This is Bloomberg day Break Weekend, our global look at the top stories in the coming week from our day Break anchors all around the world, and straight ahead on the program, a look at the US housing market ahead of the big spring home buying season and some highly anticipated data on inflation and economic growth. I'm Tom Busby in New York.
I'm Stephen carolind London, where we're looking ahead to AI's starring role at this year's Mobile World's Congress in Barcelona.
And I'm Ran Curtis in Hong Kong. I'll take a look at my news upcoming results, whether AI makes an intercot.
That's all straight ahead on Bloomberg Daybreak Weekend, The business news you need to wrap up your week, Available on Apple, Spotify, the Bloomberg Business Appen everywhere you get your podcasts.
Good day to you. I'm Tom Busby and we begin today's program with home buyers, home sellers, home builders, and home improf been chains for more on where we stand. We welcome Bloomberg Intelligence US home building analyst Drew Reading.
Drew, thanks for being here, Thanks for having me.
Well, let's start with the biggest roadblocks in the home buying selling Everybody sky high home prices, a dearth of homes on the marketplace, and mortgage rates, which just last week rose back above seven percent for the first time since early December. Drew, is there any relief in sight, any good news out of this.
I think you hit the nail on the head with the challenges facing the home buyer. I mean, we've had home prices rise more than forty percent over the last couple of years. We've had interest rates rise from three percent now above seven percent. We have the worst affordability on record if you look at monthly payments relative to income. We've been describing the housing market as kind of a tale of two markets. On one hand, you have the resale market, who's battling not only the high rates, but
low inventory and homeowners who don't want to sell. On the other hand, you have the new home market, where builders have done extremely well. Sales actually grew in twenty twenty three, and that's because they've been bringing more supply to the market. They've been pretty aggressive and adjusting base prices.
So if you look at prices in the new home market, they were actually down double digits in twenty twenty three, And most importantly, they've been offering financing incentives, so that's been a big tool in their belt that the existing home market really doesn't have to leverage. So a buyer who's going out into the market now is looking at
something in the seven percent range. Builders are able to offer lower rates somewhere in the five and a half to six percent range, So that's been a huge differentiator for them.
Now, you follow the builders, so you know what they do, where they do it, how they think. Home builder sentiment actually was I think a six month high right now. However, they also face a lot of challenges, don't they. Not enough available land, not enough of skilled labor. I mean, how are they still building these homes where people want to buy with the challenges that they face.
Yeah, builders have been facing these challenges for quite some time now. You mentioned, you know, the lack of available labor, particularly as volumes heat up, the lack of developed land, which we think could become even more of a problem for the industry. But the way I would look at the new home market is, on one hand, you have the large, well capitalized, pickly traded home builders, and on
the other hand you have smaller private peers. We think that the large builders are going to continue to take market share from those smaller private piers. And the main reason is because a lot of the private builders are reliant on regional bank financing in order to grow, whether
it's for land acquisition, land development, or construction loans. And with not only the cost of those loans going higher, but also the availability as the economy has weakened a little bit, we're seeing their ability to access that growth capital has come down. We think that the large builders are stepping in to fill the void because they've got strong balance sheets, they've got long land pipelines, and they're
able to self develop their land. So we think that, you know, as we move through twenty twenty four and into twenty twenty five, they'll continue to be the beneficiaries.
Now I imagine also some of these builders, the ones benefiting the most, are the ones building homes where people want to live. And that means the Sun Belt Florida, all the way across to Texas and the Southwest. Are there other builders having success? You know, the Toll Brothers up in the northeast. Are they building big houses, make mansions or even mansions? Are are they all seeing you know, the rising tide lift all boats in the housing market.
Yeah, that's a great question. And you know, when you look big picture, the Sunbelt is really where you want to be due to more favorable demographic patterns. That's where the population shifting, that's where the job growth is. Affordability is better, so you see some migration out of some of the higher cost markets. What's interesting right now is we are seeing pretty broad based rebound in the new
home market across the country. Some of the hardest hit markets in the back half of twenty twenty two were in the West, think California, the Pacific Northwest to Southwest, but we're even seeing a strong rebound there. You mentioned the Northeast, which is actually an interesting example because if you look at sales paces that the builders have been doing relative to twenty nineteen, the Northeast and the Midwest
have held up really well. And I think part of that has to do with the fact that maybe these are markets that didn't participate as much on the way up, so they weren't the boom markets, but they also didn't follow as much on the way down. When things got a little bit hairy. Theer in the back half of twenty twenty two and into twenty twenty three, So the Northeast has done really well. We heard from Toll Brothers recently they noticed strength across their entire footprint, across all
of their price points. So it's been a pretty broad based rally.
Wow, yeah, everybody wins now. One thing you have been reporting on though, is is more modest, moderately priced new homes, more of them going up. What can you tell us about that.
There's been a decided shift over the last several years from builders who wanted to engage more at the entry level. One of the reasons is because that's where a lot of the demographic based demand is now and will be in the coming years. The other reason that they're targeting that market is for relative affordability. As I mentioned, affordability
is near the worst on records. So one way builders are looking to address that is through doing smaller square footage floor plans, which allows them to get the price down. They're also doing projects with more density, so they could spread more units over the same piece of land and spread out costs that way and address affordability for the buyer through density. So there's a couple of different ways
they're doing it. It's something that's been ongoing for a couple of years, but it's starting to be emphasized a little bit more. Now.
One last question, Drew, and it's about last week we had home depot earnings. This week we have lows. Are we likely to see the same kind of not disappointing results, but clearly home improvement projects have slowed down.
Yeah, expectations coming into the print for lows are all that high. As you mentioned, home Deep gives some rather disappointing guidance I think on the outlook for twenty twenty four, calling for the market to be down about one percent, I expect to hear similar commentary from Loew's.
Our thanks to Bloomberg Intelligence US home building analyst Drew Redding, and up next, some closely watched economic data points out this week what they could mean for the Fed's next policy meeting just three weeks from now. And for more we welcome Bloomberg International Economic and Policy correspondent Michael McKee. Well, let's start with the Fed's preferred measure of inflation. This is a mouthful. The personal consumption expenditure core price index
for the month of January and the fourth quarter. That's the biggie this week. What are you expecting to see?
Well, we get to the fourth quarter as part of the GDP report. It's a revision, so that doesn't get as much attention from the Fed because it's quarterly, it's
over a three month average. But the monthly number, which represents the latest month that we have will be January, and that's the one that the FED looks at because it gives them the most complete picture they think of where inflation is at the moment, and that's going to be the key for them, where inflation is at the moment in the PCE, because in the CPI, obviously it
was not good news for January. Now, the forecast for the PCE is for a two point four percent year over year increase, which is down from two point six the year before, and a two point eight percent, down from two point nine percent for the core. FED Vice chair Phillip Jefferson spoke last week and said the FED
staff is basically predicting the same thing. So there are people out there who think we might see an increase in the PCE this month because of some unusual factors, but the Fed seems sanguine going into the number.
Now, what are the factors that we see that could make inflation even worse.
Well, one of the questions is what's happening with energy and with food because those went up in the CPI report, expected to but not by as much as they did. And then the ongoing question is always what's happening with housing? The CPI showed unexpected strength in housing inflation when it's supposed to be according to everybody who follows it going down. It's less of a weight in the PCE, so it may not make as much of a difference, but it
could affect that number as well. But the big one in the PCE, this is what I call the Pogo problem. We have met the enemy and he is us. Our listeners are at fault because so much trading has gone on in the markets, and obviously the markets have continued to go up, so stock trading fees are a big component of why the PCE has stayed high. And there are some analysts who really follow this stuff closely who think that's the number that's going to push PCE higher and instead of lower.
Let's go back to GDP because you talked about that. We're going to get a reading, a second reading on fourth quarter GDP. What kind of growth overall growth are we expecting in the economy, and also what does that mean for the full year?
Oh, if we only knew what it meant for the full year. Three point three percent was the initial read, and the economists we survey don't expect a change in that, just a little bit of a change in the composition, with more coming from business investment in inventories and a little bit less from personal consumption consumer spending. But for the year, the view has been that we are seeing a slowing in the economy, and we have seen some
numbers that suggest that. But I go back to some of the remarks from FED officials in this last week where they warn that one of the dangers is that consumer spending doesn't drop off that much, and that we do see a stronger than expected economy through the year. That could put pressure on inflation, and that would have an impact on if and when they start cutting interest rates. So it's something to keep in mind. It's really hard to make a prediction because it's been so it's been
so weird coming out of the pandemic. Nobody expected the kind of recovery that we've gotten, and it could keep going.
Well, that's for sure. I mean, even with a slight pullback in consumer spending, three point three percent growth in the final three months of the year is pretty strong. Good news in Washington, certainly for this administration as we go into an election year.
Yeah, they should be meeting to figure out how they're going to sell all this to the American public because obviously the political polls don't match what's happening with the economy at this point. But overall, if the economy doesn't go into recession and inflation does come down, then that could be good news for Joe Biden. The saying is always it's the economy stupid, and people have wondered if that's going to be the case this year, and we'll see.
Well, a lot to look forward to, and our thanks to Bloomberg International Economic and Policy correspondent Michael McKee, coming up on Bloomberg Day Break weekend to look ahead to the Mobile World Congress that takes place in Spain this week. I'm Tom Busby, and this is Bloomberg. This is Bloomberg Day Break weekend, our global look ahead at the top stories for investors in the coming week. I'm Tom Busby.
In New York.
Up later in our program a look at inflation in New Zealand and the next move from its bank, as well as earnings from China's biggest tech giant, but first. Mobile technology arguably one of the fastest growing sectors of the twenty first century and one investors think has boundless possibilities. In the coming days, everyone who is anyone in the world of connectivity will convene under one roof at the annual Mobile World Congress in Barcelona, trading ideas and discussing
the future. But can telecom keep up with multiple high paced advancements in the world of tech. For more, Let's go to London and bring in Bloomberg Daybreak anchor Steven Carroll.
Tom The market frenzy about tech and artificial intelligence driven gains seems to have reached fever pitch this earning season. Telecommunications is one of the many industries that's racing to adapt and harness its advantages. This year's Mobile World Congress in Barcelona will see major tech companies, including the likes of Meta, lining up to showcase their AI products to
the sector. A recent survey of more than four hundred telecoms industry professionals by AI chip giant Nvidia underlined this, over half of respondents agreed or strongly agreed that adopting AI will be a source of competitive advantage. That's a score that's up from just thirty nine percent in twenty twenty two. In Nvidia themselves are seeing blockbuster growth thanks to the technology, and their latest results show no sign
of that growth slowing down. The CEO of Futurum, Daniel Newman, and bab o'donald, chief analyst at TECHnalysis, say the pressure is on for Nvidia to continue these gains.
The only result that was going to be acceptable was not only a beat, but a substantial beat and a guidance upbeat because people are beginning to wonder, how many consecutive quarters can this company continue to run with triple digit revenue growth and high triple digit earnings growth. But it seems each quarter they continue to surprise.
This is a company that continues to execute and completely blow away everybody's most robust forecast. I mean, they raise their own forecast, the street raises the forecast, and they still beat them. It's kind of crazy. And of course the big question has been how.
Long can this continue?
How long can this go on. The competition has never been more fierce than it is right now foreign Vidia, but they have a huge headstart.
Do you think there is sort of a consensus in the industry to put some competitive pressure back on.
In video, they've been innovating at a pace that nobody else has been able to keep up.
With Daniel Newman from Futuram and Bob O'Donnell at tech Analysis, they're discussing the latest results from Nvidia with Bloomberg. Well, perhaps some of those future gains could come from AI collaborations with the telecoms industry. Those conversations will be happening at Mobile World Congress in the coming days. Apart from the latest tech, industry players will also be considering the regulatory requirements that are facing some telecoms companies that aren't
applicable to their big tech cousins. Telecoms may just be at the beginning of its AI journey, but will it be a dalliance or a long lasting partnership. While I've been discussing all of this with our European telecoms and chips, Jillian Deutsch and I started by asking here how important Mobile World Congress is in setting the agenda for the sector.
Yeah, this is really the key event for the year, and I think it's gonna be fun to kind of see not as European telcos which have lots of things that they're pushing, for example, deregulation and lots of m Andy talks across Europe, but also a lot of different international telcos and also major US tech companies coming to all descending on Barcelona to kind of really set the agenda for tacos in tech the next year.
So AI is one of the key themes at this year's events, talk us through where Telecom's companies are with them implementing that technology and where they found success with it.
Yeah, I mean AI has definitely hit a taco sector of course as well, and so I think we're going to be seeing lots of announcements about, you know, different offerings with different US tech giants for example, and how they're integrating artificial intelligence into their offerings, you know. I mean, I just definitely think a lot of this is hype. I think anyone who founds tech is used to hypes of course, and AI is obviously in the most recent ones.
But I do think there's a lot of really interesting ways that companies are trying to integrate AI into their offerings, really kind of to improve the experience for consumers when it comes to customer service also with businesses, and really kind of creating you know, more streamlined offerings for their for their clients. And so I think a lot of this also will be kind of in with kind of
key announcements with big tech giants. So we already saw now key is stock going up recently when they announced a partnership with the Videos. Those kind of big names obviously are really important to show that they are really serious about AI and intergeting AI. But also I think
we'll see some interesting ones. You know, BT for example, last year announced pretty massive job cuts fifty five thousand people until twenty to thirty and that's not entirely but at least in part because they're integrating AI, so it's kind of helping them to trim from the fat in the company. And so I think that's we might see some more more kind of uses of AI in that sense.
So does it do we have the sense that European companies are sufficiently investing in this given that so many of the technology advancements are coming from US firms.
That's a great question. I mean, celcos are It's funny, they are really afraid of just becoming you know, a pipe in the ground, right, And so it's kind of sparked this kind of panic a lot of among a lot of tech tech taco companies across Europe, and so that has led to this massive push to keep innovating and and there are a lot of questions about whether or not they actually can outcompete you know, Silicon Valley giants that have you know, massive market caps and have
all of that talents obviously you know, really harmonized or centralized into one location and already in their companies, and a lot of what these celcos are doing is to really trying to compete with them. So you see a lot of kind of IT solutions and cloud solutions and networks and factories and these are all things that actually
put tuco's in direct competition with US tech giants. And I think there's a lot of skepticism that they can really outcompete tech giants, but that is really a crucial crucial thing for tacos going forward, if they really want to make sure they're not just you know a utility company.
So it is a question of cooperation as well as some competition in these areas too.
Yeah, absolute, I me, you know, we already do see lots of tacos and tech giants working together. They have for a long time when it comes to data centers and other kinds of partnerships they've had, or even you know, when you open up your you know, you turn on your TV, you probably see YouTube or Netflix offerings, right, So telcos really do rely on us tech giants as well.
It's kind of a fren of me love hate relationship between the two, and I do think we see that that kind of relationship really play out in Brussels, where I'm based and covered tech regulation or have cover tech Regnation. A lot of these techos argue that they're way more over regulated than they're often American counterparts, and are really pushing for tucos to help out with with helping tech giants. Excuse me, helping telcos with these massive, expensive network infrastructure investments.
And they say, you know a lot of these tech giants get to piggyback off of the really expensive and complicated work that they do.
Yeah, that's a really just in conversation that I'm sure will be featuring two at Mobile Work Congress. What you know, the European Commission recently published a white paper on this on reforms to the market. What were the problems that that white paper identified.
I think it's really interesting because Taco's for the past least couple of years, I've really been, like I said, arguing that tech companies need to help with the bill for infrastructure, and this argument was dubbed fair share Tech companies need to pair their fair share for infrastructure. That specific lobbing effort failed, but what they did do is really put Taco's back at the top of regulator's agenda. They've been really overlooked for the past five plus years.
So this white paper was really interesting because it actually dives into the issues that Tacos have been complaining about for years and acknowledge a lot of the issues that they've been complaining about. You know, it's an incredibly fragmented market with over fifty players in you across the EU, you know, compared to the United States where they're early three maybe four kind of massive players. They do knowledge that they're overregulated. There's too much bureaucracy to get permits
et cetera. But I think when it comes to the actual solutions, I think most of the telcos I talk to feel like the paper is kind of lacking. There's some talk about, oh, we should harmonize spectrum policies atle bit more across the European Union, and we need to make it easier for companies to achieve scale by merging across borders. But telco's for their main number one ask really has been to merge in market, and there's very
little acknowledgement of that. And you know, and even when when the Commission was unveiling this paper, you know, we had Margaret Investigate, the competition chief for the European Commission, saying, you know, in market consolidation is not the answer. So I think that was kind of met with a lot
of sadness among the telcos. But it also will have a new commission coming in next year, and so it really is a question of what is that next commission, who's in charge, what do they think is actually the solution? Do they even do they take up telcos as a topic end item?
Yeah, so an interesting time for those companies too. I mean we're also in the midst of earning season of course as well, what's sort of financial state are these companies in.
Not not a great one in them And there's obviously a lot of nuance between companies and different markets, but these more broadly speaking, we definitely see declining revenues for almost all of these tacos year on year, and I think there's some really interesting trends that have come out of that. So I think a good one to look at is Votaphone, for example. You know, they're really a key pan European toco. They're actually exiting a lot of markets.
You know, they've sold off their operations in Spain, is going to They're trying to exit Italy. There's a massive merger in the UK, so I mean there's one, but this is an example of the kind of massive M and A talks we're seeing across Europe. And you know, this is really so that companies can try to achieve that scale that they say is necessary to actually make the kind of big infrastructure investments that they need to remain competitive. So every kind of company is trying to
scramble to find solutions in that sense. But we're also seeing a lot of foreign investment more hedge funds coming in. Whenever I talk to telco's and I ask, you know, where do you see this market in five years? Really no one has a clear pick sure or what it's going to look like, which is kind of frightening but also quite exciting I think for companies. So it'll be very interesting to see where that kind of talk is at ahead of this at the conference.
Because one of the really big investments these companies have been making has been in five G networks. Are those investments paying off for these companies or when are they expected to a great question.
I mean, I think what the best way to look at is to start with the Tulco infrastructure companies. So this is no Ki and Erickson. They really hold this kind of Nordic do compily very really interesting because they're at the mercy of network operators and no Key in their recent earnings was saying, look, you know, these companies have to start investing in five G if they want
to really remain competitive with each other. And they say that these investments will start soon, but they really don't have a great idea of when that actually will happen. And I think, you know, we do see inflation decreasing. Of course, energy costs are lower than they have been, so I think there's some optimism that maybe this is the year where things start to turn around, but it's not a very clear picture when this actually could turn around.
I also not mention, you know, not just with five G, which is obviously a massive focus for tacos, but there's also a lot of talk about open ram, which is basically a technology that allows network operators to pick and choose parts from different suppliers. There's been a lot to talk about open round for a long times when pushed by the US government, but it never really gained traction until the end of last year when at and T and that's some massive contract with Ericson to actually start
rolling this out in the US. We see Deutsche Telcom also in Germany doing this with Nokia, and so I think that's also giving companies some hope, and that might that might also kind of help for Nokia and Erickson, and that might kind of stimulate more and more network infrastructure investment. So maybe this is the year, but I'll be curious to see if there's actually much optimism in Barcelona about it,
or if this is just you know, another year. There's some hope, but never actually any any reality.
Thanks too, Bloomberg's European Telecoms and Chips reporter Gillian Deutsch. There, I'm Stephen Carroll in London. You can catch us every weekday morning here for Bloomberg Daybreak Europe. Begetting at six am in London at one am on Wall Streets.
Tom, Thank you, Steven, and coming up on Bloomberg day Break weekend, another closely watched central bank rate decision and earnings from a Chinese tech giant. I'm Tom Busby, and this is Bloomberg. I'm Tom Busby in New York with your global look ahead at the top stories for investors
in the coming week. For markets in the Asia Pacific region, two things stand out in the week ahead, a rate decision from New Zealand Central Bank and an earnings report from online retail giant and search giant by Do for more. Let's get to Bloomberg's Doug Chrisner, co host of Daybreak Asia.
Tom.
We begin with Kiwi inflation. We know higher prices have been sticky in several economies, and New Zealand is no exception. The question now is over the response on the part of central bankers the Reserve Bank of New Zealand will meet in the week ahead. Recently, the swaps market has been pricing in a possible rate hike from the RBNZ in the coming months. How real is that possibility though? Let's bring in James McIntyre from Bloomberg Economics Asia. He
joins us from our studios in Sydney. James, always a pleasure, Thanks for joining us. I'm going to ask you that question. How real is the possibility that the RBNZ raises rates again?
Great?
Look, thanks for having me, it's great to be here. And look, I think that I think it's not a real possibility, but their threat is there. The RBNZ have been quite hawkish still, even though they've done a lot and they went earlier than everyone else, and also even though they are getting things moving in the right direction, whether it's the inflation story with the New Zealand, the unemployment rate, labor capacity beginning to ease up, a lot
of that is moving in the right direction. But they've stayed tremendously hawkish. There's a few reasons why, but I think that they're more a threat than anything. It's likely to become a reality over the next few months.
When you look at inflation expectations, though, can you give me a sense of how that measure has been moving.
Yeah, well, there is a there's a key measure of inflation expectations two year ahead expectations from a survey the RBNZ does, and those expectations actually dropped down to about two and a half percent. Now one to three percent is the rbnz's target band, and they want to hit that midpoint of two. So two and a half percent for inflation over the next two years is not quite
there yet. But more than a quarter of the participants in that survey saw that headline inflation measure moving to the midpoint of the rbnz's banned by the end of this year. So things are moving in the right direction there. But I think that that might not actually necessarily be the thing that the rbnz's super worried about at this point. I think maybe that market pricing, which before traders had begun to move to price in the chance of another hike,
that market pricing had seen those two year swaps. So if we think about the to your inflation expectations from economists to your swaps out there in markets, those had been beginning to price in more and more of the arbyens at easing, and that's something that we think that they might have wanted to or that might be beginning to start to try and talk against right now.
So from what I've read about the key we inflation, the headn't line number is cooling a bit, but there are elements that are proving to be sticky. Where do we find those elements in the economy.
Yeah, it's in the non tradable side of the New Zealand inflation basket. So we've had the tradable inflation falling, and that's especially things like the energy price decline and the goods price deflation that we've been seeing coming from all around the world, and those are the things that are kind of actually not really within the ARBs control.
Those non tradable side of things. Services inflation in particular, they're proving a little bit stickier, and in the fourth quarter data that we had back at the end of January on the twenty fourth, they were quite a bit stronger than expected and not only by economists, but the arbiens it's own exit dictations for those. So that's that's a lot of the services side within the economy, rents being a bit of a challenge there and some of the other services pricing that some of the domestic labor
costs might be a problem. For now we think that that things are on track for those to EBB. But however, the arben said, this is this dynamic that we're that we've got with the hawkishness and some of that market pricing, and even some of our economists peers thinking that the Arbenz might want to actually do a little bit more
to take a little bit of extra insurance. So not quite there yet on the non tradables front, which is the part that from the domestic side and from the what the Arbenz can control where they've probably got their their maximum point of nervousness.
Stay.
When I think of higher prices in New Zealand, the property market comes to mind when you look at how home buyers have been behaving in an environment where rates have been elevated, at least on the mortgage side. Has there been a shift? Is are sales contracting a bit, our prices coming down? What's the behavior of the housing market?
Pit, Yeah, we've had a bit of a turn in the housing market. So we had been in a decline as the housing market was responding to the rate hikes thus far. But as the RBNZ has been on that pause, we have seen some life come back into the property market. Now part of that has been the very very strong demand for property that we've seen. So like Australia, New Zealand has been recently experiencing a really massive rebound in
its migration. We're getting population growth in the high twos, possibly getting towards three percent, and that's really showing up across a whole range of parts of the economy. But in the property sector it's showing up in extra demand for rents, an inflation problem for the RBNZ. And on the price side of the market, we're seeing a little bit of a pickup and activity a little bit more
confidence than some of those prices starting to rise. So that's again one of the sort of if you're on the camp of cutting rates soon in New Zealand, you'd be looking at where the economy is going in terms of activity, consumer spending, the unemployment rate, and where the
inflation track is ultimately going. But if you were going to be a little bit hawkish and sort of thinking that the RBNZ could hike that property sector and the little bit of a migration stirred revival there, along with inflation on the non tradable side being a little bit too high. They're the kind of factors that you're balancing there.
I'm sure it's going to be a very interesting conversation around the table at the meeting of the Reserve Bank of New Zealand in the week ahead. James, thank you so much for helping us preview the meeting. James McIntyre from Bloomberg Economics Asia. Up next we go to Hong Kong and the other host of Daybreak Asia, Brian Curtis Doug.
We'll be having a chat with Ernie bot in the coming week as by Do reports its fourth quarter earnings. The ernie chatbot has been generating considerable excitement for Baidou as it looks to capitalize on AI. Erniebot is based on Baidu's internally developed large language model, and like others, it can generate tech images and videos. Bidou said at the end of December that the chatbot had attracted more
than one hundred million users. We thought it would be a good time to take a look at how baid and other companies in Asia are doing on the generative AI front, where the buzz seems to be a little bit less than what we're hearing in the United States. And joining us now for a look at baido is Jumping Huang, who covers technology companies for Bloomberg News. Jumping
thanks very much for coming into our studios. So Bidu is competing against ten Cent and Ali Baba and others to commercialize this as far as we know, and I know we won't know for sure until we get the earnings in the coming week, but as far as we know, how well is byd monetizing AI.
Right before we get deep into earning BA, I would like to know that the fundamental business for Baidu is to search advertisement and it's sort of using advertisement revenue to fund its risky projects like Erniba. So for the results we were seeing the coming week, it's essential to see if it's ever a NewView is picking up again during a very difficult time during China's economy.
But back on.
Learning, Yeah, it's sort of the leader, at least in the Chinese internet sphere because it's the first to launch the service to the public and it already started to charge a monthly subscription fee for a premier tier of the Arniba, which costs a dollar promounts. So monetization is kicking off, yes, but we still have to wait and see to see how big of an impact it will have to byduce top line.
Now, I know that China has enforced a law to regulate this area. It's something that China perhaps is in advance over other places like the United States and Europe and others. What do we know about how tough this new law is.
Yeah, so what China did is like for every generative AI service to get online to be used for Chinese users and need to get the pre approval from China's top internet regulator, the CAC, and back earlier last year, the CAC issued its first batch of approvals to Chinese tech giants, including Baidu. So we got like around that doesn't like services that was greenlight by Beijing. And that's also to say that also means that foreign services like GPT and the ones from Google and Microsoft will likely
never be available within China's internet. So we're sort of like seeing yet another episode of the parannel universe of the China Internet. Versus the global Internet.
And how different is the approach of Chinese chatbot compared to those in the West, particularly in light of the overhang of the legislation that's in place.
The Traine spot will like actually do a lot of censorship to prevent some questionable answers from the bots. Whenever you touch upon politics or human rights or actually if you're trying to type the name of Chinese president, in many of the Chinese spots, they won't even let you to continue the conversation. So I think data is one thing. When we talk about whether it's like training data or like the output data, it's sort of filtered and self censored.
That could have a negative impact on the effectiveness of the Chinese spots.
And we might think that the search leader in China would have almost a step ahead or a leading start against other companies. But I understand that Chinese companies are kind of of well armed with ample CAPEX built into the spending model for this year. Are we expecting to see a lot of money spent on this?
Yeah, Actually, it's quite funny. The way it's calling China is a wall of one hundred models, meaning like whether it's like tech giants or startups there, they're trying to build their own models instead of applications. Because in the West, GPT is a clear winner, and in China, like not everyone's buying by do well be the Chinese version of
open Ai. Yet, so venture capitalists are trying to fund a lot of like rival models and for robbing THEE is trying to argue, hey, let's stop building model because it's a waste of resources. Let's try build applications on top of learning.
And if we were to set aside generative intelligence and this push on developing a chatbot, how does Buyd's earnings look otherwise?
Yeah, that goes back to my first point about advertising. So in advertising, we know it is closely tracked with China's macro economy, which is not in a good shape because it's dealing with a couple of fundamental problems like deflation, use, unemployment, and a shrinking population. And for bay Do, it's the bread and butter of its ad revenue comes from the search revenue, and traditionally automobile makers and travel agencies will
be a big spender in search ads. It would be great if the company provide us any breakdown or color about who's spending more in terms of search ad and who's spending less, so we will get a better idea of where the Chinese economy is going.
Japping, thanks so much for joining us. Chapping Huang, who covers technology companies for Bloomberg News. I'm Brian Curtis along with Doug Christner. You can catch us every weekday here for or Bloomberg day Break Asia, beginning at nine am in Hong Kong and six pm on Wall Street.
Tom thank you, Brian, and that does it for this edition of Bloomberg day Break Weekend. Join us again Monday morning at five am Wall Street time for the latest on the market's overseas and the news you need to start your day. I'm Tom Busby. Stay with us. Top stories and global business headlines are coming up right now.