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Speaker 1: Bloomberg Audio Studios, podcasts, radio news.

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Speaker 2: This is the.

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Speaker 3: Blue Bag DAYBAQ podcast. Good morning, It's Thursday, the twenty

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Speaker 3: ninth of January. I'm Caroline Hipkat in London.

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Speaker 2: And I'm Stephen Carolin Brussels. Coming up today.

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Speaker 1: Big tech earnings reveal more massive spending on artificial intelligence

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Speaker 1: as return on investment feares persist.

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Speaker 3: Gold hits yet another record high, sawing above five five

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Speaker 3: hundred dollars an ounce, fueled by a week a dollar.

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Speaker 1: Plus seeking more sophisticated ties, Keir Starmer meets shooting ping

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Speaker 1: in Beijing as UK China relations.

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Speaker 3: Though, let's start with a roundup of our top stories.

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Speaker 1: The world's largest tech firms are showing no signs of

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Speaker 1: easing up on AI spending, as earnings reveal plans worth

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Speaker 1: hundreds of billions of dollars. Meta alone has ambitions to

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Speaker 1: spend as much as one hundred and thirty five billion

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Speaker 1: dollars this year, as Microsoft, Samsung and Tesla also ratchet

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Speaker 1: up capital expenditure. Meta CEO Mark Zuckerberg says the cash

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Speaker 1: is needed to frontload computing capacity, and the company is

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Speaker 1: already seeing a payoff in the way AI is being

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Speaker 1: used internally.

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Speaker 4: I think that twenty twenty six is going to be

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Speaker 4: the year that AI starts to dramatically change the way

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Speaker 4: that we work. As we navigate this, our north star

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Speaker 4: is building the best place for individuals to make a

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Speaker 4: massive impact. So to do this, we're investing in AI

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Speaker 4: native tooling so individuals that Meta can get more done.

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Speaker 4: We're elevating individual contributors and flattening teams. We're starting to

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Speaker 4: see projects that used to require big teams now be

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Speaker 4: accomplished by a single, very talented person.

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Speaker 1: Mark Zuckerberg speaking there on Meta's earnings call, as the

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Speaker 1: firm's better than expected sales outlook helped to ease market

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Speaker 1: concerns over record spending. Meta's chair has jumped almost seven

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Speaker 1: percent and after I was trading.

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Speaker 3: Despite those gains, doubts are persisting among some investors that

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Speaker 3: firms can recoup their massive AI outlay. Shares in Microsoft

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Speaker 3: dropped in after hours training as the software giant announced

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Speaker 3: a sixty six percent increase in capital expenditure for the

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Speaker 3: second quarter. The higher than expected spend of more than

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Speaker 3: thirty seven billion dollars came as the firm also announced

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Speaker 3: to slow down in cloud services growth, but Microsoft CEO

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Speaker 3: sach In Adella says that he expects AI expenditure to

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Speaker 3: deliver for the firm.

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Speaker 5: We are in the beginning phases of AI diffusion and

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Speaker 5: its broad GDP impact. Our TAM will grow substantially across

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Speaker 5: every layer of the tech stack as this diffusion accelerates

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Speaker 5: and spreads. In fact, even in those early innings, we're

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Speaker 5: built an AI business that is larger than some of

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Speaker 5: our biggest franchises that took decades to build.

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Speaker 3: Sat an Adella was speaking as Microsoft's total sales increase

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Speaker 3: by seventeen percent to eighty one billion dollars during the quarter. Meanwhile,

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Speaker 3: The Information is reporting that Microsoft, Nvidia, and am are

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Speaker 3: in discussions to invest as much as sixty billion dollars

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Speaker 3: in open AI as part of a major new funding round.

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Speaker 3: This as analysts are increasingly warning of a potential AI

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Speaker 3: bubble forming, in part because of the circular nature of

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Speaker 3: some investments.

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Speaker 1: Gold has surged to a new record above five thousand,

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Speaker 1: five hundred dollars and ounce as a lack of liquidity

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Speaker 1: helped to accelerate a nine day rally. The price of

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Speaker 1: bullion has soared again once this week, fueled by a

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Speaker 1: weaker dollar and investor flight from sovereign bonds and currencies.

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Speaker 1: The move higher came as traders looked beyond the Fed's

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Speaker 1: decision to hold rates on Wednesday, Black Rocks. Rick Ryder,

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Speaker 1: an advocate for more aggressive rate cuts, has emerged as

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Speaker 1: a top contender to replace Jerome Powell as FED chair

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Speaker 1: later this year. That's been driving a ramping up of

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Speaker 1: bets and a dubvish policy shift from the US Central Bank,

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Speaker 1: which has helped to fuel the record breaking rallying commodities

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Speaker 1: as gold, copper, and silver all hit new highs.

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Speaker 3: Now, we have some breaking news this hour. Deutsche Bank

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Speaker 3: has announced a one billion euro share buy back as

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Speaker 3: it reported pre tax profits of just over two billion

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Speaker 3: euros for the fourth quarter. That figure came in ahead

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Speaker 3: of expectations, as revenue from fixed income trading at the

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Speaker 3: bank also beat estimates at two billion euros. The results

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Speaker 3: come less than twenty four hours after Deutsche Bank's offices

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Speaker 3: were raided by German authorities as part of a money

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Speaker 3: laundering probe looking at past dealings by staff with firms

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Speaker 3: linked to Roman Abramovich. The news had driven the bank's

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Speaker 3: share price lower. It closed down two percent.

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Speaker 1: Europe's biggest software company, SAP, is forecast cloud revenue will

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Speaker 1: grow in twenty twenty six as customers shift from older technology.

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Speaker 1: The German firm expects cloud revenue and constant currencies to

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Speaker 1: grow at least twenty three percent this year and announced

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Speaker 1: to share buyback of as much as ten billion euros

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Speaker 1: through the end of twenty twenty seven. The emergence of

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Speaker 1: artificial and intelligence power tools has fueled concerns about enterprise

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Speaker 1: software companies. Even ours, SAP has been pivoting away from

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Speaker 1: selling software licenses to a cloud subscription model. SAP, run

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Speaker 1: by CEO Christian Client, is still Germany's most valuable company,

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Speaker 1: but the stock is down thirty percent since it's all

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Speaker 1: time high last February.

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Speaker 3: Now let's turn to some geopolitics. UK Prime Minister Kiss

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Speaker 3: Starmer has called for a more sophisticated relationship with China

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Speaker 3: during an historic visit to the country. Speaking during a

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Speaker 3: meeting with Chinese President Jijinping this morning, Starmer also called

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Speaker 3: for meaningful dialogue on areas of disagreement. Peter Burnett, chief

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Speaker 3: executive of the China Britain Business Council, says firms are

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Speaker 3: hoping for more favorable conditions following the talks.

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Speaker 6: I think if we can move to less friction in services,

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Speaker 6: more generally grows market access because services is a big

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Speaker 6: component of the UK economy, recognized in the fifteenth to

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Speaker 6: five year Plan as a growth area for China. So

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Speaker 6: there's a very natural combination.

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Speaker 2: Of the two if you like.

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Speaker 3: Peter Burnett speaking there from Beijing. Sama is the first

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Speaker 3: British Prime minister in eight years to visit China as

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Speaker 3: part of a broader charm offensive design to reset relations

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Speaker 3: frozen since twenty eighteen over alleged human rights abuses and

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Speaker 3: other issues. China's official shin Wan news agency has hailed

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Speaker 3: the event as a pivotal moment, while urging the UK

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Speaker 3: to adopt policies free from external influence.

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Speaker 1: US President Donald Trump has warned around that time is

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Speaker 1: running out to make a nuclear deal with the United States.

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Speaker 1: In a social media post yesterday, Trump said a fleet

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Speaker 1: of American ships order to the region is ready to

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Speaker 1: fulfill its mission with speed and violence if necessary. The

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Speaker 1: latest remarks come after repeated threats from the White House

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Speaker 1: to launch another attack over Iran over recent crackdowns on

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Speaker 1: domestic protests. Rather than nuclear activity around motion to the

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Speaker 1: United Nations said it's ready for dialogue but will respond

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Speaker 1: like never before if pushed.

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Speaker 3: Those are our top stories for you this morning. So

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Speaker 3: in terms of the markets right now, the dollar is

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Speaker 3: declining again today, so we're down by a quarter of

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Speaker 3: one percent on the Bloomberg Dollar Spot Index. Despite the

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Speaker 3: supportive comments from Treasury Sextuary Scott bess End, gold, copper,

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Speaker 3: and silver have hit all time highs. Gold is up

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Speaker 3: some twenty eight percent this month alone. Treasuries down amid

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Speaker 3: concerns about the rising commodity prices that they could add

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Speaker 3: to inflation. US and European stock futures are looking a

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Speaker 3: bit more positive, so US SOX fifty futures up by

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Speaker 3: two tens of one percent, four tens high for the

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Speaker 3: nazdat futures. Indian stock market is seeing a major route

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Speaker 3: with a warning about a market downgrade. And we're getting

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Speaker 3: loads of earning. So you heard a bit about Deutsche

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Speaker 3: Bang knockia ing and this week is very much ramping

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Speaker 3: up in terms of earning. Well.

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Speaker 1: In a moment, we'll bring you more on what some

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Speaker 1: of the world's biggest tech companies have been saying about

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Speaker 1: their spending on Ai plus what Keerstarmer means by wanting

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Speaker 1: more sophisticated ties with China.

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Speaker 2: WA's another story that caught a rye this morning, how

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Speaker 2: much is the air above your home worth?

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Speaker 1: Sarah Rappaport from Bloomberg Pursuits has been writing about the

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Speaker 1: growing phenomenon in London of developers buying up the air

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Speaker 1: space above buildings to build penthouses on top of existing structures.

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Speaker 1: Is this some sort of Frankenstein monster building being created

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Speaker 1: in various parts of London?

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Speaker 3: Yeah, look, it's only the fanciest pass of London. That's

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Speaker 3: the bottom line, you have. The building has to be

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Speaker 3: in the right position, in the right location. But yes,

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Speaker 3: I'm seeing it increasingly. The thing is that often buildings

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Speaker 3: are owned by lots of different people, and sometimes people

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Speaker 3: who live in the buildings are worried that, you know,

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Speaker 3: they don't end up getting what the developers might promise,

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Speaker 3: who profits from it and so on, And I guess

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Speaker 3: London is also are sometimes a bit worried about the

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Speaker 3: city getting taller and taller.

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Speaker 1: Yeah, I mean the other side of this is is

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Speaker 1: that London needs more housing. So is this easier than

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Speaker 1: demolishing a load of buildings and trying to build a

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Speaker 1: shiny new apartment block. Is there a way that it

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Speaker 1: can be done where it can be in keeping with

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Speaker 1: the existing character of streets as so many in London

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Speaker 1: do have. I mean the sort of prices Airquot's a couple

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Speaker 1: of prices for these airspace sites in her piece, three

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Speaker 1: hundred and twenty thousand pounds for empty airspace in Muswell Hill,

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Speaker 1: one hundred and fifty thousand pounds for space for two

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Speaker 1: to one bedroom apartments on top of a building in

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Speaker 1: Deptford as well. It can help to alleviate some of

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Speaker 1: the housing shortage. But one of the people that she

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Speaker 1: spoke to, wil Vaughan from the State Agency House Collective,

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Speaker 1: does also point out that not everyone wants to live

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Speaker 1: in what I've described as a Frankenstein building, a teenage

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Speaker 1: mutant ninja apartment on the top of an apartment building already,

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Speaker 1: No matter how beautifully finished it is, sometimes the context

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Speaker 1: doesn't work for these sorts of spaces as well.

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Speaker 2: Interesting idea.

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Speaker 3: Yeah, absolutely, I think I could do it entire podcast

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Speaker 3: just on the buildings in London, but I love Sarah

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Speaker 3: Reports piece, so put link to it in our show notes.

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Speaker 3: For you.

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Speaker 1: Well, let's taken then to what we learned from the

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Speaker 1: latest set of tech earnings. Microsoft and Meta got different

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Speaker 1: reception from their investors to their massive AI spending plans,

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Speaker 1: while Samsung reported a big jump in profits for its

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Speaker 1: chip unit. Our tech editor of Lad sav office with

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Speaker 1: us now for more on this, Lad, good to talk

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Speaker 1: to you. So Meta and Microsoft both announced more huge

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Speaker 1: investment in AI. Why did investors respond so differently to

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Speaker 1: their reports?

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Speaker 7: Well, it's a tricky one to gauge, to be honest,

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Speaker 7: because the first reaction that we're looking at is still

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Speaker 7: aftermarkets trading. It is fairly thin, so it tends to

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Speaker 7: be overstated. It iss to be overpronounced. Whatever the reaction is.

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Speaker 7: If you look back even just the quarter, Meta announced

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Speaker 7: exactly the same thing, well maybe not to the same scale,

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Speaker 7: but similar escalation and spending, just as it did overnight,

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Speaker 7: and is share price dropped this time, share price went

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Speaker 7: up a lot of This is more in the way

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Speaker 7: of market dynamics. But to differentiate between the two companies,

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Speaker 7: Microsoft is still a little bit broader, well significantly broader

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Speaker 7: than Meta, and the strategy that Mark Zuckerberg is expressing

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Speaker 7: for Meta, it's all AI. It's AI first, it's duo diet.

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Speaker 7: There's no plan B, so it's more of a let's say,

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Speaker 7: pure play on AI. And then you also have to

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Speaker 7: consider the products that they have. Meta is building up.

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Speaker 7: Mark Zuckerberg's superintelligence team is only just going to introduce

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Speaker 7: this new AI models, so there's more of a mystery metal.

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Speaker 7: Whereas Microsoft's co Pilot products, its integration into things like

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Speaker 7: Excel and Word is already out there, and it's worth

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Speaker 7: saying it isn't great. Nobody is really buying into co

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Speaker 7: Pilot as being a superior product than Chad GBT. In fact,

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Speaker 7: most people see it as Chad GBT with some features

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Speaker 7: that lay by a few months because of Microsoft's clothes

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Speaker 7: partnership with open Aim.

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Speaker 3: Yes, that's interesting. Meanwhile, you've got Samsung, which is on

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Speaker 3: the hardware side of the equation alongside sk Heenex and

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Speaker 3: also ASML of course, who reported yesterday, and we talked

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Speaker 3: a lot about that yesterday. What did we learn though

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Speaker 3: from Samsung out of South Korea?

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Speaker 7: Well, I mean, if you look at Samsung's profit, it

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Speaker 7: is more than double the previous quarter, which is already up.

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Speaker 7: You're talking record revenues records sales and profit both for

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Speaker 7: Samsung and s k Heinis. I took a look at

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Speaker 7: esk Heinex's sales and again, when you're thinking about pure

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Speaker 7: play companies, Samsung is such a diverse company and it

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Speaker 7: has memory at his heart. But in esk heinis is

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Speaker 7: all about memory and its sales have tripled, literally tripled

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Speaker 7: since chat GPT came out, So that kind of gives

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Speaker 7: you a sense of the again the scale of demand

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Speaker 7: and spending that comes from those US hyperscalers. So really

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Speaker 7: Samsung and esk Heinicks reaffirmed that they set new records.

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Speaker 7: I would pay closer attention to ASML. That was the

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Speaker 7: biggest surprise. You know, I come from Europe. I'm very

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Speaker 7: proud that there's a European company that plays a role

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Speaker 7: in this and ASML the quarter four bookings that announced

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Speaker 7: were more than double analyst expectations.

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Speaker 2: That's a huge surprise.

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Speaker 1: Vlad our Tech editor, thanks so much for joining us

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Speaker 1: blad to have off there talking us through some of

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Speaker 1: those big, big earnings reports from both the hyperscalar side,

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Speaker 1: but also from the chip side as well, giving us

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Speaker 1: some of a picture as to where the AI story

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Speaker 1: is going from here as we see no sign of

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Speaker 1: a letup in the spending plans from the big companies

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Speaker 1: in this space as well. Stay with us more from

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Speaker 1: Bloomberg Daybreak Europe coming up after this.

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Speaker 8: Well.

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Speaker 3: I want to stay with the story in Asia because

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Speaker 3: the British Prime Minister Kissed Sarma has been meeting with

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Speaker 3: Chinese President Sijingpin in Beijing in an effort to deepen

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Speaker 3: broaden trade ties between the UK and China, but then

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Speaker 3: without upsetting the UK's relationship with the US and President Trump.

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Speaker 3: Sarma says that he wants a more sophisticated relationship between

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Speaker 3: the UK and China. This gathering is still ongoing. The

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Speaker 3: British Prime Minister has brought with him more than fifty executives,

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Speaker 3: not just one business but also from cultural life. Bloomberg's

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Speaker 3: Jenny Marsh, who leads our coverage of greater Chinese economy

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Speaker 3: and government, joins us now to discuss is give us

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Speaker 3: a flavor of what's going on there?

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Speaker 2: What does a more.

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Speaker 3: Sophisticated relationship mean? Do you think, Jenny, does kiss Starmer

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Speaker 3: have the ability to extract more from the economic relationship

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Speaker 3: that the UK has with China.

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Speaker 8: I think I think he does. And I think there's

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Speaker 8: a lot of opportunity here on the table for the

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Speaker 8: UK in terms of financial services, and you can kind

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Speaker 8: of see that from the sort of delegation that Starmer's

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Speaker 8: brought with him, which is very heavy on sort of banks.

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Speaker 8: And I think when he has talked about sort of

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Speaker 8: a more sophisticated relationship, you know, the UK China relationship

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Speaker 8: has been sort of very swayed by politics over the

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Speaker 8: past sort of eight years, and that's led to lots

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Speaker 8: of ups and downs and sort of spats about various issues.

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Speaker 8: And I think, you know what Starma really wants to

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Speaker 8: do with this trip, It's sort of back to that

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Speaker 8: old approach of separating the politics from the economic. You know,

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Speaker 8: we can have our differences about human rights and sort

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Speaker 8: of political issues over here and we can talk about them,

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Speaker 8: but we want to focus on where the opportunity is

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Speaker 8: for our economies. And I think that's what he means

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Speaker 8: by this more sort of sophisticated, grown up relationship.

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Speaker 1: Choosing things they were talking about twists and turns in

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Speaker 1: the UK China relationship, it's about rising above differences. Perhaps,

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Speaker 1: is there any change in China's position given what we've

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Speaker 1: heard out of the Trump White hose.

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Speaker 8: I think, you know, there was a very interesting comment

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Speaker 8: that She made to Starma. He said to him, I

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Speaker 8: appreciate your public statement that China presents an opportunity and

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Speaker 8: engagement with China is essential, you know, And I think

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Speaker 8: that sort of sums up this trip for She. The

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Speaker 8: UK market is already wide open to Chinese products to

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Speaker 8: trade surplus surge last year, again in China's favor. But

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Speaker 8: for She, this is sort of another leader, after Karney,

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Speaker 8: after South Korea's Lee coming to Beijing talking about the

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Speaker 8: opportunity of doing business with China and sort of you know,

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Speaker 8: it's a real sea change from how these trips used

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Speaker 8: to be, where you know, issues like Hong Kong or

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Speaker 8: Shinjang were sort of thorned in the relationship. After the

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Speaker 8: war in Ukraine, European leaders were saying, you know, we

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Speaker 8: cannot separate the political from the economic. You know, we

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Speaker 8: have to deal with both things. And I think this trip,

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Speaker 8: you know, shows has been a change, partly driven by

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Speaker 8: how Trump is sort of you know, sparring with US allies,

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Speaker 8: and so for She, this is just great in terms

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Speaker 8: of the message it sends to the world.

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Speaker 1: This is Bloomberg Daybreak Europe, your morning brief on the

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