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Speaker 1: with Carol Masser and Tim Stenebeck on Bloomberg Radio.
Speaker 2: As we've said, Tim, there's just so much coming at
Speaker 2: us on this Tuesday, and E love it is because
Speaker 2: of end Video, but there's just so much going on
Speaker 2: when it comes to AI related news today.
Speaker 3: Yeah, Opening I continue so to forge relationships, as does PayPal.
Speaker 3: The two announce to tie up whereby PayPal's digital wallet
Speaker 3: will be embedded into Chat GPT. It'll send PayPal shares
Speaker 3: up the most in more than six months, or it
Speaker 3: did send PayPal shares up the most in more than
Speaker 3: six months. And then the Microsoft news that we've talked
Speaker 3: about quite a bit, Carol, longtime backer, Microsoft a twenty
Speaker 3: seven percent ownership stake in Open Ai. This part of
Speaker 3: a restructuring plan that took nearly a year to negotiate.
Speaker 3: It rooms a major uncertainty for both companies. And clears
Speaker 3: the path for chat GPT and the maker of chat
Speaker 3: GPT to become a for profit business.
Speaker 2: It's a lot, so let's get into it and really
Speaker 2: just how open ai continues to be at the center
Speaker 2: of so much. But we've so many questions about why
Speaker 2: Microsoft is doing this at this time. Limberg Intelligence senior
Speaker 2: technology analyst an rog Rana joining us from the Bloomberg
Speaker 2: News bureau in Chicago, anurag why is Microsoft doing this?
Speaker 2: Did the company need to do this kind of cement
Speaker 2: that relationship financially and otherwise with open Ai.
Speaker 4: Yeah, I mean they had to do it because Open
Speaker 4: the Eye has been raising capital with the idea that
Speaker 4: they will go from a not for profit to a
Speaker 4: for profit company eventually going public someday. So I mean
Speaker 4: this had to be done. The big contentious for there
Speaker 4: are so many things that they were arguing against, you know,
Speaker 4: revenue share, technology share, all sorts of different things. Microsoft
Speaker 4: had controllable which cloud providers that they can use, et cetera.
Speaker 4: So this new agreement kind of cements a lot of
Speaker 4: those things, removes a big overhang that's on I would
Speaker 4: say more on Microsoft than on open Ai, frankly, because
Speaker 4: Microsoft is using open eies technology in their products, in
Speaker 4: the copilot products that are out there. You know, that's
Speaker 4: I think for us that's the most important thing. Frankly,
Speaker 4: it's not so much the other financial details.
Speaker 3: Since Microsoft will have this twenty seven percent ownership stake
Speaker 3: in open ai, can we look at Microsoft share price
Speaker 3: on a daily basis as some sort of public proxy
Speaker 3: for open ai and how investors are valuing open Ai
Speaker 3: or am I trying to do too much math here?
Speaker 5: No?
Speaker 4: I think that's that's a bit too extrapolation over there.
Speaker 4: The thing that you want to focus on is or
Speaker 4: how many US will Microsoft has have access to open
Speaker 4: EI's leading models. So when you look at frontier models,
Speaker 4: you have open Ai, you know, perhaps you know most
Speaker 4: in the lead. Then you have Entropic Gemini. Those are
Speaker 4: the three big ones that everybody talks about down the road.
Speaker 4: Microsoft needs to make sure that the copilot products that
Speaker 4: they are selling out to the public, both on the
Speaker 4: M three sixty five and then the GETHLP co pilot
Speaker 4: which is used for coding, they really have an alternative
Speaker 4: to open EI. One answer could be they have their
Speaker 4: own models, but they're not there yet. So this contract,
Speaker 4: you know, extend that to twenty thirty two, which is,
Speaker 4: you know, you can say that they're giving themselves seven
Speaker 4: years to figure this thing out.
Speaker 6: Help me out.
Speaker 2: Though, It's just like open ai and Microsoft. I'm looking
Speaker 2: at the Bloomberg open ai and PayPal, open ai and
Speaker 2: SoftBank open ai, you know, pick your company. They are
Speaker 2: just I feel like lining up deals or agreements or
Speaker 2: relationships with everybody and anybody. I mean Microsoft, I mean,
Speaker 2: are they going to have to share the wealth if
Speaker 2: you will? And does it become a little bit messy
Speaker 2: because I'm just assuming that there will be companies that
Speaker 2: maybe in some ways are also competing with Microsoft that
Speaker 2: have deals with open ai or is that not right?
Speaker 6: I don't know.
Speaker 4: See it's a very common thing in technology. Almost everybody
Speaker 4: who's competing with each other are also working closely with
Speaker 4: each other. So that's you know, that's on the side.
Speaker 4: But when you look at open ai, that's an area
Speaker 4: where you and I use a chat GPT a lot.
Speaker 4: But imagine that. Now what you can do is, you know,
Speaker 4: let's say they have a partnership with Walmart with PayPal.
Speaker 4: Today you are looking at a product and you decide
Speaker 4: that you can just buy the product seamlessly from that.
Speaker 4: They have a similar agreement with Stripe and Shopify. So
Speaker 4: what OPENINGI is basically saying, let us be the front
Speaker 4: end for a lot of what you're doing. Let's say
Speaker 4: on the consumer side, so example that I gave you
Speaker 4: is more for a retail purchase. But on the other hand,
Speaker 4: they also have a deal with Salesforce, so for example,
Speaker 4: if you are in chat GPT and you want to
Speaker 4: look at your Salesforce application, you can do that as well.
Speaker 4: So open AI wants to make sure that they are
Speaker 4: the front end for a lot of discussions that are
Speaker 4: going to happen, and that's where I think a lot
Speaker 4: of the fighting is going to be down the road
Speaker 4: on it rog.
Speaker 6: I'm, i'm.
Speaker 3: We had this conversation with you on Vanka Vanak yesterday
Speaker 3: and he talked a lot about AI and the AI trade,
Speaker 3: but he also mentioned some stats about when when web
Speaker 3: traffic is going from chat GPT two websites, and it
Speaker 3: got me thinking about how people are increasingly replacing or
Speaker 3: supplementing what they do on the internet using chat GPT.
Speaker 3: The news today too that that this potential PayPal tie
Speaker 3: up where you can pay for stuff within chat GPT
Speaker 3: also got me thinking, does Golphabet have to be scared
Speaker 3: about its core business here?
Speaker 4: But you know, but that's been the case for so
Speaker 4: many years. I mean, there have been people have been
Speaker 4: talking about this the first day chat GPT was launched, that, oh,
Speaker 4: what's going to kill Google search business? I mean, so far,
Speaker 4: I haven't seen those numbers that are out there that
Speaker 4: are just having a very large financial impact. I'm sure
Speaker 4: there is some share loss and searchers, but I haven't
Speaker 4: seen it. So we'll see. You know, how the shapes
Speaker 4: uf Google has or Alphabet has a lot of interesting assets.
Speaker 4: I mean, they have semi conductors that are very important,
Speaker 4: They have a cloud platform, they have a large frontier model.
Speaker 4: So I think they have all the pieces out there.
Speaker 4: The question is, you know, whether the market is big
Speaker 4: enough for a lot of them to exist core coexist
Speaker 4: at the same time.
Speaker 2: Hey, Anna Rogh, you know, over the summer, Bloomberg put
Speaker 2: out how open ai said, Elon Musk identified Mark Zuckerberg
Speaker 2: is one of the people with whom he had communicated
Speaker 2: about potentially financing a deal to purchase open ai. Does
Speaker 2: this Microsoft deal put an end to any other big
Speaker 2: player coming in?
Speaker 6: I mean this is theirs.
Speaker 4: I think so. But again, you know, legal grammifications are
Speaker 4: such that you don't know how some of the judges
Speaker 4: will move towards. But this is you know, this is
Speaker 4: basically open AI saying we have figured out a way
Speaker 4: to how to go you know, you could say, become nonprofit,
Speaker 4: become for profit, and eventually some day go public.
Speaker 6: M Yeah, that's going to be interesting, right, I mean,
Speaker 6: listen what valuation. Well for open right, but.
Speaker 2: For open AI, right, they can kind of stop the
Speaker 2: money grab for now, right because they just got a
Speaker 2: massive cash infusion.
Speaker 4: Yeah, but they're also spending at the amount that nobody
Speaker 4: has seen. I mean, they have a very large contract
Speaker 4: with open Air, with the Oracle and they you know
Speaker 4: today with this agreement, they've committed another two hundred and
Speaker 4: fifty billion dollars of computing capacity with Microsoft. So it's
Speaker 4: you know, their expense is far exceeding the revenue right now.
Speaker 4: They are doing these you know, you could say investments
Speaker 4: so that down the road they can recognize the value
Speaker 4: of some of these investments. So that's I think where
Speaker 4: the where the mismatches for a lot of people, And
Speaker 4: so unless there is some equilibrium, I think it's going
Speaker 4: to be very tough for them to go public.
Speaker 2: Yeah, the money flows around AI in out is like phenomenal.
Speaker 2: An rag YouTube phenomenal. Thank you, Thank you so much.
Speaker 2: He is Bloomberg Intelligence Senior technology analyst out there in
Speaker 2: our Bloomberg New Chicago bureau.
Speaker 3: Stay with us. More from Bloomberg Business Week Daily coming
Speaker 3: up after this.
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Speaker 3: It's a FED Tuesday, Carol. It is a FED Tuesday,
Speaker 3: which means it's followed by a FED Wednesday.
Speaker 7: That's how it works.
Speaker 6: Two day meetings.
Speaker 3: Let's get too. Let's get into it with Danielle di
Speaker 3: Martino bo She's CEO and chief strategist at the research
Speaker 3: and analytics firm QI Research. He's also a former advisor
Speaker 3: at the Dallas Fed. She's here in our Bloomberg Interactive
Speaker 3: Brokers studio. We've spoken to you a couple times in
Speaker 3: recent months. I want to go back to our conversation
Speaker 3: with you.
Speaker 7: Back in July.
Speaker 3: I remember it because You were kind of the first
Speaker 3: person to warn me of weakness in the lane labor market.
Speaker 3: You talked about the gig workers out there and the
Speaker 3: people who were driving for Uber for example, or Lyft
Speaker 3: or doing other gig work, and the way that a
Speaker 3: lot of them, in your view, were overqualified because they
Speaker 3: couldn't find work and what they were trained for, what
Speaker 3: they went to college for. Is the labor market worse
Speaker 3: now than it was back in July?
Speaker 8: Judging by my lift in Uber drivers, I would have
Speaker 8: to say yes. The demographics has expanded, and you've especially
Speaker 8: got a lot of kind of college graduates right now
Speaker 8: who are looking for gig work because they can't secure
Speaker 8: work in the broader economy as they thought they would
Speaker 8: be able to, you know, walk across the stage proud
Speaker 8: with their diploma, and boom, there's no work. So I mean,
Speaker 8: right now, the unemployment rate among college graduates is the
Speaker 8: high suspense since.
Speaker 6: Nineteen eighty eight.
Speaker 8: Nineteen eighty eight, it was a supply issue because that
Speaker 8: was a peak of baby boomers entering the workforce. Now
Speaker 8: it's the flip side of it. It's a demand issue,
Speaker 8: and these kids are rightfully, they're very anxious.
Speaker 2: So when You've got Amazon on letting go fourteen thousand jobs,
Speaker 2: a lot of it corporate, right, We've got UPS and
Speaker 2: that's part of its cost cutting.
Speaker 3: Matt Zetie Deutsche Bank says, pay no attention to these
Speaker 3: headline figures because they're small in comparison to the churn
Speaker 3: that we see each and every month.
Speaker 6: And that five million jobs are still being created. So
Speaker 6: what is the net.
Speaker 3: New look skeptical.
Speaker 6: Yeah, well, I mean so.
Speaker 8: We collaborate sometimes with Macro Edge and they're they're an
Speaker 8: alternative to challenge your grand Christmas.
Speaker 6: Yeah.
Speaker 8: And with the UPS announcement this morning, and of course
Speaker 8: that was so much higher than what was expected, right,
Speaker 8: it was thirty percent of what they had previously announced.
Speaker 8: So we learned from so many companies after the fact
Speaker 8: about attrition or layoffs rather than layoffs being announced in
Speaker 8: any event. At one hundred and thirty one thousand announced
Speaker 8: layoffs for the month of October thus far, and being
Speaker 8: in the heat of earning season, when so many companies
Speaker 8: are like, I'm going to get the stock to pop,
Speaker 8: I'm going to lay some people off. We're seeing the
Speaker 8: third highest level of announced layoffs in three excuse me,
Speaker 8: in two years so that, to me at least, is
Speaker 8: alarming when you do what Chair Powell suggests you do,
Speaker 8: if you add the lack of hiring to the firing,
Speaker 8: because a few years ago there wasn't.
Speaker 6: All of this lack of hiring.
Speaker 8: Now it's very much a pervasive phenomenon in addition to
Speaker 8: the layoffs coming through.
Speaker 2: Yeah, and then there was the hoarding that was still
Speaker 2: going on after the pandemic.
Speaker 6: People were freaked out.
Speaker 2: They couldn't find workers, right, absolute pandemic post pandemic, and
Speaker 2: so they're like, let me hold on to it.
Speaker 6: I mean, UPS is ap eight percent, and they're you know,
Speaker 6: UPS is flawed.
Speaker 8: I mean, but I mean, but look at the one
Speaker 8: year chart.
Speaker 6: Yeah, it's a good point of UPS. And that required
Speaker 6: forty eight thousand layoffs.
Speaker 8: In addition to the thirty four thousand they announced there
Speaker 8: was another fourteen thousand in their corporate office. Amazon today
Speaker 8: said that's fourteen, but that's fourteen of thirty and we
Speaker 8: know that.
Speaker 2: Stocks down thirty percent in the past year. WEPS, Yeah, UPS,
Speaker 2: Oh yes, absolutely well, So then got quite the all right,
Speaker 2: one word, how do you describe the economy?
Speaker 6: One word weak? So does the FED obviously needs to cut.
Speaker 8: In your view, I don't think the FED has any Yes,
Speaker 8: the FED absolutely has to cut. I think that they
Speaker 8: begin to discuss given the magnitude of the layoffs that
Speaker 8: are rolling in and the lack of hiring that Chair
Speaker 8: Powell said could in and of itself increase the unemployment rate.
Speaker 8: I think that right now what they're discussing is twenty
Speaker 8: five or fifty in December.
Speaker 6: So can I just throw at you?
Speaker 2: Like Tim and I have had lots of conversations about earnings, right,
Speaker 2: Earnings growth is there, Revenue growth is there.
Speaker 6: So companies are doing well.
Speaker 2: That's the analysis that has come our way. And it's
Speaker 2: not just big tech, although we'll see what big tech
Speaker 2: has right this week because we get a big read,
Speaker 2: but it's been broader based.
Speaker 6: I would say that Earth you not agree with that?
Speaker 8: No, no, no, I would say that earnings are doing
Speaker 8: better than revenues. And so in one survey after another,
Speaker 8: whether it's a CEO survey, a CFO survey, a regional FED.
Speaker 6: Surveys, revenue growth, it's I think coming in better. That's again,
Speaker 6: there's revenue growth. But remember these are all.
Speaker 8: Based on lowered bars that are easier to get over.
Speaker 8: I mean, if it's if you want to look at
Speaker 8: the entire revenue picture, I think it's important to bring
Speaker 8: in the bcy go function and look at the bankruptcies
Speaker 8: that are coming in on top of this. And that
Speaker 8: is you know, S and P has been tracking monthly
Speaker 8: bankruptcies uh forever and last month September came into the
Speaker 8: highest number in the post pandemic era of bankruptcies. And
Speaker 8: we're seeing what I mean, bcygos hoppin'. Whoever whatever's in
Speaker 8: charge of that is busy.
Speaker 3: So is is you know, we talk a lot about
Speaker 3: the K shaped economy when it comes to consumers, but
Speaker 3: is it is it? Is it a K shaped market
Speaker 3: where you know the and we know this about the
Speaker 3: S and P five hundred companies that they are, you know,
Speaker 3: the mag seven have just carried this index for years.
Speaker 3: But are you seriously concerned about pretty much the other
Speaker 3: company all the other companies?
Speaker 8: Well, I mean, if you're asking me if I'm seriously
Speaker 8: concerned about the other ninety percent of Americans who are
Speaker 8: outside of the top ten percent who represent fifty percent
Speaker 8: of spending.
Speaker 6: Yes, yes I am.
Speaker 8: And I think we're seeing that in freight.
Speaker 3: But we're seeing it in freight, and we're seeing it
Speaker 3: in some companies, but we're not seeing it. I mean,
Speaker 3: we're at record a new record for.
Speaker 6: Not seeing it in asset prices. Why are we not
Speaker 6: buying it an assets prices?
Speaker 8: Well, there's something very automated about this market, and this
Speaker 8: market will continue to feed on itself because that is
Speaker 8: that is the structure of passive investing.
Speaker 9: Structure.
Speaker 8: Passive investing forces stock prices up because you have to
Speaker 8: buy the biggest market cap look at Nvidia today. But
Speaker 8: that's that is a function not of necessarily enthusiasm about
Speaker 8: in Nvidia the stock on a fundamental level, the way
Speaker 8: we used to think of portfolio management one oh one.
Speaker 8: But it is a function of passive investing flows.
Speaker 6: So what do you tell investors? Do you just tell
Speaker 6: them get ready?
Speaker 8: According to Bloomberg, the cost of hedging against a decline
Speaker 8: in the markets is very expensive right now. So we
Speaker 8: know that, we know that portfolio managers are very nervous
Speaker 8: about what's happening.
Speaker 6: But no, I actually watch.
Speaker 8: The FED the most closely because you've got all of
Speaker 8: this money, trillions and trillions, and I think twelve thirteen
Speaker 8: trillion dollars in cash cast equivalents, money market friends, et cetera.
Speaker 8: That's you know, that's predominantly owned by people who are
Speaker 8: seventy and older.
Speaker 6: So as long as the.
Speaker 8: FED does not cut too much, I think we're okay.
Speaker 8: But if the FED starts to cut into what retirees
Speaker 8: consider to be the corpus of their monthly income, because
Speaker 8: they have really enjoyed the FED being higher for longer,
Speaker 8: they've collected every single fifty basis point cut by the FED,
Speaker 8: you take seventy one billion dollars of cash out of
Speaker 8: the hands of retirees. We don't want for people who
Speaker 8: own forty percent of the stock market, ie the seventy
Speaker 8: year olds to even think about selling, because that unleash
Speaker 8: is passive.
Speaker 6: Okay, got to leave it there. Hey, thanks, good to
Speaker 6: see you.
Speaker 2: Danielle Di Martino Booth CEO, Chief strategist at the Research
Speaker 2: and Analytics for QI Research.
Speaker 3: Stay with us. More from Bloomberg Business Week Daily coming
Speaker 3: up after this.
Speaker 2: Let's not forget we have a big storm. We know
Speaker 2: Hurricane Melissa has made landfall in Jamaica. Strong, strong wind
Speaker 2: and so it's something we're talking about a Category five storm.
Speaker 6: This is a very serious storm.
Speaker 3: Yeah, Melissa Crosston to Jamaica, with sustained winds of one
Speaker 3: hundred and eighty five miles per hour, making it a
Speaker 3: rare Category five hurricane at landfall. It's struck near your
Speaker 3: New Hope on Jamaica's southern coast, is about twenty five
Speaker 3: miles south of Montego Bay. The US National Hurricane Center
Speaker 3: set in a statement at one pm in New York Times.
Speaker 3: Since then, it's strongest winds have weakened to one hundred
Speaker 3: and sixty miles per hour, still at the top of
Speaker 3: the five step scale. We got a great voice with us.
Speaker 3: I want to bring in Eric Roston. He's Bloomberg News
Speaker 3: Climbate reporter. He joins us from New Jersey. Eric, it's
Speaker 3: too early to be talking about the actual cleanup effort.
Speaker 3: We don't even know that devastation that this current storm
Speaker 3: will rot and also what happens later on in hurricane season.
Speaker 3: But you've talked a lot, and you've written and reported
Speaker 3: a lot about the big business of disaster recovery. Let's
Speaker 3: talk numbers here, because you looked at those numbers in Asheville,
Speaker 3: North Carolina, for example. Just how much does it cost
Speaker 3: to clean up after one of these natural disasters.
Speaker 5: Just to take readers back a second to a year ago.
Speaker 5: In at the end of September twenty twenty four, Hurricane Helene.
Speaker 5: Technically it was a tropical storm by then, but didn't matter.
Speaker 5: Instead of going out to the Atlantic, took a left
Speaker 5: of the Appalachians and brought us just about the worst
Speaker 5: Appalachian hurricane you've ever seen. That's not a phrase we're
Speaker 5: used to hearing before. In December, after there was an accounting,
Speaker 5: North Carolina came out with a report saying that it
Speaker 5: caused sixty billion dollars in damage, concentrated in the western
Speaker 5: part of the state, which includes Ashville. Wow, the cleanup
Speaker 5: effort has largely been completed. When it comes to the
Speaker 5: immediate aftermath of removing debris, there was three and a
Speaker 5: half million cubic yards of debris removed from Buncombe County alone.
Speaker 5: That's the county where Asheville, the city of Ashville is located.
Speaker 5: And what you miss from the numbers is, and I
Speaker 5: spent time down there in May, is just the incredible
Speaker 5: vitality of this community and the incredible pride of western
Speaker 5: North Carolinians. Of course, other states were hit as well,
Speaker 5: in trying to claw back the worst hurricane that part
Speaker 5: of the state I'd ever seen.
Speaker 2: You know, I got to say, Eric, that doesn't surprise
Speaker 2: me my husband as a family member who is living
Speaker 2: in that area, and just first of all the neighborhoods
Speaker 2: coming out to help one another with generators and so
Speaker 2: on and so forth. But then you know, everybody kind
Speaker 2: of had to leave because there was no infrastructure left
Speaker 2: really you know, to be there day by day. But
Speaker 2: as you say, it's impressive, like the comeback or what
Speaker 2: people want to do to bring everything back.
Speaker 6: It's interesting in a day.
Speaker 2: Where we're talking a lot about the US economy, we're
Speaker 2: waiting for a FED decision, we have a government shutdown,
Speaker 2: we don't get a lot of government data. We're trying
Speaker 2: to figure out what is the economy going forward, what
Speaker 2: will be the strains on the economy. Maybe AI will
Speaker 2: mean less job creation here. Unfortunately, these extreme weather disasters,
Speaker 2: you know, communities do often want to build back, right,
Speaker 2: and that creates It comes at a cost, but it
Speaker 2: also creates economic activity.
Speaker 5: It does. There's an economists always for decades have been
Speaker 5: fighting about the relationship between disasters and growth, with different
Speaker 5: high ranking folks coming out on either side. What's interesting.
Speaker 5: So I went to Asheville in May, which was eight
Speaker 5: months after the storm. There were shoots of renaissance in
Speaker 5: business districts coming back. And the story that we ran
Speaker 5: last week is a profile of this very quiet, but
Speaker 5: very very large segment of the US economy that is
Speaker 5: increasingly being called on to rebuild after disasters and to
Speaker 5: help places prepare for the next one. And another leg
Speaker 5: of this conversation for the last generation really has been
Speaker 5: governed and spending, Whereas until maybe till twenty sixteen or seventeen,
Speaker 5: the US government was picking up the bill for maybe
Speaker 5: a third of recovery costs in disaster stricken areas. That
Speaker 5: number has been falling dramatically since then. It's probably down
Speaker 5: under two percent. And so there's a lot of questioning
Speaker 5: now and a lot of concern about where is the
Speaker 5: money going to come from. If the government is stepping
Speaker 5: back to pay for the services that we need before, during,
Speaker 5: and after disasters, well, there's all the disasters are going
Speaker 5: to keep on coming.
Speaker 3: There's also the question eric of how this changes the
Speaker 3: economic landscape in these areas from a housing perspective. I mean,
Speaker 3: we've had reports coming from places such as Malibu that
Speaker 3: insurance costs have become so burdensome that you see homes
Speaker 3: for sale for a tiny fraction of what they would
Speaker 3: cost if they were ensurable. One of our guests a
Speaker 3: few months ago just shocked me by noting that you
Speaker 3: could get like an actual house in Malibu for like
Speaker 3: just over one million dollars, which is a shockingly small number.
Speaker 3: We're seeing this effect the real estate market in Florida
Speaker 3: as well. Is the free market solving this a little bit?
Speaker 5: We're the free market like the whole system. If you
Speaker 5: talk to economists who look at systemic risks, we're a
Speaker 5: little bit protected from these disasters just by the nature
Speaker 5: of how they hit like big don't fortunately or they
Speaker 5: fortunately haven't yet like hit everywhere at once, And so
Speaker 5: the places that are undergoing this kind of level of
Speaker 5: suffering that you know, I can only imagine what's happening
Speaker 5: in Jamaica right now. There's got to be something that
Speaker 5: hits everywhere at once right for the systemic focused economists
Speaker 5: to really raise alarm bells, and they've started to exactly
Speaker 5: because of the dynamic you described, which is we have
Speaker 5: a system of federally backed mortgages that hinges on potential
Speaker 5: homeowners being able to get insurance policies at a time
Speaker 5: when disasters are becoming more intense, more frequent, and more expensive.
Speaker 5: So the systemic concern to the extent there is one,
Speaker 5: and this has been mentioned at very high levels. The
Speaker 5: head of the FED earlier this year expressed some concern
Speaker 5: about it in you know, in the in the decade
Speaker 5: or so ahead, right, that is something to keep an
Speaker 5: eye on.
Speaker 6: I think what's fascinating too.
Speaker 2: There's a lot in this story, but you know, you
Speaker 2: also cite John Stevenson, who's a senior analyst at our
Speaker 2: Bloomberg Intelligence dem of created an index, the Prepare and
Speaker 2: Repair Index, and it's about one hundred large public companies
Speaker 2: that will be evolved in these extreme weather situations cleaning up.
Speaker 6: It reminds me of one of my first jobs in broadcast.
Speaker 2: Business journalism, and it was a mutual fun show and
Speaker 2: when there was an earthquake, we would put on fund
Speaker 2: managers or CEOs of cement companies because it was just
Speaker 2: a logical investment plate feels a little cold, but it
Speaker 2: was kind of the reality of our world. Incredible story,
Speaker 2: highly recommend folks check it out on the Bloomberg at
Speaker 2: Bloomberg dot com.
Speaker 6: Eric, thanks so much.
Speaker 2: Eric Roston, Bloomberg News Climate Reporter, Joining us out there
Speaker 2: in New Jersey.
Speaker 3: Stay with us. More from Bloomberg Business Week Daily coming
Speaker 3: up after this.
Speaker 1: You're listening to the Bloomberg Business Week Daily Podcast. Catch
Speaker 1: us live weekday afternoons from two to five.
Speaker 6: Yes.
Speaker 1: During that, listen on Applecarplay and Android Otto with the
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Speaker 3: We got to talk about everything, or at least I'm
Speaker 3: not going to make it everything because that would be exhaustive.
Speaker 3: That would just be impossible. But we got to talk
Speaker 3: about a lot when it comes to everything happening with
Speaker 3: nuclear energy. Shares a Canadian uranium producer, Chemico, rose as
Speaker 3: much as twenty seven percent to a record high today.
Speaker 3: This after the US government signed a packed with Westinghouse Electric,
Speaker 3: chemic COO, and Brookfield that will see at least eighty
Speaker 3: billion dollars of new nuclear reactors constructed in the US
Speaker 3: to accelerate nuclear power in AI deployment and breaking. Late yesterday,
Speaker 3: next Air Energy planning to restart a nuclear power plan
Speaker 3: in Iowa, primarily to supply Google data centers. We got
Speaker 3: Will Wade with us. He's Bloomberg News energy reporter. He
Speaker 3: joins us here in the Bloomberg Interactive Brokers studio. Did
Speaker 3: the US make a mistake Will in shutting down nuclear
Speaker 3: reactors over the last few years.
Speaker 9: Oh, that's a tough question. When they made those decisions
Speaker 9: to shut down reactors, and I used to keep a
Speaker 9: spreadsheet on my desk. I call it the dead Nukes
Speaker 9: file of the dozen or so reactors that were shut
Speaker 9: down in the past a little more in a decade.
Speaker 9: It was the right decision. Then they were expensive to operate.
Speaker 9: Nobody wanted to pay that.
Speaker 7: Much for power. But the world has really changed around us.
Speaker 3: And I think at Indian Point, close to New York City,
Speaker 3: that one was didn't it outlive It's like life cycle.
Speaker 3: It was sort of at the end of its life.
Speaker 7: Oh no, it was closed ahead of time.
Speaker 3: It was closed ahead of time.
Speaker 9: Yeah, that was a big political campaign. There were people
Speaker 9: that were really worried about having a nuclear power plant
Speaker 9: so close to the biggest city in America. I mean,
Speaker 9: that's a legitimate concern. But we closed that plant and
Speaker 9: immediately people started saying, wait, New York State carbon emissions
Speaker 9: are going to go up this year because we replaced
Speaker 9: all the nuclear with natural gas, like who would have thought.
Speaker 2: So it does feel like we mentioned the US signing
Speaker 2: an eighty billion dollar pack to boost nuclear power in
Speaker 2: that AI push, Google buying power from next era nuclear
Speaker 2: power plant being revived. So the spend is on, the
Speaker 2: deals are on. Is the bild on though, to really
Speaker 2: build out maybe the nuclear capacity that's needed.
Speaker 9: Oh, building nuclear No, nobody's doing that.
Speaker 3: But the money's there, the commitments are there, the mothballing
Speaker 3: is being undone.
Speaker 9: Okay, So here's what we're seeing. There is an enormous
Speaker 9: amount of interest in nuclear energy right now. I've been
Speaker 9: seeing it for eighteen twenty four months. This is because
Speaker 9: electricity demand is going to go through the roof. That's
Speaker 9: largely for data centers and AI. It's not just that.
Speaker 9: It's for a lot of things, but that's the big
Speaker 9: part of it. We need new electricity, we need a
Speaker 9: lot of it. We did not see this coming. We
Speaker 9: were not building new nuclear plants. At the same time,
Speaker 9: we would love our electricity to be clean. So that
Speaker 9: really makes nuclear the best option because it's available around
Speaker 9: the clock.
Speaker 7: Unlike wind and solar right.
Speaker 3: How quickly can nuclear power plants be built outside of
Speaker 3: the United States? In China, Korea, Japan.
Speaker 7: Oh, China's really good at building them. They've been.
Speaker 9: They've been doing a NonStop they got I think they're
Speaker 9: soon going to surpass the US in terms of the
Speaker 9: number of reactors they've got going. So yeah, they're faster
Speaker 9: at it than us. The Koreas are really good at it.
Speaker 9: I was in Korea this year. Their nuclear industries they've
Speaker 9: been going NonStop for fifty something years. Our industry pretty
Speaker 9: much ground to a holt around nineteen seventy nine with
Speaker 9: through My Island, so we spent years doing nothing and
Speaker 9: we never really recovered from that.
Speaker 7: We're working on it.
Speaker 2: Well, we're going to keep Will Wade with us Bloomer
Speaker 2: News Energy Report. Someone else who's working on it too
Speaker 2: to build out nuclear capacity is James Walker.
Speaker 6: He's CEO of Nano Nuclear Energy.
Speaker 2: It's a two point three billion dollar market cap nuclear
Speaker 2: energy company that is working on SMR small modular reactors.
Speaker 6: Shares are up.
Speaker 2: Nearly ninety percent so far this year. Big chunk, though,
Speaker 2: of the float is short. James joining us from Vancouver.
Speaker 2: James come on in on this conversation. I mean, we'll
Speaker 2: list how long before we actually you actually.
Speaker 6: Get an SMR built and it's up and running.
Speaker 10: It's a good question because it gets asked, as you
Speaker 10: can imagine, more than any other question. And there's kind
Speaker 10: of two answers to it too, because to get a
Speaker 10: reactor built and constructed and licensed is one question, But
Speaker 10: the other question is how long is it going to
Speaker 10: take for the fuel supply chain to be built back
Speaker 10: adequately in the country to be able to mass manufacture
Speaker 10: the fuel to allow the mass manufacture of reactors. So
Speaker 10: on one side, our company is already going ahead with
Speaker 10: the construction project two construction projects to build reactor systems,
Speaker 10: and we're talking to data centers and all of those
Speaker 10: sort of groups as well. But on the other side,
Speaker 10: like you know, we even our company, we need to
Speaker 10: get involved in that fuel supply chain and build it
Speaker 10: back because, as well was saying just before this sort
Speaker 10: of after Three Mile Island, the investment into the country
Speaker 10: sort of broke down a lot. We need that investment
Speaker 10: to go back into rebuilding that fuel supply chain so
Speaker 10: companies like ours can mass manufacture the reactor systems.
Speaker 3: But James on Carol's question about a timeline here, what
Speaker 3: would be a realistic timeline for completion of your first
Speaker 3: modular nuclear reactor.
Speaker 10: So we're doing a drill program right now, as it's
Speaker 10: already started on the site. So we'll have the geotechnical
Speaker 10: data to submit for a construction permit that'll go in
Speaker 10: early next year, and our see will turn that around
Speaker 10: in twenty twenty six. So construction twenty twenty seven, twenty
Speaker 10: twenty eight, twenty twenty nine, and then fully licensed reactor
Speaker 10: operating commercial license twenty thirty is very reasonable timeline. So
Speaker 10: I would say early twenty thirties. Then you're going to
Speaker 10: see the mass rollout of reactor systems, so dozens on
Speaker 10: an annual basis.
Speaker 9: Yeah, that timeline fits with what I hear from a
Speaker 9: lot of companies early twenty thirties for a significant wave
Speaker 9: of new power plants. But I guess the issue is
Speaker 9: that we have all these people who want power yesterday.
Speaker 7: How do we meet their needs?
Speaker 10: Look, there's a it's actually a very reasonable question. Like
Speaker 10: as a company, we you know, we want to be
Speaker 10: conservative and truthful with everybody because you know, we've got
Speaker 10: to earn long term trust here. There are good interim solutions,
Speaker 10: Like I know, companies have been exploring things like gas,
Speaker 10: and to be honest, if they can get hold of
Speaker 10: that in the interim, great, But even things like gas contracts,
Speaker 10: they're all tied up for seven eight years. Turbines around
Speaker 10: gas are tied up for seven eight years too, So
Speaker 10: there's no easy solution here. Even bringing in as you mentioned,
Speaker 10: like wind and solar or anything like that, these are
Speaker 10: it's aminten technologies which require huge battery storage technology to
Speaker 10: run alongside them. A lot of the time it's just
Speaker 10: not feasible. They're also very locationally dependent, so you be
Speaker 10: limited on where you can even deploy these things. I mean, unfortunately,
Speaker 10: there's no there's no great solution, which is why when
Speaker 10: the show started they were talking about opening up these
Speaker 10: old power stations and recommissioning old nuclear power plants because
Speaker 10: those are the some of them are the interim solutions.
Speaker 10: It won't be enough power, but it'll be some.
Speaker 9: Yeah, those restart projects, that's low hanging fruit. Do you
Speaker 9: think there are other plants that we can restart or
Speaker 9: is it just the ones we've already seen? Are we
Speaker 9: exhausted that list?
Speaker 10: So it's a good question, Like there's a number have
Speaker 10: been shut down, and like it's it's arguable that you
Speaker 10: mentioned Indian Point as an example. I know it wasn't
Speaker 10: politically popular and maybe there was some of that related
Speaker 10: to the decisions around that kind of plant that could
Speaker 10: be an act, that could be a route, even the
Speaker 10: old three Mile Island plant. Since we're bringing that up
Speaker 10: as I think it's see the Microsoft or Constellation, we're
Speaker 10: involved in recommissioning that and trying to get that back
Speaker 10: up and running.
Speaker 9: Yeah, Constellation says that'll be ready by twenty twenty seven.
Speaker 10: There we go. So, like you know, I think, as
Speaker 10: you say, like there's going to be big projected powering
Speaker 10: demand increases in the country, they might not get solved
Speaker 10: until we get to those twenty thirties, and that the
Speaker 10: proper there is that that could mean a stagnation in
Speaker 10: the tech industry. They'll find every means they can to
Speaker 10: get power. But like that big online colocation green technology
Speaker 10: that provides baseload power that can only really come from
Speaker 10: nuclear and a lot of these reactor systems. Despite any
Speaker 10: really outlandish claims about deploying neotom it's it's going to
Speaker 10: be early twenty thirties, twenty thirty and onwards.
Speaker 2: All right, so the demand story is compelling that the
Speaker 2: obstacles are just as a parent. Those aren't my words,
Speaker 2: those are Well Wade words who reports on this sector,
Speaker 2: as you well know. I mean, help me out here though,
Speaker 2: because I'm just wondering.
Speaker 6: You know, if I'm looking at.
Speaker 2: A stock that is up eighty percent year to date,
Speaker 2: you know, you guys don't have any revenues, right, I mean,
Speaker 2: like our investors, Yeah, this is what we do.
Speaker 6: Like are they probably getting ahead of themselves?
Speaker 2: Thirty percent of your float is short, so investors are
Speaker 2: just kind of waiting for something maybe negative to hit
Speaker 2: because negative the sentiment. I mean realistically, you're talking at
Speaker 2: least five years right before you're showing significant revenue or
Speaker 2: earnings or anything along those lines.
Speaker 10: No, like our early US and our company will come
Speaker 10: online a long time before that. I mean, because there's
Speaker 10: this massive build back. The opportunity at the moment in
Speaker 10: the nuclear space is huge. It can come through the
Speaker 10: fuel supply chain or transportation or isotopes. Like the nice
Speaker 10: part is that we're part of this build back effort.
Speaker 10: So and look, the stock market is always about an
Speaker 10: investment in the future. I mean, the nice part is
Speaker 10: that the demand is there in a way that's unprecedented.
Speaker 10: Like buying now really is an investment in the future,
Speaker 10: and a future that's inevitable. The tech industry is not
Speaker 10: going to just give up and pack up and go away.
Speaker 6: But what if what if.
Speaker 2: The what if the AI spend and build that is
Speaker 2: I know, everybody comes out and says no bubble or
Speaker 2: a lot of people do what if there is, though,
Speaker 2: an overspend?
Speaker 6: Where does that catch you guys? Potentially?
Speaker 10: I think the bubble has only been discussed around AI.
Speaker 10: But like in terms of data centers, those are things
Speaker 10: that cannot be bubbles. That is, power that's needed for
Speaker 10: our whole tech industry, like a data center cannot be
Speaker 10: a bubble. Like if you need increased power for computing power,
Speaker 10: it has to come from somewhere AI. Whether that's going
Speaker 10: to bear out the fruits of what's been promised that
Speaker 10: remains to be seen. But currently it's just expanding. But
Speaker 10: it's it's it's kind of irrelevant to the long term
Speaker 10: power requirements because the electrification of the country, the reindustrialization
Speaker 10: of the country, that's all going ahead. And you mentioned
Speaker 10: stocks like cars and the short interest.
Speaker 6: Great.
Speaker 10: If people want to short us, that's better because we've
Speaker 10: We've gone higher and higher as a stock just because
Speaker 10: every time the shorts have been squeezed. The more shorts,
Speaker 10: the better for us because they always.
Speaker 3: Only only ten seconds left. But would you say that
Speaker 3: you are most further along than any other company, the
Speaker 3: most along than any other company in terms of microreactors?
Speaker 5: Yees.
Speaker 10: I believe we'll have the first US constry tructed full
Speaker 10: scale commercial commercially license my corrector in the.
Speaker 2: Country where you can put an SMR in my backyard
Speaker 2: because my monthly electrical bills are crazy.
Speaker 6: You're shutting off.
Speaker 7: Lights, Carol, you're glowing today.
Speaker 6: Yeah, I'm glowing.
Speaker 2: Will Wade of Bloomberg News and James Walker, CEO of
Speaker 2: Nano Nuclear Energy, Guys, thank you so much.
Speaker 6: Great discussion.
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