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. Straight ahead on the program, and look ahead to the January jobs report here in the US how that may impact FED policy moving forward.
I'm Caroline Hebcker here in London, where we're looking ahead to the Bank of England great decision and what the Chancellor's plans for growth might mean for them.
I'm Doug Chrisner looking at what lies ahead for China's deep seek.
That's all straight ahead on Bloomberg Daybreak Weekend on Bloomberg eleven three year on New York, Bloomberg ninety nine to one, Washington, DC, Bloomberg ninety two to nine, Boston, DAB Digital Radio, London, Sirius XM one twenty one, and around the world on Bloomberg Radio, dot Com and the Bloomberg Business App.
Good day to you. We begin today's program with the January jobs report. We get non farm pay year old numbers this Friday, eight thirty am Wall Street Time, and for more. We're joined by Michael McKee, Bloomberg International Economics and Policy correspondent. Well Michael twenty twenty four ended with a blowout December jobs report two hundred and fifty six thousand added, ending the year four point one percent unemployment of five decade low. Did the good times continue to January?
Well, that's the question, and we aren't exactly sure. There seems to be a division on Wall Street about how this is all going to work out. Reversion to the mean is a sort of a well known phrase in economics, and that's what economists surveyed by Bloomberg see for the private payrolls number itself two hundred twenty three thousand last month, but for January, they're only at the moment thinking about one hundred and thirty thousand, which would fit the pattern
we saw before that big December number. So that would suggest that the economy or the labor market at least, is slowing down some. But that four point one percent unemployment rate isn't expected to change. So what we have seen sort of in all the ancillary data like jobless claims and things, are that people aren't losing their jobs, but they're not getting hired. It's taking longer to find
new jobs. Business seems to be putting new employment on hold, but they're not getting rid of people yet, And the idea, I guess, is that this report will ratify that.
Now seasonal holiday jobs, we always see it to a decrease in January. Correct, Well, that's the way it used to be.
It's a little bit less that way now, and it's a little bit harder to figure out exactly what the seasonal impact is going to be. We know that the seasonal employees were hired later this year. They showed up in December instead of November. Do they stay on a little bit longer? Do they slowly go away? I think one of the reasons we're looking at the one hundred and thirty thousand is that economists are anticipating those people will have left the jobs. But it's really hard to tell.
The other impact is going to be from the Los Angeles fires because they took place during the survey week for the January payrolls, and we don't know exactly how many businesses were destroyed, but we know a lot from looking at the video, and so there are probably going to be a number of job losses. Some analysts have said as many as twenty thousand that would show up in the report.
And for the economy, we saw Hollywood suddenly stopped some production of TV shows, movies, so it really had an impact, which will lessen over time. Of course, I think things are now weeks later getting back to normal. Well, let's talk about the Federal Reserve. The labor market pretty solid. As you said, we were looking at no change at a four point one unemployment rate. Economic growth we just saw this past week GDP growth fourth quarter a little stronger than expected.
But inflation, that's always the kind of the butt out there. You don't even have to say anything beyond that inflation has sort of stalled out. The PCE numbers that the Fed released on Friday basically show that in December inflation was unchanged on a year year basis, and that's not what they want to see. What it does suggest that as long as that continues, the Fed's going to remain on hold. There is the reason that Jay Powell cited
for not moving at last week's meeting. So I think at this point we're watching to see any indications of whether inflation comes down, and all of a sudden we'll be looking at things like home prices and rents even more closely, because that's really where the stickiness is. The
Fed needs that to happen. But also we're looking at our average early earnings in the employment report because the FED says right now the labor market is not inflationary, so they don't want to see any changes there either.
Well, let's talk about the rate. Two point eight percent? Is this almost a new normal?
This?
It really hasn't changed much in months.
Right, That's the key question is can the FED get it down to the two percent target?
Or is the.
Economy growing at a faster pace than it had been. Is potential growth higher, which would mean inflation would be higher.
It could support a two point Does.
That mean that we need higher interest rates on a regular basis? Not necessarily raise them from here, but don't cut them. That's the debate within the FED, and that's the thing that they have to figure out between now and their next meeting on March nineteenth. And that should be relatively easy except for Donald Trump and his tariffs and everything else that's going to happen between now and then.
Well, speaking of those tariffs, how do you think the FED has prepared for the threat of those twenty five percent tariffs? I mean, Canada, Mexico buy more American products and anybody else, So we know this is you know, it could be challenging.
Indeed, well I know a lot of FED officials around the country at the various FED banks and then down in Washington at the Board of Governors have tasked their researchers to come up with what if scenarios. The problem is is without a lot of detail, it's been hard for them to come up with what if scenarios, and so now if they get some details, it takes them time to put to work through it all because there's
a lot that goes into it. It's not just what the tariff level is, it's how long it's imposed for and how it's imposed over time or immediately, and then what are the tariff countries do? Do they put teriffs back on the US. So all of that has to be accounted for. So it'll be a little while before the PET has a clear idea of what it would mean.
The January jobs are out This Friday morning, eight thirty am Wall Street Time our thanks to Michael McKee, Bloomberg International Economics and Policy correspondent, we turned out to earnings with two more members of the tech sector, so called Magnificent seven, posting fourth quarter results this coming week Alphabet on Tuesday and on Thursday, Amazon, and we want to focus on Amazon to see about sales over the holidays and it's cash cow cloud computing, an AI services unit,
and any impact at all from China's deep seek chat pot Now for more where all of that were joined by anirag Rana, Bloomberg Intelligence technology analyst anarag We'll start with the earnings. What are you expecting to see in Thursday's earnings report from Amazon?
You know, my colleague Punum and I we re published a preview for Amazon, and we think that the four Q sales could be at the high end of their guidance of seven to eleven percent, driven by AWS advertising retail sales over the holiday quarter, which were very strong.
Frankly, so those are the areas. We also think advertising revenue could be in the high teens given the addition of Prime Video ads.
So sales good, the ons, signature site ad sales. What about its cash cow Amazon web services and what is Amazon investing now in AI and infrastructure?
And that's you know, you're right, that's probably the most important question right now. We're looking at Amazon, you know, sales growth of somewhere around nineteen percent excluding ethics impact. That's slight better than I would say what would have anticipated just a year ago, and a lot of that is driven by the improvement in workload consumption or people
running more things on the platform. AI will contribute as well, although they don't disclose contribution from AI sales similar to Microsoft, but that's because they do not have you know, you could say the workloads coming from conserhum apps like chat, GPT.
Most of their businesses, enterprise and enterprise and corporate clients are just starting the implementation of AI related products, so it's not as you know, you could say, that is not a mature market as some of the consumer apps have been.
So a lot of room to grow for Amazon in.
AI, absolutely, and a lot of room for everybody to grow, including you know, Microsoft and Google. In this case, what Amazon has done is they have a strong relationship. They've invested in a company called Anthropic, which is one of their you could say, preferred large language model providers. They also have their own model. They also let people use models from Mecca called Lama, So it's it's up to the client what kind of model they want to use.
Amazon Web Services is just going to provide the platform and and you know, the basically the infrastructure to run those products.
Now, Wall Street got a real wake up call last week with that low cost chat from the Chinese startup Deep Seek. Boy did it rattle the markets and rattle a lot of AI companies. How did Amazon react well in.
The long run? So, first and foremost, we are not even sure whether we should see that as in a way, there are two scenarios whether we can continue to see large amount of improvements in these models without the use of expensive chips. And that's where the argument is right now.
If we were to take that aside, if in reality we can come up with models at a much cheaper cost, that's really good for somebody like an Amazon because they don't have to spend that much in capital expenditures and the growth curve or the adoption curve off AI goes up. These guys benefit from that because they're providing the infrastructure. So I think in the long run it's good for
the cloud providers like Amazon. But again I think we still have to see whether that really is the case that you can build models that.
Cheaply consumer spending. I want to go back to that in the in the final quarter of last year up better than expected about four percent. A lot of that from Amazon dot Com. Obviously, it's like most consumers can't live without it. But something I want to bring up ups in its earnings just said that they're going to slash deliveries they do for Amazon in half by next year. That's because of the home deliveries just too costly. FedEx made the same decision five years ago. FedEx doesn't even
deliver for Amazon. What do you think it could mean for their e commerce unit?
Yeah, I think you know, one of the most important part of their e commerce business is really their logistics at this point. Frankly speaking, you know, when you think about it, what they did in COVID, they've really invested so much to improve their logistics network. So frankly speaking, I think, you know, you could argue that these guys
really don't need anybody else. Now that's not true. They will outsource when they need extra capacity, but you know, their logistics are pretty impressive at this point, and in fact, this whole promise of delivering products within a few hours is really changing the way people buy. What used to happen, Tom was I used to go to Amazon because it was the low cost provider. That's no longer the case.
You can find goods outside and other websites that are cheaper, but the reason you go to Amazon dot Com is because as a Prime member, you can get those products pretty quickly. It's happened to me several times that you need something right away and they will deliver it in four to five hours. So that level of service is what I think is the biggest differentiator for Amazon, and it's not price.
Amazon Q four earnings out this coming Thursday are thanks to anirog Rana, Bloomberg Intelligence technology analyst and coming up on Bloomberg day Break weekend, a rate decision this week from the Bank of England. I'm Tom Busby and this is Bloomberger. This is Bloomberg Daybreak 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 Deep Seek Move Markets. This past week we see
what's next for China's Ai startup. But first, policymakers at the Bank of England are preparing to make their first interest rate decision of the year. A slumping currency and stagnant growth will be on the minds of officials as they make their choice. Now for more, let's go to London and bring in Bloomberg Daybreak Europe Banker Caroline.
Hepgar Tom week Sterling is just the latest factor that Bank of England officials will have to think about when plotting the path for interest rates in twenty twenty five.
Investors are still expecting a quarter point cut, one of just two fully priced in for this year, but stagnant economic growth, alongside the threat of a global trade war, has loomed large over the Central Bank's forecasts and could dampen the Bank of England's inflation projections in years this as moves in guilt yields and rate expectations since the budget in October have tightened fiscal conditions, a real headwind
for the British economy. Enter Chancellor Rachel Reeves she's on a mission to revitalize the nation's economic health by going further and faster, she puts it for growth and potentially lifting some of the pressure on Andrew Bailey's Monetary Policy Committee. She has been speaking to Bloomberg about her proposals.
Well, look at the reaction from business to the speech I gave two thirds of businesses and the instant reaction has said they now feel more confident about the government's
growth plans. I make no apologies for putting our country bag on the right's path, and because of the planning reforms that we're making alongside the big announcements yesterday, it means what we can crack on and get these projects delivered quicker because they won't get clogged up in courts because we're reforming the way that you build stuff in Britain.
Do not feel, though, Chancellor, that you need to deliver something that will deliver now that will give an uptick to growth. Now we're looking at the labor market, data, messages from recruiters, the purchasing managers' surveys, all of those telling us quite negative things about the labor market, saying that businesses are shedding jobs at the rate we haven't seen since the financial crisis.
Well, if you.
Look at the IMF forecast for the UK, they've revised up the UK's growth prospects for this year. The PwC survey released at the beginning of last week of global CEOs who see Britain as the second best place in the world to invest outside of the United States. The first time in twenty eight years have been at that position in the League table, and yesterday business is coming out and backing Labour's plans to grow the economy and making them feel more confident about the future.
Can you give me a growth number by the end of the year, then, if you are more positive about what growth is going to deliver in the UK, what growth numbers we can expect. Do you have a number in mind, do you have a target for this year and can you share it with us.
I'm not going to do growth forecasts. That's up to the Independent Office, the Budget Responsibility, the IMF and others to forecast the UK's growth prospects. But what I did was to set out some ambitious plans and to get our economy growing, to get spades in the ground, to deliver these infrastructure projects that in many cases have been available for years now but the previous government balked at.
So whether it's the Oxcam Growth Corridor to create Europe's Silicon Valley here in the UK, or the third Runway at Heathrow, a new stadium at Old Trafford, the TransPennine routes, upgrade a new airport at Doncaster. All of these things are about a confidence in Britain, saying to investors, look again at Britain. This is a great place to invest, to start and grow a business, and this government has your back.
When does the first spade go in the ground and any of those projects, Well, let's.
Take Heathrow with our key throw to come forward with plans by this summer and we hope to be able to grant a development consent order in this parliament. So spades in the ground in this parliament. But other projects can get going sooner. We've committed to build one and a half million homes in this Parliament and we've made it easier to build, for example, around commuter railway stations, with the default answer for planning applications now being yes.
So spades in the ground this parliament. One and a half million homes in this parliament, because we want to go further and faster to kickstart economic growth and to make our economy more competitive, to be a more attractive place for businesses to invest, and ultimately to make working people better off.
Chancellor, we've heard a lot about growth over reseas and that do you think to be still some divisions amongst your team around what all of these will mean for the environment. Of course, businesses might be a little bit confused about what kind of reaction function we can expect
you to have around green issues. Do you think that the green policies of this government, or the push towards electrification for example, all of these things are they a little harder to predict for business now than they were?
Well, look at the record of this government. We've ended the moratorium on onshore wind and indeed have signed off planning applications in just six months for new onshore wind farms, has signed off planning applications for solar farms that the
previous governments blocked. But we've invested alongside with BP and Equanal in carbon capture and storage in te Side and Merseyside, so we know that there are huge industrial and investment opportunities for the private sector in these jobs and industries of the and has unique strengths in this area because of our industrial heritage and because of our geography to reap the benefits of that investment.
Okay, Chancellor, can I ask you just about the US Treasury Secretary Besant, who is now going to be your counterparty in the United States. I wonder what you plan to discuss with him, and do you have plans for a conversation soon.
I'm really pleased that Scott Bessont was confirmed earlier this week as the next to the US Treasury's Secretary. I have written to him and I look forward to talking to him soon about how our two countries can work together and to grow our respective economies. And I look forward to having a close relationship with Scott Bessant and his team at the US Treasury.
That was the Chancellor Rachel Reeves speaking to Bloomberg's Anna Edwards, Christy Gupta and Guy Johnson. So the government is going for growth, but our businesses coming along for the ride. We've been getting reaction from the back to General of the British Chambers of Commerce, Chevron Haviland, who was one of the first to turn critical in the wake of the budget last year as growth flatlined and we saw
a dip in both consumer and business confidence. We spoke to her just after Rachel Reeves's big announcement.
It will deliver it in the short term and lots of different places. Remember this is a really difficult time for business. Natal insurance increases are going, you know, coming in place in just a few weeks, so tax rises for all businesses. So it was really good to see the Chancellor focus on economic growth, Airport expansion, Heathrow, Doncaster, Sheffield, new road, rail low attempts crossing East West rail and
rebalancing the planning system as you were outlined. So those things will have not just a there are a great signifier global signify far of confidence and the direction we're traveling in. You know, big infrastructure projects, as you say, take a long time, so you need to start now.
But remember that indicator for the small and medium sized businesses in those supply chains will already give them confidence to think about investing now and growing their businesses now so they can supply those into those infrastructure projects.
But Trevon, is it going to be enough.
Those businesses are worried about how they're going to pay for the national insurance rise coming in a couple of months time. The budget has been very difficult and we've seen that reflected in both business and consumer confidence figures.
The budget has been very difficult. It has, and especially if you have a business with a large employee base. It is going to be very hard. Our businesses are telling us they're going to have to put up prices if they can. A lot of them have already put up their prices. That's going to be tricky. They're going to take it in their margin, which means lower investment, or they're going to slow down recruitment. And all of
that is good. But you remember, at the same time in the budget, the Chancellor also said to mitigate against those issues, we need more opportunity for business, and she talked about getting britten back to building homes, hospitals, energy, infrastructure, and so you know, the announcements yesterday are a really good step in that direction. They're a really good indicator for that. Okay, things that infrastructure projects. It's not just
local supply chains and local economic development. Often supply chains run all over the country. Connectivity, airport expansion. That's fantastic for trade, you know, moving our goods around the world, and it also global competitiveness.
Okay, but she did not reverse the tax increases on business from the October budget. I mean, okay, you can understand why she might not do that, but she will be under pressure to do something in the spring statement. Potentially, if her fiscal head doom disappears, that's either going to be cuts to government or it's going to be more tax increases. Are you expecting more tax increases to come?
Do you want her to do, let's say something that would be much more business positive, lower corporation tax in Britain.
We well, I don't know what she's going to do in the spring, and we're definitely not expecting any tax increases for business. She's been pretty clear that that was a what did you call it yesterday?
Once in a.
Generation tax increase. However, there are other places where she can help business, so we've asked her to accelerate her review of business rates. Business rates are the tax that you pay on property, so really hard if you're on the high Street, you know, before you've even sold a single product, you're paying tens of thousands in tax. So how she can review business rates and change those more
quickly to help our high streets? And actually, you know the other thing is the quickest way to grow our economy is through trade. Our biggest training partner, the EU, is still really hard to move goods over the border.
There.
What is the government doing more quickly to help businesses who are trading around the world.
That was chevallne Havilan from the British Chambers of Commerce. She was sharing her reaction to chants of Rachel Reeves's proposals that came out in the past few days. Speaking to me and to Bloomberg's Stephen Carroll. Judging by her media blitz over the past couple of days, Reeves has a plan and she wants us to know about it. But just how long will it take for the results to materialize? And when can institutions like the Bank of
England expect to see those improvements in real life. These are all questions that remain up in the air, some of which will likely be put to Bank of England Governor Andrew Bailey during his post Monetary Policy Committee press conference in the next few days, and of course we will have full coverage of the press conference and the
interest rate decision on Bloomberg. I'm Caroline HEPCUN London. You can catch us every week day morning for Bloomberg Daybreak here at beginning at six am in London, that's one am on Wall Street.
Tom.
Thank you Caroline, and coming up on Bloomberg day Break weekend, we head to China to see how AI startup Deep seek as plans to take on US artificial intelligence giants. 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. It was a story that sent shock waves through global markets last week, a Chinese startup releasing an AI model set to rival open ais chat GPT
and allegedly at just a fraction of the cost. For more on what's ahead for China's Deep Seek, let's get to the host of the Daybreak Asia podcast, Doug Krisner.
Tom. The model is now own as R one, and the claim made by deep Seek was that R one rivaled or even outperformed leading Western chatbots on a range of AI industry benchmarks. I think the most shocking claim was R one was built for just a small fraction of the cost of its Western rivals. Well, this immediately sparked skepticism on the high valuation of US and Europe and AI related companies, but I think the eye of
the storm was clearly in Nvidia. In the Monday session, it shares tumbled seventeen percent, and that drop erased five hundred eighty nine billion dollars from Nvidia's market cap in one single trading day. For more on the deep Seek story, I'm joined by Robert Lee He a senior software analyst for Bloomberg Intelligence. Robert joining us from our studios in Hong Kong. Robert, thank you for making time to chat
with me about what's happening at the deep Seek. This Chinese artificial intelligence startup and the AI model that the company has apparently been working on for a while are one. What do we know about it exactly? Can you fill me in sure?
Thanks very much for having me on. First of all, as you would expect, Bluemberg Intelligence likes to lead the way, this is actually Deep Seeker is a company we've been writing on for the best part of seven or eight months. I would say it's relatively well known to Asian investors at this point, or has been for some time, but obviously it's only its international profile has only risen more recently.
So the main reason why, or which helps you understand why deep Seek is doing so well at the moment, really goes back to the earlier export controls on the semiconductor or chip side that we're put in place via the US. And one point I've consistently made over the last year or so is that, again not to trivialize software development, but the technological barriers to entry on software are significantly lower than on the chip side. It's far easier to develop these algorithms than it is to design
a cutting edge tip at the atomic scale. So with these export controls put in place by the US, obviously any good engineer is going to try and work their way around the problem. Go round it, go under it, go over it.
Whatever.
So what the Chinese companies as a whole have done, with deep Seek being the leading one, is moved to more computationally efficient, smaller models that are more adept at utilizing and running on locally developed chips from the likes of Huawei, and that ultimately leads to models which are faster to develop and more importantly, lower cost to both develop and to train or inference, and that gives companies like deep Seek a significant cost and efficiency advantage over
their domestic competitors in China. And also, as we've seen in recent headlines, some of the big US tech platforms, So it's really been a wake up call to the entire industry.
How long have software programmers in China been working on this?
So give you a metric to work with. I guess you know how many of us had heard of large language models in China when Chat GPT first launched, and they were next to none, So to quite a stat at you. In October twenty twenty three, so you know, roughly eighteen months ago or so, there were fourteen sanctioned officially sanctioned models available in China from the regulator, and then rolling forward to where we were at the end
of last year, they were close to three hundred. So that highlights the very rapid progress that Chinese companies have made, and as I said, with increasing focus on smaller, more computationally efficient models in order to work their wear around
this problem caused by the US chip controls. Consequence of that is their developments have remained on track and relatively unhindered, but that has given them some potential cost advantage versus the let me call it a more brute force approach taken by companies in other parts of the world, not just by the US. But again this is going back to basic principles and engineering. You know, you may have seen headlines at the end of last year given the
very high energy costs of these very large models. There was even talk about restarting nuclear reactors, etc. I think, you know, just Gutville, It just doesn't make sense. There has to be an easier way to go about things.
And I think, you know, prompted by these external restrictions placed on them, Like any good engineer, you know, the Chinese have focused gone back to their code and try to work around the problem, and that has developed them some you know, highly competitive models as a result.
So it creates a big question mark over the bleeding edge market for that hardware that you're talking about, obviously on the GPU side, on the memory side as well, right with those high bandwidth memory chips.
That remains in question. And in no way am I trying to evade that question, because if the cost of developing these models is decreasing, and on one hand, would that lead to a proliferation in the number of models, a proliferation more importantly in the number of applications out there, and in some way, you know, actually accelerate the uptake of these products within the wider market because of their
increased availability. That's one way that things could get and I guess that would be a more positive way, you know. On the negative side, and again I think it really is up the debate and remains to be seen, you know, is a potential negative for the hardware suppliers and the likes of Nvideo, etc. Because again, this brute force approach that's been taken so far. You know, I don't think it's sustainable in the long run, both from a capital point of view and you know, an environmental point of
view and an energy point of view. So I think that it genuinely is uncertain at the moment, but should become clearer in the coming months.
So what do you expect the impact to be of the fact that are one, this AI model from deep Ceas is open source. How is that going to impact the industry?
Well, again, you know, my job is to take a critical eye to thinks. But I think potentially there could be a positive from that because in open source and allowing external developers to really understand the nuts and bolts of how they've put this model together. It's potentially a positive for the industry and will help the industry as a whole move towards you know, more efficient, lower cost
models overall. So again that is one potential direction of travel that the industry could go in as a result of this. Because, and again this may surprise some people out there, this innovative Chinese company has been pretty transparent about what it's done, so I think, you know, ultimately that could be to the benefit of the entire industry. But again its early days. It remains to be seen.
What do we know about the way in which this R one model has been trained. When you hear stories of how US AI chat parts have been trained, I mean they're accumulating vast sums of data from the intranet and that is helping to train these models. It's a very different story in China though, where data is concerned, is it not and is there anything to read into kind of the context of a Chinese AI app being developed on the mainland.
That's a very important point. And again when we've raised in our research one issue that the Chinese companies do have. First of all, there's the censorship rules, the Great Firewall, et cetera. So obviously their availability to data in Chinese language is relatively unrestricted within the confines of these censorship rules, so as being commented widely. Yeah, sure, if you're asking more sensitive, politically sensitive questions, for example, the model sort
of clam up and unwilling to answer that. But I think the reality is the World Wide Web is dominated by the English language. Forget the exact stat off the top of my head, but you know it's like eighty to ninety percent of all information on the world Wide where globally is in English. And again, the Chinese aility or the ability of Chinese companies to access that training data is more limited versus companies in the US or Europe. So again I think that's another issue they need to
work around in the long run. But you know, their models, as have said, are highly efficient, highly cost competitive. The fact that they're open sourcing this technology and making it effectively available to everybody should ultimately help the developments and models, you know, globally.
So if the efficiency of the technology, which seems to have been demonstrated, is there, that will likely then I would imagine, lead to increased demand for the resource. Is this a pivotal moment for the adoption of chat bards because of what this company is doing?
Right, One thing I have done repeatedly when I I meet new people, when I talk to my friends and family and colleagues, I normally will drop into conversation a question just asking about their AI usage to see whether they're using these spots, whether they're paying for bots. More importantly, and although this is completely anecdotal, I think the reality is the vast majority of us at the moment are not paying for these things.
So why is that?
Particularly in this part of the world. In China, many of these apps are free to use, and that's the culture of Chinese apps in general. They tend to monetize through advertising, But I think it reflects the level of value add that the average consumer currently sees in the
current generation of bots and other AI tools. Whilst they're interesting to play around with and maybe there are applications in some areas, the vast majority of consumers are not putting their hands in the pocket and paying for these things. So the biggest challenge this industry faces at the moment is monetization and tying back to the US tech platform.
Spending ten billion dollars plus per quarter in CAPEX, I would say largely driven by fear of missing out, you know, at some point we are going to hit a day of reckoning if these companies are not monetizing fast enough or in a in a more meaningful way. So whilst Deepseeker is a bit of a wake up call to show that, you know, Chinese obviously narrowing the gap and the technology front, the big challenge for all these companies,
whatever region they operate in is monetization. In our view, and we've published as repeatedly this is not happening fast enough, and I think that is the major challenge this industry still faces.
So what is the risk there? When I hear that, it seems to suggest a lot of caution.
Well, there been so many bubbles and hype cycles in tech, not just in recent years, whether it's crypto or metaverse, and you know, going back to the year two thousand and the Internet bubble, and I think there are some parallels in all honesty with the Internet bubble. Ultimately, you know, we internet is an essential part of everybody's life these days.
So I'm not in any way suggesting AI won't be or isn't a useful tool, but I you know, whether it goes back to the human psychology, human nature, there
tends to be an overreaction either way. So, whilst AI is a very interesting and innovative technique that can drive efficiency and cost savings across many applications, I think the reality, as I've said, is the technology still at relatively immature phase, and therefore the companies are struggling to monetize at anywhere fast enough rate given the huge amounts, humongous amounts they're
spending on CAPEX at the moment. So I think obviously it isn't such an issue for the very large tech platforms, given their very healthy balance sheets in free cash flow generations. But I think the more marginal players out there, you know, at some point we'll have to make a decision. Can they continue plowering such high amounts into CAPEX when there's no or very limited chance of making a near term return on this.
Robert, great stuff, Thank you so much. Robert Lee, Senior analyst for Bloomberg Intelligence, joining us from Hong Kong. I'm Doug Prisner. You can catch us weekdays for the Daybreak Asia podcast. It's available wherever you get your podcast, Tom.
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 markets overseas, in the news you need to start your day. I'm Tom Buzzby. Stay with us. Top stories and global business headlines are coming up right now.