WEBVTT - Bloomberg Surveillance TV: June 5th, 2026 0:00:00.040 --> 0:00:06.720 Bloomberg Audio Studios, Podcasts, radio News. 0:00:11.640 --> 0:00:15.440 This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 0:00:15.480 --> 0:00:18.680 with Lisa Bromwitz and Amrie Hordert. Join us each day 0:00:18.720 --> 0:00:22.280 for insight from the best in markets, economics, and geopolitics 0:00:22.400 --> 0:00:24.880 from our global headquarters in New York City. We are 0:00:24.920 --> 0:00:27.680 live on Bloomberg Television weekday mornings from six to nine 0:00:27.720 --> 0:00:31.280 am Eastern. Subscribe to the podcast on Apple, Spotify or 0:00:31.320 --> 0:00:33.919 anywhere else you listen, and as always on the Bloomberg 0:00:34.000 --> 0:00:37.479 Terminal and the Bloomberg Business app. This roundy coming undone 0:00:37.479 --> 0:00:39.360 just to touch the massive run for Semi's taking a 0:00:39.360 --> 0:00:42.360 bit of a breather as potential cracks emerged. Broadcam leading 0:00:42.400 --> 0:00:44.680 the retreat, adding to losses after a raising over two 0:00:44.720 --> 0:00:47.320 hundred and eighty billion dollars in market venue. Gil Lurier 0:00:47.360 --> 0:00:49.960 of DA Davidson remaining neutral on the stargwall, raising his 0:00:50.040 --> 0:00:52.559 price target, He writes the following, We found out how 0:00:52.600 --> 0:00:55.000 on edge investors are a bad technology. If the beat 0:00:55.040 --> 0:00:58.320 isn't big enough, the consequences were severe. Value was shifting 0:00:58.400 --> 0:01:01.639 quickly as the bottlenecks merch. Gil join NAP for more. 0:01:01.720 --> 0:01:03.880 Gil Welcome Lisa Shannick called it a bit of a 0:01:03.880 --> 0:01:06.680 bit of a red flag for the semis trade. Do 0:01:06.720 --> 0:01:09.240 you consider it a red flag or just a small crack? 0:01:10.800 --> 0:01:11.800 A small crack. 0:01:12.400 --> 0:01:16.640 Let's not forget Budcom just grew revenue fifty percent. It 0:01:16.680 --> 0:01:19.520 grew its AI revenue one hundred and forty three percent, 0:01:19.640 --> 0:01:21.960 so it's a very good result. 0:01:22.160 --> 0:01:24.040 But investors had now been. 0:01:23.920 --> 0:01:26.240 Trained to expect a lot more than that because some 0:01:26.319 --> 0:01:29.880 of the upside results from companies like inte, La and 0:01:30.000 --> 0:01:34.720 d and Dell were so spectacular that investors just raised 0:01:34.720 --> 0:01:38.920 their expectations too much. You're talking about a cycle, and 0:01:39.600 --> 0:01:43.640 semis are always a cycle. This is not any different. 0:01:44.240 --> 0:01:46.720 None of us know how long the cycle is going 0:01:46.800 --> 0:01:50.000 to last. We all speculate and estimate, but it could 0:01:50.120 --> 0:01:52.680 last through next year, and it could last through twenty thirty, 0:01:52.720 --> 0:01:54.760 and those are very different outcomes. 0:01:55.000 --> 0:01:57.080 What we do know is. 0:01:57.080 --> 0:02:01.800 That different socks are trading differently on cycle. I would 0:02:01.840 --> 0:02:06.240 argue that companies like Intel or even AMD, and many 0:02:06.280 --> 0:02:09.640 of the optical stocks and the nuclear stocks are trading 0:02:09.680 --> 0:02:12.440 as if the peak of the cycle is until twenty thirty, 0:02:13.040 --> 0:02:16.640 where stocks like in Vidia and Micron are trading like 0:02:16.720 --> 0:02:19.399 the peak of the cycle is next year, So that's 0:02:19.440 --> 0:02:23.240 where we see the opportunity and betting on the ones 0:02:23.760 --> 0:02:27.080 that not a lot embedded in the valuation. And Vidia 0:02:27.240 --> 0:02:31.200 twenty two times, Micron at ten times look a lot 0:02:31.360 --> 0:02:35.080 safer than broad Coom at thirty five, a MD at forty, 0:02:35.639 --> 0:02:38.840 Intel at one hundred times, and that's where we see 0:02:38.840 --> 0:02:41.600 the opportunities because there is going to be a cycle. 0:02:42.200 --> 0:02:44.480 We just don't know how long it's going to last 0:02:44.520 --> 0:02:48.280 because the developments and AI are so rapid that it's 0:02:48.520 --> 0:02:51.680 very hard to predict when we get to peak functionality, 0:02:51.720 --> 0:02:54.880 when we get to a quicker adoption, So we have 0:02:54.960 --> 0:02:58.400 to play the cycle carefully by going to the less 0:02:58.440 --> 0:02:59.880 demanding valuations. 0:03:00.280 --> 0:03:03.720 There's also a degree of uncertainty kill about the addressable market, 0:03:03.720 --> 0:03:06.359 and that clearly was put on display with SpaceX and 0:03:06.400 --> 0:03:09.080 some of their projections, and maybe it's what's at stake 0:03:09.120 --> 0:03:11.120 with Nvidia as well. I mean, is this an issue 0:03:11.160 --> 0:03:13.400 of people saying that the peak might be next year 0:03:13.480 --> 0:03:15.720 or is it people saying that the run rates cannot 0:03:15.720 --> 0:03:17.600 continue at the pace that it has. 0:03:19.440 --> 0:03:21.200 Yeah, two sides of the same coin. 0:03:21.440 --> 0:03:24.440 We look at the hyperscalers, they're spending most of their 0:03:24.480 --> 0:03:28.000 operating cash flow. Google just went out and raised eighty 0:03:28.040 --> 0:03:30.600 billion dollars of capital. By the way, think of that 0:03:30.720 --> 0:03:34.920 as coming on top of the capital demand from SpaceX, 0:03:35.360 --> 0:03:38.920 Anthropic and then open Ay. You also have Google going 0:03:38.920 --> 0:03:42.840 out for that much. Next you'll have Amazon, Microsoft, and 0:03:42.920 --> 0:03:46.400 Meta going for more capital. So the capital demands on 0:03:46.440 --> 0:03:51.880 the market are impacting the stocks already, and if the 0:03:51.960 --> 0:03:55.440 hyperscalers raised that much money, they can continue to raise 0:03:55.480 --> 0:03:59.080 their capex rates. They do see this as a good 0:03:59.120 --> 0:04:02.480 return on invest and I know that's a controversy, it's 0:04:02.600 --> 0:04:03.520 not for them. 0:04:04.440 --> 0:04:06.280 They are growing revenue. 0:04:05.840 --> 0:04:10.280 At an accelerating rate at the same margins. That indicates 0:04:10.320 --> 0:04:14.160 a good return to the economy. You can see the 0:04:14.280 --> 0:04:18.520 return from the run rate of open Ai, Anthropic and 0:04:18.600 --> 0:04:22.200 Google's products. Those are products that are being bought by 0:04:22.279 --> 0:04:26.040 consumers and businesses. That's real economic value. And right now 0:04:26.040 --> 0:04:29.039 we're at more of one than one hundred billion dollar run. 0:04:28.920 --> 0:04:30.919 Rate, so there is return. 0:04:31.400 --> 0:04:35.080 We do expect these hyperskillers to continue to spend, but again, 0:04:35.160 --> 0:04:38.080 part of that's going to come with more capital demand, 0:04:38.480 --> 0:04:40.600 which is going to have even more of an impact 0:04:40.680 --> 0:04:45.880 on stocks as they sock up the demand combined with 0:04:45.960 --> 0:04:48.520 those IPOs doing the same thing. So that's a lot 0:04:48.560 --> 0:04:51.760 of volatility ahead from all these directions. 0:04:51.960 --> 0:04:54.680 At what point do the semiconductors lose pricing power? At 0:04:54.720 --> 0:04:57.080 what point do you have some of these companies and frankly, 0:04:57.080 --> 0:04:58.919 their creditor is pushing back and saying, I'm going to 0:04:58.960 --> 0:05:01.039 lend you ten dollars, and then they're going to charge 0:05:01.080 --> 0:05:02.760 you twenty dollars, and then you're going to ask for 0:05:02.800 --> 0:05:05.239 ten more dollars, and you're going to ask for thirty dollars, 0:05:05.279 --> 0:05:06.560 and it's going to keep going up. I mean, this 0:05:06.600 --> 0:05:08.480 is what it feels like an auction house. At what 0:05:08.560 --> 0:05:11.960 point do a lot of the hyperscalers say enough stop 0:05:11.960 --> 0:05:14.000 it already with the price increases, at what point does 0:05:14.040 --> 0:05:17.200 that leave them potentially with some capped margins. 0:05:18.880 --> 0:05:23.040 The hyperscalers don't have that many options. They are still 0:05:23.080 --> 0:05:26.919 buy and large relying on in Nvidia chicks almost entirely. 0:05:27.440 --> 0:05:32.680 That makes a videos growth smart around mid seventies relatively safe. 0:05:32.839 --> 0:05:35.760 Now they're going for alternatives. They're trying to make their 0:05:35.760 --> 0:05:38.520 own chips with Broadcom, and they're trying to ramp up 0:05:38.560 --> 0:05:42.400 production at AMD, but those are still at very early stages. 0:05:42.960 --> 0:05:46.039 And those are coming in the mid seventies, so right 0:05:46.080 --> 0:05:49.120 now those are the only options, So the hyperscalers are 0:05:49.160 --> 0:05:52.760 not necessarily in a great negotiating position in that regard, 0:05:52.880 --> 0:05:58.160 So that makes those semi margins relatively stable even in 0:05:58.320 --> 0:06:02.680 memory the supply is just not there, so those companies 0:06:02.680 --> 0:06:05.440 can be in the high seven in the high seventies. 0:06:05.480 --> 0:06:08.440 Even how long that lasts again is a matter of 0:06:08.520 --> 0:06:10.800 how long the cycle lasts, but right now it looks 0:06:10.800 --> 0:06:13.800 like it could last through twenty eight, twenty nine, twenty thirty, 0:06:14.160 --> 0:06:17.599 which for most of our investors is their investment time horizon, 0:06:18.120 --> 0:06:21.680 and they can be comfortable with that. But again that's 0:06:21.839 --> 0:06:27.039 only if AI continues to progress, if diffusion of AI 0:06:27.120 --> 0:06:31.880 happens into companies that generate productivity from that, if consumers 0:06:32.200 --> 0:06:35.400 are willing to subscribe, are willing to accept ads in 0:06:35.440 --> 0:06:39.839 their chat. Only if those things persist will the hyper 0:06:39.839 --> 0:06:43.480 scalers continue to invest and keep the margins high at 0:06:43.480 --> 0:06:45.200 those semi companies. 0:06:45.160 --> 0:06:48.599 Stay with us more Blindberg surveillance coming up after this 0:06:57.880 --> 0:07:00.000 would begin this as investors pulled back from the time 0:07:00.200 --> 0:07:02.720 trade headinggainst the latest jobs report, NAT the level of 0:07:02.800 --> 0:07:06.279 UBS writing stay positive, but diversified. We will like the 0:07:06.360 --> 0:07:09.840 AI value chain, but we think leadership broadens from a 0:07:09.920 --> 0:07:12.520 narrow set of megacaps. Natia joined us for more. Nattie, 0:07:12.520 --> 0:07:15.880 good morning. What drives the improvement in breadth? 0:07:16.800 --> 0:07:19.600 I think you continue to see. You know, as you've 0:07:19.640 --> 0:07:22.040 been talking about the AI trade, I wouldn't say that 0:07:22.400 --> 0:07:25.280 it's broken or any sort of cracks. 0:07:25.480 --> 0:07:26.880 It's more of a scratch, right. 0:07:26.840 --> 0:07:29.320 Particularly given what's happened this week, But in terms of 0:07:29.400 --> 0:07:31.440 how we're thinking about it, we continue to think that 0:07:31.520 --> 0:07:35.680 diversification across AI value chain is quite important. We've been 0:07:35.960 --> 0:07:38.440 squarely focused on where the bottlenecks are and investing in 0:07:38.480 --> 0:07:41.360 those areas. Who think about memory, think about compute, think 0:07:41.400 --> 0:07:46.080 about networking, think about platform, software, platform, and so despite 0:07:46.080 --> 0:07:49.160 the fact that you're seeing some weakness today, we do 0:07:49.200 --> 0:07:51.720 think that ultimately what's going to drive this market higher 0:07:52.240 --> 0:07:54.920 is going to be continue to be the AI trade. 0:07:54.960 --> 0:07:57.600 The AI trade and the earnings that it's created. We 0:07:57.720 --> 0:07:59.800 mentioned it earlier a bit of snack, but I'd love 0:07:59.840 --> 0:08:01.960 your reaction to it. Whether we're just seeing a massive 0:08:01.960 --> 0:08:05.600 wealth transfer from hyperscalis to the chip players, and that's 0:08:05.640 --> 0:08:07.480 all the earning story has been so far is it 0:08:07.480 --> 0:08:07.960 more than that. 0:08:08.480 --> 0:08:10.840 It is more than that, right, because the demand is 0:08:10.840 --> 0:08:13.720 there that's also driving the pickup in the hyper scale 0:08:13.760 --> 0:08:15.800 or spent in. I mean, we know that this year 0:08:15.880 --> 0:08:19.360 that the four largest hyperscalers have already airmarked over seven 0:08:19.440 --> 0:08:22.000 hundred billion dollars in capex. We think that global AI 0:08:22.040 --> 0:08:24.440 capex is going to be over eight hundred billion dollars, 0:08:24.720 --> 0:08:26.360 and then we think that that gets too close to 0:08:26.360 --> 0:08:28.400 a trillion dollars. And even those estimates might prove to 0:08:28.480 --> 0:08:31.040 be conservative just given the capital raises that we're seeing 0:08:31.920 --> 0:08:35.679 this week and the announcements around Alphabet and so forth, 0:08:35.679 --> 0:08:38.040 and so we could potentially see even more of those 0:08:38.080 --> 0:08:41.160 kind of announcement coming from the rest of the hyperscalers, 0:08:41.200 --> 0:08:44.319 and that's going to push off the capex numbers even more. Again, 0:08:44.360 --> 0:08:48.319 there's an increase in demand from the enterprise. You're seeing 0:08:48.360 --> 0:08:51.440 AI move from sort of an experiment so phase and 0:08:51.520 --> 0:08:55.360 more to deployment. You're seeing more bad race wide enterprise 0:08:55.800 --> 0:08:59.800 phase deployment across the adoptions, adoptions are going up. Depending 0:08:59.800 --> 0:09:02.559 on numbers that you look at, you could see already 0:09:02.559 --> 0:09:05.040 sixty percent adoption rate. Some numbers even put it close 0:09:05.080 --> 0:09:07.640 to eighty percent adoption rates. So the fact is that 0:09:07.800 --> 0:09:10.719 the monetization cycle has started. We're still early in the 0:09:10.720 --> 0:09:13.480 phase of it. So it's not just what transfer. You know, 0:09:13.640 --> 0:09:17.120 one capex is another person's revenue. Eventually, there is monetization 0:09:17.200 --> 0:09:18.600 that's already underway. 0:09:18.720 --> 0:09:20.920 What's paying for it right now? Is it the labor market? 0:09:22.679 --> 0:09:25.560 I would say, you know, it's a combination, right, A 0:09:25.559 --> 0:09:27.360 little bit on the margin in terms of that. We're 0:09:27.360 --> 0:09:30.560 seeing already pull back in terms of hiring and headcount 0:09:30.559 --> 0:09:34.240 reduction attack. It hasn't hit the broad based economy yet, 0:09:34.480 --> 0:09:37.000 and so I think what's paying for it right now? 0:09:37.000 --> 0:09:40.560 Of course, a lot of this is being financed upon operations, 0:09:40.559 --> 0:09:43.760 from cash flows from operations. Also, now, capital markets are 0:09:43.800 --> 0:09:46.920 quite open, and you know, the constraint is not capital 0:09:47.120 --> 0:09:50.520 right we're seeing that. We're seeing that very even in 0:09:50.600 --> 0:09:54.479 the debt race this year by the hyperscale over subscribed 0:09:54.600 --> 0:09:57.920 ten times over subscribe. The constraint continues to be these 0:09:57.920 --> 0:09:59.960 model necks that I talked about earlier. 0:10:00.240 --> 0:10:03.160 Is the excess and the ample liquidity for some of 0:10:03.240 --> 0:10:06.600 these tech companies. The potential constraint for other companies not 0:10:06.640 --> 0:10:08.680 related to this trend. In other words, do you see 0:10:08.720 --> 0:10:12.760 clients that are you recommending to them to sell other assets, 0:10:12.960 --> 0:10:17.800 other loans, other debt instruments, other stocks of companies not 0:10:18.040 --> 0:10:21.800 participating in this to finance the purchases and investments in 0:10:21.800 --> 0:10:24.400 the SpaceX IS and anthropics and opening eyes of the world. 0:10:24.559 --> 0:10:27.240 What we have been really focused is really advised in 0:10:27.320 --> 0:10:31.640 our clients to manage concentration risks so where they have. Yes, 0:10:31.840 --> 0:10:34.040 you know, over the last several years, we see like 0:10:34.040 --> 0:10:37.560 the MAC seven has driven a good portion in the 0:10:37.600 --> 0:10:39.599 appreciation in a stock market, and now you're seeing a 0:10:39.640 --> 0:10:43.200 diversification again as I talked about earlier, across the value chain. 0:10:43.280 --> 0:10:45.320 So what we've been advised in clients is to do 0:10:45.400 --> 0:10:48.559 making sure that they have exposure, diversified exposure to these 0:10:48.559 --> 0:10:52.000 transformation and innovation opportunities and not includes AI, that also 0:10:52.040 --> 0:10:55.120 includes the electrification and also includes the longevity that you 0:10:55.160 --> 0:10:58.720 talked about earlier. So it is not it's not it's 0:10:58.720 --> 0:11:02.520 not limited. So my point is, it's like the air 0:11:02.720 --> 0:11:05.839 trade has and is and continues to broaden out. I 0:11:05.880 --> 0:11:08.080 think that's an important message that it's just not one 0:11:08.240 --> 0:11:10.559 or two stocks anymore. I mean, look at the strong 0:11:10.600 --> 0:11:14.040 performance this year. It's it's not the Mac seven. It's 0:11:14.040 --> 0:11:16.959 the memory, memory stocks, it's a packaging stocks, it's a 0:11:17.000 --> 0:11:19.480 network in stocks and so fortunate. And that's how key 0:11:19.520 --> 0:11:24.240 message to clients diversification. But exposure to these secular growth 0:11:24.320 --> 0:11:26.880 trends are importance. They cannot be missed out. These are 0:11:26.880 --> 0:11:30.040 not cyclical bursts, right. The spending that has happened is 0:11:30.040 --> 0:11:33.280 not cyclical. It's really structural, and it's an infrastructure story 0:11:33.400 --> 0:11:35.160 that clients must have exposure to. 0:11:35.360 --> 0:11:37.760 Job Fridays have changed so much, haven't they. They already have. 0:11:37.920 --> 0:11:40.840 We just don't talk about jobs on payros Fridays. You 0:11:40.920 --> 0:11:44.200 join us every payros Friday, and the conversation has shifted 0:11:44.240 --> 0:11:46.240 so much. We spend so much more time talking about 0:11:46.280 --> 0:11:46.679 tech and. 0:11:46.640 --> 0:11:49.839 We will start to talk about jobs mentions when it 0:11:49.920 --> 0:11:51.880 starts to impact in the labor market in a more 0:11:51.920 --> 0:11:55.280 meaningful way. I'm sure that would be the topic of comp. 0:11:55.080 --> 0:11:58.199 In the meantime, How relevant is the number to this market? 0:11:58.200 --> 0:12:00.440 And you're cool look in terms of, of course the 0:12:00.440 --> 0:12:04.719 outlook of the FED. It is important to us number well, 0:12:04.800 --> 0:12:07.160 of course we're watching the unemployment rate. It seems to 0:12:07.200 --> 0:12:09.600 be stabilized in around four point three serpents we're also 0:12:09.600 --> 0:12:13.240 watching wage growth just given the implications for inflation. I mean, 0:12:13.360 --> 0:12:15.920 right now we know that the market is pricing in hikes. 0:12:16.720 --> 0:12:19.040 The FED we still think that there's a possibility for 0:12:19.160 --> 0:12:21.680 cut this year, but of course inflation has proven to 0:12:21.720 --> 0:12:24.960 be more sticky. The labor markets is important to the 0:12:25.000 --> 0:12:27.320 FED call. If we see any weakness in the labor market, 0:12:27.320 --> 0:12:30.840 then that could cause effect to move later this year. 0:12:31.240 --> 0:12:33.480 But we think that that, you know, even though December 0:12:33.520 --> 0:12:35.520 is sort of our official call for the next cut, 0:12:35.640 --> 0:12:37.560 that could get pushed out into twenty twenty seven. 0:12:37.600 --> 0:12:40.520 I'm actually fascinated for this labor market report. I'm excited 0:12:40.520 --> 0:12:42.439 to look at the details, and the details have been 0:12:42.480 --> 0:12:44.439 really interesting. I'm not just talking about wage growth. I'm 0:12:44.440 --> 0:12:46.400 not just talking about the unemployment rate. But if you 0:12:46.440 --> 0:12:48.280 take a look at where the gains and losses have 0:12:48.320 --> 0:12:50.720 come from, the tech sector said last month the planned 0:12:50.720 --> 0:12:54.199 to eliminate thirty eight thousand positions. That was the greatest 0:12:54.240 --> 0:12:57.199 going back two years to August twenty twenty four. You're 0:12:57.240 --> 0:13:01.160 seeing them say it's because of artificial intelligens Do you 0:13:01.200 --> 0:13:03.200 expect this to be a leading indicator of what we 0:13:03.240 --> 0:13:05.320 can look for in other sectors? Particularly the white collar 0:13:05.360 --> 0:13:08.000 areas that have been seeing some job reductions on the 0:13:08.000 --> 0:13:08.840 margin as a whole. 0:13:08.960 --> 0:13:11.240 Maybe not the magnitude that you're seeing it intact, but 0:13:11.360 --> 0:13:13.640 historically that has been the case. That's where you know, 0:13:13.679 --> 0:13:17.240 technology gets adopted first, right. But you could argue, like 0:13:17.400 --> 0:13:21.000 you know, post pandemic, like some of these tech headcounts 0:13:21.040 --> 0:13:23.640 got bloated, right. So I don't think it's all AI 0:13:23.880 --> 0:13:26.280 are related. Some of it is just normalization and right 0:13:26.320 --> 0:13:28.800 size and business. Yes, like AI is impact in tech, 0:13:29.320 --> 0:13:31.400 but if you look at the data so far, you're 0:13:31.440 --> 0:13:33.880 not seeing any sort of wide based impact to the 0:13:33.960 --> 0:13:37.040 labor market. Is that the future to come on the margin? Yes, 0:13:37.120 --> 0:13:39.280 I do think that to some extent you will start 0:13:39.280 --> 0:13:41.559 to see impact in the labor markets in the ARSCO, 0:13:42.520 --> 0:13:44.840 but it's more gradual. It's not going to be because 0:13:44.840 --> 0:13:45.959 at the end of the day, we are still a 0:13:46.000 --> 0:13:49.719 consumer driven economy. Someone has to pay for spent in 0:13:49.800 --> 0:13:51.839 and that's the consumers. So it's a balance and out 0:13:51.920 --> 0:13:54.720 for these companies as well of how much do you 0:13:54.800 --> 0:13:57.800 reduce headcount and what impact does that have of overall 0:13:57.840 --> 0:14:00.040 consumer spending, which ultimately drives. 0:14:00.520 --> 0:14:02.880 Apparently the person doing the spending, right, now is people's parents. 0:14:02.920 --> 0:14:05.640 Do you see this stat yesterday? It's amazing. Almost half 0:14:05.640 --> 0:14:08.480 of Americans rely on their parents for financial support, including 0:14:08.600 --> 0:14:11.760 thirty three percent of gen X thirty three percent of 0:14:11.800 --> 0:14:14.840 gen X. This came from Northwestern Mutual. Forty two percent 0:14:14.880 --> 0:14:17.520 of all Americans say they're financially dependent on their parents. 0:14:17.800 --> 0:14:21.240 Twenty percent of Americans believe they will never be independent. 0:14:21.960 --> 0:14:25.480 Stay with us more Bloomberg Surveillance coming up after this 0:14:34.600 --> 0:14:36.960 we begin this hour. We're still struggling to extend a 0:14:37.040 --> 0:14:39.800 night week Winn's streak. Lisa Shant of More Can Stanley writing, 0:14:39.840 --> 0:14:42.960 now is the time to evaluate where true secular growth 0:14:43.000 --> 0:14:47.200 may be on relative sale. Continue to reduce overboard semiconductors, 0:14:47.200 --> 0:14:51.320 favoring AI build out diffusion over the most scarcity priced epicenters. 0:14:51.480 --> 0:14:54.000 Lisa joins us now for more. Lisa, good morning, Good morning. 0:14:54.080 --> 0:14:57.600 That first line is really interesting true secular growth. Just 0:14:57.680 --> 0:15:00.400 how cyclical do you think parts of this market? 0:15:01.040 --> 0:15:04.920 I think that the entire market is one trade, and 0:15:05.000 --> 0:15:07.680 I think right now we are in the boom part 0:15:07.800 --> 0:15:12.000 of the trade, which means the entire thing is cyclical. 0:15:12.960 --> 0:15:15.760 And I would go further than that that one of 0:15:15.800 --> 0:15:19.160 the things we're pointing out to folks is, particularly in 0:15:19.200 --> 0:15:23.360 the semiconductor trade, what portion of it is price? So 0:15:23.480 --> 0:15:25.760 not only do you have to think about what are 0:15:25.840 --> 0:15:29.720 normalized earnings here? What is the fundamental underlying secular growth 0:15:29.800 --> 0:15:33.920 right here? So how much volume goes away and how 0:15:34.000 --> 0:15:36.520 much pricing power goes away? Because there's a lot of 0:15:36.520 --> 0:15:40.200 pricing power that folks are mistaking for productivity, you know, 0:15:40.240 --> 0:15:43.120 because pricing right now for the semis are flowing right 0:15:43.160 --> 0:15:45.480 to the bottom line, and folks are looking at those 0:15:45.480 --> 0:15:48.440 margins as in, oh my god, you know, increase the 0:15:48.600 --> 0:15:52.040 long run forecasts and our view as so much as 0:15:52.040 --> 0:15:53.000 is not sustainable. 0:15:53.080 --> 0:15:54.920 Did you think Broadcom then was just a crack or 0:15:54.960 --> 0:15:55.520 a red flag? 0:15:58.640 --> 0:16:00.520 Probably a red flag. 0:16:00.960 --> 0:16:01.880 It is. It is. 0:16:02.480 --> 0:16:07.280 It's just a reminder that these businesses are really, really hard. 0:16:07.280 --> 0:16:10.760 They're capital intensive, and you know, you can't you know, 0:16:10.920 --> 0:16:13.040 you may be able to see your order book, but 0:16:13.360 --> 0:16:16.880 you know, we're seeing you know, all kinds of pressure 0:16:16.920 --> 0:16:21.880 on the inputs right commodity inputs. We're seeing global commodity inflation. 0:16:22.720 --> 0:16:26.200 So I think I think it's a warning flag. 0:16:26.480 --> 0:16:29.200 I love this idea that pricing power people are mistaking 0:16:29.320 --> 0:16:32.080 for productivity gains. How much are we seeing that with 0:16:32.160 --> 0:16:34.360 stock prices as well, in the sense that there has 0:16:34.360 --> 0:16:36.920 been a scarcity of paper for so long that there 0:16:37.000 --> 0:16:40.360 was a power of equity valuations that's getting now diluted 0:16:40.360 --> 0:16:42.480 to some degree by some of the massive IPOs that 0:16:42.520 --> 0:16:43.320 are coming to market. 0:16:43.520 --> 0:16:45.080 Yeah, so you know, I mean, this is one of 0:16:45.080 --> 0:16:47.120 the things we've been talking about for a long time, 0:16:47.160 --> 0:16:50.240 and this is where we talk about pe valuations, right, 0:16:50.440 --> 0:16:53.960 and we've said to folks, look, multiples have peaked and 0:16:54.320 --> 0:16:57.720 you're probably going to get compression. So that's why earnings 0:16:57.760 --> 0:17:04.520 power is so important. You're not going to get scarcity premium, right, So, uh, 0:17:05.000 --> 0:17:07.600 you know, and in addition, you know, you guys talked 0:17:07.640 --> 0:17:10.639 at the top at the top of this hour about 0:17:10.720 --> 0:17:13.600 you know, the movement of capital. We're we're seeing you know, 0:17:13.840 --> 0:17:16.639 share repurchase, which used to be a huge source of 0:17:16.680 --> 0:17:20.880 demand in this market, and it was coming from the hyperscalers, uh, 0:17:20.960 --> 0:17:24.160 you know, begin to go away. So all of these things, 0:17:24.240 --> 0:17:27.240 you know, kind of put together, are are saying, you know, 0:17:27.359 --> 0:17:31.480 we are now uh seeing an erosion of the scarcity premium. 0:17:31.800 --> 0:17:35.960 We're seeing capital that is you know, much more ample. 0:17:36.080 --> 0:17:37.960 It is not precious. 0:17:38.200 --> 0:17:40.600 There is an issue right now that we keep asking 0:17:40.640 --> 0:17:44.080 people about how much they're selling to try to buy 0:17:44.119 --> 0:17:46.600 into some of these IPOs, like what are they selling? 0:17:46.960 --> 0:17:47.399 Is it? 0:17:47.480 --> 0:17:48.240 Is it bitcoin? 0:17:48.800 --> 0:17:51.240 Is it some of the non tech related names. 0:17:51.560 --> 0:17:52.320 What do you see? 0:17:52.600 --> 0:17:55.200 Yeah, so it's so interesting, you know that you brought 0:17:55.240 --> 0:17:58.320 up the crypto trade. You know, one of the hypotheses 0:17:58.359 --> 0:18:00.679 we've had for a really long time. I mean, you know, 0:18:00.720 --> 0:18:04.320 we've tried to illustrate this analytically. Is the extent to 0:18:04.400 --> 0:18:08.440 which bitcoin has been a liquidity oriented asset, meaning when 0:18:08.480 --> 0:18:13.480 liquidity and financial conditions are ample, it rallies, and when 0:18:13.680 --> 0:18:17.040 you know financial conditions are beginning to tighten, it pulls back. 0:18:17.440 --> 0:18:20.560 And I think that what you're seeing is all the 0:18:20.600 --> 0:18:24.600 folks who were in at crypto simply for the speculative 0:18:24.640 --> 0:18:28.760 price appreciation are coming out and they're chasing other things 0:18:28.800 --> 0:18:32.119 in the equity market, in semis in, you know, potentially 0:18:32.160 --> 0:18:33.280 accessing new deals. 0:18:33.520 --> 0:18:35.280 You think it might be a sign of capital constraints 0:18:35.320 --> 0:18:37.840 emerging that was seeing that move in crypto. 0:18:38.280 --> 0:18:41.240 Yes, potentially, I think, And to your point, I think 0:18:41.240 --> 0:18:44.320 we're over the next twelve to eighteen months. I think 0:18:44.840 --> 0:18:48.200 as everyone is issuing debt as everyone is issuing stock, 0:18:48.600 --> 0:18:51.680 we're going to start to tighten up here. I also 0:18:51.800 --> 0:18:54.960 think you know this idea you know that you raised 0:18:55.040 --> 0:18:58.000 Jonathan about, you know, is it the risk free rate 0:18:58.200 --> 0:19:01.760 versus you know, the credit premium. I'm not so sure 0:19:01.840 --> 0:19:08.320 here that that that the overall scarcity of capital here 0:19:08.359 --> 0:19:11.680 doesn't cause that risk free rate to go up, right, 0:19:12.240 --> 0:19:16.080 And you know, folks need to kind of care about 0:19:16.119 --> 0:19:18.480 that because they could say, Hey, I don't care, I'm 0:19:18.520 --> 0:19:21.320 just playing for the corporate But hey, at the end 0:19:21.320 --> 0:19:24.360 of the day, everyone's cost to capital is based off 0:19:24.400 --> 0:19:25.440 of that, right. 0:19:25.440 --> 0:19:25.600 So. 0:19:27.320 --> 0:19:29.480 You know, so you could have build on that because 0:19:29.520 --> 0:19:31.840 you're saying worried about the equity pace and on the 0:19:31.840 --> 0:19:35.600 selfri and pace as well. Yes, that's a difficult moments 0:19:35.600 --> 0:19:35.879 to be in. 0:19:36.040 --> 0:19:39.919 It is unbelievably difficult. So another theme that we're talking 0:19:39.920 --> 0:19:44.240 about with clients is not only you know, to have 0:19:44.320 --> 0:19:50.080 more realistic forward expectations about both stocks and bonds vs. V. History, 0:19:51.040 --> 0:19:54.560 but the need because both of those asset classes are 0:19:54.600 --> 0:19:58.240 now tied to these same exact themes and they are 0:19:58.480 --> 0:20:02.240 very positively coral related, that you need other things in 0:20:02.280 --> 0:20:04.600 your portfolio to be diversifiers. 0:20:05.040 --> 0:20:06.360 So It's why we've. 0:20:06.160 --> 0:20:10.200 Been so avid about adding real estate, about adding other 0:20:10.400 --> 0:20:16.480 real assets like commodities, energy, infrastructure. It's why we've had 0:20:16.760 --> 0:20:21.479 some appetite for alternatives, not all alternatives, but we've had 0:20:21.520 --> 0:20:24.760 an appetite for alts because you need that ballast in 0:20:24.800 --> 0:20:28.960 your portfolio because stocks and bonds now are being driven 0:20:29.119 --> 0:20:30.879 so much by the same exact trade. 0:20:30.920 --> 0:20:33.719 We've talked a lot about financial market dynamics. What does 0:20:33.720 --> 0:20:35.760 a real economy matter? I mean, how much do you 0:20:35.800 --> 0:20:38.280 actually if you look at the jobless numbers, that the 0:20:38.400 --> 0:20:41.200 jobs numbers that come out in about an hour and 0:20:41.240 --> 0:20:41.879 twenty minutes. 0:20:42.400 --> 0:20:46.679 So look, I think the real economy has absolutely mattered. 0:20:46.800 --> 0:20:47.040 Right. 0:20:47.119 --> 0:20:51.720 We are in this unbelievably interesting moment where this technology 0:20:51.760 --> 0:20:56.640 revolution is different than the prior to We are transforming 0:20:57.080 --> 0:21:02.439 the infrastructure, and we're transforming manufacturing. Data centers are the 0:21:02.560 --> 0:21:08.320 manufacturing factories of our future. That's a great thing in 0:21:08.400 --> 0:21:12.840