WEBVTT - JPMorgan Investment-Banking Fees Drop on Underwriting Miss 0:00:02.720 --> 0:00:10.559 Bloomberg Audio Studios, podcasts, radio news. You're listening to the 0:00:10.600 --> 0:00:14.560 Bloomberg Intelligence Podcast. Catch us live weekdays at ten am 0:00:14.600 --> 0:00:17.840 easterne on Apple, Cocklay and Android Auto with the Bloomberg 0:00:17.920 --> 0:00:21.040 Business App. Listen on demand wherever you get your podcasts, 0:00:21.360 --> 0:00:23.560 or watch us live on YouTube. 0:00:24.120 --> 0:00:25.439 Herman Chan has his CFA. 0:00:25.560 --> 0:00:29.000 He's also been monitoring the bank earnings and JP Morgan 0:00:29.040 --> 0:00:32.040 got us started today, although the stock, as John mentioned, 0:00:32.120 --> 0:00:34.000 is off by two and a half percent and banks 0:00:34.040 --> 0:00:36.239 are the worst performing group in the S and P 0:00:36.440 --> 0:00:41.600 five hundred. So Herman big takeaway for JP Morgan's latest results. 0:00:41.360 --> 0:00:43.920 Yeah, takeaway since that the performance was strong, So we 0:00:43.960 --> 0:00:48.519 were talking about really strong markets, trading revenue year every year, investment, 0:00:48.560 --> 0:00:51.240 Magina game with Solo lights, and then the balance sheet 0:00:51.320 --> 0:00:53.720 lending growth was really good. 0:00:53.760 --> 0:00:55.280 So solid quarter all around. 0:00:55.880 --> 0:00:59.720 Guidance was in line with what they had expected heading 0:00:59.720 --> 0:01:03.600 into quarter, but a couple of lingering things. Higher expenses 0:01:04.040 --> 0:01:07.000 for twenty twenty six as they continue to invest for growth. 0:01:07.280 --> 0:01:10.800 We're talking about nine billion dollar increase in expenses, and 0:01:10.840 --> 0:01:13.520 then the credit card cap is still lingering. 0:01:13.240 --> 0:01:15.720 Across the JP Morgan and the large banks. 0:01:16.080 --> 0:01:19.280 Herman, since everyone's been talking about the proposed cap by 0:01:19.280 --> 0:01:21.960 President Trump on credit card fees. What was the messaging 0:01:22.040 --> 0:01:24.160 from JP Morgan on the impact of that. 0:01:24.480 --> 0:01:29.520 Yeah, the messaging was that this would have drastic repercussions 0:01:29.520 --> 0:01:33.640 not only for JP Morgan, the banking industry, consumers, and 0:01:33.680 --> 0:01:37.040 overall GDP growth. So you think of credit as being 0:01:37.080 --> 0:01:45.080 the lubricator for economic activity, and when you slash card rates, 0:01:45.560 --> 0:01:49.840 that really will reduce the credit availability for a lot 0:01:49.880 --> 0:01:52.000 of JP Morgan's customers. So you can think of a 0:01:52.200 --> 0:01:55.480 large swath of them just not having credit card usage 0:01:55.800 --> 0:01:57.800 going forward under a ten percent rate cap. 0:01:58.160 --> 0:02:00.840 And JP Morgan is obviously a lot more sensitive to 0:02:01.120 --> 0:02:04.000 a potential cap on credit card interest rates than some 0:02:04.080 --> 0:02:05.680 of the other big banks. I mean, this is a 0:02:05.720 --> 0:02:09.440 bank that just purchased the Apple credit card business, or 0:02:09.560 --> 0:02:11.640 is taking on that Apple credit card business that Goldman 0:02:11.680 --> 0:02:12.400 Sachs gave up. 0:02:12.600 --> 0:02:13.080 That's right. 0:02:13.120 --> 0:02:17.640 So that's adding about two point that's adding twenty billion bounces, 0:02:17.639 --> 0:02:18.079 give or take. 0:02:18.200 --> 0:02:21.079 So that's something that will be helpful for them. 0:02:21.120 --> 0:02:25.120 But really, JP Morgan is one of the more active 0:02:25.240 --> 0:02:28.640 credit card issuers in our large cap bank coverage. 0:02:29.000 --> 0:02:30.280 City is the first, followed. 0:02:30.000 --> 0:02:33.760 By JP Morgan and then Bank of America's City and 0:02:34.840 --> 0:02:36.160 US Bank lag after that. 0:02:36.960 --> 0:02:39.280 What's the thing, Hermann that stood out most to you 0:02:39.320 --> 0:02:43.480 today from JP Morgan's results. Was there anything significant compared 0:02:43.480 --> 0:02:44.320 to prior quarters. 0:02:44.480 --> 0:02:45.480 Yeah? 0:02:44.880 --> 0:02:48.240 Really the takeaways were just how forthfore they were on 0:02:48.280 --> 0:02:53.360 the credit card rate cap issue, just reminding everybody that 0:02:54.080 --> 0:02:56.720 this is not just the JP Morgan and banks issue. 0:02:56.760 --> 0:02:58.239 This is going to have. 0:02:58.200 --> 0:03:03.799 Really big repercussions for economic activity in the United States 0:03:03.800 --> 0:03:08.760 and really will hurt some of the less advantage consumers 0:03:08.840 --> 0:03:14.000 that I think really this this ratecap would intend to help. 0:03:14.840 --> 0:03:17.880 And then the second one is really just they double 0:03:17.960 --> 0:03:21.560 down on the expense outlook, which surprised some folks when 0:03:21.600 --> 0:03:25.800 they unveiled that late last year. So nine billion dollars 0:03:25.840 --> 0:03:30.520 in higher expenses really driven by gross inflation, healthcare costs, etc. 0:03:31.120 --> 0:03:33.880 I want to go back to the President's effort to 0:03:34.000 --> 0:03:37.040 cap credit card interest rates, because from what I understand, 0:03:37.720 --> 0:03:40.119 it's not something that he has the authority to do. 0:03:40.320 --> 0:03:42.920 This is something that Congress has to pass. Yet he's 0:03:42.960 --> 0:03:46.120 talking about this January twentieth deadline. How does that work? 0:03:46.160 --> 0:03:48.400 I mean, he's calling for it, but calling for it 0:03:48.440 --> 0:03:49.680 doesn't mean that he can do it. 0:03:49.800 --> 0:03:52.320 Right, So a lot of it seems to be posturing 0:03:52.400 --> 0:03:57.360 at this point of just pushing himself to address some 0:03:57.400 --> 0:04:02.080 of the broader affordability issues. Is heading into midterm elections, 0:04:02.320 --> 0:04:03.160 is how I view it. 0:04:03.560 --> 0:04:06.200 So why don't the banks point that out or not 0:04:06.840 --> 0:04:08.480 point that part out, but call them ount on the 0:04:08.480 --> 0:04:10.400 fact that this would take an act of Congress to 0:04:10.440 --> 0:04:11.640 do anything about it, right. 0:04:11.560 --> 0:04:12.560 Well, they're not. 0:04:13.480 --> 0:04:17.880 There was a question posed during the earnings call if 0:04:17.920 --> 0:04:20.719 somebody from the administration had reached out the JP Morgan, 0:04:21.520 --> 0:04:25.240 and they said that, as far as they know, nobody has, 0:04:25.640 --> 0:04:28.760 so a lot of it seems to be just tweeting 0:04:28.800 --> 0:04:32.240 by edicts at this point. So we'll see if that 0:04:32.520 --> 0:04:36.440 shakes out to be something else more definitive. But we 0:04:36.440 --> 0:04:38.839 would expect the banks to push back and really wait 0:04:38.920 --> 0:04:43.720 for any congressional legislation to come in to really cap 0:04:43.760 --> 0:04:44.240 the rates. 0:04:44.760 --> 0:04:48.720 Herman, this slowed down and investment banking revenue down five 0:04:48.760 --> 0:04:50.960 percent from a year earlier. Do you expect that to 0:04:51.000 --> 0:04:54.160 pick up later this year given the expectation for more 0:04:54.200 --> 0:04:54.719 deal making. 0:04:54.960 --> 0:04:55.719 Yeah, that's right. 0:04:56.120 --> 0:04:57.920 The fourth quarter seems to be more of a blip 0:04:58.120 --> 0:05:02.240 to us fourth quarter. We're investment making usually is seasonally 0:05:02.279 --> 0:05:07.240 soft given the holiday season. It sounds like from their 0:05:07.240 --> 0:05:09.240 comments that a few deals were pushed out into the 0:05:09.279 --> 0:05:12.440 first quarter, So these deals didn't. 0:05:12.120 --> 0:05:13.799 Go away, they were just delayed. 0:05:14.680 --> 0:05:18.080 And looking ahead into twenty twenty six, we see robust 0:05:18.120 --> 0:05:21.719 activity investment banking. You can just think about the IPO 0:05:21.839 --> 0:05:25.919 calendar that that's really firming up. And then for M 0:05:25.920 --> 0:05:29.839 and A activity, we think lower rates will help. This 0:05:30.080 --> 0:05:36.160 deregulation effort by the administration is helping increase consolidation not 0:05:36.240 --> 0:05:39.080 only in banks but in other industries as well. And 0:05:39.120 --> 0:05:42.520 then we've seen a sponsor activity of private agreeplayers really 0:05:42.600 --> 0:05:46.839 jump back in. So those are really strong factors for 0:05:46.960 --> 0:05:49.200 improving investment banking activity next year. 0:05:49.480 --> 0:05:51.320 So, Herman, how does this set us up for the 0:05:51.360 --> 0:05:53.680 other big bank earnings which we'll be reporting over the. 0:05:53.640 --> 0:05:54.400 Next day or two. 0:05:54.480 --> 0:05:57.800 How are you seeing how is this changing expectations for say, 0:05:57.920 --> 0:05:59.920 City Bank of America Goldman Sacks Morgans. 0:06:00.440 --> 0:06:03.400 That's right, So JP Morgan really set a high bar 0:06:03.480 --> 0:06:08.120 for markets and trading, so about seventeen percent year over year. 0:06:08.520 --> 0:06:10.719 That's gonna be tough for others to meet. 0:06:10.800 --> 0:06:15.160 But that's where the bogie is at this point in 0:06:15.240 --> 0:06:18.159 terms of investment banking, we probably expect some others to 0:06:18.200 --> 0:06:20.360 do a bit better than the year over year decline 0:06:20.400 --> 0:06:21.200 for JP Morgan. 0:06:21.320 --> 0:06:22.880 So more to come on that front. 0:06:24.040 --> 0:06:26.880 Stay with us. More from Bloomberg Intelligence coming up after this. 0:06:30.560 --> 0:06:34.240 You're listening to the Bloomberg Intelligence Podcast. Catch us live 0:06:34.320 --> 0:06:37.400 weekdays at ten am Eastern on Apple, Coarplay and Android 0:06:37.440 --> 0:06:40.720 Auto with the Bloomberg Business app. Listen on demand wherever 0:06:40.800 --> 0:06:43.920 you get your podcasts, or watch us live on YouTube. 0:06:45.120 --> 0:06:47.640 Let's shift gears and talk about big tech because the 0:06:47.680 --> 0:06:52.400 news this week is that Apple is partnering up with 0:06:53.040 --> 0:06:57.440 Google Alphabet, the parent company, to power the iPhone's AI 0:06:57.480 --> 0:07:01.520 technology using Gemini. Gemini, of course, has become kind of 0:07:01.560 --> 0:07:04.560 the you know, the software that everyone's looking at right 0:07:04.600 --> 0:07:07.320 now is a big winner in the whole AI battle. 0:07:07.520 --> 0:07:10.320 So let's bring in on rog Rana, our Bloomberg Intelligence 0:07:10.400 --> 0:07:14.360 technology analyst on this and onnrag. You know, people are 0:07:14.360 --> 0:07:20.840 already crowning Google as a winner here in the AI battleground, 0:07:21.240 --> 0:07:24.840 and it definitely looks like Gemini is picking up momentum, 0:07:24.840 --> 0:07:29.280 picking up market share. What specific advantages does Google bring 0:07:29.400 --> 0:07:32.440 with the Gemini to Apple, So you. 0:07:32.480 --> 0:07:34.840 Know, we'll give first of all credit to Mark German 0:07:34.920 --> 0:07:37.600 from breaking this back in November when he said, you know, 0:07:37.680 --> 0:07:40.720 Google will work closely with Apple or on this model. 0:07:41.000 --> 0:07:44.640 Now we go back in history. You know, Apple doesn't 0:07:44.680 --> 0:07:48.320 have that big of their own foundational model on which 0:07:48.400 --> 0:07:51.480 it's running or it's supposed to run some of these technologies. 0:07:51.800 --> 0:07:54.080 But Apple and Google go back long way. They have 0:07:54.120 --> 0:07:58.760 a very very good agreement on search, which pays Apple 0:07:58.960 --> 0:08:02.000 billions of dollars. So you know, there was some legal 0:08:02.040 --> 0:08:05.240 issue around it. So we always knew that once that 0:08:05.320 --> 0:08:08.320 legal issue goes away, Apple may be working closely with 0:08:08.360 --> 0:08:12.560 Google to basically outsource a lot of their foundational models 0:08:12.600 --> 0:08:15.640 into the technology that they have. They have. Now it's 0:08:15.720 --> 0:08:18.600 possible that the next CD upgrade, which is most likely 0:08:18.640 --> 0:08:22.120 going to be in the March April timeframe, could be 0:08:22.160 --> 0:08:24.440 that one big moment that we are all looking for 0:08:24.480 --> 0:08:26.880 Apple to finally come out and say that okay, you know, 0:08:26.920 --> 0:08:29.360 we are not a laggard in AI, that they also 0:08:29.400 --> 0:08:30.640 have a product that's pretty good. 0:08:31.680 --> 0:08:34.880 Ana rag I saw a tweet actually from the official 0:08:34.920 --> 0:08:38.480 Google account announcing this deal, and Elon Musk replied. He 0:08:38.600 --> 0:08:42.439 said that this seems like an unreasonable concentration of power. 0:08:42.600 --> 0:08:46.960 For Google obviously has a vested interest here, given you know, 0:08:47.040 --> 0:08:50.400 his participation in xai. But does he have a point. 0:08:50.440 --> 0:08:52.720 What are the regulatory risks around this deal? 0:08:53.880 --> 0:08:55.520 Yeah, I mean he won't have a point if his 0:08:55.559 --> 0:08:57.439 model was being used at that point. So I mean 0:08:57.760 --> 0:09:01.360 everybody's trying to pitch Apple to use that model. But 0:09:01.760 --> 0:09:03.760 you know, at the end of the day, Apple actually, 0:09:03.760 --> 0:09:06.040 for the first time, if you go back a year 0:09:06.040 --> 0:09:08.120 and a half ago, they used open ai. I mean 0:09:08.160 --> 0:09:10.000 you can still use open ai when you go to 0:09:10.040 --> 0:09:12.440 sea and ask a question and it can take you 0:09:12.520 --> 0:09:14.960 out of there. But for Apple, it has to be 0:09:15.040 --> 0:09:20.000 integrated within the iOS, within the software, but they won't 0:09:20.040 --> 0:09:23.319 do it to an outside vendor where they don't control 0:09:23.559 --> 0:09:26.400 the data. So what Apple's going to do here, They're 0:09:26.400 --> 0:09:28.880 going to use the foundational models from Google, but they're 0:09:28.880 --> 0:09:30.559 going to run a lot of that either on the 0:09:30.640 --> 0:09:33.920 device or their own private, private cloud data centers, which 0:09:33.960 --> 0:09:37.280 means they will still protect the privacy of that question 0:09:37.960 --> 0:09:41.280 and not let it have access to other players as well. 0:09:41.559 --> 0:09:43.560 Yeah, the privacy angle is really big for Apple. 0:09:43.600 --> 0:09:46.080 It's kind of its mark of distinction here among the 0:09:46.080 --> 0:09:50.240 big tech players. ANRAG Apple has seen this exodus of 0:09:50.400 --> 0:09:53.880 talent AI talent going to other big tech companies in 0:09:53.960 --> 0:09:58.640 recent months. Does this multi year deal with alphabet with 0:09:58.720 --> 0:10:01.560 Google change any of the Does that stanch the bleeding 0:10:01.679 --> 0:10:02.000 at all? 0:10:02.960 --> 0:10:06.000 Yeah? For me, it does only because I am now 0:10:06.040 --> 0:10:09.000 buying the model outright from somebody who's doing all the 0:10:09.000 --> 0:10:12.160 hard work. So I'm not in the business of model development. 0:10:12.400 --> 0:10:14.480 If I can use the best model that's out there 0:10:14.520 --> 0:10:16.880 into my product and I pay them some money, and 0:10:16.920 --> 0:10:20.320 the humor amount is about a billion dollars a year, 0:10:20.480 --> 0:10:23.040 which is, to be honest, nothing compared to how many 0:10:23.040 --> 0:10:26.000 billions these companies are spending to come up with their 0:10:26.000 --> 0:10:28.960 own large language model. And that's what actually Apple said 0:10:29.000 --> 0:10:31.080 in the search case and says, I'm not in the 0:10:31.080 --> 0:10:33.680 search business. If Google has the best search I will 0:10:33.679 --> 0:10:36.760 outsource that technology into my products from them. 0:10:37.200 --> 0:10:40.120 Stay with us. More from Bloomberg Intelligence coming up after this. 0:10:43.880 --> 0:10:47.560 You're listening to the Bloomberg Intelligence podcast. Catch us live 0:10:47.640 --> 0:10:50.760 weekdays at ten am Eastern on Apple Coarclay, and Android 0:10:50.760 --> 0:10:54.040 Auto with the Bloomberg Business app. Listen on demand wherever 0:10:54.120 --> 0:10:57.640 you get your podcasts, or watch us live on YouTube. 0:10:58.280 --> 0:11:01.840 Scarlettfu and Alex Samanova for Paul Sweeney. I'm kind of 0:11:01.920 --> 0:11:04.360 tired of shopping. I've done so much of it in 0:11:04.400 --> 0:11:06.360 the past month or so, overwhelmed. 0:11:06.880 --> 0:11:08.840 I don't believe that for a second. 0:11:09.920 --> 0:11:10.880 I'm not into it. 0:11:10.880 --> 0:11:13.679 It's allowing to walk into a store these days. 0:11:13.960 --> 0:11:16.080 Yeah, price plants are way too high. 0:11:16.120 --> 0:11:18.000 And then also I'm just tired of it because I 0:11:18.040 --> 0:11:19.959 did so much of it in the last couple of weeks. 0:11:20.000 --> 0:11:23.120 But maybe technology will help me. Maybe it'll make it easier, 0:11:23.160 --> 0:11:25.040 It'll take some of the friction out. We want to 0:11:25.040 --> 0:11:27.839 bring in Travis Hesse, a CEO of Commerce which is 0:11:27.880 --> 0:11:31.400 treated on the NASAC under the ticker CMRC. Travis are 0:11:31.440 --> 0:11:33.440 going to tell us how AI is changing shopping, but 0:11:33.800 --> 0:11:37.199 in particular, this has to do with what Google has 0:11:37.240 --> 0:11:40.319 been doing with this thing called a universal Commerce protocol. 0:11:41.120 --> 0:11:45.720 Explain how that will make my shopping needs easier. 0:11:46.000 --> 0:11:49.440 Well, given the extent of which Google plays in all 0:11:49.440 --> 0:11:52.319 of our lives and how people think of them, it's 0:11:52.400 --> 0:11:56.040 essentially setting the foundation and the standard for brands and 0:11:56.080 --> 0:11:59.400 retailers and other organizations to be able to scale agentic 0:11:59.440 --> 0:12:03.320 commerce across all of the surfaces that Google AI would hit. 0:12:03.400 --> 0:12:07.160 So think of the contextualized conversations everyone's having through answer 0:12:07.160 --> 0:12:11.640 engines today. Those conversations are then dynamically recommending not only 0:12:11.679 --> 0:12:15.080 experiences in facts, but certainly shopping and brands based on 0:12:15.200 --> 0:12:18.120 the enrichment of data against those surfaces. And Google is 0:12:18.200 --> 0:12:21.240 enabling a standard by which consumers would be able to 0:12:21.240 --> 0:12:25.400 buy in a standardized, safe, secure way. As it serves 0:12:25.520 --> 0:12:29.120 up discovery, you'll be able to buy seamlessly across those surfaces. 0:12:28.920 --> 0:12:31.480 Travis, can you walk us through how AI will change 0:12:31.520 --> 0:12:34.880 the shopping experience in practical terms, Let's say I'm looking 0:12:34.920 --> 0:12:37.479 for a bag? How do I go about using your platform? 0:12:37.760 --> 0:12:40.760 The consumer behavior has changed more than anything. So the 0:12:40.800 --> 0:12:43.800 amount of eyeballs and behavior going to the answer engines 0:12:43.840 --> 0:12:47.120 is probably the fastest adopting technology we've seen. So because 0:12:47.200 --> 0:12:49.800 the consumers are going there and they're having these conversations, 0:12:50.480 --> 0:12:52.880 brands and retailers are having to respond in kind, and 0:12:53.160 --> 0:12:55.280 they tend to have a fair amount of brand ethos, 0:12:55.800 --> 0:12:57.960 so they're very concerned about where they show up, how 0:12:57.960 --> 0:12:59.280 they show up, and who they show up next to. 0:13:00.240 --> 0:13:01.720 Is it the cornerstone of this, So a lot of 0:13:01.720 --> 0:13:04.080 the foundational stuff you're hearing about now is to set 0:13:04.160 --> 0:13:05.960 up that trust. So when you're shopping for that bag, 0:13:06.480 --> 0:13:09.560 it's giving you a response that you can objectively trust. 0:13:09.600 --> 0:13:12.240 It's not serving up who paid the most to be 0:13:12.320 --> 0:13:15.080 listed or injected in that conversation. The thesis behind this 0:13:15.559 --> 0:13:19.000 is based on your own behavior within those answer engines, 0:13:19.040 --> 0:13:21.959 and of course other behavior within Google, whether that's through 0:13:22.000 --> 0:13:24.680 Chrome or through other Google products. They have a unique 0:13:24.720 --> 0:13:28.000 advantage there because of the amount of surfaces an individual 0:13:28.160 --> 0:13:32.040 might use to synthesize that in a hyper personalized way. 0:13:32.080 --> 0:13:34.400 So think of it as not only shopping either, but 0:13:34.400 --> 0:13:36.760 think of it going in your favorite store and someone 0:13:36.800 --> 0:13:39.199 as you walk in can scan a code and immediately 0:13:39.200 --> 0:13:41.720 knows what you own, what you like, where you're going, 0:13:41.760 --> 0:13:43.840 what you're looking for, so they could curate something for 0:13:43.880 --> 0:13:47.360 you immediately, where that friction is removed through the process. 0:13:47.480 --> 0:13:50.120 Think of that virtually in this particular capacity. That's the 0:13:50.120 --> 0:13:50.640 future state. 0:13:50.840 --> 0:13:54.160 So all the information that Google has on me, they 0:13:54.160 --> 0:13:56.040 are also selling. Who are they selling it to? 0:13:56.200 --> 0:13:57.199 Oh that's not from me? 0:14:00.280 --> 0:14:02.160 I mean the reason I ask is because it depends 0:14:02.200 --> 0:14:04.440 on me logging into Google for them to give me 0:14:04.440 --> 0:14:07.520 those personalized recommendations. If I don't choose to log in, 0:14:07.600 --> 0:14:09.520 then I end up with the equivalent of a Google 0:14:09.559 --> 0:14:10.800 search on a public computer. 0:14:11.040 --> 0:14:11.319 You do. 0:14:11.400 --> 0:14:13.920 I think the models are changing. Certainly the old model 0:14:14.080 --> 0:14:17.800 was you're searching for terms, and certainly organizations are optimizing 0:14:18.200 --> 0:14:20.560 through SEO to be listed organically at the top, or 0:14:20.600 --> 0:14:24.280 they're through paid search basted. That still exists today, certainly 0:14:24.280 --> 0:14:26.120 in this behavior that drives that. But where this is 0:14:26.160 --> 0:14:30.160 evolving to is called GEO, so generative optimization, which is 0:14:30.200 --> 0:14:33.160 really going to be a combination of structured data, which 0:14:33.200 --> 0:14:36.160 is like product catalog data, skew, color size, all those 0:14:36.240 --> 0:14:41.080 dynamics dimensions coupled with unstructured data, which are brand guidelines, 0:14:41.440 --> 0:14:45.560 call center, transcripts, blogs, articles, all the things that would 0:14:45.600 --> 0:14:49.760 contextualize that brand and that product, if you will. That's 0:14:49.800 --> 0:14:52.720 being enriched oftentimes by us on the fetonomic side, which 0:14:52.760 --> 0:14:55.520 is part of our portfolio, and then syndicated across these 0:14:55.520 --> 0:14:59.600 different surfaces, be that Google or Open AI or Microsoft 0:15:00.080 --> 0:15:02.400 or whomever. And it's going to continue to expand as 0:15:02.440 --> 0:15:04.240 the channels have expanded over the last several years. 0:15:04.440 --> 0:15:08.680 Travis, we have the National Retail Federation conference underway. Believe 0:15:08.680 --> 0:15:11.200 today's the last day what kind of AI trends and 0:15:11.240 --> 0:15:13.520 retail trends. Have you been monitoring out of it? 0:15:13.520 --> 0:15:17.880 It's all about AI this year. That's what's hot exactly 0:15:17.920 --> 0:15:20.280 this right. I think there's two sides of the spectrum. 0:15:20.320 --> 0:15:22.520 There's a lot of buzz, which is exciting, but at 0:15:22.560 --> 0:15:24.720 the same time, it's confusing a lot of people because 0:15:25.040 --> 0:15:27.760 everyone is doing everything and it's hard to kind of 0:15:27.760 --> 0:15:31.320 reconcile what's meaningful to the business. I think for larger 0:15:31.400 --> 0:15:35.360 organizations that we work with, brand manufacturers and retailers, trust, 0:15:35.480 --> 0:15:38.720 brand ethos, and security are top of mind. So for them, 0:15:39.040 --> 0:15:41.280 it's less about the sizzle, it's more about the stake 0:15:41.400 --> 0:15:43.600 and the foundational elements. I think the importance of the 0:15:43.640 --> 0:15:46.920 Google announcement is they are taking a very pragmatic approach 0:15:46.960 --> 0:15:49.560 to this, to lay the tracks so this can scale 0:15:49.600 --> 0:15:53.360 and scale properly with trust, with security, and most importantly 0:15:53.400 --> 0:15:56.480 with a frictionless experience for customers. Because the brands don't 0:15:56.520 --> 0:15:58.280 want to lose that customer data. They still want to 0:15:58.320 --> 0:16:01.760 maintain that experience. Even though they're not fully controlling the 0:16:01.800 --> 0:16:04.080 surface by which they're showing up against. It's not like 0:16:04.120 --> 0:16:06.960 they're showing up against their own websites, so they're in 0:16:07.000 --> 0:16:09.520 a surface they don't completely control. They're controlling part of 0:16:09.560 --> 0:16:12.320 it through the data enrichment in syndication, but they're not 0:16:12.320 --> 0:16:16.360 controlling all of it. So they're very, very concerned that 0:16:16.360 --> 0:16:18.520 that experience is a positive one and a frictionalist one. 0:16:18.560 --> 0:16:21.560 Otherwise it has ramifications. It drives cost up and call centers, 0:16:21.560 --> 0:16:25.280 it drives maybe negative customer experience, it drives arts exactly 0:16:25.360 --> 0:16:27.720 we're in turns bad things on the back end. So 0:16:27.760 --> 0:16:30.480 that's the reconciliation people are trying to have. But yes, 0:16:30.760 --> 0:16:33.440 the EI has sucked all the oxygen out of the 0:16:33.480 --> 0:16:34.760 room at Javits. And it's a big rule. 0:16:35.120 --> 0:16:37.840 What will AI not change for shoppers? 0:16:40.280 --> 0:16:44.840 But will it not change for shoppers? I think the 0:16:44.920 --> 0:16:48.040 behavior in the surfaces by which they're going to they're 0:16:48.080 --> 0:16:50.160 still going to go to. Right. I think new ones 0:16:50.200 --> 0:16:54.320 are showing up. I think the expectation personalization has been 0:16:54.360 --> 0:16:58.040 promised for a long time. I think there's some hesitancy 0:16:58.080 --> 0:17:01.000 there around the trust. So I think forcoming the trust 0:17:01.080 --> 0:17:04.640 aspect of this and having that reinforced through continued behavior. 0:17:04.680 --> 0:17:06.480 The shopping is very new. There was a big rush 0:17:06.480 --> 0:17:09.760 to do this in holiday and the experiences weren't great, 0:17:10.200 --> 0:17:11.960 so I think there's a little bit of hesitation. I 0:17:11.960 --> 0:17:14.600 think you'll see a much more robust offering this holiday season. 0:17:15.480 --> 0:17:18.400 Stay with us. More from Bloomberg Intelligence coming up after this. 0:17:22.119 --> 0:17:25.840 You're listening to the Bloomberg Intelligence podcast. Catch us Live 0:17:25.920 --> 0:17:29.000 weekdays at ten am Eastern on Apple, Cocklay and Android 0:17:29.040 --> 0:17:32.320 Auto with the Bloomberg Business App. Listen on demand wherever 0:17:32.400 --> 0:17:35.480 you get your podcasts, or watch us live on YouTube. 0:17:36.720 --> 0:17:39.720 Delta is the first airline to report earnings as well, 0:17:39.760 --> 0:17:44.560 and according to the stock market reaction investors not to impress. 0:17:44.840 --> 0:17:47.240 The shares of Delta are down about two point eight 0:17:47.240 --> 0:17:50.000 percent after it's full year forecast came a little bit 0:17:50.080 --> 0:17:53.160 lighter than anticipated. Let's bring in George Ferguson right now. 0:17:53.200 --> 0:17:56.359 He is our senior Aerospace, Defense and Airlines analyst, joining 0:17:56.400 --> 0:18:00.639 us from Princeton, New Jersey. George, you know, at the 0:18:00.640 --> 0:18:05.440 start of twenty twenty five, Delta sounded very optimistic about demand, 0:18:05.640 --> 0:18:09.359 about what pricing looked like, and the forecast that it 0:18:09.440 --> 0:18:11.840 gave today kind of stands in contrast to that. 0:18:13.400 --> 0:18:16.240 Yeah, I mean, at Bashlom, I think it was a 0:18:16.240 --> 0:18:18.639 little reticent to get too deep into what he sees 0:18:19.400 --> 0:18:21.400 happening in twenty twenty six. He said, you know, there'll 0:18:21.400 --> 0:18:25.920 be surprises much like they received in twenty twenty five. 0:18:26.560 --> 0:18:27.520 And you know, I just. 0:18:27.480 --> 0:18:31.840 Think as people look at the results, you know, really 0:18:31.920 --> 0:18:34.760 what we saw here from Delta was a continuation of 0:18:35.359 --> 0:18:39.240 the you know, the premium and the loyalty revenue are 0:18:39.680 --> 0:18:42.640 rolling in strongly, rolling in I think sort of five 0:18:42.680 --> 0:18:45.840 to seven percent if I recall correctly, you know above 0:18:45.880 --> 0:18:50.399 sort of GDP growth rates. But the back of the airplane, 0:18:50.480 --> 0:18:52.919 you know, they call it the main cabin or basic 0:18:53.000 --> 0:18:56.359 economy that's there was that revenue was down seven percent 0:18:56.400 --> 0:18:59.240 in a quarter where Delta was growing a couple percent. 0:18:59.359 --> 0:19:02.800 And so now I think we still see this premium trend, 0:19:03.240 --> 0:19:04.639 and I think we're going to see a lot of 0:19:04.680 --> 0:19:09.280 growth in premium seats this year. We've got Southwest converting 0:19:09.320 --> 0:19:12.679 to to more of a full service carriers premium, Delta 0:19:12.720 --> 0:19:16.440 plans to go premium, United plans to go premium. Alaska, 0:19:16.560 --> 0:19:19.439 Jet Blue, everyone wants to go premium. So I think 0:19:19.480 --> 0:19:23.760 there's probably some concern in the marketplace that maybe premium 0:19:23.840 --> 0:19:28.200 gets crowded and pushes closer to that main cabin kind 0:19:28.200 --> 0:19:31.800 of kind of fair rather than main cabin coming up. 0:19:32.320 --> 0:19:34.199 Maybe too much supply, we'll see. 0:19:34.280 --> 0:19:37.600 By the way, at Bastian, the CEO of Delta Airlines, 0:19:37.600 --> 0:19:41.919 we'll be joining Bloomberg Television surveillance on Wednesday, that is tomorrow, 0:19:42.000 --> 0:19:44.080 of course, at eight fifteen am Eastern Time, for a 0:19:44.080 --> 0:19:46.680 live interview from Delta's headquarters in Atlanta. 0:19:47.160 --> 0:19:49.400 And something that stood out to me Scarlett was that 0:19:49.560 --> 0:19:52.760 Delta said they're bracing for risk to their forecast, noting 0:19:52.920 --> 0:19:57.919 the geopolitical environment, whether it's international or domestic policy. George, 0:19:57.960 --> 0:20:00.679 is this unusual for them to issue the kind of warning. 0:20:02.200 --> 0:20:03.639 I mean again, I think we're at the beginning of 0:20:03.640 --> 0:20:07.720 the year and management teams like the caveat things right, 0:20:07.760 --> 0:20:11.000 and so I guess what I would say is we 0:20:11.040 --> 0:20:15.080 had plenty of geopolitical challenges in twenty twenty five. You know, 0:20:15.119 --> 0:20:19.760 we were watching transatlantic demand closely because you've got a 0:20:19.760 --> 0:20:21.800 war raging in Ukraine. It's been doing that for a 0:20:21.800 --> 0:20:26.320 bunch of years now. Didn't seem to slow down that demand. 0:20:26.359 --> 0:20:29.320 That demand seemed to do okay some days. I wonder 0:20:29.320 --> 0:20:32.200 if maybe there's more risk domestically right. One of the 0:20:32.240 --> 0:20:35.320 other things we're watching is the president wants to cap 0:20:35.359 --> 0:20:37.639 interest rates for the credit card companies at ten percent. 0:20:38.160 --> 0:20:40.840 Loyalty through the MX program brings a lot of money 0:20:40.880 --> 0:20:46.320 in for Delta, definitely a source of their competitive advantage. 0:20:46.560 --> 0:20:48.800 And I think if you're capping interest rates, I think 0:20:49.160 --> 0:20:51.280 some of those credit card programs have to change and 0:20:51.320 --> 0:20:53.920 that would hurt some of those loyalty programs. So there's 0:20:54.040 --> 0:20:56.120 I mean, there's risk all over the place all the time. Again, 0:20:56.160 --> 0:20:59.320 the geopolitical didn't seem to hurt demand as much as 0:20:59.320 --> 0:21:01.040 we would expect in twenty twenty five. 0:21:01.200 --> 0:21:03.000 Right, It kind of always threatens to hurt demand, but 0:21:03.040 --> 0:21:07.960 in the end, people still prioritize traveling and paying for traveling. George, 0:21:08.080 --> 0:21:10.240 I'm looking at some headlines coming out on Delta at 0:21:10.280 --> 0:21:13.040