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You can find new episodes of the Bloomberg Daybreak Europe podcast by 7am in Dublin or 8am in Brussels, Berlin and Paris. on Apple, Spotify, YouTube, or wherever you get your podcasts. Bloomberg Audio Studios, podcasts, radio, news. Welcome to the Daybreak Asia podcast. I'm Charlie Pellett. Doug Krisner's got the week off. U.S. equity futures rose, reversing earlier declines, helped along by late market gains in Alphabet and Amazon. Meanwhile, meta-platform shares slipped in post-market trading alongside Microsoft, keeping alive lingering concerns over AI intelligence spending. For more on earnings, we heard from Maribel Lopez, the founder and principal analyst at Lopez Research, and she spoke to Bloomberg's Heidi Stroud-Watts and Sherry Ahn. Is it all about really the CapEx story here and what stood out to you when it came to that drag in their numbers? Yeah, when we look at what's happening, AI rises all boats, but it also is one of those things that's very difficult to get over the CapEx wave. So what we've seen happen is almost everybody is coming in with well over $100 billion in CapEx spend. You know, we're looking at $190,000, $145,000. It's really hard to see when the revenue hits to match that CapEx spend right now. So that's the thing that Meta's experiencing right now. There's waning interest in the belief that they actually have the right AI to gain that money, whereas you see someone like Anthropic and even OpenAI starting to make real strides with that. So the CapEx thing is a thing that's also killing the Microsoft earnings. You know, by all standards, they had a great quarter, but people just don't believe that their AI revenue is going to keep pace with their AI spending. A different story for Google, though. Is Alphabet the one that right now we're seeing the capitalizing of all of these AI investments? Yeah, if this were a force race, we'd be calling Google the closer right now in the sense that everybody thought that they were extremely behind in terms of whether or not they were a leading cloud provider, whether or not they were a leading AI provider. And now it turns out that everybody's turning around, looking around and saying, hey, they seem to be having really good AI revenue, really good cloud growth. They're coming on really strong. And they're coming on strong at a time when we're actually starting to see enterprise buyer interest in both cloud and cloud AI together. So it's a really good time for them to have this hit. Whereas the other companies, if you look at Microsoft, people feel like their big wave has passed them by. And even though they seem to be growing really at a good rate, the consensus just feels like it's not enough. They thought that they should be growing more, whereas Google came in. They thought they were going to be growing less and they're growing at a better rate than people expected them to. So that's what I think we see is some of the disrupt in the numbers that we're looking at right now. By most standards, with the exception of Meta, we could say that everybody did really well this quarter. When it comes to meta, though, they attributed that CapEx overhang also to more expensive component costs, right? How much does this become more of a broader pressure point, particularly as we take a look at the expense and the sort of lack of flexibility in terms of supply chains as this war drags on too? Yeah, this is where we get into the real interesting thing of how, you know, do you have a chip game and how advanced is your chip game? So if you look at Google, they just announced new TPUs last week at their conference. And that really, they made a very big point about how that was going to help them on the cost side. AWS and Microsoft have both made similar moves. So not everybody is so dependent on NVIDIA in that regard And that gives them a little more flexibility in terms of what that operating expense is going to look like and what the CapEx is going to look like for them So I think when we look at Meta the biggest issue with Meta is they going to spend a lot on AI but we're not quite seeing where they're going to make the revenue. Is it going to be on ads? Is it going to be on Frontier models? They seem quite far behind in the Frontier model game. They've made some acquisitions. There have been some difficulty with those acquisitions lately. So really, it's a very troubled time for meta in terms of understanding how that AI strategy comes to fruition. Whereas if you look at the hyperscalers, it's pretty clear what happens. They're going to sell cloud workloads based on AI. They may sell AI applications and agentic software and other things on top of that. So the revenue picture for them, while not clear, you can actually see a path to growth for them, where it's much harder to see a path to growth to meta, where they're spending a lot of money on capital expenses for AI. The investor reaction seems quite binary in that sense, right? Either the spend is warranted or it isn't, and that's a cycle we continue to see these broader markets go through. For Meta, as you kind of allude to, it's a matter of, well, you're spending this money, and are you going to be a market leader? And there are doubts on that. What do you see in terms of the competitors in this space, right? Because we're hearing that internally Google is very worried about the likes of Anthropic. I think everyone's worried about the likes of Anthropic. they've made a really much stronger play in the enterprise than people thought they were going to make. They have been very focused in terms of what they're doing. You know, if you look at open AI, they have things like Sora, and then they shut down Sora because video spends a lot of tokens, but it doesn't really get you a lot of money. So the question is not, can you develop AI? The question is, can you monetize AI? And I think that's one of the things that when people look at what Anthropix strategy has been, people love cloud code. People are coding. There's all this discussion about the demise of software engineers, which I don't believe is valid. But even having said that, they're selling into enterprises. They have healthy, strong enterprise revenue. So people are more willing to give them a pass on the CapEx spend because they can see a path to growth. Because we're really at the early days. We are nowhere near at the point where we could say AI has mass penetration in organizations. So there's a lot of runway for the right companies. Is there room, do you think, for the right companies? Is there room for both an Anthropic and an OpenAI? We're hearing now that Anthropi is looking at a new funding round, offers at over $900 billion in terms of its value. This is not a Lord of the Rings moment. There's not going to be just one. It's impossible for whether it be just one AI company that rules it all. So I think there's opportunity. I think there will be a tremendous amount of competition. And I think that people will continue to pick their tools just the way that there was room for more than one cloud company. I believe there's room for more than one AI company. So I think we're going to have a healthy set of competition moving forward. And I think part of the bigger issue is for all the smaller, more specialized companies, how do they continue to drive value? And will they just end up rolled up into something like an anthropic or an open AI? That was Maribel Lopez, the founder and principal analyst at Lopez Research, speaking to Bloomberg's Heidi Stroud-Watts and Sherry Ahn. Next up, Federal Reserve leaves interest rates unchanged. For more, we'll hear from Jeanette Garrity, Chief Economist at Robertson Stevens, right here on the Daybreak Asia podcast. This is Caroline Hyde. And I'm Ed Ludlow, inviting you to join us for Bloomberg Tech, a daily podcast focusing exclusively on technology, innovation and the future of business. Every weekday, we bring you the top headlines from the world's biggest tech companies. From finance to defence, AI to entertainment and from startups to the magnificent seven. We highlight the latest stories of the people and companies pushing the tech sector to new frontiers and the politics that shape global tech markets. We do this all every weekday, then bring you the most important conversations and analysis in our podcast. Search for Bloomberg Tech on YouTube, Apple, Spotify, or anywhere else you listen. Join us every afternoon on your commute home and stay ahead of the tech news cycle. That's the Bloomberg Tech Podcast. I'm Caroline Hyde in New York. And I'm Ed Ludlow in San Francisco. Subscribe today, wherever you get your podcasts. What separates good leaders from transformational ones? I'm Jessica Chen, and in season two of Leading by Example, we'll sit down with executives like Grace Chen of Birdie Gray to find out. It important to understand where you spike but also really acknowledge where you don and find people who can fill those gaps Listen to Leading by Example executives making an impact on the iHeartRadio app Apple Podcasts or wherever you get your podcasts Welcome back to the Daybreak Asia podcast. I'm Charlie Pellett. Doug Krizner's got the week off. The Federal Reserve left interest rates unchanged, and Fed Chair Jay Powell said he will remain at the Federal Reserve as a governor after his term as chair of the central bank ends. This puts an end to months of speculation as to whether Powell planned to stay or leave. And for more on the Fed's latest decision and Powell's future, we heard from Jeanette Garrity, chief economist at Robertson Stevens, and she spoke to Bloomberg's Heidi Stroud-Watts and Sherry Ahn. It was such an interesting meeting for a number of reasons, right? The fact that Fed Chair Powell has decided to stay on, that's pretty unprecedented. But also even just in terms of the widening gulf on the outlook for inflation, for energy prices and the war. What did you make of everything? Well, the dissent was very interesting. The interest rate decision itself was kind of ho-hum here. But the dissent is what obviously caught everybody's eyes. And I think it's also the fact that the three people dissenting were, you know, sort of not the usual vocal dissenters. And they're all Fed presidents from, if you will, the heartland. You know, does that predispose them to look at inflation in a little bit of a different way? Possibly. but the fact that it was a dissent over the language is almost in an odd way, goes to the heart of something that Kevin Warsh, the soon-to-be new chair, has sort of put out there as something he wants to address. It's about communication. He has a very different view of communication. I think he might say, Well, this is kind of nuts if we've got people dissenting because of the tilt and the language from one FOMC statement to another. That's not really what it should be because it's not clear at all. It's not explicit. The market has read this as being these dissenters seeing something very different about inflation. but it's not really clear that that's the case, that they just want to take a more neutral position. So it is very much about communication. I know that the markets are reading into this that they're at confirmation of where they are already at, sort of here in the United States at least, that there won't be a rate cut this year. But that's not clear to me. I think it still depends on, look, tomorrow we're going to get GDP numbers. Thursday, United States time, we're going to get GDP numbers for the first quarter. We're going to get more inflation numbers. All of this is going to be highly interesting. And Powell put out there, he said, in the next two quarters, we should find out if we are correct in our, meaning the Fed, judgment, that the inflationary impact of tariffs is going to fade away as a one-time event. I think that might be some of what the bond market is listening to, quite frankly, because they're saying, oh, that means they might not see it. there might be something else going on that is a concern about inflation. I think that has been overlooked in the statement that he made. The other interesting thing, of course, which is unprecedented, is Chair Powell's decision to stay on as the governor. And he said essentially that he was left with no choice but to do that and that he would be sticking around until the threat of the criminal investigation has truly passed. But take a listen as to one of the many kind of very frank comments he gave about the risk of losing the Fed's independence and the risk of political interference. Look, I think it's at risk. I mean, I think these these, you know, these legal assaults, if you will, as I mentioned, you know, we're the institution is being battered over these things. we having to resort to you know the courts to enforce our legal you know it not so much independence it really the ability to do monetary to make monetary policy without political considerations That what we talking about Jeanette, the term shadow chair kind of typically refers to an incoming chair of the Fed, right? But do you think this is a role that perhaps gets assumed now by Fed Chair Powell, even if he is sort of a very low profile governor? Well, yeah, he said he wants to be there to guard, if you will, the independence of the Fed. Just him staying on means that Stephen Mirren goes off. And I think that's significant. It changes the weight and character of the Fed itself, of the board itself. So I think that's significant. And the you know, when I was playing back the press conference in my mind afterwards, one of the surprises I had myself was that he made the statement that he was going to stay on right up front in the press conference. I sort of thought he might introduce that two thirds of the way through or maybe even at the end. And I realize he may have done that because he really, really, really wanted to talk about Fed independence. I think he wanted that to be his legacy statement to the press corps. And it showed how strongly he felt about that. But he's been talking about that for a few months now, certainly since the legal actions or the threatened legal actions. But even at the end of last year, he has a deep-seated pride in the people and in the institution. and I think he will, personally, I think he will do it in the right way by staying on the board and it will not be disruptive. But I think he feels he has a right to stay there and help the Fed retain appropriate levels of independence. So, Jeanette, when it comes to the U.S. economy, where are we on inflation? I know that nobody wants to use the infamous transitory word. But if we get past the war in Iran, is inflation actually being reined in? That is a much bigger question right now, Sherry, than it was a couple of months ago, I think. And so for the first time, and I'm starting to see economists and others really raised this issue of, is this all just tariff-related, the non-energy spike? Powell specifically mentioned not all of the inflation spike or the level of inflation that is too high, that is elevated, is attributable to energy spikes because of the war. Jeanette Garrity, chief economist at Robertson-Stevens, speaking to Bloomberg's Heidi Stroud-Watts and Sherry Ahn. Thanks for listening to today's episode of the Bloomberg Daybreak Asia Edition podcast. Each weekday, we look at the story shaping markets, finance, and geopolitics in the Asia-Pacific. 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 Krizner, and this is Bloomberg. I'm Francine Lacqua, an award-winning journalist, and I've got a new podcast, Leaders with Francine Lacqua from Bloomberg Podcasts. I've interviewed everyone from heads of state to fashion icons about the news of the moment, but I've always been curious, Who are these people as leaders? I don't think there's one right way to be a leader. Make decisions. A poor decision is always better than no decision. Listen to new episodes every other Monday. Follow Leaders with Francine Lacroix wherever you get your podcasts. What separates good leaders from transformational ones? I'm Jessica Chen, and in Season 2 of Leading by Example, We'll sit down with executives like Grace Chen of Birdie Gray to find out. It's important to understand where you spike, but also really acknowledge where you don't and find people who can fill those gaps. Listen to Leading by Example, executives making an impact on the iHeartRadio app, Apple Podcasts or wherever you get your podcasts.
