WEBVTT - Bloomberg Surveillance TV: November 26th, 2025 0:00:02.400 --> 0:00:06.760 Bloomberg Audio Studios, Podcasts, radio News. 0:00:11.680 --> 0:00:15.480 This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along 0:00:15.520 --> 0:00:18.720 with Lisa Bromwitz and Amerie Hordern. Join us each day 0:00:18.760 --> 0:00:22.280 for insight from the best in markets, economics, and geopolitics 0:00:22.440 --> 0:00:24.880 from our global headquarters in New York City. We are 0:00:24.960 --> 0:00:27.680 live on Bloomberg Television weekday mornings from six to nine 0:00:27.720 --> 0:00:31.319 am Eastern. Subscribe to the podcast on Apple, Spotify, or 0:00:31.320 --> 0:00:33.960 anywhere else you listen, and as always on the Bloomberg 0:00:34.040 --> 0:00:35.880 Terminal and the Bloomberg Business app. 0:00:36.360 --> 0:00:38.760 And we begin this hour with stocks rising as risk 0:00:38.800 --> 0:00:42.720 appetite returns after a stretch of volatility. Amy Silverman of 0:00:42.840 --> 0:00:46.360 RBC Capital Markets writing, there's actually a lot more hedging. 0:00:46.800 --> 0:00:48.840 There's a lot more demand for hedging than is currently 0:00:48.880 --> 0:00:51.479 priced into the market. The risk of missing out is 0:00:51.520 --> 0:00:54.240 almost worse than the risk of a drawdown. And I'm 0:00:54.280 --> 0:00:56.760 pleased to say that. Amy joins us now and Amy. 0:00:56.800 --> 0:00:58.600 Matt and I were talking to you about a week ago, 0:00:58.840 --> 0:01:01.640 in the midst of some of this downturn in the market. 0:01:01.760 --> 0:01:05.440 You were talking about the shadow hedges, the desire for hedges, 0:01:05.720 --> 0:01:08.000 and the places people were turning to get them. How 0:01:08.040 --> 0:01:10.880 has that evolved over the past week as markets have recovered. 0:01:11.240 --> 0:01:15.120 I think part of the problem that I had described 0:01:15.280 --> 0:01:17.800 was this idea that there is actually a lot of 0:01:17.840 --> 0:01:21.280 concern about the fragility of a lot of the trades 0:01:21.319 --> 0:01:23.880 because they're not only related to AI, they're related to 0:01:23.920 --> 0:01:26.640 the concentration risk that you see in the mag seven. 0:01:27.080 --> 0:01:30.240 But obviously this year it's been much more about that 0:01:30.440 --> 0:01:33.560 upcrash being something that investors have to be concerned about, 0:01:33.560 --> 0:01:35.720 that fear of missing out, And so when you do 0:01:35.800 --> 0:01:37.720 get the down days, you get a little bit more 0:01:37.760 --> 0:01:39.680 pile on and you do see that in the SKW 0:01:39.720 --> 0:01:43.200 in the market, meaning that downside demand remains quite sticky. 0:01:43.440 --> 0:01:46.560 Even when you reverse the market moves and you have 0:01:46.680 --> 0:01:51.000 more updates, that SKEW hasn't quite changed as much, because again, 0:01:51.040 --> 0:01:53.720 that fragility is at top of investors' minds. 0:01:53.960 --> 0:01:56.720 What about the treatment of tech amy because before it 0:01:56.800 --> 0:01:59.000 was a market that was pricing in all the AI 0:01:59.120 --> 0:02:02.160 winners all be that that they would all be winners. 0:02:02.280 --> 0:02:03.480 Things have started to change. 0:02:03.480 --> 0:02:05.640 We're looking at another day of Nvidia losing in the 0:02:05.640 --> 0:02:08.680 pre market and Alphabet gaining. Has the treatment of these 0:02:08.680 --> 0:02:11.040 stocks shifted? Has that narrative and the way we price 0:02:11.080 --> 0:02:12.520 it in started to move. 0:02:13.040 --> 0:02:15.440 Yeah, and I think to some degree that actually might 0:02:15.480 --> 0:02:18.320 be a good thing. So one thing we look at 0:02:18.400 --> 0:02:22.360 isn't just inter stock market dispersion, but obviously inter mag 0:02:22.440 --> 0:02:25.639 seven dispersion. And so you know, on a day where 0:02:25.680 --> 0:02:28.280 you have Nvidia going down but Google going up, and 0:02:28.320 --> 0:02:31.480 obviously that story is tied to each other, then it 0:02:31.560 --> 0:02:35.440 becomes maybe something that's also more diversified, because one of 0:02:35.440 --> 0:02:39.840 the biggest concerns has been if correlation rises because it's 0:02:39.880 --> 0:02:43.640 all one big trade, it's quite incestuous. That fragility is 0:02:43.680 --> 0:02:45.679 not good for the market, even in a time when 0:02:45.720 --> 0:02:47.560 things are going up. So if it is the case 0:02:47.600 --> 0:02:49.679 that one is more of a diversifier for the other 0:02:50.080 --> 0:02:52.920 and you don't get that spiking correlation, I know, for 0:02:53.040 --> 0:02:56.120 our investor base when they're thinking about weltility and hedging, 0:02:56.200 --> 0:02:59.720 that is a big component in the market market structure 0:02:59.760 --> 0:03:02.840 that you know, it's very key for how they diversify 0:03:02.880 --> 0:03:03.520 the portfolio. 0:03:03.680 --> 0:03:08.120 Don't we necessarily have less correlation now among the mag seven? Right, 0:03:08.120 --> 0:03:11.480 they were all working together, investing in each other. It 0:03:11.520 --> 0:03:13.680 was a very incestuous circular. 0:03:15.240 --> 0:03:15.800 Economy. 0:03:15.840 --> 0:03:20.799 And now you've got one against the other. It seems 0:03:20.840 --> 0:03:25.040 like it would reduce correlation and maybe even reduce concentration risk. 0:03:25.760 --> 0:03:30.000 Yeah, exactly exactly, Matt. So it's that diversifier aspect that 0:03:30.120 --> 0:03:32.320 is important. I mean, I think the thing is there's 0:03:32.320 --> 0:03:37.240 still that incestuousness hasn't fully gone away, you know, and 0:03:37.240 --> 0:03:40.640 that's not just in terms of what kapax investments are, 0:03:40.680 --> 0:03:44.080 but obviously there's issues on the credit side as well 0:03:44.120 --> 0:03:47.480 that investors are watching for. So I don't think, you know, 0:03:47.560 --> 0:03:50.720 this alleviates the whole picture. But I actually think even 0:03:50.760 --> 0:03:53.440 though it's like Google is going up in videos going down, 0:03:53.520 --> 0:03:56.160 the way that investors are thinking about it is we 0:03:56.240 --> 0:03:59.360 at least my implied correlation on the intermag seven is 0:03:59.400 --> 0:04:02.160 something that could be a diversifier. So this whole market 0:04:02.480 --> 0:04:03.680 isn't all reaching at once. 0:04:04.120 --> 0:04:04.400 Amy. 0:04:04.400 --> 0:04:08.240 How strong does the retail bid look to you right now? 0:04:08.240 --> 0:04:12.080 Because we finally had more than five percent draw down, 0:04:12.160 --> 0:04:16.520 just barely, but it happened from peak to trough last week. 0:04:17.000 --> 0:04:19.600 Our retailer is going to continue to be buying the dip. 0:04:19.680 --> 0:04:21.599 Is that still a huge presence in this market? 0:04:23.279 --> 0:04:25.320 So it has wane and you've seen that in some 0:04:25.360 --> 0:04:28.839 of the sentiment markers, Matt. But it is something that 0:04:29.080 --> 0:04:31.320 you know, we're watching very closely because I think one 0:04:31.320 --> 0:04:33.919 thing we've talked about is the reason that investors have 0:04:34.080 --> 0:04:38.120 that institutional misters, just to be clear, have been afraid of, 0:04:38.200 --> 0:04:40.000 you know, really piling it on hedges. That's why we 0:04:40.000 --> 0:04:43.000 call it shadow hedging, is that retail bid has continued 0:04:43.000 --> 0:04:46.160 to stay in the market. Now there are these extraneous forces, 0:04:46.200 --> 0:04:49.800 so for instance, how cryptocurrency is doing, how other factors 0:04:49.839 --> 0:04:53.120 are doing that are actually quite correlated to that retail bid. 0:04:53.240 --> 0:04:56.279 So we are watching those extraneous factors closely as well, 0:04:56.560 --> 0:04:59.159 because it is interesting to see when you you know, 0:04:59.240 --> 0:05:03.240 like crypto is always supposed to be this hedge asset 0:05:03.279 --> 0:05:05.960 that in reality is a risk asset, and then it's 0:05:06.000 --> 0:05:08.360 also very correlated to that bit that you see in 0:05:08.400 --> 0:05:11.320 n ASTEC. So I think those things, even though they're 0:05:11.360 --> 0:05:14.560 not directly tied into the stock market, are very important 0:05:14.600 --> 0:05:16.599 as factors for sentiment amy. 0:05:16.760 --> 0:05:18.720 In terms of finding other places to hedge, there was 0:05:18.720 --> 0:05:21.640 a goldmn Socks report about what hedge funds are shorting, 0:05:21.720 --> 0:05:24.800 and one of them that's at historic levels, albeit at 0:05:24.839 --> 0:05:27.880 a relatively low level, is utilities two point three percent 0:05:27.880 --> 0:05:30.680 of free float. Again, that doesn't sound terribly exciting, but 0:05:30.880 --> 0:05:33.440 that is the most in history. I wonder if that 0:05:33.800 --> 0:05:37.240 could be interpreted as a hedge for AI given the 0:05:37.440 --> 0:05:40.440 close proximity and the correlations we've been talking about, And 0:05:40.720 --> 0:05:43.039 if it is a hedge, does that make sense as one? 0:05:43.400 --> 0:05:45.320 Yeah, I think it does. You know, when you think 0:05:45.360 --> 0:05:48.479 about what everything comes down to and what could be 0:05:48.520 --> 0:05:52.400 the bottleneck for large parts of the AI trade, it's 0:05:52.560 --> 0:05:56.480 just getting enough compute right, and that has implications not 0:05:56.640 --> 0:05:58.400 just for the United States, but if you think kind 0:05:58.400 --> 0:06:03.240 of bigger, it's also geo politically, the race that is 0:06:03.279 --> 0:06:06.080 going on right now between China and the United States. Again, 0:06:06.120 --> 0:06:09.240 it's that ability to do compute and what bottlenecks happen. 0:06:09.640 --> 0:06:11.800 The only issue I see when you think about doing 0:06:11.800 --> 0:06:14.839 it through utilities is one, there's just not that much 0:06:14.920 --> 0:06:18.560 market cap relative to other sectors. And two you know 0:06:18.600 --> 0:06:22.719 that liquidity is traditionally not as I guess free flowing 0:06:22.800 --> 0:06:25.440 as other sectors. So if that you think about that 0:06:25.480 --> 0:06:27.240 as your hedge, I don't know if that is the 0:06:27.279 --> 0:06:31.599 cleanest that you could have versus you know, outright owning something. 0:06:31.320 --> 0:06:33.919 As a hedge in AI underliars. 0:06:33.720 --> 0:06:37.240 Stay with US multile impex savanas. Coming up off to this. 0:06:46.200 --> 0:06:48.960 Joining US now is Wendy Schiller, directman of the Tomman 0:06:49.040 --> 0:06:53.520 Institute for American Politics and Policy at Brown University. Wendy, 0:06:53.600 --> 0:06:57.400 these negotiations as they're happening in the background, we're getting 0:06:57.680 --> 0:07:02.280 deer earnings that look really poor because of suffering consumer confidence, 0:07:02.520 --> 0:07:06.920 that plunging elections, That affordability was at the forefront. How 0:07:07.040 --> 0:07:10.240 is this coloring the administration's approach as it talks to 0:07:10.280 --> 0:07:13.640 President Sheet as it negotiates with Europe in trade deals? 0:07:14.800 --> 0:07:18.080 Hello, Donnie, I think that the President's got to balance 0:07:18.160 --> 0:07:23.280 his international clout in delivering for the domestic US political market, 0:07:23.360 --> 0:07:27.680 economically and politically, and he's getting so much pressure on 0:07:27.880 --> 0:07:31.880 all fronts, and it's now reflected in his poll numbers. 0:07:31.880 --> 0:07:35.520 On the economy, Republicans typically have an advantage managing the economy. 0:07:35.640 --> 0:07:37.240 They still have an advantage. 0:07:36.840 --> 0:07:40.600 Over the Democrats on managing the economy, but the President 0:07:40.680 --> 0:07:42.600 Trump's managing of the economy have flipped. 0:07:42.760 --> 0:07:44.960 They were more confident now he's underwater. 0:07:45.600 --> 0:07:48.160 In particular, there's also some dynamics of the midterms in 0:07:48.200 --> 0:07:53.120 twenty six Iowa, for example, big farm state relies on exports. 0:07:53.280 --> 0:07:55.280 They have a Senate race, and that. 0:07:55.200 --> 0:07:57.600 Senate race looked you know, maybe i was gone red, 0:07:57.920 --> 0:07:59.239 but now it looks like Iowa. 0:07:59.320 --> 0:08:00.840 The winds are change a little bit there. 0:08:00.840 --> 0:08:03.240 They've got a strong contender on the Democratic side, and 0:08:03.280 --> 0:08:05.480 we'll see who emerges on the Republican side. 0:08:05.600 --> 0:08:07.520 And that's something that's concerning the Senate. 0:08:07.600 --> 0:08:10.240 John fun in particular, has really been in the President's 0:08:10.240 --> 0:08:14.440 ear on agriculture, exports and China. An understanding that this 0:08:14.520 --> 0:08:18.120 doesn't just affect President Trump now, it could affect the 0:08:18.240 --> 0:08:20.440 standing of the Republicans in the Senate in twenty six. 0:08:20.440 --> 0:08:20.920 Yeah, for sure. 0:08:20.960 --> 0:08:23.120 I mean, we see that farmers don't have enough money 0:08:23.120 --> 0:08:26.560 to order more John Deere equipment. They lowered their profit 0:08:26.640 --> 0:08:28.320 forecasts for next year. 0:08:29.040 --> 0:08:30.640 We have seen already. 0:08:30.360 --> 0:08:33.560 Automakers that have had to put production on hold because 0:08:33.600 --> 0:08:37.520 they're not getting enough rare earths. And then President Trump 0:08:37.520 --> 0:08:40.320 has this call with si in which the Chinese call 0:08:40.360 --> 0:08:43.559 out Taiwan as a major sticking point. It's not even 0:08:43.679 --> 0:08:48.559 in the US President's readout, making it look like we're 0:08:48.600 --> 0:08:53.400 downplaying the important Taiwan issue in order to appease the Chinese. 0:08:53.440 --> 0:08:54.960 Are we losing this trade war. 0:08:56.520 --> 0:08:59.920 Well, Matt, I mean at the moment the American peak, 0:09:01.040 --> 0:09:03.880 as evidenced by a number of different polls across different 0:09:03.920 --> 0:09:07.160 polling companies that sort of tilt one way or the 0:09:07.200 --> 0:09:11.319 other politically, that the American public things we are that 0:09:11.400 --> 0:09:16.920 the tariffs are now being blamed for affordability, high prices, layoffs. 0:09:17.160 --> 0:09:19.120 And this is something I think the Jouman Institution did 0:09:19.120 --> 0:09:21.080 not anticipate when. 0:09:20.960 --> 0:09:23.160 He forged the sort of mantra that he was going. 0:09:23.080 --> 0:09:25.960 To stick up for America, get a better deal, negotiate 0:09:26.000 --> 0:09:28.080 a better deal, and bring manufacturing home. 0:09:28.160 --> 0:09:31.760 But every economist with a pulse warned the president about this. 0:09:33.520 --> 0:09:36.800 Well, Donald Trump marches to his own tune, his own drummer, 0:09:36.840 --> 0:09:40.640 and he will emerge claiming credit for deals. China did 0:09:40.679 --> 0:09:44.080 agree to buy more soybeans about a month ago after John. 0:09:43.880 --> 0:09:46.240 Fune pleaded with the President on this, But it still 0:09:46.240 --> 0:09:47.959 looks like we're gonna have to pay out subsidies to 0:09:48.000 --> 0:09:49.839 the farmers from the US Treasury to. 0:09:49.840 --> 0:09:53.319 Make up for these losses, and the President pivots, as 0:09:53.360 --> 0:09:54.560 we know all the time. 0:09:54.960 --> 0:09:56.000 The question is. 0:09:55.960 --> 0:09:59.880 How will the Republicans in Congress treat this going into 0:09:59.880 --> 0:10:03.520 the midterms in twenty six because American public is starting 0:10:03.559 --> 0:10:06.920 to blame the Republican Party and that's bad for them. 0:10:07.280 --> 0:10:10.920 So how effective are they in persuading Donald Trump to 0:10:11.000 --> 0:10:12.480 maybe renegotiate deals. 0:10:12.520 --> 0:10:15.679 But right now it looks like China is still driving 0:10:15.679 --> 0:10:17.480 the bus on this and. 0:10:17.480 --> 0:10:20.719 Affecting because of our geopolitics in the United States, how 0:10:20.720 --> 0:10:23.040 we elect people, which states are important. 0:10:23.360 --> 0:10:24.400 You know, they understand that. 0:10:24.480 --> 0:10:27.520 In China, they understand which markets are ware and how 0:10:27.559 --> 0:10:28.840 that affects our politics. 0:10:28.840 --> 0:10:31.040 And twenty six looms really. 0:10:30.880 --> 0:10:36.840 Large is is the president too focused on international relations 0:10:36.920 --> 0:10:39.480 when you know, we need someone to deal with the 0:10:39.520 --> 0:10:42.800 problem of skyrocketing health costs here. Apparently they're going to 0:10:42.880 --> 0:10:47.719 lay out another two year extension to these really inefficient 0:10:48.120 --> 0:10:51.480 ACA subsidies, which the Republicans really wanted to avoid, but 0:10:51.520 --> 0:10:54.080 now it looks like we're just going to keep, you know, 0:10:54.120 --> 0:10:55.000 paying these bills. 0:10:56.720 --> 0:10:59.520 Well, Matt, I mean every president of this, you know, 0:10:59.520 --> 0:11:02.400 when things are going a little bit south domestically, every 0:11:02.480 --> 0:11:04.960 president turns the page towards foreign relations. 0:11:05.000 --> 0:11:07.360 It's not a partisan thing, it's not a Trump thing. 0:11:07.960 --> 0:11:09.440 But this is what I'm watching. I'm watching. 0:11:09.480 --> 0:11:12.240 Will the Republicans, particularly in the House, come with the President. 0:11:12.520 --> 0:11:15.359 He clearly wants to sign an extension of these tax subsidies. 0:11:15.440 --> 0:11:17.800 He doesn't want to have millions of people who can't 0:11:17.800 --> 0:11:19.800 afford health insurance on his watch next year. 0:11:20.120 --> 0:11:21.400 That's what he wants to avoid. 0:11:21.640 --> 0:11:23.600 But the House is making noises that they don't want 0:11:23.600 --> 0:11:26.760 to do it, that they are uncomfortable doing it. Does 0:11:26.800 --> 0:11:29.360 he still have the same sway with the House GOP 0:11:29.559 --> 0:11:31.480 that he has appeared to have all year long. 0:11:31.840 --> 0:11:33.720 That's what I'm watching over the next couple of weeks 0:11:33.720 --> 0:11:34.120 in into. 0:11:34.040 --> 0:11:38.200 January, stay with us multple imperg Savannah's coming up off 0:11:38.200 --> 0:11:38.440 to this. 0:11:47.840 --> 0:11:51.520 Barbara Duran of BD eight Capital Partners, writing for now, 0:11:51.679 --> 0:11:54.600 the AI play is still the place to be. Avoid 0:11:54.679 --> 0:11:59.400 small cap staples, stick to quality large cap secular growers 0:11:59.480 --> 0:12:02.400 over six and Barbarrown please to say it joins us now. 0:12:02.440 --> 0:12:04.839 Really wonderful to see you this morning. Nice to see you, Danny. 0:12:04.880 --> 0:12:08.240 I'm interested by the fact you're not looking at cyclicals 0:12:08.320 --> 0:12:11.560 right now or small caps, especially since there's this hope 0:12:11.559 --> 0:12:13.560 that we're going to get fed cuts, maybe you add 0:12:13.559 --> 0:12:15.719 in fiscal stimulus and there's this reignition. 0:12:15.840 --> 0:12:17.600 Why are you still ignoring those sectors. 0:12:17.800 --> 0:12:19.600 Well, I think the FED cut that we may have 0:12:19.720 --> 0:12:22.720 one more now, but the economy has been doing fine 0:12:23.040 --> 0:12:26.080 without aggressive FED cuts, so that we've had about one 0:12:26.120 --> 0:12:28.360 and a half percentage points in the last fourteen months. 0:12:28.520 --> 0:12:30.360 But we've seen a number of false starts in terms 0:12:30.400 --> 0:12:32.360 of cyclicals and the small caps. And I see the 0:12:32.360 --> 0:12:34.800 small caps really as a trade because even with rates 0:12:34.840 --> 0:12:37.160 coming down a little bit, you still have forty percent 0:12:37.240 --> 0:12:39.360 of the russel two thousand don't make money. 0:12:39.600 --> 0:12:42.520 They have much higher cost of capital. 0:12:42.200 --> 0:12:45.240 Than return on investment typically, and unless rates come down 0:12:45.280 --> 0:12:47.920 significantly on the long end, I don't see them being helped. 0:12:47.920 --> 0:12:50.439 So I see that a's continuing as a trade. And 0:12:50.440 --> 0:12:52.440 in cyclicals, I think you have to be very selective. 0:12:52.480 --> 0:12:54.720 And industrials, for instance, I mean you want to be 0:12:54.880 --> 0:12:57.520 I think doing industrials that are play on the AI 0:12:57.600 --> 0:13:01.440 build out and infrastructure, automation, robotics, that sort of thing. 0:13:01.840 --> 0:13:04.720 But it's hard to see a big reignition here of 0:13:04.760 --> 0:13:07.640 the economy. I think we're in for good growth, decent growth, 0:13:07.640 --> 0:13:10.120 and certainly we've seen that with the forward earnings guidance 0:13:10.120 --> 0:13:12.760 from the companies who just reported a great quarter and 0:13:12.840 --> 0:13:16.280 certainly do have the big beautiful tax bill, you know, 0:13:16.320 --> 0:13:19.319 the incentives coming there for CAPEX, and also bank de 0:13:19.400 --> 0:13:22.920 regulation which should free up more capital to lend and spend. 0:13:23.320 --> 0:13:24.760 So next year is setting up nicely. 0:13:24.920 --> 0:13:26.520 I'm kind of confused why that's kind of like a 0:13:26.640 --> 0:13:30.000 muddling along versus a growth reognition, because all of those 0:13:30.080 --> 0:13:31.480 do seem like powerful forces. 0:13:31.480 --> 0:13:33.679 Barbara, Yeah, well, I think it is muddling long. 0:13:33.720 --> 0:13:36.360 And we've seen this, you know, this year, even with 0:13:36.600 --> 0:13:40.320 high supposedly high interest rates that are quote restrictive. 0:13:39.920 --> 0:13:42.520 You've seen the economy do okay. And the earnings. 0:13:42.600 --> 0:13:44.520 We just had the ninth quarter in a row where 0:13:44.559 --> 0:13:47.280 earnings were up. In fact, they were better than expected, 0:13:47.320 --> 0:13:50.760 some thirteen plus percent versus eight percent expected, you know, 0:13:50.800 --> 0:13:53.160 but it's still you know, we talked about AI. That 0:13:53.280 --> 0:13:55.120 is still the driver. I mean, if you look at 0:13:55.120 --> 0:13:58.240 what the MAG seven did in earnings x Meta, I 0:13:58.280 --> 0:13:59.760 take Meta out of the mix because they had a 0:13:59.760 --> 0:14:02.800 six team billion dollars one time charge, right, But looking 0:14:02.840 --> 0:14:05.720 at that the overall MAGS seven, we're up thirty percent, 0:14:06.240 --> 0:14:08.959 you know, in in aggregate earnings, and that's versus a 0:14:09.040 --> 0:14:11.480 twenty eight plus percent for the last four quarters. 0:14:11.480 --> 0:14:12.880 So that's still the driver here. 0:14:13.040 --> 0:14:16.560 I wonder about the massive capex plans that these companies 0:14:16.559 --> 0:14:18.640 have you mentioned meta right, they want to spend I 0:14:18.640 --> 0:14:25.280 think one hundred billion dollars next year. Is that depreciation scary? 0:14:25.320 --> 0:14:27.520 As Michael Burry warns us about the fact that they're 0:14:27.520 --> 0:14:29.760 going to buy all these chips which may be worth 0:14:30.040 --> 0:14:32.040 you know, twenty percent less the moment they drive them 0:14:32.080 --> 0:14:32.600 off the lot. 0:14:33.040 --> 0:14:34.240 Yeah, I mean the depreciation. 0:14:34.360 --> 0:14:36.880 What's what I really keep my eye on is the demand, 0:14:37.000 --> 0:14:39.440 you know, and if you're looking at very credible sources, 0:14:39.480 --> 0:14:43.080 you know see this market data infrastructure, data center infrastructure 0:14:43.120 --> 0:14:45.920 going five times what it is now, So that really 0:14:45.960 --> 0:14:48.360 speaks to the demand that's out there. So I mean 0:14:48.360 --> 0:14:50.600 he's arguing about what are the real earnings this and that, 0:14:50.640 --> 0:14:52.600 But to me, it's really what's the demand, what's the 0:14:52.640 --> 0:14:55.320 revenue potential? And that is very real. I mean, just 0:14:55.320 --> 0:14:57.880 saw an acceleration there. I think that continues. We are 0:14:57.960 --> 0:15:00.640 still in the early stages of this AI. So the 0:15:00.720 --> 0:15:03.920 concern about you know, we're in a bubble, there's too 0:15:04.000 --> 0:15:05.000 much money being spent. 0:15:05.600 --> 0:15:06.360 I don't think at all. 0:15:06.360 --> 0:15:08.360 You're going to see increasing usage of AI as it 0:15:08.360 --> 0:15:09.000 gets developed. 0:15:10.400 --> 0:15:13.800 When do we get that revenue because I you know, 0:15:13.960 --> 0:15:18.440 started this job covering tech companies as Cisco was, you know, 0:15:18.520 --> 0:15:21.280 the the darling of the market, and we were spending 0:15:21.320 --> 0:15:23.240 as much as we could to lay fiber for the 0:15:23.280 --> 0:15:26.720 Internet in the late nineties early two thousands, and lo 0:15:26.880 --> 0:15:30.680 and behold, the revenue didn't come quickly enough. Cisco fell 0:15:30.840 --> 0:15:34.720 and only now, like last week, have you made money 0:15:34.760 --> 0:15:37.240 on Cisco if you bought it in nineteen ninety nine 0:15:37.280 --> 0:15:37.880 or two thousand. 0:15:38.000 --> 0:15:38.520 No, that's true. 0:15:38.520 --> 0:15:40.400 And I think so much though, is about the timing, 0:15:40.760 --> 0:15:42.760 you know, because some of the great tech companies in 0:15:42.760 --> 0:15:45.240 the past you had great long runs and made a 0:15:45.240 --> 0:15:47.280 lot of money. But all things do come to an end. 0:15:47.280 --> 0:15:50.800 There's innovation, you know, there's markets mature. I think the 0:15:50.840 --> 0:15:53.640 AI play this is so big and what we're seeing. 0:15:53.720 --> 0:15:56.240 I always mentioned Meta as the poster child, you know 0:15:56.240 --> 0:15:58.520 for what's happy in AI. They have been very early 0:15:58.560 --> 0:16:00.600 on applying it to their own business. Then you've seen 0:16:00.600 --> 0:16:03.960 the results very quickly. They even increase their user base, 0:16:04.040 --> 0:16:07.280 the engagement is up. They've really increased their improved their 0:16:07.280 --> 0:16:10.000 ad targeting, so they've improved more dollars and you've got 0:16:10.160 --> 0:16:13.160 very early penetration. AI is still you've heard it from 0:16:13.200 --> 0:16:15.440 Palo Alto last week. They talked about it in their 0:16:15.440 --> 0:16:19.200 AI security. It's still scaling up because their customers and 0:16:19.240 --> 0:16:22.200 big enterprises are still figuring out how they're going to 0:16:22.280 --> 0:16:24.640 you know, what AI they need and how they're. 0:16:24.440 --> 0:16:25.080 Going to apply it. 0:16:25.120 --> 0:16:26.480 So this is going to be You're going to see 0:16:26.520 --> 0:16:28.920 these increases in productivity over the next year or two. 0:16:29.440 --> 0:16:32.680 Exact timing hard to know, but it will just increase. 0:16:32.720 --> 0:16:35.240 I mean, look at chat GPT. I don't know about 0:16:35.320 --> 0:16:37.280 you all, but I use it all the time, and 0:16:37.360 --> 0:16:39.760 I increase my usage as I discover more things. And 0:16:39.800 --> 0:16:42.720 they have six hundred million users a week, and so 0:16:43.080 --> 0:16:44.920 this is really still and I talked to most of 0:16:44.960 --> 0:16:46.840 my friends. They're like, yeah, I should try it. There's 0:16:46.840 --> 0:16:49.800 still so much more to come, both consumer and enterprise. 0:16:50.240 --> 0:16:52.360 It definitely feels like something we're waiting for, right Like, 0:16:52.400 --> 0:16:55.200 when do the other companies benefit from productivity? I was 0:16:55.240 --> 0:16:58.160 looking at a Brooking study that was published recently. We're 0:16:58.200 --> 0:17:01.080 only nineteen percent of their respond in said that AI 0:17:01.480 --> 0:17:07.280 increase their productivity. Only four percent said it significantly increased productivity. 0:17:07.480 --> 0:17:10.639 Roberts your point, we're still trying to figure this out. 0:17:10.880 --> 0:17:13.239 So as you're looking for who benefits from AI, who 0:17:13.320 --> 0:17:15.280 can use it, where does productivity come from? 0:17:15.440 --> 0:17:17.840 Is it just too early to say? I think it is. 0:17:18.200 --> 0:17:18.679 I think it is. 0:17:18.720 --> 0:17:21.760 I think we see different companies that are benefiting. But 0:17:21.880 --> 0:17:24.520 I think over the next twelve to eighteen months there's 0:17:24.520 --> 0:17:27.240 going to be some dramatic stories to be told about 0:17:27.240 --> 0:17:31.080 the improvements. And you look at we're early on autonomous driving, 0:17:31.320 --> 0:17:34.400 we're early on the deployment of robotics. I mean, for instance, 0:17:34.440 --> 0:17:37.600 you know, you've got Amazon, you know has a million 0:17:37.720 --> 0:17:40.400 robots out there, and so they're very early on the curve, 0:17:40.440 --> 0:17:42.920 but a lot of people are not. And so those 0:17:42.920 --> 0:17:44.719 are things that over the next year. And again it's 0:17:44.760 --> 0:17:47.200 about competition. That's where we're seeing so much spending going 0:17:47.240 --> 0:17:49.520 to this because people know, I've got to do that. 0:17:49.760 --> 0:17:52.280 When you see people like Meta or Amazon who are 0:17:52.280 --> 0:17:55.639 already early users of all this and the productivity gains 0:17:55.680 --> 0:17:58.840 they are seeing. As a company management, we've got to 0:17:58.840 --> 0:18:00.880 do it too, and that requires spending up front. 0:18:01.600 --> 0:18:03.240 Isn't there a chance though, that they go too far 0:18:03.280 --> 0:18:05.960 with that spending and at some point it no longer 0:18:05.960 --> 0:18:08.360 gets rewarded by the market. You're already starting to see 0:18:08.359 --> 0:18:10.560 that in some of the hyper scalers, right, does that 0:18:10.600 --> 0:18:11.119 continue on? 0:18:11.960 --> 0:18:14.120 There's always that concern, and I think it's a legitimate 0:18:14.119 --> 0:18:16.399 concern because at some point you can and this is 0:18:16.720 --> 0:18:18.720 think in a capitalist economy, you know, you don't have 0:18:18.760 --> 0:18:21.560 central planning, so everybody's rushing, you know, to go up 0:18:21.600 --> 0:18:24.600 to the profitability typical margins come down. But I think 0:18:24.640 --> 0:18:27.560 where we are, the demand is so explosive. It's not 0:18:27.640 --> 0:18:31.240 a six to nine month phenomenon. So at some point 0:18:31.560 --> 0:18:33.880 that will be a factor. Right now, you know, as 0:18:33.920 --> 0:18:36.359 far as the eye can see, you've just got this demand, 0:18:36.359 --> 0:18:38.800 this virtuous circle that will just keep going and going. 0:18:39.000 --> 0:18:40.679 But it is something you always have to watch. We 0:18:40.760 --> 0:18:43.920 know that the lifespan of industry is what happens. You 0:18:43.960 --> 0:18:46.560 attract players, they all want to make money, and eventually 0:18:46.560 --> 0:18:48.840 you can overbuild. I don't think it's like fiber though, 0:18:48.920 --> 0:18:50.919 you know, fiber was much more limited. That was a 0:18:51.040 --> 0:18:55.760 very specific application and very prone to being overbuilt. 0:18:55.840 --> 0:18:57.040 This is just yeah, so much. 0:18:57.040 --> 0:18:59.080 At the end of the day, data centers are just 0:18:59.080 --> 0:19:01.840 like empty boxes. Those can't really be used for anything 0:19:01.840 --> 0:19:04.399 else besides data centers, at least on the infrastructure side, 0:19:04.520 --> 0:19:05.600 there's a chance we overbuild. 0:19:05.640 --> 0:19:11.000 Now you could mind bitcoin, Yes, so true, but. 0:19:11.000 --> 0:19:12.439 That is that is a place that it feels like 0:19:12.480 --> 0:19:13.840 we could go too far, and a lot of money 0:19:13.880 --> 0:19:14.760 has been put into that. 0:19:15.119 --> 0:19:17.639 Yeah, no, it is. It is real estate. In the end, 0:19:17.800 --> 0:19:20.480 you know what's going on there. But at the moment, again, 0:19:20.840 --> 0:19:23.639 well everybody's watching that. It's like we're watching private credit. 0:19:23.920 --> 0:19:26.399