WEBVTT - Bloomberg Businessweek Weekend - November 21st, 2025 0:00:00.280 --> 0:00:07.240 Bloomberg Audio Studios, Podcasts, radio news. 0:00:08.640 --> 0:00:13.000 This is Bloomberg Business Week Daily reporting from the magazine 0:00:13.000 --> 0:00:17.599 that helps global leaders stay ahead with insight on the people, companies, 0:00:17.640 --> 0:00:22.520 and trends shaping today's complex economy. Plus global business, finance 0:00:22.560 --> 0:00:25.880 and tech news as it happens. The Bloomberg Business Week 0:00:25.960 --> 0:00:31.320 Daily Podcast with Carol Masser and Tim Steneveek on Bloomberg Radio. 0:00:32.280 --> 0:00:35.720 Hi everyone, welcome to the Bloomberg Business Week Weekend podcast. Well, 0:00:35.720 --> 0:00:38.120 this past week earnings from the King of the AI, 0:00:38.280 --> 0:00:43.000 Bellweather's amid nervousness over the artificial intelligence build out and spend. 0:00:43.520 --> 0:00:48.199 Also concerns regarding credit stress and private markets, plus the 0:00:48.320 --> 0:00:53.239 start again Tim. Finally, finally of some US government economic data. 0:00:53.360 --> 0:00:56.320 We're just getting caught up when it comes to the releases. 0:00:56.000 --> 0:00:58.560 We are, and they're coming in funny ways and on 0:00:58.640 --> 0:01:00.600 funny days like it's throwing us awfully. 0:01:00.560 --> 0:01:02.720 It is it is, but it's okay. We'll bring you 0:01:02.760 --> 0:01:04.840 all the updates as we get them. So this our 0:01:05.040 --> 0:01:06.959 on the US labor market, We're going to catch up 0:01:06.959 --> 0:01:09.800 with the CFO over at upwork. Also some of those 0:01:09.920 --> 0:01:12.679 risk concerns about the spending in circular financing of the 0:01:12.720 --> 0:01:15.760 AI buildout. We've been talking about that a lot. Also 0:01:15.800 --> 0:01:19.040 the not so transparent works of private credit. We turned 0:01:19.080 --> 0:01:21.319 to someone who we turned to a lot during the 0:01:21.400 --> 0:01:24.880 Great Financial Crisis, the former investment banker Chris Whalen. 0:01:25.280 --> 0:01:27.520 Plus also glad that we could catch up with the 0:01:27.560 --> 0:01:30.679 CEO of Connect One Bank Orp again on lending on 0:01:30.760 --> 0:01:33.560 the FED on affordable housing. That was a really fun 0:01:33.560 --> 0:01:36.360 part of the conversation. We did talk about rent stabilization 0:01:36.560 --> 0:01:39.760 and the business environments. His bank is involved in affordable 0:01:39.760 --> 0:01:42.400 housing in New York City, so that was a fun 0:01:42.440 --> 0:01:43.600 part of that conversation. 0:01:44.080 --> 0:01:48.560 Plus later on how brilliant leaders unlock collective genius, crypto, 0:01:48.600 --> 0:01:52.680 feeling the pressure, and the inescapable business of beauty. 0:01:52.960 --> 0:01:54.680 All of that to come. We begin with a look 0:01:54.720 --> 0:01:57.680 at the US labor market. Thursday, this past week, not 0:01:57.760 --> 0:02:00.560 on Friday, which is when we normally get monthly reports 0:02:00.560 --> 0:02:04.160 from the Bureau of Labor Statistics, released it's hotly anticipated, 0:02:04.560 --> 0:02:08.000 long long delayed September Jobs report. And what was good 0:02:08.000 --> 0:02:10.760 about this data batch tim they had actually collected i 0:02:10.760 --> 0:02:13.760 think all the data they needed to do this report 0:02:13.840 --> 0:02:16.600 just before the government shut down, so it was pretty complete. 0:02:16.680 --> 0:02:19.200 What we found out the job growth picked up in September, 0:02:19.240 --> 0:02:22.400 the unemployment rate tacked higher, suggests that the labor market 0:02:22.440 --> 0:02:25.239 showed signs of stabilizing before the government shut down. 0:02:25.440 --> 0:02:27.880 Meantime, the BLS also said it will not publish in 0:02:27.960 --> 0:02:31.440 October jobs report. It did, however, note it will incorporate 0:02:31.639 --> 0:02:36.760 those payroll figures into the November report. Are you keeping trying? 0:02:36.840 --> 0:02:37.040 Yeah? 0:02:37.160 --> 0:02:37.200 No. 0:02:38.080 --> 0:02:40.160 This is why I'm glad I sit right next to 0:02:40.200 --> 0:02:42.920 Mike McKee, because if I ever have questions about this, 0:02:42.960 --> 0:02:44.799 I just turn around and I say, Mike, what's going 0:02:44.840 --> 0:02:45.280 on with this? 0:02:45.560 --> 0:02:48.200 Well, and keep in mind that November report will be 0:02:48.240 --> 0:02:52.520 published in December, but it comes after the fed's fatal 0:02:52.560 --> 0:02:54.280 meeting of twenty twenty five. Did you catch that? Do 0:02:54.320 --> 0:02:55.880 you need the whiteboard screen? Do you need me to 0:02:55.880 --> 0:02:56.720 send a little note down? 0:02:56.760 --> 0:02:59.239 No, I don't because I have ECO go on the 0:02:59.240 --> 0:03:01.080 Bloomberg term and that's all I need. 0:03:01.120 --> 0:03:03.960 All right, Well, listen we nonetheless, as the data starts 0:03:03.960 --> 0:03:06.400 to come out finally from the US government, we relied 0:03:06.440 --> 0:03:09.519 once again on Erica Gessert. She's the chief financial officer 0:03:09.560 --> 0:03:12.720 at Upwork who talked about the labor market. Yes, of course, 0:03:12.720 --> 0:03:15.079 she also gave us an update on the company's investor day. 0:03:15.200 --> 0:03:18.160 Our investor day was really timed perfectly for us. The 0:03:18.200 --> 0:03:20.760 reason our stock one up thirteen percent after our earnings 0:03:20.800 --> 0:03:23.160 report was at the end of twenty twenty four, we 0:03:23.280 --> 0:03:26.080 told our investors that we would take a year and 0:03:26.240 --> 0:03:29.520 really reinvest in our company and rebuild up Work, and 0:03:29.560 --> 0:03:31.280 we said that we would return to GSB and revenue 0:03:31.280 --> 0:03:32.160 growth in twenty twenty six. 0:03:32.240 --> 0:03:33.560 Well we did that two quarters early. 0:03:33.720 --> 0:03:36.320 What we told them then was that our results are 0:03:36.360 --> 0:03:38.440 going up into the right right now, and that is 0:03:38.480 --> 0:03:43.080 because of really three investment areas. One is AI, one 0:03:43.160 --> 0:03:46.080 is SMB expanding our relationships with SMB, and one is 0:03:46.120 --> 0:03:48.400 the outsized opportunity that we have with our enterprise. 0:03:48.680 --> 0:03:51.680 So I want to remind everybody Upwork is a hiring platform. 0:03:51.720 --> 0:03:53.800 You can go there to find talent in development and 0:03:53.840 --> 0:03:57.280 ITAI services, design and creative, sales and marketing, admin and 0:03:57.320 --> 0:03:59.839 customer support. It's this two sided markets. So that's right. 0:04:00.120 --> 0:04:03.560 You have a good view on what exactly the type 0:04:03.560 --> 0:04:05.800 of job that companies are hiring for and then also 0:04:05.840 --> 0:04:08.920 the availability of that labor. What does that picture and 0:04:09.000 --> 0:04:10.320 that balance look like right now? 0:04:10.480 --> 0:04:12.440 The last few years have been as we all know 0:04:12.640 --> 0:04:15.120 tough the on the job market, and you know, most 0:04:15.160 --> 0:04:17.800 companies in our industry were down double digits over the 0:04:17.800 --> 0:04:20.600 past few years in terms of both volume and revenue. 0:04:20.880 --> 0:04:23.560 Upwork was relatively flat for the past couple of years. 0:04:23.600 --> 0:04:27.720 So we were gaining share againstaffing companies even other online marketplaces, 0:04:28.080 --> 0:04:30.880 but still relatively flat. And it's really these investments that 0:04:30.920 --> 0:04:35.240 we've made in AI. We're actually seeing both the AI 0:04:35.320 --> 0:04:38.720 category itself increase and that is really, like I say, accelerating. 0:04:38.720 --> 0:04:40.680 So this is this is AI work on the platform, 0:04:41.000 --> 0:04:43.000 but also the investments on the front end. 0:04:43.040 --> 0:04:44.040 So if you think about the. 0:04:44.040 --> 0:04:46.760 Hiring process and how that works, there's a lot of 0:04:46.760 --> 0:04:49.360 friction to it, right. You know, a client comes onto 0:04:49.400 --> 0:04:51.600 our website, they post a job, they have to write 0:04:51.600 --> 0:04:53.960 it up, they have to search for talent, the talent 0:04:54.000 --> 0:04:54.520 has to write. 0:04:54.360 --> 0:04:55.039 A job proposal. 0:04:55.240 --> 0:04:57.760 Well, now AI does all of that for both our 0:04:57.800 --> 0:05:00.960 clients and our talent and make them find each other 0:05:01.040 --> 0:05:04.000 faster and kind of fulfill these jobs and get them done. 0:05:04.200 --> 0:05:07.440 Those matches work, Like what percentage of the time or 0:05:07.480 --> 0:05:09.599 where is it that it's like, well not not good? 0:05:09.640 --> 0:05:11.800 Well, no, So what the AI is doing is it's 0:05:11.800 --> 0:05:14.279 writing the job post, it's writing the job proposal, and 0:05:14.320 --> 0:05:16.520 of course that you know they're they're there can be editing, ye. 0:05:16.960 --> 0:05:19.800 But now we do have AI interviewer and and we 0:05:19.880 --> 0:05:22.400 also one of our one of our most successful, very 0:05:22.440 --> 0:05:25.280 recent launches is UMA, which is our you know, our 0:05:25.440 --> 0:05:28.839 AI companion on our site is now recruiting talent. So 0:05:28.839 --> 0:05:30.839 so the client asked for a certain type of talent, 0:05:31.080 --> 0:05:33.600 UMA goes out within our you know, eighteen million strong 0:05:33.640 --> 0:05:35.920 talent based and identifies the right talent for that job. 0:05:36.279 --> 0:05:38.800 Now we're seeing fil rates much higher. 0:05:38.600 --> 0:05:42.040 Using the using the AI recruiter than with the human recruiter. Why, 0:05:42.600 --> 0:05:45.760 it's good at spinning lots and lots of data, right, 0:05:45.800 --> 0:05:48.560 and so you know, we've been building our platform is 0:05:48.600 --> 0:05:51.000 over ten years old, and we've been building this data 0:05:51.040 --> 0:05:53.920 set of you know, what types of jobs match with 0:05:53.960 --> 0:05:57.200 which talent. You know, whether client client is price sensitive 0:05:57.320 --> 0:06:00.080 or you know, maybe their quality sensitive. And so the 0:06:00.080 --> 0:06:02.920 the recruiter, the air recruiters much better at scanning across 0:06:02.960 --> 0:06:04.839 all of this data than a human can be. 0:06:05.120 --> 0:06:09.720 Are you seeing demand stay a stable decrease or increase 0:06:10.000 --> 0:06:12.680 from the side of your platform that is looking for 0:06:12.720 --> 0:06:13.239 the workers. 0:06:13.520 --> 0:06:15.800 Yeah, So client demand. And I think you know what 0:06:15.800 --> 0:06:16.560 we are seeing is. 0:06:16.520 --> 0:06:19.679 Client demand has been where we have seen the biggest 0:06:19.720 --> 0:06:21.800 impact from from you know, I would say the job 0:06:21.839 --> 0:06:23.640 market and the economy writ. 0:06:23.520 --> 0:06:27.240 Large, like if the economy is softer, then demand will 0:06:27.240 --> 0:06:28.520 go down from the prince, yes. 0:06:28.400 --> 0:06:30.200 And and and if you think about that, if you 0:06:30.200 --> 0:06:33.560 think about you know, our our online marketplace is primarily 0:06:33.640 --> 0:06:36.919 smb customers, right and so small the small. 0:06:36.760 --> 0:06:39.200 Medium sized business. So if you think about what's going on. 0:06:39.240 --> 0:06:42.440 There when inflation is high, you know, you know this, 0:06:42.440 --> 0:06:45.159 this hits consumer whiles it also hits smb you know 0:06:45.400 --> 0:06:47.960 leaders and and and then also when interest. 0:06:47.760 --> 0:06:49.680 Rates are high, they have lower access to capital. 0:06:49.480 --> 0:06:52.360 Right, and so we do see the demand environment in 0:06:52.440 --> 0:06:56.640 terms of just pure volume of SMB hirers relatively flat 0:06:56.640 --> 0:06:58.360 in this in this you know right now. 0:06:58.400 --> 0:06:59.680 But you know, we are. 0:06:59.800 --> 0:07:02.520 One of the few places where these SMBU customers can 0:07:02.560 --> 0:07:05.839 actually access very high quality AI talent and afford you know, 0:07:05.880 --> 0:07:08.800 in an affordable way and quickly, and so as they're 0:07:08.839 --> 0:07:12.920 trying to implement AI work within their businesses, this contingent 0:07:13.480 --> 0:07:15.600 marketplace that we offer is one of the best places 0:07:15.600 --> 0:07:16.160 they can find. 0:07:16.200 --> 0:07:18.160 What's your take on AI and the impact it's going 0:07:18.240 --> 0:07:19.200 to have on the labor force. 0:07:19.520 --> 0:07:21.880 AI is not going to replace humans. 0:07:22.160 --> 0:07:25.120 Humans with AI will replace humans without AI, right, And 0:07:25.200 --> 0:07:29.480 so we're seeing AI replace very simple tasks, but not 0:07:29.880 --> 0:07:32.480 you know, the larger, more complex work because these AI 0:07:32.520 --> 0:07:35.440 agents are not that edgentic, they have no judgment, they 0:07:35.440 --> 0:07:37.280 cannot complete the complex tasks. 0:07:37.280 --> 0:07:39.840 So what we've seen, yeah, over well. 0:07:40.080 --> 0:07:42.440 What we've seen over the years is jobs that are 0:07:42.640 --> 0:07:45.200 three hundred dollars in lower those have those have gone 0:07:45.240 --> 0:07:47.240 down on our platform. So about two years ago we 0:07:47.280 --> 0:07:49.120 had about five percent of our work with job three 0:07:49.160 --> 0:07:49.920 hundred dollars lower. 0:07:49.960 --> 0:07:51.280 Now it's about three and a half percent. 0:07:51.600 --> 0:07:54.720 But at the same time, the AI jobs on our platform, 0:07:54.840 --> 0:07:57.760 clients who engage in AI work spend about three times 0:07:57.800 --> 0:08:00.520 with our normal you know kind of platform work. Yeah, 0:08:00.520 --> 0:08:03.480 it does, and so you know, we see that growing 0:08:03.520 --> 0:08:06.120 and growing because that work is more complex. It requires 0:08:06.200 --> 0:08:09.000 humans and you know, humans using AI agents, but it 0:08:09.040 --> 0:08:10.080 requires humans in the loop. 0:08:10.360 --> 0:08:12.800 That was Erica Gessertz CFO over at Upwork. 0:08:12.960 --> 0:08:15.120 Okay, so the US economy continues to be front and 0:08:15.160 --> 0:08:17.720 center and what it means for FED policy so important. 0:08:17.920 --> 0:08:22.000 But also this week crucial earnings report from the largest 0:08:22.080 --> 0:08:24.200 market cap company in the world. We're talking about the 0:08:24.280 --> 0:08:26.480 king of the AI Bellweathers and Vidia. 0:08:26.800 --> 0:08:30.000 And Vidia delivered a surprisingly strong revenue forecast. It pushed 0:08:30.040 --> 0:08:32.160 back on the idea that the AI industry is in 0:08:32.200 --> 0:08:34.319 a bubble, and I think for a lot of investors 0:08:34.320 --> 0:08:37.480 at East concerns that had spread across the tech sector. 0:08:37.679 --> 0:08:39.800 For some thoughts on the company and the warnings of 0:08:39.840 --> 0:08:42.920 an AI bubble, we lean on Dave Lee Blueberg Opinions, 0:08:43.120 --> 0:08:44.600 US technology columnist. 0:08:45.040 --> 0:08:48.000 The question is no longer is this an AI bubble? 0:08:48.160 --> 0:08:48.280 Right? 0:08:48.320 --> 0:08:49.760 I think we've all come to the agreement there was 0:08:49.800 --> 0:08:51.480 a bubble of some kind, But is he going to 0:08:51.480 --> 0:08:53.760 be a bubble like the Internet dot com bubble where 0:08:54.400 --> 0:08:57.840 there was just devastation when many of these companies that 0:08:57.960 --> 0:09:02.520 had suspect balance it's turned out to be suspect companies. 0:09:04.080 --> 0:09:04.760 Jensen Wang. 0:09:04.880 --> 0:09:08.319 He is saying, Look, there's huge height, there's huge excitement. 0:09:08.679 --> 0:09:10.400 There's a lot of questions about how companies are going 0:09:10.440 --> 0:09:13.360 to use AI. But from where he's sitting, they're still 0:09:13.360 --> 0:09:16.320 seeing this incredibly strong demand for what they do, which 0:09:16.320 --> 0:09:18.800 is obviously create the world's best semiconductors. 0:09:18.760 --> 0:09:21.720 Still be fair, He's got a produciary responsibility. He's not 0:09:21.720 --> 0:09:24.679 going to sit right like. He's got to be careful 0:09:24.720 --> 0:09:28.320 in terms of how he quantitifies or qualifies his business. 0:09:28.440 --> 0:09:30.760 And the numbers, many would say, yeah, there is still 0:09:30.800 --> 0:09:31.800 strong demand. 0:09:31.600 --> 0:09:34.240 Still a strong demand. I think that it was interesting 0:09:34.240 --> 0:09:37.479 to see the reaction to the earnings because the immediate 0:09:37.480 --> 0:09:39.839 reaction was wow, this really pushes back on the idea 0:09:39.880 --> 0:09:42.839 as a bubble. The problems we were still worried about 0:09:42.840 --> 0:09:45.840 before the earnings they still exist despite the earnings being 0:09:45.920 --> 0:09:46.400 so strong. 0:09:46.480 --> 0:09:49.920 What is your take on why the collective market sort 0:09:49.960 --> 0:09:53.160 of recognized something here? There's no catalyst, at least to 0:09:53.200 --> 0:09:56.880 my knowledge that you know, no new information came to light. 0:09:57.320 --> 0:10:00.440 One of the defining parts of this new bubble so 0:10:00.480 --> 0:10:03.120 far has been, you know, whenever there's a slight clue 0:10:03.160 --> 0:10:06.239 as to the future AI, the reaction needs to be overstated. 0:10:06.280 --> 0:10:08.480 So you remember that that afternoon, that morning when Deep 0:10:08.520 --> 0:10:11.280 Seek was released. The reaction to back in January, I 0:10:11.320 --> 0:10:13.880 mean just devastating when everyone was sort of panicking, and 0:10:13.920 --> 0:10:15.839 then when people really thought about it, they were, well, 0:10:15.880 --> 0:10:17.560 you know what, maybe this isn't so bad after all, 0:10:17.640 --> 0:10:19.360 the same as being I think could be said for 0:10:19.679 --> 0:10:22.800 sort of positive moves. And look, nobody was coming into 0:10:23.200 --> 0:10:26.120 in videos earning thinking oh this could be you know, 0:10:26.440 --> 0:10:28.760 these could be bad or what everyone was expecting to 0:10:28.800 --> 0:10:31.000 be a great quarter. Now it's stronger than some people 0:10:31.000 --> 0:10:35.360 had thought, obviously based on the analyst estimates beforehand. But 0:10:35.800 --> 0:10:38.320 the dynamic that people are worried about isn't so much 0:10:38.480 --> 0:10:41.040 how Nvidio is doing, but how are their clients doing 0:10:41.040 --> 0:10:43.520 when they buy all this computing power? Is it going 0:10:43.600 --> 0:10:46.199 to be worth it for them? And that's where that's where. 0:10:46.000 --> 0:10:49.280 The ROI ultimately the ir yes provate margin. 0:10:49.400 --> 0:10:51.600 I mean, you know, whatever we talk about bubbles and 0:10:51.600 --> 0:10:54.080 the you know, the nineteen ninety nine and late nineties, 0:10:54.080 --> 0:10:57.520 really two thousand, what people come on who were there 0:10:58.640 --> 0:11:02.080 tell us they're push back is yes, but these companies 0:11:02.120 --> 0:11:03.080 are now profitable. 0:11:03.800 --> 0:11:05.600 I think, you know, no one's and I said this 0:11:05.920 --> 0:11:08.880 in my column, no one's calling in video the next 0:11:09.000 --> 0:11:12.200 pets dot Com, right or the risk of that. But 0:11:12.200 --> 0:11:15.040 in Video's clients could be the next pets dot Com. 0:11:15.120 --> 0:11:18.440 Open AI. You know, there's a company burning billions of 0:11:18.480 --> 0:11:21.280 dollars with an unsure way of getting that money back. 0:11:21.400 --> 0:11:23.000 Core Weave was a catalyst for a lot of the 0:11:23.160 --> 0:11:26.319 worries around, you know, just data centers in general. They're 0:11:26.360 --> 0:11:28.520 still finding it very hard to build data centers. It's 0:11:28.520 --> 0:11:30.240 going to be a big problem finding the place to 0:11:30.240 --> 0:11:32.559 build them, finding the energy to power them. There's a 0:11:32.640 --> 0:11:35.040 lot of unknowns that you know, it could could be 0:11:35.040 --> 0:11:37.199 at play here. And when we compare it to that 0:11:37.320 --> 0:11:39.800 dot com bubble, I have to say I wasn't covering 0:11:39.800 --> 0:11:41.160 it because I was a child. 0:11:43.000 --> 0:11:46.040 All right, I was covering it. And I will say 0:11:46.080 --> 0:11:47.960 there is a difference, and we talk about this that 0:11:47.960 --> 0:11:51.160 there are companies with earnings, So I'm trying to understand 0:11:51.160 --> 0:11:53.560 the demand is there, and you're saying, we get it. 0:11:53.559 --> 0:11:56.200 They can't build the data centers fast enough. They don't 0:11:56.200 --> 0:11:58.800 have the energy to power them. Is that enough to 0:11:58.880 --> 0:12:01.880 mean that this is not a real thing and that 0:12:01.920 --> 0:12:04.640 AI is not going to impact us in this spend continues? 0:12:05.559 --> 0:12:07.920 The timeline is the question, right, because when we look 0:12:07.960 --> 0:12:11.000 back at the dot com bubble, they say, well, what 0:12:11.040 --> 0:12:14.000 about Amazon, Right, there's a real company change the world. 0:12:14.320 --> 0:12:17.080 Not profitable, not profitable, not profitable. 0:12:16.679 --> 0:12:18.959 Exactly for years and years years, and I didn't recover 0:12:19.120 --> 0:12:21.760 from its dot com slump for another eight years. After 0:12:21.920 --> 0:12:25.960 nineteen eight years. I noticed that Cisco twenty five years 0:12:26.520 --> 0:12:29.600 only recover on the dot com crash this week, and 0:12:29.760 --> 0:12:32.079 so sure AI could be as big as the Internet 0:12:32.440 --> 0:12:35.199 or even electricity, as some people are saying, whether or 0:12:35.280 --> 0:12:37.280 not there'll be a slump in the meantime that could 0:12:37.280 --> 0:12:39.800 take a huge amount of time to really recover. I 0:12:39.840 --> 0:12:42.120 think that might be one of the concerns that people 0:12:42.120 --> 0:12:43.120 should should be having. 0:12:43.440 --> 0:12:46.840 That was Dave Lee, Bloomberg Opinion US Tech columnists. After 0:12:46.840 --> 0:12:49.400 the company's learnings call, CEO Jensen Wong sat down with 0:12:49.520 --> 0:12:52.440 Bloomberg Tech co host ed Ludlow. They talked about the results. 0:12:52.520 --> 0:12:55.240 You can catch that online on the Bloomberg terminal and 0:12:55.360 --> 0:12:56.520 at Bloomberg dot com. 0:12:56.559 --> 0:12:58.280 All right, coming up, we kind of stay with AI. 0:12:58.480 --> 0:13:02.800 We talk big AI bets, uneasy economy, and credits starting 0:13:02.800 --> 0:13:03.360 to buckle. 0:13:03.520 --> 0:13:04.959 That's a question mark. 0:13:04.640 --> 0:13:06.800 Because I think we're trying to figure it out. He 0:13:07.040 --> 0:13:08.520 was a go to voice for us during the Great 0:13:08.520 --> 0:13:10.800 Financial Crisis. We leaned on him so much. Chris Whalen 0:13:11.040 --> 0:13:11.480 joins us. 0:13:11.520 --> 0:13:15.199 Next, you're listening to Bloomberg Business Week. This is Bloomberg. 0:13:20.000 --> 0:13:24.000 You're listening to the Bloomberg Business Weekdaily podcast. Catch US 0:13:24.080 --> 0:13:27.520 live weekday afternoons from two to five pm Eastern Listen 0:13:27.559 --> 0:13:31.120 on Apple CarPlay and Android Auto with the Bloomberg Business app, 0:13:31.240 --> 0:13:33.080 or watch US live on YouTube. 0:13:33.640 --> 0:13:33.960 All Right. 0:13:34.000 --> 0:13:36.240 With Nvidio earnings this past week, it was no surprise 0:13:36.280 --> 0:13:38.120 that the AI trade and debate over a boom or 0:13:38.160 --> 0:13:41.040 bus remained front and center, although I need to say 0:13:41.080 --> 0:13:43.200 that I feel like the idea of a boom was 0:13:43.280 --> 0:13:47.360 more front and center following and Video's earnings. Keep in mind, though, 0:13:47.559 --> 0:13:50.760 fears of an AI bubble bubbled up earlier in the 0:13:50.760 --> 0:13:53.920 week before Nvidia reported, and that was because of warnings 0:13:53.920 --> 0:13:57.480 from investors or continued warnings from investors really who believe 0:13:57.520 --> 0:14:00.520 the AI led rally has run too hot and that 0:14:00.600 --> 0:14:03.040 the industry could be due for somewhat of a correction, 0:14:03.120 --> 0:14:06.760 maybe even just a normal correction. Rothchild and co Redburns 0:14:06.760 --> 0:14:09.880 Alexander Heisel downgraded Microsoft and Amazon for the first time 0:14:09.920 --> 0:14:12.559 since initiating coverage on the two names. That was back 0:14:12.600 --> 0:14:14.839 in June twenty twenty two. That was according to data 0:14:14.840 --> 0:14:16.920 compiled by Bloomberg. This got a lot of attention this 0:14:16.960 --> 0:14:17.760 past week, tim it. 0:14:17.800 --> 0:14:21.640 Did it move the company stocks too. Meantime, Tech bohemoths 0:14:21.760 --> 0:14:25.000 continue to spend so much on AI. Just this week, 0:14:25.040 --> 0:14:28.000 Microsoft and Nvidia announced that they would invest up to 0:14:28.040 --> 0:14:31.800 a combined fifteen billion dollars in the Open AI rival 0:14:31.840 --> 0:14:34.880 and Thropic. It's these types of deals that have investors 0:14:34.880 --> 0:14:38.800 increasingly concerned about so called circular financing within the AI 0:14:38.880 --> 0:14:42.360 spend and build. We should remind everybody the Microsoft portion 0:14:42.440 --> 0:14:45.640 of this is pretty significant, given that Microsoft has such 0:14:45.680 --> 0:14:49.359 a big ownership stake of open Ai. Yeah, and Anthropic 0:14:49.560 --> 0:14:52.280 is open AI's rival, so it's like the owner of 0:14:52.280 --> 0:14:53.960 your competitor investing in the competitor. 0:14:54.120 --> 0:14:56.680 Amid all of this and questions around market and possible 0:14:56.680 --> 0:14:59.360 financial and credit stress, we leaned on a familiar voice. 0:14:59.680 --> 0:15:01.800 Chris Whaleen was a go to for us during the 0:15:01.800 --> 0:15:04.800 Great Financial Crisis. He is chairman of whale and Global Advisors, 0:15:05.160 --> 0:15:08.680 a former investment banker, also editor of The Institutional Risk Analysts. 0:15:09.040 --> 0:15:11.440 It's a weekly newsletter that looks at the intersection of 0:15:11.440 --> 0:15:14.520 financial markets and public policy. This is a guy who 0:15:14.720 --> 0:15:17.280 spends a lot of time looking at financial balance sheets. 0:15:17.840 --> 0:15:20.960 The loss rates on many of these assets. Carol, and 0:15:21.000 --> 0:15:25.960 thank you for having me is quite astounding. Remember that 0:15:26.040 --> 0:15:29.800 you had not just big private equity firms diving into 0:15:29.920 --> 0:15:33.600 private credit, but you had retail firms selling this to 0:15:33.640 --> 0:15:37.240 individual investors for the past couple of years. I think 0:15:37.240 --> 0:15:41.040 it just speaks to a decline in standards in the 0:15:41.080 --> 0:15:45.200 investment world. I've been an investment banker for thirty years, 0:15:45.520 --> 0:15:48.360 member of FINRA, and I've got to tell you most 0:15:48.400 --> 0:15:52.840 of my astute clients, the banks I really have respect for, 0:15:53.160 --> 0:15:59.160 don't see anything that they like. They're using their private 0:15:59.240 --> 0:16:03.960 markets to off credit risk. They're selling assets to raise cash, 0:16:04.280 --> 0:16:07.520 and I think that's frankly and very consistent with what 0:16:07.600 --> 0:16:10.720 Jeff Gunlock is saying, which is that there's so much 0:16:10.840 --> 0:16:13.640 out there that needs to be fixed and the loss 0:16:13.720 --> 0:16:17.360 rates could be rather considerable. So I think it's only 0:16:17.400 --> 0:16:20.320 getting started. You saw the story in Bloomberg about Blue Owl. 0:16:20.720 --> 0:16:22.760 We're going to see a lot more of that, So, 0:16:23.000 --> 0:16:26.600 you know, just take that example and multiply it across 0:16:26.640 --> 0:16:30.880 the entire spectrum of private equity. What an interesting statistics 0:16:30.960 --> 0:16:32.800 I saw it in the last couple of weeks is 0:16:32.840 --> 0:16:35.880 that something like two thirds of the existing private equity 0:16:35.920 --> 0:16:38.240 firms are never going to be able to raise money 0:16:38.240 --> 0:16:42.040 again because the losses on their portfolio are so profound, 0:16:42.200 --> 0:16:45.320 so I think we're seeing something episodic. And as good 0:16:45.400 --> 0:16:48.520 Luck said, this is a commercial story this time. This 0:16:48.560 --> 0:16:52.720 is not about consumers and mortgages. This is purely institutional. 0:16:53.280 --> 0:16:55.200 So the well, the question I have is how it 0:16:55.280 --> 0:16:57.960 manifests and do you believe it manifests in some sort 0:16:58.000 --> 0:17:02.840 of crisis. Does it become something that is systemic and 0:17:02.960 --> 0:17:05.639 has an effect on the entire financial system? Is it 0:17:05.720 --> 0:17:07.040 that big of an issue? 0:17:07.160 --> 0:17:10.480 It is that big, But remember this is institutional investors, 0:17:10.480 --> 0:17:13.160 so a lot of it goes on behind the scenes, 0:17:13.640 --> 0:17:17.280 lawyers and bankers sitting in conference rooms trying to figure 0:17:17.320 --> 0:17:21.960 out how to extract value from a situation. So when 0:17:22.000 --> 0:17:26.440 it impacts a public company, yes, when a bank has 0:17:26.480 --> 0:17:29.160 to fess up about a loss. You just saw one 0:17:29.200 --> 0:17:33.640 with Blackstone, a telecom company, which is going to cost 0:17:33.680 --> 0:17:36.080 them one hundred and fifty million dollars. Looks like the 0:17:36.119 --> 0:17:39.159 whole thing was a fraud from the word go. But 0:17:39.320 --> 0:17:42.600 over time, yes, you're going to see more disclosure from 0:17:42.600 --> 0:17:45.320 the public players, but the amount of loss is going 0:17:45.400 --> 0:17:48.760 to be much larger than what the typical investor, the 0:17:48.840 --> 0:17:53.040 typical media person actually sees, because so much of it 0:17:53.160 --> 0:17:55.239 is private like give you an example, it is a 0:17:55.280 --> 0:17:58.920 really great publication called The Real Deal that covers commercial 0:17:58.920 --> 0:18:02.639 real estate can't even begin to cover all of the 0:18:02.640 --> 0:18:05.000 things that are going on. If you just read their 0:18:05.000 --> 0:18:07.520 headlines every morning, you get a sense for just how 0:18:07.600 --> 0:18:12.679 much restructuring there is going on in some pretty important 0:18:12.720 --> 0:18:15.520 and well located assets here in New York City and 0:18:15.640 --> 0:18:18.840 other cities around the US. And it just continues. And 0:18:18.920 --> 0:18:21.760 yet the funny part is you have new investors jumping 0:18:21.800 --> 0:18:24.760 in to buy these assets after they've been marked down, 0:18:25.080 --> 0:18:26.440 thinking that they're getting a deal. 0:18:26.800 --> 0:18:29.920 Well we'll see, you know, well we will see, right. 0:18:29.960 --> 0:18:34.280 I mean, does the AI spending frenzy play. 0:18:34.040 --> 0:18:40.240 Into this, Oh very much. I covered Silicon Valley for years. 0:18:40.280 --> 0:18:42.600 Carol is a banker, and I have a lot of 0:18:42.600 --> 0:18:46.680 respect for real technologists as opposed to salespeople. I don't 0:18:46.720 --> 0:18:52.240 think AIS it's described to most investors today, is going 0:18:52.240 --> 0:18:56.520 to amount to anything except the convenience for consumer users 0:18:56.560 --> 0:19:00.440 of the Internet. When you talk about real intell diligence 0:19:00.560 --> 0:19:03.119 on the part of a machine that is based on 0:19:03.200 --> 0:19:07.560 its ability to observe and integrate new information, that's not 0:19:07.720 --> 0:19:12.639 what we're doing here. We're simply taking existing language, existing words, 0:19:13.040 --> 0:19:18.080 and putting massive horsepower behind search. Okay, well they summarized 0:19:18.119 --> 0:19:20.439