Speaker 1: Bloomberg Audio Studios, Podcasts, radio news.
Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along
Speaker 2: with Lisa Bromwitz and Amrie Hordern. Join us each day
Speaker 2: for insight from the best in markets, economics, and geopolitics
Speaker 2: from our global headquarters in New York City. We are
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Speaker 2: Terminal and the Bloomberg Business app. We begin with our
Speaker 2: top story, a big saloff in big tech, sending the
Speaker 2: S and P five hundred to its worst day since
Speaker 2: December twenty two. Anastasia amorroso I Capital writing this tech
Speaker 2: consolidation and saloff likely has more to go. Our performance
Speaker 2: in terms of positive surprises led the significant mag seven
Speaker 2: stocks out performance over the past year and a half,
Speaker 2: but it now may be coming to an end. Alastaja
Speaker 2: joins us for more. Anastaga, good morning, It's going to
Speaker 2: see you to see what are we seeing take place here?
Speaker 2: Just the massive technical unwind of consensus positions across the board.
Speaker 2: Is it a growth scare, rotation of boarding gap, what
Speaker 2: is this.
Speaker 1: Well, I think the technical backdrop is part of the story.
Speaker 3: And obviously you know the technicals were very stretched coming
Speaker 3: into I would say June for technology shares in particular,
Speaker 3: whether you looked at physicianing, whether you looked at the
Speaker 3: overbought conditions. Remember we were the relative strength indicator over
Speaker 3: seventy for quite some time.
Speaker 1: So I think that explains partly on wine.
Speaker 3: When you see a setup like that, you think, well,
Speaker 3: something's going to happen to take us down. But I
Speaker 3: do think also there's a more fundamental story here, which
Speaker 3: is their earning surprises. As I mentioned, that's what really
Speaker 3: lifted the Max seven stocks higher. If you look at
Speaker 3: buy how much they were beating expectations.
Speaker 1: That's one way to look at it.
Speaker 3: The rest of the S and P was not doing much,
Speaker 3: but the Max seven was doing a lot. The other
Speaker 3: thing to think about is how much were their earnings
Speaker 3: revisions going up for some of those technology stocks, And
Speaker 3: again it's by a significant amount. That is not likely
Speaker 3: to be the case going forward, and case in point,
Speaker 3: Alphabet and Tesla did not see the positive surprises or
Speaker 3: saw a negative surprise, and to your point, the market
Speaker 3: is really severely punishing that. So you have lofty expectations,
Speaker 3: you have lofty valuations, and now you don't have the same.
Speaker 1: Surprise factor as you did before.
Speaker 3: So that's why I think investors will continue this on
Speaker 3: wine trade.
Speaker 4: This is a very confusing market to me because on
Speaker 4: one hand, I believe in this sort of unwined story,
Speaker 4: and then it doesn't seem so pernicious. It's just basically
Speaker 4: taking chips off the table cashing in just technically for
Speaker 4: risk adjustment. On the flip side, I want to stick
Speaker 4: on American air for a second, and I'm not asking
Speaker 4: you to comment specifically on this airline, but the fact
Speaker 4: that the shares are down so much, even after as
Speaker 4: John was mentioning being punished all through the year, it
Speaker 4: is down twenty six percent year to date really suggests
Speaker 4: that we're coming off really low expectations and still getting
Speaker 4: punished when earnings disappoint.
Speaker 5: Doesn't that reflect this.
Speaker 4: Feeling of sort of the unknown of how much and
Speaker 4: how quickly growth is weakening?
Speaker 3: Yeah, but I think the expectations were probably not low
Speaker 3: enough coming into this quarter. If you think about how
Speaker 3: much the expectations typically get revised down it's let's say
Speaker 3: three or four percent this time around that got revised
Speaker 3: down by all of half of a percent. So I
Speaker 3: don't think we really reset the bar substantially lower. And
Speaker 3: that's why going into the reporting season, one of the
Speaker 3: things we've been flagging is there's likely this disconnect that's
Speaker 3: building between the earnings expectations and what's happening in the economy.
Speaker 3: And if you look at the Economic Surprise Index, it's
Speaker 3: been negative for.
Speaker 1: Quite some time.
Speaker 3: If you look at the US consumer, Lisa, I think
Speaker 3: I'm now maybe finally joining you in that camp. There
Speaker 3: is a weakening in the US consumer, and there's the
Speaker 3: unemployment rate that did go up from three point four
Speaker 3: percent to four point one percent.
Speaker 1: That's not something to disregard.
Speaker 3: So I think that's the squaring that we have to
Speaker 3: do in the markets is acknowledged, the fact that earnings
Speaker 3: expectations were too high for the economic growth that we
Speaker 3: have today.
Speaker 4: What does that mean for how bullish bearish you are
Speaker 4: on say, tech stocks, which you used to really love
Speaker 4: and you used to lean into you so you can't
Speaker 4: just throw them out because everybody loves them. Yeah, at
Speaker 4: this point, are you looking to buy?
Speaker 1: Is this sort of a biable dip.
Speaker 4: Or is this thing that you stay away from because
Speaker 4: you don't want to get in front of a freight train.
Speaker 3: I think you don't buy just yet, or maybe you
Speaker 3: buy very slowly, but with the with the idea that
Speaker 3: this is likely to play out over the coming months.
Speaker 1: And you know the reason I.
Speaker 3: Say that lease is there's this, you know, Gardner's hype
Speaker 3: chart that I'm sure a lot of us and a
Speaker 3: lot of viewers have seen, and you go through this
Speaker 3: peak of inflated expectations cycle and what's on the other
Speaker 3: end is actually the trough of disillusionment. And I'm not
Speaker 3: saying that we're necessarily going that way for all of
Speaker 3: the AI stocks, but I think for some of them
Speaker 3: we're likely are or it's going to take longer to
Speaker 3: monetize the AI that we're all so excited about.
Speaker 1: So that's why I think that part is going to
Speaker 1: take a little bit longer to play out.
Speaker 6: You know.
Speaker 1: The other part is just given how.
Speaker 3: Long investors have been some of the artificial intelligence stocks,
Speaker 3: I think there's still a lot of selling pressure that
Speaker 3: is likely to come forth. So that's why I would
Speaker 3: think about having a shopping list. But executing that shopping
Speaker 3: list probably over the next few months. The other thing too,
Speaker 3: the market is typically consolidate into the first or I
Speaker 3: should say after the first rate cuts. So whether it's July,
Speaker 3: whether it's September, the market is three months after the
Speaker 3: cut tended to consolidate.
Speaker 1: Information technology.
Speaker 3: If you use the nineteen ninety five cycle for example,
Speaker 3: as a soft landing scenario, infotech rallied into the first
Speaker 3: rate cut, but again it's sold off or consolidated after.
Speaker 1: So that's why I don't.
Speaker 3: Think it's a quick buy the dip here intoechnology, but
Speaker 3: think about is more of a protracted, let's say three
Speaker 3: months consolidation frame.
Speaker 7: Given you've now come on to Lisa's side about these
Speaker 7: concerns in the consumer.
Speaker 1: Where will that play out in the market.
Speaker 7: If consumers aren't spending, what does that mean for potentially
Speaker 7: stocks you want to begin on or pull.
Speaker 3: Well, first of all, what I would say, the consumers
Speaker 3: are spending, right, but they're not spending as much as
Speaker 3: they used to. If you look at credit card spending data,
Speaker 3: for example, if it was up seven or eight percent
Speaker 3: year of year, right now it's maybe three to five percent,
Speaker 3: depending on what kind of a consumer you look at,
Speaker 3: so I think it's a slow down story versus a
Speaker 3: recessionary consumer spending print. But I will say that one
Speaker 3: of the favorite trades that I have in the market today,
Speaker 3: or the rotation trade, which is the other side of
Speaker 3: the technology trade, which is going to things like regional
Speaker 3: banks for example.
Speaker 1: So it's probably not.
Speaker 3: As levered to the consumer as it is to the
Speaker 3: commercial real estate market for example, but regional banks are
Speaker 3: really levered to lower interest rates.
Speaker 1: I think the one or D that we have.
Speaker 3: In this market environment is the FED is likely to
Speaker 3: cut rates, if not this month, then probably in the
Speaker 3: next couple of months. And if that's the case, you
Speaker 3: want to go to those rate cutting beneficiaries.
Speaker 1: If you have.
Speaker 3: Lower rates than some of those unrealized losses on the
Speaker 3: balance sheets of those banks should maybe become less so.
Speaker 1: Than they were before.
Speaker 3: If you have lower rates, you should also have better
Speaker 3: income margins that interest margins for those banks.
Speaker 1: So that's where I.
Speaker 3: Would be looking to position in regionals and small caps
Speaker 3: and utilities, which all of those sort of avoid the consumer.
Speaker 2: Smozampi film in this morning equity features on a rush,
Speaker 2: so by about two tens of one percent just a
Speaker 2: opsode nation. More and more people sort of shift into
Speaker 2: Ramo's camp on the consumer. You notice that it always
Speaker 2: pointed view. They're like, I'm in your camp.
Speaker 1: It's like you run the count, run the camp.
Speaker 6: I'm sort of big pessimists.
Speaker 5: I'm a sort of gloom and doom.
Speaker 4: I think about the sixty forty and Sebastian page is
Speaker 4: Allocation Committee, and basically the bond people are on one side,
Speaker 4: the equity people on the other side, and there's sort
Speaker 4: of a cloud hanging up from bond people and equity.
Speaker 5: Without a die.
Speaker 2: You are a bond person and a stage amoroso of
Speaker 2: my capital and a stage of thank you. So here's
Speaker 2: the latest. Donald Trump ramping up his attacks on Kamala Harris,
Speaker 2: criticizing her record as San Francisco District Attorney and her
Speaker 2: stance on abortion rights. Harris taking aim at Trump and
Speaker 2: the GOP's ties to Project twenty twenty five Lebby Cantrill
Speaker 2: of PIMCO, saying this, well, Trump remains favorite to win
Speaker 2: at this point. His chances as well as the odds
Speaker 2: of a Republican sweep in Congress, and now lower than
Speaker 2: they were just last week. We now view the election
Speaker 2: is more dynamic, with likely more twists ahead. Lebby joins
Speaker 2: us for more Lebby, I can't imagine what those twists
Speaker 2: might be. So let's not even let's not even entertain that.
Speaker 2: I've got a poll in front of me. It's just dropped,
Speaker 2: so I'm going to share it with you. It comes
Speaker 2: from Emerson College, and it reads as follows. It's on
Speaker 2: swing states. In Arizona forty nine percent support for Trump,
Speaker 2: forty four for Harris. Georgia forty eight percent percent support
Speaker 2: for Trump, forty six for Harris, in Michigan forty six
Speaker 2: for Trump, forty five for Harris, Pennsylvania forty eight for Trump,
Speaker 2: forty six for Harris. Wisconsin, they are tied in Wisconsin
Speaker 2: at forty seven percent support Harris and Trump, respectively. When
Speaker 2: we start to get polls like that, more polls like
Speaker 2: that in the coming days and weeks, how much weight
Speaker 2: do you put on them in the early days and
Speaker 2: weeks of this contest.
Speaker 8: Yes, I would say that not a lot right now.
Speaker 8: I think that the polls will be much more telling
Speaker 8: if after the convention and then really in September. And
Speaker 8: this is what we have been telling clients even before
Speaker 8: all this drama, is that really wait until September because
Speaker 8: that's where and just statistically.
Speaker 6: Pulling becomes more predictive.
Speaker 8: Obviously, Poland's never going to be completely clearvoydt in terms
Speaker 8: of who actually shows up to vote, but it becomes
Speaker 8: more predictive as you get closer. So and I say
Speaker 8: especially this because it is so dynamic, because she really
Speaker 8: is reintroducing herself to voters.
Speaker 6: That's good and that's bad.
Speaker 8: I mean, she has a very progressive record that she
Speaker 8: ran on in twenty twenty that she's going to have
Speaker 8: to sort of defend and clarify and what have you.
Speaker 8: But I wouldn't necessarily, I would take all of this
Speaker 8: pulling with a big grain with a big grain of salt.
Speaker 8: So really, after the convention, really wait until September. I
Speaker 8: always tell clients that have a cocktail, go to the beach,
Speaker 8: enjoy your vacation, and then come back to politics and
Speaker 8: siss Sepember, because that's actually when I think it's really
Speaker 8: what will be much more indicative.
Speaker 7: It's hard to have a cocktail given the past few
Speaker 7: weeks that we've been dealing.
Speaker 1: With in US politics.
Speaker 7: But now there's a lot of emphasis on who she's
Speaker 7: going to pick as her running mate, who do you
Speaker 7: think is best for her, not just to support her
Speaker 7: and expand her views because you say she is very progressive,
Speaker 7: but also the.
Speaker 6: Math when it comes to electoral college. Yeah, and so
Speaker 6: I mean, is she very progressive? We don't know.
Speaker 8: I mean, just to clarify, I mean, she ran on
Speaker 8: a very progressive platform. She was a Democratic primary. Yeah, yes, no,
Speaker 8: And again she was running for national office even when
Speaker 8: she was in the Senate. So for sure she has
Speaker 8: a progressive record. I think that's the thing. Though it's
Speaker 8: unknown about hers where does she stand on in many
Speaker 8: of these issues. But you're absolutely right, her running mate
Speaker 8: is going to be a really, really important both because it.
Speaker 6: Is sort of the first public.
Speaker 8: Decision that she is going to make, and oftentimes, you know,
Speaker 8: picking your running mate is really a reflection of the
Speaker 8: top of the ticket's judgment, but also, as you talk about,
Speaker 8: is really the electoral college strategy Arizona, as John just said,
Speaker 8: I mean she's lagging in Arizona. Mark Kelly, the Senator
Speaker 8: from Arizona, who's more moderate, particularly in border issues, that's
Speaker 8: going to be a big liability for her, but also
Speaker 8: could help shore up support in Arizona and then Pennsylvania.
Speaker 8: I I of all those six states that you just mentioned,
Speaker 8: Pennsylvania is going to be the most critical state for
Speaker 8: if Democrats are going to win, they have to win Pennsylvania.
Speaker 8: It's necessary, but it's you know, asday, We're not sufficient.
Speaker 8: I mean, they will have to win other states as well.
Speaker 8: But if they lose Pennsylvania, Democrats have lost this race.
Speaker 6: So Josh Shapiro, the.
Speaker 8: Government popular governor who also has a more moderate stance
Speaker 8: on things like fracking, which she said she was going
Speaker 8: to ban. So yes, no exactly, and she says she's
Speaker 8: talked him a medicare for all, she's talked about defending
Speaker 8: the police, she's talking about banning fracking. I mean, again,
Speaker 8: she has a platform that will be untenable for her
Speaker 8: to run on and win. And that's why I think
Speaker 8: she will need to start clarifying much of that.
Speaker 6: Now.
Speaker 8: The other challenge, sorry, the other challenge is that she's
Speaker 8: the vice president and current city vice president, and she
Speaker 8: can't necessarily distance herself so much from Biden as well.
Speaker 8: So this is she has a lot of challenges, a
Speaker 8: lot of twists and turns ahead in terms of really
Speaker 8: navigating like the policy front.
Speaker 7: You said, the top of the ticket is the judgment
Speaker 7: of the candidate. What does that say about Trump and
Speaker 7: his pick of JD.
Speaker 6: Vans. Yeah, well, as we were.
Speaker 8: Just talking about, I mean this, this decision to pick
Speaker 8: Jade Vance was really a moment in time, right. It
Speaker 8: was on the heels of the assass a Nation attempt.
Speaker 8: It was when Biden was still in the race. It
Speaker 8: was when folks had odds of Trump winning at seventy
Speaker 8: five eighty percent. Republican sweep looked more likely than not,
Speaker 8: and so he wasn't necessarily as concerned about expanding his
Speaker 8: voter base. He wasn't as concerned about as being tight
Speaker 8: as it might end up being.
Speaker 6: So, you know, we'll see whether he, you.
Speaker 8: Know, how how he feels about that Jake Advance. But
Speaker 8: it is much more a doubling down on kind of
Speaker 8: MAGA and on trump Ism than say a Doug Bergham
Speaker 8: or even a Marco Rubio or certainly a Nicki Haley
Speaker 8: some of the other folks who were in the mix.
Speaker 4: So you note that Michelle Obama is still not going
Speaker 4: to do the nominee for.
Speaker 1: Get here, hold on a well, but hold on that
Speaker 1: was full.
Speaker 6: Okay, efinitely that was for us.
Speaker 4: But I really I'm not going to ask you about
Speaker 4: Michelle Obama. I don't think that I was the genesis
Speaker 4: of that. I do want to ask you, though, about
Speaker 4: the tenor of the discussions that you've been having with
Speaker 4: clients overseas outside of the US, how they're viewing this,
Speaker 4: how that affects their investment decisions, what questions they're asking
Speaker 4: to understand the potential ramifications of this.
Speaker 6: Yeah.
Speaker 8: So actually I'm still getting questions about Michelle Obama from
Speaker 8: our Asian clients and about Jamie Diamond. So you know,
Speaker 8: hope spring's eternal, I guess. So I would say there's
Speaker 8: sort of in two lanes. One is around fiscal and
Speaker 8: of course a lot of our clients overseas have a
Speaker 8: lot of dollar and a lot of treasuries exposure, so
Speaker 8: just trying to navigate that, and I think, as we've
Speaker 8: talked about, really the punchline here is that the deficit
Speaker 8: is the biggest loser in November. So regardless of who wins,
Speaker 8: the deficit will remain high, and not only because there
Speaker 8: might be new spending and there might be more task cuts,
Speaker 8: although I think that's going to be difficult just given
Speaker 8: where deficits are right now, but mostly because as we've
Speaker 8: talked about, there won't be a title bit reform, and
Speaker 8: that's what you really need in order to you know,
Speaker 8: to consolidate sort of the budget and what have you.
Speaker 8: And the other concern they have is of course around
Speaker 8: geopolitics and interestingly mixed views here, because I think a
Speaker 8: lot of folks to think that well, at least President Trump,
Speaker 8: we can negotiate.
Speaker 6: With him, whereas maybe a Biden.
Speaker 8: Or Harris may have more of an ideological view. So
Speaker 8: I'm not sure that's actually I'm not sure that's right.
Speaker 8: I mean again, I think the direction of travel here
Speaker 8: around tariffs, around export controls, around even capital flows, around
Speaker 8: scrutiny around you how US investors invest in China is
Speaker 8: going to be sort of pervasive, regardless of who wins.
Speaker 8: So in some ways there's I you know, my view
Speaker 8: is there are maybe fewer distinctions than folks think, but
Speaker 8: those are that's really where our clients are focused.
Speaker 2: The message from get a cocktail, enjoy the beach.
Speaker 4: Last week, how'd that work out?
Speaker 6: Yeah?
Speaker 8: Not well, I'll tell you, yes, this is what I'm
Speaker 8: trying to do, and sort of self something, but it's
Speaker 8: not really working out very well.
Speaker 9: Thank you.
Speaker 6: I like that advice.
Speaker 2: Levi's good to say. Thank you. Letty Cantroll and fim
Speaker 2: Co on the like to. Let's turned back to big tech.
Speaker 2: I spending on AI program and computing needs at Google
Speaker 2: parent Alphabet, prompting a sell off in big tech stocks
Speaker 2: as investors look for more return on AI spending. One
Speaker 2: area companies are investing heavily is in data center capacity.
Speaker 2: Voldemare is Lasak is the global head of Digital Infrastructure
Speaker 2: at KKR and says two mega trends are driving the
Speaker 2: demand for data center capacity, migrating data to the cloud
Speaker 2: and the rise of AI. Voldemarl joined just now for
Speaker 2: more voter Mark. Good to see you, sir, Thanks for
Speaker 2: having me, thank you for being here. Let's just talk
Speaker 2: about what is digital infrastructure. Let's start there, super simple.
Speaker 2: What are we describing here?
Speaker 9: Yeah, it's great, it's a great question. I mean, I
Speaker 9: think to ask the journal. Infrastructure really has three big pillars.
Speaker 9: There's mobile infrastructure traditionally think of it as towers, telecom towers.
Speaker 9: There is the fixed line infrastructure, so it could be
Speaker 9: you know, fiber that delivers connectivity to homes or enterprises.
Speaker 9: And of course I think the topic we're about to
Speaker 9: discuss this is cloud sort of storage and computing infrastructure,
Speaker 9: right ie, data centers most pronouncedly, So those to ours
Speaker 9: are the three big pillars at least how we define
Speaker 9: it digital infrastructure within KKR.
Speaker 2: So let's talk about the investment opportunities and how much
Speaker 2: is going to be invested over the next several years.
Speaker 2: I want to reflect on a quote that came from
Speaker 2: the Google CEO, the Alphabet CEO in the last couple
Speaker 2: of days, when he said, the biggest risk here in
Speaker 2: a cycle with a theme like this is underinvesting and
Speaker 2: not over investing. I sent from your perspective, you're going
Speaker 2: to agree with that stance, am I right?
Speaker 5: Yes? Yes?
Speaker 2: Why is that? Why is this such a big moment
Speaker 2: and why is that the right way to look at
Speaker 2: the balance of risks?
Speaker 9: Well, I think if let's look at the computing piece
Speaker 9: right of it, I think two mega themes that we
Speaker 9: have are obviously under computing and last mile connectivity. And
Speaker 9: I think maybe we'll touch a little bit later on Metronod,
Speaker 9: which is a deal with announced yesterday with a partnership
Speaker 9: with T mobile, but focusing on data center piece. I
Speaker 9: think if you look at the United States and say,
Speaker 9: what was the infrastructure, what was the spand to help
Speaker 9: facilitate the build out of Internet infrastructure or cloud infrastructure,
Speaker 9: So sixteen year cycle from nineteen ninety to two thousand and.
Speaker 5: Six to gigle whatts.
Speaker 9: No longer do we think about data centers in terms
Speaker 9: of square feet. It's really about the amount of power
Speaker 9: that the data centers have. So that's an important factor
Speaker 9: there to consider, and we'll touch on that in a second.
Speaker 9: So Internet infrastructure two gigabots, the next phase was Internet
Speaker 9: two point.
Speaker 5: Zero and cloud eight gigabotts.
Speaker 9: About fifteen years, technology cycles have accelerated, so we're now
Speaker 9: talking about AI build out, Cloud two point zero, Internet
Speaker 9: three point zero as a five year cycle and twenty
Speaker 9: five to thirty gigabotts of power required to fuel this.
Speaker 9: So I think, you know, you had a more patient,
Speaker 9: sort of highly visible investment cycle that's now gotten compressed
Speaker 9: and perhaps is creating I think scaring some of the
Speaker 9: investors out there.
Speaker 4: Well, some people would argue that this might be one
Speaker 4: big reason for the selloff we've actually seen in big
Speaker 4: tech There is one investor who said this in a
Speaker 4: recent story. The overarching concern is where is the return
Speaker 4: on investment in all the A and AI infrastructure spending.
Speaker 1: It'll pay off.
Speaker 4: In a few years, but it's not going to come
Speaker 4: anytime soon. That is what the fear is of our
Speaker 4: How much are you seeing near term returns some of
Speaker 4: these infrastructure projects that a lot of people would agree
Speaker 4: may be crucial in say ten years.
Speaker 5: Yeah, I mean, I think it's a great question. You know.
Speaker 5: I would draw an analogy to similar questions.
Speaker 9: Raised during the buildout of cloud in two thousand and
Speaker 9: six and seven. So, you know, when Amazon really emerges
Speaker 9: the cloud provider in two thousand and seven, I think
Speaker 9: similar questions were raised about where is the ROI. A
Speaker 9: tremendous amount of investment is needed to help facilitate the
Speaker 9: build out before you actually start seeing the applications of that.
Speaker 9: And if you fast forward two thousand and seven to today,
Speaker 9: Amazon stock is up almost three thousand percent, right and
Speaker 9: it's been forgotten.
Speaker 5: So I think the concerns are valid.
Speaker 9: You know, I do think that there will be there's
Speaker 9: frothiness in parts of the ecosystem within digital infrastructure at
Speaker 9: least how we're positioning ourselves. We don't see that most
Speaker 9: of the capacity on the data center side it's coming
Speaker 9: online is fully leased. Most of it is leased to
Speaker 9: the large hyperscale customers. So the type of risks that
Speaker 9: we're looking to take, we're not necessarily exposed to perhaps
Speaker 9: some of their volatility. But I think it's a fair
Speaker 9: question to ask, what is the ROI. I think AI
Speaker 9: will be larger than potentially cloud. If you think about today,
Speaker 9: cloud business is about a five hundred billion dollar business annually,
Speaker 9: investing almost two hundred billion dollars to build that infrastructure.
Speaker 9: I think the view is that this feels different than
Speaker 9: late nineties perhaps Bubble.
Speaker 4: That said, you said that there are certain pockets that
Speaker 4: feel fraudy in certain pockets that seem very worthy.
Speaker 1: What are those pockets? How do you distinguish the two?
Speaker 9: Yeah, I mean that's why I think, you know, we're
Speaker 9: trying to figure that out. So a big part of
Speaker 9: what we're doing at KKR is really trying to map
Speaker 9: the entire ecosystem from the silicon side, which is I
Speaker 9: think we're talking about chips to the ultimate end point
Speaker 9: of applications layer and trying to figure out how do
Speaker 9: we participate to the different strategies that we have within KKR.
Speaker 9: We're not a venture investor, so we're staying away from that.
Speaker 9: An interesting point I would make in nineteen nineties, if
Speaker 9: a lot of analogies are being round to the nineteen
Speaker 9: nineties tech bubble and bust, there were thirty eight or
Speaker 9: thirty nine stocks in nineteen ninety nine that were up
Speaker 9: one hundred percent in a year.
Speaker 5: Today there's only one.
Speaker 9: So public markets, perhaps there isn't as much of a
Speaker 9: fraughtiness private markets. There's fifteen billion dollars of capital that
Speaker 9: has gone from venture capital funds into generative AI platforms.
Speaker 5: That's ten x the prior trend line.
Speaker 9: So I think perhaps there are parts of fraughtiness in
Speaker 9: the private markets versus the public markets. But I think
Speaker 9: we think of it as as you know, as a
Speaker 9: long term trend sort of an industry three point zero
Speaker 9: if you think about it in terms of long term,
Speaker 9: three hundred year sort of a cycle, and we're pretty
Speaker 9: confident we're still in early innings of that.
Speaker 7: When you look at the investment, is it actual market
Speaker 7: demand or some of this has to do with the
Speaker 7: fiscal push coming out of Washington.
Speaker 9: It's fundamental market demand. I think we're seeing government part
Speaker 9: of this investment has not played a large role. Now
Speaker 9: we think that in the long term, I think a
Speaker 9: comprehensive solution which includes private capital, includes obviously a combination
Speaker 9: of the tech companies, intervention from some government policies to
Speaker 9: help facility to build out some of this power infrastructure,
Speaker 9: which ultimately is a key component of this will be required.
Speaker 9: From a KKR perspective, we think of it as a
Speaker 9: pretty uniquely positioned to ultimately play a major only that
Speaker 9: so you just.
Speaker 6: Know it's the deal.
Speaker 4: And it was actually not on high falutint cyber prowess
Speaker 4: in artificial intelligence. It was in medium sized, smaller cities
Speaker 4: getting connectivity, basic connectivity to the internet, to the cell phone.
Speaker 1: How far behind.
Speaker 4: Are we basic infrastructure at a time when we're trying
Speaker 4: to build out a massive network.
Speaker 9: Yeah, So two mega themes we touched on the cloud computing.
Speaker 9: The other big theme we have is fiber to the home.
Speaker 9: We've made over ten investments globally, over ten billion dollars
Speaker 9: of capital just in the fiber to the home.
Speaker 5: Strategies over the last decade. We're pretty bullish. We think
Speaker 5: this is pretty important.
Speaker 9: So in the US, about fifty million homes still don't
Speaker 9: have access to full fiber. We think that's that's unacceptable
Speaker 9: and that ought to change. And so Metromat, which is
Speaker 9: the deal they renounced in partnership with T Mobile, it's
Speaker 9: really meant to help facilitate the growth of that and
Speaker 9: really bridge the digital divide, not only in the sort
Speaker 9: of that as you call it, the smaller cities, which,
Speaker 9: by the way, a smaller city in the United States
Speaker 9: called sub fifty thousand population center has about the one
Speaker 9: fifth of the speeds that you see in the major
Speaker 9: urban areas, and even major urban areas.
Speaker 5: It's it's it's pretty inadequate.
Speaker 9: So I do think that we believe that there is
Speaker 9: a large decade long investment cycle to help build out
Speaker 9: fiber infrastructure in United States, and we're really happy to
Speaker 9: be part of it and happy to partner with a
Speaker 9: premier telet come operator.
Speaker 5: Like T Mobile to do that.
Speaker 2: You need to come back soon. We've only scratched the surface.
Speaker 2: Seven way. This was great. It's going to catch up.
Speaker 5: The surf raise love too.
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