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All right, let's switch gears to technology.
Always, always, always a lot of technology news out there, and it's news with really big numbers too, I mean, and today's no different. Anthropic has received offers from investors for new round of funding that could value the company at about eight hundred billion dollars or hire just they just the numbers, keep it.
And this is a private company, yes.
Yes, And if I'm you know, putting my IPO banker hat back on from back in the day, I'd be knocking on these doors so hard, saying let's rip this thing into public market.
But we'll see.
Mandy've Sing joins US global tech research lead for Bloomberg Intelligence. He's over in London right now, cracking heads over there, a bloom Intelligence over there, whipping them into shape, as well as seeing a bunch of clients. See I can look at his calendar, I see actually doing a lot of real business over there too, so we appreciate that generating some revenue hopefully. Man, do you talk to us about Anthropic here any surprise here, Well.
I mean we knew when they released that thirty billion ARUR number that you know, the growth rate is phenomenal. It's been accelerating driven by the use of their product as a coding agent, and they seem to have leaf frogged open AI and the other frontier llms when it comes to coding agents specifically. So right now everyone is lining up to be part of their next funding round.
And since open aie was valued at eight hundred and fifty billion dollars, given you know, Entropic has surpassed open ais arar, I'm not surprised that we are talking about eight hundred billion dollar range for Entropic in the next funding round.
So the numbers that Paul was mentioning where a new funding round that could valuate at eight hundred billion dollars. It sounds like Anthropic doesn't actually need the money right now, so our investors just throwing money at the company and the company saying.
Nah, no thanks, we're pretty good. We just raised thirty billion in February I.
Would say these companies do need a lot of money simply because you know, they keep saying they are compute constrained, and look at you know what open ai has been doing with regards to you know, all the deals that they have signed to get the compute. And look, in the case of Hyperscalers, at least they have the free
cash flow to pay for you know, the capex. In the case of Anthropic and open Ai, they don't have any free cash flow like the hyperscalers, so they actually need the money to pay for all the compute and AI infrastructure. And that's where you know, it's great that open ai was able to raise one hundred and twenty billion before Anthropic surpassed them in terms of err. I bet you they'll have a harder time now than they had a couple of months back. And right now it's
Nthropics moment. So the more money they raise, the more compute they can lock in. And it is actually good that they have the compute to really spend on acquiring all the users and make sure they become a sticky product.
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Let's talk about Ramatz because LVMH came out in the Reselt yesterday and they seemed kind of encouraging. We thought, Okay, the luxury consumer doing well overall, Urmaz maybe not so much. Andrea Felsted is our Bloomberg opinion columnist joining us London. Andrea, what happened here with Ramez.
Well, there's been a few worries about Hermez for the last sort of few months because there's been this reset in the luxury sector where a lot of brands have got new creative directors. So it was a bit of worry that harmez Witch is very much sticking with its designers. We have got a new designer coming, but it's very much sticking with it's creative. You know, setup is going to get left behind. And what's really focused people's minds
is Chanelle. There's been this Chanell mania and Chanell was one of the brands that was most criticized for raising prices. But they've got this new designer, Matthew Blasi. Everyone loves his clothes, everyone loves his bags. There have been frenzies at Chanel stores, and the worry is that some people who would have bought her Mez bag will switch to
Chanelle in steady. Had that going on anyway, then what's happened to day is you've got got that backdrop today Hemez has shown that it's not the resilient story that everyone expected. Homes has outperformed. There are long weight lists for its bags, so when times are tough, it can just work its way through the weight list. If someone said, oh, you know, I can't afford to borking right now, there'll be someone else on the list who can been really resilient.
But what's happened is is it's been really hurt by the Middle East, and not just the Middle East, by tourists. And the big revelation was that they said they got more than fifty percent of their sales in France from tourists, and that was a surprise because the market had always thought it was the local customers that were keeping them going, and that they have such a big tourist exposed. All this is adding up to show that Hermes is not untouchable,
and that's why the shares have rerated. The shares have rerated already. That they're on about thirty six that they're thirty three times thirty four times times the next twelve months earnings. That sounds like a lot, but its five year average is forty eight times. So you can just see how much it's been public. And I think there were probably some hopes that you know, it would reassure today and the shows were gone up. That's not happened.
I think one of the harder jobs in Global Wall Street is to be a luxury analyst, because not only do you have to have the numbers right and the multiples right in your earnings models, but you have to have a call on fashion, which is fickle to say the least. Here is it exactly if you'remez, do you just bring in some new blood?
Here is that in terms of well they.
Are doing that. They've got a lady called Grace Wale's Bonner who's a very well respected men's were designed a big surprise. She's going to be the creative director of men'swear. She's been very influential. Her collaborations with added US helped to spark the you know, the big jump in demand, but Added US traders, particularly those sambas, but they were everywhere a couple of years ago. She's very powerful, she's
very well respected. She could although it's men's where she could bring a bit of a bit more of a you know, a bit more pizzazz back. They're also doing Hope couture. But the question this morning on the analyst call was are you going to reduce capacity? There are certain bags, the Kelly, the Burkin, and also the Constants which quite hard to get. You have to put your name on a list. Her miss is gradually ramping up production.
Now.
Ferrari also had these problems, and it's kind of dial back its production of like the bog standard model. If you can get a bog standard Ferrari like a you know, a run of the real Ferrari, and it's doing these
very special editions. So could hermis do that? Could it, you know, limit some of its bags and even go more up market and do like super rare burk In super break Kelly's, or even a new bag altogether that could compete with which you now so great news, you know, potentially for for resale values that have been coming down. Very bad news. If you've got your name down for one of these bags, it could be you know, if they change the model, it could be getting even harder. They'll find one.
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Let's stick with industries overall and talk about the auto sector, clearly very much impacted by the rising oil prices. Stillantis Ford GM, they all have to keep a very close eye on how oil prices are trending, especially as they have transitioned away from evs at least in the United States to focus on those big gas guzzling vehicles. Let's bring in now Steve Mann. Steve runs our Global Autos team here and Industrials Research, and.
He's actually in New York today. Hi, Steve, You've got to see you.
Hello.
So talk a little bit about what SLANTIS is doing, because it's now looking into reviving a partnership with China's doll Func Motor that would involve joint car production in Europe and China.
Yeah, we actually wrote about the emerging trend of you know, global automakers using China as a manufacturing base and really take the competition to the Chinese, because the Chinese has done really well exporting vehicles out of China, not only in Europe, but in many parts of emerging markets, Southeast Asia, parts of Latin America. So, you know, I think for global automakers like Stillentis, I think Volkswagen is considering doing
the same thing. GM is definitely doing. It is really to build cars in China at a low cost base and then compete with the Chinese in these emerging markets.
Why would so What are the BYD's the Chinese auto companies saying about.
This, Well, I think I think, you know, they feel they have an advantage because they are you know, local, They feel that their automobiles are more techy and resonates with especially the younger first time car buyers, and many of them are in emerging markets. So you know, I think I think the Chinese will will continue to export quite a bit of vehicles going forward.
What does this mean for these kinds of vehicles in the US. I mean, we're still obsessed with the gas couzling vehicles. They've done away with all the tax credits for greener vehicles. How does this position Stilantis and other carmakers for how they offer lower cost vehicles for Americans?
Yeah, interestingly, that's a good question because a lot of the buyers in emerging markets are actually skipping the ice gasoline vehicles and going straight to electric. So that's also an advantage to some of the Chinese local automakers, but it actually helped the global automakers like Slilentis because even though the US have stepped back on EV's, the rest of the world are not. Right, they're still pushing EV's, so they need to continue to bill EV's. They still
need to invest in evs. So you know, having them produced in China and able to compete in the rest of the world with the Chinese, you know, gives them a great, great option and great revenue stream.
So if i'm if I'm STILLANTUS here, one of the brands Jeep or whatever the car will be, the vehicle would be manufactured in China at that cost. I'm gonna stick my stick my jeep name on it and sell it in France or the US.
Yes, it's possible. So it's a little bit difficult in the US because there are terrorists, and I think the administration actually frowns on that. They actually had some discussion with this GM about that. But I think more in the rest of the world, like Europeans and the emerging markets.
We keep talking about how the lowest cost or the average price of a new car in the US is north of fifty thousand dollars, right, Yes, that's where we're standing at in terms of actually coming to market with an affordable, low cost vehicle.
Tesla's supposed to come out with something.
And I don't know if we have any kind of timeline on that. Have GM and Ford kind of skipped making this a priority?
Uh No, I think you know, first of all, there are kind of rumors in social media that, you know, Tesla is going to go back and think about reintroducing a smaller compact vehicle. But GM is still investing. They're still launching the Chevy Bolt. Look they have GM does have a strong portfolio of evs not in the US. Well, they do have a strong portfolio in the US, but
they also have a strong portfolio in China. And you know, I think I think the US automakers, even though they have dial down the investments in evs, they're not forgetting about it. They are still spending a lot of money. Ford is introducing something in twenty twenty seven twenty twenty eight, a smaller, more affordable vehicles. Look in the US. It's interesting to see even those EV sales have been down, the infrastructure, the charging infrastructure, actually is continue to expand.
I think as consumer finds the the convenience of having an EV's, I think there's still a place for EV's in the US, but not at at the growth way we saw in the past.
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All six big banks have now reported their results, and clearly the war, the uncertainty that the war has created has not really damped stock trading because their equity trading desks did incredible business in the first quarter. Herman Chan is our senior analyst for US banks here at Bloomberg Intelligence and he joins US now. Herman which bank came out ahead overall because they all did really well when it comes to equity trading, less well on fixed income trading.
But when you look at the results as a whole, which bank comes out of the winner.
Yeah, I would say Morgan Stanley probably outshined the most across the trading front, both on equitis and fixed income.
But overall everything was great.
On the trading front. We're talking about twenty five percent growth inequities, eleven percent growth in fixed income across the six banks. Really strong results. Fixed income, as you mentioned before, was a bit more mixed with Goldman weaker, Bank of America touch weaker, but everybody else was really strong on the fixed side.
What are they saying about the pipeline here for business because it seems like this is going to be a year where we could potentially get some mega IPOs. I'm thinking SpaceX and all the anthropics and all the kind of st Yeah.
Yeah, I think the IPO calendar looks a bit spottier. We have the big blockbuster names like you mentioned with SpaceX, potentially open AI, anthropic data bricks. Those are going to be the headline ones. But on the other hand, maybe some less activity from the private equity backed businesses that may be finding it tougher sledding in terms of getting into the markets giving the volatilty and the environment today.
But nonetheless, there's going to be these blockbuster deals that are going to happen this year in.
Our view, and it doesn't appear that companies have held off or held back from deal making either, even with all the uncertainty caused by the war.
Yeah, that's right.
M and A at least for the first quarter was solid strong all the way around on a year over year basis. That was gangbusters up sixty eight percent year every year. So we'll see how that continues given some of the you mentioned. The volatility is great for the trading front, less so for M and A activity and equities issue, and so it'll be a bit of potentially slowing down over the course of the year.
So we heard Ted pick On earlier today with Lisa Bromwitz and talking about the Morgan standing results. Man, they look they look pretty solid. There is that in the returns they're generating. Talk about tools about the returns this big banks are generating now before versus you know, several years ago.
Yeah, I mean, returns are improving across the board. JP Morgan leads a twenty three percent return on tangible equity and then even some of the laggards like City Group at thirteen percent ROTCE. That's relative to their expectations of ten to eleven percent for the year. So everybody is actually increasing their returns. It's been helped by the trading results that we saw in the first quarter. It's also been helped by stable expenses. I think AI will be
a big driver of that going forward as well. With less headcount growth for the industry, but positive operating leverage, all of the top line strengthlets falling to the bottom line, which is good to see.
I'm glad you bring up expense growth because there's a Bloomberg News story indicating that the Wall Street banks cut five thousand jobs.
In the most profitable quarter.
Ever, how much is this an indication of what we're going to see quarter after quarter from here on out? I mean, is this the kind of pace of job cuts that we might anticipate.
Yeah, It's an interesting question. It was a question that was asked by the analyst on the earnings cause across
a number of the banks that reported. I think the management teams were a bit shy to really give out concrete numbers, but AI has been a game changer, especially on the consumer side, where Bank of America gave some numbers on the headcount on the consumer site, it's come down drastically and a lot of that has to do with areas that are more manually intensive and also areas like the call center where you just don't need the
same amount of people doing that. Given the fact that Make of America has bolstered their AI chat bob, which they named Erica, that's been driving a lot of the.
Client in headcount needs. So we'll start.
Hearing from the regional banks soon. They have a much lower exposure to the capital markets business. So what are you going to be looking for from the regional banks show?
Yeah, regional banks kicked off earnings today with P and C, M and C and first to rise in reporting.
I'd say it was a mixed bag.
P and C probably outshown outshined on the lending front with strong loan growth, particularly in commercial lending, and that was echoed across the big banks as well, where they saw broader growth in commercial lending, increasing lineation which has been in the doul drums for several quarters given the uncertainty of tariffs last year, and then some pick up in production from areas like small businesses and the like. So that's great to see for banks like P and C.
For M and C, it was a bit weaker. They did guide down on their net interest income because of less growth in consumer lending.
When it comes to the big banks, there are a lot of questions about private credit and how exposed these big banks are too potentially bad loans made directly to some of these companies.
Is this a problem for regional banks.
It's it's also been a growth driver for regionals, so it's it's a area that's been one of the outstanding areas for loan growth. That being said, there there is virtually no concern across the management teams. I can point to P and C CEO Bill Demchek that just spoke earlier this morning. He said there was a question on and like where on the you know, loss curve, could could credit private credit b in a recessionary environment. And basically said it's not on the curve. He's saying that
they don't expect any losses. And he contrasts that comment with what happened a few years back on the office commercial real estate front, where they were very open about their exposures and potential loss rates.
There they virtually.
Saly know losses from their private critics. So that's great to hear that, and they were very adamant about that.
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