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What a time to be covering tech like you and Ed Buglow do Carolin. Every day there are major news items from major companies and just amazing amounts of dollars. Today again, Anthropic commit's fifty billion dollars to build AI data centers in the US.
How do you put it in context?
I mean, we become a bit numb, and then you look to some of the other whopping numbers, like the six hundred billion dollars that Mark Zuckerberg has said he's spending in capital expenditure an AI data center. You go, oh, actually, fifty billion doesn't feel that much.
Yeah.
But interestingly, Anthropic what's interesting about this one is, look, they've been reliant on investment from Strategics.
For their access to cloud.
Google massive investor in Anthropic, and with that comes access to cloud and to compute, So too has aws. Amazon and AWS has been a real provider of chips and particularly remember really Anthropic has been a strategic partner to these cloud companies because they've been helping them build out their chip offering and they've been helping training models on the future generation of those vertically integrated companies. But now they're saying, look, we think the US needs to continue
to build out AI infrastructure. As you've heard from Sam Altman, who's already saying he's going to be spending trillions on data centers and all the capital expenditure that goes with it. Then of course we have the likes of Mark Zuckerberg all in on it as well. So it feels as though Darah Amadey, who was out of open Ai, came over and set up Anthropic to do it in a more cautious, humanity friendly way. He's now saying, look, us two, we need to put some infrastructure out here.
Okay, So open ai is the chat GPT as Nthropic is to cloud.
That's a chat they use. How widely usedes this clud show they.
Are really nailing the enterprise space. This is where they've managed to lead, in particular when it comes to coding. So yes, they don't have eight hundred million weekly users in the same way that chat to gpet does. But people love it in the enterprise, and that really has
been their winning formula. They've been really rather profitable, thus far more profitable at least or seeing more revenue growth than open ai has been seeing because open ai has been all about the spending, all about the reinvestment, and in many ways, Anthropical have been seen as some sort of more asset like version of this. Now that's kind of casting that off a little bit. But they just raised thirteen billion dollars. They are valued one hundred and
eighty three billion dollars. That was back in September, and they have three hundred thousand business customers. Yeah, so they have been managing to show that that the business model works.
Is there any expectation, Caroline that these companies may come public at some point down the line, because I just think about the money they're spending, and I know a lot of people want to throw money at them, but maybe even the public markets.
So are they talking about that?
Well, Sam Almond has been saying like it's not. I can't give you a date, but clearly they are on a path in the next couple of years to going public. And that is the idea was many of these businesses, These founders feel that it's there. It's their duty. It's a duty to be able to allow the everyday retail investor as well as these very deep pocketed venture capitalists to benefit from their businesses and be able to take a chunk in within that. So we're seeing that these
companies are talking about going public. We've heard it slightly less from the anthropics of this world, but I think certainly there's going to be a push that these companies can't remain private for ever and these boatloads of cash that they need can't keep on coming from the same group of investors.
My guess is when they do go public, you know, the founders will have a huge swath of the voting sharers and everyone else won't.
Kind of like the Metas of the world.
Yes, exactly.
And what's interesting is we mentioned Meta they access the bond market just a couple of weeks ago to fund a certainly vision.
Yeah, just incredible.
But remember some mortment doesn't actually own any system significant equity and opening ah okay, so how they would structure him to have voting shares is another thing. Entirely, they of course, are owned by the overall charitable not for profit is in in control and some ways, but and has shut stock of Open AI. But I don't know what the breakdown of shareholding is by the good contract the founders of Panthropic.
I'm looking at the markets overall, Caroline and for a second day, the Dow is outperforming the NAZAC one hundred.
I don't know how many times you can say that over the past couple of years. But the NASAC under pressure.
And again it's this idea that you know, the AI boom is now.
A little bit more in doubt.
There's a little bit more skepticism, and people are asking questions about you know, is there a clear financial model for profitable AI.
There's a lot of NonStop investment.
But then how do the people see returns in the next year or two years as opposed to ten years down the road.
How has that conversation unfolded in the tech sector.
It's unfolding by having either side of the equation come on the Michael Bowries of this world saying, no one's factoring in depreciation of chips. We think that this is ultimately overvalued in a bubble. But then we're going to have thread needle come on and really start to say, look, the proof will be in the fundamentals, the proof will be in the earnings. We've just had a cracking set
of numbers from most of the Magnificent seven. We're still waiting on Nvidia AMD coming out once again showing that the total addressable market for they're AI accelerators and were broadly the chips is going to be one trillion dollars. They're showing that they're going to guide for not just two years, three years, but up to five years. They think that they can be tuning to about thirty five
percent revenue increases every single year. And we're seeing Keeger numbers coming in an the eighty percent field for an AI accelerator, offering that MII is really selling well. So I think that every time you question it, and yes, you can look at the worry about the circular financing, the anxiety that a lot of these companies that were very asset light, think Matter used to be very asset light, and to your point, now we're starting to see them
laden on debt. These things do fill people with some uncertainty, but if really the revenue taps got turned on if AMD can prove out that they're building a clear line of sight on tens of billions of dollars of revenue, people will give them the benefit of the doubt.
I think everyone's grown very customed to seeing the cash and short term investments line for all these big tech companies at like hundreds of billions of dollars, and that's not going to be the case if they're going to continue investing this much and spending this much.
Yeah.
Even and we saw MetaStock get go down pretty precipitously today when when Mark Zuckerberg said they're going to step up their capex, yeah, by that degree.
So that was interesting to see too.
A little bit of caution there.
Morgan Stanley out with report recently I just saw today saying basically, boy, a lot of things have to break right to generate returns on these investments, just writ large on the industry.
A lot of things really got to break right now.
We don't know what's going to happen tomorrow with airplanes.
Exactly, you know, exactly, So getting to the airport.
Aucture and all the things that actually need to work for us to be able to get the data centers up and running.
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Circle Internet group.
It's the issuer of the second biggest stable coin, USDC, and the shares are tumbling today, down about eight percent. And this is on kind of what feels like a pretty pedestrian reason. Concerned that lower interest rates will slow profits. I mean, that's kind of unusual if you think, you know cryptocurrency or crypto linked company with lower interest rates.
Let's bring in Emily Mason. She is a Bloomberg News fintech and crypto reporter, as she joins us now, so Emily just explained to us the dynamic here why lower interest rates from the Federal Reserve would be a concern for a company like Circle. Yeah.
So Circle issues USDC, and they that's a staple coin peg to the US dollar, and they maintain that peg by holding reserves in cash and short term treasuries.
They keep the yield.
From the treasuries and that's kind of how they make money and that's where most of their revenue comes from. So if interest rates go down, you know that shows up in earnings and that causes some concern for investors and analysts.
So what have their recent results been.
Like, I mean, this is their second time reporting since going public. They benefited heavily from all the hype around stable coin, especially before the Genius Act was passed, and their stock performed really well.
It's kind of.
Been down since their summer highs, and that's kind of because of the concern from the interest revenue, but also because of some of the distribution partners that they have they pay. They have revenue sharing agreements with coinbase, for example, who helps distribute their coin.
So if this company for now is kind of a proxy for a money market fund because it's earning's track short term treasury yields, it must need to do more to diversify its revenue streams.
What is it looking at? Yeah, that's what they're doing.
And then if you talk to Jeremy A. Lair who's the CEO, he'll kind of say that lower interest rates are actually good for the company because it means that there's higher velocity of money, there's more investment, and then people want faster move money like stable coins, and they also might want to use products like their Circle Payments network, which recently is experimenting with like a stable coin payouts product which like helps people can helps people to pay
out globally with USDC, and they're trying to move more USDC volume onto their own platform instead of working with distribution partners like Coinbase, and that kind of could help them as well. But they see the lower interest rates as a positive thing. And also the USD circulating supply is increasing very heavily as they add new partners, so that also kind of could potentially offset the lower interest rates.
Emily, your beat is fintech and crypto reporter, two things that didn't exist even just a handfull of years ago. Talk to us about broadly the kind of the intersection of the growing crypto market and applications like fintech.
Yeah, I mean, I think what's kind of the most interesting right now is like fintech when it came onto the scene was sort of like building very interfaces on top of his existing financial infrastructure, and then crypto's pitch is much more sort of like rebuilding the financial infrastructure with things like blockchains, and now the conversation is kind of about bringing the traditional world and the traditional financial
institute infrastructure together with crypto rails and Circles really kind of sitting at the center of that and trying to bring stave a coin and like integrate that with how traditional markets work, and that's involves a coming together on both sides, Like traditional firms kind of have to upgrade and make their systems interoperable with cryptotechnology, and then crypto firms also have to kind of move into a regulated environment.
And that's been something that Jeremy Alair has talked about for a long time, like he really thinks that crypto needs to be regulated and Circle that's been a big part of their narrative is like we are kind of like the suits in the room, and we're going to be regulated and that's how we're going to go about doing business.
You're kind of the most tradfy of the DeFi world.
In other words, if we want to get technical, this is going to be a dumb question, Emily, but we've seen how Bigcoin and the rest of the cryptocurrencies had a pretty rough October. They're struggling to regain momentum. All these digital coins are not the same as stable coins. But is that shift in sentiment and conviction on bigcoin and all coins, especially from institutions, affecting demand it off for stable coins or are those two just not linked.
I mean stable coin.
Has used a lot of the times, like anytime there's a lot of trading happening in crypto like and in crypto tokens like stable coins kind of benefit because they're used to like move in and out of those markets. The stable coin the whole point is that it's like a stable currency. It's peged to the dollar, it's one for one, so the price of it really shouldn't be impacted at all by like crypto market movements.
But does it does demand affect it or does sorry does the spillover involve like demand waning for sable corn or increasing for stable coin.
I think where like the demand growth for stable coin is going to come from is like it moving out of a tool for just for crypto trading. It's going to be like people in countries where the local currency is volatile wanting to hold stable coin, or people wanting to actually use it for payments or like stable cooin payouts.
Like if you're a US based company and you're employing a bunch of people around the world who want to hold a stable currency like the dollar, the stablecoin is the best way to access it, then you can pay them that way. Like that's where growth from. That's where
demand for stable coin is going to come from. I don't think it's like super tied to the trading necessarily, Like people use stablecoin to get in and out of crypto markets, so you know, they might see more volume of trading activity is high, but their journeys are kind of becoming less linked.
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I metube all right, whether we like it or not. The holidays are up, Honest, scarlet Ful and Paul.
Sweeney live here in our Bloomberg and Director Broker Studio, streaming live on YouTube and with the Holidays of honas that means shopping and for retailers. It is obviously the most important time of the year kind of right now through a year end, so we want to get a sense of how that's shaping up for the retailers out there. Mary Ross Gilbert, senior equity analyt. She covers the retail space for Bloomberg Intelligence. She's based in our Los Angeles office. Mary,
thanks so much for joining us here. We're, you know, kind of right into November, getting into the thick of it here.
How's the holiday shopping season shaping up? What are your companies saying?
Thank you, Paul.
So, if you look at how the holiday shopping is is shaping up, I think it looks I think it looks very positive. So I think we are going to see an increase and particularly for apparel retailers, that's usually
like the largest category that consumers. If you look at those that have been pulled by all the holiday service surveys that have been conducted, including the National Retail Federation, and they have over eight hundred over eight eighty two hundred respondents in their surveys, and the other ones are
pretty sizable, you know, relatively speaking, around five thousand. So they're showing that there's definitely a higher percentage of shoppers wanting at peril and accessories for gifts, So that should be good news for apparel. But gen Z is planning to cut back on their overall holidays spending by that, you know, by twenty three percent. Millennials just one percent.
Wow, So the gen Z these are the younger folks, maybe tougher time finding a job. Maybe, you know, student debt is that kind of the driver there.
Yeah, I think I think that could be part of it. Yeah, it could be the job market situation that might be happening there because these are really like the seventeen to twenty eight year olds. So we I've been hearing some you know, talk about some of these latest graduates, you know, having a difficulty finding a job. I think it's just probably going to take longer because generally unemployment is still very low and soon we'll be getting you know, more
data on that. But we're seeing resilience if you look at the data so far with Bloomberg second measure for apparel retailers and department stores and off price, we're seeing good sales coming in for the third quarter, and they'll start reporting their numbers in the next few weeks. So I think we're off to a good start, and I think Black Friday sales are already happening. Macy's is out today with fifty percent off on their private label brand
product and they expect to have other drops every week. Wow, So everyone's focused on starting now yep with promotions.
So Mary, you know, economists talk about a K shaped economy out there, some consumers, maybe the ones that own assets like stocks and bonds in real estate, doing more than good and kind of everybody else struggling a little bit, particularly with inflation.
How does that get reflected in retail sales?
Does it mean you just kind of if you're an investor, look at on Amazon Target where I can get some some some deals.
Yeah, and that's actually what's happening, and that's why you see, let's say, pretty robust sales overall coming out of off price. You know, so think of TJ Max, Ross Stores and Burlington stores, and Burlington's at the very low end if you look at credit card delinquencies or you know, those rates, and a lot of these companies that we're tracking represent the credit cardholders for like department stores and for some
select apparel brands such as gap, et cetera. And when you look at that data, delinquencies are actually lower this year versus a year ago, but not for the very low income, which kind of speaks to what you're talking about and inflation. Actually, those are up in the teams, you know, for the very low income consumer, So think like under fifty.
K yep, yep.
How about e commerce, Mary, I know the pandemic folks are saying, kind of pulled forward maybe four or five years of share shift from bricks and mortar to a digital what's the e commerce growth story look like these days?
You know, e com growth is looking strong when we look at the data, like I said, for the third quarter that we're seeing from Bloomberg second measure, it's showing actually online sales were stronger at the department stores except for Coals Coals online businesses, I mean not their online business, but actually their credit customer is shopping less, like in the double digits less, so that's kind of an issue for them. But generally we're seeing stronger pool with online
sales there. Now. There is also a delineation between the type of consumer. If it's gen Z, they tend to prefer shopping more in store and we see that with Abercrombie and Fitch's Hollister brand, so they are about seventy
percent of their sales are generated online. And then it's the inverse when you look at their namesake brand, Abercromby, because that consumer is those are millennials, and millennials prefer to shop online, so sixty percent of their sales are being generated online versus in store.
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