November 3, 2025 • 22 mins
Goldman Sachs Chairman and CEO David Solomon discusses US-China Trade Relations and M&A Activity. Solomon spoke to Bloomberg's Yvonne Man and David Ingles on the sidelines of the Hong Kong Monetary Authority's Global Financial Leaders' Investment Summit.
Plus - The start of what's known as the best month of the year for stocks saw tech rallying as Amazon.com Inc.'s $38 billion deal with OpenAI added fuel to the artificial-intelligence trade. We speak to Brad Bernstein, Managing Director at UBS Private Wealth Management.
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Speaker 1 (00:00):
Bloomberg Audio Studios, Podcasts, Radio News.
Speaker 2 (00:10):
Welcome to the Daybreak Asia podcast time det Prisoner. In
the States, we had a rally in tech stocks. That
was after Amazon signed a seven year deal with open
ai for computing power. OpenAI will pay Amazon Web Services
thirty eight billion dollars for access to hundreds of thousands
of those in Nvidia GPUs. And in a moment we'll
(00:31):
talk US tech with Brad Bernstein of UBS Wealth Management.
But we begin in Hong Kong this morning, where the
Global Financial Leader's Investment Summit is underway, and that's where
we caught up with Goldmunt Sachs CEO David Solomon. He
spoke with Bloomberg zivon Men and David Englace. The first
question had to do with Solomon's reaction to the US
(00:52):
China trade truce reached last week.
Speaker 3 (00:55):
I think at the moment, you know, a de escalation
is a good thing, but there's obviously a lot of
work to do to really arrive at a real stable
deal that can endure, you know, over a period of time.
I'm encouraged by the prospect of a potential visit from
the US President that was telegraphed in the fall, But
for the moment, you know, I did not think the
(01:15):
escalation on either side was constructive, and so you know,
I much prefer a de escalation. I think both both
sides really had a purpose in that meeting to talk constructively,
to have a more de escalated environment, and that allows
now for constructive conversations as they move forward.
Speaker 1 (01:32):
One year truth though, is there pros and cons to that?
Speaker 4 (01:35):
That was?
Speaker 1 (01:35):
I did a bit one year truth though? Between the
two Is that a good or bad thing? I mean,
what did to do in terms of business sentiment? When
there was a twelve month time frame?
Speaker 3 (01:43):
Now it's better then, it's better than an escalation at
unreasonable levels, which is kind of where we were.
Speaker 4 (01:50):
You know over the most recent time.
Speaker 3 (01:52):
Trade negotiations are complicated and there are a lot of
issues on the table. They need thoughtful responses and responses
that can be dur that both.
Speaker 4 (02:01):
Sides embrace and get to the right place.
Speaker 3 (02:04):
Yes, there's some uncertainty because it's a one year you know,
it's a one year delay.
Speaker 4 (02:08):
At all of this, but it's also a realistic period of.
Speaker 3 (02:10):
Time to try to get the right kind of deal
done so both economies can move forward in a constructive way.
And look, these are the two most important economies in
the world. I think it's very important that you know,
we arrive in a better place where we can both
participate constructively with each other in the global growth of
the world.
Speaker 5 (02:27):
I mean speaking of let me borrow your phrase, participate.
There's been a resurgence in equity capital market raising here.
Speaker 2 (02:34):
In Hong Kong.
Speaker 5 (02:35):
A lot of the Chinese companies, tech or otherwise are
raising capital for the future. I want to get your
sense as someone who sits in New York, you travel
the course all around the world. Is there a lot
of appetite now from US based investors to participate by
giving that capital to Chinese companies right now in order
to do there's you know, I realize their ambition.
Speaker 3 (02:55):
Sure, there's there's there's there's more appetite for it than
there was twelve months ago. Remember actually last November, sitting
in a dinner in the United States with a group
of US investors, and this topic came up, and there
were a couple of investors that basically said, we all
should be looking to China.
Speaker 4 (03:14):
And the reason, the reason that had evolved that way.
Speaker 3 (03:17):
Is if you look last fall, the prices had gotten
so cheap, the capital flows had moved so in the
other direction that you just knew that things would come
more into balance and there'd be a recycling.
Speaker 4 (03:29):
And we've seen that recycling. You've seen a big move.
Speaker 3 (03:31):
And prices year over year, you've seen more foreign capital
come in and start to participate. That's a fundamentally different
question about the big capital allocators really fundamentally shifting their
allocations up to be higher again. So fearg direct investment
in China has come down, and I think one of
the big questions is until we understand kind of the
trade and the geopolitical landscape, it's harder to see significant
(03:56):
shifts back to higher levels of foreign direct investment and.
Speaker 4 (03:59):
More capital allocation.
Speaker 3 (04:00):
But for the moment, those flows are making for a
better IPO market here and more opportunities here.
Speaker 4 (04:06):
How do you look at that?
Speaker 1 (04:07):
I mean, the whole competition has kind of changed into
the dynamics, right. You have so many of these Chinese
banks now that are doing some of these deals with
Chinese companies when it comes to going public.
Speaker 6 (04:17):
How does Goldman sas compete?
Speaker 3 (04:19):
Well, you know, Goldmen sex competes just fine, Thank you
very much. When it comes to taking public companies public
on a global stage. Golden Sex is a leading position.
We've had a leading position for fifty years. And there's
always competition in the business, and you know, we'll continue
to compete, so we welcome competition. But we have a
pretty active footprint out here, as you well know, they
have a pretty active footprint around the world. And look,
(04:41):
one of the big advantages. I just had breakfast this
morning with a company here that it's actually a Chinese company,
but the you know, the CEO, the founder was here
and why does he value Golden Sex. He values Golden
Sex because we have access to people, information, capital markets
all over the world, you know, not just in a
narrow portion of the world.
Speaker 4 (05:01):
And so it's a competitive business. It always will be.
But I'm comfortable that we have the resources in the
position to compete.
Speaker 5 (05:07):
Effectively, right And you know, you know I've been rereading
up of course, and I understand your history. You guys
have been doing business in China very long time.
Speaker 6 (05:15):
You guys took the.
Speaker 5 (05:15):
Big banks public back twenty plus years ago. So I
mean you're headed there, in my understanding after here, you're
going to China of course to speak with regulators, what
have you. What's your long term vision for difranchise in
Greater China? What do you want what do you want
your franchise to become longer?
Speaker 3 (05:32):
I think you have to look at Goldman Sachs and
just think strategically that as a global firm, that when
you think about our businesses, what are our two big
businesses global banking and markets, the investment banking and trading
business and asset and wealth management. And so if you
think about how we think strategically about the firm, what
advantages does the firm have Besides the fact that we
have at scale businesses, we're very good at those activities.
(05:56):
We're leaders of those activities, and we have a right
to compete and win, you know, in those activities. Another
big advantage for the firm is we're truly global, and
in fact we're more global and have a capacity to
communicate and interact globally for our clients in a way
that not many firms can. And so if you think
about where GDP is in the world, where big economies
(06:17):
are in the world, you know, China is always going
to fit that bill. And barring a much more significant
shift in geopolitics and the relationship between the US and China.
They're definitely issues. They are definitely things that need to
be sorted. But China's going to continue to be one
of the most important economies in the world. The US
is going to continue to be the most important economy
(06:38):
in the world, and we're linked. And so as a
big global firm that does what we do, we have
to be long term committed to serving our clients that
need access to advice, capital and resources, you know, in
China and around the world. And of course we've got
to do that in whatever environment, the regulatory structure or
the geopolitics play up.
Speaker 4 (06:59):
But we're long term committed. We've been long term committed.
Speaker 3 (07:02):
And will remain long term committed unless there was something
that significantly changed that.
Speaker 1 (07:06):
I'm glad you mentioned that because we've seen governments being
I guess more involved in some of these business deals.
I take a look at Intel, for example, I look
at Nippon Steel, even C. K. Hutch, which almost as
was a sole advisor to what's the advice now to
clients now in terms of that intervention risk, Well, you just.
Speaker 3 (07:23):
Mentioned three different deals and they're completely different, right, I
mean they're just completely different. Governments are always going to
apply in and weigh in on different transactions.
Speaker 4 (07:32):
There are regulatory approvals in the United States, Aciphius.
Speaker 3 (07:34):
There, I mean, there are all sorts of issues where
government's weigh in.
Speaker 4 (07:37):
That is a very different thing, very different thing that.
Speaker 3 (07:41):
A government taking an investment, you know, in a specific company.
Sure it wouldn't surprise you. I'm not a big fan
of that as a general practice. That doesn't mean there
aren't exceptions, because I believe that the markets should allow
capital formation and competition, you know, around companies, and you
know this administration is is in one or two situations
(08:02):
they're taking actions like that. You know, as I said,
I'm not black and white and dogmatic. There can be
exceptional circumstances, but I don't think as a general practice
having governments take stakes and companies is the direction of travel.
Speaker 4 (08:15):
We want our free market system to go right.
Speaker 5 (08:17):
You mentioned how would you describe the current environment for
deals going into next year? Because I remember just sitting
here this time last year and we were going into
twenty twenty five with it was a US election. We
weren't sure what were the guardrails were going to be
looking at next year. As speaking with Davanne, I can't
seem to think about think of a major risk apart
(08:38):
from a gainst Fraut evaluation.
Speaker 6 (08:40):
We can talk about that later.
Speaker 5 (08:41):
But what's your sense of the environment right now and
what risks we have to consider what's not obvious.
Speaker 3 (08:45):
Well in the you know, in the US, the US
is a huge part of the global M and A
market either for target or acquire right. You know, I
would say it's it's extremely constructive and we see it.
Speaker 4 (08:56):
You know, in our advisory business.
Speaker 3 (08:58):
You could take a look at our you know, M
and A revenues last quarter, what's your reflection of deals closing.
Speaker 4 (09:03):
But if you also go through our earnings.
Speaker 3 (09:04):
Call, you know, we made a comment about the level
of our m and A backlaw at a very high
level of our MNA backlog, and that's just an indication
to the fact that there's a lot of activity inside
the firm. I say this is really rooted from the
fact that we went through a period for four years
during the Biden administration where if you wanted to do
something strategically, you wanted to do something significant from an
(09:25):
M and A perspective, whatever the question was, the answer
was No, we're now an environment where whatever the.
Speaker 4 (09:31):
Question is, the answer is maybe.
Speaker 3 (09:33):
And I think CEOs are unleashed in believing that they
have a chance of doing strategic things to advance their position,
to advance their scale, to advance you know, how they
sit competitively. And so we see a tremendous backlog of
significant consolidating situations, what i'll call large cap M and A.
Large cap M and A in the United States is
up very very meaningfully deals over ten billion dollars, very.
Speaker 4 (09:55):
Very meaningfully year of a year.
Speaker 3 (09:56):
And so I think we're in a pretty constructive environment.
And my expectation is twenty six and twenty seven will
be quite constructive in terms of large cap M and A,
particularly in the United States.
Speaker 1 (10:08):
Obviously, we've been talking about AI. That's a big thing
in terms of how does it work for Golden assass
in terms of operational efficiencies, How does the onslought of
AI really going to impact how you hire or even
just headcount in this part of the world.
Speaker 3 (10:20):
Now, Dad, well, it's you know, it's interesting to me
that you go right to headcount and and I actually
think that you know that that that's a different.
Speaker 4 (10:29):
Lens than the lens that we would look at.
Speaker 3 (10:32):
And I don't know if you saw, but when we
reported earnings two weeks ago, we put out a memo
that we called Goldman Sachs one Goldman SAX three point
zero where we highlighted the approach that we were taking
to integrating AI and we talked about a handful of
things that were goals, including you know, operating efficiency, automation,
better sales management, and then we identified six processes that
(10:57):
we were going to look at from a very fresh
perspective to see if we can and automate them and
build better efficiency so that we would have more capacity
to invest in areas in the business where we see
growth opportunities. And so, you know, I think for a
FIRMI Goldman Sachs, there are two avenues here. One, we
have very smart people and we can put these tools
in their hands and that makes them more productive. And
(11:18):
by the way, that's no different than forty years ago
when I was starting and somebody gave me a desktop
computer and load US one two three software and I
have the ability to do a spreadsheet and a fraction
of the time that it took me before that tool
was put into my hand. That just continues. That's been
going on for forty years. It doesn't mean we have
less smart people inside Goldman Sacks. You look at Goldman
(11:41):
Sachs productivity per person. It's much higher today than it
was twenty five years ago, and my guess.
Speaker 4 (11:48):
Is twenty five years from now it will be much
higher than it is today.
Speaker 3 (11:52):
But our goal is to figure out ways that we
can invest in growth because we see lots of growth
in our franchise. By using AI technology to reimagine processes,
we can create operating efficiencies and it gives us more
of a scaled opportunity to reinvest in growth in the business.
Speaker 4 (12:09):
And look, of course, over the.
Speaker 3 (12:10):
Way, they are going to be shifts in jobs and
job functions, as there always have been. I think one
of the things you've got to wrestle with today is
the pace of this is quicker, and so since the
pace is quicker, there's a chance that it might be
a little bit more disruptive in the short term. But
at the end of the day, technology changes jobs changes
(12:30):
the way people work. This has been going on for
a long long time. It is continuing. I don't think
it's different this time.
Speaker 2 (12:37):
That was David Solomon Goldman Sachs CEO, speaking to Bloomberg
Savon Men and David Nglace at the Global Financial Leader's
Investments Summitt in Hong Kong. We're bringing it to you
here on the Daybreak Asia podcast. Welcome back to the
Daybreak Asia Podcast. I'm Doug Chrisner. T billion dollar deal
(13:01):
between Amazon and open Ai was the catalyst for a
rally in US tech stocks. For a closer look now,
I'm joined by Brad Bernstein. He is Managing director at
UBS Private Wealth Management. Brad is on the line from Philadelphia.
Thanks so much for making time to chat with me
about this. What did you make of this rally that
we had in tech shares today? I know the Amazon
(13:21):
story was a big factor, the company signing a seven
year deal with open Ai. Talk to me about the
way you view this AI trade right now?
Speaker 7 (13:30):
Well, very simply, the tech earning season so far has
just completely reinforced our view that the momentum behind AI
continues to build, not slow down as we saw today.
The top companies continue to report rising capital spending supported
largely by cash flows rather than debt, which is really important,
(13:50):
and progress is accelerating towards monetizing these investments. Bottom line,
We're just we maintain our conviction AI related stocks should
drive equity markets from here, and you know, if you're
not allocated to technology and AI, it's time to get
some exposure.
Speaker 2 (14:07):
I'm going to push back a little bit because Alphabet
today sold twenty five billion in bonds in the US
and in Europe, and last week we heard from Meta
it sold thirty billion dollars of bonds. Is it concerning
to you that some of these giants are beginning to
tap into the corporate credit market a bit?
Speaker 7 (14:23):
Not really, because I think they if you look at
the cash on hand, they have the choice. You know,
if you look at app some of the some of
the big names, they have the most cash of any
companies in the world. And I think they're just taking
advantage of bond markets right now with very tight corporate
credit spreads.
Speaker 2 (14:37):
What about the concentration I mean in Nvidia is so
much a part of this story. Open ai as well,
and I was looking at data talking about the fact
that open ai is committed to spending one point four
trillion on infrastructure to build out these AI models. That's
an unprecedented binge. Does it even prompt a little bit
(14:59):
of concern on your hard about an investment bubble.
Speaker 7 (15:01):
You certainly have to worry about that, but I think
these you know, when you look at the companies that
are spending the money and you look at their earnings
and how fast they're growing, I think it's a different environment.
Speaker 6 (15:12):
I've been in the business twenty six years.
Speaker 7 (15:13):
I recall ninety nine and two thousand during the tech
boom I started my career during that period. Evaluations are
very different today, Earnings are very different today, cash levels
are very different today. So we actually still think we're
in the early innings in this space.
Speaker 2 (15:28):
So would you be adding to positions like in nvideo,
like Alphabet, like Meta or even Microsoft.
Speaker 6 (15:36):
You know, we're still very positive on the AI stories.
Speaker 7 (15:39):
I can't speak specifically on any one company, but as
a group, we would want to be invested in beneficiaries
of AI spending, whether it's the tech large cap tech,
whether it's infrastructure, whether it's energy. So you want to
be thinking about beneficiaries of AI because that is the
expensive area of the market, but that's also where all
the growth is.
Speaker 2 (15:57):
I'm wondering about the extent to which this move that
we seen higher in many of these megacap tech stocks
is tied to the notion that the FED is going
to be a lot more accommodative going forward. Now, today's
FED speak was a little mixed, Lisa Cook, the FED Governor,
saying today the risk of further weakness in the labor
market is greater than the risk that inflation will pick up.
(16:19):
Stephen Meyron, we know his position. He thinks that policy
remains too restrictive, although Austin Goulesby today was saying he's
more concerned about inflation than jobs. How do you understand
the inflation story right now and the degree to which
FED policy is driving a lot of the price action
in the equity market.
Speaker 7 (16:39):
So we see five catalysts into the end of the
year and in the next year that make us constructible markets.
The FED is number one. So keep in mind the
FED just started a new rate cutting cycle in September
with markets within one percent of an all time high.
This has happened thirteen prior time since nineteen eighty where
where the S and p's in the ear an all
(17:00):
time high within one percent and the Fed starts a
rate cutting cycle. The previous thirteen times the market has
been positive one year later, all thirteen out of thirteen
with an average rate of return around fifteen percent.
Speaker 6 (17:11):
So we have a very positive setup.
Speaker 7 (17:14):
We have two voting members speaking this week, we do
get an ADP number. You know, we believe despite the
fact that we got a dubbish cut last week from
Jerome Pale and company, we still believe we're going to
get cuts at the next three FED meetings. So we
see a cut in December, a cut in January, and
(17:35):
a cut in March.
Speaker 6 (17:37):
Why because of weakening labor.
Speaker 7 (17:39):
We're in a really unique time, doug where the economy
when you look at the economy, you know, Atlanta Fed,
the Atlanta Fed today increase their GDP estimate for the
third quarter from three point nine to four percent because
of the ism number this morning, so they're seeing the
Atlanta Fed not ubs. The Atlanta Fed is seeing four
(18:01):
percent GDP. But yet at the same time, unemployment is weakening,
most likely due to immigration policy and probably because of
the uncertainty are around tariffs.
Speaker 6 (18:10):
So we have a.
Speaker 7 (18:12):
Unique time in our markets where we have a solid
economy which is benefiting corporate America, but weakening employment because
of the uncertainties around immigration and trade. So economy, that's
the second catalyst. Third catalyst would be the earnings, which
have just been unbelievable. Eighty percent that have reported. We've
(18:33):
seen two thirds of the S and P five hundred report.
We're going to see another twenty five percent or so
this week. Eighty percent of companies have beaten. Earnings growth
is up around so far twelve point seven percent. Estimates
were around nine percent growth. Five of the Magnificent seven
reported this past week delivering a mixed but broadly constructive read.
So earnings. Earnings are really been unbelievable, I think, supported
(18:56):
by the economy. And then we've had dscale. This is
number four from trade uncertainty with China in the US.
Granted it's only a one year deal, it's not permanent deal,
but it certainly de escalates and takes a lot of
the short term angst out of the markets that created
a lot of volatility in the last few weeks. And
then our fifth catalyst is the seven and a half
(19:18):
trillion in cash. So every time the Fed cuts, and
like I said, we see three more cuts between now
and March three of the next meetings, money market rates
will come down and it makes stocks and bonds far
more attractive, but it's another catalyst for money going into markets.
Speaker 2 (19:33):
Brad, you mentioned the Atlanta Fed GDP now forecast being
at four percent right now. Do you have a sense
of how much of that is tied to the AI
story and this massive investment in artificial intelligence infrastructure.
Speaker 7 (19:48):
It's a great question. I think it's certainly is Certainly
it's helping. I don't know what percentage it is, but
it's certainly having a big impact.
Speaker 2 (19:56):
Ed Yard Danny, you mentioned your career going back to
around the two thousands, and I remember ed at that
point with a lot of calls on the equity market
back in the day. He is now the founder of
Yar Denny Research. He was saying today there are simply
too many bulls in the market, and all it takes
is one unexpected event that could knock stocks down from
their highs, given the fact that we're seeing really really
(20:19):
poor market breadth right now. Does he have a point?
Speaker 7 (20:22):
I think he always has them. I think that's that's
true in any environment. I think markets could always have
pullbacks based on unexpected news, whether it's trade related, geopolitical,
or something that we can't foresee, like the countless experiences
we've had in the last ten twenty years with for example,
COVID and any of the other things that were unpredictable.
(20:45):
You know, markets are an incredible, incredible investment. Stocks have
averaged eleven twelve percent going back to nineteen fifty, but
they go up eight out of ten years, they go
down two out of ten, and we average about a
twelve or thirteen percent annual pullback because of the volatility
in the markets.
Speaker 6 (21:02):
You have to understand that.
Speaker 7 (21:03):
And as long as you're okay with that, and your
investments are more than for your money that's invested in
the markets is at least for three to five years,
it's a great place to be.
Speaker 2 (21:12):
So, Brad, I guess what I was more specifically wondering
is whether or not you're concerned about market breadth and
the fact that it seems to be so narrow today.
Is that a concern to you at all?
Speaker 6 (21:23):
It certainly is more narrow than we would like to see.
Speaker 7 (21:26):
And I think if you look back at the last
couple of months, the SMP has crushed the equal Weight
Index by one of the biggest discrepancies in many, many years,
and it is concerning, and I do think that is
something to absolutely watch. But I just think the overwhelming
positive catalysts going in to twenty six will overweigh any
(21:47):
of those uncertainties and those short term risks.
Speaker 2 (21:50):
Brad will leave it there. It's always a pleasure. Thanks
very much. Brad Bernstein there, Managing director at UBS Private
Wealth Management, joining us from Philadelphia here on the Daybreak.
As you, thanks for listening to today's episode of the
Bloomberg Daybreak Asia Edition podcast. Each weekday, we look at
the story shaping markets, finance, and geopolitics in the Asia Pacific.
(22:13):
You can find us on Apple, Spotify, the Bloomberg Podcast
YouTube channel, or anywhere else you listen. Join us again
tomorrow for insight on the market moves from Hong Kong
to Singapore and Australia. I'm Doug Chrisner, and this is
Bloomberg
Bloomberg Audio Studios, Podcasts, Radio News.
Speaker 2 (00:10):
Welcome to the Daybreak Asia podcast time det Prisoner. In
the States, we had a rally in tech stocks. That
was after Amazon signed a seven year deal with open
ai for computing power. OpenAI will pay Amazon Web Services
thirty eight billion dollars for access to hundreds of thousands
of those in Nvidia GPUs. And in a moment we'll
(00:31):
talk US tech with Brad Bernstein of UBS Wealth Management.
But we begin in Hong Kong this morning, where the
Global Financial Leader's Investment Summit is underway, and that's where
we caught up with Goldmunt Sachs CEO David Solomon. He
spoke with Bloomberg zivon Men and David Englace. The first
question had to do with Solomon's reaction to the US
(00:52):
China trade truce reached last week.
Speaker 3 (00:55):
I think at the moment, you know, a de escalation
is a good thing, but there's obviously a lot of
work to do to really arrive at a real stable
deal that can endure, you know, over a period of time.
I'm encouraged by the prospect of a potential visit from
the US President that was telegraphed in the fall, But
for the moment, you know, I did not think the
(01:15):
escalation on either side was constructive, and so you know,
I much prefer a de escalation. I think both both
sides really had a purpose in that meeting to talk constructively,
to have a more de escalated environment, and that allows
now for constructive conversations as they move forward.
Speaker 1 (01:32):
One year truth though, is there pros and cons to that?
Speaker 4 (01:35):
That was?
Speaker 1 (01:35):
I did a bit one year truth though? Between the
two Is that a good or bad thing? I mean,
what did to do in terms of business sentiment? When
there was a twelve month time frame?
Speaker 3 (01:43):
Now it's better then, it's better than an escalation at
unreasonable levels, which is kind of where we were.
Speaker 4 (01:50):
You know over the most recent time.
Speaker 3 (01:52):
Trade negotiations are complicated and there are a lot of
issues on the table. They need thoughtful responses and responses
that can be dur that both.
Speaker 4 (02:01):
Sides embrace and get to the right place.
Speaker 3 (02:04):
Yes, there's some uncertainty because it's a one year you know,
it's a one year delay.
Speaker 4 (02:08):
At all of this, but it's also a realistic period of.
Speaker 3 (02:10):
Time to try to get the right kind of deal
done so both economies can move forward in a constructive way.
And look, these are the two most important economies in
the world. I think it's very important that you know,
we arrive in a better place where we can both
participate constructively with each other in the global growth of
the world.
Speaker 5 (02:27):
I mean speaking of let me borrow your phrase, participate.
There's been a resurgence in equity capital market raising here.
Speaker 2 (02:34):
In Hong Kong.
Speaker 5 (02:35):
A lot of the Chinese companies, tech or otherwise are
raising capital for the future. I want to get your
sense as someone who sits in New York, you travel
the course all around the world. Is there a lot
of appetite now from US based investors to participate by
giving that capital to Chinese companies right now in order
to do there's you know, I realize their ambition.
Speaker 3 (02:55):
Sure, there's there's there's there's more appetite for it than
there was twelve months ago. Remember actually last November, sitting
in a dinner in the United States with a group
of US investors, and this topic came up, and there
were a couple of investors that basically said, we all
should be looking to China.
Speaker 4 (03:14):
And the reason, the reason that had evolved that way.
Speaker 3 (03:17):
Is if you look last fall, the prices had gotten
so cheap, the capital flows had moved so in the
other direction that you just knew that things would come
more into balance and there'd be a recycling.
Speaker 4 (03:29):
And we've seen that recycling. You've seen a big move.
Speaker 3 (03:31):
And prices year over year, you've seen more foreign capital
come in and start to participate. That's a fundamentally different
question about the big capital allocators really fundamentally shifting their
allocations up to be higher again. So fearg direct investment
in China has come down, and I think one of
the big questions is until we understand kind of the
trade and the geopolitical landscape, it's harder to see significant
(03:56):
shifts back to higher levels of foreign direct investment and.
Speaker 4 (03:59):
More capital allocation.
Speaker 3 (04:00):
But for the moment, those flows are making for a
better IPO market here and more opportunities here.
Speaker 4 (04:06):
How do you look at that?
Speaker 1 (04:07):
I mean, the whole competition has kind of changed into
the dynamics, right. You have so many of these Chinese
banks now that are doing some of these deals with
Chinese companies when it comes to going public.
Speaker 6 (04:17):
How does Goldman sas compete?
Speaker 3 (04:19):
Well, you know, Goldmen sex competes just fine, Thank you
very much. When it comes to taking public companies public
on a global stage. Golden Sex is a leading position.
We've had a leading position for fifty years. And there's
always competition in the business, and you know, we'll continue
to compete, so we welcome competition. But we have a
pretty active footprint out here, as you well know, they
have a pretty active footprint around the world. And look,
(04:41):
one of the big advantages. I just had breakfast this
morning with a company here that it's actually a Chinese company,
but the you know, the CEO, the founder was here
and why does he value Golden Sex. He values Golden
Sex because we have access to people, information, capital markets
all over the world, you know, not just in a
narrow portion of the world.
Speaker 4 (05:01):
And so it's a competitive business. It always will be.
But I'm comfortable that we have the resources in the
position to compete.
Speaker 5 (05:07):
Effectively, right And you know, you know I've been rereading
up of course, and I understand your history. You guys
have been doing business in China very long time.
Speaker 6 (05:15):
You guys took the.
Speaker 5 (05:15):
Big banks public back twenty plus years ago. So I
mean you're headed there, in my understanding after here, you're
going to China of course to speak with regulators, what
have you. What's your long term vision for difranchise in
Greater China? What do you want what do you want
your franchise to become longer?
Speaker 3 (05:32):
I think you have to look at Goldman Sachs and
just think strategically that as a global firm, that when
you think about our businesses, what are our two big
businesses global banking and markets, the investment banking and trading
business and asset and wealth management. And so if you
think about how we think strategically about the firm, what
advantages does the firm have Besides the fact that we
have at scale businesses, we're very good at those activities.
(05:56):
We're leaders of those activities, and we have a right
to compete and win, you know, in those activities. Another
big advantage for the firm is we're truly global, and
in fact we're more global and have a capacity to
communicate and interact globally for our clients in a way
that not many firms can. And so if you think
about where GDP is in the world, where big economies
(06:17):
are in the world, you know, China is always going
to fit that bill. And barring a much more significant
shift in geopolitics and the relationship between the US and China.
They're definitely issues. They are definitely things that need to
be sorted. But China's going to continue to be one
of the most important economies in the world. The US
is going to continue to be the most important economy
(06:38):
in the world, and we're linked. And so as a
big global firm that does what we do, we have
to be long term committed to serving our clients that
need access to advice, capital and resources, you know, in
China and around the world. And of course we've got
to do that in whatever environment, the regulatory structure or
the geopolitics play up.
Speaker 4 (06:59):
But we're long term committed. We've been long term committed.
Speaker 3 (07:02):
And will remain long term committed unless there was something
that significantly changed that.
Speaker 1 (07:06):
I'm glad you mentioned that because we've seen governments being
I guess more involved in some of these business deals.
I take a look at Intel, for example, I look
at Nippon Steel, even C. K. Hutch, which almost as
was a sole advisor to what's the advice now to
clients now in terms of that intervention risk, Well, you just.
Speaker 3 (07:23):
Mentioned three different deals and they're completely different, right, I
mean they're just completely different. Governments are always going to
apply in and weigh in on different transactions.
Speaker 4 (07:32):
There are regulatory approvals in the United States, Aciphius.
Speaker 3 (07:34):
There, I mean, there are all sorts of issues where
government's weigh in.
Speaker 4 (07:37):
That is a very different thing, very different thing that.
Speaker 3 (07:41):
A government taking an investment, you know, in a specific company.
Sure it wouldn't surprise you. I'm not a big fan
of that as a general practice. That doesn't mean there
aren't exceptions, because I believe that the markets should allow
capital formation and competition, you know, around companies, and you
know this administration is is in one or two situations
(08:02):
they're taking actions like that. You know, as I said,
I'm not black and white and dogmatic. There can be
exceptional circumstances, but I don't think as a general practice
having governments take stakes and companies is the direction of travel.
Speaker 4 (08:15):
We want our free market system to go right.
Speaker 5 (08:17):
You mentioned how would you describe the current environment for
deals going into next year? Because I remember just sitting
here this time last year and we were going into
twenty twenty five with it was a US election. We
weren't sure what were the guardrails were going to be
looking at next year. As speaking with Davanne, I can't
seem to think about think of a major risk apart
(08:38):
from a gainst Fraut evaluation.
Speaker 6 (08:40):
We can talk about that later.
Speaker 5 (08:41):
But what's your sense of the environment right now and
what risks we have to consider what's not obvious.
Speaker 3 (08:45):
Well in the you know, in the US, the US
is a huge part of the global M and A
market either for target or acquire right. You know, I
would say it's it's extremely constructive and we see it.
Speaker 4 (08:56):
You know, in our advisory business.
Speaker 3 (08:58):
You could take a look at our you know, M
and A revenues last quarter, what's your reflection of deals closing.
Speaker 4 (09:03):
But if you also go through our earnings.
Speaker 3 (09:04):
Call, you know, we made a comment about the level
of our m and A backlaw at a very high
level of our MNA backlog, and that's just an indication
to the fact that there's a lot of activity inside
the firm. I say this is really rooted from the
fact that we went through a period for four years
during the Biden administration where if you wanted to do
something strategically, you wanted to do something significant from an
(09:25):
M and A perspective, whatever the question was, the answer
was No, we're now an environment where whatever the.
Speaker 4 (09:31):
Question is, the answer is maybe.
Speaker 3 (09:33):
And I think CEOs are unleashed in believing that they
have a chance of doing strategic things to advance their position,
to advance their scale, to advance you know, how they
sit competitively. And so we see a tremendous backlog of
significant consolidating situations, what i'll call large cap M and A.
Large cap M and A in the United States is
up very very meaningfully deals over ten billion dollars, very.
Speaker 4 (09:55):
Very meaningfully year of a year.
Speaker 3 (09:56):
And so I think we're in a pretty constructive environment.
And my expectation is twenty six and twenty seven will
be quite constructive in terms of large cap M and A,
particularly in the United States.
Speaker 1 (10:08):
Obviously, we've been talking about AI. That's a big thing
in terms of how does it work for Golden assass
in terms of operational efficiencies, How does the onslought of
AI really going to impact how you hire or even
just headcount in this part of the world.
Speaker 3 (10:20):
Now, Dad, well, it's you know, it's interesting to me
that you go right to headcount and and I actually
think that you know that that that's a different.
Speaker 4 (10:29):
Lens than the lens that we would look at.
Speaker 3 (10:32):
And I don't know if you saw, but when we
reported earnings two weeks ago, we put out a memo
that we called Goldman Sachs one Goldman SAX three point
zero where we highlighted the approach that we were taking
to integrating AI and we talked about a handful of
things that were goals, including you know, operating efficiency, automation,
better sales management, and then we identified six processes that
(10:57):
we were going to look at from a very fresh
perspective to see if we can and automate them and
build better efficiency so that we would have more capacity
to invest in areas in the business where we see
growth opportunities. And so, you know, I think for a
FIRMI Goldman Sachs, there are two avenues here. One, we
have very smart people and we can put these tools
in their hands and that makes them more productive. And
(11:18):
by the way, that's no different than forty years ago
when I was starting and somebody gave me a desktop
computer and load US one two three software and I
have the ability to do a spreadsheet and a fraction
of the time that it took me before that tool
was put into my hand. That just continues. That's been
going on for forty years. It doesn't mean we have
less smart people inside Goldman Sacks. You look at Goldman
(11:41):
Sachs productivity per person. It's much higher today than it
was twenty five years ago, and my guess.
Speaker 4 (11:48):
Is twenty five years from now it will be much
higher than it is today.
Speaker 3 (11:52):
But our goal is to figure out ways that we
can invest in growth because we see lots of growth
in our franchise. By using AI technology to reimagine processes,
we can create operating efficiencies and it gives us more
of a scaled opportunity to reinvest in growth in the business.
Speaker 4 (12:09):
And look, of course, over the.
Speaker 3 (12:10):
Way, they are going to be shifts in jobs and
job functions, as there always have been. I think one
of the things you've got to wrestle with today is
the pace of this is quicker, and so since the
pace is quicker, there's a chance that it might be
a little bit more disruptive in the short term. But
at the end of the day, technology changes jobs changes
(12:30):
the way people work. This has been going on for
a long long time. It is continuing. I don't think
it's different this time.
Speaker 2 (12:37):
That was David Solomon Goldman Sachs CEO, speaking to Bloomberg
Savon Men and David Nglace at the Global Financial Leader's
Investments Summitt in Hong Kong. We're bringing it to you
here on the Daybreak Asia podcast. Welcome back to the
Daybreak Asia Podcast. I'm Doug Chrisner. T billion dollar deal
(13:01):
between Amazon and open Ai was the catalyst for a
rally in US tech stocks. For a closer look now,
I'm joined by Brad Bernstein. He is Managing director at
UBS Private Wealth Management. Brad is on the line from Philadelphia.
Thanks so much for making time to chat with me
about this. What did you make of this rally that
we had in tech shares today? I know the Amazon
(13:21):
story was a big factor, the company signing a seven
year deal with open Ai. Talk to me about the
way you view this AI trade right now?
Speaker 7 (13:30):
Well, very simply, the tech earning season so far has
just completely reinforced our view that the momentum behind AI
continues to build, not slow down as we saw today.
The top companies continue to report rising capital spending supported
largely by cash flows rather than debt, which is really important,
(13:50):
and progress is accelerating towards monetizing these investments. Bottom line,
We're just we maintain our conviction AI related stocks should
drive equity markets from here, and you know, if you're
not allocated to technology and AI, it's time to get
some exposure.
Speaker 2 (14:07):
I'm going to push back a little bit because Alphabet
today sold twenty five billion in bonds in the US
and in Europe, and last week we heard from Meta
it sold thirty billion dollars of bonds. Is it concerning
to you that some of these giants are beginning to
tap into the corporate credit market a bit?
Speaker 7 (14:23):
Not really, because I think they if you look at
the cash on hand, they have the choice. You know,
if you look at app some of the some of
the big names, they have the most cash of any
companies in the world. And I think they're just taking
advantage of bond markets right now with very tight corporate
credit spreads.
Speaker 2 (14:37):
What about the concentration I mean in Nvidia is so
much a part of this story. Open ai as well,
and I was looking at data talking about the fact
that open ai is committed to spending one point four
trillion on infrastructure to build out these AI models. That's
an unprecedented binge. Does it even prompt a little bit
(14:59):
of concern on your hard about an investment bubble.
Speaker 7 (15:01):
You certainly have to worry about that, but I think
these you know, when you look at the companies that
are spending the money and you look at their earnings
and how fast they're growing, I think it's a different environment.
Speaker 6 (15:12):
I've been in the business twenty six years.
Speaker 7 (15:13):
I recall ninety nine and two thousand during the tech
boom I started my career during that period. Evaluations are
very different today, Earnings are very different today, cash levels
are very different today. So we actually still think we're
in the early innings in this space.
Speaker 2 (15:28):
So would you be adding to positions like in nvideo,
like Alphabet, like Meta or even Microsoft.
Speaker 6 (15:36):
You know, we're still very positive on the AI stories.
Speaker 7 (15:39):
I can't speak specifically on any one company, but as
a group, we would want to be invested in beneficiaries
of AI spending, whether it's the tech large cap tech,
whether it's infrastructure, whether it's energy. So you want to
be thinking about beneficiaries of AI because that is the
expensive area of the market, but that's also where all
the growth is.
Speaker 2 (15:57):
I'm wondering about the extent to which this move that
we seen higher in many of these megacap tech stocks
is tied to the notion that the FED is going
to be a lot more accommodative going forward. Now, today's
FED speak was a little mixed, Lisa Cook, the FED Governor,
saying today the risk of further weakness in the labor
market is greater than the risk that inflation will pick up.
(16:19):
Stephen Meyron, we know his position. He thinks that policy
remains too restrictive, although Austin Goulesby today was saying he's
more concerned about inflation than jobs. How do you understand
the inflation story right now and the degree to which
FED policy is driving a lot of the price action
in the equity market.
Speaker 7 (16:39):
So we see five catalysts into the end of the
year and in the next year that make us constructible markets.
The FED is number one. So keep in mind the
FED just started a new rate cutting cycle in September
with markets within one percent of an all time high.
This has happened thirteen prior time since nineteen eighty where
where the S and p's in the ear an all
(17:00):
time high within one percent and the Fed starts a
rate cutting cycle. The previous thirteen times the market has
been positive one year later, all thirteen out of thirteen
with an average rate of return around fifteen percent.
Speaker 6 (17:11):
So we have a very positive setup.
Speaker 7 (17:14):
We have two voting members speaking this week, we do
get an ADP number. You know, we believe despite the
fact that we got a dubbish cut last week from
Jerome Pale and company, we still believe we're going to
get cuts at the next three FED meetings. So we
see a cut in December, a cut in January, and
(17:35):
a cut in March.
Speaker 6 (17:37):
Why because of weakening labor.
Speaker 7 (17:39):
We're in a really unique time, doug where the economy
when you look at the economy, you know, Atlanta Fed,
the Atlanta Fed today increase their GDP estimate for the
third quarter from three point nine to four percent because
of the ism number this morning, so they're seeing the
Atlanta Fed not ubs. The Atlanta Fed is seeing four
(18:01):
percent GDP. But yet at the same time, unemployment is weakening,
most likely due to immigration policy and probably because of
the uncertainty are around tariffs.
Speaker 6 (18:10):
So we have a.
Speaker 7 (18:12):
Unique time in our markets where we have a solid
economy which is benefiting corporate America, but weakening employment because
of the uncertainties around immigration and trade. So economy, that's
the second catalyst. Third catalyst would be the earnings, which
have just been unbelievable. Eighty percent that have reported. We've
(18:33):
seen two thirds of the S and P five hundred report.
We're going to see another twenty five percent or so
this week. Eighty percent of companies have beaten. Earnings growth
is up around so far twelve point seven percent. Estimates
were around nine percent growth. Five of the Magnificent seven
reported this past week delivering a mixed but broadly constructive read.
So earnings. Earnings are really been unbelievable, I think, supported
(18:56):
by the economy. And then we've had dscale. This is
number four from trade uncertainty with China in the US.
Granted it's only a one year deal, it's not permanent deal,
but it certainly de escalates and takes a lot of
the short term angst out of the markets that created
a lot of volatility in the last few weeks. And
then our fifth catalyst is the seven and a half
(19:18):
trillion in cash. So every time the Fed cuts, and
like I said, we see three more cuts between now
and March three of the next meetings, money market rates
will come down and it makes stocks and bonds far
more attractive, but it's another catalyst for money going into markets.
Speaker 2 (19:33):
Brad, you mentioned the Atlanta Fed GDP now forecast being
at four percent right now. Do you have a sense
of how much of that is tied to the AI
story and this massive investment in artificial intelligence infrastructure.
Speaker 7 (19:48):
It's a great question. I think it's certainly is Certainly
it's helping. I don't know what percentage it is, but
it's certainly having a big impact.
Speaker 2 (19:56):
Ed Yard Danny, you mentioned your career going back to
around the two thousands, and I remember ed at that
point with a lot of calls on the equity market
back in the day. He is now the founder of
Yar Denny Research. He was saying today there are simply
too many bulls in the market, and all it takes
is one unexpected event that could knock stocks down from
their highs, given the fact that we're seeing really really
(20:19):
poor market breadth right now. Does he have a point?
Speaker 7 (20:22):
I think he always has them. I think that's that's
true in any environment. I think markets could always have
pullbacks based on unexpected news, whether it's trade related, geopolitical,
or something that we can't foresee, like the countless experiences
we've had in the last ten twenty years with for example,
COVID and any of the other things that were unpredictable.
(20:45):
You know, markets are an incredible, incredible investment. Stocks have
averaged eleven twelve percent going back to nineteen fifty, but
they go up eight out of ten years, they go
down two out of ten, and we average about a
twelve or thirteen percent annual pullback because of the volatility
in the markets.
Speaker 6 (21:02):
You have to understand that.
Speaker 7 (21:03):
And as long as you're okay with that, and your
investments are more than for your money that's invested in
the markets is at least for three to five years,
it's a great place to be.
Speaker 2 (21:12):
So, Brad, I guess what I was more specifically wondering
is whether or not you're concerned about market breadth and
the fact that it seems to be so narrow today.
Is that a concern to you at all?
Speaker 6 (21:23):
It certainly is more narrow than we would like to see.
Speaker 7 (21:26):
And I think if you look back at the last
couple of months, the SMP has crushed the equal Weight
Index by one of the biggest discrepancies in many, many years,
and it is concerning, and I do think that is
something to absolutely watch. But I just think the overwhelming
positive catalysts going in to twenty six will overweigh any
(21:47):
of those uncertainties and those short term risks.
Speaker 2 (21:50):
Brad will leave it there. It's always a pleasure. Thanks
very much. Brad Bernstein there, Managing director at UBS Private
Wealth Management, joining us from Philadelphia here on the Daybreak.
As you, thanks for listening to today's episode of the
Bloomberg Daybreak Asia Edition podcast. Each weekday, we look at
the story shaping markets, finance, and geopolitics in the Asia Pacific.
(22:13):
You can find us on Apple, Spotify, the Bloomberg Podcast
YouTube channel, or anywhere else you listen. Join us again
tomorrow for insight on the market moves from Hong Kong
to Singapore and Australia. I'm Doug Chrisner, and this is
Bloomberg
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