Speaker 1: Bloomberg Audio Studios, Podcasts, radio news.
Speaker 2: This is Bloomberg Business Week, insight from the reporters and
Speaker 2: editors that bring you America's most trusted business magazine, plus
Speaker 2: global business, finance and tech news. The Bloomberg Business Week
Speaker 2: Podcast with Carol Masser and Tim Stenovek on Bloomberg Radio.
Speaker 3: Hi, everyone, Welcome to the weekend edition of Bloomberg Business Week.
Speaker 3: It's definitely been a wild week in global markets, politics
Speaker 3: and geopolitics, and really in thinking around whether American exceptionalism
Speaker 3: is still a thing. President Trump addressed Congress tariffs against Canada,
Speaker 3: Mexico and China went into effect, then summer delayed Broadcom
Speaker 3: earning surprise to the upside, reassuring investors at the AI
Speaker 3: spend remains healthy. And we got a gut check on
Speaker 3: the US economy with the Friday jobs report, which was
Speaker 3: mixed steady hiring, bud a higher unemployment rate. All of
Speaker 3: the details can be found on the Bloomberg and at
Speaker 3: Bloomberg dot com.
Speaker 1: Speaking of gut checks, Carol, we got a great one
Speaker 1: this week on the investment environment by spending time in
Speaker 1: the heart of New York's financial district at Bloomberg invest
Speaker 1: it's our annual live event, and it unites leaders in
Speaker 1: asset management, banking, wealth and private markets.
Speaker 3: We're going to bring you some of our conversations with
Speaker 3: those managing billions of dollars in the public and private
Speaker 3: markets and who have a front row seat when it
Speaker 3: comes to the investment environment.
Speaker 1: Including the president of the NYSC Group on whether an
Speaker 1: IPO boom is coming. Also New York Fed President John
Speaker 1: Williams talks tariffs and inflation.
Speaker 3: Plus a couple of conversations that brought tech and the
Speaker 3: investing world together, as Dell's Chief AI officer gives us
Speaker 3: a reality check on the AI spend. And then speaking
Speaker 3: of AI, we'll hear from sig Tech founder and CEO
Speaker 3: Bin Wren. His company provides an AI agent for financial
Speaker 3: services firms.
Speaker 1: First up, one of the discussions from the stage of
Speaker 1: Bloomberg invest Carol, you had a chance to talk to
Speaker 1: Lynn Martin, president of the NYSC Group. You guys talked
Speaker 1: about what some could say, perhaps maybe a boom in
Speaker 1: IPOs this year.
Speaker 3: Our chat happened on Tuesday beginning, just as markets opened,
Speaker 3: and we're selling off on tariff concerns. She reminded us
Speaker 3: not to panic.
Speaker 4: Remember that the S and P and the Dow in
Speaker 4: particular are still above the pre election level. So remember
Speaker 4: there was a big euphoria that occurred host election Day
Speaker 4: in the market, which was maybe overdone at that point.
Speaker 4: Potentially potentially, I mean markets recalibrate.
Speaker 3: So I was thinking about core Weave, backed by Nvidia
Speaker 3: cloud computing provider. They filed for an IPO Bloomberg reporting
Speaker 3: it could raise four billion.
Speaker 5: Dollars from the listing.
Speaker 3: It's expected to target evaluation greater than thirty five billion dollars.
Speaker 3: We are expecting kind of a wave of potentially sizable
Speaker 3: listings this year. On a day when the market sold off,
Speaker 3: it was the worst selloffs so far this year. What
Speaker 3: was more interesting to you, was it the selloff or
Speaker 3: the core Weave listing.
Speaker 4: The what you will see now our companies start to
Speaker 4: flip public. But it's a timing thing. What most people
Speaker 4: don't appreciate is if you're a private company, your financials
Speaker 4: go stale at some point, so you need to restate financials.
Speaker 5: That's what happens between.
Speaker 4: Sort of that mid February to end of February, when
Speaker 4: you get your audited financials for the previous business year.
Speaker 4: So I anticipate, based on our pipeline, we're going to
Speaker 4: start to see some companies flip public. We had one
Speaker 4: flip public called Mountain.
Speaker 3: Are you hearing from companies you're busy?
Speaker 5: Yeah, yeah, we are busy. We are busy.
Speaker 4: We're busy not just from the perspective of working with
Speaker 4: our pipeline to actually get them out the door so
Speaker 4: in execution mode, but also we're very busy in terms
Speaker 4: of pitches. Are you where companies are, you know, making
Speaker 4: their tians. They're making plans for more like second half
Speaker 4: of sizable ones, small.
Speaker 5: Yeah, decent, decent sized ones, mix of both.
Speaker 3: Now, are you worried though about our world is day
Speaker 3: to day where whatever comes out of Washington, every executive order,
Speaker 3: whatever press event happens from the Oval Office because it
Speaker 3: moves markets can Are you concerned about what you're hearing
Speaker 3: now and what seems to be optimism for IPOs that
Speaker 3: that could get derailed.
Speaker 4: The only way that I think it's going to get
Speaker 4: derailed is if the volatility in the market becomes outsized,
Speaker 4: and I don't think it'll get derailed.
Speaker 6: We've moved up a little bit, but we've moved.
Speaker 4: Up a little bit but you know, a Vicks around
Speaker 4: twenty is still fine.
Speaker 7: So there's.
Speaker 6: Is there something that the president could do?
Speaker 5: I don't know.
Speaker 4: He seems to be very focused on three key areas,
Speaker 4: or this administration is focused on three key areas, border security,
Speaker 4: resolving the wars that have sadly overtaken other other nations,
Speaker 4: and our economy. And what you're seeing right now is
Speaker 4: confluence of all three come into the four and start
Speaker 4: to affect policy.
Speaker 3: It's a lot, yeah.
Speaker 5: It is.
Speaker 3: What about the raid environment, because we have seen the
Speaker 3: US Treasury curve move down YEP, significantly, Yeah, and interesting
Speaker 3: the last few days.
Speaker 5: If we see.
Speaker 3: That move down, I guess there's a couple scenarios, right,
Speaker 3: moving down without a recession better, especially for the IPO market. Like,
Speaker 3: tell me some of the other factors that you think
Speaker 3: about that will determine what happens this year.
Speaker 4: Well, I mean, if you also look at the raid environment,
Speaker 4: that's going to affect mortgages, it's going to affect loans,
Speaker 4: it's going to affect other parts of the ecosystem. You
Speaker 4: look at the bank stocks for example, they're doing quite
Speaker 4: well at the moment. That's probably more to do with
Speaker 4: promises on the regulatory side as opposed.
Speaker 5: To the interest rate side.
Speaker 4: But there are a variety of other parts of the
Speaker 4: ecosystem that would benefit from a lower rate environment.
Speaker 5: So we'll see.
Speaker 3: What do you think of at the private equity world
Speaker 3: in terms of finally looking to spin out some of
Speaker 3: their investments. Yeah, not in an easy environment, we know that,
Speaker 3: Carlisle telling Reuters we're looking maybe for four billion dollars
Speaker 3: worth of maybe you know investments coming out. What are
Speaker 3: you hearing or what are your expectations. Do we finally
Speaker 3: see some of the private equity investors somehow you know,
Speaker 3: either IPO selling assets.
Speaker 7: What do you expect?
Speaker 4: Yeah, we've seen a couple of sponsor backed deals go
Speaker 4: out last year. Actually Standard Era was one that did
Speaker 4: particularly well. That was a Carlisle deal that did particularly
Speaker 4: well in October last year, raising north of a billion
Speaker 4: and trading really well in the secondary market. I think
Speaker 4: the more deals that get done good valuations and raise
Speaker 4: good amounts of capital and then importantly trade well in
Speaker 4: the secondary market given the liquidity and demand from investors,
Speaker 4: think you'll start to see some of the sponsors start
Speaker 4: to start to float their aged assets or look to
Speaker 4: the m and A markets. So it's not just about IPOs.
Speaker 4: This administration is also promising a more favorable m and
Speaker 4: A environment, which is another area that's attractive to sponsors.
Speaker 3: Lyn One thing I want to ask you Bloomberg reporting
Speaker 3: about a couple of weeks ago. Have three of the
Speaker 3: US's four largest IPOs this year have traded below their
Speaker 3: offer price in their first session?
Speaker 5: So many we consider that? Yeah, it's it's been a
Speaker 5: quiet though.
Speaker 3: Does that tell you that they shouldn't have gone public,
Speaker 3: that they went too soon?
Speaker 4: No, I think I think there's just a question on
Speaker 4: the valuations.
Speaker 5: Maybe, but.
Speaker 4: Sometimes that happens. Yeah, First of all, there's been very few.
Speaker 5: Deals that have gone.
Speaker 4: We've had a couple of deals have done really well.
Speaker 4: If you look at Floco and Carmen, Space and defense,
Speaker 4: those are in industries that are very attractive to investors
Speaker 4: at the moment, done really well. It's a bit of
Speaker 4: an art that the bankers have to do. They'll figure
Speaker 4: out the right valuation mixed with investor investor demand. The
Speaker 4: companies that are trading below they haven't had their first
Speaker 4: earnings calls yet. I mean, let's see, let's see.
Speaker 5: Where we're saying, be patient a little bit.
Speaker 4: Yeah, it's not an instantaneous it's not an instantaneous judgment
Speaker 4: on a companies. Let's see how some of those companies do,
Speaker 4: particularly like a Venture Global, who's really well positioned in
Speaker 4: the LNG markets, all the infrastructure moves that are taking
Speaker 4: place in this country.
Speaker 3: We've got two minutes. There's two things I want to
Speaker 3: ask you. In twenty twenty one, the USIPO market hit
Speaker 3: a record high. There are some expectations that we could
Speaker 3: get back to pre pandemic level. On the record, do
Speaker 3: you think we could get there this year?
Speaker 4: I think twenty twenty one is an anomaly. I think
Speaker 4: twenty twenty two is an anomaly. I think those are
Speaker 4: two ends of the bell curve, positive and negative. When
Speaker 4: you can said, depending on what your perspective is on
Speaker 4: twenty one and twenty two, I think we'll get back
Speaker 4: to a more normal IPO environment where companies raise and
Speaker 4: aggregate about fifty billion dollars. Yeah, there's a good number
Speaker 4: that actually go out. We would have gotten there last year.
Speaker 4: I think if we didn't have a pause in the
Speaker 4: summer which we saw, which was all sparked by the election,
Speaker 4: an uncertainty around the election. So if you had asked
Speaker 4: me last may or June. I thought we were on
Speaker 4: pace for a pretty normal IPO year for twenty four,
Speaker 4: So I think we'll get there in twenty five.
Speaker 3: The other thing I've got to ask you, there's so
Speaker 3: much money in the private yeah world, Anthropic closing a
Speaker 3: deal to raise three and a half billion and evaluation
Speaker 3: of sixty one and a half billion open ai I
Speaker 3: meantime currently talks to raise forty billion SoftBank other investors
Speaker 3: for an even larger three hundred million dollar valuation.
Speaker 7: I could go on and on.
Speaker 3: How does that hold back the IPO market that especially?
Speaker 7: I don't know.
Speaker 3: Is it just the AI world that is able to
Speaker 3: tap it?
Speaker 4: In your view, I think when a company comes out,
Speaker 4: they are more ready to be a public company. I'm
Speaker 4: more ready to be a public company. I mean, you've
Speaker 4: got durable growth, you can articulate, very clear strategy, a
Speaker 4: very disciplined piano.
Speaker 6: So this is a good thing.
Speaker 4: I think it's a good thing. I think the private
Speaker 4: markets and the public markets have to work in concert.
Speaker 3: All right, So thirteen seconds, this is what we call
Speaker 3: a super rapid round. Okay, what's the most optimistic view
Speaker 3: for the IPO market?
Speaker 4: This year most optimistic IPO. I think you're going to
Speaker 4: have a normal environment. Last year if I look at
Speaker 4: the companies, the most important thing that I look at
Speaker 4: as a secondary market for IPOs, companies that listed on
Speaker 4: the New York Stock Exchange treated fifty eight percent above
Speaker 4: their IPO price. So I think we're going to hopefully
Speaker 4: see that type of growth in the secondary just post
Speaker 4: IPO market.
Speaker 7: SHU.
Speaker 3: Last question, flipside to that is what's the biggest risk.
Speaker 4: So the biggest risk of volatility the things that are
Speaker 4: unexpected that happen in the market from time to time.
Speaker 4: I don't have a crystal ball. I don't know what
Speaker 4: that's going to be. Unfortunately, I don't know what's going
Speaker 4: to cause that unexpected shock. But I think the market
Speaker 4: does recognize those three pillars, resolving geopolitical conflict, border security,
Speaker 4: and focusing on a strong domestic economy. So as long
Speaker 4: as the administration stays within those three pillars, I don't
Speaker 4: know that there's much that's going to derail things.
Speaker 3: But the risk sounds like it'll come from Washington.
Speaker 5: I don't.
Speaker 4: I actually have no idea it could be. I mean,
Speaker 4: you look at something like deep seek. I heard the
Speaker 4: folks right before the panel, right before this talk about
Speaker 4: deep seek. That was a big surprise that caused the
Speaker 4: market to react pretty negatively when those now, when those yeah,
Speaker 4: when those usage numbers came out. That has nothing to
Speaker 4: do with anything that's happening.
Speaker 1: In DC our Thanks to Lynn Martin, president of the
Speaker 1: NYS Group, in a panel discussion with Carol at Bloomberg
Speaker 1: invest in New York City. A couple of days after
Speaker 1: that chat, we got the news that Klarna is said
Speaker 1: to be seeking to raise at least a billion dollars
Speaker 1: in an IPO. That's according to people familiar coming up.
Speaker 3: There are FED speakers, and then there are FED speakers,
Speaker 3: cheer J Powell. Of course, anytime he talks, we are
Speaker 3: all sitting up a little bit straight or listening to
Speaker 3: what he has to say. And then there's also the
Speaker 3: President of the New York Fed.
Speaker 1: That is John Williams, who talks tariffs and more. When
Speaker 1: Bloomberg Business Week continues, this is Bloomberg.
Speaker 2: You're listening to the Bloomberg Business Week podcast. Catch us
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Speaker 2: app or watch us live on YouTube.
Speaker 3: More of our highlights from Bloomberg invest in New York
Speaker 3: City this past week that gathers allocators, deal makers and
Speaker 3: investors from across the globe to track, dissect, and navigate
Speaker 3: the markets with the industry's most influential voices and.
Speaker 1: Safe to say, among those that markets and investors watch
Speaker 1: the most, the Federal Reserve and a key voting member
Speaker 1: of the US Central Banks Policy Setting Committee, the President
Speaker 1: of the New York Fed, John Williams.
Speaker 3: He spoke with Bloomberg News International Economics and Policy correspondent
Speaker 3: Michael McKee about President Donald Trump's tariffs and their possible
Speaker 3: impact on inflation.
Speaker 8: You know, when we look at the research that looks
Speaker 8: at the effects of terrorists on the US economy, you know,
Speaker 8: one of the things that's highlights it depends whether it's
Speaker 8: consumer goods. It depends on whether it's goods that lots
Speaker 8: of countries produce, and a lot of things like that.
Speaker 8: So you know, it really made sense to let's wait
Speaker 8: and see find out more about what policies may be
Speaker 8: put in place, and then kind of you know, come
Speaker 8: to I would say, you know, conditional judgments about what
Speaker 8: does it mean for the US economy, and as you said,
Speaker 8: we are seeing more actual actions on tariff and different dimensions.
Speaker 8: I would still highlight there's a lot of uncertainty. We
Speaker 8: don't know how long the tariffs will apply. We don't
Speaker 8: know what other countries may do in response to this.
Speaker 8: We don't We also don't know what else may happen
Speaker 8: in this, you know, in the kind of realm of
Speaker 8: trade policy.
Speaker 3: You know.
Speaker 8: My own view is that, based on experience from a
Speaker 8: previous episodes, based on analysis, is that you know, tariffs
Speaker 8: on consumer goods especially, they do feed into import prices
Speaker 8: pretty strongly. That does filter into prices that consumers pay.
Speaker 8: That happens relatively soon tariffs and feed into kind of
Speaker 8: intermediate inputs the things that companies use to make other
Speaker 8: things and to make other things. Those tend to pass
Speaker 8: through more gradually and have maybe last a little bit
Speaker 8: longer in terms of effects. My view is that, you know,
Speaker 8: based on what we know today, given all the uncertainties
Speaker 8: around that, you know, I do factor in some effects
Speaker 8: of tariffs now on inflow on prices, because I think
Speaker 8: we will see some of those effects later this year,
Speaker 8: not yet, but maybe later this year. I Also you
Speaker 8: have to factor in how does that affect economic activity,
Speaker 8: decisions by businesses to invest, consumers to spend, And that's
Speaker 8: where I think another big uncertainty is we've seen some
Speaker 8: kind of movements in the data in the last couple
Speaker 8: of months. I think some of that's in anticipation of tariffs,
Speaker 8: So it's hard to really read the tea leaves there.
Speaker 8: But that's something else we'll be watching carefully, is to
Speaker 8: what extent is that affecting consumer confidence, business confidence. You know,
Speaker 8: the uncertainty around this and the effects of the tariffs
Speaker 8: on economic growth and employment and things like that. So
Speaker 8: still a lot of uncertainty, I think, directionally somewhat higher
Speaker 8: prices in the outlook at least in mind kind of
Speaker 8: thinking about what's happening, but also a lot of uncertainty
Speaker 8: about how the economy responds to this.
Speaker 1: That was John Williams, President of the Federal Reserve Bank
Speaker 1: of New York. We had a chance to to catch
Speaker 1: up with Bloomberg's Mike McKee after his conversation with Williams
Speaker 1: at Bloomberg invest.
Speaker 9: They've been very circumspective about it all, trying to stay
Speaker 9: out of it and telling us we have to wait
Speaker 9: and see what they're going to do, But now there's
Speaker 9: enough information out there that apparently they're ready to start saying.
Speaker 9: This is going to be an inflation issue now, as
Speaker 9: John pointed out, we don't know yet how much of one.
Speaker 9: He said, consumer pass through to consumers would be fairly strong,
Speaker 9: especially for finished goods, and then it's a little harder
Speaker 9: to know in the intermediate goods area how much of
Speaker 9: that gets passed along and how fast, but that there
Speaker 9: would be more inflation from this, and that didn't suggest
Speaker 9: to me like he's in any hurry to cut interest
Speaker 9: rates unless we see the economy collapse.
Speaker 3: Is he worried about economic growth?
Speaker 9: He's not worried about echeconomic growth going into all of this,
Speaker 9: because the economy was in very good shape coming into
Speaker 9: the year. What he isn't sure about is where we
Speaker 9: go from here. What kind of effect is this going
Speaker 9: to have? And he mentioned we talked about consumer confidence
Speaker 9: and if confidence evaporates, then you've got a real problem
Speaker 9: in the economy, and it's something he said, we have
Speaker 9: to watch closely.
Speaker 1: What about when it comes to independence of the Federal Reserve.
Speaker 10: He said he wasn't worried about it.
Speaker 9: Obviously, the FED continuously says an independent central bank is
Speaker 9: important because that's when you can do monetary policy.
Speaker 10: Best.
Speaker 6: DOSE hasn't really made its way into the FED, you know.
Speaker 9: I've been asking around at various FED banks, and no
Speaker 9: twenty somethings with the computer coding stuff have come into
Speaker 9: the banks. They are set up legally a little different
Speaker 9: from most government agencies, so it appears that DOJE might
Speaker 9: not have access to the Federal Reserve. And I don't
Speaker 9: think that even if they did come in there, they'd
Speaker 9: let them into the computer systems.
Speaker 6: That would be kind of interesting.
Speaker 3: But anyway, anything that surprised you in your conversation with
Speaker 3: John Williams up on stage, I mean, they tend to
Speaker 3: be very careful, right and right.
Speaker 9: Well, not a surprise, but he did say that there's
Speaker 9: no need to change rates now. Asked him if what
Speaker 9: he was saying about uncertainty and we have to wait
Speaker 9: to find out what happens, if that meant that they
Speaker 9: were not going to change rates on March nineteenth, then
Speaker 9: he basically said, yes, there's no reason to do that
Speaker 9: right now. The economy is in a good place, Monetary
Speaker 9: policies in a good place, and we don't have an
Speaker 9: idea of what is going to happen.
Speaker 1: But if we do know now that tariffs have been
Speaker 1: imposed on Mexico and Canada and prices indeed do go higher,
Speaker 1: and perhaps we see some inflationary effects from that, how
Speaker 1: does that change the outlook for the FED this year?
Speaker 10: Well, it all depends on.
Speaker 9: And I'm going to sound like an economist here, it
Speaker 9: all depends on how all this comes through to the economy.
Speaker 9: Because if there are one off tariffs, if Donald Trump
Speaker 9: changes his mind tomorrow and takes them off or something
Speaker 9: like that, or if we just have this wall of
Speaker 9: tariffs hit now, it'll raise prices, but then prices will
Speaker 9: stop going up because they went up once. So that's
Speaker 9: not an inflation issue that the FED needs to react
Speaker 9: to because higher interest rates aren't going to change the
Speaker 9: price level. So that's what they need to figure out.
Speaker 10: Now.
Speaker 9: The way Trump has talked about putting on tariffs, with
Speaker 9: tariff's going on today, tariff's going on next week, tariff's
Speaker 9: going on April second, that could create more of an
Speaker 9: inflation issue because you're continually adding higher prices to the mix. Obviously,
Speaker 9: Americans aren't going to be happy about paying more at
Speaker 9: the grocery store, and they're not going to be happy
Speaker 9: about paying more for gasoline. I don't know if you
Speaker 9: noticed that. The gas buddy guy said in the Northeast,
Speaker 9: for our Boston listeners, they could go up forty cents
Speaker 9: a gallon this week.
Speaker 1: So we explain how that works with oil price is
Speaker 1: falling on a day like today.
Speaker 9: Well, oil prices are only one component of all this.
Speaker 9: There's the refining issues, and then oil prices we talk
Speaker 9: about in a generic sense West Texas Intermediate, but all
Speaker 9: these refineries use different grades of oil, and in the
Speaker 9: Northeast there's a lot of heavier oil you get from
Speaker 9: Canada and some other places, and if that's going to
Speaker 9: go up in price, then that's going to increase the
Speaker 9: cost of the refiners and they're going to pass that
Speaker 9: along to you.
Speaker 1: Somebody like Donald Trump would say, it's an example of
Speaker 1: why we should be using energy that is produced here
Speaker 1: in the United.
Speaker 9: States, except that there's the energy we produce to the
Speaker 9: United States. It differs all over the place.
Speaker 5: Now.
Speaker 10: The Bakan.
Speaker 9: Shale up in North Dakota is more similar to the
Speaker 9: heavy crud we get from Canada. But the stuff we're
Speaker 9: getting from Texas, as they like to say, is light, sweet, crude.
Speaker 10: Nice name. It's like at George Carlon thing, nice.
Speaker 1: Name, the name of Joe Wisenthal's band, exactly.
Speaker 10: Yeah.
Speaker 9: And that's a completely different kind of oil. And the refiners,
Speaker 9: you know, different refiners can't use these different oils. So
Speaker 9: it's going to be a price question, and energy is
Speaker 9: going to be one of the first areas to feel it.
Speaker 3: Mike, you talked about, you know, if we continue to
Speaker 3: see more tariffs being imposed, you know, that would be
Speaker 3: tougher on the economy. I mean, I am thinking about
Speaker 3: what we've got right now. Can the US economy is
Speaker 3: its strong enough to kind of manage if this is it?
Speaker 6: Manage it?
Speaker 9: When you go to the gas station and you have
Speaker 9: to pay more money, how are you going to react?
Speaker 9: That's really the question here, because recession is a confidence issue.
Speaker 9: If people feel that things are going to go badly,
Speaker 9: or that prices are going to go way up, or
Speaker 9: they might lose their jobs, then they stop spending and
Speaker 9: they start holding on the money, and then companies are
Speaker 9: making less and then they're hiring less, and you get
Speaker 9: into a recessionary spiral. We haven't seen one like that,
Speaker 9: you know, a long time, because the last couple of
Speaker 9: recessions have been basically finance based now and the COVID
Speaker 9: was its own generic thing. But the traditional kind of
Speaker 9: recession could come along. We can't rule that out. So
Speaker 9: it's something you want to keep an eye on the
Speaker 9: confidence figures and then watch what people do. Do they
Speaker 9: keep spending or does that slow down?
Speaker 3: Can I just say a little informal twitters survey like
Speaker 3: are you spending or holding back?
Speaker 6: And more people say that they're holding back.
Speaker 3: I'm not saying that because well a good sample or
Speaker 3: but it's just interesting to see we're hearing that from people.
Speaker 9: Last week we had the PC spending, the savings rate
Speaker 9: went way up, and people spent less money the savings
Speaker 9: the spending levels way down. So at this point it
Speaker 9: looks like people are baby pulling back down. Is that
Speaker 9: a one month thing or does that continue?
Speaker 7: Yeah?
Speaker 1: John Williams still telling you the US economy is in
Speaker 1: a good place.
Speaker 9: Well, it came into the year in a good place
Speaker 9: and people were feeling good. We spent a lot of
Speaker 9: money over the holidays, and companies had plans for capital investments.
Speaker 9: And now everybody's kind of sitting back and going, wait,
Speaker 9: let's see what's going to happen now. Does that translate
Speaker 9: into okay, we better stop or is that like, okay,
Speaker 9: we can live with this and get back to what
Speaker 9: we were doing.
Speaker 5: Mike, you have.
Speaker 3: Reported on so many different economic cycles, and yes, there
Speaker 3: are those extreme cases like the Great Financial Crisis or
Speaker 3: a pandemic where you know, everything just kind of falls
Speaker 3: off a cliff. Having said that, I feel like two
Speaker 3: weeks ago or three weeks ago, we weren't even using
Speaker 3: the word recession in a conversation, and all of a
Speaker 3: sudden we are. And again, I know you talk about
Speaker 3: the importance of sentiment, but as someone who sees cycles,
Speaker 3: when we start to talk about it doesn't necessarily mean
Speaker 3: that okay, it's more likely that people are starting to
Speaker 3: you know what I mean, If they're starting to talk
Speaker 3: about it and it's part of their considerations.
Speaker 9: It probably is a little bit more likely as the
Speaker 9: say Wall Street is predicted seven or the last three recessions.
Speaker 9: So it doesn't mean it doesn't mean it's going to happen,
Speaker 9: but it is something you want to keep an eye on.
Speaker 9: And we've had some backup to this the weaker spending
Speaker 9: reports and then the Atlanta fat GDP now, which people
Speaker 9: completely misunderstand what it is. It's not a forecast for
Speaker 9: what GDP is. It's like, given the data we have today,
Speaker 9: it's a snapshot in time.
Speaker 1: What it is called GDP now, yeah.
Speaker 6: Right, and which just why it moves around some much.
Speaker 10: Yeah, it moves around tremendously through the entire quarter.
Speaker 9: But that got into people's minds on Wall Street and
Speaker 9: it starts to scare people, and then they start writing
Speaker 9: about it, and then people are reading about it, and
Speaker 9: then they start thinking about it.
Speaker 1: Hey, one thing we haven't gotten a chance to talk
Speaker 1: to you about is what Washington, DC looks like in
Speaker 1: the wake of the doche cuts just anecdotally speaking heard
Speaker 1: of a guy down there who did lose his job
Speaker 1: just in the wake of what's happening, and he's essentially
Speaker 1: saying that in his neighborhood, half the families are now
Speaker 1: one income parents because of job cuts just in the
Speaker 1: last few months.
Speaker 9: I was just down there yesterday, and I can tell
Speaker 9: you I lived in Washington for twenty years, and it's
Speaker 9: the most depressing place right now. Everybody is down. Everybody
Speaker 9: is nervous and tense. Even if you have a job
Speaker 9: and you don't think you're going to lose it, you're
Speaker 9: worried about what the overall impact is going to be.
Speaker 9: And a lot of it is not just because people
Speaker 9: are getting fired, but because there's all this.
Speaker 10: Uncertainty about what's going to happen. The sort of.
Speaker 9: Democles is hanging over so many people, and so it's
Speaker 9: not a fun place at the moment.
Speaker 1: That was Michael McKee, Bloomberg News International Economics and Policy Correspondent.
Speaker 1: Be sure to check out Mike's full conversation with John Williams.
Speaker 1: Find that on the Bloomberg and at Bloomberg dot Com.
Speaker 3: Still ahead on Bloomberg BusinessWeek, a peek into the world
Speaker 3: of private markets and private credit with the global head
Speaker 3: of wealth management at Aris Management.
Speaker 1: This is Bloomberg.
Speaker 2: This is the Bloomberg Business Week Podcast. Listen live each
Speaker 2: weekday starting at two pm Eastern on Applecarplay and the
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Speaker 2: Just Say Alexa played Bloomberg eleven thirty.
Speaker 3: We continue with highlights from our coverage at Bloomberg invest
Speaker 3: held in downtown New York City this past week. Now,
Speaker 3: we talk often about how the public markets still trump
Speaker 3: the private markets when it comes to size, but it's
Speaker 3: hard to ignore the growth that we've seen in areas
Speaker 3: such as private credit, which grew to about one point
Speaker 3: six trillion dollars last year from four hundred and fifty
Speaker 3: two billion dollars just ten years ago.
Speaker 1: Aris Management knows a thing or two about private credit,
Speaker 1: having been involved in the market for a quarter of
Speaker 1: a century. The publicly held, a global alternative investment manager
Speaker 1: with an approximately fifty three billion dollar market cap, has
Speaker 1: four hundred and eighty four billion dollars in assets under.
Speaker 3: Management, which is why we wanted to talk with Raj Donda,
Speaker 3: global head of Wealth Management at Aris Wealth Management Solutions
Speaker 3: he joined us at Bloomberg invest.
Speaker 11: The advisors we talked to and their clients are really
Speaker 11: frustrated by this type of volatility.
Speaker 12: You know, we're.
Speaker 11: Essentially where we were, you know, early November, right in
Speaker 11: the public markets, and that backdrop makes it really hard
Speaker 11: to work diligently on a portfolio that has above, you know,
Speaker 11: at or above target returns and at the end of
Speaker 11: the day, individuals have almost as much wealth as institutional clients.
Speaker 11: They've just never had the access to the private markets,
Speaker 11: and that's starting to change. A lot of our discussion
Speaker 11: is not just should they invest in the private markets,
Speaker 11: but it's how all that said, A day like today
Speaker 11: is distracting at a minimum, because most of our clients
Speaker 11: still have eighty or ninety percent in the markets, and
Speaker 11: the headlines and the volatility are going to certainly be
Speaker 11: a distraction at a minimum.
Speaker 1: So would you say that yesterday's a poster child certainly
Speaker 1: of why people invest in privates, But would you say
Speaker 1: it's also a reason why people should consider allocating more
Speaker 1: of their portfolios to privates.
Speaker 12: I would, and I think the.
Speaker 11: Investment thesis is what really comes out at a time
Speaker 11: like this. We're quite clear that the private markets are illiquid.
Speaker 11: That's why you've got to higher risk adjusted return.
Speaker 1: You can't just call up and sell when you want to, And.
Speaker 11: The top advisors that we work with will tell you
Speaker 11: that keeping their clients invested can be challenging, particularly again
Speaker 11: at times like this. But the private markets in twenty
Speaker 11: years have changed completely in terms of the breath of solutions.
Speaker 11: You can invest in sports and media assets, you can
Speaker 11: invest in real estate and infrastructure. You can have some
Speaker 11: durbal income solutions from private credit. So the way we
Speaker 11: think about it is you should have equity exposure. You
Speaker 11: can do that in both the public and the fixed
Speaker 11: income markets. You should have some kind of credit or income.
Speaker 11: You can do that in public and private markets. And
Speaker 11: then you should have some real assets. You should own
Speaker 11: some real estate, you should own some form of infrastructure.
Speaker 11: Is a really tax efficient solution, and you can do
Speaker 11: all of that in both the public and private markets.
Speaker 12: You couldn't do that twenty years ago, even ten year
Speaker 12: years ago.
Speaker 6: I am curious.
Speaker 3: You know, we're so Washington focused right now, and you
Speaker 3: can understand why, right because there's so much that's coming
Speaker 3: down and some of it does impact the markets. What
Speaker 3: I'm curious about is when it comes to private markets,
Speaker 3: are there constructive conversations you guys are yet having with
Speaker 3: the administration or that you think have to be had
Speaker 3: when it comes to private markets.
Speaker 11: There are certainly conversations to have with any administration around
Speaker 11: the evolution of the private markets and how to make
Speaker 11: it easier to invest in the private markets. Areas has
Speaker 11: been in business for over twenty five years, and so
Speaker 11: we've worked with many administrations. This one is just getting
Speaker 11: their feet on the ground.
Speaker 12: It's early.
Speaker 11: They're certainly pro growth and pro business, and so some
Speaker 11: of that narrative we support and are happy about. But
Speaker 11: I would say they haven't yet really dug in on
Speaker 11: the type of change that would have a day to
Speaker 11: day impact on what we're doing.
Speaker 3: What would you like to see in terms of what
Speaker 3: happens for oversight in terms of private markets? You and
Speaker 3: I talked ahead of this conversation, and one of the
Speaker 3: issues is the transparency issues. And I know you talked
Speaker 3: about what you guys do in terms of I guess
Speaker 3: spreading around risk. Right, it's not like you're one investment
Speaker 3: in one particular investment. When it's the private markets, it's
Speaker 3: multiple investments. But what do you think needs to be
Speaker 3: government oversight or what you provide transparency to your investors?
Speaker 3: But does there need to be something more?
Speaker 11: Well, i'd step back because you're going to get something
Speaker 11: that's sort of paramount to any type of investment approach,
Speaker 11: which is manager selection and the diligence that goes into
Speaker 11: an investment firms track record, and so as the private
Speaker 11: markets grow and as there's a significant amount of new entrants.
Speaker 11: There are going to be firms that may not have
Speaker 11: a twenty five year track record or may not be
Speaker 11: able to speak to prior periods, whether it was the
Speaker 11: GFC or the emerging markets or other challenging times. So
Speaker 11: we definitely think in any of the whether it's private credit,
Speaker 11: or real estate or secondaries, all these areas, a twenty
Speaker 11: twenty five year track record is really helpful, right, and
Speaker 11: not everyone has it today.
Speaker 12: In the private markets, you know.
Speaker 11: We think the expectations related to transparency are no less
Speaker 11: than the private markets than the public markets. Institutional and
Speaker 11: high net worth clients expect us to provide them a
Speaker 11: significant amount of transfer today already today, So we don't
Speaker 11: think of what we do as.
Speaker 12: Changing that commitment to our investors.
Speaker 3: What do you think about private opening up to more
Speaker 3: retail investors and then does that change in terms of
Speaker 3: the transparency issues.
Speaker 13: Well.
Speaker 11: So, of course, the growth that you reference that we
Speaker 11: talked about on our earnings call it areas. This sort
Speaker 11: of marriage of alternatives in the wealth channel is a
Speaker 11: secular trend, democratization of alternatives. That growth is being driven
Speaker 11: primarily by individuals with over a million to invest in
Speaker 11: the US. That addressable market is an excess of eighty
Speaker 11: trillion and grew beyond that last year, so that's plenty
Speaker 11: to do. They all are still struggling to grow an allocation.
Speaker 11: Some of the limits in their allocations.
Speaker 12: Are where you're.
Speaker 11: Going, which is there are state limits on how much
Speaker 11: they can allocate there, or in some cases federal oversight
Speaker 11: that limits the allocation. Individual banks have their own suitability requirements,
Speaker 11: but fundamentally, this high net worth individual that has over
Speaker 11: a million dollars to invest gives us a massive runway
Speaker 11: to provide education and new solutions.
Speaker 1: To accredited investors. Correct, that's right. There are some folks
Speaker 1: in your industry who say we need to essentially say
Speaker 1: we need to get rid of those rules about accredited
Speaker 1: investors because it will give more opportunities to folks to
Speaker 1: get in on deals early and have more upside. It
Speaker 1: doesn't sound like you're actually saying that you're saying that
Speaker 1: accredit investors, there's enough dry powder there essentially for you.
Speaker 7: No.
Speaker 11: I mean, I do think that over time, as we
Speaker 11: work to investors that even less to deploy lower sophistication,
Speaker 11: there's an opportunity to provide them solutions they don't get today.
Speaker 11: You know, a big part of what we do is
Speaker 11: not just raise money, but deploy it. And the fundraising
Speaker 11: and the growth in the private markets is you know,
Speaker 11: driving a lot of the headlines, but one of the
Speaker 11: things we want to make sure is it's deployed reasonably, thoughtfully,
Speaker 11: and ARES has got a real comitment to local origination,
Speaker 11: whether in real estate or credit or any of our areas.
Speaker 11: And we were talking before the call about how important
Speaker 11: it is to build portfolios with small single investments, so
Speaker 11: you're very diversified. ARCC, which is one of the largest
Speaker 11: public BDC's, you know, the single name exposure there is
Speaker 11: two two and a half points.
Speaker 10: It's not a.
Speaker 11: Concentrated set of bets, really spread out, and to build
Speaker 11: that type of a portfolio you need to be able
Speaker 11: to have a significant feet on the ground and origination.
Speaker 11: But yes, do we think that non accredited investors are
Speaker 11: a growth area for the firm. Absolutely, But we think
Speaker 11: we're in the early innings of the high net worth
Speaker 11: investor allocating more to the wealth channel, and there will
Speaker 11: be a time when you know, not accredited investors will
Speaker 11: also get access to what we do.
Speaker 3: Rus how much bigger do you think the private credit
Speaker 3: market gets. I mean, it's just an incredible kind of
Speaker 3: the explosive growth that we've seen just in the last
Speaker 3: couple of years. And you and I talked on the
Speaker 3: call any Great Context reminding us that still the public
Speaker 3: markets are so much larger. But does it get to
Speaker 3: a point where the private market's rival, certainly on the
Speaker 3: equity side of things, or is that just crazy?
Speaker 11: Well, I think it provides a really attractive solution. It's
Speaker 11: floating rate. In ninety ninety six percent of the loans
Speaker 11: are floating rate. That's an important aspect because it minimizes
Speaker 11: the volatility that we've now seen with fixed income.
Speaker 12: Private credit is also higher yielding.
Speaker 11: And we're asked often, you know how much you know,
Speaker 11: what do we think of the growth? It's actually the
Speaker 11: growth is not really outsized versus private equity. It just
Speaker 11: has gotten a lot of attention in the last few years.
Speaker 11: Think about any sort of typical LBO. You need two
Speaker 11: quantums of debt for every amount of equity.
Speaker 12: So to have a proper.
Speaker 11: Functioning economy, the private credits have really private credit has
Speaker 11: really stepped in and some of the concerns where banks
Speaker 11: don't provide as much capital where you don't find other solutions.
Speaker 1: There are some critics out there who say that, you know,
Speaker 1: there's not the same oversight with private credit that there
Speaker 1: is with traditional lending through banks. Banks would like to
Speaker 1: say that I'm wondering if on your radar there's concern
Speaker 1: that there could be more regulation coming for private credit.
Speaker 11: I worked at a large bank for a while, and
Speaker 11: I understand that there is not the same leverage with
Speaker 11: the investment managers as there is or there used to
Speaker 11: be with banks. There's also an appropriate matching of capital and.
Speaker 12: Deploying it.
Speaker 11: So we have investors that provide us long term capital
Speaker 11: and it can't be called on a.
Speaker 12: Short on the short term.
Speaker 11: So actually, the large players in the private credit markets
Speaker 11: are very very different than banks when they were lending,
Speaker 11: either at the peak or even after the GFC. They
Speaker 11: don't have the same leverage. You might have one times leverage.
Speaker 11: They don't have the same volatility in the capital deploying,
Speaker 11: so it's a very different value proposition. It's not the
Speaker 11: same threat to the economy. We're not taking deposits from
Speaker 11: individuals and so on.
Speaker 1: That was Raj Donda, Global head of Wealth management at
Speaker 1: Aries Wealth Management.
Speaker 3: And that wraps up our first hour of the weekend
Speaker 3: edition at Bloomberg Business Week from Bloomberg Radio Ahead. In
Speaker 3: our next hour, more from Bloomberg invest held this past
Speaker 3: week in New York City, including getting really deep inside
Speaker 3: today's AI world with the global Chief Technology Officer and
Speaker 3: Chief AI Officer over at Dell, and yes, we might
Speaker 3: even talk a little Deep Seek.
Speaker 1: Deep Seek was actually one of the many things that
Speaker 1: Ben Ren and I spoke about at Bloomberg Invests. That's
Speaker 1: where he gave a demo of his GENAI product Magic.
Speaker 1: We'll hear a bit from that conversation and his predictions
Speaker 1: about the role AI will be playing in all of
Speaker 1: our lives in a very short time.
Speaker 3: And keeping your eye on the ball a mid market volatility.
Speaker 3: We'll talk about that with Goldman's co head of Global
Speaker 3: Private Wealth Management. Our coverage from Bloomberg invest continues. This
Speaker 3: is Bloomberg Business Week.
Speaker 2: You're listening to the Bloomberg Business Week podcast. Catch us
Speaker 2: live weekday afternoons from two to five pm Eastern Listen
Speaker 2: on Applecarplay and Android Auto with the Bloomberg Business app,
Speaker 2: or watch us live on YouTube.
Speaker 3: Blenny Ahead in our second hour of the weekend edition
Speaker 3: of Bloomberg Business Week, as we broadcasted live from the
Speaker 3: Bloomberg invest event to the heart of New York's financial
Speaker 3: district this past week. Coming up, another read on today's
Speaker 3: market and investment environment with Mina Flynn, co head of
Speaker 3: Global Private wealth Management at Goldman Sachs.
Speaker 1: Plus we mix in subtechnology as many guests that invest
Speaker 1: talked about the changing landscape of investing, the role of
Speaker 1: fintech and yes, artificial intelligence.
Speaker 10: On AI.
Speaker 1: We'll hear from Ben Rahn, the founder and CEO of Sigtech,
Speaker 1: a company that's built a GENAI product to analyze financial markets, and.
Speaker 3: John Rose, global Chief Technology Officer and Chief AI Officer
Speaker 3: at Dell Technologies on Deepseek, the great AI spend and
Speaker 3: build out, and how companies are really using artificial intelligence.
Speaker 1: First up, though, more on today's market environment and keeping
Speaker 1: your cool amid volatility. That was top of mind as
Speaker 1: we sat down with Mina Flynn, co head of Global
Speaker 1: Private Wealth Management at Goldman Sachs from Bloomberg invest Our
Speaker 1: conversation on Tuesday. Was a day when markets were pretty
Speaker 1: volatile amid US tariff concerns.
Speaker 14: I think the number one thing that we have to
Speaker 14: remember is that when it comes to individuals, the first
Speaker 14: thing you focus on is portfolio construction. Portfolio construction drives
Speaker 14: ninety percent of a client's returns and it's something that
Speaker 14: we talk about upfront and then on an ongoing basis
Speaker 14: with them. And the reason why this is so important
Speaker 14: is in times of volatility such as we've had this week,
Speaker 14: and what you don't want is you don't want investors
Speaker 14: to be taking so much risk that they become uncomfortable
Speaker 14: and they sell, they crystallize a loss versus staying put
Speaker 14: or buying. But on the flip side, we want to
Speaker 14: make sure that we encourage clients to take enough risks
Speaker 14: so that they offset inflation on an after tax, after
Speaker 14: spending basis.
Speaker 6: So our portfolio are.
Speaker 14: Really constructed with investment, great high quality fixed income and
Speaker 14: then a good amount of equities and alternatives.
Speaker 1: Let's talk about the equities first in terms of geographic
Speaker 1: exposure for those equities, what has it traditionally been And look,
Speaker 1: we know it's not a monolith. Every client is certainly different,
Speaker 1: but in general, how do you think about US equities
Speaker 1: versus equities outside of the US.
Speaker 14: Sure, so we prefer US equities, and we prefer that
Speaker 14: both in both public markets as well as private markets.
Speaker 14: Big picture, we have roughly about a forty percent allocation
Speaker 14: to public equities. The largest allocation of that is to
Speaker 14: US equities, and then outside of that developed international equities,
Speaker 14: we do have a small percentage to emerging markets. But
Speaker 14: then also I would say we have recently increased our
Speaker 14: allocation to private markets into private equity and specifically as
Speaker 14: it relates to buy out and growth. And the reason
Speaker 14: why is because these are two sub sectors of alternatives
Speaker 14: where you see a significant amount of alpha relative to
Speaker 14: public market markets, and also the distributions of returns is
Speaker 14: much more narrow than other subasset classes within alternatives.
Speaker 3: In terms of private equity, are you upbeat about the
Speaker 3: ability to exit, to see start seeing exits, which is
Speaker 3: something that has been really difficult over the last few years.
Speaker 14: It has been difficult as it relates to public markets.
Speaker 14: I'm upbeat as it relates to private equity on two things.
Speaker 14: One is, I do think to the extent that you
Speaker 14: have opportunities right now in public markets to be able
Speaker 14: to take companies private. I think that's an attractive opportunity
Speaker 14: for private equity companies.
Speaker 6: Second, I do.
Speaker 14: Think that there's a lot of opportunities for private equity
Speaker 14: companies in the private markets, so they don't necessarily have
Speaker 14: to only think about taking a company public or M
Speaker 14: and A as their only alternative to liquidity.
Speaker 6: So a lot of.
Speaker 14: Secondary private exits, a lot of continuation funds. The other
Speaker 14: thing I would note, although, is if you look at
Speaker 14: growth valuations and in private equity, what you have seen
Speaker 14: is you have seen a normalization of valuations between public
Speaker 14: and private market. And the reason why is because you've
Speaker 14: had really strong performance with these portfolio companies and it's
Speaker 14: allowed these companies to grow into the target exit valuations
Speaker 14: that these gps were looking for. So I do think
Speaker 14: when you have a little bit more stabilization in the markets,
Speaker 14: you're going to see more deal activity, both as relates
Speaker 14: to IPO as well as.
Speaker 5: M and A.
Speaker 1: Okay, so let's talk about potential stabilization in the markets.
Speaker 1: Just in the last couple of weeks, we've certainly seen
Speaker 1: things change quite a bit. What's your outlook?
Speaker 14: So I would just say the thing that I'm really
Speaker 14: thinking about is the sequencing of policies, and so if
Speaker 14: you look at the Trump administration, it is a pro
Speaker 14: business administration. But what we're seeing right now is some
Speaker 14: of the negative hits to growth come first, whether that's
Speaker 14: immigration or whether that's tariffs. Before in the second half
Speaker 14: of the year we're probably going to see some sort
Speaker 14: of tax reform as well as deregulation, and so I
Speaker 14: think what we've got to be mindful of is a
Speaker 14: little bit of that curve. Generally, the number one driver
Speaker 14: of US equity returns is a growing economy. Even with
Speaker 14: the tear rates that we're talking about right now, we
Speaker 14: still do anticipate that we're going to have positive GDP
Speaker 14: in the US, and so from here we still do
Speaker 14: see equity market upside in the US.
Speaker 3: So mean, you guys don't think about recession because it
Speaker 3: does feel like all of a sudden, the narratives change
Speaker 3: a little bit. We've seen weaker consumer spending numbers, consumer
Speaker 3: sentiment numbers, manufacturing data, So recession off the table completely.
Speaker 14: For this, It's definitely, it's definitely not off the table,
Speaker 14: and we absolutely are looking at the data. But you're
Speaker 14: also looking at a growth of over two percent, you know,
Speaker 14: two and a half percent, and so we have the
Speaker 14: odds of a recession even with these tariffs relatively low,
Speaker 14: call it fifteen to twenty percent. I do think it's
Speaker 14: important to take a step back and just look at
Speaker 14: we've got an SMP that's down roughly one percent year
Speaker 14: to date. Right, We've got a lot of volatility, but
Speaker 14: we've got an sp that's down one percent year to date.
Speaker 6: Okay.
Speaker 14: Where you've really seen that underperformance is in the consumer
Speaker 14: to the macro points that you were talking about, as
Speaker 14: well as in technology, just because you've had some of
Speaker 14: the growth decrease in earnings outperformance versus called the rest
Speaker 14: of the four ninety three r But outside of consumer technology,
Speaker 14: all of the other sectors are positive. And so what
Speaker 14: I'm really focused on is the earnings path for the
Speaker 14: other four ninety three. I think the max seven is
Speaker 14: going to be fine, but what we're going to see
Speaker 14: versus twenty four is likely a lot more earnings growth.
Speaker 14: So call it three percent and twenty four roughly eight
Speaker 14: nine percent this year. And so, and just your point
Speaker 14: as it relates to tariffs, we anticipate that every one
Speaker 14: percent increase in the effective tear rate decreases growth by
Speaker 14: roughly ten bases points and increases inflation by ten bases points,
Speaker 14: so it is manageable. I mean, it's going to depend
Speaker 14: on what happens, how long those tariffs are in place,
Speaker 14: if they're rolling or not. I think if they're rolling tariffs,
Speaker 14: it's going to be much more hard from an inflation perspective.
Speaker 6: Do you think that's up in the air.
Speaker 3: Do you think that these are going to be lasting
Speaker 3: tariffs that stick around for a long time, Will there
Speaker 3: be more possibly or do you think that things could
Speaker 3: change in a week and a month.
Speaker 14: I think things could absolutely change overnight in a week
Speaker 14: and a month. And I do think that there's the
Speaker 14: opportunity to also make a deal with you know, Mexico
Speaker 14: Canada in the near term and actually, you know, have
Speaker 14: those tariffs reduced. And so I think the ultimate is
Speaker 14: we don't know what's going to happen, and we just
Speaker 14: the main thing we're focused on is that economic data.
Speaker 1: Do you think that tariffs on Mexico and Canada are
Speaker 1: more damaging than tariffs on China, because it does seem
Speaker 1: like the Mexico and Canada tariffs there is this off
Speaker 1: ramp when it comes to you know, what the President
Speaker 1: and his team have called essentially the border crisis and
Speaker 1: the drug war. Yeah, I mean, I think we don't
Speaker 1: necessarily see that off ramp.
Speaker 14: Yeah, when you look at twenty five percent tariffs that
Speaker 14: you're talking about with Canada and Mexico, it's much more
Speaker 14: substantial than the tariffs that you've actually seen on China.
Speaker 14: And so when you think about that effective tariff for
Speaker 14: tariff rate right now, it's roughly about eight percent. If
Speaker 14: things stays as they have been announced, an eight percent
Speaker 14: tariff rate would actually hit growth by roughly call it,
Speaker 14: you know, eighty basis points, and what increase inflation by
Speaker 14: roughly eighty basis points. That being said, we already had
Speaker 14: inflation coming down from where it is right now, and
Speaker 14: so we probably get to roughly a three percent level
Speaker 14: if that's the case. Again, it's not our estimate or
Speaker 14: our perspective that tear of state at these levels, But
Speaker 14: if that's the case, you still have an opportunity for
Speaker 14: the FED to be able to react if you have
Speaker 14: inflation even at that three percent level. And so what
Speaker 14: we saw in twenty nineteen is the FED cut as
Speaker 14: an insurance cut. And could we see that again today
Speaker 14: or you know, call it May, June, December. Absolutely, And
Speaker 14: I think the market's pricing more of that today. That's
Speaker 14: exactly what traders are pricing in three rate cuts. What
Speaker 14: kind of blows my mind is though, as you say,
Speaker 14: things could change quickly overnight, in a week, in a day,
Speaker 14: and that's kind of the environment that we've seen and
Speaker 14: we've seen it play out in terms of the rate environment.
Speaker 14: One thing I want to ask you, because I think
Speaker 14: there's been an assumption when it comes to President Trump
Speaker 14: his tolerance of, you know, market volatility, that he was
Speaker 14: watching the equity markets. It was kind of interesting to see,
Speaker 14: I feel like over the last few days where the
Speaker 14: markets had certainly the equity markets had some problems, and
Speaker 14: we just had this assumption that President Trump would do something,
Speaker 14: say something. I'm curious, how like, what's the conversation you
Speaker 14: guys all have around that. I mean, definitely there's put
Speaker 14: whatever you want. Yeah, I mean, there's definitely their perspective
Speaker 14: that there was going to be a deal done, which
Speaker 14: is why you know, the markets are reacting like they are.
Speaker 14: And you do have a president that has really focused
Speaker 14: on pro business policies, but at the end of the day,
Speaker 14: he's very focused on bringing manufacturing and jobs back to
Speaker 14: the US and The question is can we withstand that volatility?
Speaker 14: Can the consumer withstand that volatility? Can CEOs withstand that
Speaker 14: volatility and continue to invest in their businesses?
Speaker 1: Before we let you go, Mina crypto, is it part
Speaker 1: of the alternatives in a portfolio for your ultra high
Speaker 1: networth clients?
Speaker 14: It's not part of our client's portfolios. And the main
Speaker 14: reason that is is because we don't see it as
Speaker 14: a store of value. It's very hard to actually value.
Speaker 1: Oh, please take for the crypto folks in the back.
Speaker 6: Yeah, So you don't.
Speaker 1: See it as a store of value, is what you said.
Speaker 14: We don't see the store of value and entiley volatile
Speaker 14: asset and it's hard under what valuation metrics do you
Speaker 14: actually value it? So no, we don't have it as
Speaker 14: a part of our core asset allocation.
Speaker 3: That was Mina Flynn, co head of Global Private Wealth
Speaker 3: Management at Golman Sachs.
Speaker 1: You're listening to Bloomberg Business Week coming up AI and
Speaker 1: financial services. The founder and CEO of sigtech stops by
Speaker 1: to share his magic. That's short for Multi Agent Generative
Speaker 1: Investment copilots. Carol say that five times. I like it though.
Speaker 3: Magic that's next.
Speaker 7: This is Bloomberg.
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Speaker 2: can also listen live on Amazon Alexa from our flagship
Speaker 2: New York station, Just Say Alexa played Bloomberg eleven thirty.
Speaker 3: A big theme at Bloomberg Invests this year No Surprise
Speaker 3: was AI, artificial intelligence, specifically the monetization. It feels like
Speaker 3: that we're all wondering and questioning around AI. How investors
Speaker 3: are extracting value from it, the risks, the opportunities across
Speaker 3: public and private portfolios, and where the smart money is moving.
Speaker 1: On that, I caught up with Ben Wren, founder and
Speaker 1: CEO of the London based fintech sig Tech. It's one
Speaker 1: off of Brevin Howard back in twenty nineteen. It now
Speaker 1: offers a GENAI tool called Magic. It's basically this group
Speaker 1: of AI agents that analyze financial markets and bin says
Speaker 1: work that would typically take quants and analysts hours to do,
Speaker 1: Magic can do in less than a minute. I spoke
Speaker 1: with him after he gave a demo to the folks
Speaker 1: at Bloomberg invest We.
Speaker 15: Know we work with clients to focus on workflows. The
Speaker 15: share a few characteristics. I would describe them as intellectual
Speaker 15: but not creative. For example, one of our biggest clients,
Speaker 15: they are using us to completely transform the commercial loan
Speaker 15: and the writing. To be honest, when you are when
Speaker 15: you are the human professionals and the writing commercial loans,
Speaker 15: you don't really want to be creative. So it's a
Speaker 15: very intellectual but not creative endeavor.
Speaker 7: But it's very it's very boring.
Speaker 15: The other one is it's very it's very manual because,
Speaker 15: for example, on the commercial loan applications, each each firm
Speaker 15: has to apply in their own format.
Speaker 7: There is no standard or template for.
Speaker 15: The applications, so each business is just sending their documents
Speaker 15: in whatever, you know, formats that they feel comfortable with.
Speaker 15: They could be a multily part of PDFs, slides and
Speaker 15: excel spreasures. And that is I want to make one
Speaker 15: statement which is very interesting, which is in finance, we
Speaker 15: create documents and materials by humans for humans. So if
Speaker 15: you look at all these presentations, right, actually the most
Speaker 15: important information we actually spend extra time to turn it
Speaker 15: into a graphic. Right, we want to visualize actually the
Speaker 15: most important information in our slides, because that's how we
Speaker 15: make an impact on the human reader. But it turns
Speaker 15: out this information in that format is really not very
Speaker 15: friendly to large language models. So a lot of our
Speaker 15: efforts want to make sure that we can actually extract
Speaker 15: that virual information into a format that we can work
Speaker 15: with with using large language models.
Speaker 1: Then when I saw you using magic demonstrating it for everybody,
Speaker 1: there was a little font at the bottom that said
Speaker 1: something along the lines of this is not investment advice.
Speaker 1: There could be errors in here. Make sure to use
Speaker 1: independent research, something along those lines. Obviously, I'm not a lawyer.
Speaker 1: What is the risk with just taking what it spits
Speaker 1: out and pasting and giving it to your boss.
Speaker 15: I think for regulated services and businesses, the human will
Speaker 15: stay in the loop for the foreseeable future. Regulators the
Speaker 15: entire regulation framework is about it's human centric right. So
Speaker 15: the regulator want to make sure that someone is staying
Speaker 15: the loop and is accountable for the actions and consequences.
Speaker 15: So in these businesses, AI agents they can automate a
Speaker 15: huge amount of work knowledge work. We have seen people
Speaker 15: used to spend six hours in processing loan applications. Now
Speaker 15: they only need to spend thirty seconds. That's two hundred
Speaker 15: x improvement in speed actually makes a huge impact, but
Speaker 15: someone has to be there and supervise. That's why this
Speaker 15: user interface UI design its super important.
Speaker 7: Because as we scale the capabilities.
Speaker 15: Of the intelligence, how do we make sure that the
Speaker 15: human is not overwhelmed by a new type of work?
Speaker 1: But how do you know that what Magic produces is correct?
Speaker 7: There are two There are actually many ways to do it.
Speaker 15: First, as the large language models get better, they are
Speaker 15: more and more grounded. For example, the latest generations of
Speaker 15: reasoning models they essentially build. They are building self reflection
Speaker 15: and self critique. So the quality of the response is
Speaker 15: going up, and that's just mainly because of the pre
Speaker 15: training and post training breakthrough by the foundational model air Labs.
Speaker 15: But on the other hand, as we build Magic and
Speaker 15: the build AI agents, we're actually building grounding into it.
Speaker 15: So as responses come back, we always want to provide
Speaker 15: citations quotes so the human can click away from verifying it.
Speaker 1: The whole idea behind the products such as this is
Speaker 1: to give you and edge over your competitors to find
Speaker 1: that alpha. But what happens when my competitor asks Magic
Speaker 1: the same question? That I asked, you'll get a result
Speaker 1: that's the same, and then you won't actually have that advantage.
Speaker 15: I think if you ask exactly the same question, you'll
Speaker 15: probably get some very similar.
Speaker 7: But I do think the nature of.
Speaker 15: The work going forward will become each individual contributors will
Speaker 15: become a supervisor. I think that's a fundamental shift in
Speaker 15: the world how.
Speaker 7: We do our jobs. I think today we're going in there.
Speaker 15: Most of ours are individual contributors, but it's like transition
Speaker 15: from a PhD researcher pH student to a supervisor to
Speaker 15: a research director. The other thing is I think people
Speaker 15: will ask different questions. I think, you know, people have
Speaker 15: heard about the phrase prompt engineering for a few years now,
Speaker 15: but it's surprising to me how difficult or counterintuitive it
Speaker 15: is to most people. I would say, there are no
Speaker 15: substitute for spending ten hours of your time on seriously
Speaker 15: learning how to have a productive conversation and that try
Speaker 15: to poke, try to push the limit of what this
Speaker 15: model can do or not do. I think the difference
Speaker 15: is most likely we'll come down to who ask the
Speaker 15: questions and who can follow up with better questions.
Speaker 1: So it really raises the question I think in the
Speaker 1: financial services industry about what this looks like if it's
Speaker 1: widely adopted in terms of what it does to workforces
Speaker 1: and how it changes the way companies think about who
Speaker 1: they need to hire and who they need to pay.
Speaker 1: If this does the work that a quant can do
Speaker 1: in forty five seconds that would take a quant what
Speaker 1: three to six hours, then what do the quants do?
Speaker 7: I think the quants will fund more interesting things to do.
Speaker 15: The truth is, I think, if a think about it
Speaker 15: up to this point, the technology made a difference only
Speaker 15: in the field of what we call explicit knowledge. Right,
Speaker 15: we ultimate stuff, but in order to automate that knowledge
Speaker 15: has to be explicit something we can write down, codify,
Speaker 15: you know, almost linearly, and then we get people to
Speaker 15: implement it in Python on some other programming language, then automated.
Speaker 7: But that a huge amount of.
Speaker 15: Tacit knowledge that exists, especially in industries like financial services.
Speaker 15: That's why we have human experts. They are experts because
Speaker 15: they have knowledge in their head that's based on years
Speaker 15: of experience. But that's simply impossible to write down in
Speaker 15: a very codified, simplified way. But now with large language
Speaker 15: models and AI agents, what we have learned is that
Speaker 15: for the first time, we can use AI agents to
Speaker 15: distill these testing knowledge from human experts into automated processes.
Speaker 15: I think that's where the breakthrough will really come from.
Speaker 1: You told me in one of our prep calls ahead
Speaker 1: of this panel that by the end of this year
Speaker 1: the workforce will likely be half human half AI agents.
Speaker 1: You stick to that right now?
Speaker 7: I think half half, Yes.
Speaker 15: I think by the end of next year we probably
Speaker 15: ritual will be for each one of us.
Speaker 7: There will be multiple AI agents. So the I mean I.
Speaker 15: Think by the end of this year we'll all be
Speaker 15: very familiar with the concept of a hybrid workforce. But
Speaker 15: in the next year, I think that racial well keep going.
Speaker 1: I mean, you're talking about a fundamental shift in the
Speaker 1: way that an economy runs. Here, contextualize this moment in
Speaker 1: economic history for us. Is this like the Industrial Revolution?
Speaker 1: Is it like the rise of the internet and the
Speaker 1: browser in the nineteen nineties.
Speaker 7: Where are we I think about this in terms of electricity.
Speaker 15: I think we are very close to a point where intelligence,
Speaker 15: in terms of you know, streaming tokens, will be on tap,
Speaker 15: similar to electricity on tap.
Speaker 7: Now recently you looked into it. I mean it's quite interesting.
Speaker 15: In the last two hundred years, each country on average
Speaker 15: spent about one percent of the nominal GDP building and
Speaker 15: upgrading the electricity grid.
Speaker 7: Even today, I think doing a new deal.
Speaker 15: In the nineteen thirties, the US spent about one point
Speaker 15: two percent of GDP.
Speaker 7: I'm building out power.
Speaker 15: Actually the first power station in the US is building's
Speaker 15: built in Manhattan.
Speaker 7: So one percent GDP today is three hundred billion.
Speaker 15: So coincidentally, this year, the big tech companies have already
Speaker 15: announced three hundred billions of investment into data centers. So
Speaker 15: I think the investment is not over investment. But it's
Speaker 15: quite shocking how quickly we romped up the investment to
Speaker 15: literally this magic number one percent of GDP.
Speaker 1: You did say also a couple of months ago to
Speaker 1: me that this tends to move in three month increments.
Speaker 1: The idea being the technological breakthroughs that we see are
Speaker 1: really happening so quickly. You have to think about the
Speaker 1: development of AI within three month increments. What's what's going
Speaker 1: to look like, what's it going to look like a
Speaker 1: year from now?
Speaker 15: I think for US to you know, given the one
Speaker 15: percent investment GDP investment, for US to really deliver the promise,
Speaker 15: we have to see something like eight to ten percent.
Speaker 7: Of GDP growth. We have to triple quote group our
Speaker 7: GDP growth here in the US.
Speaker 15: Here in the US in a world where the adoption
Speaker 15: for AI is really and China is very keen to
Speaker 15: adopt AI for pretty much everything. So that's really the
Speaker 15: so that when I say that's the promised land, that's
Speaker 15: that's the promised land, right, that's the promise we have
Speaker 15: to deliver given this kind of investment. I mean, just
Speaker 15: to just to illustrate how fast things have come. Three
Speaker 15: years ago to train the GBT three, it's it's only
Speaker 15: you something like a fifteen to thirty megawarts data center.
Speaker 15: It was quite normal. And today you know a mask
Speaker 15: and a matter of building two gigawards data centers, which
Speaker 15: is ten times bigger. For that to work, they have
Speaker 15: to build everything. They have to build their own natural
Speaker 15: gas power plant next to it. So that the sheer
Speaker 15: scale of the of the investment is really unprecedented. But
Speaker 15: for us to deliver the promise, we have to see
Speaker 15: in the next five years. So GDP growth of eighteen percent.
Speaker 1: You mentioned China, and I'm wondering about the country's ability
Speaker 1: to pull this off if there are export controls in
Speaker 1: place on American tech, such as we've seen within video.
Speaker 1: Since we last spoke, everything with deep Seek happened. How
Speaker 1: do you look at what's happening in China and whether
Speaker 1: or not they can become like a competitor to the
Speaker 1: US when it comes to AI.
Speaker 15: I think to scale the intelligence, there are only a
Speaker 15: few variables. Number One, data In China, there's the data
Speaker 15: privacy is much less a concern, so I also there
Speaker 15: are many people generating data, so I think I would
Speaker 15: say China probably has an advantage in terms of having
Speaker 15: access to the quality the quantity of the data. The
Speaker 15: second thing is just sheer talent. There are two hundred
Speaker 15: papers in AI published every day. I read some of them,
Speaker 15: not obviously not all of them, but one thing if
Speaker 15: very striking. You can open a random AI paper these days,
Speaker 15: about thirty percent to fifty percent the co authors are Chinese.
Speaker 15: So China has this supply of talent, but sing in
Speaker 15: the US.
Speaker 7: The last one in just compute oilse being equal.
Speaker 15: Intelligence is basically the logarithm of compute. So you increased
Speaker 15: by one hundred times, you get ten times beating intelligence.
Speaker 15: So I think China and US are really the two
Speaker 15: countries in the world who are really pushing.
Speaker 1: That was beIN Ran, founder and CEO of Sigtech, from
Speaker 1: our panel discussion at Bloomberg invest Still.
Speaker 3: Head on Bloomberg Business Week, more from Ben Rann, and
Speaker 3: more on Magic and how AI will affect financial services.
Speaker 1: This is Bloomberg.
Speaker 2: This is the Bloomberg Business Week Podcast. Listen live each
Speaker 2: weekday starting at two pm Eastern on Apple CarPlay and
Speaker 2: Android Auto with the Bloomberg Business App. You can also
Speaker 2: listen live on Amazon Alexa from our flagship New York
Speaker 2: station Just Say Alexa played Bloomberg eleven thirty.
Speaker 3: We're back with highlights from Bloomberg invest held this past
Speaker 3: week in New York City. Want to get back to
Speaker 3: Tim's conversation with Ben Rhn, the founder and CEO of Sigtech, tech.
Speaker 1: Spun off of Brevin Howard back in twenty nineteen and
Speaker 1: now offers this JENAI tool called Magic. It stands for
Speaker 1: Multi Agent Generative Investment copilots, and here Ben talks about
Speaker 1: the opportunity he sees for AI to disrupt financial services.
Speaker 7: We're Bloomberg. We love numbers.
Speaker 1: I know you're still considered a startup at this point,
Speaker 1: but give us some numbers like how many customers you
Speaker 1: have if you can, and where you're seeing it be deployed.
Speaker 15: In the last two months, we build a lot of
Speaker 15: private proparatory versions for different firms.
Speaker 7: I come show you this why a gentry three months old.
Speaker 15: So we are officially launched in September twenty twenty four.
Speaker 15: We started two years ago. We made a very big
Speaker 15: bet two years ago to say this is the future.
Speaker 15: We're going to you know better company on this. Even
Speaker 15: that took us eighteen months to figure out how to
Speaker 15: do it right because you know, it's so new, unprecedented.
Speaker 15: We have the experiment, trial and errors. So we launched
Speaker 15: in September last year, so we got into the hands
Speaker 15: of over one hundred and fifty financial institutions. We are
Speaker 15: extremely excited about the use cases we're able to deliver.
Speaker 15: So we currently focus on three categories. Number one macro
Speaker 15: market research. Just because my background is from macro hedge fund,
Speaker 15: I know the field very well. People think people use
Speaker 15: magic to get some magical insight, but funny enough, actually
Speaker 15: people find it extremely useful to have an understanding of
Speaker 15: where the market has priced in. It's kind of a
Speaker 15: common intuitive but if you think about it right, since
Speaker 15: large language models, by construction always give you the most
Speaker 15: likely word one by one, it's actually a fantastic tool
Speaker 15: to survey.
Speaker 7: The market at any point in time.
Speaker 15: I understand what other people know, how other people think
Speaker 15: about it.
Speaker 7: So what the market is pricing?
Speaker 15: Which is the first step towarding for headfrom managers, figure
Speaker 15: out do I have some view that's different, and how
Speaker 15: to put on a trade? So number one category macro
Speaker 15: market research. The second is equity fundamental analysis.
Speaker 7: So we did a big talk.
Speaker 15: On this because you know, in the last ten years
Speaker 15: a number of equity analysts has dropped by over thirty
Speaker 15: five percent, whereas the public market has become more concentrated
Speaker 15: than ever before. So we have this very weird dynamic.
Speaker 15: Tens of trillions of capital going to passive. Top twenty
Speaker 15: six companies are responsibul for half of the market cap
Speaker 15: of SMP five hundred, and I do think people can
Speaker 15: name the other four hundred and seventy four. So I
Speaker 15: in some sense we feel like the market has become
Speaker 15: less efficient where we need analytical power to cover more companies,
Speaker 15: but we don't have it. So we're working with equity
Speaker 15: fund managers who have, by the way, who had a
Speaker 15: very tough fifteen years just because it's concentration in.
Speaker 7: The top stocks. It's only really stock pickers.
Speaker 1: Yeah, the S and P five hundred has performed very
Speaker 1: well over the last It's very hard to be, so
Speaker 1: it's been tough to be. You did recently write that
Speaker 1: AI is going to dramatically impact financial services in terms
Speaker 1: of cost structure and profit margins.
Speaker 7: Yep, give us some numbers there.
Speaker 15: Yeah, So financial services excluding payment globally is a twenty
Speaker 15: trillion dollar business or twenty trillion dollars revenue every year,
Speaker 15: and we will break it down about three trillion of profits.
Speaker 15: But then in termal costs, we think eight trillion dollars.
Speaker 15: Costs can be hugely affected by what's going on, by
Speaker 15: what we are building in JENEI. That includes five trillion
Speaker 15: of staff costs, two trillion of risk and regulation related
Speaker 15: and then one trillion of tech spend. So I think
Speaker 15: eight trillion dollars that's just a starting point.
Speaker 1: Are the financial firms that you're trying to sell to
Speaker 1: or that are your customers, do you believe that they're
Speaker 1: being too cautious with their adoption of the technology.
Speaker 15: I think they are being very cautious, but again it's
Speaker 15: very difficult to make a very clear decision because just
Speaker 15: given how things are moving, and it's very hard to
Speaker 15: get you know. I think, especially in large regulated businesses,
Speaker 15: to make such big decisions, you need some kind of
Speaker 15: consensus building in the firm. But by the time you
Speaker 15: build a consensus in three months, things have changed. So
Speaker 15: I think that in terms of the adoption in financial services,
Speaker 15: I think it will start with a few firms with
Speaker 15: visionary leadership that embrace it and given a speed of
Speaker 15: which we can implement it, I think waiting six months,
Speaker 15: they will be able to disrupt the market segment they operating,
Speaker 15: and then that will have no comonfect.
Speaker 1: That's been Rand, founder and CEO of sig Tech during
Speaker 1: our panel discussion at Bloomberg invest We're going to stay.
Speaker 3: With technology now to a guest who keeps us up
Speaker 3: to speed, also on AI developments timely considering this past week,
Speaker 3: Open AI rival Anthropic officially closed a deal to raise
Speaker 3: three and a half billion dollars at a valuation of
Speaker 3: sixty one point five billion dollars, cementing it's placed him
Speaker 3: as one of the largest startups in the world.
Speaker 1: With more on AI. Where we are in the great
Speaker 1: AI build out and spend. Talked with Dell Technologies at
Speaker 1: Global CTO and Chief AI Officer John Rose, he was
Speaker 1: at Bloomberg invest.
Speaker 13: There's two answers in terms of AI spend. Clearly that's
Speaker 13: a gigantic growth the area. I think we've seen the
Speaker 13: TAM double in the last year. There's no doubt that,
Speaker 13: you know, we're on a track right now, and definitely
Speaker 13: in the global enterprise market that probably the majority of
Speaker 13: it spend in the long term is to build and
Speaker 13: implement the systems necessary to power the AI transformation of businesses.
Speaker 13: So pretty bullish on there the consequences. In order to
Speaker 13: do that, we have to make the older systems more efficient.
Speaker 13: So there's actually a spend profile there of trying to
Speaker 13: densify environments and aggregate legacy systems. So the whole space
Speaker 13: is pretty active and looks to be a pretty positive
Speaker 13: environment because without it, without that infrastructure, there is no
Speaker 13: AI future.
Speaker 3: So we're like what over two years in at least
Speaker 3: that the market the world, you know, as you always
Speaker 3: remind us, AI nothing new. We do the same thing,
Speaker 3: but certainly the narrative and the discussion changed more than
Speaker 3: two years to go. How has it evolved here in
Speaker 3: twenty twenty five? What's top of mind?
Speaker 10: Yeah, I mean, so we're in year three.
Speaker 13: Year one was experimentation with some tools that people couldn't
Speaker 13: really use for enterprise. Year two was to do it
Speaker 13: yourself here that if you wanted to do it, it was
Speaker 13: a big technical effort. Year three we've now seen lots
Speaker 13: of ISVs, lots of turnkey offerings, and most importantly, companies
Speaker 13: like DEMA, SIVs, ISV independent software vendors people which sell
Speaker 13: you stuff, so instead of do it yourself, you can
Speaker 13: actually buy stuff to do AI, which is incredibly important.
Speaker 13: The two things that we need for enterprise adoption are
Speaker 13: one the ability to consume it as a technology as
Speaker 13: opposed to a do it yourself project, which that's actually
Speaker 13: happening now. And the other is a feeling that you're
Speaker 13: not the first mover, and because some of us big
Speaker 13: companies have moved first and have gotten to the other
Speaker 13: side of productivity, now there's archetypes to follow. So so
Speaker 13: I'm pretty bullish about this is a good year in
Speaker 13: terms of expanded enterprise adoption.
Speaker 1: We haven't gotte to talk to you since the deep
Speaker 1: Seek news on January twenty seventh that really wiped hundreds
Speaker 1: of billions of dollars from in Vidia's market tap. We're
Speaker 1: down in Vidia about a little over twenty percent since
Speaker 1: the January highs for that company. Are you seeing any
Speaker 1: pullback in this space right now?
Speaker 3: No?
Speaker 1: In a word, yeah, And the reason for it is.
Speaker 13: Look, you know, Deepseek was just another of you know,
Speaker 13: forty years of disruptions that have progressively moved AI forward.
Speaker 13: You know, I was a theory forty years ago, and
Speaker 13: then we invented things and created new technologies and bent
Speaker 13: the curve multiple times to ultimately get to where we
Speaker 13: are today today. There's only two levers that make AI better.
Speaker 13: One is the mips per want of the compute environment
Speaker 13: O every time in Vidia delivers a new GPU that
Speaker 13: gets better. And the other is algorithmic improvements, which are
Speaker 13: things like deep Seek, and they just they just allow
Speaker 13: us to do things more efficiently.
Speaker 1: So you buy what we know about deep Seek, Like,
Speaker 1: are you skeptical that they were able to do what
Speaker 1: they did with the resources they had?
Speaker 12: Look, I wasn't.
Speaker 13: I didn't have a front row seat to exactly what
Speaker 13: they did. I look at it as interesting engineering. It
Speaker 13: does look like some novel approaches using some existing technologies. Great,
Speaker 13: we need that, And what we've learned from it because
Speaker 13: it's an open model, is yeah, there's some interesting techniques
Speaker 13: that other people are going to adopt and guess what
Speaker 13: it's going to make the whole AI industry more efficient.
Speaker 13: If there wasn't kind of insatiable demand in front of us,
Speaker 13: I'd be nervous.
Speaker 1: But there is.
Speaker 13: We have barely touched the processes of the enterprises in
Speaker 13: the world, and we have millions of them to go after.
Speaker 3: But I do wonder to Tim's point, that does Deep
Speaker 3: Seek make us rethink the models or the narrative about
Speaker 3: how the buildout has to happen, the energy needs, this cost,
Speaker 3: whatever it is.
Speaker 13: Yes, just like every other iteration, we're in a world
Speaker 13: welcome to the AI club. The AI club is a period,
Speaker 13: is an environment where there's constant disruption happening moving the
Speaker 13: industry forward. And so the novel approaches in Deep Seek
Speaker 13: allow us to rethink, Hey, maybe I can do training
Speaker 13: a little more efficiently, maybe I can do inferencing a
Speaker 13: little more costly. Maybe I can develop a different way
Speaker 13: of thinking about a model. Great, let's adopt that, let's
Speaker 13: build on it, and the next one might be bigger disruption,
Speaker 13: but it'll still move the industry forward.
Speaker 3: Got to ask you about Elon Musk and the government,
Speaker 3: and the goal is to make it more efficient. And
Speaker 3: there's of course a lot of news and a lot
Speaker 3: of headlines around what's going on in terms of what
Speaker 3: we've seen so far. What are your expectations that it
Speaker 3: becomes a more technologically advanced run government.
Speaker 5: Well, well, I think you know.
Speaker 3: I mean we should point out that Dell supplying servers
Speaker 3: to Elon's XAI.
Speaker 13: And the government and everybody else in the world. We're
Speaker 13: very present there.
Speaker 7: You know.
Speaker 13: Here here's the punchline, elons and technologists. He clearly understands
Speaker 13: the technology stack. The way you improve things, the way
Speaker 13: you get productivity, you do things better, is both the
Speaker 13: improvement of your processes and the application of technology to
Speaker 13: make those processes work more efficiently. Both of those are
Speaker 13: going to happen. I can't tell you exactly what's going
Speaker 13: to happen in the government. I can't tell you what
Speaker 13: play they're going to make. But what I can guarantee
Speaker 13: you is the end state, there will be more technology
Speaker 13: powering our government and our public sector, and it will
Speaker 13: probably make them more efficient and more effective. How it
Speaker 13: works out above that above my pay grade, but it
Speaker 13: is inevitable. The one thing I can guarantee you there
Speaker 13: won't be less technology in the government when we move
Speaker 13: in to the next year or the next two years.
Speaker 1: Listen, I'm asking you this as a technologist, as somebody
Speaker 1: who's a front row seat on the technology side. Critics
Speaker 1: have said their concerns about security and privacy when it
Speaker 1: comes to what Doje and what Elon Musk are doing.
Speaker 1: Should they be concerned.
Speaker 13: Maybe you should always be concerned and you should always
Speaker 13: look at the risk of technology. Here's a good example.
Speaker 13: We're maybe outspoken that for the real critical AI activities
Speaker 13: you should do them in a private environment. Some people
Speaker 13: disagree with us. The reason we say that is because
Speaker 13: that's the lowest risk path. It also happens to be
Speaker 13: the lowest cost path. Every technology decision you make is
Speaker 13: a technology and a vacuum until you apply it to
Speaker 13: a real world scenario.
Speaker 12: And that's where the risk.
Speaker 1: So essentially, what you're saying is if the Department of
Speaker 1: Government Efficiency employees are or using AI tools to help
Speaker 1: with their jobs. They should be doing that in an
Speaker 1: environment that is secure, you.
Speaker 13: Bet, and what that means to them they should figure out.
Speaker 13: But what you shouldn't do is go into an environment
Speaker 13: when you're using technology without contemplating the risk of it.
Speaker 13: I have full confidence that any good technologists, including the
Speaker 13: folks doing that work in the government, are absolutely thinking
Speaker 13: about not just the technology in a vacuum, but the
Speaker 13: fact that when it gets into the real world there
Speaker 13: are security considerations. There are other activities that need to
Speaker 13: be controlled, and you always build a security model into
Speaker 13: your technology architecture. Even lms have security models, even agents
Speaker 13: have security models, because that's necessary to make them work
Speaker 13: in something like an enterprise.
Speaker 1: Our thanks to John Rose, CTO and Chief AI Officer
Speaker 1: at Dell Technologies.
Speaker 3: And that wraps up the weekend edition of Bloomberg Business
Speaker 3: Week from Bloomberg Radio. At the Bloomberg invest event in
Speaker 3: New York City. You can catch all the conversations from
Speaker 3: the events, including Tim's demo with Sigtech. You can find
Speaker 3: that on the Bloomberg and at Bloomberg dot com, including
Speaker 3: the Bloomberg Live website as well. Thank you so much
Speaker 3: for joining us.
Speaker 1: Be sure to tune into Bloomberg Business Week Monday through
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Speaker 1: Stenebeck and I'm Carol Masser.
Speaker 3: Have a good and safe weekend.
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