WEBVTT - SCOTUS Tax Ruling, US Housing 0:00:02.920 --> 0:00:10.840 Bloomberg Audio Studios, podcasts, radio news. You're listening to the 0:00:10.880 --> 0:00:15.040 Bloomberg Intelligence Podcast. Catch us live weekdays at ten am 0:00:15.080 --> 0:00:18.040 Eastern on Apple card playing Android Auto with the Bloomberg 0:00:18.120 --> 0:00:21.440 Business app. Listen on demand wherever you get your podcasts, 0:00:21.640 --> 0:00:23.759 or watch us live on YouTube. 0:00:24.360 --> 0:00:27.280 Along the watch for some Supreme Court rulings here today 0:00:27.320 --> 0:00:29.120 we did get one. The US Supreme Court up held 0:00:29.160 --> 0:00:33.600 a twenty seventeen tax on American owned business foreign profits. 0:00:34.200 --> 0:00:36.800 June Grosso, Bloomberg Legal analyst that joins us here in 0:00:36.800 --> 0:00:37.320 our studio. 0:00:38.360 --> 0:00:39.159 Not one of the world. 0:00:38.960 --> 0:00:42.760 Sexy ones, but not even on the most watch lists, 0:00:43.080 --> 0:00:47.080 maybe on Bloomberg's most watch These are taxes right. Berties care, 0:00:47.080 --> 0:00:50.040 but the average American citizen who's looking for the hot 0:00:50.040 --> 0:00:53.080 button issues doesn't care about this. I mean, if they 0:00:53.120 --> 0:00:55.880 had not ruled this way, it would have sent the 0:00:55.920 --> 0:00:59.080 Internal Revenue Service into a frenzy trying to, you know, 0:00:59.200 --> 0:01:02.600 restore taxes that were paid and also some of the 0:01:02.680 --> 0:01:04.960 you know, the rules that they have. So this basically 0:01:05.080 --> 0:01:07.960 was a two people who owned a minority stake in 0:01:08.000 --> 0:01:10.920 an Indian company in India, and they said that they 0:01:10.920 --> 0:01:13.679 shouldn't have to pay the taxes that were allocated to 0:01:13.720 --> 0:01:17.280 them because they hadn't gotten any profits from the company. 0:01:17.520 --> 0:01:20.240 And you know, this is the sixteenth Amendment, which I 0:01:20.360 --> 0:01:22.320 can't read. I think law school was the last time 0:01:22.319 --> 0:01:26.280 I ever heard about the sixteenth Amendment. And so you know, 0:01:26.319 --> 0:01:28.360 the justice it says, this is no different than any 0:01:28.400 --> 0:01:33.560 other tax. And the fear was that this would enable 0:01:33.600 --> 0:01:37.080 a wealth tax, if a wealth tax ever comes. And 0:01:37.640 --> 0:01:39.720 that was the only fear really from this case. So 0:01:39.760 --> 0:01:43.360 it's seven to two. That tells you that there wasn't 0:01:43.440 --> 0:01:44.839 much problem. 0:01:45.240 --> 0:01:46.479 And what else are we waiting for? 0:01:46.520 --> 0:01:49.240 What are those hot wepon issues over my gosh, we're 0:01:49.240 --> 0:01:51.120 waiting Well, first of all, we're waiting for the abortion 0:01:51.280 --> 0:01:56.320 case from Idaho about state law that basically, you know, 0:01:56.600 --> 0:01:59.360 makes it only possible to have an abortion if the 0:01:59.360 --> 0:02:02.080 life of the mother there's in jeopardy. We're waiting for 0:02:02.160 --> 0:02:05.120 a gun rights case, which is based on the Second Amendment, 0:02:05.560 --> 0:02:08.240 which is whether there's a there's a law, a federal 0:02:08.320 --> 0:02:13.639 law that people who have domestic violence abuse charges against 0:02:13.680 --> 0:02:15.600 them or who have this the man in this case 0:02:15.600 --> 0:02:19.080 had a domestic violence temporary restraining order can't have a gun. 0:02:19.440 --> 0:02:23.920 That's another one. There's there the Texas and Florida social 0:02:23.960 --> 0:02:27.560 media cases. You know, whether or not social media companies 0:02:27.560 --> 0:02:30.960 are allowed to look at what they have and pick 0:02:31.200 --> 0:02:34.640 from what they have and knock things off their platform. 0:02:34.880 --> 0:02:38.320 There's also there's a case that will make people's eyes 0:02:38.400 --> 0:02:40.920 sort of glaze over, but it's really really important. It 0:02:41.000 --> 0:02:47.760 involves something called Chevron defference. And this involves every agency agencies, 0:02:47.800 --> 0:02:49.760 whether or not you're going to give deference to an 0:02:49.840 --> 0:02:53.959 agency's interpretation of a law that's ambiguous, or whether the 0:02:54.000 --> 0:02:56.400 court should be the one to interpret it. And so 0:02:56.760 --> 0:02:59.720 if and the several of the Conservative justice have been 0:02:59.720 --> 0:03:03.600 trying to get rid of Chevron deference for years and 0:03:03.919 --> 0:03:06.160 the question is whether or not. And it's something that 0:03:06.240 --> 0:03:08.400 conservatives have been trying to do because they don't like 0:03:08.480 --> 0:03:10.120 agency authority isn't a. 0:03:10.120 --> 0:03:12.440 Part because of the EPA, right, because the PLA has 0:03:12.480 --> 0:03:14.680 like large light. I know, it goes all across it's. 0:03:14.480 --> 0:03:18.040 The EPA, it's banking, social security, you name it. Would 0:03:18.080 --> 0:03:22.040 anything involving an agency this would affect. And I think 0:03:22.040 --> 0:03:24.880 the Labor Department is the department that has already started 0:03:26.000 --> 0:03:29.959 not relying on Chevron deference in proposing rules because they're 0:03:30.000 --> 0:03:32.360 afraid of what the Supreme Court may do here. I 0:03:32.360 --> 0:03:33.679 have to look up, but I think it is a 0:03:33.760 --> 0:03:34.480 labor department. 0:03:34.600 --> 0:03:36.560 June Grosso, Bloomberg Legal Analyst. 0:03:38.080 --> 0:03:41.960 You're listening to the Bloomberg Intelligence Podcast. Catch us live 0:03:42.040 --> 0:03:45.080 weekdays at ten am Eastern on Apple car Play and 0:03:45.080 --> 0:03:48.000 Android Auto with the Bloomberg Business App. You can also 0:03:48.080 --> 0:03:51.560 listen live on Amazon Alexa from our flagship New York station. 0:03:51.960 --> 0:03:54.720 Just say Alexa Play Bloomberg eleven thirty. 0:03:56.120 --> 0:03:57.520 You also want to get to some of that economic 0:03:57.560 --> 0:04:00.480 data that broke earlier Today, new home construction in the 0:04:00.600 --> 0:04:03.680 US slumped and made to the slowest pace in four years, 0:04:03.880 --> 0:04:07.680 as higher for longer interest rates sapped the housing industry's momentum. 0:04:07.200 --> 0:04:10.040 From earlier this year. Drew reading, we pay. 0:04:09.960 --> 0:04:11.720 Him to do this stuff. He's a home builder analyst 0:04:11.720 --> 0:04:16.679 at Bloomberg Intelligence. Drew what's happening in the home building business? 0:04:17.000 --> 0:04:17.480 Construction? 0:04:19.120 --> 0:04:21.560 Yeah, so a pretty big myths on the headline today 0:04:21.560 --> 0:04:24.320 on the housing starts number, not all that surprising. You 0:04:24.320 --> 0:04:26.280 have to remember rates went up to seven and a 0:04:26.320 --> 0:04:29.520 half percent last month and they're still hovering at around 0:04:29.560 --> 0:04:31.640 seven percent. We also had some week data on the 0:04:31.680 --> 0:04:36.360 home builder confidence side, you know, but these numbers are 0:04:36.400 --> 0:04:39.720 also being impacted by you want to parse out what's 0:04:39.720 --> 0:04:42.400 happening in this single family side versus the multifamily side, 0:04:42.920 --> 0:04:44.680 and the way we tend to look at it is 0:04:44.920 --> 0:04:46.960 non seasonally ad just on a year of a year basis. 0:04:47.000 --> 0:04:49.440 So we had total starts down twenty percent, which is 0:04:49.600 --> 0:04:53.039 a pretty big number, but single family starts were actually 0:04:53.160 --> 0:04:56.040 up three percent and multi family is down fifty seven percent. 0:04:56.400 --> 0:04:57.200 So that's a lot of. 0:04:57.120 --> 0:04:59.440 The story right there. And if you look here to date, 0:05:00.080 --> 0:05:03.080 starts are down about four percent, single families up nineteen, 0:05:03.120 --> 0:05:06.560 multi families down forty. So that dynamic is one thing 0:05:06.600 --> 0:05:08.719 at play. The other thing that we've talked about in 0:05:08.760 --> 0:05:13.120 the past is the relative advantage of the big, well capitalized, 0:05:13.120 --> 0:05:16.200 publicly traded home builders. And we just had some data 0:05:16.240 --> 0:05:19.320 from Lenar who just reported results which lines up nicely 0:05:19.360 --> 0:05:21.839 with what we got just got on housing starts, and 0:05:21.880 --> 0:05:24.000 if you look at over the last six months, their 0:05:24.080 --> 0:05:28.280 starts are up about twenty percent year every year. So 0:05:28.440 --> 0:05:30.080 you know a couple of stories. It's the single family 0:05:30.120 --> 0:05:31.839 side and then it's the big public builders. 0:05:32.240 --> 0:05:34.159 Well, what do we learned from KB home on that front, 0:05:34.200 --> 0:05:37.600 because that usually caters to sort of the entry level buyer. 0:05:37.720 --> 0:05:38.960 Lenar are more high end. 0:05:40.760 --> 0:05:44.039 Yeah, KB had great results pretty much across the board. 0:05:44.800 --> 0:05:47.960 You know, their results told us that demands remained strong, 0:05:48.160 --> 0:05:50.799 that buyers are still responding to the use of incentives. 0:05:51.200 --> 0:05:53.599 It also tells us that incentives probably aren't going away 0:05:53.600 --> 0:05:56.440 in the near term. You know, when we came into 0:05:56.600 --> 0:05:59.520 the first quarter, there was an expectation that, hey, look, 0:05:59.600 --> 0:06:02.200 rates came down to you know, six and three quarters, 0:06:02.680 --> 0:06:05.080 maybe builders are going to be able to pull back 0:06:05.120 --> 0:06:06.680 on their use of incentives a little bit and that 0:06:06.680 --> 0:06:08.520 would help margins in the back half of the year. 0:06:08.800 --> 0:06:11.320 But it looks like with rates back at seven they're 0:06:11.360 --> 0:06:13.200 going to remain elevated, which will put a little bit 0:06:13.240 --> 0:06:15.880 of pressure on margin. So it's it's a demand versus 0:06:15.880 --> 0:06:18.920 margin story, and buyers are still responding to incentives. 0:06:19.440 --> 0:06:21.839 True kind of where are we in this country in 0:06:21.960 --> 0:06:25.559 terms of supply of housing? I know for a while 0:06:25.600 --> 0:06:28.080 the story had been we're at a deficit, there's not 0:06:28.320 --> 0:06:29.039 enough housing. 0:06:29.320 --> 0:06:30.400 Is that still the case? 0:06:31.600 --> 0:06:34.280 Yeah, that's a great question. And you know, one of 0:06:33.839 --> 0:06:37.720 the main speaking points for the builders was there's nothing 0:06:37.760 --> 0:06:40.120 for sale on the existing home side. People don't want 0:06:40.160 --> 0:06:42.039 to list their homes because they don't want to trade 0:06:42.040 --> 0:06:44.880 in their rate. We're starting to see a little bit 0:06:44.920 --> 0:06:47.640 of a shift there. If you look across the country, 0:06:48.839 --> 0:06:51.360 inventories are up about thirteen percent in the last month. 0:06:51.640 --> 0:06:53.440 That being said, if you take a step back, they're 0:06:53.440 --> 0:06:56.960 still down about thirty percent from pre pandemic levels. But 0:06:57.000 --> 0:07:00.599 what's interesting is kind of what's happening across the US 0:07:00.640 --> 0:07:03.240 and if you look at certain markets, you're starting to see, 0:07:03.560 --> 0:07:05.080 you know, some warning signs and you know, some of 0:07:05.120 --> 0:07:08.920 the ones that come to mind our Texas and Florida. 0:07:09.040 --> 0:07:11.480 You know, in Florida you've got inventories in some cases 0:07:11.560 --> 0:07:15.400 rising over fifty percent wow, and are actually above twenty 0:07:15.480 --> 0:07:18.000 nineteen levels by you know, fifty to seventy five percent. 0:07:18.000 --> 0:07:21.440 A lot of that's concentrated in some of the West 0:07:21.480 --> 0:07:24.440 and Southwest markets. But it's something certainly to keep an 0:07:24.440 --> 0:07:27.160 eye on because you know, as that inventory increases, the 0:07:27.480 --> 0:07:29.840 advantage builders have had diminishes. 0:07:30.800 --> 0:07:33.560 Huh, that's interesting. What are some of the other sort 0:07:33.600 --> 0:07:36.119 of hot spot areas. We had a great piece out 0:07:36.640 --> 0:07:39.560 talking about was it Tennessee? Was a Tennessee that is 0:07:39.600 --> 0:07:41.720 attracting all the people from the west and east coast 0:07:41.720 --> 0:07:43.880 and it's sort of pricing out all the people that 0:07:44.000 --> 0:07:47.000 actually live there. Like, how do big waves like this 0:07:47.160 --> 0:07:49.160 like we saw in Texas, like we did see in Florida, 0:07:49.240 --> 0:07:51.000 how does that wind up affecting the housing market. 0:07:52.480 --> 0:07:54.080 Yeah, there has been a lot of movement out of 0:07:54.120 --> 0:07:56.760 some of those high cost markets, you know, from coastal 0:07:56.800 --> 0:08:00.560 California and maybe Inland and then it's like Las Vegas 0:08:00.560 --> 0:08:03.640 and Phoenix. But we're seeing from a demand perspective is 0:08:03.720 --> 0:08:06.080 kind of interesting. At the national level, demand in the 0:08:06.080 --> 0:08:09.320 new home market has been relatively strong across the board, 0:08:09.520 --> 0:08:11.720 but we have seen markets kind of move in cycles. 0:08:11.720 --> 0:08:14.680 So if you look at the hardest hit markets back 0:08:14.720 --> 0:08:16.600 in you know, the second half of twenty twenty two 0:08:16.600 --> 0:08:19.920 when rates really shot up, you had you know, California, Washington, 0:08:20.720 --> 0:08:23.520 all the markets across the southwest. Those have actually come 0:08:23.560 --> 0:08:26.600 back pretty strong. And it's now some of the markets 0:08:26.640 --> 0:08:30.040 that were leading. You think about the Texas is and 0:08:30.080 --> 0:08:32.880 the Florida's, which are the two largest markets, are now 0:08:33.200 --> 0:08:35.640 starting to soften a little bit from both a pricing 0:08:36.000 --> 0:08:39.280 and a sales perspective as inventories start to rise. So 0:08:39.720 --> 0:08:42.959 you know, those markets big picture are still benefiting from 0:08:42.960 --> 0:08:45.600 out migration into some of the lower cost markets. That's 0:08:45.600 --> 0:08:48.920 why you've seen the Southeast and Florida do so well. 0:08:49.640 --> 0:08:51.199 But at the same time we are starting to see 0:08:51.200 --> 0:08:52.440 a little bit of slow down there. 0:08:52.559 --> 0:08:53.959 You know, a friend of mine just put her house 0:08:54.200 --> 0:08:56.800 on the market yesterday and I told her, I don't 0:08:56.800 --> 0:08:58.720 eve think you can get to your open house on Saturday. 0:08:58.760 --> 0:09:00.559 I think you can have like a Jillian Offers come 0:09:00.600 --> 0:09:02.320 in and you're gonna get So we'll see. 0:09:02.800 --> 0:09:03.360 I'll check in. 0:09:03.440 --> 0:09:05.640 But just one of the things, you just don't see 0:09:05.640 --> 0:09:07.880 existing inventory coming off to the market that much. When 0:09:07.880 --> 0:09:10.199 it does, particularly in a you know, a pretty middle 0:09:10.200 --> 0:09:11.400 of the road price range. 0:09:12.280 --> 0:09:13.960 I got to think it's just going to be snapped. 0:09:13.679 --> 0:09:16.560 Up, like versus six percent. Interest rate doesn't matter as 0:09:16.600 --> 0:09:17.560 much anymore as what you're. 0:09:17.480 --> 0:09:19.720 Saying, Yeah, yeah, yeah, I don't know. We'll have to see. 0:09:19.720 --> 0:09:22.120 So, Drew, is there a sense that rates have to 0:09:22.120 --> 0:09:25.880 come down for existing homes to really move well? 0:09:25.880 --> 0:09:27.400 I think you want to see rates get into that 0:09:27.480 --> 0:09:30.040 six and a half percent at least to see things 0:09:30.040 --> 0:09:32.240 start to loosen up a little bit. But what's just 0:09:32.400 --> 0:09:35.079 what's interesting, and Alex you mentioned it six verse seven. 0:09:35.360 --> 0:09:37.880 There's not a whole heck of a lot of difference there. 0:09:37.920 --> 0:09:40.199 And you have to remember the people coming too the 0:09:40.240 --> 0:09:45.199 market now are coming with that higher rate mindset versus 0:09:45.240 --> 0:09:47.040 you know what they were a couple of years ago. 0:09:47.120 --> 0:09:50.080 So people have certainly started to adjust. And at the 0:09:50.080 --> 0:09:53.120 same time, you know, we're still transacting at these higher 0:09:53.280 --> 0:09:56.240 interest rate levels, So that mortgage rate lock and effect 0:09:56.280 --> 0:09:59.040 that we've talked about previously, you know, it starts to 0:09:59.160 --> 0:10:01.920 gradually loose in a little bit because you've had more 0:10:01.920 --> 0:10:04.280 buyers purchasing at higher rates. 0:10:05.080 --> 0:10:07.360 All right, really great stuff drew you the best. We 0:10:07.400 --> 0:10:11.200 appreciate you, Adurenni. He covers home building for a Bloomberg Intelligence. 0:10:12.640 --> 0:10:16.520 You're listening to the Bloomberg Intelligence Podcast. Catch us live 0:10:16.600 --> 0:10:19.319 weekdays at ten am Eastern on Apple card Playing and 0:10:19.440 --> 0:10:22.280 Broud Auto with the Bloomberg Business App. Listen on demand 0:10:22.360 --> 0:10:26.720 wherever you get your podcasts, or watch us live on YouTube. 0:10:27.880 --> 0:10:30.720 Alex Delpaul swinging' live here on our Bloomberg Interactor Brokers Studio. 0:10:30.760 --> 0:10:34.280 I'm gonna story here. Denlt Technology shares rose Thursday. 0:10:34.559 --> 0:10:36.920 After chiefing the second officer, Michael Dell said the company 0:10:36.960 --> 0:10:40.760 is building a Dell AI factory for Elon Mus's startup 0:10:40.920 --> 0:10:43.920 XAI alongside Nvidio Corp. A lot of big names. In 0:10:44.000 --> 0:10:46.880 the first opening sentence there stick in with Woojin Hoo. 0:10:46.920 --> 0:10:49.520 He covers all the tech stuff for Bloomberg Intelligence, Which 0:10:49.559 --> 0:10:50.719 what's going on here with Michael Dell. 0:10:51.559 --> 0:10:55.480 Yeah, so Michael actually posted a Twitter post on some 0:10:55.559 --> 0:10:58.720 of his AI server racks that's going to go over 0:10:58.840 --> 0:11:05.960 to XA, which is Elon musk AI startup. Uh. Elon 0:11:06.080 --> 0:11:09.400 Mus actually followed up is saying, hey, yeah, this is happening, 0:11:09.440 --> 0:11:11.400 but we're only gonna split. We're gonna split the deal 0:11:11.440 --> 0:11:14.360 with both Dell and super Micro, and you're seeing super 0:11:14.360 --> 0:11:15.280 Micro rise as well. 0:11:16.160 --> 0:11:18.480 Can you just walk me through like what this all 0:11:18.520 --> 0:11:20.959 looks like? Like when I hear that headline and they're 0:11:20.960 --> 0:11:24.680 gonna plot provide servers for AI x tech whatever Twitter 0:11:24.840 --> 0:11:25.360 Musk thing? 0:11:25.440 --> 0:11:25.920 What is that? 0:11:27.000 --> 0:11:27.240 Yeah? 0:11:27.320 --> 0:11:32.199 So, so essentially you need specialized servers to help build 0:11:32.480 --> 0:11:35.640 or help support large language models. If you think about 0:11:35.640 --> 0:11:38.840 the AI build out over at Meta or at Google, uh, 0:11:38.920 --> 0:11:42.839 you need you know, hundreds, well thousands of GPUs to 0:11:42.840 --> 0:11:45.559 help support it. And each of these server racks are 0:11:45.600 --> 0:11:49.000 going from roughly one hundred thousand per rack for a 0:11:49.040 --> 0:11:51.880 traditional server rack, and what I calculate it is gonna 0:11:51.880 --> 0:11:54.600 go to about a million dollars per rack all closer together. 0:11:54.760 --> 0:11:58.360 So you know, you know, we've published that this one 0:11:58.520 --> 0:12:01.880 deal could be upwards of billion dollars split two ways 0:12:02.480 --> 0:12:03.720 between Dell and super Micro. 0:12:04.400 --> 0:12:06.640 All right, I'm going to ask the out steal question. 0:12:06.720 --> 0:12:08.880 As I'm looking at this photograph that was part of 0:12:08.920 --> 0:12:13.040 the Twitter spot for mister Dell. I see a big factory, lights, 0:12:13.600 --> 0:12:17.760 air conditioning, all that kind of stuff. I mean, how 0:12:17.800 --> 0:12:19.240 are they going to power all this stuff? Did they 0:12:19.240 --> 0:12:20.319 ever have to talk about that? 0:12:20.640 --> 0:12:21.760 I love you asked this question. 0:12:22.720 --> 0:12:28.679 Yeah, well, look, Elon Musk, I've actually seen some of 0:12:28.720 --> 0:12:31.600 the layouts or where this AI factory may be going to, 0:12:32.240 --> 0:12:36.280 and they've actually allocated the power for that. Now. Near term, 0:12:36.640 --> 0:12:41.000 I think the power needs should be fulfilled. You don't 0:12:41.040 --> 0:12:43.520 do the planning without the power. But longer term, I 0:12:44.080 --> 0:12:47.400 do think there might be some issues in terms of 0:12:47.440 --> 0:12:50.400 getting the land necessary, the data center land necessary to 0:12:50.400 --> 0:12:53.800 build out these AI data centers because of the amount 0:12:53.800 --> 0:12:56.520 of power that they're going to suck up. Some solutions 0:12:56.559 --> 0:13:01.080 may be nuclear, small nuclear power plants or set aside 0:13:01.840 --> 0:13:05.600 to these data centers. But there's some regulatory issues along 0:13:05.600 --> 0:13:05.880 with that. 0:13:06.040 --> 0:13:08.280 I thought I was reading that potentially something might be 0:13:08.320 --> 0:13:10.800 sent to President Biden today that would make it easier 0:13:11.360 --> 0:13:13.440 for nuclear and I wonder if that's all sort of 0:13:13.440 --> 0:13:16.840 playing into the energy transition, but also the big data centers. 0:13:17.240 --> 0:13:19.520 So you said it could be worth as a three billion, 0:13:19.840 --> 0:13:22.760 So they enter into this agreement, when does like Adell 0:13:23.240 --> 0:13:25.920 and super Micro book that revenue, Like, does that show 0:13:26.000 --> 0:13:27.200 up on its order book? 0:13:28.320 --> 0:13:31.920 Well, I wouldn't be surprised. That's already in the backlog numbers. Okay, 0:13:32.640 --> 0:13:35.680 in their backlog numbers today. One of the things, the 0:13:35.720 --> 0:13:38.240 metric that I'll share with you is that they did 0:13:38.280 --> 0:13:40.560 one point Dell did one point five billion dollars in 0:13:40.600 --> 0:13:44.559 AI server sales in calendar twenty twenty three. I have 0:13:44.679 --> 0:13:46.920 them going in around seven point six billion dollars in 0:13:47.000 --> 0:13:51.679 calendar twenty twenty four. Super Micro they're probably on pace too, 0:13:51.679 --> 0:13:55.840 about eighteen billion dollars in calendar twenty twenty four. What 0:13:55.880 --> 0:13:58.360 this is telling me is that not only are you 0:13:58.440 --> 0:14:01.679 getting more AI or larger AI server deals, but you're 0:14:01.679 --> 0:14:03.720 getting more AI server deals going forward. 0:14:04.320 --> 0:14:08.520 So Dell, super Micro those are two ways to play. 0:14:08.720 --> 0:14:10.640 What else in your space kind of fits into that 0:14:10.720 --> 0:14:11.520 AI theme here? 0:14:12.320 --> 0:14:16.600 Well, I mean, you know, my colleague Countries Obiani, he 0:14:16.640 --> 0:14:20.840 covers the chip space Nvidia. Everyone knows Broadcom, which has 0:14:20.920 --> 0:14:25.040 rallied over the last few days. They are a leading 0:14:25.120 --> 0:14:29.240 AI chip player on the networking space of riskent Networks 0:14:30.040 --> 0:14:32.000 is one of the vendors. To know that. There are 0:14:32.040 --> 0:14:34.840 some other guys such as Cisco and Hpe, but there'll 0:14:34.880 --> 0:14:37.240 be more enterprise focused at least for the time being, 0:14:37.600 --> 0:14:40.200 and won't have as a sizeable impact from AI on 0:14:40.520 --> 0:14:42.320 their numbers, at least in the near term. 0:14:42.960 --> 0:14:45.640 So when I'm talking in panels and stuff and I 0:14:45.640 --> 0:14:48.240 hear people like, Okay, this is definitely a bubble. It 0:14:48.320 --> 0:14:50.800 will definitely burst. We don't know when and how and why. 0:14:50.920 --> 0:14:53.080 We definitely want to buy puts, Like, we're definitely in 0:14:53.080 --> 0:14:54.680 a bubble. We just don't know what that looks like. 0:14:55.320 --> 0:14:57.920 What do you who are coming through the numbers think? 0:14:58.920 --> 0:15:03.600 Yeah, So we publish our valuation though for super Micro today, 0:15:04.000 --> 0:15:06.520 and I'll tell you that, you know, much of the 0:15:06.560 --> 0:15:09.320 stock rise of the last couple of days or the 0:15:09.400 --> 0:15:11.800 last year or so has been more earning, straighter than 0:15:11.840 --> 0:15:14.440 anything else. And it goes back to the fact that 0:15:14.680 --> 0:15:20.600 a lot of these AI systems have this humongous aspos boost. 0:15:20.680 --> 0:15:23.520 I mentioned one hundred thousand dollars a rack. The latest 0:15:23.560 --> 0:15:26.440 generation of Nvidia's servers, they're going to be about three 0:15:26.520 --> 0:15:30.160 million dollars per rack, and that's going to support their 0:15:30.680 --> 0:15:36.320 twenty five billion dollars in fiscal twenty twenty five expectations. 0:15:36.520 --> 0:15:40.440 And I think that if you think about a housing boom, 0:15:40.880 --> 0:15:44.000 we are going through an AI housing boom right now. 0:15:44.320 --> 0:15:46.200 And this is going to last for the next couple 0:15:46.280 --> 0:15:50.320 of years. Now, when does this housing boom bust? Still 0:15:50.360 --> 0:15:52.840 too early to tell, because first it's going to be 0:15:52.920 --> 0:15:56.200 the cloud. The enterprise is going to start following. I 0:15:56.240 --> 0:15:58.960 don't know how big that enterprise opportunity is just yet. 0:16:00.120 --> 0:16:04.080 Sense there would how much are this incremental AI spending 0:16:04.520 --> 0:16:07.960 is in fact incremental to overall tech spending or is 0:16:08.000 --> 0:16:09.960 it just taking it from other buckets? 0:16:10.720 --> 0:16:13.320 Yeah, you know, you know, that's a good question. And 0:16:14.040 --> 0:16:18.040 if we look at the companies or the sectors from 0:16:18.080 --> 0:16:22.560 a sector basis, within hardware, we've seen some of the 0:16:22.600 --> 0:16:27.200 traditional hardware lag in terms of spending. I do blame 0:16:27.280 --> 0:16:31.760 some of the declines in hard traditional hardware spending to 0:16:32.360 --> 0:16:35.160 a mix shift to AI. But the other thesis that's 0:16:35.200 --> 0:16:38.400 going around right now in the investment circles is that, well, 0:16:39.120 --> 0:16:41.920 it could also mean that they're going to spend less 0:16:41.960 --> 0:16:45.960 on software as well. Right, So from from a larger 0:16:46.040 --> 0:16:48.560 from a from from a larger perspective, there might be 0:16:48.560 --> 0:16:51.680 spending that's being pulled away from software to build out 0:16:51.680 --> 0:16:56.400 the infrastructure. Over time, as more software becomes AI enabled, 0:16:56.440 --> 0:16:59.280 the investments are going to fall back to software. 0:17:00.080 --> 0:17:02.880 So the whole I think with Nvidia like trying to 0:17:02.920 --> 0:17:06.119 talk about software and not hardware as much. 0:17:06.640 --> 0:17:07.240 What is that? 0:17:08.520 --> 0:17:08.680 Oh? 0:17:08.760 --> 0:17:14.280 Yeah, so there actually is a more. Nvidia is also 0:17:14.280 --> 0:17:18.040 a software name, right, you actually need to build a 0:17:18.119 --> 0:17:23.280 code to drive the GPU chips very efficiently. 0:17:23.880 --> 0:17:24.080 Right. 0:17:24.560 --> 0:17:30.440 And the bigger the developer user base. Right. Think about 0:17:30.440 --> 0:17:36.840 it as a programmer for Microsoft or programmer for Oracle. Right, 0:17:37.080 --> 0:17:39.320 You're trying to build this big developer user base so 0:17:39.440 --> 0:17:43.600 you can have your your AI programmers to write to 0:17:44.320 --> 0:17:49.240 the Nvidia chipset. Right. There's two benefits to this one. 0:17:49.400 --> 0:17:52.800 The AI chip sets try to leverage the software to 0:17:52.840 --> 0:17:56.000 optimize the energy consumption, So there is an energy benefit 0:17:56.080 --> 0:17:58.840 to this and also two, you're trying to lock up 0:17:59.280 --> 0:18:03.760 more developers to write to the g Nvidia GPU so 0:18:03.800 --> 0:18:06.119 you can gain or grow your market share in the 0:18:06.160 --> 0:18:06.919 GPU space. 0:18:08.080 --> 0:18:10.679 All Right, we're seeing more and more ways to play AI. 0:18:11.000 --> 0:18:13.919 I mean, there's the chips, there's the hardware of the software. 0:18:13.960 --> 0:18:15.200 Don't know how he keeps it. I don't know how 0:18:15.240 --> 0:18:16.160 would you keep it all straight? 0:18:16.160 --> 0:18:19.280 I gotta be honest. Helps, thanks so much for joining us. 0:18:19.280 --> 0:18:19.680 Wi Jinho. 0:18:19.720 --> 0:18:22.359 He's a senior technology analyst the Bloomberg Intelligency's down in 0:18:22.400 --> 0:18:26.280 our Princeton, New Jersey office here giving us some more 0:18:26.480 --> 0:18:30.840 views on how various companies within the tech stack is 0:18:30.880 --> 0:18:35.240 the tech geeks say this case Dell Computer, super micro 0:18:35.640 --> 0:18:41.080 stocks moving today on more servers being installed for the 0:18:41.080 --> 0:18:43.560 folks that can be running these big models. 0:18:43.240 --> 0:18:45.120 I guess and just go and it just goes again. 0:18:45.160 --> 0:18:47.600 And then you pair that with those that just watch 0:18:47.640 --> 0:18:51.160 momentum bubbles and they get increasingly worried. So it's it's 0:18:51.240 --> 0:18:53.639 really hard to square those two. At the end of 0:18:53.640 --> 0:18:53.960 the day. 0:18:55.560 --> 0:18:59.440 You're listening to the Bloomberg Intelligence podcast. Catch us live 0:18:59.480 --> 0:19:03.440 weekdays ten am Eastern on applecar Play and Android Auto 0:19:03.440 --> 0:19:06.240 with the Bloomberg Business App. You can also listen live 0:19:06.320 --> 0:19:09.480 on Amazon Alexa from our flagship New York station Just 0:19:09.560 --> 0:19:13.960 say Alexa playing Bloomberg eleven thirty. 0:19:13.720 --> 0:19:15.679 Alex Deel, Paul Swing you live here in our Bloomberg 0:19:15.760 --> 0:19:18.040 Interactive Broker studio or streaming live on YouTube. 0:19:18.040 --> 0:19:19.320 So you can head over YouTube. 0:19:19.040 --> 0:19:21.880 Dot com and search Bloomber podcast and that's what you'll find. 0:19:21.880 --> 0:19:24.080 This all right, here's story getting a lot of readership 0:19:24.080 --> 0:19:27.399 today by McDonald's. McDonald's US chief says the company is 0:19:27.480 --> 0:19:29.879 ready for a fight, and in order to win, the 0:19:29.920 --> 0:19:32.640 burger chain is pulling out one of the most potent 0:19:32.880 --> 0:19:36.359 weapons in its arsenal, the value meal. So they're gonna 0:19:36.359 --> 0:19:39.440 be putting some chicken and you get fries, you get 0:19:39.440 --> 0:19:40.680 a coke, all for five bucks. 0:19:40.720 --> 0:19:43.080 That's pretty darn solid. What does it mean for the 0:19:43.080 --> 0:19:45.800 restaurant company? So let's chick in with Mike Halen. 0:19:45.840 --> 0:19:49.880 Michael Halen, he covers the restaurant industry for Bloomberg Intelligence. Mike, 0:19:49.960 --> 0:19:53.600 I guess you know the big guns here for McDonald's. 0:19:53.640 --> 0:19:54.600 Here the value meal. 0:19:54.880 --> 0:19:57.960 What's going on in the fast food business these days? 0:19:59.240 --> 0:20:00.920 Yeah, listen, they have scale. 0:20:01.160 --> 0:20:04.240 They have scale that allows them to offer prices that 0:20:04.320 --> 0:20:08.480 some of their competitors can't match, right, And so you 0:20:08.480 --> 0:20:12.720 know what we're seeing now is, you know, consistent traffic declines. 0:20:13.280 --> 0:20:15.200 Same store sales have been pretty weak now for about 0:20:15.240 --> 0:20:17.480 a year in the restaurant industry. 0:20:17.480 --> 0:20:19.800 A lot of that is due to low income consumers. 0:20:20.280 --> 0:20:22.120