WEBVTT - US Banks Finance Their Own Competition, 25% Auto Tariffs

0:00:02.720 --> 0:00:10.560
<v Speaker 1>Bloomberg Audio Studios, podcasts, radio news. You're listening to the

0:00:10.560 --> 0:00:14.520
<v Speaker 1>Bloomberg Intelligence podcast. Catch us live weekdays at ten am

0:00:14.560 --> 0:00:18.479
<v Speaker 1>Eastern on Applecarplay and Android Auto with the Bloomberg Business app.

0:00:18.600 --> 0:00:21.799
<v Speaker 1>Listen on demand wherever you get your podcasts, or watch

0:00:21.920 --> 0:00:23.040
<v Speaker 1>us live on YouTube.

0:00:23.560 --> 0:00:25.640
<v Speaker 2>One of the big stories on the Bloomberg terminal today

0:00:25.840 --> 0:00:29.720
<v Speaker 2>and how US banks finance their own competition to the

0:00:29.720 --> 0:00:32.560
<v Speaker 2>tune of one trillion dollars. I'm talking about financing, priving,

0:00:32.600 --> 0:00:36.120
<v Speaker 2>some financing to non financial kind of institutions, thinking private equity,

0:00:36.159 --> 0:00:37.480
<v Speaker 2>private credit, that kind of thing.

0:00:38.400 --> 0:00:40.800
<v Speaker 3>Herman Chan joins us here. He is Bloomberg Intelligence. She

0:00:40.800 --> 0:00:41.640
<v Speaker 3>covers all the banks.

0:00:41.880 --> 0:00:44.760
<v Speaker 2>Herman, what are the what are the banks, the US

0:00:44.880 --> 0:00:48.040
<v Speaker 2>banks doing in terms of, you know, lending to maybe

0:00:48.080 --> 0:00:51.840
<v Speaker 2>some non traditional financial institutions like private equity, like hedge funds.

0:00:52.360 --> 0:00:53.519
<v Speaker 3>How big of a business is that?

0:00:53.840 --> 0:00:57.920
<v Speaker 4>Yeah, it's It's really interesting because the Federal Reserve has

0:00:58.240 --> 0:01:02.720
<v Speaker 4>just recently require hired banks to disclose more on lending

0:01:02.760 --> 0:01:07.360
<v Speaker 4>to these non bank, non bank financial intermediaries. And what

0:01:07.440 --> 0:01:11.080
<v Speaker 4>we've seen is that some banks that we cover, like

0:01:11.240 --> 0:01:15.800
<v Speaker 4>Bank OZK, Western Alliance, that could basically mean over fifty

0:01:15.840 --> 0:01:19.400
<v Speaker 4>percent of their commercial loan portfolio is to the shadow banks.

0:01:19.840 --> 0:01:23.280
<v Speaker 4>So it's an area that is growing where you see

0:01:23.440 --> 0:01:27.240
<v Speaker 4>traditional businesses are a bit wary in this current macro

0:01:27.360 --> 0:01:30.480
<v Speaker 4>environment which still elevated interest rates, a lot of uncertainty

0:01:30.959 --> 0:01:36.200
<v Speaker 4>with the economy. But lending to non bank financial institutions

0:01:36.319 --> 0:01:37.680
<v Speaker 4>is an area of course.

0:01:38.080 --> 0:01:39.320
<v Speaker 5>So explain shadow banks.

0:01:39.360 --> 0:01:40.240
<v Speaker 3>What is that topic?

0:01:40.600 --> 0:01:46.520
<v Speaker 4>So it's interesting the regulators have broken out shadow banks

0:01:46.840 --> 0:01:53.440
<v Speaker 4>non bank financial institutions as institutions like mortgage lenders, private equity,

0:01:53.680 --> 0:01:59.040
<v Speaker 4>private credits, financial institutions that lend but don't have the

0:01:59.120 --> 0:02:03.680
<v Speaker 4>depository component to their operations.

0:02:04.640 --> 0:02:07.800
<v Speaker 2>So I kind of view these what do you call

0:02:07.840 --> 0:02:11.640
<v Speaker 2>them nd fi's, so non depositive and institutions. Aren't they

0:02:12.080 --> 0:02:14.560
<v Speaker 2>competitors to the banks themselves, So why am I lending

0:02:14.560 --> 0:02:14.960
<v Speaker 2>the money?

0:02:15.040 --> 0:02:21.160
<v Speaker 4>They are increasingly competitors. What we have noticed is that

0:02:21.880 --> 0:02:27.720
<v Speaker 4>the participants that are borrowing from these non pick financial

0:02:27.720 --> 0:02:31.760
<v Speaker 4>competitors are are a bit more riskier, and so they

0:02:32.919 --> 0:02:35.760
<v Speaker 4>are viewed as more high yield. And these are areas

0:02:35.800 --> 0:02:40.000
<v Speaker 4>that the traditional banking institutions don't want to lend money to.

0:02:40.560 --> 0:02:42.760
<v Speaker 4>So a way to get around at is to lend

0:02:42.800 --> 0:02:47.320
<v Speaker 4>it to the sponsors, and that's something that's happening. What's

0:02:47.360 --> 0:02:51.480
<v Speaker 4>interesting is that the banks themselves will say they're not

0:02:51.520 --> 0:02:56.240
<v Speaker 4>competing with the private credit operators head the head, but

0:02:57.760 --> 0:02:59.440
<v Speaker 4>we do see a bit of a hallowing out of

0:02:59.480 --> 0:03:02.920
<v Speaker 4>the tradition business borrowers. Because if you have private acway

0:03:02.960 --> 0:03:05.720
<v Speaker 4>coming in and leveraging the balance sheets of the companies

0:03:05.800 --> 0:03:09.120
<v Speaker 4>they borrow, inherently these companies are not going to be

0:03:10.680 --> 0:03:15.320
<v Speaker 4>good customers for a traditional bank, So a lot of

0:03:15.320 --> 0:03:17.239
<v Speaker 4>these customers continue to go away.

0:03:17.840 --> 0:03:21.040
<v Speaker 5>So I'm hearing the industry watched our dogs are worried

0:03:21.040 --> 0:03:25.399
<v Speaker 5>about the increase in bank loans to these DFIs. They're

0:03:25.440 --> 0:03:27.800
<v Speaker 5>thinking that it can make banks more vulnerable to liquidity

0:03:27.960 --> 0:03:31.200
<v Speaker 5>or credit shocks. What are the developments there.

0:03:31.200 --> 0:03:33.919
<v Speaker 4>Yeah, well, it remains to be seen, right, So it's

0:03:34.000 --> 0:03:38.120
<v Speaker 4>continuing to be a larger and larger portion of the

0:03:39.240 --> 0:03:42.400
<v Speaker 4>loan portfolio for these banks, but it's still in the

0:03:42.440 --> 0:03:44.880
<v Speaker 4>grand scheme of things. A lot of the banks remain

0:03:45.040 --> 0:03:49.720
<v Speaker 4>very diversified, but we haven't seen a downturn with such

0:03:49.800 --> 0:03:52.440
<v Speaker 4>a fragmented market where a lot of the lending is

0:03:52.560 --> 0:03:56.840
<v Speaker 4>going outside of the traditional banking system. So it's something

0:03:56.880 --> 0:04:00.640
<v Speaker 4>that continues to be monitored and something that we're assessing

0:04:00.760 --> 0:04:01.520
<v Speaker 4>quarter by quarter.

0:04:02.240 --> 0:04:04.080
<v Speaker 3>Do you like this business as an analysts? Do you think

0:04:04.080 --> 0:04:07.040
<v Speaker 3>it's a good business for some of these banks right now?

0:04:07.200 --> 0:04:11.880
<v Speaker 4>It's it's a way to demonstrate some better growth. We

0:04:12.040 --> 0:04:15.680
<v Speaker 4>just looked at the numbers before joining and traditional commercial

0:04:15.760 --> 0:04:18.920
<v Speaker 4>and industrial lending, it's about in the first quarter, it's

0:04:18.960 --> 0:04:22.680
<v Speaker 4>about half a percentage point growth. If you look at

0:04:22.760 --> 0:04:25.480
<v Speaker 4>the lending to non big financial institutions, that's up five

0:04:25.520 --> 0:04:28.520
<v Speaker 4>point seven percent in the quarter. So if you have

0:04:28.640 --> 0:04:32.279
<v Speaker 4>a bit more exposure to that, you can juice your growth,

0:04:32.360 --> 0:04:35.280
<v Speaker 4>which in this current environment you're not seeing a lot

0:04:35.279 --> 0:04:40.359
<v Speaker 4>of activity there. But again you need to have a

0:04:40.520 --> 0:04:42.360
<v Speaker 4>very diversified portfolio.

0:04:42.600 --> 0:04:45.200
<v Speaker 3>All right, Herman chen, you're the expert here. We're going

0:04:45.279 --> 0:04:45.640
<v Speaker 3>to go with you.

0:04:45.640 --> 0:04:48.920
<v Speaker 2>Herman Chinn, Senior analyst for US regional banks. We usually

0:04:48.960 --> 0:04:50.920
<v Speaker 2>talk to Herman when something's blowing up, but we want

0:04:50.920 --> 0:04:54.040
<v Speaker 2>to talk it's crazy, something's gulpin' right. Here's a new

0:04:54.080 --> 0:04:56.000
<v Speaker 2>source of potential long growth for some of these banks

0:04:56.000 --> 0:04:58.280
<v Speaker 2>out there. Herman Chann, senior analysts covers the regional banks

0:04:58.279 --> 0:05:00.599
<v Speaker 2>for Bloomberg Intelligence, Joining the heres joining us here in

0:05:00.600 --> 0:05:03.000
<v Speaker 2>our Bloomberg Interactive Broker Studio.

0:05:05.080 --> 0:05:08.800
<v Speaker 1>You're listening to the Bloomberg Intelligence Podcast. Catch us live

0:05:08.880 --> 0:05:12.279
<v Speaker 1>weekdays at ten am Eastern on Applecarplay and Android Auto

0:05:12.360 --> 0:05:15.440
<v Speaker 1>with the Bloomberg Business App. Listen on demand wherever you

0:05:15.480 --> 0:05:18.680
<v Speaker 1>get your podcasts, or watch us live on YouTube.

0:05:19.400 --> 0:05:21.599
<v Speaker 3>It's got a Steve Man. He's a Global autos and

0:05:21.720 --> 0:05:22.120
<v Speaker 3>I'll Steve.

0:05:22.160 --> 0:05:24.080
<v Speaker 2>I know you've got earnings models out there for a

0:05:24.080 --> 0:05:27.400
<v Speaker 2>lot of these big auto companies. Are you adjusting your

0:05:27.400 --> 0:05:30.039
<v Speaker 2>earnings models for tariffs? Here?

0:05:30.080 --> 0:05:32.760
<v Speaker 3>How's that can impact some of these big global automakers.

0:05:33.640 --> 0:05:37.000
<v Speaker 6>Yeah, we are actually going through that right now. One

0:05:37.040 --> 0:05:39.159
<v Speaker 6>of the things we did publish this morning was the

0:05:39.240 --> 0:05:42.680
<v Speaker 6>auto sales forecast for the US. You know, we were

0:05:42.880 --> 0:05:46.240
<v Speaker 6>initially looking at down half a percent. We're looking at

0:05:46.360 --> 0:05:49.680
<v Speaker 6>being down at least three percent now for the year.

0:05:50.680 --> 0:05:53.120
<v Speaker 6>But you know, we are going through the model. One

0:05:53.440 --> 0:05:56.760
<v Speaker 6>thing that really stood out for us was really Ford.

0:05:58.120 --> 0:05:58.560
<v Speaker 3>Ford.

0:05:58.600 --> 0:06:02.159
<v Speaker 6>Look, you know they they're losing Armin and le like

0:06:02.360 --> 0:06:05.880
<v Speaker 6>on on ev sales. Uh. The the popular Mochi is

0:06:05.880 --> 0:06:09.000
<v Speaker 6>actually made in Mexico, So like for us, if you

0:06:09.080 --> 0:06:13.479
<v Speaker 6>tack on another ten ten grand on the price and

0:06:13.520 --> 0:06:15.719
<v Speaker 6>it goes through the bottom line. You know, it could

0:06:15.839 --> 0:06:20.320
<v Speaker 6>hit another you could hit five hundred million dollars on earnings.

0:06:20.320 --> 0:06:23.080
<v Speaker 6>That's ten percent of their earnings. So those are some

0:06:23.120 --> 0:06:24.760
<v Speaker 6>of the things we're looking at.

0:06:24.600 --> 0:06:27.120
<v Speaker 5>Steve, What are the names that you're seeing are most

0:06:27.160 --> 0:06:27.920
<v Speaker 5>exposed here?

0:06:29.279 --> 0:06:33.400
<v Speaker 6>Well, I think on the downside, are definitely the legacy

0:06:33.600 --> 0:06:36.720
<v Speaker 6>you know, the big three autos, plus the the foreign

0:06:37.480 --> 0:06:40.880
<v Speaker 6>legacy auto makers. You know, they do have a lot

0:06:40.880 --> 0:06:46.240
<v Speaker 6>of production outside of the US. As you can see,

0:06:46.520 --> 0:06:49.880
<v Speaker 6>you know, the peer plays, not just Tesla, Rivian and Lucid,

0:06:50.200 --> 0:06:56.360
<v Speaker 6>are actually relatively performing relatively better because there's a possibility

0:06:56.400 --> 0:06:59.760
<v Speaker 6>that the peer plays could take marketshare ev market share

0:06:59.800 --> 0:07:03.160
<v Speaker 6>from legacy automakers if they have to increase prices on

0:07:03.240 --> 0:07:07.560
<v Speaker 6>those ev imports that they make in Mexico. The other

0:07:07.680 --> 0:07:10.720
<v Speaker 6>thing that's interesting too that we're keeping an eye on

0:07:11.280 --> 0:07:17.760
<v Speaker 6>is really on the retail auto parts companies like O'Reilly, AutoZone,

0:07:17.800 --> 0:07:20.880
<v Speaker 6>Advanced Auto Parts. You know, they're actually bucking the trend.

0:07:20.960 --> 0:07:24.440
<v Speaker 6>They're up and simply the reason is that you know,

0:07:24.520 --> 0:07:28.240
<v Speaker 6>if people are not buying new cars, they're gonna have

0:07:28.320 --> 0:07:33.000
<v Speaker 6>to maintain existing ones, and so you know, those DIY

0:07:33.600 --> 0:07:36.280
<v Speaker 6>parts stores are are are actually doing well today.

0:07:36.320 --> 0:07:38.400
<v Speaker 2>Yeah, I'm looking at those stocks. I mean AutoZone for examples,

0:07:38.480 --> 0:07:41.360
<v Speaker 2>up two point seven percent today, fifty two week Hi,

0:07:41.680 --> 0:07:43.600
<v Speaker 2>A lot of the other names are two three four percent.

0:07:43.640 --> 0:07:46.640
<v Speaker 3>And Steve, I'll have you know I did buy a

0:07:46.720 --> 0:07:47.600
<v Speaker 3>new or at least a.

0:07:47.560 --> 0:07:50.240
<v Speaker 2>New vehicle this past weekend, a Condon but I got

0:07:50.240 --> 0:07:51.400
<v Speaker 2>a hybrid.

0:07:51.720 --> 0:07:54.240
<v Speaker 3>So how about which hon does this? Okay?

0:07:54.400 --> 0:07:58.200
<v Speaker 2>Okay, so I've got, I've got, I've got in front

0:07:58.200 --> 0:07:59.320
<v Speaker 2>of the tariffs.

0:07:59.360 --> 0:08:00.880
<v Speaker 3>There are some set to go there.

0:08:00.960 --> 0:08:02.480
<v Speaker 6>Oh, you're on your way there.

0:08:02.720 --> 0:08:05.480
<v Speaker 2>So Stee, what are you hearing from the Hondas of

0:08:05.480 --> 0:08:08.600
<v Speaker 2>the world, the Volkswagons, the Toyotas of the world.

0:08:08.640 --> 0:08:10.400
<v Speaker 3>How are they viewing this environment?

0:08:10.680 --> 0:08:13.280
<v Speaker 6>Yeah, you know, I think they're gonna face some cost

0:08:13.320 --> 0:08:16.040
<v Speaker 6>pressures as well. You know, they do have a big chunk. Actually,

0:08:16.040 --> 0:08:18.840
<v Speaker 6>the CRV is actually made in Canada, by the way,

0:08:19.720 --> 0:08:21.440
<v Speaker 6>So yeah, so they're gonna.

0:08:21.440 --> 0:08:23.120
<v Speaker 3>I don't know what the big dealers.

0:08:23.280 --> 0:08:24.040
<v Speaker 5>See for Canada.

0:08:24.440 --> 0:08:24.680
<v Speaker 3>Yep.

0:08:24.960 --> 0:08:27.240
<v Speaker 6>So you know they're gonna they're gonna get hit. But

0:08:27.600 --> 0:08:30.840
<v Speaker 6>the difference is that Honda and Toyota in the US,

0:08:30.960 --> 0:08:34.199
<v Speaker 6>and I think globally they do have a much lower

0:08:34.320 --> 0:08:38.240
<v Speaker 6>dealer inventory so you know, there's there's still a lot

0:08:38.240 --> 0:08:40.880
<v Speaker 6>of demand for their cars because they're you know, known

0:08:40.920 --> 0:08:44.600
<v Speaker 6>to be more reliable, so you know, you know, they're

0:08:44.600 --> 0:08:47.640
<v Speaker 6>may be able to pass on some of the higher costs,

0:08:48.160 --> 0:08:51.880
<v Speaker 6>the higher pricing. The price increases the consumers, so they

0:08:52.080 --> 0:08:57.360
<v Speaker 6>they would probably fare better within the legacy automaker, but

0:08:57.400 --> 0:09:01.319
<v Speaker 6>the European will probably get hit pretty bad, especially like

0:09:02.000 --> 0:09:05.800
<v Speaker 6>the luxury brand bm BMW, Mercedes and Audi. You know,

0:09:05.880 --> 0:09:09.040
<v Speaker 6>they have a different strategy. You know, they don't they

0:09:09.040 --> 0:09:11.800
<v Speaker 6>don't have multiple plants for certain models. They do have

0:09:11.920 --> 0:09:15.560
<v Speaker 6>they have a global plant for for for their models.

0:09:15.600 --> 0:09:19.480
<v Speaker 6>So so for example, BMW and Mercedes mix SUVs in

0:09:19.600 --> 0:09:22.559
<v Speaker 6>the US, so it's going to be hard for them

0:09:22.600 --> 0:09:26.200
<v Speaker 6>to shift footprint. But the other way to think about

0:09:26.240 --> 0:09:28.520
<v Speaker 6>it is, you know, if someone is able to afford

0:09:28.800 --> 0:09:32.640
<v Speaker 6>a more expensive vehicle like a Mercedes and BMW, they

0:09:32.679 --> 0:09:35.720
<v Speaker 6>may be able to stomach the higher prices.

0:09:36.200 --> 0:09:36.719
<v Speaker 3>Yeah, I don't know.

0:09:36.840 --> 0:09:40.440
<v Speaker 2>Coming through my BMW X three, I guess it's South Carolina.

0:09:40.679 --> 0:09:42.440
<v Speaker 2>I don't know where it was built, but it wasn't

0:09:42.440 --> 0:09:43.800
<v Speaker 2>in Stuttgart with the rest of them.

0:09:43.920 --> 0:09:45.400
<v Speaker 3>Steve Man, thanks so much, appreciate it.

0:09:45.679 --> 0:09:48.760
<v Speaker 2>Steve Ban Global Autos and industrials research channels for Bloomberg

0:09:48.760 --> 0:09:53.360
<v Speaker 2>Intelligencies down there in a Bloomberg Princeton office. The office

0:09:53.400 --> 0:09:55.560
<v Speaker 2>probably some of the best food in all of Global

0:09:55.600 --> 0:09:58.960
<v Speaker 2>Bloomberg will laid out there for you right now.

0:10:00.120 --> 0:10:04.040
<v Speaker 1>Listening to the Bloomberg Intelligence Podcast. Catch us live weekdays

0:10:04.040 --> 0:10:06.920
<v Speaker 1>at ten am Eastern on Apple Cocklay and Android Auto

0:10:07.040 --> 0:10:10.120
<v Speaker 1>with the Bloomberg Business App. Listen on demand wherever you

0:10:10.160 --> 0:10:15.319
<v Speaker 1>get your podcasts, or watch us live on YouTube.

0:10:17.800 --> 0:10:21.520
<v Speaker 2>Talking about the AI trade for two years, it's been listening.

0:10:21.559 --> 0:10:23.120
<v Speaker 2>It's not just been a tech thing, it's been a

0:10:23.160 --> 0:10:26.000
<v Speaker 2>market thing. It's every company in the SP five round

0:10:26.080 --> 0:10:27.840
<v Speaker 2>and their conference calls they talk about AI. It's been

0:10:27.840 --> 0:10:29.200
<v Speaker 2>going on for a couple of years. One of the

0:10:29.200 --> 0:10:32.760
<v Speaker 2>ways to think about it is from the real estate perspective. Definitely,

0:10:32.840 --> 0:10:34.160
<v Speaker 2>you can do that. John Lynn, he does that. He

0:10:34.240 --> 0:10:37.840
<v Speaker 2>joins us. He's a chief business officer for Equinox, joining

0:10:37.920 --> 0:10:39.559
<v Speaker 2>us here in our Bloomberg Interactive Broker studio.

0:10:39.640 --> 0:10:41.080
<v Speaker 3>John to us, what you guys do at Equinics.

0:10:41.080 --> 0:10:44.480
<v Speaker 7>Thanks so much for having me. We're really the fundamental

0:10:44.480 --> 0:10:47.319
<v Speaker 7>digital infrastructure provider of the world. Building two hundred and

0:10:47.360 --> 0:10:49.640
<v Speaker 7>sixty eight data centers across seventy four market.

0:10:49.760 --> 0:10:50.240
<v Speaker 3>You're the guys.

0:10:50.520 --> 0:10:52.880
<v Speaker 7>We are the guys building and connecting all of these

0:10:53.160 --> 0:10:56.440
<v Speaker 7>cloud providers and enterprises making all of that data available

0:10:56.440 --> 0:10:56.880
<v Speaker 7>for AI.

0:10:57.440 --> 0:10:59.480
<v Speaker 5>And it's really interesting because I was just speaking with

0:10:59.559 --> 0:11:02.839
<v Speaker 5>him during the break saying that I cover US real

0:11:02.960 --> 0:11:05.400
<v Speaker 5>estate stocks, I cover real estate investment trust, and that's

0:11:05.440 --> 0:11:08.240
<v Speaker 5>exactly what ethics falls in that patch. This is my guy,

0:11:09.520 --> 0:11:12.120
<v Speaker 5>So wonderful to have this conversation. But I think that

0:11:12.120 --> 0:11:14.800
<v Speaker 5>there's often people don't really when you think about data centers,

0:11:14.840 --> 0:11:17.240
<v Speaker 5>they don't often think about the people that are actually

0:11:17.400 --> 0:11:19.640
<v Speaker 5>providing the real estate forward data center. So can you

0:11:19.679 --> 0:11:22.920
<v Speaker 5>talk a little bit about how Equinis differs from maybe

0:11:22.960 --> 0:11:24.800
<v Speaker 5>for thinking about a data center itself, but more or

0:11:24.880 --> 0:11:27.080
<v Speaker 5>less the fact that you guys are acquiring properties and

0:11:27.120 --> 0:11:27.920
<v Speaker 5>doing it that way.

0:11:28.120 --> 0:11:30.240
<v Speaker 7>Yeah, you can think about it as full scope development,

0:11:30.240 --> 0:11:32.440
<v Speaker 7>where I mean we're going from raw land getting their

0:11:32.559 --> 0:11:35.040
<v Speaker 7>entitlements and then building the entire data center and then

0:11:35.200 --> 0:11:39.040
<v Speaker 7>operating that for perpetuity essentially, and our focus is around

0:11:39.080 --> 0:11:41.880
<v Speaker 7>making sure we're getting as many customers as possible into

0:11:41.880 --> 0:11:45.120
<v Speaker 7>the facilities and really interconnecting their data flows together, which

0:11:45.160 --> 0:11:47.760
<v Speaker 7>is pretty unique. In the data center space, which has

0:11:47.880 --> 0:11:49.920
<v Speaker 7>also been a great opportunity for us to participate in

0:11:49.960 --> 0:11:50.720
<v Speaker 7>the AI growth.

0:11:51.360 --> 0:11:52.319
<v Speaker 3>What are you guys seeing here?

0:11:52.360 --> 0:11:54.880
<v Speaker 2>What are you seeing from your clients, the people you

0:11:54.960 --> 0:11:58.360
<v Speaker 2>talk to about kind of their needs going forward? Because

0:11:58.440 --> 0:12:00.280
<v Speaker 2>right now, I think in the marketplace you look, it's

0:12:00.320 --> 0:12:02.200
<v Speaker 2>like Invidious Stock and some of the other stocks that

0:12:02.240 --> 0:12:03.760
<v Speaker 2>trade around the AI theme.

0:12:04.120 --> 0:12:05.640
<v Speaker 3>Twenty twenty five has not been a good year.

0:12:05.679 --> 0:12:08.679
<v Speaker 2>After obviously phenomenal extraordinary growth in twenty three twenty four,

0:12:08.679 --> 0:12:12.719
<v Speaker 2>maybe before that. How are you viewing the growth here

0:12:12.880 --> 0:12:14.520
<v Speaker 2>in AI and from your end of the business, the

0:12:14.559 --> 0:12:15.280
<v Speaker 2>real estate side.

0:12:15.400 --> 0:12:17.360
<v Speaker 7>Yeah, First, I'd just say, you know, AI is a

0:12:17.400 --> 0:12:19.920
<v Speaker 7>portion of the demand for data centers, but data center

0:12:19.920 --> 0:12:22.400
<v Speaker 7>as a whole are powering everything that everybody is doing

0:12:22.480 --> 0:12:25.240
<v Speaker 7>right like listening to this broadcast, you know, ordering food

0:12:25.280 --> 0:12:28.880
<v Speaker 7>for lunch, you know, trading, trading on the exchange, et cetera.

0:12:28.960 --> 0:12:31.760
<v Speaker 7>I mean, you need computers for everything nowadays, and that's

0:12:31.760 --> 0:12:34.480
<v Speaker 7>still continuing. I think, you know, digital transformation is not

0:12:34.520 --> 0:12:36.960
<v Speaker 7>in the early stages anymore, but we're far from done,

0:12:37.000 --> 0:12:39.719
<v Speaker 7>and so that is just the secular driver that will continue.

0:12:40.360 --> 0:12:43.280
<v Speaker 7>From the eye landscape, I'd say, obviously, a huge amount

0:12:43.320 --> 0:12:45.720
<v Speaker 7>of interest and excitement, and I think the it caught

0:12:45.760 --> 0:12:49.040
<v Speaker 7>the imagination of everyone, and I'd say, right now, what

0:12:49.080 --> 0:12:53.000
<v Speaker 7>we're seeing is like exciting use cases that are really

0:12:53.040 --> 0:12:55.839
<v Speaker 7>providing durable value, right. And I think it's still early

0:12:55.880 --> 0:12:58.880
<v Speaker 7>stages for many of that across the general business landscape,

0:12:59.000 --> 0:13:01.040
<v Speaker 7>but that's what gets me fund mentally excited. You look

0:13:01.040 --> 0:13:03.640
<v Speaker 7>at a company like Bristol Myers squib a customer of ours.

0:13:03.760 --> 0:13:08.559
<v Speaker 7>They're doing drug discovery using nvidiagpus and being able to

0:13:08.679 --> 0:13:12.360
<v Speaker 7>increase and accelerate their time to therapeutics. That's fundamentally going

0:13:12.400 --> 0:13:14.320
<v Speaker 7>to improve like human life, right, And I think that

0:13:14.320 --> 0:13:16.960
<v Speaker 7>there's so many different aspects that AI can improve based

0:13:17.000 --> 0:13:17.280
<v Speaker 7>on that.

0:13:17.480 --> 0:13:19.520
<v Speaker 5>So run us through some of your biggest customers. Who

0:13:19.559 --> 0:13:20.200
<v Speaker 5>do you all work with?

0:13:20.600 --> 0:13:23.000
<v Speaker 7>Certainly the cloud providers are some of our top customers.

0:13:23.120 --> 0:13:25.800
<v Speaker 7>We've got over two thousand different network providers as well.

0:13:25.920 --> 0:13:28.680
<v Speaker 7>The genesis of the company was really around how do

0:13:28.720 --> 0:13:31.120
<v Speaker 7>we help the Internet scale? And that ended up being well,

0:13:31.160 --> 0:13:35.280
<v Speaker 7>how do we help the globes telecommunications and data flows scale?

0:13:35.520 --> 0:13:37.600
<v Speaker 7>And so when you think about all of the cloud providers,

0:13:37.679 --> 0:13:40.360
<v Speaker 7>how do they connect to the end customers that's through

0:13:40.360 --> 0:13:43.880
<v Speaker 7>our facilities. And then as we've built that landscape, we've

0:13:43.920 --> 0:13:47.480
<v Speaker 7>ended up basically becoming the place where enterprises put their

0:13:47.480 --> 0:13:50.439
<v Speaker 7>most trusted assets. When you think about then, whether they

0:13:50.440 --> 0:13:52.719
<v Speaker 7>have some workloads that are in the public cloud, well,

0:13:52.720 --> 0:13:54.160
<v Speaker 7>they're going to have some that they're going to have

0:13:54.240 --> 0:13:56.800
<v Speaker 7>ownership and control of themselves. When they put those in

0:13:56.840 --> 0:14:00.120
<v Speaker 7>our facilities, it lets them glue that infrastructure together and

0:14:00.160 --> 0:14:03.320
<v Speaker 7>become like one super powerful environment.

0:14:03.640 --> 0:14:08.040
<v Speaker 2>And folks, Equinics is a publicly traded company. Eqix is

0:14:08.320 --> 0:14:10.520
<v Speaker 2>the ticker. It's got a market cap of eighty one

0:14:10.800 --> 0:14:14.200
<v Speaker 2>billion dollars. And if you want some research on it

0:14:14.240 --> 0:14:16.400
<v Speaker 2>and you're on the Bloomberg terminal, Jeffrey Langbaum was my

0:14:16.559 --> 0:14:19.480
<v Speaker 2>reat analyst. He covers eqix, you can go big and

0:14:19.520 --> 0:14:23.880
<v Speaker 2>that's where you find the research on Equinox. John talk

0:14:23.880 --> 0:14:25.440
<v Speaker 2>to us about the global form front, and we know

0:14:25.440 --> 0:14:28.920
<v Speaker 2>you guys are global here. Where are you seeing growth,

0:14:29.720 --> 0:14:31.320
<v Speaker 2>stronger growth versus weaker growth?

0:14:31.880 --> 0:14:34.720
<v Speaker 7>Yeah, I'd say across the landscape, there's still quite a

0:14:34.760 --> 0:14:37.440
<v Speaker 7>bit of demand for data center activity. You know, we're

0:14:37.440 --> 0:14:40.360
<v Speaker 7>particularly excited about some of the emerging markets Southeast Asia,

0:14:40.360 --> 0:14:43.640
<v Speaker 7>for instance, it's certainly growing quite a bit, but you know,

0:14:43.960 --> 0:14:46.200
<v Speaker 7>based off of a lot of the recent Surgeon AI

0:14:46.400 --> 0:14:48.200
<v Speaker 7>and kind of the use cases set up for that,

0:14:48.560 --> 0:14:50.640
<v Speaker 7>just a tremendous amount of growth in the US over

0:14:50.680 --> 0:14:51.880
<v Speaker 7>the course of the last two years.

0:14:52.360 --> 0:14:54.240
<v Speaker 5>So, I mean, when we think about your competitors in

0:14:54.280 --> 0:14:57.040
<v Speaker 5>this broader landscape, there is obviously digital realty trust when

0:14:57.040 --> 0:14:59.360
<v Speaker 5>we're thinking about publicly traded routs here in the data

0:14:59.360 --> 0:15:02.400
<v Speaker 5>center space. And if you look over the past five years,

0:15:02.600 --> 0:15:05.840
<v Speaker 5>we have equinic shares that have risen forty percent, but

0:15:05.840 --> 0:15:08.480
<v Speaker 5>that's compared to digital realty that's risen about eleven percent.

0:15:08.760 --> 0:15:10.360
<v Speaker 5>What do you think that you all are doing differently

0:15:10.400 --> 0:15:11.480
<v Speaker 5>than your competitors.

0:15:12.480 --> 0:15:16.960
<v Speaker 7>I think one, it's our focus around really driving diversity

0:15:16.960 --> 0:15:20.240
<v Speaker 7>of customer and like kind of having an ecosystem that

0:15:20.240 --> 0:15:22.400
<v Speaker 7>we've built around the value that we're doing. And so

0:15:22.520 --> 0:15:25.080
<v Speaker 7>that's incredibly important for us. Like for the AI trade,

0:15:25.080 --> 0:15:27.840
<v Speaker 7>for instance, we're focusing not just on capturing some of

0:15:27.880 --> 0:15:30.400
<v Speaker 7>these large training footprints, but really how do we make

0:15:30.400 --> 0:15:32.680
<v Speaker 7>sure we're getting all of these AI players and exposing

0:15:32.720 --> 0:15:34.600
<v Speaker 7>them to the rest of our customer base and really

0:15:34.640 --> 0:15:39.560
<v Speaker 7>again that fuel becomes additional growth across our entire portfolio.

0:15:40.440 --> 0:15:43.560
<v Speaker 2>Do you develop and build data centers or do you

0:15:43.600 --> 0:15:44.960
<v Speaker 2>just buy existing.

0:15:44.760 --> 0:15:46.000
<v Speaker 7>We develop and build?

0:15:46.240 --> 0:15:49.080
<v Speaker 3>Where are you developing and building these days? And if

0:15:49.080 --> 0:15:50.280
<v Speaker 3>you say Texas.

0:15:49.960 --> 0:15:53.200
<v Speaker 7>Or Florida, Well, we're building all around the world. I

0:15:53.200 --> 0:15:56.280
<v Speaker 7>think we've got sixty eight current like major construction projects

0:15:56.280 --> 0:15:58.720
<v Speaker 7>across it. Yeah, so we're very active.

0:15:59.400 --> 0:16:01.760
<v Speaker 3>Wow, come up to it's.

0:16:01.680 --> 0:16:03.280
<v Speaker 5>Really it's big company in this.

0:16:03.560 --> 0:16:07.520
<v Speaker 3>I mean, yeah, you guys have to come to my path.

0:16:08.720 --> 0:16:09.680
<v Speaker 7>It's a beautiful space.

0:16:10.720 --> 0:16:12.240
<v Speaker 5>So what is your you know, what are your thoughts

0:16:12.280 --> 0:16:14.160
<v Speaker 5>for people who are saying that, you know, the tech

0:16:14.280 --> 0:16:16.640
<v Speaker 5>rally has run too far, you know, maybe we have

0:16:16.760 --> 0:16:19.120
<v Speaker 5>capex spend that's just you know, bloated. There's so much

0:16:19.120 --> 0:16:21.560
<v Speaker 5>spending in this space. Is this a place to be

0:16:21.600 --> 0:16:23.840
<v Speaker 5>investing right now? When we think about AI and in

0:16:23.840 --> 0:16:24.400
<v Speaker 5>places of.

0:16:24.360 --> 0:16:28.480
<v Speaker 7>That regard, I think the long term trend around this

0:16:28.560 --> 0:16:30.360
<v Speaker 7>is going to be inevitable, right. I think it's certainly

0:16:30.440 --> 0:16:33.080
<v Speaker 7>we're creating durable value not just for you know, kind

0:16:33.080 --> 0:16:35.040
<v Speaker 7>of the planet and all of our customers, but but

0:16:35.120 --> 0:16:37.720
<v Speaker 7>for shareholders. I think the uh, the amount of investment

0:16:37.760 --> 0:16:39.960
<v Speaker 7>in the space, and like the numbers are candidly like

0:16:40.040 --> 0:16:42.040
<v Speaker 7>eye watering right now, and so but a lot of

0:16:42.040 --> 0:16:44.760
<v Speaker 7>that I think is just capital accumulation rather than deployment.

0:16:45.440 --> 0:16:47.560
<v Speaker 7>And you know, compared to a lot of other markets

0:16:47.720 --> 0:16:50.000
<v Speaker 7>in the real estate side, it's actually a little hard

0:16:50.040 --> 0:16:53.520
<v Speaker 7>to kind of overbuild just because there's so many natural

0:16:53.880 --> 0:16:55.960
<v Speaker 7>h like limters in terms of the way we want

0:16:55.960 --> 0:16:59.400
<v Speaker 7>to scale, from utility power availability, to supply chain to

0:17:00.240 --> 0:17:02.160
<v Speaker 7>you know, kind of just the amount of trades you

0:17:02.200 --> 0:17:04.920
<v Speaker 7>need to be able to build and operate these facilities.

0:17:05.119 --> 0:17:07.480
<v Speaker 7>And so I think that that helps kind of provide

0:17:07.480 --> 0:17:09.800
<v Speaker 7>more rationality than you know, in some some real estate

0:17:09.800 --> 0:17:11.400
<v Speaker 7>markets where you know, you can throw up a shell

0:17:11.440 --> 0:17:13.280
<v Speaker 7>pretty easily, you can you can kind of just like

0:17:13.320 --> 0:17:16.600
<v Speaker 7>convert and overbuild. In this case, it's a very long

0:17:16.640 --> 0:17:19.040
<v Speaker 7>development cycle, and so I think you'll you'll see kind

0:17:19.040 --> 0:17:20.200
<v Speaker 7>of some self metering there.

0:17:20.680 --> 0:17:22.760
<v Speaker 3>John, thanks very much for joining us. Really appreciate you

0:17:22.800 --> 0:17:23.119
<v Speaker 3>coming in.

0:17:23.400 --> 0:17:26.760
<v Speaker 2>John Lynn, he's a chief business officer of Equinox, joining

0:17:26.840 --> 0:17:29.520
<v Speaker 2>us live here in our Bloomberg Interactive Broker studio. Again,

0:17:29.840 --> 0:17:32.520
<v Speaker 2>another company walking into my door here in my studio.

0:17:32.960 --> 0:17:35.520
<v Speaker 3>I had no idea existed. Happens every day now, you know,

0:17:35.640 --> 0:17:36.560
<v Speaker 3>eighty billion.

0:17:36.320 --> 0:17:38.359
<v Speaker 2>Dollars in market cap and of course I missed it,

0:17:38.880 --> 0:17:41.359
<v Speaker 2>but a big real estate investment trust. And I know

0:17:42.119 --> 0:17:44.520
<v Speaker 2>our bi Anlyst Jeff Langbaum, he's all over here. He's

0:17:44.520 --> 0:17:46.960
<v Speaker 2>got research on this company as well.

0:17:47.840 --> 0:17:52.520
<v Speaker 1>This is the Bloomberg Intelligence Podcast, available on Apple, Spotify,

0:17:52.720 --> 0:17:56.160
<v Speaker 1>and anywhere else you get your podcasts. Listen live each

0:17:56.280 --> 0:17:59.800
<v Speaker 1>me day ten am to noon Eastern on Bloomberg dot com,

0:18:00.119 --> 0:18:03.639
<v Speaker 1>the iHeartRadio app, tune In, and the Bloomberg Business app.

0:18:04.040 --> 0:18:06.960
<v Speaker 1>You can also watch us live every weekday on YouTube

0:18:07.359 --> 0:18:09.600
<v Speaker 1>and always on the Bloomberg terminal