1 00:00:02,480 --> 00:00:06,800 Speaker 1: Bloomberg Audio Studios, podcasts, radio news. 2 00:00:09,640 --> 00:00:12,840 Speaker 2: This is the Bloomberg Daybreak Asia podcast. I'm Doug Krisner. 3 00:00:12,920 --> 00:00:15,400 Speaker 2: You can join Brian Curtis and myself for the stories 4 00:00:15,440 --> 00:00:18,520 Speaker 2: making news and moving markets in the APAC region. You 5 00:00:18,600 --> 00:00:21,439 Speaker 2: can subscribe to the show anywhere you get your podcast 6 00:00:21,520 --> 00:00:24,919 Speaker 2: and always on Bloomberg Radio, the Bloomberg Terminal, and the 7 00:00:24,920 --> 00:00:26,080 Speaker 2: Bloomberg Business App. 8 00:00:26,760 --> 00:00:31,319 Speaker 3: Apple has rolled out its new artificial intelligence platform that 9 00:00:31,440 --> 00:00:36,639 Speaker 3: includes a partnership with chat GPT maker open Ai. The 10 00:00:36,680 --> 00:00:41,040 Speaker 3: market was a little bit sort of underwhelmed by what 11 00:00:41,080 --> 00:00:43,160 Speaker 3: they got today, and so we bring in Mark German, 12 00:00:43,240 --> 00:00:47,280 Speaker 3: now Bloomberg Chief correspondent on Global Technology, to perhaps explain 13 00:00:47,320 --> 00:00:49,640 Speaker 3: a little bit why the stock was down two percent. 14 00:00:50,320 --> 00:00:52,160 Speaker 3: I think a lot of people said, yeah, it was fine. 15 00:00:52,320 --> 00:00:55,200 Speaker 3: It just wasn't anything too new or too surprising. But 16 00:00:55,320 --> 00:00:57,000 Speaker 3: let me put this to you and you can push 17 00:00:57,040 --> 00:00:59,960 Speaker 3: back hard if you want that Apple is the perfect 18 00:01:00,120 --> 00:01:04,320 Speaker 3: company to consumerize AI and it will get it right. 19 00:01:06,120 --> 00:01:08,200 Speaker 4: I have to tell you, we have these conversations every 20 00:01:08,280 --> 00:01:11,280 Speaker 4: couple weeks or so, and it's not often that I'm 21 00:01:11,319 --> 00:01:13,200 Speaker 4: going to agree with you as much as I do. 22 00:01:13,280 --> 00:01:16,800 Speaker 4: I think you summed it up perfectly on the first point. 23 00:01:17,319 --> 00:01:20,080 Speaker 4: It was fine, right, Everything they rolled out was fine. 24 00:01:20,160 --> 00:01:23,319 Speaker 4: Everything they rolled out was expected. Apple did exactly what 25 00:01:23,360 --> 00:01:25,679 Speaker 4: they needed to do. They needed to show Wall Street, 26 00:01:26,040 --> 00:01:29,320 Speaker 4: consumers and the industry that they're here too. When it 27 00:01:29,319 --> 00:01:33,160 Speaker 4: comes to artificial intelligence embedded in its operating system. It 28 00:01:33,240 --> 00:01:36,520 Speaker 4: did that. It struck the deal with chat GPT to 29 00:01:36,560 --> 00:01:40,560 Speaker 4: integrate a chat GPT chatbot into Shory and other parts 30 00:01:40,640 --> 00:01:44,840 Speaker 4: of the new operating systems. But it didn't reveal anything new. 31 00:01:45,000 --> 00:01:47,880 Speaker 4: It didn't reveal anything that hasn't been done before. It 32 00:01:47,960 --> 00:01:50,520 Speaker 4: basically did it in a more of an Apple esque way, 33 00:01:50,920 --> 00:01:54,279 Speaker 4: more privacy friendly, and things that it actually believes users 34 00:01:54,320 --> 00:01:57,080 Speaker 4: will want to use on a day to day basis. 35 00:01:57,520 --> 00:01:59,920 Speaker 4: So that's what they did here. Now in terms of 36 00:02:00,080 --> 00:02:02,960 Speaker 4: consumerizing AI, I agree with you. Apple is the company 37 00:02:02,960 --> 00:02:05,760 Speaker 4: that can make AI friendly. It's so funny the slogan 38 00:02:05,800 --> 00:02:08,360 Speaker 4: they're using for Apple Intelligence, which by the way, a 39 00:02:08,360 --> 00:02:11,359 Speaker 4: funny name, is AI for the rest of us. It's 40 00:02:11,480 --> 00:02:14,160 Speaker 4: just like with computers back in the day, Max, we're 41 00:02:14,360 --> 00:02:16,200 Speaker 4: you know, computers for the rest of us when they 42 00:02:16,240 --> 00:02:18,520 Speaker 4: were trying to show how the MAC is different from 43 00:02:18,560 --> 00:02:21,800 Speaker 4: the PC. So this is integrated in different use cases 44 00:02:21,800 --> 00:02:23,720 Speaker 4: that you might want to use. You do a voice memo, 45 00:02:23,800 --> 00:02:27,000 Speaker 4: you'll get a transcription. You read an article on the web, 46 00:02:27,080 --> 00:02:29,960 Speaker 4: you'll get a summary. You'll want to create emojis on 47 00:02:29,960 --> 00:02:32,799 Speaker 4: your own using artificial intelligence, it can do that too. 48 00:02:33,120 --> 00:02:36,720 Speaker 4: So it's a suite of features that are all aiified, 49 00:02:37,240 --> 00:02:39,240 Speaker 4: that all happens in the background on its own in 50 00:02:39,280 --> 00:02:40,959 Speaker 4: a privacy and personalized way. 51 00:02:41,080 --> 00:02:43,120 Speaker 2: So what do we know about the cost of that 52 00:02:43,160 --> 00:02:46,240 Speaker 2: Apple is going to have to incur as a result 53 00:02:46,320 --> 00:02:49,240 Speaker 2: of the partnership with opeen ai, And then if the 54 00:02:49,280 --> 00:02:51,840 Speaker 2: company is effective in monetizing that, is it going to 55 00:02:51,880 --> 00:02:54,560 Speaker 2: cover the expense of moving into this area. 56 00:02:55,600 --> 00:02:57,600 Speaker 4: You know, it's so interesting they didn't get into the 57 00:02:57,600 --> 00:03:02,320 Speaker 4: financial terms. I would imagine that open ai is going 58 00:03:02,360 --> 00:03:06,320 Speaker 4: to revenue share with Apple on paid subscriptions that they 59 00:03:06,360 --> 00:03:10,440 Speaker 4: offer through iOS. So CHATGBT will be free, no account 60 00:03:10,480 --> 00:03:12,800 Speaker 4: required on iOS, but we will also be able to 61 00:03:12,840 --> 00:03:16,040 Speaker 4: do is log into your paid open ai account and 62 00:03:16,080 --> 00:03:18,280 Speaker 4: that costs about twenty dollars per month depending on the 63 00:03:18,320 --> 00:03:20,600 Speaker 4: type of open ai subscription you have. So I would 64 00:03:20,639 --> 00:03:23,240 Speaker 4: imagine if someone signs up for that subscription on iOS 65 00:03:23,280 --> 00:03:26,120 Speaker 4: and uses it through iOS eighteen or the later versions, 66 00:03:26,440 --> 00:03:29,680 Speaker 4: Apple will get a slice of that. On the other hand, 67 00:03:29,720 --> 00:03:32,359 Speaker 4: there's a money making opportunity for open Ai here as well, 68 00:03:32,400 --> 00:03:36,120 Speaker 4: in terms of monetization on advertising and subscriptions and what 69 00:03:36,160 --> 00:03:38,240 Speaker 4: else is interesting, and this didn't come up in the keynote, 70 00:03:38,360 --> 00:03:42,360 Speaker 4: is that chat GPTs on Microsoft Azure. So Microsoft is 71 00:03:42,400 --> 00:03:46,160 Speaker 4: sort of a third party in this whole situation as well. 72 00:03:46,360 --> 00:03:49,440 Speaker 3: So never mind the stock price and the implications for it. 73 00:03:49,480 --> 00:03:52,480 Speaker 3: But let me just ask you this point blank. Will 74 00:03:52,520 --> 00:03:55,840 Speaker 3: people buy new iPhones because they want access to this? 75 00:03:56,840 --> 00:03:59,760 Speaker 3: Not immediately, but when the next one comes out, when 76 00:03:59,760 --> 00:04:02,880 Speaker 3: the the sixteen or whatever it is next comes out. 77 00:04:03,840 --> 00:04:06,800 Speaker 4: That's a good question. I did not see enough here. 78 00:04:07,200 --> 00:04:08,560 Speaker 4: Or let me take a step back. Do you remember 79 00:04:08,560 --> 00:04:11,120 Speaker 4: when Apple launched Siri in twenty eleven. I wasn't working 80 00:04:11,160 --> 00:04:14,400 Speaker 4: with you guys back then, but certainly I was around. 81 00:04:14,400 --> 00:04:17,000 Speaker 4: With this launch, the iPhone fours had serious sort of 82 00:04:17,000 --> 00:04:19,920 Speaker 4: its premier new feature. Now Siri was a software based 83 00:04:19,960 --> 00:04:23,640 Speaker 4: feature that required the new hardware. Now the iPhone fifteen, 84 00:04:23,680 --> 00:04:25,760 Speaker 4: Pro and Pro Macs will be the only iPhones that 85 00:04:25,800 --> 00:04:28,880 Speaker 4: can support these new Apple Intelligence features. And so what 86 00:04:28,920 --> 00:04:31,760 Speaker 4: you're going to see is sort of a test. Are 87 00:04:31,800 --> 00:04:33,719 Speaker 4: people willing to buy the new hard or because of 88 00:04:33,760 --> 00:04:37,719 Speaker 4: these new Apple Intelligence software and services features. My guess, 89 00:04:37,920 --> 00:04:41,120 Speaker 4: unlike with Siri is now, when Siri was launched in 90 00:04:41,160 --> 00:04:44,200 Speaker 4: twenty eleven, that was hugely impressive. Nobody had ever seen 91 00:04:44,200 --> 00:04:47,400 Speaker 4: anything like it before. I don't believe these Apple Intelligence 92 00:04:47,400 --> 00:04:50,080 Speaker 4: features are unique enough to drive sales. But they are 93 00:04:50,200 --> 00:04:53,040 Speaker 4: enough is to prevent people from leaving the Apple ecosystem, 94 00:04:53,320 --> 00:04:55,680 Speaker 4: and they're enough to keep people in the Apple ecosystem 95 00:04:55,839 --> 00:04:58,719 Speaker 4: and add new people. But I don't think it's necessarily 96 00:04:58,760 --> 00:05:01,640 Speaker 4: going to spur upgrades. If you have an iPhone fourteen pro, 97 00:05:02,080 --> 00:05:04,040 Speaker 4: I'm not sure you're going to buy an iPhone sixteen 98 00:05:04,040 --> 00:05:06,080 Speaker 4: pro just because of Apple Intelligence. 99 00:05:06,160 --> 00:05:08,000 Speaker 2: So I just want to make sure that I understand 100 00:05:08,040 --> 00:05:10,400 Speaker 2: what's going on here. So there is the AI that's 101 00:05:10,440 --> 00:05:14,360 Speaker 2: happening locally on the device. Do I understand it correctly? 102 00:05:14,400 --> 00:05:18,960 Speaker 2: When you referred to the Microsoft component, the Azure cloud 103 00:05:19,000 --> 00:05:22,560 Speaker 2: computing component, that the other part of AI, the calculation 104 00:05:22,680 --> 00:05:25,360 Speaker 2: at the data center, is going to be farmed out 105 00:05:25,400 --> 00:05:26,120 Speaker 2: to Microsoft. 106 00:05:27,680 --> 00:05:31,160 Speaker 4: Uh, you're partially right. So there's three there's three components here. 107 00:05:31,240 --> 00:05:34,640 Speaker 4: There's the on device artificial intelligence that's processed on the 108 00:05:34,680 --> 00:05:38,360 Speaker 4: iPhone itself. There's the Apple Cloud artificial Intelligence. Those are 109 00:05:38,360 --> 00:05:41,680 Speaker 4: for the Apple features. Those are powered on Apple's cloud 110 00:05:42,200 --> 00:05:46,120 Speaker 4: using Apple chips in Apple Data centers specific to these features. 111 00:05:46,680 --> 00:05:51,080 Speaker 4: And then third there's Chat GPT, which is of course 112 00:05:51,080 --> 00:05:55,480 Speaker 4: a cloud based service from open Ai. Open Ai uses 113 00:05:55,600 --> 00:05:58,920 Speaker 4: Microsoft Data Centers and Microsoft Azure to power the cloud 114 00:05:58,960 --> 00:06:03,080 Speaker 4: component of Chat gp So it's a trio on device, 115 00:06:03,279 --> 00:06:05,919 Speaker 4: Apple Cloud, Apple Cloud. 116 00:06:05,640 --> 00:06:09,919 Speaker 3: Microsoft excellent. Mark. Thank you very much, Mark German, Bloomberg 117 00:06:09,960 --> 00:06:13,680 Speaker 3: Chief correspondent on Global Technology, with me Brian Curtis and 118 00:06:13,720 --> 00:06:16,800 Speaker 3: Doug Krisner taking a closer look here at what Apple 119 00:06:16,920 --> 00:06:29,320 Speaker 3: rolled out today at the WWDC in Coopertino, California. Joining 120 00:06:29,400 --> 00:06:32,480 Speaker 3: us in our studios is Helen je, Managing director and 121 00:06:32,560 --> 00:06:36,000 Speaker 3: chief investment Officer at in F Trinity. Helen, thanks very 122 00:06:36,080 --> 00:06:36,840 Speaker 3: much for coming in. 123 00:06:36,839 --> 00:06:37,359 Speaker 1: Good morning. 124 00:06:37,920 --> 00:06:41,400 Speaker 3: Some strategists are out there saying that the FED dot 125 00:06:41,400 --> 00:06:44,760 Speaker 3: plots in the meeting this week could royal markets. There's 126 00:06:45,000 --> 00:06:48,400 Speaker 3: another camp that thinks that that's kind of hokey, that 127 00:06:48,839 --> 00:06:51,960 Speaker 3: one or two cuts is not really a big deal 128 00:06:52,040 --> 00:06:54,400 Speaker 3: for the FED, but it's interesting it makes a market. 129 00:06:54,680 --> 00:06:56,760 Speaker 3: Are you expecting volatility this week? 130 00:06:57,800 --> 00:06:59,920 Speaker 5: I think it's not going to be a big deal. 131 00:07:00,160 --> 00:07:03,040 Speaker 5: Everybody knows that there's no rate cuts coming in June. 132 00:07:03,560 --> 00:07:05,560 Speaker 5: People are expecting that Powell is going to talk a 133 00:07:05,600 --> 00:07:08,440 Speaker 5: little bit more on the hawkish side and say that 134 00:07:08,480 --> 00:07:11,560 Speaker 5: everything's data dependent. But you know, in effect, basically, the 135 00:07:11,600 --> 00:07:14,760 Speaker 5: market's pricing in one and a half cuts this year anyway, 136 00:07:14,880 --> 00:07:17,080 Speaker 5: So if the dot plot moves to that, then we're 137 00:07:17,080 --> 00:07:20,560 Speaker 5: basically marking to market to some extent. The market's really 138 00:07:20,600 --> 00:07:23,080 Speaker 5: ignored the dot plot already. I mean, it has been 139 00:07:23,120 --> 00:07:25,360 Speaker 5: at that like two to three cuts the entire year, 140 00:07:25,400 --> 00:07:27,880 Speaker 5: but initially the market was expecting six cuts, and then 141 00:07:27,880 --> 00:07:29,559 Speaker 5: now the market's expecting one and a half. 142 00:07:29,600 --> 00:07:32,680 Speaker 1: So I don't think the dot plot is what's driving things. 143 00:07:32,680 --> 00:07:34,760 Speaker 1: It would be more like a marked to market than 144 00:07:34,800 --> 00:07:35,400 Speaker 1: anything else. 145 00:07:35,560 --> 00:07:37,720 Speaker 2: So if the FED is not the big big risk, 146 00:07:37,800 --> 00:07:38,760 Speaker 2: what is these days? 147 00:07:39,960 --> 00:07:41,800 Speaker 1: I think the big risk is a couple of things. 148 00:07:41,880 --> 00:07:46,240 Speaker 5: Right. One is, obviously geopolitical noises are still abound, and 149 00:07:46,680 --> 00:07:48,640 Speaker 5: previously it was a lot of US China and US 150 00:07:48,760 --> 00:07:52,560 Speaker 5: geo politics. Now we have some unexpected changes on the 151 00:07:52,600 --> 00:07:56,240 Speaker 5: political side in Europe et cetera, and obviously the other 152 00:07:56,400 --> 00:07:58,560 Speaker 5: conflicts in the Middle East et cetera, that we still 153 00:07:58,560 --> 00:07:59,080 Speaker 5: have to keep a. 154 00:07:59,000 --> 00:07:59,600 Speaker 1: Close eye on. 155 00:08:00,200 --> 00:08:02,520 Speaker 5: I think the other thing is that from a market's perspective, 156 00:08:02,520 --> 00:08:06,160 Speaker 5: I mean, people are expecting a Goldilock scenario pretty much, 157 00:08:06,240 --> 00:08:09,680 Speaker 5: especially in the US, and so the index has performed 158 00:08:09,720 --> 00:08:11,760 Speaker 5: relatively well this year. That's been led by a lot 159 00:08:11,800 --> 00:08:14,280 Speaker 5: of AI and related names. People think that the US 160 00:08:14,360 --> 00:08:16,240 Speaker 5: economy is not going to have any kind of landing. 161 00:08:16,520 --> 00:08:19,520 Speaker 5: So I think weaker US data, we've gotten to the 162 00:08:19,560 --> 00:08:22,040 Speaker 5: stage of bad as bad no longer bad is good 163 00:08:22,120 --> 00:08:25,680 Speaker 5: in terms of, you know, bringing on dubbish policy or 164 00:08:25,720 --> 00:08:28,320 Speaker 5: if there's any kind of miss in AI expectations, and 165 00:08:28,360 --> 00:08:32,200 Speaker 5: some of those large names for company specific reasons correct 166 00:08:32,240 --> 00:08:35,280 Speaker 5: a significant amount that could also bring some concern into 167 00:08:35,280 --> 00:08:36,520 Speaker 5: the market and bring more of all. 168 00:08:36,880 --> 00:08:39,840 Speaker 3: Yeah, so the earnings really have been very important, but 169 00:08:40,160 --> 00:08:41,480 Speaker 3: we're in the quiet period. 170 00:08:41,520 --> 00:08:41,720 Speaker 5: Now. 171 00:08:41,960 --> 00:08:44,560 Speaker 3: We'll have a couple more, but then a long period 172 00:08:44,559 --> 00:08:48,600 Speaker 3: of waiting. I think the macro backdrop is kind of interesting, 173 00:08:48,720 --> 00:08:52,240 Speaker 3: almost extraordinary, in that you've got these very distinct camps. 174 00:08:53,080 --> 00:08:56,120 Speaker 3: A group that thinks inflation is not tamed and that 175 00:08:56,360 --> 00:08:59,880 Speaker 3: rates will be higher. Another camp that thinks the FED 176 00:08:59,920 --> 00:09:02,960 Speaker 3: is too slow to cut in what they see is 177 00:09:03,440 --> 00:09:06,439 Speaker 3: a weakening economy, and yet we're all looking at the 178 00:09:06,440 --> 00:09:09,280 Speaker 3: same data and anyway. Then there's another camp that thinks that, 179 00:09:09,400 --> 00:09:12,400 Speaker 3: you know, as you said, goldilocks, this kind of relaxed 180 00:09:12,720 --> 00:09:15,760 Speaker 3: kids are okay, you know, we can just continue as 181 00:09:15,760 --> 00:09:16,040 Speaker 3: we are. 182 00:09:16,880 --> 00:09:19,520 Speaker 1: People kind of think one and three in combination. 183 00:09:19,640 --> 00:09:22,920 Speaker 5: I think people think that inflation is still not tame, 184 00:09:23,040 --> 00:09:26,520 Speaker 5: but that everything's still great, and therefore that's still goldilocks. 185 00:09:26,600 --> 00:09:26,760 Speaker 4: Right. 186 00:09:27,200 --> 00:09:28,880 Speaker 3: Interest rates where they are, yeah, And. 187 00:09:28,880 --> 00:09:30,839 Speaker 5: I think for the second scenario that you talked about 188 00:09:30,960 --> 00:09:32,960 Speaker 5: is less about whether the FED is going to rush 189 00:09:32,960 --> 00:09:34,880 Speaker 5: to cut or not, because everybody knows that, you know, 190 00:09:34,920 --> 00:09:37,120 Speaker 5: the FED can always cut very abruptly if they wanted 191 00:09:37,120 --> 00:09:39,000 Speaker 5: to or needed to. So people are more watching the 192 00:09:39,080 --> 00:09:42,160 Speaker 5: data itself to see if there's any meaningful signs of weakness. 193 00:09:42,400 --> 00:09:44,280 Speaker 5: We did see some over the last couple of months, 194 00:09:44,280 --> 00:09:47,559 Speaker 5: definitely more mixed data versus firmly strong data. But I 195 00:09:47,559 --> 00:09:50,240 Speaker 5: think the market still is pricing in a no landing 196 00:09:50,280 --> 00:09:53,400 Speaker 5: scenario and just assumes that if there is any kind 197 00:09:53,440 --> 00:09:56,040 Speaker 5: of meaningful weakness, they'll just rush to cut immediately. So 198 00:09:56,280 --> 00:09:59,000 Speaker 5: they're not too worried about the policy response, but rather 199 00:09:59,040 --> 00:10:02,000 Speaker 5: about whether there is indeed meaningfully weak data. 200 00:10:02,559 --> 00:10:05,920 Speaker 2: At what point does the bond market become concerned about 201 00:10:05,920 --> 00:10:09,600 Speaker 2: the fiscal situation here in the US? Could that be 202 00:10:10,760 --> 00:10:13,720 Speaker 2: problematic if yields in spite of the fact that inflation 203 00:10:13,880 --> 00:10:16,240 Speaker 2: is on its way down, If yields spike is a 204 00:10:16,280 --> 00:10:19,040 Speaker 2: result of the bond market becoming a little bit more 205 00:10:19,120 --> 00:10:21,479 Speaker 2: focused on fiscal problems in the United. 206 00:10:21,200 --> 00:10:26,360 Speaker 5: States, Well, it's been on and off concern, right, and 207 00:10:26,400 --> 00:10:29,440 Speaker 5: the fiscal problems are nothing new. We've certainly had numerous 208 00:10:29,440 --> 00:10:33,480 Speaker 5: fiscal cliffs that didn't seem to roil the bond market 209 00:10:34,160 --> 00:10:36,600 Speaker 5: as much as it should. So that is a long 210 00:10:36,679 --> 00:10:38,800 Speaker 5: term concern, but it's not something that's going to near 211 00:10:39,320 --> 00:10:42,720 Speaker 5: term blow up. And in fact, the expectation that Trump 212 00:10:42,760 --> 00:10:46,440 Speaker 5: is going to win certainly means that the fiscal you know, 213 00:10:46,559 --> 00:10:49,560 Speaker 5: discipline may not come anytime soon, and the market doesn't 214 00:10:49,559 --> 00:10:51,760 Speaker 5: seem to be too concerned about that. So I think 215 00:10:51,760 --> 00:10:55,400 Speaker 5: in the near term it's still less concerned about those 216 00:10:55,440 --> 00:10:59,360 Speaker 5: longer term issues like you know, loss of dollars supremacy 217 00:10:59,440 --> 00:11:03,080 Speaker 5: or trust in the dollar because of fiscal instability over 218 00:11:03,120 --> 00:11:05,800 Speaker 5: the medium to longer term, that that's not going to 219 00:11:05,800 --> 00:11:09,080 Speaker 5: be something to drive things in the immediate future. 220 00:11:09,280 --> 00:11:12,720 Speaker 3: We had a couple of interesting corporate stories today, one 221 00:11:12,960 --> 00:11:16,000 Speaker 3: ten for one split at Nvidia and the stock traded 222 00:11:16,400 --> 00:11:20,160 Speaker 3: reasonably well today, and then the Apple event. It seems 223 00:11:20,200 --> 00:11:23,280 Speaker 3: like in listening to some of the comments that investors 224 00:11:23,280 --> 00:11:26,040 Speaker 3: were a bit underwhelmed, not bad, but just you know, 225 00:11:26,080 --> 00:11:27,160 Speaker 3: not all that exciting. 226 00:11:28,640 --> 00:11:29,000 Speaker 1: Well. 227 00:11:29,120 --> 00:11:32,800 Speaker 5: I think the expectation for AI and the near term 228 00:11:32,840 --> 00:11:34,760 Speaker 5: is quite high. You know. Bill Gates has this famous 229 00:11:34,800 --> 00:11:38,320 Speaker 5: quote about new trend saying that things are usually overestimated 230 00:11:38,360 --> 00:11:40,680 Speaker 5: in a one to two year perspective and underestimated on 231 00:11:40,720 --> 00:11:44,600 Speaker 5: a ten year perspective. So expectations of AI AI have 232 00:11:44,640 --> 00:11:47,240 Speaker 5: really picked up substantially, but we don't actually know whether 233 00:11:47,400 --> 00:11:49,640 Speaker 5: the applications are going to come through and whether they 234 00:11:49,679 --> 00:11:52,760 Speaker 5: pick up, whether for software or for hardware. The take 235 00:11:52,800 --> 00:11:54,960 Speaker 5: up is going to be as rapid as what the 236 00:11:55,000 --> 00:11:57,400 Speaker 5: market is pricing in so I think that does leave 237 00:11:57,440 --> 00:12:02,840 Speaker 5: some room for potential negatives prizes, and some room for possible. 238 00:12:02,440 --> 00:12:05,320 Speaker 1: Profit taking for certain parts of the supply chain. 239 00:12:06,040 --> 00:12:08,719 Speaker 5: You know, things like you know, what Nvidia makes has 240 00:12:08,840 --> 00:12:11,560 Speaker 5: very high technology barriers, but a lot of other stuff 241 00:12:11,600 --> 00:12:16,040 Speaker 5: like downstream and PCs and ODM, oem et cetera. Those 242 00:12:16,080 --> 00:12:19,520 Speaker 5: don't have a lot of very high technology barriers. So 243 00:12:19,559 --> 00:12:21,840 Speaker 5: even if the take up for the market overall is great, 244 00:12:21,880 --> 00:12:24,960 Speaker 5: there could still be more competition and more price erosion 245 00:12:25,040 --> 00:12:27,560 Speaker 5: versus what people are expecting. So I think there's more 246 00:12:27,640 --> 00:12:30,400 Speaker 5: room to disappoint, and that's something that we have to 247 00:12:30,440 --> 00:12:32,439 Speaker 5: actually keep a close eye on because it is a 248 00:12:33,440 --> 00:12:36,360 Speaker 5: kind of a signal for the entire market that the 249 00:12:36,360 --> 00:12:39,400 Speaker 5: market confidence and consumer confidence is partially built on. 250 00:12:39,600 --> 00:12:42,720 Speaker 2: What might the catalyst be for that type of disappointment. 251 00:12:42,800 --> 00:12:45,480 Speaker 2: Would it be in Vidia saying that revenue is beginning 252 00:12:45,520 --> 00:12:47,480 Speaker 2: to slow a bit, or might it be something else. 253 00:12:49,040 --> 00:12:51,200 Speaker 5: It's not necessarily going to be from the Nvidia front. 254 00:12:51,200 --> 00:12:53,000 Speaker 5: I think people are going to be looking at the 255 00:12:53,000 --> 00:12:55,760 Speaker 5: downstream as well. You know, if you're shipping a lot 256 00:12:55,800 --> 00:12:59,720 Speaker 5: of stuff throughout the supply chain, is all the build 257 00:12:59,720 --> 00:13:00,840 Speaker 5: out for so. 258 00:13:00,760 --> 00:13:02,800 Speaker 2: The ROI just doesnt manifest. 259 00:13:03,320 --> 00:13:07,400 Speaker 5: Yeah, is the actual implementation and installation happening, and more importantly, 260 00:13:07,480 --> 00:13:11,160 Speaker 5: is the downstream software and application take up happening because 261 00:13:11,200 --> 00:13:14,480 Speaker 5: that's the end driver of this whole thing, right, whether 262 00:13:14,600 --> 00:13:17,120 Speaker 5: people are using it day to day and whether they 263 00:13:17,160 --> 00:13:18,440 Speaker 5: can derive revenue from. 264 00:13:18,320 --> 00:13:22,120 Speaker 3: It just quickly on China. Helen sneak this one in. 265 00:13:22,320 --> 00:13:25,480 Speaker 3: We did have some domestic tourism spending numbers out from 266 00:13:25,800 --> 00:13:29,640 Speaker 3: CCTV up pretty nicely, more than eight percent or so. 267 00:13:30,960 --> 00:13:33,520 Speaker 3: Is the consumer alive and well or stunted? 268 00:13:34,320 --> 00:13:38,240 Speaker 5: The consumer is not doing as great as it has 269 00:13:38,320 --> 00:13:40,800 Speaker 5: done in the past, But I think one is that 270 00:13:40,840 --> 00:13:42,840 Speaker 5: it's coming off a low base. 271 00:13:44,679 --> 00:13:45,640 Speaker 1: Of expectations. 272 00:13:45,920 --> 00:13:47,680 Speaker 5: And two, I do think that there's going to be 273 00:13:47,760 --> 00:13:51,680 Speaker 5: more focus on consumption in the services and tourism front. 274 00:13:51,720 --> 00:13:53,520 Speaker 5: It's very similar to what we saw in the US 275 00:13:53,559 --> 00:13:55,280 Speaker 5: for a couple of years, right, all that pent up 276 00:13:55,320 --> 00:13:56,960 Speaker 5: demand and less on goods. 277 00:13:57,160 --> 00:14:00,120 Speaker 3: Yeah, all right, well that's one to watch, Helen. Thanks 278 00:14:00,200 --> 00:14:02,520 Speaker 3: very much for coming into our studios. Helen Ju Managing 279 00:14:02,520 --> 00:14:13,280 Speaker 3: director CIO at NF Trinity. Joining us now is Mary 280 00:14:13,320 --> 00:14:17,240 Speaker 3: Nicola Bloomberg, m Live strategist with us in our studios 281 00:14:17,760 --> 00:14:20,920 Speaker 3: in Singapore. So I know you've been a little cautious 282 00:14:21,360 --> 00:14:23,200 Speaker 3: of late, Mary, So let me give you a question 283 00:14:23,280 --> 00:14:28,320 Speaker 3: that's probably red meat to you. Are you concerned about 284 00:14:28,400 --> 00:14:32,240 Speaker 3: complacency in markets? Is risk asleep at the wheel? 285 00:14:33,440 --> 00:14:35,600 Speaker 6: Yeah, there is a bit of that, especially when you 286 00:14:35,840 --> 00:14:40,280 Speaker 6: have the FED coming up and CPI coming so there 287 00:14:40,360 --> 00:14:42,920 Speaker 6: is that risk of the FED coming out and saying 288 00:14:42,960 --> 00:14:46,440 Speaker 6: that we're moving to likely to be two cuts rather 289 00:14:46,480 --> 00:14:49,200 Speaker 6: than one cut. It wouldn't move so aggressively in one 290 00:14:49,240 --> 00:14:52,120 Speaker 6: direction just within one meeting. But even if it moves 291 00:14:52,160 --> 00:14:54,480 Speaker 6: to two cuts, there's still a likelihood that it could 292 00:14:54,520 --> 00:14:57,360 Speaker 6: shift yet again if the data continues to move in 293 00:14:57,400 --> 00:15:00,440 Speaker 6: that direction, and of course you have CPI data, if 294 00:15:00,440 --> 00:15:04,720 Speaker 6: it shows its resilience, especially after average hourly earnings, there 295 00:15:04,800 --> 00:15:09,160 Speaker 6: is still that risk for assets. But meanwhile it looks 296 00:15:09,200 --> 00:15:11,040 Speaker 6: like equities continue to ignore it. 297 00:15:11,520 --> 00:15:13,880 Speaker 2: So here we are talking about two rate cuts between 298 00:15:13,880 --> 00:15:15,280 Speaker 2: now and the end of the year from the Fed, 299 00:15:15,760 --> 00:15:19,800 Speaker 2: perhaps third quarter, definitely in the third quarter. Where are 300 00:15:19,840 --> 00:15:22,880 Speaker 2: you with the dollar's strength? I mean, does that surprise 301 00:15:22,920 --> 00:15:24,520 Speaker 2: you at all? That the dollar has been holding up 302 00:15:24,520 --> 00:15:25,720 Speaker 2: as well as it has been. 303 00:15:27,000 --> 00:15:29,720 Speaker 6: It's likely that the dollar strength is going to persist, 304 00:15:29,880 --> 00:15:32,920 Speaker 6: And it is really about the fact that the Fed, 305 00:15:33,040 --> 00:15:36,320 Speaker 6: of all the central banks, is maintaining that higher for longer. 306 00:15:36,360 --> 00:15:40,040 Speaker 6: Mantra other central banks, whether it's the ECB, Bank of Canada, 307 00:15:40,320 --> 00:15:43,600 Speaker 6: they've started cutting. Yes, the ECB hasn't told us what's 308 00:15:43,600 --> 00:15:46,440 Speaker 6: going to happen thereafter, But the fact is that they're 309 00:15:46,480 --> 00:15:49,760 Speaker 6: moving in that direction, while the FED is standing and 310 00:15:49,920 --> 00:15:52,320 Speaker 6: is being a lot more resilient and looking at where 311 00:15:52,360 --> 00:15:55,280 Speaker 6: inflation is headed, and that's what's going to keep the 312 00:15:55,360 --> 00:15:57,640 Speaker 6: dollar pretty resilient going forward. 313 00:15:58,800 --> 00:16:02,320 Speaker 3: So, Mary, there's several camps out there, and I'd like 314 00:16:02,360 --> 00:16:04,240 Speaker 3: to get your view on which one do you believe 315 00:16:04,320 --> 00:16:07,640 Speaker 3: is the most accurate assessment of what's happening. Because one 316 00:16:07,720 --> 00:16:10,920 Speaker 3: camp thinks that inflation is just not tamed and it's 317 00:16:10,960 --> 00:16:13,720 Speaker 3: going to be a feature for a long period of time. 318 00:16:14,080 --> 00:16:17,160 Speaker 3: Another camp thinks that just the opposite is really happening, 319 00:16:17,160 --> 00:16:20,320 Speaker 3: that the economy is weakening so dramatically that the FED 320 00:16:20,440 --> 00:16:23,520 Speaker 3: is behind the curve and too slow in addressing it 321 00:16:23,560 --> 00:16:26,680 Speaker 3: by cutting interest rates. And then there's the soft landing camp, 322 00:16:26,720 --> 00:16:30,680 Speaker 3: that sort of complacent perhaps complacent camp, where you know, 323 00:16:30,720 --> 00:16:33,280 Speaker 3: we sort of like the environment here and we're slowly 324 00:16:33,360 --> 00:16:34,640 Speaker 3: edging into the stock market. 325 00:16:35,720 --> 00:16:38,360 Speaker 6: I think more on the side of the fact that 326 00:16:38,400 --> 00:16:41,640 Speaker 6: inflation is going to remain sticky and there is no 327 00:16:41,760 --> 00:16:44,000 Speaker 6: signs that the inflation is coming off. If you look 328 00:16:44,040 --> 00:16:47,160 Speaker 6: to average hourly earnings, let's say that is the projection 329 00:16:47,280 --> 00:16:51,960 Speaker 6: of how prices evolve, that's not showing any signs of 330 00:16:52,000 --> 00:16:56,200 Speaker 6: really coming off, and that's holding up fairly well, and 331 00:16:56,240 --> 00:16:59,280 Speaker 6: if that continues, it's hard to see how the inflation 332 00:16:59,360 --> 00:17:02,480 Speaker 6: trajectory hums off. But then there's also a part of 333 00:17:02,720 --> 00:17:06,240 Speaker 6: inflation where you wonder where is the chicken. It's like 334 00:17:06,240 --> 00:17:08,960 Speaker 6: a chicken and egg problem where there is the resilience 335 00:17:09,040 --> 00:17:12,479 Speaker 6: of rents, and the resilience of rents really does have 336 00:17:12,520 --> 00:17:15,000 Speaker 6: to do with higher interest rates. So how do you 337 00:17:15,359 --> 00:17:17,720 Speaker 6: buy a house when rates are so high? So you'd 338 00:17:17,840 --> 00:17:20,840 Speaker 6: rather instead of taking out a really high mortgage, you 339 00:17:20,880 --> 00:17:23,399 Speaker 6: would prefer to rent. So it doesn't it's hard to 340 00:17:23,440 --> 00:17:26,320 Speaker 6: assess which one would. It would have FED rate cut 341 00:17:26,400 --> 00:17:31,120 Speaker 6: actually ease the impact of rents on inflation. 342 00:17:31,320 --> 00:17:34,080 Speaker 2: So if you're right, if it's higher for longer, maybe 343 00:17:34,119 --> 00:17:36,320 Speaker 2: there's a case to be made for a little bit 344 00:17:36,320 --> 00:17:39,280 Speaker 2: of corrective behavior in the equity market. I think it 345 00:17:39,359 --> 00:17:42,800 Speaker 2: was interesting today you have two key risk events on 346 00:17:42,840 --> 00:17:46,679 Speaker 2: the horizon, the CPI print on Wednesday morning, and then 347 00:17:46,760 --> 00:17:49,600 Speaker 2: later that same day the Fed decision. I mean, if 348 00:17:49,760 --> 00:17:52,240 Speaker 2: CPI comes in on the hot side and the Feds 349 00:17:52,320 --> 00:17:54,760 Speaker 2: dot plot maybe is a little more hawkish than the 350 00:17:54,800 --> 00:17:59,240 Speaker 2: market is prepared for, could that destabilize things in some way. 351 00:18:00,480 --> 00:18:00,840 Speaker 6: I think. 352 00:18:00,920 --> 00:18:01,160 Speaker 2: So. 353 00:18:01,240 --> 00:18:03,720 Speaker 6: I think the fact that if you see inflation coming 354 00:18:03,760 --> 00:18:06,560 Speaker 6: on the hot side, and even if the Fed comes 355 00:18:06,600 --> 00:18:09,280 Speaker 6: out as two rate cuts and they say, you know, 356 00:18:09,320 --> 00:18:12,640 Speaker 6: we have to still see things and how prices evolve, 357 00:18:13,080 --> 00:18:16,040 Speaker 6: and we're not seeing as much progression, although we did 358 00:18:16,160 --> 00:18:19,000 Speaker 6: have a really good month last month, but you will 359 00:18:19,000 --> 00:18:21,960 Speaker 6: need to see at least three consecutive months of the 360 00:18:22,040 --> 00:18:25,440 Speaker 6: deceleration and inflation to really convince the Fed that it's 361 00:18:25,480 --> 00:18:28,359 Speaker 6: time to take action. And we're still not there yet. 362 00:18:28,720 --> 00:18:32,440 Speaker 6: So there's a lot of volatility that can come through. 363 00:18:32,520 --> 00:18:35,720 Speaker 6: That was probably the main theme for us within Markets Live, 364 00:18:35,920 --> 00:18:39,080 Speaker 6: is that there's going to be volatility that persists this week, 365 00:18:39,240 --> 00:18:42,320 Speaker 6: especially with things like you know, the mounting risks not 366 00:18:42,480 --> 00:18:45,200 Speaker 6: from CPI, from the Fed, and of course from what's 367 00:18:45,200 --> 00:18:46,560 Speaker 6: happening in Europe as well. 368 00:18:47,600 --> 00:18:50,399 Speaker 3: I was listening to Mark x Andy on Bloomberg Surveillance 369 00:18:50,640 --> 00:18:53,119 Speaker 3: last night before going to bed, and you know, he 370 00:18:53,160 --> 00:18:56,720 Speaker 3: talks about harmonized CPI, which is actually a thing, and 371 00:18:56,760 --> 00:19:00,960 Speaker 3: they strip out ohe are owner's equivalent rents and you 372 00:19:01,080 --> 00:19:04,280 Speaker 3: touched on it a few moments ago. Most other jurisdictions 373 00:19:04,320 --> 00:19:08,000 Speaker 3: eure up. For instance, they don't use OEI, and if 374 00:19:08,000 --> 00:19:11,600 Speaker 3: you do strip it out, then apparently CPI is around 375 00:19:11,720 --> 00:19:13,760 Speaker 3: two percent. It's right around the target, and it's been 376 00:19:13,800 --> 00:19:17,119 Speaker 3: there for a while. I know that that's an argument 377 00:19:17,200 --> 00:19:21,159 Speaker 3: that the doves make and some people kind of slough 378 00:19:21,160 --> 00:19:23,040 Speaker 3: it off a little bit. But does he have a point. 379 00:19:23,960 --> 00:19:27,359 Speaker 6: Well, it's interesting because it's however you slice and dice 380 00:19:27,440 --> 00:19:30,920 Speaker 6: the data, you can make the data come to your narrative, right. 381 00:19:31,000 --> 00:19:33,919 Speaker 6: So I think it's important to look at what is 382 00:19:33,960 --> 00:19:36,480 Speaker 6: the FED looking at, and the FED is looking at PCE, 383 00:19:36,880 --> 00:19:39,240 Speaker 6: and that's what we should be focused on. And so 384 00:19:39,480 --> 00:19:43,680 Speaker 6: if the PCE is not giving us that that narrative, 385 00:19:44,040 --> 00:19:47,320 Speaker 6: it's hard to look at something else and try and say, 386 00:19:47,520 --> 00:19:49,679 Speaker 6: oh yeah, but if we strip this out then it 387 00:19:49,800 --> 00:19:55,280 Speaker 6: actually is okay. So there's a lot of hidden, i think, 388 00:19:55,400 --> 00:19:59,720 Speaker 6: hidden issues behind looking at it in that direction, and 389 00:19:59,760 --> 00:20:01,120 Speaker 6: we have to focus on PCE. 390 00:20:01,520 --> 00:20:03,840 Speaker 2: So what take a step back and give us a 391 00:20:03,920 --> 00:20:06,600 Speaker 2: little bit of insight into what you believe what we've 392 00:20:06,640 --> 00:20:10,440 Speaker 2: been describing means for Asia and markets in your neck 393 00:20:10,480 --> 00:20:10,960 Speaker 2: of the woods. 394 00:20:11,840 --> 00:20:12,080 Speaker 4: Yeah. 395 00:20:12,160 --> 00:20:14,199 Speaker 6: I think the main thing is the fact that the 396 00:20:14,240 --> 00:20:17,040 Speaker 6: dollar's going to stay higher for longer and that US 397 00:20:17,119 --> 00:20:20,800 Speaker 6: treasury yields just continue to inch higher. That puts a 398 00:20:20,840 --> 00:20:23,520 Speaker 6: lot of pressure on central banks in this region and 399 00:20:23,560 --> 00:20:26,080 Speaker 6: on the currencies as well. So central banks in this 400 00:20:26,119 --> 00:20:28,320 Speaker 6: region are not going to be looking to cut even 401 00:20:28,320 --> 00:20:31,160 Speaker 6: if they're seeing progress and inflation come through, but they're 402 00:20:31,160 --> 00:20:33,480 Speaker 6: not going to want to go before the FED to 403 00:20:33,920 --> 00:20:36,800 Speaker 6: risk any sort of currency weakness. We've seen it with 404 00:20:36,880 --> 00:20:40,600 Speaker 6: let's say Bank in Indonesia. Bank Indonesia decided to hike even 405 00:20:40,600 --> 00:20:43,280 Speaker 6: though they don't have an inflation problem, but they wanted 406 00:20:43,320 --> 00:20:47,160 Speaker 6: to ensure that the currency maintains some sort of stability, 407 00:20:47,440 --> 00:20:49,480 Speaker 6: and that's going to continue to be one of the 408 00:20:49,560 --> 00:20:53,080 Speaker 6: key issues for central banks in this region. But also 409 00:20:53,359 --> 00:20:56,080 Speaker 6: if you have yield differentials continue to be in favor 410 00:20:56,080 --> 00:20:59,320 Speaker 6: of the dollar, that's going to weigh pressure on Asian currencies. 411 00:21:00,040 --> 00:21:01,760 Speaker 3: Okay, going to get you out of your comfort zone 412 00:21:01,760 --> 00:21:05,760 Speaker 3: a little bit here with a kind of a tricky story. 413 00:21:05,920 --> 00:21:10,040 Speaker 3: She handles it so well, she's great. So I was 414 00:21:10,080 --> 00:21:13,399 Speaker 3: just reading through some Bloomberg intelligence and apparently there's an 415 00:21:13,440 --> 00:21:17,280 Speaker 3: AI price war underway in China. These large language models, 416 00:21:18,480 --> 00:21:22,320 Speaker 3: they're having to cut prices so much to get business 417 00:21:22,680 --> 00:21:26,160 Speaker 3: that it's hurting companies like bay Do and Ali Bomba. 418 00:21:26,880 --> 00:21:29,320 Speaker 3: Is this something that is having a negative impact on 419 00:21:29,359 --> 00:21:31,719 Speaker 3: equities when they don't need a negative impact, They've got 420 00:21:31,840 --> 00:21:32,680 Speaker 3: enough others. 421 00:21:33,320 --> 00:21:36,119 Speaker 6: Yeah, it's interesting the price swar factor and how it 422 00:21:36,200 --> 00:21:38,800 Speaker 6: plays through. But I think at the end of the day, 423 00:21:39,720 --> 00:21:42,160 Speaker 6: you know, the fundamentals for a lot of these companies, 424 00:21:42,280 --> 00:21:45,280 Speaker 6: especially some of the companies that the earnings that came through, 425 00:21:45,400 --> 00:21:48,600 Speaker 6: a lot of them were okay, they beat expectations, a 426 00:21:48,600 --> 00:21:51,400 Speaker 6: lot of them didn't do so well. But still it's 427 00:21:51,440 --> 00:21:55,040 Speaker 6: about getting the retail back into the market, into the 428 00:21:55,200 --> 00:21:57,760 Speaker 6: equity markets, and that's still going to take the property. 429 00:21:57,840 --> 00:22:01,800 Speaker 6: So unfortunately all stems back to property and really getting 430 00:22:01,800 --> 00:22:04,520 Speaker 6: that equity market going in China. 431 00:22:04,800 --> 00:22:07,600 Speaker 2: Yeah, let's not forget that China is still in deflation. 432 00:22:07,680 --> 00:22:10,359 Speaker 2: I mean, will be data very quickly, Mary, that we 433 00:22:10,480 --> 00:22:14,720 Speaker 2: get this week PPI CPI for China confirm that fact 434 00:22:14,720 --> 00:22:17,320 Speaker 2: that China is still in deflation very quickly. 435 00:22:17,680 --> 00:22:18,560 Speaker 6: That's probably likely. 436 00:22:18,680 --> 00:22:24,600 Speaker 3: Yes, you know, be careful what you wish for. That's it, 437 00:22:24,760 --> 00:22:27,440 Speaker 3: mister Kristner, You got it all right. Well, Mary, thanks 438 00:22:27,480 --> 00:22:30,280 Speaker 3: very much for joining us, So Mary Nicola, Bloomberg m 439 00:22:30,359 --> 00:22:31,240 Speaker 3: Live Strategists. 440 00:22:32,920 --> 00:22:35,879 Speaker 2: This has been the Bloomberg Daybreak Asia podcast, bringing you 441 00:22:35,920 --> 00:22:39,040 Speaker 2: the stories making news and moving markets in the Asia Pacific. 442 00:22:39,560 --> 00:22:42,640 Speaker 2: Visit the Bloomberg Podcast channel on YouTube to get more 443 00:22:42,680 --> 00:22:46,320 Speaker 2: episodes of this and other shows from Bloomberg. Subscribe to 444 00:22:46,320 --> 00:22:50,119 Speaker 2: the podcast on Apple, Spotify, or anywhere else you listen 445 00:22:50,240 --> 00:22:53,320 Speaker 2: and always on Bloomberg Radio, the Bloomberg Terminal, and the 446 00:22:53,320 --> 00:22:54,440 Speaker 2: Bloomberg Business app.