अनुलिपि 🔗
00:00:02
Speaker 1: Bloomberg Audio Studios.
00:00:04
Speaker 2: Podcasts.
00:00:05
Speaker 3: Radio. News.
00:00:09
Speaker 4: You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10 a.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts or watch us live on YouTube.
00:00:24
Speaker 5: We are holding right around session lows right now for the major U.S. stock indexes. The Nasdaq Composite down 4.4%. Investors kind of reassessing what the change in the political landscape means for the semiconductor industry, for the AI industry. Let's bring in Matt Bloxham. He's our senior media and tech analyst based in London. And we're going to talk about Qualcomm's earnings as well. But I do want to get your take, Matt, on how investors are trying to suss out what the change in power in Washington means for the AI industry and therefore for semiconductors. The Philadelphia Semiconductor Index is tanking today. And as we were looking earlier, the best performing stock in there is down about now 5.2%. And the worst performing stock, yeah, is Astera Labs down 16%. This is on a daily basis. This is just today. What are you seeing, Matt?
00:01:19
Speaker 6: Yeah, I mean, you'll see that kind of the big takeaway initially is that the pace of data center build out in the U.S. is going to slow quite significantly as a result of the midterm election result. And that's going to primarily affect the builders and suppliers of components into those data centers and particularly markets. the semiconductor names, which is, I think, why you're seeing such focus there. But on the flip side, and maybe it seems a little bit counterintuitive, but the consumers of that capacity, particularly the hyperscalers and the neoclouds, benefiting because I think we got into this position where investors felt that The investments they were making were slightly disconnected from the reality of business economics, and they weren't necessarily going to make a good return on those investments. So the fact that you've got an external factor like a circuit breaker, if you like, slowing the pace at which they can make those investments is making investors feel more comfortable about the outlook that the squeeze on cash flow isn't going to be so great, and the risk of having stranded assets isn't so great either. So You know, I think there's probably going to be a few more chapters of this story and lots of nuance in it. But that's the kind of trade right now.
00:02:40
Speaker 7: How do you or how do investors, I guess, think about the risk of the U.S. falling behind maybe in some of these investments to the extent that there is this temporary or potential roadblock here to construction? Because It is competitive out there and maybe just simply between the U.S.
00:02:57
Speaker 1: And China, for example. How do we weigh that, do you think?
00:03:02
Speaker 6: Yeah, you know, I don't think, I personally think that that's too much of a worry. For a start, the U.S. is already well ahead of lots of other regions, particularly Europe. And actually, Europe is an environment that has quite heavy policy constraints around creation of new data centers. And I guess to some degree, the U.S. is potentially moving ahead in that direction. So I don't think it's necessarily going to be a disadvantage. And I think you potentially kind of create just a kind of second iteration of innovation. The kind of first wave of AI has been around kind of raw capacity. And I think what you might see is that the kind of frontier model developers now sort of say, okay, well, if if capacity is going to be constrained, I need to make frontier models that are more efficient in their consumption of compute and power. We may see that innovation come through and I still think that the big US frontier model developers and some of the Cloud providers are in the best position to innovate those new product offerings so that their end customers can make the most out of what's actually available.
00:04:11
Speaker 5: Matt, I mentioned how chip makers are down big today. Qualcomm is among them. It's down about 13%. This is after its latest earnings report. A lackluster profit forecast. Like so many others, households and companies, Qualcomm is dealing with higher costs, and that's proving to be a weight on its bottom line.
00:04:33
Speaker 6: Yeah, that's right. So, obviously, historically, Qualcomm heavily exposed to the smartphone market, which has been growing much more slowly in the last year or two, and now also suffering from higher input costs because memory is a massive part of the bill of materials for a smartphone. And obviously, memory chip prices have been going up massively. So, I think that's where the margin pressure is really coming from, both in the numbers they reported and the forward outlook. I think also what they've been doing to try to kind of make people feel more optimistic about the business outlook is make a hard pivot towards AI and supporting AI build-outs in data centers. Up until the midterms, that seemed like a great strategy and people kind of saw a positive road ramp on there. Now, obviously, even though they're still talking positively about the rate of growth for that part of their business over the next year or two, I think investors are now thinking, well, we're going to kind of pare back how much growth they're going to get from that. So you're kind of now in this kind of tricky situation where you've got cost inflation, which isn't going to go away anytime soon on their core smartphone business, and perhaps slower growth on data centers.
00:05:43
Speaker 1: What is the outlook for memory chips?
00:05:45
Speaker 7: The shortage here, as we hear it across a whole swath of companies, how long is that supposed to last?
00:05:52
Speaker 6: I think it's going to last well into 2027. I think certainly the last couple of weeks we've had
Load full transcript
indications that the squeeze is going to last until at least into the second half of next year. And there is a lag, quite a big lag, on how even a big change in, say, data center build-outs would flow through to a more normalized balance between demand and supply areas. in the chip market. They've all indicated they're sold out probably to the end of next year. Everything they can make has already been ordered and contracts agreed at certain price points. So, I think it's going to take quite some time for us to see an easing of price pressure in that market. But it may well, and I guess maybe a lot of investors are hoping, that it will make the chip manufacturers who've all indicated huge investment plans to expand capacity that they'll make some adjustments to that so that they're not in a situation that we've seen before where they've got a glut of capacity a year or two.
00:06:55
Speaker 3: Down the line.
00:06:56
Speaker 5: Before we let you go, Matt, very quickly, you think Anthropic is still moving ahead with its IPO as planned for later this month?
00:07:04
Speaker 6: You know, I was just talking about this with a colleague before I came on. You know, obviously, every day you see the market under pressure. It looks like a harder and harder sell. But I'm sure they will go with it until the very last moment and, you know, take a decision once they see what the book of demand looks like.
00:07:24
Speaker 1: Stay with us.
00:07:26
Speaker 8: More from Bloomberg Intelligence coming up after this.
00:07:32
Speaker 4: You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10 a.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business app. Listen on demand wherever you get your podcasts or watch us live on YouTube.
00:07:47
Speaker 7: Next guest writes, with Democrats winning control of Congress, policy risk for U.S. companies may increase as incentives grow for President Donald Trump to rely on public pressure, executive power and federal leverage to advance White House goals. Nathan Dean, senior policy analyst for Bloomberg Intelligence down in D.C. What do we know from President Trump here? Because he likes his executive orders. He likes his executive power. You think we may see more of that?
00:08:15
Speaker 3: Absolutely. It's been reported that the White House is going to actually do more executive orders over the next couple of weeks. And let's just think about it from a lame duck perspective. If President Trump doesn't have the ability to work with Congress, they're going to go to other areas where the power of the presidency is more powerful. So geopolitical matters, tariffs, et cetera. And presidents in the second half of their second term, when Congress largely says, look, we don't want to work with you because you're not going to be around. They try and stick to this area. So from an investing standpoint, we're looking at the energy sector in particular, just because not only of their exposure
to what's going on with Iran, but Venezuela is a good example as well. When President Trump says, look, I want access to Venezuela, we need those companies down there building up infrastructure, these companies are going to come back and say, well, Mr. President, do we have a guarantee that we'll have a financial, physical security after January 20th, 2029? That's a lot of billions of dollars they have to commit without having that type of guarantee after President Trump leaves.
00:09:10
Speaker 5: We should note, by the way, oil prices are rising about two and a half percent today and energy stocks are the best performing group in the S & P, up eight tenths of one percent. Nathan, I also want to get your take on what the changing landscape in Washington means for defense companies, defense contractors. They looked like they were going to have a good run with President Trump and a unified government behind them. But now with the Democrats taking control of Congress, what does spending on defense look like?
00:09:41
Speaker 3: So we're telling our clients that when it comes to defense spending, it's generally going to be around status quo, maybe a small increase over where we are right now. The Department of Defense slash war budget is around $ 800, $ 900 billion. You're not going to get that $ 1. 5 trillion that President Trump asked for. But what the Department of Defense is going to have to get used to is the Democrats, and this is largely simplified here, are going to make the Department of Defense slash war really justify their actions through congressional hearings and appropriations. The good news is for investors is that while this isn't going to dramatically change defense level spending, we should get additional information and we should get a greater timeline of knowing where these programs are going to go. Because, look, Democrats also view defense spending as a jobs program. And also there's a lot of armaments that the United States has to replenish, not for just the Iranian conflict, but potential conflicts with other countries.
00:10:31
Speaker 1: Nathan.
00:10:32
Speaker 7: I think in a lot of states across the country, the electorate spoke loud and clear that they either don't want data centers or the data center push needs to slow down. Yet President Trump is out there saying he's all in on AI and he thinks.
00:10:48
Speaker 1: That just go, go, go.
00:10:50
Speaker 7: How does he react, do you think, to maybe changing feelings amongst folks in this country?
00:10:55
Speaker 3: Yeah, so there's really three ways to think about artificial intelligence slash data center and policy. Now, when it comes to federal policy, President Trump, like he says, let data reign. If it's legislation, you need a signature. If it's regulation, you need his blessing. And he's very much going to be a light touch towards artificial intelligence because of his desire to be competitive with China. When it comes to the states, it's going to be extremely
difficult for these data center operators. It's not going to change overall data center spending in our view, but if you get significant roadblocks in Texas, can you take a project and move to New Mexico or move somewhere else? It's going to be a lot of trying to figure out project by project where it goes. But one of the biggest risks for artificial intelligence is the 2028 presidential cycle. Because as you noted, in this election, there was a lot of populism views coming out from the American people maybe not trusting data centers, maybe not trusting artificial intelligence. If a 2028 presidential candidate takes up that mantra and runs with it, we could see significant AI regulations, significant AI legislation brewing that could potentially play out in 2029.
00:11:56
Speaker 1: Stay with us.
00:11:58
Speaker 8: More from Bloomberg Intelligence coming up after this.
00:12:04
Speaker 4: You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10 a.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts or watch us live on YouTube.
00:12:19
Speaker 5: All right, let's go now to what this means, the change in the political landscape for data centers and hyperscalers.
00:12:26
Speaker 1: We've seen big moves in these companies.
00:12:28
Speaker 5: Justin Teresi is our Bloomberg Intelligence Antitrust Litigation and Policy Analyst. And I want to start with Texas, where most people expected Greg Abbott to hang on and to win re-election.
00:12:38
Speaker 1: I was one of them. You were one of them.
00:12:39
Speaker 6: I was, yeah.
00:12:40
Speaker 5: I remember reading your research, and you're like, this is not really what we're anticipating. Now that you have a new governor, now that you have a break on data center development, in Texas. How does that make you rethink your thesis?
00:12:52
Speaker 1: Yeah, definitely.
00:12:53
Speaker 9: So I think this is a story we obviously saw replicated in so many different states on Tuesday night. But look, when it comes to Texas, I think really the devil is going to be in the details here. We have Governor Hinojosa, Governor-elect Hinojosa coming in, who's promised this moratorium on new data centers. And like all of these other states, that's the question. What is a new data center? Are we talking about a data center That's in its earliest stages, maybe just being talked about right now. Are we talking about a facility that might have some permitting already done, but not all of it yet? That's really the big question mark here as to how this rolls out. What's the language on things as they're proposed?
00:13:30
Speaker 7: I think part of this is the tech industry and whoever builds these things have done a terrible job pitching them to.
00:13:42
Speaker 1: To the country, to local municipalities. They didn't have to, right?
00:13:45
Speaker 2: Yeah.
00:13:45
Speaker 1: They didn't have to for so long. I don't think so, yeah. Because initially it was like build, build, build, build.
00:13:50
Speaker 3: It's jobs.
00:13:51
Speaker 1: It's tax revenue.
00:13:52
Speaker 7: But is that part of the issue that it's simply a messaging issue that this industry needs to– figure out how to do something?
00:13:59
Speaker 9: Look, 100%, that's been a huge problem, Paul, right? I think we're talking about an industry that when we're looking at maybe government intervention over the past couple of decades, it's an industry that really hasn't been told.
00:14:10
Speaker 1: No very much with regard to a lot of things, right?
00:14:12
Speaker 9: And I think maybe that's baked into the equation a little bit too. But look, I think, you know, today you saw an announcement by OpenAI, they've launched a community compact, right? Where they're talking about involving communities more in these rollouts, you know, when they're proposing things at the earliest stages, right? But look, to your point, a lot of these things probably are things that should have been said already before we got to Tuesday. Things like not entering non-disclosure agreements with public officials. Nobody wants to feel like they've been, you know, they've been had by somebody coming into their community. So those aspects of these community compacts and the things we're going to see rolling out the next month or two, I'm sure, you know, these are probably things that should have happened well before Election Day as well.
00:14:51
Speaker 5: In the meantime, before the new elected officials take office, is there going to be a frenzy of activity between now and year end for whatever projects are kind of in whatever stage to kind of move forward and get as locked tight as you can?
00:15:05
Speaker 9: I think definitely there's going to be an attempt. And I think, you know, we might see this conversation about community involvement for the future. But right now, If I'm speaking with my lobbyists, I'm probably thinking about how can we expedite a permit before a governor-elect takes office in January? It remains to be seen. Will this moratorium by Governor Abbott be lifted in some way before he leaves office in January? That's a big question mark. New Mexico is another prime example. Governor-elect Holland coming in, she's been very firm about data center moratorium, but there's a huge Oracle project that still needs a few more permits before things can really get moving out there, too. it's a big question mark, but I think we're going to see a lot of activity to try to secure those port permits before January.
00:15:45
Speaker 7: And part of the discussion needs to be, you want the U.S. to remain competitive in AI? We got to figure out a solution here, people, you know, because these things have to be built. And it's just a question of how do we do it that, you know, is beneficial.
00:15:59
Speaker 1: To everybody to some degree. I don't know how you get there, but that's That's the simple pitch, I think. I
think you're right.
00:16:04
Speaker 9: And I'll just say as well, look, the good news here, the silver lining is that, look, most of these state legislatures, they're coming back in January. The political will is there right now. If there's going to be activity, it's going to.
00:16:14
Speaker 1: Be this session.
00:16:15
Speaker 9: They're mostly done by June, right? So I think this is the window. We're going to have a clearer picture of what the landscape is in most of these states between now and the close of 1H27. That's our timeline. that's when the focus will happen on these issues. And I think we actually understand what everything looks like by mid-year 27.
00:16:32
Speaker 1: Stay with us.
00:16:33
Speaker 8: More from Bloomberg Intelligence coming up after this.
00:16:40
Speaker 4: You're listening to the Bloomberg Intelligence Podcast. Catch us live weekdays at 10 a.m. Eastern on Apple CarPlay and Android Auto with the Bloomberg Business App. Listen on demand wherever you get your podcasts or watch us live on YouTube.
00:16:55
Speaker 1: Let's go to Ryan Gallagher, Bloomberg investigative reporter. He's got the big take story. He's got the story. I think it could make people a little concerned.
00:17:01
Speaker 7: Ads in popular apps give police a powerful tool to spy on users.
00:17:06
Speaker 1: Ryan, this does not sound good. It's a big take story, so we know it's important. Tell us what you found.
00:17:12
Speaker 2: Yeah, we basically dug deep on it.
00:17:15
Speaker 3: It's a U.S.
00:17:16
Speaker 2: Company based out of Nebraska that has a very interesting technology that essentially is repurposing data the advertising ecosystem to harvest location data from hundreds of millions of mobile phones all around the world and then selling that to law enforcement and intelligence agencies internationally, including many agencies that you would be familiar with in the United States, including Immigrations and Customs Enforcement and departments of the Department of Defense, several like the U.S. Army, for example, using it, as well as local agencies and state-level law enforcement agencies that are using this tool essentially to track people's phones. And what's very interesting is that it circumvents the Fourth Amendment predictions that are usually associated with monitoring people's phones. The authorities don't need to go and get a search warrant to access this data. So it's a kind of contentious topic that we're delving into.
00:18:13
Speaker 6: All right.
00:18:14
Speaker 5: This is frightening if you value your privacy.
00:18:16
Speaker 1: How come we didn't know about this before? We don't know about a lot of things.
00:18:19
Speaker 5: And I guess part of it is because they are collecting data from when your smartphone is using different apps. What are some of the apps we're talking about? Are these specialized apps or are these apps that Paul and I would use without even thinking twice?
00:18:33
Speaker 2: Well, they're commonly used apps. What we found, we were able to identify... I mean, first of all, this is very secretive. The company won't tell you which apps they're harvesting this data from. And there's like a whole sort of grey marketplace around buying and selling this data. But we did identify a few examples. One of them was... There's a popular weather app called AccuWeather. There was another one called Multimaze, which is just a game that people use on Android or iOS devices. downloaded hundreds of times some of these apps and there was another one that's a popular app among Muslims which is called Muslim Pro and it's an app that people use to set their prayer times and again this is an app that's actually been downloaded used by millions of people and they're harvesting location data off of these types of apps there's also we know about email apps that people are using So, you know, widely commonly used apps, and people have no idea that the location data is being pulled out of there and repurposed for law enforcement and intelligence agencies internationally in some cases.
00:19:46
Speaker 1: I'll ask the dumb question of the day. Is this legal?
00:19:51
Speaker 2: Well, some people, including some of the people at the ACLU in the US, believe, know that it should be, that there need to be new laws passed to regulate it. What's really interesting about this technology, like I said at the start, is that it's kind of a grey area. There actually isn't clear regulation around how the authorities can use this information. And it's one of these cases where the technology's moved faster than the law. So it's basically a giant loophole and there's numerous senators and representatives in the House as well who are trying to actively legislate this to close the loophole because they're concerned about how this data could be potentially abused by people if it's not properly overseen by a judge, for example. So it's a great area in answer to your question and people are trying to shut those loopholes now.
00:20:48
Speaker 6: Okay.
00:20:48
Speaker 5: While you're talking to us, I'm looking through my phone to see if I can turn off the location services for all these different apps I.
00:20:53
Speaker 1: Might be using.
00:20:55
Speaker 5: How do people protect themselves against this? Is there a way to do so?
00:20:59
Speaker 2: Yeah, I mean, well, because this technology essentially exploits the advertising trackers that are within these apps, one quite effective way that can work is actually to use, there are like ad blocking, special apps you can get for ad blocking that block ads from getting onto your phone in the first place. Those can actually work to shut out some of this stuff And there are also ways that you can, for example, on an iPhone or an Android phone, reset what's called an advertising ID. And it's basically a unique code that every phone has. And this is the code that they use to track the phones. And you can actually... delete your advertising id or reset it sort of frequently and it makes it basically very difficult for them to use this method to track your phone um so there are ways to to defend against it but part of the issue is that people really are are just unaware that this is happening and it's happened in secrecy so part of what we're doing is just trying to educate people around this issue because the hundreds of millions of people are implicated in it because you're just skipping up the data indiscriminately.
00:22:15
Speaker 4: This is the Bloomberg Intelligence Podcast, available on Apple, Spotify, and anywhere else you get your podcasts. Listen live each weekday, 10 a.m. to noon Eastern, on Bloomberg.com, the iHeartRadio app, TuneIn, and the Bloomberg Business app. You can also watch us live every weekday on YouTube and always on the Bloomberg Terminal.