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Speaker 3: We've been monitoring some news when it comes to TikTok.
Speaker 4: Yeah, we'll speaking of President Trumpy sign an executive order
Speaker 4: to extend the deadline for TikTok's Chinese parent Byte Dance
Speaker 4: to divest the platform's US operations until December sixteenth, So
Speaker 4: another extension. Also some details about US operations including Oracle,
Speaker 4: silver Lake, and Intrise and Horowitz. Oracle would keep the
Speaker 4: TikTok cloud contract. This would be the group that would
Speaker 4: control the US operations of TikTok. For more, I want
Speaker 4: to bring in Brad's Stone. He's the editor of Bloomberg
Speaker 4: Business Week and the author of Amazon Unbound, Jeff Bezos
Speaker 4: and the Invention of a Global Empire, among many other books.
Speaker 4: He joins us from our San Francisco bureau. Brad the
Speaker 4: latest on TikTok. It's it's not. It's interesting because it's
Speaker 4: it's one that's sort of faded into the background a
Speaker 4: little bit until it comes up for deadline and then
Speaker 4: also comes up as sort of like a tool for
Speaker 4: trade negotiations. I'm just curious what you think of this
Speaker 4: group Oracle, silver Lake Andries and Horowitz, and the idea
Speaker 4: that US operations would be controlled by a group that
Speaker 4: you know, you've come to know pretty well in Silicon Valley.
Speaker 5: Right. Well, first of all, Tim, how long have we
Speaker 5: been talking about TikTok.
Speaker 6: I can tell you I.
Speaker 4: Can answer that question for you. It was during the
Speaker 4: first longer longer than I've been at Bloomberg. It was
Speaker 4: during the first Trump administration that we were talking.
Speaker 5: Webb in the retirement home one day, analyzing this.
Speaker 6: Look.
Speaker 5: I mean, i mean, first of all, you know, they're
Speaker 5: talking about spinning off the US operation into this consortium
Speaker 5: of Oracle and and recent Horowitz. They're talking about asking
Speaker 5: TikTok's one hundred and seventy million US users to download
Speaker 5: a new app. So that's a little bit of friction
Speaker 5: right there. I mean, frankly, it seems this to me
Speaker 5: seems like it would be a win for meta and YouTube.
Speaker 5: I mean, there's very little that says this new TikTok
Speaker 5: Us operation that licenses the technology from ByteDance but then
Speaker 5: recreates the algorithm domestically. It just doesn't sound like an
Speaker 5: agile company that can adapt to the rapid changes we're
Speaker 5: seeing in social media and AI. And I just have
Speaker 5: to question, you know, because we have been talking about
Speaker 5: it for so long, whether the spinoff will really happen.
Speaker 5: You know, this has been promised and or threatened many
Speaker 5: times over the years.
Speaker 3: And you know, Brad and also seeing some reporting out
Speaker 3: I think from the Journal, but said US investors holding
Speaker 3: a roughly eighty percent stake in Chinese shareholders owning the
Speaker 3: rest according to those in the know. So like, and
Speaker 3: I think there's going to be a board in that
Speaker 3: there's going to be one board member designated by the
Speaker 3: US government. It just as you say, it just sounds
Speaker 3: like kind of a strained entity.
Speaker 5: And tiptoeing around the law, right because during the Biden administration,
Speaker 5: you know, Congress passed a law that said that the
Speaker 5: TikTok algorithm would have to be created and controlled in
Speaker 5: the US. And yet you know, according to this report,
Speaker 5: they'll still be licensing some technology from Bytten, So of
Speaker 5: course the devil will be in the details. And you know,
Speaker 5: you can also imagine that it's all subject to the
Speaker 5: next presidential pronouncement and a potential trade deal with China,
Speaker 5: and so we'll see, we'll see. But look, I mean
Speaker 5: this is terrain that as we know in Silicon Valley,
Speaker 5: everything changes every single day. And the idea of asking
Speaker 5: one hundred and seventy million users to download a new
Speaker 5: app with a new algorithm and then to compete with
Speaker 5: the likes of YouTube and Instagram, that really, over the
Speaker 5: past few years have copied a lot of TikTok's functionality.
Speaker 6: Not doing it, not doing it.
Speaker 3: And I'm appt out already, Brad, What I want to
Speaker 3: ask you about I'd much rather look at some AI slop?
Speaker 3: Can you talk about AI slap?
Speaker 6: I do have to say.
Speaker 4: I just have to say, people give AI slop a
Speaker 4: hard time. Eryl Masser Brad is a fan of this stuff.
Speaker 4: She's like baby reading the story earlier today and she's saying,
Speaker 4: I love this stuff.
Speaker 3: I've lost many moments of my time watching stuff.
Speaker 5: Tell us what it is though, right, Well, so this
Speaker 5: was my my opening essay for our October issue.
Speaker 7: It's our screen time issue.
Speaker 5: And I'm looking at and if you use social media,
Speaker 5: you're probably familiar with it. The AI generated video that
Speaker 5: has come to Instagram and TikTok and YouTube. So talking
Speaker 5: dogs with their own podcast, babies being interviewed, Bunny is
Speaker 5: jumping on trampolines, you know, all sorts of craziness that
Speaker 5: has in he feeds right now. It really has been
Speaker 5: ushered in just over the past few months, in large
Speaker 5: part Google introducing a new tool, vo three, which you know,
Speaker 5: as you can see here, does a pretty good job
Speaker 5: not just with video generation but also audio generation transform
Speaker 5: transferring a written script that the user inputs into spoken dialogue,
Speaker 5: and also a sort of realistic depiction of it.
Speaker 3: I gotta tell you, I'm watching those dogs. Sorry for
Speaker 3: those who are listening on radio, But those dogs men,
Speaker 3: I mean, I believe it.
Speaker 4: Do you think they're really talking?
Speaker 8: Yeah?
Speaker 3: I believe that they have a podcast.
Speaker 5: I mean, it's what is the matter with my dog
Speaker 5: that he's not podcasting?
Speaker 7: I don't know.
Speaker 6: Yeah, here, here, here.
Speaker 4: Here, see more podcasts.
Speaker 3: Are people making a lot of money off of this?
Speaker 5: You know, a create I've talked to a bunch of
Speaker 5: creators and you know, all of them alarmingly young. I
Speaker 5: talked to one thirteen year old who is who is
Speaker 5: generating videos using Stormtroopers.
Speaker 7: So you know Disney ip uh.
Speaker 5: He made like a couple of thousand dollars over the
Speaker 5: summer just putting up these short videos of Stormtrooper misadventures
Speaker 5: onto Instagram and TikTok. I talked to another set of
Speaker 5: brothers from Montreal who were supporting their dog, their pet
Speaker 5: app by producing the dog podcasting videos and it's been
Speaker 5: a great marketing tool. So yeah, some of the social
Speaker 5: networks do pay creators for creative content.
Speaker 7: It's also a marketing tool.
Speaker 5: I don't know that anyone's getting exceedingly wealthy, but certainly
Speaker 5: the attention and the eyeballs are there.
Speaker 4: I'm curious about what this all means for Hollywood and
Speaker 4: for content creation. And it kind of gets into this
Speaker 4: a little bit because, as you mentioned, this is the
Speaker 4: introduction for the screen time issue of Bloomberg Business wee Can.
Speaker 4: I'll use this as an opportunity to plug the event
Speaker 4: Bloomberg screen Time October eighth and ninth in Hollywood. Carol
Speaker 4: and I will be there. I assume, Brad, you will
Speaker 4: be there. If there's still tickets, you can get them
Speaker 4: at Bloomberg Live dot com. We hope to see you there.
Speaker 4: What does it mean for Hollywood, because there's been there
Speaker 4: have been a lot of concerns about the ability to
Speaker 4: create content that has become so realistic and what it
Speaker 4: means for the folks who are to the south of you.
Speaker 7: Brad.
Speaker 5: Yeah, I mean, I think I think it just shows
Speaker 5: how rapidly things are changing. Just a few years ago,
Speaker 5: during the writers strike, you know, Hollywood writers expressed a
Speaker 5: real allergy to the use of AI and professional productions,
Speaker 5: and now we have this ground swell of content that's
Speaker 5: being created in dorm rooms and in basements that's flooding
Speaker 5: social media.
Speaker 7: It's it's pretty good, it's pretty high quality.
Speaker 5: And then we're seeing a little bit of a of
Speaker 5: a loosening of the restrictions in Hollywood. There was a
Speaker 5: studio that was aligned with Amazon that recently announced it
Speaker 5: would be sort of finishing or recovering some scenes from
Speaker 5: one of the last Orson Wells productions, The Magnificent Ambersons.
Speaker 7: Using AI.
Speaker 5: So you sort of consense the winds shifting a little
Speaker 5: bit in Hollywood in a realization that the technology is.
Speaker 7: Getting so good it can no longer be ignored.
Speaker 3: The one thing I keep thinking about, and you touch
Speaker 3: upon this is the responsibility of social media companies brought
Speaker 3: in this column. And you know, we've already seen the
Speaker 3: difficulties in policing harmful posts and information, and I'm thinking
Speaker 3: deep fakes and so on and so forth. Take this
Speaker 3: potentially to a whole other level. So I don't know
Speaker 3: what are we hearing when it comes to oversight and
Speaker 3: responsibility and stuff that could be harmful.
Speaker 5: Yeah, when a creator uploads a video to Instagram or TikTok,
Speaker 5: they are asked to check a box as to whether
Speaker 5: the video has been AI generated.
Speaker 7: It's essentially optional. And look, I mean, I think the.
Speaker 5: Potential for confusion for deep fakes that defraud deceive viewers
Speaker 5: is so high that it probably is incumbent upon the
Speaker 5: companies to label those and to use technology, employe technology
Speaker 5: to look for you know, hidden fingerprints or other indications
Speaker 5: of AI, and to do their viewers as service and
Speaker 5: show when AI is being employed. I use the example
Speaker 5: and maybe some listeners remember this. If the bunnies jumping
Speaker 5: on a trampoline a lot of people thought.
Speaker 7: That was real.
Speaker 5: It was AI generated. It was a video that was
Speaker 5: popular over the summer. You know, the creator of that
Speaker 5: video didn't even realize he was being asked to mark
Speaker 5: the video as AI generated. So it probably the companies
Speaker 5: probably need to do a little better job telling people
Speaker 5: what's AI and what's not.
Speaker 4: Hey, Brad, real quick apologies to end on a somber
Speaker 4: note here, but I've been meaning to ask you about this,
Speaker 4: and we have the opportunity now. Last week, Governor Spencer
Speaker 4: Cox of Utah gave a press conference following the assassination
Speaker 4: of Charlie Kirk, and he said something that stuck with me.
Speaker 4: He said, social media is a cancer. And it made headlines,
Speaker 4: but it made me question, is this going to be
Speaker 4: a moment where social media companies take a look at
Speaker 4: their algorithms or is this just a speed bump or
Speaker 4: something that isn't even considered when thinking about algorithms.
Speaker 7: I mean, Tim, there's no evidence of it. You know,
Speaker 7: particularly over the.
Speaker 5: Last year, they have downshifted content moderation strategies, you know,
Speaker 5: part partly under pressure from the US administration, and you know,
Speaker 5: and then you look at services like x over the
Speaker 5: last week, and everyone is almost their worst sells right
Speaker 5: and going to battle over what's really undeniably at tragedy.
Speaker 5: So no, there's no sense that the companies are amplifying
Speaker 5: or amping up their content moderation strategies. In fact, they
Speaker 5: might see it as a political danger and so are
Speaker 5: doing the opposite.
Speaker 3: Yeah, it's kind of remarkable this environment. Brad we got
Speaker 3: to run. Thank you so much, looking forward to talking
Speaker 3: to you more and looking forward to being there with
Speaker 3: you on screen time. That, of course, is our Bradstone,
Speaker 3: editor of Bloomberg Business Week. He's the author of Amazon
Speaker 3: on Bound, Jeff Bezos and the Invention of a Global Empire,
Speaker 3: many many other books too, so highly recommend all that
Speaker 3: he has written on.
Speaker 4: Stay with us more from Bloomberg Business Week Daily coming
Speaker 4: up after this.
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Speaker 3: Let's get to tim A's trusted voice when it comes
Speaker 3: to the US Treasury, trade and what the Fed is
Speaker 3: up to.
Speaker 4: Katie Kaminski is Chief research strategist Dan portfolio manager with
Speaker 4: Alpha Simplex Group. She joins us from Boston. Also the
Speaker 4: co author of the book trend Following with Managed Features
Speaker 4: the Search for Crisis Alpha. Katie, good to have you
Speaker 4: with us this afternoon. First, make the call about the FEDS,
Speaker 4: not just tomorrow's move, but also the move to the
Speaker 4: end of the year. We want to put you on
Speaker 4: the spot here. What do you think happens tomorrow and
Speaker 4: then what do you think happens for the remainder of
Speaker 4: the year when it comes to the path of policy.
Speaker 6: Oh, you love to do that.
Speaker 9: I get that, So I'd say twenty five tomorrow, but
Speaker 9: that's consensus. But I do think we will get some
Speaker 9: more or cuts later this year, and the market has
Speaker 9: definitely already been pricing that in, particularly in the futures market.
Speaker 9: What that means is that people are expecting this to
Speaker 9: be a catalyst a start of a new regime, which
Speaker 9: is important.
Speaker 3: Well, having said that, you know, I'm thinking about your background.
Speaker 3: You've got a Bachelor of Science and electrical engineering, a
Speaker 3: PhD in operations research from MIT. Yeah, you're super smart.
Speaker 6: We know, we know.
Speaker 3: I'm just wondering, Katie, is it easier to kind of
Speaker 3: figure out FED policy the US fixed income market right now,
Speaker 3: or is it easier figuring out a complicated electronic schematic.
Speaker 3: I'm just curious with all that's coming out, investors. I
Speaker 3: actually think it's equally as complex. And let me tell
Speaker 3: you why.
Speaker 9: Is right now is a very interesting time and history
Speaker 9: for looking at the FED, and just the amount of
Speaker 9: dissent is actually is unprecedented. So we haven't seen three
Speaker 9: descents since nineteen eighty eight, and you're starting to see
Speaker 9: a much wider range of views on.
Speaker 6: The FED itself.
Speaker 9: So I'd like to say that this is going to
Speaker 9: cause a much wider reaction, a range of reaction, or
Speaker 9: more volatility in the reaction function of markets once those
Speaker 9: decisions come out and we try to figure out what
Speaker 9: that means.
Speaker 3: Is that descent, in your view, political or is it
Speaker 3: representative of a lot of things coming out investors and
Speaker 3: maybe some mixed signals.
Speaker 9: Well, I think you know, there's clearly some political leading
Speaker 9: in terms of.
Speaker 6: That type of dissent.
Speaker 9: I mean there's but just the fact that you have
Speaker 9: such wide range of opinions and I think, like I said,
Speaker 9: we haven't seen this many descents in FED votes for decades,
Speaker 9: So it kind of suggests a new regime shift, a
Speaker 9: very different type of FED to try to analyze, and
Speaker 9: everyone's trying to understand are these descents going to move
Speaker 9: to a new consensus or are we just going to
Speaker 9: be in the same scenario for a longer period of time.
Speaker 4: I think the FED is is independent right now.
Speaker 9: I mean, I think you know it's hard to have
Speaker 9: nothing is ever one hundred percent independent in Washington, as
Speaker 9: you guys already noted, you all already noted. But I
Speaker 9: think the fact that you know, there's definitely influence coming
Speaker 9: from those that are appointed that has a potential to
Speaker 9: make independence a little bit weaker than it was before.
Speaker 9: And that's definitely the market's sentiment on that. And the
Speaker 9: things that you see is there's a lot of concern
Speaker 9: over that, and that could put the bond market at risk.
Speaker 3: So when you look at the I mean, what are
Speaker 3: you now looking and thinking in terms of how low
Speaker 3: rates can go? O Katie. I mean, we have talked
Speaker 3: with you throughout the last three to six to nine
Speaker 3: to twelve months, and there's points where we were talking
Speaker 3: about what five percent on the ten year. We've gone
Speaker 3: below four percent on the tenure where right now kind
Speaker 3: of at it. So I'm just curious what's the smart
Speaker 3: thinking in your view when it comes to where US
Speaker 3: rates trend.
Speaker 6: So this is a very good point.
Speaker 9: We have seen more long pressure in bonds, We're starting
Speaker 9: to see trajectory towards lower rates. What I get concerned
Speaker 9: about is if we stay in the middle and we
Speaker 9: sort of have a smooth and steady ride down in rates,
Speaker 9: I think that maybe something where nothing, no balance gets tipped.
Speaker 9: On the other hand, if we have a very aggressive
Speaker 9: move downward in rates, we could have some overstimulation, we
Speaker 9: could be at risk for inflation, and we could risk
Speaker 9: losing parts of the long end of the bond curve
Speaker 9: just due to investors being concerned about rates being too
Speaker 9: low and inflation being too high. So I think for me,
Speaker 9: it's coasting in the middle will give us a nice
Speaker 9: trend down in yields.
Speaker 3: Right, So did you give me levels.
Speaker 6: Exactly? But maybe maybe three?
Speaker 2: I don't know.
Speaker 9: Really hopefully maybe one. Wait, depends on the time horizon though.
Speaker 3: Did you say one?
Speaker 6: No, I definitely didn't say one.
Speaker 3: Okay, but maybe three? Are you saying three? For like
Speaker 3: the five?
Speaker 4: Three?
Speaker 3: Three and a half three, three and a half, perhaps
Speaker 3: all along.
Speaker 9: I mean that six months sofa contract is already trading
Speaker 9: at a three four, so you know we could get there.
Speaker 6: I don't know what.
Speaker 4: About when it comes to growth. Should investors be concerned
Speaker 4: about stackflation?
Speaker 6: Well?
Speaker 9: I mean I think stagflation is one of those corner
Speaker 9: cases where you know, if things are calmon, we have
Speaker 9: a balance in terms of growth is strong enough to withstand,
Speaker 9: for example, tariffs inflation, then we should be in an
Speaker 9: okay position. I think what people really get concerned about
Speaker 9: is sort of putting the pedal to the metal, right,
Speaker 9: so you basically cut rates too quickly, try to overstimulate,
Speaker 9: it doesn't work, and suddenly inflated prices are there anyways,
Speaker 9: And so I think there is a concern because it
Speaker 9: is really sort of a very bad economic situation. It's
Speaker 9: not just low growth, it's low growth when the power
Speaker 9: of your purchasing power has gone down. And so I
Speaker 9: think we love to talk about it because it's sort
Speaker 9: of like the armagedon.
Speaker 6: Of difficult scenarios.
Speaker 4: Hey, I just want to get a couple headlines that
Speaker 4: are crossing the bloomberg right now, silver Lake and Intries
Speaker 4: and Horowitz in a TikTok investor group. This according to
Speaker 4: The Wall Street Journal. The Wall Street Journal also reporting
Speaker 4: that TikTok's US consortium would include Oracle. The TikTok deal
Speaker 4: would create a new entity, and US TikTok users would
Speaker 4: be asked to shift to a new app. This is
Speaker 4: all according to the Wall Street Journal. This comes after
Speaker 4: we did learn a little earlier that the US has
Speaker 4: extended the deadline to sell TikTok until December sixteenth.
Speaker 6: The White House.
Speaker 4: Issued in order earlier just in the last hour on TikTok,
Speaker 4: extending that TikTok enforcement delay.
Speaker 3: Hey kay, before you go, what are you watching out for?
Speaker 3: Most we get a dot plus tomorrow. We've got a
Speaker 3: new member on the FED board, Stephen Myron, of course
Speaker 3: from the FED. Enough from the Fed, excuse me, nominated
Speaker 3: by the President. So I'm just curious. What's top of mind.
Speaker 3: I feel like there's going to be a lot coming
Speaker 3: at US tomorrow.
Speaker 9: I think for me, it's the dispersion in the dot plots.
Speaker 9: Do we see a much wider range and how do
Speaker 9: we distill that information? And also the size of the cut.
Speaker 9: Let's just be honest, like, do we get a surprise.
Speaker 9: I mean, I think that is always an interesting scenario
Speaker 9: to think about a zero or fifty.
Speaker 3: All right, Gonna leave it out there. I'm always always
Speaker 3: appreciate your time in such a timely interview at that
Speaker 3: Katie B. L Kati Kaminski. She's chief research strategist and
Speaker 3: portfolio manager at Alpha Simplex Group. Joining us from Boston, Massachusetts.
Speaker 2: This is the Bloomberg Business Week Daily Podcast. Listen live
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Speaker 3: Hey over the summer. One of the things that caught
Speaker 3: our attention Bloomberg News reporting of the world's largest technology
Speaker 3: companies that we're talking Microsoft, Amazon, Google, all of them
Speaker 3: planning to spend billions of dollars more than three hundred
Speaker 3: and forty four billion dollars on capital expenditures, with much
Speaker 3: of it tim going to data centers for AI models.
Speaker 4: According to Bloomberg Intelligence analyst Amandy saying, companies have quote
Speaker 4: basically tripled capex investment in cloud due to AI with
Speaker 4: executives emphasizing they need to invest quickly to get ahead
Speaker 4: our next guests. Is helping those hyper scalers scale up
Speaker 4: when it comes to AI. With us in studio as
Speaker 4: a dere Fox Martin, President and CEO of Aquinix, the
Speaker 4: nearly seventy six a billion dollar market cap data center
Speaker 4: readA trades under the ticker EQIX, down so far this
Speaker 4: year about eighteen percent. Dear, welcome, good to see.
Speaker 3: You, Thank you so much, Thank you for having me, das.
Speaker 6: To have you. So, how's business? Business is very good?
Speaker 4: Like the best you've seen it.
Speaker 1: Like we're in the middle of a very strong cyclical
Speaker 1: demand cycle for you know, the products and services.
Speaker 6: That we offer.
Speaker 4: When you say we're in the middle, help us understand
Speaker 4: how long that means of a runway there is to
Speaker 4: go here?
Speaker 1: Sure you know, at Equinics, we see a very significant
Speaker 1: trend from the training of models in the AI economy
Speaker 1: that we refer to in your opening there with the
Speaker 1: hyperscalors to the deployment of those models in enterprise systems,
Speaker 1: and that deployment is called imprints, and we see that
Speaker 1: opportunity as potentially double the size of the training opportunity
Speaker 1: and at our company, we feel where we're built for
Speaker 1: this moment.
Speaker 3: Has that happened faster than everybody anticipated, because I do
Speaker 3: feel like the conversation although we've been talking about AI
Speaker 3: of now almost two and a half years, well or
Speaker 3: well into two and a half years, but we are
Speaker 3: now increasingly talking about all this stuff starting to be
Speaker 3: put to work.
Speaker 1: Right, you can certainly see organizations we have ten thousand
Speaker 1: customers across the world moving from proof of concepts into
Speaker 1: production systems and applications of the technology.
Speaker 3: One of the things I think we're curious about is,
Speaker 3: as you know, the news flow is fast and furious
Speaker 3: from the White House and out of Washington, and there
Speaker 3: have been some announcements out of Trump administration about AI
Speaker 3: infrastructure initiatives specifically. So I'm curious that dare have you
Speaker 3: seen any impact of that on your existing properties leasing effort?
Speaker 3: And I'm curious how you compete with how does that
Speaker 3: kind of compete their program with your own development program.
Speaker 1: Look, we very much welcome the focus that the current
Speaker 1: administration has on data centers and the importance and the
Speaker 1: recognition of data centers and their important role in the
Speaker 1: infrastructure of any economy, and we certainly are looking at,
Speaker 1: you know, some of the properties that have been identified
Speaker 1: as potential for RFPs, and we would choose based on
Speaker 1: locations that would be accreative to our business because we're
Speaker 1: very focused in cities in metro areas close to where
Speaker 1: humans are who will use this technology.
Speaker 3: Are you getting pushed back from cities and humans who
Speaker 3: don't necessarily want those.
Speaker 6: Data interest not? Not hugely.
Speaker 1: I mean, we're very conscious of the role that we
Speaker 1: play and you know, the role that we play with
Speaker 1: communities where we have data centers, and we're very considered
Speaker 1: about our approach there.
Speaker 4: What makes a good location for a data center because
Speaker 4: it doesn't actually apart from the construction, it doesn't actually
Speaker 4: involve that many people to keep it up and running
Speaker 4: relative to the amount of money that's spent on it
Speaker 4: and what actually happens in there.
Speaker 1: Yeah, it's really interesting because I think you know, when
Speaker 1: you think about the operations of a data center, you
Speaker 1: tend in your mind to go immediately to technicians and technology,
Speaker 1: but actually there's a whole series of onsoung heroes in
Speaker 1: the operation of a data center, which are the craftsmen
Speaker 1: and the tradesmen and women, you know, the plumbers, the electricians,
Speaker 1: the engineers who basically keep the Internet up and running,
Speaker 1: you know, through this data center infrastructure.
Speaker 3: So difficulties in finding those workers. We've done some reporting
Speaker 3: about that that there's you know, okay, yay, great, the
Speaker 3: spend and the build, but there's not enough workers to diet.
Speaker 1: So I think, you know, the constraints that the industry
Speaker 1: are facing, you know, are around energy and power, around
Speaker 1: skilled workforce, and then into the supply chain for the equipment.
Speaker 1: That's that's part and parwercel of a data center.
Speaker 3: Structuring the bill that you guys are trying to do
Speaker 3: and meet that demand.
Speaker 1: It is something that you have to actively manage as
Speaker 1: you are looking to build. You know, for example, in
Speaker 1: our case, around some of our supply chain portfolio, we've
Speaker 1: pre purchased in order to ensure that we can have
Speaker 1: the delivery dates that we need to bring capacity online.
Speaker 4: We talked about the three hundred and forty four billion
Speaker 4: dollars that some of the world's largest tech companies are
Speaker 4: planning to spend. When it comes to Capex, it's like
Speaker 4: the thing we look for now quarterly when a company
Speaker 4: reports results, how much of hyperscalers Capex budgets actually flow
Speaker 4: through your company.
Speaker 1: We have a very significant approach on a part of
Speaker 1: the data center industry that we call co location because
Speaker 1: not all data centers are the same, and so colocation
Speaker 1: is where enterprise customers, businesses sixty percent of the Fortune
Speaker 1: five hundred for instance, would locate their workloads or their
Speaker 1: machinery with us and the inner shared facility. We have
Speaker 1: a JV structure that works with the Hyperscalors to build
Speaker 1: to suit for the hyperscalors, and so that's how we
Speaker 1: service the Hyperscaler opportunity and maintain that very important partnership
Speaker 1: that we have with I.
Speaker 3: Mean, I guess we're trying to figure out your exposure.
Speaker 3: I think your top ten customers represent about sixteen percent
Speaker 3: of monthly recurring revenue, so your exposure to the hyperscalers
Speaker 3: is pretty big, right idea Is it manageable?
Speaker 6: It's manageable.
Speaker 1: You know, the hyperscalators, for example, when they operate in
Speaker 1: our retail facilities, they do so because of the connectivity
Speaker 1: of equinics. So that's going to be a requirement, you know,
Speaker 1: for inferencing and for the actual activation of these AI workloads.
Speaker 1: So it is for us about connectivity. Connectivity is the
Speaker 1: secret source of as the data center productor.
Speaker 3: Means specifically by that, because I think we can use
Speaker 3: the word connectivity to mean a lot of different things,
Speaker 3: certainly in the business world. What does it mean specifically
Speaker 3: for us?
Speaker 1: Yeah, so in our world, it essentially means we're located
Speaker 1: in two hundred and seventy three data centers right across
Speaker 1: the planet.
Speaker 6: Inside those data centers, we have.
Speaker 1: Ecosystems of customers, customers whose value chains are connected to
Speaker 1: each other, and we physically connect them, you know, literally
Speaker 1: internect interconnect those customers one to the other. That's the
Speaker 1: first part of interconnection. So that allows for low latency
Speaker 1: transactions to happen, say, for example, on a trading floor.
Speaker 1: That allows for that to happen in real time.
Speaker 4: Yeah, we're speaking right now with the dere Fox Martin,
Speaker 4: president and CEO of Aquinix joining us here. In the
Speaker 4: Bloomberg Business Week studio, you mentioned the difference between training
Speaker 4: and in inference. Thank you. When you think about this,
Speaker 4: like a company like core we for example, where does
Speaker 4: that fit into this, Well, a core.
Speaker 6: Weave is a neo cloud.
Speaker 1: They're a company you know that provides GPU capability to
Speaker 1: companies who want to train their models so they fit
Speaker 1: into the ecosystem in the same way for US as.
Speaker 4: Other cloud like a GPU as a service correct, okay,
Speaker 4: So what are the average lease terms for an agreement
Speaker 4: with GPU as a service coorganization?
Speaker 1: It would depend, you know, they can be relatively short.
Speaker 1: For us, are leasing in our wholesale side is ten
Speaker 1: years plus. Okay.
Speaker 3: Now, one of the things I think is interesting is
Speaker 3: I think we're all trying to figure out the boom
Speaker 3: and bust of all. And today on Bloomberg there was
Speaker 3: an investor Jack Selby. He is a z VC founder
Speaker 3: and managing partner his longtime managing director of billionaire entrepreneurs
Speaker 3: Peter Teele's family office, and he said the euphoria around
Speaker 3: AI may have led to the biggest bubble yet in
Speaker 3: private technology investing, and so sounding warning bells that a
Speaker 3: correction startup valuations is in the cards.
Speaker 1: Now.
Speaker 3: We understand when you throw AI there's a lot of
Speaker 3: different players, but behind it all is the data center spend.
Speaker 3: And we have had a lot of conversations about the
Speaker 3: hyperscalers making you know, multiple duplicate arrangements with power providers
Speaker 3: that they're not going to use all of them, but
Speaker 3: they just want to make sure they've got the power
Speaker 3: where they need it. Is there any signs to you
Speaker 3: that there's exuberance that the spend is slowing down, starting
Speaker 3: to will start to slow down. Maybe next year you're
Speaker 3: seeing it. You've got a front row scene.
Speaker 1: Yeah, I guess we believe in the enduring nature of
Speaker 1: the transformation that AI and the technology associated with it
Speaker 1: can bring and can bring to businesses. I mean, as
Speaker 1: I said, we support manyfold workloads of our customers, you know,
Speaker 1: not just AI workloads, but you know, standard business process workloads,
Speaker 1: and we really are about that being that connectivity engine.
Speaker 1: So you know, I think in many ways our business
Speaker 1: model is you know, somewhat protected from any potential.
Speaker 6: Before we let you go.
Speaker 4: As I mentioned some headlines on TikTok crossing from the
Speaker 4: Wall Street Journal, the deal would create a new US
Speaker 4: entity Oracle and recent horror with silver Lake. Are you
Speaker 4: involved in this at all?
Speaker 1: Well, we partner very closely with Oracles, so it would
Speaker 1: be through that partnership that we would be supporting.
Speaker 4: So you think you will support as independent TikTok.
Speaker 1: Potentially with Oracle with Oracle, Yes, I very key partner.
Speaker 3: One last question, your stocks down? Why if it's so
Speaker 3: the sp I mean, I know, there's also an incredible
Speaker 3: spend in what you are doing. You've got to spend
Speaker 3: in order to meet the demand, you know, and so
Speaker 3: maybe that is why there isn't some reward from some
Speaker 3: of your investors. Is it kind of a conflict.
Speaker 1: Well, we're very focused on long term value creation for
Speaker 1: our shareholders, and you know, we announced that we are
Speaker 1: going to bring on as much capacity in the next
Speaker 1: five years as we have done in the previous twenty
Speaker 1: seven years of our operations, and so we're very focused
Speaker 1: on executing against our strategy. We believe in the opportunity
Speaker 1: that we see in the market and hope to deliver
Speaker 1: proof points to that to our investor community very soon.
Speaker 3: We have to leave it there. We apologize. There's been
Speaker 3: a lot going on today, so we hope you will
Speaker 3: come back and give us that day. Thank you very
Speaker 3: much for having me. We appreciate it. Dere Fox, Martin
Speaker 3: Present and CEO of Equinox joining us right here in studio.
Speaker 4: Stay with us. More from Bloomberg Business Week Daily coming
Speaker 4: up after this.
Speaker 2: You're listening to the Bloomberg Business weekdaily podcast. Catch US
Speaker 2: live weekday afternoons from two to five pm Eastern Listen
Speaker 2: on Apple CarPlay and Android Auto with the Bloomberg Business app,
Speaker 2: or watch US live on YouTube.
Speaker 4: The Wall Street Trader is gearing up for the FED decision,
Speaker 4: refraining from making big bets as they await clues on
Speaker 4: the path of rates that will shape the outlook for
Speaker 4: markets over the next few months. On the Outlook back
Speaker 4: with us as Ali McCartney, Managing director, Wealth Management and
Speaker 4: private wealth advisor with Alignment Partners at UBS. It manages
Speaker 4: just over a billion dollars. Ali joins us here in
Speaker 4: the Bloomberg Interactive Brokers studio. I want to get to
Speaker 4: your outlook everything that you're watching. But when you walked
Speaker 4: into our studio, you made the point that today's the
Speaker 4: anniversary or yesterday, depending on how you look at it
Speaker 4: of the Great Financial Crisis, and you were there, you
Speaker 4: were part of it.
Speaker 8: What was I was on over the counter equity and
Speaker 8: hedge funder road of desk, So it was at Lehman
Speaker 8: at Lehman. Yeah, sorry, I should have said that. I
Speaker 8: sort of thought that was implied. It was a crazy,
Speaker 8: crazy time and it's interesting because a lot of the
Speaker 8: conversations now are are we in a bubble? What do
Speaker 8: we do when the market is at you know, depending
Speaker 8: on what you look at. The S and P right
Speaker 8: now is trading at twenty two point three times forward earnings.
Speaker 8: You take out the mag seven, the broad based four
Speaker 8: ninety three is at twenty point two times.
Speaker 6: So people are anxious, right.
Speaker 8: I think the big difference we have right now has
Speaker 8: a lot to do with the FED. There have been
Speaker 8: four other times in history since nineteen fifty that markets
Speaker 8: have been this highly valued, and in two of those
Speaker 8: cases the markets have outperformed over the next twelve months,
Speaker 8: and in two of those cases the markets have corrected.
Speaker 8: And the difference is very very clear. The markets have
Speaker 8: outperformed in decreasing FED interest rate environments where earnings are
Speaker 8: growing or stable. They have tanked when the FED is
Speaker 8: tightening and earnings are slowing. So I think we have
Speaker 8: a little bit of a recipe for We still think
Speaker 8: the bull market continues, but you have to be cautious.
Speaker 8: We have to look at volatility, and tomorrow is going
Speaker 8: to be really meaningful in terms of the summary of
Speaker 8: economic projections. The dot plot the dissents as your former
Speaker 8: guest said, and just in general the tone.
Speaker 3: How much juice do you think the economy really really
Speaker 3: needs right now? Because you know, we've got to read
Speaker 3: on retail sales and consumers are still spending, and I
Speaker 3: know there's it feels like there's a mixed bunch of
Speaker 3: data points alley, So how much do you think that
Speaker 3: the FED needs to do?
Speaker 6: There are a lot just for tomorrow. Yeah, so you
Speaker 6: know it's the right question.
Speaker 8: What does this whole tightening cycle and what does the
Speaker 8: neutral rate look like? So the question is back to
Speaker 8: what we were talking about initially, is this insurance or
Speaker 8: is this against a growth scare? The numbers that we
Speaker 8: have seen have been very mixed. The effect on consumers
Speaker 8: in terms of tariffs, in terms of dwindling savings, in
Speaker 8: terms of high interest rates have not really appeared to
Speaker 8: create issues yet.
Speaker 6: I don't think it derails a bull.
Speaker 8: Market, a FED tightening cycle and increasing earnings really as
Speaker 8: a tailwind with AI and increased efficiency. But it's not
Speaker 8: going to be easy. Right We increasingly have a world
Speaker 8: that is the haves and the have nots and the
Speaker 8: have lots are in a really, really tough place. And
Speaker 8: so I think that some of these interest rate cuts
Speaker 8: are going to be stimulating the housing market, stimulating main street,
Speaker 8: allowing people to borrow, and making economic opportunity more uniform.
Speaker 6: But I think we go ahead.
Speaker 3: Well, yes, because Tim and I talk about so much
Speaker 3: like with Peter Atworder over at women and Mary of
Speaker 3: the k shaped economy, right Ithas and the have nots,
Speaker 3: And I get it. I get why rate cuts will
Speaker 3: help folks that are having a tougher time right now.
Speaker 3: But can we do that without those folks who are
Speaker 3: doing just fine, not leveraging up and doing crazy things.
Speaker 6: We're going to see the answer is probably not right.
Speaker 8: And think back to the times in the economy where
Speaker 8: we have had very low interest rates and ultimately what
Speaker 8: has happened, because what does it do when you lower
Speaker 8: interest rates? You put people into you push people into
Speaker 8: risk assets. So what I'm looking to see tomorrow is
Speaker 8: exactly that. Are we getting a dubvish fed right? Are
Speaker 8: they saying this is the beginning of three to five
Speaker 8: more cuts over the next twelve months, in which case
Speaker 8: I think markets and risk takers will go all in,
Speaker 8: or are we getting a hawkish cut, which is sort
Speaker 8: of the standard Powell response, which is We're still going
Speaker 8: to be data dependent. We still know there's a lot
Speaker 8: of risks out there, but I'm looking at the labor market.
Speaker 4: I just can't imagine Fetcher Powell making a commitment that
Speaker 4: far in advance, somebody who has made such a point
Speaker 4: of emphasizing how data dependent he is and how data
Speaker 4: dependent the FED is. I can't imagine it's going to
Speaker 4: be the former. I think it's going to be the latter.
Speaker 6: Agreed.
Speaker 8: But that's why I think the concept of the sense
Speaker 8: and understanding who the dots on the dot plots are,
Speaker 8: because remember, his dot's going away very soon. The other
Speaker 8: dots and the ones that are going to be the
Speaker 8: future dots are probably going to be much more politically
Speaker 8: and partisan aligned. So I think that's really what one
Speaker 8: needs to focus on in terms of deciding if we're
Speaker 8: going further north or if it's time to sell and
Speaker 8: take your games.
Speaker 4: Does that concern you though, if the dots are politically
Speaker 4: aligned rather than aligned with what these individuals think or
Speaker 4: what economists think the race should.
Speaker 8: Be it personally and professionally, it concerns me a lot.
Speaker 8: I think a politically aligned or said another way, a
Speaker 8: non independent FED is a really challenging place to be.
Speaker 4: Does it make you think differently about deploying assets in
Speaker 4: the United States?
Speaker 6: I think that.
Speaker 8: Long term implications yes, but I think that at this
Speaker 8: point in time, and when I say short term, I
Speaker 8: even mean throughout this presidency, no one's going away from
Speaker 8: the dollar.
Speaker 6: They may be going more into.
Speaker 8: Gold, which is also dollar denominated. They're buying a little
Speaker 8: less treasuries overseas, but.
Speaker 6: Not much so.
Speaker 8: I think that we have sixty plus percent of the
Speaker 8: equity capital markets of the world. The AI trend is
Speaker 8: one that is internationally recognized as a megacap five as
Speaker 8: a US silicon valley based phenomenon, both from the current
Speaker 8: hyperscalers and from the fact that they have so much
Speaker 8: cash on hand that they're going to buy, not and.
Speaker 6: Build everything that's next.
Speaker 8: So does this create or is this another warning sign
Speaker 8: along with the deficit, along with all their polarities of
Speaker 8: things that might put a chink in the US's armor. Yes,
Speaker 8: But do I think it's in the next three to
Speaker 8: five years.
Speaker 6: Probably not.
Speaker 3: Would that have happened without this current administration At.
Speaker 6: The end of the day.
Speaker 8: One of the things that as a trained economist I
Speaker 8: always look at is the demographics?
Speaker 1: Right?
Speaker 6: So the demographics of this country are in trouble.
Speaker 8: Right. We have more people retiring than andying of the
Speaker 8: first workforce that was before we stopped immigration. The birth
Speaker 8: rate's gone down. So when you look at US and
Speaker 8: you look at us relative to let's say India or China,
Speaker 8: it's a problem.
Speaker 6: But again, when does that catch up with us?
Speaker 8: And what is the rule of law and the rule
Speaker 8: of capital in those other places? And they are not
Speaker 8: as capital or law friendly as we are in terms
Speaker 8: of attracting monetary dollars or resources.
Speaker 3: What is your expertise in kind of understanding some really
Speaker 3: dark moments in US financial history? Yeah, and maybe the
Speaker 3: world looking at us like, oh my god, I can't
Speaker 3: believe like what you did?
Speaker 1: Right?
Speaker 3: Yeah, but then understanding because I think some would say
Speaker 3: that it feels a little dark right now in trying
Speaker 3: to understand how policies are going to impact the US
Speaker 3: longer term. But showing that we can have dark, difficult
Speaker 3: moments and then rise again. Yeah, our global investors willing
Speaker 3: to kind of look at the US and say, Okay,
Speaker 3: this is a moment in time, and that doesn't mean
Speaker 3: that the investment environment or the political environment, or the
Speaker 3: global environment. The US role in it won't change again.
Speaker 8: I think that this is a very shocking and emotional
Speaker 8: time for many people in and outside the US.
Speaker 6: I think that this is.
Speaker 8: This is more serious than a lot of other points
Speaker 8: in time in how much we changed about our role
Speaker 8: as an ally, as the police of the world, as
Speaker 8: the financier of the world. But again, Russia can't take
Speaker 8: our place, European Union can't take our place, India can
Speaker 8: take our place. Africa is developing, China has issues, and
Speaker 8: their demographics are challenging as well. So I think it's
Speaker 8: one of those things where a lot of people and
Speaker 8: investors have hurt feelings. But at the end of the day,
Speaker 8: one thing I tell my clients is, regardless of how
Speaker 8: you feel about the policies and politics of this country,
Speaker 8: you need to lean into that greed and then decide
Speaker 8: what to do with your spoils to make the change
Speaker 8: you want to make. I think that's how other countries
Speaker 8: look at it.
Speaker 3: You have to be quick ten seconds. But if we
Speaker 3: don't have an independent FED, it changes.
Speaker 8: I think it changes because I think that, especially let's
Speaker 8: go back to the financial crisis, you need independence and
Speaker 8: balance to get yourself out of tough situations and have disciplined.
Speaker 3: Ali McCartney, thank you, Thank you, Managing Director, Wealth Management
Speaker 3: and Private Wealth Advisor with Alignment Partners at UBS. This
Speaker 3: is Bloomberg Business WEEKDAP.
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