Speaker 1: Bloomberg Audio Studios, podcasts, radio.
Speaker 2: News, the tech run up that we've seen in terms
Speaker 2: of stocks, and this of course after the FED and
Speaker 2: its first rate cut of the year last week, and
Speaker 2: the inflation data that we get out on Friday. Joining
Speaker 2: us now is CEO and founder of ARC invest Kathy Would.
Speaker 2: Good morning, Kathy, So you've hot footed it from our
Speaker 2: TV studio into the REJO studio. We really appreciate your
Speaker 2: time and we want to start on the H one
Speaker 2: B visa change with President Donald Trump. It seems that
Speaker 2: he has sided with magas anti immigration wing rather than
Speaker 2: the tech executives that we saw him dining with only
Speaker 2: a few weeks ago. How much of a concern is
Speaker 2: it to you in terms of limiting those high skill
Speaker 2: tech employees tech workers for some of the big names
Speaker 2: that you invested in.
Speaker 1: Yes, well, I think this is part of a much
Speaker 1: broader negotiation, particularly with India. In mind, those negotiations have
Speaker 1: not finished, and of course this is very important to India.
Speaker 1: I think that our tech executives understand that this is
Speaker 1: a part of a broader negotiation. I think the suddenness
Speaker 1: the Friday announcement and the lack of clarity through a
Speaker 1: lot of people, including US. The clarity now is this
Speaker 1: applies only to new H one B visas, So I
Speaker 1: think longer term, this administration has said that it is
Speaker 1: very interested in bringing foreigners who have been educated in
Speaker 1: the US into the US workforce, and I think longer term,
Speaker 1: that's that's the way we should think about that.
Speaker 2: So you see a change coming. This is punishment for India,
Speaker 2: and the impacts on the US is a side effect
Speaker 2: that will change.
Speaker 1: It's a negotiation negotiation with India. Longer term. I think
Speaker 1: President Trump and his team want to keep as much
Speaker 1: innovation talent, technology talent as possible in the US.
Speaker 3: Can I just ask you long term though, given the
Speaker 3: Trump administration wants to keep as much talent, you also
Speaker 3: have other countries raising the possibility of their own form
Speaker 3: of golden visas, perhaps seeing this as an opportunity to
Speaker 3: attract the same high skilled talent to their own countries.
Speaker 3: Could there be longer term ramifications if this H one
Speaker 3: B visa application fee does actually stay the higher fee.
Speaker 1: Sure, I think this is I call this regulatory arbitrage.
Speaker 1: Other companies countries should be looking at this as an
Speaker 1: opportunity to attract the best and the brightest. As I said,
Speaker 1: I don't think this is long term for the United States,
Speaker 1: but sees the moment.
Speaker 2: Okay, that's interesting that this is Yeah, Jermanica ahead, So yeah.
Speaker 3: No, no, I just wanted to pivot back to macro.
Speaker 3: You know, earlier this year, you mentioned in one of
Speaker 3: an interviews that you conducted that the US had just
Speaker 3: started to exit a rolling recession that started back in
Speaker 3: twenty twenty two and was on the path to recovery.
Speaker 3: And of course the FED then went on to cut
Speaker 3: interest rates only last week. In your opinion, were the
Speaker 3: Fed too late to cut interest rates?
Speaker 1: I think there have been signals that the Fed should
Speaker 1: cut interest rates for some time, but there's something else brewing.
Speaker 1: So this rolling recession, we think, is evolving into a
Speaker 1: rolling recovery, and you'll see weakness in employment. A lot
Speaker 1: of that is about productivity. Companies are harnessing AI tools
Speaker 1: and substituting capital for labor, and I think a lot
Speaker 1: of people are going to think that this is another
Speaker 1: sign that we're heading into a deep recession. We do
Speaker 1: not think that's the case. We think that deregulation lower taxes.
Speaker 1: I don't think people understand in the United States. What
Speaker 1: has just happened to corporate tax rates? The rate itself
Speaker 1: has stayed at twenty one percent, but when we incorporate
Speaker 1: accelerated depreciation on structures, equipment, domestic R and D software,
Speaker 1: the effective corporate tax rate in the US could be
Speaker 1: now as low as ten percent. So I hear a
Speaker 1: lot of talk about the dollar's demise and so forth.
Speaker 1: We actually think that the dollar will turn around because
Speaker 1: the return on invested capital in the US, thanks to
Speaker 1: deregulation and tax policies, is going to increase relative to
Speaker 1: the return on invested capital elsewhere. So a little contrarian
Speaker 1: point of view, but that's what we think. And we
Speaker 1: also think this rolling recovery will lead next year into
Speaker 1: an economic boom, a productivity driven economic boom. And I
Speaker 1: think this has been engineered by this administration. Get the
Speaker 1: bad news out of the way as quickly as possible
Speaker 1: because next year is the midterm elections.
Speaker 2: So it's a tax cutting environment, deregulator environment, AI environment
Speaker 2: that boost productivity. And so I mean, this is very
Speaker 2: much what President Trump and the Republican administration believes. Others
Speaker 2: are concerned about it triggering inflation. Are you not concerned
Speaker 2: about that issue.
Speaker 1: If productivity is the reason we're going to see accelerated growth,
Speaker 1: not at all. In fact, productivity is one of the
Speaker 1: most potent anti inflationary forces. We would not be surprised
Speaker 1: to see inflation drop below two percent next year and
Speaker 1: head for zero because we think the productivity gains are
Speaker 1: that profound.
Speaker 3: Let me ask you about the huge kapek spending plans
Speaker 3: that many of the US hyperscalers have. You know, we're
Speaker 3: talking about the hundreds of billions of dollars a year,
Speaker 3: and one company's investment is another company's revenue, as in
Speaker 3: the case of Nvidia. If there starts to be a
Speaker 3: marginal slowdown in just this scale of CAPEX investment, would
Speaker 3: that not mark a turnarounds in terms of just how
Speaker 3: much bullishness there is about the promises of artificial intelligence
Speaker 3: right now?
Speaker 1: Well, I'm I like everyone else are, I'm very surprised
Speaker 1: at how willing these companies are to spend massive amounts
Speaker 1: in this space. But what we're not seeing is all
Speaker 1: the companies who were starting to move into this space
Speaker 1: and have capitulated, and we're down to the big four,
Speaker 1: so Open AI and Thropic XAI and Gemini, which is Google,
Speaker 1: and I think they are moving further ahead. Those are
Speaker 1: the companies who are really spending the markets, are not
Speaker 1: funding as freely the other competitors. I know here in
Speaker 1: Europe that there are a few, so there will be
Speaker 1: regional specific large language models as well, But in terms
Speaker 1: of the global large language models, I think we're down
Speaker 1: to the big four and they are duking it out.
Speaker 1: That's why we're hearing so much about these capital spending plans.
Speaker 1: They're really talking to one another, you know, and willing
Speaker 1: to throw as much capital as possible to leapfrog one another.
Speaker 1: But if you'll notice the performance characteristics of these lms,
Speaker 1: while open ai is still ahead on at the margin,
Speaker 1: the others are getting closer. And one we haven't talked
Speaker 1: about is meta platform. They are, as you know, Mark
Speaker 1: Zuckerboardberg is acqua hiring out of these companies that are
Speaker 1: not going to make it right. So he is attracting
Speaker 1: a lot of capital and is probably going to try
Speaker 1: and get back in the game with his open source strategy.
Speaker 2: What are the opportunities in China? Then, Thus the other
Speaker 2: big stories around deep sea and the huge focus that
Speaker 2: China has on so much of the new technological world,
Speaker 2: but AI in particular, Deep Seek and others. Yes.
Speaker 1: I think President Chichiping directed the economy a couple of
Speaker 1: years ago to new productive forces, and that's all about
Speaker 1: technology and competing aggressively in the technology arena. And we
Speaker 1: think competition is a great thing as long as it's rational.
Speaker 1: And on that score, President gi Giping's discussion about our
Speaker 1: recent pronouncement and his team's pronouncement that they want to
Speaker 1: move away from involution, which means massive commoditization in areas
Speaker 1: like electric vehicles, that is very positive. So is he
Speaker 1: starting to focus on profitability because these companies have to
Speaker 1: spend so much. I think so, and that's a good thing.
Speaker 2: Kathy, thank you so much for being with us. Really
Speaker 2: great to speak to you and hear your views on
Speaker 2: the H one B visa story as well as technological
Speaker 2: advances in China. Kathy Wood is CEO and founder of
Speaker 2: ARC invest. This is going back