 --> 0:12:28.360 invest He participated in a panel already on strategies for 0:12:28.480 --> 0:12:32.040 enhancing a company value. John, Look, before we get going, 0:12:32.080 --> 0:12:33.600 I just want to get an update from you on 0:12:33.720 --> 0:12:38.560 IT spending through the pandemic if anything today and like 0:12:38.600 --> 0:12:41.679 today's volatility that we saw in the markets, although it's 0:12:41.760 --> 0:12:44.440 kind of coming back in the equity markets, are you 0:12:44.480 --> 0:12:47.920 watching that at all in the context of IT spend, well, well. 0:12:47.760 --> 0:12:52.319 There's two answers in terms of AI spend. Clearly that's 0:12:52.600 --> 0:12:55.079 a gigantic growth theory. I think we've seen the TAM 0:12:55.160 --> 0:12:58.120 double in the last year. There's no doubt that you know, 0:12:58.120 --> 0:13:00.760 we're on a track right now, and definitely in the 0:13:00.800 --> 0:13:04.160 global enterprise market that probably the majority of IT spend 0:13:04.240 --> 0:13:06.520 in the long term is to build and implement the 0:13:06.520 --> 0:13:09.319 systems necessary to power the AI transformation of businesses. So 0:13:09.960 --> 0:13:12.640 pretty bullish on there the consequences. In order to do that, 0:13:12.679 --> 0:13:14.520 we have to make the older systems more efficient. So 0:13:14.520 --> 0:13:17.080 there's actually a spend profile there of trying to densify 0:13:17.160 --> 0:13:20.520 environments and aggregate legacy systems. So the whole space is 0:13:20.600 --> 0:13:25.200 pretty active and looks to be a pretty positive environment 0:13:25.240 --> 0:13:28.320 because without it, without that infrastructure, there is no AI 0:13:28.360 --> 0:13:29.240 future too. 0:13:29.400 --> 0:13:32.320 We're like, what over two years in at least that 0:13:32.440 --> 0:13:34.960 the market, the world, you know, as you always remind us, 0:13:35.000 --> 0:13:37.760 AI nothing new. We do the same thing, but certainly 0:13:37.760 --> 0:13:40.920 the narrative and the discussion changed more than two years ago. 0:13:41.480 --> 0:13:44.320 How has it evolved here in twenty twenty five? What's 0:13:44.400 --> 0:13:45.120 top of mind? 0:13:45.240 --> 0:13:47.319 Yeah, I mean, so we're in year three. 0:13:47.880 --> 0:13:50.720 Year one was experimentation with some tools that people couldn't 0:13:50.720 --> 0:13:52.920 really use for enterprise. Year two was the do it 0:13:52.960 --> 0:13:54.880 yourself here that if you wanted to do it, it was 0:13:54.880 --> 0:13:58.480 a big technical effort. Year three we've now seen lots 0:13:58.520 --> 0:14:00.600 of ISVs, lots of turn key on offering. The most 0:14:00.600 --> 0:14:05.400 importantly companies like de sivvs, independent software vendors people which 0:14:05.400 --> 0:14:08.080 sell you stuff so instead of do it yourself, you 0:14:08.120 --> 0:14:11.000 can actually buy stuff to do AI, which is incredibly important. 0:14:11.040 --> 0:14:12.880 The two things that we need for enterprise adoption are 0:14:13.120 --> 0:14:15.520 one the ability to consume it as a technology as 0:14:15.520 --> 0:14:17.760 opposed to a do it yourself project, which that's actually 0:14:17.760 --> 0:14:20.400 happening now, and the other is a feeling that you're 0:14:20.440 --> 0:14:22.640 not the first mover and because some of us big 0:14:22.680 --> 0:14:24.600 companies have moved first and have gotten to the other 0:14:24.640 --> 0:14:27.680 side of productivity. Now there's archetypes to follow, So so 0:14:27.680 --> 0:14:29.880 I'm pretty bullish about this is a good year in 0:14:29.960 --> 0:14:31.760 terms of expanded enterprise adoption. 0:14:31.880 --> 0:14:33.880 We haven't gone to talk to you since the deep 0:14:33.920 --> 0:14:37.200 Seek news on January twenty seventh that really wiped hundreds 0:14:37.200 --> 0:14:39.600 of billions of dollars from in Vidia's market tap. We're 0:14:39.600 --> 0:14:42.520 down in Vidia about a little over twenty percent since 0:14:42.560 --> 0:14:46.360 the January highs for that company. Are you seeing any 0:14:46.440 --> 0:14:48.440 pullback in this space right now? 0:14:49.280 --> 0:14:53.240 No, in a word, yeah, And the reason for it is, Look, 0:14:53.640 --> 0:14:56.960 you know, deepsek was just another of you know, forty 0:14:57.040 --> 0:15:00.960 years of disruptions that have progressively moved AI forward. You know, 0:15:01.400 --> 0:15:03.280 I was a theory forty years ago, and then we 0:15:03.360 --> 0:15:06.760 invented things and created new technologies and bent the curve 0:15:06.840 --> 0:15:09.360 multiple times to ultimately get to where we are today today. 0:15:09.360 --> 0:15:11.720 There's only two levers that make AI better. One is 0:15:11.760 --> 0:15:13.920 the mips per want of the compute environment. Okay, every 0:15:13.960 --> 0:15:16.440 time in Vidia delivers a new GPU that gets better, 0:15:16.480 --> 0:15:19.000 and the other is algorithmic improvements, which are things like 0:15:19.000 --> 0:15:21.040 deep Seek, and they just they just allow us to 0:15:21.080 --> 0:15:21.960 do things more efficiently. 0:15:22.040 --> 0:15:25.280 So you buy what we know about Deep Seek, Like, 0:15:25.320 --> 0:15:27.720 are you skeptical that they were able to do what 0:15:27.760 --> 0:15:29.440 they did with the resources they had? 0:15:29.560 --> 0:15:30.280 Look, I wasn't. 0:15:30.480 --> 0:15:32.080 I didn't have a front row seat to exactly what 0:15:32.080 --> 0:15:33.920 they did. I look at it as interesting engineering. It 0:15:33.920 --> 0:15:37.360 does look like some novel approaches using some existing technologies. Great, 0:15:37.440 --> 0:15:39.920 we need that and what we've learned from it because 0:15:39.920 --> 0:15:42.280 as an open model is Yeah, there's some interesting techniques 0:15:42.320 --> 0:15:43.840 that other people are going to adopt and guess what 0:15:43.880 --> 0:15:46.240 it's going to make the whole AI industry more efficient. 0:15:46.560 --> 0:15:49.520 If there wasn't kind of insatiable demand in front of us, 0:15:49.560 --> 0:15:52.520 I'd be nervous, But there is. We have barely touched 0:15:52.560 --> 0:15:54.560 the processes of the enterprises in the world, and we 0:15:54.600 --> 0:15:56.040 have millions of them to go after. 0:15:56.200 --> 0:15:58.800 But I do wonder to Tim's point, that does Deep 0:15:58.840 --> 0:16:02.000 Seek make us ref the models or the narrative about 0:16:02.760 --> 0:16:06.480 how the buildout has to happen, the energy needs, this cost, 0:16:06.560 --> 0:16:07.160 whatever it is. 0:16:07.920 --> 0:16:12.280 Yes, just like every other iteration, we're in a world 0:16:12.320 --> 0:16:14.880 Welcome to the AI club. The AI club is a 0:16:15.000 --> 0:16:18.760 pre is an environment where there's constant disruption happening, moving 0:16:18.760 --> 0:16:22.280 the industry forward, and so the novel approaches in Deepseak 0:16:22.280 --> 0:16:24.040 allow us to rethink, Hey, maybe I can do training 0:16:24.080 --> 0:16:26.120 a little more efficiently, Maybe I can do inferencing a 0:16:26.160 --> 0:16:28.920 little more costly. Maybe I can develop a different way 0:16:28.960 --> 0:16:31.200 of thinking about a model. Great, let's adopt that, let's 0:16:31.200 --> 0:16:34.160 build on it, and the next one might be bigger disruption, 0:16:34.240 --> 0:16:36.120 but it'll still move the industry forward. 0:16:36.200 --> 0:16:37.920 Got to ask you about Elon Musk and the government, 0:16:38.120 --> 0:16:42.040 and the goal is to make it more efficient. And 0:16:42.080 --> 0:16:43.640 there's of course a lot of news and a lot 0:16:43.640 --> 0:16:46.600 of headlines around what's going on in terms of what 0:16:46.640 --> 0:16:49.400 we've seen so far. What are your expectations that it 0:16:49.480 --> 0:16:53.320 becomes a more technologically advanced run government. 0:16:53.600 --> 0:16:54.360 Well, well, I think you know. 0:16:54.400 --> 0:16:57.520 I mean we should point out that Dell supplying servers 0:16:58.000 --> 0:16:59.760 to Elon's XAI. 0:17:00.160 --> 0:17:03.160 The government and everybody else in the world. We're very present. 0:17:03.320 --> 0:17:04.280 Yeah, you know. 0:17:04.359 --> 0:17:07.200 Here here's the punchline, elons and technologists. He clearly understands 0:17:07.200 --> 0:17:10.000 the technology stack. The way you improve things, the way 0:17:10.040 --> 0:17:13.360 you get productivity, you do things better, is both the 0:17:13.400 --> 0:17:16.359 improvement of your processes and the application of technology to 0:17:16.440 --> 0:17:19.000 make those processes work more efficiently. Both of those are 0:17:19.000 --> 0:17:20.919 going to happen. I can't tell you exactly what's going 0:17:20.960 --> 0:17:22.240 to happen in the government. I can't tell you what 0:17:22.320 --> 0:17:24.000 play they're going to make. But what I can guarantee 0:17:24.040 --> 0:17:26.639 you as the end state, there will be more technology 0:17:26.760 --> 0:17:29.720 powering our government and our public sector, and it will 0:17:29.720 --> 0:17:33.080 probably make them more efficient and more effective. How it 0:17:33.119 --> 0:17:35.359 works out above that but by pay grade, but it 0:17:35.400 --> 0:17:37.040 is inevitable. The one thing I can guarantee you, there 0:17:37.040 --> 0:17:40.560 won't be less technology in the government when we move 0:17:40.600 --> 0:17:42.120 into the next year or the next two years. 0:17:42.160 --> 0:17:44.359 Listen, I'm asking you this as a technologists somebody who's 0:17:44.359 --> 0:17:46.600 a front row seat on the technology side. Critics have 0:17:46.680 --> 0:17:49.440 said their concerns about security and privacy when it comes 0:17:49.440 --> 0:17:51.560 to what Doje and what Elon Musk are doing. 0:17:51.560 --> 0:17:52.560 Should they be concerned? 0:17:54.400 --> 0:17:58.119 I don't know that's their opinion about Maybe you should 0:17:58.119 --> 0:17:59.959 always be concerned. You should always look at the risk 0:18:00.040 --> 0:18:03.760 give technology. Here's a good example. We're maybe outspoken that 0:18:04.040 --> 0:18:06.560 for the real critical AI activities you should do them 0:18:06.560 --> 0:18:08.679 in a private environment. Some people disagree with us. The 0:18:08.760 --> 0:18:11.680 reason we say that is because that's the lowest risk path. 0:18:11.880 --> 0:18:14.680 It also happens to be the lowest cost path. Every 0:18:14.680 --> 0:18:18.720 technology decision you make is a technology in a vacuum 0:18:18.800 --> 0:18:21.240 until you apply it to a real world scenario, and 0:18:21.240 --> 0:18:21.800 that's where the risk. 0:18:22.040 --> 0:18:24.639 So essentially, what you're saying is if the Department of 0:18:24.680 --> 0:18:29.720 Government efficiency employees are or using AI tools to help 0:18:29.880 --> 0:18:31.760 with their jobs, they should be doing that in an 0:18:31.840 --> 0:18:34.359 environment that is secure, you bet. 0:18:34.440 --> 0:18:37.120 And what that means to them they should figure out. 0:18:37.160 --> 0:18:39.000 But what you shouldn't do is go into an environment 0:18:39.000 --> 0:18:41.679 when you're using technology without contemplating the risk of it. 0:18:41.800 --> 0:18:45.199