Speaker 1: Bloomberg Audio Studios, Podcasts, radio news.
Speaker 2: This is Bloomberg Daybreak Weekend, our global look at the
Speaker 2: top stories in the coming week from our Daybreak anchors
Speaker 2: all around the world. Straight Ahead on the program, we
Speaker 2: looked at some key inflation data in the US and
Speaker 2: how they could affect FED policy. I'm Nathan Hager in Washington.
Speaker 3: I'm Carolyn Hepke Harid London, where we're getting ready for
Speaker 3: the buzz of London Tech Week.
Speaker 4: I'm Doug Chrisner looking at how higher energy prices will
Speaker 4: impact Chinese inflation.
Speaker 1: That's all straight ahead on Bloomberg Daybreak Weekend on Bloomberg
Speaker 1: eleven three YEO New York, Bloomberg ninety nine to one, Washington, DC,
Speaker 1: Bloomberg ninety two nine, Boston, DAB Digital Radio, London, Sirius
Speaker 1: XM one twenty one, and around the world on Bloomberg Radio,
Speaker 1: dot Com and the Bloomberg Business App.
Speaker 2: Good day to you. I'm Nathan Hager. We begin today's
Speaker 2: program with some key economic data in the US, with
Speaker 2: a big focus on inflation. The May Consumer Price index
Speaker 2: comes out Wednesday, followed by the index for producers the
Speaker 2: following day, and for more on what to expect We're
Speaker 2: joined by Edward Harrison, senior strategist at Bloomberg News and
Speaker 2: author of the Everything Risk newsletter. Always great to speak
Speaker 2: with you, Ed, And I think it's no secret that
Speaker 2: just about everything is more expensive these days. So what
Speaker 2: are you expecting to stand out when it comes to
Speaker 2: the data this week.
Speaker 5: Hey, Nathan, I'm expecting to see the numbers be relatively
Speaker 5: elevated across the board PPI more than CPI. And what
Speaker 5: we're looking for is we're looking for anything that's demonstray
Speaker 5: below three percent on any of the figures that we see,
Speaker 5: because the lowest expected number is two point nine percent
Speaker 5: for core CPI. If we can get something in the
Speaker 5: order of year and year increases more two point six
Speaker 5: two point seven, that would be a very positive signal
Speaker 5: for the Federal Reserve, which is meeting later in the month.
Speaker 2: Why are you expecting producer prices to be higher this
Speaker 2: time around, Well.
Speaker 5: Just because of expectations. In terms of the Bloomberg average expectations,
Speaker 5: the average economist expectations for final demand is six point
Speaker 5: four percent for the month of May, and we also
Speaker 5: have five point four percent expected if you take out
Speaker 5: food and energy and those numbers are higher than you know,
Speaker 5: a four point two percent number that's expected for CPI.
Speaker 2: What are you expecting that it's going to be driving
Speaker 2: all this? Of course, you know, you drive by a
Speaker 2: gas station these days and prices are still much higher
Speaker 2: than many of us would like to be spending. Is
Speaker 2: that really what's continuing to drive the inflation picture right now?
Speaker 3: No?
Speaker 5: And you know, so that's why I think that the
Speaker 5: number that I'm looking for in particular is the core
Speaker 5: number for a CPI, that number which is at currently
Speaker 5: it's at two point eight percent, it's expected to go
Speaker 5: up to two point nine percent. That's the number that says,
Speaker 5: here's what the economy looks like if you take out
Speaker 5: these vital food and energy items over the last year,
Speaker 5: here's the rise that we've seen. And if that number
Speaker 5: is decent, you know, moving more towards the FEDS two
Speaker 5: percent target, it changes the whole picture. Because last week
Speaker 5: on Friday, what we saw is we saw a job's
Speaker 5: number that was very large. If you look at the
Speaker 5: last three months of job gains, it's the best that
Speaker 5: we've seen since the beginning of twenty twenty four. And
Speaker 5: so the market priced in a rate hike is soon
Speaker 5: as the end of this year. On the back of that,
Speaker 5: anything that we can see in terms of inflation that
Speaker 5: is more towards two percent would therefore dial back those
Speaker 5: expectations and cause yields to go down.
Speaker 1: Yeah.
Speaker 2: Coming off the back of those jobs numbers, we actually
Speaker 2: spoke with White House National Economic Council Director Kevin Hasseid.
Speaker 2: He was saying that the FED should be able to
Speaker 2: look past an oil driven supply shock. Can it?
Speaker 5: No, it can't, because those numbers are the best that
Speaker 5: we've seen for the jobs in almost a three years
Speaker 5: or two and a half years, i should say. And
Speaker 5: the reality is is that with what we're seeing in
Speaker 5: the Gulf, in addition to core numbers that are that
Speaker 5: have reaccelerated. If you looked at PC, which is the
Speaker 5: Fed's preferred gauge, we have bottomed fourteen months ago in
Speaker 5: April twenty twenty five two point six percent. The most
Speaker 5: recent reading was three point three percent, So we've seen
Speaker 5: an acceleration in the core. This is taking out food
Speaker 5: and energy. So there's no way that the FED can
Speaker 5: look over that because we're looking at a trend that's
Speaker 5: been going on for more than a year. And we've
Speaker 5: seen an acceleration in the rate of inflation.
Speaker 2: So what do you see potentially snapping that trend? Is
Speaker 2: there anything that the FED can do at this point?
Speaker 5: No, the Fed can just sit and wait. And the
Speaker 5: reality again is that the Gulf only adds more problems there.
Speaker 5: The interesting bit is is that, you know, when this
Speaker 5: war began in the Middle East, people were expecting it
Speaker 5: to have a very negative impact on consumer spending. But
Speaker 5: it hasn't had a negative impact. It hasn't had a
Speaker 5: negative impact on a job formation. So you know, the
Speaker 5: steady state of the United States economy is very high,
Speaker 5: and that means that the ability of the FED to
Speaker 5: try to counteract the inflationary impulses is much greater, which
Speaker 5: means that we should expect the FED to hike before
Speaker 5: we expect them to lower rates.
Speaker 2: All right, appreciate this d as always. That's Bloomberg News
Speaker 2: Senior strategist Edward Harrison definitely check out adds the Everything
Speaker 2: Risk newsletter. You can find it at Bloomberg dot com,
Speaker 2: slash newsletters or by typing ni every Risk Go on
Speaker 2: the Bloomberg terminal. Let's take a look now at some
Speaker 2: stocks making news in the week Ahead. I'm Nathan Hager,
Speaker 2: joined by Bloomberg Cross Asset reporter of Adana Hirich. But Dana,
Speaker 2: we've got more tech earnings to look forward to this week,
Speaker 2: including Oracle after the close. Of course, this has been
Speaker 2: a company that's been a pretty big beneficiary of the
Speaker 2: AI buildout. So should we be looking for a blowout
Speaker 2: from Oracle?
Speaker 6: First?
Speaker 7: I want to say that every week we're looking forward
Speaker 7: to some sort of tech earnings, right, so.
Speaker 2: It seems like it.
Speaker 7: Yeah, every week there's something of interest happening. So for Oracle,
Speaker 7: that's ticker oh RCL on Wednesday, June tenth. The company
Speaker 7: was once best known for its namesake database software, but
Speaker 7: it's really found some success in providing the type of
Speaker 7: chips filled data centers and other equipment that's necessary for
Speaker 7: training and deploying AI models. And the reason I mentioned
Speaker 7: that is just so that we get a sense of
Speaker 7: what kind of read through it's giving us on a
Speaker 7: specific sector of the economy. Shares of Oracle are up
Speaker 7: some eighteen percent roughly eighteen percent year to date. Its
Speaker 7: last quarterly report was very strong in terms of what
Speaker 7: analysts had been expecting and what the company ended up
Speaker 7: delivering Its last report was in March, and shares actually
Speaker 7: soared after it posted results. It said that it's closely
Speaker 7: watched infrastructure business had jumped eighty four percent to four
Speaker 7: point nine billion dollars. The company also at the time
Speaker 7: said that revenue reach ninety billion in the fiscal year
Speaker 7: beginning in June. Also at the time, it handily beat
Speaker 7: analyst projections on a number of other measures. So the
Speaker 7: takeaway was that we were sort of seeing we were
Speaker 7: getting this through line on AI spending. It gave investors
Speaker 7: a really good look at how demand for AI centers
Speaker 7: was going. There had been in the past some concern
Speaker 7: that maybe that a specific corner of the market was
Speaker 7: maybe slowing down, but then Oracle gave us those results.
Speaker 7: Looking ahead, of course, we don't exactly know what the
Speaker 7: company is going to be telling us, but we do
Speaker 7: have some analyst projections, and we do have a report
Speaker 7: from Bloomberg Intelligence where the analysts there say oracles physical
Speaker 7: four qre results will likely reflect another quarter of robust
Speaker 7: AI infrastructure demand.
Speaker 2: Also this week, after the close on Thursday, we're going
Speaker 2: to hear from Adobe. Now, you got to think this
Speaker 2: company's got a lot to show for with all the
Speaker 2: fears around SaaS apocalypse or whatever we're calling it now.
Speaker 7: Yeah, exactly. And I love when a company can tell
Speaker 7: us a specific story, you know, one of especially with
Speaker 7: like Bellweather companies that can tell us something that's happening
Speaker 7: within a certain sector of the economy or the market,
Speaker 7: like we were just saying with Oracle. So for Adobe
Speaker 7: ticker ADB, reporting on June eleventh, after the market close,
Speaker 7: shares are not doing so great this year. They're down
Speaker 7: some twenty five percent so far this year. When we
Speaker 7: think of Adobe, we think of its software, it's creative tools,
Speaker 7: it's digital marketing offerings, and also of course PDFs, which
Speaker 7: I can never figure out how to edit or save
Speaker 7: or print seriously, But a lot of Adobe's revenue is
Speaker 7: generated via those subscriptions. Analysts will be paying attention to that.
Speaker 7: But Adobe actually has a very interesting theme and the
Speaker 7: story going on right now, which is that there are
Speaker 7: talks about who it's next CEO will be. Bloomberg just
Speaker 7: reported that the company is eyeing to internal leaders for
Speaker 7: its quest for a new chief executive officer, and Adobe
Speaker 7: has hired a well known search firm to look at
Speaker 7: some external candidates who could be suited to running the
Speaker 7: company in our ai era. And so there are two
Speaker 7: contenders of two of its main business units who are
Speaker 7: sort of like the leading in house candidates, and then
Speaker 7: you know whoever else that they're looking at from the outside.
Speaker 7: So analysts really are thinking about, you know what, will
Speaker 7: we get some clarity around the CEO transition. It's sure
Speaker 7: to be a key focus on the earnings call yea.
Speaker 2: So maybe more than just numbers in this sorting.
Speaker 7: St exactly exactly. It might even supersede some of the
Speaker 7: financial metrics themselves, which is really interesting.
Speaker 2: Yeah, it certainly is not just tech. Later on this
Speaker 2: week as well, we're going to hear from Lenar reporting
Speaker 2: their earnings. It's been pretty tough for the homebuilders in
Speaker 2: this rate and price environment.
Speaker 7: Fildana exactly another great example of a company that's giving
Speaker 7: us a look at, in this case the housing market.
Speaker 7: The home building market ticker LN shares are also lower
Speaker 7: so far this year. The company is reporting after the
Speaker 7: close on Thursday, June eleventh. This is one of the
Speaker 7: largest US homebuilders by revenue, and again another great read
Speaker 7: on home builder sentiments. So just in terms of some
Speaker 7: of the data that we've seen for new home sales.
Speaker 7: For instance, in April they had fallen month over month
Speaker 7: some six percent to around six hundred and twenty two thousand.
Speaker 7: US homebuilder sentiment had rebound London in May, but in
Speaker 7: general it sort of remains pretty low, given affordability concerns
Speaker 7: weighing on a lot of consumers and also weighing on
Speaker 7: the spring selling season, and so it's important to keep
Speaker 7: those things in mind in terms of what the housing
Speaker 7: market looks like and whether or not people think we're
Speaker 7: going to potentially continue to see a lackluster housing market persists,
Speaker 7: you know, in future quarters.
Speaker 2: Yeah, so we're going to learn more about the AI
Speaker 2: build out and the housing build out this week. Thank you, Vildona.
Speaker 2: That's Vildona Hirich, Cross asset reporter for Bloomberg News, and
Speaker 2: coming up on Bloomberg day Break weekend, we'll discuss what
Speaker 2: to expect from London's tech week. I'm Nathan Hager, and
Speaker 2: this is Bloomberg. This is Bloomberg day Break Weekend, our
Speaker 2: global look ahead at the top stories for invests in
Speaker 2: the coming week. I'm Nathan Hager in Washington. Up later
Speaker 2: in the program, we'll look to some key inflation data
Speaker 2: in China. But first London Tech Week starts Monday. Executives
Speaker 2: from AI labs like Anthropic Perplexity and Open Ai are
Speaker 2: headed to Britain, which, after the US and China, sees
Speaker 2: the highest AI investment globally. Let's get more from Bloomberg
Speaker 2: day Break Europe banker Caroline Hepger in.
Speaker 3: London, Nathan Summer conference season has arrived in London. CEOs,
Speaker 3: politicians and innovators are rubbing shoulders the likes of south
Speaker 3: By Southwest Founders Forum and London Tech Week, but the
Speaker 3: regular gatherings mask a moment of deep uncertainty about the future.
Speaker 3: Artificial intelligence promises to reshape the business world, but for
Speaker 3: UBS's chief economists to ar captain, the new technology isn't
Speaker 3: yet even close to delivering on its promises.
Speaker 8: I think there are certainly a lot of corpors benefiting
Speaker 8: from this spending boom and top twenty percent spending, but
Speaker 8: there's also I think a very large part of the
Speaker 8: population and businesses that is not benefiting from that, and
Speaker 8: so I think we're in this sort of still relatively
Speaker 8: fragile equilibrium.
Speaker 3: Okay, you mentioned productivity gains. Where are you seeing them
Speaker 3: in Europe from AI.
Speaker 8: Oh I'm not seeing here anyway yet, so I think
Speaker 8: it's way too early, right, So there's a we're in
Speaker 8: the Capex phase what I call the figuring it out phase, right,
Speaker 8: So we are diffusing AI into organizations, and the implementation
Speaker 8: model is to go to people like me, give them
Speaker 8: some AI programs and go figure it out. Right, that's
Speaker 8: not a good implementation model. And if you look at
Speaker 8: the implementation rate, so we do an enterprise adoption survey,
Speaker 8: it's still very very low, less than twenty percent of
Speaker 8: all the firms claim to be implementing at skill. So
Speaker 8: it just cannot be the case that anything is happening
Speaker 8: yet because no one's changed hiring behavior and no one's
Speaker 8: really figured it out yet. Now, the reason it shows
Speaker 8: up in the US in productivity data is because if
Speaker 8: you create a lot of output with capex, you don't
Speaker 8: hire anybody. It looks like per employee you're generating more output.
Speaker 8: But that's not AI productivity the way I think about it, right,
Speaker 8: that's just a shift from producing with libra to producing
Speaker 8: with capital. In Europe, of course, you don't even have that.
Speaker 3: AAR captain there speaking to me and James Wilcock on
Speaker 3: Bloomberg Radio for Britain. Add to that, a somewhat more
Speaker 3: frosty relationship with the US may be growing wariness of
Speaker 3: Silicon Valley and a ship of state which seems to
Speaker 3: lack a rudder. So does Britain's pitch to be an
Speaker 3: AI leader increasingly look a little thin. Bloomberg TV anchor
Speaker 3: Tom McKenzie joins me, Now you get the lucky job
Speaker 3: of going down to London Tech Week to take the
Speaker 3: temperature rub shoulders with all of these big CEOs, what
Speaker 3: are you trying to find out?
Speaker 9: Look? I think this is an incredible moment obviously for
Speaker 9: the world of technology when we think about what's happening
Speaker 9: in the US with the upcoming listings and IPOs of
Speaker 9: SpaceX and likely of course Anthropic and Open AII as well.
Speaker 9: So that intense focus on the innovation and the buildout
Speaker 9: of these companies. And so the key question really is
Speaker 9: where does the UK play in all of this? And
Speaker 9: this is a really key annual gathering that pulls together
Speaker 9: the great and the good ministers as well senior government
Speaker 9: figures with leading CEOs across the UK tech ecosystem. So
Speaker 9: my key questions and what I'm really trying to find
Speaker 9: out is where does the UK play in the AI story?
Speaker 9: Do we have some advantages that other nations don't, What
Speaker 9: kind of companies do we building, what kind of support
Speaker 9: is the government giving to those companies? And can this
Speaker 9: be sustainable? Is this something that's going to have a
Speaker 9: broader macroeconomic impact as well? That will really be the
Speaker 9: key focus as I talked to CEOs executives and government
Speaker 9: ministers as well next week.
Speaker 3: Yeah, it comes after the UK government launched this five
Speaker 3: hundred million pounds for AI in the UK that was
Speaker 3: in April. It doesn't sound like very much money, does
Speaker 3: it when you think about the billions in the AI space.
Speaker 3: But it is intent, isn't it. What do you think
Speaker 3: about the UK and whether we can really claim to
Speaker 3: be a tech leader? How much does it show about
Speaker 3: impetus to be in that leadership role in the UK?
Speaker 9: I think there's a couple of metrics that you could
Speaker 9: point to that show that there is a really healthy
Speaker 9: momentum right now in the UK and the UK really
Speaker 9: can claim to be playing a role. Not sure if
Speaker 9: it's leading, but certainly a role, a significant role in
Speaker 9: terms of the build out of AI and innovation. You
Speaker 9: do have that fund from the UK government, the UK
Speaker 9: Sovereign Wealth Fund, which yes, you say, in comparison the
Speaker 9: numbers we see in the US is is minimal. But
Speaker 9: what they would tell you James Wise is the chair
Speaker 9: formerly and also at Balderton which is eventually capital firm.
Speaker 9: What James would say is that look, not only do
Speaker 9: we invest, but we also open the doors to government
Speaker 9: for you. That credential that you get, that stamp of
Speaker 9: UK government approval actually is meaningful. In fact, I was
Speaker 9: speaking to Isomorphic Labs, a drug discovery company that sits
Speaker 9: under alphabet is a unit there, and speaking to their
Speaker 9: president he said it is meaningful. They've also had investment
Speaker 9: from the UK Sovereign Fund, so that is an important
Speaker 9: part we have. You know, three of the top ten
Speaker 9: universities in the world are in the UK, Cambridge, Oxford
Speaker 9: and Imperial. We have that talent, that deep research talent.
Speaker 9: We do have the cap of the City of London,
Speaker 9: and we do have access of course in those connections
Speaker 9: to Europe as well, so on all those fronts there
Speaker 9: is some supportive kind of muscle tissue there. What you're
Speaker 9: also seeing in terms of fun flows. I'll just give
Speaker 9: you a few statistics then that's come out of a
Speaker 9: recent technician report. The UK tech sector has a combined
Speaker 9: market value now of about one point six trillion US dollars,
Speaker 9: and AI's total UK tech market value is in fact
Speaker 9: more than doubled in the last five years. You have
Speaker 9: companies like eleven Labs, like Synthesia, like Wave AI raising
Speaker 9: billions of dollars, and.
Speaker 3: So in terms of adoption and the next steps, how
Speaker 3: far are we seeing the latest advances in AI filtering
Speaker 3: through into how startups are doing business, but also into
Speaker 3: how other businesses are adopting this technology and turning it
Speaker 3: into productivity gains.
Speaker 9: And I think that is a question that remains partly answered.
Speaker 9: And you go around the UK's tech ecosystem and you
Speaker 9: speak to people working in those organizations, they are leaning in.
Speaker 9: They're using these platforms, They're using these AI solutions. No
Speaker 9: doubt you and I are using forms of AI probably
Speaker 9: on a daily basis as well. We maybe as individuals
Speaker 9: be able to point to productivity gains. The harder question
Speaker 9: to answer is at the corporate level, to your point,
Speaker 9: at the enterprise level, are we yet seeing that filtering
Speaker 9: through to earnings to the bottom line. I think the
Speaker 9: jury is still out on that, but it is relatively
Speaker 9: early days in terms of adoption, and smaller companies and
Speaker 9: smaller enterprises may be adopting more quickly. Bigger enterprises, particularly
Speaker 9: those that are regulator heavy regulator for example in the
Speaker 9: financial services space, may take a little longer.
Speaker 6: Though.
Speaker 9: There are examples of banks that are leaning in too
Speaker 9: AI adoption, and we've seen evidence of that in terms
Speaker 9: of their commitments and their spending. So I think we
Speaker 9: still need to see that evidence come through. And that
Speaker 9: is a really key point because that comes down to
Speaker 9: the return on investment. Are we getting our bank for
Speaker 9: our bus As companies spend increasingly large amounts on AI solutions,
Speaker 9: on so called tokens, is that paying off?
Speaker 6: Yeah?
Speaker 3: Absolutely. As sort of thinking about adoption also skills, What
Speaker 3: sort of skills do people need to be able to
Speaker 3: use AI? That's one of the issues that's been brought
Speaker 3: up a lot, hasn't it in the UK? And you're right,
Speaker 3: how much does it cost a company actually to have
Speaker 3: AI tools that all of their workers can use those
Speaker 3: sort of token costs. Look, there's another sort of slightly
Speaker 3: darker issue, which is sort of the uncertainty around the
Speaker 3: labor government. And I mean I was speaking to the
Speaker 3: AI Minister only a few weeks ago about that software
Speaker 3: well funded. I know you speak to a lot of
Speaker 3: players and policy makers. The future of the current Prime
Speaker 3: Minister is very uncertain. Andy Burnham, who seems at the
Speaker 3: moment like the front runner maybe to replace him, sounds
Speaker 3: a bit tough on regulation in the AI industry, in
Speaker 3: the tech industry. Is that going to seep into issue
Speaker 3: use if there's a kind of tougher view around technology
Speaker 3: in Britain.
Speaker 9: I think that is an important question. Clearly, it's a
Speaker 9: question that we're putting to company executives around political uncertainty
Speaker 9: in the UK and what that means for their investment
Speaker 9: plans and their hiring plans. So I think that's a
Speaker 9: valid question for those working and operating in the tech
Speaker 9: ecosystem as well. I think it's fair to say that
Speaker 9: the AI Minister kenesian Arian is pretty well received within
Speaker 9: the tech ecosystem. I hear pretty solid responses off record
Speaker 9: and on record to what that government minister is doing
Speaker 9: Kanishka alongside the AI Sovereign Fund, and that is something
Speaker 9: that clearly AI leaders and entrepreneurs in the UK. They
Speaker 9: want to see that kind of commitment continuing, and there
Speaker 9: has been some evidence that the UK is and the
Speaker 9: UK government is trying to be on the front foot
Speaker 9: in terms of aligning the regulation with innovation with adoption.
Speaker 9: You've got one example of coming up at the end
Speaker 9: of this year, which is Weimo is very likely to
Speaker 9: be testing and actually rolling out its cars for the public.
Speaker 9: They're testing now rolling out its cars for the public
Speaker 9: by the end of this year. I speaking to them.
Speaker 9: That's still currently the plan, and that is because the
Speaker 9: UK has put in place a regulatory framework that allows
Speaker 9: them to do that for the first time out of
Speaker 9: the United States. So that is one example. It's not
Speaker 9: to say that there aren't others who say we need
Speaker 9: to have checks and balances around this technology. Yeah, so
Speaker 9: I think it's an important question. Will that stability or
Speaker 9: question marks about the future government post some kind of
Speaker 9: headwind is something that I will be addressing and bringing
Speaker 9: up with founders and CEOs next week.
Speaker 3: Yeah. It's going to be fascinating, isn't it watching Weimo
Speaker 3: for the first time outside a US city, you know,
Speaker 3: trying to kind of weave their way through the ancient
Speaker 3: streets of London's going to be a big test of
Speaker 3: the company. It's going to be really interesting to see
Speaker 3: how people in the UK react to that. In terms
Speaker 3: of the other major tension, you have to also bring
Speaker 3: up the worries maybe around dependency, around sovereignty. These are
Speaker 3: lots of countries thinking about this, how dependent to be
Speaker 3: on Silicon Valley on big US companies palente I can
Speaker 3: point to as the most recent worry MPs of flag
Speaker 3: that as a worry Palent's involvement, for example, with the NHS,
Speaker 3: the National Health Service. How important are those tensions?
Speaker 9: Well, I think those tensions are real and I think
Speaker 9: one response to that, and we've heard this from some
Speaker 9: would be well, it's fine, we can rip out and
Speaker 9: replace Palenteer with what So we need to have an alternative. Palenteer,
Speaker 9: the argument goes, is the best at what they do,
Speaker 9: and if we want to be able to align all
Speaker 9: the data across the NHS and make things like booking
Speaker 9: appointments and collecting all of that evidence that can help
Speaker 9: in terms of outcomes and have better healthc outcomes, then
Speaker 9: we need this kind of technology. Of course, it is
Speaker 9: a controversial company and hence the scrutiny that is it
Speaker 9: is facing. As yet, we do not have a company
Speaker 9: that can do what Palentteer does. Maybe in the future
Speaker 9: we will, But I think the broader question about sovereignty
Speaker 9: is real. Do we need more data centers? Do we
Speaker 9: need more infrastructure? How much of that needs to be
Speaker 9: on a supply chain that the UK has greater control
Speaker 9: over all We speaking to the likes of Brookfield's head
Speaker 9: of AI infrastructure about that point, we are a long
Speaker 9: way from getting the kind of investment commitments around data
Speaker 9: centers and infrastructure that the US is getting. Can we
Speaker 9: rely on the hyperscalers? Can we and are we relaxed
Speaker 9: about running our systems on ammazaws or on Azure or
Speaker 9: on other parts of the Google Cloud system, or do
Speaker 9: we need to have our own sovereign capabilities. The European
Speaker 9: Union is coming up with their response to that, and
Speaker 9: we're seeing that working through the system right now, so
Speaker 9: that is also a valid question. And then if we
Speaker 9: think about infrastructure, we have to think about energy. Our
Speaker 9: energy costs are about three times that of the United States,
Speaker 9: about two times out of China. Do we have the
Speaker 9: Greek capacity? Are we building the energy that we need
Speaker 9: to support this kind of infrastructure. What is the solution
Speaker 9: on that front. Tony Blair has his views around the
Speaker 9: North Sea oil story. Others will have opposing views, so
Speaker 9: that is also part of the question that the UK
Speaker 9: is going to have to wrestle with. And certainly entrepreneurs
Speaker 9: and executives they want to see cheaper, cleaner, more accessible
Speaker 9: energy and that is a really key part of how
Speaker 9: we position going forward.
Speaker 3: Yeah, it's going to be a very interesting week and
Speaker 3: we look forward to all of your coverage from London
Speaker 3: Tech Week. That is Bloomberg TV anchor Tom McKenzie. Thank you.
Speaker 3: I'm Caroline hepget here in London. You can catch us
Speaker 3: every weekday morning for Bloomberg Daybreak here at beginning at
Speaker 3: six am in London. That's one am on Wall Street.
Speaker 2: Nathan, Thanks Caroline. Then coming up by Bloomberg Daybreak Weekend,
Speaker 2: we'll look ahead to inflation data from the world's second
Speaker 2: largest economy. I'm Nathan Hagger and this is Bloomberg. This
Speaker 2: is Bloomberg Daybreak Weekend, our global look ahead at the
Speaker 2: top stories for investors in the coming week. I'm Nathan
Speaker 2: Haiger in Washington. One of those stories is going to
Speaker 2: be inflation in China. We get the main readings on
Speaker 2: price pressures this week. For a preview, let's get to
Speaker 2: Doug Krisner, host of the Bloomberg Daybreak Asia podcast.
Speaker 4: Thanks Nathan. For years, authorities in China have been battling
Speaker 4: a problem with deflation, and the price declines were showing
Speaker 4: up at both the wholesale and retail levels. But the
Speaker 4: energy shock as a result of the conflict in the
Speaker 4: Middle East has changed the narrative somewhat. The latest reading
Speaker 4: on PPI is likely to show factory gate prices rose
Speaker 4: in the month of May. Even so, consumer prices are
Speaker 4: still struggling to break out of their deflationary trap. For
Speaker 4: a closer look, let's bring in Bloomberg's Alan Wong. Allen
Speaker 4: is team leader for the China Economy and Government team.
Speaker 4: He joins us from our studios in Hong Kong. Thank
Speaker 4: you for being here. I want to begin with looking
Speaker 4: at the PPI story and wondering if the expected pickup
Speaker 4: that we're going to see, perhaps in factory gate prices
Speaker 4: is due to forces beyond higher energy. Is it spilling
Speaker 4: out beyond the energy complex?
Speaker 10: We are seeing limiteds spill over in terms of price hikes,
Speaker 10: which means that even if the producer prices are going up,
Speaker 10: this is not quite the China inflation story just yet.
Speaker 10: But just back through the producer prize a little bit,
Speaker 10: we're seeing forecasts for a three point nine percent jump
Speaker 10: year over year, and that would be the biggest search
Speaker 10: we've seen since July twenty twenty two. So it is
Speaker 10: still very much about the global energy crisis. It's still
Speaker 10: very much about the shockwaves from the conflict in the
Speaker 10: Middle East affecting China's factory flows. And if we look
Speaker 10: at the breakdown in price data from the previous month's release,
Speaker 10: the month of April, we've seen the cost of things
Speaker 10: like crude extraction, petroleum, natural gas, they all shot up,
Speaker 10: but then for out of categories we see mild effect
Speaker 10: in terms of rising prices, and so so far it's
Speaker 10: been pretty much contained.
Speaker 4: So let's look at the consumer level now. And my
Speaker 4: memory is that this is really a story about weak demand.
Speaker 4: Has that changed or is that still very much the
Speaker 4: same case.
Speaker 10: The numbers actually tell the story here pretty well. I
Speaker 10: mentioned that PBI is going to jump three point nine
Speaker 10: percent for CPI for the month of May, it's going
Speaker 10: to be a one point three percent increase, So that's
Speaker 10: just slightly higher than the April figure which was one
Speaker 10: point two percent. So this means that we actually, you know,
Speaker 10: on one hand, you're seeing some healthy inflation compared to
Speaker 10: the previous deflation story after the COVID. One point two
Speaker 10: isn't that much globally speaking, But then it's a much
Speaker 10: higher pace compared to the near zero level in the
Speaker 10: two years after COVID. But then another way to look
Speaker 10: at this is the gap between the rise in PBI
Speaker 10: and CPI. If the gap is large, it just means
Speaker 10: that factories and companies they are stomaching this higher input
Speaker 10: costs and without passing that on to customers. It means
Speaker 10: that to preserve their market shared they rather eat that
Speaker 10: cost themselves. And for those companies, obviously it would be
Speaker 10: terrible for them because they are suffering thinner profit margins.
Speaker 10: But then even if consumers are happy that the price
Speaker 10: tax are only modestly got bigger, their wages might suffer
Speaker 10: too because the companies can't afford to raise prices and
Speaker 10: they might have to, you know, they face pressure in
Speaker 10: terms of how much they can pay their workers. So
Speaker 10: all of these feeds back into the weak consumption story
Speaker 10: in China, where consumers just don't feel secure enough about
Speaker 10: the economic outlook to spend.
Speaker 4: So I'm going to imagine alan that part of the
Speaker 4: weak domestic demand story still traces back to the weakness
Speaker 4: in the housing market. Is that still the case.
Speaker 10: That's still very much the case, But you know, there
Speaker 10: are signs that in some part it's of the Chinese economy,
Speaker 10: housing is seeing some bottom. It's very controversial because you know,
Speaker 10: you don't want to be the one to call the
Speaker 10: bottom in the housing market, but we're seeing more voices
Speaker 10: from among economists who I'm considering that like a slower
Speaker 10: pace of decline in home prices. By some measures, we're
Speaker 10: seeing that new home prices have actually risen months over month.
Speaker 10: But when they will continue is another question because we
Speaker 10: have seen something like that over the last couple of years,
Speaker 10: but there have been false down so nobody is sticking
Speaker 10: their neck out to call bottom just yet. And in
Speaker 10: terms of the weak consumption story, housing is still a
Speaker 10: big factor. But then the uncertainty in terms of geopolitical
Speaker 10: outlook is also weighing on consumers' mind for sure, and
Speaker 10: the fact that higher oil prices, and higher PPI may
Speaker 10: limit how much the PBOC can do in terms of easing.
Speaker 10: Will also mean that policymakers have less room to stimulate
Speaker 10: domestic demand using direct measures. And one important the development
Speaker 10: we've seen in terms of the macro economy, it's just
Speaker 10: how people are paying down their debts more than they borrow.
Speaker 10: So that's just another way to gauge just how weak
Speaker 10: the sentiment is.
Speaker 4: To what extent is the trade story a part of
Speaker 4: the narrative when it comes to inflation, And I'm thinking
Speaker 4: of the tariff story where the US is involved.
Speaker 10: So yes, the US, it's trying to rebuild his tariff wall.
Speaker 10: So even after they, you know, US President An Trump
Speaker 10: met with she and kind of cooled down the tensions
Speaker 10: that the two countries previously faced, and they agreed on
Speaker 10: strategic stability framework that China came up with. So broadly speaking,
Speaker 10: that relationship is looking steady and better than previously. But
Speaker 10: then Trump did try to attempt to raise tariffs on
Speaker 10: China and among a countries again, and China is not
Speaker 10: happy with it, for sure, but it doesn't seem like
Speaker 10: it would threaten the Dayton between the two countries and
Speaker 10: the truth is that China's export to the US have
Speaker 10: fallen by a lot already since the Trump returned to office,
Speaker 10: So any marginal increase in the tariff ray on Chinese
Speaker 10: exports are not going to hurt that part of export
Speaker 10: that much. But then one potential surprise is coming from
Speaker 10: the EU, which has been floating measures to curb China's
Speaker 10: imports and and otherwise address China's over capacity issue. So
Speaker 10: China has protested that in threatened countermeasures. We're seeing a
Speaker 10: new trade war on horizon. That's to be determined, but
Speaker 10: if trade frictions rise between those two economies, that could
Speaker 10: be a source of headwinds for China's economy.
Speaker 4: That's a great point. Alan, thank you so very much
Speaker 4: for helping us look ahead to the Chinese inflation data
Speaker 4: in the week ahead. Bloomberg's Alan Wong Allen is team
Speaker 4: leader for the China Economy and Government team. Joining from
Speaker 4: our studios in Hong Kong, we go to Taiwan next,
Speaker 4: where Computechs took place in the last week. This is
Speaker 4: Asia's largest tech showcase, and the event brought together CEOs
Speaker 4: from the world's leading tech companies to discuss the outlook
Speaker 4: for things like AI robotics and semiconductors, and that's where
Speaker 4: we had the chance to speak with Albert Liu. Albert
Speaker 4: is founder and CEO of AI chip firm Neuron. He
Speaker 4: spoke with Bloomberg Steven Engel.
Speaker 11: It's interesting. I'll just read you designed and manufactured chips
Speaker 11: and hardware and software for EDGAI. So that's more local
Speaker 11: solutions rather than uploading to the cloud. And there's all
Speaker 11: kinds of and downloading from the cloud, so there's all
Speaker 11: kinds of applications for that. But you are promoting NPUs
Speaker 11: neural processing units. How does that compare? What is put
Speaker 11: it into context for US NPUs versus cp USE and GPUs.
Speaker 6: Yeah, I think the technology trend migration from CPU to
Speaker 6: GPU to MP for AI computation. Computation power is a
Speaker 6: really bit like a VHS to DVD to MB three.
Speaker 6: So nb threo is quite tiny, right one tango so
Speaker 6: they can revert BUND to DVD a bunch of vhs.
Speaker 6: So you can sing in this way today using the
Speaker 6: GPU or CPU to power GBD label AI is power hungry.
Speaker 6: Some company even comes seeking to build a nuclear help
Speaker 6: print to support that AI chain, which is kind of
Speaker 6: ridiculous and nonsustainable right. Also the privacy and also operation
Speaker 6: speed quich ai if down to the earth or enable
Speaker 6: the device and the close to diva industry which you
Speaker 6: will remote efficient and also low costs.
Speaker 11: So how does this promote your technology? How does it
Speaker 11: promote an edge AI? How does it promote you know
Speaker 11: what we're seeing in China and around the world as well,
Speaker 11: and that is the open claw movement and agentic AI
Speaker 11: essentially and the creation of agents. And even in China
Speaker 11: you're having one person companies. So you need that privacy local,
Speaker 11: you need solutions local, low latency.
Speaker 6: I think I would say not only local, also privacy,
Speaker 6: but also controllable control. I mean, uh mp, you can
Speaker 6: make it become possible is you can sing this way,
Speaker 6: you can put the GVD label AI into a small
Speaker 6: bux uh. Then the recent open clowd criticize is because
Speaker 6: first they probably will spend the token fee like unexpected
Speaker 6: right one night, you might spend like few hundred dollars.
Speaker 6: And second they probably will leak your combinational information. There's
Speaker 6: a couple of issues happen, like they even leak your
Speaker 6: conversation with your your your your lofer and or even
Speaker 6: your secret key or of your bank account to everywhere.
Speaker 6: So the open claus is really open. Yeah, yeah, yeah,
Speaker 6: open your privacy data everywhere. So if you can bring
Speaker 6: the UH cloud label AI down to the earth, which
Speaker 6: is what they're wrong, provide we are only selling the MPU,
Speaker 6: but we also sell a system like a media doing
Speaker 6: the H one hundred h two hundred there and then
Speaker 6: we put the open crowd in the small box and
Speaker 6: all the token is free and and also your privacy
Speaker 6: data got control in local.
Speaker 11: So where are we in the evolution? Right then you
Speaker 11: talked about this is the age of inference now as
Speaker 11: they still build out. Of course, UH the infrastructure for
Speaker 11: the big data centers and training is happening from the
Speaker 11: large language models. But how does your technology really fuel
Speaker 11: the age and the era of inference?
Speaker 6: I will say AI train first step definitely is the training,
Speaker 6: right Clowd training, So the Clowd training definitely, GVU has
Speaker 6: the greatest advantage because they're cool that Ecosys is so strong.
Speaker 6: But once everyone's training or AI up to a certain
Speaker 6: level become saturated or become more mature, then the second
Speaker 6: one will be the cloud inference. Then the third one
Speaker 6: will be like make them out of smaller and applied
Speaker 6: to everywhere, which would be AHI. So I think cloud
Speaker 6: AI or training AI. The GPU or the hardware is
Speaker 6: super expensive and also power consumption is heavy and also
Speaker 6: command doese emission is huge. Then once you move to
Speaker 6: the inference, using these heavy hardware is kind of luxury.
Speaker 6: So inference AI definitely is the right. Now the reason
Speaker 6: AI s over n media acquire the lp U, right,
Speaker 6: it's also facing the challenge of the inference that GPU
Speaker 6: is two sevensy. Then move to the third one, which
Speaker 6: will be HI. So I will say MP has a
Speaker 6: great adventure in inference and HI. Because we are the
Speaker 6: hardware dedications design for AI purpose.
Speaker 11: How are you specifically and where are you impacted by
Speaker 11: key components? The shortage and key components and memory is
Speaker 11: the most acute for a lot of the big data centers.
Speaker 11: But what's the most important and most acute shortage of
Speaker 11: components for you?
Speaker 6: You can see like what I said, MP street dongo
Speaker 6: there taking on us Joe Mahy different as a TVD
Speaker 6: and also VHS right the same thing MPU oxnicture is
Speaker 6: much smaller and much low costs versus the GPU or
Speaker 6: CPU GPU is any human history for Morning Street tak
Speaker 6: and that was original designed for gaming or graphic for purse, right,
Speaker 6: so they need they require HPN HIPing wish memory. Yeah so,
Speaker 6: but MPU always is TV off.
Speaker 4: That is Albert lu, founder and CEO of the AI
Speaker 4: chip firm Neuron, speaking with Bloomberg Stephen Engel on the
Speaker 4: sidelines of computext. I'm Doug Prisoner. You can catch us
Speaker 4: weekdays for the Daybreak Asia podcast. It's available wherever you
Speaker 4: get your podcast.
Speaker 2: Nathan, Thanks Doug, And that does it for this edition
Speaker 2: of Bloomberg Daybreak Weekend. Join us again Monday morning at
Speaker 2: five am Wall Street Time for the latest on markets,
Speaker 2: overseas and the news you need to start your day.
Speaker 2: I'm Nathan Hager. Stay with us. Top stories and global
Speaker 2: business headlines are coming up right now.