October 27, 2025 • 33 mins
Watch Carol and Tim LIVE every day on YouTube: http://bit.ly/3vTiACF.
Amazon.com Inc. plans to cut corporate jobs in several key departments, including logistics, payments, video games and the cloud-computing unit, according to people familiar with the matter.
The terminations, expected as soon as Tuesday, could affect as many as 30,000 jobs, Reuters reported on Monday, citing sources.
Cuts on that scale would be the largest since rolling reductions in late 2022 and early 2023 that ultimately totaled more than 27,000 corporate employees, as Chief Executive Officer Andy Jassy looked to cut costs after expanding rapidly during the pandemic. Since then, there has been a steady drip of more modest layoffs targeting individual teams. An Amazon spokesperson declined to comment.
Jassy in June signaled that Amazon’s workforce would likely get smaller as the company increases its use of artificial intelligence to complete tasks normally handled by people. The comment touched off panic among workers, who trawled anonymous online chat rooms for insights about potential job cuts that often leak piecemeal, making it difficult to assess their full size and scope.
Today's show features:
Bloomberg News Big Tech Team Leader Sarah Frier on Amazon's expected layoffs and Qualcomm’s new semiconductors aimed at competing with Nvidia
Jan van Eck, Chief Executive Officer of VanEck Funds, on the market outlook heading into mega-cap tech earnings
Sarah Hunt, Chief Market Strategist, Alpine Saxon Woods, on the Monday trade and market outlook
Bloomberg News Boston Bureau Chief Brooke Sutherland and Bloomberg News Senior Economic Writer Shawn Donnan on their Businessweek feature: AI Data Center Boom Threatens Trump’s Manufacturing Revival
See omnystudio.com/listener for privacy information.
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2 (00:08):
This is Bloomberg Business Week Daily reporting from the magazine
that helps global leaders stay ahead with insight on the people, companies,
and trends shaping today's complex economy. Plus global business finance
and tech news as it happens. The Bloomberg Business Weekdaily
Podcast with Carol Masser and Tim Steneveek on Bloomberg Radio with.
Speaker 3 (00:32):
Us is our Bloomberg News Big Tech Team leader Sarah Fryar,
also author of No Filter, The Inside Story of Instagram.
She joins us from the Bloomberg San Francisco News Bureau.
So much going on, Sarah, but let's talk about Amazon.
That feels like a pretty big number. Ten percent of
the company's roughly three hundred and fifty thousand corporate employees.
It's a report from Reuters, citing unidentified people. We haven't
(00:54):
yet confirmed it, but what's your thought initial thought on this?
Speaker 4 (00:58):
Well, first of all, we are chasing it. But this
was this is something that the companies all across the
board have been doing since the pandemic era, what they
call over hiring. A lot of these companies saw the
growth in how people were relying on tech during the pandemic.
When they were home, they were obviously ordering a lot
(01:20):
more from Amazon because they didn't want to go to
the grocery store if they were at home workers and
the company hired to accommodate that, and now they don't
need as many people. But you know, I heard your
earlier point, Carol about AI. I think that's part of it.
But I also think that part of it is when
these companies go through periods of opportunity where they see
(01:43):
a lot of growth, they're seeing that trend line and
they're hiring for the future. We're seeing it right now
with AI. People are building out these companies are building
out data centers. They don't know if they're actually going
to need all that capacity long term, but they better
make that deal today or else they might not have
it when they need it. So we do see a
lot of anticipatory investment from these tech companies over time
(02:08):
that sometimes they need to pull back on. In in
big tech, we haven't seen as big a pullback as
we have in the past few years since the pandemic.
It has really been a change in the culture that's
drive for for efficiency, for reducing you know, bureaucratic bloat
and it's not just you know, lying they're throwing out there,
(02:30):
we are seeing you. My my colleague Matt Day wrote
a really interesting story I encourage everyone to read about
a WS and how AWS was at the forefront of
cloud really inventing the market, and in the era of
AI they have they have fallen back in preference for
(02:51):
startups they had, they had that big outage we talked
about last weears on this show, and some of the
employees are attributing that to bloat, to this bureaucratic culture,
too many people working on the same things and things
not getting done fast enough. So I think, you know,
although I hate to see people lose their jobs, I
(03:13):
think that that is where a lot of this is
coming from. The idea that we need these companies in
the age of AI to be working faster to try
to catch their competitors.
Speaker 1 (03:23):
You know, I see a headline like this, Sarah, and
I immediately think back to the prominent other headlines that
I saw in the last week about big layoffs or
mid sized layoffs that a tech company met A platforms
layoff six hundred people who work in AI and then
target retail. Not necessarily tech, but Amazon straddles that right,
And we don't know the details of these layoffs yet,
but Target to cut eighteen hundred rolls eight percent of
(03:46):
its headquarters team taken together, Is there a story with
these three headlines?
Speaker 4 (03:52):
Well, I think that the Meta headline and the Amazon
headline are certainly related because they're all attributed to this
idea of trying to move faster to cut a lot
of the you know, maybe unnecessary workforce, maybe workforce that
they do expect one day will will be augmented by
(04:12):
AI tools or are already starting to be augmented by
AI tools. But like like we've said before, we don't
know if the AI tools are actually making people more
efficient that right now, it's more of more of a
hope that that will be the case. Certainly, Encoding it's
had a big role. I'm not sure because we haven't
been able to confirm the report just yet. I'm not
(04:34):
sure if these are our roles Encoding. When it comes
to Meta and AI, it's really interesting because they are
still shuffling around the leadership and therefore the direction of
this very expensive super intelligence team that they pulled together
over the course of a few months earlier this year,
(04:55):
and it seems like that is, you know, something that
could give the potential of a slowdown for that company.
But a lot is writing on metas AI efforts, both
companies Amazon and Meta. I think we are going to
have a lot to learn from this week and their
earnings which are coming Meta on Wednesday, Amazon Thursday. So
(05:18):
I think that that is going to be very key.
Speaker 5 (05:21):
Yeah, totally agree with you that.
Speaker 3 (05:23):
I feel like the earnings this week are a big
deal to see that those AI investments are paying off. Hey,
in the meantime, we're watching very closely what's going on
with Qualcom. They don't report until November fifth, But I'm
looking at a stock Sarah that is up twelve percent
at its highs was up nearly twenty two percent today,
(05:44):
and this is after unveiling some chips and computers for
the AI data center market. We know this is something
that has made Nvidia just on fire and at the
center of the AI universe.
Speaker 5 (05:56):
What do we know about Qualcom?
Speaker 4 (05:59):
Well, already have a major customer for these trips for
these chips in the form of Humane, the Saudi company.
And so I think that that is giving investors a
lot of hope that this can not only give them
a very strong position in the AI growth that is
an alternative to Nvidia, but also help make up for
(06:19):
some of the revenue lost by Apple, who was a
major customer going to in house chips. So I think
they see it as a very positive or qualcom Of course,
you know, this chip is also getting a lot of
buzz for its ability to hold quite a lot of
DRAM memory. So I think, you know, anytime that someone
(06:42):
can make inroads in chips versus Nvidia, of the stock
market is going to reward it. But will have to
see if they're able to take on some of those
big tech customers over time or what their customer base
is going to evolve into this if this comes a
big part of their portfolio.
Speaker 5 (07:01):
Yeah, I mean time will tell.
Speaker 3 (07:03):
I mean I was looking at our BI analyst in
the Ian King story basically saying, you know, it's too
soon to call this a serious challenge right to nvidious dominance.
Even modest share gains so in the over five hundred
billion dollar AI accelerator market could translate into billions in
incremental revenue. I mean, right, even this pie is so
(07:24):
big and it just seems to grow at this point,
soa that even a piece of it or a decent
piece of it.
Speaker 5 (07:30):
It could be a lot for Qualcomm if it all
plays out.
Speaker 4 (07:34):
No, absolutely, it's there's so much data center build out
happening right now and happening over the course of the
next few years. I think we're going to continue to
see these multi billion dollar deals across the US and
around the world. So I think that you know, any
player that can get in on that build out is
(07:56):
it's really significant, and I think that the time is
really now. Chips don't last very long once they are unveiled,
you know, they maybe last three to five years before
they're obsolete. So I think, you know, for those deals
that are in the making and the moment, we're we're
(08:17):
very interested to see what Qualcom's going to cook up.
Speaker 5 (08:20):
Sarah Fryar, thank you.
Speaker 3 (08:21):
As always, she is Bloomberg News Big Tech team leader.
She's out there in our San Francisco bureau. Sarah Friar
also the author of No Filter, The inside story of Instagram.
Speaker 1 (08:32):
Stay with us more from Bloomberg Business Week Daily coming
up after this.
Speaker 2 (08:39):
You're listening to the Bloomberg Business Weekdaily podcast. Catch us
live weekday afternoons from two to five pm. Eastern. Listen
on Applecarplay and Android Auto with the Bloomberg Business app,
or watch us live on YouTube.
Speaker 5 (08:53):
Great to have back with us, Jan Vanek.
Speaker 3 (08:56):
He is chief executive officer venk It has about one
hundred and thirty three billion under management AUM and he
joins us back here in our Bloomberg studio. John, Great
to have you back with us. There is a lot
coming out investors. There is this laundry list. What's most
important to you when you think about the investment environment
(09:17):
and what shapes your strategy right now?
Speaker 6 (09:19):
Well, I'm just keying off of this monetary policy discussion.
I just have to say that the big piano hanging
over our heads to me is a federal budget deficit.
And since I saw you last, we actually got some
pretty good news for fiscal twenty five that as a
percent of GDP, the budget deficit had fallen from six
and a half percent to five point nine percent. I've
(09:42):
been focusing very much on the year that we just
started on October first, because I think you know that's
the big risk, right They've fed. You know, the federal
government has to borrow or pay a trillion dollars a
year as sure the Fed governor, you know, affects that.
But what the markets think there's a lot too and
if we can reduce that pressure by having better finances,
(10:04):
that's really good news for the market, I think.
Speaker 3 (10:06):
But that's not an argument for having not an independent FED. Right,
you still want to Fed? No, no, that does monetary
policy according to inflationary pressures and labor pressure.
Speaker 6 (10:16):
Right, But what what you know, these the wonky economists
on Wall Street don't want is to have so much
debt that you basically are forcing the Fed to use
something like Japan did yield curve control or some really
extraordinary measures that would that would really be unwelcome. So,
you know, we can talk about the personalities and everything,
but right now the direction of movement is good compared
(10:39):
to coming into the year where we had a lot
of fiscal concerns and the FED chair would have had
a lot more on this plate.
Speaker 1 (10:45):
You know, when you were on with us last it
was about a month ago, it was just before the
government shutdown, and we asked you about whether or not
a government shutdown actually matters to markets. Well, here we are.
Speaker 5 (10:55):
A month later, and it's amazing.
Speaker 1 (10:57):
It is amazing. I think it's the second longest shutdown
in history entering. You know, it's it's remarkable to see.
Do you you said it didn't matter, right, Do you
stand by it?
Speaker 6 (11:06):
Yeah, I mean I don't think that there's any evidence
that has mattered. I think what's really worrisome though, is
the fact that if the.
Speaker 3 (11:13):
Dysfunctional government, you have a Washington of the government that
isn't working.
Speaker 6 (11:18):
That they don't care, right, neither party really cares if
something bad is happening, if they feel like the other
party can get the blame. And again, you know, I
don't mean not only talk about the debt problem, but
you know that's really what we all worry about at
the end, Like, well we never solve Social Security? Will
we cut Social Security payments in twenty thirty three like
we're scheduled to. Yeah, I mean, you know, those are
(11:40):
the longer term concerns.
Speaker 3 (11:43):
When you look at this market environment. The other things
that are coming, and these are obviously the ones that
we just talked about, are super super big. But I
do think about our focus on you know, these mag
seven earnings. We get a big drop this week and
we'll learn once again whether these AI investments are paying off.
Last time around, we saw it with metow and some
of the other big hyperscalers that these investments seem to
(12:05):
make sense at this point the AI trade.
Speaker 6 (12:07):
Where are you on that it's going to a we
have a compute shortage that's very visible to the whole world.
Speaker 1 (12:15):
And you know what's really interesting.
Speaker 6 (12:17):
I did some research on this since we last talked,
and open ai is really emerging as the giant in
this area. So they have eight hundred million monthly active users.
The next biggest, Gemini has four hundred and fifty but
much more interesting. So your average website is now getting
basically traffic coming from the AI chats somewhere between let's
(12:41):
call it one percent at the low end and seventeen
percent at the high end. Of the traffic that's going
to your average website like the Bloomberg website or the
van k website.
Speaker 5 (12:50):
We're not average million.
Speaker 1 (12:53):
Ahead. I can't believe I said that.
Speaker 6 (12:56):
But of that traffic, open ai is generating over ninety
percent of that traffic. They are completely dominating the other
mag seven companies when it comes to you know that
now on the flip side, they are trying to build
out a ton of this compute and they don't have
the money, right. All the other hyperscalers have a lot
(13:17):
of revenue not public, right, and the revenue is only
forty to fifty billion, so and they want to spend
hundreds of billions on compute. So that's the one thing
that I look at as a potential weakness in the
SAYI trade. But otherwise we've got at least two calendar
years of demand to deal with.
Speaker 1 (13:34):
So you're not seeing ghosts of the late nineties tech
crash here.
Speaker 6 (13:39):
As I said, the only vulnerability I see isn't this
sort of systemic thing. It's one company that's spending a
ton of money and so far they've been able to
raise it. Everyone else has got the revenue to cover
their spend, right, I mean, they've got the cash flow.
Speaker 1 (13:53):
And I'm sure in opening I can keep raising money.
It seems like there's plenty of demand. Or maybe even
do are you? Are you doing chat gipas right now? Karen?
Speaker 4 (14:00):
No?
Speaker 5 (14:01):
No, I was actually no, no, no, no, I just.
Speaker 1 (14:03):
Grabbed a phone.
Speaker 5 (14:04):
I did describe my bone, which is such a no no.
Speaker 7 (14:07):
When you're on air.
Speaker 3 (14:08):
Lisa Bramowitz, who we all she's incredible on surveillance on
the TV side, and she said the mag seven stocks
have accounted for almost half of the S and P
five hundred and fifteen percent game this year, Microsoft, Alphabet,
Amazon Meta expected to post a combined three hundred and
sixty billion CAPEX in their current fiscal years and nearly
four hundred and twenty billion next year. So what I'm
(14:30):
just wondering is the market we've talked about that we
feel like in the earning season we're seeing breath expand.
But again, these companies are still so important right to
the trade.
Speaker 6 (14:42):
Yeah, they're really I mean, we want to ask ourselves
why do they have such a high percent of the
S and P five hundred and we have an answer
because their profit dynamos. Not only is the revenue going up,
but they're caught their employee bases are flat, it's not shrinking,
So rising revenue flat costs, because that's one of the
big beneficiars obviously our software companies.
Speaker 1 (15:03):
We have thirty seconds on gold.
Speaker 7 (15:05):
This is where we are going to go there?
Speaker 1 (15:06):
Yeah? Is that where you were going to go to go?
Speaker 5 (15:08):
Call com so.
Speaker 1 (15:09):
Down eight percent from its peaks from its peak, further
to go?
Speaker 6 (15:13):
Yeah, twenty percent correction in the bull market would be
my base case.
Speaker 1 (15:17):
That's your call. Thirty five hundred dollars.
Speaker 5 (15:19):
Yes, okay, still not a bad year, right.
Speaker 1 (15:21):
Great, great year.
Speaker 6 (15:22):
I think the question is, you know, everyone's impatient already
looking at their phones and during interviews, the question is
how long does gold consolidate?
Speaker 5 (15:31):
Right, we're the goodness of the show's twelve A.
Speaker 6 (15:34):
Whole twelve months of consolidation would bore the market. So
we may have one of those situations. But still, I
you know, we like it long term, you know, for
the next decade.
Speaker 3 (15:43):
Jan Vanek he is, of course, chief executive officer VNEX,
joining us here in studio.
Speaker 2 (15:48):
This is the Bloomberg Business Week Daily Podcast. Listen live
each weekday starting at two pm Eastern up on Apple
car Play and the Android Auto with the Bloomberg Business App.
You can also listen live on Amazon Alexa from our
flagship New York station Just Say Alexa played Bloomberg eleven thirty.
Speaker 1 (16:07):
I want to know how Sarah Hunt is looking at
all this. She's partnering at chief market strategist at Alpine
Saxon Woods. The firm has about eight hundred and fifty
million dollars in assets under management. She's here in the
Bloomberg Interactive Brokers Studio. I guess we should probably start
with trade, because that is what is pushing this market
higher today. Dare I say or ask you, is it
(16:28):
getting ahead of itself given that we don't know if
this deal will happen.
Speaker 8 (16:34):
I think that that's been one of the biggest questions
all year, because when you had the meltdown earlier in
the year in April, and then you started to see
those deadlines move around and all those things change, and
markets got really were much happier with that, right because
they didn't want to hear that DRACONI and those draconian numbers.
They didn't want to see that happen immediately. So you've
seen things continuously move around. So I'm sort of surprised
(16:55):
that there's enough surprise in the headlines every time we
get one that it does do that. But in the end,
if we can get things sorted out so that you
don't have pecuniary tariffs anywhere, or at least not as
bad as we thought they were, there is a relief
to that, and I think that that's part of what
you're seeing. And I do think that there's a de
escalation of tensions because the rare Earth's thing was really
(17:15):
has really been an issue ongoing for the last several months.
So I think that all those things together and the
low CPI print on Friday really helped.
Speaker 3 (17:24):
But we still have as we mentioned earlier Sarah, China
still faces effecive US tariffs around forty percent, about twenty
five percentage points above the global average. I mean, we
are in a different tariff environment, so I agree that
I think, you know, flooding the zone. We're all exhausted,
so we just want things to land and we almost
don't care where they land, which is kind of crazy
(17:46):
because they're landing at different marks that are going to
impact profitability. It sounds of companies, So that's going to
have an impact, and I'm not quite sure when it
starts to really really show.
Speaker 8 (17:58):
And I think that that's also the million dollar question,
because that has been the issue going forwards. What's going
to happen to margins, what's going to happen to pricing?
What can consumers absorb? What what can companies absorb? And
the truth of the matter is, we haven't really seen
the effects of a lot of those tariffs because they
a lot of them came and went and or they
get suspended, or you get carve outs, or you get
different pieces. It's very difficult to pinpoint exactly who's paying
(18:21):
that forty percent right this minute and right until you
start to see it come through earnings, and until companies
start to talk about it, it becomes more and more
difficult for people to put in their numbers. So right now,
numbers look very good, and I think the third quarter
is going to be pretty good. This week is going
to be a very big week because we have a
lot of people reporting, and that's going to be very
important how that comes out. But where we go with
those and what that does to margins, I think is
the biggest question that we still don't have.
Speaker 1 (18:43):
An answer to, is that when not if these companies
start to see the effect of these.
Speaker 8 (18:47):
Tariffs, it is definitely a win and not and if
the but the win keeps moving around, and that's why
it's hard to take a victory lap, which some have
done and said, well, there's no real effect of this,
because you've seen the earnings still be very strong, when
in reality, we don't know what the effects are going
to be because you keep pushing things around and inventories
have been pulled in.
Speaker 1 (19:04):
So then how do you position for that.
Speaker 8 (19:06):
You try to find places where you think you are
not in as much risk as you would be if
the inventory picture is not good enough and or changes
and you don't get a chance to reduce that or
to put that inventory back in. So a lot of
the places are going to be obvious. The technology stocks
are part of that. Although you have seen Nvidia have
issues with being able to sell and then not sell.
Speaker 7 (19:24):
Chips and everything else.
Speaker 8 (19:26):
It's the cash generative areas, the places where you know
that there might be some pain, it's almost more to
avoid it. I mean, I wasn't thinking about Mattel when
I started when I started this, but if you think
about something like Mattel, that was a very bad situation
for them, and that you are seeing that now and
you will see that in other areas.
Speaker 1 (19:45):
But it's not like we're going to see barbiees built
here in the US. No.
Speaker 8 (19:48):
That's one of those things where you'd almost think that,
like certain things are going to need a car back
because you're not going to bring them back. Whether or
not toys are going to end up getting that. It
doesn't look like it right now. But no, there are
certain things that it doesn't make any sense to do that.
Speaker 1 (20:01):
Well, well, maybe where we was a good example, because
what did the presidents say about Barbie earlier this year?
Maybe if we only.
Speaker 3 (20:05):
Get one Barbie Christmas kids girls something like that, don't
need two Barbies.
Speaker 5 (20:11):
I don't know when I was grown up, the more Barbies,
thank you are a barrier.
Speaker 1 (20:15):
You got our chief. I was gonna say, he's chief
Barbie buyer in his house.
Speaker 5 (20:19):
Well, he's got a daughter, who's got a daughter.
Speaker 3 (20:21):
What I'm wondering is, are we, though, moving towards an
environment where we're not going to have companies that are
as profitable as they were before, which.
Speaker 5 (20:32):
Is kind of mind blowing because we just.
Speaker 3 (20:33):
Saw the banks being really profitable the earning season. We're
seeing it broaden out that a lot more companies seem
to be coming in with some strong profit numbers revenue
numbers two.
Speaker 8 (20:43):
It's it's one of the biggest conundrums because in the end,
to maintain that profitability, if you do start to have
things like Terriff's Bie, what do companies do they get
rid of costs?
Speaker 7 (20:52):
How do you get rid of costs? You get rid
of people? So what do we not have right now.
Speaker 8 (20:55):
We don't have any employment stats, right, we don't have
any statistics on what's going on.
Speaker 3 (20:59):
Amazon is cutting what ten twelve percent of its corporate
force we just got that time.
Speaker 8 (21:04):
I saw that note before I came in here, and
I thought, this is one of those This is one
of those issues because you end up with having unemployment
problems and that is going to be fine potentially.
Speaker 7 (21:15):
For margins for some period of time. But they can't
do that forever.
Speaker 3 (21:17):
Right, because we're the people who spend, right, and if
we're not working, we're not spending.
Speaker 5 (21:21):
You know, It's interesting.
Speaker 3 (21:22):
Drew Mattis, chief market Strategist ever at met Life Services
and Solutions, was on with us last week and he
talked how looking at the K shaped economy but just
saying it's not okay. And he was really talking about
the upper wrong of the K that even upper income
consumers like maybe these corporate folks at Amazon who have
(21:43):
had good salaries and good benefits, but if they're being
let go, then we've got a problem.
Speaker 5 (21:48):
Right, If the upper end of our economy is also
going to.
Speaker 3 (21:52):
Maybe be struggling, well, they've only the lower end has
been right, So I'm sorry, go ahead.
Speaker 8 (21:57):
Well, no, I was just going to say, And it's
harder to get another job too, because people stay in
jobs longer and there isn't as much movement right now,
and that's an issue as well. And I'm sure that
there are a lot of people who are going to
be surprised by that in Amazon, because nobody was looking
at Amazon saying, oh, we really think that they're about
to lay off a bunch of people. They're like when
Meta laid off a bunch of people on the AI side.
Speaker 1 (22:15):
And make other people last week was announced on.
Speaker 7 (22:17):
The AI side.
Speaker 8 (22:18):
Now, those guys were not getting paid very little. They
were probably getting paid quite a bit, right, And that's
very So yes, you're into that layer of the people
who are getting paid quite a bit of money who
are now looking at losing their jobs.
Speaker 1 (22:28):
So just thirty seconds on the labor market, it's okay week, it's.
Speaker 8 (22:33):
Not a FED cut well, and is a FED cut
going to save the labor market too?
Speaker 9 (22:39):
Right?
Speaker 7 (22:39):
Is the other question.
Speaker 8 (22:40):
But it's also there's been less movement and it's hard
to tell what's going on because you also have the
immigration story behind that too. So what is the right number,
what's the break even number? And all of those We
don't know the answers to all those questions, and now
we don't have any data, so it justice makes it.
Speaker 7 (22:52):
Much more complicated.
Speaker 5 (22:53):
Twenty seconds. Do people want to still put money to
work in this environment?
Speaker 8 (22:57):
They have to to a great degree, right because sitting
in cash, especially if we're going to cut rates, that
lower end of the money market is going to start
to come down and people are going to be.
Speaker 7 (23:05):
Start looking at it.
Speaker 8 (23:05):
And also when the market moves up like this, people
feel like they want to participate.
Speaker 1 (23:10):
Stay with us. More from Bloomberg Business Week Daily coming
up after this.
Speaker 2 (23:17):
If you're listening to the Bloomberg Business Weekdaily podcast, catch
us live weekday afternoons from two to five pm Eastern.
Listen on Applecarplay and Android Auto with the Bloomberg Business app,
or watch us live on YouTube.
Speaker 3 (23:31):
Sean Hannan and Brook Sutherland are too of the writers
of the team behind this feature. Seun Is Bloomberg News
Senior Economics writer and brook Is Bloomberg News Boston Bureau
Chief and writer for the Bloomberg Industrial Strength newsletter. Sean
joining us, Tim from the Bloomberg Washington DC Bureau.
Speaker 5 (23:45):
Book Out There in our Boston Bureau.
Speaker 1 (23:47):
So Sean, I just want to start with you and
put this for trillion dollar number into context when it
comes to economic growth here in the US over the
last few years and those estimates moving forward, how does
AI spend figure to growth and sort of where would
we be without it? Yeah.
Speaker 10 (24:03):
Look, and the answer, and we hear this from all
sorts of analysts and economists right now, is that the
US economy would look a lot weaker right now if
it wasn't for this AI investment boom. There's something like
four hundred billion dollars in capex being spent this year.
That's adding as much as a percentage point to growth,
(24:25):
or that's certainly what it added in the first half.
People are thinking about next year and thinking that it's
going to add one point five percent percentage points to
growth next year. That's significant an economy that's growing at
two to three percent, And it's just this thing that
is enormous, that's historic, but it's also something that's masking
(24:46):
weakness in other parts of the economy and may in
fact be some people think, causing weakness in other parts
of the economy like manufacturing.
Speaker 5 (24:55):
And that's what we want to talk about. This on
a day.
Speaker 3 (24:58):
I got to say, guys, I feel like every day
there are multiple stories or multiple headlines about the AI spend,
and it just ties into what we're talking about. One
crossing the Bloomberg Nvidia and Deutsche Telecom plan a one
billion euro data center in Germany, not the US economy,
but this is happening around the world. Sean, come on,
(25:20):
excuse me, Brooke, come on in on this conversation. Because
the President was very clear on the campaign trail about
wanting to bring manufacturing jobs back.
Speaker 5 (25:29):
To the United States.
Speaker 3 (25:31):
But we keep asking guests, is the AI spend squeezing
out CAPEC spend in a lot of other areas, or
just spend overall in other areas, including manufacturing.
Speaker 9 (25:43):
I mean, I think that's the real question. And you know,
to Shaun's point, they're just the flood of capital into
these AI data center construction projects is really just staggering.
And what you constantly hear in the US is that
we do not have enough workers in the construction the
manufacturing field. And so from a construction standpoint, as you
talk about wanting to reindustrialize the US, I think there's
(26:06):
a legitimate question of can you do that at the
same time as you were building all of these data centers.
Can we do both at the same time, and you know,
not just from a worker perspective, but also from an
energy need perspective, and then you know, in terms of
where the capital is going. To your point, I do
think the return is a lot better on data center
projects right now than it is for much of the
(26:27):
manufacturing industry, which really has been, you know, in a
slump for the better part of three years, outside of
those industries that cater specifically to data centers, so things
like electrical equipment or gas turbines are seeing really robust
demand from those technology comments, whereas everything else has been
really really sluggish. And also, you know, hit harder by
the impact of tariffs and the uncertainty that that on
(26:49):
LEAs shows.
Speaker 1 (26:49):
Okay, Brook, I'm glad you brought up tariffs, because there's
a really important paragraph in this story that talks about
the effect that some of the companies in the industrial
space have had as a result of these two haff
I mean, we're talking billions of dollars here of the
companies that you cover in the industrial's world, Brook, how
have tariffs affected them?
Speaker 9 (27:08):
I mean, I think tariffs have really kind of put
a hold on a lot of things. From manufacturer's perspective,
what I hear over and over again from CEOs is
it almost doesn't matter what the actual rate is. Of
course it does matter, but they just want to know
what it is and then they can adapt to that.
They can move their factories, or they can rejigger their
supply chain and shift, you know, certain things around to
(27:29):
try to mitigate the impact. What's hard for them is
when the rules of the game are constantly changing, and
we're seeing that continue to play out, where there's new
tariffs announcer taken off, or different deal struck with different countries,
and that's very difficult if you are a CEO and
trying to figure out what to do with your business,
especially in an industry like manufacturing, where these investments are
very long term and you need to sort of forecast
(27:52):
what the world is going to look like a few
years down the road, and if you don't really know
what the world looks like today, it's a lot harder
to think that far ahead.
Speaker 8 (28:00):
You know.
Speaker 9 (28:00):
One of the things that's interesting here is that, you know,
the Trump administration has been more willing to look at
exemptions for certain things that play into the data center market,
but not everything. And you know, the electrical equipment manufacturers,
you know, have pushed back against some of these tariffs
that do hit them because they're already struggling to keep
up with all the supply that we're seeing from data centers,
and tariffs make doing so even more expensive.
Speaker 3 (28:21):
No, but it's interesting, right, I mean, Sean, I mean
this idea that the Big Beautiful Act that was past,
One Big Beautiful Bill Act that was passed. I mean,
there were a lot of folks within the manufacturing sector,
if I think about the national associations of manufacturers that
you guys include in this story, that campaigned in favor
of this legislation, but as it's turning out, they're maybe
(28:43):
not so necessarily sure that it's going to be that helpful.
Speaker 10 (28:46):
One of the things that they found was that manufacturers
as a group were planning only a one percent increase
in cap X over the next year, which is kind
of right in line with what we've seen in previous years,
and that's not even adjusted for inflation. I think one
of the key points if you talked to manufacturers is
in the One Big Beautiful Bill Act, there are these
(29:06):
provisions that would allow them to clean back the cost
of capital investments, and that there's kind of beneficial tax
treatment there. But at the same time, this is an
administration that has tariffs in place on a lot of
machinery from overseas that would be needed to kind of
fulfill that capital investment to come in. So if you're
(29:27):
bringing a machinery from China, you're facing a fifty percent
tariff on a multimillion dollar machine going into an American factory.
That's a huge cost, and that's very different from what
you've seen on the AI and data center side. So
April ninth, sorry, April eleventh, a few days after Liberation Day,
(29:47):
the administration quietly on a Friday night put out some
pretty significant exemptions for consumer technology but also things like
AI servers and other components that go in into data centers.
So that AI investment boom is also largely, although not entirely,
as brook says, a terar free boom, whereas on the
(30:10):
manufacturing side, all of the machinery that would go into
those future factories now faces tariffs, whether it's coming from
Europe or Japan or China, and that is also something
that puts a real damper on investment plans and raises
questions over the costs, and those are kind of constantly
moving costs as well.
Speaker 1 (30:32):
Brook. I'm so curious about the way that in your
world of industrials, the way that AI if we look
at like second order effects here, Okay, if this stuff
gets built, and if maybe American machines and manufacturing equipment
to a certain extent are used to build it, then
do we get to a world where the companies in
your universe are able to increase productivity as a result
(30:55):
of the technology that they helped bring to fruition.
Speaker 9 (30:59):
I mean that's sort of the goal. And if you
talk to you know, industrial CEOs, they will say that,
you know, yes, there are short term constraints here, particularly
around people and power, but it's also an opportunity to
rethink the way we do things and maybe we don't
need to keep doing everything the same way that we
always have, and we can you know, sort of push
technology to that next frontier, whether that's relying more on
(31:19):
sort of free fabricating, prefabricating excuse me, parts of you know,
a building off site to help improve productivity and reduce
the risk of errors, whether it's leaning more on automation
in the factories, although of course automation in the factories
does sort of raise the question of well, how many
jobs is this reintstrialization effort going to provide? And so
you know, I do think industrial companies will rise to
(31:42):
the challenge and try to figure out how to solve
for some of these shortages, but I think there are
bigger questions about the longer term ramifications of that, especially
if your goal is to create a bunch of manufacturing
jobs in the US.
Speaker 3 (31:54):
Well, just get about a minute or so left here
and shall back to you, I mean you guys, like
I guess Time will tell because there is a line
in this reporting that you guys did in this story.
If the future of ais as Rosie as it's backers painted,
then a broader swath of manufacturers will eventually read benefits
from the technology to ever more intelligent robots will boost
productivity at American factories. You know, you're going to need
(32:16):
lots of things to build out these data centers, and
that plays into the manufacturing economy. But John Time will
tell on this and only got about forty forty five
seconds here.
Speaker 10 (32:24):
Yeah, look at Time will tell. And the big question,
and the big kind of political economy question is how
will people make out?
Speaker 1 (32:30):
How will workers make out? In this right?
Speaker 10 (32:33):
We think about AI as something that could make a
lot of us obsolescent at some point, hopefully not. But
in the manufacturing environment, you can envision kind of highly
automated factories that don't lead to a lot of employment.
And you know that is the big promise from Donald
Trump going back to his first term, is you know,
(32:54):
to bring the factories back, to bring the jobs back.
And right now on the manufacturer side, you know, the
US is down forty two thousand jobs since April. That's
just not happening, all right.
Speaker 3 (33:05):
I got to say, though, you guys, the way you
kick it off and weave through the JM, yeah, that.
Speaker 1 (33:10):
Is the place too. That is the perfect anecdote.
Speaker 3 (33:13):
Highly recommend everybody read it because you weave through it
and how it tells this story so so well as
you both did, Shawn Don and Brooks Sutherland, Thank you
so much.
Speaker 2 (33:22):
This is the Bloomberg Business Week Daily podcast, available on Apple, Spotify,
and anywhere else you get your podcasts. Listen live weekday
afternoons from two to five pm Eastern on bloomberg dot com,
the iHeartRadio app tune In, and the Bloomberg Business app.
You can also watch us live every weekday on YouTube
(33:43):
and always on the Bloomberg terminal
Bloomberg Audio Studios, Podcasts, radio News.
Speaker 2 (00:08):
This is Bloomberg Business Week Daily reporting from the magazine
that helps global leaders stay ahead with insight on the people, companies,
and trends shaping today's complex economy. Plus global business finance
and tech news as it happens. The Bloomberg Business Weekdaily
Podcast with Carol Masser and Tim Steneveek on Bloomberg Radio with.
Speaker 3 (00:32):
Us is our Bloomberg News Big Tech Team leader Sarah Fryar,
also author of No Filter, The Inside Story of Instagram.
She joins us from the Bloomberg San Francisco News Bureau.
So much going on, Sarah, but let's talk about Amazon.
That feels like a pretty big number. Ten percent of
the company's roughly three hundred and fifty thousand corporate employees.
It's a report from Reuters, citing unidentified people. We haven't
(00:54):
yet confirmed it, but what's your thought initial thought on this?
Speaker 4 (00:58):
Well, first of all, we are chasing it. But this
was this is something that the companies all across the
board have been doing since the pandemic era, what they
call over hiring. A lot of these companies saw the
growth in how people were relying on tech during the pandemic.
When they were home, they were obviously ordering a lot
(01:20):
more from Amazon because they didn't want to go to
the grocery store if they were at home workers and
the company hired to accommodate that, and now they don't
need as many people. But you know, I heard your
earlier point, Carol about AI. I think that's part of it.
But I also think that part of it is when
these companies go through periods of opportunity where they see
(01:43):
a lot of growth, they're seeing that trend line and
they're hiring for the future. We're seeing it right now
with AI. People are building out these companies are building
out data centers. They don't know if they're actually going
to need all that capacity long term, but they better
make that deal today or else they might not have
it when they need it. So we do see a
lot of anticipatory investment from these tech companies over time
(02:08):
that sometimes they need to pull back on. In in
big tech, we haven't seen as big a pullback as
we have in the past few years since the pandemic.
It has really been a change in the culture that's
drive for for efficiency, for reducing you know, bureaucratic bloat
and it's not just you know, lying they're throwing out there,
(02:30):
we are seeing you. My my colleague Matt Day wrote
a really interesting story I encourage everyone to read about
a WS and how AWS was at the forefront of
cloud really inventing the market, and in the era of
AI they have they have fallen back in preference for
(02:51):
startups they had, they had that big outage we talked
about last weears on this show, and some of the
employees are attributing that to bloat, to this bureaucratic culture,
too many people working on the same things and things
not getting done fast enough. So I think, you know,
although I hate to see people lose their jobs, I
(03:13):
think that that is where a lot of this is
coming from. The idea that we need these companies in
the age of AI to be working faster to try
to catch their competitors.
Speaker 1 (03:23):
You know, I see a headline like this, Sarah, and
I immediately think back to the prominent other headlines that
I saw in the last week about big layoffs or
mid sized layoffs that a tech company met A platforms
layoff six hundred people who work in AI and then
target retail. Not necessarily tech, but Amazon straddles that right,
And we don't know the details of these layoffs yet,
but Target to cut eighteen hundred rolls eight percent of
(03:46):
its headquarters team taken together, Is there a story with
these three headlines?
Speaker 4 (03:52):
Well, I think that the Meta headline and the Amazon
headline are certainly related because they're all attributed to this
idea of trying to move faster to cut a lot
of the you know, maybe unnecessary workforce, maybe workforce that
they do expect one day will will be augmented by
(04:12):
AI tools or are already starting to be augmented by
AI tools. But like like we've said before, we don't
know if the AI tools are actually making people more
efficient that right now, it's more of more of a
hope that that will be the case. Certainly, Encoding it's
had a big role. I'm not sure because we haven't
been able to confirm the report just yet. I'm not
(04:34):
sure if these are our roles Encoding. When it comes
to Meta and AI, it's really interesting because they are
still shuffling around the leadership and therefore the direction of
this very expensive super intelligence team that they pulled together
over the course of a few months earlier this year,
(04:55):
and it seems like that is, you know, something that
could give the potential of a slowdown for that company.
But a lot is writing on metas AI efforts, both
companies Amazon and Meta. I think we are going to
have a lot to learn from this week and their
earnings which are coming Meta on Wednesday, Amazon Thursday. So
(05:18):
I think that that is going to be very key.
Speaker 5 (05:21):
Yeah, totally agree with you that.
Speaker 3 (05:23):
I feel like the earnings this week are a big
deal to see that those AI investments are paying off. Hey,
in the meantime, we're watching very closely what's going on
with Qualcom. They don't report until November fifth, But I'm
looking at a stock Sarah that is up twelve percent
at its highs was up nearly twenty two percent today,
(05:44):
and this is after unveiling some chips and computers for
the AI data center market. We know this is something
that has made Nvidia just on fire and at the
center of the AI universe.
Speaker 5 (05:56):
What do we know about Qualcom?
Speaker 4 (05:59):
Well, already have a major customer for these trips for
these chips in the form of Humane, the Saudi company.
And so I think that that is giving investors a
lot of hope that this can not only give them
a very strong position in the AI growth that is
an alternative to Nvidia, but also help make up for
(06:19):
some of the revenue lost by Apple, who was a
major customer going to in house chips. So I think
they see it as a very positive or qualcom Of course,
you know, this chip is also getting a lot of
buzz for its ability to hold quite a lot of
DRAM memory. So I think, you know, anytime that someone
(06:42):
can make inroads in chips versus Nvidia, of the stock
market is going to reward it. But will have to
see if they're able to take on some of those
big tech customers over time or what their customer base
is going to evolve into this if this comes a
big part of their portfolio.
Speaker 5 (07:01):
Yeah, I mean time will tell.
Speaker 3 (07:03):
I mean I was looking at our BI analyst in
the Ian King story basically saying, you know, it's too
soon to call this a serious challenge right to nvidious dominance.
Even modest share gains so in the over five hundred
billion dollar AI accelerator market could translate into billions in
incremental revenue. I mean, right, even this pie is so
(07:24):
big and it just seems to grow at this point,
soa that even a piece of it or a decent
piece of it.
Speaker 5 (07:30):
It could be a lot for Qualcomm if it all
plays out.
Speaker 4 (07:34):
No, absolutely, it's there's so much data center build out
happening right now and happening over the course of the
next few years. I think we're going to continue to
see these multi billion dollar deals across the US and
around the world. So I think that you know, any
player that can get in on that build out is
(07:56):
it's really significant, and I think that the time is
really now. Chips don't last very long once they are unveiled,
you know, they maybe last three to five years before
they're obsolete. So I think, you know, for those deals
that are in the making and the moment, we're we're
(08:17):
very interested to see what Qualcom's going to cook up.
Speaker 5 (08:20):
Sarah Fryar, thank you.
Speaker 3 (08:21):
As always, she is Bloomberg News Big Tech team leader.
She's out there in our San Francisco bureau. Sarah Friar
also the author of No Filter, The inside story of Instagram.
Speaker 1 (08:32):
Stay with us more from Bloomberg Business Week Daily coming
up after this.
Speaker 2 (08:39):
You're listening to the Bloomberg Business Weekdaily podcast. Catch us
live weekday afternoons from two to five pm. Eastern. Listen
on Applecarplay and Android Auto with the Bloomberg Business app,
or watch us live on YouTube.
Speaker 5 (08:53):
Great to have back with us, Jan Vanek.
Speaker 3 (08:56):
He is chief executive officer venk It has about one
hundred and thirty three billion under management AUM and he
joins us back here in our Bloomberg studio. John, Great
to have you back with us. There is a lot
coming out investors. There is this laundry list. What's most
important to you when you think about the investment environment
(09:17):
and what shapes your strategy right now?
Speaker 6 (09:19):
Well, I'm just keying off of this monetary policy discussion.
I just have to say that the big piano hanging
over our heads to me is a federal budget deficit.
And since I saw you last, we actually got some
pretty good news for fiscal twenty five that as a
percent of GDP, the budget deficit had fallen from six
and a half percent to five point nine percent. I've
(09:42):
been focusing very much on the year that we just
started on October first, because I think you know that's
the big risk, right They've fed. You know, the federal
government has to borrow or pay a trillion dollars a
year as sure the Fed governor, you know, affects that.
But what the markets think there's a lot too and
if we can reduce that pressure by having better finances,
(10:04):
that's really good news for the market, I think.
Speaker 3 (10:06):
But that's not an argument for having not an independent FED. Right,
you still want to Fed? No, no, that does monetary
policy according to inflationary pressures and labor pressure.
Speaker 6 (10:16):
Right, But what what you know, these the wonky economists
on Wall Street don't want is to have so much
debt that you basically are forcing the Fed to use
something like Japan did yield curve control or some really
extraordinary measures that would that would really be unwelcome. So,
you know, we can talk about the personalities and everything,
but right now the direction of movement is good compared
(10:39):
to coming into the year where we had a lot
of fiscal concerns and the FED chair would have had
a lot more on this plate.
Speaker 1 (10:45):
You know, when you were on with us last it
was about a month ago, it was just before the
government shutdown, and we asked you about whether or not
a government shutdown actually matters to markets. Well, here we are.
Speaker 5 (10:55):
A month later, and it's amazing.
Speaker 1 (10:57):
It is amazing. I think it's the second longest shutdown
in history entering. You know, it's it's remarkable to see.
Do you you said it didn't matter, right, Do you
stand by it?
Speaker 6 (11:06):
Yeah, I mean I don't think that there's any evidence
that has mattered. I think what's really worrisome though, is
the fact that if the.
Speaker 3 (11:13):
Dysfunctional government, you have a Washington of the government that
isn't working.
Speaker 6 (11:18):
That they don't care, right, neither party really cares if
something bad is happening, if they feel like the other
party can get the blame. And again, you know, I
don't mean not only talk about the debt problem, but
you know that's really what we all worry about at
the end, Like, well we never solve Social Security? Will
we cut Social Security payments in twenty thirty three like
we're scheduled to. Yeah, I mean, you know, those are
(11:40):
the longer term concerns.
Speaker 3 (11:43):
When you look at this market environment. The other things
that are coming, and these are obviously the ones that
we just talked about, are super super big. But I
do think about our focus on you know, these mag
seven earnings. We get a big drop this week and
we'll learn once again whether these AI investments are paying off.
Last time around, we saw it with metow and some
of the other big hyperscalers that these investments seem to
(12:05):
make sense at this point the AI trade.
Speaker 6 (12:07):
Where are you on that it's going to a we
have a compute shortage that's very visible to the whole world.
Speaker 1 (12:15):
And you know what's really interesting.
Speaker 6 (12:17):
I did some research on this since we last talked,
and open ai is really emerging as the giant in
this area. So they have eight hundred million monthly active users.
The next biggest, Gemini has four hundred and fifty but
much more interesting. So your average website is now getting
basically traffic coming from the AI chats somewhere between let's
(12:41):
call it one percent at the low end and seventeen
percent at the high end. Of the traffic that's going
to your average website like the Bloomberg website or the
van k website.
Speaker 5 (12:50):
We're not average million.
Speaker 1 (12:53):
Ahead. I can't believe I said that.
Speaker 6 (12:56):
But of that traffic, open ai is generating over ninety
percent of that traffic. They are completely dominating the other
mag seven companies when it comes to you know that
now on the flip side, they are trying to build
out a ton of this compute and they don't have
the money, right. All the other hyperscalers have a lot
(13:17):
of revenue not public, right, and the revenue is only
forty to fifty billion, so and they want to spend
hundreds of billions on compute. So that's the one thing
that I look at as a potential weakness in the
SAYI trade. But otherwise we've got at least two calendar
years of demand to deal with.
Speaker 1 (13:34):
So you're not seeing ghosts of the late nineties tech
crash here.
Speaker 6 (13:39):
As I said, the only vulnerability I see isn't this
sort of systemic thing. It's one company that's spending a
ton of money and so far they've been able to
raise it. Everyone else has got the revenue to cover
their spend, right, I mean, they've got the cash flow.
Speaker 1 (13:53):
And I'm sure in opening I can keep raising money.
It seems like there's plenty of demand. Or maybe even
do are you? Are you doing chat gipas right now? Karen?
Speaker 4 (14:00):
No?
Speaker 5 (14:01):
No, I was actually no, no, no, no, I just.
Speaker 1 (14:03):
Grabbed a phone.
Speaker 5 (14:04):
I did describe my bone, which is such a no no.
Speaker 7 (14:07):
When you're on air.
Speaker 3 (14:08):
Lisa Bramowitz, who we all she's incredible on surveillance on
the TV side, and she said the mag seven stocks
have accounted for almost half of the S and P
five hundred and fifteen percent game this year, Microsoft, Alphabet,
Amazon Meta expected to post a combined three hundred and
sixty billion CAPEX in their current fiscal years and nearly
four hundred and twenty billion next year. So what I'm
(14:30):
just wondering is the market we've talked about that we
feel like in the earning season we're seeing breath expand.
But again, these companies are still so important right to
the trade.
Speaker 6 (14:42):
Yeah, they're really I mean, we want to ask ourselves
why do they have such a high percent of the
S and P five hundred and we have an answer
because their profit dynamos. Not only is the revenue going up,
but they're caught their employee bases are flat, it's not shrinking,
So rising revenue flat costs, because that's one of the
big beneficiars obviously our software companies.
Speaker 1 (15:03):
We have thirty seconds on gold.
Speaker 7 (15:05):
This is where we are going to go there?
Speaker 1 (15:06):
Yeah? Is that where you were going to go to go?
Speaker 5 (15:08):
Call com so.
Speaker 1 (15:09):
Down eight percent from its peaks from its peak, further
to go?
Speaker 6 (15:13):
Yeah, twenty percent correction in the bull market would be
my base case.
Speaker 1 (15:17):
That's your call. Thirty five hundred dollars.
Speaker 5 (15:19):
Yes, okay, still not a bad year, right.
Speaker 1 (15:21):
Great, great year.
Speaker 6 (15:22):
I think the question is, you know, everyone's impatient already
looking at their phones and during interviews, the question is
how long does gold consolidate?
Speaker 5 (15:31):
Right, we're the goodness of the show's twelve A.
Speaker 6 (15:34):
Whole twelve months of consolidation would bore the market. So
we may have one of those situations. But still, I
you know, we like it long term, you know, for
the next decade.
Speaker 3 (15:43):
Jan Vanek he is, of course, chief executive officer VNEX,
joining us here in studio.
Speaker 2 (15:48):
This is the Bloomberg Business Week Daily Podcast. Listen live
each weekday starting at two pm Eastern up on Apple
car Play and the Android Auto with the Bloomberg Business App.
You can also listen live on Amazon Alexa from our
flagship New York station Just Say Alexa played Bloomberg eleven thirty.
Speaker 1 (16:07):
I want to know how Sarah Hunt is looking at
all this. She's partnering at chief market strategist at Alpine
Saxon Woods. The firm has about eight hundred and fifty
million dollars in assets under management. She's here in the
Bloomberg Interactive Brokers Studio. I guess we should probably start
with trade, because that is what is pushing this market
higher today. Dare I say or ask you, is it
(16:28):
getting ahead of itself given that we don't know if
this deal will happen.
Speaker 8 (16:34):
I think that that's been one of the biggest questions
all year, because when you had the meltdown earlier in
the year in April, and then you started to see
those deadlines move around and all those things change, and
markets got really were much happier with that, right because
they didn't want to hear that DRACONI and those draconian numbers.
They didn't want to see that happen immediately. So you've
seen things continuously move around. So I'm sort of surprised
(16:55):
that there's enough surprise in the headlines every time we
get one that it does do that. But in the end,
if we can get things sorted out so that you
don't have pecuniary tariffs anywhere, or at least not as
bad as we thought they were, there is a relief
to that, and I think that that's part of what
you're seeing. And I do think that there's a de
escalation of tensions because the rare Earth's thing was really
(17:15):
has really been an issue ongoing for the last several months.
So I think that all those things together and the
low CPI print on Friday really helped.
Speaker 3 (17:24):
But we still have as we mentioned earlier Sarah, China
still faces effecive US tariffs around forty percent, about twenty
five percentage points above the global average. I mean, we
are in a different tariff environment, so I agree that
I think, you know, flooding the zone. We're all exhausted,
so we just want things to land and we almost
don't care where they land, which is kind of crazy
(17:46):
because they're landing at different marks that are going to
impact profitability. It sounds of companies, So that's going to
have an impact, and I'm not quite sure when it
starts to really really show.
Speaker 8 (17:58):
And I think that that's also the million dollar question,
because that has been the issue going forwards. What's going
to happen to margins, what's going to happen to pricing?
What can consumers absorb? What what can companies absorb? And
the truth of the matter is, we haven't really seen
the effects of a lot of those tariffs because they
a lot of them came and went and or they
get suspended, or you get carve outs, or you get
different pieces. It's very difficult to pinpoint exactly who's paying
(18:21):
that forty percent right this minute and right until you
start to see it come through earnings, and until companies
start to talk about it, it becomes more and more
difficult for people to put in their numbers. So right now,
numbers look very good, and I think the third quarter
is going to be pretty good. This week is going
to be a very big week because we have a
lot of people reporting, and that's going to be very
important how that comes out. But where we go with
those and what that does to margins, I think is
the biggest question that we still don't have.
Speaker 1 (18:43):
An answer to, is that when not if these companies
start to see the effect of these.
Speaker 8 (18:47):
Tariffs, it is definitely a win and not and if
the but the win keeps moving around, and that's why
it's hard to take a victory lap, which some have
done and said, well, there's no real effect of this,
because you've seen the earnings still be very strong, when
in reality, we don't know what the effects are going
to be because you keep pushing things around and inventories
have been pulled in.
Speaker 1 (19:04):
So then how do you position for that.
Speaker 8 (19:06):
You try to find places where you think you are
not in as much risk as you would be if
the inventory picture is not good enough and or changes
and you don't get a chance to reduce that or
to put that inventory back in. So a lot of
the places are going to be obvious. The technology stocks
are part of that. Although you have seen Nvidia have
issues with being able to sell and then not sell.
Speaker 7 (19:24):
Chips and everything else.
Speaker 8 (19:26):
It's the cash generative areas, the places where you know
that there might be some pain, it's almost more to
avoid it. I mean, I wasn't thinking about Mattel when
I started when I started this, but if you think
about something like Mattel, that was a very bad situation
for them, and that you are seeing that now and
you will see that in other areas.
Speaker 1 (19:45):
But it's not like we're going to see barbiees built
here in the US. No.
Speaker 8 (19:48):
That's one of those things where you'd almost think that,
like certain things are going to need a car back
because you're not going to bring them back. Whether or
not toys are going to end up getting that. It
doesn't look like it right now. But no, there are
certain things that it doesn't make any sense to do that.
Speaker 1 (20:01):
Well, well, maybe where we was a good example, because
what did the presidents say about Barbie earlier this year?
Maybe if we only.
Speaker 3 (20:05):
Get one Barbie Christmas kids girls something like that, don't
need two Barbies.
Speaker 5 (20:11):
I don't know when I was grown up, the more Barbies,
thank you are a barrier.
Speaker 1 (20:15):
You got our chief. I was gonna say, he's chief
Barbie buyer in his house.
Speaker 5 (20:19):
Well, he's got a daughter, who's got a daughter.
Speaker 3 (20:21):
What I'm wondering is, are we, though, moving towards an
environment where we're not going to have companies that are
as profitable as they were before, which.
Speaker 5 (20:32):
Is kind of mind blowing because we just.
Speaker 3 (20:33):
Saw the banks being really profitable the earning season. We're
seeing it broaden out that a lot more companies seem
to be coming in with some strong profit numbers revenue
numbers two.
Speaker 8 (20:43):
It's it's one of the biggest conundrums because in the end,
to maintain that profitability, if you do start to have
things like Terriff's Bie, what do companies do they get
rid of costs?
Speaker 7 (20:52):
How do you get rid of costs? You get rid
of people? So what do we not have right now.
Speaker 8 (20:55):
We don't have any employment stats, right, we don't have
any statistics on what's going on.
Speaker 3 (20:59):
Amazon is cutting what ten twelve percent of its corporate
force we just got that time.
Speaker 8 (21:04):
I saw that note before I came in here, and
I thought, this is one of those This is one
of those issues because you end up with having unemployment
problems and that is going to be fine potentially.
Speaker 7 (21:15):
For margins for some period of time. But they can't
do that forever.
Speaker 3 (21:17):
Right, because we're the people who spend, right, and if
we're not working, we're not spending.
Speaker 5 (21:21):
You know, It's interesting.
Speaker 3 (21:22):
Drew Mattis, chief market Strategist ever at met Life Services
and Solutions, was on with us last week and he
talked how looking at the K shaped economy but just
saying it's not okay. And he was really talking about
the upper wrong of the K that even upper income
consumers like maybe these corporate folks at Amazon who have
(21:43):
had good salaries and good benefits, but if they're being
let go, then we've got a problem.
Speaker 5 (21:48):
Right, If the upper end of our economy is also
going to.
Speaker 3 (21:52):
Maybe be struggling, well, they've only the lower end has
been right, So I'm sorry, go ahead.
Speaker 8 (21:57):
Well, no, I was just going to say, And it's
harder to get another job too, because people stay in
jobs longer and there isn't as much movement right now,
and that's an issue as well. And I'm sure that
there are a lot of people who are going to
be surprised by that in Amazon, because nobody was looking
at Amazon saying, oh, we really think that they're about
to lay off a bunch of people. They're like when
Meta laid off a bunch of people on the AI side.
Speaker 1 (22:15):
And make other people last week was announced on.
Speaker 7 (22:17):
The AI side.
Speaker 8 (22:18):
Now, those guys were not getting paid very little. They
were probably getting paid quite a bit, right, And that's
very So yes, you're into that layer of the people
who are getting paid quite a bit of money who
are now looking at losing their jobs.
Speaker 1 (22:28):
So just thirty seconds on the labor market, it's okay week, it's.
Speaker 8 (22:33):
Not a FED cut well, and is a FED cut
going to save the labor market too?
Speaker 9 (22:39):
Right?
Speaker 7 (22:39):
Is the other question.
Speaker 8 (22:40):
But it's also there's been less movement and it's hard
to tell what's going on because you also have the
immigration story behind that too. So what is the right number,
what's the break even number? And all of those We
don't know the answers to all those questions, and now
we don't have any data, so it justice makes it.
Speaker 7 (22:52):
Much more complicated.
Speaker 5 (22:53):
Twenty seconds. Do people want to still put money to
work in this environment?
Speaker 8 (22:57):
They have to to a great degree, right because sitting
in cash, especially if we're going to cut rates, that
lower end of the money market is going to start
to come down and people are going to be.
Speaker 7 (23:05):
Start looking at it.
Speaker 8 (23:05):
And also when the market moves up like this, people
feel like they want to participate.
Speaker 1 (23:10):
Stay with us. More from Bloomberg Business Week Daily coming
up after this.
Speaker 2 (23:17):
If you're listening to the Bloomberg Business Weekdaily podcast, catch
us live weekday afternoons from two to five pm Eastern.
Listen on Applecarplay and Android Auto with the Bloomberg Business app,
or watch us live on YouTube.
Speaker 3 (23:31):
Sean Hannan and Brook Sutherland are too of the writers
of the team behind this feature. Seun Is Bloomberg News
Senior Economics writer and brook Is Bloomberg News Boston Bureau
Chief and writer for the Bloomberg Industrial Strength newsletter. Sean
joining us, Tim from the Bloomberg Washington DC Bureau.
Speaker 5 (23:45):
Book Out There in our Boston Bureau.
Speaker 1 (23:47):
So Sean, I just want to start with you and
put this for trillion dollar number into context when it
comes to economic growth here in the US over the
last few years and those estimates moving forward, how does
AI spend figure to growth and sort of where would
we be without it? Yeah.
Speaker 10 (24:03):
Look, and the answer, and we hear this from all
sorts of analysts and economists right now, is that the
US economy would look a lot weaker right now if
it wasn't for this AI investment boom. There's something like
four hundred billion dollars in capex being spent this year.
That's adding as much as a percentage point to growth,
(24:25):
or that's certainly what it added in the first half.
People are thinking about next year and thinking that it's
going to add one point five percent percentage points to
growth next year. That's significant an economy that's growing at
two to three percent, And it's just this thing that
is enormous, that's historic, but it's also something that's masking
(24:46):
weakness in other parts of the economy and may in
fact be some people think, causing weakness in other parts
of the economy like manufacturing.
Speaker 5 (24:55):
And that's what we want to talk about. This on
a day.
Speaker 3 (24:58):
I got to say, guys, I feel like every day
there are multiple stories or multiple headlines about the AI spend,
and it just ties into what we're talking about. One
crossing the Bloomberg Nvidia and Deutsche Telecom plan a one
billion euro data center in Germany, not the US economy,
but this is happening around the world. Sean, come on,
(25:20):
excuse me, Brooke, come on in on this conversation. Because
the President was very clear on the campaign trail about
wanting to bring manufacturing jobs back.
Speaker 5 (25:29):
To the United States.
Speaker 3 (25:31):
But we keep asking guests, is the AI spend squeezing
out CAPEC spend in a lot of other areas, or
just spend overall in other areas, including manufacturing.
Speaker 9 (25:43):
I mean, I think that's the real question. And you know,
to Shaun's point, they're just the flood of capital into
these AI data center construction projects is really just staggering.
And what you constantly hear in the US is that
we do not have enough workers in the construction the
manufacturing field. And so from a construction standpoint, as you
talk about wanting to reindustrialize the US, I think there's
(26:06):
a legitimate question of can you do that at the
same time as you were building all of these data centers.
Can we do both at the same time, and you know,
not just from a worker perspective, but also from an
energy need perspective, and then you know, in terms of
where the capital is going. To your point, I do
think the return is a lot better on data center
projects right now than it is for much of the
(26:27):
manufacturing industry, which really has been, you know, in a
slump for the better part of three years, outside of
those industries that cater specifically to data centers, so things
like electrical equipment or gas turbines are seeing really robust
demand from those technology comments, whereas everything else has been
really really sluggish. And also, you know, hit harder by
the impact of tariffs and the uncertainty that that on
(26:49):
LEAs shows.
Speaker 1 (26:49):
Okay, Brook, I'm glad you brought up tariffs, because there's
a really important paragraph in this story that talks about
the effect that some of the companies in the industrial
space have had as a result of these two haff
I mean, we're talking billions of dollars here of the
companies that you cover in the industrial's world, Brook, how
have tariffs affected them?
Speaker 9 (27:08):
I mean, I think tariffs have really kind of put
a hold on a lot of things. From manufacturer's perspective,
what I hear over and over again from CEOs is
it almost doesn't matter what the actual rate is. Of
course it does matter, but they just want to know
what it is and then they can adapt to that.
They can move their factories, or they can rejigger their
supply chain and shift, you know, certain things around to
(27:29):
try to mitigate the impact. What's hard for them is
when the rules of the game are constantly changing, and
we're seeing that continue to play out, where there's new
tariffs announcer taken off, or different deal struck with different countries,
and that's very difficult if you are a CEO and
trying to figure out what to do with your business,
especially in an industry like manufacturing, where these investments are
very long term and you need to sort of forecast
(27:52):
what the world is going to look like a few
years down the road, and if you don't really know
what the world looks like today, it's a lot harder
to think that far ahead.
Speaker 8 (28:00):
You know.
Speaker 9 (28:00):
One of the things that's interesting here is that, you know,
the Trump administration has been more willing to look at
exemptions for certain things that play into the data center market,
but not everything. And you know, the electrical equipment manufacturers,
you know, have pushed back against some of these tariffs
that do hit them because they're already struggling to keep
up with all the supply that we're seeing from data centers,
and tariffs make doing so even more expensive.
Speaker 3 (28:21):
No, but it's interesting, right, I mean, Sean, I mean
this idea that the Big Beautiful Act that was past,
One Big Beautiful Bill Act that was passed. I mean,
there were a lot of folks within the manufacturing sector,
if I think about the national associations of manufacturers that
you guys include in this story, that campaigned in favor
of this legislation, but as it's turning out, they're maybe
(28:43):
not so necessarily sure that it's going to be that helpful.
Speaker 10 (28:46):
One of the things that they found was that manufacturers
as a group were planning only a one percent increase
in cap X over the next year, which is kind
of right in line with what we've seen in previous years,
and that's not even adjusted for inflation. I think one
of the key points if you talked to manufacturers is
in the One Big Beautiful Bill Act, there are these
(29:06):
provisions that would allow them to clean back the cost
of capital investments, and that there's kind of beneficial tax
treatment there. But at the same time, this is an
administration that has tariffs in place on a lot of
machinery from overseas that would be needed to kind of
fulfill that capital investment to come in. So if you're
(29:27):
bringing a machinery from China, you're facing a fifty percent
tariff on a multimillion dollar machine going into an American factory.
That's a huge cost, and that's very different from what
you've seen on the AI and data center side. So
April ninth, sorry, April eleventh, a few days after Liberation Day,
(29:47):
the administration quietly on a Friday night put out some
pretty significant exemptions for consumer technology but also things like
AI servers and other components that go in into data centers.
So that AI investment boom is also largely, although not entirely,
as brook says, a terar free boom, whereas on the
(30:10):
manufacturing side, all of the machinery that would go into
those future factories now faces tariffs, whether it's coming from
Europe or Japan or China, and that is also something
that puts a real damper on investment plans and raises
questions over the costs, and those are kind of constantly
moving costs as well.
Speaker 1 (30:32):
Brook. I'm so curious about the way that in your
world of industrials, the way that AI if we look
at like second order effects here, Okay, if this stuff
gets built, and if maybe American machines and manufacturing equipment
to a certain extent are used to build it, then
do we get to a world where the companies in
your universe are able to increase productivity as a result
(30:55):
of the technology that they helped bring to fruition.
Speaker 9 (30:59):
I mean that's sort of the goal. And if you
talk to you know, industrial CEOs, they will say that,
you know, yes, there are short term constraints here, particularly
around people and power, but it's also an opportunity to
rethink the way we do things and maybe we don't
need to keep doing everything the same way that we
always have, and we can you know, sort of push
technology to that next frontier, whether that's relying more on
(31:19):
sort of free fabricating, prefabricating excuse me, parts of you know,
a building off site to help improve productivity and reduce
the risk of errors, whether it's leaning more on automation
in the factories, although of course automation in the factories
does sort of raise the question of well, how many
jobs is this reintstrialization effort going to provide? And so
you know, I do think industrial companies will rise to
(31:42):
the challenge and try to figure out how to solve
for some of these shortages, but I think there are
bigger questions about the longer term ramifications of that, especially
if your goal is to create a bunch of manufacturing
jobs in the US.
Speaker 3 (31:54):
Well, just get about a minute or so left here
and shall back to you, I mean you guys, like
I guess Time will tell because there is a line
in this reporting that you guys did in this story.
If the future of ais as Rosie as it's backers painted,
then a broader swath of manufacturers will eventually read benefits
from the technology to ever more intelligent robots will boost
productivity at American factories. You know, you're going to need
(32:16):
lots of things to build out these data centers, and
that plays into the manufacturing economy. But John Time will
tell on this and only got about forty forty five
seconds here.
Speaker 10 (32:24):
Yeah, look at Time will tell. And the big question,
and the big kind of political economy question is how
will people make out?
Speaker 1 (32:30):
How will workers make out? In this right?
Speaker 10 (32:33):
We think about AI as something that could make a
lot of us obsolescent at some point, hopefully not. But
in the manufacturing environment, you can envision kind of highly
automated factories that don't lead to a lot of employment.
And you know that is the big promise from Donald
Trump going back to his first term, is you know,
(32:54):
to bring the factories back, to bring the jobs back.
And right now on the manufacturer side, you know, the
US is down forty two thousand jobs since April. That's
just not happening, all right.
Speaker 3 (33:05):
I got to say, though, you guys, the way you
kick it off and weave through the JM, yeah, that.
Speaker 1 (33:10):
Is the place too. That is the perfect anecdote.
Speaker 3 (33:13):
Highly recommend everybody read it because you weave through it
and how it tells this story so so well as
you both did, Shawn Don and Brooks Sutherland, Thank you
so much.
Speaker 2 (33:22):
This is the Bloomberg Business Week Daily podcast, available on Apple, Spotify,
and anywhere else you get your podcasts. Listen live weekday
afternoons from two to five pm Eastern on bloomberg dot com,
the iHeartRadio app tune In, and the Bloomberg Business app.
You can also watch us live every weekday on YouTube
(33:43):
and always on the Bloomberg terminal
Hosts And Creators
Tim Stenovec
Carol Massar
Popular Podcasts
On Purpose with Jay Shetty
I’m Jay Shetty host of On Purpose the worlds #1 Mental Health podcast and I’m so grateful you found us. I started this podcast 5 years ago to invite you into conversations and workshops that are designed to help make you happier, healthier and more healed. I believe that when you (yes you) feel seen, heard and understood you’re able to deal with relationship struggles, work challenges and life’s ups and downs with more ease and grace. I interview experts, celebrities, thought leaders and athletes so that we can grow our mindset, build better habits and uncover a side of them we’ve never seen before. New episodes every Monday and Friday. Your support means the world to me and I don’t take it for granted — click the follow button and leave a review to help us spread the love with On Purpose. I can’t wait for you to listen to your first or 500th episode!
The Joe Rogan Experience
The official podcast of comedian Joe Rogan.
Stuff You Should Know
If you've ever wanted to know about champagne, satanism, the Stonewall Uprising, chaos theory, LSD, El Nino, true crime and Rosa Parks, then look no further. Josh and Chuck have you covered.