1 00:00:00,120 --> 00:00:06,760 Speaker 1: Bloomberg Audio Studios, podcasts, radio news. 2 00:00:09,840 --> 00:00:12,400 Speaker 2: This is Bloomberg Daybreak Weekend, our global look at the 3 00:00:12,400 --> 00:00:15,080 Speaker 2: top stories in the coming week from our Daybreak anchors 4 00:00:15,080 --> 00:00:17,560 Speaker 2: all around the world, and straight ahead on the program, 5 00:00:17,560 --> 00:00:19,759 Speaker 2: a look ahead to tech earnings from some of the 6 00:00:19,800 --> 00:00:23,599 Speaker 2: Magnificent Seven. Also a monetary policy decision from the Fed. 7 00:00:24,239 --> 00:00:25,840 Speaker 2: I'm Tom Busby in New York. 8 00:00:26,040 --> 00:00:28,680 Speaker 1: I'm Calline Hecker heavy London, where we're assessing what is 9 00:00:28,720 --> 00:00:32,000 Speaker 1: at stake at the next Bank of England policy meeting. 10 00:00:32,400 --> 00:00:35,680 Speaker 3: I'm dek Prisner looking ahead to earnings from Apple and 11 00:00:35,800 --> 00:00:39,760 Speaker 3: Samsung and what these companies will say about artificial intelligence. 12 00:00:42,479 --> 00:00:46,440 Speaker 4: That's all straight ahead on Bloomberg Daybreak Weekend on Bloomberg 13 00:00:46,479 --> 00:00:48,960 Speaker 4: E Loove Them three own New York, Bloomberg ninety nine 14 00:00:49,000 --> 00:00:52,400 Speaker 4: to one, Washington, DC, Bloomberg one O six one, Boston, 15 00:00:52,479 --> 00:00:57,280 Speaker 4: Bloomberg nine sixty, San Francisco, DAB Digital Radio, London, Sirius 16 00:00:57,400 --> 00:01:00,680 Speaker 4: XM one nineteen and around the world on Blue Bomberg Radio, 17 00:01:00,760 --> 00:01:03,000 Speaker 4: dot com and via the Bloomberg Business app. 18 00:01:07,000 --> 00:01:08,800 Speaker 2: Good day to you. I'm Tom Busby, and we begin 19 00:01:08,880 --> 00:01:12,120 Speaker 2: today's program with the Federal Reserve FED officials holding a 20 00:01:12,160 --> 00:01:15,720 Speaker 2: two day policy meeting this week, issuing a monetary decision 21 00:01:16,040 --> 00:01:18,880 Speaker 2: on Wednesday. Now this coming Friday, we also get the 22 00:01:18,959 --> 00:01:21,360 Speaker 2: job data in the US for the month of July, 23 00:01:21,440 --> 00:01:24,520 Speaker 2: is something that could impact Fed policy moving forward. For 24 00:01:24,560 --> 00:01:27,000 Speaker 2: more on what to expect, we're joined by Michael McKee, 25 00:01:27,040 --> 00:01:32,400 Speaker 2: Bloomberg International Economics and Policy correspondent Michael seven meetings in 26 00:01:32,440 --> 00:01:35,440 Speaker 2: a row the Federal Open Markets Committee, leaving rates unchanged. 27 00:01:35,720 --> 00:01:38,119 Speaker 2: What do you expect to see on Wednesday? 28 00:01:38,360 --> 00:01:40,840 Speaker 5: Well, happy anniversary. By the way, it was July of 29 00:01:40,880 --> 00:01:45,319 Speaker 5: twenty twenty three when the FED finally stopped raising interest rates. 30 00:01:45,680 --> 00:01:48,840 Speaker 5: So we've been higher for longer? Is it for long enough? 31 00:01:49,400 --> 00:01:52,400 Speaker 5: Probably not this week. The Fed has not given us 32 00:01:52,440 --> 00:01:55,160 Speaker 5: an indication that they're going to cut rates this week, 33 00:01:55,320 --> 00:01:58,360 Speaker 5: so there is no reason to think that they will 34 00:01:58,360 --> 00:02:01,200 Speaker 5: because they don't like to surprise them Mark. However, the 35 00:02:01,240 --> 00:02:05,200 Speaker 5: big expectation is for them to signal a September rate 36 00:02:05,240 --> 00:02:07,880 Speaker 5: cut in the statement and then Jay Powell to follow 37 00:02:07,920 --> 00:02:12,000 Speaker 5: it up in his news conference, and that would probably 38 00:02:12,040 --> 00:02:14,080 Speaker 5: produce much the same as a rate cut, in the 39 00:02:14,120 --> 00:02:17,160 Speaker 5: sense that the markets will then start discounting a rate cut, 40 00:02:17,880 --> 00:02:21,440 Speaker 5: Yields will go down, and it's it's sort of the 41 00:02:21,480 --> 00:02:22,519 Speaker 5: same effect. 42 00:02:23,000 --> 00:02:25,840 Speaker 2: Even if they don't cut rates this time, it's like 43 00:02:26,160 --> 00:02:29,120 Speaker 2: a dec in hockey. Now, the hopes, the bets for 44 00:02:29,240 --> 00:02:32,920 Speaker 2: September rate cut obviously being bolstered by some pretty encouraging data. 45 00:02:33,000 --> 00:02:35,440 Speaker 2: Let's talk about that. On Friday, the PCE. 46 00:02:36,080 --> 00:02:40,160 Speaker 5: Yeah, Friday, we got the PCE inflation numbers which showed 47 00:02:40,320 --> 00:02:44,320 Speaker 5: a sort of ongoing decline. The core rate didn't change 48 00:02:44,360 --> 00:02:46,600 Speaker 5: on a year over year basis two point six percent, 49 00:02:46,960 --> 00:02:49,639 Speaker 5: but we just did see the headline number go down 50 00:02:49,639 --> 00:02:51,960 Speaker 5: to two point five percent, and that puts you in 51 00:02:52,040 --> 00:02:56,800 Speaker 5: the within range of the two percent target. And remember 52 00:02:56,840 --> 00:02:59,280 Speaker 5: that j Powell and others on the Fed have said 53 00:02:59,280 --> 00:03:02,240 Speaker 5: they don't want to wait to start cutting rates until 54 00:03:02,280 --> 00:03:04,640 Speaker 5: they get to two percent, and he had sort of 55 00:03:04,680 --> 00:03:07,920 Speaker 5: suggested at his last press conference that it was a 56 00:03:08,040 --> 00:03:09,520 Speaker 5: range of two to two and a half. 57 00:03:09,600 --> 00:03:11,160 Speaker 2: So so we're in that ring. 58 00:03:11,240 --> 00:03:13,320 Speaker 5: We're sort of in that range right now. 59 00:03:13,760 --> 00:03:16,680 Speaker 2: That's good. And earlier this past week, second quarter GDP 60 00:03:17,080 --> 00:03:19,079 Speaker 2: grew by much larger than expected. 61 00:03:19,440 --> 00:03:22,040 Speaker 5: There were a number of people going into the week 62 00:03:22,680 --> 00:03:25,760 Speaker 5: and during the week who were suggesting maybe the Fed 63 00:03:25,840 --> 00:03:28,520 Speaker 5: needed to cut rates in July because otherwise they'd be 64 00:03:28,560 --> 00:03:31,600 Speaker 5: behind the curve, but the stronger that expected GDP numbers 65 00:03:31,639 --> 00:03:35,560 Speaker 5: two point eight percent, a big increase from the first quarter, 66 00:03:36,160 --> 00:03:40,680 Speaker 5: sort of reassure them that they are they don't have 67 00:03:40,720 --> 00:03:44,080 Speaker 5: to rush, that the economy is not on the brink 68 00:03:44,480 --> 00:03:47,640 Speaker 5: or the precipice of recession. That's not to say things 69 00:03:47,640 --> 00:03:51,760 Speaker 5: can't get worse. This coming Friday, after the FED meeting, 70 00:03:51,760 --> 00:03:53,680 Speaker 5: we get the jobs report, which is too bad for 71 00:03:53,720 --> 00:03:56,480 Speaker 5: the Fed. I'm sure they'd like it beforehand. But the 72 00:03:56,600 --> 00:04:00,600 Speaker 5: unemployment rate there is if it's for it's point one percent, 73 00:04:00,640 --> 00:04:02,320 Speaker 5: now it goes up to four point two percent, then 74 00:04:02,320 --> 00:04:05,200 Speaker 5: that triggers the famous Sam rule that suggests that we're 75 00:04:05,200 --> 00:04:09,680 Speaker 5: getting close to a recession, and that will scare the markets. 76 00:04:09,760 --> 00:04:12,160 Speaker 5: That will scare the horses, and we may get a 77 00:04:12,160 --> 00:04:13,080 Speaker 5: reaction in the markets. 78 00:04:13,200 --> 00:04:14,880 Speaker 2: That's the barometer four point two percent. 79 00:04:15,200 --> 00:04:18,159 Speaker 5: Well it's not four point two percent, it's it's a 80 00:04:18,160 --> 00:04:22,800 Speaker 5: bit complicated, but basically the three month moving average. Subtract 81 00:04:22,839 --> 00:04:27,279 Speaker 5: from that the lowest three month moving average of the 82 00:04:27,279 --> 00:04:30,040 Speaker 5: past twelve months, and you get a number, and then 83 00:04:30,240 --> 00:04:34,680 Speaker 5: if it's greater than half a percent, then it has 84 00:04:34,800 --> 00:04:38,359 Speaker 5: always forecast recession in the past. Now and it would 85 00:04:38,360 --> 00:04:40,919 Speaker 5: only take going to four point two percent to get 86 00:04:40,960 --> 00:04:41,599 Speaker 5: that rate. 87 00:04:42,160 --> 00:04:44,640 Speaker 2: Well, let's stay on it on the jobs report this Friday. 88 00:04:44,680 --> 00:04:48,160 Speaker 2: So now in June a little softer but still pretty solid, 89 00:04:48,200 --> 00:04:50,719 Speaker 2: two hundred and six thousand jobs. What do you expect 90 00:04:50,720 --> 00:04:51,320 Speaker 2: to see then in. 91 00:04:51,320 --> 00:04:54,680 Speaker 5: July, Well, the forecast is for one hundred and seventy 92 00:04:54,680 --> 00:04:58,080 Speaker 5: five thousand, But the last three four months we have 93 00:04:58,200 --> 00:05:01,000 Speaker 5: had forecasts in that range and they've come in stronger 94 00:05:01,040 --> 00:05:04,920 Speaker 5: than that. So I don't know if you're a trend 95 00:05:04,960 --> 00:05:08,520 Speaker 5: better or not, but you might. You might think that 96 00:05:09,080 --> 00:05:11,040 Speaker 5: it's going to at some point it has to start 97 00:05:11,080 --> 00:05:13,480 Speaker 5: slowing down, but it hasn't yet. The big number, though, 98 00:05:13,520 --> 00:05:15,480 Speaker 5: is they say is going to be unemployment. It's forecast 99 00:05:15,560 --> 00:05:18,719 Speaker 5: to remain unchanged at four point one percent, but of 100 00:05:18,760 --> 00:05:20,880 Speaker 5: course a lot of you get into the three digits 101 00:05:21,240 --> 00:05:23,680 Speaker 5: and you can get rounding and it could go up 102 00:05:23,680 --> 00:05:25,520 Speaker 5: to four point two percent. So there'll be a lot 103 00:05:25,520 --> 00:05:27,880 Speaker 5: of focus on that because of this some rule thing. 104 00:05:28,320 --> 00:05:31,440 Speaker 5: But it does look like at this point that wages 105 00:05:31,480 --> 00:05:35,200 Speaker 5: are slowing down. They slowed down in the PCE numbers, 106 00:05:35,800 --> 00:05:39,040 Speaker 5: and they've been slowing on a month over a month 107 00:05:39,080 --> 00:05:42,719 Speaker 5: basis in the employment numbers. Then we get on Wednesday, 108 00:05:42,760 --> 00:05:45,520 Speaker 5: ahead of the Fed, we get the Employment cost Index. 109 00:05:45,839 --> 00:05:47,760 Speaker 5: That's something they'll be looking at to see what wages 110 00:05:47,800 --> 00:05:51,960 Speaker 5: are doing. But if wages are well behaved and we 111 00:05:52,040 --> 00:05:55,640 Speaker 5: don't get a collapse in jobs or a big rise 112 00:05:55,680 --> 00:05:58,280 Speaker 5: in unemployment, then the FED is going to be satisfied 113 00:05:58,320 --> 00:06:00,920 Speaker 5: with waiting until September. 114 00:06:00,839 --> 00:06:05,320 Speaker 2: And all that. All that, the wages, moderating inflation. It 115 00:06:05,360 --> 00:06:07,760 Speaker 2: appears to show that the Fed's Higher for Longer campaign 116 00:06:08,480 --> 00:06:11,599 Speaker 2: is working. No disastrous impact on the economy. 117 00:06:11,279 --> 00:06:14,960 Speaker 5: No disastrous impact. I hate to use the soft landing analogy. 118 00:06:16,080 --> 00:06:19,760 Speaker 5: It's almost become a cliche by now, but it looks 119 00:06:19,800 --> 00:06:22,600 Speaker 5: like we're kind of there now. They don't want to 120 00:06:22,600 --> 00:06:24,640 Speaker 5: say that because in the minute they do, it's like 121 00:06:24,720 --> 00:06:28,080 Speaker 5: jinxing themselves and something will go wrong. But at some 122 00:06:28,160 --> 00:06:31,479 Speaker 5: point you got to, as the famous senator said about 123 00:06:31,520 --> 00:06:33,799 Speaker 5: the Vietnam War, you got to declare victory and go home. 124 00:06:35,520 --> 00:06:36,520 Speaker 5: So maybe they'll do that. 125 00:06:36,960 --> 00:06:38,280 Speaker 2: Yeah, this week, maybe that's coming. 126 00:06:38,320 --> 00:06:38,440 Speaker 1: Well. 127 00:06:38,440 --> 00:06:40,520 Speaker 2: The FED wraps up it's latest two day policy meeting 128 00:06:40,640 --> 00:06:44,400 Speaker 2: this Wednesday, a decision expected around two pm Wall Street time, 129 00:06:44,400 --> 00:06:47,680 Speaker 2: and our thanks to Michael McKee Bloomberg International Economics and 130 00:06:47,760 --> 00:06:50,839 Speaker 2: policy correspondent. We move now to earnings from some of 131 00:06:50,880 --> 00:06:53,880 Speaker 2: the nation's biggest tech companies, on the heels of kind 132 00:06:53,880 --> 00:06:57,120 Speaker 2: of disappointing reports from Tesla and Alphabet last week. Now, 133 00:06:57,120 --> 00:06:59,279 Speaker 2: in the days ahead, we're going to hear from more 134 00:06:59,400 --> 00:07:03,720 Speaker 2: the so called Magnificent seven like Microsoft, Meta Platforms, Apple, 135 00:07:03,920 --> 00:07:06,680 Speaker 2: and Amazon. And for more on what to expect, we're 136 00:07:06,760 --> 00:07:12,200 Speaker 2: joined by Mandeep Singh Bloomberg Intelligence, senior tech industry analysts. Now, 137 00:07:12,240 --> 00:07:14,400 Speaker 2: Man Deep, let's start with what we saw last week 138 00:07:14,560 --> 00:07:18,520 Speaker 2: Alphabet and Tesla. What was it that rattled the markets 139 00:07:18,600 --> 00:07:19,880 Speaker 2: and investors? 140 00:07:20,520 --> 00:07:23,720 Speaker 6: Sure, Tom So, Look, when it comes to Alphabet, it 141 00:07:23,960 --> 00:07:27,280 Speaker 6: was pretty obvious that the market is focused on what 142 00:07:27,320 --> 00:07:30,280 Speaker 6: they're going to spend on CAPEX this year. And the 143 00:07:30,360 --> 00:07:34,200 Speaker 6: fact that you know, they spend billion dollars above consensus 144 00:07:34,200 --> 00:07:37,560 Speaker 6: expectations for this quarter and said it's going to be 145 00:07:38,080 --> 00:07:41,800 Speaker 6: higher than their two Q numbers for the next two quarters. 146 00:07:42,120 --> 00:07:45,080 Speaker 6: Clearly it suggests that they will keep spending. And the 147 00:07:45,400 --> 00:07:48,560 Speaker 6: CEO mentioned that in his remarks that they would rather 148 00:07:48,720 --> 00:07:54,200 Speaker 6: overspend right now on AI as opposed to underspend. And look, 149 00:07:54,560 --> 00:07:57,800 Speaker 6: I think what they are suggesting is they want to 150 00:07:57,840 --> 00:08:02,480 Speaker 6: build more capacity because they're that reflected in the cloud numbers. 151 00:08:02,880 --> 00:08:06,840 Speaker 6: So in the case of Alphabet, Google Cloud segment actually 152 00:08:06,880 --> 00:08:10,680 Speaker 6: had a sequential acceleration. It grew twenty nine percent. And 153 00:08:11,360 --> 00:08:14,400 Speaker 6: what it tells me about Microsoft is, look, they will 154 00:08:14,440 --> 00:08:17,640 Speaker 6: be reporting next week and last quarter, Azure, which is 155 00:08:17,680 --> 00:08:21,680 Speaker 6: the equivalent of Google Cloud, grew thirty one percent at 156 00:08:21,720 --> 00:08:25,120 Speaker 6: a much higher base. Microsoft Cloud is a seventy six 157 00:08:25,160 --> 00:08:28,520 Speaker 6: billion dollar rundread business. Google Cloud is about forty billion, 158 00:08:29,080 --> 00:08:32,960 Speaker 6: And so if they are able to show AI contributing 159 00:08:33,600 --> 00:08:37,160 Speaker 6: to the growth in Azure segment, then clearly you know 160 00:08:37,200 --> 00:08:40,240 Speaker 6: it's paying off for these hyperscalers. And in the case 161 00:08:40,240 --> 00:08:44,479 Speaker 6: of Microsoft, they're also monetizing it with their office Copilot, 162 00:08:44,600 --> 00:08:47,880 Speaker 6: So you want to see an acceleration in both those 163 00:08:47,880 --> 00:08:51,760 Speaker 6: segments Office Copilot as well as Microsoft Azure the infrastructure 164 00:08:51,800 --> 00:08:55,760 Speaker 6: sign and Look. With Tesla, I think it was more 165 00:08:55,760 --> 00:09:00,920 Speaker 6: idiosyncratic because they set expectations for a robotaxi launch on 166 00:09:01,000 --> 00:09:06,000 Speaker 6: August eighth, then they said they'll move it to October 167 00:09:06,120 --> 00:09:07,680 Speaker 6: tenth now, and. 168 00:09:08,040 --> 00:09:11,000 Speaker 2: It's only a prototype, not even a real vehicle yet. 169 00:09:11,080 --> 00:09:13,920 Speaker 6: Yeah, but I will give them credit to the extent 170 00:09:13,960 --> 00:09:16,480 Speaker 6: that you know, they're still the furthest along when it 171 00:09:16,520 --> 00:09:19,360 Speaker 6: comes to doing something like this. So think about all 172 00:09:19,440 --> 00:09:23,240 Speaker 6: the other carmakers. They're not even in this game, not close. 173 00:09:23,559 --> 00:09:26,280 Speaker 6: So the fact that they are spending those R and 174 00:09:26,360 --> 00:09:29,680 Speaker 6: D dollars on something that could be a big market 175 00:09:29,720 --> 00:09:33,080 Speaker 6: down the line, whether it becomes feasible this year, next year, 176 00:09:33,720 --> 00:09:36,640 Speaker 6: I mean clearly, I think they still have a lead. 177 00:09:36,840 --> 00:09:40,360 Speaker 6: And obviously they're not managing expectations very well, which is 178 00:09:40,360 --> 00:09:44,600 Speaker 6: why you see that sort of stock reaction. But I 179 00:09:44,679 --> 00:09:48,079 Speaker 6: feel with Tesla it's going to be volatile, just because 180 00:09:48,160 --> 00:09:50,880 Speaker 6: you know, it will all depend on how quickly they 181 00:09:51,600 --> 00:09:52,800 Speaker 6: time this to market. 182 00:09:52,720 --> 00:09:55,880 Speaker 2: When they deliver. Now that was then now this week, 183 00:09:55,960 --> 00:09:59,040 Speaker 2: looking ahead, we're going to hear from you already brought 184 00:09:59,120 --> 00:10:03,199 Speaker 2: up Microsoft as you're it's relationship with open Ai, and 185 00:10:03,559 --> 00:10:06,000 Speaker 2: it's I mean, they're way ahead of the pack on AI, 186 00:10:06,200 --> 00:10:06,720 Speaker 2: aren't they. 187 00:10:07,200 --> 00:10:12,360 Speaker 6: Well, I think what you're finding is other competitors are 188 00:10:12,440 --> 00:10:15,199 Speaker 6: catching up when it comes to the large anglid model. 189 00:10:15,280 --> 00:10:20,000 Speaker 6: So this week Meta actually released their latest large anglid model, 190 00:10:20,040 --> 00:10:22,840 Speaker 6: the three point one version, and they have closed the 191 00:10:22,880 --> 00:10:28,120 Speaker 6: performance gap. I mean, look for consumers like us, we 192 00:10:28,240 --> 00:10:31,120 Speaker 6: read you know about these models and the fact that 193 00:10:31,160 --> 00:10:35,480 Speaker 6: they can reason, they can generate images, they can generate texts, 194 00:10:35,600 --> 00:10:38,760 Speaker 6: do summaries, but it's very hard for us to see 195 00:10:38,840 --> 00:10:42,920 Speaker 6: real time use cases because it's still you know, in 196 00:10:43,000 --> 00:10:46,280 Speaker 6: the development. These companies are in the process of deploying it. 197 00:10:46,960 --> 00:10:50,880 Speaker 6: And to me, the fact that they are kind of 198 00:10:50,920 --> 00:10:54,760 Speaker 6: comparing themselves on benchmarks and saying the performance is almost 199 00:10:54,800 --> 00:10:59,920 Speaker 6: equal doesn't vote very well for open ai because anthropic metal, 200 00:11:00,800 --> 00:11:03,840 Speaker 6: they're all catching up at the same time. With that 201 00:11:03,880 --> 00:11:07,120 Speaker 6: being said, Microsoft still is showing it in the numbers. 202 00:11:07,160 --> 00:11:10,840 Speaker 6: That's why that growth rate of Azure and the copilot 203 00:11:11,200 --> 00:11:16,200 Speaker 6: contribution is very important. If you start to see that moderating, 204 00:11:16,600 --> 00:11:19,520 Speaker 6: then clearly you know the lead is narrowing and that 205 00:11:19,559 --> 00:11:23,240 Speaker 6: will have an impact. Instead of Microsoft being the clear winner, 206 00:11:23,600 --> 00:11:26,800 Speaker 6: you will have others kind of catch up. 207 00:11:26,720 --> 00:11:27,360 Speaker 2: Catching up fast. 208 00:11:27,440 --> 00:11:27,840 Speaker 6: Yeah. 209 00:11:27,880 --> 00:11:30,439 Speaker 2: Well, now that leads me to a point meta platforms. 210 00:11:31,120 --> 00:11:35,360 Speaker 2: You know, it's always been about user numbers for Facebook, WhatsApp, 211 00:11:35,400 --> 00:11:41,680 Speaker 2: Instagram advertising revenue. Is Wall Street now putting that behind 212 00:11:41,720 --> 00:11:45,040 Speaker 2: them and just focusing on AI? And what have you 213 00:11:45,080 --> 00:11:48,280 Speaker 2: done for me lately? How have you monetized AI or 214 00:11:48,360 --> 00:11:50,200 Speaker 2: is that still going to be a big focus? How 215 00:11:50,200 --> 00:11:52,400 Speaker 2: many average daily and monthly users. 216 00:11:52,760 --> 00:11:55,800 Speaker 6: It will absolutely be a focus because guess what, Meta 217 00:11:55,840 --> 00:11:59,360 Speaker 6: will also raise their capex, and we know the capex 218 00:11:59,400 --> 00:12:03,240 Speaker 6: increases right now are not helping these companies when it 219 00:12:03,240 --> 00:12:06,440 Speaker 6: comes to the stock performances. We saw a negative reaction 220 00:12:06,520 --> 00:12:10,360 Speaker 6: with Alphabet. I expect something similar with Meta given the 221 00:12:10,440 --> 00:12:13,920 Speaker 6: valuations these companies are training at. Remember MAC seven stocks 222 00:12:13,920 --> 00:12:17,800 Speaker 6: have done phenomenally well, so the valuations are rich, and 223 00:12:18,000 --> 00:12:21,840 Speaker 6: so any increase in capex is not good for the stocks. 224 00:12:21,920 --> 00:12:26,000 Speaker 6: And so clearly Street cares about monetization. And if Meta 225 00:12:26,040 --> 00:12:28,760 Speaker 6: is saying we are open sourcing our large anglid model 226 00:12:29,000 --> 00:12:32,280 Speaker 6: and we have no kind of roadmap to monetizing it, 227 00:12:32,400 --> 00:12:34,720 Speaker 6: that's not good news. And so they are the only 228 00:12:34,760 --> 00:12:38,480 Speaker 6: ones right now who are open sourcing everything on the 229 00:12:38,520 --> 00:12:42,000 Speaker 6: generative AI side with no plans to monetize. Remember Google 230 00:12:42,000 --> 00:12:45,560 Speaker 6: and Microsoft are monetizing through their cloud through their copilots. 231 00:12:45,840 --> 00:12:48,560 Speaker 6: They're not open sourcing it. Meta is the one that's 232 00:12:48,600 --> 00:12:50,760 Speaker 6: saying we are giving it away for free. 233 00:12:51,040 --> 00:12:53,199 Speaker 2: Well, a full slate of tech earnings in the coming 234 00:12:53,200 --> 00:12:55,199 Speaker 2: week a lot to look forward to. Our thanks to 235 00:12:55,280 --> 00:13:00,320 Speaker 2: Mandeep Sing, Bloomberg Intelligence Senior tech industry analyst up on 236 00:13:00,320 --> 00:13:02,960 Speaker 2: Bloomberg day Break weekend, a look at what's at stake 237 00:13:03,160 --> 00:13:06,360 Speaker 2: at the Bank of England's next policy meeting. I'm Tom 238 00:13:06,400 --> 00:13:19,640 Speaker 2: Busby and this is Bloomberg. This is Bloomberg day Break weekend, 239 00:13:19,679 --> 00:13:22,079 Speaker 2: our global look ahead at the top stories for investors 240 00:13:22,120 --> 00:13:24,679 Speaker 2: in the coming week. I'm Tom Busby in New York. 241 00:13:25,120 --> 00:13:27,960 Speaker 2: Up later in our program a look at more tech earnings, 242 00:13:28,000 --> 00:13:32,080 Speaker 2: including from Samsung. But first, it's approaching ten weeks since 243 00:13:32,080 --> 00:13:35,120 Speaker 2: we last heard from Bank of England Governor Andrew Bailey 244 00:13:35,200 --> 00:13:38,560 Speaker 2: and his fellow policymakers. Now, with the Bank of England 245 00:13:38,600 --> 00:13:41,800 Speaker 2: rate decision due in the coming weeks, Bloomberg Daybreak Europe 246 00:13:41,800 --> 00:13:46,160 Speaker 2: banker Caroline Hepger has been gauging the anticipation in London. 247 00:13:46,160 --> 00:13:49,880 Speaker 1: Tom after the UK has seen some volatile economic data 248 00:13:49,960 --> 00:13:54,480 Speaker 1: in recent weeks, including faster than anticipated inflation numbers, so 249 00:13:54,679 --> 00:13:58,240 Speaker 1: the sense of radio silence is all the more consequential 250 00:13:58,640 --> 00:14:02,280 Speaker 1: before a decision on whether to cut UK interest rates, 251 00:14:02,440 --> 00:14:05,760 Speaker 1: that investors are judging to be on a knife edge, 252 00:14:06,280 --> 00:14:09,440 Speaker 1: Unlike peers in the US and the Eurozone. Andrew Bailey 253 00:14:09,480 --> 00:14:13,200 Speaker 1: has played down the importance of spoon feeding signals to 254 00:14:13,280 --> 00:14:16,880 Speaker 1: the markets, but the Bank of England's approach to messaging 255 00:14:16,920 --> 00:14:20,560 Speaker 1: has been criticized by the former US Federal Reserve Chair 256 00:14:20,640 --> 00:14:24,320 Speaker 1: Ben Bananke, and a full start to rate hikes back 257 00:14:24,360 --> 00:14:27,720 Speaker 1: in twenty twenty one has also bred a persistent level 258 00:14:27,760 --> 00:14:32,400 Speaker 1: of scrutiny of the governor's tactics. While four members of 259 00:14:32,440 --> 00:14:36,680 Speaker 1: the nine person Monetary Policy Committee have communicated following the 260 00:14:36,840 --> 00:14:40,960 Speaker 1: fourth of July election, most were already seen as being 261 00:14:41,080 --> 00:14:45,080 Speaker 1: in either the hawkish or the dubvish camps, revealing little 262 00:14:45,320 --> 00:14:49,640 Speaker 1: of what investors did not already know. The upcoming decision 263 00:14:49,680 --> 00:14:53,280 Speaker 1: then could be a pivotal turning point. Andrew Bailey must 264 00:14:53,360 --> 00:14:57,280 Speaker 1: decide whether to support two rate setters already pushing for cuts, 265 00:14:57,520 --> 00:14:59,960 Speaker 1: or continue to side with the hawks, warning the u 266 00:15:00,280 --> 00:15:04,200 Speaker 1: underlying price pressures still pose a danger. It's something that 267 00:15:04,200 --> 00:15:07,760 Speaker 1: BlueBay Television has been discussing with Janet Henry, who is 268 00:15:07,840 --> 00:15:11,880 Speaker 1: Global Chief Economists at HSBC. She says that Bailey's choice 269 00:15:11,920 --> 00:15:14,760 Speaker 1: will have a big impact on her strategy. 270 00:15:15,200 --> 00:15:18,000 Speaker 7: We are looking for some modest rate cuts over the 271 00:15:18,040 --> 00:15:21,280 Speaker 7: course of the next year. We do have a gradual improvement, 272 00:15:21,320 --> 00:15:24,280 Speaker 7: but it's by no means a v shaped recovery, and 273 00:15:24,320 --> 00:15:26,640 Speaker 7: it's certainly still not a recession, as you know, we've 274 00:15:26,680 --> 00:15:28,600 Speaker 7: never been in that camp. Obviously, we have got this 275 00:15:28,760 --> 00:15:33,600 Speaker 7: enormous uncertainty regarding the fiscal backdrop through twenty twenty five. 276 00:15:33,760 --> 00:15:38,400 Speaker 7: You know, even last year the fiscal deficit widening, added 277 00:15:38,400 --> 00:15:41,800 Speaker 7: to inflation, added to GDP growth. And should we find 278 00:15:41,840 --> 00:15:45,040 Speaker 7: ourselves in a similar situation in twenty twenty five, and 279 00:15:45,120 --> 00:15:47,000 Speaker 7: that would probably mean a lot less in the way 280 00:15:47,000 --> 00:15:47,640 Speaker 7: of rate cuts. 281 00:15:47,880 --> 00:15:50,120 Speaker 5: How much visibility do we really have on twenty twenty five. 282 00:15:50,720 --> 00:15:53,080 Speaker 7: Well, we don't have a lot of visibility on twenty 283 00:15:53,120 --> 00:15:55,200 Speaker 7: twenty five. And of course it's not just the domestic 284 00:15:55,280 --> 00:15:59,880 Speaker 7: politics and the domestic fiscal there is this geopolitical overlay 285 00:16:00,080 --> 00:16:02,040 Speaker 7: in that. You know, one of the remarkable things you 286 00:16:02,120 --> 00:16:05,320 Speaker 7: might say through the first half of twenty twenty four 287 00:16:05,480 --> 00:16:08,760 Speaker 7: is that despite all of this uncertainty in terms of 288 00:16:08,840 --> 00:16:12,240 Speaker 7: conflict underway in the world, tariffs that are still coming 289 00:16:12,240 --> 00:16:14,960 Speaker 7: through not just from the US, but some from Europe 290 00:16:15,000 --> 00:16:19,160 Speaker 7: and even parts of Latin America. Despite all of this uncertainty, 291 00:16:19,280 --> 00:16:23,240 Speaker 7: the global economy generally has muddled through. It's just that 292 00:16:23,280 --> 00:16:26,359 Speaker 7: it's still really the US and from an emerging market perspective, 293 00:16:26,640 --> 00:16:30,440 Speaker 7: India that have been the stellar performers. But you're right, 294 00:16:30,480 --> 00:16:33,200 Speaker 7: twenty twenty five is the key area of uncertainty and 295 00:16:33,280 --> 00:16:37,000 Speaker 7: central banks. You know, the age of medium term forward 296 00:16:37,000 --> 00:16:39,000 Speaker 7: guidance is way behind us now. 297 00:16:39,520 --> 00:16:43,240 Speaker 1: That was Janet Henry, Global Chief Economists at HSBC. Well, 298 00:16:43,280 --> 00:16:46,320 Speaker 1: I've also been discussing the stakes of Andrew Bailey's big 299 00:16:46,320 --> 00:16:49,920 Speaker 1: decision with Bloomberg's chief economist Dan Hanson. He says the 300 00:16:50,040 --> 00:16:52,760 Speaker 1: choice will have far reaching consequences. 301 00:16:53,160 --> 00:16:54,360 Speaker 8: Well, I wish I could say this was a lot 302 00:16:54,400 --> 00:16:57,320 Speaker 8: of confidence. I'm not sure you can. I think we're 303 00:16:58,160 --> 00:17:01,080 Speaker 8: we're on the side of the the case for cutting, 304 00:17:01,640 --> 00:17:05,199 Speaker 8: that's our view, but it's really easy to make the 305 00:17:05,240 --> 00:17:08,560 Speaker 8: case for a hold as well. It's not a clear 306 00:17:08,600 --> 00:17:14,080 Speaker 8: cut decision. Markets are at about forty five percent chance 307 00:17:14,280 --> 00:17:17,600 Speaker 8: of a cut, so slightly less than a coin toss. 308 00:17:17,640 --> 00:17:20,600 Speaker 8: They're not convinced, you know, I think on balance, if 309 00:17:20,600 --> 00:17:24,199 Speaker 8: you look back to at least the June meeting, it 310 00:17:24,320 --> 00:17:27,560 Speaker 8: felt like the bank was quite keen to cut. If 311 00:17:27,640 --> 00:17:31,120 Speaker 8: you read the minutes, you know, you could potentially read 312 00:17:31,119 --> 00:17:33,720 Speaker 8: between the lines and try and make an argument that 313 00:17:33,760 --> 00:17:35,520 Speaker 8: the elections sort of they just didn't want to get 314 00:17:35,520 --> 00:17:38,760 Speaker 8: involved during the election campaign. Since then, the data's been 315 00:17:39,119 --> 00:17:42,280 Speaker 8: a bit choppy, but I think, you know, for us, 316 00:17:42,359 --> 00:17:45,320 Speaker 8: the case is still there. But as I said, at 317 00:17:45,320 --> 00:17:47,080 Speaker 8: the there's a lot of uncertainy. We've also got quite 318 00:17:47,080 --> 00:17:49,560 Speaker 8: a few changes of personnel or at least one change, 319 00:17:49,600 --> 00:17:51,800 Speaker 8: I should say, of personnel on the NPC. That makes 320 00:17:51,840 --> 00:17:54,840 Speaker 8: it just just add that element of uncertainty and the 321 00:17:54,920 --> 00:17:56,080 Speaker 8: vote split that will come out. 322 00:17:56,400 --> 00:17:56,600 Speaker 9: Yeah. 323 00:17:56,720 --> 00:17:59,679 Speaker 1: I mean you talked about the election. Of course that 324 00:17:59,800 --> 00:18:01,600 Speaker 1: meant that there was a black up and actually it's 325 00:18:01,600 --> 00:18:04,800 Speaker 1: been a really long time since we've heard from Andrew Bailey, 326 00:18:04,800 --> 00:18:08,359 Speaker 1: maybe as long as period without communicating as Bank of 327 00:18:08,400 --> 00:18:10,840 Speaker 1: England governor in the kind of four years that he's 328 00:18:10,920 --> 00:18:15,520 Speaker 1: been there. And since then fellow NPC members have also 329 00:18:15,560 --> 00:18:18,199 Speaker 1: been quite quite I mean, how significant is that to 330 00:18:18,240 --> 00:18:20,639 Speaker 1: have so little guidance from policymakers. 331 00:18:21,080 --> 00:18:23,720 Speaker 8: Yeah, I mean it's an interesting one. I was I've 332 00:18:23,720 --> 00:18:26,199 Speaker 8: been quite surprised, if I'm honest, I thought coming out 333 00:18:26,240 --> 00:18:29,239 Speaker 8: of the election blackout periods. You know, as I say, 334 00:18:29,280 --> 00:18:31,600 Speaker 8: we had the June meeting, we had the minutes from that, 335 00:18:31,760 --> 00:18:35,720 Speaker 8: but I thought Bailey and others would would come out 336 00:18:35,760 --> 00:18:38,800 Speaker 8: and sort of say set the record straight. That's not 337 00:18:38,880 --> 00:18:40,520 Speaker 8: quite right, but just give an update on where they 338 00:18:40,520 --> 00:18:42,320 Speaker 8: think things are. You know, we'd had a lot of 339 00:18:42,400 --> 00:18:44,960 Speaker 8: data and we know that the June meeting for we 340 00:18:45,000 --> 00:18:47,639 Speaker 8: don't know who they were, but for some members of 341 00:18:47,640 --> 00:18:51,480 Speaker 8: the NPC, the decision was finally balanced, and I think 342 00:18:51,480 --> 00:18:53,679 Speaker 8: it would have been I think there's sort of a 343 00:18:53,720 --> 00:18:56,520 Speaker 8: belief in amongst sort of economists and in the market 344 00:18:56,600 --> 00:18:59,280 Speaker 8: that you know, Bailey was amongst that group. It would 345 00:18:59,280 --> 00:19:01,000 Speaker 8: have been interesting, I think, to hear from him and 346 00:19:01,040 --> 00:19:03,560 Speaker 8: where things are. I don't necessarily think he would have 347 00:19:03,560 --> 00:19:05,639 Speaker 8: made it one hundred percent clear about what they were 348 00:19:05,640 --> 00:19:08,560 Speaker 8: going to do at this meeting, but I think something 349 00:19:08,640 --> 00:19:12,280 Speaker 8: around the data and you know, the weight they were 350 00:19:12,280 --> 00:19:15,879 Speaker 8: placing on upside surprises and how worried they were about that, 351 00:19:16,000 --> 00:19:18,720 Speaker 8: I think would have been a sort of useful guide. 352 00:19:18,840 --> 00:19:21,240 Speaker 8: Because there's been a lot of volatility, as I say, 353 00:19:21,240 --> 00:19:23,720 Speaker 8: in the data, and that's injective volatility into market pricing 354 00:19:23,760 --> 00:19:25,680 Speaker 8: as well, which I don't think is particularly helpful. 355 00:19:26,000 --> 00:19:29,800 Speaker 1: Okay, there does seem to be though, after the election 356 00:19:30,240 --> 00:19:33,679 Speaker 1: and the turbunce that we've seen in politics, perhaps a 357 00:19:33,920 --> 00:19:40,080 Speaker 1: window where maybe UK politics is calming down and there's 358 00:19:40,080 --> 00:19:42,200 Speaker 1: been a lot of announcements on this new government about 359 00:19:42,240 --> 00:19:44,200 Speaker 1: the things that they're going to do. Obviously it's all 360 00:19:44,280 --> 00:19:47,919 Speaker 1: untested yet, but certainly a feeling that there's maybe an 361 00:19:48,000 --> 00:19:51,840 Speaker 1: opportunity for more calm now in the UK. How useful 362 00:19:51,840 --> 00:19:55,480 Speaker 1: would a rake up be to the new chancellor? Rachel reeves. 363 00:19:55,720 --> 00:19:57,919 Speaker 1: There does seem to be more optimism, and you've written 364 00:19:57,960 --> 00:20:02,119 Speaker 1: about it about economic growth maybe being a bit better 365 00:20:02,160 --> 00:20:03,119 Speaker 1: in the UK now. 366 00:20:03,240 --> 00:20:04,960 Speaker 8: Yeah, So I think, I mean, I think on the 367 00:20:05,040 --> 00:20:07,680 Speaker 8: rate cut point, obviously, I think there's there's a really 368 00:20:07,720 --> 00:20:10,840 Speaker 8: positive narrative around that that the government can spin. Does 369 00:20:10,840 --> 00:20:12,879 Speaker 8: it does you know, if it's a twenty five basis 370 00:20:12,920 --> 00:20:15,159 Speaker 8: point rate cut, does that change the economic outlook? No, 371 00:20:15,359 --> 00:20:19,600 Speaker 8: But if it's a series of rate cuts, you know, 372 00:20:19,640 --> 00:20:22,440 Speaker 8: it does begin to sort of feed into economic activity. 373 00:20:22,480 --> 00:20:27,080 Speaker 8: But remember the sort of mortgages and the like are 374 00:20:27,119 --> 00:20:30,080 Speaker 8: already being priced off the expectations that rates will be cut, 375 00:20:30,280 --> 00:20:32,800 Speaker 8: So you know, the bigger risk is they don't get 376 00:20:32,800 --> 00:20:34,200 Speaker 8: cut and then we sort of have this sort of 377 00:20:34,280 --> 00:20:37,879 Speaker 8: knee jerk in the other direction. I mean, thinking fiscally, 378 00:20:38,000 --> 00:20:41,159 Speaker 8: if you go back to the obr's forecast in March, 379 00:20:41,880 --> 00:20:43,760 Speaker 8: there was actually a lot more easing priced into the 380 00:20:43,760 --> 00:20:45,560 Speaker 8: curve at that point sort of there was sort of 381 00:20:45,560 --> 00:20:48,160 Speaker 8: this exuberance around the number of rate cuts that come 382 00:20:48,240 --> 00:20:51,560 Speaker 8: this year. So actually, in terms of the fiscal the 383 00:20:51,800 --> 00:20:53,960 Speaker 8: sort of in their interest spending and the like is 384 00:20:54,160 --> 00:20:55,399 Speaker 8: probably going to be a little bit higher in the 385 00:20:55,440 --> 00:20:59,280 Speaker 8: obr's forecast because we've got higher guilt yields and also 386 00:20:59,359 --> 00:21:02,800 Speaker 8: higher exp dictations for bank rate and relative to March. 387 00:21:03,560 --> 00:21:06,000 Speaker 8: But you know, Ruth's will want to see rates start 388 00:21:06,040 --> 00:21:07,919 Speaker 8: to come down. That sort of narrative, I think is 389 00:21:08,200 --> 00:21:11,639 Speaker 8: one much more probably political than it is economic. As 390 00:21:11,680 --> 00:21:13,359 Speaker 8: I say, on the economic side, a lot of this 391 00:21:13,440 --> 00:21:15,239 Speaker 8: is already baked in. You know, the idea of two 392 00:21:15,359 --> 00:21:17,480 Speaker 8: rate cuts this year has been the sort of consensus 393 00:21:17,520 --> 00:21:20,199 Speaker 8: for quite a while now, and it's just a case of, 394 00:21:21,119 --> 00:21:23,720 Speaker 8: you know, from her perspective, hoping that the Bank ends 395 00:21:23,800 --> 00:21:24,399 Speaker 8: up delivering that. 396 00:21:26,200 --> 00:21:28,120 Speaker 1: How much influence will the Fed have on the Bank 397 00:21:28,160 --> 00:21:29,080 Speaker 1: of England, now. 398 00:21:29,600 --> 00:21:31,920 Speaker 8: Yeah, that's a good question, I think. You know, the 399 00:21:32,200 --> 00:21:34,800 Speaker 8: argument for one of the arguments for waiting September is 400 00:21:34,840 --> 00:21:37,120 Speaker 8: it looks like the Fed's going to go in September now, 401 00:21:37,160 --> 00:21:40,399 Speaker 8: though there are some voices saying that July is you 402 00:21:40,400 --> 00:21:41,919 Speaker 8: know we had build do on the terminal in his 403 00:21:42,000 --> 00:21:45,320 Speaker 8: opinion piece saying that July would be the right time 404 00:21:45,359 --> 00:21:47,800 Speaker 8: for them to go. I think, you know, one of 405 00:21:47,800 --> 00:21:50,600 Speaker 8: the arguments is that the US is ahead of the 406 00:21:50,720 --> 00:21:53,800 Speaker 8: UK and the rest of the world in its inflation process. 407 00:21:53,880 --> 00:21:56,560 Speaker 8: If the FED goes, it gives other central banks confidence. 408 00:21:57,520 --> 00:22:02,120 Speaker 8: That said, you know, the SMB Bank of Canada, they're 409 00:22:02,119 --> 00:22:04,000 Speaker 8: all going ahead and cutting rates. They're not waiting for 410 00:22:04,040 --> 00:22:06,800 Speaker 8: the FED. So I think the bank doesn't need the 411 00:22:06,840 --> 00:22:10,119 Speaker 8: FED to go. I just think, you know, you'd look 412 00:22:09,280 --> 00:22:11,600 Speaker 8: across the Atlantic and it would just give you a 413 00:22:11,600 --> 00:22:14,600 Speaker 8: little bit more confidence that you're sort of moving in 414 00:22:14,640 --> 00:22:17,240 Speaker 8: the right direction. So it's something they keep an eye on, 415 00:22:17,280 --> 00:22:20,000 Speaker 8: but I don't think it stops them from cutting in August. 416 00:22:21,320 --> 00:22:24,800 Speaker 1: Returning to the UK story then around mortgages, I mean, 417 00:22:25,800 --> 00:22:29,720 Speaker 1: the Institute for Fiscal Studies, interestingly in recent days has 418 00:22:29,760 --> 00:22:33,720 Speaker 1: come out with this view that the interest rate increases 419 00:22:33,760 --> 00:22:35,959 Speaker 1: from the Bank of England have pushed three and twenty 420 00:22:36,000 --> 00:22:40,600 Speaker 1: thousand more people into poverty, which I think is quite interesting. 421 00:22:40,640 --> 00:22:43,399 Speaker 1: I mean, the IFS always does hold the Government of 422 00:22:43,400 --> 00:22:46,199 Speaker 1: the day's feet to the fire or the Bank of 423 00:22:46,200 --> 00:22:49,040 Speaker 1: England or whoever that is their job. But I think 424 00:22:49,119 --> 00:22:51,119 Speaker 1: that is quite interesting, isn't it in terms of the 425 00:22:51,119 --> 00:22:54,720 Speaker 1: pressure as we look at the positive, the more positive 426 00:22:54,720 --> 00:22:58,080 Speaker 1: economic story versus the pressure that there is on UK consumer. 427 00:22:58,280 --> 00:23:00,840 Speaker 8: Yeah, definitely. I mean at an aggregate level. You know, 428 00:23:00,880 --> 00:23:03,560 Speaker 8: we've spoken for a long time about the resilience of 429 00:23:03,560 --> 00:23:05,600 Speaker 8: the UK economy. You've mentioned there the sort of pick 430 00:23:05,680 --> 00:23:08,560 Speaker 8: up in growth, but the distributional effect of all of 431 00:23:08,600 --> 00:23:12,840 Speaker 8: these things is significant and that's sort of what the 432 00:23:12,840 --> 00:23:17,240 Speaker 8: IFS is citing there. The fundamental point is that interest 433 00:23:17,320 --> 00:23:19,840 Speaker 8: rates are the Bank of England's main tool, but it's 434 00:23:19,840 --> 00:23:24,800 Speaker 8: an extremely bluntle and it does have these negative effects. 435 00:23:24,800 --> 00:23:28,400 Speaker 8: I mean, I think what's interesting is that that those 436 00:23:28,400 --> 00:23:31,760 Speaker 8: sort of numbers and you've seen insolvencies. They've come back down, 437 00:23:31,800 --> 00:23:34,199 Speaker 8: but insolvencies picked up as well on the back of 438 00:23:34,280 --> 00:23:38,199 Speaker 8: rising interest rates. And actually it's surprising, I think, against 439 00:23:38,280 --> 00:23:40,960 Speaker 8: that backdrop that the economy has at an aggregate level 440 00:23:41,480 --> 00:23:44,360 Speaker 8: performed as it has. You know, there is a lot 441 00:23:44,359 --> 00:23:49,440 Speaker 8: of stress out there. And look, I think, as I say, 442 00:23:49,680 --> 00:23:52,560 Speaker 8: interest rates are very blunt all and I think at 443 00:23:52,680 --> 00:23:55,800 Speaker 8: least if you're thinking about the distributional impact of these things. 444 00:23:55,640 --> 00:23:58,040 Speaker 8: It's really a fiscal policy question and that's I guess 445 00:23:58,040 --> 00:24:00,320 Speaker 8: it is something that the Rachel Ruves might might end 446 00:24:00,400 --> 00:24:01,040 Speaker 8: up thinking about. 447 00:24:01,560 --> 00:24:04,359 Speaker 1: Yeah, I mean her last thought on Reeves, you know, 448 00:24:04,520 --> 00:24:07,600 Speaker 1: going out making the pitch again and again in recent weeks, 449 00:24:07,800 --> 00:24:10,560 Speaker 1: now that she and Kirstarma are in power, that the 450 00:24:10,680 --> 00:24:12,919 Speaker 1: UK is open for business, open for business, that's the 451 00:24:12,920 --> 00:24:16,600 Speaker 1: mantra she's really got to deliver, doesn't she Are more 452 00:24:16,640 --> 00:24:20,000 Speaker 1: investment coming into the UK sort of longer term that's 453 00:24:20,119 --> 00:24:22,160 Speaker 1: the underlying pressure for Britain. 454 00:24:22,520 --> 00:24:22,720 Speaker 4: Yeah. 455 00:24:22,760 --> 00:24:24,919 Speaker 8: I mean they've really up the ante actually on the 456 00:24:25,000 --> 00:24:28,840 Speaker 8: narrative and some of the goals that they've set are 457 00:24:28,920 --> 00:24:33,399 Speaker 8: very challenging I think. And you know, if you remember 458 00:24:33,400 --> 00:24:36,840 Speaker 8: back to the previous government, Rishi Sunak had his five 459 00:24:36,880 --> 00:24:39,840 Speaker 8: targets and there was a lot of you know, holding 460 00:24:39,880 --> 00:24:42,640 Speaker 8: him to account about you know, whether he was achieving 461 00:24:42,680 --> 00:24:45,280 Speaker 8: these things on the economic front, but also obviously on 462 00:24:45,440 --> 00:24:49,560 Speaker 8: NHS waiting lists on the boats as well. So you know, 463 00:24:49,600 --> 00:24:52,840 Speaker 8: there if it doesn't all come to pass, they're going 464 00:24:52,920 --> 00:24:54,600 Speaker 8: to you know, they're going to feel that feel the 465 00:24:54,640 --> 00:24:56,479 Speaker 8: heat again, I think, And as I say, they are 466 00:24:56,520 --> 00:24:59,800 Speaker 8: extremely stretching targets that they've set particularly on growth, and 467 00:25:00,000 --> 00:25:03,600 Speaker 8: obviously we will hope that it comes to pass. Like 468 00:25:03,760 --> 00:25:06,040 Speaker 8: everyone wants living stands to rise. That is sort of 469 00:25:06,080 --> 00:25:09,760 Speaker 8: the best possible outcome. But as I say that, if 470 00:25:09,840 --> 00:25:12,800 Speaker 8: you look at recent history, it would suggest that we're 471 00:25:12,800 --> 00:25:15,919 Speaker 8: going to go through a quite significant step change in 472 00:25:16,240 --> 00:25:19,480 Speaker 8: economic performance to deliver it. And you sort of me 473 00:25:19,600 --> 00:25:23,080 Speaker 8: being a skeptical economist, I'm a little bit skeptical about 474 00:25:23,080 --> 00:25:26,040 Speaker 8: whether it will come to pass, but we'll see how 475 00:25:26,080 --> 00:25:27,960 Speaker 8: it goes. As you say, it's a lot of rhetoric, 476 00:25:28,080 --> 00:25:29,880 Speaker 8: but they need to put the policies in place and 477 00:25:29,960 --> 00:25:30,920 Speaker 8: see whether it delivers. 478 00:25:30,920 --> 00:25:34,520 Speaker 1: Now, that was Dan Hanson, Bloomberg's chief economist, on the 479 00:25:34,560 --> 00:25:37,920 Speaker 1: Bank of England's rate decision, which we'll hear about, of course, 480 00:25:37,960 --> 00:25:41,480 Speaker 1: on Thursday, the first of August. I'm Caroline Hepge here 481 00:25:41,520 --> 00:25:44,000 Speaker 1: in London. You can catch us every weekday morning for 482 00:25:44,040 --> 00:25:46,800 Speaker 1: Bloomberg Daybreak. You're at beginning at six am in London. 483 00:25:47,080 --> 00:25:48,760 Speaker 1: That's one am on Wall Street. 484 00:25:49,040 --> 00:25:52,600 Speaker 2: Tom, Thanks Caroline, and coming up on Bloomberg Daybreak weekend 485 00:25:52,600 --> 00:25:55,360 Speaker 2: to look at earnings from both Apple and Samsung and 486 00:25:55,440 --> 00:25:59,240 Speaker 2: what these companies will say about artificial intelligence. I'm Tom 487 00:25:59,280 --> 00:26:13,439 Speaker 2: Busby and this is Bloomberg. I'm Tom Busby in New 488 00:26:13,520 --> 00:26:15,439 Speaker 2: York with your global look ahead at the top stories 489 00:26:15,480 --> 00:26:18,240 Speaker 2: for investors in the coming week. A big week ahead 490 00:26:18,240 --> 00:26:21,680 Speaker 2: for tech earnings with some of the biggest manufacturers in Asia, 491 00:26:21,760 --> 00:26:25,199 Speaker 2: companies like Apple and Samsung reporting for more. Let's get 492 00:26:25,200 --> 00:26:29,200 Speaker 2: to Bloomberg Daybreak Asia hosts Doug Krisner and Brian Curtis Tom. 493 00:26:29,359 --> 00:26:33,280 Speaker 3: Both Samsung and Apple are putting emphasis on AI features 494 00:26:33,280 --> 00:26:36,240 Speaker 3: in their latest smartphones. The aim here, obviously, is to 495 00:26:36,320 --> 00:26:38,600 Speaker 3: create a lot more buzz when it comes to AI 496 00:26:38,760 --> 00:26:41,240 Speaker 3: technology where consumers are concerned. 497 00:26:41,880 --> 00:26:45,000 Speaker 9: Apple has been doing so after falling behind the likes 498 00:26:45,000 --> 00:26:48,480 Speaker 9: of Open Ai and Alphabet's Google, but he's playing catch 499 00:26:48,560 --> 00:26:50,800 Speaker 9: up now on the AI front with the introduction of 500 00:26:50,880 --> 00:26:54,680 Speaker 9: Apple Intelligence. It also aims to ship ten percent more 501 00:26:54,760 --> 00:26:58,640 Speaker 9: new iPhones. Meantime, Samsung had earlier announced that he would 502 00:26:58,720 --> 00:27:01,639 Speaker 9: hike prices on its latest models. With the addition of 503 00:27:01,720 --> 00:27:05,000 Speaker 9: AI features, it aims to reclaim its title as the 504 00:27:05,040 --> 00:27:06,880 Speaker 9: world's leading maker of foldables. 505 00:27:07,040 --> 00:27:09,680 Speaker 3: Earlier, Brian and I spoke to Dan Ives. He is 506 00:27:09,760 --> 00:27:14,240 Speaker 3: managing director and senior equity analyst at Webbush Securities. He 507 00:27:14,359 --> 00:27:17,960 Speaker 3: thinks Apple is the core player in AI. 508 00:27:18,119 --> 00:27:20,480 Speaker 10: Especially when you look at Apple Intelligence and what's happened 509 00:27:20,520 --> 00:27:23,399 Speaker 10: with iPhone sixteen. You know, we think that's how you 510 00:27:23,440 --> 00:27:26,679 Speaker 10: get to a four trillion dollar evaluation in Apple with 511 00:27:26,800 --> 00:27:31,240 Speaker 10: an unparalled in stallby. The reality is that consumers when 512 00:27:31,240 --> 00:27:34,160 Speaker 10: they go through AI, they're going to go through the 513 00:27:34,240 --> 00:27:38,040 Speaker 10: Coopertino essentially an Apple device that's up twenty five percent 514 00:27:38,119 --> 00:27:41,720 Speaker 10: of the world's going to access AI. You talk about 515 00:27:41,800 --> 00:27:46,040 Speaker 10: other names that benefit here. I think there's names like 516 00:27:46,280 --> 00:27:51,000 Speaker 10: an Oracle service. Now I look at names like Palenteer 517 00:27:51,119 --> 00:27:54,800 Speaker 10: that's really a pure play name in terms of use cases. 518 00:27:55,200 --> 00:27:58,280 Speaker 10: So there's a lot of You talk about narrow. It 519 00:27:58,320 --> 00:28:01,720 Speaker 10: is narrow now, but over the next one to two 520 00:28:01,800 --> 00:28:03,280 Speaker 10: years it's going to be a lot broader. 521 00:28:03,520 --> 00:28:05,800 Speaker 3: So it's nine pm, the party's going to four in 522 00:28:05,840 --> 00:28:10,040 Speaker 3: the morning. Do we need to talk about regulatory risk? 523 00:28:10,440 --> 00:28:12,320 Speaker 3: Is there at some point a move on the part 524 00:28:12,359 --> 00:28:16,840 Speaker 3: of government officials to get involved in how artificial intelligence 525 00:28:17,240 --> 00:28:19,439 Speaker 3: is regulated? Is that a concern that you have. 526 00:28:19,920 --> 00:28:22,600 Speaker 10: I mean, that's at four thirty five am, when you're 527 00:28:22,600 --> 00:28:24,760 Speaker 10: at the diner after, when you're at when you're at 528 00:28:24,760 --> 00:28:28,240 Speaker 10: the diner after the party. So the point is like, yeah, 529 00:28:28,359 --> 00:28:30,680 Speaker 10: regular toy will be there, but for now it's not. 530 00:28:30,840 --> 00:28:33,600 Speaker 10: I mean it's self regulation. We spent a lot of 531 00:28:33,600 --> 00:28:37,239 Speaker 10: time in the belt. Regulatory is going thirty miles an 532 00:28:37,280 --> 00:28:39,960 Speaker 10: hour in a minivan the right lane. The technology is 533 00:28:40,000 --> 00:28:42,400 Speaker 10: in Bugatti going one hundred miles an hour in the 534 00:28:42,480 --> 00:28:45,120 Speaker 10: left lane. So I don't think regular tour is going 535 00:28:45,200 --> 00:28:48,600 Speaker 10: to be an issue. And I think regardless with presidential 536 00:28:49,240 --> 00:28:52,320 Speaker 10: pandy wins, I also think we're gonna see less regulatory 537 00:28:52,560 --> 00:28:54,960 Speaker 10: and which ultimately I think is bullish or big tech. 538 00:28:55,320 --> 00:28:58,840 Speaker 9: Well, let's get a broader question answered here from you, Dan. 539 00:28:59,520 --> 00:29:01,640 Speaker 9: Do we need to worry about a slow down in 540 00:29:01,680 --> 00:29:04,280 Speaker 9: the economy as kind of spoiling the party or no? 541 00:29:04,680 --> 00:29:06,880 Speaker 10: I mean I think right now, unless you have a 542 00:29:07,000 --> 00:29:10,760 Speaker 10: Talis group or binocurate, you don't see your recession right. 543 00:29:10,840 --> 00:29:15,800 Speaker 10: So I think we're in this Goldilocks soft landing. I'm 544 00:29:15,840 --> 00:29:19,280 Speaker 10: not saying it's it's a Rosen Champagne. There's clearly choppiness. 545 00:29:19,280 --> 00:29:22,840 Speaker 10: But if you could overall tech earnings, it's bullsh who 546 00:29:22,840 --> 00:29:26,000 Speaker 10: could overall bank broader to I mean eighty five percent 547 00:29:26,480 --> 00:29:29,880 Speaker 10: are hit or at being earnings, So I think that 548 00:29:30,520 --> 00:29:34,000 Speaker 10: will be in the background, but it's not going to 549 00:29:34,080 --> 00:29:35,640 Speaker 10: stop this AI freight train. 550 00:29:35,920 --> 00:29:38,960 Speaker 3: He is Dan Ives of wet Bush Securities and joining 551 00:29:39,040 --> 00:29:41,560 Speaker 3: us now from our studios in Hong Kong is a 552 00:29:41,640 --> 00:29:45,320 Speaker 3: vlad Savov, Bloomberg Tech editor. Lad, thanks so much for 553 00:29:45,360 --> 00:29:48,080 Speaker 3: being with us. In the last week, the equity market 554 00:29:48,120 --> 00:29:51,400 Speaker 3: clearly was expressing concern over the issue of valuation when 555 00:29:51,400 --> 00:29:54,920 Speaker 3: it comes to a number of these artificial intelligence names, 556 00:29:54,960 --> 00:29:59,320 Speaker 3: particularly the chip makers. I don't sense that the thesis 557 00:29:59,360 --> 00:30:03,960 Speaker 3: has really fundamentally. Most people still agree on the transformative 558 00:30:04,040 --> 00:30:07,440 Speaker 3: nature of AI. Yeah, there may be some debate over 559 00:30:07,440 --> 00:30:10,920 Speaker 3: the use case when we point to what AI can 560 00:30:11,000 --> 00:30:15,080 Speaker 3: ultimately provide. Currently, the issue also seems to be on 561 00:30:15,200 --> 00:30:18,120 Speaker 3: the return of investment. I was reading a note from 562 00:30:18,200 --> 00:30:22,160 Speaker 3: Barclays saying that analysts are expecting big tech companies to 563 00:30:22,200 --> 00:30:26,160 Speaker 3: spend around sixty billion dollars a year on developing AI 564 00:30:26,280 --> 00:30:29,480 Speaker 3: models by twenty twenty six. Here's the thing. Those companies 565 00:30:29,520 --> 00:30:33,280 Speaker 3: will only reap around twenty billion a year in revenue 566 00:30:33,320 --> 00:30:36,040 Speaker 3: from AI. So it seems like the market is right 567 00:30:36,120 --> 00:30:38,680 Speaker 3: at this moment in time to be a little concerned 568 00:30:38,680 --> 00:30:41,200 Speaker 3: about how quickly we've arrived at this point. 569 00:30:41,280 --> 00:30:43,840 Speaker 11: Is that fair yes, I think naturally that is fair 570 00:30:43,880 --> 00:30:46,320 Speaker 11: to say. It's also worth bearing in mind that when 571 00:30:46,360 --> 00:30:48,640 Speaker 11: you say sixty billion for all of big tech spending 572 00:30:48,680 --> 00:30:50,840 Speaker 11: on AI, I mean a good chunk of that forty 573 00:30:50,880 --> 00:30:53,960 Speaker 11: billion is going to be just meta. They've already pledged 574 00:30:53,960 --> 00:30:57,280 Speaker 11: to spend like I say, double digit billions of dollars 575 00:30:57,360 --> 00:31:01,520 Speaker 11: just on AI, just in acquiring those to get Nvidio chips. 576 00:31:01,640 --> 00:31:04,440 Speaker 11: It's worth also thinking about the fact that this level 577 00:31:04,440 --> 00:31:07,200 Speaker 11: of investment, which is going to come this year, next year, 578 00:31:07,240 --> 00:31:09,440 Speaker 11: in the year after that, is probably not going to 579 00:31:09,480 --> 00:31:12,280 Speaker 11: be sustained, and they're probably planning for that as well. 580 00:31:12,640 --> 00:31:15,200 Speaker 11: You get those in Vidio chips, you get that hardware 581 00:31:15,240 --> 00:31:17,800 Speaker 11: infrastructure in place to train your AI models, and you 582 00:31:17,880 --> 00:31:20,680 Speaker 11: do that. But then those models are trained and they 583 00:31:20,720 --> 00:31:22,959 Speaker 11: just start being deployed, and then people start figuring out 584 00:31:22,960 --> 00:31:25,440 Speaker 11: how to use them. It's still very early days. We're 585 00:31:25,440 --> 00:31:27,960 Speaker 11: still trying to find the actual application. We're trying to 586 00:31:28,000 --> 00:31:31,120 Speaker 11: find the monetization methods, whether it's going to be through 587 00:31:31,120 --> 00:31:35,320 Speaker 11: subscription services online, whether it's going to be additions to hardware. 588 00:31:35,360 --> 00:31:37,320 Speaker 11: This is the big trend that we're seeing with the 589 00:31:37,480 --> 00:31:41,600 Speaker 11: vice makers setting their devices as effectively AI vessels. It's 590 00:31:41,840 --> 00:31:44,200 Speaker 11: by our laptop. No, it's not the same old laptop. 591 00:31:44,240 --> 00:31:46,760 Speaker 11: It's an AI laptop today. Same thing with smartphones. 592 00:31:47,280 --> 00:31:50,400 Speaker 9: We started off with Dan Eyes asking him about comment 593 00:31:50,480 --> 00:31:53,480 Speaker 9: that we'd heard on Bloomberg, which was that Apple was 594 00:31:53,560 --> 00:31:56,800 Speaker 9: the key. Apple was the company that has the smarts 595 00:31:56,840 --> 00:32:00,760 Speaker 9: through the years to convert something into a friend device 596 00:32:01,120 --> 00:32:04,120 Speaker 9: for consumers. Do you agree with that? And to what 597 00:32:04,200 --> 00:32:06,680 Speaker 9: extent is Samsung also in that category? 598 00:32:06,760 --> 00:32:09,719 Speaker 11: I agree, but only to an extent because Apple strength 599 00:32:09,720 --> 00:32:13,240 Speaker 11: has always been to integrate hardware and software and a 600 00:32:13,320 --> 00:32:16,040 Speaker 11: service that it can eventually charge for. We know that, 601 00:32:16,080 --> 00:32:17,920 Speaker 11: we know that's been the case in the track record, 602 00:32:18,240 --> 00:32:20,240 Speaker 11: but it's so much more wide open than it has 603 00:32:20,280 --> 00:32:21,120 Speaker 11: been in the past. 604 00:32:22,200 --> 00:32:23,800 Speaker 2: It really is such a wide open. 605 00:32:23,640 --> 00:32:26,120 Speaker 11: Question for how you're going to take an AI service 606 00:32:26,160 --> 00:32:29,760 Speaker 11: like an image generator or chat GBT and its ability 607 00:32:29,800 --> 00:32:33,320 Speaker 11: to translate and to generate texts for you in all 608 00:32:33,360 --> 00:32:35,680 Speaker 11: sorts of ways, how are you going to turn that 609 00:32:35,760 --> 00:32:38,680 Speaker 11: into actual revenue at the end of the day. So absolutely, 610 00:32:38,720 --> 00:32:42,880 Speaker 11: Apple has the pedigree for us to invest confidence in it, 611 00:32:43,320 --> 00:32:46,040 Speaker 11: whereas on the flip side with Samsung, it actually doesn't. 612 00:32:46,160 --> 00:32:49,800 Speaker 11: For all of his strengths and accomplishments. Samsung has never 613 00:32:49,880 --> 00:32:52,920 Speaker 11: been great at software. It's never been great coming up 614 00:32:53,000 --> 00:32:55,760 Speaker 11: with the applications that run on top of its devices. 615 00:32:56,000 --> 00:32:59,240 Speaker 11: It sells laptops those run Windows, it sells smartphones those 616 00:32:59,280 --> 00:32:59,800 Speaker 11: run Googles. 617 00:32:59,840 --> 00:33:02,000 Speaker 3: And I think it's fair to say that the weakness 618 00:33:02,040 --> 00:33:04,480 Speaker 3: that we saw in AI related stocks in the last 619 00:33:04,480 --> 00:33:07,120 Speaker 3: week was touched off by the comments that we heard 620 00:33:07,120 --> 00:33:10,800 Speaker 3: from Sundhar Pachai, the CEO of Alphabet, who said, Hey, 621 00:33:10,800 --> 00:33:12,920 Speaker 3: it's going to take some time for AI products to 622 00:33:12,960 --> 00:33:16,560 Speaker 3: mature and become more useful, but can we talk about 623 00:33:16,560 --> 00:33:20,640 Speaker 3: how quickly things are evolving. The rate of change seems 624 00:33:20,680 --> 00:33:25,280 Speaker 3: to be very clear. It's almost parabolic, right, And if 625 00:33:25,320 --> 00:33:28,160 Speaker 3: that trend line continues, I don't think the market's going 626 00:33:28,200 --> 00:33:29,960 Speaker 3: to have to wait too much longer. Am I right 627 00:33:30,000 --> 00:33:31,080 Speaker 3: on that or am I wrong? 628 00:33:31,400 --> 00:33:33,080 Speaker 11: I still think it's still going to take a good 629 00:33:33,120 --> 00:33:36,000 Speaker 11: chunk of time. But give an illustrative example for this. 630 00:33:36,600 --> 00:33:38,880 Speaker 11: When you look at image generation. One of the earliest 631 00:33:38,880 --> 00:33:41,240 Speaker 11: issues it had was with fingers. You would ask it 632 00:33:41,280 --> 00:33:43,880 Speaker 11: to generate like a Renaissance painting for you, and you 633 00:33:43,880 --> 00:33:46,320 Speaker 11: can always generated it because you can never get the 634 00:33:46,360 --> 00:33:49,040 Speaker 11: right number, the right shape, of fingers on people in on. 635 00:33:49,120 --> 00:33:52,000 Speaker 11: It took a few months and those things are large 636 00:33:52,120 --> 00:33:56,080 Speaker 11: resolve now. It really is impressive, especially with image generation, 637 00:33:56,160 --> 00:33:59,200 Speaker 11: because it becomes so obvious to see the rate of progress. 638 00:33:59,200 --> 00:34:01,400 Speaker 11: So I fully agree with you that the progress is there. 639 00:34:01,680 --> 00:34:04,000 Speaker 11: The question really is and especially the trend this year 640 00:34:04,120 --> 00:34:06,920 Speaker 11: is with Microsoft and its Copilot PCs, Apple with Apple 641 00:34:06,920 --> 00:34:11,520 Speaker 11: Intelligence and Samsung making every Galaxy smartphone an aiphone, is 642 00:34:11,640 --> 00:34:14,440 Speaker 11: they're trying to sell us, like I say, hardware as 643 00:34:14,800 --> 00:34:17,520 Speaker 11: carriers of AI. So will that prove to be the 644 00:34:17,520 --> 00:34:20,120 Speaker 11: successful tactic or will it prove to be something along 645 00:34:20,160 --> 00:34:23,080 Speaker 11: the lines of open AI setting you an only one 646 00:34:23,480 --> 00:34:24,360 Speaker 11: AI subscription. 647 00:34:24,840 --> 00:34:28,280 Speaker 9: I think the thinking on the device makers, particularly Apple, 648 00:34:28,520 --> 00:34:31,960 Speaker 9: is that you need inference on this because of privacy. 649 00:34:32,480 --> 00:34:35,640 Speaker 9: You need the intelligence the AI to be on that 650 00:34:35,760 --> 00:34:39,560 Speaker 9: phone that's in your pocket. It's not drawing from the 651 00:34:39,600 --> 00:34:45,839 Speaker 9: cloud because that's susceptible to interference and to security consideration. 652 00:34:46,680 --> 00:34:50,080 Speaker 9: And that's why I think the comment goes to Apple 653 00:34:50,560 --> 00:34:53,319 Speaker 9: knows how to ministurize these things and get it into 654 00:34:53,440 --> 00:34:54,560 Speaker 9: a very small phone. 655 00:34:54,719 --> 00:34:55,359 Speaker 2: That's right, Brian. 656 00:34:55,440 --> 00:34:57,040 Speaker 11: And one of the things to bear in mind is 657 00:34:57,040 --> 00:35:00,799 Speaker 11: that when Apple says trust us use only our proprietary 658 00:35:00,840 --> 00:35:04,479 Speaker 11: software and proprietary holdware. You kind of can because again 659 00:35:04,520 --> 00:35:07,520 Speaker 11: it has that petigree. When Samsung says trust us only 660 00:35:07,600 --> 00:35:10,600 Speaker 11: use Samsung software, it's a big question mark flat. 661 00:35:10,640 --> 00:35:12,560 Speaker 3: I think we have to talk about China. It was 662 00:35:12,680 --> 00:35:15,240 Speaker 3: interesting in the last week we heard from Texas Instruments 663 00:35:15,239 --> 00:35:18,520 Speaker 3: and the company made two points. One is that the 664 00:35:18,560 --> 00:35:22,160 Speaker 3: market for the chips that TI is involved in, in 665 00:35:22,280 --> 00:35:25,879 Speaker 3: terms of China it's return to growth. The second thing 666 00:35:25,920 --> 00:35:28,520 Speaker 3: that I thought was very interesting was the company saying 667 00:35:28,520 --> 00:35:31,360 Speaker 3: it's a mistake to assume that China is only doing 668 00:35:31,880 --> 00:35:36,520 Speaker 3: simple semiconductor manufacturing. Do we have to talk about the 669 00:35:36,560 --> 00:35:39,520 Speaker 3: degree to which China will try to play catch up 670 00:35:39,640 --> 00:35:42,239 Speaker 3: in AI or is the industry in China so far 671 00:35:42,360 --> 00:35:44,560 Speaker 3: in the dust at this point it's not likely that 672 00:35:44,680 --> 00:35:46,239 Speaker 3: China will catch up anytime soon. 673 00:35:46,480 --> 00:35:48,120 Speaker 11: It might be possible to say yes to both of 674 00:35:48,160 --> 00:35:51,359 Speaker 11: your questions, because absolutely China is trying to catch up. 675 00:35:51,360 --> 00:35:55,160 Speaker 11: There is no amount of giving up. Everyone sees AI 676 00:35:55,400 --> 00:35:58,319 Speaker 11: as essential in the same way that they see technology 677 00:35:58,440 --> 00:36:01,840 Speaker 11: and being connected in the Internet is essential to building 678 00:36:02,120 --> 00:36:05,280 Speaker 11: economic and industrial growth in the future. At the same time, 679 00:36:05,480 --> 00:36:08,080 Speaker 11: there is this big gap. This is why we're seeing. 680 00:36:08,640 --> 00:36:11,120 Speaker 11: One of the examples that I like to recall is Nicon. 681 00:36:11,200 --> 00:36:13,920 Speaker 11: We interviewed the president not too long ago, and they 682 00:36:13,920 --> 00:36:17,600 Speaker 11: are renewing a machine who's designed that haven't changed for 683 00:36:17,800 --> 00:36:21,319 Speaker 11: over a decade. And that's because China is buying up 684 00:36:21,360 --> 00:36:24,640 Speaker 11: so many of these mature chips, older technology chips. So 685 00:36:24,640 --> 00:36:27,440 Speaker 11: as much as possible, China is trying to get the 686 00:36:27,480 --> 00:36:30,440 Speaker 11: chips and the semiconductors and technology that it can subject 687 00:36:30,480 --> 00:36:33,560 Speaker 11: to the US sanctions, which means older technology, and then 688 00:36:33,600 --> 00:36:36,920 Speaker 11: maybe with some amount of creativity and technical innovation and 689 00:36:36,920 --> 00:36:40,799 Speaker 11: breakthrough to make its AI models lighter and easier to 690 00:36:40,840 --> 00:36:44,319 Speaker 11: handle with older generation hardware, it can catch up. We 691 00:36:44,320 --> 00:36:47,440 Speaker 11: should never be complacent about China's capabilities in this field. 692 00:36:47,960 --> 00:36:50,600 Speaker 9: In the broader picture of lad it seems that now 693 00:36:50,680 --> 00:36:54,560 Speaker 9: the market is giving two thumbs down to this rapid 694 00:36:54,560 --> 00:36:58,239 Speaker 9: spending on AI features. And so I want to ask 695 00:36:58,239 --> 00:37:02,000 Speaker 9: you questions kind of parallel to doug ast earlier about campex. 696 00:37:02,000 --> 00:37:05,520 Speaker 9: So for a while companies were rewarded for their campex 697 00:37:05,960 --> 00:37:08,759 Speaker 9: on AI. It showed massive commitment to what is a 698 00:37:08,800 --> 00:37:11,880 Speaker 9: mega trend. Now it seems like they're being castigated. So 699 00:37:12,160 --> 00:37:15,360 Speaker 9: the reason this is parallels from the market point of view. Okay, 700 00:37:15,880 --> 00:37:19,759 Speaker 9: is this theme about not rewarding companies for investing in 701 00:37:19,800 --> 00:37:23,240 Speaker 9: AI a passing notion or is it something that will 702 00:37:23,360 --> 00:37:24,320 Speaker 9: we'll hold for a while. 703 00:37:24,920 --> 00:37:27,680 Speaker 11: It's a very interesting one brand because Meta is kind 704 00:37:27,680 --> 00:37:30,719 Speaker 11: of the perfect example for this. They really went wrong 705 00:37:30,760 --> 00:37:33,640 Speaker 11: with technology. They went down this metaverse path, which is 706 00:37:33,680 --> 00:37:36,640 Speaker 11: now over forgotten within the company. They renamed the company 707 00:37:36,719 --> 00:37:39,400 Speaker 11: that's about the only left over from We're going to 708 00:37:39,400 --> 00:37:42,400 Speaker 11: build a metaverse for the entire world, And they invested 709 00:37:42,440 --> 00:37:45,080 Speaker 11: super heavily into AI, and the market rewarded them. Nothing 710 00:37:45,440 --> 00:37:49,320 Speaker 11: really changed. There wasn't anything special as far as metas 711 00:37:49,360 --> 00:37:52,800 Speaker 11: prospects of making money. At the end of all that investment, 712 00:37:53,000 --> 00:37:56,120 Speaker 11: people just had faith and confidence in Meta, pouring billions 713 00:37:56,120 --> 00:37:59,400 Speaker 11: into the AI thing. Apple likewise, it has really struggled 714 00:37:59,440 --> 00:38:01,759 Speaker 11: with the iPhone sales over the past year, especially in China, 715 00:38:01,800 --> 00:38:04,640 Speaker 11: the world's bigau smable market. And then everybody heard about 716 00:38:04,640 --> 00:38:07,359 Speaker 11: Apple Intelligents and they said, Okay, let's reward that. Now 717 00:38:07,400 --> 00:38:09,760 Speaker 11: the trend is shifting in the opposite direction, as everyone 718 00:38:09,880 --> 00:38:12,040 Speaker 11: is sobering up about the length of time the oldest 719 00:38:12,040 --> 00:38:13,920 Speaker 11: investment is going to take to repay. 720 00:38:14,160 --> 00:38:15,759 Speaker 2: And maybe things are just normalizing. 721 00:38:15,880 --> 00:38:17,439 Speaker 11: I don't know that we're going to see the same 722 00:38:17,560 --> 00:38:20,840 Speaker 11: levels of enthusiasm as we saw with METSA and Apple's examples. 723 00:38:21,080 --> 00:38:22,800 Speaker 11: But I also don't know that anybody's going to be 724 00:38:22,880 --> 00:38:24,000 Speaker 11: punished for investing in air. 725 00:38:24,120 --> 00:38:24,920 Speaker 2: We're not close to that. 726 00:38:25,360 --> 00:38:27,360 Speaker 3: Flat, thank you so much for spending the time to 727 00:38:27,480 --> 00:38:31,440 Speaker 3: talk about artificial intelligence with us. As we look forward 728 00:38:31,520 --> 00:38:33,920 Speaker 3: to the earnings in the coming week from both Apple 729 00:38:34,480 --> 00:38:37,640 Speaker 3: and Samsung, and we'll have those reports broken down for 730 00:38:37,719 --> 00:38:41,080 Speaker 3: you here on a Daybreak Asia. Flat Savov is a 731 00:38:41,120 --> 00:38:44,000 Speaker 3: Bloomberg Tech editor. I'm Doug Krisner, and you can join 732 00:38:44,200 --> 00:38:47,560 Speaker 3: Brian Curtis and myself weekdays here for Bloomberg day Break 733 00:38:47,600 --> 00:38:51,240 Speaker 3: Asia beginning at eight am in Hong Kong eight pm 734 00:38:51,480 --> 00:38:52,839 Speaker 3: on Wall Street. Tom. 735 00:38:53,400 --> 00:38:55,960 Speaker 2: Thank you, Doug, and thank you Brian. And that does 736 00:38:56,040 --> 00:38:58,680 Speaker 2: it for this edition of Bloomberg day Break Weekend. Join 737 00:38:58,800 --> 00:39:01,120 Speaker 2: us again Monday morning at five am Wall Street time 738 00:39:01,160 --> 00:39:03,680 Speaker 2: for the latest on markets overseas and the news you 739 00:39:03,840 --> 00:39:07,000 Speaker 2: need to start your day. I'm Tom Buzby. Stay with us. 740 00:39:07,320 --> 00:39:10,440 Speaker 2: Top stories and global business headlines are coming up right now.