Speaker 1: Bloomberg Audio Studios, Podcasts, Radio News.
Speaker 2: Good morning, I'm Nathan Hager and I'm Karen Moscow. Here
Speaker 2: are the stories we're following today.
Speaker 3: Karen, we begin with the latest on US China relations
Speaker 3: after President Trump's long awaited meeting with Chinese leader shi Jinping.
Speaker 3: The two came face to face on the sidelines of
Speaker 3: the APEX summit in Busan, South Korea, and walked away
Speaker 3: with an agreement to cut fentanyl related tariffs in half
Speaker 3: to ten percent. President Trump says China has also agreed
Speaker 3: to buy US soybeans again. On a scale of one
Speaker 3: to ten, he says he'd rate the meeting at twelve.
Speaker 4: I thought it was an amazing meeting. He's a great leader,
Speaker 4: great leader of a very powerful, very strong country China.
Speaker 3: President Trump spoke aboard Air Force one following the meeting.
Speaker 3: China's response was a bit more muted. As we hear
Speaker 3: from Bloomberg Steven Engel in Busan.
Speaker 5: He did say that China will cooperate with the United
Speaker 5: States on trade again after that hour and forty minute
Speaker 5: meeting with Donald Trump, but he also went on to say,
Speaker 5: with a little bit of a cautionary tone, he said
Speaker 5: the US and China should not fall into a vicious
Speaker 5: cycle of retaliation, and says the US should continuously reduce
Speaker 5: the list of problems. China and the US should continuously
Speaker 5: reduce the list of problems, and that the two nations
Speaker 5: should i long term benefit from cooperation.
Speaker 3: Bloomberg Steven Engel reports China's agreed to suspend rare earth
Speaker 3: export restrictions for one year, and it says the US
Speaker 3: will also pause some of it so called reciprocal tariffs
Speaker 3: for a year. China also says it will resolve issues
Speaker 3: related to TikTok with the US side, but it did
Speaker 3: not give specifics.
Speaker 6: Well.
Speaker 2: One issue that apparently did not come up Nathan and
Speaker 2: President Trump's meeting with Shijinping was in Vidia's black Well ship.
Speaker 2: The President had indicated he might discuss it giving China
Speaker 2: access to the AI chip giant's most advanced semiconductor. Trump
Speaker 2: says he and she talked about vida is access to
Speaker 2: China in general, and those conversations would continue speculation that
Speaker 2: the US my green lights sales and more advanced chips
Speaker 2: drove in Vidia to become the first ever five trillion
Speaker 2: dollar company.
Speaker 3: Well, let's turn now care into the latest market reaction
Speaker 3: to earnings from three high tech heavyweights shares of Microsoft.
Speaker 3: They are down nearly three percent in early trading the
Speaker 3: world's largest software maker reported a steeper climb and spending
Speaker 3: than Wall Street expected. The profit and revenue did top
Speaker 3: analyst estimates, and the Azure cloud computing unit posted a
Speaker 3: thirty nine percent revenue gain in the quarter that was
Speaker 3: also a beat. An aag Rana is a senior tech
Speaker 3: analyst at Bloomberg Intelligence.
Speaker 7: You look at Azure growth of thirty nine percent, I
Speaker 7: mean given that size, that's pretty good. The margins actually
Speaker 7: stood out, you know, way higher than what we were anticipating.
Speaker 7: We thought there was going to be pressure on margins
Speaker 7: because of all the spending. And then the lastly when
Speaker 7: you look at the capex number substantially higher than the
Speaker 7: thirty billion that they talked about now in you know,
Speaker 7: to some people maybe that's what this ointment. But for us,
Speaker 7: that's a good thing because I think they have so
Speaker 7: much demand coming in.
Speaker 3: That sound a rag Rana with Bloomberg Intelligence, and on
Speaker 3: the company conference call, Chief financial officer Amy Hood said
Speaker 3: Microsoft cannot meet current demand for AI and other services well.
Speaker 2: Shares of Meta Nathan they're also pulling back this morning,
Speaker 2: they are down more than seven percent. The Facebook owner
Speaker 2: is projecting increasing expenses and it's taking a one time
Speaker 2: tax charge. And we get more with Bloomberg's Sturlelypellett.
Speaker 8: Meta said the tax charge of fifteen point nine billion
Speaker 8: dollars was due to the implementation of the tax bill
Speaker 8: signed into law in July. I haven't find Sethos, a
Speaker 8: senior partner with Tigris Financial Partners.
Speaker 9: So the Big Beautiful Bill caused the recognition of a
Speaker 9: deferred tax asset. It's actually a non cast charge. And
Speaker 9: there while it caused a spike in their tax rates
Speaker 9: eighty seven percent for the quarter, it actually goes down
Speaker 9: significantly going forward. I think this is really a non event.
Speaker 9: It's an accounting issue, and I think any weakness is
Speaker 9: a buying opportunity. In the stop.
Speaker 8: Meta says it will continue to invest aggressively in artificial
Speaker 8: intelligence in New York. Charlie Bloomberg Radio, All right, Charlie,
Speaker 8: thank you.
Speaker 3: On the flip side, shares of Alphabet are surging pre
Speaker 3: market there now at eight percent. Sales topped quarterly Wall
Speaker 3: Street estimates, fueled by a surgeon demand for its cloud
Speaker 3: and artificial intelligence services.
Speaker 10: Brook May is a managing partner at evans May Wealth.
Speaker 11: Alphabet is the horse that I would put my money
Speaker 11: on right now. You know, they've blown their earnings out
Speaker 11: of the water. You know, not only did they have
Speaker 11: good earnings growth, but you know the cloud growth was
Speaker 11: very strong. You know, search is strong.
Speaker 10: That's brook May of evans May Wealth.
Speaker 3: Alphabet says its capital expenditures for the year will be
Speaker 3: ninety one to ninety three billion dollars.
Speaker 10: That's up from an earlier estimate of eighty five billion.
Speaker 2: Well, Nathan, The high tech earnings continue today with Apple
Speaker 2: and Amazon reporting after the close of trading, and we
Speaker 2: get a preview with Bloomberg's Tom Busby.
Speaker 12: Just days after Apple became the third stock in history
Speaker 12: to top four trillion dollars in value, Investors want to
Speaker 12: know about its investment in AI, how many new iPhone
Speaker 12: seventeen's it's sold, and whether sales in China have started
Speaker 12: to rebound. It's projected to report record revenue, topping one
Speaker 12: hundred billion dollars for the first time ever. At Amazon,
Speaker 12: investors will want to know about growth and its AWS
Speaker 12: cloud computing unit, the one that suffered a serious outage
Speaker 12: just last week. And they also want to know whether
Speaker 12: all the money it's investing in AI is bringing in revenue.
Speaker 12: Tom Busby, Bloomberg Radio.
Speaker 10: All right, Tom, thanks.
Speaker 3: Artificial intelligence startup open ai is reportedly preparing to file
Speaker 3: for an initial public offering as soon as next year.
Speaker 3: Reuter's is reporting that IPO could give the company a
Speaker 3: market capitalization of one trillion dollars. Earlier this week, open
Speaker 3: ai said it completed a restructuring into a more traditional
Speaker 3: corporate organization, which could make an IPO possible. Open Ai
Speaker 3: was most recently valued at five hundred billion dollars in
Speaker 3: an employee share sale.
Speaker 2: Well, Nathan Elon Musk's one trillion dollar pay package is
Speaker 2: being opposed by the biggest pension plan in the US,
Speaker 2: California Public Employees Retirement System is planning to vote against
Speaker 2: Musk's compensation agreement. A spokesperson for CalPERS the CEO pay
Speaker 2: package proposed by Tesla is larger than pay packages for
Speaker 2: CEOs and comparable companies by many orders of magnitude. CalPERS
Speaker 2: owns about five million shares in Tesla.
Speaker 3: All right, let's turn to the economy, now, Karen in
Speaker 3: the latest decision from the Federal Reserve for the second
Speaker 3: meeting in a row. The Fed has cut interest rates,
Speaker 3: but Chair J. Powell is cautioning investors against assuming another
Speaker 3: interrastrate cut is coming in December.
Speaker 13: In the committee's discussions at this meeting, there were strongly
Speaker 13: differing views about how to proceed in December. A further
Speaker 13: reduction in the policy rate at the December meeting is
Speaker 13: not a foregone conclusion.
Speaker 10: Far from it.
Speaker 13: Policy is not on a preset course.
Speaker 3: Japal's comments came after the Fed voted ten to two
Speaker 3: to lower rates by a quarter of a point for
Speaker 3: the first time in six years. There were to sense
Speaker 3: in both directions. One official advocated a larger reduction, another
Speaker 3: preferred to stay on hold.
Speaker 2: In Asia, Nathan the Bankage Japan Policy Board left at
Speaker 2: spendmark interest rate change in a vote that offered no
Speaker 2: new hints on what it might hike, and the BOJ
Speaker 2: held its policy rate at zero point five percent.
Speaker 10: And we get another rate decision later this morning.
Speaker 3: Karen from the European Central Bank economists predict the ECB
Speaker 3: will keep its interest rate unchanged for a third straight meeting.
Speaker 14: Time.
Speaker 2: Now for look at some of the other stories making
Speaker 2: news in New York and around the world. And for
Speaker 2: that we're joined by Bloomberg's Michael Barr.
Speaker 10: Michael, good morning, Good morning, Karen.
Speaker 6: The devastation from Hurricane Melissa has resulted in at least
Speaker 6: thirty three depths across the Caribbean, with powerful winds tearing
Speaker 6: the bird homes and buildings and knocking out electricity. Andrew
Speaker 6: Wholeness is Jamaica's Prime Minister.
Speaker 15: I would say about eighty to ninety percent of roofs
Speaker 15: were destroyed, Hospitals destroyed, libraries, police station, fourthouses are about
Speaker 15: infrastructure destroyed.
Speaker 6: Economic losses in Jamaica are estimated to be seven point
Speaker 6: seven billion dollars. Melissa is moving away from the Bahamas
Speaker 6: more with Bloomberg meterologist Craig Allen.
Speaker 16: Fortunately, the forward speed has picked up, now moving north
Speaker 16: northeast at about twenty to twenty five miles per hour
Speaker 16: and increasing. Next up Unfortunately Bermuda, the storm will probably
Speaker 16: pass just to the west of the island rather than
Speaker 16: a direct hit, but now less than eight hundred miles away,
Speaker 16: and it will pass with hurricane conditions for Bermuda during
Speaker 16: Thursday night into early Friday.
Speaker 6: Thank you Craig. The government shutdown is now in its
Speaker 6: thirtieth day. More than forty million Americans are expected to
Speaker 6: lose food benefits this Saturday. This Pennsylvania widow says losing
Speaker 6: snap will force her to choose either.
Speaker 2: We eat, or we don't have electricity, or we don't
Speaker 2: have gas.
Speaker 6: Republicans are blaming Democrats for the shutdown. Democrats say Republicans
Speaker 6: that refuse to address health insurance premiums. A Paris prosecutor
Speaker 6: says five more people have been arrested in the investigation
Speaker 6: into the theft of Crown jewels from the Louver Museum,
Speaker 6: but the treasures remain missing. The prosecutors says two suspects
Speaker 6: and the jewel heist have admitted their involvement in the theft.
Speaker 6: They were handed preliminary charges for a theft committed by
Speaker 6: an organized gang and criminal conspiracy. It took the thieves
Speaker 6: less than eight minutes to steal the jewels, valued at
Speaker 6: one hundred and two million dollars. Global News twenty four
Speaker 6: hours a day and whenever you want it with the
Speaker 6: Bloomberg News. Now, I'm Michael Barr, and this is Bloomberg.
Speaker 2: Karen all Right, Michael Barr thank you. Time Now for
Speaker 2: the Bloomberg Sports Update, here's John stash Hour.
Speaker 10: John, Good morning, you, Morning Careen.
Speaker 17: Dodger fans are known for being stuck in traffic, arriving
Speaker 17: in the games late, and that happened last night. Those
Speaker 17: fans missed it. Unprecedented start to a World Series game.
Speaker 18: Game five is underway with a fly ball to t left,
Speaker 18: come first to the volume and David Schneider, let's get
Speaker 18: it out on Sportsnight Gatto leave off home run has
Speaker 18: happened before, even on the first pitch. Derek Jeter did
Speaker 18: that in the two thousand Subway Series. But when Vladimir
Speaker 18: Guerrero Junior homer two pitches later, that made for World
Speaker 18: Series history and a two nothing lead that Toronto never
Speaker 18: gave up.
Speaker 10: A night after the Blue.
Speaker 17: Jays beat the Dodgers six to two, they won six
Speaker 17: to one and now head home up three to two
Speaker 17: in the series. Another pitching jem by their twenty two
Speaker 17: year old rookie Treya Savage. The Yankees and the Alds
Speaker 17: couldn't get a hit off him. The Dodgers only got three,
Speaker 17: a Savage struckout twelve. His manager is John Snyder.
Speaker 19: It's one thing to be in the zone, and it's
Speaker 19: another thing to be in his zone and get some
Speaker 19: swinging mess. So slider and split were electric. You know,
Speaker 19: I said it before the game, it's it's a different
Speaker 19: pitcher when he has his stuff.
Speaker 6: You know.
Speaker 19: Game one didn't have a feel for a split, so
Speaker 19: kind of blown away at what he did.
Speaker 17: The good news for the Dodgers the Ashinova Yamamoto will
Speaker 17: start Game six tomorrow. He's had complete game victories in
Speaker 17: his last two starts in the LA. He's alive at
Speaker 17: game seven Saturday, and the Nets are on and five
Speaker 17: and Brooklyn lost to Atlanta won seventeen one twelve. Michael
Speaker 17: Porter led the NEETs with thirty two points. In Boston,
Speaker 17: Jalen Brown scored thirty. Celtics beat the Cavs by twenty Indiana.
Speaker 17: I went to Game seven of the finals last year.
Speaker 17: They're rowing four this season, a two point loss in Dallas.
Speaker 17: Lakers are playing without both Lebron James and Luka Donson's
Speaker 17: but Austin Reeves just had a fifty one point game
Speaker 17: in last night, scored at the buzzer for Laker winn
Speaker 17: at Minnesota. The Bulls beat Sacramento to go to four
Speaker 17: and oh John Stashawa, Bloomberg Sports Karen.
Speaker 2: Nathan stay with us. More from Bloomberg day Break coming
Speaker 2: up after.
Speaker 1: This Coast to coast on Bloomberg Radio, nationwide on Sirius XM,
Speaker 1: and around the world on Bloomberg dot Com and the
Speaker 1: Bloomberg Business opp This is Bloomberg Daybreak.
Speaker 8: Good morning.
Speaker 3: I'm Nathan Hager. On a scale of one to ten,
Speaker 3: he rated a twelve. That was what President Trump said
Speaker 3: after his long awaited meeting on trade with China Knese
Speaker 3: President she Jenpang.
Speaker 4: It is an outstanding group of decisions.
Speaker 8: I think that was made.
Speaker 4: A lot of decisions were made too. It wasn't too
Speaker 4: much left out there.
Speaker 3: That was President Trump on Air Force One after his
Speaker 3: nearly two hour face to face with the Chinese leader
Speaker 3: in South Korea. Joining us for some more details on
Speaker 3: what came out of it is Bloomberg News Global Trades
Speaker 3: are Brendan Murray and Brendan. It seems like we're getting
Speaker 3: kind of a drip drip of headlines on some of
Speaker 3: the details coming out of this encounter. Walk us through
Speaker 3: what we've learned of what we know so far. Good morning.
Speaker 14: Yeah, Basically it means we're not headed into a big
Speaker 14: trade war with China over the next year. They've agreed
Speaker 14: to what they're calling a one year truce. From the
Speaker 14: US side, the US gave up the following concessions. They
Speaker 14: agreed to lower the fentanyl tariffs on Chinese imports from
Speaker 14: twenty percent to ten. They're suspending an expansion of its
Speaker 14: US Entity list. That's a list of Chinese companies that
Speaker 14: are barred from doing some commerce with US companies. They're
Speaker 14: suspending that expansion, and they're also suspending the threat of
Speaker 14: Trump's one hundred percent tariffs on Chinese goods is also
Speaker 14: off the table. On the Chinese side, they agreed to
Speaker 14: suspend the tougher rare Earth's controls that they had threatened
Speaker 14: a couple of weeks ago that was going to disrupt
Speaker 14: the global supply chain for everything from defense systems to
Speaker 14: just every day electronics. And China also agreed to buy
Speaker 14: more US soybeans, something they haven't done over the past
Speaker 14: several months in protests of Trump's tariffs on the world's
Speaker 14: second largest economy. They also agreed to suspend ship fees
Speaker 14: on each other. The US was putting fees on Chinese
Speaker 14: ships that would dock at US ports and China reciprocated
Speaker 14: doing the same to American flagships, so they're suspending those
Speaker 14: for a year. And lastly, they agreed to work together
Speaker 14: to resolve the TikTok ownership situation. So there were quite
Speaker 14: a few things on the table. None of these would
Speaker 14: be considered to be game changers in the overall relationship
Speaker 14: between the US and China, but these were sticking points
Speaker 14: that we're leading to tensions that could have escalated into
Speaker 14: something a lot worse. But they seem to have. President
Speaker 14: she and President Trump seemed to have settled things down
Speaker 14: for at.
Speaker 3: Least a year, So it sounds like it opens the
Speaker 3: door at least to getting some kind of resolution around
Speaker 3: some of those issues you mentioned, like the TikTok situation.
Speaker 3: But it was interesting, Brendan, because you know, going into
Speaker 3: this meeting, President Trump kind of surprised Wall Street with
Speaker 3: this idea that he might talk about China's blackwell chip.
Speaker 10: Apparently that did not come up.
Speaker 14: Yeah, that's that's the reporting that we that were getting.
Speaker 14: We'll still get some readouts from US officials as President
Speaker 14: Trump flies back to the States today, but as far
Speaker 14: as we know, the initial reporting that we have is
Speaker 14: that that wasn't an issue of any substantive discussion, but
Speaker 14: of course it will be on the table in the
Speaker 14: talks going forward. We're going to work. This isn't the
Speaker 14: end of the US China trade tensions. This is going
Speaker 14: to play out, you know it could. At the moment,
Speaker 14: things are things have stabilized, but you know, as we've
Speaker 14: seen recently, things can things can escalate pretty quickly. And
Speaker 14: you know, we're right back where we were with you know,
Speaker 14: threats on both sides.
Speaker 3: And I guess there's a possibility that we could see
Speaker 3: even more headlines coming because we just had a social
Speaker 3: media post from the President talking about China purchasing more
Speaker 3: US energy, not just soybeans.
Speaker 10: What more do we know about that?
Speaker 16: Yeah?
Speaker 14: This, you know, this is this The details are still fuzzy.
Speaker 14: If it probably involves some uh some projects in Alaska.
Speaker 14: But the you know, the the the the the ability
Speaker 14: of President Trump to get China to buy these kinds
Speaker 14: of things is a is a big part of what
Speaker 14: he's promised. And of course, his his his first trade
Speaker 14: deal with with China five and a half years ago
Speaker 14: during his first term, had a lot of these kinds
Speaker 14: of things. These purchases, two hundred billion dollars worth of
Speaker 14: purchases were agreed to back then, So delivering those kinds
Speaker 14: of pledges are definitely high on President and Trump's goal
Speaker 14: list of goals to accomplish with with China.
Speaker 3: So we have about a minute left here, Brendan, Where
Speaker 3: does this leave the US China relationship? Is it progress?
Speaker 3: Is it back to uh where we were with trade
Speaker 3: war one point zero?
Speaker 10: Where would you put it on that scale?
Speaker 14: It feels like we're in for a long, a longer
Speaker 14: period where it's going to take a lot of management
Speaker 14: to keep this relationship on an even keel. That that
Speaker 14: they both sides agreed that this is this is that
Speaker 14: that talking is the best way to to maintain that
Speaker 14: sort of stability. And so it feels like they're not
Speaker 14: going to walk away from this at PISA and the
Speaker 14: document that they've signed with you know, with things fixed
Speaker 14: and resolved and we you know, we move into a
Speaker 14: new era of of you know, US China relations It's
Speaker 14: gonna it's going to take some micro managing, it feels like,
Speaker 14: to keep it from escalating. And you know, of course,
Speaker 14: you know, we've got you know, countries in Southeast Asia
Speaker 14: now have new tariffs on them, and the Europeans are
Speaker 14: also looking at this carefully and trying to weigh up
Speaker 14: how they're going to respond to China.
Speaker 6: So it.
Speaker 14: All it sets the table for more drama in the
Speaker 14: future for the trade relationship.
Speaker 10: Thanks Brendan.
Speaker 3: As always, that's Bloomberg Global Trades are Brendan Murray Karen.
Speaker 2: Nathan Less repeat some of our top stories this morning.
Speaker 2: The Fed cut interest race at quarter point for a
Speaker 2: second straight meeting, but one voter dissented in favor of
Speaker 2: a half point cut, well another.
Speaker 10: Voted for a pause.
Speaker 2: Chair j Powell says a December cut is not a
Speaker 2: foregone conclusion.
Speaker 3: Hurricane Melissa has moved past Jamaica, Haiti and Cuba, believing
Speaker 3: at least thirty three dead and almost eight billion dollars
Speaker 3: in damage.
Speaker 2: And a prominent Senate Democrat says there have been no
Speaker 2: formal discussions on ending the government shutdown. New Hampshire's Jean
Speaker 2: Shaheen tells Bloomberg News it's not clear how the standoff
Speaker 2: will end, and we have more on those stories come
Speaker 2: up on Bloomberry Day Bag, but right now we continue
Speaker 2: to watch shares of a trio of tech heavyweights after
Speaker 2: they reported earnings after the closing bill and right now,
Speaker 2: shares of Meta they are down more than seven and
Speaker 2: a half percent. Microsoft shares they're lower by almost three percent.
Speaker 2: In Alphabet, those shares are higher, up seven and a
Speaker 2: half percent. We want to take a closer look now
Speaker 2: with Bloomberry's Karati Gupta Creaty. Good morning, and let's just
Speaker 2: start with your takeaway because we're getting real different investor
Speaker 2: reaction here.
Speaker 20: Good morning, We absolutely are. I mean, we'll start with
Speaker 20: a positivity. It's always good to start with some sunshine.
Speaker 20: Alphabet is having a really great day. Goog is your
Speaker 20: take of the shares? Just on a tear this morning.
Speaker 20: There's a couple of things to know about the cloud space,
Speaker 20: and this is perhaps where Microsoft is feeling a little
Speaker 20: bit of the pinch. There are a couple of major
Speaker 20: players when it comes to cloud and ultimately the technology
Speaker 20: used to get to AI and Microsoft and Amazon Web
Speaker 20: Services have just dominated the space for such a long time.
Speaker 20: They have the majority of market share, but Alphabet, where
Speaker 20: Google comes in third, and they've trying to bit alongside Oracle,
Speaker 20: trying to kind of build up that market share.
Speaker 10: And that's what investors are rewarding them for this time around.
Speaker 20: Their sales are beating on that cloud unit growth, and
Speaker 20: that is a very important piece for Alphabet because this
Speaker 20: is a company that traditionally has gotten a good chunk
Speaker 20: of its revenue from AdSpend. Think YouTube, thinks social media,
Speaker 20: think the Google search engine as well. That's kind of
Speaker 20: where it's gotten the majority of its games from. And
Speaker 20: so the fact that you are now going to see
Speaker 20: it kind of actively be viewed in cahoots or in
Speaker 20: competition with the likes of Microsoft and Alphabet Amazon excuse me,
Speaker 20: is a very big sea change in terms of how
Speaker 20: this share price is going to be looking. And that's
Speaker 20: kind of what is getting this kind of Wall Street
Speaker 20: equivalent of a round of applause for the Alphabet shares.
Speaker 20: That being said, it's those exact same concerns around the
Speaker 20: buildout and the execution for the cloud unit that is
Speaker 20: weighing on Microsoft, because look, Microsoft has this incredible reputation
Speaker 20: of just beating their expectations quarter after quarter after quarter.
Speaker 20: They're the A plus plus student, So how do you
Speaker 20: beat how do you get a better grade when you're
Speaker 20: already an A plus plus student? And that's what Microsoft
Speaker 20: has kind of struggled with today. It looks like they
Speaker 20: came out with earnings that didn't meet those enormous expectations
Speaker 20: that they've kind of attuned the market to, and you're
Speaker 20: starting to see those results, which were still fairly good,
Speaker 20: just not as good as expected, and that's really what
Speaker 20: is getting punished for. But again, a three percent drop
Speaker 20: for Microsoft is nothing compared to the seven percent drop
Speaker 20: you're seeing in Meta platforms, which again comes to a
Speaker 20: question of this massive AI spend that's starting to worry
Speaker 20: a lot of investors that have maybe seen this picture before,
Speaker 20: given that Meta did this big push for the metaverse
Speaker 20: and they kind of had to reel it back. So
Speaker 20: there are some questions about the execution when it comes
Speaker 20: to Meta.
Speaker 2: Okay, but let's talk about that AI spend in general, because,
Speaker 2: like all of these companies together, they racked up what's
Speaker 2: seventy eight billion dollars in capex last quarter. That that's
Speaker 2: a big number. That's according to US, it's eighty nine
Speaker 2: eighty nine percent higher from a year ago. So let's
Speaker 2: talk about that number. Why, why such a push and
Speaker 2: why so much money?
Speaker 20: Well, it's really interesting because when you think about technology
Speaker 20: stocks or growth stocks broadly, you don't think about capex.
Speaker 20: In fact, they're rewarded for not being value intensive. Think
Speaker 20: of up here like an Exxon Mobile or Chevron, where
Speaker 20: they need to buy physical equipment to do oil drilling.
Speaker 20: That is kind of what you associate the likes of
Speaker 20: CAPEX spending for. So you are now seeing these tech
Speaker 20: companies trade at these massive valuations on the assumption that
Speaker 20: some of the growth and AI is going to be
Speaker 20: coming down the pike. But to get to that growth,
Speaker 20: you need to build out the infrastructure. The problem is
Speaker 20: that there's so much money going into the infrastructure.
Speaker 10: It won't all be a success.
Speaker 20: And that's really where a lot of the concerns lie
Speaker 20: because to your point, they're leveraging a lot of the
Speaker 20: cash on their balance sheets that they haven't been spending
Speaker 20: for years in terms of bolt on acquisitions. And that's actually,
Speaker 20: again something the market has rewarded them for that in
Speaker 20: the worst of situations in a recession, they can rely
Speaker 20: on that cash. They can kind of tap into that
Speaker 20: extra cushion, those extra pennies under the mattress. Except if
Speaker 20: you have these pennies again, trillions being spent in the
Speaker 20: AI space. How quickly you will you get that return
Speaker 20: on investment. And that's kind of what's worrying the market,
Speaker 20: because again, when you think about tech, you don't associate
Speaker 20: it with capex spend.
Speaker 2: This is Bloomberg Daybreak, your morning podcast on the stories
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Speaker 10: And I'm Nathan Hager.
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