1 00:00:02,400 --> 00:00:09,960 Speaker 1: Bloomberg Audio Studios, Podcasts, radio news. 2 00:00:11,680 --> 00:00:15,480 Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 3 00:00:15,520 --> 00:00:18,720 Speaker 2: with Lisa Bromwitz and Amerie Hordern. Join us each day 4 00:00:18,760 --> 00:00:22,280 Speaker 2: for insight from the best in markets, economics, and geopolitics 5 00:00:22,440 --> 00:00:24,880 Speaker 2: from our global headquarters in New York City. We are 6 00:00:24,960 --> 00:00:27,680 Speaker 2: live on Bloomberg Television weekday mornings from six to nine 7 00:00:27,720 --> 00:00:31,319 Speaker 2: am Eastern. Subscribe to the podcast on Apple, Spotify or 8 00:00:31,320 --> 00:00:33,960 Speaker 2: anywhere else you listen, and as always on the Bloomberg 9 00:00:34,040 --> 00:00:35,880 Speaker 2: Terminal and the Bloomberg Business app. 10 00:00:36,479 --> 00:00:39,240 Speaker 3: We begin this hour with stocks holding steady as investors 11 00:00:39,240 --> 00:00:42,080 Speaker 3: look ahead to that two day FED meeting. John Sofas 12 00:00:42,120 --> 00:00:45,199 Speaker 3: of Oppenheimer raising his year end price target on the 13 00:00:45,280 --> 00:00:47,839 Speaker 3: S and P five hundred for twenty twenty six to 14 00:00:47,960 --> 00:00:50,320 Speaker 3: a street high of eighty one hundred, once again the 15 00:00:50,320 --> 00:00:53,880 Speaker 3: biggest bull on Wall Street. Writing, monetary policy, fiscal policy, 16 00:00:53,920 --> 00:00:56,880 Speaker 3: and the continuing progress of innovation and corporate earnings growth 17 00:00:57,120 --> 00:01:00,520 Speaker 3: are key to growing earnings and revenues in the year ahead. 18 00:01:00,680 --> 00:01:03,400 Speaker 3: John joins us. Now, John, you have been the biggest 19 00:01:03,400 --> 00:01:05,880 Speaker 3: bull and you have been right. Why do you think 20 00:01:05,959 --> 00:01:08,840 Speaker 3: this time people are getting it wrong about how accommodative 21 00:01:09,120 --> 00:01:11,800 Speaker 3: both monetary and fiscal policy makers are going to be well. 22 00:01:12,840 --> 00:01:14,959 Speaker 4: I think, Lisa, the big thing is, you know, we're 23 00:01:14,959 --> 00:01:18,360 Speaker 4: in a process of normalization of interest rates coming out 24 00:01:18,360 --> 00:01:22,839 Speaker 4: of a hike cycle, and a remarkable hike cycle, because 25 00:01:22,880 --> 00:01:26,160 Speaker 4: the Fed bock raised drakes eleven times on pause fourteen 26 00:01:26,600 --> 00:01:29,840 Speaker 4: with only five cuts in this whole process, but no recession, 27 00:01:30,240 --> 00:01:33,720 Speaker 4: brought inflation growth down from nine point seven to based 28 00:01:33,760 --> 00:01:36,360 Speaker 4: on the PCE last week sometime between two point eight 29 00:01:36,400 --> 00:01:38,679 Speaker 4: and three, So you know, it looks pretty good. It 30 00:01:38,720 --> 00:01:41,920 Speaker 4: shows sensitivity for the dual mandate, a balance. There's a 31 00:01:41,920 --> 00:01:45,440 Speaker 4: bit of a walking the tightrope for Jerown Powell, but 32 00:01:45,560 --> 00:01:48,000 Speaker 4: I think he loves it. He's a real pro and 33 00:01:48,080 --> 00:01:50,040 Speaker 4: I think, you know, he's got to walk the tightrope 34 00:01:50,080 --> 00:01:51,520 Speaker 4: here to give you a little bit of balance. So 35 00:01:51,560 --> 00:01:55,440 Speaker 4: we get enough stimulus for the economy essentially for sustainable 36 00:01:55,480 --> 00:02:00,000 Speaker 4: growth without upsetting the job cart terribly, and we moved 37 00:02:00,120 --> 00:02:03,040 Speaker 4: forward and around the world. You know that we've seen 38 00:02:03,440 --> 00:02:05,800 Speaker 4: interest rate cuts and now the thought that maybe it's 39 00:02:05,840 --> 00:02:08,120 Speaker 4: gone too far. I think this is a lot like 40 00:02:08,160 --> 00:02:12,320 Speaker 4: the different that it's got the override of the Bernanki legacy, 41 00:02:12,600 --> 00:02:17,440 Speaker 4: high transparency, communications in its policy, the way the FED operates, 42 00:02:17,800 --> 00:02:21,680 Speaker 4: But it's we're looking for that normalization and inflation tends 43 00:02:21,720 --> 00:02:24,800 Speaker 4: to be stickier for longer after you've had a period 44 00:02:24,800 --> 00:02:27,799 Speaker 4: of ontoward levels of inflation. Takes a while to work 45 00:02:27,840 --> 00:02:30,720 Speaker 4: out in the system, and it's a drama that traders 46 00:02:30,800 --> 00:02:33,680 Speaker 4: and investors need to work out and play to their benefit. 47 00:02:33,840 --> 00:02:36,040 Speaker 3: Right now, the drama is playing out. You are seeing 48 00:02:36,040 --> 00:02:38,560 Speaker 3: people ratchet back their expectations for rate cuts next week, 49 00:02:38,680 --> 00:02:41,240 Speaker 3: now next year, to now two rate cuts from three 50 00:02:41,480 --> 00:02:43,720 Speaker 3: just a couple of weeks ago. I am wondering, though, 51 00:02:44,000 --> 00:02:46,720 Speaker 3: how much that matters versus the AI trade. I mean, 52 00:02:46,760 --> 00:02:49,960 Speaker 3: there was a recent GOLBSAC survey of investors and they 53 00:02:50,000 --> 00:02:51,920 Speaker 3: agree with you on the basis that you will get 54 00:02:51,960 --> 00:02:54,200 Speaker 3: FED rate cuts, but they disagree that you're going to 55 00:02:54,200 --> 00:02:57,239 Speaker 3: get that kind of screaming return because the AI trade 56 00:02:57,320 --> 00:02:59,840 Speaker 3: is hitting some roadblocks, isn't in hypergrowth mode. How much 57 00:02:59,840 --> 00:03:00,600 Speaker 3: do you buy into that? 58 00:03:01,040 --> 00:03:03,960 Speaker 4: You know, some of that sounds to me like the 59 00:03:04,000 --> 00:03:08,480 Speaker 4: trading establishment in a way, because it's the action where 60 00:03:08,480 --> 00:03:10,640 Speaker 4: it can you add BIPs to the bucket, you know, 61 00:03:11,080 --> 00:03:14,359 Speaker 4: in trading, working with the spread and the daily basis 62 00:03:15,120 --> 00:03:17,560 Speaker 4: I'd have to say this is not just not uncommon. 63 00:03:17,720 --> 00:03:20,720 Speaker 4: I mean there's always questions. You've got you have to 64 00:03:20,800 --> 00:03:23,400 Speaker 4: invest a lot of money to do what this proposes 65 00:03:23,520 --> 00:03:27,280 Speaker 4: to do, whether it's the data centers, whether it's all 66 00:03:27,400 --> 00:03:31,640 Speaker 4: the ancillary software and the design changes to be made. 67 00:03:31,960 --> 00:03:34,320 Speaker 4: But the companies that are doing it are very well 68 00:03:34,360 --> 00:03:36,920 Speaker 4: positioned in terms of their balance sheet. And when they 69 00:03:36,960 --> 00:03:39,520 Speaker 4: borrow money, it's probably because they rather keep the cash 70 00:03:39,520 --> 00:03:42,240 Speaker 4: on the balance sheet and just use other people's money. 71 00:03:42,280 --> 00:03:44,680 Speaker 4: Oh pm, other people's money the old thing for the 72 00:03:44,720 --> 00:03:47,320 Speaker 4: old days, right, And so I look at it, it 73 00:03:47,360 --> 00:03:49,800 Speaker 4: looks to me AI is for real, you know. I 74 00:03:49,800 --> 00:03:53,840 Speaker 4: think whenever I talk to people who are institutional users, 75 00:03:53,880 --> 00:03:56,520 Speaker 4: and I don't mean just in finance, but if it's healthcare, 76 00:03:56,680 --> 00:04:01,400 Speaker 4: consumer discretionary insurance, what have you, people are using AI 77 00:04:01,720 --> 00:04:04,440 Speaker 4: and it's and the consumers are using it either for 78 00:04:04,560 --> 00:04:07,280 Speaker 4: fun or just to shock each other what they can 79 00:04:07,360 --> 00:04:09,800 Speaker 4: do with GPT, whatever the heck it's called. You know 80 00:04:09,840 --> 00:04:12,440 Speaker 4: what I mean, they put your face on somebody else, 81 00:04:12,480 --> 00:04:14,280 Speaker 4: you know, and you're running down the street place you 82 00:04:14,320 --> 00:04:16,880 Speaker 4: look like thirty year old, you know, there you go, 83 00:04:17,160 --> 00:04:20,200 Speaker 4: and it's the whole thing is it's just not uncommon. 84 00:04:20,279 --> 00:04:22,440 Speaker 4: It just looks to me like and haven't I been 85 00:04:22,440 --> 00:04:25,120 Speaker 4: here before? But the wonderful thing about this, in a 86 00:04:25,200 --> 00:04:29,679 Speaker 4: digitalized environment, the market tends to discount both good news 87 00:04:29,720 --> 00:04:32,840 Speaker 4: and bad news fairly quickly. And that's what gives us 88 00:04:32,880 --> 00:04:35,159 Speaker 4: this effect of one day the trader's on the market. 89 00:04:35,200 --> 00:04:38,000 Speaker 4: The next day it's intermediate long term investors as they 90 00:04:38,040 --> 00:04:40,640 Speaker 4: buy up the babies that got throughout the bathwater. The 91 00:04:40,640 --> 00:04:43,240 Speaker 4: next day, then they visit mids and smalls and they 92 00:04:43,240 --> 00:04:47,280 Speaker 4: go It's a rotating market, but it's it discounts good 93 00:04:47,320 --> 00:04:50,799 Speaker 4: news and bad news more quickly. Because the digital news 94 00:04:50,839 --> 00:04:55,280 Speaker 4: travels faster, it's quicker to analyze, determine, and the play 95 00:04:55,360 --> 00:04:56,880 Speaker 4: is the play is on. 96 00:04:57,080 --> 00:04:59,039 Speaker 5: John we got in terms of the play is on. 97 00:04:59,279 --> 00:05:01,560 Speaker 5: Nvidia is getting the green light to sell the H 98 00:05:01,640 --> 00:05:04,760 Speaker 5: two hundreds in China. When you look at that decision 99 00:05:04,760 --> 00:05:07,240 Speaker 5: by the administration, does it say to you that in 100 00:05:07,279 --> 00:05:10,160 Speaker 5: twenty twenty six, trade tensions are going to be a 101 00:05:10,200 --> 00:05:11,920 Speaker 5: little bit more quiet than they were this year? 102 00:05:12,520 --> 00:05:14,839 Speaker 4: You know, that's a tough one to say, because when 103 00:05:14,839 --> 00:05:17,000 Speaker 4: it comes to trade tension, it seems to be just 104 00:05:17,160 --> 00:05:19,640 Speaker 4: part of the way things work. With the current administration, 105 00:05:20,200 --> 00:05:23,720 Speaker 4: but likely would also continue on with any other administration 106 00:05:23,880 --> 00:05:27,839 Speaker 4: because that's the way President g operates. Also, there's a 107 00:05:27,920 --> 00:05:31,279 Speaker 4: balance between fig leaf and the. 108 00:05:33,839 --> 00:05:34,159 Speaker 1: Acts. 109 00:05:34,320 --> 00:05:38,159 Speaker 4: You know, it's a constant. This is a game of chess, 110 00:05:38,600 --> 00:05:41,920 Speaker 4: and it's not a friendly one. But ultimately both sides 111 00:05:42,000 --> 00:05:46,360 Speaker 4: want trade because trade is peace is more profitable than 112 00:05:46,440 --> 00:05:49,279 Speaker 4: building war machines and battling each other. Look what's happened 113 00:05:49,279 --> 00:05:51,760 Speaker 4: to Russia financially really when you look at what the 114 00:05:51,880 --> 00:05:54,640 Speaker 4: cost of doing what they've done to Ukraine has been. 115 00:05:55,400 --> 00:05:57,880 Speaker 4: And on the other hand, if you play with your 116 00:05:58,320 --> 00:06:02,919 Speaker 4: financial partners nicely, you know, and you compete, you really 117 00:06:02,960 --> 00:06:05,840 Speaker 4: you produce better results for your own people, and you 118 00:06:05,880 --> 00:06:09,960 Speaker 4: also improve the for China would be the Silk Road 119 00:06:09,960 --> 00:06:13,520 Speaker 4: and the success of that, the competition that's occurring then, 120 00:06:13,240 --> 00:06:16,560 Speaker 4: and what it's felt by other emerging markets. It's just, 121 00:06:16,800 --> 00:06:19,320 Speaker 4: you know, it's just this is the way things work. 122 00:06:19,480 --> 00:06:22,120 Speaker 4: But the tension, it's like they often say, the market 123 00:06:22,160 --> 00:06:25,840 Speaker 4: doesn't like uncertainty, it loves it. The traders love uncertainty. 124 00:06:26,160 --> 00:06:29,359 Speaker 4: Both sides can benefit intermeding to long term investors. Again, 125 00:06:29,680 --> 00:06:32,440 Speaker 4: babies that get thrown out with the bathwater. The traders 126 00:06:32,480 --> 00:06:35,640 Speaker 4: looking for the BIPs a new vanity plate with the 127 00:06:35,680 --> 00:06:36,360 Speaker 4: trophy car. 128 00:06:36,520 --> 00:06:39,839 Speaker 3: Yeah, maybe bonfire of the vanity play. I am curious 129 00:06:39,920 --> 00:06:42,359 Speaker 3: going forward about how much you see this rotation as durable, 130 00:06:42,600 --> 00:06:44,880 Speaker 3: given the fact that you still see the AI stall 131 00:06:44,920 --> 00:06:47,680 Speaker 3: warts as really having a lot of the strength. Are 132 00:06:47,720 --> 00:06:49,320 Speaker 3: they going to keep leading or do you think that 133 00:06:49,320 --> 00:06:51,000 Speaker 3: there is this durable shift that is. 134 00:06:52,440 --> 00:06:55,159 Speaker 4: That's a great question, and I think what we have 135 00:06:55,279 --> 00:06:58,960 Speaker 4: seen since twenty three, and many people deny it, has 136 00:06:59,000 --> 00:07:02,800 Speaker 4: been a broadening of the rally with other sectors sharing 137 00:07:03,400 --> 00:07:09,279 Speaker 4: the stage with information technology and communication services, which is 138 00:07:09,279 --> 00:07:12,400 Speaker 4: where the streamers and the social media and the search 139 00:07:12,440 --> 00:07:15,400 Speaker 4: engines are as well as the old phone codes. But 140 00:07:15,680 --> 00:07:18,600 Speaker 4: when you look at it, you're in a situation where 141 00:07:18,800 --> 00:07:24,040 Speaker 4: other sectors like financials, industrials, healthcare utilities are beginning to 142 00:07:24,040 --> 00:07:29,800 Speaker 4: find interest by investors more greater diversification in portfolios to 143 00:07:29,920 --> 00:07:34,480 Speaker 4: benefit from the other nine sectors that can benefit from technology. 144 00:07:35,200 --> 00:07:38,320 Speaker 4: Any company that wants to keep a competitive edge needs AI. 145 00:07:38,800 --> 00:07:41,679 Speaker 4: Any company that wants to gain a competitive edge needs AI. 146 00:07:42,040 --> 00:07:44,440 Speaker 4: Any company that just wants to maintain a good premise 147 00:07:44,560 --> 00:07:48,600 Speaker 4: is a value company to attract and maintain investor loyalty 148 00:07:48,880 --> 00:07:52,200 Speaker 4: needs AI. It looks like into the future. It's you know, 149 00:07:52,480 --> 00:07:54,840 Speaker 4: here we go, what is it? Back to the future. Yeah, 150 00:07:54,880 --> 00:07:55,360 Speaker 4: here we go. 151 00:07:55,800 --> 00:07:59,400 Speaker 2: Stay with us. Multil intex Savanas coming up off to this. 152 00:08:08,600 --> 00:08:09,040 Speaker 6: Ahead of the. 153 00:08:09,040 --> 00:08:11,640 Speaker 3: Latest FED decision, the team at Morgan Stanley expecting a 154 00:08:11,680 --> 00:08:14,880 Speaker 3: cut tomorrow followed by two more next year. Michelle Weaver 155 00:08:15,000 --> 00:08:17,440 Speaker 3: of Morgan Stanley writing, this is a bullet set up 156 00:08:17,480 --> 00:08:20,840 Speaker 3: for stocks that are looking ahead towards accelerating earnings revisions 157 00:08:21,080 --> 00:08:25,239 Speaker 3: and FED cuts based on lagging moderate labor weeks market weakness. 158 00:08:25,400 --> 00:08:27,400 Speaker 3: Michelle joins us. Now, Michelle, thank you so much for 159 00:08:27,400 --> 00:08:27,960 Speaker 3: being with us. 160 00:08:28,000 --> 00:08:28,320 Speaker 6: Thank you. 161 00:08:28,480 --> 00:08:30,280 Speaker 3: It seems to all be predicated in the idea that 162 00:08:30,280 --> 00:08:32,959 Speaker 3: two rate cuts comes with strong growth. Yes, what gives 163 00:08:33,000 --> 00:08:34,920 Speaker 3: you confidence that we are going to get strong growth 164 00:08:35,040 --> 00:08:37,320 Speaker 3: despite some of the weakening that we've seen in recent 165 00:08:37,400 --> 00:08:38,360 Speaker 3: labor market metrics. 166 00:08:38,480 --> 00:08:41,079 Speaker 1: Yeah, so we think that we've seen in the alternative 167 00:08:41,160 --> 00:08:43,000 Speaker 1: data more softness in the fall. So I think when 168 00:08:43,040 --> 00:08:44,840 Speaker 1: we get the official numbers next week, we are going 169 00:08:44,880 --> 00:08:46,760 Speaker 1: to see more softness, but that we're not going to 170 00:08:46,800 --> 00:08:51,080 Speaker 1: get one of those nonlinear, really concerning type rises in 171 00:08:51,160 --> 00:08:54,840 Speaker 1: unemployment data. We think the setup is really constructive into 172 00:08:54,880 --> 00:08:57,800 Speaker 1: next year for a broadening and earnings. If I think 173 00:08:57,840 --> 00:08:59,760 Speaker 1: about the past couple of years, it's all been about 174 00:08:59,760 --> 00:09:02,120 Speaker 1: the world cap stocks. It's all been about those who 175 00:09:02,160 --> 00:09:04,760 Speaker 1: are exposed to the AI trade. We've seen a lot 176 00:09:04,760 --> 00:09:07,400 Speaker 1: more weakness under the surface for the Russell three thousand. 177 00:09:07,480 --> 00:09:09,840 Speaker 1: Over the past couple of years, earnings growth has been 178 00:09:09,880 --> 00:09:12,400 Speaker 1: flat to negative for most of those stocks. We finally 179 00:09:12,440 --> 00:09:15,400 Speaker 1: saw that turnaround last quarter with those names growing eight percent. 180 00:09:15,720 --> 00:09:17,960 Speaker 1: So we are starting to see a more constructive setup 181 00:09:18,000 --> 00:09:21,000 Speaker 1: for that broadening. And I think that combined with a 182 00:09:21,000 --> 00:09:24,400 Speaker 1: FED that is easing but without a really concerning spike 183 00:09:24,400 --> 00:09:26,679 Speaker 1: and unemployment, is a great setup for stocks into next year. 184 00:09:26,800 --> 00:09:28,400 Speaker 3: Is it as simple as saying that some of these 185 00:09:28,440 --> 00:09:31,400 Speaker 3: smaller companies are deploying some of these AI tools to 186 00:09:31,440 --> 00:09:34,880 Speaker 3: be more efficient and preserve some of their margins, and 187 00:09:34,920 --> 00:09:36,959 Speaker 3: that's the reason why you might see now performance. 188 00:09:37,280 --> 00:09:37,600 Speaker 6: I think. 189 00:09:37,640 --> 00:09:40,040 Speaker 1: I think AI is certainly part of that story. When 190 00:09:40,040 --> 00:09:42,120 Speaker 1: we think about AI deployment, next year, I think is 191 00:09:42,120 --> 00:09:43,760 Speaker 1: really going to be the year of the AI adopter. 192 00:09:44,600 --> 00:09:47,240 Speaker 1: It's taken companies a couple of years to work with 193 00:09:47,280 --> 00:09:49,800 Speaker 1: the technology to set up the guardrails to retrain their 194 00:09:49,840 --> 00:09:53,560 Speaker 1: employees to really get AI deployed. Our tech team has 195 00:09:53,559 --> 00:09:55,640 Speaker 1: a great CIO survey. They think that by the end 196 00:09:55,679 --> 00:09:58,040 Speaker 1: of this year, sixty percent of companies will have at 197 00:09:58,120 --> 00:10:01,240 Speaker 1: least one AI product live the field, and then that 198 00:10:01,280 --> 00:10:03,280 Speaker 1: will rise to eighty percent by the end of next year. 199 00:10:03,320 --> 00:10:05,200 Speaker 1: So we are finally starting to see this wave of 200 00:10:05,240 --> 00:10:06,640 Speaker 1: adoption flow through the market. 201 00:10:06,920 --> 00:10:09,479 Speaker 5: Can you see that wave of adoption without layoffs? 202 00:10:10,120 --> 00:10:12,559 Speaker 1: I think you can. I think it's I think around 203 00:10:12,600 --> 00:10:15,640 Speaker 1: the margin, you may see some companies do a little 204 00:10:15,640 --> 00:10:17,840 Speaker 1: bit of layoffs, but it's largely going to be an 205 00:10:17,880 --> 00:10:20,000 Speaker 1: incremental story. I think a lot of the messaging I've 206 00:10:20,000 --> 00:10:22,640 Speaker 1: heard from CEOs on Ernie's calls is we're going to 207 00:10:22,720 --> 00:10:24,360 Speaker 1: keep headcount flat, but we're going to be able to 208 00:10:24,360 --> 00:10:25,920 Speaker 1: see more growth. We're going to be able to do 209 00:10:26,000 --> 00:10:28,080 Speaker 1: more with the same number of employees thanks to AI. 210 00:10:28,320 --> 00:10:31,280 Speaker 5: Do you think that AI can also continue if the 211 00:10:31,520 --> 00:10:35,200 Speaker 5: energy demand isn't quite there so I'm able to meet 212 00:10:35,200 --> 00:10:35,720 Speaker 5: that demand? 213 00:10:35,880 --> 00:10:39,360 Speaker 1: Yeah, it's absolutely a tricky setup around around the power world. 214 00:10:39,480 --> 00:10:41,959 Speaker 1: Our team has a great model where we take our 215 00:10:42,040 --> 00:10:45,959 Speaker 1: semiconductor analyst chip sales forecasts, say what's the power needed 216 00:10:46,000 --> 00:10:47,599 Speaker 1: for that and how much power are we going to 217 00:10:47,679 --> 00:10:50,880 Speaker 1: need in the US through twenty twenty eight. We're forecasting 218 00:10:50,960 --> 00:10:53,679 Speaker 1: a forty seven gigawatch shortfall in power just through the 219 00:10:53,720 --> 00:10:57,360 Speaker 1: traditional grid interconnect power for scale, that's around ten x 220 00:10:57,360 --> 00:10:58,880 Speaker 1: the power consumed by New York City. So that's a 221 00:10:58,960 --> 00:11:02,320 Speaker 1: huge shortfall. But there are a lot of innovative type 222 00:11:02,360 --> 00:11:04,280 Speaker 1: of solutions that that can apply to this. 223 00:11:04,400 --> 00:11:08,920 Speaker 7: So ten new York City's short yes, but through things 224 00:11:09,000 --> 00:11:11,960 Speaker 7: like natural natural gas turbines, those are behind the meter, 225 00:11:12,360 --> 00:11:14,520 Speaker 7: those are apart from the grid interconnect process. 226 00:11:15,160 --> 00:11:18,040 Speaker 1: And then bitcoin site conversions I think are really interesting. 227 00:11:18,720 --> 00:11:21,320 Speaker 1: So some of these companies have essentially realized that the 228 00:11:21,320 --> 00:11:23,560 Speaker 1: power that they're sitting on is more valuable than some 229 00:11:23,600 --> 00:11:27,200 Speaker 1: of the underlying business. We think there's around twenty gigawatts there, 230 00:11:27,240 --> 00:11:28,840 Speaker 1: so there's a lot of power to be had there. 231 00:11:28,880 --> 00:11:31,000 Speaker 1: And then nuclear is the last one that's a little 232 00:11:31,000 --> 00:11:33,720 Speaker 1: bit more politically challenging, but we may see some nuclear 233 00:11:33,760 --> 00:11:34,800 Speaker 1: for that problem. 234 00:11:34,840 --> 00:11:37,800 Speaker 3: Bitcoin conversion sites, so you're saying that people who previously 235 00:11:37,880 --> 00:11:40,600 Speaker 3: mind bitcoin aren't necessarily seeing the gains there and so 236 00:11:40,679 --> 00:11:44,600 Speaker 3: they're transforming that into a fuel essentially for artificial intelligence. 237 00:11:44,800 --> 00:11:48,000 Speaker 3: Is this the sort of not the death of the 238 00:11:48,000 --> 00:11:51,000 Speaker 3: bitcoin trade, but really the shifting in terms of where 239 00:11:51,000 --> 00:11:54,360 Speaker 3: the enthusiasms go that has broader market implications. 240 00:11:54,880 --> 00:11:56,600 Speaker 1: Yeah, so I wouldn't say it's the death of a 241 00:11:56,600 --> 00:11:59,120 Speaker 1: bitcoin trade by any means, But there were some bitcoin 242 00:11:59,200 --> 00:12:02,000 Speaker 1: miners who masked a ton of energy to be able 243 00:12:02,040 --> 00:12:06,280 Speaker 1: to do bitcoin mining, and they essentially saw, we're sitting 244 00:12:06,280 --> 00:12:08,840 Speaker 1: on gold rush here. We have so much power. These 245 00:12:08,920 --> 00:12:12,040 Speaker 1: hyperscalers need power. They're willing to pay a huge premium 246 00:12:12,080 --> 00:12:14,319 Speaker 1: for it. Let's just fell off the power. That's a 247 00:12:14,360 --> 00:12:15,320 Speaker 1: fascinating trend. 248 00:12:15,480 --> 00:12:17,320 Speaker 3: Meanwhile, we've been talking a lot about deals and how 249 00:12:17,400 --> 00:12:19,679 Speaker 3: much deals have been taking place both in the AI 250 00:12:19,720 --> 00:12:22,000 Speaker 3: and the tech space, but as well as the media 251 00:12:22,000 --> 00:12:24,800 Speaker 3: space and beyond. I'm just wondering how that plays into 252 00:12:24,880 --> 00:12:27,240 Speaker 3: some of your forecasts. Is that a positive thing or 253 00:12:27,280 --> 00:12:29,720 Speaker 3: is that sort of a catalyst for winners and losers 254 00:12:29,760 --> 00:12:32,760 Speaker 3: that really will differentiate the winners and losers within the 255 00:12:32,760 --> 00:12:34,200 Speaker 3: investing space in twenty twenty six. 256 00:12:34,440 --> 00:12:36,720 Speaker 1: Yeah, it's a very very positive thing for us. We 257 00:12:36,760 --> 00:12:38,959 Speaker 1: think that you're going to continue to see pretty strong 258 00:12:39,080 --> 00:12:41,440 Speaker 1: M and A and capital markets activity into next year. 259 00:12:41,880 --> 00:12:44,320 Speaker 1: I think a lot of the hesitation we saw this 260 00:12:44,400 --> 00:12:47,280 Speaker 1: year was really around the public policy front. What's going 261 00:12:47,320 --> 00:12:49,439 Speaker 1: to happen on tariffs, what's going to happen on the 262 00:12:49,480 --> 00:12:52,160 Speaker 1: regulatory front. How quickly are we going to see deregulation? 263 00:12:52,280 --> 00:12:55,040 Speaker 1: Where's tax going. I think now that we're going into 264 00:12:55,080 --> 00:12:57,280 Speaker 1: next year with a little bit more clarity on that 265 00:12:57,320 --> 00:12:59,640 Speaker 1: policy picture, I think you're going to continue to see 266 00:13:00,000 --> 00:13:02,520 Speaker 1: some of that corporate risk taking a little more aggressiveness 267 00:13:02,559 --> 00:13:03,719 Speaker 1: on them and I front. 268 00:13:03,559 --> 00:13:06,199 Speaker 3: At a certain point, is the year of the adapter 269 00:13:06,679 --> 00:13:09,240 Speaker 3: rather than the adopter, rather than the year of the 270 00:13:09,280 --> 00:13:12,880 Speaker 3: AI tech innovator? Does that disadvantage the United States over 271 00:13:12,920 --> 00:13:15,000 Speaker 3: the rest of the world As we see jpmmorgan come 272 00:13:15,000 --> 00:13:17,600 Speaker 3: out this morning and say they see the emerging equity 273 00:13:17,679 --> 00:13:21,160 Speaker 3: market outperforming the develop market one for yet another year 274 00:13:21,280 --> 00:13:22,640 Speaker 3: after years of underperformance. 275 00:13:23,360 --> 00:13:25,559 Speaker 1: Yeah, So I think that we're going to continue to 276 00:13:25,600 --> 00:13:29,120 Speaker 1: see that adoption really ramp up, and that broader diffusion 277 00:13:29,240 --> 00:13:31,199 Speaker 1: is what's going to really help the US market. It's 278 00:13:31,240 --> 00:13:34,880 Speaker 1: been so concentrated the return story on the enabler side 279 00:13:34,880 --> 00:13:37,720 Speaker 1: that as we see that adopter story broaden out, that 280 00:13:37,800 --> 00:13:39,760 Speaker 1: will be more constructive on the enabler side. Though we 281 00:13:39,800 --> 00:13:41,880 Speaker 1: did have the announcement, so that company will see some 282 00:13:41,920 --> 00:13:43,559 Speaker 1: games there. So there's a little bit more gains to 283 00:13:43,600 --> 00:13:45,400 Speaker 1: be had in the enabler side, but I do think 284 00:13:45,400 --> 00:13:46,720 Speaker 1: it's overall constructive setup. 285 00:13:46,760 --> 00:13:48,760 Speaker 5: When it comes to the real economy, is the consumer 286 00:13:48,800 --> 00:13:49,320 Speaker 5: holding up? 287 00:13:50,679 --> 00:13:53,439 Speaker 1: It's been really tricky for the consumer. We held our 288 00:13:53,559 --> 00:13:56,120 Speaker 1: consumer conference last week in New York and we had 289 00:13:56,200 --> 00:13:58,400 Speaker 1: over one hundred companies in attendance. We got a pretty 290 00:13:58,400 --> 00:14:01,120 Speaker 1: good read on the consumer from that. I think one 291 00:14:01,600 --> 00:14:04,200 Speaker 1: key takeaway there was the k economy is still very 292 00:14:04,280 --> 00:14:07,280 Speaker 1: much in place. We're really still seeing that bifurcation between 293 00:14:07,559 --> 00:14:11,199 Speaker 1: higher income consumers and lower income consumers. I think you're 294 00:14:11,200 --> 00:14:13,360 Speaker 1: going to start to see that continue into next year. 295 00:14:13,400 --> 00:14:15,160 Speaker 1: But that's really what companies were talking about. 296 00:14:15,240 --> 00:14:17,600 Speaker 5: Is that what makes the FED a little bit more 297 00:14:17,640 --> 00:14:18,680 Speaker 5: complicated next year? 298 00:14:19,360 --> 00:14:21,680 Speaker 1: Yeah, I think there's some complication there. I also want 299 00:14:21,680 --> 00:14:23,800 Speaker 1: to bring this back to the energy story that we 300 00:14:23,800 --> 00:14:27,720 Speaker 1: were talking about earlier. Affordability concerns are huge, and there's 301 00:14:27,760 --> 00:14:32,160 Speaker 1: been a lot of discussion around is this demand for 302 00:14:32,400 --> 00:14:34,760 Speaker 1: AI power starting to weigh on the consumer? So just 303 00:14:34,760 --> 00:14:38,080 Speaker 1: bringing those two conversations together, and we've found that in 304 00:14:38,160 --> 00:14:42,360 Speaker 1: certain regions that activity has really pressured consumer electricity bills 305 00:14:42,680 --> 00:14:44,840 Speaker 1: in the mid Atlantic, those bills have risen by about 306 00:14:44,840 --> 00:14:47,880 Speaker 1: eighteen percent, where data center activity is really concentrated. 307 00:14:48,080 --> 00:14:50,760 Speaker 2: Stay with US multiple IMPEX dividance coming up. 308 00:14:51,080 --> 00:15:02,760 Speaker 3: Off to this, turning to the trade war between the 309 00:15:02,840 --> 00:15:05,800 Speaker 3: US and China, China's top leaders signaling they are on 310 00:15:05,880 --> 00:15:08,120 Speaker 3: alert for a potential flare up as they draw up 311 00:15:08,120 --> 00:15:11,640 Speaker 3: economic plans for next year. Joining us now to discusseswar. 312 00:15:11,680 --> 00:15:16,080 Speaker 3: Prasad Senior Fellow at the Brookings Institute Esmar, thank you 313 00:15:16,160 --> 00:15:18,240 Speaker 3: so much for being with us. I want to start 314 00:15:18,400 --> 00:15:21,040 Speaker 3: with the trade war and the context of this recent 315 00:15:21,080 --> 00:15:23,960 Speaker 3: move by the United States for Nvidia to be allowed 316 00:15:24,000 --> 00:15:26,920 Speaker 3: to sell its h two hundred chips into China. Do 317 00:15:26,960 --> 00:15:30,560 Speaker 3: we have a sense of where buying those chips fits 318 00:15:30,680 --> 00:15:33,760 Speaker 3: into China's plans as they try to turn more inward 319 00:15:34,040 --> 00:15:35,920 Speaker 3: and rely on domestic champions. 320 00:15:37,280 --> 00:15:40,520 Speaker 6: So we are looking at competition in one area which 321 00:15:40,600 --> 00:15:42,800 Speaker 6: is going to be the most intense between the US 322 00:15:42,800 --> 00:15:46,360 Speaker 6: and China, which is technology. The Chinese government has been 323 00:15:46,480 --> 00:15:50,120 Speaker 6: very keen on upgrading its manufacturing sector, moving up to 324 00:15:50,200 --> 00:15:54,360 Speaker 6: value added chain and trying to dominate the high technology sectors. 325 00:15:54,400 --> 00:15:57,960 Speaker 6: You know, solar panels, electric vehicles and now AI. For 326 00:15:58,000 --> 00:16:00,960 Speaker 6: the US, it's a very dicey st right now. On 327 00:16:01,000 --> 00:16:03,120 Speaker 6: the one hand, you don't want to lose access to 328 00:16:03,160 --> 00:16:06,360 Speaker 6: the Chinese market or deny China some of these chips, 329 00:16:06,400 --> 00:16:09,000 Speaker 6: because that means that it gives China much more of 330 00:16:09,040 --> 00:16:12,720 Speaker 6: an incentive to move forward with its domestic innovation strategy. 331 00:16:13,200 --> 00:16:15,560 Speaker 6: But at the same time, providing these tips to China, 332 00:16:15,560 --> 00:16:17,760 Speaker 6: it does make it a lot easier for them to 333 00:16:17,880 --> 00:16:20,800 Speaker 6: move forward in terms of that innovation. And of course, 334 00:16:21,240 --> 00:16:24,200 Speaker 6: the Trump team seems to be betting that this is 335 00:16:24,200 --> 00:16:27,640 Speaker 6: going to help in video gain significant market share there. 336 00:16:27,640 --> 00:16:30,400 Speaker 6: Whether that's going to be a durable increase in market share, 337 00:16:30,680 --> 00:16:35,000 Speaker 6: whether in Vidia can hold on when China competes with 338 00:16:35,040 --> 00:16:37,400 Speaker 6: all the state resources behind it, I think it's the 339 00:16:37,480 --> 00:16:40,360 Speaker 6: key question. But in the short term, in Video's revenues 340 00:16:40,400 --> 00:16:44,200 Speaker 6: are certainly going to take a big positive bounds, and 341 00:16:44,440 --> 00:16:46,200 Speaker 6: there are going to be some revenues coming in for 342 00:16:46,200 --> 00:16:48,560 Speaker 6: the US government, But I'm not quite sure that this 343 00:16:48,680 --> 00:16:51,480 Speaker 6: is going to serve the long term US national security 344 00:16:51,640 --> 00:16:53,080 Speaker 6: or economic interest very well. 345 00:16:53,520 --> 00:16:53,840 Speaker 5: As far. 346 00:16:53,880 --> 00:16:57,400 Speaker 3: I'm wondering the Belton road, the digital Belton road that 347 00:16:57,440 --> 00:17:00,480 Speaker 3: we've heard Jenson Wan talk about that China would create 348 00:17:00,520 --> 00:17:04,000 Speaker 3: a system of dependence on some of its technologies and 349 00:17:04,080 --> 00:17:08,720 Speaker 3: goods in Southeast Asia. How far has China gotten in 350 00:17:09,000 --> 00:17:14,600 Speaker 3: creating that type of ecosystem where domestic economies nearby really 351 00:17:14,640 --> 00:17:18,080 Speaker 3: rely on China, both technologically as well as beyond that. 352 00:17:19,480 --> 00:17:22,359 Speaker 6: So in terms of trade and finance, China I certainly 353 00:17:22,400 --> 00:17:24,560 Speaker 6: made a lot of progress through the Belton Road and 354 00:17:24,600 --> 00:17:28,400 Speaker 6: other initiatives, and technology is what they're coming from. At 355 00:17:28,440 --> 00:17:31,399 Speaker 6: the moment. I think there is still a sense that 356 00:17:31,520 --> 00:17:36,359 Speaker 6: China is able to not innovate fundamentally, but take existing innovations, 357 00:17:36,359 --> 00:17:39,320 Speaker 6: many of which come out of the US, and commercialize 358 00:17:39,359 --> 00:17:42,159 Speaker 6: them and scale them up in a way that is, 359 00:17:42,640 --> 00:17:46,080 Speaker 6: you know, clearly world beating. And that is the advantage 360 00:17:46,119 --> 00:17:49,560 Speaker 6: that is certainly very relevant in terms of increasing the 361 00:17:49,600 --> 00:17:53,520 Speaker 6: scope of its technological you know, influence within Asia. That 362 00:17:53,600 --> 00:17:56,080 Speaker 6: is happening. It is happening a little slowly, and the 363 00:17:56,119 --> 00:17:58,560 Speaker 6: fact that the US is somewhat receding from the region 364 00:17:58,920 --> 00:18:02,040 Speaker 6: and many countries in the feel that they cannot disengage 365 00:18:02,080 --> 00:18:05,760 Speaker 6: from China because they don't have an alternative, trustworthy partner, 366 00:18:05,880 --> 00:18:08,920 Speaker 6: is certainly helping China in this process as well. 367 00:18:09,000 --> 00:18:12,400 Speaker 5: When it comes to China's relationship with Europe, especially now 368 00:18:12,440 --> 00:18:13,880 Speaker 5: given Ammanu macrom is just there. 369 00:18:13,880 --> 00:18:15,400 Speaker 3: He's talking about how it's unstable. 370 00:18:16,000 --> 00:18:18,480 Speaker 5: Do you see China going to have to not just 371 00:18:18,600 --> 00:18:22,040 Speaker 5: dump more in Europe but try have to invest more 372 00:18:22,080 --> 00:18:23,919 Speaker 5: in Europe because the walls have gone up and it's been 373 00:18:23,920 --> 00:18:25,439 Speaker 5: so complicated with the United States. 374 00:18:27,200 --> 00:18:29,760 Speaker 6: The walls are going up for Chinese exports and they're 375 00:18:29,800 --> 00:18:31,920 Speaker 6: going to go up more because the reality is that 376 00:18:32,040 --> 00:18:36,439 Speaker 6: China is now a very very unbalanced growth model, with 377 00:18:36,600 --> 00:18:38,600 Speaker 6: most of the growth coming from the supply side of 378 00:18:38,640 --> 00:18:40,960 Speaker 6: the economy, which in normal times is not a bad thing, 379 00:18:41,320 --> 00:18:44,080 Speaker 6: but domestic demand is not keeping up, and with every 380 00:18:44,119 --> 00:18:47,080 Speaker 6: passing day, every passing quarter, there is more capacity in 381 00:18:47,160 --> 00:18:49,720 Speaker 6: China that needs to be exported. The US has put 382 00:18:49,800 --> 00:18:53,800 Speaker 6: up walls at least to direct Chinese exports to the US, 383 00:18:53,840 --> 00:18:57,919 Speaker 6: So Europe and other countries that need exports themselves to 384 00:18:58,000 --> 00:19:00,960 Speaker 6: boast their economies are going to face The brand in 385 00:19:01,080 --> 00:19:05,080 Speaker 6: China is very cognizant of this issue, its reliance on 386 00:19:05,119 --> 00:19:07,880 Speaker 6: exports to power its own growth, but also the fact 387 00:19:07,920 --> 00:19:10,119 Speaker 6: that wolves are going up to its exports around the world, 388 00:19:10,200 --> 00:19:13,520 Speaker 6: so it is trying to befriend these countries by essentially 389 00:19:13,560 --> 00:19:17,400 Speaker 6: investing in those countries, and this again poses an existential 390 00:19:17,520 --> 00:19:19,960 Speaker 6: risk in my view for some of the companies in 391 00:19:20,000 --> 00:19:23,280 Speaker 6: these countries, especially in the high technology sectors, because they 392 00:19:23,320 --> 00:19:27,240 Speaker 6: could get swallowed up by these Chinese investments and essentially 393 00:19:27,400 --> 00:19:31,399 Speaker 6: become find it very difficult to compete against Chinese firms 394 00:19:31,440 --> 00:19:34,200 Speaker 6: operating on their own soil. But that's the direction that 395 00:19:34,280 --> 00:19:37,000 Speaker 6: Chinese are taking, and at the moment, very few countries 396 00:19:37,040 --> 00:19:38,159 Speaker 6: are able to resist. 397 00:19:38,400 --> 00:19:40,200 Speaker 5: A lot of times the United States will say that 398 00:19:40,240 --> 00:19:44,000 Speaker 5: they are pushing other countries to do this, to not 399 00:19:44,080 --> 00:19:47,400 Speaker 5: exactly combat, but have this competition with China. What kind 400 00:19:47,400 --> 00:19:50,000 Speaker 5: of message is the US sending at the same time 401 00:19:50,000 --> 00:19:52,399 Speaker 5: when they're basically showing that they want to put trade 402 00:19:52,400 --> 00:19:56,680 Speaker 5: and economic concerns higher than national security concerns with there's 403 00:19:56,680 --> 00:19:59,919 Speaker 5: an entroump allowing Nvidia to sell the H two hundred 404 00:20:00,040 --> 00:20:00,720 Speaker 5: into Beijing. 405 00:20:02,000 --> 00:20:04,879 Speaker 6: Yes, some of the policymakers I've spoken to you do 406 00:20:05,480 --> 00:20:08,879 Speaker 6: point to what they see as US hypocrisy in the 407 00:20:08,960 --> 00:20:13,840 Speaker 6: sense of trying to put up barriers to Chinese imports, 408 00:20:14,119 --> 00:20:16,880 Speaker 6: trying to limit exports and trying to get them. There 409 00:20:16,920 --> 00:20:18,840 Speaker 6: is other countries to do the same, while at the 410 00:20:18,880 --> 00:20:22,439 Speaker 6: same time the US seems very very willing to trade 411 00:20:22,480 --> 00:20:25,720 Speaker 6: off many issues that the US claims should be very important, 412 00:20:25,720 --> 00:20:30,359 Speaker 6: including national security considerations, for short term economic gain, and 413 00:20:30,359 --> 00:20:33,760 Speaker 6: this in media decision is a prime example of that. 414 00:20:34,000 --> 00:20:36,119 Speaker 6: So certainly the message that the rest of the world 415 00:20:36,160 --> 00:20:39,640 Speaker 6: is hearing from the US is one of great inconsistency 416 00:20:40,119 --> 00:20:43,119 Speaker 6: and some degree of short termism rather than really viewing 417 00:20:44,000 --> 00:20:47,720 Speaker 6: the long term economic national security of the interests being 418 00:20:47,760 --> 00:20:50,880 Speaker 6: the prime drivers of US policy as. 419 00:20:50,800 --> 00:20:52,439 Speaker 3: Far over the past couple of years, you and I 420 00:20:52,440 --> 00:20:54,320 Speaker 3: have talked about a real question of how much the 421 00:20:54,440 --> 00:20:57,320 Speaker 3: US will lose some of its dominance globally as a 422 00:20:57,359 --> 00:20:59,359 Speaker 3: result of some of these shifts and concerns that you 423 00:20:59,440 --> 00:21:02,160 Speaker 3: talk about. We haven't really seen it. You have seen 424 00:21:02,200 --> 00:21:05,440 Speaker 3: some sell offs arbitrarily in the dollar, sort of momentarily, 425 00:21:05,480 --> 00:21:07,760 Speaker 3: not arbitrarily, and a real bid up in the price 426 00:21:07,800 --> 00:21:11,040 Speaker 3: of gold, but have you seen a sustained shift away 427 00:21:11,040 --> 00:21:14,200 Speaker 3: from the US financial system by some of the trade 428 00:21:14,240 --> 00:21:15,080 Speaker 3: partners of the. 429 00:21:15,200 --> 00:21:19,760 Speaker 6: R In short, NOE, I think the reality is that 430 00:21:19,800 --> 00:21:23,359 Speaker 6: the US remains a dominant economy and dominant financial market 431 00:21:23,359 --> 00:21:26,119 Speaker 6: in the world in terms of final consumption demand is 432 00:21:26,119 --> 00:21:29,720 Speaker 6: still the most important and relatively speaking, in terms of 433 00:21:29,760 --> 00:21:35,600 Speaker 6: its financial market, debt size and its institutional framework, which 434 00:21:35,640 --> 00:21:38,679 Speaker 6: is certainly being eroded as we speak. But overall, this 435 00:21:38,800 --> 00:21:41,240 Speaker 6: package is going to be very difficult for any country 436 00:21:41,320 --> 00:21:46,040 Speaker 6: to beat. And despite all the concerns about US government debt, 437 00:21:46,160 --> 00:21:50,080 Speaker 6: about the US institutional framework, including the central bank independence 438 00:21:50,200 --> 00:21:52,679 Speaker 6: is one what we have seen is foreign investors have 439 00:21:52,840 --> 00:21:56,480 Speaker 6: continued to buy significant amounts of US treasuries and other 440 00:21:56,600 --> 00:22:00,840 Speaker 6: US financial assets, and this includes foreign central banks. Certainly 441 00:22:00,880 --> 00:22:03,600 Speaker 6: foreign central banks and everybody around the world is trying 442 00:22:03,640 --> 00:22:06,560 Speaker 6: to diversify away from the dollar. They're doing so at 443 00:22:06,600 --> 00:22:09,800 Speaker 6: the margin, but really there isn't much of an alternative 444 00:22:09,800 --> 00:22:12,000 Speaker 6: to the US and we see that in investor behavior 445 00:22:12,160 --> 00:22:12,800 Speaker 6: very clearly. 446 00:22:13,600 --> 00:22:17,160 Speaker 2: This is the Bloomberg Survanons podcast, bringing you the best 447 00:22:17,160 --> 00:22:20,480 Speaker 2: in markets, economics, and geopolitics. You can watch the show 448 00:22:20,520 --> 00:22:23,480 Speaker 2: live on Bloomberg TV weekday mornings from six am to 449 00:22:23,640 --> 00:22:27,399 Speaker 2: nine am Eastern. Subscribe to the podcast on Apple, Spotify 450 00:22:27,520 --> 00:22:29,760 Speaker 2: or anywhere else you listen, and as always on the 451 00:22:29,760 --> 00:22:32,200 Speaker 2: Bloomberg Terminal and the Bloomberg Business app.