Episode summary
Markets Energy Shock | Bloomberg Surveillance
Bloomberg Surveillance
· · 33 min · Hosts: Tom Keene, Paul Sweeney, Lisa Mateo, Michael Barr · Guests: David Lebowitz, Steve Englander, Leslie Palti-Guzman, Sandy Peters
Summary
JPMorgan Asset Management’s David Lebowitz argued that the market’s leadership is still concentrated in tech and semiconductors, but that a broader rotation should emerge over a 12- to 18-month horizon as AI productivity benefits spread. He said hyperscalers’ free cash flow has effectively gone to zero, which is pushing AI spending toward the capital markets and creating a more balanced setup than the one-way trade of the past couple of years. He also said the firm is trimming winners in hardware and finding value in cheaper markets, especially China, while still seeing opportunity in Japan and parts of emerging markets.
On rates and currencies, Steve Englander said the Iran conflict has faded into the background for FX, with the dollar instead driven by the Fed, the US economy and real rates. He said higher real interest rates can support the dollar if they reflect a positive productivity shock, while the Bank of Japan remains boxed in as capital outflows keep yen weakness in place.
Leslie Palti-Guzman said the Qatar energy shock has revived volatility across LNG and oil markets, with no war-no peace conditions keeping supply chains uncertain. Sandy Peters of the CFA Institute argued that moving from quarterly to semiannual reporting would weaken transparency, likely harm investors, and could be a costly experiment for US capital markets.
Key takeaways
- David Lebowitz said AI leadership is still concentrated in chips, but a broader equity rotation should become more durable over the next 12 to 18 months.
- Lebowitz said hyperscalers’ free cash flow has effectively gone to zero, so AI funding is shifting from internal cash generation to debt and equity markets.
- Englander said the Iran war is not the main dollar driver; Fed policy, the US economy and real interest rates matter more.
- Englander said the BOJ is stuck with a weak yen and capital outflows, making intervention harder to manage.
- Palti-Guzman said Qatar-related disruptions keep LNG prices volatile and leave a lasting risk premium on shipping through the Strait of Hormuz.
- Peters said two-thirds of CFA Institute investor members still view quarterly reporting as essential and warned that semiannual reporting would reduce transparency.
Notable quotes
“we do think that this rotation is going to begin to materialize in a more durable way”
“if you look at what's happened to free cash flow for the hyperscalers, it's effectively gone to zero”
“I think unless something more dramatic happens, the war is faded into the background”
“it could be positive. And they said I agree. I agree”
“we say no. Um uh we CFA Institute has supported quarterly reporting since the 1950s”
How the episode opens
Bloomberg Audio Studios, podcasts, radio, news. This is the Bloomberg Surveillance Podcast. Catch us live weekdays at 7 a.m. Eastern on Apple CarPlay or Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts or watch us live on YouTube.
David Lea is with us right now. JP Morgan asset management. Paul, there's like 20 degrees in America that are pixie dust. One of them is leadership studies, Williams College. Oh boy. Like it's like liberal arts, but it's like you have to actually work.
You have to read everything on FDR. FDR. You have to read everything on FDR. It's like the — Cottage industry. Uh there. Let's take leadership studies, David, over to
The markets right now. Where's the leadership? Is there new leadership in the market?
So up until this point, the leadership obviously has been concentrated in the tech trade and and more specifically the hardware side of things, the chip side of things. You know, when we when we zoom out and we take a 12 to 18month view, we do think that this rotation is going to begin to materialize in a more durable way. I think part of what you're seeing in the market today is investors differentiate between the different parts of the AI supply chain.
And so they think about the chips one way and the hyperscalers another way. But you know, every company is an AI company in this environment. And so as you see these productivity benefits begin to acrue more broadly, that's when I really think you're going to see this rotation materialize in a more durable way.
Are we at the point now where it used to be the more you spend on capex, visav AI, the better it is for your stock.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- energy shock
- middle east energy risk
- fx moves
- fed minutes
- semiannual reporting
Companies and tickers mentioned
- JPM
- JPMorgan Investment Management
- Standard Chartered Bank
- Energy Vista
- CFA Institute
Watch the episode
Watch “Markets Energy Shock | Bloomberg Surveillance” on YouTube
Summary, takeaways and quote selection by Octagon. Quotes are short excerpts; the full conversation is in the episode.
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