Speaker 1: Bloomberg Audio Studios, Podcasts, radio news.
Speaker 2: This is the Bloomberg Surveillance Podcast. I'm Jonathan Ferrow, along
Speaker 2: with Lisa Bromwitz and Amrie Hordert. Join us each day
Speaker 2: for insight from the best in markets, economics, and geopolitics
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Speaker 2: Terminal and the Bloomberg Business app. We'll begin this out
Speaker 2: with stock sliding as the tech sell off deepens. Judian
Speaker 2: and Manual I've ever core remains constructive writing. We'll remain
Speaker 2: steadfastly bullish, led by a I names and themes. Stocks
Speaker 2: remain on course for seventy seven point fifty, and the
Speaker 2: nine K ballcase is still operational. Julian joins us now
Speaker 2: for more. Julian, good morning, Good Mornings. That's somewhat contrarian
Speaker 2: after the few days we've had.
Speaker 3: Well, first I want to say is, given the sports intra,
Speaker 3: we should start talking about MESSI again, which we were
Speaker 3: doing prior to the time.
Speaker 4: It makes some SI for that a little bit like fine, fine.
Speaker 3: So I liken this to the beginning of the year
Speaker 3: when you started to have the accumulated worries around software
Speaker 3: and the initial concerns around debt, which obviously the debt
Speaker 3: pile has gotten much larger, which earnings are supporting, and
Speaker 3: you got this intense negativity around technology stocks, and we
Speaker 3: felt like we were contrarians coming into the beginning of
Speaker 3: twenty twenty six sticking with the call, and frankly, you know,
Speaker 3: we saw the progression into the most hedged position we
Speaker 3: had ever seen in thirty years at the lows in March,
Speaker 3: and the market isn't hedged to that degree, to be sure, but.
Speaker 5: The skepticism is there.
Speaker 3: And frankly, when you think about it, you're just sort
Speaker 3: of transitioning this wall of worry away from the maligne
Speaker 3: of of high oil and into the potential concerns around
Speaker 3: supply and less transparent monetary.
Speaker 2: So you say, the bill case is operational. Yet we
Speaker 2: started the program by pointing out a couple of names,
Speaker 2: the likes of Microsoft and Meta deep into baar markets. Now,
Speaker 2: can you have nine K on the S and P
Speaker 2: operational so to speak? Without those names participating in any way,
Speaker 2: shape or form.
Speaker 3: Mathematically you can't, okay, And when you look at it,
Speaker 3: the chip names, you know, have done a great deal
Speaker 3: of the heavy lifting. You will need a refreshed attitude
Speaker 3: towards the mag seven and we think that that comes
Speaker 3: in time. And if you look at it, over the
Speaker 3: course of this bull market, now almost three years old,
Speaker 3: there have been certain periods of time where essentially earnings
Speaker 3: and price have you know, caught up to each other.
Speaker 3: And we think that's one of these periods in these
Speaker 3: larger aimes, and that you will have price start to
Speaker 3: advance once more.
Speaker 1: What will it take for people to have a refreshed
Speaker 1: attitude about the hyperscalers.
Speaker 3: It will likely be a little bit more churn, a
Speaker 3: little bit more volatility, a little bit more negativity, and
Speaker 3: then ultimately.
Speaker 4: The proof of the pudding.
Speaker 3: That was the proof of the pudding that caused this
Speaker 3: furious rally to begin with. In April and May, earnings
Speaker 3: you're going to see good earnings.
Speaker 1: Are we starting to see the beginnings of pushback from
Speaker 1: the adults in the room, the bond investors, saying hold
Speaker 1: on a second, and we're talking about this particularly with SpaceX,
Speaker 1: not necessarily leading off the entire selloff, but not helping
Speaker 1: exactly this company that just ipo'd coming back to mark
Speaker 1: of twenty billion dollars, it's investment grade even though it's
Speaker 1: been burning cash and has a prospect of getting to
Speaker 1: the moon literally and beyond how much is this the
Speaker 1: beginning of something that's important to watch.
Speaker 3: Well, again, this is the point where we will figure
Speaker 3: out how supply and demand interact, because clearly the message is,
Speaker 3: well you iPod and maybe you should have waited at
Speaker 3: least till you got included in the Nasdaq one hundred
Speaker 3: before marketing debt. But here we are, and to us again,
Speaker 3: when you look at the market action, it's just a
Speaker 3: much more significant, volatile churn. And again with that name
Speaker 3: in particular, you're still comfortably above the IPO price. So
Speaker 3: I mean, you know, they may send people to the
Speaker 3: moon and to Mars, but stocks don't go to the
Speaker 3: moon and Mars indefinitely.
Speaker 2: For now, at least we've done another four percent in
Speaker 2: the pre market headline, I'll be talked about small caps
Speaker 2: record highs. What's going on there? The small caps move,
Speaker 2: which is where the air performance has been so fine
Speaker 2: y today.
Speaker 3: So during the course of the entirety of this bull market,
Speaker 3: small caps have been the default short for active managers,
Speaker 3: and that really kind of faded as the year started again,
Speaker 3: partly is a function of the concern around technology that
Speaker 3: started the year, but more preciently about this fact that
Speaker 3: we may be having agitation about where the short end
Speaker 3: of the interest rate curve is going to go.
Speaker 4: But guess what, the long end is.
Speaker 3: Incredibly well anchored around four point fifty and oh, by
Speaker 3: the way, the labor market is it's suggesting, and all
Speaker 3: of those are positives for small caps, as is the
Speaker 3: price of oil. And then last point here is that
Speaker 3: again this tends to be around the Russell rebalance, the
Speaker 3: time where you get your maximum small cap out performance.
Speaker 3: We wouldn't be surprised by a little bit of reversion
Speaker 3: as the third.
Speaker 2: Quarter starts IBM and the pre mar ket by four percent.
Speaker 2: We have a new whale in the tech sector and
Speaker 2: it's the US goverment. How are you thinking about that?
Speaker 3: Well, look again, there's the concept of picking stocks and
Speaker 3: getting national champions, and you've seen it with a number
Speaker 3: of names, you know, very old line US technology names.
Speaker 6: You know.
Speaker 3: In the bigger picture, anointing winners and losers has its
Speaker 3: own issues in terms of the government level. But frankly,
Speaker 3: the fact that the government is, as you know, forcefully
Speaker 3: behind the Ai revolution as it is is a positive
Speaker 3: in our mind for investors broadly.
Speaker 7: Well, we see this administration do it with Intel and
Speaker 7: a number of rare earth mineral companies. Do you just
Speaker 7: have a list of potentially the next company the US
Speaker 7: government might take a stake in, and then it's the stock.
Speaker 4: Is off to the moon.
Speaker 3: We did that a number of months ago. I would
Speaker 3: say it was very well received and certainly work. But
Speaker 3: again I think we're far enough along. And again this
Speaker 3: is also part of the investment problem in general, that
Speaker 3: when you look at the major sectors, it's now fifty
Speaker 3: eight percent of the S and P five hundred, the
Speaker 3: top ten stocks forty percent of the S and P
Speaker 3: five hundred. That there is a little bit of psychological
Speaker 3: crowding out in trying to find companies with smaller market caps.
Speaker 7: The heavy hand of the US government. Does it distort
Speaker 7: the market?
Speaker 3: Classical economics would tell you that it does, okay, But
Speaker 3: again I go back to this idea that the bigger
Speaker 3: picture in terms of you know, making sure that the
Speaker 3: US is front foot versus the rest of its global
Speaker 3: competitors in technology is a positive.
Speaker 1: There's also a sense that there's a rolling ball of
Speaker 1: money that is racing to the next corner, the next
Speaker 1: big thing that could potentially take off as this build
Speaker 1: out and tech continues, and that people aren't sure what
Speaker 1: the ultimate goal is with the ultimate form of AI
Speaker 1: is going to take in terms of the way its
Speaker 1: displayed throughout economies. At the same time, it's just racing
Speaker 1: to get there. Whether we see it in eske Heinex
Speaker 1: and Samsung or whether we see it in the semiconductors
Speaker 1: in the United States. How does that destabilize markets? I mean,
Speaker 1: how much is that something that you're watching?
Speaker 3: Well, it just shows you that volatility works both to
Speaker 3: the upside and the downside. And actually for us, this
Speaker 3: is very interesting And the reason we don't think we're
Speaker 3: in a bubble right now is because for the last
Speaker 3: six weeks, clients have been asking how do we hedge AI?
Speaker 3: How do we deal with the fact that the AI
Speaker 3: trade is everything and now dominates emerging markets. It's changed
Speaker 3: the relationship of gold is a hedge. It's changed the
Speaker 3: relationship of bonds as a hedge versus stocks, And our
Speaker 3: answer is, actually, this is a very interesting time.
Speaker 4: On a day to.
Speaker 3: Day basis, there's a larger universe of stocks in the
Speaker 3: S and P five hundred that are moving inversely to
Speaker 3: the S and P day in and day out. We
Speaker 3: call them negative beta names that really act as a
Speaker 3: portfolio diversifier.
Speaker 4: People are looking.
Speaker 3: For reasons to hedge yet stay invested.
Speaker 1: Are stocks the best hedge to stocks versus bonds being
Speaker 1: a good hedge to stocks in.
Speaker 3: This environment, well, in an environment where we're concerned about
Speaker 3: higher inflation broadly on a sustained basis, history tells you
Speaker 3: that stocks are the best.
Speaker 4: Can you disrupt those stocks? Where do we find those stocks?
Speaker 3: They are across you know, an entirety of industries. Energy obviously,
Speaker 3: in the narrative of this entire year has basically been
Speaker 3: energy moving inversely to the S and P five hundred.
Speaker 3: But you see it in consumer names, you see it
Speaker 3: in utilities, and of all the strange places you actually
Speaker 3: see it and select financials. In our mind, that is
Speaker 3: definitely different behavior.
Speaker 4: Yeah, what do you make of that?
Speaker 2: The bank's troid because thin were meant to be the
Speaker 2: big beneficiaries of all of this technology.
Speaker 3: I think again what it is is sort of a preference.
Speaker 3: I remember years ago at a different shop, our oil
Speaker 3: analyst said to me, in the midst of a massive
Speaker 3: rally in oil, when are my stocks going to start rallying?
Speaker 3: And I said, they're going to start rallying when they
Speaker 3: start selling technology. Okay, And so when I think of financials,
Speaker 3: that's likely going to be the outcome when we take
Speaker 3: some chip. If you look at yesterday, financials traded very
Speaker 3: well in a negative tech tape, and that's kind of
Speaker 3: the narrative.
Speaker 2: Stay with us multiple index surveilance coming up after this.
Speaker 2: Let's talk about a different asset, clous Let's talk about crew.
Speaker 2: The President announcing funds from lifted and rounding and sanctions
Speaker 2: will be put in scrow to be used exclusively to
Speaker 2: buy us goods.
Speaker 6: If the sanctions go out, money is going to be
Speaker 6: put into this country. All that money's coming back and
Speaker 6: the former purchases of food which they desperately needed. Can
Speaker 6: you assure that you're radios won't use profits from oil
Speaker 6: sales to rebuild the new Sargy.
Speaker 5: Well, they're not supposed to be doing that.
Speaker 6: So I will say, but they're supposed to use money
Speaker 6: to buy food for their people.
Speaker 2: Roun now has sixty days to sound oil on the
Speaker 2: international market. Crewed this morning seventy seven on Brent, seventy
Speaker 2: three on WTI. Joining us now to discuss the former
Speaker 2: White House senior advisor and partner at TWT Group, Amos Hawkstein.
Speaker 2: Amus will start Broadway. We can get into details. What's
Speaker 2: your reaction been to how this has played out over
Speaker 2: the last week.
Speaker 8: Well, quite remarkable because the MoU in itself is little
Speaker 8: more than really I mean, it's almost like a surrender.
Speaker 8: I mean, if you think about where we started a
Speaker 8: few months ago, and what policy has been for the
Speaker 8: last several decades, and where we are today, we have
Speaker 8: basically said, for sixty days, we are removing massive amounts
Speaker 8: of sanctions off oil, gas and petrochemicals and refined products.
Speaker 8: You can sell it anywhere in dollars, which haven't done
Speaker 8: that in many, many years. They can also get some
Speaker 8: access to unfrozen their own unfrozen assets, you know, six
Speaker 8: to twelve billion dollars depending on which report you here.
Speaker 8: They get other benefits, and all they have to do
Speaker 8: was to open the straits and agree to talk. So
Speaker 8: we haven't actually agreed to anything on the nuclear but
Speaker 8: we have agreed that missile ballistic missile program and support
Speaker 8: for proxy terrorist groups in the region are not on
Speaker 8: the table and not part of the negotiations. And we've
Speaker 8: given them the huge political win of now being the
Speaker 8: decision makers in Lebanon, which is quite astonishing. So this
Speaker 8: is what we've done. We've given them all. This whole
Speaker 8: document is incentives and agreements to give an things with
Speaker 8: the hope that we'll get something out of it at
Speaker 8: some point during the sixty days. And the clip that
Speaker 8: you showed a little bit earlier with the president talking
Speaker 8: about buying food and medicine, I think he's confusing two
Speaker 8: different types of revenues. The food and medicine is really
Speaker 8: I think what they're trying to do with the unfrozen
Speaker 8: assets in cutter the six to twelve billion dollars the
Speaker 8: oil revenues. They can sell and do with that revenue
Speaker 8: whatever they want.
Speaker 7: When it comes to that oil revenue, almost where do
Speaker 7: you think your run and crude will be going? Is
Speaker 7: this just legitimize the Chinese buyers or will they actually
Speaker 7: find new customers?
Speaker 5: I assume that.
Speaker 8: At first it will just be the Chinese customers with legitimacy,
Speaker 8: and probably Indian consumers as well, and then the rest
Speaker 8: of the market will wait and see and to see
Speaker 8: how long this lasts. Because the worst thing is you
Speaker 8: unsanction something, the Americans and the Iranians get into some tiff,
Speaker 8: you know, some a few a week from now, three
Speaker 8: weeks from now, five week from now, and suddenly what
Speaker 8: you bought that was unsanctioned is suddenly sanctioned again. So
Speaker 8: I think people will take some time to figure that out,
Speaker 8: except of course, some trading houses that will buy a
Speaker 8: whole bunch of Iranian crude and blend it and then.
Speaker 5: They'll be able to sell wherever they want.
Speaker 8: So I think you're going to see sort of a broadening,
Speaker 8: but it'll be a gradual broadening.
Speaker 7: I know they're not a monolith, but do you have
Speaker 7: an understanding of where the GCC is on this, given
Speaker 7: the fact that it is pretty remarkable, as you said,
Speaker 7: to see this U turn from this administration to allow
Speaker 7: Irani and oil to legally hit the market. We haven't
Speaker 7: seen this in four decades.
Speaker 8: Yeah, this is again. I think that you're right, the
Speaker 8: golf is not a monolith. Clearly the political winner in
Speaker 8: the Golf is Cutter, where they are setting, to some degree,
Speaker 8: setting American policy. They're in charge of American Middle East
Speaker 8: policy right now in quite an extraordinary way. They are
Speaker 8: quite gifted at this, and I think that there are
Speaker 8: others in the Gulf who are looking at this and saying,
Speaker 8: wait a minute, we didn't like, we don't really like
Speaker 8: Cutter foreign policy, and now it's running American foreign policy.
Speaker 8: Iran was a threat to us, the United States convinced
Speaker 8: us to join them in conflict. Now they're emerging stronger
Speaker 8: politically at home, right I mean, you can't imagine anybody
Speaker 8: going out and demonstrating against the regime right now. Help
Speaker 8: is definitely not on the way, and so they're left
Speaker 8: with a neighbor next door that is angry and vengeful
Speaker 8: and is going to be very well funded. And if
Speaker 8: they are very well funded, you're talking about it. If you
Speaker 8: talk about their sales on oil sales alone and petrochemicals,
Speaker 8: you're probably talking about revenues of about a billion a week.
Speaker 8: So those countries in the Gulf are are looking at
Speaker 8: this with great concern, and they're going to have to
Speaker 8: invest in their own defense in the long term, thinking
Speaker 8: that the United States has become extremely short term thinking.
Speaker 8: You know, that's kind of how they view us at
Speaker 8: the moment.
Speaker 1: So we're looking at oil prices because that's what the
Speaker 1: market is looking at, and there are somewhat agnostic, as
Speaker 1: John has mentioned many times about exactly how oil is
Speaker 1: getting from one place to another and the potential geopolitical implications,
Speaker 1: at least in the short term, saying, look, at least
Speaker 1: barrels of oil are going through the strait of removes.
Speaker 1: Do you think that this is an accurate reflection of
Speaker 1: the potential risk of an additional closure? Because if there
Speaker 1: is true control buy orn over the strait of removes,
Speaker 1: should there be a higher premium to potentially offset against
Speaker 1: the risk of something like this happening?
Speaker 8: Again, Look, I think if we were talking about five
Speaker 8: years ago, ten years ago, yes you would talk about
Speaker 8: risk premiums and so on.
Speaker 5: But the market at the moment is.
Speaker 8: Basically saying, I have a lot of news that I
Speaker 8: want to look at on the tech side, how much
Speaker 8: CAPEX is coming in on AI and data centers and
Speaker 8: blockbuster IPOs and space. That's what I want to focus on.
Speaker 8: So energy really is judge.
Speaker 5: Us do I have?
Speaker 8: Is this something that's going to drag me down or not?
Speaker 8: If it's not going to drag me down, I don't
Speaker 8: want to talk about it. Everything is fine. I don't
Speaker 8: want to hear people tell me about risk premiums. And
Speaker 8: so that's where we are reality wise in the market.
Speaker 8: Do we have a risk in of course, because the
Speaker 8: one thing that's come out of this conflict is Iran.
Speaker 8: As I said on your show a few weeks ago
Speaker 8: before this agreement, No matter how this war ends, no
Speaker 8: matter what agreement we reach, Iran sees it as they
Speaker 8: control the Straits, and control of the straits does not
Speaker 8: necessarily mean a toll. It could just as well mean
Speaker 8: I decide that tankers need to give me forty eight
Speaker 8: hours notice. I can decide that I don't like a
Speaker 8: certain company. Your tankers are not going through those kinds
Speaker 8: of things. So yes, there's a risk, but I don't
Speaker 8: think the market is there to look at it.
Speaker 5: The second piece of that.
Speaker 8: Is, while oil prices are coming down, there's still you know,
Speaker 8: Brent's still at seventy seven, WTI at seventy three in
Speaker 8: December of this you know, this past year of December January,
Speaker 8: before the winds of war started blowing, we were at
Speaker 8: fifty six to sixty dollars.
Speaker 5: So we're still.
Speaker 8: Trading at a significant premium to where we were before
Speaker 8: the wins of war in December. So I think if
Speaker 8: the prices start coming down further, which I think they will,
Speaker 8: at some point you'll start saying, okay, can they really
Speaker 8: go back to where they were in December? And that's
Speaker 8: where we'll see probably a five to ten dollars risk
Speaker 8: premium that will be that will be put into the market.
Speaker 4: Even Amos managed to get the.
Speaker 1: Tech tried in the you know well, I mean, I
Speaker 1: think that there's a bit of frustration at least when
Speaker 1: people look at the geopolitics saying this actually matters tremendously,
Speaker 1: but they can't get anyone to care because everyone's saying, ooh.
Speaker 2: Space almost I'd love to find a word with you
Speaker 2: on that. There was some discussion that the rebuilt effort
Speaker 2: would be so costly, so expensive for nations across the Gulf,
Speaker 2: that they'd be distracted from spending all this money on
Speaker 2: tech on AI. When there has been some excitement, particularly
Speaker 2: over the last year about softign A on the amount
Speaker 2: investment that would come from that particular part of the world.
Speaker 2: What should we be tracking now, where's the money going?
Speaker 2: Where isn't it going?
Speaker 5: So I never agreed with that.
Speaker 8: With that notion, I think countries like you e And
Speaker 8: Saudi and others are really looking at tech as a
Speaker 8: long term diversification away from oil in their national economy
Speaker 8: and budgets that has become more acute, not less. They're
Speaker 8: going to be spending money one on diversification of their
Speaker 8: energy sector away from the Strait of Hormuz, so building
Speaker 8: out infrastructure, which sounds expensive but really isn't. It's a
Speaker 8: few billion dollars here and there to build out this infrastructure.
Speaker 8: And the second piece is to double down on their
Speaker 8: investments in tech, and most of that is going to
Speaker 8: be in the United States, because where else are you
Speaker 8: going to invest? There's a ceiling for them in how
Speaker 8: much they can invest.
Speaker 5: In China.
Speaker 8: They're continuing to invest there, but there's a ceiling.
Speaker 5: Europe is non existent.
Speaker 8: Or there's a little bit of play here and there,
Speaker 8: but it's really small amounts of dollars, and so the
Speaker 8: bulk of it will have to come to the United States.
Speaker 8: And I got to say I've been to UA in Saudi.
Speaker 8: The buildout that's happening there is going to continue to
Speaker 8: expand the question will be not how much they want
Speaker 8: to spend. What will companies, American companies, European companies want
Speaker 8: to build data centers in the golf or will they
Speaker 8: be more hesitant as a result of this. But I
Speaker 8: think you're going to see more money coming in to
Speaker 8: invest in this sector, and I think it's going to
Speaker 8: be mostly in the tech sector, some of it in healthcare,
Speaker 8: and other in sports and other entertainment sectors around the world,
Speaker 8: but mostly again, I think in the United States.
Speaker 4: Stay with us.
Speaker 2: More Bloomberg surveillance coming up after this. Let's move on
Speaker 2: to talk about tech SpaceX the ill and muscled companies
Speaker 2: shedding roughly four hundred billion dollars in Monday session alone,
Speaker 2: the second largest single session drop in market value on record.
Speaker 2: Matt Wiheiler of Wellington Management writing, it's unique in that
Speaker 2: it's one of the few companies that can talk about
Speaker 2: a future that doesn't exist and get credit for it
Speaker 2: in their price. This is exactly how test the stock behaves.
Speaker 2: Joined to snaff and walmac and wanting good to see
Speaker 2: it good morning.
Speaker 4: Thanks for having me. Does that make it difficult to
Speaker 4: bet against the al Musk?
Speaker 9: It definitely makes it difficult to bet against Elon Musk.
Speaker 9: When I think about the companies out there that can
Speaker 9: go public and be trading at a two trillion dollars
Speaker 9: plus market cap, there are very few that could do
Speaker 9: it with the current financial stats that SpaceX is delivered.
Speaker 2: You check in the story how close are we to
Speaker 2: the reusable technology the advancements that we need to justify
Speaker 2: this market cap.
Speaker 9: You know, I'm not a huge SpaceX expert, but what
Speaker 9: I think they have delivered is reusable rockets at scale,
Speaker 9: and I think they've proven a lot of that, which
Speaker 9: is in fulfillment of the vision, with the next step
Speaker 9: being vision of having orbital data centers.
Speaker 4: And when you look at the analyst reports and you.
Speaker 9: Look at how SpaceX is trading, obviously a lot of
Speaker 9: embedded value in that orbital data center story.
Speaker 1: Massiosha, son of SoftBank, came out overnight and was talking
Speaker 1: about how he doesn't see data centers in space as
Speaker 1: the likely path of traveling said, it's really about the
Speaker 1: next couple of years and who wins the data center
Speaker 1: build out on Earth as an investor in anthropic someone
Speaker 1: who has been a participant in this whole space, in
Speaker 1: this race for AI.
Speaker 4: Do you agree with him?
Speaker 9: I do think there is a question around the long
Speaker 9: term viability of orbital data centers. And I am not
Speaker 9: an expert when it comes to the physics, the math
Speaker 9: and the numbers of getting these things up in the sky.
Speaker 9: But I think that the Softbaing point is right, which
Speaker 9: is today we are in a compute constrained environment for inference.
Speaker 9: There is more demand for this inference, compute for AI
Speaker 9: analysis and AI workloads, and there is supply of that,
Speaker 9: and that ultimately is what's driven a lot of the
Speaker 9: performance in the market today, as we've seen the chip
Speaker 9: maker's rally, as we've seen companies in the AI space
Speaker 9: in the public market like Nvidia, like Microsoft.
Speaker 4: Like Facebook.
Speaker 1: Yeah, but is there's starting to be some pushback in
Speaker 1: terms of the cost of that buildout of capacity. Torsenk
Speaker 1: I was mentioning him earlier of Apollo talked about AI
Speaker 1: as a risk and says, what happens if companies start
Speaker 1: limiting their token budgets meaningfully because they're only seeing weak
Speaker 1: return on investment, and this is something that people are
Speaker 1: pointing to the idea that tokens are getting restricted. How
Speaker 1: much is this a risk factor for you as an
Speaker 1: investor in some of these top names.
Speaker 9: I mean, it's definitely something we think about, but ultimately,
Speaker 9: I think you have to look at two things. The
Speaker 9: first thing you have to look at is what the
Speaker 9: companies purchasing and spending this capital are saying, and whether
Speaker 9: it's SpaceX with their recent bond issue and their IPO
Speaker 9: or Google with their recent equity rays, these companies are
Speaker 9: saying that there is ROI here. It is sufficient for
Speaker 9: me to raise additional funds to go do these buildouts.
Speaker 9: And that's not because they are necessarily fueling others. It's
Speaker 9: also they see internal demand for this. So I think
Speaker 9: that's one thing you have to look at. And I
Speaker 9: think the second thing you have to think about is
Speaker 9: is perhaps they're over spending in tokens today, almost certainly.
Speaker 9: But does that mean that AI does not deliver ROI
Speaker 9: across a wide.
Speaker 4: Variety of use cases.
Speaker 9: I definitely don't think so, and I think that the
Speaker 9: proof will be in the years that play out. Does
Speaker 9: Anthropic end up going from I don't know, two thousand
Speaker 9: percent year over year growth like they've been tracking today,
Speaker 9: you know, five hundred or seven hundred percent.
Speaker 1: But Microsoft has recently tap deep seek Chinese models.
Speaker 4: To try to offset some of the cost.
Speaker 1: Why is that not the path of travel for a
Speaker 1: lot of these companies.
Speaker 9: I think that when you think about how the economics
Speaker 9: will flow in the model builders themselves, I think it's
Speaker 9: our opinion, or certainly my opinion, that the frontier model
Speaker 9: is the open AI, the anthropics, the leading models out
Speaker 9: there will capture a lot of the revenue. But does
Speaker 9: that mean that everything needs to run at the frontier
Speaker 9: model level? Absolutely not. Is there a role for deep seek?
Speaker 9: Is there a role for open source? Absolutely? And I
Speaker 9: think that's how the market will bifurcate. Is there'll be
Speaker 9: a lot of value in the large language models at
Speaker 9: the leading edge, and they'll also be valued accrude to
Speaker 9: the open source and Chinese models.
Speaker 7: When we look at SpaceX. So who's really the competitor
Speaker 7: right now? Is it the anthropics or is it the
Speaker 7: blue origins.
Speaker 9: I think it's probably more the blue origins. And if
Speaker 9: you actually look at the economics of the business today
Speaker 9: and you look at how much capital the company is
Speaker 9: bringing in a lot of their competition is actually the
Speaker 9: core we even hyperscalers of the world. If you look
Speaker 9: at their economic agreements with Anthropic and with Google that
Speaker 9: accounts for almost twenty four billion dollars of annualized revenue
Speaker 9: that is coming from just leasing out their data center.
Speaker 4: Compute might just find me.
Speaker 2: You're an investor in Anthropic, can make a your reaction
Speaker 2: to how you'd characterize the messaging coming from leadership Anthropic,
Speaker 2: which some people say is AI doomerism and it is
Speaker 2: not helpful to the whole landscape right now, what's your
Speaker 2: take on it?
Speaker 9: My take on that is that it may be perceived
Speaker 9: as numerism, But if you look at how this administration
Speaker 9: is acting, and if you look at some of the
Speaker 9: reports that came out yesterday, perhaps the dumerism isn't as
Speaker 9: extreme as people had thought. I think there was reporting
Speaker 9: yesterday that perhaps the latest Anthropic model was able to
Speaker 9: breach some classified systems, and that is what resulted in
Speaker 9: the administration putting a lockdown on the fable release that
Speaker 9: Anthropic had.
Speaker 4: Now I mentioned when this goes pumplic, you'll be sun
Speaker 4: of the stock. Right.
Speaker 2: It's that fat to say you hold Anthropic now when
Speaker 2: the stock goes public, we hold anthropic still.
Speaker 4: We as a firm, as.
Speaker 9: A one point three trillion dollar asset manager, have lots
Speaker 9: of different pockets of capital, some of which may be
Speaker 9: selling anthropics, some of which may be bokay.
Speaker 4: So complicated, complicated.
Speaker 2: I'm trying to understand how you think about this in
Speaker 2: the future, because clearly now in private markets, it's got
Speaker 2: a great valuation. It's come in public, there's a lot
Speaker 2: of stories that are the hype around it. And what
Speaker 2: helps the hype sometimes are these kind of declarations that
Speaker 2: it's going to wipe out thirty percent of white collar work.
Speaker 2: You don't have to deal with the regulatory response just
Speaker 2: now because they've created so much value in private markets.
Speaker 2: You've been a part of that value creation. How are
Speaker 2: you thinking about the prospect of regulation down the road.
Speaker 2: Is that a story you want to navigate with that
Speaker 2: company or something you want to take your hands away
Speaker 2: and say you're on your own now.
Speaker 4: Thanks all to right.
Speaker 9: Well, I think it's definitely a complicated piece of the
Speaker 9: mosaic across all the AI landscape, and I think the
Speaker 9: trade off ultimately comes down to how much regulatory flex
Speaker 9: does the government want to have in this space versus
Speaker 9: how much free market and leadership position we want to take.
Speaker 9: And I think that's the tension we're seeing today. And
Speaker 9: if you look back a week ago, I think there
Speaker 9: was some reporting that perhaps the US government may start
Speaker 9: taking positions in some of these companies like they did
Speaker 9: at Intel, and I think that potentially could be a route,
Speaker 9: although I don't know.
Speaker 2: Do political realities in your mind dictate one or the other.
Speaker 2: Is it easier to say in China we're going to
Speaker 2: be market leaders and focus on that, and in the
Speaker 2: US you just have to face the political reality that
Speaker 2: you need to control this thing because the people they
Speaker 2: are voting are the people losing their jobs.
Speaker 9: Well, I think that if you can trust the China
Speaker 9: approach versus the US approach, I think you can mandate
Speaker 9: that we're going to be a leader and that we
Speaker 9: are going to win there, but that doesn't mean that
Speaker 9: you deliver on being the winner in leading there. And
Speaker 9: I think that's what makes the US development of AI
Speaker 9: quite unique is that we have multiple free market economy
Speaker 9: participants trying to build the best models, and so far
Speaker 9: that have resulted in US having.
Speaker 4: A lead in the models.
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