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Speaker 2: Here's some news out on the tech side that got
Speaker 2: my attention. I got the attention of the marketplace Oracle,
Speaker 2: our good friends therea They signed a cloud service deal
Speaker 2: that could be worth thirty billion dollars a year. I said,
Speaker 2: we got to get on Ograno on this because this
Speaker 2: cloud story, this AI story, is just a story that
Speaker 2: continues to give to investors on Rograna, Technology analyst for
Speaker 2: Bloomberg Intelligence Joints is here ONROK tell us about this
Speaker 2: Oracle deal. Here. What's happening?
Speaker 3: Yeah, I think it caught everybody by surprise. Now, we
Speaker 3: knew that this was going to happen sometime over the
Speaker 3: next six to twelve months, but we didn't know what
Speaker 3: happened so quickly. We think this is part of the
Speaker 3: Starfate contract. This is something that's going to flow from
Speaker 3: open Ai. You know, the combination between soft Bank, Oracle
Speaker 3: and open Ai. So if you remember, there was a
Speaker 3: big deal, you know, just I think a day or
Speaker 3: two after the president took office where Larry Allison and
Speaker 3: you know, got on TV and talked about it. I
Speaker 3: you know, we think this is a byproduct of that.
Speaker 4: How is Oracle matching up with its competitors? I mean,
Speaker 4: I know it's gained traction for renting out computing power
Speaker 4: over the Internet, and of course it's been targeting a
Speaker 4: lot of its clients that are focused on AI there.
Speaker 4: But how does it look in comparison to peers?
Speaker 3: Yeah, I think you know, it was really I mean
Speaker 3: go back a few years. It was, you know, to
Speaker 3: be honest, non existent about three years ago. So the
Speaker 3: revenue was, you know, just a handful of billion dollars
Speaker 3: or so compared to you know, somebody like an AWS
Speaker 3: which is now running at a rounderd of over one
Speaker 3: hundred billion dollars. So, but this, if you look at it,
Speaker 3: in last year alone, oracles infrastructure as a service business,
Speaker 3: which is what we look as the proxy for their
Speaker 3: cloud infrastructure business, had revenues off about ten billion dollars.
Speaker 3: So and then here comes a contract that in three
Speaker 3: years and you know, they will have thirty billion dollars
Speaker 3: annually from one just one customer. So you could see
Speaker 3: just the overall what's happening with AI? What does really
Speaker 3: need so much of computing power to run these models?
Speaker 3: And this is you know again they are going everywhere,
Speaker 3: But Oracle is you know, one of the bigger beneficiaries
Speaker 3: over here.
Speaker 2: Rich go rich, the world's richest people. Larry Ellison of
Speaker 2: Oracle clocks in a number four two hundred and twenty
Speaker 2: nine billion dollars, up thirty seven billion dollars year to date,
Speaker 2: the stock is up fifty two week high, an A
Speaker 2: rackets at an all time high. What's the bookcase for
Speaker 2: Oracle here? It's just just another way to play cloud
Speaker 2: slash AI.
Speaker 3: Yeah, so that's the bookcase. Definitely on that end, you
Speaker 3: could see the gro thrates are going to pick up
Speaker 3: so much more than any of the other cloud providers,
Speaker 3: and partially because they're you know, the numbers are too small.
Speaker 3: As I said, they're only at about ten billion run
Speaker 3: rate or so in this case at this point. So
Speaker 3: that's one. But on the other side, you know, they
Speaker 3: will have to spend a lot on capex right now,
Speaker 3: so that capex number is going to go up margins
Speaker 3: are going to most likely take ahead. But frankly speaking,
Speaker 3: in this market right now, it's all about market share
Speaker 3: gains and which of the companies can actually benefit from
Speaker 3: all these large language model training or inference. Basically, you
Speaker 3: know they are you know, they're going everywhere. I mean
Speaker 3: look at for example, code Weep their growth rate. The
Speaker 3: SAME's the case with Microsoft, Azure or EWS. I mean,
Speaker 3: everybody in this particular ecosystem is going to make lots
Speaker 3: of money.
Speaker 4: We know, expectations remain high for a lot of these
Speaker 4: tech firms, especially as we think about the AI push.
Speaker 4: What do investors want to see right now? What's the
Speaker 4: next step for Oracle?
Speaker 3: I think a lot of this would become to execution
Speaker 3: in this case, because you know, this is we are
Speaker 3: assuming flawless execution in terms of data centered expansion. But
Speaker 3: what if they are not able to get enough power
Speaker 3: in there out there? I mean, what if we get
Speaker 3: into a shortage in that area. So there's going to
Speaker 3: be a lot to you know, I would say ups
Speaker 3: and downs, not just for article, but everybody in the
Speaker 3: equation where maybe the project gets delayed some funding issues.
Speaker 3: Right now, everything is fine when it comes to funding
Speaker 3: for these particular projects, but you know, those are the
Speaker 3: things that we will watch for. But other than that,
Speaker 3: I think the future is pretty bright for all the
Speaker 3: cloud providers because of the workloads that are coming in.
Speaker 2: And Rok Rana, thank you so much. We appreciate it.
Speaker 2: A Ron Rana. He's a technology analyst for Bloomberg Intelligence.
Speaker 2: Joining us via zoom from Chicago.
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Speaker 2: All right, we all know about the AI story. The
Speaker 2: tech industry is spending get jillions of dollars building up
Speaker 2: their computing power their data centers. But you know what,
Speaker 2: Apparently you have to power those data centers and that's
Speaker 2: a huge demand on the grid. So everybody's trying to
Speaker 2: figure out how are they going to do that. One
Speaker 2: topic is nuclear, Believe it or not, Nuclear is being
Speaker 2: considered heavily as a source of power for a lot
Speaker 2: of these data centers. Our next guest is an expert here,
Speaker 2: Stephanie Diaz, Senior Associate at BNF Okay, I was alive.
Speaker 2: I was in high school with three Mile Island blew
Speaker 2: a gasket and we had to go home from boarding
Speaker 2: school talk to us about nuclear Where are we as
Speaker 2: a country today with nuclear power and how can that
Speaker 2: perhaps be a solution to some of the energy needs
Speaker 2: of AI.
Speaker 5: Yeah, So, currently we have roughly one hundred gigawatts of
Speaker 5: nuclear installed in the US, and we haven't been building
Speaker 5: much nuclear. We've built a couple of nuclear reactors in Georgia,
Speaker 5: those are the last two, but we currently don't have
Speaker 5: any under construction here in the US. Their hopes is
Speaker 5: that that would change. The Trump administration, for example, has
Speaker 5: an ambitious target to basically quadruple our nuclear fleet by
Speaker 5: twenty fifty. Getting there will be quite challenging, though, considering
Speaker 5: we really haven't built up the capacity to build on
Speaker 5: that sort of scale yet.
Speaker 4: So where are we in comparison to outside of the
Speaker 4: US right now? Because I know we don't have a
Speaker 4: lot of nuclear here, he mentioned.
Speaker 5: Well, when we say we don't have a lot, I
Speaker 5: think we actually have one of the biggest nuclear fleets
Speaker 5: in the world. If I'm not mistaken. It's more of
Speaker 5: a we haven't really been building much so it's really
Speaker 5: hard to see how we all of a sudden start
Speaker 5: flexing that muscle to build on that sort of scale.
Speaker 2: I'll tell you what I like for the nuclear I've
Speaker 2: heard this story a few times is a modular nuclear
Speaker 2: things little? What are they and how do they work?
Speaker 5: Yeah, so one of the a couple of well, there
Speaker 5: are dozens of startups out there that are trying to
Speaker 5: come up with new nuclear technologies. The majority of the
Speaker 5: fleet that's out there globally is these large light water reactors.
Speaker 5: What you're talking about is small modular reactors. And the
Speaker 5: idea is that we can make nuclear reactors that are
Speaker 5: much smaller, with the hopes that we can one require
Speaker 5: less capital to build a reactor and two maybe be
Speaker 5: able to do it faster and therefore overall be able
Speaker 5: to deploy on a much bigger scale. The companies that
Speaker 5: are doing that, I mean, there are dozens of them
Speaker 5: out there, and they're currently trying to work with the
Speaker 5: US Nuclear Regulatory Commission to get their designs approved so
Speaker 5: that they can start constructing these as well.
Speaker 4: So can you speak a little bit more about Trump's
Speaker 4: ambitious plan here in regards to pushing this forward? Is
Speaker 4: that different than the previous administration.
Speaker 5: It is different from the previous administration. Biden already had
Speaker 5: what we have been considered an ambitious plan for increasing
Speaker 5: nuclear and Trump's school of four gigle or four hundred
Speaker 5: giggawatts by twenty fifty is even more ambitious. One of
Speaker 5: the things that the Trump administration has done is at
Speaker 5: the end of May they issued for executive orders all
Speaker 5: aiming to help bring nuclear online much more quickly in
Speaker 5: a couple of ways. Mainly it's by expediting the regulatory
Speaker 5: review of nuclear reactors. So currently you can take three
Speaker 5: to six years to get through that regulatory gauntlet, and
Speaker 5: the administration wants to bring that down to eighteen months
Speaker 5: for all the different pathways. How they actually go about
Speaker 5: doing that remains to be seen, though it's one thing
Speaker 5: to say we can do this in eighteen months. It's
Speaker 5: another to actually do it. You need to rewrite some rules,
Speaker 5: you need to have staff who can review these applications
Speaker 5: as they come in. So it remains to be seen
Speaker 5: how they want to do it. But there's definitely a
Speaker 5: significant push from the Trump administration to bring nuclear online.
Speaker 5: But of course it's not just having push from government.
Speaker 5: We also need pull from markets. We need to see
Speaker 5: more customers sign firm commitments to make sure that these
Speaker 5: reactors get built.
Speaker 2: So if when a Microsoft says they're going to spend
Speaker 2: a jillion dollars on data centers, is any of that
Speaker 2: allocated to powering these data centers or is it? Are
Speaker 2: they relying upon utilities and existing grid and all that
Speaker 2: kind of stuff.
Speaker 5: No, we've seen not big tech companies. So Microsoft, Google, Amazon,
Speaker 5: Metal all announced partnerships with different nuclear companies in order
Speaker 5: to have power for all of these data centers. And
Speaker 5: it's not just them, it's also lots of data center
Speaker 5: providers of names that we often don't know, but they're
Speaker 5: the ones who build data centers that other companies use Together,
Speaker 5: they've been announcing something like thirty two gigawatts of nuclear
Speaker 5: that they want to bring in here in the US
Speaker 5: for context, thirty two gigawats in the US for just
Speaker 5: data centers. Supposedly in the world currently we have sixty
Speaker 5: five giggle watts of nuclear reactor of nuclear reactors under construction,
Speaker 5: so they're talking about building a lot. So there's definitely
Speaker 5: lots of them thinking about a big time companies thinking
Speaker 5: about how they're going to power all of this, but
Speaker 5: like I said, it still remains to be seen how
Speaker 5: much of it actually comes online. Like I'll be more
Speaker 5: excited when I see a construction permit get issue.
Speaker 4: So where do clean energy advocates fit into this whole conversation?
Speaker 4: Has there been a push against this at all?
Speaker 5: Yeah, it's been interesting because nuclear for so long has
Speaker 5: kind of been the pariah of clean energy, right of
Speaker 5: like we know we can do it, but we haven't
Speaker 5: done much of it. What we've seen in the last
Speaker 5: couple of years has been a big shift towards thinking
Speaker 5: more about clean base load power again, and that's why
Speaker 5: nuclear and also geothermal have come back into the conversation.
Speaker 2: Power.
Speaker 5: Baseload power is basically think of it as like round
Speaker 5: the clock power, So unlike solar and wind, which are
Speaker 5: inherently intermitt and this is the stuff where like we
Speaker 5: know we can run it as long as we want
Speaker 5: to run it, right, like you take it down for
Speaker 5: maintenance or something like that, but otherwise it can run constantly.
Speaker 2: Interesting, So is nuclear considered a reliable from that perspective,
Speaker 2: reliable source of energy?
Speaker 5: Correct? Because it runs constantly basically.
Speaker 2: And where's it like Norra suggesting it. Has there been
Speaker 2: any I haven't heard any pushback from the anti nuke
Speaker 2: people out there. Are they just kind of capitulating that
Speaker 2: we're going to need all kinds of energy going forward?
Speaker 5: Or I mean, I don't, I don't know about that.
Speaker 5: I think maybe it's it's a little harder to I
Speaker 5: don't know, be against something when we're well, like I said,
Speaker 5: we're still in the announcement stage. We we have a
Speaker 5: lot more work to do before we get to seeing
Speaker 5: what actually comes online when plans get built and all
Speaker 5: of that.
Speaker 4: I mean, are there also just concerns when we think
Speaker 4: about nuclear waste? You know, I think that when you
Speaker 4: think about a lot of people pushing back, especially on
Speaker 4: some of the bills that President Donald Trump is trying
Speaker 4: to push and whatnot, how does that kind of come
Speaker 4: into play, especially as you think about that against this
Speaker 4: ambitious plan.
Speaker 5: Yeah, so nuclear waste is honestly not something that I've
Speaker 5: spent too much time thinking about. More than anything, Like
Speaker 5: I said, we are still here focused on like can
Speaker 5: we even build it? Can we build it cheaply? Like
Speaker 5: one of the things that we saw with the two
Speaker 5: plants that we most recently built in Georgia was that
Speaker 5: they came in significantly over budget. If we want to
Speaker 5: build more nuclear in the US, like, one of the
Speaker 5: big things we're going to need to do is bring
Speaker 5: those costs down before we see any massive scaling in
Speaker 5: this industry. Oh yeah, it's much more expensive.
Speaker 6: Ya.
Speaker 2: It's definitely great stuff. Thank you so much for We
Speaker 2: appreciate its. Technie Diaz Jus, a senior associate at b
Speaker 2: n EF. Those are the folks that have all the data,
Speaker 2: all the analysis within Bloomberg about the energy transition that
Speaker 2: this country and this world is going through. So they've
Speaker 2: they're experts in that stuff.
Speaker 1: Right now, you're listening to the Bloomberg Intelligence Podcast. Catch
Speaker 1: us live weekdays at ten am Eastern on Applecarclay, and
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Speaker 2: Well, I think it seems like forever that leadership of
Speaker 2: the stock market has been led by technology. Big tech
Speaker 2: has been the leader. We've had a lot of volatility
Speaker 2: this year. What if that's still the case? Michelle Martin
Speaker 2: joins US president for the firm's name Prosperity. It's an
Speaker 2: Eisner Airport Company joining us from Minneapolis via zoom. So,
Speaker 2: Michelle's we think about the volatility we've experienced just so
Speaker 2: far this calendar year, is Tech still the leader for
Speaker 2: this market?
Speaker 6: Hi? Paul, nice to be here. So Tech is actually
Speaker 6: not the leader as it relates to where we're at
Speaker 6: on a year to date basis. So what a difference
Speaker 6: six weeks makes? Right? YEP? With the pullback that we
Speaker 6: saw in April and all the uncertainty around tariffs, we've
Speaker 6: actually seen value stocks and international in particular IFAH really
Speaker 6: pick up momentum, and we're we're actually seeing a market
Speaker 6: rotation here, uh, with a move towards international value stocks.
Speaker 6: The Magnificent seven is is not the only game in
Speaker 6: town anymore.
Speaker 4: So you said the Max seven is not the only
Speaker 4: game in town. We're seeing a bit of a rotation
Speaker 4: toward international and value. Where are you advising that your
Speaker 4: clients be.
Speaker 6: We're we're maintaining some some core allocations to domestic and
Speaker 6: obviously growth is not gone, but but we are broadening
Speaker 6: our allocations uh to international, Uh, primarily UH, Western Europe.
Speaker 6: We're seeing Germany breakout. We're we're really seeing an investment
Speaker 6: in defense, a little bit different look on policy, and
Speaker 6: then we're also paying attention to alternatives and really making
Speaker 6: sure that we have a lot of diversity in our
Speaker 6: fixed income as well. So this is this is really
Speaker 6: about maybe scaling back a bit on some of the
Speaker 6: growth overweight and the SMP overweight and just looking at
Speaker 6: a broader market allocation Michelle.
Speaker 2: And in terms of fixed income here, you know you
Speaker 2: can sit there with a two year treasure and get
Speaker 2: three in a court three point seven three percent. Is
Speaker 2: that a place to be or should you be taking
Speaker 2: credit risk with your fixed income allocation?
Speaker 6: We still have some credit risk. We've we've scaled back
Speaker 6: on credit risk a little bit, Paul, because we are
Speaker 6: seeing some potential for slower growth, which which obviously means
Speaker 6: there's there's a bit of credit risk, but we're not
Speaker 6: seeing big red flakes at this point. The duration that
Speaker 6: we're seeing and what we're maintaining in our portfolios is
Speaker 6: about five years. We actually went out in duration last
Speaker 6: year and have maintained that we think that the longer
Speaker 6: duration allows us to pick up more yield. And in
Speaker 6: many instances with our clients, we're holding individual bonds, so
Speaker 6: so that volatility in uh, in the bonds is not
Speaker 6: as as not as real. We're also looking at more
Speaker 6: broader managers for fixed income where they can be more nimble,
Speaker 6: take advantage of opportunities in the market duration, interest rate differences,
Speaker 6: just just really be a bit more nimble. So that's
Speaker 6: another area where we're seeing opportunities.
Speaker 4: We talk about investment opportunities, uh, more broadly, where are
Speaker 4: you advising clients be are we thinking equities fixed income effects?
Speaker 4: Where are the opportunities right now?
Speaker 5: Really?
Speaker 6: You know, from from from the FX perspective, I think
Speaker 6: you pick up something when you expand your international exposure.
Speaker 6: That's a real simple way to do it. As we
Speaker 6: see pressure on the dollar with the tariffs, just by
Speaker 6: expanding your international exposure, that's a way to pick that up.
Speaker 6: On the fixed income side, I think because we're looking
Speaker 6: we're actually looking at fixed income as a pretty stable
Speaker 6: You know, you can get four and a half to
Speaker 6: five and a half percent on core bond portfolios, very
Speaker 6: high quality corporate bonds. So when you're looking at potentially
Speaker 6: seeing a relatively slow growth in the second half of
Speaker 6: the year, this is something that's a pretty strong ballast
Speaker 6: to portfolios.
Speaker 2: Michelle, you mentioned alternatives. What do you guys like in
Speaker 2: alternatives and what do you think a reasonable allocation should
Speaker 2: be to alternatives.
Speaker 6: So, Paul, we typically for our portfolios, and again it
Speaker 6: depends on the client and kind of what their liquidity
Speaker 6: needs are, but anywhere from ten to twenty percent in alternatives,
Speaker 6: about half of that allocation we look at, and liquid
Speaker 6: alternatives things that have hedge funds or hedging buffers, even
Speaker 6: buffer ETF strategies can work really well to protect. On
Speaker 6: the downside, and another area that we're seeing opportunities and
Speaker 6: dislocation in the real estate market, there's very strong opportunities
Speaker 6: just because of the rise and interest rates over the
Speaker 6: last couple of years. Some developers and properties were kind
Speaker 6: of caught flat footed, didn't forecast that. So we're seeing
Speaker 6: real buying opportunities, particularly in the multifamily space and as
Speaker 6: well in the industrial space. So that those are those
Speaker 6: are areas where again taking advantage of dislocations in the
Speaker 6: market and then producting on the downside is where we're
Speaker 6: seeing the primary use of alternatives.
Speaker 2: Hi, Michelle, thank you so much for joining us. Really
Speaker 2: appreciate getting a few minutes of your time. Michelle Martin,
Speaker 2: President over at Prosperity. Turn us from Minnea Apples.
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