Speaker 1: This is Bloomberg Wall Street Week.
Speaker 2: I mean may not have an overall recession. We're having
Speaker 2: a rolling recession. To Kanye roll looks pretty strongly is
Speaker 2: when it comes to jobs.
Speaker 3: The financial story is that shape are worth.
Speaker 2: Three major regional bank failures send shockwaves through the banking system.
Speaker 2: We're all trying to figure out what to make of
Speaker 2: generative AI.
Speaker 3: Through the eyes of the most influential voices.
Speaker 2: Welcome down, Doctor Paul Krugman, Ryan Moynahan, a Bank of America,
Speaker 2: deebro Lair of the Paulson Institute, Len Hubbard of the
Speaker 2: Columbia Business.
Speaker 3: School, Bloomberg Wall Street Week with David Weston from Bloomberg Radio.
Speaker 4: The Law of unintended consequences for the Fed, for Biden,
Speaker 4: and for India. This is Wall Street Week. I'm Romain
Speaker 4: Bosting in for David Weston this week, The geopolitical wins
Speaker 4: blowing in India's favor. A conversation with Rockefeller International Chairman
Speaker 4: Rasher Sharma on the Rendramodi's economic ambition.
Speaker 5: You'd have to be a very big contradiant to take
Speaker 5: a bit against India.
Speaker 4: Plus The Business of Sports with Boston Celtics co founder
Speaker 4: ce Felauca on the high stakes deal making in basketball
Speaker 4: and soccer.
Speaker 6: A lot of these valuations have been drown up by
Speaker 6: the fact that certainly basketball and soccer are global game.
Speaker 4: At HPE, CEO Antonio n on the rush to strike.
Speaker 7: While the AI iron is high.
Speaker 8: AI will be a huge boost of revenue growth.
Speaker 4: It was a compressed trading week in US markets, markets
Speaker 4: that for a second week in a row, orbited around
Speaker 4: one J. Powell, the FED Chair, making a semi annual
Speaker 4: pilgrimage to Congress, two days of questioning before the House
Speaker 4: and the Senate on the outlook for interest rates.
Speaker 9: It only makes common sense to move at a careful pace.
Speaker 9: We don't want to do more than we have to,
Speaker 9: but overwhelmingly people in the committee do think that there's
Speaker 9: more rate hikes coming.
Speaker 4: Lawmakers also press Powell to explain how the FED will
Speaker 4: strengthen the supervision and regulation of our banks.
Speaker 9: We need to update our thinking around liquidity regulation, which
Speaker 9: was based on a certain speed of bank runs, which
Speaker 9: now looks to be outdated. Really, the liquidity regulation was
Speaker 9: just not It was not appropriate.
Speaker 4: The rise of interest rates and the regional bank fauled
Speaker 4: out have already had considerable consequence for the housing market,
Speaker 4: the number of homes for sale in the US dropping
Speaker 4: to a record low, homeowners opting to stay put since
Speaker 4: moving would mean giving up a cheaper mortgage.
Speaker 10: Those that have that three percent four percent mortgage are
Speaker 10: going to be very reluctant.
Speaker 8: To give up that interest rate.
Speaker 1: They have equity in their home. They have equity in
Speaker 1: their mortgage.
Speaker 7: Then there are the consequences of high inflation.
Speaker 4: Central bankers around the globe this week making clear that
Speaker 4: the battle.
Speaker 7: Decurb price pressures far from over. Fresh rate heights from Switzerland, Norway, Turkey,
Speaker 7: and the UK.
Speaker 4: The Bank of England unexpectedly boosting its benchmark rate by
Speaker 4: a half percentage point, a day after core inflation unexpectedly
Speaker 4: surge to a thirty one year high.
Speaker 11: Well, today's figures strengthen the case for the government to
Speaker 11: stick to its gums. No matter what the pressure from left,
Speaker 11: right or center, we wouldn't be pushed off course.
Speaker 4: Meanwhile, the consequence of a single word. The week started
Speaker 4: with US Secretary of State Anthony Blincoln making progress on
Speaker 4: thawing relations with China, but by the end of the
Speaker 4: week that progress was undone. An unscripted comment from President
Speaker 4: Biden at a campaign event, preferring to Jijian PINGUS quote
Speaker 4: a dictator.
Speaker 12: We had an incident that caused some confusion, it might say,
Speaker 12: But the Secretary of Blincoln had a great trip to China.
Speaker 12: I expect to be meeting with President she sometime on
Speaker 12: a near term. And I don't think it's had any
Speaker 12: real consequence and.
Speaker 4: The consequence for poor US China relations. It's looking to
Speaker 4: be advantageous for India Prime Minister voting in his first
Speaker 4: official state visit to the US, making the case for
Speaker 4: corporate CEOs and government officials to view India as a
Speaker 4: partner in technology and a counterbalance to China in the pond.
Speaker 7: Few YUS that have been many advances in AI E
Speaker 7: at the same time that help been.
Speaker 13: Even more momentous development in another AIA.
Speaker 7: I made it long and India.
Speaker 4: Meanwhile, back on Wall Street, global stocks notching their worst
Speaker 4: week since March, the SMP and the Nasdaq down more
Speaker 4: than a percent on the week, the socks six hundred,
Speaker 4: Europe sliding three and the World beating NK in Japan
Speaker 4: ending a run of ten straight week of gains. The
Speaker 4: money flowing out of equities did find its way into
Speaker 4: the perceived safety of government bonds, and that did push
Speaker 4: yields lower, deepening the inversion of the treasury yield curve,
Speaker 4: and that in turn prompted a flight into the dollar
Speaker 4: and a flight out of commodities. It was a somewhat
Speaker 4: confusing and chaotic week four financial markets. Financial markets that
Speaker 4: have been on an unexpected rally this year in defiance
Speaker 4: of mixed economic data and Hawker's central bank actions.
Speaker 7: Investors now left.
Speaker 4: To decide what's worse, the fear of missing out or
Speaker 4: fear of the next shoe to drop. Joining us now
Speaker 4: for our roundtable is Chris Alman, the chief investment officer
Speaker 4: over at Calsters, and Sarah Ketter are the co founder
Speaker 4: over at Causeway Capital. And Sarah, this is a question
Speaker 4: that I think is going to be debated for weeks,
Speaker 4: if not months to come here. Looking at this rally
Speaker 4: that we've had so far this year, do you think
Speaker 4: that whatever tail winds caused that rally will persist into
Speaker 4: the second half.
Speaker 1: Of the year.
Speaker 14: Probably not, And for some of the reasons that you've
Speaker 14: opened the show with today, the economic situation is likely
Speaker 14: to slow, certainly overseas. Europe's already slowing. UK has a
Speaker 14: terrible inflation problem, is doing its best to contain it.
Speaker 14: And as for the US, I mean even more inverted
Speaker 14: yield curve plus the fastest FED funds rate rise up
Speaker 14: to five percentage points that we've seen. I don't know
Speaker 14: how long. What's going on in credit and tightening a
Speaker 14: credit and there are numerous reasons why the stock market
Speaker 14: in the US and oversees may have gotten ahead of themselves.
Speaker 14: It doesn't mean to say there aren't stocks to own,
Speaker 14: just the broad indices might have a bit of a
Speaker 14: setback ahead.
Speaker 4: The KBW Bank index is falling more than five percent
Speaker 4: this week amid what Wells Fargo analyst Mike Mayo said
Speaker 4: is a combination of a bank crisis discount, a recession discount,
Speaker 4: and a regulatory discount. The results of the stress tests
Speaker 4: are set to be released next week and could provide
Speaker 4: some insight into the potential for higher capital requirements for
Speaker 4: the biggest lenders out there, and insight of course, and
Speaker 4: to the feed through into bank lending and economic activity. Sarah,
Speaker 4: there's sort of two components here when we talk about
Speaker 4: the banks, and I guess what we want out of
Speaker 4: the banks, right, there's that extension of credit, I guess,
Speaker 4: to the economy, to folks that need to borrow. There's
Speaker 4: also the issue of capital returns to shareholders.
Speaker 14: Yes, and the conflict at present in the US. US banks,
Speaker 14: certainly the regional level, are under quite a bit of
Speaker 14: pressure and as long as rates remain high, they have
Speaker 14: a series problem both their assets and their liabilities, flight
Speaker 14: of liabilities and markdown and assets. So what are they
Speaker 14: going to do? I think they just just embrace against time.
Speaker 15: For them, they've got to hold it all together.
Speaker 14: You think they're somewhat unsavory place to be investing at present.
Speaker 14: In contrast, European banks over capitalized in general and returning
Speaker 14: capitalist shareholders through dividends and share buybacks. That's you know,
Speaker 14: it's interesting to see the turn of the tables. After
Speaker 14: all those years of European banks being under performers versus
Speaker 14: the US, it has all changed.
Speaker 4: Chris, I am here is when we talk about economic conditions,
Speaker 4: or at least we try to read the tea leads
Speaker 4: of what those economic conditions might be. We do know
Speaker 4: that well having credit, basically banks lending money to consumers
Speaker 4: and to businesses is a big part of the grease
Speaker 4: for our economy here and their concerns that that grease
Speaker 4: just isn't there, at least not into the level that
Speaker 4: we want it to be.
Speaker 16: Well remain I think the banks have really slowed down
Speaker 16: their corporate lending in their direct line programs as a
Speaker 16: result of the regulations that came in two thousand and eight,
Speaker 16: but I did definitely being more conservative. The regional banks.
Speaker 10: Hold a lot of real estate debt in office real
Speaker 10: estate debt, and you guys have talked a lot today
Speaker 10: about how the real estate market is due for write
Speaker 10: downs and declines in value. That's going to put pressure
Speaker 10: on their balance sheets, as in some cases the owners
Speaker 10: throw the keys at them.
Speaker 7: So I'm worried.
Speaker 10: You know, there's still a lot of private credit that
Speaker 10: has now come in from institutional investors into the market
Speaker 10: that can fill that financing gap. Those rates of return
Speaker 10: look pretty attractive now that there really are yields and
Speaker 10: fixed income. That said, I think the regional banks are
Speaker 10: going to continue to feel pressure just because their natural
Speaker 10: market is certainly compressed. They've got better interest rates to
Speaker 10: help them, but it's going to be tough.
Speaker 4: That natural market is compressed right now. Chris So and
Speaker 4: you mentioned commercial real estate. That's obviously a big focus
Speaker 4: as well. But then even j Powell, when he was
Speaker 4: on Capitol Hill this week, was asked about the need
Speaker 4: for additional or I should say, higher capital requirements, and
Speaker 4: he pretty much, at least in the way that Jay
Speaker 4: Powell speaks, affirm that.
Speaker 7: He did.
Speaker 10: Romaine and I think that you know, they would like
Speaker 10: to see stronger, safer banks. We took a lot of
Speaker 10: time to look deep into Silicon Valley Bank and understand
Speaker 10: that exposure first reserve bank.
Speaker 16: They really were outliers.
Speaker 10: When you look at the inflows and outflows to banks,
Speaker 10: their capital structure, the regional banks, there are some that
Speaker 10: are weak and some that are strong.
Speaker 16: The money center banks really are in very good shape
Speaker 16: in the.
Speaker 4: US, say Sarah, you're probably a little bit more of
Speaker 4: an active manager than what Chris would be.
Speaker 7: I am curious.
Speaker 4: Does what happen with the banking crisis, the regional banking
Speaker 4: crisis back in March and the potential sort of specter
Speaker 4: of additional regulation, does that change your broader investment thesis overall?
Speaker 15: No, it doesn't. That we're value managers.
Speaker 14: It causeway in our fundamental portfolios, international and global and
Speaker 14: We're no matter where we are in the economic cycle,
Speaker 14: whether we're in a slowing phase or an expansion, We're
Speaker 14: looking for companies engaged in operational restructuring, so something has
Speaker 14: gone wrong with their earnings and then new management or
Speaker 14: the reformed management is there to fix it and reaccelerate.
Speaker 14: And those companies exist all over the world.
Speaker 4: This is a great conversation. Sarah Ketterer over at Causeway Capital,
Speaker 4: and there on the other side of your screen, Chris
Speaker 4: Ailman over at Cawsters. Two big and really smart people
Speaker 4: here to talk about the week that was and maybe
Speaker 4: the weeks to come up ahead. Coming up, norendromodes high
Speaker 4: fline ambitions and a fresh opportunity to sell the world.
Speaker 4: On India's economic future, Rockefeller internationals Rashier Sharma says there's
Speaker 4: still a long way to go.
Speaker 5: India's China shouldn't be or wait, China was about twenty
Speaker 5: years ago or so.
Speaker 7: That's next on Wall Street Week on Bloomberg.
Speaker 3: This is Bloomberg Wall Street Week with David Weston from
Speaker 3: Bloomberg Radio.
Speaker 4: India is now the world's fifth largest economy and it
Speaker 4: is big plans to step out of China's shadow Prime
Speaker 4: Minister Narendra Modi addressing Congress in.
Speaker 7: His first official state visit here to the US.
Speaker 4: Laying out an economic model for expanding India's manufacturing nohow
Speaker 4: welcoming foreign capital and solidifying his government as a premier
Speaker 4: partner for the US and his technology companies.
Speaker 13: India willive be the our largest economics soon.
Speaker 4: The World Bank estimates that India's GDP will expand by
Speaker 4: six point three percent in twenty twenty three, outpacing China's
Speaker 4: five point six percent forecastid growth. That's drawing a lot
Speaker 4: of attention and a lot of money from foreign investors,
Speaker 4: a rotation to India, particularly among those worried that China's
Speaker 4: economic recovery is sputtering and in need of a fiscal boost.
Speaker 11: I think the Chinese have a very difficult set of
Speaker 11: challenges ahead of them.
Speaker 17: They're very serious financial overhangs.
Speaker 4: It's not just India's economic road that is giving China
Speaker 4: a run for its money. India has taken away China's
Speaker 4: title as the most populous country in the world. That's
Speaker 4: according to estimates by the UN's World Population Dashboard.
Speaker 18: Projections indicate that the size of the Chinese population could
Speaker 18: drop below one billion before the end of the century.
Speaker 18: In India, by contrast, the population is expected to continue
Speaker 18: growing for several decades.
Speaker 4: Its younger population gives it an edge attracting multinational companies
Speaker 4: from Goldman Sachs to Rolls Royce to Rakuten make in India.
Speaker 7: The world's back office.
Speaker 4: Recent economic data highlighted a rapid service sector expansion that
Speaker 4: can be attributed to the soul called global capability centers.
Speaker 4: These gccs now count for more than one percent of
Speaker 4: India's GDP.
Speaker 18: You have to think about the labor productivity issues in
Speaker 18: the country because it's already a services dominated economy in
Speaker 18: terms of the share of GDP.
Speaker 4: Apple is doing its part in heating up competition between
Speaker 4: India and China. Apple's biggest supplier of Fox Con It's
Speaker 4: set to start manufacturing iPhones in India by next year
Speaker 4: as Apple diversifies away from China.
Speaker 18: We've had considerable success and tailments in the smartphone segment,
Speaker 18: and we have been great interest from the likes of
Speaker 18: Apple and Samsung and expanding and growing here.
Speaker 7: Investors appear to be all on board.
Speaker 4: Rupee denominated bonds are on track for the longest streak
Speaker 4: a monthly buying by overseas funds in almost four years.
Speaker 7: The local currency is offering the.
Speaker 4: Second best carrier returns in Asia this year, and equities
Speaker 4: have loured almost ten billion dollars in net foreign inflows
Speaker 4: this quarter, helping India's three point four trillion dollars stock
Speaker 4: market reclaim its spot as the world's fifth largest.
Speaker 6: See the great thing about India is that with one
Speaker 6: point four billion, you could go into the penny industry.
Speaker 7: There's a market domestic.
Speaker 4: As it positions itself as a leader on the global stage,
Speaker 4: India faces challenges at home with the withering scrutiny of
Speaker 4: a Donni Group after a report from Hindenberg Research alleged
Speaker 4: accounting fraud and stock manipulation.
Speaker 15: These things don't happen every so often.
Speaker 16: They're kind of rare, and our views that we need
Speaker 16: to bet a little bit bigger when you do get
Speaker 16: these outsize opportunities.
Speaker 4: India's modern nations free must also confront some significant shortcomings,
Speaker 4: the country's deadliest rail accident in nearly three decades raising
Speaker 4: questions about outdated infrastructure.
Speaker 17: It is a huge headpack find you.
Speaker 14: They see federal elections with just a couple of months ago.
Speaker 1: There they will be Nikiya.
Speaker 6: For more.
Speaker 4: We welcome Rashier Sharma, the chair of Rockefeller International. Rashier,
Speaker 4: great to have you here on the program. You know
Speaker 4: emerging markets better than anyone, and I'm sure you also
Speaker 4: know that for years, decades, really investors have really been
Speaker 4: interested in the promise of India. There is a focus
Speaker 4: right now, if you will, on that country, on its
Speaker 4: economy and on its cap markets that seems much different
Speaker 4: than what that focus had been in the past.
Speaker 7: What's changed?
Speaker 5: Well, I think that this focus you're seeing on the
Speaker 5: back of Prime Minister Moody's visit here has a lot
Speaker 5: to do with.
Speaker 17: Geography and size.
Speaker 5: The fact that there is such disenchantment with China and
Speaker 5: India's the only country of that kind of size, and
Speaker 5: now also its economic size has become and made it
Speaker 5: so relevant.
Speaker 4: Are there lessons though, that Mody can take from Xijenping
Speaker 4: and his move to globalize the Chinese economy and avoid
Speaker 4: some of the maybe the missteps that Jijienping made.
Speaker 5: Yeah, I think it's quite clear, which is that as
Speaker 5: far as China is concerned, that if you look at
Speaker 5: China's development path, it was a fantastic development path. It's
Speaker 5: only in the last few years that it's got derailed.
Speaker 5: And it's got derailed because they took on too much debt.
Speaker 5: It's got derailed because the state there has decided to
Speaker 5: become much more interventionist flex its muscle, and because China
Speaker 5: is in a way also been retreating from the world
Speaker 5: and turning more inward.
Speaker 17: So what Mode needs to sort.
Speaker 5: Of realize today is that India is where China should be,
Speaker 5: or where China was about twenty years ago or so.
Speaker 17: It should still be a country that's opening up.
Speaker 5: It should still be a country that is backing its
Speaker 5: private sector.
Speaker 4: We were speaking a little bit earlier this week about
Speaker 4: the unemployment rate in China, specifically among the youth, something over.
Speaker 1: Twenty one percent.
Speaker 4: India isn't that far behind, I think, depending on what
Speaker 4: numbers are used, somewhere around seventeen eighteen percent here. So
Speaker 4: that's something that has to be addressed. But it's also
Speaker 4: those same demographics that I think attracts a lot of investors,
Speaker 4: the idea that they have a younger population relative to China,
Speaker 4: younger working age population, as you're saying, relative to China.
Speaker 5: This is a country that has consistently disappointed the optimists
Speaker 5: in the pessimists. So the last few years it has
Speaker 5: clearly disappointed the pessimists because it's done much better than
Speaker 5: what the worst forecasts were. Now, I think that we
Speaker 5: just have to be careful that India doesn't follow its
Speaker 5: past pattern and disappoint the optimists as well. So I
Speaker 5: think that this is about expectations, about controlling that, about
Speaker 5: letting the numbers come through, because if you look at
Speaker 5: India today, the amount of foreign investment that India attracts
Speaker 5: is still quite small as a share of its economy.
Speaker 5: Look at numbers you know, such as foreign direct investment,
Speaker 5: the amount that comes into India as is like around
Speaker 5: one percent of GDP. Now, when China was booming and
Speaker 5: really sort of growing at a nineteen percent clip, it
Speaker 5: was attracting foreign investment or foreign direct investment in particular
Speaker 5: of close to four percent of GDP. Even today, other
Speaker 5: emerging markets are attracting foreign investment of around two two
Speaker 5: and a half percent of GDP. So we need those
Speaker 5: numbers now to come through after this incredible amount of
Speaker 5: expectations and also outperformance that we have seen.
Speaker 4: In order to do that, do they need to sort of,
Speaker 4: I guess broad and what's available to invest in. One
Speaker 4: criticism that I've heard from foreign investors is that the
Speaker 4: Indian economy, at least in terms of what can be
Speaker 4: invested in, and they're primarily talking about public markets, is
Speaker 4: way narrower than what you're going to find in China
Speaker 4: any other emerging markets. You even see that in a
Speaker 4: market capitalization three trillion dollars stock market compared to mainland
Speaker 4: China stock market which is like twelve or thirteen trillion.
Speaker 5: Yeah, but that I think the stock market in India
Speaker 5: has done very well because you know, the Indian economy
Speaker 5: members also about three trillions.
Speaker 17: So but if you.
Speaker 4: Notice that where the growth is so the list being
Speaker 4: in the publicly listed company. Yes, the criticism is that
Speaker 4: a lot of the companies and industries they want to
Speaker 4: invest in aren't public yet, so they either feel like
Speaker 4: they have to find a direct way into those companies
Speaker 4: or they have to sit on the sidelines until there's
Speaker 4: a listening.
Speaker 5: Well for foreign investors and their track record are big
Speaker 5: private investments in India is quite mixed. So I think
Speaker 5: that the public markets in India have done very well.
Speaker 5: If you look at the breadth of companies in India
Speaker 5: and the diversity of the stock market that's one of
Speaker 5: the best I know of any country in the world.
Speaker 5: There are so many sectors represented out there, from manufacturing
Speaker 5: to healthcare to commodities. It's all their technology, like obviously
Speaker 5: is known. If you look at other emerging markets, they
Speaker 5: tend to be very concentrated. You know, Brazil has one
Speaker 5: or two sectors which are make up the market, or
Speaker 5: even China got so sort of taken up by tech.
Speaker 17: As far as the good performing markets concerned.
Speaker 5: So I don't think that's an issue as far as
Speaker 5: India's concern. What's an issue today is just the fact
Speaker 5: that the valuations are very high, which is reflective of
Speaker 5: the fact that expectations are very high out of India,
Speaker 5: and those is what those need to come through.
Speaker 2: Now.
Speaker 5: We need to see the numbers come through. And you
Speaker 5: can never have an attitude that where else will the
Speaker 5: money go, It's got to come to India. I think
Speaker 5: that that attitude can be problematic. So we're all sort
Speaker 5: of you know, I think that today you'll have to
Speaker 5: be a very big contrariant to take a bet against
Speaker 5: India because the fundamentals do look pretty good as far
Speaker 5: as India's concerned, but also the fact that expectations and
Speaker 5: the hype around India is something which is quite unprecedented.
Speaker 4: All right, that's a great place to Endre Rashier really
Speaker 4: appreciate you taking time for us.
Speaker 7: Thanks Rushir Sharmerck.
Speaker 4: Where's a chair of Rockefeller International and long career Morgan
Speaker 4: Sanley and now of course the founder over at Breakout Capital.
Speaker 4: Coming up, AI gets another champion. Hewlett Packard Enterprise CEO
Speaker 4: Antonio Nerry on how HPE fits into the competition.
Speaker 8: AI would be competitive too, but we always start from
Speaker 8: the customer point of view.
Speaker 4: That's next on Wall Street Week on Bloomberg. This is
Speaker 4: Wall Street Week. I'm Romaine Boss again for David Weston.
Speaker 4: This week, HPE pushed deeper into the AI fray an
Speaker 4: announcement of a cloud service designed to handle the large
Speaker 4: computing power needed to support generative artificial intelligence. I had
Speaker 4: a chance to sit down with Antonio Nry, the CEO,
Speaker 4: about HPE's long transition away from hardware to the cloud
Speaker 4: and now to AI.
Speaker 8: The announcement we made yesterday and AI completes our vision
Speaker 8: and the execution of the strategy we have been through
Speaker 8: over the last four to five years, which green Lake
Speaker 8: is our cloud platform where we offer edge services, hybrid
Speaker 8: cloud services, and now we're going to offer AI services,
Speaker 8: so in many ways complete entire portfolio. Because in twenty
Speaker 8: eighteen I stated that the enterprise of the future will
Speaker 8: be edge centric, cloud enabled, and data driven, and obviously
Speaker 8: AI is an accelerate of the data driven strategy. And
Speaker 8: we made available an amazing set of services yesterday, with
Speaker 8: the leading service being THEAI Cloud, meaning a public offer
Speaker 8: so customers can come and privately to train their AI
Speaker 8: models in the most sustainable infrastructure.
Speaker 7: Well, let's talk about shareholder value.
Speaker 4: What are we looking at in terms of the addition
Speaker 4: to growth, whether it's profitability or revenue.
Speaker 8: AI will be a huge boost of and your growth,
Speaker 8: and we talked about this in the Q two earnings
Speaker 8: where we specifically call out in ninety days, just in
Speaker 8: Q two we booked an incremental eight hundred million dollars
Speaker 8: just for this type of AI world loads. Since then,
Speaker 8: our pipeline has grown out to over three billion dollars.
Speaker 8: And so this is what you see the momental macell
Speaker 8: rated and the reason why they're coming to us is
Speaker 8: because they know we have the capabilities, but also we
Speaker 8: have the trust. Trust is everything when it comes down
Speaker 8: to AI, and to build trust, you need to have
Speaker 8: model completion, and to have model completion, need to have
Speaker 8: this capability. So we expect this business to continue to
Speaker 8: grow and write profitable growth for.
Speaker 4: Our sholders well as you seek to get a little
Speaker 4: bit more traction on this, particularly when it comes to
Speaker 4: revenue growth. Is that going to be enough Antonio to
Speaker 4: make up for some of the lack that we've been
Speaker 4: seeing in the compute segment.
Speaker 8: Now, listen, last year the compute business grew double digits
Speaker 8: and we drove an amazing profitability.
Speaker 7: And we know compute things to be cyclical.
Speaker 8: You know, there are period of times where your modernize
Speaker 8: and you add compute capacity depending on where you want
Speaker 8: to host the worloads, and there periods that will go
Speaker 8: through digestive. But remember Green Lake, and that's an accelerator
Speaker 8: of our compute demand because ultimately that compute demand stays
Speaker 8: there for a longer period of time with hybrid prosmologen
Speaker 8: and honestly higher attached rates. So that's why we are
Speaker 8: growing the edge, we are growing the hybrid cloud, and
Speaker 8: now we're going to grow. The AI together with the
Speaker 8: data and computer will continue to be a very important
Speaker 8: aspect of portfolio, but over time the portfolio mix is
Speaker 8: going to go to those line of businesses just mentioned.
Speaker 7: That was HPE CEO Antonio Neri.
Speaker 4: AI is attracting the tension across sectors, bringing from education
Speaker 4: to healthcare. But while the use of the nascent technology
Speaker 4: might vary, the concerns are similar. Some even characterize AI
Speaker 4: as an existential threat. I sat down with Neurologic CEO
Speaker 4: Janna Eggers a little bit earlier to ask her about
Speaker 4: where AI is at.
Speaker 13: In most people's opinion, you know, they think of AI
Speaker 13: as when is it going to be like the human
Speaker 13: I think we're very, very far from that.
Speaker 15: But where we are, which is exciting.
Speaker 14: Is we're at a point where AI can really augment.
Speaker 15: Humans and help us out.
Speaker 13: And you're seeing them with chat, GPT and some of
Speaker 13: the excitements that people have around the things that it's
Speaker 13: able to do for them as far as generating ideas
Speaker 13: maybe for a vacation or for a new marketing campaign,
Speaker 13: that it's coming up with different ways than they were thinking.
Speaker 4: I well, speaking with the CEO of Hewlett Packard Enterprise.
Speaker 4: They just had a big splash you roll out this
Speaker 4: week of some new AI tools that they're integrating really
Speaker 4: into their larger cloud and enterprise software products. Here, you
Speaker 4: advise a lot of companies. You deal with a lot
Speaker 4: of companies that are looking to build out into this space.
Speaker 4: Is there sort of a scale up factor here that
Speaker 4: you think is viable, particularly when it comes to software
Speaker 4: and a lot of cloud services.
Speaker 13: Well, I typically actually advise company is to scale back
Speaker 13: rather than scale out. You know, most companies aren't going
Speaker 13: to use something like chat GPT for their business unless
Speaker 13: it's uh and HPE has an offering there, unless it's
Speaker 13: really focused on their business. So they're training models not
Speaker 13: to be the whole web of information, but to be
Speaker 13: their corporate information. And I do think that's really important,
Speaker 13: and so I wouldn't you know, obviously their use cases
Speaker 13: will scale out, but I think the data self scales back,
Speaker 13: even though again things like chat GPT give us those
Speaker 13: ideas of what could be done.
Speaker 4: Well, we have to talk a little bit here about
Speaker 4: some of the risk, or at least the perceived risk
Speaker 4: of this uh uh. This week, Bloomberg Technology held a
Speaker 4: big AI summit. They had to sit down with the
Speaker 4: open ai co founder and there was a little bit
Speaker 4: of a pushback here to some of the I guess
Speaker 4: worst case scenarios that have been positive about what AI
Speaker 4: ends up being for us, for human being.
Speaker 13: So I'm I'm again excited that consumers are able to
Speaker 13: use it because they start seeing more of what's wrong
Speaker 13: with it, and because of that, I think they'll learn
Speaker 13: a bit more about AI and.
Speaker 15: Start questioning, which I think is terrific.
Speaker 13: I think, you know some of those fears. I'm more
Speaker 13: worried about AI hype than I am actually worried about
Speaker 13: AI itself.
Speaker 15: So people start believing that it's something that it's not.
Speaker 15: That's what worries me.
Speaker 13: And so I'm I am more excited where people can
Speaker 13: use it, understand that there's some.
Speaker 15: Hype around it, and then they can.
Speaker 14: Start questioning it more and.
Speaker 13: Demanding more, demanding things like transparency and explainability, so that
Speaker 13: we know what data's used, how it's used, and what
Speaker 13: data was actually led to this suggestion or this information,
Speaker 13: and whether it.
Speaker 15: Was created or not.
Speaker 13: I mean, you've see some examples of GPT making up
Speaker 13: and people call it hallucinating.
Speaker 15: Citations.
Speaker 13: So if I know that that actually didn't come from
Speaker 13: a real site. I should be able to see that,
Speaker 13: So chat GPT should tell me that as an example.
Speaker 4: Well, that gets to this whole idea of just how
Speaker 4: reliable the use of this can be. Also, it raises
Speaker 4: a lot of questions about bias. You know, the idea
Speaker 4: that the chat GPT or whatever other generative AI products
Speaker 4: are using. The output is only be as good or
Speaker 4: as qualitative as the inputs, right, And I'd.
Speaker 13: Even say if you have you may have some really
Speaker 13: good data, but the question is is it good for
Speaker 13: that use case?
Speaker 15: So people understanding I always talk about AIS really three parts.
Speaker 13: First part is the data, second part is the algorithm,
Speaker 13: and the third part is the objective.
Speaker 15: So making sure that those are.
Speaker 13: All aligned and that this is good data for that
Speaker 13: use case and of the right size.
Speaker 15: Again, you may not need the whole internet of information.
Speaker 13: You may just need your corporate information to actually give
Speaker 13: you better answers than what the whole Internet would give.
Speaker 15: And then back to my point.
Speaker 13: About transparency and explainability. Being able to understand which data
Speaker 13: from which data set or which aggregation of data sets
Speaker 13: really drove that answer is actually quite important now and
Speaker 13: becoming more important.
Speaker 4: As we go down this path, and this does appear
Speaker 4: to be kind of the future in some form or another.
Speaker 4: There's been a lot of discussions about the data itself,
Speaker 4: the ownership of that data. We know, at least with
Speaker 4: some of these consumer products, if you're just scraping in
Speaker 4: the web, the question is do you have a right
Speaker 4: to use something that someone else produced without their permission
Speaker 4: and more importantly, without compensation. How do you sort of
Speaker 4: reconcile that given the large data needs that are required
Speaker 4: for this.
Speaker 13: Yeah, I am actually very much in the protect and
Speaker 13: protect people's copyrights and really respect their data. This is
Speaker 13: why when I talk about corporation and you know them
Speaker 13: going with their own data. When our customers come to
Speaker 13: us and say, hey, can you also help us find data,
Speaker 13: I always push back and say, let's start with your
Speaker 13: data first.
Speaker 15: Maybe we'll need that eventually, but let's start with your
Speaker 15: data first.
Speaker 13: Because most corporations have plenty of data, they don't need
Speaker 13: to go outside of their of their you know.
Speaker 15: Corporate walls to do well with data. So that that
Speaker 15: to me, the amount of data is.
Speaker 7: A red herring that was narrow logic.
Speaker 4: CEO Janna Eggers more coverage coming up here on Wall
Speaker 4: Street Week on Bloomberg, including a look at turning around
Speaker 4: a company and winning the NBA Finals. Believe it or not,
Speaker 4: they actually have a lot in common. A conversation coming
Speaker 4: up with Seve Palayuker, the co owner of the Boston
Speaker 4: Celtics and of course, former co chair over at Bain Capital.
Speaker 4: He's going to tell us how he applies his private
Speaker 4: equity background to basketball.
Speaker 7: That's coming up next on Wall Street Week on Bloomberg.
Speaker 4: I'm here right now with Stephen Palayuka, of course, the
Speaker 4: former co chairman of Bine Capital and co owner of
Speaker 4: the Boston Celtics. We've been talking a lot about the
Speaker 4: business of sports here, Steven. Probably no business has grown
Speaker 4: as much, at least not here in the US as
Speaker 4: a National Basketball Association. The current television broadcast rights set
Speaker 4: to expire sometime in mid twenty twenty five. I know
Speaker 4: negotiations have already begun, at least with current partners, but
Speaker 4: there's a lot of speculation right now about how much
Speaker 4: the NBA will broaden its reach in terms of the
Speaker 4: TV rights and the TV partners it has.
Speaker 1: Well, We're very optimistic. Viewership has never been higher.
Speaker 6: It's been a fantastic season, great competitive balance and wonderful playoffs.
Speaker 1: So singers looking up for the NBA.
Speaker 6: It's a global game and we continue to build the
Speaker 6: business in Africa overseas, and so really exciting times ahead in.
Speaker 4: Order to sort of reach a lot of the new
Speaker 4: folks as well as even the current crop of fans
Speaker 4: that you have in the league. Here is some concern
Speaker 4: here that over the last few years, if you wanted
Speaker 4: to watch an NBA game, there were really only a
Speaker 4: couple of places that you can do it. You know
Speaker 4: that how we watch TV, how we consume media has
Speaker 4: changed a lot, even over the last five years. When
Speaker 4: you anticipate what a new contract, a new broadcast contract
Speaker 4: looks like, do you think it's going to be a
Speaker 4: much wider number of companies involved than what we currently have.
Speaker 6: Yes, that's been the trend, trend in the NFL, the
Speaker 6: trend in all sports, so more people can see more games. Fundamentally,
Speaker 6: a lot of these valuations have been driven up by
Speaker 6: the fact that certainly basketball and soccer are global games,
Speaker 6: and with the streaming capability and ability to reach millions
Speaker 6: and millions of customers. We used to measure the fan
Speaker 6: base in millions, and now it's tens of millions, hundreds of millions,
Speaker 6: and even billions as far as football goes.
Speaker 4: As we see evaluation for the popular sports, the soccers
Speaker 4: of the world, the nbas of the world, we've also
Speaker 4: seen investors now start to look at I guess what
Speaker 4: can be considered second tier sports, where you're talking about
Speaker 4: something like lac or even something as what was once
Speaker 4: obscure like pickleball, at least as a professional sport. Have
Speaker 4: you taken any interest in that sort of tier of
Speaker 4: sports leagues.
Speaker 6: Yes, PAGs Group Sports our family office, we've looked at
Speaker 6: several opportunities, and again, I think sports is compelling programming
Speaker 6: and there's going to be a trickle down.
Speaker 1: Effect into all these other leagues.
Speaker 6: So people will start have the capability of watching lacrosse
Speaker 6: or watching pickleball because it's compelling programming.
Speaker 1: So I think you're going to see growth in those
Speaker 1: ancillary sports.
Speaker 4: I am curious about your career in private equity. I
Speaker 4: know you've stepped away from your main role at Bain
Speaker 4: Capital earlier this year. There are I think personally some
Speaker 4: parallels to the growth that we've seen in the private
Speaker 4: equity space over the last couple of decades and the
Speaker 4: growth that we've seen in the interest and valuations in
Speaker 4: sports franchises over that same period of time. Is there
Speaker 4: a material difference in how you approach what you did
Speaker 4: at Bain and the companies that you involved with the
Speaker 4: Bane and what you're doing now in the world of sports.
Speaker 6: It's actually very similar. There are similar dynamics in sports.
Speaker 6: You need to have a great operation, you want to
Speaker 6: build a championship team, you have to have fantastic management
Speaker 6: like we have at the Celtics.
Speaker 1: So there are a lot of parallels.
Speaker 6: The great news is there is a tailwind in the
Speaker 6: growth and private equity.
Speaker 1: It's been a missing over in the past.
Speaker 6: Maybe forty years ago, private equity was known for taking
Speaker 6: out costs. Today the industry is competitive and really focused
Speaker 6: on building businesses, and they want to build growth businesses.
Speaker 1: So it's very similar in that aspect. People want to
Speaker 1: buy and invest in companies.
Speaker 6: That can grow, and sports is a very growing property
Speaker 6: throughout the world.
Speaker 7: All right.
Speaker 4: See Well, one of the reasons why we wanted to
Speaker 4: talk to you specifically on this week is because the
Speaker 4: National Basketball Association Draft was held Thursday here in New
Speaker 4: York City. There was a lot of discussion about who
Speaker 4: would be picked first. I don't think the discussion really
Speaker 4: veered too far away from I guess the man that
Speaker 4: everyone thinks is going to be the future of this
Speaker 4: when Bamania, I think, is what they're calling it right now?
Speaker 7: What do you make of him?
Speaker 4: And more importantly, I think what he can mean for
Speaker 4: the league and what it can mean for new viewership.
Speaker 6: Well, the league has been fortunate in that, you know,
Speaker 6: I've been following it for forty years now, and we
Speaker 6: had the Larry Magic, you know, Michael Jordan Age, and
Speaker 6: now there are more stars than ever in the league.
Speaker 6: So if you look down the list, there are thirty
Speaker 6: forty what i'd call transcendent players. And when Bymania, you
Speaker 6: know is going to be amazing.
Speaker 1: He's one of.
Speaker 6: The most skilled big men we've ever seen. He can
Speaker 6: do it all, not unlike Lebron when he came in.
Speaker 7: All right, Steve, really appreciate you taking time for us.
Speaker 4: Steven Peluca there he is, of course, the former co
Speaker 4: chairman of Bane Capitol, co owner of the Boston Celtics.
Speaker 7: That does it.
Speaker 4: For this episode of Wall Street Week, I'm Romaine Bostik,
Speaker 4: This is Bloomberg,