WEBVTT - Asia Stocks Drop on Broadcom Outlook, SpaceX Record IPO

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<v Speaker 1>Bloomberg Audio Studios, podcasts, radio News.

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<v Speaker 2>Welcome to the Daybreak Asia podcast. I'm Deck Chrisner. It

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<v Speaker 2>was concern over an escalation of hostilities between the US

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<v Speaker 2>and Iran that weighed on US markets during the last session.

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<v Speaker 2>There were clashes in the early hours of Wednesday, with

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<v Speaker 2>Kuwait and Bahrain caught in the crossfire, and we had

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<v Speaker 2>the S and P five hundred dropping from a record

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<v Speaker 2>high by seven tens to one percent. Snapping a nine

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<v Speaker 2>day winning streak tack led the decline, and we had

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<v Speaker 2>a key software etf that being the IGV sinking more

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<v Speaker 2>than four percent. Now. A short while ago, the State

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<v Speaker 2>Department said that Israel and Lebanon have agreed to renew

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<v Speaker 2>their fragile Cy's fire. This agreement, by the way, will

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<v Speaker 2>also create a number of pilot security zones inside Lebanon

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<v Speaker 2>from which Hesbalah militants would be banned. Crude oil prices

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<v Speaker 2>are drifting lower on that news. For a look at

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<v Speaker 2>market action, let's bring in Bloomberg's Paul Dobson. Paul is

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<v Speaker 2>Executive editor for Asian Markets. He joins us from our

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<v Speaker 2>studio in Singapore. Thank you for being here. Where do

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<v Speaker 2>you want to begin. Can we talk first about the

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<v Speaker 2>geopolitical story and how it's intersecting with some of the

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<v Speaker 2>price action that we're seeing.

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<v Speaker 3>Yeah, Hi, there doeg absolutely, and it's back on the radar,

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<v Speaker 3>having sort of drifted into the background a little bit

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<v Speaker 3>in recent days. So this newest escalation, the fact that

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<v Speaker 3>although Trump tells us that he's getting closer to reaching

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<v Speaker 3>an agreement with her round, we'sta ll not really seeing

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<v Speaker 3>it is you know, pushing up crude oil prices again

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<v Speaker 3>and seeping back into the broader markets. As a result,

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<v Speaker 3>we have higher bond yields and a stronger dollar on

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<v Speaker 3>top of that as well. I mean, on the positive side,

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<v Speaker 3>we are seeing more tankers and shit escaping from homies,

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<v Speaker 3>bringing a little bit more products onto the market. But

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<v Speaker 3>at the same time, you know, the oil reserves data

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<v Speaker 3>was a good reminder that we're burning through everything at

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<v Speaker 3>a relatively rapid pace and that it can't hold out forever.

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<v Speaker 3>And you still see those countries that are most under pressure,

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<v Speaker 3>and I'm thinking again, you know, we talk about those

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<v Speaker 3>ones in Southeast Asia, like Indonesia under a considerable amount

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<v Speaker 3>of pressure. Indonesia, I think, so its current account surplus

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<v Speaker 3>whittled down to almost nothing because it's spending so much

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<v Speaker 3>on crude oil and other energy products, which is interesting

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<v Speaker 3>one and weight on the currency again yesterday, so.

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<v Speaker 2>We had tech weakness during the regular session in New

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<v Speaker 2>York trading, and then after the bell kind of disappointing

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<v Speaker 2>news from Broadcom I think ai Chip revenue will not

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<v Speaker 2>meet expectations, and then on top of that, CrowdStrike holding

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<v Speaker 2>saying that revenue for the current quarter will be low

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<v Speaker 2>the most optimistic expectations. How is that news being received

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<v Speaker 2>right now in the APEC.

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<v Speaker 3>Yeah, well so bad news on the hardware front, bad

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<v Speaker 3>news on the software front too, And what we saw

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<v Speaker 3>in reaction to that was not just broad Come it's

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<v Speaker 3>self fowarding, but piers across the US tech space like

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<v Speaker 3>marvle AMD also under some pressure. And the futures I

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<v Speaker 3>think for S and p NASDAK around half a percent

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<v Speaker 3>lower as a result. So that's going to weigh on

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<v Speaker 3>the Asia tech sector or things being equal, I think

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<v Speaker 3>it's a little bit of a you know, a reality check,

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<v Speaker 3>like you said, Doug. I mean, the market had been

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<v Speaker 3>up for nine days in a row until yesterday. So

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<v Speaker 3>the bigger picture is that there is still this humongous

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<v Speaker 3>amount of optimism out of there. I think it's good

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<v Speaker 3>every now and then for the markets to think, how

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<v Speaker 3>have we running too far with this story? But also

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<v Speaker 3>to think about, you know, not everybody is necessary already

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<v Speaker 3>going to be a winner. There are going to be

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<v Speaker 3>stronger hands than weaken hands. That's going to become more

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<v Speaker 3>and more evident as we go through this new sort

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<v Speaker 3>of AI infrastructure boom.

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<v Speaker 2>We have some amazing IPOs in the pipeline right now.

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<v Speaker 2>Tonight in the US, the SEC filing from SpaceX reveals

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<v Speaker 2>that the company is looking to raise seventy five billion

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<v Speaker 2>in what would be the largest IPO in history. That

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<v Speaker 2>comes after the Anthropic filing, and then we're still waiting

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<v Speaker 2>to hear from Open AI. How is this news being

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<v Speaker 2>received where you are?

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<v Speaker 3>Yeah, well, I think with a lot of interest. I

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<v Speaker 3>think that you can see that there are many people

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<v Speaker 3>that want to get in on it. Even with the

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<v Speaker 3>high valuations and the extremely large amounts of money that

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<v Speaker 3>are involved and need to be raised, it feels like

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<v Speaker 3>there will be some difficulties for the market to absorb

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<v Speaker 3>it all because it will drain liquidity at least temporarily.

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<v Speaker 3>But on the other hand, I think that you know,

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<v Speaker 3>what we saw, okay, so this is you know, quite

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<v Speaker 3>a good example, I think was we had the technology

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<v Speaker 3>conferences in Asia recently, we had Jensen Huang visiting China

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<v Speaker 3>and various other nations, and just the kind of buzz

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<v Speaker 3>that he generates wherever he shows up in the region.

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<v Speaker 3>You know, whatever he's doing, he's eating a bowl of noodles,

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<v Speaker 3>it's over a social media everywhere, there's lots of excitement.

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<v Speaker 3>You know, he goes to an airport and there's there's fans,

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<v Speaker 3>it's being mobbed a little bit like a like a

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<v Speaker 3>rock star or something like that. I think that that

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<v Speaker 3>sort of talks to the idea that there's a great

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<v Speaker 3>deal of enthusiasm and excitement over the potential for the

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<v Speaker 3>next leg of the AI rally, and the fact that

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<v Speaker 3>what he was talking about was, you know, the other

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<v Speaker 3>companies that can do well. He was talking about software,

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<v Speaker 3>he was talking about robotics and that power of it.

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<v Speaker 3>Just the word was enough to lift for various equities

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<v Speaker 3>markets talks to you know, there's that there is that

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<v Speaker 3>faith in some of these deaders, and I think that

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<v Speaker 3>Elil must certainly carries that same thing. When Sam Oltman

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<v Speaker 3>comes to the region, it has that same effects as well.

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<v Speaker 3>So you know, these are the new these are the

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<v Speaker 3>new superstar CEOs, and and that can get you quite

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<v Speaker 3>a long way, even when you're doing gigantic IPOs.

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<v Speaker 2>And then we have a story. S k Heinez, I

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<v Speaker 2>believe the other day was out with an indication that

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<v Speaker 2>it plans to double its memory chip capacity over the

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<v Speaker 2>coming half decade. This is obviously a part of that

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<v Speaker 2>AI story. So it's not just things being optimistic right now,

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<v Speaker 2>kind of in the short term, but I think in

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<v Speaker 2>terms of the longer view, people are still of the

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<v Speaker 2>opinion that this is a durable trend.

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<v Speaker 3>Yeah. Now, memory chips is obviously highly sicklical based on

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<v Speaker 3>the recent past, so there's booms and busts, and so

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<v Speaker 3>the idea that s k Heinez wants to do that

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<v Speaker 3>huge build out does show you that they're very confident

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<v Speaker 3>on the outlook. But it also you know, we've seen

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<v Speaker 3>over capacity. Oh, we've seen ebbs and flows in demand before,

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<v Speaker 3>so it's not one hundred percent guaranteed that this is

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<v Speaker 3>going to be successful, but it does talk to the

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<v Speaker 3>fact that there's a clamor for the products that they're

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<v Speaker 3>making at the moment, and the fact that the market

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<v Speaker 3>receives it well and not skeptically again talks to that

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<v Speaker 3>same sort of thing. I think the South career at

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<v Speaker 3>the moment, those markets are getting a little bit what

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<v Speaker 3>would be the right word, raising some anxieties among more

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<v Speaker 3>seasoned investors when you see the two times leverage single

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<v Speaker 3>stock ETFs springing up and attracting huge volumes as well,

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<v Speaker 3>and the volatility really whipping up as a result, feels like,

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<v Speaker 3>you know, you need to be careful to control it

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<v Speaker 3>and not to get over confident. Otherwise if we do

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<v Speaker 3>get into too frofi a situation, then the risk of

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<v Speaker 3>sharp corrections only builds as well.

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<v Speaker 2>So in the US we had manufacturing PMI data indicating

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<v Speaker 2>that businesses face the fastest growth in input cost in

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<v Speaker 2>nearly four years during the month of May, and that

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<v Speaker 2>is largely the energy story, where prices have moved sharply higher.

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<v Speaker 2>I know next week in China we get a lot

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<v Speaker 2>of the price data. How is the inflation story playing

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<v Speaker 2>out where you are? Is it much more severe than

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<v Speaker 2>what we're talking about in the States.

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<v Speaker 3>Yeah, Well, it's country by country basis. I think is

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<v Speaker 3>part of it because google energy exposure and costs varies

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<v Speaker 3>from place to place, and I think you're right to

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<v Speaker 3>draw attention to that. I think the bond markets run

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<v Speaker 3>the pressure pretty much everywhere at the moment. So that's

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<v Speaker 3>a testimony to it, and that a lot of Asian

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<v Speaker 3>central banks have already started hiking to get ahead of it,

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<v Speaker 3>and those that aren't, like the boj are getting punished,

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<v Speaker 3>and so they're sort of having to make noises that

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<v Speaker 3>they're also coming around to the idea that likes to

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<v Speaker 3>going to be needed relatively soon. And I think not

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<v Speaker 3>to be forgotten within that DOUG actually is not just

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<v Speaker 3>those energy costs, but also the costs of the semiconductors

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<v Speaker 3>and all the equipment because the market is seeing all

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<v Speaker 3>of these bottlenecks at the moment. The companies that are

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<v Speaker 3>making the technology hardware have pricing power, and if they're

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<v Speaker 3>raising prices, then that does feed into the costs for everything.

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<v Speaker 3>And so we've seen you know, a few isolated, I

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<v Speaker 3>would say so far, but nevertheless quite prominent squeals of pain,

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<v Speaker 3>the likes of Nintendo talking about how the cost of

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<v Speaker 3>the chips that it's putting into it's you know, gaming

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<v Speaker 3>equipment and things like that is also going up, so

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<v Speaker 3>that idea I think people are calling it chipflation is

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<v Speaker 3>also something that needs a little bit more attention.

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<v Speaker 4>I think.

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<v Speaker 2>Okay, Paul, good stuff. We'll leave it there. Thank you

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<v Speaker 2>so much. Bloomberg's Paul Dobson, Executive Editor for Asia Markets,

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<v Speaker 2>joining from Singapore here on the Daybreak Asia podcast. Welcome

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<v Speaker 2>back to the Daybreak as your podcast. I'm Doug Prisner,

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<v Speaker 2>and as I mentioned earlier, SpaceX is seeking to raise

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<v Speaker 2>a record seventy five billion dollars through its initial public offering.

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<v Speaker 2>This would be the largest IPO in history, and it

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<v Speaker 2>could clear the path for even more mega listings. That's

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<v Speaker 2>where we begin our conversation with Sylvia Jablonski. She is

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<v Speaker 2>the chief investment officer at Defiance ETFs, and Sylvia spoke

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<v Speaker 2>with Bloomberg TV host Heidi Stroud, Watts and Cherry on.

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<v Speaker 5>Such a hectic time for market participants. Let's start off

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<v Speaker 5>with the mega IPOs with SpaceX. How do you view

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<v Speaker 5>this offering for all of its ways that is quite unconventional,

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<v Speaker 5>I should say, coming at a time where the valuations

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<v Speaker 5>for a lot of these companies are just so hefty.

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<v Speaker 6>And so first, thank you for having me here.

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<v Speaker 4>I think that's the sex IPO is going to be

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<v Speaker 4>one of the most exciting IPOs in history. There are

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<v Speaker 4>so many investors that are just you know, kind of

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<v Speaker 4>chomping at the bit to get exposure and access to

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<v Speaker 4>the shares and trying to figure out, you know, how

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<v Speaker 4>they're going to do it, whether it's going to be

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<v Speaker 4>they're an ETF wrapper, whether it's going to be you know,

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<v Speaker 4>buying the stock itself once at IPOs, and I just

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<v Speaker 4>think that the interest is massive.

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<v Speaker 6>The SpaceX IPO is interesting on a lot of levels.

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<v Speaker 4>I think first, it shows that there is this huge

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<v Speaker 4>focus on the future of AI and that will be

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<v Speaker 4>you know, kind of space space connectivity, AI space compute

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<v Speaker 4>different ways to have you know, connectivity outside of what

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<v Speaker 4>we have here on Earth essentially, so you know, lower latency,

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<v Speaker 4>lower energy use, things like this. It could be a

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<v Speaker 4>potential AI company, as you said in your intro there.

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<v Speaker 4>And I think the second thing is just you know,

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<v Speaker 4>how much excitement there is about some of the IPOs lately,

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<v Speaker 4>Like Quantinium is another exciting one. It's twelve billion, you know,

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<v Speaker 4>kind of is much smaller than SpaceX, but investors are

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<v Speaker 4>very much investor in the next generation of computing, and

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<v Speaker 4>I think, you know, these quantum companies, these space companies.

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<v Speaker 6>Are just what that brings.

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<v Speaker 7>Are there enough pieces of the pie for everyone at

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<v Speaker 7>this point or are you going to see this kind

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<v Speaker 7>of desperation to be first to market suck up a

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<v Speaker 7>lot of the oxygen.

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<v Speaker 6>I think, you know, I think both.

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<v Speaker 4>I think there'll be a lot of competition and a

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<v Speaker 4>lot of you know, who's getting first to market, But

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<v Speaker 4>I think the opportunities are also vast.

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<v Speaker 6>Right.

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<v Speaker 4>AI just started with this chat shipt moment, and you know,

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<v Speaker 4>a year or so ago, that's what AI was to everyone,

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<v Speaker 4>and you know, then it kind of broadened out to

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<v Speaker 4>chatbots and now it's it's a much different thing. Right

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<v Speaker 4>We're talking now about defense AI. We're talking about the

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<v Speaker 4>power and infrastructure of AI, the cooling, the photonics aspect

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<v Speaker 4>of it, you know, memory. I just think that the

0:12:48.679 --> 0:12:51.240
<v Speaker 4>moat of AI is so massive right now that investors

0:12:51.280 --> 0:12:53.400
<v Speaker 4>have so many different angles by which they can play

0:12:53.920 --> 0:12:58.000
<v Speaker 4>this trade and get exposure to it.

0:12:58.160 --> 0:12:58.559
<v Speaker 6>Sylvia.

0:12:58.679 --> 0:13:00.160
<v Speaker 8>But at the end of the day, this fine the

0:13:00.160 --> 0:13:02.839
<v Speaker 8>foam on the e zub rants around artificial intelligence we're

0:13:02.840 --> 0:13:07.120
<v Speaker 8>talking about a huge flood of stock supply coming to market.

0:13:07.640 --> 0:13:11.400
<v Speaker 8>What will be the broader repercussions for market levels, especially

0:13:11.400 --> 0:13:14.320
<v Speaker 8>when you take it from the passive investor side of

0:13:14.360 --> 0:13:17.040
<v Speaker 8>things and they take a look at these big atfs

0:13:17.120 --> 0:13:22.240
<v Speaker 8>and how some very few companies are dominating the broader market.

0:13:23.559 --> 0:13:23.760
<v Speaker 6>Right.

0:13:23.800 --> 0:13:26.240
<v Speaker 4>Well, you know, I do think that you'll have this

0:13:26.360 --> 0:13:29.640
<v Speaker 4>verification of stocks in the market if that happens, and

0:13:29.640 --> 0:13:31.800
<v Speaker 4>if you do get this congestion problem. But again, I

0:13:31.880 --> 0:13:34.040
<v Speaker 4>just think that some of the companies that are iploing

0:13:34.080 --> 0:13:36.280
<v Speaker 4>and coming to the market offers something a little bit

0:13:36.320 --> 0:13:39.520
<v Speaker 4>different than the others that were already familiar with. You know,

0:13:39.559 --> 0:13:41.360
<v Speaker 4>there are a lot of newer names in AI for

0:13:41.679 --> 0:13:44.240
<v Speaker 4>you know, I could I could name like a po

0:13:44.360 --> 0:13:46.640
<v Speaker 4>E l or Iron, which is to be a bit

0:13:46.720 --> 0:13:49.840
<v Speaker 4>mining company. They're involved in AI infrastructure. There's so many,

0:13:50.720 --> 0:13:52.840
<v Speaker 4>you know, kind of small cap companies that are actually

0:13:52.960 --> 0:13:56.200
<v Speaker 4>starting to generate revenues and have come to market and

0:13:56.240 --> 0:13:59.559
<v Speaker 4>gained investor attention and they're actually doing quite well.

0:13:59.600 --> 0:14:01.600
<v Speaker 6>So I do that the runway for some of these.

0:14:01.440 --> 0:14:06.160
<v Speaker 4>Stocks continues to be there potentially there anyway, as AI grows.

0:14:07.480 --> 0:14:09.880
<v Speaker 8>Do you have to be more concerned about diversifying in

0:14:09.880 --> 0:14:11.680
<v Speaker 8>this environment, and how would you do that?

0:14:12.679 --> 0:14:16.080
<v Speaker 4>Yeah, I mean, I think it's always smart to diversify, right.

0:14:16.200 --> 0:14:19.280
<v Speaker 4>We always say that, you know, you kind of want

0:14:19.280 --> 0:14:21.960
<v Speaker 4>to have different alternatives in your portfolio. And I think

0:14:21.960 --> 0:14:24.040
<v Speaker 4>that there are ways of doing that. So if investors

0:14:24.040 --> 0:14:27.600
<v Speaker 4>feel that they're starting to get very heavily allocated to

0:14:28.120 --> 0:14:30.840
<v Speaker 4>you know, specific AI companies for example, or just tech stocks,

0:14:30.840 --> 0:14:33.840
<v Speaker 4>they could look at things like XMG and you know,

0:14:33.920 --> 0:14:35.960
<v Speaker 4>kind of take out the exposure of the mag seven

0:14:35.960 --> 0:14:38.320
<v Speaker 4>and get the broader diversity of the S and P

0:14:38.440 --> 0:14:42.160
<v Speaker 4>five hundred. So there's certainly ways to diversify that. I think,

0:14:42.320 --> 0:14:44.080
<v Speaker 4>you know, investors are going to start looking at companies

0:14:44.080 --> 0:14:46.880
<v Speaker 4>that will actually benefit from AI, So you know this

0:14:46.880 --> 0:14:50.560
<v Speaker 4>this this type of concept, right, And I you know,

0:14:50.840 --> 0:14:53.280
<v Speaker 4>I do think that there are ways to diversify by

0:14:53.280 --> 0:14:56.080
<v Speaker 4>seeing where AI will play out in different and broader

0:14:56.120 --> 0:14:58.320
<v Speaker 4>sectors that are not necessarily technology based.

0:15:00.000 --> 0:15:02.560
<v Speaker 7>Can you point out this is not just a software

0:15:02.560 --> 0:15:05.200
<v Speaker 7>story for AI anymore, or even a ship story. It's

0:15:05.240 --> 0:15:08.200
<v Speaker 7>an energy supply story. Is that one of the biggest risks?

0:15:08.280 --> 0:15:08.640
<v Speaker 5>You think?

0:15:09.560 --> 0:15:10.000
<v Speaker 6>Yeah, I do.

0:15:10.080 --> 0:15:11.800
<v Speaker 4>I think that's I think that's a big bottleneck, and

0:15:11.840 --> 0:15:14.400
<v Speaker 4>I think it's why you're seeing some of these other companies,

0:15:15.320 --> 0:15:17.600
<v Speaker 4>you know, doing very well. A lot of the top

0:15:17.760 --> 0:15:21.360
<v Speaker 4>energy companies, for example, the photonics companies, the laser you know,

0:15:21.360 --> 0:15:22.800
<v Speaker 4>the Lumentums, Coherence, the.

0:15:24.520 --> 0:15:26.280
<v Speaker 6>Poets of the.

0:15:26.120 --> 0:15:28.400
<v Speaker 4>Universe are doing quite well because I think there's this

0:15:28.600 --> 0:15:31.840
<v Speaker 4>thought that you know, as we continue to consume energy

0:15:31.880 --> 0:15:33.760
<v Speaker 4>and we're trying to build out these big AI data

0:15:33.760 --> 0:15:37.160
<v Speaker 4>centers and workloads, you know, some of the smaller companies

0:15:37.160 --> 0:15:39.480
<v Speaker 4>that are doing it and moving data in different ways

0:15:39.520 --> 0:15:41.120
<v Speaker 4>will benefit from that.

0:15:41.120 --> 0:15:45.440
<v Speaker 2>That was Sylvia Jablonski, CIO at Defiance ETFs, speaking to

0:15:45.480 --> 0:15:49.160
<v Speaker 2>Bloomberg TV host Heidi Stroud Watson Sherry on bringing you

0:15:49.200 --> 0:15:55.400
<v Speaker 2>their conversation here on the Daybreak Asia Podcast. Thanks for

0:15:55.480 --> 0:16:00.200
<v Speaker 2>listening to today's episode of the Bloomberg Daybreak Asia Edition podcast.

0:16:00.400 --> 0:16:03.560
<v Speaker 2>Each weekday, we look at the story shaping markets, finance,

0:16:03.920 --> 0:16:07.000
<v Speaker 2>and geopolitics in the Asia Pacific. You can find us

0:16:07.000 --> 0:16:11.240
<v Speaker 2>on Apple, Spotify, the Bloomberg Podcast YouTube channel, or anywhere

0:16:11.240 --> 0:16:14.320
<v Speaker 2>else you listen. Join us again tomorrow for insight on

0:16:14.360 --> 0:16:18.520
<v Speaker 2>the market moves from Hong Kong to Singapore and Australia.

0:16:18.960 --> 0:16:21.440
<v Speaker 2>I'm Doug prisoner, and this is Bloomberg