WEBVTT - AI Capex Concerns Persist & Central Banks on Hold 0:00:02.520 --> 0:00:13.760 Bloomberg Audio Studios, podcasts, radio news. This is the Bloomberg 0:00:13.840 --> 0:00:17.920 Surveillance Podcast. Catch us live weekdays at seven am Eastern 0:00:18.200 --> 0:00:22.000 on Apple CarPlay or Android Auto with the Bloomberg Business App. 0:00:22.360 --> 0:00:25.680 Listen on demand wherever you get your podcasts, or watch 0:00:25.760 --> 0:00:27.240 us live on YouTube. 0:00:27.600 --> 0:00:30.080 We are fortunate, we get lucky. We've got a great 0:00:30.120 --> 0:00:32.000 set of conversations today, but. 0:00:32.000 --> 0:00:34.600 We don't know the news flow. Here's the news flow. 0:00:34.760 --> 0:00:37.960 Bank of England they leave raids, they say interest rates 0:00:38.040 --> 0:00:40.720 quote likely to be reduced further, they do not talk 0:00:40.760 --> 0:00:46.519 about Liverpool's a defensive strategy. Bank of England sees inflation 0:00:46.640 --> 0:00:51.160 at one point eight percent Q one twenty twenty eight. 0:00:51.760 --> 0:00:54.360 None of that matters. What matters is and. 0:00:54.360 --> 0:00:58.240 This is particularly for the United States crew listening this morning. 0:00:58.760 --> 0:01:01.840 It was a five to four vote joining as Senior 0:01:01.920 --> 0:01:07.560 Vice president descent at a missoo. Jordan Rochester joins us 0:01:07.600 --> 0:01:09.320 this morning. Jordan, let's rip up the script and you 0:01:09.360 --> 0:01:11.480 can do this because you're encyclopedic. 0:01:11.840 --> 0:01:14.399 Do Americans have to get used to a Bank of 0:01:14.480 --> 0:01:18.280 England descent with the upset over our new chairman? 0:01:20.040 --> 0:01:22.000 No, I don't think they're going to be upset at all. 0:01:22.319 --> 0:01:24.440 The Bank of England is doing what Donald Trump would 0:01:24.480 --> 0:01:27.680 like his own Center Act to do, which is they're 0:01:27.720 --> 0:01:30.720 slowly cutting interest rates. And the annoying part about the 0:01:30.760 --> 0:01:32.640 banking is how slow it's kind of been in the 0:01:32.640 --> 0:01:35.520 past few months. There's a little bit of a political 0:01:35.560 --> 0:01:38.320 problem the budgets that we've had from Rachel Reeves. The 0:01:38.360 --> 0:01:41.560 Chancellor had raised inflation in twenty twenty four when she 0:01:41.600 --> 0:01:43.959 gave that budget, so last year we had sticky inflation. 0:01:44.360 --> 0:01:47.160 A good half percent of the inflation the UK had 0:01:47.360 --> 0:01:48.960 came from her tax raising measures. 0:01:49.160 --> 0:01:50.240 It's now flipped the other way. 0:01:50.280 --> 0:01:52.520 The Chancellor learned her lesson and in the budget she's 0:01:52.560 --> 0:01:55.560 cut taxes in certain areas. So the banking is looking 0:01:55.560 --> 0:01:57.360 at a more dubbish outlook. Inflation is going to hit 0:01:57.360 --> 0:02:00.000 their target pretty much by the spring into the summer, 0:02:00.520 --> 0:02:02.120 and in our view, we're going to get more rate 0:02:02.160 --> 0:02:03.120 cuts from them today. 0:02:03.160 --> 0:02:06.640 We didn't get it from said would we be better 0:02:06.680 --> 0:02:10.920 in the United States? Were they more fractious Central Bank, 0:02:11.040 --> 0:02:14.760 Federal Open Market Committee where we see Bailey and Catherine 0:02:14.800 --> 0:02:18.400 Mann of City Group in brandeis where we see certain 0:02:18.600 --> 0:02:21.720 presidents and governors at the Fed descent more and more visibly. 0:02:22.760 --> 0:02:24.760 I see what you mean. It's going to happen, I think. 0:02:24.840 --> 0:02:28.080 And the new administration with Kevin Walsh coming in if 0:02:28.120 --> 0:02:30.880 he gets confirmed, of course, the banking is very we're very, 0:02:30.960 --> 0:02:31.560 very used to it. 0:02:31.560 --> 0:02:31.680 All. 0:02:31.680 --> 0:02:33.800 The individual members of Embassy are encouraged to have their 0:02:33.800 --> 0:02:36.080 own different views and in the sort of minutes we 0:02:36.160 --> 0:02:38.959 got today all their different views as to where rates 0:02:38.960 --> 0:02:41.600 should go and how quickly are all there from each member. 0:02:41.840 --> 0:02:44.960 That's something they took on from Ben Bernanke's review just 0:02:45.080 --> 0:02:47.960 last year. They implemented those changes to be more transparent 0:02:48.360 --> 0:02:51.000 where at the Fed, You're right, it's been much less 0:02:51.040 --> 0:02:51.720 of ascent. 0:02:51.960 --> 0:02:54.600 Descent are kind of a sort of red sort of. 0:02:54.680 --> 0:02:57.280 Headline on Bloomberg terminals and when we get them, but 0:02:57.360 --> 0:02:59.720 we've already started to get them with Stephen Myron and 0:02:59.800 --> 0:03:03.640 other and Waller, So I think under wall should have tricked. 0:03:03.639 --> 0:03:06.120 The hard part for him will be he might want 0:03:06.160 --> 0:03:08.080 to cut rates, but maybe the regional governers don't. 0:03:09.160 --> 0:03:11.600 So Jordan, when you talk to clients, what do they 0:03:11.600 --> 0:03:14.799 feel like the trade is in the fixed income space? 0:03:15.240 --> 0:03:17.080 In twenty twenty six, we've got the bank giving and 0:03:17.240 --> 0:03:20.720 likely to continue to cut rags here the FED presumably 0:03:21.520 --> 0:03:22.880 will continue to cut rates here. 0:03:22.919 --> 0:03:24.040 What's the trade in twenty. 0:03:23.880 --> 0:03:26.880 Six I think the trade here is to kind of 0:03:27.040 --> 0:03:29.000 take the opposite sort of stances to what we've got 0:03:29.040 --> 0:03:31.560 into some spaces of last year. So in US rates 0:03:31.560 --> 0:03:33.120 it was all about how far they could go in 0:03:33.200 --> 0:03:35.920 terms of the neutral rate being three percent. The long 0:03:36.000 --> 0:03:38.880 term dots are therefore we should receive, which is going 0:03:38.960 --> 0:03:42.320 long US rates on the back of that, that's now 0:03:42.360 --> 0:03:45.280 turning the labor market data in the US it should 0:03:45.280 --> 0:03:45.720 pick up. 0:03:45.840 --> 0:03:46.640 We've already got the. 0:03:46.560 --> 0:03:50.360 Growth data storming higher in the data surprises of the US. 0:03:50.520 --> 0:03:53.320 Look at the ism manufacturing this past week. So I 0:03:53.320 --> 0:03:55.839 think the trade is actually to bet on a US 0:03:55.960 --> 0:03:59.360 rebound in growth and therefore in the labor markets as well, 0:03:59.480 --> 0:04:01.560 and were higher interest rates in the US to come. 0:04:02.680 --> 0:04:04.600 So it's interesting here we can starting to see that 0:04:04.600 --> 0:04:07.280 a little bit in the US yield curve. Jordan, the 0:04:07.320 --> 0:04:09.560 twos and tens, you know you've got sixty seventy basis 0:04:09.600 --> 0:04:12.280 points of steepening. What is that telling you there? 0:04:13.720 --> 0:04:17.640 Well, the steepness comes partially from the front end being 0:04:17.680 --> 0:04:20.359 quite anchored to the dots. There's still just shy of 0:04:20.400 --> 0:04:22.800 two cuts priced him for this year. The long end's 0:04:22.800 --> 0:04:25.280 been driven by what's going on with the one big 0:04:25.320 --> 0:04:28.320 beautiful bill, the fiscal stillness that we're getting, and also 0:04:28.640 --> 0:04:31.920 not just from America but from Japan, from Germany and 0:04:32.000 --> 0:04:32.960 other parts of the world. 0:04:33.000 --> 0:04:35.120 Everyone's increasing them out there issuing this year. 0:04:35.200 --> 0:04:38.080 It's just very difficult for long end yields not to 0:04:38.120 --> 0:04:41.320 go higher when you've got the issuance coming out the 0:04:41.360 --> 0:04:44.240 way it is and the growth picking upt the same time. 0:04:44.520 --> 0:04:48.640 I'm not sure why interest rates should fall. Then you've got, 0:04:48.640 --> 0:04:50.960 on top of that, Kevin Walsh's view on the balance sheet, 0:04:51.000 --> 0:04:53.440 which is all about reducing the size of it, which 0:04:53.480 --> 0:04:54.320 is active. 0:04:54.040 --> 0:04:55.560 Sales of US treasuries. 0:04:55.600 --> 0:04:57.720 If he was to do so, that would put further 0:04:57.720 --> 0:04:58.720 pressure on yields as well. 0:05:00.080 --> 0:05:02.440 Did have it in the European Union here there was 0:05:02.480 --> 0:05:06.200 about earlier last year where boy Germany was talking about 0:05:06.480 --> 0:05:10.240 really stepping up spending on defense and other parts of 0:05:10.279 --> 0:05:13.360 its economy. Maybe a little fall on from some other 0:05:13.400 --> 0:05:15.920 parts of Europe. That is that still the feel there 0:05:16.120 --> 0:05:19.080 or what's the thought about europ right here? 0:05:19.800 --> 0:05:23.080 It's still a feel. The problem is is it in 0:05:23.080 --> 0:05:26.000 the price? Is it a stale narrative? Could things turn 0:05:26.040 --> 0:05:29.119 against us? While we've started to get a similar story 0:05:29.120 --> 0:05:31.720 in European data surprises. We had a very strong German 0:05:31.800 --> 0:05:35.920 factory orders this morning, for example, thirteen percent of year 0:05:35.920 --> 0:05:38.719 to date. What we've been waiting for, We've been waiting 0:05:38.760 --> 0:05:41.920 to see if this huge defense order through companies like 0:05:42.120 --> 0:05:45.320 Lion Mattau for further tanks, drones, planes, etc. 0:05:46.080 --> 0:05:48.080 Would it feed through to the data. And what about the. 0:05:48.040 --> 0:05:50.480 Infrastructure spending as well, which is five hundred billion euros 0:05:50.520 --> 0:05:51.440 over twelve years. 0:05:51.839 --> 0:05:53.680 Yes it is, I think, is the answer from the 0:05:53.800 --> 0:05:54.480 data so far. 0:05:54.760 --> 0:05:57.360 If that carries on the market could revise up its 0:05:57.400 --> 0:06:01.960 ECB assumptions and we're talking about hikes being possible really 0:06:02.000 --> 0:06:03.360 not this year but next year. 0:06:03.360 --> 0:06:04.680 Wow Bloomberg surveillance. 0:06:04.680 --> 0:06:08.680 So as we continue with Jordan Rochester of Missoul, wonderful 0:06:08.680 --> 0:06:12.839 team working with Dominic Constant and Stephen Mershudo among others, we. 0:06:12.680 --> 0:06:14.800 Welcome all of you across the nation. Good morning on 0:06:14.800 --> 0:06:15.560 the Pacific RAM. 0:06:15.600 --> 0:06:19.240 Good evening, i should say, on Spotify it's a podcast. 0:06:19.320 --> 0:06:22.000 Thank you so much for your attention out on the 0:06:22.320 --> 0:06:26.880 Pacific RAM and of course on YouTube podcast as well. Jordan, 0:06:26.960 --> 0:06:28.599 I look at where we are and once again, I 0:06:28.600 --> 0:06:30.719 sit down. I got got bit dog with a sixty 0:06:30.839 --> 0:06:34.640 nine handle, which gets my attention, but far more Jordan Rochester, 0:06:34.720 --> 0:06:38.800 I got a dollar that just won't strengthen. I mean, 0:06:38.839 --> 0:06:42.400 I got a ninety seven point eight dx y I 0:06:42.400 --> 0:06:44.680 got yen. Excuse me, I got yen backed up to 0:06:44.800 --> 0:06:48.640 one fifty seven weaker yen and all what. I just 0:06:48.720 --> 0:06:51.679 don't see the catalysts to get into a new leg 0:06:51.880 --> 0:06:53.600 of dollar weakness. 0:06:54.520 --> 0:06:56.440 Yeah, I think the FX space is one of the 0:06:56.440 --> 0:06:59.360 most difficult sectors to have a strong conviction on. You 0:06:59.640 --> 0:07:03.000 onist out there talking about a weeker dollar on the 0:07:03.080 --> 0:07:06.800 debasement trade. I subscribe to that, which is, I do 0:07:06.880 --> 0:07:09.680 see the sort of real assets outperforming due to the 0:07:09.680 --> 0:07:11.800 fiscal and monetary policy we're talking about. 0:07:11.920 --> 0:07:14.120 But that's real assets. We'm talking about gold and silver, 0:07:14.200 --> 0:07:17.480 and is bitcoin real? Who knows. But when it comes 0:07:17.560 --> 0:07:19.760 to when it comes to the. 0:07:19.720 --> 0:07:22.240 FX space, which is eure overs the dollar, the dollar 0:07:22.280 --> 0:07:25.040 versus the yen, the correlations that we're used to, that 0:07:25.120 --> 0:07:27.240 the frameworks that we use to try and understand how 0:07:27.240 --> 0:07:29.920 do we make money from this? The broken liberation? They 0:07:30.040 --> 0:07:33.200 completely changed it. Donald Trump told basically all the European 0:07:33.200 --> 0:07:36.960 investors through other words, of course, to hedge their exposures more. 0:07:37.120 --> 0:07:42.680 And so we're having much more dollar selling in foreign exchange, forwards, swaps, options. 0:07:43.000 --> 0:07:44.080 However you want to do it. 0:07:44.720 --> 0:07:46.480 But what I think is going to happen is the 0:07:46.560 --> 0:07:49.600 dollar is going to rebound in February and we're getting 0:07:49.600 --> 0:07:51.920 that dollary in's heading hire into this election. This weekend, 0:07:51.920 --> 0:07:55.040 we're having euro dollar four cables falling against the pound. 0:07:55.760 --> 0:07:59.280 Why because while I talked about US data surprises rebounding 0:07:59.360 --> 0:08:03.160 thanks to the FIST and monetary policy kicking in bigger picture, 0:08:03.640 --> 0:08:06.920 I do think the dollar weekens Tom Why global growth? 0:08:07.600 --> 0:08:09.560 Where's the recession coming from? I don't see it. 0:08:09.760 --> 0:08:11.880 And when you have a global rebound as I think 0:08:11.880 --> 0:08:14.440 we're going to have, typically that's an environment where the 0:08:14.480 --> 0:08:17.560 dollar underperforms and risk assets do well. So in the 0:08:17.560 --> 0:08:19.200 second half this year we could be looking at your 0:08:19.240 --> 0:08:20.840 dollar one twenty two quite easily. 0:08:20.840 --> 0:08:22.840 I mean, wow, your meetings are tense. He goes into 0:08:22.880 --> 0:08:25.800 a room with like twelve people. Yeah, and nobody's taken notes, 0:08:25.800 --> 0:08:28.400 so just listening. They got their digital lie pads out 0:08:28.640 --> 0:08:30.320 taking Rochester no ites. 0:08:30.360 --> 0:08:33.640 What's the number one question you get right now? Jordan Rochester. 0:08:35.760 --> 0:08:37.520 Will the Bank Japan hike in April or not? 0:08:38.000 --> 0:08:40.400 I think is one of the most common questions, and 0:08:40.440 --> 0:08:43.480 it's one of those ones where it's really up to 0:08:43.640 --> 0:08:45.560 dollar yen as to whether they will hike or not. 0:08:45.800 --> 0:08:48.520 If we look at the pricing, it's twenty basis points price, 0:08:48.600 --> 0:08:51.160 so it's eighty percent probability it's going to happen according 0:08:51.160 --> 0:08:51.760 to the market. 0:08:52.000 --> 0:08:53.439 We thought for a long time. 0:08:53.320 --> 0:08:55.920 July was going to be the base case, but it 0:08:55.960 --> 0:09:00.319 does each seem that expectations, expectations are shifting forward. And 0:09:00.400 --> 0:09:02.440 you want to learn I'd learned some new Japanese phrase 0:09:02.679 --> 0:09:04.640 whilst I was in Tokyo last week. If you want 0:09:04.679 --> 0:09:05.480 to hear it, go. 0:09:07.240 --> 0:09:09.880 More commercial and let's make money. 0:09:10.320 --> 0:09:10.680 Let's me. 0:09:12.800 --> 0:09:13.360 There we go. 0:09:13.520 --> 0:09:15.920 I mean you got to get out of the office 0:09:15.920 --> 0:09:17.800 and go see clients a run in the world. That's 0:09:17.800 --> 0:09:21.320 what you pick up here. And Jordan, how closely are 0:09:21.480 --> 0:09:26.200 European investors following the I guess the upcoming confirmation hearings 0:09:26.240 --> 0:09:29.760 of mister Warsh and what it may mean for US 0:09:29.800 --> 0:09:32.520 physical policy here? How critical is that to kind of 0:09:33.160 --> 0:09:35.760 twenty twenty six views for a lot of your clients. 0:09:36.640 --> 0:09:38.439 I think for a lot of them. I think it's done. 0:09:39.000 --> 0:09:42.360 Whether Mkowski or Tillis holds it up in the Banking 0:09:42.400 --> 0:09:45.080 Senate Committee is kind of for the Wall Street Post 0:09:45.160 --> 0:09:47.120 to talk about Wall Street Journal. But I don't think 0:09:47.160 --> 0:09:49.600 that it's going to really matter to markets too much 0:09:49.600 --> 0:09:52.160 because most people just think eventually the case will probably 0:09:52.200 --> 0:09:54.600 be dropped in some way and it will just go through. 0:09:54.840 --> 0:09:56.640 I think if Powell hangs on or not is more 0:09:56.640 --> 0:10:00.000 of a crucial question for markets rather than will walk 0:10:00.960 --> 0:10:01.400 thank you. 0:10:01.360 --> 0:10:03.680 So much, thank you, thank you, thank you. Frame that 0:10:03.800 --> 0:10:07.400 out Jordan Rochester. What happens if he leaves, What happens 0:10:07.400 --> 0:10:08.040 if he stays. 0:10:08.800 --> 0:10:11.839 Well, if he stays, he's probably got the attention of 0:10:11.880 --> 0:10:17.280 the room, probably more than Kevin Walsh possible, because he's 0:10:17.280 --> 0:10:20.400 built the connections of all the other governments. And if 0:10:20.480 --> 0:10:23.120 Powell's arguing against the idea of cutting interest rates when 0:10:23.120 --> 0:10:25.080 it comes to the June meeting when wash takes over, 0:10:25.880 --> 0:10:28.480 that's where you could see a descent for the first time. 0:10:28.520 --> 0:10:30.959 I think since Volker, you have to go back to 0:10:31.040 --> 0:10:31.760 Volka for. 0:10:31.679 --> 0:10:34.120 When you last had the Federal Reserve chair have a 0:10:34.200 --> 0:10:35.920 descent go against them. 0:10:36.240 --> 0:10:36.520 Now. 0:10:36.640 --> 0:10:39.240 If Powell bows out, that means that's another seat that 0:10:39.360 --> 0:10:41.640 Trump can nominate somebody for. And then we start and 0:10:41.640 --> 0:10:44.120 if Lisa Cook's Supreme Court hearing doesn't go her way, 0:10:44.559 --> 0:10:47.360 then we're talking about a board that's highly governed by 0:10:47.400 --> 0:10:50.400 Trump appointees, and then things could get more interesting. 0:10:51.480 --> 0:10:54.319 Jordan Rochester, thank you so much, greatly appreciated this morning 0:10:54.320 --> 0:11:00.720 with Miszoo fascinating. Stay with us more from Bloomberg's coming 0:11:00.800 --> 0:11:01.800 up after this. 0:11:09.040 --> 0:11:12.640 You're listening to the Bloomberg Surveillance Podcast. Catch us live 0:11:12.679 --> 0:11:16.200 weekday afternoons from seven to ten am Eastern Listen on Apple, 0:11:16.280 --> 0:11:19.600 Karplay and Android Otto with the Bloomberg Business app, or 0:11:19.760 --> 0:11:21.240 watch us live on YouTube. 0:11:21.600 --> 0:11:24.000 Danielize with this is Wedbush, of course, coming off the 0:11:24.000 --> 0:11:27.160 glory of a Baron's cover showed. Were you surprised by 0:11:27.200 --> 0:11:29.480 the Baron's article like they had like a float chart 0:11:29.520 --> 0:11:31.240 of all your business interests? 0:11:31.280 --> 0:11:33.800 Are you on speaking terms with Wedbush? Compliance? 0:11:34.080 --> 0:11:34.520 Of course? 0:11:34.600 --> 0:11:37.200 Look, I mean it's one like look I understand like 0:11:37.600 --> 0:11:41.520 the nature of like when you expand opportunities outside just 0:11:41.640 --> 0:11:45.240 traditional analysts, it's something where like you know you're breaking 0:11:45.320 --> 0:11:47.280 new ground, right, but it's something like if I chew 0:11:47.360 --> 0:11:49.160 gum webbush news. 0:11:49.520 --> 0:11:51.160 And the reality is is that I. 0:11:51.200 --> 0:11:54.040 Get the criticism, but look, it's something like for twenty 0:11:54.040 --> 0:11:57.440 five years being bullsh in tech, being bullsh and AI revolution. 0:11:57.720 --> 0:12:01.000 It's led to obviously other opportunities, but it's something where 0:12:01.200 --> 0:12:03.160 you know, it's I get the crisis. 0:12:03.280 --> 0:12:05.199 I want to go back to first principles here. There 0:12:05.240 --> 0:12:06.960 was a there's a couple of courses we took on 0:12:07.040 --> 0:12:11.720 network effect, on Metcalf's law, on ethernet study here, and 0:12:11.760 --> 0:12:15.960 the answers that devolved into spectacular profits for a very 0:12:15.960 --> 0:12:19.600 few Michael Mobison just being iconic on this early work 0:12:19.640 --> 0:12:22.199 as well. It's still in play right when I look 0:12:22.240 --> 0:12:27.720 at Google's profit machine, it's about Metcalf's law. They're playing 0:12:27.800 --> 0:12:30.440 a different rule book and we don't understand it exactly. 0:12:30.440 --> 0:12:30.679 I mean. 0:12:30.800 --> 0:12:33.960 And that's why, to further your point, if you look 0:12:34.000 --> 0:12:38.040 at the cloud growth forty eight percent, you look at Capex, 0:12:38.080 --> 0:12:40.720 now that's basically going to be you're. 0:12:40.600 --> 0:12:41.679 Really almost doubling. 0:12:42.559 --> 0:12:48.000 This just shows that these companies they see the modernization path. 0:12:48.240 --> 0:12:52.040 It's happening now. Just investors beg why would you not 0:12:52.280 --> 0:12:54.920 slow up? Because they have to accelerate because of the 0:12:55.080 --> 0:12:56.920 arms race, that's playing out. So when you look at 0:12:57.000 --> 0:13:01.959 earning season the last few weeks, it's further validated that 0:13:02.040 --> 0:13:04.640 this is not a bubble. This is an AI revolution. 0:13:04.760 --> 0:13:07.599 The monization's just started. And it's my view like to 0:13:07.960 --> 0:13:10.640 view it that software and it's essentially what I'll call 0:13:10.720 --> 0:13:13.800 an arm and getting like environment for software. And I 0:13:13.840 --> 0:13:17.640 think this is going to be viewed as I think 0:13:17.720 --> 0:13:22.440 a time where software names have gotten so over sold. 0:13:22.559 --> 0:13:25.280 I'd have to go back twenty five years, maybe two 0:13:25.360 --> 0:13:27.720 or three times they've ever seen a moment like this. 0:13:28.080 --> 0:13:31.040 So how do you respond to the concern that some 0:13:31.040 --> 0:13:35.440 people have that AI posts a fundamental threat to certain 0:13:35.520 --> 0:13:39.000 aspects of software, specialized software, application software. 0:13:39.040 --> 0:13:42.760 Look, I think on the edges down the road, is 0:13:42.800 --> 0:13:46.040 it a headwind? Yeah, But then on the other hand, 0:13:46.200 --> 0:13:49.320 like for a salesforce service now fro an Adobe for 0:13:49.640 --> 0:13:53.160 large and work that you could argue that AI is 0:13:53.200 --> 0:13:56.560 actually a talent, but they just haven't seen the modernization 0:13:56.760 --> 0:13:59.599 yet because it's ultimately the use cases are going to 0:13:59.640 --> 0:14:02.400 be well by software and pallunteer being the first one 0:14:02.440 --> 0:14:05.800 you say, snowflake, mango or our necks in line. And 0:14:05.840 --> 0:14:08.880 I just think the view that software is done that 0:14:09.000 --> 0:14:12.400 you're gonna have companies you're that are gonna go away 0:14:12.880 --> 0:14:16.400 from a salesforce toward a clod or an anthropic model. 0:14:17.040 --> 0:14:21.680 Is just it's it's somewhere between ridiculous to fictional or whatever. 0:14:21.720 --> 0:14:25.119 Are you seeing the major software companies, let's pick on MSFT. 0:14:25.800 --> 0:14:28.520 Are they having conversations at Redman to say we're down 0:14:28.600 --> 0:14:31.960 twenty six percent? Do we take depth to buy back 0:14:32.080 --> 0:14:35.400 shares and other creative I mean are they are. 0:14:35.240 --> 0:14:38.520 They do they want to be opportunistic? Given this AI frenzy? 0:14:38.680 --> 0:14:41.360 Well, look, I think this is going to create a 0:14:41.400 --> 0:14:45.200 massive m and a cycle in software because to Tom's pointing, 0:14:45.240 --> 0:14:47.800 like if you look at the cash flow both on 0:14:47.840 --> 0:14:49.680 the on the pe side as well as in the 0:14:49.720 --> 0:14:53.120 strategic and you look now where the where these software 0:14:53.120 --> 0:14:55.960 comings right, if you think about maintenance ar are you 0:14:56.040 --> 0:14:58.760 to basically would have to assume that numbers come down 0:14:59.400 --> 0:15:02.920 twenty five percent the next three years not to buy 0:15:03.240 --> 0:15:04.200 the sector. 0:15:04.280 --> 0:15:06.560 Danives with this folks worldwide or thrilled day of min 0:15:06.680 --> 0:15:10.520 robbers shipping with us later the best in conversation on technology. 0:15:10.760 --> 0:15:12.600 Okay, you know where I am on Tesla. 0:15:12.760 --> 0:15:15.400 You and I sit up in the food court over cheesus, 0:15:15.480 --> 0:15:17.880 I have cheese its Isaay has something. 0:15:17.680 --> 0:15:20.000 Great a bullish scar you were wearing too. 0:15:19.960 --> 0:15:23.480 Okay, but yeah, But the bottom line, Dan ives, is 0:15:23.520 --> 0:15:26.720 there going to take Tesla taking out two vehicles, something 0:15:26.760 --> 0:15:29.120 new's going to happen. They're going to run it into 0:15:29.360 --> 0:15:31.840 x AI whatever the hell that is, and they're going 0:15:31.920 --> 0:15:35.040 to fund it through starlink. Are things in space going 0:15:35.120 --> 0:15:36.480 to make this accounting work? 0:15:36.680 --> 0:15:40.640 Well, it's my view that Tesla and SpaceX eventually merge, 0:15:40.760 --> 0:15:45.560 I guay. So this is x An, XAI, XAI space. 0:15:45.720 --> 0:15:47.840 Is there going to be a legitimate red herring? Is 0:15:47.840 --> 0:15:50.480 there going to be a legitimate process or is just 0:15:50.640 --> 0:15:51.320 musk blather? 0:15:51.600 --> 0:15:53.480 No, it's I think it's Jim and Pat. I think 0:15:53.520 --> 0:15:55.680 this is all step by step in terms of what's 0:15:55.720 --> 0:15:56.280 going to happen. 0:15:56.360 --> 0:15:59.680 I think the reality is okay, Like, why would Must. 0:15:59.480 --> 0:16:02.880 Do this because essentially when you look at XAI, that's 0:16:02.920 --> 0:16:06.280 so much of the AI technology now that's within SpaceX, 0:16:06.280 --> 0:16:09.880 SpaceX basically being the vehicle that obviously gets you to space. 0:16:10.240 --> 0:16:15.600 It's must view where this he's basically creating his own ecosystem. 0:16:15.760 --> 0:16:20.000 You do about circular financing and everything else. He's internally 0:16:20.280 --> 0:16:23.000 building this what I would argue is probably going to 0:16:23.040 --> 0:16:25.960 be the biggest AI company in the world. 0:16:25.480 --> 0:16:30.760 Is this whole new thing, this SpaceX slash xai, is 0:16:30.760 --> 0:16:31.880 that gonna go public this year? 0:16:32.160 --> 0:16:33.960 Well yeah, I mean I think it's one that would 0:16:33.960 --> 0:16:36.280 make a ton of sense for SpaceX to go public. 0:16:37.400 --> 0:16:40.720 Then you think about Xai being a key component to that. 0:16:41.360 --> 0:16:43.760 I think then the other the thing for investors is 0:16:43.760 --> 0:16:47.520 trying to figure out how does this affect Tesla and 0:16:47.560 --> 0:16:49.640 when does that cross pollination start. 0:16:50.160 --> 0:16:52.200 Okay, bitcoin is sixty nine thousand. 0:16:52.200 --> 0:16:54.880 We haven't broken down below, but everybody's paying attention sixty 0:16:54.920 --> 0:16:58.360 nine five hundred. The fancy people at cryptos say, where's 0:16:58.400 --> 0:17:03.160 the underlying where's the underlying on the combination of SpaceX, 0:17:03.360 --> 0:17:08.080 XAI and Tesla, what's the underlying free cash flow generation? 0:17:08.359 --> 0:17:12.280 I mean you look, it's my view, autonomous and robotics 0:17:12.280 --> 0:17:16.960 alone for Tesla numbers today. If you've got free cashow, 0:17:17.080 --> 0:17:20.280 free cash flow will be up five six acts the 0:17:20.280 --> 0:17:21.359 next four or five years. 0:17:21.400 --> 0:17:24.760 Just basing that. Then when you actually will, if you. 0:17:24.720 --> 0:17:28.720 Actually combine it all, you're essentially looking at something where 0:17:29.400 --> 0:17:32.680 they could when you think about the longer term model, 0:17:32.800 --> 0:17:35.720 they would generate free cash flow potentia on par with 0:17:35.760 --> 0:17:36.200 any of these. 0:17:36.440 --> 0:17:39.280 So you're saying, Paul's got any questions. This is my 0:17:39.359 --> 0:17:39.960 last one. 0:17:39.840 --> 0:17:42.639 Called Alexis, get out the surveillance cork and put it 0:17:42.640 --> 0:17:45.440 in my mouth. When I've done with this question, you 0:17:45.560 --> 0:17:48.800 got a red herring out right now. Basically there's no 0:17:48.880 --> 0:17:52.520 profit model and it's an innovation hope five years out 0:17:52.600 --> 0:17:54.280 is that weix struction. 0:17:54.359 --> 0:17:57.000 I mean Xai, let's say a billion dollars a month 0:17:57.040 --> 0:18:00.800 or whatever that they're burning. So you but tom My 0:18:00.960 --> 0:18:03.920 view is like, it's no different than the one hundred 0:18:04.000 --> 0:18:06.600 ey five billion that Google's in a spending cap backs 0:18:06.920 --> 0:18:10.560 or Microsoft's doing cap backs right now. You are betting 0:18:10.640 --> 0:18:13.400 on the next two, three, four, five years. Now, does 0:18:13.400 --> 0:18:16.440 that is you have? Do you have to be a believer? 0:18:16.560 --> 0:18:19.280 And does that impact the near term in terms of 0:18:19.320 --> 0:18:19.800 these names? 0:18:19.840 --> 0:18:20.320 Of course? 0:18:20.880 --> 0:18:23.880 But the view from an investor perspective, it's my view 0:18:24.040 --> 0:18:26.440 is that we're in a fourth and ducal revolution. We're 0:18:26.480 --> 0:18:28.200 in year three of a ten year buildout. 0:18:28.640 --> 0:18:32.040 We've had some great reporting from Bloomberg News on Elon 0:18:32.119 --> 0:18:35.920 Musk and SpaceX and Xai and this merger here, and 0:18:35.960 --> 0:18:38.440 I think two themes out there. The bulls are saying, hey, 0:18:38.440 --> 0:18:42.359 you're putting together the great SpaceX with the arguably the 0:18:42.440 --> 0:18:43.960 leading AI company. 0:18:44.000 --> 0:18:45.720 Put those two together, what a great story. 0:18:45.960 --> 0:18:48.639 Others might say, wait, it kind of feels like SpaceX 0:18:48.720 --> 0:18:52.439 is bailing out XAI or vice versa. Do we But 0:18:52.480 --> 0:18:54.280 we don't know because we don't know any numbers there. 0:18:54.320 --> 0:18:55.480 Do we know? We don't. 0:18:55.520 --> 0:18:58.919 I mean, obviously the burn you which which we know 0:18:59.040 --> 0:19:02.440 is probably you know, about billion a month. But for SpaceX, 0:19:02.920 --> 0:19:08.720 they're getting the AI technology from Xai so that they 0:19:08.800 --> 0:19:11.440 ultimately need. If you think about this being what i'll 0:19:11.480 --> 0:19:14.520 call it AI play, it was the first step then, 0:19:14.680 --> 0:19:19.160 but they eventually go down the aisle with Tesla. 0:19:19.440 --> 0:19:21.720 Okay, just just published moments ago. We did this in 0:19:21.760 --> 0:19:23.560 real time, folks. We'll make it up as we go, 0:19:23.840 --> 0:19:26.520 Dan Eyes. So this was Bush Robert Schiffman, who'll be 0:19:26.600 --> 0:19:29.240 with us in the next hour, publishes moments ago. This 0:19:29.280 --> 0:19:31.359 is on the credit on the build out of Google 0:19:31.440 --> 0:19:35.600