1 00:00:02,480 --> 00:00:06,800 Speaker 1: Bloomberg Audio Studios, podcasts, radio news. 2 00:00:09,640 --> 00:00:12,840 Speaker 2: This is the Bloomberg Daybreak Aisia podcast. I'm Doug Krisner. 3 00:00:12,920 --> 00:00:15,400 Speaker 2: You can join Brian Curtis and myself for the stories, 4 00:00:15,440 --> 00:00:18,520 Speaker 2: making news and moving markets in the APAC region. You 5 00:00:18,600 --> 00:00:21,439 Speaker 2: can subscribe to the show anywhere you get your podcast 6 00:00:21,520 --> 00:00:24,919 Speaker 2: and always on Bloomberg Radio, the Bloomberg Terminal, and the 7 00:00:24,920 --> 00:00:26,080 Speaker 2: Bloomberg Business App. 8 00:00:27,000 --> 00:00:29,400 Speaker 3: Joining us now for look at markets in the Asia 9 00:00:29,400 --> 00:00:33,879 Speaker 3: Pacific and globally is Jamie Cox, Managing partner at Harris 10 00:00:33,880 --> 00:00:37,879 Speaker 3: Financial Group. Jamie, thanks very much. So I was characterizing 11 00:00:37,920 --> 00:00:41,760 Speaker 3: the CPI report as offering some positives to the market 12 00:00:42,360 --> 00:00:44,280 Speaker 3: and the FED meeting. Well, I suppose you could take 13 00:00:44,280 --> 00:00:48,519 Speaker 3: that either way. One rate cut penciled in this year 14 00:00:48,560 --> 00:00:51,080 Speaker 3: instead of three and then one more next year still 15 00:00:51,120 --> 00:00:54,200 Speaker 3: means that for the next eighteen months a year and 16 00:00:54,200 --> 00:00:58,880 Speaker 3: a half, FED policymakers are expecting one fewer rate cut 17 00:00:58,960 --> 00:01:03,080 Speaker 3: than what the market is thinking. Yet the markets were buoyant. 18 00:01:03,240 --> 00:01:06,000 Speaker 3: So just your thoughts on the current environment. 19 00:01:07,080 --> 00:01:09,399 Speaker 4: Well, I mean, this is the third consecutive session that 20 00:01:09,440 --> 00:01:11,400 Speaker 4: you've seen, you know, all time highs for the S 21 00:01:11,480 --> 00:01:15,600 Speaker 4: and P five hundred. Markets don't need rate cuts. That's 22 00:01:15,640 --> 00:01:18,440 Speaker 4: the bottom line. I mean, we're sitting at a situation. Yeah, 23 00:01:18,480 --> 00:01:21,440 Speaker 4: I really believe that it's that investors are begging for 24 00:01:21,480 --> 00:01:23,760 Speaker 4: the wrong thing when they're asking for the Fed to 25 00:01:23,800 --> 00:01:27,560 Speaker 4: cut rates. You know, historically, the time between the last 26 00:01:27,920 --> 00:01:31,720 Speaker 4: increase in the FED funds rate and the first decrease 27 00:01:32,080 --> 00:01:34,760 Speaker 4: in the FED funds rate sometime later is when the 28 00:01:34,800 --> 00:01:38,760 Speaker 4: markets are strongest and and the majority of the return 29 00:01:38,880 --> 00:01:41,720 Speaker 4: during that period is front loaded. So investors need to 30 00:01:41,760 --> 00:01:43,640 Speaker 4: be careful what they wish for when they when they're 31 00:01:43,640 --> 00:01:46,360 Speaker 4: talking about rates. If rates are pushed into the future, 32 00:01:46,760 --> 00:01:49,480 Speaker 4: it's actually very very positive for stocks. It's been It's 33 00:01:49,520 --> 00:01:52,480 Speaker 4: actually the Goldilock scenario in markets. So I believe that 34 00:01:52,560 --> 00:01:55,560 Speaker 4: most people will be happy to for the Fed to 35 00:01:55,600 --> 00:01:57,920 Speaker 4: be you know a little bit more sanguine in their 36 00:01:58,000 --> 00:01:59,160 Speaker 4: need to cut rates quickly. 37 00:01:59,480 --> 00:02:03,320 Speaker 2: Soldilocks and no bears looking around the corner. Is that 38 00:02:03,360 --> 00:02:05,960 Speaker 2: the way you see it now, Jamie, Well. 39 00:02:05,840 --> 00:02:08,000 Speaker 4: You know, it's really interesting. I mean, we were sitting 40 00:02:08,000 --> 00:02:10,679 Speaker 4: at a very similar time to the mid nineties, where 41 00:02:10,720 --> 00:02:14,280 Speaker 4: you have this massive productivity wave that is yet to 42 00:02:14,320 --> 00:02:19,160 Speaker 4: be realized. You're seeing you know, massive infrastructure investment, the 43 00:02:19,320 --> 00:02:22,040 Speaker 4: likes we haven't seen in such a long time try to, 44 00:02:22,160 --> 00:02:25,680 Speaker 4: you know, build out the AI infrastructure. We have not 45 00:02:25,760 --> 00:02:28,120 Speaker 4: yet seen the benefits of it. We've only seen the 46 00:02:28,160 --> 00:02:30,960 Speaker 4: beginning of the investment component, and that's going to be 47 00:02:31,200 --> 00:02:33,799 Speaker 4: very negative for inflation in the future. So I think 48 00:02:33,840 --> 00:02:38,160 Speaker 4: markets are looking beyond the temporary factors that have you know, 49 00:02:38,880 --> 00:02:41,440 Speaker 4: you know, kept the last mile of inflation from coming 50 00:02:41,480 --> 00:02:43,640 Speaker 4: down to the target from the Fed, and looking at 51 00:02:43,720 --> 00:02:46,200 Speaker 4: the future and saying, gosh, there's some really positive things 52 00:02:46,240 --> 00:02:49,680 Speaker 4: that are happening in tech and energy and industrials. This 53 00:02:49,760 --> 00:02:52,880 Speaker 4: is a really good time to invest. And you know, 54 00:02:53,320 --> 00:02:55,600 Speaker 4: there's a lot of people who are afraid and that 55 00:02:55,720 --> 00:02:58,160 Speaker 4: is and they think markets aren't good and it's just 56 00:02:58,280 --> 00:03:00,400 Speaker 4: not true. I mean, people aren't paying attention to all 57 00:03:00,400 --> 00:03:02,480 Speaker 4: of the benefits and all the earnings, all the money 58 00:03:02,520 --> 00:03:05,640 Speaker 4: that's being made. And now, what's interesting to me, I 59 00:03:05,680 --> 00:03:07,880 Speaker 4: work with a lot of retired people, and for the 60 00:03:07,919 --> 00:03:10,079 Speaker 4: first time in the long time, people's retirements are a 61 00:03:10,160 --> 00:03:13,080 Speaker 4: lot more secure now because they can actually earn respectable 62 00:03:13,280 --> 00:03:16,680 Speaker 4: face income rates on their investments. It's the irony is 63 00:03:17,120 --> 00:03:19,040 Speaker 4: not lost on me on how much better things are 64 00:03:19,080 --> 00:03:19,959 Speaker 4: when rates are higher. 65 00:03:20,720 --> 00:03:22,360 Speaker 3: Doug, you listen to me every day. This guy's in 66 00:03:22,400 --> 00:03:24,760 Speaker 3: my head. This is what I've been talking about. I mean, 67 00:03:24,840 --> 00:03:27,160 Speaker 3: I couldn't agree more. Who cares what I think? But 68 00:03:27,200 --> 00:03:29,720 Speaker 3: we do care what you think, Jamie, and I know 69 00:03:29,760 --> 00:03:32,600 Speaker 3: that you're sort of big on the broadening theme, and 70 00:03:32,680 --> 00:03:34,720 Speaker 3: I was just having a look a little bit earlier 71 00:03:34,720 --> 00:03:36,920 Speaker 3: this morning. The S and B five hundred is up 72 00:03:36,960 --> 00:03:40,600 Speaker 3: about twenty four percent over the past twelve months, and 73 00:03:40,720 --> 00:03:43,800 Speaker 3: the equal weight S and P is up sixteen percent. 74 00:03:44,080 --> 00:03:46,400 Speaker 3: Now that's not as much, but it's not bad. 75 00:03:47,880 --> 00:03:49,000 Speaker 5: No, it's actually good. 76 00:03:49,080 --> 00:03:51,400 Speaker 4: I'm actually glad because it's been way worse than that 77 00:03:51,840 --> 00:03:54,240 Speaker 4: over the past couple of years. I mean, you've had, 78 00:03:54,480 --> 00:03:58,280 Speaker 4: you know, the top tech stocks which are consistently bringing 79 00:03:58,360 --> 00:04:00,760 Speaker 4: the average hire, but you're so already to see the 80 00:04:00,800 --> 00:04:03,840 Speaker 4: rest of the rest of the field catch up, and 81 00:04:03,960 --> 00:04:07,640 Speaker 4: last year financials were a gigantic drag on the equal 82 00:04:07,640 --> 00:04:11,360 Speaker 4: weight SMP. That seems to be turning around some and 83 00:04:11,400 --> 00:04:13,720 Speaker 4: you're also seeing some of the other the other areas 84 00:04:13,760 --> 00:04:15,960 Speaker 4: of utilities and things like I start to get some 85 00:04:16,040 --> 00:04:19,520 Speaker 4: life behind them. So the broadening out of of the 86 00:04:19,800 --> 00:04:22,440 Speaker 4: of the sector weightings I think is very positive. It's 87 00:04:22,480 --> 00:04:24,600 Speaker 4: been talked about and talked about and talked about that 88 00:04:24,800 --> 00:04:27,760 Speaker 4: never happened, and I believe it's happening in earnest now 89 00:04:28,360 --> 00:04:31,479 Speaker 4: and there's a lot of people who had diversified portfolios 90 00:04:31,520 --> 00:04:34,320 Speaker 4: who have really been kicking themselves for not having it 91 00:04:34,400 --> 00:04:37,320 Speaker 4: all in the Nasdaq or in the queues are finally 92 00:04:37,360 --> 00:04:40,840 Speaker 4: going to benefit from that diversification. So so here here 93 00:04:40,880 --> 00:04:41,039 Speaker 4: to that. 94 00:04:41,200 --> 00:04:43,680 Speaker 2: Yeah, I'm wondering whether we can't make the same statement 95 00:04:43,760 --> 00:04:47,960 Speaker 2: about being overly diverse in geographically when it comes to 96 00:04:48,040 --> 00:04:51,880 Speaker 2: equity markets around the world. Proof it kind of the 97 00:04:51,960 --> 00:04:54,720 Speaker 2: data points that Brian just mentioned that maybe you really 98 00:04:54,760 --> 00:04:57,760 Speaker 2: needed to be overly exposed to the US through this period. 99 00:04:58,839 --> 00:05:01,560 Speaker 4: Yeah, that's that is for sure. There is no question 100 00:05:01,640 --> 00:05:05,600 Speaker 4: that the US markets have dominated everything, and I don't 101 00:05:05,640 --> 00:05:09,360 Speaker 4: think that's going to change. I mean, there are some divergence, 102 00:05:09,640 --> 00:05:13,040 Speaker 4: you know, in central bank policy that may change the 103 00:05:13,120 --> 00:05:18,560 Speaker 4: dynamic a little bit, But when everything is so tech dominant, 104 00:05:19,080 --> 00:05:21,440 Speaker 4: there's really no other part of the world that can compete. 105 00:05:21,720 --> 00:05:24,320 Speaker 4: And that's just the bottom line. And as long as 106 00:05:24,360 --> 00:05:26,479 Speaker 4: that persists, I think that's the way it's going to be. 107 00:05:26,600 --> 00:05:30,440 Speaker 4: Unless there's a major turnover in tech. I think that 108 00:05:30,600 --> 00:05:34,279 Speaker 4: US markets will remain the leader period in the discussion. 109 00:05:34,720 --> 00:05:39,400 Speaker 3: So that said, the tai X in Taiwan is up 110 00:05:39,720 --> 00:05:42,120 Speaker 3: sixteen percent year to date. That's more than the S 111 00:05:42,160 --> 00:05:47,120 Speaker 3: and p's thirteen percent. And also the EK in yen 112 00:05:47,240 --> 00:05:49,559 Speaker 3: terms is up sixteen percent. There's only up four percent 113 00:05:49,600 --> 00:05:51,479 Speaker 3: in dollar terms. But that's kind of the crux of 114 00:05:51,480 --> 00:05:53,919 Speaker 3: the problem, isn't it. The dollar has been so strong 115 00:05:54,320 --> 00:05:56,360 Speaker 3: that it's kind of pummeled a lot of foreign markets. 116 00:05:57,400 --> 00:05:58,000 Speaker 1: Yeah, it's been. 117 00:05:58,080 --> 00:06:00,760 Speaker 4: It's been difficult to be a US US investor and 118 00:06:01,160 --> 00:06:04,839 Speaker 4: devote some of your capital overseas. That is definitely the 119 00:06:04,839 --> 00:06:08,640 Speaker 4: currency translation is in your way, But that doesn't mean 120 00:06:08,640 --> 00:06:12,480 Speaker 4: that there aren't plenty of opportunities. And you know, it 121 00:06:12,480 --> 00:06:15,680 Speaker 4: has been such a long time since international markets dominated. 122 00:06:16,200 --> 00:06:18,640 Speaker 4: At some point the pendulum will switch, but I don't 123 00:06:18,640 --> 00:06:21,000 Speaker 4: think that's any time soon. I think that it's very 124 00:06:21,040 --> 00:06:25,200 Speaker 4: much a sector specific story, perhaps in Taiwan, but I 125 00:06:25,240 --> 00:06:28,240 Speaker 4: don't think that you're going to see much change, not 126 00:06:28,360 --> 00:06:30,800 Speaker 4: for a while. The US is so dominant from a 127 00:06:30,800 --> 00:06:33,640 Speaker 4: consumption point of view, it's really difficult to change the 128 00:06:33,720 --> 00:06:34,360 Speaker 4: narrative there. 129 00:06:35,240 --> 00:06:37,240 Speaker 3: All right, Jamie, thanks very much for joining us here 130 00:06:37,279 --> 00:06:39,320 Speaker 3: live on the program. Enjoyed the chat. We'll get you 131 00:06:39,360 --> 00:06:43,760 Speaker 3: back again, Jamie Cox, managing partner at Harris Financial Group. 132 00:06:50,960 --> 00:06:53,800 Speaker 2: Well after the belt here in the US, Broadcom reported 133 00:06:53,920 --> 00:06:59,040 Speaker 2: quarterly results and gave an annual forecast, both topping estimates. 134 00:06:59,279 --> 00:07:02,240 Speaker 2: This is a reflect reduction of robust demand for artificial 135 00:07:02,279 --> 00:07:05,800 Speaker 2: intelligence products. We have a bit more from Bloomberg's Charlie Pellett. 136 00:07:06,560 --> 00:07:09,680 Speaker 5: Broadcom is a chip supplier to Apple and other big 137 00:07:09,800 --> 00:07:13,120 Speaker 5: tech companies. It said sales in the full fiscal year, 138 00:07:13,320 --> 00:07:17,160 Speaker 5: which runs through October, will be about fifty one billion dollars. 139 00:07:17,400 --> 00:07:21,200 Speaker 5: Analysts had projected about fifty point six billion. The race 140 00:07:21,280 --> 00:07:26,760 Speaker 5: to build artificial intelligence systems has benefited semiconductor companies like Broadcom, 141 00:07:27,040 --> 00:07:29,920 Speaker 5: even though they don't sell the highly prized AI chips 142 00:07:29,920 --> 00:07:33,400 Speaker 5: that are made by Nvidia in New York, Charlie Pellett 143 00:07:33,440 --> 00:07:35,400 Speaker 5: Bloomberg Radio, and. 144 00:07:35,320 --> 00:07:39,040 Speaker 3: The stock jumped almost fifteen percent in late trading. Joining 145 00:07:39,080 --> 00:07:43,280 Speaker 3: us for more on Broadcom is Kunjhon Sobani, senior semiconductor 146 00:07:43,320 --> 00:07:47,280 Speaker 3: analyst for Bloomberg Intelligence. Kunjohn, thanks very much for coming in. 147 00:07:47,360 --> 00:07:49,640 Speaker 3: So we had a revenue beat and a profit beat, 148 00:07:50,320 --> 00:07:52,960 Speaker 3: and then we also had a forecast beat. But these 149 00:07:52,960 --> 00:07:57,520 Speaker 3: were not really massive beats. There is this stock split, 150 00:07:57,840 --> 00:07:59,880 Speaker 3: but it's a little tricky trying to figure out what 151 00:08:00,240 --> 00:08:03,640 Speaker 3: drove the stock up nearly fifteen percent in late trading. 152 00:08:03,680 --> 00:08:05,760 Speaker 3: So I'll put that question to you. What did. 153 00:08:07,280 --> 00:08:07,520 Speaker 6: Yeah? 154 00:08:07,560 --> 00:08:11,600 Speaker 7: So, I mean, the short answer is everything that investors 155 00:08:11,640 --> 00:08:14,720 Speaker 7: and as analysts were looking and hoping for during the 156 00:08:14,760 --> 00:08:18,240 Speaker 7: call sort of came in line. There were three things 157 00:08:18,320 --> 00:08:20,160 Speaker 7: going into Gold. We wanted to see an upside to 158 00:08:20,200 --> 00:08:24,840 Speaker 7: the AI numbers, which did happen, actually significant upside to 159 00:08:24,880 --> 00:08:27,920 Speaker 7: the AI specific numbers, even though on a total revenue 160 00:08:27,960 --> 00:08:30,640 Speaker 7: as you said, it was not a big upside. Second, 161 00:08:30,680 --> 00:08:33,680 Speaker 7: we wanted to look at better or upside to the 162 00:08:33,800 --> 00:08:37,240 Speaker 7: VMware numbers, both for the quarter and the outlook, which 163 00:08:37,280 --> 00:08:41,360 Speaker 7: did happen. VMware numbers came better than what the speed estimated, 164 00:08:41,440 --> 00:08:44,320 Speaker 7: and the outlook looks again better both in terms of 165 00:08:44,360 --> 00:08:46,960 Speaker 7: revenue growth as well as the cost cutting and the 166 00:08:47,000 --> 00:08:50,160 Speaker 7: integration part of it. And Third, we wanted to see 167 00:08:50,920 --> 00:08:54,640 Speaker 7: a sort of a confirmed bottom and a clarity of 168 00:08:54,679 --> 00:08:58,880 Speaker 7: recovery in its non AI sychnical business, which again did happen, 169 00:08:59,360 --> 00:09:02,839 Speaker 7: most of it non AI cyclical business. The company said 170 00:09:03,000 --> 00:09:05,760 Speaker 7: Q two will be the bottom except for broadband, which 171 00:09:05,920 --> 00:09:07,520 Speaker 7: will continue to persist weakness. 172 00:09:07,640 --> 00:09:10,720 Speaker 2: Con John, you know, semiconductor is such a broad category. 173 00:09:10,760 --> 00:09:14,240 Speaker 2: We talk about the AI accelerators, when we talk about 174 00:09:14,280 --> 00:09:17,000 Speaker 2: in Nvidia, we talk about the memory chips companies like 175 00:09:17,080 --> 00:09:21,920 Speaker 2: Micron and Samsung. Sk Heinex help me understand the products 176 00:09:22,240 --> 00:09:26,400 Speaker 2: that Broadcom is involved in manufacturing and how that fits 177 00:09:26,400 --> 00:09:29,559 Speaker 2: into the overall chip ecosystem. 178 00:09:29,720 --> 00:09:33,920 Speaker 7: Yeah, so I'll Broadcom has many semiconductor businesses, but for 179 00:09:34,040 --> 00:09:35,480 Speaker 7: this I'll stick to the AI portion. 180 00:09:35,880 --> 00:09:36,880 Speaker 6: So it has two. 181 00:09:37,160 --> 00:09:42,240 Speaker 7: Major products when it comes to AI. One is the accelerators, 182 00:09:42,480 --> 00:09:45,520 Speaker 7: which is the ACIC accelerators that it only sells to 183 00:09:46,000 --> 00:09:50,239 Speaker 7: these large cloud providers and hyperscalers like Google and Facebook, 184 00:09:50,720 --> 00:09:54,320 Speaker 7: And this is sort of an alternative to the merchant 185 00:09:54,400 --> 00:09:58,240 Speaker 7: GPU Silicon do, Nvidia and AMD Cell. So there's a 186 00:09:58,280 --> 00:10:01,800 Speaker 7: portion of that market where Dotcom is the leader actually 187 00:10:01,880 --> 00:10:05,200 Speaker 7: and the number one and has majority share in that market. 188 00:10:05,840 --> 00:10:08,439 Speaker 7: Other than that, in AI, they sell a lot of 189 00:10:08,520 --> 00:10:11,880 Speaker 7: networking and connectivity chips, so you need to connect all 190 00:10:11,920 --> 00:10:16,160 Speaker 7: of these memories and GPUs on networks and optics. So 191 00:10:16,200 --> 00:10:19,480 Speaker 7: there's a lot of chips and components involved here that 192 00:10:19,679 --> 00:10:22,559 Speaker 7: Broadcom sort of supports the ecosystem. 193 00:10:22,960 --> 00:10:26,000 Speaker 3: Yeah, it's a it's a very complex and big company. 194 00:10:26,360 --> 00:10:30,080 Speaker 3: There's a there's a big software component too. And one 195 00:10:30,120 --> 00:10:33,199 Speaker 3: of the reasons that maybe Broadcom stock had lagged a 196 00:10:33,240 --> 00:10:35,400 Speaker 3: little bit over the past quarter. And I say that 197 00:10:35,520 --> 00:10:38,880 Speaker 3: because a week ago the stock was at about thirteen 198 00:10:38,920 --> 00:10:42,080 Speaker 3: hundred dollars and change, and you know, it had gotten 199 00:10:42,120 --> 00:10:45,120 Speaker 3: to over fourteen hundred way back when it announced earnings 200 00:10:45,120 --> 00:10:47,680 Speaker 3: a quarter ago. Hasn't done all that much. And that 201 00:10:47,760 --> 00:10:50,600 Speaker 3: coincided with a lot of selling and software company, I 202 00:10:50,600 --> 00:10:53,080 Speaker 3: mean software has struggled quite a lot. And if you 203 00:10:53,080 --> 00:10:57,040 Speaker 3: look at Broadcoms mix you talked about the semiconductors, I 204 00:10:57,040 --> 00:10:59,600 Speaker 3: think they run about sixty seventy percent. You've got twenty 205 00:10:59,600 --> 00:11:03,640 Speaker 3: percent VMware another ten or fifteen percent in software. So 206 00:11:03,720 --> 00:11:06,560 Speaker 3: maybe a little bit of relief from investors today that yeah, 207 00:11:06,559 --> 00:11:07,880 Speaker 3: the software portion was okay. 208 00:11:09,200 --> 00:11:10,840 Speaker 6: Yeah, you're definitely on spot. 209 00:11:10,880 --> 00:11:13,640 Speaker 7: And one of the concerns with this VMware deal is 210 00:11:13,679 --> 00:11:17,719 Speaker 7: their largest and a bit different than the typical software 211 00:11:17,760 --> 00:11:20,840 Speaker 7: assets that they've acquired in the past, where they only 212 00:11:20,840 --> 00:11:24,840 Speaker 7: focus on select few large customers. But VMware has hundreds 213 00:11:24,840 --> 00:11:27,560 Speaker 7: of thousands of customers, so exactly put right, you know, 214 00:11:27,600 --> 00:11:30,600 Speaker 7: the coster coming down better than what they had laid out, 215 00:11:30,840 --> 00:11:34,080 Speaker 7: and the revenue growth is not being impacted as some 216 00:11:34,840 --> 00:11:38,040 Speaker 7: had worried. So a relief over there that the software 217 00:11:38,080 --> 00:11:39,400 Speaker 7: per piece is still doing. 218 00:11:39,200 --> 00:11:40,199 Speaker 5: Fine, Kunchan. 219 00:11:40,280 --> 00:11:42,600 Speaker 2: When you look at the overall industry right now, so 220 00:11:42,679 --> 00:11:45,720 Speaker 2: much of this, as we've been discussing, revolves on the 221 00:11:46,000 --> 00:11:50,559 Speaker 2: around the AI trade. Are you seeing signs of any 222 00:11:50,679 --> 00:11:54,160 Speaker 2: type of a slowdown in demand or is thing? Are 223 00:11:54,200 --> 00:11:57,040 Speaker 2: things still firing on all cylinders. 224 00:11:58,240 --> 00:12:03,000 Speaker 7: From our perspective, for the pure play AI chip makers, 225 00:12:03,280 --> 00:12:06,120 Speaker 7: not the ones you know, not the wannabes, but the 226 00:12:06,120 --> 00:12:10,040 Speaker 7: ones who are currently selling, see don't see any slowdown. 227 00:12:10,760 --> 00:12:13,079 Speaker 7: One proof point of that is if you look at 228 00:12:13,120 --> 00:12:18,280 Speaker 7: all the biggest US hyperscalers and cloud service providers, they 229 00:12:18,320 --> 00:12:21,920 Speaker 7: inaggregate have raised their CAPEX spending for twenty twenty four 230 00:12:22,360 --> 00:12:25,640 Speaker 7: by forty percent over twenty three levels, which were already 231 00:12:25,800 --> 00:12:29,720 Speaker 7: at sky high. So as long as those guys don't 232 00:12:29,760 --> 00:12:33,400 Speaker 7: pause or slow down spending, the AI chip pure play 233 00:12:33,800 --> 00:12:35,880 Speaker 7: names should be fine, because those are the ones who 234 00:12:35,880 --> 00:12:37,720 Speaker 7: are they're spending the most money on. 235 00:12:39,280 --> 00:12:40,920 Speaker 3: You know, it's kind of funny. I was just looking 236 00:12:40,960 --> 00:12:43,600 Speaker 3: inside the costp here for some of the gains this morning, 237 00:12:44,040 --> 00:12:46,720 Speaker 3: and you know you can imagine after the broadcon print 238 00:12:46,760 --> 00:12:50,000 Speaker 3: and the reaction to it, information technology is up two 239 00:12:50,040 --> 00:12:52,720 Speaker 3: and a half percent, But it's not the biggest gainer. 240 00:12:52,760 --> 00:12:56,960 Speaker 3: What's the biggest gainer utilities? So you know that's kind 241 00:12:57,000 --> 00:13:00,760 Speaker 3: of tied now utilities and power producers sort of tied 242 00:13:00,800 --> 00:13:04,000 Speaker 3: to the AI trade. A lot of people exposed to this. 243 00:13:04,040 --> 00:13:08,480 Speaker 3: So my question to you, Ken John is what's the 244 00:13:08,480 --> 00:13:10,920 Speaker 3: most important thing to watch for? Is it a warning 245 00:13:11,000 --> 00:13:14,559 Speaker 3: from in video when in Vidia finally does say worn 246 00:13:14,720 --> 00:13:17,600 Speaker 3: on revenue? Is that the time you know, up until 247 00:13:17,600 --> 00:13:19,840 Speaker 3: that time, you're okay, but then look out? 248 00:13:21,480 --> 00:13:25,000 Speaker 7: Yeah, I think Nvidia could be definitely a good bogie. 249 00:13:25,080 --> 00:13:29,880 Speaker 7: So if Nvidia says any concerning comments, that's definitely a 250 00:13:29,920 --> 00:13:33,480 Speaker 7: big signal given that they have about more than ninety 251 00:13:33,480 --> 00:13:36,840 Speaker 7: percent share there. Another good proxy point could be again 252 00:13:36,920 --> 00:13:41,120 Speaker 7: the CAPEX spending from the large four or five cloud 253 00:13:41,320 --> 00:13:43,960 Speaker 7: to the providers and hyperscalers. If they come out and 254 00:13:44,000 --> 00:13:47,200 Speaker 7: say that they're reducing their spend for twenty twenty five, 255 00:13:47,720 --> 00:13:49,040 Speaker 7: that could be to say. 256 00:13:49,120 --> 00:13:52,640 Speaker 2: Another concern you mentioned the wannabes, and I'd like you 257 00:13:52,679 --> 00:13:55,400 Speaker 2: to expand on that the companies that are aspiring to 258 00:13:55,920 --> 00:13:58,400 Speaker 2: rise to the level of Nvidia, maybe they've got a 259 00:13:58,440 --> 00:14:00,840 Speaker 2: heavy lift ahead of them, but the R and D 260 00:14:01,000 --> 00:14:04,000 Speaker 2: spending that would be required to engineer a chip as 261 00:14:04,040 --> 00:14:09,400 Speaker 2: sophisticated as some of the AI accelerators that in Vidia manufacturers. 262 00:14:10,640 --> 00:14:14,000 Speaker 2: Can you imagine a world where a company rivals in 263 00:14:14,120 --> 00:14:15,040 Speaker 2: Vida at some point? 264 00:14:17,000 --> 00:14:19,000 Speaker 6: I mean, you could never say never. 265 00:14:19,840 --> 00:14:23,640 Speaker 7: You know, we have a good precedent from Intel at 266 00:14:23,640 --> 00:14:27,920 Speaker 7: one point the largest semiconductor company by revenue, by unit sales, etc. 267 00:14:28,200 --> 00:14:30,640 Speaker 7: And we used to you know, I've covered this sect. 268 00:14:30,760 --> 00:14:32,760 Speaker 7: I've been in this industry for twenty years. I used 269 00:14:32,760 --> 00:14:35,440 Speaker 7: to think of like, nobody could ever overtake Intel, right, 270 00:14:35,480 --> 00:14:37,680 Speaker 7: but it did happen, So you can. 271 00:14:37,600 --> 00:14:39,400 Speaker 6: Never say never. But yes, you're right. 272 00:14:39,600 --> 00:14:42,520 Speaker 7: I mean, at this point you were talking about tens, 273 00:14:42,600 --> 00:14:45,240 Speaker 7: if not in fifties, you know, billions. 274 00:14:44,880 --> 00:14:47,960 Speaker 6: Of dollars of R and D to catch up to Nvidia. 275 00:14:48,000 --> 00:14:51,440 Speaker 7: So it's really that Nvidia has to misstep itself or 276 00:14:51,520 --> 00:14:54,320 Speaker 7: hit itself in the foot to get someone else ahead 277 00:14:54,360 --> 00:14:54,640 Speaker 7: of them. 278 00:14:55,320 --> 00:14:57,800 Speaker 3: All right, Cunjohn, thanks so much for joining us. Some 279 00:14:57,840 --> 00:15:03,000 Speaker 3: great information there. Kunjohn's Bonnie Senior semiconductor analyst for Bloomberg 280 00:15:03,200 --> 00:15:15,040 Speaker 3: Intelligence looking at Broadcom in its earnings earlier today. Joining 281 00:15:15,120 --> 00:15:18,720 Speaker 3: us here on the program is Sarah Ponzak, financial advisor 282 00:15:18,800 --> 00:15:22,000 Speaker 3: at UBS Private Wealth Management. Well, let's talk about the 283 00:15:22,040 --> 00:15:25,240 Speaker 3: FED here. On the face of it, this was actually 284 00:15:25,280 --> 00:15:29,160 Speaker 3: a hawkish FED meeting, given the one rate cut this 285 00:15:29,280 --> 00:15:32,400 Speaker 3: year down from three in the dot plots, and also 286 00:15:32,440 --> 00:15:35,520 Speaker 3: the raising of the core inflation forecast by the end 287 00:15:35,560 --> 00:15:38,840 Speaker 3: of the year. But the market response was, as we know, 288 00:15:39,040 --> 00:15:41,080 Speaker 3: quite positive, with the S and P five hundred up 289 00:15:41,120 --> 00:15:44,640 Speaker 3: almost one percent. I think many would say that this 290 00:15:44,800 --> 00:15:49,360 Speaker 3: is that the market has confidence in disinflation and confidence 291 00:15:49,440 --> 00:15:51,960 Speaker 3: in the FED. Would you agree, I. 292 00:15:51,920 --> 00:15:53,280 Speaker 1: Would absolutely agree with you. 293 00:15:53,320 --> 00:15:55,560 Speaker 8: I think, especially if you just look at today's market action, 294 00:15:56,200 --> 00:15:57,440 Speaker 8: the market would agree. 295 00:15:57,240 --> 00:15:59,320 Speaker 1: With you as well. Look, when it comes. 296 00:15:59,120 --> 00:16:02,600 Speaker 8: To the FED meeting today, you highlighted it. Really what 297 00:16:02,720 --> 00:16:05,800 Speaker 8: the big news was was that dot plot, the fact 298 00:16:06,160 --> 00:16:09,040 Speaker 8: that the median dot in the dot plot is now 299 00:16:09,200 --> 00:16:12,520 Speaker 8: only pointing to one rate cut in twenty twenty four. 300 00:16:12,880 --> 00:16:17,280 Speaker 1: But if you listen to many market watchers strategists, you. 301 00:16:17,240 --> 00:16:19,560 Speaker 8: Even look at what the market is pricing, what a 302 00:16:19,560 --> 00:16:22,560 Speaker 8: lot of people are thinking is that, well, maybe you 303 00:16:22,600 --> 00:16:27,600 Speaker 8: know these FED officials submitted their dots before this morning's 304 00:16:27,640 --> 00:16:31,720 Speaker 8: inflation data. Because this morning's inflation data, and you laid 305 00:16:31,760 --> 00:16:33,400 Speaker 8: it out right at the top of the show, the 306 00:16:33,440 --> 00:16:37,120 Speaker 8: fact that we saw CPI rise year every year by 307 00:16:37,160 --> 00:16:40,000 Speaker 8: three point four percent in May, that's the slowest pace 308 00:16:40,000 --> 00:16:41,880 Speaker 8: of more than three years. I think the Fed might 309 00:16:41,880 --> 00:16:44,240 Speaker 8: be patting themselves on the back a little bit saying, 310 00:16:44,240 --> 00:16:44,920 Speaker 8: all right. 311 00:16:44,760 --> 00:16:46,640 Speaker 1: We're seeing disinflation now. 312 00:16:47,000 --> 00:16:50,240 Speaker 8: The market really latched onto that and said, okay, well, 313 00:16:50,360 --> 00:16:53,920 Speaker 8: inflation's coming down. Sure, the Fed is saying only one 314 00:16:53,960 --> 00:16:56,160 Speaker 8: cut this year, but you add it all together, what 315 00:16:56,200 --> 00:16:58,000 Speaker 8: do you get. You have a market that's still pricing 316 00:16:58,040 --> 00:16:59,800 Speaker 8: in two cuts this year. So the market is still 317 00:16:59,840 --> 00:17:01,040 Speaker 8: called the fence bloff there. 318 00:17:01,480 --> 00:17:03,880 Speaker 2: So maybe we can agree that the degree of easing 319 00:17:03,960 --> 00:17:06,639 Speaker 2: really hasn't changed much. I mean, Brian talked about the 320 00:17:06,680 --> 00:17:09,240 Speaker 2: fact that now there are more rate cuts forecast in 321 00:17:09,280 --> 00:17:13,120 Speaker 2: twenty twenty five. Timeline has changed a little bit here. 322 00:17:13,240 --> 00:17:15,040 Speaker 2: But in your view, Sarah, what does it mean for 323 00:17:15,080 --> 00:17:18,840 Speaker 2: the market, for the equity market in particular, correct, So. 324 00:17:18,840 --> 00:17:23,080 Speaker 8: I don't think today's events really mean all that much 325 00:17:23,200 --> 00:17:26,720 Speaker 8: as it pertains to change for the equity market. Sure, 326 00:17:26,840 --> 00:17:29,600 Speaker 8: if we get a cut one quarter or one month 327 00:17:29,680 --> 00:17:33,119 Speaker 8: later than expected before, that's not that big of a 328 00:17:33,119 --> 00:17:36,720 Speaker 8: difference as long as the direction of travel remains the same, and. 329 00:17:36,680 --> 00:17:39,080 Speaker 1: The direction of travel for interest rates. 330 00:17:39,080 --> 00:17:42,240 Speaker 8: As of now still remains lower. The expectation is that 331 00:17:42,240 --> 00:17:44,040 Speaker 8: the Fed's going to start cutting. Whether it's at the 332 00:17:44,119 --> 00:17:46,840 Speaker 8: end of twenty four or the beginning of twenty twenty five, 333 00:17:47,160 --> 00:17:49,520 Speaker 8: doesn't really matter, as long as they start cutting interest 334 00:17:49,600 --> 00:17:51,119 Speaker 8: rates and they continue. 335 00:17:50,760 --> 00:17:51,520 Speaker 1: Along that path. 336 00:17:51,640 --> 00:17:54,720 Speaker 8: So when we look at the outlook for the equity market, 337 00:17:55,040 --> 00:17:58,600 Speaker 8: we actually see reason for its stocks to potentially grind 338 00:17:58,680 --> 00:18:02,320 Speaker 8: higher from here. A few fundamental factors there, one of 339 00:18:02,359 --> 00:18:04,920 Speaker 8: course being the expectation that interest rates are going. 340 00:18:04,760 --> 00:18:05,320 Speaker 1: To come down. 341 00:18:05,760 --> 00:18:08,720 Speaker 8: But behind that, really the fact of the matter being 342 00:18:08,720 --> 00:18:13,000 Speaker 8: that the US economy remains solid. But we have seen 343 00:18:13,119 --> 00:18:17,480 Speaker 8: this modest deceleration towards a soft landing. If you look 344 00:18:17,520 --> 00:18:21,520 Speaker 8: at JOLDS data, if you look at housing data, credit 345 00:18:21,560 --> 00:18:25,800 Speaker 8: card spending, ism, manufacturing data, we've seen a softening, but 346 00:18:25,960 --> 00:18:29,240 Speaker 8: not to a point that would warrant a complete falling 347 00:18:29,280 --> 00:18:31,680 Speaker 8: out of the economy, rather to a point in which 348 00:18:31,720 --> 00:18:34,359 Speaker 8: we can say, all right, we're seeing the economy slow. 349 00:18:34,720 --> 00:18:38,400 Speaker 8: We're seeing dissinflation. That's exactly what the Federal Reserve wants, 350 00:18:38,480 --> 00:18:40,640 Speaker 8: and that means that interest rates can come down over 351 00:18:40,680 --> 00:18:41,399 Speaker 8: the next year or so. 352 00:18:42,040 --> 00:18:45,000 Speaker 3: Yeah, it's kind of a quirky world though, Sarah, in 353 00:18:45,040 --> 00:18:48,600 Speaker 3: that if let's say interest rates come down, that will 354 00:18:48,640 --> 00:18:52,720 Speaker 3: actually hurt megacaps to a certain degree. And all of us, 355 00:18:53,200 --> 00:18:56,280 Speaker 3: all of you listening, who have more interest in yield 356 00:18:56,400 --> 00:18:59,080 Speaker 3: income than you have loans. That's a lot of people. 357 00:18:59,119 --> 00:19:01,320 Speaker 3: I mean, not all of us have a whole lot 358 00:19:01,320 --> 00:19:03,760 Speaker 3: of loans, but we're all taking advantage of getting five 359 00:19:03,800 --> 00:19:07,239 Speaker 3: percent yield, you know, in short term treasuries and in 360 00:19:07,440 --> 00:19:10,359 Speaker 3: cash equivalents. So I want to put it to you 361 00:19:10,400 --> 00:19:12,880 Speaker 3: that it might be one reason to hire for longer. 362 00:19:12,960 --> 00:19:15,280 Speaker 3: Is actually a good thing for many in this in 363 00:19:15,320 --> 00:19:18,120 Speaker 3: this economy, for savers. 364 00:19:17,640 --> 00:19:21,000 Speaker 1: And retireies, it is. And we have plenty of clients who. 365 00:19:21,080 --> 00:19:23,239 Speaker 3: Well, not just that, but think of the megacaps. They 366 00:19:23,280 --> 00:19:26,879 Speaker 3: have all this cash and no loans. The megacaps themselves, 367 00:19:27,840 --> 00:19:28,600 Speaker 3: there's a well. 368 00:19:28,480 --> 00:19:30,920 Speaker 1: Within the within the tech space, yes, megacap. 369 00:19:31,640 --> 00:19:35,000 Speaker 8: Now, megacap tech sucks are seen as quality stocks because 370 00:19:35,000 --> 00:19:35,960 Speaker 8: they have extremely. 371 00:19:35,680 --> 00:19:38,120 Speaker 1: Sturdy balance sheets. But if you think of tech as 372 00:19:38,119 --> 00:19:40,600 Speaker 1: a whole and growth. There are a lot of tech 373 00:19:40,640 --> 00:19:43,040 Speaker 1: companies and a lot of growth companies that still are 374 00:19:43,119 --> 00:19:44,960 Speaker 1: hanging on to a lot of debt. 375 00:19:45,240 --> 00:19:47,320 Speaker 8: And look, a lot of these you know, a lot 376 00:19:47,320 --> 00:19:50,720 Speaker 8: of these corporations, a lot of their executives are very smart, 377 00:19:50,760 --> 00:19:53,639 Speaker 8: and they locked in lower interest frees years ago. But 378 00:19:53,720 --> 00:19:56,359 Speaker 8: at some point in time, there is going to be 379 00:19:56,400 --> 00:19:58,919 Speaker 8: this wall of deep that's coming due, and there are 380 00:19:58,920 --> 00:20:01,600 Speaker 8: a lot of corporations out there that are going to 381 00:20:01,640 --> 00:20:02,920 Speaker 8: have to figure out what to do if all of 382 00:20:02,960 --> 00:20:06,119 Speaker 8: a sudden they have fixed debt maturing at higher interest. 383 00:20:05,920 --> 00:20:08,760 Speaker 1: Rates and now they have to work that into. 384 00:20:08,359 --> 00:20:12,160 Speaker 8: Their balance sheet and revenues and profits and whatnot. 385 00:20:12,359 --> 00:20:15,440 Speaker 1: So, yes, you're right. Look, if you're talking about the 386 00:20:15,480 --> 00:20:16,800 Speaker 1: biggest of the big. 387 00:20:16,640 --> 00:20:20,600 Speaker 8: Megacap tech SUCs that have strong balance sheets, and they're 388 00:20:20,640 --> 00:20:22,399 Speaker 8: in a fine place no matter what. 389 00:20:23,240 --> 00:20:25,600 Speaker 1: But at the same time, if you think about the 390 00:20:25,640 --> 00:20:27,800 Speaker 1: majority of the growth space, the majority. 391 00:20:27,400 --> 00:20:29,440 Speaker 8: Of the tech space, a lot of these companies do 392 00:20:29,520 --> 00:20:32,720 Speaker 8: have dit on their balance sheet. And if we see 393 00:20:32,720 --> 00:20:36,800 Speaker 8: interest rates come down, we probably will see that as 394 00:20:36,840 --> 00:20:39,200 Speaker 8: a boon to some growth stocks as well. 395 00:20:39,359 --> 00:20:42,160 Speaker 2: Yeah, and lower rates obviously going to take a lot 396 00:20:42,200 --> 00:20:44,440 Speaker 2: of pressure off of some of the regional banks. We've 397 00:20:44,440 --> 00:20:49,400 Speaker 2: been talking about potential stress in things like commercial real estate. 398 00:20:49,480 --> 00:20:52,600 Speaker 2: Powell kind of pushed back against that notion. Today thought 399 00:20:52,600 --> 00:20:56,040 Speaker 2: the financial system was doing pretty well. Let's talk about 400 00:20:56,040 --> 00:21:00,560 Speaker 2: the AI trade. Brian was mentioning Broadcom earlier. This is 401 00:21:00,640 --> 00:21:03,000 Speaker 2: part of the narrative that we've been discussing for months. 402 00:21:03,000 --> 00:21:06,679 Speaker 2: It's the Nvidia story, is it's the open AI Microsoft story. 403 00:21:06,880 --> 00:21:09,600 Speaker 2: Are you still feeling positive about this now? 404 00:21:11,000 --> 00:21:11,440 Speaker 1: We are. 405 00:21:11,600 --> 00:21:14,600 Speaker 8: You know, everyone's been talking about AI now quite some time, 406 00:21:14,680 --> 00:21:17,679 Speaker 8: and it seems like there's so much hype surrounding artificial intelligence. 407 00:21:17,920 --> 00:21:19,760 Speaker 1: You know, it's the aihive. You hear AI. 408 00:21:20,280 --> 00:21:22,760 Speaker 8: All of our clients are constantly asking about it, calling, 409 00:21:22,800 --> 00:21:24,320 Speaker 8: oh am I invested in AI? 410 00:21:24,480 --> 00:21:25,760 Speaker 6: How are we investing in AI? 411 00:21:25,880 --> 00:21:27,640 Speaker 1: You know it's important, but we do. 412 00:21:27,720 --> 00:21:30,880 Speaker 8: We believe in it, even considering the games that we've 413 00:21:30,880 --> 00:21:32,800 Speaker 8: already seen. I mean, if you think about what's really 414 00:21:32,840 --> 00:21:37,320 Speaker 8: fueling AI into the future, it is semiconductors, which we've seen. 415 00:21:37,400 --> 00:21:38,240 Speaker 1: You just mentioned. 416 00:21:38,520 --> 00:21:40,840 Speaker 8: But if you look at the socks the Philadelphia Semiconductor 417 00:21:40,840 --> 00:21:44,240 Speaker 8: Index this year already here to date, it's up another 418 00:21:44,320 --> 00:21:46,840 Speaker 8: thirty percent. So we just continue to see semi conductors 419 00:21:46,880 --> 00:21:50,000 Speaker 8: move higher, but there's reason behind that, you know, if 420 00:21:50,040 --> 00:21:50,760 Speaker 8: we look. 421 00:21:50,600 --> 00:21:53,000 Speaker 1: At the numbers, if we look at the earnings behind 422 00:21:53,040 --> 00:21:53,720 Speaker 1: what's fueling this. 423 00:21:54,000 --> 00:21:57,639 Speaker 8: Our Chief Investment Office actually expects global semi conductors to 424 00:21:57,680 --> 00:22:00,920 Speaker 8: deliver earnings growth of fifty percent this year in twenty 425 00:22:00,920 --> 00:22:03,760 Speaker 8: twenty four, and another twenty five percent in twenty twenty five. 426 00:22:04,040 --> 00:22:06,440 Speaker 8: So what's amazing is that, Yes, there's a lot of talk, 427 00:22:06,560 --> 00:22:08,920 Speaker 8: there's a lot of high expectations here, but there's numbers 428 00:22:08,960 --> 00:22:09,640 Speaker 8: behind it as well. 429 00:22:09,920 --> 00:22:12,840 Speaker 3: Yeah, especially the Nvidia numbers, but if you look at Broadcom, 430 00:22:12,880 --> 00:22:15,639 Speaker 3: the revenue and the profit piece were hardly knocked out 431 00:22:15,680 --> 00:22:19,840 Speaker 3: of the park numbers, nor was the forecast. I guess 432 00:22:19,840 --> 00:22:22,240 Speaker 3: there's this stock split, but it's hard to fathom a 433 00:22:22,320 --> 00:22:24,720 Speaker 3: fifteen percent jump on those numbers, don't you think. 434 00:22:26,160 --> 00:22:29,200 Speaker 8: Yeah, look, I can't speak to any one individual stock, 435 00:22:29,480 --> 00:22:31,680 Speaker 8: but when you look at what's been happening at large, 436 00:22:31,960 --> 00:22:37,399 Speaker 8: is already there's such high expectations baked into these stock 437 00:22:37,480 --> 00:22:42,520 Speaker 8: prices before these earnings reports. And what's happening is if 438 00:22:42,520 --> 00:22:45,000 Speaker 8: these companies just report, they don't necessarily have to be 439 00:22:45,520 --> 00:22:48,320 Speaker 8: they just have to meet these lofty expectations and investors 440 00:22:48,320 --> 00:22:49,520 Speaker 8: are clearly happy with that. 441 00:22:50,240 --> 00:22:52,800 Speaker 3: Okay, Sarah, thank you so much for joining us. Sarah Ponzak, 442 00:22:52,840 --> 00:22:55,280 Speaker 3: Financial advisor at UBS Private Wealth Management. 443 00:22:57,040 --> 00:23:00,000 Speaker 2: This has been the Bloomberg Daybreak Asia podcast, bringing you 444 00:23:00,080 --> 00:23:03,160 Speaker 2: the stories making news and moving markets in the Asia Pacific. 445 00:23:03,680 --> 00:23:06,800 Speaker 2: Visit the Bloomberg Podcast channel on YouTube to get more 446 00:23:06,840 --> 00:23:10,439 Speaker 2: episodes of this and other shows from Bloomberg. Subscribe to 447 00:23:10,440 --> 00:23:14,240 Speaker 2: the podcast on Apple, Spotify, or anywhere else you listen, 448 00:23:14,359 --> 00:23:17,440 Speaker 2: and always on Bloomberg Radio, the Bloomberg Terminal, and the 449 00:23:17,440 --> 00:23:18,520 Speaker 2: Bloomberg Business App.