The State of the 2026 AI Trade

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One of the things we're going to do is talk about retirement planning. Marta Norton is exquisite out of Chicago.

She's with Empower.

I should say that Empower handles the retirement programs of Bloomberg LP.

Do you know I have a retirement program, so.

I can't retire now, just keeping training.

I've been in the triple leveraged all cash fund with Empower forever, joining us Marta and Norton. Marta, I read your research note and then I look at the retirement planning of Empower and Empower saying, you know what, if you really believe in equities, front load you retirement contribution this year.

Is that a good strategy for you? Are you so bullish that.

You want to tell people, don't do your retirement contribution over twelve months, load the boat the first ninety days.

Of course, the argument for doing that is that then you capture with your contribution all the gains over the course of the year. And I think when we take a look at what to expect in twenty twenty six, a lot of the bulk case comes down to what we expect from earnings, and that relates, of course to the mag seven, which are expected to deliver something along the lines of what we saw in twenty twenty five.

So you have two good choices there, Marty.

Do we have a rotation going on maybe late last year in this market or is it still going to be an AI driven twenty twenty six.

Yeah, this is what.

I am wrestling with a great deal, and I think there are two major arguments that people are pointing to when they talk about this rotation away from tech, away from AI, they point to valuations and they point to earnings. I think that second second argument is a lot stronger than the first argument.

When we look at valuations, we're.

Not just looking at them relative sector to one another. We're looking at them relative to their own history. And on that count, I would actually argue that some of the mag seven have gotten a bit cheaper. And when we look outside that subset, if you're looking at consumer staples, if you're looking at utilities, if you're looking at some of these other areas of the market, they're actually pretty pricey.

Are more important than ever one could argue. So we had some really good earnings in twenty twenty five, you expect earnings to continue strong enough in twenty six to support this market.

I think that is a reasonable expectation. I think there's a few things that are coming to head there on the AI front. I think we can continue to see some of that momentum from the MAG seven, from the AI names. I think when we're looking at the broader market, you have a few tail wins to take advantage of. You have the fiscal stimulus, you have the monetary stimulus.

You have what some folks are.

Expecting to be kind of the incremental implementation of AI. This one i'm a little bit more allier of. I think it will take more time to really see a massive earnings boost from AI implementation, but maybe on the margin that's another benefit. So I guess as much as I want to be skeptical on the earnings front, I think it's hard to find a really negative case to look at from a corporate earnings perspective, Marta.

The retirement planning game, going back to the risk of nineteen seventy four or has been really difficult for a lot of people. How many people, I mean, within all the expertise of empower and all the macroeconomics and the calls that you're making, how many people are behind? What percentage of America is behind in their retirement.

Well, there's a few different ways to look at this. When we take a look at access to retirement portfolios, that access has improved meaningfully. I think there's numbers that show of the private companies out there, we have about seventy.

Percent offering for one case.

When we look at the actual contributions, we're are seeing decent savings rates. So experts recommend somewhere between twelve and fifteen percent saving for retirement. When we look at what numbers we saw in twenty twenty five, we see numbers that kind of rival that level. I think the big question is making sure that folks are engaged. When people get engaged with our retirement accounts, when they're paying attention, that's when you start to see the contributions take up.

What is an auto escalator feature?

So the idea that every year your contribution automatically increases, so you don't have to go in and make an active decision. You press a button and that occurs automatically for you.

Nice should try that.

I don't know if I have that act great app by the way and empower Oh good, yeah, it works for me.

I know what I'm doing.

So for how about the younger folks? Are the younger folks saving and entering.

Into opting into four to one k's.

And savings plans at a rate we'd like to see how's it look for the younger folks.

So when we look at account balances, we're seeing, say, if you're in your twenties, you're seeing an account balance of somewhere around one hundred thousand. If you're looking later in life, you're seeing account balances of somewhere around six hundred. So we are seeing engagement from the younger folks. I think this is always something that requires a lot of

Well, mister Buffet and mister Bunger also talk about don't over diversify.

What's a trend you see it in power?

Given the macroeconomics, given a three year or four year equity post COVID boom, are we too diversified? Are we in too many fancy things other than doing basic, block and tackle investing.

Yeah, I think at this point what we're seeing is still I mean in terms of asset classes. When you look at managed accounts for example, which is you know, a single solution that has a range of asset classes within it and investors make one choice to move into that portfolio, you do see a pretty ample spread across US non US fixed income. It's not overly exotic, and you have seen a real benefit And I think this was one of the things that came into question last year.

Marta, Thank you so much.

More Empower Stay with us more from Bloomberg Surveillance coming up after this.

You're listening to the Bloomberg Surveillance podcast. Catch us Live weekday afternoons from seven to ten am Eastern Listen on app, CarPlay and Android Otto with the Bloomberg Business Up, or watch us live on YouTube.

This is a special moment for Bloomberg Surveillance.

We'd love to see our guests over the years have a conviction.

Have a belief. Sometimes they're wrong. Has Dan and Ives ever been wrong?

Oh?

You know, I thought you think there was a a while back there. But he's been right enough where today he will do something very cool. I've enjoyed this wonderful privilege to sit with Ken Pruitt and wants Charlie Pellett ring the bell of the New York Stock Exchange. Mister Ives, I believe will open trading of the New York Stock Exchange today and celebration of the success of the ives ETF It's brought.

In a few few do balloons over the recent weeks.

Dan Ives joins us from Wedbush and celebration of nine point thirty and this morning, Dan, what does it feel like to join Snoop Dogg and kiss with the I don't know his his?

You know? To these fancy people on the bell? What are you going to dress appropriately?

I mean, I'm look I addressed appropriately?

Look I mean to look You're It's part of history, right h What the New York Stock Machines represents in terms of those walls and obviously the success that we've had with odds, it's not just me, it's you know, it's the team, but it's the broad belief that investments have had in us in this AI revolution. So it's so exciting to be a part of history this morning.

Is your ETF actively managed? Is it passive?

Has there been a strategic IVES call that's brought in a few dollars?

Yeah?

Look, I mean this is all based on the ives AI thirty, which is.

Our you know, these are our AI thirty, are thirty winners in the AI Revolution, all based on our research four times a year. You know, we basically switch in out who I believe is more relevant less relevant. And you know, the last six months and getting to a billion, it's been I think a validation as investors are trying to find how do you play the AI Revolution?

And I'm happy about the comblems and on and.

Just for you know, for this fund here the top fund holdings is the names that Dan's been talking about for a long time in video, Micron Technologies, Taiwan Semiconductor, Amazon, Alphabet, Microsoft, So the names that Dan's been recommending for a long time.

Dan speaking of AI.

We know you just returned from Las Vegas the Consumer Electronics Show. I'm hearing a lot about physical AI. I heard that from mister Wang Jensen Wong at Uh in video. What is physical AI and what are the opportunities there?

Yeah, look, well physical AI, it's really about autonomous robotic.

I mean this is now.

What I view is the consumer AI revolution starts in terms of physical app and I think what you saw with in video, they're weighing out and to end's platform on autonomous We've talked about It's why we're so bulletr and Tatsa, even robotaxes and the autonomous sort of vision there. But this is this is the next stiege of AI. But it's all fueled by the godfather of AI Jensen the video.

I look Dan and Wells Fargo reducing their overweight. They stay overweight on Microsoft from whatever it was down to six sixty five down the income statement into the earning season. Dan eyes with you with a six twenty five outperformer in Microsoft. Where and the financial statements is the important point for Microsoft earnings?

I mean, I think it's about Azure and cloud and growth. I had to put in the context. I mean, you're talking about the highest margin business that I believe the streets under estimating probably by ten to fifteen percent this year. And you're talking about I think the streets all the underestimating about twenty five billion of incremental growth from a cash book perspective, we're talking about fifteen billion that.

I don't think is factor industry models from Microsoft.

Right, Well, they're modeling fifteen percent revenue growth. So are you saying down the income statement is the underestimation of Microsoft?

Yeah, I think I think it's underestimated from a growth perstructive on cloud, underestimated in terms that we say on cask FOWK.

And the reality is the enterprise AI revolution.

It all starts in Redmond and Thedella, and industry is underestimating what this means from Microsoft.

Dan.

One of the things I heard from cees and and Video they launched this Alpha Mayo platform. Tell us what this is because this gets a little scary for some people.

I think, Yeah, I mean, like you could say it's reasoning or really AI needs autonomous. It's an end to end platform that in Video is basically laying out as their answer for autonomous. It's really something that ultimately better than the human driver. And I view it is just like what Taska was doing on robo taxes, just like what we're seeing on autonomous Nvidia is going to be a supplier from a chip perspective, but also they're.

Going to play an ant end platform play as well.

Dan ives with us this morning with webbush a celebration, and just under one hour he will stand at the New York Stock Exchange with his wonderful etf It's really done well, and the vectors from his garbman would say from the lower left to the upper right as.

Well, Dan, I want to switch to Apple. I was just in Paris and I'd never been.

To the Tuileries, to the Museum Rangerie it's called, which is the those lovely simple quiet Monet paintings of the water lilies, sterile quiet, and I witnessed their dan Ives and I thought of you packed tourists, many many from the Pacific Rim, holding Apple iPhones in their hands, taking photos, taking selfies, doing YouTube bes stuff in front of the quiet of Claude Monet of eighteen ninety, his gift to the.

Nation at World War One.

Explain Dan Ives, what I witnessed where are we in five years with the use of the iPhone.

Look, and I think it's all about the AI coming to the Apple ecosystem.

We talk about this is going to be the year AI for Apple.

I mean, to my what one point five billion iPhones in the world, I mean two point four billion iOS devices. It's about you when you look at this next stage for Apple, it's going to be the most important stage I think, going to the AI revolution and they monetize that install based.

That's going to be front and summer.

And it's why one of our top picks and in my opinion, underestimated in terms of what the error that they're hitting when it comes to AI.

Dan.

I know, we kind of knew the CS was going to be all AI centric here as you talk to investors, are you don't say any AI fatigue that maybe it's played out, or boy, it's it's hard to handle these valuations, or boy, their numbers are getting so big. What's the conversations you're having with clients.

About Yeah, well, I think when you you know the time we spend there with Nvideo and Jensen and on the floor, you cannot come away within that.

There's an AI bubble I.

Mean we're still in the early days of play now because you see what's happening on embedded devices on the chip releases obviously releasage to AMD and others, and I think it's not the tig. I think investors are starting to realize that this next stage of the AI revolution is now taken.

Hold Dan, help me here with this.

Paul mentioned cees. Where do the smaller AI companies fit in? Are we going to like perplexity, Are we going to see M and A this year for all of these names that Claude and the rest that I don't understand.

Are we going to see an AI roll up?

I think you're gonna see a lot of acts, positions, strategic financial acquisitions in terms of tech, which about robotics, that's one of our favorite era games. I've still serve robotics is in a good example. Looking the reality is that it's an arms race that's playing out. It's gonna be a lot of acquisitions, a lot of consolidation, and I think that's why it's just going to be year three of an eight to ten year build out of the revolution.

When did you get into tech stocks, Like, were you sitting in the student union. I've sat in the student union at Penn State. Were you out at State College one day and the lights shone down? Dan Eisener's was epiphany, wear bright clothes and followed tech.

I think, look, I mean, obviously it started in my Penn and State days. I have a lot of tend standers here at the at the bell ring it. But I think to me, it was really in the late nineties starting to cover Internet. It was the recognition that it was going to be the start of what's really going to be a forty to fifty year tech buildout. And I think what we're seeing today is just the next stage of that.

It started in State College.

And obviously, you know, I'm super happy that investors have to have supported me along the journeys.

Dan, So what's the uh, what's the key issue pushback if any from your clients these days?

Is it valuation?

Is it just I'm just I've made my money, I'm taking it off the table here?

What's the pushback?

Yeah?

I think evaluations, circuit of financing. Is there a two big defail moment open the eye and I think news are in the US try to trade negotiations parents, but look to me, it's like we'll have these white knuckle moments. But I said, I think techtocks are up twenty percent this year, but it's as wegin earning season in January and you get more into cap backs and get more I think that's going to be the key to this next stage.

Are the tech broke? I'm going to ask a Paul Sweetey question. We got to go Dan, Are the tech.

Broken to grow up and finally develop dividends and dividend growth height?

Look, I mean a bench, but I don't think now because you want to focus on investments, right, and I think that to me, this is an arms race. It's ten thirty pm in the AI party goes to four am. Don't worry if there's some glass dropping the dance for.

Okay, Dani's congratulations on the thank you initiative of your GIF.

What was the number he brought in?

It was like, I think there's like a billion dollars in THEIRS.

One billion dollars for That's a nice number. Stay with us.

More from Bloomberg Surveillance coming up after this.

This is the Bloomberg Surveillance podcast. Listen live each weekday starting at seven am Eastern on Applecarplay and Android Auto with the Bloomberg Business app. You can also listen live on Amazon Alexa from our flagship New York station. Just say Alexa play Bloomberg eleven thirty.

Wendy Shower joins us. Now as we go, look at grebs there. If you do the AI thing like your students, and I do, Professor Schiller up at Brown University, It's something like Jefferson, a strict constructionist, worried the Constitution didn't grant power to buy territory. Let's start with the basics, as President Trump trying to buy territory in Greenland or Venezuela.

Well, Tom and Paul and Lisa. Stephen Miller is one of his chief domestic advisors, said, yeah, they want to buy Greenland. They want to control Greenland somehow. And if they want to do that, at least the most famous precedent would indicate they need Congress's permission in a vote to authorize using US dollars to do that.

Is that a Louisiana purchase.

It is a Louisiana purchase, and we're going to buy a major territory. Now, you know, a lot of people don't know the scope of Louisiana purchase, how much land that was and why it was so important, you know, to go west and sort of opening that entire gateway, solidifying I think, US expansion.

So it's really going.

To have to be a justification when again, people are worried about things at home, the president seems to be focusing, with some exceptions, on matters abroad.

Wendy, should we be surprised that Congress is giving the president a fair amount of leeway here on these international efforts in Venezuela, maybe Greenland, maybe some other areas.

Should Congress be taking a larger role here?

Well, you know, on Venezuela, you know, the President of States can take military action without talking to Congress, without telling Congress for some limited.

Period of time.

And you know, the technicalities of the War Powers Act is really boots on the ground, troops that are going to be there. You have about forty five days, then you have to ask permission again for forty five days. Then you need an authorization of military force like we had in Iraq.

That's the rule, that's the law.

The president seems to find ways of exercising presidential.

Power without following the law.

But right now, he is within the bounds of presidential power in Venezuela.

Greenland's totally different.

And you're seeing Republican senators jump, you know, really get out there very quickly.

And say, we're not buying Greenland. What are we doing? We don't need Greenland. This doesn't seem to be what we should be focusing on. So you've got some prominent Republican voices in the Senate saying, no, we're not going to approve this.

So I don't know how he moves money from the Treasury somehow to buy Greenland without that support, but it's a bigger matter. Republicans don't love to get involved in these conflicts without any endgame, except, of course, a rock under George W.

Bush.

So we're going into an election year. How do you tell your constituents this is what we should be doing. And Trump hasn't given them a really clear explanation they could use with their constituents.

So politically, how does this play in an election year for the Republicans and the Democrats? Here with President Trump, like many presidents do here at the stage of their you know, in a second term, focusing on international efforts, how does this play domestically, do you thinkolitically well.

Republicans have argued for limited government, they supported those they supported cutting governments.

You know, spending can go arise. We saw in Minnesota.

You know, things if they're not watched, we can lose a lot of money to inefficiency and corruption. That's a winning message with most voters. But how does that improve.

Voters' lives right now?

And the Democrats have the task without being in power of saying, if you give us power, we will make your life better on these dimensions, and Republicans now are sort of saddled with explaining how they can control the entire federal government and not make things better for people.

And going into Greenland and Venezuela doesn't really show voters there, So that both parties face some challenges. They're kind of inverse of each other.

Want to show here with us with Brown University, can't say enough about our academic effort and new treats out an inequality across states in America.

At Cambridge, we're celebrating that as well. Paul.

In the old days, you and I studied the Louisiana purchase, you know, before Duke basketball game, we read like six pages in the cliff notes, David Rubinstein. Now at the archives, you go in you can see the actual photo images of the seven page document. You can click and get a transcription. So here's where we're heading, Professor Schiller, I'm

Well again, you know, to get we know this from history. Presidents need the Senate to approve treaties. That's the rule that's in the Constitution. You know, you can't really get around that.

So he could sign a document and they can have some ceremony, but it wouldn't have any standing unless the Senate of roofs the treaty.

And we know we know.

That Senates have rejected treaties in the past, as Jimmy Carter on Sault too. So you can get rejected, and certainly I think this is the thing that.

The Republicans want to avoid.

The Republicans in Congress now are running from behind to keep control of the House and maybe even the Senate, and they need something to help them get back into the game. You know, having to attend a signing ceremony on purchasing Greenland is not going to get the Republicans back in the game to hold power in twenty twenty six.

Well, this is the Detroit Lions blue button. Excuse me, Paul, this is a huge deal. The Senate, we don't know. As Professor Schulwood just said, it's up for grabs.

It is so again, we're the news is coming fast and Florida furious.

Wendy.

We had this Ice Minneapolis shooting kind of raising questions just about Ice in general and how Ice interacts with citizens and non citizens. Is this a political liability for the president or is this in fact play up to kind of what his base is looking for.

Well, I mean, his core base supports him really no matter what he does. And remember he's not actually running for anything in November. But we've seen with George Floyd in Minneapolis in particular, also how this event could catalyze and organize what have been resistance movements across the country to ICE and the placement of the National Guard in major cities, and that can really bring it all together under the umbrella of overreach and overstepping power.

We know that the vast majority of Americans are the vast.

Majority sixty three percent or so disapprove of ICE tactics, So this is not going to help that number with Republicans and Independents are in that mix as our Republican voter. So you have to ask yourself, if your Congress, do you want to defend these measures consistently?

That the real power Trump has now still.

Over the Pulkans and Congress is the primaries. He can swoop in and shift the primary. At least we saw that in the fall. If he can still do that, they have to stay loyal to him because they don't want him to come into their backyard and get them a primary challenge that they can't win.

Wendy, thank you so much, Professor Schuller of Brown At University.

Stay with us.

More from Bloomberg Surveillance coming up after this.

This is the Bloomberg Surveillance Podcast listen live each weekday starting at seven am Eastern on Apple Cocklay and Android Auto with the Bloomberg Business App. You can also listen live on Amazon Alexa from our flagship New York station, Just Say Alexa, Play Bloomberg eleven thirty with our newspapers Lisa Manteto.

Okay, so we've all heard about AI taking over a lot of the mundane tests at work, right, the stuff you don't want to do. The thought is that it's going to for you to concentrate on the important stuff, right,

Last study is that what it's come up.

So they're saying you need that busy work to spark some creative you know energy.

Empty the dishwasher, Yes.

Like that's mundane work, and she can she can get some great creative energy from doing the dish from emptying the dishwasher. But that's where there's it's a different side to it because we've always you know, heard, you know how the benefits of you know, getting rid of the mundane task.

But they're saying we need them.

See, I'm kind of a task granted person as opposed to the white on the weekend, the whiteboard all that.

No, thank you, No you don't.

You don't make a list on the weekend.

No no, but I just list.

No no.

My father was the absolute worst, and because of him, there's never been a list.

Buy and low, sell high. That's I can follow that.

There you go, There you go.

Okay, we know food costs are on the rise, right, we always talk about that. But Bloomberg has this interesting article on the terminal. You got to check it out. It's saying that shum, some chefs they're turning to trash to create new menus. Now stay with me. Okay, I'm not talking about they're going in the garbage. Okay, they're not going in the garbage, but they're doing these zero

Cost one hundred and sixty dollars.

Nice, So they're making a profit on things that they would have thrown out. So it's a different look into how companies are dealing with the increase of food prices.

But there's a lot of waste.

Like there's a report it shows more than one billion tons of food.

Gets tossed in the world each year. Restaurants about thirty percent of that total.

A lot of it is, you know, from people when you're done eating, you just kind of throw your food out, but a lot of it is from stuff that they could reuse that they choose not to.

Well.

I think part of the problem is just in the US. I noticed it is just thes are just out of control and they're embarrassing.

It's ridiculous, you know, I mean, now we're we ordered, we split it, and we split what we ordered.

Last night, major you shout out in New York City, they led the way. City Harvest has been brilliant in US. Yes, is a great charity. What else do you give me one more.

Okay, I'll give you one more because we were talking about you know, the someone mentioned earlier, the dry January, right, people drinking a lot less. Okay, so this is the sober party girl revolution.

Okay.

This is in the New York Times. They had like over one hundred people who went to this New Year's place called the Maze. You know, those are like those private clubs that people pay memberships for.

But the difference with this.

One is that it does not serve alcohol. So it costs about their annual dues or by three three hundred dollars a year, you have a one time fee of about fifteen hundred dollars. All that you get, you know, the fancy chairs, and you get the nice spaces and the fancy restaurant dishes, but you get no alcohol. And they're saying this is the trend. People are drinking less alcohol, and they want to go to these places where they don't have to worry about other drunk people, you know, being an issue.

What percentage of them are all gummied up when they go.

Into today That was not mentioned in the article.

Yeah, but they're just saying that they want members to remain sober on site.

You don't want any for drinking on their.

Club, and people are paying to have this membership over three thousand.

Dollars a year.

The newspaper's Lisa Mateo there with another lecture for Time King greatly appreciate that this morning.

This is the Bloomberg Surveillance Podcast, available on Apple, Spotify, and anywhere else you get your podcasts. Listen live each weekday, seven to ten am Easter and on Bloomberg dot com, the iHeartRadio app, tune In, and the Bloomberg Business app. You can also watch us live every weekday on YouTube and always on the Bloomberg terminal