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Terminal and the Bloomberg Business app. Nrian Rabini of NYU and Hadson Bay Capital proposing a solution writing quote to resolve their current tensions, Canada, Mexico and the United States should start drafting plans for a North American economic union. Noria Rabini joined us now for more. Welcome to the program sir, Thanks for making time for us. That's quite a statement. Just go through the way you're thinking about it. How on earth would this work?
Well?
For now, we have only a free trade area between US, Canada and Mexico, and there already tensions involved. There's nothing not only to do with of course drugs, fan and ila and migrants but the US is also concerned about the trade imbalance between Mexico, US and Canada. They are very large trade services with the United States. So you can really negotiate the USMCA in a direction of restricting trade, and US is now probably asking Mexico and Canada to
also restrict trade in automobiles. There may be twenty twenty five percent tarries on that because there are lots of job loss in US. Or you can do something that is more bold, forming a full economic union. They would imply free trade not only in goods, but also in services, in the movement of capital, labor, data, technology, and information. That's what the European country have done for the last few decades, and from any economic point of view, America
is an optimal trading area that goes beyond goods. Now, one step you can take along those lines before having a full economic union could be, for example, to form a custom union. What's the difference between a custom union and a free trade area. In a free trade area,
there is no common external tariff against other countries. So for example, there are lots of Chinese cars that are now entering into Mexico, while US is a one hundred percent tariff on against Chinese ev if you form a custom unions, the first step for economic union, you have to have the same tariff impost on Chinese cars whether
they go to Mexico or US or Canadata. And in this way you create a full market, for example, for automobiles, and you prevent the imposition of say twenty twenty five percent tariffs on experts for Chinese cars or parts from Mexico to the United States. So you can do a reform of the trade agreement action of shrinking trade, or you can do it in the direction of expanding trade. And I argue that actually in the economic benefit of
all three counties to expand trade. To first the custom union and then a full economic union.
You offer a different vision then first, before we get to the much bigger one later, Can we just talk about the much bigger one. Freedom of labor, free movement of labor between the United States and Mexico just sounds like a complete nonstarter, Noriel, do you actually think that could be a stepping stone further out down the road in the future.
Well, in the case of the European Union, you had the same problem. The country with the were much poorer in central Eastern Europe. They you joined the U, there was a transition period of many decades until they reached a certain level of per capita income, a certain level of governor, at a certain level of reform. Of course, free trade in labor within US and Canada would not be a problem, same per capita income, same culture, language, and actually there'll be probably more people going from US
to Canada. They yeah, we around because of global climate change and shipland in Canada.
With Mexico.
Of course, at the current level of per capita income, you cannot have free trade in labor. But as I said, like in the case of Europe, you can have Sundard criteria that suggests that maybe after ten or twenty years, when Mexican per capita income is much higher, there's better governance than you free up that type of trade. So I say that in economic union, the part that is
controversial is only probably migration of labor. It will be in the interest of the United States who have free trade in goods, in services where it has comparative advantage, in the movement of capital, portfolio and FDI, and of course data information technology, where the US as a major comparative advantage. Real to Mexico and to Canada. The only controversial part, as I said, is labor movement, but you can restrict it over time.
Noel, do you get the sense that anyone in the current administration is sympathetic to this type of proposal at a time where it seems like people are increasingly going for economic isolation rather than reducing the walls entirely.
I will start conversation within the administration on this matter, but I would say that certainly a step towards reforming the USMCA in the direction of a custom union makes sense because right now, of course, the automakers, that the producers are very worried about the impact on their own production costs and profit margins of restricting and imposing a
lot of tariffs on say auto trade. The unions and the workers are in favor of it, but the problem is that you're imposing these twenty five percent tariff or on both automotive trade. The cost of cars in North America is going to increase by ten twenty percent. That's going to hurt first of all, consumers, but it's going to also hurt the workers. So if you care about US auto workers, there are two options wanted to impose the tariffs and restricting trade in automotive, but that's going
to be bad for everybody. Another one is instead having a casto union, where if you essentially have an external tariff that is common against Chinese autos, then Chinese autos that are not entering the United States today will not enter Mexico either, and therefore the market for US automaker is going to be much bigger because you have one hundred and twenty million Mexican they need auto and that
by now mostly Chinese cars. So you can have a win win solution that makes everybody better off, including the auto workers if you go in the direction of a custom union and eventually in economic union, so you have to go forward other than going backward. And I think that those arguments can be made in Washington, in Mexico City, and of course in Canada as well.
Noreel is this proposal potentially a way that the United States could have more heft when it comes to driving a wedge between Beijing.
Well, certainly, one of the concerns that the United States has is not just fentanyl that is coming to the US via China, but more important that the Chinese have avoided tariffs by essentially exporting goods to Mexico and from Mexico to the United States as if there were Mexican goods. The Mexican production of many goods as a lot of content of parts that is Chinese. And there is also a concern about the fact that the Chinese are taking over the auto market of Mexico as well. Exporting chip
cars isn't otherwise to Mexico. So if you care about the risking the relationship with essentially China, whether it's in auto or other critical parts of the economy, it makes sense to have initially customed union and then having also a full economic union where decisions about how much you trade and you investment with China from North America are done not by the US alone side alone, and then Mexico can do whatever they want as they do right now,
but everything the context of an economic union, and initially so it makes sense for the US, it makes sense for North America.
Noiel provocative as always, It's going to catch up with this, sir, and I should say thanks for making sign for us. I know you're on a bit of a world tour, so looking forward to catching up with you. When you're back in New York, Noria Rabini there of n Yu Stern and Hudson Bay. We'll begin this hour with stocks lower struggling to snap a four week losing street seem
a shower of principal ascent management writing. Whether the rally can reassert itself and deliver positive equity returns going forward will likely depend on whether Earning's growth can deliver. Seema joins us now for more, Sema, welcome to the program. Can it deliver relative to expectations? So let's talk about expectations. Have they pulled back sufficiently over the last several weeks.
Hi, John, I don't know if it necessarily has. I mean, we've already seen a couple of downgrades to economic growth forecast. Actually, from learning's perspective, I don't think it's moved down enough, particularly when you start to think about the second of April and the amount that could happen to global stocks, global earnings. So I think there's a little bit further
to go. You know, we need to see a number of other I guess boosts coming in the second half of the year, but I think for the next couple of months it's going to be a really rocky road.
Same as some of the retailers have come out and said that the next year could be difficult. They've loved red expectations. Delta air Lines the Airlines Group have done a similar thing over the last several weeks as well. Which parts of the market do you think are more vulnerable going into earning season?
So I think anything, of course, any which has got any kind of international revenue exposure, anything which is linked to consumers. The things that we're really concerned about with consumer is just what we're seeing with regards to price increases, the pressures that people are having on household income. So actually it's spread across so many sectors because there's so much significant exposure. There are parts of the market which we think a little bit less vulnerable, places like financials
which have had a bit of a pullback. It could see some return, but so much really depends on what can we expect to come through from a stimulus perspective, not just from the FED, but in terms of you know, what happens to tabs in the second half of the year, Are something can be lifted, Are we going to expect to see deregulation if that comes through then there are parts of the market that stand to gain over the
coming months. But as I said, I think the jury is out until we have some further clarity of where this administration is going with a number of their different policies.
And there also needs to be some clarity some of those inflationary pressures that you're referring to, both with respect to households and what that does to their spending capacity, as well as two companies and their ability to pass it along. Two said consumers, Do you have a sense of whether so far some of these price pressures are actually inflationary or whether they have the seeds of being disinflationary down the line in tandem with weaker growth.
So actually, I don't think there is any clarity tool. I think we're hearing really contradictory stories. You know, about a year ago, we were talking to a number of our larger clients who had told us that typically you can pass on increases twice. You know, consumers can handle it twice. The third time the third time is a complete nogo, and we're almost looking at the third time now.
On the other hand, we are hearing some small businesses who are saying that there's so much uncertainty and they cannot be left out of pockets, so they're already starting to increase prices ahead of what could be reciprocation on tariffs on April the second. So actually it's a very, very very story, which of course it doesn't help businesses, companies, investors really plan ahead.
At the end of another week where my mind feels somewhat fried, I wonder if people are just getting sick of all of the uncertainty in the United States and are looking for the certainty of the budget that was just passed in Germany, the certainty of other regions in the world that might be engaging in fiscal stimulus. Do you jump on that train or do you think that that sort of haven from uncertainty or just.
Another story, another narrative.
Do you think that that's basically played out as people realize, Okay, it's going to be more complicated.
So it's funny. So I've been in Madrid all of this week speaking to clients, and it was interesting from their perspective. They're a little bit more skeptical than I'm finding the US audience to be. They're looking at this and they're saying, look, this is really great news for Germany, without a doubt, but in terms of how it feeds through to Europe, they are still unsure of really what
the positive repercussions could be. They don't really think there's going to be a major fiscal stimulus from their countries, and even if there was, they're worried about what happened to debt markets, and on top of that, from their perspective, the real game changer that they're looking for is deregulation in Europe, which unfortunately is not something that they are particularly optimistic about. So I think there is some potential, certainly that there's good news at least in one part
of the world rather than the other. But how far this can go in the near term, I think is questionable, and certainly we think there could be a near term pullback for Europe in equities as you start to see some reality set in around what's happening with tariffs, and really you know how quickly this fiscal stimus can actually feed through to the German economy, let alone the European economy.
So see, why are you challenging this idea that the wall of exceptionalism is shifting over to Europe and China and elsehere we're in away from the United States, that that's maybe overly simplistic and it's just getting more complicated with a less clear path to which area and which stocks are going to outperform.
Is that kind of how you see things?
So I think that the near term is a little bit cloudy than many people who have been thinking. I think the near term, you know, there's been so much positivity around the fiscal stimulus news, but there's still, as you said, you know a lot of things with regards to the tariffs, how quickly the fiscal stimulus can be passed through that in the near term some of that optimism around international equities could take a bit of a setback. The other thing that we're thinking is that exceptional sorry
exceptionalism should necessarily be in question. We do think that the US is still going to see superior growth going forward, but is it going to does that necessarily stop European equities Chinese equities from doing well? Even a move to benchmark positions for so many investors would be a significant tail wind for equities. So it's just that the world
is a bigger place now. There are other opportunities for investors that and if you haven't had a chance in the last couple of weeks to get onto that ride, you probably will see aune to within the next few months.
When it comes to the uncertainty in the United States around teriffs, is April second then.
Going to be a clearing event?
Well, you know, one hand, yes, we hope that there will be some kind of certainty coming through. That is one thing which is overhanging, particularly for global investors or investors looking at international equities. So I think there'd be some clarity. Does it really clear up everything that we
that we are waiting to hear? I guess I'm fairly pessimistic on that, but at least we're getting to a process that at some point within the next few months we know some kind of direction where this administration is going, and then businesses can plan. So that's why for the second half of the year we have slightly more optimism because we think some of the uncertainty will clear.
Up the life of a European based strategist. Here Lisa Sprinkler, Madrid, a little bit of London, quick trip to Rome, doesn't it.
I think they we're both really tired.
Spending its head over there. It's all added up.
Yeah, but as long as you don't fire to Heathrow.
Before it did, makes sense at all.
Yeah.
Well, but I will say it's interesting that in Spain they're not particularly interested in what Germany's doing as being the Holy Grail, considering that it doesn't necessarily open up the purse strings for them, and frankly it might make them more in a difficult spot because of what spreads are doing on the periphery.
Sam, I appreciate your time, as always, sim Michan, they're a principal asset man. We begin this hour with stocks lower, Kate more of city wealth writing sentiment has weakened, but not fully collapsed, an absent full capitulation, and with persistently high and certainty around Tariff's growth and policy, we believe it it's too soon to step in. Kate joined us now for more. Kate morning, good to see you. Yeah, thanks John, congratulations on the new seat as well.
Thank you.
We've seen you since you moved over.
That's yeah.
I had a nice break and I've been getting ramped up in city. You know, it sort of pains me to have to write what I just wrote and what you read, you know, me.
I like risk.
I've always liked to look at opportunities. I like to see when they're just locations and say, this is a nice time to step in and right now to the conversation you guys were just having around uncertainty, not just in terms of the macro forecast, but also in earnings. It's almost impossible for me to say we've seen the bottom. We can break out of this trading range, and it's time for us to add.
There's always a price. Have we reset price low enough? How much more do we need to do that? Have we reset expectations sufficiently? What would you look for that would change your mind that a risk reward would become more compelling.
Well, one of the things that I keep getting my head stuck on is everyone's focus on pas right on multiples and valuation, and they keep on saying over and over again, you know we've derated a little bit. It's now looking a little bit more attractive, And I say, that's great. We have no faith and confidence in the denominator and against that backdrop, if you don't know what you're measuring yourself against.
Like are we cheap? I don't think so.
Look, there are super high quality companies in the US. I know we've had some rotation away from those companies over the last couple of weeks of trading, but you know that doesn't mean we need to step in and kind of back up the truck and add back to those companies right now.
And I hate, as I said, sitting.
On my hands a little bit, because like everyone else in this business, I have a bias to action.
How inconsistent are some of the projections that we're getting right now at of Wall Street.
Gosh, well, on one page you've got I know, it's a big question. You want to just start there.
Yeah, no, this is I mean, it's a terrible time to have to put out forecasts. I'm fortunate enough to not have to put a target on the S and P or say here's my technical buying level, or here's my earnings expectation at the moment, because it is going
to be a losing game at this moment. We could get to April second and have some clarity, I would put a much higher probability that we don't have clarity after April second, and so people are going to have to make these constant revisions, and especially as.
We were talking about four corporates don't know what's going to happen.
One of the things I'm worried about and Slash watching as we go into this next earning season is not just whether or not companies take down their guidance, but
whether or not they pull guidance all together. If they say, we don't have enough information to even reaffirm or adjust or even take down what we've given you before and we're going to step back, that tells us that kind of all bets are off and kind of continuing to sit on the sidelines makes make some sense now to be fair for like city wealth clients who have you know, multi assid portfolios.
We're not saying sell, but.
You know, there are a lot of folks that have big cash balances and we want to be convicted when we say put that cash to work.
That was what I was just going to ask.
Why sitting on your hands actually mean in financial terms? This is just means sitting on cash? Does it mean sitting on gold?
Going too big ass allocation decisions right now? Let's wait for more information and whether that's you know, tweaking our equity allocations or looking for more opportunities across the fixed income or alternative space, like, we don't need to do that right now. Let's wait for hopefully what will be a little bit more clarity.
Do you think you're going to have the conviction after April second? May make some of those decisions.
I think April second is an arbitrary date. I mean it is a point which we will have some information on tariffs.
But we won't have a significant.
Outlook for the for the entire policy program in the US. And until we have that, it's pretty hard to say, you know, what the growth forecast should look like.
This is what I would also say.
We have a pattern of behavior from this administration over the last couple weeks or a couple months that suggests there's, you know, a constant revisiting of their own targets and what pain they're willing to take, even as they stay focused on what they believe their big goals are. And the communication has not always been consistent to the corporate sector, anti the investment community, and I don't know that that changes just because we get to April third.
One thing is consistent. The President this morning just minutes ago saying April second is Liberation Day in America.
But to your point.
To a lot of people's point, they're not expecting April second to be the end all the bal If uncertainty is a feature, not a bug.
How do you do this for four years?
I think you're going to have to stay really focused on the areas where.
You do have certainty.
You know.
I always have a bit of a laugh when everyone says we want to own quality companies. No kidding, there's no point in the cycle where you don't want to own a quality company. And like any fund manager or investor says, like, I don't care about quality. I mean, I think you should probably head for the door. But what we're looking for, I think in an environment where there is a lot of uncertainty is earning, sustainability and
earnings you know, yeah, stability. Basically in general, we want companies that can earn through all parts of the economic cycle, that have strong products and business models, and like really like outstanding management teams that we can have faith in. When it comes to fixed income, we're going to have to see what happens to the inflation and growth side. So I can't say for sure what that kind of uncertainty will mean for that allocation.
The new policy is not confusing the administration. They seem to change every day, and they can change again very soon, and they will do on a for a second and maybe again multiple times after that as well. That's had enough understanding. How the rest of the world responds to it is equally as complex. How much has Europe's response to this complicated? How we allocate assets in the United States?
OK, I know people have gotten really excited about, you know, closing their underweights. I'm not going to say, going explicitly long Europe closing their underweights to Europe, and they've said, look, there's some of these pockets a fiscal stimulus, something we haven't gotten in a long time, and they've gotten really excited. I don't think that we can say we're going to make a wholesale regional equity change based on a few
policy announcements. And unfortunately, and I hate saying this, but I'm going to say it anyway, When the US needze is the rest of the.
World catches the cold. If there's a.
Significant slowdown in demand and activity on both consumers and businesses in the US, you know, it's really hard for me to imagine that all these global multinationals domiciled and all these other markets won't feel it, and that consumption patterns won't change.
So you don't buy into the erosion of US exceptionalism.
I think the US has some really exceptional parts of our economy and our corporate sector, but we are at.
A more challenging part of the cycle.
The other thing I would say is, you know, even going into this policy uncertainty, you guys know this very well, some of the macro data was slowing a little bit before any of this uncertainty was introduced. You know, there were some pockets of retail and consumer. We were talking about that a year ago. Remember, you know, as we were going through first quarter earnings for twenty twenty four,
everyone was saying, you know, is the consumer cracking. It didn't fully crack, but as we got into the beginning part of this year, some of.
Those fractures look more pronounced.
So that happened before the policy uncertainty, and I think we have to keep a very close.
Eye on that.
This space to a wait and see moment. There's so many people are in right now, not just businesses but investors too.
I just want to know what's going to end that right if it's not April.
Second.
If it's not necessarily guidance that companies can't give, what's going to give anyone a sense of conviction at a time of endless uncertainty.
Yeah, I wish I knew right now, and if I had the roadmap and my crystal ball was crystal clear, that would make me sleep a little bit better at night at this moment. But I will say here, we are on a Friday morning, and we know a lot of investors, both fast money and real money, don't really want to go into the close today or into a weekend super long risk, you know, because.
Of the uncertainty factor.
I want to see a change in that overall behavior once we start to really neutralize some of the big overweights and sometimes underweights that people have had in their portfolios over the last couple of years, and people feel confident that what they're owning and what they're adding to you can perform in a sustained way over multiple quarters. Like, I'll sleep a lot better. I just don't think we're there yet.
Okay, it's good to see you.
Yeah, thanks for going to catch up.
It's been too long. Yes, hopefully we can do this more often. K more of city.
OK, thank you.
Cisco announcing plans this week to extend their partnership, creating their most advanced AI architecture package that will provide secure enterprise AI networking. I'm very placed to say the Cisco Chief Product Officer and executive vice president G two Patau joined us now for more. G too, It's good to see.
You, sir. It's great to see you.
Thank you for having me, Thank you for being here. If I wanted to do this for a while with you, we all have. Let's just take a giant step back before we get into this partnership. You know what I worry about. I worry the AI will do to services what manufacturing was done so by globalization. What is the risk of that happening over the next several decades.
Look at any replatforming that happens. You'll always have some level of displacement of jobs, and we need to make sure that we make it as painless for society to make that transition happen. But I worry less about AI taking my job. I worry more about someone who uses AI really well.
Taking my job.
But if you take a step back, it's actually really exciting to see what the possibilities are with AI because what people, even despite all the hype, what people grossly underestimate is the original insights that AI is going to be able to go derive that don't exist in the human corpus of knowledge, that allow us to solve problems that we have not been able to solve until now.
And so, you know, whether it be in healthcare or financial services, or transportation or whatever industry you pick, you will actually have a reimagination of the ways in which we can solve problems that have not existed up until now. And that's exciting, frankly, because you'll have this, you know, a population of eight billion people that will feel like it's got the thru but capacity of eighty billion.
Are we seeing that happen right now? Is that a dream for the future or something that's being realized in this very moment.
You're going to start seeing it happen.
In twenty twenty five, for example, there'll be you know, a meaningful amount of code that will actually start getting autonomously written, and so you'll actually start to see so many more the capacity of engineers will actually.
Ten x during the course of twenty twenty five.
It's exciting to see this, as you know, is the societal issue that I'd be slightly concerned about. So there are a bunch of graduates who are graduating over the next couple of years or so, and they went to learn to code because they were told this is what you need to go and learn to do, and they're coming out into a workforce where maybe they feel like they're no longer needed. What's the advice you'd give to them as they graduate.
Here's the thing that I feel like people, you might overestimate the capabilities on that front, because AI is still not going to have the human instinct and the judgment that you're going to need to have.
You still going to need to do oversight. There's a human in the loop.
But now that developer is going to have a companion that can actually do the stuff that they didn't really care to do or they weren't as good as at doing. So this is a net positive in my mind, and you're going to see a lot of progress in society because of it, rather than a regression that happens.
Not to build on negativity, because I actually am a very big believer on the positivity and I'm excited for it, but there is this question of who's going to lose their jobs in the meantime, and John alluded to this, this idea that it's more of a white collar issue than a blue collar issue. And I'm thinking of things that we've heard about, like at banks where there have been fat fingers that cause transfers or whatever else, and that some of those efforts are being shifted to AI.
How significant do you think that transition is going to be.
You will always have some degree of jobs that will get displaced, and then there'll be new jobs that actually get created.
And the thing that.
We have to keep in mind is there's a lot of jobs that right now people don't have enough labor to get done that we are either we just don't have the resources to do that actually don't happen right now. And so what AI will allow us to do is not just go do things that humans don't do as well, not just do things that replace humans, but actually do things that humans don't have the time to get done.
Which industries do you think are being the most aggressive about adapting to different AI tools and bringing them into their entry.
I think it's costs the board you're seeing it right now, In fact, i'd say, you know, two years ago when chat GPT came out, almost every company in every industry when I'm noticing what's our AI strategy going to look like?
And we've now had a couple of.
Years to go bake that, and in twenty twenty five, you're going to see this really exciting move from just chat pots to agents where you'll actually have workflows get automated in every industry, in every sector, in every segment of the market, and every geography. So I feel like, you know, there's only going to be two kinds of companies in the world, those that are going to be really dexterous for the use of AI and others that are going to really struggle for elements.
Before we talk about facilitating that for Corporate America. G two, can we talk about how things are changing inside Cisco? What's different about how Cisco's operating with these advancements that you're talking about.
We are lucky in the sense that we've actually got a front row seat on what's happening, and you know, everything from the way in which we're building out infrastructure to the way in which we are getting our security and safety parameters in the right way, and then making sure that the workflows get automated. So you know, how
are we using AI and engineering? How are we using AI in our contact center so that when customers call because they've got a problem, we're using AI to make sure that we can help them solve the problems faster. What are we doing in legal? What are we doing in marketing? What are we doing in sales? Each one of these areas is getting rethought and reimagined. It's actually exciting to see.
The whole world's got to do this. Yes, every company's got to do the same thing.
Every company, EVERYDA introduces.
This partnership with in Vidio. Talk to us about that and what's going to change over the next several years with that partnership in mind.
So we're excited.
Jensen, the CEO of n Vidia, put it best. He said, Cisco and Nvideo are putting together the blueprint for securing AI. And John, I go talk to a lot of customers all the time, and when you go, when you go, ask customers how enthusiastic they are about AI. Virtually every ceo we had a study we recently did, ninety seven percent of the CEO said they were excited about AI, but only one point seven percent felt prepared right, and so there's this kind of dissonance between the preparedness and
the level of enthusiasm that's there. And then you ask in the next level question, why do you not feel prepared? There's two reasons that come up. The first one is they don't feel like they've got the right infrastructure in place to make sure that they'll be able to harness
the full potential of AI. And the second one is safety and security actually holds them back because they feel like it also is going to have a negative effect on adoption because if you don't trust the system, you're not going to use it right, and so that's in it. Those are two areas where Cisco helps customers out and what we've done with n videos, we just announced a partnership for this thing called the Cisco the Secure AI Factory. Now,
what is an AI factory. An AI factory essentially is a data center that's meticulously built for AI workloads.
And what it.
Allows you to do is make sure that you can you can create these data centers in the enterprise that can allow organizations to fully harness the potential of AI. And so we're jointly partnering over there WLBR networking, our security, their technologies looks. Cisco is one of the greatest networking companies in the world, and Nvidia is a pioneer on
the chips and actually create it to some degree. The movement in AI and the combination of the two companies together, and I think you're going to see more and more of this where companies are going to partner with each other in this ecosystem to really go serve needs of customers and work backwards, even if there might be a slight competitive elopment.
This is fascinating to me because what it signifies is there's a growing number of companies that don't want to rely on the hyperscalers, that don't want to rely on the cloud systems to provide the artificial intelligence for their businesses. And it raises a question about them that everyone has bought into in the market, which is that they will
be the big beneficiaries. How much is that changing with companies not wanting to necessarily develop their artificial intelligence in the cloud for security reasons and want to have it in secure locations that keeps their data encapsulated.
I think you're going to have both.
I think there's going to be probably the fastest growth that hyperscalers experience that they've ever experienced with AI, and they'll be the fastest growth that enterprises have because there will be some data centers that they'll want to repatriate back within the enterprise so that they can make sure that especially in areas like inferns, you'll actually see a lot more of that.
There's two big areas.
There's training infrastructure that's needed to train the models, and then there's inferencing, which is what happens when you use the models. And on the inferencing side, you're seeing a fair amount of repatriation of data centers back in enterprise, and I think you're going to see a little bit
of both. And we want to make sure that whether you're a hyperscaler, you're a service provider, you're an enterprise, Cisco wants to serve each one of them in a way that they can actually have infrastructure be plug and play and it's massively simplified.
It's still too complicated.
What's the role of government in this. There's tremendous competition around the world. Obviously, I'm thinking of Washington, and Beijing. Do you like what you're hearing out of the administration.
I'm actually very optimistic about the kind of things that you're seeing across the board, with the enthusiasm on THEI. If we weren't talking about AI, I would be concerned. But right now the governments are talking about it. They're talking about how automation happens within the government, how automation is happening in the private sector, how are they're going to make sure that they can accelerate the innovation on those areas.
So I think it's not positive.
Are we going to be replaced? So we care about?
No, John, You'll still be here in five years from now. I'm still going to come and talk to you at the show, and it's not going to be an AI humanoid.
It's going to be John.
That's all I wanted to know. That's all I care about.
How do you know I haven't already been replaced?
That would be.
Sorry.
Kerry had a guest recently. It was remote, and I word it might be AI. Just didn't have a clique. You never know, you never know, you never know.
Wonder an optimist. Someday this is ben War converting me.
I'm looking forward to being on this journey with you. G T one of the best. Appreciate it, thanks for being Thank you. G. Two p's out there the Cisco Chief Product Officer and Executive vice president. This is the Bloomberg Surveillance Podcast, bringing you the best in markets, economics, and geopolitics. You can watch the show live on Bloomberg TV weekday mornings from six am to nine am Eastern.
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