1 00:00:02,560 --> 00:00:05,080 Speaker 1: This is Bloomberg day Break Weekend, our global look at 2 00:00:05,080 --> 00:00:07,080 Speaker 1: the top stories in the coming week from our day 3 00:00:07,120 --> 00:00:09,360 Speaker 1: Break anchors all around the world, and straight ahead on 4 00:00:09,400 --> 00:00:11,799 Speaker 1: the program, a look at the US housing market ahead 5 00:00:11,800 --> 00:00:14,760 Speaker 1: of the big spring home buying season and some highly 6 00:00:14,800 --> 00:00:19,279 Speaker 1: anticipated data on inflation and economic growth. I'm Tom Busby 7 00:00:19,360 --> 00:00:19,919 Speaker 1: in New York. 8 00:00:20,239 --> 00:00:23,000 Speaker 2: I'm Stephen carolind London, where we're looking ahead to AI's 9 00:00:23,239 --> 00:00:27,400 Speaker 2: starring role at this year's Mobile World's Congress in Barcelona. 10 00:00:27,480 --> 00:00:29,840 Speaker 3: And I'm Ran Curtis in Hong Kong. I'll take a 11 00:00:29,880 --> 00:00:34,040 Speaker 3: look at my news upcoming results, whether AI makes an intercot. 12 00:00:37,200 --> 00:00:41,239 Speaker 4: That's all straight ahead on Bloomberg Daybreak Weekend, The business 13 00:00:41,280 --> 00:00:45,280 Speaker 4: news you need to wrap up your week, Available on Apple, Spotify, 14 00:00:45,400 --> 00:00:48,760 Speaker 4: the Bloomberg Business Appen everywhere you get your podcasts. 15 00:00:53,520 --> 00:00:55,400 Speaker 1: Good day to you. I'm Tom Busby and we begin 16 00:00:55,440 --> 00:00:59,320 Speaker 1: today's program with home buyers, home sellers, home builders, and 17 00:00:59,400 --> 00:01:02,600 Speaker 1: home improf been chains for more on where we stand. 18 00:01:02,640 --> 00:01:06,360 Speaker 1: We welcome Bloomberg Intelligence US home building analyst Drew Reading. 19 00:01:06,440 --> 00:01:08,640 Speaker 5: Drew, thanks for being here, Thanks for having me. 20 00:01:08,800 --> 00:01:12,880 Speaker 1: Well, let's start with the biggest roadblocks in the home 21 00:01:12,920 --> 00:01:16,720 Speaker 1: buying selling Everybody sky high home prices, a dearth of 22 00:01:16,720 --> 00:01:20,160 Speaker 1: homes on the marketplace, and mortgage rates, which just last 23 00:01:20,160 --> 00:01:22,640 Speaker 1: week rose back above seven percent for the first time 24 00:01:22,680 --> 00:01:26,319 Speaker 1: since early December. Drew, is there any relief in sight, 25 00:01:26,480 --> 00:01:28,000 Speaker 1: any good news out of this. 26 00:01:28,440 --> 00:01:29,800 Speaker 5: I think you hit the nail on the head with 27 00:01:30,040 --> 00:01:32,399 Speaker 5: the challenges facing the home buyer. I mean, we've had 28 00:01:32,520 --> 00:01:35,880 Speaker 5: home prices rise more than forty percent over the last 29 00:01:35,880 --> 00:01:39,320 Speaker 5: couple of years. We've had interest rates rise from three 30 00:01:39,360 --> 00:01:43,760 Speaker 5: percent now above seven percent. We have the worst affordability 31 00:01:43,760 --> 00:01:46,840 Speaker 5: on record if you look at monthly payments relative to income. 32 00:01:48,240 --> 00:01:50,600 Speaker 5: We've been describing the housing market as kind of a 33 00:01:50,640 --> 00:01:53,280 Speaker 5: tale of two markets. On one hand, you have the 34 00:01:53,320 --> 00:01:56,520 Speaker 5: resale market, who's battling not only the high rates, but 35 00:01:56,600 --> 00:02:00,320 Speaker 5: low inventory and homeowners who don't want to sell. On 36 00:02:00,360 --> 00:02:03,880 Speaker 5: the other hand, you have the new home market, where 37 00:02:04,240 --> 00:02:07,360 Speaker 5: builders have done extremely well. Sales actually grew in twenty 38 00:02:07,400 --> 00:02:10,800 Speaker 5: twenty three, and that's because they've been bringing more supply 39 00:02:10,880 --> 00:02:14,800 Speaker 5: to the market. They've been pretty aggressive and adjusting base prices. 40 00:02:14,960 --> 00:02:16,840 Speaker 5: So if you look at prices in the new home market, 41 00:02:16,919 --> 00:02:20,160 Speaker 5: they were actually down double digits in twenty twenty three, 42 00:02:20,960 --> 00:02:24,280 Speaker 5: And most importantly, they've been offering financing incentives, so that's 43 00:02:24,320 --> 00:02:26,080 Speaker 5: been a big tool in their belt that the existing 44 00:02:26,120 --> 00:02:29,600 Speaker 5: home market really doesn't have to leverage. So a buyer 45 00:02:29,639 --> 00:02:31,600 Speaker 5: who's going out into the market now is looking at 46 00:02:31,600 --> 00:02:35,120 Speaker 5: something in the seven percent range. Builders are able to 47 00:02:35,160 --> 00:02:37,200 Speaker 5: offer lower rates somewhere in the five and a half 48 00:02:37,200 --> 00:02:40,040 Speaker 5: to six percent range, So that's been a huge differentiator 49 00:02:40,080 --> 00:02:40,399 Speaker 5: for them. 50 00:02:40,520 --> 00:02:43,480 Speaker 1: Now, you follow the builders, so you know what they do, 51 00:02:43,600 --> 00:02:47,359 Speaker 1: where they do it, how they think. Home builder sentiment 52 00:02:47,639 --> 00:02:51,280 Speaker 1: actually was I think a six month high right now. However, 53 00:02:51,680 --> 00:02:54,360 Speaker 1: they also face a lot of challenges, don't they. Not 54 00:02:54,520 --> 00:02:57,959 Speaker 1: enough available land, not enough of skilled labor. I mean, 55 00:02:58,080 --> 00:03:01,399 Speaker 1: how are they still building these homes where people want 56 00:03:01,440 --> 00:03:03,760 Speaker 1: to buy with the challenges that they face. 57 00:03:04,240 --> 00:03:07,920 Speaker 5: Yeah, builders have been facing these challenges for quite some 58 00:03:08,000 --> 00:03:10,799 Speaker 5: time now. You mentioned, you know, the lack of available labor, 59 00:03:11,040 --> 00:03:15,080 Speaker 5: particularly as volumes heat up, the lack of developed land, 60 00:03:15,080 --> 00:03:17,280 Speaker 5: which we think could become even more of a problem 61 00:03:17,320 --> 00:03:20,560 Speaker 5: for the industry. But the way I would look at 62 00:03:20,560 --> 00:03:22,400 Speaker 5: the new home market is, on one hand, you have 63 00:03:22,800 --> 00:03:27,080 Speaker 5: the large, well capitalized, pickly traded home builders, and on 64 00:03:27,120 --> 00:03:30,560 Speaker 5: the other hand you have smaller private peers. We think 65 00:03:30,600 --> 00:03:33,560 Speaker 5: that the large builders are going to continue to take 66 00:03:33,680 --> 00:03:36,000 Speaker 5: market share from those smaller private piers. And the main 67 00:03:36,040 --> 00:03:39,480 Speaker 5: reason is because a lot of the private builders are 68 00:03:39,800 --> 00:03:43,560 Speaker 5: reliant on regional bank financing in order to grow, whether 69 00:03:43,600 --> 00:03:48,480 Speaker 5: it's for land acquisition, land development, or construction loans. And 70 00:03:48,880 --> 00:03:52,440 Speaker 5: with not only the cost of those loans going higher, 71 00:03:52,440 --> 00:03:55,440 Speaker 5: but also the availability as the economy has weakened a 72 00:03:55,480 --> 00:03:58,440 Speaker 5: little bit, we're seeing their ability to access that growth 73 00:03:58,440 --> 00:04:01,360 Speaker 5: capital has come down. We think that the large builders 74 00:04:01,400 --> 00:04:03,480 Speaker 5: are stepping in to fill the void because they've got 75 00:04:03,520 --> 00:04:07,240 Speaker 5: strong balance sheets, they've got long land pipelines, and they're 76 00:04:07,240 --> 00:04:09,680 Speaker 5: able to self develop their land. So we think that, 77 00:04:10,200 --> 00:04:11,960 Speaker 5: you know, as we move through twenty twenty four and 78 00:04:12,000 --> 00:04:15,280 Speaker 5: into twenty twenty five, they'll continue to be the beneficiaries. 79 00:04:15,880 --> 00:04:18,640 Speaker 1: Now I imagine also some of these builders, the ones benefiting 80 00:04:18,640 --> 00:04:21,599 Speaker 1: the most, are the ones building homes where people want 81 00:04:21,640 --> 00:04:24,400 Speaker 1: to live. And that means the Sun Belt Florida, all 82 00:04:24,480 --> 00:04:28,240 Speaker 1: the way across to Texas and the Southwest. Are there 83 00:04:28,440 --> 00:04:31,680 Speaker 1: other builders having success? You know, the Toll Brothers up 84 00:04:31,680 --> 00:04:35,640 Speaker 1: in the northeast. Are they building big houses, make mansions 85 00:04:35,680 --> 00:04:38,400 Speaker 1: or even mansions? Are are they all seeing you know, 86 00:04:38,440 --> 00:04:41,000 Speaker 1: the rising tide lift all boats in the housing market. 87 00:04:42,120 --> 00:04:44,640 Speaker 5: Yeah, that's a great question. And you know, when you 88 00:04:44,640 --> 00:04:46,800 Speaker 5: look big picture, the Sunbelt is really where you want 89 00:04:46,800 --> 00:04:50,160 Speaker 5: to be due to more favorable demographic patterns. That's where 90 00:04:50,200 --> 00:04:54,000 Speaker 5: the population shifting, that's where the job growth is. Affordability 91 00:04:54,080 --> 00:04:56,080 Speaker 5: is better, so you see some migration out of some 92 00:04:56,120 --> 00:04:59,159 Speaker 5: of the higher cost markets. What's interesting right now is 93 00:04:59,200 --> 00:05:03,680 Speaker 5: we are seeing pretty broad based rebound in the new 94 00:05:03,680 --> 00:05:07,520 Speaker 5: home market across the country. Some of the hardest hit 95 00:05:07,560 --> 00:05:09,480 Speaker 5: markets in the back half of twenty twenty two were 96 00:05:09,480 --> 00:05:13,960 Speaker 5: in the West, think California, the Pacific Northwest to Southwest, 97 00:05:14,000 --> 00:05:17,320 Speaker 5: but we're even seeing a strong rebound there. You mentioned 98 00:05:17,320 --> 00:05:20,720 Speaker 5: the Northeast, which is actually an interesting example because if 99 00:05:20,760 --> 00:05:23,800 Speaker 5: you look at sales paces that the builders have been 100 00:05:23,800 --> 00:05:27,880 Speaker 5: doing relative to twenty nineteen, the Northeast and the Midwest 101 00:05:27,880 --> 00:05:29,720 Speaker 5: have held up really well. And I think part of 102 00:05:29,760 --> 00:05:32,080 Speaker 5: that has to do with the fact that maybe these 103 00:05:32,080 --> 00:05:34,800 Speaker 5: are markets that didn't participate as much on the way up, 104 00:05:34,880 --> 00:05:37,920 Speaker 5: so they weren't the boom markets, but they also didn't 105 00:05:37,960 --> 00:05:40,400 Speaker 5: follow as much on the way down. When things got 106 00:05:40,440 --> 00:05:41,960 Speaker 5: a little bit hairy. Theer in the back half of 107 00:05:41,960 --> 00:05:44,800 Speaker 5: twenty twenty two and into twenty twenty three, So the 108 00:05:44,839 --> 00:05:48,560 Speaker 5: Northeast has done really well. We heard from Toll Brothers 109 00:05:48,600 --> 00:05:51,880 Speaker 5: recently they noticed strength across their entire footprint, across all 110 00:05:51,920 --> 00:05:54,000 Speaker 5: of their price points. So it's been a pretty broad 111 00:05:54,040 --> 00:05:54,760 Speaker 5: based rally. 112 00:05:54,880 --> 00:05:58,640 Speaker 1: Wow, yeah, everybody wins now. One thing you have been 113 00:05:58,680 --> 00:06:03,680 Speaker 1: reporting on though, is is more modest, moderately priced new homes, 114 00:06:04,560 --> 00:06:06,160 Speaker 1: more of them going up. What can you tell us 115 00:06:06,160 --> 00:06:06,600 Speaker 1: about that. 116 00:06:06,800 --> 00:06:10,000 Speaker 5: There's been a decided shift over the last several years 117 00:06:10,960 --> 00:06:14,000 Speaker 5: from builders who wanted to engage more at the entry level. 118 00:06:14,920 --> 00:06:16,600 Speaker 5: One of the reasons is because that's where a lot 119 00:06:16,600 --> 00:06:19,120 Speaker 5: of the demographic based demand is now and will be 120 00:06:19,200 --> 00:06:22,279 Speaker 5: in the coming years. The other reason that they're targeting 121 00:06:22,279 --> 00:06:26,640 Speaker 5: that market is for relative affordability. As I mentioned, affordability 122 00:06:26,640 --> 00:06:30,080 Speaker 5: is near the worst on records. So one way builders 123 00:06:30,080 --> 00:06:33,839 Speaker 5: are looking to address that is through doing smaller square 124 00:06:33,839 --> 00:06:36,400 Speaker 5: footage floor plans, which allows them to get the price down. 125 00:06:36,440 --> 00:06:38,960 Speaker 5: They're also doing projects with more density, so they could 126 00:06:38,960 --> 00:06:43,000 Speaker 5: spread more units over the same piece of land and 127 00:06:43,040 --> 00:06:46,760 Speaker 5: spread out costs that way and address affordability for the 128 00:06:46,760 --> 00:06:48,800 Speaker 5: buyer through density. So there's a couple of different ways 129 00:06:48,839 --> 00:06:51,719 Speaker 5: they're doing it. It's something that's been ongoing for a 130 00:06:51,720 --> 00:06:53,760 Speaker 5: couple of years, but it's starting to be emphasized a 131 00:06:53,760 --> 00:06:54,640 Speaker 5: little bit more. Now. 132 00:06:54,839 --> 00:06:57,320 Speaker 1: One last question, Drew, and it's about last week we 133 00:06:57,400 --> 00:07:00,320 Speaker 1: had home depot earnings. This week we have lows. Are 134 00:07:00,360 --> 00:07:05,040 Speaker 1: we likely to see the same kind of not disappointing results, 135 00:07:05,120 --> 00:07:08,720 Speaker 1: but clearly home improvement projects have slowed down. 136 00:07:09,360 --> 00:07:12,400 Speaker 5: Yeah, expectations coming into the print for lows are all 137 00:07:12,440 --> 00:07:15,880 Speaker 5: that high. As you mentioned, home Deep gives some rather 138 00:07:16,120 --> 00:07:18,840 Speaker 5: disappointing guidance I think on the outlook for twenty twenty four, 139 00:07:18,880 --> 00:07:21,640 Speaker 5: calling for the market to be down about one percent, 140 00:07:22,320 --> 00:07:24,800 Speaker 5: I expect to hear similar commentary from Loew's. 141 00:07:24,720 --> 00:07:28,480 Speaker 1: Our thanks to Bloomberg Intelligence US home building analyst Drew Redding, 142 00:07:28,520 --> 00:07:31,520 Speaker 1: and up next, some closely watched economic data points out 143 00:07:31,600 --> 00:07:34,240 Speaker 1: this week what they could mean for the Fed's next 144 00:07:34,280 --> 00:07:36,560 Speaker 1: policy meeting just three weeks from now. And for more 145 00:07:37,000 --> 00:07:41,680 Speaker 1: we welcome Bloomberg International Economic and Policy correspondent Michael McKee. Well, 146 00:07:41,760 --> 00:07:44,840 Speaker 1: let's start with the Fed's preferred measure of inflation. This 147 00:07:44,920 --> 00:07:48,800 Speaker 1: is a mouthful. The personal consumption expenditure core price index 148 00:07:48,840 --> 00:07:52,160 Speaker 1: for the month of January and the fourth quarter. That's 149 00:07:52,160 --> 00:07:54,760 Speaker 1: the biggie this week. What are you expecting to see? 150 00:07:54,840 --> 00:07:56,400 Speaker 6: Well, we get to the fourth quarter as part of 151 00:07:56,400 --> 00:07:59,760 Speaker 6: the GDP report. It's a revision, so that doesn't get 152 00:07:59,760 --> 00:08:02,600 Speaker 6: as much attention from the Fed because it's quarterly, it's 153 00:08:02,640 --> 00:08:07,520 Speaker 6: over a three month average. But the monthly number, which 154 00:08:07,560 --> 00:08:10,520 Speaker 6: represents the latest month that we have will be January, 155 00:08:10,640 --> 00:08:12,560 Speaker 6: and that's the one that the FED looks at because 156 00:08:12,600 --> 00:08:14,960 Speaker 6: it gives them the most complete picture they think of 157 00:08:15,040 --> 00:08:18,320 Speaker 6: where inflation is at the moment, and that's going to 158 00:08:18,400 --> 00:08:21,480 Speaker 6: be the key for them, where inflation is at the 159 00:08:21,560 --> 00:08:24,960 Speaker 6: moment in the PCE, because in the CPI, obviously it 160 00:08:25,120 --> 00:08:30,680 Speaker 6: was not good news for January. Now, the forecast for 161 00:08:30,920 --> 00:08:34,600 Speaker 6: the PCE is for a two point four percent year 162 00:08:34,640 --> 00:08:37,960 Speaker 6: over year increase, which is down from two point six 163 00:08:38,040 --> 00:08:41,640 Speaker 6: the year before, and a two point eight percent, down 164 00:08:41,679 --> 00:08:46,120 Speaker 6: from two point nine percent for the core. FED Vice 165 00:08:46,200 --> 00:08:49,959 Speaker 6: chair Phillip Jefferson spoke last week and said the FED 166 00:08:50,040 --> 00:08:53,520 Speaker 6: staff is basically predicting the same thing. So there are 167 00:08:53,559 --> 00:08:56,000 Speaker 6: people out there who think we might see an increase 168 00:08:56,440 --> 00:09:00,560 Speaker 6: in the PCE this month because of some unusual factors, 169 00:09:00,920 --> 00:09:04,960 Speaker 6: but the Fed seems sanguine going into the number. 170 00:09:05,120 --> 00:09:07,280 Speaker 1: Now, what are the factors that we see that could 171 00:09:07,559 --> 00:09:08,839 Speaker 1: make inflation even worse. 172 00:09:09,400 --> 00:09:11,760 Speaker 6: Well, one of the questions is what's happening with energy 173 00:09:11,840 --> 00:09:16,559 Speaker 6: and with food because those went up in the CPI report, 174 00:09:18,160 --> 00:09:20,520 Speaker 6: expected to but not by as much as they did. 175 00:09:20,559 --> 00:09:25,480 Speaker 6: And then the ongoing question is always what's happening with housing? 176 00:09:25,920 --> 00:09:31,600 Speaker 6: The CPI showed unexpected strength in housing inflation when it's 177 00:09:31,720 --> 00:09:34,920 Speaker 6: supposed to be according to everybody who follows it going down. 178 00:09:35,320 --> 00:09:37,560 Speaker 6: It's less of a weight in the PCE, so it 179 00:09:37,600 --> 00:09:40,960 Speaker 6: may not make as much of a difference, but it 180 00:09:41,040 --> 00:09:45,640 Speaker 6: could affect that number as well. But the big one 181 00:09:45,640 --> 00:09:49,920 Speaker 6: in the PCE, this is what I call the Pogo problem. 182 00:09:50,400 --> 00:09:53,760 Speaker 6: We have met the enemy and he is us. Our 183 00:09:53,880 --> 00:09:58,199 Speaker 6: listeners are at fault because so much trading has gone 184 00:09:58,200 --> 00:10:02,400 Speaker 6: on in the markets, and obviously the markets have continued 185 00:10:02,440 --> 00:10:07,640 Speaker 6: to go up, so stock trading fees are a big 186 00:10:07,679 --> 00:10:11,280 Speaker 6: component of why the PCE has stayed high. And there 187 00:10:11,320 --> 00:10:13,920 Speaker 6: are some analysts who really follow this stuff closely who 188 00:10:13,960 --> 00:10:17,400 Speaker 6: think that's the number that's going to push PCE higher 189 00:10:17,440 --> 00:10:18,480 Speaker 6: and instead of lower. 190 00:10:18,559 --> 00:10:21,320 Speaker 1: Let's go back to GDP because you talked about that. 191 00:10:21,679 --> 00:10:23,880 Speaker 1: We're going to get a reading, a second reading on 192 00:10:23,960 --> 00:10:27,560 Speaker 1: fourth quarter GDP. What kind of growth overall growth are 193 00:10:27,600 --> 00:10:29,440 Speaker 1: we expecting in the economy, and also what does that 194 00:10:29,480 --> 00:10:30,280 Speaker 1: mean for the full year? 195 00:10:31,440 --> 00:10:33,360 Speaker 6: Oh, if we only knew what it meant for the 196 00:10:33,400 --> 00:10:36,240 Speaker 6: full year. Three point three percent was the initial read, 197 00:10:36,320 --> 00:10:40,240 Speaker 6: and the economists we survey don't expect a change in that, 198 00:10:40,559 --> 00:10:42,359 Speaker 6: just a little bit of a change in the composition, 199 00:10:42,480 --> 00:10:46,520 Speaker 6: with more coming from business investment in inventories and a 200 00:10:46,559 --> 00:10:50,559 Speaker 6: little bit less from personal consumption consumer spending. But for 201 00:10:51,160 --> 00:10:54,560 Speaker 6: the year, the view has been that we are seeing 202 00:10:55,160 --> 00:10:58,040 Speaker 6: a slowing in the economy, and we have seen some 203 00:10:58,160 --> 00:11:02,520 Speaker 6: numbers that suggest that. But I go back to some 204 00:11:02,559 --> 00:11:05,200 Speaker 6: of the remarks from FED officials in this last week 205 00:11:05,240 --> 00:11:08,520 Speaker 6: where they warn that one of the dangers is that 206 00:11:08,600 --> 00:11:12,080 Speaker 6: consumer spending doesn't drop off that much, and that we 207 00:11:12,120 --> 00:11:15,400 Speaker 6: do see a stronger than expected economy through the year. 208 00:11:15,760 --> 00:11:18,280 Speaker 6: That could put pressure on inflation, and that would have 209 00:11:18,320 --> 00:11:21,560 Speaker 6: an impact on if and when they start cutting interest rates. 210 00:11:21,600 --> 00:11:25,560 Speaker 6: So it's something to keep in mind. It's really hard 211 00:11:25,600 --> 00:11:29,959 Speaker 6: to make a prediction because it's been so it's been 212 00:11:30,000 --> 00:11:33,439 Speaker 6: so weird coming out of the pandemic. Nobody expected the 213 00:11:33,559 --> 00:11:37,640 Speaker 6: kind of recovery that we've gotten, and it could keep going. 214 00:11:37,880 --> 00:11:40,480 Speaker 1: Well, that's for sure. I mean, even with a slight 215 00:11:41,080 --> 00:11:44,400 Speaker 1: pullback in consumer spending, three point three percent growth in 216 00:11:44,440 --> 00:11:47,400 Speaker 1: the final three months of the year is pretty strong. 217 00:11:48,120 --> 00:11:51,160 Speaker 1: Good news in Washington, certainly for this administration as we 218 00:11:51,200 --> 00:11:52,240 Speaker 1: go into an election year. 219 00:11:52,679 --> 00:11:55,000 Speaker 6: Yeah, they should be meeting to figure out how they're 220 00:11:55,000 --> 00:11:57,640 Speaker 6: going to sell all this to the American public because 221 00:11:57,640 --> 00:12:01,800 Speaker 6: obviously the political polls don't match what's happening with the 222 00:12:02,000 --> 00:12:07,320 Speaker 6: economy at this point. But overall, if the economy doesn't 223 00:12:07,320 --> 00:12:11,600 Speaker 6: go into recession and inflation does come down, then that 224 00:12:11,720 --> 00:12:15,920 Speaker 6: could be good news for Joe Biden. The saying is 225 00:12:15,920 --> 00:12:19,440 Speaker 6: always it's the economy stupid, and people have wondered if 226 00:12:19,480 --> 00:12:22,280 Speaker 6: that's going to be the case this year, and we'll see. 227 00:12:22,600 --> 00:12:24,640 Speaker 1: Well, a lot to look forward to, and our thanks 228 00:12:24,679 --> 00:12:29,520 Speaker 1: to Bloomberg International Economic and Policy correspondent Michael McKee, coming 229 00:12:29,600 --> 00:12:31,720 Speaker 1: up on Bloomberg Day Break weekend to look ahead to 230 00:12:31,760 --> 00:12:35,720 Speaker 1: the Mobile World Congress that takes place in Spain this week. 231 00:12:36,040 --> 00:12:49,200 Speaker 1: I'm Tom Busby, and this is Bloomberg. This is Bloomberg 232 00:12:49,280 --> 00:12:51,360 Speaker 1: Day Break weekend, our global look ahead at the top 233 00:12:51,400 --> 00:12:54,360 Speaker 1: stories for investors in the coming week. I'm Tom Busby. 234 00:12:54,400 --> 00:12:54,920 Speaker 4: In New York. 235 00:12:55,280 --> 00:12:57,560 Speaker 1: Up later in our program a look at inflation in 236 00:12:57,640 --> 00:13:00,920 Speaker 1: New Zealand and the next move from its bank, as 237 00:13:01,000 --> 00:13:04,760 Speaker 1: well as earnings from China's biggest tech giant, but first. 238 00:13:04,920 --> 00:13:08,200 Speaker 1: Mobile technology arguably one of the fastest growing sectors of 239 00:13:08,240 --> 00:13:12,760 Speaker 1: the twenty first century and one investors think has boundless possibilities. 240 00:13:12,920 --> 00:13:15,760 Speaker 1: In the coming days, everyone who is anyone in the 241 00:13:15,800 --> 00:13:18,480 Speaker 1: world of connectivity will convene under one roof at the 242 00:13:18,520 --> 00:13:23,120 Speaker 1: annual Mobile World Congress in Barcelona, trading ideas and discussing 243 00:13:23,160 --> 00:13:26,280 Speaker 1: the future. But can telecom keep up with multiple high 244 00:13:26,320 --> 00:13:28,880 Speaker 1: paced advancements in the world of tech. For more, Let's 245 00:13:28,920 --> 00:13:32,600 Speaker 1: go to London and bring in Bloomberg Daybreak anchor Steven Carroll. 246 00:13:32,640 --> 00:13:36,920 Speaker 2: Tom The market frenzy about tech and artificial intelligence driven 247 00:13:37,040 --> 00:13:40,400 Speaker 2: gains seems to have reached fever pitch this earning season. 248 00:13:40,640 --> 00:13:43,280 Speaker 2: Telecommunications is one of the many industries that's racing to 249 00:13:43,360 --> 00:13:48,200 Speaker 2: adapt and harness its advantages. This year's Mobile World Congress 250 00:13:48,240 --> 00:13:51,240 Speaker 2: in Barcelona will see major tech companies, including the likes 251 00:13:51,240 --> 00:13:54,440 Speaker 2: of Meta, lining up to showcase their AI products to 252 00:13:54,480 --> 00:13:57,320 Speaker 2: the sector. A recent survey of more than four hundred 253 00:13:57,320 --> 00:14:01,760 Speaker 2: telecoms industry professionals by AI chip giant Nvidia underlined this, 254 00:14:02,160 --> 00:14:05,760 Speaker 2: over half of respondents agreed or strongly agreed that adopting 255 00:14:05,800 --> 00:14:09,079 Speaker 2: AI will be a source of competitive advantage. That's a 256 00:14:09,080 --> 00:14:11,360 Speaker 2: score that's up from just thirty nine percent in twenty 257 00:14:11,559 --> 00:14:15,280 Speaker 2: twenty two. In Nvidia themselves are seeing blockbuster growth thanks 258 00:14:15,320 --> 00:14:18,240 Speaker 2: to the technology, and their latest results show no sign 259 00:14:18,280 --> 00:14:22,400 Speaker 2: of that growth slowing down. The CEO of Futurum, Daniel Newman, 260 00:14:22,440 --> 00:14:26,280 Speaker 2: and bab o'donald, chief analyst at TECHnalysis, say the pressure 261 00:14:26,480 --> 00:14:29,600 Speaker 2: is on for Nvidia to continue these gains. 262 00:14:30,680 --> 00:14:32,800 Speaker 7: The only result that was going to be acceptable was 263 00:14:32,800 --> 00:14:35,520 Speaker 7: not only a beat, but a substantial beat and a 264 00:14:36,040 --> 00:14:40,080 Speaker 7: guidance upbeat because people are beginning to wonder, how many 265 00:14:40,120 --> 00:14:43,840 Speaker 7: consecutive quarters can this company continue to run with triple 266 00:14:43,880 --> 00:14:47,160 Speaker 7: digit revenue growth and high triple digit earnings growth. But 267 00:14:47,240 --> 00:14:49,640 Speaker 7: it seems each quarter they continue to surprise. 268 00:14:49,920 --> 00:14:53,240 Speaker 8: This is a company that continues to execute and completely 269 00:14:53,280 --> 00:14:57,320 Speaker 8: blow away everybody's most robust forecast. I mean, they raise 270 00:14:57,400 --> 00:15:00,360 Speaker 8: their own forecast, the street raises the forecast, and they 271 00:15:00,400 --> 00:15:02,440 Speaker 8: still beat them. It's kind of crazy. And of course 272 00:15:02,520 --> 00:15:04,080 Speaker 8: the big question has been how. 273 00:15:03,920 --> 00:15:05,000 Speaker 7: Long can this continue? 274 00:15:05,000 --> 00:15:07,480 Speaker 8: How long can this go on. The competition has never 275 00:15:07,600 --> 00:15:10,920 Speaker 8: been more fierce than it is right now foreign Vidia, 276 00:15:10,960 --> 00:15:12,560 Speaker 8: but they have a huge headstart. 277 00:15:12,600 --> 00:15:14,600 Speaker 7: Do you think there is sort of a consensus in 278 00:15:14,640 --> 00:15:17,280 Speaker 7: the industry to put some competitive pressure back on. 279 00:15:17,360 --> 00:15:21,080 Speaker 8: In video, they've been innovating at a pace that nobody 280 00:15:21,080 --> 00:15:22,280 Speaker 8: else has been able to keep up. 281 00:15:22,320 --> 00:15:26,920 Speaker 2: With Daniel Newman from Futuram and Bob O'Donnell at tech Analysis, 282 00:15:26,960 --> 00:15:30,480 Speaker 2: they're discussing the latest results from Nvidia with Bloomberg. Well, 283 00:15:30,480 --> 00:15:33,640 Speaker 2: perhaps some of those future gains could come from AI 284 00:15:33,800 --> 00:15:38,160 Speaker 2: collaborations with the telecoms industry. Those conversations will be happening 285 00:15:38,160 --> 00:15:41,440 Speaker 2: at Mobile World Congress in the coming days. Apart from 286 00:15:41,480 --> 00:15:44,000 Speaker 2: the latest tech, industry players will also be considering the 287 00:15:44,080 --> 00:15:48,080 Speaker 2: regulatory requirements that are facing some telecoms companies that aren't 288 00:15:48,080 --> 00:15:51,600 Speaker 2: applicable to their big tech cousins. Telecoms may just be 289 00:15:51,640 --> 00:15:53,680 Speaker 2: at the beginning of its AI journey, but will it 290 00:15:53,760 --> 00:15:56,960 Speaker 2: be a dalliance or a long lasting partnership. While I've 291 00:15:56,960 --> 00:16:00,000 Speaker 2: been discussing all of this with our European telecoms and chips, 292 00:16:00,280 --> 00:16:02,720 Speaker 2: Jillian Deutsch and I started by asking here how important 293 00:16:02,840 --> 00:16:07,160 Speaker 2: Mobile World Congress is in setting the agenda for the sector. 294 00:16:07,960 --> 00:16:10,960 Speaker 9: Yeah, this is really the key event for the year, 295 00:16:11,000 --> 00:16:12,400 Speaker 9: and I think it's gonna be fun to kind of 296 00:16:12,440 --> 00:16:16,000 Speaker 9: see not as European telcos which have lots of things 297 00:16:16,040 --> 00:16:19,240 Speaker 9: that they're pushing, for example, deregulation and lots of m 298 00:16:19,240 --> 00:16:21,440 Speaker 9: Andy talks across Europe, but also a lot of different 299 00:16:21,480 --> 00:16:24,800 Speaker 9: international telcos and also major US tech companies coming to 300 00:16:25,320 --> 00:16:28,960 Speaker 9: all descending on Barcelona to kind of really set the 301 00:16:28,960 --> 00:16:31,160 Speaker 9: agenda for tacos in tech the next year. 302 00:16:31,760 --> 00:16:33,520 Speaker 2: So AI is one of the key themes at this 303 00:16:33,640 --> 00:16:37,400 Speaker 2: year's events, talk us through where Telecom's companies are with 304 00:16:37,560 --> 00:16:40,400 Speaker 2: them implementing that technology and where they found success with it. 305 00:16:42,000 --> 00:16:44,800 Speaker 9: Yeah, I mean AI has definitely hit a taco sector 306 00:16:44,840 --> 00:16:46,240 Speaker 9: of course as well, and so I think we're going 307 00:16:46,280 --> 00:16:49,680 Speaker 9: to be seeing lots of announcements about, you know, different 308 00:16:49,680 --> 00:16:52,320 Speaker 9: offerings with different US tech giants for example, and how 309 00:16:52,320 --> 00:16:55,520 Speaker 9: they're integrating artificial intelligence into their offerings, you know. I mean, 310 00:16:55,720 --> 00:16:57,360 Speaker 9: I just definitely think a lot of this is hype. 311 00:16:57,360 --> 00:16:59,840 Speaker 9: I think anyone who founds tech is used to hypes 312 00:17:00,320 --> 00:17:03,000 Speaker 9: of course, and AI is obviously in the most recent ones. 313 00:17:03,200 --> 00:17:04,960 Speaker 9: But I do think there's a lot of really interesting 314 00:17:05,359 --> 00:17:08,280 Speaker 9: ways that companies are trying to integrate AI into their offerings, 315 00:17:08,480 --> 00:17:11,480 Speaker 9: really kind of to improve the experience for consumers when 316 00:17:11,480 --> 00:17:15,200 Speaker 9: it comes to customer service also with businesses, and really 317 00:17:15,280 --> 00:17:18,240 Speaker 9: kind of creating you know, more streamlined offerings for their 318 00:17:18,280 --> 00:17:20,639 Speaker 9: for their clients. And so I think a lot of 319 00:17:20,640 --> 00:17:23,080 Speaker 9: this also will be kind of in with kind of 320 00:17:23,119 --> 00:17:25,680 Speaker 9: key announcements with big tech giants. So we already saw 321 00:17:25,720 --> 00:17:27,760 Speaker 9: now key is stock going up recently when they announced 322 00:17:27,760 --> 00:17:29,720 Speaker 9: a partnership with the Videos. Those kind of big names 323 00:17:29,760 --> 00:17:32,080 Speaker 9: obviously are really important to show that they are really 324 00:17:32,119 --> 00:17:34,879 Speaker 9: serious about AI and intergeting AI. But also I think 325 00:17:34,920 --> 00:17:37,240 Speaker 9: we'll see some interesting ones. You know, BT for example, 326 00:17:37,320 --> 00:17:40,439 Speaker 9: last year announced pretty massive job cuts fifty five thousand 327 00:17:40,480 --> 00:17:43,639 Speaker 9: people until twenty to thirty and that's not entirely but 328 00:17:43,680 --> 00:17:45,679 Speaker 9: at least in part because they're integrating AI, so it's 329 00:17:45,720 --> 00:17:47,800 Speaker 9: kind of helping them to trim from the fat in 330 00:17:47,840 --> 00:17:49,800 Speaker 9: the company. And so I think that's we might see 331 00:17:49,800 --> 00:17:52,600 Speaker 9: some more more kind of uses of AI in that sense. 332 00:17:53,400 --> 00:17:55,760 Speaker 2: So does it do we have the sense that European 333 00:17:55,800 --> 00:17:59,720 Speaker 2: companies are sufficiently investing in this given that so many 334 00:17:59,760 --> 00:18:02,479 Speaker 2: of the technology advancements are coming from US firms. 335 00:18:03,440 --> 00:18:06,720 Speaker 9: That's a great question. I mean, celcos are It's funny, 336 00:18:06,560 --> 00:18:08,919 Speaker 9: they are really afraid of just becoming you know, a 337 00:18:08,960 --> 00:18:10,560 Speaker 9: pipe in the ground, right, And so it's kind of 338 00:18:10,560 --> 00:18:12,560 Speaker 9: sparked this kind of panic a lot of among a 339 00:18:12,600 --> 00:18:15,640 Speaker 9: lot of tech tech taco companies across Europe, and so 340 00:18:15,760 --> 00:18:17,720 Speaker 9: that has led to this massive push to keep innovating 341 00:18:18,600 --> 00:18:20,560 Speaker 9: and and there are a lot of questions about whether 342 00:18:20,640 --> 00:18:23,720 Speaker 9: or not they actually can outcompete you know, Silicon Valley 343 00:18:23,720 --> 00:18:26,320 Speaker 9: giants that have you know, massive market caps and have 344 00:18:26,680 --> 00:18:29,280 Speaker 9: all of that talents obviously you know, really harmonized or 345 00:18:29,280 --> 00:18:33,480 Speaker 9: centralized into one location and already in their companies, and 346 00:18:33,520 --> 00:18:35,240 Speaker 9: a lot of what these celcos are doing is to 347 00:18:35,240 --> 00:18:37,159 Speaker 9: really trying to compete with them. So you see a 348 00:18:37,200 --> 00:18:40,359 Speaker 9: lot of kind of IT solutions and cloud solutions and 349 00:18:40,560 --> 00:18:43,760 Speaker 9: networks and factories and these are all things that actually 350 00:18:43,760 --> 00:18:48,119 Speaker 9: put tuco's in direct competition with US tech giants. And 351 00:18:48,200 --> 00:18:50,160 Speaker 9: I think there's a lot of skepticism that they can 352 00:18:50,200 --> 00:18:53,720 Speaker 9: really outcompete tech giants, but that is really a crucial 353 00:18:53,920 --> 00:18:56,360 Speaker 9: crucial thing for tacos going forward, if they really want 354 00:18:56,480 --> 00:19:00,400 Speaker 9: to make sure they're not just you know a utility company. 355 00:19:00,600 --> 00:19:03,080 Speaker 2: So it is a question of cooperation as well as 356 00:19:03,080 --> 00:19:04,680 Speaker 2: some competition in these areas too. 357 00:19:06,200 --> 00:19:07,880 Speaker 9: Yeah, absolute, I me, you know, we already do see 358 00:19:07,920 --> 00:19:10,879 Speaker 9: lots of tacos and tech giants working together. They have 359 00:19:10,960 --> 00:19:12,800 Speaker 9: for a long time when it comes to data centers 360 00:19:13,760 --> 00:19:16,119 Speaker 9: and other kinds of partnerships they've had, or even you know, 361 00:19:16,200 --> 00:19:18,439 Speaker 9: when you open up your you know, you turn on 362 00:19:18,480 --> 00:19:21,720 Speaker 9: your TV, you probably see YouTube or Netflix offerings, right, 363 00:19:21,800 --> 00:19:25,040 Speaker 9: So telcos really do rely on us tech giants as well. 364 00:19:25,040 --> 00:19:26,960 Speaker 9: It's kind of a fren of me love hate relationship 365 00:19:26,960 --> 00:19:29,000 Speaker 9: between the two, and I do think we see that 366 00:19:29,000 --> 00:19:33,240 Speaker 9: that kind of relationship really play out in Brussels, where 367 00:19:33,240 --> 00:19:36,440 Speaker 9: I'm based and covered tech regulation or have cover tech Regnation. 368 00:19:37,320 --> 00:19:39,280 Speaker 9: A lot of these techos argue that they're way more 369 00:19:39,280 --> 00:19:43,000 Speaker 9: over regulated than they're often American counterparts, and are really 370 00:19:43,040 --> 00:19:47,520 Speaker 9: pushing for tucos to help out with with helping tech giants. 371 00:19:47,560 --> 00:19:52,440 Speaker 9: Excuse me, helping telcos with these massive, expensive network infrastructure investments. 372 00:19:52,520 --> 00:19:54,240 Speaker 9: And they say, you know a lot of these tech 373 00:19:54,280 --> 00:19:56,600 Speaker 9: giants get to piggyback off of the really expensive and 374 00:19:56,600 --> 00:19:57,880 Speaker 9: complicated work that they do. 375 00:19:59,040 --> 00:20:01,720 Speaker 2: Yeah, that's a really just in conversation that I'm sure 376 00:20:01,720 --> 00:20:05,280 Speaker 2: will be featuring two at Mobile Work Congress. What you know, 377 00:20:05,320 --> 00:20:07,359 Speaker 2: the European Commission recently published a white paper on this 378 00:20:07,440 --> 00:20:10,680 Speaker 2: on reforms to the market. What were the problems that 379 00:20:10,680 --> 00:20:12,120 Speaker 2: that white paper identified. 380 00:20:13,440 --> 00:20:16,240 Speaker 9: I think it's really interesting because Taco's for the past 381 00:20:16,320 --> 00:20:18,960 Speaker 9: least couple of years, I've really been, like I said, 382 00:20:19,040 --> 00:20:21,840 Speaker 9: arguing that tech companies need to help with the bill 383 00:20:21,920 --> 00:20:26,120 Speaker 9: for infrastructure, and this argument was dubbed fair share Tech 384 00:20:26,119 --> 00:20:29,880 Speaker 9: companies need to pair their fair share for infrastructure. That 385 00:20:30,280 --> 00:20:33,119 Speaker 9: specific lobbing effort failed, but what they did do is 386 00:20:33,160 --> 00:20:35,720 Speaker 9: really put Taco's back at the top of regulator's agenda. 387 00:20:35,760 --> 00:20:38,359 Speaker 9: They've been really overlooked for the past five plus years. 388 00:20:38,880 --> 00:20:41,119 Speaker 9: So this white paper was really interesting because it actually 389 00:20:41,160 --> 00:20:43,639 Speaker 9: dives into the issues that Tacos have been complaining about 390 00:20:43,640 --> 00:20:45,879 Speaker 9: for years and acknowledge a lot of the issues that 391 00:20:45,920 --> 00:20:48,240 Speaker 9: they've been complaining about. You know, it's an incredibly fragmented 392 00:20:48,320 --> 00:20:52,040 Speaker 9: market with over fifty players in you across the EU, 393 00:20:52,160 --> 00:20:53,840 Speaker 9: you know, compared to the United States where they're early 394 00:20:53,880 --> 00:20:57,720 Speaker 9: three maybe four kind of massive players. They do knowledge 395 00:20:57,720 --> 00:21:02,240 Speaker 9: that they're overregulated. There's too much bureaucracy to get permits 396 00:21:02,240 --> 00:21:04,840 Speaker 9: et cetera. But I think when it comes to the 397 00:21:04,880 --> 00:21:06,800 Speaker 9: actual solutions, I think most of the telcos I talk 398 00:21:06,880 --> 00:21:09,960 Speaker 9: to feel like the paper is kind of lacking. There's 399 00:21:10,000 --> 00:21:13,000 Speaker 9: some talk about, oh, we should harmonize spectrum policies atle 400 00:21:13,000 --> 00:21:14,919 Speaker 9: bit more across the European Union, and we need to 401 00:21:14,960 --> 00:21:18,639 Speaker 9: make it easier for companies to achieve scale by merging 402 00:21:18,680 --> 00:21:21,800 Speaker 9: across borders. But telco's for their main number one ask 403 00:21:21,960 --> 00:21:24,840 Speaker 9: really has been to merge in market, and there's very 404 00:21:24,880 --> 00:21:28,160 Speaker 9: little acknowledgement of that. And you know, and even when 405 00:21:28,240 --> 00:21:30,639 Speaker 9: when the Commission was unveiling this paper, you know, we 406 00:21:30,680 --> 00:21:34,240 Speaker 9: had Margaret Investigate, the competition chief for the European Commission, saying, 407 00:21:34,320 --> 00:21:37,440 Speaker 9: you know, in market consolidation is not the answer. So 408 00:21:37,520 --> 00:21:39,080 Speaker 9: I think that was kind of met with a lot 409 00:21:39,119 --> 00:21:43,159 Speaker 9: of sadness among the telcos. But it also will have 410 00:21:43,200 --> 00:21:45,760 Speaker 9: a new commission coming in next year, and so it 411 00:21:45,760 --> 00:21:48,240 Speaker 9: really is a question of what is that next commission, 412 00:21:48,240 --> 00:21:50,639 Speaker 9: who's in charge, what do they think is actually the solution? 413 00:21:50,760 --> 00:21:53,639 Speaker 9: Do they even do they take up telcos as a 414 00:21:53,680 --> 00:21:54,800 Speaker 9: topic end item? 415 00:21:55,200 --> 00:21:57,480 Speaker 2: Yeah, so an interesting time for those companies too. I 416 00:21:57,520 --> 00:21:59,080 Speaker 2: mean we're also in the midst of earning season of 417 00:21:59,119 --> 00:22:01,680 Speaker 2: course as well, what's sort of financial state are these 418 00:22:01,680 --> 00:22:02,400 Speaker 2: companies in. 419 00:22:03,840 --> 00:22:06,080 Speaker 9: Not not a great one in them And there's obviously 420 00:22:06,080 --> 00:22:08,600 Speaker 9: a lot of nuance between companies and different markets, but 421 00:22:09,200 --> 00:22:12,159 Speaker 9: these more broadly speaking, we definitely see declining revenues for 422 00:22:12,200 --> 00:22:15,399 Speaker 9: almost all of these tacos year on year, and I 423 00:22:15,440 --> 00:22:17,680 Speaker 9: think there's some really interesting trends that have come out 424 00:22:17,680 --> 00:22:19,920 Speaker 9: of that. So I think a good one to look 425 00:22:19,960 --> 00:22:21,879 Speaker 9: at is Votaphone, for example. You know, they're really a 426 00:22:21,960 --> 00:22:25,320 Speaker 9: key pan European toco. They're actually exiting a lot of markets. 427 00:22:25,359 --> 00:22:28,119 Speaker 9: You know, they've sold off their operations in Spain, is 428 00:22:28,200 --> 00:22:30,480 Speaker 9: going to They're trying to exit Italy. There's a massive 429 00:22:30,480 --> 00:22:32,840 Speaker 9: merger in the UK, so I mean there's one, but 430 00:22:33,440 --> 00:22:35,240 Speaker 9: this is an example of the kind of massive M 431 00:22:35,280 --> 00:22:38,480 Speaker 9: and A talks we're seeing across Europe. And you know, 432 00:22:38,520 --> 00:22:40,280 Speaker 9: this is really so that companies can try to achieve 433 00:22:40,320 --> 00:22:42,679 Speaker 9: that scale that they say is necessary to actually make 434 00:22:42,720 --> 00:22:45,879 Speaker 9: the kind of big infrastructure investments that they need to 435 00:22:45,920 --> 00:22:48,600 Speaker 9: remain competitive. So every kind of company is trying to 436 00:22:48,600 --> 00:22:51,440 Speaker 9: scramble to find solutions in that sense. But we're also 437 00:22:51,480 --> 00:22:54,000 Speaker 9: seeing a lot of foreign investment more hedge funds coming in. 438 00:22:54,840 --> 00:22:56,840 Speaker 9: Whenever I talk to telco's and I ask, you know, 439 00:22:56,880 --> 00:22:59,119 Speaker 9: where do you see this market in five years? Really 440 00:22:59,160 --> 00:23:00,640 Speaker 9: no one has a clear pick sure or what it's 441 00:23:00,640 --> 00:23:03,000 Speaker 9: going to look like, which is kind of frightening but 442 00:23:03,000 --> 00:23:05,159 Speaker 9: also quite exciting I think for companies. So it'll be 443 00:23:05,680 --> 00:23:07,919 Speaker 9: very interesting to see where that kind of talk is 444 00:23:07,960 --> 00:23:11,280 Speaker 9: at ahead of this at the conference. 445 00:23:11,880 --> 00:23:13,960 Speaker 2: Because one of the really big investments these companies have 446 00:23:14,000 --> 00:23:16,640 Speaker 2: been making has been in five G networks. Are those 447 00:23:16,640 --> 00:23:18,840 Speaker 2: investments paying off for these companies or when are they 448 00:23:18,920 --> 00:23:21,359 Speaker 2: expected to a great question. 449 00:23:21,400 --> 00:23:23,360 Speaker 9: I mean, I think what the best way to look 450 00:23:23,359 --> 00:23:25,959 Speaker 9: at is to start with the Tulco infrastructure companies. So 451 00:23:26,000 --> 00:23:28,560 Speaker 9: this is no Ki and Erickson. They really hold this 452 00:23:28,680 --> 00:23:31,800 Speaker 9: kind of Nordic do compily very really interesting because they're 453 00:23:31,800 --> 00:23:35,040 Speaker 9: at the mercy of network operators and no Key in 454 00:23:35,040 --> 00:23:37,640 Speaker 9: their recent earnings was saying, look, you know, these companies 455 00:23:37,720 --> 00:23:40,240 Speaker 9: have to start investing in five G if they want 456 00:23:40,280 --> 00:23:43,360 Speaker 9: to really remain competitive with each other. And they say 457 00:23:43,359 --> 00:23:46,080 Speaker 9: that these investments will start soon, but they really don't 458 00:23:46,119 --> 00:23:49,200 Speaker 9: have a great idea of when that actually will happen. 459 00:23:50,119 --> 00:23:53,240 Speaker 9: And I think, you know, we do see inflation decreasing. 460 00:23:53,240 --> 00:23:55,160 Speaker 9: Of course, energy costs are lower than they have been, 461 00:23:55,960 --> 00:23:58,159 Speaker 9: so I think there's some optimism that maybe this is 462 00:23:58,200 --> 00:24:00,920 Speaker 9: the year where things start to turn around, but it's 463 00:24:00,960 --> 00:24:04,760 Speaker 9: not a very clear picture when this actually could turn around. 464 00:24:04,960 --> 00:24:07,159 Speaker 9: I also not mention, you know, not just with five G, 465 00:24:07,359 --> 00:24:11,080 Speaker 9: which is obviously a massive focus for tacos, but there's 466 00:24:11,080 --> 00:24:12,639 Speaker 9: also a lot of talk about open ram, which is 467 00:24:12,640 --> 00:24:16,119 Speaker 9: basically a technology that allows network operators to pick and 468 00:24:16,200 --> 00:24:18,800 Speaker 9: choose parts from different suppliers. There's been a lot to 469 00:24:18,800 --> 00:24:20,480 Speaker 9: talk about open round for a long times when pushed 470 00:24:20,480 --> 00:24:22,880 Speaker 9: by the US government, but it never really gained traction 471 00:24:23,000 --> 00:24:24,600 Speaker 9: until the end of last year when at and T 472 00:24:24,720 --> 00:24:27,480 Speaker 9: and that's some massive contract with Ericson to actually start 473 00:24:27,520 --> 00:24:29,400 Speaker 9: rolling this out in the US. We see Deutsche Telcom also 474 00:24:29,440 --> 00:24:31,960 Speaker 9: in Germany doing this with Nokia, and so I think 475 00:24:32,000 --> 00:24:35,600 Speaker 9: that's also giving companies some hope, and that might that 476 00:24:35,680 --> 00:24:38,119 Speaker 9: might also kind of help for Nokia and Erickson, and 477 00:24:38,160 --> 00:24:42,760 Speaker 9: that might kind of stimulate more and more network infrastructure investment. 478 00:24:43,240 --> 00:24:45,879 Speaker 9: So maybe this is the year, but I'll be curious 479 00:24:45,880 --> 00:24:48,199 Speaker 9: to see if there's actually much optimism in Barcelona about it, 480 00:24:48,880 --> 00:24:51,280 Speaker 9: or if this is just you know, another year. There's 481 00:24:51,600 --> 00:24:54,240 Speaker 9: some hope, but never actually any any reality. 482 00:24:54,480 --> 00:24:57,960 Speaker 2: Thanks too, Bloomberg's European Telecoms and Chips reporter Gillian Deutsch. There, 483 00:24:58,000 --> 00:25:00,399 Speaker 2: I'm Stephen Carroll in London. You can catch us every 484 00:25:00,400 --> 00:25:03,720 Speaker 2: weekday morning here for Bloomberg Daybreak Europe. Begetting at six 485 00:25:03,760 --> 00:25:06,800 Speaker 2: am in London at one am on Wall Streets. 486 00:25:06,960 --> 00:25:09,919 Speaker 1: Tom, Thank you, Steven, and coming up on Bloomberg day 487 00:25:09,920 --> 00:25:14,119 Speaker 1: Break weekend, another closely watched central bank rate decision and 488 00:25:14,280 --> 00:25:17,959 Speaker 1: earnings from a Chinese tech giant. I'm Tom Busby, and 489 00:25:18,080 --> 00:25:31,240 Speaker 1: this is Bloomberg. I'm Tom Busby in New York with 490 00:25:31,280 --> 00:25:33,560 Speaker 1: your global look ahead at the top stories for investors 491 00:25:33,600 --> 00:25:36,679 Speaker 1: in the coming week. For markets in the Asia Pacific region, 492 00:25:36,760 --> 00:25:39,360 Speaker 1: two things stand out in the week ahead, a rate 493 00:25:39,440 --> 00:25:42,800 Speaker 1: decision from New Zealand Central Bank and an earnings report 494 00:25:42,880 --> 00:25:47,240 Speaker 1: from online retail giant and search giant by Do for more. 495 00:25:47,359 --> 00:25:50,919 Speaker 1: Let's get to Bloomberg's Doug Chrisner, co host of Daybreak Asia. 496 00:25:51,080 --> 00:25:51,359 Speaker 5: Tom. 497 00:25:51,400 --> 00:25:54,479 Speaker 10: We begin with Kiwi inflation. We know higher prices have 498 00:25:54,560 --> 00:25:58,040 Speaker 10: been sticky in several economies, and New Zealand is no exception. 499 00:25:58,520 --> 00:26:01,160 Speaker 10: The question now is over the response on the part 500 00:26:01,160 --> 00:26:03,880 Speaker 10: of central bankers the Reserve Bank of New Zealand will 501 00:26:03,880 --> 00:26:07,159 Speaker 10: meet in the week ahead. Recently, the swaps market has 502 00:26:07,200 --> 00:26:10,280 Speaker 10: been pricing in a possible rate hike from the RBNZ 503 00:26:10,480 --> 00:26:13,359 Speaker 10: in the coming months. How real is that possibility though? 504 00:26:13,800 --> 00:26:17,280 Speaker 10: Let's bring in James McIntyre from Bloomberg Economics Asia. He 505 00:26:17,359 --> 00:26:20,399 Speaker 10: joins us from our studios in Sydney. James, always a pleasure, 506 00:26:20,440 --> 00:26:22,719 Speaker 10: Thanks for joining us. I'm going to ask you that question. 507 00:26:22,800 --> 00:26:27,440 Speaker 10: How real is the possibility that the RBNZ raises rates again? 508 00:26:28,000 --> 00:26:28,200 Speaker 4: Great? 509 00:26:28,240 --> 00:26:30,160 Speaker 11: Look, thanks for having me, it's great to be here. 510 00:26:30,200 --> 00:26:33,000 Speaker 11: And look, I think that I think it's not a 511 00:26:33,040 --> 00:26:37,199 Speaker 11: real possibility, but their threat is there. The RBNZ have 512 00:26:37,400 --> 00:26:40,359 Speaker 11: been quite hawkish still, even though they've done a lot 513 00:26:40,480 --> 00:26:43,160 Speaker 11: and they went earlier than everyone else, and also even 514 00:26:43,200 --> 00:26:45,639 Speaker 11: though they are getting things moving in the right direction, 515 00:26:45,720 --> 00:26:48,639 Speaker 11: whether it's the inflation story with the New Zealand, the 516 00:26:48,720 --> 00:26:52,320 Speaker 11: unemployment rate, labor capacity beginning to ease up, a lot 517 00:26:52,320 --> 00:26:54,720 Speaker 11: of that is moving in the right direction. But they've 518 00:26:54,760 --> 00:26:58,159 Speaker 11: stayed tremendously hawkish. There's a few reasons why, but I 519 00:26:58,200 --> 00:27:00,399 Speaker 11: think that they're more a threat than anything. It's likely 520 00:27:00,480 --> 00:27:02,160 Speaker 11: to become a reality over the next few months. 521 00:27:02,200 --> 00:27:05,080 Speaker 10: When you look at inflation expectations, though, can you give 522 00:27:05,119 --> 00:27:07,480 Speaker 10: me a sense of how that measure has been moving. 523 00:27:07,720 --> 00:27:09,760 Speaker 11: Yeah, well, there is a there's a key measure of 524 00:27:09,760 --> 00:27:13,480 Speaker 11: inflation expectations two year ahead expectations from a survey the 525 00:27:13,560 --> 00:27:18,639 Speaker 11: RBNZ does, and those expectations actually dropped down to about 526 00:27:18,640 --> 00:27:21,280 Speaker 11: two and a half percent. Now one to three percent 527 00:27:21,359 --> 00:27:23,520 Speaker 11: is the rbnz's target band, and they want to hit 528 00:27:23,560 --> 00:27:26,720 Speaker 11: that midpoint of two. So two and a half percent 529 00:27:27,160 --> 00:27:29,920 Speaker 11: for inflation over the next two years is not quite 530 00:27:30,000 --> 00:27:33,199 Speaker 11: there yet. But more than a quarter of the participants 531 00:27:33,200 --> 00:27:37,600 Speaker 11: in that survey saw that headline inflation measure moving to 532 00:27:37,720 --> 00:27:40,560 Speaker 11: the midpoint of the rbnz's banned by the end of 533 00:27:40,560 --> 00:27:43,640 Speaker 11: this year. So things are moving in the right direction there. 534 00:27:43,800 --> 00:27:45,960 Speaker 11: But I think that that might not actually necessarily be 535 00:27:46,040 --> 00:27:48,879 Speaker 11: the thing that the rbnz's super worried about at this point. 536 00:27:49,320 --> 00:27:52,919 Speaker 11: I think maybe that market pricing, which before traders had 537 00:27:52,960 --> 00:27:55,960 Speaker 11: begun to move to price in the chance of another hike, 538 00:27:56,240 --> 00:27:59,240 Speaker 11: that market pricing had seen those two year swaps. So 539 00:27:59,280 --> 00:28:01,919 Speaker 11: if we think about the to your inflation expectations from 540 00:28:02,000 --> 00:28:05,200 Speaker 11: economists to your swaps out there in markets, those had 541 00:28:05,200 --> 00:28:07,720 Speaker 11: been beginning to price in more and more of the 542 00:28:07,840 --> 00:28:10,200 Speaker 11: arbyens at easing, and that's something that we think that 543 00:28:10,240 --> 00:28:12,399 Speaker 11: they might have wanted to or that might be beginning 544 00:28:12,480 --> 00:28:14,440 Speaker 11: to start to try and talk against right now. 545 00:28:14,520 --> 00:28:16,920 Speaker 10: So from what I've read about the key we inflation, 546 00:28:17,040 --> 00:28:19,719 Speaker 10: the headn't line number is cooling a bit, but there 547 00:28:19,760 --> 00:28:22,439 Speaker 10: are elements that are proving to be sticky. Where do 548 00:28:22,520 --> 00:28:24,280 Speaker 10: we find those elements in the economy. 549 00:28:24,800 --> 00:28:27,520 Speaker 11: Yeah, it's in the non tradable side of the New 550 00:28:27,600 --> 00:28:31,560 Speaker 11: Zealand inflation basket. So we've had the tradable inflation falling, 551 00:28:31,600 --> 00:28:35,120 Speaker 11: and that's especially things like the energy price decline and 552 00:28:35,480 --> 00:28:38,080 Speaker 11: the goods price deflation that we've been seeing coming from 553 00:28:38,560 --> 00:28:40,640 Speaker 11: all around the world, and those are the things that 554 00:28:40,680 --> 00:28:43,600 Speaker 11: are kind of actually not really within the ARBs control. 555 00:28:43,880 --> 00:28:47,280 Speaker 11: Those non tradable side of things. Services inflation in particular, 556 00:28:47,320 --> 00:28:49,640 Speaker 11: they're proving a little bit stickier, and in the fourth 557 00:28:49,720 --> 00:28:52,680 Speaker 11: quarter data that we had back at the end of 558 00:28:52,720 --> 00:28:55,360 Speaker 11: January on the twenty fourth, they were quite a bit 559 00:28:55,400 --> 00:28:59,000 Speaker 11: stronger than expected and not only by economists, but the 560 00:28:59,080 --> 00:29:01,880 Speaker 11: arbiens it's own exit dictations for those. So that's that's 561 00:29:01,920 --> 00:29:04,680 Speaker 11: a lot of the services side within the economy, rents 562 00:29:04,720 --> 00:29:07,880 Speaker 11: being a bit of a challenge there and some of 563 00:29:07,880 --> 00:29:11,680 Speaker 11: the other services pricing that some of the domestic labor 564 00:29:11,720 --> 00:29:14,880 Speaker 11: costs might be a problem. For now we think that 565 00:29:14,880 --> 00:29:17,920 Speaker 11: that things are on track for those to EBB. But however, 566 00:29:18,080 --> 00:29:20,480 Speaker 11: the arben said, this is this dynamic that we're that 567 00:29:20,520 --> 00:29:24,000 Speaker 11: we've got with the hawkishness and some of that market pricing, 568 00:29:24,320 --> 00:29:27,840 Speaker 11: and even some of our economists peers thinking that the 569 00:29:27,920 --> 00:29:30,320 Speaker 11: Arbenz might want to actually do a little bit more 570 00:29:30,560 --> 00:29:33,040 Speaker 11: to take a little bit of extra insurance. So not 571 00:29:33,120 --> 00:29:35,440 Speaker 11: quite there yet on the non tradables front, which is 572 00:29:35,440 --> 00:29:38,719 Speaker 11: the part that from the domestic side and from the 573 00:29:38,800 --> 00:29:42,239 Speaker 11: what the Arbenz can control where they've probably got their 574 00:29:42,320 --> 00:29:43,880 Speaker 11: their maximum point of nervousness. 575 00:29:43,880 --> 00:29:44,080 Speaker 5: Stay. 576 00:29:44,120 --> 00:29:46,960 Speaker 10: When I think of higher prices in New Zealand, the 577 00:29:47,000 --> 00:29:49,720 Speaker 10: property market comes to mind when you look at how 578 00:29:49,800 --> 00:29:53,120 Speaker 10: home buyers have been behaving in an environment where rates 579 00:29:53,360 --> 00:29:56,520 Speaker 10: have been elevated, at least on the mortgage side. Has 580 00:29:56,560 --> 00:29:59,680 Speaker 10: there been a shift? Is are sales contracting a bit, 581 00:30:00,320 --> 00:30:03,440 Speaker 10: our prices coming down? What's the behavior of the housing market? 582 00:30:03,480 --> 00:30:05,960 Speaker 11: Pit, Yeah, we've had a bit of a turn in 583 00:30:06,000 --> 00:30:08,200 Speaker 11: the housing market. So we had been in a decline 584 00:30:08,280 --> 00:30:11,880 Speaker 11: as the housing market was responding to the rate hikes 585 00:30:11,880 --> 00:30:15,440 Speaker 11: thus far. But as the RBNZ has been on that pause, 586 00:30:16,360 --> 00:30:19,280 Speaker 11: we have seen some life come back into the property market. 587 00:30:19,480 --> 00:30:21,880 Speaker 11: Now part of that has been the very very strong 588 00:30:21,960 --> 00:30:24,800 Speaker 11: demand for property that we've seen. So like Australia, New 589 00:30:24,840 --> 00:30:29,680 Speaker 11: Zealand has been recently experiencing a really massive rebound in 590 00:30:29,720 --> 00:30:33,200 Speaker 11: its migration. We're getting population growth in the high twos, 591 00:30:33,760 --> 00:30:37,400 Speaker 11: possibly getting towards three percent, and that's really showing up 592 00:30:37,440 --> 00:30:39,360 Speaker 11: across a whole range of parts of the economy. But 593 00:30:39,400 --> 00:30:41,560 Speaker 11: in the property sector it's showing up in extra demand 594 00:30:41,600 --> 00:30:45,040 Speaker 11: for rents, an inflation problem for the RBNZ. And on 595 00:30:45,160 --> 00:30:47,520 Speaker 11: the price side of the market, we're seeing a little 596 00:30:47,520 --> 00:30:49,560 Speaker 11: bit of a pickup and activity a little bit more 597 00:30:49,560 --> 00:30:52,360 Speaker 11: confidence than some of those prices starting to rise. So 598 00:30:52,560 --> 00:30:54,960 Speaker 11: that's again one of the sort of if you're on 599 00:30:55,000 --> 00:30:57,800 Speaker 11: the camp of cutting rates soon in New Zealand, you'd 600 00:30:57,800 --> 00:31:00,360 Speaker 11: be looking at where the economy is going in terms 601 00:31:00,360 --> 00:31:03,800 Speaker 11: of activity, consumer spending, the unemployment rate, and where the 602 00:31:03,800 --> 00:31:06,840 Speaker 11: inflation track is ultimately going. But if you were going 603 00:31:06,880 --> 00:31:08,960 Speaker 11: to be a little bit hawkish and sort of thinking 604 00:31:08,960 --> 00:31:12,120 Speaker 11: that the RBNZ could hike that property sector and the 605 00:31:12,160 --> 00:31:15,680 Speaker 11: little bit of a migration stirred revival there, along with 606 00:31:15,720 --> 00:31:18,160 Speaker 11: inflation on the non tradable side being a little bit 607 00:31:18,160 --> 00:31:21,240 Speaker 11: too high. They're the kind of factors that you're balancing there. 608 00:31:21,360 --> 00:31:24,160 Speaker 10: I'm sure it's going to be a very interesting conversation 609 00:31:24,360 --> 00:31:26,560 Speaker 10: around the table at the meeting of the Reserve Bank 610 00:31:26,600 --> 00:31:28,680 Speaker 10: of New Zealand in the week ahead. James, thank you 611 00:31:28,760 --> 00:31:32,160 Speaker 10: so much for helping us preview the meeting. James McIntyre 612 00:31:32,200 --> 00:31:35,800 Speaker 10: from Bloomberg Economics Asia. Up next we go to Hong 613 00:31:35,920 --> 00:31:40,280 Speaker 10: Kong and the other host of Daybreak Asia, Brian Curtis Doug. 614 00:31:40,440 --> 00:31:42,720 Speaker 3: We'll be having a chat with Ernie bot in the 615 00:31:42,800 --> 00:31:46,480 Speaker 3: coming week as by Do reports its fourth quarter earnings. 616 00:31:47,040 --> 00:31:51,400 Speaker 3: The ernie chatbot has been generating considerable excitement for Baidou 617 00:31:51,520 --> 00:31:55,000 Speaker 3: as it looks to capitalize on AI. Erniebot is based 618 00:31:55,040 --> 00:31:58,920 Speaker 3: on Baidu's internally developed large language model, and like others, 619 00:31:59,000 --> 00:32:03,080 Speaker 3: it can generate tech images and videos. Bidou said at 620 00:32:03,120 --> 00:32:06,320 Speaker 3: the end of December that the chatbot had attracted more 621 00:32:06,360 --> 00:32:09,680 Speaker 3: than one hundred million users. We thought it would be 622 00:32:09,680 --> 00:32:11,440 Speaker 3: a good time to take a look at how baid 623 00:32:11,600 --> 00:32:14,640 Speaker 3: and other companies in Asia are doing on the generative 624 00:32:14,720 --> 00:32:18,040 Speaker 3: AI front, where the buzz seems to be a little 625 00:32:18,080 --> 00:32:20,440 Speaker 3: bit less than what we're hearing in the United States. 626 00:32:20,520 --> 00:32:22,720 Speaker 3: And joining us now for a look at baido is 627 00:32:22,840 --> 00:32:28,120 Speaker 3: Jumping Huang, who covers technology companies for Bloomberg News. Jumping 628 00:32:28,160 --> 00:32:31,479 Speaker 3: thanks very much for coming into our studios. So Bidu 629 00:32:31,560 --> 00:32:34,400 Speaker 3: is competing against ten Cent and Ali Baba and others 630 00:32:34,440 --> 00:32:37,400 Speaker 3: to commercialize this as far as we know, and I 631 00:32:37,400 --> 00:32:39,560 Speaker 3: know we won't know for sure until we get the 632 00:32:39,600 --> 00:32:42,480 Speaker 3: earnings in the coming week, but as far as we know, 633 00:32:42,600 --> 00:32:44,880 Speaker 3: how well is byd monetizing AI. 634 00:32:45,680 --> 00:32:48,920 Speaker 12: Right before we get deep into earning BA, I would 635 00:32:48,920 --> 00:32:52,840 Speaker 12: like to know that the fundamental business for Baidu is 636 00:32:52,920 --> 00:32:57,720 Speaker 12: to search advertisement and it's sort of using advertisement revenue 637 00:32:57,760 --> 00:33:03,200 Speaker 12: to fund its risky projects like Erniba. So for the 638 00:33:03,240 --> 00:33:07,440 Speaker 12: results we were seeing the coming week, it's essential to 639 00:33:07,480 --> 00:33:10,560 Speaker 12: see if it's ever a NewView is picking up again 640 00:33:11,000 --> 00:33:14,720 Speaker 12: during a very difficult time during China's economy. 641 00:33:15,080 --> 00:33:15,680 Speaker 5: But back on. 642 00:33:15,720 --> 00:33:19,240 Speaker 12: Learning, Yeah, it's sort of the leader, at least in 643 00:33:19,320 --> 00:33:23,560 Speaker 12: the Chinese internet sphere because it's the first to launch 644 00:33:23,600 --> 00:33:26,400 Speaker 12: the service to the public and it already started to 645 00:33:26,520 --> 00:33:30,720 Speaker 12: charge a monthly subscription fee for a premier tier of 646 00:33:30,760 --> 00:33:35,880 Speaker 12: the Arniba, which costs a dollar promounts. So monetization is 647 00:33:35,960 --> 00:33:39,040 Speaker 12: kicking off, yes, but we still have to wait and 648 00:33:39,080 --> 00:33:42,560 Speaker 12: see to see how big of an impact it will 649 00:33:42,600 --> 00:33:44,360 Speaker 12: have to byduce top line. 650 00:33:44,400 --> 00:33:46,800 Speaker 3: Now, I know that China has enforced a law to 651 00:33:46,920 --> 00:33:52,040 Speaker 3: regulate this area. It's something that China perhaps is in 652 00:33:52,120 --> 00:33:56,000 Speaker 3: advance over other places like the United States and Europe 653 00:33:56,040 --> 00:33:59,280 Speaker 3: and others. What do we know about how tough this 654 00:33:59,400 --> 00:33:59,960 Speaker 3: new law is. 655 00:34:00,840 --> 00:34:04,920 Speaker 12: Yeah, so what China did is like for every generative 656 00:34:05,000 --> 00:34:09,080 Speaker 12: AI service to get online to be used for Chinese 657 00:34:09,200 --> 00:34:12,840 Speaker 12: users and need to get the pre approval from China's 658 00:34:12,920 --> 00:34:19,719 Speaker 12: top internet regulator, the CAC, and back earlier last year, 659 00:34:20,360 --> 00:34:24,880 Speaker 12: the CAC issued its first batch of approvals to Chinese 660 00:34:24,960 --> 00:34:28,160 Speaker 12: tech giants, including Baidu. So we got like around that 661 00:34:28,239 --> 00:34:32,920 Speaker 12: doesn't like services that was greenlight by Beijing. And that's 662 00:34:33,000 --> 00:34:37,560 Speaker 12: also to say that also means that foreign services like 663 00:34:37,880 --> 00:34:41,920 Speaker 12: GPT and the ones from Google and Microsoft will likely 664 00:34:42,160 --> 00:34:45,920 Speaker 12: never be available within China's internet. So we're sort of 665 00:34:46,000 --> 00:34:51,360 Speaker 12: like seeing yet another episode of the parannel universe of 666 00:34:52,000 --> 00:34:55,000 Speaker 12: the China Internet. Versus the global Internet. 667 00:34:55,320 --> 00:35:00,680 Speaker 3: And how different is the approach of Chinese chatbot compared 668 00:35:00,719 --> 00:35:03,759 Speaker 3: to those in the West, particularly in light of the 669 00:35:03,800 --> 00:35:05,880 Speaker 3: overhang of the legislation that's in place. 670 00:35:06,040 --> 00:35:09,520 Speaker 12: The Traine spot will like actually do a lot of 671 00:35:09,640 --> 00:35:16,400 Speaker 12: censorship to prevent some questionable answers from the bots. Whenever 672 00:35:16,440 --> 00:35:21,600 Speaker 12: you touch upon politics or human rights or actually if 673 00:35:21,640 --> 00:35:25,880 Speaker 12: you're trying to type the name of Chinese president, in 674 00:35:26,000 --> 00:35:28,960 Speaker 12: many of the Chinese spots, they won't even let you 675 00:35:29,239 --> 00:35:34,319 Speaker 12: to continue the conversation. So I think data is one thing. 676 00:35:34,560 --> 00:35:37,600 Speaker 12: When we talk about whether it's like training data or 677 00:35:37,640 --> 00:35:42,320 Speaker 12: like the output data, it's sort of filtered and self censored. 678 00:35:42,719 --> 00:35:47,960 Speaker 12: That could have a negative impact on the effectiveness of 679 00:35:48,000 --> 00:35:49,040 Speaker 12: the Chinese spots. 680 00:35:49,200 --> 00:35:51,760 Speaker 3: And we might think that the search leader in China 681 00:35:51,840 --> 00:35:56,000 Speaker 3: would have almost a step ahead or a leading start 682 00:35:56,040 --> 00:35:59,560 Speaker 3: against other companies. But I understand that Chinese companies are 683 00:35:59,680 --> 00:36:03,600 Speaker 3: kind of of well armed with ample CAPEX built into 684 00:36:04,280 --> 00:36:06,759 Speaker 3: the spending model for this year. Are we expecting to 685 00:36:06,800 --> 00:36:08,080 Speaker 3: see a lot of money spent on this? 686 00:36:08,600 --> 00:36:12,640 Speaker 12: Yeah, Actually, it's quite funny. The way it's calling China 687 00:36:12,760 --> 00:36:16,360 Speaker 12: is a wall of one hundred models, meaning like whether 688 00:36:16,400 --> 00:36:19,239 Speaker 12: it's like tech giants or startups there, they're trying to 689 00:36:19,239 --> 00:36:23,440 Speaker 12: build their own models instead of applications. Because in the West, 690 00:36:23,960 --> 00:36:28,000 Speaker 12: GPT is a clear winner, and in China, like not 691 00:36:28,200 --> 00:36:31,239 Speaker 12: everyone's buying by do well be the Chinese version of 692 00:36:31,360 --> 00:36:36,240 Speaker 12: open Ai. Yet, so venture capitalists are trying to fund 693 00:36:36,360 --> 00:36:41,080 Speaker 12: a lot of like rival models and for robbing THEE 694 00:36:41,280 --> 00:36:44,040 Speaker 12: is trying to argue, hey, let's stop building model because 695 00:36:44,040 --> 00:36:47,880 Speaker 12: it's a waste of resources. Let's try build applications on 696 00:36:47,960 --> 00:36:48,680 Speaker 12: top of learning. 697 00:36:49,680 --> 00:36:53,439 Speaker 3: And if we were to set aside generative intelligence and 698 00:36:53,600 --> 00:36:57,760 Speaker 3: this push on developing a chatbot, how does Buyd's earnings 699 00:36:57,760 --> 00:36:58,400 Speaker 3: look otherwise? 700 00:36:59,520 --> 00:37:03,839 Speaker 12: Yeah, that goes back to my first point about advertising. 701 00:37:04,440 --> 00:37:08,759 Speaker 12: So in advertising, we know it is closely tracked with 702 00:37:09,040 --> 00:37:12,760 Speaker 12: China's macro economy, which is not in a good shape 703 00:37:12,800 --> 00:37:19,120 Speaker 12: because it's dealing with a couple of fundamental problems like deflation, use, unemployment, 704 00:37:19,360 --> 00:37:23,759 Speaker 12: and a shrinking population. And for bay Do, it's the 705 00:37:23,800 --> 00:37:26,719 Speaker 12: bread and butter of its ad revenue comes from the 706 00:37:26,840 --> 00:37:33,799 Speaker 12: search revenue, and traditionally automobile makers and travel agencies will 707 00:37:33,840 --> 00:37:37,200 Speaker 12: be a big spender in search ads. It would be 708 00:37:37,239 --> 00:37:40,520 Speaker 12: great if the company provide us any breakdown or color 709 00:37:40,560 --> 00:37:44,279 Speaker 12: about who's spending more in terms of search ad and 710 00:37:44,320 --> 00:37:47,600 Speaker 12: who's spending less, so we will get a better idea 711 00:37:47,680 --> 00:37:49,919 Speaker 12: of where the Chinese economy is going. 712 00:37:50,160 --> 00:37:52,879 Speaker 3: Japping, thanks so much for joining us. Chapping Huang, who 713 00:37:52,920 --> 00:37:57,239 Speaker 3: covers technology companies for Bloomberg News. I'm Brian Curtis along 714 00:37:57,280 --> 00:37:59,799 Speaker 3: with Doug Christner. You can catch us every weekday here 715 00:37:59,840 --> 00:38:02,839 Speaker 3: for or Bloomberg day Break Asia, beginning at nine am 716 00:38:02,880 --> 00:38:05,880 Speaker 3: in Hong Kong and six pm on Wall Street. 717 00:38:06,320 --> 00:38:08,799 Speaker 1: Tom thank you, Brian, and that does it for this 718 00:38:09,000 --> 00:38:11,720 Speaker 1: edition of Bloomberg day Break Weekend. Join us again Monday 719 00:38:11,719 --> 00:38:14,080 Speaker 1: morning at five am Wall Street time for the latest 720 00:38:14,120 --> 00:38:16,640 Speaker 1: on the market's overseas and the news you need to 721 00:38:16,640 --> 00:38:20,000 Speaker 1: start your day. I'm Tom Busby. Stay with us. Top 722 00:38:20,040 --> 00:38:23,680 Speaker 1: stories and global business headlines are coming up right now.