December 22, 2025 • 20 mins
Japan has a “free hand” to take bold action against currency moves that are not in line with fundamentals, Finance Minister Satsuki Katayama said, in her strongest warning yet to speculators following the yen’s weakening even after a rise in interest rates. “The moves were clearly not in line with fundamentals but rather speculative,” Katayama said in an interview with Bloomberg on Monday, referring to a sharp weakening of the yen on Friday. “Against such movements, we have made clear that we will take bold action, as stated in the Japan–US finance ministers’ joint statement,” she said. We heard from Keio University Professor Sayuri Shirai. She spoke to Bloomberg’s Annabelle Droulers and Avril Hong on the Asia Trade.
Plus - Bank of America Corp. Chief Executive Officer Brian Moynihan said that artificial intelligence is starting to have a bigger impact on the US economy. For more on the AI trade and what’s ahead for the energy sector for 2026, we spoke to Peter Gardett, CEO of Noreva.
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Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:02):
Bloomberg Audio Studios, Podcasts, radio News. Welcome to the Daybreak
Asia Podcast. I'm Doug Krisner. We begin in Japan, where
the yen has been under a great deal of pressure lately,
despite last week's rate hike from the Bank of Japan. Now,
as expected, the BOJ did raise its policy rate twenty
(00:25):
five basis points to seventy five basis points. Now that's
a thirty year high. Even so, the yen weakened by
more than one percent against the dollar, with much of
that decline coming after BOJ governor who wait his news
conference where he kind of refrained from a particularly hawkish message,
and within the last twenty four hours, Japanese finance ministers
(00:47):
Satsuki Katayama expressed deep concern about the yen's decline. Speaking
to Bloomberg, Katayama said that Japan has a free hand
to take bold action against currency moves that are not
in line with fundamentals. That's where we start our conversation
with Soyuri Sharai, professor of economics at Kyo University in Tokyo.
(01:09):
She spoke with Bloomberg TV host Annabel Jewelers and April Holm.
Speaker 2 (01:13):
The question is though any sort of jaw burning we
get from government officials has had the tendency to be
quite short lived.
Speaker 3 (01:22):
Yeah, so in Tavina for exchange market, you know that's possible.
But at this moment, the main reason why Yang has
been so weak over since twenty twenty two is because
of the big interest differential, especially in deal Town. So
Japan's policy date in deal town is a minus two percent,
(01:43):
So it's very difficult to increase this interesting because the
Japan's information is around three percent cost push inforation and
you know policit it it's just zero point seventy five percent,
so very dearly real interesting, So it's very difficult to
change the strength at this stage.
Speaker 2 (02:01):
Yeah, exactly, especially when you've got the bo j that's
really not moving in lockstep with other global central banks.
I mean, it's it's it's very difficult to arrest those moves.
What then, do you think is the outlook for the
currency and as well, what is the priority that the
government officials are likely to place on that weakness?
Speaker 3 (02:20):
So you know, government is changing their strategy. You know,
over the past years, premister Mitakaichi was always criticized in
bank or Japan's leading Interesting increased forty CY. But I
guess since you know October he started to deplicate even more, so, say, know,
this is really creating cost pushing creations. So maybe the
(02:44):
compromise is to some extent. But the Japanese economy is
so weak. So that's why Governor Way that cannot be
so confident about ladying interesting, So this is a dynama.
So next year, it also depends on what would happen
to US forty c h. The US shows very determined
past toward you know, lowering interesting, that might change this
(03:07):
exchangery towards somewhat more applicial level, but still I think
he would remain at the very depreicit level next year.
Speaker 4 (03:17):
So Eurysan on the issue of US policy when it
comes to I guess the signals of intervention, how on
board would you say the US Treasury is with it?
Is there a tacit understanding between the US and Japan
on this so.
Speaker 3 (03:32):
Inves tragury, you know, I think they would accept it
because the Japan is to try to appreciate exchangery, not
depreciate in creating competitiveness, So you know, it's a different story.
And I think also, you know, US Traasury is always
say Japan is behind the CUB. A Bank of Japan
is behind the CUB, so maybe it may suggest to
(03:52):
more PROLICI late increase by Bank of Japan.
Speaker 4 (03:59):
What would you say is a sort of yacht stake.
I mean the boj has been highlighting reiterating that there's
no specific level or finance authorities in Japan, I should say,
are highlighting there's no specific level. But what is your
sense of how we can tell the levels in which
they might step in.
Speaker 3 (04:20):
Yeah, so one sixty is very very dangerous level, and
that is a time that you know, Treasury in tadin,
so you know we have to check. But still even
now it's very deplicit level, so we have you know,
this is really creating a very bad cost push information.
This is the biggest program. So I think people are
worry that you stay at very you know, high deprecating
(04:44):
level or maybe even depre sated FAA if the Takaichi
is going to do more physical expression and policy in
twenty twenty six, so one sixties I think quite a
dangerous bong.
Speaker 4 (04:58):
On fiscal policy. How regressive are you expecting the extra
budget the forthcoming budget to be from the Takeuchi administration.
Speaker 3 (05:07):
I want to say to think is to try to
show that she is very bored expansionary, uh, you know,
doing physical policy and so this century. You know, she
showed some tax cut by expanding you know, income tax deduction,
but to be honest, in Japan, people are paying more
and more social security you know premium and you know payments,
(05:30):
so that is really a lot and also a lot
of people still paying sort of fact inflation tax, right
because we have an braket creep. So considering all these
de fact infreation and social sexifity security spending, I think
the net net tax the tax cut is very small,
so I think people do not feel that their lives
(05:53):
are getting better. Also, you know, her policy is really
to try not to directly influence the fuel prices. Who
the prices have increased over twenty eight percent in these
four years. Energy it's just thirteen percent. But she never
really tried to deal with you know, reducing sake you know,
food consumption tax you know, for a while, and she
(06:15):
tried to avoid it. So you know, even she tried
to do a lot of thing, but she's tried to
you know, arrogate a lot of money to local government
discription is spending, so she doesn't really touch on the
extremely high hood prices.
Speaker 2 (06:30):
Yeah, and of course that's such a big component of
inflation or the inflationary basket. What do you think then
about the outlook for next year, because when you've got
the bio the government officials rather than Takichi's government, that's
that's very focused on more of an expansionary policy, and
that goes up against the BOJ that is looking to hike.
And you've seen that agitation in bond markets as well,
(06:51):
really with yields rising across the curve and that limited
spillover so far, but spillover into US, UK German bond yields.
What sort of risks are you monitoring then in global
bond markets?
Speaker 3 (07:04):
Yes, so tenure here there is now reaching two percent,
still real to be low, say compares to thirty years
ago when the policy date was at a similar level.
You know, thirty years ago ten years was you know,
around four percent or thirty percent, so much higher. Like so,
you know, I think in long term, long term it
(07:25):
is still low, maybe because the BOG is still hold
on nearly fifty percent of low government bond So of
course there is at tension here. I'm pretty sure Prime Minister,
you try to show another expressional physical policy, but probably
limited impact for the increasing disposable income in next year.
But there is a tension here, so you know, I
(07:47):
think it's very difficult, uh, especially for the bo j
or monetary policy.
Speaker 1 (07:55):
That is, so you're sure. I professor of economics at
Ko University in Tokyo, speaking with Bloomberg TV host Averril
Hong and anbl droolers here on the Daybreak Asia podcast.
Welcome back to the Daybreak Asia podcast. I'm Doug Chrisner.
(08:16):
It's a holiday shortened week for markets. Earlier in the
day in the States, there were broad gains for equities,
with the S and P five hundred rising by six
tens to one percent. Now on Tuesday, we'll get the
initial reading on third quarter economic growth. Bloomberg Economics is
estimating the American economy likely grew more than three percent,
(08:37):
supported by robust consumer spending and modest gains in investments. Earlier,
we had the chance to visit with Bank of America
CEO Brian moynihan. He said artificial intelligence is starting to
have a bigger impact on growth.
Speaker 5 (08:53):
I think that's part why the reason we feel constructive
for next year. We think AI spending continues. We think
there's benefits they can taxpayer from tax rebates, lower taxes
due to the tax bill going through and being effective
for next year. And we think the expense expensing and
other bonuses for businesses are good. So all that leads
to our confidence that we go from basic at two
(09:14):
percent type of growth letter level this year plus or
minus up to two point four percent.
Speaker 1 (09:19):
Brian moynihan, they're the CEO of Bank of America now.
Moynihan also said that bfac's relatively limited risk to the
economy if the AI industry became too overheated and had
to pull back. For a closer look now at the
AI trade, I'm joined by Peter Gardette. He is the
CEO of Narreva AI. Thank you for making time to
(09:42):
chat with me.
Speaker 6 (09:43):
It's great to be here.
Speaker 1 (09:44):
Do you expect this trend in AI to continue what
we have seen right now in terms of the buildout
of these data centers from hyperscalers. Is that a trend
that you expect to continue well into twenty twenty six.
Speaker 6 (09:56):
I think the interesting thing about the timing right now
is that we've seen enormal number of headlines. Right there's
a lot of press release money, as I call it,
out there for around AI. People have announced enormous capex plans,
But if you look at the actual financial results, the
financial reporting of these firms, we have yet to see
a lot of capex actual steel go in the ground.
(10:17):
You don't just when you have AI, you're not just
talking about the software and the chips. You're actually talking
about the power that's needed behind it. And for all
that we're announcing a lot of new power plans, a
lot of new power capacity in the United States, the
actual energy itself has not come online yet.
Speaker 1 (10:33):
So Alphabet has recently agreed to buy the clean energy developer,
Intersect Power. This is a pretty much an all cash bid.
I think they're taking on some existing debt as well
for just under five billion. Are we going to see
more deals like this where the hyperscaler actually becomes acquisitive
in buying some type of power infrastructure.
Speaker 6 (10:55):
I think this is the most interesting deal because in
many ways what they're buying is actually knowledge Intersect itself
as a developer. They're leaving most of the existing actual
power production assets out of that deal. So what they're
actually buying with they're just under five billion dollars is
the ability the knowledge of how to bring power online.
And that's been the big question. How do you go
(11:16):
from announcing power to actually bringing power online. The coordination
behind that, the permitting, the financing piece, the actually getting
the supply chain right. All of these components are actually
very difficult to pull off, and we've seen that over
and over.
Speaker 1 (11:29):
So to what extent is green energy going to be
a driver here? Because we had information today that is
Monday in the States that the federal government is suspending
the leases on all five wind farms that were under
construction off the east coast of the US. We're going
to see more situations like this where green energy is
(11:49):
really under a cloud of suspicion or maybe doubt, and
a lot of what comes online in terms of new
power is going to be focused on carbon fuels or
you clear you.
Speaker 6 (12:01):
Need to delineate between different technologies. Yeah, offshore wind has
always been problematic. It requires a huge amount of capex,
It has operational issues. You know, if I was building
a data center in the Dominion Service area in Virginia
and I was concerned about getting great power. I would
be concerned about the cancelation of a big offshore wind project.
(12:22):
On the other hand, if I'm building a data center
in the southwestern United States where I'm using solar panels,
I'm not as concerned. You know, it's all about the
exact technology mix, the connection to the individual sighting.
Speaker 1 (12:36):
Already, we are seeing that residential electric rates have started
to move up. Some people who look at the inflation
component here are beginning to get a little worried, if
they haven't already been worried over this trend. Is that
something that will continue, that we're going to see higher prices,
much higher prices for electricity in the new year.
Speaker 6 (12:55):
In a word, yes, I think there's no doubt. If
you look at the what I called the capacity as
where people are auctioning off future power, we've reached record prices,
and until we find a way to build out more
power at scale, we're simply not going to see prices
go down. There's not enough supply to meet demand. It's
a very simple equation.
Speaker 1 (13:16):
So if you have to push electric power across a
grid over long distances, physics tells you that that power
is actually going to be reduced over distance correct, So
it would be much more beneficial to have LESE power
sources kind of localized where they're needed, and.
Speaker 6 (13:32):
That's increasingly something you see is what's called behind the
meter or on site generation for large power for large
data center projects in particular, bringing colocated on site generation
is a big part of the strategy. And that's I
presume what Google is expecting Intersect to do.
Speaker 1 (13:48):
What about the use of solar as we look to
the needs of electricity in the new year, is this
something that will grow? Are we going to see much
more in the way of solar farms developed.
Speaker 6 (13:57):
Amazingly enough, you know, in the past year. It's still
the fastest growing a piece of the energy generation puzzle.
You know. We just it's very, very cheap. There's a
lot of solar. It's something that's easy to install, it's distributed.
To your point, solar remains a big industry. The issue
with it is that intermitten CP so it's only operational
(14:18):
of course when the sun shines, and so you need
a battery associated with it or you need to back
it up our national gas.
Speaker 1 (14:24):
Well, that's an interesting point about battery technology. Where is
the US right now on that front? I think recently,
when Ford Motor announced that it was scaling back production
of vvs, it was committed to retooling a plant in
Kentucky to develop battery of batteries that could be used
for the grid.
Speaker 6 (14:41):
Right, Yeah, batteries are a massive growth area. Everyone needs
dispatchable power. All of these data centers need to essentially
be wrapped in batteries in order to control for what
are called frequency issues. Batteries is just a buy the
across the board.
Speaker 1 (14:55):
Does that take us into the conversation about rare earth
minerals and relations between the US and China?
Speaker 6 (15:01):
It absolutely does. I mean, the supply chain for batteries
is you know, just rooted in China. There are other
battery sources, you know, you're talking about the South Korean companies,
but China has deliberately, you know, cornered that market, and
so building up an alternative supply chain is a huge
strategic imperative this administration.
Speaker 1 (15:21):
So in certain jurisdictions, state regulators get to kind of
get involved when prices are set. Is that something that's
going to become more evident as we go out into
twenty twenty six where state utility commissions or other regulators
are going to be kind of trying to cap the
rate of electric power.
Speaker 6 (15:41):
You've already seen it. I think intervention is definitely going
to happen. I mean, if you get higher prices people
really feel that it flows directly through to the voter.
You're going to see higher price. You're going to see
intervention trying to control for prices. The problem, then, however,
is that you know investors are going to hold back,
which means that the supply situation only gets worse. Prices
are a solution to high prices. You need to let
(16:03):
prices go up.
Speaker 1 (16:03):
So if we look away from green technology, whether it's
solar or wind farms, and we focus for a moment
on kind of carbon based fuels, and I'm thinking of
the turbines that are actually involved in that production, and
I'm thinking of a company like Semens for example, or
maybe to a lesser extent, even General Electric, and I
don't know the extent to which GE is still a
(16:25):
player in this space. Are these companies going to be
able to meet demand here?
Speaker 6 (16:31):
So this is Vernova, which is part of what used
to be the great conglomerate called GE and Semens. They
are building very quickly, but the fact that they are
not adding as much capacity as they need to in
order to meet the market. You've actually seen people redeploy
airline turbines in order to do very quick power because
(16:51):
it's fundamentally very similar sort of engineering.
Speaker 1 (16:54):
What about the power that's used to drive those turbines.
I'm thinking of natural gas fuel oil. Is there going
to be much more in the way of mining those resources?
Speaker 6 (17:06):
I mean, I think drilling for gas will almost inevitably
go up. There's a big export demand, there's a lot
of domestic demand, as we've talked about, like that's one
of the things that could back up renewables on the
grid or be used a data centers. So natural gas
is a growth area for sure.
Speaker 1 (17:19):
So are you optimistic about the power industry in the
new year.
Speaker 6 (17:23):
Absolutely, There's only way one way for it to go
if demand keeps hope the way it is okay?
Speaker 1 (17:27):
And what type of return can we expect? Is it
going to be outsized versus let's say the overall equity market.
Speaker 6 (17:34):
I will say that there was just some analysis just
today that the private equity purchase of a natural gas
generator called Calpine was I believe the largest in dollar
terms for a return. Ever, so we're talking about some
very big potential numbers.
Speaker 1 (17:50):
So if a lot of this is kind of linked
to where the US happens to be in the AI
story right now, is there the risk that competition from
China maybe takes a little bit of supremacy here and
in some way reduces the demand for power from the US.
Speaker 6 (18:08):
Look, the worst possible outcome for the United States economy
would be if China takes the lead in AI because
they have so much power and thereby relieves the inflation
for power in the United States. What needs to happen
is better coordination, more construction, more building. That's the solution here.
Speaker 1 (18:25):
So when you say that, you're talking about across the
fifty states, right for sure. So is there anyone that's
kind of getting this in terms of the people who
are making policy within the Trump administration? Do you think
that they've got it right?
Speaker 6 (18:39):
It's more about looking at individuals states. So I think
if you look at Texas massive energy build out over
the years, and I think that we're seeing a lot
of energy intensive industries relocate to that region in part
because they've managed to build out a lot of power.
And so I think if you see some of that
same market structure be applied to other regions, you know,
the Northeastern United States, California, you could be to see
(19:00):
a much faster.
Speaker 1 (19:01):
Build out in terms of the build out that we've
been experiencing here in the US private companies versus some
of the public players in the energy space. We're speaking
here in New York. I'm thinking of con Edison, right,
who is a major supplier here in New York City.
Private equity is becoming increasingly involved in this space. Is
(19:22):
that do you think going to be well funded next year?
Is there a lot more money that's going to be
flowing into private equity as it relates to energy production.
Speaker 6 (19:31):
We've seen a continued ongoing boom in fundraising for anything
to do with energy on the private market side, I
think and after today you know TPG private equity from
backed intersect, We're talking about another private equity from the
back Calpine. These are big, chunky returns that will bring
in more capital.
Speaker 1 (19:50):
What is the one thing that you're worried about though,
is a regard in regards to this industry as we
look out to the future lawsuits.
Speaker 6 (19:57):
I think, you know, when it comes to permitting everybody's
allowed to sue every everybody. Anything that delays power buildout
is a bad outcome.
Speaker 1 (20:04):
Here, Peter will leave it there. Thank you so much.
You're dropping by. Peter Gardette is the CEO of Narreva Ai.
Joining us here on the Daybreak Asia Podcast. Thanks for
listening to today's episode of the Bloomberg Daybreak Asia Edition podcast.
Each weekday, we look at the story shaping markets, finance,
(20:24):
and geopolitics in the Asia Pacific. 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. Welcome to the Daybreak
Asia Podcast. I'm Doug Krisner. We begin in Japan, where
the yen has been under a great deal of pressure lately,
despite last week's rate hike from the Bank of Japan. Now,
as expected, the BOJ did raise its policy rate twenty
(00:25):
five basis points to seventy five basis points. Now that's
a thirty year high. Even so, the yen weakened by
more than one percent against the dollar, with much of
that decline coming after BOJ governor who wait his news
conference where he kind of refrained from a particularly hawkish message,
and within the last twenty four hours, Japanese finance ministers
(00:47):
Satsuki Katayama expressed deep concern about the yen's decline. Speaking
to Bloomberg, Katayama said that Japan has a free hand
to take bold action against currency moves that are not
in line with fundamentals. That's where we start our conversation
with Soyuri Sharai, professor of economics at Kyo University in Tokyo.
(01:09):
She spoke with Bloomberg TV host Annabel Jewelers and April Holm.
Speaker 2 (01:13):
The question is though any sort of jaw burning we
get from government officials has had the tendency to be
quite short lived.
Speaker 3 (01:22):
Yeah, so in Tavina for exchange market, you know that's possible.
But at this moment, the main reason why Yang has
been so weak over since twenty twenty two is because
of the big interest differential, especially in deal Town. So
Japan's policy date in deal town is a minus two percent,
(01:43):
So it's very difficult to increase this interesting because the
Japan's information is around three percent cost push inforation and
you know policit it it's just zero point seventy five percent,
so very dearly real interesting, So it's very difficult to
change the strength at this stage.
Speaker 2 (02:01):
Yeah, exactly, especially when you've got the bo j that's
really not moving in lockstep with other global central banks.
I mean, it's it's it's very difficult to arrest those moves.
What then, do you think is the outlook for the
currency and as well, what is the priority that the
government officials are likely to place on that weakness?
Speaker 3 (02:20):
So you know, government is changing their strategy. You know,
over the past years, premister Mitakaichi was always criticized in
bank or Japan's leading Interesting increased forty CY. But I
guess since you know October he started to deplicate even more, so, say, know,
this is really creating cost pushing creations. So maybe the
(02:44):
compromise is to some extent. But the Japanese economy is
so weak. So that's why Governor Way that cannot be
so confident about ladying interesting, So this is a dynama.
So next year, it also depends on what would happen
to US forty c h. The US shows very determined
past toward you know, lowering interesting, that might change this
(03:07):
exchangery towards somewhat more applicial level, but still I think
he would remain at the very depreicit level next year.
Speaker 4 (03:17):
So Eurysan on the issue of US policy when it
comes to I guess the signals of intervention, how on
board would you say the US Treasury is with it?
Is there a tacit understanding between the US and Japan
on this so.
Speaker 3 (03:32):
Inves tragury, you know, I think they would accept it
because the Japan is to try to appreciate exchangery, not
depreciate in creating competitiveness, So you know, it's a different story.
And I think also, you know, US Traasury is always
say Japan is behind the CUB. A Bank of Japan
is behind the CUB, so maybe it may suggest to
(03:52):
more PROLICI late increase by Bank of Japan.
Speaker 4 (03:59):
What would you say is a sort of yacht stake.
I mean the boj has been highlighting reiterating that there's
no specific level or finance authorities in Japan, I should say,
are highlighting there's no specific level. But what is your
sense of how we can tell the levels in which
they might step in.
Speaker 3 (04:20):
Yeah, so one sixty is very very dangerous level, and
that is a time that you know, Treasury in tadin,
so you know we have to check. But still even
now it's very deplicit level, so we have you know,
this is really creating a very bad cost push information.
This is the biggest program. So I think people are
worry that you stay at very you know, high deprecating
(04:44):
level or maybe even depre sated FAA if the Takaichi
is going to do more physical expression and policy in
twenty twenty six, so one sixties I think quite a
dangerous bong.
Speaker 4 (04:58):
On fiscal policy. How regressive are you expecting the extra
budget the forthcoming budget to be from the Takeuchi administration.
Speaker 3 (05:07):
I want to say to think is to try to
show that she is very bored expansionary, uh, you know,
doing physical policy and so this century. You know, she
showed some tax cut by expanding you know, income tax deduction,
but to be honest, in Japan, people are paying more
and more social security you know premium and you know payments,
(05:30):
so that is really a lot and also a lot
of people still paying sort of fact inflation tax, right
because we have an braket creep. So considering all these
de fact infreation and social sexifity security spending, I think
the net net tax the tax cut is very small,
so I think people do not feel that their lives
(05:53):
are getting better. Also, you know, her policy is really
to try not to directly influence the fuel prices. Who
the prices have increased over twenty eight percent in these
four years. Energy it's just thirteen percent. But she never
really tried to deal with you know, reducing sake you know,
food consumption tax you know, for a while, and she
(06:15):
tried to avoid it. So you know, even she tried
to do a lot of thing, but she's tried to
you know, arrogate a lot of money to local government
discription is spending, so she doesn't really touch on the
extremely high hood prices.
Speaker 2 (06:30):
Yeah, and of course that's such a big component of
inflation or the inflationary basket. What do you think then
about the outlook for next year, because when you've got
the bio the government officials rather than Takichi's government, that's
that's very focused on more of an expansionary policy, and
that goes up against the BOJ that is looking to hike.
And you've seen that agitation in bond markets as well,
(06:51):
really with yields rising across the curve and that limited
spillover so far, but spillover into US, UK German bond yields.
What sort of risks are you monitoring then in global
bond markets?
Speaker 3 (07:04):
Yes, so tenure here there is now reaching two percent,
still real to be low, say compares to thirty years
ago when the policy date was at a similar level.
You know, thirty years ago ten years was you know,
around four percent or thirty percent, so much higher. Like so,
you know, I think in long term, long term it
(07:25):
is still low, maybe because the BOG is still hold
on nearly fifty percent of low government bond So of
course there is at tension here. I'm pretty sure Prime Minister,
you try to show another expressional physical policy, but probably
limited impact for the increasing disposable income in next year.
But there is a tension here, so you know, I
(07:47):
think it's very difficult, uh, especially for the bo j
or monetary policy.
Speaker 1 (07:55):
That is, so you're sure. I professor of economics at
Ko University in Tokyo, speaking with Bloomberg TV host Averril
Hong and anbl droolers here on the Daybreak Asia podcast.
Welcome back to the Daybreak Asia podcast. I'm Doug Chrisner.
(08:16):
It's a holiday shortened week for markets. Earlier in the
day in the States, there were broad gains for equities,
with the S and P five hundred rising by six
tens to one percent. Now on Tuesday, we'll get the
initial reading on third quarter economic growth. Bloomberg Economics is
estimating the American economy likely grew more than three percent,
(08:37):
supported by robust consumer spending and modest gains in investments. Earlier,
we had the chance to visit with Bank of America
CEO Brian moynihan. He said artificial intelligence is starting to
have a bigger impact on growth.
Speaker 5 (08:53):
I think that's part why the reason we feel constructive
for next year. We think AI spending continues. We think
there's benefits they can taxpayer from tax rebates, lower taxes
due to the tax bill going through and being effective
for next year. And we think the expense expensing and
other bonuses for businesses are good. So all that leads
to our confidence that we go from basic at two
(09:14):
percent type of growth letter level this year plus or
minus up to two point four percent.
Speaker 1 (09:19):
Brian moynihan, they're the CEO of Bank of America now.
Moynihan also said that bfac's relatively limited risk to the
economy if the AI industry became too overheated and had
to pull back. For a closer look now at the
AI trade, I'm joined by Peter Gardette. He is the
CEO of Narreva AI. Thank you for making time to
(09:42):
chat with me.
Speaker 6 (09:43):
It's great to be here.
Speaker 1 (09:44):
Do you expect this trend in AI to continue what
we have seen right now in terms of the buildout
of these data centers from hyperscalers. Is that a trend
that you expect to continue well into twenty twenty six.
Speaker 6 (09:56):
I think the interesting thing about the timing right now
is that we've seen enormal number of headlines. Right there's
a lot of press release money, as I call it,
out there for around AI. People have announced enormous capex plans,
But if you look at the actual financial results, the
financial reporting of these firms, we have yet to see
a lot of capex actual steel go in the ground.
(10:17):
You don't just when you have AI, you're not just
talking about the software and the chips. You're actually talking
about the power that's needed behind it. And for all
that we're announcing a lot of new power plans, a
lot of new power capacity in the United States, the
actual energy itself has not come online yet.
Speaker 1 (10:33):
So Alphabet has recently agreed to buy the clean energy developer,
Intersect Power. This is a pretty much an all cash bid.
I think they're taking on some existing debt as well
for just under five billion. Are we going to see
more deals like this where the hyperscaler actually becomes acquisitive
in buying some type of power infrastructure.
Speaker 6 (10:55):
I think this is the most interesting deal because in
many ways what they're buying is actually knowledge Intersect itself
as a developer. They're leaving most of the existing actual
power production assets out of that deal. So what they're
actually buying with they're just under five billion dollars is
the ability the knowledge of how to bring power online.
And that's been the big question. How do you go
(11:16):
from announcing power to actually bringing power online. The coordination
behind that, the permitting, the financing piece, the actually getting
the supply chain right. All of these components are actually
very difficult to pull off, and we've seen that over
and over.
Speaker 1 (11:29):
So to what extent is green energy going to be
a driver here? Because we had information today that is
Monday in the States that the federal government is suspending
the leases on all five wind farms that were under
construction off the east coast of the US. We're going
to see more situations like this where green energy is
(11:49):
really under a cloud of suspicion or maybe doubt, and
a lot of what comes online in terms of new
power is going to be focused on carbon fuels or
you clear you.
Speaker 6 (12:01):
Need to delineate between different technologies. Yeah, offshore wind has
always been problematic. It requires a huge amount of capex,
It has operational issues. You know, if I was building
a data center in the Dominion Service area in Virginia
and I was concerned about getting great power. I would
be concerned about the cancelation of a big offshore wind project.
(12:22):
On the other hand, if I'm building a data center
in the southwestern United States where I'm using solar panels,
I'm not as concerned. You know, it's all about the
exact technology mix, the connection to the individual sighting.
Speaker 1 (12:36):
Already, we are seeing that residential electric rates have started
to move up. Some people who look at the inflation
component here are beginning to get a little worried, if
they haven't already been worried over this trend. Is that
something that will continue, that we're going to see higher prices,
much higher prices for electricity in the new year.
Speaker 6 (12:55):
In a word, yes, I think there's no doubt. If
you look at the what I called the capacity as
where people are auctioning off future power, we've reached record prices,
and until we find a way to build out more
power at scale, we're simply not going to see prices
go down. There's not enough supply to meet demand. It's
a very simple equation.
Speaker 1 (13:16):
So if you have to push electric power across a
grid over long distances, physics tells you that that power
is actually going to be reduced over distance correct, So
it would be much more beneficial to have LESE power
sources kind of localized where they're needed, and.
Speaker 6 (13:32):
That's increasingly something you see is what's called behind the
meter or on site generation for large power for large
data center projects in particular, bringing colocated on site generation
is a big part of the strategy. And that's I
presume what Google is expecting Intersect to do.
Speaker 1 (13:48):
What about the use of solar as we look to
the needs of electricity in the new year, is this
something that will grow? Are we going to see much
more in the way of solar farms developed.
Speaker 6 (13:57):
Amazingly enough, you know, in the past year. It's still
the fastest growing a piece of the energy generation puzzle.
You know. We just it's very, very cheap. There's a
lot of solar. It's something that's easy to install, it's distributed.
To your point, solar remains a big industry. The issue
with it is that intermitten CP so it's only operational
(14:18):
of course when the sun shines, and so you need
a battery associated with it or you need to back
it up our national gas.
Speaker 1 (14:24):
Well, that's an interesting point about battery technology. Where is
the US right now on that front? I think recently,
when Ford Motor announced that it was scaling back production
of vvs, it was committed to retooling a plant in
Kentucky to develop battery of batteries that could be used
for the grid.
Speaker 6 (14:41):
Right, Yeah, batteries are a massive growth area. Everyone needs
dispatchable power. All of these data centers need to essentially
be wrapped in batteries in order to control for what
are called frequency issues. Batteries is just a buy the
across the board.
Speaker 1 (14:55):
Does that take us into the conversation about rare earth
minerals and relations between the US and China?
Speaker 6 (15:01):
It absolutely does. I mean, the supply chain for batteries
is you know, just rooted in China. There are other
battery sources, you know, you're talking about the South Korean companies,
but China has deliberately, you know, cornered that market, and
so building up an alternative supply chain is a huge
strategic imperative this administration.
Speaker 1 (15:21):
So in certain jurisdictions, state regulators get to kind of
get involved when prices are set. Is that something that's
going to become more evident as we go out into
twenty twenty six where state utility commissions or other regulators
are going to be kind of trying to cap the
rate of electric power.
Speaker 6 (15:41):
You've already seen it. I think intervention is definitely going
to happen. I mean, if you get higher prices people
really feel that it flows directly through to the voter.
You're going to see higher price. You're going to see
intervention trying to control for prices. The problem, then, however,
is that you know investors are going to hold back,
which means that the supply situation only gets worse. Prices
are a solution to high prices. You need to let
(16:03):
prices go up.
Speaker 1 (16:03):
So if we look away from green technology, whether it's
solar or wind farms, and we focus for a moment
on kind of carbon based fuels, and I'm thinking of
the turbines that are actually involved in that production, and
I'm thinking of a company like Semens for example, or
maybe to a lesser extent, even General Electric, and I
don't know the extent to which GE is still a
(16:25):
player in this space. Are these companies going to be
able to meet demand here?
Speaker 6 (16:31):
So this is Vernova, which is part of what used
to be the great conglomerate called GE and Semens. They
are building very quickly, but the fact that they are
not adding as much capacity as they need to in
order to meet the market. You've actually seen people redeploy
airline turbines in order to do very quick power because
(16:51):
it's fundamentally very similar sort of engineering.
Speaker 1 (16:54):
What about the power that's used to drive those turbines.
I'm thinking of natural gas fuel oil. Is there going
to be much more in the way of mining those resources?
Speaker 6 (17:06):
I mean, I think drilling for gas will almost inevitably
go up. There's a big export demand, there's a lot
of domestic demand, as we've talked about, like that's one
of the things that could back up renewables on the
grid or be used a data centers. So natural gas
is a growth area for sure.
Speaker 1 (17:19):
So are you optimistic about the power industry in the
new year.
Speaker 6 (17:23):
Absolutely, There's only way one way for it to go
if demand keeps hope the way it is okay?
Speaker 1 (17:27):
And what type of return can we expect? Is it
going to be outsized versus let's say the overall equity market.
Speaker 6 (17:34):
I will say that there was just some analysis just
today that the private equity purchase of a natural gas
generator called Calpine was I believe the largest in dollar
terms for a return. Ever, so we're talking about some
very big potential numbers.
Speaker 1 (17:50):
So if a lot of this is kind of linked
to where the US happens to be in the AI
story right now, is there the risk that competition from
China maybe takes a little bit of supremacy here and
in some way reduces the demand for power from the US.
Speaker 6 (18:08):
Look, the worst possible outcome for the United States economy
would be if China takes the lead in AI because
they have so much power and thereby relieves the inflation
for power in the United States. What needs to happen
is better coordination, more construction, more building. That's the solution here.
Speaker 1 (18:25):
So when you say that, you're talking about across the
fifty states, right for sure. So is there anyone that's
kind of getting this in terms of the people who
are making policy within the Trump administration? Do you think
that they've got it right?
Speaker 6 (18:39):
It's more about looking at individuals states. So I think
if you look at Texas massive energy build out over
the years, and I think that we're seeing a lot
of energy intensive industries relocate to that region in part
because they've managed to build out a lot of power.
And so I think if you see some of that
same market structure be applied to other regions, you know,
the Northeastern United States, California, you could be to see
(19:00):
a much faster.
Speaker 1 (19:01):
Build out in terms of the build out that we've
been experiencing here in the US private companies versus some
of the public players in the energy space. We're speaking
here in New York. I'm thinking of con Edison, right,
who is a major supplier here in New York City.
Private equity is becoming increasingly involved in this space. Is
(19:22):
that do you think going to be well funded next year?
Is there a lot more money that's going to be
flowing into private equity as it relates to energy production.
Speaker 6 (19:31):
We've seen a continued ongoing boom in fundraising for anything
to do with energy on the private market side, I
think and after today you know TPG private equity from
backed intersect, We're talking about another private equity from the
back Calpine. These are big, chunky returns that will bring
in more capital.
Speaker 1 (19:50):
What is the one thing that you're worried about though,
is a regard in regards to this industry as we
look out to the future lawsuits.
Speaker 6 (19:57):
I think, you know, when it comes to permitting everybody's
allowed to sue every everybody. Anything that delays power buildout
is a bad outcome.
Speaker 1 (20:04):
Here, Peter will leave it there. Thank you so much.
You're dropping by. Peter Gardette is the CEO of Narreva Ai.
Joining us here on the Daybreak Asia Podcast. Thanks for
listening to today's episode of the Bloomberg Daybreak Asia Edition podcast.
Each weekday, we look at the story shaping markets, finance,
(20:24):
and geopolitics in the Asia Pacific. 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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