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Welcome to the Daybreak Asia podcast. I'm Charlie Pelle. Doug Chrisner has the day off. Asian shares eased from records, oil held gains as efforts to revive a peace deal with or On showed little progress, even as the AI driven rally continues to propel equities to records. Financial markets have been whipsawed by geopolitical headlines after an escalation in
Middle East hostilities jeopardized peace negotiations. For more on the markets, we heard from Willem Sell's global CIO at HSBC Private Bank and Premiere Wealth, and he spoke to Bloomberg TV hosts Paul Allen and Heidi Stroud Watts.
I want to start off on that tic theme. I mean, your most recent report talks about the importance of investing in an AI LID future. But if we drill into that, what does that mean Specifically, you're buying chip makers, you're buying ASML energy stocks, all of the above, or is there something else in there that that investors should be looking at.
All of the above. You know, we need to invest in in that, you know, the the ecosystem, which is of course AI chip makers, but also the enablers as well as the adopters. But I think it's very important to try to at least have a little bit of sector diversification and style diversification by also going to the rest of the ecosystem which feeds that, ie the energy.
The energy security theme. The reason why we call it energy security is of course because of the conflict and even the Russia Ukraine War as well, we saw that, you know, countries want to invest in that energy independence, and of course the demand for energy is further enhanced you know, buy AI. So that's important because so much of the economy and of earnings is driven by I that you don't just want to be in one single sector.
Just getting back to that all the above theme where we heard from Jensen Huang yesterday. He was talking about software companies and how they won't go out of business because of AI. He said, it's actually an incredible time to be a software company. Do you buy into that narrative?
Well, we see that for example into hiring as well. So amongst economists there's a lot of discussion as to whether you know, people will be laid off at this point in time, there's actually a lot of demand and you know for software developers, for consultants as well, who can install that AI into you know, into the corporate sector. I think within the software business it's very very important
to try to differentiate. There are indeed some businesses that don't have demods, that don't have the competitive advantage fees have VEI, but there's a lot of them that are very well integrated with their clients, that have a lot of proprietary data, and therefore it's very difficult to push those out of business. They are going to do very well. They need to be integrated and they can be enhanced
as well in their capability by AI. They not just the potential casualty, they can also benefit you know, from that day it to big their software more powerful.
Well, there's obviously a huge wave of AI and big tech IPOs and deals that are almost upon us. We've had on Propit having that first mover up your edge by filing first Open II to come. We had the big fundraising from Alphabet, Google Overnight as well and SpaceX. How much interest do you think there's going to be when it comes to your clients for being able to get access to these deals.
Yeah, there will certainly be interest, But I think there is a lot of speculation in the market about whether this would hurt the index overall because of sort of a supply you know effect, vacuum cleaner effact, there's some call it.
You know.
Historically, these the impact on the market tends to be very very small if you look back at very important IPOs. Also, it's important to look at the free float, right you know, which is which is a small section. I think a lot of those companies have a different risk profile, you know than the Magnificent seven, so it's not necessarily one for one, you know, and comparable. So people won't necessarily take money out of those Magnificent seven or other stocks
to go to go into that. So I think the the the AI will need to be driven higher by those earnings. So as long as you believe, as we do, that more and more companies are installing, that more and more consumers are using it, that companies are monetizing it, you know, through subscription advertising in others, you know, that that earning tailwind you know, will continue to drive up, you know, the sector.
There is that risk in terms of being first to tap the market that that test of particularly the US market, for for depth, for liquidity, for the investor appetite that you allude to, and I'm sure that's the case when it comes to Asian investors as well. Right, do you think in the short or medium term there is that risk that some of that interest will get sucked out of other assets and other names, and should we prepare for some volatility?
So I think there's still a lot of liquidity on the sidelines. I think the initial i pls will will not be big enough to to to drain the liquidity out of the market. And the question is obviously do you get secondary you know deals as well and more of those stocks coming to the market that free float increasing. But I think there is that liquidity, and the equity marketer is the liquidity in the bond market as well.
But one thing that I would say is that, of course we can't just talk about the tailwind of AI. We also still have the cyclical headwind from the uncertainty around you know, the Middle East. What I think that will do is lead to market to market volatility, not an equity market correction. But we have to be fully prepared for you know, the odd inflation or growth number or illustrations from companies that their supply chains are being
interrupted to lead to some mark to market volatility. We are with the treasury at a level where you know what we call the danger zone, where that Treasury level, when you get more volatility, that then feeds through into equity market volatility. So people need to prepare for that, but they need to be continued to be exposed to
the market up site. And how do you balance those two things well, by building resilient portfolios with gold, with treasuries, with hedge funds, with alternative assets, and by trying to have some sexor diversification as well.
You mentioned a few volatility factors there. I want to inject one more potential risk to this goal run. Where do you place the chances of a FED rate hike before the end of the year.
We don't have a federate high penciled in, and to some extent that is because in the US the natural gas prices, for example, have gone much much less than in Europe, so the effect that you see around the
world is differentiated. The other thing, obviously, is that looks at both inflation and ed growth, So in our view, you don't get that federate hike and that obviously to some extent is an anchor for markets if we're right about that, and probably one of the things that helps the markets have that resilience as well that we see at this current stage.
Well them sells Global CIO at HSBC, Private Bank and Premier Well speaking to Bloomberg TV hosts highly Stround Wants and Paul Allen. Up next, we'll take you to type A where COMPUTEXT twenty twenty six is underway. That's coming up on the Daybreak Asia podcast. Welcome back to the Daybreak Asia podcast. I'm Charlie Pellett. Doug Chrisner has the day off. We take you to type Ay where COMPUTECHS twenty twenty six is underway. It is Asia's largest tech showcase.
CEOs from the world's leading technology companies are gathering to discuss the outlook for AI, robotics and chips and this is where we have the chance to speak to Craig McDonald abb Robotics business Line Managing Director, robot Industries, and he spoke to Bloomberg Steven Engel.
So how is AI being infused? I mean Jensen along and everyone else here from Qualcom CEO all talking about agentic AI is the next new springboard for the adoption and investment and profitability of AI. How is agentic AI being infused into a traditional industrial tool like you have? This's been around since the nineteen seventies. How is it being improved?
So ABB started in robotics in nineteen seventy four. I think we were the first introduced microprocessor controls into the robotic space, and over the next fifty years we've come up with a very wide range of industrial, collaborative and mobile robots. And we spent probably the last twenty years evolving that system now into robots that can operate more
autonomously and versatile versus in a more versatile manner. So think of robots with intelligent eyes, think of robots with hands and ability to manipulate, and also think of robots that now have a brain. But these are evolving to a point where ultimately simulation becomes more and more important
because you're e merging so many different technologies. The ability to create hyper realistic synthetic data to recreate these environments is truly bringing these technologies together and is really the next step that we're working on.
So, how are you then as well partnering within video because A Video stole all the headlines yesterday, no doubt, with their new laptop to take on the likes of Intel and AMD. But of course we all know that they the orchestrac architecture to go into those big data centers and they have the new infrastructure with Vera Rubin in full production right now. So you also use Nvidia in a way to sort of virtually game out a scenario for a client virtually so they don't have to
necessarily have a physical prototype. Tell us about that.
Yeah, So if you look up until now, synthetic data generation hasn't been accurately enough for robotics. Many of these applications are fifty to sixty percent accurate, and when it comes to systems that need to operate safely, at speed and at skill in an industrial hardened environment, it hasn't been achievable over the last year and a bits, and
we announced in March our collaboration within video. We've really merged their capabilities in accelerated compute and their abilities with wide world simulation with our industrial knowledge, our digital twin capability, and of course our robots to address this sym to real gap, and in a number of applications, most notably in the electronic space, we managed to shrink that sim
to real gap to a very very close correlation. So we can with a ninety nine percent accuracy now recreate robot motion in the virtual space when compared to the real space.
So what kind of cost savings are we talking about? And also more importantly perhaps is time to market?
Oh?
Absolutely, you can now reimagine how you bring product to market. So think if you're sitting in Taiwan right now, you're designing a product here, you're having to apply it in China,
apply it in India, apply it in Vietnam. You need to be able to in a concurrent way generate those production systems, but also train them for all these manufacturing edge cases so that you can then concurrently engineer, taking probably out about fifty percent out of your time to market, but also at the same time take about forty percent of your total cost out because from day one you've pre trained for all those manufacturing edge cases, so you
can hit productivity much more earlier than traditional systems.
So through this or just the big uptick obviously in physical AI, how are new installations for you guys looking this year.
I mean the electronics space specifically is going through a supercycle. I think there's been a lot of activity on the consumer electronics side, but also more recently, the AI compute side has got to volume levels that have justified robotization. Many of these systems up until now we're only partially automated because of the lower volumes compared to the consumer electronics.
But I think you've all seen the headlines on data centers and how that market is growing exponentially and with that comes the robotization of that space.
What's your strategy for China because they have their own infrastructure and their own indigenous innovation in robotics. Yes, I've seen a lot of automobile factories with ABB robots. No doubt they're going dark factories and the like. But again, I think the cost basis because of their stem to stern supply chain is about forty percent of what. Yeah, I mean you're at the high end really, ABB. But what is your strategy for China as they go up the value chain on their industrialization?
Oh?
Absolutely, I think China is fifty percent of the world's robot market. If you look at the IFR data so they are obviously the dominant player in robotic automation from a market perspective, and we've been there for the last twenty years, and we've built our one of our main production facilities in China, and we've got a long history of helping Chinese system integrators and the ecosystem they evolve
and become more robots capable. Now, there's no doubt it's a competitive space, but at the same time, we are deeply present in China, and we are also using i think the deeply integrated supply chain on the cost side, but also on the system deployment side, this ecosystem of fantastic value providers to come up with many of these solutions. So we're active there.
A number of different parts makers in the whole IT supply chain are talking about key component crunt right now and prices obviously for memories going way up. How is that impacting you? What are you seeing now?
I think in the global market of robotics. Actually we've seen for the last few years, we haven't seen exponential growth in the robotic space, so we haven't quite seen the same pressures on supply chain that you might have been seen coming from say the compute side and electronics yet yet now definitely it's something to keep a close eye on. The good part is, as we went through the COVID time, we retooled many of our supply chains
to become more resilient to possible supply chain shortages. Resilience, certainly, we believe is going to stand us in good stead should they become a tighter supply market.
Could that be exacerbated by the exponential interest in humanoid robots? I know you do industrial robots primarily, you do have a division I think called you ME which is looking at sort of cobots.
Absolutely. Yeah, so we are active in the cobot space, but also we are very active in trying to make our robots more intelligent and essentially utilize many of the characteristics that you see out of a humanoid. We just haven't seen the volume application of the humanoid form factor in the industrial space. We've seen a slightly different form factor.
We see it's not as necessary it unless you need dexterous hands for sorting and things like that in warehouses.
Right, yeah, yeah, it's not. But you can still achieve that dexterity by putting your robot platform one wheels and you can come up with much higher payloads. Now, some of these technologies from humanoids are great await from a supply chain perspective, We're not seeing those volumes and those volume use cases yet impact our supply Chack.
Craig McDonald ABB Robotics, Business Line Managing Director, robot Industries, speaking to Bloomberg Steven Engel from the sidelines of Computechs in Taipei, and we are bringing their conversation to you here on the Daybreak Asia Podcast. Thanks for listening to today's episode of the Bloomberg Daybreak Asia Edition podcast. Each weekday, we look at the story shaping markets, finance, 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 Prisoner and this is Bloomberg