Episode summary
The Shifting AI and Energy Trades | Bloomberg Surveillance
Bloomberg Surveillance
· · 26 min · Hosts: Tom Keene, Paul Sweeney, Lisa Mateo, Michael Barr · Guests: Dan Ives, Lori Calvasina, David Tinsley, Naomi Fink
Summary
The episode focused on how a wave of AI caution and higher rates could reshape the equity trade without actually stopping capital spending. A guest argued that warnings from OpenAI and Anthropic about slowing the pursuit of cutting-edge models are a step toward safety, but not a signal that the AI capex cycle is ending, because China is not slowing down and U.S. tech is unlikely to either. The bigger issue for investors, the guest said, is distinguishing real change from “just more talk” while data-center spending continues and model economics commoditize over time.
Market strategy discussions centered on rates, inflation, and whether equities can absorb more tightening. One guest said the market can likely handle about three hikes over the next 12 months if 10-year yields stay below 5%, but six hikes, inflation nearer 4%, and a 10-year around 5.5% would do real damage. The same guest said a 10% haircut to next year’s consensus earnings still leaves room for the S&P 500 to reach 8150 over 12 months.
A consumer economist argued the U.S. consumer remains resilient, with August spending up 4.5% year over year and lower-income spending catching up to higher-income spending. On Japan, the yen was described as still cheap versus fair value, while gradual normalization by the Bank of Japan and the Ministry of Finance could eventually support it, especially in a risk-off move.
Key takeaways
- A guest said the Anthropic and OpenAI slowdown talk is a safety step, but not evidence that the AI capex cycle is ending.
- The guest argued China’s pace means U.S. tech is unlikely to slow materially, so investors should separate signal from rhetoric.
- One strategist said equities can probably absorb about three hikes and sub-5% 10-year yields, but six hikes and a 5.5% 10-year would hurt stocks.
- The strategist still modeled an S&P 500 level of 8150 on a 12-month view even after cutting consensus earnings by 10%.
- A consumer economist said August spending rose 4.5% year over year and lower-income consumers have largely caught up to higher-income consumers.
- The Japan discussion framed the yen as still undervalued, with gradual normalization the key longer-term force rather than a specific exchange-rate target.
Notable quotes
“this is a step in the right direction relative to safety because it's our view self-regulation is going to be the ultimate path”
“this is not stopping one penny of money. that's going into the data center and the AI capex”
“if we take inflation closer to 4% than 3%, and if we, you know, kind of model in 5 a.5% on the 10-year yield, then we start to see some real damage done to equities”
“We can still get you to 8150 on a 12-month time frame right now”
“just if you look at our latest August data, spending was up 4.5% year-over-year. That's a very good number”
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. We know if somebody knows about this tech space here, Dan Ies, he's a partner.
Yorkville, Ives and company. So, here's a top story on the Bloomberg terminal. Anthropic and Open AI are promising measures to reign in the pursuit of cuttingedge AI models to better understand the risk posed by the technology.
Dan, I'm not sure I saw this coming. I'm not sure the market saw this coming. What do you make of it?
Yeah, look, I mean, I think there's a few ways to to sort of dissect it. One, this is a step in the right direction relative to safety because it's our view self-regulation is going to be the ultimate path. But, you know, call it regulatory capture when you see calls in the beltway looking for more and more regulatory.
Ultimately, Open AI, Anthropic, they they took it by themselves and said, "Okay, we're going to ultimately start to now say that there should be a slowdown. But the reality is China's not slowing down. And if China doesn't slow down, this is all words because US tech's not going to slow down.
I think that is what investors are trying to navigate to understand what's real versus essentially just more talk.
This is coming from the companies themselves, Dan. And presumably they have a lot more knowledge than I do, than Tom does, than most folks out there do. I think a lot of folks out there are just saying a even before this talk over the last week or so, we really didn't know the risk associated with AI.
From the episode’s captions: roughly the first two minutes, lightly cleaned. Keep watching on YouTube →
Topics
- ai trade
- energy prices
- us equity strategy
- consumer demand
- yen and bojs rates
Companies and tickers mentioned
- BAC
- Yorkville & Ives
- RBC Capital Markets
- Bank of America
- Amova Asset Management
Watch the episode
Watch “The Shifting AI and Energy Trades | 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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