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So honored Ted Wade Lee with us here in an historic week.
Always in diplomacy.
She is a black rock and a wonderful think of their chief investment strategist Wally. This is not Nixon to China. This is not Henry Kissinger's secretly hanging out of the Piece hotel in Shanghai to get things started. If this is not Nixon to China, what is this visit?
Well, the summit points to a push to preserve near to stability. There are incentive on both sides to manage tension given the deep supply disruption in the Middle East and also the interconnectedness in global trade right and of course technology remains at the center of the strategic competition. You know, with what's happening in the China AI models. They are catching up in terms of performance of those in the US, and they are also competing on cost
and efficiency. The energy system, power system in China is large and less constraint, so lots going on, and I think some of that is reflected in markets as well well.
Ye, we just had the S and P just have its best April Vois twenty twenty, and the backdrop is kind of strong earnings here. What do you make of this market, this earning cycle we're seeing and these valuations.
Well, valuations look more attractive compared to this time last year because of the very strong earnings that have been coming through. And I would say that the backdrop is a is an interesting backdrop, right, because the strait of Hormus is still closed in terms of the accrude damage. We're talking about zero point five to global GDP this year and pushing up inflation higher as well. That also have been pushing up rates. But when it comes to valuing risk assets, it's a discounting.
Future cash flow.
So even though R is going higher, if g is going faster and higher, still we can still have a rosy market, which is what we have had so far. But it's very concentrated up until now. In tech, right you look at attach those large type earnings in terms of delivery for this quarter, it's tracking three times higher versus expectation at the beginning of the quarter. So the AI theme is off setting, in fact more than offsetting in risk market the disruption from the Middle East.
So we did have wayley it's certainly in the US broader market. It's kind of a rotation late last year maybe out of some of those tech names into some more evaluation.
Areas.
Small and mid cap stocks even had some good performance. Was that just a short term trade and now we're back to kind of where we've been for many years, which is a tech driven, AI driven marketplace.
Well, we saw a bit of rotation, and I think that came also of the back of worries about the unprecedented kopex spent. If you look at the speed of copex spent by these hyperscalers word tracking actually even faster than Industrial Revolution, right, so you look at the contribution of AI related spent to GDP, I mean, it's all AI right now for Q one, So they would worry about the regional investments for this kopex spent, which is why tech was taking a back seat and underperforming and
the rest of the market were catching up. But if you look at kind of revenue ramp I'm not just talking about the earnings of big tech companies that have reported, but also the model builders. You look at Anthropic, they're arr revenue ramp at the end of last year was nine billion, and you know in March got to thirty billion dollars a year and now tracking forty two forty four billion.
Dollars a year.
So this speed of revenue ramp is also unprecedented one hundred. That's that's why I'm feeling a bit more comfortable.
Really, you're prodigious mathematics and also a sense of history. Do you have an analog to this tech dominant moment? We're all living in the halves of tech and the have nots. Is there a wayly analog besides maybe you brush against ninety ninety two thousand and one, or do you go back further?
I would say that this is not quite ninety nine in two thousand, because the revenues are coming through and earnings are coming through. Evaluations are not as stretched as things were looking back then. And I would also say that if history is anything to go by, it would be too early to call who are the automate winners versus the automate losers of the AI transformation. In fact, the winners and losers may not even be in public
market just ye it right. And I say that because if you think about kind of the application of AI in other sectors, I think it's still unclear if it is the provider of compute and model on the one hand, that are going to win, or if it is the provider of data IP and patterns that are going to win. So it's still too early to say, even though market narratives swing wildly, as you know.
Really, thank you for the brief for the black Rock this morning. Greatly, greatly appreciate that. Stay with us. More from Bloomberg Surveillance coming up after this.
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YouTube in studio.
Today, one of our leaders in thinking about the messes we are in Leslie vin Ja Murray, joins as President's CEO of Chicago Council on Global Affairs.
You wrote an intelligent.
Blurb for a book that is absolutely spectacular. Iran's Grand Strategy Valley Nasa. You're going to hear a lot about this book from me, folks. Iiken Green's book on currencies, my book of the summer, but Vali NASA's book is outstanding as well. What's the number one thing in that book that we misunderstand about Iran?
I mean, I think that you know, the eyes on the prize is that you know, you've got to kind true that's thinking very strategically about its future. And I think this is you know, if you if you look at Valley Nassar's analysis of the of the current conflict, you know, it's very clear Iran's got its eyes on the prize. It's in a winning position, It's used its leverage very effectively. What we thought was very asymmetric has turned to feel less asymmetric than you might think. And
we're seeing that. And you know, as those as President Trump sort of throws up his hands and says that the deal's not good enough or he doesn't like what they what they wish to have, Iran looking unfortunately quite powerful, and the US, as President Trump goes to China looking not very strong.
What do you think the best the US can get out of any type of negotiated piece with Iran is at this point.
You know, I think that the real concern is that that's straight, that leverage that Iran has is going to continue to hover over President Trump's head over all of US. I guess the best deal would be to, you know, sort of maybe not have a deal, but to get some sort of ongoing cease fire and some sort of opening of that straight. Kick the can down the road on negotiating a deal when it comes to the nuclear issue,
because that's not going to be resolved anytime soon. But if you know, if he could perhaps offer to lip some sanctions tough thing to do, unblock some assets for in exchange for a deal in which you know this UK French led proposal to help open the straight, keep the straight open. You know, I think for the US president the number one thing is really the straight, not the nuclear issue, which you know, let's be fair, it hadn't been a big issue in reality leading up was open.
The straight was open ten weeks ago. Decades it has now the game has fundamentally changed in the straight of Hormus.
Can can I ask a dumb question. We put a man on the moon, why are we having trouble with this.
What is the where we have an adversaries?
What is it?
I mean, I feel like Robert D. Kaplan.
What's the geographical constraint for us applying what we need to do to open the straight other than our will?
Yeah, look, they're there, We're very far away. It's a tiny little passage way. They have all the will in the world. It's their one source of leverage.
Didn't we know this?
Of course we did. Our foreign policy experts have gamed this out for a very long time. They were very well aware that this was the scenario to be aware of. And this US administration has simply not been taking that advice. It hasn't been thinking through I think President Trump, I mean we know this by now, he thought.
He could go in. He could you remove the to your ships.
You could create then, you know, the US and to be fair and Israel thought they could create the conditions that would allow the people of Iran to rise up. Clearly a very shallow analysis of this regime. And it's you know, it's its embeddedness across the entirety of the country.
You just have relocated from London. Give us just a sense of how our and I can use air quotes here. Our allies are traditional allies view the US now simply in the context of this Iran venture here.
I mean, we know it's not good, but you know, you can you can separate it out right. Obviously, British and European elites are struggling to engage and try to diversify away from their dependents on the US because they're i think so ongoing shock but realization that the US under this leadership and even going forward, isn't coming back.
But look at the people.
Sixty eight percent of Brits pold last month thought that the US was, you know, doing doing nothing good for the world. To put it in a nutshell, you go pulling. I mean that's extraordinarily high. It was up eleven percent month from the month previously. So our soft power, our public diplomacy. But the elites, right, the foreign policy elites and leaders in our allied countries in Europe are really trying to find ways to not have to work with
US and to not be dependent on us. But what they are doing, they're meeting today the UK and the French and forty other nations to try and come up with a proposal so that if there is a deal, they can enforce, help to enforce, you know, and and ensure an opening of that straight So that is you know, that's a win.
If it happens, it's going.
To be very spending Leslie Vnja Murray.
Where this is Chicago Council and Global Affairs with all our work in England, I have to ask, I've been bringing this up just to get our guests to get the room ras.
S up as well. Are we going to have Prime Minister Farage?
I mean, look, it was not it's not been a good few days for the Labor Party. Cure Starmer is you know.
Should thread and should step aside.
Politics is never about a single choice. It's always about an alternative. And this is the main reason that he's still there, that that you know, there hasn't been an effective leadership challenge yet you know, wait and see what happens today and tomorrow. Is that there's there's not a clear alternative. Andy Burnham's not got to you know, people talk about him. He's not got a seat in Parliament. No, and folks don't want to see you know, they don't want to seeatives.
So you didn't answer. This is a typical.
I don't think so. And remember the general elections in the UK are still several years out. This is not a short term thing. And you know, you know the phrase Tom a week is a long time in politics. The question is how long we're going to have Stormer? I don't think this Prime Minister sadly gets you know, stays in position very much longer. And what does the next person do?
Can they?
Can they meet the challenge of you know that what we saw in the local elections were you know, we're not happy people going for the Lib Dems, but especially going for Reform and the Green Party. We're not happy, but we didn't see a consolidated opposition.
What's it like is a brit out of Wesleyan University caecut?
I am, by the way, until citizen now.
Very dubul Okay, what is it like?
As Paul mentioned earlier, parachuting into Chicago, White Sox are Cubs.
Look, you never choose my daughter's white Sox. You know my first game was white Sox versus Cubs. The Pope is white Sox, and I love the Pope to speak at the Chicago Council. But I'll tell you Tom, the
fascinating thing about Chicago. World class economists and elected representatives, deeply concerned about the stability of our international trade order, about these tariffs now the bread basket of the world, deeply concerned about the impact of the closure of the Strait on food, on fertilizer prices, and so, you know, many things to watch, but we're all watching US and China.
This meeting coming up, and whether you know President Trump's efforts to lean on g will do anything to get that straight.
Did she did she answer a question?
Never answer a question.
The Chicago Council is independent and partisan, you know, sport based. So never take a sign and.
One of these to see you in the studio.
Leslie Vengerburi or President's CEO at Chicago Council of Global Affairs.
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 Applecarplay and Android Otto with the Bloomberg Business app, or watch us live on YouTube.
He's a Pinata on Wall Street. He's also been right.
Dan Ives joins US Global head of tech research at Webbush Securities. Daniel, I lifted your call on Apple. I believe it was on Friday. I saw that tweet as you listed it went through compliance.
The tweet.
Is well state to us how the persistency has developed at Apple, the persistency of cash flow that allows for share buybacks. Where in their machinery does that come from.
I mean, look, to some extent, I don't think there's been a tech company, or maybe a company in the world that's don a better job from a cask flow capito allocation perspective than Apple. Now you know, if you look at it, I think the criticism would be cap
backs and what they've done from an AI perspective. And tom My whole point is they are now going to be in the winner circle when it comes to ascension, monetizing, the consumer AI revolution that all starts to WWDC when they unvol their strategy.
Okay, they're going to unveil their strategy, but everything sudden. It's our strategy is to avoid the capex build up that we've seen in AI. How smart are they that they're not forced to do a euro Canadian yen debt issuance like Google.
Look they're so because right now they're in a position of strength, and I think when you look at Turnus now as CEO, I think the big focus is going to be doubling down services, but it's going to be about unleashing the AI strategy because it's my view, it's a trillion dollars of incremental value when it's all said done, seventy five hundred dollars per share.
As they mindize AI, that.
Could be fifteen billion per year annually services and it starts off what's going to be probably an AI enabled phone as we go into next year or two.
Dan, I think I'm like the rest of the market. I don't know what Apple's AI strategy is. What do you think it is?
I mean, Paul, in my view, and you have one point five billion iPhones and two point five billion iOS devices. It's now laying out what essentially will be a subscription service.
I mean, you're going to be able to have models.
Gemini will be the first one that they'll talk about WWDC, You'll have Claude, You'll have you know, Chat, GPT. It's going to really become the foundation for consumers. You'll have the models in there. The apps are going to get developed, you know, from an AI perspective, over the next.
Year, they're going to get a slice of the pie. I mean that's that's really the key.
I mean the services perspective, they'll be the storage, they'll be the consumer foundation for AI. That's twenty percent of consumers in the world will access AI through an Apple device.
Is that what we're going to see at the developer conference or is this something that is going to be an announced or develop over time.
Well, I think it starts off.
I mean, finally, all the Apple intelligence features that they'll actually veil, JEM and I will be the first in terms of what we talk about as the big partnership.
And it's all gonna plug in.
When you think about the next version of iOS, I mean, this is really gonna plug in to the Apple ecosystem. Everything we've been waiting for the last two years is now here. The enterprise AI revolution has been here, the consumer hasn't been and now it starts.
So will this be you know, chat ept Claude, whomever it is saying Apple saying hey, if you want to be on my system, I'm going to take a cut of any subscription revenue.
Is at the model.
Well, I think at first that's not gonna be it, right, but eventually the storage.
The thing about the amount of storage, that's ultimately going to mean the where's that's going to go through. It's going to go through the cloud.
It's gonna you're gonna see in Essentially, apps develop their AI enabled on the app store, Apple gets a peace. So what starts to happen is as more consumers around the world world start to use AI in everyday setting, it's going to happen through an Apple device, and that is how they're going to monetize on AI.
So is this does this suggest that they will, you know, unlikely make the types of large language model investments and data center investments that we've seen some other technology companies.
That is not going to be their model. They're going to do an asset light model.
And it's an asset lives not because they don't need to do it, because they have the install based they're not a hyperscaleur right, I mean, they're not spending that type of hours and this some extent.
By them not spending like that, they now are in a.
Position of strength to finally execute on the strategy. And that's why I think the baton's getting handed to turn is at this time, especially you know as you you basically have the surprise upgrade cycle that's helped them this year.
How does this end?
I mean it denies as we stagger through this, I mean the narrowness here, there's no analog to what we've seen here. Does this broaden out into other AI stocks? Do I have Apple with a fifty multiple? Where are we heading.
It broadens out?
Look?
It's my look. We're top of the third.
Inning, one out man on second in terms of AI game, and I think what's going to happen is it's going to expand out to software, expand out on the consumer side. You've obviously seen the expansion within chips in terms of Intel and others. And then I think it's going to expand to energy and we talk about you know, other sort of subsectors. That's why it's our view we'll be talking NAZAC thirty thousand by the end of the.
Year, Dan, Microsoft's been one of the names that you've talked about for a long time.
What's the current call on MSFT.
It's the most undervalued large cap technique out there, am I view? I mean, just given where my view on prize, what's happened on Azure.
I think in.
Terms of the execution, it's one where investors, you know, have definitely significant dismounted relatively what's happening with Google and others. I think the two you'll get Apple and Microsoft, or the two table pounders on large cap relative to where they're trade today.
I look Dan at the the AI upheaval.
And I'll be honest, folks, I really don't follow all this executive stuff. Is must gonna win in all this? I mean, Dan, do you have eight thousand shares? I mean you know the IPO? I mean are you front running this? I mean, does Musk win in all this?
I think in the case, I think ultimately all I think, I don't think must wins against all men in open A. I mean there could be some wins, but I think it scrapes and bruises. Open AI does not get significantly transformed because of the case. But thing about SpaceX, think about eventually it's going to be a Tesla merger.
It speaks to it's an arms trace happen right now.
And Musk Alman, obviously everything happened at Google and Anthropic I mean it's it's just starting in terms of whether there's playing out and guess what that's bullish for broader attack.
Hey Dan, do we have any more guidance on the potential IPOs of the Anthropic and maybe chat GPT. You know, thinking was it is going to be a twenty twenty six event.
What do we know now?
Oh?
I think by I mean between in the fall mid to eight. I think this all happens this year Anthropic Open AI and of course space X in the summer.
Wow.
And I think that's bullish for tech.
Some could say it's you know, Oxygen's steal in terms of from mag seven. Other I disagree. I think it's good to have those public. It's good transparency wise, and I think it just showed two more years of a tech bull run.
Jenn, I thank you so much with webbers 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 Applecarplay and Android Otto with the Bloomberg Business app, or watch us live on YouTube.
Joining sta mar Brick, Chuddar and joined us from the Texas out of Paris as well. It's just a grind over in France. I mean there's almost no American equivalent. What was it like getting the degree sorbone daffine e NSA in all, No, there's no other equivalent in the world.
I would suggest, well, thank you for this invitation. We have a strong tradition with I mean quante and mathematics, summon studies. And you mentioned the National School of Statistic en say, which is my school? Actually I did you mentioned Pari Dufin And I do agree there is no equivalent, mean.
There's no equivalent.
We have this strong tradition I mean using I mean mathematics, statistic studying, I mean these I mean these fields and apply them in these fields to different fields like finance and economics. And this is exactly what we are doing at the University of barudu Fin and this is what we're doing in the National School of Statistic.
Take the macro view right now in a Texas then what is your measurement of risk of the American system right now?
Well, so when we look I mean there are different parameters of course we are looking at. But when we look at the pure economic cycle in the US in our opinion, there is no risk so far. Why we're saying that because based on our measures, based on the models where we are looking at, and based on the market perception also the business cycle. So far, the US economy is still strong. So we are in the middle
of the war. Of course, in the media of East there are concerns regarding inflation, concerns regarding the purchasing.
Power for our households.
But at the end of the day, one of the the must track things were looking at we are seeing when it comes to the US, is this economy has the capability that we don't have in Europe to surprise to the upside. We were talking about I mean a couple of years ago, a couple of quarters ago, about I mean soft lending of the economy whatever, blah blah blah, and what happened then the economy has still continued to surprise.
So we we are still confident on the fact that growth is still there and here's to stay in the US.
Blah blah blah. I read I learned that dual lingo that's French blah blah blah exactly.
But Brooke talk to us about the impact on Europe and the UK from this war because your energy dependence is greater than that.
Of the US.
So you guys are how are you guys thinking about the effects now? What are you seeing and what could happen towards the end of they We.
Have seen already in some effects taking place in Europe because if you look at the French growth I mean growth is at zero for the first quarter and this and this is clearly a man of problem link connected to these energy crisis. We do think that, uh, the coming quarters could be tough for for the European growth and for European countries and with and because we are more depending on these energy competited to the US. US
is the first supply of energy in the world. Uh, there is clearly more better, greater sensitivity too of the European country to this energy shock. Will be a man negatively affected via the private consumption via growth, and these clearly will need I mean an additional support from the fiscal policy. However, we don't have the room of maneuver to a main support or economy via the fiscal policy.
You're in meetings with institutions in Europe, have they wavered under commitment to marginal investment in America.
Well, I think I mean clearly that there is a need I mean for Europe to to to diversify these I mean this investment and continue to invest in America another too, to be in to lower or I mean their energy dependency to the Middle East. And this is absolutely fundamentally and crucial to continue to collaborate and to expand I mean our investment to the US. So I mean at the end of the day, I mean investment is crucial and one of the big feature of with
a big difference between Europe and the US. We are not investing a lot and enough sorry, in our economy, and we are not investing enough period compared to the US corporates.
How about I mean, AI seems to be a US maybe.
An Asian story in terms of where the money is being invested. It feels like, you know, Europe missed tech broadly defined. Are they running the risk of missing AI?
I think the risk is already I mean as already materialized.
Okay, when we look at I.
Mean there is only one or two core companies that are involved in these AI stories, which is I mean the case I mean when it comes to the US or you mentioned emerging Asian country and we have not invested in this field. We are late, and we are we can say that we are in the middle of
nowhere when it comes to tech and AI. Seriously, I mean when we look, I mean off, when we look just at the CAPEX spend spend expectations for this year in the US, I mean this is there is no comparision between Europe and the US.
Remember, thank you so much, don't be a stranger, Thank you so much for jelling and Robert not showing with us in the Texas of Paris.
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