WEBVTT - Boaz Weinstein Warns ‘Wheels Coming Off’ Private Credit Funds 0:00:02.520 --> 0:00:10.719 Bloomberg Audio Studios, Podcasts, radio News. This is Bloomberg Business Week, 0:00:10.800 --> 0:00:14.680 Daily reporting from the magazine that helps global leaders stay 0:00:14.680 --> 0:00:18.759 ahead with insight on the people, companies, and trends shaping 0:00:18.800 --> 0:00:23.720 today's complex economy. Plus global business, finance and tech news 0:00:23.760 --> 0:00:27.760 as it happens. The Bloomberg Business Week Daily Podcast with 0:00:27.920 --> 0:00:31.720 Carol Masser and Tim Stenebek on Bloomberg Radio. 0:00:32.200 --> 0:00:34.199 Well, let's get to one of our most read stories 0:00:34.240 --> 0:00:35.240 on the Bloomberg Today. 0:00:35.080 --> 0:00:36.000 Jpust Cross. 0:00:36.080 --> 0:00:36.559 Last night. 0:00:36.840 --> 0:00:39.640 First of all, we were on air actually when headlines started, 0:00:39.680 --> 0:00:42.280 oh really in terms of some financial message. 0:00:42.400 --> 0:00:44.199 I saw this late yesterday and then you know, three 0:00:44.280 --> 0:00:46.920 minutes later, Talia sends the email too, because she's on 0:00:46.960 --> 0:00:47.360 top of it. 0:00:47.360 --> 0:00:48.720 Because she I don't know how she does it. I 0:00:48.760 --> 0:00:50.640 feel like Bloomberg goes right to her brain. 0:00:51.280 --> 0:00:53.199 It's wired in, it is wired in. 0:00:53.600 --> 0:00:55.200 It is one of our most read stories. Though on 0:00:55.240 --> 0:00:58.160 this Tuesday, JP Morgan Chase CEO Jamie Diamond, we're talking 0:00:58.160 --> 0:01:03.240 about him fierce competition across the financial industry. He said 0:01:03.240 --> 0:01:05.440 he's starting to see parallels to the era before the 0:01:05.480 --> 0:01:08.319 two thousand and eight financial crisis, when a rush, as 0:01:08.319 --> 0:01:10.560 you know, to make loans ended disastrously. We don't need 0:01:10.560 --> 0:01:13.119 to remind you how rough that was. Jamie Diamond made 0:01:13.120 --> 0:01:16.119 the comments yesterday at JP Morgan's investor Day right here 0:01:16.120 --> 0:01:16.840 in New York City. 0:01:17.680 --> 0:01:22.000 Unfortunately, we did see this in five and six and seven, 0:01:22.920 --> 0:01:25.840 almost the same thing, the rising tires lifts in all boats. 0:01:26.120 --> 0:01:28.280 Everyone was making a lot of money. I don't know 0:01:28.319 --> 0:01:30.720 how long it's going to be great for everybody. I 0:01:30.760 --> 0:01:33.679 see a couple of people doing some dumb things. You know, 0:01:33.800 --> 0:01:37.000 they're just doing dumb things to create ANII or or 0:01:37.080 --> 0:01:38.960 say they're you know, winning in the markets business or 0:01:38.959 --> 0:01:39.600 something like that. 0:01:40.520 --> 0:01:43.240 All right, that of course JP Morgan Chase CEO, Jamie Diamond, 0:01:43.400 --> 0:01:45.959 yesterday's investor Day here in New York City. Look in 0:01:46.000 --> 0:01:46.600 Rev Cash. 0:01:46.760 --> 0:01:48.440 I was going to say, a little different look than 0:01:48.440 --> 0:01:51.280 we usually see. Yeah, but you know what, it was 0:01:51.360 --> 0:01:53.120 a lot of snow yesterday. 0:01:53.280 --> 0:01:55.800 Yeah. I don't know everybody like I felt like we 0:01:55.840 --> 0:01:56.720 all had our bootstools. 0:01:56.720 --> 0:01:57.920 We did Investor Day though. 0:01:57.840 --> 0:02:00.920 Yeah, they did, they did. They carried through all right. 0:02:01.040 --> 0:02:03.480 This comment's definitely getting our attention to get even Tim 0:02:03.520 --> 0:02:07.560 who was home getting locked into what he had to say. 0:02:07.600 --> 0:02:09.960 Let's get more though on it. Kat Dougherty's with us. 0:02:09.960 --> 0:02:13.320 She's Blomberg News finance reporter right here in studio Kat. 0:02:13.360 --> 0:02:17.320 Whether it's cockroaches or he's making a weather forecast. When 0:02:17.400 --> 0:02:20.160 Jamie says something, it gets our attention. Tell us about 0:02:20.160 --> 0:02:21.720 the meeting and some of the things that stand out. 0:02:21.840 --> 0:02:25.680 You're right, but this stood out more so than the 0:02:25.720 --> 0:02:29.760 cockroaches comments. He's made those types of jabs at the 0:02:29.800 --> 0:02:34.320 private credit industry specifically before, and yes it's gotten attention, 0:02:34.560 --> 0:02:37.280 but not in the same way that Tim's right. When 0:02:37.320 --> 0:02:40.200 this headline crossed last night, I think a lot of 0:02:40.240 --> 0:02:42.560 folks were clicking through, and you can see in the 0:02:42.639 --> 0:02:46.560 interest even today, it's just continuing on and it's generating 0:02:46.600 --> 0:02:50.880 a lot of talk amongst banking colleagues that are really 0:02:51.160 --> 0:02:57.160 kind of diving into the parallels that Diamond is drawing today. 0:02:57.680 --> 0:03:00.480 And he's saying that he's seen a lot of his words, 0:03:00.800 --> 0:03:04.160 dumb things going on from his competitors across the street. 0:03:04.400 --> 0:03:07.920 He's not necessarily calling out the other banks, He's calling 0:03:07.960 --> 0:03:13.360 out the Apollos, the Blue Owls, these firms that have 0:03:13.480 --> 0:03:17.400 really generated and not just attention, but the money that 0:03:17.440 --> 0:03:20.400 they are handling that is outside of the banks. That 0:03:20.840 --> 0:03:24.320 is what Diamond is drawing attention to, saying that a 0:03:24.400 --> 0:03:27.560 lot of what you saw with the two thousand and 0:03:27.600 --> 0:03:31.679 eight financial crisis was the money that was being handled 0:03:32.040 --> 0:03:33.600 that at the end of the day, that was with 0:03:33.720 --> 0:03:36.200 the banks. So now that the money has moved away 0:03:36.200 --> 0:03:38.680 from the banks, it's behind the scenes. He's saying that 0:03:38.720 --> 0:03:41.240 if the cracks start to emerge and you have the 0:03:41.280 --> 0:03:43.960 cockroaches that again he has called out before, that's not 0:03:44.000 --> 0:03:46.440 a new comment, but he's saying that that's where the 0:03:46.520 --> 0:03:49.880 underlying stresses and he doesn't know when he didn't make 0:03:49.880 --> 0:03:52.000 a call yesterday. I think that's important to note yea 0:03:52.120 --> 0:03:55.480 of when this might actually come through. But he's saying 0:03:55.600 --> 0:04:00.120 it's a matter of the question being the timing, but 0:04:00.160 --> 0:04:02.760 he's thinking that it's going to happen at some point. 0:04:03.240 --> 0:04:04.440 I know, you want to talk a little bit about 0:04:04.440 --> 0:04:08.000 the history and what JP Morgan and what Jamie Diamond 0:04:08.080 --> 0:04:10.920 has seen because he's, you know, one of the people 0:04:10.960 --> 0:04:12.920 who was there through the financial crisis at the helm 0:04:12.960 --> 0:04:13.560 of the big bank. 0:04:14.080 --> 0:04:15.840 He's the only one that's the only point is the 0:04:15.920 --> 0:04:18.160 o man standing right among those big banks that. 0:04:18.200 --> 0:04:20.320 Said, and you touched on this a little bit Kat 0:04:20.360 --> 0:04:24.640 with what you said about you mentioned Apoulo for example, 0:04:25.400 --> 0:04:29.400 what are the specific that, if any, that he called 0:04:29.440 --> 0:04:32.200 out or that we can infer from the quote unquote 0:04:32.240 --> 0:04:34.800 dumb things like what is he seeing. 0:04:34.600 --> 0:04:39.080 He's referencing lending lending practices that if you are going 0:04:39.160 --> 0:04:42.200 to affirm, let's keep with Apolo. But there's so many 0:04:42.200 --> 0:04:45.520 others that we could use as examples. The pricing on 0:04:45.600 --> 0:04:48.080 these loans is so much different than let's say, how 0:04:48.160 --> 0:04:52.400 you price Apple's stock. It's not as liquid and so 0:04:52.920 --> 0:04:57.159 there might be underlying stress, but the price doesn't reflect that. 0:04:57.760 --> 0:05:00.320 But if there gets to a point like we seen 0:05:00.360 --> 0:05:03.000 with some of the cockroach examples, where at the end 0:05:03.000 --> 0:05:05.080 of the day there's massive selling and then the price 0:05:05.240 --> 0:05:09.640 does have to reflect the underlying stresses. That's when if 0:05:09.760 --> 0:05:13.159 those things start to pile up, you could it's a 0:05:13.200 --> 0:05:16.920 snowball effect. And you had boas Weinstein today, he's down 0:05:16.920 --> 0:05:19.919 in Miami and he made very similar comments. He was 0:05:19.960 --> 0:05:23.200 saying that it is something that builds on itself, and 0:05:23.240 --> 0:05:27.840 you don't need too much of these specific instances that 0:05:28.360 --> 0:05:30.920 some are calling just one offs and saying that it's 0:05:30.960 --> 0:05:34.560 not representative of the entire industry. But if you start 0:05:34.600 --> 0:05:37.640 to see those one offs become two, three, four, and 0:05:37.760 --> 0:05:40.960 all of a sudden, it does be building and the 0:05:41.000 --> 0:05:44.719 stress can turn into something much bigger. That's what Diamond 0:05:45.080 --> 0:05:45.920 is calling out. 0:05:45.880 --> 0:05:49.640 Bo As Weinstein say, a capital management founder, you're right 0:05:49.680 --> 0:05:51.720 saying all you need is a snowball to start going 0:05:51.760 --> 0:05:53.760 down the hill, and it started blue ouls right in 0:05:53.800 --> 0:05:55.640 the middle of that. I think we are in the 0:05:55.760 --> 0:05:58.880 super early innings of the wheels coming off the car. 0:06:00.000 --> 0:06:04.200 I mean, this cat. This gets to the lack of transparency, 0:06:04.279 --> 0:06:06.159 especially when it comes to the private markets. We keep 0:06:06.160 --> 0:06:09.320 talking about this, and so I'm not going to ask 0:06:09.320 --> 0:06:13.559 you Essa go into a premo on the private markets world, 0:06:13.560 --> 0:06:15.599 but that's part of what we're getting to. The banks 0:06:15.640 --> 0:06:19.560 are highly regulated, A lot of investment firms are highly regulated, right, 0:06:19.640 --> 0:06:23.520 oversight and transparency in what is kind of on their 0:06:23.560 --> 0:06:24.200 balance sheet. 0:06:24.279 --> 0:06:24.719 That's right. 0:06:24.880 --> 0:06:28.320 But when we're talking about these loans that are outside 0:06:28.400 --> 0:06:30.800 of the banks, the mark to market. You might be 0:06:30.839 --> 0:06:32.919 able to hold a loan and say that it is 0:06:32.920 --> 0:06:35.760 worth let's say, ninety cents on the dollar, but the 0:06:35.800 --> 0:06:40.960 stress that's underlying might if it does eventually trade trade 0:06:41.000 --> 0:06:43.440 down to sixty. Now that's going to be a lot 0:06:43.480 --> 0:06:46.080 different in the private credit market than it is with 0:06:46.200 --> 0:06:48.719 the banks, especially if the banks are the ones that 0:06:48.760 --> 0:06:52.400 are holding these loans. They have to disclose and the 0:06:52.440 --> 0:06:54.800 pricing is a little bit more transparent. 0:06:55.560 --> 0:06:56.599 But there are parallels. 0:06:56.600 --> 0:06:57.320 And what's also. 0:06:57.120 --> 0:07:00.320 Interesting is that the banks too are getting into private credit. 0:07:00.360 --> 0:07:04.000 They're setting aside their own balance sheet for some of 0:07:04.040 --> 0:07:07.479 these deals. So it's an interesting dichotomy when this is 0:07:07.520 --> 0:07:09.800 business for them and they're losing some of the business 0:07:10.000 --> 0:07:13.080 if it is going to firms outside of the banking system. 0:07:13.280 --> 0:07:15.040 So they want to be in the game. They want 0:07:15.040 --> 0:07:19.360 to put their money towards some of these lending opportunities, 0:07:20.160 --> 0:07:25.559 but that competition might end up growing the market even 0:07:25.800 --> 0:07:29.400 more because you have the firms that want to get 0:07:29.400 --> 0:07:31.800 in and they want to really put their money to work. 0:07:31.920 --> 0:07:34.600 Yeah, and like there's been such a push right when 0:07:34.600 --> 0:07:36.840 it comes to the private market world to get into 0:07:36.840 --> 0:07:38.680 things like for a one ks and so on and 0:07:38.680 --> 0:07:41.600 so forth, And this is why stuff like this has 0:07:41.640 --> 0:07:42.800 even more important. 0:07:42.840 --> 0:07:46.080 Sure should they Yeah, I'm not even gonna ask not ask. 0:07:46.120 --> 0:07:47.040 Not, but we should. 0:07:47.080 --> 0:07:49.920 But I'm just saying, you know, full disclosure. You need 0:07:49.960 --> 0:07:53.320 to know, right, especially when you're talking about people's retirements 0:07:53.320 --> 0:07:55.640 and all that good stuff. God, thank you so much. Kat. 0:07:55.720 --> 0:07:58.880 Already she's Bloomberg News Finance reporter joining us right here 0:07:58.920 --> 0:08:01.280 in studio, and as we've met, this is one of 0:08:01.280 --> 0:08:03.080 the most read stories. I feel like it's already a 0:08:03.160 --> 0:08:06.400 very big theme and big story this year. It is 0:08:06.480 --> 0:08:10.280 blue owl, one canary in the private market coal mine? 0:08:10.360 --> 0:08:13.360 Or is it the beginning like boas Weinstein seems to say, 0:08:13.560 --> 0:08:15.160 the beginning of an undoing. 0:08:15.640 --> 0:08:17.840 And I think fair to put Jamie Diamond in the 0:08:17.880 --> 0:08:19.640 category of concern. 0:08:20.200 --> 0:08:23.880 Yeah, exactly right. It's a big, big thing, all right. 0:08:24.400 --> 0:08:27.760 Our thanks to Kat once more, stay with us. 0:08:27.800 --> 0:08:30.800 More from Bloomberg Business Week Daily coming up after this. 0:08:35.120 --> 0:08:39.000 You're listening to the Bloomberg Business Week Daily Podcast. Catch 0:08:39.040 --> 0:08:41.720 us live weekday afternoons from two to five eas during 0:08:41.960 --> 0:08:45.160 Listen on Apple Karplay and Android Otto with the Bloomberg 0:08:45.200 --> 0:08:48.600 Business app, or watch us live on YouTube. 0:08:49.600 --> 0:08:51.520 Now we want to get to some of today's trade 0:08:51.559 --> 0:08:54.640 economic fundamentals behind it all. There's a lot going on, 0:08:54.760 --> 0:08:57.560 you know, things like that little thing called inflation. 0:08:57.800 --> 0:08:59.199 I think it will be addressed tonight in the State 0:08:59.240 --> 0:08:59.640 of the Union. 0:09:00.160 --> 0:09:02.120 It will right now, affordability at large. 0:09:02.160 --> 0:09:04.240 Oh, no question. I think many people argue though it's 0:09:04.240 --> 0:09:07.080 still a problem. The FED largely reminds us, yes, it is, 0:09:07.160 --> 0:09:09.000 and yet there are those that are concerned about the 0:09:09.040 --> 0:09:12.360 slowing US labor market. Earlier today, at the twenty twenty 0:09:12.360 --> 0:09:16.520 six National Association of Business Economics Policy meeting underway in Washington, DC, 0:09:16.600 --> 0:09:20.679 Bloomberg's Mike McKee caught up with Fed Bank Reserve President 0:09:20.920 --> 0:09:23.800 of Chicago Austin Goolsby to talk about the Supreme Court's 0:09:23.840 --> 0:09:25.800 ruling and how it could impact US inflation. 0:09:26.800 --> 0:09:30.120 When the part of inflation that has come from tariffs 0:09:30.320 --> 0:09:33.960 is supposed to go away, is supposed to be transittory, 0:09:34.640 --> 0:09:40.720 and when you see things like the forecasts say inflation's 0:09:40.760 --> 0:09:43.559 going to peak out and then start falling by the 0:09:43.679 --> 0:09:48.720 end of twenty twenty five, and then that moves the goalpost, 0:09:48.880 --> 0:09:52.440 well maybe it'll be the first quarter of twenty six, 0:09:53.360 --> 0:09:55.440 and now they're saying, well, maybe it will be the 0:09:55.559 --> 0:09:59.120 second quarter of twenty six. That's not a great sign. 0:10:00.200 --> 0:10:04.480 We need to see what we should see, especially on 0:10:04.520 --> 0:10:10.040 the good side. If the tariff inflation is transitory, it's 0:10:10.080 --> 0:10:11.720 supposed to start going away. 0:10:13.200 --> 0:10:15.520 That's what we were Mike McKee cott it catching up with 0:10:15.600 --> 0:10:18.120 the feder Reserve Bank of Chicago. President Austin Goulesby a 0:10:18.160 --> 0:10:19.200 little earlier today. 0:10:19.360 --> 0:10:21.280 Well, and this is kind of the predicament we are 0:10:21.760 --> 0:10:24.800 when we see that Friday decision, Supreme Court decision when 0:10:24.840 --> 0:10:28.320 it comes to tariffs, what does that mean do we 0:10:28.360 --> 0:10:31.400 take away inflationary pressures? 0:10:31.480 --> 0:10:31.600 Right? 0:10:31.640 --> 0:10:33.400 When it comes to costs? This is something we've talked 0:10:33.400 --> 0:10:36.520 about that ultimately the consumer is going to pay a 0:10:36.640 --> 0:10:39.520 higher cost. Some companies have been eating that higher cost 0:10:39.559 --> 0:10:42.800 because of tariffs, but eventually, you know, we're seeing things 0:10:43.360 --> 0:10:46.559 already being passed on to consumers. And Austin Goolsby kind 0:10:46.559 --> 0:10:49.080 of getting to this point like where are we Like 0:10:49.080 --> 0:10:51.240 it's a kind of a moving goalpost, Like, all right, 0:10:51.320 --> 0:10:53.760 a big decision on Friday, but then we have the 0:10:53.800 --> 0:10:55.600 president over the weekend, and we talked about this a 0:10:55.600 --> 0:10:59.160 lot yesterday of imposing his own kind of across the 0:10:59.200 --> 0:11:02.920 board tariffs, and so we're trying to figure out if 0:11:03.120 --> 0:11:06.080 tariff inflation is transitory. He said, you know, it's supposed 0:11:06.080 --> 0:11:07.760 to start going away. And that's kind of like the 0:11:07.840 --> 0:11:09.000 question in predicament we're in. 0:11:09.040 --> 0:11:11.000 Well, let's get that question over to Lauren Goodwin. She's 0:11:11.000 --> 0:11:13.560 economist and chief market Strategies at New York Life Investments. 0:11:13.559 --> 0:11:15.320 She joins us here in the studio. So, following that 0:11:15.360 --> 0:11:18.240 Supreme Court decision, do we have a clear view on 0:11:18.280 --> 0:11:19.560 where inflation goes from here? 0:11:19.920 --> 0:11:22.040 I don't think we were ever going to be super 0:11:22.040 --> 0:11:25.240 clear on the impact that tariffs have directly to inflation. 0:11:25.920 --> 0:11:28.120 When you're looking at an inflation forecast, you can certainly 0:11:28.160 --> 0:11:30.959 look at which types of goods are receiving tariffs how 0:11:31.000 --> 0:11:33.560 that might roll into the total number. But keep in 0:11:33.559 --> 0:11:37.199 mind there is a bigger geopolitical context that's changing as 0:11:37.240 --> 0:11:40.160 well with respect to how goods are sourced, where supply 0:11:40.240 --> 0:11:43.520 chains are moving. That started during the pandemic, if not before. 0:11:43.559 --> 0:11:47.439 And so I think the conversation around tariff's and uncertainty 0:11:47.440 --> 0:11:50.240 and what it means certainly for the deficit is very reasonable. 0:11:50.280 --> 0:11:53.680 But the specific pass through to consumers, I don't know 0:11:53.720 --> 0:11:55.560 that we were ever really going to have a great 0:11:55.679 --> 0:11:56.240 number on that. 0:11:56.440 --> 0:11:58.200 So in terms of the deficit, you're saying, this is 0:11:58.280 --> 0:12:00.680 revenue that maybe is going away could have helped to 0:12:00.679 --> 0:12:02.319 cut back the US deficit. 0:12:02.720 --> 0:12:06.040 That's no or yes, that's well, that's the concern over 0:12:06.080 --> 0:12:08.680 the last couple of days. To be honest with ourselves 0:12:08.760 --> 0:12:12.160 and really any investor that I've been speaking to, most 0:12:12.280 --> 0:12:16.200 folks range of average effective tariff rate was somewhere between 0:12:16.240 --> 0:12:19.120 between ten and twelve and fifteen and sixteen percent, And 0:12:19.160 --> 0:12:21.120 it looks like that's where we're likely to net out, 0:12:21.160 --> 0:12:23.760 regardless of the authority used for those tariffs. And so 0:12:24.160 --> 0:12:27.680 that likely means we don't have a huge change in 0:12:27.800 --> 0:12:31.480 deficit assumptions really, and the activity we've seen on the 0:12:31.480 --> 0:12:33.640 curve I think suggests that the market agrees with that. 0:12:34.240 --> 0:12:38.120 What about other inflationary pressures in terms of the president's 0:12:38.160 --> 0:12:40.760 big spending bill that he sent, you know, that was 0:12:40.760 --> 0:12:43.800 passed last year. So is that kind of tailwind for 0:12:43.840 --> 0:12:47.000 the economy and that's inflationary you know, in the long 0:12:47.040 --> 0:12:50.160 reul tell us about kind of how you're gaming out 0:12:50.320 --> 0:12:51.880 inflation for this year. 0:12:52.000 --> 0:12:54.760 Yeah, that's really where the rub is. As if you 0:12:54.760 --> 0:12:58.000 look at the broader economy picture, you have, of course 0:12:58.080 --> 0:13:01.760 tariffs and that tax on the concer again difficult to handicap, 0:13:01.800 --> 0:13:04.120 but we know it's there. Same is true of global 0:13:04.120 --> 0:13:08.200 supply chains and geopolitical challenges, and certainly these fiscal tailwinds 0:13:08.200 --> 0:13:11.080 that we see supporting the consumer likely mean that prices 0:13:11.080 --> 0:13:14.040 are going to continue moving higher. Now, it's my view, 0:13:14.080 --> 0:13:16.360 and we've talked about this a bit before, that a 0:13:16.400 --> 0:13:18.760 strong inflation print a couple times in a row is 0:13:18.760 --> 0:13:23.040 probably one of the more disruptive events for this market 0:13:23.080 --> 0:13:28.040 pricing that we could see. However, it's not clear to 0:13:28.080 --> 0:13:30.400 me that that's going to be the mechanism that disrupts 0:13:30.400 --> 0:13:32.600 the market here in the next couple of months. I'm 0:13:32.600 --> 0:13:34.600 watching for it, but it's not in our base case. 0:13:35.000 --> 0:13:38.559 What I think though, that that affordability challenge creates talk 0:13:38.600 --> 0:13:40.120 a lot about how we don't really see that in 0:13:40.160 --> 0:13:42.480 the market. I don't know that I agree because a 0:13:42.480 --> 0:13:46.280 lot of the spending and more i'll call it populist 0:13:46.440 --> 0:13:48.440 leaning policies from both sides of the aisle that we 0:13:48.480 --> 0:13:52.120 see are a reflection of knowing that the average American 0:13:52.280 --> 0:13:53.719 is struggling with affordability. 0:13:55.880 --> 0:13:58.120 What I just we only have a minute, I know, 0:13:58.320 --> 0:14:00.280 two minutes left, and there's a lot that we want 0:14:00.320 --> 0:14:02.400 to get to. Yeah, okay, so I want to get 0:14:02.400 --> 0:14:07.040 to a little bit of your view on AI and productivity. 0:14:07.520 --> 0:14:10.640 We don't have time to play the sound, but there's 0:14:10.679 --> 0:14:12.480 a lot of people talking about this right now, and 0:14:12.520 --> 0:14:15.320 I mean yesterday IBM was the latest example of what 0:14:15.360 --> 0:14:17.400 happens to a stock that people think is under threat 0:14:17.400 --> 0:14:20.480 from AI. The productivity side of this, how do we 0:14:20.520 --> 0:14:20.960 look at that? 0:14:21.640 --> 0:14:27.240 So here's here's the real answer. None of us know, certainly, 0:14:27.240 --> 0:14:27.600 none of. 0:14:27.560 --> 0:14:30.000 Us, none of us in Max World Company saying. 0:14:30.680 --> 0:14:32.160 Certainly, none of us in macro world. 0:14:32.160 --> 0:14:32.320 Note. 0:14:32.360 --> 0:14:35.840 Look, the way that productivity will be garnered from this 0:14:35.920 --> 0:14:38.880 technology is much more closely in the hands of the 0:14:39.000 --> 0:14:43.400 technology actors than in the macro and investment space. And 0:14:43.440 --> 0:14:46.560 so what we're all doing is crafting our scenarios. And 0:14:46.600 --> 0:14:49.200 one thing I'll say about our high uptake, medium, uptake, 0:14:49.280 --> 0:14:51.920 low and take scenarios. They're all disruptive. And so I 0:14:51.960 --> 0:14:53.800 think what we need to focus on instead of the 0:14:53.840 --> 0:14:56.200 specific winners and losers, which I think are too early 0:14:56.720 --> 0:15:00.280 to identify, it's how do you get more accust them 0:15:00.320 --> 0:15:03.520 to that disruptive market where leadership is changing the way 0:15:03.560 --> 0:15:04.760 it has been pretty regularly. 0:15:06.480 --> 0:15:08.680 It's I think it's tough, and I think you know 0:15:08.720 --> 0:15:11.840 the caveat is and you are not alone, you know, Lauren. 0:15:11.920 --> 0:15:15.080 Everybody says it's early on. We don't really know, and 0:15:15.080 --> 0:15:18.040 that even the report, the research report that came out yesterday, 0:15:18.080 --> 0:15:20.600 that it's just too soon to kind of figure out 0:15:20.600 --> 0:15:22.800 winners and losers and the impact. I mean, we did 0:15:23.440 --> 0:15:25.720 FED Governor Chris Waller talking today about the US Central 0:15:25.720 --> 0:15:29.000 Bank moving towards a system wide deployment of AI across 0:15:29.040 --> 0:15:31.600 regional banks and it's DC headquarters. But that's again, it's 0:15:31.600 --> 0:15:33.560 a tool that everybody's playing with. 0:15:33.640 --> 0:15:36.080 Yeah, we should. We should hope that they are right. Everyone. 0:15:36.240 --> 0:15:40.280 The more we use AI, the more unfireable. 0:15:40.800 --> 0:15:41.400 I watch that. 0:15:41.480 --> 0:15:42.840 But the matter it is for us. 0:15:42.920 --> 0:15:44.120 Your job is safe for today. 0:15:44.480 --> 0:15:46.120 Someone in the world said, if you're not using it, 0:15:46.160 --> 0:15:49.680 you've just got to start otherwise you're behind already. Lauren Goodwin, 0:15:49.800 --> 0:15:50.880 you rock. Thank you so much. 0:15:51.680 --> 0:15:54.480 Stay with us. More from Bloomberg Business Week Daily coming 0:15:54.560 --> 0:15:55.600 up after this. 0:16:00.240 --> 0:16:03.920 Listening to the Bloomberg Business Week Daily podcast. Catch us 0:16:04.000 --> 0:16:06.520 live weekday afternoons from two to five e's during this 0:16:06.720 --> 0:16:10.600 listen on Applecarplay and Android Auto with the Bloomberg Business app, 0:16:10.800 --> 0:16:12.640 or watch us live on YouTube. 0:16:13.560 --> 0:16:15.880 So among our most read stories on the Bloomberg Today, 0:16:15.960 --> 0:16:18.760 Charlie just mentioned it has to do with meta platforms 0:16:18.800 --> 0:16:21.560 doing a mega deal with advanced micro devices. It's a 0:16:21.600 --> 0:16:24.920 blockbuster one that marks a win for chip maker's attempts 0:16:24.960 --> 0:16:27.080 to catch up and video. So let's get right to 0:16:27.160 --> 0:16:29.520 it with us his Bloomberg Tech co host ed Ludlow, 0:16:29.880 --> 0:16:32.480 airing every Monday through Friday eleven am Wall Street Time 0:16:32.800 --> 0:16:35.320 on Bloomberg Television. Ed out there in our San Francisco 0:16:35.440 --> 0:16:39.160 News bureau ed walk us through the particulars of I'm 0:16:39.200 --> 0:16:42.920 not sure what to call it, arrangement, partnership, deal, what 0:16:42.960 --> 0:16:43.760 do you want to call it? 0:16:44.320 --> 0:16:47.080 Well, it's a deal, for sure, it's a deal, and 0:16:47.120 --> 0:16:49.640 I'm sure the inkstra on it. But you know, it's 0:16:49.680 --> 0:16:54.200 six gigawats of capacity. That's like the equivalent of the 0:16:54.240 --> 0:16:59.160 output of six nuclear reactors power millions and millions of homes. 0:16:58.800 --> 0:17:01.560 With that, because I want to see the power head. 0:17:02.200 --> 0:17:04.600 Well, it's you know, people have been posing really good questions, 0:17:04.600 --> 0:17:06.320 which is like a very simple question is why do 0:17:06.400 --> 0:17:09.120 we talk about data cent capacity in terms of gigawatts 0:17:09.400 --> 0:17:10.879 and not like in dollars or a. 0:17:10.880 --> 0:17:11.639 Number of chips? 0:17:12.000 --> 0:17:15.199 And the reality is like at a base level, data 0:17:15.320 --> 0:17:18.520 is transferred within the server inside the data center using 0:17:18.560 --> 0:17:21.800 electrons and it requires electricity to power it, you know, 0:17:21.880 --> 0:17:24.400 and that that's why we measure it that way. But 0:17:24.440 --> 0:17:27.639 for AMD it's important, right because it represents tens of 0:17:27.680 --> 0:17:31.200 billions of dollars of revenue over that period, and it's 0:17:31.640 --> 0:17:34.439 a kind of vote of confidence from a very large 0:17:34.560 --> 0:17:38.520 data center operator on their latest technology, which starts with 0:17:38.920 --> 0:17:41.199 four fifty and then the roadmap goes from that. 0:17:41.400 --> 0:17:45.040 So much more powerful to say how much power will 0:17:45.080 --> 0:17:48.560 be created or how much data center capacity versus saying 0:17:48.560 --> 0:17:51.520 we're going to buy a jillion chips from you. 0:17:52.560 --> 0:17:52.840 Yeah. 0:17:52.920 --> 0:17:55.440 Well, there are loads of reasons for that, in part 0:17:55.520 --> 0:18:00.240 because like AMD's story is now mirroring what Nvidia when through, 0:18:00.280 --> 0:18:01.800 which is we used to talk about in video is 0:18:01.880 --> 0:18:04.960 just having a great chip single GPU, as if it 0:18:05.000 --> 0:18:06.600 was something you could sort of hold up in your hand, 0:18:06.640 --> 0:18:09.480 and it doesn't really work like that, you know. AMD 0:18:09.760 --> 0:18:12.879 does the whole design of the server, and the server 0:18:13.600 --> 0:18:16.840 is power hungry, you know, and it puts a burden 0:18:16.920 --> 0:18:19.320 on the grid. But that's why we talk about it 0:18:19.320 --> 0:18:21.719 in those terms in common pilance in gigawatts because it 0:18:21.880 --> 0:18:25.520 explains the scale of the compute, right and this is massive, 0:18:25.560 --> 0:18:29.120 massive scale. The average size of a data center right now, 0:18:29.200 --> 0:18:32.280 is like three hundred to five hundred megawatts. So the 0:18:32.320 --> 0:18:34.800 fact that these two are committing to six gigawats over time, 0:18:35.200 --> 0:18:37.800 it is really big. But note that, like metas talked 0:18:37.800 --> 0:18:39.600 about all of this, you know, by the end of 0:18:39.600 --> 0:18:43.439 this decade having tens of gigawatts online and beyond that 0:18:43.560 --> 0:18:45.919 hundreds of gigawatts you know, for what they want to 0:18:45.960 --> 0:18:46.680 achieve in AI. 0:18:47.400 --> 0:18:50.480 So ed, let's talk about the financing of this, and yes, 0:18:50.520 --> 0:18:54.080 and whether or not they're like, explain the equity involvement, 0:18:54.080 --> 0:18:56.320 because as part of the arrangement, Meta will receive warrants 0:18:56.320 --> 0:18:59.920 to buy one hundred and sixty million AMD shares in stag. 0:19:00.760 --> 0:19:04.840 Does that mean that, yeah, that let's say AMD's price 0:19:04.920 --> 0:19:07.520 doesn't go up to you know, six hundred dollars per share, 0:19:07.560 --> 0:19:11.640 which is in the agreement. Does does that mean that 0:19:11.920 --> 0:19:16.000 Meta won't own that that portion of AMD stock. Yeah. 0:19:16.040 --> 0:19:19.639 So they are mandatory and they are operational and financial goals. 0:19:19.680 --> 0:19:22.080 So in one scenario, which I think is the final 0:19:22.160 --> 0:19:25.760 tranch of how it's structured, AMD share price would need 0:19:25.800 --> 0:19:28.000 to hit six hundred dollars a share. And let me 0:19:28.040 --> 0:19:31.600 just look down on my screen. Two thirty now two thirteen, Well, 0:19:32.080 --> 0:19:35.679 there's some way to go right and so, but it 0:19:35.760 --> 0:19:40.000 works in both directions. This in terms of what AMD gets. 0:19:40.040 --> 0:19:43.520 AMD will book revenue on this, Meta will pay AMD 0:19:44.160 --> 0:19:48.479