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, the nation's biggest retailers battle it out for your summer spending dollars, and what earnings from Delta Airlines will tell us about travel demand Right now, I'm Tom Busby in New York.
I'm Caroline Hetka in London as JP Morgan's Jmie Daman visits Ireland ahead of the US tariff deadline.
For Europe, I'm Doug Prisner looking ahead to next week CPI and PPI reports for China.
That's all straight ahead on Bloomberg Daybreak Weekend on Bloomberg eleven three year, 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. I'm Tom Busby. We begin today's program with what's become a Black Friday sales bonanza in the middle of summer. Amazon's annual Prime Day July sales event kicks off with Target, Walmart and others joining in. How much money is at stake? Are Americans expected to spend like we did before? And what role could the Trump tariffs play in sales? For more, we bring in Poonham Goyle, Senior US e Commerce and retail analysts at
Bloomberg Intelligence. Poonham, thank you so much for joining us this holiday weekend. Millions of Americans gearing up to spend, spend, spend at the nation's biggest retailers, and this year is a little different. I think we have a couple of competing forces. A pullback in consumer spending, no doubt some people are spending less, and then fears about these Trump tariffs that are scheduled to kick in this coming Wednesday, July ninth. What do you see coming up on these big sales events?
You know, you said it exactly right. They're really consumers are pulling back, and consumers are looking for deals. So what better way to find deals than on Amazon's Prime Day sales, which now is a four day event versus a two day event. Historically, deals matter, and hopefully these deals draw consumers to Amazon to buy what they want.
Now, this is a lot of money last year in twenty four American This is, according to eMarketer, fourteen point two billion dollars. And as you said, this was only Amazon had a two day sales event. This year, they've stretched it to four. Do you think we're going to see that kind of spending.
I think spending will be up double digits, including on this Prime Day. Now, the fact that it's four days and two days, does that mean that you double what you're expected to get? Probably not double, because there is spending that still occurs right on the Amazon platform after Prime Day. But I think what this helps do is if you think about what's happened since Amazon has introduced Prime Day, is that other retailers, as you have followed suit.
So Walmart has its deals, Target has its steals, Best by Wayfair, you name it. But these deals aren't just two days, they're longer. So by Amazon going from two days to four days, they're now in play along with the rest of them for a longer duration. I think that's really what helps here.
And Target is seven days, Walmart is a six day event. I mean, they are real. They're really stretching things here, aren't they.
Yeah? Exactly, So you know, Amazon being just two days. I think it's smart of them to go to four days, and I do think it'll help them draw higher sales because it is a longer event.
Now, Amazon did something I think really smart this year. They moved up the dates. Last year, i'll say there was a two day event. It started July sixteenth. This year it's starting July ninth, and that's an important day because that's the day that the across the board Trump tariffs are supposed to kick in, and we know anything could change before then. But I think it's a savvy move to move this up because people are afraid. People
are worried. There's a lot of uncertainty about those tariffs, how much it's going to change, you know, prices on things, inflation rising, and it looks like everybody else has followed suit.
Yeah, you're absolutely right. Look, that day is clearly going to be an important day and we'll find out what happens with tariffs. But as tariffs are top of mind on that day, consumers are also at the tip of their seats looking for deals because if things do change and if things get more expensive for the consumer, they're going to want to buy it now. And the Prime day sale happens to be just that day and for the next four days.
Now, this started kind of the dog days of summer. People were not spending a lot of money. It started in twenty fifteen with Amazon, and they've grown into maybe stretching out not only back to school sales, they've early those up. I mean, this has really become an annual event along the lines of Black Friday, hasn't it all these retailers and consumers.
Absolutely, the Prime Day sale is a big event. It's not as big as Black Friday, but still a very big event, and it comes at a key shopping point in time, right it's right ahead of back to school, So consumers have the intent to shop, they have the urgency to shop, they have the need to shop, and this year especially, they want the deals right. They're looking to spend less and get more and the only way to do that is to go shop on Dal Days.
And this is one of Amazon's biggest deal days outside of Black Friday.
Now, Amazon now has two hundred and twenty million subscribers, and really to get the full benefits of these Prime Days, you have to be a subscriber. What kind of deals are we talking about and are there ones that stick out to you that you've seen that could really really have a big impact on sales.
So we'll see the deals this week when you know. Amazon starts launching them this year. They're doing it a little differently. They're dropping new deals every day on different categories. So they're being very targeted in how they get consumers to keep coming back. Right, you don't want to go shop the first day and then not come back the second day. So they're being targeted for their deals. In terms of what the deals will be, I think you're going to see the same as you've seen before. You're
going to see deals on electronics. You're going to see deals on Amazon gadgets, whether it's a Kindle or any of their other devices. You're going to see them use their Rufus and Alexa AI assistance to help consumers find deals. So that's the real new thing here is that Amazon is going to try to have consumers lean into these AI tools not only just to compare products on their website, but also to learn about them, get smarter, and really see the value in them to help them hit Dappa and buy now.
Our thanks to Punamgoyle, Senior US e Commerce and retail analysts at Bloomberg Intelligence. We turn out to the airline industry with the latest earnings from Delta Airlines, out on Thursday, just as the summer travel season is in full swing or is it for more. We're joined by George ferguson Airlines, Aerospace and Defense, senior analyst with Bloomberg Intelligence. Well, George,
thank you for being here. I want to start with what you expect to see from Delta second quarter earnings this week, which comes after blowout earnings for Q one three months ago. But since then, I think we both agree a lot has changed in the industry.
It has, and thanks for having me on. Delta is always the first airline to report and usually one of the stronger airlines in the US industry, and we'd expect the same this time. I think you know, the big things that we're going to watch is first US domestic travel.
We think US domestic travel is probably cooling. It's the biggest driver of revenues profits for the airlines, and so to give us a good sense for how much that is cooling right now, it's hard for these airlines to continue to push to higher profitability if that market isn't working. And we're expecting across the board that the US airlines
are going to have lower profitability than last year. In the same quarter, we'll also get a first look at Europe during the summer vacation season that's been super strong for the big US full service carriers United, Delta, and American. You know, we suspect that this market's going to cool as well, although this is probably because of a slowing economy,
the US dollar weakening a bit. We don't think it's going to fall off a cliff, but we just can't see it remaining as super strong as it has been. Kind of suspect that a lot of these travelers book pretty far in advance. I have sort of a joke that on Christmas Morning, everybody wakes up, opens their presence and then decides where they're going to travel to Europe that summer in the well heeled families of America, And so we suspect that two q' is probably going to
hang in there pretty well. But we'll be listening closely for trends for three Q and into four Q because again we think there's a bit of a lag that occurs in bookings into Europe. We still think two Q may provide some insight into some potential softening in that market.
And I think one of the challenges we'll also have as we look at Delta, like I said, is you know, we're expecting that domestic market to soften, and we'll see some of that in Delta's earnings, but it won't be a good indicator as good an indicator, but we expect that at the low cost carriers, because the low cost carriers really catering to a different clientele, we would expect that anything Delta reports on the domestic industry is going to be even softer when we get to some of
the low costs like Jet Blue, Southwest Frontier, those kind of companies.
Well back to Delta now, they telegraph this softening back in April their last earnings report, right where they withdrew a full year guidance because of softer demand. And since then, I mean, we've seen more unrest in the Middle East, these White House, you know, policies on migrants, travel bands, the Trump tariffs, I mean, have things even gotten a little worse than even you suspected?
Yeah, I mean I think that the backdrop is getting is definitely getting more difficult. I don't know that they totally telegraphed more difficult times ahead. You know, the sense I got was at earnings there was just so much, so many things changing in the US right tariffs were being announced. Everybody wasn't sure what it was going to do to GDP that I think that the company has just decided that it was most prudent, maybe easiest, just
to pull guidance for the year. But as we went through the call, there was you know, a lot of discussion about how they hadn't seen the softening yet in many of these markets. But again I agree with you. I think since then the backdrop has gotten a little bit worse on all those fronts. You know, again, I think commentary on the back half of the year won't be as strong. We'll be listening very closely for that, but all this takes time to filter through, and so too Q.
You know, we expect it.
To be okay, not more profitable than last year, but okay.
Now, chances are, if you're traveling this summer, you've already made your flight and hotel bookings. But if not, could that mean right now it's July there are solid deals out there for consumers.
Again, I think that some of the shortest distance between booking and travel is typically the domestic market. I would suspect that there's probably some interesting deals out there right now for the domestic market, because that's the one I think we'll get softest sooner. And then I think, you know, you'll see the airlines discount that try to fill those airplanes.
You know, the way we see sort of revenue management at the airlines nowadays, all these carriers traditionally have sort of eight plus percent capacity of every airplane that flies. You know, those revenue managers will get out there and try to fill those airplanes at the marginal cost of the seat, and so, like I said, that means you
could get some pretty interesting opportunities. I suspect on some of the international travel long haul Latin America, Asia, pac and Europe, I suspect still a good amount of those seats have been filled and filled earlier in the year, and so I think you'll see maybe less great deals in the marketplace for those, but you'll probably see some well.
Delta Airlines Q two earnings out this Thursday ahead of Wall Street's opening bell our Thanks to George Ferguson, Senior analyst, for airlines, aerospace, and defense with Bloomberg Intelligence and coming up on Bloomberg day Break Weekend, JP Morgan Chase's Jamie Diamond visits Ireland head of the US tariff deadline for Europe. 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, China firms locked in a race to the bottom when it comes to pricing artificial intelligence. But first, Jamie Diamond, Chairman and CEO of JP Morgan, visits Ireland this week, just ahead of this Wednesday's July ninth deadline for US tariffs, which, if they go ahead as planned, would add fifty percent duties to most European goods exported to the US. Ireland,
a major beneficiary of global economic integration. That's, according to the Finance Minister, is aiming to maintain formidable growth while balancing European interest with its traditionally strong relationship with America. For more, we turn to Bloomberg Daybreak anchor Caroline Hepger in the midst.
Of a boom in Europe's banking sector. JP Morgan, Chair and CEO Jamie Diamond, will head to Dublin for talks with the country's second in command on trade, tariffs and sustaining economic growth the Banking Store. We'll meet with Ireland's tournished in effect, the Deputy Prime Minister. Just as geopolitical uncertainty both drives interest in Ireland's goldilock business climate but
also could pose threats to its tech and farmer industry. Well, joining me now to discuss is Olivia Fletcher, Boomberg's Dublin bureau reporter, and here in London Blueberg Senior finance reporter Laura Noonan. Welcome to both of you and thanks for being with me. Olivia. To you first. Jamie Diamond has raised the alarm on macroeconomic risk, on bond markets, on tariff uncertainty. What do you think he's going to be
talking about and thinking about when he's in Ireland. How much is Ireland at a risk from all of these Well.
Big question now is how Ireland could remain competitive. You know, its whole economic model has been based off attracting and knowing foreign direct investment internationally, got especially from a lot of US firms. There are a lot of multinational hubs here, Apple Visor, a lot of the investment banks here as well, And the key is going to be staying competitives because was basically the envy of Europe. You know, it's got this huge budgets. Last year reaped record thirty nine billion
euros in corporate tax receipts. Albeit they are kind of volatile, but that's a huge, huge amount of money that has transformed it from one of europe'spores to one of its richest. But now it's kind of make an headvise, I guess for maybe the wrong reasons, because Arland is now directly in Trump's line of sight. It has one of the biggest trade imbalances with the US, and Howard Lutnick has
repeatedly singled out Land for its huge SURFLUS. So big question, I guess is how does Ireland continue to attract and maintain the foreign direct investment that's kind of funded its coffers, just as Trump is trying to nawse so many of those US companies back to American shores.
Laura A lot of uncertainty then around tariffs and trade and what that means for Ireland, there.
Is certainly a lot of uncertainty. What I would say is Ireland has tried to tread very fine line around Turfs and around the current Trump administration. So Ireland's always been in a particular position. I think where it is economically and politically is also similar to where it is from a geographic perspective. It is midway between it itself has been between the EU and between the US, and there has always been close ties between Ireland and the US,
some of which predate Ireland's EU membership. So I think Ireland is trying to play a very fine line here. They are very conscious of not wanting to alienate the US administration anymore than is definitionally necessary. Because Ireland does have a low corporate tax base, that low corporate tax base has attracted a lot of multinational activity, a lot of US activity, which the US administration believes should be
in the US. So that is a definitional problem. But beyond that, Ireland is trying to position itself as a friend to the US while also being a good European So you won't see the Irish administration making the same kind of combative statements as what you have seen some of the other eunations doing. In terms of Jamie coming to Ireland and Jamie Diamond, JP Morgan, Chase CEO, Jamie
loves Ireland. That's the first thing to say. There are sometimes it's several times, there are some Americans who love Ireland. Jamie is one of those. So he loves Ireland. I think he will be stressing the benefits our of the Irish economy. He'll be spress stressing all the great things that the Irish landscape has delivered for JP Morgan, They've
already got a couple of thousand people there. One of the jokes about Jamie coming to Ireland is that Jamie will come to Ireland to promise a couple of thousand jobs and then it's up for everyone else to figure out how to make that happen, or like how to walk that back. Like he just loves the place. So I think he will be stressing the strengths of Ireland and also trying to encourage Ireland to stay the path.
From a stability perspective, one of the other assets Arreold has had through the recent geopolitical ups and downs is that there have been a lot of big elections. There's been a lot of political shifts in a lot of big countries and the UK. So last year we had elections and a lot of major EU countries. We had elections in the US, there was a lot of public talk about that. Internationally, we also had Irish elections. Nobody cared because essentially they rearranged the chairs in a very
similar order to the old chairs. And I think that stability as well has become an asset. So while it doesn't make Olivia's life uny easier in trying to excite people about the Irish elections, it does become a selling point when you think about companies like JP Morrigan, who in this world have a lot of uncertainty. I think people do look for stability, and I think Jamie will be stressing the stability they have found in Ireland and will be encouraging the country to continue on that route.
And of course some of these points were reflected in some recent interviews that we've had, including my Daybreak Europe co host co Ankers Stephen Carroll, who sat down with the Irish Finance Minister Pascal Donacue when Bloomberg opened its brand new bureau in Dublin. So have a listen to what on a Hue had to say.
We have a growth outlook for our economy even now of to maybe even more than two percent per year. The reason why these companies have part of their global supply chains here in Ireland is because we have the skill, the experience and the competitiveness built up to keep them in our country, and we will look down at how we can maintained us even if the trade environment around it does begin to change.
So quite a rosy vision then for Ireland's economy, despite the trade worries from Donahue Olivia, in terms of you know, the reliance as you say, on corporate tax receipts from large multinational companies, and also what the government is going to do with the budget surplus that it's got in terms of setting up a sovereign wealth fund. What are the next steps for the Irish government?
Well, like you say, the picture is perhaps not as rosy as it once. You know, his Finance Department and has revised an it's domestic economic outlook, and so has a central bank. You know, the kind of saying that while Arland will still see a star plus, the selflus might not be as high as you know, it was once anticipated to be. And so the next steps for the Irish administration are, like I say, to continue to keep that competitive edge, you know, the Finance Department and
you know, and also Arland's for Indirect Investment Agency. The idea that keen to stress that while Land has in the parson have attracted these companies because they are a strategic tax space. You know, Arland also has a hugely skilled workforce, and like Law has said as well. Actually when I went to see the idea recently when the press conferences, their chair said that Arland stands out as
an oasis of stability to investors. So I think the key thing for Arland is to you know, remain stable, which seems like that's something they'll be able to do, and to continue squirrel and away some of that money into the sovereign welfare because Island isn't just thinking about the next three four years. The problems potentially could come you know, ten years down the line, when you know, for example, a company might not pull out of Island right away, but they might just decide not to invest
in a pharmaceutical plant in ten years time. So the issue isn't necessarily that all these companies are going to lead right away, it's that what might just not be there in future, which is harder to measure. So you know, Ireland is having to look at all kinds of other ways to continue to attract companies. Also invest more in research and development. That's quite another thing that's hyped up on their agenda, things like that.
Lord to bring you the context also amidst all of this is that European banks have done incredibly well in the first half of this year, so there's also that context to kind of bring into to this that European banks are again sort of back in focus.
Yeah, I mean Irish banks are a bit of a different sector to European banks in the sense that what's happening there priorly reflects a reprivatization the market. Ireland is a very particular banking market, so there are basically two very large banks AIB and Bank of Ireland who dominate the market one slightly smaller bank. AIB has just returned to fully private ownership. That has put a lot of win behind Ireland sales, So I think it's a bit
of a different sector. The Riish banking sector has gone well, but they also had obviously a very problematic legacy, and these things do tend to go up in ups and down. So because they lost a lot of money, they then tighten their standards a ton. I mean, if you think about underwriting standard Ireland and probably has some of the toughest. We have very tough mortgage rules. All those things do mean that the sector should out performed. So I think
the domestic bank sector is going very well. I did want to say a word on the foreign banking sector as well in terms of next steps and what Ireland is doing. So Ireland will shortly launch its next international finance strategy. They launched their last one in twenty twenty. This is basically their strategy to make Ireland they go to destination for international finance and that will see them tackle some of the structure or see them they've certainly
been lobbied on some of the structural points. Those are things like infrastructure. Anyone who's been to Ireland will know that we do not have a metro from the airport, which has been a bone of contention. I first wrote about it in two thousand and four, so there has been a very there is that there is housing. There are some issues around tax, both in terms of funds taxation. We talk a lot about banks, but funds are big industry in Ireland. Issues around that, issues around the banking
bonus tax. So there are policy issues for the international finance sector and the international sector more broadly, because we all care about housing and infrastructure, which I think Ireland is going to commit to tackling quite soon.
Olivia a last thought. As with all the other European countries, Ireland is also under pressure to continue achieving strong economic growth. Can they continue to deliver that?
So the forecast suggests, the forecasts from the Department of Finance and the Central Banks suggests that Ireland will continue to grow, but at a slower pace. So while Onland may continue to you know, like Laura said, there.
Are a lot of roadblocks to that.
That actually some of the biggest points that the multinationals raised, we're violand you know, things like fix and infrastructure, energy grid, increase in housing starts, water supply. So while Island is probably can of continue to grow, there are definitely roadlocks to that and that's probably Areland's biggest challenge right now.
So in terms of the economic growth picture your view, Laura.
Yeah, so I think without putting in too much about Green Jersey on is where saying Ireland had the half fastest growth rate of any country in the EU in the first quarter and is expected to have one of the highest growth rates economically, So while it will be lower than it has been, it will still be one of the highest in the EU. Yeah.
Absolutely, Laura, thank you so much for being with us today here in the radio studio Blueberg Senior Finance Reporter Laura Noonan, And in Dublin our Dublin bureau reporter Olivia Fletcher.
Thank you, thanks Caroline. And coming up on Bloomberg day Break weekend, how China's AI drag risk choking each other.
Whenever a new craze emerges, there's always just so many rivals that sort of come out of the woodwork ready to pounce. And now these sort of same forces are really in full swing in the booming artificial intelligence industry, and these AI firms have really been focused on this sort of classic playbook, which is scaling up their user bases and racing for market share.
I'm Tom Busby and this is Bloombery. 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. Recent data out of China providing an ambiguous read on the health of the world's second largest economy. With that, investors will be closely watching the next round of inflation data out of Beijing, and for a preview, let's get to the host of the Daybreak Asia podcast, Doug Krisner.
Tom. Many recent data points for the Chinese economy have been mixed in the last week that saisheen manufacturing PMI for June seem to improve into expansion. Bloomberg Economic says this is a reflection of the truth in the US China trade war. However, the latest flash reading from China beige Book International shows slowing in June. Most sectors, according to China Beige Book, weakened as the result of declining revenue and profits, as well as falling prices and fewer hirings.
Now in the week ahead, we'll get fresh data on inflation in the form of both the consumer price and producer price indices for a closer look. Now, I'm joined by Shazad Kazi. He is the COO also Managing director at China beij Book International. When we talk about price activity in China, I'm tempted to use the term deflation, but maybe that's a bit overused. Can we still use that term to characterize what's going on on the mainland?
If you look at the producer side of the equation, there's no question about the fact that there has been deflation in and it's tied into the whole concept of excess capacity and companies having to cut prices to sell and so forth. But if you look at their CPI measure, and especially if you look at core CPI, what you have got going on and the official data even is
a lot of disinflation rather than outright deflation. But the problem is that there is a profitability challenge in China, and fundamentally there's a price war going on in so many sectors that that's what's driving depressing a lot of those indicators.
So is this merely an issue of overcapacity or is there something else that we need to unpack here?
A lot of it is certainly over capacity. Chinese industrial sector has produced so much, whether it's you're talking about steel, aluminum, copper, whether you're talking about cars or evs, now that every company feels a pressure to cut cut cut prices in order to sell domestically and even more importantly, to sell abroad,
which is where Chinese overcapacity problem comes in. They cut prices to the point where every other countries companies tend to not be very competitive, and then that's they fled their goods. But ultimately comes back in the form of weak industrial profits and it comes back in the form of this disinflation or oftentimes deflation challenge that we're talking about in China.
Is there an effective policy response Beijing should employ to kind of begin to turn things around or is it more a matter of things being in place right now? But global markets need to be a little bit more patient.
So there's no question. You know, this week we got some policy statements out criticizing these price wars and saying we have to push back on them by authorities in China. But you know the reality is that there's no incentive structure there. As a matter of fact, the incentive structure is the quite opposite. There's no pressure ultimately on many companies,
especially large state owned companies, to turn a profit. Ever, and so as long as you have access to cheap or free loans from banks or you know, that Beijing is going to bail you out. There's absolutely no desire to say we have to whether we cannot do these price cutting. As a matter of fact, the whole reason you've got this price cutting is because many sectors are overly subsidized in that country.
When I think of problems with price activity, I think of the property market, where in many cases prices are continuing to decline. Is that still the case?
That is, unfortunately the case where you had a brief period here where prices were beginning to rebound and even though year over year they were looking weak, you know, the weakness was certainly starting to dissipate. I would say that is going away, and you are getting reports at least directionally saying that prices are again starting to decline.
Based on the data that you have access to, what are your expectations for the CPI and PPI prints that we're going to be looking at in the week ahead.
Look, if you were to base it strictly on what we're seeing here, where we're seeing outright, you know, slow downs in our in our sales prices and disease and our input costs and disease. That tells us that the CPI and PPI prints. We should get lower prints there, we should probably get you know, CPI falling and PPI probably contracting further.
But this is nothing really that the cent Bank can address, or can the PBOC change policy in a way to kind of reverse this. It seems to be coming back time and again to the issue of sentiment. Whether you're talking about consumers or businesses, the sentiment levels have been just too weak.
That's exactly right. The sentiment levels have been too weak. And the problem is that monetary policy in China for a while now has not been producing the kinds of results you would expect it to. And by that I mean that interest rates keep coming down. Yet companies generally speaking are not particularly inclined to borrow. So in May, for example, we saw this nice jump a multi high from a monthly standpoint in our borrowing data. It came
back down to earth in June. So you don't have this sustained rise in corporate borrowing for several years over the last almost five years as a matter of fact, now, because the economy overall is quite weak. So if you're not investing a lot, if you're not hiring a lot, if that r and d isn't there. The desire to borrow is not going to be there. It makes no sense to leverage.
In a moment or two, we're going to be talking about the AI story in China. When you look at the degree to which tech companies, particularly those that have been playing in the AI space, have been contributing to growth, is that moving the needle in any way, not in.
Any kind of meaningful way where you would see it showing up I think in big macroeconomic data points. But the reality is on the ground, the environment is very exciting. China is doing what they've done with for example, EVS and other sectors. They are increasingly figuring out ways to subsidize the indigenization of chip production, AI, quantum, et cetera. So they're throwing a lot of money at it. You've
got companies that are ipoing in these fields. So certainly in China, the tech space and the tech industries and is having an exciting moment.
Shazad will leave it there, Thank you so much. Shazad Kazi also Managing director at China Basebook International. And as I promised, let's shift gears. China's crowded AI landscape is not only fueling rapid innovation, but fierce competition as well, and it's that competition that seems to be dragging down profits. Let's check in with Bloomberg opinion columnist Catherine Thorbek. She covers all things tech in Asia, and she joins us from our bureau in Tokyo. Catherine, thank you for making
time to chat with me about this. Give me a sense of perspective on this. How recent has this kind of tension between innovation and competition been developing in Ai in China?
This is really a story we've seen play out many times in the history of China's tech sector. You know, competition is notoriously fierce in the world's second largest economy, So whenever a new craze emerges, there's always just so many rivals that sort of come out of the woodwork ready to pounce. And for example, we saw this in the food delivery market. There's some food delivery wars that were going on, and it really became a race to
the bottom when it comes to pricing. You know, we saw bubble tea being sold for less than twenty five cents last month, and we also saw it in the electric vehicle market, which is sort of left behind a trail of zombie cars. And now, oh, these sort of same forces are really in full swing in the booming artificial intelligence industry, and these AI firms have really been focused on this sort of classic playbook, which is scaling up their user bases and racing for market share, and
the result has sort of been this rat race. You know, they're at each other's throats when it comes to pricing, and it's really become a race to the bottom. But I think a key difference here is that nobody has actually figured out has really cracked the key to getting consumers to pay for these services. So it makes the issue of monetization or a path to profitability seem a really long way off. And this is really unique to
China's tech sector. You know, in the States, there's in Silicon Valley, there's sort of a smaller number of large players that really dominate the market and they really have control over pricing, whereas in China, you know, there's just so many smaller players and as well as the big tech companies, so competition has been really really fierce, and I'm just not sure how sustainable it is.
I'm just wondering when you talk about big tech companies, I think of Ali Baba, and you would expect maybe that company or companies like Baba to have some sort of advantage.
That's right. So Ali Baba and Byteedance and Tencent, these sort of big tech players, I think they really can play the long game and they can sort of sort of weather this storm a little bit better than these so called little dragons, which are these sort of startups that are really driving innovation in China's tech ecosystem. And so I think the big tech players are definitely in
a better position. But I also think that's a little bit unfortunate because we really see sort of the biggest breakthroughs in AI come from these smaller startups, which I think are at higher risk.
Here.
Does the government have a view on what's happening?
Do you think so?
I think post deep Seek, there's just been a lot
of exuberance. There's been a lot of top down support for the AI sector, and so it's sort of driving this And in some ways it's a double edged sword, you know, because there's so much excitement for AI and so much top down support, it has really been driving widespread adoption of AI services and AI tools throughout China, which the government wants, but I think it definitely puts these companies in a crunch when it comes to sort of figuring out how to make money.
So when you talk about adoption, is it primarily on the part of consumers using more AI related devices or is it in industry as well?
That's right, So I think consumers definitely demand for AI services and tools is red hot. You know, we see so many chatbots, so many people using deep seak across you know, local governments and across even hospitals. So I
think the adoption has been widespread. And the way I kind of look at it when we talk about the sort of top down support was you know, I'm not going to remember which US president it was, but there was a president that put electricity in the White House to sort of signal that, you know, this technology is
safe and we can you know, rapidly adopt it. And I think there have been a lot of top down signals coming from Beijing and coming from Hijinping about how AI is you know, the future and we shouldn't be afraid of it. And I think we've really seen that play out when it comes to consumers really sort of embracing this technology and not being afraid of it and sort of rushing to adopt it.
One of the big questions in the States as it relates to the investments being made in artificial intelligence, is the ROI turn on those investments. Do we have any visibility into whether or not this is having kind of a similar conundrum in China right now?
Right so, I really think that's sort of the biggest existential threat hanging over sort of the entire AI ecosystem in China is that there really is not a clear path to profitability, and there's not even a clear path to sort of monetization and making money off of consumers. You know, so many of these chatbots are being offered for free, and because you know, competitors are offering them for free, it basically peer pressures all of the companies
to do the same. And I think there's one statistic that our Bloomberg Intelligence colleagues wrote which was that I think all of the top ten AI chat bots at China generated just one million dollars in revenue from Apple's iOS app store in twelve months, and during that same time period, open AI's chat GBT garnered six hundred and sixty nine million dollars in iOS revenue. So that's quite a big difference, and that's just one chatbot compared to ten of So what do.
We know about the rate of failure here? I mean, do we have enough data to begin to kind of quantify that?
So I think it's too soon to tell. Like I said, there's you know, this top down support, and there's just this insatiable hype, especially in the wake of Deep Seek, and I think for now that's been a really strong propellant of the AI sector. You know, a former government official in China last week said that the nation is on the cusp of generating more than one hundred Deep Seek like breakthroughs. But I think, you know, if you look at more than one hundred deep Seeks, you know,
what does that actually mean. That means such fierce competition, And so I think in the long run, we may see at least one hundred you know, zombie AI tools or zombie AI agents. But I think, you know, that's still a long way off. And for now, you know, this hype is really driving a lot of exuberance, But we'll have to see how it plays out.
Catherine, Thank you so very much. It's always a pleasure. That is Catherine Thorbeck, Bloomberg opinion columnist. She covers Asia tech for us here at Bloomberg, and I'm Doug Chrisner. You can catch us weekdays for the Daybreak Asia Pod. It's available wherever you get your podcast.
Tom, Thank you, Doug. 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.