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Speaker 1: Bloomberg Audio Studios, Podcasts, Radio News.

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Speaker 2: Good morning, I'm Nathan Hager and I'm Karen Moscow. Here

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Speaker 2: are the stories we're following today.

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Speaker 3: Karen, we begin with the latest on US China relations

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Speaker 3: after President Trump's long awaited meeting with Chinese leader shi Jinping.

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Speaker 3: The two came face to face on the sidelines of

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Speaker 3: the APEX summit in Busan, South Korea, and walked away

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Speaker 3: with an agreement to cut fentanyl related tariffs in half

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Speaker 3: to ten percent. President Trump says China has also agreed

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Speaker 3: to buy US soybeans again. On a scale of one

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Speaker 3: to ten, he says he'd rate the meeting at twelve.

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Speaker 4: I thought it was an amazing meeting. He's a great leader,

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Speaker 4: great leader of a very powerful, very strong country China.

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Speaker 3: President Trump spoke aboard Air Force one following the meeting.

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Speaker 3: China's response was a bit more muted. As we hear

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Speaker 3: from Bloomberg Steven Engel in Busan.

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Speaker 5: He did say that China will cooperate with the United

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Speaker 5: States on trade again after that hour and forty minute

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Speaker 5: meeting with Donald Trump, but he also went on to say,

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Speaker 5: with a little bit of a cautionary tone, he said

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Speaker 5: the US and China should not fall into a vicious

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Speaker 5: cycle of retaliation, and says the US should continuously reduce

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Speaker 5: the list of problems. China and the US should continuously

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Speaker 5: reduce the list of problems, and that the two nations

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Speaker 5: should i long term benefit from cooperation.

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Speaker 3: Bloomberg Steven Engel reports China's agreed to suspend rare earth

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Speaker 3: export restrictions for one year, and it says the US

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Speaker 3: will also pause some of it so called reciprocal tariffs

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Speaker 3: for a year. China also says it will resolve issues

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Speaker 3: related to TikTok with the US side, but it did

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Speaker 3: not give specifics.

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Speaker 6: Well.

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Speaker 2: One issue that apparently did not come up Nathan and

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Speaker 2: President Trump's meeting with Shijinping was in Vidia's black Well ship.

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Speaker 2: The President had indicated he might discuss it giving China

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Speaker 2: access to the AI chip giant's most advanced semiconductor. Trump

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Speaker 2: says he and she talked about vida is access to

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Speaker 2: China in general, and those conversations would continue speculation that

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Speaker 2: the US my green lights sales and more advanced chips

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Speaker 2: drove in Vidia to become the first ever five trillion

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Speaker 2: dollar company.

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Speaker 3: Well, let's turn now care into the latest market reaction

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Speaker 3: to earnings from three high tech heavyweights shares of Microsoft.

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Speaker 3: They are down nearly three percent in early trading the

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Speaker 3: world's largest software maker reported a steeper climb and spending

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Speaker 3: than Wall Street expected. The profit and revenue did top

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Speaker 3: analyst estimates, and the Azure cloud computing unit posted a

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Speaker 3: thirty nine percent revenue gain in the quarter that was

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Speaker 3: also a beat. An aag Rana is a senior tech

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Speaker 3: analyst at Bloomberg Intelligence.

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Speaker 7: You look at Azure growth of thirty nine percent, I

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Speaker 7: mean given that size, that's pretty good. The margins actually

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Speaker 7: stood out, you know, way higher than what we were anticipating.

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Speaker 7: We thought there was going to be pressure on margins

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Speaker 7: because of all the spending. And then the lastly when

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Speaker 7: you look at the capex number substantially higher than the

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Speaker 7: thirty billion that they talked about now in you know,

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Speaker 7: to some people maybe that's what this ointment. But for us,

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Speaker 7: that's a good thing because I think they have so

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Speaker 7: much demand coming in.

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Speaker 3: That sound a rag Rana with Bloomberg Intelligence, and on

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Speaker 3: the company conference call, Chief financial officer Amy Hood said

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Speaker 3: Microsoft cannot meet current demand for AI and other services well.

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Speaker 2: Shares of Meta Nathan they're also pulling back this morning,

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Speaker 2: they are down more than seven percent. The Facebook owner

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Speaker 2: is projecting increasing expenses and it's taking a one time

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Speaker 2: tax charge. And we get more with Bloomberg's Sturlelypellett.

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Speaker 8: Meta said the tax charge of fifteen point nine billion

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Speaker 8: dollars was due to the implementation of the tax bill

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Speaker 8: signed into law in July. I haven't find Sethos, a

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Speaker 8: senior partner with Tigris Financial Partners.

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Speaker 9: So the Big Beautiful Bill caused the recognition of a

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Speaker 9: deferred tax asset. It's actually a non cast charge. And

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Speaker 9: there while it caused a spike in their tax rates

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Speaker 9: eighty seven percent for the quarter, it actually goes down

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Speaker 9: significantly going forward. I think this is really a non event.

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Speaker 9: It's an accounting issue, and I think any weakness is

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Speaker 9: a buying opportunity. In the stop.

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Speaker 8: Meta says it will continue to invest aggressively in artificial

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Speaker 8: intelligence in New York. Charlie Bloomberg Radio, All right, Charlie,

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Speaker 8: thank you.

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Speaker 3: On the flip side, shares of Alphabet are surging pre

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Speaker 3: market there now at eight percent. Sales topped quarterly Wall

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Speaker 3: Street estimates, fueled by a surgeon demand for its cloud

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Speaker 3: and artificial intelligence services.

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Speaker 10: Brook May is a managing partner at evans May Wealth.

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Speaker 11: Alphabet is the horse that I would put my money

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Speaker 11: on right now. You know, they've blown their earnings out

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Speaker 11: of the water. You know, not only did they have

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Speaker 11: good earnings growth, but you know the cloud growth was

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Speaker 11: very strong. You know, search is strong.

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Speaker 10: That's brook May of evans May Wealth.

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Speaker 3: Alphabet says its capital expenditures for the year will be

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Speaker 3: ninety one to ninety three billion dollars.

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Speaker 10: That's up from an earlier estimate of eighty five billion.

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Speaker 2: Well, Nathan, The high tech earnings continue today with Apple

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Speaker 2: and Amazon reporting after the close of trading, and we

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Speaker 2: get a preview with Bloomberg's Tom Busby.

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Speaker 12: Just days after Apple became the third stock in history

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Speaker 12: to top four trillion dollars in value, Investors want to

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Speaker 12: know about its investment in AI, how many new iPhone

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Speaker 12: seventeen's it's sold, and whether sales in China have started

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Speaker 12: to rebound. It's projected to report record revenue, topping one

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Speaker 12: hundred billion dollars for the first time ever. At Amazon,

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Speaker 12: investors will want to know about growth and its AWS

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Speaker 12: cloud computing unit, the one that suffered a serious outage

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Speaker 12: just last week. And they also want to know whether

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Speaker 12: all the money it's investing in AI is bringing in revenue.

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Speaker 12: Tom Busby, Bloomberg Radio.

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Speaker 10: All right, Tom, thanks.

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Speaker 3: Artificial intelligence startup open ai is reportedly preparing to file

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Speaker 3: for an initial public offering as soon as next year.

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Speaker 3: Reuter's is reporting that IPO could give the company a

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Speaker 3: market capitalization of one trillion dollars. Earlier this week, open

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Speaker 3: ai said it completed a restructuring into a more traditional

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Speaker 3: corporate organization, which could make an IPO possible. Open Ai

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Speaker 3: was most recently valued at five hundred billion dollars in

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Speaker 3: an employee share sale.

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Speaker 2: Well, Nathan Elon Musk's one trillion dollar pay package is

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Speaker 2: being opposed by the biggest pension plan in the US,

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Speaker 2: California Public Employees Retirement System is planning to vote against

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Speaker 2: Musk's compensation agreement. A spokesperson for CalPERS the CEO pay

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Speaker 2: package proposed by Tesla is larger than pay packages for

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Speaker 2: CEOs and comparable companies by many orders of magnitude. CalPERS

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Speaker 2: owns about five million shares in Tesla.

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Speaker 3: All right, let's turn to the economy, now, Karen in

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Speaker 3: the latest decision from the Federal Reserve for the second

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Speaker 3: meeting in a row. The Fed has cut interest rates,

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Speaker 3: but Chair J. Powell is cautioning investors against assuming another

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Speaker 3: interrastrate cut is coming in December.

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Speaker 13: In the committee's discussions at this meeting, there were strongly

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Speaker 13: differing views about how to proceed in December. A further

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Speaker 13: reduction in the policy rate at the December meeting is

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Speaker 13: not a foregone conclusion.

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Speaker 10: Far from it.

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Speaker 13: Policy is not on a preset course.

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Speaker 3: Japal's comments came after the Fed voted ten to two

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Speaker 3: to lower rates by a quarter of a point for

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Speaker 3: the first time in six years. There were to sense

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Speaker 3: in both directions. One official advocated a larger reduction, another

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Speaker 3: preferred to stay on hold.

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Speaker 2: In Asia, Nathan the Bankage Japan Policy Board left at

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Speaker 2: spendmark interest rate change in a vote that offered no

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Speaker 2: new hints on what it might hike, and the BOJ

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Speaker 2: held its policy rate at zero point five percent.

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Speaker 10: And we get another rate decision later this morning.

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Speaker 3: Karen from the European Central Bank economists predict the ECB

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Speaker 3: will keep its interest rate unchanged for a third straight meeting.

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Speaker 14: Time.

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Speaker 2: Now for look at some of the other stories making

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Speaker 2: news in New York and around the world. And for

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Speaker 2: that we're joined by Bloomberg's Michael Barr.

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Speaker 10: Michael, good morning, Good morning, Karen.

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Speaker 6: The devastation from Hurricane Melissa has resulted in at least

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Speaker 6: thirty three depths across the Caribbean, with powerful winds tearing

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Speaker 6: the bird homes and buildings and knocking out electricity. Andrew

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Speaker 6: Wholeness is Jamaica's Prime Minister.

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Speaker 15: I would say about eighty to ninety percent of roofs

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Speaker 15: were destroyed, Hospitals destroyed, libraries, police station, fourthouses are about

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Speaker 15: infrastructure destroyed.

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Speaker 6: Economic losses in Jamaica are estimated to be seven point

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Speaker 6: seven billion dollars. Melissa is moving away from the Bahamas

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Speaker 6: more with Bloomberg meterologist Craig Allen.

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Speaker 16: Fortunately, the forward speed has picked up, now moving north

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Speaker 16: northeast at about twenty to twenty five miles per hour

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Speaker 16: and increasing. Next up Unfortunately Bermuda, the storm will probably

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Speaker 16: pass just to the west of the island rather than

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Speaker 16: a direct hit, but now less than eight hundred miles away,

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Speaker 16: and it will pass with hurricane conditions for Bermuda during

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Speaker 16: Thursday night into early Friday.

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Speaker 6: Thank you Craig. The government shutdown is now in its

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Speaker 6: thirtieth day. More than forty million Americans are expected to

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Speaker 6: lose food benefits this Saturday. This Pennsylvania widow says losing

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Speaker 6: snap will force her to choose either.

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Speaker 2: We eat, or we don't have electricity, or we don't

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Speaker 2: have gas.

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Speaker 6: Republicans are blaming Democrats for the shutdown. Democrats say Republicans

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Speaker 6: that refuse to address health insurance premiums. A Paris prosecutor

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Speaker 6: says five more people have been arrested in the investigation

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Speaker 6: into the theft of Crown jewels from the Louver Museum,

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Speaker 6: but the treasures remain missing. The prosecutors says two suspects

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Speaker 6: and the jewel heist have admitted their involvement in the theft.

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Speaker 6: They were handed preliminary charges for a theft committed by

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Speaker 6: an organized gang and criminal conspiracy. It took the thieves

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Speaker 6: less than eight minutes to steal the jewels, valued at

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Speaker 6: one hundred and two million dollars. Global News twenty four

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Speaker 6: hours a day and whenever you want it with the

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Speaker 6: Bloomberg News. Now, I'm Michael Barr, and this is Bloomberg.

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Speaker 2: Karen all Right, Michael Barr thank you. Time Now for

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Speaker 2: the Bloomberg Sports Update, here's John stash Hour.

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Speaker 10: John, Good morning, you, Morning Careen.

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Speaker 17: Dodger fans are known for being stuck in traffic, arriving

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Speaker 17: in the games late, and that happened last night. Those

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Speaker 17: fans missed it. Unprecedented start to a World Series game.

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Speaker 18: Game five is underway with a fly ball to t left,

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Speaker 18: come first to the volume and David Schneider, let's get

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Speaker 18: it out on Sportsnight Gatto leave off home run has

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Speaker 18: happened before, even on the first pitch. Derek Jeter did

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Speaker 18: that in the two thousand Subway Series. But when Vladimir

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Speaker 18: Guerrero Junior homer two pitches later, that made for World

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Speaker 18: Series history and a two nothing lead that Toronto never

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Speaker 18: gave up.

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Speaker 10: A night after the Blue.

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Speaker 17: Jays beat the Dodgers six to two, they won six

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Speaker 17: to one and now head home up three to two

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Speaker 17: in the series. Another pitching jem by their twenty two

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Speaker 17: year old rookie Treya Savage. The Yankees and the Alds

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Speaker 17: couldn't get a hit off him. The Dodgers only got three,

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Speaker 17: a Savage struckout twelve. His manager is John Snyder.

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Speaker 19: It's one thing to be in the zone, and it's

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Speaker 19: another thing to be in his zone and get some

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Speaker 19: swinging mess. So slider and split were electric. You know,

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Speaker 19: I said it before the game, it's it's a different

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Speaker 19: pitcher when he has his stuff.

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Speaker 6: You know.

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Speaker 19: Game one didn't have a feel for a split, so

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Speaker 19: kind of blown away at what he did.

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Speaker 17: The good news for the Dodgers the Ashinova Yamamoto will

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Speaker 17: start Game six tomorrow. He's had complete game victories in

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Speaker 17: his last two starts in the LA. He's alive at

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Speaker 17: game seven Saturday, and the Nets are on and five

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Speaker 17: and Brooklyn lost to Atlanta won seventeen one twelve. Michael

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Speaker 17: Porter led the NEETs with thirty two points. In Boston,

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Speaker 17: Jalen Brown scored thirty. Celtics beat the Cavs by twenty Indiana.

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Speaker 17: I went to Game seven of the finals last year.

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Speaker 17: They're rowing four this season, a two point loss in Dallas.

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Speaker 17: Lakers are playing without both Lebron James and Luka Donson's

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Speaker 17: but Austin Reeves just had a fifty one point game

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Speaker 17: in last night, scored at the buzzer for Laker winn

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Speaker 17: at Minnesota. The Bulls beat Sacramento to go to four

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Speaker 17: and oh John Stashawa, Bloomberg Sports Karen.

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Speaker 2: Nathan stay with us. More from Bloomberg day Break coming

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Speaker 2: up after.

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Speaker 1: This Coast to coast on Bloomberg Radio, nationwide on Sirius XM,

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Speaker 1: and around the world on Bloomberg dot Com and the

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Speaker 1: Bloomberg Business opp This is Bloomberg Daybreak.

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Speaker 8: Good morning.

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Speaker 3: I'm Nathan Hager. On a scale of one to ten,

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Speaker 3: he rated a twelve. That was what President Trump said

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Speaker 3: after his long awaited meeting on trade with China Knese

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Speaker 3: President she Jenpang.

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Speaker 4: It is an outstanding group of decisions.

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Speaker 8: I think that was made.

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Speaker 4: A lot of decisions were made too. It wasn't too

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Speaker 4: much left out there.

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Speaker 3: That was President Trump on Air Force One after his

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Speaker 3: nearly two hour face to face with the Chinese leader

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Speaker 3: in South Korea. Joining us for some more details on

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Speaker 3: what came out of it is Bloomberg News Global Trades

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Speaker 3: are Brendan Murray and Brendan. It seems like we're getting

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Speaker 3: kind of a drip drip of headlines on some of

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Speaker 3: the details coming out of this encounter. Walk us through

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Speaker 3: what we've learned of what we know so far. Good morning.

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Speaker 14: Yeah, Basically it means we're not headed into a big

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Speaker 14: trade war with China over the next year. They've agreed

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Speaker 14: to what they're calling a one year truce. From the

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Speaker 14: US side, the US gave up the following concessions. They

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Speaker 14: agreed to lower the fentanyl tariffs on Chinese imports from

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Speaker 14: twenty percent to ten. They're suspending an expansion of its

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Speaker 14: US Entity list. That's a list of Chinese companies that

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Speaker 14: are barred from doing some commerce with US companies. They're

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Speaker 14: suspending that expansion, and they're also suspending the threat of

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Speaker 14: Trump's one hundred percent tariffs on Chinese goods is also

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Speaker 14: off the table. On the Chinese side, they agreed to

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Speaker 14: suspend the tougher rare Earth's controls that they had threatened

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Speaker 14: a couple of weeks ago that was going to disrupt

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Speaker 14: the global supply chain for everything from defense systems to

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Speaker 14: just every day electronics. And China also agreed to buy

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Speaker 14: more US soybeans, something they haven't done over the past

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Speaker 14: several months in protests of Trump's tariffs on the world's

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Speaker 14: second largest economy. They also agreed to suspend ship fees

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Speaker 14: on each other. The US was putting fees on Chinese

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Speaker 14: ships that would dock at US ports and China reciprocated

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Speaker 14: doing the same to American flagships, so they're suspending those

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Speaker 14: for a year. And lastly, they agreed to work together

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Speaker 14: to resolve the TikTok ownership situation. So there were quite

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Speaker 14: a few things on the table. None of these would

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Speaker 14: be considered to be game changers in the overall relationship

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Speaker 14: between the US and China, but these were sticking points

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Speaker 14: that we're leading to tensions that could have escalated into

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Speaker 14: something a lot worse. But they seem to have. President

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Speaker 14: she and President Trump seemed to have settled things down

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Speaker 14: for at.

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Speaker 3: Least a year, So it sounds like it opens the

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Speaker 3: door at least to getting some kind of resolution around

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Speaker 3: some of those issues you mentioned, like the TikTok situation.

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Speaker 3: But it was interesting, Brendan, because you know, going into

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Speaker 3: this meeting, President Trump kind of surprised Wall Street with

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Speaker 3: this idea that he might talk about China's blackwell chip.

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Speaker 10: Apparently that did not come up.

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Speaker 14: Yeah, that's that's the reporting that we that were getting.

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Speaker 14: We'll still get some readouts from US officials as President

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Speaker 14: Trump flies back to the States today, but as far

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Speaker 14: as we know, the initial reporting that we have is

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Speaker 14: that that wasn't an issue of any substantive discussion, but

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Speaker 14: of course it will be on the table in the

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Speaker 14: talks going forward. We're going to work. This isn't the

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Speaker 14: end of the US China trade tensions. This is going

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Speaker 14: to play out, you know it could. At the moment,

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Speaker 14: things are things have stabilized, but you know, as we've

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Speaker 14: seen recently, things can things can escalate pretty quickly. And

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Speaker 14: you know, we're right back where we were with you know,

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Speaker 14: threats on both sides.

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Speaker 3: And I guess there's a possibility that we could see

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Speaker 3: even more headlines coming because we just had a social

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Speaker 3: media post from the President talking about China purchasing more

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Speaker 3: US energy, not just soybeans.

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Speaker 10: What more do we know about that?

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Speaker 16: Yeah?

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Speaker 14: This, you know, this is this The details are still fuzzy.

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Speaker 14: If it probably involves some uh some projects in Alaska.

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Speaker 14: But the you know, the the the the the ability

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Speaker 14: of President Trump to get China to buy these kinds

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Speaker 14: of things is a is a big part of what

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Speaker 14: he's promised. And of course, his his his first trade

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Speaker 14: deal with with China five and a half years ago

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Speaker 14: during his first term, had a lot of these kinds

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Speaker 14: of things. These purchases, two hundred billion dollars worth of

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Speaker 14: purchases were agreed to back then, So delivering those kinds

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Speaker 14: of pledges are definitely high on President and Trump's goal

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Speaker 14: list of goals to accomplish with with China.

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Speaker 3: So we have about a minute left here, Brendan, Where

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Speaker 3: does this leave the US China relationship? Is it progress?

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Speaker 3: Is it back to uh where we were with trade

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Speaker 3: war one point zero?

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Speaker 10: Where would you put it on that scale?

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Speaker 14: It feels like we're in for a long, a longer

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Speaker 14: period where it's going to take a lot of management

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Speaker 14: to keep this relationship on an even keel. That that

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Speaker 14: they both sides agreed that this is this is that

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Speaker 14: that talking is the best way to to maintain that

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Speaker 14: sort of stability. And so it feels like they're not

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Speaker 14: going to walk away from this at PISA and the

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Speaker 14: document that they've signed with you know, with things fixed

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Speaker 14: and resolved and we you know, we move into a

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Speaker 14: new era of of you know, US China relations It's

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Speaker 14: gonna it's going to take some micro managing, it feels like,

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Speaker 14: to keep it from escalating. And you know, of course,

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Speaker 14: you know, we've got you know, countries in Southeast Asia

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Speaker 14: now have new tariffs on them, and the Europeans are

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Speaker 14: also looking at this carefully and trying to weigh up

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Speaker 14: how they're going to respond to China.

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Speaker 6: So it.

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Speaker 14: All it sets the table for more drama in the

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Speaker 14: future for the trade relationship.

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Speaker 10: Thanks Brendan.

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Speaker 3: As always, that's Bloomberg Global Trades are Brendan Murray Karen.

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Speaker 2: Nathan Less repeat some of our top stories this morning.

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Speaker 2: The Fed cut interest race at quarter point for a

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Speaker 2: second straight meeting, but one voter dissented in favor of

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Speaker 2: a half point cut, well another.

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Speaker 10: Voted for a pause.

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Speaker 2: Chair j Powell says a December cut is not a

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Speaker 2: foregone conclusion.

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Speaker 3: Hurricane Melissa has moved past Jamaica, Haiti and Cuba, believing

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Speaker 3: at least thirty three dead and almost eight billion dollars

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Speaker 3: in damage.

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Speaker 2: And a prominent Senate Democrat says there have been no

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Speaker 2: formal discussions on ending the government shutdown. New Hampshire's Jean

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Speaker 2: Shaheen tells Bloomberg News it's not clear how the standoff

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Speaker 2: will end, and we have more on those stories come

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Speaker 2: up on Bloomberry Day Bag, but right now we continue

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Speaker 2: to watch shares of a trio of tech heavyweights after

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Speaker 2: they reported earnings after the closing bill and right now,

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Speaker 2: shares of Meta they are down more than seven and

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Speaker 2: a half percent. Microsoft shares they're lower by almost three percent.

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Speaker 2: In Alphabet, those shares are higher, up seven and a

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Speaker 2: half percent. We want to take a closer look now

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Speaker 2: with Bloomberry's Karati Gupta Creaty. Good morning, and let's just

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Speaker 2: start with your takeaway because we're getting real different investor

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Speaker 2: reaction here.

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Speaker 20: Good morning, We absolutely are. I mean, we'll start with

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Speaker 20: a positivity. It's always good to start with some sunshine.

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Speaker 20: Alphabet is having a really great day. Goog is your

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Speaker 20: take of the shares? Just on a tear this morning.

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Speaker 20: There's a couple of things to know about the cloud space,

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Speaker 20: and this is perhaps where Microsoft is feeling a little

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Speaker 20: bit of the pinch. There are a couple of major

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Speaker 20: players when it comes to cloud and ultimately the technology

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Speaker 20: used to get to AI and Microsoft and Amazon Web

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Speaker 20: Services have just dominated the space for such a long time.

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Speaker 20: They have the majority of market share, but Alphabet, where

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Speaker 20: Google comes in third, and they've trying to bit alongside Oracle,

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Speaker 20: trying to kind of build up that market share.

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Speaker 10: And that's what investors are rewarding them for this time around.

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Speaker 20: Their sales are beating on that cloud unit growth, and

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Speaker 20: that is a very important piece for Alphabet because this

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Speaker 20: is a company that traditionally has gotten a good chunk

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Speaker 20: of its revenue from AdSpend. Think YouTube, thinks social media,

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Speaker 20: think the Google search engine as well. That's kind of

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Speaker 20: where it's gotten the majority of its games from. And

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Speaker 20: so the fact that you are now going to see

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Speaker 20: it kind of actively be viewed in cahoots or in

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Speaker 20: competition with the likes of Microsoft and Alphabet Amazon excuse me,

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Speaker 20: is a very big sea change in terms of how

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Speaker 20: this share price is going to be looking. And that's

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Speaker 20: kind of what is getting this kind of Wall Street

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Speaker 20: equivalent of a round of applause for the Alphabet shares.

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Speaker 20: That being said, it's those exact same concerns around the

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Speaker 20: buildout and the execution for the cloud unit that is

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Speaker 20: weighing on Microsoft, because look, Microsoft has this incredible reputation

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Speaker 20: of just beating their expectations quarter after quarter after quarter.

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Speaker 20: They're the A plus plus student, So how do you

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Speaker 20: beat how do you get a better grade when you're

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Speaker 20: already an A plus plus student? And that's what Microsoft

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Speaker 20: has kind of struggled with today. It looks like they

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Speaker 20: came out with earnings that didn't meet those enormous expectations

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Speaker 20: that they've kind of attuned the market to, and you're

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Speaker 20: starting to see those results, which were still fairly good,

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Speaker 20: just not as good as expected, and that's really what

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Speaker 20: is getting punished for. But again, a three percent drop

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Speaker 20: for Microsoft is nothing compared to the seven percent drop

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Speaker 20: you're seeing in Meta platforms, which again comes to a

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Speaker 20: question of this massive AI spend that's starting to worry

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Speaker 20: a lot of investors that have maybe seen this picture before,

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Speaker 20: given that Meta did this big push for the metaverse

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Speaker 20: and they kind of had to reel it back. So

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Speaker 20: there are some questions about the execution when it comes

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Speaker 20: to Meta.

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Speaker 2: Okay, but let's talk about that AI spend in general, because,

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Speaker 2: like all of these companies together, they racked up what's

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Speaker 2: seventy eight billion dollars in capex last quarter. That that's

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Speaker 2: a big number. That's according to US, it's eighty nine

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Speaker 2: eighty nine percent higher from a year ago. So let's

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Speaker 2: talk about that number. Why, why such a push and

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Speaker 2: why so much money?

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Speaker 20: Well, it's really interesting because when you think about technology

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Speaker 20: stocks or growth stocks broadly, you don't think about capex.

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Speaker 20: In fact, they're rewarded for not being value intensive. Think

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Speaker 20: of up here like an Exxon Mobile or Chevron, where

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Speaker 20: they need to buy physical equipment to do oil drilling.

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Speaker 20: That is kind of what you associate the likes of

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Speaker 20: CAPEX spending for. So you are now seeing these tech

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Speaker 20: companies trade at these massive valuations on the assumption that

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Speaker 20: some of the growth and AI is going to be

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Speaker 20: coming down the pike. But to get to that growth,

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Speaker 20: you need to build out the infrastructure. The problem is

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Speaker 20: that there's so much money going into the infrastructure.

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Speaker 10: It won't all be a success.

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Speaker 20: And that's really where a lot of the concerns lie

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Speaker 20: because to your point, they're leveraging a lot of the

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Speaker 20: cash on their balance sheets that they haven't been spending

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Speaker 20: for years in terms of bolt on acquisitions. And that's actually,

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Speaker 20: again something the market has rewarded them for that in

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Speaker 20: the worst of situations in a recession, they can rely

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Speaker 20: on that cash. They can kind of tap into that

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Speaker 20: extra cushion, those extra pennies under the mattress. Except if

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Speaker 20: you have these pennies again, trillions being spent in the

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Speaker 20: AI space. How quickly you will you get that return

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Speaker 20: on investment. And that's kind of what's worrying the market,

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Speaker 20: because again, when you think about tech, you don't associate

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Speaker 20: it with capex spend.

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Speaker 2: This is Bloomberg Daybreak, your morning podcast on the stories

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