WEBVTT - Broadcom Boom, Intel Bust Tell Two Chipmaking Tales 0:00:02.880 --> 0:00:10.680 Bloomberg Audio Studios, Podcasts, radio news. This is Bloomberg business 0:00:10.720 --> 0:00:13.920 Week inside from the reporters and editors who bring you 0:00:13.960 --> 0:00:18.320 America's most trusted business magazine, plus global business finance and 0:00:18.360 --> 0:00:22.680 tech news. The Bloomberg Business Week Podcast with Carol Messer 0:00:23.000 --> 0:00:26.600 and Tim Stenebeck from Bloomberg Radio. 0:00:27.080 --> 0:00:29.680 Twenty twenty four. Man, it was a benchmark year for 0:00:29.720 --> 0:00:34.760 the semiconductor industry, companies including Nvidia and Broadcom reaching new highs. 0:00:35.080 --> 0:00:37.600 Not everyone that was sharing in the good fortune. Intel, 0:00:37.720 --> 0:00:40.400 as we know, a story we talked throughout the year, 0:00:40.720 --> 0:00:43.519 falling sharply in twenty twenty four as the company contended 0:00:43.600 --> 0:00:46.800 with losses and grim forecasts and really trying to figure 0:00:46.880 --> 0:00:49.240 its way forward for more. We are joined by someone 0:00:49.240 --> 0:00:52.479 who knows the semi space like no other, Bloomberg Semiconductor 0:00:52.479 --> 0:00:57.320 and networking reporter Ian King, joining us on this money Monday. Ian, 0:00:57.560 --> 0:01:00.120 good to have you here with Fannie and me. I 0:01:00.160 --> 0:01:02.160 do want to start with Intel. I do wonder if 0:01:02.200 --> 0:01:03.960 twenty twenty five is going to be the year where 0:01:03.960 --> 0:01:07.440 it figures itself out. I don't know, how are you 0:01:07.520 --> 0:01:09.080 thinking about it as we get ready to kick off 0:01:09.120 --> 0:01:09.560 a new year. 0:01:10.440 --> 0:01:10.640 Yeah? 0:01:10.720 --> 0:01:13.679 No, I mean, it's a huge question right now. It 0:01:13.680 --> 0:01:17.080 doesn't even have a CEO. Remember, we still don't even 0:01:17.080 --> 0:01:20.000 know who is going to lead this company forward. The 0:01:20.080 --> 0:01:22.679 last thing we heard from its two co CEOs, who 0:01:22.800 --> 0:01:26.640 the interim appointees, was that is a company going to 0:01:26.680 --> 0:01:29.480 be broken up? We don't know that'll be for something 0:01:29.520 --> 0:01:32.480 that whoever takes the CEO role will decide. So that's 0:01:32.720 --> 0:01:35.880 even the existence of this company as it currently is, 0:01:36.120 --> 0:01:38.560 as it always has been. Even that's a question at 0:01:38.560 --> 0:01:39.319 this point. 0:01:39.480 --> 0:01:46.120 What's its expertise in now? Ian, sorry I expertise? What 0:01:46.680 --> 0:01:47.720 would it be bought for? 0:01:49.080 --> 0:01:53.440 Well, historically it had one of the strongest design teams 0:01:53.480 --> 0:01:57.360 in microprocesses, still owns a huge percentage of the PC 0:01:57.560 --> 0:01:59.840 market in terms of market share, still owns a big 0:02:00.280 --> 0:02:04.000 percentage of the server market in terms of market share, 0:02:04.040 --> 0:02:06.840 and it used to have the best factories in the world. 0:02:07.400 --> 0:02:09.880 All of those bright and shiny things are a little 0:02:09.880 --> 0:02:13.919 bit duller these days, unfortunately, but there's still in many 0:02:13.960 --> 0:02:17.880 respects and intrinsic value in that capacity in those engineering. 0:02:18.800 --> 0:02:22.480 Hey, one thing I do think about Ian is what 0:02:22.639 --> 0:02:25.760 kind of leader does Intel need going forward? You know, 0:02:26.800 --> 0:02:29.240 we've talked a lot about it. You know, the insider 0:02:29.360 --> 0:02:32.680 versus the outsider, And I do wonder what is the 0:02:32.800 --> 0:02:35.520 kind of leader that this company needs to compete in 0:02:35.560 --> 0:02:38.560 this and video world, if you will, or Nvidia dominated 0:02:38.560 --> 0:02:39.680 world at least at this moment. 0:02:40.480 --> 0:02:43.200 No, I mean, that's the question. And I think once 0:02:43.240 --> 0:02:46.160 the board decide who that is, that the type of 0:02:46.240 --> 0:02:49.840 choice they make will be a really important indicator as 0:02:49.880 --> 0:02:52.359 to what they see as the future of this company. 0:02:52.880 --> 0:02:56.440 If they look to sort of replace Pat Gelsinger, the 0:02:56.880 --> 0:03:01.240 outgo and CEO, with somebody similar, somebody who knows the company, 0:03:01.320 --> 0:03:03.919 somebody who's committed to keeping it together, then that's a 0:03:04.000 --> 0:03:08.040 sign that they're still believers. If they looked perhaps bringing 0:03:08.080 --> 0:03:11.560 an outsider, somebody who's perhaps towards the end of their career, 0:03:11.880 --> 0:03:14.840 who kind of knows the industry in general, has all 0:03:14.880 --> 0:03:17.519 the contacts, maybe that's because they see it as a 0:03:17.960 --> 0:03:20.360 breakup situation at this point. 0:03:20.680 --> 0:03:22.160 And then, of course, and you have the other side 0:03:22.160 --> 0:03:25.079 of the coin. Let's take Broadcom for example. We waited 0:03:25.160 --> 0:03:28.560 all year long and then suddenly Broadcom had this resurgence 0:03:28.600 --> 0:03:29.919 and twenty five percent. 0:03:29.680 --> 0:03:30.880 Move in one day alone. 0:03:31.320 --> 0:03:35.240 What's behind that sort of you know, revitalization of Broadcom. 0:03:35.760 --> 0:03:35.960 Yeah. 0:03:36.000 --> 0:03:38.800 I mean, you've got Hoctan, the CEO there, who's made 0:03:38.800 --> 0:03:41.840 this kind of company out of sort of the leftover 0:03:41.920 --> 0:03:44.760 parts of other companies. He sort of identified what he 0:03:44.840 --> 0:03:48.560 sees as these kind of staid but strong franchises, and 0:03:48.600 --> 0:03:51.040 that's been the atmosphere surrounding this company. But then all 0:03:51.040 --> 0:03:53.760 of a sudden, it's like, bang, we're exploding with growth 0:03:54.360 --> 0:03:58.680 because Broadcom does the design work for companies like Google 0:03:59.280 --> 0:04:01.720 who want to make their own semiconductors. And what he's 0:04:02.160 --> 0:04:04.680 saying is, Hey, I've got a pessimistic view of chips overall, 0:04:04.720 --> 0:04:06.960 but guess what this sector is amazing. 0:04:07.720 --> 0:04:12.840 Is Broadcom ian potentially the company we talk more about 0:04:12.880 --> 0:04:15.040 in twenty twenty five Over in Vidia. 0:04:16.800 --> 0:04:18.799 Difficult to say if you look at the raw numbers. 0:04:19.160 --> 0:04:24.120 No broadcoms projecting massive growth an available market as much 0:04:24.120 --> 0:04:27.440 as I think ninety billion by twenty twenty seven for 0:04:27.600 --> 0:04:31.279 its you know, AI related chip designs in videos already 0:04:31.320 --> 0:04:34.040 there right. In Vidia this year is going to have, 0:04:35.360 --> 0:04:37.440 you know, a data center division that's going to be 0:04:37.440 --> 0:04:40.200 somewhere in the one hundred hundred and twenty billion dollars. 0:04:40.320 --> 0:04:42.880 And that's just one division. So clearly in video is 0:04:42.880 --> 0:04:44.920 already there. Clearly we all have a long way to 0:04:45.000 --> 0:04:47.280 go to get even close to them. But the one 0:04:47.320 --> 0:04:50.200 that appears to be closest at this point would be Broadcome. 0:04:51.360 --> 0:04:54.080 So Nvidia is one of the stocks that is hirer today. 0:04:54.160 --> 0:04:56.200 Ian and today are always seeing right across the screen 0:04:56.240 --> 0:04:58.880 and spartially, I would imagine because of this acquisition. 0:04:58.920 --> 0:05:00.479 And Israeli software. 0:05:00.000 --> 0:05:02.320 Company tell us a little bit about one AI and 0:05:02.360 --> 0:05:03.440 what it will do for Invidea. 0:05:04.160 --> 0:05:07.120 Yeah, I mean this is a software acquisition. This software 0:05:07.240 --> 0:05:10.599 from this is rarely startup. Helps owners of data centers 0:05:10.640 --> 0:05:12.840 to get the best out of their infrastructure, to sort 0:05:12.839 --> 0:05:15.760 of coordinate it, to make sure the utilization is up, 0:05:15.800 --> 0:05:17.600 to make sure the software is being balanced in the 0:05:17.680 --> 0:05:20.600 right way. This kind of intermediary role, which is very 0:05:20.600 --> 0:05:23.560 important when you're spending you know, tens of thousands of 0:05:23.560 --> 0:05:27.800 dollars per chip. So that's very useful for Invidea. And 0:05:27.839 --> 0:05:31.160 there was some you know, concerns that in Vidia, because 0:05:31.160 --> 0:05:33.960 of its market influence, because of its size, just wouldn't 0:05:33.960 --> 0:05:36.960 be able to get anything past regulators. That's obviously not 0:05:37.040 --> 0:05:39.440 the case. It's obviously been able to close this deal 0:05:40.040 --> 0:05:42.720 and it's shown, you know, that Invidia perhaps still has 0:05:42.800 --> 0:05:45.200 room to do deals and to be able to sort 0:05:45.200 --> 0:05:47.680 of make moves and influence the industry externally. 0:05:47.880 --> 0:05:50.760 Hey, Ian, one quick last question forty five seconds here. 0:05:50.800 --> 0:05:53.000 I am curious you. We've talked so much about the 0:05:53.040 --> 0:05:55.719 semiconductor cycles right where there's lots of demand, then there's 0:05:55.720 --> 0:05:58.200 the build up, and then there's over supply. Will the 0:05:58.279 --> 0:06:00.960 AI semi cycle be the same thing or is it 0:06:01.000 --> 0:06:02.080 something different this time? 0:06:03.320 --> 0:06:03.839 Every time? 0:06:03.960 --> 0:06:06.240 I mean, I Scarlett likes to point out how long 0:06:06.320 --> 0:06:10.240 I've been covering this industry. I've been listening to CEOs 0:06:10.279 --> 0:06:13.040 telling me this time is different for most of those 0:06:13.080 --> 0:06:15.479 twenty five years, and that's never been the case. So 0:06:16.279 --> 0:06:17.520 why would that change now? 0:06:17.560 --> 0:06:18.120 Fair enough? 0:06:18.560 --> 0:06:21.560 I will definitely whatever you say, I'm going to follow it. Ian, 0:06:21.680 --> 0:06:24.440 Thank you so much, Tappy Holidays, Happy New Year, Ian 0:06:24.800 --> 0:06:28.920 King of course, Bloomberg Semiconductor and Networking reporter. All right, folks, 0:06:29.080 --> 0:06:31.200 we just chatted, of course about semis with e on. 0:06:31.279 --> 0:06:33.960 Twenty twenty four was once again a year about artificial 0:06:34.000 --> 0:06:34.800 intelligence in. 0:06:34.760 --> 0:06:35.360 A big way. 0:06:35.760 --> 0:06:38.120 Check out one measure on that. If you look at 0:06:38.120 --> 0:06:40.919 the two point six billion dollar global X funds, global 0:06:41.120 --> 0:06:44.960 X artificial intelligence and Technology ETF. It's up about twenty 0:06:45.000 --> 0:06:47.800 six percent year to date, and that's after a fifty 0:06:47.800 --> 0:06:50.280 five percent gain in twenty twenty three. So the question 0:06:50.400 --> 0:06:53.119 at this point is can it outperformed for a third 0:06:53.320 --> 0:06:55.480 year in a row. Let's get some thoughts on that. 0:06:55.520 --> 0:06:59.640 We welcome Xeno Mercer senior research analyst a Vetefi Zino. 0:06:59.720 --> 0:07:02.679 Good to have you here with Vonnie and me. Strong 0:07:02.800 --> 0:07:07.200 year in twenty twenty four, strong year in twenty twenty three, 0:07:07.800 --> 0:07:10.560 much stronger in twenty twenty three. What's your investment outlook 0:07:10.880 --> 0:07:14.200 for AI related investing come twenty twenty five. Do you 0:07:14.240 --> 0:07:15.400 have any clarity on that? 0:07:16.760 --> 0:07:18.960 I think it's clear at this point to most people 0:07:19.000 --> 0:07:21.680 and viewers or the show that AI is coming down 0:07:21.720 --> 0:07:24.880 the pipeline and every facet of society. It's not just 0:07:25.120 --> 0:07:30.160 chat and interfaces. It's advanced you know, autonomous vehicles, it's logistics, 0:07:30.360 --> 0:07:33.560 it's you know, human you know, we're advancing to the 0:07:33.600 --> 0:07:36.880 next kind of phase of human tech interaction. It's not 0:07:37.000 --> 0:07:38.520 just going to be locked in the screens. It's going 0:07:38.560 --> 0:07:41.320 to be real time with us. You know, we had 0:07:41.320 --> 0:07:44.200 the iPhone atwe Haven seven. Maybe wireless your buds and 0:07:44.240 --> 0:07:47.920 then chat GPT and now you know, from a consumer, enterprise, government, 0:07:48.320 --> 0:07:52.560 industrial standpoint, we're starting to see kind of the aifurcation 0:07:52.680 --> 0:07:55.040 of everything. And to be clear, there's still a lot 0:07:55.080 --> 0:07:59.160 of challenges and roadblocks ahead for deployment and implementation. There's 0:07:59.200 --> 0:08:01.880 new safeguards, there's new challenges that occur when you start 0:08:01.920 --> 0:08:05.480 to automate more. You know, human society isn't perfect. We 0:08:05.600 --> 0:08:09.920 operate off communication and assumptions and ledgers and things of 0:08:09.920 --> 0:08:12.760 our own, you know, AI and then robots, for example, 0:08:12.840 --> 0:08:16.760 also depend on real time and accumulated knowledge to make decisions, 0:08:16.800 --> 0:08:19.880 both from an individual basis as well as you know. 0:08:19.880 --> 0:08:21.160 A societal basis. 0:08:21.560 --> 0:08:26.840 And so what we expect to see is continued implementation 0:08:26.920 --> 0:08:29.920 of AI and robotics that you know, we expect to 0:08:29.960 --> 0:08:32.280 start to continue to eat the world to kind of 0:08:32.280 --> 0:08:36.920 paraphrase Mark Indreas and and and that's definitely something that 0:08:36.960 --> 0:08:39.360 we don't expect to slow down at all, especially when 0:08:39.400 --> 0:08:42.600 you consider some of the policies and global dynamics that 0:08:42.640 --> 0:08:43.640 are happening right now. 0:08:43.760 --> 0:08:46.319 Sure, but what kind of return on investment will it provide? 0:08:46.400 --> 0:08:49.920 And specifically for investors and companies that are making those investments, 0:08:50.040 --> 0:08:52.920 is there a case for waiting to see what it 0:08:52.960 --> 0:08:54.839 can actually do. In terms of the bottom. 0:08:54.640 --> 0:08:57.240 Line, well, I mean if you look at you know, 0:08:57.360 --> 0:08:59.480 just to look at how Wall Street's looking at it, 0:08:59.559 --> 0:09:03.240 classic the projected top and bottom lines for AI and 0:09:03.320 --> 0:09:06.559 robotics companies are both projected to continue to accelerate next year. 0:09:06.800 --> 0:09:09.240 Now and video might start to you know, grow into 0:09:09.320 --> 0:09:12.880 its accelerated growth that's been going on since you know, 0:09:13.000 --> 0:09:16.120 October twenty twenty two or you know, November since when 0:09:16.160 --> 0:09:19.480 it bottomed out. But you know, these end markets are 0:09:19.520 --> 0:09:22.760 expected to grow rapidly. I mean we're talking about, you know, 0:09:22.880 --> 0:09:26.480 majority of GDP starting to be AI and robotics driven. 0:09:26.880 --> 0:09:28.880 That's a huge you know, you're talking talking about the 0:09:28.920 --> 0:09:31.840 tam of the world that you can reverse engineer task 0:09:32.000 --> 0:09:34.960 and processes and everything else. So you if you break 0:09:35.000 --> 0:09:37.840 down the stack of what AI or robotics are, let's 0:09:37.840 --> 0:09:41.000 talk about you know, cerebral digital automation and all the 0:09:41.080 --> 0:09:44.160 connectivity and data stores that happens on that side, and 0:09:44.280 --> 0:09:48.280 the physical inputs, right we're physics found and then physical automation, 0:09:48.360 --> 0:09:51.240 which is even less automated. There's a lot of sub 0:09:51.320 --> 0:09:54.280 sectors within those that are that are that are parts 0:09:54.280 --> 0:09:56.800 of that sensors. For example, as we start to have 0:09:56.920 --> 0:09:59.600 robots that can connect and do more rather than just 0:09:59.679 --> 0:10:03.000 stat and non dynamic, We're going to have dynamic robots 0:10:03.000 --> 0:10:06.120 with more skills, higher adoption rates because they can do more. 0:10:06.360 --> 0:10:08.440 The payback periods are going to be better both for 0:10:08.559 --> 0:10:11.199 you know, manufacturers. Right now, there's a lot of push 0:10:11.240 --> 0:10:14.480 to move away from China. So we've got Vietnam, India, 0:10:14.520 --> 0:10:16.480 and even the US. A lot of people are saying like, hey, 0:10:16.480 --> 0:10:18.760 why don't we build more here? We've got very low 0:10:18.880 --> 0:10:21.800 robotics penetration rates here. You know, we're tenth in the 0:10:22.400 --> 0:10:24.720 world the United States. There's a lot of room to grow. 0:10:24.760 --> 0:10:26.600 And if we actually want to be able to match 0:10:26.920 --> 0:10:30.120 parity of cost and make this efficient for everybody, we 0:10:30.240 --> 0:10:31.960 have to we have to do more there. 0:10:32.200 --> 0:10:33.360 So z you know, walk us through. 0:10:33.400 --> 0:10:36.240 Then how does my life maybe change as a result 0:10:36.320 --> 0:10:38.040 of what you're saying? How does Bonni's life? How does 0:10:38.080 --> 0:10:41.240 everybody who's listening and watching their life change? Maybe in 0:10:41.280 --> 0:10:43.160 twenty twenty five as a result of what you're saying. 0:10:43.360 --> 0:10:46.960 This collaboration between AI and robotics, well. 0:10:46.880 --> 0:10:48.880 Some of it will be less obvious and behind the 0:10:48.920 --> 0:10:51.480 scenes right, like how food and deliveries get to you 0:10:51.559 --> 0:10:53.720 right when you We're used to pressing a button and 0:10:53.720 --> 0:10:56.720 magically things appear, so kind of continue, like, let's go 0:10:56.760 --> 0:11:00.240 a step further, right, navigating around your home for but 0:11:00.280 --> 0:11:03.160 we have remotes and automatic doors and dispensers and things 0:11:03.200 --> 0:11:03.520 like that. 0:11:03.800 --> 0:11:05.360 But what's the next level of that? Right? 0:11:05.720 --> 0:11:08.240 You know, Meta, for example, is working on interfaces that 0:11:08.520 --> 0:11:10.280 combine your real time vision. 0:11:10.400 --> 0:11:13.520 And you know, potentially a risk a wrisk worn sensor 0:11:13.679 --> 0:11:15.600 that allows you to navigate your environment. 0:11:15.640 --> 0:11:18.160 Now, this could be huge for elderly and pair you know, 0:11:18.200 --> 0:11:21.319 disabled other people as well as everyone else. On the 0:11:21.360 --> 0:11:24.000 other side, you know, personal AI assistance. I think we'll 0:11:24.040 --> 0:11:26.080 start to take off a little bit more in a 0:11:26.120 --> 0:11:29.480 more impactful way in twenty twenty five. We've seen GEM 0:11:29.520 --> 0:11:31.000 and I do this. You know, it starts connect with 0:11:31.040 --> 0:11:32.840 your calendar, your goal is your budget. 0:11:33.120 --> 0:11:35.360 You know it's not exactly there yet, but kind. 0:11:35.200 --> 0:11:36.960 Of a more simple way is you know, just even 0:11:37.160 --> 0:11:39.880 you know Open Eye's latest and others, you know, ability 0:11:39.920 --> 0:11:42.840 to look at a scene and ask questions it's asked. 0:11:42.840 --> 0:11:44.320 You know, it's kind of there's a lag period. 0:11:44.400 --> 0:11:47.679 We'll start to see that inference time disappear, maybe we'll 0:11:47.720 --> 0:11:51.520 even see that full AI capability on that specific device, 0:11:51.559 --> 0:11:54.200 whether it's a glasses or a camera on your phone, 0:11:54.559 --> 0:11:56.560 and that allows you to basically have kind of like 0:11:56.600 --> 0:11:59.680 a personal AI assistant, life coach or you know, trainer 0:11:59.800 --> 0:12:03.000 or just kind of this omni all knowing thing that 0:12:03.040 --> 0:12:05.320 can help you solve whatever problem you have. 0:12:05.600 --> 0:12:08.040 Are there companies then that have been overlooked so far 0:12:08.120 --> 0:12:10.440 in this bull run, Companies you know that are doing 0:12:10.520 --> 0:12:12.040 some of the things you just laid out. 0:12:13.080 --> 0:12:15.560 Well, there's certainly a lot of companies that are putting 0:12:15.600 --> 0:12:18.000 their hat in the ring. There's public and private companies. 0:12:18.000 --> 0:12:20.360 To be clear, You've got humanoid robots that are coming. 0:12:20.720 --> 0:12:23.000 That's one form factor of many. To be clear, you 0:12:23.080 --> 0:12:25.599 might not even have humanoids be the phone factor in 0:12:25.640 --> 0:12:27.560 your home. It might be on a base or the 0:12:27.600 --> 0:12:30.320 stand in a telescopic arm and things. 0:12:29.960 --> 0:12:30.880 To do chores for you. 0:12:31.160 --> 0:12:34.000 So we probably will have an iPhone like moment or 0:12:34.040 --> 0:12:36.480 chat GBT moment in the next year or two to say, 0:12:36.480 --> 0:12:39.120 twenty twenty five might be a bit bullish, but it's coming. 0:12:39.120 --> 0:12:41.719 You're seeing lots of companies working on it, I think 0:12:41.760 --> 0:12:44.480 at this point because things are moving so fast. It's 0:12:44.480 --> 0:12:47.679 almost better to have a basket of companies that are out. 0:12:47.480 --> 0:12:48.679 You know, that have exposure. 0:12:49.120 --> 0:12:51.560 And you know, if you have AI and autonomous vehicles 0:12:51.559 --> 0:12:54.800 to take off, you need cloud connectivity, right because they're 0:12:54.840 --> 0:12:58.040 not just operating as a loan device their network, so 0:12:58.200 --> 0:13:01.559 they depend on inputs and sensors and so a. 0:13:01.480 --> 0:13:04.240 Lot of these components like actuation, computer vision. 0:13:05.280 --> 0:13:07.480 You know, I would almost look at it as sub 0:13:07.920 --> 0:13:10.000 leaders of these sub sectors that make a lot of 0:13:10.080 --> 0:13:12.960 sense to get access to how we're seeing the majority 0:13:13.000 --> 0:13:15.600 of the GDP transforming into a more automated world. 0:13:15.840 --> 0:13:17.240 Heze and know, I do wonder do we make the 0:13:17.320 --> 0:13:19.520 leap of AI having its own agency? 0:13:19.600 --> 0:13:19.720 Right? 0:13:19.760 --> 0:13:23.080 We talk a lot about autonomous agents and basically AI 0:13:23.360 --> 0:13:27.480 not needing human intervention to respond react, just got about 0:13:27.520 --> 0:13:28.720 thirty seconds. Do we have that? 0:13:29.000 --> 0:13:29.480 Do we see? 0:13:29.520 --> 0:13:31.480 Do we hear more about that in twenty twenty five 0:13:31.520 --> 0:13:33.480 because it feels like that's the next big step. 0:13:34.160 --> 0:13:37.360 Yeah, AI agents and mixture of experts. We're going to 0:13:37.400 --> 0:13:40.920 see a lot of advances here. Clearly, you know, AI 0:13:41.040 --> 0:13:43.480 can start to solve problems on its own. We saw 0:13:43.800 --> 0:13:47.280 three from open AI come out. We're seeing open source 0:13:47.280 --> 0:13:50.120 AI come out with new models, and ultimately AI agents 0:13:50.200 --> 0:13:53.040 will will certainly start to be utilized more in twenty 0:13:53.400 --> 0:13:53.960 twenty five. 0:13:54.040 --> 0:13:55.680 That there's no question about it. 0:13:55.679 --> 0:13:58.840 It's it's going to start, you know again, open source 0:13:58.920 --> 0:14:01.720 or even just directed AI will start to eat the world, 0:14:01.720 --> 0:14:04.560 and AI agents is certainly a big part, but a 0:14:04.559 --> 0:14:05.600 slice of that pie. 0:14:05.679 --> 0:14:07.640 Well, you know, we will no doubt be talking to 0:14:07.640 --> 0:14:09.720 you again then in twenty twenty five and looking forward 0:14:09.760 --> 0:14:10.800 to a happy new year to. 0:14:10.760 --> 0:14:12.720 You that I'm not looking forward to the agent or 0:14:12.720 --> 0:14:15.319 the personal AI assistant that says, do you really need. 0:14:15.160 --> 0:14:18.720 Those new shoes? I'm not so worried about how much 0:14:18.760 --> 0:14:20.840 they get. They kind of invade your life. 0:14:21.240 --> 0:14:21.960 I totally agree. 0:14:22.040 --> 0:14:24.080 Although I bought the new iPhone, the one that's supposed to 0:14:24.080 --> 0:14:25.640 have AI capabilities, I don't know. 0:14:25.800 --> 0:14:27.480 I do not notice any difference. 0:14:28.000 --> 0:14:31.960 Alasino Mercer, they're a senior research analyst at Vertify joining us. 0:14:32.920 --> 0:14:36.320 You're listening to the Bloomberg Business Week podcast. Can't Just 0:14:36.480 --> 0:14:39.720 Live weekday afternoons from two to five pm Eastern Listen 0:14:39.760 --> 0:14:41.920 on Apple car Play and then brought auto with a 0:14:41.960 --> 0:14:44.960 Bloomberg Business act or Warn't Just Live on YouTube? 0:14:46.480 --> 0:14:49.120 Let's turn out to Lauren zeidel Baker, who is an 0:14:49.120 --> 0:14:52.120 economist at it R Economics, and Lauren will start with, 0:14:52.240 --> 0:14:54.560 you know, the most recent data out today, Dallas FED 0:14:54.600 --> 0:14:55.960 manufacturing activity coming. 0:14:55.760 --> 0:14:57.280 In strong three point four. 0:14:57.360 --> 0:14:59.960 We were anticipating a decline for December and pending home 0:15:00.120 --> 0:15:03.080 sales month over month of two point two percent, year 0:15:03.120 --> 0:15:06.840 of year of five point six percent less strong, but 0:15:06.880 --> 0:15:08.240 nevertheless getting up there. 0:15:08.440 --> 0:15:09.720 What concerns do you have? 0:15:09.800 --> 0:15:12.040 Let's start there with the US economy for twenty twenty five. 0:15:13.520 --> 0:15:16.240 Sure, we see actually good news ahead for the economy, 0:15:16.320 --> 0:15:18.720 so my concerns are really limited to these black Swan 0:15:18.760 --> 0:15:22.000 type events. So something like tariff policy, as Matt mentioned, 0:15:22.240 --> 0:15:25.200 really could constrain It could cause them upward pricing for 0:15:25.240 --> 0:15:28.040 a US consumer that's already been very squeezed by inflation. 0:15:28.360 --> 0:15:32.160 Could cause some additional hindrances for businesses here. But overall, 0:15:32.160 --> 0:15:35.400 the foundational pieces are in place for a very resilient economy, 0:15:35.480 --> 0:15:38.880 so I don't see any underlying cracks now. Later into 0:15:39.360 --> 0:15:42.400 twenty twenty five, that's when we at ITR Economics do 0:15:42.560 --> 0:15:45.960 see inflation starting to build again. Some of those inflationary 0:15:46.000 --> 0:15:49.120 pressures already in place, So something that has been squeezing 0:15:49.120 --> 0:15:52.280 both consumers and businesses, could even cause the FED to 0:15:52.400 --> 0:15:55.680 stop decreasing rates potentially even start raising them again by 0:15:55.680 --> 0:15:58.400 the end of next year, but those impacts would probably 0:15:58.440 --> 0:16:00.920 be felt more strongly by twenty two, twenty six, or seven. 0:16:01.040 --> 0:16:03.720 So all signs really pointing to good news ahead in 0:16:03.760 --> 0:16:04.400 the year to come. 0:16:04.520 --> 0:16:05.840 All right, I want to go back to how you 0:16:05.920 --> 0:16:09.880 started black swan events, whether it's tariffs, because if anything 0:16:09.920 --> 0:16:12.520 we've learned over the last decade or so or two decades, 0:16:12.680 --> 0:16:15.080 is that black swan events actually do happen, and I've 0:16:15.080 --> 0:16:16.920 had a couple in my lifetime, whether it's the Great 0:16:16.920 --> 0:16:20.000 Financial Crisis or whether it's the global pandemic. So when 0:16:20.040 --> 0:16:23.240 you say that, what in particular is it what kind 0:16:23.240 --> 0:16:25.800 of trade war we see? What is it in particular 0:16:25.800 --> 0:16:27.800 that you are so most worried about. 0:16:28.400 --> 0:16:30.720 The big ones for me are all geopolitical. So if 0:16:30.760 --> 0:16:35.440 we see wars right, increasing tensions or conflicts globally, that 0:16:35.600 --> 0:16:37.760 is a big one that we just couldn't really predict. 0:16:37.800 --> 0:16:41.440 I'm an economist, not a geopolitical analyst. But other than that, 0:16:41.480 --> 0:16:44.440 we do see the trade war, especially if we get 0:16:44.440 --> 0:16:48.360 reciprocal tariffs on some broad based US tariffs that could 0:16:48.480 --> 0:16:51.880 hinder some global trade activities. Now globally we are sort 0:16:51.880 --> 0:16:55.760 of seeing the pendulum swing away from globalization back towards nationalism. 0:16:55.920 --> 0:16:59.040 There are certainly some benefits, especially to US manufacturers, a 0:16:59.040 --> 0:17:01.720 lot of foreign direct and flowing into the United States. 0:17:02.040 --> 0:17:03.880 But this is just tipping the scale. 0:17:03.920 --> 0:17:06.240 So there will be winners and there will be losers 0:17:06.240 --> 0:17:10.600 of this tariff policy of changes right to the trade policy. 0:17:10.840 --> 0:17:12.760 It's more a matter of which side of the table 0:17:12.760 --> 0:17:16.080 you're sitting on. Certainly some opportunities for some, but it 0:17:16.119 --> 0:17:19.240 does also cause that disruption which could have those unintended 0:17:19.280 --> 0:17:20.679 consequences economy wide and. 0:17:20.720 --> 0:17:22.879 Can make things more expensive. Correct, I mean this is 0:17:22.920 --> 0:17:25.160 what I worry about. The inflationary pressures. 0:17:28.400 --> 0:17:31.280 Yeah, I want to be clear, we see fundamental reasons 0:17:31.320 --> 0:17:33.560 for inflation coming back next year on top of the 0:17:33.560 --> 0:17:35.879 tariff's tariffs would really just to boost that level of 0:17:36.240 --> 0:17:38.280 price rise. But at the end of the day, tariffs 0:17:38.320 --> 0:17:40.400 do tend to be inflationary. We have really good case 0:17:40.440 --> 0:17:43.400 studies historically from either the twenty eighteen round of tariffs. 0:17:43.880 --> 0:17:47.200 Even domestic producers do tend to increase their own prices 0:17:47.240 --> 0:17:49.880 when they get that room from their foreign competition being 0:17:49.880 --> 0:17:50.440 priced up. 0:17:50.720 --> 0:17:52.320 So I would expect. 0:17:51.920 --> 0:17:55.120 This is building on what we already see as again 0:17:55.200 --> 0:17:56.800 fundamentally resurgent inflation. 0:17:57.200 --> 0:18:01.320 So we see quite the rebound and yields treasuries just 0:18:01.400 --> 0:18:03.800 really having the most phenomenally. 0:18:03.480 --> 0:18:04.920 Awkward and strange year. 0:18:05.359 --> 0:18:07.600 Lauren Neil DNA is saying today the rise and yields 0:18:07.600 --> 0:18:09.560 is about the term premium going up, and that's because 0:18:09.600 --> 0:18:12.919 of deficit concerns. He sort of puts away the idea 0:18:12.960 --> 0:18:14.959 that it's anything to do with economic growth. 0:18:15.400 --> 0:18:16.040 What do you think. 0:18:17.720 --> 0:18:20.240 I think there's a real case for the market just 0:18:20.440 --> 0:18:22.800 putting its hand on the scale in this case. So 0:18:22.960 --> 0:18:26.399 we've seen even things like government, you know, kind of 0:18:26.400 --> 0:18:30.600 funding treasury levels, mortgage rate with certainly we think would 0:18:30.640 --> 0:18:32.879 be driven by something like the Federal funds rate, but 0:18:32.960 --> 0:18:36.040 seem much more closely correlated, especially this cycle, with those 0:18:36.520 --> 0:18:39.960 treasury yields and just not reacting in quite the same 0:18:40.000 --> 0:18:42.280 way to the Fed funds rate as they have historically. 0:18:42.400 --> 0:18:43.280 So there is. 0:18:43.200 --> 0:18:45.800 Certainly a lot of money at play right The kind 0:18:45.840 --> 0:18:49.640 of differential between global central bank policy is coming into 0:18:49.680 --> 0:18:52.080 effect here. But overall, the US is still a very 0:18:52.119 --> 0:18:54.560 good place to do business. Anytime we get that additional 0:18:54.680 --> 0:18:58.159 risk premium. Right, we are the gold standards. So I 0:18:58.240 --> 0:19:01.760 see why yields have reacted in the way. Will deficit concerns. 0:19:01.840 --> 0:19:04.320